Entries Tagged 'The platform holders' ↓

Sony’s full year financial results, for the period ending March 31st, 2008 make interesting reading. During this period they sold 13.73 million Playstation 2s and 9.24  million Playstation 3s. This, possibly, tells us some or all of the following.

• The Playstation 2 to 3 transition has not been the bloodbath that the PSX to PS2 transition was.
• Publishers who desert platforms early in the transition lose out.
• HDTV is maybe not yet such a critical USP.
• The PS3 is still far too expensive for a lot of people.
• Current generation consoles, the Xbox 360 and PS3, are eventually going to be a lot bigger than people think when eventually all these people upgrade.
• There is more to the games industry than Europe, America and Japan. A lot of these PS2 sales will be in less developed economies.
• Presuming that the whole PS2 operation is now vastly profitable the PS3 losses are a lot worse than they look as they are being subsidised by the PS2.
• Maybe the PS3 catalogue of games doesn’t yet contain enough system sellers.

To look at this from the publishing side we have Electronic Arts’ figures for the same period. They show PS2 revenue at $601million against PS3 revenue of $284 million. So more than double. And I wonder how accurately all of this was predicted by the analysts.

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.

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.

The following is just speculative fun. But it is based firmly in reality.

The Microsoft Xbox 360 is very, very well designed. Part of this design genius is ease of manufacture and potential for cost reduction. So I see this console as having a ten year life. This should easily see it up to 2015.

This year Microsoft will use their manufacturing cost advantage to use the price mechanism to build market share in the face of Sony’s AAA game releases. This will leave headroom in the market for them to introduce a new premium console giving them a two model range, just as Sony have had for a few years now. It will also make the 360 a cheap mass market machine which will have the effect of growing Xbox Live enormously. And this is the most important thing for Microsoft. It is the online platform which, ultimately, will be the main event.

The new premium console (Xbox 3) will feature a gesture interface and probably integration with a new handheld game console.
Microsoft have a great incentive to go for this two model (plus handheld) strategy sooner rather than later because Sony are currently too weak to respond. So it would be a knockout blow that could give them market supremacy.

The new Microsoft handheld will be son of Zune with iPhone and Nintendo DS features. This device looks pretty inevitable and will give access to Xbox Live anywhere and everywhere and with it’s integration to Xbox 3 it will bring a whole raft of new capabilities to the consumer.

Another factor to remember is that Nintendo will have to do something about the Wii. This machine is really Gamecube 1.5 with a gesture interface. It’s old technology will find it out. So Wii2 cannot be too far away. And it is something that Microsoft must have an answer for.

So when will we see Xbox 3? The normal console cycle is for new models every 5 years. Which would put availabilty at the end of 2010. I can see Microsoft bringing this forwards a year to 2009. The current year year is too soon as they still have to build the market position of the 360.  So next year it is then! And rememeber that for just about every new product area that Microsoft has entered it is their third generation of that product that gives them world domination.

Of the 3 current generation consoles the Nintendo Wii is the only one that is not HD. This has brought them several advantages. The consoles are cheaper to manufacture so they can be sold at a profit, unlike the HD consoles from Microsoft and Sony. In addition the Wii can have games developed for it far more quickly and cheaply because a far smaller number of pixels are being manipulated.

HDTV puts about four times the number of pixels on the screen compared to the conventional TV standard we have grown up with. When consumers see this, it is such a huge leap in performance that they want it. But at the moment there isn’t much true HDTV content of any kind so people are generally unaware of the capabilities. They are buying HDTVs mainly for their large screen size and the convenience of their flat form.

However this situation is changing every day as more HDTV is broadcast and more people get HD DVD or Blu-Ray players. Games thus far on the HD consoles have come nowhere near delivering the full HDTV experience. Over 2008 this will gradually change. When it does the results will blow you away. Once people routinely watch broadcast HD television and watch HD videos they will not want to go back to inferior quality. The same will apply to gaming. Once people are fully HD literate they will not want to go back.

So what is key to the life of the Wii is how long it takes for people to become fully HD aware (they are not there yet) and how long it takes the games industry to make the best of HD graphics. These will not be sudden things. They will ramp up gradually over the next couple of years.

Wii is an amazing creation of Nintendo and has a fantastic but short future ahead of it. Imagine if someone brought out a console that only displayed in black and white because that is what televisions used to be. This is the situation Wii will be in by Q4 2009. Nintendo are not stupid, they know this, so new product announcements are inevitable.

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.