Along with publishing some rather good games, Ubisoft has quietly been developing another important role over the past few years. Thanks to the outspoken nature of CEO Yves Guillemot and the company’s careful balancing of enthusiasm for new technologies and platforms with a decent degree of financial and management conservatism, Ubisoft has become a bellwether for the publishing industry. Perhaps a difference between French and American business culture plays a role, perhaps not; either way, where other firms equivocate and fall back on meaningless corporate double-speak, Ubisoft and its executives have developed a reputation for speaking openly and giving us an insight into what the publishing industry at large is actually thinking.
When Guillemot pronounces, then, that his company is no longer going to launch “mature” titles on Wii U – Watch_Dogs will be their last such effort, following the disappointing performance of Assassin’s Creed on the platform – you can safely bet that it’s not acting in isolation. What Ubisoft says in the open is almost certainly precisely the strategy being pursued by other publishers as well; they’re just more likely to try and veil it with empty platitudes about what a great partner Nintendo is and how important it is to the industry, effusive corporate praise which, once picked apart, actually carries no commitment of substance to the Wii U platform.
Nor should any such commitment be forthcoming. If mature cross-platform titles aren’t selling on the Wii U, which they are not, then publishers should feel no obligation to continue to develop them for that platform. If this were a two-horse race between rival platform holders, some publishers might be tempted to continue support for the lagging console just in order to keep the front-runner on its toes, but with three strong companies competing, that branch of thought no longer produces fruit. Wii U is on its own, in this regard. Just as Ubisoft will continue to publish Just Dance titles and their ilk on the platform, where they do very well, other publishers will also find casual or kids’ games in their line-ups which suit the Wii U – but support for “mature” or “core” games will disappear in short order. I wouldn’t expect to see many multi-platform core titles on Wii U from 2015 onwards.
This will cause wailing and gnashing of teeth, because wailing and gnashing of teeth is essentially what the games media and the fanboy frenzy is set up to provide. The death knell! The final nail in the coffin! Vultures circle overhead! Once the core-game supply for Wii U completely dries up and other publishers admit to pursuing exactly the same policy as Ubisoft, headline writers will fall over themselves to drag out death-related imagery that would make a teenage goth poet blush. We know this, because it has happened before. Every Nintendo console since the SNES, in fact, has seen its third-party support fall off a cliff at some point in its life cycle. On each occasion, Nintendo’s failure to woo third-parties has been presented as a sign of inevitable doom.
Let’s lay it out, then; Nintendo’s home console platforms are terrible for third parties. They’ve been that way for twenty years and they’re not going to stop being that way any time soon. Honestly, it wouldn’t matter a tuppenny damn if Nintendo unveiled a PS4-beating HD console tomorrow; the business model, the branding and the market for Nintendo consoles is simply poison to the cross-platform “mature” mega-hit franchises like Call of Duty, GTA or Assassin’s Creed.
“Core gamers buy a Nintendo console as a second device because they want access to Nintendo exclusive titles, primarily first-party games”
Purchasers of Nintendo home consoles fall broadly into two categories. You’ve got core gamers who buy a Nintendo console alongside another gaming device – either a Sony or Microsoft console, or a PC; and you’ve got “casual” gamers, including the family and child segments, who buy a Nintendo device because they trust the brand. Neither of those groups is actually all that keen to buy the latest Call of Duty on a Nintendo platform. Core gamers buy a Nintendo console as a second device because they want access to Nintendo exclusive titles, primarily first-party games, but migrate back to their “primary” console to play mature cross-platform titles. Casual gamers don’t want to play mature cross-platform titles anyway. In both cases, they bought a Nintendo device to play Nintendo exclusives.
That’s exactly how Nintendo likes it. Nintendo consoles maintain pretty strong tie ratios – even the Wii, supposedly the dust-gatherer of the last generation, had a healthy software tie ratio – and the lion’s share of the games sold are Nintendo first-party games. It’s not that Nintendo “accidentally” builds consoles like the Wii and Wii U which are underpowered and “weird” compared with the other consoles of their era, then wrings its hands and wonders why third-parties aren’t launching loads of cross-platform games. Nintendo does this deliberately, building consoles that are custom-made to play Nintendo first-party games and which don’t risk being overrun by Call of Duty and its ilk and thus damaging or polluting the brand image which the company has carefully constructed over the past few decades. For Nintendo, the fact that Assassin’s Creed doesn’t sell too well on Wii U is a feature, not a bug, because it means that the company’s own first-party titles remain solidly in the spotlight and the brand image of the console remains Nintendo’s to control.
Of course, that approach begins to look a little less wise when the console in question fails to sell very well, leaving Nintendo’s first-party titles with only a limited audience to address – which is exactly what’s happened with the Wii U. Yet the solution isn’t to throw in the towel and simply copy what Sony does – an enterprise in which Nintendo would almost certainly be doomed to fail. Nintendo needs to find a solution to its current woes which actually suits Nintendo; something which leverages all the things the company is good at and rescues its market position without simply becoming a clone of its rivals or, worse, just another software publisher jostling for attention on the App Store.
The solution, perhaps unsurprisingly for a company with such a long history, may lie in the past. Nintendo doesn’t need or want a swathe of third-party multi-platform manshooters on the Wii U, and that’s absolutely fine. It does, however, need more breadth if not more depth in the Wii U’s software catalogue. The first-party games on the system are excellent, but it needs more of them, addressing more niches; maintaining Nintendo’s excellent quality standards while also exploring more genres, more aesthetics and more audiences.
Once upon a time, Nintendo used to do almost exactly that. It operated “second-party” studios within and outside Japan, most famously Britain’s Rare, which were independent but nestled under the wing of the platform holder, given access to Nintendo’s expertise, assets and finance in return for accepting creative guidance from Kyoto and publishing exclusively on Nintendo platforms. It also built relationships with publishers, mostly in Japan, which guaranteed exclusive titles to Nintendo systems on similar terms.
Some legacies of the second-party system remain. Bayonetta 2, which no other publisher or platform holder would fund, is a compelling Nintendo exclusive now; Hyrule Warriors, released in Japan last week, is a cross-publisher collaboration of a sort which the company should pursue more regularly. Yet these are mere echoes of a system which once guaranteed a strong flow of exclusive, high-quality titles to Nintendo platforms – titles which were different from the offerings on rival platforms, but compelling enough to ensure that gamers felt that they really, really needed a Nintendo console under the TV as well.
A resurrection and reinvigoration of second-party would make enormous sense for Nintendo today. It would look quite different to the system of the past in some regards; indie developers would have to form a big part of it, for example, although one could argue that Sony has already stolen a march on Nintendo in this regard with its policy of working closely with selected indie developers on PS4 and Vita. The scope would have to be as big as it once was if not bigger, though; studios around the globe, not just in Japan, with oversight from Kyoto but also enjoying the trust required both to build excellent new IP and to experiment with old properties. Rebuilding this system would require opening the Nintendo warchest, of course; and it would take time and patience, although both of those are qualities Nintendo has never lacked for. It would, however, do more that just giving Wii U a shot in the arm; it would set Nintendo up with a supply of IP and games that would sustain its platforms for generations to come.
Sources are suggesting that Activision is planning to launch an entertainment division that would be responsible for creating movies and TV shows based on Activision intellectual properties. The move might leave many scratching their heads if true since so many others have failed at trying to turn video game IP into gold.
Word is that CEO Bobby Kotick is taking to folks in an effort to secure the right talent to make this happen. Kotick has to be aware that this has not gone well for its competitors, but he apparently thinks that Activision IP is different and they will have no problem giving the people want they want.
Our take on this is that we will wait and see what happens, but it will not be easy to be successful, regardless of the IP that you have in your stable. The bigger question might be is it really worth the money and effort to try and make it work?
