With Amazon’s Fire TV device the first out the door, the second wave of microconsoles has just kicked off. Amazon’s device will be joined in reasonably short order by one from Google, with an app-capable update of the Apple TV device also likely in the works. Who else will join the party is unclear; Sony’s Vita TV, quietly soft-launched in Japan last year, remains a potentially fascinating contender if it had the right messaging and services behind it, but for now it’s out of the race. One thing seems certain, though; at least this time we’re actually going to have a party.
“Second wave”, you see, rather implies the existence of a first wave of microconsoles, but last time out the party was disappointing, to say the least. In fact, if you missed the first wave, don’t feel too bad; you’re in good company. Despite enthusiasm, Kickstarter dollars and lofty predictions, the first wave of microconsole devices tanked. Ouya, Gamestick and their ilk just turned out to be something few people actually wanted or needed. Somewhat dodgy controllers and weak selections of a sub-set of Android’s game library merely compounded the basic problem – they weren’t sufficiently cheap or appealing compared to the consoles reaching their end-of-life and armed with a vast back catalogue of excellent, cheap AAA software.
“The second wave microconsoles will enjoy all the advantages their predecessors did not. They’ll be backed by significant money, marketing and development effort, and will have a major presence at retail”
That was always the reality which deflated the most puffed-up “microconsoles will kill consoles” argument; the last wave of microconsoles sucked compared to consoles, not just for the core AAA gamer but for just about everyone else as well. Their hardware was poor, their controllers uncomfortable, their software libraries anaemic and their much-vaunted cost savings resulting from mobile game pricing rather than console game pricing tended to ignore the actual behaviour of non-core console gamers – who rarely buy day-one software and as a result get remarkably good value for money from their console gaming experiences. Comparing mobile game pricing or F2P models to $60 console games is a pretty dishonest exercise if you know perfectly well that most of the consumers you’re targeting wouldn’t dream of spending $60 on a console game, and never have to.
Why is the second wave of microconsoles going to be different? Three words: Amazon, Google, Apple. Perhaps Sony; perhaps even Samsung or Microsoft, if the wind blows the right direction for those firms (a Samsung microconsole, sold separately and also bundled into the firm’s TVs, as Sony will probably do with Vita TV in future Bravia televisions, would make particular sense). Every major player in the tech industry has a keen interest in controlling the channel through which media is consumed in the living room. Just as Sony and Microsoft originally entered the games business with a “trojan horse” strategy for controlling living rooms, Amazon and Google now recognise games as being a useful way to pursue the same objective. Thus, unlike the plucky but poorly conceived efforts of the small companies who launched the first wave of microconsoles, the second wave is backed by the most powerful tech giants in the world, whose titanic struggle with each other for control of the means of media distribution means their devices will have enormous backing.
To that end, Amazon has created its own game studios, focusing their efforts on the elusive mid-range between casual mobile games and core console games. Other microconsole vendors may take a different approach, creating schemes to appeal to third-party developers rather than building in-house studios (Apple, at least, is almost guaranteed to go down this path; Google could yet surprise us by pursuing in-house development for key exclusive titles). Either way, the investment in software will come. The second wave of microconsoles will not be “boxes that let you play phone games on your TV”; at least not entirely. Rather, they will enjoy dedicated software support from companies who understand that a hit exclusive game would be a powerful way to drive installed base and usage.
Moreover, this wave of microconsoles will enjoy significant retail support. Fire TV’s edge is obvious; Amazon is the world’s largest and most successful online retailer, and it will give Fire TV prime billing on its various sites. The power of being promoted strongly by Amazon is not to be underestimated. Kindle Fire devices may still be eclipsed by the astonishing strength of the iPad in the tablet market, but they’re effectively the only non-iPad devices in the running, in sales terms, largely because Amazon has thrown its weight as a retailer behind them. Apple, meanwhile, is no laggard at retail, operating a network of the world’s most profitable stores to sell its own goods, while Google, although the runt of the litter in this regard, has done a solid job of balancing direct sales of its Nexus handsets with carrier and retail sales, work which it could bring to bear effectively on a microconsole offering.
In short, the second wave microconsoles will enjoy all the advantages their predecessors did not. They’ll be backed by significant money, marketing and development effort, and will have a major presence at retail. Moreover, they’ll be “trojan horse” devices in more ways than one, since their primary purpose will be as media devices, streaming content from Amazon, Google Play, iTunes, Hulu, Netflix and so on, while also serving as solid gaming devices in their own right. Here, then, is the convergence that microconsole advocates (and the rather less credible advocates of Smart TV) have been predicting all along; a tiny box that will stream all your media off the network and also build in enough gaming capability to satisfy the mainstream of consumers. Between the microconsole under the TV and the phone in your pocket, that’s gaming all sewn up, they reckon; just as a smartphone camera is good enough for almost everyone, leaving digital SLRs and their ilk to the devoted hobbyist, the professional and the poseur, a microconsole and a smartphone will be more than enough gaming for almost everyone, leaving dedicated consoles and gaming PCs to a commercially irrelevant hardcore fringe.
There are, I think, two problems with that assessment. The first is the notion that the “hardcore fringe” who will use dedicated gaming hardware is small enough to be commercially irrelevant; I’ve pointed out before that the strong growth of a new casual gaming market does not have to come at the cost of growth in the core market, and may even support it by providing a new stream of interested consumers. This is not a zero-sum game, and will not be a zero-sum game until we reach a point where there are no more non-gaming consumers out there to introduce to our medium. Microconsoles might do very well and still cause not the slightest headache to PlayStation, Xbox or Steam.
The second problem with the assessment is a problem with the microconsoles themselves – a problem which the Fire TV suffers from very seriously, and which will likely be replicated by subsequent devices. The problem is control.
Games are an interactive experience. Having a box which can run graphically intensive games is only one side of the equation – it is, arguably, the less important side of the equation. The other side is the controller, the device through which the player interacts with the game world. The most powerful graphics hardware in the world would be meaningless without some enjoyable, comfortable, well-designed method of interaction for players; and out of the box, Fire TV doesn’t have that.
