Game Marketing Tips, Analysis, and News


Tuesday, July 26, 2016

How Nintendo NX Will Fail... or Could Succeed

An NX mockup
Let's take a closer look at Nintendo's NX at what its strategy may look like. Does this new console have any chance for success? Many industry insiders have been saying for years that the console is dying – that is, before the PlayStation 4 and Xbox One came out and blew away console sales figures, both outselling the previous generation in the same time period from launch. Then insiders starting saying "Well, this is probably the last generation of consoles..." and now we've got the Xbox One S coming out (the first console redesign where it's not just smaller and cheaper, but actually better in several ways), and soon the PlayStation 'Neo' and next year the Xbox One Scorpio. Now, those new consoles may or may not set sales records, but at least we're seeing more new consoles with at least a fair chance of good sales.

Now we come to Nintendo. After the 100 million unit sales of the Wii, some at Nintendo felt they could repeat that with the Wii U. Instead, the Wii U is ending its lifespan this year with perhaps 13 million units sold, earning it the Worst Selling Nintendo Console of All Time award (not counting the Virtual Boy, which was strangled in its crib). Now, slated for March 2017, Nintendo has announced the Nintendo NX, about which we officially know – nothing. Well, aside from the fact that Legend of Zelda: Breath of the Wind will be coming out for it (perhaps at launch, you'd think, but Nintendo hasn't even confirmed that). As for the Nintendo NX features and price, Nintendo remains quiet. We'll probably get the reveal in the next couple of months, since the supposed launch date is fast approaching.

Instead of official news, we have a rumor (confirmed by multiple sources, according to Eurogamer) that the NX will be a portable device that you can plug into your TV, with a pair of detachable shoulder controls, powered by an Nvidia Tegra chip of some sort (K1? X1? Or a custom version? No one is sure). Games would come on cartridges (!), though you could also download them. The NX would not be Android based, but instead run a custom OS designed by Nintendo. No backwards compatibility with previous Nintendo devices, we assume. No word on NX price, of course, or the actual graphics power – though based on what we have seen of Tegra chips, the NX should be around Xbox 360/PS3 level, with perhaps higher resolution output and some better 3D shading.

Let's assume for the moment that the NX does indeed look a lot like this device. What are its chances in the marketplace? The answer really comes down to the software situation. The launch title should be Zelda, of course, though if they don't release it for months after the hardware launches, that may be enough to kill the device. Look, regardless of the NX price, whether it's $299 or $499, there will be at least a million people who would buy one so they could get a new Zelda title. Really, continuing sales of the NX will depend to a large extent on how many quality titles Nintendo can publish for it, and how quickly they come out. If we have to wait six months for a good Mario title, and then another six months for a new Smash Bros., then six more months for Mario Kart... the NX is dead. Even hit software only every three months would be pushing it – if Nintendo really wants the NX to sell, their top brands should be coming out for the NX every two months or faster.

Third-party software support would be very helpful indeed, but it seems doubtful that Nintendo would get much support from the likes of EA or Activision. They've got much more certain places to invest their development money, at least until Nintendo shows some significant market numbers.

One thing about the NX seems likely – battery life will be a problem. You may only get two or three hours before you need to find an outlet. Will this affect sales and usage? Perhaps, but if the software is there people will just be external battery packs and move on.

There are a few things we can deduce from this (rumored) NX configuration. One is that Nintendo is opting out of the horsepower race with Sony and Microsoft, remaining well behind the capability of the competing consoles. That has an immediate consequence – almost none of the AAA titles from major publishers would be available for the NX, due to the sheer difficulty of porting (not to mention whether or not the publishers would even want to). So, the NX software would be limited to what Nintendo could produce, along with perhaps a handful of Japanese publishers and some daring indies (if Nintendo even decides to allow indies to publish on the NX). The NX, therefore, is likely to suffer from a severe lack of games compared to every other platform. If Nintendo can't produce key titles quickly enough (as has been the case with the Wii U), the NX will fail.

