Games

Recently, IndustryGamers revealed that in just six months Sony managed to shave off another 1.4 million units from Microsoft’s global installed base lead with Xbox 360. As it stands now, the gap between PS3 and 360 is around 3 million units, despite the fact that Xbox 360 hit the market a full year before Sony’s console. So the question has to be asked: Did Microsoft squander their lead?

We asked a few of the prominent games industry analysts that very question. DFC Intelligence’s David Cole noted that Xbox 360 simply lacks diversity – it focuses almost too much on shooters – and Microsoft probably should have targeted the European market a bit more heavily.

“We have been forecasting for the past 3 years that the PS3 would catch up to the 360 by 2011.  I think the big issue is that the 360 has been primarily the platform for FPS games and has lacked the diversity to appeal to a broader international market…mainly Japan and Europe where Sony is very strong.  The Xbox 360 was just much stronger in North America than it was globally,” he said. “The main issue I think is Sony (and also Nintendo) being so strong in Europe and Japan.  I think in terms of doing things differently they should probably have focused more on Europe and just given up on Japan. They would have had a better chance in Europe.”

Cole doesn’t see Kinect necessarily being enough to stave off the Sony attack either. “Going forward I don’t know if there is much they can do.  They will try with the Kinect but I don’t see that working.  I think the PS3 will soon pass the 360 for good,” he said.

Of the analysts we contacted, Cole was definitely the least optimistic for Microsoft. Other analysts chose to put things in a broader perspective, reminding us that Microsoft is still fairly new to video games compared to Nintendo and Sony and they should be commended for their accomplishments thus far.

“We do not believe Microsoft has in some way squandered a first to market advantage; particularly when you consider how most game pundits back in the day expected Sony to dominate the next generation,” said Janco Partners’ Mike Hickey, who’s clearly a bigger believer in Kinect than Cole. “Perhaps more important is where we go from here, with no meaningful console introduction in the medium term; we believe Microsoft’s Kinect system is the most identifiable organic installed base accelerator (aside from continued price cuts and/or aggressive promotional bundling), which will likely extend their global lead over Sony’s PS3 console.”

EEDAR’s Jesse Divnich sees things similarly to Hickey. “Nothing went wrong. The achievements of the Xbox 360 are incredible,” he stressed. “It went from fighting for a distant second place last generation to now being considered one of the healthiest platforms to develop for. The PlayStation 2 outsold the Xbox nearly 7 to 1 in Europe and nearly 40 to 1 in Japan.  In 2010, PlayStation 3 is outselling the Xbox 360 a tad over 1 to 1 in Europe and only about 10 to 1 in Japan. For a company that entered the video game space late, going up against two competitors with decades of loyal gamers, Microsoft should be proud of their accomplishments. Any faults to point out would simply be nitpicking.”

Wedbush Morgan analyst Michael Pachter was essentially in agreement as well, noting – unlike Cole – that Microsoft might even be able to remain in second place.

“What did people expect?  They have a huge advantage in Japan, have been roughly equal in Europe and pretty far behind in the U.S.  It is only a matter of time before the lead in Japan erodes the lead in the U.S. I would NOT say that anything has gone ‘wrong.’  At the beginning of the cycle, I thought PS3 would win because of greater loyalty in Europe and a stacked deck in Japan.  Nintendo surprised me greatly with their phenomenal sales, and after a year or two, I said that I thought Sony would still finish second due to the Japanese advantage.  I now think that with Kinect and a pricing advantage, Microsoft might hold them off, and I certainly don’t think that Microsoft has done anything wrong at all,” Pachter commented.

What do you think? Should Microsoft have made better use of the Xbox 360’s first year? Could things have been done differently so that the lead would be bigger now?

In advance of his presentation at Digital Interactive Gaming 2010 in London, Ontario, EEDAR analyst Jesse Divnich shared some highlights of his talk, and in particular he noted how important it is to have a strong brand. If your brand is strong enough, fans will jump on the next title in the franchise, even if there’s a slight dip in quality.

“Even though Fallout: New Vegas, Fable III, Medal of Honor, and Star Wars: Forced Unleashed 2 (top October 2010 releases) produced quality scores below their predecessors, the strength of their brand equity was enough to overcome any shortfall in quality,” noted Divnich. “The truth is, once a high consumer promise is established for a brand, the equity built plays a persuasive role with consumers.  As long as the slip on quality is not significant, sales are unlikely to be impacted as consumers are more forgiving.”

Publishers, of course, still need to be careful, especially if they aim to further their sales with the next iteration in a franchise. “It should be noted, however, that a decrease in quality for a brand rarely results in significant series growth, but rather producing sales in-line with its predecessor.  For some publishers, this is perfectly acceptable,” Divnich continued.

