While some publishers establish their own eSports divisions and appoint chief competition officers, Take-Two is approaching the competitive gaming trend with a bit more caution. Speaking with GamesIndustry.biz in advance of the company’s financial earnings report today, CEO and chairman Strauss Zelnick said the field was promising, but still unproven.
“eSports we find very interesting,” Zelnick said. “It is, however, still more a promotional tool than anything else. And most people see eSports as an opportunity to increase consumer engagement in their titles, and depending on the title, to increase consumer spending within the title.”
To date, Take-Two’s biggest eSports endeavor has been an NBA 2K tournament with 92,000 teams competing for a $250,000 prize. The final 16 teams are set to compete in a single-elimination tournament this weekend, with the finals taking place during the NBA Finals next month.
“It’s just the beginning for us,” Zelnick said of the tournament. “It’s very gratifying so far, but we have yet to see it as a stand-alone profitable business. We see it more as an adjunct to consumer engagement in our titles.”
Zelnick also addressed the company’s digital revenues, which for the first time made up more than half of its revenues for the year. While the industry has shifted heavily toward digital in recent years, Zelnick doesn’t see this as some sort of tipping point or a harbinger that physical goods are in for declines from here on out.
“This year was a little different because we had a very significant portion of this year’s revenue through digital distribution,” Zelnick said. “And that’s a reflection of the power of titles like Grand Theft Auto Online as well as PC titles, 90 percent of which are digitally delivered. With frontline console releases, your numbers are more like 20 percent from digital distribution. So physical distribution remains the lion’s share of our revenue.”
While Zelnick acknowledged the growth of digital distribution is a good thing for Take-Two, he specified that it wasn’t a strategy for the company because it’s ultimately out of his hands.
“We want to be where the consumer is, and we’re not really the ones who vote,” Zelnick said.
HelloTech will combine its network of about 150 college students who provide on-demand tech repair to Southern California consumers with Geekatoo’s U.S. network of about 5,000 technicians, the companies said in a joint statement.
The merger connects HelloTech with Geekatoo’s national market and provides Geekatoo with more access to venture capital funding, HelloTech co-founder Richard Wolpert said in an interview.
HelloTech, which launched about a year ago, has raised $17 million from investors, while 5-year-old Geekatoo has raised close to $3 million.
“You could either use capital to expand really quickly or you could merge with a company like Geekatoo that had already spent money doing this,” said Mark Suster, managing partner at Upfront Ventures, which backed HelloTech.
The new company keeps the HelloTech name and will be led by Wolpert. He said the deal was a stock transaction, rather than a cash payment, but declined to provide further details.
Both companies dispatch in-home tech support within hours of a request to fix a wonky printer, install a new TV or troubleshoot WiFi problems, among other services.
HelloTech hit a few bumps last year after launching, with some negative customer feedback that its workforce of predominantly college students was unprofessional.
Wolpert said the company has worked out the glitches. HelloTech has a five-star rating on customer review site Yelp.
Geekatoo Executive Chairman Christian Shelton saw demand for tech services rising as more people add internet-connected devices – such as the smart thermostat Nest or WiFi camera Dropcam – to their homes.
The U.S. tech support industry makes about $30 billion in annual revenue, according to research by Parks Associates, a consulting firm.
“The opportunity is massive,” Wolpert said.
The company’s main competition is Geek Squad, a tech support service founded in 1994 and owned by big-box retailer Best Buy.
HelloTech targets baby boomers with disposable income to spend on new gadgets and someone to help get them up and running.
“There is enormous wealth in the baby boomer generation,” Suster said, and their “digital lives are becoming increasingly complicated.”
EA is telling the world that it wants into the third-person action market with an open world game, but it does not appear to be happening any time soon.
EA Studios VP Patrick Söderlund told us in 2015 that EA wanted to expand its portfolio into gigantic action games like Assassin’s Creed or Batman or GTA and CFO Blake Jorgensen said something similar.
“We feel like there’s a huge opportunity for us to continue to invest in new areas of the business like the action genre where we haven’t competed historically. There’s a very ripe opportunity for us to invest in and we’ve been able to bring great talent in to build out that part of the business.”
But according to Game Radar it is not going to happen any time soon. Blake is quoted as saying that the outfit was building an action genre product that’s probably will appear in three or four years.
We can expect something new from EA next year which has not been announced, Blake said. But this will not be anything like the big games which have captured popular attention.
Vevo might be the new MTV for millennials, who might not know MTV that played music a few decades ago. Vevo CEO Erik Huggers had an interview at a Hunter Walk blog talking about YouTube, subscription base and the future.
Vevo CEO, ex Intel and ex BBC executive Erik Huggers mentioned that the Vevo will get a subscription based service but for the time being the company will stay with add supported content. Huggers first worked first on the iBBC player and later at Intel OnCue, then Verizon before getting the Vevo CEO.
