Armchair Analysis Extra: The Correction Period Continues

Between SEGA Europe‘s painful restructuring and Activision‘s dismantling of Radical Entertainment, this week has been another one of those weeks that we’d rather forget. It’s always unfortunate when people lose their jobs, and downsizing doesn’t often instill confidence that the affected industry is moving in the right direction. These moves are a continuation of the state of correction that the video game industry is in– especially in the console sector. The market is shrinking, and not enough money is being made to keep moves like these from occurring.

I know that when I remark that events like these aren’t surprising or that the market is shrinking, many people react quickly and negatively to my observations. “Stop with the doom and gloom” or “Things aren’t as bad as you claim” are popular responses. I don’t make these observations to earn praise, and I know that very few gaming fans like hearing these things. I’m simply calling things as I see them, and there isn’t a whole lot of good news out there to talk about.

The console sector has had an amazing run, especially since the PlayStation era began. The consumer base had steadily grown before the Wii took the market by storm and sold tons. A lot of studios saw success and expanded before we saw the opposite begin to happen during this console generation. These runs of success don’t last forever, and consumers are finding other entertainment options. Consoles are no longer the undisputed gaming platforms. Consumers are splintering into other areas, like PC, mobile, and social methods of gaming. Most consumers who wanted consoles have them now, as it’s been 6-7 years since the current generation of consoles was introduced… and at least some of those consumers are moving on. Perhaps it’s partially because of stagnation due to an anomalously long console cycle. Maybe the economy forced a change in spending priorities as consumers got older. It’s possible that the time isn’t there anymore for some consumers to play video games like they once did.

The correction in the console market feels much more painful because it’s coming down off of a huge period of sales. Nearly 40 million Wii units have sold since November of 2006 in the United States alone. Another 55 million combined Xbox 360 and PlayStation 3 units have sold over the course of this console generation. That’s an awful lot of hardware. It was a boom period for the first half of the console generation before things began to recede… and now, we’re seeing sales decline to levels similar to 2004-05 when the previous generation was running out of steam. Perhaps we see a significant resurgence in sales when Gen4 really gets going sometime in the next 12-18 months, but there’s no guarantee.

I’m not going to come out and say that the console sector is dying. I know that might be your gut reaction to what you’re reading, but it’s not my point. I firmly believe that there is a solid nucleus of consumers in place to support Gen4 and that at least some profits are out there for the taking. I don’t expect console sales to fall off a cliff in Gen4, but I also think that it’s unreasonable to assume that another 100 million consoles will sell in the US when we tabulate Gen4 data in another 7 years. Unfortunately, since the bar is set so high, there’s going to be disappointment from investors and analysts when consoles don’t set records for another generation. There’s the possibility that investors pull back and, with the focus being on “AAAA blockbusters”, more studios and companies could face restructuring and/or closure over the next couple of years. A shrinking market– and declining sales– can’t support projections of 5 million units sold as a success. Not anymore.

I understand that many of you want to hold onto the idea that Gen4 hardware will reinvigorate the market and that trends will turn around. Several industry people that I have great respect for have cited this reasoning repeatedly. I believe that is a possibility and could very well happen; however, I personally am not convinced that the solution to ending this correction period is that simple. Many different variables come into play. How much will Gen4 hardware be? Will software prices rise again to offset expected rises in development costs? How will digital distribution expand? Will the economy find a foothold and begin to rise with confidence, or will a double-dip recession occur at the worst possible time for the console sector? As these puzzle pieces fall into place, I’ll feel more confident in my own outlook or may start shifting my line of thinking in a different direction.

For right now, based on the data and trends that are available, I see no reason to change my thought process. More studio closures are possible to likely in the next 12 months, and I expect YOY sales comparisons to remain moderately negative for the balance of 2012.

iOS Gaming: Now I Believe

As I mentioned in my last post, I recently jumped on board the iPhone train. After spending some time with it and sampling some of the many games that are available for the device, I can honestly say that my time with dedicated handhelds is probably over. Affordable games, impressive visuals and sound, and plenty of variation in genres and offerings make iOS devices compete favorably with the DS and Vita handhelds we see now.

