Why Consoles Didn’t Die

Yeah I was wrong. But hey, so were a lot of people. The PS4 barrels ahead with the fastest selling console ever. Microsoft is making a lot of similar but highly qualified statements about the XBOX One which leads me to believe it’s lagging behind significantly. Still, the recent European price cut and upcoming tent pole releases may perk things up.

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Regardless, most console doom predictions haven’t come true. This is because Microsoft, and primarily Sony, changed their business models in response to the looming threat from mobile and tablets. If consoles kept going the direction they were in 2008, we would see a totally different story.

What changed?

No more loss leaders.

Consoles historically launched as high-end hardware sold at a loss–but still quite expensive. This peaked last generation with the ‘aspirational’ PS3 debuting at nearly $600 in 2006. The idea behind this business model was that they’d make it up in software sales and eventually cost reduce the hardware.

This time, Sony took a page out of Nintendo’s book and built lower cost hardware that can at least be sold close to breakeven at launch. The downside being that the tech specs are somewhat mundane. Price sensitivity wins over performance.

Dropping the gates.

The tightly gated ecosystem that dominated consoles for decades would have been absolutely disastrous if left to stand. Sony has largely obliterated their gate and gone for a more authoritarian version of Apple’s curated model. Surely the most significant evidence of mobile’s influence on console to date. Microsoft has also adopted this posture with their ID program. The indie revolution is heavily influencing games, and allowing this movement to continue on consoles is a smart move. Especially when fewer and fewer studios can execute at a AAA level.

Users didn’t move.

A lot of analysts mistook stagnant console numbers for lagging demand. It turns out, there really was just nothing else to buy. Despite hype about core games on mobile–that transition has yet to happen. Most titles console players would recognize as ‘core’ games have utterly failed to gain traction on tablets. Core gamers want core games exclusively on console or desktop while reserving mobile for a completely different experience.

Eventually we’ll see a major disruption in how and where games are consumed. It’s going to take longer than one console generation to transform core gamer habits. It also may be too early to tell. After all, we’re only a few months into this generation.

The fact is, the AAA economy isn’t sustainable. Massive layoffs, even while Sony is basking in post-hardware launch success, shows not all is well with the AAA end of the spectrum.

How to survive the mobile gaming apocalypse

I was listening to the latest Walled Garden podcast and towards the end they stopped just short of stating what many developers I talk to have been saying–mobile gaming is dead.

Ok, not actually dead. After all, mobile gaming revenue is higher than it’s ever been, and mobile consumption of everything is eating the planet. However, mobile gaming is completely dead as a business model for independent developers and undercapitalized startups.

IAP has become so dominant that there’s really only one somewhat reproducible way to make money in the AppStore: make a hamster wheel f2p game in a handful of established genres and spend tens of thousands of dollars a day on user acquisition to drive traffic to it. Despite many bold experiments, the charts increasingly bear this out.

Republique

This means that some companies with top charting mobile games aren’t actually making a profit as UA costs can eat up most of the revenue. Surely this will produce a shakeout and consolidation in 2014. This is similar to what happened to Facebook games circa 2010 causing a mass exodus to mobile.

Now that mobile is dead, where should you escape to? There are several options.

PC

The PC, and more specifically Steam, remains the platform of choice for those who actually want to charge money for content. There’s a large market for premium games and Steam has loosened their gate with the advent of Greenlight. Some prominent developers have been abandoning mobile for PC with their new projects. Despite PC sales declining in the face of tablets, it makes sense. This is where the paying customers are.

Consoles

A lot has been written here about the impending demise of consoles, but Sony and Microsoft managed to change up their business model and product strategy enough to have early success with both the PS4 and XBOX One. One of the big changes has been the thawing of the gated ecosystem and allowing independent developers to self-publish. Oh yeah, and on the Wii U also.

Next generation console owners are starved for content. There will be many independent successes over the next few years before the channel becomes completely saturated.

VR

On one hand VR is merely a peripheral for existing games, on the other it’s part of an entirely new category of wearable computing and an emerging platform. Oculus Rift is the clear leader with a huge round of investment and development kits widespread. However a glut of VR headsets is on the horizon.

