The digital transition–Who is a hero and who is a Zero

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If you’re reading this as it is posted, I should be taking the stage at the London Games Conference to convince 200 gaming industry bigwigs of the companies that I think are going to be winners or losers as digital outstrips physical as the primary way we distribute and experience games.

Here’s my list. Once the conference is over, I’ll update GAMESbrief with whether I was able to convince the audience of my points of view

Zynga – ZERO

It may have been a poster-child for free-to-play and social games, but its continuing cynical approach to retention and monetisation makes Zynga a zero in my mind. It saw an opportunity, exploited it ruthlessly but I feel a tipping point coming.

Time for Zynga to start caring about its customers, or it will realise that no amount of marketing spend can make up for the fact that you have burned through the entire Facebook user base several times.

PlayStation Home – HERO

PlayStation Home is a unsung asset at Sony. Too many, it is a place where brands can advertise to gamers, an unloved, unsung, unused Second Life. To me, it is a console-quality virtual world with an easy purchase system and users who are prepared to spend money on game-related content.

For PlayStation Home to become a hero requires a change of mindset amongst senior SCE executives. If that happens, Home becomes the stealth free-to-play engine of the PlayStation business.

Nimblebit – HERO

The developers of Pocket Frogs and Tiny Tower are making, conservatively, three million bucks from their perfectly-executed free-to-play smartphone strategy. If you have an interest in how to make great, engaging, freemium games, you should check them out.

They’re in my hero list not just for themselves, but as representatives of the opportunity for indie developers to create games that appeal to particular audiences and to make lots of money from them.

Subscription MMOs – ZERO

Subscriptions used to be a holy grail for game publishers. Moving from being able to get one payment of $50 from a customer to getting that upfront payment PLUS $15 a month seemed like an amazing result.

But the truth is that a subscription fee is a cap on revenue. It means that people who barely like your game are paying the same amount as those who love it to bits and pay every day. It means that you can’t offer people the opportunity to pay for different things that they value. It is a limit on the amount of money that you can make, and it is only suited to the most mass-market of products.

There have been recent successes, notably Rift, but subscription MMOs are going the way of the dodo. The flexibility of free-to-play will win.

Handhelds – ZERO

The PS Vita? The 3DS? The iPhone? The iPad? Which do you think is a more generally desirable product.

The handhelds are threatened by ubiquitous, powerful machines that are flexible, do lots of things well, and are sold for massive discounts to people who are paying for mobile phone subscriptions.

The tragedy for handhelds is that some people still want them. Publishers want them because they allow publishers to keep software prices high. Some consumers want them because they are better gaming platforms.

“Some” isn’t enough. It doesn’t take everyone to abandon handhelds, it just takes “enough”. How much is enough? 20%? 30%? The exact figure is unclear, but the portents are frightening.

We’ve seen the last generation of dedicated handhelds.

Gaikai – HERO

The future of gaming is through cloud-distribution, not expensive pieces of DRM-enforcing plastic sitting underneath our plasma screens.

I remain deeply sceptical of OnLive’s consumer-facing business model, but Gaikai is building a platform to help companies bring games to consumers instantly.

That makes it a hero in my book.

THQ – ZERO

It feels a little unfair to single out THQ, but they are representative of the “squeezed middle.” I believe that the two options for games are to go big or go niche. THQ is trapped inbetween. I can’t think of a single must-have IP that THQ own. They are competing with the big boys on unequal terms.

I’ve argued before that there is room for 5-7 players at the top table of AAA publishers. I struggle to see THQ earning a place there.

Amazon – HERO

Amazon is responsible for the massive growth in Internet startups through its Amazon Web Services. It has become one of the largest retailers in the world. Its Kindle has begun the transformation of the book publishing market and the Kindle Fire looks like a credible, Android-based competitor to the iPad.

Amazon may not be the sexiest company on the list but it has the broadest view of the opportunities in the market.

4 heroes, 4 zeroes

That’s my list. Do you agree? Who would you add? Who doesn’t deserve to be on the list.

Tell me below.

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