Maxthon has carved out a name for itself as a reliable alternative web browser built with the cloud in mind. The company has more than 120 million monthly users for its browser, which isn’t as crash-prone as those made by its rivals.

Now the Beijing-based company hopes to transform the web experience further by releasing a WebKit core for Android browsers so they can become better foundations for web-based games. The new release of the browser, which has achieved a billion downloads, will make it work even better with web-based games, the company says.

Karl Mattson, the general manager of Maxthon International, told GamesBeat that the Maxthon cloud browser has carved out a niche among gamers because it allows them to sign into as many as five separate accounts simultaneously. That allows them to play different games at the same time. It is also more reliable since memory-management technology was built into the browser from the ground up. If you’ve ever had a browser crash on you during a game or a multi-window session, you’ll come to appreciate memory management. This is basic plumbing for the internet. And it’s something that is holding up the progress of the game industry, along with the difficulty of making games that can run across various platforms.

“We’ve grown by word of mouth in the gaming community,” Mattson said. “We’re the best browser you’ve never heard of. Now we’re offering the world’s best support for HTML5,” the lingua franca of the web. In a test running HTML5 canvas using the CanvasMark benchmark, Maxthon scored the highest of the major web browsers in running HTML5 pages.

That improved support for HTML5 will make it easier to run both 2D and 3D games in web browsers, enabling games to be written once for the web and run on a variety of platforms. Maxthon is available as an app in Apple’s iTunes App Store and the Google Play store for Android devices.

“Gamers are the canaries in the coal mine in leading support for fast browser performance,” Mattson said.

Mattson said that the browser has become the favorite of pro gamers who play web-based games in professional tournaments. It also offers a split-screen feature on the desktop. Maxthon says it can render web pages on Windows, Android, and iOS faster than any other web browser.

Maxthon is growing in a variety of regions, but its market share in browsers is still below that of rivals like Opera, Firefox, Chrome, and Internet Explorer. The company is now expanding in the U.S. market. Another rival is OnLive, which offers a cloud-based browser that loads pages really fast. But Maxthon doesn’t put quite as much of the computing task in the web-connected data centers, or cloud, itself.

“Our goal is to make the actual software faster,” Mattson said.

Jeff Chen, a student in Singapore, started the browser in 2003 when he created a browser out of frustration. He was tired of the poor performance of the big browsers and found an abandoned browser projected dubbed MyIE. He decided to craft his own browser, dubbed MyIE2. He formed the company Maxthon in 2004 and kept adding features. In 2005, Chen renamed the company Maxthon, and the browser became the first one with tabs. Then it added sandboxed tabs in 2007 for added security. In 2008, Maxthon offered cloud-based services for syncing bookmarks and history.

With memory management, Maxthon allows you to pick up where you left off, no matter what you were working on, with any of your Internet-enabled devices.

“We started with a high-performance web-browsing experience,” Mattson said. “We made a strong commitment in the last year and a half to HTML5 support. We’ve got support in the gaming community because of this. We’re making HTML5 games work really well. As a company, we believe that the browser should change the computing experience.”

That meant that users could log into their browser and access their own favorite web pages and history of browsing from any location. In 2010, Maxthon came out on Android, and it has reached more than 500 million downloads to date on that platform. In 2011, the browser came out on Android tablets. Maxthon is also getting chip makers such as Intel and Advanced Micro Devices to support its software in their hardware. The company received one round of funding from Charles River Capital and WI Harper. Today, the browser is used in more than 150 countries.

Maxthon provides HTML5 support in Android, allowing for high-quality video support and Web GL enhancements. Other new features include the ability to run 2D games at 60 frames per second on devices that can support such graphics. It can also run WebGL 3D graphics.

Maxthon has more than 220 employees and is profitable. Now that’s a company that should be on the radar of all of the major game companies and platform owners.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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You have to love the game business and the beauty of competition. As Nintendo’s fortunes sink in the video game console business, Ouya’s fortunes are rising with its $15 million in venture funding. It is conceivable that the console business could become a four-horse race.

For years, the oligopoly has been ruled by Nintendo, Sony, and Microsoft. When one of them got too arrogant, it fell of its perch, and another would step forward to grab the throne. But then Apple came into the business with the iPhone and threw that cycle into disarray. Nintendo ruled the roost when the Wii launched in 2006, but Microsoft cut off its motion-sensing advantage with the launch of Kinect in 2010. And, after selling nearly 100 million Wii consoles, Nintendo came back last fall with the Wii U, the high-definition console with a tablet screen to control it. Nintendo appeared supremely confident just before the Wii U launch.

Against the might of Nintendo, Ouya seemed like an ant. Sure, it had raised $8.6 million in crowdfunding on Kickstarter, but to put out a real game console in lots of retail stores takes a huge investment. It had no credibility even with all of the support from indie game developers who didn’t have the cash to make big-budget console games.

Now the scales may be tipping.

Ouya has been lifted by premiere Silicon Valley venture capital firms Kleiner Perkins Caufield & Byers and Mayfield Fund. Both are lending their credibility; Kleiner’s Bing Gordon is joining the Ouya board. Their money will let Ouya make more consoles that will seem like a bargain to console fans — at $99 for the hardware and tons of free-to-try Android games.

If Ouya hits its targets, it may be able to raise more money as it needs it. Julie Uhrman, the chief executive of Ouya, told GamesBeat, “What I love about Bing is that he is not constrained by conventional thinking and is a great supporter of game developers.”

We’re not sure what the valuation was, but Ouya just got a lot more expensive as a potential acquisition. Nintendo should have grabbed it while it had the chance. Nintendo, meanwhile, had its window to sell Wii U game consoles during the last six months. It had a shortage of hits, and the big games from top publishers either didn’t materialize or didn’t sell well. Nintendo generated some good digital revenue through the app store on the Wii U platform, but it hasn’t had a huge breakout hit on that front.

Now the Wii U is dead in the water. Nintendo sold 3.45 million Wii U consoles as of March 31, and since December, Nintendo sold just 390,000 Wii Us. That’s a horrible start for a new game console, and it must be viewed in this context: Apple sold 56 million iPhones and iPads in one quarter.

As Apple was gathering steam, Nintendo was resting on its laurels and watching the money come in from the Wii. It squandered a chance to do something about the situation. Somehow, with the design of its new console, Nintendo whiffed, and it is in the process of moving from No. 1 in consoles sold in a generation to No. 3 or maybe even No. 4.

Apple is being chased by Google’s Android, and Ouya is riding on that wave, too. Console kingmakers Electronic Arts and Activision Blizzard appear to be pulling the plug on Wii U versions of their games. Activision Blizzard isn’t making a Wii U version of Call of Duty: Ghosts, and EA isn’t making a Wii U version of Battlefield 4.

Gordon said in an interview this week, “My own take on Nintendo is that the Wii was a spectacular head fake.” But Microsoft’s Kinect and its Xbox Live service have staked out the high end of the game business. Sony, by comparison, “is starting to look like the new Sega of the game business,” Gordon said. That means that it may soon exit hardware, as Sega did with the ill-fated Dreamcast.

Nintendo ruled in cartoon-style 2D games made by game masters like Shigeru Miyamoto, but Nintendo is losing fans of cartoon games to the tablets and smartphones, Gordon said.

“Once you have a tablet, there is not much reason to buy a Nintendo,” Gordon said. “What they have left is the Miyamoto exclusive box. If you want his games, then you spend the $300 on whatever Miyamoto makes. But that’s a box for tens of millions, not hundreds of millions.”

The question now is what should Nintendo do to right its ship. The odds are strong that it will have to be something drastic — something as disruptive as the Wii was. Or something as risky and crazy as buying Ouya. Or one of the many variants of gaming on Android, such as GameStick or Green Throttle Games.

Maybe Nintendo could get rid of hardware and make its software available on all platforms, as EA and Activision are doing. Wherever it goes, it will face competition. And that’s a good thing. It would be nice if Nintendo can find that expanding part of the game market that no one has discovered yet — the blue-ocean strategy that Satoru Iwata, the chief executive of Nintendo, has embraced in the past. In that strategy, it’s best to swim out far into the ocean where no competitors are rather than swim into the red ocean where sharks are feasting and fighting for scraps.

Nintendo will have its chance to be heard at the Electronic Entertainment Expo (E3) trade show in Los Angeles in June. I hope Iwata can figure this out. Otherwise, it will remind me of the words of Kurt Vonnegut from the novel Cat’s Cradle: “Of all the words of mice and men, the saddest are ‘it might have been.’”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The NeuroGaming Conference and Expo drew more than 300 people to the YetiZen Innovation Lab this week in San Francisco. That’s a good turnout for a first-time conference, and it generated enough buzz to inflate a new investment bubble in games. There was plenty to get excited about with games that can really latch onto our nervous systems and brains. More than 50 companies showed up to share their efforts in the space. But it’s also clear that the nascent market is also in need of a reality check.

Source: Dean Takahashi

Roger Quy, Nate Hennings, and Sana Choudary

Zack Lynch (pictured above), the organizer of this week’s event and founder of the Neurotechnology Industry Organization, deserves enormous credit for envisioning and defining a new part of the game market. He explains Neurogaming as the “technologies that integrate all of our nervous system, not just our brains, into gaming.” It includes technologies that track things like player heart rate, brain wave data, facial analysis, pupil dilation, hand and body gestures, and changing emotional and cognitive state — all toward driving actual gameplay.

Lynch is effectively looking ahead to the point where new technologies put the spinal cord in touch with the brain and result in a fusion of big data games that are fun. Looked at that way, you could see Neurogaming as a combination of a market with lot of early R&D (it’s still pretty hard to use only your brain waves to control a game), as well as a market where a lot of heavy lifting has been done in putting the sensors in place, such as the Wii remote or Microsoft Kinect. Neurogames will take the data from sensors and turn it into fun. In five years, Lynch believes it will be a huge market.

But if someone is going to invest what it takes to make that happen, there has to be a pay off. At the event, I moderated a panel of investors who evaluated the risks and opportunities in the market. We took a survey of the space. On the lightweight level, Neurogaming started with “brain training” games such as Nintendo’s Brain Age from 2005,  and it has evolved into hardcore brain training games from companies like Lumos Labs. And it has expanded to include sensor-based gaming such as Nintendo’s Wii Fit, Microsoft’s Kinect Sports, and Intel’s Perceptual Computing initiative.

Our panelists saw Neurogaming hardware startups as risky ventures, and none have made a real investment in a Neurogaming company yet. I characterized the market as being made up of great science fiction, fascinating R&D, and limited commercial potential. Chris Petrovic, a former general manager of GameStop Digital Ventures, said it was very hard for the retail chain to embrace startups that wanted to sell an accessory for a PC or console since the likelihood that a gamer would buy an extra accessory for a machine was very low.

It’s pretty hard for startups to come up with the marketing dollars to promote a new product in 4,500 game stores in the U.S., Petrovic said. Any startup will have to find partners with deep pockets, and to do that, it will have to have technology that works flawlessly.

Petrovic also said that companies avoid calling themselves “Neurogaming” companies because they might just wind up scaring consumers, who may not want games messing with their brains.

“Keep consumers in mind,” he said. “Don’t call this the next great Neurogaming device because it won’t sell.”

Source: Dean Takahashi

Dean Takahashi, Brian Cho, and Roger Quy

So a Neurogaming startup trying to sell its own hardware (as only a few companies such as NeuroSky have successfully done) is swimming upstream. Only the biggest players, such as Microsoft, have the investment horizon and capital to build technologies such as Kinect and bring a new piece of hardware to the market with a bang.

But, as the market grows up, it is encouraging to see technologies that could be used for Neurogames being built into general-purpose devices such as smartphones. One of the most exciting platforms for Neurogaming could be Google Glass, given its use of so many big data sources that it can pull into your view, said Brian Cho, a partner at Andreessen Horowitz. That technology could prove to be very immersive and entertaining.

“It always increases what’s possible when the devices themselves are more capable,” said Sana Choudary, the chief executive of YetiZen (pictured with the gold crown). “Qualcomm acquired a gesture control company, and it is putting that capability into all of its chip platforms for mobile devices. That’s more exciting for a game developer.”

Choudary said that, based on data from the investment bank Raymond James, about 108 Neurogaming startups have raised money in recent years. Eight companies are providing technologies for game developers to enable Neurogaming. Sixteen startups called themselves platforms, seven were new hardware plays, and eight were integrating hardware devices together. Of all of the companies, only one was a pure game developer. The good news is that the category isn’t oversaturated like social casino games.

Neurogaming companies have raised around $23 million for new hardware plays and $64 million for existing hardware plays. That’s not a bad start, but it’s a small slice of the $901.3 million raised by game companies in 2012. Most new investment in games is going into mobile game companies, where it’s much easier to strike gold than in Neurogaming.

Roger Quy, a partner at venture firm Technology Partners, said he slices the market into two parts. One is the part of Neurogaming that could be therapeutic, such as the software that is used to identify and treat people with attention deficit disorder (ADD). The other part is entertainment. Therapeutic Neurogames have to have measurable benefits, but they often aren’t fun. The entertaining Neurogames are fun, but their benefits are often easily debunked.

Source: Dean Takahashi

Nate Hennings, Sana Choudary, and Chris Petrovic

“Therapeutic benefits have to be measured and pass muster with the FDA,” Quy said.

Quy worries that many technologies are being added to platforms on the assumption that they will be used for something useful. But what games would really benefit from information such as a user’s heartbeat? (Some folks have speculated that you could speed up or slow down a game based on how the user physically responds to it). Quy says that adding technology for the sake of it isn’t necessarily going to result in fun and useful Neurogames.

Quy also identified another weakness in the market: the lack of investors who are comfortable making game investments. Gaming falls “between the cracks” of information technology and healthcare investments, and many investors won’t even listen to game pitches because they can’t judge them well. On the other hand, the smaller game companies are capital efficient, and they don’t always need a ton of seed money.

Gaming is like the Tesla Roadster for Neurogaming applications, said Nate Hennings of Union Square Advisors. It is a market full of enthusiasts who want to believe in the high-end technology and will adopt it even if it is expensive and on the bleeding edge. But as the technology and games become more real, the chance to reach the mass market is growing, and it could spread into other markets well beyond gaming.

Cho said a Neurogaming startup would grab his attention if it had a world class team with people who have done a successful startup before and have a great track record working with technology. It helps to have software or hardware that can’t be easily replicated. All of that mitigates risk.

It could still be years before a Neurogaming company makes its mark. Still, with so many game companies on the downswing, it was fun to talk about a market on its way up. And it’s fun to dream.

“I would love to have one of those brain sensors so that I could blow up my enemies in a game just by thinking it,” Choudary said.

Quy said he would love to see a device with brain wave detection technology built into an inexpensive mobile device.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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A sea change has happened in social gaming. The Zynga era is over. Long live King.

It’s not quite dramatic as that as the competition is still fierce for games on social networks and mobile devices. But Zynga’s earnings call revealed a big change in the standings. Zynga said it has 52 million daily active users of its social games on Facebook, Zynga.com, and mobile devices. London-based King says it now has more than 66 million daily active users. And the remarkable thing is that King has just 400 employees while Zynga has 2,902.

Zynga has had a long run as the king of social games as it jumped on the platform as soon as Facebook opened itself up to third-party applications in May 2007. It grew quickly and, with the help of games like Mafia Wars and Zynga Poker, became the No. 1 company on Facebook in early 2009. It held that rank ever since. When Zynga launched FarmVille in mid-2009, the company’s users shot through the roof to nearly 83 million monthly active users in a single game. It started crushing rivals, who decided to flee to new platforms on mobile devices as a way to escape it.

Many contenders emerged, like Berlin’s Wooga and Electronic Arts. Just a year ago, it looked like EA would give Zynga a run for its money thanks to rapid growth of titles from its Playfish division, acquired for up to $400 million in late 2009. EA saw rocket-like growth for titles like The Sims Social and SimCity Social. It looked like, if anyone could do it, EA would supplant Zynga with its well-known gamer brands. Then, poof. EA’s audience evaporated as mobile devices grew in favor and the company failed to capitalize on its one-off successes. EA finally shut down Playfish this month.

But you can’t fully credit Zynga for EA’s defeat. Ten-year-old King played a role, too, and it was much more methodical in catching up in social games.

“King now has more than 66 million daily players of our games, and in Candy Crush Saga, we have a global hit on Facebook and on mobile,” said Riccardo Zacconi, the chief executive of King, in a statement. “Our players love being able to switch from mobile phone to tablet computer to PC without losing their progress in the game — the cross-platform synchronization that makes that possible is a big reason for our popularity. Our bite-size games are perfect for coffee breaks, bus journeys, or any spare few minutes in your day.”

Born on the web in 2003, King focused on tournament games and web-based casual titles for years. But by 2011, it was clear the audience was shifting. Rather than dump its 300 games from the web onto Facebook, King experimented for a while to see what worked.

King launched its first Facebook game, Bubble Saga, in April 2011. That title hit the top 10, and King’s ranking was No. 45. In September 2011, the company launched Bubble Witch Saga on Facebook. By October 2011, King became a top-10 Facebook developer. In March 2012, King acquired mobile-game developer Fabrication Games.

In April 2012, King came out with its most triumphant game, Candy Crush Saga, on Facebook. The success of that title catapulted it ahead of EA, Wooga, and Disney-Playdom. King kept bulking up its studios. It figured out that gamers were growing up and out of the simple simulation games that they first embraced on Facebook. They were increasingly playing arcade-like games that could generate outcomes in a minute or two. They were short, fun, frenzied, and addictive. Zynga was slower to recognize this shift.

The smart thing that Zacconi did was that he viewed social networking and mobile as the same platform. He drove King to design games that could be played on a PC or Mac on Facebook, or on a mobile device. You could log into the game on any platform and find your progress and scores synchronized. That allowed consumers to “consume our content in a seamless, ubiquitous way,” Zacconi said.

It did this first with the mobile version of Bubble Witch Saga, launched as King’s first real push into mobile games in July 2012. By January, Candy Crush Saga became the No. 1 game on Facebook. It was joined in the top 10 by Pet Rescue Saga and Bubble Witch Saga. Last month, King launched Farm Heroes Saga and Papa Pear Saga. Zacconi said recently that, after the mobile version of Candy Crush Saga launched, King saw a big increase in demand for the PC version as well. It is also leveraging Facebook’s fast growth on mobile to find new users for its games.

During the past year, as King was on the rise, Zynga was hurting. It missed its earnings targets as Facebook’s growth slowed. The company lost money for a couple of quarters, and it has had to retrench. In the past two quarters, Zynga has returned to breakeven results. But it has shrunk its staff and seen a lot of executive churn.

David Ko, Zynga’s chief operations officer, said in an interview that he isn’t overly concerned about losing the top spot in users to King as he doesn’t see the competition as a zero-sum game.

“The way I look at it is, we have a belief that social gaming is a huge opportunity,” Ko said. “Not only from the estimate that it is a $9 billion market but also from what we’re seeing in the marketplace. Competition like this just reinforces the opportunity. My biggest thing is, I want to make sure that we’re confident that you’re going to see more of our franchises in that mix.”

There are a lot of metrics where Zynga is still No. 1 in social games, such as revenues. But King is on the march. It will have to defend its ground and extend its lead, or the King era may be very short.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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I was reading an article on the front page of the New York Times today and saw a banner ad above it. It was for Defiance, the new transmedia project that’s a TV show on the Syfy Channel and online game from Trion Worlds.

As we were warned by the producers, Defiance is going to be inescapable. If you’re breathing, you’re going to hear about it. NBC Universal heavily advertised the television series pilot, and it seems to have paid off. The show drew 2.7 million viewers on Monday, and it was the most-watched scripted Syfy premiere since 2006.

A marketing juggernaut

The stars, like Grant Bowler (Nolan), are on the talk-show circuit. And Defiance earned a lot of “social exposure,” as measured by Syfy. I thought the opener was good, but I said it was no Game of Thrones. In fact, the premiere of Defiance outperformed Game of Thrones on its own premiere day. Syfy hasn’t had a show this hot since Eureka, and its second-screen tablet app posted its best day ever with the debut. The digital stats in terms of uniques, page views, and visits are stellar.

Meanwhile, the massively multiplayer online game has scored 6 million hours of playtime since the launch two weeks ago. I’ve poured around 10 hours into it myself. This transmedia — or a story that is told in more than one medium — has to be considered a success in terms of its ability to grab attention even though it appeared on the same day as the Boston bombings.

Can it last?

But the nagging question remains for me. Was it worth it? Will it last? This $100 million-plus project (the budget for both the $70 million game and the TV series with its 12 episodes) was in the works for more than five years. It occupied the time of hundreds of game developers and show creators.

In my view, the show is good, and the game is good. The cast is talented, and the special effects are respectable. But they weren’t outstanding. And with so little time on my hands these days, I won’t give a lot of time to entertainment that is just good. On TV, especially on Monday nights, the show doesn’t have a ton of competition. But when it comes to games, I have endless choices now.

That’s why the launch of the game was particularly important, and it is bad news that it had a lot of hiccups. A lot of players complained that they couldn’t get into the game. Trion took down the Xbox 360 and PC versions for part of Monday due to problems with a patch.  You would think that after five years of planning, these technical issues wouldn’t happen. But it seems on par with the launch of major games these days.

The question is whether the TV show is good enough to keep the players interested even though the game’s launch could have been better. The next TV episode comes on April 22. The show will be critical in determining the fate of the transmedia project. If the audience grows — thanks to word of mouth and the ubiquitous marketing — the franchise could still be a hit.

Trion appears to understand what is at stake. When I took a couple of nights off, Trion sent me an email saying it wanted “to make amends for some of the tech issues at launch.” It gave me a bunch of virtual credits to help my progress in the game. Trion said it was “working around the clock to deliver a gaming experience that exceeds fan expectations.” It said a massive patch was coming to improve server and client stability and a bunch of other fixes.

That ability to fix problems shows the company is willing to invest in the game as an ongoing service. I am glad for that, and it may make me stick around for longer.

Players themselves appear to be strongly engaged, according to player statistics gathered by the gamer social network Raptr. In the first week, the average Defiance player on the PC played for 15.1 hours. They played for 2.2 hours each session, and played 6.8 sessions during the week. Xbox 360 player stats were similarly strong. In the second week, play time was 14 hours, 2.2 hours each session, and 6.3 sessions per week. Those are strong results that show no sign of weakness.

So, how does it play?

For those who have seen just the TV show, it may be worth it to wait until the game bugs are squashed.

I share many of the same feelings that my fellow GamesBeat writer Stefanie Fogel expressed in her initial impressions. The standard enemies in this game are really stupid while bosses are impossibly tough. On Metacritic, a review aggregator, the game has a weak 63 out of 100 score, and it’s gotten weaker as more reviews come in. (The TV show has a rating of 55 out of 100.)

