With the advent of Xbox Live and other new interactive entertainment technologies, cable operators this year will be taking a harder look at how gaming fits in with the services they currently offer their customers

Interactive and online gaming is poised to become a bigger piece of the package that cable operators offer their subscribers in the coming year. Some of the growth will be fueled by new online platforms, and still more through operator programs intended to keep their customers from churning off of the digital tier.

Even though there may be some more pressing rollouts on cable operators' agendas for the coming year–efforts like video-on-demand, high-definition television or tiered high-speed data, to name just a few–there's a movement bubbling below the surface that might force operators to reshuffle their list of priorities and advanced services strategies.

Gaming applications, up to this point, have been pushed close to the bottom of that list of operator priorities. Today, however, market forces are aligning to make gaming more attractive to operators–both because of increased demand for online gaming through inventive new platforms that maximize broadband connections, as well as some early successes in keeping customers engaged to digital services through the addition of a gaming piece to the digital tier. Gamers are a growing "demographic" for cable operators, and that realization, along with advances in interactive technologies for use on thin-client set-tops in the field, are making business development managers at leading MSOs take a harder look at gaming.

One of the big developments pushing ops to look more closely at gaming is the rise of the online, broadband gamer. Specifically, the release and consequent success of the Xbox Live by gaming force Microsoft has breathed new life into the sector. Launched late last year, the platform that connects the Microsoft Xbox game console to the Internet through a typical broadband connection is making online trash-talkers out of average Joes everywhere. The only real question was whether Microsoft could pull off launching an online gaming platform that actually worked, and wonder of wonders, it does. Sales are through the roof for Xbox Live, and the coming year should add even more fuel to that fire as word of mouth spreads, and more compelling online titles make it to the consumer channel. With the broadband connection such an essential part of the Xbox Live system, can cable operators afford to turn a blind eye to this new online gaming revolution?

Another issue operators face is making the most of the digital tier–and it's been a real issue of contention, as digital churn continues to stifle the industry's progress. While gaming and other interactive services haven't been the application operators have turned to in order to save their digital customers, initial success by some prescient operators may make the rest of the industry take another look at interactive gaming.

One of the visionary few in this regard is Charter Communications, which has been working with developer Digeo Inc. to roll out interactive services to more than 650,000 digital subscribers. Digeo's i-Channels interactive platform was launched on the Charter network a little over a year ago, bringing local news, sports, weather and shopping to digital subscribers through just a few clicks of their standard remote. While the initial i-Channels did attract some regular users, the service didn't really take off until Charter and Digeo added the gaming piece to the service late last year.

By adding two simple games to the service–a puzzle game called "Picnic Antics" and a simple card-based game called "Deal With It"–the i-Channels service now claims some impressive usage numbers. According to both Charter and Digeo, the Games i-Channel has generated nearly 2 million page views and counting, which is about 30 percent of weekly i-Channel usage. Gamers on the Charter service now play them an average 2.7 hours per week.

"We expected games to do well, even before the launch, but I don't know if we expected it to have the multiplier effect on usage that it did," crows Matt Earnest, director of basic iTV programming with developer Digeo. "We did think that we established a baseline service of utility and information, and games took a little longer to launch just because there's more involved in delivering it."

Another Digeo exec, in addition to touting the platform's potential as an additional advertising vehicle, thinks reducing churn is a reason more operators will gravitate to interactive gaming.

"I think a key element that all MSOs are looking for is ways to attract and grow the digital base, because it's a more profitable customer for them," says Steve Martino, general manager for Digeo's basic iTV group. "MSOs are all looking for proof points. Charter jumped in and they're finding (gaming and iTV) reduce churn in their systems," Martino adds.

Since the games channel was launched so recently, there aren't any specific churn numbers Martino could cite. But, he adds, "I think anybody who spends almost three hours a week on a particular channel isn't going to be too excited to give that up." With that in mind, Charter is planning on expanding the service to more than 1 million subs by year's end, as Digeo creates a version of i-Channels that can work on both Motorola Broadband- and Scientific-Atlanta-based digital networks and related set-tops.

It's a similar success story at regional operator Susquehanna Communica-tions of York, Pa. Gaming is at the center of that company's digital churn strategy, as the operator has offered to digital customers single-player games from Scientific-Atlanta and multi-player trivia games from developer Buzztime. Just three months after launch, more than 42 percent of SusCom's digital customers signed on to play the games, and overall churn fell to below five percent.

"It certainly bodes very well for our plans and our strategy of using these applications to really get customers hooked," says SusCom Vice President of Marketing and Program-ming Dan Templin.


But today, most of the growth potential seems to be in online broadband gaming, like the hot Xbox Live. Some of the forecasts of the sector are trickling in, and the numbers can't be overlooked. One notable study, from researcher Datamonitor, predicts online gaming revenue to jump to $2.9 billion in 2005, from just $670 million in 2002.

For cable operators, the momentum for Xbox Live (similar services for the Sony Playstation 2 and the Nintendo GameCube use broadband and narrowband connections) presents a potential opportunity to grow their high-speed Internet business, as the platform depends on having a reliable broadband connection. That's part of the reason a slew of broadband providers signed an Xbox Live compatibility agreement back in October 2002 with Microsoft, letting consumers know that their high-speed network will be ideally suited to the online gaming service. Signers of the agreement include service providers Charter, Comcast, Time Warner Cable, Rogers Communications, EarthLink, SBC and Qwest. It also includes Cox Communications, which seems to have a newfound interest in the gaming crowd as a whole.

"(The compatibility agreement) provides consumers yet another justification that Cox High-Speed Internet is the right choice for them," explains Steve Gorman, director of marketing for residential Internet services at Cox. "If indeed a (high-speed connection) sale is combined with an Xbox Live purchase, that's great. But to the extent that someone already has Cox High-Speed Internet, or wants to be future-proofed a bit, this gives them yet another method of relief to know that if they do go out and buy an Xbox, it will at least function properly on the Cox network."

Cox, for its part, has done all it can to support the new service, even setting up informational links on its Web site to help new users set up a networked system with Xbox at the center. In addition to driving new high-speed connection sales, Xbox potentially will drive business to Cox's home networking effort, which is just now being trialed for a system-wide roll out.

"I indeed see these types of applications and partnerships as catalysts to drive that segment of our business," Gorman adds.


Might game consoles be the next set-top box?

There's more horsepower in that Sony PlayStation2 or Microsoft Xbox game console than you think.

And with the recent news that Sony has developed a conditional access technology called "Passage" to rival the current CA platforms from Motorola and Scientific-Atlanta, the game console of the future, equipped with a digital tuner, could be used for much more than games.

That's the impetus behind a system developed by Advent Networks and software developer BroadQ, which uses the Sony PlayStation2 game system to deliver MPEG-4 streams for applications like video-on-demand.

Essentially, the system combines the PS2 console with Advent's Ultraband router to establish a dedicated 5 Mbps connection between the cable headend and the customer premises. BroadQ software, in game disk form, then serves as the portal used to browse and order movie or music titles.

"If you look at the value of this $199 PS2 versus a $499 Explorer 8000, you're saving hundreds of dollars, and you're moving into a completely retail environment," explains Geoff Tudor, Advent's president and CEO. –DH