It's clear that online distribution is transforming the video game industry into something exciting -- and publishers are scared. At the SXSW conference in Austin, Multiverse's Corey Bridges was there to suggest that they most certainly should be.

With previous experience at Zone Labs, Netflix, and Netscape, Bridges is used to promoting ideas other people think are nuts. His latest venture, Multiverse, is no exception. They've created a platform that allows anyone to create an online world – who wants that?

When the Web first came out, people thought it would be dominated by the big guys, like Time-Warner, Bridges recalls. Turns out, it’s the indies that generate the bulk of the content. There is a near-universal desire to create; says Bridges, “Everybody wants to express themselves in some way.”

Is Traditional Publishing Dead?

The indies are significantly affecting traditional media, explains Bridges. Critically, production and distribution are now in the people’s hands. This results in stats such as Facebook's 70 million users in 4 years, Google with $4.83 billion in revenue in Q4 2007, and Blizzard with 10 million WoW subcriptions worldwide -- which makes Blizzard the de facto #1 media company in the world right now.

“Sucks to be you, media oligopolists,” says Bridges. Nowadays, newspapers are folding and the music industry is going through painful spasms. Retail stores are dropping like flies. The venerable Tower Records up and died. Things are changing.

For example, Nine Inch Nails recently released an online-only “album," with no record company involved. Fans could choose from several versions and packages, including a $300 deluxe version with a vinyl pressing and Trent Reznor autograph.

The film/TV industry is even starting to twitch, Bridges continues. Movie theater revenues are deflating, video stores are beset by Netflix, and the industry was rocked (and possibly undone by) the recent Writers' strike for a cut of online and DVD sales.

As far as Bridges is concerned, video game publishers are next on the chopping block.

Over the past few years, affordable technologies have enabled individuals to produce media content at home. Shipping has become more reasonable, and folks find the middle man less and less necessary.

Video game companies spend a ton of money creating games, which forces them into conservative choices. With production costs at $10 million minimum, a bad game can take down a whole company. Once in the store, a game has maybe a month to prove its selling value. After that, it’s off the shelf. Even if it sells well, the studio usually makes a profit of only 8-20 percent.

So publishers are understandably risk-averse. The outcome, however, is problematic. Under the Hollywood blockbuster model, companies rely on the same old genres, depend on franchises, and constrain creativity. Industry jobs routinely grind people up and spit them out. Game development falters.

But there is good news, says Bridges. Broadband, middleware – specifically, indie-geared platforms for noncommercial use, – and the emergence of a universal client. Of course, Bridges has a reason to promote this avenue; his company's Multiverse Network is one such solution.

As the online world industry continues to grow, Bridges predicts it will take a huge chunk out of the video game industry. "MMOs are not some weird little genre that popped up out of nowhere," he says. "WoW is not a fad, it’s a harbinger." According to Bridges, everyone will have an avatar in a few years.

At the same time, social networks are growing by leaps and bounds. Electronic Arts recently began to develop Facebook applications. "Folks are starting to realize that $80 million budgets and 6 year production schedules are not tenable," Bridges adds.

"This year, the intersection of virtual worlds and social networks will be huge," he says.

From Their Compost, A Garden

Bridges predicts we will see new genres of games for different consumers – not just hardcore gamers – and smarter games for smaller market segments (not just “not only hardcores” but also “not only mainstream dreck”). These trends will benefit both indies and the established publishers -- but the indies will move more quickly, he says.

Today's hitches, according to Bridges: The genres are limited, and few companies control the majority of the market. Digital content is expensive to build, and there is significant friction for new users.

Tomorrow all that will change, Bridges predicts. Independent developers drive innovation. As viral marketing campaigns show, people are more inclined to take information from trusted sources. Communities and forums will continue to grow.

Right now, online worlds are a new medium, he continues. As businesses integrate these tools, the stigma of gameplay will recede. According to Bridges, the distinction between industries will soon blur: video game, virtual world, social network – all will combine as the World Wide Web.

As self-publishing indie studios blossom, Bridges predicts a consolidation of the bigger publishers. “They will still push atoms when everyone else is pushing bits.”

Without their stranglehold on distribution, publishers will fill the remaining niches. They will compete with boutique firms to offer financing, recruitment, management, and marketing services. Overall, we will see better design, fewer publishers, and more millionaires.

“So what world,” asks Bridges, “will you build?”

[The preceding article by Jessica Maguire originally appeared at Worlds in Motion sister site Gamasutra.]

