Meeting Before E3

"Fortunately, the film has high profile, and Spielberg had digital modeling during pre-production," the manager added. "The North America Second Development Group used the upgraded 3D dinosaur models directly, and the lighting and Jupiter's capabilities work very well together. Although the film has been taken off the shelves, VHS tapes, VCDs, and DVDs will be available in North America next month. If we release the game now, riding the wave of home entertainment, we can recoup some of the losses."

"What about ' Fast & Furious 2 '? Did Universal finally settle for less with this one?"

"Much more cooperative now." The supervisor smiled. "With the success of the first film as a benchmark, the production company is very cooperative this time. They even sent our development team the storyboard and CAD data for all the modified cars eight months in advance. The movie is scheduled for release during the summer season, and our game will be released simultaneously on its opening weekend. The two-player split-screen racing mode is the main selling point for Jupiter this time, and the demo was submitted for review last week."

Hisao Oguchi stared at the two home console display stands on the blueprints, then pondered for a moment.

"Sony will definitely launch a fierce counterattack on home consoles at this E3. Final Fantasy VII has given Jupiter a lot of ground, but Sony has never stopped its price cuts and promotions on PlayStation. They have a lot of second-tier action games in hand, and they will definitely make a big splash at George-ia Dome this time."

He stood up and walked to the floor-to-ceiling window in the office.

"However, this year, the main battleground for the entire industry is no longer entirely in front of the television." Hisao Oguchi turned around, his expression calm. "Call the booth construction team over and adjust the budget allocation."

How do I adjust it?

"Shrink the circular demo area originally reserved for Jupiter by one-third, and convert all the freed-up space into a GP2 battle arena." Hisao Oguchi drew a horizontal line in the middle of the blueprint. "Make a huge physical plant wall for Plants vs. Zombies, and prepare four external infrared projectors for Yu-Gi-Oh!!. Since the handheld console craze has already started in April, then we..."

Riding the wave of E3, let's turn it into a wildfire.

The flight from Tokyo to Atlanta landed late at night.

Hisao Oguchi, along with several staff members from the Japan headquarters, checked into the Westin Hotel in the city center and spent most of the day adjusting to the time difference.

At 8:30 a. m. the next morning, he met Frank Marshall, who had just flown in from Los Angeles, in the executive lounge.

Frank was wearing a light gray shirt without a tie, his jacket casually draped over the armchair, and holding a cup of black coffee in his hand.

As the head of Silicon Valley Online, the CEO who just led the company to a market capitalization of over US dollar 10 billion showed no signs of fatigue from the long flight.

"Oguchi, try their American-style pancakes first, they're pretty good." Frank pointed to his plate and pulled out the chair opposite him.

Hisao Oguchi ordered a pot of black tea, sat down, and placed his briefcase beside him.

"Are the Silicon Valley Online people coming in over at the booth construction site?"

"The equipment was all moved into the Georgia World Congress Center yesterday afternoon." Frank put down his coffee cup, took a printed brochure from his suit pocket, and spread it in front of Oguchi. "This year, we're not going to piggyback on Sega of America's leftover booth space; we've secured a 400-square-meter main booth in the West Hall ourselves."

The brochure featured a rendering of the booth, with the area below the huge "Silicon Valley Online" logo clearly divided into several sections.

"The card and board game lobby occupies a corner; that's our core daily active user base, mainly for investors and a few traditional advertising sponsors." Frank tapped the most prominent area of the large screen in the center of the blueprints. "The lion's share went to ' Dungeons & Dragons Online.' Last year alone, this game contributed over US dollar 100 million in revenue to our accounts through monthly subscription cards and value-added services. Goldman Sachs analysts always start their financial reports with this number."

Hisao Oguchi turned the page. "I heard the development team is currently refactoring the graphics engine?"

"We have to rebuild it; players have become too discerning." Frank leaned back. "After UE 1.0 came out last year, the graphics of single-player games jumped a notch. If players see a bunch of pixelated, rough models in online games, who's going to be willing to pay US dollar 14 a month for a subscription? We took 20% of last year's profits to give Dungeons & Dragons Online a complete graphics engine upgrade. High-poly textures, dynamic water surfaces, real-time shadows—it's all new. At E3 this year, the main screen will feature a live demonstration of the new engine in the carousel."

