I was recently interviewed by Matt Martin of GamesIndustry.biz on the subject of publishers making the transition to Facebook. Since my correspondence with Matt was via email, I thought I’d take advantage and share the full transcript, for those of you who are interested in this topic:

Question: Is Facebook a viable format for traditional videogame publishers? Are there opportunities for someone like EA or Take 2 to make a significant profit? Or is Facebook as a platform over for those big publishers that haven’t already established themselves on the service?

Facebook is definitely a viable platform for traditional publishers. The short-term problem, as I’ve noted in the past, is that traditional publishers simply aren’t geared towards making the kinds of games that succeed on Facebook. In general, their game designers are trained (and prefer) to make games that are fun above all else, where a Facebook game designer needs to be as concerned with designing a free-to-play game that is capable of generating real revenue. And in general, their designers are also accustomed to thinking of player acquisition as “marketing’s problem,” whereas viral player acquisition is clearly a core design challenge on Facebook. But I don’t want to make it sound like design is the only challenge; traditional publishers don’t have much experience marketing these kinds of games, in this kind of channel, to this broad an audience. They’re set up to manage the relationship with Microsoft, Sony and Nintendo, to push discs into retail stores, and to blow a wad of cash on TV and magazine advertising. Obviously this is a generalization, but you get my point.

But as I mentioned earlier, that’s all a short-term problem. There’s no inherent reason why traditional publishers can’t build (or buy) fresh studios to focus on this opportunity. They’ve done it before; mobile games are a good example. The traditional publishers will end up wasting quite a lot of money in the process — you can be certain of that — but some of them will ultimately succeed at entering the market.

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When I look at Facebook, I see a games platform that has been thoroughly enjoying the “early glory” phase of maturity. Not too long ago, there was guarded optimism about the potential of Facebook to host profitable games, but few good examples of such games. Less than a blink of an eye later, Facebook has become the apple of our industry’s eye.

While most publishers are laying employees off by the hundreds, Facebook-centric publishers are hiring like mad. Savvy conference organizers are rushing to capitalize on audience demand for business venues to discuss social gaming. The inevitable stories of unbelievable growth have, quite predictably, become common-place. Facebook’s platform managers have finally started embracing our industry and contributing to the hype around their platform. And finally, a remarkable number of developers (and even large publishers) have begun to re-orient themselves towards the development of social games.

Facebook’s “inevitable misery”

All of these are classic signs that Facebook gaming’s “early glory” phase is in full swing. You may therefore conclude, with 99% certainty, that Facebook as a games platform is likely within a single year’s reach of the “inevitable misery” phase of its lifecycle. Probably much less than a year, in fact. As I’ve argued before, this does not necessarily mean that savvy developers should begin to look elsewhere — it simply means that there will soon be a large quantity of blood in Facebook’s waters. The victims of that impending blood-bath are listed here, in no particular order:

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This article was originally published by Gamasutra on 12/22/09, and later on GameSetWatch. I’m republishing it here for those of you who missed it. I recommend checking out the original articles, as both have received interesting comments that you may appreciate.

In my experience, one of the problems that most seems to bedevil game developers is the problem of timing; specifically, understanding when is the “right time” to begin developing for a specific platform. To understand why this is such a challenge for developers, you need to understand how a games platform tends to evolve.

Here’s the typical scenario: A platform — for example, XBLA, or the iPhone app store, or Facebook — comes into existence. Most people regard the platform suspiciously, for a variety of reasons. It’s an unproven market, for starters. The platform owner’s commitment to growing the platform may be unclear. The pros and cons of working with the platform owner in this context are unknown. There are lots of other platforms to choose from. Etc. Most developers take all this into account and decide to pass on the platform for the time being.

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Film Victoria was kind enough to publicly share the video of my keynote at the Digital Distribution Summit in Melbourne. You can find it here.

Quick summary: I focus mainly on what it takes to successfully pitch your XBLA/PSN/Wiiware/Steam game to a publisher or platform-holder. If you haven’t already endured too many talks on this subject, I think you’ll enjoy the video. I’ve gotten an unusually large amount of good feedback about it!

