Nintendo has formed a comprehensive new alliance with DeNA that will make every one of the company’s famous IPs available for mobile development.
The bedrock of the deal is a dual stock purchase, with each company buying ¥22 billion ($181 million) of the other’s treasury shares. That’s equivalent to 10 per cent of DeNA’s stock, and 1.24 per cent of Nintendo. The payments will complete on April 2, 2015.
What this will ultimately mean for the consumer is Nintendo IP on mobile, “extending Nintendo’s reach into the vast market of smart device users worldwide.” There will be no ports of existing Nintendo games, according to information released today, but, “all Nintendo IP will be eligible for development and exploration by the alliance.” That includes the “iconic characters” that the company has guarded for so long.
No details on the business model that these games and apps will be released under were offered, though Nintendo may well be reluctant to adopt free-to-play at first. The information provided to the press emphasised the “premium” experiences Nintendo currently offers on platforms like Wii U and 3DS. Admittedly, that could be interpreted in either direction.
However, Nintendo and DeNA are planning an online membership service that will span Nintendo consoles, PC and smart devices. That will launch in the autumn this year.
This marks a significant change in strategy for Nintendo, which has been the subject of reports about plans to take its famous IPs to mobile for at least a year. Indeed, the company has denied the suggestion on several occasions, even as it indicated that it did have plans to make mobile a part of its core strategy in other ways.
Analysts have been offering their reflections on the deal, with the response from most being largely positive.
“Nintendo’s decision to partner with DeNA is a recognition of the importance of the games app audience to the future of its business,” said IHS head of gaming Piers Harding-Rolls. “Not only is there significant revenue to be made directly from smartphone and tablet consumers for Nintendo, app ecosystems are also very important in reaching new customers to make them aware of the Nintendo brand and to drive a new and broader audience to its dedicated console business. Last year IHS data shows that games apps were worth $26 billion in consumer spending globally, with handheld console games worth only 13 per cent of that total at $3.3 billion.
“The Nintendo-DeNA alliance is a good fit and offers up a number of important synergies for two companies that are no longer leaders in their respective segments.
“DeNA remains one of the leading mobile games company’s in Japan and, we believe, shares cultural similarities with Nintendo, especially across its most popular big-brand content. The alliance gives Nintendo access to a large audience in its home market, which remains very important to its overall financial performance. Japanese consumers spend significantly more per capita on mobile games than in any other country and it remains the biggest market for both smartphone and handheld gaming. While the partnership gives Nintendo immediate potential to grow its domestic revenues through this audience, gaining access to DeNA’s mobile expertise is important too to realise this potential.
“This alliance makes commercial sense on many levels – the main challenge will be knitting together the cultures of both companies and aligning the speed of development and iteration that is needed in the mobile space with Nintendo’s more patient and systematic approach to games content production. How the new games are monetised may also provide a challenge considering the general differences in models used in retail for Nintendo and through in-app purchases for DeNA.”
In a livestreamed press conference regarding the DeNA deal, Nintendo’s Satoru Iwata reassured those in attendance that the company was still committed to “dedicated video game systems” as its core business. To do that, he confirmed that the company was working on a new console, codenamed “NX”.
“As proof that Nintendo maintains strong enthusiasm for the dedicated game system business let me confirm that Nintendo is currently developing a dedicated game platform with a brand new concept under the development codename NX,” he said.
“It is too early to elaborate on the details of this project but we hope to share more information with you next year.”
Nintendo is heading back to black, with the company’s financial announcements this week revealing that it’s expecting to post a fairly reasonable profit for the full year. For a company that’s largely been mired in red ink since the end of the glory days of the Wii, that looks like pretty fantastic news; but since I was one of the people who repeatedly pointed out in the past when Nintendo’s quarterly losses were driven by currency fluctuations, not sales failures, it’s only fair that I now point out that quite the reverse is true. The Yen has fallen dramatically against the Dollar and the Euro in recent months, making Nintendo’s overseas assets and sales much more valuable in its end-of-year results – and this time, that’s covering over the fact that the company has missed its hardware sales targets for both the 3DS and the Wii U.
In short, all those “Nintendo back in profit” headlines aren’t really worth anything more than the “Nintendo makes shock loss” headlines were back when the Yen was soaring to all-time highs a few years ago. The company is still facing the same tough times this week that it was last week; the Wii U is still struggling to break 10 million units and the 3DS is seeing a major year-on-year decline in its sales, having faltered significantly after hitting the 50 million installed base mark.
In hardware terms, then, Nintendo deserves all the furrowed brows and concerned looks it’s getting right now. Part of the problem is comparisons with past successes, of course; the Wii shipped over a million units and the DS, an absolute monster of a console, managed over 150 million. In reality, while the Wii U is having a seriously hard time in spite of its almost universally acclaimed 2014 software line-up, the 3DS isn’t doing badly at all; but it can’t escape comparison with its record-breaking older sibling, naturally enough.
Plenty of commentators reckon they know the answer to Nintendo’s woes, and they’ve all got the same answer; the company needs to ditch hardware and start selling its games on other platforms. Pokemon on iOS! Smash Bros on PlayStation! Mario Kart on Xbox! Freed from the limited installed base of Nintendo’s own hardware – and presumably, in the case of handheld titles, freed to experiment with new business models like F2P – the company’s games would reach their full potential, the expensive hardware division could be shut down and everyone at Nintendo could spend the rest of their lives blowing their noses on ¥10,000 notes.
