Microsoft's Massive acquisition now official
by Vladimir Cole 
{ May 5th 2006 at 2:00AM }
Last week's news that Microsoft would be acquiring video game
advertising firm Massive Inc. for between $200 and $400 million was confirmed by Microsoft on Thursday.
According to a Microsoft press release, Massive’s technology for inserting advertising into games will be integrated across Microsoft properties including games on MSN and games played within MSN Messenger. (It's a given that certain Windows games will continue to incorporate the technology, depending on whether the developers and publishers of those games wish to incorporate it.)
Approximately 60% of Xbox 360s are connected to Microsoft's Xbox Live service. If that connection ratio stays constant even as the number of Xbox 360s sold increases, Microsoft will be able to promise advertisers the ability to deliver ads to millions (if not tens of millions, depending on how Microsoft fares versus the PS3 and Wii) of net-connected console gamers.
Reader Comments (Page 1 of 2)
Smellslikepie @ May 5th 2006 2:07AM
no credit? :p.
Yeah, anyway, I think this is quite good for the Xbox and Xbox 360 community as a whole. As long as it isn't like on Fight Night
vc @ May 5th 2006 2:13AM
Smellslike: we got the press release from MSFT before any tips arrived. Furthermore, we got about 10 tips on it (all after the press release arrived).
lakersin2025 @ May 5th 2006 2:14AM
That's cool. I like to see to pro ads in games because it makes it more real. We are pounded by ads in real life so make it real in games too. I'd rather have a home town team get the revenue instead of the visitors (sony). BTW I'm so pissed the LAKERS just blew the lead and lost in OT. (of topic). Yippy for Halo 3 next week!
Smellslikepie @ May 5th 2006 2:15AM
LOL, I didn't exactly NEED it, I was just messing around. Hah! kind of. tbh I completely forgot about you recieving press releases etc. Anyway.. Nice one! :P
Darth Pixel @ May 5th 2006 2:23AM
Microsoft spends between $200 and $400 million on a company with no sales and less than 100 employees.
Add that to the running loss they are building up for the 360.
vc @ May 5th 2006 2:31AM
Darth Pixel: The Massive acquisition isn't just about Xbox. Microsoft has a thriving games business on MSN.com. They've also got mobile games, games that are packaged with operating systems, and all of the first- and third-party developers putting together games designed to run on Windows PCs.
There are a number of different games platforms where the Massive technology can be inserted.
As for the suggested valuation ... let's just say they paid $300 million (midway between $200 and $400). That's $3.75 million per employee, assuming 80 employees.
Would you pay $3.75 million to have Warren Buffet work for you and manage your personal stock portfolio? (Of course you would.) This is an extreme example that suggests that what knowledge capital (which Buffet has in surfeit) can be very valuable.
I don't believe that valuing a company on the number of employees makes sense anyway.
Magenta steam @ May 5th 2006 2:34AM
That was dumb news, even if Micro$oft sells more Xbox 360s it wont matter cause most people who own one are Xbox fanboys or very rich, the requirements for Xbox Live are broadband internet, Which I don't have and Xbox live which I also don't have so were looking at maybe $40 a month plus games and since it's a power hungry Xbox 360 we're looking at around $999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999 a month, $20 for roadband $20 for Xbox live, I don't know it's cost, $200 for games and the rest for it's power cost.
Sloopydrew @ May 5th 2006 2:48AM
"I think this is quite good for the Xbox and Xbox 360 community as a whole."
How is this good for the Xbox and Xbox 360 community as a whole? Is this MS's idea of innovation? Huge amounts of product placements? Back when I was playing Condemned for the 360 (great game, btw -- although too linear), and seeing all these generic ads for cars and alcohol in the subway station, I thought, "I bet we'll be seeing ads like this in the future, for REAL cars and REAL alcohol."
I'm sorry. I don't PAY for advertising. If they don't provide the option to buy a game free of advertising at a higher price (say $60 for an ad-free game, while games with advertising would go for $10 or $20 -- product placements don't come cheap), I won't be buying another 360 game. The same goes for PS3 or Nintendo Wii.
There are few exceptions. I would pay for a racing game with ads, as would I pay for a sports game. Fortunately, I rarely play racing or sports games.
I can't believe MS just paid hundreds of millions of dollars to be ... the best console out there? ... the most innovative gaming experience? No. They paid hundreds of millions of dollars to advertise to gamers. Congrats, MS. How will you cheapen gaming further, in the months and years to come? I can't wait to find out!
The Samsung logo on the load screens for PDZ was a perfect start! I look forward to how you humiliate the gaming world in the future. To think, at one time I supported the Xbox.
Darth Pixel @ May 5th 2006 2:48AM
vc,
I know that's what they teach you at Wharton.
Reality and theory are 2 different things, however.
In practice, when you buy such a small company for such a high price, 80-90% of its employees quit within 6 months to launch a new start-up. As the buyer, you are left with the last 20% of the staff and a bunch of technology no one can understand because it was produced in a hurry. (And those employees who stick around are never those you wanted to keep.)
That's reality. I have witnessed this first hand half a dozen times during the past 15 years.
Microsoft should know since they experienced this very scenario when they bought Hotmail for $650M, in another move to capitalize on online advertising.