Activision Blizzard reported its financial results for the quarter ended June 30 today, revealing an unprecedented reliance on digital revenues.
The publisher reported revenues of $970 million in sales on a GAAP basis, 49 percent of which came from digital channels. On a non-GAAP basis (excluding the impact of changes in deferred revenues), the digital percentage was actually 73 percent of the company’s $658 million in sales. Activision attributed the digital strength to Blizzard’s lineup of titles (World of Warcraft, Hearthstone, and Diablo III), combined with digital sales for Call of Duty.
However, not all of those digital sales drivers posted strong numbers for the quarter. World of Warcraft in particular lost about 800,000 subscribers over the period, and as of the end of June was down to a paying player base of 6.8 million gamers. However, Activision Blizzard characterized this decline as a “seasonal” dip in advance of the next expansion, Warlords of Draenor, which is set to launch later this year. The publisher likened the downturn to the subscriber losses that happened in 2012 ahead of the Mists of Panderia launch.
On a GAAP basis, Activision Blizzard revenues were down nearly 8 percent, with net income down 37 percent to $204 million. However, the publisher still beat its previous guidance. On a non-GAAP basis, revenues were up about 10 percent to $658 million, while non-GAAP net income was reported at $45 million, down 50 percent year-over-year.
The quarter’s performance gave Activision Blizzard enough confidence to update its previous guidance for the full year. For calendar year 2014, the publisher had previously forecast total GAAP revenues of $4.22 billion, but moved that up to $4.24 billion today. The company also projected earnings per share of $0.91, up from $0.89.
Whether you think it’s a fad or the next big thing, there’s no denying that the return of virtual reality, this time backed up by competent technology and plausible price-points, has caught the imagination of developers and their customers alike. Projects for Sony’s Morpheus and the Oculus Rift are popping up everywhere, from the modest to the monumental.
As of yet, though, none of the major publishers have publicly committed much to the new platforms, leaving it to smaller studios to test the waters of what could potentially form an entirely new frontier for games. Many of those smaller studios are changing their models and work-methods entirely to focus on the new technology, preparing to hit the ground running once consumers are finally able to get their hands on the headsets.
One of those studios is Patrick O’Luanaigh’s nDreams. A studio which has always enjoyed a broad remit, nDreams now has “around five [VR] projects on the go”, including forthcoming title The Assembly: a 3D VR adventure game which will see players investigating a ground-breaking scientific organisation which has started to push some ethical boundaries.
“We decided that an adventure game would make sense because we don’t have the budget to draw tons of environments that you run through at top speed,” Patrick tells me. “Adventure games work well because we’ve found that, when people play with VR, they want to really look around and explore. They want to examine the walls, everything, in a way you might not in a FPS.
“The game is split into sections of about 10-15 minutes long, which we thought makes sense for VR. We still don’t know what the final consumer versions will be like, but 10-15 minutes seems sensible. People can either do a chapter then take a break, or they can play through the entire game.
“We spent around six months prototyping lots of experiments with VR. What happens when your avatar wears glasses? What would it be like if it’s cold and you have frosty breath? What about different sized characters? That tested really nicely – Madeline is 5’1″ and Joel is 6 foot and you really notice that. You notice the breathing, the speed they walk at, the perspective. It’s all very different. You feel like you’re playing those roles.
“We’ve also got lots of specific things for VR, microscopes, binoculars, night vision goggles, things like that. They work really well. We’ve also got plenty of puzzles and other bits like vertigo and fear sections that we think are great for VR, so it’s a real medley.”
The Assembly is a definite step up for the developer in terms of scope and ambition, so I ask O’Luanaigh if the resource costs were pushed up even further by the technology they’re working with. In short, is making a VR game more expensive?
“I don’t know, honestly,” he admits. “It’s probably slightly more for VR, but there’s not a lot of difference. We’ve kind of picked our battle here and chosen a game we think would be great for VR, but one that we can also afford to make. This seemed like the right genre and approach. We’re taking influence from games like Gone Home and Dear Esther – with more puzzles, but still about exploring a great environment. I guess if we’d just done it as a Steam game it might have been a bit cheaper, but not a big difference.
The Shahid Effect: Sony’s indie push & VR
Being PC-based, the Oculus Rift has a clear advantage in attracting indie developers: working on an open platform with little or no restriction. That said, Sony has made a very strong argument to small studios this generation, something it will need to continue if it wants to recruit the most exciting VR ideas. O’Luanaigh agrees, and says that there’s no need for concern on that front.
“Sony has been fantastic,” he says, enthusiastically. “We’re very lucky in that we’ve been working on Home for a number of years, so we have a good relationship with Sony. Our account manager happens to be the evangelist for Morpheus as well, so they’ve been great. They’ve been very supportive.
“We saw the Morpheus very early, it was one of the things that persuaded us to pivot away from what we were doing and spend so much time and money on VR. They’ve been really open, really helpful. I’ve got nothing but positive things to say about Sony. I can’t wait to see the final hardware that’s going to launch to consumers.”
“It’s more about the design, doing things the right way. There are a lot of ways you can mess up VR really easily. We’ve figured out what works and what doesn’t and designed the game with that in mind. It’s working really nicely.”
The Assembly is due for release on both the Oculus Rift and Sony’s Morpheus headset, currently the two mindshare leaders of virtual reality tech. Whilst neither is likely to admit it, each has a vested interest in the success of the other – a reason which was floated to explain Valve passing on some of its own VR research to Oculus last year: if the tech is to succeed it needs to attract developers. To do that, a rough ‘gold standard’ needs to be established, giving developers a technological target to aim at for cross-platform games. Having used both the Oculus and Morpheus and found them to be roughly equivalent, I’m interested to know if O’Luanaigh sees parity in the two visors.
“They are very, very similar, technology-wise,” he confirms. “Obviously with Oculus being on PC it’s a lot more open, there’s more freedom to mess around, but it’s also easier for people to just stick stuff out, to make bad VR. That’s one of the big risks – it’s very easy make people feel ill. You have to have good software as well as hardware. I think it’s easier for Sony to control that, because it’s a closed platform. They can say, do this, do that; to make sure people don’t do stupid stuff. I suspect that Oculus will do something similar, but obviously it’s open, so people can put what they want up online.
“In terms of specs, though, they’re really very similar. We’re creating this game for both and there’s not a big difference. There are a few little things involved in supporting the PS4: the Dualshock and some of the ways that PSN works, but by and large they’re very similar.”
Moving away from comfortable ground is an essential part of growing almost any company, but when you’re relying on a third party, such as a platform holder, for your success, there’s an additional risk. nDreams must be confident about the future of virtual reality to put such stake in it, so I ask Patrick if there’s a sales point when they’ll breathe a little more easily.
“We’ve kind of come at it the other way,” he counters. “We believe it will work. We’ve got financial models and projections but it’s all a bit finger-in-the-air, it’s very hard to know. We’re committed to doing it though, we’ve got a lot of launch titles and we’re going to be pushing and growing those. We’re lucky in that we’re financially secure enough to do that without too much stress.
“We’ve been looking at things like previous install bases of hardware on consoles. If you look at the Kinect install base, which was amazing, really – something like 35-40 per cent on the 360 – we’ve made projections on a conservative install base over time. I actually think that it’s going to be better than that, given the excitement around VR and the customer reaction when they see it, but we’re being fairly conservative. With Oculus they’ve spoken about trying to sell a million, by a set point. We’ve been working along those lines. Again, we think it’s going to do really well.
“There’s going to be other headsets out there as well, that haven’t been announced, we think those are going to be very exciting. There’s not going to just be two headsets, there’ll be a number of things over the next few years. We’re going to try and work out as best we can what we think they can sell, but we want to be there at launch with products so we can build and learn what people like and don’t like.