I’m being flippant, yes, but there’s honestly not a lot more depth than that to the remedies so often proposed for Nintendo. I can’t help but find myself deeply unconvinced. For a start, let’s think about “Nintendo’s woes”, and what exactly is meant by the doom and gloom narrative that has surrounded the company in recent years. That the Wii U isn’t selling well is absolutely true; it’s doing better than the Dreamcast did, to pick an ominous example, but unless there’s a major change of pace the console is unlikely ever to exceed the installed base of the GameCube. Indeed, if you treat the Wii as a “black swan” in Nintendo’s home console history, a flare of success that the company never quite figured out how to bottle and repeat, then the Wii U starts to look like a continuation of a slow and steady decline that started with the Nintendo 64 (a little over thirty million consoles sold in total) and continued with the GameCube (a little over twenty million). That the 3DS is struggling to match the pace and momentum of the DS is also absolutely true; it’s captured a big, healthy swathe of the core Nintendo market but hasn’t broken out to the mass market in the way that the DS did with games like Brain Training.
Yet here’s a thing; in spite of the doom and gloom around downward-revised forecasts for hardware, Nintendo was still able to pull out a list of this year’s million-plus selling software that would put any other publisher in the industry to shame. The latest Pokemon games on 3DS have done nearly 10 million units; Super Smash Bros has done 6.2 million on 3DS and 3.4 million on the Wii U. Mario Kart 8 has done almost five million units, on a console that’s yet to sell 10 million. Also selling over a million units in the last nine months of 2014 on 3DS we find Tomodachi Life, Mario Kart 7 (which has topped 11 million units, life to date), Pokemon X and Y (nearly 14 million units to date), New Super Mario Bros 2 (over 9 million), Animal Crossing: New Leaf (nearly 9 million) and Kirby: Triple Deluxe. The Wii U, in addition to Mario Kart 8 and Super Smash Bros, had million-plus sellers in Super Mario 3D World and Nintendo Land.
That’s 12 software titles from a single publisher managing to sell over a million units in the first three quarters of a financial year – a pretty bloody fantastic result that only gets better if you add in the context that Nintendo is also 2014′s highest-rated publisher in terms of critical acclaim. Plus, Nintendo also gets a nice cut of any third-party software sold on its consoles; granted, that probably doesn’t sum up to much on the Wii U, where third-party games generally seem to have bombed, but on the 3DS it means that the company is enjoying a nice chunk of change from the enormous success of Yokai Watch, various versions of which occupied several slots in the Japanese software top ten for 2014, among other successful 3DS third-party games.
Aha, say the advocates of a third-party publisher approach for Nintendo, that’s exactly our point! The company’s software is amazing! It would do so much better if it weren’t restrained by only being released on consoles that aren’t all that popular! Imagine how Nintendo’s home console games would perform on the vastly faster-selling PS4 (and imagine how great they’d look, intones the occasional graphics-obsessive); imagine how something like Tomodachi Life or Super Smash Bros would do if it was opened up to the countless millions of people with iOS or Android phones!
Let’s take those arguments one at a time, because they’re actually very different. Firstly, home consoles – a sector in which there’s no doubt that Nintendo is struggling. The PS4 has got around twice the installed base of the Wii U after only half the time on the market; it’s clear where the momentum and enthusiasm lies. Still, Super Smash Bros and Mario Kart 8 managed to sell several million copies apiece on Wii U; in the case of Mario Kart 8, around half of Wii U owners bought a copy. Bearing in mind that Nintendo makes way more profit per unit from selling software on its own systems than it would from selling it on third-party consoles (where it would, remember, be paying a licensing fee to Sony or Microsoft), here’s the core question; could it sell more copies of Mario Kart 8 on other people’s consoles than it managed on its own?
If you think the answer to that is “yes”, here’s what you’re essentially claiming; that there’s a large pent-up demand among PlayStation owners for Mario Kart games. Is there really? Can you prove that, through means other than dredging up a handful of Reddit posts from anonymous people saying “I’d play Nintendo games if they were 1080p/60fps on my PS4″? To me, that seems like quite a big claim. It’s an especially big claim when you consider the hyper-competitive environment in which Nintendo would be operating on the PS4 (or Xbox One, or both).
Right now, a big Nintendo game launching on a Nintendo console is a major event for owners of that console. I think Nintendo launches would still be a big event on any console, but there’s no doubt that the company would lose focus as a third-party publisher – sure, the new Smash Bros is out, but competing for attention, pocket money and free time against plenty of other software. It’s not that I don’t think Nintendo games could hold their own in a competitive market, I merely don’t wish to underestimate the focus that Nintendo acquires by having a devoted console all of their own underneath the TVs of millions of consumers – even if its not quite the number of millions they’d like.
How about the other side of the argument, then – the mobile games aspect? Nintendo’s position in handheld consoles may not be what it used to be, but the 3DS has roundly trounced the PlayStation Vita in sales terms. Sure, iPhones and high-end Android devices have much bigger installed bases (Apple shifted around 75 million iPhones in the last quarter, while the lifetime sales of the 3DS are only just over 50 million), but that comparison isn’t necessarily a very useful one. All 50 million 3DS owners bought an expensive device solely to play games, and the lifetime spend on game software of each 3DS owner runs into hundreds of dollars. The “average revenue per user” calculation for Pokemon on the 3DS is easy; everyone paid substantial money for the game up front.
By comparison, lots and lots of iOS and Android users never play games at all, and many of those who play games never pay for them. That’s fine; that’s the very basis of the F2P model, and games using that model effectively can still make plenty of money while continuing to entertain a large number (perhaps even a majority) of players who pay nothing. Still, the claim that moving to smartphones is a “no-brainer” for Nintendo is a pretty huge one, taken in this context. The market for premium, expensive software on smartphones is very limited and deeply undermined by F2P; the move to F2P for Nintendo titles would be creatively difficult for many games, and even for ones that are a relatively natural fit (such as Pokemon), it would be an enormous commercial risk. There’s a chance Nintendo could get it right and end up with a Puzzle & Dragons sized hit on its hands (which is what it would take to exceed the half a billion dollars or so the company makes from each iteration of Pokemon on 3DS); there’s also an enormous risk that the company could get it wrong, attracting criticism and controversy around poor decisions or misjudged sales techniques, and badly damage the precious Pokemon brand itself.