The other thing that's obvious is that even if the NX is a hit, selling tens of millions of units in its first year, that will be perhaps two orders of magnitude less than the number of smartphones and tablets out there (now around 2 billion). So the 75 million downloads Pokemon Go has already seen, with a likely $1 billion or more in annual revenue (of which more than half will be profit), is not even remotely possible for the NX. Nintendo has said it now sees 2 million units of software sales as a hit. Compared to what mobile software can do, that's pathetic.

Look, Pokemon Go all by itself could generate more profit (for Niantic, not Nintendo – Nintendo only owns 32% of The Pokemon Co., which gets a royalty from Niantic – though both TPC and Nintendo have investments in Niantic) in one year than Nintendo has generated in the last three years. Think of the profits Nintendo could generate if it invested in high-margin mobile game development instead of low-margin hardware development.

Sure, Nintendo has mobile games coming from its partnership with DeNA – but if Miitomo is any example, these mobile games will sink like rocks. If Nintendo was smart, it would ditch the NX, buy the rest of DeNA, The Pokemon Company, and maybe a couple of other mobile studios, and plunge headlong into mobile games with its library of iconic brands.

I'm pretty sure they won't, though. They will launch the NX, and there will be plenty of talk about it, and the software will be late in arriving and new titles won't come out all that often... and the NX will perhaps sell 20 or 30 million units in its lifetime. That's what seems most likely given Nintendo's track record.

Sure, it's possible the NX could be a success. How? Make sure the price is low to start with, like $199. Use Android as its base so you can get an enormous number of developers on board. Add GPS and a version of Pokemon Go that's better than the one on smartphones, because then every Pokemon Go player will want an NX. Give it a good name that doesn't have "Wii" in it anywhere. Spend a couple of hundred million dollars on savvy marketing, and pay a few hundred million to get several top game studios working on hot titles for the NX. How much of that will Nintendo actually do? Probably none of it, as they amble along hoping to eke out a couple of hundred million in annual profits, maybe sweetened by an occasional payout from The Pokemon Company or from licensing Nintendo characters to theme parks or beach towel makers.


Anyone care to argue that the NX will be a huge hit? Let's hear some good reasons.

Sunday, June 19, 2016

Where E3 is Headed

This year marked several significant changes for the Electronic Entertainment Expo (E3). The most obvious is that Activision Blizzard and Electronic Arts both chose to leave the show floor, just maintaining the usual second-floor conference rooms for meetings. Their games could be found on the show floor in Sony and Microsoft's booths, but the massive presence those two major publishers usually had at E3 was completely gone. EA instead hosted the EA Play events (next door to the convention center, and a simultaneous one in London) where they brought players together with creators and celebrities to play some of their upcoming games.

E3 reported it had 3.6% fewer attendees this year, around 50,000 in all. They staged an event called EA Live in the parking lot next to the convention, giving out 20,000 free tickets. Apparently, though, this was a big disappointment; it was an area about the size of two tennis courts, mostly selling merchandise and barely any games. Fans felt liked they'd been duped; they'd been led to believe this was like E3, and of course it was nothing like being inside the halls. While E3 seems to understand that going direct to consumers is the future, this was not the way to do it.

E3 now has all its major media events streamed, and Twitch has a studio on the show floor with continuous programming during show hours. Essentially, all you get from actually being at the show is the chance to go hands-on with games, and to have in-person meetings. As far as getting time with games, you will have some problems with that unless you are a VIP or a member of the media. The line to play the new Zelda game was reportedly as much as eight hours long... or the entire time the expo floor was open one day.

Business meetings are something that benefits from personal contact, so E3's value in that area isn't going to change. The other reasons for the show – generating media coverage, generating excitement and social media amongst fans – those can and are being done more effectively in other ways. E3's value is dropping, and that's clear by what Activision and EA have done. Essentially, those two companies said "we can take the resources we'd spend on E3 and get a better return spending it elsewhere." Other large companies will probably be making that calculation in the coming years. For smaller companies, E3 is a good place to be because of the sheer volume attention directed to the show, which can spill over onto smaller companies. However, that will be less and less true as larger companies depart – less attention to the show, less attention to smaller companies, less reason for them to appear.

