Games as services, Uncategorized, video games

Would you Live Anywhere? Xbox Live assessed

June 2006

When Bill Gates took to the stage at Microsoft’s E3 event, he focused his brief speech on moving the Xbox Live platform to PC and mobile phones. Microsoft had to reclaim the initiative after Sony abandoned its perplexing internet agnosticism and announced a raft of online features for PS3. Gates, architect of multi-billion dollar technology monopolies, was signalling a major change to the way games are managed, purchased and played.

Xbox Live (XBL), much like the Xbox or Internet Explorer, was a loss-leader developed in advance of commercial viability, in this case before mass-market broadband penetration. As XBL grew, Microsoft borrowed familiar features from Windows and online gaming, but its real innovations – services such as Arcade and Marketplace – have defined the online console gaming experience, which Sony can now only emulate.

Arcade has attracted over 100 mini-games with sub-$¼m budgets from independent studios. These must increasingly compete with the new and back-catalogue products from major publishers and oversupply is already a problem. As such, Microsoft’s claim that Arcade represents the industry’s Sundance Festival is over-blown and unlikely to be justifiable for long. But Arcade is commercially viable for independents and Microsoft is expected to find additional ways of monetising this oversupply including taking some titles to retail.

Marketplace has undoubtedly stimulated retail sales by offering promo videos and demos. More importantly, Marketplace has changed the way games are purchased by enabling gamers to buy discrete game assets via micro-payments. According to one EA executive, up to 1/3rd of EA’s revenues may eventually come from such incremental transactions. Selling small, high-margin game fragments to a captive console audience is a powerful revenue driver that will inevitably force a change in the way games are designed and produced. When publishers’ finance directors see the numbers, they will ensure that, eventually, all console games have this feature. Marketplace currently offers 1,000+ pieces of content, and with 18 million downloads since its launch in December, the Marketplace has already proved its consumer appeal.

Today, XBL has over 3 million users, 30 million monthly players, and penetration of the service into the 360 user base is approaching 60%. Usage can only increase as online features become central to the gameplay of every 360 game.

An example of creeping convergence, XBL Anywhere extends much of this functionality to Vista PCs and mobile phones. On mobile, Microsoft hopes to launch a wave of innovative cross-platform functionality on Java as well as Windows Mobile phones. It remains to be seen whether network operators will accept another walled garden that sits alongside their own. The incentive is to increase mobile games penetration, currently well below 10%, by accessing XBL’s substantial installed base across platforms. On Vista, XBL will effectively be hard-coded into every new PC shipped from spring 07, a default multi-player games matchmaking and micro-payment platform that is likely to be in half the world’s PCs by 2011. By then, any studio producing an online PC game will think hard about investing in new server or billing technology when Microsoft’s platform is so prevalent. For cross-platform games, XBL will be impossible to ignore.

Questions remain, such as whether Microsoft could sustain the XBL subscription on PC or mobile, what sort of charging structure Microsoft will impose on publishers for the new platforms, whether large scale multi-player gaming or transactions between players will be enabled or indeed whether consumers will pay for incremental content on PC as they do on console.

On the face of it, ‘Anywhere’ is not necessarily a bad thing – a viable micro-payment system has been a holy grail for e-tailers and content providers everywhere. New ways to monetise PC and mobile gaming are badly needed.

Nevertheless, XBL Anywhere is a land-grab of an addressable market of 150m PC gamers by the most aggressive software company on the planet. Regulators may not clock this move from a closed platform (Xbox) to an open one (PC) in time.

Remember Netscape.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s