2013-05-19T13:02:01-04:00 Bob Thomas http://www.huffingtonpost.co.uk/author/index.php?author=bob-thomas Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Bob Thomas Good old fashioned elbow grease. tag:www.huffingtonpost.com,2012:/theblog//3.1519437 2012-05-15T18:05:12-04:00 2012-07-15T05:12:09-04:00

Bob Thomas http://www.huffingtonpost.com/bob-thomas/ The end of gaming retail, I'll vouch:

I've written elsewhere about the inevitable failure of GAME, and particularly the poor strategic decisions that have set the retailer apart from its competitors, and have sealed its fate. However, I also suggested, in a more recent article, that companies looking to promote digital distribution (particularly EA) could be doing more to capitalise on the now-weak bargaining position of high-street gaming retailers to more effectively promote their platforms.

That's why Valve's latest move, to start selling Steam vouchers through GameStop in the US, has me so excited. It's a real vindication of that argument, and a creative marketing play to extract value from a shrinking market.

Gaming goes digital (in chunks):

Explaining the decline of high-street retail as a channel for games distribution isn't as simple as saying "well, gaming is going digital" and waving at "the cloud" (a gesture that is "post-peak", in terms of its credibility as an explanator).

There are added degrees of complexity, surrounding gamer types (segmented, most easily by platform, but also by game-types and other, more subtle, gaming behaviours), which help explain why the shift in consumer behaviour, towards digital content acquisition, has been only partial. While some segments of the gaming market have quickly gone digital, other segments have been stickier in retail channels.

Valve's sale of vouchers through GameStop concerns the PC gaming segment, and particularly, two subsegments which have been stubborn in their refusal to move away from high-street retailers, towards online content provision.

PC gamers - the natural beneficiaries of digital distribution:

The PC gaming market was the first to move substantively towards digital distribution models, and now is mostly distributed in digital form. Since 2010, digital distribution has outweighed physical distribution of PC games. The market for digital distribution on the PC is dominated by Valve's Steam platform, with more than 50% market share by revenue.

EA attempted to challenge Valve's dominant position, releasing Origin in June 2011, but the platform arrived too late to secure the first-adopting, hardcore PC gaming market, and with substantial spend in Steam online libraries (which initially contained many EA games), switching incentives for gamers were virtually non-existent. Steam had arrived 8 years previously, and the strength of release-period titles (initially Counter Strike, then Half Life 2, Portal titles and the free-to-play release of Team Fortress) and the stability of the platform itself made it difficult to unseat as a consumer favourite.

A series of very public (often ridiculous) Origin customer service gaffes soon after launch, followed by an excellently-timed (and very well-received) Steam Christmas sale, cemented the first-mover advantage held by Valve and the popular impression that the Steam platform was superior to Origin, just as EA were hoping to capitalise on their platform's first serious exclusive title (Battlefield 3). Origin has been left to play catch-up, and hasn't displayed much imagination in attempting to unseat the champion.

So, who hasn't gone digital in PC gaming?

The increasing ubiquity of DRM processes that require constant connectivity and the last decade's growth in massively multiplayer titles will combine to make offline forms of gaming increasingly irrelevant. If top games require an internet connection to be verified, and to be enjoyed fully with friends, the digital distribution hurdle is likely to be one that consumers are equipped/prepared to clear. But GameStop and others are still selling PC games. So who is still out there buying them?

Essentially, two groups of people:

(1) The "long tail" of late adopters of digital distribution. The consumers who, when GAME folds in the UK, will simply visit HMV, Play.co.uk or Amazon.co.uk for their games. They will not necessarily jump towards digital distribution, simply because their buying behaviours are store or website-based. Why is that? Console games could be a distant complement, and PC titles could be cross-sold to consumers who happen to be in-store. Opportunities to trade-in games could be attractive. Broadband infrastructure limitations may make the opportunity to own disks more attractive. Whatever the reason, the gradual disappearance of gaming retailers and infrastructure improvements mean that this group is shrinking, but slowly.

(2) Younger gamers who make cash purchases. Steam and Origin (or any other smaller digital distribution platform) are platforms that require a credit card, or personal account linked to finance, from their gamers. However, Little Johnny has very limited access to electronic credit. Perhaps mum and dad will buy Little Johnny a game each month, but are more likely to do so while visiting a retailer (on a weekend shopping trip) than via Steam or Origin. For those without parental credit access, but with allowances sufficient to buy games, a visit to GAME is still in order.

That's why Steam's latest play is creative:

Steam's ability to sell vouchers for the online platform in GameStop gives the platform access to (1) and (2) to a degree which digital distributors haven't previously achieved. The company is clearly determined to change consumer behaviour, and sweep up as much of the existing retail-buying market before other online distributors get an opportunity.

Of course, Valve will forego some margin, handed to GameStop. But Valve playing the long game. Valve is building brand loyalty in young gamers and those users who may not have had chance to purchase digital products before: gamers who are now likely to build a Steam library, before they start owning products on Origin.

Ten years in the future: Little Johnny has become Big John, and it's an important part of his buying decision-making that he built up his games collection on Steam (exposed to Steam, not Origin, marketing) - a platform that he trusts. GameStop may well have disappeared from the market, but the opportunity that Valve established in striking a deal with the dying retailer ten years ago was a long-term masterstroke in their campaign to control digital distribution.

