MAY 22, 2007 • Given the expense and scope of creating best-selling video games for today’s powerful systems, it’s hard to imagine the industry will soon see individuals starting fresh and coming to wield as much influence as David Perry. Along with the likes of Peter Molyneux, Warren Spector and others in the early 1990s, Perry came to personify the gamemaker who repeatedly hit it big in sales and was able to parlay that success into an influential independent development house.

Perry is best known for titles exhibiting wry wit and edgy gameplay. His portfolio begins with writing game programming books in his native Northern Ireland before moving onto London as a successful gamemaker for numerous publishers, crossing the Atlantic in 1991 to work for Virgin Games, and starting his own development studio two years later, Shiny Entertainment.

Shiny produced such cutting-edge and profitable games as Earthworm Jim, MDK and Sacrifice, and Enter the Matrix. Messiah, a game which garnered much attention early-on for its ground-breaking 3D engine, faced serious production delays that saw the title take five years to finish, resulting in tepid sales upon its 2000 release. Shiny was sold to Atari in 2002, and Perry left the company in 2006.

Today, Perry has a series of online projects in development for Acclaim Entertainment: a fantasy MMOG called 2Moons; Dance Online, the first massively multiplayer dancing game; and Top Secret, a racing game created and built by the user community. Perry also manages development talent via his video game consultancy, gameconsultants.com; plus an investment portal at gameinvestors.com. DFC asked Perry to share his observations on where the online game business is going in 2007.

DFC: How can the Western market expand MMOG genres beyond fantasy RPG?

David: The book “The Long Tail” by Chris Anderson has been very clear in pointing out that when given choices, consumers take them. It cites examples like Amazon.com, where most people don’t just buy chart music or books, they go and find the music they like, or bands they have always loved and buy those instead. Offer them depth of choice and they dig deep, surprisingly deep. You don’t buy the popular items on eBay, you buy what you want. Games are going this way too.

Back in the old days, there was much less choice, and blockbusters were easier to come by. Going forward, especially with the Asian and Indian invasion you can anticipate in the coming years, I expect to see games focused more on pleasing certain groups of people. Over time I think you will see even that concept fracture into more and more detail. Meaning someone will make a massively multiplayer fishing game, then someone else will make a massively multiplayer Fly-Fishing game. Some people will think it’s a crazy design idea as they might not like fishing, but then again the fly fishermen will love it and get very, very passionate about it.

Balancing costs against real demographics is the trick in the future, not just filling out yet another “it’s going to be a blockbuster or we die” plan. The companies that ignore the concept of “the long tail” I think are missing out on opportunity, to get creative and to expand the video game business. They can use almost every Internet business to see examples of how the long tail is already occurring, so to dismiss the concept I think is a mistake. The second part of this is to include the community where possible, this can greatly reduce costs when done right, and again begin to open up the long tail.

DFC: The Long Tail works best to describe a new form of content aggregation/distribution model without the heavy bricks and mortar overhead and inventory costs where you can sell all kinds of obscure stuff. Great for the person that can collect all that good stuff, but how good is it for the people that create that good stuff on the content creation side?

David: I think the Long Tail message is that betting on blockbusters will get more and more risky over time as potential sales are spread over a widening range of purchasing choices. That’s the point here. I predict publishers will continue to get more and more risk adverse, seeking safer and safer blockbuster bets, while the indie developers will score some major hits by taking significant creative risk, not just in the game, but in their business models. When some 400-point Xbox Live Arcade games get played more than $60 games, the flip will begin to occur. Hold on, that’s happening already! If you find ways to reduce costs – partnerships, outsourcing, technology, licensing, community created assets etc. – then you don’t need the blockbuster numbers to break even.

DFC: Are there other models beyond high-end subscription charges that can work in the U.S.? If so what are they?

David: The most important thing is keeping credit cards in pockets as long as possible. Of course, it’s heresy to say this, but if we want more consumers we need to get more compatible with them. Reducing their risk is huge, letting them invite friends to play on the spot with no charges is also huge because the concept of piracy disappears. So bet on your game, meaning if they don’t like it, it’s free to them, if they do like it, then they can enhance that experience for money. It’s not all bad news here, as if they love the game, they will spend far beyond $50 on it. That’s the point here, to remove the $50-60 cap on games and let people go far beyond that. We are seeing people go way beyond that limit in our tests (yes some over $1,000 on a single game) and remember they’re doing it by choice. So this is without doubt a good model with much room for experimentation and growth.

DFC: Could any of the Asian virtual item models work in the U.S.?

