Miyamoto Retiring?

This guy doesn't look ready to retire.

A rollup of stories from IndustryGamers this week, as featured on Kotaku can be found here. There's been a lot going on, and perhaps the most interesting flap has been over an interview that Wired conducted with Nintendo's star designer Shigeru Miyamoto, where he talks about retiring. Of course Nintendo, no doubt worried about their stock price, rushed to say he's not really resigning. I think the truth probably is Miyamoto wants to shift his responsibilities some, and maybe not "retire" in the Western sense of the word (as in not work any more), but maybe change from overseeing development efforts to being more hands-on.

Somehow Nintendo would like to get Miyamoto to sprinkle his magic dust over every title they do, or at least make investors think that he does.

Although I think what is really important is to get a whole crop of designers who can do what Miyamoto does, or at least approximate it. If he could train up some developers, that would be hugely useful to Nintendo. I'm not sure if that;s even possible, though, but it's certainly worth a try.

This Week In The Business

If only making money from games was this simple.

My son rightly pointed out I should link to this post on Kotaku, which rolls up a number of the top stories on IndustryGamers for the week. It's a good overview on the important stories in the game business for the week.

Nintendo Enables Paid DLC

Here's a story that I've just posted to IndustryGamers.com, about how Nintendo will be enabling developers to put DLC online in the 3DS eShop and actually charge customers money for it. This is apparently something Nintendo is doing because developers have asked for it, not because the Big N particularly thinks they should charge for DLC. I'm sure gamers everywhere cheer at the thought of free content, especially more free content for games they've already purchased. But is this really a good idea, ultimately, for a business?

After all, the biggest change in smartphone games is the shift to free-to-play, going form only 12% of smartphone games to a project 92% of them in a couple of years from now. If the games are free, how will they make money? Sale of virtual goods... AKA, paid DLC in another guise. If that's the right path in smartphones, is it necessarily the right path for consoles?

Well, maybe, maybe not. I think part of the reason (a big part) that free-to-play (F2P) is taking over smartphone games is that there are so damn many games out there it's hard to get people to commit to buying one. If it's free, then people have one less barrier to trying it out, and then if they like it they might spend money on buying things for it. So F2P is a way to encourage discovery. On a platform like the 3DS, though, there are very few games (compared to smartphones, orders of magnitude fewer), so buyers aren't as overwhelmed... and therefore maybe they don't need to be enticed by free games to make a buying decision.

I see that counter-argument, but I think the bigger picture for consumers is that they see "Hey, I can get a smartphone and have thousands of free games" which may lead them away from choosing a dedicated gaming handheld. Oh, the hardcore gamers will see the advantages of the dedicated handheld, but that audience isn't very big compared to the size of the smartphone buying audience. The comparison between $30 games on a 3DS and free or $1.99 games on the smartphone isn't helping dedicated handheld sales at all.

The real tough part is that making a game F2P means fundamental design changes; you can't just take any old game and make it F2P and expect it to work properly. And many $30 games aren't really worth the full price, especially when it's easy to find them used. I think games have sustained really high prices for a very long time, but the party is rapidly coming to a close. For every Call of Duty or Skyrim, there's dozens of games that don't even cover their development and marketing costs.

I think Nintendo's fighting a rearguard action here, but the industry as a whole is inexorably moving to lower game prices up front (in many cases, free) and looking to make their money after the initial game acquisition. Companies are trying like hell to increase customer engagement with game brands, using Facebook and multiple tools to keep you continuously interested in their game. Companies are racing towards this goal of comprehensive, multiplatform brand engagement, but I'm not sure what exactly they'll find at the end of the race.

2011 has been a year of big changes, but 2012 may be even bigger.

Things Are Changing

I just posted an interview on IndustryGamers.com with Warren Spector, where he talks about how things have been changing in the game business. Check it out here. I was thinking of calling it When Dinosaurs Ruled The Earth, but thought better of it.

I'll be interviewing other Game Industry Legends in the coming weeks, like Richard Garriott and Sid Meier. It's interesting to compare and contrast their thoughts about the vast changes taking place in the game business these days.

Apologies to my audience here, but the exigencies of IndustryGamers have kept me hopping. I hope to get back to regular posting here soon.

Book Publishing 2.0 Emerging

As if we needed any more evidence, Kobo has announced it's signing deals directly with author, just like Amazon. It's as Amazon exec Russell Grandinetti told the New York Times recently:

 "[T]he only really necessary people in the publishing process now are the writer and reader. Everyone who stands between those two has both risk and opportunity."


Which is something Joe Konrath and others have been saying for a while. It's a great time to be an author, especially if you have some understanding of business and marketing. Some authors are lost in this brave new world without a publisher to take care of everything for them, no matter how ineptly that might take place. I've heard one best-selling author describe how she just writes a huge number of pages, and then her editor turns it into a novel. (One of the many unsung editors who deserve far more credit than they ever get.) The author sounded like she really couldn't be bothered with figuring out how to tighten up her work, put it in order, make it make sense... I think that sort of author, who is deeply reliant on a publisher's help, is going to struggle without a publisher.

Most authors are certainly going to need a graphic artist to design a cover, develop formatting and such; an editor to at least find typos, and probably to help refine their writing; technical help in preparing their books for various electronic platforms; business and marketing advice on banking, company structure, how and where to market, and a zillion other things. Certainly some authors are familiar with some or all of this; some may even be able to do a pretty good job of all those things. Most will need to find people to help them with some or all of these tasks, and usually for a flat fee. These are all functions that publishers took care of, but they took an enormous percentage of sales to do all that... which makes sense given that books then had a huge capital cost and inventory and shipping costs. All that has gone away with digital distribution, and even with print-on-demand. Bookstore and newsstand distribution is still the one area where the self-publisher can't go without a partner, and that may be a good reason to go the traditional route with a book... at least so you can attract attention to all those other books you are selling yourself digitally.

I'm also excited to see that authors are beginning to experiment with different lengths, and styles of publishing. Let's see those monthly pulp adventures return, the 90-page adventures of The Shadow and Doc Savage and countless others. The new magazine era is upon us, for digitally published content. Apple's new Newsstand app in iOS 5 is apparently causing huge jumps in sales for magazines. Which is great, because that may help magazines finally make the transition to digital.

It all means I'm going to have to make some time to work on the books I want to write...

New Way To Publish An Ebook

The online book publishing service Blurb is offering a way to publish collections of photos as an e-book for the iPad,  for only $1.99. If you're in downtown Manhattan, watch out for falling publishing executives. The end is near for traditional publishing.

Baby Game, For Real

See, it says Serious Game, so you know they aren't foolin'.

Seriously, why can't we get games like this in the USA? The Mommy Tummy game certainly has unique aspects for a marketer to grab onto. Look, you get to wear a suit with special chest and stomach sensors, and simulate an entire pregnancy in only a few minutes. Don't jump around too much, or you'll have a miscarriage!

His kung fu is strong.

Although perhaps they need a longer game play experience than 2 minutes... maybe they could stretch that out to a few hours. Make it multiplayer, let someone else play the baby... just for kicks.

As a sequel, perhaps a simulation of raising a child. For added realism, it deducts amounts regularly from your credit card.

Maybe this one isn't going to be hitting the top of the bestseller lists soon, but it's definitely thought-provoking.

Zynga is about to announce something big... Probably support for Facebook's newly announced HTML5 app for iOS and Android. Sounds cool, but how will in-app payments split between Apple, Facebook and Zynga? More to follow.

Steve Jobs, R.I.P.

