It appears that the Ouya is going to be a bit delayed.
This is good news though, as it is being delayed because the console developers have more cash to spend on it, $15m more to be precise.
Ouya already raised around $7m on Kickstarter, and now, when it should be taking its last steps towards completion, it has had almost twice as much more injected into it by lovely venture capitalists.
We were expecting the console in early June, but that has slid back to 25 June. The time and money will in part be used to solve an issue with sticky buttons, something that usually only happens once consumers have taken some hardware home with them.
The money comes from venture capital firms and other companies including Kleiner Perkins Caufield & Byers (KPCB), Nvidia, Shasta Ventures, and Occam Partners. KPCB’s general partner Bing Gordon will join the Ouya board of directors as a result.
“We want Ouya to be here for a long time to come,” said Julie Uhrman, Ouya founder and CEO.
“The message is clear: people want Ouya. We first heard this from Kickstarter backers who provided more than $8 million to help us build Ouya, then from over 12,000 developers who have registered to make an Ouya game, next from retailers who are carrying Ouya online and soon on store shelves, and now from top pioneering investors.”
Gordon is in charge of digital investments at KPCB and is a veteran of the games industry, having started at Electronic Arts in 1982.
“Ouya’s open source platform creates a new world of opportunity for established and emerging independent game creators and gamers alike,” he said.
“There are some types of games that can only be experienced on a TV, and Ouya is squarely focused on bringing back the living room gaming experience. Ouya will allow game developers to unleash their most creative ideas and satisfy gamers craving a new kind of experience.”
Ouya consoles should start arriving in living rooms on 25 June. If you want one, you are going to have to come up with around $100 dollars, plus another $50 dollars if you want two controllers.
Ouya, the open Android-based console designed by Yves Behar, is being shipped to its Kickstarter backers today, and the company officially announced this week at GDC that it will hit retailers in the US, UK and Canada on June 4. Ouya is promising “hundreds” of titles for the June 4 release and the $99 console will be available at Amazon, Best Buy, GAME, GameStop, Target, and the store on OUYA.tv. Additional controllers will be sold for $49.99. And for digital purchases, consumers will be able to get pre-paid cards with redeemable codes at retail if they wish.
The company said that over 8,000 game developers worldwide are currently developing games, including both up-and-comers and more well known game makers like Square Enix, Double Fine Productions, Tripwire Interactive, Vlambeer, Phil Fish’s Polytron Corporation, and Kim Swift’s Airtight Games. “The majority of devs so far are experienced devs who’ve never built an Android game before. About 1 out of 5 have never even built a game before,” Ouya CEO Julie Uhrman said that at the GDC unveiling. She boasted that Ouya “already has more titles a couple months before launch than any console has ever launched with.”
The Ouya hardware itself is even smaller than we had previously thought (think Rubik’s Cube or smaller), and its sleek design and brushed aluminum is pleasing to the eye. Uhrman, however, stressed the controller more than anything else. “What we spent the most amount of time on is the controller. We really want this to be our love letter to gamers,” she said, adding that Ouya focused on the ergonomics, the weight, the feel, and wanted it to be a precise, accurate controller. “This is one of the pieces of Ouya that evolved a lot based on early supporter feedback,” she continued.
Apparently, the feedback led to numerous changes on the controller in terms of button placement, and the style of d-pad. The team found out that many preferred a cross-style d-pad than a disc because it’s superior for fighting games. Also, the engineers retooled the tension of the analogs and the design of shoulder buttons. And Ouya even made the responsiveness and speed of the center touch pad customizable. In this journalist’s hands, it felt comfortable and familiar while playing a few titles.
After showing off the hardware, Uhrman dived into the user interface of Ouya. The whole UI is incredibly streamlined, with four categories and an apps-like layout. The four categories are Play, Discover, Make, and Manage (which is for settings). Play is simply where anything you’ve downloaded – games or music or video apps – will be placed. Discover is the store, and it’s been designed to encourage people to “find the best games.” For example, sub-selections in Discover include featured channels like Go Retro, Hear Me, Genres, and Sandbox. The plan is to offer more descriptive names for games within genres.
“The way games get exposed in the genre list is based on what we call the O-rank, which is our fun algorithm. It’s how we rank great games. A lot of app platforms today use downloads as a metric or they use revenue as a metric and we don’t think that’s a good way to say if it’s a good game,” Uhrman said. “You could download a game and never play it again. And with the free-to-try model, revenue isn’t necessarily the best model either. What is [a good metric] is what proves that the game is fun, and that’s engagement. So things like how long you have played a game, how many times you’ve played that game over a certain period of time. How quickly from the time you boot up Ouya, which is an always-on device, do you play that game… It’s those types of engagement metrics that we think prove it’s a fun game.”
Another interesting area within Discover is Sandbox, which offers developers an opportunity to put builds up and ask people to thumb it up. The idea is for great games to get out of the Sandbox and be searchable and merchandized. It encourages developers to market their games and promote them to fans. Once you get out of Sandbox you know the people next to you have great quality games, Uhrman explained.
The Make channel is an area that appears to still be in flux. Uhrman said the goal is to serve two audiences, gamers and developers, equally. While Make is a place where a developer can upload early builds, over time it’ll be a place for devs to communicate with fans. “We also can grow it to be, what if you want to make a game, here’s how to market a game, etc. We’ll look to devs and gamers for feedback on how to evolve the section,” Uhrman said.
A console that’s as open as Ouya should have a fairly simple submission process for developers right? Uhrman confirmed that it’s not overly complicated and should be something most can complete within an hour. “It’s something we thought a lot about given that we’re an open platform… but we wanted to make sure that there are good quality games, at least to the extent that it was optimized to the television and for the controller. So the guidelines isn’t necessarily a quality review, but it checks if there’s malware, does it break or freeze often, does it use our controller schema in the right way, we need to make sure there’s no IP infringement, no pornography, does it elicit real-world violence, you are who you say you are kind of thing – that’s the review. We try to keep it under an hour. Developers can choose to go live immediately or they can choose a certain time,” she detailed.
Curiously, there’s been no partnership reached with the ESRB to rate the games in North America. Right now, the games will be self-rated by devs and community reviewed. Given that Ouya is being sold in mainstream retail, however, we do have to wonder if this will pose potential problems for the company in an atmosphere where some people are still pointing fingers at violent video games. “We’ll take it as it comes; right now we want to expose great content from any type of developer and we do have the thumbs-up/like feature or the report if this is abuse on the system,” responded Uhrman, adding that “We basically say that we can change the rules at any time and we can reject the game for any reason that doesn’t fit our content guidelines – we want everybody on Ouya to have a great experience.”
Ratings aside, one of the big questions surrounding Ouya is whether or not it can truly carve out a market for itself in the console space as industry veterans Sony and Microsoft prepare to launch their respective next-generation systems. The games we saw on Ouya are not graphically intense and are very indie in nature. Can Ouya handle high fidelity triple-A releases? Or does it even need to in order to get noticed?
Ouya does has a partnership with OnLive, so that’s one way to get triple-A games. “That’s one solution. We also support 1080p, hi-def… and we have a USB port so someone can add an external hard drive, so for games that are heavy you could absolutely use that. We have a max download size of 1.2GB for the first download, but as a developer if you want to add and send additional content from your servers you can,” Uhrman said.
