Geography of Job Loss

Somewhat related to the arguments that the game industry is “recession proof” or at least “recession resistant”, a very interesting interactive map outlining job creation/loss over the past 5 years is circulating around the internet. When viewing this map, keep in mind that the game development industry is highly centralized in Southern California, Seattle, Austin, and to a lesser extent Boston — keep track of these locations while you’re watching the progress, and that the map represents areas by MSA (so suburbs are included in the metropolis they are tied to, for instance Cambridge would be tied to Boston).

If you look in the beginning, you’ll notice SoCal booming, as well as in Austin, with no major losses anywhere until the mega-red explosion from Katrina hitting New Orleans, but even there are no major losses. Up through the beginning of 2008, California begins shrinking, with losses starting to appear for the first times in SoCal (although ironically, the reverse is occurring in the Bay Area), but Texas and Seattle remain booming with tens of thousands of new jobs.

Then by mid-2008, the meltdown is in full swing. Starting in South Florida, SoCal, and Detroit, it quickly spreads over the next year to the entire nation. Interestingly enough, while in August 2008 Los Angeles was posting a -97,800 lost job rate for the previous 12 months and -20,000 in San Francisco, Austin was up by 18,100 jobs and Seattle was up by 17,200.

By November, that had turned into nearly -160,000 lost jobs in LA alone, while even Seattle was starting to feel the heat with -11,000 or so. Boston was down by nearly -20,000, and only Austin (as an industry hub) remained in the green.

Perhaps the most fascinating slide is the end, which looks like red nuclear explosions going off; but lets pay attention to what you CAN’T see on that last slide: Austin down by only -1,400 jobs that year (keeping in mind this is across ALL industries) compared to -240,000 in LA.

The website itself states “The animated map makes clear that this recession has not treated all regions equally.” Does this mean that Austin is a safe place to work to wait out the recession? That might not be a stretch of the imagination. Texas isn’t faced with nearly the same budget meltdowns as California, and aside from Houston and Dallas, hasn’t been hit with the same critical job loss that California has (though the site also notes that Texas remained solid in part due to a run-up in oil prices through 2008, and that the receding job growth in 2009 came from the energy and construction sectors.)

The time will come where development studios are going to have to think harder about where they set up shop — not just in terms of access to employment talent or favorable taxes, but economic solidity and risk of rampant unemployment in other critical sectors like public safety or education. Perhaps this map will highlight that for some studios.

Popularity: 12% [?]

Joe Biden: Improving Your Battery Life?

Engadget is reporting that Vice President Joe Biden recently announced billions in battery-related grants to automakers. The interesting question is, will any of this filter down to the PC and handheld gaming market? While the lion’s share of the $2.4 billion went to GM and Chrysler for development into hybrids, it is interesting to note that EnerDel received nearly $120 million for a plant in Indianapolis to produce lithium-ion cells and battery packs.

Lithium-ion batteries, of course are widely used in the cell phone and handheld gaming markets. It will be very interesting to see whether any of the money goes to research, and whether the benefits trickle down into improved battery life on your cell phone or laptop.

Popularity: 4% [?]

Jindal Passes Tax Breaks for Game Devs, Nobody Cares

GamePolitics is reporting on an AP story that Louisiana governor (and often cited potential Presidential candidate in 2012) Bobby Jindal has signed into law tax breaks to, among others, game development studios to try and bolster production in the state. The action has received praise from the ESA.

Here’s why you shouldn’t care: Bobby Jindal is the governor of Louisiana, and his tax breaks will only affect Louisiana. Not California, not New York, not any other state in the union. Louisiana. Now, you may be thinking “so what, he’s trying to attract an industry into Louisiana.” Problem is, that’s not going to happen.