Smellslikepie @ May 5th 2006 2:53AM
What? Xbox Live Gold subscription costs around £30 (can't remember the price, but it's in the thirties) for 12 months. You don't really need to worry about affect the 360 will have on your elecrticity bill, it really doesn't make that much difference, or atleast, I haven;t noticed a difference. Yeah £20 a month for broadband, sure, but surely that isn't all that much? and £200 a month for games? I don't think you need four new games a month! that's one a week!
And it isn;t just Xbox fanboys and the very rich (!) that have xbox 360's, I wouldn't consider myself a fanboy or very rich, but i got one because it IS an affordable price. If you consider ( I'm not starting a flame war) what the cost of the PS3 MIGHT be because of the integration of a Blu-Ray drive, then the 360 is an affordable piece of next gen hardware.
Anyway, and I'm not sure on this, surely in-game advertising and the possibility of advertisements being integreated into the 360 dashboard is a good way to lower prices even further?
Sloopydrew @ May 5th 2006 2:54AM
"We are pounded by ads in real life so make it real in games too."
Yes. Let's do that. Because we don't play games to ESCAPE from reality.
Then let's have games where we can just drive to work. Nothing exciting, outside of a traffic-jam, here and there. And of course the billboards will advertise Axe Body Spray and Jiffy Lube. Maybe they could even advertise "Driving to Work 2: The Sequel to the First One." Why not? Isn't this why we all started gaming in the first place?
vc @ May 5th 2006 2:58AM
"when you buy such a small company for such a high price, 80-90% of its employees quit within 6 months to launch a new start-up."
Unless, as part of the terms of the merger, you build golden handcuffs into the equation.
"I have witnessed this first hand half a dozen times during the past 15 years."
I've seen it too. Acquisitions are often dangerous.
However, some companies know how to do them. Cisco's core competency seems to be mergers. Microsoft should also be, by this time, an old hand at 'em.
There are numerous ways to value the company, but the best would be to model some cashflows. Someone had to have done such a model and must have come up with a valuation of the business. What potential do you think they saw in this, and why do you disagre with them?
Your disagreements thus far are:
(1) people leave after acquisitions
(2) the company is just adding to its losses
My rebuttals:
(1) There are ways to structure deals so that key personnel do not leave. Cisco is a great example of this.
(2) Sunk cost should never be considered when investing in new projects. Xbox 360's losses to date have nothing to do with whether or not the Massive "project" is worthwhile.
Sloopydrew @ May 5th 2006 2:59AM
"I'm not sure on this, surely in-game advertising and the possibility of advertisements being integreated into the 360 dashboard is a good way to lower prices even further?"
No. It most surely isn't. When product placements started in film and on video, prices did not drop. I can't see it being any different with games. The corporations will make more money and the rest of us will be stuck watching Lara Croft drinking a Coke as she plans her next mission. In-game advertising, in no possible way (unless you're into the whole advertising side of things), is a good thing.
Sloopydrew @ May 5th 2006 3:02AM
"Microsoft should also be, by this time, an old hand at 'em."
Their acquisition of Rare proved how apt they are at feeling the pulse of the gaming market.
vc @ May 5th 2006 3:06AM
Now now, Sloopydrew. You seem to be forgetting a certain company named Bungie. Was that sniping really fair?
Also, Perfect Dark Zero was the best selling first-party title during the launch window. The worst was Kameo.
phipscube @ May 5th 2006 3:10AM
I cant understand people saying Advertising in games is good!? Its just going to get worse and worse to a point where we will have "commercial breaks" every 5 minutes whilst playing a game. Its crap crap crap crap. But no its like "Real life" so yeah.. coooool...JEEEHHHZUZ!
Naff off Microsoft.
Sloopydrew @ May 5th 2006 3:20AM
VC wrote:
"Now now, Sloopydrew. You seem to be forgetting a certain company named Bungie. Was that sniping really fair?"
VC,
In my opinion, the sniping was fair. Rare's Grabbed by a Ghoulie (or whatever it was called) was a disaster. Rare's overhyped Conker remake was a huge disappointment with sales and with critics. Rare's even more overhyped Kameo was also an embarrassment in units sold and critics pleased.
PDZ was a decent seller because it was advertised as the "Halo Killer" (like so many other games before it). Still, it received a lukewarm reception from the critics and many a gamer tend to hate the title.
Before MS bought Rare, there was Starfox Adventures for the GameCube. An average selling Zelda rip-off with lukewarm reviews.
If MS is as in-tune with the market as you're claiming they appear to be, they would have looked at SF: Adventures and said, "Screw this outfit."
Bungie was a GREAT purchase, but that was how many years ago now? And the company has proven itself on the Xbox with how many franchises?
If MS's greatest idea is to pump advertising into its games, it's got a long way to go to become the best-selling console in America, much less worldwide.
I personally think almost every choice they've made was wrong (excluding Bungie). Even games I LOVED, like Oddworld, Jet Set Radio Future and Shenmue turned out to be duds. The company is still new to consoles and it is definitely stumbling. If it wasn't for the money MS has, it would have already failed.
Sloopydrew @ May 5th 2006 3:23AM
"I cant understand people saying Advertising in games is good!? Its just going to get worse and worse to a point where we will have "commercial breaks" every 5 minutes whilst playing a game. Its crap crap crap crap. But no its like "Real life" so yeah.. coooool...JEEEHHHZUZ!"
