A Visual: How Much We've Been Getting Per Game

Mp3 Size information courtesy of:
Tempus, June 2, 2005: MP3 file size: how many MB/minute @ 320kbps?

NES, SNES, and N64 Cartridge Average/Maximum Capacities courtesy of:
Sebastian Mihai, June 24, 2011:
A comparison of videogame cartridge sizes across generations

Average PS1 Game Size courtesy of:
reactionsok, October 15, 2007:
The average size of a downloadable PS1 game

Average Xbox 360 Game Size courtesy of:
Gorilla1dad, October 10, 2008: Average 360 Game Size...1-2 GB's?

What are you really paying for? - A look at the content of games Part 2

In the last post, the topic of DLC has sparked a large amount of comments (3 is quite the feat for this blog!), and they bring up great topics for discussion.

Smartphone Games

Love them or hate them, smartphone are permeating society, one study shows that 50.4% of United States consumers own a smartphone^[1]. Of course, video game developers, mostly independent studios, have taken interest in developing games for this now prevalent platform. Typically the games are cheap, and in some cases free, and in my opinion, the quality of the games really reflects the saying "you get what you pay for". Needless to say, these games seem to please people, and in some cases like Angry Birds, the games have spawned merchandise, so there's no way that I could ever ignore that these games are clear exceptions to the topic of this blog - they're produced relatively cheaply, costing anywhere from $10,000 to $250,000 USD to produce ^[2], and just to take the success of Angry Birds into consideration: from a development cost of $140,000 USD, it grossed $70 Million USD as of March 2011 ^[3]. A figure like that is the dream of the professional industry.

Smartphones for the professional industry

Of course, independent game developers can't have all the fun, right? Professional development studios have started to produce games for smartphones, as well. Of particular note here is Capcom, whose most notable (read: notorious) foray into the world of smartphone games is a remake of RockMan X (originally for the Super Nintendo), and most recently, RockMan XOver. Unfortunately, finding the cost of either of these games' production is relatively impossible, so I cannot speak for how much Capcom has made off of it. However, pertaining to one of the comments in the previous post, the remake of RockMan X allows players to buy the armor upgrades and weapons as DLC without having to get them in-game. To answer the question of how I feel about this form of DLC: it's a bit of a cash grab. When the game was released on the Super Nintendo, a password system was implemented to make it easier on beginner players. From a non-business standpoint, there is no reason to implement a system of asking your users to pay to unlock a feature in a video game, especially when it's something you could just wait to find or unlock later.

Digital Distribution

One of the comments in the previous post asked how I feel about Digital Distribution, which is the concept of selling a product purely as its software and not as a physical copy. From a business standpoint, this is an excellent model. Nowhere in this model does a company have to pay for packaging, shipping, reseller costs, and if they're selling their products through their own service (such as Nintendo's eShop), the company doesn't really even need to spend money on advertising. In the case of services like Steam, it's extremely useful for independent developers to get their game out in the public eye at a relatively low cost to the developer (although, the share of the revenue that Steam gets from sales is kept secret). However, from the standpoint of a collector such as myself, services like this bother me, since not only does it strip you of the ability to own a potentially collectable item, I worry that eventually physical software will leave the market for good. Hopefully, enough consumers will want to get physical goods in exchange for their money to perpetuate the distribution of physical copies of games.

Next time, we'll go back to the past to continue the theme of exactly how much you're getting on your games in comparison to the games of the past, and exactly how it's affecting the industry.

[1] Nielson, May 7, 2012: America’s New Mobile Majority: a Look at Smartphone Owners in the U.S.
[2] Carter Thomas: How Much Does it Cost to Develop an App? (Accessed November 27, 2012)
[3] James Brightman, March 9, 2011: Angry Birds 'One of the Most Profitable Games in History'

What are you really paying for? - A look at the content of games Part 1

Like I went over in the previous post, Microsoft has made hundreds of thousands of dollars off of their Xbox live membership fees, and even though they charge for their service, they still place ads on the Xbox Dashboard (for those unfamiliar with this, that's the home screen when you turn your Xbox Console on). Whether it's in your games or simply on your consoles, the question arises: what are gamers paying for? Compared to other forms of entertainment media, I believe the answer is very little.

Years in the past...

Let's shoot back to the days of the NES. Games were simple, but just as much a form of art as they are today. Don't let uninformed people try to tell you that games were cheaper back then though, since games had just as high prices in the late 80s and early 90s as they have today, sometimes even higher: Street Fighter 2 sold for $74.99 USD, and Final Fantasy V was an impressive $88.00 USD!^[1] What you could rely on back then, though, was that your money went into a full game.