The company has announced a new Apple TV, iOS and Android applications for people who like to watch the content on the TV console or their tablets and phones. Huggers mentioned that Vevo was getting 17 billion unique views per month. He said that if you are musician you will prefer Spotify for audio streaming and Vevo to YouTube, and here is why.
Peter Mensch, the manager of bands including Metallica, Red Hot Chili Peppers and Muse told a BBC Radio 4 documentary on the music business:
“YouTube, they’re the devil. We don’t get paid at all.”
The BBC quoted him saying that YouTube was killing the record industry.
There is now way you can say it better than this, Mensch obviously knows what he is talking about. When we dug a bit deeper into the issue, bands have issues with complete albums being uploaded to YouTube. The big bands don’t get paid at all, at least according to Peter Mensch.
Vevo might turn its back to YouTube, despite its current business model where the company uses YouTube to distribute its videos. We see a big change coming. Artists are obviously not happy as people are ripping their stuff and not paying.
Online publishing was an area where big mistakes were made 20 + years ago. Online magazines usually rely on marketing, same as YouTube, but it seems that YouTube, Facebook and other big social based website make a lot of money and giving YouTubers and artists pennies.
Huggers believes Vevo can offer a tailored experience which is personalised for individuals who love music videos via various channels including Apple TV or mobile applications. Imagine if Vevo starts offering exclusive concert footage of your favourite bands, this would probably be worth of a few bucks a month, wouldn’t it?
Taking a page from its earlier Open Compute Project effort for data centers, Facebook is joining forces with Intel, Nokia and several telecommunications companies, including Germany’s Deutsche Telekom, to share designs and technological advances for open source hardware and software.
Facebook, Intel and Nokia will work on the new designs. The telecoms will use the technology based on those designs.
“Every day, more people and more devices around the world are coming online, and it’s becoming easier to share data-intensive experiences like video and virtual reality,” wrote Jay Parikh, Facebook’s global head of engineering and infrastructure, in a blog post . “Scaling traditional telecom infrastructure to meet this global data challenge is not moving as fast as people need it to. We know there isn’t a single solution for this, and no one company can tackle the problem alone.”
Is Facebook diving into the challenge of designing wireless hardware and software? It might seem like a far cry from social networking, but Dan Olds, an analyst with The Gabriel Consulting Group, said the move makes sense.
“Both Facebook and Google know that the more content people pursue and consume across the web, the more people will be using their respective services,” Olds said. “So if Facebook believes that wireless technology isn’t advancing quickly enough, it makes sense for them to become more directly involved in its evolution.”
It makes even more sense for Facebook to create a team to tackle wireless technology after it created another team with the Open Compute Project about five years ago to build better data centers.
This week’s move is a slight change in direction but the same strategy – to pull together forces in advanced technology that eventually will help the business.
Bluetooth SIG, the organization that coordinates development and promotes the use of our favorite communication platform named after a Danish king, has announced the arrival of a toolkit which it said will connect billions more devices to the Internet of Things (IoT).
The Bluetooth architecture and toolkit will allow developers, makers, hackers and OEMs to quickly and easily create connections with the cloud in a format that is already widely in use across almost every device imaginable.
The INQUIRER spoke to Martin Woolley, technical program manager at Bluetooth SIG, to tell us more.
“A lot of people aren’t aware of the possible range for Bluetooth devices. We know of one manufacturer whose chips can range up to 450m. It puts us in an ideal position to become a central part of the IoT. I’m particularly interested in the connected home and we can do amazing things there,” he said.
One of the key features that will give Bluetooth an advantage in this area is ‘meshing’, which is rolling out in the latest versions of the Bluetooth stack.
Bluetooth devices can bring connectivity where there was none before by adding IPv6 support and the ability for each Bluetooth device to act as a relay to others without a direct connection to a central hub, thus forming a ‘mesh’ around the premises. Their backwards compatibility means that it requires only the hub and a node to be mesh-ready to make the entire network compliant.
There are a number of other formats that have the march on Bluetooth in the IoT field, but Martin pointed out that there is good reason.
“It’s because it has been a massive undertaking and now it’s ready. It can be so easily configured to work with products already on the market which are currently using individual systems. There are 120 companies working together in the Mesh Working Group, Bluetooth is a standard for the IoT that already exists. The toolkit allows it to do more,” said Woolley.
Bluetooth has been instrumental to the BBC Microbit learners kit that has finally started distribution to UK schools. Bluetooth plays a big part in the communication capabilities of the device.
“I really think this is a landmark in computing. I really want to see the next generation of computer pioneers saying they were first sparked by the day they got their BBC Microbit,” he said.
The Bluetooth Internet Gateway Smart Starter Kit is available for download now.
This confirms what we noticed at CES where there were few people even showing 3D as a feature and one of them was LG.
Speaking to ET News in Korea, an LG representative stated that only its premium sets this year will be 3D capable, slashing the number of supporting TVs by half.
“Although 40 per cent of all TVs last year had 3D functions, only 20 per cent this year will. There are still consumers who enjoy 3D movies and others, so we are going to apply it mainly on premium products.”
