January 19, 2007

Games People Play : Making Money from SecondLife

I am often asked a question on whether it is possible for SecondLife to be a source of revenue and my answers is simple : depends on what you do there.

Like the Web, SL is a platform and a platform does not make money. There are websites that are a source of revenue and there are websites that are purely informational or educative and SL is no different.

I believe that one of the biggest sources of revenue in SL could be online games. Games are a worldwide industry that draws billions of dollars of revenue and the popularity of this industry lies in the fact that Microsoft, with XBOX, Sony with PS3 and Nintendo have developed specialist hardware devices for people to access these games.

If you look closely, the fundamental architecture of the games that run on these platforms is very similar to the 3D Virtual Universe technology that is the backbone of SecondLife. It is all a matter of positioning and moving 'solid' artifacts through a virtual space and making them interact with each other -- whether it is a gun shooting a man or a man driving a car through the streets.

Now that the SL client has gone into Open Source, it should be very easy (relatively easy) for each of these games to be 'ported' from their proprietory platforms to the common SL platform. The initial versions of these games will be less sophisticated than their proprietory counterparts but the benefits of open-ness will outweigh the drawbacks.

In traditional client server architecture, proprietory frontends like PowerBuilder, Oracle Dev2k, Visual Basic etc were always more sophisticated when they were used to build applications that were connecting to a RDBMS, but today, the browser front end has become the de-facto front end for all client server applications.

Games could follow the same trajectory.

Newer versions of the games could be developed for use on the SL client or a modified version of the SL client. Perhaps there will be clients developed for the major gamestations like XBOX, PS3 and Nintendo and when this happens the traditional games will move from their respective servers to the SL servers.

This means that we do not have to reinvent the wheel again. The IP (and revenue streams ) attached to these popular games can move to the SL platform and bring in a generational jump to existing SL applications.

Taking things a step further, the Movie Industry can contemplate the creation of movies that are set in SecondLife ... and these could movies that one does not merely watch but one that people can participate in.

Would these be movies ? or would these be classified as games ? Or are looking at the convergence of the world of movies and that of 'games' ...

January 12, 2007

Police Reforms and the 9th Schedule

After all the murder and mayhem around SEZ and the obnoxious quota regime, there is a ray of hope that things can improve for the better in India.
First of course the news Infosys and its 50% growth in quarterly profits. More than Infosys, it is a great sign that things are going well for outsourcing industry in general and the IT industry in particular.

But IT adds only 5% to the GDP and touches perhaps 3% people in the country. For the other 97% there is a bigger ray of hope as well thanks to two initiatives taken by the Supreme Court.

First : They have tried to free the police from the tyranny of the local party bosses. Policemen are corrupt but not all ... there are some honest law enforcers still left but the moment they do anything good, they are transferred out of the jurisdiction by party bosses whose toes have been tread on. With the formation of the police board in each state, this should be minimised to a large extent.

The Home Minister and his cronies will not be able to 'punish' an honest policeman -- the transfer is the most effective punishment anyway, it causes severe distress to the family -- on a whim. All transfers will have to be approved by a board consisting of three senior police officers. But what about these officers themselves ? Can they be transfered as well ? Yes but there are two safeguards ... one, they cannot be moved within two years of their posting and two, to move them, the local party bosses will have to seek the help of bigger party bosses.

No system is perfect, but this will go a long way to insulate policemen from politicians and the first sign of success is that all politicians are yelling blue murder and an abrogation of their fundamental rights ( to ruin this country)

Second : The 9th schedule of the constitution, that haven for all illegal, irrational, obnoxious and obviously politically motivated legislation has been thrown open to judicial review. Earlier, however nasty a law was -- like the 69% reservation in Tamil Nadu -- were protected from all review by placing them in the 9th schedule. The general refrain was "parliament (or legislature) is supreme" ... much like the medieval concept of the "divine right of kings".

With this being thrown overboard, we have a hope that regressive legislation will now face review in the courts.


These two events will have far reaching implications and these are positive implications, much more important and relevent than Infosys's profits or the current Sensex level.

The Virtual OmniVerse

My last post of of 2006 had proposed ( 'predicted' ) that if SecondLife has to thrive and become the defacto standard for the Virtual Universe, then there is no option but to take the open source route.

Proprietory products, especially when they are so very useful, cannot stand up to the tide of popularity that sweeps in with Open Source products.

I am not sure if someone in Linden Labs heard me or read my blog ... or perhaps it is that fools seldom differ .. but I am delighted to note that earlier this week, the Second Life client has been put under open source GPL.

Anyone can download and modify the product and if their modifications are good and useful, everyone else, including Linden Labs will use it.

