Category Archives: Gaming

The costs of user-generated content

When I first started this blog, I intended to write more about virtual worlds, following the general theme of massive scalability. In this instance, though, I want to muse upon the balance between maximizing your revenues, and adhering to principle, especially when you’re a public company with shareholders to worry about. Also, this involves the unintended consequences of user-generated content, and there are lessons to be learned here if you’re looking at UGC, whether in your own enterprise or for consumers in general. Similarly, there are perils in any customer-controlled environment. Bear with me, though, because this is long.

Massively multiplayer online games (MMOGs), and MMO roleplaying games (MMORPGs) in particular, all have distinct communities, but each such community is always full of players with conflicting interests. The development studio has to balance their own vision, as well as the sometimes-warring interests of different types of players, and the commercial needs of the game (whether it’s paid for in subscriptions, real-money trade, or other, there has to be revenue), in order to maximize long-term profit. Communities are particularly fragile, and widespread changes can lead to mass exodus, as Sony Online Entertainment discovered with Star Wars: Galaxies, where a thorough and expensive revamp instead caused more than a 50% drop in subscriptions. Players who depart are not individuals — they are part of a community of family, friends, and online acquaintances, and when key players leave, there’s a domino effect.

Enter NCsoft (SEO:036570), and one of its veteran properties, five-year-old City of Heroes. CoH is relatively small fry for NCsoft — it peaked at around 200,000 subscribers, and now has something in the 150,000 range, paying a base of $15/month in subscription fees. NCsoft’s Lineage and Lineage II, by contrast, each have about a million subscribers; for anyone that isn’t Blizzard and the juggernaut that is World of Warcraft, these are impressive numbers, but they’re down hugely from their all-time highs.

CoH currently enjoys a position as the only superhero-themed MMOG out there. However, Champions Online comes out this summer, designed by the same folks who originally created CoH, creating an imminent competitive threat. Paragon Studios (the studio within NCsoft that’s responsible for CoH) chose to do something smart — introduce user-generated content, allowing players to create their own missions (scenarios), complete with fully custom enemies to fight. (As an on-and-off CoH player with what I hope is a creative streak, UGC is deeply welcome feature, and lots of people are using it to do very entertaining things.)

As one would expect, players immediately went diligently to work to find ways to hyperoptimize UGC in order to maximize rewards for a given amount of play time. The game’s EULA specifies you’re not allowed to use exploits, but the difficulty created was this: What is an exploit, versus merely unintended levels of reward? There are methods in the game that generate very high rewards per unit time, for instance; UGC simply allowed players to generate optimal situations for themselves. The game’s programmers rapidly closed down some methods, but left other methods live for almost a full month. The hyper-efficient methods were well-known and broadly used by the player base, but the studio was essentially silent, with no communication to customers, other than a request for feedback.

Usually, in a virtual world, when there’s an exploit, the exploiters are limited to a handful of people; players normally know a bug when they see one, like the ability to duplicate a valuable object. This particular case is unusual because it affects a sizable percentage of the player base, and it’s unclear what is and is not an exploit.

Consequently, players have been shocked to see NCsoft announce that they’ve decided to react harshly, stating that players who have “abused” the reward system may lose the rewards they’ve gained, including losing access to the characters used. Since CoH is an MMORPG, characters may represent hundreds, even thousands, of hours of investment, so this is a serious threat. The real-world cash value of optimized characters is significant, too, although such sales and transfers are against the EULA.

It’s an extraordinary choice on NCsoft’s part. Other than the instructions not to “exploit” the system, as well as explicit rules forbidding players from creating exploitative UGC, there was never any warning to customers not to play UGC that might be exploitative, although CoH‘s parent studio publicly communicates with customers on a daily basis through the game’s forums. NCsoft has recently been pushing sales of a new boxed set for new players, as well, leading to the high likelihood of inadvertent “abuse” by new players who would not necessarily know that these were exceptional levels of reward for the time.

