TwitchCon 2016: Amazon’s Growing Twitch Presence

Twitch Prime

The content creator market is maturing and growing. Bigger and more established companies are beginning to see the value in investing in the space, and nowhere was that more apparent than at TwitchCon 2016. For the second annual event, TwitchCon relocated to San Diego and we began to see Amazon’s impact on Twitch start to take shape for the first time. Below are three observations on how the future of Twitch will be impacted by Amazon.

First off, the announcement of Twitch Prime made clear Amazon’s desire to integrate more directly with Twitch. Twitch Prime is an extension of their regular Prime service that adds perks specific to Twitch users, which, surprisingly, does not come with a price increase. It’s the first time that Amazon has extended Prime beyond their own core brand, and the perks for the inaugural month were as follows:

  • Free game loot – Tyrande Hearthstone hero, copy of Streamline, Paladins Bomb King weapon skin

  • Discounts on new-release box games

  • Ad-free viewing on Twitch

  • Exclusive emote & chat badge

  • One free channel Twitch channel sub per month

  • Everything else included with Amazon Prime

Twitch Prime

Second, Amazon has started positioning Twitch as a digital game storefront with Steam-like functionality by introducing a “Game Details” page and supporting Twitch Launcher software. Amazon first introduced this new functionality by including a copy of Streamline in Amazon’s Twitch Prime service. The “Game Details” page is just an addition to the page that each game already has in the Twitch directory. This page contains screenshots, a trailer, and a download/purchase link. Once downloaded, the new game can be accessed and managed in Twitch Launcher.

This new functionality will make for an interesting customer browsing experience, as they have immediate access to see who is streaming it or who has made videos of the game. Additionally, when a Twitch Partner streams a game that is a part of this system, they get a referral link that their viewers can use to go purchase the game. Twitch incentivizes the streamer to participate by giving them a 30% cut of each sale. Right now, the only game in this system is Streamline but there is no doubt more will be added.

Finally, Amazon hosted a launch party for their new game studio’s first titles: Breakaway, a “mythological sport brawler,” New World, and Crucible, that will surely set the tone for how other gaming companies participate in the event. Of course, all three titles have promised a high level of Twitch integration such as the announced Stream+ feature, which has similar functionality to Proletariat Inc’s Streamote.tv. Amazon’s launch party was experience-oriented and put the games front and center with attendees, offering demo access and alpha codes (etched on heavy metal coins, no less).

It‘s quite clear that Amazon plans to use their purchase of Twitch to further their initiatives, which is great for gamers and content creators. Amazon seems keen to make use of Twitch streamers’ influence on their viewers to create a store/publishing platform. How this plays out in a Steam-centric world will be interesting. Any more methods they can create or provide for Streamers to monetize their shows, in a way that benefits viewers, is great for the market as well. In short, TwitchCon provided us with plenty of evidence to be optimistic about what Amazon will be bringing to Twitch in the future.

The Fault in VR: Oculus Widens the Rift Between Gamers

"Huh, did you say something?"

Oculus Rift has already won the hearts and minds of geeks everywhere, without a finished product on shelves. At trade shows like CES and E3, the chance to get even a brief demo of the virtual reality headset has spawned endless, snaking lines of near-Disneyland proportions. There’s no doubt that the Rift has the potential to change entertainment as we know it, but it’s a step in the wrong direction that will further divide gamers from the mainstream.

Continue reading The Fault in VR: Oculus Widens the Rift Between Gamers

Pushers–Why Titanfall will not save the Xbone (yet)

Titanfall launched a couple of weeks ago, and the reviews are very good. The game has an 86 on Metacritic, which reflects (if nothing else) a unanimously positive response from the aggregated gaming media, and players are raving about how great the game is. I myself participated in the Beta test for Titanfall on PC, and found the game fast-paced, intense, and generally fun to play.

But it won’t sell Xbox Ones. Not yet. Continue reading Pushers–Why Titanfall will not save the Xbone (yet)

Smartphone Game Controllers – More of a Game Changer Than You Think

Ask any game developer on iOS and Android today about the challenges they face in succeeding (i.e. turning a profit, making a sustainable living), and chances are there will be expressions of frustration and negativity. Save for companies that have already established themselves in the mobile marketplace and can afford to build and sustain a customer base, an overwhelming majority will never see a penny of profit.

At the same time, the mobile game market is at a crossroads. On one hand, you have casual experiences being churned out that can be monetized through growth hacking, a.k.a. the ability to target, but and convert players into paying customers. On the other hand, unique game experiences with deep and engaging levels of gameplay that can appeal to true “gamers” are finding it incredibly challenging to succeed, experiences that might command an upfront payment for a quality experience, one that such gamers are willing to pay.

