E3 Roundtable: Online Experts Discuss Importance of Online Communities

"Profiting from Innovative Online Communities" was a roundtable discussion held during the afternoon of E3's opening day. Bringing together giants from the MMO, online entertainment and virtual world communities, including representatives from Xbox Live Arcade, "gamer" instant messenger service Xfire, Gravity Co. (Ragnarok Online), Electronic Arts and Linden Lab (Second Life), the panel discussed strategies for building online communities; and, more importantly, how to profit from them. "I think that the term 'casual games' is a rather dangerous term," said Xbox Live Arcade Group Manager Greg Canessa, opening the discussion with an overview of the hugely successful casual game online business model. "We debate a lot about this internally, and I think 'casual games' tends to mean different things to different people and is used interchangeably to used at times genres of games, at times it's used to demote a certain consumer demographic, mostly older females, and at times it's used to denote one's time commitment to a game, as in, I'm a casual gamer because I enjoy playing Halo a half hour a week." Canessa's Xbox Live Arcade team has been focused on bringing quick-play titles to Xbox 360 owners. Beyond specific genres and demographics, he says, the business model is based strictly on the quick play time. "There will always be a market for deep, immersive experiences," he said. "That level of sophistication is always going to appeal to people. But there's also always going to be a market for quick, pick-up-and-play experiences. In terms of the size of those markets, we believe, obviously, there's a huge opportunity for hardcore gamers, and in terms of reaching the non-gamer, we think that's more challenging, but there are a lot more." "At EA, we're trying not to use it at all," said Electronic Artts Online Marketing President Chip Lange about the term 'casual games.' "Those housewives playing poker online are playing longer than some World of Warcraft players. That's not casual. These aren't casual gamers, this is an expanded market." Michael Cassidy, CEO and founder of Xfire, is of course a champion of the importance of building close-knit online communities, having devoted himself to bringing gamers together intimately with online voice chatting and friends systems. He says that the type of consumer targeting possible with Xfire is one to be explored. The buddy system can track, for example, how long a player has played a demo version of a game, and how many of his or her friends have purchased the full version of the product, and could potentially target that consumer in a quick advertising scheme. "The more you allow people to build communities, the more they have expectations that you're not collecting that data to sell or give away," said Cory Ondejka, who says that there is a delicate balance with keeping customer loyalty and with strong advertisement targeting. There are additional risks as well, including legal. "We throw data away as fast as we can," said Ondejka. "The last thing you want to do is hold on to user created data, the less that's there if you get subpoenaed, the better." Gravity Co. Managing Director Eric Kwun attributes the worldwide success of their 2D/3D hybrid MMO Ragnarok Online to two factors: first, that the game is what he describes as a "softcore MMO," due to the social networking aspects of the community. Additionally, when Ragnarok Online launched in 2000, it was not only the only MMO based on an existing popular IP, it was also a case of being in the right place at the right time. "The comic book has been really really well recognized due to the Korean and Japanese anime boom," he said. "The timing of the launch of Ragnarok was perfect." Ondejka made the delicate decision for residents of Second Life to not only own the content they create in-game, they're also not restricted from selling content for real world money, which he says is a huge incentive for many Second Life residents. Xfire's revenue is purely made in advertising. There is $15 billion a year spent on television advertising, said Cassidy, but a much larger number of the male demographic are playing games more than watching television. "And that's shifting," he said. He believes that the advertising budget is growing rapidly for the overall games space, and that the future will hold many games funded exclusively through advertising. Xbox Live's Canessa outlined what he thinks are the three subscription pay models, which includes the typical content-specific subscription model, such as those paying a monthly fee to pay World of Warcraft; a subscription service and online community model, such as Xbox Life itself; and the third, which is little used but with a large potential, is what Canessa compares to a "book of the month" club model, offering, for example, a spotlighted game a month on a discounted price. From hearing the panelists speak, it's perfectly clear that online communities present significant opportunity for revenue, whether through advertising, subscription fees, micropayments, or other streams, and it doesn't appear that this trend will be slowing anytime soon.