Geek Bravado

The blown hard arrogance of Parallax Abstraction.

Tag Archives: business

The social games bubble is bursting and mobile is next

3 Comments Posted by on October 25, 2012

I’ve said for a long time that the explosive growth of social and mobile gaming is a fashion trend. Many a clueless analyst and click driving “journalist” has latched onto this trend as a clear and irrefutable sign that this is where all gaming is going and those who doubt it just refuse to embrace “the future”, sentiment that always makes me chuckle and roll my eyes. This does not mean I think they are going to go away or that they won’t be a major part of the gaming landscape going forward, that couldn’t be further from the truth. However, how anyone can look at the growth in both industries and say that it isn’t a bubble is either clueless or just doesn’t want to see the truth. There are many industry bubbles throughout history to refer to and this bears many of the same signs.

There has been much proof of the cracks in the bubble appearing of late but few have been as dramatic or sudden as the implosion of Zynga. They had a meteoric rise with their shovelware skinner box Facebook non-games and were reporting staggering and ballooning revenues that made many believe they’d finally cracked the nut to make gaming something everyone could get into, even when drenched in scummy business practices. It caused a gold rush of investment and many more companies to spring up in the space, few of which got the same level of attention. They quickly tried to expand into the similarly exploding mobile space, paying insanely overvalued prices for studios that had hit titles like Words with Friends and Draw Something.

Zynga quickly went public and has been cratering ever since but not before their scumbag extraordinare CEO Marc Pincus got his big pay day. From an IPO price of $10, they are now around $2.10 and their market cap is worth less than their physical assets such as real estate. They are losing money, closing studios and laying off employees, bleeding users, writing down mobile studio acquisitions made just months prior and are desperately trying to restructure themselves as an online gambling company. As is the case with most fashion trends, people got bored with what they were offering and moved on. Though Zynga is the biggest example of this, they’re also far from the only one. Lots of front line workers are now out of a job while the people who led them into oblivion are still rich. It’s the opposite of any kind of justice or fairness.

I am not a stock market analyst, I am not a professional pundit and I’m certainly not any kind of journalist so why does it feel like I’m one of the few who actually saw this coming? I certainly didn’t see it happening this fast but I was laughed at when I said this type of growth was unsustainable. When companies grow too fast, they tend to crash down hard. It’s the ones that have measured, controlled growth that tend to survive and thrive. It appears an upheaval is happening in the social games space right now, one that’s going to decimate a lot of what was quickly built, leaving behind something that will be much smaller and certainly not something that represents the future of all gaming. Many of those in charge of these companies deserve to have some hard questions asked of them but so do the analysts and press people who overhyped them and now act like they couldn’t have known this would happen. If a clueless armchair commentator like me could see it, what’s their excuse?

Make no mistake, while this may be a bubble that started to burst in the social space first, a similar reckoning is coming to the mobile games industry as well. A bazillion and one mobile studios are starting up every day and many former AAA developers are switching to mobile development, many as a means to try and survive. The AAA industry is without a doubt in a chaotic state right now but as I’ve said before, mobile is quickly becoming just as risky and hard to succeed in. It’s gone from a space where nobody could fail to a space where your cost of entry may be low but you’d almost have better financial luck buying a lottery ticket. Those who succeed either do so hugely or just well enough but the majority crash and burn. This isn’t being talked about because no big players have been affected by it yet, the same as in the social space. But make no mistake, it’s coming. A lot of hyped games will fail, a lot of studios will fold and a lot of talented aspiring developers will be left disillusioned and will give up on the craft. That’s a crime to the medium.

To be clear, while I don’t care for more social and mobile games, I’m not getting some sick sense of schadenfreude from this happening. I don’t like to see people out of work and I think the more people there are making video games of all types, the better off everyone who is into this hobby will be. However, as someone who isn’t into those forms of gaming, it has frustrated me greatly to see pundits proclaim that the types of games I love are dead, they’re no longer possible and that we either need to embrace “the future” or get out of the way. Social and mobile games will be here for the foreseeable future and that’s a good thing but they’ve started themselves off on very shaky ground, largely led by greedy businesspeople and the analysts and press puppets that propped them up and ignored valid questions that needed to be asked of them. As business does, it will adjust, adapt and what’s left will be strong and know how to thrive. But the time for meteoric growth is rapidly ending,

Ask yourself this question: Why have the majority of big publishers who have been around for decades only dipped into social and mobile gaming (yes, EA being a notable exception who is also feeling the pain right now), instead choosing to focus on their core console and PC businesses? Is it because they’re just clueless old guard types who stubbornly refuse to embrace reality and will end up in the footnotes of gaming history? Or could it be that businesspeople with a history of success saw the signs of another bubble and decided to feel things out before jumping into bed with the unknown? No one’s saying so we don’t know for sure but consider this as well: Zynga once had the financial might to buy almost any AAA publisher and now, despite EA’s stock price and market cap being a fraction of what they used to be, EA could now buy Zynga lock, stock and barrel with cash they have in the bank. That flip happened in less than a year and I think it speaks volumes.

The last few years of social and mobile’s stratospheric rise has been very interesting to watch. And the next couple of years after the bubble bursts and it begins to settle into a more sustainable model will be even more interesting.