Nottingham Trent University's recent study, that found 70 percent of females and 54 percent of males prefer to play as the opposite gender, is the sort of online worlds story that the media absolutely loves. But Richard Bartle, arguably the father of online worlds, says on his blog that it makes him "sad."

He argues that the study is being used to push a stereotype of women being treated badly online, for one thing, as he saw a Guardian headline that read: "Sexual Harassment is Rife Online - No Wonder Women Swap Gender." Says Bartle:

"Now yesterday's article is actually correct in reporting the research results, in that it says the survey found that a majority of players had switched gender while playing (er, obviously not literally, but they had played a character of a gender not the same as their real one). This makes the context for the later assertion of "up to 70% of female players said they chose to use male identities for internet games" a little clearer. What the survey found was that up to 70% of the 32 female gamers they surveyed had played as a male persona in an online role-playing game at least once.

By today, this had turned into up to 70% of the 32 female gamers they surveyed had played as a male persona in an online role-playing world at least once. We're then treated to a diatribe as to how awful it is to be female online, without any apparent realisation that if it were that bad then why would any men play as women, as many do?"

There are also many flaws with the research that Bartle calls out -- an ineffectually small sample size, no real way to verify the responses as concerns identity or the verity of the reasoning provided. After all, as Bartle says, lots of people use excuses to mask the real reasons they do certain things in the anonymity of an online society.

He concludes by stating the research reminds him of some similar initiatives in the mid 1990s that, without proper study practices, and by treating well-researched phenomena as brand-new, studies such as these ultimately undermined the view of virtual society rather than contributed to its growth and the broader understanding thereof.

[Thanks to Giff Constable for pointing out Bartle's response!]

A group of researchers from Rensselaer Polytechnic Institute, with support from IBM and other sponsors, claim they're working on developing virtual world characters that can hold beliefs and reason about the beliefs of others. They say these characters will be able to predict and manipulate the behavior of real-world people, and unveiled a 4-year old Second Life child named Eddie as an example.

The researchers' objective is to develop engineering to mimic the "theory of mind," or the principles and techniques humans use to interact behaviorally with other humans. The result, they say, would "allow artificial agents to understand, predict, and manipulate the behavior of other agents, in order to be genuine stand-ins for human beings or autonomous intellects in their own right."

The researchers say that Eddie's already been subjected to a "false belief" test, which they explain:

"In a typical real-life version of this test, a child witnesses a series of events in which Person A places an object (such as a teddy bear) in a certain location (such as a cabinet). Person A then leaves the room, and during his absence Person B moves the object to a new location (such as the refrigerator). The child is then asked to predict where Person A will look for the object when he gets back. The right answer, of course, is the cabinet, but children age 4 and under will generally say the refrigerator because they haven’t yet formed a theory of the mind of others."

The research group says it wants to develop a real-world version of Star Trek's holodeck, where users can interact with projected holograms of other individuals (I wonder, is there anyone reading this site who requires explanation on what 'Star Trek's holodeck' is?) Selmer Bringsjord, head of Rensselaer’s Cognitive Science Department and leader of the research project, says that a system like this could allow "cognitively robust" avatars to interact directly with human beings.

Says Bringsjord, "Our aim is not to construct a computational theory that explains and predicts actual human behavior, but rather to build artificial agents made more interesting and useful by their ability to ascribe mental states to other agents, reason about such states, and have — as avatars — states that are correlates to those experienced by humans. Applications include entertainment and gaming, but also education and homeland defense."

Over at the Chicago Tribune's blogs, Eric Benderoff has proposed an interesting question -- are we becoming a little bit fatigued of being added as everyone's "friends" on everything?

Social media's got big buzz these days, and as a phenomenon is one of the bigger drivers of casual multiplayer online worlds. Can you be Facebook friends with your beer buddies and your boss, Benderoff asks, or is a George Costanza-style "worlds colliding" moment taking place?

Granted, virtual worlds and Facebook may be having some moments of overlap these days, but are still separate kinds of products at the end of the day -- kids don't have to worry, for example, about getting friend requests from their parents in a virtual world for children, since that kind of product has not been designed to appeal to adults, and virtual worlds developers seem to be increasingly tailoring their products towards more specific niches within the audience.

But that doesn't mean that fatigue-2.0 might not have a reverberating effect on other kinds of new web media -- it's clear that there are many types of virtual worlds products for many different types of purposes, but it could be tough for them to gain ground if they're suffering from connectivity fatigue induced by other online tools.