Louisiana is different than most every other state in the union, because their state legal system has not updated itself to anything remotely resembling the 21st century. Louisiana is the sole state in the union that follows the “civil law” legal system, rather than the traditional common law. The problem with this form of law, is that while common law provides a certain amount of precedent, which can be researched and relied upon, the civil law system is relatively uncertain. It relies upon judges interpreting what the law should be. The difference is most marked in the area of estate law and succession, and to be fair the gap has narrowed with the Uniform Commercial Code. But game developers working in Louisiana have to abide by its law. They’re going to live there, and be subject to its tort laws when they get in a wreck going to work. They’re going to be subject to its estate law when they make a will, or (god forbid) pass away. They’re going to face the state’s antiquated legal system day in and day out, and that is a MAJOR turnoff for attracting skilled developers. Nobody wants to work in a state where you can’t tell what the law is in advance. The secondary issues like the abject poverty surrounding much of the state, inequality in education, jobs, and healthcare, and the blindingly deep corruption reaching nearly every level of the state’s government certainly can’t help.

So, while Bobby Jindal’s announcement is all fine and dandy, it’s a non-starter.

Popularity: 6% [?]

China bans RMT, perhaps EVE Online.

China’s Ministry of Culture and Ministry of Commerce have banned the trading of virtual currency for tangible goods or services. According to the ministry, “the virtual currency, which is converted into
real money at a certain exchange rate, will only be allowed to trade in
virtual goods and services provided by its issuer, not real goods and
services,” and specifically includes prepaid game cards for online games.

This presents something of a problem for games with sanctioned RMT models, as by the ministry’s wording not even game publishers can traffic in real goods and services. For a game like EVE, where the developers have sanctioned third party trading in prepaid time cards, this seems to run afoul of the letter of the policy; rather unfairly as it doesn’t seem to violate the spirit of the policy. Interestingly, China Daily is reporting that virtual item selling will not be covered under this policy.

Something tells me that this is going to be a rather empty gesture by the Chinese government, but we’ll keep an eye on this.

Popularity: 2% [?]

Free2Play MMO Revenue Metrics

Gamasutra has a great article by Daniel James of Three Rings Design, about the metrics for measuring free2play MMO revenue: specifically, average revenue per paying user (ARPPU) vs. average revenue per user (ARPU). The piece argues that ARPU is a superior model for determining potential financial viability of a free2play game.

For instance, an average ARPPU may look like $50 (because it only includes paying/premium users), while an ARPU may be in the $0.80 to $3 range (because it includes free users as well as paying users). According to James, his ARPU is within $1-$2, but only 10% of his user base will ever pay him something. As a result, 5,000 gamers are generating $230,000 per month for him. James argues that the ARPU is the true number that any new paying customer is worth to you; it allows you to better forecast trends in revenue, and to make distribution and marketing deals with affiliates. James suggests a scenario where a publisher with a $3 ARPU can go to a distribution site and say “Hey, put my game on your site and advertise it, and I’ll give you $1 for every new user you send me.” Measuring by ARPPU would not give you that sort of freedom. James also notes that number of registered users is not an important metric in determining revenue streams – those 5,000 gamers generating the big bucks for him come from a pool of 7 million registered users.

The article does diverge a bit from common sense at one point. Jeremy Lliew, of Lightspeed Venture Partners (a VC firm focusing on free2play MMOs) suggests that “if you
can wrap your head around the implication of less money in and less money out …
and you can develop the games with relatively small, multiple teams that are
constantly turning them out like an assembly line … you’re going to find that
free-to-play MMOs are an exciting and worthwhile place to be.” I strongly disagree here. Churning out assembly line style games has a negative effect on the market, as one can see from the bargain basement stocks lining the shelves of Wal-marts everywhere. F2P games are no different, and with such a diversity to choose from, assembly line product will fall by the wayside — decimating that critical marginal increase in ARPU necessary to financial success. Games need to have some minimum standard of quality, uniqueness, and innovation to them to spur interest, especially via word-of-mouth marketing which is so critical to free2play games. Despite that small hiccup, the article is spot on. Interestingly, it also features a promise from Raph Koster, that he will release his ARPU/ARPPU numbers on Metaverse (his social gaming project) once the data is significantly developed. That’s something we’ll be looking forward to, for certain.