Yet, the touchscreen experience doesn’t match the deep level of gameplay that sufficiently satisfies the needs of the average gamer. A few hours of playing a serious shooter, and you’re left with finger burn and a crooked wrist. This is why I adamantly support Nintendo’s strategy to continue building out their own platform with dedicated portable consoles, but that’s best left said in another blog post that I previously wrote.

While these challenges will persist in the near future, there is a bright spot in the mobile industry, steadily growing to help push development of high quality, deep gaming experiences that consumers might be willing to pay for – Bluetooth game controllers. Yes, multiple companies exist that provide such solutions, such as Green Throttle, Nyko, MOGA and others, but the tipping point will come with native integration of controller support by Apple and Google.

We already know about Apple’s controller API released with iOS 7, one that any developer can integrate into their game to support any wireless Bluetooth game controller. Google can’t be far behind, and we can be confident that we’ll see the support in the next year, at the most.

Free-to-play games rule the roost, and likely will for some time to come, if not permanently. This has allowed companies with the most capital to execute “growth hacking” techniques weighed heavily on user acquisition to build and sustain a player base. This has unfortunately led to an incredibly difficult marketplace for less capable developers to navigate and get discovered, especially the indie tier where the best ideas are generated and the least analytical capabilities lie. And we certainly can’t count on a quality game to succeed based on a one-time payment model. Free-to-play becomes even more challenging for the serious gamers, an incredibly difficult balance to manage in avoidance of pay-to-win perceptions.

As for “quality” games following the paid download model, $1.99 is unfortunately the maximum a majority of smartphone gamers will pay, with $9.99 and $19.99 being special price points for console ports – generally not optimal experiences built from the ground up for the touchscreen.

With universal game controller support built into iOS and Android, we can count on gamers playing for longer periods of time. With such higher engagements, developers can build deeper experiences with flexible game mechanics and backstories that have gamers investing tens of hours of time. Such game experiences are why 35 million gamers around the globe own a 3DS, and games that sell for $40 each sell in the millions within several days of release. These are the games, like Grand Theft Auto V and Call of Duty, that smash entertainment sales records, surpassing movies and music. Many of these games just wouldn’t work on a free-to-play model.

We’ve witnessed a variety of companies enter the market to disrupt the console business, most of which have been categorized as “microconsoles”, dedicated set-top box hardware usually build on top of Linux/Android. Yet, I can’t help but think that the last thing developers need to worry about right now is another platform, particularly one with little install base to justify the additional resource investment.

Why the need for a microconsole, when we all already own one, sitting right in our pocket? The smartphone and tablet, both iOS and Android, will quickly displace the need for dedicated microconsoles that offer the same value. Connectivity to the TV an issue? Tap and stream, enabled by Apple TV and, soon, the likes of Chromecast, will eliminate this hurdle for mainstream consumers. Don’t worry about the gamers – they’re savvy enough to make it happen now, as long as they have a reason to.

 

To summarize why I’m optimistic about the smartphone and tablet gaming space for the future of gaming:

1.) Native integration of controllers accelerating developer adoption into games.

2.) Games built from the ground up with controller support can lean on deeper experiences that please core gamers.

3.) High quality game experiences that can be played for hours (and avoid finger burn) can command premium price points and not rely on free-to-play access and conversion.

4.) Smartphone and tablets significantly increasing in power and capabilities can offer an experience that pleases the core gamer.

5.) One-tap streaming from smartphones/tablets to TV will all but eliminate the need for dedicated consoles tethered to the TV.

6.) More freedom and flexibility for gamers – one game file and experience no matter where you are, whether played on the road or on your living room TV.

 

I truly believe that there’s still a bright future ahead for experiences that gamers can enjoy and would be willing to pay a premium price point for on mobile devices. The hurdles that face development and adoption of such titles is a technology challenge already being solved in the form of native controller support and mobile-to-TV streaming. This is an exciting opportunity for developers to harness and create rich game experiences that meets the behaviors and consumption habits of gamers both casual and core. For all the gamers out there, we get to enjoy great games using the hardware that we own coupled with an affordable controller, anytime, anywhere.

