Saturday, May 10, 2014

Boss Battle: The plight of the armchair analyst.

unnh and another one....
It was about the beginning of the new console cycle, that I walked away from blogging about video games. To me, I felt like I didn't have anything else to talk about. During my tenure as a "games research neo journalist", I've engaged in verbal combat with analysts, CEOs, and even the gaming community, itself. I also interviewed gamer musicians and done things I never would of imagined. Hell, I even get emails and comments from readers about how well a job I had been doing on the writing, and I appreciate it all. That's more than enough reason to tip my hat and slink back into the shadows from whence I came, isn't it? But like Michael Corleone said in his often quotable moment in The Godfather III, "Just when I thought I was out, they pull me right back in!!"





I'm going to start by saying this; I never understood the logic of the community on things, and I doubt I'll ever understand the logic of analysts like Michael Pachter, who clearly has an agenda when he discusses his "findings" on his news blurbs. With all that being said, I still find myself completely at a loss with the things being said about Nintendo's financial report, Wednesday. Let's start with the article I originally read on Joystiq.

"Nintendo fell slightly short of the reduced financial projections it set in January, with the Wii U reaching 2.72 million shipments for the fiscal year ending March 31, 2014. However, the system remains way off Nintendo's initial projection of 9 million, so it's no surprise to see more conservative estimates for the fiscal year ending March 31, 2015 of 3.6 million units. That's 60 percent less than Nintendo originally projected for the previous year.

Total Wii U shipments are now up to 6.17 million, nearly a year and a half after the console launched. On the software side, Nintendo revealed figures of 32.28 million units to date, with New Super Mario Bros. U (4.16 million), Nintendo Land (3.09 million) and Super Mario 3D World (2.17 million) leading the way.

The Japanese company announced a net loss of 23.2 billion yen for the fiscal year, which converts to around $229 million. Nintendo noted net sales were lower than expected due to 3DS hardware and Wii U hardware and software not meeting targets, with the Wii U continuing to negatively affect profits due to its markdown in the West. Downgraded assets and increased spend on research and development also contributed to the net loss.

While the 3DS also fell below targets, it still shifted 12.24 million units across the last fiscal year, with the 2DS contributing 2.2 million to that figure. The handheld's total shipments to date are up to 43.3 million, with total software figures at just under 163 million. Pokemon X/Y (12.26 million) and Animal Crossing: New Leaf (7.66 million) were big sales drivers, but Nintendo noted strong figures for Luigi's Mansion: Dark Moon (3.98 million), The Legend of Zelda: A Link Between Worlds (2.51 million) and Mario & Luigi: Dream Team (2.08 million).

Looking ahead, the company noted the Wii U "still faces a challenging sales situation," and it's looking to stimulate its retail performance by making the GamePad have greater value as "the most important differentiator of Wii U." As for the 3DS, the forecast remains steady at 12 million units across the fiscal year. Overall, Nintendo projects revenues of 590 billion yen, converting to $5.8 billion, and a net profit of 20 billion yen, equal to $197 million."
This is the start of a set of debates that I have participated in on both Twitter, and Facebook. Both of them were started by comments which boiled down to the following.

  • Nintendo needs to go third party in order to save their company. AKA: Go the Sega route.
  • Developing only "child friendly" games is the reason why they are failing.
  • Nintendo didn't spend the advertising dollars needed to promote the Wii / secure third party support
  • Nintendo needs to scrap the Wiiu and put Iwata out.
  • Conform to what everyone else wants in order to build sales.

Before I get down to business, let me take a moment to crack my knuckles and stretch, grab a cup of coffee and get my game face on, because this is going to be a long day..
 Fifteen minutes later...

ah, that was refreshing... Now where was I? Oh yes. Let's take the bull by the horns, shall we?
 Argument 1: Nintendo needs to go third party

Never before  have I been so amused at the absurdity of this statement.

Let's use a similar company from the previous generations as an example. Sega suffered consecutive losses with multiple consoles; Sega CD, The 32X, the Saturn, and their final console, the Dreamcast.

The Sega 32X, and Sega CD, hardware add-on to the Genesis, had initial success, but faltered due to lack of software, and sabotaged by extensive hype generated about Sega's next offering, the Saturn (as well as the Sony Playstation.).

 The Saturn died off due to a mix of poor pricing ( $399 USD, which at the time was one hundred dollars more expensive than the Sony Playstation), lack of games for North America compared to Japan's launch library, and Sega Brass poisoning their own well. Things spiraled out so far that two years after release, Bernie Stolar, Sega of America's vice president of product development, went on at E3 '97 to state that the "Saturn was not our future".

