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Monday, March 2nd, 2009

    Time Event
    2:08p
    GamesBeat 09 preview: Veteran VC Tim Chang on what’s hot, what’s not in game investments

    Game and virtual world investments soared to $885 million in 2008, but the picture is likely to be a mixed one this year. Games are one of the few industries still growing at retail (13 percent in January), and online games are still a hotbed of entrepreneurial activity.

    But will the industry hold up in 2009? And will big investments in game companies still make sense this year? We talked about the state of game investments with Tim Chang, a principal at Norwest Venture Partners to get his take on those questions.

    Chang is on the opening game investor panel at GamesBeat 09, VentureBeat’s inaugural game conference coming up on March 24. At Norwest, Chang focuses on digital media, mobile, and Asia Pacific investments. He’s been involved in venture capital for more than a decade, both at Norwest, which he joined in 2006, and at Gabriel Venture Partners.

    Chang said that the parts of the game market that are cooling off include the in-game advertising market. In-game ad company Massive, which inserts ads into scenery in games (in billboards, for example), scored big in 2006 when Microsoft bought it for an estimated $400 million. That started a stampede toward in-game ads, culminating with Google eventually buying Adscape and entering the in-game ad market last year for casual games. While that market is still going strong, investment in such companies is tapering off, as it settles into a bigger market with players such as Microsoft’s Massive, Google, Double Fusion and IGA Worldwide. So while that market isn’t dead in terms of revenues, it’s not attracting investment because it has moved past its peak hype cycle, Chang said.

    By contrast, one sector that’s still in its peak hype cycle is social games. Players in this category include Social Gaming Network, Zynga and Playfish. Other hot categories include mobile payments for games, virtual goods, and what Chang calls white-label engines that fulfill functions such as software-as-a service for virtual worlds. Still other hot areas include engines that make it possible to play games with high-quality 3-D graphics on web browsers. Companies in that category include Unity and InstantAction, the last of which we wrote about last week.

    Chang is watching the iPhone ecosystem for companies that are able to make money off a bunch of applications, such as RockYou does with Facebook applications. While many iPhone game developers can get by with just five people and make profitable games, Chang observed that professional game developers are moving into these iPhone and social games companies. SGN, for instance, hired Eric Hunyh, a veteran from Vivendi Games, as its chief technology officer.

    VCs are crawling over the game space, looking at everything from small casual companies to big studios making high-end games such as Trion World Network and Cryptic Studios. At the same time, some observers are wondering if gaming is falling apart at the high end as big companies such as Electronic Arts hit hard times and profits are concentrated in firms such as China’s online game companies and Activision Blizzard, owner of World of Warcraft, the most popular subscription fantasy role-playing online game.

    “The old publishing model is broken and needs repair,” Chang said. “Does that mean a resurgence for indie games?” Yes and no. The indies are capital efficient, which is good during a recession, and can launch games that quickly make themselves profitable. But they have a hard time getting bigger distribution and reaching scale, and they have a hard time coming up with repeat hits. They may have to sell out to a big publisher, but the big publishers may find they have dozens of acquisition targets.

    Only one or two will stand out, like Club Penguin (sold to Disney for $700 million) or BioWare/Pandemic (sold to EA for $860 million). Zynga and SGN are certainly hoping to follow in those footsteps. There will be a lot of companies that get stuck in a rut. Somebody may have an opportunity to roll up a lot of the under-capitalized gaming startups. That’s why the war chests of BigFish Games, which raised $83 million, and Trion World Network, which raised $70 million, may come in handy.

    But Activision Blizzard and EA aren’t likely to be the only acquirers. Other media companies coming into the fray, such as Disney, MTV, CBS, Warner Bros. and Comcast, are likely to buy game companies. Because of those prospects, and because games continue to be a haven in the economy, VCs are piling in.

    Chang said that VCs who used to focus on enterprise software are now pivoting into games, resulting in dumb deals. But at some point during the recession, Chang said, the “tourist money will dry up.” The problem the clueless VCs will find is that the gaming elite is still a small club. Many of the best stars in the business have made money and don’t need funding. The rest are highly sought after.

