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Consoleation Reaction: The (Correctly Predicted) XBL Increase

August 30, 2010 3 comments

So, yeah. I called it. Sure, it was just shy of 10 months ago, but I did predict that Microsoft would increase the price of Xbox LIVE subscriptions… and here we are.

The increase occurs on November 1st, which is just before the release of Microsoft’s Kinect camera and associated hardware bundles. It’s a blatant attempt to cash in on these new users while raising prices for legacy consumers at the same time. At least Microsoft’s giving legacy consumers a chance to “lock in” one more year of the service before they’re subject to the increase. Speaking in terms of absolute business, it makes sense since Microsoft is expecting (hoping) to attract a ton of new, more casual users with the Kinect launch… so upping the ante means extra profit for Microsoft right away… if the consumers bite. From a consumer standpoint, especially for legacy consumers, questions are sure to be raised. What else are consumers getting for their money to justify the extra $10? Why raise prices now, especially considering that Sony’s competing service is free and the PlayStation 3 has steadily been gaining momentum? Any increase also causes consumers to reconsider their use of a service; how often do users play online, and is it worth the price of a full retail release every year? Each individual’s mileage is going to vary, but it’s going to be tougher for some to justify paying more every year.

What really gets me is the discussion about the increase that’s been going on via Twitter. There are two distinct camps. One side is genuinely frustrated about the increase and openly wonders what the increase is for. The other side uses the same general argument that the Industry Defense Force has been using for their War on Used Games argument: It’s only $10 per year or less than a dollar per month; if you can’t afford that, maybe you shouldn’t be gaming. What’s worse about this is that there are reputable members of the gaming press out there on the Twitter service who are not only siding with this argument– but actually putting it out there. I’m not going to name names or drag anyone into the mud here, but it seems painfully obvious that the industry and its associated press seem to stick together on issues like price increases, used games, and other decisions that adversely affect the consumer.

Let’s look at some of these Twitter arguments, shall we?

You guys are nuts if you think a $10 boost is a problem. Put aside entitlement and realize how much you get for that $.

Again with the entitlement argument. Really? We’re so damned entitled that we’ve been paying the $50 all along, right? Where does this come from? We don’t have to be “entitled” to anything, I suppose, if we just stop paying Microsoft for a service that’s being provided comparably elsewhere for no fee at all. See, if you want to talk entitlement, you can address PSN users who may complain about that service, which is free– although it does have its share of issues. Legacy consumers have been paying Microsoft, so I move that they have a right to complain and even cancel subscriptions if they think that the price hike is not justified.

People need to stop whining so much; it’s just $10.

Indeed. I mean, why would anyone complain about an increase, right? After all, as consumers, we should just lie down and take it. While we’re at it, when game prices go up another $10 or more, let’s send an additional check for $10 to the publisher. After all, games are worth it! In fact, we don’t pay enough. You’re right. I will stop whining immediately. After all, it’s just $10. Along with the extra $10 we pay for new games now, the $10 Online Pass, $15 DLC map packs, and… oh, wait. I’ll stop whining. Really.

Stop bitching about the XBL price increase. Its no big deal. Its not like its $100. $60 is a reasonable price for the service we get.

Yes. $60 is not $100. It’s also not $50, either. If you feel that $60 is a more “reasonable” price, then feel free to send Microsoft the extra $10. The “big deal” is that Microsoft is raising prices in the midst of an economy that’s on the brink of a double-dip recession. If the industry wants to keep console gaming relevant as a source of entertainment, they aren’t going to do well by increasing prices across the board on almost everything from hardware to software to online functionality. They may still keep a decent amount of hardcore gamers, but the general consumer is in the process of being disenchanted– and the fiscal numbers prove it.

You know what? Maybe all of this “bitching” that I’m doing is for nothing. After all, there are still many people who are obviously more than happy to pay more for their video game habit. The industry has become powerful enough where a full-blown crash just won’t happen, so even when the more casual consumer base decides that enough is enough when it comes to raising prices on everything– hardware, software, accessories, online functionality, and DLC– there will still be a small but potent base of potential buyers out there who will keep console gaming from complete life support. The unfortunate reality in this mess is that the casual consumer base is what catapulted console gaming from something you did in your parents’ basement to a legitimate form of entertainment that rivaled movies in terms of revenue. The industry will never get those people back, and, as a consequence, has taken an immeasurable step backwards.

But it’s only $10, right. Keep telling yourselves that.

Consoleation Wrap-Up: Ledesma-gate Odds and Ends

August 26, 2010 1 comment

First off, a big thank you goes to the staff over at GameCritics for picking up my reaction piece on Ledesma-gate. I see that my viewpoint has incurred about equal amounts of commenters for and against my viewpoint, and I guess that batting .500 isn’t too shabby. I see that at least one commenter works in the industry, and naturally his comments were the most harsh. Being on the opposite side of where he stands, as I am a consumer of his goods, I guess that disagreement is natural. He wants to make money, and I want to be able to afford his goods. We’re both right, and we’re both wrong.

What’s unfortunate in all of this is that Ledesma’s comments have not only damaged relations between the industry and its consumers who read Ledesma’s views… but they’ve also succeeded in widening a rift between the haves and have-nots when it comes to this form of entertainment that we all enjoy. Charges of entitlement are flying back and forth and the argument that video games are a luxury– or even a service– makes what was once touted to be “fun for everyone” into a select group of individuals who are financially fortunate enough to take part.

It’s a disaster waiting to happen.