It's a sad day in the high-tech world. Steve Jobs has passed away. He was the driving force behind the Apple II, which created the computer game industry, and later the iPhone, which transformed the industry. Let's not forget Pixar, either, and the amazing movies that they have made. Or the iPad, which is busy remaking the laptop market and creating a whole new category of devices.

I never met the man, though I did go to a few Homebrew Computer Club meetings back in the 1970's. I still remember when Ty Roberts (now CTO at Gracenote) came by the Hero Games offices in 1983, to show us the prototype of this awesome new computer called the Macintosh... Ty wanted to create a Champions game for it. That was cool, but what that computer really meant was that a few years later, with a laser printer and Pagemaker software, it made putting out books incredibly easier. And all of that was really because of Steve Jobs' vision. I hope his companies continue to do great things, and carry onward in his memory.

Requiescat in pacem.

New Directions

I'll be hanging out here.

I apologize for not posting much in the last week, but I've been busy. I've accepted a position as the West Coast Editor for IndustryGamers.com, where you will see my byline regularly posting on a variety of topics. I'll be continuing this blog, but my focus will shift away from news and analysis (since that will be on IndustryGamers) to marketing tips and items about the book trade.

Look for some new pieces here daily, once I get into the groove... In the meantime, check out some of my latest stuff:

The 3DS vs. the PS Vita: Who Will Win?

How The iPhone 5 Could Reshape Gaming

Japanese Game Marketing

Love the title.

I watched Nintendo's press conference live last night, and it was an interesting experience. It was all in Japanese, so I didn't understand much of what they were saying. At then end of the stage presentation, Nintendo ran a series of commercials, trailers, and interviews for over an hour. (I guess this was their way of getting people to leave the auditorium.) It was an interesting insight into Japanese marketing techniques.

There was a seemingly endless series of cartoons where Gatchaman was busy selling Monster Hunter Tri G. The classic Tatsunoko animation (resembling the worst of Hanna Barbera) was spiced up with 3DS's drawn in, along with a caricature of an American professor (speaking hilariously bad Japanese) and clips from the video game. I tried to imagine if, say, Activision used old Scooby Doo episodes to sell Modern Warfare and included a Japanese caricature speaking broken English... but the film in my head kept breaking. I know that Japanese like kawaii (cute) things, but this was the visual equivalent of fingernails on the blackboard. The Monster Hunter visuals were compelling, but just as I was enjoying those the animation would come back like an annoying sidekick.

I thought that was odd marketing, but then I saw the ad for Loveplus, one of those Japanese dating simulations. This ad featured a couple of young Japanese hipsters and a young Japanese woman playing the dating sim... which featured a Japanese schoolgirl in traditional schoolgirl attire. Very creepy to anyone who's ever watched Law & Order: Special Victims Unit.

Then there was the surreal ad for Tekken 3D Prime Edition, featuring a Japanese businessman in his office who gets attacked and defeated by one of the Tekken characters flying through his window... and at the end we find the Japanese businessman was working for Capcom. OK, it was surreal, but bonus points for taking a shot at a rival.

All in all, it was an interesting exercise revealing just how different Japanese culture is from American culture, and how you can't expect marketing messages to transfer between them. You have to create a brand-new marketing campaign for each country; you may even need to change the name of the product. Like Square Enix's new RPG, Bravely Default: Flying Fairy, which would probably find a new title before coming out over here. And many titles, like Loveplus, aren;t even worth the cost of translating them; they're just so far away from what customers would buy that sales would be miniscule.

Games Sales Down 23% In August

The chart is small, like the overall sales numbers.

The relentless slide of traditional game sales continued in August, as sales dropped 23% over last year. Last year, $873.8 million; this year, $669.9 million. Software sales were even worse, with a 34% drop to $264.8 million. Hardware fell 12% (to $249.4 million), and accessories dropped only 1% (to $134.7 million).

So far this year, overall sales are down 5% from last year. Of course, NPD was quick to point out that there are a lot of good titles lined up for the 4th quarter: Modern Warfare 3, Battlefield 3, SkyRim, SWTOR, and more. NPD's Anita Frazier expects with all of those blockbusters, sales for the year could end up at flat or maybe even a little positive.

I suppose it's good to be optimistic, but I think a more realistic assessment is that the industry would be lucky to see sales end up at even for last year. With all of the big titles coming out around the same time, there's no way customers will have the money or the desire to get all of them. Take one example: Are people really going to buy both Modern Warfare 3 and Battlefield 3? Not when they're coming out within a couple of weeks of one another. Customers will pick one or the other, and then play it for weeks or months until they feel they've gotten their money's worth. Now, if one of these titles came out six months ago... or six months from now... they'd sell a lot more.

More than that, many of the customers for the biggest titles are the type who buy multiple titles... when they can afford them, and when they're not already busy with a new game. Look, if you've been eagerly awaiting Star Wars: The Old Republic, you're going to spend all your gaming time with that once it comes out, at least for a few weeks. Which means you're not going to be picking up Battlefield 3 for a while, even if you plan to eventually. If you have no time to play it, what's the point? So that purchase gets pushed off a month. This scenario will be repeated in many variations. Too many titles at the same time means lower sales for everybody.

It's going to be a very busy holiday season, but don't expect the overall industry tally to be higher than last year. If it is, that's truly reason for celebration... before the sales declines continue in 2012.

Can Free Apps Sell Games?

GetJar is trying a new gambit in an effort to generate more app sales. They've implemented the GetJar Gold store, where they've taken 50 top Android apps and offered them for free. It's "free app of the day" on steroids, and represents a serious effort to draw some attention away from Amazon's app store. The 50 titles available at launch include such hits as Fruit Ninja THD, Pocket Legends, and Age of Zombies.

The developers of these games will get paid by GetJar, so it's not a bad deal for them. GetJar plans to generate revenue from GetJar Gold by offering sponsored listings to other app developers. Developers can bid from 1 cent to $1 or more for each install they get by being listed. Sponsored apps are shown with a different color coding alongside the high-quality free apps.

It's a clever method to entice a horde of buyers in by offering high-quality free apps, and while they're busy downloading some of those, customers will be seeing other apps they might never have found. It will be interesting to see how well the model performs.

These days, though, small developers should be happy to have some new way to try out in order to find more customers.

Who's Spending Money For Freemium Games?

The 18-24 crowd spends more time, but the 25-34 crowd spends 3x the money.

That's a key question for mobile game developers. At least, it should be if you expect to maximize the revenue you get from the freemium game you're developing. (And if you're a mobile developer who's not working on a freemium game, you're missing out on more than half the revenue produced by mobile games.) Mobile analytics firm Flurry has some data for you.

The data was gathered from a sample of iOS and Android freemium games with over 20 million users across more than 1.4 billion sessions, so I think most people would agree that's a statistically significant sample to look at.

From the chart you can see that game usage skews heavily towards the younger audience, which shouldn't surprise anyone. I'd also guess that smartphone usage tends to follow a similar distribution, with the over 55 crowd being the least likely to even have a smartphone, much less play a game on it. However, the money is definitely coming from the older audience; teens don't spend much at all on freemium games even though they play a lot of them. The real pot of gold lies with the 25-34 age range (spending nearly half the money) and with the 35-54 group (spending more than a quarter of the money). If your game targets those older spenders, you could make more money with fewer overall downloads.

This is important data as you consider the design of your game, the style of the artwork, and the marketing. If you're interesting in maximizing your returns, you need to consider the realities of the marketplace.

Market Size For Gaming Platforms

Numbers of console sales thru March of 2011.

