Futurist Ray Kurzweil dazzled the crowd at the recent Game Developers Conference with his prediction that technological progress is accelerating what that will mean in the next couple of decades.

“Games are the cutting edge,” he said, noting the fast progress from crude virtual reality a decade ago to the upcoming virtual worlds of the future where, he said, we will see animations on the inside of our sunglasses and will need reminders to distinguish reality from fantasy.

Based on the progress associated with Moore’s Law and nanotech, Kurzweil predicts that advances in electronics will continue, with shrinkage/performance advancing 100,000-fold in the next 25 years. That, of course, means that graphics and everything associated with gaming will become far better. It means that we’ll be putting little electronic devices inside our blood streams, extending our life spans, and thereby (wink) necessitating longer video games.

The Will Wright Franchise

If I thought Kurzweil was flying way over my head, I was in for more of the same with Will Wright, a college dropout with a knack for creating billion-dollar franchise games. Wright’s last series, The Sims, has sold 98 million units in the past decade and we’re all awaiting the Sept. 7 launch of Wright’s next game, Spore.

The eclectic Wright took the stage at Electronic Arts’ party at the Mezzanine nightclub. He reads like a demon, admitting that he’s read the book “Zen and the Art of Motorcycle Maintenance” more than ten times. In his talk, he sought to explain the concept of a franchise, which is what EA wants to make out of Spore.

Wright said that the most successful franchises, built around stories such as James Bond or Disneyland, can be broken down into their archetypal elements. They take root in your imagination, you carry them far beyond your enjoyment of the actual entertainment. That is, you walk away from a game but keep thinking about it. You turn it into your own, devising stories like what would happen if you sent James Bond after Osama Bin Laden.

“The best stories are inherently deconstructible and read from the largest variety of play,” he said. “And the best play experiences that I have seen are inherently generative and lead to the widest variety of story.”

Wright wants to allow players to take the tools in Spore and construct their own universes, with the resulting social commentary shedding light on both the real world and fantasy worlds.

I saw a demo of Spore at the EA analyst meeting the week before. I’m impressed with the game because there are so many big ideas in it. Typically, a game is lucky to have just one big idea. With The Sims, published in 1997, EA/Maxis encouraged fans to share their stories with the tools inside the game. But it wasn’t approached as a franchise. In fact, fellow Sims producer Lucy Bradshaw, recalled that some folks didn’t even think an expansion pack was necessary.

With Spore, EA is approaching game as a franchise from the get go, Wright said. The basic idea involves the Powers of Ten, a photographic concept where you view things from the smallest to the largest scale. With the game, you can create microbes and see how they fare against others in a survival of the fittest. You can create creatures and see whether they can take over the planet. And you can create an intergalactic race that can conquer the entire galaxy. It is a very ambitious game, originally slated to debut two years ago.

Another big idea that EA put into Spore is that the editor is simple and more extensive than what you create with games like The Sims. Every creature you create is likely to be unique. And EA will release that creature editor ahead of the game’s launch so players can become excited about the game ahead of time, creating creatures that they can share with each other over social networks.

Wright calls this a “massively single-player game” because those creatures are uploaded into the Spore servers and then downloaded into each and every single-player version of Spore. You can then set your creature loose in the world and see how it competes against other player-designed creatures. The big cost savings for EA is that it doesn’t have to use its artists to create an army of creatures for the game. Another big idea: You can record videos of your creature inside the game and, from inside the game, upload the videos directly to YouTube. Already, this is a big deal, as evidenced by Microsoft’s claim that 100,000 Halo 3 Saved Game films are uploaded to YouTube every day.

Another cool idea is that you will be able to take your own unique creature creation and order a plastic 3-D model of it. EA is working with a company that will ship you a model for a fee. Ed Fries, the former head of Microsoft Game Studios, liked this idea so much that he started a similar business making World of Warcraft characters based on unique player designs. His FigurePrints business started taking orders in December and quickly got a backlog over 100,000. He is selling them at $100 a piece and had an initial capacity of just 1,000 a month. When Spore starts, you can bet they will line up a lot of capacity.

John Riccitiello, CEO of EA, said with some pride that he decided to delay Spore so that they could refine the game and get it right as a franchise. Among the changes is that you can start the game at any one of the major levels: microbial, planetary, or galaxy-wide.

Virtual Worlds Everywhere

Virtual worlds were a big topic at the GDC, starting from the Worlds in Motion conference. Thanks to successes ranging from Second Life to World of Warcraft, the debate is less about whether they are viable and more about which business model really delivers.

More brands are piling into the virtual opportunity. LEGO is hard at work on LEGO Universe, a 3-D world brick-building world for 8 to 12-year olds. At Lego.com, the company already has 12 million visitors a month playing its simple games. But this new world will have missions, stories, and regions such as LEGO Castle. Given what Wright talked about, it is interesting to see LEGO revive its brand in recent years, creating everything from the LEGO Mindstorms robots to its LEGO factory concept, where you can design something online that LEGO will make just for you.

