HP Game Strategy

HP Game Strategy Brian Wainstein

Agenda Executive Summary Gaming Landscape Game Platform Overview Recommendations and Next Steps

Executive Summary

Executive summary Objective Evaluate HP’s current approach to games and develop recommendations to address gaps Opportunity The PC gaming industry is split between core and casual gaming with combined annual revenues exceeding $13 billion Core gamers are willing to pay more for their gaming experience, driving higher ASPs and increasing back-end revenue Recommendations Message gaming and make it part of the product story Use games to showcase HP hardware capabilities Preinstall the Steam game platform on premium notebooks to attract core gamers

Gaming Landscape

Games matter PC games sold over $13 billion worldwide in 2009 1 out of the $61 billion worldwide video game industry2 The PC Gaming industry increased 3 percent from 2008 despite poor economic conditions1 The majority of electronic games are played on non-dedicated devices, such as phones and PCs3 Over half of PC users in every segment (Trend Techie, etc) play computer games 1PC Gaming Alliance Horizon Report 2 DFC Intelligence Report 3 North American Technographics PC and Online Gaming Survey

Core and casual gamers

Game sale percentages 1IDC US Online PC Gamine 2010-2014 Forecast

What GAMERS VALUE IN A PLATFORM

Trends 2006 iPhone 2009 WebOS Touch 2010 iPad 2004 Nintendo DS 2008 Android 1998 Wicked3D 2010 3D Television 3-D 2010 Nintendo 3DS 1995 Nintendo Virtual Boy 2008 Nvidia 3D Vision 2010 Playstation Move 2006 iPhone Motion 2010 Microsoft Kinect 2008 Wii Fit 2006 Nintendo Wii

Game Platform Overview

HP Games Overview Pre-installed on every HP notebook with Windows except Envy Currently perceived as “crapware” Earned HP $7.5 million in 2009, projected to earn $8.2 million in 2010 Monetized through advertising, sponsorships and purchases Focus on casual games, eg: World of Goo, Plants vs. Zombies Touchpoints: Desktop icon, shortcuts in start menu under Games folder From May 20, 2010 to June 2, 2010 WildTangent released 10 games Over 40 million users in the WildTangent network

STEAm (Core gaming) Focused on core gaming The gold standard of digital game distribution Sells games from 42 publishers Monetization through game sales, add-on sales, and micro-content From May 20, 2010 to June 2, 2010, Steam released 35 games Strong community features, including intra-platform chat Over 25 million users

HP Download store Digitally distributes applications, including utilities and games Future plans are to expand content Monetization through traditional retail-like one-time sales Touchpoint: Taskbar icon

HP Download store

Game Platform comparison

webos app catalog Supports Unreal Engine, allowing a core gaming experience Allows users to purchase on a PC and send to mobile device Currently has over 3,000 apps in the store

OnLive Cloud-based gaming Enables full gaming experience on almost any platform (demos included computers, and an iPad) Service started June 17, 2010 At launch, required a wired 5 Mbps Internet connection SD gaming enabled later, requirements dropping to 1.5 Mbps Relatively small game selection at launch Danger of creating a hardware-agnostic environment

Current Game Approach

Manufacturer Pre-Installs

Recommendations

Core gaming hardware capability *Assumes discrete graphics and 1GB of RAM on GPU required

Game Platform recommendations

USER EXPERIENCE RECOMMENDATIONS Ask user during OOBE process if they want games on their notebook This can free up hard drive space for users who do not value games Indicating that a notebook has games will drive customers to use them, increasing revenue Create an HP Gaming Profile, with leaderboardsand achievements, linking customers to games Increases brand loyalty and brand promotion Gives HP accurate usage data Allows the implementation of a recommendation engine, potentially increasing sales

Casual game recommendations Continue using WildTangent for HP Games Meets the needs of casual gamers Work with WildTangent to conform to HP design language Provides point of differentiation from other manufacturers’ WildTangent builds Use WildTangent to enhance product stories by delivering hardware-showcasing games Create basic stereoscopic 3-D titles Include webcam games Expand touch portfolio Message to consumers that HP Games are desirable Combat the perception that HP Games are “crapware”

Core game recommendations Preinstall Steam on notebooks with gaming-grade hardware This inclusion positions HP notebooks as premium products Include a game showcasing the notebooks’ gaming prowess Message the gaming capabilities of powerful HP notebooks to consumers For the Envy line, this is a point of differentiation from Apple – the Envy can do everything a MacBook can do, and more For the Pavilion line, this will attract customers willing to pay more for a premium gaming experience Take advantage of the halo effect of a premium product to increase brand value This has been proven in the automotive industry with Nissan’s GTR, Dodge’s Viper, etc.

