Forecasting PS Vita Launch Sales

I’ve long thought about the necessity of PS Vita. Its raison d’etre if you’d like. I did so because, in my opinion, it does not bring anything revolutionary to the table, from a hardware point of view. The 3DS has a 3D screen and you don’t need any glasses to experience the 3D effect. The iPhone (first generation) brought us the beauty and simplicity of the touchscreen, which along with the mouse and the click wheel was a revolutionary and disruptive user interface.

PS Vita brings us 2 analog sticks, a capacitive touchscreen on the front of the handheld and a rear touchpad. While touchscreens and touchpads are the norm today, depending on the hardware, two analog sticks is something definitely weird for a newcomer. For those of you who have owned a PSP before, it could very well be the most requested feature on a handheld. The main reason is that having two analog sticks allows you proper control over camera and character movement in the same time, imitating the control you get when using a real controller. This way, it’s possible to play all the modern games, either PS2 ports or PS3 spin-offs. Some say PS Vita is a bit late to the table and considering the competition they could be right. Others are saying the market for dedicated gaming handhelds is dying. This is why I wanted to see if I can forecast the PS Vita demand (and of course its initial sales).

Details »

Published on November 21, 2011 23:44.
Filed under: Early Warning, GI Analysis, Intel Tags: , , , , ,

Why is Pachter wrong on the Wii 2 as an in-between console

I’ve read a piece on Industry Gamers quoting Pachter on the subject of Wii 2 as an in-between console. You can read it here. I’ve followed Michael Pachter for a while and while I do agree with some of his analysis, most of the time I don’t and this happens to be the case right now.

Details »

Published on April 25, 2011 20:29.
Filed under: Early Warning, GI Analysis Tags: , , ,

The Online Pass – Lack of Vision?

The online pass has been hailed as one successful measure to counter piracy and pre-owned sales. It has been used by THQ in UFC 2010 and Homefront (and probably others I don’t recall for the moment), and it’s present in the latest Mortal Kombat game from Warner Bros. which is launching this week.

Details »

Published on April 18, 2011 12:36.
Filed under: GI Analysis Tags: , , , , , , , , , ,

iPad 2 – Apple’s Strategy Shift

With iPad 2 out, one of the things that really caught my attention was the estimated graphics performance. Let me repeat that for you. 9 times over the first version of the tablet. I don’t recall in the whole history of gadgets or even video cards such a bold statement. It really sent shivers all over my spine. Now that all the excitement has begun to sink in, I’m able to look at the iPad in a different light and start asking questions.

Details »

Published on March 8, 2011 13:13.
Filed under: GI Analysis Tags: , , , , , ,

Trends 2011 Episode 2 Update – Why Kinect is a safe bet just for Microsoft

Since I’ve written the Trends 2011 piece regarding Microsoft, Steve Ballmer went in front of an audience during CES 2011, saying that no less than 8 million Kinect units have been sold worldwide.  I don’t know if it’s true or not, although their previous estimate said 5 million, so they must hire pretty shitty analysts over at Microsoft. In fact, they have probably pushed 8 million to retailers and e-tailers. Good for them, but that’s not the problem. Kinect was designed from ground up to be a safe bet for Microsoft AND only for them. What happens after that, it all depends on how many developers will be on board and Microsoft’s strategy in the long run.

I won’t do all the math on Kinect’s components and marketing costs, but you can find a pretty good explanation here. Considering the 56USD or so production price and the 76USD or so final price including everything, the total cost for the 8 mil. units is a little bit over 600 mil. USD. Now add to that the 500 mil. USD marketing costs and you reach 1.1 bn. USD.

Now let’s go back to the final price that retails and e-tailers are paying for Kinect and I’m going for the same references from the previous link. Considering Microsoft sold Kinect at a medium price of 125USD, their revenues should be around 1 bn. USD, while a 138 USD price point ups them to 1.1 bn. Wow, what a coincidence! Why is that?

Well, let me tell you what’s happening. When you say Microsoft, you say financial power. They are perfectly able to finance such tech from R&D to manufacture and marketing. The real question here was “What is the required marketing budget for us to sell X mil. units of Kinect AND BREAK EVEN in the shortest time possible?” They estimated that 500 mil. is enough (almost as much as paying for them) and they were fortunate enough to nail it.

It’s the perfect example of “Happy End”. It doesn’t matter if 6 months from now there will be no more titles to play for Kinect. They haven’t lost anything as those 8 mil. units will be long gone and their money back in their pockets. So why did they do it? Two reasons, at least. Compete with Nintendo and Sony, their Japanese competitors, AND, you cannot deny that Kinect doesn’t bring value to the Xbox brand. It does and the miracle is that it didn’t cost them a fucking dime to do it. Now, that’s some smart business for Microsoft.

What about the rest of you out there rushing to develop games for the Kinect? Now that you know the truth behind the business, it’s that time of the year to ask yourself if Kinect is the same safe bet for you, as it was for Microsoft. I can’t decide for you, but next time, I’d be a little more careful. I don’t say that Kinect will fail in 6 to 12 months. I’ll just ask you to check Nintendo Wii’s third-party casual line-up… and think again.

Have a nice… dream!

Published on January 11, 2011 19:09.
Filed under: GI Analysis Tags: , , , , ,

Trends 2011 Episode 2 Microsoft

Well Pinky, it’s that time of the year again

When we play?

No Pinky, when we devise our plans for taking over the world… next year.

Oh, ok… can I be the the reindeer again? Pleeease?

Well, they’re right. Someone really has to show us they’re still in the game. 2010 for Microsoft was a tough year. Just look at their shares which took an upward trend last year, anticipating a new period of growth. Unfortunately, that wasn’t really the case this year. I’ll stick to games, X360 and Kinect.

The most important titles for Xbox 360 in 2010 were Mass Effect 2, Splinter Cell: Conviction, Alan Wake, Crackdown 2 and Halo: Reach. Of course, there are other titles out there, most notably Call of Duty: Black Ops, but the titles I mentioned were Xbox 360 (console) exclusives this year. Just Mass Effect 2 will be launched for the PS3 early 2011.

As well as hardware goes, Microsoft released the slim version of Xbox 360, a series of interesting bundles and, of course, Kinect, also available as a bundle. Kinect managed to sell 2.5 mil. units in the first 25 days, with Microsoft forecasting 5 million before year ends. Well, those forcasts are not that hard to do, as they mostly represent units pushed to retail. If they’ll sell 4.5 mil. or 5 mil. units this year, that’s not so important. All they were saying was that they intended from the very beginning to push 5 mil. units to retail. From I gathered during the last two months, retailers have also pushed Kinect forward through lots of buzz and advertising. The reason this happens is that the profit margin from selling Kinect should be a lot higher than selling Sony’s Move. For them, selling the Move or the Kinect is the same thing, but the two don’t carry the same price. I’d say that retailers’ partnership was a key point in Microsoft’s strategy, so they’ve pulled it off quite nicely.

What Kinect lacks (as well as Move) is the presence of a strong line-up of titles and this is the weakness that Sony anticipated, so the Move support for some of their key (upcoming) titles was one of their key points which helped them sell fast, but we’ll discuss that in the Trends 2011 article dedicated to Sony. Back to Microsoft now, I’d say that first thing for them in 2011, right from the beginning of the year, they should transmit a clear message about their upcoming titles. The first one that comes to mind is Gears of War 3 which was planned for April, but was delayed for November. The big announcement we all waited to happen at the VGA 2010 show, never was, but let’s hope for the better. The list gets even better with titles like Mass Effect 3, Dragon Age 2, Forza: Kinect, Kingdoms, Crysis 2, Bulletstorm, Dead Space 2, next CoD, next FIFA, Deus Ex: Human Revolution, Mortal Kombat, Portal 2, RAGE, Alice: Madness Returns, Batman: Arkham City, Battlefield 3, Brink, Driver: SanFrancisco, Duke Nukem Forever, I Am Alive, L.A. Noire, Thor: God of Thunder, as well as some other projects which could finally see the light of dawn (like Max Payne 3, GTA V, XCOM, PGR5, Hitman 5, Thief IV), along with some unannounced/unleaked projects. The reason I say this, is that Microsoft really took care of the hardware side of things in 2010, so the only logical move for them in 2011 is to do what they know how to do best… software, either first party or through the third-party partners. As you can see, the list is already quite generous, but there are a few things missing.