"Will this upgrade be demanding on the player's computer configuration?" Hisao Oguchi asked, hitting the nail on the head.

"That's what I'm going to do next." Frank smiled, leaned forward, and lowered his voice, "Didn't IDSA hold a high-level closed-door industry summit this year? Two thousand seats, and I got the keynote speech on the third morning."

Hisao Oguchi paused, his hand holding the teacup still. "You're going to openly solicit customers on the forum?"

"Selling shovels openly and honestly, how can that be called soliciting customers?" Frank pulled another bound data report from his briefcase. "How many kilometers of DSL have telecom operators in California and New York laid this year? How many times has the ISDN access rate in Japan and Western Europe increased? How many tens of millions of homes have been shipped globally this year? All the data is in this booklet."

Frank pressed his finger heavily on the cover.

The current PC game market is fiercely competitive, with major companies like Capcom, Konami, Westwood, and id Software all locked in a fierce battle for console and AAA titles. However, in North America and Europe, far-sighted development teams have their eyes on the lucrative online market. Compared to the one-time sale of PC games, the sustainable revenue model of online games, coupled with the current capital investment in the internet sector...

The frenzied hype makes it easy for industry professionals to raise startup capital. They're envious of the passive cash flow of games Dungeons & Dragons Online, but they can't replicate it.

"Why?"

"Because they can't afford to maintain servers, let alone write the underlying network synchronization code." Frank tapped his knuckles on the table. "Programmers who work on single-player games know how to adjust graphics rendering, but the moment they face transoceanic data packet loss and concurrent connections, their brains immediately shut down. EA has money, and Sony can build its own infrastructure, but what about the remaining 90% of small and medium-sized companies and even studios in the industry?"

They might have a great online game plan, but they don't even have the budget to rent a local Los Angeles server room and spend several months developing and debugging it.

Hisao Oguchi understood his plan.

"So you want Silicon Valley Online to become the infrastructure of the entire online gaming industry."

"Absolutely right." Frank's lips curled into a smile. "The nodes we've built in key global network hubs are currently running GO. com, ICQ, blogs, Webdir, and Blizzard's Battle.net. Battle.net has undergone a real stress test with millions of concurrent users; its stability is evident to the world. At the meeting, I'll present this technical support solution. Small and medium-sized teams only need to write their data input/output network modules according to our technical specifications, connect the network modules to our underlying SDK, and Silicon Valley Online will handle everything: global server nodes, billing channels, and anti-cheat monitoring. They just need to focus on gameplay; we'll take care of the dirty work, and everyone can sit back and split the profits."

"While gold prospectors are scrambling to get their hands on the gold, the ones who always make a profit are the people selling shovels and jeans at the crossroads." Hisao Oguchi closed the data report in his hand and handed it back to Frank.

"What did Blizzard say?" Hisao Oguchi asked casually.

Frank shrugged. "Mike Mohan is thrilled we're making the pie bigger. Battle.net has a huge number of players online every day now."

"The Silicon Valley Online tech team just helped them expand their Dallas data center last week. As long as this network infrastructure is robust enough, Blizzard can focus on the games themselves and quickly deploy servers when they urgently need to expand service capacity."

Hisao Oguchi picked up the teapot and poured half a cup of black tea into the white porcelain cup.

"Sega Galaxy's session is scheduled for the afternoon of the second day," Hisao Oguchi, pushing his teacup towards him. "It's also a special session of the IDSA closed-door summit, focusing on the commercialization of game assets."

Frank took a bite of his muffin and tapped his finger on his napkin. "Director Hattori himself is coming to speak?"

"Yes, Hattori the team." Hisao Oguchi nodded. "After Sunrise and Sotsu were integrated into the Sega system, the copyright chain was mostly streamlined. Coupled with Bandai's toy sales network, Sega now holds the most derivative development resources in the entire industry. Hattori is going to give these European and American counterparts a real rundown on stage this time."

"What secrets are you going to reveal? How are you going to teach Hollywood how to sell vinyl records?" Frank chuckled.

"Teach them not to put the cart before the horse."

Hisao Oguchi spoke calmly, tapping his finger on the table.