Sure, you can control games (some of them, anyway) with the default remote control, but that’s going to be a terrible experience. I’m reminded of terribly earnest people ten years ago trying to convince me that you could have fun controlling complex games on pre-smartphone phones, or on TV remote controls linked up to cable boxes; valiant efforts ultimately doomed not only by a non-existent business ecosystem but by a terrible, terrible user experience. Smartphones heralded a gaming revolution not just because of the App Store ecosystem, but because it turned out that a sensitive multi-touch screen isn’t a bad way of controlling quite a lot of games. It still doesn’t work for many types of game; a lot of traditional game genres are designed around control mechanisms that simply can’t be shoehorned onto a smartphone. By and large, though, developers have come to grips with the possibilities and limitations of the touchscreen as a controller, and are making some solid, fun experiences with it.
With Fire TV, and I expect with whatever offering Google and Apple end up making, the controller is an afterthought – both figuratively and literally. You have to buy it separately, which keeps down the cost of the basic box but makes it highly unlikely that the average purchaser will be able to have a good game experience on the device. The controller itself doesn’t look great, which doesn’t help much, but simply being bundled with the box would make a bold statement about Fire TV’s gaming ambitions. As it is, this is not a gaming device. It’s a device that can play games if you buy an add-on; the notion that a box is a “gaming device” just because its internal chips can process game software, even if it doesn’t have the external hardware required to adequately control the experience, is the kind of notion only held by people who don’t play or understand games.
This is the Achilles’ Heel of the second generation of microconsoles. They offer a great deal – the backing of the tech giants, potentially huge investment and enormous retail presence. They could, with the right wind in their sales, help to bring “sofa gaming” to the same immense, casual audience that presently enjoys “pocket gaming”. Yet the giant unsolved question remains; how will these games be controlled? A Fire TV owner, a potential casual gamer, who tries to play a game using his remote control and finds the experience frustrating and unpleasant won’t go off and buy a controller to make things better; he’ll shrug and return to the Hulu app, dismissing the Games panel of the device as being a pointless irrelevance.
The answer doesn’t have to be “bundle a joypad”. Perhaps it’ll be “tether to a smartphone”, a decision which would demand a whole new approach to interaction design (which would be rather exciting, actually). Perhaps a simple Wiimote style wand could double as a remote control and a great motion controller or pointer. Perhaps (though I acknowledge this as deeply unlikely) a motion sensor like a “Kinect Lite” could be the solution. Many compelling approaches exist which deserve to be tried out; but one thing is absolutely certain. While the second generation of microconsoles are going to do very well in sales terms, they will primarily be bought as media streaming boxes – and will never be an important games platform until the question of control gets a good answer.
With Fire TV, Amazon has launched its first box to deliver games to the living room. The $99 Android-based hardware features a quad-core processor, a dedicated GPU and a separate gaming controller for $40. Moreover, Amazon will bring exclusive games to the Fire TV through its first-party team at Amazon Game Studios.
Similar to other microconsoles, the games on the digital store will be either free or quite cheap to purchase, which Amazon hopes will make it attractive to the masses. Amazon has an army of resources and while other microconsoles have failed to become mainstream, it would be foolish to doubt Amazon’s potential. Should dedicated console makers like Sony or Microsoft be concerned? The majority of the analysts GamesIndustry International spoke to didn’t think so.
Wedbush Securities’ Michael Pachter called the announcement a “nonevent,” saying Amazon “will not be a player.” DFC Intelligence’s David Cole agrees.
“Short term they don’t have a reason to be concerned but long term it could be an issue. The main focus of the box is streaming video. The issue is video is 1) a much bigger application than games and 2) much easier to do. It is clear games are at best currently a distant after thought for Amazon in terms of the Amazon box. The type of games they are looking at are more in the realm of tablet/mobile/casual products, which are really no substitute for what the dedicated consoles provide,” he said.
“So I think right now it is a rounding error in the game industry but that could change if Amazon decides it wants to make a big investment in the space. However, the reality is you really have to very directly target gamers and Amazon right now is only half-heartedly doing that.”
Indeed, hardcore gamers won’t be passing up the PlayStation 4 or Xbox One for an Amazon Fire TV anytime soon, said independent analyst Billy Pidgeon: “Hardcore games enthusiasts won’t be satisfied by this or any other inexpensive television-connected device. Still, Microsoft, Sony and Nintendo are increasingly competing for individual and family entertainment time with interactive entertainment, video and audio available in the home on multiple devices, including smartphones and tablets as well as multimedia boxes that connect to television sets.”
Pidgeon conceded that “as more devices can offer games and media, consoles’ appeal for the mass market (an important factor in mid-to-end cycle console adoption) is in steep decline.” He added that if anyone should be worried now, it should be Apple and Google.
“Apple and Google have been the main contenders for online media transactions, but Amazon has the motivation, the focus and the distribution to move Fire TV quickly into lead position. Apple has competition issues with media providers and Google is behind in online retail and user experience. Amazon’s entry into connected TV could energize the competition and speed household penetration,” he said.
Asif Khan, CFO of Virtue LLC, wasn’t wowed by the Fire TV announcement either. Even with exclusive games – and now Amazon has hired some heavy hitters in Clint Hocking and Kim Swift – he’s not convinced that Amazon can disrupt the console market.
“We knew that Amazon was going to enter the games industry, but I am not sure who is going to feel compelled to buy it with a controller that costs 40 percent of the device. The success of the device as a gaming alternative will likely depend on the software that Amazon’s gaming studio can create, but we have seen with Nintendo’s Wii U flop that first-party content is not enough to get consumers to buy a device,” Khan noted.
“There is chance that Fire TV can make some waves if Amazon’s partners continue to bring games to the device, but in my opinion this product will achieve limited success,” he continued. “It feels like all of Apple’s competitors have now shown their cards in anticipation of the upcoming Apple TV refresh. We have seen Xbox One, Chromecast, and now Fire TV. None of these products have wowed consumers and ushered in a new age of how we interact with TVs. This announcement by Amazon today just has me even more interested in what Apple is going to announce this year. Clearly the set top box market has a lot of players and Amazon has a chance to contribute something to that increasingly crowded space. With that being said, I do not think the Fire TV is a game changer for video game consoles. It is a set top box that also plays games, with the potential of asymmetric gameplay.”
If the analysts seem overly negative, perhaps they are forgetting about Amazon’s web services. The back-end technology could make a difference, said IDC research manager Lewis Ward, who believes Amazon is “absolutely” a contender in the console space.
