GameDaily BIZ: So how's the GameTap business been going since launch?

Stuart Synder: We're very pleased. We launched in mid-October and we're hitting our metrics and people are going to the website; people are enjoying the service. We've got the business open and now 2006 is all about building and growing.

BIZ: How many subscribers do you now have and what are your goals?

SS: Well, we don't release subscriber counts. What I can share with you is a couple of other metrics. We've had about 3 million people come to GameTap.com. We've had a lot of people trying and sampling GameTap, and what I can share with you is that of the people who are sampling GameTap—and this is different from the 3 million because 3 million is unique visitors—60 percent of that audience becomes subscribers. So we're very pleased with conversion; we're very pleased with driving traffic, and they're enjoying the service.

BIZ: How would you describe the service to someone who doesn't know that much about gaming? What's your elevator pitch?

SS: It's the first of its kind broadband gaming network. And I want to highlight network because while we also have 1,300 games under license—we have close to 400 games now in the service, which is up from the 300 when we launched and were adding new games—but we also have all of those great linear programs, so it's a hybrid of "all-you-can-eat" gaming and great entertainment programming.

BIZ: The focus in the media has largely been on GameTap's aggregate of games. What can you tell us about the other programming?

SS: Through our section called Mediaplex we have acquired and produced programming about games, so it's all behind-the-scenes footage of the games, how they were put together, how they were produced. We have promotional trailers of games. We produce our own content which is promoting the games in the service. We have fun interstitials... which is giving personalities to gaming characters, so these are short snippets of shorts and we have about 5-10 of those in GameTap; we're going to be doing more of those. We have Tomb Raider outtakes, our outtakes of Tomb Raider. We have a great award-winning clip called Video Pac-Man, so we're producing content, original content for consumers to enjoy. And we'll be doing more of that in '06.

BIZ: What do you think is the best "piece of glass" for your customers to enjoy that content on? Is it the PC screen or is it the TV? Obviously, your service is kind of a hybrid PC/TV experience. How do you see that?

SS: First of all, we're first and primary a PC platform for a broadband network. The content plays great. Consumers are using their PCs—frankly, it's the new television. They're watching everything from movie trailers to television trailers to music videos to our programming. They're playing games on their PCs... So how do you watch programming? Well it's going to be on television, but television can be almost anywhere. So the new generation, they're receiving their content, their entertainment through that screen [laptop] in front of you right now. So our programming plays great there. Through our new relationship with Intel Viiv, our programming can now be enjoyed on that plasma screen behind you.

BIZ: How important do you think the Intel Viiv feature will be to further GameTap adoption? Is it too confusing for the average user?

SS: Well I do think that there's an education process taking over with the consumer for them to kind of clarify what this all means. For us, we're excited about Viiv because it takes GameTap, which we think is a great product for Viiv and TV, to virtually any room in the house; instead of it being just on the PC on the desk, we now can go into living rooms, we can go into family rooms, we can go into the basement, we can stay on the PC in the workstation... we go anywhere now in the house. If I'm sitting in my family room and I have a plasma screen and I hook up my computers to it, then now all of a sudden I can play GameTap there—a very exciting proposition... all on a single subscription. We allow multiple computers; we allow seven different user account names.

BIZ: It seems like your portfolio thus far has been largely dominated by Sega and Ubisoft. What incentives do you offer publishers to join the GameTap network?

SS: We have over 28 publishers with GameTap, which represents over 1,300 [titles]. What we provide to publishers we think is an incredibly brand-new revenue share. Turner got into this business because frankly it was an aggregation of programming, which is kind of what we do best. We aggregate programming, we repurpose it, we repopularize it. That's what we're doing with [game] catalogs right now, so we offer publishers the opportunity to further [profit from] their titles in a new and exciting way.

BIZ: How many publishers and titles do you hope to have in GameTap by the end of 2006?

SS: We're adding approximately 20 [games] a month right now, so that would put us at around 600 titles by the end of the year if I do my math right.

BIZ: Are there any holdout publishers you want to work with that so far have not been embracing the model?

