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Cable Plays To Win

Take an audience of 1 million, multiply it by an average nightly session time of three hours, mix in a presence in the red-hot social-networking sector, and what do you get?

An offer of $102 million from Tom Freston.

That’s how much the MTV Networks Inc. president/CEO agreed to pay the founders of the closely held Xfire Inc., one of the hot properties in the rapidly growing world of online videogames. Launched two years ago, Xfire connects PC game enthusiasts through an online instant-messaging application that lets members converse while they’re playing. With 1 million active users, who, according to Xfire, spend an average of 91 hours a month hanging out on the platform, Xfire offers the kind of large and devoted following that’s difficult to cultivate in a highly fragmented media age.

The media-gaming romance is happening partly because of the proliferation of high-speed broadband Internet connections. Those devices allow users to download game applications and interact in real time over the network without impairing the performance of latency-sensitive multiplayer game sessions. New enhancements to cable-industry high-speed Internet technologies, for example, are aimed specifically at reducing the slight hesitations that can otherwise impede multiplayer game performance online.

“We started getting interested in gaming in earnest four years ago, right at the time when some of the main console makers started to make Internet kits,” said Glenn Russell, director of multimedia applications for CableLabs, at the National Cable and Telecommunications Association convention. “We noticed immediate impact on traffic patterns and usage statistics.”

But media companies now think there’s potential to cross over into the game realm by delivering games and game-centered content through the Internet or through digital-cable connections to the living room. The business models are wide-ranging. Like MTV’s purchase of Xfire, many involve some reliance on the Internet—particularly high-speed broadband—to get games or game-related fare into the hands of both hardcore and casual players.

Many cable companies, for example, offer customers access to online portals that feature a variety of so-called casual videogames. Some can be played immediately at no cost, and others can be sampled for free and downloaded for a fee. Cable companies also participate in the thriving market for MOGs, or multiplayer online games.

Cable companies also are working to endow high-speed connections with traffic-management approaches that favor gamers by reducing “ping time,” a measure of network latency. In a sort of backhanded compliment, game players who enjoy unusually low latency are referred to by fellow gamers as “low-ping bastards,” according to Susie Riley, the chief technology officer of a Boston-area firm, Camiant Inc., that provides traffic-management systems to cable operators.

Several game developers are trying to persuade operators to offer simple play-along games like solitaire and trivia contests over the companies’ digital-cable set-top boxes, which lack the processing power and memory needed for more full-blown PC games.

For example, some lower-end digital set-tops feature as little as 2 megabytes of memory available for gaming applications, forcing some set-top game developers to compensate by placing more processing power in cable headends. The set-top limitations make authoring interactive-TV game software more challenging than writing for the far more muscular PC or game-console platforms.

“It basically means there’s a very important synergistic relationship that has to happen with the application developer, the MSO engineering group, and the other vendors that reside on the digital set-top box,” says Tyrone Lam, president of cable interactive games provider Buzztime Entertainment, whose Texas Hold ’Em has become a popular game offering.

A second impact of broadband is to cultivate connected communities of gamers that media companies covet. Other deals marrying big media with videogames include News Corp.’s September 2005 acquisition of videogame Web publisher IGN Entertainment Inc. and Comcast Corp.’s launch of the videogame cable network G4 in 2002. In addition, Turner Broadcasting System in 2005 launched GameTap, an online repository of classic and newer videogames available to subscribers who pay about $15 a month.

Each instance represents a bid by established TV and media companies to carve out a position in a sector that accounts for an estimated $12 billion of spending annually in the U.S., according to the Entertainment Software Association, a trade group.

For now, cable programmers like MTV and Turner Broadcasting appear to be more aggressive in establishing a large videogame presence than most cable operators. GameTap, with around 420 games now available, is adding five or more games a week to its broadband game subscription service, and it plans to expand a companion original video program to an hour a week by the end of this year. “There are a lot of ways to make money off the game industry,” GameTap’s VP of Content Rick Sanchez said at the NCTA conference last month.

Although several providers have developed interactive games for digital set-top environments, so far the going has been slow as cable operators in the U.S. instead focus on mainstream products like telephone service. That’s frustrating to Lam, who says operators are missing out on a big competitive advantage.

“We’re getting ratings that are equal to or better than some of the major networks,” he says, “and you can’t do this on satellite.”