Champions League Quarter-Finals

The UEFA Champions League semi-finals are set: Man. United v. Arsenal and Barcelona v. Chelsea. The winners will play the final in Rome on May 27th. There's a chance we will see a rematch of last year's Chelsea-ManU final, although I don't think that's the way it's going to go down. This is no symbolic tournament about national honor -- this year's winner could take home nearly $60MM in prize and TV money.

Once again, there are three English Premiership sides in the final four. It's the third year in a row that we have a chance for an all-England final -- Sepp Blatter's head must be exploding. Not only does it reinforce Blatter's rants about the excessive strength of the Premiership, but it also increases the English clubs' claims on the $300MM in Champions League TV revenue, giving these top clubs an even larger war-chest with which to acquire the foreign players that Blatter has been trying to limit.

There was some great drama in the quarter-finals, at least in two of the ties. In the two that weren't particularly competitive, Arsenal dismantled Villareal 4-1 on aggregate, and Barcelona absolutely shelled Bayern Munich 5-1 on aggregate. Barcelona's 4-0 win at home was particularly eye-opening; they dominated Bayern so completely, and looked so dangerous in attack, that match could have been 8-0.

The Man. United-Porto tie was surprisingly competitive. Porto came to Old Trafford and toughed out a 2-2 draw, grabbing two crucial away goals. That put United in position to have to win on the road in Portugal. Which they did, but only 0-1 on an early goal from Christiano Ronaldo. If Porto had managed a late goal and a 1-1 draw, the Portuguese side would have gone through on away goals.

But the most enjoyable tie was certainly Chelsea-Liverpool. Chelsea was on the road in the first match and punked Liverpool 1-3, setting a seemingly impossible bar with three away goals. Liverpool had to win 0-3 on the road to win the tie. They opened the match at Stamford Bridge with two first-half goals and Chelsea was clearly sweating bullets down 0-2 at the break. Chelsea roared back in the second half and went in front 3-2 with 10 minutes to go. But then Liverpool scored twice, making it 3-4, pulling to within a goal on aggregate, and, with 4 away goals, seizing the tie-breaker advantage. It was down to the wire until Lampard scored in the last minute to clinch it for Chelsea, 4-4, 7-5 on aggregate. Classic.

Predictions? I think Arsenal can beat United (they beat them 2-1 in their league match back in November), but I just don't think it's in the cards this year. I pick United to go through to the final again by a slim margin on aggregate. Barcelona v. Chelsea will be highly competitive, but this year the Spaniards are just too strong to bet against. They've scored 87 goals in 30 matches in La Liga, an average of almost 3 per match, and have an astonishing +63 goal differential. They are just humiliating teams this year. I think they go all the way.

Disrupting the OODA Loop

I got a lot of re-tweets over the weekend regarding a blog post by Kas Thomas on "The Principle of the Last Responsible Moment." Thomas' post has mostly to do with project planning and the fallacy of the complete specification. But the actual principle he's talking about is a military tactic which is oriented toward threats, or in the realm of business, competition.

I've always been a big believer in strategy, but I'm an equally big believer in execution. They are the yin and yang of business competition; execution limiting and informing strategy, strategy creating the pathway for execution. I've always thought it absurd when somebody describes a business as being either a "strategic play" or an "execution play" -- business competition is inherently always both.

The military has been dealing with the problem of strategy vs. execution for a long time. Everyone has heard the truism that "no plan survives contact with the enemy," but the military has a doctrine to deal with that fact, called "OODA" -- Observe, Orient, Decide, Act. OODA was first articulated by Air Force Colonel John Boyd, and it describes a continuous command and control feedback loop, in which unfolding circumstances inform changes in strategy and execution. It is to the military what agile development is to the software team.

To me, Boyd's key competitive insight is the idea of "tempo" -- the speed with which you can run your feedback loop compared to your enemy. The most profound disruption occurs when you can strategize and execute inside the decision-making window of your enemy. As Boyd wrote about aerial combat:

"Time is the dominant parameter. The pilot who goes through the OODA cycle in the shortest time prevails because his opponent is caught responding to situations that have already changed."

This is a massively important idea. Getting your opponent to respond to your moves prevents them from seizing the initiative and surprising you. I've seen this play out in business many times. In traditional video games, long development cycles created numerous examples of teams that conceptualized new products and delivered them to market while their competitors were mired in delays, grabbing market share and reinforcing brand. We've all seen supposedly weaker technologies vanquish more established ones through rapid, directed innovation in response to market forces.

Time is of the essence. If we've learned anything from the media and technology revolutions of the last 30 years, it's that things happen a lot faster than everybody thinks.

GDC Recap

This week I spent a day at Dean Takahashi's GamesBeat conference (where I did a panel with some sharp investors from other venture firms) and two days at the Game Developer's Conference (including a solo session in the business track -- slides posted here). Didn't get a chance to see many GDC sessions, given all the meetings and presentations, but I was able to see a couple, and walk the floor and check out what was on display at GDC. I also caught up with many old friends and colleagues over the course of my time there, and met with a number of entrepreneurs.

