PBC plots path to maximize distribution UFC adjusting after acquisition Who's next: Fighters on the rise New HQ represents turning point for UFC Tennis: Advantage technology Baseball: Pace of play Timeline: Charting change Sports fights fatigue First Look podcast: World Congress 2017 Hockey: Technology power play
Upcoming Conferences and Events
May 31 - Jun 1
Taking aim online
Published July 27, 2009
EA Sports’ “Tiger Woods PGA Tour” for gaming consoles such as the Nintendo Wii and Xbox 360 is very much like real golf, true to its aim to be a full-featured simulation, right down to the golf-like swing required for the Wii version. The title is immersive, time-consuming and can be just as frustrating or enthralling as being on the course. And at $60, it’s a lot like a weekend greens fee, too.
But the online, browser-based “Tiger Woods PGA Tour,” set for public release this fall, presents an entirely different dynamic in terms of both gameplay and economics. The game is strictly Web-based, does not require a console, can easily be stopped and restarted on demand, is designed for quick, more casual play, and carries a multitiered subscription model that allow users to buy as much or as little gaming of “Tiger” as they wish.
It is in this latter and newer version of “Tiger Woods” where EA and other game publishers, Web site operators and industry professionals see a robust future for the video game industry beyond the console.
Future online gaming, they believe, will allow for more dynamic game development that breaks out of the traditionally expensive, time-consuming model built strictly around annual physical releases. They think it will attract new gamers outside of the usual demographics and lift video gaming to greater heights with regard to both revenue and cultural relevance.
“‘Tiger’ in many ways is a pilot program for us, and we’re looking forward to taking a lot of learnings from this, but the core concept above this is fairly simple,” said Peter Moore, EA Sports president. “Consumers want mobile entertainment, on the go, and wherever they are. And that’s something that goes right into our wheelhouse. The PC presents a huge opportunity for us, but not in a traditional packaged-goods format.”
EA’s connected gaming effort extends well beyond “Tiger Woods.” The company later this summer is introducing an online franchise mode for its hallmark football title “Madden NFL” in which users can manage their teams from anywhere they have Internet access. EA also has developed online versions of “FIFA” and “NBA Street” for the more advanced European and Asian gaming markets, similar to what 2K Sports is doing for its NBA title.
Other major sports-related entrants into online gaming include:
iRacing, a high-end racing simulator led in part by New England Sports Ventures Chairman John Henry that recently signed a licensing pact with NASCAR to create a sanctioned online racing series;
Virtual golf outfit World Golf Tour;
ActionAllStars.com, a destination designed for fans ages 6 to 14 that includes games from the NBA, MLB.com and the X Games;
Quick Hit, a free football game that does not use licensed intellectual property from the NFL (see related story) and is due to launch this fall; and,
ESPNArcade.com, which recently relaunched with a expanded suite of casual, free-to-play games.
“This is something us veterans in the business have been talking about for a very long time but is now coming to fruition,” said Dave Kaemmer, chief executive for iRacing, which has more than 16,000 people paying rates ranging from $19 per month to $156 per year to play the game. “There’s been an exponential increase in computing power that’s opened up a lot of this and has made many of the consoles quickly outdated. And the great thing about online gaming is that we’re still only at the tip of the iceberg.”
While sports-based online gaming is now hitting a major inflection point, other genres have long embraced the format, providing some key early lessons. Massively multiplayer online (MMO) games involving role-playing and fantasy, such as what occurs in an offline game like “Dungeons and Dragons,” actually predate the commercial Internet and were previously played as early as the 1970s on more limited, university-based computer systems. The games are typically played using the computer’s keyboard and mouse.
In more recent years, games and virtual worlds such as “The Sims” and “Second Life” attracted significant global followings online, with the sale of virtual goods becoming a key fiscal underpinning. The MMO concept also quickly translated to soccer, where numerous outfits in Europe and Asia combined the elements of online group play with the rabid popularity of the sport.
Many of these games, however, did not require significant computing power and were not advanced in their graphics and gameplay, contrary to most console-based sports titles most popular in America. But in the last several years, a continued increase in processing speed and memory has allowed game developers to match their ambitions and consumer demands with achievable reality. Such a factor is particularly important in simulation-based sports titles, where fans are rigidly judging them on their ability to replicate every nuance of real life sports.
