And now some words from our game sponsor

Tail wagging the dog

Analysis The first several generations of electronic game playing were hit and miss affairs, based primarily on powerful arcade consoles, low resolution PC graphics and specialist games consoles that simply didn’t do enough.

Today’s electronic games business is worth in excess of $20 billion of predictable annual global revenues, with far more powerful arcade devices, extremely powerful PCs and a group of specialist games consoles that rivals the PC for power.

The battle seems to have turned into a three-way platform fight between Microsoft, Sony and Nintendo for games that play within the home, with the addition of Nokia for games that play as you are on the move.

There are hundreds of game distribution and games creation companies, and that side of it is a little like Hollywood. The big studios parallel the platform owners, and the independent film production companies take the place of games creators.

It used to cost considerably less than $1 million to create a PC-based shoot ‘em up or platformer, and you couldn’t make much of a film for that. But like films creation, as the repayment cycle for games has become more predictable, the cost of producing the games has gone up, and the ambition that goes into the play experience is far sharper.

Many games are now taking more like $3 or $4 million to make and several are lifting towards the $10 million bracket. Hollywood films average around $50 million, with perhaps 40 per cent of that put into promotion and advertising. So they are becoming similar sized and similarly rewarding businesses, structured in much the same way.

The key ingredient that is changing, and which all of the players realize is changing, is that television programs and the devices they are played on are turning into digital platforms, and the bandwidth to and from the home is rising with the installation of millions of residential broadband lines.

And the rise and rise of game playing on computers and televisions is going to create something very scary to the TV world – it will create something for consumers to do in the living room and elsewhere around the home, that does not involve advertising.

A decade ago electronic games played at the arcade were a street beyond what could be achieved on PC or games platforms. Perhaps one in 10 households had a dedicated console, and it wasn’t played with more than a few hours a week. In short it had the potential to become boring.

Now there are gamers in two-thirds of US homes, and that number is rising rapidly as the market grows more mature and tries to tie in older age groups.

And of those 68.5 million US homes that have games devices, there is at least one family member that plays a game regularly.

Playing role playing games over the Internet is one platform of choice, but there are games platforms and PDA- and phone-based games, with over 9.5 million people reported playing games on their PDAs, and 8 million using their mobile phones.

In the same survey that gave us this information, carried out by Ziff Davis, it transpires that the average player spends 12 hours a week playing games. Globally, if you take the public numbers from the games platform suppliers, you can reach the same or similar conclusions. Sony has shipped a total of almost 148 million playing devices, both PS1 and PS2, since the first Playstation came out in 1995. Within this, there are 51 million PS2s and of those, over 22 million shipped last year. Perhaps 50 per cent of all those devices are still in use, with some PS1s being swapped for PS2s and some of them failing, so at least 74 million machines are still active.

Microsoft doesn’t issue a number of machines shipped, but in its last quarter it did $265 million in Xbox revenues. Roughly 50per cent of this was in games sold, so the rest was in platforms. Divided by its current price of $179, that suggests that Microsoft is shipping Xboxes at the rate of about 3 million a year and is widely reported to have 9 million consoles installed, probably all active.

Nintendo has shipped 9.6 million units of its Gamecube, and it’s likely that most of these are active still. That means that, from just these three companies, there are perhaps 90-plus million games platforms that are still being used day to day. There are certainly more than a third of these in the US, perhaps as many as a half, which suggests that at least 50per cent of those 68.5 million US homes that have a regular game player, also have a dedicated games platform.

There is no average time for a games player to take to get through a game. It depends whether it’s a driving game, a shoot ‘em up, a strategy game or a platformer. However, many of these can take hundreds of play hours to complete and some have many variations.

There are certainly enough games out there for each of the players to be engaged in 12 hours of gameplay a week. Sony alone has shipped 917 million Playstation games for Playstation 1, and a further 350 million, with 190 million of those this year, for PS2. That’s an average of eight to nine games per machine sold by Sony. Microsoft is selling at something like the same ratio of machines to games, so 23 million games sold this year, and Nintendo Game Cube, almost exactly the same.

That’s 300 million games sold each year by these three and there are many independent games sales too, that owe nothing to these companies and yet run on their platforms. It is nothing for a game player to have 20 to 40 games and if these provide up to 100 hours of enthrallment, then over the years that’s some 30 billion hours lost from other activities.

Many of those are lost from television viewing hours. That’s something like 3 per cent to 4 per cent of all global TV viewing hours lost purely to games. And many of the individuals that are lost from that viewing are either now, or will be in future, high earning, key targets for advertising.

