Amazon.com’s cloud-computing services already power some of the biggest names in online gaming. Its new Kindle Fire tablet and app store are giving game publishers a critical new sales channel. And now, the e-commerce pioneer appears to be getting more serious about publishing its own games.

Over the last few months, Amazon (NASDAQ: AMZN) has ramped up job postings for game developers, artists, designers, and producers at both an Orange County research and development office and, for jobs focusing on social games, at its Seattle headquarters. Several notable names from the gaming industry have also joined the company recently, with a range of experience that spans many different gaming genres.

Some game publishers—who count Amazon as a key partner—have now concluded that it could become a competitor as well. Not much is known about what the secretive company is working on, and no sources who suspect Amazon is planning a bigger push into game publishing would comment on the record for this story. Amazon itself did not respond to e-mailed requests for comment.

But, as is often the case, you can tell what the company is planning by what it’s telling prospective job applicants.

In ads for developer, engineer, and producer jobs, Amazon describes its game development studio as a place to “imagine and develop games that will shape the future of interactive media,” with “an agile team made up of the brightest engineers, artists, producers and designers in the industry.”

The scope of what the company says it plans to build is pretty wide, pointing toward the all-platforms gaming experience expected to soon be standard in the industry: “We conceptualize, build and distribute the most exciting and addicting games on Android, iPhone/iPad, Kindle, HTML5 and other next generation operating systems!” The studio is based in an Orange County, CA, office of the company’s a2z research and development subsidiary.

Digital game publishing isn’t completely new territory for Amazon, but it’s been relatively quiet so far. The company purchased small game studio Reflexive Entertainment in 2008, and that unit has continued to publish some casual titles and e-book games for the Kindle digital reader—examples include cheery casual game Airport Mania 2 and interactive e-book Dusk World.

But now that Amazon has introduced its new full-color, touchscreen Kindle Fire tablet, it’s got a much stronger hand in selling digital games—and a much bigger reason to explore creating its own titles. Tellingly, the company’s job board lists six new game studio positions since the public introduction of the Kindle Fire, including three that were just posted yesterday.

Meanwhile, up at its Seattle headquarters, Amazon is building up a group that focuses on “social games innovation.” The company’s job board lists a dozen open positions mentioning that team, most of them posted in the past three months. Some of the jobs being advertised could be suited to a platform project, rather than game production. But job descriptions for designers and artists are pretty specific about the kind of work needed to produce a title. The artist, for example, is expected to “set the artistic direction [of] a new social game.”

Word of a social gaming project started leaking out last summer when the website IndustryGamers reported that Amazon had hired longtime role-playing-game designer Jonathan Tweet to work on a social game, following his stint working on Facebook games at GameHouse, a division of Seattle-based RealNetworks.

Since then, Amazon has accumulated more experienced game-industry talent. They include Nik Davidson, a veteran of massively multiplayer online games; Paul Furio, who has experience in social and casual games, as well as interactive fiction; and Russ Glaser, a user experience designer who worked on several high-profile projects for Microsoft’s Xbox Live service, including Xbox Live Mobile and the integration of Facebook.

Some don’t think that Amazon is too serious about becoming a major game publisher. GameHouse president Matt Hulett says Amazon will probably use its industry talent to strengthen its distribution platform, possibly developing demonstration titles to show off the strength of its platform.

“Remember ‘Minesweeper’ on Microsoft Windows? Sometimes you need a couple of reference apps that are bundled in so that people know what to do,” Hulett says. “I just seriously doubt that Amazon would try to build its own hit games.”

But there are precedents for just such a strategy. For one thing, it’s quite common for big video game distribution platforms to produce their own titles—Microsoft, Valve, and BigFish Games are three prominent examples just in the Seattle area.

Amazon also has shown an interest in producing other kinds of content that it sells. After years of disrupting the business of selling books, Amazon is now directly taking on the publishing houses by signing up its own authors. And it’s also exploring new ways of getting movies made with its Amazon Studios project, a complement to a new video-streaming business.

That’s before we even discuss the plain dollars-and-cents reasons. Video gaming has been a relatively strong area of the overall media industry in the past decade, pulling in an estimated $16.5 billion last year. The console game sector may have suffered, but social and casual games continue to be hot, despite Facebook game-leader Zynga’s sometimes disappointing IPO—in Seattle alone, we saw PopCap Games acquired for up to $1.3 billion and Double Down Interactive sold for up to $500 million. And games continue to be the most popular smartphone apps, according to tracking by the research firm Nielsen.

Finally, don’t forget that Amazon started life as a seller of media—namely books—and views its new Kindle Fire in that vein, with CEO Jeff Bezos recently telling Wired that the device is “a fully integrated media service.”

If integration’s your thing, it’s pretty hard to beat this recipe: Owning the game itself, the app store that delivers it, the computing power that makes it tick, and the device that it lands on.

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Big video games studios are a bit old school, with everything from game design, production, execution, and financing done in house, says Boaz Sender, a JavaScript programmer at the Boston-based Web consulting firm Bocoup. But they’re about to go the way that the old Hollywood movie studios did, he says, by outsourcing many of the operations they once tightly controlled.