There are also other places to get significant attention. Gamescom, with its 340,000 attendees, is already running a trade show during the same week as Gamescom that attracts almost as many people as E3. Other consumer shows like PAX and San Diego ComicCon and many smaller ones are also packed with consumers. That's not even considering streamers and YouTubers and other ways of connecting with an audience.


I predict E3 will continue to try out new tactics in order to remain relevant, but it will probably continue its decline as both console games and retail sales are no longer the core of the games industry. Moreover, there are better conventions for companies that want to maximize audience influence with consumers. E3 will probably continue to shrink in size and influence, though I think there's a reasonable chance that (at some point) the ESA will decide to make some radical change – possibly a reduction to a more business-oriented conference without the huge exhibit floor. Or the ESA may decide to go large and make it a huge consumer show... but that would definitely have to be at a different venue. I think all options are on the table, and it's hard to predict what might happen beyond the next couple of years where E3 has a contract for the LACC. What, if any, contract E3 signs next will be very telling about how they view the future.

Saturday, June 11, 2016

Create Games For a Brand, Not a Platform

The electronic games industry has been focused on the technical challenge of making games work on a platform since its inception. Sure, there'd be an idea for what the game could be -- and then a seemingly endless struggle to bend the hardware to make it deliver your vision. Most of the industry's resources (in time and money) went to overcome the technical challenges in just making games work for each successive platform -- early consoles, early PCs, the NES, the new wave of consoles, more advanced PCs (now with graphics cards!), the Internet (and if you don't think dealing with multiplayer games was challenging from the start... you weren't there), mobile games on smartphones and tablets, and now the latest versions of consoles and PCs (which have become more closely aligned, thankfully) and the emerging VR platforms (mobile, console, and PC based).

Fortunately the tools to create games have advanced even faster than the hardware. There are now multiple choices for excellent tools like Unity, Unreal Engine 4, and many more services that take care of handling servers, payments, and all manner of fiddly pieces of software that developers used to have to write themselves. Or spend endless hours debugging platform makers' tools and early dev systems.

Now, unless you're pushing the hardware limits of a particular platform, more resource can be spent on design than was formerly the case. Heck, you don't even have to chase the best possible resolution for your artwork -- stylized art can be easier to produce and look very nice. Even a style as basic as Minecraft works just fine, thank you -- 100 million copies says artwork is not necessarily the only reason people will buy a game.

Now VR is sucking up a lot of time and energy among developers trying to figure out how to build great VR titles while the hardware is still in flux, and the tools are still being refined. Profits are years away, in all likelihood. Does that mean we shouldn't build VR titles? No, the effort has value in many ways -- and at some point VR will become a market where a developer can make a profit, and those who have labored in the trenches are going to be more likely to reap the early benefits of that.

Still, game developers should realize that the platform is not the most important thing any more -- your brand is. Game players are less platform-fanatic than they used to be, and with the incredible expansion of the game-playing audience through mobile devices all the most dedicated game players have at least two game-playing platforms: Their console or PC and their smartphone. Many have multiple game-playing devices. Do they only play games on one device. Nope, for the most part, they play on the device that makes the most sense at the moment. Hearthstone may be better on a PC, but when you're away from your PC it plays just fine on your phone.

The larger audience of game players cares more about playing their game than on what device it's on. Play Candy Crush on your phone while you're on the train, on your PC at work (during breaks, I hope!). Games should try to be on the platform where their players are likely to be found.

Besides, profits come from games that last for years -- and those are brands. Look at Call of Duty, for instance -- does it matter what console or PC you find it on? Not so much as the brand name does. Sure some game brands are tied to a platform, like League of Legends. But many of the games that earn a billion dollars or more a year are found on mobile -- which means, at minimum, Android and iOS, and probably a special version for the iPad, too. Most top console games these days are found on the PS4 and the Xbox One and on PC as well. Most of those top console brands also have mobile titles linked to the brand, even though the gameplay may be completely different. Heck, Fallout 4 had a top mobile title for months simply on the strength of its brand being applied to the smartphone game.

