Entries from December 2007 ↓

So this is it for the year. I am abroad on holiday and normal service will resume on January 3rd 2008. Between now and then I hope that everyone will have a fantastic holiday. At the pace our industry moves we deserve it.

A special thank you to all those who have contributed comments and so enriched the quality of the discussion here. I am sure that this input is appreciated by everyone. Less welcome are the fanboys, spammers and profane children who try and get on here. By personally filtering content I ensure that they now reside in the bottom of the spam bucket.

This blog has been going for a little over four months. So, at an article a day, there is plenty in the archives to read. In this short period we have had some great successes. Two articles have been selected from here to go into MCV, the premier computer games trade newspaper. And two financial websites Seeking Alpha and iStockAnalyst are reprinting my articles for the benefit of the financial community. So if you want a company’s shares to go up or down just ask and I will write the appropriate articles!!!! Also several article directories have asked if they can carry the content. I was invited on to the panel of Never Mind The Polygons, which was a great experience. And also interviewed by CJOB Radio in Winnipeg about the Wii phenomenon.

Regular readers will know that, by a combination of luck and good timing, several predictions that were made on here have come true. Let’s hope the luck holds up next year.

If you like what you read here please tell others about it. Give it a plug on your internal company forum! For it to be worth my while to put the time it takes, on a continuing basis, to keep this blog going, a good audience is essential. Currently approximately 200 people a day visit the site and approximately 100 take the RSS feed. Whilst this is good after such a short time it still falls a long way short of making the effort worthwhile. A bigger audience is essential.

Once again, have a great festive season.

• Sony make ever more ridiculous press announcements. For Sir Howard Stringer to say that PS3 games are “infinitely more fun, demanding and exciting” than Wii games is very worrying. He either hasn’t the faintest idea what he is talking about or he has the mistaken belief that dodgy statements like this carry any credibility.
• Sega put Sonic on iPod. Following on from the Harmonix/Phase announcement and the Hudson announcement. We are getting some good momentum here with iPod as a gaming platform. It should be massive. 
• In Fortune’s 101 Dumbest Moments in Business for 2007 Sony Computer Entertainment feature twice, here and here. The Manchester Cathedral story has already been covered here.
• Sega announce that they will enter the industry consolidation fray. But anyone who reads this blog or any other analysis on the subject knows it will be as the subject of a takeover.
• DS breaks UK hardware sales record for one week. With 212,584 units. Brilliant. A lot of industry people will need to readjust their ideas as to what a gaming platform is and what a game is. About time too.
• Analysts say 2008 to be the year of the PS3. But regular readers know that it carries a few problems:
  1) The PS3 is too expensive to make. They have no room to get into price competition with the 360.
  2) They are a long way behind in the number of AAA exclusives. This is the main reason for buying one console instead of another.
  3) They currently have only half the global installed base of the 360, so games have only half the sales potential.
  4) Xbox Live gives Microsoft a huge competitive advantage. And they are putting a lot of effort into making it even better.
  5) The Wii has cannibalised development resources.
  6) The PS3 has a less powerful GPU than the 360. It is strange that Sony did this.
• E3 returns to the LA Convention Centre in 2008. But in July which gives developers more time to prepare demos for their Q4 releases. And retail/the media less time to plan for the same releases.
• PSP Media Manager now free, as long as you get it from their Japanese website. Nice for consumers for whom the PSP is mainly a media player and for which games are, at best, an afterthought.

There is already an article on here about this. Quite simply I believe that education will be the biggest area of video gaming. By education I don’t mean the dire low budget software that appeared on the BBC computer, whose progeny have been on the periphery of our industry ever since. No, I mean polished, big budget titles that educate whilst they entertain. And not just in school. Educational gaming will work in any area where people need to gain knowledge or skills. Vocational training, the military, self improvement and even PhD level studies and above.

Gaming has a lot of advantages as an educational method. Information can be presented as text, sound or graphically and the student can interact with that information in many creative ways. They also, via the internet, have access to all the world’s knowledge, which they can instantly use for research. Learning can be done in an exploratory, non linear way and in co-operation with other, connected, students. The advantages are immense. This is much closer to the way man evolved to be educated and must result in a far more efficient educational process. At the Natural History Museum in New York there is a diorama on primitive tribes and play is combined with education as the same subject.

Of course gaming is already educating people, almost by accident. Game players have better hand/eye coordination, better problem solving skills and better social skills. In addition military games often contain a huge amount of detailed historic and geographic knowledge. And a grasp of economics can be gained by playing God games and MMORPGs. But all this is a by product of being entertained.

As in many things in this industry, it is Nintendo who are leading where the rest of the industry will follow. Brain Age on DS has become an immense global hit. And it works suprisingly well. They are following it up with Eye Training and Math Play. Both of which will be global best sellers. And if you want to improve your body there is Wii Fit. On the non Nintendo front it was nice to see the announcement of a 17th century MMO based on the works of Shakespeare. It is a pity it is so low budget because this sort of concept is exactly what will work.

One small anecdote here is that the Codemasters military simulation game, Operation Flashpoint, was adopted for use by the US Marines. They use it as a fairly sophisticated combat trainer.

Eventually games will replace teachers as we know them. There will be no need to stand at the front and spout facts. Instead teaching will consist of guiding people into and through interactive worlds. And there will be no need whatsoever for schools as we now know them. Education will happen wherever the student is. This means that, at long last, students in the third world can have the same access to education as students in the first world.

Once the bandwagon starts there will be created an immense range and depth of materials. This will have the biggest impact on education since the invention of the printing press. As a result future generations will be vastly better educated than we are. And they will enjoy that education.

