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.

E3 Post-Mortem: Who Won, Who Lost

See full-size infographic here.

Now that the booths have been struck, the loudspeakers turned off, and the booth babes are fully dressed again, it's time to sort through all of the information, misinformation, hype and rhodomontade to figure out who won, who lost, and who's going to be up and who's going to be down in the coming year. Some interesting data on that point was compiled here by Webtrends, shown in the graphic above.

Adding up total mentions on the internet, Nintendo won with 43.1%, Sony had 31.2%, and Microsoft had 25.7%. Of course, it's not just who got talked about the most, it's what people said about it. Nintendo, going into E3, was certainly the favorite to get the most buzz, since they were introducing a new console.

Nintendo's introduction was certainly not an unqualified success. One very independent measure is what happened to Nintendo's stock price, which dropped 5.7% the next day and then another 5.2% the following day. Many people were confused by the presentation, which focused more on the Wii U controller than on the Wii U itself, to the point where some observers were wondering if Nintendo was introducing some sort of tablet gaming device instead of a new console. It didn't help that Nintendo was more than usually vague about speeds and feeds, leaving the tech journalists without much to talk about. Even when it came to game software, we were shown technical demos and some concepts about game design rather than actual games. Clearly this new console is quite far from being ready for release. It feels to me like Nintendo was rushed into announcing the device by the rather alarming drop in Wii sales over the past 6 months, and the disappointing 3DS sales, which between them has left Nintendo in rather poor condition.

Meanwhile, Sony had to spend part of its time apologizing for the massive security problems and the PSN shutdown. They did manage to redirect attention to their new handheld, announcing the name (PS Vita) and the price ($249). The name is about as enchanting as the Wii U name; Japanese companies seem to have problems coming up with really good names in the last decade or so (I still like Super Nintendo Entertainment System, myself). The price announcement was a surprise, and puts Sony in a good competitive position against the 3DS this holiday season. Assuming, that is, that Nintendo doesn't drop the 3DS price before the PS Vita release, which would be the obvious tactical move.

Microsoft didn't have any new hardware to talk about, which left them pushing existing hardware... specifically, Kinect. They showed Kinect enabled for nearly everything, though it was pretty clear that adding Kinect capability to a shooter is not exactly a must-have combo. Announcements for Xbox Live video content and new games were the primary news for Microsoft.

Publishers were, of course, mostly talking about their new titles. Electronic Arts was pushing their new Origin service, a combination of digital distribution and social network. Activision was talking about their new Call of Duty Elite subscription service. Both of these things mark the shift of the industry from purely depending on retail store sales to moving to digital revenue and subscription services.

Overall, I saw nothing coming out of E3 that would help the traditional retail sales market. It's harder than ever for a title to succeed at retail, unless it happens to be a sequel to a best-seller. Software sales through retail stores have sunk for three years running, and while sales of accessories have masked it somewhat this year, it's clear that trend will continue. Digital distribution and other business models are the future of the gaming industry. Some publishers seem to be fully aware of this, others are being dragged into it... and some are closing their eyes and hoping it goes away.

I think Nintendo has an interesting new console that will do OK for them, but it will not be as successful as the  Wii. Sony has a better handheld than the 3DS in their new PS Vita, but it remains to be seen if a $249 dedicated gaming device can really be a huge success in a world of smartphones and tablets with thousands of free games. Microsoft seems to be hoping that their Kinect, expansion of Xbox Live to Windows and smartphones, and the smartphone partnership with Nokia will be sufficient to maintain their leadership position in the console business.

I think huge changes are still heading for the console business, and Nintendo seems ill-positioned to meet those changes. Sony and Microsoft, at least, have worked hard on their networks for their consoles. Nintendo has barely acknowledged its existence. I fear for their future.

As for the game industry, E3 no longer represents the future. The revenue is quickly shifting to digital distribution, social gaming and mobile gaming. Console gaming will continue to be a major force, but it will no longer be the only game in town.

PS Vita (NGP) vs. 3DS vs. iPhone 4/5, Round Two

Now that Sony has announced the most important piece of missing information about their new console (The price, not the name), and we have some sales history of the 3DS to examine, it's time to revisit the head-to-head comparison of the three major contenders for the handheld gaming crown. I first examined these three platforms in this post, after Sony first announced their new handheld gaming device.

Let's look at the hardware specs first. The 3DS has a 3.5" 400 x 240 screen on top (that's 3D mode resolution; it would be 800 x 240 in 2D) and the second screen below is 320 x 240. The PS Vita has a single 5" screen with a resolution of 960 x 544. The iPhone 4 (and likely the iPhone 5) has a 3.5" screen with a resolution of 960 x 640. The PS Vita has the largest screen that's close to the highest resolution screen, which is the iPhone screen. The 3DS has the glasses-free 3D effect which none of the other devices have, but for about 15% to 25% of the customers the 3D effect either doesn't work or produces nausea and headaches, or is just unpleasant.