We all know what the easy solution is: Get members of prominent game publishers and prominent resale retailers together and hammer out some sort of financial agreement. That solution, however, isn’t going to happen as long as you or I are not in charge. Both sides have obligations to their respective investors. If resellers agree, their profits dwindle and shareholders will find another venture that may be more lucrative. As long as the agreement doesn’t occur, the industry will continue to wage this war on resale and there won’t be a winner when it’s all over. In fact, if the industry was actually successful in the removal of resold product and decided not to adjust their pricing scheme, it’s highly likely that the financial state of the console gaming industry would be far worse than it is now.

If recession-like economic conditions continue, which is likely for at least the next couple of years, eliminating cheaper alternatives than new $60 games will erode the consumer base. That’s not a prediction; it’s a fact. We’d be looking at a firm IF/THEN argument; IF you don’t have $60, THEN you won’t be buying these games. Sure, there may be sales now and again, but with several periods each year when there are more than a handful of new releases for each platform, many games are going to be ignored and left on store shelves. This will lead to retailers not being as bullish on console games as a viable revenue stream as the industry will have lost popularity and the depth of its consumer base. That leads to smaller amounts of retailer purchases of games from publishers, which then will lead to more closures and consolidations. Over a decade’s worth of growth will be lost in a short time, and other– cheaper– sources of entertainment will be sought.

Why are used games so bad? It’s not a black and white scenario. Many consumers sell or trade games to be able to afford new releases. I’ll admit that I’ve done it for years. In fact, I sold my entire NES collection and other games back in 1999 to FuncoLand and gained enough store credit to buy $700 worth of new Dreamcast hardware and games. Note the bolded word there: NEW. A fair amount of that $700 went right back to the industry, with FuncoLand receiving a small profit on the sale. They got their profit from me when I willingly traded in my games for less than they were worth. The industry won, the retailer won, and I won. I do the same now. It makes me a second-class citizen in the eyes of the Industry Defense Force, but everyone really does win. It’s the same scenario: I trade in games for less than I paid for them (reseller profit) to afford to buy new ones (publisher / developer profit) that I can enjoy (my own gain). Where’s the loser here? Is it because the publisher doesn’t make any more money from me or the resale retailer if the game finds a new owner? That’s a shame, but the industry is already making money from the reseller to begin with.

And this incessant ranting about GameStop killing the industry? No. GameStop’s #1 revenue driver is sales of new software.

Let me say it again, with emphasis: Gamestop’s #1 revenue driver is sales of new software.

NEW. SOFTWARE.

As with any business, there are certainly some GameStop business policies that can be debated. Gutting of new games. Questionable trade-in values. Occasionally over-emphatic employees begging for subscriptions and preorders. GameStop isn’t anywhere near perfect, but they’re also doing business well enough that they’re still here and making money in a time period that’s seen Game Crazy go by the boards and Blockbuster’s Game Rush experiment fail. There are lots of myths out there about how GameStop does business, and a lot of online embellishments of in-store experiences that become gross generalizations. Despite what you may or may not agree with about GameStop’s policies, the company isn’t worse for the industry’s financial well-being than GameFly, Goozex, yard sales, or Goodwill.

How about those who buy used games? People have been doing it for years without having to be harangued or made to feel like a second-class citizen or criminal. It used to be called “getting a good deal”. Now it’s some sort of moral dilemma. Again, there’s no black and white here; if you buy used, you’re a (legal) pirate. It doesn’t matter if you’ve bought once or plenty of times. Think of the developers… think of the publishers. If you want better games, buy the “right way”. You know, outside of this bubble called the internet, consumers honestly don’t care about the developer, the publisher, or even what some no-name blogger has to say. He or she has a budget and sticks by it. If he or she wants a game, that person is oftentimes going to buy cheaper if possible. Impulse shopping has been a revenue driver for video games for a long time; if a game is cheap enough, some people will drop the money on it. It’s not about putting money away each week like Wal-Mart layaway and rejoicing when you finally have been able to stash enough away that you can afford this luxury. Maybe for the hardcore gamer, budgeting and savings are a way of life… but for everyone else, it’s a snap decision: Buy now as cheaply as possible, or table it and see if money becomes available in the future. I see this ALL THE TIME. Sometimes they come back, sometimes they’ll buy it used, and I’ve even seen cases where the consumer has flatly said that games are too expensive and that he’s going to “sell the damned thing.”

I would think that, rather than locking features, cutting content for future DLC, and basically trying to nickel and dime what’s left of its consumer base, the console gaming industry would instead think about how to not get back to gaining more consumers… but also try to use incentives instead of what’s viewed as punitive actions to maintain the consumers that it’s been trying to build for years.

We’ve all said things this week that probably should have been held in check. What we need to do now is find real solutions and enact them before it’s too late.

Consoleation Reaction: Five Comments, Five Reactions

August 24, 2010 3 comments

I’ve been reading some comments to some articles relating to Cory Ledesma‘s verbal slap at used game buyers and about Sony’s decision to at least consider using some sort of Online Pass system for their games, and I’m disappointed in what I’ve seen. It’s one thing for industry workers to be so defensive or to say some pretty dumb things, as they believe that used games affect their bottom lines. It’s another for gamers to point fingers at others and basically tell them that they don’t belong to the Gamers’ Club.

Let’s take a look at some examples:

1. “If you can’t afford a $60 game, you shouldn’t be playing video games.”

I love this argument, which generally comes from a group of commenters that I like to call the Industry Defense Force. It’s similar to the “You’re not a real gamer if…” argument in that there are apparently rules to becoming a video game consumer which aren’t clearly stated when you buy a game. It’s bunk, of course. The console gaming industry went through its strongest period of growth by expanding its potential user base. During the previous two console generations (PS2/Xbox/GC and PSX/N64/DC), console hardware and software prices were generally under control and it was all about selling the best value. Yes, the Nintendo 64 did have higher software prices for a time, thanks to Hiroshi Yamauchi’s decision to stick with cartridge-based media, but these prices eventually fell into line with its competition. Now, publishers have happily tacked on a $10 “HD tax” to games for the Xbox 360 and PlayStation 3, citing higher development costs… and, unsurprisingly, software sales have trended down thanks to a recessed economy and games that feel incomplete or rushed.

