Google-AOL, ERTS and Google U.

A lot has happened since my last posting. Most recently Google [nasdaq:GOOG] announced that it would be investing $1 billion for 5% of AOL. Most of the mainstream business press seemed to focus on the advertising - Google getting access to the AOL network and selling a broader range of ads. I think the ad stuff is a bit of a Trojan horse. The future as George Gilder has been preaching, is all about the so called "teleputer" or cell phone. I think Google's main interest is in AOL's instant messaging network. Google has its own Google Talk instant messaging Voice over IP service and hooking up with AOL's 43 million U.S. IM accounts will give its service huge traction. Vonage has 1 million VoIP telephone subscribers and Wall Street is drueling in anticipation on an IPO. Just imagine what a powerful telecom GOOGLE/AOL becomes with a huge footprint of Internet phone users. You saw what Ebay paid for Skype- $2.6 billion. In the meantime you are already seeing Google trying to get into the WiFi municipality market by proposing free WiFi access for San Francisco. Using Voice over IP , these WiFi networsk could easily become cell phone networks and then Gilder's teleputer revolution becomes a reality and Google is the telecom provider in cities like San Francisco. It is no coincidence that Google just started promoting that its Gmail service was available via cell phone. In my opinion all of the big broadband cable companies and wireless service providers like Verizon should be nervous. Google will be big in wireless, maybe even bigger than service providers like Verizon Wireless. And just imagine what happens to "ARPU" when Google offers free wireless phone service supported by contextual advertising. ... stay tuned.

On a different front Electronic Arts [nasdaq:ERTS], maker of Madden 2006, Need For Speed Most Wanted, and Medal of Honor, recently announced that it would purchase wireless gaming company Jamdat Mobile [nasdaq:JMDT]. Forbes Wireless editor Nik Hutheesing has long been a Jamdat bull and we have been saying that the big gaming companies were eager to gain share in wireless gaming. Jamdat was created by former executives at Activision. There will be more such mergers, and I predict that even bigger media companies, perhaps Disney [nyse:DIS] will go after a video gaming company like ERTS (think convergence of ESPN and ERTS stranglehold over the best sports video games.) For the established console companies cell phone gaming is huge. For starters, many more millions of people have cell phones with games on them than consoles, or play computer games. The video gaming companies need to expand beyond their core demographic, teens to 30 somethings. Cell phone games reach people who would never even pick up an Xbox controller. One gaming company that is extremely proactive at addressing video game makers' stuck in the hardcore gaming rut is Nintendo. It doesnt get that hung up on graphics or high def, like Microsoft. They want to improve gameplay and thereby broaden video gaming's audience. I believe the Nintendo Revolution , coupled with the release of Zelda will be huge. Too bad Nintendo isnt listed here on Nasdaq.


Lastly I would like to point readers to my very bold prediction for 2006. On Forbes.com I looked way out in the future and predicted that eventually we might see a Google University. The point is the University Education market is ripe for disintermediation. Content providers (ie professors) arent getting rich, but their University employers raise tuitions every year and have coffers brimming with billions. Google’s stated mission is to “organize the world’s information and make it universally accessible and useful.” It has already been busy scanning the libraries of venerable institutions like Stanford ( which was in on the Google IPO), Harvard, University of Michigan and Oxford. It also has a fledgling broadband video operation. Why couldnt say Stanford and Google create smart curriculum using full multimedia over the internet? And would parents sick of paying $40,000 per year mind terribly if they the price dropped to $5,000 per year provided that small text ads run in the margins of Junior's online texts or video courses? To read all of my "Sneak Peek 2006" predictions on Forbes.com, including prescient calls on the rise of Eastern Europe, Vonage, ETFs and the Real Estate Boom, click here.
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Will ERTS Spike?

I just got came back from standing in line at midnight at a GameStop in Clifton, NJ to pick up a pre-ordered copy of Madden 2006 from Electronic Arts [ERTS]. There were about 200 thug looking teens and twenty-somethings waiting in line with excitement. Most walked away with the Xbox version and I was the only one getting it for my son's Nintendo [NTDOY]GameCube. He will be exstatic tomorrow.