“Traditional games take longer to develop, and we have some of those in development that we’re really excited about. Ouya is not about the number of polygons on the screen,” Uhrman acknowledged. “That’s not where we went. We wanted to have innovative and creative exclusive content, and we’re already starting to see that.”
Exclusive content plus a very appealing $99 price point is what could make the system an easy impulse buy for many gamers Uhrman believes. Moreover, Uhrman noted that most core gamers tend to purchase more than one console, so Ouya is likely to be something they’ll want to buy even if they are getting a PS4.
“Ouya offers something different; every gamer has a different expectation depending upon the platform and we believe we’re going to have innovative, creative games and exclusive games to Ouya… And the barrier to entry at just $99 where every game is free-to-try, I think opens up the opportunity for a number of gamers, even core gamers. Core gamers on average own more than one console. We don’t really think it’s an either/or situation. We’re offering something different – I think they’re going to want Ouya too,” she said.
A number of traditional consoles in the past have launched selling at a loss. Since Ouya is built with off the shelf components, it may be easier to contain costs, but Uhrman wouldn’t confirm that each unit is sold at a profit. “We’re really comfortable with our business model,” is all she would say.
That said, if things go the way Uhrman would like, this is only the beginning. Ouya will continue to evolve its software and hardware, and the hardware is likely to get refreshed quickly.
“We’re like any other software platform that iterates and grows over time, and we’ll have a hardware refresh rate more similar to a mobile refresh rate than a console refresh rate because we want to take advantage of the best chips out there and falling commodity prices. We will certainly make sure that there’s enough content that’s optimized for that chip and we don’t push on higher prices to the consumer,” she said.
Does that mean some Ouyas in future will not be compatible with certain games? Uhrman is looking to avoid that scenario. “We have a plan where all content will be compatible with future Ouya systems; we don’t want to fragment our own market for developers, and we always want gamers to have a great experience,” she commented.
Ouya will be interesting to watch. It’s a bold move for the industry and everything we’ve seen so far is completely unconventional. Whether or not that will pay dividends in the long-run is hard to judge at this point in time. “The market is calling us the ‘un-console’ and we like doing things the ‘un-way’,” Uhrman remarked.
It was a better than expected quarter that capped off a record year for Activision. The fourth quarter brought in $2.6 billion in revenue, compared to analyst estimates of $2.44 billion. The company came within spitting distance of $5 billion in revenue for the year ($4.987 billion, to be precise), which is amazing for a company that’s not manufacturing console hardware. The downside of this performance: Activision is already telling us it won’t happen again in 2013, with the company projecting results substantially lower for this year (at $4.175 billion). Will the company see growth again, or was 2012 the highest point it will ever reach?
CEO Bobby Kotick praised the company’s performance: “We achieved record fourth quarter and annual results. And in 2012, on a non-GAAP basis, we generated approximately $5 billion in revenues, a 34 per cent operating margin and EPS growth of 27 per cent over the prior year. We increased our operating cash flow by 41 percent.” It’s extremely impressive; Activision continues to manage its properties well in a horrible retail environment.
Kotick also provided some other info to show Activision’s dominance. “In the US and Europe, we were the #1 video game publisher at retail, we’re the #1 title overall, the #1 console title and the #1 PC title.” Kotick also threw in the following: “We’re also the #1 independent Western Digital game publisher and had the #1 subscription-based MMORPG.”
Notice the exceptionally careful phrasing here, to conveniently exclude Chinese, Korean and Japanese publishers, as well as Russia’s Wargaming.net. And being the #1 subscription-based MMORPG isn’t saying much, given that almost every other MMORPG these days is free-to-play. The lily is already pretty damn impressive; there’s really no need to add gilding.
The rapid growth of Skylanders was given some special attention. “Skylanders, our newest franchise, which is both toys and video games, has life-to-date sold in excess of $100 million toys and generated revenues of approximately $1 billion. This week, Activision Publishing revealed the third game in the Skylanders franchise for holiday 2013. And while there are new entrants in the category and challenges from slower than expected adoption of the Wii U, we remain enthusiastic about Skylanders’ future prospects.”
First we had EA’s CEO saying the Wii U wasn’t a next-generation console, and now Activision’s CEO is calling out the Wii U for slow sales. Nintendo doesn’t appear to be getting much love from third-party publishers in the West.
Kotick then sounded a cautionary note: “We recognized that 2013 is a transition year, as we enter the ninth year of the current generation of console video game systems. We encounter new threats from unproven business models, and we compete against new category entrants. We aren’t immune to unfavorable market dynamics, but we have navigated through the transitions many times before, and we are well prepared to do so again.”
If a business model is unproven, how is it a threat exactly? Isn’t it a threat if it’s doing really well, which in some sense proves that it (or at least that instantiation) works, doesn’t it? Perhaps what Kotick is saying is that there are business models (like free-to-play) which are working damnably well, but unfortunately Activision hasn’t used those models, so they (to Activision’s experience) are unproven. Let’s simplify this: If it’s working well enough to be a threat, shouldn’t Activision at least be experimenting with it?
CFO Dennis Durkin looked ahead to this year’s prospects: “Our product lineup is expected to be anchored by 4 of our top franchises: Call of Duty, Skylanders, World of Warcraft and StarCraft. It will also be a year of significant continued investment in several new properties with long-term potential that are not factored into our 2013 financial outlook, including Activision Publishing’s new Bungie universe, Call of Duty Online for China and the new Blizzard MMO.” That could mean none of those new titles will ship this year. Or perhaps one or more might ship, but Activision isn’t sure, and doesn’t want to count revenue that may not materialize.
Durkin went on to say: “For the full year 2012, Diablo III contributed more than $0.20 of EPS on a standalone basis. This year, our outlook for Blizzard includes the release of the StarCraft II expansion pack, Heart of the Swarm, in March and one additional title. For Call of Duty, consistent with our past practices, we are planning for the mainline release in Q4 to be down versus 2012.”
Activision reached peak sales of Call of Duty two years ago, and expects this year to be lower once again than last year. When you’re coming out with a new version of the game every year, it’s hard to keep posting record numbers. New consoles might help, but they will probably be too late in the year to matter much even if Activision does have a version of Call of Duty ready for them.
Why won’t new consoles matter much for 2013? Let’s look at the numbers. Assuming a new console ships in November, it’s unlikely to sell more than a couple of million units by the end of the year; let’s say it’s an amazing success and sells 5 million. Selling a game to half of those buyers would be incredible; that would be 2.5 million units. When a Call of Duty title can sell nearly ten times that amount, you can see why it’s not reasonable to expect new consoles to help Activision’s numbers significantly. Sure, they might, if absolutely everything goes well. But companies like to be a little conservative on their projections to give themselves a good chance to beat the numbers. Investors like it when companies beat their numbers.
Blizzard CEO Mike Morhaime then gave some color on his products: “World of Warcraft added more than 9.6 million players, down slightly from the previous quarter. The majority of the decline came from China, while subscribership in the West was relatively more stable.” Later, Morhaime added: “With respect to China, in spite of the decline in subscribership, it is important to note that the engagement levels of the core items did increase with the launch of the expansions and I think that, that suggests increased engagement by our core players.”