    Chang believes that the quality companies in the future will have a combination of talent from social networking startups and talent from established game companies. They will likely explore alternative business models such as virtual goods or hybrids of subscriptions and free-to-play (try it out for free, buy virtual goods later) models. Those models have been proven in China and Korea but have yet to see breakout success in the U.S.

    Chang likes emerging sectors such as music games and those that are taking games in new directions, such as Lumos Labs, which is one of the companies making brain-training games and which Norwest invested in. He also says there is a lot of investment opportunity in Asia.

    With inexperienced VCs moving into gaming, the money is still there for good companies. Is the investment environment slower than in 2008? Yes, Chang said, but there are still good opportunities out there.

     

    2:09p
    Runes of Magic provides no-cost ticket to fantasy realm

    Hamburg - At least 11.5 million people try to take over the world regularly albeit they are trying to conquer a virtual one. Their numbers reflect how many players pay monthly subscription fees for the online role playing game (RPG) World of Warcraft. Yet after more than four years in the Warcraft's realm of Azeroth, some players may be asking themselves whether online RPGs are anything other than cold, hard commercialism, designed only to lure subscribers to pay real money for months on end. While there have been serious attempts to establish different payment models, no one has toppled the Warcraft empire. The latest attempt is on the horizon, though: Runes of Magic will be available completely free of charge. Even so, its developers hope to earn money from the game and their chances are not bad either.

    The game itself, written by the Taiwanese development house Runewake Entertainment, is based on the standard online role playing game principle. The character is created at the start of the game. The player is then led through the world using the mouse, completing quests and destroying monsters with the goal of rise from the initial level 1 to the maximum level 50. The events take place against a medieval backdrop, with various clichés from the fantasy world.

    Even so, there are several new wrinkles compared with the many preceding games. So far, commercial titles have managed to take advantage of a large, dedicated base of developers to set the quality benchmarks in terms of regular improvements and expansions. Any free-to-play titles tended to be poor cousins, with the lack of commercial funding reflected in the low quality. Runes of Magic is attempting to link the two extremes: the complexity of a pay title with the chance to keep your wallet intact.

    As one might imagine, though, the entire endeavour is not powered by philanthropy. The game's creators do indeed hope to ring in some cash through their work. The gateway here is a virtual supermarket known as an item shop. Real life money can be used to purchase objects there - some useful, some less so. If the player gets tired of spending a few minutes walking through landscape after landscape between destinations, they can instead rent or even buy a virtual horse. The game's own internal money, measured in terms of diamonds, can also be purchased this way. Some items cost just a few cents, others several dollars.

    The game's publishers are promising that no items will be available for sale that affect a level playing field between players willing to spend real money and those who are not. Yet this has also led to a heated discussion, especially in the site's German forum, as to the truth of this promise or whether purchased equipment inherently leads to advantages.

    Apart from these considerations, however, Runes of Magic does provide several features long desired even by players of the commercial titles. One is housing. While many other games simply leave their players homeless, here four walls of one's own - including a maid - are standard. The same applies to a craftsman system for creating goods and objects. There are also new elements to the character design and class selection process. Instead of being "just" a knight or mage, it is now possible to become a sort of dual-specialists such as a knight with some magical talents.

    Runes of Magic is slated to go live on March 19. At present, it is being put through what developers call the "open beta." That means that the software is freely available at http://www.runesofmagic.com for download, installation, registration and play. Yet during this stage, the developers make no bones that some rough edges still exist. The players are non-paid testers.

    Interest has been intense with some 450,000 players already registered so far. And even industry journals have been impressed. The Munich-based Gamestar reviewed the title in a recent edition, questioning whether Runes of Magic can compete with the big boys. Its preliminary verdict can be summed up with, "Oh yes, it can!"

    This only holds true, if the beta software actually installs properly. There are numerous reports in official forums of problematic installations. In part this is because Runes of Magic requires the latest graphics card drivers, as well as current updates in the depths of the OS. Even those who are handy with a sword need some computer skills as well.

