Friday, August 31, 2007

A Spanish-Language Madden in the US?


Via GameSpot, there is word that Electronic Arts, the world's largest videogame publisher, could by readying a Spanish language version of its perennial bestseller, Madden, for the US market:
Given that the game is only being listed on the PS2 and Xbox 360, it suggests that EA is taking a cautious approach to a possible Madden NFL 08 en Español release. Picking the two active consoles with the largest installed user bases maximizes the potential market without committing the resources needed to prepare Español counterparts for systems where they might not make their money back.
This type of move could become increasingly common, although it really only makes sense with the most popular titles on, as the article notes, the most popular platforms. Our guess is that EA will limit the release to areas with major Latin populations like California, Texas, New York, and Florida. Marketing to consumers' ethnicities works pretty well in all kinds of industries.

But we'll see. The "localized" version is still just a rumor: EA hasn't con
firmed the release.

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2 Movies Made with Dolls and Meg Ryan as a Prostitute

This music video features the only known cocaine overdose by a plastic figurine in filmed entertainment history. Check it out about 2 minutes in. You could say this is love child of the Sean Penn does Hollywood-B-List vehicle Hurlyburly, which also featured Meg Ryan as a prostitute, and Velvet Goldmine director Todd Haynes’ 1987 movie, Superstar: The Karen Carpenter Story, in which all the actors are actually Ken and Barbie dolls. The latter film is very, very rare because Mattel obviously doesn’t want its dolls used to portray one of the most famous anorexia stories of all time. Know your eyes are taking in true rarity as you check this old VHS transfer.



And then, see this actual Hollywood B-List guy doing a Hurlyburly monologue by a fictional Hollywood B-List guy.

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Thursday, August 30, 2007

LTTTT: You're a Phenomenon!

This is an incredible Nintendo GameBoy ad from early 90s Spain featuring a bunch of kind of busted Spanish kids saying, “GameBoy,” occasionally to a sweet early hip hop beat. (G-g-g-gameboy!). Nintendo’s tagline was, “Eres un fenomeno!” which translates to, “You’re a phenomenon!” It could be the beginning of a collective lovepoem from Spanish consumers to their Gameboys. Or it could be Nintendo informing their users that they were transforming themselves and their country with never-before-seen entertainment.

How strange and unbelievable this all must have seemed to these kids’ grandparents who lived through the Spanish Civil War, WWII, and several decades under Franco’s dictatorship. I mean, this was a country with basically one television station into the 80s. Then, almost magically, the country telescoped right into hordes of kids glued to a tiny screen mashing buttons furiously.

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Wednesday, August 29, 2007

Wu Tang to Bring Ruckus to Chessmaster 3000


Chessmaster, erstwhile game brand and my 9 year old self's nemesis, is teaming up with the Hip Hop Chess Federation to bring some killa bees to the chess tables at the San Francisco Design Center on Saturday, October 13, from 1 to 5 pm. Be there or be... one of those scrubby guys who plays in a park on a birdshit covered bench.

The RZA, the GZA and Old Dirty Wizard Guy will be there. Check it:

The 1st Annual Chess Kings Invitational will kick off with HHCF’s Life Strategies All-Star Panel. The Life Strategies panel will feature multi-platinum rappers RZA and GZA from the Wu-Tang Clan, chess icon Josh Waitzkin, turntable wizards DJ QBert and DJ Disk and other surprise guests in a discussion about how music, chess and martial arts have guided them in their paths to success.

"We are excited to be a part of the 1st Annual Chess Kings Invitational," said Tony Key, vice president of marketing at Ubisoft. "The HHCF has used the connection between hip-hop and chess to make the game not only accessible, but cool to a new whole audience. The Chessmaster series of video games does the same thing; inviting people of all ages and skill levels to engage in the timeless art of chess. It was a natural connection for us to become partners in bringing this great event to the community."

Ahem. Yes, Chessmaster and the Hip Hop Chess Federation are doing exactly the same thing. Good thing Method Man won't be there to do the trash talking. Because he's nasty.

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Other Posts, World of Warcraft as Hobby

I neglected to mention that yesterday was Alexis Madrigal day. I had posts up at Ed Cotton’s awesome Influx Insights and the t(w)een trendspotting blog Ypulse on World of Warcraft as the new surfing and Ubisoft’s Babyz, respectively.

Dean Browell of Skewed Perspective had a great comment at Influx:

A sport vs. a product
interesting-- while I think you use good numbers, I think you're working from an assumption that World of Warcraft has been pitched as embracing all ages; of course with the size of the Baby Boomer population (who play golf) just about any causal entertainment activity will have a tough time beating such a pervasive sport. If we look at the number of people below 30 who play golf-- something tells me it'd be on par with the number of people who play WoW. The other important thing from a market standpoint is what WoW means as a product-- this isn't at all like everyone who plays a single sport such as golf, unless everyone who played golf all did so at the same golf course or with the same clubs. What an incredible thing it is, even if WoW is as big as surfing, that this one activity hosted by a single company has accumulated that following. It's not just a general hobby, it's a product. No one owns or controls all surfing experiences like Blizzard does WoW. How remarkable, I think!

Here is why I think WoW is looking hobby-like, even if it remains a product (reproduced from my response to him):

…my argument would be that the amount of money being spent on WoW but not captured by Blizzard as well as the amount of outside tools and relationships that have been brought into the game are making WoW hobby-likeWe're talking the wholesale purchase of characters, guilds from other games, various hacks/dupes, powerleveling, buying virtual currency, TeamSpeak, Ventrilo, mobile/web guild management software/services, hint books, outside websites like Thottbot, etc. It's still primarily a product, but it's blurring the line…

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$95 in 1st Round Venture Capital - August 2007

In our continuing drive to bring you some data to play with, here's a quick review of who got how much money from whom to do what.