So, while you may spend a lot of time getting your game to work on given platform, if you want to make money in the long term with that effort you should be thinking about how you can extend that brand to as many platforms as you can, assuming it's successful on the first platform. Don't be thinking "I make (platform X) games;" instead be thinking "I make (specific genre) games" and try to figure out how you can get those games in front of all the players who'd be interested.

Brand first, platform second. That's how you should think about building and keeping an audience over time, which is ultimately how you make money with games.

Friday, June 10, 2016

PS4 'Neo' (PS4K) Confirmed; Scorpio Still Rumored

Sony has confirmed that they will be introducing a more powerful PS4 with 4K output, but the company will not be showing it at E3. They still aren't getting specific about the features, or when it will launch, other than to say it will have 4K output and all PS4 games will work with it -- and it will be more expensive than the PS4.

The main reason for the PS4K is rumored to be in order to make the PlayStation VR work better, and to provide 4K output to support Sony's 4K TV business (the console may have a 4K Blu-ray player, which would be a strong incentive to buy for 4K TV owners). Note that this doesn't mean games would be playable in 4K resolution; that requires very expensive levels of graphics hardware unlikely to be found in a console that would (probably) retail for $499 or less. Although I could see making some cut scenes or an intro video in 4K for a game... a pure marketing feature.

Rumor still suggests that Sony will introduce this new console this fall, in conjunction with the already announced launch of PlayStation VR in October. Normally you'd expect a fall device to be introduced at E3, but Sony may be thinking that the PS4 Neo would drown out all of the other things Sony wants to talk about at E3. That's certainly a valid concern. By confirming the device before E3, Sony is no doubt hoping that they can focus on new PS4 titles at the show, and perhaps generate some pre-E3 buzz greater than Microsoft.

Also, Sony is doubtless trying to keep current PS4 sales from slowing down too much with a new console on the horizon. SCE head Andrew House confirmed that the current PS4 would continue to be sold; they will have both consoles on the market for the foreseeable future, separated by price and capabilities. But both will be able to run all software for PS4. (House said making software work with the PS4K would be relatively easy, though one would suppose that varies depending on how much developers want to improve the game's look for the PS4K version.)

There are risks here, though. Now that the PS4K is real, journalists and social media may still focus on that rather than new PS4 titles. You can bet there will be questions about every upcoming Sony title like this: "What will this look like on PS4K?" Also, knowing that a PS4K is coming, some buyers may hold off picking up a PS4, though probably most of those who really care enough about horsepower to pay more for a more powerful console already have a PS4. GameStop will probably get a bunch of PS4s as trade-ins when the new PS4K comes out.

Perhaps the greater risk for Sony is that it gives Microsoft a chance to capture more E3 buzz by actually talking about upcoming hardware. Microsoft is probably going to introduce a smaller, cheaper Xbox One  -- that's a normal part of console evolution. Microsoft is also rumored to have a more powerful Xbox One in the works, codenamed 'Scorpio', that is rumored to be even more powerful than the PS4K.

Now, Microsoft may also want to avoid depressing Xbox One sales by announcing a more powerful console too far in advance. Rumors have suggested a 2017 introduction for the Xbox One Scorpio; touting it now would seems to hurt Xbox One sales, unless you offered some sort of upgrade plan. Which Microsoft could in fact do if they really wanted to; one of the big advantages Microsoft has over Sony is the immense amount of cash Microsoft has (over $100 billion at last count). Microsoft has been reluctant to use this weapon in the Xbox One fight up to now, but they could unleash it.

If Microsoft is really planning for a Scorpio launch in 2017, they'd be wise to keep its features unspoken for now. Let Sony and Nintendo reveal everything about their new consoles (PS4K and NX) by the end of this year, then Microsoft has a chance to tweak the Scorpio a bit to make it as competitive as possible. Yes, complicated changes would mean a delay, but simple things like choosing a higher clock speed for the GPU or CPU, or adding more RAM or higher-speed RAM could make a big difference in the specs without changing the timetable. That might increase the component costs for Microsoft, but they could certainly deal with a lower profit margin better than Sony or Nintendo could.