Now assuming that my local GameStop [GME] is pretty typical, and considering that there are 4,000 of these stores including EBGames outlets (soon part of GameStop), and considering that this game costs over $50, I think ERTS could bring in $40 million or so from Madden in the first 24 hours. And I think the dollar volume could be double that, easily. Now this may not be as big as Halo 2, but salees will still be very strong. So I think their shares could move tomorrow, based on the news. I bought a small number of ERTS shares a while ago because I reasoned that they are the top video gaming franchise in the business, and in my opinion could represent a juicy merger partner for another media/entertainment company one day. So will the the stock move tomorrow on strong sales of this title? Or will a malaise continue to afflict ERTS shares?

Give Back Time for Gaming Companies

There has been a lot of flap over the violence and now sexual references inTakeTwo Interacive's [nasdaq:TTWO]video games. Grand Theft Auto-San Andreas, the companies flagship game from Rockstar, is being singled out by activists and legislators as an example of what is bad about video gaming and pop culture. Now I read that another promising game from TTWO, Bully, is under attack because of its potential for violence among school age children.

I have never really played GTA, but I have read a lot about it and talked to many people who love it. These aren't street thugs who play this game. These are everyday normal people as well as some of the most educated and esteemed people in the nation. Dont forget they have sold more than 30 million copies of the various versions of GTA.

I own TTWO's stock not just because they have a blockbuster game, but because I realized that they are at the forefront of video gaming when it comes to creating new franchises that video gamers love. Compared to the crude slash and slaughter copycats that have jumped on the GTA bandwagon, their creative teams and games are standouts in terms of innovation and the ability to keep gamers engaged. Put simply their games are smarter. Unlike others that have to strike expensive license deals, TTWO's Rockstar doesnt rely on preexisting blockbuster movie franchises or books. They create their own blockbusters from scratch, kind of the way Viacom did with Sponge Bob, Rugrats and MTV.

Steven Johnson author of "Everything Bad is Good For You"talks about the merits of games like GTA, that challenge players minds to solve problems and create winning strategies. He makes the argument that video gaming and other forms of pop culture like television actually make us smarter because we excersize the parts of our brain used in problem solving, organizing and strategizing. It occured to me while reading his book that his theories could have powerful implications if some of these video companies could actually come up with games that can be used in our educational system to help children learn. We all see the power of these video games. My nine year old could spend 6 hours in a day (if we let him) playing a video game like Madden, creating teams, improving his offensive strategy...etc. However when it comes to math homework, which he excels in, he rushes through it in 20 minutes.

Unfortunately good innovative companies like Take Two are under attack. I think they would do themselves a world of good if they were to devote some of their resources to creating a few smart, addictive games that have an edge, yes, but also help young people learn important things. Not just how to hijack a car or, in the case of the upcoming Bully, use a sling shot. Of course they need to do more than just create the games. They need to prove to the educational establishment that they are worthwhile.

Blog Power

In the Summer 2005 edition of Forbes.com Best of The Web, our editors have trained their sights on the rapidly expanding world of blogs, collectively known as the "blogosphere."
Blogs (short for Weblogs) started out mostly as personal Web journals. However, thanks to sites like Google’s Blogger, which allows people to easily create blogs in a matter of minutes, these homespun Internet outposts are rapidly expanding and evolving. At this writing, there are some 14 million blogs, growing at a rate of 12,000 a day. Cumulatively, bloggers post content about 275,000 times per day on nearly every topic or niche imaginable. One study claims that more than 50 million people regularly read blogs.
here are medical blogs featuring the diaries and experiences of licensed physicians; economic scholars use blogs to post their opinions about subjects as varied as China’s energy consumption and Australia’s benign housing bubble. Shopaholics have created online journals like Mightygoods.com, whose publisher, Margaret Mason, scours the Web to bring readers wish-list items like the fuchsia/orange embroidered cutwork-silk pillows currently selling at Gumps for $75. Some blogs uncover scoops that occasionally have a big impact--as CBS News’ former anchorman Dan Rather can readily testify.

