Activision Blizzard has bought King Digital Entertainment for $5.9 billion, marking not only one of the largest acquisitions in videogame history but one of the largest deals ever made in the entertainment business. Comparing this to previous entertainment deals highlights just how extraordinary the figures involved are; the purchase price values King at significantly more than Marvel Entertainment (acquired by Disney for $4.2 billion), Star Wars owner Lucasfilm (Disney again, for $4.1 billion) and movie studio Metro-Goldwyn-Mayer (acquired by Sony for almost $5 billion). The price dwarfs the $1.5 billion paid by Japanese network SoftBank and mobile publisher GungHo for Supercell back in 2013 – though it’s not quite on the same scale as the $7.4 billion price tag Disney paid for Pixar, or in the same ballpark as the $18 billion-odd involved in the merger that originally created Activision Blizzard itself.
How is $5.9 billion justified? Well, it’s a fairly reasonable premium of 20% over the company’s share price – though if you’ve been holding on to King shares since its IPO in 2014, you’ll still be disappointed, as it’s far short of the $22.50 IPO price, or even the $20.50 that the shares traded at on their first day on the open market. The company’s share price has been more or less stable this year, but Activision’s offer still doesn’t make up for the various tumbles shares took through 2014.
A better justification, perhaps, lies in the scale of King’s mobile game business. The company is a little off its peak at the moment. Candy Crush Saga, its biggest title, is on a slow decline from an extraordinary peak of success, and other titles aren’t growing fast enough to make up for that decline, but it still recorded over half a billion monthly active users (MAUs) in its recently reported second quarter figures. In terms of paying users, the company had 7.6 million paying users each month – more than Blizzard’s cash cow, World of Warcraft, and moreover, the average revenue from each of those users was $23.26, far more than a World of Warcraft subscriber pays. King took in $529 million in bookings during the quarter, 81 per cent of it from mobile devices – a seriously appealing set of figures for a company like Activision, which struggles to get even 10 per cent of its revenues from mobile despite its constant lip-service to the platform.
In buying King, Activision instantly makes itself into one of the biggest players in the mobile space, albeit simply by absorbing the company that is presently at the top of the heap. It diversifies its bottom line in a way that investors and analysts have been crying out for it to do, reducing its reliance on console (still damn near half of its revenues) and on the remarkable-but-fading World of Warcraft, and bulking up its anaemic mobile revenues to the point of respectability. On paper, this deal turns Activision into a much more broad-based company that’s far more in line with the present trajectory of the market at large, and should assuage the fears of those who think Activision’s over-reliance on a small number of core franchises leaves it far more vulnerable than rivals like Electronic Arts.
That’s on paper. In practice, though, what has Activision just bought for $5.9 billion? That’s a slightly trickier question. The company is, unquestionably, now the proud owner of one of the most talented and accomplished creators and operators of mobile games in the world. King’s experience of developing, marketing and, crucially, running mobile games at enormous scale, and the team that accomplished all of that, is undoubtedly valuable in its own right. Those are talents that Activision didn’t have yesterday, but will have tomorrow. Are those talents worth $5.9 billion, though? Without wishing for a moment to cast doubt on the skills of those who work at King, no, they’re not. $5.9 billion isn’t “acquihire” money, and when that’s the kind of cash involved we simply can’t think of this as an “acquihire” deal. Activision didn’t pay that kind of money in order to get access to the talent and experience assembled at King. It paid for King itself, for its ongoing businesses and its IP.
Open the shopping bag, and you might struggle to understand how the contents reach $5.9 billion at the till. King has one remarkable, breakthrough, enormously successful IP – Candy Crush Saga, which still accounts (not including heavily marketed spin-off title Candy Crush Soda Saga) for 39 per cent of the company’s gross bookings. No doubt deeply aware of the danger of being over-reliant on revenues from this single title, King has worked incredibly hard to find success for other games in its portfolio. But even its great efforts in this regard have failed to compensate for falling revenues from Candy Crush, and it’s notable that a fair amount of the “non-Candy Crush Saga” revenue that the company boasts actually comes from Candy Crush Soda Saga. Other titles like Farm Heroes Saga and Pet Rescue Saga are no doubt profitable and successful in their own right, and King would be a sustainable business even without Candy Crush. But it would be a much, much smaller business, and certainly not a $5.9 billion business.
Despite being generally bullish about King’s prospects, then, it’s hard to avoid the feeling that the company has done incredibly well out of this acquisition. The undoubted talent and experience of its teams aside, this is, realistically, a company with one IP worth paying for, and unlike Star Wars or the Avengers, Candy Crush is a very new IP whose longevity is entirely untested and whose potential for merchandising or cross-media ventures is dubious at best. King has done better than most of its rivals in the mobile space at applying some of the lessons of its biggest hit to subsequent games and making them successful, but it shares with every other mobile developer the same fundamental problem: none of them has ever worked out how to bottle the lightning that creates a mega-hit and repeat the success down the line. Absent of another Candy Crush game, the odds are that King’s business would slowly deflate as the air escaped from the Candy Crush bubble, until the company’s sustainable (and undoubtedly profitable) core was what was left. Selling up to Activision at a healthy premium while the company is still “inflated” by the likely unrepeatable success of Candy Crush is a fantastic move for the company’s management and investors, but rather less so for Activision.
Perhaps, though, the whole might be more than the sum of its parts? Couldn’t Activision, holders of some of the world’s favourite console and PC game IP, work with King to leverage that IP and the firm’s reach in traditional games, creating new business at the interaction of their respective specialisations? That’s a big part of what made Pixar so valuable to Disney, for example; the match between their businesses was of vital importance to that deal, and the same can broadly be said for Disney’s other huge acquisitions, Lucasfilm and Marvel. (SoftBank’s purchase of Supercell, by comparison, was rather more of a straightforward market-share land grab.) What could this new hybrid, Activision Blizzard King, hope to achieve in terms of overlap that enhances the value of its various component parts?
Certainly, Activision has some properties that could work on mobile (I’m thinking specifically of Skylanders here, though others may also fit); some Blizzard properties could also probably work on mobile, though I very much doubt that Blizzard (which retains a strong degree of independence within the group) is a good cultural fit for King, and is deeply unlikely to work with it in any manner which gives up the slightest creative control over its properties. King’s properties, meanwhile, don’t look terribly enticing as console or PC games, and conversions done this way would almost certainly defeat the entire purpose of the deal anyway, since the objective is to bolster Activision’s mobile business. The prospect of a mobile game based on Call of Duty or another major console IP may seem superficially interesting, but we’ve been down this road before and it didn’t lead anywhere impressive. Sure, core gamers are on mobile too, but they’ve by and large been nonplussed at best and outraged at worst by the notion of engaging with mobile versions of their console favourites. It’s genuinely hard to piece together the various IPs and franchises owned by King and Activision and see how there’s any winning interaction between them on the table.
