Friday, June 10, 2011

Video Games Future in Doubt

Online Game Play Future Cash Cow

I am sure that those that read this may think I am crazy, but from my own personal experience as a player and parent of an AVID player, the future of video games is in doubt because of the many enterprise players who are trying to figure out how to monetize the future of video game play. IE: we pay way more for broadband connections than we pay for a game itself, who wouldn't want a residual model for game sales?

Combine that with my belief based upon interviews with gamers that today most game sales are made to players wanting access to the online play world, that's where the real game play happens.

In my home that is Xbox Live and to a much smaller degree the Nintendo WII world.

The Current Money Pit

Xbox live has a tidy additional sum of $60/yr for access to play and interact with friends, regardless of interface used including the newest Kinect type interactions, why else would skype be so appealing to an organization where they sell a simple audio/video interface into the home for game play that could be leveraged with a Kinect device to be the core VOIP/Video station to the home. That means new services on the backbone of that and perhaps future acquisitions of broadband service providers so they own the future of the last mile to the home?

The Real Money

Regardless the real money they seem to be focusing on based upon all the chatter is subscription based online play. The chatter is in some cases just noise, in others a real concern as leading titles may become free or less expensive in order to draw a larger audience who start by paying for premium access to dedicated game servers, additional game content not already in the online store’s, or even access to play online. This last point is the real crutch of the matter.

As identified earlier, I believe that the bulk of game sales today are to players who go online, so removing online access, as a standard part of the game you buy will detract from future game sales. The strategy may be to reduce the cost of a product for replaced revenue for online play, BUT I would argue that no one talk about online play as a 1 time cost, the SaaS software market has already proven that. It is a subscription service model that really works for software developers, and games are after all just another type of software.

Future Implications

Sure there may be subscribe and get games for free models, Gamefly already has a simple model that can be used to understand how that could work, but the real question is what does that new model mean to game companies? Do we see title being retired and even though you love playing it, if not supported you can’t play it anymore? Then you need to get more content?


This is an area to watch, my predication is watch what the game console companies do an the top 5 game developers in each platform market, folks like EA are in everyone’s top 5 virtually as a simple example. The companies actions in the next 1-3 yrs will dictate the next 5-10 yrs of what will happen with game sales and if they can master that content, watch out Video producers as that is next target, but due to bandwidth concerns in just North America alone, it is doubtful if even 10% of the population could get enough bandwidth to service all the video, audio, game, voip needs. That is another story.

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