The cycle of arrogance

Readers of my blog are familiar with my industry cycle articles. It basically describes a regular cycle which shakes up the industry whenever the consoles upgrade to the next entry. The Playstation 5 and the new XBox have been announced for second half of 2020 - welcome to the transition year.

If you want to read up my posts in the recent years on this blog about the cycle simply search for this word on the top left of this site.

One attribute of console cycles I have never written about is the cycle of arrogance. It means that whoever dominates the current cycle is getting arrogant in the next, forgetting what put him there in the first place - leading to wrong or often strange decisions.

These decisions will make it hard to third parties to develop on the new leading platform during the first 2 years. They will focus on big names & brands first, or their own first party titles. What also happens is that they underestimate the competition leaving holes for them to enter.

So expect the number 2 and 3 (Microsoft & Nintendo) to be more open to new developers, titles and approval processes while Sony will make it harder.

A sign to prove this? There is an internal shakeup at Sony management level where many of the key people who were developer relations or in charge of external titles were fired and replaced. This strangely isn't in the news as usually these key managers are known to developers of all sizes but not to the press or the public.
Still, as a developer, you should be worried if you bet on releasing soon on Sony PS5. You won't.

And as usual before transition years if you run a developer you should have been prepared and found alternative revenue sources or platforms. Did you? I hope you did. As this isn't anything new to the industry, its a cycle with similar attributes and effects to the industry.

And no, backwards compatibility won't help ;)

The WiiU CPU sucks - NOT

A recent anonymous post is making its rounds on social networks from a disgruntled developer:

http://www.eurogamer.net/articles/digitalfoundry-2014-secret-developers-wii-u-the-inside-story

While its worth reading make note that you can replace the word "WiiU" with any console in the past. Working on new consoles sucks. Launches are always messy. Some remember that Xbox development kits where Apple Macintoshes. Imagine that.

The point about the CPU clock speeds in the article is a bit extreme and wrong. Recent trends basically move more and more work into the GPU of your computer.

Wolfgang Engel, the "Shader God" of this industry (among others responsible for Lara Crofts Hair in Tomb Raider), explained it to me like this:

"GPUs move into the direction of CPUs since 2007. They become more general purpose. Fortunately they have a multi-core / multi-threading model that is very efficient and much easier to use.
On a fundamental level the difference between a CPU and GPU is the type of data they work on. GPUs work well on lots of similar "small" data sets while CPUs can work on more generic data. It turns out that games have a lot of those small data sets and that in general they became more common over the last 20 years with large amounts of data generated by computers.
So what we are seeing is that the importance of CPUs decreases in game consoles and the importance of GPUs increase. GPUs take over more and more CPU tasks. 
This is why the XBOX One and PS4 have -compared to the PC market- rather slow CPUs but quite fast GPUs."

No reason to complain about low clock speeds of your CPU, simply learn proper shader language and do your work there. And that is where the major difference lies from the last generation of consoles: when the PS3 and Xbox 360 was designed the GPU's weren't developed with that general purpose architecture. Now they are.

Sidenote: as all three consoles use AMD chips as GPU's they basically define the GPU and Shader standard to come. I wouldn't buy nVidia shares now...

Edit: and more developers speak out:

http://nintendoenthusiast.com/news/3rd-party-wii-u-developers-speak/

Microsoft is losing one advantage on Xbox One

Microsoft is stupid sometimes. Well maybe more often than we like. Microsoft introduced the internet to consoles. The Xbox was a good start and they made it really good on the Xbox 360. Yes, they screwed up their interface and shop over time, but still it was much better compared to their counterparts Sony or Nintendo.

Why is this? My explanation is that both Nintendo and Sony are Japanese and in Japan the Internet never took off as big as in the western world. Online games never played a major role. The reason I guess is that PC's aren't used at home much due to space restrictions. Japanese people access the internet through their mobile phone. So they had all sorts of online services much sooner than we had. They already had full internet functions when UMTS was still in development in the western world.

If you look at how Nintendo handles the internet it can't get any worse. You add friends by using cryptic numbers like 435132. They claim to protect their kids customers. Sure. That can't excuse the bad online experiences you have with their club Nintendo or their eShop. If you ever tried to buy software there, recover your password or even link new devices you know what I am talking about. Abysmal user experiences.

Sony had the same problem for a long time but patched up their systems over time. Still it is odd that when you login the PlayStation Network on your PC and click on an advertised title to buy it you are redirected to their shop and need to LOGIN AGAIN. Besides only accepting credit cards (no point cards available) they have a decent collection of movies and TV series on top of their game offers.

The PS4 is slightly better in this regard but you see the Japanese style Internet of the 2000's working on all ends. I was surprised that Sony has the lead in live streaming over TwichTV on the PS4 while the Xbone feels like a closed system currently.

And that is my point: Microsoft is losing their big advantage they once had: The internet, online games, connectivity. And Sony is catching up fast. While Nintendo still doesn't understand how the internet works Sony is implementing features fast. Besides Twitch they offer now streaming services for PS3 games through their GaiKai aquisition. If that works well or not doesn't matter, what matters is that Microsoft must speed up their operating software development and store offers, otherwise they will continue to lose against Sony.

Happy New Year!

