Sony Corp plans to extend content for its dedicated virtual-reality (VR) headset into non-gaming areas such as TV and film, and has no plans to join the burgeoning market for smartphone-based headsets, its gaming division chief said.
Andrew House, Sony Interactive Entertainment Inc’s chief executive, said in an interview that he was already in talks with media production companies to explore possibilities for the PlayStation VR headset, due for release on Oct. 13.
“We are talking about years into the future, but these are interesting conversations to start having now,” House said.
House’s gaming division has been one of Sony’s main sources of profit in recent years as sales of TV sets and other once-core electronics goods decline in the face of price competition.
As smartphone gaming now encroaches on the console market, Sony has opted to seek growth through innovations such as VR. However, analysts have said non-gaming content is necessary to broaden the appeal – and profitability – of VR.
Sony’s VR headset works in conjunction with its PlayStation 4 games console and will retail at a price lower than Facebook Inc’s Oculus Rift and HTC Corp’s Vive headsets that require more expensive personal computers to run.
But smartphone-powered headsets will be far cheaper and more portable because they use the smartphone screen as the display.
There are well over 100 smartphone-based VR headsets from 65 developers already on the market, according to Lux Research. Alphabet Inc’s Google will add to that number with its Daydream VR platform that works with its Android mobile operating system.
Sony’s House argued that smartphones would not be capable of achieving the highest quality VR experience.
“We are focused on great gaming VR experiences,” he said. “I haven’t seen a cellphone or mobile-based VR experience that really gets our content teams excited.”
House said, beyond gaming, Sony is looking into TV and film and will also concentrate on seeking “ways of bringing much more static experiences to life” in areas such as museums and planetariums.
Sony has said it is working with more than 230 developers globally, and expects over 50 titles by the end of the year, include non-gaming content such as cartoons and music, karaoke and landscape videos.
Nvidia might be getting ready to launch a new Shield Android TV console later this year.
According to a filing to the FCC made public, Nvidia has applied for permission to flog a new console with a model number P2897. Obviously the rest of the filing is time secret but really the only thing that can fit the bill is a new Shield.
Listed under the labeling portion, we see that the device is rectangular and that the console features 802.11ac WiFi. A new shield remote and Controller device also went through the FCC last week.
Since all this is happening at once it seems likely that the new Shield Android TV will be in the shops sometime in autumn. However, Nvidia has applied and obtained FCC approval for things before and we never saw any product in the shops. An updated Shield Tablet went through the FCC and we are still waiting for it to appear.
All this guessing means that it is unclear if the new Shield TV is something new or radical or just a few updated bits stuck inside the existing box. It is also unknown whether Nvidia will launch a new hardware design for the Shield TV or simply stick updated components inside its existing package.
From the advent of what we might consider modern game consoles in the 1980s through to the point when standard budgets for individual games topped $10 million took around 25 years. Budgets spiked significantly when the PlayStation shifted the industry from 2D to 3D, but that merely drove them from six to seven figures; it wasn’t until the last generation, with Xbox 360 and PS3, that $10 million became the baseline for developing a AAA game.
From the advent of modern smartphones, in mid-2007, less than a decade has passed; so when Kabam CEO Kevin Chou talks about budgets of over $10 million for mobile games, and easily twice that when launch marketing costs are taken into account, it’s a sign of how quickly the world has accelerated.
Only a few years ago, mobile was the platform recommended to anyone starting out in game development; it was a new, exciting and fertile land waiting to be discovered by anyone with a smartphone, a copy of Xcode and a flash of genius. The very lure of mobile was that it was fast, it was cheap and it had no gatekeepers; you could prototype an idea, try it out in the marketplace, and either discard it or iterate upon it in a matter of weeks or months, even with a tiny indie team.
It would be wrong to imply that there’s no room in the mobile space for small teams and indies any more – an inspired game and a bolt of astonishing luck could still create a cultural phenomenon and a smash hit for something developed on a shoestring budget. Short of winning the development lottery in this way, though, it’s pretty clear that the big opportunities for smaller developers on mobile aren’t just shrinking; they’re actually gone entirely.
What Chou is saying merely reiterates what’s been clear to those watching the industry carefully for the past few years. Mobile games have become an enormous business, but most of the activity in the sector is no longer focused on game development, per se; it’s an incredibly marketing led business. The games that dominate mobile in 2016 are, with the notable exception of Pokemon Go, the same games that dominated 2015 and 2014. They’ve been updated somewhat and are constantly tweaking their formulas based on the data fed back from the playerbase, but the real efforts that drive consistent chart-toppers like Clash of Clans or Candy Crush Saga are marketing led – and very, very expensive marketing at that.
Indeed, while Chou’s comments on development budgets may seem intimidating to an indie creator, they’re the part of his message that deserves to be taken with a pinch of salt. Sure, moving to 3D has boosted development costs in mobile, but high quality 3D is not a hard and fast requirement for a successful game – and his claim that mobile games will be running with a graphical quality comparable to today’s home console titles within two years is pure fantasy (and not even desirable, were it possible; any game attempting such graphical quality will crucify its own retention statistics by being an unforgivable battery hog). Mobile development is unquestionably more expensive than it has been in the past and I don’t doubt Kabam’s budget estimations – they’re in line with what I’ve heard from others in the mobile sector recently – but this level of budget is still a nice-to-have, not a must-have.
