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Used Games Are Not the Problem
Jun 25th, 2010 by worldblee

Videogame publishers and analysts are blaming used games for shortfalls in revenue and profit. But the problem goes much deeper than can be explained by any increase in the sales of used games. If people are flush with cash, they will buy a new car. If they’re worried about money, they’re going to buy a used car.

It’s similar with games. Consumers aren’t trying to rip off game developers when they wait a month or three to buy a used copy of the latest hit game—they’re spending less and forcing themselves to wait patiently because a new AAA game is $60, and that money is slotted for rent or food or childcare.

Publishers, led by my friends at EA, have struck back with new pay-for-play access to online features. If you buy a new game, you get a coupon for online play. Buy a used game, and you’ll have to fork over $10 or so for those privileges. Will this slow used game sales? I doubt it. Will it increase revenue for publishers? It will increase DLC sales figures, but it won’t affect the fundamental problem for the industry: there are only so many dollars that can be allocated toward entertainment. The $10 EA takes in from the guy who bought Madden two months after launch is $10 he won’t be spending on NBA Live (sorry, NBA Elite—as one of the guys from the original NBA Live launch, I have trouble letting that one go).

If you try to nickel and dime your customer in a time of financial hardship, you’re endangering your customer relationship over the long haul. In these days of quarterly performance, that lesson is often lost in the boardroom—but ultimately the price will be paid. It will probably just become the problem of a new management team that’s brought in after the current regime is forced out because of declining market share.

A harsh assessment? Most definitely. But I’ve said it before and I’ll say it again: a better strategy is to lower pricing on frontline games. You want to put the hurt on used game sales? Try selling your sports game for $20. Make online play an extra charge, let hardcore fans buy roster packs and extra levels, release limited editions, do what you have to do to extract more value from those willing and able to pay more. But realize that recession is a time to increase market share, not a time to boost profit margins. Maintaining revenues vs. 2008 or 2009 is not going to happen. Publishers will make less money, because there’s less money in the hands of consumers.

If you want to blame someone, blame the financialization of our economy that is transferring cash from the hands of workers into the hands of bankers and other financial wizards who ran up bad bets they expect taxpayers to cover. That’s the real reason people have less money in their pockets for games.

But don’t make the cost of entry so high your customer starts looking for a new door. Like the one to his or her local Gamestop, where they can buy a used copy of last season’s hit game for $40 less than your brand new game. Give your customer a real choice. Put yourself in their shoes and price your games accordingly.

It’s the (Videogame) Economy, Stupid
Mar 3rd, 2010 by worldblee

While games may provide an escape from reality, the global games business is enmeshed in economic reality. A large scale, polished experience like Uncharted 2Dragon Age, or Modern Warfare 2 requires investment, which requires revenue, which requires customers willing and able to pay money. With the current generation of consoles (although more so for Xbox 360 and PS3 than for Wii), revenue has been driven by the $60 list price, roughly three times higher than that of a DVD movie and four times more than a music CD.

That price has started to creep down as publishers realize that anything other than new AAA games won’t sell at $60. EEDAR has a good newsletter on the topic of recent price trends that you can read here. The average list price on Wii is now $40 compared with $50 in 2007 (via EEDAR), which is in line with the trend for previous console systems at this point in the cycle.

However, for PS3/Xbox 360, the average game price has actually risen by 6% compared to what games cost at system launch. When you couple that with declining household income, you have a real problem. There is a long term economic shift happening before our eyes, and there is no expected result we can see that points to an upswing in improved household incomes—which leads to less disposable income available for games.

A year ago, we predicted game publishers would use the economy as an excuse to lay off workers, and this has sadly come true. We also said, “entertainment performs well in recession compared to consumer goods.” This has held true, but the drop in consumer good sales has been so steep that performing relatively well still means a drop in revenue.

This where the story gets political—or at least some will perceive it that way. Why is the world economy faltering? Is it because of drought, natural disasters, low worker productivity, strikes, or war? No. Although war and natural disasters have hit many countries, they have not affected overall output. The economy is suffering because it has been financialized, with resources diverted away from production, workers, and families to a narrow group of financial elite who gamble with the livelihoods of the rest of us.