One way to look at where to invest development resources is in how rapidly a market is growing. Yes, the installed base is nice, but it's also true that new owners of a platform are more likely to pick up new games... especially ones that show off the power of their platform.

Let's look at the console market, for example. Excluding the holiday season, the Xbox 360 has been selling somewhere around 250K to 300K units a month lately; the PS3 (prior to the price cut to $249) somewhere around 200K units, and the Wii about 175K units. Of course, they all have installed bases in the tens of millions; the Wii is the champ there at around 90 million sold worldwide, the Xbox 360 around 55 million, and the PS3 around 45 million.

Those numbers represent a pretty solid market base to sell games into. Sure, there are many more computers, but consoles are mainly for games, and computers are used for many different things. How does this compare to smartphones? Android smartphones are selling at the rate of about 18 million per month right now, with over 100 million out there already. Apple's iOS devices have an installed base around 200 million, if you include all the iPod Touches and iPads; the phones alone are around 120 million. And iPhones sell at the rate of about 7 million per month. Yes, these are not primarily game devices; at the same time, it's true too that games represent one of the biggest (if not the biggest) types of apps sold on smartphones. So gaming is clearly important to smartphones.

Smartphone worldwide sales in Q2 2011

Yes, Nokia is still selling a lot of Symbian smartphones, but it's not attracting new development as the company has already written its obituary.

Finally, let's look at tablets. Apple has sold about 30 million iPads so far, and they are currently moving out the door at about 3-4 million per month. Android tablets are perhaps half that. Again, games are the largest category of apps sold for these devices, so while gaming is not the primary reason people buy tablets it's clearly important.

How about handheld consoles? Well, the 3DS was selling about 100K per month before the price cut; we'll have to wait awhile before we see what the new level is.

I think you can see why smartphones and tablets are catching the attention of game developers. While it's very hard for most games to get any traction, if you do have a hit you can do very well indeed. Those companies who have figured out how to get their games before a large audience are doing quite well; other companies are busy trying to figure out how to emulate their success.

This also explains why game developers should be paying attention to Amazon's rumored tablet. If Amazon can sell 1-2 million tablets a month, which is not unreasonable to expect, that's a substantial market opportunity, especially for developers who can be there at the beginning.

The Amazon Tablet Vs. iPad 2

No doubt it won't look like this.

We are fast approaching the holiday selling season, and if Amazon is going to launch an Android-based tablet they'll have to act soon if they want to maximize their initial sales. A number of rumors have been making the rounds about these tablets, so I thought I'd round them up and provide my own thoughts.

Why is Amazon's entry into the Android tablet market important? Primarily because nobody has succeeded in creating an Android tablet that comes anywhere near the iPad in terms of sales. The closest is perhaps Samsung's Galaxy Tab, but even that is a distant second. Apple's managed to combine a smooth interface with a solid combination of hardware that other manufacturers are hard-pressed to match at Apple's price points. So there's an opportunity here for Amazon to use its advantages to secure a leading position in the Android market, and provide a credible threat to Apple's dominance. More competition is good for consumers, and tablets are an important market for games and books and other media.

The rumor mill is buzzing that Amazon is aiming at the low end of the market, planning to undercut Apple's prices. I think this is where the opportunity is best for Amazon; analysts think they could sell 3-5 million tablets in Q4 alone.. The trick is to give people the features they desire at a price they can afford. How can Amazon achieve this?

Here's my advice: Minimize the feature set to keep the costs low. Amazon is said to be using only a two-finger-capable multi-touch screen, instead of the ten fingers an iPad or a standard Android tablet can handle. Remove the cameras; this tablet will be for consuming content you buy from Amazon, not taking pictures. No need for a really fast processor, either, or for lots of flash memory. Give it a memory card slot and let users pay for extra storage. The target price should be $299 or less. Perhaps sell a 10 inch tablet for $299 and a 7 inch tablet for $199. Make the interface smooth and responsive, and provide a good selection of apps. The screen needs to be good... maybe one of those hybrid E-Ink and LCD screens, giving you the best of both worlds?

Amazon's goal should be in selling lots of content. They have a clunky interface, but a terrific recommendation engine. They've certainly encountered some problems with their version of the Android market, but here's a chance for them to fix the problems.

The key feature is going to be Amazon's vast array of media and their ability to suggest things to buy. If the price is low enough, millions will take advantage of it. Amazon has its doubters, though. Others see how Amazon could be a huge winner. It all depends on the execution. Amazon will really need to get these tablets out in October or earlier, and have some big TV advertising buys planned. The hardware, if it really is by Samsung, should be high-quality. Amazon has shown they can produce a good piece of hardware with the Kindle. (An interesting question here is whether Amazon stays with the Kindle brand, or creates an entirely new name... I'd bet on a variation of Kindle. Why not build off of the success of the Kindle?)

This tablet (or tablets) could represent an important expansion of the tablet market next year. Amazon could capture the #2 spot behind Apple, and put pressure on other Android tablet makers to step up their quality and pricing. Of course, Apple already has a plan to deal with whatever tablet threat might emerge. I'm sure they plan to introduce the iPad 3 next year, with a Retina display (4x the current resolution), better cameras, and a significantly more powerful processor. At the same time, they'll reduce the price of the iPad 2 to counter   any threat there might be at the lower end of the market. Oh, it's going to be an interesting marketing battle next year...

A New Console

A new console contender? If you live in India...

There's a new console being planned, by a startup called Zeebo, but its focus is not on games, it's on education.. They've been around since 2007, and initially their aim was to get consoles into developing countries like Brazil and Mexico, where they introduced the Zeebo in 2009. The unit plugs right into a TV set, and accessed the Internet wirelessly via 3G (which is also how software titles were distributed). Apparently Zeebo didn't go over well enough in those countries, for they are refocusing their efforts on India as well as other emerging markets. Current Zeebo operations in Brazil and Mexico are shutting down as of the end of September, and the devices will no longer be able to connect to the Internet.

Zeebo is planning on a new version to be introduced in 2012, and reducing the emphasis on gaming. It's an interesting vision, trying to bring Internet connectivity, software sales, education and gaming to a wide audience in the emerging world. I'm not sure how successful this will be, since they've already tried in Brazil and Mexico without sufficient success to continue. Much will depend on the pricing, and on the sort of content they can get onto their system.

I'm dubious that they can reach a sufficient scale to be a big success, though. I think their vision of inexpensive Internet access will be realized by the spread of smartphones to emerging markets. The size and amazing growth of the smartphone market can drive hardware prices low enough to be possibly affordable in emerging markets, especially since the devices are small and don't use much power. Solar charging becomes quite possible. Tablets will follow along as screen prices continue to drop. Distribution will take place digitally, thereby avoiding all the problems of retail stores and getting physical goods shipped in a country with a poor road system.

The result will be a huge market emerging for games that never existed before, if you can make your games accessible in a variety of languages. Many games need very few words to be playable, and these will be the ones that make their way quickly to new markets. There are many implications in the spread of this technology, and astute marketers should begin to think about how to bring their games to emerging markets.

Product Naming Case Study: The 3DS

Naming products is a difficult process. An ideal name is short, memorable, an undisputable trademark, has no easy way to mock it, doesn't mean something bad in common languages, and it embodies the key features and positioning of the product. It's an extraordinarily difficult feat to achieve all of those goals, and correspondingly rare. Usually names fall short, sometimes far short, of more than one of those points. Even less-than-stellar product names can take many hours of work to create and approve.

One aspect of of product naming is that a product name can also turn into a negative factor, sometimes merely by chance. Usually this happens when you move a product to a foreign country and find the product name doesn't work. A classic example is GM trying to sell the Chevy Nova in Latin America, but "no va" in Spanish means "it doesn't go", which is a less than useful association for a car.