Sender says that’s all going to happen as a result of traditional video games moving to the open Web, which is a set of standardized, royalty free, HTTP- and HTML-based technologies for building network software. The software design principles and content policies behind it focus on consumer empowerment and third-party integration, he says.

“When you move to the Web, one thing that becomes a lot cheaper is distribution,” says Sender. This enables younger, scrappier startups to get involved in building games, and encourages other startups to sprout up that are developing related games software, for functions like game authoring, payment, advertising, and managing player identities.

Bocoup is looking to seed this trend via Game Lab, a small games incubator it’s running with Cambridge-based Atlas Venture with the “goal of funding companies that help the games industry move to the open Web.” It’s particularly focused on HTML5, the emerging new standard for programming Web pages and services.

Bocoup’s 15-person team has spent two years helping companies develop and adopt open Web technologies, through events, evangelism, and consulting for customers like Google, Microsoft, and Mozilla. Sender founded the firm, which consists of a group of (“especially elite,” according to Atlas) JavaScript programmers. They work closely with other Web design-focused consultancies.

Game Lab’s funding model varies from startup to startup, but it could potentially invest in seed rounds for existing companies, help new companies form and seed those, and participate in Series A rounds, says Sender. Atlas is supplying the capital and Bocoup is bringing its expertise in open Web technology to the teams. Entrepreneurs in the Game Lab also get close mentoring from Atlas, and the option of working out of Bocoup’s open source hacker space.

“It’s about how we’re going to fund the building blocks of the open Web games industry,” says Sender. Bocoup is also working with its … Next Page »

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As more people turn to social networks for a video game fix, they’re also getting friendlier with the idea of forking over real cash for in-game virtual currency and items, according to a study commissioned by Seattle’s PopCap Games—the recent Electronic Arts acquisition that’s providing a lot of fuel for EA’s transition into more online and mobile games.

Digital transactions are the key to making money in social gaming, where free-to-play games are very common and revenue comes from charging for add-ons and extras that bring a player some special status, abilities, or even just decorations.

The online survey, conducted by pollster Information Solutions Group, shows two compelling statistics: First, more people are buying digital currency this year, compared with a similar survey in 2010. That measure went from 14 percent in last year’s survey to 26 percent in this year’s version, which is based on responses from roughly 1,200 social gamers in the U.S. and U.K.

If you extrapolate that response out to the broader population, Information Solutions Group says you’ve got about 31 million players buying virtual currency.

And secondly, people seem to be warming up to the idea—even if they haven’t taken the plunge in buying digital items yet. When asked how likely they were to pay for virtual items, about 46 percent said they were “very likely” or “somewhat likely” to open up their wallets. That’s up from about 32 percent of respondents in the 2010 survey.

Also significantly, the staunch holdouts who said they were “very unlikely” to pay for digital items showed a significant drop: In the 2010 survey, 47 percent of respondents showed that level of resistance. But in this year’s edition of the survey, the “very unlikely” fraction was down to 33 percent.

All the usual caveats about surveys apply, and fellow polling geeks can read the detailed methodology statement from the pollsters here. But this would generally track with what the games industry is chasing as it evolves from a fixed-production studio model into a digital-service industry with different revenue streams.

Exhibit A in that transformation is Zynga, which has rocketed from founding in 2007 to the verge of a $1 billion IPO. Zynga’s games, largely tied to Facebook, have traditionally made money by getting players to pay for little accoutrements that gussy up their game-play—so if you’re building digital barns in FarmVille, you might buy the nails and lumber to complete that project.

The lucrative potential for this revenue stream is a big reason why Facebook insisted that Zynga and other developers use its proprietary Credits system for such purchases, with Facebook getting a 30 percent cut. Facebook is now testing those credits outside the social network proper, with the GameHouse division of Seattle’s RealNetworks serving as a a key guinea pig.

This overall consumer trend shows why Redwood Shores, CA-based EA was willing to pay $750 million in cash and stock up front for PopCap (with earn-outs, the price could reach $1.3 billion). EA is a pioneer and longtime leader in traditional, hardcore console gaming, but is charging after Zynga in the digital sector, with acquisitions like PopCap providing a lot of the fuel.

When it bought PopCap, EA cited analyst figures showing that worldwide social game revenue would grow from about $2.4 billion in 2010 to $7.5 billion in 2014. PopCap’s 2010 revenue was just over $100 million, and EA recently said the unit’s sales  would grow more than 30 percent for 2011.

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The past week in tech headlines was dominated by our leading alpha geek: Microsoft co-founder and chairman Bill Gates. Gates stopped by the University of Washington to give a short talk about the future of computing, and how he sees cheap, powerful storage and processing revolutionizing everything from robots to disease eradication (the part about malaria went on for kind of a long time).

But the most interesting part of the evening was surely the Q&A portion, in which Gates sat on stage with the UW’s Ed Lazowska to field questions on just about anything from students in the crowd. Gates seemed to rather enjoy the give-and-take, even when a young woman asked him how she could get rich.

As you’ve probably read by now, Gates marveled at how strange it was to be a billionaire, and said that once you get past a several million-dollar fortune, it’s really just more responsibility about how to give it away. “Once you get much beyond that—you know, I have to tell you, it’s the same hamburger,” Gates said to laughs. The UW now has the whole lecture up online.