This is stupendous news. This is now like the browser and the way it has become an open product.

Now we will have hundreds of developers working on enhancements and no other Virtual Universe product will have the werewithal to stand up to this tide. Which is wonderful.

As this client becomes more and more popular, all other Virtual Universe products will have to align their servers to be accessible by these clients. Just as from one browser you can access all websites ( and services like Yahoo mail, Google Mail, Hotmail etc), in the not too distant future, we will be using one virtual universe client ... to access all virtual universe servers -- provided you are registered user with a valid userid and password.

Each Virtual Universe will of course be different in terms of content -- some will have fights and war, others will have car racing and others will provide Call Centre services for example )

But just as all websites form a part of the World Wide Web, so shall all Virtual Universes be a part of greater collection called the Virtual Omniverse.

January 04, 2007

SEZ Policy : Making the best of a bad situation

The SEZ policy is a prime example of the crony-capitalism that hides behind the pseudo-socialistic facade that hangs over India. However it is not something that can be wished away. How can we make the make best use of it.

But before that, a quick analysis of the genesis of the current mess.

Special Economic Zones were dreamt up by the Indian bureaucracy as a way to emulate China's success story and had two design points.

(a) India's notoriously rigid, inflexible and anti-market labour laws will be relaxed so that the nation could compete with China's manufacturing muscle.
(b) Tax exemptions will be allowed to make India's companies more competitive.

However, bureacrats propose and politicians dispose and so the first casualty of the policy was the labour laws. Faced with the implacable ire of the miniscule, but politically significant organised labour lobby ... the idea of relaxing the labour laws was summarily thrown out of the first available window.

That is when the SEZ policy should have been given a quick burial but that was not to be. The tax exemption clauses were highlighted as the main advantages.

Now, tax exemptions, in the long run, can never be the basis of a sustainable business model but given the success of the Indian software industry, it was touted as a panacea of all evils. In a sense, that was OK ... because a rupee paid as TAX is always used LESS PRODUCTIVELY by the government than the same rupee withheld from the government (preferably in a legal manner )and used anywhere else. So net-net, the tax exemptions can be seen as a generally progressive step to the extent that it keeps money in more productive hands.

But that is NOT why the SEZs are so hot property today .. for that we need to look at the crony-capitalism that is rampant in the real estate business.

India is a heavily populated country and 'good' land is always scarce. If you want to buy some land to build a house, a villa or a factory ... you will not get it very easily.

That is where the Laws of the Land can be used, if you can pay-off the lawmakers to work for you. For the law of the land says that Property Rights are NOT fundamental in India and land can be acquired ('extorted') for a public purpose.

And that is what the well-connected businessmen are doing. They convince the local politician that creating a SEZ is good. So please pass a law ( or order) that compells the owner -- who is generally a small farmer -- to part with this land for a small sum of money. This land, ostensibly acquired for a public purpose, is next declared as an SEZ and handed over to the businessman for a price ... and the politician makes a nice 'cut' on the side. The businessman can then resell this land for a huge price to others ... who are willing to pay a premium for getting SEZ land where he can carry out a tax-free business.

Nice scam, right ? And that is the game that is being played all over India. Who is benefitting from this ? Not the farmer ... he is being a paid low sum for his land. Not the actual end user, the export industry, since they are paying a huge premium for getting SEZ land. Then who ? First the SEZ developer and of course his willing accomplice the local politician.

Can we get out of this mess ? Jaytirth Rao, chairman of MPhasis has an elegant solution. Cut out the middleman ... and let industry talk directly to the farmer and negotiate to buy the land. The price that they will arrive at through the price-discovery mechanism will reflect the market reality ... and that is fair for both.

Will this happen ? Extremely unlikely .. the vested interests involved are too powerful.

So how do we make the best of a bad situation.

Consider the case of the Left front and their quagmire in West Bengal. After the bloody nose they got in Singur .. they are headed for a far more bloody body blow in Nandipur where the Salim SEZ is asking for 14000 acres. In this they are in a bind as much as the rest of the politicians in India and they dont have a choice. They cannot abandon the SEZ route and lose face. So they will force them to join the "anti-people" bandwagon. And once they are on this band wagon, they will have to accept other "anti-people" policies like Pension Reform, FDI, Foreign Universities, Privatisation ... and other worthwhile things that they have been opposing for decades.

Karat, Yechury and Company are already talking soft on FDI and it is a matter of weeks (hopefully) that they will be as "reformists" as the other politicians in the country ..

And when that happens ... India will take off. That is what we are all hoping for.

Thanks, but no thanks to our flawed SEZ policy.