Please note the term recessed economy. The Federal Government may claim that the Great Recession is over, but look around you and you’ll see a different story. Foreclosures are still happening. Layoffs are still occurring and new job creation is occurring at the speed of molasses. Unemployment has gotten so bad that the rate is inaccurate because some people have been out of work for so long that their benefits have ended. Credit is tighter. Taxes are going up to try and help states that are on the verge of going into receivership. Despite all of these things, the console gaming industry and the Industry Defense Force both insist that $60 is not that much money. The Industry Defense Force will cite pointless inflation comparisons and mention that we’ve been “due” for a price hike. Really? Now? Despite economic reality? The same economic reality that’s sent the industry into its first bonafide downturn in over a decade?

2. “It’s only a $5 difference. Don’t be cheap.”

No… not really. Depending on the retailer, that difference can be $10 or more if certain conditions are fulfilled. That’s enough for a quick lunch, a bit of gas for your vehicle, or extra cash in your pocket that can be spent elsewhere. In tough economic times, it’s not the amount of the savings that is important– it’s the fact that you’re saving any money at all that’s the key. Sometimes you have to wonder how many of these commenters have actual bills or financial obligations, because the value of money seems to escape them. Try this math: Even if you do only save $5 for each game and buy one per month for a full year, you save enough to buy an extra game each year… or two if you partake in discount programs from GameStop or Play ‘n Trade. It adds up, and the bottom line is what matters the most to consumers in times like these. Consumers will continue to be cheap, and they frankly don’t care if the Industry Defense Force calls them out for being that way.

3. “Better for the developers to get money when you buy new than for GameStop to get all of your money.”

Ah, the new version of The Crusades. Let’s forget the fact that the developers got their money for games sold already. Let’s also forget that GameStop isn’t the only source for used games around. Do developers get any money when you trade used games on Goozex? Nope. How about eBay? Nope. What if you see a game at a yard sale or flea market? Negative. Developers and publishers stopped getting their money’s worth of a rented title after a few rentals at GameFly or Blockbuster. Besides, why should gaming consumers care about the industry and how much money it makes when the industry has made it abundantly clear that it doesn’t care about consumers? As for the GameStop stigma, it’s downright laughable how commenters hang onto silly memes and attack a retail chain based on hearsay and the “cool to hate” factor. GameStop, like any other retail chain, has its share of problems and business policies that make consumers cringe… but it’s still a video game store, and there just aren’t very many of them left. The used games problem seems to have GameStop at its core, but there are many other retailers who deal with pre-owned games, both in online and brick-and-mortar spaces.

4. “Servers cost money to maintain. They aren’t free, you know.”

Oh, I know they’re not free. The problem is that the same number of people who own the game have the ability to play it online. In order for a game to be pre-owned, somebody had to buy it first before selling it or trading it in. The seller no longer plays the game online; the new owner does. There’s no additional stress on the server. With the Online Pass program, the $10 is basically free money for the publisher, and it’s not at all guaranteed to go towards server maintenance or upgrades. It’s like a gas tax in some states; ideally, this money should be going to road repair, but it usually goes into a different government fund. This is a shallow and impossible-to-defend argument.

5. “People who buy used games deserve to get a lesser experience.”

Since when? Consumers have been buying pre-owned games for decades, but only now do we vilify them? I don’t think so. Contrary to prior belief or notion, buying used games isn’t a crime, it isn’t a new fad, and it should not be a punitive situation. I’ll agree that, if you buy used, you should expect certain possibilities… like missing instruction manuals, cracked or missing cases, and possible physical damage to the media… but the games are still expected to work like they should. This business of locking content away as a deterrent from buying used in order to generate “a lesser experience” is a cash grab from publishers who decided that used games are the reason for the current business downturn.

Having said all of this, I’m going to step away from the matter once again as I’m trying not get back to writing basics rather than continuing to harp on the same topics. I will say that this issue isn’t going away and is going to likely worsen in the coming months. What will be interesting to see if how consumers respond and whether there will be any pushback– or if  they’re just resigned to their fate of having to pay more to play what they want. In the meantime, I’ll be back to writing impressions and reviews soon.

Consoleation Opinion: The Gloves Are Off

August 23, 2010 2 comments

Some things are better left unsaid.

For example, most gaming consumers know that the industry doesn’t care about them. The disconnect between the industry and the consumer has never been more evident than it’s been during this console generation, as I’ve mentioned more than a few times before. We’ve known that the industry treats used game purchasers as second-class citizens– or worse– and this well-publicized “war on used games” has devolved into taking basic gameplay modes away from those looking to not pay $60 apiece for games that may or may not be worth their asking prices.

Cory Ledesma, who has been working on THQ‘s WWE games for years now, finally took the gloves off and said what has assuredly been on the minds of many publishers and developers since this war on used games really began in earnest– he doesn’t care about used game purchasers.

Let’s look at his quote, pulled from a CVG article:

I don’t think we really care whether used game buyers are upset because new game buyers get everything. So if used game buyers are upset they don’t get the online feature set I don’t really have much sympathy for them. That’s a little blunt but we hope it doesn’t disappoint people. We hope people understand that when the game’s bought used we get cheated. I don’t think anyone wants that so in order for us to make strong, high-quality WWE games we need loyal fans that are interested in purchasing the game. We want to award those fans with additional content.