One of them is the casual line-up of titles. Yes, we all may be hardcore gamers or at least we crave for mature content, but let’s face it, they have launched Kinect, so they have to make you use it for as long as possible. This is why, for 2011 I’m expecting a rather long and strong line-up of casual titles for Kinect, as well as new announcements in major franchises like Halo.

The next thing missing from Microsoft’s portfolio is the number of exclusive franchises they have under their belt. Their number has been going down for a while now, for various reasons, so Microsoft should really take a look at their most fierce competitor, Sony, and try to do something about it. Software has always been Microsoft’s strength, although innovation is something they’re not so keen about. This is one of the major obstacles that Microsoft should try to leave behind in 2011. This is why they desperately need to own some new (or old), but epic franchises that can produce some really cool exclusives. This should put them back on track starting with 2012. If this doesn’t happen in at least 2 years time, it means they’re saving them for the next generation of hardware, which shouldn’t be that far away, 2-3 years.

The last thing on the menu addresses mostly the mobile market. They launched their next Windows Mobile this year, but my guess is they desperately need software to back them up, meaning we’ll probably see lots and lots of apps and games in the coming months. They officially stated that 1.5 million WP7 handsets were pushed to retailers in the first 6 weeks from launch, so depending on how they are managing the situation and what partners they choose, it’s possible that WP7 will really take off. Upcoming tablets based on Windows will spark apps for them, so if you’re in the business, get ready for a new offering.

Last but not least, we have the PC games market which has become the black hole of the industry. Ubisoft cheered when AC2′s protection was unbreakable for 30 days or so, but I don’t think this is the way to go. Selling games with unique codes for the multiplayer, online distribution and hopefully better prices can easily turn this around. There are many other marketing tools they can try, but it feels like there’s a very bad vibe when talking about the PC, so no one is really caring about innovation in this area. This COULD BE one of the biggest opportunities for some publishers/developers out there, so if it’s done right, the lack of competition on this field can really be the driving factor for some cool twists. If you realize that there’s plenty of room for titles DONE right and MARKETED right, then you’re in there for the win. Everybody is concentrated on the consoles, mobiles and tablets. A really cool title for the PC could be the surprise no one saw for 2011. I wish this will happen, though I fear it won’t.

That’s Trends 2011 for Microsoft. Take you will and comment if you feel like it. My conclusion on Microsoft for the upcoming year is that they’re in the best position to flex their (software) muscles and come up with some cool games and apps. It all depends on them seeing this opportunity and maximizing their advantages. It’s like they’re having a new foundation, so they have to start building on it. It all depends on how they planned for it, how they’ll manage it from now on and how everything will come into place. The market is on the rise again, not at a very high pace, but the rise is there, so there’s definitely potential for Microsoft to grow, especially in new territories (and I don’t mean that geographically).

Published on December 22, 2010 13:55.
Filed under: GI Analysis Tags: , , , , ,

Trends 2011 Episode 1 Nintendo

….

Pinky, this is important. Let me write it.

……………

No, no Pinky, we’ll take over the world at a later date.

…….

No Pinky, there’s no Santa and yes, I’ll buy you a present.

….

I don’t know that yet. Just let me finish and we’ll see.

So, where was I? Hmm… As 2010 ends, I thought it’s about time I do what I like most, except taking over the world, and that is taking a peak into the future. December it’s usually the time of the year when you read about the most important titles, about awards, disappointments, or even delays. Unfortunately, no one has the guts to tell you what’s going to happen next. Some of them don’t know it, for a variety of reasons. Some others don’t really like that info to go public. You see, it’s still December and you, the consumer, as big corporations like to call you, haven’t yet decided what to buy for Christmas. You don’t need distractions about upcoming games set to be released in February or March, but teasers for titles launching late next year are perfectly fine, so that’s all you’re going to get from them. Let’s trick these corporations and unveil their game for the year to come. This article will be published in episodic format during December and uses only OSINT (open-source intelligence). You’ll read about all your favorite publishers and their plans for 2011.

For now though, I’ll start with Nintendo. Well, you just have to look at their financial statements to realize something’s off. Their revenues are down each quarter and their forecast revenue for the actual fiscal year (April 1st 2010 – March 31st 2011) is down 23% from 1.4T yens to 1.1T (T is for trillion by the way). Given the financial crisis and the fact that interest in the Wii and the DS is not that high any more, I anticipate slow sales even this December. The company had to postpone the launch of the 3DS as they were not able to produce the required number of units and they have announced its release for next February in Japan and next March for the rest of the world. Given their financial statements, it seems that something really impacted their costs, since their forecast revenue for the year is just 23% lower, while their net income will be 60% lower.

What’s interesting enough is that Nintendo expects to sell in the short time frame from the 3DS release until their fiscal year ends, March 31, 2011, 4 million units worldwide, while the software for it should sell 15 million units worldwide. Hmm, I think math is failing me here. So Nintendo expects to sell 23.5 million DS units this fiscal year, with 4 million expected sales of the 3DS and JUST 6.7 million units sold until September 30th? Sorry guys, but you’re just too optimistic when it comes to forecasts and your previous forecasts really support this assumption. Nintendo is optimistic and over-confident and given their history for the last few years, I won’t blame them. That’s why, in this case, a TEAM B analysis should/could really help them (that’s in case someone from Nintendo actually reads this, but if you’re interested what that is, just Google it).

I understand that your shares are quite low right now, compared with say April 2010, but that’s no reason to panic. If you look at the evolution of Nintendo’s shares in the US, you’ll see the highest price in April 2010, right after the announcement of the 3DS in late march. The price then goes down right before E3 and immediately up following their successful E3 presentation. Since then, it has gone up and down with prices going up during TGS and then down again. It’s a downward trend that will continue until the 3DS launches, although the December shopping spree has helped them a little.

So that’s Nintendo this year. What about the next? Well, since this year has been about the DS, I expect next year to be about the Wii. Let me tell you why. I can’t really say and I don’t think that anyone can at this point in time, if they will launch the next Wii in 2011. My guess is NO, they won’t, but you should expect some form of announcement at either E3 or TGS. Truth is they are now under double pressure, one from their classic ‘rivals’, Microsoft and Sony, who have launched the Kinect and Move, and another one coming from a totally different company aiming to steal their social/family gaming experiences, Apple. There’s even a third danger that no one is taking seriously right now, though its influence is increasing at an alarming speed. It’s Facebook. Have you ever wondered what they all have in common? Well, it’s you, the consumer. And you have two resources they desperately need. TIME and MONEY. And all of them will compete next year to gain as much time and money they possibly can from YOU. That’s why Nintendo has to announce something next year or else their shares will go down the drain, as well as their revenues. On the other hand, a Wii 2 release in 2012 is quite about right, if we take into account that consoles from Microsoft and Sony will not be released until 2013-2014. So that’s one of the dangers taken care of.