Losing access to rewards and characters essentially represents nullifying the time investment of players, and the removal of avenues from which to have fun (the character represents the ability to access content). Thus, impacted customers, most of whom subscribe month-to-month, have a very high likelihood of cancelling. This represents a potential direct revenue hit at a time when the game is likely extremely vulnerable to competition, and the aforementioned domino effect of subscriber loss is real and must be considered. Yet, to not do anything is a compromise of principle, and potentially creates a whack-a-mole effect whereby players find new gray areas of high-reward generation and widely use them to gain rewards, while developers try to patch these as quickly as possible. Moreover, because virtual worlds have internal economies, exceptionally fast rewards create imbalances, so they have an impact beyond individual players. (This does not include the impact to “gold farmers” and “power-leveling services”, who offer in-game rewards and powerful characters in exchange for real money, a practice which is against nearly every MMOG’s terms of service, but is nonetheless a significant and growing business. Ironically, making it easier for players to gain quick rewards on their own devalues such services.)

NCsoft is facing the prospect of significant subscriber bleed due to the forthcoming Champions Online, so a decision that increases the likelihood of cancellations is an extraordinarily bold move. It’s unusual for public companies to be willing to choose principle over revenue. Implementing harsh penalties based on clear guidelines, possibly with an automated warning system (i.e., if a player has gotten more than X widgets per Y time, alert him to it), may be advisable, but retroactive imposition of penalties on one’s customer base is another matter. Creating “traps” for bad apples disguised as paying customers is certainly reasonable. Punishing ordinary customers for having done something gray, and which your company has failed to even suggest is black, may be a quick ticket to having to offer unpleasantly complex explanations to your shareholders. Industry-watchers may find the outcome of this to be instructive.

So here are the broader lessons:

A couple of months ago, I wrote about scaling and friendly failure. The same principle that applies here: It’s not what the limits are. It’s how well you communicate them to your customers in advance of enforcing them. It applies whether you’re a gaming company, a cloud computing company, a network services provider, or an entirely non-tech company.

If you are providing an environment with user-generated content, expect that it will be abused, sometimes in subtle ways. Even in a corporate environment, there are potentials for abuse, particularly if the company gives employees goals or bonuses to work towards for completing UGC. Human nature being what it is, people optimize; in the work world, they’re careful not to optimize so much that they think they could get fired over it, but again, the boundaries are gray and hazy. Clear communication of what is and isn’t acceptable, in advance, is necessary.

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OnLive game streaming

OnLive debuted its gaming service at the Game Developers Conference in what was apparently a pretty impressive demonstration, to judge from the press and blogosphere buzz. Basically, OnLive will be running games on its server infrastructure, and then streams them live to users over the Internet, thus allowing users to play titles for multiple consoles, as well as games whose normal hardware specs exceed their own PCs, on whatever computers they want.

Forrester’s Josh Bernoff is enthused about both the announcement and the broader implications of “your life in the cloud”. His take is an interesting read, which I’m not entirely sure I agree with in its entirety. However, I do think that the implications of OnLive’s technology is well worth thinking about in the context of hosted desktop virtualization.

In order for OnLive to be able to deliver graphics-intensive, high-resolution, fast-twitch games over long-haul Internet links, they have to have an amazing, very low-latency way to transmit screen images from their central servers to users at the edge. We know it has to be screen images because in their scheme, the end-user’s computer is not responsible for rendering anything. (This kind of display is a hard problem; previous attempts to display games via remote desktop have run into serious performance issues.) From the way this is written about, the trick is that it’s sending video, meaning that it can stream as quickly as live video in general can be streamed. Real-time screen update is theoretically awesome for business uses too, not just for gaming. So I am extremely curious about the underlying technology.

I’m not sure whether I’m really OnLive’s target audience. I own all three modern consoles (Xbox 360, PS3, Wii), and a lot of my games come with peripherals. So my primary interest in this is mostly the ability to truly get games on-demand. But I am enough of a performance hound to own a high-end gaming monitor, gaming keyboard, gaming mouse, etc. for my PC (although ironically, no high-end graphics card), so any compromise in latency might not be my cup of tea. But it is certainly a terribly interesting idea.

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Zork meets browser-based games

Nostalgia for the ’80s continues to reign. (Robot Chicken fans: Have you seen the Pac-Matrix?)

A company called Jolt Online Gaming has acquired the rights to produce a browser-based MMORPG called Legends of Zork. For those of you who have never had the experience of realizing it is dark and you may be eaten by a grue, this is probably not particularly meaningful to you, but for fans of the era of classic Infocom text-adventure games, it is both fascinating and bizarre to see that they’re going to try to turn the Great Underground Empire into a hack-and-slash online multiplayer RPG.

