A couple digital distribution points of interest

Sighted today, two different - but related - items on digital distribution:

1. Amazon noted today that Kindle sales of books have surpassed hardcover.

"While our hardcover sales continue to grow, the Kindle format has now overtaken the hardcover format. Amazon.com customers now purchase more Kindle books than hardcover books--astonishing when you consider that we've been selling hardcover books for 15 years, and Kindle books for 33 months "Bezos says

Different than games you say? High price premium at launch - check, hit driven - check, most titles consumed once - check, atoms resellable buts bits are not - check, etc.

Still think people won't give up their shiny DVD?

2. Gamasutra had this story on Gamestop looks to Netflix for Online Business Cues.

Of course the last retailer with a boat-anchor of retail outlets that looked to Netflix for cues was Blockbuster, and it didn't work out for them so well. So good luck to you, Gamestop!

And the money quote:

"...The world won't be all digital tomorrow, even though that's what people are claiming. In this business, users still want physical content." said CEO Paul Raines.

Hey Paul. See item #1 above. KTHXBAI!

A couple VC Gems

I have a few of the better (I think they are, anyway) VC blogs on my feed reader, and just recently did some catching up.

A few snippets caught my eye:

1. Ben Horowitz, on "How we picked our first cloud investment" makes this point:

...the first attempts to build applications in the cloud from companies such as Corio simply fork-lifted the leading on premise software and moved it into the hosted environment. While this sounded like a good idea to many VCs at the time, it turned out to miss important details and advantages of the cloud...

Reading this should spin your gears if you are thinking lately about OnLive, Gaikai et al. (And thinking about it further, you might see why I was saying early on that MMOs are a really good customer for these services - Already architected for the cloud, just the network stack sits at a different point in the pipeline). Regardless, key point is that content that is ported is always second-rate compared to content authored from the outset for a platform.

2. Lightspeed Venture Partners has this post (2 months old now) estimating Zynga revenue at ~240M for 2010, down slightly from 2009.

a) It's a fairly thorough model, and they have the spreadsheet shared on google docs if you want to tinker with it.

b) The graph of Zynga's revenue over time sure made me think of Dave Edery's inevitable misery pitch.

Anyhow, something to noodle on.

5 Things I'm Thinking Right Now

I've been very busy at work. Other than taking some time to write a few notes up about E3, the blog's taken a back seat right now.

However, Alice did a post on her current thoughts that I thought might make a nifty meme, so here are 5 Things I'm Thinking Right Now. (What are 5 things YOU are thinking?)

1. The time is right for a explosion of funding models. Over the past few years, we've seen things like funding disaggregated from the other facets of publishing, we've seen government grants, Indiefund, Kickstarter, and others. But when on one hand projects can raise $10-20k on Kickstarter based only on a good pitch - and large projects can do retail pre-orders for millions, months in advance (GoW3 went on pre-sale *10* months before release!!), it seems there's a lot of play in the middle. If gamers are willing to part with $60 6+ months in advance just to ensure they get a copy on release day, are they willing to part with $100 a year in advance if it gets them an advanced copy and possible repayment from the developer? Seems there's a lot of room for play (and opportunity) in between these two extremes. (Right now pre-orders are rewarded, if at all, with a piece of DLC. Couldn't they come with a royalty or dividend check?)
2. There's a new wave of growth coming. While down at E3, I ran into a number of industry veteran friends who've quit posts at large companies to pursue their indie interests. Then in the few weeks since E3, I've had four different friends (from very different areas of the tech industry) call me for feedback on their startup pitches. Maybe this is just symptomatic of post-recession exuberance? I don't know, but I put it to a friend that I felt like I was seeing a bunch of surfers waiting on the right wave. I'm suddenly seeing a bunch of people paddling hard to catch a wave I don't yet see, but there must be one coming.
3. An explosion of graphics capabilities is good and bad for game devs. This deserves a much longer post, but the short version goes like this: People are becoming accustomed to sexy UI (iphone, ipad, win7, consoles - all doing UI leveraging GPU transistors to do visuals). As this trend continues, graphics vendors are going to be putting more graphics power into devices across the board (good for devs) but the 'top customer' dictating the requirements for these things is not always going to be the game developer (bad for devs?) and there will be wide variance in solutions (not just performance, sometimes DIFFERENT - like the stereo3D gap I mentioned in my E3 post).
4. We are vastly underestimating the 'next wave of social'. Alice touched on this in her post, talking about how current social network games are only touching the basic 'slot machine/food pellet' buttons in folks. However, here are a couple things to think about: (a) There's a lot of money being poured into chasing Zynga's tail lights. Some companies will pour that into game design, production quality, and technical innovation - all of which will explode genres and offerings. (b) The console vendors have all learned a lot from MS's effort with Live. Last round we got a very basic stab at social with friends list, acheivements, messages, multiplayer, etc. Remember, this was a console shipped in 2005 and shipped before that. Pre-facebook-hysteria. The set of capabilities to trump that next time around has to be a pretty high bar. OnLive had some early glimpses of this at E3, but you could riff on this one all day. Forget Gamerscore and MS Points. Give me GamerWhuffie.
5. This time the phone is for real. By that I mean that we've been hearing for years that "The phone will be the leading device connecting people to the Internet". To which many have replied, "well sure, if you count texting, or very basic services, or voip". The reality is that Apple reset everyone on what high-end phones are expected to do, and low-end phones will follow in short order. First-world, money-spending consumers are going to use phones more than PCs in many cases, and so there's a real market there. The Apple vs Android will look like a blip when we look at the bigger picture years from now.

