Games Sales For March 2012: Down 25%

Once again the NPD numbers look pretty grim. Total game industry sales dropped 25 percent to $1.1 billion, as total software across consoles, portable and PC fell 26 percent to $585.1 million, while hardware sales plunged 35 percent to $323.5 million. This makes the 4th month in a row where sales have dropped more than 20% over the previous year... which, overall was down 8%. And that was the third year in a row of declining sales for video games... that is, for console games, primarily.

Nobody I talk to, and I've been talking to a lot of CEOs lately across the gaming industry, seems to be all that thrilled with the advent of a new console generation. Oh sure, they are all hoping for it to be a great success and arrive soon, but I don't think anybody believes that this console generation is going to beat the last one in sales.

Which has long-term implications for where big publishers should be investing...

China Attempts to Ban Internet Rumors

Yep, the Chinese government has really got fed up with all those rumors on the Internet, and has decided to ban them. Well, they have released a paper on how to fight rumors, and this comes about a week after they punished China's two largest Twitter-clone sites, Sina and Tencent for spreading rumors. It's not clear what the punishment was, but all comments have been banned for now. I guess those rumors about a coup d'etat in Beijing hit a little close to home. Nervous much?

I'm sure that attempting to ban rumors on the Internet is gonna work great. Right after they succeed at that maybe they can get rid of spam, too. I don't think I'll be holding my breath waiting for their success.

I'm not sure what connection this has to games, except to note that Tencent, one of the punished companies, is also a major game company (remember, they bought Riot Games last year). No word on whether this may affect their game operations.

It does make you wonder, though, about in-game chatting in the hugely popular Chinese MMO's... since any of these attempts to ban rumors wouldn't affect in-game chatting. So gamers may be the first to know things, unless the Chinese government wants to contemplate shutting down the Chinese game industry. Now, that might really spark a coup d'etat...

Video Game Sales Expected Down Again

Michael Pachter at Wedbush Securities sent out a note this morning, saying they expect NPD figures for March to be nasty once again. They expect software sales to be down 23% over last year, following similar declines in December, January, and February. Hardware sales were down, too, but only by 8%.

Grim numbers for traditional videogames sold in traditional retail channels. Yes, DLC helps, but not enough. Gamers are getting more careful about what they buy on disc, at least new games on disc. There's so many other options these days. Numbers for May, when Diablo II comes out, will doubtless look pretty good, but the overall trend is pretty scary. Declines of a few percent here or there can be handwaved away; declines in the 20% range month after month cannot be dismissed so easily.

Durango vs. Orbis vs. Wii U

These concept pics are inevitably way cooler than the actual hardware; too bad.

The ramp up to E3 is starting, because rumors about consoles are getting more common. Now I see stirrings about Microsoft's Durango (the current codename) having a 16-core processor (compared to 3 cores in the 360), though 4 of those cores will be needed to handle the built-in Kinect 2.0 voice and movement recognition (higher resolution than the current one). It'll have AMD Radeon HD7000 series graphics. Oh, and it will have a Blu-Ray drive. Sounds expensive... 

Meanwhile Sony is working on the PS4 Orbis, which may have an AMD 64 bit CPU and a GPU that can output 4096 x 2160 images. Why is that important, when you can't find a TV in that resolution? Well, it means you can have 60 fps 3D images. And higher-res TVs are in the planning stages. This unit also sounds expensive.

Meanwhile, we get word that Nintendo's looking at a Wii U hardware cost of $180, nout counting packaging and software and any other incidentals (like paying for marketing, R&D, and the like). So the Big N is planning to retail the Wii U for at least $300, maybe more. Ouch.

I'm guessing that the Durango and the Orbis will be more in the range of $400 to $500. Double ouch.

Good luck to all of them; I think selling devices seen primarily as game consoles will be very difficult at those price points. Especially if, as I expect, there will be Apple and Android options for far less. Of course, consoles are increasingly being seen as multimedia devices; Microsoft admitted recently that more hours are spent streaming music and video on the Xbox than are spent playing games. Will Sony and Microsoft be pushing their new consoles more as media centers than as gaming devices? That may be one way to justify a high price.

The marketing battles will be interesting this Christmas, as Nintendo tries to establish its new hardware and Sony and Microsoft try to keep selling old hardware as the world becomes increasingly aware of new consoles headed for Christmas 2013. Grab a comfy chair and some popcorn, the show will be fascinating.

Wii U vs. Xbox 360 vs. PS3: Not as Powerful?

The tablet controller feels pretty good, in my experience.