In short, while I’m constantly aware that the market seems to be changing faster than Nintendo is prepared to keep up with, I’m not convinced that any of the company’s critics actually have a better plan right now than Satoru Iwata’s “stay the course” approach. If you believe that PlayStation fans will flock to buy Nintendo software on their console, you may think differently; if you think that the risk and reward profile of the global iOS market is a better bet than the 50-odd million people who have locked themselves in to Nintendo’s 3DS platform and shown a willingness to pay high software prices there, then similarly, you’ll probably think differently. Certainly, there’s some merit to the idea that Nintendo ought to be willing to disrupt its own business in order to avoid being disrupted by others – yet there’s a difference between self-disruption and just hurling yourself headlong into disaster in the name of “not standing still”.
There’s a great deal that needs to be fixed at Nintendo; its marketing and branding remains a bit of a disaster, its relationships with third-party studios and publishers are deeply questionable and its entire approach to online services is incoherent at best. Yet this most fundamental question, “should Nintendo stay in the hardware business”, remains a hell of a lot tougher than the company’s critics seem to believe. For now, beleaguered though he may seem, Iwata still seems to be articulating the most convincing vision for the future of the industry’s most iconic company.
Dailymotion Games will put the firm into a market that so far includes Twitch, a streamer that has cemented its place as a gaming add-on and a coveted option on the Xbox One and PlayStation 4 consoles.
The Dailymotion information does not dwell on Twitch, which has been a feature of many a gushing press release from console makers such as Sony, but it does say that the live streaming gaming platform has some decent credentials.
For example, the promotional information says that the platform is backed with “industry leading video and live streaming technology”.
The firm also reminds us that it has some history here, and has been e-gaming for some time.
“Since 2011, with the first Dailymotion Cup on Starcraft, Dailymotion has accompanied e-sport growth on the internet,” said Martin Rogard, Dailymotion’s chief operating officer.
“Dailymotion Games is entirely dedicated to e-sports fans and streamers who come together every evening to form an amazingly talented and gregarious community.
“Over the coming months, we will significantly increase our investment in the e-sports domain to ensure worldwide recognition of all our talented content producers.”
Dailymotion said that live streamers will be able to monetise their content, which Microsoft recently confirmed is fine for its users, and that streamers could run their own “controlled video advertisement” and any number of social tools including search and real-time communications. Android and iOS apps are available.
The service is currently in beta. Dailymotion said that it serves some 180 million game videos a month.
As the market for games has grown and diversified, it’s become increasingly important to take any headline figures you might read with a grain of salt. Every time an analyst or a research firm announces that the games business has reached such and such a size, or that monthly revenues compare thusly with previous figures, or that a certain product or company has over- or under-performed projections, their august pronouncement isn’t so much an answer as a source of more questions. What exactly are you defining as the “games business”? Which sectors have you included? How did you measure digital revenues? What about IAP? Are your figures global, regional, merely covering the increasingly unrepresentative US market or “global” for a narrow definition of “global” which means “markets we could find data for with a quick Google search, and to hell with the rest of them”? And as for projections, whose projections, arrived at through which logic and with which agenda?
In short: with a very, very few notable exceptions, most of the sector analysis and research conducted on this industry is awful. It’s under-informed, narrow and rarely exposes its methodology well enough to understand and account for its flaws. It’s also the best thing we’ve got, unfortunately, which is why sites (including this one) continue to publish this research as it becomes available, although all of it should probably carry a large flashing warning to remind readers that an infant let loose with coloured crayons and some graph paper would probably have a similar margin of error to their data.
Yet this is only when we’re talking about data about what’s going on right now. Start to project forward, into crystal-ball-gazing questions like “where will the market be in five years”, and you’re into the realms where the real nonsense starts. Models and figures are pulled out of analyst’s backsides with wild abandon. Rationales and factual grounds are nowhere to be found, but incredibly slick charts and graphs abound; it’s a little like astrology, except that rather than blathering about Saturn being in Capricorn and whatnot, analysts seek to bamboozle everyone with charts and then deeply, fervently hope that when the time period they’re predicting actually arrives nobody will remember how wrong they were.
Even so, when all of the world’s analysts start to point in the same direction – the good, the bad and the bluffing – it’s worth taking note. That’s the context in which the headline figures from research firm Newzoo’s latest report are interesting; headline figures which, in a nutshell, suggest that 2015 will be the tipping point at which revenues from mobile game software surpass revenues from console game software.
“What’s happened to consoles as mobiles have taken over? Not much, as it happens”
Newzoo, like most research firms focusing on this industry, doesn’t provide sufficient detail to back up or verify its sweeping and grandiose claims, because apparently a really pretty graph with a swish background ought to suffice. They would argue, no doubt, that all the juicy detail which would explain their peculiarly high figures is what they charge clients lots of money for, an argument which is entirely true and still leaves them in the position of peddling figures while failing to show their workings. Nevertheless, Newzoo is not alone in its prediction. It’s not even a particularly novel prediction, actually; research firms have been pointing at this tipping point for several years, although when exactly the graph lines would intersect has been a subject of some debate. With mobile growth still strong and the next-gen consoles performing excellently but remaining largely constrained within the core market (rather than seeing another Wii-style breakout success story), the lines are converging a little more evenly and the soothsayers are in accord; next year is the year.
So what happens then? Do burning stones rain from an angry sky to smash all our PlayStation 4s? Will a horde of rampant mobile gamers, driven to murderous insanity by Candy Crush Saga, rip the 3DS’ from our hands and beat us to death with them? Shall E3 be swallowed by a lake of fire, and every presentation at GDC be replaced by an ominous looping video of Zynga founder Mark Pincus laughing savagely at the audience?
