Entries from January 2008 ↓

The reason that people buy game consoles is to play games (except for the Sony PSP). So it is worth looking at the upcoming games on all three home consoles to see what bearing they will have on the success of these machines.

The Nintendo Wii is in an immensely powerful position with three highly polished AAA titles, Wii Fit, Super Smash Bros Brawl and Mario Kart. Of these Wii Fit will be the big system seller. Whole demographics who previously wouldn’t have bought a console will buy one just for this game. People are obsessed with their bodies so this could become a bit of a cult product. SSBB and MK are different, these are classical super quality Nintendo games. They will sell in massive quantities and really enhance the attach rate. However they are not, on their own, system sellers. However when added to all the other AAA Wiii games they could bring a lot of people to making a buying decision. What is for certain is that there are good reasons for Wiis not to be relegated to the toy cupboard just yet.

The downside of the success of the Wii is that it has attracted huge amounts of hastily cobbled together shovelware which, quite frankly, does nobody any good. Games are expensive so it is a very bad experience when the customer has invested in what they think will be a great game only to find that it is money down the grid. The press should do more to expose this sort of rubbish. To create successful Wii games it is a good idea to follow these 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.

The Sony Playstation 3 has had a lacklustre start to it’s life. Sony’s management and marketing people seem to have lost some of the magic ingredient that worked so well for them in the past, there were no system seller games and the box was too expensive. Sony are trying to put all of this behind them so we have some great AAA games coming up. Metal Gear Solid 4 is the big exclusive, one of the biggest properties in gaming. LittleBigPlanet sees them move into Nintendo territory with a highly polished platform game and Killzone 2 is getting rave previews and is eagerly anticipated. There are more top tiles such as Wipeout HD . But biggest of all will be GTA IV. The Grand Theft Auto franchise has been very good to Sony but these days they have to share it with Microsoft and the Xbox 360.

Talking of Microsoft, they have just been through a great period of AAA releases. Even if a lot of them were shooters with little to differentiate one title from the next. The immediate AAA exclusive future is looking a lot lighter than it is for the other two platforms. Ninja Gaiden is a great hard core gamer’s game and Banjo-Kazooie 3, Too Human and Alan Wake are all good games. But nothing to really compete with the other two platforms. Halo 3 is so big that it will continue to deliver and GTA IV will be the biggest gaming event of the year. It really does look as if Microsoft have reached the point in the cycle where a big system price drop is what is needed for them.

This has to be the biggest event in this generation of consoles. The point when 130 million (150 million if you include Wii) owners of old generation consoles decide to walk into a shop and buy an HD console. A Microsoft Xbox 360 or a Sony PS3. There seem to be three factors that, coming together, will decide when this event happens.

The first is the gaming. There are still far more AAA titles on the old consoles than there is on the new, HD platforms. Microsoft have released a lot of AAA games for the 360 but it has not been enough to tip the balance. Sony are way behind and there is still no compelling reason to buy a PS3 for the games. All that changes in 2008 with a whole raft of Sony AAA system seller releases. A lot of commentators think that GTA IV will tip the whole market on it’s own. That the power of this franchise is so great as to make the HD consoles become compelling purchases overnight. Maybe they are right, but Halo 3 didn’t have this power for the 360.

The second factor is public awareness of what HD is. Currently most people seem to be buying HD LCD and plasma televisions for their bigger size and slim form factor. Not for the HD capabilities. This is largely down to the scarcity of broadcast and recorded HD content. The format war between HD-DVD and BluRay is only confusing matters. As more and more HD content becomes available people will gradually switch over to it. Then they will no longer be prepared to watch non HD content. It will be just like the transition from black and white television to colour television. And if they only watch HD broadcast and recorded content then they will only be happy with HD game content. Watching four times as many pixels on screen makes a big difference in a game.

The third factor is price, as it has been for every previous generation of console. The early adopters are willing to pay a premium for the kudos of their position. But the real meat of a console’s sales curve only comes with radical price reductions. Both of the HD consoles are still too expensive to have reached the mass consumer, casual purchase price point. But they will get there and they may well get there this year. Both Sony and Microsoft have been working furiously hard behind the scenes to reduce the manufacturing costs of their consoles. When you are making tens of millions of something every fraction of a penny counts. They have been girding their loins for a price war and a price war is what we are going to get.

So as you can see these three factors will inevitably come together to create a massive demand for the HD consoles. But how sudden will it be, will 150 million people walk into the stores on the same day? Probably not, but it will be one event, probably a price drop, that is the trigger. So there will be an overnight surge in demand. The manufacturers can control this by rolling the price cut out, country by country, over a few months. But it will still be pretty spectacular.

