Entries from November 2007 ↓

I have been caught out a bit with a few things happening, so this is a bonus post!

• Betting on the Christmas number one. Pretty much dominated by EA titles, again. They certainly know how to make profit with Q4 blockbusters. In fact it has become a self fulfilling prophecy, everyone expects it, so it happens.
• Family timer on Xbox 360. This is a brilliant form of parental control. We know that game playing is very good for kids but there are other things in life. This system will stop a lot of arguing. Another plus for 360 sales.
• EA Q3 revenue breakdown. Very significant figures. They are getting their Wii act together, but the big news is how dismal PS3 is compared to Xbox 360. Also they are reaping the benefits of sticking with PS2.
  Xbox 360 – $218 million
  PlayStation 2 – $73 million
  Nintendo Wii – $59 million
  Nintendo DS – $47 million
  PlayStation Portable – $21 million
  PlayStation 3 – $17 million
• Kaz Hirai not happy with Sony Home. The sands of time are slipping through Sony’s fingers here. Added to the Metal Gear Solid delay they are just falling behind. Xbox Live was a massive investment for Microsoft, one that is paying off. Strategically the online environment is more important than the console in your house.
• Super Mario Galaxy number one in Japan. And soon to be number one everywhere else. The Wii really needed a good solid title to keep their audience happy. Too many publishers are putting rubbishy shovelware on Wii and wondering why it doesn’t sell. Here are some Wii development rules:
  1) Don’t do shovelware. You are just damaging your brand(s).
  2) Write Wii specific titles. Don’t port. You have to respect the interface difference.
  3) Understand that most Wiis live in the lounge. And most other consoles live in the bedroom.
  4) Polish, lots. Then polish some more.
  5) Realise that you have to provide entertainment for the population at large. FPS titles are not a good idea.
  6) You need to market completely differently. PR in women’s magazines will work a lot better than adverts in game magazines.
  7) Talk to your wife/girlfriend. They understand the Wii better than you do.
• Warner brothers flex their muscles. This is not some one off, this is the big global media companies moving concertedly into games. They have no option. Gaming will be bigger than both film and television, if they aren’t in they will be left behind.
• Target pull Manhunt 2. Not a game that appeals to me, but adults should be free to buy it. Target are just so small minded here, there is vastly more objectionable content sitting in their video department. Gaming still has a long way to go before some people understand it.
• Bungie working on new IP. Just one more step in the battle that Microsoft is winning. AAA exclusives are the main differentiator between platforms, not HDTV or Blu-Ray or anything else. It is the game that matters.

I don’t want this blog to be just a news commentary, but a few significant things all happened at once! Please add any comments you may have.

Deutsche Bank analyst Jeetil Patel has downgraded the stock (ERTS) to “Sell” and issued a price target of $45. He says: “We think that the company still appears to be losing share in the video game industry.” and “Our investment thesis on Electronic Arts remains unchanged in that amidst solid growth industrywide, EA’s game quality remains questionable, which in turn could translate into ongoing market share losses and limit operating margin expansion to historical levels. In our opinion, the lack of major outperformance on unit volumes among a majority of EA’s titles, especially with a growing fixed R&D expense base, represents the single most important hurdle for the company.”

And the news stories are not good. Headlines such as EA Chicago closed , EA-Chertsey-facility-to-close? , Job losses on the way at EA  and EA announce Q2 losses do not help matters at all. So let’s look at what the problems are:

• EA has built itself on a formulaic dependency on other people’s IP. Harry Potter, Madden, Lord of the Rings. There is no true value to the company. The thing about this is that EA management know it better than we do and they are doing something about it, hence the recent purchase of Pandemic and Bioware.
• EA do not get the best value out of acquisitions. Perhaps historically they tried to absorb other companies. Now they seem to have a far more flexible mix and match policy, helping acquisitions only in the areas that they need help.
• The market has changed very rapidly. From adolescent boys playing shoot-em ups in their bedroom to the whole family being entertained in the lounge. And with a two year development time it is difficult to adapt. This has caught the whole industry on the hop, not just EA. But EA have the financial resources and excellent management to make the most of the new market opportunities.
• The new generation installed base profile is radically different to what EA expected. Yes the Wii has massively outperformed, but nobody expected this, even Nintendo. And the PS3 is very badly under-performing. This is Sony’s fault 100% for losing sight of their customers. And the analysts didn’t see it coming. This is bad news. Luckily EA support so many platforms now that they can weather through this.

