Gaming is serious business, and Microsoft knows it

ZDNet colleague Mary Jo Foley reports that three Microsoft Web services brains -- including Dave Treadwell, Joe Long and Don Box (SOAP guru, and a star in the Web services and SOA space) -- may be engaged in Microsoft's Interactive Entertainment Business (IEB), the part of Microsoft that currently encompasses the Xbox/gaming; IPTV; Media Center; Zune; and mobile communications businesses.

Mary Jo, who probably knows more about the inner workings of Microsoft than Steve Ballmer, could only speculate on why these chaps are in Xbox land. Perhaps they're involved in gaming, perhaps digital home connectivity, or perhaps something new altogether.  (A couple of readers offer that their work may involve Live Mesh.)

But one thing is certain: gaming and associated online entertainment have become big, big, business -- and may have more influence over innovation and productivity investments than the actual military itself. And computer gaming itself has become a huge sector of the economy.

Keys to the economic kingdom? Microsoft Xbox joystick and console. (Photo credit: Wikipedia.)

A recent survey of 755 Internet users conducted by the Pew Research Center confirms the economic viability of the game business: 19 percent of respondents said they had purchased online games in the most recent quarter. Considering the fact that there are about two billion Internet users across the globe, that translates into one big, big market.

A new report from the Texas Comptroller of Public Accounts says that the computer and video game industry created more full time jobs in the past two years than any other moving image entertainment sector.

Writing in The Wall Street Journal, Andy Kessler makes the point that the military and defense spending were the locus of the US economy for decades. Now, it appears the ground has shifted. Rather than military spending, the foundation of innovation and productivity investment is now based on electronic games.

Even the military is following suit, he observes, noting that piloting and navigation systems are likely to be modeled after game consoles.  Witness the pilotless drones being employed across the world, controlled by joysticks and video screens.

The user interfaces developed for gaming eventually find their way into the corporate world as productivity-enhancing tools, productivity is what drives our economy onward and upward. “Much as keyboards and mice and fast graphics have driven corporate productivity for 40 years… the next decades will be driven by tools that can harness voices and gestures,” says Kessler. Gaming technology has stolen the show here.

There is plenty of evidence that adoption of computer games is on the rise within the corporate sector. As reported by my colleague Heather Clancy just this past October, IBM launched CityOne, an interactive simulation exercise focused on business and civic leaders. There are more than 100 different development scenarios built into the “game,” focused on traffic congestion, saving water, supply chain optimization, green power choices and so on.

Last year, ZDNet/SmartPlanet colleague Heather Clancy talked about how some of the world’s biggest and most successful companies are encouraging management candidates to participate in business simulations to build the skills they need for their next step up the corporate ladder. Companies such as including Nokia, Accenture, Sony, Phillips, Rolls-Royce, Novartis, Ernst & Young, KPMG, IBM, Hewlett-Packard and Cisco are encouraging up-and-coming management candidates to participate in such an experience, the BTS Global Business Tournament, to build the skills they need for their next step up the corporate ladder.

There is enormous educational value, in fact. Last summer, a survey of more than 200 medical students at the University of Michigan and University of Wisconsin at Madison, reported in CNET, founds that 77 percent say they would participate in a multiplayer online health care simulator if said simulator helped them accomplish an important goal.

Consider also the convergence that is taking place between gaming, entertainment, online services, and the cloud. Chris Nuttall, writing in The Financial Times, observes that the set-top box and console for computer games may soon be going the way of the VCR — being replaced by online games that are streamed to consumers from cloud data centers.

Nuttall reports that online game companies such as OnLive, Playcast, and GameTree TV are beginning to stream games to consumers in early markets. While computer games already use the Internet to bring competitors together from around the world, we may soon be able to partake in them without the hardware, cartridges, and disks. As Nuttall put it: "Although it enhances them now, the Internet could soon make these devices obsolete… the PC box can go and little more than a monitor, keyboard and mouse are needed.”

Another interesting twist that I’ve also observed is that games themselves are serving as gateways to the Internet. The Wii system itself, for example, can serve as a front-end device for surfing the Internet, though not quite as agile as a mobile or PC. Either way, the convergence is coming on strong.

It's all connected.