This is what makes me keep returning to those other mega-deals – to Star Wars, to Marvel, to Pixar – and finding the contrast between them and Activision / King so extraordinary. Each of those multi-billion dollar deals was carried out by Disney with a very specific, long-term plan in mind that would leverage the abilities of both acquirer and acquired to create something far more than the sum of its parts. Each of those deals had a very clear raison d’être beyond simply “it’ll make us bigger.” Each of those companies fitted with the new parent like a piece of a puzzle. King’s only role in Activision’s “puzzle” is that they do mobile, and Activision sucks at mobile; there’s no sense of any grand plan that will play out.
In all likelihood, Activision has just paid a huge premium for a company which is past the peak of its greatest hit title and into a period of managed decline, not to mention a company with which its core businesses simply don’t fit in any meaningful way. King’s a great company in many respects, but its acquisition isn’t going to go down as a great deal for Activision – and we can expect to see plenty of that $5.9 billion being frittered away in goodwill write-downs over the coming few years.
Apparenlty, the total gaming hardware marker in 2014 was more than $24,936 billion in 2014 and it slightly declined in 2015 to $24,684 billion. However, in 2016 it looks like that the gaming hardware market will increase to $26.118 billion and it will reach $28.253 billion in 2017.
However the record year for gaming hardware will be three years from now as in 2018 JPR believes that the gaming hardware market is set to grow to $30.092. Of course by then we will have forgotten that Mr Peddie made his prediction so if he gets it wrong no one will remember.
|PC Gaming Hardware Market||2014||2015||2016||2017||2018|
|Total – numbers in millions||$24,936||$24,684||$26,118||$28,253||$30,092|
In his report, Ted Pollak, Senior Analyst at JPR wrote
“This cycle, unlike any for the past 15 years, will inspire gamers to upgrade their displays. 27 inch and larger 4K/UHD displays are reaching mass market pricing levels and produce an incredible experience allowing much wider field of view and greater detail. The financial outlay for these display upgrades alone is billions of dollars over the coming years”.
Jon Peddie, President of JPR adds
“In addition to the cost of the new display technology, gamers are going to need the computing muscle to drive Triple A game engines at over 60 frames per second, and that horsepower comes at a premium”. Sixty frames per second is considered the gold standard in PC gaming and many prefer even faster speeds, at least twice that number if VR is involved. ”
It is interesting to note that the PC gaming peripherals market is projected to make $3.6 billion in 2015. These are cheaper and easier to change and gamers wear out mice, keyboards and headset much faster than other components.
JPR believes that mainstream gaming notebook and desktop will have to fight with TV gaming optimised PCs including the ones from Alienware iBuyPower and a few others. We do agree that many gamers will be changing their monitors to at least 25×14 or the full 4K experience. To run high end triple A games at 4K you would need a lot of gaming power and a card such as Greenland with HBM 2 from AMD or Pascal high end class from Nvidia. Both of these will arrive in 2016. Gamers who want over 60 FPS in current high end titles might want to get two of the Geforce GTX 980 or higher end cards or a dual Fury from AMD.
If you want the VR glasses in 2016 you will need double the power but we will have to see the adoption rate of these gaming devices before we think that will take off. VR gaming will become significant segment eventually but definitely not overnight.
Over the last few years, competitive gaming has made huge strides, building a massive fanbase, supporting the rise of entire genres of games and attracting vast prize pots for the discipline’s very best. Almost across the board, the phenomenon has also seen its revenues gaining, as new sponsors come on board, including some major household names. Sustaining the rapidity of the growth of eSports is going to be key to its long term success, maintaining momentum and pushing it ever further into the public consciousness.
In order to do that, according to Newzoo, eSports need to learn some lessons from their more traditional athletic counterparts. Right now, the research firm puts a pin in eSports revenues of $2.40 per enthusiast per year, a number which is expected to bring the total revenue for the industry to $275 million for 2015 – a 43 per cent increase on last year. By 2018, the firm expects that per user number to almost double, reaching $4.63.
That’s a decent number, representing very rapid growth, but it pales in comparison to Newzoo’s estimates on the average earning per fan for a sport like Basketball, which represents a $14 per fan revenue – rising to $19 where only the major league NBA is a factor. To catch up to numbers like this is going to take some time, but Newzoo’s research has listed five factors it considers vital to achieving that aim.
Right now, MOBAs are undeniably the king of the eSports scene, and one of the biggest genres in gaming. The king of MOBAs, League of Legends, is the highest earning game in the world, whilst others like Valve’s DOTA 2 are also represent huge audiences and revenues, including the prestigious annual International tournament. Shooters are also still big business here, with Activision Blizzard recently announcing the formation of a new Call of Duty League.
Nonetheless, MOBAs are still the mainstay and if you don’t like them, you’re not going to get too deeply into competitive gaming as a fan. Although their popularity with the athletes is going to make them a difficult genre to shift, Newzoo says that broadening the slate is a key factor to growth.
The major tournaments bring players, and audiences, from all over the world, but it’s often only the very top tier of players who can find themselves a foothold in regular competition. Major territories like the US, South Korea and Europe have some local structure, but again League of Legends stands almost alone in its provision of local infrastructure. By expanding a network of regular leagues and competitions to more countries, eSports stands a much better chance of building a grassroots movement and capturing more fans.
Already a problem very much on the radar of official bodies and players around the world, the introduction of regulation is always a tough transition for any industry. However, when you’re putting up millions of dollars in prize money, you can’t have any grey areas around doping, match fixing and player behaviour at events. These young players are frequently thrust into a very rapid acceleration of lifestyle, fame and responsibility – a heady mixture which can prove to be a damaging influence on many. Just like in other sports, stars need protecting and nurturing – and the competitions careful monitoring – in order for growth to occur without scandal and harm to its stars.
Dishing out the rights to broadcast, promote and profit from eSports is a complex issue. Whilst games like football are worldwide concerns, with media rights a hotly contested and constantly shifting field, nobody owns the games themselves. With eSports, every single aspect of the games being played is a trademark in itself, with its owners understandably keen to protect them. However, with fan promotion such a key part of the sport’s growth, and services like Twitch a massive factor in organic promotion, governing the rights of distribution is only going to become a murkier and more complex business as time goes on. With major TV networks, well used to exclusivity, now starting to show an interest, expect this to become a hot topic.
Conflict between new and old media
That clash of worlds, between the fresh and agile formats of digital user-sourced broadcasting and the old network model is also going to be source of many of its own problems. One or the other, or even both, is going to have to adapt fast for there to be a convivial agreement which betters the industry as a whole. There’s currently considerable pushback from established media against the idea of eSports becoming accepted as a mainstream activity, fuelled in no small part by their audiences themselves, so a lo of attitudes need to change. Add to that the links between these media giants and many of the world’s richest advertisers and you can start to see the problem.
The console business will hit a wall in terms of sales in this generation, and that’s okay. According to Wedbush analyst Michael Pachter, the subsequent shift away from the traditional console model will be a catalyst for even more growth.