What he said. Anyone wanting advertising in games is under 25 and has completely forgotten why corporations are, for the most part, the bad guys.
AOL excluded, of course. ;-)
vc @ May 5th 2006 3:31AM
"Anyone wanting advertising in games is under 25 and has completely forgotten why corporations are, for the most part, the bad guys."
I'm over 25 and I want to see advertising in games.
Advertising opens all sorts of opportunities. Joystiq would not exist if the ad-supported content model didn't exist. I hate the annoying ads on our site as much as you do, but those ads allow us to hire writers to blog about games.
Advertising has also allowed really fine publications such as The New Yorker and the New York Times to produce the content that they have been producing. Without the budget to support writers, editors, reporters, and other staff, we'd have been deprived of major, society-impacting news stories. The fifth estate would be significantly weaker without the ad model.
Darth Pixel @ May 5th 2006 3:35AM
vc,
1) Golden handcuffs have limitations. They must be limited both in time and geography. And courts are often reluctant to enforce them based on the "loss-to-society" rationale. There is vast jurisprudence to that effect.
However, those who agree to wear these golden handcuffs often find other ways to be relieved without pursuit. Clearly, you cannot keep people who want to leave. No matter what you do.
2) Yes, you have to invest to succeed.
Yet, there is a difference between buying tangible assets that yield accretive results rapidly and paying vast amounts of money for pure potential based on pie-in-the-sky projections.
If D&B is to be trusted, Massive had less than $6M in sales during the past year.
Less than 60 employees + less than $6M in sales during the past year = $200 and $400 million?
Finally, since Massive focuses on advertising in games, isn't it reasonable to assume the charge will be assigned to the same division that hosts the entertainment group?
Any bad move that gets posted against that division is a move that will affect all business units within that division.
vc @ May 5th 2006 3:55AM
DP:
1. Sure, everything has limitations. But the point of golden handcuffs is that they make people WANT to stay.
2. Even if that $6 million figure is correct, it's meaningless. Ebay paid $2.6 billion for Skype in 2005. Skype had revenues of $7 million in 2004. The absolute number is meaningless without growth figures.
Would you rather buy a company with $2 billion in revenues and projected growth of 2% or a company with 30 cents in revenues and projected growth of 50% in perpetuity?
vc @ May 5th 2006 4:16AM
By the way, Skype had just 60 employees near the end of 2004, the same year their revenues were just $7 million.
I don't think that it's possible to be an armchair banker and value a company without significant research and actually trying to predict how much money the company's going to make. Microsoft had the added advantage of complete access to the company's books and projections, making that job easier.
We also don't know how much was really paid. It might have been $50 million plus $250 in slow-vesting stock options for all the key people. Who knows?!
R.U.Sirius @ May 5th 2006 6:13AM
Yay!
Paying for getting bombarded with ads.
Yay!
-R.U.Sirius
boots (former bd (former b)) @ May 5th 2006 7:26AM
"Before MS bought Rare, there was Starfox Adventures for the GameCube. An average selling Zelda rip-off with lukewarm reviews."
Don't even compare that POS to Zelda, because it's an insult to the best franchise ever. That's probably the worst gaming acquisition I've ever made, and possibly the worst game ever made. I couldn't believe how slow, boring, and idiotic the game was (dinosaurs talking in their own "language" with subtitles? Annoying and stupid). They ruined the StarFox franchise. I don't know what happened when Assault came out, but I had a bad mouth taste from last time so I haven't tried it even if made by Namco.
Rare *was* good when they released Banjo, DK, Killer Instinct and Blast Corps. Rare's last "OK" title was Conker 64, but you could see how everything was going down with them. Thank goodness Nintendo got rid off them. Too bad Killer Instinct got off Nintendo's exclusives at the same time (probably because Rare ruined it with KI2, which wasn't as good as the first one (the arcade one, not the SNES one)).
I'm "sick and tired" of Microsoft, whether that sounds exaggerate or not. Peter Molyneaux wanted to make a Wii (sic) game; now Nintendo got screwed since Molyneaux is a Microsoft employee now. What's next, a GTA exclusive? How about getting hardware that is WAY above average in every way, and not just on the GPU and in part in the CPU? I guess they wanted to save costs to keep buying companies or franchises instead of making good games.
VC, buying "Bungie" was a good idea if they just wanted to rake in profit (that's what all is about, right?). Unfortunately, before Microsoft, Halo looked like it was going to be an original game (and again, they screwed Apple in the process).
After that, it seemed that Bungie wanted (were obligated) to make a mainstream game; i.e., the least possible innovation in it (the least risk possible) for getting the most generic and shallow of FPS, in terms of gameplay, on the market. If that wasn't enough, the storyline is too typical of FPS (but that was probably going to be the case in the first place).
I believe that both games sold the way they did because Halo 1 was a launch title and met a considerable amount of Hype, and Halo 2 met with even a lot more Hype, possibly one of the most hyped (and marketed) games ever; that and they have been bundled with the console (at least Halo 2 once was), just like when Mario Bros was bundled with the NES. I do admit though, that Microsoft and Bungie have made good efforts to increase the gaming population and attract casuals, but that doesn’t make up for the flaws.
Surprisingly to me, both Halos have met not only commercial acclaim, but also critical acclaim; by that I mean that they have been played (well, the second one) through LIVE service. Every Magazine or internet review you can find will have played Halo 2 on LIVE.