In two areas, though, budget is non-negotiable. The first is network services. The reality is that even if a small independent developer came along tomorrow with a Pokemon Go beating game (which won’t happen, because Pokemon Go’s primary strength is in its license, but humour me anyway), the game wouldn’t survive a month. Either the game wouldn’t scale to match its audience, and would abruptly fall over and lose all market momentum; or it would scale, but the bills for the cloud services used in the process would reach unsustainable levels before the revenues from players actually started to roll in. Without good financial backing and the ability to sustain some high up-front costs, a runaway hit could be more likely to bankrupt its creator than a mediocre success.
The second area in which budget is non-negotiable, or rapidly becoming that way, is the aforementioned marketing. Chou suggested that Kabam is putting around $10 million in marketing behind its launches, which is a huge figure that’s still dwarfed by the amount big players such as Supercell and King are spending on “player acquisition” (which is just another way of saying marketing, in mobile game parlance) on their behemoth games. The sheer volume of TV, outdoor and online advertising space occupied by mobile games dwarfs the marketing for even the biggest console games, for the simple reason that the equation is different. Mobile game operators know that their existence relies on acquiring lots of players (which costs marketing money), holding on to as many of them as possible for as long as possible, and ultimately making more money out of each player than it cost to acquire them.
As the mobile market has grown, the cost of getting a player to try your game (Cost Per Acquisition, CPA) has risen enormously. That’s a cost that’s right there from day one of a mobile game’s existence; if you don’t have an acquisition strategy, which means expensive, high-profile advertising, you don’t have a mobile game with any chance of commercial success. Far, far more than any boost to development budgets, that’s what’s locking small teams and indies out of the mobile space. There are workarounds to some degree – like getting someone at Apple to love your game and feature it on the App Store frontpage, for example – but they’re a million to one shot.
It is, bluntly, long past time that we called time on the romantic myth of the indie mobile developer. If you’re an indie with good skills and a great idea, you’re far better off peddling that idea elsewhere. PC remains fertile ground for indie developers, of course, but one of the wonderful things that mobile has done for game development is the role it’s played in forcing console platform holders to open up to indies. If you’re talented and creative, getting access to a console development kit has never been easier or cheaper – in some cases, such as Microsoft’s ID@Xbox program, platform holders actually give dev kits away for free to just about anyone who wants one. It’s a far, far cry from the walled gardens of only a few years ago.
At first glance, mobile still looks like a more open platform than console (or even perhaps than PC, where Steam and its dubious Greenlight program act as de facto gatekeepers); everyone has a smartphone, the development tools to make games on them are free and anyone can upload a game to the App Store or the Play Store with ease. In reality, though, the opportunities for a small studio to succeed on mobile have narrowed rapidly to the point of nothingness, while opportunities on PC and on traditionally more “closed” platforms have boomed. Short of finding someone with a genuinely amazing, eye-opening idea for a mobile title, I’d be hard-pressed to recommend mobile development to any indie studio in 2016.
The wheel may yet turn again. Mobile game audiences, if nothing else, are still very new and very fickle; their tastes and desires may well shift, and more commercially viable niches may grow within the mobile space. As these devices get more powerful and capable, they’ll enable new experiences and consumers may come to demand more diversity from their gaming. For now, though, mobile has gone the way of console games around a decade ago; rising costs and an escalating arms race in marketing have killed, or are killing, the low-cost end of the market entirely. Unless you’ve got millions you don’t mind losing on a risky gamble, consider the mobile space closed to new entrants for the time being.
According to leaked FCC documentation, it appears that Nvidia has decided to cancel its new Shield Tablet, that was earlier spotted in the in the FCC filing.
According to a leaked document from Federal Communications Commission (FCC) database, dated August 1st and spotted by Androidpolice.com, Nvidia has decided to cancel the tablet “for business reasons”.
The earlier rumored Shield Tablet refresh, which was spotted at FCC, packed some impressive specifications, including an 8-inch 1920×1200 resolution screen, faster Tegra X1 SoC, 3GB of RAM and 32GB of storage.
The most probable reason is the decline in tablet sales and Nvidia’s focus on cars.
Hopefully, this doesn’t mean that we won’t see any more tablets or similar devices from Nvidia in future but not the new Shield Tablet.
Not so long ago it was impossible to check up on your ex without getting a Farmville invite, but since then it seems that gaming has moved away from Facebook and onto mobile phones. Speak to the Facebook games team though, and they’ll tell you that Facebook is a bigger part of the gaming industry than ever.
“To answer the broad question of ‘Where is Facebook Games today?’ the right answer is today we’re everywhere. When I say we’re everywhere what I mean is we work with developers on just about any system that they’re on. They’re on mobile devices, PCs, desktops, Macs, whatever it’s going to be, consoles as well,” says director of global games partnerships Leo Olebe, a gaming veteran who’s worked in marketing for BioWare, Kabam, Zynga and more.
“We have a very strong and overall healthy gaming business. There’s a lot of people that are participating in the Facebook Games ecosystem as a whole and we’re just really passionate about making sure that people have the power to share the stuff that they love.”
He points particularly to Facebook’s recent work with Riot and League Of Legends and the simple ability to log into your PlayStation 4 with Facebook and share screenshots and video directly to your Facebook news feed.
League Of Legends saw 4 million players connect their League of Legends account to their Facebook accounts, which resulted in 15 million new friend connections.
