At present, relatively few people use mobile data services in a big way. Yes, they'll SMS each other at a per-message charge; yes, they'll download the occasional ringtone or game. But they don't do a lot of browsing, and enterprise integration is only beginning. At the same time, the operators are moving from 2G to 2.5G and 3G networks, and are looking to mobile data services as a way of maintaining ARPU (average revenue per user) even as voice revenue declines.

In order to spur data revenue, the operators will be pushing services like video telephony, TV-on-the-handset, and networked gaming. 3G gives you broadband levels of bandwidth, and you have to sell consumers on services like these to get them to subscribe to data services, upgrade their handsets, and so on.

In the past, operators have charged for mobile data on the assumption that the primary target is business users, who will pay high fees for anywhere, anytime connectivity--but the spread of WiFi means that the ubiquitous nature of the air network is less critical to most business users, so the focus is shifting to consumers, who are far less price tolerant.

As a result, operators will be forced to move to fairly reasonably priced all-you-can-eat plans, in order to spur consumer uptake.

Thus, in a few short years, you will be carrying a device with the processing power of a cheap PC and wireless broadband connectivity. You'll be paying probably <$20/month for unlimited data access--and about the same as you pay now for voice telephony.

But this is, of course, a direct contradiction: If I have broadband levels of bandwidth, plus the processing power of a cheap computer, I can program my device to use VoIP for voice conversation. Then, my voice data is going out under the data price model, rather than the voice price model. So I buy the cheaptest voice plan, never use it--and the operator's ARPU goes to hell.

To put it succinctly: The operators need to increase ARPU, and think data services is the way to do that; to spur uptake of data services, they'll price them relatively cheaply; they'll try to maintain their margins on voice by using the existing business model there--but data can be used to replace voice.

From a consumer perspective, this sounds pretty attractive; mobile phones become what fixed-line phones are already becoming--devices that allow unlimited calling for a flat monthly fee. From an operator perspective, this is a nightmare; the long-distance carriers are already completely screwed, and the local carriers surviving only by bundling DSL, voice, and fixed line together--and by the fact that they are effective local monopolies (despite the growth of the cable modem + VoIP solution), and face less pricing pressure.

The wireless VoIP scenario means commoditization of wireless communication, and that means far lower ARPU, and a huge loss in profitability, for the operators.

The operators haven't begun to focus on this issue yet, but some likely responses can be anticipated:

Pressure manufacturers not to make VoIP-capable phones

Major mobile phone manufacturers depend heavily on the operators for sales, particularly in the US, Japan, and the UK (in most of continental Europe, handset sales are mainly through third party retailers, like Carphone Warehouse). A company like, oh, say, Motorola, or Sony Ericsson, or, you know (whistle whistle), will seriously want to avoid pissing off the operators. However, it's hard to see how you can sustain this forever--there are enough small Asian manufacturers, and enough companies willing to do contract work for third parties, that such handsets will inevitably become available, and ultimately the larger manufacturers have to enter the market, or face serious loss of market share.

Try to keep VoIP-capable phones off their networks

This is hard, particularly for GSM operators--easier for those, like Verizon, who have better control over handsets on their network. It also depends on none of the operators breaking ranks--if it's suddenly vastly cheaper to make voice calls on Carrier A, then Carriers B and C are going to lose market share....

Refuse to permit VoIP interoperability

There are a potentially ways to do this: not allowing IP addresses to be easily associated with a phone number, for instance, or detecting and dropping any voice-related IP traffic. The question then becomes what regulators do--whether they follow the path they've already chosen for the fixed-wire business, and require operators to permit VoIP traffic, or whether they are captured by the operators and cater to their desires, rather than consumers.

When people talk about wireless VoIP at the moment, they're mostly talking about phones that can use WiFi and your existing Internet connection for VoIP calls, but use the air network when you're not near a WiFi hub. That is, it seems to me, only the first step; as 3G spreads, along with cheaper data pricing schemes, a move to VoIP-over-3G strikes me as inevitable--unless the operators can thwart it in some fashion.

