games–and play each other–via PCs, TVs and consoles
PC and console gaming, once considered a childish pursuit, has grown into a mature and thriving business segment, and there's no doubt that broadband will play a key role in defining its future.
But what specific role the cable industry will play is not as clear-cut. Sure, operators cull the incremental revenue generated from cable modem subscriptions, but, after that, their involvement can diminish quickly.
And the broadband gaming industry appears to be flourishing quite well without a lot of direct help, perhaps filing cable under the dreaded "dumb pipe" category. Microsoft Corp.'s Xbox Live service has done nicely in signing up more than 500,000 players since its launch, and some publishers are preparing to launch subscription-based games that require broadband connections.
But this doesn't mean the industry is sitting on its hands. Comcast Corp., for one, has expanded its influence into the sector. The most visible of these activities is the games channel offered at the Comcast.net portal.
a QoS-enhanced IP tunnel. Source: CableLabs
"The cable connection offers so many possibilities on a technical level. It provides the best possible [connection] for gamers," says Jennifer Maclean, director of sports, entertainment and games for Comcast Online.
Cable's involvement won't stop there. Those most opportunistic operators are beginning to look at gaming tiers and marketing/bundling arrangements with game publishers and console makers. And, why not? The amount of traffic flowing over cable networks is increasingly tied to gaming applications,rea says Ron Sege, president and CEO of Ellacoya Networks, one of a growing group of IP "bandwidth control" vendors.
"On a typical operator network, about 20 to 30 percent of active subscribers are gaming at any point in time," he says, citing an internal study. "Online gaming is popular [with high-speed data subs]. There's definitely a business there."
But that business will be found in multiple areas, spanning so-called "casual" gamers and consumers who won't settle for anything less than the latest and greatest games for the PC or console.Starting casual
Although PCs and consoles attract the most hard-core gamers, they don't necessarily represent the sweet spot of the gaming community.
"For digitally-distributed games for cable operators...the casual segment is the largest and fastest growing," says Andrew Wright, general manager of the RealOne Arcade division of RealNetworks Inc.
Real Networks, as the primary gaming partner for the Comcast.net portal, offers dozens of Web-based and downloadable titles for that segment. Many of the games are free, but some premium titles must be purchased following a trial period if the customer wants to continue playing them.
Real, instead of the operator, signs the deals directly with the content providers. The operator can then private label and control the merchandising and marketing of the product.
"They [the cable operators] collect the margin, and they don't have any costs," Wright says. The MSO also gets a "substantial" share of revenue derived from subscriptions and game purchases. "It's less than half, but it's a pretty good business," he adds.
RealNetworks doesn't break out how many Arcade subs it has, but the service is starting to rack up some impressive numbers: 200,000 game downloads per day, close to 140 million games distributed overall, and approaching 1.5 million games sold.
"The casual gamer, the bigger market, has not been served well by retail. That's why it has worked so well," Wright says.Set-top gaming
TvHead will port and recraft games
for the TV.
Delivering games to millions of deployed digital set-tops–because of their relatively feeble processing capabilities– has been relegated to simple parlor games. Well-documented efforts by operators such as Susquehanna Communications have shown that the approach can reduce digital churn significantly. But that marks just the tip of the set-top gaming iceberg if companies such as ICTV and TvHead have anything to say about it.
For more than a decade, ICTV has evangelized an approach that places most of the processing power at the headend, allowing even the thinnest of digital boxes to render graphically-rich applications, including games, to the TV.
Although the company's efforts have produced little in terms of deployment, ICTV believes the time is finally right for cable operators to hang their hats on its newest product, HeadendWare.
"The real emphasis is enabling cable operators the ability to finally deliver games that cable subscribers would be willing to pay for," says Ed Forman, ICTV's senior vice president of marketing.
ICTV demonstrated that capability this summer at a CableLabs conference in Keystone, Colo., showing off a version of Quake playing on DCT-1000s and DCT-2000s. "The fact that it could be done on [thin set-tops]...was a shock to people," Forman says.
ICTV, which is still at the lab testing stage with some of the larger U.S. MSOs, is working with several content aggregators for the HeadendWare platform. Among them is TvHead Inc., a stealthy startup headquartered in Los Altos, Calif., that plans to deliver to the set-top a menu of trivia and puzzle games, as well as more advanced games and classic arcade titles.