Apparently Samsung is going the same way according to a supplier of 3D glasses who was told not to bother making compatible specs this year.
3D in the home has been in decline for the last two to three years, with first the BBC stopping producing its 3D material and Sky started killing off its dedicated channels last June. Sky still offers some 3D movies and content on demand.
It does not mean that 3D video is a dead format. It is still going strong in cinemas and we will probably see films made in that format for years. It is just that it never really worked in the home. Some of that might have been due to content, other reasons is that it tended to be erratic technology whcih was a little too much like hard work to set up. Quality also suffered in comparison some of the HD and UH pictures which were suddenly more realistic.
According to Newzoo’s 2016 Global eSports Market Report, this year is expected to be a “pivotal” one for the eSports sector. The firm said that last year’s tally for worldwide eSports revenues came to $325 million, and this year the full eSports economy should grow 43 percent to $463 million; Newzoo said this correlates with an audience of 131 million eSports enthusiasts and another 125 million “occasional viewers who tune in mainly for the big international events.” Overall, Newzoo’s report states that global and local eSports markets should jointly generate $1.1 billion in 2019.
Looking a bit deeper, Newzoo found that investment into and advertising associated with eSports continue to grow at a rapid clip. “This year has been dominated by the amount of investors getting involved in eSports. An increasing amount of traditional media companies have become aware of the value of the eSports sphere and have launched their first eSports initiatives. With these parties getting involved, there will be an increased focus on content and media rights. All major publishers have increased their investment into the space, realizing that convergence of video, live events and the game itself are providing consumers the cross-screen entertainment they desire from their favorite franchises,” Newzoo commented.
Online advertising in particular is the fastest growing revenue segment within eSports, jumping up 99.6 percent on a global scale compared to 2014. North America is expected to lead the charge worldwide.
“In 2016, North America will strengthen its lead in terms of revenues with an anticipated $175 million generated through merchandise, event tickets, sponsorships, online advertising and media rights. A significant part of these revenues flows back to the game publisher, but across all publishers, more money is invested into the eSports economy than is directly recouped by their eSports activities,” said Newzoo’s eSports Analyst, Pieter van den Heuvel.
“China and Korea together will represent 23 percent of global esports revenues, totalling $106 million in 2016. Audience-wise, the situation is different, with Asia contributing 44 percent of global eSports enthusiasts. Growth in this region is, for a large part, fuelled by an explosive uptake in Southeast Asia.”
While eSports is certainly on a good path for growth, game companies would be wise to not get too caught up by the hype. The average annual revenue per eSports enthusiast was $2.83 in 2015 and is expected to grow to $3.53 this year, Newzoo said, but that’s still a factor four lower than a mainstream sport such as basketball, which generates revenues of $15 per fan per year.
Peter Warman, CEO at Newzoo added, “The initial buzz will settle down and the way forward on several key factors, such as regulations, content rights and involvement of traditional media, will become more clear. The collapse of MLG was a reminder that this market still has a long road to maturity and we need to be realistic about the opportunities it provides. In that respect, it is in nobody’s interest that current market estimates differ so strongly. Luckily, when zooming in on the highest market estimates of more than $700 million, the difference is explainable by an in-depth look. This estimate only differs in the revenues generated in Asia (Korea in particular), and by taking betting revenues into account. At Newzoo, we believe betting on eSports should not be mixed into direct eSports revenues as the money does not flow into the eSports economy. Similarly, sports betting is not reported in sports market reports.”
On February 16, Street Fighter V will launch on PlayStation 4 and PC. It will not be launching to Xbox One thanks to an exclusivity deal signed with Sony. And as Capcom director of brand marketing and eSports Matt Dahlgren told GamesIndustry.biz recently, there are a few reasons for that.
Dahlgren called the deal “the largest strategic partnership that fighting games have ever seen,” and said it addressed several problems the publisher has had surrounding its fighting games for years.
“Basically every SKU of a game we released had its own segmented community,” he said. “No one was really able to play together and online leaderboards were always segmented, so it was very difficult to find out who would be the best online and compare everybody across the board.”
Street Fighter V should alleviate that problem as it’s only on two platforms, and gamers on each will be able to play with those on the other. Dahlgren said it will also help salt away problems that stemmed from differences between platforms. For example, the Xbox 360 version of Street Fighter IV had less input lag than the PS3 version. That fraction of a second difference between button press and action on-screen might have been unnoticeable to most casual players, but it was felt by high-level players who know the game down to the last frame of animation.
“There were varying degrees of input lag, so when those players ended up playing each other, it wasn’t necessarily on an equal playing field,” Dahlgren said. “This time around, by standardizing the platform and making everyone play together, there will be a tournament standard and everyone is on an equal playing field.”
Finally, Dahlgren said the deal with Sony will help take Street Fighter to the next level when it comes to eSports. In some ways, it’s a wonder it’s not there already.
