Games publisher EA believes things will turn around for the company next year. This year has been pretty unpleasant for the company after its trusted DRM sunk its flagship SimCity release.
But Electronic Arts seems to think that is all behind it and has forecast fiscal 2014 earnings above Wall Street’s expectations. EA has been cutting staff and reorganizing studios in recent months to embrace new game platforms. It is preparing a new batch of games including the latest installment of its “Battlefield” shooter game franchise.
Digital revenue, from mobile games, online offerings and other newer sales channels, rose 45 percent year-over-year to $618 million, larger than EA’s packaged goods business in the fourth quarter ended on March 31. It thinks that consumers have held back from buying hardware and software as they await new versions of Sony’s PlayStation and Microsoft Xbox expected later this year.
The video game maker forecast revenue of $4 billion, in line with Wall Street’s expectations. Weakness in the packaged games market dented revenue, but EA recognized $120 million of deferred payments from its “Battlefield Premium” service in the fourth quarter.
For the latest quarter, total revenue declined to $1.2 billion from $1.37 billion a year ago. Adjusted revenue rose 6.4 percent to $1.04 billion over the same period, barely beating analysts’ average estimate of $1.03 billion.
Net income fell to $323 million from $400 million last year.
As anyone who has accidentally walked into a room full of children can tell you, they’re good at asking the kinds of questions that just keep drilling down. “Why is the sky blue? So why does blue light get scattered more? Then why is the sky red at sunset? Where are you going?”
And although I don’t recommend it, if you were to sit one of these little buggers down with a quarterly earnings reports from EA or Activision, they might soon start asking “Why are violent video games so much more popular than other games?” It’s a tricky question to answer without falling down the why hole. Because shooting stuff is fun. Why is it fun? Because people like military themes where they can be the hero. Okay, but why is that? Because players like feeling ridiculously powerful and enormous guns let them do that. But why is that appealing? Why, why, why?
Well, some psychologists are trying to tease apart the reasons why violence sells without throwing their hands up and shouting “Just because! And I’m not even your real dad!” Researchers Scott Rigby and Richard Ryan describe how they think that the design of violent games – especially shooters – naturally does a pretty good job of satisfying some very basic psychological needs. But not in the way you may be thinking.
In their book, Glued to Games: How Video Games Draw Us In and Hold Us Spellbound, Rigby and Ryan describe “self-determination theory,” a fairly well established framework that aims to describe why people pursue certain voluntary activities. In part, self-determination theory says that people are motivated to engage in activities to the extent that they satisfy three psychological needs:
- 1. Competence – progressing in skill and power.
- 2. Autonomy – being able to choose from multiple, meaningful options.
- 3. Relatedness – feeling important to others.
What does this have to do with violent shooters? Rigby, Ryan, and their colleagues argue that many of the design principles of good shooters also happen to follow well worn paths to satisfying these three psychological needs. Let’s take a closer look.
Competence is communicated by immediate and unambiguous positive feedback in response to your actions – you see opponents stagger, see blood fly off them, and ultimately see them collapse. The beloved headshot is particularly effective in this regard. Scott Rigby notes, “I’ll often put up a slide with a great screenshot of a headshot, and it always elicits smiles. The smiles here aren’t because everyone is sadistic – they are because this is a moment of mastery satisfaction that all gamers can relate to. The blood may not be the value component, but really is just a traditional way dense informational feedback on mastery is provided.” Information about competence in shooters is also thrown at you in the form of scoreboards, rankings, weapon unlocks, and eventually the outcome of every (relatively short) match.
Autonomy, the second motivator in self-determination theory, is also well served by the design of most popular shooters. Having the option to choose many different paths through a level satisfies autonomy, as does choosing between different classes, different loadouts, or different tactics. In a lot of games you can even choose between different modes, modifiers, or maps, allowing you to satisfy the need to play a game how you please. And if that’s not enough, custom character or weapon skins or models also fit in here.
Finally, relatedness is most obviously important in multiplayer games where you can feel like part of a successful (or, perhaps more likely of pickup games, incompetent) team bound together by opposition to a common foe. To the extent that shooters communicate your contributions in the forms of scores, points, server-wide notifications, or MVP awards, relatedness will be satisfied – to say nothing of what you can get out of text and voice chat. But even most modern shooters have single player campaigns that somewhat mimic this and put you in the role of someone important to those around you.
Of course, none of these motivators is unique to shooters. They show up in good game design across all genres and themes. But violent shooters usually hit on all three, and Rigby and Ryan believe that’s there’s a big overlap between what makes an effective shooter and what satisfies multiple facets of all three of these psychological needs. So while RPGs might nail autonomy, platformers may demand competence, and MMOs may allow the most relatedness, violent shooters fire on all three cylinders.
“[Violent games] are fun not because of the blood and gore,” write Rigby and Ryan, “but because games of war and combat offer so many opportunities to feel autonomy, competence, and the relatedness of camaraderie rolled up into an epic heroic experience.” But, that all said, do shooters satisfy all these motivators so well because they’re violent?