Nintendo's most recent hardware has had some interesting names. Back in the early days, they stuck to pretty straightforward names that were easy to remember and obviously had no trademark problems: The Nintendo Entertainment System (NES). The Super Nintendo Entertainment System. The Nintendo 64. All had the company name as part of the product name, so it was clear what company was making it. These products reinforced the meaning of Nintendo as a key gaming brand. Although the N64 didn't really say it was a game machine, by this time the word Nintendo was so strongly associated with gaming the point was made.

Next up was the GameCube, which was descriptive to a fault. It really wasn't an exciting or evocative name, and didn't point to any product benefits. Yet Nintendo's brand by this time was plenty strong enough to compensate. Subsequently, Nintendo choose to find a readily trademarkable name that had some unusual resonances: The Wii. This was probably the most radical name in Nintendo's history, and it attracted a great deal of commentary (much of it negative). Again, though, the power of Nintendo's brand carried the company past any negatives, and the best-selling hardware shut up detractors pretty quickly. After all, if it was selling like hotcakes who cared what they called it?

The Gameboy was a little bit odd for America, but the overwhelming success of the product eventually transcended the relatively weak name. (Weak because it really didn't point to any product benefits, and seemed a little off-putting to half the potential audience.) The Nintendo DS was a fairly obvious name to point to the device's main differentiation: the dual screens.

Now we come to the Nintendo 3DS. I'm sure that when Nintendo was working on the prototypes, and somebody said "What will we call it?" somebody quickly suggested "Nintendo 3DS!" Sure, the device has glasses-free 3D display, and it's basically an advanced version of the DS. At that time, too, 3D was making a resurgence. James Cameron's Avatar was setting box-office records, and the movie industry was making plans to have 3D in every theater, with every movie being in 3D, as a way to get people to come back to theaters to get something they couldn't get at home. (And, not incidentally, charge them a lot more.) Meanwhile, TV manufacturers realized they might have a way to get people to buy new TVs even though they might have just bought an HDTV in the last year or two. And game publishers, watching console game sales sinking, saw the possibility for a new technology that could revive game sales and be relatively easy to add on to existing consoles.

Nintendo was in desperate need of a sales boost, too. A new handheld device riding the wave of 3D enthusiasm seemed like the perfect answer. What better way to ensure that the device was associated with the 3D craze than to put 3D in the name?

The upside to the 3DS name seemed clear: The name clearly associates the device with 3D, and thus with the enthusiasm for 3D being generated by the movies, TV makers, and the game industry. So the 3DS name should help boost sales by some amount. Perhaps no one even mentioned the possible down side: What if 3D turned out to be just a fad? Or, worse, if 3D actually turned out to be a negative feature for customers? Then the name might be a drag on sales, reminding customers of a feature they don't like or don't care about, and making it seem like the device is all about that feature.

Of course, this is exactly what has happened. Satoru Iwata realized this early on, and noted in public statements that the device wasn't all about 3D and that you could have non-3D games on it. But if you leave your little 3D slider in the off position on the 3DS, you're left with a DS that is clunkier than a DS Lite and has about 1/3 the battery life. At least, it still has more horsepower, and when you're not using 3D the main screen is a fairly high resolution. The lower price tag is going to help significantly, too, by showing that you can get the extra features with paying a huge amount more than you would for DS.

I expect that a new version of the hardware is in the works, at least to make it less expensive to produce, and possibly to add a second analog control, improve the battery life, and maybe make it slimmer and lighter. This is a natural evolution that console maker inevitably work on (at least, the part about making the device cheaper to produce). I think Nintendo will be looking closely at possibly rebranding

This is a cautionary tale for marketers, though. Naming is a two-edged sword; think carefully before you hitch your product's success to single feature or a pop-culture craze. That may be OK if your product is only going to be on sale for a few months, but if you expect to be selling something for years you need to take a longer view. A blander name might not give you an initial sales boost, but it may also avoid a sales problem. Nintendo's done pretty well in the past with names that are not terribly exciting in and of themselves, but they let the quality of the product add value to the name. And some solid marketing spending, too. Marketers, take heed.

The Next Console Generation

If I saw this in my family room I'd figure the invasion had started.

Some analysts have started to say that we really need a new generation of consoles to turn around the sagging sales of the traditional game business. We're in the third straight year of a slump, and it's true that the current consoles are getting towards the end of the usual console lifespan, as the Xbox 360 hits its 6th year and the PS3 and the Wii in their 5th years. Previous generations of consoles have seen new generations introduced in around year 5 or 6, so by that reasoning we should be due for a new round of consoles.

Nintendo has already announced their next-generation console, the Wii U. Sony and Microsoft have said they are working on new technology, but have no plans to introduce new consoles right now. I'm sure they'll determine the proper time to ship a new console based on how well the Wii U does, and if sales of their current consoles start to slip significantly.

I don't think a new console generation in the traditional sense is the solution to the industry's problems. The usual "next-generation" console would have a significant increase in graphics power, and probably storage capacity and connectivity; a 5x to 10x jump in performance is something we've come to expect. Of course, that would mean substantially higher hardware prices, too. An "Xbox 720" or a "PS 4" would likely have to be priced in the neighborhood of $499 to $599 to offer a substantial jump in graphics. The Wii U is anticipated to be around the level of the Xbox 360 and the PS3, probably somewhat better, and the price tag will probably be in the range of $299 to $399, or maybe even more.

I think this is the wrong direction for console hardware. The sales figures should be telling us that customers thing games are priced too high already, which is why they're buying fewer of them (and buying a lot of used games). Higher resolution means higher development costs, too, and publishers are already seeing budgets that make it very difficult to turn a profit on most games.

The big threat to the current console generation is coming from tablets, smartphones, and connected TVs. They all share the same basic ARM technology at their core, which is very low-power and inexpensive. The smartphone/tablet/connected TV market is an order of magnitude or two larger than the console business, which by the inexorable laws of high-tech manufacturing means the console business won't be able to compete on price-performance. Look, an Apple TV is $99, and with the next generation of chips in it the Apple TV can outperform a Wii, graphically.

Microsoft and Sony, at least, have been working hard to build a compelling online experience and a big audience for Xbox Live and PSN. They should leverage that by expanding the variety of software available to their customers. Open up the development for your platforms, make it easier and cheaper to create titles or all types. Encourage more hardware add-ons. Make a new generation of your consoles, but focus on making them more flexible, extendable, and cheaper. Heck, switch over to ARM chips to get the same cost advantages as the smartphone folks. (Microsoft, you're in bed with Nokia... use their manufacturing expertise. Sony, you've got a deal with Ericsson...)

Microsoft and Sony have the advantage of an existing large audience and the market share and the branding. Don't wait around for Apple and Google to steal those things from you. Push your consoles down in price faster. You can make a more expensive, spiffier one if you really want to, but before you do make the $99 Xbox 360 or the $99 PS3. Make it easier to use network storage, cloud storage, or to plug in a USB hard drive or flash memory. Use your motion control to create a smooth interface to all different media. Microsoft, exploit that Windows Phone 7 connection. Sony, bring Android in to the PS3 and embrace that wholeheartedly. Imagine Sony being the first to bring the Android Market to the family room with games designed for the HDTV screen... they would dominate before Google even has a chance to get started.

Yes, I understand this requires throwing some cherished business models into the compost pile. Recycling those business models should provide a rich fertilizer for the growth of your new business models. If you wait to see whether the traditional new expensive console will fly, it will be too late.