“I think fighting games are one of the purest forms of 1v1 competition,” Dahlgren said. “A lot of the other eSports games out there are team-based, and while there’s an appeal to those, there’s something about having a single champion and having that 1v1 showdown that’s just inherently easy for people to understand.”
Street Fighter has a competitive gaming legacy longer than League of Legends or DOTA, but isn’t mentioned in the same breath as those hits on the eSports scene. In some ways, that legacy might have stymied the franchise’s growth in eSports.
“A lot of our community was really built by the fans themselves,” Dahlgren said. “Our tournament scene was built by grassroots tournament organizers, really without the help of Capcom throughout the years. And I would say a lot of those fans have been somewhat defensive [about expanding the game's appeal to new audiences]. It hasn’t been as inclusive as it could have been. With that said, I do definitely feel a shift in our community. There’s always been a talking point with our hardcore fans as to whether or not Street Fighter is an eSport, and what eSports could do for the scene. Could it potentially hurt it? There’s been all this controversy behind it.”
Even Capcom has shifted stances on how to handle Street Fighter as an eSport.
“In the past, we were actually against partnering up with any sort of corporations or companies out there that were treating eSports more like a business,” Dahlgren said. “And that has to do out of respect for some of our long-term tournament organizers… Our fear was that if we go out and partner up with companies concerned more about making a profit off the scene instead of the values that drive the community, then it could end up stomping out all these tournament organizers who are very passionate and have done so much for our franchise.”
“In the past, we were actually against partnering up with any sort of corporations or companies out there that were treating eSports more like a business.”
So instead of teaming with the MLGs or ESLs of the world, Capcom teamed with Twitch and formed its own Pro Tour in 2014. Local tournament organizers handle the logistics of the shows and retain the rights to their brands, while Capcom provides marketing support and helps with production values.
“I can’t say Capcom wouldn’t partner up with some of the other, more established eSports leagues out there,” Dahlgren said. “I do think there’s a way to make both of them exist, but our priority in the beginning was paying homage to our hardcore fans that helped build the scene, protecting them and allowing them to still have the entrepreneurial spirit to grow their own events. That comes first, before partnering with larger organizations.”
Just as Capcom’s stance toward tournaments has changed to better suit Street Fighter’s growth as an eSport, so too has the business model behind the game. The company has clearly looked at the success of many free-to-play eSports favorites and incorporated elements of them (except the whole “free-to-play” thing) into Street Fighter V. Previously, Capcom would release a core Street Fighter game, followed by annual or bi-annual updates with a handful of new fighters and balancing tweaks. Street Fighter V will have no such “Super” versions, with all new content and tweaks made to the game on a rolling basis.
“We are treating the game now more as a platform and a service, and are going to be continually adding new content post-launch,” Dahlgren said. “This is the first time we’re actually having our own in-game economy and in-game currency. So the more you play the game online, you’re going to generate fight money, and then you can use that fight money to earn DLC content post-launch free of charge, which is a first in our franchise. So essentially we’re looking at an approach that takes the best of both worlds. It’s not too far away from what our players really expect from a SF game, yet we get some of the benefits of continually releasing content post-launch and giving fans more of what they want to increase engagement long-term.”
Even if it’s not quite free-to-play, Street Fighter V may at least be cheaper to play. Dahlgren said that pricey arcade stick peripherals are not as essential for dedicated players as they might have seemed in the past.
“Since Street Fighter comes from an arcade heritage, a lot of people have this general belief that arcade sticks are the premier way of playing,” Dahlgren said. “I think now that the platform choice has moved more towards consoles, pad play has definitely become much more prevalent. I would believe that at launch you’re probably going to have more pad players than you actually have stick players. And in the competitive scene, we’ve seen the rise of a lot of very impressive pad players, which has pretty much shown that Street Fighter is a game that’s not necessarily dictated by the controller you play with; it’s the strategies and tactics you employ. And both of them are essentially on equal playing ground.”
Epic Games said it is investigating issue with Unreal Engine 4 and AMD CPUs.
The problem appears in Squad which is the first big, publicly available game using Epic Games’ Unreal Engine 4. The game was just stuck up on Steam so complaints about the AMD have been somewhat vocal.
The engine appears to create a poor performance on AMD CPUs due to an audio component of the engine. The issue has been reported before but no one took it that seriously. In fact some of theissues here seem to be a communication problem between Squad and Epic.
Squad developer Offworld Industries told Tweaktown that there was little it could do about this besides wait for Epic to fix it and release the fix in an engine patch.
However Epic’s senior marketing manager Dana Cowley said she didn’t even know about the problem until she was contacted by the media.
She said he was getting on the blower with the Squad team to investigate, and see how it could help.
There is a work around being suggested on the blogs which might help. If you navigate to C:UsersAppDataLocalSquadSavedConfigWindowsNoEditor, back up the Engine.ini file then open it with Notepad, find the [Audio] section, change MaxChannels from 128 to 96, 64, or 32, and save.
RedHat has announced the launch of OpenShift Dedicated, a cloud-based service targeting enterprise IT and development teams.
