Philippe Paquet Tech blogging from Los Angeles

7Oct/10Off

The great disconnect

I have been looking at a very uncanny phenomenon. On one side, the number of personal computers has been increasing sharply (see 1, 2 and 3) and, on the other side, the revenues from PC games, as a percentage from overall games sales, have been steadily falling (see 4).

Some would blame the recent economic troubles but I don’t believe that is the case for two reasons: 1) that trend started before 2008 and, 2) if you can afford a new personal computer, you should be able to afford to buy at least one game.

I actually don’t even believe that revenues from PC games have been falling at all. I believe that they have just been shifting from traditionnal game publishers to companies like Zynga (see 5), Playdom (see 6) and PopCap (see 7) following what I call "The Great Disconnect."

On one side, you have traditional game publishers that are still doing business as they were in the 1990s. They produce PC games as ports of console games, requiring a powerful desktop PC with an expensive graphic card, a mouse or a gamepad. Their only innovation in the last 10 years has been to give the consumers the ability to buy games online and download them.

On the other side, consumers have evolved. They have turned to laptops and netbooks. These machines are low power, come with a small screen and are equiped with touchpad. They are used on the go and in short sessions, such as on a metro commute or during a coffee break. No wonder that consumers are playing Farmville or Bejeweled. These games fit their lifestyles and their machines. If traditional game publishers still want to be part of the PC market, they will have to change their approach before the Zyngas and PopCaps of the world completely take over. Tradionnal game publishers are loosing sales every time potential customers are forced to read a game's minimum requirements. Time is running out...

    References:

  1. Gartner Says Worldwide PC Shipments to Grow 11 Percent in 2008
  2. Gartner Says Worldwide PC Shipments to Grow 2.8 Percent in 2009
  3. Gartner Says Worldwide PC Shipments to Increase 19 Percent in 2010
  4. 2009 Essential Facts about the Computer and Video Game Industry
  5. Could Zynga really be worth $5 billion?
  6. Disney buys social game firm Playdom for up to $763.2M
  7. PopCap Games’ retail revenues up 85 percent in 2008 as PC game sales dive
Filed under: Business Comments Off
1Dec/08Off

The future of game distribution

I would like to speculate a bit about the future of game distribution and take an educated guess on what is going to happen.

I've been thinking and talking about that for years actually. To me, the future of game distribution is 100% online. I have been expecting that to happen years ago but it seems that in the consumer space, time is relative. So, here is my guess: in 5 years, the only way to buy a game will be online. There are several reasons for this:

  • Online distribution would eliminate the cost of goods. On the scale of the game industry we're talking about hundreds of millions of dollar spent every year on cartridges, discs, manuals and boxes. That's a pretty big saving for publishers.

  • Online distribution would eliminate real distribution. By going online, you would eliminate wholesalers, retailers and all the associated marketing, shipping and logistic costs. Not only we are talking about billions dollars of saving across the industry but at the same time we're talking about eliminating the latency of distributing physical goods. As a consumer, you will get the possibility to buy any game at any time. Did I say instant gratification?

  • Online distribution would eliminate the used game market. When you buy a second hand game in a shop, the retailer is the only one making money. And retailers make a lot of money out of the second hand market as they usually take a bigger cut on a second hand game than they would on a new one. If a retailer push you toward a used copy of a game instead of a new one, don't be surprised. They're just trying to maximize their profits. Eliminating the second hand market would significantly boost publishers revenues.

  • Online distribution would reduce if not eliminate piracy. Games purchased online will be able to use online authorization systems to confirm authenticity and tie them down to a specific machine while at the same time reducing hassles for honest consumers. No more incompatible copy protection system that prevents you to play the game you bought. Reducing piracy would also boost publishers revenues.

  • Online distribution would eliminate returns. While I'm sure that all the publishers will put in place some way for consumers to get refunded if they are dissatisfied of an online purchase, they wouldn't have to deal with physical returns.

  • Online distribution would give control of the rental market to publisher and platform owners. Again, that would significantly increase publishers revenues.

After a long list of publishers benefits, what does the consumer itself get from that shift? I already mentioned instant access to games and a more transparent copy protection system as direct benefits. In addition of the direct benefits, I can see some indirect benefits:

  • As margins increases, publishers will be able to spend more money on producing games. Overall quality should increase across the board.

  • Because of the suppression of physical inventory, publishers will be able to take more risks. That should increase the originality and diversity.

  • As you will no more need to build an international distribution network to compete, the market place will open to Indy publishers. Again, that should increase the originality and diversity.

Does that mean that stores are going to disappear? Probably not. I can see them becoming very similar to what mobile phone stores are. They will still be there to sell you a console, an online subscription to go with your console and some accessories.

