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OUYA: Dead on arrival

The game industry is currently abuzz with the Kickstarter success of OUYA, “a new kind of video game console” as described by its creators. It reminds me a lot of how Apple started out in the early days – rebels in the world of Orwellian corporations. What it fails to do in my eyes, however, is convince me of being able to reach its lofty goals – revolutionizing the suffering console market. When you take a split-second glance at it, you see disruptive innovation written all over it. Look harder, though, and the mask starts to fall apart piece by piece. Here’s why.

Open platform, no gatekeepers = anarchy at its best

The company says it will let developers release whatever their hearts will desire. That means there will be no curation and ill-intentioned developers will be able flood the store with drivel, no questions asked. Want to make a quick buck and sell trash to consumers? Go ahead, there’s nobody stopping you! Yes, each game (or app) will require developers to give away a sequence for free, but what if that sequence is not indicative of the final product? What if the whole thing is orchestrated so as to mislead the consumer? Potential voting systems, you say? Those can easily be abused. Lack of curation is clearly not the answer.

This also begs the question: How will gamers find the good games in the midst of a sea of apps? Don’t forget, the sea which includes trash that other platforms ditch at first sight (or at least aim to do that).

And then there is piracy which will likely be a big problem from the get-go. Android is known to have a high level of piracy as it is and OUYA seems like it will only take it a step further.

This bring us to the most troubling hole I personally see in OUYA’s strategy – its target audience.

Target audience not interested

Clearly, the core gamer is the voluptuous woman (or man, whatever floats your boat) OUYA is wooing here. And, as we are all well aware, core gamers are not the biggest fans of social/mobile games, especially those associated in any kind of way with the three dreaded letters – F2P (free-to-play) (Edit: There are some F2P exceptions, such as League of Legends and Team Fortress 2, but the success of these has a lot to do with accessibility which I talk about later on). The company makes a big mistake describing their games as “free to play” right on their introductory Kickstarter page, even though this definition of theirs also includes paid titles with demos and subscription-based games.

That’s just the tip of the iceberg. Here’s a much bigger problem for F2P games on OUYA. It is said that around 10% of the total user base consists of paying users when it comes to F2P titles. That’s if you are GREE or DeNA which most companies aren’t. Not even Zynga can get that number. Zynga, the Facebook dominator, enjoys “only” 1.2% of paying users from its dropping number of MAU (monthly active users) which, at the time of writing, sits at 235 million users. Here’s the catch – the majority of these users consists of the casual users who don’t mind paying up to refill their energy bar.

Don’t forget, core gamers don’t like the F2P rule book. Even if a developer, say, decided to make a AAA F2P which would respect the user and would focus on fun first, monetization later, it still wouldn’t be viable, as such a project would cost a lot of dineros. Therefore, to even consider the option of going big in the F2P space, the developer would first need an established audience of large proportions which I don’t see materializing due to the open, free-for-all nature of the platform touched upon earlier.

Yet another problem with the core market, the kind which supports the traditional business model, is that they already own either an Xbox 360 or Playstation 3, both of which offer a plethora of fantastic indie games available from closed, but heavily curated digital stores. Of course, that’s in addition to the more popular high-budget retail titles and supplementary entertainment media services, like Netflix. And let’s not forget that both of these consoles are heavily rumoured to soon go down in price, given the disappointing sales numbers in 2012.

And that’s not all. Also threatening is the eventual arrival of next-gen successors which are rumoured to be unleashed in Fall 2013, at the earliest. You can bet your bottom dollar that quite a few core gamers are heavily anticipating the arrival of this eight console generation and have no problem waiting until they hit store shelves.

Accessibility plays a crucial role too

All throughout the post so far I intentionally ignored the core PC audience. PC gamers are known to be heavy supporters of indie titles, especially the Steam community. They were the ones who gave rise to the incredible success of Minecraft. One might point to them and say they are THE target audience for OUYA, but that would be wrong. PC offers something which OUYA doesn’t and that’s accessibility. Desktops and laptops are EVERYWHERE. People buy them to do indispensable tasks, such as watching cats doing all sorts of crazy shit and, duh, watching porn. That and play video games. Housewives seek relief in going on shopping sprees in FarmVille and core gamers immerse themselves in recreating Westeros in Minecraft. There’s a reason why many of these gamers don’t want consoles – they don’t need one, because PC serves all of their needs, gaming-related or not.