Founded in May, TvHead has already secured licensing agreements with Atari, Midway, PopCap Games, Gamer.TV and Merit Industries. TvHead either "ports" games to the set-top environment or re-creates them from scratch to ensure they look and sound as much like the original games as possible.
"We are developing a distribution system to bring [these games] to market," says TvHead Vice President of Business Development Sangita Verma, who previously headed up Midway's interactive television and GameBoy divisions.
TvHead's business model calls for the sharing of revenue between it, the cable operator and TvHead's game distribution partners. Verma wouldn't disclose those terms, but said the cable operator would receive the bulk of the revenue.
The revenue source is the cable customer, who would pay a subscription fee to play many of the games, and perhaps pony up a bit more for premium titles. More consumer testing needs to be done, but monthly subscription fees could fall in the range of $4.99 to $9.99, Verma says.
To do this, TvHead is creating a "channel" or a "walled garden" environment that, in addition to games, would provide community features for players to chat with each other, enter tournaments and post scores. The company hopes to have a variety of games available on its platform by Q1 2004.
"We're going after the casual game player," she says. "They don't have to pay $50 on a game and spend hours playing it."
The company is also building the games to work with standard remote controls, but has also patented some technology for future keyboard options that work with TVs. "We're looking at some other devices as well," Verma says.Console gaming
On the other side of the spectrum are the console gamers, a discerning group willing to fork over a couple hundred bucks for a system, $50 per game and perhaps a few dollars more each month to play online.
Microsoft Corp., for one, has already picked up more than 500,000 subs for its broadband-only Xbox Live service. Sony Electronics, meanwhile, offers an adapter for the popular Playstation2 that works with high-speed and dial-up connections.
Cable tested the console waters long before these boxes appeared. In the mid-1990s, many operators offered the Sega Channel, a subscription gaming service that used a special adapter to offer a rotating menu of games for the Sega Genesis for about $12.95 per month.
Outside of providing the connection itself and some marketing tie-ins, cable thus far has had little to no involvement in how well these new consoles play online. But that could change if operators want to work with the Microsofts and Sonys (and make some money while they're at it) by fulfilling a console-maker's wish list that includes QoS capabilities, service tiers targeted to console gamers and headend-based game servers.
The game publishers would like the help as well. Electronic Arts, for example, runs EA Sports Nation, an online gaming community dedicated to the company's games for the PS2.
"We're looking to get people to play longer and more often, and to come back year-after-year...to purchase new versions," says Kim Cieslak, director of marketing for EA Sports Online.
Though the service can work with dial-up, a broadband connection is required for the service's voice chat feature. Subsequently, the majority of EA Sports Nation's users have high-speed access, she says.The 'always-on' platform
The “Phantom” is shooting to become the first “always-on” gaming machine.
Among its many options, the Phantom can come with an embedded cable modem, marking what could be considered the first "always-on" broadband gaming platform.
The Phantom is not a game console in the traditional sense, but a gaming system made up of two components: the box, and a virtual private game network it hooks into, explains David Frederick, chief marketing officer for Infinium Labs.
PhantomNet, the VPN piece of the system, will give users the ability to preview, rent and buy games for an additional subscription fee. In an age of digital piracy, Infinium Labs hopes the security afforded by the VPN will entice software developers to create games for the platform.
PhantomNet "is the heart of the machine," Frederick says. "You can save content on the hard drive...or you can have it streamed to the box."
Frederick says Infinium Labs is talking with a number of high-speed service providers about potential co-marketing partnerships. "Phantom needs broadband to work," he notes. "Without it, it's like buying a Ferrari and only driving it up and down your driveway."
Despite challenges with the price tag and the battle it will have to wage in the ultra-competitive, cutthroat console market, Infinium Labs will make a go of it when it releases the product in Q1 2004. The company hopes to roll out its beta system sometime this month.Can cable cash in?
There's a lot of broadband associated with gaming these days, but is there a role for cable operators and, if so, how can they make money at it?
In the casual gaming space, the operator's role is abundantly clear. Either do it all yourself, an approach that can cost money and sap resources, or hook up with a gaming aggregator/ASP, let it do most of the heavy lifting, slap your brand on it, and start printing money.
But there's also money to be made in selling cable modem service tiers especially for gamers. "Some MSOs are looking at some higher bandwidth tiers with increments as high as $25," says one industry insider.