Speaking at DICE Europe last week, Pachter discussed a provocative and divisive topic: the end of the console era.
“The console installed base is as big as it’s ever going to get,” he said. “[This] generation is not going to be bigger than the last generation. We’re going to be about the same.
“The Wii U is going to sell 20 million units compared to 100 million for the Wii. The PlayStation 4 is going to sell 120 million or 130 million – that’s great. The Xbox One will sell 100 million to 110 million – that’s great. Add it all together and it’s 260 million units, maybe, and the last cycle was 270 million.”
This take on the trajectory of the PS4 / Xbox One generation must be assessed in the context of a world that contains far more people who play games than at any time in history – thanks in part to the impact of the Wii, and in larger part to the rapid emergence of smartphones and the app economy. If Pachter’s analysis proves to be accurate, it would suggest that consoles are a limiting factor on the growth potential of the games industry, putting some of the medium’s best and most alluring products beyond the reach of the vast majority of people.
“This is the last real console cycle,” Pachter continued. “I don’t mean that Microsoft, Sony and Nintendo will go bankrupt and shut down – they will not. Each of them will make another console, some people will buy them, and the next console cycle will be to this console cycle what the 3DS is to the DS. The 3DS is selling about 15 million units a year, the DS had five consecutive years where it sold more than 26 million. So about half as big.
“So when I say that this console cycle is the last console cycle, the reason is that console games shouldn’t require a console. And I’m not talking about the cloud.”
What games require, Pachter said, is a CPU, a GPU, storage, a controller, and a display. In the coming years, the need to purchase a console to access the first four will be diminished as smartphone and set-top box hardware becomes more sophisticated. By the time this console generation nears its end, “you’re going to have a CPU/GPU in your house that is connected to your television,” whether that be the latest model of the iPhone or a Fire TV box from Amazon.
The switch, Pachter suggested, was simply a matter of the hardware reaching a certain degree of technical sophistication; to use one of his own examples, the point when an affordable set-top box from Amazon can run Call of Duty, a brand chosen by Pachter due to its popularity among online console players. For a publisher like Activision that switch would be easy to justify, opening up the possibility of controlling the multiplayer revenues that currently go to Microsoft and Sony in the form of Xbox Live and PSN subscription fees.
For the consumer, the benefit is the removal of the need to purchase a console, and the ability to exert more control over their gaming habits.
“What happens when you lower the entry so nobody has to buy a console?” Pachter asked. “If Activision sells 20 million copies of Call of Duty to people with a console, how many people would buy it who don’t have a console? I’m guessing 20 million more. To make it easier for the Europeans in the room, how many more people would play FIFA if a console wasn’t required? Another 20 million.
Pachter shared some detailed speculation on how this structure might work, from a publisher charging a dollar or two for monthly access to its biggest online game, to the major publishers forming a consortium that charges one fee and portions out revenue according to which games received the most play. The point, though, is that console publishers have a clear incentive to work out the details, and the consumer has every reason to embrace the change.
“There’s plenty of 30 or 40-somethings who would like to play FIFA or Call of Duty, but they can’t,” Pachter continued. “They’re not going to buy a console for one game, and I’d say that’s true of every single [console] game made. There’s a market of probably several million people who would never buy a console to play the game, but would absolutely buy the game.”
This could be a solution to the problem that flat console hardware sales in a world crammed with gamers highlights. As the number of players on mobile and other accessible platforms continues to grow, making the biggest brands in gaming available to people who see no value in a $400 box makes a great deal of sense.
“I think the traditional gamer market – which has high standards – does broaden. But the only way you actually see a step function change in that is to pull the console out of the equation, and make it open to people who can’t afford or won’t buy a console,” Pachter said.
“I think this shift to full-game digital downloads, where everybody has the opportunity to play a game without having to invest $399 is a huge opportunity. It’s an opportunity for everyone in the value chain, except the retailer and maybe the console manufacturer.”
The rumor mill might have been a bit broken when it was announced that Microsoft was about to launch an Xbox-mini.
The rumor claimed that Microsoft would be holding a launch event in October where people could expect the company to launch the Surface Pro 4, Lumia flagships and an “Xbox One Mini.”
It was claimed that the X-box mini would be third the size of the current console and lack a Blu-Ray drive.
However Microsoft’s Phil Spencer has now debunked this theory, stating that the rumors are simply “not real”. Although he didn’t say the project didn’t exist just that the rumor that it was coming out in October was “not real.”
Given the nature of reality, and theories that the universe is a holographic game being played two-dimensional gods, we are not ready to dismiss out of hand yet.
While the Xbox One Mini definitely won’t be happening the Lumia flagships; Cityman and Talkman, new Surface tablets including the Surface Pro 4, the eagerly awaited Band 2 and perhaps even a slimmer Xbox One is still a possibility at the event.
The validity of framing the console market as a ‘race’ or a ‘war’ is open to question, but there’s no doubt that it’s a lot more fun when you do. The notion that there is a hard, immovable line between winning and losing simply doesn’t make much sense from a business perspective, but it makes for lively debate and – from an entirely selfish perspective – good copy.
For the first six months of this console generation that was certainly the case: the Xbox One tripping, stumbling and backtracking, with the PlayStation 4 marketing department lying in wait, pointed comments at the ready. Microsoft is dealing with the fallout from that disastrous period even now, its own reluctance to disclose hardware sales figures compounded by Sony’s eagerness to provide an update at every opportunity. At the last count, in July, the PlayStation 4 had sold more than 25 million units. The Xbox One, on the other hand, has sold…. well, we haven’t been given an official worldwide figure in 2015 so far.
In terms of sales, then, it’s very clear which console is ‘winning’ the generation, and it has been from the very first day. In terms of content, though, the debate is more nuanced, the outcome far less certain. Sony’s development resources have long been regarded as a unique strength when compared to Microsoft, effectively guaranteeing a superior crop of exclusive games regardless of how well the PlayStation hardware is selling. Whether that’s still true in terms of first-party studios is almost besides the point, because in terms of available, exclusive games there’s a strong argument that the Xbox has been a more attractive platform since the launch of Titanfall more than a year ago. By the end of this year, that point may well be beyond debate.
“I wouldn’t even say the gap has closed,” says Kudo Tsunoda, one of the leading executives in the Xbox games business. “We’ve got a lot more exclusive games than any other platform.”
Tsunoda and the various studios he oversees are celebrating the second Xbox showcase in less than two months. The first, at E3, is generally regarded as a key battleground within the console war, and a significant proportion of those who watched this year believed that Microsoft emerged victorious despite an impressive showing from Sony. The second, at Gamescom, was an Xbox victory by default, with Sony electing to steer clear of the event for the first time in years. Even so, Microsoft presided over 90 minutes of new games, not all of which were exclusive to the Xbox One, but none of which were on show at E3. Whether those exclusives came from first-party studios (Halo and Gears of War) or via chequebook-and-pen (Tomb Raider and Quantum Break) is largely irrelevant. For perhaps the first time in this console generation Xbox owners have an undeniable right to feel smug.