It’s an important question, and Ryan, Rigby, and their colleague Andrew Przybylski published a 2009 study in the Personality and Social Psychology Bulletin that addresses it. Part of their research involved a clever experiment where they modified Half-Life 2 to create a high-violence version of the game’s multiplayer and a low-violence version. The high violence version is pretty much what you’d expect. The low violence one, though, was created by changing the bullet-spewing guns into “tag” tools that players would use to zap opponents. Once tagged, foes would freeze and float up into the air for a second before being harmlessly teleported to a “penalty box” where they would wait to respawn into the game. So the main difference – arguably the only difference – between the two groups was how much violence there was in the game. Everything else was the same: the level layouts, the controls, and all the other stuff that satisfied competence and autonomy (unfortunately they didn’t examine relatedness). Only the violence was teased out of the equation
What did they find? Well, a lot of things. But one interesting finding was that the games in either condition were found enjoyable and both games satisfied the basic psychological needs of competence and autonomy. Even whether or not a person was naturally aggressive and normally enjoyed violent games didn’t matter once you accounted for competence and autonomy.
To me, this is vastly interesting and argues for alternatives to the go-to trope of violence and gore if you’re looking to draw people to games. It’s not the bloodshed as much as it is feeling like you’re able to make what you want happen on-screen. It’s not fetishising guns and explosions as much as it is the ability to use tactics and choose among meaningful options on the road to victory. It’s not the military themes as much as it is feeling like you’re an important part of a team.
Sure, war and military heroism are themes and experiences worthy of exploration, but there are other options that can be just as effective. Gamers may be happy to just keep buying the same game over and over again without understanding a thing about self determination theory, and publishers may only want to greenlight games that look like smash hits from the past without caring about mechanisms for satisfying psychological needs, but developers who think about these things and play around with them can definitely do something both great and different.
When Crytek opened its new Crytek USA studio, it picked up a number of the staff from Vigil when THQ hit bottom. Now, it looks like those former Vigil studio members might be lucky enough to see Crytek acquire the Darksiders franchise that these folks poured their hearts and souls into.
Crytek is apparently looking to buy the rights to the Darksiders franchise. This is not to make a new Darksiders game, but is in the spirit that the people who created the game might as well own the IP if someone if going to get it.
Former Vigil boss, David Adams, now the head of Crytek USA, went to Twitter to announce the news that Crytek would be bidding to acquire the franchise because the IP belongs at home with is creators, according to the Twitter posting.
While it is far from assured that Crytek will acquire it, the courts and the legal wrangling will determine how it shakes out. Still, it is nice thing to see that some of the former Vigil crew could end up with the IP being under the roof where they work again. It does not get anywhere close to a new Darksiders game, but it would be nice for the Vigil folks to have something good come their way.
The recent launch of SimCity was a troubled one for Electronic Arts, as the company struggled to get its servers fully functional. Ordinarily, this wouldn’t be good for any game’s launch, but when a title is designed to be always online, and countless players therefore can’t even play the game they just purchased, the situation quickly escalates. EA moved as fast as it could to rectify the situation, but some players felt EA’s real intent was to force DRM on its customers. Maxis head Lucy Bradshaw’s blog post seemed to only stir the pot, but EA Labels president Frank Gibeau now insists that DRM had absolutely nothing to do with the game’s design whatsoever.
Speaking at GDC this week, Gibeau commented, “That’s not the reality; I was involved in all the meetings. DRM was never even brought up once. You don’t build an MMO because you’re thinking of DRM – you’re building a massively multiplayer experience, that’s what you’re building.”
Not only was DRM not a topic of internal discussion at EA, Gibeau said, but the executive also made it very clear that DRM is simply not an option for publishers anymore.
“At no point in time did anybody say ‘you must make this online’. It was the creative people on the team that thought it was best to create a multiplayer collaborative experience”
“DRM is a failed dead-end strategy; it’s not a viable strategy for the gaming business. So what we tried to do creatively is build an online service in the SimCity universe and that’s what we sought to achieve. For the folks who have conspiracy theories about evil suits at EA forcing DRM down the throats of Maxis, that’s not the case at all,” he said with a laugh.
For EA and Maxis, Gibeau said it really was a case of building a completely connected world with an MMO-like infrastructure.
“It started with the team at Maxis that had a creative vision for a multiplayer, connected, collaborative SimCity experience where your city and my city and others’ were [working together]; for better or for worse, and for right or for wrong, the lead designers and the producers and the programmers felt like they wanted to tell us a multiplayer, cooperative city story around SimCity. We had built a bunch of these and you could’ve gone deeper and deeper into your plumbing and managing toilets and electrical posts, but we felt there was a bigger story to tell and a bigger opportunity to chase with an always-on connected experience built around that concept. That’s what we set out to design and that’s what Maxis created and brought forward into the marketplace,” Gibeau explained.