There is real "lock-in" value in changing the behaviours of the long tail too. Valve's deal with GameStop is such that second-hand games owned by die-hard physical-game buyers will be tradeable for Steam vouchers - presenting that sticky tail of consumers (and some console users) with a real incentive to finally move to digital ownership.

EA should be kicking themselves. It's a massive win for Valve.

Bob Thomas also writes at GamesRSrsBsns]]> tag:www.huffingtonpost.com,2012:/theblog//3.1511053 2012-05-11T19:58:34-04:00 2012-07-11T05:12:13-04:00

Bob Thomas http://www.huffingtonpost.com/bob-thomas/ Kickstarter is at something of a crossroads. Gamers (and developers) have seen the dizzying heights that are possible when crowdsourced funding is invited for projects which capture the marketplace's imagination. Tim Schafer's Double Fine project exceeded fundraising goals overnight (raising more than $3.3m in total) . Wasteland 2, aiming for $900,000, comfortably raised over $3m before the fundraising deadline. For the right projects, it is clear that Kickstarter is a viable alternative to more traditional, publisher-reliant methods of financing game development.

However, Kickstarter's very public successes have increased developer attraction to the platform. And with the increased developer activity, the number of failures and cancellations has increased also. The failure of some projects once their funding objectives are met is a sign that the crowd assumes certain levels of risk when they fund projects through Kickstarter - levels of risk that are not necessarily well understood.

Crowdsourcing default:

What happens when a project achieves its funding aims, but deploys the capital raised inefficiently, then fails? Star Command was such a project.

The witty, professional video on the project's Kickstarter homepage gave the crowd the impression that development for an exciting new space-exploration RPG would be possible for $20k (a small ask, by almost any games' standards).

However, even having exceeded their funding requirement by c.$16k, the developer ran into financial problems, which they have documented in detail on their project page. The team have admitted that they hadn't fully understood the costs involved in satisfying the rewards promised to their micro-investors, and were equally unaware of how high their basic operating costs would be. Aware of their inexperience, the team has made their expenses very visible to the crowd responsible for their funding, and problems with their operating cost model are apparent to any reader.

Although satisfaction of Kickstarter rewards were more expensive than anticipated, after all Kickstarter-related costs are considered the company was left with $22k ($2k more than the investment requested). However, the spending that followed, when itemised, does not suggest a mature project with clearly scoped milestones for development. With $4k being used for basic business start-up costs, registration and accounting, it would be safe to say that these developers, despite having solid concept for a game, were not well-prepared to receive funding.

While Kickstarters have not criticised Star Command's development team for "wasting" crowdsourced funds, most of their Kickstarters will probably be surprised by the candid account of inexperience and loss. This project is an example of how apparently well-considered projects can be marred by inexperience, and how excellent ideas will attract funds, but not necessarily deploy them well.

The fact that more speculative applications with weaker business cases are appearing on Kickstarter has not gone unnoticed by the crowd. One redditor rightly mentions the natural risk-adjustment process that funders apply to projects, saying "Kickstarters without a prototype or trailer of the prototype and ones without devs with a history of getting things done won't get invested in". However, Star Command is a good example of projects that can seem to have prototypes (based on the video screens), and that achieve fundraising objectives by requesting low amounts from the crowd. How can funders be expected to see past convincing Kickstarter profiles, and really examine the credibility of projects?

Kivastarter?

Kiva, the online microfinance portal, takes a slightly different approach to Kickstarter, crowdsourcing small loans for small, charitable projects. It has field partners, which have a more intimate knowledge of potential microfinance beneficiaries in different regions, and can give a more accurate representation of the level of risk taken by Kiva's small loan providers (the crowd). Loan repayments and defaults are tracked for all active projects, and new projects undergo some form of due diligence, where possible. Kiva make their funders much more aware of the levels of risk taken when funding projects than Kickstarter, through a risk metric which is clearly explained.

Currently, the only information currently available to the crowd of funders is information provided by the projects themselves, leaving the Kickstarter system open to a level of abuse. Kickstarter does not look to provide a level of due diligence from its projects, and no clear breakdown of costs is required (it is only assumed that more detailed project descriptions will increase fundraising chances of success).

Kickstarter scams are beginning to emerge, posing a real threat to funders, and consequently Kickstarter is under pressure to improve project vigilance and mitigate the impact of scammer-accounts.

But I would go further, and argue that if Kickstarter is to succeed, and hold the interest of crowds of funders, it requires a risk-clarification metric to provide basic project due diligence. Without an attempt to make risk visible to funders, public failures of speculative business cases (such as Star Command) will damage the credibility of the platform and the good faith of funders.

The bottom line:

Until Kickstarter is able to provide a higher level of project due diligence, worthy projects may struggle to raise funds from risk-conscious funders, as people avoid "getting burnt". The default of funded but speculative projects will only exaggerate this trend.]]> tag:www.huffingtonpost.com,2010:/thenewswire//2.498528 2010-03-14T08:29:59-04:00 2011-05-25T15:50:25-04:00

Bob Thomas http://www.huffingtonpost.com/bob-thomas/
Graves died of an apparent heart attack outside his Los Angeles home, publicist Sandy Brokaw said. He would have been 84 this week.]]>