The next episodes of Trends 2011 will deal with Sony and Microsoft. We’ll then go on to the third-party publishers and see what they’ll do next year and conclude with episodes dedicated to Apple and Facebook. When this journey ends, I expect you’ll get the big picture and this will hopefully help you make better and informed decisions regarding your precious time and money. See you soon and follow my Twitter and Facebook accounts for the next episodes of Trends 2011.

Published on December 3, 2010 23:08.
Filed under: GI Analysis Tags: , , , , , , , ,

XBLA Market Overview and Forecast

We have a press release from FADE  (Forecasting and Analyzing Digital Entertainment LLC), a market research and consulting firm focused on electronic entertainment and the emerging download and mobile game markets. As their research points out, it seems that Microsoft has set a new record in October with a 91% growth in revenue over the same month of last year, $11.2 mil. USD. The firm estimates that Microsoft’s XBLA will brake the $100 million mark in terms of revenue this year. Check the press release below for details.

Dead Rising 2: Case Zero Beats Sonic 4 in Best October Ever

November 22nd, 2010 – As per the Research & Analysis division of analyst firm Forecasting & Analyzing Digital Entertainment, LLC (FADE), Microsoft set a new record in October, realizing 91% growth from last October in terms of revenue. October saw revenues of $11.2 million USD, with the yearly totals breaking the $100 million mark.

Dead Rising Continues to Sell Well After Retail Release

Despite the release of the retail release the prequel was designed for, ‘Dead Rising 2: Case Zero’ led sales when ordered by units sold, garnering 104,000 units sold  at 400 Microsoft Points during the month. The title is without question, the fastest selling XBLA title of the year, with over 600,000 units sold after three months on market. Close behind was Sega’s 2D console revival ‘Sonic the Hedgehog 4: Episode 1′, which sold an estimated 98,000 units at 1200 Microsoft Points per unit. The 4th game in the series did well among all platforms, selling an estimated 260,000 units between its four major platforms, with XBLA leading the way.

Other major titles were released during the ‘Game Feast’ promotion, which launched the last week of September. Critically-acclaimed platformer ‘Super Meat Boy’ employed a unique sale, offering the 1200 point title for just 800 points for the first few weeks of release. Meat Boy sold an estimated 70,000 units at the 800 point price, making it the 3rd best-selling title of the month. Twisted Pixel Games’ 3rd release on Xbox Live Arcade, ‘Comic Jumper’ sold a respectable 55,000 units at 1200 Microsoft points. Twisted Pixel Games has had a string of good fortune on XBLA, releasing ‘Splosion Man’ and ‘The Maw’ which also were met with success.

Revenues Nearly Double on Strong Game Lineup

“Traditionally, October has been the slowest month of the 2nd half of the year for Microsoft” said Benjamin Schlichter, Director of Research & Analysis at FADE. “However, through the ‘Games Feast’ promotion, and a strong title lineup, Microsoft saw the greatest year-on-year growth in October.” With revenues nearly reaching 2009′s yearly total, Microsoft looks to be in solid shape to realize double-digit growth for the entirety of the market. October is also the 2nd consecutive month of major growth, with September posting a 43% gain year-over-year. FADE anticipates November to continue the double-digit growth, and should see sales of between $11 million and $14 million USD.

Estimated Top 10 Titles for October 2010, by Units Sold:

  • Dead Rising 2: Case Zero (Capcom) – 104,000 Units (400 Microsoft Points/$5.00 USD)
  • Sonic The Hedgehog 4: Episode 1 (Sega) – 98,000 Units (1200 Microsoft Points/$15.00 USD)
  • Super Meat Boy (Team Meat) – 70,000 Units (800 Microsoft Points/$10.00 USD)
  • Comic Jumper (Twisted Pixel Games) – 55,000 Units (1200 Microsoft Points/$15.00 USD)
  • Plants vs. Zombies (PopCap Games) – 45,000 Units (1200 Microsoft Points/$15.00 USD)
  • LIMBO (Playdead) – 33,000 Units (1200 Microsoft Points/$15.00 USD)
  • Costume Quest (Double Fine Productions) – 31,000 Units (1200 Microsoft Points/$15.00 USD)
  • Castle Crashers (The Behemoth) – 28,000 Units (1200 Microsoft Points/$15.00 USD)
  • Trials HD (RedLynx) – 26,000 Units (1200 Microsoft Points/$15.00 USD)
  • Dead Space Ignition (Sumo Digital) – 26,000 Units (400 Microsoft Points/$5.00 USD)

Published on November 23, 2010 13:44.
Filed under: GI Analysis Tags: , ,

NPD Group – Searching For A Victim

The NPD Group Blog has run a piece this week, entitled ‘Searching For A Savior’. We’d like to kick-start our industry analysis articles with a few comments on their assumptions and conclusions.

Based on their research, they have identified four major issues influencing the industry this year. We’ll call them ‘assumptions’ (though some of them are conclusions drawn based on surveys or other research), because they form the basis for the conclusions stated in the article posted on their blog.

1. Pricing levels continue to flatten, with movements around 5%, instead of 20-25% as consumers are usually used to.

2. Lack of killer hardware to motivate consumers, increased number of repeat purchases and a decline in the number of first-time buyers.

3. Industry growth nearly impossible to achieve this year, compared with 2009 for example.

4. Consumers are not planning to buy anything at all, as a result of high unit volumes of the past years and the lack of need to upgrade to newer tech.

Another idea expressed by Stephen Baker (Vice President, Industry Analysis) is that tech products are now perceived as need-based products instead of luxury ones, so it’s easier to postpone a new purchase.

As an analyst myself, although not Vice President, I’d like to run a small analysis to see if their assumptions really hold up or not. We’ll do what it’s called a Key Assumptions Check. Of course, we do not have access to all the resources NPD has, but we’ll base our judgment on the available OSINT (open-source intelligence). Just let me state that my intention is not to discredit any of these assumptions or Mr. Stephen Baker himself. They look valid at first glance, but as you know, not everything is quite as obvious as we’d like and more important, maybe these are not all the assumptions we could state after carefully checking all the evidence or information available. Maybe NPD missed something. Or maybe they are hiding something, as lack of information or evidence is as important as its presence.

1. Let’s start with pricing levels. There are quite a few causes which determine the evolution of prices. NPD has mentioned the lack of consumer confidence in new tech, high unit volumes of past years, postponed purchases and a decrease in first-time buyers as some of the apparent causes. Of course, many others are blaming the ‘financial crisis’.

Well, the first half of 2010 was marked by increased cargo traffic as suppliers have pushed more and more goods in order to fill stocks and prepare the markets for the upcoming sales (as I work in the aviation industry, I should know). Yes, it is possible that consumers are no that willing to spend more money on technology right now, as they are a lot more cost-conscious, but companies are not lowering prices because their forecasted sales for this year are in stark contradiction with the ones from previous years. As NPD clearly stated, the industry cannot grow forever. Do you think the industry players don’t know that? If they knew it, what could have been the best way to react? We know there are plenty of goods in stock and that there are no production problems, but their intention is to create the need for a product. You don’t create this need by allowing everyone to have a certain product. Look at the iPhone 4 and iPad pre-order/sales evolution. Look at Sony stating they have to ramp up production for the PS Move. Do you think NPD can say that and risk its relationship with their partners? Nope, they don’t. So, they blame the consumers.

Stock is not a problem these days, but creating the illusion of lack of stock is a very efficient method for driving consumers crazy and creating buzz around a product. Price levels will not go down this season because the companies themselves have used this method for about the whole year and they are now enjoying the results. Why should they lower prices if you’re eager to get your hands on their products at the regular price point? They’d be really stupid if they did that.

