Thursday, May 29, 2008

Balla Tounkara: Social Gaming Revolutionary Edition



The gentlemen in the video above is Balla Tounkara. He is a 40th generation Kora player. No, it's not a typo, 40th. He plays the Kora because he was "born into it." In the US, where tracing your family back a handful of generations is unusual, an unbroken line of 40 generations is incomprehensible. The instrument is the predecessor to the harp, and the one he plays has his village in Mali painted on the front. The village hasn't really changed much since his ancestors started to play, and neither has the dissemination of the music and message. His family line spread the word of the Kora and makes as many people happy as they can with the music. Mr. Tounkara chose to go to New York, and "platform" his music in the subway. He serves his music to millions of people weekly, as they walk through the subway. If they are engaged by the free sample, they will stay and listen and then they can buy his CD, allowing him to retain them as a customer. If they buy the CD, they may play it in their home, friends will hear it, and based upon this trusted agent referral, they will buy the CD too. He understands from a financial standpoint, the music and his brand have no value until millions of people know it. Once they know of him, it has financial value.

Mr. Tounkara's model is being employed by social game companies, the hottest investment area for video games. They just figured out a way to do it from a location without a urine smell, and it is about the most exciting new development I've seen in a long time.  

The market leaders, Social Gaming Network, and Zynga raised USD 15 million and USD 10 million, respectively, from marquis venture capitalists.    The companies employ an "if we build it, they will come" model to revenue, but, at least from these Kara Swisher interviews, it sounds like Marc Pincus of Zynga knows exactly where he is going.  

Shervin Pishevar of Social Gaming Network did raise more money than I did last week, roughly USD $15 million more, but he lost me when he went buzzwordy.  I trust the business model is better than the interview.   Mr. Pishevar's business includes original IP, an open platform with API's distributed to developers and eventually, and advanced CRM system to match consumers to appealing products.   He hopes to make money through advertising and object sales.   He loses credibility when he starts talking about EA 2.0 and Pixar quality.  He is not really doing either. EA makes tent pole console games and Pixar's pre rendered animation will always be better than his. Neither factor detracts from his company and he should drop them from future interviews. He seems to think his games will eclipse the existing business. He does not seem to realize his "product" is his customer base, he is an ad sale play, not the games. He has said, at peak usage, Warbook, his top game, generates USD 100,000 in sponsorship.



Marc Pyncus makes a lot more sense, maybe it is the media savy which comes along with having handled startups before, maybe it is a better business. He is able to identify his audience, his revenue streams and his games. I may be drinking his Kool-Aid, but I like the reference to the Wii as inspiration for the company. He is recognizing the reason for the Wii's success - the lack of interface - and applying it to the company.  At its core, he is making good games. Good enough for people share with friends.  Good enough for them to be his completely uncompensated sales force.  Of course I am a bit jealous of his action, I played the Wii the same time he did and all I started was a bigger game collection. He is making games which will drive the growth of his distribution channel and at the right time, will welcome existing publishers into the channel. Mr. Pyncus knows, he is making television to the publishing world's film.




In the history of media, every new medium or distribution channel is initially viewed as a threat, until the market realizes it actually expands the existing media. Recorded sound was a threat to live performance. Radio was a threat to the recording industry. Film was a threat to theater. Television was a threat to film. Recording devices were threats to music and television and DVDs were a threat to film and television. In each case, the latter expanded the customer and financial bases of the former. When the distribution is robust enough and the base is large enough, these channels may create the secondary and tertiary windows we are missing today. In some cases, even the primary window.

When viewed in a compare and contrast mode, anyone in a developer should be looking up from their darkened cube, and away from their monitor, seething with envy and figuring out how to get in.   You can think it, and have it off your desk and playable in weeks or months.  Crunch?  What crunch? 

I saw this in action at DICE. I was standing with a client and we were talking to a small developer. These guys just finished an XBLA title. My client is in the business of making 8 figure console titles.
"We invested our own money and it took a couple of months, but we put the title up on XBLA."
"Yeah, how did it do?"
"So far we have returned about 10x on our investment."
"Wow!"
"Yeah, it was cool, but now we want to get into front line console games."
"Why?"
When I got into the business games took weeks and months to build and often had budgets in the 5 and low six figures. People were on and off the title quickly and the thing made it to market. Now it takes years to make a title and huge amounts of money. The social gaming space brings back the best aspects of the game business, with some bonus. Even a year ago, once you made a game, you put it out on the web, planted some seeds and hoped it spread virally. Today, you can make the same game inexpensively and if it is a hit, the community does the work for you much more efficiently. In a matter of days the game can be played by hundreds of thousands of people. Every invitation to play is a trusted agent referral. If it doesn't work, throw it away and start over again. Their entire budget for the company is less than the costs of a single front line console game.

The reliance on the social networks, is really a double edged sword. As a lawyer, I always get nervous when you rely on a distribution channel without a contractual relationship. Sure, there are no contracts for web distribution, but the web is democratic. These guys are operating on a metalayer to the Web. Facebook can arbitrarily decide to bar applications which share between social networks, change advertising sales rules, or buy the market leader and ban everyone else. For support, look what happens to the SEO market every time Google decides to change its page rank formula. The other edge of the sword protects these guys. There are tons, and tons of Facebook apps out there. A lot of them don't work. Non-working and substandard applications killed the game business in the early eighties and they will kill the Facebook app market. You will not accept an app if the last five you used crashed or did not work- as many do today. The game market came back when Nintendo committed to review and approve every piece of software on its platform. Facebook will have to follow suit. The likely beneficiaries, will be the guys who got in early, and branded. These two and to a lesser extent when it comes to games, Rock You and Slide are already in. Of course the market is is still very young, and any new entrant is only one game away from passing these guys, but a "Jamdat." will emerge from the market.

The other issue is revenue.  Facebook itself does not make money.  Eric Schmidt just said Myspace is a disappointment in terms of ad revenue.  Media buyers won't buy until performane is proven. These guys are establishing matrices for the ad buyers to establish value.  Some money may be coming in, but Mr. Pishevar says, they are in tests right now. They also say they are trying object sales.   Object sales work for hardcore gamers, but if you are not really committed to a game, will they work?  With most of Mr. Pincus' audience being 50 year old women, do they have a consumer base?  The poker chips are working in one segment, but does it scale?  It sounds like they are both throwing a bunch of shit up against the wall to see what actually pans out.  Either of these may work, as well as IP rights, channel access and things we can't even think of.  If you look at what Henk Rogers did with Tetris, one game alone may be the answer.  

If your head is spinning as much as mine was after watching these interviews, then go back to the top and listen to some Kor.  It helps. . . . and tell a friend. 

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