The Dreamcast was another interesting bout of Sega's in-fighting. Wikipedia's entry on Bernie Stolar states that Sega of Japan wanted to oringially price the Dreamcast at $249 USD, in order to generate profits immediately. Stolar, who knew the mistakes of the Saturn, decided to price the Dreamcast at $199 USD. A daring move that lead to, as Wikipedia states "a then-unprecedented 500,000 consoles in its first week in North America". While this gave them a strong lead, the software library was fairly weak, and despite the powerful hardware, the hype from Playstation 2's launch rendered them asunder. This, plus the fact that they were still selling hardware at a loss, seems to be the nails in the coffin for Sega Corporation. 
These events eventually lead to Sega reaching their decision of going into software distribution, and abandoning the hardware market. The following information was taken from the Wikipedia entry;
"In late 1999, Sega Enterprises Chairman Isao Okawa spoke at an Okawa Foundation meeting, saying that Sega's focus in the future would shift from hardware to software, but adding that they were still fully behind the Dreamcast. On January 23, 2001, a story ran in Nihon Keizai Shimbun that said Sega was going to cease production of the Dreamcast and develop software for other platforms.[23] After the initial denial, Sega Japan then put out a press release confirming they were considering producing software for PlayStation 2 and Game Boy Advance as part of their "New Management Policy".[24][25] Then on January 31, 2001, Sega of America officially announced they were becoming a third-party software publisher.[1]

The company has since developed primarily into a platform-neutral software company, known as a "third-party publisher", that creates games that will launch on a variety of game consoles produced by other companies, many of their former rivals, the first of which was a port of ChuChu Rocket! to Nintendo's Game Boy Advance.

Arcade units are still being produced, first under the Sega NAOMI name, and then with subsequent releases of the Sega NAOMI 2, Sega Hikaru, Sega Chihiro, Triforce (in collaboration with Nintendo and Namco), Sega Lindbergh, and more recently, RingEdge.
Sega's financial trouble in the 1998–2002 time periods. This financial data came from their Annual Reports.[26][27][28][29]

By March 31, 2002, Sega had five consecutive fiscal years of net losses.[30] To help with Sega's debt, CSK founder Isao Okawa, before his death in 2001, gave the company a $695.7 million private donation,[31] and also talked to Microsoft about a sale or a merger with their Xbox division, but those talks failed.[32] On February 13, 2003, Sega announced plans to merge with Sammy, but plans fell through.[contradiction] Discussions also took place with Namco, Bandai, Electronic Arts and again with Microsoft.

The shift to software development affected Sega's Australian operations. Sega Ozisoft ceased to operate in its current form with Sega Enterprises selling its share in Sega Ozisoft and was bought over by Infogrames in 2002. This led to Infogrames having an Australian presence for the first time but decided to change the company name for its Australian operations to GameNation. Sega then went to find an Australian distributor, and made a deal with THQ Asia Pacific, who at the time until 2006 had deals with Capcom. In 2003 GameNation was changed to Atari Australia and then challenged THQ Asia Pacific to the distribution rights to Sega's IP's in Australia but failed. In early 2008 Sega Corporation announced that Sega would re-establish an Australian presence, effectively ending THQ's distribution of Sega's products in Australia and would be a subsidiary of Sega of Europe, rather than being a separate local subsidiary like Atari Australia, Nintendo Australia and THQ Asia Pacific.

In August 2003, Sammy bought the outstanding 22% of shares that CSK had,[33] and Sammy chairman Hajime Satomi became CEO of Sega. With the Sammy chairman at the helm of Sega, it has been stated that Sega's activity will focus on its profit-making arcade business rather than its loss-making home software development. In late December, Sega released Sonic Heroes selling over 2 million copies. It was the first multi-platform Sonic game, with identical versions on the Xbox, the PlayStation 2, and the GameCube.

In 2003, Wow Entertainment and Overworks were merged, as well as Sonic Team with United Game Artists and Hitmaker with Sega Rosso.

On July 1, 2004, Sega's 2nd party studios, Wow Entertainment, Amusement Vision, Hitmaker, Smilebit, Sega Rosso, United Game Artists and AM2 were reintegrated into Sega again, following the Sega-Sammy merger.

During mid-2004, Sammy bought a controlling share in Sega Corporation at a cost of $1.1 billion, creating the new company Sega Sammy Holdings, one of the biggest game manufacturing companies in the world.