Room for Everyone

When the subject of gaming comes up in conversation, it’s not dissimilar from discussing movies, television, or literature. “What are you playing these days?” is the gamers’ equivalent of “Did you catch the last episode of…” or “Did you go see…?” There are several unspoken questions that go with it; our friends are assessing where our interests lie, whether we’re keeping up with a franchise or a genre, which spoilers are safe to discuss, and so forth. Answering the question, though, involves assessing the party asking it, as well. If I’m asked what I played last week, do I open with the one about the bittersweet love story told through atmospheric exploration, or the one about punching the alien in the balls so hard he blew up a gas station? Continue reading Room for Everyone

Plenty of Fish in the Sea: Gaming, Ego, and Missed Opportunities

For those of you loyal readers who are less games-industry inclined, things got preeeetty exciting at the end of last week. Notable industry sour-puss Phil Fish, the creator of puzzle/platform game Fez, took a special kind of offense to some strong words from Marcus Beer, a journalist and commentator most known for his Annoyed Gamer segment on GameTrailers. Beer was upset that Fish and fellow indie designer Jonathan Blow had refused to comment when approached about Xbox One’s decision to allow for Indie publishing. Mean things were said, a Twitter war started, and at the end of the day Mr. Fish announced his retirement from game development, and the subsequent cancellation of his much anticipated game Fez 2.

It was a strange turn of events. Fish has long been an outspoken member of the gaming community, and has not been afraid of stepping on toes—he once declared that Japanese games, on the whole, “suck.” But despite his polarized opinions and regular flack he received for them, never before had he given an indication that he would quit the industry entirely. Journalists, commentators, and gamers are in a kind of stunned state, some siding with Fish against the very personal attacks leveled against him, others basically telling him to toughen up.

Fez 2 will not remain cancelled. Fish will return to the industry. Many commentators with more experience and understanding than I have already broken down the arguments for and against what happened. My interest in the story is not about the dramatic exit of a recognized industry figure: rather, it’s frustrating and completely predictable that attention would be given to the childish behavior of Beer and Fish, and not the actual topic that started it all.

Beer’s complaint with Fish and Blow was that they did not appreciate the two-way street of journalist-developer relations. Many journalists had worked closely with the two of them to promote their games, but when asked to give a thoughtful comment on this pressing industry issue, both had laughed in journalists’ faces—they very publically (e.g. on Twitter) stated their disdain at games journalists who dared to approach them for their thoughts and belittled the journalist trade on the whole. In short, Beer’s argument was simple: if developers don’t help journalists with commentary on industry issues, journalists should stop helping developers with reviews and coverage of their games.

The relationship between journalists and the people they write about is an interesting conversation topic that extends far beyond the realms of the games industry. The profession of PR is a testament to the complicated nature of journalist and subject, particularly in an industry defined by creativity and personal expression, such as gaming. Positive reviews make or break games: do developers “owe” journalists for positive coverage? If that’s the case, are they entitled to recompense from negative coverage? Is there a responsibility for successful people, people who define industries, to be available to discuss major movements?

Now, we’ll never know. A shining opportunity for a mature, adult discussion about the nature of gaming media and responsibilities of developers has been almost completely destroyed by the fact that some people are far too childish for the real world.  Marcus had a valid point about reciprocity in the gaming industry, but he wrapped it up in name calling and cussing that completely obscured the kernel of rationality. Phil Fish and Jonathan Blow (probably) had a rational reason for refusing the opportunities—specifically, they were being asked to comment on rumors and speculation before the news actually broke—but instead of being rational adults, they tried to turn it all into a rage against the media. Names were called, and one of the industry’s most talented creators has walked away.

On the surface, this is a sad story about a fight that got out of control, and how damaging trolls are in the gaming industry. But on a deeper level, this inability to engage in conversations stops the gaming industry from growing up. It’s remarkable that this conflict occurred, but it’s not surprising. Name calling and yelling louder than the next guy have become an accepted part of gaming culture, even at the highest levels of professionalism, just like rampant sexism and racism are the norm in online gaming communities. This is not the first time a journalist and developer will fight like children in the public eye, and it will not be the last, but this is the first time that the damage these childish spats cause is clear.

Two gaming experts had the chance to have a real conversation to improve the gaming industry, but they were too busy calling each other “tosspots” and f***faces to realize it.

Mobile Gaming USA Panel Recap: Fishing in a Small Pond – Opportunities Abound!

I had the privilege of moderating a panel at this year’s Mobile Gaming USA West, held in San Francisco on May 14-15. The event drew some of the top minds in mobile game development, publishing and services, all sharing their thoughts on the current state of the industry, and offering advice on the immediate challenges we all face.

I usually hone in on topics of marketing and public relations, but this panel was different, titled “Fishing in a Smaller Pond: Evaluating the mobile gaming market outside iOS and Android devices”.

While every discussion and panel preceding mine focused on iOS and Android (obviously, given its majority rule over the other mobile operating systems), my panel consisted of experts finding success on other mobile platforms.

The goal was to plant seeds of interest in an audience with little knowledge of and motivation for serving these alternate audiences, discussing the immediate opportunities, monetization, challenges and best practices.