The game is different because it is a third-person shooter where you can level up in many different ways. It’s not your typical role-playing game in that respect. The dynamic events can spice things up, creating big headaches — and opportunities to collect a lot of loot — where there weren’t any before.

My view is that the story of the game is compelling enough to keep you playing. You have to protect an important (but arrogant) scientist and his work from falling into the wrong hands. And you have to unravel a mystery in parallel to the mystery in the show. I’m not going to argue with people who say the story is terrible, like in a B movie. But I have to admit that it’s why I have continued to play.

Some nice touches make the game fun. The third-person combat is fast-paced and entertaining. Like with Borderlands 2, you have all sorts of ways to level up your character, weapons, vehicles, and special abilities. The open world gives you a ton of choice on which missions to pursue. You can follow a straight path on the main missions or deviate into side missions. And it’s easy to get around. You can press a single key on the keyboard to call up your vehicle, and then you can jump into it and zoom off to your next destination. You aren’t doomed to walk through the cool future landscape of the Marin headlands.

But there are also drawbacks that tell you the game has been five years in the making. Like Electronic Arts’ Star Wars: The Old Republic, the 3D graphics look like time has passed them by. The facial animations and the outlines of the bodies aren’t as smooth as they could be. Offline games still look a lot better.

And the experience isn’t all that good. I have had to replay some missions as well because the game wasn’t smart enough to figure out that I had already completed them. Some of the missions are difficult enough to get my blood flowing.

But other tasks are so difficult for the level of my character that I wish I had some gigantic gun at my disposal to take care of the problem. Those are the missions where I enjoy having a human companion to help me. Others are way too easy, with enemy A.I. that are incredibly easy to outflank. The balance isn’t there.

The dynamic events, where lots of human players converge on a single alien incursion, are fun to join. Dozens of players can converge on a single area and band together to stop the attackers. You feel like you are working toward a common goal, and you don’t have to worry that those players are going to steal your loot. I also like the fact that, when I’m driving down the road, there is no way I will hit another human player’s vehicle. I just pass right through them.

But each of these dynamic events plays out the same, and they don’t seem to be connected to the story at all. That’s a lost opportunity to make the missions more meaningful.

I know there is a connection to the TV show and its characters. By playing the game, I can become steeped in the lore of the show. But the connection seems too loose right now. I understand that both the show and the game have to stand on their own and attract fans who will enjoy one but not bother with the other. But there should be more rewards for those who both watch the show and play the game. I hear these are coming, but I don’t want to put 30 or more hours into the game before I figure out if it’s worth it.

I’m not your classic massively multiplayer online (MMO) fan in that regard. I am impatient. For this game to be a success and to generate a payback on those five years of investment, it has to reach people like me and convince us to stick around not just for a couple of weeks but for a number of months. Right now, I don’t see myself doing that. I just want to solve a mystery or two and then escape.

But I’ll give Trion this much. There’s room for improvement. The game can be polished. If the company is holding back anything on the experience for later on, it should consider releasing it sooner rather than later. This game isn’t doomed. But it has to be fixed.

Check out our poll about whether you like the game or not, and please leave a comment.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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BioShock Infinite is one of those rare games that has everything: a great story, intriguing characters, a beautiful virtual world, and lots of action. Evidence suggests that sales are soaring and that people are actually finishing the 12-hour game. It has a wonderful story, with an ending that is generating huge conversations on the Internet. The main characters and the relationship between them are far more interesting than the combat scenes that, as fun as they are to play, pale in comparison to the drama and mystery.

If you haven’t finished the game, you’ll have to cover your ears when you pass by any two gamers gathered together. People can’t stop talking about it with others who have finished the game. I watched helplessly as one person spoiled a big piece of the game for someone who hadn’t finished yet. This game has some plot twists and scenes that resonate with you long after you’re done with the game.

Oh yeah, BEWARE OF SPOILERS in this column. The rest of this column is dedicated to convincing you that should play this game or at least be aware of it because it has that rare chance of becoming a cultural phenomenon.

I’ve finished the game and thoroughly enjoyed it, but I was also disturbed by the level of violence. I can handle it, but I wouldn’t recommend it for the faint-hearted. That said, the experience of BioShock Infinite has fully restored my faith in the triple-A hardcore game.

At a time when snack-like mobile games are pulling us away from the big-screen games, this title held my attention and made me feel like I was immersed in another world. In fact, I consider this game to be one of the rare works of art in a video game. I’ve pulled out this “art” word before, when I’ve written about games like Journey, Alan Wake, and others.

With its mind-bending ending, it reminds me of books like Stephen King’s The Dark Tower series (pictured) and movies like Terry Gilliam’s Brazil or Christopher Nolan’s Inception. Sometimes I pull that “art” word out too readily. But I mean it this time. Before I got to the ending, I wouldn’t have said that. But after you experience the ending, so much of what happened before in the game comes rushing back to you — an effect that is not unlike the point in the original BioShock, when you discover something about your identity as the player of the game. BioShock Infinite is a lot like that in the feelings it evokes, and it belongs in the company of great tales, no matter the medium.

You could build a cottage industry around its critical interpretations or teach it in a college English class. At a time when game publications are on the ropes, BioShock Infinite provides a ton of fodder for analysis on topics ranging from its anachronistic music to the subject of false choices. Like a school boy, I want to understand the intricacies of the story that link the final scenes with early scenes, figure out the meaning behind the deliberate mysteries, and learn what the game designers really intended for the players. This game brings out the old English major in me. That’s refreshing.

Ken Levine, the mad genius at Irrational Games, took more than five years to realize his vision. But he created a world in the floating city of Columbia in turn-of-the-century America that grabs you and draws you into it. It’s too bad that Roger Ebert, the longtime film critic who insisted that video games can’t be art, passed away this week and didn’t get a chance to play this game. This game is good enough to lose yourself in it. And once you’ll come out, you’ll want to talk about it with someone else who has finished it. I want to talk to Ken, dammit. Pick up the phone!

It’s hard to explain what art is, but you sort of know it when you see it. When I was walking through the statues and gardens of the lost First Lady, listening to opera music in the soundtrack, I felt admiration for Levine’s artistry. It was so beautiful that I just wanted to sit on a bench and look around at the city before it became a ruin.

But the limitations of video games as a medium are clear with this game. The violence is so extreme that I can’t show it to a lot of people I would like to share it with. The problem with BioShock Infinite is that it won’t reach the largest possible audience because of the constraints that rein in its mass appeal. It is an exceedingly violent game, much like the first two BioShock titles — full of dripping blood, decapitations, burning bodies, and other horrors.

This points us to a trap. Levine took five years and a huge budget to make BioShock Infinite. He could only do that if that game had a core base of fans who were guaranteed customers. And the only real games that have such fans are first-person shooters. So Levine had to make a shooter game, but that trapped him. He couldn’t take this game into a broader audience because of the violence inherent in the shooter genre. GamesBeat writer Rus McLaughlin has his own view that the context of the game justifies the violence.

I find a need to explain my fanboy love. The title is so creative. Columbia floats in the clouds, and it has some wonderful creations like the rails that you hang on to travel between the levitating buildings.

The game has meaning in every scene and image. In the beginning, many of these scenes are mysteries. You don’t know anything about your identity in the beginning except that you are Booker DeWitt and your mission is to “bring us the girl, and all debts will be forgiven.” Those debts don’t have anything to do with money. At Wounded Knee, DeWitt, accused of having “teepees in his family tree,” became a savage murderer of women and children. He seeks a baptism to absolve himself — in a scene and a theme that will come back over and over, like a ghost that won’t die.

It almost seems unscripted, yet a strong sense of deja vu is layered into the game at every point. The conversations are deep, and the writing is good. At one point, Booker DeWitt (pictured with shotgun) asks Elizabeth about the monstrous Songbird. “What did that thing do to you?” She replies, “If he were to take me back, that’s death, Mr. DeWitt, or something so like it I cannot tell the difference.” At another point, Elizabeth asks, “Booker, are you afraid of God?” He replies, “No, but I’m afraid of you.”

The humor and mystery of the Lutece twins (pictured with quarter) will entertain you and drive you mad. They impart many of the threads in the plot that help you unravel what is going on. And they provide geeky comic relief amid a city full of racism, white supremacy, and religious fanaticism. When you finish the game, everything that they say starts to make sense.

Like King’s The Dark Tower series, the game has a lot of literary references, evoking works such as the play Rozencrantz and Guildenstern are Dead or Shirley Jackson’s short story The Lottery. A single red rose, which is prominent in The Dark Tower series, appears in this game. There are references to history like the Boxer Rebellion and the massacre of Native Americans at Wounded Knee. The game takes on the issue of racism and what it becomes when taken to its logical extreme. These aren’t just pedantic. They add a layer of meaning that helps you understand the context for the tale, much like the myth of Atlantis and Ayn Rand’s Atlas Shrugged informed the player about the underwater city of Rapture in the original BioShock.

By no means is this game perfect. The art choices are sometimes perplexing. The robot-like Patriots bear the face of George Washington, yet they’re supposed to be the most menacing enemies in the game. (They were virtual tour guides, repurposed as Terminator-like robots to crush the Vox Populi rebellion). And, like I said, the violence is horrendous, but the game doesn’t have the same suspenseful horror that the original BioShock had in droves.

Having played the game, I have a hundred questions about what it all means. Looking at the chatter on the Internet, it amazes me what fans have figured out through a kind of crowdsourcing of critical analysis.

If I had a chance to ask the Lord Creator himself, Levine, about anything, here’s what I would want to know.

Why do we see the same images and scenes over and over, like the lighthouse, the red chair, the Songbird who arrives at the worst possible times, and the rose? Why is there so much drowning? The details in the game just raise more questions. Why does Elizabeth hit Booker DeWitt with a book on quantum physics (pictured at top)? Why do the tears (or something else) give Booker a bloody nose? How do we keep straight which “tear” we are in at any given time? Who put Cyndi Lauper’s “Girls Just Want to Have Fun” song in the game? Why does Rapture reappear? What really happened during those baptisms? What is a Beach Boys song in this game?

The ending of the game isn’t what I would call satisfying. It provides you some answers, but it will not make you happy or fulfilled. It goes on for 25 minutes and is mesmerizing. It’s also confusing and not very interactive. All of the choices that you had before are not at your disposal. You don’t fight Songbird. In fact, he becomes your ally. Even so, you have to wonder if you are powerless to do anything except play the whole thing again with a sense of fatalism.

I really want to make my own ending to the game. In fact, there’s a joke in there. You can play this game over and over again, but it is a metagame — the Infinite in the title — that you can never win. No matter how many times I play this game, it’s going to come out the same way. The choices are false. And once I understand that, I can truly see how sad the story is.

I wish we could liberate this game from the constraints. We could break it. We could make a movie out of it, like the folks on the Internet who are taking all of the movie-like cutscenes out of the game and stringing them together in a continuous video. We could give Levine an army of developers to make mobile games, BioShock novels, mobile games, TV shows, comics, and paintings. Then people would really see it as a brilliant work of art.

Of course, if we did this, we would turn it into a franchise. What does that mean? Well, this game would become like McDonald’s. We would go down so many paths, trying to make this art into something of our own. And we would crush it, like the Songbird crushes its enemies.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The mobile revolution is on the minds of everybody at the Game Developers Conference (GDC). It is happening faster than anyone expected, and it came into sharp focus this week as Japan’s telecom giant SoftBank announced it would pay $265 million to acquire additional shares in GungHo Online Entertainment, the maker of the runaway mobile gaming hit Puzzle & Dragons. That game was made by six people over the course of a year.

SoftBank, run by tech empire builder Masayoshi Son, will own about 40 percent of GungHo Entertainment, up from 33.6 percent. But the stunning fact is that GungHo is now valued at around $5 billion, up from just $300 million about five months ago. What could have possibly made GungHo so much more valuable in such a short time, and is it possible that this game will generate $1 billion in revenues more quickly than the upcoming Battlefield 4 from Electronic Arts? Probably so, and that tells us more about the bifurcations in the video game business today.

Whether you believe the hype about mobile or not, you can’t avoid a conversation on the topic at GDC, which is drawing an estimated 23,000 game developers to San Francisco this week. Roughly half of the attendees at the show are now indie game developers, and they all dream of striking it big with games like Puzzle & Dragons. Asked why the game took off, Kazuki Morishita, chief executive of GungHo, said, “Luck.” Seriously, though, Morishita and his team carefully crafted the title until that had something that was simple and worked.

Puzzle & Dragons is the top-grossing app in the world today on Apple’s iTunes App Store and Google Play thanks to its incredible success on iOS in Japan. The game took off without much help. But in Asia, mobile messaging networks such as Line, Kakao, and We Chat are taking off like crazy. People are downloading lots of games via the mobile messaging networks, which add a social layer on top of Android in markets such as China, Japan, and Korea. Puzzle & Dragons, which combines a hardcore role-playing game and casual “Bejeweled-like” gameplay, has more than 10 million downloads in Japan and is monetizing far better than other titles. The company is generating an estimated $86 million a month, or roughly $2.5 million in revenues per day. In a word, that’s insane.

You could think of Puzzle & Dragons as an anomaly, the strange winner of a lottery where hundreds of thousands of mobile games are competing for the attention of gamers. But it is not alone. Finland’s Supercell has scored big time with Clash of Clans, a role-playing game that is bringing in an estimated $1.4 million a day. It is no wonder that other big digital game companies — Kixeye, Kabam, and Wargaming — are rushing into mobile games. Supercell is rumored to be raising a round of more than $100 million at a valuation of more than $800 million.

Compare what is going on in mobile with the traditional business. Battlefield 4, a hardcore PC and next-generation console game that EA announced this week at GDC with the release of a spectacularly movie-like trailer, represents the pinnacle of what veteran game developers can achieve. EA has hundreds of people working on the title, which includes lifelike human graphics and pulse-pounding sound. The title is at the high-end of the triple-A spectrum in terms of quality, but it may have a tougher time reaching $1 billion in sales than Puzzle & Dragons. After all, the best-selling first-person shooter game Call of Duty can generate $1 billion in revenues in a couple of weeks. EA has yet to knock that title off its throne.

Those who don’t succeed in making a transition to this new world of gaming are being left behind. THQ and Atari have gone bankrupt. Many console game studios are closing. It is no surprise that EA is in the midst of a change in chief executive officer and that traditional Japanese console game maker Square Enix also lost its CEO this week. EA has about $4 billion in revenue, but among Western game companies, it is a leader in digital games. Interestingly, China’s Tencent, a leading Internet company, also has about $4 billion in revenues related to games. With around $55 billion in market value, Tencent is far bigger than its Western rivals, and it is likely to keep on growing. Companies like it are expanding and will pay dearly to break into the business. Last year, Tencent bought 40 percent of hardcore game maker Epic Games at a valuation of about $825 million. It’s so strange that Epic is worth a fraction of GungHo, and it is probably on par in value with a company like Supercell.

By comparison, Puzzle & Dragons is a relatively simple title built by a small team. It came from a company that was struggling, and it faced tough opposition from some very large competitors. GungHo has a bigger game in mobile today than EA, Zynga, Disney, Gree, and DeNA. David Helgason, the chief executive of game engine maker Unity Technologies, said in an interview that that is a sign that indie developers are going to be successful for a long time to come on mobile platforms even as the major brands storm the platform.

If mobile keeps on gaining momentum, the choice for developers is going to become easier and easier in terms of where to place their bets. Developers vote on the future based on their platform choices. About 58 percent of developers plan to release their next games on mobile platforms such as smartphones and tablets. Only about 49 percent are planning to release their next games on PCs, and around 13 percent intend to release on consoles.

These figures are going to become more interesting going forward as the number of mobile devices climbs into the billions. But acquiring or investing in these small mobile companies at the height of their success is a risky matter. Zynga, for instance, acquired OMGPOP last year for hundreds of millions of dollars only to see its smash hit, Draw Something, come crashing down in the rankings as the fad that drove the game ran out of gas. Mobile games are golden if they can continue to stay at the top of the charts for a long time, but they can lose their value as quickly as they earned it.

Anil Dharni, an executive at Gree, told GamesBeat that you have to invest in titles and franchises that you believe will be around a decade from now. In the meantime, the whole industry is still just beginning to discover what works and what doesn’t. One executive at GDC told me that one of the tests for whether a game will have lasting power as a franchise is whether or not it has a strong community behind it. If it does, then it will be hard for challengers to take on a game that has a grip on a strong base of fans.

GungHo’s title hasn’t been around long enough for us to know if it has that kind of community. So purchasing a company like that has its risks. Buyers beware.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Next week is the Game Developers Conference in San Francisco, and there are so many things I want to do there that I’m feeling overwhelmed. I’ve got interviews booked, talks to attend, press events to cover, and exclusive parties to go to. It’s such a first-world problem to have. One of the reasons I have this issue is that GDC has grown so much from its roots as a geek gathering where developers came together to discuss their craft. It has morphed into place where you have to be if you’re in the game business. That business has expanded so that it includes not only the hardcore PC and console industries but also free-to-play, mobile, social, and online businesses from around the globe.

I hope this column will help you set your expectations for the event at the Moscone Convention Center in San Francisco. The GDC has become a strategic battleground, where platform owners vie for the attention of developers, who can make or break game systems. With 23,000 attendees and tons of press attending, companies are using GDC as a place to make a splash. They are making big commercial game announcements. Electronic Arts, for instance, has an invite-only event on Tuesday night where everybody expects it to unveil Battlefield 4, a title that EA hopes will break Activision Blizzard’s grip on the multibillion-dollar first-person shooter market. My schedule is so loaded with such stuff that, if a surprise news story breaks, it will wreck my beautifully orchestrated timetable, which is set up from morning to midnight, Monday through Friday.

The battle between the two juggernauts — EA and Activision Blizzard — is so multifaceted that you feel like you have to pay attention. Last week, EA chief executive John Riccitiello resigned because his attempts to sell more games of existing franchises to jaded consumers failed. If one of these companies gets a bright idea, like Activision Blizzard did with the hybrid toy-games for Skylanders, it can become a new multibillion-dollar business. GDC is wonderful because it is full of creative people who can come up with those ideas.

The problem for the paranoid journalist or attendee is that you just don’t know where to start when it comes to covering the bases at an industry event where there is just too much cool stuff going on. I thought I’d share my secret thought process on how to cover an event like GDC just because it might tell you what’s happening in the game business and what some of these important events say about the state of video games.

I am so tied up with these events that I have stopped taking meetings. And some wise PR folks have figured this out, so they’re briefing me on news I can write about this week, before the show. That’s why I have five stories to write at night before I go to bed. A few years ago, the debut of OnLive’s service details at our very own GamesBeat@GDC was the star of the show, with hundreds of news stories linking to it.

It used to be that I would look at the keynotes and figure out what the biggest companies in the industry were doing in order to set my schedule. Apple would occasionally disrupt GDC by holding a (seemingly) non-game event such as an iPhone or iPad press conference in the middle of the show. Normally, companies try to position themselves so that they are part of the flow of GDC events. But Apple worked against the tide, like only Apple can. But this year, Apple isn’t doing anything (big), and there are no keynote speeches. (I still remember that speech where Bill Gates introduced the first Xbox in 2000.) Fortunately for the game hardware makers, Apple has no nasty surprise waiting for them this year.

Now I want to know about the small companies that are there to disrupt the big guys. It is interesting for me to know about the doings of companies like Unity Technologies (and its new alliance with Sony), Oculus VR, and Ouya. I also want to see cool stuff, like the latest demos from Epic Games, Crytek, and the promises of visual heaven from folks like Bungie. And I want to know about issues, like women in games, crowdfunding, crunch time at companies where people work too hard, and — the perennial crowd favorite — sex in games. I’m also intrigued by the Experimental Game Workshop, where developers go to show off avant-garde gameplay.

Among the hundreds of talks, I’ve noticed some technical gems like “Techniques for Aim Assist in Console Shooters.” I’ve never felt like I had enough time at GDC, but I always felt like I had some time to walk the show floor and soak in the environment. I’m going to feel pretty obligated to hit some of the major talks. Sony, for instance, is going to give a sponsored talk on designing games for the PlayStation 4. Such talks may prove to be for the geeks, but once in a while they generate some news that everybody will want to know about. How can I not go to a talk about the PS4?

Well, odds are good that the room will be so crowded I won’t be able to get into that session. And, in fact, I’m going to refuse to tell anybody where it is if they ask me. I also feel obligated to accept when a company offers a secret hands-on meeting in a hotel suite for the debut of a major game. I feel like I have to attend meetings with celebrity game designers that come from faraway places. That leaves me with exactly zero time to roam and discover.

But that’s the thing about the game business. It’s those random meetings, sleeper sessions, and chance encounters where you can get a great idea that makes it all worth it. If you have a chance to break loose from the schedule and wander, do so. You probably won’t regret it. Just try not to go where you will get trampled.

Some folks are giving off-the-record dinners with a small circle of folks. Those invitations are rare, but when you get them, you feel like you have to attend. You can catch up with old friends at these events and get their take on the important news of the day. It’s hard to gauge whether these meetings are more valuable than waiting in line to get the last seat in a crowded session. Then some folks swear that you have to attend a party, particularly ones at swanky nightclubs with loud music and celebrity rock bands as special guests. I don’t always put these ones at the top of the list.

Sometimes I attend sessions to mark the passage of time. Last year, Google promised it would unify the Google+ social network, Chrome web browsers, and the Android app store (now Google Play) into a single platform. At Google’s session this year, I would hope they follow through on it. And sometimes, the absence of a session is meaningful. At a graphics conference this week, Nvidia canceled a talk on Project Shield, its handheld Android gaming system. Next week, I believe Nvidia may also keep a low profile. This thing is supposed to launch in a very short time, and I’m wondering why it isn’t ready.

This year, I don’t see anything that is going to steal the show. If you’re really scratching your head, here are some interesting “must see” sessions.

The Game Developers Choice Awards. You’ll learn something just from who gets cheers and who gets booed. It’s hosted by funny man Tim Schafer, the head of Double Fine Productions.

The emerging landscape of African game development. There is a lot of hope tied into this session.

#1ReasonToBe. A session about women in the game business and lingering sexism. It includes female notables such as Brenda Romero, Robin Hunicke, and Leigh Alexander.

Scapegoats no more: Improving the public image of games. Some leading thinkers like Ian Bogost, Michael Capps, and Daniel Greenberg will examine violence in games.

Classic game post-mortem: Myst. For old folks like me, co-creator Robyn Miller will describe how he made Myst, one of the first breakthrough games on CD-ROMs on the PC.

