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19

Jun

Game Developers Need More Than “Cool” Factor

Infinity Blade for iPhone

Every day I take the train into New York, I see more and more people with their heads bent over some handheld device, playing games. This is not just an anecdotal phenomenon: global video game sales were $52 billion in 2011, and DFC Intelligence projects that number is expected to increase to over $70 billion in 2017. Compare this to music, which only generated $16.6 billion worldwide in 2011, and it will give you an idea of where consumers increasingly are investing their entertainment dollars.

And as my fellow commuters can attest, what makes this trend even more interesting is the rapid growth of online gaming, including mobile games for phones and tablets. This means a glut of gaming products have hit the market, and you need more than a good idea to be successful. When DEV evaluates companies for our portfolio, there are the things we always look for, such as a solid team with a great track record and an innovative concept that can scale as a business. For gaming, we are focused on several issues that we think increase the likelihood of success: marketing strategy, unique design for the platform, immersive experience, and a vision for a larger business beyond the first releases.

Getting Noticed

Every month, General Assembly in New York hosts a Gaming Meet-Up that features some of the best independent developers in the city. Typically there are one or two demos each night that blow everyone’s minds. These are invariably casual games that were developed for iOS by a small team and are on their way to an Apple App Store launch. So far, so good, but then comes the hard part: how to let people know that a great game has arrived.

This is not a minor issue. Each year, the App Store ingests hundreds of thousands of new entries. Only a handful are highlighted in the store, and even fewer go on to reach a mass audience. In fact, most never see the light of day, which is why over 250,000 app store titles are currently dormant, meaning they have had virtually no activity for an extended period of time. So assuming the game is great to start with, “getting noticed” is the single most important barrier that initially separates failure from success.

There are a variety of marketing strategies to tip the scales in your favor, and we look at these closely when evaluating game concepts. For example, you can attach your game to a known brand. This could be a physical product, a movie, or a celebrity. However, this approach must be managed carefully so the game doesn’t just become an incidental component of a much larger brand marketing campaign. If your game is topical, you can tap a hot news event or trend that is getting broad coverage in the media. Whatever the approach, the game concept must be tightly coupled with the method of marketing it.

Designing for the Medium

Console games use a variety of controllers such as handheld devices, mock guitars, steering wheels, or motion sensors and are usually displayed on a big screen with a sound system. The player is in a particular location, usually seated at a distance from the screen. The menus, navigation, and graphic detail are all optimized to support the gameplay setting. Console game developers have consciously designed their games from the ground up to be consumed in a particular manner.

Tablets are emerging as the new medium of choice for gaming. It is projected that tablets will outsell laptops by 2015, and gaming is already established as the most popular tablet activity. The latest tablets have all the right ingredients for gaming: very high resolution displays, significant storage, and computing power that rivals a game console. We can expect to see continued rapid advancements in tablet technology as consumer investment in the medium grows.

Just as console game developers meticulously built products for the console setting, the next generation of tablet game developers must design for their medium. They have an enviable toolset to work with that includes a portable form factor, GPS, touchscreen navigation, a camera, a microphone and connectivity through Wi-Fi and wireless. The innovative game designs will take full advantage of these features.

Immersing Your Audience

Players of games like Bioshock Infinite or Far Cry 3 are used to mind-numbing graphics and a gameplay experience that draws them so deeply into another world that they become oblivious to their real-life surroundings. The best games have complex storylines with a variety of missions that engage players and hold their interest for hours. It is the anticipation of this experience that prompted gamers to line up and spend $400 million on Call of Duty in the first 24 hours of its release.

On the other hand, casual games currently dominate tablets and phones. They are well-suited to filling free moments using a portable device when you are on the go. It is no accident that titles such as Angry Birds and Words with Friends have become so popular, and they will continue to fill an important niche.  But as the universe of tablets expands, the bigger opportunity may be in highly produced games that are deeply immersive and capitalize on the unique features of a mobile device.

For the most part, casual games have moved to the freemium model. A baseline game is offered for free to encourage downloading of the app. The player can then add premium features for a small fee. However, little has been done so far to build a business around console-style games for the tablet. There are a few initial entries such as Infinity Blade, but the real explosion in triple-A games is just ahead of us. This will change the economics of tablet gaming. Players may not be willing to pay the $60 they shell out for console games, but $10 should be a reasonable price point for eight hours of immersive tablet gameplay.

Building a Business

Everyone has a game-changing app that, with a little investment, will bring riches. Well, maybe not everyone, but you get my point. A business can have an app but rarely is a single app a business. Ask Rovio how many games fell flat before they scored a hit with Angry Birds. They were formed as a mobile game studio in 2003, but the Angry Birds phenomenon didn’t occur until 2010, so the answer is, “a lot!” Now, Rovio is a multi-dimensional media company that includes broadcast media, merchandising, and publishing.