SS: I'm not sure embracing is how we'd characterize it; we continue to be in conversations with everyone but clearly anyone can go and check and see that we don't have certain publishers, but that's just because we're still in conversations with them and we will continue to be in conversations with them.

BIZ: Do you envision GameTap ever offering current releases like other digital distribution portals, or will it remain a catalog service?

SS: Well today our business model is based on the catalog of titles; we're helping our publishing partners promote new titles at retail and we do cross-promotions. We did a Prince of Persia cross-promotion where we promoted the new retail release and we also cross-promoted all of the PoP titles that we have in the service. We promote their titles going to retail to viewers and players going to GameTap and we remind them when the title is coming out and that they can go to retail. Because we complement them, we don't see ourselves as competition... But I won't close the door in terms of any future opportunities. If the right opportunity was to premiere games or to develop games, we would take a hard look at that as well.

BIZ: What do you think Turner's getting involved in the game industry says about how important gaming has become? Do you believe more big media companies will also look to make a play in this industry?

SS: I think it says a lot about where gaming is right now in the entertainment matrix. I think clearly the gaming business has a major seat at the table; it is clearly a $10 billion+ business. I think that Turner's stepping into this business is a very positive sign that more, I would say, high-profile organizations are getting into it, or multimedia—Time Warner and Turner together going into this. We're seeing that other companies are doing this; we've seen Viacom step into this space with a couple of their purchases. So, yes I think everybody is trying to figure out the landscape of how to continue to grow the gaming business now; and how does it integrate with traditional media as well?

BIZ: Right, you have an incredible resume as a traditional media guy from the TV, film and entertainment world. There seem to be a lot more avenues of recurring revenue than there currently is in gaming. Do you envision any new models in which game IP can be monetized in ways that create not just the single catalog stuff but something also analogous to the film business with DVD and rental, and hotels and airlines? How do you see it from your perspective?

SS: Well that's exactly why I came back to Turner to help Turner with GameTap and to build the business. I see that we're on a precipice of clearly just going out and doing what GameTap did with the publishers is a new economic model—the idea 5 years ago of a "secondary window." This is creating a secondary window for titles in a very compelling way.

And I think the broadband opportunity is going to create new doors to open for game developers and publishers. How are games going to be promoted? How are they going to be sold? How are consumers going to digest them? The broadband opportunity actually raises a lot of questions and I think the smart companies and the smart publishers and the smart developers, the ones who figure out that lock and have that key to that lock, they're going to be successful. Every time there's been a new platform—when video was formed, everybody stepped back and said, "Oh video is going to hurt the film business." And it didn't hurt the film business; what everybody figured out was how to mine the catalog and then also how to develop programming for video. And I think there's an opportunity as well for games.

BIZ: The film industry now seems to be dealing with the possibility of day-and-date video releases with theatrical. Is that something that will happen in the games business as well, where stuff comes out at retail and the digital version on GameTap or elsewhere?

SS: I remember a long time ago because of my background, there are two rules that I got to live my career by: 1) Content is king; and 2) The consumer makes the final decision. So from the standpoint of how it will be, we could sit here and think and decide how it's going to be, but the consumer is going to drive it to how they want it. Now what's making it more complex these days is that the consumer today wants everything yesterday... And at first they wanted it free, but over the years we are seeing the signs of economic models. Millions of people are paying 99 cents for songs; millions of people are buying television shows now; Vongo service has premiered now where you can get movies on a subscription basis and people are now going to buy movies that way. Even the simplest way, millions of people are going and buying DVDs via Amazon and there's talk that they are going to do downloads as well.

So I think that there was a time, I called it the "Wild, Wild West," and I think that's come down a bit and there's a little bit more maturity going into the marketplace now. So consumers are ultimately going to decide how they want it, but the one thing they are getting a taste of is instant gratification. If I didn't see Desperate Housewives yesterday—guess what?—I'll watch it tomorrow. And what do you mean I can't watch it tomorrow? And the job of media companies is to create an economic value so that they don't do it for free. That's really the secret here. They could do it for free, but if you give an alternative way and you give a cost efficient way, consumers will go in that direction. We're seeing it already.