So WoW subscriber numbers are shrinking, but the remaining players are more engaged. To some extent, this is acceptable if overall revenue can remain constant or even rise if virtual goods sales are high enough among the remaining players, and they stay subscribed longer. At some point, though, if subscriber numbers keep falling overall revenue will drop. The key information here is that World of Warcraft has apparently already burned through the boost it got from Mists of Pandaria, and is back to losing subscribers (at least in China), but the rate of erosion isn’t too alarming. Yet.
One of the analysts asked whether development costs will rise for titles destined for next-gen consoles. Kotick was straightforward: “This is my 22nd year doing this, and in every single console transition, we’ve seen an increase in development costs.” Margin improvement for next-gen titles is going to depend on selling more DLC, not on reducing development costs. Until next-gen consoles are in tens of millions of households, revenue from next-gen titles will be lower than current-gen titles – and development costs will be higher. That’s not a good combination.
Activision’s stock has mostly hovered between $10.50 and $12.50 for the past several years, though after yesterday’s report it’s shot up to $13.41, a gain of over 11 per cent. Wedbush analyst Michael Pachter has a long-term target of $19 for Activision stock, which is above the stock’s high point five years ago. It’s difficult to see how the stock gets there unless gaming stocks in general become more well-received by investors. Perhaps if new consoles launch strongly, and Bungie’s new game is a smash hit, and everything goes well…
Meanwhile the general message of this earnings report is that Activision is being careful with major strategy moves. Activision is still merely dabbling in mobile games, and doesn’t expect them to be a significant contribution to the company in the coming year. So far, the company is resisting moving World of Warcraft over to a free-to-play model; that may be wise given that such a changeover doesn’t always work well. Where’s the chance for major growth? Bungie’s new title, the new Blizzard MMO, and Call of Duty in China, that’s where. There are questions about all of them, of course. Will Bungie’s title pull in a significantly different audience than Call of Duty, or will it cannibalize that game’s players? Will Blizzard’s MMO merely move players over from World of Warcraft, or will it attract a significant new audience? Will Chinese players really turn out in big numbers for Call of Duty Online?
Looming over all of these questions is the long-term viability of the console market, and whether the new consoles coming from Sony and Microsoft will revive the console game business to the heights of 2008. Activision is in great shape right now, with billions of dollars in cash and four great brands that generate amazing sales. Of those four brands, three are getting pretty long in the tooth; can they perform at their current levels, or will they continue to decline slowly? The success of new consoles may be critical to Activision’s future. The company may choose to diversify with acquisitions, or it may keep the cash tucked away for a rainy day or a larger strategic acqusition.
Activision’s had a great 2012, and 2013 looks pretty good. The company’s longer-term picture depends mostly on how the console market continues, and how the MMOG market evolves along with Activision’s products in that area. Mobile doesn’t appear to have big potential for Activision yet. The other potential big mover for Activision is a major acquisition, like, say, Take-Two. Activision has enough cash to make such a purchase, or some other large strategic move. We’ll have to keep watching to see how that strategy game might play out.
For now, at least, Activision expects to have sales lower than last year’s level. Growth is only going to happen in 2014 and beyond if Activision’s new projects can do well, and new consoles do well, and existing brands don’t fade too quickly. When you’re at the top of the mountain, climbing higher is difficult. Perhaps the Skylands offer a path higher…
There is no “perfect answer” to doing business with video games. Let’s call a halt to the pointless “zero-sum” debates that blighted 2012
A day in which you learn nothing is a day wasted; by which standard, a year in which we learned nothing would be a pointless waste of time indeed. It’s worth, as 2012 draws to a close (all that’s left now is the few days of indulgence before the year, in harmony with our waistbands, croaks its last), thinking about what we’ve learned. What did 2012 teach us that we did not before? Never mind, for a moment, the money we earned or lost, the games we played or made; did we grow? Did we advance? Did we learn?
From a business standpoint, certainly, we learned a great deal. 2012 cemented the place of mobile in the gaming ecosystem, forcing all but the most ardent refuseniks (so Nintendo and… er… that’s about it) to recognise mobile as an important part of their business – and even those who were slow to react to the rise of mobile gaming seem determined not to be left behind as tablets gain steam, with 2012 having shown us pretty clearly that the iPad and its myriad imitators are on track to become the primary data device of many consumers in the coming years.
We also learned some things – although not enough, I reckon – about where price points are heading. Freed of the artificial barriers to entry which define console platforms and physical retail, the App Store and Google Play have shown us where prices for digital content will inevitably trend towards – zero. In 2012, more entertaining, successful games than ever before launched at the princely price point of absolutely nothing. Plenty of others didn’t debut at far above 99p, and several of my favourite games of the year would have given me change from a £10 note. Free to play, with all that it entails, remains in its infancy, but is clearly going to be with us for the long haul; hopefully 2013 might be the year when the industry stops having ill-tempered hissy fits about this fact, and starts engaging with making F2P work better rather than loudly and pointlessly damning or exalting it at every turn.
That, perhaps, is a reasonable lead-in to something that I don’t think we learned this year, as an industry – we didn’t learn to stop being afraid of zero-sum games that don’t really exist. Discussions about mobile gaming, even among supposed professionals and experts, often descend into abject ridiculousness due to an insistence that mobile games will come to replace all other kinds of games, or that they are doomed to be a cynical, low-quality niche – neither of which position stands up to the slightest moment of intellectual scrutiny. The same applies to the vitriolic arguments about free-to-play which have washed over and back across 2012 like a stinking, polluted tide – when one side insists that everything will eventually be F2P, and the other insists that F2P is intrinsically evil and wrong, you’re no longer dealing with professional debate, but with dumb fanaticism.
I’m not saying, by the way, that we should all be cautious fence-sitters – there’s no virtue to sitting on the fence simply because it’s comfortable. Strong beliefs are good, but meaningless unless tempered by reason and fact. The fact is that cinema did not kill theatre, television did not kill cinema, video games have yet to viciously murder books, home recording did not kill music and video did not kill the radio star. Media and entertainment industries are ecosystems that accommodate an extraordinary range of different kinds of product and different business models – and that is not ever going to change. The idea that one form of entertainment, one form of business model or even one form of distribution will emerge to Rule Them All, is simply an idiot’s fantasy.
I say that with absolute confidence, not just because it is supported by countless years of history and the sheer wealth of culture and entertainment they have bequeathed to us, but because I recognise where the belief springs from. It’s the unique curse and blessing of the games industry that it teems with “left-brained” people – logical, analytical, mathematical, and quite different from the “right-brained” people who often dominate other creative industries. Video games were born with both feet firmly in the sphere of technology, only gradually moving to straddle the worlds of both technology and art – a marriage which is superbly creative but often fraught, as evidenced by the hissing recoil of many gamers and industry types alike when presented with the (stonkingly obvious) fact that games are an artform.
