Fun Inc. (24 page)

Then there are alternative interfaces, which have just started to come into their own thanks to the latest generation of mass-market advances by console manufacturers. We are entering an age of neurological control, facial and postural recognition, and real-time sensory feedback – one where remote human interactions will increasingly involve more than simply sounds and images, and where three-dimensional displays will finally start to become a realistic option for home users. We can expect games to remain at the forefront of this field, with physical feedback and motion detection as standard in every gaming device in the near future. Away from the home, location-based gaming will also offer a different kind of interaction, with GPS-enabled gamers tying up with everything from Google maps to TripAdvisor.

Contrary to the old-fashioned vision of video games as isolating experiences, it’s social interactions of various kinds that are – and will continue to be – the biggest single engine driving both gaming and modern media progress as a whole. Yet social networks, from Facebook to Bebo and even Twitter, could be in for a rude awakening. They may host some good applications, but the networks themselves are still not nearly as fun to use as actual video games, and already their kind of functionality is starting to be incorporated as standard in almost every new media application and platform. Younger people are spending more and more time using the social networking services that come attached to particular games and consoles in preference to communities like Facebook, and with the increasing interlinking of this kind of interactive service, specialist social networks may find themselves sitting in a vanishing marketplace.

On the hardware side of things, mobile internet technology is the undisputed key to the immediate future. First-generation mobile phones were terrible gaming platforms: they offered no business model whatsoever to developers or publishers, and no marketplace to speak of for customers wishing to purchase games of a decent quality. All this has now changed beyond measure. Every year, approximately as many mobile phones are sold as home computers have ever been sold. As of the last few years, these phones are increasingly able to function as internet-enabled computers in their own right – and this, complete with the capacity for customers to purchase and install independently developed applications on them, represents a global technology revolution all of its own.

The iPhone is by far the most successful example of this kind of device, thanks to its aesthetic appeal, slick interface and the masterful precision of its online marketplace for downloadable software, the App Store. And here the statistics already speak for themselves. During the first year of the Apple App Store’s existence, between July 2008 and July 2009, over 1.5 billion applications were downloaded. This is just a marketplace for Apple products to be used on Apple phones, yet it’s already worth over $1 million a day in revenues. And, in obedience to one of the most reliable long-term principles of any programmable technology platform, the one thing people seem to want to do on their iPhones more than anything else (apart, perhaps, from phoning people) is to play games.

The single most popular and populous set of applications on the App Store are games. In July 2009, ‘Games’ and ‘Entertainment’ (programs that are essentially mini-games or puzzles) were the No.1 and No.2 categories of App respectively, with 10,805 active Games (18 per cent of the total) and 8,508 Entertainment programs (14 per cent). There were also another 3,900 (6.5 per cent) classified as Education titles, most of which are simply serious games that teach maths, languages and so on. These three areas together account for almost 40 per cent of all iPhone applications – and some of them are rather good. The No.1 paid-for download in July 2009 was, as you might expect, a video game (so were No.2 and No.3). In
I Dig It
, which costs just a couple of dollars, you play a farmer who’s obliged to burrow away through the earth underneath his farmhouse in a specially adapted digger in order to uncover rare metals, minerals and so on. He has to do this, you’re told, in order to pay the mortgage on the farm: a pleasingly unlikely combination of credit crunch concerns and science fiction solutions. With beautifully hand-drawn graphics and an intuitive touch-screen control method, it’s cheap, quirky fun of the kind that’s increasingly dominating the free time of much of the Western world.

With 45 million iPhones sold already, it’s conceivable that the iPhone could, on its own, become the world’s most important gaming platform within a few years. What’s certain is that Apple’s App Store – and its policy of allowing developers to submit their applications for approval and sale within the Store cheaply and easily – has established a model that will be emulated everywhere by pretty much anyone who wants to make a success of their own mobile internet phones and future technology platforms – all of which, of course, are likely to boast games as their top-selling software draws. The gaming revolution hasn’t just left the bedroom and entered the living room: it’s out on the streets, in people’s pockets and amusing them on trains as they come home from work.

Despite all this potential for growth and influence, there still remains an element of paradox in the modern video games industry: a result, in part, of the enormous momentum older models of media production still have. As far as most individual companies are concerned, making and selling traditional, big-budget video games remains a deeply uncertain commercial proposition. This perception is shared to some degree with all the creative industries. Creating a hit is an art, not a science. Big games are extraordinarily complex products that demand substantial up-front investment, and this means that many established games publishers are likely to remain conservative in their outlook, relying on established brands and series for the bulk of their income. Smaller companies, meanwhile, may be able to make a splash with digitally distributed delights, but they face an uphill struggle to break into the realm of serious profit. Much of the money is still in boxed product, old-fashioned distribution and online extras to keep players happy.

While the current generation of consoles remain on the market – the PlayStation III, the Xbox 360, the Nintendo Wii – this is unlikely to change. Too much money has been spent by their manufacturers in developing them, and by publishers and developers in learning how to develop games for them. Yet this generation of consoles may well be the last time that the gaming industry sees what has been, for the last two decades, a constant cycle of vast initial expenditure on developing new hardware, translating after a few years into huge profits, thanks to licensed software sales on the several hundred million hardware units that have been sold.

Nicholas Lovell, an industry analyst who has spent the last fifteen years working and advising companies in the overlapping areas of technology, media and finance, is one man who believes that the present generation of games consoles may also be the last. ‘I believe the console is dead and the future is online,’ he argues. ‘The current generation of consoles is predicated on companies subsidizing a very expensive piece of hardware, and recovering their money mainly through a tax on everyone who wants to develop games for their platform. You can make some money selling consoles at the end of their life-cycle, after all the research and development is paid off, but the core of the model is that the console manufacturers have absolute control over their platforms and over who gets to develop games for them.’