Welcome to 2014. It will be an important year as the last generation of consoles will start to fade out while the new one takes over.

This Christmas will be the time of the new generation. The last hurrah of the last gen consoles will be in its software. Some good games are still to come.

The problem however is numbers. The last gen won't sell the millions of games it used to be simply because some users migrated to the new one, some users stored their consoles away or they simply break (remember the last gen is particularly prone to this).

The next gen won't have the numbers yet. GTA V sold zillions on a market with 140+ million consoles. The recent sales numbers of Xbone + PS4 are close to 8 million in total. If you extrapolate this to Christmas we might end up with maybe 24 million end of this year (both Xbone + PS4). Thats ca. 15% of the last gen market so publishers won't expect more than 20% of the revenues counting the effect in that there aren't many games yet and people buy everything they can get their hands on.

So the revenues of all publishers will be DOWN this and the next fiscal year (ending March 2015). Still it is an important step as afterwards we will end up with a better and healthier console market simply for some of these factors:

The PS4 and Xbone embraces online much better than the last gen. This will help smaller titles to be distributed online and make smaller console teams viable.

This will also allow MMO's to migrate to the consoles helping with long term revenue and retention for these titles. This include f2p titles (and first ones are very successful like Warframe)

More importantly the architecture of both consoles are very PC like as they use PC components. This will make cross platform development much cheaper and easier helping return of investment, lessening the risk of large scale AAA game development like Assassins Creed IV or GTA V was. You can basically develop for 2 consoles and PC at once without losing too much quality. The last gen had problems due to their custom architecture. Hint: this will push PC gaming a lot as a side effect.

So I expect further consolidation in 2014 until more money is being made on the markets (including mobile, online) which will have an investment effect in 2015+ soonest, maybe even as late as 2016. In 2016 we will be back in a market of 100m+ consoles making even more money than this gen. Remember this kind of investment has a lag of one fiscal year.

What about the other markets? Mobile will still grow (and is still growing in case you doubt it) but it is getting rather populated. The market is swamped with clones of games already existing making it even worse for new innovative games to be noticed. I think this is only a temporary phase until the markets mature and both developers and providers find ways to offer better visibility and customer acquisition. Signs of this are already there.

What about me? I will have public appearances in Helsinki at one of their Universities teaching f2p:

http://avp.aalto.fi/courses/games

I will also attend Casual Connect in Amsterdam participating in the Evil Game Design Challenge and talking about WoT:

http://europe.casualconnect.org/

Next I will attend Game Developers conference in SF analyzing the monetisation of World of Tanks:

http://www.gdconf.com/

Finally I will be in Berlin for Quo Vadis of course, ranting about our industry and giving German developers a glimpse what awaits them;

http://die-entwicklerkonferenz.de/

See you on one of these events or on this blog. Thank you for your loyalty and listening to my rants!

The GTA V billion

We all read the news of the fastest selling entertainment product of all time: GTA V made a billion on the first weekend. This gets all sorts of media attention and jealousy - and most of them get it wrong.

First: the billion mentioned is retail revenue. That means Rockstar did NOT make a billion as they don't get the full sales price. So what do they get anyway?

First you need to deduct VAT from the price you paid, something around 15-19% depending on country. Your government gets that.

Then retail takes their share, somewhere 10-15% usually, sometimes more, sometimes less. That leaves (very rough calculation!):


$69
$58 -VAT
$49 -15% retail
$46 -5% distributor fees
$33 -$13 MS/Sony license & Production fee, includes BlueRay, Manual & Packaging

So, $33, minus Take2 share as they own Rockstar & paid the hundreds of millions of marketing, so less than half actually arrives at Rockstar.

Considering the game costs somewhere around $200 million they broke even first weekend with that billion - barely. Rest is profit now, but you see that without that record they would have had a harder time to break even. 5 years development time with hundreds of people does cost some serious money (120-200 million depending on country).

So there. Yes they deserve the record, the money, but they don't have a billion yet. For that they need to continue selling strong and maybe ship some add ons (or the PC version!)

So if Sam Houser reads this: great job man, the first GTA since Vice City I enjoy!

Bad opinion II

So it continues. It comes around every couple of years that industry professionals claim it is a good idea for Nintendo to get rid of their hardware business and write their games for all platforms. Mario on PS4, iPad etc. They think it is a good idea.

Some things they forget:

Nintendo is a Japanese company. They are patient as an elephant. They don't care if they lost one generation of consoles, hey, its just 5 years.

Nintendo is a rich company. Valued billions, having billions in cash reserve. In fact it is one of the richest companies of Japan.

Mario, Zelda, Pokemon etc are the high value IP's which cause people to buy Nintendo hardware.

Nintendo always innovated the consoles, controllers and systems with Sony & MS following their lead.

Compared to Sony and Microsoft Entertainment Nintendo had profitable console generations. MS did not. Sony did not.

Why should they bother about other platforms? Nintendo often enough stated that they do not see MS or Sony as competitors. They merely see bicycles, girls and TV as competition as they steal entertainment time from their consumers.

German article on Krawall.de mirroring my opinion:
http://www.krawall.de/web/Wii_U/special/id,65290/

And a video / Statement with the same position:
http://www.gametrailers.com/videos/uujebd/the-final-bosman-what-about-nintendo-