I've been talking to some developers working with the Wii U, and they've told me that in their opinion it's just not as powerful as the current generation of consoles. (I go into that in depth in this article on GamesIndustry International.) Do I believe them? I believe that's their opinion, and they have experience in many different consoles. Determining "power" isn't all that easy, though. You can't run the same benchmarks on different consoles. Raw spec comparisons won't help too much, as the processors and GPUs are different. Then you get into polygon count, textures, fill rates, bandwidth of the graphics bus... until you can compare the same game running on each console you can't really be too accurate. Even then, it will depend on the tools the developers used, and how familiar they are with the hardware, and what design decisions were made in creating the game (for instance, how the texture maps are created).

All you can really do is have a fairly general comparison. It's readily acknowledged that the PS3 and the Xbox 360 are roughly comparable, though you will find people who will argue particular points that mean one platform is "better" than the other. Almost everyone will agree that the Wii is significantly less powerful, not even putting out HD graphics. The Wii version of a game doesn't look as good as the same game on PS3 or Xbox 360.

I expect that the Wii U will fall somewhere in the range of "a little less powerful" to "a little more powerful" than the Xbox 360 or the PS3. We won't know for sure until the hardware is out and has been dissected by the hardware geeks. (Right now, any pre-release hardware can still change some things, like clock speeds or RAM, that could significantly affect performance.) And I expect there to be plenty of arguments.

I still think the clearest indicator of the Wii U's power level is not what developers say, it's what Nintendo says. Nintendo's statements have very specifically stayed away from talking about power, and have focused on game play, innovative mechanics, and just being fun. That's a good position to take, I think; the most important thing is how much players enjoy playing games on your console, not the number of polygons per second. It does imply to me that Nintendo knows the Wii U is not significantly more powerful than a 360 or a PS3. Why? Well, if it was, they'd be saying that over and over again. Raw power is an easy thing to market; "You get twice as much (whatever) for the same price" is a strong selling point. Nintendo's not using it, which means to me it isn't the case.

Some rumors have been floated before about the Wii U being 2x more powerful, or 4x, or even 8x. I don't believe those, because I see no reason why Nintendo would not have been saying or implying that for months if it were true.

The odd thing to me is how so many people get, well, religious about their devotion to a console or a manufacturer. Personally, I wish them all well. I have friends at many companies, and I hope they all succeed. I enjoy playing games on the Xbox, PS3, and Wii; they all have their good points and bad points. I do feel it's my job to point out problem areas ahead, and when I think somebody's making a mistake. In that light, I don't think Nintendo is making a mistake so far with the Wii U; OK, maybe with the name, which I think is weak for a number of reasons. But in general I think Nintendo's new console should not compete on power, and should offer one or more innovative features that drive adoption and make for compelling games. Which they seem to be doing, though until we see actual games it's hard to say if the tablet controller will be as successful an innovation as the Wiimote and motion control have been. (My guess at this point is no, because the tablet's not as simple and approachable as the Wiimote, but I could certainly be wrong.) I think pricing is going to be critical to the success of the Wii U, along with the games. A Wii U at $399 is going to flop, I think. A Wii U at $299 will have some convincing to do. A Wii U at $199 would be a big hit if there's some good games (a hi-def Zelda title would sell systems).

I suspect the Wii U will debut at somewhere between $249 and $299, and that Microsoft and Sony will probably drop their prices to give the Xbox 360 and the PS3 a stronger competitive position against the new kid on the block. Nintendo's going to have to market hard because Microsoft and Sony will be, too. If Nintendo doesn't have a more compelling software lineup than they did for the 3DS, they're going to have a very crappy Christmas. Hopefully they've learned that lesson, but you never know. It would take a lot of guts to delay the launch of the Wii U several months if the hardware was ready but that Zelda game just wasn't finished. Nintendo might well say, heck, we'll sell some units to the fanboys regardless of the software, and after the good titles come out sales will turn up and everyone will forget about how bad the launch was. It worked for the 3DS, didn't it?

Maybe. But the market keeps changing, and the competition isn't snoozing. Nintendo's going to have to be innovative in their business models eventually, and that's where they have really fallen behind. Announcing the Nintendo Network is a good step, but the real trick is making it work well. Nintendo's going to have to work hard to get back on top of the console business.

Because like the Stark family says in Game of Thrones, "Winter is coming." Microsoft and Sony will probably ship new consoles next year, and then the Wii U will be clearly behind once again in terms of power. (Which is yet another reason not to base your marketing on raw power right now, because in 18 months you'd lose that argument anyway.)

Ebooks Have A Magic Moment

Other authors may do this, too.