Next steps Short Term Reskin the WildTangent console to conform to HP design language Ensure Wildtangent advertisements meet HP standards Medium Term Establish relationship with Valve to install Steam on notebooks with dedicated GPUs to capture premium gamers De-emphasize HP Download Store for games Work with WildTangent to include games showcasing HP hardware Communicate HP’s game story to consumers Long Term Develop differentiating in-house game service, leveraging WebOS for casual games Evaluate the OnLive gaming service

Additional information

Additional Frequent sales drive users to purchase additional games on Steam Steam uses Windows Vista and Windows 7 parental controls, Wildtangent has separate controls The OnLive service offers another solution, viable on platforms regardless of specs “Some users complain that the WildTangent software is difficult to uninstall, although the company packages an uninstaller with the program. To remove a WildTangent installation that was initiated by an end user, the user might be able to use the Add/Remove functionality in Windows or third-party spyware and adware removal tools. However, in cases where the OEM (such as HP) has installed the software on Windows 7, the software has been made intentionally difficult to uninstall by obfuscating files and preventing a complete uninstall from the Remove Programs applet” - Wikipedia Confidential & Proprietary

Game Availability Confidential & Proprietary

Hp games console

Hp games

Acer games

Next wildtangent iteration

Game sales trends

Time dedicated to gaming HP Segmentation Report

Steam Client

HP Download store

Gamer profiles

Brand Segments

Cost Conscious (1 of 8) 13% of WW PC market SEGMENT OVERVIEW KEY DIFFERENTIATORS The Cost Conscious segment is not reliant on their PC – they don’t necessarily see it as a tool, and they don’t find anywhere/anytime access to their PC to be critical. At the same time, time spent with the PC is not focused on entertainment. They do not feel it’s important to have the latest & greatest technology and are not willing to pay for top of the line features. While they have proficient PC skills, they turn to others for assistance/advice re: PCs. Largely in mature markets – theorize incidence in Emerging Markets is much lower due to higher quality concerns. Moderate female skew. Older, less affluent, somewhat more likely to be retired. More likely to currently use a Desktop (DT) most often. While highest proportion plan to purchase a Notebook next, less so than other segments. Highest level of uncertainty about next PC brand, less likely to feel brand is a reflection of them. Longest interval between expected PC purchases. PC SELECTION CRITERIA Price is the most important factor, and their next PC will most likely be in the low-end price range. AGE BRACKETS HOUSEHOLD EMPLOYMENT Lower Income: 37% Mid/High Income:39% Affluent Income: 10% Children <19:34% Male/Female: 46% / 54% 18-24 18% 45+ 49% 16% 25-34 17% 35-44 Mean age: 43.2 years HP Restricted

Cost Conscious (5 of 8) 13% WW PC ACTIVITIES TYPE(S) OF INTERNET ACCESS % Daily/Weekly NON-WORK PC HOURS PER WEEK Mean: 22 hours TYPE(S) OF GAMES PLAYED Q32/33. The following is a list of activities you may or may not do, using a computer. How often do you yourself use a non-work computer for each of the following purposes, if at all? Q35. Which of the following best describes the type(s) of home Internet connection your household has, if any? Q37. About how many hours a week do you, yourself, use a computer for non-work purposes? Q34. Which of the following types of computer games, if any, do you play, by yourself or with others in your home? HP Restricted

Late Mainstream (1 of 8) 17% of WW PC market SEGMENT OVERVIEW KEY DIFFERENTIATORS Potentially due to heavy presence in Emerging Markets, those in the Late Mainstream segment appear to be newer PC users – they own fewer PCs, have lower self-reported PC skills, and are heavily reliant on peers for information on PCs. They are, however, frequent users of technology. Reflecting the younger skew of PC users in China & India, Communication and Entertainment are key PC tasks, with higher usage of music via online/ streaming, gaming, and video chat via webcam. Higher concentration in emerging markets, particularly India and China. Skew heavily male, somewhat younger, more affluent in emerging mkts; Female and older in mature mkts. Somewhat likely to pay extra for top-of-the-line features and somewhat interested in latest/greatest technology Higher NB purchase intent. Strong interest in eco-friendly PC. While price is low in importance, next PC more likely to be in the low-end price range. Potentially influenced by wide availability of low price options. More likely to play games, particularly MMOG. Given EM presence, much more likely to purchase next PC from local PC market or digital plaza. PC SELECTION CRITERIA Wide variety of criteria, with emphasis on reassurance – durability, service/support, security, PC brand, warranty. Relatively low emphasis on price, driven partly by wide availability of low-price options, as well as reluctance to buy something too cheap/low quality. AGE BRACKETS HOUSEHOLD EMPLOYMENT Lower Income: 19% Mid/High Income:39% Affluent Income: 28% Children <19:39% Male/Female: 66% / 34% 18-24 45+ 29% 36% 23% 13% 25-34 35-44 Mean age: 37.6 years HP Restricted