“At no point in time did anybody say ‘you must make this online’. It was the creative people on the team that thought it was best to create a multiplayer collaborative experience and when you’re building entertainment… you don’t always know what the customer is going to want. You have to innovate and try new things and surprise people and in this particular case that’s what we sought to achieve. If you play an MMO, you don’t demand an offline mode, you just don’t. And in fact, SimCity started out and felt like an MMO more than anything else and it plays like an MMO,” he continued.
Gibeau acknowledged that EA probably should have done a better job in its messaging with the community, making sure that they understand the MMO nature of the title and the need to be always connected.
“I’m disappointed that we didn’t do a better job communicating that upfront. I’m disappointed that we had a rough first couple of days in terms of underestimating how people were going to play the game and how the server infrastructure was going to hold up, but we responded the best we could, we got people to fix it as fast as we could,” he said. “We had a majority of people come through who had a good experience and a bunch of people that didn’t and that’s not acceptable, but at the same time we tried to do make-goods with free games, we’ve been fixing and constantly tinkering with the experience and it’s an experience that we want to continue to evolve over time. It has to be an online experience like an MMO where you bring out new events, new kits, new places to go, and that’s more the vision for where SimCity is going.”
Even with its problems, however, the game did quite well, selling over 1.1 million copies in its first two weeks, which Gibeau noted makes it “the fastest-selling and biggest SimCity we’ve ever built.” Gibeau believes that part of the problem is the entire situation snowballed when the media started covering it.
“Some customers have had problems, and you’re in the media; you know how some things can snowball, and unfortunately that’s what happened here. We did the best we could in order to respond to that and made adjustments to the service but the game is continuing to sell through at a much higher expectation than we thought. The servers are now at 100 percent and there’s plenty of capacity… and we’re not the first or the last company [to have a problem like this] – Activision Blizzard, Steam, Ubisoft…everybody’s had this problem and it was our turn I guess,” he said.
Warhammer 40K owner Games Workshop has confirmed a new licensing deal with Roadhouse Interactive to develop new titles for mobile space based on the franchise. The developer, who is based in Vancouver, describes the new Warhammer title as a side screening action game.
While Roadhouse confirms that the game is in development, the end mobile platforms that will see the released version of the game are still up in the air at the moment; but more information is sure to be coming in the months ahead, according to the studio.
The Warhammer 40K has had others attempts to capture the tabletop war game in video form before. These Warhammer offerings have met with mixed reviews, but this new title from Roadhouse will be a first for Warhammer 40K in the mobile space.
The Disney acquisition of LucasFilm last October included all of the company’s subsidiaries, including Industrial Light & Magic, Skywalker Sound, and veteran game developer LucasArts. While news since the acquisition has been mostly focused – and justifiably so – on an announcement of a new Star Wars movie in production, what does the future hold for LucasArts?
Here’s what’s known about Disney’s plans for Lucasfilm and its subsidiaries. Disney’s official press release on the acquisition stated that “Lucasfilm, headquartered in San Francisco, operates under the names Lucasfilm Ltd., LucasArts, Industrial Light & Magic, and Skywalker Sound, and the present intent is for Lucasfilm employees to remain in their current locations.”
Subsequently, Disney has announced the beginning of production on Star Wars Episode VII, to be directed by noted director JJ Abrams; the cancellation of the acclaimed animated series The Clone Wars after 100 episodes; and Seth Green’s planned Star Wars: Detours comedy has been shelved for now. The speculation among Hollywood insiders is that Disney wants to focus efforts on the new movie, and wants to remove possible distractions (other licensed Star Wars shows) from the entertainment landscape.
The picture regarding LucasArts’ future is much less clear. The company began in 1982 producing games for Atari consoles, and later produced computer games including a series of popular adventure games (like The Secret of Monkey Island), military simulations (like Battlehawks 1942) and first-person shooters (Star Wars: Dark Forces). Subsequently, after the turn of the millennium LucasArts changed focus, working with other publishers and focusing mostly on titles based on Lucasfilm properties.
The last few years have been turbulent for LucasArts, with a series of executive changes and downsizings. Jim Ward headed up the company from 2004 to 2008; he was followed by Howard Roffman as interim until Darrell Rodriguez took over and was replaced by Paul Meegan in 2010; Meegan left in 2012, and the studio has not yet chosen a permanent president.
The game slate for LucasArts has been pared down to only one that’s promoted on its web site: Star Wars 1313. The game is a third-person adventure game, seemingly similar to a BioWare game, and it caused quite a positive buzz at E3 last year. Kotaku has reported that the three different sources told them the game was put on hold since the acquisition, but LucasArts denied this, saying that “Star Wars 1313 continues production.” Kotaku also reported that Star Wars: First Assault, a multiplayer shooter, may never be released given the uncertainty about the future of LucasArts and its direction.
