Xfire gaming network to be acquired by Viacom, rolled into MTV Networks

Posted by Scott M. Fulton, III

Menlo Park (CA) - In a clear indication that the gaming support industry is booming at least as much as the video gaming industry itself, Xfire, a manufacturer of an in-game messaging tool for online gamers, announced it is being acquired for $102 million by the MTV Networks division of media giant Viacom.

Xfire makes an instant messaging tool designed to run both outside and inside the latest games, enabling friends to communicate and invite one another into the club. With literally hundreds of major titles supported, the tool can enable one player to invite another, have that other accept, and then have the game itself set the stage for the invited party.

Where's the revenue model? It's in advertising, mostly for other games, as Xfire runs a major league download service for pre-release game demos and advertising trailer files. Some demos are actually free trial versions of the complete game, which can sell themselves if the player chooses to remain "alive" after the trial period has expired.

While the company says it couldn't really afford to advertise itself, the truth is, word has been getting around, and not entirely on its own account. The company's co-founder is the popular world champion Quake player known as "Thresh." And in 2004, Xfire entered into a very successful marketing campaign in conjunction with basic cable network Spike TV (not so ironically, another unit of MTV Networks), which premiered during the QuakeCon 2004 convention, and challenged players to "Build the Biggest Gamer Network."

Still, in a statement issued today on Xfire's Web site, Chris Kirmse, the company's vice president of engineering, credited good ol' social engineering with the engine of his company's success. "We figured that if we build a good enough program then everyone would want to share it with their friends. Four million registrations later, I think we've been proven correct."

Viacom's strategy appears to be to let gaming tools build a gaming audience for them, rather than rely on traditional media. It may turn out to be a very smart move, especially after the company had considered a video game TV network of its own, only to rely on Spike TV to present gaming programming. Viacom's competitor in the cable arena, Comcast, is the owner of the newly semi-redubbed G4TV network, which was originally devoted 100% to video games, but has recently branched out to, shall we say, unique forms of "interactive television," including repackaged reruns of the original Star Trek series with added graphics that interact with...themselves. Ratings numbers give G4TV the unlucky distinction of being the least viewed basic cable network in America - less than evangelistic channels, less than third-rate shopping channels. Meanwhile, Spike has video game programming, its own Star Trek reruns (without the cheesy graphics), and now, Xfire to boot. We may learn more about Viacom's payoff in just a few weeks, during the E3 Expo in Los Angeles.