Another idea under discussion is an inexpensive ($5 or $6 per month) standalone tier for console gamers who want the benefits of broadband, but don't use or own a PC. Coupled with that, cable operators might also develop some business by hosting console games at their headends.
"It's fair to say that we're looking at [gaming tiers]," says Comcast's Maclean, who wasn't more specific. "It's also fair to say that Comcast is excited about games because they add value to our high-speed Internet subscribers."
Time Warner Cable spokesman Mark Harrad says it's still a bit early to discuss the MSO's broadband gaming plans in detail because those plans are still in development. He noted, though, that TWC's Road Runner unit is primarily targeting the casual gamer, and has already embarked on agreements with a variety of suppliers on an a la carte basis.
Tiers aside, cable operators might also drive some additional incremental revenue through marketing or bundling relationships with game publishers. One publisher of a popular Massively Multiplayer Online Roleplaying Game (MMORPGs) is already pursuing such an opportunity.
Simon & Schuster Interactive is preparing to offer "Eve," a sci-fi MMORPG, plus some other bundled games, to MSOs for about $6 per unit. The publisher has also offered to share with its cable partners a portion (about $2) of the revenues brought in by the game's $12.95 subscription fee. The cable affiliate program, details of which are posted at www.evecable.com, was set to launch last month.
The creator of “Eve,” a multiplayer game, hopes to tap cable’s marketing conduit.
Other publishers also are cognizant that their business models will have to account for high-speed connectivity.
"Broadband is very important to the gaming industry, and it will help us grow in the future," says Eric Hartness, director of marketing for Electronic Arts, which makes "massively multiplayer" PC titles such as The Sims Online and Ultima Online, as well services aimed at the more casual gamer under the "Pogo" brand.
Even the cable modem vendors are getting into the act. At press time, Toshiba was close to announcing a bundling deal with a well-known PC game publisher.
"It initially will be a title from the MMORPG genre," says Chris Boring, marketing communications manager with Toshiba's network products division. The bundled offer, which will include a free evaluation period for the game, will be made available to Toshiba's retail and MSO partners.
Bundling software with cable gear is nothing new to Toshiba. The company already packages Norton anti-virus and firewall software with its cable modem gateways.The role of bandwidth management
Marketing and partnerships aside, there are some technical paths ops can take to enhance their position among gamers.
Though much of the IP control activity has centered on peer-to-peer applications, those discussions are also starting to encroach into the realm of multiplayer gaming.
Once the defensive controls are put in place to curb how much traffic is used for P2P, the next move should involve how operators can extract more value from their high-speed connections, notes Yuval Shahar, CEO of P-Cube, which offers a product that peers into the application layer.
"The principal is the same. You can easily [identify] a gaming session, a VoIP session, a video stream, etc., and create broad differentiation in your network," he says. "You can handpick those sessions to provision at high quality and make sure they get what they need," he says.
Applying that control can improve overall quality of play, which can be affected by time of day, network congestion, etc.
"Some of these games are very real-time," says Sege of Ellacoya. "DOCSIS can set up classes of service, but it doesn't have the ability to do that particular class of service with a particular application to a particular customer. Operators are in need of those types of tools and specs to offer differentiated services. The groundwork is being laid now."Enter PacketCable Multimedia
Some of that work can be found in PacketCable Multimedia, a CableLabs specification released in February. Extending cable's IP influence beyond voice applications, PC Multimedia, when layered on top of DOCSIS 1.1, lends support to multimedia services ranging from video conferencing, streaming media and online gaming.
As outlined in the spec, PacketCable Multimedia is comprised of components such as the application manager, the policy server and the cable modem termination system. The spec also identifies how to deal with a variety of client types, including "legacy" endpoints such as gaming consoles, which are not innately aware of DOCSIS, CableHome or PacketCable messaging, and, therefore, cannot request QoS resources from the MSO network.
Further, a PacketCable Multimedia technical report released in June provides an example of how two gaming consoles could engage one another through a network tunnel (see Figure 1, p. 18).
In that scenario, the users would connect to the application manager, which, in turn, would generate a "policy request" on their behalf. The policy server would then make its determination and send a "policy set" message to the CMTS, which would enable access network QoS between the devices for the gaming tunnel using DOCSIS messaging.
What this all means is that noticeable lag would be removed from the equation, allowing gamers to enter the virtual battlefield on equal footing. But offering those capabilities could also give cable a leg up on its high-speed competitors.