According to BusinessWeek’s article on the Disney acquisition of Lucasfilm, LucasArts brought in $150 million in revenue in 2012, with operating income of about $90 million. Those numbers may seem high given the languid pace of LucasArts releases (Kinect Star Wars being the only release in 2012, and Lego Star Wars III in 2011), but LucasArts also has licensed game revenue from titles like Star Wars: The Old Republic.
Now, sources have indicated that since the acquisition LucasArts hiring has been frozen, and other rumors passed along to us questioned the future of the studio itself. LucasArts, when reached for a statement, said it’s “one hundred percent not true” that LucasArts was headed for a shutdown, and that “everything is moving ahead.” Speculation will doubtless continue in the absence of hard information about release dates and future products.
The studio’s performance in recent years has not impressed former LucasArts employees. One ex-LucasArts employee had this to say: “The ‘business’ has been on life-support since the Star Wars license and subsequent development for their best title went to Bioware/EA. I’m frankly amazed that they’ve stayed in business this long. No stomach for truly original product, and slender means to produce their previous cash cows – Indy and Star Wars.”
Disney has many things to consider when looking at the future of LucasArts. The studio has had a spotty record of product releases, but perhaps some of that may be due to the unfocused nature of the Star Wars franchise in the last few years. Disney has had its own difficulties in determining a strong interactive strategy, shutting down Junction Point Studios and recently slipping the ship date for Disney Infinity. Many of Disney’s best intellectual properties (like the many Marvel characters) are licensed out rather than developed in-house.
The relaunch of the Star Wars movie franchise with Episode VII is clearly a major event that Disney will want to exploit to the fullest. Either LucasArts should be revitalized to produce games worthy of a major media event, or Disney may decide to just give up in-house production of cutting-edge game titles and license the property out. Either way, Disney needs to decide soon which way to go; AAA games take years to develop properly, and time is passing swiftly.
Essentially, if Disney doesn’t decide what to do with LucasArts soon the decision will effectively be made for it. Employees who have no clear picture of their future will be looking for work elsewhere, and typically the most talented employees are among the first to leave. If Disney waits too long, it won’t be able to have AAA games available around the launch of the new movie, and the talent pool may be lower than it was. May the Force be with them.
EA games has been caught out making bogus claims about its SimCity claiming it needs a server to function. The outfit has been responding to requests from users that it abandon its DRM and allow for a version of the game that does not need to log onto a server. EA insists that it needs the servers to work and that it would take the company ages to reprogram the game so that it can work independently.
Maxis’ studio head, Lucy Bradshaw went on record saying that the software offloads a significant amount of the calculations to EA servers, and that it would take “a significant amount of engineering work from our team to rewrite the game” for single player. But that is complete rubbish according to a SimCity developer who has got in touch with RPS to tell us that at least the first of these statements is not true. He claimed that the server is not handling calculations for non-social aspects of running the game, and that engineering a single-player mode would be a doddle.
He told Rocketpapershotgun.com that the servers were not handling any of the computation done to simulate the city you are playing. They are still acting as servers, doing some amount of computation to route messages of various types between both players and cities and doing cloud storage of save games, interfacing with Origin, but doing nothing for the game itself.
Kotaku said that the game was happy for 20 minutes before it realized it wasn’t syncing to the servers and the DRM kicked in. Game play can’t be using the servers at all. For some reason EA is determined to keep its DRM up and running even if it means killing the game completely.
I haven’t played any of the Dead Space games, so I can’t comment on the criticisms that Dead Space 3 sold poorly because of game content or the way in which it dumbed down the gameplay experience to appeal to a broader audience. I can talk about how I see the microtransaction and other changes that vocal fans derided fit in with Electronic Arts’ broader strategy.
The games market is polarizing. The big are getting bigger (see Grand Theft Auto and Call of Duty beating first week sales records year after year) while the niche is becoming more viable (see every indie game on Steam) while the middle is getting squeezed (see THQ, Eurocom and dozens of other midsize developers). The emergence of digital distribution has brought along a bigger change than many people realized, driven by two different properties:
- It is cheaper than ever before to distribute content
- It is possible to have unique, personal, one-to-one relationships with every customer
The strategies that EA are putting in place reflect this reality.
The variable demand curve
The past 30 years were about putting games in boxes, shoving them in shops and trying to sell as many as possible. The price was basically fixed at around £30-40, so the only way you could make more money was to do more volume, i.e. sell more copies. You could also try to maintain the price for as long as possible by restricting price reductions and limiting trade-ins. What you couldn’t do was to connect with your fans in any meaningful way.
We no longer live in that world, except perhaps for the very biggest blockbusters. We live in the world where there is a bewildering choice and variety of games available to us. At the same time, development costs for AAA games are enormous and rising, while the market is not getting bigger. In fact, that subset of the market is shrinking as players are distracted by the many different ways, times and devices they can play games on.