Perhaps rather than stockpiling tinned foods, filling the bath with potable water and tearfully locking away your beloved RPGs and FPS games in a lead-lined safe, it might be instructive to take a look at a market where this transition has already happened. There is, you see, a place where revenues from mobile games overtook revenues from console games several years ago – as early as 2011, according to some figures, although the safe money is on 2012/13 being the tipping point. Now, in this market, mobile games are the unquestioned market leader in revenue.
The market in question is Japan, where a well-developed market for mobile gaming on existing “feature phone” devices was supercharged by the arrival of the smartphone. Now mobile game revenues have soared well clear of console games. Unlike in the 1990s, Japan’s mobile phones aren’t vastly advanced compared to those overseas – they queue up here for iPhones just like everywhere else, with Apple’s devices being by far the dominant player in the smartphone market, so it’s not that games they’re playing are technologically advanced compared to those in the west. Rather, it’s that the market itself was further down the path than the west, with a wider swathe of consumers familiar and comfortable with mobile gaming, F2P models and in-game transactions.
What’s happened to consoles as mobiles have taken over? Not much, as it happens. The softness of PS4′s sales in Japan since the stellar launch last spring has been well noted, but it’s not a meaningful indicator of an overall problem with the console market; anecdotally, I get the impression that PS4 is extremely desired but still lacks the killer apps which will actually drive Japanese gamers to go out and buy one. Indeed, the line-up of software that appeals to the local market is still weak; a few big titles will shift the needle significantly, just as Mario Kart 8 did for the Wii U (which is now back in a slump awaiting the arrival of Smash Bros; software sells hardware, as ever).
Handhelds, meanwhile, are what you’d expect to suffer most from the triumph of mobile, yet the 3DS is going gangbusters in Japan and the PS Vita is stronger in this market than anywhere else in the world. The rise of mobile to take the crown of most lucrative and expansive market hasn’t even impacted the ability of Japanese publishers to launch genuinely massive new franchises on handheld consoles; Yokai Watch may not have made it to the west yet, but if it’s half as pervasive over there once it launches, it’ll be the biggest new gaming franchise in years.
So the consoles are still pretty healthy, especially the handheld devices. They play to their strengths, for the most part; it’s notable that the biggest handheld games around at the moment, games like Smash Bros and Monster Hunter, really wouldn’t work on a mobile phone as they rely on accurate, pinpoint controls that couldn’t be replicated on a touchscreen to any degree of satisfaction. Other games that work well are those designed for long sessions of play; mobile devices still suffer badly from rapidly draining batteries when playing games, and while a dead battery in your 3DS is a little annoying, a dead battery in your mobile phone is a disaster, meaning few people are willing to put in significant play sessions in GPU-intensive mobile titles.
“If 2015 does see mobile overtaking console worldwide, it may be the best thing to happen to games in years; it won’t hurt console, at least not for a long while yet, and it’ll allow us to finally turn a corner towards mobile being seen as a platform for everyone”
What’s actually more interesting than what’s happened to console, though, is what’s happened to mobile itself. The mobile game market in Japan is nothing short of fascinating. Ever since its meteoric growth, it’s become a hugely expansive market that caters to an enormous range of tastes and demographics, as you’d expect – but the core demographic, the heart of the market for which every company seems to be competing… Well, that’s oddly familiar, as it happens.
Every time you see a commuter train festooned with ads for a new mobile title, or a lengthy TV commercial promoting the latest smartphone release, or even the huge screens at Shibuya’s scramble crossing taken over with a video of a mobile game, they always have something in common. Their visual language, their core mechanisms and their basic appeal is absolutely in tune with core gamers. Mobile’s new position on top of the heap has opened the door to games with higher production values and more depth, aimed at the market that has always played the most and paid the most; the core.
The results aren’t always appealing; mobile games launch fast and fail fast, and that’s fine. When things do work out, though, they create some pretty amazing hits. Puzzle & Dragons, as you probably know by now, was the biggest-grossing game on any platform in 2013 (probably; analyst figures, you know?), and it’s also incredibly deep, compelling and fun. Publisher GungHo advertises the game on trains and TV over here with videos showing advanced techniques for building chain combos in the game; just consider that for a moment, a game so successful that your advertising isn’t even “here’s why this game is great”, it’s “we know you already play, here’s a tip so you can play better”, displayed on evening TV across the nation. Puzzle & Dragons is far from being Japan’s only “mobile core” hit, though. RPGs have been rapidly rising in prominence on mobile platforms, and now appear to be even more popular than the collect ‘em up titles (mostly card battlers) which dominated up until this point; the latest big title is Mistwalker-developed RPG Terra Battle, a game which I’m resigned to installing on my phone this week because literally everyone around me doesn’t talk about anything else any more.
In short, the Japanese market may be peculiar by comparison with the rest of the world, but sometimes that’s simply because it’s still a couple of years ahead of the western market in a few regards. Not in every regard; Japan is a very retrograde nation in terms of certain tech advances (it’s worth noting that streaming video services like Netflix are an absolute disaster here, and let’s not even talk about online banking), but in gaming, the market if not the technology is a little in advance of most western countries. Japan crossed the line between console-as-number-one and mobile-as-number-one a couple of years ago, and the world did not end. Console and handheld are doing fine; mobile is doing better than fine, and most excitingly of all, the new titles coming to mobile are better than ever, driven by a strong desire to get the most lucrative market in gaming, the core gamers themselves, playing. If 2015 does see mobile overtaking console worldwide, it may be the best thing to happen to games in years; it won’t hurt console, at least not for a long while yet, and it’ll allow us to finally turn a corner towards mobile being seen as a platform for everyone – core, casual, and everyone in between.
Although has not been publicly confirmed that Google’s latest Android 5.0 Lolipop will be coming to its Nvidia Shield tablet, Nvidia was pretty quiet about the Shield Portable handheld console, so we asked around. It appears that the update will indeed be coming to Shield Portable as well.