What about graphics performance? Clearly the PS Vita, with its quad-core ARM A9 CPU and Power VR graphics co-processor has the others beat. The iPhone 4 has a single-core ARM-based A8 CPU, but the iPhone 5 is likely to have the same A9-based dual core CPU that the iPad 2 has. It still won't be up to the performance of the PS Vita, but it won't exactly be a sluggard, either. The 3DS has some custom silicon in there, so it's hard to say for sure how it compares. According to this article, the 3DS can put out about 30 million triangles per second, about the same as an iPhone 3GS and slightly less than a PSP. Which means it's way, way behind a PS Vita or an iPhone 5, by about an order of magnitude I'd guess. The fillrate in pixels per second is about 1.6 billion for the 3DS, which is definitely better than the PSP at 664 million or the iPhone 3GS at 500 million... but certainly way behind the PS Vita or the iPhone 5 (the iPhone 4 has a raw fillrate of at least 700 million pixels).

Finally, there's the price point comparison: The 3DS is $249, the iPhone 4 is hard to compare since it's under a contract, but you can get an 8 GB iPod Touch for $229, and the PS Vita will be $249.

I have to say that the 3DS doesn't stack up well at its current price point. Certainly its sales have been weaker than Nintendo projected, and it's currently limping along at a fairly low level. Nintendo is hoping that some strong software titles and more marketing spending will bring up its sales, but I think Nintendo will have to cut the price to $199 before Sony launches the PS Vita, or shortly thereafter.

Nintendo's big edge with the 3DS was to have been the 3D effect, but that's gotten a mixed reception from customers. Even Nintendo has been busy de-emphasizing its importance. Without that, thought, the 3DS doesn't have any advantages over the competition aside from exclusive software titles. Which is no small advantage, as Link and Mario and Starfox and others are a huge draw. It may not be enough for Nintendo to overcome the hardware and business model advantages of iPhones, the PS Vita, and of course Android smartphones and tablets. There are far more mobile gaming options than ever before, and smartphones and tablets have a variety of other features that make them extremely attractive.

Sony seems to be working towards having a variety of inexpensive downloads for the PS Vita, as well as movies, and perhaps will be more open to other functionality. Nintendo has said they will have 3D movies available, but 3D movies aren't doing all that well at the box office either. The 3D fad may have run its course... which would be a bad thing for Nintendo since it planned for 3D to be the major selling point of the 3DS (hence the name!).

The iPhone (and Android smartphones) have suffered from a lack of top-quality games, but titles like Infinity Blade have shown that it's possible to do some very impressive games for the hardware. (And with Epic Games announcing they've brought in more than $10 million dollars from Infinity Blade, it's clear you can make real money from these games, too.) I expect we'll see more high-quality games for smartphones in the coming years.

Verdict: On the raw hardware level, the PS Vita has the horsepower, the biggest screen and the best array of features. The iPhone/iPod Touch has an impressive variety of apps, many of them free, and quite decent hardware performance even though it lacks dedicated gaming controls. The 3DS is bringing up the rear right now, but with better software and a lower price point it could be quite competitive. Nintendo may well release a sleeker, less expensive version next year, and then it will be a different story.

Sony Announces PlayStation Vita, Amazing Price

3DS, this machine's coming to get you.

Sony has announced the name for the NGP (Next Generation Portable): PlayStation Vita (pronounced VEE-ta). Yeah, I know, it sounds like something from Jersey Shore. Well, it's better than the Wii. Regardless of what you think of the name, though, the astonishing thing is that Sony announced the price: $249 for the Wi-Fi version, $299 for the 3G/Wi-Fi version.

Sony has thrown down the gauntlet at Nintendo's feet, pricing the PS Vita exactly the same as the current Nintendo 3DS. In a head-to-head hardware matchup, the 3DS pales in comparison to the gorgeous HD 5" OLED touchscreen, rear touch panel, dual analog controls, dual cameras, and amazing raw horsepower that puts it close to the PS3 in performance.

Given that the 3DS has not exactly set the world on fire with its sales or its features or its software so far, this is shaping up to be a real battle for the holiday season when the PS Vita finally ships. Nintendo has about six months to ship some really strong titles, encourage third-party developers to do the same, get some good marketing programs in place... and maybe reduce the price to $199 before the holidays. So far, the software for the 3DS has not been impressive, and the hardware is clunky, and customers don't seem to find the 3D effect more than a gimmick (and one that about 25% of the audience either can't stand or can't notice). I think the 3DS will have to be $50 cheaper than the PS Vita if it wants to be at all competitive. A better version of the hardware would be nice, one that was smaller and lighter with better battery life.

