A conference next week will try to find out what the future holds for the gaming industry
NEW TECHNOLOGY companies will lead the way in transforming the games industry, driving the shift to digital downloads for gaming and learning from successful social gaming companies, experts have said.
The change in the industry and its future potential will be discussed at a conference in Dublin next week.
The Mash conference will look at the change in media over the past five years, and try to identify the trends and technologies that will influence the coming five years.
The games industry has seen much change in recent years. Few would have predicted the growth of social gaming, but it has become enormously successful and offers developers the chance to break out of traditional business models.
“The whole universe of games design and games development is a massive shifting amorphous one that really requires constant definition, but also we really need to explore how we need to be flexible about that,” says Marek Walton, co founder of the Mustard Corporation, which creates storylines and other content for games.
And it’s not just in gaming. In the past few years, consumers have become accustomed to digital downloads, whether it is for music, books or video. However, the physical media industry has not yet disappeared, with several parties interested in keeping the status quo.
But it seems more change is coming, whether the established companies like it or not. It’s not just about shifting to digital distribution and continuing to charge large amounts of money for titles on a once-off basis.
“At a basic level if you don’t need to ship discs then you save money in retailer packaging and manufacturing. But that’s not changing business models. That’s simply saying we can do what we used to do, just a little bit cheaper,” explains Nicholas Lovell, founder of Gamesbrief, a blog covering the business of games.
“The successful companies will start looking at the internet and digital distribution as a way first of all of asking how they can get content for free into the hands of as many people as possible, and then, having done that, how they can charge some of those people enough money to make it cost-effective to have made the content in the first place. That’s a very different way of thinking. It means instead of every customer being of roughly the same value to you, some are very little and others are worth enormous amounts.”
Social gaming firms are obviously doing something right. According to Facebook’s last count, some 40 per cent of members play at least one game on the site every month.
There is a great deal of money to be made in the social gaming arena, Walton says.
“There’s always a lot of talk about how video games are making a great deal of money and people often wheel out the fact that games make more money than movies these days. However, in some areas it’s contracting – because of the shift to digital, for example,” he says.
“Boxed product sales, for example, are on the decrease. Social gaming revenue, however, is on the increase. There’s a lesson to explore about distribution and also where to be putting your money and development funds.”
There is much for businesses to learn from new firms entering the market, many of which are more nimble and find it easier to adapt to change than their larger, more established rivals.
But even the movement towards digital distribution is facing resistance on a number of fronts, from both big companies and retailers, both of whom benefit from retaining the current business model.
“They have a business model that has historically worked. I don’t think it’s going to continue working,” Lovell says. “There will be some space for a few companies but nowhere near as many as there were.”
Companies will have to change how they view their product and its value to a certain extent, finding out what is of value to consumers and how much they are willing to pay for it, rather than relying simply on charging for access to content.
Walton works on the idea that gamers, to a certain extent, are “weird”.
“One of the things that fascinates me is what gamers put value in,” he says. He cites the extreme example of a virtual space station for online game Entropia, which sold for $100,000 several years ago. It subsequently sold for $635,000. Less extreme would be games such as World of Warcraft, where game items change hands for cash.
If businesses can tap into this, they could adapt their business model to something more flexible and up to date.
However, the recent breach at Sony’s online networks may cause consumers to pause for thought before opting for digital downloads in future. The company recently admitted that details of its 77 million customers on its PlayStation Network and Qriocity services may have been accessed in a data breach. Although credit card details were encrypted, Sony said data such as name, billing address, date of birth and other important security questions were not.
However, Lovell does not think this will spell bad news for the industry as a whole, although it may be damaging to the Sony brand. “I think it’s a speed bump, it’s not a derailment. It may well slow down some of the pace of moving to digital distribution as consumers are a little bit more nervous about putting their credit cards or personal details on to different systems,” he said.
“Credit cards are actually very cheap on the black market. A full profile – your name, address date of birth, parents’ names, mother’s maiden name – that’s worth a lot more because there’s a lot more you can do with it.
“I think a lot of people have been very focused on the credit card, which are the easiest thing to change. You can’t change your name, date of birth or mother’s maiden name. Once it’s out in the criminal fraternity, it’s hard to get it back.”
The question is if the benefits of digital downloads will be able to persuade both consumers and the larger firms that it is worth changing their behaviour.
The Mash Conference 2011 takes place at Croke Park, Dublin, on May 9th and 10th. For details see: mediacontact.ie/mash2011