“Anybody in high tech or in content that sees Amazon jump into their bread and butter market and isn’t concerned about what Amazon might be able to do should have their head examined,” he commented. “Let’s put it this way: Fire TV is by far the most viable microconsole platform out there. Couple that with Amazon’s back-end streaming, storage, and game-hosting platforms and developer tools and you’ve got a serious threat to casual home-based console gaming in particular, at least in North America and pockets of Europe in the next few years.”
The Japanese company showed off its SmartEyeglass prototype at the Wearables DevCon conference just outside San Francisco, where it was trying to drum up interest among developers, who will need to build applications for the device.
Like Google Glass, SmartEyeglass displays information instantly in front of a users eyes. Unlike Glass, which has a small prism display, Sony’s prototype looks more like a normal pair of eyeglasses and shows information in green over a pair of see-through lenses.
In a video to show off its capabilities, users walk into an airport and get sent directions to the check-in desk which pop up on their glasses. Other potential uses include displaying the latest score and players’ names while watching a football game, sending and receiving texts and being notified of a missed call.
The glasses have a binocular-type display that makes the text look further away, which makes it more comfortable to read. They also have an embedded camera and a microphone and sensors similar to those in a smartphone, including an accelerometer, gyroscope and compass.
The device is still a prototype and not as advanced as Google Glass. It’s operated via a separate, wired controller with a touchpad that has navigation, power and camera buttons. And the glasses currently work in conjunction with an Android phone. The applications for the glasses run on the phone, and interact with the phone over Bluetooth or Wi-Fi.
Sony said it’s working on a software developer kit for the product, based on the same framework as its SmartWatch 2. But there was no word yet when the SDK or the prototype itself will be available.
Over 90 million people play Candy Crush Saga every day. Say whatever you like about London- based social game developer King, but its headline game is an unquestionable success. Like many games (most games, perhaps) it iterates upon previously existing formulae rather than being a breakthrough, unseen innovation. Like many games, the real DNA of its success can only be analysed honestly if we first admit that one of the dominant genes involved was luck. Still; 90 million players. About 1.3 per cent of the entire population of the planet try to clear candies and jellies at least once a day. Whether you consider that to be a depressing reflection of the state of humanity or not is entirely subjective; whether you consider it to be a remarkable business success is not. King’s got a touch of magic in its sweet jar.
Now King wants to convert that magic into cold, hard cash, so it’s going to float on the New York Stock Exchange. It’s proposing an initial public offering valued at $500 million, but given that its net income last year was $568 million (on revenues of $1.9 billion), everyone involved will clearly be hoping to make a killing off an early spike in share value.
When any company announces an IPO, it’s reasonable to ask why it’s happening. There are two ways for an entrepreneur to “exit”, cashing in his or her chips on the company that’s been built. One is by being acquired by a bigger firm (like the recent purchase of a major stake in Supercell by Puzzle & Dragons publisher GungHo). The other is an IPO. In both cases, there are two clear reasons for cashing in – the first one, which everyone always claims to be pursuing, is to raise more money to facilitate further growth and make your company bigger and better. The second is shadier but not uncommon. You reckon you’ve taken the business as far as you can – organic growth is looking rocky from here, maybe you sense a change in the market or an oncoming headwind, and you want to grab as much cash as you can while the going is good, before your valuation starts to heavily decline.
“Take the money and run” isn’t an uncommon reason for a sale or an IPO, although none of the parties involved would ever be so gauche as to admit to such a thing. Still, the logic underwriting such a thing is cold and undeniable. If you can sense that your company is facing rocky ground and its valuation has likely peaked, you want to make sure you get as much of a return on your holdings as possible before they become devalued. Laws and rules force lots of disclosure of financial data, of course, so you can’t hide a decline that’s already started – but if your instinct says next year won’t be as good as last year, now’s the right time to sell, and “instinct” doesn’t appear on SEC-mandated documents.
Is King taking the money and running? Yes, I think they are. I think this IPO is actually a little late – it’s going to occur just as King is on a downslope – but it’s far better timed than the easiest comparison, Zynga. Zynga launched on the stock exchange far too late, after it had already become obvious that the company was completely hobbled by the rapid transition from Facebook to smartphones in social gaming. Its IPO was a flop from an investor’s perspective, although plenty of people still made a lot of money from it – it certainly made more money than it would have if they’d waited around until the depths of the company’s troubles became apparent. On its current timeline, King will be IPOing while it’s still within touching distance of Candy Crush Saga’s peak.
“Is King taking the money and running? Yes, I think they are”
I foresee two problems, both of which ought to ring huge alarm bells for investors interested in the company. The first is that Candy Crush Saga’s peak is just that – a monolithic, dramatic peak climbing up out of a landscape of foothills and gentle valleys. There are no other peaks in sight. King’s other games do “okay”, but nearly 80% of its revenue comes from Candy Crush Saga, whose 90 million daily users figure is six times greater than the daily users figure for the firm’s second-place game, Pet Rescue Saga. There is nothing on the horizon which might replace Candy Crush Saga; once you start descending from that peak, the danger is that you end up back in the foothills with no more peaks to ascend. There’s simply no evidence, let alone proof, that King is capable of recreating the lightning-strike success of Candy Crush Saga. Bluntly, I don’t think King believes it can manage that either – because if the firm and its investors genuinely believed that they could repeat the success of Candy Crush, they would IPO after doing so, knowing that a company with a proven ability to turn out enormous hits is vastly, vastly more valuable than a company with one lucky strike and a string of also-rans to its name.
The second problem is Zynga itself. The stock market has already had one market-leading social game company perform absolutely dismally after flotation. Investors now know that this sector, while it’s exciting and interesting and extremely profitable, is also insanely volatile, completely hit- driven and largely subject to the rapidly changing whims of technology. On the surface, the F2P model is far more investor-friendly than the old-fashioned boxed game model, since you actually get a steady revenue stream from your products rather than a single burst of revenue after a couple of years of expensive development. In practice, though, you still need to keep turning out hit titles in order to ensure revenue growth (which is all the stock market gives a damn about). Few studios have shown any capacity for doing that – there are laudable exceptions like Supercell and Nimblebit, but most mobile gaming studios are still dining out on single successes. King has Candy Crush Saga; Rovio has Angry Birds; GungHo has Puzzle & Dragons. None of these companies have managed to create another game as popular as the one that made them famous – lacking a track record, each of them can fairly be considered a one-hit wonder until proven otherwise.