Popularity: unranked [?]

Study Shows Game Developers Focusing on Wrong Subjects

I recently did an article at Stratics on a new study from Absolute Quality on bio-sensory feedback testing in games. I want to expand on it a bit here, and discuss some of the development and financial implications for the industry. First, the original article:

In a report to be released later this week, a company called Absolute
Quality (a subsidiary of gaming services company e4e) has completed a
bio-sensory study of how “engaged” gamers really are when they play.*
The study concluded that while game developers get the biggest reaction
out of cutscenes, exposition, and scripted ecnounters, their target
audience does not and prefers the simpler gameplay aspects of “running
and gunning”. Using a wireless headset from EmSense that scans subjects
brain waves (EEG), visual reactions, and the like from dozens of
sensors, the test involved subjects playing through a game, with
moments of emotive activity being recorded and tagged with the in-game
action that they correspond to. According to Absolute Quality, the
system measures “objective and continuous emotional and cognitive
responses.” 

So what does this mean for MMO Gamers? It means that we need to
start questioning what it is that makes MMORPGs fun. Obviously, that’s
a colossal topic, and that is precisely why Absolute Quality’s test
results are so exciting. “Brainwave and bio-sensory measurement
technologies give developers insight into the visceral engagement and
emotion of gamers, all with the precision of real-time measurement,”
said Tim Hong, SVP Product Development and Analytics, EmSense. 
“Traditional focus groups or surveys have their fair share of biases
and only try to get at the thrill and fun of a gamer experience, but
using this powerful technology clients have quantitative, benchmarked
measures for game engagement.”

According to Absolute Quality, in future studies, Absolute Quality
and EmSense will continue testing to explore gamer experiences in other
genres of the game industry. They intend to probe deeper into the issue
of developing games which are engaging for women, who now represent
more than 40 percent of gaming consumers. In the future, this could
mean that we’ll see games that are more tailored towards the mythical
“what women want”. But the potential runs deeper than that. For
example, free2play model gamers have different likes and dislikes than
subscription model gamers. Future tests can help reveal more detail
into what these differences are, and theoretically this will lead to
improved games. Right?

Maybe. The core result of the test showed that gamers prefer
gameplay to cutscenes; solid mechanics vs. plot exposition; and that
women prefer story and cutscenes more than men, who want more visceral
engagement.  Is that really all that surprising? Over the past years,
WoW has refined their gameplay model to focus much more on play
mechanics and solid design choices over forcing plot and cutscenes on
players (of course, it still has a rich lore available for the people
who want that). EVE has rock-solid gameplay and freeform environments
putting less importance on story and plot exposition, and more on the
tactical aspects of gameplay. In the shooter genre, we’ve found that
the most successful games included Counter-Strike with nearly no plot;
and old-schoolers will remember the buzz around the Serious Sam series,
which was hugely popular in bringing gameplay back to the simple roots.
The concept that this is surprising is a little bit of a stretch, but
it is nice to have some raw data to back up these numbers.

The study won’t be the end of the “story/plot vs.
gameplay/mechanics” fight in game development. Far from it. That debate
will probably rage until hell freezes over. But this, and future
studies, can provide a glimpse into the intangible answer to that
question. “The gaming industry has changed considerably in response to
changing demographics. Factors such as age, gender and socio-economic
conditions play a significant role in gamer experience”, said Shirish
Netke, President, Interactive Entertainment, e4e. “Better gamer-market
segmentation is crucial to delivering the right gaming experience for
the right audience.  It is also clear that game developers appear more
inclined to develop games based on their own personal preferences,
rather than truly understanding the needs of their target market.  By
more thoroughly exploring the target consumers’ gaming preferences,
game developers can significantly increase the success rates of new
titles in the market.” Greater success rates in new titles means more
choices for us as gamers, and that’s always a good thing.  A copy of
the report can be viewed here.

*Full disclosure: I was one of the subjects of this study at GDC 2009.