Left-brain people (yes, modern psychology dismisses this terminology, but it’s so much more polite than grouping you all as “geeks” and “arty types”, isn’t it?) love perfect answers. They like problems which have a correct solution, and see the world in those terms. In many industries, they’re perfect business leaders – there absolutely is a single most efficient way to extract oil or metal from the ground, to build an aircraft, to lay out a road or rail network. In entertainment, though, the idea of a “perfect” solution runs into a huge set of problems which utterly stump the left-brained – sentiment. Emotion. Irrationality. Sheer outright bloody-mindedness.
The fact is – nobody needs entertainment. Not really. If video games, films, books, music, plays, TV shows, paintings and sculptures all disappeared tomorrow, we’d be a much diminished species, but nobody would die. People need shelter, food, clothing, transport, protection, fuel – but entertainment is “discretionary”. It says so right there in your accounts. It’s spending at your discretion – and what that means is that it’s spending guided not by optimisation, but by sentiment.
Is free-to-play the most efficient way for money and experiences to change hands between developer and player? Is mobile or tablet gaming the most cost-effective route for consumers to engage with video games? Yeah, maybe – but what so few of us seem to really grasp is that this doesn’t actually matter. Is MP3 music the perfect balance of quality, convenience and file size? Probably – but vinyl shops thrive and specialist services offering “lossless” quality music files are on the rise. Is Kindle the best way to consume books? Yes, undoubtedly – but I don’t think of myself “consuming” books. Some books I just read; some I own; some I treasure. Sentiment; emotion; irrationality. I went to a shop and bought a leather-backed volume of a book I already own in paperback and Kindle alike. I’ll probably never read it. I love it. Am I an idiot, failing to see that this is not the optimal consumption path and bound to realise the error of my ways eventually? No, because this is my discretion; this is how I choose to enjoy and to spend on my pastime.
That’s why the zero-sum game will never come to pass – not as the strident debaters of 2012 believed. A very large number of consumers will still want things like dedicated gaming hardware, expensive full-price releases and physical products, not because this makes “sense” in an economic or logical way, but because they love those things and because, beyond straightforward questions of affordability, “economic sense” isn’t a welcome guest in deliberations about your hobbies and your passions.
The industry evolves and changes – never as rapidly as it did in 2012, though 2013 will probably make our heads spin just as fast – but little is truly lost. We don’t sell petrol, or sliced bread, or concrete, or train tickets. We sell experiences and emotions, and people will choose to consume those in the way that makes them feel best, not the way that is most coldly, mathematically efficient. Nobody fears that releasing Shakespeare adaptations on DVD will shut down theatres, or that allowing buskers onto the streets will eventually lead to concert halls being demolished. It’s time that we, too, learned that the expansion of the games business leads to more opportunities and more diversity, not to an existential threat to things we love – or worse, a chance to gloat over the imagined demise of things we hate. If you’ve got one new years resolution to make for 2013, make it this one – no more zero-sum arguments. Mobile won’t kill console. F2P won’t kill full-price. Cloud won’t kill local. The forest grows ever bigger; the old tree doesn’t block the sunlight from the new trees, the new trees do not strangle the roots of the old.
It appears that Activision, too, is suffering from a leak before its planned release. The Xbox 360 version of Call of Duty: Black Ops 2 has started showing up in all of the usual places in advance of the title’s upcoming official release. The title’s leak onto the Internet is similar to what we saw with Halo 4; and once again, we can expect Microsoft to come down hard on those who are playing the game early.
As with Halo 4, we are also seeing live streams of Black Ops 2. While Activision isn’t talking, sources tell us that the company is actively engaged in seeking out who might have been responsible for the leak. In addition, word of early sales of the game has also been talked about, with consumers saying they have been able to purchase the game ahead of its release in Slovakia.
Nintendo will be launching Wii U in just a few weeks, and Mario and Co. no doubt would like Wii owners to make the jump to their new platform, but Microsoft sees it playing out differently this holiday. With blockbusters like Halo 4 and a $50 price cut on holiday bundles, Matt Barlow, general manager of product marketing for Microsoft’s Interactive Entertainment Business, believes Xbox 360 will have the edge in the HD console battle.
“I think this holiday season is an amazing jump off for all those people who may have been interested in the Wii and now want to be interested in high definition gaming”. “I can’t think of a better console for them to choose than one that has the most games available, the highest rated games available, than the Xbox 360 platform.”
“And when you look at the alternative experiences that we’re going to bring with SmartGlass, the entertainment providers that we’re bringing on board, with sports and music and movies and TV, and then if you think about those preeminent best selling blockbuster games that they’re going to want to play – Halo, Call of Duty, Assassin’s Creed, Forza, Nike+ Kinect Fitness – they either play first or they play best on Xbox 360 and nowhere else.”
“We’ve only scratched the surface…Kinect is going to be something that everyone’s going to want to own”
“Like I said, jump off is great and we like the way we’re positioned to pick those customers up. They really should consider an Xbox 360 if they’re looking for the best high definition gaming and entertainment platform.”
Barlow was speaking as part of an interview about how Microsoft is positioning the Xbox 360 business going into yet another holiday season, nearing the end of its lifecycle. He noted that Kinect, which he said has now sold 20 million units, will continue to play a large role and he believes it’s actually beginning to resonate with the core audience.
“When you look at the way core has adapted to Kinect, the things that they’re valuing with it – the voice control stuff is really starting to catch on. When I look at some of the stuff we’ve done with Skyrim, some of the integration we have with Skyrim, some of the work with FIFA…voice integration has been unbelievable. If you look at some of the reviews we have on Mass Effect 3 and some of the people who play through using some of the voice control capabilities as well in that game. We’re starting to strike the right chords in the core audience,” he said.
“There are plenty of uses for this particular technology, whether it’s gesture or speech, and we’ve only scratched the surface. We’ve only been in this thing a couple of years now…Kinect is going to be something that everyone’s going to want to own. Whether you’re core, whether you’re broad.
Microsoft has a little surprise in store for those using USB Flash drives for storage on their Xbox 360 consoles. With the latest update, Microsoft has doubled the allowed size of USB flash drives from 16GB to 32GB.
The news of the capacity increase came as more users have been getting the latest dashboard update. Previously, even if you had a larger flash drive than 16GB, the Xbox 360 would only allow users to use 16GB of the available storage space.
The storage increase comes as Microsoft confirms that Halo 4 will require 8GB of available storage space. The capacity increase will help those users that have opted not to go with a hard drive, but instead have taken advantage of the cheap prices of USB flash drive storage for handling their storage needs. Some users have reported using multiple USB flash drives and are pleased with the option, as it is still cheaper in most cases than buying a hard drive for use with their Xbox 360.
While the price of 32GB USB flash drives isn’t as cheap as 16GB flash drives yet, 32GB USB flash drives are now under $20, and we see the price going a bit lower as many makers are moving to USB 3.0 drives; which is making for great deals on the older and slower USB 2.0 models. Since the Xbox 360 does not support USB 3.0, there is no gain in buying a USB 3.0 model. With two 32GB drives, users have more storage than the 60GB hard drive that appeared in the Xbox 360 for a short time prior to the company moving away from both the 20GB and 60GB models in favor of the 120GB drive, which became the standard for a long time.
The studio, which will be run under the Microsoft Studio’s banner, will report into Phil Harrison, corporate VP of Microsoft’s Interactive Entertainment Business in the EMEA region, and will have a focus on developing for Windows 8 tablets. Apparently because, well, someone has to.