2. And this brings us to the second statement. There is no killer hardware to motivate consumers. No shit? IDevices sales are going up. Tablets are the new killer hardware, though I have to admit we still don’t have a real iPad competitor on the market today. Nintendo is creating a tremendous buzz around their 3DS, while the recently leaked PlayStation phone is looking like a sweet addition to the Android based mobile platforms. iOS and Android are enjoying an ever rising number of apps, while Apple has announced the Mac App Store, so things are definitely moving in the right direction. Yes, there’s a bit of confusion on the 3D market, but Sony, Discovery Network and IMAX have announced a joint venture to launch the first 24/7, fully programmed 3D television network in the U.S. in 2011.

So, there’s plenty of killer hardware around, but there are no services to complement the offer (or at best, the services are fragmented). There’s even more. As NPD stated, there was a transition concerning tech products, from luxury ones, implying a certain price tag, to need-based ones, which of course are more affordable. What NPD misses, is the point that users today have also been trained to expect complete experiences, while many of the hardware manufacturers are still ignoring this fact. Once again, can NPD say that and have hardware companies look like they’re crippled? I doubt it.

3. When I said that hardware manufacturers feel crippled, I was in fact stating the reason for the slow growth of the industry. Well, you can say that Apple posted quite nice results. Yes, but Apple is just a slice of that industry. There are more players and there are even more markets that Apple hasn’t tried yet. Take AMD-ATI. The new ATI cards are all over the net. What for? How many PC games have you seen lately, requiring more horsepower than we already have now? If the PC games market is not as competitive as it used to be, then companies should try to adapt their products to the existing market, so that consumers relate to their products and find them actually useful.

What hardware and software companies, or at least some of them, have not understood is that consumers have to place a product in a slot which has written under it either ‘I want this product’ or ‘I need this product’, but above everything else, companies should wonder if there is already another product in that slot and if it is, then what can they do to replace it with one of their own.

That being said, we think that companies have put such a big pressure on consumers, which are now refusing to play by the manufacturer’s rules. Hence, no growth. That’s why some of them have come up with the idea of creating needs and the illusion of scarcity for certain products. It’s an unorthodox approach, necessary under these conditions, but not everyone is applying the same tactics. What does this mean? It means that not everyone will survive. That’s why there is a high probability for mergers, buy-outs or even bankruptcies. Imagine NPD saying something like ‘We’re expecting some of our partners to go bankrupt’. Lol, it’s never going to happen.

4. Consumers are not planning to upgrade. Probably, but I’m not convinced that they lack confidence in new tech. It’s true that high unit volumes have been pushed in past years, but the quality of mass market products has also decreased in the meantime (as a result of the transition from luxury to need-based). Those products are breaking more often than the previous luxury ones the consumers used to own. So, what are they doing? If we were in a pre-crisis environment, they’d switch (remember when angry Xbox 360 owners went for the PlayStation 3?). No repeat purchases increase and more first time buyers. But, it’s a crisis out there, or at least that’s what we should believe. What do you do? You stick with what you know and you assume the risks you can handle or manage.

That’s why we see lots of repeat purchases and a decline in the number of first-time buyers, but this will not last. As the crisis is becoming a lesson in the history books, consumers will begin to gain confidence (in their wallets) and start spending more. The battle for their needs that companies are engaged in today will leave lots of empty slots in the luxury/unique category. I bet that as time goes by, we’ll see companies rolling out the saviors.

So, is NPD wrong? Is NPD hiding something? Yes and no. I don’t think they are wrong, but I also think they are not able to publicly say what they have to say. While all their issues are valid, they have chosen a path which puts them out of harm’s way. Should you believe them? NO, and I’m not saying that because there is something wrong with their view. It’s because they have chosen not to disclose information relevant to the judgment in question and when this happens, it usually means they have to push consumers in a certain way, to shape their reasoning based only on the information given and controlled by their group. Unfortunately, everyone out there even remotely connected with the industry is trying to race on a circuit where they are in pole-position. What can you do then? Just watch, smile and spend. Let’s get that economy rolling, boys!

Published on October 27, 2010 12:06.
Filed under: GI Analysis Tags: , , , , , , , , ,

EA Buys Angry Birds Publisher Mac App Store Connection?

LA Times ran a piece earlier this morning about Electronic Arts buying Chillingo, the UK publisher of Angry Birds and other games for iPad and iPhone.

“By acquiring Chillingo, EA Mobile is increasing its market leadership on the Apple Platform as well as reaffirming its position as the world’s leading wireless entertainment publisher,” EA said in a statement. “This acquisition will combine Chillingo’s expertise in cultivating the ideas of independent developers with EA’s global mobile publishing reach.”

Indeed, the iOS – Android – WP7 trio is getting more and more interesting for big time publishers and as Ubisoft showed us, via Gameloft, entertainment on mobile devices is a sure bet for the future.

But, I think that’s not quite everything we have to say regarding this matter. Steve Jobs announced earlier today that an App Store for Macs will be up and running in about 90 days from now. Well, I’ll be damned if this is not one hell of a coincidence. EA grabbing a publisher with lots of expertise in App Store as a distribution channel, while Steve here announces the new distribution platform for Macs. Sorry, but I don’t believe in coincidences, so I can safely say that EA will surely go for a piece of the Mac App Store pie AND they intend to do it right. That’s what Chillingo is doing in their portfolio.

This means that EA’s intentions are to bring some well-known franchises to the Mac App Store. Sims is a sure thing. Why not titles from the MoH and Battlefield franchises? Don’t be surprised if Battlefield 3 will show up in a Mac near you, via the new Mac App Store.

Published on October 20, 2010 20:07.
Filed under: GI Analysis Tags: , , , ,

10 Ways to Revive the Japanese Game Industry

TGS 2010 came and went like it was never there. Yes, there were some pretty cool announcements, but most of the whining about the state of the Japanese gaming industry took something away from it. You could just hear a mysterious voice asking for the inevitable to happen “Are we there yet? Are we there yet?” and a big gathering of Japanese developers answering “Yes, we are”.

Well, I think there is a misperception of the industry right now and probably some identity crisis thrown in the mix. Over the following paragraphs I’ll try to show why this is happening and what solutions can be applied to get over it.

The Japanese gaming industry has been on top of things for many years. All we have to do is mention Nintendo and Sony and all of a sudden you’ll realize its magnitude. So why are they thinking the Japanese industry is five years behind? Why are they trying to westernize their games? Is it a good decision, especially business wise? Are there any best practices out there?

First of all, they were on top until multiplayer came out. In the West, multiplayer is king. Westerners want to socialize, to play games together in co-op or against each other, solo or in teams. The western companies delivered what was expected from them to deliver. These companies still struggle with distribution problems and they’re trying to monetize on the sale of used games, but they’ll sort it out in the end. While all this was happening, the Japanese developers just stood there and watched, while in the process of making more Marios, Resident Evils, Dynasty Warriors and so on. Most of the games made in Japan belong to different genres, but first-person shooters are not exactly their passion, nor their focus.

Does this mean they should develop fps games? God no. That would be the worst mistake ever. Stick to what you know and what you do best. That’s what they should learn. That’s also why they shouldn’t artificially westernize their games. I’m going to repeat myself. Stick to what you know. Make the same Japanese games we all know and love. BUT WITH A TWIST. You are one of the most creative nation on the PLANET. I’ll give you some hints, but the revival of the Japanese industry is up to you.

1. Colaborate with good western publishers and ask them to help you implement features in your games that western gamers crave for, WITHOUT sacrificing the look, feel, atmosphere and gameplay from the traditional Japanese games. This means, for example, adding a lobby for socializing with other people, adding a multiplayer component, leaderboards, clans and integration with services like YouTube for uploading insane kills or stunts and even unforgettable moments. Players like to brag about their skills and feats. Let them do it.