Business, Predictions, Video Games , , , , , ,

Apple’s (And Soon Microsoft’s) Big Threats to Choice

3 Comments Posted by on May 29, 2012

UPDATE: Since I posted this entry, Microsoft has decided to change the Metro-only restriction on their free development tools. A smart move on their part.

I make no secret of the fact that while there are many cool things Apple does, I am not a fan of many of the company’s practices nor the lazy, fanboy driven press that salivates and gives free PR to everything they do, usually free of criticism. The innovations made by Apple products in recent years are undeniable and they are finally pushing an otherwise stagnant tech industry forward with new ideas that involve more than just bumped specs. However, not all of these ideas are good ones and the success Apple is meeting with some are driving others like Microsoft towards similar models that while they are beneficial in some ways, also serve to greatly hurt consumers and the power we have to self-determine our experiences with technology. The biggest threat that Apple (and soon Microsoft) represent is the restriction and constriction of user choice.

I’ve said for a while now that Apple’s biggest failing as a company (from a consumer perspective, clearly not yet a financial one) is that their products are designed around limiting consumer options. You can only buy Mac and iOS hardware from one place, you have a very limited number of options for that hardware, it’s largely not upgradable (or in the case of iOS devices, not at all) and it’s purpose-designed to be a treadmill of forced obsolescence that requires users to upgrade their products on Apple’s desired schedule instead of theirs, creating huge amount of technological and monetary waste. With the App Store, they’ve taken this a step further by ensuring that all iOS devices only have one place where you can buy software for them. This is a place Apple controls in every way from approval of what software you can see to how add-ons for it can be purchased to how updates are delivered. They also get a 30% cut of every penny spent on this software, a fairly respectable number given how little they really offer developers beyond permission to list there.

Compare that to the PC landscape where you have dozens of vendors selling pre-built PCs with hundreds of options, you can custom build a system in just about any configuration you can fathom, you have multiple operating system choices and within those, hundreds of different ways to acquire both free and paid software. Many have criticised the PC as being the “wild west” and all the complexity and risks that come with that but I see that as its greatest trait. If you are a new user who needs to be guided by the hand, there are options for that. If you’re a power user like myself who likes to poke, prod and tweak every aspect of your computing experience, you can do that too. If your budget for a computer is $400 or $4,000, there’s options to suit what you want. This has never been the case with Apple and I find their furthering that to greater and greater extremes each year to be a dangerous precedent. For all of the failings of Windows (and there are many), it’s still my preferred OS because of the freedom it offers me while also giving me access to the widest array of software and tools available. When I use a Mac, I’m always feeling as if it’s trying to make me use it the way Apple feels is ideal as opposed to the way I feel is ideal which is how computing is supposed to be.

My biggest worry for the future of technology today is how Apple and now Microsoft with Windows 8 are aggressively pushing the vision of having stricter control over what you do with your computing devices. They are both heavily pushing native software stores that they control (and get a cut from), Apple is planning to make it much more frustrating to install non-App Store delivered content, Microsoft is pushing the new Metro app-driven Start Screen down people’s throats whether they want it or not, they tried to force PC manufacturers to lock out alternative operating systems (they backed off from that but only on the desktop side) and they’re restricting the free versions of development tools to Metro app development only. Much like iOS apps, Metro apps will only be deliverable through Microsoft’s proprietary store. To be fair, Microsoft isn’t trying to restrict or curtail traditional software development and delivery the way Apple seems to be but given the ability these two companies can have to get a piece of every piece of software sold for their respective systems, it stands to reason that they’ll continue to try to squeeze alternatives out more moving forward.

As someone who gets my free and paid software from a wide variety of different places (often depending on who is offering the best deal), this prospect terrifies me and it should terrify every other computer user as well. Both of these companies were already making a ton of money and will continue to without cornering the software delivery market. They are trying to change the value in what they offer us from being the platform on which a variety of things can run to create an experience ideal for each user to one where they are in charge of what we get to consume, how we get to consume it and all the while, taking their percentage from the software authors for the privilege of getting to play in their walled garden. This isn’t the way computers are supposed to be and there’s no need for it beyond enriching the platform holders at the expense of consumer interests.

They claim this is done under the guise of keeping things easy to use and secure but that’s frankly bollocks. Yes, there are a lot of stupid computer users out there and many security problems which largely result from that stupidity. Nonetheless, we’ve been managing fine up to this point and forcing us to get our software from your store where you can shove competition aside for any reason you choose and confine innovation only to that which doesn’t impeded your business interests is not going to improve that. Is iOS only easy to use and secure because the users don’t have access to third party app stores? To claim that position to me says that Apple doesn’t think very highly of their average user’s intelligence. And given that every iOS release gets jailbroken almost immediately, I would say the security claims have already been disproved repeatedly. But then, convincing people that Apple loves and respects its users while actively working against their interests has been among the company’s greatest achievements. I’ve embraced PCs and Windows, faults and all, because I never got the impression from Microsoft that they wanted things to act in a similar, at least not until now. They are a company that’s out to make money but they were already making lots and growing amounts of it and seemed fine with that. Now, having seen Apple’s insane (and unsustainable) profits made on the backs of monopolising the software delivery business as well, they’ve realised there’s a huge slice of the pie they could be getting and want it no matter what.