OpenShift Dedicated includes the recently released OpenShift Enterprise 3.1 and builds on the success of OpenShift Online, the service that allows developers to build, launch and host applications in the public cloud. Support includes Kubernetes and Docker containerisation.
The base offering includes single tenant isolation and a resource pool of 100GB of SSD-based persistent storage, 48TB network IOPS and nine nodes in which to deploy container-based applications. Customers can gain secure access to security and access controls using VPN and Amazon Virtual Private Cloud.
Also available is access to Red Hat JBoss Middleware container optimized services, integration and business access capabilities from OpenShift developed and deployed applications.
There’s no need for separate administrative support because Red Hat acts as the service producer, and the firm offers customers exactly what they need when they need it.
Ashesh Badani, vice president of OpenShift at Red Hat, said: ”We are pleased to continue to expand OpenShift’s portfolio of offerings, extending new support to users running OpenShift in the public cloud and enabling the power of an open source application platform to extend into more layers of cloud computing.
“New users signing on to OpenShift Dedicated can experience the same powerful combination of Red Hat-backed support, middleware services and container functionality they have come to expect in OpenShift Enterprise, now optimised for the public cloud.”
OpenShift Dedicated launches today in all regions where AWS supports third-party public clouds. Support for other providers will follow.
The launch follows a host of recent announcements from Red Hat. Last week the company announced CloudForms 4, the latest “manager of managers” package for distributed workloads. This came after the recent deal between Red Hat and Microsoft to partner on bringing Linux to the previously proprietary world of the Azure Cloud.
Electronic Arts is the latest publisher to add a dedicated eSports group to its business, as CEO Andrew Wilson today announced the formation of the EA Competitive Gaming Division.
“As the latest step in our journey to put our players first, this group will enable global eSports competitions in our biggest franchises including FIFA, Madden NFL, Battlefield and more,” Wilson said, adding, “EA’s CGD will seek to build a best-in-class program to centralize our efforts with new events, as well as the infrastructure to bring you the world’s preeminent EA competitive experiences.”
Wilson said the CGD will foster competition and community around EA’s games, creating official tournaments and live broadcasts to entertain millions.
Leading up the new CGD will be Peter Moore, who will step down from his role as chief operating officer of EA at the end of the fiscal year to assume a new role as executive vice president and chief competition officer. Moore is well acquainted with EA’s key competitive gaming franchises like FIFA and Madden; prior to assuming his current role in 2011, Moore spent almost four years as president of EA Sports. An EA representative said the company has not yet announced a successor to Moore in the COO position, with details on those plans to come in the weeks and months ahead.
Moore seems excited to lead a burgeoning field for EA. “As a longtime champion of competitive gaming, bringing this to life at EA is a once-in-a-lifetime opportunity for me,” he said in a tweet. He also told IGN that this is something that EA has been thinking about for some time.
“We’re already very engaged with our development teams around the world to make sure our games have got modes that lend themselves very well to competitive gaming, built-in from the get-go. Not as something that’s put in as an add-on mode or a last-minute afterthought,” he explained.
“Prior to the formation of this division, conversations have been had, not just within the last few weeks but in the last couple years, about how we’ve got games that are coming to market in FY17, FY18, and FY19, and making darn sure that if you’re in a genre that lends itself to competitive gaming, you better have those modes built in.”
Wilson also named Todd Sitrin as the division’s senior vice president and general manager. Sitrin started with the company 14 years ago, leading product marketing at EA Tiburon for projects like Madden NFL and NASCAR Racing. Over the next decade, he worked his way up to senior vice president of marketing for all EA Sports, and has spent the last few years overseeing global marketing and product marketing for EA as a whole.
EA is by no means the only traditional publisher to identify an opportunity in the eSports market. In October, Activision Blizzard established its own eSports division. Unlike EA, Activision Blizzard looked outside its own walls for leadership of the group, tapping former ESPN CEO Steve Bornstein and MLG co-founder Mike Sepso to handle the new division.
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.
Hideo Kojima has left the building. The New Yorker has confirmed that the famous game creator’s last day at Konami has come and gone, with a farewell party attended by colleagues from within and without the country – but not, notably, by Konami’s top brass. Only a couple of months after his latest game, Metal Gear Solid V: The Phantom Pain, clocked up the most commercially successful opening day’s sales of any media product in 2015, Kojima has left a studio facing shutdown – its extraordinary technology effectively abandoned, its talent scattered, seemingly unwanted, by a company whose abusive and aggressive treatment of its staff has now entered the annals of industry legend.