Imagine a Yakuza game which has the same single-player experience we know, but also features a third-person multiplayer mode, much like GTA IV did, except that we have nunchakus, tonfas and many other BLOODY weapons. Of course, lots of blood is violently recommended. Take the versus add-on for RE5. It’s nice, but it’s for only four players. I’m not saying you should copy western games, but identify the right features and be sure your next game suits a western/international taste. I should probably mention here the new DMC which is the best example for killing a franchise by westernizing it. This is how you should NOT do it.

Japanese games don’t have to become American or European games and I also have the perfect example for that. Remember Heavy Rain? That is a game with lots of European influences, but it still appeals to a wide range of players. This is what you should do, games with Japanese influences which appeal to a wide range of players. Just don’t kill your franchises like Capcom does. One more thing. No one wants to play a Japanese Call of Duty, a Japanese Halo or a Japanese Need for Speed. There’s really no need to do that. I hope you get the point.

Another ‘one more thing’. Don’t use focus groups. If you use Japanese focus groups, you’ve missed the point. If you use North American or European focus groups you’ll just obtain a flat game. Go with bold ideas instead, based firmly on what you know it works for your game.

2. Try to find alternate platforms. How many games specially developed for iPhone or iPad have you seen from Japanese developers? Yes, there are a few ports here and there, maybe a true gem once in a while, but nothing like Gameloft which sold 20 mil. games in 2 years via App Store.

Make this your top priority and here’s another hint. Apple, listen up, as it also concerns you.  Why should a player carry a PSP, a DS, a notebook and an iPhone, all at once? What can you do to help him or her lighten up a bit? Apple, you have the solution right there. Come up with a controller similar to what we have on consoles, a controller that can be paired with both an iPhone or an iPad (via bluetooth) and that’s it. You’ll kill every other gaming handheld device out there. We already have the case which puts the iPad in the perfect position, so all we need is to fire up a controller, fire up a game (like TEKKEN or Resident Evil) and that’s it. Just game!

Touch controls are not perfect for gaming on the go and they will never be. Besides analog sticks, we need real buttons and triggers. There’s another option if you don’t fancy designing a controller. Desing a motion controller. The next iPad will have a front camera. The iPhone 4 already has one. Design a controller similar to the PS Move and let us play everything on the go, from first-person shooters to third-person shooters, adventure games, platform or combat games. Everything can be adjusted to such a controller if you think about it for a moment. A combat game could make use of just the controller’s buttons, not necessarily the motion part of it (if there is at least one stick). A platform game can have similar controls, while a strategy game would be so much fun to play with a motion controller.

I’m confident that next iterations of the iPad and iPhone will have better hardware, including better graphics, more memory and more powerful CPUs. Unreal Engine is already present on iDevices, so we’re all set. Steve, just do it man and save us from having to buy so many gadgets at once.

Last but not least. What do you think our beloved Steve has to do in order to transform his Apple TV box in a home console?

Just one thing: design and release the damn controller I’ve been mentioning for a few paragraphs now (and probably update the box a bit, hardware and software, but that’s happening as we speak anyway).

3. First party versus Third-party games. Third-party Japanese games are not always succesful and I’m looking at Wii here. Of course there are some exceptions, but first-party games always enjoy good sales. So, my next advice is to look at some of the first-party titles out there. Analyze them. Have your designers drill down and identify the core features that make it work. Talk to the publishers. Maybe they’ll be willing to help you. Get external consultants, basically learn what gamers WORLDWIDE want. It’s not such a big deal. If you can’t do it, have someone else do it, like a marketing research company with a proven track record. On the other hand, publishers already have this info. Ask them to SHARE.

4. There are many people out there enjoying Japanese culture. Not releasing a game outside Japan, hurts your sales and hurts these people. Be good and don’t hurt them any more. Release worldwide.

5. This is actually a follow-up for the previous remark. Don’t be lazy bastards and launch the games worldwide in the same time with the Japanese launch. By the time you launch in the US and UK, YouTube is full with walkthroughs of your game and that’s not always a good thing. Customers, especially in the most important markets like US and Europe, want to be treated equally. Give us that and you will be rewarded.

6. Reinvent old genres. Like adventure games. Adventure games are perfect for multi-touch devices like iPhone and iPad. Of course, the era of the adventure PC game has passed, but right now, these devices allow players to immerse themselves in beautiful universes or why not, horror stories. Allow people to pick up and inspect the murder weapon tainted with blood or inspect the body of a gorgeous blonde at the morgue. It’s fun, isn’t it?

7. Consider different targets. Most of the Japanese games are either mature games or niche games. Yes, we love them, but in order to grow your income, you can also try to produce games for a wider audience, considering different platforms. Take women and children. Apply the Nintendo DS business model to mobile phones and tablets. Trust me, it will work. I can’t imagine a nicer image than a mom with her daughter playing together a game on the iPad. Or why not, on two iPads? (Steve, can I get an iPad? I don’t have one.)

8. Try to come up with franchises which can be monetized periodically. Not quite annually like FIFA or Call of Duty and especially not on episodic basis. Players don’t like episodic games because, first of all, an episode is short, and second, you always want to play some more. Players like complete experiences, but repeatable ones. That’s why Halo, Call of Duty, Battlefield, FIFA, NFS and others enjoy so much succes (sales wise at least). Have this in mind when you think about your next, new IP.

9. Design more games for the Xbox 360 and PC/Mac. Yes, the pirates will hunt you, but this is the price to pay if you plan to acces the western world. Noting comes cheap. Make your game in such a way that players will buy it, even if they’ve played the single-player campaign two weeks before the game is actually released. Add multiplayer, DLC for multiplayer, have second hand buyers pay to access the multiplayer, distribute your game online, etc.

10. Outsource and control your costs. I know it’s a hard business decision but cutting costs while improving the revenue should be your main goal. Of course, don’t just do it because your shareholders are pressing you to cut costs. You risk sacrificing quality. Do some market research and check if there are companies out there that can do what you need them to do for a smaller price. My advice would be to forget about China and India. You don’t want to go there. Try instead Europe, Russia or North America. You need people from these markets to work with/for you, so you will get insights from their experience and culture. That’s why I said I’d forget about China and India.

So this is it. Ten ways to improve your company and hopefully, your business. What the Japanese industry needs, in fact, is a change in its business processes. You cannot continue to make games the way you used to, and in order to do that, you’ll have to change your business. I don’t think these ten advices are the definitive recipe for you, but instead you should read between the lines and apply whatever you consider necessary. Always adapt, never take for granted, and you’ll be fine. And most important, don’t believe some crazy dude who says you’re dead. Last I checked, you still had a pulse. It’s just a…Crank situation. You’ll be fine.

Published on September 22, 2010 11:44.
Filed under: GI Analysis Tags: , , ,

Gameloft Sells 20 mil. Games via App Store

Gameloft has sold over 20 million paid games since the App Store opened in July 2008.

Of the 47 iPhone & iPad games launched from the beginning of this year, 42 titles climbed to the top 5 best-selling games on the App Store with 25 of the games reaching the number one spot. All of these consecutive and successful launches have helped Gameloft achieve a new level of sales on the App Store. Gameloft’s Let’s Golf ! franchise has continued to perform well with the launch of Let’s Golf ! 2 on the iPhone and the arrival of Let’s Golf ! HD on the iPad. Other notable titles include Iron Man 2, the number-one game sold in the United States and Europe; Brothers in Arms 2: Global Front the top ranking game for both iPhone and iPad; and the very successful launch of N.O.V.A. Near Orbit Vanguard Alliance on the iPhone 4.