“I’m hugely excited by this new venture,” said Schuneman. “Adding a fourth UK based studio to the incredible roster of talent already in place across Rare, Soho Productions and Lionhead not only increases our in-region studio presence, but will allow Microsoft Studios to explore the many creative and business opportunities that developing new games and entertainment experiences on Windows 8 tablet devices and platforms will afford.”
Schuneman will not be the only person working there of course, and Microsoft said that it is running a recruitment drive for other staffers. Anyone that is hired will work on “entertainment as a service” releases, which should fun, and focus on the aforementioned Windows 8 on tablets.
Work at the studio is expected to start in November.
The NPD Group has sent its August retail sales report for the US market, and once again it was not a pretty sight, as total industry sales dropped 20 percent to $515.6 million. Total software sales (including PC retail software) dropped 11 percent to $252.8 million while hardware sales declined a sizable 39 percent to $150.6 million. Accessories were also down seven percent to $127.3 million.
“The current hardware systems are showing their age, so it goes without saying that it would be great to have new systems breathe life into traditional retail industry sales,” said NPD industry analyst Anita Frazier. “I am anxious to learn more about the Wii U launch later this month. And with any luck we will hear news about other systems on the horizon.”
While software sales weren’t good, Frazier noted some encouraging news about the market starting to stabilize.
“Within software, the high definition platforms posted only a slight 1 percent decline in dollar sales as compared to last August, pointing to a stabilization in that portion of the retail market for games content,” she said.
“One factor contributing to the softness we have seen in retail content sales so far in 2012 has been the decline in the sheer number of new titles. This, however, was not the case in August because there were more new titles when compared to last year; titles with sales that were significantly better than last year’s launches. So, what we’re seeing impact August results is the domino effect of the light release schedule from earlier in the year. That lack of new releases has had a significant impact on subsequent month’s sales,” she continued.
As NPD now does every month, the firm reminded us that this report is only one piece of the total games industry revenue pie.
“These sales figures represent new physical retail sales of hardware, software and accessories, which account for roughly 50% of the total consumer spend on games,” Frazier noted.
“When you consider our preliminary estimate for other physical format sales in August such as used and rentals at $104MM, and our estimate for digital format sales including full game and add-on content downloads including microtransactions, subscriptions, mobile apps and the consumer spend on social network games at $391MM, we would estimate the total consumer spend in August to be $989MM. Our final assessment of the consumer spend in these areas outside of new physical retail sales will be reported in November in our Q3 Games Market Dynamics: U.S. report.”
“The CPU and GPU capabilities of mobile devices will reach Xbox 360 levels of graphical fidelity and processing power within the next generation,” Canessa said.
“Activision will be creating a mix of casual and immersive gaming experiences on mobile, but as I say smartphones are more and more allowing for us to create those kinds of experiences. The games that Activision publishes on console, the games it publishes on PC, pretty soon we’ll be publishing those kinds of experiences on tablets and smartphones.”
Canessa explained that Activision is all-in when it comes to mobile development and is bringing some of its biggest IP to the table.
“We have about 350 different brands and IPs to work with. That’s legacy IP, that’s triple-A IP and that’s licences with other companies. We want to create mobile games from all of these aspects of the Activision portfolio, and build a variety of experiences,” he said.
“I would definitely say that one of our competitive advantages is the strength of our brands. The creation of new IP is expensive, and when you consider how much money we spend on marketing our IP, we can apply that halo effect to our mobile properties. You are going to continue to see us take advantage of our big marketing campaigns to help our mobile products too.”
Activision is also betting big on mobile development talent in the UK.
“What I will say is that we are in the UK to hire the best talent in the mobile space. If you look at the UK development community, some of the world’s best handheld and mobile game developers are there. That’s the talent we want to hire.”
Microsoft lowered the price on its Kinect camera peripheral by $40 last week. It’s a sign that Microsoft is getting ready to ramp up for the holidays, but is it also a portent of an imminent price drop on Xbox 360 hardware? Not necessarily, according to top industry analysts.
Most analysts we spoke with think Microsoft is much more likely to continue enhancing its bundle offerings rather than slashing any hardware prices.
“Price cut no, bundles yes. For now, I think Microsoft is happy with Xbox sales and some early traction in the different pricing models they have rolled out at retail,” said Colin Sebastian of RW Baird. “We still expect the launch of the next Xbox in the fall of 2013, so there will still need to be a price cut on the current gen, although perhaps not until after the holidays. I am sure retailers will offer their own promotions this holiday though.”
Sebastian makes a good point. Consumers hungry for great deals may still find a sudden temporary sale price for Xbox 360 at huge brick-and-mortar stores like Walmart. To the extent that Microsoft will cut prices on anything, it will be in the form of discounted bundles.
“I don’t believe an Xbox 360 price cut is imminent. The Xbox 360 hardware still leads in sales and I do doubt whether we even see a price cut at all in 2012. However, we should expect a holiday season full of discounted and limited edition bundles that, on paper, would reflect a price cut. But a full price cut on the base hardware, I wouldn’t expect one until early 2013,” Jesse Divnich of EEDAR told us.
Divnich noted one caveat in his prediction, however, and it involves Nintendo. “Of course, this is entirely dependent upon the success of the Wii U. If the Wii U comes flying out of the gates and begins to impact Xbox 360 hardware, I would expect Microsoft to react swiftly with a price cut or more aggressive retail promotions,” he added.
Wedbush Securities’ Michael Pachter couldn’t believe that Kinect hadn’t seen a price cut already. “I thought Kinect had been cut a long time ago, and can’t believe that the standalone unit sells that well,” he said. Pachter is forecasting a slight reduction on the current Kinect bundles. “I think they will price a Kinect bundle at $50 lower than the current bundles, so $249 for the 4GB bundle and $349 for the 250GB bundle, and yes, I think this is a sign [of future Xbox hardware cuts],” he remarked, deviating from other analysts’ opinions.
Aside from the possibility of Xbox 360 hardware seeing a price cut, we also have to look at what a Kinect price cut means for Kinect. Is Microsoft paving the way for a Kinect 2 launch this holiday? Lewis Ward of IDC Research believes so.
“I’m leaning toward Microsoft not cutting the price of the Xbox 360 in the near future since it’s already selling quite well, though a minor cut is possible. I think there will definitely be some interesting bundles this holiday season,” he noted, then adding, “I’ll go out on a limb as far as the Kinect MSRP cut goes. It’s been rumored that Kinect 2 will arrive with the Windows 8 launch at the end of October. It’s possible that Microsoft is clearing the channel in preparation of this (potential) new arrival.”
“If Kinect 2 does arrive this holiday season I’m sure they’ll put it in a bundle and there will have to be a few marquis games that use it in interesting ways. That’s a tall order, though, and if they’ve been able to keep it quiet to this point that would be a stunning feat!”
According to The NPD Group, US games business continued its downward slide for 2012 during the month of July. Total game industry sales diminished 20 percent to $548.4 million and software sales (including PC) were down 23 percent to $278.2 million.