What I'd love to know, is the opinion of a sample of those 4-5 million Halo 2 players (and that's not counting the pirated numbers) that have never played it on LIVE (that’s assuming everyone that owns a LIVE account owns the Halo 2 game, for the sake of the Xbox and this argument). How could these people be satisfied with the half assed product of the campaign? It has a disappointing length, let alone ending. How could 4 million people tolerate playing this game on a single player mission that is shorter than George Constanza? Are they satisfied with mediocre games? I don’t think so.
To me, the most important part of a game is the single player mission (and that’s why I’m against MMOs and their fees), because you can’t depend on anybody else to be connected (I know that’s not an issue for Halo, but what if you just want to play alone?), let alone be at home with anyone else (which is not even comparable to the online experience; not like I’m in love with it, but it’s safe to assume that’s the best part for Halo 2, and Halo CE), an extra fee to play. Almost all games have a full-fledged single player mission, and if these 4 million buyers didn’t get it for the good single player mission they expected (and didn’t get, on my opinion), then I wonder why they got it if they don’t even have or plan to get a LIVE account any time soon.
I have yet to see a really innovative game from Microsoft. Too bad Age of Empires hasn't seen an Xbox release... even if it did, it would require a keyboard, and Age of Empires games don't tend to have a lot of hardware requirements, so they would come eventually to the PC and many PCs could run it (and that's when a hardcore gamer like me wonders if it's really worth getting an Xbox while having a PC, especially now that Vista will somehow have some sort of LIVE service).
Of all three Halos (Halo, Halo 2 and Halo CE), the best one is the PC version, now that you not only have the first part of the storyline, but also the online component *and* you can customize it. Hell, there’s even going to be a Zelda mod for it, what else could you ask for? And if Halo 2 gets customizable for Vista, then why would that give me and PC owners confidence for getting an Xbox 360 if I will get better performance on a PC, let alone a more complete game for future iterations?
I wonder how Microsoft plans to dominate the market if they do the same thing they did with the first Xbox; keep spending on other not directly related to gaming income sources and development houses instead of actually doing games themselves, and doing them good. Hopefully for them, they won’t do this (as much) with 360 and get their asses moving (although there are rumors about them getting a GTA exclusive…hmm).
I hope history doesn’t repeat itself and happens what did with Windows, MSN messenger (which, in its newest features, has things ICQ had almost 10 years ago), and Internet Explorer. These last three products have been getting updates because they’ve had to, not because Microsoft was forced to by the competition. Is this the future of the Xbox division? I hope not.
jadenguy @ May 5th 2006 7:30AM
don't forget live windows/office/whatever else comes piped to you from MS. and i honestly don't believe the 360 will look like it's competing against wii. i'm gonna buy both, and i don't know anybody who changed their mind about the 360 because wii exists.
Amos @ May 5th 2006 7:59AM
Wow, I love how a post on Massive turns into a rant on Halo, way to stay on topic! In the Xbox's defense, it has a lot of other great games besides Halo :P. I could bloody care less what aquisitions Msoft makes as long as the titles I'm interested in keep getting made for the 360. Nor do I care what title's *might* have been made from a half-assed developer who I didn't care about in the first place. Msoft is a business. Msoft wants exclusives. Msoft buys game companies on the market. Doesn't take a genius to figure out their motivations here, and I don't really see why anybody should be getting upset over it. They're not losing or gaining anything in the deal.
C. Grant @ May 5th 2006 8:27AM
Awesome debate vc, Darth Pixel. Questions from an outsider: Isn't it possible that a significant amount of their investment was for any proprietary (patented?) technology that Massive developed for this application?
Microsoft could just have easily added in the anticipated cost of their engineers building a comparable system to Massive's, learning the entire way, only to compete directly with industry-leader Massive once they got it working. My puny brain can totally grok how something that's potentially this huge would be worth Microsoft's time.
Things to remember, they *do* have an operating system monopoly to fall back on, providing them with a nice steady cash flow (assuming Vista ever gets released). And Ballmer just defended the huge losses the Xbox project has faced as being worthwhile. Seems to me the Massive acquisition is part One of exploiting that console box in the living room (the Trojan Horse theory) by delivering a captive audience in a key demographic to marketers.
I'll leave the "do ads belong in games?" debate alone for now.
boots (former bd (former b)) @ May 5th 2006 8:52AM
Hey Amos,
It's not just about Halo, it's about the effect of Microsoft buying so many companies; on the companies in particular, and on the market. I could have said a lot more things about Rare Games, and I'll probably be able to say something similar about any upcoming Lionhead games. I could also say something about the games that could have relied on the hard drive on 360 to get better performance, but since Microsoft preferred to buy other companies instead of subsidizing the Hard Drive (an even bigger one) to bring better gameplay experiences, we got piss-poor performance on some games. That was Microsoft's standard last gen, what happened? It's Microsoft's effect on gameplay, I'm just giving you some examples.
Of course Microsoft *should* get exclusives, but that doesn't require buying companies. Microsoft could do a lot more things, better things to get exclusives, but they've chosen the easy way. Nintendo has bought what, ZERO companies? they appealed to developers with innovative hardware. Sony, while having bought companies, I haven't seen them buy Konami, Namco, Square-Enix or Capcom, possibly their four biggest Japanese supporters; again, they appealed to them through hardware (CD) and Japanese marketshare... and they appealed to the Japanese through technology all three times.
