Q&A With Exent Technologies' Yoav Tzruya: Can Games-on-Demand Really Pay?

Electronic Gaming Business, August 25, 2004

The undisputed leader in providing games-on-demand infrastructure is Israeli-based Exent Technologies. Offering multiple models, the company provides back-end GoD serving and management to the Yahoo portal, a brand-specific game subscription services for Atari at AtariOnDemand.com, and full turnkey solutions for ISPs like Comcast and RCN, in which Exent manages the title licensing and relationships with the game publishers. With his finger on the pulse of all the major GoD systems available, we asked Yoav Tzruya, Exent vp of products and markets strategy, to address specifically some of the skepticism surrounding the GoD model and whether it can attract enough eyeballs and make real money for publishers.

EGB: How many GoD subscribers are there now?

Tzruya: In North America we support 50,000 users and we're quickly approaching 100,000.

EGB: What sort of growth rate have we seen in the last year?

Tzruya: After the service provider reaches the 3% penetration mark they typically enjoy .3% to .4% monthly uptake after that. We see very good growth both in Europe and the U.S. Comcast is doing very nicely. They are definitely on pace to reach that goal.

EGB: If you are talking 2% of their broadband base, then a couple of hundred thousand?

Tzruya: 120,000 to 150,000 after the 12-month period.

EGB: What share does a publisher make on subscriptions?

Tzruya: They typically get about 40% of the topline revenues of the royalties.

EGB: What is the actual largest check that gets cut to a publisher each month from say a large portal with a GoD system?

Tzruya: It's close to a six-digit figure. That's from one portal to one publisher. Royalties can get to half a million or more a month in aggregate to all publishers from a single service.

EGB: Most people don't go to their ISP's home page, so how can the ISPs really deliver the necessary traffic to convert to GoD?

Tzruya: A very good question, and we've had some mixed results. Bell Canada has been very effective at tapping into the potential end user base by using the right sales channels. They train their support people when [customers] call in with a problem to try to sell them GoD, so they have a very cheap acquisitions channel to get to the mass audience. We have had worse experiences like a mass email campaign announcing the service. But most users of that ISP did not use the ISP's own email system, so they weren't able to reach those users with that marketing tool.

We approach service providers and teach them about how best to reach that end user, and the messaging that needs to be put in place for each demographic group and we've achieved good results. Most service providers can reach the 3% penetration mark in the first twelve months.

EGB: Does the standard $14.95 all-you-can-play model need adjusting?

Tzruya: At the end of this quarter we will implement lower-priced packages that are targeted at specific communities: a kids package and a genre package that will be $5.95 to $7.95, a basic package with a smaller bundle of titles at $9.95.

EGB: It seems that hardcore gamers wouldn't go for the predominantly older titles in these libraries, and the casual gamer wouldn't be serious enough about gaming to spend a monthly fee. Who is subscribing yo GoD?

Tzruya: There is a mix. More than 50% are women; definitely not just the hardcore. They play between 7 and 10 different games a month and for around 30 hours in total a month. Each session lasts about 90 minutes. The biggest hits are not the most recent. The biggest game on Yahoo is Civilization III. On the other hand, we also see certain types of hardcore gamers like playing the oldies that they used to have and don't find anywhere else.

EGB: Why shouldn't a publisher just convert an old title to digital download and sell them directly to consumers for more revenues?

Tzruya: It is not an either/or. Different users will use different models. The purchase model is for people who know what titles they want to buy. They look at the game and reviews and they know what they want. A subscription is distinct. It is value pricing. For the same money required for one title you can enjoy more than 100 titles and you will play ten different titles a month. It is for players who do not necessarily look to fully immerse themselves sin a single game experience. We see them shifting from one game to another. Both models will have their place. We will launch a purchase store with some service providers by the end of the year.

Most games that publishers want to sell online is in the try-to-buy model. The conversion rate on these titles is 1% to 2%. If you think about these games that are 300mb or more, the download costs associated with delivering the game, it is a big hurdle for them because with current conversions rates a game becomes financially unviable in the download model if it is over 350mb. In our model you download 10% to 15% of the game [to play in GoD mode] and you eliminate that hurdle.

EGB: What publishers are not working with you and why?

Tzruya: The only one in the top ten we don't work with is Electronic Arts. The tiles that are more successful like EA Sports are not licensed for online delivery. When they signed those contracts they didn't cover online delivery. The second thing is that EA expects very hefty royalty checks which are even higher that the numbers I mentioned earlier and we are not there yet.