“It’s definitely going to be more of a core audience at launch, but I think Facebook’s acquisition of Oculus means that it’s going to be a bit cheaper than it would have been. I think they can afford to give it away at cost, which is brilliant. But it’s really hard to put a finger on how much that market is going to be worth. We think it’s going to be a couple of billion within two years, but we’ll see. We may be massively over-egging, or hugely under-estimating it. What’s clear is that there’s massive potential here, it could really explode. When you get a great VR experience it’s really special.
“I was at E3 playing Alien Isolation on Oculus and, although I’m slightly embarrassed to admit it, when it came to the end I ripped my headset off because I was so scared. You really feel like the Alien is there and actually attacking you. I’ve never done that with Dead Space or Resident Evil or anything. It really heightens your emotions.”
I can attest to just how absorbing that experience can be, having lost myself in the Morpheus demo at GDC in March. Even surrounded by other gawking journalists and nervous PR, dropping that helmet on was, in many sense, completely akin to teleportation. That demonstration wasn’t exactly a road-test, though. These were first-party, highly polished demonstrations designed to show off the potential for the new technology in a short, well-controlled session. Had my first experience been a shoddy, half-finished or poorly-executed demo instead, I might never have been interested at all. For O’Luanaigh, the responsibility for audience growth is firmly on the shoulders of developers.
“For me, it’s really important,” he tells me when I ask whether VR needs to get it right this time around. “I’m utterly convinced that VR is now a technology that’s caught up to an amazing idea and can make it work. The only thing that can ruin that is dreadful games. It’s easy to make a rubbish VR game with a bad framerate that takes control of the camera and does stupid things. That’s the worst thing that could happen, and I think that both Oculus and Sony get that. I think everyone entering the VR space gets it, but we just need to keep an eye on it.
“At least one or two of the projects we’re working on are non-traditional games, it’s definitely quite different. You’ll see VR spread into different areas over the next few years”
“I hope that the press plays its part as well and makes sure that, if there’s one rogue VR game that’s snuck out and it’s dreadful, that they won’t use that to argue that VR is awful.”
Good games might be the things that get people queuing in the shops, or, more likely, clicking online, but there are clear possibilities for virtual reality which fall well outside our sphere, particularly for Oculus’ Rift. Will nDreams being dipping a toe in those waters?
“At least one or two of the projects we’re working on are non-traditional games, it’s definitely quite different. You’ll see VR spread into different areas over the next few years, although it’ll definitely start with games. Oculus aren’t showing off Facebook social pop-up sims, they’re showing off great games.
“I don’t think Facebook has changed that but I think you’ll notice them start to add stuff in over the next few years. You might see spaces where people can hang out with their friends, stuff like that. If you’ve ever read Snowcrash, I think that sort of thing is why Facebook bought Oculus. They’ve got more money now, but it’s the same people with the same values. It’s very cool to be rude about Facebook, but I think a lot of the people who were being rude about Facebook when it bought Oculus were doing it on Facebook, which is pretty ironic.”
A new survey commissioned by IHS in partnership with Gamer Network has shown that E3 gave a huge boost to the number of people interested in buying a Wii U, with purchasing intent growing by 50 per cent over the course of the event.
Around one thousand core gamers were surveyed on various purchase intentions before and after the LA show, revealing that, whilst Nintendo’s platform started out with the lowest number of people looking at buying it, it saw the biggest benefit from the show’s exposure. 20 per cent of respondents now intend to buy the machine, equal to those who are looking at an Xbox One, which saw a seven per cent increase in popularity.
Sony’s PS4, a clear leader going in to E3, lost ground to its competitors, sinking below 30 per cent of respondents.
In terms of anticipated games, consumers are champing at the bit for 2015′s third-party releases, with Warner’s Arkham Knight leading the charge with an incredible 60 per cent of those surveyed intending to buy the game for at least one platform. Gamers are slightly less excited for 2014′s titles, but Activision’s Destiny is the narrow leader for this year, edging out AC: Unity and GTA V with just under 50 per cent. Both Battlefield Hardline and CoD: Advanced Warfare are lagging behind slightly.
As might be expected, purchasing intent is higher amongst first-party exclusives for current platform owners. On PS4, Uncharted 4 was the most popular game both before and after E3 with 76 per cent of PS4 owners expected to buy it. On Xbox One, it’s Halo which pays the piper, garnering support from 77 per cent of One owners. Over on the Wii U and amazing 89 per cent of owners expect to buy the new Zelda game when it’s released. None of these platform-exclusive heavy hitters will land until 2015 at the earliest, which IHS predicts will increase pre-Christmas reliance on multi-platform games for Microsoft, Sony and, to a lesser extent, Nintendo.
“Although there are other exclusive titles coming in 2014 or already available,” the report reads, “none hold the influence that these leading titles have in terms of selling console hardware, with the exception of Mario Kart 8 for Wii U. As a result, the success of console sales this holiday shopping season will depend more heavily on the total value and content proposition including exclusive content offered by multi-platform games rather than a single, very influential system-selling exclusive. This factor will impact the marketing strategies of the platform holders as we move into 2014′s main shopping season.”
The new generation of consoles and booming category of free-to-play PC games won’t be enough to keep the market growing indefinitely. According to a Juniper Research report, the market will soon turn south, falling from $46.5 billion worldwide this year to $41 billion in 2019.
Despite that 12 percent drop, the PC and console segment will still account for more than half of all gaming revenues through 2019. Additionally, Juniper said software sales on PC and console “will remain relatively healthy,” with PC revenues topping those of its console counterparts.
The PC & Console Games: Trends, Opportunities, and Vendor Strategies 2014-2019 report also predicts the console cycle to continue as in generations past. That means the new systems will spark sales in the short-term, with growth slowing and then turning negative as the new platforms age. Juniper also expects another generation of consoles likely arriving around 2019, with the new platforms having a similar lifespan to the their predecessors.
Dedicated gaming handhelds will continue to play a part in the industry, with Juniper penciling them in for about $2.2 billion in revenues in 2019. (Handhelds were not included in the console/PC figures above.) And while cloud gaming is going to receive a boost this year with the launch of PlayStation Now, it won’t upend the status quo just yet. Juniper expects the cloud gaming market to rise from $281 million this year to $1 billion by 2019.
Quantum Break is said to feature television segments that will be part of the main game with players unlocking new segments at the end of some gameplay segments. The live action television segments can we watched right away or they can be viewed later on mobile devices such as a smart phone or tablet.
The run here is that originally we assumed that these live action segments to be integrated with the game were being produced by Remedy, but word is now that this may not actually be the case and that the Microsoft Xbox Entertainment Studios division might actually be responsible for delivering this content.
So far, no one at Microsoft or Remedy will confirm what if any the impact of closing Xbox Entertainment Studios may have on the Quantum Break project if any. Sources we have spoken with seem to think that the recording of all of this live action segments is already done and finished. So there is nothing to worry about, but other think that it will be difficult to scrap Quantum Break this far into the development, but a redesign that does not use the television segments might be likely.
To hear the likes of Electronic Arts and Gameloft tell it, premium apps are all but a relic of the past, the obsolete progenitor to mobile’s free-to-play future. But some smaller developers have found that future isn’t all it’s made out to be, and have been finding more success back on the premium side of the fence.
Kitfox Games and Double Stallion, two Montreal studios from Jason Della Rocca’s Execution Labs incubator, launched Shattered Planet and Big Action Mega Fight, respectively, on mobile in the last year. However, both titles struggled to rake in revenue, and the studios have since released more successful premium versions of the two. Kitfox’s Tanya X. Short and Double Stallion’s Nicolas Barrière-Kucharski spoke with GamesIndustry International this week to discuss their forays into free-to-play, and why more traditional business models worked better for them.
In Double Stallion’s case, part of the problem was that Big Action Mega Fight proved an awkward fit for the free-to-play format.