Sony's not ignoring the threat from smartphones, either, by making the PS Vita compatible with the PlayStation Suite for Android. Old PSP titles that were downloadable can play on the PS Vita, too. This all may not be enough to really deal with the threat of smartphones, but Sony seems to understand the nature of the problem, which is more than I can say for Nintendo.

It's shaping up to be an interesting Christmas this year.

Minecraft Junkies Rejoice

Minecraft has garnered plenty of fans so far, over 1.6 million of them, and it's still in beta. Now there's news that Mojang (developer of Minecraft) is bringing the game to a mobile platform... exclusively to the Experia Play, AKA the PlayStation Phone. Well, I'm sure this will get onto other smartphone over time, but at least for a while it will be an exclusive. Mojang will be showing this off at E3. A nice coup for Sony to bring attention to the phone, and the whole PlayStation Suite concept (PS titles on Android phones), and distracting the press form any little minor security issues they may want to talk about at E3.

Console Apocalypse Predicted

That's pretty much what the future looks like for consoles, I fear.

I guess I'm not the only one who sees signs and portents of the End Times... the end of the standard console market. Computing power continues to increase rapidly, and the smartphones have hastened the advances. The 7 year cycle of the home console is now woefully inadequate to keep up with the relentless march of technology. Worse, raw horsepower and pushing polygons is now less important; games are growing more because of business models than 3D models. The advance of technology is being used to reduce the cost of producing HD graphics for a home display, striking the consoles in their weakest point: price.

The real weakness in the console market is the dependence on physical distribution of games. This keeps publishers tied to high price points (now $60), and high development budgets (since you have to put $60 or more of entertainment value in each package) and dealing with retail stores and returns and inventory and packaging. When you take all of that away with digital distribution, you are freed from the need for high price points. Which means content can be of variable length, and lower development budgets are possible. Alternative business models like free-to-play or ad-supported are viable. A huge range of possibilities opens up... most of which traditional console makers are afraid to use.

Why? Because stepping in that direction means pissing off the retailers, who are still responsible for the majority of their revenue. So they take baby steps, and new game companies without a physical distribution legacy are free to grow into that space. And find ways to undermine console makers, like OnLive or Gaikai or Apple TV or Google TV.

I think the 3DS is a harbinger of what's going to occur for consoles. Nintendo's new box, regardless of hardware specs, will probably be in the $300 or more price range and rely on physical distribution of game discs. Those two factors will mean it will never sell as well as consoles of the past, as new business models with $99 boxes begin to take hold in the family room.

Hardcore gamers are still tied to consoles, but even that will change over time as the new wave of boxes develops even greater power and capabilities. Remember, the smartphone-technology based family room boxes (Google TV and Apple TV, et al.) are based on smartphones that get a significant tech boost every year. Apple's last boost (from the A4 last year to the A5 this year) was about a 9x graphics improvement. How long will it take to catch up and then pass current consoles? Far less than their 7-year cycle.

Sony and Microsoft have some idea of what's happening, and are making some moves to cope. But both of those companies are not used to being nimble, not the way Google and Apple are. At least Sony and Microsoft have a chance at maintaining a reasonable market share... I am very worried about Nintendo. I fear they are heading towards just becoming a software company, like Sega did. Sounds like the big tech improvement for their new console will be controllers with a display screen... which is arguably what smartphones are for the new wave of consoles.

It's a time of great changes... and some will thrive on those changes as others wither. Place your bets now, folks, the game of games continues...

Sony Tries Again, Misses

Sony is still looking for some good news.

Once again Sony has written to developers and managed to tell them not much. I can understand why Sony would not want to make a blanket, public statement to the effect of "developers, we'll cover all your losses." They don't want to create more liability, and possibly have developers inflating what they might have lost. So Sony is probably telling developers, quietly, that they'll make good on the losses in some fashion.

However, Sony loses out by not making a public statement, because developers who might be considering creating PSN titles are certainly not as interested now as they might have been a month ago.

Sony's probably hoping that all the bad press will blow over soon, but while PSN is back up in most place the online store still isn't operating. Which means developers are still not able to sell anything, and they're probably wondering when they will make money from the PS3 again.

At least Sony's got some free games going out to the fans, who will probably not remember the outage too much in a month or two. Developers have longer memories, especially when large sums of money are involved. I still think some public declaration of future loss indemnification would be a good idea for Sony... or perhaps Microsoft will try that.

PSN Not Secure Enough, Says Japan

See the original here.

Sometimes you just can't get no respect. Sony's bringing PSN back around the world... except for Japan, where the government wants more security measures in place before they'll allow PSN to come back. I guess we're not entitled to as much protection as Japanese consumers deserve.