There is only one solution. It is to find a way to use the initial launch of AAA game as a starting point in your relationship with fans. It is to start the long process of turning games from one-off purchases to long-term relationships. It is about using games to engage with and retain players, to convert some of those players into fans and to convert some of those fans into superfans. In the process, niche AAA games that are not viable using the blockbuster, fixed-price-massive-volume model can become successful long-term businesses.
Viewed through that lens, everything that EA is doing makes sense. It is trying to use its games as the starting point of the relationship. Sometimes those games are free (as in most of its mobile, tablet and online strategy). Sometimes they are paid (as in its console strategy). What they are trying to achieve is a revenue model which means that those people who love their games, who keep playing, who are vocal and demanding, are given an opportunity to spend lots of money on the products that they love. It is the only way for niche AAA games to survive.
I don’t know why Dead Space 3 didn’t do well. I don’t know if it was about poor design decisions, a change of focus or gamers voting with their wallets and not supporting a game with microtransactions on principle (EA will have data on how many users engaged with microtransactions. Answering the other questions will be harder).
But I don’t think gamers should view any rumored cancellations of blockbuster projects as a victory against microtransactions. Finding a way for the biggest fans to pay lots of money to get things they truly value is the only way to support niche AAA games (and by niche, I mean anything outside the top 4 or 5 games released every year). EA may not have got the exact model right yet, but they are experimenting. The failure of the experiment does not mean that EA will abandon microtransactions: it means that it will abandon anything other than blockbuster games and tablet games.
Is that what you really want?
Nicholas Lovell is director at GAMESbrief, a blog about the business of games. He provides business advice on free-to-play and paymium design. He will be giving a masterclass on how to make money from free-to-play games in San Francisco on Sunday March 24, just before GDC. You can also book one-to-one surgeries.
Crytek chief executive officer Cevat Yerli has told Digital Spy that Crysis 3 won’t be coming to the Nintendo Wii U because there’s no “business drive” between Electronic Arts and Nintendo.
“There have been discussions between Nintendo and EA and Crytek, but the bottom line is that there is that there’s not enough business drive in it,” Yerli told Digital Spy.
“I’d love to see it on Wii U, but what I love to see and what gets done at the end of the day are two different things. Even so, I could initiate it but someone has to sell it, right?” said Yerli. “It’s a business decision between EA and Nintendo. If that business decision doesn’t make sense, or seems to not make sense for them, it’s… not possible for us to make it. We can’t publish ourselves, and that’s the bottom line.”
Crysis 3 will be coming Xbox 360, PlayStation 3, and PC on February 19 in North America and February 22 in Europe. Electronic Arts has released the Unreal Engine 3-powered Mass Effect 3 and versions of EA Sports’ Madden NFL 13 and FIFA 13 on Nintendo’s new console.
Electronic Arts is consolidating some of its online gaming efforts. The publisher is taking its free-to-play gaming hub, Play4Free, and folding it into its online storefront, Origin.
EA already has a free gaming section set up on Origin, with links to all of the Play4Free titles. The same section also plays host to additional EA efforts like Crossfire and more casual games from the publisher’s Pogo casual gaming brand, including Word Whomp and Monopoly: The World Edition.
The Play4Free brand has been home to seven of EA’s free-to-play online games, including Battlefield Heroes, Battlefield Play4Free, and Need for Speed World. Even with the additions, the Origin label doesn’t extend across all of EA’s PC microtransaction titles; Tiger Woods PGA Tour Online continues to operate apart from the Play4Free brand, and the game’s official site gives no indication that it will be moving to Origin. Additionally, EA runs a number of games on Facebook, including The Sims Social and Outernauts.
Play4Free was announced in 2008, and officially went live with the 2009 launch of Battlefield Heroes. Origin is a comparatively younger endeavor, having been unveiled and rolled out in June of 2011.
Crysis 3 is one of the most anticipated game titles and it appears that the PC version will feature high-res texture pack from day one.
According to a post over at PCGamer.com, Crysis 3 will feature high-res texture pack as well as some advanced graphics options that will put that console version to shame. As you remember, Crysis 2 only featured v-sync, resolution, HUD bobbing and general quality settings before the famous patch. Crytek and EA are not going to make the same mistake and will include a great deal of settings that will make the PC version much better than the console version.
The list includes game effects, objects, particles, post processing, shading, shadows, water, anisotropic filtering, texture resolution, motion blur amount and lens flares.
In any case it sounds like really good news for PC gamers.
EA has finally revealed minimum, recommended and high performance system requirements for the upcoming Crysis 3 first-person shooter and, unsurprisingly, if you want to play it at high performance settings you’ll need AMD’s Radeon HD 7970 or Nvidia GTX 680 graphics cards paired up with a decent CPU.
Posted over at Crysis.com, the system requirements are pretty much in line with what expectations, and Crysis 3 will run on Windows Vista, Windows 7 or Windows 8 OS. The minimum requirements include at least a dual core CPU, DirectX 11 graphics card with 1GB of VRAM and 2GB of memory (3GB on Vista OS). As an example, EA offered Intel’s Core 2 Duo E6600 paired up with GTS 450 graphics card or AMD’s Athlon 64 X2 5200+ paired up with Radeon HD 5770.