What about recent controversies around King? The company’s aggressive approach to trademarks, its reputed cloning of games and so on have done nothing to endear it to the gaming world and cultivated an atmosphere of negativity around the company. I would caution against reading too much into the likely impact of such stories on an IPO, though. Investors, bluntly, don’t really care if a company stands accused of not being terribly innovative, as long as the results are good. They certainly couldn’t care less about trademark spats with independent developers, I fear. Such issues are important and relevant to those directly involved, but of no consequence to the IPO prospects of a company like King.
What they do, however, is set mood music around the firm. Being seen as a bit ruthless is no bad thing, but I suspect that investors burned by Zynga will be quick to note the parallels between the sort of behaviour of which King stands accused, and the sort of behaviour in which Zynga engaged. The two companies are, in my mind, very similar both in culture and in approach. Neither was founded out of any attachment to games as a medium, a culture or an artform; both are simply entrepreneurial vehicles to exploit a potential market, and as such, it’s to be expected that both would struggle to adapt and succeed at points where they encounter obstacles that can only be surmounted by creativity rather than by management bullet points or business model refinement.
That’s not entirely a criticism, by the way; in a capitalist economy, there’s no sin to creating a business just to exploit a gap in the market. If the market in question happens to be a creative medium, one has to expect significant blowback to this approach. Moreover, there’s a limited lifespan to such a strategy – a company in a creative sector which is not founded on creative principles cannot expect to significantly outlive the market conditions it was originally designed to exploit.
In summary, I find it hard to view King’s IPO as anything more than Zynga 2.0. It is better-timed, certainly, but the companies involved are similar enterprises facing similar challenges – and thus far, demonstrating a similar lack of capacity to overcome them. Zynga is much, much further down the slope from its peak than King, so of course there remains a reasonable possibility that King can surprise us all with a second title on the scale of Candy Crush – and by doing so, establish itself as a genuine leading light of this new market. For all the negativity poured upon the company of late, I honestly hope King can make lightning strike twice for itself. I don’t like Candy Crush Saga personally, but that’s a subjective view – objectively, I cannot find a trace of the supposed immorality, grasping and nastiness of which the game regularly stands accused, and can’t help but recall all the awful stuff of which Flappy Bird also stood wrongly accused when it dared to be a break-out mobile gaming success. King faces problems down the line and I question whether it represents a good investment opportunity for anyone – but should it overcome those issues and prove itself capable of the creativity required to replicate its Candy Crush success, it would be churlish to call that anything other than a fresh triumph for UK game development. Fingers crossed that it happens.
Walt Disney Co is making plans to lay off several hundred people in its interactive unit, the division that includes gaming products and the Disney.com website, The Wall Street Journal reported earlier this week.
The job eliminations are expected to begin after Disney releases its quarterly earnings today, the Journal said. Playdom, a social gaming business Disney acquired in 2010, is one division expected to see cutbacks, the newspaper said.
Disney is trying to turn around the interactive unit, which has about 3,000 employees. Its new Infinity video game enjoyed strong initial sales after its release last August, helping the division report a $16 million profit for the quarter that ended in September, an improvement from the $76 million loss a year earlier.
A Disney spokeswoman had no comment.
Nintendo has issued a detailed and far-reaching response to the pervasive concerns about its future as a business.
In a meeting with investors, Nintendo president Satoru Iwata outlined the company’s strategy in both the short-term and as far ahead as 2016. From changing the fortunes of the Wii U to evolving the way we think about game consoles as a concept, Nintendo displayed striking candour in its attempt to allay the criticisms it has received since it drastically reduced its sales forecasts earlier this month.
However, Iwata was clear about one thing from the outset: regardless of what followed, there are certain aspects of Nintendo’s business that will not change, namely the frequently proposed idea that it should take its IP stable to new platforms.
“Dedicated video game platforms which integrate hardware and software will remain our core business,” he said. “Naturally, we are moving ahead with research and development efforts for future hardware as we have done before, and we are not planning to give up our own hardware systems and shift our axis toward other platforms.
“Dedicated video game platforms which integrate hardware and software will remain our core business… We are not planning to give up our own hardware systems and shift our axis toward other platforms”
“From a medium- to long-term standpoint…we don’t believe that following trends will lead to a positive outcome for Nintendo as an entertainment company. Instead, we should continue to make our best efforts to seek a blue ocean with no rivals and create a new market with innovative offerings.”
Here are the key points from Iwata’s presentation
The Wii U is Nintendo’s top priority
It is no secret that Nintendo has struggled to repeat the success of the Wii with the Wii U, but Iwata reassured investors that it has no intention of abandoning its ailing console. The possibility of a further reduction in price was ruled out immediately, with Iwata instead emphasising the company’s ongoing failure to adequately demonstrate the value of the GamePad controller, and to distinguish the console from its hugely popular predecessor.
“By looking at the current sales situation, I am aware that this is due to our lack of effort,” he said. “Our top priority task this year is to offer software titles that are made possible because of the GamePad… We have managed to offer several of such software titles for occasions when many people gather in one place to play, but we have not been able to offer a decisive software title that enriches the user’s gameplay experience when playing alone with the GamePad. This will be one of the top priorities of Mr. Miyamoto’s software development department this year.”
Iwata offered a strong first-step by setting an official May release date for the release of Mario Kart 8, but he also indicated that Nintendo’s development teams would focus on the GamePad’s near-field communication (NFC) function – the same basic technology as that used in lucrative franchises like Skylanders and Disney Infinity. Iwata promised more details of its plans for NFC at E3 in June.
The end of “device-based relationships”
While many have cited the Wii U as evidence of Nintendo’s failure to respond to the changes in the games industry since the launch of the Wii, Iwata stated that the company has already laid the foundations for a fundamental shift in the way it thinks about its products.
Before now, Nintendo had “device-based relationships” with its customers. This was mitigated somewhat by the strength of its software IP, but fundamentally the link with any given consumer followed the lifecycle of each piece of hardware. “We became disconnected with our consumers with the launch of each new device as we could only form device-based relationships,” he said.