Elsewhere around town:

—PopCap Games mobile chief Giordano Contestabile reminisced about the inglorious past of mobile gaming, when all games on cell phones were basically hokey ways to get people to send premium-priced text messages. As Contestabile said on Twitter, “When mobile games were crap.” Now it’s quite a different story, of course, and Contestabile is one of the people in the driver’s seat pushing the boundaries of how games will evolve.

He’s also joining us Dec. 6 for Mobile Madness Northwest, our half-day forum presented with the Washington Technology Industry Association at F5 Networks in Seattle. Early Bird pricing only lasts until Nov. 15, so get your tickets now.

—Online real-estate brokerage Redfin added $14.8 million in venture funding, with designs on expanding the business into new markets around the U.S.. The round was led by new investor Globespan Capital Partners.

—Speaking of venture deals, we looked at September’s fundraising for Washington-based companies in technology, biotech, and clean energy and found a total of $32 million had been raised, according to data from our partners at research firm CB Insights. Medical companies led the pack, with $12 million for RF Surgical Systems and $10.6 million for Theraclone Sciences.

—More turmoil at Clearwire (NASDAQ: CLWR), which saw board member Benjamin Wolff resign. Wolff is a close associate of Clearwire founder and former chairman Craig McCaw. The Kirkland-based wireless provider has been on a roller coaster ride lately—mostly down—as it and majority shareholder Sprint figure out how to navigate Clearwire’s expensive changeover to a new type of broadband technology.

—The state of Washington has been cutting millions from education budgets in the past several years as its treasury deals with low tax revenue. So there was one spot of good news for students shouldering larger tuition burdens: The rollout of open-source course materials for the most common community and technical college courses, called the Open Course Library. The project is jointly paid for by the state and the Bill & Melinda Gates Foundation.

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Giordano Contestabile started working in mobile gaming before it was cool. Way before.

Back then, the only available mobile games were based around sending and receiving text messages—something that brings in nice profits for mobile carriers, of course.

“I’d go out and pitch this game, and the game was an SMS fishing game. Already it doesn’t sound very exciting,” he says with a laugh. “But basically, the game was this: You had to send an SMS to a premium number—you paid a dollar or whatever, probably less—and you sent an SMS: ‘I want to fish.’”

Then, players were supposed to whip their arm forward in a casting motion—it’s a fishing game!—”and then you received another SMS with the fish that you got, which was basically random. And that was the game.”

“Pretty much every game was like that,” Contestabile says.

These days, Contestabile is on the lookout for much bigger fish. As the senior director of mobile product and business strategy for Seattle’s PopCap Games, he leads efforts to deliver a portfolio of games for smartphones and tablets. Mobile accounts for more than a quarter of the business for PopCap, which is being acquired by Electronic Arts (NASDAQ: ERTS) for up to $1.3 billion.

And, by the way, he’s one of our all-star panelists for Mobile Madness Northwest, Xconomy’s half-day forum on mobile innovation Dec. 6 at F5 Networks in Seattle. Get your tickets now—the special Early Bird rate is available until Nov. 12.

Contestabile took the lead on mobile at PopCap’s Seattle headquarters at the end of 2010. He previously worked for PopCap as senior business development director in Asia, spending three years based in Shanghai. It turns out that experience was perfect preparation, because Asian consumers were already accustomed to playing games for free, largely because of piracy. But they would pay for in-game extras and premium add-ons. That model was still seen as kind of weird back in the U.S., however.

“In 2007, the attitude here was a bit of, ‘Well, here we do those games and we sell them for 20 bucks,’” Contestabile says. “‘You guys out there in Asia do this crazy thing, and then maybe one day we’ll be interested for the U.S.’”

“What happened was, basically Facebook made free-to-play overnight a sensation in the U.S. So now a lot of what we do is based on that,” Contestabile says. “When people in the U.S. think that this is a new phenomenon and it’s a change that’s being initiated here, I like to remind them that it’s been the case in Asia for 10 years. And a lot of what’s happening here is actually replicating stuff that happened in the Asian markets.”

Ubiquitous, powerful mobile devices are one of the major forces shaping the future of the games business today. Along with the rise of games on Facebook and other social networks, the industry is seeing a near future where games will become always-on, connected services. That’s a big change from the traditional model, where gamers would plop down in front of a PC screen or TV to play.

Like so many other sectors of consumer tech, mobile gaming was revolutionized by the introduction of the iPhone. And Apple’s tight control over the device, software, and apps was a huge reason, Contestabile says.

Before Apple seized the lead, wireless carriers held the keys to … Next Page »

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A Boston-area tech startup with a pretty bold vision is announcing its expansion to Silicon Valley today. Waltham, MA-based Affectiva, an MIT Media Lab spinout, is opening an office in Santa Clara, CA, where its CEO Dave Berman is based, along with other key members of the team.

Affectiva, which has about 25 employees (most of them in Waltham), is looking to hire 15 people in Santa Clara, mostly in sales, marketing, and business development, Berman says. He’s a former WebEx veteran, and in fact Affectiva’s new office sits right across from his former company, which is now part of Cisco Systems.

“I’ve been commuting [to Boston] for two years,” Berman says.