The old model, in other words, relies on everyone wanting to develop games for Sony, Microsoft and Nintendo’s machines – and being willing to pay a hefty premium to do so. And this, Lovell believes, is a situation that in the age of an open internet is no longer sustainable. ‘Anyone at all can develop games for the PC, for websites in general, and for devices like the iPhone. And what that means is that the game the console manufacturers are fighting is the same old battle that other companies fought at the start of the internet, of a walled garden over open access. In the end, in my opinion, it is inevitable that the open world will kill the closed one.’

It’s an analysis that is, in many ways, music to the ears of the business community. Accel Group is one of the largest global venture capital firms to specialise in interactive media. Founded twenty-five years ago in Silicon Valley, it has since expanded across America, Europe, China and India, and now manages a pool of over $6 billion in investment. Yet only recently has it decided that the video games industry is ripe for the kind of investment it has historically put into companies such as Facebook, BitTorrent, Real, Macromedia, comScore and numerous other blue-chip internet players. As one of their senior partners, Simon Levene, who joined the company in 2006 and has a particular interest in internet-based services and entertainment software, explained: ‘Gaming, historically, is really not an area that has attracted a lot of professional venture capital. And this is because it really has been a hitsdriven business – and because the economics have really been stacked against development studios, what with the power of a few publishers controlling distribution and the required amount of capital and time needed to build really good games just growing and growing.’

The situation for those investing in internet-based games today looks very different. Cost of entry is lower. Time to build is much shorter. Time to market is much faster. And the cost of failure is far less devastating. Moreover, distribution is no longer reliant on the cooperation of a publisher with heft in big retail outlets: titles can be bought online from anywhere, and success can spread as much by word of mouth and online friendships and social networks as by expensive advertising campaigns. ‘All of this,’ Levene explained, ‘makes it a very different industry to the one we shied away from twenty years ago. If you look at the statistics from people like ComScore, they think that between 5 and 10 per cent of all time spent online is spent playing games. And that doesn’t even include people playing things like
World of Warcraft
via specialised clients rather than in browsers. It is an unbelievable amount of human time, billions of hours, and it is growing far faster than the rest of the web.’

However; console manufacturers are not simply going to sit back and watch their business model die. For a start, there’s the example of the Nintendo Wii, which by refusing even to compete with the raw processing power of Sony’s and Microsoft’s machines introduced a hugely successful new model into a marketplace hitherto dominated by raw processing power: a fun-led, lower-powered platform, with the emphasis firmly on appealing to consumers by innovation and entertainment value rather than graphical and sonic marvels.

Beyond this, though, lies a still more important point, at least as far as Sony and Microsoft are concerned: the fact that the real battle heating up in living rooms around the world is not so much about being the world’s video gaming machine of choice as about being the world’s all-singing, all-dancing media box. This is why Microsoft entered the console war in 2001 in the first place: because it realised that the market for electronic play was about to blossom into something far bigger. With all consoles now boasting wired and wireless internet capacities, and the ability to play DVDs, audio CDs and other media with ease (although only Sony’s PlayStation III can so far boast a Blu-ray player), they are increasingly positioning themselves not just as games machines, but as media hubs, able to offer everything from on-demand television and movie services to media playing and social networking. Microsoft has proved itself the nimblest of the big players here, and has already announced a live television service in partnership with Rupert Murdoch’s BSkyB in the UK. This will effectively provide a satellite television service via a console through a broadband connection rather than a dish; and it will compete directly with the set-top boxes that – complete with the ability to record and manage television programmes digitally on a hard disk – are now the mainstay of the pay-television industry.

Given the number of consoles in use around the world – which, including handheld machines, is already close to half a billion – the idea of exclusive console-based television content is likely to prove an extremely appealing one for both struggling television companies and their equally audience-hungry advertisers. And given the hardware and software sophistication of most consoles, as compared to most cable and recordable television boxes, the battle to deliver a top quality product is one consoles are in a strong position to win, should they choose to fight it.

In fact, with consumers’ expectations of all media increasingly tending towards the interactive – recordable digital television, music that is purchased and managed as discrete MP3 files, photographs that exist and are displayed only on screens – gaming machines are remarkably well placed to become the single indispensable object sitting next to any flat-screen television. They are operating in a different league to PCs in terms of design, interfaces and sheer consumer cool: PCs for browser-based fun; consoles for living room media; smartphones for everything else. The future is looking increasingly like a triple-platform place – with everything socially linked and synchronised online, and the games software industry cropping up everywhere and anywhere there’s a media product being consumed. It won’t be long before the first games are released for e-book readers like Amazon’s Kindle: the idea of any media platform in possession of a marketplace lacking games seems unlikely to last for long.

In fact, perhaps the most significant challenge to the console model of gaming is not so much competition from PCs as the more radical possibility of removing most of the hardware from the homes of individual consumers entirely. Much like ‘cloud computing’, where the remote use of powerful central computers via the internet is already revolutionising many people’s relationship with traditional suites of applications on their computers, this kind of system could offer gamers a simple two-way streaming service in the place of a traditional, expensive console: an inexpensive box able to stream sounds and images in one direction, and relay their instructions in the other, with a central piece of hardware doing all the intensive work, just like the machinery that powers an internet search engine or any other remote service.