Video Gaming’s Hot Venue: CES Wins Full Embrace From Sony Online Entertainment

Editor’s note: John Gaudiosi, who covers the video game industry for WRAL Local Tech Wire and writes the Gaming Guru blog for WRAL.com, covered the Consumer Electronics Show this week.

LAS VEGAS — Sony Online Entertainment, a division of Sony Pictures Digital, has expanded its presence at the Consumer Electronics Show over the past three years. What literally started as a last-minute showcase of its games at the Sahara Casino in 2006 has blossomed into a full-blown presence.

Anchored at the MGM Casino in a two-story penthouse Sky Loft suite, SOE scheduled meetings with the growing domestic and international gaming press that covers CES. In addition, the company held a press dinner on Jan. 8 at the Italian restaurant Fiamma and had a full-blown party at The Joint at the Hard Rock Casino, which included SOE’s 2nd Annual Poker Tournament and celebrated the launch of "Pirates of the Burning Seas."

John Smedley, president of SOE, said he’d like to keep CES part of the company’s press focus each year. Internally, SOE holds its yearly town hall in mid-December in which every one of its games is reviewed. This allows these latest builds of current and upcoming games to be shown at CES a few weeks later.

With the shrinking of the E3 Expo from its mammoth spectacle of 60,000 attendees in 2006 to the intimate Santa Monica hotel suite format of 2007, which was attended by under 5,000 journalists and industry professionals, CES has become a larger focus for game-makers like SOE.

“E3 is going in the right direction this year after last year,” said Smedley, referring to the still-downscaled show’s return to the Los Angeles Convention Center this July.

“CES is a great event because there’s so much press here, plus, so many people like coming to Vegas,” said Smedley. “This allows us to show off our games when most of the other game companies aren’t.”

After establishing itself in the massively multi-player online (MMO) space with "EverQuest" years ago, SOE has been actively developing additional games aimed at widening the market. It’s had success with its joint-venture with LucasArts, "Star Wars Galaxies." This year will mark the launch of three new MMO games: "Pirates of the Burning Seas," which is setting sail in February, and "Free Realms" and "The Agency" for later this fall.

Although Disney Online has had success with its "Pirates of the Caribbean Online" game, which launched last fall and was actually shown at the new Palazzo Casino during CES, Smedley said SOE’s "Pirates" game is aimed at core gamers, not the young audience that is playing the free Disney game.

“The average age of our MMO player is 31, and our demographic consists of 85 percent male gamers,” said Smedley. “We need to broaden this space out. "Free Realms" is aimed at the tween and family market and is a game that should attract a 50/50 male/female audience. "The Agency" is the evolution of the MMO. It combines the popular shooter genre with spies. Everyone knows “Alias,” “24,” and James Bond. There’s a huge market of gamers that can’t stand fantasy games, and I think this will attract them.”

In a business that is dominated by Blizzard’s "World of Warcraft," which has over 10 million subscribers, Smedley believes SOE needs to reach out to new gamers for this space. He added that the percentage of gamers who try all of the MMO games is getting smaller and smaller, which is why SOE is developing new IP, including the 2009 MMO game based on the DC Comics universe.

“The MMO space is evolving similar to the PC gaming world in that it’s being driven by a small number of huge franchises like WOW, 'EverQuest' and 'Rune,'” said Smedley. “We’re turning to a new market of gamers with new subscription models.”

"Free Realms," a Shrek-like fairy tale world filled with colorful characters and humor, will be available to play for free through in-game advertising sponsorship. Gamers will be able to buy a $4.95 monthly subscription to unlock additional areas and content. In addition, in-game items will be sold through micro-transactions for 99 cents each.

“We may follow this model for "The Agency" and offer in-game ads and micro-transactions, but we’re still in the process of deciding the best business model,” said Smedley. “The benefit of this model is that you attract a much larger audience, including new people who might not otherwise try an MMO game.”

SOE is also gearing up its PlayStation 3 synergy. With Sony's selling 1.2 million PS3s during the Christmas season, Smedley said PS3 has some steam behind it now. "Free Realms" for PS3 will be released six months after the PC version, and both "The Agency" and the DC Comics game should have simultaneous PC and PS3 launches.

The PlayStation Store has opened up a lucrative new business model for SOE, which is the number two publisher of games for the PS3 digital distribution store with 10 games available. Looking ahead to this year, SOE is developing both Wheel of Fortune and Jeopardy as downloadable games.

“We’re taking more time with these games because they’re perennial franchises,” said Smedley. “We’re working on tie-ins between the game and the TV show and we’re also integrating this game into PlayStation Home.”

SOE is also developing a downloadable game based on Sony Pictures July tent pole movie, Hancock, starring Will Smith. This marks the first time the company has worked with the film division on a property, but it won’t be the last.

In five years, Smedley sees the PS3 generating half of SOE’s revenue as Sony establishes its new console around the world. He said SOE is not trying to create a WOW clone, as other game publishers are attempting.

“We’re trying to create different games and offer consumers new experiences that stretch the potential of this space,” said Smedley.