• 3Jun 07

  My Dilemma

  Wow, it's been a really long time since I've posted here, and that last one I just pasted from my other blog.  So to get everyone up to speed, I just got a Wii from my girlfriend for our anniversary (I know she's amazing).  Anyways, I have a bit of a dilemma when it comes to the system though, in that I don't really know what games I'll be getting for it now or in the near future.

  The problem is that I don't much care for mini games, which seem to be the heart and soul of the Wii right now.  I tend to prefer more traditional games and genres, such as action/adventure and RPGs.  I also own a 360, so most of the games I'm looking forward to in these genres will be on that platform, simply due to the better horsepower.  Of course, I picked up Zelda and I'm looking forward to Metroid.  But I don't really expect to be playing many games in those genres on the Wii.

  So there's my dilemma.  I'm looking for games that aren't in the traditional genres for the Wii, but I don't much care for most of the non-traditional genres.  Right now, I'm most optimistic about strategy/sim titles, as I've always enjoyed those on the PC, but there don't seem to be many big ones that have been announced so far.  There's MySims, which may be ok, but I'm a little pessimistic about anything that comes out of EA, especially spinoffs.  Then there's supposedly an Animal Crossing game down the line, but it doesn't even have an official title yet.  And there are a few Fire Emblem titles, which are always fun, but if you've played one game in that series you've pretty much played them all.

  So what about it?  Anyone have an idea about any Wii games coming out that might interest me? 

  • Posted Jun 3, 2007 9:26 pm GMT
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• 22Mar 07

  Why the console industry is backwards and what can be done about it

  This is a copy of an article that I originally posted here.

  One of the most basic rules of economics is that of supply and demand. Essentially, the value of a product fluctuates based upon a ratio of how scarce a product is and how much demand this is for the product. One of the main points of supply and demand is the the price will always return to an equilibrium. If supply falls then price will increase. Increased price reduces demand, which in turn reduces the price, etc... Although they don't realize it yet, the current console makers have their economics all wrong, yes even Nintendo. It may not be hurting them much at the moment, but things like this have a way of catching up with you when you're least prepared.
  
  In the last decade the laws of supply and demand have turned the music industry on its head. Just today came reports that CD sales are down an astonishing 20% from last year. The reason music sales have suffered so much is that with digital media, supply is, for all intents and purposes, infinite. If it costs you $50,000 to record an album, it costs you $50,000 regardless of if you sell only 1 album or 10 million albums. The problem is that when you plug infinite supply into a supply/demand equation, no matter what your demand is, the ratio becomes zero. So how do you make any money off of a product with a price of $0.00? There has been a lot of discussion about how this effects business models. Some of my favorite publications are The Long Tail, by Chris Anderson, and Techdirt's series on The Economics of Scarcity. It's still a relatively new area of study, but some ideas are starting to come to the forefront.
  
  One of the keys is that you have to connect the product with infinite supply with a product that is scarce. Take the iTunes Store for instance. Despite its massive sales, Apple makes almost nothing off of the iTunes Store. They have to charge something in order to pay the record labels' bill, but beyond that songs are sold almost at cost. But the songs sold on iTS wouldn't be worth much more than what they're currently sold for anyways because they're a product with infinite supply. However, the iPod is scarce, not just in terms of materials, but also in terms of it's design. By connecting the iTS to the iPod, Apple is able to make much better profits on the iPod than competitors can on their MP3 players. The cheap, but abundant songs, increase the value of the already expensive, but scarce iPod.
  
  This is also Google's business model. Search results are in infinite supply, but have almost no marketable value on their own. However, those search results bring peoples' attention, which is scarce and can be sold to advertisers for profit. This concept isn't limited to digital goods either. By now Starbucks is notorious for their "$5 latte". Everyone knows that it doesn't cost $5 to make that latte. In fact, it probably costs less than most people think, because coffee is not that scarce of a good. But it doesn't matter how much the coffee costs because Starbucks isn't really selling coffee anyways. They're selling something much more scarce, much more valuable, and something people will gladly pay out the nose for: convenience. Ever notice how Starbucks are seemingly everywhere you go? The location is the real product and that's what your really paying for when you plop down your $4.99.
  