“We picked a genre, fighting, that was very content-driven,” Barrière-Kucharski said. “It was really very arduous to keep up and engage the audience with new levels, new enemies, and new types of content. We couldn’t compete at our size and budget with other, more established free-to-play studios and games.”
Beyond that, the genre may have been a poor fit for the audience. Barrière-Kucharski said that the people who would appreciate Big Action Mega Fight’s skill-based gameplay and faithful take on the beat-’em-up genre simply weren’t the same people interested in free-to-play games.
“I think the overlap between audiences was just too small to sustain a thriving community around the game,” Barrière-Kucharski said.
With Shattered Planet, Short said genre wasn’t a problem. She thinks the games-as-a-service model is actually a perfect fit for roguelikes like Shattered Planet, where a few new items and systems can exponentially increase the potential content for players to experience. However, Shattered Planet still didn’t fit the free-to-play mold for a few reasons.
“Free-to-play is not always suitable to single-player games,” Short said. “I think it’s best suited to multiplayer games in which it being free is actually of value to players because they can have more people to play with. That’s one philosophy we’ve developed, that if we ever do free-to-play again, we would only do it for multiplayer.”
On top of that, Shattered Planet was designed to be a tough game for players. But Short said in the free-to-play business model, difficulty can be “a dangerous thing.”
“We made a difficult game, and the fact that it was free made people suspicious, and rightfully so,” Short said. “I think they had every right to be a little bit paranoid about why the game was difficult. And in a business model where difficulty generally does often make people spend more, I think a designer’s hands are tied as to how and when a game can be difficult and when it’s ethical. So we felt a lot more comfortable about making a premium game, and me as the designer, I was happier because we could say sincerely that it’s exactly as difficult as we wanted it to be and you can’t say it was greedy or whatever.
Both games have found more success since they were released as premium versions. Big Action Mega Fight was re-launched last month as a $3 app ($2 during a first-week sale); those who downloaded the free-to-play version received the upgrade to the premium version as a free title update. Even though the free version of the game was downloaded about 400,000 times, Barrière-Kucharski said the revenues from Big Action Mega Fight’s first week as a paid app topped the total lifetime income from the free-to-play version since its November debut. To date the company has sold about 3,600 copies of Big Action Mega Fight on iOS, Android, Amazon Fire, and Ouya.
Kitfox took a different approach to premium the switch, continuing to run the free-to-play Shattered Planet mobile app alone, but also releasing a premium PC version on Steam with a $15 price tag and no monetization beyond that. The results were similarly positive, as Short said the studio made as much on Steam in one day as it had on mobile in two months. In its first week, Shattered Planet sold 2,500 copies on Steam. Short is happy to see the game bringing in more money, but she confessed to being a little bit torn on the trade-off it required.
“It really was great seeing that we had 300,000 downloads on mobile,” Short said. “We had 300,000 people play Shattered Planet on iOS and Android, and that’s amazing. Sure, it looks like we’re going to make two to five to 10 times more money on Steam, but it’s only going to be 1 percent of the amount of people that could see it if we tried to release it free, in theory… It’s a little bit sad that you monetize better with fewer people. When you’re trying to get your brand and your name out there, it is sad we couldn’t have another few hundred thousand people.”
Beyond the trade-off of settling for a smaller but more supportive audience, Kitfox has encountered some negative effects of releasing Shattered Planet as a free-to-play mobile title and then as a PC premium game.
“For us, a lot of people remained skeptical of the quality of the game if they knew the mobile version existed,” Short said. “I don’t think that really has that much to do with free-to-play and more to do with platform snobbery. It’s just kind of a general feeling of console and PC gamers that if a game was ever on mobile, it couldn’t possibly be as feature-rich or as deep, as strategic or anything like that.”
On top of that, there was some customer confusion over the game and its business model. Short said the game’s forums on Steam had some angry users saying they wouldn’t buy the game because it had in-app purchases (which it didn’t). Although the developers were able to post in the threads and clear things up, that sort of inconsistency has convinced them that if they ever do return to mobile platforms, they will stick to a free demo or companion app rather than something monetized.
“It’s just so dominated by giant players,” Short said of the mobile scene. “It’s such a completely different market that I think you really have to focus on it, and that’s not my team’s expertise. For us, we’re definitely going to be focus on PC and console; I think that’s where our talents are.”
Barrière-Kucharski agreed, saying that even if a niche audience is willing to pay for a certain experience, there just aren’t good ways for developers to connect to that audience.
“It’s really hard to be found or be discovered by players,” Barrière-Kucharski said. “I’m really looking forward to all the curation issues that are going to be tackled in the next year or so on iOS 8 and the Steam Greenlight update.”
But even if those initiatives follow through on their promises of improving discoverability, Barrière-Kucharski worries that the problem could still get worse as the gains made won’t be enough to offset the flood of new developers entering the field. Short also saw discoverability as a key problem facing developers right now, but stressed that finding a solution is in the best interests of the platform holders.
“Whatever platform figures out discoverability first will have a huge advantage because there are these thousands of developers that as soon as they hear there is any discoverability, that’s where they’re going to flood for sure,” Short said. “So it is almost a race at the moment between Steam and Apple and Google.”
There’s a popular narrative about Japan’s game development industry: it’s an industry in trouble, lagging behind the West and running out of ideas. If any Japanese developer wants to get themselves splashed into the headlines, all they need do is trot out a soundbite disparaging their own industry; in a world of click bait headlines, the fall of Japanese development is a sure-fire winner. The apparent decline of Japan’s game developers is linked to a secondary narrative as well, namely the decline of Japan’s internal market for videogames. Once the undisputed gaming capital of the world, Japan seems to be falling out of love with the pastime – at least on consoles, and at least according to some rather unusual readings of the data.
There’s a nugget of truth to both of these stories; just enough to make them worth considering, yet certainly not enough to prevent the majority of reporting and discussion on them from being a torrent of absolute nonsense. Japanese game development is somewhat troubled, but it’s troubled by exactly the same factors that are giving sleepless nights to Western game developers – skyrocketing AAA budgets, new business models, a diversification of platforms and the globalisation of the audience. Japanese development studios remain perfectly capable of making superb games that delight their fans; their problem, just as everywhere else, is figuring out how to make money from those games in a new world where profitability escapes everything but the million-selling megahit.
That links back to the second narrative; Japan is falling out of love with games. On the surface, it’s hard to see this alleged decline. The country’s arcades may not be what they once were, but they’re still far more numerous and spacious, not to mention well-attended, than any such establishments in the west. Dedicated videogame stores remain a fixture of shopping districts, while every large electronics store (and there are plenty of those, dominating most city centre areas) has a large videogames section – a stark contrast with, for example, central London, where actually going out and buying a videogame in a shop is an increasingly difficult task. Food courts and fast-food joints still play host to groups of children and teenagers engaged in the likes of Pokemon and Monster Hunter, and a trip outside in an urban area with a 3DS in your pocket will bag a full complement of Street Pass hits in no time flat.
Where’s the decline, then? Well, as figures released earlier this week by Japanese magazine publisher and industry data agency Enterbrain confirm, it’s not actually a decline so much as a stagnation. Enterbrain’s report, widely reported online after being translated in part by Kantan Games’ boss Serkan Toto on the company’s blog, showed that combined hardware and software sales in the first half of 2014 were almost exactly the same as the first half of 2013 – showing growth of just 0.1%. Toto’s entirely reasonable point was that this is much, much lower growth than Japan’s booming smartphone game market, yet this seems to have been picked up by many outlets as further confirmation of a Japanese gaming decline and specifically of a failure to ignite interest in the PS4.