The implications of this technology on the industry are really quite fascinating for a number of reasons. Game development is expensive — AAA games can take $12-20 million to develop. MMO games can be even more expensive due to the huge frontloading of capital outlay required for the actual operation, and the long-tail marketing costs needed to keep a continually growing user base. More importantly, game development follows a production-possibilities frontier for the allocation of scarce development resources. I see some very fascinating implications for this technology in helping to make more efficient choices along that curve, especially in relation to man-hours spent on story and immersion, versus on mechanics and game design.

For example, let’s somewhat facetiously take a hypothetical IP: “My Little Pony Adventures.” The creative director, production heads, and the senior investors are deciding on what kind of game to make utilizing that IP. They determine that the target market is 8-year old children, and that they want to make the game a semi-MMO involving 100-1000 players on a server at a time. The teams come up with two, distinctive concepts.

Concept A is called “My Little Pony Adventures: Pony Panic”. Rather than focusing on story, this concept intends to feature many kinds of simple, refined game mechanics that will appeal to 8-year olds. In addition to puzzles, it will have many options for how to groom your pony, play with them, and take them to shows and ride them in a virtual field with other players.  The intent is to create an series of fun mini-games as well as a sandbox experience that will be accessible to the skill levels and interests of 8-year olds.

Concept B is called “My Little Pony Adventures: Princess Universe”. The concept will focus many hours into developing an immersive story and universe that captures the spirit of the My Little Pony IP. Players will take the role of a princess, and follow her through a series of adventures around the universe. Through the use of cut-scenes, merchandise tie-ins, and extensive world building and scripted events, players will take part in a relatively static (i.e. not sandboxy) experience that will hopefully be immersive for the interests of 8-year olds.

Both games potentially could be big-money winners for the target audience, but come from wildly different approaches. Which will be more successful? It will be important for the company to find out early in the development cycle, so that resources can be efficiently allocated, and time, energy and money are not being wasted.  That’s what makes the EmSense headset and AbsoluteQuality’s analysis so fascinating to me. It bypasses the focus group process, and significantly slims down the percent chance of error from inaccurate statements. And, it allows for extrapolation of information from other datasets. The My Little Pony team can take studies from other games like Lego Universe, and Puzzle Pirates, and the like, and see what the 8-year olds are thinking while they play. They can identify directly what mechanics cause feelings of joy, and what don’t; what stimulate brain activity, and what they gloss over. The end result, theoretically is that they can make better informed choices early in the development cycle, and continue these choices throughout the cycle, allowing for an agile solution based on quality feedback.

Assuming it works, this is good for the industry. Better decisions make better games; better games mean more money for the developers, which means better quality of life for employees, more development, greater risk taking and a broader selection. Now, it is likely to be several years before the technology permeates the market and there are enough datasets to make these kind of choices. But the fact that Absolute Quality is thinking outside the box, and working to improve the industry as a whole is just absolutely fascinating to me. It’s such as simple choice, yet it’s so innovative. “Lets find out what triggers various emotions in gaming, and then we can exploit it as design choices.” It seems so common sense, so why isn’t anyone else doing it?  I think, as an industry, we can be somewhat jaded about developments in technology. Oh look, a new program that lets you render graphics 5% faster. Ho hum. A new motion-capture software lets you do skeletal modelling on the fly. Yawn.  It’s so…..boring. I may be overly excited about this technology, but the optimism comes from the innovative nature of what the technology does.  It’s not “let’s do this faster, or make this easier for our designers.” It’s “how can we make games better?” And in the end, isn’t that the goal?

Popularity: 3% [?]

A Pair of Major Settlements

Well, two major settlements in the news today. On Friday, the NFL Players Association announced a settlement in Parrish Adderley et al v. NFL Players Inc. If you don’t remember, that’s the retired players law suit against the union for breaching licensing agreements over the use of their images. Incidentally, the suit lives on in a recent law suit from former Arizona State and Nebraska QB Sam keller against EA Sports and the NCAA over the use of player images.