Let’s break down this piece of honesty– and attempted backtracking– from Mr. Ledesma here.

Ledesma has chosen to, with this quote, be the mouthpiece of THQ– if not the industry– and say “they” don’t care about used game buyers. We know that; in fact, they don’t care about consumers, period. It’s business. The “don’t care” part has been magnified during this console generation because, for the first time in many years, the industry is not thriving and a scapegoat has to be sought. It’s easy to pinpoint used games as a problem, considering that publishers and developers don’t make ANY MORE money from sales of their games. Note the capitalized words here: ANY MORE. The fact is that the publisher and developer already made their money from the game when it was bought by the retailer that originally sold the game as new. Want to cite online server fees? Those were factored into the original sale; there aren’t any extra people playing the game online… just different people.

After backtracking a bit by claiming that he doesn’t want to disappoint people, Ledesma really lets the cat out of the bag and uses the “C” word: Cheated.

When the game’s bought used, we get cheated, he says. Oh… so he doesn’t care about used game buyers, except when they buy the game used. Then he– and the industry– gets cheated. If you don’t care about used game buyers, then why should they care about you when they’re trying to buy a game as cheaply as possible? Sure, it’s all about the bottom line for the industry, but the consumer’s bottom line doesn’t count for anything? Since when? Consumers have other fiscal responsibilities than gaming… that includes people who work within the industry, too. Especially when it comes to Q4 and new games swell into retailers like a software tsunami, paying $60 for each game means that you are forced to limit what you can buy. I have a sinking suspicion that not too many consumers have $200 per month to drop on new releases. Then you’re either forced to play pick-and-choose or to try and buy the game you want as cheaply as possible. If cheap means that retailers are putting certain games on sale, great… but with the profit margin on new games being so thin for retailers, that rarely happens. The other options are either renting– which THQ’s Online Pass program doesn’t account for– or buying used, which can be significantly cheaper than $60 in certain instances.

The last part of Ledesma’s quote is priceless, because he equates the Online Pass with being an “award” for “loyal fans”. Not really. Considering that the online component of a game used to be an expectation and not a right– as it has apparently become– this isn’t an “award” or an incentive for new purchasers. It’s legalized extortion. Holding online play for ransom, especially when Xbox 360 users are already paying a fee for the ability to play online, is another stop along the industry’s slippery slope of descent. Incentives are adding things to the game… like extra levels, extra characters or weapons, and other things designed to make the game more enjoyable. Locking features is punitive.

The industry has lost sight of one major part of the used game formula. There are many consumers that trade their games in towards new games, and this happens a lot. That $60 price tag is a little more attractive if you trade games in for store credit towards new games, or if you sell games to friends or online for cash. For all of the outcry against GameStop, trading sites like Goozex and auction sites like eBay are just as involved in this issue that the Online Pass program is trying to put down. The industry, quite frankly, refuses to admit that games cost too much to sell in large and consistent quantities given the current economic climate. By holding online play for ransom, publishers are forcing trade-in and resale values down and this is counter-productive to game trades or resales in the first place: Game consumers need that buffer to be able to keep up with the latest games.

I’ve said this time and time again, and yet nobody listens. This is why software sales have been consistently off on a year-on-year comparison. This is why publishers are struggling to find answers and are quick to blame used games. The industry demands that consumers to foot a constantly increasing bill for entertainment and consumers have been indirectly telling the industry that they no longer have the money, by way of decreasing revenues. Rather than accept any kind of responsibility or acknowledge that there’s a problem, Cory Ledesma has taken the gloves off and spoken his mind.

In response, I will assume the role of the consumer base. Here’s our response to Mr. Ledesma and the rest of the industry:

I don’t think that we, as gaming consumers, really care whether the industry is upset because we’re just trying to afford to buy games without having to take out a second mortgage on our homes or work a third job. So if the industry is upset that they’re not getting any more money from us, then we really don’t have much sympathy for them. That’s a little blunt, but we hope that it doesn’t disappoint anyone in the industry. We hope the industry understands that game prices need to come down and that we need better incentives in order for us to continue spending our money on a consistent basis on your products. We want to reward companies that recognize and acknowledge the issue of high prices with our loyalty.

I think that’s about right.

Consoleation Opinion: Endgame

July 26, 2010 3 comments

Think about this for a moment:

You’ve already paid hundreds of dollars for your Xbox 360 or PlayStation 3. You’re paying $60 apiece for games for your console(s). If you’re an Xbox 360 owner, you may be paying as much as $50 annually for online play (by way of Xbox LIVE). You’re paying a certain amount of money per month to your internet service provider in order to have the ability to get online to either play games, download them, or patch existing games in your library. Just these factors alone likely put this hobby into costing over $1,000 in the first year of owning a console alone, between buying the console, games, accessories, and monthly internet fees. Some people pay more.

Now, if Michael Pachter‘s latest money-grabbing idea gains traction, internet fees might not be the only monthly fees that you’ll be paying.

Pachter predicts that Electronic Arts will ditch their recently-launched Online Pass program and instead charge a monthly fee to play all EA Sports titles online. Furthermore he continues to blame free multiplayer for decreased game sales and believes that “…purchasers just have to accept online multiplayer is going subscription.” He even says that both new and used game sales are being “cannibalized” by free multiplayer.