“Yes, we have a really incredible and thriving developer and publisher community that’s on Facebook, people playing all sorts of games from Candy Crush to social casino games but then also participating through the rest of the ecosystem as well,” Olebe says.
Facebook also shared some stats with GamesIndustry.biz: over 550 million people play games that are connected with Facebook every month on desktop, mobile and console and more than 30 million people have connected their Facebook account to either PSN or Xbox Live. Of course, Facebook is also the owner of virtual reality pioneers, Oculus VR.
With Facebook Games Arcade, the company is looking at finding new ways for people to discover and access games when they’re using Facebook on desktops. The company pointed out that users currently can choose from over 500 games including Clash of Kings, Family Guy: The Quest for Stuff and Angry Birds Friends to name but a few.
On the development side, it says developers earned over $2.5 billion on Facebook’s web platform in 2015 and 15 per cent of time spent on Facebook.com is gaming.
“What we’ve done is we’ve become even more sophisticated about how to really think about the 1.6 billion people that are on Facebook. What I mean by more sophisticated is we’ve developed a whole suite of products that developers can use to really understand the people who are playing their games and loving their games. Whether that’s Facebook Login and friend finding, analytics, sharing products, a lot of people use our mobile app install ads to do user acquisition, [so] we have audience network tools,” explains Olebe.
“The most sophisticated publishers and developers out there truly understand that Facebook is a global platform”
“There’s no one thing that everybody has to use but there’s a lot of different things that are valuable to different publishers and different developers in different ways so we really wanted to adapt all our platform products to be flexible as their businesses change as well.”
Calvin Grunewald, engineering manager for games at Facebook elaborates:
“One of the goals from an engineering team perspective is that we want to let game developers build, grow and monetize their apps,” he says.
“It’s a really cool time to be a developer and it’s a really cool time to be working in the platform business just because you get to facilitate social connections on all of these platforms and developers are hungry for them.”
So with Facebook playing such a large role on console, PC and mobile what preconceptions do people still have about Facebook and games that are just downright wrong?
“If anything I think it’s that people still have this idea that Facebook’s place in the global games industry and business is somehow limited to games that you play on the web,” says Olebe.
“The most sophisticated publishers and developers out there truly understand that Facebook is a global platform and assists not only with user acquisition but also heavily with sharing and engagement. We really operate everywhere that gamers are.
“There are misconceptions out there, but I think only because people have an old understanding of Facebook as social games on the web and haven’t spent as much time thinking about all the different avenues where we play.”
Nintendo has confirmed that its next-gen console, the Nintendo NX, will launch in March 2017.
Causing many to screw up their Christmas lists, the company told shareholders during its earnings call on Tuesday: “For our dedicated video game platform business, Nintendo is currently developing a gaming platform codenamed ‘NX’ with a brand-new concept. NX will be launched in March 2017 globally.”
Probably also causing some to cancel a trip to Los Angeles, Nintendo said that the NX will not be demonstrated at the upcoming E3 video games conference in June, despite speculation that Sony plans to show off its so-called PlayStation 4.5 console.
Nintendo’s keynote at the games show will focus instead on the next Legend of Zelda game, which will launch simultaneously on the Wii U and Nintendo NX in 2017. Rumour has it that Smash Bros 4, Splatoon and Super Mario Maker are all set to receive an NX makeover too.
A launch is now less than a year away, but we still don’t know much about the Nintendo NX, which Nintendo confirmed this week is just a codename for the incoming console. However, rumour claims that it will arrive as a hybrid between a home console and a mobile games console to sit alongside the New Nintendo 3DS.
Nintendo president and CEO Tatsumi Kimishima reiterated in December last year that the company is “not building the next version of Wii or Wii U” and that the device will be something “unique and different”.
News of the Nintendo NX’s launch date no doubt came as the firm looked to play down the fact that its profits fell 61 per cent year over year. Worked, didn’t it?
Last year, it was loose lips in the supply chain for console manufacture, now it’s seemingly loose lips within Nintendo’s own marketing department, but there’s a common thread to every leak or rumour that spreads about the platform holder these days – they all point to a late 2016 launch for the company’s next console platform, codenamed NX.
The numbers Nintendo was said to be targeting for NX that were floated around from sources at overseas parts suppliers checked out pretty well. Similarly, the more recent marketing leak has lent significant credibility by being on the money regarding the now-announced Pokemon Sun and Moon titles. It’s all still in the realm of rumour – a dedicated faker could have done the maths required to arrive at plausible manufacturing numbers for NX, just as we did when we dissected the claims; someone with knowledge of a soon-to-be-announced Pokemon game could have tacked on fake information about an upcoming console in order to troll gaming forums. It happens.
Besides, in the skeptics’ corner, there are some solid reasons to question the 2016 launch window. For a start, there’s the simple fact that we know nothing about NX. It’s already March, and all we know is a codename and some vague, hand-waving stuff about the console bridging home and handheld paradigms. That’s pretty much it. Assuming a November launch, that would leave Nintendo with a grand total of eight months to unveil, explain, market and promote an entire new console launch – even assuming that they were to start that process tomorrow. It’s not impossible, of course; that eight months would encompass E3, GamesCom, Tokyo Games Show and as many Nintendo Direct shows as the company wanted, so getting the message out there is plausible… But bear in mind that this is also the year in which Nintendo’s mobile gaming partnership with DeNA will bear its first fruit, and while I maintain that the company views that as a support to its console business, not a replacement for it, it’s reasonable to be dubious of the idea that it would willingly completely overshadow the marketing of those games with a blitz of promotion for a new console.
