Entries Tagged 'Crystal ball' ↓

Firstly the iPod and iPhone. Apple can see a lot of money here and are working to create a major gaming platform. Earlier iPods lacked the horsepower but the iPhone and iPod Touch correct that fault. Because of the iTunes distribution system this platform could be ramped up very quickly indeed to an already well established user base. This could well be the biggest growth area in gaming this year.

Nokia meanwhile continue to mess up their nGage platform. In 2003 Nokia had the potential to create the most popular gaming platform on earth and instead they made just about every mistake that was available to them. It was embarrassing. They are trying yet another tactic this year. It could work for them, but the evidence of history is not on their side. A pity because we are headed towards a universal pocket device and Nintendo Nokia could have owned the market. Yet they squandered first mover advantage.

The PC has matured into an interesting gaming platform. For boxed games at retail it has been in a downwards slide for some years. But for MMOs, casual gaming and for Steam it has grown massively. Also the effective banning of online gambling in the USA has forced companies to put their resources into online for money skill games. This will grow a lot during 2008. The companies with a gambling background will make a lot of money from this, showing up the lack of vision of traditional game publishers.

MMOs have grown under the effect of World of Warcraft which brought strong social networking to the genre. Other MMOs have learned this lesson and we will see the results of this during the year. Also non subscription business models will increase. Habbo Hotel is a powerful role model. As for genre we must be reaching the time when something other than swords and sorcery will work. It is overdue.

Steam is hugely important to the whole future of gaming. It must make Valve worth billions of dollars. The addition of social networking at the end of last year was a genius masterstroke. For serious hardcore gaming Steam is rapidly becoming the only show in town. It is a great example of what a team of very clever people can achieve.

Another group of gaming platforms that will show very strong growth this year are the social networking sites. MySpace and Facebook are now both open to third party developers. Their huge user base guarantees that games have a great potential. It is a pity that so many developers can see no further than data mining. Combining online for money skill games with social networking userbases could be a license to print a vast amount of money.

Mobile phone gaming will continue to be a niche due to the fragmentation of platforms and carriers. However the potential is massive. They are ubiquitous. The current complex business model could well die out as much stronger business models run by the platform manufacturers come along. Apple and Nokia are the obvious ones, but look out for Sony, Microsoft and Nintendo entering this space.

There are loads of other gaming platforms from in flight seat back entertainment to SCUBA diving computers. They all sit in their respective niches and make business for those that service them.

Happy new year. And back to work! As is traditional at this time of year I will try and give some pointers to what I think may happen over the next twelve months. Firstly let’s look at the current situation. According to VG Chartz there are now 8.71 million Sony PS3s sold to end users, whilst the Microsoft Xbox 360 has sold nearly twice as many at 16.02 million, but has been overtaken by the Nintendo Wii with 19.45 million. All three of these are dwarfed by ownership of the Nintendo DS which has 64.92million happy owners, far more than the three previous machines combined. The PSP continues to sell with 29.79 million but most of these are used as media players, not as gaming machines.

Sony PS3 sales were given a big kick by the price reduction, despite the lack of AAA exclusives on the machine. This year sees massive system sellers such as Metal Gear Solid 4 and LittleBigPlanet which at long last will give the PS3 credibility and make it a worthwhile purchase. The delayed Playstation Home has the potential to be huge. Unlike Xbox Live this is geared up very much to be an online social networking community and we all know how big they can become. Sony should recover their position a lot during 2008, they need to with the amount of money this is costing them.

Microsoft have already pulled off what may well be the biggest marketing coup of 2008. Grand Theft Auto IV on the 360 is going to have a lot of exclusive downloadable content that the PS3 won’t have. Considering that this will certainly be the biggest game of the year this exclusive content will swing a lot of buying decisions over to 360. Other than this Microsoft have more games coming out for the 360 than Sony has for the PS3 and a lot of room to use the price mechanism to maintain their market position.

The Nintendo Wii could very well be a bubble that is already bursting. Or it could build on the existing solid base to become an entertainment phenomenon. Wii Fit will keep the impetus going through Q1&2 whilst Animal Crossing will be massive in Q4. These alone will probably be insufficient so Nintendo need some AAA third party titles. Nintendo like to upgrade their hardware so we could see an enhanced Wii with, for instance, a hard drive. Also a more powerful HD console must be on the way.

The DS for Nintendo threatens to become a ubiquitous device like the Walkman was for Sony. This year should see another upgrade with bigger screens. Nintendo are perfectly placed to make a telephone version (with a partner like, say, NEC?) which could deal a huge blow to both Nokia and Apple.