Late Mainstream (5 of 8) WW 17% PC ACTIVITIES TYPE(S) OF INTERNET ACCESS % Daily/Weekly NON-WORK PC HOURS PER WEEK Mean: 20 hours TYPE(S) OF GAMES PLAYED Q32/33. The following is a list of activities you may or may not do, using a computer. How often do you yourself use a non-work computer for each of the following purposes, if at all? Q35. Which of the following best describes the type(s) of home Internet connection your household has, if any? Q37. About how many hours a week do you, yourself, use a computer for non-work purposes? Q34. Which of the following types of computer games, if any, do you play, by yourself or with others in your home? HP Restricted

Early Mainstream (1 of 8) 12% of WW PC market SEGMENT OVERVIEW KEY DIFFERENTIATORS The Early Mainstream segment is comfortable with PCs but doesn’t want or need the latest technology. Below average reliance on their PC, with primary uses email and web surfing; secondary uses are IM/Chat, social networking, listening to music via online/streaming radio. Unlikely to pay extra for top-of-the-line features, their next PC will be in the low- to mid-price range. They have proficient PC skills, but turn to others for assistance/advice. Strong presence in both Mature and Emerging Markets. Male skew, but average age and income levels. Lower agreement that PC is a tool, that they couldn’t get by without a PC, and that anywhere/anytime access to their PC is critical. Of those who play games, word/puzzle/card/arcade are most popular. Less comfortable with purchasing products/services over the Internet, yet do not feel compelled to touch/feel the product prior to purchase. Less likely to turn to editorial reviews for PC information. Less concerned about the environment. PC SELECTION CRITERIA performance/speed is most important, followed by price and RAM. Tertiary criteria are Windows compatibility, hard drive capacity, and durability. AGE BRACKETS HOUSEHOLD EMPLOYMENT Lower Income: 28% Mid/High Income:38% Affluent Income: 18% Children <19:39% Male/Female: 60% / 40% 18-24 23% 37% 45+ 23% 25-34 18% 35-44 Mean age: 39.2 years HP Restricted

Early Mainstream (5 of 8) WW 12% PC ACTIVITIES TYPE(S) OF INTERNET ACCESS % Daily/Weekly NON-WORK PC HOURS PER WEEK Mean: 21 hours TYPE(S) OF GAMES PLAYED Q32/33. The following is a list of activities you may or may not do, using a computer. How often do you yourself use a non-work computer for each of the following purposes, if at all? Q35. Which of the following best describes the type(s) of home Internet connection your household has, if any? Q37. About how many hours a week do you, yourself, use a computer for non-work purposes? Q34. Which of the following types of computer games, if any, do you play, by yourself or with others in your home? HP Restricted

Practical Enthusiast (1 of 8) 19% of WW PC market SEGMENT OVERVIEW KEY DIFFERENTIATORS Slightly higher proportions in Mature markets, with lowest incidence in India and China. Older, low-mid income, slightly more female. Versus other segments, higher proportion are retired. More likely to currently use a Desktop (DT) most often. More likely than other segments to plan to purchase a Notebook (NB) next. With exception of above average usage of word/ puzzle/card/board/arcade games, low use of PC for entertainment. Longer interval between expected PC purchases. While CES is the most likely purchase source, likelihood to purchase at Office Superstores is higher than other segments. Practical Enthusiasts are reliant on their PC, but more for productivity and communication than entertainment. They are proficient with using their PC, but turn to others for assistance/advice. In fact, when purchasing a PC, this segment relies more on store sales reps than other segments. Price is of lower influence at purchase, but due to their more risk-averse nature, they are unlikely to pay extra for top-of-the-line features or to want the latest & greatest technology. PC SELECTION CRITERIA Primary criteria are performance/speed followed by RAM. Tertiary criteria are Windows compatibilityand hard drive capacity. Price is not among key purchase criteria. AGE BRACKETS HOUSEHOLD EMPLOYMENT Lower Income: 35% Mid/High Income:40% Affluent Income: 12% Children <19:33% Male/Female: 42% / 58% 18-24 20% 48% 45+ 25-34 13% 19% 35-44 Mean age: 43.5 years HP Restricted

Practical Enthusiasts (5 of 8) WW 19% PC ACTIVITIES TYPE(S) OF INTERNET ACCESS % Daily/Weekly NON-WORK PC HOURS PER WEEK Mean: 22 hours TYPE(S) OF GAMES PLAYED Q32/33. The following is a list of activities you may or may not do, using a computer. How often do you yourself use a non-work computer for each of the following purposes, if at all? Q35. Which of the following best describes the type(s) of home Internet connection your household has, if any? Q37. About how many hours a week do you, yourself, use a computer for non-work purposes? Q34. Which of the following types of computer games, if any, do you play, by yourself or with others in your home? HP Restricted