Date Company Main VC Cash Area SubAreas
28-Aug BluePulse VantagePoint $6 SocialNet Mobile
28-Aug Jaxtr August Capital $10 SocialNet VOIP
28-Aug D2C Rubicon, 755 Capital $6 Games Downloadable
27-Aug Vadver Draper Fisher Jurvetson $1.7 Search Social, Video
27-Aug Masala VantagePoint $4.5 SocialNet
24-Aug Veveo Matrix, Norwest, North
Bridge
$14 Search Mobile, Video
23-Aug Pluggd Intel $6 Search Video, Audio
23-Aug Lending Club Norwest, Canaan $10.26 P2P Lending
22-Aug Conduit Labs Charles River, Prism $5.50 Games SocialNet, Worlds
17-Aug Zivity Undisclosed $1 SocialNet Adult
16-Aug Kongregate Grelock $5 Games SocialNet
16-Aug Northworks HighTech Grunderfonds,
ICS Holding
Games Online, Sports
14-Aug DietTV MentorTech $2 SocialNet Dieters
14-Aug Trilogy Studios Chicen Itza Games Worlds
9-Aug Sports Composite DFJ, Mission, SCP,
Allen & Co, Jeff Fluhr
$6 Games Fantasy Sports
7-Aug TeeBeeDee Shasta, Monitor $4.80 SocialNet Boomer
7-Aug Worldwide Biggies NBC, Platform $9 Games Kids
2-Aug Minekey NEA IndoUS $3 Search Widget, Recs

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Tuesday, August 28, 2007

YTT: Minnesotan/Laotian Rappers, Lao Crimino

While shopping around for a videographer to help me create a documentary on Chris Berg, of Tankride.com, I was introduced by a Current TV creative exec to Gabriel Cheifetz’s documentary on Laotian rap group, Lao Crimino. It's an awesome piece that resists the urge to exoticize what the individuals involved see as completely normal. Gabe's piece presents these guys having fun just as they are, “just people with ideas,” when as Dead Prez would have it, “the smoke and camera disappear.”

But it’s not really the camera, per se, that needs to disappear. In Gabe’s doc, they are just guys at home making dinner in Minnesota and rhyming. But in the video above, they have stepped out of their world and into the one that was created to promote rap, sexualized and sexualizing.

It’s when the MTV camera turns its eye on them, with its checkered history for both rappers and their music video honeys, that these guys transform into hip hop stars. They have to exploit and be exploited to make it. Because stars don’t sit in kitchens in the burbs of Minneapolis-St.Paul. They sit in clubs with women in bikinis sitting on their laps and a stack of cash in their hands. Fake it til you make it, commercially.

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Monday, August 27, 2007

ITIAA: The Myth of Cultural Differences

In the gaming world’s talk about Asia, the term “localization” or the even better coinage, “culturalization” are thrown around a lot. With the former term, people normally just meant translation. The latter, however, could mean almost anything. For example, when Sony Online Entertainment tried to bring Everquest 2 to Asia, they manga’d all the character models to more closely conform with what most Asian games' graphics looked like.

What was clear was that many Western games people were unwilling to believe that Asian consumers might be quite like their American and European counterparts. I have heard the opinion espoused by high level Western games people that Asian players had an especial taste for massively multiplayer online games because they allowed them a degree of individuality that was lacking in Asian cultures.

The myth of “cultural differences” had strong backers. Companies from Asia had all the incentive in the world to keep Western companies from believing that their local customers could be understood. Western companies who had games fail wanted excuses beyond their own execution. It was just easier for everyone to believe that Asian gamers just didn’t want Western games and genres.

There were signs that this wasn’t the case. Most prominently, the most popular pirated games on the streets were the most popular games sold at retail around the world. Shooting, racing, sports, and fighting games were being played by kids all over the world, officially or unofficially.

What was holding back the introduction of legal games in these genres into the Korean and Chinese markets was the lack of a business model that made sense. Massively multiplayer games are inherently piracy resistant because the actual software product is given away. Players pay for the massively multiplayer service, which requires significant infrastructure investment. Online games that feature only a few players are almost as easy to pirate as standalone games.

Enter the virtual item business model. It was famously popularized in the Korean market via Nexon’s Kart Rider, a kart racing game quite like Mario Kart. By allowing players to both download the game software and use the service for free, Nexon reduced the incentive to pirate the game. Then, the company counted on the human desire to win at games by selling users items that enhanced their chances.

It became a smash success and the business model became standard. Now, it’s hard to find a successful MMO launch in Korea because players have shifted their time and money into sports, racing, fighting, music, and shooting games. What appeared to be cultural differences vanished as soon as a business model came into focus that allowed high-quality products to be produced.

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Sunday, August 26, 2007

Influx Insights, Louis L'Amour

You should be on the lookout for some of our new blog posts over at Influx Insights. We’ve worked out a deal where they’ll host them exclusively for a few days before they head over here to hang out with their less well distributed friends.

I’m posting via satellite uplink from the wilds of the Rocky Mountains. I’m on a ranch outside Granby, Colorado, home of a bulldozer attack in June 2004, among other things. Today, we went for a hike in the Arapaho National Recreation Area. After zigzagging on a rocky path through scraggly lodgepole pines for a good hour, we broke out onto a beautiful meadow at about 9000 feet, which hid a lake covered in lily pads. It was dramatically western. I found myself narrating, “As Sheriff Madrigal’s boots clinked through the grass...” I also had many visions of having a horse.

That meadow sent me into Louis L’Amour mode. When I was about 10, my fur-coat-in-the-summer Mexican grandma had a boyfriend about 25 years her junior. He was a mountain man who owned guns, fishing poles, and cowboy literature. I used him as a lending library and borrowed about 30 novels over a couple of months.