Thus, it seems to me that the "copyfight" is only the first of what are likely to be a number of situations in which disruptive IP technology threatens existing businesses, who respond by trying to control consumer behavior--and by attempting to use government power to suppress innovation.

I wonder, in fact, to what degree the current consolidation we're seeing among wireless operators is motivated, in part, by fears of this very phenomenon--the more monopsonistic the market is, the better able operators will be to maintain pricing in the face of pressure. But short of regulatory intervention to maintain prices at an artificially high level, I don't see how this can be resisted, ultimately.
posted by Greg at 4:02 PM

FEB 24
Positioning for Profitability in the Video Game Economy
A conference sponsorted by the Wall Street Transcript. At the Harvard Club, 27 West 44th St, $895 fee for a day-long conference. I'm moderating the mobile games panel; speakers include Brent Brookler of Mobliss, Isaac Babbs of Infospace, and Eric Albert of Gameloft.

MAR 11, 2:30
Burning Down the House: Game Developers Rant
Panel at the Game Developer's Conference in San Francisco. Moderated by Eric Zimmerman, other speakers include Warren Spector, Chris Hecker, and Brenda Laurel.

MAR 24-27
Guest of Honor at Fastaval, the Danish national RPG convention, in Aarhus. Speaking on the 25th on "convergence between tabletop RPGs and other games," on a panel about "alternative uses of RPGs" with Max Moller of Learning Lab/Denmark, Ask Agger of Zentropa Interactive, and Svend Larsen of Reflection-in-Action.

MAR 29
Speaking on the future of mobile games at Learning Lab/Denmark.

MAR 30
Lecturing at Miguel Sicart's Computer Game Theory course at the Copenhagen IT University.

MAY 17, 1PM
Mobile Games: Taking advantage of what's new in handset technology
Moderating this panel at E3; confirmed panelists include Phil Cooke of Digital Bridges and Brian Wolkenberg of Motorola.

JUN 16-20
Digital Games Research Association Conference
I'll be giving a short paper on the historical tendency of game design technique to advance by the publication of one novel game that spawns a whole genre--and by historical, I mean beginning in the 18th century. In Vancouver.
posted by Greg at 11:39 AM

I have a review of Hofer's The Games We Played, a coffee table book about 19th century American board games, in the current issue of Games International, a UK-based magazine about boardgames. (They don't seem to have a website, but there's a little bit about it here--which, incidentally, seems to be the website of Bruce Whitehill, author of the invaluable Games: American Games and Their Makers, 1822-1992--and should you want to subscribe, try here.)

I also have a letter to the editor in the current issue of The Economist, commenting on an article in a previous issue in which they discussed low per-capita videogame sales in Germany and came to the conclusion that Germans just don't like games as much as people from other countries--which, of course, will come as something of a novel idea to the boardgamers among us.
posted by Greg at 7:46 PM

Doubtless you've seen the news about EQ II's new in-game /pizza command.

I hope they got paid a chunk of cash, but I mean... The gorge rises. Pizza Hut? Retch. I am so glad I live in a city with real pizza.

Now, if they let me customize the command so I could summon the pizza of my choice... that would be useful.
posted by Greg at 3:26 PM

Phil Steinmeyer, who used to run Pop Top (Tropico, Railroad Tycoon 2), recently started a pretty decent blog; but what caught my eye is his game business faq. Basically, it pulls together information that's publically available elsewhere on overall market sizes, best sellers, etc.--nothing you couldn't find without googling, but useful to have it in one place. The next time I get asked questions by witless analysts or people working on business plans, I can just point them here.

Incidentally, the numbers may be publically available, and may be the best that is publically available, but a lot should still be taken with a big grain of salt. If the European mobile games market is $600m annually today, I'll eat my hat.
posted by Greg at 5:03 PM

My, my, my... Now this is interesting.

Thottbot is a very clever little piece of software that, in essence, automates the collection of spoiler information for World of Warcraft. It's a plugin that WoW players can download and install; once installed, it tracks every mob, item, quest, and so on you encounter, and sends it to a remote database, where it is automatically collated and made available to everyone on the Thottbot site. Thus, it does essentially the samething community sites for MMOs have always done--but automates the process. Tres cool. (It's built on to of something called Cosmos.)