The panel consisted of:

  • Abhinav Gupta, CEO, Game Scorpion
  • Charles Huang, CEO, Green Throttle Games
  • Chris Mahoney, Director of Emerging Platforms, PlayStation
  • Kenny Rosenblatt, CEO, Arkadium

Kicking off, we took a quick audience poll. Of the approximately 100 people in the room:

  • 90% working on iOS
  • 80% working on Android
  • 5% working on Windows Mobile*
  • 5% working on BlackBerry*

*It’s worth noting a clear overlap of those working on Windows Mobile and BlackBerry.

Next up was an opportunity to frame the discussion with a few interesting data points, food for thought as we discussed the various platforms:

  • There are 6B active cellphones worldwide.
  • Smartphones recently overtook feature phone shipments for the first time ever this year. That’s 418M units shipped in Q1 2013, 216M of which are smartphones, and that shift is accelerating.
  • Of smartphones, iOS and Android combined make up 91% (4Q 2012) of total market share worldwide.
  • Windows rose to 2.6%, BlackBerry fell to 3.2%.
  • What’s interesting is that the BlackBerry Q10 was the fastest-selling consumer electronics product ever in the UK (source: Guardian); is this a sign that hard keyboards will live on, and a potential niche for BlackBerry to successfully service?

Digging into the discussion, there were a few key takeaways:

Don’t take anything outside of iOS or Android for granted – money talks

While we’re all focused on chasing the popular thing that’s getting all the press/peer attention, we should take a step back and look to where opportunities might be ripest. Microsoft and RIM are spending millions to attract great content to a marketplace with a healthy install base and lacking attention from massive content players with big marketing budgets (your competitors). Additionally, console manufacturers such as Sony have shifted with the market to reduce barriers to entry, allowing mobile game developers to easily expand to audiences that are already conditioned to liberally spend dollars on a good game. And those of us living in a tech bubble with our shiny new gadgets, constantly looking 10 years into the future, could perhaps look around the world and see that a billion new feature phones will ship this year, generating millions for companies who are actively participating (e.g. Gameloft, vserv.mobi, etc.).

Windows: the agnostic OS

Rosenblatt’s emphasized the emerging importance of Windows, one that will rise to significance over the next several years. Central to this is Microsoft’s efforts for a harmonious OS centralized with Windows 8, not only providing consumers with a familiar experience across all devices, but a platform that developers can easily harness and through which their software/apps can deployed. It’s the only OS on the market with such capabilities and, thus, shouldn’t be ignored, particularly at a time when Microsoft’s deep pockets and massive audience size can provide significant support for great content.

These channels offer prime shelf space

Granted, you’ll need to start with a good game, but the relatively little activity on these alternative platforms means more opportunities for developing a relationship with the channel owners and receiving positive treatment in the form of feature placements. While every developer in the world is knocking on Apple and Google’s door for a feature spot on their respective marketplaces, bringing your great game to these other channels may resonate for preferential treatment.

Develop your content for the audience specific to the platform and/or channel

Sounds obvious, but when was the last time you considered developing for the Nook, or enhancing engagement by allowing mobile games to be played both on the road and on the big-screen TV? When you’re in the early stages of developing a game concept, you should be thinking about the audience it serves and where those audiences consume.

Gupta’s company has seen great success for children’s apps on the Nook and Kindle Fire, which both have audiences mostly comprised of 24+ professionals with children, who are also privy to spending money on an app that might serve an educational purpose for their kids (and of course, keep the kids busy in times of need).

Huang’s company is focusing on the convergence of mobile and TV, following the mantra of harnessing the console that you already own – an Android device in your pocket. Developers can increase engagement and monetization for an existing game by allowing playability in a social environment on the big screen in the living room.

Both Huang and Gupta agree that niche audiences are emerging within the Android ecosystem, which may be viewed simply as the continued fragmentation of the OS, but can be leveraged in a smart way to channel specific efforts into highly targeted audiences.

Also, clearly, Mahoney’s company harnesses the power of the PlayStation brand, creating an entire ecosystem of gaming products that will not only serve core gamers with deep, high-quality game experiences, but also accommodate the great content that the indies and mobile studios are generating in reaching the expanded mainstream audience.

In closing, we all agreed that there are big opportunities out there beyond just iOS and Android, most notably on PlayStation’s expanding line of hardware and distribution, Windows 8’s agnostic platform, BlackBerry’s fight to attract content to its existing base of core customers, and niche channels emerging within Android. I would’ve loved to look at the feature phone business, which globally ships 1m devices annually and has come a long way in terms of device capabilities for games (even with its own app stores!), but we’ll save that for another time. For now, focusing on starting/growing a sustainable business that can continue to feed the development of great games should be everyone’s priority, and these alternative options to iOS and Android just might be the perfect launchpad to future success.