Let’s be clear – the Japanese smartphone game market is in extraordinarily rude health. Revenues from mobile games, by some measures, surpassed packaged game revenue about three years ago and haven’t looked back since. For every person you see playing a 3DS or a Vita (the latter, I note, becoming vastly more commonplace on trains in recent months), you see dozens engrossed in mobile games. Puzzle & Dragons remains the clear favourite, but a trip on a busy Tokyo commuter line will turn up any number of different games gracing the ubiquitous smartphones. The industry’s revenues are clear to see, too; the vast majority of expensive marketing campaigns for games here are for mobile games, not console titles. Only last week I walked onto a train carriage on the phenomenally busy Yamanote loop line in central Tokyo to find that every advertising space in the carriage was full of Clash of Clans marketing; the huge billboard near my apartment, meanwhile, alternates fortnightly between ads for hopeful Puzzle & Dragons clones and ads for new singles by terrible boybands. There’s a huge amount of cash flowing through mobile games in Japan right now, and from a business perspective, that makes it a more interesting (if vastly more challenging) space than the console market.
Yet that doesn’t change the slowdown of Japan’s console market into a “decline” or a “crisis”. We all know that Japan has been ahead of the curve in terms of the adoption of videogames since the 1980s. 30 years down the line, is it surprising that it has hit a plateau? Gaming as a whole – including mobile, browser and online gaming – continues to grow at a massive rate, but in Japan at least, the console space has reached a point where there simply isn’t much new market to conquer. That may change in future as new devices open up new audiences, but console games as they stand don’t seem to have much further to go in Japan. That doesn’t make them a bad business. It means that if you want to make huge bucks and impress shareholders with your growth figures, you probably want to place your investments elsewhere – but if you want to make great games and make money selling them, a mature, stable market is no worse a place to do that than a growing one.
Moreover, when you consider the underlying factors in Japan’s economy, maintaining a steady market size is actually quite impressive. Japan’s population peaked in 2008 and has slowly declined since then; the most rapid decline being the proportion of young people (the most avid consumers of videogames). So this is a market with less “core” consumers of videogames than before; moreover, a series of ill-targeted reforms and a few decades of economic slump have meant that a very large proportion of those young people are trapped in low-paying work with no job security. Furthermore, Japan’s prices have been in slow but steady decline since the early 1990s. Yes, unlike most western economies, Japanese prices aren’t slowly rising due to inflation – rather, they’re falling due to deflation. This has supposedly been reversed in the past 12 months or so, with tiny inflation figures finally showing up, but most of the change so far has been down to a sharp rise in energy costs (a consequence of expensive imported fuels replacing Japan’s still-offline nuclear power plants) and it generally hasn’t been reflected in consumer goods.
One other economic factor has been mentioned by a handful of writers this week. They pointed out that Japan’s consumption tax went up from 5 per cent to 8 per cent in April, in the middle of this reporting period; if that 3 per cent hike were included in Enterbrain’s figures, it would mean industry revenues actually fell. However, to my knowledge Enterbrain’s numbers are based on pre-tax figures, much as US market data is, and thus the consumption tax rise isn’t a factor – except in that it would have been expected to push videogame sales down, thus making the rise slightly more impressive.
In short – Japan has less consumers for games and it’s charging less for things than it used to. Under those circumstances, a market which was performing precisely as well this year as it did last year would be expected to show a modest decline. Just staying still would mean you’d actually grown by a few percent in relative to offset the underlying audience decline and price deflation. Growing by 0.1% in Japan is comparable to growing by a couple of percent in the USA or much of Europe, where population is still generally growing and prices are being inflated, not deflated.
These factors don’t combine to mean that Japan is magically showing strong growth in defiance of the figures, but they are important to understanding what the figures mean. Japan’s “decline” is more like stagnation, and in the past year, even that stagnation has showed a positive trend. The market for consoles and games remains big and pretty healthy even as the market for smartphone games shoots through the roof; both of them clearly have an important place in the future of the country’s games industry.
As for the supposedly “disappointing” impact of the PlayStation 4? There’s no doubt that the performance of the console has slowed down significantly since a very strong launch, but it’s worth noting that sales of hardware were actually up nearly 7% year-on-year, with the PS4 and the resurgent Vita picking up slack from slower sales of the 3DS. PS4′s software line-up in Japan is still largely composed of western titles with limited appeal to the local audience, and the console probably won’t pick up significantly until more local software is available later this year – it’s notable that the PS Vita’s success in the first half of 2014 is largely attributable to the sudden arrival of software titles that match local tastes, and not (as some commentators would have it) to an upsurge of interest in PS4 Remote Play functionality. Overall, PS4 in Japan continues to perform as you’d expect for a new console with limited software – a great launch, followed by slow but steady sales while it awaits new software to spark purchases from new audiences. It’s done well, but it hasn’t “rescued” the Japanese market; but then again, if you take the time to understand the figures, it should be pretty clear that the Japanese market doesn’t actually need rescuing.
Breaking up is hard to do, as the Carpenters famously crooned; right now, Microsoft is discovering, not for the first time this generation, that dumping your old ideas is just as tough as dumping your clingy ex. It may be the right thing to do, but it’s a fraught process and one that it’s tough to emerge from without attracting plenty of ire along the way.
Kinect 2.0 and Xbox One were, after all, meant to be married for life. The expensive sensor was bundled with the console from day one. Its functionality was deeply ingrained in the design of the system’s user interface, and a whole 10% of GPU resources were permanently devoted to it. Originally, Xbox One wasn’t even capable of booting up without a Kinect plugged in; it was an intrinsic and inseparable part of the console. In sickness and health, till death do they part.
Well, like so many relationships and marriages, it turned out that there were plenty of good reasons to break up long before the Grim Reaper raised a bony hand. Kinect has been at the root of many of Microsoft’s woes with Xbox One. It raised the price of the system, making the console $100 more expensive than the more technically impressive and well-liked PS4. It seemed to imply that Xbox One was a console aimed at casual gamers (with whom motion controls are now, fairly or unfairly, strongly associated) at the expense of the core gamers who made Xbox 360 successful. Moreover, in an age of actually rather justifiable paranoia about privacy, a camera in your living room that never turned off made plenty of people downright uncomfortable.
Worst of all, up to this point, Kinect just hasn’t justified its own existence. There aren’t any great games on the Xbox One that use Kinect extensively; there’s simply nothing there to make people think, “wow, this is something you couldn’t do on PS4 because it doesn’t have Kinect”. After 12 months of doggedly repeating the party line that Kinect was a great unique selling point for Xbox One, Microsoft’s decision to unbundle the peripheral from the console is a tacit admission that it wasn’t a selling point at all. Innovative hardware is meaningless if nobody builds must-have games to exploit the functionality.
It’s no coincidence, I think, that the decision to bring Kinect around the back of the woodshed and put a bullet in it was announced shortly after Phil Spencer took over Xbox. Spencer understands games in a way that his immediate predecessors did not; he would have an innate understanding of the fact that games sell consoles, and untapped potential in hardware is not exciting to consumers, it’s simply wasteful. An expensive peripheral that doesn’t drive great software isn’t a USP, it’s a ball and chain around the ankle of the console. It had to go.
It’s a little disingenuous, then, to see Spencer trying to claim that everything is fine in the land of Kinect. Speaking to GamesIndustry International at E3, he simultaneously acknowledged that Kinect was dragging the console down (noting that Kinect couldn’t succeed if Xbox One itself failed, which is a tacit admission that bundling Kinect with the console was risking a huge failure) while also claiming that plenty of consumers will buy the Kinect peripheral separately, and it’ll continue to be a big part of the Xbox One offering.