Affectiva, which started in 2009, uses computer vision and machine learning software to interpret people’s facial expressions, gestures, heart rate, and other physiological responses. The idea is to be able to track and understand consumers’ emotions as they do things like watch video ads, play computer games, or interact with Web or mobile content. The software works in conjunction with a webcam and/or biometric sensors, like a wristband that monitors temperature, motion, and sweat—and consumers have to opt in to all of that, of course.

The company’s technology comes from the Media Lab’s “affective computing” research group, led by professor Roz Picard. Picard and research scientist Rana el Kaliouby are founders of the startup, which most recently raised $5.7 million in a Series B funding round led by Kantar (part of communications firm WPP) and Myrian Capital. “I wanted something that was next-gen, a software-as-a-service model, a huge opportunity. And something pretty early,” says Berman about what attracted him to work at Affectiva. “I met Roz and Rana and they blew me away. This is going to be everywhere.”

Talking to Berman, I still felt like I was in a sci-fi movie, though. I’ve followed Picard’s research over the years—including recent work with el Kaliouby on autism-related technologies—but I don’t have an intuitive feel for how well a computer can classify a person’s emotions based on their expressions. (I would guess not all that well, though it’s improving.)

Berman walked me through a demo that was eye-opening. The company had volunteers watch a series of TV commercials—standard baby-product stuff, for instance—while a webcam captured their facial expressions. Affectiva’s software identifies key movements and facial markers—regions around the eyes, lips, and more—and infers positive and negative reactions during the course of each ad. What’s more, it tries to distinguish between different mental states, such as frustration, confusion, excitement, contentment, concentrating, interested, disagreement, and unsure. (Another Affectiva technology that is in the early stages of development involves monitoring heart rate based on webcam images that can be analyzed to track the blood flow to a person’s face.)

The business idea is to “send real-time insights back to the marketer,” Berman says, and to provide a sample pool of “thousands of [consumers] in seconds.” On the advertising front, the company is already making money. Its customers include Disney Media, Millward Brown, IPG, and some 150 universities and nonprofits on the research side. But you can also imagine a much wider range of applications, if enough people opt in to the technology—which Berman says could help make “content more relevant to them.”

Imagine retail kiosks that react to customers’ expressions as they browse products by trying to show them things they like, he says. Or websites and smartphones that react to people in real time as they interact with content, play video games, take online education courses, or watch presidential debates. It’s all part of the big vision of computers that understand their users’ emotional states—something that’s been talked about for decades, but is only starting to see the commercial light of day now.

“It’s a big business if we do this right,” Berman says.

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San Diego-based Zeebo, founded in 2007 to build a business around a new wireless game console, apparently is making a significant change in its strategy, and has raised additional equity funding, according to a recent regulatory filing.

Zeebo discloses in the document submitted to the SEC that it’s raising $17 million in equity financing, but the company’s investors are not identified and it’s unclear if the $17 million represents just a $3.5 million extension of the $13.5 million the company raised in mid-2010—or if Zeebo has raised an additional $17 million in new money.

Zeebo was formed as the result of a partnership between Brazilian video-game company Tectoy S.A., and Qualcomm (NASDAQ: QCOM), with the San Diego wireless chipmaker holding a minority stake, at least as of 2009.

When I called the Zeebo phone number listed on the form, I got the mobile phone of former Zeebo CEO John Rizzo, who says he left the company in February. He later joined Palo Alto, CA-based Jive Software as chief marketing officer. Qualcomm referred my query about the company’s financing to Zeebo’s new CEO, Mike Yuen, who couldn’t immediately be reached for comment.

Mike Freeman of the San Diego Union-Tribune notes in a story this morning that Zeebo’s website shows the company is changing its strategy to focus on education, “with a reduced emphasis on gaming.” Critical comments posted beneath a story about Zeebo’s latest financing on the Gamasutra website suggest that the console maker wasn’t entirely successful in penetrating the video game markets in Brazil and Mexico.

Indeed, Zeebo’s website includes this statement: “As a result of the realignment, business and studio operations in Brazil and Mexico will be discontinued, and the current Zeebo system is no longer available for purchase in retail stores. Zeebo Inc. appreciates the tremendous support by customers in Brazil and Mexico who have enjoyed the system’s content and service offering. The product warranty, call center, and repair services will continue to be available for Zeebo customers.”

Zeebo’s website says the company now sees a vast opportunity to bring interactive education to emerging markets around the world, “with near-term operations and business interests centered on India.”

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New York-based Major League Gaming has raised $3.1 million in debt and rights, as part of a funding round that could reach $4.9 million, according to an SEC filing. Major League Gaming is the largest league of professional video game players in the world. The company’s previous investors include Legion Enterprises, Oak Investment Partners, and Ritchie Capital Ventures.

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Kixeye, the San Francisco game studio behind the Facebook games Backyard Monster and Battle Pirates, said it has raised $18 million in a Series C financing round. Jafco Ventures was in the lead, and was joined by existing investors Trinity Ventures and Lightspeed Venture Partners. Jafco managing general partner Joe Horowitz has joined Kixeye’s board, as has Andrew Trader, a former Zynga executive now with venture firm Maveron. In a statement, Horowitz called Kixeye a “hits factory” with a “highly sophisticated monetization model.”