This greedy mindset represents one of the biggest threats to innovation and consumer freedom when it comes to technology in my opinion. The greatest thing technology has permitted is larger democratization, making it easier for people to create and express both in terms of what they make and do with their tools and how they are able to tailor those tools to their needs. When the two biggest players start locking the doors to their kingdoms and start to limit who gets keys to it based not on the needs and desires of their customers but of their own business interests, technology moves away from a democratic model to a totalitarian one. What if an app offends their corporate standards of taste that may not line up with yours or what if an app does something better than one of theirs which they are trying to sell for more? There are many examples of software that was denied by Apple for both of these reasons. Call my position hyperbolic if you want but when Apple and Microsoft are allowed to decide what gets to be installed on what is supposed to be your computer,  your tablet and your phone, who really owns that device you paid for?

I don’t know what the best solution is to this problem. I’m not normally a fan of governments telling businesses how to run themselves but ultimately, consumer interests are greater and these companies enjoy positions that don’t simply give people the ability to just “speak with their wallets”. When the platform holders are already making record profits, I think it’s perfectly reasonable to tell them that they need to keep improving their products to entice people to keep buying them, not start sapping away secondary revenue sources and forcing people to use them so they can keep making money after they’ve already made their money. If the only way you can keep making money for your business is by sticking your nose into other people’s, then your leadership is failing and you need fresh thinking. Keeping technology open and free for choices and the innovation that comes from them should be paramount and this is a vision that Apple and Microsoft no longer share. Consumers need and deserve a better solution that what we’re proposing, I just wonder if we’re too blinded by the new shiny to demand it.

Business, Computers, Mobile Phones, Predictions, Tablets, Technology , , , , , , , , , , , ,

Gamers Should Be Mad About 38 Studios’ Failure

1 Comment Posted by on May 24, 2012

This afternoon, 38 Studios officially laid off their entire staff of 380 people and is closing both their studios. This after running out of cash following a rather public scene with the Rhode Island Economic Development Corporation, a state agency which loaned them almost $75 million dollars to relocate there and to fund the development of their long cooking and until recently, never shown MMO Project Copernicus. Employees are due almost a month’s back pay that they likely won’t get, their health insurance lapsed two days ago and they reportedly only found out when a staffer’s pregnant wife was told by her doctor. The Rhode Island taxpayers are also now on the hook to absorb the cost of the loan which is going to end up being $100 million after interest.

38 Studios was started by former Boston Red Sox pitcher Curt Schilling. When he retired from baseball, he wanted to take his love of video games and do something big with it so he started up a studio to make an MMO. He staffed it with top talent and brought on Todd McFarlane and R.A. Salvatore to help create the vast universe for it.  It was a big deal and got a lot of people excited include yours truly. A couple of years later, they bought Big Huge Games who were about to be shuttered by THQ. Big Huge Games was working on an RPG for PC and consoles and the idea was to take that game and retool it to be part of their new universe as a lead-in to the MMO. It was a big, grandiose plan and it was a breath of fresh air to see a new AAA studio start up with big ideas. In 5 years, nothing was seen of Project Copernicus but in January, Big Huge Games’ project was released as Kingdom’s of Amalur: Reckoning. I haven’t played it beyond the demo but it was well reviewed and sold nicely for a new IP, exceeding publisher EA’s expectations. Fast forward to now and the studio is collapsing, a lot of people are out of work and health insurance in a very small state that now has to absorb the cost of that, all we’ve seen of Project Copernicus is one rushed trailer that showed little and the Rhode Island government revealed that even though Kingdoms of Amalur: Reckoning sold 1.2 million copies worldwide, it would have needed to do three times that just to break even.

Despite this very public and abject failure, some people are still trying to defend the company, Curt Schilling and his management. I admit that most of what we have to go on is accounts of the battle with the state in the press but we do know a fair amount of reliable information. I will also admit that I’ve been personally burnt by bad management who got away scott free before so I do have a bit of my own emotional influence in this situation. But even based on the sparse details we know so far, they all point to a company that was horribly managed and screwed a lot of people who can’t afford it while the top dogs basically walked away from the smouldering wreckage. That’s not defensible and it really burns me to see people try to defend it. Let’s break this down some.

To their credit, 38 Studios saved Big Huge Games from being closed by an at the time schizophrenic THQ who bought them just a year prior and was already trying to dump them, seemingly not confident in what they were working on. No one knows what that deal was worth but given that Kingdoms of Amalur: Reckoning apparently needed to have blockbuster sales that are almost never seen be a new IP, chances are it and the continuing development costs were in the many millions. Still, they gave them the time they needed and a good game came out of it. Concurrently with this, they were developing a AAA MMO with the same new IP, at a time when the common MMO business model was still to charge people to buy the game plus a monthly subscription fee. In the years since, this model has been proven impossible for any MMO that isn’t World of Warcraft and many failures litter the genre as proof. Even Big Huge Games’ former owner THQ recently took their long in development MMO and made it not an MMO anymore. Still, 38 Studios continued to plug away at Project Copernicus, saying nothing about it, even as they were in a financial death spiral which they obviously knew about. I’m sure they spent this time trying to secure more funding but no one wants to invest in AAA MMOs right now. Instead of adjusting their business goals to something that may have a better chance, they continued pouring money down the sinkhole and now Project Copernicus will likely never see release. All the creative effort is for nothing and a lot of people now have to hope they don’t get sick while trying to find work in an industry that’s not very healthy in general right now. This will also likely dissuade Rhode Island from ever investing into the video game industry again and will shake general investor confidence in AAA game development even more. When a team of supposedly top talent backed by a multi-millionaire fails so spectacularly, what would you do if asked to bankroll a new AAA studio?