Oh, and in case you’re wondering, when I ask “are you all right?” in the first few minutes of the talk, it’s because some poor guy fell on his face at the back of the auditorium. I, ummm, probably should have let someone else — someone NOT delivering a keynote at the time — ask after him.  :-}

If you are developing an original IP for XBLA or PSN, or hope to develop one someday, this post is for you.

Given the sales estimates being reported by Gamasutra (see these helpful examples), given what I’ve heard from individual developers as of late, and given the relative strength of established IP on the platform to date, I estimate that in general, no more than nine truly original IP-based games will succeed in any given year on XBLA. This is obviously a rough guesstimate at best; there is certainly the possibility that you will see more (or less) hit original-IP based titles in any given year. But even if I’m off by a few, you’ll see shortly that it doesn’t matter for the purposes of this post.

Now assume that approximately four (or more) of those original IPs will be successful partially because they are high quality, but partially because they are king-made by Microsoft. They might be included in the annual Summer of Arcade promotion. They might support a new 360/LIVE platform feature and be showered with tremendous dashboard and press exposure. They might be internally developed by Microsoft Game Studios. And the list goes on… (I would have included winning the Dream Build Play competition, but it seems like Microsoft is now keeping the winners in the Indie Games Channel.)

Now assume your original IP is not king-made. Darn!

You’ve got approximately five chances left to turn a serious profit on your XBLA game. You’ve worked endless hours and paid yourself peanuts, all in the name of making a great game. You’ve taken the time to create a decent demo experience. Still, it feels like you’re forgetting something… but what could it be? Frustrated, you decide to take a night off and have some fun at PAX. But when you walk through the main entrance, it hits you:

Twisted Pixel, showing off The Maw, Splosion Man, and their upcoming title, Comic Jumper	Slick Entertainment, showing off upcoming title, Scrap Metal
Ankama Games, giving private demos of upcoming title, Islands of Wakfu	Klei, showing off the upcoming title, Shank

You spent so much time developing your baby that you forgot to get out there and talk about it… but the competition didn’t! There were at least six different XBLA development shops parked right by the main entrance! Handing out toys. Showcasing their games. Kissing hands and shaking babies. (Or is it the reverse? You’re so distraught that you can’t remember!) And for many, this isn’t their first conference. The Behemoth… what conference do they not go to? And Twisted Pixel… those wacky guys never cease to charm the public with their adorable Maw plushies.

You play a few demos and grudgingly admit that these guys are making pretty decent games, too. A pit forms in your stomach as you realize that you might be screwed. But hey, that won’t happen. Marketing is bullshit, right? Quality always wins, Right?

Right.

I’ve been meaning to post a followup to my Develop keynote on digital distribution, and was reminded to do so by Raph, who lately has been speaking his mind about the realities of the Long Tail (good stuff — worth a read.) Raph also highlighted a report that Zynga is spending millions of dollars advertising its games and wisely predicted that new digital ecosystems will eventually be “much more hit-driven” as marketing and development budgets escalate. Raph’s right, as he frequently is, but I have one minor correction to make: the new digital ecosystems already are remarkably hit-driven! Put more bluntly: the people who thought the Long Tail would promise the end of hit-driven market dynamics were completely wrong (both about the nature of digital distribution and about the companies that digital distribution benefits.)

With rare exception (see my comments on niche markets at the end of this article) the Long Tail primarily benefits platform holders and the creators of hit content, not the broader creative community. Of course, I’m talking about financial benefit here; one could easily argue that the social benefits of digital distribution touch a far greater number of creators and consumers, and the social benefits are what make digital distribution truly wonderful. But that’s a story for another blog post.

