Will the connected home be a winner-take-all world or one big happily family of interconnected devices? And where do consoles and set-top boxes shake out in these scenarios? Both extremes are represented in this first panel from Digital Media Wire’s LA Games Conference 2008.
Battle for the Digital Home: Is the Console Entertainment Hub of the Future or Fighting to Stay Alive?
Erin Turner, Sr. Director, Web Services & Publishing, Trion World Network
Steven Roberts, VP & GM, Games & Strategic Initiatives, DIRECTV
Mike Yuen, Senior Director, Gaming Group, QUALCOMM Internet Services
Josh Krane, SVP, Interactive & New Media, G4
Moderator: Ted Cohen, TAG Strategic/Chairman, Mobile Entertainment Forum Americas
Does the console die?
Josh – For consumers that would be a good thing, but it’s a question of how you’d get there. It would take a lot for set top box and PC makers to catch up to the consoles, and for consumers, they want the best gaming experience possible, which the consoles deliver.
My 15 year old has gone from Xbox 360 to PS3 to now a Dell XPS, and no longer touches the consoles saying that PC gaming is where it’s at.
Josh – As the big titles come out for the consoles I bet he’ll be back to the consoles. The titles will drive it.
Erin – There isn’t really a hub for the home; broadband has become the platform. Going forward, any device with a monitor, rendering engine and connectivity will be able to play games. That’s why we’ve focused on building server based games, where the intelligence is in the server.
Steve, your company provides set top boxes. Can you compete?
Steve – No. Set top boxes will never achieve a console or XPS experience. Can we do casual gaming with a good experience that 150K people pay for? Yes. The purpose for set top boxes is to provide content, and television content first.
But as you watch Joost, Brightcove and Veoh emerge, is there the potential for DirectTV to become disaggregated?
Steve – I don’t think so. You can’t think about people watching TV just in the context of gamers. Will the consoles be connected to TVs and bring in content, whether a movie or a TV show downloaded? Sure. But in terms of a TV provider, we are the ones who will pay $1 billion for NFL rights.
Mike – I’ll take the contrarian view, premised around emerging markets. We believe that a single hub or box will become dominant in emerging markets, like Russia. These markets may have one TV, no cable, and such a box would be a precursor to broader entertainment. It may not be a wired home, it may be wireless via 3G etc. to deliver content and conquer piracy.
Was the success of Xbox Live a surprise?
Josh – What was surprising was the speed at which they pushed it out. The only thing missing from Xbox now is the cable card slot. It’s one of the areas will Microsoft was able to bully it’s way into. It definitely extends the life and value of the consoles, to download content, communicate and connect with friends.
How do your companies utilize all this?
Erin – Our big focus is on connected games. For us it’s about content being local and intelligence being on the server, so games can evolve over time. With connected games you create enough to get started, build a feedback cycle, and then build out the game over time. It’s a different development model, and it also makes web access much more important. It changes the model from pure software to software plus service, all enabled by connectivity.
Steve – The connected home is critical for all of us. We are seeing more content and games going to broadband connected set top boxes. These components will all work together. Eventually, Xbox will become a client to our set top box within the connected home – not that far away, probably the next generation console. Today you can stream from DVRs to PCs.
How many of the audience have played the Wii Fit already, just release today? (20 or so hands in the air). What does the Wii do for the console market?
Josh – The controller changes the market for consoles, creating experiential physical gaming. The Wii Fit expands it even further, just another interface for using your body and natural motions, and will be another lift for Nintendo and for these experiential types of games.
Mike – The Wii changed the metric for gaming, let’s have fun. From an emerging market perspective, few of them have any exposure to games or have any brand preference. We think there’s a huge opportunity to introduce different types of content in emerging markets with this clean slate.
What is the future of HD in the home and gaming?
Steve – We see HD television growing faster than any other home entertainment element, and I can only believe consumers will want the same in gaming.
Josh – We also see a lot of HD owners with no HD service but with HD consoles.
Erin – The bottom line is that gamers like good graphics, and HD is great for that.
Mike – I just hope we don’t go down the path of increasing production cost and content pricing.
Coming from the music world, interoperability was a critical success element. Does the lack of interoperability hold back the success of the gaming market?
Erin – Absolutely not, if you think of a world where gaming is a service (server based) that can be delivered to any platform, where the server is common across all devices and the platform just renders the graphics.
Audience question, what do you do to keep consumers’ attention when they are multitasking with media?
Steve – That’s just the world we live in, so you build in mechanisms that will allow consumers to have a multi-tasking experience, like interactive TV elements or from a game to keep an eye on ESPN with picture-in-picture. You just have to make it flexible enough that you don’t impose it on the 60 year old woman who just wants to watch her TV programming.