Nintendo, you guys are so far behind Microsoft and Sony in embracing the new digital reality I don't know if you can catch up. You seem to have become aware that something is seriously wrong, which is good. You'll need to make a drastic move to catch up, let alone pull ahead. Start thinking big; call Apple and see if they want access to your brands. Cut a deal with Apple and gain all the manufacturing scale advantages Apple can offer. You can give their technology the very best gaming brands in existence. The combination would be very hard to beat, but it's going to require some daring, unconventional thinking and dealmaking.

I really don't know what's going to happen over the next few years, but if the traditional console makers stick to the traditional game plan, I think they're going to be in deep trouble. If they get creative, they could see a new era of growth. Grab some popcorn; it's gonna be a really good show.

GameStop Wants OnLive To Play Dead

The smoking gun memo.

The followup memo.

This has to be one of the more unusual stories I've seen lately. Square Enix recently shipped Deus Ex: Human Revolution, and had worked out a promotional deal with streaming game service OnLive. Onlive gave them vouchers, which Square Enix put into every boxed copy they produced; the vouchers give you free access via OnLive to the streaming version of DEHR. I'm not exactly sure why Square Enix thought this was a great idea; why would you want to stream the game if you already owned the full version? I suppose because the streamed version might be higher quality than your PC could produce, since OnLive uses the gnarliest computers they can build to generate the streaming games, and unless you're a real gaming fanatic your PC probably can't match the graphics they can pump out.

Anyway, this all seemed like a typical cross-promotional marketing move. It was, until the boxes arrived at GameStop... then the memo went out to all GameStop employees: Open those boxes and pull out the vouchers and throw them away, then tape up the boxes and sell them as new. Later, word went out to just pull at the copies of the game and send them back to Square Enix. Square Enix acknowledged that they had failed to mention this voucher to GameStop, and bascially accepted the right of GameStop to refuse to sell the game with voucher.

As you might expect, once news of this hit the net, customers were not happy that GameStop was taking away something of value they thought they were getting. Now, GameStop's official position is that they don't want to support a competitor. I tried to check out GameStop's Facebook page where they had posted their official response, but it was not available. Probably swamped with angry comments.

OK, I understand that GameStop has purchased Spawn Labs with the intent of providing streaming game services at some point. GameStop also owns Impulse, a digital game distribution service. Would GameStop then pull Steam coupons from games? Where does this whole process stop?

GameStop's response was pretty hamhanded, and is going to generate a wave of bad publicity for them. Are they really that scared of OnLive? Seems like they are doing OnLive a favor by causing this publicity. If GameStop hadn't said anything and just ignored the voucher, it would have been gone and forgotten in a few weeks. They're going to have to compete against OnLive, but they're not ready with their competing service yet, so doing this doesn't get them any customers right now. If anything, it may lose a few. Or provide some nice PR value for OnLive.

Sometimes the best response is just to ignore something and continue with your own efforts.

Clever Ad Scheme For News Sites

One of the tough decisions facing newspapers has been whether to give away their content for free on the Internet, or to keep it hidden behind a paywall and charge for it. If you're free, you can get plenty of pageviews, but advertising revenue is elusive. If you through up a paywall, you may lose so many readers you can't make enough money. The New York Times has been trying to split the difference, allowing certain articles to be free and trying to keep the rest for subscribers, but they admit that so far they've broken about even on the effort (lost about 24% of the readers, but gained enough revenue to compensate... barely). Now a company called DoubleRecall has an interesting scheme that may make publishers, advertisers, and customers happy.

A publisher who wants to put content behind a paywall can offer DoubleRecall ad units, which requires a reader to read a short message and type in a couple of words (highlighted by the advertiser) to gain access to the content. This unlocks the article for a limited time, or can provide other benefits (like virtual goods) to the reader.

DoubleRecall says their research shows this process boosts name recognition by 11 times over traditional methods. Ads can fetch a CPM (cost per 1,000 impressions) of $120, which is about 10 times as much as a traditional banner ad. There's also a social ad at the end of the content that allows the user to retweet the brand message, reply to the sponsor or click through to their web site. DoubleRecall says they've been getting a 12% clickthrough rate on these ads.

Some of this may be due to the novelty value; I'm not sure how well people would like this if they had to go through the process again and again and again, on multiple sites. Still, this is an interesting idea for web sites and mobile apps as well. Part of the success depends on their ability to find plenty of advertisers; let's hope they have some luck with that.

Latest Nintendo Rumors: 3DS Lite?

If only we could see inside Nintendo this easily.

While we await the results of Nintendo's price-slashing experiment with the 3DS, some rumors (courtesy of Bloomberg Japan) have surfaced, claiming that Nintendo is planning a big announcement in September, perhaps prior to the Tokyo Game Show. Nintendo's stock has risen almost 10% in the last few days, which certainly might indicate that something is up. Adding fuel to the fire is this report on French gaming site 01net.com, which claims to have heard from a source inside Nintendo the following things:

1) Nintendo is planning an add-on second analog control for the 3DS, which would retail for about $10.

2) 3DS dev kits have about a 6-month backlog, so Nintendo is outsourcing the production in an attempt to get them out faster.

3) Nintendo, realizing that the whole 3D craze has flamed out, is planning to de-emphasize the 3D display, possibly even rebranding the 3DS.

4) Nintendo is planning a new 3DS for release next year... which would radically tone down the 3D aspect, a new design and possibly the new branding.

While Nintendo may be about to make a big announcement in September, I'm sure it wouldn't be about any new hardware. I seriously doubt they would want to do anything that might hurt holiday sales. I'd expect some announcement of additional marketing efforts, perhaps some free software pack-ins or downloads, and maybe an announcement of big marketing spending over the holidays. I think Nintendo will want to push the 3DS as hard as possible this holiday season (I'm already seeing new TV commercials pushing the lower price and the software titles coming soon), to maximize the sales.

Nintendo probably realizes just how dire the situation is for the 3DS. If they can't show strong sales over the holidays, with a radically lower price tag and with Zelda, Mario, Mario Kart and Starfox all hitting the stores, you can bet 3rd-party publishers will be spraining a finger pushing the abort button on current or planned 3DS development. If the 3rd-party publishers head for the PS Vita or smartphones (or both), the 3DS has almost no chance of being a big success.

I suspect Nintendo is hoping to demonstrate at least strong sales this holiday season, if not stellar sales. Then early next year they can keep publishers excited by telling them about the new version of the 3DS, where they fix all the perceived problems (make it smaller, lighter, longer battery life, 2nd analog control) and relegate the 3D feature to a minor role (since it doesn't seem to be a huge draw for customers; if anything, it might be keeping moms away from buying it over concern for their kid's eyesight).

Nintendo won't want to make any public announcement of a new version of the 3DS until just before it ships, or else sales would probably totally collapse. They might, however, want to float a few trial balloons in the rumorsphere, just to see what the response is among publishers and customers.

I think shifts in the hardware and the marketing emphasis might help, but the real problem is with Nintendo's business model. The problem of dev kits being back-ordered 6 months is a huge one for the future of the device. No dev kits, no development... which means fewer titles, which means less software to attract buyers. The fact that Nintendo still wants to charge about $4500 for a dev kit shows they still don't understand the value in having a lot of titles out there. (Microsoft charges $99 for an XNA sub to allow you to make Xbox indie games, for instance; Sony's charging $2700 for a PS Vita dev kit.) Nintendo really needs to open up development, and put some serious effort into digital distribution, if they want to have a chance.