The first devices on the list to receive the Android 5.0 Lolipop update will be Google’s own Nexus devices, starting with the Nexus 4, Nexus 7 2012 and Nexus 10 as the oldest devices, followed by Google Play Edition devices and LTE-enabled products. Most smartphone and tablet manufacturers have also confirmed that the new Android 5.0 Lolipop will be coming to their recent devices.
One of the companies on the list is also Nvidia, which has announced that it “ultimate tablet for gamers” also known as the Nvidia Shield Tablet will be getting the Android 5.0 Lolipop update soon. The update for Shield Tablet does not come as a surprise considering that it is based on the speedy Tegra K1 32-bit chipset.
While it did not give out any details regarding Android 5.0 Lolipop update for the Shield Portable handheld console, we sent out a quick email to Nvidia and managed to confirm that the update will indeed be coming to the Shield Portable as well. Unfortunately, Nvidia did not give any precise date for this device either.
“We have been building our team on assumptions of faster growth than have materialized. As a result, we announced today that we plan to simplify our organization … we also need to consider possible employee reductions,” Chief Executive Mikael Hed said in a statement.
According to Rovio, the Angry Birds game, in which players use a slingshot to attack pigs who steal birds’ eggs, is the No. 1 paid mobile application of all time.
Rovio has expanded the brand into an animated TV series and merchandising of toys and clothing, but at the same time it has struggled to retain players, resulting to its earnings halving last year.
In August, the company named Pekka Rantala, a former Nokia executive, as its next CEO.
When Titan first came to light in 2007, most people assumed it would be Blizzard’s next big thing, ultimately taking the place of World of Warcraft which was likely to see further declines in the years ahead. Fast forward seven years, WoW clearly has been fading (down to 6.8 million subs as of June 30) but Blizzard has no MMO lined up to replace it, and that fact was really hammered home today with the surprise cancellation of Titan. In fact, the developer stressed that it didn’t want to be known as an MMO company and one may not be in its future. Cancelling the project this late in the game may have cost Blizzard several tens of millions of dollars, analysts told GamesIndustry.biz.
“Development costs for Titan may have amounted to tens of millions, perhaps $50 million or more. This is not an unusual event, however. Blizzard has cancelled several games in various stages of development in the past. Costs for unreleased games can be significant, but launching substandard games can harm the reputation of a successful publisher such as Blizzard. Expenses for development can be considered R&D, and benefits can include invaluable training, IP and technology that can be applied to other games,” explained independent analyst Billy Pidgeon.
Wedbush Securities’ Michael Pachter estimated an even higher amount lost: “My guess is 100 – 200 people at $100,000 per year, so $70 – 140 million sunk cost. It’s pretty sad that it took so long to figure out how bad the game was. I expect them to go back to the drawing board.”
Indeed, the market has changed considerably in the last seven years, and while MMOs like EA’s Star Wars: The Old Republic struggle to find a large audience, free-to-play games and tablet games like Blizzard’s own Hearthstone are finding success. Blizzard has no doubt been keenly aware of the market realities too.
“As far back as 2013, they had already stated Titan was not likely to be a subscription-based MMORPG. This is consistent with a market that is increasingly dominated by multiplayer games that are either free to play or are an expected feature included with triple-A games such as Call of Duty. Titanfall and Destiny sold as standalone games supplemented by paid downloadable add-ons. Blizzard maintains very high standards of quality, so expectations will be steep for new franchises as well as for sequels,” Pidgeon continued.
DFC Intelligence’s David Cole agreed, noting that after seven years of development in an industry where trends and technologies change at a rapid pace, Blizzard simply had to pull the plug on Titan.
“They realized that unless a big MMO is out-of-this-world unbelievable it won’t work in today’s market where it competes against a bunch of low cost options. If they felt that it just wasn’t getting to that point it makes sense to cut your losses,” he noted. “Also, you see games like League of Legends and their own Hearthstone which are doing very well on a much lower budget.”
“For Blizzard, I am expecting to see them continue to focus on high quality products but also focus on products with shorter development cycles and less cost. The market is just not in a place where you can have games with 7+ year development. It is changing too fast.”
For most developers, junking a seven-year long project would instantly spell turmoil, but thankfully for Blizzard, it’s part of the Activision Blizzard behemoth, which has a market cap of over $15 billion and, as of June 30, cash and cash equivalents of over $4 billion on hand. It’s a nice luxury to have.
Nintendo’s Shigeru Miyamoto doesn’t want to make games for “passive” people; the attitude that games ought to be to be a roller-coaster ride, to entertain without challenge, is, to his mind, “pathetic”. That was the message from the legendary game designer in an E3 interview with Edge magazine, published in this month’s edition; it’s been presented by other news outlets as a sign of a Nintendo U-turn, moving away from the casual market it sought with the Wii and the DS in favour of re-engaging core gamers.
That’s exactly the sort of message that most of the games media wants to hear, of course. The media, after all, speaks exclusively to core gamers; casual players generally don’t bother with specialist media. “Nintendo has seen the error of its ways and realised that the only people worth making games for are you, my dear brethren!” is a crowd-pleaser of a message; but it’s also a pretty big leap to make from the comments Miyamoto actually made.
First, the context. Edge had just challenged Miyamoto over the fact that his prototype games at E3 were all somewhat difficult to play. They used the Wii U GamePad in new ways which it took a while to get accustomed to; the question implied in the text of Edge’s interview isn’t about casual games at all, but about the difficulty level of the prototypes. Miyamoto’s response does make clear a mental distinction between different types of game consumer and a preference for those who enjoy some challenge in their entertainment, but to extrapolate that into a U-turn in Nintendo’s development priorities is an overreach.
