Entries Tagged 'News analysis and background' ↓

No, Bruceongames isn’t turning into a Smartphone blog. It is just that it is pretty clear that smartphones are soon going to be the most common computers on earth, with over a billion a year being sold. Which means they will be the most common gaming devices. So if you have anything to do with gaming then you need to know about smartphones.

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 big news is that Nokia, who make 40% of the world’s smartphones, won’t be there.

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.

Also addressing the conference is Steve Balmer, CEO of Microsoft, who have lost their way in the mobile marketplace. He is there to launch Windows Mobile 7, which is going to be called just Windows Phone. Microsoft need this to be very special as they are drinking in the last chance saloon here. The good news is that the interface is based on Zune (maybe they are reading this blog!) and more good news is that Microsoft are going to lay down the law regarding handset specification so that Windows Phone doesn’t end up on any dodgy devices.

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.

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.

At the gym yesterday the TV news in the changing room carried an item about Advent Computer Training going bust. One of the guys there said that he had been a victim of this company. He said a high pressure salesman had come to his house and promised him a highly paid career and that they would help him find a job. So he signed up to a finance agreement with Barclays for £5,000. When the course arrived it was no good for him and he gave up on it. But he still has to pay off the £5,000 to Barclays with several years of monthly payments. Even with Advent bust he will still owe that money.

It appears that what finished Advent off was Barclays stopping the supply of such student loans. In their words: “Barclays Bank are the main student funding partner and we have worked with them closely for several years. Just before Christmas Barclays informed us that they were pulling out of the student training sector with effect from 31st January 2010.”

So you can see what was happening here. Barclays were giving out loans to students and then handing the money over to the company. The company should have held that money in trust and only used it as the course progressed. But they didn’t. Obviously it was being spent, going somewhere, almost immediately. So when the supply of new money dried up there was nothing left to finance the training that the students had paid up for. Within weeks the company was bust.

I don’t like this business model. Why should the provider of a service (in this case training) be paid in advance with a lump sum for several years of that training? Universities and colleges don’t do this.

In my opinion using a finance company, like Barclays, is also pernicious. The student’s relationship for their course is with the training company, yet their relationship for paying for the course is with the finance company. This is not good.

You can see why Barclays may have got out. Even if the course is brilliant there are still going to be a percentage of people who have bought the wrong thing. And they are caught in a trap with years of monthly payments ahead of them. So they won’t be happy bunnies and, inevitably, they will take out some of their ire against the company they are paying the money to. Barclays don’t need this flack.

And remember that these courses are targeted at the young, the weak, the vulnerable. They are for people who are under educated and want to improve themselves. These people stand no chance against a highly trained high pressure salesman. Many of them become victims, they receive nothing yet have to pay out large payments every month for years. You can read about such victims here, and here.

Don’t these people realise that there are better ways to get an education? The Open University for instance. These guys don’t use high pressure salesmen, don’t use finance companies, have world class course material, give qualifications that are universally recognised, have first class training staff, don’t demand several year’s financial commitment up front and yet only cost a fraction of what some commercial trainers charge.They even hand out financial support to lots of students!

The Open University say: “Want to get a qualification that will help you develop or change your career? Learn a subject in depth? The Open University – voted top for student satisfaction for three years running – could provide the flexibility, the qualifications and the top-class teaching you’re after. For most courses you don’t need any previous qualifications. And with our world-leading blend of supported open learning and innovative course materials, you’ll get an exceptional learning experience.”

For example here is a course that provides an introduction to computing and human-computer interaction, including gesture interfaces such as the Wii Remote. It costs just £400. And it counts towards a degree.

Finally, here is some Advent marketing blurb:

Advent Training is Different.

At Advent, we not only provide excellent IT training courses, but we also offer specialist careers advice and support to help our students get a job in IT.

We understand how the industry works and we know what employers are looking for. We constantly research IT jobs in the UK to make sure our courses are up to date, providing you with the skills you need to get a job in IT.