It’s not exaggerating to say that an era came to a close as Kojima walked out the door of the studio that bore his name for the last time. For all of Konami’s the-lady-doth-protest-too-much claims that it’s not abandoning the console market, actions matter far more than PR-moderated words, and shutting down your most famous studio, severing ties with your most successful creator in the process, is an action that shouts from the rooftops. Still, there’s some truth to Konami’s statements; it’s unlikely to abandon the console versions of Winning Eleven / Pro Evolution Soccer, or of Power Pro Baseball, any time soon, though more and more of the firm’s focus will be on the mobile incarnations of those franchises. The big, expensive, risky and crowd-pleasing AAA titles, though? Those are dead in the water. Metal Gear Solid, Silent Hill (whose reincarnation, with acclaimed horror director Guillermo del Toro teaming up with Kojima at the helm, is a casualty of this change of focus), Suikoden, Castlevania, Contra… Any AAA title in those franchises from now on will almost certainly be the result of a licensing deal, not a Konami game.
One can criticise the company endlessly for how this transition has been handled; Konami has shown nigh-on endless disrespect and contempt for its creative staff and, Kojima himself aside, for talented, loyal workers who have stuck by the firm for years if not decades. It richly deserves every brickbat it’s getting for how unprofessionally and unpleasantly it’s dealt with the present situation. It’s much, much harder to criticise the company for the broader strokes of the decisions being made. Mobile games based on F2P models are enormous in Japan, not just with casual players but with the core audience that used to consume console games. The transition to the “mid-core” that mobile companies talk about in western territories is a reality in Japan, and has been for years; impressively deep, complex and involved games boast startling player numbers and vastly higher revenue-per-user figures than most western mobile games could even dream of. Konami, like a lot of other companies, probably expects that western markets will follow the same path, and sees a focus on Japan’s mobile space today as a reasonable long-term strategy that will position it well for tomorrow’s mobile space in the west.
Mobile is the right business to be in if you’re a major publisher in Japan right now. It’s where the audience has gone, it’s where the revenues are coming from, and almost all of the cost of a mobile hit is marketing, not development. Look at this from a business perspective; if you want to develop a game on the scale of Metal Gear Solid V, you have to sink tens of millions of dollars (the oft-cited figure for MGSV is $80 million) into it before it’s even ready to be promoted and sold to consumers. That’s an enormous, terrifying risk profile; while the studio next door is working on mobile games that cost a fraction of that money to get ready for launch, with the bulk of the spend being in marketing and post-launch development, which can be stemmed rapidly if the game is underperforming badly. Sure, mobile games are risky as all hell and nobody really knows what the parameters for success and failure are just yet, but with the time and money taken to make a Metal Gear Solid, you can throw ten, twenty or thirty mobile games at the wall and see which one sticks. The logic is compelling, whether you like the outcome or not.
Here’s what nobody, honestly, wants to hear – that logic isn’t just compelling for Konami. Other Japanese publishers are perhaps being more circumspect about their transitions, but don’t kid yourself; those transitions are happening, and Konami will not be the last of the famous old publishers to excuse itself and slip away from the console market entirely. When Square Enix surveys the tortured, vastly expensive and time-consuming development process of its still-unfinished white elephant Final Fantasy XV, and then looks at the startling success it’s enjoyed with games like Final Fantasy Record Keeper or Heavenstrike Rivals on mobile, what thoughts do you think run through the heads of its executives and managers? Do you think Sega hasn’t noticed that its classic franchises are mostly critically eviscerated when they turn up as AAA console releases, but perform very solidly as mobile titles? Has Namco Bandai, a firm increasingly tightly focused on delivering tie-in videogames for Bandai’s media franchises, not noticed the disparity between costs and earnings on its console games as against its mobile titles? And haven’t all of these, and others besides, looked across from their TGS stands to see the gigantic, expensive, airship-adorned stands of games like mobile RPG GranBlue Fantasy and thought, “we’re in the wrong line of work”?
Kojima isn’t the first significant Japanese developer to walk out of a publisher that no longer wants his kind of game – but he’s the most significant thus far, and he’s certainly not going to be the last. The change that’s sweeping through the Japanese industry now is accelerating as traditional game companies react to the emergence of upstarts grabbing huge slices of market share; DeNA and Gree were only the first wave, followed now by the likes of GungHo, CyGames, Mixi and Colopl. If you’re an executive at a Japanese publisher right now, you probably feel like your company is already behind the curve. You’ve studied plenty of cases in business school in which dominant companies who appeared unassailable ended up disappearing entirely as newcomers took the lion’s share of an emerging market whose importance wasn’t recognised by the old firms until it was too late. You go home every evening (probably around midnight – it’s a Japanese company, after all) and eat your microwave dinner in front of TV shows whose ad breaks are packed with expensive commercials for mobile games from companies that hadn’t even appeared on your radar until a year or two ago, and none from the companies you’d always considered the “key players” in the industry. You’re more than a little bit scared, and you really, really want your company to be up to speed in mobile, like, yesterday – even if that means bulldozing what you’re doing on console in the process.
This is not entirely a bleak picture for fans of console-style games. Japanese mobile games really are pushing more and more towards mid-core and even hardcore experiences which, though the monetisation model may be a little uncomfortable, are very satisfying for most gamers; the evolution of those kinds of games in the coming years will be interesting to watch. Still, it will be a very long time before there’s a mobile Metal Gear Solid or a mobile Silent Hill; some experiences just don’t make sense in the context of mobile gaming, and there is a great deal of justification to the fears of gamers that this kind of game is threatened by the transition we’re seeing right now.