The successful players in gaming will have a broader strategy than developing an individual app or game. They will have a comprehensive business concept that targets a specific audience, type of game, production method, revenue model, and marketing approach. They will build a company that over time carves out an identifiable niche and supports both the hits and misses.

It is also worth noting that being in the game business doesn’t just mean forming a game studio and developing a roster of game titles. There is a wide assortment of businesses that are key components of the gaming ecosystem from development  and promotional tools to ecommerce and advertising  platforms. In the gold rush years of Red Dead Redemption, it was the purveyors of mining tools that consistently made all the money.

A great game experience is just the start. When companies are ready for outside capital, they will need to prove they have more than the “cool” factor. Marketing strategy, design sensibility for both the platform and the user experience, and a vision for growth are all things DEV sees as critical elements for success. How are you going to grab the attention of those MTA commuters or the kids at Game Stop the first time, and then maintain that engagement through the next release, and the next, and the next, and the next?

- Alan McGlade

02

May

DEV – Why Here, Why Now


Today we officially opened the doors of DEV (Digital Entertainment Ventures). Given all the disruption in one of New York’s core industries, media and entertainment, and the continued focus on Silicon Valley as the place for new ideas, our move begs the question, “Why here? and Why now?” Because with great disruption comes great opportunity and New York, the city of reinvention, is leading the way.

It is difficult to overstate the radical transformation that is underway in the entertainment and media industries.  Music, film, TV, videogames, newspapers and magazines have all been profoundly affected by the explosion of new devices that enable the consumption of digital media. 

In the music industry, a generation has grown up acquiring and listening to music through digital downloads and streaming as CD sales rapidly declined.  Record companies long struggled to respond but have finally loosened the reins on licensing.  This has unleashed a new wave of innovative music services.

Last year Nielsen reported the first decline in TV homes in 20 years, and pay TV subscribers flattened as some consumers scaled back. At the same time, online availability of professionally produced content has increased dramatically. Mobile devices and Internet-enabled TVs that can stream video will support big winners in a new digital video ecosystem.

Video games have been one of the highest growth segments in entertainment with major titles tied to gaming consoles such as Playstation and Xbox.  That has changed now that mobile devices are portable game consoles.  New game studios such as Rovio (Angry Birds), GluMobile (Gun Bros.) and Zynga (Farmville) have emerged as major players.  Many more winners will surface by innovating game design and promotion for these platforms.

DVD sales, historically the most profitable segment of the film industry, have begun a downward slide that looks a lot like the decline in CD sales that preceded it.  Online streaming has struck a chord with consumers after years of indifference to cable pay-per-view offers, and services like Netflix and Hulu have attracted market and mind share with significant upside ahead.

Newspapers, magazines and book sales have declined across the board and in some cases physical versions have disappeared entirely.  Online publishers like the Huffington Post have rushed to fill the vacuum left behind. eReaders, tablets, and handsets are redefining the print experience and igniting new businesses.

Social media has become pervasive and has altered how consumers discover and enjoy entertainment.  It is the common thread that runs through the digital media user experience and the most efficient way for content providers to market to a large audience in a personalized manner.

We are in a period of concentrated change and innovation, a period that New York City and DEV stand to play a strong role in.  

New Media Investing Landscape

The Price Waterhouse Coopers Global Entertainment and Media Outlook report forecasts that U.S. digital industry revenue will cross the $100 billion mark on a gross basis this year and that nearly 60 percent of the worldwide industry growth over the next five years will be driven by digital products and services.  Over the next five years, PWC predicts that worldwide entertainment and media spending will grow at a compound annual rate of 5.7 percent from a projected $1.4 trillion in 2010 to $1.9 trillion in 2015.

Angel and VC funds are the force behind the companies driving this transformation.  In 2010 alone, angel investments in the US exceeded $20 billion and VCs clocked in slightly higher at $22 billion.  These investors are betting on the next generation of innovative companies, some of which will become household names in years to come.  And active investors with domain expertise can benefit these young companies in significant ways  — a recent study by the Harvard Business School Angels concluded that companies that receive early stage funding have a 30 to 50 percent improvement in web traffic and web site rankings, compared to similar ventures without such funding. 

Moreover, New York City, the reigning media capital, is spawning a number of successful start-ups that are displacing traditional media and entertainment companies.  Long time media executive Paul Vidich first talked about this trend two years ago in his excellent article, “Media-related Venture Activity is in Bloom in NYC.” According to Paul, over $100 billion per year in revenue from traditional media companies is vulnerable to smart web solutions. 