Meanwhile, what’s Curt Schilling lost? Not much really. He apparently has put a chunk of his own fortune into the company but used the Rhode Island loan to pay at least some of that back. He still has substantial wealth from his baseball career and while his employees bounce rent cheques, he will still be living very comfortably. There’s also the irony of Schilling being a huge proponent of small government but his politics don’t matter much here. Many Kingdoms of Amalur fans say that he was very passionate about the company and their games and regularly engaged with his community on forums and the like. I applaud him for that, it’s more than many developers do. But creative passion often distorts reality–something it certainly seems to have done for him–and passion doesn’t put roofs over your employees’ heads or food on their tables. And it certainly doesn’t magically complete an MMO that was started 5 years ago and yet not even announced or named yet.

It frustrates me to see people defend this train wreck. Sure, we don’t know all the facts but we know enough to see that many poor decisions were being made at 38 Studios and that they must have known for a long time now that they couldn’t survive to see Project Copernicus released. Yet they made no substantive changes to their scope and their employees and Rhode Island taxpayers were left in the dark until it was too late. Now they’re all screwed but the people at the top are walking away with very little lost beyond pride. I’m sorry, that’s wrong. When similar situations happen at Enron or the banks (yes, on a much larger scale), people are rightfully furious but when it happens to a place that put out a game some enjoyed, apparently we should sympathise with the company and to not do so is to take shots at at the people who made the game. No, that’s not how it works and it’s possible for rational people to separate the talent from the management and the latter is what failed catastrophically here.

Having been where the 38 Studios employees are right now, I feel horrible for them and all the hard work they have devoted to a creative project that will likely never see the light of day. Big Huge Games in particular has been through a roller coaster ride the last few years and has been one of the most under-appreciated developers in the industry. I hope that a competent company will pick them up and give them a stable home but with most of the big publishers terrified of risk and AAA development shrinking, I don’t see that happening. The Project Copernicus team are also now stuck in a state with virtually no other game development jobs and no shipped project to put on their CVs. Schilling and his failed management team will likely not be formally held to account for this and they don’t deserve anyone’s sympathy. What happened here may be common practice in modern business but that’s exactly the problem, especially at a company headed by people who are supposedly so passionate about what they were doing. The people at the top are supposed to have final accountability and should be the ones that absorb the brunt of the hits, not deflect them downwind to the rank and file. When my previous business failed, my partner and I had no other employees besides ourselves but we ran the place and ultimately, it was our failure and I will always see it as such. This is no different but where my business was barely a blip of an entity, 38 Studios was a large company and like all large things, fell hard.

This was a business disaster, one that’s done substantial damage to an already frail AAA industry and gamers who still want to see these kinds of games get made by independent studios should be mad about this. To treat Schilling and his management team as the victims here is disrespectful to those who just lost their livelihoods. I wouldn’t wish their circumstances on my worst enemy and it infuriates me to see people standing up for their failed leaders. There’s no doubt that game development of any kind is a risky business and I’m sure many of these employees had a good idea of the potential hurdles. That doesn’t make keeping them in the dark until a taxpayer-funded loan payment bounces any more excusable. If Schilling and the management didn’t want to be in the crosshairs for this loss, then they shouldn’t have been the management and Schilling shouldn’t have put his former jersey number in the logo and put himself out there as the face of the company. They let a lot of people down, they deserve to feel bad for it and we as devoted followers of this industry shouldn’t sympathise with their failure.

Business, Video Games , , , , , , , ,

On Gaming’s Future: Mobile Reality Check

2 Comments Posted by on April 4, 2012

In the last couple of weeks, we’ve had the launch of the iPad 3 and a slew of rumours about what we may see in the next-gen home consoles. As usual, the growing Apple-centric members of the enthusiast press were quick to chime in on how the iPad 3 is somehow revolutionising games yet again, how Apple are the only ones that get the future of games and how iPad specs are accelerating so rapidly that in a few years, it will not only have rendered dedicated handhelds obsolete but now home consoles as well.

Never mind the inherent dangers of Apple controlling the industry, this is where all gaming is going they say and somehow, a monopoly is now a good thing. I think the predictions as they lay them out are very much a result of the Apple reality distortion field that still permeates the press today. However, they’re not entirely off base and to say that the current AAA industry doesn’t have major problems that currently don’t have a clear path to being solved is also false. I think AAA games as they are today are in very real danger but I don’t think mobile games on your TV is where things are going either. As usual, the answer lies somewhere in the middle. I think if we’re going to answer the question on where gaming is going to be in a few years, it’s important to have a reality check of both sides of this debate as both are overstating their benefits and understating their weaknesses. Each have a lot of challenges both now and going forward and many of these are more similar between them than either would like to admit. This post is going to focus on the mobile space and the next one in a couple of days will focus on the AAA space.