If you’re not familiar with the concept of financialization, the following graph may help you understand the issue:

GDP share of US financial industry (via Wikipedia)

The so-called booms of the 80s, 90s, and 00 years were not fueled by a growth in consumer income, they were driven by speculative bubbles. And where does the profit from these bubbles go? Into the financial sector, as the chart shows. The most recent boom, that of housing, was fueled entirely by borrowing (for which the taxpayers picked up the tab, shoveling some $13 trillion dollars in aid, loans, and guarantees to the financial sector while the rest of us shared well under $1 trillion in bailout money). Former Assistant Treasure Secretary Paul Craig Roberts describes the issue succinctly:

Unable to maintain their accustomed living standards with income alone, Americans spent their equity in their homes and ran up credit card debts, maxing out credit cards in anticipation that rising asset prices would cover the debts. When the bubble burst, the debts strangled consumer demand, and the economy died.

It’s not a pretty statement, but it reflects the reality we face. And there are no factors lined up to improve the situation. Government spending, the only practical way to pull a country from recession or depression, is being curbed except in the case of military spending. This will likely further contract the US economy. If consumer spending, which constitutes 70% of the US economy declines, the government is the only institution capable of filling the gap. However, the US government shows no signs of investing in the consumer economy as the vast majority of its bailout money has gone to the financial sector.

So where does this economic fiasco leave the gaming business? The best, hottest games will still do well, although the prices will move downward to reflect lower household incomes. If you have a hit, it’s still a good investment to spend behind it, both in development and marketing. And the low end of the market, whether in casual games for social platforms, iPhone games, or used games, is still healthy since people still want to play games (especially if they’re free or cheap!). The economy hasn’t impacted the viability of gaming as a leisure time activity. Where the economy has hit and will continue to hit most deeply is the middle of the market, the games that are good but not driven by marketing and/or buzz to be the ‘gotta have’ games. These games are too expensive to develop for small, low overhead developers, yet they don’t produce the economic return that major publishers are looking for.

If people aren’t really excited about your game, they’re not going to buy it in droves even if you buy a Super Bowl ad. Money is too tight to splurge on titles that are not essential for your videogame library—a rental or used purchase down the line, maybe. But not an automatic purchase even if the reviews are good.

And when people buy fewer copies and/or spend less to purchase each copy of those AA games, that’s bad news for a lot of developers. We see trouble ahead for the ‘middle class’ of game franchises, developers, and publishers alike. Is it time to go big or go small—while abandoning the middle?

If so, we expect this will mean a further siphoning of jobs from the industry with publishers continuing to close developers they own to save on overhead. Continuing to roll out DLC to support existing titles could serve as a buffer for jobs, but most of that DLC will come from teams already employed on the hit games. It can keep the content teams busy while the core design teams are working on the next big iteration, but it’s not likely to serve as a panacea for creative workers.

Demo Play: A Step in the Right Direction
Jun 15th, 2009 by worldblee

In an interview with USA Today, Shigeru Miyamoto revealed this week that Nintendo is planning to add a new help feature to Super Mario Bros. Wii. Called ‘Demo Play’ (for now), it will allow the player to choose to let the CPU play his or her character through a difficult part of the game.

Its a me, Mario, and I can play as myself now!

It's a me, Mario, and I can play as myself now!

Here’s USA Today’s summary of the feature:

Beginning with the upcoming New Super Mario Bros. Wii (due this holiday season), players will be able to pause a game during a particularly difficult level and let the game take over to complete the level. Press a button at any time to resume playing. This will help reduce barriers of entry for new or younger players – without purchasing a strategy guide or resorting to websites that list cheat codes.

The response from the fan boys of the gaming community was typically harsh. On GameSpot’s article on the topic a user named Koopatrol summed up the hardcore response to the feature:

I understand games are supposed to be fun, but what happened to skill? Gamers are supposed to face challenges they can’t get through.

For young male gamers his attitude makes sense. Games mean different things to different people and for core gamers the challenge is a huge part of the fun. Saying they beat a tough game is a badge of honor and they don’t want n00bs to be able to say they got through a game if they used Demo Play for all the hard parts.

But for the gaming industry, Demo Play is a belated recognition that most of us, particularly the ‘maybe’ gamers that Nintendo is trying to reach, want to have success when playing a game. We play games for fun and missing a tricky jump ten times in a row is not fun–it’s frustrating. Most of us get plenty of frustration in the rest of our lives; we game for entertainment more than the challenge factor.

If we followed the logic that more difficult games are more fun, why not remove the user interface and let the user type in code on a command line to launch the game? Or make them play blindfolded?

The challenge for developers is most of us are core gamers. We recognize that our games should be accessible but since they’re accessible for us, we don’t see the problem. “This game is easy,” we say, casually zipping through a level that we’ve played a hundred times by the time it’s reached alpha.