Gameloft has developed and published 100 games since the App Store was launched in July 2008, including 18 iPhone games and 29 iPad games since January 2010. 15 other titles will be added to the catalog of games already available on the App Store by year’s end. This includes NFL 2011 HD, Assassin’s Creed: Altaïr’s Chronicles HD, Spider-Man: Total Mayhem HD on the iPad, as well as Dungeon Hunter 2, Gangstar: Miami Vindication, Star Battalion and Modern Combat 2: Black Pegasus (also available on the iPad) on the iPhone.

The first half of 2010 marks a new step for us on the App Store,” declared Michel Guillemot, President of Gameloft. “The launch of the iPad and iPhone 4 has opened new horizons for developers and allowed us once again to transform our consumers gaming experience. 20 million paid downloads is proof that our games meet the expectations of our players and we will continue to satisfy them.

Published on September 20, 2010 20:42.
Filed under: GI Analysis, News Impact Tags: , , ,

Game Violence? Game Over!

You’re all familiar with the latest installment in the Medal of Honor series and the fact that its multiplayer mode allows you to play as the [wikipop]Taliban[/wikipop]. Right? This piece will cast a new light on some of the accusations floating around, but more important will solve once and for all the ever lasting problem of “video game violence”. Epic!

First, the game.

Medal of Honor, an M rated game, launches soon. October 12 in North America and October 15 in Europe, for the PC, Xbox 360 and PlayStation 3. The game is set in 2001′s war-torn Afghanistan and uses a modified version of Unreal 3 for the singleplayer and the DICE’s Frostbite engine for its multiplayer.

Second, the controversy.

Karen Meredith (twitter/blog/info), the mother of Army Lt. Ken Ballard who was killed in Iraq in 2004, stated on her blog that “Last week, when I heard about the details of this game and the ability to be the Taliban and shoot US soldiers, I was shocked at the insensitivity to releasing this game as our members of the military fight and die in Iraq and Afghanistan.  This game trivializes the training and the service of members of the military.” She was also on Fox News. You can watch the video here.

A little bit over the pond, in the UK, Defence Secretary Liam Fox called it an “un-British game” and urged retailers not to stock it. Oh, but it doesn’t stop here. We’ll go back over the pond, this time in Canada, where Canadian Defence Minister Peter MacKay stated something quite similar.

Now that we stated the facts, lets see if it’s too soon to play such a game. First of all, I’d really wish Karen Meredith read these interviews. Of course, they represent the opinion of maybe too few persons and while everyone is entitled to his or her personal opinion, these interviews might be irrelevant, as they do not express the opinion of a majority. On the other hand, what EA has chosen to do is not a question of legality, but morality. Is it fair for the families who have lost their sons in Iraq or Afghanistan? I’m also a parent (though SHE’s just six months old). From a parent’s perspective, no, it’s not fair. Unfortunately life is not fair and if we start pretending it is, we’ll end up living in a bubble, an illusion a lot more dangerous than the Taliban from Medal of Honor.

Let me put it another way. How many victims of road accidents are the in US each year? According to the US Department of Transportation, the 37,261 Americans killed in car accidents and other collisions in 2008 marked the lowest number since 1961. You can start checking the database here, if you feel brave enough. Of course, I cannot state that every such victim had a family, but it’s probably safe to say that most of them had one. Does this mean we should impose a ban or publishers should remove the driving titles from their portfolios? There are driving titles which seem to be more brutal than others, with unprecedented levels of car damage (Burnout Paradise for example). Of course, you don’t see anyone killed or lots of blood splashed on your screen in Burnout, but one can argue it promotes unsafe driving and trivializes accidents. The gamers should know that driving a real car is not the same thing as driving a virtual one. This is why, all such games feature a statement in the very beginning asking players to drive safely in real life. Maybe it’s time for first-person shooters to feature a similar message. War is not a game. War is real. The people are real and their death is, unfortunately, real.

During my occasional browsing for news on this subject, I’ve stumbled upon a discussion from The Globe and Mail where a few people/parents from Toronto asked if the Taliban video game trivialize war. It’s a little bit biased, but one user definitely got my attention. He said that if the Tier 1 operatives viral videos made by EA would be included with the full game, then Medal of Honor could become a learning material. If more information about the harsh reality of war makes it into A game, then yes,  that game will provide a unique view of the conflict. On the other hand, the single-player of the game follows Tier 1 operators from the National Command Authority, so no first-person taliban here.

Last but not least, I’d like to point out the fact that actual/recent real events have always been a source of inspiration for all kinds of media. If history is more or less harmless, then real recent events can disturb some of the persons still envolved. Unfortunately, there are many similar situations out there. The 37,261 victims of road accidents surely have families mourning them. I don’t know if all the WWII games out there are historically accurate or not, but sincerely I don’t care. Some historians might care though. In the future. Do we really have a reason to ban these games? I’m sorry for everyone’s losses, but no, we don’t. There is no legitimate reason for banning them. It’s just a question of morality. Is it fair? No, it’s not but as a parent, I’d like to see people have a choice, just as my kid will hopefully have a choice when she’ll be an adult, allowed to play such games.

SO, it’s quite a simple conclusion. Play it and maybe learn something out of it. Don’t play it and  live on. That’s everything there’s to say about it. Or is it?

Back when I started writing this I promised you I’ll solve the “video game violence” problem. In the future, I’ll probably conduct a deeper analysis on the subject, with international reach, but for now I’ll stick to the US which is one of the dominant markets for this industry, especially if we’re talking FPS and action games.

First of all, let’s look at some charts from the US Bureau of Justice Statistics. Just for facts.

Crimes committed with firearms, 1973-2006 – After peaking in 1993, the number of gun crimes reported to police declined and then stabilized at levels last seen in 1988. For crimes committed with firearms, the number began at 361,141 in 1973 and decreased to 301,590 in 1977. Then the number increased to 581,697 in 1993. It then fluctuates with a low of 338,535 in 1999, before increasing to 388,897 in 2006.

Nonfatal firearm-related violent victimization rate, 1993-2008 – Nonfatal firearm crime rates have been declining since 1994, before increasing (just a little) in 2005 (and starting to decline again afterwards). For firearm crime rates, the rate of victims per 1,000 residents began at 5.9 in 1993 and increased to 6.0 in 1994. After 1994, the rate decreased, reaching 1.4 in 2008.

Nonfatal firearm-related crime has plummeted since 1993, before increasing in 2005. For firearm incidents, the number of nonfatal firearm incidents began at 1,054,820 in 1993 and increased to 1,060,800 in 1994. After 1994, the number of nonfatal firearm incidents fell, reaching 280,890 in 2004, before increasing to 499,390 in 2006. For firearm victims, the number of victims began at 1,248,250 in 1993 and increased, reaching 1,286,860 in 1994. Then the number fell to 331,630 in 2004, before rising to 561,760 in 2006.

After declining since 1992, motor vehicle theft rates leveled off after 2000. For motor vehicle theft, violent crime rate per 1,000 households began at 19.1 in 1973 and fluctuated with a high of 19.5 as it decreased to 14.2 in 1985. After 1985, violent crime rate climbed to 22.2 in 1991, before it decreased to 8.4 in 2006.

After many years of declining, burglary rates have stabilized. For burglary theft, violent crime rate per 1,000 households began at 110.0 in 1973 and climbed, reaching 111.8 in 1974. Then violent crime rate fell, reaching a low of 27.7 in 2002. Then it fluctuated reaching 30.2 in 2006.

For property crime, violent crime rate per 1,000 households began at 519.9 in 1973 and climbed to 553.6 in 1975. Then violent crime rate continued to drop reaching 160.5 in 2006.

For rape, violent crime rate per 1,000 persons began at 2.5 in 1973 and climbed to 2.6 in 1974. Then violent crime rate decreased to 2.2 in 1976, before increasing to 2.8 in 1979. After 1979, it fell to 0.4 in 2004, before increasing, reaching 0.8 in 2006.