Microsoft is avoiding all that and bringing a System that has very little risk in itself (not a boomerang, not a wand, very few cutting-edge technologies). They are becoming a General Motors of the gaming/tech/gadget industry, as opposed to Apple or Nintendo to give a few examples.
As C. Grant mentioned, they could have made their own Massive like system, and learn in the process (like they did with LIVE and succeeded), but they chose the easy way, like they did with Bungie (making a once original game mainstream), Rare (trashing the company), Lionhead (left to see what's up), instant messaging, web browsing, and Operative Systems (which could have started fast as market leaders by doing things right, but instead did what they are doing with the Xbox: learn slowly, update rarely and not that much, invest a lot of money, and wait till you leave the market no other choice but to buy yours). I fear that once Microsoft ends up owning the market, Xbox might become like the rest of their products. The only good thing is that gaming consoles are not necessary goods, so if Microsoft ends up king but does what it has always done, then the market will die altogether. But that might have been Microsoft's goal in the first place, as some conspiracy theorists might say.
theberlindoctor @ May 5th 2006 9:01AM
"if your in the advertising field, do me a favor; kill yourself." -bill hicks
i'll help.
docLEXfisti @ May 5th 2006 9:12AM
"... How about getting hardware that is WAY above average in every way, and not just on the GPU and in part in the CPU? I guess they wanted to save costs to keep buying companies or franchises instead of making good games...."
When reading that post, it is quite obviously, that boots (former bd (former b)) is quite the Sony fanboy. So any more comments regarding his post don't seem necessary.
But didn't anyone come to the conclusion that they might want to offer Xbox Live service with AD's - for FREE? Maybe that's what they're up to . . ..
greetz from Vienna
vc @ May 5th 2006 9:54AM
"Isn't it possible that a significant amount of their investment was for any proprietary (patented?) technology that Massive developed for this application?"
That's definitely the case. There had to have been a make-vs.-buy analysis with regards to Massive's technology. It's part of the process.
Also, we haven't even talked about the fact that trying to assemble a team of 80 people who can run your nascent game-ads business is difficult work, especially when one of your biggest challenges as a company is simply finding enough qualified people.
Hiro Protagonist @ May 5th 2006 9:56AM
Boots doesn't look like a fanboy to me.
He has good points supports them.
If he would just shoot out random things without supporting them, bash Microsoft and put Sony on a pedestal for no reason THEN he would look like a fanboy.
Don't mistake fanboy-ism with preference.
On subject: I don't see this being as one of the best purchases Microsoft could do. Im pretty sure that they won't make live free, unless they are really desperate.
Why make money only on advertising when you can make money on both advertising and subscription?
Because you lose your subscriptions. So I can see this going either way.
Ethan Thomas @ May 5th 2006 10:02AM
docLEXfisti-
You, my friend, are absolutely correct. I've been reading Joystiq for months now, and as far as boots is concerned, MS is the devil and Sony is the best. Like I said on my last post, it's just Sony's blind sheep at work again.
Now, on the topic at hand. Okay, so MS buys a company they consider a good aquisition. Wow. We really need to do something about that. I mean, come on, it's not like Sony would EVER betray the fans...*cough*rootkit*cough**cough*blu-raytrojanhorseknownasthePS3**cough*..whew..sorry about that. But on a serious note, do you think that if Sony or Nintendo saw what they considered a good business opportunity, that they wouldn't capitalize on that? Do you honestly believe that Sony or the big N would say, "Wow, this is great! We could get tons of revenue. But hey, before we do anything, let's go get the approval of our entire fanbase and then decide."? The answer: No. Welcome to big business ladies and gentlemen. In the end, no matter what company you love or hate, they could care less because all they want is your almighty dollar. And that's your only voice. So if you don't like what a company is doing, then don't buy their products. But quit whining everytime they make a move that rubs you the wrong way. It's not like they are listening. And no matter how you sit there and pick apart a company's previous acquisitions, it's all a mute point. It's done. Get over it. How long has it been since Lionhead got bought by MS, and people are STILL upset and ranting about Molyneux and his ideas for a Wii game. Newsflash: Fable wasn't that good. I looked forward to that one forever, and it sucked. Way too short. Not nearly the amount of costumes promised. In short, Molyneux overpromised/underdelivered. Wait...maybe he would have been more at home over in the Sony camp..;).
Seriously guys (and gals), you had to see this one coming. Ads have been in games for awhile now. Do I like ads in my games? NO. Fight Night was ridiculous, as were a few others. But MS, in fairness, isn't the only company using ads. Nintendo and (gasp! OMFG NO WAY!!!11one) Sony also use ads in their games. Microsoft has simply bought a specific company that does ads. I'll say give it a year, and ads will be rampant multi-platform. Do I like the thought? No. Ads in racing games and sports titles, as someone else said, are understandable to me because it's more realistic that way. But there is a limit on how much you can advertise in a game before it becomes excessive. However, in the end, this is business and, just like we're getting ripped at the gas pumps right now, that's just the way it is until we, as consumers, change that by not buying their products. Which, in the case of ads, will soon mean not buying any video games for any system. Is it worth it?
pandlcg @ May 5th 2006 10:02AM
"Would you rather buy a company with $2 billion in revenues and projected growth of 2% or a company with 30 cents in revenues and projected growth of 50% in perpetuity?"
vc, any company growing at 50% in perpetuity would soon take over the world. I know you were trying to make a point, but come on....
vc @ May 5th 2006 10:06AM
My only point was that growth rate is required when valuing a company. To suggest that Massive isn't worth however much Microsoft paid just because they've got "only" $6 million in annual revenues just doesn't work.