It turns out that the hits get *bigger*

As many prominent journalists, analysts and scholars have recently argued, it turns out that hits are no less important in the new Long Tail world. Lee Gomes noted in the Wall Street Journal that in 2006, Amazon.com still derived 75% of its book sales from just 2.7% of its titles. True, 2.7% of 3.7 million books is nearly 100 thousand books — a great deal more than the total offered by any brick and mortar store — but that doesn’t change the financial situation for the authors of the other 3.6 million! Gomes also noted that, wherever he looked, hits remained vitally important to a given ecosystem (or in his words, “iTunes looks like Billboard, not some paradise of niches.”) And research by Anita Elberse, a professor at Harvard Business School, has shown that in some “Long Tail markets,” success has begun to concentrate in progressively fewer best-selling titles, and worse, that independent artists have actually lost share to major labels. And via Raph, another recent research study with similar findings: of the 13m songs for sale online last year, 10m never found a single buyer, and 80% of all revenue was generated by less than half of one percent (.004) of all songs.

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The Wii is a funny thing. When it comes up in conversation, half the time I find myself arguing with people who claim it’s just a fad. The other half the time, I’m arguing with people who seem to think that Nintendo is beyond reproach or that anyone who criticizes the Wii simply can’t see past their own hardcore biases.

I think the fundamental issue at play is far more subtle than “the Wii is a fad” vs. “hardcore gamers don’t get it.” You can’t rationally argue against Nintendo’s success at this point… too many units of the Wii and games like Wii Fit have been sold to call this a fad. And you can’t deny that the Wii was a strategically brilliant move on Nintendo’s part. At the same time, it’s troubling to see how many people — casual OR hardcore — are allowing their Wii to collect dust. Why is that the case?

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Maybe I’m turning into an old fart, but E3 really didn’t do it for me this year. The show remains utterly console-centric, despite the many exciting recent developments in non-console game ecosystems. The games on the floor, with a few notable exceptions, felt like more of the same (“look, another racing game with realistic graphics!”) At least the new Splinter Cell and DJ Hero both managed to intrigue me. And for those of you who haven’t seen it, check out the Natal teaser video. I thought it was impressive (and I’m particularly excited about the prospect of never having to sign into LIVE again thanks to facial recognition, as well as not needing to touch a controller to fire up Netflix on my 360.)

Regarding the PS3’s motion controller vs the 360’s Natal vs Wii Motion Plus…

I believe that the PS3’s controller is irrelevant because it fails to meaningfully innovate above and beyond Wii Motion Plus. By the time it hits the market, millions of existing Wii owners will have already purchased Wii Sports Resort and/or Tiger Woods PGA Tour. Millions more consumers will have purchased new Wiis with Motion Plus in the box. No one will purchase an already-too-expensive PS3 because its (extra) motion controller is supposedly a bit more accurate than Motion Plus. And if Sony doesn’t announce a big price cut on the PS3 by this holiday, all of this is irrelevant, because the PS3 will be D-E-A-D. (Note: I also still believe that it will take more than a $100 cut to really turn things around for the PS3, but who knows when Sony will be able to manage anything more than $100.)

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Speculation continues as to the timing of an inevitable drop in the price of the PS3. Most people seem to think a $100 drop is coming by end of summer. I’m going to go out on a limb here and say “who cares?” and “it really doesn’t matter.”

The PS3 is currently $400. A $100 price cut will put it at $300. Analysts appear to be fond of saying that $300 and below counts as “mass market pricing” for a video game console — as if timing, the current economic conditions, and the competitive landscape have nothing whatsoever to do with consumer demand.

If it were the middle of 2007, a $300 PS3 might be something to get excited about. But unfortunately for Sony, it’s the middle of 2009. If you’re a true hardcore gamer, by now you’ve most likely purchased the Xbox 360 or PS3 already. A select few consumers might be waiting for price drops to add a second hardcore machine to their collection, but the software libraries for the PS3 and 360 are so similar that most people won’t ever bother. Long story short: the war for the hardcore gamer is effectively over in this console generation.

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I’ve been compiling a list of “free game types” in preparation for my GDC Lyon lecture. When I look at the list on a single page, its breadth and depth are a bit stunning. There’s already a mountain of free game content out there, and the mountain is growing fast.

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