This move would mean that anyone who purchases EA Sports titles– new purchasers and preowned purchasers– would have to pay the subscription fee in order to utilize any of their online services for games. For golf games, it means more money for GamerNet, which was quite addictive. For Madden and NCAA Football, it means you’ll have to pay for those online leagues and franchises. For the great NHL games, it basically transforms the highly touted EASHL into a subscription-only format that will instantly lose players. It’s a big risk, should EA actually be considering this move. What precedent would EA have? Sports games are not MMOs. Roster updates are not equivalent to the content updates that World of Warcraft gets. Charging ALL consumers for online play is going to ruffle more than a few feathers, plus it’s double jeopardy for Xbox 360 owners who are already paying between $35-$50 per year to play online games.

This milking of the console gaming consumer base is reaching pathetic proportions. Before this generation came to pass, with the promise of better graphics, “expanding game experiences” with downloadable content (which is also a major problem), a whole bunch of other bells and whistles, we knew what we were getting when we bought a game. There was nothing held for ransom. Cheat codes or Easter Eggs unlocked extra levels or costumes which were already on the disc… but now we have to pay for all of those, even when they’re still on the disc. We never had to pay any more for the apparent privilege of multiplayer functionality– unless it was an Xbox game and you were playing online. We’re asked, as consumers, to pay for this and pay for that, but we’ve already given millions of dollars to these greedy publishers who are the sole reason why development budgets are so high in the first place, causing them to cry poor. What we pay is not enough, though. It’s never enough. Not anymore.

Holding online multiplayer completely for ransom marks the continuation of the industry’s descent down a very slippery slope. What will we see locked away in our next $60 purchase? Three “bonus” levels, which were originally part of the game, will now be sold as DLC unlock keys? Will we see difficulty settings locked away for DLC? Think about that; if a game is too hard for less-skilled players, why not charge a dollar or two for Easy Mode? Don’t think it hasn’t been thought about. What about endings? Oh, can you imagine having to pay to see the ending that you worked so hard to achieve? Locked endings are coming for pre-owned buyers, at least… and nothing says that new game buyers won’t see it with this precedent, either.

There used to be a point in time when a piece like this one would be dismissed as ludicrous. The industry would never think to do things like this. Things had been so good for so long that there was seemingly no need for any kind of adjustment. Now that the bubble has burst, the inevitable finger-pointing and damage control has been ongoing for some time, and the finger of blame seems to go everywhere else but to the industry itself. Consumers are buying too many used games. Consumers (allegedly) want big-budget games. Consumers rent too many games. Consumers shouldn’t get to play online for free because it costs us (very little) money. It’s always convenient to blame everyone and everything else while taking absolutely no responsibility for your own role in the downturn. There’s certainly no way that consumers are buying fewer new games because they’re more expensive, contain less content, carry hidden fees, and just might not be any good. Too many games are coming out at prices that are too high for consumers to afford in this economy, and the glut is leading to a lot of games (and accessories) being left on the shelf.

With all of these blog entries and despite my passion on this topic, I can’t see a resolution on the horizon. The industry seems pretty set in its path of raising prices, cutting content, and attempting to fleece its userbase. Fortunately for them, consumers don’t see to have reached their limits yet. When they do– note that I’m not using the conditional “if”– that will spell the endgame for the industry as we have known it for the last 15 years in terms of popularity and volume of sales. Sadly, I think that’s the only way that the console gaming industry will understand that it was the cause of its own downfall.

Consoleation Special: The War on Used Games – Proof and Consequences

June 28, 2010 2 comments

It’s almost as if someone noteworthy in the console gaming industry has been reading my blogs about this War on Used Games and decided to try and get some analysts out there to try and prive prove that, in fact, used games are gradually killing this once invulnerable activity. An article on Gamasutra talks about a study performed by Cowen Group that basically blames GameStop and the “dramatic” growth of used games for the industry’s woes. In the article, Cowen analyst Doug Creutz not only understands the recent popularity of Online Pass-like DLC in games currently, but actually thinks that more– and more aggressive– restrictions can be placed on software to dissuade consumers from buying used and “recapture value” from the used game market.

This is going to get ugly.

Publishers and developers can cry all they want about how expensive that game development is, and how used games take food off of somebody’s table, but they are far from innocent when it comes to this division in economics. The industry has decided what is best for its consumer base, which then is valiantly used as a reason why video games are $60 apiece.

In a recession.

Haven’t we gone over this before? Haven’t we talked about how an extra $10 per game means fewer games purchased per year? Need I mention that the economic climate is starkly different now than it was three years ago? If you want more people to buy more games, then you have to make them affordable. You know… drop prices. High-definition televisions and Blu-ray players are finding their way into more households because the technology and the media have both come down in price. The only entertainment expenses that have increased are movie tickets, including 3D and IMAX events. Everything else is coming down but console games, and nobody in the industry cares to mention that.

Doesn’t anyone remember when console gaming really picked up steam during the 1990s? Sony burst onto the scene with an affordable new platform with reasonably-priced games and a mentality to get everyone involved, including core gamers from the Nintendo and SEGA stables and new consumers who might not have been into gaming before. Video games started to become more inclusive, and aside from Nintendo’s misstep on media for the Nintendo 64 ($70 per game? No.), we saw the popularity of video games begin to skyrocket. Nobody wanted to price anybody out of the market; despite new technology, we saw platform prices hovering at $300 or less. The consoles that broke this rule– 3DO, CD-i, Neo Geo, Saturn– all sold minor amounts and faded into obscurity. Even into the early 2000s, prices remained the same for both hardware and software despite technological advances and rising development costs.

Let’s also not forget that used games existed during the same period.

Now, let’s review what this generation has brought us:

  • Two of the three gaming platforms in this generation launched for over $300, with software prices at $60 for the first time in over a decade.
  • Features and functionality that previously had been included with a software purchase have been eliminated or held back for later distribution as downloadable content, mostly of the paid variety.
  • Some games require a constant internet connection to work, despite being paid for… so if your internet service goes down, some games don’t work at all.