Oculus is building an ecosystem out of their device, but VR content can be distributed through any PC gaming channel. Although, supporting every single headset may be a nightmare for developers–isn’t it time for some kind of standard VR API?

Board games

Board games are a cottage industry yet a hot category on Kickstarter. As an example, Sandy Peteresen’s Cuthulu World Combat iOS game Kickstarter failed miserably, but when re-pitched as a board game, it blew past its funding goal. Going from digital to physical presents a lot of new challenges for developers, but does have a dedicated fan base of paying customers. Plus, you can’t pirate a board game!

Facebook / Web

Facebook games ‘died’ in 2010, but are ironically becoming an increasingly common alternative platform for mobile developers. Especially if you have a working web client already, why not put it on Facebook? The problem is the audience is decidedly non-hardcore. Facebook games can still make some money, but for a very specific audience. However, for hardcore games, the open web still remains a viable place to find an audience of paying gamers. Kongregate proves this.

What needs to change in mobile?

The supremacy of f2p and the very few options for user acquisition make the momentum towards free and the companies with enough money to compete in the mobile UA wars insurmountable. Apple could make some changes to the App Store to help support premium games and other alternative business models, however there really isn’t any incentive to do so–Either way, Apple sells phones. It’s difficult to foresee anything but the continuing dominance of f2p and mega-publishers on mobile in 2014. If you have a ton of cash and resources, solving this problem is hard, and thus very lucrative. For the rest of us, plan your strategy accordingly.

My Week with the XBOX One

A mere week after the outstanding launch of the PlayStation 4 comes Microsoft’s XBOX One with a similar success story. Hey–time for some bulletized observations:

Quick!  Where's the games??

Quick! Where’s the games??

The interface is hideous. I’m not a huge fan of Windows 8, but I do think Windows Mobile is pretty snazzy. Yet, Microsoft’s implementation of the “Metro” tile interface on XBOX One is bewildering. You’re constantly getting lost in a sea of scrolling tiles with no context. Especially considering the sheer number of panels on the screen at once, navigating with the controller is a pain. The XBOX One main shell seems designed to be used with a mouse or touch instead of a control pad.

Voice control is a neat trick, but not quite ready. I have to speak in hushed tones around my console because if I dare mention its name, I’m not sure what will happen. In my house, “XBOX” is a killing word.

TV Integration is probably awesome–if I watched TV. I don’t watch much TV, and I certainly don’t watch live TV. So, all of these DVR features on the XBOX One are lost on me. Still, the ability to hook in your TV’s HDMI feed and use the XBOX One as a DVR and cable box is pretty cool–especially when using voice control to search for content. It’s the dream of Google TV realized. I guess. This really isn’t a feature I care much about. I do love the universal IR blaster feature–shouting “XBOX On” to turn on all my equipment is a neat trick!

The actual box is ugly. It’s nowhere near as bad as the original XBOX, but can’t touch the beauty of the gleaming white original XBOX 360. That’s still among my favorite consumer electronics industrial designs. The XBOX One is huge and seems to resemble a 1980’s VCR.

The launch title lineup is strong. By far, Dead Rising 3 is my favorite next generation exclusive. Granted, I’m a huge fan of the series. I’m not a big racing game player, but friends of mine who are love the new Forza–especially with individual button feedback. Even the free2play Killer Instinct has defied expectations. Unlike the PlayStation 4, there aren’t many smaller indie digital exclusives–likely due to Microsoft’s recent reversal of their self-publishing policy. Regardless, the XBOX One currently has better games–the most important point!

Overall I’m quite pleased with the XBOX One. The hardware specs are a bit lower than the PS4 and it’s a little more expensive, but so far the games are strong and the platform shows a lot of promise for growth. Microsoft has also swerved a bit to avoid total disruption, but the verdict is still out. You can’t go wrong making either choice, but if you were to evaluate both the PS4 and XBOX One purely on games alone–I’d have to give the edge to XBOX.