However, the Wii U saw the introduction of “Nintendo Network IDs,” an attempt to create “account-based” customer relationships that could continue across different hardware platforms and generations. In the future, Iwata said, “connecting with our consumers through NNIDs will precisely be our new definition of a Nintendo platform.”
With this in mind, Iwata was able to put an end to the speculation around Nintendo’s strategy for smartphones and tablets. He made it quite clear that Nintendo has no plans to release its games on smart devices, but it does intend to use them as a way to communicate and build relationships with new audiences. Iwata offered few details of how the company intends to accomplish that goal, but he indicated that it would include a mobile app that leveraged Nintendo’s existing IP to raise awareness of its hardware and software.
“I have not given any restrictions to the development team, even not ruling out the possibility of making games or using our game characters. However, if you report that we will release Mario on smart devices, it would be a completely misleading statement. It is our intention to release some application on smart devices this year that is capable of attracting consumer attention and communicating the value of our entertainment offerings.”
Flexible pricing for existing and emerging markets
The existence of NNIDs and account-based relationships will also give Nintendo the ability to alter the way its products are sold. Iwata highlighted the company’s role in establishing the model of selling a console for several hundred dollars and individual games for fifty or sixty dollars, but Nintendo now recognises that this model is no longer viable in the long-term.
The first aspect of this that Nintendo intends to challenge is the fixed price-point of software. Iwata suggested a system where the price of a games could be tailored to individual customers based on their NNIDs: someone who purchased five games in a year might pay less and less for each one, for example, or there might be incentives tied to recommending a game to a friend.
“If we can achieve such a sales mechanism, we can expect to increase the number of players per title, and the players will play our games with more friends. This can help maintain the high usage ratio of a platform… Nintendo aims to work on this brand-new sales mechanism in the medium term, but we would like to start experimenting with Wii U at an early stage.”
“While we will continue to devote our energy to dedicated video game platforms, our first step into a new business area is the theme of ‘Health’”
This flexibility will also extend to emerging markets for gaming across the world. Nintendo is a globally recognised brand, but Iwata conceded that the price of its products has put them beyond the reach of people in certain countries. While Iwata didn’t mention any specific regions, he is likely referring to countries like Brazil and India, where the interest in gaming has increased in concert with the disposable income available to the population.
“To leverage Nintendo’s strength as an integrated hardware-software business, we will not rule out the idea of offering our own hardware for new markets. But for dramatic expansion of the consumer base there, we require a product family of hardware and software with an entirely different price structure from that of the developed markets.
“We aim to connect with consumers who do not own Nintendo’s video game systems yet, which will play an important role in cultivating new markets. Once we can establish such a connection with consumers in these nations, we will be able to use smart devices to share our information as well as important content distribution infrastructure. We plan to take significant steps toward such a new market approach in the year 2015.
Going beyond games
There may be no chance of playing Super Mario World on an iPad anytime soon, Iwata did state Nintendo’s interest in making money from its IP outside of first-party video games. Nintendo has always been very cautious of damaging its iconic characters through excessive merchandising and licensing, but one need only look at Rovio’s Angry Birds to see how much profitable such deals can be. Indeed, Iwata attributed the strength of Nintendo’s IP stable to that very reluctance, but, he said, “we are going to change our policy going forward.”
“To be more precise, we will actively expand our character licensing business, including proactively finding appropriate partners. In fact, we have been actively selling character merchandise for about a year in the U.S. Also, we will be flexible about forming licensing relationships in areas we did not license in the past, such as digital fields, provided we are not in direct competition and we can form win-win relationships.
“By moving forward with such activities globally, we aim to increase consumer exposure to Nintendo characters by making them appear in places other than on video game platforms.”
Nintendo’s new business idea: Health
Iwata closed the presentation with Nintendo’s planned entry into an entirely new area of business, one that will provide the “blue ocean” the company so desperately needs.
“While we will continue to devote our energy to dedicated video game platforms, what I see as our first step into a new business area in our endeavour to improve [quality of life] is the theme of “Health.” Of course, defining a new entertainment business that seeks to improve [quality of life] creates various possibilities for the future such as “learning” and “lifestyle,” but it is our intention to take “health” as our first step.”
Again, exact details of what this focus on health will entail were not provided, but Iwata described the concept as “an integrated hardware-software platform business” that will use the company’s experience making products like Wii Fit, Brain Age and the Touch Generations series as a springboard for a more pervasive and persistent initiative.
“We will be able to provide feedback to our consumers on a continual basis, and our approach will be to redefine the notion of health-consciousness, and eventually increase the fit population… I feel that not only can this [quality of life]-improving platform utilise our know-how and experience about video game platforms, but also we can expect it to interact with games and create a synergistic effect.
“While we feel that this is going to take two to three years after its launch, we expect the [quality of life]-improving platform to provide us with new themes which we can then turn into games that operate on our future video game platforms, too. Once we have established such a cycle, we will see continuous positive interactions between the two platforms that enable us to make unique propositions.”
Iwata promised to announce more details this year, and confirmed that the new business will officially launch during the fiscal year ending March 2016.
Nike announced that its Vapor Laser Talon bottom plate weighs just 5.6 oz. and was specifically designed on a 3D printer to provide optimal traction on football turf and to help athletes maintain their “drive stance” longer.
According to Performance Director Lance Walker, an athlete’s “Zero Step” is a pivotal point that can make or break an athlete’s 40-yard dash time. In the moments before that first step hits the turf, his propulsion and acceleration speed are determined. At that point, it’s all about geometry, Nike said.
The plate of the cleat is crafted using Selective Laser Sintering technology(SLS), a 3D printing technique that uses lasers to melt successive layers of powdered polymers.
Unlike fused deposition modeling, where polymers are melted and extruded from a hair-thin hole in a nozzle layer by layer, SLS 3D printers melt layers in a bed of powder. As each layer is melted, an additional layer of powder from a cartridge is added atop the preceding layer. Each layer is fused to the layer beneath it as it melts. As with all 3D printing, computer-aided design (CAD) software directs the robotic laser mechanism as it builds an object.
Nike said the SLS 3D printing, it was able to prototype a fully functional cleat plate and traction system within a fraction of the traditional timeframe — and at a fraction of the weight.
