The Impacts of Broadband Network Entertainment on the Video Games

Industry and its Value Chain

OECD BROADBAND CONTENT PANELWorking Party of the Information Economy

3rd June 2004Murray Hume

Head of SCEE Network Gaming Service team

AGENDA

• Some assumptions about the future

• Some conclusions for the video games industry

• Structural Shifts in our Industry Value Chain

• Significance of Service Provision and Community to Content Owners

Assumption A

We are depending on competition to deliver exponential growth of broadband homes with

consoles

BB Households

= 20m (10%)PS2 Households

= 20m

2m PS2 Households

with Broadband

NOW

2004

BB Households

= 50m (25%)PS2 Households

= 40m +

~ 10m+ PS2 Households

with Broadband

BUT SOON

2006/7

Assumption B

Network Capabilities will become a normal part of the gaming experience for leading product

2.0M PS2’s ALREADY ONLINE

4 of 5 Xmas 03 TopPS2 Titles were

Networked

30+ PS2 NetworkTitles

+ 50 More This Year

Assumption C

Video Games Consoles are increasingly

‘Computer Entertainment Consoles' with many non

game product lines

Community + Service Provision

Public arena access to Broadband

Network Games and Features New Forms of

NetworkInteractiveContent +

Communication

?

Key Areas of Change for Network Computer Entertainment

To Fulfil Its True Potential The Console Network Universe Needs Competition in Services and

Broadband Supply:

First Conclusion

“Many Communities Must Co-Exist"

Second Conclusion

Network Entertainment Changes Our Industry Value Chain.

CURRENT VALUE CHAIN

Developer

Publisher

Distributo

r

Retail

Design Creative

& Technology

Product Management

Marketing

Funding

Pricing Policy

Timing

Inventory

CRM

Sales

Logistics

Terms

Pricing

Mark Downs

Priority

Presentation

€

Dev

elop

er

NEW WORLD ORDER PUBLISHING

Design,

Creative &

Technology

Disc Publishing

Network Publishing

Reta

il

Product

Management,

Funding, Sales

Logistics, POS,

Marketing, CRM

€Pricing Policy Sales Terms

Priority, Technology, Marketing, Funding,

Billing, CRM, Product Management

Dis

trib

Third Conclusion

As Network Services become part of our

products, capability in delivery of Network

Publishing Services will impact

the Disc Publishing process.

NETWORK QOS

GAME INTEGRATION

MARKETING + COMMUNICATION

BILLING & PAYMENT OPTIONS

EVENT MANAGEMENT

MODERATION STRATEGY

IDENTITY AND AUTHENTICATION

Key Ingredients of Network Service Delivery

CUSTOMER SERVICE

OurTraditional Function

OurNew Functions

We have over 70 broadband ISP partners

Final ConclusionVideo Game Publishers Need to Develop 3D

Business Model Thinking

SubsFees

EventFees

DiscSale

Changes in one offering will affect the others

Thank you

OECD BROADBAND CONTENT PANEL3rd June 2004