If you look at the relative positions of Sony and Microsoft this is a no brainer.

Sony are losing a billion dollars this year alone in retail price support for the Playstation 3 because it is far more expensive to make than consumers are prepared to pay. To finance this they have sold off other chunks of their business and raised equity capital. The PS3 is also suffering from a lack of AAA exclusive games, so currently there is little motive for a gamer to buy one. This changes during 2008 when the system seller titles start to appear.

Microsoft have first mover advantage in that the Xbox 360 has a lot of AAA exclusives. Hence they have sold twice as many consoles worldwide, thus far, as the PS3 has. However their superiority in exclusives will start to erode during 2008. They have a second advantage in that the 360, whilst technically as capable as the PS3, is relatively economic to manufacture. This is something Microsoft have put a lot of effort into.  So as their AAA exclusives advantage reduces then their ability to use the price mechanism will come further into play. Especially as Microsoft have lots of money in the bank.

Currently Microsoft can easily sell every Xbox 360 they can make, fuelled by the demands of the festive season. However, as we get into Q1 2008 the demand will, naturally, slacken off. This would be the absolutely perfect time for Microsoft to use the price mechanism to stimulate demand. They could put together, say, a Halo 3 package at a price where it was a “must buy” and so move a huge number of units off the shelf. By acting sooner rather than later they pre-empt Sony’s upcoming AAA titles. And by using the price mechanism they know that they are using a tactic that Sony just cannot afford to follow.

This really is a one off moment where Microsoft could put in the knock out blow against Sony and so win this generation of the console war.

Their very interesting article can be found here. Let’s take a look at the 5.

• #5 Consolidation. You have read it countless times on here. In 2008 there will be a lot more of it. The ownership of the gaming industry is changing very quickly. This all comes from the power shift from conventional media such as film, music and television which are in the descendancy to games which are in the ascendancy. The big global media companies have no option but to buy our industry up. It is a matter of survival for them.
• #4 Catering to the Wii audience. Here, once again, 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.
• #3 The Rise of the shooter. Some huge successes: Halo 3, Call of Duty 4, The Orange Box and Mass Effect. All entertainment industries go through fashions, usually sparked by one great product that others then imitate. Shooters are not the game industry’s finest hour and it is inevitable that other genres will come along and have their fashionable time.
• #2 Indies going Major. This is very interesting. Basically it is the democratisation that happens when you take publishers out of the loop. And it is coming about because of the vastly increasing availability of digital distribution mechanisms. As has been said before on here, this could be the way the whole industry goes with publishers as we now know them becoming obsolete.
• #1 Mainstreaming of Handhelds. The DS has become the walkman of our time. Just about everyone could and should have one. And we haven’t even begun to scratch the surface of the potential here. The possibilities are almost infinite. This will be the best selling console in the world this year, next year, and so on until Nintendo replace it. It could bring out a complete revolution in what education is and how it is delivered. The only limitations to what the DS will achieve is our own imaginations. Meanwhile the PSP seems to have found a niche for itself as a media player, with games for it selling less and less. This must infuriate Sony who traditionally take a loss on the console and then make their profit on the games. Which is a pity as Sony, uniquely, are in a position to make the DS killer device.

It is nice that 4 out of the 5 trends are a direct result of the enormous success and phenomenal growth of the industry. Something that looks set to continue for years ahead.

In this article they tell you stuff that you have been reading here for some time.

However they use a very dodgy graph:

They seem to have the 360 and PS3 captions the wrong way around! Seriously there is still no good reason why anyone should buy a PS3. Next year Sony will be releasing some AAA exclusives (MGS4 Q2 and GT5 Q3) that will change this. However by then there will be even more good reasons to buy a 360 instead.

The fundamental problem for Sony (now they have solved the retail price anomaly) is that the development community have switched a lot of resources away from their machine. So, ultimately, it will have a smaller library of games to run on it. So it makes a far less appealing purchase proposition for the end user.

Another problem with that graph is that it shows no seasonality in Wii sales. This just cannot be right.

When I first joined Codemasters in 1985 it was a new company and I was in charge of all marketing. As we were selling budget games for £1.99 each there was not much money to spend on anything. So I had to get the absolute maximum out of every marketing penny. Public relations became the core tool, it is just so cost effective.

The idea was to go for the broadest coverage in mass popular media with stories based on the youth and success of the Darling brothers. But which PR company could be trusted with this great story and my precious budget? Previous experience had told me that these companies vary greatly in what they deliver.

So I hit upon a crafty plan. I rang journalists who covered more mature popular culture industries such as popular music and film. And across a few different media including national daily newspapers, TV and radio. I chatted to all these journalists and asked them which PR companies looked after them well and gave them good stories. Gradually a picture emerged of a very small number of PR companies that delivered. And of these one was head and shoulders above the others. Lynne Franks. Who, famously, later became the real life person that Absolutely Fabulous was based on.

Lynne Franks were incredibly professional, hardworking and slightly zany. They also delivered massive results. Soon David and Richard were in every Sunday newspaper colour supplement with multi page features, they were regulars on weekend kids TV and they had become minor celebrities. I was still doing the specialist press PR myself and this new found fame made doing my job a whole lot easier. The games press love to write about people in the industry who are household names.

So our sales went up. A lot. We ended up with over 27% of the total UK market for computer games. In our first year of trading.

Of course this success led to us being copied. A few other game companies also went to Lynne Franks. Because they had Chinese Walls between their PR teams (from handling several different fashion designers) they were able to handle this with no conflict. But they never achieved such spectacular results as we had because we had a better story and we were first.