The SLS process allowed for the engineering and creation of shapes not possible in traditional manufacturing, the company said. It also allows for design updates within hours instead of months to truly accelerate the innovation process.
“SLS technology has revolutionized the way we design cleat plates – even beyond football – and gives Nike the ability to create solutions that were not possible within the constraints of traditional manufacturing processes,” Shane Kohatsu, director of Nike Footwear Innovation, said in a statement.
Nintendo blew it. That much is clear, and even Satoru Iwata doesn’t debate it – Nintendo blew it. The financials could be much worse, but the unit sales? Way, way below targets, and in the case of Wii U, way below sustainability. Nintendo blew it! Shout it from the rooftops, if you can find space on a rooftop next to all the people who are already shouting it, with altogether too much peculiar jubilance in their snide, told-you-so voices.
Nintendo blew it. Blew what, though? That’s a tougher question. The company’s year has been a lot more complex than anyone is giving it credit for. In 2013, Nintendo was proud owner of the best-selling console in every major territory worldwide, and launched an enviable range of first-party software titles that sold over a million copies each – more than any other publisher out there. The company retained its crown as the biggest platform holder and the biggest software publisher in the business.
Yet, Nintendo blew it, because it also had a platform that utterly under-performed even the most conservative of estimates – a console that, on its current trajectory, is set to undershoot the low bar set by the GameCube and become the firm’s worst performing home console ever. Moreover, Nintendo blew it in a subtle but crucially important way – with startling incompetence for a company of its size, the firm predicted sales figures for both the 3DS and the Wii U which were absolutely ludicrous and then failed to revise them as the year carried on, meaning that even the solidly performing 3DS has undershot its targets, while the Wii U looks even worse than it ought to (which is pretty bad to begin with).
“Nintendo’s stock didn’t tumble too badly after it revised its guidance, largely since nobody with a clue actually thought the firm was going to hit its targets anyway”
This latter aspect has made the coverage of Nintendo’s situation even more negative than it would already have been (and there are plenty of people waiting to pile onto the company at the slightest provocation), since it covers up the success of the 3DS and its software line-up – seriously, 3DS has had an amazing year for software and is now set up with a library that effectively secures the console’s future – in a heavy smearing of corporate incompetence. It has also, understandably, deeply annoyed shareholders, because they rely on companies making accurate predictions to figure out whether or not to pick up stock in a firm. That said, Nintendo’s stock didn’t tumble too badly after it revised its guidance, largely since nobody with a clue actually thought the firm was going to hit its targets anyway. Incidentally, the company’s stock price is about 50% higher today than it was 12 months ago, in line with the rise in the Nikkei 225 index – which means that Japanese investors, at least, are rating the company as broadly neutral rather than actually negative.
Still, Nintendo blew it, and that means lots of people are making angry noises. Iwata must go, say some; Nintendo must exit hardware, say others; time for Mario on smartphones, say still others. The owners of all of those voices are going to be disappointed – not least, I believe, because very few of them actually understand Nintendo as a company or the Japanese corporate environment in which it operates. They don’t understand that activist shareholders don’t mean a tuppenny damn to a company whose shares are largely held by a combination of the founding family, the senior staff and (more significantly still) the complex web of interrelated share- and debt-holdings that connects Nintendo with Japanese banks and other corporations, none of whom have the slightest concern in being “activist” except in the most extreme of circumstances. An earnings miss? Pah! Japanese corporations routinely missed annual earnings every year for decades after the Asian Financial Crisis of the early 1990s, but shareholder pressure to change top management never materialised then, and it won’t materialise now. Iwata is secure until he does something sufficiently wrong to have a taint of scandal around it, and that’s deeply unlikely to happen.
Exiting hardware? Absolutely no chance. Nintendo’s primary view of itself is as a toy company and its core business model is selling hardware (generally profitably) and then selling software that runs on that hardware (extremely profitably). The synergy between the company’s hardware side and its software side is legendary, as is the extent to which each Nintendo platform is designed with the requirements of planned first-party software in mind. For that reason alone, it’s likely that the Wii U will eventually have a clutch of startlingly excellent games, matching last year’s critically acclaimed Super Mario 3D World in quality – although whether that will actually do anything to resuscitate sales is another question entirely. The point is that this approach isn’t going to change; the inertia behind Nintendo as a hardware company is immense, and moreover, despite this year’s earnings miss, it’s largely working. Nintendo is, pretty much every year, the largest and most successful game software company in the world. Would it retain that crown on someone else’s hardware? If you rush to answer “yes!” to that question, either your crystal ball gazing skills are excellent or you haven’t thought about it hard enough; I don’t think there is a good answer to that question right now, and I know Nintendo will be eyeing Sega’s post-hardware decline and thinking about its own potential fortunes as one-among-many on a smartphone app store. Right now, Nintendo has around 40 million 3DS owners who are keenly anticipating future first-party releases from the company – keenly enough that they start to agitate and make noise if there’s ever a gap in the release schedule. Would that be true on iOS, or Android, or even on a competitor’s console platform?
“one of the company’s failings, in some regards, is that it still doesn’t really have a global outlook, with Nintendo of America and Nintendo Europe being rather stunted”
How about a limited engagement with smartphones, then, even if they wouldn’t make the leap entirely? That’s plausible. Nintendo’s primary point of reference for its product decisions is Japan – one of the company’s failings, in some regards, is that it still doesn’t really have a global outlook, with Nintendo of America and (even more so) Nintendo Europe being rather stunted local offshoots whose actual contribution to the firm’s planning and success is pretty obviously minimal. In Japan, smartphone games are a huge sector, and interestingly, there’s seemingly more of a market for premium-priced games than there is in the west, where free-to-play is increasingly the only show in town (although premium-priced games are carving out an interesting niche there too). There is, I believe, some potential for Nintendo to start putting Virtual Console titles on smartphones, perhaps initially through a tie-up with one of Japan’s carriers. However, I’d expect this roll-out to be slow and careful, with Nintendo incredibly mindful of the possibility of damaging its core brands by launching Mario or Zelda games tainted by emulation problems or crap touchscreen controls. Still – it could happen, and is by far the most likely of the “demands” being made of the firm to actually be met in some limited form.