How about you? Are you just a little Facebook, IMVU and Twittered-out?

[Work, virtual social life collide | Eric 2.0]

How can the rights of human beings and property be protected in a virtual world? How can they be enforced, and who should bear that cost? These are just a few of the complex issues currently facing online worlds, where virtual lives and goods have real value to users, and at the SXSW conference in Austin, a panel of industry experts gathered to discuss possible solutions.

GoPets CEO Erik Bethke, Live Gamer co-founder Andrew Schneider and attorney Greg Boyd spoke on the panel, while Charles River Ventures' Susan Wu, long an advocate of online world businesses, moderated.
What are virtual property rights?

The Precedents

Wu began by discussing the recent Bragg v. Linden Labs court case -- in brief, a legal battle between a Second Life user and the world's parent company over land that Bragg apparently improperly acquired, resulting in a ban from the world by Linden. That case, Wu says, was a landmark in that it demonstrated that virtual property rights have tangible value in the court system.

In another recent incident, a Dutch teenager was arrested for stealing $6000 in virtual furniture from Sulake's Habbo Hotel. He was arrested for burglary, rather than hacking.

"What are the prevailing customs that should apply?" Wu asked. "Is it the country where the company is based? Is it the country where the customer lives? We don’t even know what the basic virtual property rights are that we should be concerned with."

Boyd opined that users have a license to use virtual property, and Wu suggested that perspective indicates governance by prevailing perspectives.

Said Schneider, "It’s all about the terms of service, especially for a company like mine that does allow the cashing out of virtual goods for money. The terms of service need to be absolutely rock solid. We’re talking about limited licenses. What are the rights you are granted? What happens if the servers go down? What happens if you’re banned? It’s almost as though every MMO and virtual world has its own constitution."

If that's the case, asked Wu, doesn't that create a lot of confusion for the consumers?

Stated Bethke, "I consider WoW the biggest MMO failure ever. The gameplay is amazing, and graphics, and everything. But at the end of the day, people know it doesn’t mean anything. Their stuff can be taken away from them. They can be banned at any moment. I believe what they earn becomes their property."

"That's kind of extreme," Wu opined. "But how do we reconcile the rights of a player to sell items and so forth?"

"At the end of the day, it’s a limited-use license," Schneider noted.

A Question of Ownership

Bethke suggested it might be the litigious environment that prevents a solution to the problem. "The law comes from common law, which comes from expectations and how people work together," he added. "I think we want to match people’s expectations."

Said Boyd, "I fundamentally believe developers should be able to do whatever they want. But you should go into that with your eyes open. Once you say to a player, 'you own this sword,” you invoke a lot of legal precedent regarding property rights.

So full ownership doesn’t exist because publishers are scared?

Admitted Boyd, "You are buying a lot more risk if you go out and say, 'you guys own this.'"

Wu wondered whether there's a difference between a world's citizens and those who are merely 'tourists.' -- in other words, paying versus free users.

Replied Bethke, "If you’re a tourist, I’m not going to grant you all these property and human rights, because you could simply be a griefer. If you’re paying me money, you could still be a griefer, but at least you’re paying me money."

He continued, "If you’re a paid citizen, the stuff you buy is your stuff. If you lose it, we will replace it. I’m not going to give you fair market value. If you do anything wrong, we offer four locations of arbitration and if we need to, we take away your stuff and that’s it."

In a world with very explicit broad rights, much of which are tied to real world value, at some point courts of law recognize content as real property. Wu asked the panelists a key question -- do they have the legal right to enforce punishments or codes of behavior against those rights?

"We have three avenues to ensure fairness," Bethke explained. "If it ever got to litigation, I’m pretty confident we would prevail."

Do property rights automatically mean microtransactions?

"Putting a monetary value on something is more black and white," conceded Schneider, "but time has value too."

Said Boyd, "You cannot think about property rights without thinking of RMT. You need to consider gambling regulation, banking regulation, money laundering, taxes. These are not really things that we know yet. All these are magnified when you go full ownership over license and when you have a cash-out component. These are things we are sorting out right now."

And how quickly will the law catch up to practice?

Bethe pointed out, "40 million people make sales on eBay, and you’re supposed to pay taxes on that. But many people do not. That’s a lot of money. There are bigger economic things happening. And I’m confident they will be hit before we’ll be hit."