As I stood in the meadow, I realized how strange it was that this random consumer, who told me himself that he never read other books, had this fine Louis L’Amour collection. If Louis had reached that old dog, he probably was a very popular author. I got to wondering how hestacked up in commercial terms.

Here’s a very incomplete and mildly accurate list of best selling authors quickly compiled via this Wikipedia page and some clever Googling (“* million copies sold” etc):

Author

Copies Sold

Agatha Cristie

2 billion

Jin Yong

1 billion

Danielle Steel

550 million

JK Rowling

500 million?

Enid Blyton

400 million

RL Stine

400 million

Richard Scarry

300 million

Louis L'Amour

270 million

CS Lewis

100 million

P.S. Check out the flickr page for the image above. It's called the ubiquitous printed word.

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Friday, August 24, 2007

Overheard: What does urban mean, anyhow?

This week’s Overhead features Shoe Carnival (SCVL) CEO Mark Lemond, and Clifton Sifford, Executive Vice President, General Merchandising Manager. Basically, Shoe Carnival is a discount shoe retailer like DSW or Payless. They generated $682 million in fiscal 2007 revenue. As usual, all Overheard quotes are being pulled from the investor conference call transcripts over at Seeking Alpha.

We decided to take a look at Shoe Carnival because of their focus on race and their consumers. After all, Mark Lemond is willing to say things like, “We're still looking at income, you know, the lower to moderate income levels as really our core consumer, and try to merchandise around the ethnicity of that core consumer.” He’s honest, right?

In fact, they break down their stores between urban and suburban. What’s interesting, however, is that it does not appear that a commonly recognized measure like, say, population density, determines the urban or suburban nature of the store. In response to a question from Jill Caruthers of the New Orleans-based investment bank, Johnson Rice, about the urban/suburban split, Clifton Sifford responded:

Clifton Sifford - EVP, General Merchandising Manager: Jill, this is Cliff. We have -- out of the 284 stores that we operate today, 179 of them were what we consider to be urban. What turns a store urban in our opinion is at least 30% or more of the traffic that walks into the door is urban. It's because every store that we operate has an urban influence, it's almost impossible to tell you what our suburban business would be minus that.
Jill Caruthers - Johnson Rice:
Okay.
CS:
Does that make sense?
JC:
Yes. So I -- okay. All right. Thank you.

Wait. 30% or more of the traffic is urban? Wouldn’t all traffic in a city be considered urban? Every store has an urban influence? No, it actually doesn’t make sense, Cliff. At least not unless you choose a pretty unconventional definition of urban.

We can look for guidance about the language from Mark Lemond, “Our urban consumer, both African-American and Hispanic, is not shopping as they have in previous seasons.” You know, the urban Hispanics of the central valley of California or the fields of Oklahoma. The urban African-Americans of the farms of Georgia.

I wonder if Japanese people are counted in the suburban or urban stores. How about Chinese people? Vietnamese? Palestinians? At least they count all white people as suburban, which everyone knows is code for uncool, or at least, tapered.

A final question: would it be better if they labeled their stores, Black, Hispanic, White? It’s actually a serious question. Could occluding the racial categories that are clearly operative be a good thing? Or not.

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Thursday, August 23, 2007

LTTTT: The Rise and Fall of Multiculturalism






Kashi Good Friends cereal boxes from the nineties through today. Kashi (owned by Kellogg's) has announced that they are phasing out the (in)famous Good Friends brand and replacing it with the simpler "High Fibre Flakes & Granola cereal" branding, the last box pictured. The company's reasoning is the desire "to offer a more consistent look across the brand, helping to make it easier for consumers to find the product in stores." As if those biracial couples didn't turn heads. Sheeeit.

My guess is that multiculturalism has just gone downmarket:

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Wednesday, August 22, 2007

AaP: Consumer Placebo Effect

This is the very first Ask A Professor (AaP) post. In it, we’ll review some important (or at least interesting) academic work in the fields of consumer psychology, behavioral economics, sociology, and history. The idea is to connect the excellent research that our universities are pumping out with the consumer questions that many business-types encounter everyday. I also have a long-term goal of academics and businesspeople liking each other more, but hey, poco a poco.

In the casual game world, people talk a lot about “perceived value”. Sometimes this term is tossed around with a kind of hard-nosed tack on price elasticity: “If we raise prices, will the greater ARPU offset less user purchases? How many fewer users will convert?” But I’ve heard this more intriguing argument made: “If we raise the price of our games from $20 to $30, consumers will assume that the higher-priced games are premium, better games and purchase them at higher rates.”

Classical price theory (and “common sense”) would disagree; it holds that as prices go up, demand goes down. It’s sort of Pricing 101. Of course, this kind of economics did not exactly anticipate the modern entertainment/media markets. With a commodity, it’s basically all the same stuff. With electronics, games, movies, and music, no two products are exactly alike (although casual games come close).

Into this debate, we insert a November 2005 paper in the Journal of Marketing Research by Baba Shiv, Ziv Carmon, and Dan Ariely of Stanford, INSEAD, and MIT, respectively. The title? Placebo Effects of Marketing Actions: Consumers May Get What They Pay For.

We’re all familiar with the placebo effect where people get better by taking the sugar pills, not the actual medicine. What the authors of this paper did was A) lead people to believe that the SoBe Adrenaline Rush drink they’d just had would increase their Brain Age type skills and B) tell them whether or not the drink they’d received was purchased at a discount or full price. Then they gave them puzzles to solve and measured how many they got finished.