Support Every Step of the Way.

Our certified trainers work closely with you to monitor your progress, making sure you move forward to the next stage only once you are absolutely ready. No-one is left to fend for themselves and everyone works at their own pace.

We also give every student comprehensive study guides, practical advice on exam preparation / technique and unlimited email and phone support throughout their course.

Whats more, our unique, introductory modules provide essential background information to enable you to understand more about computer skills in the IT environment and to be able to talk with confidence at interview or in a job situation.

Advent Training’s technical expertise is recognised through Microsoft’s Certified Partner accreditation.

At 6PM GMT today Steve Jobs will announce the iSlate (or whatever they are going to call it) at the Yerba Buena Centre for the Arts in San Francisco, in one of the most anticipated product launches in history. Jobs himself seems pretty nonchalant: “The new products we are planning to release this year are very strong, starting this week with a major new product we are very excited about.”

Here is some of what is being speculated:

• It will have a very highly developed gesture interface using multi touch. Possibly a big capability jump in this area. Apple have been leaders with the man/machine interface for 30 years now, here is another opportunity to stun the world.
• Backwards iPhone compatibility. So it will have access to 130,000ish existing apps from day one. Which means it will hit the ground running.
• High level of utility as a gaming machine. It is known that game publishers such as Electronic Arts are part of the project. To have platform specific game content at or near launch. Which shows that Apple have learned what customers want from the iPhone AppStore.
• It looks like it will also be an electronic book (and magazines, newspapers etc) reader, using OLED screen technology. Apple have been doing lots of deals for this sort of content. So they are going after Kindle, it can be no coincidence that Amazon have just launched a Kindle SDK and are going to open a Kindle application store. iSlate Vs Kindle could be a big upcoming battle.
• It will also stream television and play movies. So Apple really are going for a Swiss penknife device.
• 3D. Well it is all the fashion and it is technically possible (I wrote about this last July). If they really have done this then it will give 3D in consumer devices a bigger impetus than even Avatar has done.
• It will sell in huge quantities. Analysts reckon on 4 to 6 million units this year. And there are rumours of manufacturing capacity shortages in the sorts of display it will use because of Apple’s huge orders.
• Image recognition. We know from Microsoft’s Natal that there have been big strides in bringing this technology to consumers. It is a software thing and if Microsoft can do it, then why not Apple?

Presumably it will also do inter stellar travel and make the tea. The level of expectation is at a fever pitch and the air is thick with rumours. If it does what people expect then it will become a black market item from day one, selling secondhand at a massive premium on eBay. Some people just have to be seen with the latest toy.

And where does this leave Google and Android? Still catching up very quickly is the answer. Android will see very many devices this year from many of the world’s biggest consumer electronic companies. Google are in this for the win, their survival strategy depends upon it as the internet becomes mostly mobile. Apple are trying to put clear blue water between themselves and Android but they are just one manufacturer against many. Apple will need to innovate like crazy just to maintain position.

And where does this leave Microsoft with Zune and Windows Mobile? Trailing badly and losing position by the day is the answer. This is one boat that Microsoft have well and truly missed. They have failed to see that smartphones will become the main form of computing. This is as big a mistake for them as when they failed to understand the internet, losing major markets to competitors. It will take massive investment and stunning product announcements to even play catch up here.

So this looks like being a very big day in the history of computing and the history of gaming. Soon there will be over a billion new smartphones being made every year. They will become the main computing device on earth. They will become a commodity.  iSlate is a step by Apple to keep themselves ahead of and above the commodity market. But they are starting a technology race that they have to win every year.

George Hotz is a very well known American hacker, famous for being the first to break the security of the iPhone. Now he has told the BBC that he has cracked the Sony Playstation PS3 and that he will post the details of how to do this on the interweb. You can read about his progress on his blog.