Higher prices. Less functionality. Fewer features. And somehow the consumer is to blame when they decide that $60 is too much?

Creutz and other analysts like him who share this punitive vision are in for some surprises. Creutz may believe that consumers will conform:

We believe that consumers are likely to grudgingly accept a revised and evolving pricing strategy that reflects the value they receive outside of and in addition to the traditional single-player offline experience.

Note his verbiage here. See the word grudgingly? That means that consumers aren’t going to like it. There’s only so far that you can push a consumer base before people realize that the console gaming industry has completely lost touch with reality and that it’s just an expensive fad that’s managed to outlast most. Perhaps they’ll move on to free online gaming. Maybe they’ll go back to older games. Maybe they’ll just leave video gaming behind and find less expensive hobbies.

I know that I move closer and closer to going full-on retrogaming with every story like this that I read and comment on. Playing games like Final Fantasy IV Advance or Virtua Tennis on my Game Boy Micro remind me of a time when the industry that I love wasn’t out to drain me of every penny I make in order to enjoy myself and stay current. Playing games like Tony Hawk’s Pro Skater or Castlevania: Symphony of the Night on my PlayStation reminds me of simpler times, too. Maybe I’m just getting older or more cynical, but there’s a part of me that genuinely believes that these recent events and the widening divide between the console gaming industry and its consumer base is going to lead to irreparable damage.

No continues, my friends.

Consoleation Special: The War On Used Games Continues

While catching up on gaming uber-board NeoGAF this morning, I came across this thread talking about Sony and Level 5‘s upcoming RPG sequel, White Knight Chronicles 2. According to the thread, the game is going to have DLC similar to EA’s Online Pass where users will have to enter a code to unlock online play. If you buy the game second-hand, of course, you will likely have to pony up extra funds in order to buy an unlock code– similar to what we’ve already seen with Tiger Woods PGA Tour Golf 11 and UFC Undisputed 2010.

Aside from the fact that we’re adding another game to what’s likely going to grow into a formidable list of games that will require extra funds to play as intended if they’re either rented or bought second-hand, the alarming factor here is that Sony is publishing the game and seems to be backing this initiative. What other games could be next on this list for this service? Could Killzone 3 and Twisted Metal be next to require unlock codes for multiplayer? What about Call of Duty: Black Ops? That seems like a prime target for Activision to roll out some sort of online pass of its own. What about Rock Band 3? The possibilities are endless– and scary.

All the while, there’s still been zero evidence to support the fear that used games are driving the industry into the ground. I’ve searched high and low for someone to supply hard data that supports this claim– which amounts to nothing more than fear-mongering. The industry continues to ignore the fact that games are not only expensive for developers to make… but also for the average consumer to purchase with any kind of regularity. $60 for each game, especially during windows of time when new releases are numerous, is more than the market can bear. This is why I am confident that May’s NPD numbers will show success for Red Dead Redemption and Super Mario Galaxy 2, but disappointment for strongly-reviewed titles like Blur, Split/Second, and even UFC Undisputed 2010. When you supersaturate the retail channel with too many releases in a short span, some games are going to be left in the wake of others… and the high cost of these games magnifies this reality.

By taking away from the functionality of a game without some form of DLC, you also reduce the game’s cost in a second-hand marketplace. When games are sold to friends or traded in at a gaming retail store, oftentimes these raised funds go towards the purchase of new games. If you diminish the value of these games, you reduce the ability of consumers to buy new ones to replace them. The gaming economy stagnates. It becomes a question of what can be afforded, rather than what’s out there based on impulse. New games sit longer on store shelves, leading to price drops and losses for the retailer… which leads to some retailers basing their purchases from publishers based on pre-orders and consumer interest.

In fact, the trend of preorder selling at retailers like GameStop is a direct result of this change in consumer buying habits. Stores tend to receive enough copies of new games to fulfill preorder quotas with a few left over. This leads to consumers walking in off the street to buy games and being disappointed because the game that was desired is not available for purchase. There’s no way to guarantee at launch whether a game is going to be hugely successful without having a high number of preorders to support the game’s credibility and sales potential. In short, retailers are no longer willing to buy large quantities of games– and pay out a high amount to publishers– just to have them sit on store shelves for weeks on end.

With Sony now on board with this kind of ransomware, there’s no telling where this trend will end. It’s safe to assume that Microsoft is looking closely as something similar. I can’t say for sure if we’ll see something for Halo: Reach or it might wait for Gears of War 3. Other publishers will likely follow suit in the months to come. Ubisoft has already said that it’s looking into its own Online Pass program, and you can bet that Square-Enix is watching these events unfold with great interest. The battle lines between consumers and the console gaming industry are being deepening with each successive release that takes away functionality and features while maintaining a high price tag and copious amounts of launch-window DLC. Consumers may still be buying, but there are lots of questions and a fair amount of mistrust to go along with fewer purchases and a sharp drop in impulse buying.

As we approach Q4 2010 and its cornucopia of new releases and technologies, the mindset of the consumer will be worth keeping an eye on. With $60 games, $100-$150 motion control add-ons, a new generation of plastic musical instruments, and the Online Pass trend continuing to pick up steam, there are equal chances of continued weakness in the console gaming sector as there are of a recovery for an industry that just two years ago was thought to be “recession-proof”. How far can the industry push and gouge its consumer base before a revolt– or worse, a general sense of apathy– occurs and a more perilous freefall takes place? I still believe that a more acute correction may take place and more publishers will shut their doors before this fiscal year ends, and used games will be the least of this industry’s problems.