There’s all sorts of academic boilerplate about the various study designs, which you can read for yourselves, but the basic results are all graspable via one chart on the last experiment, where the researchers really laid it on thick:

The high-expectancy people were given the hardsell (“Drinks such as SoBe have been shown to improve mental functioning, resulting in improved performance on tasks such as solving puzzles.”) about how sweet the drink would be for their minds. The low-expectancy people were told less about the SoBe, etc.

The first thing that stands out is that people who paid the full price and had the full expectation more than doubled up the performance of the discounted drink, low-expectation people. There’s no doubt that the full price people got more “value” out of the drink than the other people. That’s remarkable in a world where many people think of the “value” of a product a fixed unit. But what’s really incredible to me is that the price discount actually impacted both the low and high expectancy testees. It’s basically jumping higher when you are wearing your $200 Nikes than when you are wearing your $60 Nike Outlet Nikes, even though it’s the same shoes! And all because someone told you, “Maybe it’s the shoes” and someone else told you, “Money means performance.”

Returning to the casual games debate, we can say that, given the right set of expectations, the perceived (and actual) value of a product can be increased. Whether a price increase alone is enough to set the expectations bar higher will have to be another post. In the meantime, we can all ponder how small casual game companies can, at the etail point-of-sale, convince consumers that what they are about to purchase is actually more fun/relaxing/etc, than a competing product. Perhaps they could just lie to them, as the authors of the studies ponder:

“This study suggests the possibility that placebo effects of marketing actions could create ethical dilemmas. For example, a marketer may falsely claim that a product offers a particular benefit, or similarly, a marketer could repackage a product and significantly increase its price, suggesting (explicitly or implicitly) that the higher cost of the cosmetically different product is justified by its greater efficacy. Because of placebo effects of marketing actions, consumers’ misplaced beliefs in such seemingly baseless claims may paradoxically make those claims partly true; indeed, given that unlike false statements, puffery is often considered acceptable, even modest placebo effects may make false claims legitimate.”

Of course, the try-before-you-buy model makes the lying a little more difficult, but hey, if consumers actually do have more fun paying more money, where’s the harm in that? (Just kidding. Sort of.)

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Social Networking the (Ask a) Mexican Way

I was present at the birth of Facebook. It was actually developed by Zuckerberg in my dorm (Kirkland House, what). I watched as it, still using its definite article form Thefacebook, tore through Harvard. The killer app was that you could add your classes and find out who all those weirdos who talked in lecture were. We were the vanguard of the facebookstalk.

Back then, when it was one school, it was easier to tell what Facebook was doing. It was merely revealing our real-world social networks (classes, dorms, colleges, clubs, activities), not really creating new ones. You could make an argument that MySpace did the same for the kinds of flakey, loose social networks that musicians build. Each site has tools that appeal to those early audiences.

It seems to me that most of the 2.0 companies have taken their eyes off this prize, or at least are finding it really difficult to spot and target large, offline networks.

Tierra Natal is an excellent example of how to capture the value of a real-life network. It allows Mexicans and Mexican-Americans (Chicanos, if you must) to connect not just via their current place of residence, but where they come from. The Techcrunch gloss misses that this is of pretty vital importance for many in the Mexican communities.

Take this example from Gustavo Arellano’s incredible book, Ask A Mexican, in which he describes the identification process in his OC:

“Since there are so many damn Mexicans in Orange County, for instance, we more commonly identify ourselves by state—I, for instance, am from the central state of Zacatecas, Mexico. But since there are so many damn Zacatecans in Orange County, we usually branch off by municipio—the rough equivalent of a county. I’m from the municipio of Jerez, Zacatecas, but since there are so many damn jerezanos in Orange County, we divide ourselves by ranchos (villages)—I hail from El Cargadero, Jerez, Zacatecas, Mexico. But since there are so many damn cargaderenses in Orange County…you get the picture.”

Right here on this page of Tierra Natal, a dude like Gustavo can go through exactly that process online. (And who can argue with the sole picture from El Cargadero on the site, which you see up top. Check that dude’s eyebrows! ¿Què chingado?)

The developers seem sensitive to the way recent waves of Mexican immigrants have built their roots into their identities. That (real or perceived) understanding could strike a chord with real Mexicans or half-Mexicans like me who really wish their parents had taught them Spanish. As Tierra Natal staffer, Chuck Longanecker, put it in a Techcrunch comment:

“We hope to distinguish ourselves by placing the online community focus specifically on people’s connection and relationship to their hometowns and not just individual members. We believe that the collective of members will give personality to the individual town profiles and allow people to stay connected with local news, people and happenings.”

You could argue that any social network could have a group of people from El Cargadero who could find each other. They would just enter that into their hometown in Facebook, say. But structuring the input of the data around a social network that we already know people value is a much better idea than hoping they find that value themselves. It worked for Facebook with colleges and it could work for Tierra Natal with ranchos. We'll be keeping a close eye on the town sites, especially that minor village Mehico D.f., where my dad and me were both born.

There are a slew of "Hispanic" or Latino social networks but most just seem like attempts to grab some Spanish-speaking money without meaningfully connecting with the cultural specifics that might lead one to a ethnicized site in the first place.

My one beef is that the site is incredibly slow. We’ll cut them some slack though considering that they have just soft launched and probably don’t have all the kinks worked out yet.

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The Pure Conduit Through Which All Fun Will Flow?

Via 3pointD, we have another VC story, this time Conduit has received $5.5 million from Charles River Ventures and Prism. 3pointD’s story focuses on the money behind the operation:

I’ll be very interested to see what Conduit is cooking up, and whether there’s a form of “social gaming world” that could be that different from current offerings. Considering its backers, though, it’s definitely one to watch.
We’re more interested in the actual people involved in the project. They have worked on MMOG(Asheron’s Call), actually cool videogames (Guitar Hero), and ambient consumer technology (the Ambient Orb). We’re not sure what comes out of that brew, but just Guitar Hero + MMOG would be incredible. Integrate some data from our real lives, and you could have a product that rises above the 2.bullshit.

