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Cable’s Gaming Future

Cable companies have set their sights on the close to 50 million videogamers in this country who make up the core of a market generating north of $7 billion in annual revenue and rising fast.

For cable, the current chips on the table also include a battle for retention, a more vigorous bottom line and a sharpened competitive edge against growing satellite and digital subscriber line threats. Recently, DirecTV Inc. and EchoStar Communications Corp. announced total gains of 795,000 satellite TV subscribers in second quarter, more than double gains a year earlier. Meanwhile, five top MSOs reported losing a total of 225,000 basic customers.

The subscriber balance is still weighted heavily toward cable (20.3 million satellite households versus 73.8 million cable households, according to Nielsen Media Research), but the road to cable riches might mean jettisoning some bottom-line basic customers in order to lure high-end, high-yield digital and Internet players who will pay large sums to play often.

Within the past two years, Time Warner Cable, Comcast Corp., and Susquehanna Communications signed joint deals with Buzztime Entertainment to test or market interactive games and trivia channels to more than 128,000 digital customers in selected markets.

Charter Communications Inc. has installed video games in 20 markets, offering seven interactive channels for its 2.5-million digital customers via Digeo Inc.’s high-end Moxi platform.

Cablevision Systems Corp. offers a $4.95-per-month games service to its digital customers and reported strong sales right after the May launch.

Cox Communications Inc. says it is “looking at various opportunities to provide games for our digital subscribers on their television sets,” but won’t announce specific products, technologies or vendors. Insiders insist, though, that Cox is close to introducing some form of broadband “casual” gaming this year.

MSOs also are introducing new higher-speed services within their broadband data packages to accommodate game players.

In August, Time Warner rolled out a high-speed Internet service with download speeds of 6 Megabits per second (twice the speed it now currently offers) and Comcast recently launched a 4 Mbps downstream service, calling the new service “ideal for streamlining audio, multiplayer and online gaming.”

In May, Cablevision launched the industry’s first interactive subscription-games service on its iO: Interactive Optimum portal, with Cablevision’s 1.2 million interactive subscribers now offered “Variety Pak” and “Arcade,” featuring interactive games for all ages, and “Casino,” a gaming package featuring player favorites such as video poker, blackjack or slots.

The same month, launched a games-on-demand service adding 10 new games a month. It’s now up to 90 games.

According to a recent Pricewaterhouse Coopers report, the overall video games market is projected to grow by 15.1% compounded annually, moving from a $7.6 billion business in 2003 to a $15.3 billion bonanza in 2008, rising from 2 million players to more than 30 million.

Online, Nielsen Net Ratings reports one out of every three online visitors went to game sites in May. That’s 46 million people, up from one in four a year ago.

These players, equally split between men and women, logged an average of 90 minutes or more at the top sites.

This is not necessarily a pastime for the budget-minded, at least in terms of infrastructure cost to customers.

Access to the new Time Warner and Comcast high-speed Internet platforms cost from $52.95 to $84.95 a month, versus the average high-speed data bill of around $45.

Why the push for such costly features for gamers now? According to several cable industry sources, “chance” is less an issue in this battle for the gaming dollar.

Instead, “quality games,” “quality prizes” and “faster and flawless delivery system technologies” are key cards in the cable industry’s gaming hand.

“One answer is that cable’s two-way network recently fulfilled its two-way pipe,” Buzztime Entertainment CEO Tyrone Lam said. “Cable has spent over $50 billion to upgrade. It now offers [video on demand], telephony, high-speed modems, and [digital video recorders]. It’s time to look at games. Games appeal to one-third of all U.S. household and VOD clears a path for games revenue.”

Buzztime Entertainment develops and distributes “play-along” technology and programming. Its Buzztime Channel offers trivia and non-trivia Buzztime-branded games for cable, including six 24-hour channels programmed with questions about TV, history, Kids Only, music and sports.

Buzztime’s biggest launch overall is with EchoStar’s Dish Network, for a four-player “pass the remote” version of the interactive games on cable that let customers compare their scores with the best players on the system.

Buzztime has launched interactive games on cable systems in Baltimore (Comcast); Williamsport and York, Pa. (SusCom); and Portland, Maine (Time Warner Cable).

Lam sees games on the cable set-top as first providing the MSO with a value-added digital option.

“Video games on digital are not yet a must-have item for cable households,” Lam said. “But by offering the games platforms either for free or for a low fee, you could create a loyal following.” One, he adds, addicted enough to follow video games’ logical future: skill-based games played for prizes (either advertiser-driven or offered through advertiser-created games.)

Meanwhile, cable needs to exploit its faster speed and more far-reaching two-way delivery.

“Having been involved with interactive television for over 12 years,” Lam says, “I’ve noticed in the past few months MSOs at the highest level truly understand the value of connecting their subscribers in the gaming community. Two-way clearly differentiates cable from the one-way satellite system.”

Another plus: “Cable not only has a two-way broadband pipe, but it alone has both a local imprint and local technology,” he says. Those are strengths that could create competitive gaming not just across the country, but across the street and down the block.

In Europe, Rupert Murdoch’s companies already have two-way satellite delivery and telephone lines.

“In the U.K., all the cable homes have set-top boxes that offer games and there’s less restrictions about prizes,” Lam says. “DirecTV could be a threat here and cable is playing a little bit of catch up. After two years of cable trials, it’s time.”

At Comcast, games are available on set-tops via the TV and online, with the latter still in test mode.

According to Comcast senior vice president of digital television Mark Hess, the Baltimore test “among friendly customers” is a “market trial” of about 50,000 households.