Consoleation Quickie: NPD Delay and More…

Today is a work day for me, but I have a few things to touch on while I have a little bit of time:

First, NPD numbers for May have been delayed by up to three weeks. I see that a lot of you who have found my work have used NPD in your searches and may be looking for numbers and analysis; I will certainly relay the numbers and break them down shortly after they are released, but the numbers likely won’t be released until the end of this month. While this is disappointing, it’s also a bit of a relief for many members of the gaming press, as E3 is right around the corner and now the NPD numbers won’t interfere with show preparations. For now, all we can do is wait. Don’t worry– E3 will likely not disappoint anyone and should offer plenty of fodder for me to talk about going forward.

Next, although there weren’t any comments on my last entry, it seems that a lot of you read it and some of you mentioned it on Twitter over the weekend. Thank you all for sharing my work and for reading it. Indeed, working in gaming retail does offer a new perspective when talking about sales, trends, and the disconnect between the industry and its consumers. It’s one thing to just write about these trends from my personal experience and point of view. Video games and I have been intertwined for decades and I draw on a mix of observations, history, personal feelings, and other things when I sit in front of my computer and begin writing… but seeing consumers every day and noting their own trends, reactions, and buying habits adds strength to my work and fuels my writing even more. Developers and publishers can’t see what’s going on at the retail level. They just use numbers to gauge their successes and failures. Numbers are only half of the story. They don’t see that consumers are burdened by the amount of games out there and the fact that there’s just not enough money to buy everything that looks good. The industry refuses to acknowledge that game trade-ins actually drive new game sales, especially within a new game’s launch window… which makes that $60+ price tag a little easier to swallow when it’s reduced by store credit earned from trade-ins. I know that I continue to hammer on the same theme regarding this War on Used Games, but that’s exactly what this is becoming. You have the industry on one side and the consumers on the other, and if the industry thinks that eliminating used games or penalizing used consumers means victory, then they’re tragically mistaken and this industry will be doomed to failure as another passing fad, just as it was back in 1983.

In related news, trading in games has allowed me to afford one of this week’s major retail releases. Rock Band: Green Day was a no-brainer for me, in spite the non-stop cries of “Green Day sucks!” and “Music games have passed their prime!” You are free to think that Green Day “sucks”, but I’m perfectly fine with the track list and what Harmonix is bringing to the table with this game. As for the assertion that music games are dead, that may be, but I still enjoy playing them. We’ll see what Rock Band 3 brings to the table and whether Activision can find the magic again with their next Guitar Hero entry. I think that the biggest problem with music game sales had more to do with the high cost of plastic instruments, which many consumers now have already; the rumor of a new keyboard/piano controller for Rock Band 3 could mean a return to higher pricing, but we’ll have to see what SKUs that get released.

That’s about it for today. Look for impressions on Rock Band: Green Day on Wednesday, and hopefully some other entries as well. Thanks for reading and for your continued support and comments.

Consoleation Opinion: Bandwagon of Greed

The list of publishers looking to punish the based of used game consumers is growing seemingly by the day. Electronic Arts started it with their Online Pass. UbiSoft then mentioned that it was going to start implementing something similar in the near future. Next, THQ dropped a bombshell and made online play a DLC feature for UFC Undisputed 2010. Now, SEGA is apparently interested in some variation of EA’s Online Pass idea.

The Bandwagon of Greed is indeed filling up, and I certainly don’t expect the trend to slow down anytime soon.

Working in gaming retail is an eye-opening experience when it comes to seeing how people who are not always online posting comments or on message boards actually shop. The high cost of software is taking a toll. More than a few customers have mentioned that Red Dead Redemption is their one game for the summer. Many traded in games to bring the cost down. Others gradually paid down the cost of the game in advance so as not to have to deal with the impact of dropping $60 plus the local 8.8% sales tax on in one day. Despite the decent amount of games due this summer, there’s almost no interest. Titles like Tiger Woods PGA Tour 11 and Rock Band: Green Day are seeing a lukewarm reception pre-launch. May was too full; Red Dead Redemption and Super Mario Galaxy 2 were pretty much all people could afford while Blur, Split/Second, Lost Planet 2, ModNation Racers, and other games just sit. Even UFC Undisputed 2010 is feared to be selling below expectations.

High prices, a glut of software releases, and now a trend towards significant loss in the value of purchased games spells what could be the beginning of a major backfire for the industry. Publishers (and their short-sighted internet volunteer defense force) may not like the used game market, but the fact is that a fair amount of trades go towards buying new games within their launch windows. If trade-in values continue to decline– or if trades drop off significantly– new game sales will start to decline for many games not titled Halo, Call of Duty, or Grand Theft Auto. The disposable income just isn’t there. Trades and second-hand sales are what’s kept many facets of the industry alive through the brunt of the Great Recession. This gives consumers the opportunity to afford games that money isn’t otherwise available for.

The thing that gets me about this topic is the number of people who are apparently wealthy enough to tell people to “get a job” and buy new. Almost every website that allows comments and has a news story on this topic has a member of the Industry Defense Force to tell the rest of us that we need to get better jobs, save our money, or to just stop being pirates and buy new. It’s not just NeoGAF, which I usually relay as an example in entries like these. It’s Kotaku, Destructoid, Joystiq, and others. It’s amazing that these ignorant people fail to keep in mind that the national unemployment rate is still hovering near 10% with layoffs still sporadically occurring. They seem to forget that the average gaming consumer has grown up and now has bills to pay, including rent or mortgages, car payments, credit cards, medical insurance payments, rising food costs, fluctuating energy costs, and other life occurrences that take priority over buying a $60 video game. Credit is tighter than ever now, which curbs impulse purchases.