What is certain is that this generation is still in it’s infancy. There are still over 130 million owners of last generation consoles who have yet to upgrade (mainly PS2 owners waiting to see if the PS3 will be worth buying). If you add in the constant growth of the market and the popularising effect of the Wii then there could easily be a market for a further 200 million home consoles in this generation. Four and a half times more than have been sold to date.

A big factor this generation will be multiple machine ownership. To a far higher level than in previous generations. This is because there are so many must have games that are platform exclusives. This means that the real war between Microsoft and Sony will increasingly be fought between Xbox Live and Playstation Home. So expect both companies to put a lot of effort into these online platforms.

A big tactic this generation has been to stratify each console into a product range and to bundle games with consoles to give higher perceived value (something that was overdone in the days of the Commodore Amiga and Atari ST). Expect this to be continued this year with top end versions of the 360 and PS3 featuring large hard drives and enticing bundles of AAA games.

That is a very quick overview. It is impossibly to say who will do best out of the three. This generation of consoles is spectacularly good at making analyst’s predictions look stupid. One major change that has emerged is that Microsoft are now a player at the top table in the console industry. Just watching how they use this new found position will be fascinating.

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.

The video games business is currently going through an unprecedented phase of consolidation. This phase is characterised by big global media companies investing very heavily to rapidly increase their presence, mainly by the aquisition of independent specialist game companies. They are doing this as a matter of survival as many traditional media areas such as TV are experiencing ever reducing revenues whilst gaming continues to expand rapidly as a business.

The recent acquisition of Activision by Vivendi is symptomatic of this phase and the size of this particular deal has focused attention on the whole consolidation process. Electronic Arts are the largest independent specialist game publisher in the world at $3 billion annual turnover, so they are the biggest prize. Who could be in the frame to buy them?

• Nintendo. The popularity of Nintendo platforms has raced ahead of the availability of games for them. Nintendo need all the game making capacity they can get their hands on. And, as the most profitable video gaming company ever, they have the money.
• Microsoft. In the war against Sony the most powerful weapon is the AAA platform exclusive. EA could give Microsoft a huge stream of such exclusives making the 360 a must have purchase and effectively handing Microsoft victory. And they can afford to do it.
• Sony are in a worse position than Microsoft regarding AAA platform exclusives. They would love to address this weakness, but how much money do they have to do so?
• Google are increasingly a company with a wide portfolio of software products. And the huge gap in their portfolio is gaming. They could easily afford to buy EA and if they applied the possible synergies it would move the whole industry along a lot. Downloadable content, pay per play, server based gaming, episodic content and user generated content would all become mainstream realities either far sooner or to a far greater extent.
• News Corporation. Already own Myspace (recently opened up to developers as a gaming platform), IGN Entertainment (which includes GameSpy) and a small Danish game developer ITE. Obviously they are missing out and need to move quickly. They have a history of speculate to accumulate (Sky TV for instance) so a bold move, such as buying EA, is entirely possible.
• National Amusements controls CBS and Viacom (which owns MTV (who are investing $500 million in gaming), Xfire, Harmonix, GameTrailers and Neopets) and Midway Games. So they look set probably to grow their gaming organically and by smaller acquisitions. But don’t rule them completely out of the frame.
• Warner Brothers are very active at buying game industry assets , they have seen the writing on the wall. I am sure they would love to own EA.
• Walt Disney are yet another media giant who are already in gaming with Disney Interactive Studios and who need to rapidly increase their presence.
• NBC Universal are in a slightly complicated position of being 20% owned by Vivendi who now own Activision. However the other 80% is owned by General Electric who certainly have the money to buy EA. NBC have lots of good IP which they could make gaming use of, they are also heavily dependent on the lacklustre TV industry so need a growth area.

Of course there is a chance that EA remains independent, but the economic and commercial forces are so strongly in favour of them being taken over that it is just about inevitable. The main way to remain independent is to rapidly become a lot bigger. To merge with, say Ubisoft and/or Konami to make a global gaming giant. If the regulators would allow this.

The above businesses seem to be the ones with the most to gain from a purchase, but that does not preclude other suitors. As I keep saying, we live in interesting times, and it will be fascinating to see the outcome. 

Currently our model for video games consists of very powerful consoles playing games that are distributed as cardboard and plastic. Actually this is a very wasteful model because most of the processing power spends most of the time doing nothing. And in the days of the interweb using physical distribution of a digital product is just plain silly.