Regardless, we like the tone of the CEO’s inaugural
blog post.

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Tuesday, August 21, 2007

VC Pony Up $317 million in 1H07 for 2.0 Start Ups


Tucked away in the third paragraph of a post at PaidContent, we find the following nugget of information:

U.S. investors in the first half of this year put $317 million into social nets, blogs and other “Web 2.0” companies with an emphasis on advertising, a gain of almost 21 percent over the same period last year, according to research firm VentureOne.

Through the years, as I’ve seen startups get funded, I’ve come to think about VC as its own market, which is only tangentially related to the Internet market at-large. Certain entrepreneurs, who come to have a certain, recognizable odor, don’t actually design their companies for consumer market success. They just cater to the VC. That $317 million number, though, is a really good reason to design products for mainstream success. It tells us that the VC market for Web 2.0 apps is a sub-billion dollar market. In the first quarter of 2007 alone, online advertisers spent $4.9 billion.

And perhaps if we designed less for the tiny, elite VC market, we would get more interesting products than 5,000 Facebook knockoffs.

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YouTube Tales: Fry's Trek

Our first You Tube Tale is more of a video mission statement. In the video above, 4 pretty serious Star Trek fans (and also guys who work in the bowels of Hollywood), take a ride out to Fry’s, the electronics superstore, and attempt to make a movie. They interview a very confused woman, then run afoul of security and are unceremoniously booted. It’s the story of a Voyage to the Exurbs and the difficulties that the cityfolk can run into out there.

Having grown up out beyond the urban core, I’ve noticed that my friends and business associates often have little familiarity with a life that moves fluidly between hip hop and dirt bikes, Republicans and Democrats, Bed Bath & Beyond and shotguns. The town where I grew up was a natural mashup between the shitkicking place we physically lived in and the urban media culture we watched on TV.

The idea behind YTT is to use user-generated content produced by the people in the hinterlands to illuminate life outside the urban cores that most hip people live in. We’re talking golf communities, rural high schools, big box shopping, souped-up Honda Civics, Robert Altman’s Short Cuts, Friday Night Lights, Raymond Carver stories, and the dirt mall.

It matters that Americans understand each other. Most importantly, we have to save the world (warning: link has scary right wing thought embedded). The consumption that occurs 15+ miles from the city is of a different shape than what goes on in denser environments. Some obviously bad things (big ass trucks) might be offset by good things (more local food through larger gardens). Secondarily, understanding the heterogeneity of consumption patterns is just good business and can help us target consumers more effectively. In any case, it makes sense to at least look at each other with clear eyes.

The idea for YTT struck me while I was working out in a Holiday Inn Express in Salmon Creek, Washington, about 20 miles north of Portland, Oregon. The entire workout room was mirrors, brushed metal and (fake?) cherry wood. My skin glistened in track lighting. The place was recognizably ”designed” by anyone. The question was why. How had these particular design elements trickled down to this particular place? Why did they think that the people who would work out here wanted a gym that looked like this? Has Starbucks really turned our whole country on to a certain color scheme and aesthetic?

Any business proposition that targets the mainstream will want to understand what’s happening out there beyond the hipspace. I don’t think I have (all of) the answers yet, but I do think that the diffusion of design among other things to the Common Man(TM) is important for a sustainable future. Is the mass market buying into the idea that the way a product/space is made is important? Or merely that the way a product looks is important? The answer to that question could help us understand our future.

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Household Bargaining and "Housewives"

I got a question yesterday about why I counted "housewives" among consumers with limitations. Looking at the list, I suppose they do stand out among the groups of people that I mention. In any case, it’s a good question.

My answer begins with the idea of what a consumer limitation is. A definition: any circumstance, whether lack of money, time, or product availability, that restricts the purchase of a reasonable amount of one’s consumer desires. It’s a thorny definition, particularly the “reasonable” part, but I’m just saying that the inability to buy a car would be considered a limitation while the inability to buy a plane would not be considered a limitation.

So, the question becomes: does the lack of one’s own income restrict one’s ability to move money around? Even in the most ideal marital circumstances, I’m pretty sure that it does. (I’m allowing there are other benefits.) Perhaps there are some marriages in which both partners share money completely and equally, regardless of who brings it in. But economists using bargaining models suggest that economic power (in the form of actual or potential income) do impact who has the power to distribute resources. Cheryl Doss’ article Bargaining Power within the Household discusses many of these issues. A telling example is a naturally occurring experiment in which the UK changed the recipient of a child tax credit from men to women. Expenditures on children’s and women’s clothing went up while men’s cloth expenditures went down. It's a complicated issue but her conclusion is clear, “This suggests that allocating the money to women gave them more power to decide how it should be spent.”

The last question is, “Why not just write stay-at-home partners/parents?” It would be an easy way out of being called to explain myself. But the situation is gendered. There are far more housewives than househusbands and there are real reasons behind that above and beyond this supposed trend that Gen Y women want to relive the 50s. The income gap between men and women persists and really only tells half the shameful story. The US is just about the worst at providing legal protection and support for women who want to take time off work to have their children. US politicians and businesspeople claim it’s about efficiency and “the economy” but some of the world’s fiercest economies, like Sweden, Germany, and the UK offer far more generous benefits.

Add all that up and you have a bundle of incentives against women having children and staying the workforce. Seeing as the vast majority of people want children, women are forced to play with a stacked deck that pushes more economic power into the hands of men. As a result, everyone’s options are reduced (although men are harder to feel bad for).

So, in the US as it is, it seems to me that including housewives among my list of poets of consumption is a (raw) gesture to the gendered nature of economic inequality.

