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Los Angeles (CA) - All this week, the $31 billion global video game industry will have the Hollywood spotlights shining exclusively upon it, as even the old MGM Studios have been rented out to help stage one of the biggest showdowns in the history of the entertainment industry. The Electronic Entertainment Expo officially commences next Wednesday, but Monday will be high noon, as the first of the next-generation consoles - Sony's PlayStation 3 - makes its world premiere.
Perhaps the number one question on gamers' minds come Monday morning will be, will the PlayStation 3 transcend the $500 mark? With a Blu-ray Disc player on-board, the retail price can't afford to go much lower - it's a poorly-held secret already that manufacturers lose money on consoles anyway, in order to make money on game software. But with consumer sentiments wavering this year worldwide, and with disposable income being drained by higher fuel prices, the final price can't go much higher, either.
Can PlayStation 3 stick to $500?
Parks Associates' director of broadband and gaming analysis, Michael Cai, told TG Daily this afternoon that $500 could be the sweet spot for Sony. "I think the Xbox 360 was doing pretty good at the level of $399," said Cai. "I think if Sony can control it under $500, I think they should be successful, considering it has a Blu-ray Disc there. The Blu-ray DVD player alone would normally cost $1,000. So consumers, especially the savvy gamers, should especially see the value."
Potentially, Cai added, Sony's pricing scheme could maintain the PlayStation 2's place in the market for the next few years, by giving it a solid entry level price at around the $150 mark. "The PS2 will still be a factor in hardware," said Cai, referring back to the successful PS2 pricing scheme which enabled the PS one to live out a full life. "I personally have friends who are saying they are so looking forward to buying a PS2 now, because it's so much cheaper, and also it's much slimmer than the one they had before."
Why Wii?
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| Joining Sony's Vaio and Intel's Viiv in the Weird Names Hall of Fame is Nintendo's Wii. |
The number three player in consoles, Nintendo, successfully stole its share of the spotlight last week, with the strange yet somehow intriguing naming choice for its "Revolution" console. Was "Wii" just a ploy for attention that'll burn out by the end of the week? Michael Cai doesn't think so; in fact, he believes Nintendo's move may have a streak of brilliance to it. "Since Nintendo wanted to expand the gamer audience to focus more on the moderate, casual gamers, and re-invigorate the gaming-as-a-family experience anyway, it might as well end up being a smart move."
Cai's reasoning goes like this: Only hard-core gamers knew of the existence of the "Revolution" console by that name anyway. The Wii name introduces Nintendo's console to its true targeted market, which is made up more of parents. For them, he said, Nintendo may need to distinguish itself as more of a family-friendly brand anyway, and the "Wheee!" notion sounds more like a roller-coaster ride than something blowing up. Sure, the console was a revolution of sorts when it was first announced, to those to whom it was announced. "But casual gamers, and the moms who might make these decisions to buy that platform, might not even know. They might never have heard of ['Revolution']," he remarked. For them, the former code name might not have given the proper message.
Besides, Cai threw in for the heck of it, the Wii is no longer a particularly revolutionary console, especially from a hardware standpoint, stacked up against Xbox 360 and PS3. Perhaps - just perhaps - the little remote controls could be considered "revolutionary," but even the concept itself smacks of war and revolt and all the things that moms won't invest in. "Why would you want to call it 'Revolution,'" he asked hypothetically, "if your technology is much less?"
Can Xbox 360 continue on cruise control?
With Microsoft's Xbox 360 selling more units in the last quarter (1.7 million) than it did over the holidays (1.5 million), manufacturers now producing on a more efficient schedule, and with supplies now evening out, the first next-generation console is well on its way to normalization. It was a spectacular premiere after all, just delayed by several roadblocks. But with two big acts that could upstage it, Microsoft has to put together something fabulous - especially for its Tuesday morning rollout event - that will keep Xbox 360 in the hunt, and in the news.
What would that be? Having Microsoft's own publicists report on what the rumors are surrounding their client's own console, is a bit like watching an infomercial on the energy benefits of clean, natural coal, produced by the coal producer's association. On the one hand, it plants just the right seeds in customers' minds; on the other, it doesn't really give those seeds what they need to germinate. Is it real, or is it wishful thinking?
The publicists are using the phrase "Console Evolution," though the description the publicists are giving is an indicator that Microsoft isn't upgrading the console itself, so much as adding peripherals to it. The big-ticket items appear to be a likely HD DVD player and an add-on camera. But here is where Microsoft could find itself between a box and a hard place. Peripherals such as these might give an Xbox 360 "More Valuable Than Platinum" edition a feature set more in tune which what's expected for PS3, whose built-in Blu-ray player was confirmed long ago. Yet with the company's Live bundle (which features a year's subscription to Xbox Live) already selling for around $600, Microsoft doesn't have much room to play, if you will, with the price of an even more feature-rich bundle, and still remain price-competitive with PS3...unless that $500 mark was a ruse.
