Friday, November 30, 2007

Venture Capitalist Sees Growing Investment Opportunities In Serious Games

What makes Serious Games attractive to investors


As anticipated on my prior posts focused on Serious Games Market Size, funding has started to become available from foundations, governmental agencies, non-profits and venture capitalists.

The following article by Richard Carey, offers a unique opportunity to get a venture capitalist perspective on investing in the educational technology market, including educational games and simulations.

A VC’s Perspective on EdTech Investment - Published November 29th, 2007

The SIIA’s annual Ed Tech Business Forum, the leading business and finance conference for the K-12 and post secondary education technology market, attracts senior management from education software companies, platform technology firms, solution providers, publishers, private equity firms and venture capitalists.

The keynote speaker for this years conference was John Martinson, Managing Partner of the Edison Venture Fund. With 31 years of venture capital experience, including 8 investments for Edison from $3-10M and 12 investments from $250K-12M as an individual, Martinson has significant experience and a unique perspective on investing in the educational technology market.

In his presentation, Martinson provided a candid appraisal of what makes educational technology attractive to investors, as well as its unique challenges.

He also shared his “tired or wired” list, highlighting emerging segments of the market — invaluable insight for anyone managing an educational technology portfolio or investing in new products for this market.

K-12 Software is a Sizable Niche Market

Among his obserations: K-12 software is a sizable niche market with 55M students, 125K schools and 12K districts.

There’s tremendous public pressure to improve student performance, reduce costs and improve productivity.

It’s a market of passionate entrepreneurs, a market with a high SAS (software as a service) renewal rates. Equally important, if somewhat below the radar of many departments of education and school boards who make purchasing decisions, today’s students are digital natives as are many of their parents, so the demand for educational technology will only increase.

On the downside, there’s a long tradition that schools pay for hardware and expect software and services to be free. Add to that regulations that differ by state, a long (and seasonal) sales cycle, decision making by committee, and disbursed sales (12 thousand districts, 125 thousand schools) and the challenges become clear.

Growing Investment Opportunities

In spite of these negatives, Martinson sees growing investment opportunities on several fronts, including instruction management (learning management systems), data management (assessment reporting and analytics to drive individualized instruction), portals and communication systems, special education (see individualized instruction), online schools and courses (distance learning), educational games and simulations -- "Serious Games”, and in mobile computing devices.

Martinson is particularly bullish on the post-secondary market. Despite being much smaller than K-12, the technology infrastructure is more robust, there are fewer cumbersome regulations, there are business-like initiatives to increase revenues and lower costs, and decisions are more timely compared with those made by state and local school committees.

In a nutshell, while educational technology remains unarguably a niche market with unique challenges, Martinson feels the need for applied technologies, rapid acceptance of web-delivered software as a service, recurring revenue business models, and pent-up demand from years of restrained investment in K-12 point to increased opportunity for investors, publishers and product developers.

Saturday, November 24, 2007

Serious Games: Bigger Than Movies In Netherlands

Serious Games challenging us to play a better future

The Center for Advanced Gaming and Simulation is a leading edge research center that advances the state-of-the-art in gaming, simulation and virtual reality. Its goal is to create technology for highly effective learning and training experiences. For this purpose Utrecht University, the Utrecht School of the Arts and TNO combine their creative talents and unique professional skills in the fields of computer science, information science, psychology, liberal arts and game design.

(Serious) Games Booming Business in The Netherlands

On Webwereld's yesterday news: "Nederlandse Gamesindustrie groter dan filmbranche", which means: in The Netherlands games are bigger than movies - in some respects.

The article cites the chairman of the Dutch gaming industry organization NLGD, who claims that in 2007 the game industry will employ over 1500 people and generate an annual estimated turnover of one billion dollars - more than the whole Dutch movie industry.

Of course the Dutch movie industry isn't exactly Hollywood, but it's still significant when something new overtakes the old.

What makes this really interesting, however, is that it's especially the Serious Games segment (training, simulation, education) that do well, creating most of the games economic activity.

One of the major universities in The Netherlands, the University of Utrecht, has created the Center for Advanced Gaming and Simulation (AGS) in partnership with the Utrecht School of the Arts and TNO.

The ambition of AGS is to be the most productive and most cited research center in Europe and to be the preferred supplier of knowledge for companies dealing with gaming and simulation for education, training, and entertainment.

Sunday, November 18, 2007

Serious Games Pioneering How We Will Learn & Work In The Future

Computer Games: a solitary past-time has morphed into a social intensive activity

For most people, video games mean entertainment, like TV or the movies. But their true meaning may be much bigger, impacting every aspect of our world, from education to business, society and culture

Via: IBM - The Future Of Computer Games

IBM explores how video games may impact every aspect of our world, from education to business, society and culture.

