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  1. #1
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    Future of the game server business - is it dead?

    Guys,
    I am doing a bit of research into the game server industry and its potential growth/stagnation/drop considering the major players that has entered the market the last years and the game consoles with online presence outside of the traditional game server scene.

    How do you see the market evolving in the short to middle term?

    Any input?

    Thanks
    Ditlev
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  2. #2
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    This may not be the reality, but from what I've gathered from people here is that the clients are 15 and have some b-day money they can blow for a few months, then youre clientless.

    If you're going to get into it, I'd start with something solid before offering game servers. Either that or start with a reseller
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  3. #3
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    we, uk2.net, use to be one of the biggest game server hosts back in our hey-days with cyborg2.com - we only have a few 100 left now, but are considering making a move incl. a few acquisitions to get it rolling. This is why I am asking
    Ditlev Bredahl. CEO,
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  4. #4
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    I have been in talks with one of the best game server providers in Velocity owned, Summit-Servers.com and talking with the owner Jon Biloh he explained to me that the state of the industry is pretty unstable. You have many new GSP companies popping out, but the average life span of these companies are about 2-5 months at most with very little profit if any. The industry is really sticking to the hosts that have been in the business for a while and can provide the best service.

    My suggestion is to not get into the industry again unless you are VERY serious and can provide HIGH QUALITY game servers. Otherwise it will be waste and you would be likely to die out soon. Best of luck to you though and let us know what you decide to do.

    Also, make sure you can afford quad core servers, most large companies are doing "game servers have their own CPU" now.
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  5. #5
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    thanks john, good advice
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  6. #6
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    The profit margins appear to be thin. I'm not sure why you would want to run a GSP. The amount of time spent working on it could be applied to flipping hamburgers and you'd probably get higher take home pay.

  7. #7
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    Quote Originally Posted by eming
    we, uk2.net, use to be one of the biggest game server hosts back in our hey-days with cyborg2.com - we only have a few 100 left now, but are considering making a move incl. a few acquisitions to get it rolling. This is why I am asking
    Ah yes. I remember the UK2.net cs_assault servers

    The market's prices are always falling and then cost of servers stay about the same. Even thought you might be able to fit a few extra clients on to the box. The clients are very demanding, and unlike many web hosting clients, will notice the second their server goes down or there is even a slight network problem.

    You have to be specialised in the game your offering servers for and not just as a player but know every server configuration cvar, exactly what it does and how it will affect your server.
    Sean

  8. #8
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    seems our time+money is better put somewhere else
    Ditlev Bredahl. CEO,
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  9. #9
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    Most of the GSPs I spoke with ( with exception for a few UK providers, who oddly enough, seem to be making pretty good ) have a very narrow minded idea of where they need to be.

    The fact is, most of them ignore the fact that they are in the content distribution business ( games being the content ). Game console is actually just a delivery, technology, and by far, outdated, in the new world of IP.

    There are also barrier's from the technical and economical standpoint associated with this model, such as:

    *The rising cost of quality data centerer colo space. I can't tell you how many times they came back to me with unreasonable target rates for bandwidth and colo space.

    *Consoles need to be placed closer to customers. Most GSPs won't invest in the footprint or do not have the right relationship with Tier 1 providers to create presence and generate economies of scale.

    *Most GSPs are averse to CDNs , even though that could be the best solution to their needs. Entry cost, and copyright issues are the main barrier for technology adoption.

    *GSPs don't own the content, or have limited licensing rights to it. Large scale distribution would imply they need to negotiate royalty payments, or revenue sharing.

    *Lack of loyal customer base. Gamers will change GSP's or stop using their services at moment's notice. Actually GSPs are at fault, since most do not have any customer retention incentives program.

    *Not much of depth in running support operations (billing, customer acquisition, support).

    *Lack of funding to invest in technology and personnel.

    Now, if you heard Game Developers before, most will say that their business is a tough one to make, that they hold the smallest share of the revenue published games generates, and that they are by contract held hostage by publishers.

    The money in the gaming business is ultimately for Publishers. They own the content, they can negotiate better distribution terms with network providers, content developers, and any other distribution channels ( retail ).

    Yet some might argue otherwise, and for those brave hopefulls, I have a word of advice:

    If you want to succeed into this business, borrow the model from the Online Adult/Porn industry. People might twist their noses at the Adult Business, but they know a thing or two on how to survive despite all of these barriers, and with the Government hell bent in putting them out of business. I've seen a lot of what they do and how they do, and baffles me that no one has payed attention to their business model, other than just surfing for porn.

    That's my 5 cents.

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  10. #10
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    The game server business is far from dead - the companies that are well established are, and will continue to profit nicely.

    It is very hard to break into the business though - too much competition nowadays. Think about it, you'd need to give someone quite a big incentive to choose your new company over one of the big name companies that have been around for a while. As Jon said, this causes many of the new companies to die within 6 months.
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  11. #11
    capeto has made some excellent points. If this board allowed for a plus/minus rep system, he'd be getting a + for his "5 cents."