But the gamer playing through the game the first time at home often encounters problems not anticipated by the development team. He or she may not know the level boss is vulnerable to fire and that he needs to equip the flamethrower he found on level two to have a chance of victory. If the player can watch Mario navigate through the level properly, he may be able take control and rip through the level himself after seeing how it’s done–or perhaps he just wants to see what the next level looks like and is happy to never go back and replay the difficult section.

And there’s no reason the player should have to replay a level time and time again–games are not a competitive sport unless you’re actually playing by choice in a tournament or other competitive venue. The more we force players to conform to a standard of expertise to play a game, the more we limit our audience.

From Concepticate’s point of view, features such as Demo Play are long overdue (and it’s no surprise that Nintendo is the company bold enough to break the mold; they’re #1 right now for a reason). Reducing the barriers to entry helps more people to discover the magic of interactive entertainment. And for those who decry Demo Play as turning gaming into passive entertainment, watching a game is part of the fun. How many times have you watched a friend play a beautiful game and been entertained? Sharing the experience is much better than playing alone and if having some training wheels helps your friends or family join in the fun–and if you don’t want to use the feature don’t activate it. But I have a feeling that even the most core gamers will be tempted to use it if they fail repeatedly in certain situations–they may eventually wonder how they got along without it.

However, there is a downside to Demo Play of which we should all be aware. If you have an autopilot function players can use as a crutch, designers may be tempted to not hone play mechanics and level design as much as they might otherwise–in crunch time it’s inevitable that certain things get less attention than is ideal. If you know players can get around a tough section you may be more likely to think it’s OK to leave more fiendishly difficult gameplay scenarios than you would if autopilot was not an option. Demo Play should be an option for less skilled gamers; it shouldn’t mask poorly conceived gameplay. If people are using Demo Play in a level you need to ask yourself: are they unskilled or is this level just not fun enough?

That caveat aside, we’re looking forward to getting to the next level in Super Mario Bros. Wii even if our gameplay skills are not up to par. Knowing that Demo Play will be an option makes us more eager to open the box and start playing.

Videogame Censorship
May 21st, 2009 by worldblee

The politicians are at it again. Like lab rats that push a button hoping that food will come out, California Attorney General Jerry Brown is appealing the state’s earlier loss in court with regard to its bill to restrict the sale of videogames in the hope that votes will come his way should he run for re-election or for Governor. Every time this type of restriction is brought before a reasonable judge or court it is thrown out as unconstitutional. The results will probably be the same this time, with the tax payers of California footing the bill for the failed appeal.

My name is Jerry Brown, and I also hate puppies

My name is Jerry Brown, and I also hate puppies

The response from game industry folks such as me is just as Pavlovian–why would anyone want to ban our lovely games? Parents should be responsible for the children’s buying choices, and anyway games rated ‘M’ for Mature aren’t available for sale to minors… But even if expressed in self-interest, the arguments against censorship are all valid (and personally I don’t believe in the ESRB ratings system anyway-having submitted games through it I’ve seen how arbitrary it can be and the fact that nudity is rated more obscene than violence just makes no sense to me) and there is no empirical evidence that games ever actually hurt anyone.

Columbine wasn’t caused by videogames. People with severe problems kill other people, and pixilated characters aren’t powerful enough to cause a normal, healthy person to kill another person. These truths are self evident.

But not to Jerry Brown:

“These video game makers are shamelessly exploiting vulnerable children for profit,” Brown told The Times in an interview. “And in the same way pornography can be banned, pornographic violence can be banned as well.”

So what can a videogame supporter do? There are a couple things:

  • Follow the issue at www.gamepolitics.com -they do a good job of covering game censorship issues.
  • Follow general censorship issues at http://www.mediacoalition.org/.
  • Don’t be shy about writing to your elected officials-let them know that videogame censorship is an issue you take seriously. If you’re lazy like me, sign up for the Video Game Voter’s Network; this will allow you to receive notifications and express your views in pre-rolled and pre-addressed emails to officials so that you can express your views without having to use your noggin much.

One would imagine that this issue will go away eventually as more politicians enter office having played games their whole lives-but who knows, perhaps having fun* and wanting to hold office are mutually exclusive.

* By fun I mean legal, open activities as opposed to the clandestine affairs that have brought down more than one politician (or preacher).

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© All content (c) 2008, 2009 by David C. Lee