A Weekend at Oculus Connect

I spent this past weekend at Oculus Connect and have just now had the time to process what I saw. For Oculus to go from a humble Kickstarter project a few years ago to a capacity filled conference rife with amazing demos and prototypes by countless developers is mind-boggling. I know I said VR in 2014 is like Mobile in 2002, but the pace of progress is staggering. The maturation path for VR is going to be MUCH quicker. Is it 2005 already?

...and all I got was this lousy t-shirt.

…and all I got was this lousy t-shirt.

As I stated before, Gear VR is the most important wearable platform in the universe. I’ve been developing Gear VR games for a while and am thoroughly convinced this wireless, lightweight platform will have far more reach than VR tethered to your desktop.

The GearVR demo area.

The GearVR demo area.

The apps on display were great, but I even saw a few Gear VR demos from random developers in the hotel hallways that blew away what were officially shown in Samsung’s display area. Developer interest for Gear VR is very high. Once it’s commercially available, a flood of content is soon upon us.

Despite the intense interest in the platform, I spoke to a few desktop and console developers who dismissed Gear VR as a distraction and are ignoring it–which I think is really short-sighted.

It’s true that there may be a division in audiences. Gear VR may be the larger, casual audience while apps built around Oculus’ astounding Crescent Bay platform could be for a highly monetizable market of core enthusiasts. Either route is smart business. Depending on how long you can hold out for customer traction, that is.

Oh, and Crescent Bay…was a revolution. There’s probably not much more to be said about it that hasn’t already–but the ridiculous momentum behind Oculus’ path from the DK1 to Crescent Bay makes me question the competition. Oculus has hired all of the smartest people I know and have billions of dollars to spend on VR R&D–which is their main business, not a side project. Will competitors like Sony really commit enough resources to compete with the relentless pace of Oculus’ progress?

VR in 2014 = Mobile Games in 2002?

The first VRLA Meetup last week was awesome.  The performance capture studio at Digital Domain in Marina Del Rey hosted a series of impressive demos as well as live presentations on the current state and future of VR applications.  The venue could only hold 100 people, but 300 registered.  Mobs of interested VR consumers, developers, and producers had to be turned away at the door.

VRLA winding down. (Photo via John Root)

VRLA winding down. (Photo via John Root)

After this event, it struck me that VR in 2014 is reminiscent of mobile in the early 2000s.  Back in 2002 I attended the first GDC Mobile Gaming Summit.  It was at a jam-packed lecture hall in San Jose where presenters demoed the latest in technology and gave their thoughts on where the industry was heading.

At that point, mobile phone hardware was clunky and primitive.  Most phones were still sporting 80×50 monochrome screens with maybe 100k of RAM available for programs to run.  Even if you were ‘lucky’ enough to have one of these devices, it was nearly impossible to figure out how to download games.

In 2002 almost nobody knew how to monetize mobile games.  The hardware could barely run games anyway.  Yet, these people knew it was going to be a big deal.  The room was filled with excitement and anything could happen.

Since then, mobile gaming has created a huge new audience for games that has disrupted the traditional game industry, forcing a shift in how console games are designed and delivered.  Now mobile gaming is obvious, but back in 2002 there were many naysayers–despite the fact that in Japan iMode had been successfully delivering mobile games since the late ‘90s.

To me, VR in its current state feels the same way.  The hardware is huge and clumsy.  There is some precedent for VR applications stretching way back to the 1990s with Virtuality and Battletech Centers.  And there’s a lot of consumer interest–evidenced by all the successful VR and AR hardware kickstarters in addition to the attendance of VRLA this month.

The top question on everyone’s mind is “how do I make money in VR?”  This was the same question asked by many about mobile in 2002.  Back then, the path was more obvious.  Qualcomm’s BREW and Japan’s iMode already had established billing models for mobile content.  Right now, it’s unknown who will pay for VR experiences and what form they will take. A lot of this is a hardware question. Nobody really knows what the iPhone of wearable gaming will be like–but when it arrives, it will be revolutionary.

These definitely are uncertain and exciting times for this new medium–which makes it much more fun to develop for than established platforms.

From Bits to Atoms: Creating A Game In The Physical World

Some of you may recall last year’s post about 3D printing and my general disappointment with consumer-grade additive manufacturing technology. This was the start of my year-long quest to turn bits into atoms. Since that time there has been much progress in the technology and I’ve learned a lot about manufacturing. But first, a little about why I’m doing this, and my new project titled: Ether Drift.

Ether Drift AR App

A little over a year ago, I met a small team of developers who had a jaw-dropping trailer for a property they tried to get funded as a AAA console game. After failing to get the game off the ground it was mothballed until I accidentally saw their video one fateful afternoon.