Of course, most blogs are mind-numbingly dull. You need to dig deep to find the gems and that is exactly what Best of The Web has done for you. We identify 100 of the best blogs in 20 categories ranging from Art and Literary blogs, to Small Business, Marketing, Shopping and Music blogs. Read More...

Gamers: Virtual Reality Check

On March 17th I read an article in the New York Times Circuits section that reported that certain video games would soon allow their main characters to use/abuse drugs ranging from marijuana to crack cocaine. The games mentioned include Narc, another from Take Two Interactive called Snow and one from Vivendi Universal called Scarface. I have always been a proponent of the video gaming industry and have written before that I think gaming companies have the potential to be among the leading companies in the digital age. I must admit that I was taken aback by this disturbing news.

I realize that these games are rated M for mature, however gaming executives and parents know full well that these M games find their way into teen and preteen hands. I think that this is a case where the video gaming industry has a moral obligation to reinforce right from wrong. I understand that for a long time games have promoted violence, and I do have reservations about this when it is wreckless. But as NY Times reviewers have pointed out, this violence can be cathartic for gamers. Moreover I believe that promoting these types of drugs is especially dangerous because they are much more accessible and acceptable in our society than firearms.

Some argue that these are no different than the "power ups" found in kids games like Mario Brothers or Pokemon. I disagree. You can't go out around the town and buy a magic coin or wand for a pick me up, but you can go out and find crack or methamphetamine in many high schools. Like it or not teens learn from the media, be it cable tv or video games and this is the wrong kind of message to be sending out.

I will admit that I have played violent video games with my preteen son. However realizing that he would learn from this, I atleast chose a game (Medal of Honor/Frontline) where the enemy is a real historical villain (Nazis in WWII) and the goals are admirable. I also was able to take the opportunity to teach my son about WWII and about his grandfather and great uncle who fought in those wars. Lastly I try to insist that I am present when he plays this violent single person shooter game, to monitor his behavior. If my young son becomes wreckless and indescriminantly shoots allies, or becomes cruel, it's game over.

I believe that video game entreprenuers and industry members need to rethink their game strategies when it comes to dangerous narcotics and other wreckless behavior ( including violence.) At the very least there needs to be severe game consequences for such ugly acts. Ultimately a parental or media backlash could erupt and have a long-lasting negative affect on what is otherwise a bright future for video gaming. Yes these wreckless violent games bring in the bucks. But it's time for video game executives to put down the digital crack pipes and get their virtual realities in check.

Apple's Game Plan

What’s next for Apple? In a word, games. Or more precisely video gaming. If there is one thing that most of the digital soothsayers agree upon it is that a key part of the digital future is gaming. That’s why Microsoft has spent billions in capital on developing and supporting its Xbox platform even though it only recently turned a small profit. It is also is why consumer electronics giant Sony is still an important player in the digital future. Despite falling behind in former strongholds like television sets and digital music, its Playstation 2 and new Playstation Portable are still leading the industry.

I believe gaming is one of the areas in Apple’s digital arsenal that has been woefully underexploited. By now there are about 15 million ipods in the hands of, not just Macintosh devotees, but Windows users. I see people sitting on the train or subway happily listening to their ipods all the time. But the games Apple includes for the ipod are limited if not lame. That is why you don’t see too many idle ipod listeners playing Apple’s pre-installed games. Now ipods feature color screens and photographs and before you know it I bet there will be video clips.

According to mac news and rumor web site ThinkSecret, Apple has been actively searching for game developers who can write new games for the same kind of platform found on the iPod. Add to this the fact that the new Mac mini is positioned perfectly to fit on a living room entertainment rack next to that new high definition TV, and you can bet that Steve Jobs will at some future Macworld, unveil an integrated gaming strategy from Apple.