I usually don't post stuff about interviews, but this one is very interesting. Alex St. John (CEO of Wildtangent) talks about several subjects such as: The current and following generations of consoles, the change of PC gaming business models and it's future, Direct X, Wildtangent's Orb, Microsoft and Intel.

Part 1 and Part 2 of the interview. I did not quote the entire interview, so you can check the full version in the links.

Introdution

ExtremeTech: I understand that at WildTangent, you're working hard on the Orb, which is technically a console for the PC. Now, Epic Games' Tim Sweeney, I'm sure you heard, put forth a very widely posted quote, "PCs are good for anything, just not games." That was taken out of context; he'd been asked about mainstream computers that lack graphics and audio power. How do you react to that quote?

Alex St. John: And so the shame of it is, the PC's a fantastic gaming platform, superior to anything anybody's every imagined, superior to every console, and Microsoft and Intel put crap in the PC that make it not so good. And so if you see a PC that is not denuded by things interfering with it by Microsoft and Intel, in many cases like an Intel crappy graphics chip, or a bloated Vista operating system, it's a fantastic gaming platform. And the shame is, if the low end of the PC market, the mass market PCs that everybody buys did not come with these crappy graphics chips on them and was not burdened with a fat OS, that the PC would be a larger contiguous gaming platform than all the next-generation consoles combined, probably would be clearly superior; the PC is the home of the most profitable game in history generating more revenue than the top 10 console games combined—that's World of Warcraft generating a 1.2 billion dollars a year in revenue, that's a pure PC game.

So it is clear that PC gaming absolutely killed [the market] in terms of revenue, killed it in terms of consumer usage—the average console gamer, according to Powers Associates, spends more time playing PC games than console games.

ET: Really?

ASJ: Yep, they do. They spend more money on the console, but again that's Microsoft's and Intel's fault.

Microsoft, Intel, and the Future of Computer Hardware

ET: How is this Microsoft and Intel's fault?

ASJ: Two problems. Two really simple ones. The first one is that, from many points of view, Microsoft and Intel come from an enterprise background. They're enterprise-centric. So in many respects the consumer market, from their point of view, is an after market for stuff really designed for the enterprise. And the consequence of that is in many cases subtle but important. Because what it means is that game and media support and keeping the operating system out of the way is secondary to, in many cases, silly security infrastructure and a lot of useless OS junk that impedes the real-time performance of games unnecessarily.

The second thing, in Intel's case is, they ship the cheapest, crappiest graphics chip they can as the commodity component—they push the OEMs to do that, because really what they want to do is sell that big Intel chip, the processor, if they can, because that's really where their core expertise is; from an enterprise perspective, GPU is kind of an afterthought.

ET: Intel's been saying for years that Intel graphics chips are going to improve fivefold, tenfold, whatever. Do you actually see a future where they do?

ASJ: I believe that both Intel and AMD have very sincere and significant efforts to dramatically bring up the graphics capabilities of their next generation chips, and I think the architecture that they are moving towards could be incredible. Literally revolutionary for PC gaming. Of course, Intel has got it down—you can't bet on them necessarily getting it right, but the story and the people working on it are very sincere, and the story, I believe, is a very strong one.

So certainly Intel is producing a new generation of chips that have CPU and GPU on the same die which share access to the cache—the L1 cache—coming out in maybe 2009. Those chips should have two interesting capabilities. They should theoretically, in terms of traditional Direct3D performance, be maybe five to ten times faster than the current chips on the market, but they may also have some graphics capabilities that don't exist anywhere on the market because of the change in architecture.

Because unifying the GPU with the CPU can produce dramatically faster vector processing and shared rendering performance between the CPU and GPU, so guys like Tim Sweeney will probably have to build their game engines, or may increasingly build their game engines, in entirely different ways than they used to in order to take advantage of the different architecture.

And Intel and AMD are planning on putting those chips into their mainstream consumer laptops, and although it's going to take a year or two for that to happen, it's still going to happen in an era in which the existing generation of consoles are well obsolete, they're slow, they haven't improved in performance in five years, they're nearing the edge of their lifespan, and consumer PCs shipping in that area, including the laptops, could have equal to or superior gaming capabilities. So you can say that certainly the intention appears to be in the right place.

ET: So we'll hope…

ASJ: We'll hope. I'm excited by the vision that Intel is expressing, and I'm an engineer; the architecture they're talking about, if they execute it well, could bring a fantastic revolution or renaissance in PC gaming. It's a long overdue fundamental change to PC architecture.

The Death of Console Gaming?