I’m certainly not out to sway anyone from their preferences. If you bought and if you enjoy your 3DS or Vita, that’s fantastic. I’ve always said that there will be a market for them. For me, though, I was very surprised with the gaming experiences that awaited me on my iPhone 4S. Augmented reality is there. Tilt controls are there. Touch controls, while obviously not as responsive or accurate as traditional controller inputs, are acceptable as long as the game is built with touch in mind and not a port with adapted control schemes. I’ve got pinball games to hold my interest from Farsight Studios and from Zen Studios. I’ve got arcade-based games like Galaga S and Galaxian S that work surprisingly well. I’ve got a pretty neat puzzler in Castlevania Puzzle, which appeals to me as a fan of the series and adapts the idea for a touch screen instead of porting an older game with potentially rough play control. I’ve got a really cool shooter in Star Wars: Falcon Gunner that satisfies my arcade and Star Wars appetites while letting me dabble in augmented reality if I wish.

The Death Star has never looked better on a portable platform.

For what amounts to the price of a downloadable game on Xbox LIVE Arcade or the PlayStation Store, I have a library of seven games to play on the go… and I haven’t even taken a look at free offerings too much just yet.

I’ll admit that I’d rather play with a more traditional controller, as that’s what I’m used to. I admit that sometimes my thumbs get in the way of the action, and, on occasion, the touch screen is inconsistent with its sensitivity. It’s not a perfect experience, but when I consider everything else that I can do with this device– phone calls, text messaging, web, decent photo and video tools, productivity apps, and a lot more that I haven’t even tried yet… thinking about spending $250 on a Vita or $200 on a 3DS seems redundant. I don’t want to carry two gadgets when one fills my needs adequately or better.

I know that I’m not alone in thinking this way, either.

People are still playing video games, and will for a long time. The problem is that portable tech has caught up to dedicated handhelds in many respects, and the biggest attraction is that there’s a lot to choose from and it’s almost all significantly cheaper than what we see on the Vita and 3DS. There aren’t enough reasons for more casual players to make that second investment when they already own smartphones and tablets. Core players will still buy handhelds and will always rail on the lack of a controller, and that’s perfectly fine. For me, smartphone gaming is an imperfect but still enjoyable experience that’s less expensive, more varied, and is good enough to satisfy my gaming urges when I’m not here at home.

Castlevania Puzzle is deceptively fun and supplies fan service to Symphony of the Night players.

As an analyst, it’s been clear to see that a gradual market shift has been occurring as handheld hardware sales– despite new platforms– have been generally struggling here in 2012 while the mobile sector has been growing. Now, as a longtime video game player and with first-hand experience of what iDevices bring to the table, I can see why the shift is happening. You can complain about lack of depth, lack of a controller, the advancement of the freemium model, and more… but a growing number of people don’t care enough about any of that.

It will be very interesting to see how Sony and Nintendo deal with the challenges posed by the mobile sector as we move forward. It looks like more games will be coming for both the 3DS and the Vita later this year, which solves one problem. Now they have to get consumers to buy in… and not just the core consumer that has been on the fence, either. Trying to win back the casual consumer is important; without them, revenues will continue to slide and questions about the viability of the dedicated handheld market will continue to be asked.

Post-E3 Update: I’m Alive!

Hey there, everyone!

After a long and very busy week in Los Angeles, I’m in the midst of working on E3 content for Popzara Press. I have some things to share here with you as well, and will do that this coming week. It was all quite an adventure. I met some incredible people, saw some great games, and was able to apply a lot of what I saw towards my analysis of where I expect console sector sales to trend for the balance of 2012.

NBA Baller Beats was surprisingly fun. This guy was a pro. Me? Well… not so much.

A couple of pieces are already up on Popzara for you to look at, covering my hands-on experiences with Double Dragon: NEON and NBA Baller Beats. Feel free to leave comments or questions on either article, or you can do so here. I loved Double Dragon: NEON, which builds on the arcade experience and revisits some of the coolest moments from other games in the series. As for NBA Baller Beats, although my basketball skills need serious work, I was pleasantly surprised by how much fun I had playing it.