     

     

     

    There are 38 screenshots in total, unveiling probable boss locations including that of Yogg-Saron himself, stunning interior scenery, strange machinery and floating planets.

    There's also a
    video of the exploration, and a written description of the experience:

    "..the dungeon is split in various sections. Think of a circle shape. In the center is the massive prison of Yogg-Saron. This is speculation, just visual interpretation. There is a big pool at the bottom and broken chains. The circle seems to have been a crystal dome. The dome is shattered and floating in the air in the midst of magical residue. Around the circle are entrances to the areas where the bosses will be. When you enter this circle, to the right you will see a snowy tunnel. There is where you will find Hodir."

     

    2:10p
    'BattleForge' Developer Interview

    WP: Who has the honor to speak with us? State your name, rank, and occupation!

    Kevin O'Leary, and I'm the product manager.

    WP: BattleForge has been in production for a while. You're in the beta stage and are about a month away from launch. What's your feeling on the game right now? Where are you guys at? How far has it come? What's it like now versus last year at the studio showcase, when everyone got their first hands-on time with the game?

    KO: We're pretty close to launch, like you said, about a month away. We're really excited about it. The game has come definitely a long way. Now we're hitting open beta, we just opened up all the cards for players today, so all 200 cards are now available in-game for you to see and play with. We're really excited about that. It's the first time that's going on, and we've been seeing really strong server stats from the beta, and we just hit fully open beta.

    WP: Let's talk about the card sorting. In traditional card games, like Magic: The Gathering, you've got your cards, and you've got your flipbook to go through. You're talking about a computer screen here. It can be annoying enough just searching through eBay and looking for things. How do you manage a 20-card deck, let alone when you're trying to make a deck out of 50, 100 or 200 cards?

    KO: There are 200 cards total in the game. You're going to start with about over 140 of them, so there are definitely quite a few that you're going to have to select from, like you said. But we have a bunch of features in there that will help you out. Within the card selection process itself, you're able to sort by specific name or faction color. We have four different factions that you can sort from; as well as your casting cost of how powerful a unit is, how far along you would be playing that unit; and units, buildings and spells. So you can sort all the way down pretty much to a microcosm and then back to the macro level as well.

    WP: You've talked in the past about rarity and having card editions, and eventually cards will stop being made. The main question there is, once an edition goes out and is no longer "in print," so to speak, will the cards still be able to be used online? I know with some collectible card games, again using Magic as an example, there were early cards that they decided were too powerful, so in later games, you simply weren't able to use them. How is the BattleForge team approaching that aspect?

    KO: The team is planning to keep the cards in-game, and you'll be able to play with them all the way through. The difference that we have between any kind of hardtop collectible card game is the fact that we can patch in if we need to, so if there are discrepancies and balancing issues, the team will be able to take care of that. As you alluded to, we will be having different editions coming. The high-reaching goal is to double the amount of cards in a year, so going from 200 at launch to about 400 a year or so after. Like you said, again, the editions will be kind of "retired," so your initial cards will have a market value that the players will be able to decide on, so if you have a rare, first edition card, it may go for more than a new edition card of "equal" strength.

    WP: What about duplicates? We were playing on the beta accounts today, and you said that our accounts have everything unlocked, and we have one of each card. Going on the auction house, just as an example, the juggernaut seems to be particularly favorable. Is it possible to have two, three or four of the same card in your deck and use that to increase the number of a particular character you can use, or is a deck limited to one card per type?

    KO: No, you pretty much hit right on it. You can vertically stack your cards, if you were to think about it, behind each other, so if your card has only three or four uses in-game and you get a duplicate, you earn upgrades through playing the game. You gain experience playing the different maps that you have, and those upgrades can be applied to stack those cards together. For example, if you have a card, like the juggernaut can only be played once in a game, you can stack a second card behind it so now it can be played twice, and again for a third time. So those upgrades and duplicates are both worthwhile.

    WP: What about value? You mentioned a bit about players creating value, but if you guys are selling cards, doesn't that set the value? How does the value of, say, the juggernaut card get determined when players can still buy new cards from you?