Of course, one of the big reasons to create a more powerful Xbox One is virtual reality (VR). Given that the Oculus Rift ships with an Xbox One controller, it's not difficult to imagine Microsoft would like to have an Xbox One Scorpio powerful enough that an Oculus Rift could plug into it. Or a HoloLens.

It will be interesting to see exactly what gets announced at E3 this year.

Sunday, May 29, 2016

The Origin of Crunch Time for Game Development -- and Why It Should Die

Recently, the issue of 'crunch time' in the games industry has come to the forefront of discussion – crunch time being the still-common practice of forcing employees to work 60, 70, 80 hour weeks or more, sometimes for months on end, in order to complete games. Crunch time is in the news because of an IGDA report on the issue (and a promise to work with publishers about the issue, because according to an IGDA survey 37% of employees report they are not compensated for crunch time).

What really brought the issue to a boil was the derisory response to the IGDA report by industry veteran Alex St. John, who essentially said that crunch time is just part of the business – he concluded his screed by saying "Don’t be in the game industry if you can’t love all 80 hours/week of it — you’re taking a job from somebody who would really value it." Now, a number of people like Rami Ismail have fisked St. John's article (among others who wrote in opposition, his own daughter), so I don't feel the need to directly address the issues raised.

Still, I want to explore why crunch time arose in the games industry and became a standard part of the production process for many years – and why most of those reasons are no longer valid for most games. Let me make one thing clear up front: I think when crunch time occurs, everyone should be well compensated for it regardless of the reasons behind the crunch. And that while crunch time is often due to avoidable problems like feature creep or bad management, there are times when it's the least bad alternative – but those cases should be rare.

The Origin of Crunch Time in the Games Industry
Crunch time arose in the games industry because of the need to hit specific ship dates for several reasons. These reasons were dictated by the technology and the business model of the time, which was in the 1980's as the initial videogame console era (led by Atari) came to a close. Whether games were being created for consoles (after 1985, this was the Nintendo Entertainment System or NES, and later the Sega Genesis and other systems) or for personal computers (the Apple II and Commodore 64, initially), they all had some common features. The games were put onto some form of media (a cartridge or a floppy disc) and put into a box along with instructions, and then sold in retail stores.

This meant that manufacturing had to be prepared in advance for the final game code (the "gold master") to be ready for duplication, along with all of the packaging. Retailers had to be told of the game's ship date months in advance, so they could place orders. All marketing efforts, including advertising and PR, had to be created months in advance, with large amounts of money spent, in anticipation of a certain ship date that had to be chosen many months before the software was finished.

Add to all of this, once the software was duplicated onto its medium there was no way to change it or patch it – there was no online connection. Theoretically, you could perhaps recall all the packages you had shipped and replace the software, but the cost would be staggering – and I don't know of any cases off-hand where that was done.

Because of all these factors, the games had to be finished, tested, and debugged by a certain time or else the publisher would lose a lot of money. A missed ship date could mean advertising appeared months before release, rendering it useless (or worse than useless, if it got people mad).

Add to this the problems associated with early console games, which were all on cartridges (memory chips in a proprietary plastic case) that were only manufactured by the console maker. If you wanted to put out a game for Nintendo's Super NES, for instance, you not only had to have your game approved by Nintendo (which meant the game had to be submitted in final form), but Nintendo would manufacture the game as well. You had to tell Nintendo months in advance not only when you would deliver the game, but also how many cartridges you wanted made (and pay a large amount of the bill up front, too). If you missed your delivery date, your manufacturing window might be gone for weeks or months – so you might well miss the all-important holiday season. Thus, a huge incentive to go into crunch mode and get the game done.

Don't forget, too, that manufacturing was only part of the issue – huge amounts of money were spent on time sensitive marketing and PR. Advertising in magazines had to be created and scheduled months in advance. If you pushed out your game release by a month or several months, you'd miss the issues where your game was advertised – or worse, where your game was featured on the cover or previewed in a feature article.