No company can grow at a rate greater than inflation in perpetuity. Wasn't the point of the example, but good to keep the basics in mind.
kagai @ May 5th 2006 10:10AM
"Advertising opens all sorts of opportunities. Joystiq would not exist if the ad-supported content model didn't exist. I hate the annoying ads on our site as much as you do, but those ads allow us to hire writers to blog about games." by VC
What does that have to do with video games? I pay for the game, I don't get it for free, but I get Joystiq for free, so I expect to see ads. Also, I subscribe to both IGN and Gamespot and they both allow subscribers to turn off most ads (mainly those annoying popups and ads between page views). I don't pay $50-$60 to see ads for any game, including sporting games. I like fake ads in games (especially game commentary). Now, instead of hearing about Spackle Butt Cream, I'll have to hear about real life products (like Coke, Cadillac, Frito-Lay, etc). I don't want to see that crap. It's all ridiculous. Real life ads in games SUCK!
Oh, and I'm sure we will start to see game patches whose sole purpose is to update the advertisers in your game. Great freaking idea! More money for them, more annoying for me!
boots (former bd (former b)) @ May 5th 2006 10:14AM
"When reading that post, it is quite obviously, that boots (former bd (former b)) is quite the Sony fanboy. So any more comments regarding his post don't seem necessary."
Ironically, I never mentioned Sony in that post, so how can you say I'm a "Sony fanboy"? If I was a "fanboy", I would have the label "Nintendo" all over me, but Sony has had a remarkable strategy the last 10 years. Sony has its flaws too, and frankly they correct them most of the time (they either offer something similar or better to make up for what they've lacked), but this post is about Microsoft. I was being truthful, not biased (or am I wrong?). Even if I was a "Sony Fanboy", it's as stupid to say "don't answer him" as, and I hate to mention politics, conservatives saying "He's a liberal, he's not worth our explanation on our policy".
Did I lie? I never said Microsoft's hardware isn't good; I simply said it is not as good as it could be; if the hard drive was there, and if it was MUCH bigger, not only would the game experience would have ended up being better, but online distribution would have started not in a few months, but since launch day; they could have straight offered every title in both DVD format and on demand (cheaper), and consumers would have started switching online faster, 1uping Sony. Hell, its RAM even had to be upgraded (same applies to PS3). All these steps could have been taken to kill Sony. Just as Sony could have made their PS2 console online out of the box, and Nintendo anything online, they didn't and that's why online didn't pick up so much (that, and LIVE costing, and neither console being wireless, but the tech wasn't available back then).
Nintendo's Revolution (or Wii), while having very little power, it diverges from the rest, effectively getting the most exclusives; even "ports" will feel exclusive. THe only problem with Nintendo is that they take themselves too seriously and just as they are great on themselves, they are also their own worst enemy.
So, do you not agree that there are easier ways to get exclusive games, or are you an Xbox 360 fanboy? Way to avoid the problems posed by simply ignoring me, by the way. If you fail to realize that buying the market instead of making it (and/or enlarging it) is a bad choice, then you are hopeless and I feel sorry for you.
zsavior @ May 5th 2006 10:17AM
I am finding it hard to some up why the idea of in game advertising is such a horrible idea, especially at the hands of a company as rich and influential as MS. So all I can do is start off with a story from class.
My first year of college I took SCO4(school of communiations) class and it focused on advertising in movies. This was done to show how camera work and lighting could focus the attention of the audience from the people in the movie or the plot to something else like advertising, if carefully placed. The one monumental example was the Tom Hanks and Meg Ryan film "You've got mail" where a couple find love with each other through the internet, particulary the service aol hence the name.
Our class wasn't long, but we went through shot after shot after shot of that movie, and you do you know what the disturbing truth of that film was? Half the scenes centered around the use of the AOL aim/mail chat screen and beyond that there was no real plot. True it had wonderful actors who were veterans at pulling heart strings, but that is what made it all the better. People saw Meg Ryan and Tom Hanks, and over looked the fact that the movie pretty much had no plot or basis and was just an infomercial on how AOL can enrich your life! I guess you can pretty much deduce who was the production company behind the movie, and if you can't I will obviously tell you WARNER BROS. The same Warner Bros that owns aol, but the truly terrifying part wasn't that the advertising was in there. It was that I didn't completely notice it till I took the class, and neither did many other people around the world.
Granted I was never a big Tom Hanks Meg Ryan fan, but the movie pushed a horrible fact forward. Advertisers because of the amount of money they invest into your film, can make changes to content and direction of your film with enough power. I mean of course now we have movies like "Torque" which obviously doesn't care about its integrity at all. Yet the problem with video games is this kind of interference in story and plot could ruin a whole game.
