Online Games 04 07

Computer Games & Virtual Worlds Trends in Online Electronic Entertainment

Steven DeBenedictis – Dassault Systemes April 17, 2007

The computer game and electronic entertainment industries are multi-billion dollar global businesses that have strong growth in revenue, consumers and territory reach year over year. Maturing online functionality and growing consumer adoption are strongly intertwining online activities with game offerings. Increasing demand and more sophisticated technology offerings will constantly drive the need for high capacity and highly reliable data communications and services.

Computer and Video Game Industry Statistics Online Gaming • Product Categories • Consumer Demographics • Growth Drivers Case Studies • America Online – Casual and Premium Games • Turbine Entertainment – MMORPG • GoPets – ‘Free-to-Play’ Online Virtual World • Microsoft Live – Console closed system • Real Arcade – Digital fulfillment • Disney.com – Online destination Conclusions

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U.S. Computer and Video Game sales - 2006 • Console, Handheld and PC software = $7.4 billion1 • Console and Handheld hardware = $4.6 billion1 Worldwide Video Game market predicted to grow to $46.5 billion by 20102 • Filmed Entertainment market predicted to be at $104 billion by 20102 Worldwide Online Game market predicted to grow to $13 billion by 20113 • Asia Pacific expected to lead reaching $4.4 billion by 20102

Personal Computers • Mainstream OS applications — Games • Multiplayer • Persistent world — Communications applications • IM chat clients Closed Hardware Systems • Consoles — PS3, Xbox, Wii Mobile Telephony • Games • Internet enabled handsets

Web Browser • Content Destination — Branded content • Single player • Communities • Persistent worlds — Content aggregator • Casual Games — Browser-based — Digital download — Skill-based — Advergame • Digital Distribution — Online sales — Digital fulfillment

Online Gaming Participation • 44% of gamers participate in online game activities one or more hours per week2 • Average online gamer spends 5 hours/week online1 Gender Statistics • Males gamers outnumber female gamers 2 to 11 • Online gamer breakdown2 — Male – 58% — Female – 42% • 64% of online casual gamers are female1 Online Gamer Demographics • Hardcore Gamer – 18 to 34 year old male • Casual Gamer – 35 to 54 year old female

1- Nielson Entertainment – 10/06 2- Entertainment Software Association – 2006 Game Industry Overview

Technology advancements a key factor in driving online gaming growth1 • Higher PC penetration • Increased adoption of broadband Internet • Increased usage of console systems online Evolving consumer behavior making online gaming use more mainstream • Familiarity with finding content • Increased comfort with online transactions • Digital fulfillment offers instant gratification Game play advancements integrate online activities seamlessly and addictively • Virtual economies mirror real-world systems that create value and worth to consumers • Community dynamics create social situations with more control for consumer to customize their persona • Short play time requirements and certain ready availability allows for access anytime - anyplace

1- DFC Intelligence – 06/06

Category • Branded web content destination — Browser — Proprietary client Product Types • Free, browser-based games • Downloadable casual games Customer Profile • Mass market • Women, 30-45 • Most popular game – Solitaire

Consumers • 7 – 8MM unique users per month • #1 content channel/user/month on AOL Content and Bandwidth Usage • Downloadable casual games — 15 – 35MB • Browser game file size — 1MB • Advertising — In-game advertisements — Interstitial advertisements — 2MM ad impressions / month Hosting Configuration • Dedicated and co-located hosting for content and advertisements

Online and downloadable file game consumption are growing Downloadable file sizes getting larger Rich advertising content requiring more bandwidth to push media Internal and External Recommendations • Advertising content optimization • Reliance on commercial data networking services to accommodate new content and functionality

Category • Mainstream OS application • Persistent world Product Types • MMOG — Dungeons & Dragons Online — Lord of the Rings Online • Fantasy role playing • Dedicated client/server hosting experience Customer Profile • US — Hardcore gamer — Male, 13 – 24 • Asia – China, Korea — Social based — Time and item based activities and revenue model

Consumers • 500K client downloads to registered LOTR Online beta applicants • 2MM users/month in U.S. for all MMOG’s Content and Bandwidth Usage • Downloadable client — 4GB • Peak bandwidth usage — 20Kbps Hosting Configuration • Shard — 13 servers — 3000 users/shard • Multiple instances to support user community Consumer Use • 20 hrs/week - some up to 40 hrs/week

