Entries from February 2010 ↓

I have written on here about some of the totally execrable, violent films that are out there in the cinemas, available for the public to see. Antichrist and Waz have far, far worse content than any video game. And remember that film violence is far more traumatic because it is imposed on you, at least in games you can take action in response.

Paranormal Activity is one of the most profitable movies ever. It cost just $15,000 to make and has grossed over $100 million. And it is massively disturbing. Specialist horror movie website Bloody Disgusting said the following: “Paranormal Activity is one of the scariest movies of all-time. YOU WILL BE AFFECTED as it’s hard to ignore the imprint it leaves on your psyche. You know it’s fake, and yet, you can’t shake it. Nightmares are guaranteed.“

Now it is being shown in Italy and this is what the Daily Telegraph reports: “Emergency services received dozens of on calls on Saturday from cinema-goers having prolonged panic attacks after watching the film. The most severe case was that of a 14-year-old girl who was brought into hospital “in a state of paralysis”, an emergency services spokesman said.”

So what I want to know is where is Keith Vaz when you want him? How he can have the temerity to criticise a video game yet is not denouncing this film to Parliament is totally beyond me.

Mobile devices such as smartphones, netbooks and now tablets are becoming increasingly important as computing devices and therefore as gaming machines. In just a few short years from now over a billion smartphones will be shipped every year, so there will be far more computing power in the world’s pockets than there will be on the world’s desktops.

At the moment, as we are seeing with the sudden rash of tablets like the iPad, manufacturers are struggling to find the form factor that people will want. Let’s look at what is involved:

• Battery life. This is becoming unimportant as devices become massively more power efficient. ARM processors and OLED displays use a small fraction of the electricity of the technology they are replacing. So any form factor can be easily powered and devices will be “always on”.
• Keyboard. Essential if you want to do much data entry. Currently there are three levels of implementation. Firstly there are near full sized tactile keyboards. These are best but limit size reduction to what we now have with netbooks. Secondly there are micro keyboards like on a Blackberry, or in fold out form on the Nokia N900. These are much slower and more cumbersome to use. Thirdly there are the virtual, touch screen keyboards found on many smartphones and tablets. These have got better as hardware and software have evolved and have the massive advantage of being instantly reconfigurable. However they are still a long way short of a proper mechanical keyboard.
• Screen size. The bigger the better for seeing content, the smaller the better for portability. A left field option is the two screen clamshell, as with the Nintendo DS. Over a certain size of screen the device cannot be used as a phone, people will not hold a tablet sized device to their ear. This is why the current generation of smartphones all have similar sized screens. A way round this is to use a bluetooth earpiece but these are universally recognised as making their users look spectacularly silly. Perhaps fashions will change. It is also interesting that Amazon felt moved to offer the Kindle in a big screen format in addition to their standard size. A sure sign that they don’t know what size is best.
• Clamshell (or fold out keyboard) Vs monolithic (one piece design). Monoliths have the advantage of simplicity and is the way of the iPad and iPhone. However the clamshell has the massive advantage of quickly doubling in size on the journey from your pocket to being used. As we have seen keyboard and display size are critical so having double the space gives clamshells a pretty big advantage.
• Depth. For portability this is nearly as important as width and height. Clamshells currently have the theoretical disadvantage of being twice as thick as monoliths. However we are moving over to OLED displays which are as thick as a piece of paper. So all devices will get a lot thinner. A monolith could be just a few millimetres thick, so a clamshell could eventually be as little as half a centimetre thick (or less!)

It is difficult to predict where we are going here, because fashion will be nearly as important as technology. Common sense says that the market should gravitate into two sorts of devices. Firstly evolutions of the current netbooks, so clamshell devices with usable keyboards. However they will be at least half as thick and a third of the weight (battery size will go down a lot). Secondly evolutions of the current iPhone sized smartphones, but once again clamshell to take advantage of the doubling of space that this affords. With both these devices we could see two screen solutions. The DS could be a very prophetic device.

For very many years Electronic Arts were the biggest game publisher on earth. They have an income of billions every year and they employ thousands of people all around the globe. EA are very important indeed for the video games industry. But they are no longer undisputed number one. The marriage of Vivendi and Activision, fed by the cash cow that is World of Warcraft, with mega hits like Modern Warfare and Guitar Hero and very ably led by Bob Kotick are now probably established at the top of the heap, especially when it comes to profit. (Amazingly they were bankrupt in the early ’90s.)

