Game.not

From your UK correspondent...

(OK, one of your two UK correspondents).

An article in gameindustry.biz today announces the demise of Game.net, formerly known as Barrysworld.

Barrysworld started out as a game hosting service along the lines of BT's Wireplay. During the dot com boom, Wireplay merged with games-by-mail retail company ICE to form Gameplay, which did indeed go boom during the dot com bust. Barrysworld was bought by High Street retail chain Game (now merged with Electronic Boutique in the UK) and survived, renamed as Game.net.

The business model for Gameplay and Game.net was the same: provide games servers for free or at low prices, in order to build a community who will then naturally buy their games from your online store. They won't check out other stores for lower prices because ... er ... well that's kinda where the model broke down. If you want to make profits from selling games mail order to hard-core gamers, you can only do it by undercutting the prices of your competitors. You can't do it if you have to fund a farm of high-spec games servers too, and players won't pay high fees to rent those servers when they can play more cheaply elsewhere (eg. using their own broadband PC as a server).

Why am I mentioning this here?

Because publishers and VCs will use the death of Game.net as evidence that online games don't make money. Ignorance among UK sources of finance is scuh that the Gameindustry.biz article's careful use of the words "online gaming services for standard PC multiplayer games" may as well not have the middle 6 words. New virtual worlds, being "online games", will thus become even harder to finance in the UK. If the people who actually sell games in their hundreds of shops can't make a profit from them, who can?

Someone tell me I'm being too pessimistic, please...

Comments

[Ren]

1.

Richard > Someone tell me I'm being too pessimistic, please...

I’m not sure your being too pessimistic but I’m also not sure that your being pessimistic for the right reasons, and this is why..

>Because publishers and VCs will use the death of Game.net as evidence that online games don't make money.

We obviously have different experiences of VC’s / funding sources – but may be that’s because we sit on the side of the fence or may be we’ve just had different experiences.

I tend to be on the side with the money either VCs or more extensively with Telco’s – actually I was part of the bit of BT that set up WirePlay (though I was looking at different ‘applications’ (yes a game is just another application if you’re a telco)). And I suppose generally what I have hunted for is companies that need cash, that look like they might provide a return and who some how have synergy with other investments or portfolio services. Oh and if it’s something that my competitors don’t have or something that will give me some market image then that helps too.

So if I was looking at the games market as an investment opportunity (which I have a bit in the past) then I don’t think I’d be to bothered about the fact that one part of it that has a passing resemblance to another did not make money coz of a broken business model. What would bother me is if that was indicative of market fundamentals – is the target demographic going to other entertainment sectors ? That sort of thing.

What I want to know (and I really do want to know any and all off list email are more then welcome) is does the MMO business make money – if so how much and how can I leverage that to make me some money too.

Certainly looking at the PC \ Console games as a whole I like the look of MMOs as they have on-going revenues which most shrink wrap titles done have. But the problem that they share is that they have high upfront costs and the market seems very similar to the film market i.e. the old adage ‘no one knows anything’ seems to apply, that is there is no sure way at the outset of a project to determine a hit from a miss so you need to have a big chunk of cash and invest widely, oh, that would be in publishers with a good track record then.

Again I have not looked at data for some time. But to me attractive parts of the games sector are still much more around _trivial_ games that hit a wider demographic and have much lower upfront costs.

Having said all this, the idea of a VC taking a supercial look at a complex market. A dumb VC, it couldn’t happen, surely, with that much money to look after they’d be sensible…

Ren
www.renreynolds.com

[Jeff Cole]

2.

Richard: "Ignorance among UK sources of finance is scuh that the Gameindustry.biz article's careful use of the words ..."

Do not fret. Just provide them a copy of the Themis report and it's not-so-careful use of words (or, more careful, depending on perspective). Hell, it's got the blessing of an "outside" economist, so that 2014 fairytale must be reasonable.

Granted, my opinion is based upon the foreward and seection 5.5, but if the analysis in the rest of the document is equally shallow, I mean optimistic, you should be able to easily sell the collective euphoria.

Jeff Cole

[magicback]

3.

I don't know about VCs, but if I am a VC I would think like the VCs who invested in There and Second Life. I would think about creating a VW to foster a secondary market for virtual goods.

I think you're too pessimistic. We may already have a gone through the MMORPG boom-bust phase, so we may be back on a healthy growth path.

Frank

[Richard Bartle]

4.

Jeff Cole>Do not fret. Just provide them a copy of the Themis report and it's not-so-careful use of words (or, more careful, depending on perspective). Hell, it's got the blessing of an "outside" economist, so that 2014 fairytale must be reasonable.

As one of the few people on this blog who has actually read the Themis Report I can comment on this. However, because I'm a Themis consultant (which is why I got to read the report) I'd have a conflict of interests were I to do so, so I can't.

Richard

[Daniel Manachi]

5.

Jeff Cole:
"Do not fret. Just provide them a copy of the Themis report and it's not-so-careful use of words (or, more careful, depending on perspective). Hell, it's got the blessing of an "outside" economist, so that 2014 fairytale must be reasonable.

Granted, my opinion is based upon the foreward and seection 5.5, but if the analysis in the rest of the document is equally shallow, I mean optimistic, you should be able to easily sell the collective euphoria."

I wasn't sure if you knew what a Delphi survey was, so figured I'd provide you with a few links.

http://www.coe.uh.edu/~smcneil/delphi.htm

http://www.ibiblio.org/fosphost/IFHOSP/ExplainDelphi/whatdelphi.htm

Best,

Daniel Manachi

[Jeff Cole]

6.

Rishcard: I didn't expect you would. If you are that concerned about ignorant VC, you should consider the report. Shrug.

Daniel: I was indeed aware of Delphi surveys. Let me underscore my skepticism is with respect to the analysis.

Ted's foreward reads more like the "Investment Opportunity" section of a business plan than the foreward to an objective "report."

I certainly hope that the everything's-coming-up-roses analysis represents the worst of it. I just doubt it.

Jeff Cole