A Napster for Games? OK, Not That Fun!
Driven by its ambition to move beyond software for broadcasting audio and video over the Internet, RealNetworks is entering the online games market by introducing RealArcade – a powerful new end-to-end platform for the digital distribution of PC games.
The new venture – previewed two weeks ago at the Game Developers Conference – offers consumers a simple and highly intuitive game experience. It includes an easy way to find, acquire and manage Web-based games and a simple, versatile way to interact and play online with other gamers.
The developers’ package of the service gives both amateur and experienced game makers two ways to bring their games to a mass market of consumers – a self-publishing option and a full-service option that offers turn-key business solutions.
The first is a friction-free, self-publishing model, designed to let developers quickly and easily design, package and distribute PC games through the RealArcade platform. With the help of the RealArcade game packager they can create compressed installation packages that are 20% to 50% smaller than most other compression technologies.
In addition, metadata can be added easily through the game packager, detailing contextual game information to the service and its users. All game titles will be listed in the RealArcade Games Bazaar. Game creators can gain broad exposure with minimal investment by using the product.
The second publishing option offers developers a full-service business solution. It utilizes RealNetworks’ powerful game development and packaging tools, digital distribution network, and e-commerce transaction and customer services, as well as technical support.
The software platform will also include Real’s audio and video technologies, making it possible for gamers to watch a movie or listen to music while playing a game. It will feature game reviews and a manager to help gamers keep track of all the titles on their computer. The company intends to provide chat services and gaming news on its site as well.
RealNetworks announced that the developers’ section is open now. Users are required to fill out a questionnaire to gain access and download the product right away. The customer service is scheduled to be publicly launched in the second quarter of this year. Details, including new game titles, will be unveiled at the launch.
Real did say that the technology will make downloading simple. For instance, it will allow consumers to stop the process midway and then resume later. The product will also offer a service for hard-core gamers, making it easier for them to manage games stored on hard drives.
But the main thrust of RealArcade is to give unknown game developers an opportunity to get their products to wider audiences. They will be able to post games directly to the Internet instead of having to court giant publishers who may be unwilling to take a risk on a new title.
“The independent games business is where the real innovation of the games industry comes from,” says Mark Long, President of Zombie Studios. “Young developers get together like garage bands, and only once in a while does a publisher give them a chance. This is an end-run around that.”
Furthermore, with this effort, Real wants to make another huge market move, this time toward the gaming industry.
“Digital distribution has been affected by Napster and music downloading,” says Paul Thelen, group product manager at RealNetworks. “The games industry is next.”
Some analysts predict that this technology will be a kind of Napster for the digital distribution of games and will jump-start that market. But the RealNetworks’ services will differ from the free music available through Napster.
First, no illegal copying will be allowed. Before developers can post games, RealNetworks will screen the files for illegal material or viruses. Users, on their part, will be able to post lists of games that they play, but won’t be able to swap games with each other directly.
In fact, RealArcade represents the first major distribution plan for online games on the market. RealNetworks hopes that giving consumers the chance to download games and play them offline will help it succeed where other subscription-based services have failed.
“With the release of the RealArcade digital distribution platform, RealNetworks is planting its stake at the epicenter of the fast-growing world of digitally distributed games,” said Rob Glaser, chairman and CEO of RealNetworks.
He added, “RealNetworks pioneered the digital distribution of audio and video over the Internet. Now we’re excited to apply our experience and expertise to Internet games. With our global distribution channel and open publishing model, RealNetworks is revolutionizing the way game developers create and bring games to market.”
RealNetworks first entered the games industry last year when it launched its highly successful Real.com Games Web site. The company claims it has generated over 5 million downloads during the past 11 months; about 3% of those have paid for the full game. Now it handles 70,000 game downloads a day.
So far, several publishers – including Havas Interactive’s Sierra On-Line and Arush Entertainment – and more than 40 game developers – like Valve Software, Monolith Corporation, Zombie Entertainment, Small Rockets and Daydream Software – have signed up to publish games through RealArcade.
Intel Corporation (INTC) has also said it will sponsor a number of games on the Real.com Web site that show off the power of its microprocessors.
In conjunction with the new initiative, RealNetworks announced a strategic agreement with GameSpy Industries Inc. – a pioneer in the field of multiplayer gaming.
As a result of this relationship, users of the GameSpy Arcade online games service and the RealArcade service will be able to participate in one common directory that matches consumers for multiplayer online games.
Developers will only need to integrate a single multiplayer technology in order to reach GameSpy Arcade and RealArcade users. Consumers will benefit from the scale of community, increasing their likelihood of finding the perfect multiplayer match.