Experimental Gameplay Workshop. Stars like Keita Takahashi will show off cool gameplay prototypes.

Brave New World: New Bungie IP. From the makers of Halo, the next big game is Destiny.

Photorealism through the eyes of a fox. Hideo Kojima, a gaming legend, talks about photorealism.

Designing Journey. Jenova Chen, the creator of one of the most compelling non-violent games of 2012, describes the making of Journey.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Recent events in the video game business once again give the DeanBeat a wealth of material to analyze. And we see this lesson hit home again this week: The community matters. If you make games the community likes, if you deliver authenticity and transparency, you’ll win. If you fail to execute, the community will roast you alive. We visited this subject in October when the gamer social network Raptr shared its own analysis of the benefits of treating the community right in games such as League of Legends, Portal 2, and the ARMA II DayZ mod.

But it’s time to hammer the point home again.

A tale of two launches

With the launch of StarCraft II: Heart of the Swarm, Blizzard Entertainment teamed up with Twitch and delivered a live launch that treated the die-hard fans right with an in-person event and then let the large audience salivate over a live broadcast. Livestreaming of matches played by professional gamers showed fans just how exciting a Heart of the Swarm match could be. Fans had to log in and authenticate themselves on Battle.net. But if they owned StarCraft II already, they could immediately start playing Heart of the Swarm at the stroke of midnight.

With SimCity, EA witnessed the consequences of letting down the community and then angering it. EA launched a single-player game that required an always-on Internet connection. The megapublisher argued that it had to do it that way in order to give players the experience of creating a city amid a region full of cities belonging to friends. But EA failed to execute, as it didn’t have enough serves on hand to handle demand. Players who paid $60 — or more for special editions — couldn’t log in (sometimes at all) for days. EA endured ridicule and skepticism from people who believed the company had only wanted the always-on connection to defeat pirates. Fans believed that EA didn’t have their interests at heart. EA’s Lucy Bradshaw, the general manager of the Maxis Label (the developer of SimCity), admitted that underestimating demand was “dumb.” Bradshaw’s posts were perhaps the saving grace in preserving EA’s reputation.

Interpretation of good community and bad community

The lessons of these two launches are clear when it comes to the community. To interpret these events, I turned again to our game community expert, Dennis Fong [right], a former pro gamer and chief executive of Raptr.

“On the flip side, when you are not authentic, and you stumble, the community will be extremely vocal,” Fong said.

The problem for EA was that it didn’t seem to learn from server problems it had with the launches of Battlefield 3 and Star Wars: The Old Republic. SimCity was a very different kind of game, built by a different studio. But EA should have learned, as Blizzard appeared to do after the fiasco of the launch of last year’s always-connected game Diablo III.

“When you don’t provide a bunch of community tools that distract the users, and you have an always-on game where the servers get overloaded, that’s when the community goes crazy,” Fong said. “They clearly haven’t learned. EA is a big company and it is not easy to steer the company where the community wants it to be.”

(We do expect to hear more from EA about its own postmortem on SimCity, and we’ll update this piece as we do. EA has begun to do a good job of being more transparent with its SimCity blog, and it is offering a free game to SimCity purchases as penance). [Update: In a blog post today, Bradshaw said that the always-connected feature did not come as a mandate from corporate].

Fong is heartened to see the direct results Raptr’s own campaigns, where its targeting of rewards to like-minded fans helped the online game Rift achieve a 470 percent improvement in daily active users and 58 percent longer play sessions. It costs money to do that, and the traditional view of community support is as a cost center. But those additional players will help spread the word about the game, bring in more people, and effectively do the job of advertising without incurring the costs of advertising. In that way, the community gives a return on investment.

Livestreaming is authentic

We were pleased to see Sony, which Fong criticized as lacking in community support over the years, add a “share button” and livestreaming as built-in features of the upcoming PlayStation 4. PC gamers have long had access to such tools, but Fong said the inclusion in the consoles and the growing popularity of Twitch — which had 28 million unique viewers in February — is making livestreaming easier than ever. Twitch is also being built into online games made by Sony Online Entertainment, Activision, and EA.

It is becoming brain-dead simple to do livestreaming.

“What Twitch has done is made it more universal,” Fong said. “Having 600,000 people broadcasting their own content in a month is a big milestone. The fact that people know how to do that is new. I’m staggered at how quickly it has grown.”

What makes Twitch community-friendly is that it is authentic, Fong said. (For a view on authenticity, see our interview with gaming academic Jesse Schell). A livestream doesn’t lie. Gamers may get tired of reviews, trailers, interviews, and staged videos that are filtered views of games. But a livestream delivers what the unfiltered gameplay looks like, albeit when it is played by some of the best gamers in the world. When you watch a livestream, you get an authentic and transparent view of how the game really plays. If you recall the sexy, beautifully illustrated covers of comic books, you probably remember the disappointment you found when you opened them up to see the lower-quality paper and hurried art on the pages in the middle. A livestream is more like showing the gamer what is behind the cover — so you know exactly what you’re paying for.

This may help explain the growing popularity of e-sports. If you see a game being played the right way, you’ll have an easier experience as you play it yourself. Games are being designed for the e-sports community, making them more fun to watch as spectators. And the community’s feedback makes the games better, enabling the developers to improve the games on the fly. Livestreaming and e-sports are becoming part of the core strategy of games such as Call of Duty: Black Ops II, which draws players back over and over.

The other thing that makes a livestream more authentic is the “shoutcasting,” or play-by-play commentary by expert broadcasters. Those shoutcasters can convey the excitement of the game to the players, but those shoutcasters have to be authentic enough to know their stuff and describe the fast-action game play to the audience.

“They know the nuances in the game that the audience cares about,” Fong said. “They can convey it with fidelity and respect.”

The future of community

I’ve focused on this week’s events. We can applaud Blizzard and scold EA, but at least they are engaged closely with users. But there are other issues that matter to the community, as the game industry matures, moves on to new consoles, and moves deeper into the digital revolution.

Valve, which is reportedly working on a Linux-based Steam Box living room console, is carrying the flag for the community on openness. Open versus closed is a familiar debate, as we’ve seen with Android versus iOS in mobile devices. The community favors openness. But the advocates of closed cite a better user experience and security. You can close off your platform, but if you don’t deliver on that better user experience and you get hacked (ahem, PlayStation Network), then the community will once again show you no mercy — and maybe move on to a better platform.

As the console makers complete their designs and business practices, they would do well to remember this. Their machines should be designed to be community-friendly. You could build a console with no disc drive or discs, convincing gamers that they don’t need to own a physical copy of their digital games. But if the player’s downloads disappear from the account and the cloud access doesn’t work, people will be pissed. As social and mobile games become more focused on multiplayer experiences, the makers of those games should focus on community satisfaction and engagement. And this does not necessarily mean that game companies need to fleece consumers with microtransactions at every turn.

“Community should be part of the core strategy of a company,” Fong said. “In a year or two, we’ll be talking about that for mobile games.”

It would be great if someone could come up with a ranking of community-friendly game companies that also make the best games. I’d like to know which of those high-ranking, community-smart companies are making the best return on investment. That’s the company that I would bet on as a big winner in the future of games.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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How do you succeed in video games? If I had that answer, I would be rich. I could study the whole history of the game business, or I could simply look at what happened this week. And it has been another amazing week indeed.

As I watch what the pros do, I can’t help but notice that staying in the game is important. Even after you fail. Richard Garriott [above] is one of those game developers who has survived and thrived in the game business for more than three decades. He was there at the beginning, creating role-playing games like Akalabeth and Ultima on floppy disks that shipped in plastic bags. He came up with the story for Ultima in one of his much-hated English classes and then went on to create a gigantic franchise for Origin Systems, which he sold to Electronic Arts. Garriott went on to create titles like Ultima Online, the first big hit in massively multiplayer online games.

And he also dug one of the biggest craters in gaming history, with the seven-year quest to create a sci-fi massively multiplayer online game, Tabula Rasa. When it debuted, nobody played it. But he didn’t quit. He didn’t give into the evil of making games that he didn’t want to make. He flew into space on his own dime, using his profits from decades of making games and becoming the only second-generation astronaut in the world. He could have called it quits after an achievement like that. But then he started making Facebook games, and he’s not done yet. He’s making news this week with a new game and a Kickstarter to fund it, too (more on that in another story). Garriott has a shot at success because he is taking another shot.

Now, I started thinking about this column because of the efforts of some of the youngest people in the industry. The three-man crew creating a documentary, Videogamer: The Film, is coming in fresh out of school and early jobs to ask the question, “What is innovation?” It’s such an elementary question that I thought, “Why didn’t I think of that?” We’ll see what amateur filmmakers Josh Craig, Jonathan Reynolds-Engel and Shepherd Chou come up with. They’re going to knock on everybody’s doors until they get good answers.

Now they have a ways to go. Malcolm Gladwell, author of Outliers, estimates that it takes about 10,000 hours of specialized training to become so awesome at something that you’ll appear to be a genius in that field. That’s what software geniuses like Bill Gates and Bill Joy did. They had done their 10,000 hours of programming by the time they were out of high school. Most people figure that those guys were born smart, but what they really did, as Gladwell points out, was put their hours in. They got plenty of help, and they didn’t give up.

The combination of the old and the new can sometimes lead to success. Disney teamed up again this week with the young studio Imangi to release Temple Run: Oz. And Zynga, which has been battered in the stock market but hasn’t given up on the chance of a comeback, chased Temple Run into the endless runner genre with the launch of Running With Friends, created by the old game studio Eat Sleep Play. Zynga needs a lot of hits to pay for its payroll for 3,000 employees. But it’s not about to throw in the towel just because it got a bloody nose last year.

You have to admire the folks who are staying in the game and the rewards that they’re reaping for it. Brian Fargo, the chief executive of InXile, took a lot of risks creating early franchises in the beginning of the game industry. Now he’s reviving some old classics, raising money for them on Kickstarter, beginning with Wasteland 2, a sequel to a role-playing game he made in 1988. This week, Fargo launched a Kickstarter to revive a classic with Torment: Tides of Numenera. He hit his target of raising $900,000 in his first day, scoring more than $1.5 million in donations from the crowd.

Chris Taylor, the grizzled chief executive of Gas Powered Games, was on his last legs. He lost deals to make games and tried a Kickstarter as his last Hail Mary play to raise money for his game studio. He failed to raise the money, but just before shutting down, he managed to sell his 15-year-old studio to Cyprus-based Wargaming.net. Thanks to World of Tanks, Wargaming.net is printing money. It has enough dollars to fund whatever Taylor wants to do. That’s a nice outcome for Taylor, who stayed in the game, even when everything was looking like it was falling apart.

Gordie Campbell just might stun us all. He is a pioneer of Silicon Valley, and he had some great successes. He also had a huge failure with QuickSilver Technology, a reconfigurable chip company that burned through $84 million before it shut down in 2005. His new companies, LeoNovus and Sviral, have created parallel programming that makes use of all of the unused computing power in homes and offices. That might seem like it has nothing to do with video games. But with Campbell’s technology, it would make sense for game companies to give away their consoles for free, with the only condition being that they could use the processing power of those machines when the user wasn’t playing games. LeoNovus will turn that computing power into a profit-making distributed data center.

If you see a pattern here, you could call this the revenge of the old farts. But survival itself is not a high threshold for defining success. The bad thing about getting old is that you will sometimes find that, when you are faced with a new decision, you can pull out a personal example from your past that gives you a great reason to do it, and you’ll have another personal example that tells you why you shouldn’t do it.

Gladwell wrote about success, “When outliers become outliers, it is not just because of their own efforts. It’s because of the contributions of lots of different people and lots of different circumstances — and that means that we, as a society, have more control about who succeeds — and how many of us succeed — than we think.”

I am an optimist. I think that people who believe in the impossible should be encouraged. They are the ones who get things done. They last longer. They defeat evil. And they are left standing after everyone else has fallen. And they maintain the ability to take a fresh look at things. They have the capacity to be surprised and to act on that.

So if game studio layoffs have got you down, and you’re thinking of giving up, don’t forget this. When you survive in the game industry, you are managing to do what so many other people can only dream of. You can get paid for playing or making games.

Warren Spector, a game designer in his 50s who just saw his studio shut down by Disney, put it well in a recent talk. He wants senior game designers to think about their legacies and giving back. He values passion over analytics. And he thinks change is the norm.

Quoting inventor Alexander Graham Bell, Spector said, “When one door closes, another opens. Another aphorism is more relevant. ‘Chaos is a friend of mine.’ Bob Dylan said it in 1965, and it is still true today. I have seen so much chaos in the last 35 years, you wouldn’t believe it.”

Every week, I see something new in gaming. And that’s even after writing about video games since 1996. This week, I saw how some health care researchers at Xerox’s Palo Alto Research Center were using Microsoft’s Kinect motion-sensing game system to detect the air intake of a person, simply by using a 3D space sensor to detect a change in the person’s chest volume. What can you get from that? Well, maybe the next Kinect will detect your heart rate, and it will speed up or slow down the game based on how excited you are.

That’s exciting to me. So I’m going to keep at it for another week.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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We all know that Nintendo’s Wii U is in trouble. It sold more than 3 million units during the holidays and was in short supply. But with a dearth of new titles after that launch, sales have slowed down. Nintendo shaved its sales target for the period ending March 31 to 4 million, down from its previous estimate of 5.5 million hardware units.

And now the Game Developers Conference has published a survey showing that U.S. developers are making few titles for the Wii U. The GDC’s survey of 2,500 attendees showed that only 4.6 percent of developers are creating a Wii U game, and 6.4 percent plan to make their next game on the console.

This is a critical problem because the developers are the canaries in the coal mine. When they start dropping, there’s a bigger problem.

The Wii U is a brand-new console, but its developer support is significantly below the level for the Xbox 360. About 13.2 percent of companies are making games for Microsoft’s current machine, and 14 percent plan to make their next title for the Xbox 360. About 13 percent are making current games for the Sony PlayStation 3, and 12.4 percent will do so again. Sony’s announcement of the PlayStation 4 could put a big dent in developer support just as Sony’s early announcement of the PlayStation 2 helped kill off support for the Sega Dreamcast.

By comparison, developers are moving en masse to mobile. About 55 percent are making games for smartphones and tablets, and 58 percent plan to do so for their next title. And 48 percent are making games on the Mac and PCs. The only weaker platforms than the Wii U are the Nintendo 3DS and the Sony PlayStation Vita. Despite the grim picture, Nintendo chief executive Satoru Iwata said that no price cut is coming for the Wii U, whose basic version is selling for $300 in the U.S.

It’s not a happy state of affairs for Nintendo, which launched the Wii console in 2006 and sold more than 100 million units worldwide. It has sold more consoles than Microsoft and Sony in this generation, but for the last couple of years, the Wii has been weak. That’s why Nintendo introduced the Wii U, which has a tablet controller, last fall. But the naysayers were out early, saying the Wii U’s processing power was feeble and that its support for only one tablet controller was a major problem.

Cevat Yerli, the chief executive of game studio Crytek, said that his company made a Wii U version of Crysis 3, its flagship game that just debuted. But Crytek didn’t have a license to publish games on Nintendo, and his publisher, Electronic Arts, hit its own impasse over deciding to publish on the Wii U. And with that, Yerli said in an interview with GamesBeat, “Crysis 3 on Wii U had to die.”

Now a lot of people are tossing rocks at Nintendo. EA has offered very little support for the system, and EA chief executive John Riccitiello said that the “true next generation” consoles will begin with the launch of machines from Sony and Microsoft. Cliff Bleszinski, the former design director at Epic Games, said that Nintendo may need to get out of hardware.

Michael Pachter, an analyst at Wedbush Securities, said that Nintendo “misfired on the Wii U.” Sales were weak in January, and Microsoft’s old Xbox 360 outsold the new Nintendo machine that month. Another marquee developer, who asked not to be identified, said, “The Wii U is already a non-event. I couldn’t be more disappointed with the launch titles.” Mario Wynands of gamemaker Sidhe said that he had multiple conversations with developers who are dialing back their support of the Wii U because of the weak sales.

“While I believe they need to build a very strong digital marketplace for both developers and consumers longterm, their current business model demands they continue to respond to the needs of retailers and hardcore consumer,” Wynands said. “Fundamentally, they just need to start selling a lot more hardware in order to create a viable marketplace and survive long enough in order to be able to transition their business.”

David Cole, a longtime analyst at DFC Intelligence, said, “The Wii U is in big trouble. Nintendo didn’t get out in front with [games on the Wii U], and that means third parties are cautious. We are lowering our Wii U forecasts quite a bit, and it can become an ugly cycle. It is really on Nintendo’s shoulders to turn it around. They can’t rely on third parties.”

Ben Sawyer, a leader of the games for health movement, said that Nintendo’s ecosystem isn’t open enough compared to smartphones and tablets.

Nintendo isn’t giving up yet. In a statement to GamesBeat, the company said, “[We are] proud of the relationships we have built with all our third-party partners, from the large publishers and their well-known franchises to our independent developer partners making incredible downloadable games for the Nintendo eShop.”

Indeed, while the Wii whiffed at coming up with a rival to Microsoft’s Xbox Live, some developers say they like the eShop, where gamers can download new titles.

Nintendo also said it “has robust third-party support on both Wii U and Nintendo 3DS. The biggest publishers in the world — Ubisoft, Activision, EA, 2K, SEGA, Disney, Warner Bros. and Namco Bandai, to name a few — have brought their best franchises to Wii U with games like Call of Duty: Black Ops II, ZombiU, Scribblenauts Unlimited, Batman: Arkham City Armored Edition, Assassin’s Creed III, Disney Epic Mickey 2: The Power of Two, Just Dance 4, and Sonic & All-Stars Racing Transformed. On Nintendo 3DS, Nintendo has a great lineup of third-party games, including the upcoming Castlevania: Lords of Shadow — Mirror of Fate from Konami and Monster Hunter 3 Ultimate from Capcom.”

Nintendo has also done a good job of recruiting smaller developers. Nicalis, WayForward, Gaijin Games, Tomorrow Corporation, and Renegade Kid are all in the midst of working on downloadable titles for the Wii U.

Alex Neuse and Mike Roush, co-founders of Gaijin Games, said they enjoy developing on the Wii U and it is a step up from the Wii. They just released Bit.Trip Presents Runner 2: Future Legend of Rhythm Alien for the Wii U eShop.

“We see great business potential in the Wii U eShop. It’s a particularly indie-friendly distribution channel, and if you’re an independent developer and want to get your game on a console, the eShop looks like it might be the next big thing,” the Gaijin founders said in an email. “But above and beyond the eShop, the Miiverse has been an integral part of growing our community of fans. Being able to interact with fans in real time, on the console, while the game is running is an incredible feature that only Nintendo has. If Nintendo can manage to continue their efforts towards wooing indies, as they have been doing so far, they could probably corner the console indie market without much trouble.”

Of course, Nintendo has always been its own savior. First-party games on the Wii U are spread out and slow in coming. But if its own gamemakers create bigger hits, then console sales could pick up, the third-party developers could return, and the ecosystem will look better.

Even if this griping about the Wii U’s prospects continues, don’t expect Nintendo to waver. The company has been in tough spots before, and it has pulled off turnarounds. It can still point to Sega and say that getting out of hardware is not always a good solution. Nintendo is working on some big games. And it still has a hold on young audiences and families, which are different from the audiences for the other consoles, said Jon Peddie, an analyst at Jon Peddie Research.

Whatever happens with Nintendo, Microsoft and Sony shouldn’t gloat about the slow acceptance of the Wii U.

Alex St. John, the co-creator of Microsoft’s DirectX technology, who has been predicting the death of consoles for years, said, “I think Apple is the next-generation console and that all of the next-generation consoles will fade. If your next-generation ‘console’ isn’t a cell phone that can deliver a console experience to a TV, you’re already obsolete.”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The statistics around mobile gaming are becoming staggering. At the Casual Connect Europe in Hamburg, Germany, the move toward mobile games was evident among the 1,600 attendees. The numbers suggest that a sweeping shift is happening in the industry.

Of the 7.1 billion people on the planet, about 4.3 billion have mobile phones, according to the TomiAhonen Almanac 2013. About 1.3 billion of those are using smartphones. There are an estimated 1.2 billion mobile gamers, or 18 percent of total mobile subscribers. By comparison, there are about 1.2 billion computer users in the world.

Much of the excitement is, of course, focused on the growth of iPhones and iPads and their Android counterparts. The app economy is creating jobs for small studio developers at a time when the big console game companies are hurting. On the iOS iTunes app store, there are 792,398 active apps, including 132,963 active games, according to 148apps.biz.

In 2012, revenue earned from apps will approach $10 billion, with games taking over 80 percent of the pie, Flurry reported.  The free-to-play business model (aka freemium), where consumers download and play the “core loop” of a game for free but then pay for virtual goods and currency through microtransactions, is the the best business model in the era of digital distribution. When it comes to app consumption on iOS and Android smart devices, consumers spend over 40 percent of all their time using games.

And their favorite business model is free-to-play. Of the top free-to-play games, about 47 percent have average revenue per daily active user at more than 25 cents. The average cost per install is $4. And while Android has lots of users, iOS generates 3.5 times more revenue.

On the charts, the No. 10 top-grossing game makes about 10 times the revenue of the No. 100 game, said Chris Williams, a vice president at Big Fish Games.

Forrester Research found that 46 percent of mobile users use games on a daily basis, and most users prefer apps that include ads instead of paying a purchase fee.

Magid Associates found in a survey for Tapjoy that four out of five smartphone users and nine out of ten tablet users have played a mobile game. Kids ages four to 14 play mobile games more regularly on handheld game devices than on tablets, but the gap is closing.

Smartphone gaming is no longer just a U.S. business. Mobile chat networks have soared in Asia, with Tencent’s We Chat reaching 300 million users, Japan’s Line getting 100 million, and Korea’s Kakao Talk hitting 70 million. On Kakao, the viral spread of a game can boost it into the top 10 lists on Google Play on a worldwide basis — sometimes generating $1 million a day, according to market researcher App Annie and industry sources.

Thanks to Kakao, the Google Play app store in Korea generates 95 percent of its revenue from games, compared to 76 percent in the U.S. In the worldwide Google Play app store, several Kakao-based games are on the top 10 grossing list at any given time. Apple generates more game revenue than Google Play in the United Kingdom, China, Australia, Canada, German, France, Russia, and Italy. Still, Google Play earns a higher percentage of its revenue from games compared to the Apple iOS app store.

When looking for apps, consumers do about 80 percent of their searches by interest, such as golf or racing games. About 10 percent of the searches are by inspiration, 5 percent function, and 5 percent brands, according to consumer app search engine Xyologic.