ET: Now, Mr. Sweeney, and also the God of War: Chains of Olympus studio head, Didier Malenfant, indicated enthusiasm for the next generation of consoles—not next-gen consoles as they're referred to now, but the following generation. Now when I spoke to you at Game Developer's Conference, you predicted that the current generation of consoles would be the last. Who's correct here?

ASJ: It's a heretical thing to say, but I have a damn good point. First of all, it's not crazy to point out many, major console failures in history completely destroyed the company and stymied the console market for years. Sega and Colecovision being two of the classic ones. They were leaders, everything they did—they could do no wrong, and boom, they're gone.

And the thing that's interesting in this era, that I think is significant, is that Sony and Microsoft severely overextended themselves. Burned themselves. Burned more money than they could ever hope to get back on these consoles. Even if the Xbox 360 and the PlayStation 3 are wild successes, they will never get their money back.

Billions of dollars. Billions of dollars. And, to say that they will have—for one, to say that they will be eager to do that to themselves anytime soon, is highly improbable, which means that this generation of consoles could be in the market as the only generation of consoles available for a very long time.

Second, who are the guys making money in the console space? Nintendo! They shipped off the shelf, cheapo, ATI video chips! And they're killing it! And the reason is that Nintendo correctly observes that graphics is no longer a differentiating feature; it's a commodity. The feature of the Nintendo [Wii] is a new type of game mechanic, enabled by a new controller. And so what that says is that graphics has become a commodity. As we talked about on the PC, all PCs are gonna have great graphics compared to a console, in many cases; the Japanese and Microsoft aren't going to engineer a superior graphics chip in the future than one you can buy from ATI or Nvidia; it's never gonna happen again. For Sony or Microsoft to go and design their own graphics chip would be lunacy in the next generation.

So that means that if there is another generation, it's gotta be about either input devices, or online community. Graphics will just be good everywhere. And if it's about community, that puts the console out of business. Because why the hell does Wal-Mart want to sell a money-losing loss leader device, when all the valuable content will be tied to online services and subscriptions and downloadable stuff? So for all the talk about downloadable content on the console, the console depends on the retail channel for that market to be valuable, and the retailer, if they don't get a cut of that, is going to say why the hell am I trying to sell these consoles at a loss for?

ET: True…there were rumors last year that the next PlayStation would not have an optical drive. Everything would be downloaded.

ASJ: Yeah. Yeah, that's a good—that's a very interesting—and here's another point. Why is World of Warcraft the most profitable game on the PC?

ET: Community.

ASJ: Yeah, but what makes it so profitable? There are a lot of community games out there. What is it about a massive multiplayer game that makes it make so much revenue? Is it just community?

ET: Why don't you tell me?

ASJ: There's one very important feature: DRM. You can't f---ing steal the thing.

ET: Ah. Gotcha.

ASJ: You can't pirate a community. So an MMO has two properties that make it hugely valuable. One is community; frankly, that's almost secondary. The truth is, you can't steal a community-based game. And because you can't steal it, you get all the revenue from it. All a console is is a giant DRM device. A console's job is not to enable you to play games, but to stop you from playing games you didn't pay for. If a console goes online, and plays community based games, its primary value, the reason Microsoft and Sony make the console and get a third of all the revenue, because they control the DRM and security. It's irrelevant if the games are community based games. The developers don't need their DRM and community; therefore, what idiot would share revenue with them?

You just make PC community games you're gonna reach everybody, because the average console gamer plays more PC games than console games—they have a PC—so again, you're out of business.

A real migration from CD games to online games would break the console business model, so you either have to make up an entirely new one, or believe that consoles as we know them are gone.

Online vs Retail

ExtremeTech: Do you see retail spaces like EB, GameStop, Wal-Mart, continuing to sell these expensive boxed products much longer? Where will distribution head over the next few years?

Alex St. John: I think one of the most fascinating things I've noticed over the years is when you walk into a game store today, there's a whole rack of empty boxes that say "coming soon." So they're literally selling futures on unreleased games. We'll call you when this game's released, but pay me fifty bucks for the box now. I think clearly distribution's gonna go online. Certainly, WildTangent's selling thousands of games. The WildTangent Orb is, we've got Sierra and THQ supporting it, and we expect that when it goes live to others, major publishers will announce support for it as well.

ET: Obviously you can't say who they are.

ASJ: I can't say who they are. But THQ and Sierra have announced and two other, huge names will probably have announced by the time we launch the thing.

And so, what you see, is one of the reasons that games that have 40 million dollar budgets and that too close to 80 percent of the cost of the game is art now, is that art replaces, or fakes, the absence of good 3D or realistic 3D and physics. Because instead of having a realistic interaction with the [game] world, what I do instead is create a lot more animations. For every possible scenario in the game….