With the incredible success of wargaming miniatures and miniature-based board game campaigns on Kickstarter, I thought one way to launch this awesome concept would be to turn the existing game assets into figurines. These toys would work with an augmented reality app that introduces the world and the characters as well as light gameplay elements. This would be a way to gauge interest in the property before going ahead with a full game production.

A lot of this was based on my erroneous assumption that I could just 3D print game models and ship them as toys. I really knew nothing about manufacturing. Vague memories of Ed Fries’ 3D printing service that made figurines out of World of Warcraft avatars guided my first steps.

3D printers are great prototyping tools. Still, printing the existing game model took over 20 hours and cost hundreds of dollars in materials and machine time. Plus, 3D prints are fragile and require a lot of hand-finishing to smooth out. When manufacturing in quantity, you need to go back to old-school molding.

You can 3D print just about any shape, but molding and casting has strict limitations. You have to minimize undercut by breaking the model up into smaller pieces that can be molded and assembled. The game model I printed out was way too complicated to be broken down into a manageable set of parts.

Most of these little bits on the back and underside would have to be individual molded parts to be re-assembled later--An expensive process!

Most of these little bits on the back and underside would have to be individual molded parts to be re-assembled later–An expensive process!

So I scrapped the idea of using an existing game property. Instead, I developed an entirely new production process. I now create new characters from scratch that are designed to be molded. This starts as a high detail 3D model that is printed out in parts that molds are made from. Then, I have that 3D model turned into something that can be textured and rigged for Unity3D. There are some sacrifices made in character design since the more pieces there are, the more expensive it is to manufacture. Same goes for the painting process–the more detailed the game texture is, the more costly it becomes to duplicate in paint on a plastic toy.

We're working on getting a simple paint job that matches the in-game texture.

We’re working on getting a simple paint job that matches the in-game texture.

So, what is Ether Drift? In short: it’s Skylanders for nerds. I love the concept of Skylanders–but, grown adult geeks like toys too. The first version of this project features a limited set of figures and an augmented reality companion app.

The app uses augmented reality trading cards packed with each figure to display your toy in real-time 3D as well as allowing you to use your characters with a simple card battle game. I’m using Qualcomm’s Vuforia for this feature–the gold standard in AR.

The app lets you add characters to your collection via a unique code on the card. These characters will be available in the eventual Ether Drift game, as well as others. I’ve secured a deal to have these characters available in at least one other game.

If you are building a new IP today, it’s extremely important to think about your physical goods strategy. Smart indies have already figured this out. The workflow I created for physical to digital can be applied to any IP, but planning it in advance can make the process much simpler.

In essence, I’m financing the development of a new IP by selling individual assets as toys while it is being built. For me, it’s also a throwback to the days before everything was licensed from movies or comic books and toy store shelves were stocked with all kinds of crazy stuff. Will it work? We’ll see next month! I am planning a Kickstarter for the first series in mid-March. Stay Tuned to the Ether Drift site, Facebook page, or Twitter account. Selling atoms instead of bits is totally new ground for me. I’m open to all feedback on the project, as well as people who want to collaborate.

How to survive the mobile gaming apocalypse

I was listening to the latest Walled Garden podcast and towards the end they stopped just short of stating what many developers I talk to have been saying–mobile gaming is dead.

Ok, not actually dead. After all, mobile gaming revenue is higher than it’s ever been, and mobile consumption of everything is eating the planet. However, mobile gaming is completely dead as a business model for independent developers and undercapitalized startups.

IAP has become so dominant that there’s really only one somewhat reproducible way to make money in the AppStore: make a hamster wheel f2p game in a handful of established genres and spend tens of thousands of dollars a day on user acquisition to drive traffic to it. Despite many bold experiments, the charts increasingly bear this out.

Republique

This means that some companies with top charting mobile games aren’t actually making a profit as UA costs can eat up most of the revenue. Surely this will produce a shakeout and consolidation in 2014. This is similar to what happened to Facebook games circa 2010 causing a mass exodus to mobile.

Now that mobile is dead, where should you escape to? There are several options.

PC

The PC, and more specifically Steam, remains the platform of choice for those who actually want to charge money for content. There’s a large market for premium games and Steam has loosened their gate with the advent of Greenlight. Some prominent developers have been abandoning mobile for PC with their new projects. Despite PC sales declining in the face of tablets, it makes sense. This is where the paying customers are.

Consoles

A lot has been written here about the impending demise of consoles, but Sony and Microsoft managed to change up their business model and product strategy enough to have early success with both the PS4 and XBOX One. One of the big changes has been the thawing of the gated ecosystem and allowing independent developers to self-publish. Oh yeah, and on the Wii U also.

Next generation console owners are starved for content. There will be many independent successes over the next few years before the channel becomes completely saturated.

VR

On one hand VR is merely a peripheral for existing games, on the other it’s part of an entirely new category of wearable computing and an emerging platform. Oculus Rift is the clear leader with a huge round of investment and development kits widespread. However a glut of VR headsets is on the horizon.

