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Monthly Archives: March 2009

One console to rule them all


The gaming world got some giddy news to mull over at last week’s Game Developers Conference. OnLive unveiled a new gaming console and platform dedicated to streaming games over the internet. There will be no discs – just a constant internet connection bringing a variety of games to computers and televisions. Most interestingly, all the processing of the games happen on some server, allowing basic PCs to play the most graphically intense games.  Displays at GDC showed basic laptops playing Crysis, a game that taxes even the most top-of-the line PCs.

Very little is known about how the system works, especially details like pricing. But in continuing the hype machine, OnLive is an exciting endeavor and even more thrilling experiment into the future of video games and digital distribution. There are many technical hurdles, specifically how fast connections will be. Streaming high-definition games at the demanded 30 frames per second requires a rapid and steady connection. It’s possible OnLive is a few years too early with broadband speeds no up to their challenge.

The experiment itself is in launching a new business opportunity for video games, and even a model for the entertainment industry.  OnLive is offering a microconole for gamers who want to play on their televisions, but they are also offering a browser plug-in so people can play right on their computers.  No hardware requirement means an instant customer base open to the product.  Hardware’s a tough business as movie-streaming services like Blockbuster and Netflix are learning.  Screenshots show options to rent or buy games, showing flexible pricing, though I’d prefer a subscription option similar to GameTap.  There are no details about downloading content onto hard drives to play offline, but that also would be appreciated.

OnLive boasts impressive support from leading game developers and now the debate begins of will it succeed or lose. Too many details are up in the air (how open is the system, how much value does the service offer the user, how comfortable is the controller). Certainly a slick interface and high-profile (if not out-dated) library makes me think OnLive is on the right path.  The case study alone will be worth the price of admission.

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ABC ends community-building exercise

I haven’t been a fan of the Writers Guild.  It seems the group is more interested in hording control rather than making the entertainment industry stronger and more profitable.  The most recent example is the Writers Guild’s outrage that ABC asked for viewer stories and input on their new sitcom, “In the Motherhood.” ABC initially asked for ideas on their website, saying ideas might be used as “inspiration.” This was a wonderful idea to engage a target audience, making them feel like a part of the new show and more eager to watch it hoping their ideas inspire.

But the Writers Guild wants none of that engagement. Claiming the idea submissions were not allowed under their contract, ABC removed the inspiration language from its website, though it still asks for ideas.

Again, the Writers Guild is holding back an innovative effort from ABC to make a TV show more exciting and engaging by building a community of viewers.

Suddenly violent video games mean the medium is grown up

Nintendo DSi

The New York Times claims the new video game Grand Theft Auto: Chinatown Wars is “one of the most important” because of its story telling and maturity.

But really, it’s just because this is a violent video game on a stereotypically kiddie and girlie gaming system, the Nintendo DS. The article praises game developer Rockstar and Nintendo for being “bold” and making a “vital statement to the public” that video games are not just for children.

Didn’t we already know this?

How is it bold of Nintendo for approving one of the best-selling video game series of all time to make a game exclusively for their system, almost certain to sell millions of copies. GTA is a safe-bet, not bold. And as amazing as Chinatown Wars is, it’s not a “crucial moment in the maturation of the gaming industry.” It’s a well-known franchise in an industry more known for violence than child-friendly fare. The New York Times itself has pushed flawed research about how all this violence is harmful.

Video games are still maturing yes, and Chinatown Wars is a helpful step to spreading the rich storytelling potential of the medium. But it’s a miniature version of the also adult GTA IV released only a year ago. Just as adult and arguably more visually spectacular. Adult is not always maturity.  Video games can be mature without violence, but talking animals and magic spells don’t get the same headlines as blood and gore.

I recognize the DS itself has expanded the video game market. Yay. It’s more than four years old. About time the New York Times realized violence can sometimes make good storytelling.

Too big to fail, but what to do next

The big news has been the $165 million bonuses AIG gave its executives after receiving $170 billion in taxpayer bailouts. It’s disgusting, outrageous, and shows how short-sighted these bailouts have been.

The government has claimed AIG and other financial and car companies are just too big too fail, so we have to give them money. But this rewards companies that expand, even if unsustainable. If a company gets big enough, no matter their mistakes, the government and taxpayers will save them. AIG just makes mistake after mistake because free money doesn’t teach anyone a lesson on how to run a better business.

