It’s taken years for video on demand to get off the ground. An application hitting the market for the VOD platform, video games, may take just as long, but the growing audience of gamers may make it worthwhile for operators to play along. In the first half of next year, at least one of the top five cable operators will launch SeaChange’s "Game On" VOD application, enabling games that are streamed over the VOD platform, according to Joel Ginsparg, VP and GM of SeaChange subsidiary Digital Video Arts. This application layered into an operator’s video-on-demand service could open up a new revenue stream in a market currently dominated by the PlayStation, Xbox and GameBoy consoles; PC games; and online games. But it won’t be as simple for operators to offer games, which require a fast upstream path, as it is for them to offer movies and other content via VOD. There’s no question video games are hot. PriceWaterhouseCoopers forecasts 15% annual growth in the U.S. and Canadian video game market, to $15.3 billion in 2008, up from an estimated $8.1 billion this year. MSOs already are staking a claim in the fast-growing online segment of the market, which PriceWaterhouseCoopers expects to grow to $3.4 billion in 2008, up from an estimated $662 million this year. Comcast, for example, offers two levels of subscription packages: Comcast Arcade, with a $4.95 per month price tag, has hundreds of thousands of customers, according to spokeswoman Jeanne Russo; and a $14.95 per month package gives more passionate gamers access to more than 100 titles. Cable’s interest in games on the broadband side is evident in one of the latest additions to next year’s NCTA conference—the GameNet 2005 Conference and Exhibition. Some operators, such as Cablevision, have taken a different tack by launching subscription packages of interactive games, which use two-way networks and digital set-top boxes. Susquehanna Communications has long had a suite of interactive parlor games that can be played via the digital set-top. Likewise, Charter Communications’ ITV package includes a games channel with simple card, puzzle and strategy games that use the digital remote. 21st Century Bandwidth The big question for cable operators is whether games will work—and be profitable—on demand. Analysts are interested in understanding how the new applications will be layered onto the service. George Breen, president of Digital Video Arts, thinks games definitely have an on-demand future, and says operators are interested in Game On. "We’ve been showing [VOD] games in prototype form for six months now" he says, and "every operator that has seen it says they want it deployed." Cable operators have been interested in games and interactivity for at least two decades. In the early 1980s, Mattel and General Instruments teamed up to launch an interactive games channel on cable called PlayCable, which required subscribers to purchase Mattel’s equipment from an operator and subscribe for a monthly fee of $6 to $10, according to a 1981 article in The New York Times entitled "Two-Way Games Channel Is Coming to Cable TV." New games were added or rotated monthly, and operators split the fees with Mattel. PlayCable was tested in a few cable markets starting in 1981, but was discontinued in 1983 because, among other reasons, it took up bandwidth that was needed to launch cable networks. Needless to say, cable’s infrastructure is far more advanced now, and operators are testing and launching more advanced services as they seek a return on the money laid out for upgrades. A Comcast spokeswoman said the company is evaluating the feasibility of VOD games, but has nothing to announce. Cablevision is focused on its ITV game offerings, says spokesman Jim Maiella, while a spokesman for Time Warner Cable, which is gearing up to make a big interactive push next year, says the company has not launched anything close to games on VOD. Although games on demand could further differentiate cable from satellite, the nascent service comes with challenges. Games on VOD is not even mentioned in research reports from PriceWaterhouseCoopers, Parks Associates and DFC Intelligence that forecast the market. One of the biggest hurdles will be consumer adoption. Will gamers be willing to give up their Sony PlayStations, Microsoft Xboxes and Nintendo GameCubes, not to mention their PC games and their online games, and choose instead to select a game from a VOD screen? "That’s the million dollar question," says Tim Downs, president of Shorecliff Communications, a trade show producer that’s producing the GameNet conference. "My sense is that it’s going to be enormous." There is a lot of pent-up demand, especially for multiplayer games, he adds, which are far more prevalent in Asia than the U.S. "Multiplayer gaming relies on bandwidth and network quality and customer service and network engineering—all those things that the cable industry can deliver." SeaChange’s Game Plan for Cable There are about 20 million PlayStation and PlayStation 2 game consoles installed in the U.S.; Microsoft had close to 10 million Xbox units installed at the end of September. Over the next few years, even more people will be playing games online. DFC, a market research firm specializing in the video game industry, forecasts 376 million people worldwide will be playing games online by 2009. The deployment of the VOD games application may expand the market, says Parks Associates analyst Michael Cai. Consumers wouldn’t "necessarily give up their consoles or PC games," he says. Offering the ability to sample games could be a huge driver for the new platform, says Joe Ambeault, director of broadband systems at SeaChange. Marketing also will help. For instance, Disney and game publisher THQ recently joined forces to co-promote The Incredibles movie and video game—consumers who bought the game in Best Buy got a free ticket to the movie. Ambeault sees those kinds of marketing deals taken a step further in the on-demand world—rent the movie, try the game for free, for instance. "There’s a lot of these great cross-promotional tie-ins that we can leverage," he says. Just as kids packages drove usage in the early days of video on demand, they also may drive games on VOD. Households