“There’s a reason we’re able to put on two shows of content together,” Tsunoda continues. “We’ve got seven exclusives coming this holiday, and then everything coming in 2016. Not just the blockbusters, but the ID@Xbox games, the indie games. We’re giving people a lot more.”
Microsoft’s early mistakes have been formative for the Xbox One, its underlying strategy switching from closed and controlled to open and inclusive. Sony recorded several huge PR victories by simply responding to those initial bad choices, but Microsoft has since proved more committed to the stance that Sony initially claimed as its own. An early indicator was Sony’s refusal to allow EA Access onto the PlayStation Network due to stated concerns that it didn’t offer “good value” to the consumer, but just as likely down to competition with its own planned streaming service, PlayStation Now. Microsoft allowed its customers to make that choice for themselves. Had you been asked to guess the stance each company would adopt even a few months before, it’s likely those roles would have been reversed.
Tsunoda repeats the idea that MIcrosoft is ‘listening to the fans’ throughout our interview, making it quite clear that it’s a message the company wants us to hear. However, while it would be naive to believe that any multinational corporation is motivated principally by altruism, the strategy for Xbox One is increasingly guided by consumer demand.
Two incoming services perfectly illustrate the degree to which Microsoft has pivoted since the days of mandatory online checks and a prohibition on used games. Xbox Preview is a more tightly controlled version of Steam Early Access, and just the sort of concept that walled gardens were formed to exclude. Backwards compatibility, meanwhile, demands little in the way of explanation. Equally, its importance cannot be overstated, to the consumers who spend so much on games every console generation, and to those who believe that companies like Microsoft should be treating their creative heritage with more respect.
“With backwards compatibility, it isn’t something that we just think gamers might want,” Tsunoda says. “We know. We’re looking for and soliciting that feedback. It was the number one most requested feature for Xbox One by far.”
Sony has no plans to match Microsoft in this respect, and the possibility of monetising those games through PlayStation Now makes it very unlikely that it ever will. For Microsoft, it’s part of a broader view of gaming with Windows 10 at its core, which should, in theory, unite the previously disparate tendrils of Microsoft’s sprawling organisation. PC and console, past and present, existing in harmony, each interacting with and complementing the other. Cross-Buy, Cross-Play, console to PC streaming; one might say that Microsoft should have been doing this for years already. According to Tsunoda, this is a first step.
“For a long time we’ve had PC gamers and console gamers who weren’t really able to play together,” Tsunoda says. “That’s why Cross-Play is still such a powerful idea. You should be able to play what you love, and play together, regardless of what device you’re playing on. It’s about connecting people.
“With backwards compatibility, it isn’t something that we just think gamers might want. We know”
“It’s a really unique value that only we can offer. You still need very gamer-focused values, but there are lots of things you can do with our technology. We’ve really got a lot more going on [than our competitors]. We’re doing things that can’t be done on any other console.
If Microsoft is pushing towards a more holistic approach to its games business, then a few reminders of its clumsier past still remain. One is perched just below the television directly to our left: Kinect, a device once positioned as an integral part of the future of Xbox, a future that Tsunoda was instrumental in selling to the press and public. These days, though, it feels additive, and that’s being kind. In more than 150 minutes of press conferences across E3 and Gamescom Kinect barely merited a single mention, while a new announcement, the Chatpad, offered a core-friendly alternative to the search and chat functions that represent a huge chunk of why anyone might still use it.
“I don’t think it’s an alternative [to Kinect]. It’s just about giving people a choice in how they can do things,” Tsunoda replies. “There’s still a lot of great voice capabilities that you can use with Kinect, but there’s also a lot of great possibilities for communication with the Chatpad. You can also customise a lot, with specific buttons for specific functions. With everything we do, we’re trying to give people the choice.”
In terms of games, though, Tsunoda offers only Just Dance 2016 as a specific example – which is developed and published by Ubisoft – accompanied by the vague promise that, “There’s still Kinect games coming as well.” This may be what ‘choice’ starts to look like when Microsoft loses faith in one of its possible futures. It should be noted that Kinect is now listed under the “More” section on the Xbox One Accessories page, beneath “Controllers,” beneath “Headsets and Communication,” grouped in the same vague category as the Xbox One Digital TV Tuner and the Xbox One Media Remote.
The fear of obsolescence created by the doldrum in which Kinect now resides also haunts the HoloLens, another promising device that Microsoft has just finished thrusting into the public eye. It stole the show at E3 with an immaculately orchestrated Minecraft demo, only for its limited field-of-view to be scrutinised by the press, and its early utility as gaming hardware to be questioned by none other than the CEO of Microsoft, Satya Nadella.
For Tsunoda, who is also closely involved with the development of HoloLens, the difference between watching a demonstration and actually experiencing it first-hand is more pronounced than any product he’s ever worked on – including Kinect. However, there is more common ground between the two devices than one might think.
“You should think about it in the same way that you would a phone or your computer. It does a lot of things,” Tsunoda says. “Obviously, gaming is a big part of what you do on those machines as well. But that’s what it is: an untethered holographic computer. You can do a lot in the gaming and entertainment space, but it has a lot of other functionality as well.
“Microsoft is a leader in depth-sensing technology: with Kinect, but also the stuff we’re doing with HoloLens as well. A big part of what we’re doing there is an environmental understanding that comes from having pushed our knowledge in depth-sensing. That’s what you’ll see us do as a company. [Kinect] is still a part of the platform, and there’s still Kinect games coming of course, but then also we’re pushing that depth-sensing technology forward with what we’re doing with HoloLens.”
It’s all a part of Microsoft’s future of gaming, whatever that turns out to be. Right now, though, Xbox might finally have emerged from PlayStation’s shadow.
As the 7th console generation was coming to an end several years ago, there was much pessimism regarding the impending launch of the 8th generation. Just as 7th generation software sales were starting to lag, mobile gaming exploded, and PC gaming experienced a renaissance. It was easy to think that the console players were going to be going elsewhere to find their gaming entertainment by the time the new consoles hit the scene. However, the 8th generation consoles have had a successful launch. In fact, the Sony and Microsoft consoles are as successful as ever.
A comparison of the year over year console software sales suggests that the 8th generation is performing better than the 7th generation – provided you exclude the Nintendo consoles. The following graph shows physical and digital software sales for years 1 through 3 of each generation for the Xbox and PlayStation platforms.
The annual numbers take into account the staggered launch cycle, so year 1 comprises different sales years for Xbox 360 and PS3. The data shows that the Sony and Microsoft platforms have outperformed their 7th generation counterparts, especially in the first two years of the cycle. The 8th generation outperforms the 7th generation even in an analysis that excludes DLC, which now accounts for an additional 5-10 percent of software sales.
However, the picture is far different if we include the Nintendo platforms. The graph below shows the same data, but now includes the Wii and Wii U in their respective launch years.