While a movie can some what pull itself out of the gutter with a great cast and some slick writing, video games depend on the connection the player has with its character and surroundings. It is also importnat that the focus remands on the game and finding out clues and steps to further progress. Instead of Lara Croft looking out of a building across the street for a clue her eyes are instead sliding towards the BillBoard, of some soft drink to send the message to lara and you that you are thirsty.
Before you scuff at the idea, just imagine the video game equivalents, Hideo Kojima, and Yu Suzuki come together to make an epic game. WHen you finally recieve said amazing game, half the game is centered around you using a windows computer, because of some app they have centered the game around to get your attention to the product. As much as many of you believe this couldn't happen it very well could, and has in the movie industry, and to combat it sony would have to implement the same tactics. Advertising in Videogames is a slippery slope I just hope the video game community is savvy enough to combat it.
Thryon @ May 5th 2006 10:18AM
We all know that MS is contemplating FREE Xbox Live Gold service. Maybe the technology that MS planned to use for this was the IP of Massive. It is cheaper to purchase the company, and the IP, then to have another lawsuit to haunt them. Given that MS has more money than all of us combined, I will not doubt their financial wisdom.
vc @ May 5th 2006 10:18AM
Kagai wrote, "Oh, and I'm sure we will start to see game patches whose sole purpose is to update the advertisers in your game."
Kagai -- the whole point of Massive's software is that this never happens. Ads rotate dynamically and automatically and you (as gamer) never notice any delay of game.
bladestar @ May 5th 2006 10:48AM
Why is it that you tick skulled anti-Microsoft come into forums targeted to the people that care or are interested on a certain topic to bitch and criticize everything? If you don’t like what Microsoft or the 360 is doing. Is this your way of trying to control your envy and frustration? Cause I think this would make it worst.
I worked on a project (web developer) a while back for a company called (doubleclick.com) which is an internet advertising company. I know some of you are ignorant about this but this market is big! Everyday these sites try to make their system more targeted or to deliver the ads to the right people. Companies can have a better return of investment when it comes to the money they spend on ads if a similar system is integrated in a console like the Xbox 360 and MSN games. Why?
1) Every Person displaying the add have a 360 or play games.
2) The add can be regional targeted. (you local game store can advertise).
3) Ads can be targeted based on interest or the type of game you play the most. or the games you have.
I know some of you may say, "but what do I get out of it?!" Well XBOX live can be completely free! how do you think companies like Google make their profits?
The Internet Advertising market (for 2005 only) was $12.5B an increased of %30 over the year 2004. (I bet some nut head is going to say, but that’s all ads) well who says games don't eat pizza or buy movies, all they have to do is take a look at your profile and put an add that you might be interested on. Heck, imagine you can click on the ad and buy pizza using MS points and get discounts.
Here is the report:
http://www.iab.net/resources/adrevenue/pdf/IAB_PwC_2005.pdf
Now, keep hating Microsoft but they are digging where the gold is. ohh yeah, also don't hate cause the XBOX 360 is behind a company that have lots of cash and know how to make money and is willing to spend it expanding itself. All cry baby can do is complain "uhh.. they lost billions", "ahh... they are going to die...", "ahh.. they suck..".
but all we can say is, "XBOX 360 and M$ Rule! Now go back to your little dog house till Sony or Nintendo drop you a bone. While we enjoy what the XBOX is offering.”
benjamin @ May 5th 2006 10:58AM
Why is it generally assumed that if advertisements are permitted in games that they are going to quickly proliferate to the point where the game ceases to exist?
I am not a fan of having real-world ads in games that I pay to play but its unrealistic to think that those ads are going to destroy the experience of gaming entirely.
The movie industry has been used as an example in previous posts. Advertisements have been commonplace in films for quite some time but they rarely are so blatant or destracting that they are detrimental to the movie. How many movies have you walked out on simply because you just can stand one more plug?
In-game advertisers are aware that we gamers won't tolerate ads that detract significantly from the experience. If that were to happen, we'd read the reviews and refuse to buy the game. That's the last thing advertisers want to see happen.
Anonymous rep @ May 5th 2006 11:36AM
There are actual several good points in this discussion - and several bad points.
First - "I wonder how Microsoft plans to dominate the market if they do the same thing they did with the first Xbox: keep spending on other not directly related to gaming income sources and development houses instead of actually doing games themselves, and doing them good.". Well, the answer to that one is that they don't plan on doing the same thing. This is purely good business sense - there's a company that makes something that someone is planning on using at some point - so buy the company so YOU can use it yourself. Advertising and product placement is big money - ever see a NASCAR race? There's got to be a way to pay for free silver access for everyone who has a 360 - and if the advertising dollar from product placement lets the price of Gold come down, more power to them.
Second - Kudos to C Grant for using "grok" correctly! Oh, and Vista is out in Beta now, and due to be released January of 2007.
Third - Kagai, "I like fake ads in games (especially game commentary). " Yeah, but after you play NCAA football for about 3 seasons, you get really sick of hearing about the Pontiac scoreboard.
Fourth - zsavior "The one monumental example was the Tom Hanks and Meg Ryan film "You've got mail" where a couple find love with each other through the internet, particulary the service aol hence the name" - While this pushed AOL, the reason it did so was that everyone has heard of AOHell, and knows about their tagline. You had to have some kind of IM service, with a mail server up and running, and so they chose what was familiar. It certainly wouldn't have reached as many people if they'd used ICQ and Yahoo mail in the plotline. (Which is how I met MY wife, for what it's worth - we've been married now for 7 years.)