“We believe the category has a lot of potential,” Hess said. “And one thing we like about Buzztime is the scoring capability” which is vital if games are to be played among different or distant households.

Hess called Comcast’s digital games test real-time interactive. “Cable games players could be ranked locally or nationally. You could pit one city against another.”

The future holds not only playoffs.

“We are in the very early stages of looking at prizes,” Hess said. “There is a potential there for people (to win) at every level.”

But he doesn’t want to oversell cable digital gaming as challenging casinos any time soon.

“Our whole thing [about gaming] is to add value,” Hess said. Comcast’s barometer of success here is “keeping a customer or adding a new one. People like games. They’re fun to play.”

And they just might prevent competitive households away from direct-broadcast satellite., with its “Games Channel/Arcade” and “Games on Demand,” offers high-speed game access to 6 million homes as the No. 1 broadband Internet provider.

The Comcast Arcade (in conjunction with Real Networks Inc.) offers hundreds of thousands of users very quick, very simple games and “fun experiences.”

Games on Demand (offered at $42.95 per month for 3-Mbps customers and $52.95 month for 4 Mbps capability) are more immersive and time-consuming, offering single player and interactive game play across many genres, including action games like Atari’s Dead Man’s Hand and educational games like Scholastic Media’s Clifford’s Thinking Adventure.

Teaming with Electronic Arts, Comcast in August said it will be the exclusive broadband provider for EA Sports Fantasy Football, which includes hundreds of customized options such as live scoring, exclusive news, player updates, rankings and injury reports.

“We see this as part of our overall entertainment offering,” says Jen McLean, director of sports, entertainment and games for Comcast Online. “But since it includes video email, it’s also a great example of an application made better by broadband.”

Unlike DSL, Internet cable is “faster and more consistent,” McLean adds. “It’s very frustrating to games players to experience delays during a game. With our set-top and PC connection, we are very poised to deliver on the promise of the connected home to deliver a gaming experience where cable is the platform of choice over DSL or satellite. And we offer one bill, one installation, one repair service.”

Charter began its foray into interactivity in 2003. Now, 1 million digital Charter homes have gaming access.

The MSO’s Games Channel (on Charter Channel 1) offers up to five parlor games and seven interactive games. Charter is also doing a digital test of premium games (played for prizes.)

“Our games are faster and our return path is over a cable wire, not a telephone,” says Page Shaper, Charter’s marketing director of new products.

“We have genre games, puzzles, parlor games, but strategically we’re not there yet,” Shaper says. “But we will have games that have more color, more sound, more motion, more action” than competitors might offer.

Charter can offer more because of the capabilities inherent in its Moxi platform.

Shaper said the next big move for cable is to get into genre gaming. “That’s something Cablevision has already done,” she said.

“We are also looking into more creative ways to engage advertisers directly in the game. One option is having an advertiser creating a game that runs on our site for one quarter.”

On May 20, Cablevision launched cable’s first interactive subscription games package to its iO digital customers, growing in two years from 43,000 digital customers, or 1% penetration of its 3-million cable homes, to 1.2 million iO homes (40% penetration).

“A robust digital service that includes VOD and interactivity has clearly driven this growth,” Cablevision president of interactive television development and operations Patrick Donoghue says.

For $4.95 per month, Cablevision digital households can buy unlimited access to “Variety Pak” games such as Dudes, Planet Rider, Sumo Tsunami, Speed Spell and Backgammon.

“We launched the service at 3 a.m. on a Monday morning with no promotion and by 3:30 had subscribers playing games and filling up our high-score screens,” Donoghue said, “We’re committed to evolving our service by adding additional games, launching new games and games packages. We’re also planning to introduce multi-player capabilities in 2005, which will give our subscribers the ability to play against their friends and neighbors.”

Ten days after the “Pak” launch, Cablevision added “Casino” to its iO offering, at no additional cost. Subscribers currently can play Blackjack, Caribbean Poker, Roulette, Video Poker, Battle Royal, Slots and Keno. Players draw iO branded cards, throw dice and drop coins with the touch of the remote control. Top players are able to post their scores on leader boards visible across Cablevision’s service area.

“Popular casino games will create additional momentum for a service already becoming popular with customers,” Donoghue said. “We’ve developed a compelling interface and intuitive controls enhanced with incredible graphics that are as real to a casino floor as you can get on TV.”

By any measure, Dish Network is currently the nation’s leader in interactive TV programming. Dish launched an ITV portal in 2001 and has been building on it ever since.

In addition to the $3.99 Buzztime pass-the-remote service, Dish offers a fantasy auto-racing game, for $4.99 a month, provided by Silverstar Holdings, a division of the National Association for Stock Car Auto Racing. Also available are “evergreen” games such as Playin’ TV, Kidswise and PlayJam, plus seven seasonal sports games.

Last week, Dish added an ITV fantasy football game from OpenTV Corp.

EchoStar won’t specify how many of its 9 million ITV capable customers are also games households, but, according to the company’s director of interactive programming Scott Higgins, “We wouldn’t be continuing to offer games if they weren’t successful.”

Higgins cites satellite’s pluses as multi-household games, personalized game services, and the fact that satellite is offering prizes now.

The future challenge, he said, will be played against competing technologies, specifically artificial intelligence.

“The battle is going to be on the quality of the games and on our maximizing technology which you can have better video presentation and artificial intelligence, where you can play a game and say 'Wow! How cool is that car wreck!’ Without AI, games just get boring after 15 minutes.”

Responds Donoghue: “We offer a richer games experience then satellite because we have much more bandwidth to support advanced features and functionality, including real-time top-scores, and interactivity between customers, satellite competitors simply can’t provide.”