The same goes for iOS and Android platforms. They are mobile phone platforms and their primary use is communication. The games that are available in the app stores are just a (big) plus, nothing more. Mobile phone buyers don’t go “It has Angry Birds, GOTTA get one of those!” prior to purchasing the device. Therefore, equating the iOS/Android user base and potential with OUYA’s Android-based platform in any kind of way is a HUGE no-no.

In short, games available for PC and mobile are highly accessible, because these two consumer electronic devices are so damn wide-spread. EVERYBODY has them. And their primary/sole functions are not gaming. In contrast, OUYA is a dedicated game console.

Conclusion

My conclusion is that OUYA will not enjoy anywhere near the level of success expected by so many people. It will cater to a really small niche of consumers, offering nothing more than a hacker-friendly platform filled to the brim with a plethora of futile games/apps. The capital-lettered console clearly got the attention of the industry, but don’t hold your breath for it to get anything more than that.

Edit: I addressed a comment regarding the success of core-centered F2P titles, such as League of Legends and Team Fortress 2. Thanks Ben.

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Zynga faces some serious firecrackers

As Zynga’s number of monthly active users (MAU) continues to plummet (now at 254 million, down from 292 million in April 2012) and its stock price continues to fare well below expectations (60% less than what it was at its highest point in March 2012), the social game giant is clearly experiencing some not so pleasant times. While the drop in share price is somewhat attributable to the Facebook IPO, there are other more fundamental problems Zynga is facing.

Move to mobile devices

Many attribute the drop in Zynga’s MAU to users increasingly going after mobile game experiences as opposed to web experiences. Although this can’t be proven, there is no denying that the smartphone market is too big for game makers to ignore, especially by the likes of Zynga. As its Japanese counterparts GREE and DeNA absolutely dominate the mobile game market, with approximately $5 of monthly average revenue per user (MARPU) compared to Zynga’s $1 MARPU, and slowly expand their reaches into Western markets, Zynga is having an incredibly hard time replicating its Facebook success and dominance on mobile platforms. To put this into perspective, there is only one Zynga title currently in the US top 10 grossing titles charts on both iOS and Android: Zynga Poker.

One of the most logical explanations for the lack of success is Zynga’s overreliance on Facebook. Whereas the two prosper on the web, it’s not the same story on mobile. Both are known to be having difficulties properly adapting to the mobile platforms. Facebook’s app for mobile is still as mediocre as ever. For this reason, Facebook has been known to be making some heavy investments into the mobile space, the latest being the infamous acquisition of Instagram. Zynga, as expected, has been doing the same, but the results don’t yet reflect the efforts put into it, far from it actually. The $200 million acquisition of Draw Something maker OMGPOP especially is looking more and more like one of the worst investments in the social game industry in the last few years, as the drawing game sees no end in sight for its continuous drop in MAU.

Franchise fatigue

In the video game industry (or any media industry for that matter), there is a thing called franchise fatigue. It kicks in when companies refuse or fail to innovate their game series and churn out a similar product year in, year out. Usually these companies are sure they are doing nothing wrong, that they are innovating by simply slightly changing a few things, like changing the setting and adding in meaningless features.

An example I always like to use is Electronic Arts in the pre-2006 times. For many years, EA was the leader in the video game business who knew exactly how to satisfy both consumers and investors. The recipe for its long-lived success was simple: base your product on a popular sports or movie series, spend many a million dollars marketing it, and then pump out a new version of said product year after year. Impressive sales of such products, based on properties like the omnipresent Harry Potter, James Bond, and the Lord of the Rings, meant consumers were content with EA’s way of running its business, as were investors, knowing the company had a reliable stream of revenue in the infamously hit-or-miss video game business.

However, as EA transitioned its product portfolio into the next console generation in 2005 and 2006, it became more and more clear that its seemingly invulnerable strategy was, in fact, full of faults. Instead of generating new, wholly-owned IPs, it relied on its established darlings, but without innovating them. As a result, quality dropped and consumer interest and sales along with it. Luckily for EA, it realized the mistake it had been making (for too long, mind you) and started its restructuring process in 2006. In the years since then, it ramped up its investment into new properties, improved quality of its existing franchises, and successfully started its transition to digital. All of these changes came at a significant cost, however. Its market valuation is down 50 per cent since November 2011, as investors increasingly lose trust in the company. The company that was once the industry’s biggest third-party publisher has a very tough time ahead.