For games, the top three countries generating revenue in the Google Play store are Japan, South Korea, and the U.S. In data from the month of December, South Korea’s Google Play app revenues are 95 percent based on games. Japan’s Google Play app revenues are about 88 percent based on games, and the figure for the U.S. is 76 percent, App Annie said.

On the worldwide market, the success of the Asian chat platforms has remade the top rankings of the most popular developers. For games, the top revenue generators on Google Play in December were GungHo Online’s Puzzle & Dragons, DragonFlight for Kakao by NextFloor, NHN’s Line Pope, Anipang for Kakao by Sundaytoz, and a casual title from Patistudio. Of these top five, all were from Japan and South Korea.

App Annie found that the U.S. and Japan contributed over half of the total revenue for the iOS app store in December. Asian countries lead the way in percent of revenue coming from games on the iOS app store. China has more than 80 percent of its iOS app store revenue coming from games. It is followed by Japan, Macau, Singapore, and Canada.

Japan has the highest games revenue-to-download ratio on the iOS app store, followed by Switzerland, Australia, and Singapore. It’s no surprise then that Japan’s Gree and DeNA, two multibillion-dollar makers of rival mobile gaming social network companies.

And in the U.S., the top revenue generators among games in the iOS app store were Supercell’s Clash of Clans, Electronic Art’s The Simpsons: Tapped Out, Supercell’s Hay Day, Backflip Studios’ DragonVale, and Kabam’s Kingdoms of Camelot: Battle for the North.

The arrival of social features is remaking the ranks of which games are popular. In Big Fish Games’ Casino app, more than 100,000 players have more than 10 friends. One popular player has 13,000 friends, Williams said.

“Five to 10 percent of your users will be responsible for 50 percent of your revenue,” Williams said. “Some players in the free-to-play casino game are spending more than $5,000 a month.”

Peter Warman, an analyst at Newzoo, said that 33 percent more people in America are spending more on mobile games than a year ago. Sixty-nine percent are spending more time. And Anil Dharni, an executive at Gree, said that revenues from mobile games are four times bigger than they were just a year ago.

Zynga has more than 50 percent of its developers working on mobile games as of the start of the year, according to our interview with David Ko, the company’s chief operations officer. That’s impressive, considering that Zynga has more than 3,000 employees. Wooga, with just 280 employees, hit the same milestone in June 2012.

Disclosure: The organizers of Casual Connect paid for my trip to Hamburg, where I moderated a panel. Our coverage of the event remains objective.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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[For a view on gaming investing myths, read this guest post from YetiZen CEO Sana Choudary. -Ed.]

In 2012, investors were excited about the game market’s march toward billions of new users with the rise of smartphones and tablets. But that excitement fizzled as Zynga’s fortunes wavered, and it reported weak earnings starting in August. Consequently, game investments rose dramatically for a while, and then they tapered off.

The data for this story comes from GamesBeat’s own original research into fundings during the year, with contributions from Sana Choudary of YetiZen, Tim Merel of Digi-Capital, Internet Deal Book, Signia Venture Partners, and Electronic Arts.

The upshot is that game investors have been spooked and they aren’t making as many deals as they once were. That means that higher-quality startups will receive funding, but copycat ideas aren’t necessarily going to. And as weak as the year was in investments, nobody is changing any forecasts about the march of gaming into the stratosphere in revenues and player numbers over time. So the industry is facing a confidence contradiction. Game companies are growing, but the money they’re raising isn’t.

The number of game investments rose to 188 deals, compared to 145 a year ago. But the value of the announced deals was $901.3 million, compared with $1.540 billion in 2011. That represents a 29 percent increase in the number of deals, but a 42 percent decline in dollars invested.

By comparison, the value of game acquisitions rose 23 percent in 2012 to $3.47 billion, compared to $2.87 billion a year earlier. The number of game acquisitions fell from 77 in 2011 to 58 in 2012. According to Avista Partners, the value of publicly traded video game companies is about $153 billion, but 78 percent of the value is in the top 10 companies, with China’s Tencent leading the list.

A big gap exists in investor thinking, according to analyst Peter Warman of Newzoo in a recent interview with GamesBeat. Fear kept investors from pouring money into a sector that was actually producing much better results in terms of cashing out through acquisitions. Since 1997, Avista Partners says that games have produced $44 billion in value for venture capitalists and private equity investors since 1997.

Tim Merel, the managing director at Digi-Capital, said that the collapse of social gaming investments in the wake of Zynga’s troubles accounts for almost all of the decline in the game investment deals. Investment capital continued to shift from traditional console games to social, mobile, and online games.

But the clear bright spot for the year was mobile gaming. Merel reported that mobile deals account for as many as 40 percent of the overall game deals. But a mobile game studio with 10 employees can produce a game and get it into the market. It doesn’t need the same kind of capital that earlier game startups required, so it makes sense that the average size of a game deal is getting smaller.

In 2012, the average size was $4.8 million, compared with $10.6 million a year earlier. Zynga’s crash in the stock market (it’s trading at 25 percent of its peak value) also deflated game investment valuations.

Another savior for many game companies was Kickstarter, the crowdfunding platform that raised $83.1 million for video games and board games from 520,000 backers (we’ve included Kickstarter deals in our list). Of that amount, $55 million went to 296 video game companies (we haven’t included most of those on our list). The average amount raised via crowdfunding was $186,000, as most projects raised money for games instead of trying to finance whole companies.

More than anything, Kickstarter changed the dependence of developers on major publishers for funding. Midsized game companies such as Double Fine Productions, which started a Kickstarter mania back in March, could turn directly to their fans for the first time to raise money to make games. The crowdfunding platform became an important place to test disruptive ideas such as the Oculus VR virtual reality goggles and the Ouya Android video game console for televisions.

Certain sectors saw a boom, as hardcore game companies such as Kabam and Kixeye saw huge demand for free-to-play hardcore games. And social casino games debuted by the dozens on Facebook and mobile game platforms. More disruptions are happening as game companies adopt new business models such as free-to-play games, where you play for free and pay small amounts for virtual goods. Gaming also has its own version of the war for talent as big companies acquire smaller ones. Green Throttle Games raised $6 million on the hope that its Android game controller and app could disrupt $60 console games on the television. Such trends serve as grist for the bigger investments.

Signia Ventures (which did eight deals in games in 2012) noted that about 80 percent of investments in 2012 were in North America, with a lot of excitement continuing in mobile gaming, analytics, distribution and the larger consumer mobile ecosystem.

Investors probably shied away from the sector because of the almost total absence of initial public offerings. China’s YY and Zattikka staged a couple of small IPOs, but no one grabbed the attention or the investment dollars like Zynga and Nexon did in 2011, when both companies raised $1 billion each. Zynga raised $515 million in a secondary offering not long before its stock collapsed. And Tencent completed a $598 million fixed income offering. If the IPOs return, you can bet that the investors will as well. But perhaps the only trend to count on is further consolidation with a continued acquisition boom.

Here’s a cautionary note about these numbers. If we knew the value of every deal, the numbers would be much higher this year. We’d love to know how much money Tencent invested in Epic Games, but we don’t. But we have the same problem every year as the majority of the dealmakers keep their values secret.

Here’s a look at the deals of the year below. We’ve organized them by dollar value of the transactions. For those deals where the value is unknown, we have listed them in reverse chronological order. We have linked to our own VentureBeat/GamesBeat stories where we covered them. For deals we didn’t cover, we have linked to other publications or press releases.

Major VC firms such as Accel Partners, Sequoia Capital, DCM,  Kleiner Perkins Caufield & Byers, Andreessen Horowitz, and others all poured money into big game companies this year. Google Ventures continued its role as an active strategic investor. Check out the GamesBeat game investments list in the following pages.

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Making games for the BlackBerry makes a little sense, but it’s more of a diversion, not a long-term occupation. If you’re doing it, you have to ask why. Do you have nothing better to do with your time?

That is not a disrespectful question, but a practical one. Opportunity cost is a hurdle for BlackBerry. It has to convince developers that making games for its platform will pay off, when they can make more money developing for other platforms. It’s a hard sell, but BlackBerry, formerly known as Research in Motion, is doing what it can.

Yesterday, the company debuted its new BlackBerry 10 phones and apps in an attempt to save the business. For the most part, observers say that the new stuff doesn’t suck, which is a prerequisite for game developers to pay attention. BlackBerry’s curse has been the status quo of loyal users who don’t mind using a BlackBerry, even though more interesting smartphones and tablets are available. BlackBerry’s business has seemed doomed ever since Apple debuted the iPhone in 2007 and consumers began to favor touchscreens over BlackBerry keyboards. But BlackBerry fans didn’t see to notice, and 18 million of them are still out there.

BlackBerry has come out swinging with its own touchscreen mobile devices now (the Z10) and a faster operating system. But it seems terribly late. After all, Microsoft has been trying for months to steal away the developers and consumers who aren’t already in the Android or Apple camps.

The new devices are compatible with past BlackBerry apps, so 70,000 are already apps available. That sounds like a lot, but Apple has 10 times more apps. To bolster its app store, the Canadian company has turned to game companies in an attempt to bring in new audiences beyond the core demographic of executives who check their emails. That makes sense. If you look at Google Play, about 95 percent of revenues generated by apps in South Korea come from games. In the U.S., the percentage is 76 percent, according to market analyst firm App Annie.

Gameloft and Electronic Arts’ mobile division have said they will support the platform with games. EA is putting eight games on the BlackBerry 10, including Plants vs. Zombies and The Sims FreePlay, while Gameloft is publishing 11 games, including Six Guns and Modern Combat 4: Zero Hour.

Sam Shperling, a senior account manager for BlackBerry at Gameloft, told me in an interview that his teams have worked with BlackBerry for years making Java games.

“They still have a huge and loyal customer base who could migrate to the BlackBerry 10,” he said. “We think this is a great opportunity to show those users there is a new frontier for BlackBerry.”

But the Gameloft guys never met a game platform they didn’t like. It has a huge mobile game businesses already and teams that are able to quickly adapt games to run on any platform. Doing the extra work to port to BlackBerry 10 isn’t that difficult for it. Gameloft is also more experimental in nature. Because it benefits from the spread of new platforms, it’s more willing to expand to the new platforms. So it’s doing games for Microsoft’s platforms at the same time it’s doing games for BlackBerry.

If you think about how the big game publishers are willing to take risks while the little ones aren’t, it makes sense. If your games are on 10 platforms, adding No. 11 isn’t so hard. But if you are a small indie game developer only has the staff and money to adapt to maybe three platforms, BlackBerry isn’t on your list. Sure, it has 18 million users, but that is actually a small number in the overall mobile market.

Other game supporters include Disney, Sega, Rovio (the publisher of Angry Birds), Fishlabs, Funkoi, Halfbrick, JoyBits, Square One Games, and ZeptoLab. But if you really wanted to play games from these companies, wouldn’t you really want to do it on the 10 platforms that are already out there? The presence of these companies and their me-too games will not help BlackBerry sell any new devices. What BlackBerry needs is some content that nobody else has.

BlackBerry is also enticing indie developers by offering them $100 per approved application. Cash bribes could actually work with developers who are starting out and currently don’t have any apps out. For these developers, making money on the BlackBerry could finance efforts on bigger platforms. The problem here is that BlackBerry has no idea if it is getting shovelware or quality stuff from these developers.

The new BlackBerry models, the Z10 and the Q10, don’t suck, according to VentureBeat’s Devindra Hardawar. The Z10 has a 4.2-inch touchscreen with 720p resolution. The Q10 has a 3.1-inch screen with a keyboard. The technology isn’t bad, with a dual-core 1.5 GHz processor, 2GB of main memory, and 16GB of storage.

But the devices seem terribly late. Will they devices go the way of the ill-fated BlackBerry PlayBook tablet, which debuted in the spring 2011 and sold maybe 2 million units by the end of last year. That’s a horrible record compared to the sales of competitors. Against the iPad and Android tablets, this device had no chance. Gameloft’s Shperling said that the PlayBook was a first step where the company got its feet wet making and recruiting apps.

“I think what matters here is that there is another alternative platform out there that developers can go to,” Shperling said.

BlackBerry is late again, compared to the launch of another challenge, Microsoft’s Windows 8, which got started in the market last fall. Game developers and publishers aren’t lacking for yet another mobile contender. They didn’t make unique content for the PlayBook, and it isn’t clear to me why many game developers would make unique content for the BlackBerry now.

BlackBerry has a chance for survival if consumers decide they don’t need these extra choices the other guys offer. Perhaps the only way that it could survive is if it provides enough of the basics to cover the field. If consumers only want about 70,000 apps and BlackBerry delivers the right ones, then it could survive. And BlackBerry can always hope to strike gold, seeding enough money to hungry developers who might come up with some exclusive content that could give people a reason to buy a BlackBerry.

But that’s going to be so hard to do. Lots of platforms are spreading money around, and they may very well have more users than BlackBerry does. Developers who make games for a small platform face that opportunity cost. BlackBerry, at least, has made it easy to adapt game. Shperling said there is still some risk to what it’s doing. For a company with Gameloft’s resources, making games for the BlackBerry is an acceptable risk. But if you’re betting the company on making games for the BlackBerry, don’t do it.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Those countervailing forces affected the year in game acquisitions and investments. Acquisitions saw a boom year, rising 23 percent to more than $3.477 billion spent on game companies, compared to $2.827 billion a year earlier. But the number of deals declined and investments fell off.

Of course, if we knew the value of every deal, the numbers would be much higher this year. But we have the same problem every year as the majority of the deals keep the values secret. 2012 saw 58 game-related deals, compared to 77 in 2011, according to original research by GamesBeat with contributions from Sana Choudary of YetiZen, Tim Merel of Digi-Capital, Internet Deal Book, and Electronic Arts. The average deal size (where values were disclosed) was $60 million, compared with $36 million from a year earlier.

Acquisitions and disruption go together. Deal valuations are building because traditional game companies and major entertainment brands are adapting to the major shift away from the consoles toward social, mobile, and online gaming. And the barriers between social casino games and real-money online gambling companies are falling. With the prospect of legalization in the U.S. driving up values, casino games were hot in 2012. More disruptions are happening as game companies adopt new business such as free-to-play games, where users play for free and pay small amounts for virtual goods. Gaming also has its own version of the war for talent as big companies acquire smaller ones.

Zynga slowed down its acquisitions from its torrid pace of one per month, but it still bought nine companies during the year. Japan’s Gree stepped up its acquisitions of mobile game studios as it tried to expand ahead of rival DeNA into the U.S. market. Many game companies raised money through crowdfunding, obviating the need to sell out to larger rivals. Electronic Arts paused to digest its $1.3 billion purchase of PopCap Games from 2011.

As far as initial public offerings go, the only stand-outs were China’s YY, which raised $81.9 million in November, and London’s Zattika, which went public and acquired three companies. Microsoft was curiously absent from the acquisitive companies. That’s very odd for a company that is preparing to launch a new video game console sometime soon.

Here’s a look at the deals of the year. We’ve organized them by dollar value of the transactions. For those deals where the value was not disclosed, we have listed them in reverse chronological order. We have linked to our own VentureBeat/GamesBeat stories where we covered them. For deals, we didn’t cover, we have linked to other publications or press releases.

1. Nexon bought 14.7 percent of massively multiplayer online game publisher NCsoft for $688 million. This was a private transaction where Nexon purchased shares owned by Taek Jin Kim, chairman and founder of NCsoft, publisher of titles such as Guild Wars 2, Aion, Lineage II and Wildstar. By comparison, last year’s top deal happened when Electronic Arts bought PopCap Games for up to $1.3 billion, including $550 million that depended on performance targets.

2. China’s ZheBao Media bought GameABC.com from online game publisher Shanda Games for 3.18 billion renminbi, or $503.8 million.

3. International Gaming Technology paid $500 million for Double Down Interactive. This deal in early 2012 signaled the beginning of the bubble around social casino games, just after the Justice Department ruled that online gambling could be legalized in the U.S. if states pass laws allowing it. That opened the door for synergy between gambling companies like slot machine maker IGT and social gaming companies like Double Down, which had just 70 employees. IGT’s latest quarterly report shows that its social casino game revenues are still growing.

4. Nexon bought Gloops for $486 million. This deal may go down as the most money ever paid for a mobile gaming studio (at least so far). Nexon cut its teeth on free-to-play online games such as MapleStory, but it went public in 2011 and has cash to burn. It spent some of that on NCsoft, and it also bought Gloops, a developer based in Japan. Gloops is known for its JapanPro Baseball Card Battle and Warriors of Odin games.

5. Sony acquired Gaikai for $380 million. While Gaikai had almost no revenue, this deal signaled the arrival of cloud gaming as a contender. It was accompanied soon after by the collapse of cloud gaming leader OnLive, whose assets were sold for a pittance. Sony hasn’t said what it will do with Gaikai. But by offering cloud games on its next console, it could certainly disrupt its own $60 disc-based console game business. Better for Sony to do that than somebody else.

6. Gree paid $210 million for Funzio. Gree’s move came in the spring, when the bubble around games was still inflating and the company was aggressively trying to break into the U.S. mobile games market. Funzio seemed to have cracked the code with hit games such as Modern Combat and Kingdom Age. The Japanese company was generating more than a billion in revenue from its mobile social gaming network, and it was betting that U.S. mobile gamers would behave the same way. By the end of the year, Gree was still acquisitive, but it was also laying off staff.

7. Zynga bought OMGPOP for $180 million, plus more if the company hit is targets. But OMGPOP’s Pictionary-style hit game Draw Something fell apart just as Zynga closed the deal. Zynga had to write off $95 million of the deal’s value before the year was over. Still, the social gaming giant justified the deal as a big investment in the mobile market.

8. Gree bought collectible card game maker Pokelabo for $173 million. Pokelabo created digital collectible card games such as Mystic Monsters for iOS and Android. This deal took place in October, after Zynga’s struggles were clear and game investments were on the decline. As such, the high dollar amount shows that Gree wasn’t deterred by a small hiccups in the game market’s investment cycle.

9. NCsoft acquired 76 percent of Korean casual game developer Ntreev Soft for $96 million. Korea’s NCsoft saw the move as a chance to shore up its casual game expertise. It was in talks with SK Telecom to buy the stake for months. Ntreev makes the online golf game Pangya and the massively multiplayer online game Trickster.

10. PlayPhone paid $51.5 million for mobile marketing firm SocialHour. This stock-based deal positioned mobile social gaming network PlayPhone to offer non-incentivized cross promotions for games on its network.

11. China’s ZheBao Media bought CGA.com.cn from Shanda Games for $49.1 million.

12. Wargaming bought BigWorld for $45 million. Wargaming is printing money with its World of Tanks online game, which has 45 million registered users for its 3D tank combat game. BigWorld builds middleware to create massively multiplayer online worlds.

13. Amaya Gaming bought Ongame Network for $32 million. Bwin.party sold off its business-to-business online poker network to Amaya Gaming in the online gambling market.

14. Glu Mobile paid $28 million in stock to acquire Griptonite Games in Kirkland, Wash., as an expansion into free-to-play games.

15. China’s Rekoo paid $20 million for the acquisition of social gaming firm HappySNS.

16. KongZhong purchased Noumena Innovations for $15 million. China’s KongZhong is expanding its online game presence in Asia and acquired Noumena, the maker of the smartphone mobile-game engine Handymo.

17. Big Fish Games acquired Self Aware Games for $12 million. The move was a relatively inexpensive way for casual game market firm Big Fish to dive into the social casino gaming market, which stayed hot for most of 2012.

18. Glu Mobile bought Blammo Games in Toronto as a further expansion into mobile games. The deal was worth around $4.5 million in stock.

19. Zynga bought social game maker Wild Needle for an undisclosed price. A source told us the deal was valued at $3.8 million.

Here’s our list of deals where valuations were not revealed, in reverse chronological order.

19. Aeria Games merged with Japan’s Gamepot, as the companies created PC and mobile game powerhouse.

20. Arktos took a majority stake in Hammerpoint Interactive, creator of The War Z downloadable game.

21. Corona Labs acquired mobile cloud services startup Game Minion.

22. Kabam bought Balanced Worlds to gain a 3D social game development team in China.

23. Zynga bought November Software as it maneuvered to become a bigger player in mid-core games, which are hardcore in nature but can be played for a shorter time.

24. Disney picked up LucasArts, the venerated game publisher, as part of its $4 billion acquisition of Lucasfilm.

25. Saban Brands acquired kid-friendly online video and gaming site Zui.

26. Electronic Arts bought online game development studio ESN. ESN developed the Planet web-based games framework and had been working on the Battlelog online social network for Battlefield 3.

27. Zynga acquired midcore social game startup A Bit Lucky, maker of Lucky Train.

28. Gree acquired mobile game developer App Ant Studios as the Japanese company continued its expansion in the U.S.

29. Playsino made its move into casino games with the acquisition of Popover Games.

30. And on the same day, Playsino announced its acquisition of Foghorn Games.

31. NaturalMotion acquired Boss Alien as it harvested the fruits of its 3D iOS games.

32. Epic Games acquired People Can Fly to stop its talent from flying out the door. That was one of the few console-PC deals of the year.

33. Saban Brands bought Zombie Farm game maker The Playforge.

34. Glu Mobile acquired GameSpy Technology from IGN as a move into multiplayer gaming technology.

35. Mobile ad network Tapjoy bought the core team of social gaming network startup Viximo.

36. Aeria Games assimilated three major online shooter games owned by Ijji.

37. Downloadable games firm Green Man Gaming and social gaming network Playfire merged.

38. Roadhouse acquired social-mobile game maker The Embassy Interactive.

39. Kabam acquired Wild Shadow Studios, the maker of the 2D shooter game Realm of the Mad God.

40. Zynga picked up Buzz Monkey, a team with console gaming experience on titles such as Army of Two: 40th Day.

41. Japan’s Klab acquired social game company Pikkle.

42, 43, 44. Zattika buys three social game firms after its initial public offering. Zattika bought Hattrick Holdings, Sneaky Games, and Concept Art House.

45. Kabam lifted Gravity Bear, a maker of social games such as Battle Punks.

46. Angry Birds maker Rovio bought its fellow Finnish game firm Futuremark Games Studio.

47. King.com bought Fabrication Games as it pushed beyond social games into mobile.

48. Otoy acquired Refractive Software as part of a move to create cloud-based digital animation and gaming tools.

49. Z2Live swallowed Big Sandwich Games, maker of the mobile game Battle Nations.

50. Peak Games acquired Saudi Arabia’s Kammelna as part of a move to go big with social games in the Middle East.

51. Linden Lab acquired LittleTextPeople for some new development talent.

52. Kabam purchased Fearless Studios, led by former Star Wars game developers.

53, 54, 55, 56. Zynga bought four mobile game companies: Gamedoctors, Page44 Studios, HipLogic, and Astro Ape Studios.