    KO: We actually don't sell individual cards, we only sell booster packs. In each booster pack, you're going to get a random assortment, much like Magic or baseball cards. You know the kind of breakdown of what you're getting, you don't know exactly what's inside, so you're going to get five common, two uncommon, and one rare or ultra-rare card. Those will always be available to you to purchase, but individual cards will only be sold and bought through players individually.

    WP: Obviously BattleForge is a completely online game and digital, and the cards by themselves wouldn't have any real value in a game without the RTS aspect. Have there been any plans or any talk of releasing physical card packs? I know with the online DLC space, retailers have been very persuasive in getting that. In the most recent example, Amazon.com has been selling GTA: The Lost and Damned cards with the DLC code on them. Any thoughts of selling booster card packs with a scratch-off code to enter that card in-game? Anything of the sort, where retailers would have physical cards?

    KO: It's definitely something that's down the line, possibly planned. Obviously digital is our main space, but we would like to have that option open for players hopefully down the line. You will be able to buy a boxed product of BattleForge as well as digital, and it will be, much like you said, a scratch code available to you, so that you can enter in your stuff and be awarded all your entitlements.

    WP: Let's talk about the communication aspect of it. BattleForge uses its own in-game chat system. Why go for a proprietary system rather than using one of the more established backends? There's Microsoft's Games for Windows Live. EA's also a partner in Steam. Why not use Live Messaging or Steam Messaging for authentication? Why roll your own?

    KO: It has to do with our backend. We tie everything in together so that it's kind of kept in one place with the entitlements for your cards. The communication channels stay open, but you can also collaborate that if you want to use Xfire or something like that, you could manage both at the same time. You can put chat to the side and use voice communication or even another text chat tool, if you wanted.

    WP: You mentioned a scratch card on the physical product. Is there going to be a CD, or given that this is an online game, is this going to be one of those enjoyable games where you won't have to worry about copy protection, needing to have the CD in the drive, or only being able to install it in one location?

    KO: Yeah, you got it. We don't have a traditional DRM sequence. It's much like an MMO, where you have to log on online every time, so our authentication process comes from that, so you'll be able to install the game on pretty much as many machines as you want, and you won't have to worry about if your computer has enough installs left.

    WP: There's no offline mode in BattleForge. What if I'm curious about it and want to give it a try? Is there some sort of demo deck that I can sign up for, or you know how in MMO space, World of Warcraft has their 10-day free trial? What does a player who thinks it sounds cool, but isn't too sure about the concept, supposed to do before he plunks down his $50?

    KO: We just went into open beta, so you'll be able to try the game for free before it comes out. We release on March 24, so it'll give you about a month's worth of time to play with the game before you make that choice. Afterward, you'll hopefully have some options to do that going forward, but looking forward now to continuing to drive the beta and launch the game on March 24.

    WP: You've got an in-game marketplace where you can trade BattleForge points, which are your equivalent to real money. When it goes live, what's the policy stance on players trading their cards in more traditional aspects, such as eBay or in person? Is EA trying to ban sales outside of the game? Are they looking at it with a hands-off approach? Are they embracing it? What's the current status or thought on that?

    KO: I don't really have a full answer for that question right now, but we will be offering, like you said, the in-game marketplace. It's fully robust. It actually is like a mini-eBay; you can bid, buy or watch cards as you would on a traditional system like eBay. So we have all that built in for you, so there's no need to leave the game. You can buy a card instantaneously, it gets added to your deck, and you can test it out right then and there without having to leave the game.

    WP: Looking over some of the beta patch notes, there have been a lot of tweaks. The biggest question that comes to mind is, how did you overcome the no build-time aspect? When you play a card, you've essentially got insta-build. What was that like in the early stages of the game, when you were trying to figure this out? Most RTSes don't have that click-and-go aspect.