I note that Sony recently stated that all PS Vita titles would be available through digital distribution as well as in retail stores. Which may not make GameStop all that happy, but it's certainly a plus for customers. Nintendo has yet to make any substantive moves in this direction; if anything they've said they aren't all that interested in online stuff.

This is all happening as excitement is building prior to Apple's introduction of a new iPhone model. Rather, two new models; a new one with a faster processor, bigger screen, and better camera, the usual yearly advancement everyone expects. The real winner, though, is the other iPhone that's looking more real: The iCloud iPhone, which is essentially a cost-reduced iPhone 4 with only 8 GB of flash storage that can use Apple's new iCloud service for streaming music and video. This may be so low cost as to be free with a 2-year contract with AT&T or Verizon. If that's true, we're talking an even greater threat to the 3DS and the PS Vita.

Yes, yes, I know smartphones don't play the deeper, richer games you find on consoles... yet. But everyone needs a phone, and when you leave the house you'll always carry that, for sure. If you have a smartphone that plays some pretty nice games (that are mostly free or only a couple of bucks), you will be much less inclined to drop hundreds of dollars on a dedicated gaming device where the games cost $40 apiece. You'll certainly be much less inclined to buy a dedicated handheld gaming device for your kids when you will really want to make sure they have a phone first. If a really cool smartphone is $0 when you sign a 2-year agreement... hey that sure looks attractive. No wonder handheld software sales having been dropping for the last 3 years straight.

And as smartphones become even more popular, and their graphic capabilities equal or exceed consoles, we'll see more of the key console hits coming to smartphones. I'm not surprised at all that Nintendo might be getting a little desperate. I just hope they start applying their talent for disruptive innovation to their business models, and not just their hardware designs.

Activision Slams Social Games

Activision's first foray into social gaming has a warm, friendly group-hug kinda logo, doesn't it?

The surprise isn't that someone from Activision is saying something amusing; the surprise is that it's not Bobby Kotick, for once. This time the quote comes from Eric Hirshberg, CEO of Activision Publishing, speaking at Gamescom, when asked about Activision possibly making an acquisition to get into social games:

Valuations of some of the companies in that space are out of whack, so that’s an issue when it comes to acquisitions…But don’t mistake careful, methodical planning for inaction. Any new place where people are playing games, at scale, is something that we’re interested in.


Don't mistake careful, methodical planning for inaction? Is that like when I tell my wife that I was just thinking, and she says I was snoring while I was thinking? Yeah, I think sometimes planning and inaction are difficult to distinguish except in an autopsy.

Investors may be getting a trifle weary of dismissive statements from execs about market segments they're not in; see Nintendo for how that works. Activision has floated along without too much criticism with Blizzard and Call of Duty to buoy their sales. If there's ever a hiccup in one of those, expect the criticism to become a deafening roar.

What Googorola Means To Games

The acquisition of Motorola Mobility this week by Google, for $12.5 billion dollars, caught most observers by surprise. The primary reason is, ostensibly, the treasure trove of patents that Motorola possesses. Google's Android has come under fire, or rather manufacturers of smartphones and tablets using Android have come under fire, for patent infringement; Apple is attempting to get some nice settlement from Samsung over patent infringement, and is working to get injunctions against their sales. Microsoft has also been getting some payments from manufacturers for infringing on their patents. This sort of patent fighting goes on all the time in the high-tech business, and the only way to get around it is to have a pile of patents of your own. That way you can cut deals for mutual use of patents, and everyone avoids lawsuits.

Google will now have an array of patents that rivals its opponents, and thus should be able to defend itself and its Android partners from legal attacks. Google has so far maintained that just because Motorola has something like a 30% market share for Android devices, other Android partners shouldn't be concerned. Google plans to be hands-off with Motorola, and not give them favored status with Android releases or other special treatment.

Google may believe that right now, but the advantages of producing both hardware and software will ultimately prove too seductive to resist. Apple seems to be doing pretty well with that combination, and the weaknesses of Android have been in the integration of hardware and software... which Google should be able to solve now. Also, Google only makes about $6 per Android phone from the ad sales, since they charge no licensing fees. Apple makes hundreds of dollars in profits from the phones they sell; don't you think Google will want to get some of that action?

What does all this mean for games? Probably not much right away. In the long term Google may use its Motorola set-top box position (Motorola is one of the leading makers of boxes for cable services) to leverage Google TV into more households, and thus provide a big opening for games in the Android Market. I expect improvements in the Android Market, but that probably would have been happening anyway.

It'll be interesting to see if Motorola phones start getting special Android features before other hardware makers, but I wouldn't expect anything like that right away. Will we see other hardware makers back away from Android? Perhaps if somehow Microsoft can make Windows Phone 7 more attractive... but with Nokia in hand, other makers may be reticent about putting more effort into WP7.

The Motorola-Google deal probably won't affect gamers much in the near term. By 2012, we should see if Google can work Google TV into the standard set-top box; if they can, the impact on gamers could be huge.

PS Vita Vs. 3DS, Round Two

The battle will begin soon...

Sony has now published the specs for the PS Vita, and now we can do a head-to-head comparison of the hardware.

PS Vita CPU: ARM(R) Cortex(TM)-A9 core (4 core), GPU: SGX543MP4+.
3DS: ARM 9 CPU at 133 MHz, ARM 7 CPU at 33 MHz,  DMP Pica 200 at 200 MHz

What does this mean in terms of performance? For the CPUs, the PS Vita's ARM 9 4-core variant can deliver somewhere between 8,000  and 20,000 Dhrystone MIPs (millions of instructions per second), depending on the clock speed (which is nominally 800 MHz but could be varied dynamically, but at the cost of greater power consumption). The 3DS is running its CPU at 133 MHz, and it's only one core; the second CPU is probably dedicated to running the second screen. Exact comparisons are difficult, but it's safe to say the PS Vita is at least 5x as powerful as the 3DS when you look at the CPU power.

For the GPUs, the 3DS delivers about 15 million polygons per sec, while the PS Vita should hit around 133 million; the pixel fill rate for the 3DS is 0.8 gigapixels per second, while the PS Vita delivers about 4 gigapixels/sec. Obviously we can't run the same benchmarks on both sets of hardware to see how this translates into actual game performance. Again, though, the PS Vita is clearly more powerful, at least 5x as much as the 3DS.

Both devices have an array of controls and sensors, though the PS Vita has the backside touch panel and multitouch capability on the front screen. The 3.5 inch main screen of the 3DS is nice at 800 x 240 (400 x 240 in 3D mode), but pales in comparison to the PS Vita's 5 inch 960 x 544 OLED display.

The most important final stat: Price. The 3DS is now the clear winner at $169.99, with the base model of the PS Vita coming in at $249.99 (you can pay $299.99 for 3G capability).

The software lineup is strengthening for the 3DS, with some key franchises (Mario, Star Fox) coming this holiday season. The PS Vita lineup will no doubt be solid, given that Sony has watched Nintendo's problems with having the hardware shipping without any notable software titles.

The real issue is how well either of these devices will do against smartphones. Is there still a substantial market for a single-purpose device, when you can get a smartphone that does everything you can think of at around the same price? Yes, the dedicated game devices have exclusive games, and deeper game play, and offer more power... but very few people are going to carry two pocket devices around with them all the time. And you'll always make sure you have your phone with you.

For kids, will parents buy them a dedicated game device, or one that they can use for school, communication, music, taking pictures, watching video, and games as well? Where the games don't cost $40 each?

I think Nintendo's got a reasonable price point for the 3DS now, and Sony's got a reasonable price for the power of their device. I'm just not sure there are enough gamers willing to spend the cash for those devices, when they can get gaming and a whole lot more with a smartphone. Yeah, smartphone games aren't as deep, you don't have the great controls... but they are cheap and there's thousands of them.