The recommended specs take these specs a notch higher to quad-core CPU and 4GB of system memory with examples like GTX 560 paired up with Core i3-530 or Radeon HD 5870 paired up with Phenom II X2 565. The high performance requirements include “latest DirectX 11 GPU” and “latest quad-core CPU” paired up with 8GB of system memory. The examples are Intel’s Core i7-2600k paired up with the GTX 680 or AMD FX-4150 paired up with Radeon HD 7970.
Crysis 3 is scheduled for February 2013 release and will be available for PC, Xbox 360 and Playstation 3.
News of yet another PlayStation 3 hack is unlikely to be greeted with too much surprise, but the damage wrought by the release of the LV0 bootloader keys last week could have serious repercussions – not just in terms of PS3 piracy but also for the long-term security of the PlayStation Network.
Up until now, Sony has coped relatively well with the multiple breaches of its security that have occurred over the last couple of years. The original PSJailbreak was built around an exploit in the USB interface present up until firmware 3.41, and that hole was plugged by Sony within weeks. Hackers managed to run a small amount of games built for later system software revisions but through mandatory software upgrades, access to the PlayStation Network was off-limits for those who remained on the hacked firmware.
Then, disaster. Inherent weaknesses in Sony’s encryption algorithms were unveiled by hacker group fail0verflow, swiftly followed by the publication of the metldr “master key” from the infamous Geohot. PlayStation 3 was blown wide open – seemingly irrevocably – from two fronts. Not only could all aspects of the system be decrypted with the master key and then reverse-engineered, but thanks to fail0verflow’s signing tools, the code could be repackaged into a form that the PS3 was happy to process. The era of the “custom firmware” was upon us and there was a point where every console on the market could be compromised simply through running a CFW update from a memory stick.
System software 3.60 saw Sony fight back valiantly. New encryption protocols were put in place which effectively mothballed metldr, while the specific signing algorithms used for fail0verflow’s tools were blacklisted. Encryption keys were changed so new software would not run on older firmware, and Sony even released a revised console with changes to the Cell architecture that addressed some of the exploits hackers were using to gain access to the PS3 hardware – even the metldr key was changed on this new hardware. Access to the PlayStation Network was completely locked out on hacked consoles.
There’s little evidence that the hack which saw PSN’s servers compromised in one of the biggest security fails in internet history had much to do with the breaches that preceded it. The hack was server-side and there Sony was running traditional hardware with open source software, which had vulnerabilities of its own. It’s telling that even after PSN was restored to service, the underlying protocols by which PS3 “spoke” to the servers hadn’t changed so much at all.
However, the hackers were not done with PS3. A new “jailbreak” based on another USB dongle appeared last year, dubbed “TrueBlue”. This allowed newer games to run on older, compromised firmware 3.55 PlayStation 3s. It worked through the hackers decrypting newer games and then re-signing them with a variant of fail0verflow’s tools. This time there was no exploit in Sony’s USB code: instead the hackers released their own firmware which would not function without the dongle attached. In short, it was a crude way to monetise the fact that someone, somewhere had somehow managed to retrieve decryption codes from Sony’s latest OS updates. At the same time, the unique “pass phrase” buried within the firmware that allows PS3s to connect with the PlayStation Network was also leaked – and then leaked again after Sony changed it.
If there’s any silver lining to the new PlayStation 3 hack, it’s down to the fact that only decryption has been hacked, not encryption. This means that only older consoles running 3.55 firmware or lower can be used with the latest piracy-enabling firmwares. Consoles running 3.56 or later can’t run any kind of unofficial code.
So how was it done? Despite locking down metldr, there remained one further vulnerability – one that Sony simply cannot revoke: the bootloader key. If you still have an untouched PS3 from the 2006 launch, you can power it up and update it to the latest 4.30 firmware. Every PS3 requires the means by which to decrypt any firmware update – past, present or future. That’s what the so-called “lv0″ bootloader key does, and that’s the final element of PlayStation 3 security that is now out there in the public domain.
How did it get out there? All the indications are that the hackers who made the discovery – who have dubbed themselves “the three muskateers” had no intention of ever making it out into the public domain. However, one of their associates with access to their work appears to have sold it on, and the release of the bootloader keys was made in response to Far Eastern hackers looking to profit from a new wave of “custom firmware”. Rather than allow others to profit from their work, the “muskateers” went nuclear, and released the master key so any one with PS3 hacking experience could roll their own firmware. Since then, in just the space of a few days, at least two piracy enabling system updates have been released.