The data shows how much the “Wii bubble” contributed to the explosive growth in software sales in 2008, the year the Wii really took off as a family and party device. This data corroborates a broader theme EEDAR has seen across our research – new, shortened gaming experiences that have added diversity to the market, especially mobile, have cannibalized the casual console market, not the core console market. People will find the best platform to play a specific experience, and for many types of experiences, that is still a sofa, controller, and 50 inch flat-screen TV.
The shift in consoles to core games is further exemplified by an analysis of sales by genre in the 7th vs. 8th generation. The graph below shows the percentage of sales by genre in 2007 versus 2014, ordered from more casual genres to more core genres. Casual genres like General Entertainment and Music over-indexed in 2007 while core genres like Action and Shooter over-indexed in 2014.
It has become trendy to call this console generation the last console generation. EEDAR believes one needs to be very specific when making these claims. While this might be the last generation with a disc delivery and a hard drive in your living room, EEDAR does not believe the living room, sit-down experience is going away any time soon.
The PlayStation business has had another phenomenal quarter in the first four months of 2015, selling three million PS4 units and turning in an operating income of $160 million from revenues of $2.365 billion. There are now 25.3 million PlayStation 4 units in the hands of players worldwide – a number achieved in less than two full years.
The console continues to be the company’s fastest seller – outpacing the PS2, which took two years and eight months to reach the 20 million mark. Furthermore, thanks to dropping production costs for PS4 hardware, a 12 per cent increase in sales from the same quarter last year translated to a massive 350 per cent rise in operating income.
A strengthening dollar again hurt Sony’s bottom line, having an estimated impact of 15.6 billion Yen on the revenue total of 288.6 billion Yen, but this was massively outweighed by the increase in sales and the efficiency gains of Sony’s operation. On the strength of the results, Sony has added another 20 billion Yen in operating income to the sector’s full year forecast.
The sales rate of PS4 shows a healthily steady growth in player base, returning to a gradual upswing after a huge blip in Q3, 2014. Sony has upgraded it full year forecast from 16 million units to 16.5 as a result – a figure which would show a substantial increase on 2014′s 14.8 million total. By Sony’s own reckoning, the end of Q1 2016 will see nigh on 40 million of the consoles in homes. Vita sales once again went unmentioned in the report, whilst the gradual decline of PS3 continued.
Hardware wasn’t the only success story. Network, (“Network includes network services relating to game, video, and music content provided by Sony Network Entertainment Inc.”) mad almost as much in revenues, netting around 105.8 billion Yen compared to Hardware’s 129.5 billion. The Other category (Other includes packaged software and peripheral devices) brought in 30.6 billion.
Overall, the corporation turned a healthy profit, banking $676 million in net from sales of nearly $15 billion. Whilst the PlayStation business is very healthy indeed, it’s far from Sony’s only, or even biggest, success story: Devices, Imaging, Financial Services and Music all continue to return a higher operating income.
The launch of Sony’s PS4 and Microsoft’s Xbox One consoles in China hasn’t attracted much fanfare, perhaps because both firms were aware from the outset of what an uphill struggle this would be, and how much potential for disappointment there was if expectations were set too high. Last week saw the first stab at estimating figures, from market intelligence firm Niko Partners, who reckon that the two platforms combined will sell a little over half a million units this year; not bad, but a tiny drop in the ocean that is China’s market for videogames.
These are not confirmed sales figures, it’s important to note; market intelligence firms essentially make educated guesses, and some of those guesses are a damn sight more educated than others, so treating anything they publish as hard data is ill-advisable. Nonetheless, the basic conclusion of Niko Partners’ report is straightforward and seems to have invited no argument; the newly launched game consoles are making little impact on the Chinese market.
There are lots of reasons why this is happening. For a start, far from being starved of a much desired product, the limited pre-existing market for game consoles in China is actually somewhat saturated; the country is host to a thriving grey import market for systems from Hong Kong, Taiwan and Japan. This market hasn’t gone away with the official launch of the consoles, not least because the software made officially available in China is extremely limited. Anyone interested in console gaming will be importing games on the grey market anyway, which makes it more likely that they’ll acquire their console through the same means.
Moreover, there’s a big cultural difference to overcome. Game consoles are actually a pretty tough sell, especially to families, in countries where they’re not already well-established. Their continued strength in western markets is largely down to the present generation of parents being accustomed to game consoles in the home; cast your mind back to the 1980s and 1990s in those markets, though, and you may recall that rather a lot of parents were suspicious of game consoles not just because of tabloid fury over violent content, but because these machines were essentially computers shorn of all “educational” value. I didn’t own a console until I bought a PlayStation, because my parents – otherwise very keen for us to use and learn about computers, resulting in a parade of devices marching through the house, starting from the Amstrad CPC and ending up with a Gateway 2000 PC in which I surreptitiously installed a Voodoo 3D graphics board – wouldn’t countenance having a SNES in the house. That’s precisely the situation consoles in China now face with much of their target audience; a situation amplified even further by the extremely high-pressure nature of Chinese secondary education, which probably makes parents even more reluctant than mine when it comes to installing potentially time-sucking entertainment devices in their homes.
Besides; Chinese people, teens and adults alike, already play lots of games. PC games are enormously popular there; mobile games are absolutely huge. This isn’t virgin territory for videogames, it’s an extremely developed, high-value, complex market, and an expensive new piece of hardware needs to justify its existence in very compelling terms. Not least due to local content restrictions, neither PS4 nor Xbox One is doing that, nor are they particularly likely to do so in the future; the sheer amount of content and momentum that would be needed to make an impression upon such a mature landscape is likely to be beyond the scope of all but a truly herculean effort at local engagement and local development by either company – not just with games, but also with a unique local range of services and products beyond gaming – and neither is truly in a position to make that effort. It’s altogether more likely that both Sony and Microsoft will simply sell into China to satisfy pre-existing local demand as much as possible, without creating or fulfilling any expectations higher than that.
Is this important? Well, it’s important in so much as China is the largest marketplace in the world, with a fast-growing middle class whose appetite for luxury electronics is well-established. Apple makes increasingly large swathes of its revenue in China; companies with high-end gaming hardware would like to do something similar, were the barriers to success not raised so high. Without building a market in China, the global growth potential of the console business is fairly severely limited – the established rich nations in which consoles are presently successful have a pretty high rate of market penetration as it is, and growing sales there is only going to get tougher as birth-rates fall off (a major factor in Japan already, but most European and North American states are within spitting distance of the Japanese figures, which is worth bearing in mind next time someone shares some moronic clickbait about sexless Japan on your Facebook feed). So yes, the failure of consoles to engage strongly in China would be a big deal.
The deal looks even bigger, though, if you view China as something of a bellwether. It’s a unique country in many regards – regulations, media environment, culture, sheer scale – but in other regards, it’s on a developmental track that’s not so different from many other nations who are also seeing the rise of an increasingly monied urban middle class. If the primary difficulty in China is regulations and content restrictions, then perhaps Sony and Microsoft will find more luck in Brazil, in India, in Indonesia, in the Philippines and in the many other nations whose rapid development is creating larger and larger audiences with disposable income for entertainment. In that case, China may be the outlier, the one nation where special conditions deny consoles a chance at market success.