    It's all been said before; the market is tough to get into, and until the economies of scale are working with you, not against, your almost doomed to fail.
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  12. #12
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    It depends on who you talk to. I know quite a few up and coming GSP's that seem to be doing well so I would disagree that the market is dead. But it's hard to say who's doing well and who isn't since everyone you talk to will say they are the world's largest GSP..

    But seriously, It's not as easy to make a substantial profit as it once was but like any other market there is always room for a new idea.

  13. #13
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    Apart from my company, I work for a big game server provider company and to be honest, there is daily signups and servers being tested, and the competitive field of game servers is growing nicely.

  14. #14
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    Frankly, from my knowledge of the GSP community I wouldn't trust a single thing said in this thread (except maybe Rich's comment: "everyone you talk to will say they are the world's largest GSP.."). More than half of the companies are operated by teenagers with mommy and daddy's credit card who have no concept of economics or honesty. Some of the persons posting in this very thread have in the past lied about their age, their accomplishments, their infrastructure and their companies size (and they know who they are).

    Truth be told, we're all sharing each other's clients on a monthly cycle. Those who keep enough to pay their bills each month will live, those who do not will die. It's not a place to start a business unless you have ample time on your hands with little expectation for return. The odds of turning a startup game server host into a respected "enterprise" (and I use that term very loosely) are not good. The only true way to succeed is to own all of your equipment, be aggressive with reducing accounts payable and be honest with clients at all times. Until early cancellation fees become common in this industry (like in cell phones, etc), there will always be constant client flux (due to said teenagers with mommy & daddy's credit cards going out of "business").
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  15. #15
    HiDef-Laws, Very well said and I completely agree with your point of view on the entire outlook of the GSP industry.

  16. #16
    There's room in any/every industry for a higher quality product and service, better marketing and with those come profits. Someone could truthfully say the GSP industry as it was is dead. As it is emerging (GSP 2.0?) there are plenty of opportunities.

    As for kids with credit cards, many industries have entry level entrepreneurs with little chance of success. Web hosting, programming, web design, domainers, etc. I don't see many people claiming to be the biggest or best, but people naturally tend to think of themselves in a better light than an objective person might.

  17. #17
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    I never could understand how anyone could make the claim of being the "worlds largest provider" I couldn't tell you whether the next guy had 10 customers or 10,000 and I'm pretty sure none of you have any clue how many clients we have.

  18. #18
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    Quote Originally Posted by Defcon|Rich View Post
    I never could understand how anyone could make the claim of being the "worlds largest provider" I couldn't tell you whether the next guy had 10 customers or 10,000 and I'm pretty sure none of you have any clue how many clients we have.
    Simple. It is marketing hype. They know they can't back up that claim for the very reasons you stated. Unlike the hosting industry there is no way to know as you don't need to register a domain or anything. When we ran gameservers we had some clans with 1 server and some clans with > 5.

    Also there are a lot of unbroadcasted games so you can't just use a server browser to find out how many are out there. Personally I even ignored that hype with webhosting and CERTAINLY ignore it with gameservers.
    Can't we all just get along

  19. #19
    One of the many problems facing game server providers is the financial layout for new servers this is why a lot of the smaller GSP's fade away. The smaller GSP's tend to be run by less experienced personnel and when problems occur they are not able to provide the answers/ solutions that customers require.

    I think the market is heavily saturated but with good quality of service and plenty of word of mouth/ SEO's optimisation there is an excellent potential to make a good profit still.

    It's a tough market to crack with the recent explosion of low cost providers but there will always be a market for game-servers. You wouldn't believe it but I reckon the demographic for the people who purchase game-servers is 15-35 years old with the majority being 18+.
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  20. #20
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    You guys kidding me? The GSP market is nowhere close to dead. MMORPGs are affecting it to a degree but the FPS market is still pretty strong.

    GSP is extremely competitive due to the fact there are so many kiddie companies out there under-cutting prices. GSP is like any other business, you have to stay competitive and deliver a quality product with great service.
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  21. #21
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    Quote Originally Posted by Defcon|Rich View Post
    I never could understand how anyone could make the claim of being the "worlds largest provider" I couldn't tell you whether the next guy had 10 customers or 10,000 and I'm pretty sure none of you have any clue how many clients we have.
    <--- has a clue i can keep track of how many customers you have easier then how many motorcycles you have
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  22. #22
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    Quote Originally Posted by Gnax|Jordan View Post
    <--- has a clue i can keep track of how many customers you have easier then how many motorcycles you have
    That's scary.