When we hear the enthusiast press and Apple crusaders talk about mobile gaming (which is largely dominated by iOS, this can’t really be disputed yet), the talk is how it’s ushering a return to a golden era when games were less complicated, cheaper to create, the developers and not publishers controlled the content and innovation was encouraged and praised. Indeed, these are all generally good things. Games on iOS right now are low risk and every week, we hear stories about a small team having their project make a killing which leads to massive riches. Every time there are layoffs or departures from AAA studios, there’s usually a story the next day about how those people have gone off and formed new teams in the mobile and social spaces. Games on iOS are cheap to make, cheaper to buy and come with a massive and growing install base right out of the gate. It seems like the sector is in a stratospheric rise that has no limit and which will mean great things for innovation and new gaming experiences in the future.

That’s the reality for right now but the sad truth becoming more evident all the time is that mobile game development is quickly becoming as risky as other parts of the industry and will only get worse as the technology improves. There are tens of thousands, if not hundreds of thousands of games alone on the iTunes App Store right now and hundreds more being added every week. The better part of 90% of these offerings are garbage and not worth a second glance but the sheer volume makes it impossible to determine what’s good and what isn’t. iTunes has user reviews but like most other places, they often aren’t trustworthy and are dependent on personal taste. Even with many games selling for as little as a buck, people are being choosy because those bucks add up fast with that much choice and poor quality content out there.

So how does the average consumer decide what to buy? Usually by looking at the top seller or staff picks list, which are almost always dominated with the same few titles and rarely change. Unless a new game becomes a viral hit, has publisher and PR backing or gets co-promotion from Apple through one of these lists or placement in a TV ad, the chances of it becoming a huge seller are almost lottery-win thin. Apple has always thought of gaming as a red-headed stepchild and the revolution many say they started was something they fell into by accident and which has been perpetuated largely with their indifference. Steve Jobs believed computers were tools and that gaming was a waste of their potential and that’s still very much part of Apple’s culture.

The reality is that while we may always hear the press talk about runaway hits like Angry Birds or Draw Something, they are actually flukes and do not at all represent the norm. The makers of both of those titles had a string of releases prior to their seminal hits, most of which were flops. In fact, the often unspoken truth is that a tiny group of developers make almost all of the revenue on iOS and many respected developers are now seeing the platform becoming just like the rest of the industry it’s supposedly revolutionising. In other words, in only a few short years iOS has become almost entirely hit driven and dominated by a few key players who are following the money and not focusing on innovation or new ideas.

The one major advantage iOS has over home consoles and to a lesser extent PC is that the cost of entry is very low. One of the great things it has done has allowed the “bedroom programmers” to sweep back in and have a strong creative voice again. An individual or small team that would never be able to develop on a console can make an iOS game in their spare time, put it out there and maybe get rich from it. While there’s certainly a chance of that, the hard truths above make it a rare chance at best. Mark Rein, Vice-President of Epic Games who have released the very successful (and co-promoted by Apple) Infinity Blade series said on a podcast earlier this year that the average iOS game grosses $700 over its lifetime. Granted, he just threw that out with no citation but I’m going to assume given his position that he knows what he’s talking about.

$700 is nothing and makes even a part-time development endeavour a big financial risk. Even if we assume Rein is low-balling and the average return is ten to twenty times that, it’s still not enough for even one person to make a living on, let alone a team of people working full-time. For a lot of hobbyist developers, the risk may be worth it and I say more power to them. Some of the biggest successes and innovations in the world came from people with only a shoestring and a dream. But as a supposed new revolution that will bring with it a whole new facet of the industry, the picture is not super rosy. The press has people believing that the cost to get into iOS games is super low and because of that, it’s virtually a guarantee that you’ll get your investment back if not make a sizeable profit. That’s simply not the case and while the low cost of entry may allow a newly funded team to survive a flop or two, they can’t do so indefinitely until they get lucky enough to find their golden goose. Most of these people who are fleeing AAA development to make mobile games are going to fail and don’t have much greater a chance of success as they do in AAA, though getting funding to try is certainly easier. As tablets and phones get more powerful, it will only get worse.

The press is talking about how powerful the iPad 3 is and how it can rival the power of an Xbox 360. That’s actually not true at all right now but as these tablets continue to increase in power, there’s a good chance that in a few years, they will have similar graphical and processing capabilities as even the next-gen consoles. At that time, you could put your tablet down on a wireless video dock, pick up a Bluetooth game pad and play a AAA experience on your TV with a console you can pick up and take with you. Sounds pretty good from a user experience point of view and honestly, I really like the idea.

The danger is that the technical arms race is what made AAA games so incredibly expensive and risky and with iOS being fairly risky already, it will get even more so as power increases. This will quickly lead to the small developers being marginalised and forced out and the larger ones to need bigger and bigger budgets (and by extension more marketing which means even more money) to ensure that their games succeed. See where this is going? Right to where AAA games are now. Long development times, huge budgets and teams and few creative risks being taken. $1-$5 games won’t be possible anymore when they go from costing thousands to millions and then tens of millions to make and market. As prices go up, so do the apprehensions of customers to try out a bunch of games in succession to find out what they like. The marketing for these larger games will also drown out indie developers and push them back from the mainstream to a low-profit niche for enthusiasts only. Different form factor, same problems. This isn’t good for developers or gamers.