The era of Downloadable Content (DLC) Begins

In today's world, the concept of a "full game" has changed and taken on a slightly different meaning. As the internet became more popular, game developers quickly tried to find a way to use it to enhance the experience of playing games - Enter DLC. It's hard to really pinpoint where DLC started, but from my own experience, early DLC ranged anywhere from simple things such as maps, characters, or extra weapons, to entirely new single player scenarios. Typically, these small additions to the game were free, and even today, some companies like Valve provide free DLC for their popular titles such as Team Fortress 2, Left 4 Dead 2, and Portal 2.

Paid DLC: A blessing or a curse?

It's sort of a given that when a concept is introduced, someone is going to try and monetize that concept, and DLC is definitely no exception to that. Of course, there's nothing inherently wrong with asking consumers to pay for DLC - it's only logical that if you put work into a professional product, consumers should expect to pay for it. On the positive side, it's a great way for developers to make extra money without having to release a full game, but on the other side of the spectrum, recently the industry has been plagued by developers releasing DLC for games while the DLC is already on the disc. Notable examples of this are Street Fighter X Tekken^[2] and most recently, Resident Evil 6^[3]. This insistence on forcing consumers to pay twice for their game is something that I have likened to if you bought a toy, and then you had to pay money to open the box and play with it.

Next post, we'll go further into the realm of DLC and its implications on the industry. For my readers in the United States, have a happy Thanksgiving!


References:
[1] Jeremy Parish, March 30, 2012: The 90s Game Comparison Charticle
[2] William Usher, July 6, 2012: Street Fighter X Tekken Disc Locked Content Unlocks July 31st for $19.99
[3] Jason, October 8, 2012: Capcom Responds to on-disc DLC found in Resident Evil 6

The Industry of Today: Part 4

As we've seen from Nintendo and Sony's standpoint, the fall in stocks can be from outright failure to make sales, or from what I perceive as forgetting your target audience. But what about Microsoft, where do their stocks fit in with all of this?

First, we need to remember that Microsoft is a huge corporation, and they are extremely popular all over the world. But what about Microsoft Games Studios, the branch of their company that actually produces the games for their popular Xbox 360 console, and for PC?

Let's look at this purely from a popularity standpoint - Microsoft's Xbox 360 has outsold both the PS3 and Wii in the United States for the past 18 months, as of August 16, 2012^[1]. To still be pulling in such strong sales figures after almost 7 years on the market is a feat indeed. What is it that makes the Xbox 360 so much more buyable than its competitors?

Probably the most influential selling point of the Xbox 360 is its use as a social gaming media, allowing you to connect with your friends in almost every game on the console. Microsoft brings in a steady profit from their "Xbox Live" service, which charges, on average, $5 USD per month, and an estimate from Forbes in June 2010 put the total amount that Microsoft is making off of their Xbox Live Gold service at $625 million USD per year, and that's from subscription fees alone.^[2]

On top of the subscription income, Microsoft makes even more money by selling advertisement space on the Xbox Dashboard. Microsoft seems to have stumbled upon a diamond mine, charging consumers to give them ads, and in effect winning twice. Next post, we'll look at the implications this has on games, and in the future, why I believe treating gaming as a "social media" has negative implications on the future of the industry.

References:

[1] Don Reisinger, August 16, 2012: Microsoft versus Sony versus Nintendo. Who wins?
[2] Oliver Chiang, June 17, 2012: Microsoft's Xbox Live Is Making Boatloads Of Money On Virtual Goods

The Industry of Today: Part 3

As I've mentioned before, Nintendo is the only company in the industry today that makes nothing but video games. Heralded as the savior of video games, the Nintendo Entertainment System's (NES) release in 1985 revived the video game industry from the slump it was in due to the crash in 1983. Although historically, Nintendo has been one of the strongest game producing companies in the industry, and even with the success of the Wii, which launched in 2006, recently Nintendo has been suffering from the same sort of problem as Sony - losing money.

The factors in Nintendo's money loss are basically the same as Sony's, their hardware is costing them to sell, and sales aren't doing too great. The Nintendo 3DS, while outselling Sony's Vita, sold nowhere near as well as expected at launch, prompting Nintendo to drop its price soon after its initial launch. Fortunately for Nintendo's finances, as of July 25 of 2012, they stopped reporting losses on 3DS sales, meaning that the cost of production of the hardware has gone down enough to allow for the lowered price^[1], but that hasn't undone the losses they suffered from it.

To me, Nintendo's problems stem from their consoles having less than desirable launch games since the launch of the Wii, typically being carried by one high-name title, and supplemented (barely, might I add) by lesser titles and the promise of better titles in the future. If we look back to the release of the Wii, the big named launch title was The Legend of Zelda: Twilight Princess. At E3 2006 when Nintendo revealed the Wii, they also promised that it would have Super Smash Bros. Brawl as a launch title, which was then delayed to be a "soon after launch" title, and further delayed until it finally released in the United States in 2008. In my opinion, the promise of Brawl was something that Nintendo used to sell Wii consoles to their core audience, but the 3DS didn't have this kind of push behind it, and neither does the Wii U, which releases later this month.