Faultline has said before, and will repeat now, the assertion that in a world where there is more choice, more people will choose not to be advertised to while they are taking their enjoyment. CDs that contain games are not a good format for delivering adverts, and neither would be an online games service that you pay $20 a month to be a member of.

Video on demand is increasingly thought of as a double play, with the advertising being inserted into the viewing time at random and beyond the control of the viewer, at the same time the film is paid for. But when you buy a DVD, there is no question of a viewer watching any advertising, unless it’s for another film. There is no such double revenue available in game play, as games started out with no advertising.

The leading companies in games, Sony, Microsoft and Nintendo (with the exception of the other parts of Sony) have no interest in advertising revenue. The independent games producers such as Activision and Infogrames and Eidos also have no such interest. Each constituent here wants to sell either the device the game is played on or the game logic itself. As more and more games are delivered over broadband lines, we will come into a situation where broadband line owners are companies that have a strong advertising revenue base. They may well try to introduce compulsory advertising, but we feel it will backfire even in the advertising friendly culture of America.

Elsewhere in games, on PCs, on PDAs and on phones, and even on handheld game platforms, there is absolutely no incentive to introduce advertising. The handheld market leaders are the Nintendo Game Boy and Game Boy Advance. Last quarter alone Nintendo sold 3.2 million devices (on track for a 12.8 million year) of which 2.7 million were Advance versions, and over 10 million games (on track for a 40 million-plus year. While these are mostly consumed away from the home (not always) they are contributing to the rich entertainment culture which is based around choice.

Do I want to watch a film, play a game on TV, play a game upstairs or outside on my Game Boy, listen to my MP3 player or watch that DVD I just bought? It is these types of questions that make the particular generation that is growing up with this culture less and less likely to sit still while the adverts are on. And what will we get in the next generation of playing platforms? It is no secret that Nintendo is building its existing platform on IBM Power PC technology and Microsoft looks set fair to follow. Also Sony is taking that same technology into the next generation Cell chip and will build its PS3 on it. Each of the cells in a Cell chip contains a CPU, a next generation PowerPC core, as well as eight Arithmetic Processing Units, essentially vector processors, and in turn each of these will have their own memory, possibly upwards of 128K. The CPU is believed to run at 4GHz, producing huge floating point calculation power of around 256Gflops. Each cell will be connected to central memory, some 64MB, which will run through a switched 1024bit bus. There will either be four of these "cells" used in each Playstation3, or Sony will stagger the power of the machine and have various configurations up to eight CPUs, which would mean 72 processing elements on a chip, including the slaves.

Sony has always said that it would deliver one teraflops, so a four-core architecture fits in with this. Superfast links, perhaps wireless, or a version of optical Firewire, will provide switching between the game configuration and other cell chips used elsewhere in the total entertainment architecture of a home network.

It is this type of architecture that will mean that the Cell chip will not only perform the heavy computational tasks, such as rendering real time video quality graphics, but will also offload to another processor the high bandwidth communication to and from the chip into viewing or storage devices without incurring penalty.

This type of architecture will be with us within two years and what the world’s games developers will do with this is anybody’s business. What they CAN do with it is drive large screens with photorealistic rendering. In other words, your monsters will come to life, lifesize in 3D, on five-feet flat transflective screens. They may interact with beasts from other games on the other side of the planet and they may take their movements from your movements in the room (Sony Eye Toy is already doing this).

Games researchers say “be careful” that the games don’t rely purely on the wow factor. That pretty soon wears out. But the design of game play is beginning to turn from an art into a science and although applying that to the new genre of devices will take time, it will happen and the effects can only be improved game play and player retention. And that’s bad new for free to air advertising to the television. In the end, in the next generation of games, the thematic depth of epic novels will combine with photorealistic awe and create virtual societies scattered around the planet that virtually do not watch television.

However that won’t happen if the big US games publishers get their way and it will be left to pioneers to make it happen. The US is not, and never really has been, the games writing capital of the world. It is responsible for perhaps 30 per cent of games, while Europe contributes about 40 per cent of them, 98 per cent of those coming from the UK. In the US, games tend to be merchandising for films, with one media dominating the other.

In revenue terms, this will soon be the tail wagging the dog, and it is unlikely to continue into the next generation because the photo intensity of games will go beyond film media. Whatever happens, I’d hate to imagine, halfway through a battle with six-feet high monsters, who appear to be coming through my TV screen, and which are controlled by a friend of mine, a grandmaster of this particular game, from some other part of the planet, that a voice suddenly came in over all the effects and said: “And now a word from our sponsor…” Just ain’t gonna happen and without the attention of the games playing generation, advertising is going to have to change beyond all recognition.

© Copyright 2003 Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of events that have happened each week in the world of digital media. Faultline is where media meets technology. Subscription details here