Like the people who've been playing games all their lives, the interactive entertainment industry has matured. It's grown from a simple extension of a toy company to a multi-billion dollar industry run by global conglomerates seeking the dollars of people of all ages and both sexes. It's really starting to come into its own as a major media industry.

However, unlike other forms of popular media, the overhead for making new games has been increasing at a clip nearly parallel with sales revenue. With certain next-gen titles estimated to cost upwards of $30 million, new forms of revenue are almost necessary for publishers to maintain their very existence. The increase of most new retail games to $59 dollars was one such measure, but publishers are increasingly looking towards another revenue stream: in-game ads.

We sat down with representatives of Electronic Arts and Midway and their respective in-game advertising partners at IGA Worldwide and Double Fusion, about in-game ads and the next-gen.

The increased amount of ads in games has drawn a degree of apprehension from most gamers. This is for understandable reasons; when you've paid for something, you don't expect another "fee" to come in the form of an ad. However, it appears as though those fears are (somewhat) unfounded. Every company we talked to agreed (in so many words) that putting ads in the right context, such as where a billboard would occur in real life, is very important for in-game ads.

"It's about the contextual reality of the placement," said Jon Epstein, CEO of Double Fusion. "If you saw it in the real world, it's a brand that's likely to appear there in real life. Comparatively, in free games, publishers/users seem to care less what makes a 'good' ad. I want to stress that there are numerous ways to put ads in games. We don't limit ourselves to certain ad constructs... we want to do things like competitions and leaderboards. We've found the best way is to stay flexible, stay proportionate, and not to limit our thinking to in-game ads. After all, there are games that aren't sports titles or set in the modern world. One such way is giving gamers sponsored hints, and so long as you're outside the reality of the game, it has tremendous value."

"With most of the genres we're doing in-game ads, it's going to be more distracting taking the ads out than putting it in. We've done tests in NHL and Need for Speed where we took out the ads, and the environment looked naked. After all, our world is marketing rich... but we're not going to place ads where the fiction doesn't dictate it," said Chip Lange, VP of Online Commerce for EA. "First line, it has to work within the fiction; that's a creative decision. Then you make the tech decision; can you integrate the SKUs of the ads into the game. Then, if it passes that, you ask 'Is the market for this game large?' With EA, the answer tends to be 'yes' with our mainstream products."

But beyond the vital question of "Does this ad fit in the context of the game?" what's the next step to determine whether an ad is or isn't integrated?

"A publisher will put together an RFP (Request for Proposal) that they want for in-game ads," explained IGA's CEO Justin Townsend, describing the process. "They'll be sent to different advertisers. It will be sent back to the publisher with the relevant data. There's a tech evaluation, with a trial run of the software. Producers will receive demos of the game. Senior guys will look at ad revenue potential. There are guarantee and advances. We guarantee X money for a certain game, sometimes there will be something in advance. Then there's revenue sharing between both parties."

One thing that surprised GameDaily BIZ is how little difference there was with different hardware platforms (such as Xbox 360, PS3, PSP or PC) from a marketing perspective, according to the companies we talked to. The most significant difference for the next console generation is the "always on" Internet capabilities. The PS3, Xbox 360 and Wii are designed to be always connected to the Internet, and that's a large part of their feature set. This opens up new doors for in-game advertisements, since ads can be changed or streamed in from their networks. It offers new revenue possibilities in places where there would be only static ads that would quickly lose their significance a few years ago.

"In as much as the games are different, there are different opportunities," said Lange. "With Battlefield, you have sponsored servers. On the 360, you have the Marketplace where you can sponsor content and do direct advertising. The big difference is the online penetration rates between the platforms."

"Essentially, between consoles and PC there isn't much of a difference," said Townsend. "There's no difference between the SKUs. However, [regarding] mobile SKUs, which have more limitations, there's a great deal of fragmentation in the U.S. and units are low res and wont for memory. When the 3G mobiles come and you'll see more advertising."

"I think the next-gen consoles offer different opportunities. It's different on the Wii as opposed to PSP. However, we look to have the same brands in the same SKUs," said Sarah McIlroy, Midway Director of In-Game Advertising and Promotions. "From a product development perspective, it's similar to how games are created; the goal is to have all the SKUs play similar. We have a cross engine strategy. That's one of the advantages of Unreal Engine 3 is that we can integrate across brands. We want to make the brand experience as similar as possible across formats."