Microsoft could possibly mark down, or even eliminate, subscription fees for certain tiers of Xbox Live service; but what would that mean for customers who have already purchased subscriptions? Even so, if a new HD DVD-endowed bundle (with the HD DVD player hanging off the side, by the way) ends up selling for over $900, what could historically have been written up as the lead act in the next-generation console battle, could play out as a failed follow-up act for HD DVD.
Console games and PC games go separate ways
A look at the NPD games sales charts (http://www.starpulse.com/news/index.php/2006/04/19/march_2006_game_sale_charts_npd) for the month of March 2006 tells you everything you need to know about how consoles and PCs are dividing like drifting continents, with game genres split between them like separate species. The weird hybrid of anime and Disneyland, Kingdom Hearts II, took the lead spot again in the console sales charts, with mainly action combat games - among them, mostly first-person shooters - and sports titles following. Meanwhile, the PC games chart - whose titles now sell with one-third the quantity - is dominated by simulated worlds and gothic role-playing, with the add-on Sims 2: Open for Business leading the top spot, and Sims 2 itself at #7. Interspersed among them are all the major genre franchises we've come to know, with the powerhouse World of Warcraft clinching tightly to #5, Elder Scrolls IV: Oblivion at #2, and Star Wars, Lord of the Rings, D&D, Age of Empires, and Civilization IV all well represented.
Are PC games becoming a minor player? Not really, believes Parks Associates' Michael Cai. While that continent may continue to drift, he believes it's in a state of transformation, and may yet have its just revenge. The secret is in the online component. Consoles and console games dominate the retail market today, he explained, and because of that, they command the spotlight. But as the online business models for PC games change, away from the "per-box" retail model and more toward subscriptions, gaming-on-demand, and ad-subsidized services (more on that later), the big franchise games and role-playing simulations that are already well established on the PC side, are perhaps best suited to these models. They fit like a glove.
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| A "blood elf" - a kind of well-endowed Darryl Hannah/Christopher Walken hybrid, due to inhabit the long-awaited Continent of the Upgrades in World of Warcraft: The Burning Crusade. |
Welcoming the new business models to E3 this year could be an absolute blitz of PC games franchises, all of which are battling with each other for the biggest splash. I would say there's a "blizzard" ahead, but that name's been taken already. Blizzard's The Burning Crusade expansion to WoW, expected at E3, actually will create an entirely new continent, called "Outland," where one might find a new race of so-called "blood elves." (Oh, you never will believe where those Keebler cookies come from.) Meanwhile, Namco - yes, the company that introduced the world to Galaxian and Pac-Man - will actually try to knock WoW off its throne, with its much-anticipated Warhammer: Mark of Chaos. The company describes it as dealing particularly with "WAR, focusing on the armies and battles while de-emphasizing the tedious aspects of base and resource management." Which should already win this title some followers at the Defense Dept.
Sticking a finger in the notion that first-person shooters are entirely migrating to console-based platforms, CryTek is likely to demonstrate its even-more-perfected rendering engine, in a demo of its upcoming sequel to Far Cry, entitled Crysis. This is the game that should prove the viability of Microsoft's DirectX 10 rendering library, due to become one of the foundation components of its upcoming Windows Vista operating system. The difference between DirectX 10 worlds and DirectX 9 worlds (for Windows XP), gamers are led to believe, will be clearly visible.
But if the first-person shooter crowd is all gathering together around consoles, and if shooter games are more adapted to the retail model than the online sales model (How long can a gamer go on subscribing to the right to keep shooting down the same thing?), then could Crysis be less well received among publishers and retailers than it's likely to be among fans? This could be a bright comet of a game that burns out fairly quickly, as franchise role-playing and strategy titles such as Midway's Unreal Tournament 2007 appear well positioned to command and conquer - to borrow a phrase - the resurrected realm of PC gaming.