The raw fact is this: Publishers are desperate for new sustainable revenue streams right now and with a couple of exceptions like Electronic Arts, none of them have gotten behind iOS gaming in a big way. Some might say they’re just dinosaurs stuck in old ways and not embracing new things but these are large companies that are run by smart people in one of the most dynamic, rapidly changing industries in the world. They know fortunes in gaming can change overnight and how to latch on to things that have big success potential. With their resources, it wouldn’t be hard for them to try a few iOS games out and see what happens. Yet they largely aren’t and most of them are tie-ins to other properties, not original titles. Why is that? Is that because they simply don’t see them as big enough for their league or could it be that perhaps they don’t see the long-term potential in the segment and that it stands to be more of a fad than the wave of the future? The AAA industry is hurting right now but it still makes far more money per year than iOS gaming and it’s foolish to discount their knowledge and decisions. If they are lining up to back the Wii U but aren’t paying much attention to iOS, I think that says something significant.

So what needs to happen to prevent this platform from burning out and becoming like the AAA industry it’s trying to avoid? I honestly have more thoughts on this from the AAA side, only because that industry has been around much longer and isn’t in such a state of flux. I think the first and biggest thing is that Apple needs to take some pages from the book of Steam. They need to stop thinking of gaming as an afterthought and start embracing it. Rather than just letting games exist on iOS and having Darwin rule the ecosystem, they need to start showcasing titles and really giving attention and promotion to indies. Don’t just let the best selling or viral titles get noticed, start showing off the unique and creative experiences offered on your platform and show why sometimes the smaller games can be just as good or better than the technical show pieces like Infinity Blade. Steam is its own platform and owned by a company that makes games too but Valve don’t shy away from promoting the work of others and giving great projects from all levels of development the spotlight. If they want iOS to take over living rooms and become the next great force in gaming, they need to show everything that makes the platform great and ensure that it doesn’t just become about flashy graphics and big marketing budgets.

Even Apple must realise that iOS’s current growth is a fashion trend and is going to slow in the next couple of years. The platform’s not going anywhere but sales of new devices will taper and their user base will begin to plateau. If they don’t step up and start selling the benefits of their hardware as a gaming platform for all kinds of different experiences, they risk handing the keys of gaming back to the console makers before iOS gaming truly has rubber hit road. The small developers are fuelling the growth of iOS gaming and they’re the reason the enthusiast press is so infatuated with it right now. If it simply becomes about flashy graphics and style over substance, it will lose its lustre and the renaissance will fade. There’s great opportunity for creativity to shine here, Apple needs to get off the sidelines and start backing that. Otherwise gaming may go roaring right past them.

By the end of the week, I’ll have my next post up which will tackle this same issue but from the AAA side.

Business, Mobile Phones, Predictions, Tablets, Technology, Video Games , , , , , ,

The THQ Drama Continues – Is there really any hope left?

1 Comment Posted by on January 25, 2012

I’ve said before that I like to not only follow creative mediums but often the businesses behind them as I think it’s valuable to know where the stuff we enjoy comes from. One of my early posts here was about THQ, specifically taking the piss out of Danny Bilson and what I believed was a botched strategy that attempted–and largely failed–to revitalise the company. Since then, THQ’s fortunes have gotten markedly worse with their one potential saving grace of Saint’s Row The Third selling well but not as well as they wanted and rumours of dwindling cash reserves, massive cancellations and the possible sale of the company, which were promptly denied and followed up by a statement that they are dumping licensed games and refocusing on core products. Their stock price is well under a dollar and they will be faced with delisting if they can’t turn things around fast. In short, things are dire at what is still the world’s fourth largest publisher.

This morning, NeoGAF posted a lengthy (and I must say very poorly written) letter from an anonymous group claiming to be made up of ex-employees and shareholders. You can read it for yourself but if its contents are true, it paints a very unflattering picture of the top management and a trend of poor decisions and leadership that goes back many years. It shows that the company’s problems are historically rooted and not just a result of bad luck over the last couple of years but of someone running the show who doesn’t really seem to understand the business they’re in. I still maintain that many strategic and creative decisions made under Danny Bilson’s watch (like turning away Respawn, Homefront and Red Faction Armageddon) were bad ones and hurt the company big. However, it also appears as though many of those bad decisions and many past ones were influenced by an overall poor strategic vision employed by Brian Farrell, long-time CEO. I’m not sure if Bilson’s ideas are what THQ needs to save itself but in light of this new information, I will admit that I was probably harder on him than I needed to be. Plus there’s that whole uDraw things which even before I admitted he had nothing to do with. That facepalmingly dumb project was all Farrell.

Despite a plummeting stock price, botched initiatives, massive layoffs and studio closures, the top echelon’s of THQ’s management still took home millions in compensation, millions the company desperately needs to stay afloat. Yet for some reason, shareholders don’t seem to be fighting for a change. Whether or not Danny Bilson should be there is debatable but at this point, I think there’s no question that the CEO and other members of the company’s leadership don’t know what they’re doing and don’t know how to carry the company forward in a new direction. They need to be kicked to the curb and soon if they want to have any hope of recovering. With so many stories in the news of ruthless shareholder rebellions at other companies just for failing to meet a quarter of two’s expectations, I don’t know how Farrell & Co. have survived this long without being overturned.