I went to my first GDC in 1993. Literally, the entire game developer community fit into a single banquet hall in San Jose that year. The next year, the "old timers" (Chris Crawford, Ernest Adams, etc.) were both lamenting and celebrating the explosion of newbies. They asked for a show of hands at dinner in '94, which indicated that about half the attendees were at their first GDC. Fifteen years later, with the demise of E3, GDC is now the pre-eminent show on the domestic calendar. This year's GDC was certainly as well-attended as any show I can remember.

What's great about GDC is that despite the huge surge in attendance, it still feels like a "gathering of the tribe" and the speakers are still remarkably forthcoming and candid about their craft -- you rarely feel like you are sitting through a sales pitch when you attend a technical session. I always learn more at GDC than any other conference.

There were a couple of big trends in evidence that I think are worth mentioning:

1) Digital Distribution: between the massively-hyped OnLive launch, the Qualcomm-backed Zeebo, the large number of MMO's and casual game plays, the frothy (and mostly misplaced and uninformed) attention given to iPhone/iPod Touch, and the frequent lamentations about long development times and huge budgets for traditional console and PC games, digital distribution was clearly the trend of the show. It seems to me that the old-line publishers are way out of position on this one. I predict that you'll see a strange detente between retail and traditional publishers (maybe a trade-off on used games vs. digital distribution) as they circle the drain together.

2) Virtual Goods: with advertising on an apparent decline as a way to monetize free games, a worry about how many online subscriptions an average user is willing to take on, and a yawning gap between the retail price points and free-to-play ARPU, virtual goods has emerged as the "white knight" business model for games. Easier said than done. I heard that Don Choi from OGPlanet gave a great presentation on the actual mechanics of virtual goods, but I sadly missed it (Don worked for me as a business development executive at JAMDAT before returning to Korea -- he's a very smart guy).

3) The Economy: not what you'd think. It was really the profound lack of visible concern about the economic melt-down that was so startling. Attendance was up. The "job fare" aspect of GDC seemed to be in full swing. Certainly the venture appetite for games is not what it was two years ago, but I got the distinct vibe that the industry expected to make it through the down-turn, with most job losses hitting the big publishers rather than the indy/next-gen developers.

4) Hardware Transition: again, significant by its general absence from the discussion. We're 4 years into this cycle, and historically at this point we would have been obsessing about Xbox vs. PlayStation vs. Wii, speculating about hardware and who was getting early access to dev kits, etc. I heard none of that. I saw a lot more MMO-enabling technology than console-enabling ones. It begs the question whether there will actually be a transition in the traditional sense. With the X360 and PS3 already moving well in the direction of being living room set-top boxes and home media hubs (with music, online services, Netflix, etc.), could we possibly see a disc-less PS4 from Sony?

Powerball vs. Moneyball

My friend Rick Heitzmann sent me a blog post by Stephen DiMarco from Online Metrics Insider titled Powerball vs. Moneyball Marketing. It is interesting reading. DiMarco's point is that there are two approaches to marketing: the Powerball approach, which is a high risk/high return, "swing for the fences" strategy; and the Moneyball approach, which (hat tip to Michael Lewis) is a metrics and measurement-driven strategy designed to "engineer outcomes."

I'm no marketer, so I can't really comment on DiMarco's post from that perspective, but I think his analogy is broadly applicable to the current state of the video game business. The packaged goods publishers are playing a lot of Powerball -- buying lottery tickets for new IP, spending horrendous sums of money up front with very little understanding or measurement of audience dynamics, and hoping for home run outcomes. The fact that every so often a new game becomes a monster success keeps everybody buying lottery tickets.

Conversely, the approach that companies like MiniClip, or some of the social network-based publishers are taking looks a lot like DiMarco's Moneyball strategy. I'd be willing to bet that MiniClip knows exactly the amount of traffic they can drive to a game featured on their home page, and structures their economics accordingly.

We once had a meeting with some senior executives from a well-known video game publisher when we were running JAMDAT. The head of studios for that publisher finished getting demos of our best-selling products and famously said, "A monkey could make these games." What he was responding to was the lack of whiz-bang 3D graphics, the lack of fanboy, nerd-core "innovation". He was used to playing Powerball. We, on the other hand, were playing Moneyball. We knew from studying our customer data that our audience didn't care a rat's ass about the kinds of things that Gamasutra editors cared about. They wanted simplicity, accessibility, and value. So we made products to "engineer" that result. And we acquired IP that fit into that mold, like Tetris.

What Michael Lewis described the Oakland A's doing in Moneyball -- buying players who were undervalued by other clubs but who were overachievers in the metrics which actually produced results -- is really quite similar to the the ideas of customer acquisition leverage and audience measurement in the entertainment business. I think there's going to be a lot of value created exploiting this in the future.

