Microsoft's Games Get Serious

ESP is a new software product based on the popular PC game Flight Simulator. It's also Microsoft's first foray into nonentertainment games

by Reena Jana

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At the end of the 2006 movie Snakes on a Plane, a passenger whose only aviation training was playing video games successfully lands a jumbo jet. Come January, thanks to Microsoft (MSFT), such a scenario won't be just a cinematic fantasy. On New Year's Day, 2008, the software giant will release a platform called Microsoft ESP based on Flight Simulator, a 25-year-old video game from Microsoft Game Studios. ESP allows corporations to design customized training simulations. The first target market: aviation companies that cater to the U.S. military and other clients.

It's the first time a major software company has entered the "serious"—or nonentertainment—games arena with a product to help other corporations build their own employee-training video games in-house via a simple, Windows-based program. And priced at only $799 per license, Microsoft ESP poses a cost-effective threat to smaller studios that develop custom games—at a cost of $500,000 and up per game—for corporations, hospitals, and the armed forces.

For years, companies such as military contractor Northrop Grumman (NOC) had contacted Microsoft, asking if they could license the game engine for Flight Simulator. "Since the late 1990s, there have been ongoing inquiries to our game studio by various companies who ask, 'Can we use this for training? How can we make it do this or that?'" recalls David Boker, senior director of the Business Development Group at Microsoft's Aces Studio, one of Microsoft's game studios, where ESP and Flight Simulator were developed. But at first, Microsoft wasn't interested.

Market's Tripled Since 2005

"Up until 2007, we haven't had time or energy to invest in that sort of thing," Boker says. "However, we knew the market was there. And it became clear how we could capitalize on that." The strategy—to explore new ways of finding a new revenue stream for an old title. It is an interesting, lateral leap for Microsoft—or any entertainment game maker.

The serious games market is currently valued at about $150 million, according to Ben Sawyer, president of the Portland (Me.) consulting firm Digitalmill and co-director of the Serious Games Initiative. While not huge, that's nearly three times more than in 2005, according to Sawyer's estimates, and growth looks set to continue.

Then there's the larger simulation and 3-D modeling market (which includes military training sims, design prototyping, and educational software for a variety of corporate and school settings). This market does overlap with serious games, and it's so vast that it's hard to quantify, so it poses a much larger, tempting potential revenue stream. Boker says Microsoft conservatively estimates this market at $9 billion, based on its internal tally of various analyst forecasts from Frost & Sullivan and other sources, as well as proprietary research. In theory at least, Microsoft ESP can be used by designers working on digital prototypes of, say, cockpits, and not only companies working on flight simulations. That's just one way the platform might cross over.

Interviews Suggest a Market

By 2006, Boker says, Microsoft employees in the enterprise software side of the company started paying attention to increasing buzz around video game industry events such as the Serious Games Summit, a semiregular conference on educational, military, and staff-training games. Boker adds that many of his colleagues also frequently discussed research on how people under 40 have grown up with video games, and how games could potentially be used as a learning tool.