Much like EA in the past, Zynga too is having problems with franchise fatigue or, rather, focusing too much on the financials (metrics and monetization) and not enough on the gameplay experience of its titles. Its strategy titles, such as FarmVille, are all based on the same formula – either wait millennia or pay up – and consumers can be tricked only so long with new face lifts before they turn their attention and money to other experiences.

Needless to say, this kind of business thinking is flawed. Although many of Zynga’s titles have been great successes, they can’t be sustained indefinitely. Just because they are based on the new business models enabled by social gaming, it doesn’t mean they are bullet-proof from the negative consequences of resting on laurels and failing to innovate.  And not innovation in the sense of putting on a new coat of paint.

What Zynga needs is a good old reality check. It needs to realize that no matter which business model you use to monetize your titles, you simply need to come up with new games eventually (better sooner than later, though), games that not only match the market performance and quality of your previous releases, but exceed them. That or you’re on your way out of the industry.

Nintendo fumbles its second chance

Following last year’s mess of an E3 showing, leaving industry watchers rather confused as to what the Wii U was, Nintendo got the second chance at this year’s E3 to correct the mistake and properly introduce its upcoming Wii U controller console. Did it though? Nope.

Nintendo started off E3 nicely with its pre-E3 conference video on Sunday, revealing the Wii U’s menu system/social network, called Miiverse, and its core features for the first time. Also pleasing was the reveal of Wii U’s planned integration with not only 3DS (a no-brainer, yes), but mobile devices and PC as well. The only downside here is that this cross-device integration is to be implemented some time after Wii U’s launch later this year. Just before the end of the pre-E3 conference, Nintendo President Satoru Iwata assured us all the great Wii U games will be shown two days later at Nintendo’s proper E3 conference.

Showed they were, just not the kind that would make people camp in front of stores come launch day. First-party titles that were showcased were Pikmin 3, Nintendo Land, and New Super Mario Bros. U. While the anticipated Pikmin 3 roused the Nintendo core fans and raised hope for the same kind of excitement, if not higher, to follow on throughout the rest of the conference, the other two Nintendo offerings disappointed. New Super Mario Bros. U looked strikingly similar to the Wii original and failed to show what makes this Wii U iteration better than its predecessor. Nintendo Land was an even bigger disappointment. Aimed at casual gamers and positioned as the Wii U’s “Wii Sports” title, the party game made little sense when demonstrated on stage. The more Nintendo talked about it, the more confused the audience got and if know-it-all industry professionals didn’t get it, how will the casual market? Nintendo certainly needs to work on presenting their games better. One thing was for certain: this is no Wii Sports for Wii U.

Seeing as how New Super Mario Bros. U, Nintendo Land, and Wii Fit U are geared more towards casual gamers, that leaves only Pikmin 3 on the core gamer’s plate in Wii U’s launch window. That’s it? No Zelda? No Metroid? No Pokemon? When probed on the matter, Nintendo of America President Reggie Fils-Aime said that all the fan-favourite Nintendo properties are being worked on, it’s just that they won’t see the light of day in the launch window, but will follow later on in the console’ life cycle. Starting to sound a lot like what went down with the 3DS in its first year.

If first-party doesn’t satiate the core gamer’s hunger, surely Nintendo made sure the third-party line-up will, right? Nope, wrong again. Although LEGO City: Undercover and ZombiU looked very solid, they don’t exactly have the trappings of a killer app that moves units. The rest of the third-party line-up consisted of uninspiring re-releases, like Ninja Gaiden 3: Razor’s Edge, Mass Effect 3, and Batman: Arkham City Armored Edition, and new upcoming multiplatform titles, such as Darksiders 2 and Assassin’s Creed 3 for the core, and Just Dance 4 and Rabbids Land for the casual.