In fact, Miyamoto’s comments – equating passivity with “the sort of people who, for example, might want to watch a movie. They might want to go to Disneyland. Their attitude is ‘OK, I am the customer; you are supposed to entertain me’” – are punching in a number of directions at once. Certainly, he’s frustrated by people who play games without ever really engaging with them as a challenge; I doubt he’s a fan of free-to-play systems that allow you to pay money to bypass challenges. Equally, though, those comments are an attack on some approaches to AAA game design; barren technological wonders which serve as little more than on-rails galleries for artwork and pale narrative. Miyamoto isn’t saying “casuals have ruined the market”; far from it. He’s saying that there are consumers who demand spoon-fed entertainment at all points of the spectrum from core to casual, and that he doesn’t want to make games for any of them. (It’s also worth noting that he’s not really blowing his top over this; “pathetic” doesn’t carry the same kind of stinging indictment in Japanese that it does in translation.)
Later in the Edge interview, Miyamoto veers back to similar territory when he talks about the proliferation of mainstream game-capable platforms like iOS and Android devices. While adamant that Nintendo needs to continue to make hardware as well as software, he’s delighted that these new platforms exist, because they provide an “on-ramp” for consumers who haven’t engaged with games before. Nintendo previously saw itself holding a responsibility to try to open up new demographics for the games industry; now it seems that we’ve reached a tipping point, technologically and culturally, where that’s happening by itself.
Edge speculates that this means Miyamoto (and hence Nintendo) believes that the window has shut on making games for entry-level gamers. Titles like Brain Training, which opened up the DS to a huge audience of people who had rarely if ever played games before, may now be pointless; the consumers they ought to target are all playing games on their phones and tablets, so there isn’t an addressable market remaining there for dedicated hardware and more expensive (non-F2P) games. This is fair analysis, and indeed, it probably features in Nintendo’s thinking; let iOS serve as the entry level for new gamers and then hope that those who enjoy the experience will ultimately upgrade to the superior offerings available on a dedicated console.
At the same time, though, Nintendo itself has a conception of “casual” and “core” that probably isn’t shared by the majority of sites reporting Miyamoto’s comments. Miyamoto talks not about themes but about enjoyment of challenge as the distinction between the two groups. To him, a supposedly “adult” game full of blood and ripe language could be utterly casual if it spoon-feeds players with dull, linear gameplay. Meanwhile, a brightly coloured Mushroom Kingdom epic could qualify as “core” if it challenges players in the right way. Consequently, Nintendo’s family-friendly IP and the broad appeal of its themes is entirely compatible with a focus on “core games”, to Miyamoto’s mind. What he’s talking about changing is something at the root of design, not the thematic wallpaper of the company’s games; he wants to challenge people, not to force Nintendo’s artists to remove all the primary colours from their Photoshop palettes.
Viewed in this light, Miyamoto’s comments are an earnest and down-to-earth appraisal of Nintendo’s present situation; still recovering from the heady days of the Wii and figuring out how much of that flash-in-the-pan market is really sustainable, but knuckling down to the challenge of entertaining and delighting (and of course, selling to) those within the audience who really enjoyed games rather than latching onto the platform as a fad. Contrary to the more excitable reportage on his comments, Miyamoto is promising no major changes to Nintendo’s approach; rather, he’s re-committing himself and the company to the same course of action which delivered games like Mario Kart 8, a title firmly within the family-friendly Nintendo tradition and absolutely celebratory of challenge and good design.
“Core gamer” is a phrase that’s picked up a strong whiff of soi-disant elitism and exclusion over the past few years; the phrase “as a core gamer…” in a forum post or comment thread is this odd little corner of society’s equivalent of “I’m not a racist, but…”, indicating a post that’s probably going to brim with self-important awfulness. The bête noire of the core gamer is the “casual”, and just as any move by a game creator or publisher to cater to “casuals” is despised and derided, any prodigal son who declares their abandonment of the casual market and return to the core is greeted with an I-told-you-so roar of delight. This is a thin sliver of the market overall, of course, but a noisy one; as such, it’s worth reiterating that what Miyamoto absolutely did not say is that Nintendo is resetting its course to please these people. Nintendo, for many years to come, will still be a company defined by games that are broadly appealing, generally family-friendly and enormously accessible. Under Miyamoto’s watchful eye, they’ll also be challenging and engaging; but anyone taking his comments on “passivity” as near-confirmation that we’ll see Grand Theft Mario down the line is utterly misreading the situation.
Amazon.com Inc has acquired live-streaming gamingnetwork Twitch Interactive for about $970 million in cash, reflecting Chief Executive Officer Jeff Bezos’ vision to transform Amazon into an Internet destination beyond its roots in retail operations.
The deal, jointly announced by the two companies, is the largest deal in Amazon’s 20-year history and will help the U.S. e-commerce company vie with Apple Inc and Google Inc in the fast-growing world of online gaming, which accounts for more than 75 percent of all mobile app sales.
The acquisition involves some retention agreements that push the deal over $1 billion, a source close to the deal told Reuters.
“Twitch will further push Amazon into the gaming community while also helping it with video and advertising,” Macquarie Research analyst Ben Schachter said in a note.
Twitch’s format, which lets viewers message players and each other during live play, is garnering interest as one of the fastest-growing segments of digital video streaming, which in turn is attracting more and more advertising dollars.
The deal, expected to close in the second half of the year, is an unusual step for Amazon, which tends to build from within or make smaller acquisitions. Tech rival Google was earlier in talks to buy Twitch, which launched slightly more than three years ago, one person briefed on the deal said.
Neither Amazon nor Twitch would discuss how the deal came together or comment on Google’s interest.
In an interview, Twitch Chief Executive Officer Emmett Shear said the startup contacted Amazon because its deep pockets and ad sales expertise would allow the startup to pursue its strategic objectives more quickly.