"Many companies are incredibly envious of us making money from both ' Clear and Present Danger ' and ' Fast & Furious,' thinking that we can simply buy a popular comic book or movie title, reskin it, and print money. Hattori's speech outline clearly states in its first point: the game itself must be of high quality. If the content on the cartridge and disc isn't compelling, players will forget it as soon as they turn off the machine, and no matter how fancy the subsequent merchandise is, it's just a one-off sale."

Frank took a sip of coffee. "The surrounding markets in Japan and the US are not lacking in distribution channels."

"The distribution channels are readily available, even excessive," Hisao Oguchi continued. "Animation has Cartoon Network and TV Tokyo, manga has Shueisha, and audio-visual products have major record companies, not to mention Hasbro, Mattel, and Bandai's densely packed toy stores."

Finding a OEM factory to make molds, print plastic figurines, or produce cassette tapes is hardly a barrier for large companies. Their real Achilles' heel lies in their brand image.

Hisao Oguchi took a note out of his suit pocket and pushed it over.

"These are four spin-off projects that Sega Galaxy canceled last year. Two light novel projects for RPG games, and two North America release plans for mecha models. The reason is simple: the prototypes were made, but the core audience didn't accept them. Western players wanted hardcore collisions and realistic paint jobs, but the Japanese team insisted on stuffing them with cute girl photos. If you put this kind of stuff in Walmart, it would only get moldy and dusty in the warehouse, tying up millions of US dollar in working capital, and it would be completely pointless."

"So Hattori went to pour cold water on things." Frank picked up the note, glanced at it, and tossed it back onto the table.

"It's about telling them how to lose less money." Hisao Oguchi picked up his teacup and took a sip. "Even though Sega has Sunrise's Gundam and Bandai's injection molding lines, when faced with a second-tier game that doesn't receive a great market response, they immediately stop developing derivative products and never push them too hard. Those small and medium-sized teams don't have that kind of scale. Once they have hundreds of thousands of plastic peripherals tied up in their hands, their cash flow will dry up, and the company can be liquidated and go bankrupt within a month."

Frank leaned back in his chair, crossed his arms, and smiled.

"You traditional physical systems are much more reliable, taking things one step at a time. Unlike us internet engineers, who have to fight those geeks in San Francisco over underlying protocols the moment we open our eyes every day. If we're even a fraction of a step behind, new compilers and data compression algorithms can bring down the old system."

Hisao Oguchi looked up at him and chuckled softly.

"Stop complaining about being poor. Silicon Valley Online's market value has exceeded 10 billion, and Goldman Sachs writes research reports praising it every day. Besides, if Sega weren't so focused on cutting-edge technology, where do you think President Nakayama would be throwing all those Japanese yen around?"

Frank raised an eyebrow. "Is there some news from Nvidia?"

"The custom chip solution has been revised to its fourth version." Hisao Oguchi lowered his voice, his expression serious. "Jupiter's current market share can still overtake Sony for more than a year, but Sony's price cuts on PlayStation have launched a fierce counterattack, Ken Kutaragi has a lot of cash on hand, so he's probably already started developing the next-generation home console. The president knows very well that after the outcome of the 32-bit console war is decided, the next tough battle will be the completely new graphics architecture. Nvidia is developing a new graphics processor in parallel, while Sega wants a completely customized next-generation home console graphics core."

Frank picked up his black coffee and took a small sip; the rim of the cup touched the saucer, making a slight clinking sound.

He leaned forward and lowered his voice. "The chip design has been revised to the fourth version. After that, there's tape-out, packaging and testing, then motherboard integration and system firmware debugging. This whole process will take at least two years to complete."

Hisao Oguchi didn't respond, but simply picked up the silver teaspoon and swirled it around in the cup twice.

"Sony hasn't stopped throwing money at marketing and promotion for the PlayStation." Frank tapped his fingers on the tablecloth. "Ken Kutaragi is a tech-savvy madman. He's not going to swallow the fact that our Jupiter has outperformed the 32-bit console. Given the pace of their semiconductor division's development, Sony's new console could be released anytime soon. What if they manage to get their console out by the end of next year or the first half of the year after? Wouldn't Sega be in a very passive position during that lull?"

The two exhibition booth floor plans on the table were blown up by the wind seeping in through the window.

Hisao Oguchi reached out and flattened the drawing, a slight smile playing on his lips.

"The operations department held a closed-door meeting with Tokyo about this back in April. At that time, several senior directors were so anxious that they were banging on the table, fearing that Sony would catch them off guard."