One thing he has always said is that the iPhone / AppStore gaming market is just like the Sinclair Spectrum market was. And here are a few reasons why this is so:
Very low barriers to entry. Download the SDK and you are away. This is a huge contrast to the established platform holders like Nintendo, Microsoft and Sony who make you jump through lots of hoops and invest in expensive hardware development kits.
Huge flowering of creativity. Anyone can have an idea, no matter how oddball, and realise it. Then (theoretically) in the Darwinian world of the AppStore the fittest succeed. New genres of game are being created without anyone realising it. It will take historians to unpick because so much has happened so quickly.
Equally huge upsurge in new game publishing companies. I bet that more new game publishers were set up last 18 months than in the preceding 18 years. The problem here is that a publisher has three main functions 1) Editorial control 2) Finance 3) Marketing. Most of these new publishers don’t realise this yet. The ones that survive will be the ones that do.
So far all a reader will be seeing here is a rosy story. But the reality is that, just like the Sinclair Spectrum market before it, the AppStore business model is largely broken (as I predicted would happen in 2008), and for much the same reasons.
The collapse of prices. Inexperienced marketeers use the price mechanism to gain competitive advantage. Experienced marketeers use the price mechanism to beat the game thieves. Together they drag prices down so there is no budget for marketing. This creates a downwards spiral so there is no money for development.
Imperfect market knowledge. The AppStore has happened so fast that the mechanisms are not in place to inform people properly what is on it. So a total gem of a product can be hidden from view because of all the dross that surrounds it. This is partially Apple’s fault for having an inadequate front end to the AppStore. It is partially the fault of the news media who are not reporting sufficiently in depth, the volume has overwhelmed them. And it is partially the fault of the users who mostly take a very casual attitude to their downloads and who would be massively rewarded if they did more research.
So the net effect is that you are lucky if someone finds your game, even if they do you have to sell it to them at an uneconomically low price. But even then they are most likely to just steal it from you.
Which brings us back to Neil Young. He has given up selling games on AppStore. Now they are free. Really he had no option, because of the broken business model. So instead he charges for in game stuff with micro transactions. And it works. He has already had two successes with Touch Dogs and Eliminate Pro. Both of these allow a daily amount of play time, over which you have to pay.
A measure of just how broken the pay before you play business model is on the AppStore is that Neil Young has just cancelled the latest iteration of one of his biggest properties, Rolando 3. It was just not worth throwing good money after bad. The IP isn’t dead though, obviously, it will just appear in a new micropayment form.
So the lesson here is that the AppStore is a broken business model for selling Apps. But you can still make money and do good business on iPhone, it is just a matter of selling a service instead of a product. This is a very big and very serious lesson for the whole future of gaming.
The stupid British government is misspending a fortune. One example is forcing climate change propaganda down our throats. Mainly to justify hitting us with more and more “green” taxes. And part of their propaganda effort was a video game.
According to the Tax Payers Alliance: “The Yigal Allon Educational Trust received a grant of £49,480 to produce a “fun and engaging multi-player computer where the player’s role is to decide on local environmental policy, and interact with other players to decide global policy…………The report says that 1,048 active sessions (games with at least one player) created between July 2007 and April 2008. That implies that the project cost around £47 in grant funding per game played…..”
Under this government the British video game industry has gone from being third in the world (behind America and Japan) to almost certainly sixth (behind Canada, Korea and China). One of the main reasons for this decline (which has cost the country many billions) is government ignorance, ineptitude and apathy. Especially compared with more enlightened governments elsewhere. One example was the tax regime that they devised for the film industry (reflecting the risk and financing problems) which has been a great success. But which they did not extend to the game industry which was beset with identical problems. Yet they can throw money away at misguided propaganda when it suits them
There is a solution to this problem. Shortly there will be a general election and we can vote in a better regime (it can hardly be worse, can it?) and this interview with Ed Vaizey gives us some idea what to expect.