Oculus is building an ecosystem out of their device, but VR content can be distributed through any PC gaming channel. Although, supporting every single headset may be a nightmare for developers–isn’t it time for some kind of standard VR API?

Board games

Board games are a cottage industry yet a hot category on Kickstarter. As an example, Sandy Peteresen’s Cuthulu World Combat iOS game Kickstarter failed miserably, but when re-pitched as a board game, it blew past its funding goal. Going from digital to physical presents a lot of new challenges for developers, but does have a dedicated fan base of paying customers. Plus, you can’t pirate a board game!

Facebook / Web

Facebook games ‘died’ in 2010, but are ironically becoming an increasingly common alternative platform for mobile developers. Especially if you have a working web client already, why not put it on Facebook? The problem is the audience is decidedly non-hardcore. Facebook games can still make some money, but for a very specific audience. However, for hardcore games, the open web still remains a viable place to find an audience of paying gamers. Kongregate proves this.

What needs to change in mobile?

The supremacy of f2p and the very few options for user acquisition make the momentum towards free and the companies with enough money to compete in the mobile UA wars insurmountable. Apple could make some changes to the App Store to help support premium games and other alternative business models, however there really isn’t any incentive to do so–Either way, Apple sells phones. It’s difficult to foresee anything but the continuing dominance of f2p and mega-publishers on mobile in 2014. If you have a ton of cash and resources, solving this problem is hard, and thus very lucrative. For the rest of us, plan your strategy accordingly.

Game Developers: Don’t Compete, Disrupt.

In the old boxed retail model of games, publishers often waited for an “off year” to capture a hit title’s audience. For instance, a publisher would release a competing open world game the year after a Grand Theft Auto installment to monetize GTA fans who are looking for a similar experience. This successful strategy spawned many hit original properties despite its “fast follow” basis.

Today’s hit games such as League of Legends are constantly updated services and thus never have an “off year.” As discussed in a previous post, we’re in a winner-take-all game economy. Top games consume all of the time and money of their players.

It’s exceedingly expensive to go toe-to-toe with a leading game-as-a-service. Not only do you have to compete with the top game’s deluge of content and social network, but you must overcome the switching cost users bear to move to a new game. A player could have thousands of dollars invested in his League of Legends character. Now you want him to start all over on your new, unproven MOBA?

Competition is possible, but only with deep pockets. The only company posing a distant threat to League of Legends is Valve with DOTA2. Not only have they made an excellent game, but are lavishing massive development and marketing budgets to compete with the frontrunner.

What can you do if you’re not among the most financially successful developers in the world? Don’t compete, disrupt.

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As described in my bible, Clayton Christensen’s Innovator’s Dilemma, disruptive innovation typically arrives in a form that’s lower quality than the established player, but cheaper or more convenient to use for a low-end customer.

This low end customer is not as profitable, and thus not very interesting to big companies. The disruptive product’s quality improves steadily. By the time the threat is noticed by the incumbent, it’s too late. The disruptive competitor is attracting the old guard’s high-end customers.

A modern example might be what the tablet did to the netbook and is now apparently doing to notebooks.

How does one develop a game disruptive to the established players? Is it even possible to do so? After all, there are flaws when you apply the low-end disruption theory to consumer products. Let’s look at few vectors of disruption and how they may work in games.

Cost

World of Warcraft’s plunging subscriber numbers may be showing that Blizzard has fallen victim to Innovator’s Dilemma in the form of free2play competition.

F2p originally meant lower quality, lower commitment, and (supposedly) cheaper-to-play MMOs. Now, all major releases from Western companies inevitably become f2p. The quality bar has risen to where it’s possible to match or surpass the incumbent combined with a dramatically different business model.

Convenience

How about making a game more convenient to access? One way developers are trying is by bringing established PC f2p genres to mobile. The idea is that by making a MOBA simple to play on a tablet, it’s possible to capture a segment of the desktop customer. This ignores the fact that tablet-owning hardcore LoL players are still looking for an experience uniquely crafted for mobile–Not simply a long-session MOBA plopped into an iPad.

The problem when applying business model advice to the games industry is that most are based around solving a problem. The only problem games (and entertainment in general) may solve is boredom. When you aren’t solving a problem or “pain point”, you are selling based on other emotional qualities such a branding or user experience.

Lessons can be applied–but perhaps not literally. Which is fine. Slavishly following any business model or development methodology ends up in the creation of a process cult.

Facebook: The Next Generation Game Publisher

Upon the eve of Casual Connect one of the big announcements was Facebook becoming a mobile games publisher. Much like how the launch of Facebook’s mobile ad network went largely unnoticed only to become a huge deal later, I suspect we may see this move in a similar light in the near future.