Why the Lahore Cricket Attack Matters

In Lahore, Pakistan, a group of up to a dozen terrorists brazenly ambushed two minivans carrying the Sri Lankan national cricket team and officials, killing 7 police and civilians, and injuring 9 of the cricketers.

Just another sad and pathetic day for Pakistan, fast becoming the Somalia of South Asia? A blow to Pakistan's government, which -- after the destruction of the Islamabad Marriott, the assassination of Benazir Bhutto, and the Mumbai attack fiasco -- appears to have no control over the security situation inside its country? All certainly true, but I think, ironically, this incident is potentially more profound in its regional implications.

The government of Pakistan has recently embarked on a new strategy for dealing with its internal security issues. After failing to defeat the Islamic militants in combat over the last year or two (despite inflicting mass casualties on the Talibs in Bajaur and elsewhere), and after failing to root out the Islamist sympathizers in their internal security services, Pakistan has started a campaign of appeasement, including several cease-fires and an agreement to allow the propagation of Islamic sharia law in the Swat Valley. The theory seems to be to grant autonomy and an Islamic identity to these loosely-governed regions in exchange for peace in the rest of Pakistan.

Meanwhile, the Obama administration continues to assassinate Taliban and al Qaeda leadership inside Pakistan, with 4 CIA drone missile attacks killing 90 people since the new president took office. These attacks have been brutally effective but wildly unpopular inside Pakistan; viewed there as both a provocation of the enemy and an infringement of Pakistani sovereignty.

And, now, the Lahore attacks. This is not like Mumbai (an attack on an old enemy), or the Marriott (an attack on a symbol of American influence), or Bhutto (an attack on a controversial politician) but rather an attack on what is probably an institution second only to Islam in Pakistani esteem: cricket. If you think I'm exaggerating, you've never been to South Asia during a test match. I was in Mumbai and Delhi a couple of years ago when the Indian national team was visiting Pakistan for a series of one day internationals, and these huge cities were literally shut down during the matches. I was trying to get a deal done, and my Indian counterpart was getting a text message from his wife after every couple of balls were bowled. After India won, there was rioting in the streets of Mumbai.

The ICC (the FIFA of cricket) has already questioned whether Pakistan can participate in the 2011 World Cup as a host (they were going to co-host with India, Sri Lanka and Bangladesh). No team is going to go to Pakistan to play, and it's equally unlikely that the Pakistan team is going to be welcomed abroad.

I think this could be the tipping point for the moderate majority in Pakistan. Up until now, I think you could be a moderate, worldly Pakistani and still be an apologist for Islamist terror. There is widespread popular support for the Taliban as freedom fighters in Pakistan, widespread hatred for the US and India, and the usual Islamic tendency to blame a long string of political, social, and economic failures on outsiders.

But this is by all indications a home-grown attack, on a national institution that will serve to punish and humiliate average Pakistanis in an area, cricket, where they are reasonably competitive (World Cup winners in '92, runner's up in '99). This attack is indefensible to even to the Pakistani apologist. There is not going to be a solution to the Pak-Afghan terror crisis without the political support of the majority of Pakistanis. And if there is not a change in mindset after this attack, it's likely time to consider a more aggressive worldwide censure and isolation of Pakistan.

Riot Games Releases "League of Legends" Trailer

Very cool stuff.

Champion's League Restart

Tomorrow is the first match day of the UEFA Champion's League knock-out stage (live on ESPN2 @ 11:30am Pacific, with other matches rebroadcast on Setanta later in the day). There are sixteen elite teams left and some phenomenal ties. It's a great format: they play a two match home and away series, with the winner determined by aggregate goals and the tie-breaker being away goals. It is hard to produce a single fluke result and get through -- the quality teams tend to do well in this format because they are heavily rewarded if they can score goals on the road.

Among the great games tomorrow (and the one ESPN is televising here) is Inter-Milan vs. Manchester United, the current leaders of the Italian and English leagues, respectively. They are two of the best teams in, arguably, two of the most competitive leagues in Europe. Manchester United won the Champion's League last year, beating England rivals Chelsea in a shootout in Moscow. Inter is coached by last-year's Chelsea coach, Jose Mourinho, who got turfed by his Russian billionaire owner, Roman Abramovitch, in the middle of last season's Champion's League knockout stage.

On Wednesday, the marquee match is probably Real Madrid vs. Liverpool, the current second-place teams in Spain and England. Madrid won the Champion's League in '02, Liverpool won in '05. But ESPN is broadcasting Chelsea vs. Juventus, which should also be a great match. Chelsea is currently third in England and Juventus is second in Italy. There's managerial drama here, too: the Juventus coach is Claudio Ranieri, who used to coach Chelsea; Chelsea is coached by current Russian national team manager Guus Hiddink, who stepped in last week after Abramovitch fired Big Phil Scolari (detect a pattern here?).