David: In Asia they’ve gone far beyond just selling simple upgrades, they are really starting to think about the psychology of purchasing, actually not just thinking but really studying and analyzing purchasing patterns, etc. For example, how can you get people to buy something more than once? What’s the best time to offer a discount? What needs to be in collection? Will people pay to save time? What human emotions get involved in the buying experience? Examples are our Dance! Online game where you can get married, so which virtual ring should you buy: the cheap one, the nice gold one, or the really big diamond one? Remembering these are virtual items, with a zero cost of goods, it shouldn’t matter, but it does. Another example, is the concept of completing sets and rewarding people for doing that. Say you have collected seven out of a set of eight items. If you get all eight you get a special reward, but that eighth one is really difficult to come by, and you will find people spend more money than you would expect just to complete that set. Again it’s just the study of psychology, but it’s interesting to see where the Asians take the buying models in the future as they certainly seem to be taking more risks in the experimentation phase.

DFC: How much money can you make from virtual item sales?

David: First you have to work out are what is the best time of the day to offer discounts, will you offer savings packs, number of items, when they are released, etc. Like can you buy an entire outfit for less than its individual pieces? As many items are $1-$10, on average it racks up quite quickly when some people will buy everything they like. So the hard part here is supplying what they like. The trick? Ask them! “What exact items would you like to see in the store?” They will post images of their favorite hats, shoes etc. Remember you are not the consumer, they are. When you are clear on that point, then there’s plenty of money to be made from virtual items.

DFC: Is there any potential for an MMOG to be ad supported?

David: We asked gamers if they could turn off adverts on TV or Games, would they? The answer was 100% yes. Not a good statistic for the in-game advertising companies. That said, we signed up a deal with IGA and being really forward-thinking they agreed to test the concept that we let the gamers decide. If they HATE advertising, they can turn the adverts off, no harm, no foul. In reality advertisers wouldn’t have wanted to have paid for that negative impression anyway, which is not an option for the TV advertisers. On the other hand, if they turn on the advertising, why not reward them? Like give them something of great value in the game, like boosting their character growth. In our tests, 96% of gamers, given a choice will turn adverts back on as they appreciate the exchange going on. So I think there’s a new model there, where it’s a win-win for both sides of the advertising argument. I’m trying hard to pioneer this concept of optional advertising, I think there’s no chance that advertising will go away, so I really hope it becomes optional.

DFC: How much do you think an individual game could make from the opt-in advertising model that you describe?

David: It really depends if you want to ram the advertising down the throat of the gamer. Some companies will, some won’t. I’m a big believer in advertising in natural gaps, meaning those spots where gamers wait anyway: game lobbies, or during loading etc. I expect to see plenty of gamers generate between $5 to $30 per month if they don’t un-install before the month is up. It’s really hard to calculate the actual dollar number, unless you choose a specific game and calculate where the natural pauses are, then decide if you will put still, interactive or video adverts. Other factors are what size, as this also affects the CPM rate; then whether you will blend in user-generated adverts – which communities love – or if you will only run paid adverts. If the gamer is having fun and you’re being careful not to spam them, then the advertising revenue is certainly there. I find it quite amusing that if a gamer installs your game, then immediately un-installs it – meaning they never even played it – you still make money if you ran adverts during the install, as it’s another natural waiting period.

DFC: What specifically are you doing in the MMOG space?

David: I’m currently directing six MMO titles for the U.S. market, three not announced yet. Dance! Online is a massively multiplayer dance mat game, that can also be played on keyboard, created via a new kind of music partnership with Warner Music in which we have their artists actually appearing in the game to dance with the gamers. It’s a new kind of licensing deal, where you can fire up our game and dance to Madonna all night long for free. People are doing it right now. Obviously you need to create new licensing models to make these kinds of deals work – like hearing hit music at no cost – and that’s what we will continue to try to do. Licensing will be very important in helping differentiate a title from its competitors.

2Moons is a mature-audience massively multiplayer role-playing game, with epic (almost arcade like) battles and features a 4,000-page script written by a Hollywood writer. The game was initially made in Korea by GameHI, and they currently operate the No. 1 game in that country. So we’re working with foreign teams with major pedigrees.

I’m directing the first community-created game in the world, by building the biggest development team ever. You’ve heard of Web 2.0, this is Game 2.0, with over 28,000 people on the development team already. The person that gets the best reputation will win a Directorship of a massively multiplayer game, so they can go from bedroom to director in one project. It’s a bit like The Apprentice meets American Idol. Our industry is finally really embracing the idea of “user-generated content,” and this is that concept on steroids.