There’s also the simple matter of history to consider. Nintendo has never, as far as I can recall or uncover, announced a console in the same calendar year that it released it. The pattern for its systems’ pre-launch promotion has been fairly consistent since the turn of the millennium; a slow build-up from the reveal of hardware to further details and the introduction of software, with a launch often as much as 18 months after the unveiling. Compressing that into eight months (or seven, or six) might be possible, but it would be totally outside the pattern of what Nintendo has done up until now with its consoles.
On the other hand, Nintendo is in a pretty unique situation right now. It has a new CEO who, although he’s essentially pledged to follow the path Iwata set the company upon, will also have his own way of doing things and his own vision for the firm. It also has an absolute albatross in the form of the Wii U, which has not been saved from commercial disaster even by successful, acclaimed games like Splatoon and Super Mario Maker – and, almost uniquely for the company, it faces giving the Wii U an early bath at the same time that its all-conquering handheld platform, the 3DS (which has done very well despite not matching sales of its predecessor, the DS) is also slowing down significantly. Nintendo does face entering 2016 without a particularly strong handheld or home console platform and only the 3DS’ installed base to keep things ticking over – which might be a significant impetus to speed things up on the introduction of something new.
Let’s think in more details about the factors that would be involved in launching the NX by the end of the year. It would absolutely have benefits; perhaps the most clear one is that it would prevent 2016 being a “wasted” holiday season for Nintendo. The flatlining Wii U and the rapidly slowing 3DS suggest that without the introduction of a new platform this year, holiday 2016 will likely be Nintendo’s worst for many years – arguably not something Kimishima will want on his report card so early in his tenure. A rapid build-up and launch for the NX would give the company a blow-out Christmas, since Nintendo platforms pretty much always do well at launch – and of course, this would also place NX in the window to receive a prettied-up port of the upcoming Zelda title for Wii U at the same time as the Wii U version itself launches, a mirror of the very successful strategy the company used for Twilight Princess across the GameCube and Wii a couple of hardware generations ago. Even if the game isn’t totally exclusive to NX, a Zelda game at launch would be an enormous boon for the new platform and a great way to ensure a solid holiday season.
It’s definitely a short period of time, though, and the window in which Nintendo can announce the console is probably quite limited. It’s highly unlikely that it would wait for E3 to unveil its plans; much as turning up with a brand new console to the show would be a very effective way to “win” E3, it’s probably more sensible to unveil some aspects of the device, at least, in a Nintendo event well ahead of the show. Indeed, if NX details aren’t revealed to some degree either this month or next, I suspect a 2016 launch can be said to be entirely off the cards – although I wouldn’t actually put money on that, since if we’re talking about reducing the pre-launch promotion window from 18 months to 8 or 7 months, why on earth not make it six, or five, or four?
In fact, it might be more instructive to think about that window in terms of how other devices manage it. Consoles are actually quite unusual in having a lengthy, protracted period where everyone is talking about them, everyone is showing off software for them, but nobody can buy them. Compare that to smartphones or tablets, which are generally available to buy within a matter of days or weeks after they’re first unveiled. That short lead time doesn’t seem to stop Apple’s devoted fans from camping out to buy a new iPhone; perhaps a short lead time for a console might actually spur fans to excitement, rather than denying the new system a build-up? If the NX console is really a complex concept that it takes people a while to get their head around, then perhaps that will be problematic – you don’t want to launch a device that hardly anyone actually understands yet – but if it’s merely an interesting twist on the familiar, then perhaps a short, intense few months of promotion is actually a marketing advantage over a year or more of drawn-out arguments regarding the merits of a still-vapourware device.
Whatever Nintendo actually plans for the NX, it will represent a very dramatic choice for the company. A 2016 launch will be an aggressive strategy that overturns its previous approach to console launches and suggests dramatic reforms under Kimishima’s guidance. Pushing its launch out into next year, though, will leave the company facing a bleak holiday season with an ailing, albeit still popular, handheld device and a home console that’s almost totally dead in the water – and even with the prospect of a Zelda swan song on the Wii U, that will be a bitter pill to swallow for Nintendo. The company is, in some regards, painted into a corner – no matter what it does next, it’ll require a very different Nintendo difference.
Nintendo’s finances took a dip in the company’s third quarter report for FY 2015 – sales stayed relatively stable with just 3.9 per cent shrinkage to 427.7 billion Yen ($3.5bn), but profits dropped by 32 per cent year-on-year to 40.5 billion Yen ($336m).
Although the bottom line failed to excite, plenty of familiar faces performed well for the publisher’s software arm, as well as a few new names. Top seller was Child friendly Wii U shooter Splatoon, shifting over four million units. Super Mario maker wasn’t far behind on 3.34 million, whilst Animal Crossing Happy Home Designer reached 2.93 million. Collectively the 3DS family sold 5.88 million units of hardware and 38.87 million games. The Wii U totalled 3.06 million consoles and 22.62 million pieces of software. 20.50 million Amiibo figures were sold, and approximately 21.50 million Amiibo cards.
Those eagerly awaiting news of either the new NX system or the company’s first smartphone game will be disappointed – neither was mentioned in the company’s forward looking statements. Instead, the publisher focused on relatively known quantities.