Wii U to Ditch Friend Codes, Welcomes Convenient Social Gaming

Wii U

One of my biggest gripes about the Nintendo Wii was the idea of having to jot down lengthy friend codes to play with friends and colleagues online. Talk about counterproductive measures to experience “social” gaming. However, earlier today, it was revealed that multiple user IDs will be able to be stored on the Wii U, which also means Friend Codes are now a thing of the past.

Sites like Destructoid are confirming that Nintendo has officially set the record straight, stating, “Our plan is to replace Friend Codes with a much more user-friendly Account ID system, which employs user-created account names.”

Finally, Nintendo has caught up to the consoles (and mobile devices for that matter), allowing quick, immediate connectivity to friends without the ridiculous number sequences previously required to connect. This just went a long way in getting me further intrigued in the Wii U’s launch, which is slated for November 18.

With a handful of launch titles featuring multiplayer capabilities, including Call of Duty: Black Ops II, Wipeout 3, FIFA Soccer 13, and Sonic & All-Stars Racing Transformed to name a few, you can bet friends looking to play together across the country breathed a collective sigh of relief around today’s Nintendo reveal – myself included.

Part of Me: On the Smithsonian’s Art of Video Games

In the farthest reaches of the Smithsonian, at the end of a dark corridor, was a large screen indicating the entrance to the Art of Video Games exhibit. On the large screen were snippets of video game cut-scenes from various video games, old and new, from Pac-Man to Heavy Rain. What really caught my eye were not the images on the screen but the statement by guest curator, Chris Melissinos.

Last month, Destructoid’s Ryan Perez expressed his disdain for the industry’s need to validate itself by calling video games “art.” Mr. Perez notes at the beginning of his article that he is neither the first nor the only one to be tired of the “games as art” argument. I personally never bothered to validate video games as art or not art as I felt that if a medium—an experience—could mean so much to me and be such an important part of myself, does it really matter if the public believes it to be art or not?

I believe this to be the reason why I was refreshed to see the words written on the wall. In three short paragraphs, Chris Melissinos explains the importance of video games in his life, as some of the deepest personal and globally connecting experiences in human history. More importantly, Mr. Melissinos makes it clear that the exhibit was not created to educate viewers on why video games are art, but for viewers to make that decision for themselves, that video games “may even be” art.

The adjacent room, with concept art from a few games and videos of facial expressions captured while playing, housed a small gray panel which explained the goal of the exhibit further.

If I had ever argued that games are art, it was because I believed the definition of art was any piece that made a bold statement that resonated with me when I viewed it. I wondered after reading this panel if Mr. Melissinos wished viewers to leave the exhibit believing games to be art, while still allowing them to come to the conclusion themselves.

I believed that to be the case when I saw the next room, which was filled with demos of games from the original Super Mario Bros. to The Secret of Monkey Island to thatgamecompany’s Flower. Visitors were invited to play through a few minutes of each of those games in the hope that it would either bring back fond memories or help non-gamers understand the meaning of video games and the experiences they offer. Though I could not read what each player in the room was thinking when they were playing, I knew this room was intended to complete the equation explained in the gray panel: the conversation among the game, the artist, and the player.

The final room of the exhibit had a timeline of consoles on display, with video clips from games of different generations from the Atari VCS to the PlayStation 3. After getting my dose of knowledge and nostalgia (and an array of new photos in my camera), I wondered if the hundreds of strangers around me actually believed games are art, refused to believe they are, or were indifferent of the answer. Did each visitor fulfill Chris Melissinos’s goal of at least deliberating the question?

I took one last look at the gray panel: Three Voices—Artist, Game, Player. In this instance, the Artist is the game developer, the Game is the physical product created by the developer, and the Player is the consumer; the one experiencing the game. As I read the passage one more time, the definitions of each voice began to blur in my mind. I believed this to be the goal of the exhibit as well: to allow viewers—the players—to insert themselves into the concept art they saw, into the game demos on display, and into the memories that returned when looking at the different generations of consoles and games. Though we will never know what exactly emerges within each visitor, we can safely assume that each is wholly unique.

Personally, I still do not believe there is a universal truth on whether or not games are art. I could write an entirely separate piece arguing for the importance of the medium, but for now, I have at least come to this conclusion:

Each visitor of the exhibit is the creator of what they took away and of what they believe video games are to them. I chose to focus on what video games have made me and why I chose to agree with Chris Melissinos’ beliefs on the sacred bond the player makes with the game. For these reasons, I believe that the conversation between the game, the artist, and the player—and the blurring of the lines separating the three—brings about a fourth voice. And it is for these reasons that the identity of the fourth voice is up to the player to decide.

PR Tips for App Developers

Which icon stands out in this sea of apps?