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This morning was a busy one for Eric Gastfriend, but he made time to chat about his Cambridge, MA-based startup’s coming out of beta. Its goal: to make high-quality PC video games as fast and easy to access as the social-network and casual games that have swept the country over the past few years (think Zynga, Playdom, and increasingly Electronic Arts, which owns Playfish and now PopCap).

The Happy Cloud, if you can get past the name (OK, it’s actually fine), has opened up its on-demand game store to the general public today, with 10 PC games from three publishers—Warner Bros. Interactive Entertainment, Paradox Interactive, and Frictional Games. The games themselves range from first-person shooters (F.E.A.R. 2) to adventures (LEGO Harry Potter, Amnesia). They are free to demo, says Gastfriend, the company’s general manager, and if people buy the full version of a game, the startup splits the revenue with the game publisher.

Happy Cloud tries to drastically cut down the amount of time it takes to download PC games—from around six hours (or overnight), which is the status quo, to just a few minutes. Gastfriend, a recent Brown University grad, has probably been thinking about how to do this for a long time. He’s been playing and working with video games since he was five (and making websites since 5th grade).

“If you make games easy to access, frictionless, and simple and easy to learn, then it turns out everyone and their grandma wants to play a video game,” he says. “Hopefully, Happy Cloud can bring a high-quality experience to a more casual audience.”

Unlike other approaches to streaming games, Happy Cloud works by buffering the first few moments of the game and tricking the system into thinking the game is fully installed, when in fact Happy Cloud’s browsing and caching algorithms are constantly figuring out what parts to download next. The company says this approach gets rid of time lags (because the game runs locally on your PC) and poor resolution issues (because there’s no video compression) that come with streaming.

The two-year-old startup has been in private beta trials since May. In its first month, Happy Cloud logged more than 2,500 unique visitors, Gastfriend says, and half of them signed up for e-mail blasts. The company has since found that half of its traffic comes from outside the U.S. (mostly Europe and South America). So although the public launch today is only for U.S. consumers, the startup is looking to add more countries.

Happy Cloud currently has 10 employees, split half and half between Cambridge, MA, and Israel. It previously raised about $1 million in angel financing and will be looking to raise another round, Gastfriend says. The company was founded by Jacob and David Guedalia, serial entrepreneurs who sold their last company, iSkoot, to Qualcomm last fall.

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“The time to invest in social media was two years ago.” That was a quote—or the gist of it, anyway—from Todd Dagres, co-founder and general partner of Spark Capital, during the venture panel at XSITE, Xconomy’s innovation summit last month.

Dagres ought to know, since Spark is an investor in both Twitter and Tumblr, the white hot mixed-media blogging platform—and Twitter co-founder Biz Stone recently became a Spark strategic advisor. So his quip seemed a perfect setup for me to ask the obvious follow up: What’s next?

I sat down with Dagres last Friday in Spark’s offices on Newbury Street in Boston to get the skinny on what he sees as the emerging new areas for investing that might take off the way social media has the last few years. “I can’t tell you that,” was his first reaction, but he wilted, as you’ll see. We also covered some other interesting ground—such as his views on what has made New York tech so hot and how it compares to Boston, why Groupon doesn’t get his investor juices flowing, why tech investing is better than making movies (Dagres had a stint as a Hollywood producer and still does it on the side), and more (Governor Patrick—read on, because there’s some stuff for you, too).

We started with New York, since late last month Spark closed its 19th deal in the Big Apple—joining in a new $50 million round for Foursquare—out of a total of 43 the firm, which was founded in 2005, has done. And Dagres says Spark has signed two more term sheets with NY companies. That’s a whopping percentage, almost half the total. The rest, he says, break down as a dozen in Silicon Valley, seven or eight in the Boston area, and a few others scattered around.

Here are the take-homes from our conversation:

Boston vs. New York—Dagres says New York surpasses Boston on some key parameters for entrepreneurship. “It really is a vibrant community of entrepreneurs. It’s a very creative environment. It’s an environment where there’s a sense for the customer. And it’s also a community where there’s a lot of sharing going on.” What Dagres calls “a powerful mixture of factors” has led to the ascendance of New York entrepreneurship. “I think it grew out of the Wall Street bust and also the transition from traditional media to digital media. Kids grew up in a media hub and an environment of a lot of risk-taking. That all mixed together. The other thing I will throw in there is the artistic element.” All these things previously existed in pockets around the city. “Now, it’s kind of come together into one big vibrant, collaborative community.”

Todd Dagres of Spark Capital participated in a discussion of the social media bubble, among other things, at XSITE 2011.

Boston, says Dagres, now falls short of New York on at least two of the factors listed above: collaboration and sense for the consumer. When it comes to venture firms, he says Boston VCs have traditionally invested in enterprise-focused software companies-and see consumer-oriented startups as too risky. “It’s all risky,” he counters, and meanwhile the unprecedented ability of small companies today to reach billions of consumers is “incredibly powerful.” Besides Spark, Dagres could only name one other Boston-based firm he felt was comfortable investing in consumer plays and taking big risks (another, oft-cited critique of Boston venture firms, which Dagres agrees with)—and that was General Catalyst.