Trend Techie (1 of 6) 9% of WW PC market SEGMENT OVERVIEW KEY DIFFERENTIATORS Trend Techies are early adopters of new technology – such as Smart phones and notebook PCs – who express high interest in new products/concepts. They are heavily focused on entertainment, including gaming. Always on the lookout for the latest & greatest technology, they are willing to pay more for top-of-the line features. They have strong PC skills, but are largely reliant on their others for technical assistance. Skew male, younger. More likely to currently use NB, Smart phone, and strong intent to purchase an iPhone or Smart phone. More likely to use PC for online video and music streaming. More likely to be playing strategy/simulation, adventure/shooter/fighting, MMOG and sports/racing/flying games. More likely that next PC will be in high end price range. Higher desire to touch/feel PC before purchase. Strong belief in protecting the environment, and rate importance of an eco-friendly PC high. PC SELECTION CRITERIA Performance / speed is the most important criterion, with RAM second. All other criteria are much less important, particularly Price and Windows compatibility (versus other segments). AGE BRACKETS HOUSEHOLD EMPLOYMENT Lower Income: 29% Mid/High Income:37% Affluent Income: 19% Children <19:41% Male/Female: 69% / 31% 18-24 45+ 32% 30% 22% 16% 25-34 35-44 Mean age: 36.7 years HP Restricted

Trend Techie (5 of 6) 9% WW PC ACTIVITIES TYPE(S) OF INTERNET ACCESS % Daily/Weekly NON-WORK PC HOURS PER WEEK Mean: 23 hours TYPE(S) OF GAMES PLAYED Q32/33. The following is a list of activities you may or may not do, using a computer. How often do you yourself use a non-work computer for each of the following purposes, if at all? Q35. Which of the following best describes the type(s) of home Internet connection your household has, if any? Q37. About how many hours a week do you, yourself, use a computer for non-work purposes? Q34. Which of the following types of computer games, if any, do you play, by yourself or with others in your home? HP Restricted

Brand Techie (1 of 6) 13% of WW PC market SEGMENT OVERVIEW KEY DIFFERENTIATORS Younger, slight male skew. More likely to use a Notebook (NB), Smart phone, and iPhone. Current Desktop (DT) usage lower than other segments. Strong intent to purchase an iPhone or Smart phone. More likely to own multiple PCs. Above average interest in new product concepts. Above average number of non-work PC hours. Using PC more for Internet-reliant activities. Also higher usage of the PC for gaming, photos and productivity. Strong indication that next PC will be in the high-end price range. Above average interest in Apple and Sony. Brand Techies are interested in technology, but are also concerned with how well tech products portray their image. They do not feel all brands are the same, and in fact see brand as a reflection of self. They think how a PC looks is important, and as a result want to be able to touch/feel a product before purchase. They have strong PC skills, with many being able to resolve issues on their own. They are very reliant on their PC, and are likely to pay extra for top features, want latest/greatest technology. SEGMENT DEFINITION Speed/performance is most important criterion, with price and RAM in next tier. All other criteria are at much lower levels. Strongly agree that brand chosen is a reflection of them and disagree that all PC brands are the same. AGE BRACKETS HOUSEHOLD EMPLOYMENT Lower Income: 28% Mid/High Income:42% Affluent Income: 19% Children <19:40% Male/Female: 55% / 45% 18-24 45+ 27% 30% 18% 25% 35-44 25-34 Mean age: 35.6 years HP Restricted

Brand Techie (5 of 6) 13% WW PC ACTIVITIES TYPE(S) OF INTERNET ACCESS % Daily/Weekly NON-WORK PC HOURS PER WEEK Mean: 25 hours TYPE(S) OF GAMES PLAYED Q32/33. The following is a list of activities you may or may not do, using a computer. How often do you yourself use a non-work computer for each of the following purposes, if at all? Q35. Which of the following best describes the type(s) of home Internet connection your household has, if any? Q37. About how many hours a week do you, yourself, use a computer for non-work purposes? Q34. Which of the following types of computer games, if any, do you play, by yourself or with others in your home? HP Restricted

WW Segment Comparisons (18 of 19) ade acdeg ade ade a e ce ad ad abcdeg ad ad a a a a a a a acd ad acdef ad ad ade ad ad a a adef adef ad ade ad ad a ade acdeg adeg a Q.32/33 How often do you yourself use a computer for each of the following purposes, if at all? HP Restricted

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Brand Segments