Content additions and patches • Several hundred MB’s/month Consumer behavior • Expect instant gratification with updates Successful MMOG product have conditioned the market for new offerings • Replacement MMOG for core gamers • Mainstream consumer variants Internal and External Recommendations • Packet size vs. Speed – a constant battle • Predictive vs. Twitch clients • Fiber optics to the home • Priority packet traffic with carriers • Hosting infrastructure and locations — Hops through ISP

Category • Online virtual world - Korea • Mainstream OS application • Web destination Product Types • “Free-to-Play” — Community and Item based • Proprietary client • Web browser functionality Customer Profile • Mass market • Female, 13-45

Consumers • 600,000 registered users Content and Bandwidth Usage • Downloadable client — 20MB • Backend download — 700MB Consumer Use • Broadband penetration is directly proportionate to user conversion — Korea, Thailand – 90% — U.S. – 40%

“Item Based” game play coming to the west Game design takes precedence over networking efficiency making reliance on commercial services a given Internal and External Recommendations • Game is designed to allow users to participate while new content is downloading • Markets with widely available high speed connectivity such as Singapore and Korea are leading the way in shaping online offerings — Better product development — Preconditioned consumer behavior

Category • Web browser – Casual Games • Proprietary Closed System Product Types • Casual Games — Downloadable and browser • Networked console - PvP Customer Profile • MSN Games — 66% female — 50% over 35 years old • Xbox Live — Males - strong majority — 18 – 34 years old

Consumers • MSN Games — 13MM users/month • Xbox Live — 6MM members Content and Bandwidth Usage • MSN Games — 25MB – 100MB/download file • Xbox Live — Similar data networking usage as PC games Hosting Configuration • Dedicated hosting facilities on large connections • Bandwidth costs are <10% to overall technology development and maintenance costs Consumer Use • MSN Games — 141 minutes play time/month • Xbox Live — 4 of the top 10 games played on Xbox Live are from Xbox Arcade = MSN Games

Content additions and new media • Dozens of new downloadable games added each month • AAA titles are more regularly including network functionality • Expansion into other forms of content such as streaming and downloadable videos will greatly increase bandwidth demands Internal and External Recommendations • Toolsets and best practices to developers to optimize game code efficiency and compression, and to maximize data networking functionality • From a non time-based perspective the data networking infrastructure is good. For time-sensitive data traffic such as game packets the infrastructure needs to be improved. • Worldwide junctions between large and regional networks needs to be improved

Category • Mainstream OS application • Web destination Product Types • Casual games • Digital fulfillment and download • Proprietary client Customer Profile • Downloadable games — 66% female — 30 - 50 years old • Browser based games — More even between male and female — 15 – 30 years old

Consumers • 12MM unique users/month Content and Bandwidth Usage • Downloadable files — 25 – 100MB • Bandwidth usage/user/session is greater than typical MMOG usage Hosting Configuration • Dedicated and co-located hosting facilities on various continents • Connected on major data networking pipes Consumer Use • 1MM downloads/day • 55 minutes/session

Encouraging streaming content consumption is the primary mission: games, music, etc. Consider content delivery speed and reliability a critical success factor to optimal user experience Internal and External Recommendations • “Invented streaming” and will always have a significant technical investment in development efficiencies and data communications optimization • The faster users can get content the better • Specialty fringe services such as Akamai create better overall service

Category • Branded web content destination • Content aggregator • Online community Product Types • Web browser - Flash • Proprietary content delivery platform • Multitasking environment in the browser — Games, streaming video, content customization, commerce and rewards Customer Profile • Games and XD community — Children and ‘tweens’ • Overall Disney.com network — Children to adults

Content and Bandwidth Usage • Browser functionality packet size — <1Kbps • Peak bandwidth usage — 700 Kbps – streaming video Hosting Configuration • In-house hosting facility • High-end, multi-core processor servers • Located on main data pipeline connections

Evolution from static, request/response communications to state-dependent, socket layer communications User customized content from a variety of sources constantly being updated Real-time communications and sharable environments with community members Browser-based content will also tie into client applications • MMOG – Disney Toontown

Online gaming is a major component to the future of the worldwide electronic entertainment market Consumers are adapting to online content utilization and acquisition models that are expanding the markets and demand for rich content worldwide Game developers and content distributors are pushing greater amounts and larger blocks of data that require expeditious and reliable data connectivity Technology development is happening on the content development side, but is significantly reliant on the capabilities of commercial data networking offerings