This is all going to make a great PR case study someday. Perhaps not as much fun as Facebook attempting to use a PR agency to dish dirt on Google, but instructive nonetheless. (Though reading the sordid tale of Facebook and PR giant Burson-Marsteller is highly entertaining in an oh-my-god-did-they-really sort of way.)

PSN Coming Back, But Sony Isn't Secure

Encouraging hackers to create more downtime?

Two stories at odds with one another...

First off, Sony is bringing back the PlayStation network... actually, PSN should now be up for everyone. You'll need to download a software update, and of course you should be changing your password, but now you can enjoy your PSN goodness again after nearly a month without it.


Second, how secure is it really in Sony's network? Reuters did some investigating, asking the CTO of the partially government funded US Cyber Consequences Unit to check out Sony's security. He found numerous problems just by doing some Google searches, locating servers, files, and sensitive areas that should have been locked down. Reuters was kind enough to tell Sony about what they found, so hopefully those areas have been secured now. Still, being able to just Google and find a security management console for A Sony web site is disturbing.

At least Sony has brought back the network and they can try to move past this nasty little incident and hope that everyone forgets all about it, preferably before E3 takes place. I suppose it can happen, given how everyone was able to look past the Red Ring Of Death problem that Microsoft had with Xbox 360's. Of course, in that case it was pretty clearly a hardware design issue, and once they changed the design the problem mostly went away. It's not exactly the same with network security. We all hope Sony has learned a thing or two about locking down networks against hackers, but how can we really be sure?

Sony has announced a bunch of freebies for customers to try and make up for the problem, and I'm sure the customers will probably not hold it against Sony for long. At least, that should be true if no unusual charges show up on their next credit card statements. The bigger issue for Sony is the developers who lost a lot of money from the outage. Perhaps they are being handled quietly, individually, and being asked not to comment further. But Sony does need to make some public gestures to reassure potential developers that they will not lose money being PSN developers.

Sony, Running Out Of Feet, Shoots Itself In Another Appendage

It only does everything.

Just when you think Sony's had enough time to figure out how to talk to people about the PSN/SOE hack attack, they issue another public statement and you think "Have these guys learned nothing?" This time, Sony is attempting to deal with developers. You know, those companies that provide the games that are sold on PSN... those companies who have seen their PSN revenue drop to zero for the last three weeks, with no end in sight.

Apparently there's been no official communication from Sony to developers regarding the outage until a couple of days, ago, when VP of Publisher Relations Rob Dyer sent out this email. It's worth reading as an example of how not to communicate in a crisis. Let me summarize the contents of the letter for you: "We had a big break-in and customer data was compromised. We deeply regret that this occurred. We are sure it won't happen again, and thanks for your support. We'll keep you updated."

Let's start with the fact that this email was sent out, not on day two or three of the outage, but after more than three weeks of outage. Good communication? That's an insult. Sure, I bet all the developers were in communication with their account executives at Sony about the issue, and were getting information. But that's back-channel stuff, not Official Word. Not something you can take to your investors or shareholders to explain what happened to your revenue numbers this month. Or when that might stop.

As to the content, Sony didn't tell developers anything they didn't already know about the break-in or the outage. Sony didn't even really apologize; they just "deeply regret that this incident has occurred." Nice use of the passive voice there, Sony, to avoid taking any responsibility. Maybe the lawyers wanted them to avoid any language that might open them up to a lawsuit. I don't know whether that will work, but certainly it's not helping make anyone affected feel any better.

Finally, you'll note the important thing that's missing from this letter: Any mention of recompense to the developers for the lost revenue. Or, indeed, any mention of revenue, even obliquely. If you have lost thousands, or hundreds of thousands, or maybe even millions of dollars because of lost sales, you might be a trifle peeved that Sony isn't mentioning that fact.

Microsoft, if they haven't already done so, should be communicating with all the PSN developers and saying something like this: "Hey, put your games on Xbox Live and we'll guarantee we don't have an outage. In fact, we'll back that up by promising to pay you the average daily sales you normally get if any outage ever does occur." Microsoft could probably even get an insurance policy to cover those costs for them.

Sony should, in fact, be telling their developers that they'll be recompensed for their lost revenue. Hell, they should have told them that on Day 1 of the outage. Any developer that looks at creating a PS3 exclusive title for download will doubtless conclude that's just stupid, because then you might lose a month of revenue with no warning. At least if your title is on Xbox Live as well as PSN, you'll only lose part of the revenue. With this logic, PSN will not be seeing exclusive titles... which loses an advantage to Microsoft. Bad play, Sony.

Sony still gives the impression of floundering, after three weeks of crisis. It's going to be a very difficult E3 for them; I hope they get their act together soon. But hope is fading after three weeks... this incident is going to have long-term damage to the Sony brand, I fear.

Sony's PSN Outage Costing Developers

Will Sony debut a new PSN logo at E3? Probably not this one.