But according to this post on Wow Census, Thottbot is in fact owned by--IGE, a company that makes a business of selling "virtual property" in almost all of the top MMOs, and is universally loathed by most MMO developers, since in their view, IGE assists people in violating their terms of service, which generally prohibit such sales. (Links via Slashdot.)

(IGE has, in the past, been rumored to employee people in China as pharmers, that is, people who play for the sole purpose of gaining virtual property for resale--although IGE has recently denied that they do so, and claim their China office consists solely of customer service personnel. Nonetheless, it is clear that some games, particularly Lineage 2, are rife with pharmers, to the point of making it close to impossible for "regular" players to obtain rare drops. Whether or not IGE is involved in the practice, -someone- is, and it's likely that IGE does business with said someones.)

Now, here's the thing; if Thottbot is just potlatch, a way of contributing to the community by helping build a database of information about the game, then its unexceptionable. Some might argue that "you're building a cheat database," but really, MMO worlds are so large and complicated that assistance, particularly for newbies, is both necessary and reasonable--and the MMO operators don't provide the information themselves. In the past, no one has complained about fan databases--and indeed, MMO operators generally view them as strong positives, expressions of enthusiasm by the fans, and useful sources of information by fans.

But--many gamers also loathe "eBayers," and if Thottbot is also benefiting, in some fashion, the biggest eBayer of all (though IGE doesn't trade on eBay directly, it uses its own facilities), well, that's a whole different matter. And it also raises the issue of whether the information displayed by Thottbot is entirely aboveboard; wouldn't IGE have an incentive to, for example, keep information about some rare drops private, so they can direct their own people (or subcontractors) to mine those drops?

I'm not saying they in fact do so; I suspect not, since the value of Thottbot lies in the number of people who use it, and they'd want to maintain trust in the service. But there is a clear conflict of interest here--the kind of conflict of interest that, in world of real commodities, leads to things like the "Chinese wall" between traders and analysts. Or to bans on having accounting firms both perform audits and also perform consulting services for the same client.

In other words, if this kind of thing were to arise in a real, rather than a virtual, market, the SEC would be all over it.

Note that the allegation is a result of one post on a bulletin board; it may not even be true. But it does raise some interesting issues about the evolution of virtual property markets, and possibly about what sort of regulation they may ultimately need.
posted by Greg at 2:56 PM

Paul Hyman, writes the games column for the Hollywood Reporter and has been doing some interesting articles recently, has a piece on the Hollywood model for game development, which Alex Seropian (ex-Bungie) of Wideload Studios is promoting. In this case, "the Hollywood model" means keeping a core creative team on staff and using contractors for most of the work. IMO, doing this with code would be extremely difficult--I want the coders in-house and closely watched by the tech lead and producer--but quite doable with art assets, and given that art production is more than half (sometimes a lot more than half) of the production cost of a typical game, there is some logic to the idea.

But let's look a little bit about what happens if the industry does adopt this as the norm. The problem with being a contractor is that you have no job security--you always have to be looking for the next gig. I've been a freelancer off and on for a big part of my professional life, and it's not easy; you must expect to spend 50+% of your time prospecting for work, meaning you have to charge enough for your work to carry the other portion of your time. (Of course, employees probably spend 50+% of their time goofing off, so maybe there's no net loss here.)

Of course, you can argue that "job security" in the industry is completely illusory, anyway; it's very common for a team, or a big portion of it, to be laid off at the end of a project. For small studios, that's because they may not have the next project lined up when the old one ends; for larger ones (or big publishers), it's because the end of one project is often an opportunity to cut. At many larger studios, toward the end of a project, virtually everyone on the project is spending a lot of time with internal politics, trying to get themselves attached to another, earlier stage project, so they don't get canned when the current one goes gold master. This, of course, means a lack of focus on the project just at the moment when it needs it most.