So Facebook has 400 million active users worldwide. Let’s compare that as a gaming platform with some of the others. Wii 67 million, 360 38 million, PS3 32 million, DS 125 million, PSP 54 million, iPhone 43 million. Do the maths, Facebook is bigger than all these platforms put together.
With such a huge audience you would expect Facebook games to reach a substantial audience. And they do. FarmVille has over 75 million active users (and it is just 8 months old). Compare that with some other games. World of Warcraft is perhaps over 11 million active, RuneScape is probably about the same, Modern Warfare 2 has maybe sold 16 million units. You must be getting the idea now, Facebook games can dwarf those on any other platform in terms of popularity.
So these are impressive number. Now they get more impressive. In September ’09 there were just 65 million smartphone facebook users. So it has gone up by over 50% in just 5 months. Show me any other gaming platform that is exploding in popularity at this rate.
And there is a huge amount more to come. The world makes about a billion new mobile phones each year, currently very approximately10% of these (100 million) are smartphones. This percentage is going to ramp up massively, already £100 at retail smartphones are predicted for this year, so hardly anyone in the first world will buy a non smartphone. But as the price collapse continues this will spread to the rest of the world.
So then you have to ask the question. Do you develop games for Application Stores or for FaceBook? That looks like the subject of another article.
Windows Phone is a synergistic combination of Xbox Live, the Bing search engine, Zune MP3 player and the Windows Mobile operating system. All these elements have been upgraded to become state of the mobile art and to work together seamlessly. And it looks like Microsoft have designed it for real people instead of for “business”, which is a massive step in the right direction.
This has changed the smartphone game. The Apple App Store may have lots of applications, but it has nothing like the user resonance the Xbox Live provides. Google may have lots of very nice proprietary software, but then so does Microsoft. Android may be used by many different phone manufacturers, but so is Windows Mobile.
So now the war has hotted up. Between iPhone/iPad, Android, Symbian/Maemo and Windows Phone. There are others such as RIM (Blackberry), which is currently still the second most popular smartphone, but whose “business” bias and walled garden could see them left behind. Also Palm, who have their Treo operating system but have also used Windows Mobile, so they will probably major on the new Windows Phone O/S. And finally there is Samsung Bada, of which little is known.
This is going to be fantastic for consumers as the industry brings out new models, update their software and bring out new services and apps, all at breakneck speed. This is a billion handset a year business they are fighting for so they are playing for massive stakes.
This week it is the 2010 Mobile World Congress in Barcelona, the world’s largest mobile technology fair. Things are getting critical now as manufacturers, operating systems and browsers jockey for position ahead of the big explosion.
The next biggest news is that that Eric Schmidt, the CEO of Google, is giving the event’s keynote address. His Android operating system is the fastest rising star of the smartphone firmament. This is vital for Google as web traffic, and the advertising revenue that goes with it, moves away from the desktop and onto mobile devices. There are going to be more than 50 new Android phone models announced at the show from manufacturers such as HTC, Samsung, Motorola, Dell, and Sony Ericsson. Also Android is developing very rapidly with Swype word input, voice recognition and lots of location based services all on the way.
The war just now is between the handset manufacturers and between the operating systems. New developments are almost alarmingly fast. Because these devices are online their operating software can be and is constantly updated to try and keep up with or maybe even ahead of the opposition. Handsets that are a year old are virtually obsolete. Take out a two year contract and you will be using a museum piece by the end of it.
But it isn’t the handsets and the operating systems that will make all the money. Just like with your desktop PC, the handset manufacturer will become increasingly irrelevant. Also the operating system on its own will generate little revenue and people will replace their operating system on a whim, much as they now do with PC web browsers.
The real money will be in advertising (and other marketing) and applications. Our current best effort at smartphone applications, the application store, is close to being a broken business model as price has collapsed and piracy run rampant. Expect more and more applications to be offered as services, with subscriptions. And we know all about that in the gaming world, just look at World of Warcraft and Xbox Live.
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.
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.
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.
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.
