More E3 Musings

The press releases are starting to spread like a massive oil spill from E3, though fortunately in this case no wildlife is threatened. Still, there's the sticky ooze to contend with... in this case, a sludge of desperate hyperbole trying to build up the traditional game industry's prospects. Much of the attention and hope for the future is focused on two hardware trends: Motion controllers and 3D displays. Many in the game industry seem to be expecting these things to cause a surge of new interest and sales in game consoles and games, putting the industry back on a solid sales growth trend. Sure, and if pigs had wings maybe bacon could fly onto your plate, but I wouldn't expect it.

Here's some evidence that, industry hopes to the contrary, the customers aren't exactly itching to spend money on motion controllers. This study shows there's less than 10% of Playstation and Xbox customers intending to purchase either Move or Natal, respectively. Not exactly a massive sales surge. What would it take for these things to be successful? Well, they'd have to be priced comparable to a game ($49 or $59), and include with that price a hotly anticipated game (or a sequel to a best-selling series) that takes full advantage of the new hardware. And then they'd have to market the hell out of it. With all that, you could maybe get 60% penetration of the existing base... and perhaps you'd want to start packing that thing in with the console in time for the Christmas market, so you would know you'd have 100% of future sales with the new controllers. Then you'd better have a lot of help and encouragement and some funding for new games that use your new hardware, and make it compelling for new customers to buy your hardware. Then perhaps you'd get some significant sales increases due to your new hardware. You think it's very unlikely that this will all happen? I agree.

And it's even worse for the 3D display idea. Either customers are going to have to drop $2000 or more on a new 3D-capable TV, and $100 for each pair of glasses, or get a new 3DS which doesn't require glasses. And aside from the ability to more easily generate nausea in gamers, how exactly is this going to improve the gameplay? How well will the 3DS work in a range of ambient lighting conditions, and even if you do get a good 3D effect, how again does it improve gameplay? Those answers aren't obvious.

Maybe E3 will show clearly how these new hardware technologies will transform the industry and put traditional game sales back into a solid growth pattern, instead of trending downward like this year and last year. Meanwhile, business model innovation has been posting amazing growth in the gaming industry: Free-to-play, social gaming, mobile gaming, virtual sales, DLC... and soon Google TV and Apple TV. Much of that sales growth is proven, and the wiser publishers are jumping into it. Look for announcements in those areas if you want to identify companies poised for growth. Companies that ignore those areas in favor of shiny new hardware are the ones taking the huge risks.