Boyd – There’s a web video out there of me in 2004 saying, “we’re totally going to have this virtual world thing sorted out by 2007.” (laughs)

Said Schneider, "Tackling this issue involves a lot of heavy lifting. We have quite a few lawyers trying to figure out this stuff. We want to do the right thing; It is not a black-and-white issue. Some things are a state by state issue, and not a federal issue. Part of our challenge is to figure out the landscape and the regulatory issues involved in being compliant."

But all of the panelists agree some kind of resolution is inevitable: "If you think about things that gain a lot of people’s attention… you need a lot of people to invest money, time, and creativity. You’re going to need to give them property rights to get those things."

[Jessica Maguire contributed this report.]

California-based developer Fluid Entertainment has announced it has secured $3.2 million in Series A funding, led by Trinity Ventures. The fund will be used to support the development of a new, original massively multiplayer online (MMO) game for children.

Specific details of the game have not yet been revealed, but it will feature an environmental theme and is due to launch this year.

The company’s previous products include partnerships with companies like Hasbro, Berkeley Systems, Disney, Mattel and The Learning Company on PC and Mac Pokemon, Harry Potter and PowerPuff Girls franchise titles.

"Fluid Entertainment is led by a creative team with more than a decade of experience developing interactive, educational, and - most importantly - fun entertainment for kids," said Tim McAdam, general partner at Trinity Ventures.

"The company has been in business since the late 90s, and is widely known for developing well regarded games for children. With three other gaming investments in our current portfolio, we were looking for the right play in the children's MMO area, which is an open canvas with only a few incumbents. Fluid has a veteran team, a great history, and a clear and progressive vision that positions the company to become a leader in this arena."

"It's an exciting time for everyone here at Fluid Entertainment as we drive toward launching an enormously imaginative, vibrant, and innovative new online 'playscape' for children," said Greg Jones, CEO of Fluid Entertainment. "We're thrilled that the venture community shares our exciting vision, and this financing ensures our ability to execute."

AOL has announced it will acquire Bebo, the social media network whose traction is primarily in the UK, Ireland and New Zealand. It currently claims more than 40 million worldwide, as compared to AOL's claimed 80 million across its AIM and ICQ communications network. AOL is set to pay $850 for the company.

On the transaction's closing, current Bebo president Joanna Shields will continue to run the company and its approximately 100 employees, and will report to AOL president and COO Ron Grant.

AOL recently launched Open AIM 2.0 with the aim of allowing developers more access to the AIM network for integration into their sites and apps. AOL chairman and CEO Randy Falco commented, "Bebo is the perfect complement to AOL's personal communications network and puts us in a leading position in social media. What drew us to Bebo was its substantial and fast-growing worldwide user-base, its vision of a truly social web, and the monetization opportunities that leverage Platform-A across our combined global audience. This positions us to offer advertisers even greater reach and marketers significant insights into the desires and needs of consumers."

Sony has announced that after a structural reshuffle, its Sony Online Entertainment division (Everquest, The Agency) is being moved to the Sony Computer Entertainment wing to better integrate with "the PS3 experience," with CEO John Smedley now reporting directly to SCEI president Kaz Hirai.

Sony says the new structure "is designed to mutually benefit both companies by further accelerating the PlayStation business through SOE's strong online gaming expertise."

The San Diego based division -- formerly part of Sony Pictures Entertainment -- is expected to continue normal operations producing PC and PS3 titles, but Hirai says the move will help online games and services to become "a more integral part of the PS3 entertainment experience."

He added, "This new structure will allow us to take full advantage of the extensive breadth of expertise of the two companies and increase our range of exciting entertainment offerings to our consumers."

Said Smedley, "We are thrilled to become a part of the incredible team that has made PlayStation 3 the premier platform for next generation online gaming. This move is going to broaden our capabilities and expand the development of our products into new and exciting directions."

According to a new report, Linden Labs' Philip Rosedale has announced he will be stepping down as the Second Life developer's CEO to become chairman of the board, seeking a replacement with "more operational and management expertise."

According to an exclusive Reuters report, Rosedale will replace current chairman Mitch Kapor, who will stay on as a board member, and, Reuters notes, the company’s largest investor.

A former RealNetworks CTO, Rosedale told Reuters he was "not going anywhere, and I’m still full-time on this, probably for the rest of my life,” adding he would continue to work full time on Second Life product development and strategy.

Kapor told Reuters the move "was not precipitated by a crisis,” and said the move was not meant to imply a pending sale of the company, but said taking the company public was "an option under consideration."