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Ypulse Post

I have a post up on the excellent t(w)een trendspotting site, Ypulse. It's about an attempt to build the Chinese Webkinz. Thanks to Bill Bishop, Red Mushroom's CEO, for dropping an English preview on us.

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Monday, August 20, 2007

Used Games and Sustainability

We here at ConsumerConspicuous are interested in the whole green side of our world. But not really being experts in the field, we’ll just try to highlight the systems already at work in the world that seem aligned with a sustainable future. First up are used videogame sales.

As has been noted by just about everyone, consumer recycling is what it is: a good step, but perhaps not exactly a revolutionary act. With only minor cash incentives and inconsistent, sometimes unnecessarily Byzantine systems, recycling is clearly only one part of the edict to Reuse. The good folks at Worldchanging (full disclosure: my girlfriend was their managing editor until a few weeks ago), have tossed out all sorts of interesting new ways that items can be dematerialized or shared under the “use community” paradigm. But the bowels of modern American capitalism have produced a fantastic and underrated example of reuse that really works for consumers, retailers, and arguably for content creators too: the rise of used sales of durable media like books, music, movies, and games. What makes the story better is that there is no “moral” or “eco” justification for what these companies are doing. It just makes sense.

Walk into almost any videogame chain specialty shop (like GameStop) and you’re likely to see between 25%-50% of shelf space dedicated to used game sales. Imagine walking into a Home Depot and seeing the same percentage of used products! The economics are not hard to figure out. A new game, say, Gears of War for the Xbox 360 can have a wholesale price of something like $55 and a retail price of $60. That’s a skinny margin. As etailer DVD Empire wrote when they quit the games business:

Video Game Manufacturers set the price using what is called MSRP (Manufacturers Standard Retail Price)…When we sell a game we make on average 8.3% gross margin. That does not take into account any of the cost to store the video game or labor to receive/ship an item.

Brick-and-mortar retailers were in an even worse position, having to pay for the retail storefront and a greater number of employees. These companies struggled their way into mass consolidation, leaving GameStop’s 4,000+ store chain now dominant in the North American market with similar movements occurring in many other countries like the UK and its dominant chain GAME. GameStop’s scale has allowed them to broker better deals with game companies and avoid middlemen distributors such that their gross margins on new games are around 20%. Still, in the end, net profit margins would be dangerously close to 0 without used sales.

Into this situation, on which a $30 billion industry partially rests, came used games sales. The idea is simple: consumer sell back their games for a small amount of money, between $5-25, which the store in turn, resells with about a 45% markup. While used game sales only accounted for $1.3 billion (25%) of GameStop’s sales in fiscal 2006, they accounted for 50% of the company’s gross profit.

What makes this story so compelling is how well the value chain is aligned towards a sustainable alternative to new consumption. Consumers get to salvage a decent amount of the monetary value of their original purchase while reaping the full entertainment of the product; this reduces the effective cost of the product. Retailers get a way to bolster the thin margins of today’s ultracompetitive retail world. The world receives a reduced amount of packaging and actual material. The stickiest issue is what the value proposition is for the companies actually producing these types of content. They often wonder aloud if used games are good for them, but given that the used games enable retailers to have the amount of floor space they do and 75% of sales volume is still of new games, there is not a clear incentive to attempt to restrict the sale of used entertainment items.

In the videogame industry, used sales clearly work. The bigger question is: What types of other goods are likely candidates for this particular kind of dematerialization?

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Korean Video Calls and Proximity

As someone who, like most Americans, doesn’t find mobile content (except Gmail mobile) in the US appealing, I’ve been fascinated by what’s going on in Korea. All types of mobile content have been having success, including games and filmed entertainment.

The old James Bond dream of the video call is now becoming a reality. One of Korea’s top mobile entertainment companies, KTF, is putting a huge marketing push behind its Show brand, focusing on that technology. Check out the video for some footage of the latest commercials advertising the service, posted by a 19 year old Korean YouTube kid.

The commercial that begins at 2:24 is fascinating. Various opposite sex couples are having video calls. One person is in an exotic foreign location (Pamplona, Paris) and the other is not. It’s powerful advertising: always be right there with your boy/girl, no matter where they are.

A new aspect to cell phones is that we can be anywhere while talking to anyone. More importantly, two people having a conversation don’t share any common setting. We don’t know where the other person is, literally or metaphorically. Video calls could provide a frame of reference for conversations that could close the proximity gap between people communicating across vast mental or physical distances. Which would be a good thing?

Watch the faces of the people in the little video box. Each one is an embedded narrative that anyone who’s been left at home while your significant other was off somewhere cool can tap into. One is happy, another confused. The last man looks like he is just holding it together while his (presumable) girlfriend shows off the Eiffel Tower. Perhaps seeing the context actually heightens the feeling of distance?

It makes you wonder if technology can make us feel more proximate or whether anything short of physical co-location will always be unsatisfying (if better than nothing). Perhaps there is a relationship version of the uncanny valley where the closer we get to virtually being together, the more estranged we'll actually feel.

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Sunday, August 19, 2007

Context Kit: China, Internet

One of the goals of Consumers Conspicuous is to provide context for reportage on the consumer landscape. Up-to-the-minute news is a fantastic luxury in the Internet world, but a lot of the value of that information gets left on the table because people don’t have the background information they need to understand the individual stories that rise of the background noise. These Context Kits are meant to provide our readers with the means to fill-in-the-blanks. We include web resources, some historical context, important metrics, some popular products/ideas, and will even dabble in some analysis.

China is a big country with a lot going on. One long post isn’t going to provide context for an entire country. So, I’ve bitten off a slightly smaller piece. As time goes by, we hope to cover more of the changes wracking and restructuring the place. In the meantime, take a night and go see Manufactured Landscapes, Jennifer Baichwal’s beautiful documentary about industrial China via Ed Burtynsky’s photography.