OK, back to work now!

A belated E3 2010 post

E3's been over a little while, but work's been *crazy* lately so I'm only now getting around to posting some thoughts.

The show got big again this year. Not much sign of recession other than on the faces of some friends who's studios either were casualties or are still standing after a grueling year. Signs seem to point to things being up though, and that's a good thing.

Short version of E3 was absolutely nailed by Penny Arcade and by Zero Punctuation:

So, E3 in short form:

Motion Control: MS and Sony *finally* show up with their Wiimote-killers. Sony's is a Wiimote with better accuracy (camera input to add some multiplayer capabilities) and MS's is the more ambitious Kinect. Why did it take so long? Because both companies went through the Five stages of competitor acceptance: "It'll never work", "It's a fad", "It's a novelty that appeals to a niche", "well, they'll never beat our installed base numbers", and finally "holy crap, we need to build us a wiimote!". Add product development on top of that, and you get five years of Nintendo first-mover advantage.

Ironically, there was a bit of ho-hum as maybe people are tiring of Wii style motion control and were hoping for dramatically better but didn't see it? At the very least, the hype has subsided from "In the future all games will be played this way!" to "It's good for some types of games"

Stereo3D: Sony's doing stereo on TVs with glasses, tapping their performance headroom to engage with developers and to the full cinematic immersive thing. Nintendo on the other hand impressed folks with the 3DS, which is using a lenticular filter/display to do no-glasses, single-player viewing.

One interesting point that I haven't heard anyone talk about (which I should do a longer post on at some point) is that the type of content that will lend itself to the handheld Stereo3D (DS, plus people are talking about doing this on phones, etc) will likely be different content. Rather than think stereo3D movies like Avatar, think macro-lens style close-ups of small objects.

I'll have to think about what that means for developers. Also, it makes me wonder where on the spectrum PCs will end up. Are they single viewer devices?

Onlive: There stuff looked good. Lots of interesting features that are one-up over consoles (e.g. jump in/out of spectator mode). Of course, the real question is how it runs in the field.

Favorite game of the show: A toss up between Pacman: Battle Royale (Warlords meets Pacman for a 4-player competitive arcade deathmatch), and Miegakure, a brain-twisting FOUR-dimensional puzzle-platformer. There’s a video here, but you won’t get it until you play it (and even then, it’s doubtful!)

Best graphics of the show: Many people claimed PS3’s Killzone 3, but I thought that was mainly cinematics and presentation. Personally, I thought Mafia 2 on PC was outstanding. I heard that Id’s Rage was awesome as well, but didn’t get to see it.

Best Game that wasn’t on the showfloor: I went to the Indiecade BBQ on Thursday and got to playtest Chris Hecker’s SpyParty , and even this early it’s a temple-sweating, nail-biter, multiplayer game.

Best Random Art Encounter: I was walking down the street after dinner and happened upon The Vader Project