Another cool virtual world I saw was Blue Mars, created by Honolulu-based Avatar Reality and headed by Kaz Hashimoto, former tech vice president at Electronic Arts. This world uses the insane Crysis-based graphics engine from Crytek. Hashimoto showed me a waterfall that consisted of 25,000 on-screen particles. You could see the water cascading into a canyon at 24 frames per second with a fine mist rising into the vegetation. I could see the individual blades of grass blowing in the wind.

Avatar Reality is inviting third-party developers to create content for its world. Hashimoto expects developers will be able to set up their own businesses, like maybe a hang-gliding business atop the waterfall and in other parts of the initial four-kilometer by four-kilometer world. Hashimoto says 10,000 people should fit in a single server shard.

This is going to be a lush, terraformed Mars that will require a 3-gigahertz processor and an Nvidia 8800 GTX graphics card or better. That’s a $900 computer today, a requirement that shrinks the size of the audience, but delivers a better experience. The subscription game won’t launch in beta until the end of this year. Avatar Reality has 20 employees, including nine former Square Enix (formerly SquareSoft) employees, some of whom worked on the ill-fated Final Fantasy movie. But the company has subcontracted its art work to a Chinese developer with 180 employees.

Artists will be Artists

I was struck by the comments of BioShock game designer Ken Levine of Take-Two Interactive’s Irrational Games studio. He said that he finally felt like his storyline for his game came together – just eight months before the game shipped. That’s not ideal, he admitted. And it’s no wonder that the game shipped late.

But Levine has the last laugh, as BioShock has sold more than 2 million copies, generating $120 million at retail. He talked like a novelist later, when he argued on another panel that the best storylines in games are those that force gamers to answer difficult choices and questions, based on their own conscience.

More than an Invisible Hand

I enjoyed a lecture entitled Virtual Greenspans by Eyjolfur Gudmundson, an economist at CCP and the economist for the virtual world Eve Online, a science-fiction massively multiplayer online game with 225,000 subscribers who pay a monthly fee.

He answered the question, “Why do you need an economist in a virtual world?” It’s simple. Anytime you have a community, you will have trading. With trading, you have an economy. If you have scarce resources, even if they are virtual, people will put a value on them. That trading, he said, will make or break the popularity of the game.

For reading on this topic, he recommended “Designing Virtual Worlds” by Richard Bartle and “Synthetic Worlds” by Edward Castronova.

In Eve Online, different factions stake out their claims among the planets in a galaxy and then fight to control regions where they can get the scarce resources needed to wage war and build civilizations.

Part of the fun, Gudmundson said, is trying to become the Bill Gates of the galaxy. You can watch the in-game corporations form and how they create their own alliances. But for the companies running the worlds, the issues can get sticky if you don’t monitor the interaction of currency between the real world and the virtual world. (LiveGamer, as we’ve covered before on VentureBeat, has set up a business to create secondary markets so that players can legally auction off their in-game properties with the sanction of world operators).

The decisions that Eve Online creators face have to do with how much of each natural resource they should create inside a world, and how much control they should transfer to the players to create value-added goods that require resources.

There are thousands of goods you can buy or sell inside Eve Online. The player-created objects, such as a 1200 mm artillery cannon, account for 90 percent of the transactions. Big events can be staged as the Eve Online producers create artificial shortages of resources. But the producers have to be careful not to anger players by wiping out the results of players’ labor.

Gudmundson said he is convinced that virtual worlds will increase the total economic value in the real world. The common theme, as it is throughout video games, is that the lines between the real world and fantasy worlds are blurring.

Outing the Startups

No GDC is fun without its share of new companies, and this year a number of startups came out of hiding. Rmbr is making a casual game out of posting photos. TwoFish Elements created a plug-and-play system that companies can use to create in-game economies inside their own virtual worlds. Another interesting startup was the casual online game site www.iminlikewithyou.com. And you may have read about Sunnyvale, Calif.-based Raptr, which was unveiled at the event and is CEO Dennis Fong’s latest startup after Xfire. Fong, by the way, was once the world’s best Doom player and a former professional gamer.

He is a baby-faced 30-year-old, but he is already a serial entrepreneur. I told him I was at level 30 in Call of Duty 4: Modern Warfare multiplayer. But he told me he hadn’t cracked that game open yet. Imagine that. The Doom king hasn’t played the world’s most popular shooter. How times change.

He walked me through a presentation where he talked about how much of pain it is to play games. Recall a recent Saturday night when you finally got some free time, only to find you have to download a huge patch to play a multiplayer combat game? Raptr monitors all of the patches for your games and then automates the downloading and installation of them. It also has a social networking component, where it automatically uploads information about your gaming achievements, including your Xbox Live gamer achievements, to a social network for gamers. That’s good because I ain’t typing all that.

At the very end of the GDC, I ran into a line of hundreds of people waiting to see a presentation on the making of Portal, the title that won the Game Developers Choice Award. That was understandable. A bunch of video game students created the game, along with Valve Software.

The clever thing about Portal is that you can shoot a hole into one wall, shoot another hole in a different wall, walk into the first one and emerge from the other. The making of this game is inspiring since it has such humble origins and it still managed to beat out big-budget titles such as BioShock and Call of Duty 4: Modern Warfare.

Now if these people in that line were all game developers, it is quite possible that in about a year from now we’re going to see a bunch of Portal clones.