with kids consume six times more video on demand than the average household, according to Ambeault. The launches of new generations of Xbox and PlayStation could push migration to an on-demand platform. Microsoft and Sony are expected to launch PlayStation 3 and Xbox 2 in the 2006-2007 time frame. Although console prices have been dropping, according to PriceWaterhouse-Coopers, sales for the Playstation 2 declined 26% last year. With video on demand, all consumer hardware costs would be eliminated, although users would have to purchase a game controller or joystick. "When a home wants to play an advanced computer game, they don’t have to have the hardware in the home and put the software in," says Thomas Schmidt, VP strategy and development at G-Cluster, a subsidiary of Softbank that has partnered with SeaChange to offer the streaming game technology. "They can simply connect with their set-top box and to the remote G-Cluster server." For an operator that already has an installed base of SeaChange VOD equipment, getting up and running to offer on-demand games would take a small incremental investment, according to Ambeault. He estimates the incremental cost would be about $10 to $20 per subscriber, or less than $100 per stream. That would include a slightly different video server and more software. "[Operators] already put all these things in place," he says, referring to the VOD equipment and associated management and integration software that are part of an operator’s fixed costs. "Here’s another way [they] can make [the equipment] do tricks that earns revenue." Operators already have the bandwidth for video on demand. Adding another application is another way for them to make "as much money out of [the] bandwidth as [they] can," Schmidt says. Partnering with G-Cluster gave SeaChange access to the technology that would allow an operator to stream game content just as it does standard VOD content. "We said, let’s treat games exactly as we treat video on demand," Breen says. SeaChange’s Game On package would be listed as its own category, just like movies or favorites, when a consumer punches up the on-demand channel. A list of games would pop up when the games category is selected—Digital Video Arts envisions the content to be comparable to the game libraries offered in online packages. "To our whole back-end system it looks like you’re ordering another movie," Breen says. All of the back-end billing interfaces treat games as simply another VOD transaction. But instead of playing a movie from a hard drive in the server, the signal is sent to a server that’s been upgraded with G-Cluster technology. Who Will Play Along? Michael Cai of Parks Associates says that game publishers will be interested in anything that can increase their sales, as long as their games can be easily adapted. "Publishers are too dependent on the game consoles," he says. VOD’s ability to protect against piracy could induce game publishers to adapt their games to the platform. Piracy is as serious an issue in the games industry as it has been in the cable television and music industries, especially for console games, which account for 76% of video game sales. "I’m not going to say [piracy] is 100% eliminated, but it is dramatically pared down because that content is sitting protected," Ambeault notes. The company adds a bit of code that will only allow a game to run on that platform. "Game studios applaud every time I present that portion," says Ambeault. "Everybody pays attention. They see in about three seconds their content is safer through this distribution mechanism." Depending on the audience, there are benefits for gamers as well, according to SeaChange. The video-on-demand platform eliminates the need for costly PC upgrades to run the latest games. Streamed games eliminate "lagdeath"— whereby a user is kicked off an online network. "We get this really unique benefit by killing off one of the biggest problems of online gaming by using the managed networks that are in place," Ambeault notes. The biggest concern for hard-core gamers is latency—the time it takes for a signal to travel to and from the game server, which would be located in an operator’s head-end. That’s where G-Cluster’s technology comes in. The application is designed so that it takes a signal just 100 milliseconds to travel from the user’s remote, or controller, to the server and back, says Ginsparg. In other words, it’s really fast. At a demonstration at DVA’s digs—a nondescript one-story building on a long road of office parks in Fort Washington, Penn.—it was hard to discern any latency issues on PlayStation Golf. (The street is not wired for cable, so Digital Video Arts built its own cable plant, courtesy of Stephen Kraiman, VP of technology. It includes two head-ends, for both the Scientific-Atlanta and Motorola platforms, CMTS for DOCSIS set-top boxes, a HITS digital video satellite feed, In Demand content feed, TV Guide EPG data feed and Music Choice satellite feed.) "Gaming is not like a movie," Ginsparg says. "Latency is an issue. In this implementation, all but a really hard-core gamer would find it very acceptable." It all sounds almost too good to be true—more revenue for cable operators with just a small incremental investment, something for gamers and something for the publishers, too. Operators are telling SeaChange how much they like the application, the company says, but, so far, they are not saying publicly that games on demand will be a killer app that will drive further penetration of digital TV and more usage of VOD. After all, there are many other priorities, from deployments of voice over IP telephone, to HDTV to DVRs; generally, operators tackle one product launch at a time. But, although it took awhile for cable’s customers to start playing around with VOD, as more of them get acquainted with VOD itself, more of them may be primed to click into some serious game playing.

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Comcast Spectacor named Russell Arons president of G4 ahead of the network’s return to linear, OTT and streaming channels later this year. She last served as gm of Machinima , a division of Warner Bros

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