SXSW – Digital Distribution of games

Alexander Fernandez CEO, Streamline Studios
David Burks Mktg Mgr, Seagate Technology
Dan Connors CEO, Telltale Productions
Craig Allen CEO, Spark Unlimited

Q: Does p2p count as distribution? what is it?

Craig: yes. in it’s purest sense its about creating commerce. To get the big companies you have to go to the publishers. there are a lot of people in the chain who may not care about your product. if you want to innovate there is not a lot to point to, you can;t get people to take risks. they want to do things that are proven. It;s not that you can’t do it, its a tough sell. so digital distribution removes some of these middle men, it;s a chance for rebalance; you can diversify the content.

Dan: more a logistical plan – stored on web and delivered direct to consumers. what the hosts and to what devices are going to establish what digital distribution is going. it’s all in play at moment. a sysmbiotic relationship now.

David: we see the clearest defintion is moving away form a physical form. that the direction the game consoles are going with otehr content etc, it’s a matter of time before the game content goes inthe saem irectiona nd it is a matter of figuring out the business models.

Q: what are you doing:

Dan: we have launches recent latest episode. first it is broadcast as part of subscription model, then sold on the website and then at the send of the season we will package it up into a single product. w e are spending and making money at the saem time. we have top of mind presence from releasing things on the web.

Q: you will sell at stores?

Dan: yes, we have a relationship with a publisher.

Craig: we are not doing anything yet but it is in future. we are excited about it, but we are doing big games for next gen consoles and we throw it over the wall and hope they like it. a lot like movie making, but may go like magazine etc and we get multiple channels for distribution, to be able to build relationship and have a strong dialogue with the digital consumer. they are vocal. you can taylor it, you can change and down the line you have a strong product. you can find out early if it will not work and better manage investments. have to wait til console base matures to the point where this is a strategy – 2-3 years.

Q: we have open and closed distribution platforms. what are your pros and cons. start off with closed ones.

Dan: on open platform, conversion costs are low. but it competes a lot. On the closed sites, then you have a high conversion user. On a PC, average everything on, including casual, then 1-2% and xbox live is about 20%. On causal, its found more randomly. on xbox they are looking for something particular so higher conversion. but you can;t set up how you get presented etc. there’s not a lot of products on closed system yet and it will change – so how do you get noticed in the future. there’s not as much freedom to advertise yourself.

David: people need to store things; we get asked for larger and larger drives for consoles. there are convenience opportunities. you can try before you buy with downloads etc. the online is good news for consumer. so how can we get there sooner. MS and Sony are not ness motivated to make it happen sooner.

Craig: you need to know your audience, who the core are. look what happened with mix tapes. now we have 50$ games…less than 10% of people who buy finish games. you have to give people value. where I think it will evolve o is like the seasonal TV market; people will talk about the good levels on a game. you spend money on what you want. you can’t subsidise crap. you have to build good stuff to get people to buy in this model. It’s an exciting place as we are on the cusp of having an open market.

Q: dan talked about customer ownership and value creation. you have more touchpoints with your consumer. how important is it for developers and content creators to be with the customer.

Dan: you can be topical, we are in a tight feedback loop, we encourage them to feedback, give them content for UGC to mic, building a community is what it is about. the shared interest is our target. we use a lot of the techniques to keep them coming back and interested, plus giving them something they can buy every month.

Q: are you using tips from other communities. can we learn stuff from music industry?

Dan: itunes is doing interesting things. but people are using this now to sell retail product. we are focused on doing things…digital distribution and episodic. itunes and single songs is good. they bought singles back works in the web… user reviews works. they have linked experiences together. the other key thing is the hard ware piece as well and has been adopted at a huge rate and is not there on the games side fully yet.

Q: who will win – MS or Sony ? or is it someone else

Dan: Nintendo has a shot. xbox is all over it now. Nintendo has momentum at the moment. Sony are doing stuff. so we will see!

Q: Dave, is there an opportunity to get involved in a different way beyond storage.

