Anarchy Online gets dynamic ads

In-game dynamic advertising also comes to massively multiplayer online game Anarchy Online. Massive Incorporated will introduce their game advertising solution to Funcom’s online game in the form of dynamically changing billboard ads.

I recently wrote about the possibility that in-game ads might be disrupting the feeling of a fantasy game, and that could lead into situation where the share of futuristic online games might increase, compared to fantasy online games. Presently, TOP 10 of online games is dominated by fantasy titles, but if in-game ads increase the profitability of games with more concurrent theme, they could be the gainers.

Eidos does not interest Murdoch anymore?

Spokesperson for News Corporation ended the speculation about possible Eidos acquisition. For the time being, News Corporation is not in talks with the game publisher and game developer Eidos.

It seems hard to catch ones breath. If the rumours of possible acquisition preparations still are correct, who on earth is the buyer?

NCSoft 2004 financial results

NCSoft was proud to announce impressive financial results for the fourth quarter and year 2004 in general – Yonhap News reported the numbers. Net profit for the year 2004 increased almost 2,5 times from year 2003 and reached nearly 78 billion won. Company is getting more profitable, good news for the investors. For the year 2005, NCSoft expects to reach 305 billion won turnover. In euros this means just about 230 million euros. This company starts to get some financial muscle and the growth rate is still very fast. For example in China, NCSoft’s partner Sina just reported 110000 concurrent users for Lineage II – solid development.

Activision share split

TheStreet.com had interesting article about Activision. They have announced a 4-to-3 stock split. Furthermore, they are calling a special shareholder meeting, in which they propose doubling the authorized share amount. This move, if accepted, will increase the amount of authorized shares from 225 million to 450 million. According to the article such a move typically points to the direction of acquisitions or management compensation.

The article doesn’t say it implicitly, but as the new accounting rule soon makes it expensive to grant options, this could mean that Activision has acquisition plans of its own. Playing field changed all of a sudden, again. What is it that Activision would like to buy? I would go for further mass on their home markets to combat Electronic Arts, so maybe THQ or Take-Two Interactive. This sure starts to feel like Christmas, so much to wait for.

Sina devices poison pill

Traditionally the Chinese way of doing business has involved lot of background checking, before any actions have been made. One had to check up if all the interest groups are ok with the plans. Seems like the culture of making business has changed in China. I personally thought that if Shanda is making such a purchase, they must have, on some level, negotiated with Sina and reached to some sort of an agreement. Sina’s initial comments promised good and the road for acquisition seemed to be open.

What happened? Sine told about poison pill, which makes acquisition of Sina very expensive. Suddenly we have a stalemate in our hands. Shanda doesn’t have the money to buy Sina with these new terms in mind and Sina is not able to develop its business as long as there is a threat hovering over. This makes following Chinese markets even more exciting than European and American.

NCSoft introduces Auto Assault

They did it again. This time NCSoft has chosen that part of male demographics that is interested in cars. I can tell you that this segment is huge. I personally know several car game enthusiast, who will like the concept of demolishing cars in post-apocalyptic future. This reads Mad Max all over, just that they did not pay a dime for any licensing rights. According to the website of the game, features are nothing out of ordinary so we are probably going to have a standard online game.

It remains to be seen, how popular the game becomes, but this could be another major earner for the NCSoft. Production costs are relatively low, marketing channels are there and the world is full of men who like games and cars, but just do not want to see another online fantasy or space game.

Eidos linked to News Corporation

Ancient enemy is raising its head again. Well, not really, it is only Rubert Murdoch’s News Corporation that it once again in the nexus of game industry speculation. Both Pocket-lint.co.uk and Gameindustry.biz wrote about growing speculation over possible Eidos deal. Buyer could be, as earlier mentioned, News Corporation.

This is no surprise, in my earlier analysis of this situation I set a hypothesis that News Corp. will go for Eidos, but will not settle for that but goes on and acquires at least another game company from overseas. Rob Fahey seems to have fairly reliable information sources, so the deal could really be just a matter of time.