57. 6waves Lolapps acquired mobile game maker Escalation Studios.

58. Ascend Acquisition Corp. merged with mobile gaming firm Andover Games in a reverse acquisition.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Toy war. It sounds like a title for a game or a movie. But it applies to the business competition between Disney and Activision Blizzard that erupted this week. You might call it the first major “transmedia” war between two heavyweight entertainment companies that are both deeply involved in video games. The winner will be able to stake out a leadership role in the cross-platform worlds of toys, video games, mobile apps, and online universes.

In short, the victor will carve out a toy-game empire.

On Tuesday, Disney unveiled its Infinity interactive gaming platform, which pulls together characters from Disney and Pixar into the world of digitally connected toys and games. It is a direct challenge to Activision Blizzard’s Skylanders franchise, which generated $500 million in retail sales of toys and video games in 2012. Who is going to win? In this battle, brands, marketing, technology, and gameplay should set apart the victor and the loser.

Both companies are bringing toys to life in the virtual environments of games across consoles, mobile and online. The toys serve as storage devices, keeping a gamer’s custom data for use in the game. And players can unlock the game and characters from a number of platforms. Activision has a head start. It said that its toys are outselling both the Transformers and Star Wars lines of action figures. That’s a shot across the bow for Disney, which now owns the Star Wars brand. (Hasbro currently produces action figures under the Star Wars license.)

Based on Skylanders’ positive reception, Disney’s Infinity could very well be a huge driver of demand across different marketing channels. Kids (and adults) already love the Disney and Pixar characters, and this Infinity platform will give them multiple ways to engage with those characters. They can play with them in the home, at a friend’s house, or on the run with a mobile device. The market demand for one character will pull consumers into getting the same character on a different platform.

Technology is making it possible. The Disney and Pixar characters (starting with Captain Jack Sparrow of the Pirates of the Caribbean, Sully from Monsters. Inc., and Mr. Incredible from The Incredibles) stand on power discs that connect to the Infinity platform. That seems an awful lot like the Portal of Power that the Skylanders connect to.

Skylanders use a cheap radio-frequency identification chip — much like the ones in employee badges that unlock company doors — that interacts with a reader in the portal. Disney’s Infinity, which arrives this June, probably uses a similar technology for data transfer, and it can connect with a computer or console via a USB port. Players use this tech to drop in or drop out, shifting from one character to another quickly simply by moving a character onto the platform. These portals provide the basic connectivity and storage of saved games. But I expect new technologies to come into the platforms over time.

Disney has the advantage of having bigger brands, with scores of characters to churn out that any child would recognize. The Skylanders had the advantage of novelty, but they’re definitely less memorable. Either side could spend a lot of money to publicize its characters, but Disney definitely has the upper hand in marketing muscle. Activision will have to accelerate its plans to update Skylanders. Already, its Toys for Bob game studio in Novato, Calif., is working at a punishing pace, having launched two major games in 10 months. Now it will have to come up with something new again. Disney, meanwhile, has huge resources to bear as it tries to be a fast follower.

Can startups play in this game?  Certainly, Disney and Activision have upped the ante. If you have just a toy business, or a game business for kids, you’ve been disrupted. San Francisco-based Nukotoys labored for years before it debuted its hybrid of physical card games with mobile games on an iPad. Nukotoys may get swamped by Disney and Activision. But Nukotoys has brands of its own. It teamed up to deliver card games based on the Animal Planet and Monsterology.

The scary thing about this transmedia business is that the bets are huge. And the consequences of failure are tremendous. If you fail, you don’t just fail in one business. You can bring down a whole franchise across multiple platforms. That’s why this competition between Disney and Activision will be so interesting to watch.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Jen-Hsun Huang has thought about making Project Shield, the portable Android gaming system that Nvidia unveiled this week at the Consumer Electronics Show, for the past seven years. But the chief executive of the world’s biggest graphics chip maker had to pull a lot of things together first before deciding to make it — like figuring out how to make a gaming console.

Nvidia designs chips such as the Tegra 4 inside the Project Shield, but it’s never gone directly into the consumer market with its own game system. (It did go out on its own into the retail market before with its 3DVision 3D glasses in the past). Nvidia has also worked to establish a cloud gaming network dubbed the Nvidia GeForce Gaming Grid, which provides the underlying foundation for delivering games to the Shield device, which includes a 5-inch screen atop a game controller. Then it designed a new kind of processing for its latest graphics chips. And in the past year, it put the finishing touches on its Tegra 4 mobile processor, which has four computing cores and 72 graphics cores.

It would be wrong to think that Shield is just another Android game controller. It has a whole ecosystem built around it and high-end components for hardcore gamers. In short, Project Shield is a massive effort that required the work of thousands of Nvidia employees. Now, it’s finally ready, and Huang showed Project Shield to us in an interview at the Nvidia booth at CES. (See our hands-on vide0). Here’s an edited transcript of our exclusive interview.

GamesBeat: How heavy is it? A pound or so?

Jen-Hsun Huang: Here you go. It’s under a pound. A bit under a pound.

GamesBeat: It feels like a regular Xbox controller. 

Huang: Exactly. That’s ideal. We haven’t tuned any of the knobs on this, or the buttons, but ideally it should respond just like one. The moment you pick it up, you should recognize it as a controller.

There are two things that we wanted to do. We wanted to make sure that for anybody who picks it up, and in the moment that they do, they’re instantly familiar with it. All the controls are exactly where they expected. Secondly, because it’s pure Android, you know exactly how to use it. Because this is pure Android. If you’re an Android user — and this is targeting Android users — the moment that you turn it on, your whole life shows up. All your music is there. All your movies are there. All the Tegra Zone games you’ve already bought on your phone are there.

GamesBeat: What are some of the reactions you’ve heard so far? 

Huang: I would say that the No. 1 reaction is, “Wow, it’s a lot smaller than I expected.”

GamesBeat: What design decisions can you talk about? You could probably have just had a tablet sitting on top of something that you could attach, taking the controller away. I think I’ve seen other designs like that out there already. Is there a reason not to do that?

Huang: First of all, a tablet is too heavy. It’s too top-heavy. Second, notice that this isn’t a tablet. It’s just a display. All of the electronics, the batteries, are in here. The balance of the system wants to be in your hand. Even a phone is too top-heavy. Worse, you don’t want to drain the battery life of your phone. Your phone is used for communication. The benefit of using Android is that all of the content on your tablet or your phone automatically shows up here. The instant familiarity of the system is a real plus. The connection to your open system, with all of your digital content, is a plus.

The design decisions started with this. It has to be a wonderful gaming device. The controller can’t be sacrificed. We started with the palms of your hands, how everything fit into your hand — the bumpers, the triggers, the buttons. They have to be in the appropriate places. Then we fit all of the technology around it. That’s No. 1. No. 2, it has to be as small as possible, to the point where the volume of this device is approximately a game controller. The reason for that is because if you’re willing to carry a game controller in your bag, then from a volume perspective, you want to carry this in your bag. The third thing, of course, is that the performance has to be amazing.

And then, the magic trick … as a device that is consistent with the way we expect to consume media in the future — wireless, cloud, streaming — those kinds of experiences have to be introduced. Streaming from your PC. We do streaming to your TV. In the future we’ll do streaming from Grid. Not only is this a wonderful game device, but it’s also gaming in a new way, the way that we expect to consume digital content.

GamesBeat: Are you filtering Android content in some ways so that it works with this?

Huang: No, not at all. This is pure Android.

GamesBeat: Some of those games are designed more for touch, though, as opposed to buttons. How does that convert?

Huang: The way we’ll do it is this. Everything will work. But for games that are designed for controllers and also optimized for Shield, we have the Tegra Zone. All of your games in here just work. This is your Android experience. Everything is there. This is your gaming experience. Tegra Zone pops up. You’re playing your games. If, all of a sudden, you got a text and you want to check it out, and if you want to go back to that game, it’s exactly like Android. The behavior is exactly the same if you’re connected to the PC.

GamesBeat: How much of the hard work focuses not just on this but also in the whole ecosystem around it? Like, for a console maker, they have to go round up all the game publishers and game developers to get behind a console some months or years ahead of time.  

Huang: We are perpetually doing that. You know that we work with game developers all over the world to enhance for GeForce or to optimize for Tegra. All of the optimizations that we made for Tegra are in Tegra Zone, and all of those games just showed up. For the last two years, all of the games that we’ve optimized for Tegra have already included controller support. We’ve been preparing for this day. All of those games, the 100 games or so, and the few hundred games in development right now, they’re all being optimized for this.

GamesBeat: How much of this resembles a console business and how much might be different or disruptive to it?

Huang: It’s completely different. That’s a really good question. We’re not trying to build a console. We’re trying to build an Android digital device, in the same way that Nexus 7 enjoys books and magazines and movies. This is an Android device for enjoying games. It’s part of your collection of Android devices. That’s how we think about this device. All of the economics associated with this device are exactly the same. We’re going to have to sell this device based on the value of this device, for people who are enjoying it and finding it useful.

The differences are this. The console, as you know, is proprietary, it’s closed, and it has a razor-and-blades business model. Our business model is open, it’s based on Android, it’s completely familiar to you, and the games range from free to free-to-play with virtual goods and also, of course, to premium games. This is the perfect platform for free-to-play. The free-to-play publisher wants to get their games on as many platforms as possible. Broad distribution is what they’re looking for. Broad distribution isn’t what the console guys are looking for. They’re looking for exclusivity. For us, this is just a fantastic thing we’re doing for that industry. That’s why free-to-play works great for PCs. Free-to-play is going to work great for Android, and if it works great for Android it’s going to work even better for Shield.

GamesBeat: What was going on in your heads during all of this time? People were saying that free-to-play was disrupting everything on Facebook, for instance, or iOS. They said that somebody had to bring this to the consoles and disrupt those $60-dollar console games, but nobody did it. Then things like Ouya started popping up. It seemed like it was taking startups to do something the established companies wouldn’t. You guys are an established company in different ways, partnering with some of those guys. What was your thinking when the opportunity for something like this came up?

Huang: If you talk to Julie at Ouya, she’ll tell you that her best partner in the world is Nvidia. We have hundreds of engineers working on her behalf to realize that game console. We love what they’re doing. But I frankly think that Ouya and that game console could be made by other companies aside from us. We can do it, but other companies can do it too. The reason why I built this device is because only we can build this device.

This device, Shield, has such incredible performance. It’s got the software stack that treats it like a server to stream to television. It treats it like a receiver for servers in the cloud and on your PC. The software that’s necessary to do that is so complicated. No company in the world is going to get it together. We’re going to have to do this. It’s the same technology that I was going to use for GRID anyway. The GRID technology goes into my PC. My PC now becomes a GRID server for this. I put that same technology in Shield. Now Shield becomes a GRID server for television. I’ve got all the technology that I can leverage. It’s very delicate and complicated technology, because it has to work, but it also has to work with very low latency.

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Welcome to the new year in games. I made my predictions about the game industry last week, but this week I’m thinking about what will happen in 2013 on a month-by-month basis. The pattern of the game industry is somewhat predictable, based on the major events that happen every year. But social, mobile, and online game companies have changed the business and the patterns of the year as well.

If you’re used to the old annual cycle, what follows below is more like what you can expect from the disrupted game business. As you can see, 2013 promises to be a very different kind of year. No longer is the cycle driven simply by the announcement of new games and their launch in the fall. Call it the drumbeat of disruption. But the cadence of news will be steady all year long.

January

Next week, we’ll make our way to the Consumer Electronics Show. Sony will have a press conference, but don’t expect it to announce the PlayStation 4. We’ll see all sorts of game peripherals from companies like Mad Catz Interactive (launching its GameSmart devices), but CES is losing its luster as a big event for the game business.

Still, there is a huge amount happening behind the scenes. If the console companies really want to release new consoles this year, the major chips have to be shipping from the chip manufacturer already, according to Charlie Demerjian at the chip blog SemiAccurate. The debugging process and the subsequent creation of launch titles happens so far in advance that the chip makers have much earlier deadlines than anyone else making components for the consoles.

The new game release schedule for the month is light, with smaller titles such as DmC: Devil May Cry coming out. In mid January, market researcher NPD Group will release sales figures for the full calendar year of retail video game sales, and we’ll find out just how weak a year it was for the core business in the U.S. That will coincide with earnings season for the major U.S. publicly traded game companies.

February

We’ll be delighted to see the release of some major titles such as Sony’s Sly Cooper: Thieves in Time, Konami’s Metal Gear Rising: Revengeance, Electronic Arts’ Dead Space 3, and EA-Crytek’s Crysis 3. We’ll be traveling to events such as Casual Connect in Hamburg, Germany, and the Dice Summit in Las Vegas to capture the pulse of the industry. At Dice, we’ll see major talks from David Cage, head of Quantic Dream, whose major game Beyond: Two Souls should be one of the big titles of the year. The Dice Summit is a great place for game industry leaders to stir up a lot of news and focus the world’s attention on the big issues.

This year, many of the speakers will hail from tablet and mobile game makers. One of the speakers is Gabe Newell, head of Valve and a man who supposedly has his own Linux-based game console in the works.

Yet the game business is spilling over into different industries. Titles such as Skylanders, which offer both toy and game products, have seen their debut at the Toy Fair show in New York. As toys go digital, they’re becoming much more game like.

March

The Game Developers Conference will keep us busy for a whole week in San Francisco. And we’ll finally see a gigantic month for core games with the scheduled releases of Tomb Raider, God of War: Ascension, SimCity, StarCraft II: Heart of the Swarm, Gears of War Judgement, and BioShock Infinite. Apple will probably try to upstage the game companies at the GDC by holding a launch of its own, either a new iPad or a new iPhone. Ouya also promises that its Android-based $99 game console will launch during March. The company is hoping to disrupt the traditional consoles with free-to-play games that were born on mobile devices.

April

Disrupt the disruptors! PlayJam hopes to disrupt the likes of Ouya with its own GameStick, a game console that sells for $79 and fits on a universal serial bus stick. For some reason, there aren’t many big games coming out, except for the Dead Island Riptide sequel. If you’re thinking about delaying a major game release, April is a good time for it to launch on a revised schedule. The Gamification Summit may offer a nice distraction for those who believe that making work more game-like can make people more productive. The Neuro Gaming Conference and Expo might also be cool for folks who want to see the mind and body meet through game play. Meanwhile, the Global iGaming Summit & Expo will highlight the intersection of social casino games and online gambling — a big growth area for games.

May

The industry will be full of next-generation rumors as it approaches E3. But the blockbuster titles expected this month include Sony’s The Last of Us and Rockstar Games’ Grand Theft Auto V. Gamers will be in a state of heaven. Rockstar and its parent Take-Two Interactive have consistently launched big games during May in recent years. For all other developers, beware the Ides of May.

June

At the E3 show in Los Angeles, we’ll probably see Sony and Microsoft unveil their new game consoles. Sony’s PlayStation 4 will hopefully make use of cloud gaming technology acquired with the $380 million purchase of Gaikai. Microsoft’s Major Nelson, aka Larry Hyrb, has a timer showing that the event is only 158 days and some fraction of a day away. Some folks took that to mean that Microsoft will introduce a new game console at that moment, but Major Nelson does that every year. E3 will still be huge, but the changes wrought by new business models and distribution systems will be evident.

July

This is a quiet month, but Zynga sometimes holds its Unleashed event to describe the big new games coming on social and mobile platforms. Our own MobileBeat event will highlight the growth of mobile platforms and the app economy. And in Shanghai, the ChinaJoy conference takes place to highlight all things gaming in one of the fastest-growing markets for free-to-play games.

August

The Gamescom event in Cologne, Germany, has become Europe’s biggest game fest. And the Pax Prime event in Seattle is another show where the fans will come out by the tens of thousands.

September

The first games of the fall will start hitting the market, and the game developers who managed to get their games out on time will see the benefit of a longer selling cycle up through the holidays. This month is also home to the Tokyo Game Show. With the rise of mobile social game companies Gree and DeNA, don’t be surprised if the Japanese companies start making a lot more money from mobile games compared to what they make on the traditional consoles. Apple usually unveils its new fall platform launches in this month.

October

Super hero games will debut at the New York Comic-Con. But social and mobile games are likely to account for a bigger slice of these titles in contrast to superhero console games in the past. And this year, our GamesBeat 2013 conference will take place during October. We’ll line up dozens of speakers for this event. And we don’t know what they are, but there will be lots of games launching this month.

November

This is still the big month for blockbuster game launches. You can expect to see Call of Duty: Modern Warfare 4 (or something like it) debut this month. Ubisoft typically releases a new Assassin’s Creed game, Microsoft cranks out a Halo, and other big titles typically hit just before Black Friday. But this month will also likely see the debut of the Sony PlayStation 4 or the Microsoft Xbox 720 (as it has been nicknamed). In Korea, you can expect another Gstar conference to take place.

December

The Spike TV VGA game awards have distorted the calendar so that many new games that were once announced at CES are now revealed in December instead, after all the big games have already launched for the holiday season.

The industry will feel the impact of smartphones and tablets as game activity peaks in the last week of the year. But chances are that some of the biggest game playing will happen on mobile devices, as consumers cash in their gift cards and download mobile titles on their new devices. That was how Angry Birds saw more than 8 million downloads on Christmas Day in 2012. The days after Christmas may actually turn out to be the biggest days for game sales for the whole year one of these days.

[Image credits: Mike_fleming on Flickr Creative Commons, Major Nelson]

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The horror is still fresh around the deaths of 20 children and six adults in the Newtown shootings. And with game-playing at a peak after Christmas, the debate on video game violence will be a conversation for many families during the holiday season.

In the aftermath, the attention is once again focused on what could have driven a shooter so mad. Should we blame video games for the shootings, simply because the gunman played them? For all of us, the pain of these shootings gives this academic debate about gaming violence a renewed sense of urgency.

The mass media are already diving into the issue; some of this coverage is thoughtful and some of it not. On the thoughtful side, The Washington Post conducted a study looking at 10 countries, comparing video game spending and gun-related homicides and found no statistical correlation. The U.S. has the highest firearm murder rate in the world, but other countries where video games are popular have much lower gun-related murder rates. And countries where game playing is the highest are some of the safest in the world.

As for the not-so-thoughtful media coverage: One particular angle was to blame Mass Effect, a game that the reported shooter “Ryan Lanza” supposedly liked, according to his Facebook page. But then the inconvenient fact arose that the killer was actually named “Adam Lanza,” and the Facebook page belonged to somebody else. Not being quick to judge isn’t one of the virtues of mass media.

This isn’t going to go away

The coverage has begun to shift toward the political reactions that are already in motion. The politicians know what their roles are.

“The violence in the entertainment culture — particularly, with the extraordinary realism to video games, movies now, etc. — does cause vulnerable young men to be more violent,” Sen. Joe Lieberman, I-Conn., told the Associated Press.

Lieberman has been involved with the topic of violent games since the bloody Mortal Kombat debuted in 1992, prompting a debate that led to the industry’s creation of the Entertainment Software Ratings Board, which puts ratings with age recommendations on games. At the time, game makers knew it had to adopt ratings or face government regulation and perhaps even censorship. Those ratings have proven remarkably resilient in calming concerned parents and holding off further legislation.

One of the game industry veterans from that time worries that the political aftermath of the shooting will be long-lasting.

“Its going to be hard for the next couple of years no matter where you sit in the games business,” said Greg Fischbach, a startup investor and former chief executive of Acclaim Entertainment, in an email to GamesBeat (his company got into hot water for publishing Mortal Kombat). “On top of that, you have to expect that Congress will attempt to pass some legislation that could impact the Call of Duty’s of the world. The ramifications of the Newtown disaster will impact Hollywood as much as the gun industry.”

Lieberman is retiring, and Fischbach isn’t in the game business anymore. This isn’t their fight anymore. Sen. Jay Rockefeller (D-WV), may be picking up Lieberman’s mantle as the video game industry “watch dog.” He introduced a bill to have the National Academy of Science investigate the impact of violent video games.

Those who are coming fresh to this discussion should know that anti-game legislation was passed, making it a crime to sell violent video games to minors in California. The law was signed by former Gov. Arnold Schwarzenegger, who starred in many violent films. The U.S. Supreme Court ruled in the game industry’s favor, saying that limitations on video games violated free speech and singled out the medium for blame without considering other forms of art or causes. The court found no convincing evidence of a causal link between violence and media.

A generation of feuding

But judging from the reactions in the past week, the Supreme Court didn’t end this debate. I don’t want to see this turn into a Hatfields and the McCoys feud. But the raw emotions on this subject run deep, as an exchange involving two old foes illustrated this week.

Hal Halpin, the president of the lobbying group that represents gamers — the Entertainment Consumers Association — issued a measured statement that noted how close to home this struck. Halpin’s association is based in Wilton, Conn., not far from Newtown, and he said that some in his office had friends and families who suffered deaths in the shooting. Hal’s brother, Spencer, made a thoughtful documentary called Spencer Halpin’s Moral Kombat, in which I played a role. The film is still surprisingly relevant today, even though it was released in 2009 and made much earlier.

“Regarding media requests for a statement about what role violent media — movies, music, games, etc. — has played, I’d simply and respectfully point to the lack of evidence to support any causal link,” Hal Halpin said this week. “As our local law enforcement — involving most of the surrounding towns — work in concert with state and federal authorities, we will likely learn more about all involved and perhaps even more clarity about the murderer, his health and family. But until there are any details that point to media-related blame, it’s premature to make any such assumptions.”

Jack Thompson, the anti-game crusading Miami lawyer who was once the scourge of the industry and is now disbarred, called up Hal Halpin and left him a voice mail message.

“Hey Hal, Jack Thompson in Miami. I think it’s tragic, and maybe it brings the tragedy of others to home … to your home, that this is happened now in Connecticut. Uh, you know, I did what I could to try and prevent these things … I was called a ‘massacre chaser’ by you and your friends … when I all I wanted to do was prevent these things from happening. So maybe now you’ll get it, Hal. Maybe now you’ll get it … though somehow I doubt it.”

No doubt, if he could, Thompson would pass the mantle on to his son to take on the video game companies. It would sadden me to see everyone fall into their familiar roles, with no compromises, and no changes in point of view.

Your views can change

I think that Halpin and Thompson could both agree that we don’t want this to be a problem that we pass on to our children to solve. My oldest child came out to discuss the shootings with me while I was playing a round of Call of Duty: Black Ops II multiplayer combat. The discussion reminded me. Game violence is always the elephant in the room. I would not play Black Ops II in front of my youngest child. With my oldest, I can joke how bad I am at the game compared to her friends. And in real life, I would never own a gun.

I can admit that my views on game violence have evolved. My own brother died at the hands of two gunmen, 19 years ago. Just after that happened, I couldn’t play violent games. But over time, the pain wore off, and I was able to separate fantasy from reality again. Today, I play violent games again, and I see no great contradiction in that, because I have rebuilt the capacity to understand the difference between play and real life. Every one of us will change how we view violent games during our lifetimes, as we move from child to parent, or from one state of life to another.

I can look at this game violence issue from across a generation. But this discussion isn’t about who has the most scars or the freshest ones. I do think that we can all learn something from the debate, but not if we fall back to our well-rememberd, knee-jerk reactions. And that is the only opportunity that I see for all of us to seize in this tragedy.

The debate to me has never been just about whether we should have the freedom to create what can entertain us. It has also been about the responsibility to create something that is meaningful. And it is about whether it is even possible to control and measure the effects of the goodness or badness of media. It is hard to balance these competing concerns, and that is why it has taken more than a generation to solve this problem. To do that, you have to figure out what is fun, what is art, what is safe, what is harmful, and what is like pouring gasoline on a fire. If you shift your point of view slightly, you’ll see that video games can be all of these things.

At some point, when we’re all ready for a sober discussion, we can all raise our heads and address this issue, for once and for all. But I recommend that, rather than digging in, you should try a new point of view.

[Image credit: Peter Kaminski, Flickr Creative Commons]

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The era of 3D graphics created a revolution in gaming that more than 70 graphics chip startups helped serve. Of those, only Nvidia, Intel, and Advanced Micro Devices survived. With each new game console cycle, game publishers and developers came and went. The cycles were so familiar that everybody thought a cycle had to last five years. (Microsoft changed that and shrank the cycle to four years with the original Xbox, and now it is going past seven years with the Xbox 360). Price cuts became an annual tradition.

But now the era of accelerated change is upon us, said Ted Price, the chief executive of Insomniac Games (the creators of the notable Ratchet & Clank and Resistance franchises), which has been around for 19 years. If we’re in a cycle, or maybe an investment bubble, we won’t be able to see it until we have hindsight. The patterns are crazy.

“The industry reflects society right now,” he said in an interview with GamesBeat. “Society is evolving extremely fast in terms of how it uses technology. Our industry is experiencing that change as well. We’ve been very lucky over the last almost two decades to have a stable, predictable industry. But now we’re in a different world. That change has come upon us and everyone else in the world in the last five years. So it’s not just us. It’s the Internet. It’s sales. It’s traditional media. Everything and everybody is feeling the effects of this accelerated change in our world.”

You don’t want to misjudge what is happening. My old boss at the San Jose Mercury News, Jerry Ceppos, once lamented that Silicon Valley was going through something like the Italian Renaissance, that great flowering of art that would become legendary for centuries. But all we could see in our day-to-day coverage of it was the changes in the sales of cans of paint. Maybe if we slapped a name on this era — as good as the word “renaissance” was — then we could understand it better.

We saw the era of high-definition games arrive with the Xbox 360 and PlayStation 3, only to see them broadsided by the Nintendo Wii and its motion-sensing technology. Intel, ever the market driver, wants motion-sensing to evolve into an era of “perceptual computing,” where you can use anything — a keyboard, a touchscreen, voice commands, or hand gestures — to control your PC and its accompanying software.

That sounds like it might take an army of technologists to accomplish. And for sure, Intel and the hardware companies will keep a lot of engineers busy bringing about that change. But gaming’s reach is closing in on billions of people, as smartphones and tablets fall into the hands of so many. And to reach that global audience, you don’t have to be a gigantic game publisher, Price said.

“You can be a guy in his bedroom with a great idea, using off-the-shelf tools to build something that nobody’s ever seen before,” Price said. “That guy can change the world. That’s the promise that got me into games in the first place. I feel like, in many ways, it’s come full circle.”

The waves are coming in faster, but they’re also crashing into each other from different directions. Apple’s iPhone and iPad disrupted gaming on the handhelds and the PC. Free-to-play games started in Asia and migrated to the U.S. via Facebook, and now that wave is sweeping through MMOs. We’re seeing a new era in gamification and a new era in mobile social gaming. Heck, we’re even seeing a new era of social casino games (George Zaloom at GoPlay counts 225 of them from 50 game developers). Everybody knows that you’re supposed to embrace change. But which change do you embrace?

It isn’t easy to be a decision maker now. THQ tried to do a few too many things: kids games, hardcore real-time strategy games, MMOs, Facebook apps, and mobile games. Now it’s paying for failures in multiple segments. If you’re a game studio chief, who can you look at who has made a successful transition from console games to mobile games? Usually, when someone enters the mobile game business, they do so by taking off and creating a new studio. Shifting the identity of an existing studio or publisher is akin to dinosaurs becoming mammals. And that’s more drastic than getting a sex change.

Earlier this year, we referred to this as the Crossover Era, where game companies crossed over from one market to another. The disruption breaks down barriers between industries and creates opportunities. Companies like Zynga and OnLive were leading the charge on changing fast and adapting to new technologies. But perhaps they got too far ahead of themselves.

The tough thing that is happening now is that we’re also seeing leadership changes as well. Price admits he is riding on a rollercoaster, but he is sticking around to see what happens. Not all of his compatriots are doing so.

Jason Rubin has been installed as the president of THQ. He still reports to longtime CEO Brian Farrell, but Rubin has a mandate for change at the company, which has shrunk dramatically and may very well go out of business. Mike Capps, the longtime president of Epic, announced he was retiring. So did Cliff “CliffyB” Bleszinski, Epic’s top game designer. The doctors, Ray Muzyka and Greg Zeschuk, left Electronic Arts/BioWare after two decades in the business. You can expect more of this change as leaders decide whether they want to sign up or sign off for the coming changes.

Normally, I would bet on these folks to be the winners in any era. Certainly, I’m no good at seeing the winners and losers. It feels like I’m in a tunnel now, when I really want to be perched above, looking down from a mountain at the beach of the game industry. I wish I could zoom in and zoom out to understand what is happening.

Do you see the wave coming ashore? Are you going to be the one that clings to your vinyl records? Are you going to ride it? Or will it crash down upon you and sweep you out to sea?

[Image credit: Sound Wave sculpture by Korean artist Jean Shin]

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Millions of players around the world are playing multiplayer combat in this season’s biggest video game blockbuster, Call of Duty: Black Ops II. But just how many of those players are doing things by rote, playing in the same old style year after year and never getting any better?

I have been one of those players, too lazy to change. And we’re not good for Activision Blizzard, which generates more than billion dollars a year from more than 40 million Call of Duty fans every year. (This year, the game sold more than $1 billion worth in its first 15 days). If you get progressively worse at multiplayer, you’ll drop off sooner and move to another game. Worse yet, you might be so embarrassed at how you play that you never even try multiplayer. Bit by bit, such fan erosion could one day knock Call of Duty off its perch as the fastest-selling game of all time.

That hasn’t happened yet. Its players are still very active. As of earlier this week, fans had played Black Ops II for 178,535,425 hours, and more than 399,835,504,682 shots had been fired in multiplayer. Players had thrown 2,359,330,195 grenades and killed more than 20,132,02,068 enemies. Of those, 1,677,862,824 had been killed with head shots. Call of Duty Elite developer Beachhead Studios tracks and shares the data on every bullet fired. It has figured out that the data itself has created a metagame that makes fans even more competitive.

I’ve played Call of Duty games for years. But this time, I engaged in a serious experiment as I rushed through the single-player game and began multiplayer. I got some expert advice from Treyarch game design director David Vonderhaar. His sensible advice reminded me that I should equip myself better to become consistently faster in order to get the drop on (the much younger) players with faster reflexes. He also suggested equipping myself alternatively for stealth, support, survival, or run-and-gun roles. That was like a basic therapy session on how I could play better, without embarrassing myself.

I’ve continued to play, keeping close tabs on my progress using Call of Duty Elite, the social network that now comes free with the game. And now I received a second review of my tactics from Michael Gesner, the executive producer at Activision Beachhead Studios (maker of Call of Duty Elite), and Jason Ades, a producer at Activision Publishing. I’m sharing their collective wisdom with all of those players who need the help, like me, but don’t get a chance to quiz the game developers. These experts are the front-line in the battle that Activision is fighting to get players to re-engage with Call of Duty.

My track record doesn’t lie (I wish it could)

For those who don’t know the game, Call of Duty: Black Ops II is not a realistic combat simulation. It is set in the year 2025, and some of the weapons, while rooted in fact, are not real. You can run faster in the game than in real life, and you can take more bullet damage. The game is very violent, but it is respectful of  the sacrifice of real soldiers. Activision donates some of the proceeds to veterans causes. The single-player story conveys a mature tale about the horrors of modern war, and it tries to give you a sense of what war is like.

But multiplayer is different. I think of the multiplayer version of the game as a sport. Activision encourages this comparison, encouraging players to create their own competitive clans and participate in league play. And it pays to have coaches in this sport.

The experts reviewed my lousy stats, which are available in an amazing amount of detail on Elite. With Elite, you can log in and go to your career page, which has a host of details aimed at helping you brag about the good stuff and improve your play. The stats come from every session you play. You can drill down on a “heat map,” which shows an overhead view of the level and has a timeline. If you haven’t done this yet, you should go to Call of Duty Elite and check it out. You can see where most of the deaths occurred on the map during the session, and who shot whom. The playback shows you exactly who shot you, the weapon they used, and the positions of the shooter and victim.

If I had recorded some matches, they could have seen the video playback of the match from my point of view. With all of this help, I feel that I’m getting enough feedback to help me get better at the game. And that makes me want to play it longer.

In Black Ops II, after 17.5 hours of play, I have a kill-to-death ratio of 0.74. For every three kills, I die four times. On last year’s Call of Duty: Modern Warfare 3, my kill-to-death ratio was 0.43. That was after 59 hours of play, and it was from playing a mode of multiplayer dubbed Domination, where your team tries to take and hold three flags on the map. I wrote about my Modern Warfare 3 experience here.

As you try to grab those flags, you’re more likely to get killed and less likely to get kills. And on the original Call of Duty: Black Ops, I had a 0.76 kill-to-death ratio after 69 hours of play. I always thought Black Ops multiplayer was easier than Modern Warfare 3, thanks in part to small changes like the radio-controlled car in Black Ops that enabled even the lamest players to get some easy kills.

I’ve become a Lieutenant Colonel III, on level 39 of 55 total, and I score about 136 points per minute in the game. My total score is 141,765. By comparison, the top player in the game has more than 4 million points. I’ve got about 23 hours to go before I hit the top level, or Prestige. I’m actually playing more than I have in the past. I’m also thinking about it more and am starting to use the Call of Duty Elite app for the iPhone, which lets me change my custom classes, or favorite weapon kits.

The stats tell you that the Modern Warfare style of multiplayer is much more difficult and less forgiving for average players like me. But I also feel there are some significant differences with Black Ops II that help equalize the playing field.

The no-brainer tricks I had already figured out

The first 10 levels now have a tutorial that you can play with bots, or computer-controlled characters. You can also watch five multiplayer videos on Elite TV for helpful hints. If you still need help, you can head over to Twitch to watch live Black Ops II games in action. It is mesmerizing to watch players who are really good.

The new Pick 10 system, where you can customize your loadout using 10 points — rather than be restricted to certain choices — is great for people who need to fix their problems with multiplayer fast.

Finding your right game is also essential. I switched from Domination to Team Deathmatch to improve my survival and get a better kill-to-death ratio. But I can probably earn more points taking one for the team and grabbing a flag instead of going for a kill. Domination is also a team game, and I mostly play on my own.

I also learned the maps better. When you know a map, you can start executing on a strategy to outwit your enemies. Some of the maps are very hard to figure out. For those ones, it pays to know that everyone dies in the middle. If you want to stay alive, keep to the edges.

If you know an area is well-trafficked, like a corner in a corridor, you can put a Bouncing Betty mine on it. If you’re going to snipe, find good cover. Match your weaponry to the map, as appropriate. Submachine guns are better for indoors, and sniping is good for maps with long, outdoor spaces. When you are moving, go from cover to cover. Sprint to get to your hiding spot, but don’t get caught walking in the open.

The weaponry of Black Ops II, which is set in the year 2025, is far more deadly than in past games. But that can be a good thing for new and average players. If you level up your assault rifle, such as my MTAR, enough, you qualify for more and more accessories. I quickly latched on to the Target Finder, a scope that identifies enemies in bright pink rectangles as soon as you look through the scope. That helps my older eyes discern enemies against any backdrop in a split-second. I simply move my crosshairs of my gun into that rectangle and a white “X” appears. I fire indiscriminately at that X until the enemy drops.

Now that I have leveled up my weapon (getting access to the better accessories in doing so), I don’t really want to go back and start over again with other weapons. But that could pay off for me if I do that with better guns. Overall, I’ve only completed 88 of more than 1,700 challenges, such as getting 25 kills with a particular weapon.

You could say that’s cheating to use such a powerful scope. But I contend that anybody can take advantage of this scope, and it really helps the people who need some extra help pinpointing exactly where the enemy is. It helps the “noobs” and the average players more than it does the excellent players. And Black Ops II has counters to it. You can spend a point in your 10-point armory kit to negate the effects of the Target Finder.

Gesner says the interesting thing is the “rock, paper, scissors” effect of the strategies and counter-strategies. If you know how to counter somebody’s else’s strategy, then you’re a step ahead. But good players adapt and find new counters to a winning strategy. In fact, you can actually watch a good player and copy his or her custom class kit in Call of Duty Elite. And there are many different ways to succeed at Call of Duty, which makes the game so fun to so many different types of players.

Good advice on staying alive that I didn’t know

The good thing is their advice had an immediate effect on my game play.

They fixed one obvious problem in my kit, or the things I took into battle. They told me to get rid of the grenade launcher attachment (known as the noob tube) since I clearly wasn’t using it that much. That saved me one of my 10 points and I could apply it to something else.

I was using grenades and concussion bombs, to no effect. Whenever I tossed these, they only hurt the enemies by pure accident. I replaced them with electric shock charges, which you can plant in the ground and stop an enemy cold with an electric blast. The blast doesn’t kill the enemy, but it holds them still for a precious second. If I am camping by a window, I can turn around as soon as I hear the electric blast and shoot the frozen enemy.

Supplementing the shock charges is the Bouncing Betty land mine, which pops up in the air and explodes when an enemy comes near. If you plant this near the shock charge, you can kill the stunned enemy. These two changes to my loadout enabled me to stay in a building, look out the window, and shoot passersby without worrying that someone would take me from behind. It made me much deadlier as a “camper.”

But it didn’t make me invincible. The maps are designed for balance. Gesner said that the best camping spots are also the ones with the most intersections. You can’t possibly watch your back if there are three entrances into a room where you are camping. Gesner says that every camping spot has its weaknesses (on purpose). Perhaps the best method for camping/sniping effectively is to keep moving — maneuver to one camping spot, take out an opponent, then seek cover and move to your next one.

The big counter to camping is a new accessory, the millimeter scanner. At short range, this scope can see through buildings and barriers, showing you the outline of someone who is stationary. If you have a weapon equipped with a “full metal jacket” bullet, you can shoot through walls and take the camper out. The millimeter scanner also works when you toss out a smoke grenade, as it allows you to see the silhouette of someone obscured in the smoke.

Some more tips

Study the maps. And look at your heat maps. If you get too bored as a camper, or if the enemy comes after you, try the next best thing. Move around on a circuit. You can run from camping spot to camping spot, or from one part of the map to another where you know you can get the drop on people who are moving in the usual heavily trafficked spots.

Get the right accessories. If the recoil of your assault rifle is a problem, get a foregrip or stock to reduce the recoil. If you’re a sniper, consider carrying an assault shield to create your own cover. Every accessory should complement your style of play.

Scorestreaks (such as an air or missile strike you can loose on an enemy when you reap enough kills in a row) are a lot of fun to unleash on the enemy. But they are costly if you use the “Hardline” perk to reduce the number of kills it takes to get a Scorestreak. If you never get enough kills to get a Scorestreak, the Hardline perk may be a waste.

Corners matter a lot. Never go around a corner in a sprint, said Ades. It takes time to stop, draw your weapon, aim, and shoot. If possible, you should be aiming down your gun site if you can when you round the corner. Glance at your minimap to see if you can spot an enemy. And toss out a shock charge or Bouncing Betty mine to check to see if there’s an enemy there that you can’t see.

Pay attention to the range of your gun. Light Machine Guns have longer range than an assault rifle, but they slow you down. Sniper rifles have long range, but they’re slow, have a low rate of fire, and they don’t work in close quarters. Submachine guns are good for short corridors and maps with lots of corners. But they have a short range. Each of the guns also has a different amount of recoil, but you can reduce that with accessories like the stock or foregrip. And you can further reduce it by lying prone on the ground and shooting.

Conclusion

As I noted, the battlefield of 2025 is deadly. But the changes made to Call of Duty: Black Ops II’s multiplayer serve to level the playing field. Once you learn how to play a certain way, you can try out another method, such as stealth. That should increase the time you spend with the game, and that is good for Activision and your overall competence as a multiplayer participant.

One of the best moves that Activision made was to make Call of Duty Elite free. It provides the necessary feedback and transparency that a player can use to objectively evaluate different fighting styles. It pays off if you take the time to analyze your game (or find a seasoned veterans to analyze it for you) and make the changes you need to stay alive longer.

Gesner said, “There are other camps that will disagree with our advice, and that’s what makes Call of Duty great.”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Nintendo surprised the industry this week as it confirmed a leaked story that it would launch a stripped-down Wii mini game console for $99 in the Canadian market. The red console pictured above has the same core functionality as the Wii introduced in 2006, but it will be available on Dec. 7 for $30 less. What’s missing? The machine has no Internet capability and does not play older Nintendo GameCube games. It also has a slightly smaller footprint than the Wii.

We asked if Nintendo would launch the new Wii mini in other markets. But the company said only, “No information is available about its potential availability in other territories in the future.” The Wii mini plays 1,300-plus Wii games, but it isn’t being sold with a bundle. By contrast, the $130 (or, counting recent discounts, as low as $119) Wii sells with Wii Sports and Wii Sports Resort bundled. The question before us: What is Nintendo’s strategy? I’ve got my own opinions on the subject, and I gathered some from throughout the industry as well.

In the past, game industry wags have talked about the “magical $99 price.” Once a console drops to that price, mass market adoption can be huge. The PlayStation 2, one of the most popular consoles ever with more than 150 million units sold, hit its stride at $99. Nintendo’s history suggests that it sells its hardware for a profit. Nintendo has “no tolerance for selling hardware below cost,” said Jesse Sutton, CEO of Majesco. So it probably can’t cut the Wii’s price to $99 and still make a profit.

Still, hitting that $99 price will help the Wii match the price of its newest rival, the Android-based Ouya machine, coming out in the spring. Jeff Hilbert, managing partner at Digital Development Management (a game talent agency), says that part is “genius.” But Marco DeMiroz, CEO of mobile game maker PlayFirst, says that the $99 price is too high in the age of tablets and smartphones. This new machine just isn’t competitive with the experience you can get on subsidized mobile devices. He thinks it might work only if marketed outside the U.S. in emerging territories.

“It’s an appropriate price and offers a strong consumer value with a deep readily available software line-up,” said Jesse Divnich, vice president of insight and analysis at market researcher EEDAR. “The $99 price point shouldn’t be compared to the PlayStation 2, as most consumers viewed the PlayStation 2 as a DVD Player that also played games.  The Wii lacks a DVD playback function. The Wii mini won’t be a revival of the console, but instead targeting the extreme price sensitive consumer.”

In its glory years from 2006 to 2009, the motion-sensing Wii was so innovative and in such high demand that Nintendo didn’t have to think about cutting its introductory $250 price. Microsoft and Sony had more expensive machines, but the innovation in the Wii enabled it to race ahead and sell nearly 100 million consoles, compared to about 70 million each for the rivals. Sony has introduced cost-reduced versions of the PlayStation 3, and Nintendo is now taking a page from that book.

Of course, some of us wondered why Nintendo didn’t hit the $99 price earlier, with such an explosion of competition from the iPad, iPhone, and other new game platforms.

“Nintendo should have two years ago dropped the price on the Wii,” said Michael Zyda, head of the University of Southern California’s GamePipe Laboratory. “This is very late. Nintendo is on a path towards extinction.”

Loyd Case, a veteran journalist and hardware expert, wonders if there is a cost advantage to manufacturing the mini. It is smaller and uses less material, but the Wii components are made in such huge volumes that it might actually be more costly to start over and make some components in lower volumes, even if they are smaller. Blake Commagere, CEO of MediaSpike, said, “Not sure what the point of making it smaller is — it was already small, but it’s not like it’s any more portable now.”

“Removing Internet connectivity is a problem but Nintendo never had a good online strategy to begin with, so I don’t think it’s all that big of a deal,” said Anand Shimpi, head of the tech gadget site AnandTech. This is a cheap way of giving users access to Wii games, which is the whole point of a gaming console last I checked. It’s a great way to prop up sales of existing Wii titles.

Lastly, why launch in just Canada? It could be a test market. Or it could be the result of limited supplies. Or, as game veteran and DirectX co-creator Alex St. John says, maybe it is a test to figure out how much the Wii mini might cannibalize sales of the Wii U. If it does cannibalize sales, then Nintendo might shelve the Wii mini. If it doesn’t the Wii mini might get young kids started on the Nintendo life and eventually lead them to the newest console.

“I’d be inclined to call it a ‘gateway console for children,’ ” St. John said.

And veteran mobile developer Scott Foe says the mini is Nintendo’s message: “Wii are not dead yet.”

Nintendo created more questions than answers so far. But it’s fun to guess at what’s really happening. And it shows that those on the sidelines have no shortage of creative thinking.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Real-money gambling could generate considerable revenue for Facebook and other social gaming companies as regulations loosen around the world. So Gamesys hopes to have the jump on big companies from Zynga to PKR (makers of online poker) as it conducts its first real experiment with gambling with Facebook’s audience in the U.K.

Gamesys launched its real-money gambling app, Bingo Friendzy, on Facebook in August. The result so far is very positive, said chief executive Noel Hayden (pictured above) in his talk last week at the Social Gambling Conference in London. Gamesys will get more competition over time, as Facebook authorizes more real-money gambling games on its platform in places where it is legal, such as the U.K. At some point in the future, U.S. online real-money gambling could be legalized, according to bullish investors.

“The players that we have converted [from free to play to real-money paid gambling] are high-value players,” he said. “The social players are more valuable than our standard real-money players.” Real-money gambling games can be very lucrative, generating $500 a month from a paying player, and word about such games can spread very rapidly among friends on Facebook.