Dave: like a gaming harddrive at a vendor, loaded up with games. we launched DAVE that stores and communicates. can be used for viral and p2p distribution, demos etc. Everything that was analogue is going digital. pipes and tanks are all over.

Craig: piracy is another issue for us as an industry. physical copying has been one challenge. and digital makes it worse, how can producers protect their model. the gaming social community can create a protection to the revenue model. if you can disconnect and go I can steal. but if have to be connected and participate there is an opportunity to protect and have a revenue model. you can use media virally to create interest and convert to revenue model when they want to participate. you’ll see more of this cross pollination. the games industry and social connection groups will become new drivers of media as will be able to own consumer. PS Home becomes an expression of you digital lifestyle. you can reward people for participation this will be the big shift with media companies becoming tech companies.

Q: in Asia there is a tendency to give game away for free and then the add-ons are paid for.

Dan: xbox does, I think micropayments are coming. a cheap initial purchase, create relationship, it’s a smart way to go. a lot of software products were given away for free at the start. You have a base…and your marketing spend can reduce.

Q: can you launch a multimillion game via digital distribution now?

Craig: it;s possible but not advisable. you need the hardwear install base is maximised and the right number of connected users who would download. we are heading into the age of access, but need to wait. once there, a subset for game is them viable. At the moment the inventory is a risk, we have to pay for hardwear.disks etc. that is a huge burden on the capital. digital distribution i need the money to make the game not the disks. I have a predictor for growth. I can get loans on game success.

Audience Questions

Q: there’s a lot of PC digital distribution there. and they are locking in, there’s incompatibility. everyone wants to own. and there;s conflict and multiple accounts etc

Alex: remember they are fighting for you
Craig- they put up barriers to keep you. but if it gets too confusing then people go away. look at TVs..it’s too confusing. i it becomes like that then we have done somethings wrong. we need a simple turnkey approach for media.. barriers to commerce gets in the way of revenue.
Dave: the open architecture lends itself to the clutter, the closed systems make it more streamlined but little choice.

Q: Piracy…can you explain what you meant.

Craig – they pirate cos there is a lack of understanding or their is a significant barrier or inequity. a lot of piracy came form not being able to serve consumer needs. the commerce system did not meet needs. we have a blockbuster model cos that is vs walmart wants to hear. try something experimental, you need to be a big publisher.

Q: is there a lower resistance if in a episodic structure.

Dan: it’s a low price point, very web friendly. as they come back regularly, you can tell if they are pirating as well.
Craig: you have a personal relationship and easier to want to pay. on the big stuff, it;s difficult to get people to try, the barrier to sampling is 50$. Game sampling allows you try things and see if you like it.

Alex: you buy something and it sucks you cannot do anything about it.

Q: at GDC last week, the developers were excited about digital distribution, enables new innovation, new developers.

Craig: you can balance financing, creative etc. the layers of publishing puts difficulties in getting games up. there are different models growing up, people wanting to fund development.

Alex: dan, you jumped right in. why did you do this

Dan: it does look like we thought it would people were investing; we needed to build company from ground up and we built for it. the most exciting things have happened online and started with the independents online.

Q: Dan Dig dist has been around for a while. a lot of stuff has been worked through. biggest question is about user experience, how do they manage the full stuff. most are user side, the hardware stuff has been answered a lot.

Craig: the safety, monitoring etc will become an issue. for connected worlds. UGC and co-creation is going to create a lot of policy issues for a lot of people. minors, etc. people will create inappropriate content. so how do you govern, what are the risk and liabilities. the legislation will not catch up.

Q: What are your thoughts of selling the other stuff?

Dan: we give them added bonuses for the other stuff, tshirts etc

Q: how viable is the shareware model?

Craig – it depends on what your goals are. keep resource and cost down and it works well.

Q: PC games and older games. there is a lot of push back with invasive things on computers (steam) is the industry listening to their pushback.

Dan: understanding what users wants is key. the older audience is our core target. People also need to understand what steam is trying to do, with hardware fingerprinting etc, to balance security needs with user comfort.

Craig: we see a huge amount of people not being served. need to get beyond core gamers.

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