The secret to a successful app is a combination of factors, some of which you can control, others you can’t. In order to do well in the oversaturated app marketplace it’s essential to put yourself in the best possible position for success. App success starts with a great idea, it hinges on execution during development, and it is largely influenced by PR, marketing, timing, and luck.

Of those factors, PR is one that you can control. PR for apps is about how you present the product to the public, garner media coverage, and build users and awareness through proactive outreach. Here are 5 tips to help your PR effort.

Continue reading PR Tips for App Developers

Nintendo’s Battle for a Dedicated Gaming Platform: Throw In the Towel for Mobile?

Nintendo has been facing an incredible amount of pressure from existing and new entrants to the gaming space that has led to a decline of its market share. With only so much time in one day to consume media, consumers have a choice between “core” gaming, by way of consoles and PCs, and a more casual experience via browser and on mobile devices; Nintendo has found itself at the service of neither audience.

With the impending launch of Wii U, the company has taken a public stance in support of the core gamer, but is faced with overcoming the challenge of offering a superior online experience to the established leader in the space, Microsoft and its Xbox 360. Its track record with Wii Shop leaves many of us doubtful that it can rebound in this sense. Meanwhile, the mainstream audience that helped propel Nintendo to success in the last decade with the Wii is being abandoned in favor of more costly hardware and complicated controls of the Wii U.

Clearly, Nintendo’s platform is at risk of failure, and investors and Mario fans alike are clamoring for a shift in strategy. Most notable among the call for action lies with the leader and renowned innovator in software and hardware – Apple.  Prior to iOS, we had terrible interfaces that were counterintuitive to driving engagement of content and considered a 5% market penetration of games as a success. Since the debut of iOS and the App Store, we’ve seen the market expand to over 600,000 applications and indie developers rising to fame, claiming thousands in revenue, and in some cases millions. Google Play trails closely behind with over 500,000 applications available, although the platform faces piracy issues that leave it second to iOS in terms of developer support.

The new market opportunity is in mobile gaming, as Apple and Google continue to seed global audiences with smartphone devices that spur user engagement with various forms of content, most notably games. Should Nintendo bow to market pressures and take Mario, Zelda and Metroid to mobile devices? Certainly not now, without sacrificing its entire platform and affecting its remaining grip on the game enthusiast market. Let’s analyze the implications of what can be seen as a rash decision in several ways.

Shifts in Revenue

Nintendo’s revenues have taken a hard hit as a result of our shift to mobile platforms. Wii owners are largely content with Wii Sports, and those mainstream consumers have hardly converted into purchasers of additional software, resulting in decreased developer support. The 3DS launched to a cold welcome, but has since slashed prices and achieved moderate success among a stagnant core gaming audience.

The company recorded its first operating loss of $460 million for fiscal year ending March 31st, much of which can be attributed to the struggling Wii console, DS and 3DS, all falling short of sales expectations and incorporating price cuts in response to increased competitive pressures. We can also assume that much of the capital was allocated to continued support for game developers on each platform and R&D towards Wii U.

Meanwhile, Rovio released its 2011 earnings statement, highlighting $67.6 million in profit on $106.3 million in revenues that can be largely attributed to its Angry Birds property, 30% of which came from merchandising and licensing. Based on these numbers, we can estimate that around $70 million was generated by downloads of Angry Birds. Impressive numbers indeed and deserving of praise for the company’s immense success across the various platforms on which Angry Birds can be found.

Yet, Angry Birds is at the top of the food chain, and few (if any) can come close to matching the success that Angry Birds has seen. And in comparison to Nintendo’s current business, it fails to match the numbers of its own game platform business.

For fiscal year beginning April 1, 2012, Nintendo is expected to achieve $500 million in operating profit according to a forecast estimate compiled through a survey of 20 analysts by Thomson Reuters I/B/E/S. The company controls its own fully integrated platform specifically tailored to gaming, similar to Apple’s hardware/software strategy that spans personal computers and mobile devices, not to mention the impending launch of the rumored iTV. Nintendo sells the hardware and controls the pipeline of software making its way to consumers, consisting of its own popular IP and an ecosystem of developers from which it generates additional revenues with every game purchase.

Let’s take a look at another example, one that would be on the lower end of Nintendo’s sales figures on a platform that is largely characterized as “struggling” – Mario Kart 7 on the 3DS. The title has so far achieved global sales of nearly 5.5 million units, running at $39.99 a pop. That’s nearly $220 million in revenues, over double Rovio’s business. Now, the margin on packaged goods isn’t really as significant, but even if we’re looking at a 20% profit margin, we’re talking about approximately $44 million in profit from a single title that has been on the market for only 6 months and on hardware that isn’t even considered a mainstream success. Looking forward, it’s not a stretch for Nintendo’s hardware to go strictly digital as industry trends indicate and eliminating the packaged goods channel, increasing margins and generating even greater profits (considering a premium price point maintained through “deeper” gaming experiences of Nintendo hardware). Also, this is just for one title – consider all the other games moving through the 3DS, controlled 100% by Nintendo and generating even greater revenues from both 1st and 3rd party games.