  Which brings me to gaming. For a long time, console makers have subsidized their profits with game with game sales. This is something anyone with any connection to the industry should be familiar with. Microsoft, for example, sells every Xbox 360 at a loss of about $126, according to some estimates. Then it charges game makers approximately 11.5% of their revenue to sell games for the system in order to make back their losses and then some. This almost makes sense because disk based media is still semi-scarce, but I'll come back to that later.
  
  However, Microsoft sells other games over Xbox Live. Xbox Live Marketplace is made up of small games sold only as downloads for $5, $10, and $15 as well as other downloadable content. Sony and Nintendo both have similar systems with similar prices, but let's stick with Microsoft for the example. At GDC, Microsoft announced that Xbox Live users had activated (read purchased) more than 5 billion Microsoft Points, or $40 million at a rate of 80 points per dollar, and had a total of 6 million users. While these numbers initially sound impressive, this translates to only $6.67 per Xbox Live user. How could Microsoft increase their revenue from Xbox Live? They could raise their prices, but that would decrease demand and they would end up right back where they started.
  
  However, with digital content supply is infinite. It would cost Microsoft nothing but bandwidth and server costs to distribute it all to all 6 million Xbox Live users. So if Microsoft radically drops prices they can increase demand until this content is being distributed to nearly all Xbox 360 owners. Their revenues over Xbox Live Marketplace would probably either stay the same or drop even further, but that doesn't matter because there's another effect from making this content free and/or very cheap. Currently Microsoft sells the Xbox 360 at $400 because that's what they've determined it's worth to their customers. However, an Xbox 360 with access to thousands of pieces of free digital games and content would be worth quite a bit more. The value of the product with infinite supply enhances the value of the product with limited supply. How much more, I can't say. Perhaps $50, perhaps only $20, but certainly more than the $6.67 per unit that Microsoft is currently making. By radically decreasing the price of their online content, Microsoft can raise their revenues while simultaneously making their product more attractive to customers. Additionally, Microsoft decreases its risk in the process. Before they had to sell about 10 games before they recouped their losses. If they can raise the value of the Xbox 360 and therefore the price then they don't need to sell as many games before they bring their product out of the red.
  
  Even Nintendo, who supposedly sells their systems for a profit could benefit by changing their economics. In fact, they're in an even better position than Microsoft since most titles sold on the Virtual Console have long since recouped their initial investment and Nintendo owns or controls the rights to many of them. By making their titles free, or significantly cheaper, they could raise the price of their console, again making it more attractive to customers, increasing their profits, and lowering their risk.
  
  Earlier I mentioned how standard disk based games are only semi-scarce. My meaning is that, while their digital content can infinitely copied and transferred over the internet, the technology has not yet reached a point where transferring 9gb or more of data is feasible in most parts of the world. Technology does not stand still though, and this is something that will not last. Indeed, it is already starting to happen. While we have not yet seen full retail titles released in large numbers, smaller titles, like Gran Tourismo HD and Oblivion's expansion pack The Shivering Isles, are being already being released online only to console audiences. As more and more of this content makes it to online distribution, it makes less and less sense to continue subsidizing hardware, the scarce product, with software, the abundant product.
  
  I'm not even suggesting that software has to be free. Earlier this week, Forbes published an article breaking down the price of a game and where the revenue went. For a game with a $60 retail price, approximately 43%, or $26, goes to covering manufacturing costs, retail profits, and subsidizing console hardware. With digital distribution, if we stop subsidizing hardware with software, nearly all of that $26 in costs can be eliminated. Developers and publishers would sacrifice none of their profits, consumers get cheaper games, and console makers can make profits on selling their hardware.
  
  The economics of the console games business have been backwards for so long now that people just accept it as reality. In what other business can a product sell 24 million units, but post a $4 billion loss, and still be considered a relative success? The fate of the music industry should serve as a warning for the video game industry. Without proper economics behind their business models, companies will be eaten alive by the disruptive forces of the internet combined with the free market. The time to act is now, while digital distribution for games is still in its infancy. Companies who wait for it to mature can expect to be swept aside.

  • Posted Mar 22, 2007 7:06 pm GMT
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• 16Mar 07

  The adventures of Frederic Chopin

  Wow, Eternal Sonata is looking absolutely beautiful.  With titles like this, Blue Dragon, Fable 2, Lost Odyssey, and Mass Effect, the 360 could well be shaping up to be this generation's system for RPG lovers.
  • Posted Mar 16, 2007 8:54 pm GMT
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