So again, very unsurprisingly, Electronic Arts have issued more bad financial results. They lost $82 million in the quarter ended 31 December (the best time of year for video games!). Their stock price took another hit. They can’t blame the industry, big global publishers like the aforementioned Activision, and also Ubisoft have done very well indeed. Even Sega have managed to get themselves back into profit. I have written about EA’s problems on here before. Repeatedly.

So what is going wrong?:

• The market for all entertainment IP (including films, television and books) is polarising into blockbusters and niche. Everything else is a potential loss maker. The most successful publishers are those who have geared themselves to the new reality.
• This generation of HD home consoles have awful business models to develop for. Basically making a game costs far, far too much. Several times the cost of games for the previous generation. The root of this is that HD games need a massive amount of content which is still largely hand crafted. The next generation of platforms will have enough power to run lots and lots of middleware so development costs should drop back to sensible levels. In the meantime we are stuck with the PS3 and 360 and they are causing a lot of problems.
• The Wii has been a black hole for many third party publishers. Their fault. They mostly haven’t made the games that Wii owners want to buy. Just look at the Metacritic for Wii to see this. Electronic Arts on the Wii published NCAA Football 09 All-Play (Metacritic 49), Celebrity Sports Showdown (Metacritic 50), NBA Live 09 All-Play (Metacritic 51), G I Joe: The Rise of Cobra (Metacritic 51) and many other such gems that should never have seen the light of day.
• There is a trend on the more casual platforms for developers to self publish. This removes discipline from the market, especially on price. The job of a publisher is to provide editorial control, finance and marketing. Self publishers tend to use the price mechanism as their main marketing tool. Done competitively this rapidly collapses the viability of a platform. Electronic Arts have not taken the grip that they should have, thus allowing upstarts like PopCap to gain traction. Also they were late on the scene for emerging platforms, such as Facebook.
• Electronic Arts’ marketing still seems to be largely based on that of the 1960s detergent companies with expensive broadcast advertising. Their customers’ lifestyle habits have moved on and EA seemingly haven’t moved with them. Marketing now is far more about one on one, two way communication.
• Electronic Arts is very corporate. This is expensive and not necessarily the best way to run a large organisation, no matter how good the man at the top is. Far better to take a lesson from Alfred Sloan and break it up into semi autonomous profit centres with individual bosses who live and die by the sword and who are far more receptive to their customers.

It is not all doom and gloom. The losses are less than they were. The management are cutting out the non block buster games. EA moved away from licensed products so have built up the beginning of a portfolio of good IP that they actually own. There are huge economic advantages of scale in publishing, which positions EA very nicely indeed. The world’s consumers will spend more on games in the future than they are now. The next generation of home consoles will reward those with enough clout to invest heavily in middleware.  And EA do have some excellent employees.

So where does the future lie? I still think that EA are a prime M&A target. They would make a perfect acquisition for Microsoft to give them ammunition in their console wars against Sony and Nintendo. And they would also be a perfect fit for Apple, if and when Apple launch their own home gaming console. To both of these companies EA would be far more valuable than it is for its current stockholders. And both of them have the cash sitting in the bank to buy EA with ease.

Being a hardware platform holder is not easy, there are so many pressures waiting to destroy you, technology, competition, piracy, fashion. So, over the years we have seen many platform holders leave the arena, Atari, Sega, Sinclair, Amstrad, Acorn, Commodore and many more. Each loss weakens gaming. Every platform holder is precious and adds to our industry.

Two years ago it looked, very worryingly, as if Sony were headed to join the others in the graveyard, they had gone from owning the PS2 generation to making just about every mistake possible in the PS3 generation. I wrote articles on here itemising what they were doing wrong. And it wasn’t just Playstation that was in trouble, Sony the corporation was also having massive problems. And Sony has led consumer electronics for half a century, so it was not good for anyone.

Nintendo are an entertainment company, Microsoft are a software company and Apple are a marketing company. Sony, however, are a manufacturing company so their solutions to the PS3s problems came firstly from manufacturing. The PS3 was obscenely expensive to manufacture, the unit loss hit that Sony was taking was untenable and unsustainable. So they quickly re-engineered it taking out many features, including backwards compatibility. After this they were still taking a huge unit loss, but not one that would kill them. Then last year they made another big manufacturing step change with the Slim, this gave them enough leeway to do a little to become more competitive with retail pricing, but they were still taking a hit on every machine.

Underneath the skin the PS3 was following Moore’s law with the chips starting out using 90nm fabrication, this moved to 65nm in 2007, then 45 nm with the slim, which reduces the silicon acreage by 75% compared to the original machines.