Not an unexpected claim, of course; but also patently not a true one. Kinect wasn’t supported strongly by developers even when it was bundled with every Xbox One. Now that it’s been dropped to the status of “expensive peripheral with no good games”, developer support will entirely dry up. Just like its predecessor on the Xbox 360, Xbox One Kinect is going to be relegated to lip-service support (“jump around to avoid enemy attacks, or just press B… Huh, you pressed B? Not up for jumping around? Surprising…”) and a handful of dancing or exercise titles. Not that there’s anything wrong with dancing or exercise titles, but you don’t get platform-defining tech from them; if you did, the world would have changed a hell of a lot more when Dance Dance Revolution mats came out for the PS1.
I don’t want to give Microsoft too much of a hard time for its decision with Kinect, not least because it’s the right decision. It gives them price parity with Sony and might help to fix some of the perception problems Xbox One faces. On the other hand, while Kinect was a failed USP – and thus deserved to be ditched – it was at least an attempt at a USP. With the right software and services backing it up, it could have given the Xbox One an offer different enough from Sony’s to be very interesting indeed – but building that software would have taken time, effort and attention. Spencer, with full visibility of the firm’s software pipeline, chose instead to amputate the limb and cauterise the wound. Painful, but mercifully quick; definitely a vote of no confidence in whatever Kinect software is still under development; possibly a move that will make Xbox One walk with a limp for the rest of its life.
What I hope the Xbox team recognises is that ditching Kinect isn’t enough – and hollow platitudes about how important the peripheral remains to the company’s strategy certainly aren’t enough either. What Xbox One needs is something to replace Kinect, a new USP; one that isn’t rubbish, this time. That USP could just be software, with Microsoft doubling down on its internal studios and building its relationships with third-parties to produce genuine exclusives (as opposed to timed-release DLC exclusives, which just look desperate and annoying no matter which platform is involved in them). It could be services, as the company attempts to leapfrog Sony and regain the lead Xbox Live once had over PSN’s services; what form that might take is tough to say, but there’s certainly still headway to be made in the provision of online services, and right now Microsoft lags behind, which makes this into an area brimming with opportunity. Most likely, a combination of both great games and great new services will be needed to make Xbox One attractive to consumers; to give it the USP that Kinect was supposed to be, but never was.
There’s an interesting comparison, of course, to be made with Nintendo’s difficulties with Wii U. I observed some time ago that both Microsoft and Nintendo had made the same basic error with their new consoles – they launched with expensive peripherals that boosted the cost of the console but had yet to show any dividends in terms of unique, must-have software. In Microsoft’s case, Kinect has now been ditched; losing the millstone, but with no sign yet of a new USP to replace it. Nintendo, however, has taken quite the opposite approach. Gamepad remains firmly bundled with the Wii U, and while software for the Gamepad still doesn’t impress, there’s obviously potential there; the short, cryptic videos of Miyamoto Shigeru working up gameplay demos using the pad which was shown at the end of Nintendo’s E3 broadcast was a statement of intent. Rather than ditching its white elephant, Nintendo is trying to figure out how to put it to work.
So, over the next year, we’re going to get to see how two diametrically opposed solutions to the same problem work out. Microsoft, making the latest of several U-turns, has gone back to square one and now needs to find a new selling point for the Xbox One. Nintendo has doubled down on the Gamepad, and needs to convince consumers of the worth of its innovation – not to mention the worth of the Wii U overall. Different challenges with similar requirements; they both need great games to prove their point. The consumer wins, in this situation, but it will be interesting to see which company, if either, can emerge victorious from these trials.
Support for a union among game developers has grown, according to survey results released today by the International Game Developers Association. The group today announced the result of its Developers Satisfaction Survey from earlier this year, which found that more than half of respondents were in favor of unionization.
Of the more than 2,200 developers surveyed, 56 percent said yes when asked if they would vote to form a national union of game developers in their own countries today. That’s up from the group’s 2009 Quality of Life Survey, where just 35 percent of more than 3,300 developers said they would vote in favor of unionizing at that time.
As for whether the IGDA was considering a move in that direction, the group’s executive director Kate Edwards dismissed the notion.
“For the IGDA, we will always be a professional association,” Edwards told GamesIndustry International. “That’s what we exist for, and what we’ll always be. But if we are seeing that developers feel unionization is what they perceive to be a solution, then that’s something we’re going to pay attention to and see where it goes for them.”
“When we asked people how many jobs they’d had in the last five years and the average number was four, that was pretty eye-opening for us.”
IGDA head Kate Edwards
The survey also yielded new findings on gender diversity. While the group determined that men still “dominate” the industry, it isn’t to the same degree as before. The IGDA found 22 percent of respondents identified as female, up from 11.5 percent in 2009. Additionally, the 2009 survey only included “male” and “female” designations; this year’s poll found 2 percent of respondents identifying as male-to-female transgender, male-to female transgender or “other.”
Edwards also found responses on the lack of job security in the industry notable, if not exactly surprising.
“When we asked people how many jobs they’d had in the last five years and the average number was four, that was pretty eye-opening for us,” Edwards said. “But I do think it basically confirms what a lot of us have sort of known and have been hearing anecdotally for a while now.”
The Developers Satisfaction Survey also polled people on their salary, and found that nearly half of developers earn less than $50,000 annually. That stands in stark contrast to the Gamasutra annual Game Developer Salary Survey, which found that last year the average developer made more than $84,000, with QA being the only discipline with a sub-$50,000 average salary (and even that was a little shy of $49,000). Edwards chalked the difference up to a high percentage of the IGDA survey respondents who identified themselves as independent developers, saying they were likely working in freelance or start-up capacities.
A little less than two-thirds of respondents (61 percent) said they planned to work in games indefinitely. Of those who saw themselves leaving at some point, the most frequently given reason (39 percent) was a desire for a better quality of life.
The IGDA will release a summary report of the survey next month, followed up by reports focusing on specific topics within the survey, like diversity, quality of life, and employment practices. The group has said it will use the findings to help identify what its members care about and prioritize its initiatives and advocacy efforts around those subjects. To keep up with members’ needs as they change, the IGDA is planning the Developer Satisfaction Survey as an annual exercise.
The 3DS stumbled at launch, enduring sluggish sales until Nintendo instituted a drastic price cut on the hardware. While Moffitt noted the impact of the price cut, he said a pair of first-party releases was another key driver in reversing the handheld’s fortunes.
“We had the price cut in August , and then we had Mario Kart 7, Super Mario 3D Land, which really drove sales that first holiday, and on 3DS we haven’t looked back,” Moffitt said. “So we’ve had momentum ever since that first holiday and we’ve got now 260 some games in the library and some of the best, most highest rated, most highest quality content we’ve ever had on that platform. Everything we launched seems to do above forecast and surprises us on the positive side.”
The situation with the Wii U is similar, Moffitt said, adding that the console is about to reach a very similar tipping point.
“As I look at what we have coming this holiday, now with Mario Kart and Super Smash Bros, plus the innovation of Amiibo, I think we are right at that tipping point where we have a lot of great content that is about to be released for that platform that’s going to tempt gamers into buying the system,” Moffitt said. “From the comments I’m reading online, and following gamers’ comments, I think there are a lot of people that are going to have a hard time resisting buying a Wii U once Smash Bros comes out. I think that’s going to be a major hardware driver for us. So that’s the narrative we hope that plays out and that I think we are starting to see play out.”
One avenue that Nintendo won’t be pursuing to spike Wii U sales is an unbundling of the GamePad, Xbox One Kinect-style. Both companies pitched the peripherals as essential components of their visions, but when Xbox One sales lagged, Microsoft found the demands of potential customers more convincing than their original plans. While Moffitt said Nintendo is still working to create gameplay experiences that demonstrate the true benefits of the Wii U GamePad, he said removing it from the hardware bundle is not in consideration.
“We think GamePad is the only innovation that’s come in this new generation of consoles. So we have the only real point of difference. Certainly graphics are faster, graphics are better. This is not a real innovation for gamers. We are fully committed to leveraging the GamePad, to keeping it bundled with the system.”