Basics: China Has a Lot of People

When looking at a market, you need to know the basics. That usually begins with how many people might be interested. At the most basic level, we mean the raw number of people who live somewhere. For that type of information, it is hard to beat the Population Reference Bureau.

Resource: Population Reference Bureau, www.prb.org

Most of us know that China has 1.3 billion people in a landmass about the same size as the United States. But really, when we talk about the Internet space, we’re talking about the non-agricultural workers of China, who effectively comprise an urbanized country-within-a-country. The PRB tells us that only 37% of China’s population is urban. (The US and UK, for comparison, are 79% and 89% urban.) So, excluding economic/cultural factors, we could say that about 500 million Chinese actually form the possible Internet market.

Of course, the Internet is limited to those with the money, time, inclination, and actual access, so one would expect the Internet population to be much smaller. The Chinese government has a research bureau, the China Internet Network Information Center (CNNIC), dedicated to tracking Internet population. According to their survey work, the Chinese Internet population has grown like this:

So, we know how many people we are talking about. Seeing as we’re talking consumers, we want to know how much money they have to spend. China does have a National Bureau of Statistics (www.stats.gov.cn) but English language updates are not an especial priority. The Chinese government also runs the China Economic Information Network (www1.cei.gov.cn/ce/) but the statistical information costs money there too.

Luckily, many scholars are also interested in this information, so we can find reprints of much of the information that above resources charge you for. So we can thank Shi Dong of the People’s Bank of China for the following chart:


We can also find out where the Chinese government thinks its headed via the National Development and Reform Commission. This agency has posted the 11th 5 year Plan for Economic & Social Development, which lays out the Chinese economic agenda and has excellent data snapshots, like this one.

Resource: National Development and Reform Commission (NDRC) People’s Republic of China, http://en.ndrc.gov.cn/

It should be noted that Chinese government statistics have drawn all sorts of criticism. But, we do know that the the Chinese economy is growing at some staggering rate that probably is near the 10% a year that we often hear. Though the population scale is new, sustained national economic expansions have occurred many times, often for 20 years or more. Most European countries experienced this kind of growth after World War II. See, for example, Spain’s El Milagro Español, Germany’s Wirtschaftswunder, France’s Les Trente Glorieuses, or the Japanese post-war economic miracle.

Chinese Media: They Love Idol Too!

All the dry stats, leave us wanting some juicier tidbits, like say, what’s on (or off) Chinese television. Luckily, there is a canonical resource on all things Chinese media.

Resource: Danwei.org, Chinese media, advertising, and urban life

You can get started with the Danwei Media Guide, which will guide you through rapidly proliferating Chinese newspapers, magazines, websites, TV stations, and government regulators. Danwei tends to focus more on the fun, cultural studies type news items. For more pointed business news, nothing beats Pacific Epoch.

Resource: Pacific Epoch, pacificepoch.com

Pacific Epoch covers telecom, tech, media, and has done a great job being all over most Chinese Internet phenomena early on.

There are two blogs of special interest to us. The first is billsdue, which focuses on China’s Internet and media. Its author, Bill Bishop, runs a Chinese game company called Red Mushroom, but he is also a closet scholar and the co-founder of (now CBS) Marketwatch. EastSouthWestNorth, a wide-ranging blog run by Roland Soong, a long-time journalist raised in Hong Kong. He’s got edge and he’s very smart.

Resource: billsude, bbb.typepad.com
Resource
: EastSouthWestNorth, www.zonaeuropa.com

Metrics

We tend to measure Western internet sites in terms of subscribers and/or unique users. Similar metrics are used in China, perhaps because of the prevalence of pay-to-play games in the Internet experience, which were charged by the hour, other metrics are sometimes used like Peak Concurrent Users (PCU) or Average Concurrent Users(ACU). Sadly, the usually wildly misleading Total Registered Users is still a common metric. Active Registered Users is sometimes used, but its meaning can vary depending on the company’s definition of “active”.

With the increase in free-to-use products (spearheaded by Shanda) that incorporate the sale of digital assets, a new metric has come into being: Active Paying Accounts. It just denotes the number of consumers purchasing one or more digital items. Combined with the standard ARPU and a conversion rate, When it comes to money, there are many publicly listed companies, so actual revenue (the preferred metric) is often available.

China’s Internet Players: The More Things Change

All things considered, the major players in the Chinese Internet space are not that different from what they were several years ago. Sina, Netease, Shanda, Tencent, and Sohu have all been around for years. Excellent coverage is provided, along with conference calls and other financial information at Seeking Alpha. We provide a table of the major Chinese Internet companies here. Revenue numbers are in millions and corollaries are obviously pretty loose.

Resource: Seeking Alpha, china.seekingalpha.com

It should also be noted that, as in the US, there are literally thousands of start-ups looking to take out the big guys. Pacific Epoch is a great resource for following smaller companies like 9you. Another great resource is to look at publicly listed Korean Internet companies like CJ Internet, NHN, Daum, Cyworld, and Naver. They are often interested and/or invested in the Chinese market and can be great market data sources.