If Eidos will be off the markets that will effectively cut UbiSoft’s acquisition possibilities. It is merely theoretical possibility that UbiSoft could have bought Eidos as an attempt to stave off Electronic Arts. Now UbiSoft does not have any other suitably cheap opportunities at hand. Trying to buy any other relatively large game company would just take a serious hit on UbiSoft’s stock price and that would anger the shareholders and they would probably resort into selling their shares for Electronic Arts.

Aren’t these exciting times?

Telltale Games introduces episodic games

I promised an article about a game company that is pushing the envelope. Paul Hyman wrote the original long article, which was called “Startups experiment with online distribution”, I am just going to mention few pointers. This company is called Telltale Games. They believe that in coming years, games will increasingly take the place of TV as a family or friends gather together to play and advance game episodes.

Businesswise they are using the old credit card and download combination but the variation comes in form of episodic gaming. Player would order the game in episodes, therefore lowering the single purchase price and allowing players to tip their toes to the water. If one grows bored with the series, one can stop ordering further episodes. To me this sounds reasonable enough.

According to the article, this kind of game production benefits from the scale of operation, because once the basic framework is done, episodes just need to have new plots and puzzles. Playtime for one episode would be around 4 hours and production costs set somewhere near half a million dollars.

In the article Paul Hyman mentions few other companies, so check it from Google to see if it still is in circulation.

Nexon CEO interview

Kim So-young interviewed Suh Won-il, CEO of Nexon for The Korea Herald. It is very informative article, in which they go through Suh’s past but focus more on Nexon’s business.

In the article, they discuss the phenomenal growth that Nexon has achieved with their popular game titles such as KartRider, Maple Story and Mabinogi. The other contributing factor for financial success, according to 27-year-old Mr. Suh, is that they have stepped up advertising and marketing budgets.

Company has fared especially well on domestic markets, but now they are increasing their efforts to improve their situation at abroad. China is the first natural step. Busy CEO plans to learn Chinese in order to communicate directly with their partners. He has set a goal of being number one in Asia’s online game business. That is a commendable target.

Independent game industry business models

Small game development companies are trying to find ways to cut down the cost of producing games. One popular method is direct online sales, right from the company’s website. This approach is somewhat limited by the modest visibility of the game. As a result, company has much higher margin from direct sales, the sales volume fall far behind typical retail sales distribution.

As I see it, there are basically three ways to work around this problem:

Shareware model
Micropayment model
Service model

The first approach is based on the good old shareware model. In this model, game is finished and shipped via network and people can try it out quite freely. These games have extra features or time limitations, which cut the playing experience short. At this point, if the player wants to have more he has to pull out a credit card or other kind of method of payment. Company gets decent exposure for the game but risks sales with too high prices and suffers from high advance development costs.

Other companies, which follow the second approach, believe that getting people to upgrade or order the real version is possible but difficult if the requested fee is high. They rely on micropayments that must be paid if one desires to advance in the game. These games are often simple and static. They run with straightforward logic and have cycles and to complete one must pay. Casual games, casino games and other money or classic games fit into this group very nicely. Once again, retail level is cut off and customers are served directly. The only problem here is that the whole micropayment business model hasn’t really kicked off. It seems to be all too difficult to agree on common method of doing this and now different technologies are competing and spreading on the market place. At this time, it seems like the companies, which are doing most of the money are actually those, which offer the billing technology for micropayments. For so long micropayment has been popping up here and there, it sure has potential, but when it becomes reality...

Personal memory takes me back twenty years to the time of C64. At that time I was engaged in an exhausting fight to get one for myself. I was on the other side and my parents on the other. They thought that C64 was waste of time and money, so I spent my pocket money on arcade games. Without a doubt by the time I finally got myself a C64, I had blown away enough money to buy two of them. Just to get the record straight, this took a year or two. I repeat, the potential for micropayments is there.