Mike Masnick proposed my favorite idea that bailed out companies should be broken up so they are small enough to fail.  The new, smaller companies have less baggage and can focus on a fresh start.  James Moore points out, even with $170 billion, AIG is closer to death than a fresh start.  Moore writes:

AIG’s predicament will be studied for years to come in marketing and communications classes. When the company decided to pay out millions of dollars in retention bonuses after seeking billions in bailouts from taxpayers, there was probably nothing the greatest crisis communications expert in history might have ever done to manage the situation. AIG’s first step was to insist that it had contractual obligations to pay and this is factually correct. The company had signed deals to keep critical employees in the competitive financial products division. However, the people getting these bonuses are precisely the same individuals who created the nonsensical derivatives that turned America’s economy into a stick of butter in a microwave.

Financial mistakes are one thing. A company can reclaim the public’s trust even after bankruptcy or other major missteps. But AIG has harmed the public’s good faith so much, it’s impossible to see a realistic scenario where AIG becomes a force for good business in the United States and the world.  So with $170 billion of taxpayer’s money, what is AIG to do next?

There isn’t much. One argument could be the government is bailing out AIG just so companies can get their insurance payouts and not default themselves. After everyone’s paid, AIG can collapse under its own incompetence. But can AIG remain? I don’t think a name change will be enough to build back trust. The company name and image is so tainted and untrustworthy, Moore says “AIG is dead.” We, the taxpayers, own a dead company – a company with no viable future.

Trust for a company or person is one of their most valuable commodities. Without trust, products, services, and marketing are ignored because no one can believe them. AIG could make every reform possible, and there would be questions about what are they hiding.

I’m a believer (and practicer) of the magic of community-building and know Americans have a high capacity for forgiveness (we haven’t lynched anyone…yet). But at some point, we have to cut our losses and realize these too big to fail companies eventually have to be successful on their own. How do we accomplish that? Rewarding incompetency or outright manipulation don’t seem like winning strategies. Companies, from banking to insurance to cars have to rebuild trust in their brands, otherwise we’re just bailing out lost causes.

Break the old before in with the new

Clay Shirky has an excellent article about how the newspaper industry and how technology affects business models. Shocking to many newspaper and music executives, this is not the first time technology has upended business models. Just like before,  the old systems break before new systems are put in place because it takes so much experimentation to find new business models.  Shirky summarizes “If the old model is broken, what will work in its place? The answer is: Nothing will work, but everything might.”

Shirky opens with a great quote putting the newspaper predicament in perspective. He quotes Gordy Thompson talking about Usenet piracy of Dave Barry columns. “When a 14 year old kid can blow up your business in his spare time, not because he hates you but because he loves you, then you got a problem.”  The problem for newspapers is not a loss of interest in news, but a loss of interest in paper. Do we save newspapers or do we just redefine how get our news?

Shirky states wonderfully how newspapers seem to dwell on how we’ll replace newspapers – that without newspapers, there will be no watchdog for government or business (cause of the bang up job they’ve been doing). But with the fall of one business models leaves open experimentation for a new business model.  Automobiles make horse and buggies obsolete before we have an widespread, paved roads. Or as Shirky highlights, the printing press made for chaotic business models back in the day.

The Bible was translated into local languages; was this an educational boon or the work of the devil? Erotic novels appeared, prompting the same set of questions. Copies of Aristotle and Galen circulated widely, but direct encounter with the relevant texts revealed that the two sources clashed, tarnishing faith in the Ancients. As novelty spread, old institutions seemed exhausted while new ones seemed untrustworthy; as a result, people almost literally didn’t know what to think. If you can’t trust Aristotle, who can you trust?

During the wrenching transition to print, experiments were only revealed in retrospect to be turning points. Aldus Manutius, the Venetian printer and publisher, invented the smaller octavo volume along with italic type. What seemed like a minor change — take a book and shrink it — was in retrospect a key innovation in the democratization of the printed word. As books became cheaper, more portable, and therefore more desirable, they expanded the market for all publishers, heightening the value of literacy still further.

That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place.

While it seems we’re giving up newspapers for the hope something new will come along, the truth is newspapers need to fail for the new thing to be worth trying.  And as past transitions have shown, the new model is often more efficient and profitable and better for all parties.

Another wasted arms race: Hulu versus Boxee

boxeeI like Hulu; I love Boxee.  Boxee is one of the best media centers I’ve seen with a brilliant interface bringing video on your computer and internet together on your TV.  This included TV shows and movies from Hulu on a convenient display for televisions.  Last month, Hulu blocked Boxee’s access to their videos, cutting off a viable audience.