As I’ve said before (and will say again), the triple-A video game industry is in a bad way right now and it needs more competition, not less. This is a brutal industry and it requires adaptive leadership with razor-sharp business wit and a pulse on industry trends. Brian Farrell is not providing that and if the open letter is true, hasn’t been for a long time. There are a lot of employees, shareholders and gamers who want to see THQ succeed and grow. They clearly can’t do that with the current team at the helm. They gotta’ go.

Business, Predictions, Video Games , , , ,

Retail Can’t See the Apples Through the Trees

Leave a Comment Posted by on October 13, 2011

Say what you will about Apple and I can say plenty but if there’s one thing they understand better than anything else, it’s tailoring the user experience. Perhaps nowhere else is this more apparent than in their branded retail stores. Sean Sands from the awesome Gamers With Jobs wrote an interesting piece on this subject. Like myself, he’s a die-hard PC guy but as his wife is in graphic design, she’s a heavy Mac user. After an unfortunate incident involving fruit juice and her MacBook’s keyboard, they were forced to make haste to their local Apple store for assistance. What Sean describes next is what sounds like a blissful masterpiece of customer service design and execution. If you want more of the details, check his article out, it’s a good read.

I’ve never bought anything from an Apple store but I have been in them and seen how they operate and it is very impressive. My employer also does some work for their Canadian locations and I’ve heard our staff comment on how much better customers are treated there. Some say that it depends on the store and that in others, the “Geniuses” are actually anything but overall, I think they definitely aim for a high standard. A few years ago, I worked for another electronics retailer with just a few more locations, Best Buy or more specifically, the Geek Squad. In my two and a half years there, I went through several job titles and sets of responsibilities but through all that, I was in positions where I was interacting directly with customers. I always made a point of being friendly, courteous, knowledgeable and if I couldn’t answer a question, saying so and doing my best to get the information needed. I tried to inspire this behaviour to my co-workers but as I spent more time at the company and learned of its real goals, I knew this was a fleeting pursuit. My morale dove off a cliff shortly thereafter.

In the modern retail world, the stated focus is on great customer service but in reality, the focus is on selling you as much stuff as quickly as possible and trying to provide a good service experience along the way. If you don’t, customers in general have short memories and are being accustomed to expect being treated like cattle so they won’t ultimately mind much. The general corporate mindset of today is “meet your numbers no matter what, we’ll deal with what happens after the quarterly results later” and that reflects in the average retail experience. Apple understands very well that if you treat your customers like gold now, the loyalty and respect you earn from them will provide greater returns in the long run than simply fleecing them as much as possible and shoving them out the door. Apple’s astounding success in recent years is all the proof we need. Granted, there is a lot more to Apple’s image and success than how their retail experience is and many have tried and failed to prove up to now that just “being like Apple” isn’t at all a simple thing to do. It’s also much easier to hit your revenue and profit numbers (make no mistake, Apple stores are as heavily metrics focused as any other) when you’re selling computers that cost several hundred dollars more than they should on average.

With the tsunami of new customers Apple is acquiring in general, other retailers can’t afford to ignore how their experience compares to the Apple store. Not only can people go there for Apple products, they can go there for Apple products instead of another brand they also sell. The key is getting people to shop with you instead and Apple is proving that to many people, the lowest price isn’t necessarily all you need. Retailers do have the means to change their culture to be about putting the customer first and letting the profits flow from that. I can think of a few off the top of my head:

  • Taking away commission sales but also paying a good hourly wage with a strong bonus incentive based on customer feedback and not just sales targets. When you’re paying someone to sell electronics so little that they’ll never be able to afford to buy what they’re selling, it’s rare that you’re going to get an enthusiast who is passionate and knowledgeable about the product.
  • Employee training on how to make customers happy, not on how to just find ways to weave more upsells into the conversation. Make sure they know it’s OK to not know the answer to something and say you need to get more information.
  • An easy to access, fast and current information resource on the products you’re selling and a way to ask for answers if you don’t know something. Being able to access the consumer facing web site on the cashier terminals isn’t good enough. Having a chat-based salesperson support staff with fast research skills would be really good.
  • Better (i.e. not horrible) warranty and return programs. Anyone who has had to have something repaired or replaced under an extended warranty plan knows what I’m talking about. The experience is horrendous and only because it’s cheaper for it to be that way. Your margins are already very high on these programs, accept a little bit less and get properly trained people and a consistent, reliable and fast service pipeline.
  • Make the salespeople and techs partners, if not the same job. At Best Buy, the techs hated the salespeople because they always overpromised and created unfair burdens on them and the salespeople hated the techs because they were often rude to customers (due to being stressed out) and never got things done quick enough. The culture needs to change so that both types are taught to work together and that one’s actions affect the other’s. Ideally, the entire staff should be skilled in both trades so they can interchange easily but that’s a tough undertaking.
  • Sell them the product first and all the other stuff after. The biggest problem at big box retail is that the experience has not become about selling you the product you need but all the overpriced accessories, warranties and setup services to accompany it. That’s because the profit margins on these additions is often orders of magnitude greater than that on the product itself. One of my old Best Buy managers used to say “If you don’t sell something else with this computer, it cost us more to pay you to complete the sale than we made from it.” This needs to stop. There’s nothing wrong with recommending stuff the client might need but if you make that the focus of your sale rather than getting them the right product, you’re burning potential loyalty.
There is of course one major problem that all of these issues share: They’ll cost a bunch of money to fix. In the current business climate of “next quarter is all that matters”, this is a hard step to take. Nonetheless, it’s what Apple does and they’re one of the biggest companies in the world so haven’t they already proven there’s merit in it? Fixing systemic problems sometimes requires some hurt up front but in the end, I think a strategy like this is better for the customer and ultimately, better for the company. Simply put retailers, you’re not beating Apple so you’d best join them while you still have a chance. I don’t see anything that’s going to make me switch to Mac any time soon but if I was, you’d be damn sure I’d be buying it from an Apple store and not from Best Buy.
Business, Computers, Technology , , , , , ,