We have to balance this with what EA has going for them:

• Excellent management who have a great record of making money and making the difficult decisions when they need to. This is important in an industry with much shoddy management.
• Size. There are huge economies of scale in global game publishing. Hence the drive for industry consolidation. The threats to EA here are the big global media companies. Rupert Murdoch could spoil their day. And online distribution which would give everyone a level playing-field.
• A huge catalogue of releases across the widest possible range of platforms. Nobody else comes anywhere near. This is a steamroller in the market.

Personally I think that John Riccitiello is the best there is in the industry. Erudite, decisive and contemplative. So I see no current threat to the EA crown. And to me EA are a buy. This industry is expanding massively and EA are the undisputed leader.

So, do you have any comments to add to this?

Roger Ehrenberg has been an Investment Banker and Managing Director at Citibank and Managing Director and Co-head of Deutsche Bank’s Global Strategic Equity Transactions Group, he writes the influential blog Information Arbitrage. And he likes this site!

Some of the flattery is enough to make even me blush. He says “I discovered this gaming blogger Bruce – he’s really smart, cerebral and experienced. But most importantly, it seems that he and I are on the same wavelength as it relates to Sony’s PS2 strategy. And he really knows gaming.” and “Bruce is a lucid thinker and a good writer. ”

The Weekend Gamer has written about this site a few times: “The internet is littered with fanboys of every persuasion, doling out their myopic and inane arguments without much thought for intelligent discourse.  It’s because of the fact that you can hardly go anywhere without getting inundated with abusive fans of one console or the next that Bruceongames.com is so appealing to me.  The conversation has, so far in the short life of the site, maintained a high degree of intelligence that is refreshing.” and “One of my absolute favorite sites for gaming has got to be Bruceongames, a blog by Bruce Everiss–a british marketing expert who has worked for over twenty years in the video game business.  His articles are always thought provoking, and so I thought I’d highlight one that I read the other day and thoroughly enjoyed. ”

And The Gamer Gene says: “A pioneer still respected to this day, Bruce Everiss has been there since the beginning. He’s the man responsible for helping both Imagine and Codemasters get off the ground, allowing both to become among the most successful game publishers in the UK.”

We’ve also had good mentions on N4G, 1Up and GameSet Watch amongs many others.

All this is very gratifying indeed and makes all the work worthwhile. Thank you everyone.

This weekly roundup thing is getting easier as I get the hang of it. The trick is to find stories that are worthy of a bit of analysis and which might be of interest to industry professionals. The good thing is that our industry is more fascinating, more successful, more diverse and more dynamic than it has ever been before.

• Harmonix game arrives on iTunes. I have said repeatedly on here that iPod/iPhone is a gaming platform. One with immense potential. And one that is currently under exploited. There is a lot of money to be made here.
• $11.9 million loss for Atari in Q1. It is amazing that Infogrammes/Atari can make such huge losses over such a protracted period. You would wonder where the money is coming from. In a time of publisher consolidation and tighter money they surely have no future. To keep the interventionist French government happy the obvious suitor for their IP must be Ubisoft.
• Google announce phone operating system. As if the phone application development world isn’t already sufficiently fragmented. This is yet another linux adaptation. Google have so many balls in the air and keep adding to them that you must start to wonder about their juggling ability.
• Viral marketing rules tightened up by EU. You can’t pretend to be a customer any more on the internet. More laws to protect people from their own stupidity. Marketeers will just have to be even more devious.
• Microsoft predict long life for 360. They own more of the IP in the box this time so why not string it out as long as possible to make the most money? Obviously when the next machine is released they will keep the 360 going. The two model overlapping generation model has worked so well for Sony that it is well worth copying.
• Satoru Iwata says the console cycle is too inflexible. Commentators are reading this to mean that it will be longer before Nintendo bring out another home console. But it could be read that they will launch sooner, after all the Wii is non HDTV and has far less horsepower than the PS3 and 360, which must ultimately find it out. Nintendo could launch something very special that walks on the competition and still keep the Wii as a $99 toy.
• Wiis sell for premium on ebay. And there is a Wii in stock locator website! This stock shortage will get even tighter in the run up to Christmas and with Wii Fit coming out. The last official Wii production figure was under two million a month but this November Nintendo must be making nearer three million. It is, quite literally, a license to print money and the biggest thing to hit video gaming. Ever.
• Metal Gear Solid slips to Q2 2008. And by this they don’t mean 1st April. More likely 30th June. A huge blow to Sony. This is probably their first real system seller on PS3. A reason, at last, for buying one. This gives Microsoft another six months to build their lead unchallenged.

