In my last post I brashly predicted that gaming will be at the forefront of digital convergence. Why? Because the youth of the world are spending billions of dollars each year to play in the digital world. This means that it’s the gaming companies that have the current revenue streams and profit margins that enable them to push the technological envelope. They will develop (and own) the technologies that businesses and non-gaming inviduals will later use to operate in the digital world (when they finally get with the program).
And by the way, by “gaming companies” I don’t just mean Electronic Arts, ActivisionBlizzard, Sony and the like. I also mean the smaller, privately-held companies that are building the digital world, and/or supplying the tools to expand the digital world. Importantly, I also mean those companies that are melding entertainment, social networking, devices and other hardware.
Two examples:
1. Epic Games. Makers of the Unreal Engine which is a product that enables a company to build its digital world. Maybe you’re building Third Life or World of WarWhatever, or maybe you’ve thought of the next great use of digital worlds. Whatever the case, you’ll have the choice of investing the time, money and effort to build your own graphics engine or license one from companies such as Epic. If you build your own, then maybe, if you’re lucky, you can start building the actual digital world many months later. In the mean time, your cash burn rate is on fire and your revenue stream is still just a twinkle in your founder’s eye.
So yeah, it’s pretty much a no-brainer to license a graphics engine in the majority of cases.
By licensing a graphics engine, the gaming company can focus much earlier on its storyline, game play, etc., and not worry as much about the underlying video technical issues. These engines are an example of what I would consider a digital backbone play.
2. GamerDNA.com This is a new website that is establishing a unique community by allowing anyone who has ever played a video game to list those games, take quizes that help flesh out what type of games they enjoy, and make recommendations for new games based on quiz results. Like facebook and myspace, you establish a network of friends by inviting those you’ve played with and/or know in real life to become your friend.
It also creates incentives to participate with more and more of its content by allowing you to level up your gamerDNA rank, host your guild’s website/forums, and create cool signatures. (More on guilds and forums in an upcoming post). The idea, of course, is to make the site as sticky as possible so as to get consistent, high-volume traffic, which then leads to income streams.
Oh, and they also have created a database which draws on information from various sources such as Xbox Live and Steam which enables them to spot trends in the gaming space.
I caught gamerDNA’s schtick at the latest Boston Post Mortem when founder and CEO John Radoff spoke about the company and its ambitions. I was impressed with the presentation and got to chat with John afterwards. I have also fiddled around quite a bit on the site and give it an enthusiastic Two Clicks Up.
To me, gamerDNA gives us a hint of how far the gaming community has come, both in terms of breadth and depth. There are now enough people out there who have played enough games where having a central gathering spot for them to congregate, regardless of what games are currently hot, is a viable business. When you see collatetal businesses like this starting up, you know you’re dealing with a vibrant industry.
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