“These sales figures represent new physical retail sales of hardware, software and accessories, which account for roughly 50 percent of the total consumer spend on games. When you consider our preliminary estimate for other physical format sales in July such as used and rentals at $117MM, and our estimate for digital format sales including full game and add-on content downloads including microtransactions, subscriptions, mobile apps and the consumer spend on social network games at $439MM, we would estimate the total consumer spend in July to be $1.1B,” said NPD industry analyst Anita Frazier.
“Our final assessment of the consumer spend in these areas outside of new physical retail sales will be reported in November in our Q3 Games Market Dynamics: U.S. report.”
While July was a down month in what has been a down year, Frazier says there’s reason to be optimistic in the near term.
“Looking forward to August, the launch of the 3DS XL coupled with New Super Mario Bros. 2 should bring a nice boost to the performance of the new physical retail channel. While August is typically ‘Madden Month’, Madden NFL ’13 launches on August 28th which falls into the September reporting period. So, like last year, Madden will impact September results instead of August,” she said.
“New physical retail sales of games hardware, software and accessories traditionally follows a very reliable seasonality pattern. Based on year to date sales, and taking into account the release slate for the back five months of the year as well as the anticipated launch of the Wii U, annual sales for the new physical channel should come in around $14.5B for the year.”
Hardware shrunk 32 percent year-on-year to $150.7 million and Frazier noted that it affected almost every piece of hardware across the board.
“Of the hardware platforms that were on the market last July, only one, the 3DS, realized a unit sales increase over last year. Both the DS and the 3DS, however, realized a month-over-month unit sales increase over June 2012 while the other platforms declined,” she said.
As expected, NCAA Football 13 was the leading seller for the month that saw few new releases. Lego Batman 2: DC Super Heroes, The Amazing Spider-Man and Batman: Arkham City were all in the top five, showing the boost the Summer movies The Amazing Spider-Man and The Dark Knight Rises are giving to their complementary video games. Just Dance 3 reentered the top five at number four, while Diablo III (a top seller the past two months) fell completely out of the top 10.
“On a SKU ranking, Pokemon Conquest is among the top 10 in sales for the month of July,” noted Frazier. “The top ten games ranking includes several games that launched a number of months ago such as Batman Arkham City and Dead Island, which both received a boost in sales due to the release of Game of the Year editions. Looking forward to August, besides the launch of New Super Mario Bros. 2 for the 3DS, it will be interesting to see the performance of Sleeping Dogs which is new IP that has garnered a fair amount of buzz.”
Accessories are bucking the overall trend of the industry, up 8 percent to $136.9 million.
“Accessories was the only category up in both dollars and units for the month, driven by increases in points and subscriptions game cards as well as the Skylanders character packs,” she said. “Between the characters that are packaged with the Skylanders game and the sales of the separate character packs, over 25 million individual Skylanders figures have been sold through at retail in the U.S. since the launch of the game in October 2011.”
This time last week, nobody had heard of Ouya; we might have guessed that it was an approximation of the sound of a polite grandmother dropping a hammer on her toe, or the carnal grunt of an Old Etonian. Seven days later, it’s soared past its funding target on Kickstarter and has become one of the hottest topics in the industry. Yet it’s been fascinating to speak to a variety of different people about the proposed console and gauge the reasons for their support, because doing so has revealed vast fractures in terms of what people actually expect from this console.
For most – especially those at the lower end of the pledging scale, I expect – their support is a reflection of pent-up demand for a smart TV device. An all-digital console with the same development philosophy as mobile and tablet games is seen as filling the gap which has been created, conspicuously, by years of talking about a Google, Apple or even Valve led Smart TV revolution which has thus far failed to materialize. Ouya hitches a lift on a variety of related trends in a pretty overt way – the rise of indie (and of the superstar indie developer – witness the quotes from the likes of Mojang and Jenova Chen on the Kickstarter page), the rise of crowdfunding, the sense of inevitability about mobile and tablet gaming making an impact on the TV screen.
Then there’s the controller – a conventional joypad. No touch screen, no movement controls. Among the traditional gamers who have voiced hatred of such things for years, not a dry eye in the house. Could it be? Could this be the device that’s going to reclaim these brave new worlds of gaming – F2P, mobile, tablet, digital – from the hordes of arm-waving, song-singing, touchscreen-molesting not-proper-gamers who have infested them? Shut up and take my money!
If you’re detecting a hint of cynicism here – well, I think that’s natural. Here we have a device which clambers atop a rickety tower of trends and waves its arms for attention. Think about it – it’s an open platform, for indie developers, crowdfunded, all-digital, “disruptive” (maybe), hacker-friendly, free-to-play… It’s painfully hip, like a console built after a brainstorming session consisting exclusively of words cut out from the headlines of Boing Boing posts. This console wears heavy non-prescription glasses and patterned cardigans, has a dreadful beard, drinks chai lattes outside pop-up cafes in Shoreditch and listens to the latest unreleased music demos on an old tape walkman “ironically”. It couldn’t have been more guaranteed the Kickstarter success it has ultimately achieved.
I don’t begrudge it that. It has played to a crowd beautifully – perhaps even unconsciously – and indeed, it’s a thing of beauty in many ways. Like the trends which have birthed it, the Ouya is a lovely idea. Cheap, open, hackable, filled with content from talented indie developers. It’s a beautiful idea and in fact, it has the potential to become a beautiful little community – a creative incubator filled with new ideas being tested and trialed, welcoming fledgling developers to dip in and show what they can do, while giving more established developers a platform on which to trial new ideas. (Of course, PC advocates might point out that Windows and indeed OSX have been doing exactly that for years, but while there’s substance to that argument, the point remains that console gaming and hence console development is intrinsically more attractive for some players, so there is theoretically room for an “open console” of sorts.)
The real problem is one of expectation. Ouya’s creators asked for $950,000 and at the time that I’m writing this, they’re hovering around the $4 million mark. Exceeding their target by such a margin has created immense excitement around the platform, and that’s led to a lot of the fractures in terms of expectation that I alluded to earlier. Some people (outspoken Android advocates, mostly, which can’t be an easy position to take and thus deserves our sympathy) view this as a final piece of the puzzle for Android, completing a platform comprising mobile, tablet and now console offerings and thus ushering in an era of dominance for their chosen OS. Others, more sanely but equally questionably, view it as a full-scale introduction of F2P mechanisms to the console space which will prove disruptive to the console business at large.
Those two are marginal viewpoints, certainly – but they can be found easily enough within many discussions around Ouya this week. Much more common is the viewpoint that this has just become a major battleground between “open” and “closed”. Consoles are, unquestionably, “closed” – it’s insanely expensive to develop a title for the Xbox 360 or the PS3 and you need permission from a platform holder, probably via an equally restrictive publisher, to do so. At the other end of the spectrum, Ouya is open; buy one, build something, release it. (In the middle, you get all manner of things being labeled “open” or “closed” based on rhetorical convenience rather than any truly useful definition – witness iOS and WP7 being labeled “closed” despite occupying a space at the “open” end of the spectrum so close to Android’s own policies that most consumers couldn’t make a meaningful distinction between them.)