Many video game companies in the '80's and '90's were positioning themselves to go public through an IPO – that was the primary way companies paid back initial investors at that time, and employees could realize huge amounts through their stock options. Thus companies like Electronic Arts were focusing on meeting quarterly financial goals for years in order to look good prior to an IPO – which meant meeting projected sales in a quarter, which meant doing whatever you could to ship software on the date you had promised many months ago. Crunch time again, with the carrot that your crunching could make you rich someday through a more successful IPO.

Finally, there was typically an extremely limited time to generate revenue from your game. Retailers didn't keep games around for more than a few weeks unless it was a very strong seller. Over 90% of a game's lifetime revenue might occur in the month after its release – so if that month was not perfectly timed with all marketing efforts and the peak game-buying season, you could be losing millions. Hence, crunch time.

Now, none of those reasons to go into crunch mode meant that you shouldn't compensate employees for crunching. Some companies did directly through added pay or bonuses or vacation time. Sometimes it was more indirect (the stock options might have an increased value). Often crunch time just wasn't compensated at all, but expected.

Why Crunch Time Should Now Be Rare
If you think about most of the reasons I listed for the existence of crunch time, most of them just don't apply in today's game market. Many of the most lucrative games earn their revenue over years, and are essentially services – like League of Legends or Clash of Clans. New content is constantly being delivered every few weeks, but it really doesn't matter what day it ships on. There's no manufacturing times, or long marketing lead times. New content is created and presented to players. Crunch time would be burning out your employees to no financial purpose.

As for getting the game perfect before it ships, that does matter to some degree – but it's nowhere near as important as it used to be when you couldn't patch a game. In fact, many games now make a point of having early open betas to let people test out the game and help refine the design, as well as add to the marketing excitement. Yes, games that are sold in retail stores still have some time constraints that might encourage crunch – but not to the same degree that it used to.


Really, crunch time should be rare if you are at all good at scheduling and don't succumb to feature creep in your game design. Yes, there are still good reasons for crunch – for instance, you're a small developer and you're going to run out of money unless you get your new game out the door generating revenue. But managers at all levels should strive to avoid crunch whenever possible. When it's necessary, make sure you are compensating the employees as generously as you can for the immense sacrifice you're asking them to make.

Tuesday, March 22, 2016

PlayStation 4.5 And Xbox One Plus Make Sense

The latest rumor making the rounds is that Sony and Microsoft are both considering introducing new versions of their consoles, possibly as early as later this year. Microsoft's Phil Spencer even hinted at this in a talk, as reported by Polygon. The rumors are that these machines would not represent a full new generation of consoles (which usually means a new architecture), but instead they would be a speed bump for better graphics performance.

Of course there are many questions, starting with "Why?" There's an obvious answer from the perspective of Sony, which is still in the business of selling TVs: The PlayStation 4 cannot produce 4K output, and increasingly 4K TVs are taking over in sales. Additionally, a PS4.5 (which some are calling "PS4K") could potentially build in the additional graphics box that will be coming with the PlayStation VR.

There's precedent for this sort of speed bump -- Nintendo's done that with the New 3DS, for instance. Of course, fans instantly want to know if there will be some sort of upgrade path for those who bought the original console. That seems unlikely, though certainly GameStop would probably offer a trade-in value for your old PS4 or Xbox One.

One thing that's quite different with these consoles is that they use standard PC architecture in many ways, so dropping in a new CPU and a new GPU wouldn't necessarily be all that difficult. Given how component prices have dropped, we might not even see much of a price increase. It's likely that Sony and Microsoft would keep their current consoles around at a $299 price point, and then charge $399 for the speedier version.

As far as compatibility goes, there's no reason that these console would have any issues running current software. Would developers conceivably build new titles that would require the added horsepower? Sure, but supporting the older consoles would be easy enough that it should happen in almost all cases. Games would probably just detect what hardware they were running on and change graphics modes automatically, or give you a couple of options.

These new consoles would also likely be able to read the new 4K/Ultra HD Blu-Ray discs that will be coming out. Otherwise the consoles would probably look much the same, except for some obvious visual way to distinguish them from the original versions.

