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In the raging debate over the legitimacy and consequences of the "long tail" theory, few markets have received more attention than those dedicated to digitally-distributed video games. Proponents of the long tail have argued that digital distribution will finally turn the historically hit-driven game industry on its head - that future revenues will be driven by consumer activity distributed across a huge catalogue of video games, developed, in large part, by independent game developers as opposed to titanic publishers. That it will prove consistently more profitable to focus on niche audiences in this new world of digital game distribution, rather than to focus on the development of broadly-appealing hits. And (for those of us interested in the spreadability model) that a new generation of empowered consumers will actively seek out and promote the highest-quality content, driving revenues to the most deserving game developers and leading to a healthier and more vibrant video game ecosystem overall. There can be no doubt that encouraging signs of this have begun to crop up everywhere. Many now-prominent independent game developers, such as The Behemoth and 2D Boy, have leveraged console-based digital distribution platforms like Xbox LIVE, Wiiware, and the Playstation Network (PSN) to reach markets that were previously only accessible via the long arm of a traditional publisher. These developers have not only created award-winning games that have generated significant amounts of profit - they have, in many cases, retained the rights to their IP and have operated with near-total independence; an unthinkable situation for small console game developers only a few years ago. And while digital distribution on the console typically generates the most buzz, independent developers have made equally great strides on the Web and the PC thanks to a wide variety of channels (portals like Kongregate.com, services like Steam, and more generalized distribution networks like Facebook, to name just a few.) Most recently, attention has been diverted to mobile application stores like that of the iPhone, where independent developers have also made a name for themselves and have, again in many cases, retained the rights to their IP in the process. These happenings, while extremely encouraging, mask some of the current realities and challenges faced by digital game distribution systems. As many prominent journalists, analysts and scholars have recently argued, it turns out that hits are no less important in the new long tail world. As Lee Gomes argued in the Wall Street Journal, in 2006 Amazon.com still derived 75% of its book sales from just 2.7% of its titles. True, 2.7% of 3.7 million books is nearly 100 thousand books - a great deal more than the total offered by any brick and mortar store - but that doesn't change the financial situation for the authors of the other 3.6 million! Gomes also noted that, wherever he looked, hits remained vitally important to a given ecosystem (or in his words, "iTunes looks like Billboard, not some paradise of niches.") And research by Anita Elberse, a professor at Harvard Business School, has shown that in some long tail markets, "success" has begun to concentrate in progressively fewer best-selling titles. Professor Elberse also found that, in some digital markets, independent artists have actually lost share to major labels. This is not the indie paradise that Chris Anderson promised us. The phenomenon studied by Gomes and Elberse appear to be repeating themselves in digital game ecosystems. While, unfortunately, no verifiable public sources of information exist for the sales of iPhone, Steam, Wiiware, PSN, or Xbox LIVE Arcade games, it is widely believed that all of these ecosystems have become more competitive and more hit-driven over time. Where once any game had a reasonably good chance of reaching a sizeable audience, thousand of games (most especially on the iPhone) now go entirely unnoticed. This was the inevitable and unsurprising result of the initial supply/demand imbalance that characterized each of these digital ecosystems upon their births. Millions of consumers, eager to download content on their exciting new game consoles or phones, poured through initially-limited game catalogues and purchased everything in sight. Dramatic sales were trumpeted by indies, by the press, and by the platform holders themselves, spurring huge increases in content supply which inevitably pulled each ecosystem back towards the more familiar hit-driven model. However, these ecosystems also display (to varying extents) the hallmarks of the long tail; some hit and niche titles continue to generate a significant amount of revenue despite having been launched two to three years ago. That's an extremely rare feat in the land of retail games. To a limited extent, the platform holders who drive these digital game ecosystems can be held responsible for the speed with which they have evolved into hit-driven businesses. As of the time of this writing, Steam, Wiiware, PSN, Xbox LIVE, and the iPhone do not enable consumers to both freely rate and comment on content and - crucially - to sort the title catalogue by those ratings. (The iPhone does, at least, enable and encourage ratings.) Consumers are also unable to filter the title catalogue by the subset of games that their friends rate highly - the most important ratings of all. Furthermore, none of these ecosystems currently possess a recommendation engine of the sort that has proven so useful and wildly successful on Amazon.com. The consequence, unsurprisingly, is an increasing tendency for consumers to steer towards titles they recognize, which means games based on well-known IP and/or games that have received substantial promotion by the press and user communities. For example, most of the recent, publicly-heralded hits on Xbox LIVE Arcade, such as Braid, Castle Crashers, and Street Fighter 2 HD Remix, are all games that were promoted years in advance of their public release or were (like Street Fighter) based on venerable IP. However, it would be terribly unfair to blame the platform holders for the ultimate evolution of their digital ecosystems into hit-driven businesses. As noted earlier, even Amazon.com, with all its supremely-refined tools and merchandizing mechanisms, has not managed to avoid the realities of a hit-driven business. More importantly, research has indicated that - given fundamental characteristics of human decision-making and interaction - it simply may not be possible to avoid hit-driven market dynamics in a digital ecosystem. Professors Duncan Watts, Matthew Salganikand and Peter Dodds recently demonstrated that, in a digital music ecosystem devoid of traditional marketing signals and recognizable IP (but possessing a public rating system), not only did "the hits get bigger," but popularity was essentially random. A song's popularity depended entirely on the first few users who happened to notice, rate and download it; a song that was #1 within one test ecosystem was bottom of the barrel in another. Of course, one could view this not as randomness, but as the ultimate validation of the spreadability model. That is: if a tiny group of initial consumers in an (admittedly rarified) digital ecosystem can have total control over the fate of a product, perhaps media companies have underestimated the importance of every consumer's voice. Perhaps active user communities - even very small ones - hold the key to success in this new long tail age. It's an age in which hits still matter (perhaps more than ever) but also in which indies have a better chance to make an impact on consumers and society at large. It may not be the long tail age that Chris Anderson promised us, but it is an exciting one nevertheless. David Edery David Edery is an independent consultant focused on the business and design of online and digitally-distributed games. Prior to starting his consulting firm, David was the Worldwide Games Portfolio Manager for Microsoft's Xbox Live Arcade service. Before moving to Microsoft, David worked for the MIT CMS Program, during which time he helped co-found C3. He is co-author (with Ethan Mollick) of "Changing the Game: How Video Games are Transforming the Future of Business" (FT Press, 2009) - a review of the ways that games are helping companies to connect with customers, to attract, train, and motivate employees, and to boost productivity.
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This issue of the C3 Weekly Update compiled and edited by Sheila Seles (seles@mit.edu) for the Convergence Culture Consortium.
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