If the problem with China is more fundamental, though, it spells trouble on the road. If the issue is that developing nations are adopting other gaming platforms and systems long before consoles become viable for launch there, creating a huge degree of inertia which no console firm has the financial or cultural clout to overcome, then the chances are that consoles are never going to take root in any significant degree in the new middle class economies of the world. Games will be there, of course; mobile games, PC games, games on devices that haven’t even been invented yet (though honestly, Niko Partners’ tip of SmartTV games as a growth market is one that I simply can’t view from any angle that doesn’t demand instant incredulity; still, who knows?). Consoles, though, would then find themselves restricted geographically to the markets in which they already hold sway, which creates a really big limit on future growth.
That’s not the end of the world. The wealthy nations which consume consoles right now aren’t likely to go anywhere overnight, and the chances are that they’ll continue to sustain a console audience of many tens of millions – perhaps well over 100 million – for years if not decades to come. Moreover, the future of games is inevitably more fragmented than its present; different cultures, different contexts and different tastes will mean that it will be a truly rare game which is played and enjoyed to a large degree in all quadrants of the globe. There’ll still be a market for a game which “just” does great business in North America, Europe and so on; but it’ll be an increasingly small part of an ever-growing market, and its own potential for growth will be minimal. That, in the end, is a fairly hard cap on console development costs – you can’t spend vastly more money making something unless your audience either gets bigger, or more willing to pay, and there’s little evidence of either of those things in the console world right now.
The real figures from China, if and when they’re finally announced, will be interesting to see – but it’s unlikely that Niko Partners’ projections are terribly far from the truth. Whether any console company truly decides to put their weight behind a push in China, or in another developing country, over the coming years may be a deciding factor in the role consoles will play in the future of the industry as a whole.
You know a company has had a particularly miserable E3 when, before the show is even over, one senior executive finds himself having to officially deny that another senior executive has apologized for the state of their E3 offerings. That’s exactly the situation Reggie Fils-Aime found himself in earlier this week, as the disappointment at Nintendo’s extremely weak showing crystallized around a single tweet sent by company president Satoru Iwata. The tweet was in Japanese; various translations floated around, some more accurate than others, and the media gleefully seized on an interpretation which had Iwata promising to “do better” at E3 in future. It was the perfect stick with which to beat Nintendo for failing to live up to the standards accomplished by Microsoft and, even more spectacularly, by Sony on the previous day; look, even the company’s own president thinks it was rubbish!
As it happens, Fils-Aime is quite right; Iwata did not apologize for Nintendo’s conference. He said that the company was listening closely to feedback and would work hard, in future, to meet the expectations of even more people. This was prefaced with a comment related to the extremely late hour at which the show was broadcast in Japan (it didn’t start until 1am JST; the Sony conference the previous day was at a rather more comfortable 10am JST, and nobody in Japan really cares about the Microsoft conference). In context (and context is king in the Japanese language), Iwata’s comment is clearly a generic “thanks for your feedback, we’ll work hard in future too”, coupled with a tacit promise to try not to mess up the scheduling for Japanese viewers in future.
Iwata didn’t apologize. Of course he bloody didn’t; the Nintendo boss is often frank and refreshingly direct in his manner, but the content of his statements is always, always on-message. The idea that he was going to take to Twitter to say “sorry, that was a load of old bollocks wasn’t it?” after his company’s event is ludicrous. Yet, at the same time, the fact that it seemed plausible to so many people is a reflection of something troubling; Nintendo’s event was genuinely bad enough to make an apology from Iwata himself seem, if not realistic, then at least not ridiculous.
Nintendo, or at least a part of Nintendo – perhaps the Japanese part – didn’t want to be at E3. That’s partially related to NX; the company is the only platform holder which has acknowledged that it’s working on future hardware, but isn’t going to say anything further about it until 2016. It’s also too early to talk about its mobile titles (and E3 probably isn’t the venue for that anyway), and Iwata confirmed prior to the event that it wouldn’t talk about its health, lifestyle and education related projects at a purely gaming event like E3. Nonetheless, there’s plenty that Nintendo could have talked about but didn’t. The choice to reveal only games that are locked in for release within the next 10 months or so isn’t confirmation of a time-of-death being decided for Wii U (they did the same thing for 3DS, which has an installed base twice the size of the PS4 and isn’t going anywhere any time soon), it’s a decision which was taken, along with the decision to do an online broadcast rather than a live event – cutting out the whooping crowds and the spectacle that usually defines an E3 conference.
These are decisions which say, “we’re not playing your game” – the game in question being E3 itself. Nintendo doesn’t feel like it fits well with E3 right now. It’s not just troubled by the dismal sales of the Wii U, it’s also deeply uncomfortable with being the only major company in the industry that’s still seriously committed to family entertainment. It knows that no matter how wonderful its software and franchises are – and I maintain that Nintendo is in a genuine golden age regarding the quality of its games – they make problematic bedfellows for the mainstream of distinctly adult-focused games and the monetization of violent nostalgia for thirty-somethings. I think it’s genuinely wonderful that the games industry’s wings are spread so wide, even in the AAA space, that it can accommodate both the charming, gentle fun of Yoshi’s Wooly World and the gut-wrenching, visceral violence of the Doom reboot; at the same time, I can understand why the creators of the former don’t see much value in investing heavily in promoting it alongside the latter. Wrong place, wrong time, wrong audience. It’s no accident that one of the very few third-party games to appear in the Nintendo event was Skylanders, a hugely successful franchise that’s equally uncomfortable standing shoulder to shoulder with Call of Duty and Assassin’s Creed.
By going digital rather than having a staged event, by replacing its executives with loveable puppets, by giving developers lengthy, meandering videos to chat about their creative process after showing off their new trailers, by refusing to talk about anything but the immediate future of its software line-up – by all these decisions and more, Nintendo said “we’re not playing the E3 game” and attempted to dodge the inevitably negative contrasts with Sony and Microsoft.
It didn’t work. It didn’t work because it’s an intrinsically dishonest approach, one which not only failed to establish a “Nintendo difference” that denied negative contrasts, but which also robbed the company of the chance to make a decent fist out of its showing. Nintendo hobbled its own event, making it even more disappointing than it needed to be, and all it achieved was to make itself look even weaker, even more troubled, next to the might of Sony and Microsoft.
Here’s what Nintendo should have done – should have had the courage to do – nothing. They should have held no digital event. Some of Nintendo of America’s activities, like the entertaining and light-hearted Nintendo World Championships, fit nicely with the week, but the digital event shouldn’t have happened at all. The company is absolutely correct to think that its approach and its products don’t fit E3 as it stands, but absolutely wrong to think that it can avoid the resulting negativity by just down-scaling its involvement. Pick a lane and stick with it; given the choice to go big or go home, Nintendo’s decision ought to have been “go home”, not “can’t we just go a bit small and hope for the best?”