The market for browser-based massively-multiplayer games supports a cottage industry of small companies with a handful of developers, backed by an artist or two, who crank out a reasonably nice living for themselves without ever competing with the big-time. I wonder if we’ll eventually see a roll-up of these guys, or if they like being “lifestyle companies”.

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Trion World gets a $70m C round

MMOG developer and publisher Trion World Network just closed a $70 million Series C round, which brings its total raised since its inception in 2006 to over $100 million.

This might seem like a staggering amount of money for a company with two games in development but none published yet. It’s trading on the name of its founder, Jon Van Caneghem, of Might and Magic fame. But it’s not that much money if you realize that games are now being made on movie-sized budgets, and MMOGs are exceptionally expensive to develop.

Dan Hunter had an interesting piece on the Terra Nova blog last year regarding the financials of MMOG development, based off an Interplay prospectus for an MMOG based on Fallout. That cited a cost of $75m, including a launch budget of $30m, which presumably includes marketing, manufacturing, and server deployment.

MMOGs are not efficient beasts, and by their nature, they are also prone to flash crowds and highly variable capacity needs. Most scale in a highly unwieldy manner, compounding the basic inefficient utilization of computing capacity. Utility computing infrastructure has huge potential to reduce the overbuy of capacity, but colocation on their own hardware is nigh-universally the way that such companies deploy their games.

Nicholas Carr estimated back in 2006 that an avatar in Second Life has a carbon footprint equivalent to a Brazilian. Last year, I heard, from a source I’d consider to be pretty authoritative, that an avatar in Second Life actually has a carbon footprint larger than its typical real-person (usually an affluent American).

This is why Internet data center providers drool at MMOG companies.

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This generation’s got game

Pew Research just released a report on Teens, Video Games, and Civics. Of particular interest — 99% of boys and 94% of girls play video games. 27% play games with people they connect to via the Internet. 21% of teens play MMOGs, and 10% play virtual worlds (i.e., Habbo Hotel and similar pure-social games). And Guitar Hero topped the favorite-games mentions.

The Pew study is interesting when taken in conjunction with some numbers released released by comScore today, in conjunction with Edward Hunter’s Measuring and Metrics presentation at Austin GDC earlier this week. That provides more demographic detail about the changing gaming market in general.

Bottom line: Lots and lots of casual gamers, and as the teen generation ages up, a growing ubiquity of gaming as an entirely mainstream activity. This is Generation V in action.

(Those of you with Gartner subscriptions might want to check out How ‘Generation V’ Will Change Your Business for my colleague Adam Sarner’s future-looking take on how the 40th-level half-elf from Secaucus, New Jersey, behaves as a customer.)

Yahoo! Music and Rock Band

Last year, Ian Rogers, who was at the time the VP of Yahoo! Music, gave an interesting presentation to some music-industry friends of his, which he shared in his blog: Convenience Wins, Hubris Loses, and Content vs. Context. His point, to quote: “Let’s get beyond talking about how you get the music and into building context: reasons and ways to experience the music.”

I just picked up a copy of the Rock Band 2 videogame this past weekend, for my Xbox 360. (I am a giant plastic-guitar nerd.) Here’s a perfect example of context, and the cheerful willingness of consumers to pay for the ability to experience music in a different way. The game experience changes depending on what music you’ve bought from the Rock Band online store — it can, for instance, create “Challenges” based around music from a particular band. The new game has also substantially improved in-game display of songs, including cover art and the like. Given the online capabilities of consoles, one expects that future versions of such games are going to begin offering more and more additional in-game context around the music featured. That context, in the form of band interviews and so on, is already available on the game’s website.

This stuff is huge, by the way, in terms of revenue. The Guitar Hero and Rock Band franchises had each surpassed 15 milion paid song downloads by the end of Q2 2008. Music video games account for a giant part of software industry growth. In fact, they bring in more total revenue than digital music downloads. And the games drive digital purchases of the songs.

In the meantime, Yahoo! Music is turning back into a portal. What it notably does not seem to be doing: building new reasons and ways to experience music. (In the meantime, Ian Rogers went off to join Topspin.)

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