As for the problem of third-party support for Wii U, Moffitt namechecked the continued efforts of partners like Sega, Warner Bros. Interactive Entertainment, and Activision. While some big companies who have dropped the system, Moffitt understood why that would have happened and acknowledged it was Nintendo’s problem to fix.
“It’s all about driving the install base and so that’s our work to do, right? We need to get to a critical mass where it makes financial sense for them,” he said.
Moffitt added that third-party games don’t all come from the big AAA publishers. He touted the company’s efforts in lowering the barriers to entry for indie developers looking to publish on Nintendo platforms.
“We talked to a lot of them before launching the Wii U and we addressed some of the issues that really were holding some of them back from developing realistic content on our platform,” Moffitt said. “At least for the indie community, we’ve become a lot easier to do business with and we’re seeing a steady flow of content now.”
However, those efforts were largely invisible at E3. Where Microsoft and Sony devoted sections of their booths to indie developers working on Xbox One and PlayStation 4 respectively, there was no such equivalent in Nintendo’s booth.
“With any show, you have choices to make,” Moffitt said. “Every time I go down to our booth floor and see how many people are waiting to play Super Smash Bros, when I look outside at the Best Buys… Last night we had four hours of game play on Super Smash Bros. and we had 1,000 people in line. We had to turn people away. So it’s a tough choice for us as a platform holder. We don’t have enough game stations down there on Smash Bros. We try to feature as much content as we can in the limited space that we have. Right now we just have a lot of demand for Super Smash Bros. We could have used 10 more game stations on that game alone. Choices have to be made.”
Finally, Moffitt weighed in on the VR trend. While Nintendo has a distant history in the field with the Virtual Boy headset, Moffitt suggested Nintendo was taking a wait-and-see approach toward returning to it
“What I’d say is it’s appealing technology,” Moffitt said. “It’s interesting. We’re going to follow it closely to see where it goes. It’s got a lot of advantages. It’s got one disadvantage relative to what we know is often very fun for gamers, which is playing games socially in a living room. This is a very single player solitary gaming experience. Not all of our games are fun to play with multiple people in a living room in front of a game console but it doesn’t lend itself to that kind of an experience as well as what Wii U does now. That would be a disadvantage of going in that direction. Could it be a nice addition to our hardware platform? Sure.”
It was the best of times, it was the worst of times; while I hesitate to apply Dickens’ immortal words to something as fleetingly temporal as Sony’s financial woes, it’s a quote I couldn’t quite shake as I digested this week’s results statement. Here is a company that has just launched one of its most important products in years, the PlayStation 4, to almost universal fanfare and massive sales; whose reputation has risen remarkably in its core markets and whose overseas sales are, finally, being buoyed once more by a sensibly-priced Yen. The best of times! And yet; here is a company whose computer entertainment division can’t turn a profit, a company posting huge losses against all expectations, a company whose already-interminable restructuring is set to last another year. The worst of times.
Sony lost over $1.2 billion last year. Revenues were up, though; over $75 billion poured through the company during the year, a 14.3% increase on the previous year. That’s important context for the scale of the loss, but it doesn’t make the loss itself any smaller. Market analysts expected a small profit. Instead, they got not only a loss overall, but a loss in the videogames division specifically, whose seemingly stellar performance recently could not plug the $78 million gap in its finances.
To add to the company’s woes, its new CFO – the commendably straight-talking Yoshida Kenichiro – says that next year will be another loss. There’s more restructuring ahead, he told analysts at a briefing this week, and it’s going to hit the company’s balance sheet hard in the next 12 months. Yoshida simultaneously promises light at the end of the tunnel, and a rocky road ahead; a travel-related mixed metaphor that probably doesn’t fill any veteran Sony-watchers with confidence.
It’s worth digging a little deeper into Sony’s results to try and understand what’s actually happening here. For all that it has trimmed its operations over the past decade, Sony remains a pretty enormous sprawl of a company, with interests that extend far beyond the consumer electronics for which western consumers recognise the firm. Sony Music and Sony Pictures, of course, are major parts of the business; Sony Computer Entertainment we all know and love; cameras and TVs we understand; but how about Sony’s life insurance businesses, or its banking efforts? How about its semiconductor operations, or its sidelines in making camera components for other firms’ smartphones? How about its fabrication plants for CDs, DVDs and Blu-Ray discs, responsible for a huge proportion of the discs on sale around the world today?
The challenge in interpreting Sony results lies in trying to understand the full scale of those business interests and then in trying to figure out where negative results really stem from. We know, for instance, that Sony is taking on major costs in winding down disc fabrication plants in some parts of the world. We know that the television division has been in trouble for years thanks to competition (some of it state-backed) from Asian rivals, and will finally be spun off and left to sink or swim in a major swathe of restructuring this year. That won’t be without its own costs, of course. Other costs or profits may be harder to discern. Clients for component businesses are generally somewhat anonymous; it’s considered an open secret that Sony provides the camera for recent iPhones, but few component contracts are quite so well-known, and thus, their bottom line impact is harder to discern.
What I’m saying is that Sony (and to an even greater extent, its rival Microsoft) is a bloody hard business to read and understand on the basis of financial reports. Companies like Nintendo, Electronic Arts and Activision Blizzard really just do videogames, so when their results are poor, it’s easy to discern what’s going on. We know their products, we know their markets and we can usually quite easily discern the weaknesses causing difficulties (although seeing the difficulty and suggesting an effective prescription are two very different talents). Sony, however, is big, complex and obfuscated to no small degree. We get broad outlines; a big loss is a big loss; but the fine detail is hard to get a grasp upon.
None of which is to say we shouldn’t try. Sony is one of the most important companies in the games business; with the success of the PS4 over the past six months, it’s arguably the most important company in the business right now. Hence, yes, it’s a concern that it’s making big losses. It’s doubly concerning that some of those losses are coming out of the seemingly successful computer entertainment division, but we can make some educated guesses at what’s happening here. Firstly, the extremely high sales of the PS4 in its early months are actually a short-term negative to the company’s figures. Sony’s console business is a razor-and-razorblades model, selling hardware at a loss initially but recouping this money through software sales and, ultimately, through more profitable hardware sales down the line when manufacturing costs have fallen. Thus, the more units PS4 sold in its launch period, the more money Sony would lose – but this lost money is really more of an investment, since the firm is betting on getting it back in software sales down the line.
High early sales also contribute to losses in other ways. Sony’s launch plans for PS4 were hugely ambitious in terms of the number of units shipped to each territory; the company did end up somewhat supply-constrained, but it aimed to avoid such constraints where possible with enormous shipments and rapid resupply of inventory. This strategy may have been partially aimed at capitalising on Microsoft’s launch weakness before strategic changes could be made to the Xbox One’s product or pricing, but I’m sure that a wider goal was also in mind. Rapid sales of a new home console would silence some critics expecting tablets and smartphones to destroy this market sector entirely; such rapid sales would require a good supply chain, and those don’t come cheap. The exceptional ramp-up of Sony’s PS4 manufacturing capabilities won’t have been cheap, an expense compounded by the loss the firm will have registered on manufacturing every PS4 shipped to date.
In the short term, that means a loss for SCE; but CFO Yoshida seemed pretty blase about that, and rightly so. In the medium term, it’s a good investment. Sony has a great track record of strong attach rates for its consoles, meaning it will get its money back with interest. Moreover, it has a truly fantastic track record of cost-cutting on console manufacture, even managing to get the tricky Cell-based PS3 into a vastly smaller and cheaper casing in the end. The faster the installed base grows, the faster the bulk discounts to manufacturing costs can be realised; with PS4 selling far faster than PS3 or Xbox 360 did before it, Sony can expect its new console to be in the black well ahead of schedule.