This would not be unprecedented. Faced with a similar disconnect between their games and much of the rest of the industry’s direction, Nintendo – by far the largest games company in Japan – has spurned involvement in the Tokyo Game Show for many, many years. Being at TGS makes no sense for the company. It can achieve better exposure for its games in a more positive environment by holding its own event, digital or otherwise, at a different time; a month or two before the show, or after the show. This decision has never hurt Nintendo one jot – not in the way that a rubbish, half-hearted TGS conference every year would have.
Precisely the same logic applies to E3. Imagine if Nintendo had skipped E3 entirely; sure, there would have been a bit of hand-wringing and pearl-clutching in the media over it, but it would have been over soon, and a few people writing “Nintendo were conspicuous by their absence” in their show reports is hardly the end of the world. Then this week’s digital event could have been held as an ordinary digital event a month or six weeks later; call it “Nintendo’s preview of the next six months”, or whatever. In that context, it would actually have been a pretty great show. Tack on a few seconds of new footage from the upcoming open-world Zelda game and one of Miyamoto’s work-in-progress Gamepad titles, and you’d have a digital event that everyone would consider pretty strong, instead of an E3 show that everyone considered awful and weak.
To make this work, though, Nintendo needs to commit to the strategy. This year, it tried to have its cake and eat it; to participate in E3 without committing to it, without making a big deal of it. It failed so miserably that the Internet spent a few hours genuinely believing that Iwata had apologized for the whole sorry affair. Skipping E3 entirely – or at the very least, dropping all pretense of holding a conference during E3 week – would have been preferable, and ought to be the company’s strategy for the future.
By examining trends between the digital and physical ecosystem, EEDAR has found the digital space to be increasingly driving the future of new console game publishers.
In recent years, the physical games market on consoles has been experiencing a consolidation of publishers and a downturn in the number of games released. From 2008 to 2014, the number of games released on the physical format across Microsoft, Nintendo, and Sony consoles declined from 383 (in 2008) to 145 (in 2014).
Conversely to the physical games’ market, the digital space has been growing considerably within this same time frame. Thanks to the growing focus of online digital ecosystems on consoles, more publishers than ever are releasing console games. In 2008, there were 102 digital-only games released across all consoles; in 2014, there were 279 digital-only games released, according to release data taken from EEDAR’s internal database which tracks all physically and digitally released games on these platforms.
EEDAR defines the Digital Only category as games that do not have a simultaneous (within 90 days) physical release. The Physical + Digital category encompasses most AAA game releases which see simultaneous physical and digital releases, and the Physical Only category consists of games that do not also appear on digital storefronts. Nearly every title released today on consoles also makes an appearance on the console’s digital storefront. The Digital Only category by itself accounts for 66 percent of total game releases. This digital ecosystem is not only reinvigorating game releases, but the number of active publishers has been increasing considerably.
Since 2011, the Traditional Market (defined as Physical + Digital and Physical Only releases) has seen a decline in the number of active publishers. In 2014, there were only 46 different publishers releasing new games compared to the 82 publishers active in 2011. While the traditional market continues to be more dominated by the few larger AAA publishers, the digital space has become a hotspot for numerous smaller publishing companies.
The 8th generation of consoles has caused a resurgence in publisher activity in the digital-only space. Thanks to the growing digital ecosystem and more robust digital storefront experiences on the 8th-gen consoles, publishers continue to flock to the digital games space. In 2014, the total count of publishers releasing digital-only games in the console gaming space was the highest in history at over 146 different publishers.
In the Digital Only market, game releases are more spread across the active publishers. For each active yearly publisher, games released per publisher has been decreasing within the digital-only space. This represents a market with a diverse range of publishers where the larger, more established publishers do not overshadow the presence of other publishers.
Amazon has looked at the gaming market and felt that it is an area it can make a pile of dosh.
So far its games have been restricted to mobile devices. But it looks like that’s about to change: Amazon Game Studios is currently hiring for what it describes as an “ambitious new PC game project using the latest technology.”
It looks like this will be Amazon’s first ever PC release. Amazon hired notable developers like Kim Swift, designer of Portal, as well as Clint Hocking, who previously worked on franchises like Far Cry and Splinter Cell.
It has spent a small fortune licensing the CryEngine, the same one used to make high-end PC games like Crysis 3 and bought the game streaming service Twitch last August for $970 million, and made gaming a big focus for its Fire TV media box.
In a statement Amazon said: “We believe that games have just scratched the surface in their power to unite players,” the job posting reads, “and will produce some of the future’s most influential voices in media and art.”
There’s something genuinely surreal about sitting down to write an article about region locking in 2015. It feels archaic and almost nostalgic; I might as well be writing something about blowing into cartridge ports to get games to work, or bemoaning the long load times for cassettes. Yet here we are. Years into the era of digital distribution, long after we reached the point where it became technically harder to prevent customers from accessing games from anywhere in the world than it is to permit the same, region locking is back in the news. Thanks, Nintendo.
The focus of this week’s headlines is the Humble Bundle promotion which Nintendo is running for a number of indie titles on 3DS and Wii U. It’s a great deal for some excellent games and is raising money for a solid cause; plus it’s wonderful to see console platform holders engaging with the Humble Bundle approach, which has been so successful at bringing indie games (and other creative works) to wider audiences on the PC. It ought to be a win, win, win for Nintendo, gamers and indie developers alike.
Unfortunately, though, the bundle only works in the Americas; North America and some bits of Central and South America. Customers elsewhere are entirely locked out, a matter which has been a source of deep frustration not only to those customers, but also seemingly to Nintendo’s own staff working on the project. The result is that what ought to have been a straightforward PR win for the company has turned bittersweet; there has been more widespread news coverage of the region locking debacle in the past few days than there has been for the bundle itself.
Although this is a terrible shame for the developers involved – and I sincerely hope that Nintendo can pull its thumb out of its backside and launch an international version of the bundle in short order – no sympathy is due to Nintendo in this situation. It’s a problem entirely of the company’s own making; the firm made a deliberate and conscious decision to embrace region locking even as the internationalisation of digital distribution made that look increasingly ridiculous, and until that stubbornly backwards piece of decision making is reversed, it’s going to continue causing PR problems for the firm, not to mention genuine problems for its most devoted customers.
Remember, after all, that the rest of the gaming world has ditched region locking en masse – Sony gave it up with the PS3, even making it painless to use digital content from different regions by creating multiple accounts on the same console, while Microsoft made region locking optional on Xbox 360 (making a bit of a mess where some publishers enforced it and others didn’t) before ditching it entirely on the Xbox One. At the same time Nintendo, ever the merry contrarians, went the opposite direction, not only maintaining region locking on the Wii and Wii U, but even extending it to the 3DS – in contrast to the company’s prior handheld consoles, which had been region free.