In addition, RealNetworks expects to expand the online game offerings on its Real.com Web site, adding more titles aimed at casual play, like casino and card games, in contrast to those aimed at hard-core games, like Quake.
Huge Market Support
The new venture is an effort by RealNetworks to capitalize on the growing popularity of online game-playing and to help the company endure a recent slump in both Web advertising and spending on audio and video applications.
Valued at more than $7 billion, the PC and video games market has witnessed phenomenal growth over the past five years and is now approaching the scale of the music and film industries. More than 150 million Americans play computer and video games each year, according to the Interactive Digital Software Association. PC Data estimates that 75 million U.S. Web surfers have tried some form of online game.
RealNetworks is smart enough to enter this online games market, which is still relatively underdeveloped. While online sales of games brought in about $250 million in revenue last year, this is expected to grow to $5 billion by 2005.
The company already has traffic, brand recognition and expertise in delivering media content to consumers. Combine that with a growing market, and its revenue projections are more than optimistic.
RealNetworks’ goal is to court the 89% of gamers who aren’t hard-core fans. They are often turned off by the hassle of installing new games and by the difficulty in finding strategy or puzzle games instead of action titles.
“Our method of distribution is very well suited to these people and their needs are not perfectly met in the market today,” said Andrew Wright, general manager of the Games Group at RealNetworks. “We make it super simple, it’s like an MP3 (music file). It’s easy to find and download games and they’re installed seamlessly.”
Analysis: RealNetworks intends to offer tools and services free to game developers. For novice creators and the companies wanting to use the self-publishing service, RealNetworks will only handle the $300 expense of having each game scanned for viruses before being released to the community. If a certain game attracts significant attention, the company will attempt to form a distribution deal with that developer.
The companies opting for the full service will have to split revenue with RealNetworks, which also plans to make money by selling advertising space during downloading time and within the games themselves.
In the consumer version of RealArcade, the company will offer the latest games for trial or purchase via download. Customers will be able to play demos for free or pay for the entire game. Most games will be priced under $20 and the company will take a cut of each game sale.
RealNetworks also intends to work the RealArcade into its GoldPass premium subscription service, which currently costs $9.95 per month for access to selected audio and video features. Executives say RealNetworks will offer one game a month on the GoldPass service. It will gradually add more titles depending on consumer demand.
Some industry experts believe RealArcade is a significant revenue generating opportunity for the company. It represents another way to make money off the millions of people who currently visit the company’s Web site for free downloads, such as RealPlayer. The venture marks an important step in the company’s drive to diversify its products and services and to figure out new ways of making money.
Problems Still Exist
RealNetworks hasn’t completely solved the problems of distributing games over the Net. By optimizing the game’s quality, file sizes and download times grow larger. For that reason, only smaller games will be available. However, consumers have shown they won’t pay to play such simple versions.
RealNetworks’ compression technology can reduce the size of large files considerably. A 350 MB game, for example, could be reduced by 30% to 80% in terms of download file size. But for now, the company won’t be able to post standard CD-ROM games, which use about 650 MB, because they take too long to download.
Casual gamers often don’t have the patience to wait the 10 minutes or more that it could take to download many of the games over a standard 56 Kbps modem.
Moreover, consumers will have to download software in order to play the games, and it isn’t clear if they’ll have the patience to do so. Complicating matters further, the company wasn’t able to include the game player in its standard RealPlayer video and audio playback programs because the downloads would have become too heavy.
In its attempts to attract a larger paying audience, the company may also run into problems, as it aims to reach everyone from novice players to hard-core enthusiasts.
While opening up this new frontier of self-publishing for cash-strapped small developers, RealNetworks faces yet another obstacle – the competition. A number of other companies are setting up their own online game-playing and distribution services using competing technologies from firms like WildTangent Inc., which is based in Redmond, Wash.
“The question here is, ‘what’s new?'” says Alex St. John, CEO of WildTangent. “We’re making online game distribution happen for other companies like Sony (SNE) and TBS. What RealNetworks is doing sounds like they are putting their brand first, and other companies won’t go for that.”
The new service could bring RealNetworks into competition with other groups of game companies as well. Macromedia Inc.’s (MACR) Shockwave.com and a dozen online gaming sites already offer casual games. Lots of game sites also offer news and online game stores, take orders over the Internet and ship via snail mail. And traditional retailers, of course, will square off against the digital distribution system.
Over time, as compression technologies improve and high-speed Internet connections spread, the technology may reduce the amount of time it takes to download bigger and bigger games. As such, digital game downloading might one day represent a real threat to traditional game publishers and brick-and-mortar retailers.
However, the main challenge for the company now will be to offer games that are compelling enough to keep people coming back and shelling out money for the service.