View from the podium before my Casual Connect event.

View from the podium before my Casual Connect event.

A social network like Facebook directly publishing apps isn’t without precedent. Facebook took their lead from Asian mobile social networks like Japan’s LINE and Korea’s Kakao Talk. Both extended their messaging services to include mobile games that use their respective social network for viral reach in ways similar to the bad old days of Farmville spam.

Both LINE and Kakao Talk have been able to send games to the top of the charts in their native countries netting big revenue. With increasing adoption of messaging applications in the West, this trend may continue here.

In the boxed software era you had few options other than to go through a publisher for distribution. Publishers had guaranteed shelf space at national retailers. Now that software doesn’t exist in boxes, there’s no need for shelves. As we’ve discussed before, users are the new shelf space.

Mobile publishers like GREE and DeNA pride themselves on having a huge audience to advertise games to. This usually involves blowing lots of money buying users through ads–many of which show up on Facebook. Pretty much this is the only service mobile publishers provide.

If user acquisition is all a mobile game publisher does, why not cut out the middleman?

Facebook can acquire users much cheaper than GREE or DeNA–they own the network. In fact, this is a major reason why GREE and DeNA make so much money in Japan. Especially in the feature phone era, they operated mobile social networks they also published their own games on.

Perhaps Facebook did the math and figured out that a cut of an app’s revenue in exchange for premium placement of ads is a profitable exchange. Instead of having an audience of 30-40 million users as DeNA’s mobage network does, Facebook has over 800 million mobile users.

In the past, Facebook has proven they can make a game popular–at least for a short time. It’s up for the game developer to create a game that lasts. Given the Chaotic Evil alignment of modern game publishers, I’d much rather make this deal with Facebook* than with one of them.

* Oh, I’d take this deal with Twitter too. They’ve been able to get Vine to the top of the App Store charts all year. Imagine what they could do if they published mobile games!

Paymium: Walking Away From Free2Play

Many small mobile game developers I talk with are considering abandoning pure Free2Play in favor of paid apps with in-app-purchases–AKA “paymium”. A great example of this is on the latest Walled Garden podcast featuring Plague Inc. creator, James Vaughan.

At first, Plague Inc. was a simple premium app. After quickly building a rabid following, he added purchasable items that can otherwise be earned in-game. This has been an extremely successful business model for Plague, Inc. and many other top games from the likes of Rovio and Halfbrick.

James’ sound reasoning for his use of Paymium is that he dislikes games purely designed around IAP and thus made a game he wanted to play. Making small games is a very personal process. If you don’t like what you’re making it’s not going to be good.

Another reason developers are considering this approach is that the top free download charts on iOS are completely bought and sold. If you look at any game in the top 10 free downloads, it’s safe to assume that spot is paid for with heavy advertising spends along with other somewhat underhanded tactics. The latter may get you bounced from the App Store, but it doesn’t stop most publishers from finding a way.

The paid charts are theoretically more honest. Because you have to tack on the price of the app along with whatever you pay for guaranteed downloads, paid chart manipulation is more expensive. Yet, this may still be common considering how large advertising budgets are for the top mobile games.

A great new paymium example is Contra: Evolution, a clever mobile remake of Konami’s NES classic from PunchBox. The game costs 99 cents on iPhone and $2.99 on iPad. Both versions feature a plethora of in-app-purchases.

Contra has been floating around the top of the paid charts for a while–although still scraping the bottom of the top grossing. This illustrates the depressing reality of premium apps. Even a top 5 paid download barely registers on the grossing charts. Yet, any indie developer would kill for the type of revenue Contra is making.

What did Contra do right? The following is a bunch of hand-wavey, rear-view-mirror driving. It could all be true. Or the game’s success could purely be fictional and entirely paid for by outrageous ad spends and thus this entire article is nonsense. Anyway…

First, there’s the brand. Brands generally aren’t worth much in mobile. If you look at the top apps, the overwhelming majority are original IPs. Yet, Contra has strong awareness among retro gaming enthusiasts. Some brands matter in mobile.

Secondly, the game is good. Over a decade since the last reboot, PunchBox went to the origins of the series with a remake of a classic that is competitive with current mobile games. As we’ve seen in Predictably Irrational, it’s extremely difficult for a paid product to compete against free at any quality level. PunchBox pulled it off

Finally, people who have paid for your app are already invested. Theoretically, they are more likely to spend again. Contra’s unimpressive top grossing rank may not actually prove this out. However, mega-hits like Angry Birds and Jetpack Joyride have used paymium to great success. Contra’s low grossing rank may be due to poor monetization design instead of a flawed model.

A few years ago I would have laughed if you suggested launching a premium app. Now I’m not so sure. The new rule is, there is no rule about monetization. F2P isn’t one size fits all–but, how do you actually find what does fit?