The idiocy of a region locked handheld is staggering; these are systems which are quite simply at their best when you’re traveling, yet lo and behold, Nintendo don’t want you to buy any games if you go on holiday or on a business trip. The excuses trotted out were mealy-mouthed corporate dishonesty from start to finish; it was all about protecting customers, honest, and respecting local customs and laws. Utter tosh. Had those things been a genuine issue, they would have been an issue in the previous decades when Nintendo managed to sell handheld consoles without region locking; they would also have been an issue for Sony and Microsoft when they removed region locking from their systems.
In truth, there’s only one reason for region locking in this day and age – price control – and Nintendo’s calculation must have been that they had more to lose from the possibility, real or imagined, of people buying cheaper 3DS games from countries overseas, than they had to lose from annoying a chunk of their customer base, be they keen gamers who wanted to try out titles unlikely to be released in their regions, expats who want to play games brought from their home countries or parents who find that a game bought in the airport on the way home from holiday results not in a pacified, happy child on the flight but in an angry, upset child with a game that won’t work.
In Nintendo’s defence, Satoru Iwata has recently been musing publicly about dropping region locking from the Nintendo NX, whenever that turns up. That the company is clearly planning to move down that path does rather confirm that it’s been fibbing about its motivations for region locking all along, of course, which might be why Iwata is being cautious in his statements; it’s a shame if such face-saving is the reason for Nintendo failing to keep up with industry moves in this regard, because the company is going to keep being periodically beaten with this stick until the problem is fixed.
Admittedly, there would be problems with removing region locking from its existing consoles – not least that Nintendo’s agreements with publishers probably guarantee the region locking system, so even if it could be patched out of the 3DS and Wii U with a software update, that can’t happen legally due to the contracts it would breach. What Nintendo could and should do, however, is to offer gamers a gesture of good faith on the matter by dropping region locking from all its first-party software from now on – and perhaps emulating Xbox 360 era Microsoft by making it optional for third-party publishers as well. I can envisage no legal barrier to that approach; it would earn the company enormous kudos for responding to its audience and dealing with the problem, and would cost them precisely nothing. There aren’t that many easy PR wins floating around the industry right now; Nintendo should leap on this chance to show itself to be on the customers’ side.
Wheels turn slowly in Kyoto, though, and it’s probably too much to expect the company to react in a startup-like way to the region locking issue. In some ways it’s Nintendo’s strength that it reacts slowly and thoughtfully rather than jumping on every bandwagon, but in recent years, it’s also been a weakness far too many times – and the thoroughly wonderful software that the company has been turning out in the past few years, perhaps the finest line-up it’s produced in decades, has been regularly undermined by bad decisions in marketing and positioning of its platforms, many of which can be traced to a failure to understand where the market is and where it’s moving.
Region locking isn’t the biggest problem. Fixing it would be cheap and easy but would hardly be a panacea for Nintendo’s issues – but it’s a problem that’s symptomatic, emblematic even, of the broader problems Nintendo has with putting its customers first and applying the same care and attention to its corporate aspects which it always applies to its software development. Fix a problem like this in a proactive, rapid way, and we might all start to believe that the company has what it takes to get back on top.
At Sony’s 2015 Investor Relations Day today, Sony Computer Entertainment president and global CEO Andrew House detailed the company’s strategy for the coming year, including how it will address some shortcomings.
House began his presentation on a positive note, talking up PlayStation 4 as “the fastest selling hardware platform in our history,” showing better-than expected growth and pushing PlayStation Plus subscriptions to twice what they were in fiscal year 2013. He said the company has a competitive advantage for the moment, and laid out three ways it hopes to maintain that. In addition to next year’s launch of the Project Morpheus virtual reality headset and continued cost reduction efforts, House said the company needs quality software.
“We are working very hard to continue very strong support from third-party pubs and devs,” House said. “Our first-party lineup is a little sparse this year, so I think this places even greater emphasis on getting good third-party support.”
That doesn’t necessarily mean exclusive third-party support. To date, House said Sony has been primarily trying to get multiplatform developers to simply take advantage of features the PS4 has over the competition, like SharePlay, or maybe include extra content in the PS4 version or give players early access to add-on content. Third-party exclusives are still an option, just not a frequently used one.
“I will admit that these are, in the current publishing landscape, few and far between, but we were able to announce a full exclusive around a franchise like Street Fighter so that Street Fighter 5 is a complete exclusive for PlayStation 4,” House said, adding, “Although given publishing dynamics and development costs, those are increasingly difficult to secure.”
House also talked about the decline in Sony’s other platforms. As much as the PS4′s growth has exceeded expectations, so too has the PlayStation 3′s decline. House said the system’s price simply isn’t as competitive in the market as the PlayStation 2 and PSone were after their successors launched, and added that the shift toward more connected console experiences has also made less capable offerings less attractive.
House also cast a dim view of the company’s handheld business. While he noted that the Vita platform remains “strong and vibrant” in Asia and Japan, his outlook for the current fiscal year included declines in the US and Europe. Additionally, he referred to the PlayStation Vita and its microconsole counterpart the PlayStation TV as “legacy platforms” when discussing a write-off of hardware components for the two.
“I would characterize 2015 as the beginning of a harvest period for the PlayStation 4 platform,” House said. “The beginning of a harvest period. That being said, we are also undertaking to invest in the future, and 2015 will also be a year of investment.”
That investment will be focused on a few areas. There’s the Morpheus, of course, as well as continued spend on original PlayStation entertainment content like the TV show Powers (which was recently greenlit for a second season). On top of that, House said Sony would be investing in the expansion of its PlayStation Vue television streaming platform and a continued re-architecture of its PlayStation Network with an eye toward increasing stability and reducing maintenance downtime.
Hackers from Brazil have managed to discover a new exploit for the PS4 which enables them to bypass the DRM on any software and games.
A couple of weeks ago, a number of electronic stores in Brazil had been advertising the means to copy and run a series of ripped retail games on the console.
At the time little was known about the hack back then, but information gradually began to trickle out from customers and make its way around the web. Please see below for commentary from Lancope.
Gavin Reid, VP of threat intelligence, Lancope said that Sony was playing an arms race against groups that benefit from the abilities to copy and share games.
The hack originates from a Russian website and has been pushed into the public by Brasilian retailers. The hack isn’t necessarily a jailbreak for the PS4, nor is it really a homebrew technique.
What they did was use a retail PS4, with several games installed on it, with it’s entire game database and operating system (including NAN/BIOS). This was then dumped onto a hacked PS4 via Raspberry Pi.
The entire process costs about $100 to $150 to install 10 games and $15 per additional game.
“Open source groups like Homebrew with more altruistic motivations of extending the functionality of the console alongside groups selling modified consoles specifically to play copied games and of course the resell of the games themselves at fraction of the actuals costs. This has happened historically with all of the major consoles. It would be highly unlikely not to continue with the PS4,” he said.