If Iwata isn’t going to go (he’s not), Nintendo isn’t going to exit hardware (they’re not) and the company’s future isn’t on smartphones (it’s not, although some cautious toes in that water may be seen in time), then what is Nintendo’s reaction to its present situation going to be?
I’ve stated this before, but it bears repeating – Nintendo has incredibly, insanely deep pockets. The firm has set aside a vast war chest over the course of its successful years, and it can easily ride out even the complete failure of a console platform, supporting that platform sufficiently to satisfy consumers while quietly working on a replacement. That’s what Satoru Iwata told me Nintendo would do if the Wii failed completely – they’d make something else and try that instead – and I see no reason why that logic would have changed. If anything, the firm’s financial position is even stronger now than it was then.
What will Nintendo make? There’s a lot of speculation around that, but most of it is evolutionary. A faster, more powerful DS / 3DS style handheld. A Nintendo tablet, capable of handheld gaming and being hooked up to a TV. A full-spec next-gen console built to rival the PS4. All of these are options for the company – the tablet computer one is even an interesting one, combining as it does the handheld market (which Nintendo always dominates) with the home console market (where it’s hit and miss). However, they all miss the crucial ingredient which Nintendo actually requires to bring itself back to success – surprise.
“Nintendo needs the element of surprise. It surprised the hell out of everyone with the DS, it surprised everyone with the Wii”
Nintendo needs the element of surprise. It surprised the hell out of everyone with the DS, a daft, stupid idea for a handheld console that everyone expected to be trounced by the much more comprehensible PSP. It surprised everyone with the Wii, a weird, tiny, underpowered system with a controller that looked nothing like we expected – so odd that it led me to rather bluntly ask Iwata what he planned to do if everyone hated it and the system flopped, hence his comment above. The DS is the best-selling console in history (or at least, tied for that honour with the PS2); the Wii trounced the Xbox 360 and PS3 in the last generation of hardware. Nintendo does exceptionally well when it surprises people. It creates a clear gap between itself and the competition and makes “the Nintendo Difference” into more than just a silly slogan. Even those who own a more “mainstream” console end up wanting a Nintendo one too, because it’s so interesting and different, while those from outside the core gamer market find themselves intrigued by the very peculiarity and curiosity of the devices and their software.
3DS and Wii U fail the surprise test. They’re practically indistinguishable from their predecessors, both in appearance and in branding. 3DS suffered terribly from being mistaken for a new version of the original DS hardware; the Wii U, I suspect, is doing even worse, with many consumers not realising that it’s a new console entirely and not a new controller for the Wii. There’s been a disastrous failure of communication, branding and marketing, which has compounded the more basic error – assuming that the success of the Wii meant people wanted more of that kind of thing. Nintendo’s strength is providing people will surprises, things that look daft to begin with and then turn out to be precisely what we always wanted and never realised. If it’s to successfully come back from its present mess, it needs to do so by surprising us, not by following along the dull path analysts would now demand of it.
That, I earnestly hope, is what the company is working hard on in Kyoto right now. I don’t want Nintendo to abandon the Wii U, and I don’t think that will happen. The installed base is small, but big enough to be worth caring about, and the console still has the makings of a profitable platform, albeit a niche one. However, alongside continued support for the Wii U (and hopefully, a drastic change in marketing and branding), Nintendo is hopefully also working on something else; something more important and simply more Nintendo; its next big surprise.
Nintendo reportedly is looking to mobile devices to save its struggling business, after it admitted last week that the Wii U isn’t selling.
On Thursday, Nintendo slashed its Wii U sales forecast, acknowledging that despite previously expecting to shift nine million units between April 2013 and March this year, it now expects sales of just 2.8 million. Nintendo’s 3DS console isn’t selling well either, leading the firm to admit that it expects to post a $240m annual loss.
These clearly are signs that Nintendo is losing its appeal in the gaming market, and although there are still many dedicated Wii U gamers out there, the firm is struggling to compete against the Sony Playstation 4 (PS4) and Microsoft Xbox One games consoles.
It seems that Nintendo is starting to realize this too, and it admitted over the weekend that it might look to mobiles and tablets to save the future of the company, following rumors that the firm may be planning its own Android tablet for educational use.
Although the company had previous said that you’re unlikely to ever see Mario Kart running on an iPhone, Nintendo president Satoru Itawa hinted that the firm’s stance on mobile devices has changed, with the company exploring the possibility of bringing its titles to smartphones and tablets.
“We are thinking about a new business structure. Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business,” Itawa said.
“The way people use their time, their lifestyles, who they are have changed. If we stay in one place, we will become outdated.”
However, Itawa admitted, “It’s not as simple as enabling Mario to move on a smartphone,” hinting that the firm will develop dedicated games for mobile devices, rather than porting those it already has.
Yandex leads the world’s biggest search engine Google in Russia with a market share of more than 60 percent and derives the bulk of its revenues from text search-based advertising.
In a statement on Tuesday, Yandex said it would get full access to public data from Facebook users in Russia, CIS countries including Ukraine, Belarus and Kazakhstan, and inTurkey. Apart from the users’ posts, its search results will soon also display other users’ comments on them.
The agreement is non-cash and is based on mutual benefits with Yandex improving the quality of its search results and Facebook getting more traffic, a Yandex spokeswoman said.
Russia’s social networking landscape is dominated by local players such as Vkontakte, part-owned by internet holding company Mail.ru, while Facebook is ranked an estimated fourth most popular site.
Yandex raised $1.4 billion in an oversubscribed initial public offering in New York in May 2011 that was priced at $25 per share. The stock has since risen by around 70 percent as Yandex benefited from booming online advertising in the country which has become Europe’s largest internet market by audience.
It recently also raised $600 million by placing convertible senior notes due 2018 to fund a share buyback program and for general corporate purposes.
While Westerners are shunning Nintendo as if it were a rabid dog, the console maker is hoping to make in roads into China.
China just announced that it was allowing consoles made by western companies to exist in the country for the first time in 14 years. The move could pave the way for Nintendo, Sony and Microsoft to enter the world’s third-largest video game market in terms of revenue. But it is Nintendo, which is much cheaper, which could be the winner.
The most popular video games in China are often free to play with gamers only paying for add-ons such as weapons or extra lives.