There’s a little good news and somewhat more bad news for Sony here. The good news is that while decryption has now been fully blown open, there is no firmware 4.30 equivalent to fail0verflow’s encryption tools – only Sony has the means to produce code that runs on any console running on firmware 3.56 or higher. The hackers meanwhile, have to rely upon the 3.55 fail0verflow tools, which can only run on un-updated consoles. Many firmware revisions have been released since then and we’d tentatively suggest that the vast majority of active consoles out there will be running on the newer firmware. At the time of writing, any new hacked code cannot be run on these machines.
So while the overall damage is most likely limited for now in terms of revenue lost due to piracy, there are still many fundamental issues Sony has to address. Firstly there’s the integrity of the PlayStation Network. Genuine, legitimate players will be playing online not only with people who’ve pirated PS3 software, but have the means to adjust any game data they want. Pirate games run from read/write PC hard drives rather than read-only optical media making customisation much simpler – maps could be altered for example to give hackers an unfair advantage in a first-person shooter. Sony can address this by changing the “pass phrase” which allows PS3s to connect to PSN, but this brings us nicely to the second major problem: how to tackle the leak of the lv0 bootloader keys.
The problem here is that any change Sony makes to the PS3 software has to be read by the PS3 – and that’s what the bootloader does. The PSN pass phrase can be changed, but that change needs to be integrated into data that lv0 decrypts – and thus it can be read by hackers. Similarly, new games coming out can be re-encrypted with keys not present in current firmwares – but they need to be delivered to the console via an update that (you guessed it), lv0 – and thus, the hackers – will be able to read. Now Sony can make it harder for those keys to be revealed, they can encrypt to many hundreds of layers if they need to – but at the end of the day, the beginning of the process always begins with the bootloader, which has been irrevocably compromised.
In terms of guaranteeing the validity of the console attached to the network, Microsoft has been far more aggressive than Sony thus far, and has faced attacks from a number of different sources. Consoles running custom firmware are quickly identified and banned from Xbox Live, while users flashing the DVD drive in order to run burned games have also found themselves barred from the service. But it seems that the hackers are always one step ahead, and in the here and now, pirates are still able to access Xbox Live relatively easily using copied games. Only those foolish enough to run leaked code days or even weeks before the game is released are identified as hackers and face the uncompromising wrath of the banhammer.
So where does this all leave game developers? At the most basic level, when it comes to multiplayer gameplay, the bottom line is that the system-level methods of weeding out cheats probably aren’t enough on their own: it’s going to be down to developers to add further levels of security to ensure that integrity of online gameplay. In short, exactly the sort of thing that’s been a required standard for PC gaming for a long, long time now.
Sony is facing new PlayStation 3 security headaches today, as Eurogamer reports that hackers have released custom firmware that allows for compromised consoles to go on the PlayStation Network, and LV0 decryption keys that will facilitate circumvention of future security updates.
PlayStation 3 security was largely undermined in early 2011 after hacking team Fail0verflow detailed a technique to get unauthorized code running on Sony’s console. At the time, the group said they attacked the console’s security as a response to Sony removing the OtherOS feature that allowed installation of the Linux operating system on the PS3. Eurogamer notes that Sony’s 3.60 firmware actually managed to plug many of the security holes from that event, but piracy has persisted for those willing to run older firmware and not take their systems onto PSN.
However, the newly released custom firmware contains the current PSN passphrase security protocol. And even if Sony changes that with new firmware, the release of the LV0 decryption keys means that hackers should be able to easily lay bare future security measures in system updates.
According to Eurogamer, Chinese hacking group BlueDiskCFW had planned to sell the custom firmware circumvention’s, which prompted another group called The Three Tuskateers to release the LV0 keys. They also released a statement claiming to have discovered the keys some time ago, adding, “only the fear of our work being used by others to make money out of it has forced us to release this now.”
As the advent of increasingly powerful and accessible digital distribution platforms continues to wreak havoc on traditional business and revenue models in the games industry, one business model appears to have collapsed faster than others – the monthly subscription. As little as half a decade ago, nearly every publisher on the planet seemed to want a slice of subscription action. Spurred on by the success of Blizzard’s World of Warcraft, they poured tens of millions of dollars into creating massively multiplayer worlds which would give them access to the kind of recurring monthly revenue that had made Blizzard into the most bankable company in the business.
We all know what happened. While Blizzard continued to grow – and despite recent decline, it’s still operating the most commercially successful game on the planet – almost everyone else failed miserably. Some titles dared to be radically different and found a profitable niche, like CCP’s extraordinary EVE Online or Square Enix’ stylistically gorgeous (and console-friendly) Final Fantasy XI. Most copied WoW, to greater or lesser degrees of competence, and fell far short of commercial expectations.
Today, the subscription model is dead in the water. Electronic Arts’ Star Wars: The Old Republic was a hugely expensive final roll of the dice; in the coming weeks it will complete its transition to a free to play business model, less than a year after launching to immense fanfare with a WoW style “pay up front, pay again next month” revenue model.
