Making Fun Predicts "Destruction Of The Game Console Model"

CEO John Welch and CTO Lee Crawford, co-founders of Making Fun, a division of News Corporation, continued our conversation (see part one here) about the impact of social and mobile gaming on the game industry.

Making Fun is a small company with barely more than 20 people, but as a division of News Corporation they have an outsized vision. "News Corp didn't get into gaming to be small," said Welch. "They didn't want us to go and do a bunch of me-too stuff. We're not going to beat Zynga by following in their shadow and nipping at their heels."

Crawford underscored Welch's point. "To compete as an emerging publisher you have to go to where the market's going to be when the title comes out. You can't follow, you can't clone. That's not a way to success."

Well, that's not true for every company, is it? Welch broke in: "If you have a early-mover advantage, and you got to scale based on certain techniques..." Crawford completed the thought: "The gorilla can ape all he wants - that works fine, for the smaller guys it's hard." They don't see copying or fast-following as the right strategy. "We're not going to get to where Zynga is by doing what they did," said Welch. "If you look at Hidden Haunts, we're not going to be the biggest hidden object game, but we'll be the best. We'll be more successful than all of the other ones."

When asked if Facebook's impending IPO would have a direct impact on game developers, Welch responded "I'd be hard pressed to find a direct impact." Then he launched into a passionate speech about how the game market is changing. "Maybe it's an accelerant to what's already happening, which is the destruction of the classic game console model, of the proprietary dictatorship of how to put entertainment on a TV, which we had in the mobile ecosystem also until Apple came and shattered that."

"The world we live in, this free-to-play, democratic world where anybody can create content - we're competing against the dude that created Minecraft, and we're competing against the guys that ported their Flash games for chucking birds, and that's great. You can have phenomenal economic success as a relatively small independent company. Or as a newly established, hopefully bigger company, and you don't need permission. You don't need to ask permission to put your title on the device."

"What's already happening... is the destruction of the classic game console model."

John Welch, Making Fun

"Where do you think the innovation is going to happen?," Welch asked rhetorically. "The world of Miyamoto having early access to the hardware spec, and helping to create the hardware spec and knowing what the controllers were going to look like, and being able to do ridiculous stuff that no one's been able to do before - those days are over. Because now development happens in the hands of hundreds of thousands of teams around the world, who don't ask anyone for permission. They do. And where traction occurs, you get the acceleration. That's the world we live in now in the mobile space, that's the world we live in now in the social space, and hopefully soon in the television space."

Crawford was more specific about what a Facebook IPO could do. "I think the benefit of their IPO will be they'll have considerably more cash. I suspect they'll start to invest more widely in adjacent markets. I think we'll see a big push into HTML 5. A lack of game development in HTML 5 is what's keeping games off of television sets, for example. I think Facebook will lead the charge of investment into that arena. They'll seed some games and some entertainment content, and then the rush will come. We'll see gaming in general bleed very rapidly into the 10-foot environment as a result of Facebook's investment."

Both Welch and Crawford see the impending transformation of living room gaming in the new Google TV and the rumored "iTV" from Apple. "I'm sure there'll be an iOS -based TV shortly," said Crawford. "Then all the games we know and love on the iPad will suddenly be running in the living room."

What does this do to the current console market? Welch was blunt. "Hopefully destroys it," he said. Having tens of thousands of free-to-play games is certainly challenging for consoles, but a vast quantity of games is not an unalloyed blessing. "Nobody needs that either. You want some curation," Welch noted. "Apple's tried to get better at that over the years, and Facebook makes too much money on ads to care about it. Ultimately nobody needs millions of games competing for users' attention and time. What we do need is millions of developers out there having the opportunity to succeed. That's what's cool."

Could console makers try to adapt to the changes in the marketplace, and perhaps open up their platforms to be more social? "I don't think they're going to open up their platform because they want to maintain a quality bar on those consoles, and I don't think they're going to partner with the conventional social networks," said Crawford.

"They've got a massive innovator's dilemma," added Welch. "They're going to destroy value if they keep up with the times; they're hampered by their success. Embracing the models that are necessary and that will happen with other companies, would destroy a lot of the value that they already have built."

"Microsoft and Sony can keep optimizing their console experience, but it's going to be a smaller and smaller piece of the overall entertainment pie," said Welch.

Crawford explained why the console space is changing. "The reason you had to hot-rod in the form of a console is because you needed the CPU capacity co-located with the television set to get high-quality graphics. That's not the case anymore. An iPad graphics processor will give you Wii quality graphics. You can use services like OnLive or Gaikai or any cloud-based service to stream even higher fidelity experiences than you can produce locally. I think that's going to result in a bifurcation of content from the hardware. It's going to neuter the ability of the console manufacturers to stay the course with the business models they currently employ. I can enjoy a very high end graphic experience on a very low-end television set today if I have the network."

"I don't care about the Call of Duty market," said Welch. "Let Activision and Sony have all the fun they want to have making Call of Duty and putting it on a console. What about tower defense games and card games and the stuff that's generating billions of dollars online today that's not on the television set? Those consumers watch TV, they have TVs, they want to play games, clearly. So I'm happy to start with the 'lower end' that's still beautiful and rich that may not be as taxing of a CPU and a GPU, but it's still beautiful and rich and it's social. There's a lot of room for innovation for with what's there today and what will be there tomorrow."

Welch summed up his vision for the future of living room gaming: "What I'd like to see happen, and I think it will happen sooner or later, is that the console ceases to become the defining characteristic of the ecosystem."