Sony's still not ready to say exactly when the PlayStation Network will return,,, they are still conducting "comprehensive system checks". A report from Bloomberg pegged May 31 as the date, but Sony has denied there's a firm date for PSN's return. Perhaps... but the pressure is growing on Sony every day that passes.

It's not just 100 million gamers annoyed at Sony for allowing hackers to get to their data; it's developers who sell products on PSN. That is, they used to sell products on PSN, and they hope to do so again someday. Meanwhile, they are not making any money. In some cases, this is a substantial hit; Capcom has gone on the record as saying the PSN outage is costing them hundreds of thousands of dollars, possibly into the millions. (Damn, does this mean the price of smurfberries is gonna rise? Maybe you might want to purchase a wheelbarrow or two.)

They're not the only ones; Q-Games, developer of PixelJunk, says they're losing a lot of money, too. While Sony has announced some efforts to compensate gamers for the lost network time, nothing has been announced so far to help developers. Maybe Capcom can absorb a million dollar loss, but they aren't happy about it; smaller developers who may be more reliant on the revenue from their PSN games could be seriously hurt.

Game developers are no doubt starting to wonder if they should be investing resources in PSN games if the service is going to be unable to generate revenue for weeks or months at a time. Or if that's deemed unlikely to happen again, if they've been hurt by Sony and not properly assuaged, perhaps they may just put their efforts into Xbox Live instead.

Sony's got to spend time on damage control on many fronts here: PR, developers, financial industry, network security, and key executives wondering if they'll keep their jobs after this debacle. All when they should be working hard on E3 and the big PR opportunity to look good for the world for the coming year. Now, though, they'll have to work hard just to avoid looking like villains or inept bumblers. (I'm sure they feel some sympathy for the Pakistani officials who are trying to avoid both of those categories right now.)

Anyway, Sony, remember the developers... you'd better make some gestures in their direction, too, or you could find that PSN has a lot fewer new games in the future.

Sony Offers Identity Theft Protection

It's been a busy week for Sony, as the scramble continues to deal with the enormous hacker intrusion and the consequences to Sony's brand. A major development this week has been a public letter from Sony CEO Howard Stringer. The gist of the matter: Howard Stringer apologizes. Finally. Why on earth it took two weeks for Sony's CEO to make a public statement can only be attributed to the Japanese culture, I suppose, where admitting a problem is the very last thing you want to do. All very well and good in Japan, I suppose, but Sony is an international company, and they need to handle their international customers, too.

Meanwhile, Sony has offered a free identity protection service for 12 months through Debix, Inc. for PSN users in the United States. Users in other territories will hopefully be offered similar deals. Hey, you'll get priority access to licensed private investigators! I bet you never thought you'd get that with your PSN membership.

Meanwhile, the return of PSN has been delayed for some indefinite period. we're now at 19 days and counting, with no specific start date being mentioned yet. Just to rub salt in Sony's wounds, apparently, the hackers responsible for the attack (who have been lying low) posted personal info from 2500 PSN customers to a dormant Sony web site. Sony did manage to notice and shut down the site, but it is one more embarrassment to add to the list. 

Sony's considering offering a reward for information leading to the arrest of the hackers. Hey, maybe you can win a free game! The identity of the hackers remains a mystery, at least publicly, though some Anonymous veterans have stated in interviews they believe that members of the group were in fact responsible, despite denials.

So the wounds continue to ooze, and Sony's efforts to stop the bleeding have so far proven too feeble. Maybe it's time for Kevin Butler, Sony's faux VP they use for PR purposes, to go on the record about the situation. At least we can get some laughs that way. Sony needs some dramatic victory to really turn the PR situation around... maybe they should call Seal Team Six.

AppDroid Apocalypse, Nowish

The face of destruction.

With Google's I/O conference coming up next week, it's a good time to look at what's happening to Google TV and Apple TV. According to this report, Google TV 2.0 will be coming with support for other chips than Intel, Android 3.0, and a full Android Market unleashed. What's that all mean? A lower price tag, since ARM-based chips are much cheaper than Intel's, an easier interface, and better graphics.

Which all means that Google TV may have a chance... if Google has been smart enough to cut some deals allowing content from major broadcasters to be shown through Google TV, unlike the first version. Sorry, Google, but if people can't watch the TV they want to watch through Google TV, don't expect the unit to take off.

Meanwhile, all is quiet on the Apple front... too quiet. Rumors have been bubbling up about the massive data center Apple has constructed in North Carolina, which apparently will be used in some fashion for iTunes. But it's probably connected to Apple's recent purchase of iCloud, and the streaming music service, and the deals Apple's been cutting with major music labels. I suspect even more than that... other rumors have Apple eying Netflix's business.