If Nintendo showed off all the note-worthy titles not in trailer form, but real-time gameplay demo form with all the Wii U’s exciting features, we would be having a different conversation right now. Also no live demo of Miiverse and its integration with the announced titles. It was all shown in the form of concept videos. With some five months before Wii U launch, this is simply unacceptable. We instead got unnecessary live demos of Just Dance 4 and Batman: Arkham City Armored Edition. Wow.

All in all, Nintendo’s E3 showing was a disaster. E3 matters most to the core, one half of Wii U’s target market, the other half being the casual (questionable strategy business-wise), and Nintendo simply didn’t deliver. Unhappy core fans remain sceptic. I wouldn’t be surprised if most of them already lost hope for Wii U. And if the price won’t be $250 or below, Nintendo can kiss goodbye casual gamers as well. As 3DS nicely demonstrated, even with a fuzzy hardware proposition, the audience comes when the right games are available and the hardware is priced right. Neither of these two crucial factors are determined yet.

With Nintendo skipping this year’s gamescom, meaning no further new game announcements are in store for launch day, the core gamers are already off the ship. They will sit this launch out and wait on the sidelines until the right moment (read: killer apps) comes. Nintendo’s only hope now lies in the indifferent and unpredictable hands of casual gamers – only one half of Wii U’s twofold target audience.

OMG: E3 euphoria only two days away!

Billions of people get excited each year when the Christmas holiday season starts. Dozens of millions of football fans will be glued to their screens when the European Football Championship kicks off on June 8. A plethora of gamers around the world will experience the same level of excitement when Electronic Entertainment Expo (E3) 2012 starts early next week. Many of those (me included!) are already psyched about the games that will be shown and the announcements that the industry’s top companies will make. Therefore, it’s only fitting that I share what I’m thrilled to see starting Monday.

Microsoft

Gears of War: Judgment was just announced two days ago, so not much is known about the game, but those that have had the chance to read the Game Informer issue are saying it’s a prequel not about Marcus Fenix, but Baird, Cole, and two other companions. It will be interesting to see how different it will be from the trilogy (since it’s a spin-off title). Seeing as how Halo 4 is coming out late this year, Judgment will then be out next year, but when? It would be unusual for Microsoft not to release a new flagship title in Q4 which seems kind of far off, begging the question why come out with the announcement so soon. Then again, Microsoft did the same with Halo 4 – announced at E3 2011, release in Fall 2012.

Other than Judgment, I’m excited to see the single-player portion of Halo 4 at the MS presser. The rest will probably be related to Kinect and Xbox’s other entertainment options.

Sony

As far as games go, I can’t wait to see gameplay footages of The Last of Us and God of War: Ascension. We know quite a bit about the former, but not much about the latter. I know it’s next to impossible, but I want Santa Monica Studio to surpass the previous entries when it comes to the single-player campaign.

Next, Sony is probably going to outline what its strategy for the Vita will be. A price cut or just a bunch of new game announcements? We’ll see.

Rumoured to take place at the presser is a Gaikai partnership announcement which would be amazing if true. It would show that Sony is in synch with where things are going in the industry and gamers would get more options to choose from. A double win.

Nintendo

Nintendo has the most to prove out of the three. They already made it clear they won’t announce the price and launch date. Some are predicting they will announce a new name for the console which would be a good move, in my opinion. It already confused a hell of a lot of journalists at last year’s E3 as to what it was and consumers won’t be any different, only worse. Changing the name would not only make it clearer that it’s a brand new console, but it would also be more appealing to the core gamers who were left with a bad taste in their mouths following the disappointing, more casual-oriented Wii.

Other

Apart from these, I also can’t wait to see EA showcase Dead Space 3 and their big new social game. Tough not confirmed, I think they will also be showing off Dragon Age 3 for the first time. Then, I’m also curious to find out about the mid-tier games Zynga has been working on. Last but certainly not least, I’m psyched to see Unreal Engine 4 in motion and how it will change gaming.

Two more days and then it’s show time, woo hoo!

SURPRISE: Handheld market still breathes

Let’s rewind back to April 2011. Nintendo 3DS has been out in the market for nearly a month and things aren’t looking too rosy for the successor to the best-selling handheld to date, Nintendo DS. Many professionals in the industry are already proclaiming that this is it for the handheld market as we once knew it. It’s time to pull the plug. Fast-forward back to the present. The 3DS is still on store shelves. Nintendo has moved as many as 17 million 3DS units in a little over a year and the 3DS has outsold the DS by about a 1 million units in their respective first 14 months in the market. Dead much?