If Nintendo can't post some great sales of the 3DS this Christmas, I think Sony's gonna have a rough time selling PS Vitas next spring. Apple's new iPhone(s) are going to make the choices even harder. The new iPhone(s) will certainly be more powerful, which means even more powerful games could be played on it. Apple may also introduce an even cheaper iPhone that is still as powerful as the iPhone 4... which will attack dedicated handheld gaming devices at their most vulnerable point, pricing.

I would love to be surprised by a resurgence of handheld gaming this Christmas, but my prediction is that while Nintendo will do well, 3DS sales won't be stunningly high. The torch for handheld gaming will be passed to the smartphones, for better or worse.

Roku's Added More Games

Now with even more games...

That didn't take long; Roku has just added 7 new casual games to its little streaming video box, to go along with Angry Birds. The 7 games are from Accedo, and cost a whopping 99 cents apiece. And so the concept of an app store for games appears in the family room, not with Apple TV or Google TV, but with Roku.

Google has just acquired Motorola, which happens to be a major cable-box manufacturer. IS it possible we could see Google TV getting some widespread adoption in the cable industry? Don't hold your breath; those cable boxes are just a way for cable companies to get you to pay for their DRM and give their profits a fat boost. They're unlikely to see any benefit to Google TV... "what's in it for me?" will be the question running through their minds.

I suspect Google may take their time with the Google TV relaunch, as Apple is apparently doing. Apple may pop up with a surprise for the holidays, but it looks like their new iPhone(s) being announced in September will probably be their major product introduction for the rest of the year, aside from some new MacBook Pros.

Roku may have the 99 cent family room game market all to itself this Christmas. I wonder if they'll let other developers in on the fun?

Android App Users Less Adventurous

If you're not in the Top 50 Android apps, you're nowhere.

Smartphone users spend more time in apps than on the web.

The hidden weakness of the Android platform is that developers are having a hard time making money; even harder than on the iOS platform. Which is not what you'd think given that Android has the bigger market share, but it's due to the behavior of the customers. Here's a new study from Nielsen that gives the sad data: 61% of the time spent on Android devices is spent in the top 50 apps; 43% of the time in the top 10. That's an extraordinary concentration of time; it means that if you're not one of the top apps, you're pretty much invisible. Which explains why developers are still targeting iOS first; it's where the money is. At least, iOS users appear to be more adventurous about trying out other apps.

Both the App Store and the Android Market need to have better discovery tools if app developers are going to have a good chance to make some money. Clearly, though, Android has bigger problems. Developers can help by creating better apps, and by encouraging cross-app marketing. Google also should put some effort into encouraging users to try a wide variety of apps, perhaps through some marketing efforts. I see that Apple continues to advertise apps on iOS, where Android partners all seem to focus on their hardware. Google should step in and spend some marketing dollars showcasing various apps.

In the meantime, developers will continue to be pretty much on their own when it comes to getting customers to buy their apps.

Console Pricing: The New Battleground

Now only $249... will it be able to beat 360 sales in the USA?

The underlying message of three straight years of declining console game sales must finally be getting through to console makers, as they are hauling out their biggest sale-boosting weapon: Price cuts. The latest entry in his field is Sony, which announced at Gamescom that they are reducing the price of the PS3 to $249, effective immediately. Clearly they've gotten tired of being the regular #2 to the Xbox 360 in monthly sales numbers, and this is their bid to have a go at first place.

Early reports are positive, with Amazon sales of the PS3 jumping 400% after the price cut. Overall, analysts expect the price cut to add 30% to the PS3's monthly sales. For now, Microsoft is content to wait and see what happens, but you can bet they will lower the 360's price if the sales of the PS3 start to pass up the 360, especially with the crucial holiday selling season coming up.

Meanwhile, what about Nintendo's massive price cut on the 3DS? So far, it's having a positive impact (as you would expect), but precise numbers aren't in yet except from Japan, where the 3DS had its second best week since launch. Nintendo is being more cautious in proclaiming "problem solved", as they should be, and noting that they have major 3DS release planned for the holidays (Super Mario 3D Land, Mario Kart 7, and Star Fox 64 3D). If Nintendo can't have an excellent holiday selling season for the 3DS with that price point and those software titles, then they have a problem with the 3DS that won't have an easy fix, if any fix is possible. This holiday will be a crucial test for the 3DS and for Nintendo.

Meanwhile, what about the Wii? We haven't really heard much about its sales since the price drop to $149, have we? Let's look at July 2011 sales: The Xbox 360 sold 277,000 units, the Wii sold 190,000 units, and the PS3 sold 148,000 units (all sales are USA only). We can certainly see why Sony is feeling the need to drop its price, and why Microsoft is holding off.

Nintendo just announced a new version of the Wii, with backwards GameCube compatibility for controllers and software removed (and the ability to stand upright, apparently), which should be reducing the cost to Nintendo somewhat. Inexplicably, this new version is for Europe only, Nintendo of America confirmed it has no plans to introduce this version in America. You'd think a chance to cut the Wii price to $99 for the holidays would be reason enough to have a lower manufacturing cost version shipping, but I guess not.

So far it would seem like Nintendo is placing its hopes on a sales recovery for the 3DS because of the lower price and some key new titles, and the Wii with its new Zelda title will have to pull its own weight against the PS3 and the Xbox 360. I suspect Microsoft will respond with a lower 360 price before all is said and done this Christmas. Which will set things up for an even harder intro for the Wii U if its price point is going to be north of $249.... Nintendo may be in the uncomfortable position of having the most expensive console on the market when the Wii U launches.

When the dust settles and final holiday numbers are in, there will be a reckoning in the console business; the next E3 is going to be very, very interesting.

Zynga Hit With Another Lawsuit

Zynga may need to modify its logo to more accurately reflect their business.

This time, it's not Vostu suing Zynga; it's a company called Agincourt Gaming. They have a Facebook game called Pantheon, and apparently a couple of patents regarding in-game rewards and prizes. Agincourt Gaming apparently acquires social gaming companies, and they picked up Pantheon. The patents in question are 6,758,755, issued in July 2004; and 6,306,035, issued in October 2001, which means they are relatively ancient. At least, older than Zynga, which was founded in 2007. At least at a cursory glance, the patents seem to resemble Zynga's prize system Rewardville and the graphical system for showing such credits. Experts will have to pore over the patents and exactly how Zynga implements its systems to see if there's infringement.

Of course, depending on how broadly the patents are written, this lawsuit could be just the first of many against other social gaming companies. Why Zynga? Well, no doubt it has to do with the fact that it is the biggest social gaming company, and therefore has the deepest pockets. Especially with an upcoming IPO that could value the company at $20 billion.

Zynga, as is normal in these sorts of cases, has declined to comment. We probably won't hear much until after a whole bunch of legal paperwork gets filed back and forth, and lawyers have had a chance to look over the battlefield. Often, these patent cases get settled quietly out of court. I suspect the timing of this suit is no accident; the plaintiff's lawyers probably figured that with Zynga getting its IPO ready, they have an extra incentive to settle quietly before a legal cloud casts a shadow on the IPO.

Zynga's legal team will be racking up the billables between this and the Vostu case and all the others they're facing. Others? This isn't even the first lawsuit of the summer for Zynga; Segan LLC, based in Long Island City, New York, sued July 29 in Delaware federal court alleging patent infringement. And a company called SocialApps has filed suit against Zynga, claiming the big Z stole their source code and used it to make Farmville. Zynga's no stranger to lawsuits, having dealt with several already in its short history. No doubt there will be many more.