The Wii U is in an especially odd position, since it is being carried more by third party games than Nintendo's own first party material. In the days of the Nintendo 64, which launched with a diverse selection of games from different publishers, this third party support was instrumental in the 64's success, but only because the consumers could not get those games on a rival console. When you look at titles like Batman: Arkham City or Assassin's Creed III on the Wii U, you realize that not only can you get these games on other consoles, but you could have purchased them months ago.

Of course, for owners of the consoles that already have these games, purchasing a Wii U based on these titles is pointless, so I'm predicting the Wii U's sales being lower than anticipated by Nintendo, to follow suit with the 3DS.

Next up, we'll look at Microsoft, whose stock chart seems to make them out to be the strongest in the market right now. Are the stocks really an indicator of this when the majority of Microsoft's income comes from their computer software?


References:

[1] Keza MacDonald, July 25, 2012: Nintendo Still Losing Money, But 3DS Sales Improving

The Industry of Today: Part 2

From the picture in the previous post, I think it's clear that the industry is not in great condition. Of course, it's just stock prices right? We can define the cost of shares of stock simply: more people are selling their stocks than there are buyers.^[1] But why would traders not want to buy stocks in a company like Sony? Sony has a hand in almost every form of consumer electronic device, so there should be no reason they're doing poorly, right? Unfortunately, that's wrong, so let's have a look at Sony's decline.

Purely from a video game standpoint, Sony was a magnificent player during the 2001-2006 generation of consoles, when their PlayStation 2 (PS2) was in the prime of its life. The console even continued outshining its successor, the PlayStation 3 (PS3), during the holiday season of 2006.^[2] Even as recently as April of 2009, the PS2 was still outselling the PS3, and note that this was after the $100 USD price reduction given to the PS3 in August of 2007.^[3] As any business minded individual can understand, when you pour time and resources into making a superior product only for its predecessor to outdo it in sales figures (even AFTER a price cut), something has gone wrong. Even in 2010, as the sales of the PS3 finally started to pick up, Sony was losing about $18 USD on every PS3 console it sold.^[4]

Sony is an example of a company that has pushed itself almost to the breaking point, and given their liabilities of $135.61 billion USD as of June 2012^[5], compared to their assets totaling in at $166.22 billion USD^[6], it's no wonder that investors have chosen to stay away from Sony on the stock exchange.

Next post, we'll be looking at Nintendo to see how their overall performance has been in this clearly tumultuous industry.





References:
[1] Joseph Nicholson: What Happens When a Company's Share Price Drops Sharply? (Accessed November 2, 2012)
[2] Chris Baker, March 7, 2012: What's the Hottest Video-Game Console of Them All?
[3] Carlos Bergfeld, July 8, 2007: PS3 Price Cut Confirmed, New $599 SKU Announced (Updated)
[4] Don Reisinger, February 5, 2010: Sony still losing on every PlayStation 3 it sells
[5] YCharts.com: Sony Liabilities Chart (accessed November 2, 2012)
[6] YCharts.com: Sony Assets Chart (accessed November 2, 2012)

The Industry of Today: Part 1

As you have read, the industry's journey from its rather humble roots of Pong has been a rough one. Over the past few years, though, a question has come up in circles of gamers and enthusiasts across the internet: could the industry suffer another crash? The response to that question is as varied as the amount of people who ask it, and I respond to it with a confident "definitely".

Of course, I'm realistic about that belief. Realistically, the crash could never happen again like it did in 1983, and the primary cause of that is the idea of "The Big Three". "The Big Three" refers to the three most prominent video game developers in the industry right now, Microsoft, Nintendo, and Sony. Of these three, Nintendo is the only company who strictly produces video games, where Sony and Microsoft have a much more diverse business, having influence in computer hardware and software, telephones, music devices, televisions, and other consumer electronics. Compare this to 1983, where the biggest name in the industry was Atari who, like Nintendo, had all of their resources tied to video game production.

In the current industry, the major failure of one of these three companies should not constitute a major crash of the entire industry. The most compelling proof of this comes from Sega who, facing debts and heavy competition, dropped out of the home console market to make software. Subsequently, their presence in the industry was replaced by the likes of Sony and Microsoft, and the industry moved right along with few repercussions.

Let's pose a quick question, though. What would happen in the unlikely event that each of the big three began to suffer major losses in their income at the same time? Let's augment that with another question: what if the "unlikely event" isn't unlikely at all, and is in fact, already happening?

The first question will be covered next blog post, which will be up Friday, November 2, 2012. The second question, however, can be answered in this post with ease: