Bernie Stolar, former games evangelist at Google and a veteran of many game companies, is one of those unfiltered loose cannons. He had a fireside chat on Friday with Forbes writer Mary Jane Irwin at the SD Forum games conference at Microsoft’s office in Mountain View, Calif. Stolar has been around the block. He joked about being the old guy of the game industry. But he has played a key role at Atari, Sony, Sega, and most recently, Adscape Media, which Google bought for $21 million as the foundation for its entry into the in-game advertising business. Here’s a transcript of his talk with Irwin.

Q: From the time when you started in the game industry, what do you think is the biggest change that has taken place?

A: Thank you for indicating that I am the oldest person in the room. I appreciate that. I’m not going to have a filter for anything I say. I see too many games. Most of the games that I see, there’s a word for them. It’s called crap. I just don’t understand why people make product that’s not fun. That’s the only thing that anybody wants. Why build a store? Why go online and play games that you just don’t have any fun with. You want people to go back and keep playing games that are fun.

Q: What happened? Did the game industry lose its way?
At one time, there were 20 publishers. Now four major ones. It’s no different from the film industry. You had studios like Carolco and Lorimar disappear. It just changed over a period of time. It’s much more mature. And there are more and more platforms. You have the PC, you have the console platforms, and all of these handheld devices. You can put product almost anywhere. That is terrific. The problem is, there is more and more of it. It gets very confusing. There are companies like Kongregate [which posts user-generated games]. I respect that company a lot. Consumers are doing the games. How is that happening? You can monetize them with advertising. There is nothing wrong with that. But there is more and more product coming. It’s difficult for the consumer to choose.

Q: What needs to happen to help consumers to find games and what can companies do to make sure they focus on fun products?

A: I look at the major publishers doing things right. I really respect Activision Blizzard and Ubisoft. They are coming out with great product. They are doing fun games, including episodic product. It’s quick, easy to go through. You don’t have to spend hours. You can get in and out. It’s a matter of publishers cutting back on what they’re doing. For consumers, they have to learn about that product. They usually get there by a review. Is the reviewing individual even able to understand the game? They give a review, like a number that is five out of ten. What does that mean? I just don’t know.

Q: So one of the problems is it’s hard to know what you’re buying.

A: That’s an issue. You go to stores this year. There are more games than ever going to retail and being released online. It’s damned confusing. How do you really make money?

Q: If you were starting a game company right now, what would be your priority?

A: I’d have very low overhead. Keep headcount down. I would do the product on an episodic basis. Jerry Bruckheimer did that on TV. If you look at his shows, they’re all basically the same, but maybe with a different city. You have to be lean and mean and then build fun contact. I was always accused of killing a lot of product. When we started the Sony PlayStation, in one day I killed $19 million worth of product. It was really awful.

Q: When it comes to fun, do you equate that to the burgeoning casual game market, which seems to be focused on quick hits, short game play and lighter fare?

A: I always have trouble with the definition of casual games. If it’s fun and you can get through it quickly, it’s a great product. I want to be able to get through it quickly. I want to get pulled into higher levels, making it more difficult as I go.

Q: Do you see the death of the hardcore game?

A: I don’t foresee the death of it. I see less and less of that product. How often do you see Grand Theft Auto coming out? Every year? No. Every two or three. It depends on the scope that they want to do. It’s also hard to do World of Warcraft. How many companies can do that kind of game? Blizzard is the only one. Activision did one of the smartest things in the world merging with them. That was a great way to enhance shareholder value and build that company. Guitar Hero has fueled Activision’s growth. But music has exhausted its growth.

Q: Is [PC based] internet distribution the way to go, either through Flash games or digital distribution?

A: People say PC is dead. I don’t believe that. The PC will come back in a big way, based on what you just said. If I look at what happened with music and films, the same thing will happen.

Q: Will the current retail market stick around?

A: At one time, there were 15 retailers. Now it’s Wal-Mart, Best Buy, Target, and GameStop. Will they still exist? Probably. But it’s more and more difficult. They have all of these debit cards now [which enable online purchases]. How do you view retail? You have to buy that space.

Q: Are more companies going to do in-game ads and micro transactions?

A: Having sold an in-game ad company, yes. I think micro transactions will grow a lot faster than in-game ads. For in-game advertising, you have to use Massive to get into an Xbox 360 product. It’s not yet on PlayStation 3 or Nintendo Wii. People say that it will be a $1 billion business by 2009. I don’t believe that. Will it be that by 2011? Maybe. It will take until then for the market to really mature.

Q: What are the stumbling blocks?

A: You need Sony and Nintendo to drive it more.

Q: How will Google affect the market for in-game ads?

A: They have a sales force of 800 people selling that. It’s a matter of time. But they can’t sell that much until Nintendo and Sony open that up. [Sony has its own in-game ad program in place, but Google’s ads are focused on web-based casual games for now].

Q: Is it a mistake for Nintendo not to open up its platform more?

A: Nintendo has always been a strong first-party publisher. It’s just a matter of time. They are a smart, cash-rich company. They will see which way the marketplace turns before they move forward. I think Sony will move that way first. [as mentioned, Sony has opened up to in-game ads]

Q: Xbox Live is a huge online platform. Facebook games are getting more popular. How is the social side of games changing gaming?

A: It’s broadened the market. It’s no longer just young male teens. There is a bigger percentage of female gamers than ever.

Q: What do game developers need to do to broaden?