But Boston’s shortcomings vis à vis New York don’t stop with venture firms. Dagres says as a whole, Boston’s entrepreneurs lag New York startups when it comes to collaboration and sharing—and that, in turn, has prevented Boston from matching the spirit of the entrepreneurial community in New York. “We don’t quite have the critical mass in the community,” he says. “And we don’t have … Next Page »

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The Supreme Court today released its opinion regarding California’s attempt to ban the sale of so-called violent video games to those under 18. My company, Vindicia, filed an amicus brief in the case, Brown v. Entertainment Merchant’s Association, to make sure the Court was aware of the ramifications of the California law in the digital gaming world.

The decision is being widely reported as 7-2, which is true enough on the merits of this law. But looking closer, the decision is really 5-4 when it comes to the question of whether the First Amendment categorically protects the sale of video games to minors.

As I noted in a blog post after attending oral arguments in the case, Justice Alito and Chief Justice Roberts both seemed willing to allow states an ability to restrict the sale of violent video games. The Chief Justice seemed to miss the point that Postal 2, the game in question in the case, appears designed specifically to make white middle-aged conservative fathers like him angry. Justice Alito’s concurrence, with which the Chief agreed (bringing the two additional votes in the 7-2 vote), argues that some other law that better defines “violent” could pass constitutional muster.

Justice Thomas wrote a dissent in which he continues to take the position that kids really don’t have any free speech rights as an originalist matter. The flip side being that game creators have no right to sell to them if they’re under 18 (and as an original matter, probably under 21). Justice Scalia rightly points out in the majority opinion that Justice Thomas’s theory may support a system where parents could put their kids on a state-wide “do not sell video games to” list, but Scalia asserted that game makers’ free speech rights are violated when all kids are banned from buying their games.

Justice Breyer continues simply to believe that everything is a balancing test, regardless of the fundamental enumerated right in question, and that therefore judges should be allowed to use political arguments about what is best for society to balance laws against their harms. I’m reminded of Justice Scalia in another recent opinion replying to an almost identical Breyer argument with, “the very enumeration of the right takes out of the hands of government—even the Third Branch of Government—the power to decide on a case-by-case basis whether the right is really worth insisting upon.”

Today’s decision is good news in that the Supreme Court has found that states attempting to severely restrict the sales of video games have been going about it using unconstitutional methods. What’s still frightening is that we appear to be only one vote away from a state finding a way to restrict sales of video games to minors. Luckily, most of the methods that legislatures who really just don’t like video games would want to use would fail other constitutional tests. However, the “do not sell” list concept combined with the existing rating system does leave open a path for legislation that may not burden video game makers much. (That concept, however, faces the difficulty of the changes the digital revolution is bringing to the game industry’s business models, as we outlined in our Amicus brief.)

For adults, this opinion reaffirms something many of us knew. The fact that some people don’t like the content of video games is no basis for curtailing or choking them off at what many consider to be the beginning of a revolution in creativity, realism, and storytelling.

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[Updated 2:10 pm with more details throughout] It’s not just for bootleggers anymore. Today, Microsoft (NASDAQ: MSFT) is making good on its promises to officially open up the Xbox 360′s Kinect motion sensor, offering a software development kit download for non-commercial uses. That means it’s aimed at “enthusiasts and academics,” some of whom the company said it invited over to its Redmond, WA campus for an all-day hackathon yesterday to start road-testing the kit.

While today’s beta version of the kit for Windows 7 isn’t aimed at commercial developers, Microsoft has already said it’s heading that way eventually, with Microsoft Research distinguished scientist Anoop Gupta telling CNet earlier this year that he thinks it could be “a meaningful business” in both software and hardware.

One of the chief areas that seems primed for Kinect’s technology is a combination with Microsoft’s recent $8.5 billion acquisition of Skype, the online video-conferencing service. Gupta told me in a follow-up interview today that video-conferencing—something Microsoft calls “telepresence”—is one of the big areas he personally sees as a holding rich potential for Kinect development.

For non-gamers who may have missed all the hubbub, Kinect is a bar-shaped sensor that uses cameras, microphones, and sophisticated software to detect live movements by people playing Xbox games. It is sensitive and sharp enough to distinguish depth, sense separate people standing in the same area, notice faces and pick up on hand movements.

Interest in the device quickly spread beyond video games, inspiring all kinds of futuristic-semming motion-controlled hacks right after it hit the market in late 2010—one of the most noted early adaptations was the effort by some University of Washington engineering students to use the Kinect for research into how surgeons can better control robots to perform delicate surgeries.

Microsoft was caught off-guard by the immediate enthusiasm for Kinect hacks, at first poormouthing the phenomenon and then clarifying that it intended to open up the technology all along. I guess this week’s hackathon leaves little doubt about the company’s seriousness for developing an ecosystem around the product, but it remains to be seen how soon Microsoft will go after the commercial side.

Gupta declined to give a timeline for a commercial release, saying in Microsoft’s in-house video conference that “Although our intent is to release a commercial SDK, we’re not making any announcements about it now.”

There’s not really anything stopping someone from doing some homework ahead of time, of course, and those academics have been known to turn their research into businesses from time to time. But Gupta also reminded business-minded hackers that the programming interface could change when CNet caught up with him in April.