“For Nintendo 3DS, we will globally release a special edition hardware pre-installed with Pokémon title(s) from the original Pokémon series on February 27 which marks the 20th year since the original Pokémon series release,2 read the accompanying statement.
“Furthermore, Mario & Sonic at the Rio 2016 Olympic Games and key titles from third-party publishers are scheduled for release. For Wii U, we will strive to maintain the attention level of Splatoon and Super Mario Maker, which are continuing to show steady sales, while introducing new titles such as The Legend of Zelda: Twilight Princess HD. Meanwhile, for Amiibo, we will continue to expand the product lineup in order to maintain momentum. At the same time, we will aim to further expand sales by offering new gaming experiences with the use of Amiibo. In addition, the first application for smart devices, Miitomo, is scheduled for release.”
The company has maintained its full year target of 35 billion Yen in profit.
Facebook has made the switch from Flash to HTML5 for playing video content on the social media website.
Facebook said in a blog post that it has changed to HTML5 for all video content in News Feed, Pages and the Facebook embedded video player.
“From development velocity to accessibility features, HTML5 offers a lot of benefits. Moving to HTML5 best enables us to continue to innovate quickly and at scale, given Facebook’s large size and complex needs,” said the firm’s front-end engineer Daniel Baulig.
“We are continuing to work together with Adobe to deliver a reliable and secure Flash experience for games on our platform, but have shipped the change for video to all browsers by default.”
The move will come as quite a blow for Adobe’s Flash platform, which has been used online for over 10 years. Flash Player, either as an app or plug-in for the browser, became an essential installation for anyone who wanted to see multimedia content or watch video online, but the need for it is slowly fading and Facebook’s decision to change could be the final nail in the coffin.
HTML5 is better as it can now support content such as video without the need for plug-ins like Flash, so many developers and online services have begun to switch to HTML5 for displaying video.
“Using web technologies allows us to tap into the excellent tooling that exists in browsers, among the open source community, and at Facebook in general. Not having to recompile code and being able to apply changes directly in the browser allow us to move fast,” explained Baulig.
Google stopped supporting Flash in its Chrome browser earlier this year, while Amazon recently declared a ban on Flash in advertising content on its site. Facebook seems pretty happy with the move to HTML as it will also improve video performance in general on the site.
“Not only did launching the HTML5 video player make development easier, but it improved the video experience for people on Facebook. Videos now start playing faster. People like, comment and share more on videos after the switch, and users have been reporting fewer bugs,” Baulig added.
“People appear to be spending more time with video because of it. Videos are an enriching way to connect with the world around you, and we’re happy we could make the Facebook video experience better.”
The Nintendo NX may surpass the Wii U’s lifetime installed base in its first year on shelves. According to a Digi-Times report, Nintendo’s upstream component suppliers are expecting to provide the company with enough hardware to ship 10-12 million units in 2016.
That would mark a rebound after the Wii U, which through September had put up lifetime sales of a little under 11 million. However, Nintendo may be expecting even more from its next platform; in July, Digi-Times reported that the company was planning to ship 20 million Nintendo NX systems globally in 2016.
The report states that Foxconn Electronics will manufacture the NX, with mass production beginning at the end of the first quarter. Foxconn Technology, Macronix, Pixart Imaging, Coxon Precise Industrial, Nishoku Technology, Delta Technology, Lingsen Precision Industries and Jentech are expected to be supplying components for the NX.
Activision Blizzard Inc has launched a film and TV studio to develop original content based on its popular videogame franchises such as “Call of Duty” and “Hearthstone” in its latest push to expand beyond console-based games.
Activision Blizzard Studios’ first production will be “Skylanders Academy,” an animated TV series based on the company’s toys-to-life videogame “Skylanders”, the company said in a statement.
A “near-term” project for the videogame maker’s film and TV studio will be to develop a movie franchise based on the hugely successful military first-person shooter “Call of Duty”.
The company said it would also consider adapting the franchise for TV.
“Warcraft”, Activision’s other well-known game franchise, is already being made into a film through a partnership between its Blizzard Entertainment unit and Legendary Pictures, and is slated for a 2016 release.
Activision said last month it would start an e-sports division to tap into the fast-growing competitive gaming market, where gamers play against each other for prize money.
Earlier this week, Activision agreed to buy “Candy Crush” creator King Digital Entertainment Plc for $5.9 billion to sharpen its focus on mobile games.
Activision’s highly anticipated “Call of Duty: Black Ops III” game went on sale earlier on Friday.
Activision Blizzard has bought King Digital Entertainment for $5.9 billion, marking not only one of the largest acquisitions in videogame history but one of the largest deals ever made in the entertainment business. Comparing this to previous entertainment deals highlights just how extraordinary the figures involved are; the purchase price values King at significantly more than Marvel Entertainment (acquired by Disney for $4.2 billion), Star Wars owner Lucasfilm (Disney again, for $4.1 billion) and movie studio Metro-Goldwyn-Mayer (acquired by Sony for almost $5 billion). The price dwarfs the $1.5 billion paid by Japanese network SoftBank and mobile publisher GungHo for Supercell back in 2013 – though it’s not quite on the same scale as the $7.4 billion price tag Disney paid for Pixar, or in the same ballpark as the $18 billion-odd involved in the merger that originally created Activision Blizzard itself.