Sony Chief Financial Officer Nobuyuki Oneda says that they are still making a loss on every PS3 sold, but now it is just a paltry $18. But with an attach rate of around 8 games for every PS3 sold Sony are now making an overall profit out of every new PS3 owner, which is what we want for the health of the game industry. And it isn’t just the PS3 that is making a profit, Sony as a whole are. They finally made an overall profit in the last three months of 2009, after 5 consecutive quarters of losses.

I started writing about this hardware based turnaround and the new optimism this brought to Sony last August. And about Howard Stringer’s (Sony’s CEO) actions to bring this about last May. Even further back in August 2008 I wrote an article about how Sony would recover from their disaster. So regular readers here will not be surprised by the turnaround.

But still Sony seem set to come third in this generation of home console, behind Microsoft and Nintendo, just because of momentum, if nothing else. Sony still rake in profits from PS2 and PSP so overall they are very healthy indeed.

Sony are still massively well placed for the future, they have the brand and the heritage and everything that goes with it. But they do need to get their finger out with smartphones. In just a few years time more of the computing power on earth will be in smartphones than in desk top computers, over a billion a year will be shipped. So they will become the main gaming device. Currently Apple, Android and Nokia are running away with the market. But Sony are uniquely positioned to challenge this, with the PSP they have built an understanding of mobile gaming and they have a large mobile phone division. Let’s hope they have the insight to convert these assets into platforms.

In all the current excitement and hype about Android and the Apple iPhone and iPad people have seemed to lose sight of Nokia, this is a very silly thing to do. Nokia make about 40% (actually 39% last quarter) of all the mobile phones in the world, compared with Apple’s 2%. Nokia has 123,000 employees to Apple’s 35,000. Of the 52 million smartphones sold in the world in the last quarter 21 million came from Nokia, a 40% market share.

In the gaming world everyone remembers the Nokia failure that was the original nGage. They forget that Nokia Snake is on more machines than any other video game in the world.

Who owns the smartphone market is headed to become the most important factor in all of technology for the foreseeable future. To explain why we need to go back to Moore’s law (again). This says that the number of transistors on a chip doubles every two years. Compound. This means that a given chip halves in cost or doubles in power every two years. This is easy to see in the price and capabilities of the game consoles, mobile telephones and computers we use every day.Other, lesser, components are not governed by Moore’s law. But we are at the beginning of a display revolution that will see complex, power hungry LCD displays replaces by simple, cheap, elegant OLED displays, which will drop prices further and faster.

There are companies that tear down these electronic devices to work out how much they cost to manufacture. Currently this is around $180 for a top end smartphone. So in 24 months time this could be $90. And due to the compound nature of Moore’s law this would be just $22 in 6 years time. You can see that at this price non smartphones have had their day. All new phones will be smartphones. And we are talking about a billion new phones every year.

A billion new smartphones is a billion new computers connected to the internet. It is also a billion new gaming machines. Every year. This is going to be revolutionary. It is going to put so much power and so much capability in the hands of so many people. It is going to totally dwarf the computing power in all the world’s desktop computers and it will make game consoles look like a small sideshow. It will be the biggest democratisation of knowledge and the means to use that knowledge in human history.

So if Nokia can hang on to owning 40% of this they will be the biggest computer company on earth. And if you look at what they are doing right now there is no reason why they won’t. They may lack the showmanship of Steve Jobs but they are more than making up for it with great products that people want.

The N97 Mini is a very well made, very well featured evolution of the less than stellar N97. With a fold out keyboard it can take some serious use and it represents serious value for money. The 5800 has been honed by Nokia to be a brilliant non keyboard smartphone and is available both with or without the XpressMusic service. And the new N900 is a fantastic, fully featured top end smartphone. These three devices (and others) are why Nokia can command a 40% smartphone market share and must be giving their competitors sleepless nights.

It is not just the hardware. Nokia are covering their bets by having two different operating systems. Symbian is now open source so expect more rapid development to build on it’s ten years of development that make it the most fully features smartphone OS. Which is why it is on more smartphones than any other OS. Maemo is also mostly open source. It is a clean sheet of paper, state of the art, linux based OS and it is what drives the new N900.

Ovi is the online portal for Nokia smartphones, it is an App Store, an iTunes, a Google Maps, email, file storage and sharing service and so much more. It is where nGage now resides. Ovi is the most comprehensive suite of online services currently available for a smartphone.