Quick Context Kit: China, Internet
Basics
Population Resource Bureau, www.prb.org
China Internet Network Information Center,
www.cnnic.net.cn/en/index/index.htm
Table : Urban Dweller Disposable Income
Table : Chinese Internet Users Chart

CNNIC, www.cnnic.net.cn/en/index/index.htm
Media
Danwei, Danwei.org
Pacific Epoch,
pacificepoch.com
EastSouthWestNorth, http://www.zonaeuropa.com/weblog.htm
Bill Bishop’s Blog, http://bbb.typepad.com
Metrics
Chinese Internet Companies

Seeking Alpha, china.seekingalpha.com
Table: Major Chinese Internet Players

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Friday, August 17, 2007

Miniclip's New Robot Army

On the retail distribution and online games front, here’s an interesting, not-quite-officially announced online game. It’s a collaboration between RC2, makers oGames at Miniclip.com - Battle Wheelsf fine radio-controlled products, and Miniclip, the online game portal. The game is called Battle WheelsT and it’s tied in, via codes, to RC2’s Battle Wheels robots, pictured in this post and retailing for $29.99. All consumers can play the Battle Wheels game but those who purchase a robot at retail will receive a special in-game item, the “golden armor.” The game serves as a promotional tool for the robots and the robots serve as a promotional tool for the game. Either way the consumer is introduced to the product, the brand is reinforced.

Giving away something entertaining/collectible separate from the product being purchased is at least as old as sticking baseball cards in Old Judge tobacco (i.e. the 1880s), but the combination of the online and offline worlds could be a new and explosive mixture. For evidence, we could cite the normal example here of Webkinz, but let’s use TimesSelect access when you subscribe to the tree-made New York Times.

Consumers already see their lives as seamless, yet the companies providing them goods and services keep erecting walls between their online and offline lives. After all, even users running around in an immersive 3D environment are still sitting in meatspace in front of a computer. There’s no escaping that, at least not yet.

(I love that this product foreshadows two posts I’m working on, one about retail front ends for online services and the other a post about the Chinese Webkinz.)

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Overheard: The Starbucks of Strip


Fridays are for poking fun at CEOs. Here at CC, we’ll be running Overheard: What CEOs are Telling Their Investors. Using the earnings call transcripts generously posted over at Seeking Alpha, we’ll be bringing you some choice cuts from exchanges between corporate executives and investment analysts. For the non-business types out there, earnings calls happen four times a year when companies report to the SEC exactly how much money they pulled from the world and into their coffers. They are a goldmine of information on all things that have to do with buying and selling stuff. They are also great corporate theater. Yeah, I said it, Corporate Theater.

Nothing is more mass market than sex, which might be why it sells, so first up is Rick’s Cabaret (NASDAQ: RICK), “one of the nation's premier operators of upscale adult nightclubs.” The company is going to generate over $30 million in 2007 from its 13 adult clubs and a few naughty websites. (I note that Rick is an abbreviation for Richard, and wish that the original owner, this Richard, had chosen the other common shortening of that name. Truth in tickers.)

The way Overheard goes is that I dig up a good exchange like this one from August 14th and then we mine it for useful information. As the hedge fund manager at my first job said, “Executives don’t lie, analysts just don’t listen.”

David Yamamoto - Montgomery Securities: So how have customers responded to the new VIP Suite and Skybox, Skyboxes in your Austin locations?

Eric Langan, CEO Rick’s Cabaret: Its unbelievable. The thing about the Austin locations in that we are working on, we finally got the pictures and I think they should be on our website sometime tomorrow afternoon. And you will actually be able to see the difference in this location. It is just a phenomenal location, Austin. There is nothing to compete with the facility itself. It's a little over 20 some thousand square feet. Its two storey; most of the clubs that are in Austin were built in the late 1980s, early 1990s and they have had very little modernization. And this club is probably one of the nicest club that we own, very modern and really built with the VIP customer in mind.

DY: Right.

EL: And the response was, I mean, everybody was just, they couldn't believe that something like that existed in Austin, Texas.

DY: Right. And Eric, you had mentioned a little bit about just seasonality with regards to club owners and them contacting you with the possibility of acquiring them. How would you characterize the acquisition by them right now?

EL: It's very active. There are a lot of people, there are a lot of people shopping… I do believe that there are some very serious sellers out there as well. People looking how to monetize their asset and figure out what their escape route is or their exit strategy is, because, you know, this is not something they want to do forever.


So, first, if you are looking for a sweet ultramodern strip club, Austin hasn’t really been your town (try Portland, not Seattle). Your options have been dingy and, quite frankly, bearing that early 90s color palette that liked mixing teal and purple. It’s hard to receive a lap dance in that sort of environment. Everyone knows.

Second, Yamamoto does a good job maintaining his dignity, considering the circumstances. I mean, the Skyboxes. What a term. Celestial.

Third, you have to feel a bit for Langan. You can imagine it is tough for him at CEO conferences when all the well-known companies can hide the evil that they do and he has to proudly walk in and announce that he bought his yacht with stripper bills. And do we detect a hint of sadness in Langan pronouncement that “you know, this is not something that [I] want to do forever.” Perhaps he imagines that he’ll move on to bigger and better things. Like, maybe, Red Robin management. Or Magic Mountain (oddly, not named after the Thomas Mann’s The Magic Mountain).

Enough clowning. There is real information about what is going on in our world in this call. First, the strip club market is experiencing consolidation as individual owners find their “escape route” by selling to corporate consolidators like Rick’s. Second, fancy clubs have always existed in places like New York (e.g. Scores), but increasingly savvy “VIP customers” in all geographies want that high-end experience. The strip club market, like everything else in our country, is increasingly segmented. Out: the trenchcoated, harried businessman ducking into a grimy place called The Sandy Jug to rub elbows with truckers. In: The architect of the strip club deserving several dozen one dollar bills.

Rick’s wants to be the Starbucks of strip clubs. As Eric put it elsewhere in the call:

“If you go major cities right now, throughout the country and if that comes, about a gentlemen’s clubs which one to go to, where is the best bet. You are going to get well about 30 different answers, and we hope to take that and create a brand, so that when you go to these different markets Rick's is the brand that hear about each and every time.”

(Oh, in case you are wondering, Montgomery Securities is actually part of Bank of America.)

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