“After a high consumer promise and strong brand equity is established, publishers often use secondary developers for the next iteration. With the reuse of assets and lower development costs, publishers are able to generate greater profitability off the next iteration.  The increase in profitability can then be used to fund the next-iteration that will again re-establish that original high consumer promise, and grow the series.”

Building up a strong video game brand is a massive investment for most publishers, but as we’ve seen with Halo, Call of Duty and others, the pay off can be tremendous. “Consumers tend to forget the enormous amount of resources, risk, and difficulty of achieving a 90+ rated title (less than 1% of titles achieve this).  Often, publishers are willing to sacrifice significant profits in order to establish a high consumer promise and strong brand equity, so that future titles may focus on recovering those costs in order to continue to maintain a brand’s strong equity,” Divnich concluded.

It is well known that Microsoft has not had the most successful sales figures when it comes to the Xbox 360 in Japan. Though popular titles such as Ace Combat have been instrumental in moving consoles, the PS3 and Wii are well ahead of the Xbox in the Land of the Rising Sun. The Kinect though, could change that, says Xbox Japan boss Takashi Sensui.

“It’s been two or three years since I first became aware of the Kinect project, but it seems a lot quicker than that,” he told Famitsu magazine in this week’s issue [via 1UP]. “Back when it was still Project Natal, I remember being taken to a corner of the U.S. headquarters without being told what it was — just ‘Here, come try this for a bit.’ I’ll never forget what a shock it was — I couldn’t believe it at first. I said ‘This kind of thing actually exists?!’ I figured it’d be a very, very long time before it could be a consumer product, so looking at it that way; we’ve gone really far in the space of a few years. That first prototype cost about $30,000 by itself, so it’s definitely a better value now!”

“To be honest, the Kinect response from Japanese creators was a lot bigger than I expected,” he said. “I think they, in particular, quickly got a grasp on how controller-free gaming could be taken advantage of; it really fueled their imaginations, and that’s made us happy as well. They really feel like they can create a whole new type of play with the games they’re developing. The games we announced at the 2010 Tokyo Game Show, like Grasshopper’s Codename D and Capcom’s Steel Battalion: Heavy Armor, serve to prove that.”

“We’re thinking first and foremost about games that provide a whole new style of play to gamers,” he said, “and having developers make those sorts of games might take a little time. To be honest, the lineup may not be as expansive as the rest of our retail library. However, something I’ve felt as I played the launch titles is that Kinect games tend to be enjoyed by users for relatively longer than other titles. The experience itself is fresh, but the games themselves tend to get played for relatively longer, too. I think that because of that, Kinect owners won’t feel that there is a lack of games to choose from.”

The main question remains though… can the Kinect succeed? “I’d like all Xbox 360 users to play with it,” Sensui commented, “because the Kinect experience isn’t something you can bring back to previous games. Still, I think we’ll see how quickly the Kinect is being adopted by around a year after launch. The launch will have its impact on the industry, but I think the Kinect is going to take longer to reach a wider base of people. It’s a new game system, so I think word-of-mouth among players will be what drives more purchases here.”

Valve will be bringing Treyarch’s Call of Duty: Black Ops to Steam subscribers through Steamworks at launch, it has been announced. Valve plans to bring Black Ops to all of its 30 million subscribers for the PC and Mac platforms.

“We are delighted to be delivering the year’s most anticipated title with Black Ops to PC gamers around the world,” said Jason Holtman, director of business development at Valve. “We’ve collaborated with the development team to leverage the Steamworks suite of services to deliver the highest level of service to Call of Duty: Black Ops PC customers.”

“Steam has been a great partner throughout development of Black Ops,” said Mark Lamia, president of Treyarch. “We’re working closely together to take full advantage of Steamworks to ensure we deliver the most polished and secure PC experience that our community deserves.”

Black Ops is currently available for pre-purchase via Steam.

At the BAFTA Video Games Lecture in London, Media Molecule technical director Alex Evans spoke about the game industry’s focus on new technology, to the detriment of the gaming experience itself. The LittleBigPlanet developer prefers to use such tech to make things simpler for gamers, instead of adding complexity to the system.

“I think there’s a huge mistake that the industry makes as a whole and that is to talk about technology as this arms race – who’s got the coolest shaders and who’s got the most polygons,” Evans said. “Back in 2005 when we started Media Molecule, the next generation of consoles were just arriving on the scene and it was expected that the technology was going to be an incredibly difficult and complex barrier. We were aware of this but really wanted to use technology to simplify games.”

“Why are we not using this fancy technology to make the images that we deliver more beautiful?” he asked developers.

Evans cautioned developers on quickly implementing new technology and techniques, as they could make development iteration a difficult and costly process.

“All the people who have a desire to create something end up being utterly miserable because they can’t iterate. It’s like being punched in the face – you have to fail at something to know how to fix it and if you can’t fail quickly you’re doomed,” he said.

Media Molecule’s second shot at making things simpler for gamers, LittleBigPlanet 2, will hit the PS3 in January of 2011.