Gamer or Futurist?

What was one a solitary past-time for children has morphed into a social intensive activity. People play games with friends, with family, and in online communities.

Massively-multiplayer communities are stretching the boundaries of grid computing. Games are driving demand for an advanced new breed of computer technology, which can render 3D virtual environments in stunning fidelity.

To understand the true potential of games, think of them as pioneering a new environment— for entertainment, but also for learning, commerce and culture.

These virtualization technologies have many powerful applications, e.g. from telemedicine to medical imaging. Eventually, most work may be performed inside rich, intensively collaborative environments that gamers are pioneering today.

Games Facts and Figures

As games get more popular...
Video games sales are driven by the games-console cycle. Every five to six years, console manufacturers such as Sony, Nintendo and Microsoft introduce a new generation of equipment, triggering new growth in games sales. This year marks the start of a new console cycle. According to In-Stat/MDR, next-generation game-console shipments will hit 17m in 2006, 27m in 2007 and 33.5m in 2008.

Facts and figures are originated from two mains sources:

The Entertainment Software Association Report - "Essential Facts About The Computer And Video Game Industry", 2006 sales, demographic and usage data. PDF 65 Kb ...

...gaming is now for everyone
The stereotype of the solitary, adolescent gamer is seriously out of date. More than two-thirds of gamers are adults, according to the Entertainment Software Association. People who grew up on games continue to keep playing them— though the sorts of games they play tend to change. And although the majority of
gamers continue to be male, the numbers of female gamers is rising even more quickly.

... and Irresistible! Markets, Models and Meta-Values in Consumer Electronics (December 2005).

Some online games have become huge virtual communities...
Online games like Everquest II and Dark Age of Camelot have attracted hundreds of thousands of subscribers. World of Warcraft became the fastest selling PC game in North America in 2004-2005, selling 240,000 copies through retailers in the first 24 hours. World of Warcraft has since recorded an astonishing peak of 500,000 concurrent users and 3.5m subscribers

Friday, November 16, 2007

Microsoft Shaping The Serious Games Movement Into A Multi-Billion Dollar Market

Serious Games may now explode driven by game-based training efficiencies

As Microsoft Corp. announced on Wednesday plans for its new platform dubbed Microsoft ESP, available as of January 2008, “that enables the innovative use of visual simulations for immersive learning and decision-making, supports PC-based commercial off-the-shelf hardware and software, and enables simulations to be built faster and more cost-effectively, I’ve been considering two potential major implications for the Serious Games Market.

My very first thought – SG Market Size

Short, sweet and to the point, my very first thought was:“By no means would Microsoft join either a current $ 150 million dollar market or a $ 1 billion market to-be only in 2011”.

(Please refer to Adobe Serious Games Whitepaper By Anne Derryberry, page 6, for recent disputes on the SG market size).

My derived second thoughts – SG Business Models

Some analysts have stated that “despite the uncertainty of a standard go-to-market model for "serious games," most insiders are optimistic about their commercial future.”

However, the announcement embeds quite a few threads that could be easily pulled out to challenge the above statement, e.g.:

"With over half of today's work force having grown up playing immersive computer-based games, businesses, governments, trade schools and universities are seeking affordable solutions that enable immersive learning experiences.”


“Microsoft ESP makes it easy and cost-effective for organizations to apply the advantages of games-based technology to serious learning and training endeavors”,

or still

“The initial version of the platform focuses on Microsoft's established strength and expertise in aviation capabilities and is targeted to military and commercial aviation audiences. Future versions of Microsoft ESP will expand beyond aviation into ground and maritime operations, indoor and avatar-centric simulations for commercial, government and academic learning opportunities.”

As SG early developers know, potentially every training or education program, every curriculum, could be reshaped by the use of "Serious Games."

The market so far has been essentially B2B oriented, where the majority of projects are "work-for-hire" or single-use efforts like those seen in traditional business software industries

As developers seek to find ways to make the market work for them, which implies new ways of doing business, raising capital, distributing, and selling product, it seems Microsoft is already shaping Serious Games from a movement into an emerging multi-billion dollar market.

Sources:CNN Money
Microsoft ESP Debuts as a Platform for Visual Simulation

Wednesday, November 14, 2007

Adobe Serious Games Whitepaper By Anne Derryberry

Serious Games Whitepaper is available online and freely distributable

Via: I'm Serious Net

Anne Derryberry, over I’m Serious.Net Blog, has made available for download and distribution her whitepaper for Adobe Systems on serious games:
“Serious Games: Online Games for Learning” (Adobe PDF format).

