Bus. Std: Coming Soon — Video Games, in a Big Way

My latest column in Business Standard:

May saw plenty of action on the gaming console front with announcements by Sony, Microsoft and Nintendo about their new products due for launch in the coming months. Chinese online gaming leader Shanda also disclosed plans for its interactive entertainment box. The net result: video gaming is set to go mainstream, and the broader battle for control of the living room is well underway.

An article in the Wall Street Journal summarised the key selling points of each of the three new game consoles: Sony PlayStation 3: Ultrafast, powerful chips for movie-quality graphics and complex videogame environments. Will also be able to stream and download music and movies. Microsoft Xbox 360: Aims to be a hub for all kinds of digital media — movies, music and online content as well as games. Nintendo Revolution: Emphasis on innovative, networked game play and simpler, cheaper game development rather than power and graphics.

Another story in the Wall Street Journal captured the importance of the new generation of consoles: While the PlayStation 3 is seen as more powerful than the Xbox 360, both will have the speed to render complicated computer environments and permit complex game play, game company executives and experts said. As developers become familiar with the new machines, video games should make a dramatic transformation. You’re going to see a much bigger emphasis on physics giving games a much more responsive and interactive world, says Peter Hirschmann, vice president of product development at LucasArts. It’s about creating an authentic kind of world. The last transition to new consoles, about five years ago, brought the gaming world three-dimensional graphics. Experts say photo realism might be the best term to describe the change this time. But it is about more than just advanced graphics, says David Zucker, chief executive of Midway Games Inc. To me, it’s really about artificial intelligence creating environments that react the way they would in real life.

Over the years, the power available on the consoles and the ambitions of the console makers has grown dramatically. Both Sony and Microsoft look at their products as the entry point into the living room with hopes of becoming the multimedia hub and gateway for all entertainment delivery, creating significantly large revenue opportunities.

TIME magazine wrote in a cover story (May 23, 2005) about the Xbox: D.E.L digital entertainment lifestyle is shorthand for the notion that all media movies, music, games, cameras, phones, TVs are becoming digital media, and thats changing how we relate to them and how they relate to one another. Theyre merging into a single integrated, portable, customizable media gestaltAs music and movies become more and more digital, the entertainment business is transforming into a software business, and somebody has to build a master platform on which all the software runs, and the hardware through which it flows. In short, the Xbox 360 is Microsofts Trojan horse to get into peoples homes and be the hub for the emerging digital ecosystem.

This is also what Shanda in China hopes to capitalise on to become an interactive Disney. Forbes wrote recently in a cover story (May 23, 2005): Only 94 million of China’s 1.3 billion people were Internet users at the end of last year, but 330 million have TV sets. A huge chunk of Shanda users are nomads, logging in from Internet cafes.Later this year [Shanda] will unveil a new interactive entertainment box, dubbed the Shanda Station, that will allow TV viewers to go online, play Shanda’s games and buy music and, eventually, films. Developed in part with Intel, the product uses Microsoft software and connects to the Internet over high-speed DSLphone lines. Shanda is considering putting voice and video calling features inside the Shanda Station, which will be sold through electronics chain stores, plus Shanda’s own sales channelsA home audience will also give Shanda a better claim on China’s torrid advertising market.

The video games we are familiar with in India are the ones we play in entertainment arcades or on PCs. Game consoles have traditionally been absent from the Indian market for a simple reason: console companies lose money with every console they sell, and make money as the consumers buy the games. In piracy-ridden markets, the opportunity to sell games disappears leaving only losses from console sales.

Broadband and mobiles offer new models for gaming. Broadband makes possible online gaming, where players can buy pre-paid gaming cards and connect to servers on the Internet to play either by themselves or against others. (There are also many free Internet game sites.) Mobile gaming is also growing rapidly and has emerged as one of the sweet spots for operators and gaming companies for generating additional revenues. Coming soon: networked mobile gaming, where mobile phone users can play against each other.

With a youthful population, gaming has the potential to be a killer app for broadband in India. The low installed base of PCs and the non-availability of consoles in India creates an opportunity for an IP set-top-box, which provides not just a gateway to gaming, but also computing (and Internet access), telecom and television the triple play that the consumer electronics has been talking about for some time. The set-top-box should be able to connect to both a TV and a computer monitor. Such a box will probably need to sell for about Rs 5,000 ($110) and should leverage the Internet for offloading computing and storage. Services would be offered on a subscription basis to home users.

The game is afoot! Are we ready to hunt?

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.