Expect more content to go up as soon as today, including hands-on pieces for Dead or Alive 5 and Sonic & SEGA All-Stars Racing Transformed. I also have some insight into two of the biggest games for this holiday season in Call of Duty: Black Ops II and Skylanders Giants, plus more brief looks at games including The Amazing Spider-Man, The Last Story, and Way of the Samurai 4. That’s not all, either. I still have a considerable amount of writing to do in the next day or so, including hands-on impressions of Borderlands 2, Zen Pinball 2 and the Avengers Chronicles tables, and Tony Hawk’s Pro Skater HD.

The demos for Tony Hawk’s Pro Skater HD has decent lines, and with good reason.

This week is also NPD sales data week, as May’s numbers will be released on Thursday. That means that I have another busy week ahead of me.

For the next week or so, I’ll be doing a lot of sharing of articles and content here… but we’ll be getting back to more original content once the E3 crunch eases and I have a bit more free time. I’m also taking a trip back to Stateline Video Games today, where I’ll be working on some details for some community management and social media integration… as well as sharing some of my thoughts on E3 with Frank. It’ll be a fun decompression afternoon after the rigors of the last few days.

So… it’s good to be home. Thanks for checking in via Twitter, Facebook, and Google Plus over the past week or so.

Pre-E3 Thoughts

Popzara Press recently published two articles of mine that I wrote in order to get the E3 ball rolling there.

The first one is from an analyst perspective, breaking down each of the three hardware companies: Microsoft, Sony, and Nintendo. Microsoft was the easiest of the three to talk about, though I found it interesting that early fears of a strong focus on non-game entertainment seem to have cooled with word of several big third-party game announcements during the Monday morning presser. I think that we might be surprised with what Microsoft brings to the table, but I’m not sure whether it makes a difference in terms of hardware sales for 2012 given the saturation status of the platform. Sony’s event could be the most intriguing, as there are several possible storylines. How will Sony address the Vita situation? What of this rumored cloud-based gaming acquisition that we’ve been hearing about? Is a revamp of PlayStation Plus in the cards? I’m personally very interested in what comes from that event Monday night. Finally, Nintendo’s true unveiling of the WiiU is extremely important. Nintendo needs to start selling the world on what WiiU is, and this is the company’s first big chance to do that. Launch date and pricing won’t be revealed, but games and hardware capability will be center stage.

My other piece has to do with some downloadable games that I’m looking to see on the show floor. I named three in particular. Tony Hawk’s Pro Skater HD is a personal selection. I hold this series in very high regard and am excited to see the work that Josh Tsui and his team at Robomodo have put so much effort into. I’ve been following the progress of THPSHD since it was announced last December; from what I’ve seen, this has the potential to be one of this summer’s bigger releases. Zen Pinball 2 is another game that I’m looking forward to seeing. If you know me, you know I’m a bit of a pinball freak… and it’s great that the PlayStation 3 is finally getting its own Pinball FX2 kind of upgrade from Zen Pinball. Hopefully I’ll get a peek at the new Avengers tables, too. Finally, Double Dragon: NEON is an appointment that I set up because of my arcade roots. WayForward has done some great things with arcade IP in the past (Contra 4, anyone?) and I’m eager to see what they’ve done with Double Dragon here.

I hope that you’ll take a look at both pieces, and I invite you to comment on either or both.

It’s worth mentioning at this point that most of my writing for the next couple of weeks will be for Popzara Press. I’m not sure how much extra writing time I’ll have during the event, and I’m going to be playing catch-up for another week or so after I return from Los Angeles. I will post some more personal stories and content from the trip here as time allows, though, and most definitely after my Popzara workload slows down a bit. If you’re interested in more frequent updates from me during E3, I recommend following me on Twitter. You can follow along as I’m terrified during my flight, you can find out what I’m playing and who I’ve met, and it’ll basically be a running diary of my experience.

Although the thought of flying to Los Angeles is still freaking me out, I’m extremely excited to be able to attend E3 this year. It’s going to be a big show and I am even more excited to be able to share my experience with so many people. Some call this work– and it certainly is– but I consider it an honor.