ET: Well, what will?

ASJ: See, because when you move online…the thing that's interesting about the game business is you can think of it as walking into a grocery store and saying, "Hey, I'm a customer for some chocolate, do you guys have any chocolate?"

And the grocery store says, "Yeah, we have 50 pound barrels of it over there. They're a thousand bucks a barrel."

You say, "Well I like chocolate, but not that much." The store says, "Well go to hell, that's all we've got. A thousand bucks or no chocolate for you."

That's how retail games are sold. And it's an extremely inefficient business model. It's very crude. Only the hardest core or most dedicated, addicted gamer is willing to pay that way. Everybody else who has an appetite for chocolate will say, "Hey, I just want to buy a little 50-cent pack of Hershey's Kissables." If you took those barrels of chocolate and packaged them up in little packets of chocolate, everybody would buy them. Everybody's a customer for it.

So what you see happens when content distribution moves online, and the box, and the retail, and the physical inventory no longer imposes expensive strictures on how you can monetize the gameplay. Suddenly, games are paid for by subscription, microcurrency, and advertising, and demanding 50 bucks for the box is a tertiary market. Only a small percentage of hardcore gamers will do that, and most people are gonna consume content more like they consume television content—by jumping between channels and consuming a little bit of this and a little bit of that. And so, I think in the world that yeah, content distribution will move online, but more significantly will be the revolution of online business models, World of Warcraft again being the most fascinating example of that in the PC space.

The PC box business in 1998-ish was 2.2 billion dollars. Today, it's about one billion dollars, plus 1.2 billion in World of Warcraft subscriptions. Frankly, there's another billion dollars in advertising around Flash games that people often don't count in that, so the market actually grew, but the point is, if you ask where did all the PC box shelf space go to, it's not like the PC game business collapsed. The money just moved to entirely different business models and the market actually grew in those business models. So that what you see is that selling a box for fifty bucks is kind of a legacy business model, and I think that's the major transition that's taking place; that's if you want to make money selling games for the PC, it's gonna be in a different business model than demanding fifty bucks for a cardboard box and a piece of plastic.

The PC Online Business and the Orb

ET: And that, of course, is where the [WildTangent] Orb comes in.

ASJ: Yeah, the thing we see that's fascinating, of course, is that the PC OEMs are all huge fans of gaming. So the OEMs really want to make great gaming machines, and they want consumers using their devices for gaming. In fact, gaming is the principle purchase consideration for buying a new PC. Anybody buying a new PC is doing it because their old PC broke, or it's so infected with viruses, or God knows what that they can't fix it, or they want to play games. Those are the only really reasons people buy a PC, a new consumer PC.

They know the PC's gonna run their email. They know it's gonna browse, Word's gonna work fine [fakes a big yawn] you know…and if that's all they're looking for they're gonna pay the lowest price they can for a PC. If they think that PC may be a good gaming machine they'll pay more for it.

And so, gaming is the number one differentiator. If you walk into a Fry's today, and fire up a HP, Toshiba, or Gateway PC, every one of them is gonna have a huge catalog of games from WildTangent on it. That's how consumers decide what machine they're gonna buy to play their games. So gaming is one of the most significant influencers in driving consumer PC purchases. That's a phenomenal observation!

In the U.S. alone, 33 million consumer PCs are sold every year—more than all consoles combined—and 67% of them are used to play games on a regular basis. And that's also more than all consoles combined. So the PC's a really dominant gaming device and gaming's a really dominant influence.

So people absolutely want to play games on their PCs, they play whatever they can. However, the PC's not very secure, which is Microsoft's and Intel's fault. So piracy is very high on the PC which makes it hard for content developers to target it, and there's a huge install base of low-end machines sold with poor graphics capabilities, which is Intel's fault. This fragments the market which for developers like Tim Sweeney to target the PC with a quality piece of content in a broad way, and know that their content, their investment in that game will reach the maximum set of users; because, some machines it's not gonna work on for reasons they don't understand or it's too hard to support, and they don't know that their content's not gonna get stolen—in fact, they know it is gonna get stolen.

And so the problem with the PC business is that [Epic Games] would make much bigger, higher production value games, if the low-end graphics chips that Intel pushed to the market didn't suck, and if the PC was more secure so that they could be sure the games weren't getting stolen.

Those are the things that a console ensures: That the hardware's capabilities are consistent, games can't be stolen, and why people invest 40 million dollars in making a console game, even if it's for a smaller market opportunity.