By now you must be getting the message, if you are in the game industry you ignore Nokia at your peril. If you develop smartphone games they need to be on Ovi, not just Android and iPhone. And if you don’t develop smartphone games then you are going to miss out. Massively.

The Wii isn’t clinically dead yet, but its best days are well behind it. Sales are massively down, and with that so are Nintendo’s profits and their share price. So they must do something soon, not so much for their gaming audience and fanboys, but rather to keep their investors happy.

The Wii was always just Gamecube V1.5, it was not truly a machine of the current generation like the Sony Playstation PS3 and the Microsoft Xbox 360. It lacked the power and it lacked the HD graphics. But to make up for this it was cheaper, it had that breakthrough gesture interface and it had a catalogue of amazing Nintendo first party games that were must haves for any keen gamer.

The problem now is that the Wii no longer looks cheap, the cupboard is pretty bare of first party titles (most third party titles having missed the mark) and the gesture interface is looking old hat compared to what the competition are about to unleash.

Now, the people that run Nintendo are not fools, they know all of this better than I do. So it is obvious that the successor for the Wii is already designed, that the first party studios are working on games for it and that production is just about to start. So the Wii will be discontinued with about 68 million units made, it will be interesting to see if the Xbox 360 can catch up with this figure over the next five years.

The new machine, if Nintendo keep to their previous naming rules, could well be called the Super Wii. Moore’s Law tells us it will be about four times more powerful than the Wii. And the market tells us that it will be HD. Obviously it will be backwards compatible. But this specification, on its own, will not be enough to compete. Nintendo need to do more. Much more.

Satoru Iwata is the president of Nintendo and he has just given an interview that reveals much of their thinking. It is in Japanese but with the magic of Google Translate you can read it here. And he says that HD is not enough, that Nintendo will be doing something new.

Over three years ago I wrote an article in this blog entitled What is Nintendo? That article is just as true now as it was then and mirrors much of Satoru Iwata’s thoughts. The key here is that Nintendo is an entertainment company first and foremost, they are not a hardware or a software company, it is just the entertainment that matters. And they use technology and innovation to provide this entertainment.

So I don’t know what to expect. They know that they need to innovate, so they could do just about anything. The only thing that is for sure is that it will be fun.

The Microsoft Entertainment and Devices Division was able to start the year by telling the world that they are three times more profitable than they were a year ago. Q4 ’09 profits from the division were $375 million, compared with $130 million for Q4 ’08. The increase comes from Moore’s law bringing down hardware manufacturing costs and from the ever increasing user base buying proportionately more software and Live services, which are a lot more profitable than hardware.

The Xbox 360 also currently heads the game sales chart with Mass Effect 2 and are by far the most popular platform for the monster hit that is Modern Warfare 2. This presages a year in which there will be a succession of huge titles that are not available on the other consoles. Halo: Reach, Fable III, Tom Clancy’s Splinter Cell Conviction, Alan Wake, Crackdown 2 and Scrap Metal for starters. For any game enthusiast these make owning a 360 essential, even if it is in addition to owning other consoles.

On the hardware side Microsoft are starting to roll out 250GB hard drives. And this autumn we have the much anticipated release of Project Natal. Microsoft have changed the design slightly to reduce the hardware by doing more in software (using 10-15% of the 360s cpu resources), this is to keep to the $50 price target and to increase the flexibility of the device. At this price Microsoft expect to sell several million units in the ’10 holiday season and so there is impressive game support coming from publishers. Pretty soon around half of all 360 owners will probably buy Natal and they will want Natal enabled games to play on it. Expect a surge in more family friendly titles, which will take the 360 to new demographics, further enhancing its success.

All is not sweetness and light at the Microsoft Entertainment and Devices Division, though. Their mobile strategy has been an unmitigated disaster with Google and Apple trampling all over them. This is the biggest possible problem for Microsoft as mobile devices are set to dominate computing and the internet. Even if they continue to dominate the office and grow to dominate the living room they could still be beaten by the owners of the mobile space.

Finally let’s risk making a prediction for the next generation of Microsoft home console, the Xbox 720, Xbox 3 or Xbox Phoenix. It is inevitable that Microsoft must do this because Moores law will leave the Xbox 360 looking less and less powerful. They will produce a scaled Xbox 360, so it will be backwards compatible. The new machine will have many more features and benefits such as 3D. It will be announced, probably at E3, in Q2 ’11 and will be available at retail Q4 ’11. Expect it to be 8 times the power of an Xbox 360 (Moores law says it will be) and expect the 360 to stay in production as the junior model in a two model range, retailing for $100.