There are lots of ifs here. If what he says is true, if he releases details out into the wild, if it can be easily replicated by others, if it is used for widespread game stealing and if Sony don’t come up with an effective counter. If all these ifs line up then Sony are in enormous trouble. The PS3 is just over three years into what should be a ten year life. So the loss in sales revenue from games will add up many hundreds of millions of dollars. A billion dollar reduction in revenue is not impossible. Not news that any company wants to hear.

The main protection on Sony consoles has come from the media. Playstation 1 used CD-Rom, Playstation 2 used DVD and Playstation 3 uses Bluray. Each of these media standards was very new when the consoles were launched so blank media and burners were very very expensive. Over the life of a console the blank media costs tumble, burners become cheaply and readily available and the thieves get up the learning curve of how to crack the machines.

I was at Codemasters when Playstation 1 game theft reached critical mass. We very suddenly went from being able to make a good living from PS1 games to making a loss on every one. There wasn’t platform proliferation then, the PS1 was the main show in town. So it hit us very badly. The thieving caused 20% of the workforce to lose their jobs. I was there through all the trauma that this involved. Fortunately the company survived, largely because of a PC game called Operation Flashpoint that went to number one in every country with a chart. But time were bleak until the Playstation 2 got up to a big enough user base to provide us with a regular living once again.

Things would not be so bad for publishers these days if the Playstation 3 really is cracked. Now there are lots of platforms and lots of business models. The industry just moves resources away from platforms that are badly effected by stealing to ones that are less affected. So the thieves shoot themselves in the foot as much less money is spent developing games for their machine.

Of course the Microsoft Xbox 360 and the Nintendo Wii are also cracked. With the 360 Microsoft have the simple solution of kicking modified machines off their Live service. This is a very effective deterrent as Live is one of the main reasons for owning a 360. The Wii being cracked is less of a problem because of the casual nature of their user demographic who are less likely to be bothered with trying to steal. And Nintendo make latest release games look for known platform modifications and then refuse to play if the machine is not kosher.

Of course Sony also can and will come up with a strategy to counter cracked machines. But obviously the degree of success they achieve has yet to be seen.

Once again we are seeing that the public cannot be trusted with physical ownership of games. If they can steal without getting caught then there are tens of millions of people who are happy to do so. They have no morals. Gaming is going to move increasingly into the cloud. MMOs and most casual gaming are already there. What are now console games will increasingly follow.

On my recent visits to video game stores I was unsurprised to see that the secondhand game section is now just as big as the new game section. This must make the blood of every game developer and publisher boil because they are getting no income from these sales, despite having done all the work to create the games. Add to this the massive bit torrent stealing of games, which can reach over 90% of all users on some platforms and you can see that there has to be another way.

Eight or nine years ago at Codemasters I came up with the Registered Player Service, an idea to tie each copy of a game down to an individual user and then to provide downloadable content (DLC) as an incentive for participation. So only if we, the publisher, had received a person’s money, did they get the full experience. If they had a pirated or secondhand copy then they only got a basic game. Because of politics at Codemasters this idea was never implemented.

So you can imagine how pleased I am that at long last this idea is being implemented. By BioWare, and they are calling it the Cerberus network. They have added the refinement that someone with a pirated or secondhand copy can still get the content, by paying a fee, currently $15. This is probably pretty close to the incremental nett profit BioWare would make from selling a legitimate copy of the game, so it cancels out the financial effects of both secondhand sales and game theft.

The first game this is being done with is Mass Effect 2, out tomorrow. Legitimate game owners and players must be very pleased, here is an anti piracy measure that doesn’t punish them and which forces everyone to contribute to the cost of making the game if they want the full experience.

From a marketing point of view this requires the philosophy shift to treat owners of the game as a community, not just as a number of consumers, the benefits for everyone are enormous. It is certainly something that needs to be brought to the Apple AppStore (and the many similar such models) if developers want to be adequately paid for their work.