In other words, realistically, people are already hired on a project-to-project basis, even though they're told they're "full-time employees," with the presumption that employment continues once the project is over.

What "the Hollywood model" does is change the dynamic: instead of putting in 40 (or 6o or 80...) hours a week, you're paid a flat fee in exchange for providing agreed-upon deliverables in an agreed-upon time-frame. That's a good dynamic from a project management perspective, since it's easier to budget X dollars per character model (or whatnot) than simply have Y staff around for Z hours, and hope that you're time estimates are reaasonably accurate. Thus, I believe Seropian when he claims to have saved roughly 35% of the budget by using contractors (by comparison to the cost of hiring folks).

But is this model better for people working in the industry? Well, it does work for Hollywood, right? And plenty of people make decent money working in the movies as craftspeople--so a priori, it seems like it could work.

There is, however, a big "but." But in Hollywood, all of those contractors belong to unions. The unions not only set minimum pay levels, but at least as importantly, provide health care and other benefits. That's key.

For a decade or more, I went without health insurance, and never saw a dentist; I made not bad money as a freelancer, actually, but I have kids and a Manhattan apartment, I was in good health, and frankly, I was running to run the risk in order to ensure that other priorities were met. It sucked. (Incidentally, if you're a freelancer in New York, pretty decent health insurance can be obtained at reasonable rates through Working Today.)

Typically, employer's budget as much as 30% above salary cost to deal with benefits (plus employer's share of social security). As a freelancer, you must bear that cost yourself, and also budget a fair bit of your time for work prospecting. The only way it adds up is if there is a way for you to obtain the necessary benefits at a reasonable cost--and that means unionization.

So this, I think, is a reasonable question to ask of proponents of the Hollywood model: Are you willing to go this route even if it means the unionization of the industry?
posted by Greg at 11:39 AM

Cognitoy, a Boston-based independent game developer, has a new product called Cosmic Blobs. It's a 3D modelling and animation package for kids--or to put it another way, Cosmic Blobs is to Maya as KidPix is to Adobe Illustrator.

This is, I think, a good idea. Karen says "It's as hard to work with as Maya," but by this she means that if you are attempting to model a particular object (a choo-choo train, say), figuring out which controls you need to use, in what order, to obtain your objective is non-trivial (and probably beyond the capacities of, say, a 5-9 year-old). And it doesn't help that the application uses tool icons exclusively--icons are not always intuitive, and text menus at least provide a little information about their functionality. And there are no tooltip mouseovers (an unfortunate omission).

However, if you approach the application in the way I suspect most kids will--mess about with it and see what you get, rather than trying to get a model of something in particular--it's good fun. When I mucked about a bit, I got some odd looking objects somewhat reminiscent of creatures from the Burgess shale. I can definitely see kids in the 8-12 range having fun with this.

For that matter, adults who want some idea of what 3D artists do to build models may find Cosmic Blobs worth a look--certainly, the $39.99 price point is a whole lot less than the cost of a Maya seat. Although I don't believe there's a way to export models as anything useable, so this certainly isn't going to replace a professional-grade application.

Still, an interesting effort.


Update: Kent Quirk writes "Hey, Greg. I saw your blog that mentioned Cosmic Blobs. I was the lead architect on that product – but the product was funded by SolidWorks, which is owned by Dassault Systemes. Originally CogniToy was working as a contractor on the project, but now I’m actually employed by SolidWorks."
posted by Greg at 9:53 AM

Argh... Got up at 5 today for a conference call with Finland, then realized it's actually scheduled for tomorrow...

Clive Thompson discovers what we already knew; that cut-scenes suck (thanks, Zdim).

John Szeder writes that the end is nigh for mobile content. John believes that 3D is "the death of gameplay," and he arguably has a point, at least for some game styles. And... do we really need 3D bowling? And if we do, wouldn't it be better to do something interesting with the 3D aspect, like, say, Rocket Bowl?

Also, Dave Thomas writes to point us to the IGJA Style Guide wiki. As he points out, Chicago Manual doesn't tell you the correct orthography for "Xbox".


posted by Greg at 9:48 AM