I’m not sure what company (Blizzard itself excepted, perhaps) will have the cajones to launch a subscription MMO along such traditional lines ever again. In today’s market, and most likely in tomorrow’s, such a move would feel less like confidence in the model and more like a stubborn refusal to acknowledge reality.
The dream is dead, then – the dream in question being the executive’s dream of having a siphon directly into the bank accounts of all of your customers, deftly extracting a monthly toll in return for playing a game which had become a service, delivering solid, predictable monthly revenues of the sort which look excellent in graphs, charts and quarterly financial results. World of Warcraft was not the model for the future after all – which isn’t to say that it was a fluke, but is certainly to say that it was a unique product whose ideas could be cloned but whose success was not subject to simple copying. We’ve woken from that dream to a free-to-play reality. Free to play business models are the new darling child of MMO and persistent world creators and operators. This new reality is similar to the subscription dream, in that it also involves generating a monthly revenue stream – but that revenue is less predictable, since it comes from a certain percentage of your dedicated players choosing to make purchases of in-game items.
Some MMOs are being designed from the ground up as free to play titles (indeed, that’s been the default business model for MMOs in East Asia for years, so you could argue convincingly that we’re not innovating, we’re just catching up). Others – many of them very high profile, like The Old Republic – have F2P systems bolted on to them after the subscription model fails. Sometimes that works, but it’s hard; balancing F2P is a tough proposition to begin with, which probably explains why so many people, creators and consumers alike, recoil instinctively from the very concept. It’s done badly more often than it’s done well.
So free-to-play is the entire future of this type of game, then? I could write that, certainly, and plenty of people would nod along in agreement – but I fear that we’d all be just as blinkered as those who confidently predicted, ten years ago, that subscriptions were the unrivalled future of the industry.
Here’s a slightly different prediction, instead – free to play is going to be the dominant form of revenue model for online and MMO games in the (very near) future. Most games will feature some if not all aspects of the free to play model. However, being dominant doesn’t mean being the only game in town – and free to play itself is a broad church, encompassing plenty of model variants which can appeal to different consumer groups or suit different game types. (That in itself is an important response to those who issue blanket criticisms of free to play as being exploitative or immoral. Their criticism is normally grounded in a bad experience with a single game or company – and let’s be blunt, it’s usually Zynga – and doesn’t acknowledge the breadth of concepts encompassed within free to play.)
However, even quite a few years down the line, I suspect (and hope) that many developers will still be experimenting with business models – picking and choosing aspects of free to play which suit their product and audience, while also inventing new concepts or new hybrids of existing models.
This week’s launch of Guild Wars 2 is a pretty solid example of that happening already. The game is a fully featured MMO, but instead of asking for a subscription fee, it’s sold as a full-price PC game (and with a million copies sold before it even launched, it’s very successful in that right already). Further down the line, developer ArenaNet has the opportunity to earn extra revenues through microstransactions (for services like moving or renaming characters, or for cosmetic items, for example) and through selling regular, albeit optional, content packs for the game.
World of Warcraft itself is another solid example. After leading the entire games industry for a merry dance for a decade, as publishers struggled to emulate its subscription model, Blizzard has begun dabbling in in-game item purchases – building its revenue from the hugely popular game by selling cosmetic items as well as its hugely successful content packs.
These are developers who know how free to play works. They’ve clearly studied it and liked some of what they saw (Blizzard also applies the viral user acquisition idea as deftly, if not more so, as many dedicated F2P game companies do), but decided that their specific customer base was better served by a hybrid model which enjoys advantages from other sides of the industry as well. Of course, it’s worth noting that making a decision like that requires really knowing your customer very well. Companies like Blizzard and ArenaNet don’t make decisions based on emotional responses like “I hate F2P!”; they make them based on an extraordinarily in-depth knowledge of their product and their customer, and of what will work best for both.
Even so, they illustrate an important point. We can and should accept that F2P, in its various guises, is going to be a dominant form of business model for games over the coming years. However, those various guises are indeed varied, and the dominance of F2P won’t squeeze out other models entirely either. Toyota cars are the dominant way of moving people around on the roads; they’re arguably also the most cost-efficient and effective way of doing so, from a dispassionate, analytical point of view. That doesn’t stop you from seeing the occasional Ferrari or Porsche, neither of which company seems to be about to disappear due to Toyota’s dominance; nor does it stop some people from cycling, some from choosing motorcycles, or Sir Richard Branson from getting from A to B by hot air balloon. Just because a business model isn’t the dominant form doesn’t mean that it can’t work profitably and effectively for certain products and audiences.
Perhaps we’re even ringing the funeral bell a little early for the subscription model. Who’s to say that this won’t transpire to be the perfect model for some consumers; for some developers; for some types of game? The story of the games industry in the 21st century is often mislabelled as “transition”, but that’s not what’s happening. What’s happening is diversification. Our church grows ever broader – and different business models are simply becoming a powerful set of tools which developers and entrepreneurs can use as appropriate. That’s a future to welcome, not one to fear.