Now all eyes are on the Playstation Vita which has been on the market for some 3 months. Not much unlike Nintendo 3DS in its first months out, Vita too is struggling. Really struggling. A week ago, Sony revealed that it’s sold a pathetic 1.8 million units. But that’s no longer important. What’s important is this: what to do next?

What worked for Nintendo is a 30% price reduction and a much-needed influx of new quality software releases. Is that what the Vita needs as well? A price cut is pretty much guaranteed following weeks and weeks of stagnant and disappointing sales in all three regions. However, what makes it improbable in the eyes of many a pundit is Sony’s recent announcement of a record loss for the last financial year. They simply can’t afford any more losses. But what Sony also revealed was its projections for the Vita – 10 million sold by the end of the fiscal year next March. Now, Sony must be smoking some really good shit, or they have something big up their sleeves.

New game announcements for the Vita are heavily anticipated for Sony’s E3 press conference early next month. That’s the one thing the handheld severely lacks. But even if Sony manages to release spectacular Vita versions of Killzone, Call of Duty, and the like, it still isn’t enough. Definitely not enough to reach that very high 10 million. The only other solution that would work well at this point is cutting the price, everybody knows that. Then again, such a move would anger the investors even more, as Sony would most likely be forced to sell Vita systems at a loss. So Sony is better off with no price cut then? No, wrong!

Sony needs to do whatever is needed to move more Vita units, even if that means selling the Vita (which is part of an otherwise healthy Playstation division, the only bright spot in Sony’s current product portfolio) at a loss. The reason lies in the developers. If there are not enough Vita systems in the hands of consumers, why develop for it? 1.8 million is most certainly not enough. And with no exciting titles on the horizon, what else, other than the double-edged price cut, can turn the consumer’s eye away from the 3DS or iPad in the needed time?

3DS is out of the woods. Will Vita follow?

Also, don’t expect Sony to just magically procure headline breaking Vita game announcements at E3 in June. If that is what Sony has in store for us at its press conference, it either promised huge amounts of money to the developers, or a Vita price cut. It doesn’t take a genius to figure out which of the two was Sony’s carrot.

Say Sony announces a price cut and a slate of eye-popping Vita games, will that do it? Will that set the system on the right course? That’s impossible to tell. But if it worked for Nintendo, why shouldn’t it for Sony? With Apple close to announcing the next iteration of iPhone and Sony as desperate to turn the situation around as ever, it really does seem to be the best way to go forward at this point. It’s the shortest straw, yes, but still a straw.

One thing is for certain, though: Handhelds are still very much alive.

No THQ booth at E3 2012: Panic or sit tight?

Earlier this month, THQ announced that it won’t have a public booth at this year’s E3 in June. It didn’t provide any reasons for making such a worrisome decision, because it really didn’t have to. It’s been known for a long time now that the company is experiencing serious financial troubles which forced it to lay off hundreds of employees and cut CEO Brian Farrell’s salary in half earlier this year, among other unpleasantries. Following the announcement, a good number of gamers voiced their concerns about the company’s future, some going so far as to proclaim it as good as dead. Is there really enough reason to panic or should we sit tight?

1. Weak 2012 line-up

THQ’s 2012 line-up comprises only 5 titles: Darksiders 2, South Park: The Game, WWE ’13, Nicktoons: Unleashed, and Saints Row: The Third – Enter The Dominatrix, a standalone expansion. That’s only 3 titles worthy of the consumer’s attention, really, and only 2 which need do some convincing, as Enter The Dominatrix can already count on The Third’s multi-million following. Holding a booth for just 2 titles is, that’s right, ridiculous (THQ is no Activision).

2. THQ will have a presence in the press and business sections

Although it won’t be present on the show floor that’s open to the public audience, the publisher will still have a presence in the press and business sections of the Los Angeles Convention Center for meetings, will be showing off its games to the E3 judges, and will be participating in first party activities. If not offline, THQ’s titles will be there for everyone to see online and you can be sure it will make the best of it.

Darksiders 2

3. Show floor space is not for free

What some forget to take into account or are simply unaware of is that the costs that come with the construction and operation of a massive booth on the show floor can be outrageous (the bigger ones are upwards of $1 million). With the company facing a possible delisting from Nasdaq by July 23 if it doesn’t raise its stock price (which currently sits at $0.65) above $1 for 10 consecutive days, it really can’t risk alienating its investors even more by investing huge amounts into a 3-day public booth.

4. 2013 line-up currently looks much stronger

Many gamers also expressed their bewilderment at THQ skipping a public showing of its other, more anticipated future titles, such as inSANE, Devil’s Third, Metro: Last Light, Company of Heroes 2, and Homefront 2. One thing one should keep in mind is that just because these titles are in development, it doesn’t mean they are ready to be shown off. Just recall the Too Human E3 debacle years ago. THQ can’t have that, especially not at the time when its investors are sitting on the fence with both legs dangling on one side. Another thing to bear mind is also that demos take a long time to build and are therefore not only expensive for the company to produce, but also force the development team to work at reduced capacity for a considerable period of time. This, in turn, prolongs the development time, increases the costs, and reduces the already weak prospects of THQ in the eyes of its stakeholders.

THQ’s decision to sit on the sidelines at this year’s E3 might raise eyebrows, but it’s the right thing to do. Let’s hope Darksiders 2 and South Park: The Game do well enough to tide the company over until the much more promising 2013.

Social/mobile games versus next-gen consoles

In the past year, there has been one particular prediction about the next generation of consoles from Microsoft, Sony, and Nintendo that always got my outmost attention: »Next-gen consoles are the last of their kind and will bow to the new leader – social/mobile games.« There are other reasons being thrown around for the forthcoming failure of next-gen consoles, like the eventual release of one, unified digital platform or simply the heavily rumoured Apple TV, but social/mobile games feature most prominently in the press as the reason. It seems like each new week brings along a wise prophet who suddenly foresees the all too apparent demise of consoles in the years to come.

While I recognize the incredible potential of the young social/mobile games market, I don’t believe the future of consoles is as gloomy as many industry professionals lead us to believe (it doesn’t hurt to mention that quite a few of these so-called experts work for social/mobile game companies; go figure). Well, at least not at the merciless hand of the popular business model of social/mobile games. Here’s why I thinks so.

Will social/mobile games dethrone console games?

While there has been a gazillion rumours swirling around the internets regarding the alleged specifics of next-gen consoles, absolutely nothing is yet concrete about them. This leaves room for as much speculation as your heart desires.

The majority of social/mobile game advocates make their predictions based on the business models of current-gen consoles. So, in essence: very pro-retail, closed environment, controlled pricing and distribution, and little to no flexibility. What I don’t get for the life of me is why these predictions are based on the status quo and completely disregard the possibility of significant additions to how games are distributed to consumers on consoles. Who’s to say one of the three console manufacturers won’t introduce new ways to distribute games? Won’t do away with controlled pricing models? Won’t allow developers and publishers to implement their own digital platforms? This is one liberty social game advocates take all too often. Everybody is talking about the usual stuff – more processing power, better GPU, more RAM, etc. – but very few mention possible changes to how games are priced and distributed.

I recently mused how great it would be if Capcom, for example, made a fighting game which would act as a service and not a product. Imagine Street Fighter IV not as a one-time release, but as a service. The entry price would be lower, say between $10 and $20 (or even free to play!), consumers wouldn’t be force-fed the whole package, but would be given a certain portion of the pie for the entry price and then the possibility of other pie slices – as in more fighters, stages, game modes, game features (online multiplayer, spectator mode, customization, etc.), you name it, at an additional low fee per piece.

This, in turn, would (sooner or later) largely cut out the middle-man which, obviously, wouldn’t sit well with game retailers whose bread and butter are physical releases. I’m perfectly aware that this is the primary reason for the very slow move to a more open and flexible digital console platform. However, since this is a whole other topic which would warrant not only its own blog post, but a full-fledged book, I won’t go into it.

I wouldn't write these three off just yet...

My intention is not to bash social/mobile games. It’s only to raise another possibility which often goes unmentioned in a lot of discussions about next-gen consoles versus social/mobile games. Hopefully, the big three will be smart enough to take the true power of social/mobile games seriously and craft their next-gen offerings accordingly.