And there's one more little thing: While fans of the Star Trek movies will happily remind you that it's generally the even-numbered films that are the best, and the odd-numbered ones that are as cursed as a red-shirted security officer in a dark cave, they'll also tell you that there has never really been a completely perfect Star Trek game, for any genre, in the last quarter-century. So the question on at least some people's minds at E3 (they'll be the ones in Starfleet uniforms) is whether Perpetual's Star Trek Online - which is likely to be previewed on Tuesday - will break this curse. Set 20 years after the last "Next Generation" movie, with slightly updated ships, set decoration, and uniforms designed under the direction of no less than Trek veteran artist Andrew Probert, the screen shots of this MMORPG look perhaps even more stunning than some of the odd-numbered films (Trek V comes to mind). But with the promise of away-team exploration of multiple worlds, and true 3D combat among fleets of starships, manned by multiple live players simultaneously, the question transcends whether this game will feel like a Trek movie, and becomes whether it places the gamer in anything resembling his understanding of the Trek universe.
The emergence of ad-supported online gaming
With PS3 stealing the spotlight on Monday, and Microsoft's Xbox 360 and Nintendo's Wii (formerly "Revolution") following up with subsequent world premieres on Tuesday, you'd think E3 was all about consoles. But recent multi-million-dollar investments, such as Viacom's $102 million buyout (http://www.tgdaily.com/2006/04/25/xfire_to_be_acquired_by_viacom/) of in-game messaging firm Xfire, and Microsoft's astonishing buyout just earlier this week of in-game advertising firm Massive Inc., estimated at as much as $400 million (http://www.tgdaily.com/2006/05/05/microsoft_gets_massive_in_video-game-ad_deal/), suggest another set of dynamics is at work: The PC gaming market is in transition, as major media and software companies are placing huge bets on gamers' receptiveness to commercial messages during high-adrenaline online tournaments. Their investments could change the entire business model of PC gaming to something almost unrecognizable by just the end of this year.
Conceivably, as expert gaming analyst Michael Cai of Parks Associates tells TG Daily, a new, ad-subsidized PC online gaming market could shift the focus of game development itself, perhaps away from the "core" segment of tournament games and first-person shooters, and toward two emerging segments, both on opposite extremes: 1) massively multi-player games (MMORPGs) that depend on the Internet connection which serves as advertising's principal pipeline; and 2) casual games, which take a moment or two of the player's break time, and could very well be the new home for "breaks" of a different sort.
"The online market is very dynamic and lively," Cai believes, "and there are a lot of new business models emerging, generating new revenues." Because next-generation consoles will rely on their Internet connections for consumer services, they won't be left out of the loop. Thanks to World of Warcraft, Cai said, MMORPGs have broken out into a huge potential market - which we could see others capitalize on, especially if Namco makes a splash with its much-anticipated Warhammer: Mark of Chaos next week.
But the problem with gothic fighting games, we believe, is the context they create: In mythical worlds, it's a little hard to plant a billboard for Sprite or Nike. That's why "sim worlds" of the kind featured in the online role-playing game Second Life (http://secondlife.com/) are generating quite a bit of buzz. In a world that looks more current-day, where the characters do more current-day things, it's just as easy - if not easier - to bombard virtual people with commercial advertising as it is real people. With hundreds of millions in subsidies at stake, it may soon become a possibility that, even if Warhammer attains tremendous popularity, the games that get front-burner treatment in coming years could look less gothic and more like a sitcom.
On the other hand, Viacom's investment in Xfire suggests an alternative: The Xfire instant messaging platform gives gamers a way to connect with and send live messages to one another, without breaking the context of the game they're playing. If Viacom - which originally got its big boost as an outdoor advertising company - takes advantage of this, it could drive growth in advertising vehicles that don't steer the direction of game development. On the other hand, they don't necessarily subsidize game development either, which may make reliance upon Xfire a less attractive option in the future for some game publishers.
Michael Cai breaks down the math for us: Just last year alone, advertisers spent over $60 billion on TV advertising. With 108 million households, that's a total investment of $45 - 50 per month. That's not much from each advertiser's perspective, but if you did away with ads, that's how much money consumers would need to spend to compensate.
"For video games, especially on the PC platform, there are more than 50 million US Internet households who have active Internet gamers. Only about 1 to 2 million of them are paying for casual online games." Recent buyout announcements that first put in-game advertising in the public spotlight, Cai believes, may be focusing too much on what ads may provide to the core gamer segments, while it's casual gaming that could provide the more fertile proving ground. "I understand Wild Tangent is doing something in the casual space in terms of in-game advertising," said Cai, "but I think more companies need to step up as they figure out the in-game advertising technology and business model for the casual games as well. That will provide more incentive for publishers and developers to give out better games for the casual market."
E3 2006 continuing coverage throughout the week
TwitchGuru, Tom's Hardware Guide, and TG Daily will be on location to bring you live analysis of all the events of this year's E3 Expo, as it happens. Follow our coverage to find out What It Is, How It Works, and What It Means.