    KO: It's something that is really exciting when you try it for the first time. All of a sudden, within 20 to 30 seconds, you've got an army to go out and start attacking. A lot of players find that really invigorating and rewarding that they don't have to spend that 10-minute barrier getting into the game and starting off kind of slow and then picking up the pace. It's instant, like you said. We get right to the action, moving forward, and some of the best times are when you see a player put down the juggernaut card for the first time. Their facial expressions are always like, "Wow, this is a great card!" With any other type of top-tier unit, it's fun to watch players get to those things for the first time and experience the fast-paced nature. What I hear from a lot of people all the time is, "I used to play RTS, and now I want to keep playing RTS." That's kind of what we're driving, and we're changing the genre in a way that World of Warcraft did; we're bringing it online and adding all kinds of community features and letting players kind of make it their own.

    WP: You've got four different colored cards that you can assemble into decks. Can you briefly touch on the attributes of the different colors? How does that play into deck-building, whether you're doing a single-color deck or a mixed-color deck?

    KO: We have four different factions: fire, frost, shadow and nature. Each one has its own kind of gameplay abilities. They're not rock-paper-scissors, and they're not one beats another; they're just different kinds of strategies for players to use when they're in the game. Fire's very offensive, so there are a lot of heavy-hitting spells. Frost is defensive, nature's a lot of siege and healing units, and shadow is very risky. There's a lot of soul-stealing strategy going on there, and mixing them together is a key part of the game. With 200 cards, there are a lot of options that you can build together, and the odds of seeing a deck like yours are very, very low. One example would be a traditional deck that we've seen a lot of people make is fire and frost. There are a couple of spells where you can freeze units in place and bring down big, powerful meteor shower spells on those units. That's a very simple, tactical approach, but you can have even up to all four colors if you're feeling bold enough to manage something as difficult as that, but two seems to be the sweet spot. We see a lot of players mixing those around together.

    WP: Obviously, players who have been playing around with the game for a while are going to want a custom assembling of a deck. What about new players who are unsure of what to do or how to go about it? Obviously you sell booster packs and you get a starter set of cards when you buy the game, but are there any pre-made starter decks or any quick deck-builder functionality to get a general-level deck from the cards that you have?

    KO: We actually will be providing you with four made decks when you initially buy the game, so you can definitely use those early on to get a feel for how the cards work together, and you can mix and match them at any time. You can build as many decks as you want, so if you try one and it's not quite right, you can build another one or modify the one you already have, so there's a lot of trial and error in the game. We have a sandbox area, which is fully enabled for players to kind of manage that, so if you want to test out your deck against in a specific scenario or specific enemies, you can do so and learn which part works, which part doesn't, and you can add and drop guys as you see fit.

    WP: Is there anything about the game that we haven't talked about that you wanted to add?

    KO: We are featuring a massive co-op that RTS hasn't seen before. We let up to 12 players play together in co-op missions, which can be quite a bit of fun. Today, you guys have been playing with four- and two-player ones, mixing and matching those, and it's already pretty cool and gets busy. With 12 players, it's really fun. There are some really big goals and boss fights there, and you also earn the best rewards for going and taking those maps down. The higher the difficulty, you'll earn better rewards, and on top of that, we actually offer a pretty cool pre-order. We're giving you one leveled-up unit in each faction if you pre-order the game ahead of time so you can get a little bit of a jumpstart and feature your decks if you want to round some key units in the game.

    WP: What about competitive? Are there any options to go kick your buddy's butt?

    KO: Definitely. If you want to go head-to-head, we have it fully enabled. There'll be a full ranking system and matchmaking. You can do 1v1 and 2v2, and these matches are actually really exciting. We had a bunch of them at New York Comic Con. Brand new players, never seen the game before, come in and waste into each other. It was pretty cool! One of the great things about the game, with the lack of base-building, is these matches are very fast. Typically, they don't last past 15 minutes, and if you're playing with really advanced players, I've been wiped out in as few as three minutes from our QA guys, so you get some really fast-paced action right away, right to the core of RTS. For those advanced players, it's definitely there for head-to-head, and even if you're new to the game, matchmaking will make sure that you're playing against people of equal level.

    EA Phenomic Studio's BattleForge, rated T for Teen, is expected to ship on March 24, 2009 for the PC.

     

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