“For a while, it was [that] you were waiting for the SDK,” Gupta said to developers in Microsoft’s announcement. “Now, it is I am waiting to see what are the exciting things the community is … Next Page »

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Microsoft’s blockbuster $8.5 billion deal to acquire Skype dominated headlines far beyond the Puget Sound region last week, raising all kinds of interesting implications for mobile computing, business communications, video games, and more. Many commenters were walloped by the sheer scope of Microsoft (NASDAQ: MSFT) products that Skype could be plugged into, but in our initial report, we called out mobile and video as the two broad areas to watch.

Xconomy writers from around the country also weighed in with follow-up reports from different angles. Xconomy Boston’s Greg Huang sat down for an exclusive interview with Microsoft’s Qi Lu, president of Microsoft’s online services division. Skype won’t report to Lu, but he praised the power of bringing a big consumer brand under Microsoft’s umbrella. Lu also pointed to “powerful scenarios” in combining Skype with Windows Phone, Xbox Kinect, and the Lync messaging service on the business side.

In San Diego, Xconomy’s Bruce Bigelow had this Q&A with Bryan Hertz of Telcentris, a small California-based startup that makes a Skype competitor. Hertz pointed out that some of the initial mixed reaction might have to do with Skype’s upstart profile, including its roots in the music-sharing service Kazaa: “People saw Kazaa and then Skype as a way of ‘beating the system.’ Microsoft IS the system, so it’s easy to assume the worst.”

Here’s the rest of the news making headlines at Xconomy from the past week on the Seattle-area tech scene:

—Speaking of Microsoft, co-founder Bill Gates was on hand for an event from environmental nonprofit Climate Solutions focusing on the future of clean energy. As Luke reported, Gates said he was bullish on the science and business opportunities—but less optimistic about leadership from the government in setting carbon limits and paying for research and development. If Gates’ talk is up your alley, you should definitely check out our next power-packed Xconomy Seattle event, Separating Hype from Reality in Alternative Fuels, this Thursday.

—Xconomy San Francisco’s Wade Roush interviewed Dan Reed of Microsoft’s Extreme Computing Group—basically, the guy who’s in charge of figuring out what the future will hold for the world’s largest software company. Reed and Roush chatted about smart radios, data center design, artificial intelligence, and more—and all this was just a preview to today’s Beyond Mobile event in San Francisco, where Reed will join Bill Mark of SRI International, Larry Smarr of Calit2 and others for an in-depth discussion on the next 10 years of computing.

—Lest Microsoft steal all the headlines, we also had a couple of interesting items from the world of gamification—the drive to apply common video game features and experiences to a broader array of consumer life, from shopping to health and beyond. First up was BigDoor Media‘s announcement that it was partnering with Major League Baseball to bring game mechanics to the league’s live game-tracker site. Following that, we got an in-depth interview with Scott Dodson of Bobber Interactive, a Seattle startup that’s bringing game features to children’s finance. Dodson, a leading thinker on gamification, is optimistic about what the future holds—but he’s also worried that too much use of shallow elements could saturate the market and bring the whole thing down.

—Finally, a pair of great guest posts from people in the Seattle-area technology community. First up was Kal Raman of GlobalScholar, who wrote about the opportunity that entrepreneurs in the region have to bring innovation and data-driven solutions to the country’s education system. We also cross-posted this piece from Eric Koester of Zaarly, who recounted his recent trip to Washington, D.C., to speak about on the importance of maintaining a strong ecosystem for startups.

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These are dizzying days for the business of games. It was almost exactly a year ago that we first wrote about the idea of applying video game features, like rewards and leaderboards, to websites and other connected services. Known as “gamification,” this new niche business aims to increase the amount of time people spend with sites or apps, thereby driving up advertising revenue or even getting users to shell out real money for virtual goods that are used within their game of choice.

Today, it seems like you can’t swing a dead cat in the tech world without hitting something gamified. Zynga, the maker of addictive Facebook games like Mafia Wars and FarmVille, delivered on the social network’s financial potential by getting people to tend their online gardens or hunt down adversaries. In February, multiple reports had Zynga raising money at a $10 billion valuation.

Startups are trying to repeat some of that success by tying games into all sorts of online experiences—Seattle’s BigDoor Media, for instance, just landed a marquee partnership with Major League Baseball, getting its platform on one of the best websites in professional sports.

And Seth Priebatsch, founder of Boston-based group-buying startup SCVNGR, got worldwide press coverage for his keynote speech at SXSW Interactive in March, when he declared that “The last decade was the decade of the social layer … Now, the game layer is coming.”

So you’d think a guy like Scott Dodson, whose company is bringing game mechanics to personal finance for kids, would be psyched by all this momentum. Except he’s not—quite the opposite, in fact. Dodson, a gaming veteran who serves as operations chief at Seattle-based Bobber Interactive, actually thinks that too many gamification efforts are merely employing the surface aspects of what makes a game experience compelling—the rewards, rankings, and progressive levels. At next week’s Login online game developer conference in Bellevue, WA, Dodson is giving a presentation on this issue with a dire title: Gamification will eat itself.

Dodson argues that, by focusing on the outcome of games instead of the internal dynamics that make them addictive, the current gamification trend could become generic, leading the entire idea to be considered annoying and passé. And Dodson says that presents a problem for companies like Bobber, which he says is trying to deliver a deeper level of gamification. “It risks sinking the whole ship. It risks de-legitimizing the value that actually does exist in creating a game layer,” he says.