It all makes sense to me. Apple could certainly turn Apple TV into another huge growth center if they can put the pieces all together. Imagine streaming video deals where you could use the Netflix model, which has proven so popular Netflix now has more subscribers than Comcast. If you focus on streaming content, which you can do if you have a massive data center, then you don't need large local storage... a few GB in an Apple TV unit would suffice, thus keeping the costs of the unit way down. Streaming video, streaming audio, purchases kept in the cloud instead of stored locally... Now you put an A5 chip in the Apple TV, and suddenly the graphics power is now better than a Wii, and closing in on Xbox 360.

Flip the switch and allow the full App Store to be there on Apple TV. Now you're seeing a $99 box that outdoes a Wii for gaming power, easy use of an iPhone or an iPad as a controller (easily outdoing the planned Wii 2 controller-with-a-screen we're hearing about), and thousands... no, hundreds of thousands of apps available. Most of them for free or a few dollars... tens of thousands of games, and thousands of other types of apps, and more created every day.

Yeah, this is all coming soon to your family room, once Apple gets all the pieces in place. The media deals are the hardest part. The data center is ready, the hardware is ready. The gaming industry? Not ready. Nintendo, Microsoft, Sony... this is the next enemy you have to fight. Apple has hurt your handheld business, Nintendo, now they are aiming right for your jugular in the family room. Sure, Nintendo has their new console planned... but it will be hundreds of dollars, not $99. And I see no sign that Nintendo is going to embrace the new app business model that has propelled the smartphone business to amazing growth in the last few years.

Just to make it all worse, Apple is on a one-year hardware cycle, where the hardware gets a significant power boost every year. Think the new Apple TV that will be coming, with an A5 chip, is too wimpy? Wait a year for a newer $99 box. Another year or two after that and it will be more powerful than Nintendo's new console.

I still think Nintendo, Microsoft and Sony have some amazing assets in this fight, and a chance to continue to hold significant market share in the future. But unless they start embracing the future sooner rather than later, they are going to see their market share diminish between the onslaught of Google and Apple. The handheld business is just about a lost cause now, though Sony seems to be fighting an intelligent rearguard action with the NGP. Next up is the console business... and I can see that being upended the same way the phone business was upended in a few short years, by Apple.

Developers, get ready to rumble...

Sony Tries Distraction

Sony, being busy dodging requests from Congress to appear at hearings, has at least sent some answers to Congressional questions about their security breach. In a classic move, Sony attempts to dangle a shiny object in front of observers to see if they can deflect attention away from the real problem.

The shiny object is this: Kazuo Hirai noted in a letter to Congress that "that the intruders had planted a file on one of our Sony Online Entertainment servers named 'Anonymous' with the words 'We are Legion." So now we're all supposed to focus on how Sony is just the poor victim of those nasty hackers.

The real problem, of course, is Sony's poor security and why a hacker was able to break in, regardless of who exactly the hacker is. Sure, chase down the hacker(s) and throw them in jail; hanging's too good for them. But why was Sony's security so weak, and what steps are they taking to ensure this won't happen again, why should we believe them, and what are they going to do for their customers and developers?

I understand why Sony would like to focus on the hackers, but let's keep our attention on the core problems. Sony needs to deal with its issues at the same time as they look for the bad guys. It's called multitasking, and Sony should be capable of that.

The funny thing is this whole problem with Anonymous arose because Sony decided, in a firmware update, to remove support for Linux on the PS3. Now, this was a feature that perhaps 99.9% of the PS3 owners knew nothing about, nor cared. Some hardcore techheads could buy a PS3 and install Linux on it, and a have a pretty spiffy little computer for their trouble. Yet Sony decides they have to go and eliminate that capability... perhaps because they were worried some hacker might use that to subvert a game or two, or some such thing. All they really managed to do was unleash a series of attacks and incidents... they should have just left well enough alone.

At this point, Sony has to move on and figure out how to restore their reputation. Their appearance at E3 should show how they intend to deal with their PR problems; we'll see if they make some good moves.

Sony Shoots Self In Other Foot

Maybe Sony could hire him for security.

Just when things seem darkest... maybe they're about to get worse. Sony's had a bad couple of weeks with the PlayStation Network problem, where they've had to shut down the service (still down after two weeks) and admit that over 77 million user accounts were compromised, and possibly credit information was taken, but they can't really be sure. Oh, hey, we're sorry that some really nasty bad guys did this to you, and we plan to offer you a whole free month of PlayStation Plus!

Now Sony has admitted that the PSN break-in isn't their only problem. Sony Online Entertainment (SOE) has admitted that 24.6 million accounts have been compromised, and over 12,000 credit card numbers stolen. The hits just keep on coming, don't they? Sony has admitted that this happened around the same time PSN was hacked, though why Sony didn't figure this all out until now is a damn good question.