No doubt consumers would be annoyed to some extent if more powerful versions of consoles they already owned were introduced. Some sort of trade-up program, even if it were done through a third party like GameStop, would help mitigate this backlash. Sure, people could sell their old consoles and buy a new one themselves, but it would be better if Sony and Microsoft sweetened the deal somehow; a low-cost way to do that would be to offer some free games for trading up

While still only rumors, this sounds like a good idea. This would extend the lifespan of existing consoles (and the sales lifespan of existing software), and keep up with the relentless advance of PC graphics, and provide more horsepower for VR and AR. For Sony, it helps sell 4K TVs and makes the PlayStation VR more attractive. For Microsoft, it might make the Xbox One more competitive graphics-wise with the PS4 (or rather, the PS 4.5), and perhaps provide enough horsepower for the Xbox One to drive an Oculus Rift. That would be a very smart move on Microsoft's part, even if it meant losing some money on each console sold.

This is a chance for Microsoft in particular to reset the console race and to actually move ahead in the VR race. Microsoft has had a huge advantage over Sony that hasn't been used so far -- Microsoft's huge pile of cash in the bank (well over $60 billion), compared to Sony still struggling to turn a profit. Microsoft could provide more horsepower than Sony at the same price, even if the company had to lose $50 or $100 per console. Say that's over 20 million consoles, by which time the component cost would have fallen enough to make much of that differential disappear. So it costs Microsoft perhaps $2 billion to catch up to Sony in terms of installed base; given how much more software the company could sell that seems like a reasonable deal.

Tuesday, March 8, 2016

Nintendo's NX vs. Xbox One vs. PlayStation 4

Nintendo is currently working on its next console system, the NX. The company has announced no details as yet about the hardware, the software, the release date, or the price. Rumor has it that Nintendo has shipped NX development systems to key developers, who are already hard at work on software for the system. Given how Nintendo's sales of the Wii U and the 3DS are going now (the company just revised its forecast downward yet again for its current fiscal year), it's safe to say we should see the NX sooner rather than later.

The obvious, traditional launch plan (and Nintendo has great respect for tradition) would be to announce the NX at the E3 show this June, and ship it to stores prior to the Thanksgiving weekend -- perhaps as early as mid-October.This provides time to build up excitement and pre-orders, and maximize initial sales for the holidays.

The NX Hardware
There's a persistent rumor that the NX system will be both a home console and a handheld device, merging Nintendo's two main hardware lines into one line. This would simplify the company's production and marketing, as well as third-party development efforts. However, it leads to the core design problem facing Nintendo: Cost versus power. Nintendo could make the NX more powerful graphically than the Xbox One or PS4 with the advantage of the relentless advances in CPU and GPU power -- the NX design is at least a couple of years in advance of the Xbox One and PS4, which means CPUs and GPUs have gotten much better at the same price. Portability, though, is much harder to achieve with graphics that exceed current consoles. You quickly run into issues of power consumption and heat, not to mention increased costs for trying to put powerful chips into a portable package.

Even if the handheld rumor is not correct, Nintendo will still have to decide what the NX retail price should be -- which controls how powerful the console is. Nintendo could conceivably beat the Xbox One and PS4 in terms of graphics power, but probably not for much less than those consoles are selling for right now.So, will Nintendo try for a higher price point for the NX than the competition (roughly $349 now) or will it try to undercut the current console pricing?

Nintendo has had great success before with undercutting the competition's price (the Wii was a great example of this), but may well choose to make the NX more expensive in order to put in desired features. A hybrid home console/handheld will have to deal with screen costs and battery costs, and if the entire system is to be competitive graphically with current consoles (or better than them) that means there will actually be two parts to the system -- a portable part and a base station, where the base station has additional graphics capability (at least; it may also have more storage and connectivity options). That adds significant costs as well.

The bottom line is this: If the NX is more powerful than Xbox One/PS4 and has a portable component, it's going to be more expensive than Xbox One/PS4. Now, Nintendo has stayed away from the technological arms race for decades -- it's been content to be less powerful graphically than the competition, preferring to have a lower cost and some unique feature to set itself apart, as well as its own extremely popular IP.