By his own recounting, Dodson was among the early wave of people to start publicly promoting the notion of broad gamification. In a session at last year’s Login conference—the speech was optimistically titled “Gamification!”—Dodson tied together several threads in the then-burgeoning field. When he pitched the talk a few months ahead of time, it was little more than a word and an idea.

“I dug out my old proposal, and it was literally like, ‘Look—I don’t even really know what I’m going to say. I’ve just got this word. But trust me, it’s going to be big, and it’s going to be good,” he says with laugh. “At the time, I did a search for the word gamification and I got literally four results. And that was it. There were no other references Google found to the word gamification.”

As Dodson was developing that presentation and ramping up work on Bobber, game designer and Carnegie Mellon professor Jesse Schell spoke about the idea at DICE, a major game conference, … Next Page »

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San Francisco-based Funzio, developer of the popular Facebook game Crime City, said today it has raised $20 million in Series A financing. US-based IDG Ventures and China-based IDG Capital Partners led the round, which was joined by Playdom co-founder Rick Thompson. Thompson chairs the company’s board, which IDG Ventures managing director Phil Sanderson has now joined. Founded by former Zynga general manager Ken Chiu, Funzio said it plans to use the new funds to complete a mobile version of Crime City, triple the size of its team, and “scale its business so that it can launch games faster and develop them in parallel.”

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San Diego’s Mad Catz Interactive (AMEX: MCZ), which sells videogame enhancements and interactive accessories, says today it has repaid $14.5 million in convertible debt that the company incurred when it acquired the Saitek group of companies in 2007. The financing included about $12.2 million raised last month through a private stock placement arranged by Roth Capital Partners. Mad Catz CEO Darren Richardson says the repayment will eliminate roughly $1.1 million of annual interest expense and retire about 10.2 million common shares that had been included in the company’s calculations of fully diluted earnings per share.

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Electronic Arts, the Redwood City, CA-based video game giant, said today it has acquired Melbourne, Australia-based Firemint for an undisclosed sum. Firemint’s games Real Racing and Flight Control have been runaway hits on the Apple iPhone and iPad platforms. The startup will become part of EA’s interactive division. “The Firemint team is remarkable for its critical and commercial success,” said EA Interactive executive vice president and general manager Barry Cottle in a statement. “Having them as part of EAi will accelerate our position as worldwide leader in game development for mobile devices and online gaming platforms.”

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Seattle-based PopCap Games said today it has acquired social gaming firm ZipZapPlay, based in San Francisco. Financial terms weren’t disclosed, but ZipZapPlay has 17 employees (led by founders Curt Bererton and Mathilde Pignol) and gives PopCap a social-game studio presence in the Bay Area. The studio will report to Jon David, PopCap’s vice president of social games development. PopCap has been moving strongly into social-network games, with Bejeweled Blitz and Zuma Blitz, and says it is the third largest Facebook game developer, after Zynga and Electronic Arts.

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Chalk up another sign of the explosive growth in mobile and casual gaming—Seattle’s PopCap Games, makers of the hit games Bejeweled and Plants vs. Zombies, has set up an “experimental” second label for feeding their weirder side. Yes, even weirder than a Zombie bobsled team.

The new studio and label is called 4th & Battery, a tribute to PopCap’s headquarters address. The second label is intended to help feed the PopCap team’s creative juices by offering a sandbox for coming up with far-out games in a more fast-twitch manner, the company said in a statement. Ed Allard, PopCap’s executive vice president of studios, described the new shop as “a pressure valve,” recognizing that the normal development process can be long and intensive for creative types who like to have fun with their work.

“4th & Battery gives us a way to quickly try really strange or marginal ideas, and to give our designers a safe area to hone their chops,” Allard said. PopCap co-founder Jason Kapalka added that 4th & Battery also won’t have “the typical concerns like schedules, profitability, or even target audience. It’s kind of the video game equivalent of B-sides or short films.”

It’s an interesting move for a maturing company like PopCap, which has been around since 2000. It certainly has the resources to let its developers run loose, now that it claims 56 games and more than 400 employees, and has been edging toward a possible public offering. On one hand, I could see something like 4th & Battery functioning just as advertised—a place to capitalize on PopCap employees’ creative side without restrictions or expectations. That’s probably a good way to keep talent—and their wild ideas—in the building at a time when many of them could be hearing siren songs from other talent-hungry companies.

But this indie-label approach also could function as a faster-moving development pipeline that adds new streams of revenue pretty quickly. One of the casual game industry’s major advantages over traditional console gaming is a quick development cycle. That’s led to some tension within the broader gaming world, but it’s also clear that technological improvements are going to make game development even quicker than it is today. On top of that, PopCap’s 4th & Broadway experiment is a potential play on a broader market, as PopCap says the games coming out of 4th & Battery will include titles aimed solidly at a “mature audience.” I read that to mean people—particularly guys—who love games but don’t want to download some of the cutesier titles out there.

The first game coming out of 4th & Battery definitely fits that mold. It’s Unpleasant Horse, which involves keeping a skull-bedecked black Pegasus flying through the air and sending nicer creatures into a field of meat grinders below. The demo video includes an awesome heavy-metal theme song that really makes me think we should resurrect our Battle of the Tech Bands.

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