ET: So on current PCs, where the market is fragmented, how does something like the Orb guarantee a dependable playing experience?

ASJ: We do a couple things that are very clever. First off, we detect the system configuration requirements for all the games in the catalog, so you only see the games on your machine that are going to work on [your system]. And you can also ask, hey, what do I need to have in order for this game to work?

Ninety percent of consumers are not that technically sophisticated. So when they walk to the store to pick up a game they want to buy, reading the edge of the box to figure out if the system requirements match their machine—they can't do it. They have no idea. They don't know what their machine is. And so that is meaningless information. So they either buy the box and take it home and the game doesn't work then they're pissed off that they have to return it, or they say, "Ah, this probably won't work, and I've had a bad experience before, so I'm gonna buy a console game."

In the online distribution model for the Orb, one, the console will detect what games will work and won't in your machine. Second, it doesn't cost anything to try the games on your machine for free. So there is no disappointment factor that you slapped down some money on a game that's not gonna work.

So the Orb, and the online business model, solves that problem in two ways. First, it doesn't make it a high tax if the game doesn't work, and second we detect what games are gonna work on your machine, so the consumer has a good indication…

I got bored about half way through but, who the hell is this guy (as in, what has he done that gives him credibility as he proclaims all these things)? Because it sounds to me like he is making some program to better run games on the PC so it is in his best interest for him to proclaim the death of consoles. Oh, also, THQ and Sierra is backing his program, *yawn*.

http://www.stayathomeserver.com/

Be afraid!

:)

http://www.stayathomeserver.com/book.aspx

and you can buy that book at Amazon here.

http://www.amazon.com/Mommy-Why-There-Server-House/dp/160530641X

The stay at home server will grow up and become a games monster controlled by microsoft! DANGER!!!!

okay fine games run better on PC. that doesn't mean consoles are dying. they're actually growing and based on what i know PC gaming is dying.

I agree with coolestguy, It's the other way around.

Console gaming is becoming more expensive, but relative to the PC, it's a drop in the ocean. We are getting gorgeous games on the 360 and the PS3, even though they are not crysis levels, how much would a person spend on a PS3 and 360 compared to a person who spends on a PC to get crysis running smoothly, let alone on high settings. BTW Don't give me random figures about how much PC builds cost, because at the end of the day, you can't factor in the tv into the console costs (Because a tv can be used stand-alone), but you have to factor in monitors, mouse and keyboards, speakers (because none of them work standalone without a connection to a PC). Even then, high end towers cost more than the console alone.

If anything, Consoles are eating away at the PC market, FPS (while according to some are always better on PC) have finally begun to get the controls right on the console. I would say the only two genre's that have PC still have to brag about are RTS and MMO's. RTS's may still fall the way FPS did if MS plans to bring multiple RTS's to the 360 actual works and well, personally, I don't care about MMO's.

Funny. Console gaming is not going anywhere. it's one of the fastest growing markets. This is just a guy with an agenda.

Is it 1983 again? Gosh, I wish they'd stop reversing time so much, it's getting old... Seriously, PC enthusiasts were making the exact same claims as soon as the Atari 2600 faltered. And look how wrong they were.

Console gaming is not going to vanish. Whenever an industry gets to the point where the implicit costs outweigh the revenues, you see industry exits and innovations come into play. Those not confident in their future in the industry will bow out, while those who cannot bow out of the industry will change the industry so that it's affordable again (hello Wii). This will be the second time that's happened to console gaming (the first being the NES).

If servers become popular, consoles are dead. :) But thats a big IF.

Computers don't have a prayer of overtaking home consoles, for the same reason that home consoles can never hope to succeed as "everything boxes": the mass market doesn't want computers in their living rooms, they want entertainment in their living rooms. Were every company somehow to bow out of TV-oriented gaming and no company to take their place, we would not see the purported rise of PC gaming; PC gaming would remain more or less the same size. There would be a minimal growth from console gamers switching to PCs, but most would rather not bother.

he's working on another steam! download the software! hook up in MP.

The problem he's has is the console is a lost leader in store and then there's no software and perifferals sales so why would a retailer carry it well that could be said about the PC to. why sell them if the games are being sold else where???

and not everyone playing console likes pc gaming! controller in hand 12 feet from tv on a recliner!

PC gaming two inchs from monitor leaning forward with hot pocket and monster drink in hand!

2 hour mission at stake dont bug me! theres a reason south parks take on WOW was so funny!
Cartman:MOM BATHROOM
Mom: what??
Cartman: BATHROOM!
Mom: That's a big boy!

To funny!