Then we have to ask if the tipping point will come at the same moment for both manufacturers. Possibly if it comes at a certain point in the calendar, like say Christmas. But possibly not if Microsoft take advantage of their lower manufacturing costs and early adopter benefits. If they brought out a $199 Halo 3 bundle for the 360 in the same week that GTA IV is released it would be the biggest sales week in the whole history of gaming.

So when will it happen? Probably this year. Definitely by the end of next year. And how big will it be? When the market tips each HD console will start outselling the Wii by a significant margin. And over lifetime they will possibly each go on to sell a multiple of what the Wii sells. The 360 and PS3 will go on to become the biggest selling consoles ever, until the next generation. And who will win? Microsoft if they capitalise on their early adopter and low manufacturing advantages, the exclusive content for GTA IV is a marketing masterstroke that could win the generation for them. Sony if they can rediscover their core strengths and bring them to the marketplace.

Funny and incisive video.

Regular readers here will be well aware that in global IP publishing there are enormous economies of scale. These infer a great competitive advantage on big publishers. This is why the music and film industry have each consolidated down to a handful of companies. (Except for niche players). Video game publishing is, inevitably, going the same way.

SCi was a very small but long established British publisher that had been bumbling along for quite a long time. They never impressed or excited, they just got on with the job of surviving. Then EIDOS, a much bigger British publisher got into trouble. And some bright spark came up with the idea of reversing SCi into EIDOS with the SCi management taking charge. The thing is that they has failed to impress for many years in the smaller publisher so how were they going to suddenly up the ante of their management performance in a much larger company? The simple answer was that they didn’t.

So we had the situation where SCi was the wrong size to be able to compete in global publishing and it didn’t have the most dynamic management. No wonder the share price went down by 85% in 12 months. In the same 12 months that virtually every other company in the industry was booming.

The only possible future for SCi is as a takeover target. It really has no other possible future. They have a heritage of a big catalogue of IP so they are worth buying by someone who has the financial and management resources to capitalise on it. Someone like Electronic Arts or Take Two for instance. Remember that these firms are desperate to get bigger so that they don’t get swallowed by the big global media corporations themselves. Of course there are other things that could happen to SCi, but they would just be delaying the inevitable.

The senior management of SCi that just resigned had tried to sell the company a number of times to a number of parties. But had failed every time. So it is little wonder that the City brought big pressure to give the job to people more capable of doing it.

The City has a long and unhappy history with the video game industry. Company after company has gone public and then got themselves into trouble with investors losing their money. Argonaut and Rage are prime examples. So this current episode will further their disenchantment, which does not auger well for Codemasters (even smaller than SCI) who hope to do an IPO this year.

Overall it is a dismal track record for British game publishing. A record that is solely down to the level of management ability of those in charge.

The second industry organisation in the UK is TIGA, which stands for Independent Games Developers Trade Association. Once again it isn’t what it says it is with publishers, non independent developers and others in it’s 157 strong membership. TIGA lobby government just as ELSPA do on pretty much the same issues. This is needless duplication. TIGA are currently advertising for a new chief executive at £50-60K. It would be so tempting to take this job and then immediately amalgamate with ELSPA.

The thing is that Britain really need two industry organisations. But not the two that it has.

The first need is for an all encompassing British trade body. One that includes retail, publishing, the press, development, education and all the other sectors that make up our industry. Each sector would have it’s own sub group within the organisation to look after their special interests. The total organisation would be big and would talk for a significant chunk of the economy. This would give it real clout in all it’s dealings. So it would be far better able to do a good job and represent the industry properly. It would also be able to afford the staff to get the job done.

The second need is for a Games Council, just like there is a Film Council and a Music Council. It’s job would be to develop the industry strategically from a public interest point of view. So it would be funded by government. Obviously the chances of achieving this with the level of ignorance displayed by the current UK government is precisely zero.

Obviously this isn’t going to happen. The most important function of any organisation is to secure it’s own survival, this comes before doing their job properly. So ELSPA and TIGA are hardly likely to vote themselves out of existence. I was a member of the Games Industry Forum which meets under the aegis of the former DTI in London. When I put forwards the Games Council idea at a Forum meeting it was talked down by the ELSPA representative. He didn’t want anything that could threaten his own orginisation’s pre-eminence, no matter how good it may be for the industry.