For Nintendo to trash its own closed gaming platform for Apple’s in pursuit of revenues that have not publicly achieved the scale that Nintendo currently maintains just doesn’t add up. It’s also understandable that Nintendo derides the thought of having to pay Apple the 30% cut, which would make it an even greater challenge to achieve success on the scale of its current games business. A counter argument to this is that Nintendo can offer games on each platform, which doesn’t come without merit, but let’s take a look at this audience.

Can Mario Wear Different Hats?

For Nintendo to reach the scale of success on Apple’s platform that it currently achieves within the confines of its own closed platform, let’s assume two scenarios: 1) that the game experience is rich enough to sell on the level of Angry Birds (that’s 1 billion downloads!), or 2) that Nintendo sells at a premium with less market penetration. Both situations would have to involve the creation of new games based on its popular IP, rather than a direct port of old games which would only have a minimal impact on Nintendo’s bottom line, not to mention potential disappointment in the controls for some of our most favorite classics that were built for console controls.

The first scenario would be largely targeted at the expanded mainstream audience, one that Nintendo did a great job of penetrating with the Wii and DS. Yet, we have to ask ourselves if the casual gamer of an older demographic and one that skews female would be willing to purchase a Nintendo device if Mario could be had on an iPhone, iPod touch or iPad. Facing limited time in one’s day, chances are that this gamer would skip the purchase of a game-dedicated device and invest $0.99 on a more casual Mario experience. Asking my wife and her 21 year old sister if they’d purchase a new Mario for Wii if they had Super Mario World on their mobile device, they both confidently answered “no way, the app would be good enough”. This would affect the purchasing decision of millions of consumers and cannibalize Nintendo’s gaming platform at a much more significant loss than what it can possibly recover in $0.99 downloads. This isn’t a risk that Nintendo can afford to make, at least not right now.

The second scenario involves a very challenging balancing act of pricing games at a premium, say $9.99, and selling through enough downloads to generate a return on development costs. This would carry an even greater risk of cannibalizing Nintendo’s own platform as these premium games would also come with a deeper and richer gaming experience that could potentially directly compete with Wii U, DS and 3DS game quality. If I have a great Mario title on my mobile devices at $9.99, chances are that I’ll skip the dedicated hardware and $50 price tag for the game.

Additionally, either decision would send a very negative signal to the remaining developers who still believe in Nintendo’s gaming platform, causing additional speculation about those consoles’ impending demise, an even further loss of support in game development, and all but hammering the final nail in the coffin of Nintendo’s platform.

Finally, do we really want an innovator in the gaming space to drop what it does to hop on the iOS bandwagon and solely rely on a touchscreen interface? Is the future of gaming really only about the touchscreen, perhaps with gesture and voice recognition integrated within? Imagine where gaming would be now if Nintendo bowed down to economic pressures back when the GameCube was being labeled as a failure and the Wii and DS never happened. All those Wine, Cheese and Wii parties would have never happened, and one could fairly assume that the Kinect and Move gaming experiences may not have been inspired into market release, perhaps confined to TV integration and never having impacted the games we play.

“Tiiiime Is On My Side, Yes It Is”

Mick Jagger’s voice resonates in my head as I read that Nintendo is sitting on a pile of cash amounting to $14 billion. Not only is Nintendo expected to turn a profit for fiscal year 2012/13, but it has a war chest to conceive and define the “next generation of gaming” through a fully integrated hardware and software platform, one that’s made exclusively for gamers and consumers seeking a good time. Even though the new Wii U doesn’t spur much hope with industry analysts and other market players, such efforts would be completely lost if confined solely to the hardware and interface design choices of Apple, a company whose business is far greater than the games sector to justify a focus on giving us new ways to experience video games.

But how much time does Nintendo really have to make a decision? Even with $14 billion to cover years of operating costs, Nintendo can’t afford to sit around forever. A fair guess at the amount of time that Nintendo has to evaluate the marketplace and give a shot at maintaining a unique gaming experience lies perhaps in the 5-10 year range. Most everyone will understandably argue that this is too much time, but Mario, Zelda and Metroid aren’t going anywhere, and if Nintendo’s own platform faces a demise there will always be an audience ready to pounce on these titles when made available on iOS, Android or any other platform outside the company’s own walls.