Price may also be a problem for console makers looking to expand in China. More than 70 percent of Chinese gamers earn less than $660 a month. Nintendo, being cheaper, might do better.
There are more than a million apps on Apple Inc’s App Store and Google Inc’s Play store, the two dominant marketplaces for apps, which see billions of downloads each year.
This year, the most downloaded apps were new takes on communication, gaming, and entertainment, according to mobile app experts.
“2013 was a really interesting year in terms of maturation, milestones and new trends,” said Craig Palli, chief strategy officer at Fiksu, a mobile marketing company based in Boston.
“The most downloaded apps were in familiar categories, but offered new twists,” he added.
While old favorites such as Instagram, Facebook and Twitter — available for iPhone, Android and other devices – continued to be popular ways of communicating with friends, Snapchat eclipsed them in downloads in 2013, becoming the sixth most downloaded free app of the year on the App Store, according to Apple.
“Snapchat went from being a niche app to achieving much more critical mass, so much so that Facebook was reportedly willing to spend billions of dollars to acquire the company,” said Palli.
With Snapchat, users can send photos and videos that disappear shortly after they are viewed.
Launched in 2011, the app’s user base continued to grow rapidly in 2013, with over 13 million people using the app in October, according to the latest available estimates from global information and measurement company Nielsen. In December alone, over 400 million pieces of content were shared through the app, according to Snapchat, based in Venice, CA.
Vine, a video sharing app released earlier this year by microblogging company Twitter Inc, was the fourth most downloaded free app in 2013. The app, for iPhone, Android and other devices, allows users to share videos under six seconds in length. Nielsen estimates over 6 million people in the US were using the app in October of this year.
Snapchat and Vine fall into a category that mobile analytics firm Flurry calls camera-enhanced messaging, which they said grew eightfold in 2013.
With the Xbox One and PS4 fighting over the core gaming crowd this holiday season, Nintendo is targeting its Wii U marketing elsewhere. In an interview with Seattle NBC affiliate King-5, Nintendo of America president Reggie Fils-Aime said the system is enjoying strong holiday momentum, thanks in part to a renewed and refocused marketing push.
“The marketing has tremendously ramped up,” Fils-Aime said. “And really where it comes down to is being crystal clear in who’s your target. For us, this holiday with the Wii U, the target is parents and their kids. So if you’re watching primetime family entertainment, you’re seeing our marketing. If you’re a parent watching morning or daytime media, you’re seeing our content.”
Fils-Aime declined to give specifics about Nintendo’s marketing spend, but did expound on the company’s overall strategy.
“More than just the dollars, we’re putting our product where the consumer can see it, touch it, and feel it,” Fils-Aime said. “We’re in over 20 malls across the country. We’re creating an opportunity for consumers to see the product, because that, for Nintendo, is where the ‘wow’ happens. It’s not when you talk about specs or technology.”
Fils-Aime also addressed continued calls for Nintendo to begin making games for smartphones and tablets. While he stressed a corporate philosophy that Nintendo games are best played on Nintendo devices, Fils-Aime said the company has been doing “experimentation” on mobile platforms. However, he cautioned that experimentation is “largely going to be much more marketing activity oriented,” and designed to push users to experiences on the 3DS or Wii U rather than serve as stand-alone experiences in themselves.
“What drives us is creating fantastic experiences for consumers that in the end we’re able to monetize as a for-profit company,” Fils-Aime said. “The issue is that if you have games out there on all of these smart devices for very small amounts of money, it’s very difficult to monetize. And if you look at all of these companies who are trying to do it, there aren’t many that are doing it long-term, profitably.”
It is starting to look like the Wii is destined to go the way of the Dodo.
Estimated sales figures seem to indicate that 222,700 Wii U consoles were sold in the United States in November and 4.3 million Wii U consoles worldwide to date. This is not to be sneezed at, but given that Nintendo wanted to sell Nine million Wii Us worldwide during its 2014 fiscal year that is disappointing.
Nintendo flogged 160,000 systems in the first quarter and 300,000 units in the second quarter. Added to this new 222,000, this means Nintendo would need to sell an additional 8.3 million Wii Us before the end of March in order to reach its goal, or between 2.0-2.1 million consoles per month in December, January, February and March.
Analysts have already predicted that Nintendo “will likely miss” its profit goals for Wii U. Nintendo is trying to talk up the figures saying that sales of Wii U hardware increased by more than 340 percent over sales in October. Meanwhile sales of Microsoft’s and Sony’s new consoles are going through the roof.
Spotify offers free music on desktop computers with advertising but customers previously had to pay for on-demand connection on their mobile devices.
Its new service will allow listeners to choose the tracks they want to hear for free – with commercial interruptions – in the hope that people will upgrade to subscriptions.
“The more music you play, the more likely you will pay,” said Spotify founder and CEO Daniel Ek during a press conference at Spotify’s offices in New York.
Spotify has about 24 million active users around the world of which 6 million pay to listen to music without advertising.
Ek also announced Spotify launched in 20 new markets for a total of 55 markets worldwide.
As smartphones and tablets mushroom they have become choice devices to listen to music, even in the home, Ek said.
“It’s the one thing on my mind more than a year that had been bugging me,” Ek said about the proliferation of mobile devices and making Spotify available on them for free.
Streaming music has soared in popularity but competition is fierce with U.S. rival Pandora,Apple Inc’s iTunes Radio, Sirius XM, Rdio and a handful of smaller players all battling it out for listeners.
Revenues from mobile advertising at Pandora, which dominates the U.S. music streaming space and has over 70 million active listeners in three markets, have been rising as more people tune in on their smartphones.
Ek said that Spotify plans to air an ad every three or four songs, similar to the frequency of advertising spots on Spotify’s free desktop service.
Still, while consumers flock to streaming music services it has been difficult to turn a profit because of the cost to license music. Spotify strikes royalty deals with record labels and pays back about 70 percent of its revenue – already totaling $1 billion – to rights holders.
It’s a point that Spotify brings up often that usually coincides with the announcement of an artist or band that has chosen Spotify as a partner.
This year, that group is Led Zeppelin, whose entire catalog is now available to stream and on-demand exclusively on Spotify.
Last December Spotify announced that Metallica signed with the service – a notable addition since that group was once one of the leading crusaders more than a decade ago against the digital music sharing service Napster.