HP: How can something so large be so clueless?

Leave a Comment Posted by on September 22, 2011

In addition to just liking gaming and technology, I also have a hobbyist level of interest in the actual businesses behind those things. I like to think that we can learn a lot about the stuff we enjoy if we also know where it comes from and the trials and tribulations of making it. I’m no MBA and the only business I ever tried to run flopped like a wet towel on a tile floor so I can only make observations as an outsider with no real intimate knowledge of the corporate structure and politics involved. So really, I have about as much expertise as your average stock analyst.

I’m sort of a half fan of HP. I think most of their consumer computers are crapware-laden junk with horrible support and are second only to Acer in terms of my most disliked brands. When it comes to corporate machines and servers however, it’s an entirely different story. My employer is an HP shop and the stuff we use is very solid, reliable and supported very well. Given this, I was quite shocked along with many others to hear the news that the company had abruptly decided to nuke its WebOS phones and tablets from orbit and wanted to divest its PC business (one of its biggest revenue drivers and a market they lead in) altogether in favour of becoming a software and services company like IBM. They also announced they were spending $10.3 billion to kick this strategy off by buying Autonomy Corporation, a company no one had heard of and which many believe was highly overvalued at that price. Will Smith from Tested.com took a lot of stick for claiming just before that “HP is in this for the long haul” but he wasn’t wrong to say that. Like Microsoft and Google, HP is known for committing to an idea for the long-term and is prepared to lose buckets of money refining that idea until it eventually reaches profitability. It’s a sound strategy for a large company, one that has proven quite lucrative for Microsoft with the Xbox 360 among other things. With the iPad commanding such a dominant share of the tablet market, a strategy of that nature may be the only way to carve out a significant niche against it. The initial TouchPad was lacking software support and had some issues but was overall considered a solid tablet that showed a lot of promise. Unfortunately, those who believed in the long-form approach weren’t in charge anymore.

After HP’s previous CEO Mark Hurd–who righted the sinking ship Carly Fiorina left behind as she often does–was forced to resign for ultimately pretty stupid reasons, they brought in Leo Apotheker, the guy formerly in charge of SAP, a company he also didn’t do very well at. I’m not sure why they chose to bring in someone from a software as a service background to run a company focused almost entirely on physical goods but that’s what they did. After a string of disappointing financial results that began almost immediately after he took over, Apotheker decided out of the blue to take the aforementioned wild shift in direction. Customers and the press were not the only ones caught off guard, investors were too. Now they’re thinking of giving Apotheker the boot after less than a year and re-evaluating the idea of dumping the PC business, though it looks like they’re stuck with their purchase of Autonomy. I think dumping a business that while maybe not currently in growth is still a huge driver of revenue and profit for the company is a bad decision. There’s no doubt the state of the traditional PC business is in flux right now but no one has any idea where it’s going to go and it’s way too premature to consider getting out of it when it makes you most of your money. IBM got out of PC because they never figured out how to sell inexpensive computers to consumers, something HP has done very well for years now, regardless of what I think of the product quality. It’s simply not the time for decisions like that yet in my opinion.

While HP’s board may have finally woken up and learned Apotheker was the wrong fit for them, they still haven’t learned who is. It is rumoured that Meg Whitman is going to be his replacement. While she definitely has more experience running product focused companies, the shining star of her career is overseeing the hyper growth of eBay. A huge business achievement, this was followed by her then failing to strategise on its sudden plateau and decline, massively overpaying for a company that had nothing to do with their business while forgetting to secure the actual technology behind it and eventually, trying and failing to run for governor of California. So HP’s decision is to oust someone who made dumb short-sighted decisions with someone whose recent corporate achievements are similarly boneheaded decisions? What is it they feel Whitman can bring to the table that’s going to be able to clean up the new mess Apotheker has created and keep driving HP’s growth in the future?

Big business often means bad news for consumers these days but companies like HP, Microsoft and Google are the ones that have the resources to put up a fight against the likes of Apple, preventing them from dominating market segments, removing choice and ultimately, causing a worse experience for everyone. It still amazes me that an entity that is so massive and clearly has many very smart people involved can keep making decisions like these which don’t make any sense. I want to see them succeed but I don’t see how this change does that and if current trends continue as they have, they may not have much time left to get this right. Seriously guys, get your act together.

Business, Technology , , ,

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