Play a computer game on my pc

Byline: Vince Vittore

If there is such a thing as a really cool job in telecom - one that might appeal to a typical teen-age boy - Tim Hill has it. As director of portal services for BellSouth, one of Hill's duties is to watch the gaming market closely, ferreting out the next great hit game among the melange of titles hitting the street and test the playability of those games.

In fact, one might imagine that on some level Hill could complete his work while cranked back in a La-Z-Boy, sucking down Mountain Dew and Doritos. Reality, of course, is as far from that perception as Final Fantasy X is from the average player's life.

"A lot of people want to join my group, thinking they get to sit around and play games," Hill said.

Hill, however, doesn't ensconce himself in a dark room to figure out the "cheat keys" in the latest fight game releases. Instead, he's more likely to be having an in-depth conversation with other BellSouth staff members on what the gaming experience means and how it can be improved using the carrier's DSL network. Not the stuff of testosterone-fueled fantasy.

"I've had multiple discussions of what really is a hardcore gamer and what is not," he said. BellSouth's definition doesn't necessarily exclude those that don't spend hours playing first-person "shoot-em-ups" like Doom, and may explain a little bit about its gaming strategy. "You can be a hardcore gamer and just play Collapse or Tetris, but you play it all the time."

Hill's job, however, is a rarity among telcos. Among the Bell operating companies, only BellSouth has chosen not to hand over the majority of its broadband content development to another company. (SBC uses Yahoo! content while Qwest and Verizon have tight relationships with MSN). Those decisions were made several years ago at a time when the business model for premium content delivered over DSL was unstable. It's not less firm now, but BellSouth's decision to bring the content management for its Internet access in house is looking like a calculated risk that may end up paying off later. Under the BellSouth model, users get faster access to exclusive content through relationships like MovieLink, which provides a library of more than 600 movies. On the gaming side, the company offers a rotating list of 60 to 80 free games from both big and small publishers, including GameHouse, Disney and OneWorld. About half of those games generate revenue to BellSouth through upgrades that are downloaded or subscriptions for online games. Additionally, BellSouth, like every other ISP, generates some revenue from banner ad sales.

For acquisition purposes, the company acts as its own aggregator, buying content from publishers or offering a sliding scale of revenue percentage based on popularity and other factors.

And though BellSouth, which packages all of its content as part of its FastAccess DSL service, doesn't break out the revenue, Hill said the portal group is doing well with a combination of ad revenue and e-commerce residuals.

"We run a very efficient, low-cost shop," he said. "We not only will be EBITDA positive, but we will make a little money this year, and we haven't lost a lot of money in previous years. I honestly thought it would take a little longer. Today what we've focused on is the transactions. Those usually get completed by a partner, and we take a cut of that."

Included in that is subscription and download revenues from gaming. Unlike the console gaming market, though, where publishers live and die based on finding hit games for what most people think of as "hardcore gamers," BellSouth's model is more dependent on serving lots of little segments of the online population.

So what is selling? Think simple.

"We try to get content that is going to be attractive to at least 4% of the user base," Hill said. "All [the gaming] experiences are much better on DSL, but we're going after the customers who enjoy gaming occasionally. We want to offer content that gets us to all the little niches."

Among the company's most successful titles is Collapse, an intense, modern version of the classic Tetris game that has an infinite variety of iterations. (In mid-March, the most popular of the company's games was the Sponge Bob Square Pants version of Collapse.) In fact, the company launched the first version of Collapse as part of its original rollout of FastAccess in October 2002, and it has remained in the top five games ever since.

"Seventy percent of our gamers are more on the casual side," Hill said. "The rest are a mixture of hardcore gamers and others."

Such results may be more reflective of the small segment of the overall population that U.S. telcos serve with their DSL service. The global gaming market, which is estimated to take in at least $27 billion per year, is dominated (about 63%, according to one estimate) by full-sized arcade games that skew largely to first-person, quick-trigger, fighting games. Online gaming, while growing quickly, is still a fraction of that overall total. And based on initial studies and anecdotal evidence, the fastest growing segment comes from two major areas. The first segment is network gaming, in which users log on and search for other players using either matchmaking software or a Web site that provides matchmaking information on a per-game basis. The second segment includes massive multiplayer online games (MMOGs), which use client/server technology to direct all data through a network server. MMOGs, which already have about 14 million users worldwide according to Datamonitor, also allow users to have their activity saved on the server, letting them accumulate points or any other type of online currency over long periods of time.

Neither category is one that U.S. carriers have attempted to enter in a major way, said Derek Kuhn, director of marketing with Alcatel's Fixed Solutions Division and chairman of the Broadband Content Delivery Forum. Alcatel is focusing much of its gaming development on Asian carriers, which are generating significant revenues from online game subscriptions where users pay a recurring fee to be part of an online community dedicated to a specific title.

"In Asia, this model is absolutely dominating," Kuhn said. "There are so many people who are interested in the massive multiplayer games that those services are becoming a mainstay."

Asia's gaming market, which is driven by MMOGs, is helped by the lack of retail outlets selling games in the way that U.S. stores do. Whether U.S. carriers and ISPs can parlay the growing popularity of online games, either networked titles or MMOGs, is uncertain. Some believe that U.S. service providers will find their greatest success by allowing popular PC games to be played online. The first couple of attempts at that haven't proven successful, though.

"The problem is that the [MMOG] genre of games doesn't really appeal yet to the North American consumer," Kuhn said.

Case in point is The Sims, which was one of the best-selling PC titles in the U.S. but was considered a failure when its publisher, Electronic Arts, tried to convert it into a MMOG format, he said. However, that may be largely due to EA's marketing misstep of focusing almost exclusively on women, Kuhn said. He added that he believes "lifestyle" games such as The Sims, which are more about relationship building than killing opponents, played online will be more popular in time. The problem for any service provider is finding the right niche.

MMOGs that have had the best response in Asia are heavily focused on fantasy role-playing titles. Among the most successful is a Korean title called Lineage, which claims 4 million active subscriptions and has generated more than $96 million in revenue in both 2001 and 2002, generally through Internet cafes, according to a BCD white paper.

BellSouth, which is studying the launch of network gaming titles, is finding some of its best success with games that cut across gender and social-economic lines. "So far, we've focused on single-player [non-networked] games," Hill said. "At the core, you want to push as far into your network as possible. We'll keep focusing on putting more in our network here."

Ironically, one of the few factors not holding back major deployment of MMOGs or network gaming in the U.S. is the technology. Indeed some hosting companies are jumping into the market with products geared to gamers.

"As broadband becomes more available, that's going to propel a massive explosion in the online gaming market," said Cody Calhoun, director of viaVerio Enterprise Hosting and the Access Partner Program for Verio.