“The reason why we reached out to Amazon, the reason I thought working for Amazon, having Twitch being a part of Amazon, would be a great idea for us (because) they would give us the resources to pursue these things that we honestly already want to pursue and they’d let us do it faster,” Shear said.
Sources are suggesting that Activision is planning to launch an entertainment division that would be responsible for creating movies and TV shows based on Activision intellectual properties. The move might leave many scratching their heads if true since so many others have failed at trying to turn video game IP into gold.
Word is that CEO Bobby Kotick is taking to folks in an effort to secure the right talent to make this happen. Kotick has to be aware that this has not gone well for its competitors, but he apparently thinks that Activision IP is different and they will have no problem giving the people want they want.
Our take on this is that we will wait and see what happens, but it will not be easy to be successful, regardless of the IP that you have in your stable. The bigger question might be is it really worth the money and effort to try and make it work?
Social and mobile game company King Digital Entertainment Plc lowered its 2014 forecast after reporting lower-than-expected second-quarter revenue on Tuesday, as gamers continued to abandon its “Candy Crush Saga” game.
King also announced a $150 million special dividend, or 46.9 cents per share, payable to shareholders of record on Sept. 30. Its shares, however, slipped 22 percent in after-hours trading after closing at $18.20 on the New York Stock Exchange.
The company, which went public in March, said it has reduced its 2014 forecast and expects gross bookings in the range of $2.25 billion to $2.35 billion from its previous estimate of $2.55 billion to $2.65 billion.
“We have seen a step down in monetization in the latter part of Q2 and so we have adapted the view forward,” Chief Executive Officer Riccardo Zacconi said in an interview.
Investors have worried that unless King delivers a set of consistent and long-lasting hits, apart from “Candy Crush Saga,” it might suffer the same fate as “Farmville” maker Zynga Inc and “Angry Birds” developer Rovio Corp, which are struggling to retain players.
King’s second quarter gross bookings, an indicator of future revenue, was $611 million, up 27 percent from the year-ago period, but less than the last quarter when it reported gross bookings of $641.1 million.
King has yet to see its other titles such as “Farm Heroes Saga” and “Bubble Witch 2 Saga” fully offset user losses of its “Candy Crush Saga” puzzler game that accounted for about 60 percent of second-quarter gross bookings.
“We expect ‘Candy Crush’ will decline, but have a very strong tail and a long tail,” Chief Financial Officer Hope Cochran said in an interview. “We will be launching the ‘Candy Crush’ sister title in Q4, which will give more longevity to that title.”
Activision Blizzard reported its financial results for the quarter ended June 30 today, revealing an unprecedented reliance on digital revenues.
The publisher reported revenues of $970 million in sales on a GAAP basis, 49 percent of which came from digital channels. On a non-GAAP basis (excluding the impact of changes in deferred revenues), the digital percentage was actually 73 percent of the company’s $658 million in sales. Activision attributed the digital strength to Blizzard’s lineup of titles (World of Warcraft, Hearthstone, and Diablo III), combined with digital sales for Call of Duty.
However, not all of those digital sales drivers posted strong numbers for the quarter. World of Warcraft in particular lost about 800,000 subscribers over the period, and as of the end of June was down to a paying player base of 6.8 million gamers. However, Activision Blizzard characterized this decline as a “seasonal” dip in advance of the next expansion, Warlords of Draenor, which is set to launch later this year. The publisher likened the downturn to the subscriber losses that happened in 2012 ahead of the Mists of Panderia launch.
On a GAAP basis, Activision Blizzard revenues were down nearly 8 percent, with net income down 37 percent to $204 million. However, the publisher still beat its previous guidance. On a non-GAAP basis, revenues were up about 10 percent to $658 million, while non-GAAP net income was reported at $45 million, down 50 percent year-over-year.
The quarter’s performance gave Activision Blizzard enough confidence to update its previous guidance for the full year. For calendar year 2014, the publisher had previously forecast total GAAP revenues of $4.22 billion, but moved that up to $4.24 billion today. The company also projected earnings per share of $0.91, up from $0.89.
A new survey commissioned by IHS in partnership with Gamer Network has shown that E3 gave a huge boost to the number of people interested in buying a Wii U, with purchasing intent growing by 50 per cent over the course of the event.
Around one thousand core gamers were surveyed on various purchase intentions before and after the LA show, revealing that, whilst Nintendo’s platform started out with the lowest number of people looking at buying it, it saw the biggest benefit from the show’s exposure. 20 per cent of respondents now intend to buy the machine, equal to those who are looking at an Xbox One, which saw a seven per cent increase in popularity.
Sony’s PS4, a clear leader going in to E3, lost ground to its competitors, sinking below 30 per cent of respondents.
In terms of anticipated games, consumers are champing at the bit for 2015′s third-party releases, with Warner’s Arkham Knight leading the charge with an incredible 60 per cent of those surveyed intending to buy the game for at least one platform. Gamers are slightly less excited for 2014′s titles, but Activision’s Destiny is the narrow leader for this year, edging out AC: Unity and GTA V with just under 50 per cent. Both Battlefield Hardline and CoD: Advanced Warfare are lagging behind slightly.
As might be expected, purchasing intent is higher amongst first-party exclusives for current platform owners. On PS4, Uncharted 4 was the most popular game both before and after E3 with 76 per cent of PS4 owners expected to buy it. On Xbox One, it’s Halo which pays the piper, garnering support from 77 per cent of One owners. Over on the Wii U and amazing 89 per cent of owners expect to buy the new Zelda game when it’s released. None of these platform-exclusive heavy hitters will land until 2015 at the earliest, which IHS predicts will increase pre-Christmas reliance on multi-platform games for Microsoft, Sony and, to a lesser extent, Nintendo.