At Qualcomm, how do you look at scaling experience to meet consumer expectations – so the mobile gaming experience is as rewarding as it can be given screen size limitations.
Mike – Though handsets are getting pretty powerful, they’ll never match consoles or PCs. We’ve been evangelizing cross-platform gaming. For example, rather than put a whole MMO on the handheld, you enable certain tasks that you can do on your phone.
Josh – I think that’s a brilliant idea (the approach Mike described). As a content provider, we also try to do something similar, push the use of multiple platforms. We’ve gone toward trying to be sure that we are on as many platforms as possible, enabling the ability to do a certain function for example on mobile that will bring you back to the TV. For example, with Championship Gaming, we’ll take snippets of the TV content and push it out via WAP and via the browser on the PS3, Wii, or Xbox Live, and using the web for interactivity and voting. We’d also want to push out that interactivity to the set top box during broadcast as well.
Erin – The same opportunity we discussed for gaming on mobile – doing a specific task – can apply to TV as well, like checking sports scores.
Steve – Summarizing around the question, interconnectivity across multiple platforms is not holding gaming back, it’s creating opportunities.
From DirectTV’s perspective, is there anything about the Xbox that’s scary?
Steve – No. Like any other competitor, it makes us better, to create a set top box that allows us to bring VOD content via broadband right into our DVR. In the end it helps the consumer get what they want. We just did a research study. We now have a 300 GB DVR. Whether you have a DVR or not, 50% of consumers say no, we need more content.
What do you think about the future of microtransactions in the console world?
Erin – Microsoft is a closed world. Sony is a more open platform, and PC is completely open. If you look at Asia, the majority of PC gaming business models there is microtransactions.
Seems that the carriers are in a good position to manage that?
Mike – From the mobile perspective in the US, some of the operators don’t understand it and are reluctant to adopt and drive a $20 support call for a $0.20 transaction. A question is whether there will be a big currency exchange across Xbox, PS3, etc.
The media center PC has had surprising staying power. Does the media center PC with console capabilities become disruptive to the console business.
Steve – First let’s look at media PCs. The people who own them are not using the media functions that Microsoft intended. In terms of capability, I think you’ll see amazing functionality on these boxes over the next 12 months. Over time, you’re going to see companies embrace one another’s capabilities to allow the consumer to fully utilize those functions across the home. You’re never going to stop advancement, and we feel secure that for our 17 million homes we can deliver a better entertainment experience.
So you don’t have to be in the hardware business, just the service business?
Steve – If we didn’t have to build set top boxes, we wouldn’t. It’s a necessary evil but not a high margin business. We went into the business for the ability to control the consumer’s experience, as well as for economies of scale. For Microsoft and Sony, like us, it’s a loss leader for selling software and content.
Mike – On the issue of the media center PC not taking hold, the limiting factor has been ease of use. The PC still has the stigma on being a PC. Will it take an Apple to get this right? I don’t think they’ll give up after the initial failure of the Apple TV.
We’re on PS3 now. Will there be a PS5 or will there be a death of the console?
Josh – I think there will be a PS5. Sony has been open that they see the platform as a ten-year platform. We’ll see a PS4. The 5 may have many more capabilities than a console today, but I think we’ll see one. All these devices are missing linear TV. I think they’ll work that out and we’ll see a 5, not sure about a 6.
I know Steve will hate me, but again, with an Xbox or a PlayStation, do you need DirectTV?
Steve – We get over 100 million customer service calls a year, “I can’t find channel 202”. If you think about those types of questions and the complexity of using a console to get linear programming in multiple rooms in the house, and extend that over the 120 million TV homes in the US, you are not going to displace DirectTV or Comcast so easily. We’re built for the mass market. And while the consoles evolve, we’ll be evolving as well.
LA Games Conference 2008, Connected Home, Set Top Box, Game Consoles
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Charlene Li is an Analyst at Forrester Research and co-author of the new book, 
Andrew and Alex covered Forrester Research’s Marketing Forum 2008. During the forum, Charlene Li and Josh Bernoff presented material from their new book, Groundswell: Winning in a World Transformed by Social Technologies.
Charlene and Josh quickly overviewed their POST framework for using social networks and shared a number of bite-sized case studies of how brands like Procter & Gamble, Ernst & Young, and Loblaws effectively use social media to talk with and energize their customers. They also used Dell to illustrate the importance of tackling social media one application at a time, with high level executive support, and getting it right before moving on to the next initiative.
In addition to covering the presentation at the conference,