So poor Ouya, now, is going to be a stalking horse for the hopes and dreams of the “open” crowd. This beautiful, well-intentioned, achingly hip piece of technology is going to go out into the world with the expectation of actually winning over a meaningful audience of consumers who will knowingly choose an “open” platform over the “closed” ones currently on offer – who will buy into the Ouya vision of a future where entertainment exists without gatekeepers or curators.
Let’s put this in a little bit of perspective. First, hard numbers. Ouya, as I write, has raised $4 million from around 31,000 people. That’s a big number of consumers to some people. If I wrote a book on Kindle and sold it to 31,000 people for a fiver each, I’d be very happy. For a console with an F2P business model, though, it’s barely even a test market, let alone a viable consumer base. Remember that even the most successful console games rarely sell to 10% of the console installed base (misfits like Wii Fit aside) – even if we assume that F2P ensures a wider group will sample the game, remember that only around 1 in 20 people who play F2P games actually pay (the figures fluctuate and are tough to pin down, but that’s not a bad ballpark). Now, Ouya will hopefully sell to a lot more than the 31,000 people who backed it, but the point remains – what we’ve seen so far is a sliver of a fraction of a niche, not a workable market and not an indication of guaranteed success.
Secondly, a brief exploration of why consumers buy consoles. One word – games. Consumers buy consoles because those consoles have games they want to play. A handful buy consoles due to platform loyalty, and go on to make a lot of noise about them on the internet, but they’re not an important market overall (even Nintendo’s consoles sell, ultimately, because of Nintendo’s games, not because of the Nintendo name itself). I doubt that any human being in history has ever walked into a games store and bought a console because they like the market philosophy behind it (“an Xbox 360 and a copy of Atlas Shrugged if you would please, shopkeep!”), although if someone has, I’m sure they’ll pop up in the comments below to prove both my wrongness and their own loneliness in the world. On mobile, a handful of noisy Internet types choose Android specifically because of the open/closed debate, but again, they’re not a particularly important market segment – one of Android’s greatest problems is that most people who choose Android phones do so simply because they’re cheap, and go on to spend no money whatsoever in the Google Play store.
This is the reality facing Ouya. You convince consumers to buy a console by having top-flight software available for it. You convince developers to create top-flight software by either paying them (first party), or by convincing them that there are going to be tons of consumers around to buy their software at launch. The way you achieve the latter is by injecting enormous amounts of money into both first party software and launch marketing. Ouya, which is launching a console on a budget less than that of most console software releases, let alone hardware launches, cannot afford to do that – and all the Boing Boing posts and Kickstarter magic dust in the world doesn’t change that.
To me, the saddest thing about this situation is that Ouya is brilliant. It’s a great idea, and I think it’s going to do something really interesting in terms of creating a community that’s very small, very rough and tumble but utterly buzzing with creativity. I’ve backed it (not least because in a week when people seem to have decided that throwing money at an existing, profitable publication through Kickstarter is a reasonable use of the site, giving some money to an actually innovative, creative project seemed like the best riposte) and I’ll buy one, and I’m intrigued to see what comes of it. But it’s sad, because Ouya is going to be judged a failure. Those creating huge expectations for the console are going to be disappointed; the internet opinion machine will take that disappointment and turn it into failure. Ouya will do some great stuff, but it’s not going to disrupt the console business (which is already pretty disrupted already) or initiate a revolution against closed platforms. I fear that the hype will make it impossible to enjoy the platform for what it is – an idea that’s simply too lovely to survive in the real world.
Vivendi chief executive Jean-Bernard Levy stepped down last month amidst growing concerns about the company’s debt and flagging share price. One of the rumored ways that Vivendi could bolster its financial position is to sell off its 60 percent stake in video game behemoth Activision Blizzard, and today more fuel has been added to that fire, as Reuters has reported that Vivendi is now actively testing the waters.
“It’s nothing official yet, but they’ve asked a bank to go and talk to possible buyers for Activision,” said a source close to the Vivendi board, according to the report.
The idea is that by selling Activision Blizzard the French media conglomerate could raise about $10 billion. Those who may be interested include cash-rich firms like China’s Tencent, media giant Time Warner, Microsoft, as well as private-equity heavyweights KKR, Providence and Blackstone, according to banking sources.
There already is an existing relationship between Tencent and Activision as the two recently announced a partnership to offer Call of Duty as a free-to-play online game in China. The report notes, however, that buying Activision outright may not make sense for Tencent and its very different business model.
“They have two big franchises, Call of Duty on the console side and World of Warcraft on the MMOG (massively multiplayer online game) side. And China is not a big market for console businesses; online games are much bigger for various reasons,” said a banker.
Microsoft, on the other hand, may want to add some more blockbuster IP to its arsenal on Xbox, and making Call of Duty 100 percent Xbox exclusive is likely appealing, but the company may not want to invest so much when it’s gearing up to launch a next-gen console in the next year or so.
“They probably don’t want to distract themselves too much, but they are the ones who, if they want to stay in games, would think about owning some of these big franchises, not just providing the consoles,” a banker source said.
Wedbush Securities analyst Michael Pachter recently said that Vivendi is more likely to spin off Activision than selling the gaming firm outright.
For over three years, only one tablet product has gained traction with the mainstream: Apple’s phenomenal iPad. Niche challengers have come and gone, while heavyweights including RIM, Sony, Samsung and Motorola have all singularly failed to make any kind of impact on Apple’s stranglehold on the market. Now the Cupertino giant’s closest rivals have finally woken up: Microsoft and Google are both rolling out the big guns with the upcoming releases of Surface and the Nexus 7.
There’s little doubt that the iPad has defined the prerequisites of a mainstream-focused tablet, and to a certain extent both of these challengers are “me too” products. Each is based on the notions of a slick, user-friendly interface, capacitive touch-screens, and low-power integrated processors paired with large batteries to provide stamina in the 8-10 hour range – the defining elements of the iPad.
However, the differences between the products are interesting in that they illustrate exactly where Apple’s challengers believe its weaknesses are: the question really is whether these perceived deficiencies are enough to really open up the market.
Google’s approach is intriguing: with the Nexus 7, it has staked a claim to the value end of the market, looking to offer an approximate high-end experience in a package that is a fraction of the cost of the $500 top-end “New iPad” and half the price of the $400 iPad 2. Google’s tablet miniaturises the experience onto a 7-inch, IPS 1280×800 screen that cuts some corners on brightness and colour reproduction but crams a lot of pixels into a small enough area to give something approaching Retina fidelity.
Elsewhere, all the core functionality you would expect from a tablet is present and correct, while more extravagant elements that have somehow become a standard on more expensive tablets have been stripped out – so there is no rear-mounted camera for example, no HDMI output – and only a single microUSB port.
Only 8GB and 16GB SKUs are planned and there is no support at all for cellular connectivity – Google’s strategy seems to be in attracting the value-conscious and tablet newcomers, and perhaps convince them to upgrade when the time is right to another Android tablet. The Nexus 7 is produced by Asus, and the Nexus 7 comes across to a certain extent as a “gateway” product to the firm’s more expensive offerings.