“Although there are other exclusive titles coming in 2014 or already available,” the report reads, “none hold the influence that these leading titles have in terms of selling console hardware, with the exception of Mario Kart 8 for Wii U. As a result, the success of console sales this holiday shopping season will depend more heavily on the total value and content proposition including exclusive content offered by multi-platform games rather than a single, very influential system-selling exclusive. This factor will impact the marketing strategies of the platform holders as we move into 2014′s main shopping season.”
By 2017, mobile and online games could push worldwide gaming software revenues to $100 billion. That’s according to Digi-Capital’s latest Global Games Investment Review report, which said the mobile/online game market could make up a whopping 60 percent ($60 billion) of that total thanks to a compound annual growth rate of nearly 24 percent since 2011.
The firm found mobile was the main driver of record mergers and acquisitions activity in the last year, accounting for $4.6 billion of a record $12.5 billion in games M&A. The free-to-play MMO market was the next biggest driver with $4 billion in M&A business, followed by tech interests with $2.8 billion.
That total covers the last year, but most of it has come in 2014, with gaming M&A accounting for a record $6.6 billion in the first six months of the year alone. Even if 2014 didn’t see another penny added to that total, it would be a new full-year record as well, having already eclipsed the $5.6 billion in mergers and acquisitions recorded for the entirety of 2013.
Digi-Capital offered a number of reasons for the increase of M&A activity beyond the simple attraction of massive growth in the field. The firm also said some acquirers were interested in “stopping mobile insurgents from eating their lunch,” indicating the Zynga pick-up of Natural Motion would fall under that category. It also said companies established in one region are looking to buy strength in a different part of the world (as with Softbank’s majority stake acquisition of Supercell), and lukewarm or delayed IPOs for a handful of companies in the market have made recent valuations seem like good bargains.
The 3DS stumbled at launch, enduring sluggish sales until Nintendo instituted a drastic price cut on the hardware. While Moffitt noted the impact of the price cut, he said a pair of first-party releases was another key driver in reversing the handheld’s fortunes.
“We had the price cut in August , and then we had Mario Kart 7, Super Mario 3D Land, which really drove sales that first holiday, and on 3DS we haven’t looked back,” Moffitt said. “So we’ve had momentum ever since that first holiday and we’ve got now 260 some games in the library and some of the best, most highest rated, most highest quality content we’ve ever had on that platform. Everything we launched seems to do above forecast and surprises us on the positive side.”
The situation with the Wii U is similar, Moffitt said, adding that the console is about to reach a very similar tipping point.
“As I look at what we have coming this holiday, now with Mario Kart and Super Smash Bros, plus the innovation of Amiibo, I think we are right at that tipping point where we have a lot of great content that is about to be released for that platform that’s going to tempt gamers into buying the system,” Moffitt said. “From the comments I’m reading online, and following gamers’ comments, I think there are a lot of people that are going to have a hard time resisting buying a Wii U once Smash Bros comes out. I think that’s going to be a major hardware driver for us. So that’s the narrative we hope that plays out and that I think we are starting to see play out.”
One avenue that Nintendo won’t be pursuing to spike Wii U sales is an unbundling of the GamePad, Xbox One Kinect-style. Both companies pitched the peripherals as essential components of their visions, but when Xbox One sales lagged, Microsoft found the demands of potential customers more convincing than their original plans. While Moffitt said Nintendo is still working to create gameplay experiences that demonstrate the true benefits of the Wii U GamePad, he said removing it from the hardware bundle is not in consideration.
“We think GamePad is the only innovation that’s come in this new generation of consoles. So we have the only real point of difference. Certainly graphics are faster, graphics are better. This is not a real innovation for gamers. We are fully committed to leveraging the GamePad, to keeping it bundled with the system.”
As for the problem of third-party support for Wii U, Moffitt namechecked the continued efforts of partners like Sega, Warner Bros. Interactive Entertainment, and Activision. While some big companies who have dropped the system, Moffitt understood why that would have happened and acknowledged it was Nintendo’s problem to fix.
“It’s all about driving the install base and so that’s our work to do, right? We need to get to a critical mass where it makes financial sense for them,” he said.
Moffitt added that third-party games don’t all come from the big AAA publishers. He touted the company’s efforts in lowering the barriers to entry for indie developers looking to publish on Nintendo platforms.
“We talked to a lot of them before launching the Wii U and we addressed some of the issues that really were holding some of them back from developing realistic content on our platform,” Moffitt said. “At least for the indie community, we’ve become a lot easier to do business with and we’re seeing a steady flow of content now.”
However, those efforts were largely invisible at E3. Where Microsoft and Sony devoted sections of their booths to indie developers working on Xbox One and PlayStation 4 respectively, there was no such equivalent in Nintendo’s booth.
“With any show, you have choices to make,” Moffitt said. “Every time I go down to our booth floor and see how many people are waiting to play Super Smash Bros, when I look outside at the Best Buys… Last night we had four hours of game play on Super Smash Bros. and we had 1,000 people in line. We had to turn people away. So it’s a tough choice for us as a platform holder. We don’t have enough game stations down there on Smash Bros. We try to feature as much content as we can in the limited space that we have. Right now we just have a lot of demand for Super Smash Bros. We could have used 10 more game stations on that game alone. Choices have to be made.”
Finally, Moffitt weighed in on the VR trend. While Nintendo has a distant history in the field with the Virtual Boy headset, Moffitt suggested Nintendo was taking a wait-and-see approach toward returning to it
“What I’d say is it’s appealing technology,” Moffitt said. “It’s interesting. We’re going to follow it closely to see where it goes. It’s got a lot of advantages. It’s got one disadvantage relative to what we know is often very fun for gamers, which is playing games socially in a living room. This is a very single player solitary gaming experience. Not all of our games are fun to play with multiple people in a living room in front of a game console but it doesn’t lend itself to that kind of an experience as well as what Wii U does now. That would be a disadvantage of going in that direction. Could it be a nice addition to our hardware platform? Sure.”