How is $5.9 billion justified? Well, it’s a fairly reasonable premium of 20% over the company’s share price – though if you’ve been holding on to King shares since its IPO in 2014, you’ll still be disappointed, as it’s far short of the $22.50 IPO price, or even the $20.50 that the shares traded at on their first day on the open market. The company’s share price has been more or less stable this year, but Activision’s offer still doesn’t make up for the various tumbles shares took through 2014.
A better justification, perhaps, lies in the scale of King’s mobile game business. The company is a little off its peak at the moment. Candy Crush Saga, its biggest title, is on a slow decline from an extraordinary peak of success, and other titles aren’t growing fast enough to make up for that decline, but it still recorded over half a billion monthly active users (MAUs) in its recently reported second quarter figures. In terms of paying users, the company had 7.6 million paying users each month – more than Blizzard’s cash cow, World of Warcraft, and moreover, the average revenue from each of those users was $23.26, far more than a World of Warcraft subscriber pays. King took in $529 million in bookings during the quarter, 81 per cent of it from mobile devices – a seriously appealing set of figures for a company like Activision, which struggles to get even 10 per cent of its revenues from mobile despite its constant lip-service to the platform.
In buying King, Activision instantly makes itself into one of the biggest players in the mobile space, albeit simply by absorbing the company that is presently at the top of the heap. It diversifies its bottom line in a way that investors and analysts have been crying out for it to do, reducing its reliance on console (still damn near half of its revenues) and on the remarkable-but-fading World of Warcraft, and bulking up its anaemic mobile revenues to the point of respectability. On paper, this deal turns Activision into a much more broad-based company that’s far more in line with the present trajectory of the market at large, and should assuage the fears of those who think Activision’s over-reliance on a small number of core franchises leaves it far more vulnerable than rivals like Electronic Arts.
That’s on paper. In practice, though, what has Activision just bought for $5.9 billion? That’s a slightly trickier question. The company is, unquestionably, now the proud owner of one of the most talented and accomplished creators and operators of mobile games in the world. King’s experience of developing, marketing and, crucially, running mobile games at enormous scale, and the team that accomplished all of that, is undoubtedly valuable in its own right. Those are talents that Activision didn’t have yesterday, but will have tomorrow. Are those talents worth $5.9 billion, though? Without wishing for a moment to cast doubt on the skills of those who work at King, no, they’re not. $5.9 billion isn’t “acquihire” money, and when that’s the kind of cash involved we simply can’t think of this as an “acquihire” deal. Activision didn’t pay that kind of money in order to get access to the talent and experience assembled at King. It paid for King itself, for its ongoing businesses and its IP.
Open the shopping bag, and you might struggle to understand how the contents reach $5.9 billion at the till. King has one remarkable, breakthrough, enormously successful IP – Candy Crush Saga, which still accounts (not including heavily marketed spin-off title Candy Crush Soda Saga) for 39 per cent of the company’s gross bookings. No doubt deeply aware of the danger of being over-reliant on revenues from this single title, King has worked incredibly hard to find success for other games in its portfolio. But even its great efforts in this regard have failed to compensate for falling revenues from Candy Crush, and it’s notable that a fair amount of the “non-Candy Crush Saga” revenue that the company boasts actually comes from Candy Crush Soda Saga. Other titles like Farm Heroes Saga and Pet Rescue Saga are no doubt profitable and successful in their own right, and King would be a sustainable business even without Candy Crush. But it would be a much, much smaller business, and certainly not a $5.9 billion business.
Despite being generally bullish about King’s prospects, then, it’s hard to avoid the feeling that the company has done incredibly well out of this acquisition. The undoubted talent and experience of its teams aside, this is, realistically, a company with one IP worth paying for, and unlike Star Wars or the Avengers, Candy Crush is a very new IP whose longevity is entirely untested and whose potential for merchandising or cross-media ventures is dubious at best. King has done better than most of its rivals in the mobile space at applying some of the lessons of its biggest hit to subsequent games and making them successful, but it shares with every other mobile developer the same fundamental problem: none of them has ever worked out how to bottle the lightning that creates a mega-hit and repeat the success down the line. Absent of another Candy Crush game, the odds are that King’s business would slowly deflate as the air escaped from the Candy Crush bubble, until the company’s sustainable (and undoubtedly profitable) core was what was left. Selling up to Activision at a healthy premium while the company is still “inflated” by the likely unrepeatable success of Candy Crush is a fantastic move for the company’s management and investors, but rather less so for Activision.
Perhaps, though, the whole might be more than the sum of its parts? Couldn’t Activision, holders of some of the world’s favourite console and PC game IP, work with King to leverage that IP and the firm’s reach in traditional games, creating new business at the interaction of their respective specialisations? That’s a big part of what made Pixar so valuable to Disney, for example; the match between their businesses was of vital importance to that deal, and the same can broadly be said for Disney’s other huge acquisitions, Lucasfilm and Marvel. (SoftBank’s purchase of Supercell, by comparison, was rather more of a straightforward market-share land grab.) What could this new hybrid, Activision Blizzard King, hope to achieve in terms of overlap that enhances the value of its various component parts?