Atari, who is celebrating its 40th anniversary this year, has hit a milestone of 10 million downloads just a year after releasing a number of classic and new games based on its renowned IP. Even decades after spending my hard earned weekly allowance in the arcades on Missile Command, Asteroids and Super Breakout, I can count myself among the millions that are downloading these games on iOS and Android (disclaimer: Atari is a TriplePoint client). You can bet that team Mario will have a lasting impact on consumers and maintain brand recognition that results in downloads 5-10 years down the road.

Losing Share to Angry Birds

Kids everywhere are wearing Angry Birds shirts and socks, while plushies continue to fill the rooms of children around the world. The ~$30 million merchandising/licensing business around this IP is a strong indicator that the property is capturing the mindshare of consumers, certainly at a loss for Mario. This perhaps is the greatest challenge facing Nintendo the longer it waits to nail down and execute a strategy for distribution on iOS and Android. Yet, the company has a history of bringing fans of its various 1st party IP a reason to buy back into the franchises, and the continued power of those brands will no doubt ensure that it continues to sell hardware and games, and that the expanded audiences take notice as well, even if these casual audiences may no longer be willing to purchase a Nintendo gaming device.

When all is said and done, nothing can sway Nintendo from sitting on its bankroll to continue attempts at innovating gaming fun as we know it, not as long as the market opportunities in mobile fall short of the rewards of maintaining its own closed gaming platform. A company that has over 120 years of history shouldn’t be swayed so easily by market pressures to ditch its game-focused platform for a new market that has been hot during the past 4 years (App Store launched in 2008). A survivor of the turbulent gaming market in the 90s and one that has stood up to Microsoft and Sony, we should be cheering on Nintendo to come up with a fresh gaming experience that takes us beyond a simple touchscreen interface dominated by a company that (understandably) deprioritizes gaming among all forms of digital media. Mario and team may one day land on our mobile devices, but considerations for its existing business should be taken into account, and we’ll always be ready to download Nintendo’s games years down the road.

 

Bourbon Cupcakes, BBQ, and a Sense of Community at the East Coast Game Conference

Two weeks ago, hundreds of game industry professionals and industry hopefuls gathered for the fourth installment of East Coast Game Conference in Raleigh, North Carolina. While the southeast doesn’t quite have the bustling industry reputation of San Francisco or Los Angeles, attendees didn’t seem to mind in the least. That a show planned almost entirely by a board that has separate full-time jobs, competing with giant expos that bring in 30 to 70 thousand people, continues to thrive says a lot about the industry today.

The expo hall, much like the show’s attendees, featured a unique split of well-established companies (Insomniac, Funcom, Red Storm), growing independent developers (Spark Plug Games, Mighty Rabbit), and industry-focused businesses, all rubbing elbows as they showed off their work and wares. Panels and presentation topics ranged from business to mobile and social gaming, along with a standalone track led by the region’s most recognizable name: Epic Games.

Of these varied panels, one in particular provided some helpful insights into the continually evolving relationship between consumers, journalists, and public relations in the gaming industry. Within trappings of bourbon cupcakes and actual bourbon, covered to great effect by Kotaku’s esteemed Mike Fahey here, editors from Polygon, The Escapist, Kotaku, and IGN spent an hour going over some of the tougher ethical questions they face in their work.

At the end of the final day, as the expo hall closed and the last panels wrapped up, the unique spirit of the NC Triangle’s gaming industry became a bit more apparent. Attendees lingered and chatted as they broke down their booths, some helping others as they packed up to head home and very few seeming in a huge rush to leave.

While it’s true that hubs like SF and LA lead the industry in size, there’s a lesson to be learned in the continued success of the ECGC. No matter how competitive the space gets, or how much worry goes into predicting the future landscape, we’re all in this together in the end.

Oh, and one more extremely important takeaway from the show: bourbon before noon can be dangerous. Drink responsibly, and preferably a bit later in the day. Cupcakes optional.

Adventures in Hindsight

The games industry hasn’t been able to get enough of Kickstarter since Tim Schafer and Double Fine managed to pull together $3.3 Million for an as-yet-nonspecific adventure game title. The story has given everybody a new theory about what is possible with regards to game publishing: esoteric designs and genres finally have a way to get around cautious publishers. The adventure game is not dead. Gamers will gladly pay a reasonable price if their wishes are being met. Finally, game design can be a true meritocracy.

These are mostly exaggerations, mind you. Not every aspiring game developer gets to be Tim Schafer, with an existing track record of critically acclaimed games and significant cachet among press and fans. Double Fine may have raised an incredible sum, but there have been plenty of also-rans who have failed to magically capitalize on this amazing new source of revenue. Continue reading Adventures in Hindsight