Filed under: Business Comments Off
21Oct/08Off

When everyone is responsible, no one is responsible

One of the major problems organizations have is accountability. Nothing gets done and nobody is accountable for that. Accountability can be a problem of it's own when there is no enforcement but it's usually the symptom of a deeper and more serious problem: responsibility. Time and time again, I've seen both the quasi paralysis and the damages caused by unclear or, even worse, undefined responsibilities. Responsibilities are to be clearly defined. By clearly defined, here is what I mean:

  • There's one and only one person responsible for an area. This is very important as the sentiment of responsibility is inversely proportional to the number of people that are responsible. When everyone is responsible, no one is responsible.

  • The boundaries of an area of responsibility are well defined. It's very easy to give an area of responsibility to someone but unless there is a clear and agreed definition of the boundaries you're going to have gaps. If you have ever heard things like "I thought that marketing was covering that." or "Isn't that responsibility of production?" then you know what I'm talking about.

  • The person responsible for an area knows what they are responsible for. I know that sounds obvious but very often it is a problem. Responsibilities need to be clearly communicated. You can't just assume that someone knows what they are responsible for, you have to tell them.

  • The person responsible for an area agree to be responsible for it. Whether you impose responsibilities from a position of authority or you broker an agreement between peers or with your superior doesn't matter. If you don't have an agreement, you're wasting your time.

  • Everybody needs to know what people are responsible for. Knowing who is responsible for what will help people to direct information to the right person. Additionally, peer pressure will help to improve overall performance. When everybody knows what you supposed to do, everybody can see if you're doing it or not.

Only after responsibilities have been clearly defined will you be able to efficiently take care of accountability problems and manage performance. Save yourself time, money and headaches by making sure responsibilities are clearly defined before starting any kind of project.

Filed under: Business Comments Off
26Sep/08Off

The convergence of mobile phone platforms

I would like to speculate a bit about the future of mobile phones and take an educated guess on what is going to happen.

Up to June last year, mobile phones were closed platforms. You had to have the permission of both the network operators and the phone manufacturers to develop an application. Then, you had to go through the network operators to distribute that application. A long process that only large companies could afford to go through. On June 29, 2007, when Apple introduced the iPhone, everything changed. Small independent developers were not only given the opportunity to develop applications for the iPhone but were given distribution independently of the network operators.

Let's speculate about what is going to happen. After being exposed to the iPhone, I believe that consumers are going to require from their network operators to get phones that offers the same features, including the same diversity of applications. Pretty obvious, isn't it? The problem is that, because of the differences between phones, you have to develop a specific version of your applications for every different phone. If you want to provide broad support, you have to produce hundreds of versions of your application. Small independent developers can't afford to do that.

So, here is my guess: To solve that problem, network operators are going to require from phone manufacturers unified, open platforms. And the only way that phone manufacturers can achieve that will be through 3rd party operating systems. I believe that in the next two years, every mobile phone except maybe the very low end models, will be running one of following operating system: Windows CE, Android or MacOS (The iPhone runs a cut down version of MacOS).

Now, what is going to be very interesting is to see what network operators are going to try not to be transformed in dumb pipes and keep their control on the content market.

Filed under: Business Comments Off
24Sep/08Off

The $5000 meeting

One the company I was working for regulary held large high level meetings. We would take an afternoon and review a good part of the product portfolio. In addition of the peoples responsibles for the products, all the executives, vice presidents and most of the directors were present. The CEO will arrive in the meeting room, look around and quietly comment "very expensive meeting". Of course, he was right. If we were to add the hourly rate of all the peoples present, I have no doubt that we would be far from a $5000 meeting. Now, did we get any value for spending $5000 on a meeting. Sometimes we did and sometimes we didn't.

A very common problem is ownership. Very often, peoples expect the highest ranking person in the room to run the meeting. Why not? He's the highest ranking after all. Well, that's wrong. If you call it, you own it. If you call a meeting, it is your responsability to run it and by that I mean the following: It is your responsability to keep discipline in the meeting. It is your responsability to keep everyone focused and more importantly, it is your responsability to get an outcome. Who's going to do what? If that is not clear for everyone, you wasted time and money.

Another common problem is the 5000 people meeting. Let's invite everybody, just in case of. Maybe they need to know what we're going to discuss about? Maybe I would get a promotion if the executives see me solving problems? Again, that's wrong. You don't want to waste people's time and company money. You should only invite people that are necessary to get an outcome. First of all, make sure that your meeting invitation clearly state what you are going to talk about and what you are expecting as outcome of that discussion. That way, not only you will give the people you invite a chance to decide if their presence is required or not but you will have attendees that are prepared for the discussion to come. Then, instead of inviting people that won't have an involvment in getting an outcome, consider sending them meeting minutes. You keep meeting minutes, don't you?

So, save your company some money and save your co-workers some time by doing the following:

  1. Only invite peoples that are required to get an outcome.
  2. Make your meeting invitation clear, specifying what you are going to talk about and what outcome you expect.
  3. Own the meetings you call by keeping discipline, keeping focus and making sure that you get an outcome.
  4. Send minutes to the people that need to know about it.
Filed under: Business Comments Off