For robbery, violent crime rate per 1,000 persons began at 6.7 in 1973 and increased to 7.2 in 1974. After 1974, violent crime rate dropped to 5.9 in 1978, before increasing, reaching 7.4 in 1981. It then decreased to 2.1 in 2004, before increasing to 2.9 in 2006.

Serious violent crime levels declined since 1993.

This is an important one. The proportion of serious violent crimes committed by juveniles has generally declined since 1993. According to the victim’s perception of the age of the offender, the number of serious violent offenses committed by persons ages 12 to 17 declined 61% from 1993 to 2005, while those committed by persons older than 17 fell 58%.

Violent crime rates declined in recent years for most age groups. Teens and young adults experience the highest rates of violent crime, but 2008 levels are a lot smaller than the 1994 ones.

Since 1994 violent crime rates have declined, reaching the lowest level ever in 2005. For overall violent crime, violent crime rate per 1,000 persons began at 47.7 in 1973 and increased to 52.3 in 1981. After 1981, violent crime rate decreased, reaching 24.5 in 2006.

For those charts where I have not posted additional data, there is a small [D] besides the chart. Click it and you’ll get relevant info, including data.

As you can see, all the rates and levels in these charts decreased over time. There was a peak in 1994-1995, but then they decreased again. Whatever makes them decrease, it’s really working.

On the other hand, December 1994 meant the launch of the first PlayStation in Japan. Just have a look at some of the games from that era and compare them with what 2010 has to offer. It’s quite a big change from ANY point of view. Visually, games are a lot more appealing today. The gameplay is a lot different. In the end, you feel immersed in the detailed universes that unravels in front of you. The market is also totally different today, than it was in 1994. There are big players selling lots of games and there are very big franchises selling lots of units (as they probably don’t like to call them copies). Over the years we had lots of GTAs, CoDs, MoHs, Halos, Hitmans, Resident Evils, Silent Hills  and other crazy Japanese horror games, Carmageddons, Need for Speeds, Burnouts, Mortal Kombats, Tekkens, Virtua Fighters, DOAs and lots and lots of other beautifully violent video games. Heck, even adventure games like Sherlock Holmes were a bit “murdery” violent.

And we loved it. We loved every minute of these violent fantasy we call video games, while the violent crime rates were falling. How’s that? I don’t know. All I know is THAT VIOLENT VIDEO GAMES HAVE NEVER EVER DETERMINED AN INCREASE OF THE U.S.A. VIOLENT CRIME RATES OF ANY KIND. If someone actually intends to conduct a useful analysis, then we should try to understand why violent video games HAVE NOT determined an increase of the violent crime rates AND what legal/social mix was the exact cause for the decrease we see in the charts. Understanding the past is the key for understanding the future and we have the past right here. Let’s just look into the future. Let’s try to bring everyone in this pursuit of happiness. Happiness of parents, of children and, of course, of gamers. We are somebody’s child, maybe parents and definitely gamers, all in one. The burden is ours and we shouldn’t forget that. If we let other people decide for us, then we have no future.

This concludes my rather long trip through video game violence. Of course, I’d like to conduct a deeper analysis of this phenomenon and its influence or better, lack of it, on our society over the years. Obtaining an international view of the problem might be useful. A study on violent crime and its root causes can also be a starting point. I promise I’ll think about it. If you feel you have something to say, drop a comment or two here or register in the forum, if you plan to stick around for a while. I hope you found this piece interesting and hopefully useful. Epic, isn’t it?

Published on August 25, 2010 21:34.
Filed under: GI Analysis Tags: , , , , , , , , ,

Blizzard Gets $88M – Faulty System or Mock Trial?

This one has already made quite a big tour throughout the news/media websites, but we’ll trust gamasutra for now. It seems that last year, Blizzard Entertainment sued Alyson Reeves, operator of Scapegaming, for copyright infringement. Scapegaming was offering its users access to private World of Warcraft servers, asking donations for the service. Apparently, Alyson Reeves raised $3,052,339 out of this operation. An U.S. District Court judge awarded Blizzard $88M, including, as gamasutra states, “over $3 million in disgorged profits, $85.4 million in statutory damages and $64,000 in attorney’s fees.” WoW, Alyson Reeves must have had a pretty lousy lawyer.

So, how did it happen? Is this ammount correct? Is the legal system faulty, was it a mock trial or simply did Alyson Reeves get what she deserved?

Well, I have a background in law. I never practised (and this is a good example why), but at least I can understand what’s going on and try to explain what happened in the end. Of course, the law I was taught is a lot different than the US one, as it’s a different legal system, but some of the basic principles are everywhere the same. One of these basic principles states that the injured party’s position should be restored, as if the infringement has never happened. The verdict should restore both parties to their initial positions.

Of course, this is not always easy, especially when we’re talking copyright. One way of doing it is by analyzing the losses the injured party suffered and the profits the injured party never made. Sometimes you have to choose between them, as you cannot ask for both of them. In the US, there is another way, by asking for statutory damages. What are they? Well, you can read here, but I think it’s too complicated for many of you, so it’s better if you try Wikipedia. When it is too difficult to establish how many copies were made or how many times the infringement took place, the owner can choose to receive compensation per work, instead of per copy (when the judge should have calculated the losses and the profits).

It seems that, during the trial, Alyson Reeves lawyers said that Scapegaming users were not aware they were accessing private, not legitimate, servers. It also seems the judge bought it and that’s why he calculated 427,000users times 200USD. The Scapegaming community had 427,000 members in June 2008. Blizzard submitted evidence showing that during the very same month Scapegaming hosted 32,000 users on a given day. Reeves stated that 40,000 people were playing on Scapegaming’s servers every day. These contradictory statements could have lead the judge to use the total number of members, instead of counting the active accounts.

So, what should have happened?

First of all, Alyson Reeves and her lawyers should have sent the full logs of the servers to Blizzard. Let them digg through the logs and check how many active accounts were on their servers at any given time. Alyson Reeves could have retrieved the statistics quite easily and if she said that there were around 40,000 accounts, let’s believe her for the sake of our (legal) exercise.

So, how much did Blizzard actually lose?

40,000 accounts times 15USD which is the regular WoW subscription means Blizzard lost $600,000 a month. Lets say the service operated for 3 years. I don’t know how long it actually operated, but let’s just assume it was 3 years. That’s 36 months. In this case, we have $600,000 times 36 months. $21,600,000. It actually makes more sense to say that Blizzard should have been awarded $21.6 million instead of $85.4 million.

From this point of view, Blizzard could have chosen to receive either the losses Alyson Reeves provoked, or the profit Alyson Reeves made out of the operation. Why not both? Because the profits she made, in this case, should be included in Blizzard’s losses. If the profits were higher, Blizzard could have asked for them, instead of the losses. This is where the system is faulty. If the aim is to restore both parties to their initial position (executing compensations in order to do that), then those $3 million dollars Alyson Reeves made do not belong to the parties, but to the people who donated, because the verdict should have put the parties in a state where THE INFRINGEMENT NEVER TOOK PLACE. If Alyson Reeves would have been forced to pay damages to Blizzard for copyright infringement, she should have been forced to return the money she made to the people she conned. So, any way, those $3 million should have never been awarded to Blizzard. Unfortunately, that’s theory we’re talking here. Or not!

Blizzard submitted evidence of the PayPal transactions. Blizzard asked for statutory damages, instead of losses (and profits). OK, why not summon to the trial all those who have donated? Why assume they did not know these were not official servers? This would have been a very good defence and this should have slowed Blizzard quite a lot. A judge cannot rule on assumptions. Burrying Blizzard’s lawyers in server logs and PayPal transactions could have lead to an understanding between the parties where Alyson Reeves had to return the profits and MAYBE go free.

