I attended the London Games Conference last night. My second time.
Overall it wasn't as informative as last year. Unfortunately, most of the speakers use the opportunity to showcase their own products, services and technologies - rather than sharing useful business insights. I wouldn't mind so much if the event was free, but it isn't. Far from it!
Nevertheless, there are the occasional pearls of wisdom. Here's some of what was relevant to me...
Phil Harrison (Corp VP of Interactive Games @ Microsoft) discussed the phenomenal growth of the XBox Live platform. Not surprisingly, it's an important component of their strategy to beat Apple at its own game - by having a universe of apps and content that can be consumed on any of their devices.
Given that 70m XBox's have been sold to date, XBox Live has become the media hub of Microsoft's strategy. However, it appears that they want to decouple it somewhat from the living room, but want to use the XBox branding (rather like iTunes), because of its market share and share-of-mind. According to Harrison, roughly 442 hours of entertainment content is consumed within each 7-day period on the platform. Interesting to note, movie and tv content consumption is growing faster than games, even though games customers confer enormous advantages in the long-run.
With the press reporting that COD Black Ops II did over $500m in sales in its first twenty-four hour period, the $220m earned by HALO 4 might seem a poor runner-up, but the combined sales of both titles were worth over $500m to Microsoft - making this the bedrock of their earnings. Nevertheless, they are exploring television spin-offs with titles like HALO ("Forward unto Dawn" and "Spartan Ops"). At the moment, these are free-to-view episodes that increase customer engagement with the game franchise. In short - Transmedia. In fact, in last year's presentation on the HALO franchise, it was made pretty clear that the combined, network effect of transmedia content resulted in billions of dollars in earnings.
Microsoft continues to work with third-party developers, but has made many acquisitions. They really want to develop their transmedia expertise in-house: Press Play, Rare, Lionhead Studios, Soho Productions, etc. In addition, they are launching a new London studio, the name of which has yet to be announced. Integrating all of these media forms onto the XBox Live platform is a priority.
There was a representative from Google present, Warren Mills, as well as Yogscast (self-proclaimed UK's biggest YouTube channel). The number of views, subscribers and such for Yogscast and other indie talent like FreddieW and Toby Turner are impressive, but nobody spoke to the issue of monetisation. How much is talent earning from YouTube for their efforts? Is it a lifestyle business, or enterprise-ready? It's hard to say. No doubt, YouTube is a great promotional vehicle and talent scouting platform, but it seems to end there. Despite press coverage of YouTube investing in new talent and channels, the money on offer is ridiculously low (for the launch of these new channels), despite the phenomenal earnings of the parent company. They still seem to be toying with media, rather than investing in it - IMHO.
Humour and gaming-related content still reigns supreme on YouTube. Combine the two and you have nirvana - e.g. "Machinima": 42 billion network views, 138m subscribers.
Mills says that the average games buyer spends 39 days researching the purchase of a new game and that YouTube is used heavily during this process. 40% of search research is carried out 6 months prior to the game launch. This amounts to hundreds of millions of views per month in the gaming category in the UK alone (2nd most popular category overall). To note: 1 in 3 views are coming from mobile devices.
John Clark (Sega) discussed some of his work with STEAM. What is impressive about them is that they tinker with ever known monetisation strategy that they can think of. They appear to invest considerable amounts of money in new content, seek out something new and different, while supporting customer-led initiatives. Does that sound like a puff-piece? We'll see. But, STEAM sounds like one to watch.
Sean Decker (EA, head of Play4Free) gave some interesting insights into the free-to-play sector, based on personal experience. He explained in simple terms how the upfront model (getting people to pay before they view) causes the customer to calculate the trade-off between money and time-commitment. In order to overcome these two barriers, publishers are forced to spend enormous amounts of time and money seeding reviews, trailers, demos, friend referrals and the like... rather like how the film studios spend a fortune to release a new film. Nothing new here, but refreshing to think of it in these terms.
The pay-off, of course, is that if you get people over that initial barrier, then they'll consume a lot more of your content, because they've already made an investment in it. Free-to-play, on the other hand, sidesteps those issues, preciesly because "it's free!" Also, there is less incentive for piracy. After all, what are you ripping off when it's available to everyone for free? And, finally, there is less marketing required, because the viral nature of friend referral is much more effective and powerful than traditional marketing.
However, not all that glitters is gold. Free-to-play may have overcome the initial barriers, but it comes with other challenges. The first being that - on average - 70% of your customers will abandon you after day one. Seven days later, only 15% remain. Why? Because it's free. They had no investment, no commitment and no money in the game. Getting them to make a long-term commitment is the trick.
Long-term commitment comes from making the experience as social as possible. People stay because of their friends. If you have a real friend playing in the game, you are six times more likely to stay and stick with it. Games are social.
AFter your first day, 70% on average will leave. After 7 days, 15% are left. Why? Because it's free. They have no investment, commitment (or money in the game). You have to get them to commit long-term. Even in the long-run, only 1-20% of the players will ever pay to play.
Nicholas Lovell rounded out the evening with a blitz of stats and votes on who would win and lose next year's competitive war. He was bullish on "Paymium" - a clumsy phrase for games that require an upfront purchase, followed by many follow-on purchases down the line.