Certainly, Activision has some properties that could work on mobile (I’m thinking specifically of Skylanders here, though others may also fit); some Blizzard properties could also probably work on mobile, though I very much doubt that Blizzard (which retains a strong degree of independence within the group) is a good cultural fit for King, and is deeply unlikely to work with it in any manner which gives up the slightest creative control over its properties. King’s properties, meanwhile, don’t look terribly enticing as console or PC games, and conversions done this way would almost certainly defeat the entire purpose of the deal anyway, since the objective is to bolster Activision’s mobile business. The prospect of a mobile game based on Call of Duty or another major console IP may seem superficially interesting, but we’ve been down this road before and it didn’t lead anywhere impressive. Sure, core gamers are on mobile too, but they’ve by and large been nonplussed at best and outraged at worst by the notion of engaging with mobile versions of their console favourites. It’s genuinely hard to piece together the various IPs and franchises owned by King and Activision and see how there’s any winning interaction between them on the table.
This is what makes me keep returning to those other mega-deals – to Star Wars, to Marvel, to Pixar – and finding the contrast between them and Activision / King so extraordinary. Each of those multi-billion dollar deals was carried out by Disney with a very specific, long-term plan in mind that would leverage the abilities of both acquirer and acquired to create something far more than the sum of its parts. Each of those deals had a very clear raison d’être beyond simply “it’ll make us bigger.” Each of those companies fitted with the new parent like a piece of a puzzle. King’s only role in Activision’s “puzzle” is that they do mobile, and Activision sucks at mobile; there’s no sense of any grand plan that will play out.
In all likelihood, Activision has just paid a huge premium for a company which is past the peak of its greatest hit title and into a period of managed decline, not to mention a company with which its core businesses simply don’t fit in any meaningful way. King’s a great company in many respects, but its acquisition isn’t going to go down as a great deal for Activision – and we can expect to see plenty of that $5.9 billion being frittered away in goodwill write-downs over the coming few years.
Facebook crossed the 1 billion monthly user mark in September 2012, so it’s taken about three years to add the last half billion. It took just over two years to amass the half billion before that. For comparison, Twitter has about 320 million monthly users.
Facebook announced the figure with its earnings results for the third quarter, which came in better than expected. Revenue was $4.5 billion, up 41 percent from a year earlier, the company said, while net profit was $896 million, up 11 percent.
Excluding charges, Facebook’s profit was 57 cents a share, better than the 52 cents a share analysts were expecting, according to a poll by Thompson Reuters.
Facebook had 1.55 billion monthly active users at the end of September, up 14 percent from the same time last year. Mobile monthly active users were 1.39 billion, it said.
The social network announced another milestone in August, when it said the number of people who accessed Facebook in a single day passed 1 billion for the first time.
“When we talk about our financials, we use average numbers, but this is different. This was the first time we reached this milestone, and it’s just the beginning of connecting the whole world,” Zuckerberg said at the time.
The company’s net profit had declined in the two previous quarters, largely because costs increased as it invested in new areas like virtual reality. But costs rose less sharply this past quarter — by 68 percent, compared to 82 percent in the second quarter — and net profit was up again.
In the mobile gaming space, change occurs quickly and often. In the seven years since the App Store revitalised a previously disjointed and granular market, almost every important aspect of production, distribution, marketing and consumption has been upturned several times. Smart developers learned to move quickly, primed for instant response and rapid iteration, in order to keep pace with a constantly shifting environment.
For mobile’s biggest companies, Kabam’s Aaron Loeb says, this way of thinking no longer suits the marketplace. “Five years ago mobile could best be characterised as a market where the best attribute you could have as a developer was speed. Today, the best attribute you can have as a developer is reliability. That requires different studios, that requires different leadership, and that requires different ways of thinking about steering development.”
Loeb left a senior position at Electronic Arts for Kabam in June 2014, the first in a run of major hires that also saw Zynga’s Mike Verdu and EA’s Nick Earl arrive at the company. Kevin Chou, Kabam’s CEO, had steered the company from a dependence on Facebook to its own web platform, Kabam.com, and then from there to mobile, the company emerging stronger and more successful each time. Loeb, Verdu and Early were hired in a conscious attempt to pivot once again, preparation for what Chou believed soon become a more settled and predictable place to do business.
Broader product strategies used to work, Loeb says, echoing an idea he expressed in a talk that proved to be the highlight of DICE Europe last month. Ever since the first games with in-app purchases appeared on the App Store in North America and Europe five years ago, the collective confusion over what constituted a ‘good’ product encouraged a “throw spaghetti against the wall and see what sticks” culture. Player taste and behaviour has changed, Loeb says, and the companies with the will – and the resources – to monitor and understand those factors have a clearer idea about the qualities necessary for success in mobile.
A company like Kabam can now place its bets with greater confidence than ever before. Those bets will be fewer, bolder and bigger, and they will ultimately lead to what Loeb has called – on his Linkedin profile, no less – “the next generation of free-to-play games.”
“Players are demanding games with more compelling loops, a richer sense of gameplay satisfaction,” he says. “The historical notion of what that means – from the console industry – is deep immersion, 80-hours of gameplay, you can disappear into your man or woman cave and never come up for air. That is not great mobile gameplay.
“Games that are purely versions of Solitaire – minimal attention, brain-clearing exercises – will always have their place in mobile, but more sophisticated mobile consumers want games they can have meaningful relationships with. So characters they care about, and other players they can care about, in ways both good and ill.
“The other thing that will be really prevalent will be an emerging and changing sense of what people will pay for, and what works in free-to-play… I can’t give you an exact answer to [what that will be], and not because I secretly know the answer and won’t tell you. It’s because it’s happening right now, and it is one of the most interesting things happening right now.”