Simultaneously, Midway Games’s shareholder Mark Thomas and the Midway Games creditors committee (these are the unsecured creditors), have secured a settlement that appears quite favorable to the creditors. If you haven’t been tracking the whole complicated mess, basically Thomas purchased Sumner Redstone’s super-majority stake in Midway for $100,000 – the deal of the century some said. He also purchased $70 million of Midway debt owed to Redstone’s company National Amusements. The debt, apparently, was structured $40 million unsecured and $30 million secured.  Originally, Thomas’s $30 million secured debt claim would have put him in the front of the line vis a vis the creditors in Midway’s bankruptcy reorganization.

That appears scuttled in the settlement, however. Thomas apparently has agreed to allow the $40 million in unsecured debt to be wiped out, and to accept a $5 million payment instead of the $30 million secured debt claim. This leaves him with a tidy chunk of change (though far far less than he could have received) and the creditors actually in a position to recover some of their money.

Somehow, I don’t think this is the last chapter in this shady saga. But we’ll see.

Popularity: unranked [?]

Trademark Licensing Dispute Over Fallout MMO

Kotaku brings word of a spat between IP owner Bethesda and licensee Interplay over the Fallout MMO Interplay is allegedly developing. I say allegedly, because whether Interplay is doing anything is the crux of Bethesda’s dispute. The history between the two firms and the Fallout brand is somewhat convoluted, but the end result is, Bethesda now owns the rights for the name and the IP, but Interplay has a license to create the MMO. Bethesda is threatening to terminate the license because Interplay has failed to secure funding or to start work.

What’s interesting here is two-fold. First, Bethesda (through their parent company Zenimax) certainly has publishing capability. Why haven’t they stepped in and said “fine, we’ll publish it, you develop it”? The question bodes ominously for the fate of the game… is Zenimax scared to touch it?

Second, it appears that Bethesda negotiated terms to the license agreement that would put Interplay, allegedly, in material breach of the license terms. Under contract law, a material breach allows the licensor/offeror in a contract to terminate the contract (as opposed to a partial/non-material breach, which merely allows monetary damages as remedy for breach, but not termination of the agreement). Now, I’m under the impression that Interplay is somewhat strapped for cash, so damages are not really the big concern for Zenimax since they’d likely not get anything great. So what’s the play here? Is it over the real value (the IP?) It will be interesting to see what Bethesda’s goal is here.

If anyone can point us towards a copy of the licensing agreement, or the SEC filings regarding the sale of the IP between Bethesda and Interplay, that’d be awesome.

Popularity: unranked [?]

Take-Two Settles With Shareholders

Take-Two disclosed on Monday that they’ve settled their lawsuit with shareholders over the attempted buyout from EA Games last year. In what appears to be something of a coup for the company over its shareholders, the terms of the settlement do not include any payments. Since the suit was launched for failure to consider EA’s $26 per share proposal last year, that’s a bit odd, and it looks like Take-Two can push any fees and costs aside into insurance and get out of the suit without a dime. The news sent Take-Two stock up over 3% today, with EA’s stock rising by over 2%.

Popularity: unranked [?]

Who is Mark Thomas?

You probably remember him as this guy (not to be confused with that guy). But WHO IS KAISER SOZE?

Actually what Midway creditors want to know is who he REALLY is, and how was he able to purchase Midway for $100,000. Remember these creditors hold some $100+ million of debt, and they’ve filed a motion in the U.S. Bankruptcy court alleging insider debt issuance. Gamepolitics has an analysis, but basically what it comes down to is an allegation that Thomas was improperly issued secured debt (which takes priority over unsecured debt), when he purchased the company. Potentially, now Thomas stands to get first dibs on any incoming repayment of the debts to Midway; and depending what he does with the company he could reap some big returns and leave the unsecured debtors high and dry. As a bonus, Gamepolitics provides us via Kotaku a link to the Chicago Tribune’s guessing game as to who Thomas really is.

Popularity: unranked [?]