BIZ: And I guess the question for you is, does GameTap become an à la carte business model or does it stay one price, "all you can eat" and you add incremental value?

SS: We're brand new. You raise some great questions... but we've been open three months, and what we're going to do is take our time and do a lot of market research about what consumers think. We're going to talk to a lot of people in the business here, and figure out what's the next step. There are certain things that we're going to do this year that are on the horizon in terms of improvements and enhancements, but we're always going to keep an eye on what we're going to do a year from now and two years from now. But we'll do that with the concept of, "How do we keep our customers happy... and how do we deliver the best possible product?"

BIZ: Bill Gates has said a few times that he thinks the future for all entertainment (games, music, movies, etc.) will be online. Do you agree?

SS: If you're defining retail as brick & mortars, as buildings and stores, I don't believe they are dinosaurs that will go by the wayside. I've been hearing about this prediction that everything was going to go online and that's still going to be the future and everything like that. Well, I don't know, I may be hanging onto a little bit of a different perspective. I do believe that people are moving faster and faster to online, so I believe that people are going to be buying software and music and goods and they're doing it now. So that's been proven. But I think people are going to go to movie theaters.

BIZ: Why would people go to movie theaters if they can just download a movie for a few bucks and get it in high-def in your own theater in your own home?

SS: It provides a social experience. I think that there will be a model where as a consumer I may have a choice. Five years from now, let's say I want to go see a movie in the theater on the opening weekend I can go do that, but if I want it in my home to watch on my high-def [display] that's going to be a different economic value. And there would probably be a premium for offering it in your home, so I'm going to pay a higher price. I may be able to go to a movie theater for $15 or download a movie and watch it in my home and maybe it's $30, if not higher. So what would I rather do? Do I want to sit home and do it or do I just have to get out of the house and want to have dinner and go out and socialize? So I don't think everything just shifts to the "cocooning age" that was once talked about 5 or 10 years ago. I just think that the windows and all of the different options lift together.

BIZ: Finally, there's been so much bad press in the gaming space about violence in games and objectionable content. What do you think the gaming community in general can do to make a viable economic model for either educational software or family friendly software? We hear people say a lot, "there's no market for it."

SS: I'm going to speak to it from maybe a diverse entertainment person rather than a gaming person... but my perspective is if that was really true, then why is the video business completely filled with family titles, which are embraced by consumers? There are "edutainment" titles in the marketplace...

BIZ: But traditionally they haven't been economically successful.

SS: Well in video, maybe not in software. Then the question goes back to, how do they promote it? Do they have the bandwidth? See, I think there's an issue here on what I call "opening weekend phenomenon." What do I mean by that? Edutainment titles seem to work in the home video world because their structured platform is mainly television; they get exposed via television... I think broadband is going to open up a whole new market. Because now consumers can go right away with kids and have this online. There's no gatekeepers. Whereas in the television world the gatekeepers are PBS, Nickelodeon, Cartoon Network, and you're all fighting to get your program on there, which sets up the video business. In the game business, broadband now is going to open this up, I believe, for these titles to get exposed. And that's what they need; they need exposure, they need promotion. So I actually believe that there's going to be a greater opportunity for these types of titles because of broadband and online, because it will give it the platform that it needs.

Regarding GameTap, GameTap is definitely a family friendly portal. So we're going to continue to support families, and we're going to continue to support "E" titles. We may even come up with a kid's product this year. And we're finding, by the way, right now with GameTap that we have a very big audience of males ages 18-34 but we have an equally large audience of parents and kids. So we really want to look at this audience of parents and kids because we think we have the opportunity if we're producing great programming—we have the games, we have the "edutainment" software—we think there's an opportunity to have parents and kids sample the games and then play the game, because they just need to be exposed to them. If you don't know a title it's tough for someone to go into a retail store and buy it; they need to get that sample and that's why television works well.

BIZ: Thanks for your time, Stuart.