Third approach offers the game as a service. After the player has been lured into playing the game, it is just a question of making the game so interesting that people keep on playing and paying. Laser Squad Nemesis is one example of such a game. Game’s developers started from humble beginning, but they have been constantly improving the game and now it is packed with features. Players like it and compete against each other, and in the end a community forms around the game service. No retail in between.

In the next article I tell you about a company that is trying to push the envelope.

Shanda takes a piece of Sina

Pacific Epoch run stories about connection between Sina and Shanda Paul Waide was the person who posted the news. Last Friday, Shanda Interactive had filed documents with US SEC, saying that Shanda and Skyline Media Limited, which is Shanda’s CEO Chen’s investment company, had bought 19,5% of Sina, between January 12 and February 10. In other Epoch news it was stated that Sina is not planning to device any poison pill arrangements.

So, what do I think about this? Shanda was and still is loaded with cash. They announced their desire to move outside online gaming arena and this they are now doing. Earlier I was raising my concern on their expansion, because they could loose their focus while fostering new businesses. This sudden move towards Sina erases those fears of mine. If they manage to buy Sina, they will have ready entity that can handle on its own.

There are some clouds on horizon. Sina just made a remark that Chinese government plans on restricting the marketing of astrological services and Sina has large revenue coming in from such services. This will shadow Shanda’s growth expectations. Other concern is more traditional, how can they get synergies from this marriage, if it is to happen? It will be very hard to do any cross selling between these companies Shanda will benefit from new advertising channels, so there still are some opportunities to benefit from. Sina claimed that they will not device any poison pill to make it expensive for Shanda to buy more shares. Remains to be seen if Shanda will go all the way. Seems like their CEO is on a mission, though, so I place my money on acquisition.

New business model

This article that I am referring to was in Gameindustry.biz a while back, but I only now got the time to mention it. Good old Rob Fahey was behind it. Anyway, according to the article, new production model aims to lower the costs of concept development. Game Republic is behind the enterprise.

Basic idea here is that developers have their development plans Okayed in the early stages of the process. If format key holders like Nokia, Sony and Microsoft think that the idea will not fly, then there is no need for expensive full scale development. This will speed up the development process, because now those more or less raw ideas can be tested before building an expensive, functional demo etc. Furthermore, accepted projects will get financial backing from early on and development companies can take it easier with capital requirements. Future looks bright for game developers.

Enough article references. My gut feeling tells me that this will unify game genres into standard forms. If the game industry is not yet like movie industry, then this development will further demolish the fences. Buying a game will be easy, because you have seen it being advertised, you find it from the promotional stand in any major shop and it includes some real life sports or movie and game stars.

The ones who benefit are those, already big companies, which can now put their money into good use by garnering all the needed name features that make a good game. Throw the mix on general engine platform and there you have it. Now it is only time to repeat the process as many times as possible and the production numbers take care of the rest. There are bound to be few hits among the titles produced this way so just loop the process.

Why is it so? My guess is that decision makers have already a long career in game industry and they have worked their way up. It needs wits and vision, but their career advancement takes so long that when they finally are in the decision making position, they are bit out of touch with their young audience and therefore they are not making game decision anymore, just business decisions. In such a landscape there is room for many innovative companies that are pushing the envelope, but because of the nature of this business, innovations are quickly copied and major players remain on the top.

If you want to the top, there still might be a window of opportunity open for few years, run for it.

In-game advertising

Chris Morris wrote and interesting article for CNN Money about online game advertising. In the article he lines out some plans that major game companies have in the arena of online game advertising. I recommend you to look it up, good stuff. It got me thinking few ideas like:

Nothing will get your fantasy immersion down like an ad for snack bar while playing some fantasy game. Therefore ads can be safely placed only into a game with current or future theme. It is cool to crack some heads in some pop and ultra violent game from criminal genre and then smoke a cigarette of some specific brand. It is also cool to play some distant future space simulation and notice that there is still some well-known brand existing at that time. Fantasy? Nah, I want my high quality sword from local blacksmith Barnes, not from International Steel.

