Watching Sony Corporation sometimes is like watching paint dry, it takes an infuriatingly long time and then it turns out they chose the wrong color. But finally just as Sony has begun to turn the corner on its PlayStation 3 gaming console, making in-roads into the more than one year lead that it gave the Microsoft Xbox 360, it has opened up a bid to control in-game advertising.
Industry pundits seem to think that it was biding its time, frightened to damage the resurgence of the PS3. CEO Howard Stringer has been quoted commenting that young people don’t like advertising very much, suggesting that the decision to not enter in-game advertising came from the very top of Sony.
But now the company is ready, saying that it is opening its doors to in-game advertisers, citing only IGA Worldwide as the ‘first’ network to gain its endorsement. As long as four years ago, the pioneers of in-game advertising claimed it was possible to get Sony’s permission for in-game adverts in games it distributed, but in decisions which came reluctantly and did not include the major games that were exclusives for Sony.
IGA has followed this up with a wide-ranging exclusive deal with market leaders EA Games to bring all of its PlayStation titles to market with advertising in them, effectively sewing up in two deals an incredible amount of potential revenue, a deal that the company is almost certain to go public on the back of.
The shockwaves from this announcement will have forecasters everywhere tearing up their view of the in-game advertising market and thinking again. When we first saw the extent to which in-game advertising could accommodate rich media, including in-game TV video, Cinema screens, advertising hoardings, especially around race tracks, we predicted a multi $ billion business in the offing. Today forecasters are still cautious, all forecasting it to be under $1 billion by 2011, and some still insisting that advergaming (building free games around brands) and casual gaming are likely to be bigger markets.
But always the freeze on this market was the icy grip of Sony and its glacially slow decision making. Now that this has been released, expect 2009 to smash all in-game advertising records by an order of magnitude.
In-game advertising is the process whereby potential advertising vehicles ‘ radio voice, sidewalk hoardings, shop fronts ‘ within games are identified by the producer as non-intrusive and then video and image objects, or even just text replacements, are produced for successive advertisers. These can then be inserted into the game at the time the game is loaded onto any given console, through its online connection. That way on one day a character in a game is drinking from a branded Pepsi bottle, and the next from a Snapple bottle, with a special promotion on the side.
This is analogous to internet ad serving networks and changes in-game advertising from a market where a handful of adverts were inserted into games when they were being written, and remained unchanged forever, into a dynamic promotion vehicle even for time sensitive launches such as motion pictures. In-game adverts can also be delivered in particular regions, for instance in reach of a specific retailer.
Sony also ceded a two year lead in this market when Microsoft bought Massive Inc, a start up with an apparent lead in in-game advertising technology, two years ago. Sony was thought to be considering buying one of the other major in-game players, but has instead decided that being an open advertising platform is better, working with all the players, except perhaps Massive.
Although IGA has made the running here, and topped if off with the EA deal on the back of it, it will be Sony that is calling the shots, and deciding on the distribution of advertising revenues between the advertising network, the game creator and Sony.
A piece in Advertising Age this week claims that not only is Sony working with one of the other well known advertising network Double Fusion, but is in talks with Google regarding its Adscape in-game advertising operation, which it acquired at the beginning of last year ‘ a direct rival to IGA.
This will allow Sony to work WITH Google rather than against it, a strategy that’s not really available to game console rival Microsoft.
AdScape has former Sony Computer Entertainment America president Bernard Stolar acting as the company’s chairman, so a connection here was always on the cards, while back in August Sony hired a head of in-game advertising, Darlene Kinder, from Adscape. So we would expect this connection to be completed with Adscape soon.
Technically there is nothing to stop Sony defining in-game ad spaces and allowing them to be sold on multiple in-game advertising networks and even operating an auction for key spaces. However that would require that the inventory was coordinated by some kind of Sony server, although there was nothing in the announcement to suggest this and we think at present this is unlikely, and that each game will offer its inventory to one or other of the in-game networks and they will manage advertising delivery and reporting to clients.
It was almost a year ago that Sony took its first steps into in-game advertising when it said it would work with Nielsen Media to design an ad delivery system and an advertising measurement system, which suggested that it would come to the market with its own product, rather than open itself to market forces.
The Sony PS3 has sold 13 million units worldwide, and Sony hopes it will sell almost 60 million by 2012. IGA is headquartered in New York with offices in London and Berlin, the group is backed by Peacock Equity, Easton Capital Group, Intel Capital, Morgenthaler Ventures, KTB Ventures, Translink Capital, Presidio STX, LLC. and ITOCHU Corporation.