Already the PC industry is moving to another model. Microsoft Office is a very expensive ($499 for a one off copy of the professional edition), heavyweight package of software. Yet probably 99% of it’s features are not accessed by most users. Google is now offering pretty much the same features in it’s Google Apps, the big difference is that they sit in a remote server and your PC is just a terminal. Oh yes, and they only cost $50 per year for the top Premier Edition.

This is a model we could go to in gaming with the game once again sitting on a remote server and the console just being a terminal. In fact it is something we already do with MMO games and online casual gaming. This approach offers a lot of advantages over the current console business model:

• The gamer can choose from hundreds, maybe even thousands, of games to play. Physical product at retail is self evidently limited in range and shelf life. A server has no such problems and can carry an almost infinite “stock” of games. Once a game was written it would have an almost infinite life.
• No retail, taking their massive percentage. It is really silly for the game industry to effectively pay for the high street rents and staffing costs of conventional retailers. They are not needed if you go to either digital distribution or server based games. Which allows for lower cost gaming and/or bigger development budgets. Either way the customer wins.
• Much cheaper consoles. Because the game runs on the server you don’t need much horsepower in the console. It is mainly there just for the interface. In fact you could cheaply build the interface into the television and do away with the console completely.
• Zero piracy. This is an exceptionally good point. If everyone who played games paid as they should then games would be cheaper. If the game is sitting on a remote server then it cannot be stolen. This is one reason why MMOs are such good business.
• Latest version of the game always available to play. To fix bugs or add content you just need to update the game on the server and it is instantly updated for every player in the world. Retail games are inevitably buggy because of their sheer size and complexity. Server games could instantly fix bugs as they were found.
• Web 2.0 benefits. If everyone playing a game is playing the same version on a server it is much easier to incorporate user generated content (as MMOs now do) and social networking. Together these make gaming more immersive and more rewarding.
• No need for publishers. It is true, they would be redundant. The game developer can deliver the game directly to the server owner. There is no need for a global sales and distribution network because there are no retailers to sell to! I can see two new sorts of companies setting up. Mini merchant banks to finance individual games and distribute the risk and reward. And marketing companies to raise public awareness of games on the server. Presumably existing publishers would morph into doing one or both of these jobs.

As you can see, it is an alluring model with a lot of benefits. Taking publishers and retailers out of the loop and having a very long product life all put more money into game development. And playing games is what this whole industry is about.

I am sure that Sony, Microsoft and Nintendo are looking at this very seriously as a future option. Of the three Microsoft, with their five year lead on Live, are by far the best positioned to take advantage.

When you buy a game on an optical disk you are getting millions of microscopic areas on the disk that reflect light differently and so represent the ones and zeros of the digital world. These ones and zeros can also be represented with sound and sent down a telephone line. This is the wonder of digital downloads. Let’s look at some of the advantages:

• Instant distribution of your game to every country in the world.
• No need to manufacture, handle or stock tons of plastic and carboard.
• Bigger profit margin by cutting out all the middlemen.
• You can instantly meet demand, no matter how big.
• No returns from retail.
• Ability to patch bugs on an already sold game.
• Perfect for episodic content.
• Perfect for user generated content.

So it is absolutly brilliant. Why aren’t we doing it more?

• Inertia. The normal resistance to change.
• The platform holders outdated business model doesn’t allow for it.
• Some customers like to have plastic and carboard.
• Piracy. The big cancer that can destroy our industry.
• It is still a bit cumbersome at current interweb speeds.

But the writing is on the wall. Music and video downloads in the UK will reach £163 million this year, a 45.5% increase on last year. Admittedly this is in a £4 billion market. But it is inevitable that the value of downloads will be greater than the value of optical disks within a very few years. The same will happen with games, the advantages are so great and, when they have got used to it for music, the customers will demand it.

There is a very highly successful game developer called Valve. They are responsible for one of the greatest ever games, Half Life. And now The Orange Box compilation. In 2002 they launched a digital game download service for PCs called Steam and made it available to the whole industry, I tried to get Codemasters to adopt it. This has evolved now to include social networking. And it does everything in the advantages list above. Steam is one of the biggest and most important things to have ever happened in gaming. If Microsoft and Google had any sense they would be outbidding each other to pay $billions to buy Steam now. It will generate far more revenue than Facebook ever will.

Well are you all geared up for online distribution of your games, or do you just love the sight of all that plastic and carboard in your warehouse?