Sony, quite rightly, are getting a lot of stick on here. So I promise to write a nice article about them next week!

Please use the comments if you want to add to any of the above.

Sony Japan are to start selling a new version of the PS2 (the SCPH-90000) in Japan later this year which will then be rolled out to other markets in the new year. Initially it will be at the same price as the old model. This is pretty much what Sony did with the original playstation.

The reason for this is very simple, despite being 7 years old and with over 120 million sold, the PS2 still has a few years to go (three, maybe four). By re-engineering it to be cheaper to manufacture Sony will make more profit on every unit sold to help support the cash hole that is the PS3. Also it gives them more headroom to sell at lower prices, especially in emerging markets like India and China. And especially to compete with the Nintendo Wii.

The details of the makeover are scant, merely that the power supply is now integrated and that it is lighter (720g). Whilst being functionally the same the component count inside will certainly be down and some of the chips will be smaller. This is achieved with a higher level of integration and possibly 65nm fabrication. As a result it will run cooler so they can get away with incorporating the power supply inside the console casing, which is the identical size to the old model’s. An important consideration will be that without the external PSU they can now ship more units per container.

Periodic re-engineering of the inside of consoles (whilst keeping appearance and usually function the same) like this is standard practice as the manufacturers try to take advantage of advancing technology to reduce manufacturing costs. The original Playstation had a massive reduction in the number of components during it’s ten year lifetime. And both the PS3 and Xbox 360 have just been re-engineered to take advantage of the new 65nm fabrication technology.

It is amazing that so many developers gave up on the PS2 two years ago. Then it had at least 5 years production life left in it as well as that massive installed user base. It is now well known by development staff with lots of proven tools available. So it is very easy to develop for, unlike the PS3. There is a lot of money to be made in the second half of a console lifecycle.

So what do you think of this move by Sony?

Read about this in the services section:

 Bruce Everiss has been involved in games marketing since the dawn of the industry in the 1970s. As one of the industry’s true pioneers, over the last thirty years Bruce has built an unrivalled reputation for innovation and independent thinking; thinking that has enabled him to take two independent publishers to the number one position in their first year of trading.
Bruce, the author of BruceonGames.com, now acts as an ideas generator, sounding board, strategy adviser and consultant to companies looking to make significant improvements in their market share and market presence, in the UK, Europe and across the world.
Bruce is available for both short-term and longer consulting assignments, from one day brainstorming sessions to long-term retained consultancy contracts, including:

• Working with independent games developers to leverage their industry presence.
• Advising mainstream media companies on entering the games market and making the best of existing, non gaming, resources.
• Developing and expanding intellectual properties
• Working with games publishers to ensure their next game reaches its maximum market potential. Or more.

For further information, or to have an informal chat about a possible consulting assignment, please contact Bruce Everiss – in confidence – on 01926 612094 (+44 1926 612094 from outside the UK) or email him at bruce@everiss.com.

If you read a James Bond book you will know that our eponymous hero certainly gets his sex in. This is the case in most literature unless it is written for children. Then there is specific erotic literature which is pretty much non stop sex. Then there is literature with every sort of kink and perversion that you can possibly imagine. All done without any age ratings. It seems to be that sex is what people want to read about.

What works with books is also pretty true of the film industry. Except for the age ratings. Pornography is massively popular and has stars like Jenna Jameson (above) who are internationally famous.

Even the popular music industry seems centred on lyrics that have sex as their main preoccupation. Sometimes very explicitly, which can lead to a parental advisory sticker on the packaging.

Then you come to the game industry and, when it comes to sex, it is a puritanical wasteland. You really would think that babies were delivered by storks. It is patently obvious that this is a ridiculous situation. All the other media are obviously giving the public what the public want. And we aren’t. Yet we have advantages, such as interactivity and connectivity that mean we should be able to do this whole sex thing a lot better than they can.

Part of this is down to our industry’s heritage of entertaining adolescent males. They obviously aren’t interested in sex! It is strange with this audience that you cannot be seen to be giving them what they want. Everybody knows that one of the main consumers of adult magazines is not , in fact, adults.

Another restriction on the development of content is the approval process of the platform holders. This really holds the industry back in many ways by narrowly limiting the sorts of games they will allow. Graphically killing other human beings with a knife is OK. Encountering a ladies hockey team wearing only smiles is not OK. This is very, very silly and fails totally to treat adults as adults. I would much prefer the hockey team encounter.

So do you think we should grow up and give our customers what they want? Or are you happy with a diet of violence and sport?