Well, in the end, was it a mock trial? I don’t think so. I just think Alyson Reeves’ lawyers didn’t have the experience necessary to handle such a case and, of course, the system in its current form is faulty. Alyson Reeves has undoubtedly committed copyright infringement but, in the same time, $88 million is a ridiculous ammount, pretty much like the statutory damages concept. The system should adhere to the “reasonable royalty” concept, which tries to define what someone would have paid the copyright owner if a royalty system was available before the infringement.

The legal system should be used to restore the balance and put both parties in the initial situation, not give one party the chance for profit. Unfortunately, many legal systems today, including the US one, are geared towards profit, competition and marketing. If one serial killer gets 200 years in prison, the next one thinks something like “I can beat that, no problem!”. This way, the system generates competition and unwanted advertising. The system should never be used for such things. Give all serial killers prison for life (or death sentence if available) and that’s it, no more competition, hence lower criminal activity. All copyright owners who sue other parties should have the obligation to show how many times their rights were infringed or how many illegal copies were made and award them the right ammount of money for their losses. That’s just common sense.

Of course, Blizzard will never get those $88 million. What they get is what they intended to get in the first place, free advertisement. All the media picked up on this, but nobody judged Blizzard (or its parent company Activision) for it. They used the system to get free advertisement and to send a clear message to those who use their copyrighted content illegaly. I’m sorry, but IT’s WRONG. This is not what the legal system should be used for. If they actually tried to obtain some money from Scapegaming, then I would have believed their intentions were to shut down the servers and obtain damages, which would have been very well their right. Unfortunately, they used the system for other purposes, exposed in this article, and the system allowed them to do it. If this is not a faulty system, I don’t really know what is. Leave a comment below or discuss this in the forum (registration pending approval).

UPDATE: This is just one side of the coin. For the other side, check the comments below.

Published on August 17, 2010 10:31.
Filed under: GI Analysis Tags: , , ,

3D Animated Terminator 3000 Terminated?

Did you know some people were planning a new Terminator movie? Animated, by the way. Everything was fine until the owners of the Terminator franchise, a company called Pacificor, realised they didn’t know anything about it. Well, lets start with the beginning.

Back in February 2010, Halcyon Group, the bankrupt production company behind last year’s “Terminator Salvation”, transferred the rights to a hedge fund, Pacificor, for $29.5 million plus $5 million for each sequel produced, despite objections from Sony and Lions Gate. The update for this piece quotes Wayne Flick, a lawyer for the hedge fund, saying “We expect there to be a fair amount of interest. We know this is a very valuable franchise and, in the coming weeks, we will be considering all of the various options.”

Well, it seems they didn’t BECAUSE in May this year more news about Pacificor hit the press, this time saying the hedge fund was looking for an agency to help them sell the “Terminator” rights. And they found one. [wikipop]William Morris Endeavor[/wikipop]

Again, nothing happens or at least there are no public details on the agreement with William Morris Endeavor. Fast forward to August 12th, two days ago. Hannover House, the entertainment distribution division of Target Development Group, Inc., issued a press release, proudly announcing they have “entered into a feature film development venture with Vancouver-based Red Bear Entertainment, for “Terminator 3000,” envisioned as a $70-million dollar budgeted, 3-D animated feature film based on the characters and situations introduced in the original “Terminator” feature.”

Who is Hannover House? It seems, and I quote from their Company Information page, that “Hannover House is a full service media company, specializing in the production and distribution of feature films onto the DVD format for the North American retail marketplace.” You can read the rest on their website.

What about their parent company? Target Development Group, Inc. is a Wyoming based corporation (with just 8 employees?) and the parent company of Hannover House. Target is a publicly traded entity on the Pinksheets exchange under the trading symbol:  TDGI. You can find the company information on the otcMarkets website. It’s market capitalization is just $18,448,268 as of August 13th. Can they finance the movie? Not by themselves apparently.

So they entered a development agreement with Red Bear Entertainment. Who? Has anyone bothered to search for such a company? IMDB hasn’t heard of them so, naturally, I searched Linkedin. It so happens that a certain Lindsay Macadam is the president of RedBear Entertainment. The company is real, as I’ve search for a new British Columbia company name and it listed RedBear Entertainment Inc. So why choose an anonymous production company? It seems that Lindsay Macadam has some experience in asset management and commercial banking. She was employed as a Commercial Account Manager with [wikipop]HSBC[/wikipop] (2001-2004), “responsible for closing nearly $100 million in loan growth, specializing in large scale single family home residential and commercial real estate development”.

So, back to Pacificor. When they realized they weren’t invited to this “sweet” deal, their lawyers sent a cease and desist letter to Erik Parkinson, the CEO of Hannover House. You can find all the details here, as well as the letter in its original format. What’s more interesting is Erik Parkinson’s statement. “We’ve arranged a meeting, we’ll show them our money and if the rational brain prevails, they’ll take the deal. If not, I can’t do it without them. You’ll have a followup next week that we are either holding  hands, or not doing the film. At least we now have our meeting. I hope they will can think outside the box, because if we can make a movie that delivers a $20 million to $30 million rights payment, that is an income source they didn’t realize was possible. If not, it was a good idea anyway.”

I don’t know many of you are actually trained to analyze such statements. I don’t want to brag about it, but I have some experience with it and this is what you should understand.

First, let’s clear the statement and organize the ideas.

- “it was a good idea anyway” which means “in the first place, it was a good IDEA”.

- “I can’t do it without them” – which means “I knew I can’t do it without them, but I had that “good IDEA” and I had to find a way to make it work”.

- “we’ll show them our money” – meaning “we’ll show them how much we’ve got and maybe they’ll be interested to finance the rest of the movie”.

-”if we can make a movie that delivers a $20 million to $30 million rights payment, that is an income source they didn’t realize was possible” – lol, IF you can make it? You’re not sure? This statement should have been something like “This movie will deliver between $20 and $30 million, an income source they didn’t realize was possible”. “IF” and “CAN” shouldn’t have been anywhere in this sentence. Hey, big shot CEO, IF you cannot write a statement properly, have someone do it for you.

- “At least we now have our meeting” – meaning ” at least our goal is almost happening”. THIS is the key sentence in all the statement. All they wanted was a meeting.

And now, the conclusion.

Let’s think for a moment. If a small company would have approached you directly, you owning the Terminator rights, would you believe them in the first place? You’d have said ” Come on, I won’t make any deals with you. What proven track record do you have to show me?”

Instead, they (Hannover/Target) decided to issue a press release, KNOWING that Pacificor lawyers would spring into action. Negotiations are necessary, so this basically translates into a series of meetings where Hannover House has to convince them “it’s a good idea”. The question though is the following. Will they ask Pacificor for money or show Pacificor they have access to a line of credit for financing the production?

Either way, I’d say Pacificor should better be damn careful here. Last thing we want is Pacificor losing time and money on a company who cannot deliver. The franchise needs some serious rework and a company with a proven track record would be the right, business healthy, choice.

A video game for teenagers, inspired by this animated movie, would be ANOTHER good idea, especially if the cast will lend their voices, but I can also imagine an animated mini-series and why not comics, since we’re talking about a PG-13 product. 

Give it two, maybe three years, and everybody will be hyped about the next, 3D animated, Terminator movie. While yes, it’s maybe a bad idea today, in two, three years time, I have to quote big shot CEO Erik Parkinson, “it was a good idea anyway”.

Published on August 14, 2010 21:28.
Filed under: GI Analysis Tags: , , ,

QR Code Business Card