The bottom line is that the industry never adjusted to the consumer when the Great Recession began taking its toll and instead focused solely on its own bottom line and ways to inflate revenues.

When console gaming really took off in popularity during the late 1990s through about 2005 or so, it was all about trying to draw more consumers in. Even with the upgrade in technology from the 32/64-bit generation to the 128-bit era with the Dreamcast, PlayStation 2, Xbox, and Gamecube… game prices stayed relatively stationary (or even declined). Prices probably could have risen during the last console generation because the economy was fairly strong then, but the focus was on getting more people into games. It was an extension of Sony’s philosophy during the PlayStation era; nobody cared if you were new to gaming or had been playing for decades. The industry seemed to understand that more revenue naturally existed when the consumer base was large and varied.

Now, it’s solely about how much money that the industry can squeeze from consumers. They assume that nobody can live without games; they think that society is hooked and is willing to pay whatever is asked. At times, consumers have fallen into line. We’ve seen sets of plastic instruments sell despite a triple-digit price tag. We’ve seen map packs for Modern Warfare 2 sell like hotcakes for $15 each transaction, despite grumblings. We’ve seen some adaptation to the HD tax and its associated higher price points. All the while, it’s not just been cash and credit transactions that have fueled these sales; games and consoles have been traded in for store credit at various retailers and that credit has been used to buy both second-hand and new games, consoles, and accessories. This factor is generally overlooked, but it’s significant.

If publishers and developers continue to wage this war on used games and game rentals, there’s going to be irreparable damage. I can sit here and tell you that I’m close to the last straw and ready to just sell off my current-generation games and hardware in order to go all retro, but that’s minimal compared to what will happen. The reality is that the industry will see just how little money that consumers have to spend. Perhaps one out of every 10-15 games released in a month will sell with reasonable success while the other sit and wait for their inevitable markdown and subsequent financial loss– if they even sell at all. Lower sales will lead to smaller video game sections within stores, and retail chains will be less apt to buy substantial quantities of new games from IPs that don’t have proven sales track records. This will lead to further reductions in revenues for publishers and developers, leading to contractions, layoffs, and closures. The strongest will survive, of course, but many other companies will fold.

Of course, nobody sees this. Scenarios like mine are overreactions or extreme circumstances in the eyes of many.

Fine.

Continue to jump on this bandwagon as it careens down this slippery slope. There’s apparently plenty of room. Just remember that there’s no turning back.

Consoleation Reaction: NeoGAFfes

May 11, 2010 4 comments

Here are a couple of reaction posts from within the NeoGAF thread that discussed EA‘s Online Pass, which I covered at length yesterday.

First, words of wisdom from one Odrion:

buying used games makes you worse than a pirate because

1. you are a potential customer with actual capital
2. you are promoting an industry that profits by ripping off the work of developers

The other sage advice comes from Dark Octave:

Just buy the game new. Gamestop, where the majority of masses buy used games, sell most of their newly/semi-new released used titles for $55. Only $5 less than full price. If saving $5 is really that serious, maybe your hobby should be hunting for a better paying job.

Let’s take a good look at these posts, shall we?

I’m not sure how buying used games makes me worse than a pirate. For starters, I am legally purchasing software. A transaction involving either currency or trade of goods results in my acquisition of a game. It is not my responsibility as a consumer to pay the publisher anything for the game. That responsibility– if it even exists– falls on the reseller and the publisher. Where the money (or monetary value) goes after that transaction is not my concern. Also, how would you expect a specialty store like a GameStop to exist if it wasn’t for preowned game sales? Not that the pricing isn’t arguably a bit skewed in the chain’s favor, but there’s almost no profit margin when selling new product. Just like publishers, GameStop and similar resellers have a responsibility to their bottom line. The same publishers who decry used sales also advertise heavily in the same retail chains that they claim is damaging their bottom lines. Does wanting to buy the same product for less money– especially in a severe recession– make me worse than a criminal? Yes, I have “capital”, but it’s a limited amount… and if I can save a few bucks, I’m going to. The worst part for Odrion here is that I know that I’m not alone in wanting to buy games more cheaply. I guess we all should just put on our eye patches and walk the plank.

Dark Octave’s comment made a little bit of sense to start with. Yes, the difference is only $5– unless you have a discount card, like many resellers offer. Then that $5 more than doubles to $10.50. Since when is $10 not at least somewhat significant, especially these days? It can get you a movie ticket, a meal, a bit of gasoline if you’re running low, and many more things. Without the discount card option, I will admit that I likely wouldn’t be as inclined to buy recently released games at the usual price points that resellers tend to use.

The problem that I have with this post is the last sentence– and it underscores a disconcerting trend within the gaming community. Since when did video games become such an elitist activity? Are we really insinuating that if you can’t find a good job, then you need to find another form of entertainment? Are we really supporting the higher cost of video games instead of even questioning why the increases have occurred? Are we that eager to just bend over and take it because the industry allegedly needs us to in order for it to survive?

You know what? Maybe the answer isn’t to “get a higher paying job”. Maybe the answer is to fly the middle finger to the entire industry, sell all of my current video game consoles and software, and go retro. For the price of a new game, I can buy multiple games for older platforms. My gaming dollars will get more a lot more if I go back to the past, and I won’t have to deal with the crap that this generation has propagated. No DRM. No DLC. No having to be online. Fully-featured games (for the time, obviously). Then the industry will get none of my disposable income and, even in a small way, it’ll increase their losses. If that makes me worse than a pirate, then call me Jack Sparrow because I’m not going to ask for a raise or force myself to work overtime for games and consoles that aren’t necessarily worthy of my hard-earned money.

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