I would offer up two potential silver linings. The first is that not all companies are in a position to break away from console (and PC) development quite as dramatically as Konami has done. Sega, for example, is tied to those markets not least by its significant (and very successful) investments in overseas development studios, many of which have come about under the auspices of the firm’s overseas offices. Square Enix is in a similar position due to its ownership of the old Eidos studios and franchises, along with other western properties. Besides, despite the seemingly permanent state of crisis surrounding Final Fantasy XV, the firm likely recognises that the Final Fantasy franchise requires occasional major, high-profile console releases to keep it relevant, even if much of its profit is found in nostalgic retreads of past glories. Capcom, meanwhile, is deeply wedded to console development – it’s a much smaller company than the others and perhaps more content to stick to what it knows and does well, even if console ends up as a (large) niche market. (Having said that, if a mobile version of Monster Hunter springs to the top of the App Store charts, all bets are probably off.)
“Hideo Kojima left Konami because he wants to make a style of game that doesn’t fit on mobile F2P – and that’s, in the long run, probably a good thing”
The other silver lining is perhaps more substantial and less like cold comfort. Hideo Kojima left Konami because he wants to make a style of game that doesn’t fit on mobile F2P – and that’s, in the long run, probably a good thing. He joins a slow but steady exodus of talent from major Japanese studios over the past five years or more. The kind of games which people like Kojima – deeply involved with and influenced by literature, film and critical theory – want to make don’t fit with publishers terribly well any more, but that doesn’t mean those people have to stop making those games. It just means they have to find a new place to make them and a new way to fund them. Kojima’s non-compete with Konami supposedly ends in a few months and then I suspect we’ll hear more about what he plans; but plenty of former star developers from publishers’ internal studios have ended up creating their own independent studios and funding themselves either through publisher deals or, more recently, through crowdfunding. Konami’s never likely to make another game like Castlevania: Symphony of the Night, but that doesn’t stop Koji Igarashi from putting Bloodstained: Ritual of the Night on Kickstarter. Sega knocked Shenmue on the head, but a combination of Sony and Kickstarter has sent Yu Suzuki back to work on the franchise. Keiji Inafune also combined crowdfunding money with publisher funding for Mighty No. 9. Perhaps the most famous and successful of all breakaways from the traditional publishing world, though, is of a very different kind; Platinum Games, which has worked with many of the world’s top publishers in recent years while retaining its independence, is largely made up of veterans of Capcom’s internal studios.
Whichever of those avenues Kojima ends up following – the project-funding style approach of combining crowdfunding and publisher investment, or the Platinum Games approach of founding a studio and working for multiple publishers – there is no question of him walking away from making the kind of games he loves. Not every developer has his sway, of course, and many will probably end up working on mobile titles regardless of personal preference – but the creation of Japanese-style console and PC games isn’t about to end just because publishers are falling over themselves to transition to mobile. As long as the creators want to make this kind of game, and enough consumers are willing to pay for them (or even to fund their development), there’s a market and its demands will be filled. The words “A Hideo Kojima Game” will never appear on the front of a Konami title again; but they’ll appear somewhere, and that’s what’s truly important in the final analysis.
Sony’s Worldwide Studios boss Shuhei Yoshida was only stating the obvious when he told the audience at EGX that the “climate is not healthy” for a successor to the company’s struggling handheld console, the PlayStation Vita, but sometimes even the obvious makes for an interesting statement, depending upon who’s stating it.
The likelihood of another handheld console from Sony turning up in the foreseeable future is considered to be incredibly low by almost everyone, and it’s notable that there’s never been so much as a whisper about what such a successor might look like or comprise; it’s so vanishingly unlikely to come to pass, why even bother speculating on what might be? Yet for commentators and analysts to dismiss the notion of Sony carrying on in handheld is one thing; for such a senior figure at the company to seemingly join in that dismissal is another. The final step of the long and strange handheld journey which Sony started with the announcement of the PSP’s development all the way back in 2003 won’t come until the Vita reaches its official end-of-life, but Yoshida’s statement is the moment when we learned for certain that the company itself reckons the handheld market is past saving.
It’s not that there’s any lack of affection for the Vita within Sony, including Yoshida himself, whose Twitter feed confirms that he is an avid player of the system. Even as weak sales have essentially rendered AAA development for the Vita financially unsustainable, the firm has done a great job of turning it into one of the platforms of choice for break-out indie hits, and much of the success of the PS4 as a platform for indie games can be traced back to the sterling work Sony’s team did on building relationships and services for indies on the Vita. For that alone, it’s a shame that the console will apparently be the last of its line; there are some games that simply work better on handhelds than on home consoles, and some developers who are more comfortable working within the limitations of handheld systems.