Hey, Sony, there's an old Washington D.C. adage about PR, and it's one you should take to heart right now. It's called the Rule of Holes: When you find yourself in a hole, STOP DIGGING.

Sony's problems just went from bad to worse. Their PR response has been inadequate, and questions keep multiplying among users and the press, which is always a good sign that your PR efforts haven't been thorough enough. It seems inevitable at this point that Sony will still be dealing with the fallout at E3, given that the FBI is now involved, Congressional hearings are being scheduled, and there seems to be no end to the bad news from Sony.

Some analysts are speculating Sony may offer a PS3 price cut sooner rather than later to help their image get on track... Too soon, I think. It might be interpreted as "we'll sell the PS3 for less because it's not secure" which is not quite the message you want to send right now.

So what should Sony be doing? A more forthright presentation replete with data and sincere apologies would be good. Especially noting exactly how Sony screwed up on its security, which shouldn't cause any danger to Sony because they've plugged that hole, right? I hope so. Explain why moving your servers to an undiscolsed location is part of the fix... this kind of implies that there was a physical breach of security, not just a hacker coming in over the data lines. What really happened? What does Sony really know about what data was accessed?

At this point I'm starting to see that Sony's gaming brand could be negatively affected. And it's not going to stop there; Microsoft and Nintendo have to be ready to state just how this won't be happening to them, and how tight their security is. Sony has the highest hurdle to climb here, though. They should think about some dramatic move to restore their reputation...

Sony Still Losing Hit Points

Ouch.

Sony is still reeling from the hack attack on the PlayStation Network that exposed 77 million customers to possible theft of their personal information. Sony's not sure if any credit card info was taken, but then there's this story: Supposedly 2.2 million credit card numbers are up for sale on some underground message boards, with sellers claiming to have taken them from Sony. Of course, it's not clear if this is just someone trying to capitalize on the publicity or the actual thieves, but it's not good news for Sony either way.

Now we have an Australian man who had $2000 in charges run up on his credit card, and he thinks Sony is the source for the credit card info. Again, bad news for Sony either way... the PR hits just keep accumulating. Sony's PR efforts have been rather lame at best, with a few blog posts and vague reassurances. Many users are pissed that Sony took so long to figure out there might be a credit card problem, and to reveal facts to users about the breach.

I think it's clear Sony is carefully trying to avoid saying anything that might help a lawsuit against it... and lawyers are already filing class action suits against Sony. But Sony has other problems... like preserving its positive brand name, and trying to get a handle on this issue before E3. The nightmare scenario is that Sony spends its E3 press time talking about the breach rather than new products. Some observers have not been kind regarding Sony's efforts so far, like this one. I think Sony is going to have to step up its efforts in a major way in order to avoid worse effects down the line.

Take some PR lessons from Sony's experience. If you have a major problem, try to get out in front of the story. Communicate a lot. Avoid the passive voice, own up to the problem, explain how you are dealing with it, and tell the customers what you're going to do for them to make it right. Bad things do happen to good companies; but good companies show they can handle it adroitly. So far, Sony looks more like a deer in the headlights than a calm, confident videogame hero about to solve a problem.

PlayStation Network Hacked, Outage Continues Indefinitely

Caution: Here There Be Hackers.

Sony finally admitted today that a hacker had broken into their network, and had accessed personal data on the subscribers. That would be 70 million subscribers who now are wondering if their credit card data is being sold on the Russian black market, or in some other shadowy corner of the Internet.

Users were wondering why Sony didn't tell them until after a week of an outage that was only supposed to be a very short-term thing. Sony says they didn't know the information database had been compromised until yesterday. I guess when you've got a database that huge, looking in every corner could take a while.

Anyway, the outage will last for some unknown period of time... perhaps another week. Which is a big disappointment to Playstation owners hoping to do some multiplayer online gaming. Or for developers hoping to make some money selling games over PSN. Losing a couple of weeks of sales could be thousands of dollars lost.

I think it's good for Sony to take its time and make sure everything is totally secure, and I'm sure they're going to be reviewing their security and how this whole thing happened in the first place. I wouldn't want to be the person in charge of IT for this network... not a happy time for them and their team.

It does show the value in diversification... like developers having games on more than one platform so their cash flow doesn't go away for a couple of weeks when there's an outage. Or perhaps Sony may have more than one backup or layer of security in the future.

I bet Microsoft is going around checking the locks on Xbox Live this week to make sure they aren't the next target.

PS3 Sales Hit 41 Million

Actually the number shown was low... how often does that happen?

While the Xbox 360 has been consistently at the top of the charts for console sales in the last year, the battle for second place has been interesting. As Wii sales continue their slide, the PS3 has been making up some ground. Sony announced that they have hit 47.9 million PS3's worldwide by the end of 2010. Not a bad sized market.