Additionally, online economics have advanced enough to where major titles carrying licensed intellectual property, such as “Tiger Woods,” can now exist online in either a subscription basis, an advertiser-supported free version, or a hybrid of the two. The availability of wireless Internet access, including now on some airplanes, further heightens the importance of high-end online content.
“You definitely still have to battle the notion that everything should be free online, but there is a general comfort level now to buying things on the Internet and for advertisers to market online,” Kaemmer said. “People are starting to realize that it’s worth paying a price for the right content, and that’s definitely an important shift.”
But getting from those early-stage MMOs to the current high-end, browser-based games required a key intermediate step: the connected console. For more than a decade, consoles such as PlayStation and Xbox have included Internet connections for group play, game and content downloads, and other material, such as the daily statistical updates now part of EA’s “NBA Live” and other games. The connected console helps open up the notion of video gaming as a more real-time experience and one not simply designed for solitary play.
Major League Gaming, a competitive video gaming league, early last year re-oriented its business model to one in which online competitions form the foundation of its existence. On a spectator basis, all of its Pro Circuit competitions are distributed online, in part through a partnership with ESPN360.com.
“I think it’s pretty clear now that single-person playing of a game on a console is simply not the most exciting part of this business. It’s really only a jumping off point to everything else out there,” said Matthew Bromberg, Major League Gaming president and chief executive. “Gaming is simply more competitive, more social, more engaging now, and that all requires being online.”
Building a business?
Even as the online business matures, the question remains as to whether online gaming can be lucrative and profitable enough to be self-sustaining and, more directly, whether it will cannibalize the existing physical game business.
EA, which garners more than $4 billion in yearly revenue, has invested an estimated $300 million into research and development over the past two years around online gaming and is making a big bet that the two gaming experiences will remain different.
The company’s thinking is that online gamers, at least in the case of “Tiger Woods,” will be older and playing much more outside the home. More generally, early research also suggests that online gamers are both older and younger, and slightly less male, than the traditional, core demographic of males ages 16-29 for console-based games.
“These are very differentiated experiences we’re constructing. We’ve specifically designed them to be separate and distinct,” Moore said. “So we see very little cannibalization.”
EA and its competitors need to be correct on such an assessment. NPD Group earlier this month reported that U.S. sales of video game hardware, software and peripherals amounted to $1.2 billion in June, a staggering 31 percent drop from the same month in 2008 and the fourth straight month with a sales decline. Such sales defy the conventional wisdom of video games being a safe haven in the recession as more consumers stay home.
But some analysts believe that even amid that contracting market, online gaming will continue to gain market share as more content moves off the console and into the computing “cloud,” particularly as those domestic NPD numbers do not include online gaming revenue.
Lazard Capital Markets analyst Colin Sebastian recently estimated the online gaming market at $11 billion globally, a quarter of the revenue for the entire industry and more than triple the total from four years ago. That revenue, he said, also carries higher profit margins, unlimited shelf space and more economies of scale.
“A lot of that [revenue] number is overseas and in other genres with games such as ‘World of Warcraft.’ So while it is true that online in the traditional, U.S.-based video games business is more limited, a lot of the growth going forward [across the entire video game industry] is certainly going to come from online,” Sebastian said. “And here, I would definitely expect sports to be on the leading edge of that conversion as it continues to happen.”
Social media, sports portals
With the continued rise of social media, many observers also see social networks such as Facebook as an increasingly important destination for online gaming. Similarly, several leading sports portals such as Yahoo! and ESPN have built casual gaming sections within their sites.
Some of the games are self-developed while third-party outfits such as Zynga and Playdom have built growing businesses for online games played within Facebook and MySpace.
Similar to stand-alone, browser-based games, the titles existing within the portals and social networks generally have been able to boast better reach among younger gamers and longer engagement periods than many other areas of those sites.
Additionally, online games in these areas have been buttressed by the usual display advertising and subscription-based business models by integrating corporate brands into the game. ESPN’s photo-matching game franchise, Zoom, for example, incorporates still photos from upcoming movies into the game when a movie studio purchases ads for ESPN Arcade.
“This has been a big thing for us and allows us to be a bit more creative with advertisers than we can be in other parts of ESPN.com,” said Raphael Poplock, ESPN vice president of games. “Arcade has also been a part of the overall programming strategy for things like ESPNU and Rise since we’re all going after that young male audience.”