Yoshida is right, though; mobile phones are the handheld killer. They may not be as good at controlling the kind of games that the PSP and Vita excelled at, but mobile devices are more powerful, more frequently updated, carried everywhere and heavily subsidised by networks for most users. Buttons and sticks make for wonderful game controllers, as Yoshida noted, but when the competition has a great multi-touch screen and accelerometer, a processor faster than most laptops only a few years ago, and is replaced every couple of years with a better model, the best set of buttons and sticks on earth just can’t compete for most consumers. Even if Sony could release a Vita 2 tomorrow which leapfrogged the iPhone 6S, within a year Apple, Samsung and others would be back out in front.
That’s not to say that this battle can’t be won. Nintendo has still managed to shift a dramatic number of 3DS consoles despite the advent of the smartphone era – though in typically Nintendo style, it chose not to play the competition at their own game, favouring a continuation of the DS’ odd form-factor, a 3D screen and a low-cost, low-power chipset over an arms race with smartphones (and, indeed, with the Vita). Crucially, Nintendo also pumped out high quality software on the 3DS at a breathtaking pace, at one point coming close to having a must-buy title on the system every month. Nintendo’s advantage, as ever, is its software – and at least in part, its longevity in the handheld market is down to the family-friendly nature of that software, which has made the 3DS popular with kids, who usually (at least in Japan, the 3DS’ best performing market) do not carry smartphones and generally can’t engage with F2P-style transactions even if they do. Vita, by comparison, aimed itself at a more adult market which has now become saturated with phones and tablets.
So; is that the end of Sony’s handheld adventure? Trounced by Nintendo twice over, first with the DS’ incredibly surprising (if utterly obvious in hindsight) dominance over the PSP, then with the 3DS’ success over the Vita, Sony nonetheless carved out an impressive little market for the PSP, at least. Vita has failed to replicate that success, despite being an excellent piece of hardware, and 12 years after news of the PSP first reached gamers’ eager ears, it looks like that failure and the shifting sands of the market mean Sony’s ready to bail out of handhelds. With the stunning success of PS4 and the upcoming PlayStation VR launch keeping the company busy, there’s seemingly neither time, nor inclination, nor resources to try to drive a comeback for the Vita – and any such effort would be swimming against the tide anyway.
I would not go so far as to say that Sony is dropping out of handheld and portable gaming entirely, though. I think it’s interesting, in the context of Yoshida’s comments, to note what the company did at TGS last month – where a large stand directly facing the main PlayStation booth was entirely devoted to the Sony Xperia range of phones and tablets, and more specifically to demonstrating their prowess when it comes to interacting with a PS4. The devices can be hooked up to a PS4 controller and used for remote play on the console; it’s an excellent play experience, actually significantly better in some games than using the Vita (whose controls do not perfectly map to the controller). I use my Vita to do simple tasks in Final Fantasy XIV on my PS4 while the TV is in use, but it wouldn’t be up to the task of more complex battles or dungeons; I’d happily do those on an Xperia device with a proper controller, though.
Remember when the Vita launched and much of the buzz Sony tried to create was about how it was going to interact with the PS4? That functionality, a key selling point of the Vita, is now on Xperia, and it’s even better than it was on the devoted handheld. Sony’s phones also play Android games well and will undoubtedly be well-optimized for PlayStation Now, which means that full-strength console games will be playable on them. In short, though the Vita may be the last dedicated handheld to carry the Sony brand, the company has come a long way towards putting the core functions of Vita into its other devices. It’s not abandoning handheld gaming; it’s just trying to evolve its approach to match what handheld gaming has become.
It’s not a perfect solution. Not everyone has or wants an Xperia device – Japan is the best performing market for Sony phones and even here, Apple is absolutely dominant, with iPhones holding more than half of the market share for smartphones. If Sony is being clever, though, it will recognize that the success of the PS4 is a great basis from which to build smartphone success; if the Xperia devices can massively improve the user experience of the PS4, many owners of those devices may well consider a switch, if not to a new phone then at least to one of the Xperia tablets. It might also be worth the company’s time to think a little about the controllers people will hook up to the Xperia to play games; I love the PS4 controller, but it’s bulky to carry in a bag, let alone a pocket. If the firm is serious about its phones and tablets filling the handheld gap, a more svelte controller designed specifically for Xperia (but still recognizably and functionally a PS4 pad) would be an interesting and worthwhile addition to the line-up.
Nonetheless, what’s happening with Xperia – in terms of remote play, PS Now, and so on – is an interesting look at how consoles and smartphones might co-exist in the near future. The broad assumption that smart devices will kill off consoles doesn’t show any sign of coming true; PS4 and Xbox One are doing far, far better than PS3 and Xbox 360 did, and while the AAA market is struggling a little with its margins, the rapid rise of very high quality indie titles to fill the gap left by the decline of mid-range games in the previous generation means the software market is healthier than it’s been for years. If consoles aren’t going away, then we need to be thinking about how they’ll interact with smart devices – and if that’s what Sony’s doing with Xperia and PlayStation, it’s a strategy that could pay off handsomely down the line.