Cable Goes Gaming: Can ISPs Make Money for Us?

Electronic Gaming Business, August 25, 2004

In putting game content close to the vendor of the pipe, the theory goes, publishers gain access to a broader mass base of broadband customers and are able to take advantage of the massive marketing and unified billing mechanisms of cable and telephone companies. And now that many broadband providers are competing with one another in the same markets, ISPs like Comcast and RCN are partnering with game publishers, download networks, and games-on-demand (GoD) providers like Exent Technologies in order to use gaming as a key differentiator.

Broadband providers see game content as one of the most attractive ways to show off the advantages of fatter pipes. With newly upgraded download speeds of 7 mbps for premium customers, RCN can download a full version of many CD-based games in six minutes, says Elad Nafshi, director, internet and phone product management, RCN Corporation, which has 200,000 cable TV subscribers in Washington D.C., Philadelphia and other areas. It keeps a content hub at RCNInternactive.com. "That is tremendously valuable to the consumer, to be able to access a game you would pay for at retail and can download in under six minutes."

David Cole, president DFC Intelligence, says that GoD is a bit ahead of its time, because the systems still require massive up front downloads. And while existing portals like Yahoo may be effective in gathering enough eyeballs to market the services successfully, he is not sure that broadband providers have what it takes. "The ISPs do not have a good hold on their consumers, and I imagine a lot of people don't go to Comcast.net because there is not much there."

Comcast counters that its recent content partnerships are paying off in traffic. In June 2004, Comcast.net was #8 in page views and #47 in unique visitors among all Web sites online, so it represents a substantial marketing vehicle for content partners. "It's designed as a true destination for gamers," says Jen MacLean, director of sports, entertainment and games, Comcast Online. The company is investing heavily in partnerships with streaming video providers, adding video email, and using a novel customized video clip interface called The Fan. "In the first six months of 2004 there was an 87% jump in video usage at our site" she says. As for GoD, "We're getting really great feedback. They're using it more than we expected and more times per month."

Neither Comcast or RCN would provide numbers, although back end provider Exent estimates that Comcast may be on track for more than 100,000 GoD subscribers within a year. As for RCN, "We've been very pleased with the results to date, and we certainly view it as a strategic advantage to high speed subscriber," says Nafshi.

Drilling New Fields

The ISPs are flocking to the games-on-demand approach because it represents a business model they already know, premium content services that are layered on top of basic fees every month. But the concern is that GoD is not as attractive a model for consumers. Casual gamers have trouble seeing the value in paying for games. Hardcore gamers would tend to be the types to subscribe to a gaming service, but the current libraries mainly have older titles. "We haven't seen that either one of those [things] is true," says MacLean. She points to the release of Splinter Cell Pandora Tomorrow on GoD close to its retail launch, which Comcast supported with marketing across the portal.

"I feel that we're penetrating a market that is underserved by traditional distribution channels," says Nafshi. His GoD customers are families with higher-than-average incomes, not traditional core gamers. RCN is about to launch Exent's upcoming kids GoD package in order to further drill that segment with a more appealing, lower price point.

In fact, ISPs like Comcast and RCN are brokering deals with content providers by leveraging their mass marketing muscle. Comcast recently ran Rayman on its home page as part of a GoD promo, and the company has millions of email addresses that it can use for direct marketing new titles to a general audience.

Nafshi says it is all about using the right distribution and billing channels, namely his existing customer support staff and billing system. Rather than rely on attracting people to a Web site, he decided to train everyone at RCN, from tele-sales to support, to sell the GoD product. "I can compensate every person at RCN for a GoD subscription sale, so we're able to be very effective in the way we market and promote it." Depending on an online portal to sell subscriptions leads to a 2% conversion rate, he estimates. Pulling the GoD offer into the rest of the ISPs sales and support channel and direct market consumers "is orders of magnitude more effective. We are not dependent on how many eyeballs I attract to a Web site. I can proactively go and sell to customers."

Consoles Unplugged?

ISPs would seem to be likely partners for console makers Sony and Microsoft, who are struggling to broaden the appeal of networked console gaming, but neither game company seems much interested yet. Comcast was among the first participants in the Xbox Live compatibility program, and the company did an Xbox giveaway to new subscribers in Seattle. So far, the ISPs say, Sony isn't even sniffing around.