Ironically these same enterprises are helping to fuel start-up activity.  Employees from traditional media now complement the growing concentration of engineers, designers and programmers clustered in lower Manhattan and Brooklyn. Television, film, music and publishing companies spent $3 billion from 2007-2009 to acquire early stage companies. 

The gap between early, expansion and late stage ventures has narrowed considerably in the last ten years.  A one to two million dollar investment can take a company significantly further towards an exit due to much lower capital and operating costs entry for technology-based businesses. Storage, streaming and download delivery, and hosting have moved into the cloud with pay-as-you-go models.  Advanced software tools for other core business functions reduce internal development costs.  And an unprecedented talent pool is available globally for every skillset.  Early stage businesses can manage this workforce through virtual offices connected by mobile communication and video conferencing.

The DEV Advantage

DEV is focusing on early stage digital media companies in the New York region to take full advantage of the expertise of our principals and advisors, capitalize on synergies between portfolio companies, and provide frequent counsel to founders and managers.  DEV companies will develop new products in digital media and entertainment, encompassing music, publishing, TV/film, games and the social media applications that help to create their audiences.  Each company will have a significant presence in New York City, which has emerged as a major player in new media innovation. 

-Alan McGlade

Managing Director, DEV

Veteran Media Executive Alan McGlade Launches DEV to Promote Next Generation Digital Media Companies

Initial Investments in Stageit and Mad Humans

NEW YORK, May 2, 2012 – Longtime digital media executive Alan McGlade, along with partner, venture capitalist and attorney Michael Yang, today announced the launch of DEV (Digital Entertainment Ventures), a New York-based firm that will provide early stage capital and management counsel to the next generation of digital media companies.  DEV’s fund has made initial investments in several companies including web-based live music platform Stageit and mobile gaming company Mad Humans.

DEV will continue to build its portfolio with nascent companies focused on music, TV, film, games, publishing and social media that are based on new business models and devices such as internet-enabled TVs, tablets and handsets.  In some cases, DEV will develop and incubate businesses based on identified marketplace needs. And in addition to providing capital, DEV will take an active role in its portfolio companies, providing them with domain expertise and strategic relationships to take them to the next level.

DEV Managing Director McGlade has more than two decades of experience in taking companies from the conceptual stage to becoming significant market players. He was formerly CEO of MediaNet, a pioneer in providing legal digital music downloads, and of Video Jukebox Network (The Box), which he sold to MTV in 2001.  Yang, also Managing Director, is a senior venture/ funds attorney.  He was previously a venture capitalist for Divine Interventures and Sandbox Industries, and before that, was the co-founder and CTO of enterprise software company Redmind, Inc.

“The media industry is undergoing the most profound transformation in our history,” said McGlade.  “New York City, with its established media businesses, talent and burgeoning startup ecosystem, has all the right elements for these game-changing companies to emerge.  DEV will play a significant role in helping digital media start-ups succeed, not only with early stage investments but also by providing a leg up from our team’s collective experience and relationships.”

DEV offers investors the opportunity to participate in promising new companies vetted by its experienced team of entrepreneurs, investors and managers of media and entertainment ventures.   Its first portfolio investments show the diversity of its investment philosophy and approach.  Two of these companies include:

·         Stageit - A web-based platform created for musicians by musicians that empowers them to deliver and monetize interactive live experiences directly from their laptop. Offering intimacy and direct interaction with fans, Stageit gives artists the opportunity to offer unique online fan experiences that will not be archived or duplicated for distribution. Stageit was launched in March 2011 by CEO and music industry veteran Evan Lowenstein, who has nearly 20 years of experience as a recording artist, award-winning writer and executive. 

·         Mad Humans - A suite of mobile games that tap the American zeitgeist. It pits players against comically hostile celebrity humans and their minions from the worlds of politics and entertainment in easy to use, non-lethal shooting games.  Incubated by DEV, Mad Humans ELECTION 2012 is being introduced soon.

For more information about DEV, visit devny.vc.

About DEV (Digital Entertainment Ventures)

DEV (Digital Entertainment Ventures) provides guidance, seed and early stage capital to companies building the next generation of digital services that are transforming media and entertainment. DEV is managed by seasoned media and venture executives Alan McGlade and Michael Yang, and its initial investments include Stageit and Mad Humans.  It is headquartered in New York City.  Visit DEV on the web at devny.vc. 

# # #

CONTACT:

Cathy Halgas Nevins

chnevins@devny.vc

917-887-4140

Laurie Jakobsen

ljakobsen@devny.vc

646-484-6764