• PS3 production cost halved with the 40GB model. It is these reductions on the Microsoft Xbox 360 as well as on the Sony PS3 that will be essential for the price war between these two consoles this year. My guess is that Microsoft will cut most to compensate for the PS3s AAA system sellers that are due out this year.
• The British Prime Minister, Gordon Brown, is an idiot. Trying to blame knife crime on computer games is patently crass and inane. Far better to blame it on failed Government policies, because that is a far more likely cause. And who is in charge of the Government? Before the Americans reading this get too smug remember that Hilary Clinton is anti game.
• Games bucks retail downturn trend over Christmas. This is important. It shows that video gaming will be less effected by the coming economic downturn than other consumer industries. Remember that Hollywood had some of it’s best times during the great recession. People give up their entertainment last.
• PC Piracy rears it’s ugly head yet again. Piracy is the greatest threat to the video game industry and no platform and no publisher is immune. Just because it isn’t destroying your business today doesn’t mean that it won’t be tomorrow. If people can get something for free they will, it doesn’t matter if they go to church and/or are rich. It doesn’t even matter if they actually work in the game industry and depend on it for a living. They all still steal. Because what they are stealing isn’t physical they don’t even think of it as theft. This has destroyed the market for boxed PC games and it could just as easily destroy the market for Wii, DS, 360 or PS3 games.
• Porn stars love video games. Of course they do, they are human beings who like to play now and again like all of us. This just looks like a pretext for Game Daily to post 15 photographs of porn stars. Presumably this shows that Time Warner (who own Game Daily) have a far broader view of video gaming than just Lego games.
• Surfer Girl is a very indiscreet anonymous industry insider. She reveals all sorts of industry secrets in her blog. You would wonder where she gets so much inside information on so many companies. And obviously what she is revealing is causing much consternation among management. Very interesting stuff.
• Super Smash Bros. Brawl is raising a big head of steam including 40/40 (very rare) from Famitsu. Looks like Nintendo have done it again with another polished AAA classic. Pity about the USA release delay, though.
• Facebook grows as a gaming platform with SuperPoke on 684,000 active daily users and Scrabulous on 594,000. Non game applications still lead, though, with FunWall on nearly four million active daily users!! For mainstream publishers this must be worth using as a viral to support boxed product.

It seems that one of the defining attributes of the current generation of consoles will be the very large number of homes that have two of them. Mainly because the Wii does a completely different job compared to the HD consoles.

The Nintendo Wii is very much family fun. So it sits in the lounge where the whole family can use it. The main use it will get will be for things that the other consoles just don’t do. Wii Sports is the prime example of this family fun and Wii Fit will be similarly successful. People will also use it to play the great Nintendo first party games such as Galaxy, which just aren’t available on anything else. Third party developers are going to have a hard time of it no matter how big the installed base, unless they can learn how to produce Nintendo like products.

The Microsoft 360 and the Sony PS3 are traditional consoles that the whole industry understands. A single person or a couple will have it in their lounge, but in a family it will be in the main users bedroom. The big games will be the Halos, Metal Gear Solids, GTAs etc that did well in the previous generations with a smattering of new IP such as Assassin’s Creed. Third party developers will do very well and make a lot of money out of these games on these consoles. 

This huge dichotomy between the Wii and the HD consoles has come about because the manufacturers have followed different strategic routes. Nintendo have concentrated on their gesture interface and the new fun possibilities that it brings. (Though remember that Sony could have done the same with Eyetoy and they messed up.) Whilst the HD consoles mainly offer more of the same features that their previous generations did.

Hence the rapid uptake of Wii. It offers something completely new whilst the HD consoles are just evolutionary. This makes the HD consoles slow burners. People will only buy them when they are forced to by the weight of must have games. 2008 looks like being the year when that weight will reach critical mass. I can see a situation where Sony and Microsoft are unable to meet demand as 130 million previous generation owners try to upgrade. Nearly simultaneously.

The fun will come with the next generation of consoles. Nintendo will obviously be forced to go HD, so they will become more like Sony and Microsoft. These two, meanwhile, will have added gesture interfaces and family fun. So they will be more like Nintendo. So we could go back to all three platform holders producing similar machines. And households going back to having just one platform. Or maybe more than one of the same platform networked together.

If this is the case how will people choose which one? Nintendo will have the advantage of their first party titles and the range of compatible peripherals that people already own. But I don’t see this as being the great decider. The biggest differentiation between the three next generation platforms will be their online offerings. Here it will be between Microsoft Xbox Live, which has the momentum, Sony Home which offers (as things currently stand) a far better social networking capability and Nintendo whose Wii Online is still a very lightweight offering. So the key to the future of console gaming is what happens to these online platforms over the next three years.