Microsoft’s Surface has no pretensions in masking the “me too” elements of its design. Although it has opted for a widescreen display over the iPad’s 4:3 screen, there’s little doubt that it aims for the premium side of the market in exactly the same way as the Apple tablet, with its high-end magnesium finish and weight/dimension advantages over the current generation iPad. At its presentation for the device, a huge amount of focus was put into the kickstand – curious, as it suggests that Microsoft believes that a great deal of tablet-time is spent near some kind of static, flat surface that it can rest upon.
But the true point of difference that Microsoft is banking on is Windows 8 and everything it represents: specifically functionality, productivity and the ubiquity of the OS on other devices. A fully featured USB port means that virtually any peripheral can be run from the tablet – printers, storage drives – with standard Windows drivers being used to run them. The Touch and Type covers in combination with Microsoft Office potentially offer Surface RT a level of functionality well beyond what the iPad offers, in a pleasingly integrated manner.
Traditional, native x86 Windows programs won’t work on the Surface RT however, and therein lies one of Microsoft’s biggest challenges: building its own version of Apple’s walled garden app store. Having failed comprehensively with Windows Phone 7, Microsoft desperately needs to create transaction infrastructure that rivals Google Play and iTunes. Just a couple of months from launch, there are still some question marks over the Metro marketplace and the level of support it will attract.
Of course, the advantage Microsoft has is the sheer proliferation of Windows on traditional computers and laptops. The next version of the desktop OS features support for Metro apps, along with the compatibility with traditional x86 binaries missing from the RT tablet. The same core kernel is deployed on all devices, be they tablet, smartphone, laptop or desktop – representing an unprecedented level of convergence.
In this respect, Microsoft is well ahead of Apple: there have been rumours for some time that iOS and OSX would merge, or overlap more overtly at some point, but Windows 8 manages to pull that off successfully in the here and now. It’s a state of affairs reflected in the Surface hardware too. While the RT tablet has access to Metro apps only, the Surface Pro – running Intel ultra-low voltage CPUs – is effectively an Ultrabook class PC squeezed down into a tablet form factor just a little heavier and thicker than the New iPad. It supports Metro while running traditional apps and games (albeit less demanding ones owing to the Intel integrated GPU). Most tantalising of all, the integration of powerful x86 hardware into the tablet form factor is hugely compelling – in a stroke, Microsoft not only provides an intriguing alternative to the iPad, but it is also taking on the Macbook Air too.
All of which suggests that maybe – just maybe – Apple will be facing its first serious challenges: Google with its value approach on one side and a direct attack from the full power of the Windows brand on the other. It’ll certainly make life interesting – definitely from a tech writer’s point of view – but it’s difficult to place any kind of bet against the company that has essentially defined this fledgling market. Apple wins not only through its combination of a power brand, product quality and a beautiful user interface, but also in terms of the most crucial factor of all: content.
In this regard, Android still falls short, while Windows 8 – in terms of Metro apps, at least – remains a completely unknown quantity. From a gaming perspective, Apple has invested significantly in creating the most attractive ecosystem for games developers. Market fragmentation is an issue (New iPad is immensely more powerful than the original, 4S vs. 3GS likewise), but it’s nowhere near as bad as Android where virtually every hardware manufacturer rolls their own combination of processor, RAM, GPU and display, and where take-up of the latest version of the OS is minimal, to say the least. Perhaps the Nexus 7 can change that.
Microsoft’s shot at the title is a two-pronged assault not just on the iPad, but on the Macbook Air too. The ARM-based Surface RT features all of the strengths of Windows 8 – aside from native x86 program support – while the Surface Pro is essentially a complete PC housed in iPad-style casing. As this photo amply demonstrates, Microsoft believes that productivity is the key to taking on Apple’s phenomenal tablet.
In terms of our industry, there’s also the small matter of Apple having invested most heavily in the most games-capable hardware. The PowerVR SGX543 in the iPad 2 still comfortably outpaces Tegra 3 in most GPU applications, and when comparing the size of the silicon that’s no real surprise at all. With a 163mm2 die-size, the New iPad’s main processor occupies twice the space of Tegra 3 and even iPad 2′s processor remains a good 50 per cent larger.
The Nexus 7 uses a lower-binned version of the Tegra 3 chip that can’t run quite as quickly as the top-end version found in the Transformer Prime, but Surface appears to be using a revised Tegra 3+ – a more powerful version of the chip that hasn’t been benchmarked as of yet. NVIDIA describes it as a significant bump, but it will take more than that to get anywhere near top-end PowerVR performance. Apple’s investment in this hardware obviously makes iPad more expensive, but it’s a direct investment into the quality of the slick user-interface and the gaming credentials of the platform.
It’s also difficult to avoid the conclusion that Apple’s competitors are still playing catch-up, and in this regard, while Microsoft is bringing something tangibly new to the table with Windows integration, it still has some clear UI weaknesses. Android 4.1′s “Project Butter” finally sees Google addressing the stuttering interface issues that have plagued its OS, but there are still some serious question marks over just how intuitive Microsoft’s Metro interface actually is – especially so in the desktop iteration. Not only that, but the OS actually seemed to crash during the media playback demo during the Surface keynote, and even the creators of the device appeared to be having issues navigating around the interface – something that doesn’t fill us with confidence.
There’s also the fact that Apple remains the trailblazer in the tablet sector. It has the cash, the will, the infrastructure and the guaranteed launch success – not to mention the software support – to drive the products forward into territory that its competitors fear to tread. Take the New iPad for example – it is defined by its Retina screen, which in turn required enormous battery and processor upgrades. Remarkably, Apple’s latest tablet has battery capacity around 20 per cent higher than that of the 11-inch Macbook Air. In short, the firm targeted the display upgrade as the defining element of its third-gen tablet and moved heaven and earth to make it happen.
In a market sector defined to a great extent by technological advancement, it’s hard to imagine any of Apple’s rivals pushing back new frontiers with anything like the same kind of zeal – and there is perhaps a sense that, as games machines at least, there is some missed potential here. Even though Tegra 3 lacks 3D performance compared to the IMG tech in the iPad, it is clearly capable enough for current mobile gaming – but next year, everything changes. The same 28nm chip production technology that makes the next-gen consoles possible, and that has made NVIDIA’s Kepler GPUs so powerful and efficient, will also reach mainstream mobile production.
Tegra 3 will be superseded by NVIDIA’s Project Wayne – said to offer a whole new level of graphical performance, offering a real challenge to performance leaders IMG. At the higher end of the scale, Intel’s next CPU – which could well end up in a second-gen Surface Pro – is believed to offer a 2x to 3x graphical boost over the current HD4000 tech. Based on our recent integrated graphics testing, conceivably we could see Battlefield 3 and Crysis 2 running at 60 frames per second – on a tablet.
But it’s almost certain that Apple will take point on this new gaming revolution. Next year’s iPad – hotly tipped to incorporate the new ARM Cortex A15 architecture and IMG’s PowerVR Rogue chipset sees a leap in performance that should see the tablet’s raw gaming potential reach and even exceed current-gen console levels, with the added benefit of DirectX 11-level GPU features. At that point, the platform becomes a viable target for AAA games development. Remember the first time you saw Infinity Blade on mobile? That is just a hint of where the platform could be heading – and while Google and Microsoft race to catch up with the current-gen iPad, once again it’ll be Apple that pushes the game to the next level.