  23. #23
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    Quote Originally Posted by Gnax|Jordan View Post
    <--- has a clue i can keep track of how many customers you have easier then how many motorcycles you have
    I would agree you have a clue my old friend but not about that

  24. #24
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    My spies tell me Rich prefers mopeds and not motorcycles. Rich is all about safety and stability, after all.
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  25. #25
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    Considering I'm a few years shy of 40 there is some truth to that but I still love my toys

  26. #26
    Ive been removed from the running of a GSP for about 8 months now, but these are still the problems I see with this type of host:

    1) Inexperienced operators/owners
    You will see someone who knows how to run a CSS server want to start a business doing it, finding the cheapest dedicated server on the worst network possible, and then offering 10 cents a slot on the server. They don't know how to fix anything, and expect the community they purchase their control panel (if they even have one) to fix every cvar problem. They dont sit down and take the time to do a business plan (if they even heard of the concept), and don't look at how their performance will be to the customers. Of course, this is true for all the cpanel/plesk webhosts out there. I would guess 95% of them do not know what ssh is, and how to configure their software by hand to fix problems (or even just run tail -f on access logs to see who's using all their bandwidth).

    2) False Website Info
    Saying you have these uber servers and own them, etc is not the best thing to do. I love these providers that say they own all their server hardware, but their control panel is Cortex... I have yet to figure out how a control panel made by a dedicated server provider which does not allow it on colocation boxes ends up on "100% owned" machines.

    3) No Accounting/Support Software
    How can these people run businesses without basic trouble ticket software or an accounting package to allow customers to make payments with more than just paypal? I personally feel that paypal only GSPs are scams and will disappear one night with all your money.

    4) No phone contact
    We had phone support, and when nobody was at the office, it was forwarded to my cell phone. I received so many orders just because someone answered the phone at 7pm or 3am and actually talked to the customer. I guess this ties back to #3.

    Now, as we grew, our #1 money maker wasn't actually the Gameservers themselves. It was addon services. Things like Ventrilo and Teamspeak (mainly Ventrilo), redirect hosting, website hosting. Our game servers were colocation and on 95th billing, but they made their money back. Our non-game boxes were on Dedicated boxes located different datacenters and made us our most money.

    If you are dedicated to your customers, and know what you are doing with a good business plan, you can break into the business. But it is not a way to make a quick buck.

    Well, here is my WHT post for the year. Im going to go back to lurking in the darkness.

  27. #27
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    Quote Originally Posted by Hogie View Post
    Ive been removed from the running of a GSP for about 8 months now, but these are still the problems I see with this type of host:

    1) Inexperienced operators/owners
    You will see someone who knows how to run a CSS server want to start a business doing it, finding the cheapest dedicated server on the worst network possible, and then offering 10 cents a slot on the server. They don't know how to fix anything, and expect the community they purchase their control panel (if they even have one) to fix every cvar problem. They dont sit down and take the time to do a business plan (if they even heard of the concept), and don't look at how their performance will be to the customers. Of course, this is true for all the cpanel/plesk webhosts out there. I would guess 95% of them do not know what ssh is, and how to configure their software by hand to fix problems (or even just run tail -f on access logs to see who's using all their bandwidth).

    2) False Website Info
    Saying you have these uber servers and own them, etc is not the best thing to do. I love these providers that say they own all their server hardware, but their control panel is Cortex... I have yet to figure out how a control panel made by a dedicated server provider which does not allow it on colocation boxes ends up on "100% owned" machines.

    3) No Accounting/Support Software
    How can these people run businesses without basic trouble ticket software or an accounting package to allow customers to make payments with more than just paypal? I personally feel that paypal only GSPs are scams and will disappear one night with all your money.

    4) No phone contact
    We had phone support, and when nobody was at the office, it was forwarded to my cell phone. I received so many orders just because someone answered the phone at 7pm or 3am and actually talked to the customer. I guess this ties back to #3.

    Now, as we grew, our #1 money maker wasn't actually the Gameservers themselves. It was addon services. Things like Ventrilo and Teamspeak (mainly Ventrilo), redirect hosting, website hosting. Our game servers were colocation and on 95th billing, but they made their money back. Our non-game boxes were on Dedicated boxes located different datacenters and made us our most money.

    If you are dedicated to your customers, and know what you are doing with a good business plan, you can break into the business. But it is not a way to make a quick buck.

    Well, here is my WHT post for the year. Im going to go back to lurking in the darkness.
    I agree on a majority of those items except the Paypal portion. I have used regular credit card processing and found the amount of fraud unreasonable. We only use Paypal and we have a manual verification/confirmation process to ensure the Paypal account isn't hijacked (or at least, helps in that regard). Anyways, for the most part "Paypal only" is probably something that scares clients UNLESS that company is known and has a long history of good client support and service practices. Frankly, I'd rather use Paypal to buy things online than to give my information to a bunch of random companies with unknown security protocols. Maybe that's just me, but I think I'm a somewhat "reasonable" person.
    Joseph Laws
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  28. #28
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    When your dealing with a few bucks for a game or voice server taking only paypal is fine but pushing out 30k/mo on dedicated servers you don't want to take the chance with customers holding your $$ ransom.

    But yes I agree with the chargeback angle. It's a never ending battle..


    Good to hear your still around though Hogie

  29. #29
    According to a research, by the end of 2015, the gaming industry will generate double the bucks than hollywood!

  30. #30
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    Would you rather play a game, or watch a movie.
    A game would last you alot longer (brain chewing gum) then a temporary movie fix. That an pirating has made hollywood into a scrambling fool.
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