Sony’s New Game: In-Game Ad Biz

Console manufacturers act as gatekeepers for dynamic in-game advertising on the current generation of game systems. To facilitate advertising opportunities on the PlayStation 3, Sony Computer Entertainment America on Monday established an in-game advertising business unit.

The unit will handle advertising and brand placements across the PlayStation platforms including the PlayStation Network. The network includes first- and third-party games published for the PlayStation 3, as well as PlayStation Home, a 3D community gathering place for PlayStation 3 owners. Since the system’s launch last holiday season, advertisers were able to reach gamers only through product integration and branding deals that remained static throughout the game’s shelf life. Dynamic in-game advertising had been closed off to advertisers for games played across the PlayStation Network.

“It makes sense. It’s a revenue stream they have to take advantage of,” said Billy Pidgeon, program manager of games at IDC. “I believe they want to make it open to existing networks, but of course they want to levy a fee there.” Pidgeon identified additional revenue streams created by consoles connected to the Internet in the report “Worldwide Connected Console 2007 – 2011 Forecast: Downloads for Dollars.” Sony has opportunities both in games, and in the online community supporting the PlayStation 3.

Microsoft has sold ads both in-game, managed by the acquired in-game ad network Massive, and on its Xbox Live online platform. “Xbox Live has been running since the previous version of the Xbox, they had a network in place much longer.”

At Sony, Darlene Kindler was network advertising director to head up the new unit. Kindler was most recently VP of publishing at Adscape Media, acquired by Google in March. Kindler’s previous experience includes stints at Nintendo of America, IREM America Corp, Data East, and video card manufacturer 3dfx.

It remains to be seen whether Sony will work directly with game publishers and advertisers, or work with both parties through in-game advertising networks such as Double Fusion or IGA Worldwide. The former could potentially fragment the media-buying process and discourage media buyers as well as video game publishers. Sony was unavailable to answer questions on when in-game advertising will be made available on the PlayStation 3, or how inventory will be sold.

In-game advertising on the Xbox 360 platform is already available through Massive. “Right now the Xbox 360 has momentum, and they have an online audience. Sony has to catch up. Then there’s the PC, which has a larger audience,” Pidgeon said. “If brand owners have to go across platforms to go to Microsoft or Sony separately, [it] may be a disadvantage in the long term.”

Data to entice advertisers, as well as publishers, will be available through a partnership between Sony and Nielsen Media Research established in July.

A recent move on the advertising front made by another Sony Unit was the creation of Imageworks Interactive, a full-service interactive agency spun off from Sony Pictures Entertainment.

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