Fifth - Bladestar is annoying in his writing and language usage habits, but he's also correct. Think about this - game developement costs are going to continue to grow with the consumer demands of better graphics, better gameplay, better, better, better... In a supply and demand system, that would increase the game cost to the consumer to $100 or more per disk - and we all know how well THAT would go over at this point in time. Instead, we can use in game advertising to defray development costs - and by purchasing the company that allows for easy in game ads by the CONSOLE manufacturer, this is a signal that the CONSOLE company also realizes that there has to be a way to defray development costs. You pump $60 million into a game, that means you have to sell a million copies of it at $60 each just to break even. If you get advertising to pay $10 million, then if you sell your million copies at $60 each, then you've made a profit - which means you can expand your business, pay your investors, and STAY in business. Profit is NOT a dirty word - it's how the business world (and nature, actually) really works.
jon again @ May 5th 2006 11:46AM
Benjamin, I have to disagree.
"How many movies have you walked out on simply because you just can stand one more plug?"
I didn't walk out on Cast Away© because I had already paid to see it. However, the experience was marred when it became apparent that I was watching a commercial for FedEx©.
"gamers won't tolerate ads that detract significantly from the experience"
At times we're powerless to do anything but tolerate it. I have a hard time imagining a gamer brining a copy of Halo© 3 back to the store even if was completely saturated with ads. I predict a bleak gaming future where the content of games changes daily to target ads directly to you.
We will know gaming has died the day we load up a game and realize that, while we were sleeping, our character went out and bought a whole bunch of Marc Ecko© clothes, is on Trimspa©, bought a new Dell©, and pauses gameplay to remind us to drink our OVALTINE©. Son of a bitch.
Thryon @ May 5th 2006 11:49AM
Bladestar....excellent point. Also you have allowed me to figure out the star rating system, the more you talk positive about the Xbox 360, the lower your star rating (notice my -2 stars).
What is interesting, is that the first game I can remeber having any ads was some old Basketball game for the NES that contained Pepsi banners.
I now figured out what
benjamin @ May 5th 2006 11:49AM
EvilVlad: How can you critisize someone for having a view on big business? Whether or not you agree with his posts, Vlad consistently publishes articles that generate discussion. What's the point of debating an issue with someone you agree with 100% of the time?
Pickypants @ May 5th 2006 12:07PM
Dare I enter the fray?
I have a question for VC.
This is in earnest. You support advertising in games. As an advertiser myself, I understand the necessity of ads to generate revenue. My question is how, specifically in games, ads will give a benefit to the end user.
Free Xbox live Gold in exchange for ads, I totally understand and love.
But for the real video games. Are you saying that the added revenue from in game ads will be included in the production budget for the game itself, thereby giving that game manufacturer an edge in producing more impressive visuals, voice talent, phsyics et. al.?
My cynical mind immediately thinks of the current conflation of oil. Without being too political here, I wonder if that added revenue will do no more good than to line the pockets of already wealthy businessmen/women, who have no say, nor concern, over the actual production of a game.
Wordy, but there you have it. Am I too cynical, or is there information out there I have not discovered.
Thanks, love your posts btw.
benjamin @ May 5th 2006 12:11PM
jon again: You talk about how disruptive you see the ads becoming in your game but what's the precedent?
I was annoyed by the ads in Cast Away myself, Wilson more than FedEx actually, but not enough to stop watching a 99 cent rental.
I just don't envision ads becoming as pervasive as you predict.
As far as not being able to return a game when you realize how disruptive the ads are: my point is that you'd hear about that from the dozens of reviews that came out before you bought the game. Don't you think that a site like, say Joystiq, would have some commentary about the game if the ads were so bad that the game wasn't worthwhile? Would you still buy the game?
vc @ May 5th 2006 12:11PM
Thyron wrote: "Also you have allowed me to figure out the star rating system, the more you talk positive about the Xbox 360, the lower your star rating (notice my -2 stars)."
I'll provide a little more helpful information. The more you RANT and post unbalanced, unfair information, the fewer stars you have.
I looked briefly through your comments. This one almost certainly earned you a negative star: "But I do have a solution for all your Xbox 360 (or any other console) problems, give your Xbox 360 away to someone that will appreciate the console and not come off like a pampered pansy."
That was in response to my post here:
http://www.joystiq.com/2006/03/08/xbox-360-headset-cheap-painful-horrible-sounding-oh-ye/#c1253425
Darth Pixel @ May 5th 2006 12:23PM
vc, it comes down to a difference in opinion, I guess.
People who create start-ups instead of collecting a paycheck from some existing entity do so because they like to be independent and respected.
Golden handcuffs are never enough for these people.
Your other point is quite artificial. You ask: Would you prefer to be rich and beautiful or poor and ugly?
No company grows at a 50% rate forever.
Besides, growing at a 100% rate between 0 and $100M is somewhat trivial if you have a real product/service and competent people to develop and market it.
Past $100M in sales, it all becomes a different story.
Past $500M in sales, it's yet a different story.
Very few businesses pass the $500M cap.
Brief, I think Microsoft will make as much money with Massive as they did with Hotmail. (Do you believe Hotmail was a smart investment too?)