Better still, 805 of them are connected to the internet and there are 70 million PSN accounts. Sell that digital content, Sony!

The big question in my mind is who makes the next price move: Sony or Microsoft? Which one blinks first? (The Wii doesn't count any more, really... its price drop is inevitable, the only question is whether Nintendo waits past the point where no one cares.) Both companies will try to maintain the price as long as possible... but I bet there might be drop in time for holiday shopping, or at least a pack-in title or two. Bundles with Move or Kinect might get an even better price... it'll be fun to watch the pricing battle!

Camel's Nose In The PSN Tent

Free Realms... it's like an online cosplayer convention, I think.

Here's a news tidbit that I filed away, but haven't gotten a chance to comment on yet... Sony has announced the first free-to-play title for the PS3, Free Realms. This is a family-friendly MMO that's done well on the PC, and now it's bringing the freemium monetization model to the PS3. Of course, this would be much more cool if the Playstation Network (PSN) was actually operational right now, but it's still turned off due to a rather nasty intrusion by a hacker. Sony is having to scour their servers to make sure there's no sneaky little code hiding out ready to steal credit card numbers or hack player scores.

It will be interesting to see just how well MMO's can do on consoles, and how well the virtual goods will sell. I'd think the lack of a keyboard would affect the ability to make friends and communicate, but since everything seems to be moving to voice chat anyway perhaps it's not so much of a bother any more.

I do wonder when Xbox Live will take the leap and allow free-to-play, or MMO's for that matter. They risk being left behind when Apple TV and Google TV make the leap to apps in the family room, as you can bet there will be plenty of companies ready to offer free-to-play games on those platforms.

GDC Day 4

The most popular way to get attendees to visit a booth at GDC.

Today was a day for the Expo... in between meetings and random encounters. And missing some of the people I was hoping to find... but they'll turn up sooner or later. The Expo was an intense experience, with crowds of people, brightly colored booths with billions of polygons and technology oozing from every port. Here's some impressions of what I saw today:

The Nintendo 3DS. I finally got a chance to play with a 3DS and see some of the titles coming up for it. A very nice 3D effect without glasses... as long as you keep your eyes in the sweet spot. The movie clip produced a good 3D effect. I tried a couple of the built-in Augmented Reality (AR) games, which used the 3DS cameras to view a card on the desktop to create a dragon that you could shoot at by moving the 3DS around and pressing the button. Another game took a picture of your face and mapped it onto targets... rather disturbing I think.

Overall, the 3DS felt heavier than a DSi, and the controls seemed sturdy. The 3D effect worked well, but after playing for 15 minutes I found I had a headache. I think it's a nice device, but I am still unconvinced that the market will embrace the device the way it embraced the DS. There are some significant limitations, such as the battery life (3-5 hours versus 15 or more), the $250 price tag, the high cost of the games ($40 or more) and the still-feeble embrace of digital distribution and its possibilities. In a market where smartphones will be selling in the hundreds of millions, the 3DS will  be lucky to achieve a significant fraction of their market share.

What could Nintendo do better? I'd say bring down the price to $199, and embrace digital distribution for a wide range of price points. Open it up to developers and a wide variety of apps. I's screens would still be far lower resolution than a smartphone, but at least it wouldn't have such a glaring disadvantage in software distribution.

The Sony Xperia Play. In stark contrast to the 3DS is the new "Playstation Phone" from Sony Ericsson. I had seen pictures, and it looked pretty cool... but holding it you're struck by how incredibly thin and light it is. And speedy... with a gorgeous screen. Android powered, and a set of Playstation games included, with more on the way. Makes the 3DS look clunky and underpowered and kinda ugly. Frankly, I'm not enamored of 3D. Nintendo's tried to make it important as a gameplay element, but it's unclear how many games will really do that. And the headaches may be more prevalent than Nintendo would like. The Xperia Play is a worthy phone to carry, and a great gaming device.

Middleware, Payments, Cloud Computing... All of these had multiple booths for a variety of vendors. I took a variety of literature, but really reporting on these things will require some review. There seems to be more ways than ever to get paid for your games, and to have your games hosted, and to have various sorts of services connected to your games. The part that I really don't understand is booths seemingly devoted to obscure Chinese MMOs. Other other foreing games... why have a booth at GDC? What do they hope to gain? I'll try to find out tomorrow, because I'm curious.

One interesting note: The most popular prize for giveaways at booths seems to be an iPad... with a few bold booths offering an iPad 2. Of course, they're only giving away one to a booth... but there are a half dozen booths where you can find this offer. Interesting that they would presume attendees at GDC to be interested in this item... and I think they're right.

Right now I want to spend some time watching the League of Legends tournament being staged for the GDC Conference Associates... my son is competing. More tomorrow.