As for the rest of the company; I reiterate my position that Kaz Hirai’s job is not an enviable one. It was said of John Riccitiello’s tenure at EA that he faced the task of trying to explain to shareholders why his company was in the fifth year of a three-year restructuring that was going to take seven years. Hirai’s task is even more tricky, in some regards. He’s only been in the top job for two years, so if his ambitious restructuring can truly be completed by next year (as Yoshida claims, with some authority) then it will actually have been a rather fast turnaround. However, Sony is already restructure-weary; seven years of turmoil under former CEO Howard Stringer left the company and its commentators skeptical of any claims regarding light at the end of the restructuring tunnel. Stringer did many good things and helped to move Sony’s culture to a point where Hirai’s ideas could find fertile soil, but he also permitted (or felt that he could not fight) all manner of poor strategy in core divisions, most notably television, where Sony has stumbled from disastrous strategy to doubly disastrous strategy on a near-annual basis for the past decade.
Hirai, at least, appears to have the confidence and the clout to make his plans work where Stringer’s did not. Separating the almost certainly doomed TV business from the rest of Sony is a good plan, but one that required extraordinary political capital within the firm. Having the respected Yoshida as CFO is also a good move, since it’s given Hirai the cover he needs to bring all of the financial pain of his restructuring plans into the current year and the following year. The temptation would have been to spread things out, but the markets seem to respect Hirai and Yoshida’s honesty in front-loading the costs, anticipating a return to profitability in two years’ time.
That, perhaps, is the big difference between Sony and Nintendo – two companies that have been compared heavily in discussion over their recent financial results. Both have some very profitable divisions (3DS does well for Nintendo, while movies and finance, in particular, are solid performers for Sony), but both have just recorded financial results well below expectations and triggered alarm among market commentators. Nintendo, though, can only suggest vague directions it might take to exit its current situation; it will take a major new product announcement to see whether the company can get back on track, and that’s not likely for a couple of years. Until then, Nintendo’s financial health is largely a matter of faith.
Sony, on the other hand, has a plan. It’s a tough plan, but a solid one; the divestment of loss-making businesses, the refocus on core pillars that actually make money, and more specifically to our industry, the tried-and-tested approach to bringing the PS4 into profitability as rapidly as possible. A CFO like Yoshida can speak plainly about how Sony is going to change, what it’s going to cost and when it’s going to start making money; Nintendo, relying on products still under wraps to give it a relevant future, lacks the ability to be so blunt and straightforward about how it will build future success.
Even the rather tolerant Japanese stock market and its very patient institutional investors have limits, and Sony could yet reach those limits. The company’s restructuring to date would try the patience of even someone playing a very long game; but Yoshida is a credible figure, Hirai seemingly retains the ability to carry out the reforms he plans, and the company’s generally profitable divisions, including games, are still in good shape. Even if another year of pain does loom for Sony, the end might finally be in sight; in 12 months time we can hope to hear of a leaner, tighter and more focused Sony, with black ink finally starting to crop up on its accounts.
Philips is looking to get Nintendo’s Wii U games consoles banned in the US.
Philips has patents in its sights and it said that those patents belong to it and are being used without permission.
The firm has filed a complaint for patent infringement with the US District Court for the District of Delaware, and that has been published on Scribd.
The complaint accuses Nintendo of infringing two Philips patents, and Philips said that they are used in the Wii console and its peripherals. It is pushing for a US sales ban.
The patent numbers at issue end in 379 and 231. Philips claims that it alerted Nintendo to its infringing use of 379 as early as 2011. It registered patent 231 last year and the patent covers interactive device pointing, which is rather a key element of the Wii experience.
Philips is asking for a ban on Wii U sales in the US and monetary damages. The impact on Nintendo could be significant if a sales ban in put in place. So far we have not been able to get a response from the company.
The Philips complaint identifies a long list of infringing hardware. “The infringing interactive virtual modeling products of Nintendo include but are not limited to motion-controlled gaming consoles and motion-detecting devices such as the Wii video gaming systems and related software and accessories including, for example, the Wii console, Wii Remote Plus Controller, Wii Remote Controller, Wii Nunchuk Controller, Wii MotionPlus, Wii Balance Board, Wii U console, Wii U GamePad, and Wii Mini,” it says. “The infringement by Nintendo has been deliberate and willful.”
Philips has requested a jury trial.
Fireproof Games’s Barry Meade has issued a blunt jeremiad to what he sees as a mobile gaming industry hurtling towards creative irrelevance due to its reliance on data.
In an article published on Polygon, Meade lamented the reality that Fireproof’s The Room franchise is an extremely rare exception in mobile gaming: standalone experiences that earn good revenue from paid downloads.
“In a market as huge as mobile how the fuck are Fireproof among the only makers of premium games that saw this kind of success?” Meade asked, citing data indicating low levels of engagement (66 per cent of mobile games are not played beyond the first 24 hours) and incredibly small numbers of paying customers (two to three per cent) as evidence that the dominant free-to-play model is not providing quality entertainment to the market
“This is a statistically insignificant amount of happy gamers and nothing that gives you a basis to make claims about ‘what people want’. I think it just as likely that mobile’s orgy of casual titles is due to simple bandwagon-ism or, in other words, not knowing what people want.
“This is a statistically insignificant amount of happy gamers and nothing that gives you a basis to make claims about ‘what people want’”
“So it bothers me to hear game developers talking as if casual games are the new paradigm on mobile when so very few developers are actually happy with the games as they are, and mobile gamers clearly seem to “care” least of all. Free-to-play and casual titles should be a part of a greater gaming ecosystem, but right now they are the entirety of it on mobile.”
For further evidence, Meade pointed towards the top-ten grossing charts, which are dominated by an unchanging crop of huge titles that do little more than trade their relative positions of dominance. To the public, however, these “ten cute grinding games that are clones of each other” seem like the best the industry has to offer, and continue to reap the vast majority of the rewards.
“The free-to-play model itself serves a million uses to developers and gamers, I’ve chucked lots of time and money into World of Tanks, Warhammer Quest and many others myself – the model is not the problem,” Meade continued.
“The problem is more general, that taken as a whole the games industry is making mobile games that nobody cares about available to millions of players for nothing. Free-to-play producers chime that quality levels are obviously fine, ‘If it’s making money it’s objectively good, see?’
“Well no, not quite, shit sells by the ton every day. In the real world Burger King doesn’t get three Michelin stars. Burger King gets to be happy with its revenue not its reviews, and our industry’s inability to see the difference will only pull us further into our creative vacuum.”
The dominance of the free-to-play model in mobile continues to be divisive, and there are certainly counterpoints to Meade’s take on the matter – most notably from Ben Cousins, who has argued the relative merits of free-to-play both at conferences and in the press. However, Meade is far from alone in his doubt, and that includes developers who have spent years working with the free-to-play model.
At Casual Connect Europe this year, The Workshop’s Laralyn McWilliams gave a talk in which she warned the industry about mistaking data for an emotional connection. “There’s no measuring spoon for love. You can’t quantify it,” she said. “Retention is not the same as happiness.”
Meeting with GamesIndustry International after her talk, McWilliams expressed very real concern that the amount of money being made is masking the negative connections created by free-to-play games, and the possible long-term damage that could result from that relationship.
“The moment that you monetise in Candy Crush you’re probably extremely frustrated. You want to get past this level you’ve failed to complete 40 or 50 times, and that’s the moment you spend. But mixed into that moment where you spend is that frustration. It’s building a bad connection. I’m not monetising at a positive moment.”
Meade concludes his argument with perhaps the most salient point of all: “The audience knows better than all of us and if our mobile public truly does signal ‘I care’ through purchasing, I don’t think its radical for the industry to start listening to the 98 per cent of mobile gamers out there saying ‘I don’t care’.”
The full version of the article is over on Polygon, and it’s well worth your time.