A: I don’t think game developers should limit themselves to any gender or age group. They should develop for across the board. Games cost a lot more money to develop. To spend $20 million on a game with a limited market -– I just don’t see how you can do it.

Q: The economy is hurting and there are claims that the game industry is recession proof. With the downturn, what will the landscape look like?

A: There will be fewer publishers. Will the industry survive? Only if they have original games. Can a small company with one title survive? What will happen with Electronic Arts? EA is a great company. I know everyone there. About 50 percent of its revenue is sports and of that, 50 percent is Madden NFL football. So Madden is 25 percent of the revenues of EA. What happens if someone does a great football game online to compete with Madden? That will change the landscape.

Q: Should EA move to acquire the web game companies?

A: EA has made a lot of attempts. They have lost a lot of opportunities. They have to get back in. They have smart people there. They have the right people there. It’s a matter of time.

Q: Will we be able to maintain the price of $60 for boxed console games?

A: I personally wouldn’t want to be in that business. You probably spent $25 million to develop that game. The reviewers say it’s bad and no one goes to the store to get that game. You are paying Sony or the other console makers $7 of that amount as part of the royalty for every disk, and you pay them $3 for manufacturing each disk. How do you sustain that? It’s too hard.

Q: What about all of the downloadable content that keeps people playing the $60 products? Do they need to distribute their games through a service like Valve’s Steam, to distribute a $60 game via the internet?

A: I can’t get into that part because of investments. I wouldn’t want to build a $60 game. I would do it episodically. I would do it online. Not in a box.

Q: Can a $60 game sell via digital distribution, or do people want free games?

A: I don’t think people just want free games on the internet. If it’s a good, strong product, you can sell it. But it has to be marketed smart. Like with chapter two.

Q: There are ways for independent developers to get their content out. How will that change the industry?

A: It continues to broaden the industry and you get to discover some great talent. Kongregate lets you discover [user-generated]content. The world is much more open. It’s all about finding new talent. In every company I’ve worked in, it’s all about the teams bonding and getting their products out in a quick and efficient way.

Q: Has the traditional game industry run out of creativity?

A: I don’t think it’s a creativity problem. Ubisoft has been able to do very creative games in different genres and different environments. Not every company is doing that. The companies need to broaden their scope. There isn’t a danger of being too broad, as long as you target the right way. It’s like TV network programming. Certain people watch at certain times of the day and you program to target them, but you still have a wide array of shows.

Q: What about the trend toward more mature games, for adults? Can games tackle more meaningful subjects?

A: I’ll go back to Grand Theft Auto. The press refers to it as sex, violence and cheap thrills. Look what it did dollar wise. [It sold $500 million in the first week]. It’s a great game. Well done. It’s a great experience. You don’t see that with a lot of games. I look at Madden: I’ll be bored with it, unless there is a new engine developed for it.

Q: Are companies doing branded games too often?

A: People should spread out. Branded games are OK. GTA is coming every few years and I’m looking forward to the next one. Am I looking forward to Madden again? No. It comes out every year. It has to. That’s the financial backbone of that company. But it is possible to do a great sports game, like the baseball games from 2K Sports.

Q: EA has its All Play brand for Wii sports players, and other companies are setting up casual divisions to target Wii players. Is that a good idea?

A: I’m big Wii fan. That’s a great system. Nintendo has taken the product across every single demographic, from the cradle to grave. Grandparents are playing. Nintendo is a great company and it will absolutely help developers as they do major publishers. That’s terrific.

Q: Do you think there are games that can target senior citizens?

A: Are you talking about me now? The amount of people playing bowling on the Wii is phenomenal. Most of them are older. That’s great. You should be marketing titles from the cradle to the grave. It works. It’s reality.

Q: Can the PS 3 and Xbox 360 expand beyond core gamers?

A: Yes they can. Sony has a new head of third-party relations (Rob Dyer). He is doing that now. I take my hat off to them. They need to do that.

Q: How will the industry look in five years?

A: There will be fewer publishers, but there will be no boundaries for the game industry. It will spread out. The online environment will be much bigger.

Q: How has the iPhone changed gaming?

A: I think the iPhone has been a phenomenal development. A number of companies are developing product for that. It’s a great platform. A major company with a handheld device [hint: think Sony] ]missed the boat because they should have done what Apple did. Distribution, ease of development and cost. Handheld Games of Seattle is making iPhone games and they’re making money. It’s a small business.

Q: Do you see Facebook as a viable game platform?

A: It’s all about capturing eyeballs and attention of people. Yes. Social platforms have content that is easy to use. I think we’ll see a lot more of it.

Q: Are the Facebook games more like a conversation starter, as opposed to a solitary experience?

A: If I look at the music genre, here’s how I see it. I had friends telling me they wanted to buy Guitar Hero for their kids. They get together after school and play it. It’s a social experience. It’s engaging them differently than they did before.

Q: Is the music area getting too crowded?

A: It’s hard for me to say. A lot of games are coming out. Time will weed out the crap.

Q: We talked about the rise of the PC. Will there be a lot more direct-to-the-TV games?

A: To me, the PS 3 is a set-top box. It’s not just a game platform. I look at what Comcast is doing. It is working with another large company to do a set-top box for games. The cost is prohibitive. If you did PlayStation 1, stripped it down, then you could have a game platform right there. For me, there will be a direct-to-TV model. A number of companies are looking at that. One of the former founders of WebTV is looking for that.

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