The NX Software
If the past experience from Nintendo's previous hardware is any guide, don't expect too much from the system software or interface for the new NX console. All of the basic functionality will be there, of course, and there may be some added features like connecting with mobile devices.

The issue of backwards compatibility will n doubt be raised, but this is something you shouldn't expect -- at least not right away. If Nintendo changes the basic system hardware to a different platform (a distinct possibility), then compatibility will be much harder to achieve. The company's resources would be better spent on getting new games ready for the system.

The most important thing for Nintendo to get right is its first-party software. The Wii U should have shown quite clearly the danger of not having key Nintendo franchises ready at launch. The really good Wii U games didn't begin to arrive until the console had been out for almost a year, and that certainly didn't help sales. Thankfully, we have an obvious candidate for an NX launch title in the new Zelda game, which coincidentally (ahem!) is due to come out this year. Hopefully the game will launch for both the Wii U and the NX, with the NX version showing some very clear improvements that will help convince fans to buy the new hardware. A truly compelling Zelda game for the NX could motivate more than a few people to spend $400 or $500 for the new console, regardless of what else is available.

NX Marketing
We can hope that Nintendo will budget a significant amount for NX marketing. First, though, the company should make sure to name the system properly -- "Wii" was widely acknowledged as a lousy name, and Wii U compounded the error by giving many people the impression it was not a new console at all, but merely some sort of peripheral. Or, if it was a new console, Wii U didn't make it clear that it was better in any way. If Nintendo uses the word Wii in any way for the NX console's name, that would be a huge mistake.

We should expect plenty of TV advertising, because that's what Nintendo has done in the past. It would be nice to see some events (Nintendo has done well with these in the past few years), and hopefully get the new hardware and software into the hands of influencers. Maybe Nintendo can truly embrace social media for the first time, and let people stream NX experiences. Building a launch around streaming would be a clever plan, but it requires that Nintendo break free of its inherent conservatism. Let's hope they can.

The Prospects for the NX
It's one thing to point out all the positive things Nintendo could do to make the NX launch a success, but what Nintendo is likely to do is quite different. Nintendo will probably price the NX higher than it should, design it with less power and fewer features than it really should have, and have fewer software titles than it should have at launch. That's just the way the company has tended to do things in the past decade.

We may or may not see Nintendo rally good third-party support for the NX, but that's probably not the deciding factor in how successful this new platform will be. The alliance with DeNA may be more important, if it means Nintendo gets a good back end for online services and perhaps some help in creating mobile titles that connect with NX titles.

The difficult thing for Nintendo to realize is that the world is fundamentally different in many ways from the world of Nintendo's greatest success. Back then, there was no Internet to speak of; multiplayer games were something you did with all players sitting in front of the same TV. Consoles had the best animations, graphics, and sounds. Mobile gaming was only available on a Game Boy.A free-to-play game? Oh, you mean a demo?

Nintendo thrived in that world, especially with the lock-in provided by its console hardware. Selling hardware was a key part of the strategy. Now, great gaming hardware is all around -- everybody has at least one great gaming device, and usually more than one (a tablet or a PC in addition to a smartphone). Yet Nintendo is persisting in trying to sell proprietary hardware, with its low to non-existent profit margins. Meanwhile, a company like Supercell has 100 million daily active users across only four games, and pulled in over $1.5 billion last year with about 100 employees.

Yes, Nintendo has created many iconic characters and memorable game franchises. But how long has it been since Nintendo created the last such character or franchise? A decade? Two decades? When its greatest hits of the last few years have been the third or fourth or 8th or 10th version of a franchise, you have to wonder how creative the company still is. Splatoon is great, and fresh, but it's not a new Zelda title.

So I'm skeptical that the Nintendo NX will change the overall course for Nintendo. At best, it will help keep the company going forward, as it overall share of the market dwindles with the continuing strong growth of the rest of the industry. Nintendo was once directly or indirectly responsible for about 90% of the game industry revenue, some 25 or so years ago. Now it's under 5%, and that percentage will continue to fall. Let's enjoy it while we can, and celebrate when the company can come out with another great game, for as long as that continues to happen. Unless major changes in direction happen, that won't be forever.