The traditional publishers are facing some scary magical power, wielded by none other than J.K. Rowling. Her Pottermore.com web site has begun selling Harry Potter ebooks, as the exclusive place to buy them. Rowling's clout is such that she even got Amazon and barnes & Noble to point to her site in affiliate marketing arrangements. Rowling gets to keep roughly 70% to 90% of the revenue from the Potter ebooks, which are selling for $7.99 for the first 3,  $9.99 for the last 4... or $57.54 for the set. Sure beats the heck out of the usual 17.5% cut that traditional publishers give to authors for ebook editions.

Granted, Rowling is not the typical author; far from it. Yet other big names (paging Stephen King) are probably looking at similar arrangements, or at least better terms. The big authors are what generate the most profits for traditional publishers, so this should be a wake-up call. Of course, you'd have thought the events of the last few years would have been a wake-up call, too, but you would have been wrong. Legacy publishers seem to be pulling the sheets over their heads and hoping the scary ebook monster goes away.

This is not to say that publishing your own ebook is necessarily the way to go. But every author now has a lot more options to consider, and some thought as to which path to take. There are many more options for getting your book to market, and that's a good thing. It's more complicated, though, and not necessarily easier. Heck, signing a deal with a publisher and then sending in your manuscript and waiting for checks is about as easy as it gets. Publishing it yourself is much more work... but you may make a lot more money, too, if you are successful at it. I advise all authors to study the market carefully; read Joe Konrath's blog, Mike Stackpole's website, and others.

Be prepared to do a lot of homework. Magic spells optional.

Kickstarter: New Publishing Model?

Nice try.

There's been a rash of Kickstarters lately connected to people and publishers I know, and I think it's worthy of comment. Double Fine's Kickstarter brought in a record of over $3.5 million to do an adventure game. Yes, an old-school, point-and-click adventure game, to be created by Tim Schafer and Ron Gilbert, who did games for Lucasfilm like Monkey Island and Grim Fandango. It's interesting to note that their proposal doesn't even describe what the game will be about. The fan base is so devoted to all of their old games they don't really care what a new game would be about, they just want to see one.

Similarly, Brian Fargo put Wasteland 2 up as a Kickstarter, and it's already broken through $1.5 million. People remember the original RPG, and want to see a sequel. Other Kickstarters are proposed for novels, tabletop RPG projects, and mobile games. More people on jumping on, looking for funding. I think there's some things to be aware of in order to have a successful Kickstarter campaign.

First off, Kickstarter has lots of advice, which you should take to heart. They have to approve your project, too, so that's a hurdle you have to pass. Make sure you do an excellent video; that's a key element in most successful proposals. It's your chance to make the pitch in the most compelling way possible. Use it well.

Now, some other considerations:

Have an audience. If you've got a big fan base, that's going to be a key element in success. If you know the size of your fan base, and can run some numbers ahead of time, you'll get an idea of how likely your Kickstarter is to succeed. If your lowest support level is (say) $10, and you have a fan base of 1,000 (based on previous sales, or members in your forums, or Twitter followers, or some such data), and you're asking for $5,000, you're likely to be disappointed. Why? Because you're expecting 50% of your followers to cough up money; that's a very high percentage. Something in the single digits would be more believable. Try to set yourself up to be pleasantly surprised on the up side; if you can make a go of it by getting 1% of your users to support at the lowest level, you're in good shape. But what if you don't have an audience? Then...

Be totally cool. Whatever your doing just has to be a cool concept. Maybe it's a gadget, or an RPG setting, or a movie, but when you explain it there's a lot of people who will go, "Ooh, me want." Don't expect a huge response if you're doing something obscure. If it takes you a long time to explain what it is and why it's cool, it's not compelling enough. If you can boil it down to a simple phrase, and everyone you tell that phrase to says "Wow," then you've got something.

Offer good value. Don't expect people to throw money at your project, even if it's totally cool and you have a big audience, if you're not offering a reasonable value. A paperback book for $50? Not a good value. A hardcover coffee-table book with gorgeous photographs or art for $50, signed by the author and photographer, in a numbered limited edition? A great value. It's all relative, so look at similar things on the market or available in stores to get an idea of reasonable pricing.

Be believable. If the audience doesn't believe you can deliver, they won't support it. Hopefully you have experience that will lead them to believe in your project, but make it explicit as to why you can deliver what you're promising. Also, can you do it in the time frame described, with anything or everything else you may have going on? Convince the audience of this.

Offer a wide range of benefits. More is better, I think. Check out a bunch of Kickstarters to see what kinds of things they are offering. Don't neglect the high end! You'd be surprised how much money some dedicated fans will come up with (some free-to-play games have sold in-game items for $10,000 or more!). Make sure you are ready and able to deliver on everything; don't offer dinner with yourself if you really don't want to have dinner with some random people, even if they are your fans.

I don't think this financing model will take over game publishing of any kind, but it certainly has a place. It's also good marketing for you and your company, if it's successful. So make sure it's a success!