“We’ve been thinking about these things for a long time,” Hayden said. “We’re excited because Facebook has so many rich viral features, amazing targeting — it’s unbelievable the targeting you can do. We’ve all had refer-a-friend features in our games, but Facebook enables refer-a-friend on steroids.”

The key advantage on Facebook is that members don’t normally trust ads but look favorably on referrals. So if your friend recommends that you play a real-money gambling bingo game on Facebook, you’re more likely to do it.

Hayden started the company in 2001 with Robin Tombs, Andrew Dixon, and several developers. In 2003, they launched the Jackpotjoy web-based casino game, which had both free-to-play title and pay-to-play versions. On its first day, the game generated £35 in revenue.

“I was absolutely delighted,” Hayden said. “Back in those days, I was doing all the support calls. I was doing chat hosting in bingo. I printed the games of the winners and was writing checks to them manually.”

The company launched a real-money online gambling version of bingo. It has provided its version of bingo under license to a variety of brands, such as Lycos, Ryanair, News International, Orange, and Harrah’s Entertainment.

Eleven years later, Gamesys has more than 700 employees. In 2011, the company took more than 3.2 billion real-money gambling bets from players, and it generated £125 million — $198 million in U.S. currency — in revenue.

“I’ve got some seriously great people in the business and things are going well,” he said. “In 2008, we started to notice a lot more of our players spending time on Facebook. So in 2009, we decided to start our social gaming division,” which made non-gambling freemium games (where users play for free but may pay real money for virtual currency).

Gamesys tried out Facebook by launching a social city-building game, but it didn’t do so well because Facebook had scaled back on the viral messages that games could send out to people on the network, largely because of too much game spam going to those not interested in games. The city-builder failed, but Gamesys learned a lot about the need to continuously update a game.

“You have to be constantly adding features and that creates a huge added cost for a team,” Hayden said.

Hayden said that non-gambling social gaming companies had the advantage of speed and agility over the traditional online gambling companies. They can, for instance, make use of analytics and act upon them in short order to change games to better suit users.

“I thought cash gaming moved quickly, but social gaming was moving at light speed,” Hayden said. “You can move really fast with the right team. … It’s about the science and the creativity coming together. You have to do all this stuff really fast to compete with the San Francisco dudes.”

He visited San Francisco to visit the social gaming ecosystem and understand the business better. That opened his eyes to the competitive landscape. Social casino gaming had its attractions because of no regulation, in contrast to online gambling, which has regulations such as putting limits on how much people can lose in a month of gambling.

With the new game, Gamesys “gets a single view of the customer, both on the freemium side and the real [money gambling] side,” Hayden said.

One difference between the games is that a freemium game can pay a lot more chips out to winners and reward them more frequently, while developers face limitations to how much cash you can give out in a real-money gambling game. So the games actually have to have different designs.

In designing social bingo games, Gamesys included features such as signing in again after an interrupted session and start back where the game left off. It also added pictures of Facebook friends on the game board so a player can immediately see who wants to play a round. Such features are typical in social games, but they’re relatively new for real-money online gambling games.

The Bingo Friendzy game had to be designed to fit in the Facebook Canvas, or the user interface that fits around a Facebook app.  When someone wins a round, it’s treated as a huge deal, with all of the appropriate fanfare. That’s a big part of the fun factor that social gaming companies have executed better than real-money gambling firms, Hayden said.

The Facebook gambling game works well in a social context because it gives you bigger payouts if you play with multiple friends. That encourages people to play together. Friends can take videos of game sessions and put them on YouTube. And that leads to more notifications going out about how your friends are playing a particular game on Facebook.

“You get tons of impressions going out in all kinds of ways,” he said.

Gamesys also created Slot Friendzy, a slot machine game as another addition to the bingo game. One of the unique things about Facebook is that it uses real names. When you’re gambling, you don’t necessarily want everyone in the world to know it. So the app has to get your permission before it posts that you won ten pounds in a bingo gambling game.

“You have to really think carefully about the type of content you are sharing and promoting,” Hayden said.

As far as what is coming next for Gamesys, it is soon launching a free-to-play social gaming title called Here Be Monsters, a mashup of a social farming simulation and a Pokémon-like monster collection game. It has worked on the game for the past 18 months and plans to launch it in 2013.

The company will continue to make web-based games, move into mobile, and continue to make Facebook games as well. Watch out Zynga.

The conference organizers paid my way to London, where I gave a speech. Our coverage of the event remains objective.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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How do you operate when you’re inside a speculative bubble?

That’s an important question to consider when you look at all of the companies in the social casino gaming and online gambling business. Those companies are aware that both disruption and some irrational exuberance are happening, but they have to find the right strategy to either ride the bubble out as in inflates or be ready to land on their feet when it pops.

I’m contemplating this question while flying over the Atlantic Ocean as I make my way to the Social Gambling Conference in London. I’ll be giving a talk there about who is being clever in this emerging gaming market, and this is an amended and abbreviated version of that talk.

Social casino games have been hot, and they’re poised to disrupt both gaming and gambling. There are more than 100 such games on Facebook now. The biggest of them is Zynga Poker, a 5-year-old game that is still a cash cow for the company. In this game, you can buy virtual poker chips and play poker with your friends, but you can’t cash your winnings out. If you could cash out, that would amount to online gambling, and that’s illegal in most U.S. states. But that could change, and that possibility has fueled the bubble.

A year ago, the U.S. Justice Department ruled that online gambling wasn’t illegal after all, provided that states approved laws that expressly permitted it. By January, slot machine maker IGT bought DoubleDown Interactive, a 70-employee social casino gaming firm on Facebook, for $500 million. That seemed crazy, but IGT and other gambling companies see social casino games as the “top of the funnel,” according to Playsino chief executive Brock Pierce.

In the spring, more than 700 people attended in the iGaming Summit in San Francisco, and we saw a big crowd at the GamesBeat 2012 conference’s social casino gaming panel.

Facebook games are free to play, allowing users to play for free and pay real money for virtual goods. That model draws a lot of people into social casino games at a very low cost, at least compared to the high cost of acquiring new real-money online gamblers. If social casino games draw in new players at a very low cost, some of those players will become online gamblers. And some of those players may visit land-based casinos. And some may become high rollers.

That’s the benefit to the casino companies, and it’s why companies such as MGM have teamed up with social casino gaming startup Playstudios. According to a survey by analytics firm Kontagent, about 82 percent of online gambling executives believe there is still room for them to play in social casino games.

But those casino companies and online gaming firms have been slow to create good social games. Zynga has disrupted them, with 33 million monthly active users for Zynga Poker on Facebook. DoubleDown Casino, by contrast, has just 4.8 million monthly active users on Facebook. On its own, without real-money online gambling, social casino games are already a $1.6 billion worldwide business, according to market analyst SuperData. And the percentage of people playing social casino games is on the rise.

Zynga is expanding in the other direction, launching social casino games that have given it a very large percentage of the social casino gaming market. It hired a seasoned real-money gambling chief, and it is preparing for the day when online gambling will be legalized again. In the spring, it will launch real-money gambling games in a partnership with real-money online gambling firm Bwin.party, which has a license for legal gambling in the United Kingdom.

The only drawback is that, to get to the market quickly and avoid lengthy regulatory reviews of its own games, Zynga may have to relabel Bwin.party games with its own Zynga brand.

Why is Zynga in such a rush? The company’s stock price is hurting, and it needs do something ambitious — because it makes a few dollars per user per month with social casino games, with a lifetime value for a paying customer of just a few dollars. By comparison, online gambling companies can make $300 per user per month. If Zynga can knock down the barriers between online gambling and social casino games and then wait for legalization to happen in the U.S., it can start collecting pennies in the Gold Rush.

But making games is not the only way to make money in the Gold Rush. Betable is selling picks and shovels to the gold miners. It is doing so by enabling social casino game companies to offer a real-money betting option when they play a casino game on their mobile phones. Betable has built all of the infrastructure and obtained the necessary licenses (currently in the United Kingdom) to authenticate players and check whether it’s legal for them to play a real-money gambling game on their phone based on their actual location. If the user passes all of the tests, then Betable will allow that player to play a real-money version of the social casino game. In contrast to many social casino gaming startups, Betable has a business-to-business platform that could very well succeed regardless of the pace of legalization.

Luckity, a division of Churchill Downs, wants to accelerate the Gold Rush, but it is betting that legalization could happen slowly. In the meantime, it is offering a suite of social casino games where you can bet real money in the U.S. It has done so by capitalizing on the federal laws governing horse racing. Because of a separate federal law, betting real money online in horse races is legal in the U.S. So Luckity has created a random number generator based on the outcomes of horse races that occur around the clock throughout the world. It then uses that random number generator to determine whether a player wins or loses a bet in a social casino game.

That helps Luckity skirt the restrictions of the online gambling laws. The drawback is that when you play a slot machine game and bet real money, you might have to wait minutes for the outcome since there isn’t always a horse race happening every minute of the day. That will introduce delays that may frustrate players. The player thinks he is playing a real-money social casino game, such as a slot game. But in reality, he is betting on a horse race.

Other companies see the risks of the overcrowded casino game market, and they’re moving into the social sports-betting market, hoping to capitalize on the “second screen” trend, where users watch sports games and make bets with their friends on smartphones or tablets. Each of these tactics is a clever way to deal with the fact that there is a solid but melting barrier between gaming and gambling.

There are plenty of hurdles that could pop the bubble. Legalization may not happen in the U.S., given the concern that many people have about how addictive games are. Game developers may not want to design games that promote the “sinful” entertainment such as online gambling. And users might very well decide that playing social casino games for fun is more attractive than playing for real money.

Those factors could put practical limits on the business that social casino game companies can undertake. Whatever happens, whether the bubble pops or not, the companies with the right strategy and flexibility will win.

Disclosure: The Social Gambling Conference paid my way to London in exchange for a speech. Our coverage of the issue remains objective.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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A simple video game controller could be the key to unlocking huge markets for games and disrupting existing platforms. That’s the conclusion of Charles Huang, co-creator of Guitar Hero and the founder of mobile game controller company Green Throttle Games, which came out of stealth this week with a plan to upset the status quo in the game console business.

Sound crazy? It’s worth taking seriously because the difference between an incredible game platform and a boring one often lies in the quality and ease-of-use of the user interface. The mouse and keyboard have worked fine for decades, but the touchscreen finally matured and became easier to use with the iPhone. Touchscreen games exploded, and touch-oriented devices disrupted the traditional handheld game systems like the Nintendo DS.

But as much as the touchscreen represented an advance for casual game players, it was too imprecise for use with the most demanding games, such as fast-action first-person shooters, Huang said. That limited how much of the game business that smartphones and tablets could steal away. To play first-person shooters, you needed a real game controller.

The game controller is intimidating to non-gamers. That was why Nintendo created the motion-sensing Wii controller, which resembled something else that was familiar: a TV remote control. But the Wii-mote was imprecise, and it didn’t work well with shooters or racing games. Still, the Wii was disruptive because it captured non-gamers, the people who would have never picked up a controller. Nintendo tricked (or enticed) those people into becoming gamers via motion sensing technology.

Microsoft introduced yet another cool user interface, the Kinect motion-sensing system, in 2010 for the Xbox 360. Instead of holding a controller, your body became the controller. Motion sensors could detect your body and map its movements into game controls. But Kinect didn’t work at ranges closer than 10 feet, and it was also imprecise. Intel is working on technology it dubs “perceptual computing,” where you can wave a hand inches from a laptop and it will detect your movement as a computer command. Gesture-based controls will get more precise at some point, though they’re not there yet.

So far, nobody has really beaten the humble game controller at precise control. Casual gamers won’t use it, but the hardcore folks swear by it.

“It’s like the QWERTY keyboard,” Huang said. “Whatever its flaws, gamers know how to use a controller with analog sticks and buttons.”

So Green Throttle is launching a controller for Android mobile devices. On top of that, it will provide a high-definition multimedia interface (HDMI) cable to hook the mobile device up to the TV, so you can display the cool game graphics on a flat-panel TV.

This is where the disruption can happen. If you buy Green Throttle’s controller and an app to go with it, you can play fast-action mobile games on a big screen, without having to buy an expensive video game console. You can play cheap Android games rather than dish out $60 for each console title.

The threat isn’t lost on the console companies. Sony has embraced mobile gaming with PlayStation Mobile. Nintendo’s Wii U has a tablet-like controller with analog sticks. And Microsoft has launched its “second screen” experience with its SmartGlass app.

There is no end to the possibilities here. That’s why we’re seeing an explosion of innovation in the controller space. Rivals such as PowerA, maker of the Moga mobile game controller, see the opportunity. So does Wikipad, which is making a new gaming tablet with analog stick controls. If somebody nails the solution, then you will be able to play free-to-play apps on a television. And that will disrupt the consoles.

And it will introduce the big players of the new gaming business — Google, Apple, Amazon, and Samsung — into the living room and bring them into direct conflict with Sony, Microsoft, Nintendo, Electronic Arts, and Activision Blizzard.

And at some point, every one of those players will probably want to get their hands on a good game controller solution. Players like Green Throttle will be happy to provide it to them. Yes, it’s quite possible that the lowly game controller company could become a king maker.

FYI, I’ll be speaking at the Social Gambling Conference next week in London on Nov. 16.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Warning: This column has some story spoilers.

All these years, we thought that the Halo sci-fi video game series — which has generated $3 billion in sales and 46 million happy customers for Microsoft — was about combat. After all, the original Halo game from 2001 was subtitled Halo: Combat Evolved.

Forget that subtitle. It’s a romance. It should be called Halo: A Love Story. Cortana and Master Chief are in love, and the latest installment in the series — Halo 4 — reinforces that story.

At the beginning of Halo 4, Cortana awakens Master Chief from cryo-sleep in the midst of the wreckage of Forward Unto Dawn, the UNSC space vessel that was torn apart at the end of Halo 3. We learn from her that artificial intelligence companions have a seven-year life span, and Cortana has just turned 8. She is on the verge of “rampancy,” or being in danger of thinking herself to death.

Cortana — who is now fleshed out as a full, voluptuous character in contrast to past Halo games — becomes emotional during the conversation. Master Chief vows to get Cortana fixed. That sets up one of the main narratives of the game. This narrative is the most emotionally stirring and personal. No longer is Halo just about an epic interstellar war between humanity and the aliens known as the Covenant. It’s not about racking up the kills in combat. And I could care less about why I’m fighting this new race of Prometheans and a character named the Didact, who is beyond mysterious even among the enigmatic aliens.

It’s about saving Cortana. Behind the orange face mask and underneath the gravelly voice, you can sense the emotion within Master Chief, who is about as machine-like as any person can get.

The interesting thing about this more personal story is that it comes amid an interesting change in the guard. Bungie’s decision to hand Halo off to Microsoft’s 343 Industries, a brand new studio, is a little like George Lucas handing off Lucasfilm and Star Wars to Disney.

I was worried about that hand-off, as was our Halo 4 reviewer Rus McLaughlin. But now that I’ve played through the entire game — which debuts worldwide on Nov. 6 — I think that 343 has done an excellent job of elevating the relationship between Cortana and Master Chief to the main stage.

In the first Halo from 2001, Master Chief and Cortana (pictured left) bantered a lot. They made jokes as they faced overwhelming odds, and Cortana’s screams were meant to supply a sense of danger to the mission that Master Chief was about to undertake. It was like a buddy movie, with a hero and a sidekick. The original Halo was really about kicking the enemy’s butt.

But in Halo 4, Cortana is up for best actress, not best actress in a supporting role.

“Everything that you see has been lovingly reimagined for Halo 4, including Cortana,” said Josh Holmes, the franchise creative director at 343 Industries, in an interview with GamesBeat. “We have a story in Halo 4 that is focused more on the personal dynamic between Cortana and the Master Chief.”

Everything in the game seems built to support this point. The 3D graphics are better so that you can detect more emotion in Cortana’s eyes and face. The cutscenes, or cinematic sequences between the action, give lots of air time to Cortana as she briefs the Chief on his progress.

The love story raises interesting questions about what is human. Facing her own mortality, Cortana understands the meaning of sacrifice in a way that many humans do not. And the machine-like Master Chief has to come to terms with his humanity and his ability to love someone, even if that someone is a computer program.

This part of the story was clearly the right part to focus on. Halo is an action game. But it has a “quieter, more personal story,” as Holmes said.

“For us, finding [quieter] moments within the action to explore that more personal story has been the challenge,” he said. “Chief and Cortana are on this amazing adventure. How do they deal with, in the Chief’s case, his own humanity, and in Cortana’s case, her own mortality? That was a fascinating story for us to explore as a team.”

The personal connection between the Master Chief and Cortana brings home the larger sadness of the Halo series. For the most part, Halo is about the human race losing an interstellar war. Master Chief fights nobly to prevent that, but he doesn’t have something personal at stake in it. For him, in Halo 4, Cortana becomes the thing that he might lose. Cortana still delivers levity during breaks in the action, but there is a darker, different tone to the whole story in contrast to previous games. She’s come a long way, baby. The love story may be platonic, but it’s very moving.

And that is where 343 Industries really delivers. They have shown that they can step up and provide a full-throated, epic love story that some fans have always wanted to see. It will be interesting to see if gamers, who relish the kill and beauty of Halo’s combat, will admit their own humanity and acknowledge that this love story is really what has held their attention for more than a decade. Halo? Yeah, I play it for the love story.

See our video interview with Josh Holmes, the creative director for 343 Industries, below.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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We wrote earlier this week about the iPad mini‘s expected impact on gaming, and from the many responses to our articles, one thing became clear: Apple has once again fired up the imaginations of developers to create new kinds of gaming content.

The company has already (perhaps unintentionally) disrupted portable gaming machines, like Nintendo’s 3DS and Sony’s PlayStation Vita, with its iOS devices with 99 cent or free-to-play apps. That has thrown the market for dedicated handhelds into upheaval, and the iPad mini could cause further creative destruction in that market. This new, smaller tablet is like a cross between the iPhone and the iPad. That raises the question posed by Andy Yang, chief executive of PlayHaven: Is it the best of both worlds or less ideal than either?

“The history of portable gaming devices shows that gamers like a screen that’s bigger than a typical phone but smaller than a large tablet,” said Jim Greer, co-founder of GameStop’s Kongregate division. “If you look at games on Kongregate, most would work on a 3-inch or 4-inch screen, but a 10-inch screen is much more than they need. 7 inches seems like a sweet spot in the trade-off between [screen] real estate and portability.”

Greg Harper, North American general manager for tablet game maker Supercell, sees the iPad mini as cementing Apple’s lead as “the first true mass market game platform that captures both casual and core gamers.”

The tough part of developers is that they will have to create apps for some very different devices. The iPad mini has an A5 chip, and its display is a 7.9-inch, 1024×768 pixel display. The fourth-generation iPad, on the other hand, has a retina display with better resolution and an A6X processor, which might very well outperform a game console. Apple’s universe is becoming increasingly fragmented, with different screen sizes and processors. But the common thread of iOS (and the same number of pixels) means that the 275,000 apps written for the iPad 1 and iPad 2 will run on the iPad mini.

The popularity of rival devices Amazon Kindle and Google Nexus 7 means that the market size is already proven, said Jay Moore, president of BitRaider. Some 14 million to 17 million units have already sold in this category of tablet. The larger the installed base of iPads in the market, the stronger the return on investment for quality games, he said. The iPad mini can fit into purses and “man bags” better than an iPad, so it may appeal to a different consumer. And that might mean that we’ll see a greater diversity of apps sold on the iPad mini, Moore said.

While the iPad is gorgeous, smaller is better for a lot of games. Action games that use the accelerometer might function better (and be less embarrassing to play) with a smaller device.

“A smaller tablet is nothing new, but more choices and options for consumers to digest new content is never a bad thing,” said Will Harbin, chief executive of social game publisher Kixeye. “I hope tablet manufacturers step up to the plate and deliver devices that aren’t restricted around content creation and give users the same control they’d have with a laptop.  Currently, these devices are needlessly locked down, and it’s what is holding tablets back from truly explosive adoption.”

John Romero, co-creator of Doom and a co-founder of Loot Drop, said that the iPad mini “might feel to parents like a ‘kid iPad’ and probably sell in droves to kids … which may basically destroy Nintendo’s remaining market.” Keval Desai of venture capital firm InterWest Partners said that his three-and-a-half-year-old is more comfortable with a Nexus 7 tablet because it is smaller and easier to hold. The smaller size and lower weight will make a big difference to the youngest kids, he said.

Margaret Wallace, chief executive of Playmatics, said that the new size may be a perfect “stocking stuffer” for casual, social, and kid gamers. The greater portability will help it reach new audiences and enable innovation in areas such as multiplayer, location, augmented reality, and gamification (such as health apps), she said.

Speaking of new markets, veteran mobile game developer Scott Foe said that the iPad mini could further revolutionize the educational market, leading to more devices in classrooms. That could mean kids goofing off playing Angry Birds in school or new kinds of apps that could replace physical textbooks.

Another idea is to use the iPad mini itself as a game controller, much as Nintendo is planning to do with its tablet-like GamePad controller for the Wii U console.

“I could definitely see the iPad mini being used as a dedicated game controller based on its size, working with your Apple TV and Airplay,” said Aron Drayer, marketing director at fancy headset maker Astro Gaming.

Of course, the iPad mini has touch controls and motion sensors. But it doesn’t have dedicated buttons or game sticks, like the 3Ds, the Wii U GamePad, or the PS Vita. That means that first-person shooter games will still be very hard to play on an iPad, which leaves a multibillion-dollar segment of the game industry out of reach of the app ecosystem.

Brad Foxhoven, co-founder of mobile location game maker Ogmento, says that a smaller screen won’t make your arms as tired as when you play. That could directly affect the length of gaming sessions.

The price of $329 is a real issue. But it’s a serious competitor not only to the $249 PS Vita and the $169 3DS but also the $299 iPod Touch. Apple has to hope that its new device won’t cannibalize the popular MP3 player.

And it’s priced way above the $199 Google Nexus 7 and the $199 Amazon Kindle Fire HD. If Apple brings down the price, that will leave less room in the market for others. But Jens Begemann, chief executive of Germany’s Wooga social and mobile game publisher, said that the amount is far below Apple’s previous $499 tablet entry price, and that should lead to many millions more sales.

Kyu Lee, head of the North American division at mobile game publisher Gamevil, said that the increased competition at the 7-inch screen size will be good for the market. And that should naturally lead to pricing pressure.

“We see the iPad mini as a lower-cost, lightweight alternative to the iPad that will showcase our 3D games in spectacular fashion,” said Ben Vu, chief executive at Battle Bears game publisher SkyVu.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Gamification, or the use of game mechanics in non-game applications, has made its way to stock trading.

