Interview: Alex St. John Reminds Us Why Console Gaming Is Dead

Alex St. John, who became CEO of social network hi5 late last year, is one of the most famously outspoken personalities in the sphere of online gaming. He's seen the gaming industry grow up, first at Microsoft where he helped push the DirectX technology and later as co-founder of WildTangent, which was on the leading edge of monetizing online PC games primarily through micro-transactions. St. John also famously declared consoles dead in 2008, something that IndustryGamers asked him about in a recent interview among other things (hint: he's not backing down from it.)

IndustryGamers: Why did you join hi5? What are you looking forward to do most at hi5?

Alex St. John: Well, much for the same reason of why I helped found WildTanget, it's because I believe in online gaming. I think multiplayer would dominate the industry and that it would destroy the console industry, and I firmly believe that the way the game business is going. What everyone is calling social media games... I think that's not the right term, they're VIRAL games; when you look at social media sites, they look like bad MMOs. From where I originally came from in the business, you sold linear content that players played until they were finished and then they never looked at it again, but then it was discovered if you put in multiplayer you would last longer on shelves. Then with the Quake and Unreal series, they eventually realized you could make a game about multiplayer. Now, they found that Facebook could have people poke at a screen for hours, a metagame of sorts with people commenting; terrible at profitability, but great at attracting users.

hi5 had content and they wanted to see how to make an entertainment platform that is profitable. Once a platform is online, you can build games that are made around the philosophy of 'you can give us only as much as you want to,' and you can monetize it easily that way. But going back to what I was saying before, one of the fascinating things about these Facebook games isn't social-ness; it's viral-ness. Venture capitals who want to get into the space always talk about the social factor and bring up Zynga Poker, but that was the company's last multiplayer game. They realized that they don't need actual interaction - you just need notifications of your friends. The biggest connection to Facebook is spamming your friends about lost sheep, etc. Thanks Facebook, thanks Zynga!

The main advantage of an online platform like Facebook is that all your friends can participate; you can't play with your friends in World of Warcraft, except under specific contingencies. Facebook allows players to connect more naturally. When they are engaging in social networks, it's like they're playing in a crappy playground; you can bring in quality toys later and increase the value of the experience. So what I'm going to do is take a passive profile into an active venue. I want to create a place that you can really interact with other people and make a little money along the way, because Facebook is the biggest MMO in the world, but it's also among the most boring.

IG: There's been a shift in console games going online as well, with a lot of single player franchises adding multiplayer components.

ASJ: Yeah, and have you seen the variety of free multiplayer titles on the PC? I mean, can you believe how many bad online games there are? These games look like s***! You have to go, 'Holy cow, how can you make so much money out of games that look like this?'

I've got some fun facts for you. World of Warcraft wipes out an entire retail sector for PC; it was one billion [dollars] a decade ago at its peak, but WoW brought in $1.6 billion in 2009. WoW is also a pauper compared to online gambling; despite the fact that it's technically illegal, there was $6 billion alone spent in the U.S. last year compared to $1.6 billion in WoW. The average console gamer spends more time per day playing games on PC than he does on consoles, but at the same time, he spends three times as much money on his console games than he does on his PC pursuits.

IG: For the record, you're counting things like Facebook and Internet poker as PC games, right? 

ASJ: That's right.

IG: Do you think that “games-as-a-service” is the inevitable future?

ASJ: Completely. People don't think in geological time scales – consoles are really the anomaly. For arcade games, if you had $300, you could spend that on games at the arcade; if you had $5 you could spent that too. People payed as much as they wanted for content. So the arcade business was more efficient because you paid for what you wanted, and this is what you saw in China and Asia when the online markets there started to take off.

IG: So are you still of the mind that consoles are going to die in a few years?

ASJ: Yes, for a few reasons. One, the rise of MMOs; with World of Warcraft that makes billions of dollars a year, you show something that's a real threat to console business. The console business is a legacy of the DRM model that Nintendo instituted back on the Nintendo Entertainment System and was perpetuated by Sega, Sony Microsoft and others. Anecdotally, I talked to some high level Sony people, who asked me about evolving their online platform for PlayStation 3. Eventually, they asked me why I would help them since I'm technically their competition. I said, 'You don't understand. The degree to which you become successful in online gaming, is the degree to which you're dead! Once you prove yourself useless to big box retailers like Wal-mart, you will absolutely cease to exist as a necessary platform!'

The second reason lies in 3D graphics. We've reached a level of diminishing returns. We are at the limit to where if you make a console twice as good looking, it isn't worth it financially for the console maker or the games publishers.

I'm not afraid to make these sort of predictions; I was at a Microsoft gaming conference back in the day for Windows 3.1. I told all of the 1,500 developers there that they were going to boo me. Then I said that all of them were going to quit being DOS developers and shift to Windows. And sure enough they booed me off the stage, but eventually I was proved right.

IG: Now, let's say an avid console user takes exception to what you're saying and points out, “Saying that multiplayer experiences will make single-player outdated is like saying that tennis will overtake books; they're very different experiences.”

ASJ: Ok, you got me, I'm exaggerating a bit. Television didn't eliminate the consumption of books, but it did replace it as the dominant form of entertainment. It's kind of like how radios are no longer placed in living rooms – the paradigm shifted. Gaming is the dominant media for this generation, and it's going online primarily. Single-player experiences will be like books are to TV – still there, but only a smaller part of the overall market.

You know how music used to be a big part in Wal-mart? Now it's mostly iTunes gift cards with very little presence of CDs. DVDs also used to be bigger – now you see them at super markets shuffled off to some corner. That'll be retail console games pretty soon.

IG: So what you're saying is that console games at retail in a few years is going to become like PC games at retail are now?

ASJ: Exactly. The PC consumers have shifted online.

IG: Returning to the original subject, give me your one over of what you're excited to do at hi5?

ASJ: I think online delivery is a concept that appeals to me immensely. I founded WildTanget because I believe in online gaming, and I went to hi5 because I believe their viral method is the way of the future.

IG: So... what you're saying is that you're a serial entrepreneur?

ASJ: Absolutely.

IG: Do you ever sleep?

ASJ: I'll sleep when I'm dead!

IG: Ha! Thanks Alex.

Also See St. John's recent op-ed:  Opinion: Why Brand IP Doesn't Matter to Online Games