Hulu blocking Boxee makes little sense. You still had to watch ads and couldn’t download the videos, thus Hulu’s business model was still in tacked.  Allegedly cable companies pressured Hulu to block Boxee for fear people would watch these free videos, shockingly, on their televisions.  Web video should be exclusively web video, it seems.

So Boxee found a work around (in addition to several third-party fixes).  Boxee used Hulu’s own RSS feeds – freely available lists of content on the website. So Hulu blocked Boxee’s access even to the RSS feeds.  Hulu is spending resources to block people from seeing its content. How does that make sense?

I’ve pointed this arms race mentality before, where companies want to control everything done with their products. Sony releases update after update to its PSP to block homebrew while Apple rendered many iPhones useless after an update to stop people from jailbreaking them.  But these modders and hackers are just expanding the value of the original product. Boxee is making Hulu videos more valuable by making them easier to watch the way consumers want to.  Cable companies are scared because they no longer control this distribution – but that should be a good thing. Customers are telling them what they want and smart businesses can use this information to make more money.  Taking away an important value like this is what sends customers to piracy and file-sharing – where they can get whatever they want without seeing those three minutes of Hulu ads.

More jobs now better than more jobs later

Last week I wrote about using bailout money to fund start-ups rather than supporting already failing companies. Leave it to Techdirt’s Michael Masnick to show how short my post fell.

Obama’s bailout plan, as he says, is focused strictly on creating jobs as quickly as possible.  But truly successful start-ups create jobs slowly. And if they’re truly revolutionary, they even destroy the need for other jobs.  Masnick explains this:

So, think about it from a government bureaucrat’s perspective right now. Go back a few decades, and assume someone came to you with a plan to create the internet — and even accurately described how it would allow a great free exchange of information. The reaction, if you were trying to deal with an economic crisis, would be to focus on all of the jobs it upset. People can share music online? Think of all the job losses in the music industry! People can read news for free? Think of all those newspapers shutting down! But they wouldn’t consider all of the economic activity created by the internet — the billions of dollars and millions of new jobs created thanks to it.

The internet makes so many things easier, it makes those jobs obsolete, but doing so, it opens up millions of new jobs over the long-term.  It takes more jobs to make cars than it did to make and sell a horse and buggy.  Bailing out incumbent companies prevents the risk-taking and innovation that will create the next industry. It’s short-term thinking that is, part, of the same problem Wall Street got into. When all you think about it the quarterly job report, sustainable economic growth is always another quarter behind.

Learning the right lessons from iTunes

The New York Times took an intelligent look at how content is selling on Apple’s App Store.  The best-selling version of David Pogue’s “iPhone: The Missing Manual” book is its $4.99 iPhone app version, not the paper book or PDF.  Saul Hansell understands the application’s success on the iPhone is because of the valuable convenience and service Apple provides rather than customers simply paying for content.

Apple has created an environment that makes buying digital goods easy and common. With an infrastructure that supports one-click purchases of songs and videos, it was easy to add applications in the same paradigm. Paying for software, especially games, is not new to Apple customers. So when you see the iPhone manual or the Frommer’s Paris guidebook, it feels natural to click. (And of course, your credit card is already on file with Apple.)

He adds that Pogue’s app “hard to use” with poorly formatted text and a lack of interactive features, but for $4.99, the book sells quite well to a captive audience.  The publisher raised the price to $9.99 and saw sales plummet 75 percent.

This is not an example of micropayments, like some would like us to believe.  As newspaper’s desperately try to convince the public content should be paid for, they forget to tell us why to pay for it, let alone give us a reason to.  Apple built a easy-to-use system that is so convenient, it’s worth a few dollars and cents.  But Apple doesn’t look to make money on it’s App store. Apple already makes a healthy profit on the iPhone itself, just like on the iPod. Any profit from songs or applications is icing on an already sweet cake. These so called micropayments supplement Apple’s massive profits – they aren’t the source.  Newspapers hoping to replicate this model will be sorely disappointed.

Another difference, Apple has no real competition.  No one else can sell or offer iPhone applications except Apple (unless you jailbreak your phone). And no other mobile phone system offers as complete a catalogue or convenient system to truly challenge the iPhone (Google’s Android is trying very, very slowly).  If and when Android or Symbian or Windows Mobile (ha) can and do challenge the iPhone, convenient service will not be worth paying so much for. It’ll be expected and the next innovation will be required.  That’s, of course, smart business – staying ahead of the competition.

Something of concern for Apple and micropayment fans is research shows iPhone users rarely use applications after 20 days.  Techdirt points out iPhone users not finding much value in the apps they download will be less likely to spend money on more, hurting the long-term viability of the store.