Those big piles of money cast a sweet scent that tends to attract lawsuits...

Notch Calls Out Bethesda

Wait, could these have a copyright problem?

Trademark disputes are nothing new in the game business, I remember doing battle with Marvel over the trademark to Champions in the early 1980's. (We won, by the way, though it cost us a fair amount of money.) What may be changing is the method of resolution. Seems that Bethesda got a bit antsy over Mojang's looking to trademark the word "Scrolls", and fired off a legal letter.

Here's Notch's response (Notch is the handle of Markus Persson, creator of Minecraft and Mojang):

I challenge Bethesda to a game of Quake 3. Three of our best warriors against three of your best warriors. We select one level, you select the other, we randomize the order. 20 minute matches, highest total frag count per team across both levels wins.

If we win, you drop the lawsuit.

If you win, we will change the name of Scrolls to something you’re fine with.

Regardless of the outcome, we could still have a small text somewhere saying our game is not related to your game series in any way, if you wish.

Oh, I do wish Bethesda would take him up on this... but sadly, I suspect they won't.

How Nintendo Could Succeed Through Brand Extension

Nintendo just needs to have its business guys pelted by gamma rays...

Since Nintendo's been going through its rough patch lately, investors and analysts have been weighing in with advice. One of the most frequent pieces of advice is that Nintendo should make games for smartphones (Android and iOS). If this advice is given in any sort of forum where fans can comment, they immediately pile on. Nintendo fans hate smartphones, it seems, and they certainly don't want to see Nintendo making Mario games for iPhones.

Aside from the visceral reaction of Nintendo's most loyal fans, there is a good reason why Nintendo shouldn't make games for hardware that they don't sell. Platform exclusives sell hardware, and Nintendo traditionally makes money from hardware sales (and a lot of money from software sales, of course). If you could get the latest Mario or Zelda game on any platform, you'd be less likely to buy the game on Nintendo's hardware. So Nintendo might gain some added software revenue, but they'd lose hardware revenue... and other potential software sales that come from locking someone into to their hardware.

Aside from the hardest core fans, most people only have one game console, or one handheld gaming console. So this idea of hardware lock-in certainly makes sense. But it does rely on some hidden assumptions that reveal a possible strategy for Nintendo.

The hidden assumption is that Nintendo would put out the identical game on its own hardware and on other hardware. Sure, a game for the Wii or Wii U could be ported to look exactly the same on an Xbox 360 or a PS3. But it doesn't have too... and that's the point that's even more clear when we're talking about smartphones.

Smartphone games are slammed by console gamers for being lightweight; they don't have the depth or the fine control console gamers are used to getting in a game. True enough, and it's an obvious consequence of the lack of gaming controls (buttons and joysticks) on a smartphone, and the smartphone's role as a general purpose device (where you need to be able to switch to a phone call at any moment).

Suppose Nintendo decided to put out some smartphone games not as a replacement for a 3DS game, but as a way to introduce iconic Nintendo characters to new customers. The game play would be similar, but not identical, and the game's design would be simpler (at least the controls would have to be). Such games would serve to make some money (not much, at the price of smartphone games) and, more importantly, introduce Nintendo characters to customers who may not be aware of them. Properly crafted marketing campaigns would encourage those smartphone gamers to try out the richer experiences available on a 3DS or a Wii or a Wii U. You could even get special content on your Wii U game because you played a Nintendo game on a smartphone.

Imagine, if you will, a regular series of Nintendo games on smartphones creating a groundswell of interest in Mario and Link and Pokemon. Engage those customers further with social games on Facebook and Google+, with plenty of nice virtual items you could buy. Imagine a Pokemon game on Facebook where you could customize your training and battlegrounds. Or an Animal Crossing game, or Pikmin... and all of those could be designed to lead people into the deeper, richer game experience that Nintendo would have waiting for them on their proprietary hardware.

Of course, future games on Nintendo hardware could easily send out social messages to let your friends know about your successes in the games, and encourage them to help you out. Nintendo could connect their iconic characters across social and mobile gaming, and engage a much larger audience. They'd make good money from those efforts, too, with nice high profit margins, while promoting the games on their hardware. This is good old-fashioned brand extension; leveraging the power of your brands by taking them into new areas. If these games don't duplicate your games on proprietary hardware, there should be no downside risk. Unless you think that people would try Mario out on a smartphone and then, because of that, never buy a Mario game on a Wii U. That seems dubious, unless the game is really bad... which Nintendo should be able to avoid easily.

This doesn't even touch on the possibilities of taking old Nintendo games and putting them on smartphones. Nintendo could grab a whole new generation of gamers with games their parents enjoyed. Of course, Nintendo has had those available on their Virtual Console, but that's not easy for people to access. Also, Nintendo has never tried to optimize their revenue from old games, just charging $5 for each one as if the price was set in stone for some reason. They seem to be oblivious to the possibility that they could make for more money if the reduced the price; perhaps they could sell 10x as many games at $2 as they could at $5. Maybe not... but they'll never know unless they try the experiment.

Nintendo still has great potential for success; they just have to be as innovative in their business models as they have been with their hardware designs. Get some fresh blood in their design department, and in the business department, Nintendo. You could still rocket back to the top, but time's a-wasting. You need to make sure the 3DS starts selling well, and you really, really need to make sure the Wii U sells well from the start.

Smartphone Share: Android, Apple Gain

This chart should look similar to the last several.

This news is getting very familiar: Once again Android gained market share, and so did Apple's iOS, and everyone else lost. Smartphone sales were up 74% in the second quarter of 2011 compared to last year, as smartphone sales grabbed 25% of all phone sales (compared to 17% last year). This is while overall sales of mobile devices rose by 16.5%. The mobile market is growing, and the smartphone share is growing very rapidly. There were 108 million smartphones sold in Q2, worldwide. Which is around two orders of magnitude more than videogame consoles sold in Q2, in case you're wondering why intelligent game publishers are eyeing the smartphone market. Those that aren't already there, that is.

The big losers for Q2 were, of course, Nokia and RIM, as Symbian and Blackberry continue to fade. Microsoft, too, lost ground, as we await the first Nokia phones with Windows Phone 7 software on them later this year. There's a lot more interesting data on manufacturer market share here.

While Android clearly has a commanding market share lead, Apple is still making more money (about two-thirds of all the smartphone profits belong to Apple). Developers seem to be approaching the Android marketplace a little differently, too, according to the data from Mobilewalla, an app discovery firm. More than half of all the apps in the Android Market are created by developers who have authored more than 100 apps.

So Android has a lot of developers who are pushing out huge amounts of apps... which may certainly explain the general perception that Android apps are lower quality than iOS apps. Also, Android apps are getting updates at almost 3x the rate of iOS apps, which may be a result of the fragmentation of the hardware in the Android market. I'm sure there are many Android apps that get released, and then the developers find out it has a problem with a particular smartphone they didn't test on. Apple's relative scarcity of different models of phones does have an advantage after all.

Mobilewalla's data also seems to indicate that Android apps, once you get out of the top 30, are even more invisible than typical iOS apps. In other words, if you're not one of the popular apps, you're not getting found or downloaded. So the larger size of the Android market isn't helping smaller developers; the discovery problem is still just as great.

I'm sure we'll continue to see nifty advances in smartphone hardware and software from both Google and Apple. I wish they'd take just a fraction of the effort they put into the technology and put it towards improving their app stores. I doubt that's going to happen, though, but I'd really like to be wrong about that.