Certain aspects of the answer can be found in two Kabam releases from the recent past: Marvel Contest of Champions, which is still among the top-grossing iOS games almost a year after launch, and Spirit Lords, which launched to considerable fanfare in May this year. Spirit Lords, in particular, displayed an uncommon degree of ambition: a new IP with lavish production values, an all-star development team, and no pre-existing brand awareness to use as a crutch.
“The point is that we’re taking the best design elements of those traditional games that our team members have been building for years – Diablo, Dragon Age, real classics – and bring them truly into mobile,” Loeb says. “We’re not trying to recreate your love of Diablo in the Nineties. We’re trying to create a new language of games for mobile.”
Such things don’t come cheap, of course, and that kind of investment demands a successful launch. Only two or three years ago, I heard very smart people advise mobile developers to launch a minimum viable product; to use the live, reactive nature of the App Store to shape what those games would become. With a game like Spirit Lords, however, there isn’t even a hint of uncertainty, no optimistic air of ‘we’ll see how it goes.’ To use Loeb’s own comparison, Kabam wasn’t throwing spaghetti at the wall with this one.
“That’s 100 per cent accurate. Kabam has engaged in a significant shift, and I believe that the whole industry will engage in that shift,” he says. “It is these launches that set the trajectory of a title. The launch is a big deal in mobile now, in a way that it wasn’t a few years ago. You had the sense then that you could build a business over two years. You still can do that, by the way, but you don’t get two chances to make a first impression.
“We are certainly thinking about how to make a very compelling, very satisfying experience at launch, which then continues to grow after launch… We don’t agree with [MVP strategy] any more. We believe we can look at the market now, and see the tastes of the customer and the player, and we can determine at some root level what is a good game and what is a bad game. That doesn’t mean that if you release a good game it will succeed – it’s still an incredibly competitive market – but at the very least you can have more influence on the outcome than treating it all like a coin toss.”
This kind of thinking is now commonplace among the big mobile developers. Earlier this month, Machine Zone’s Gabriel Leydon predicted that the most successful companies would soon be releasing just one or two games a year, with more and more money coming from an ever decreasing slate of products. The market remains crowded and chaotic, but the way Kabam, Machine Zone and others like them are setting up for the future will impose a kind of order – one not dissimilar to that which arose due to the rocketing costs of AAA console development, when many so studios discovered that they could no longer compete on such an uneven field of play.
“The launch is a big deal in mobile now, in a way that it wasn’t a few years ago”
“It is too early to say it’s gonna be the exact same phenomenon as console, and the economic factors of the industry are different enough that I don’t think it will be the exact same,” Loeb says. “In part, the middle fell out of console because the consumer for small and mid-sized games left to go to mobile and free-to-play. That was a pretty big part of that phenomenon.”
Whether those developers left through choice or necessity is a crucial distinction, of course. As is the question of where, exactly, those developers will turn if this age of “fewer, bigger and bolder games” has a similar fallout to the consolidation of high-end development in the last console generation. Loeb certainly doesn’t dismiss it as a possibility, and he admits that the companies worst affected by the shift will be further down the chain. With console, the middle of the market dropped away. With this next phase of mobile, it will be the little guys.
“The way that mobile and free-to-play as they currently stand will be disrupted is not completely clear,” he says. “The very low end of mobile game development seems likely to go away, or it will truly become like hoping to get hit by lightning. The developer who spends $20,000 throwing something on the marketplace really ought to put that $20,000 in a mutual fund. That’s just not very likely to produce any outcome.
“There’s so much competition, and so much quality product being created, that it will be very, very hard for those games. Harder than it has ever been.”
Japan’s Nintendo Co announced that it is delaying the much-awaited launch of its videogame service for smartphones by a few months to March 2016, disappointing gaming fans as well as investors who drove its shares down by more than 10 percent.
Under a strategy announced by its previous chief executive, who died of cancer earlier this year, Nintendo had said it would introduce its first smartphone games by the end of 2015. Fans and investors had hoped it would include its best-selling videogame franchise Mario in the first lineup.
Chief Executive Tatsumi Kimishima, a former banker who succeeded Satoru Iwata, said the delay would help Nintendo concentrate on selling its existing consoles and game software during the year-end holiday season.
“The year-end is traditionally our peak season for sales,” told a packed news conference, when asked about the delay. “This way, we’d be able to introduce our new applications after the holiday season is over.”
He avoided commenting on whether Mario would come to smartphones, instead introducing a new social networking service-style application called “Miitomo” which would be available in March.
The news knocked Nintendo’s shares down more than 10 percent in morning trade, erasing earlier gains. DeNA Co, Nintendo’s mobile gaming partner, fell as much as 19 percent.
Kimishima must avoid cannibalizing traditional console sales at the same time as pushing aggressively into the rapidly growing mobile gaming segment. On Wednesday, Nintendo reported a weaker-than-expected operating profit for the July-September quarter on tepid sales of game software.
“This (move into mobile gaming) is a sea change for them and there may be some growing pains like this along the way,” said Gavin Parry, managing director of Hong Kong-based brokerage Parry International Trade.
Former CEO Iwata, credited with broadening the appeal of videogames, died of cancer in July just months after deciding to enter mobile gaming despite years of resisting investor calls for such a move.