Kapitall has launched an online stock-trading site that makes trading stocks a lot less intimidating for people who aren’t familiar with stock trading. The basic idea is that trading stocks should be no more difficult than playing a video game. And if you practice at it long enough, you can become much more skillful than a neophyte stock picker. This clever approach to training people how to do something hard is another sign that the influence of gaming is growing and that gamification — delivered as achievement, badge, and leaderboard services to enterprises — has only scratched the surface so far.

“Financial services brands are delivering complex services to active traders who have experience,” said Jarrett Lilien, the chief executive of New York-based Kapitall, in an interview with GamesBeat. “We feel that’s a little unfair to smaller investors. We tried to simplify it because too much information is overwhelming.”

The user interface for Kapitall, pictured above, looks a lot more like a video game than an online brokerage account. That’s important for attracting people 35 and under, who are more likely to enjoy a game-like experience. Lilien said Kapitall draws a young set of customers, and roughly half are women.

When you first create an account, you play for free. You receive $25,000 in virtual money to get started picking stocks. When you aren’t trading with real money, you can do the experimentation it takes to understand how stocks move up and down over time. The first time I logged in, I went through a tutorial that showed me important numbers to notice like “price of profit.” That number is basically a forward price-earnings ratio, which divides a company’s stock price by its expected earnings per share 12 months from now. It is a measure of how good a deal a stock is. The lower the number, the better the opportunity to make money.

You can drag and drop icons onto a central work space dubbed a “playground,” where you can look at a lot of things at once. You can look at stocks on a superficial level or drill down on them. The tutorial also shows you how to compare different stocks with the press of a button. You can do so by using an “analyze” or “compare” tool. It’s easy to see analyst ratings at a glance, so you can see whether the bulk of analysts following the company recommend it or not. Purchasing a stock is similarly easy.

The second time I logged in, I found that my practice portfolio of $25,000 had turned into $24,996. But my return for that day was $9.63. A normal newbie investor would play around with the practice portfolio for a while and see if he or she had a knack for making money trading stocks. If they don’t, then they won’t lose any money. But if they can consistently make money over six months or a year, it might very well be profitable to convert the practice account into a real online brokerage account.

That’s where Kapitall makes money, and it gives you a series of missions to fulfill so that you can get more comfortable with trading. Some of the changes are intuitive. Rather than show a new investor a tile with a stock symbol, Kapitall has a tile with an icon on it. A stock ticker runs across the bottom of the page with real-time stock quotes. But the stock symbols are replaced with icons so that the company are more easily recognizable.

You can explore stocks by clicking on the icons of investment themes. Those icons include a portfolio of stocks that fit a particular investment strategy. If you want to invest in electric cars, you’ll see stocks like Tesla listed.

If I had any complaint about the way Kapitall looks, it’s that it doesn’t look enough like a game. But it has to balance the need to make its user interface flashy against the fact that a very different type of user will be playing this “game.” You can share your picks with others. But Gaspard de Dreuzy, who has the game experience on the team, said in an interview with GamesBeat that Kapitall is designed like a game, but it just doesn’t look like a game.

“Our market is likely going to skew toward women who are older,” de Dreuzy, chief innovation officer, said.

The video game experience comes from founder de Dreuzy, who started the company (under the name Stereo Scope) in 2008 with Serge Kreiker, Cordell ratzlaff, David Neubert and Sally Wood. Lilien, former president of E*Trade who has spent a career in stock trading, came on in August as chief executive and chairman. It launched its first iteration of its Kapitall web site in 2009 and it now has dozens of employees. One of its directors is Mike Haller, former senior vice president at video game publisher THQ, and an advisor is Bruce Shelley, a game veteran and co-creator of Age of Empires.

“The world doesn’t need another online broker,” said Lilien. “But there is an opportunity for one that brings a radical change to the usual model.”

“And to me, the user experience will be the next radical change,” de Dreuzy said. “We don’t really like the word ‘gamification’ because it suggests you do something on top of another site. In this case, we have built in the game technology from the ground up.

Real-world brokers are likely to give you a lot more attention. But if you want to sign up with Merrill Lynch, you’ll find that you have to put a lot of money down.

Their hope is to use gaming to change how people invest in the future.

So far, more than 100,000 people have logged in and created practice portfolios. Of those, 2,800 have created brokerage accounts. Over time, de Dreuzy said his company will add more features and applications. The way he sees it, the company has creating an operating system for gamifying online trading. And the applications will follow to make the users more and more engaged.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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We’ve seen several rounds of disruption come and go in the video game business. Not every great idea has taken hold and changed the industry as we know it. OnLive, the promising cloud-gaming startup that raised $200 million and then cratered, was a prime example of a company that tried to disrupt the traditional game retail business and rushed too fast. Startups and traditional game companies have to not only understand disruption, but also how fast to execute it. That was the topic of discussion at the keynote panel I recently moderated at the Login conference in San Francisco. We had five leaders of the modern gaming business talk about the pace of change in gaming, and the perspectives they offered were enlightening. Here’s part two of our edited story on the pace of change from physical to digital gaming. For part one, check out this link.

Chris Early (pictured second from right), the head of digital games at Ubisoft, said, “Content is really what inspires players to go somewhere. That’s probably why it’s been a little bit hard for the industry, with this long console cycle. We’re aided every time there’s a platform or hardware change. Then, people have new platforms with new capabilities. Content creators are able to do more than they were able to do before. But some of those same popular game mechanics continue on. Poker, regardless of the platform, continues to be a popular game.

Chris Petrovic (pictured far right), the head of GameStop Digital Ventures, said he found it ironic that mobile was considered the next big thing.

“For those of us who have been around, we were in mobile gaming in the late ’90s, when it was dealing with carriers and JAR files and G2 and all that kind of stuff,” he said. “To me, it’s an iteration. It’s not a revolution. Tetris on a smartphone versus a future phone is a step function — better, but not mind-jarring. It’s still the same content. We’re just reinventing it. The Big Fish Games and WildTangents of the world that pioneered casual gaming and hidden objects are still thriving with what’s perceived to be an outdated model. That content is showing up in new places now. For the most part, it’s iteration. It’s adapting to where consumers are.

Kevin Chou (fourth from left), the chief executive of social gaming firm Kabam, said, “I agree that there’s a lot of gaming content that gets remixed and applied to new platforms. But I have to think there’s three major changes that are happening right now. There’s a business model change, there are multiple platform iterations and changes, and there’s a distribution change.”

He added, “With business models, as you look at mobile game sales charts today, most of the games now are free-to-play games. Every once in a while, for a couple of weeks at a time, a paid game will come on there. But primarily, we’re moving from paid-up-front games to free-to-play games that have a much longer shelf life. The second thing that’s changing is platforms. We’re talking about mobile now. We’re talking about Facebook and so forth. The third is that even though we’re talking about mobile again, the distribution models are changing. It used to be you’d go to carriers. The carriers would buy the preloads, and they’d get it into their media-center stores. Today, you’re talking about Apple and Google controlling the distribution much more than the carriers are. The carriers are almost cut out of the picture in game distribution.”

Chou said, “These three changes that are happening are a challenging environment for companies. How do I figure out how to deal with these things that are happening in different parts of the business? At the same time, though, they offer a lot of opportunities for companies that solve these problems.”

Petrovic said that user fragmentation will slow down the rate of change, new adoption, and disruption.

“When you see a large, centralized group of consumers, you can make an investment,” he said. “If you think back to a few years ago, there was a variety of streaming services online. They made some big bets, and they helped consolidate the market somewhat. Not so much through acquisition, but through attention. That’s what we saw happen on Facebook. Consolidation of users brought them enough users to get a lot of people to invest there. If we don’t see consolidation of users, it makes it very hard to invest.”

How do you know when to step on the gas during a big market change? Ubisoft’s Early said his company has always been active on new platforms.

“We bet big on Wii,” he said. “We bet big on Kinect. Most of the time, it pays off. Once in a while, you get poked in the eye, but most of the time, it works. Wii U is coming out. There are 23 titles, and we’re more than 25 percent of that title count by launch. Part of what pushes us to continue to do that is the focus we have on how we encourage our studios. Part of their business is working on how to evolve and how to build something new. Sometimes we end up investing in a platform that doesn’t have a concentration of users, and that project loses money. But the learning we have from that doesn’t go away.”

He added, “You can look back at some of the social things we did two years ago in San Francisco with Ubisoft that didn’t pan out, but the learning we have from that now is applying to Ghost Recon Online and the other free-to-play games. It’s even trending into the console space. We’re doing a free-to-play game on both consoles this January with Spartacus. That’s how we do it internally. We make sure we waste as little knowledge as possible.”

Petrovic at GameStop said that OnLive is the perfect case study for moving too fast.

“They were anointed, back when I read an article in 2009, as one of the Four Horsemen of disruption,” he said. “It was Facebook, OnLive, Zynga, and I forget the fourth one. They’re probably not around, either. The point, at least for me and I think for the industry, is that it wasn’t a question of technology. To operate at that scale, you need a lot of money to build up and to acquire customers. Building technology and having customer-facing businesses — those are two very expensive propositions that I think a lot of people underestimate. Also, it’s about knowing consumer demand. In that case, just because it’s technologically possible doesn’t mean it’s a good idea.”

Karl Mehta (pictured second from left), the founder of PlaySpan, which was acquired by Visa, said, “You have to have the culture and the ability to do small experimentation. That’s the only winning formula. Everything is changing. The distribution is changing, the consumers, the market, the platforms. Everything is changing. It’s hard to predict where you’re going to make money. If you can run four or five experiments and test it out, and then you know that one out of the four is the winner, then you go after it. OnLive never did this kind of small experiment. From day one, it acted as if it were the 800-pound gorilla. That’s one example of how it’s easy to step too hard on the gas as well as the brakes.”

Mehta believes the big companies like Nintendo and Electronic Arts should cannibalize their cash flow and invest in the new markets.

“They’re always trying to defend that existing business,” said Mehta. “Any new trend comes in, a new business comes in, and the first thing they’re thinking about is, ‘Okay, how am I going to defend my billion-dollar revenue that’s already paying the bills?’ Seventy percent of their energy gets spent there. Innovating on this new business side doesn’t get 100 percent dedication and focus. That’s why people [are] in this room and in the Silicon Valley area. We can make money because we can do a startup, be 100 percent focused on this new business, and we can always win against the large companies.”

Petrovic added, “Where Karl hits the nail on the head is the classic innovator’s dilemma. It’s a business where the case studies and the histories have yet to be written. We’re not immune from the challenges that Karl mentioned. If you look at all our revenue in the space, where there’s a transition from physical media to digital or an expansion from physical to digital… You have an analog business that’s bringing in dollars. You have a digital business that’s growing, but it’s only bringing in dimes. Getting that perfect intersection of growth in dimes against decline in dollars is, unfortunately, impossible to predict or plan for.”

As for the future, Petrovic said, “Our prediction is that the next generation is going to see a lot more diversification of business models between smartphones and tablets. Tablet is going to be the place where developers and publishers won’t be afraid to charge money up front and also in apps: The ‘paymium’ model, as I call it — somewhere between premium and freemium. You have a customer who’s already said, ‘I spent $500 on an unsubsidized device, and I want high-def content. I’m not afraid to pay for it.’”

He also said, “We believe that the continuing rise of accessories and controllers, like the one we’re selling in our stores, will create a more console-like experience for tablet gamers. We see a lot of leveraging of Android and other open-source systems to create the next-generation, over-the-top or side-loaded device. Even [with] the Android tablets that we sell, people are buying HDMI cables to plug them into their 55-inch TV screen because they want the larger form factor.”

Kabam’s Chou said, “I think the next generation is a lot of mobile and social. But what we’re going to see is those elements trending across all game types. Not just because of a hardware platform, but because they’re elements that are in the games. Across all the games, we’re going to see more social elements. We already see this at the console level, where they’ve got Facebook integration or integration with their own service. Social works. People like it. It’s a human trait — back to the point earlier. The concept of mobile [is] that you’re going to be able to interact with your content in a variety of places and not only on your couch. That’s part of the next generation.”

Chou added, “Now, I’m not saying ‘next generation’ in terms of hardware. I’m talking about the next evolution of content that we play with. We’re going to be able to play with it from a lot of places. Part of that might be on a console like Xbox or PlayStation. Part of it might be on your mobile phone. Business model is a key part of that. We see that happening on social networks. It’s happening on mobile. The big three console manufacturers are starting to dip their toes into it. Sony already has some free-to-play games. Microsoft is doing their first experiments this year. They’ve been slower than other places. But those are trends you’re going to see across all the next generation of content.”

Anil Dharni (pictured third from right), the senior vice president of studio operations at Gree International (the international division of Japan’s Gree mobile social networking company), said, “One thing I want to add to this, again, with my experience on both Facebook and mobile. … Mobile is really interesting, and it’s quite different from the other social platforms, specifically Facebook. You have games that are nothing but HTML 5. They’re webpages, basically. You have 2D isometric, nearly 3D-like experiences like some of the games that Funzio and Gree built. You have 3D games like CSR. You can see all of these succeed. So it’s not that you need console quality. The mobile space is littered with the bodies of developers who tried Unity and Unreal and have not succeeded. It’s an amazingly level field.”

He added, “It boils down to one simple answer, which we’ve thought about a lot. When you’re evaluating a platform, you need to answer the question, ‘Is it a pull platform, or is it a push platform?’ By that I mean, on Facebook, people don’t necessarily play games. You need to push them to play games. On mobile, people are checking the App Store every day. That’s why you see. … On Android, for example, it’s not that intrinsic. People are still adapting to Android as gamers versus iOS, where it’s so straightforward. We see better KPIs on iOS versus Android.”

Speaking about mobile gaming issues, Dharni said, “My take on that is, every platform has issues. For example, iOS is a pain. You have to submit an upgrade, you wait for two weeks, and then you see the next results. I’m pretty sure Kabam is the same way. We’re pretty used to running on a daily basis in order to push code out every single day. We want to get the results that very same day. But we can’t do that, necessarily. We have to figure out a way to build the entire architecture so we can push stuff out on the server that doesn’t impact the client. Whereas on Android, you actually can move at that pace. So yeah, that’s one technical architecture problem. We are so used to offering games as a service, but that’s challenging. Also, [look] at discoverability. It’s a problem everywhere.”

Asked if and when the games industry will go completely digital, Ubisoft’s Early said, “Absolutely. Every single product, within a relatively short time, will be available digitally. But I don’t think that means that the retail experience goes away. You’ll have a continuing set of choices as a consumer. Obviously, for some platforms, you can only get things digitally. At the console level, I think you’ll be able to get everything digitally, but will you go there? There are a lot of impediments to that. There are physical limitations when you think about the American market. There are areas that don’t have adequate bandwidth to think about spending several days downloading the newest game. Yes, there’s precaching and all those other things for dedicated players, or there’s a half-hour trip down to the store. There are all kinds of reasons that I don’t think we’ll ever go all the way to one or the other.”

Petrovic responded, “In my mind, it’s kind of a red herring, this question of ‘when are console games going to be completely downloadable?’ In theory, they will be. In practice, not so much, for a lot of the reasons you mentioned — whether it’s looming bandwidth caps or the speed of bandwidth or the value proposition of not being able to trade that in once you’re done with it. All those things go into it. These boxes are becoming media centers. We’re not just delivering games anymore. The more you load on to those boxes, the less you can tax it with downloading all those gigabytes of games that you eventually have to erase. That’s a pretty expensive thing to erase.”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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We’ve seen several rounds of disruption come and go in the video game business. Not every great idea has taken hold and changed the industry as we know it. OnLive, the promising cloud-gaming startup that raised $200 million and then cratered, was a prime example of a company that tried to disrupt the traditional game retail business and rushed too fast. Startups and traditional game companies have to not only understand disruption, but also how fast to execute it. That was the topic of discussion at the keynote panel I recently moderated at the Login conference in San Francisco. We had five leaders of the modern gaming business talk about the pace of change in gaming, and the perspectives they offered were enlightening. (See part two here).

The view of disruption depended on where you sat. Karl Mehta (pictured second from left), the founder of PlaySpan, which was acquired by Visa, said that the change from physical to digital was happening super fast. Online, mobile, and social are the future, he said.

“[Look] at every other form of media, starting with books,” he said. “We’ve seen music go the same way. Video’s going that way. Games are going the same way. There’s also the revolution around multiple devices in multiple places. Users want to play their games across multiple devices, and they want not just a time shift, but also a place shift. They want to play in different places. The mobile devices are becoming the prime gaming consoles. If you spend as much time as I do in Asia. … There are about two and a half billion people there, and that’s what the market is if you look at the economic growth activity. The device they have is a mobile phone. They don’t have PCs. They leapfrogged over consoles, which most of them can’t afford anyway. I could go out and predict that in the next 10 years, the console business will be dead.” Mehta added that his family just wasn’t playing console games anymore.

That was a nice little cannonade to get the conversation going. Chris Early (pictured second from right), the head of the digital business at Ubisoft, replied, “Thank goodness we have a few customers who aren’t like you, Karl.” He said that Ubisoft is still investing in console games that people buy for $60, but it is also making downloadable content and companion games on new platforms. Roughly 25 percent of Ubisoft’s staff is working on digital-only games. (He wouldn’t say if it disclosed 25 percent of revenue).

Chris Petrovic (pictured at far right), the head of GameStop Digital Ventures, the digital arm of the 6,000-plus store chain GameStop, chimed in to note that there is no longer a one-size-fits-all gaming experience for users. He says free-to-play, virtual goods-based games are not cannibalizing the $60 console game.

“What we’re seeing is that a rising tide is floating all boats here,” said Petrovic. “We’re introducing new people to gaming. Now, we’re not looking to boil the ocean and have everybody as a customer. What we have is a very targeted audience of passionate gamers who enjoy quality and aren’t afraid to pay for it. Whether that’s a tablet game for $9.99, a console game for $60 dollars, or a monetizing free-to-play game on a smartphone or on Kongregate — an online gaming site now owned by GameStop. What we’re seeing is that they’re spending more time gaming. They’re not making choices around gaming here or gaming there. What that’s impacting is other discretionary activities that they were doing before a wider variety of gaming came along. It’s what’s led us to selling Apple devices and Android tablets in our stores. We built a wireless gaming controller to support gaming on Android.”

GameStop has a $500 million digital business today, and it plans to triple that in a few years. But Petrovic wouldn’t say at what pace GameStop will shut down physical stores (that’s not his department). But he says it’s easy to forget that GameStop has tight relationships with the biggest “whales of gaming,” or the people who are like “gamer hobbyists” and spend the most on games. About 500 million of those walk into GameStop stores every year. GameStop has begun pitching digital games to those whales, and they’re far more likely to bite than the average online gamer.

“We have to be careful about these very linear, binary predictions,” where everyone says physical is doomed and digital will win, said Petrovic. “One answer doesn’t [work] for everyone.”

Anil Dharni (pictured third from right), the senior vice president of studio operations at Gree International (the international division of Japan’s Gree mobile social networking company), said that the cycle for social gaming is changing about every three months, particularly on Facebook, iPhone, and Android. Dharni has watched the change occur at Storm8, Funzio, and Gree.

“The teams and organizations you need to build have to be very capable and very flexible to adapt to a constantly changing platform,” he said. “And it’s not just the platform that’s changing. The flavor of the month is changing. The flavor of the quarter is changing. How you think about game design and game mechanics, that changes rapidly. The technology, the graphics quality — all the good stuff keeps evolving and rapidly moving. I feel like, looking back, Facebook evolution in social gaming is a lot slower than what I see on mobile.”

Dharni believes the oft-made prediction that mobile gaming in the U.S. will follow the pattern in Japan, where mobile game companies Gree and DeNA have created a $5 billion market. Mehta agreed that the U.S. will follow suit. If Japan is logically only 10 percent of the world market, then it follows that mobile games will be a $50 billion worldwide market — some day.

“We look at Japan and discard a lot of those trends by saying that they’re culturally very different, or they travel by train so that’s why they use mobile phones so much,” said Mehta. “They’re all superfluous, stupid arguments to me. Take out all that stuff and look at the underlying human behavior. The human need for entertainment is the same. If we ignore all these trends in Japan, if we’re not working on it now, then we’re going to miss the bus. This is a huge inflection point, and we have to be paying attention to this. “

Mehta said, “It’s not a matter of whether it will happen or not. It’s a matter of time. In the next 10 years, mobile-social games could become a $50 billion dollar market and will exceed consoles worldwide.”

Dharni says Gree is encouraged that what worked in Japan is starting to work here. Japanese-style role-playing games are starting to take off in the U.S. But Petrovic hinted that Gree might be spending a little too much acquiring new users, based on its belief that mobile gaming nirvana is at hand.

Kevin Chou, the chief executive of hardcore social and mobile gaming firm Kabam, is pivoting quickly from a social gaming company to a mobile-first multiplatform game company. A year ago, 100 percent of the company’s revenues (it closed 2011 with $100 million in revenue) was based on Facebook games. Today, that number is less than 30 percent, and mobile gaming is growing fast.

Disagreeing with Petrovic, Chou said, “The change of pace is not necessarily linear. Looking at it exponentially doesn’t do it justice, either. It’s really a step-ise function as far as how fast change can happen. A lot of gameplay is tied to devices. Looking at device sales is an important leading indicator for understanding where gameplay may happen in the future. At the same time, looking at device sales and trying to predict device sales in more traditional gaming categories. … It’s an interesting picture.”

Kabam looked at making games for the PlayStation Vita or the Nintendo 3DS. To him, it didn’t make sense since Android devices are selling at a rate of 1.3 million units a day. He noted that mobile devices such as the iPhone 5 are going through massive technological advancements every year. As gaming platforms, they are growing up rapidly, compared to the stagnant consoles.

Just a couple of years ago, everybody thought that Facebook on PCs would take a huge chunk of the gaming market. But now mobile is surpassing it, and Zynga’s social gaming revenues are starting to slow down. Petrovic says that Facebook wasn’t authentic enough as a gaming platform to hang on to the most rabid game fans, who are now moving on to other things. Early said, “There have certainly been some fads on the platform side.”

He added, “You look at the casual games market, which five or 10 years ago consisted of $20 downloadable games on the PC. There was a time when the sudden new thing there was hidden-object games. We’ve seen that come across again in social games, and it’s creeping now into tablet gaming, as well. In many cases, that content follows along and becomes the trend on new hardware platforms. In other cases, the content itself tends to die out. We all saw Guitar Hero and Rock Band and the music games that were hot and did huge business for a number of years. They’ve significantly declined since then. We’re enjoying the dance phenomenon right now. We expect that will end sometime. Hopefully, not before Just Dance 9 or 10 or whatever.”

We’ll continue with part two of the discussion on Saturday.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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