Anne is a Learning Architect for Serious Games, online learning games, simulations and virtual worlds. She works with learning organizations, game developers, tools developers, and analysts as learning architect, advisor, consultant, and industry observer.

Anne says her "fascination as a designer is with group experience and how groups learn in virtual environments, especially through games. Group in this context does not mean a collection of people whose individual statistics are aggregated together. Groups, or cohorts, are a collection of people who are identified in advance and for whom the experience is intended."

She defends the idea that for Serious Games to gain wide-spread adoption, commercial developers will need to figure out how to make money in this space. To do that, design and business minds must wrestle with the ever more pressing problem of how to make learning and meaningful play into profitable and sustainable business.

Tuesday, November 6, 2007

China's Serious Games: Sizeable As Its Economic Growth

Serious Games to bridge China's manufacturers and consumers around the world

Via: The Associated Press - China Plans Virtual World for Commerce

China's government is building a vast virtual world dubbed "Beijing Cyber Recreation District," which founders say will help the manufacturing superpower evolve into virtual commerce.

Some supply chain experts say the project is impossibly grandiose in its goal to provide direct links between tens of thousands of Chinese manufacturers and millions of individual customers around the world.

The Beijing municipality in partnership with private capital (and with help from MindArk of Sweden) is planning a virtual world for around 150m avatars, of which 7m could be online at the same time.

But every "Made in China" label eventually could include a Web site where customers could order more — and Chinese factories would produce custom-made goods and send them directly to consumers' homes, mused Chi Tau Robert Lai, chief scientist of the virtual world.

The 3D world is supposed to be the online counterpart to the China Recreation District (CRD), a theme park, mall and playground being built in a former steel plant in Beijing for the 2008 Olympics.
Some Chinese-language Web sites of the CRD are already up, but most of it — including the first direct links to manufacturers — won't come until the second half of next year at the earliest, Lai said.

In addition to connecting factories with people outside China, the project will allow businesses outside China to tap the nation's burgeoning middle class, he said.

The CRD's dream of eliminating middle men — brokers, shippers, purchasers, even retailers — is not new. Toyota Motor Corp. began experimenting with "just-in-time" manufacturing in the 1950s, though it took decades to refine the process.

But just-in-time manufacturing for less expensive items such as clothing, electronics and toys is still years away. The low cost of labor in China makes it cheaper to ship bulk items to retailers around the world and then sell overstock online or in discount stores.

China's plants are unlikely to deliver consumer goods to doorsteps abroad anytime soon, said Robert L. Bartlett, a retail industry consultant in San Rafael, Calif.

"In the long run, the age of technology will allow us to do just-in-time responsive manufacturing based on consumer needs — but the superior customer experience in truth is still in a retail store," said Bartlett, consultant to Gap Inc., Wal-Mart Stores Inc. and other major retailers.

Lai acknowledged that Chinese manufacturers can't efficiently crank out just one custom-ordered shirt. But they can wait until numerous people and clothing shops around the world submit similar orders, then assemble 5,000 of the same blue, pinstriped button-down shirt and ship it within a day or two, he said.

Lai said the CRD could eventually become a bigger version of eBay Inc., which connects buyers and sellers worldwide online in both auction and fixed-price formats. EBay is now also creating social networks where registered users can discuss everything from shoes to Barbies.

Just-in-time manufacturing is expected to generate the largest amount of revenue for the CRD, but the network also will host cultural exchanges, corporate meetings, educational classes and other events common in virtual worlds. Registration will be free, Lai said. Users will buy virtual items with credit cards or micropayments in dozens of currencies.

The CRD will be based on technology from Sweden's MindArk, maker of the "Entropia Universe" virtual world. Entropia built virtual "islands" from company templates. CRD's v-commerce transactions will go through Paynova, Sweden's equivalent of PayPal, and Germany's CryTek will provide some of the graphics.

Everything in the CRD will live on servers in Beijing maintained by government programmers. The government has dictated that there will be no pornography or online gambling on the CRD, which it is touting as a public-private partnership.

The Chinese government currently restricts access to certain types of information published online. However, the authorities have embraced commercial development and the country's economy is booming.

It is the world's biggest manufacturing country pitching to lead the next stage of development as the internet moves into three dimensions.

It doesn't stop there. Beijing Cyber Recreation District, now under construction, will have all the infrastructure (server farms, communication links, electricity, banking links, logistics etc) needed to make this the world's one-stop shop for consumers and producers.

China, which is hosting a conference on the subject this month, wants companies around the globe to set up there - the likes of Cisco, IBM or western virtual worlds - to take advantage of state-of-the art communications, infrastructure and (for the moment) cheap wages. It could be a difficult proposition for many corporations to resist.