To me this means that in order to get more revenue out from the games by introducing growing product or advertisement placement, publishers are going to start producing more games with concurrent issues. Good example comes from UbiSoft, which has tied in Clancy books and video games. That is a believable setting for advertising. We see the advertising trend also in the frenzy in which publishers are licensing franchises as fast as they can - the more commercial, the better. Sports are the best as they already are fiercely commercial and players actually expect to see some advertising, it makes the games feel more real.

Virtual realities and communities like Second Life are excellent base for virtual and real advertising. These environments are less game oriented and people have other reasons for their existence than collecting experience points. Those environments will see advertising become an integral part of the setting and important vehicle in achieving objectives.

Overtime class-action suit against Electronic Arts

There are some clouds gathering over the sky of the Electronic Arts. Mark Schwanhausser at Mercury News wrote in an article about another worker of EA, who had filed class-action lawsuit against his employer, seeking overtime compensation.

This opens interesting opportunities for game industry workers. It is not only one person against big company anymore. Now there is the possibility that workers start to get encouraged and raise up to demand better working conditions. It would mean more salary or at least shorter working days. This is basic union mathematics – cause needs people and as the threshold has been reached there is now way of turning the tide. It remains to be seen if other game industry workers join the “movement”.

So how many angry game industry workers does it take to pull off a successful class-action suit against the employer? I wish, I could answer that, but maybe you can comment on the article and suggest something.

Anyhow, what we are seeing now is those out of reach of stock options workers, who are going for class-action suit. These people have no chance of benefiting from excellent financial results of their employers. They are also easy to replace and they have to pull those long hours just to keep their jobs. The cost of their “rebellion” could be their job, but that already is a threat that exists.

From European point of view, this could even the competition between old and new continents. European game companies have been moving their operations away from Europe with increasing speed and one major contributing factor has been higher personnel costs in Europe.

What happens if American personnel costs rise to the level of those in Europe? I bet that the movement towards Asia will speed up. I wonder if UbiSoft made a clever move with their decision to bolster their studios in Montreal. Like with other things, time will tell...

Majesco A GBA Enthusiast

I am broadening up my narrow point of view starting to get to know game companies in a bit more organized manner. Majesco is the first on the list. Compact little company that has profiled itself especially as a maker of GBA content, but they also have products on other platforms. For me, this company appears to have potential as a take over target, because of their relatively understandable focus. Good addition for some big game company that wants to bolster their mobile front.

Analysts have mixed opinions what comes to this company. Just recently stock price dropped markedly and analysts have been busy in restating their views. As I said, mixed bag, ranging from stable to market outperforms. Without going into the numbers, it looks like they have some serious challenges to grow organically. Luckily the competition on GBA titles is not as fierce as it is on consoles. I will add this to my watch list.

Electronic Arts In Dialogue With UbiSoft

According to Wall Street Journal and Reuters, Electronic Arts and UbiSoft are in preliminary talks or as they say “I would not say there's negotiations taking place, but we are having the kind of dialogue that you would expect of a large shareholder with the company". It is not clear what these talks concern, but I could make some wild guesses:

Firstly, they will test the waters on some ownership arrangements. It is very good setting for that because there are some high-ranking UbiSoft managers (there should be) involved in this dialogue, and they are also major shareholders. Impress these guys and the whole UbiSoft will move. Convince them not and the deadlock will remain.

Secondly, there will be discussion on possible cooperation. If direct approach fails, try to lure the partner to see possible benefits of joining forces. This has the added benefit of people of these two companies getting to know each other. However this could backfire too, there are some classic prejudices between the two sides of the great water.

Thirdly, if all else fails that are friendly gestures and mild manners. The only thing for Electronic Arts to do is to turn on pressure to make some changes in the UbiSoft board. Guillemot brothers have the power in company that goes well beyond their ownership. Last chance for EA to gain better hold in this situation is to, as a major shareholder, get their guy into the board.

I am guessing that this is the blueprint for the dialogue.

Renamed!

I thought that I wanted to write about mobile phone games, but it turned out that I mostly wrote about game industry in general and especially those trendy massively multiplayer online games. This new title should fit better for the content.