On January 25, 2005, Sega's Visual Concepts, a studio Sega dubbed a "1.5" developer, was sold to Take-Two Interactive. Sega used the parlance "1.5" as a midpoint of sorts between first-party and second-party developer status: that is, a wholly owned studio that would otherwise be known as a first-party developer, but was outside of internal development teams. Visual Concepts was known for many Sega Sports games including the ESPN NFL Football series, formerly NFL2K. The sale also came with Visual Concept's wholly owned subsidiary Kush Games. Take Two subsequently announced the start of the publishing label 2K Games because of this purchase."
While Sega's trasition to Software did eventually get them out of the red, it took a lot to bring them out of the debt they made from themselves. The difference here is in the fact that Nintendo had fewer debts due to the low cost of hardware production in previous generations. Yes, this also includes the fabled Virtual boy, The "commercial failure" that only shipped 1.26m units in it's six month run, and the Gamecube which sold 21.74 million units worldwide before the end of it's seven year run.  



Most of the conversations about Nintendo needing to go third party cite Sega's history as an example. In reality, Sega was in a far worse financial shape than Nintendo has ever been. It's incredibly short-sighted to compare a year and a half of financial losses of the Wii U, with Five years of consecutive fiscal losses over the course of two peripherals and two consoles. The astounding part is, people still ignore the fact that despite the oft cited Virtual Boy fiasco there hasn't been a "commercial failure" in Nintendo's camp on that level since. The Wii last generation was Nintendo's highest grossing console since the NES. In fact, since the Wii set such an incredibly high standard one console generation ago, why would we immediately want the company to cut it's losses and fold it's hardware development interests? More importantly, Why would we want them to develop their software which is often lauded as "too kiddy for 'real gamers' to be included on consoles like the Playstation 4 or the Xbox One? The answer is pretty simple.
 Argument 2: Developing child friendly games are hurting Nintendo.

Nintendo's properties are successful, and are often considered to be a threat to the competition. We've heard the term before; "Underestimate Nintendo at your own peril!!". These words have echoed throughout the halls of the industry. Even in the Joystiq article, the company cited successful returns on their first party offerings. 
 "While the 3DS also fell below targets, it still shifted 12.24 million units across the last fiscal year, with the 2DS contributing 2.2 million to that figure. The handheld's total shipments to date are up to 43.3 million, with total software figures at just under 163 million. Pokemon X/Y (12.26 million) and Animal Crossing: New Leaf (7.66 million) were big sales drivers, but Nintendo noted strong figures for Luigi's Mansion: Dark Moon (3.98 million), The Legend of Zelda: A Link Between Worlds (2.51 million) and Mario & Luigi: Dream Team (2.08 million)."
With all this information The only logical reason why people still recite the same litany is because everyone knows that Nintendo's software sells. The biggest issue right now is not the fact that their software is all ages, it's clearly because there is a severe gap in the software release cycle. This was the same issue that plagued the Wii circa 2008. A big part of that problem lies in  third party developers that abandoned them at their time of need. During the Wii's run, third party devs complained of the hardware, and catered to the competition. This generation the complaints ranged from coding issues, to hardware specs, to any other excuse they could find. Honestly, I would go out on a limb to say it's money, since it's a well known fact that both Sony and Microsoft court third party developers like a Southern gentleman looking for dowry.

I could talk about how that's a bad thing, but it's business as usual. Some devs actually stuck around, and are firing back at the those fleeing developers. Going back one generation, We had developers downplaying the Wii's capibilities, and releasing PS2 ports. They cited the technological limitations of the hardware as the reason for this. But as the linked article shows, it's a bad carpenter that blames his own tools.
  

For the record, "Mature Gamer" is an oxymoron.
One more thing before I move onto the next topic; I find the discussions about Nintendo making only kid friendly games to be hypocritical. There are developers who only develop sports games (2k sports), There are developers that only create first person shooters (Infinity Ward / Turtle Rock), There are developers who create only fighting games (NetherRelms). Nintendo has gone on to make Sports games, Fighting games, platformers, Real time simulations,  Action RPGs, and through companies like Retro, they have also produced a successful First Person Adventure series in the Metroid Prime series. Each of these genres have proved successful for the company despite their family friendly appeal. When I look toward the competing systems. I see the same genres, but they have their "adult" slant, which is fine. Variety is the spice of life, but with that comes problems that a lot of those games fall into; Awkward. overdramatic. boring. It's no secret that if the competing consoles had the added variety of Nintendo's software, it would balance out both of the consoles software problems. However, this also shows Nintendo's strength of apealing to multiple demographics, while providing its consumers with things they can't get anywhere else.  There are other bloggers out there that state that the fault lies more in our own insecurities, and I can't disagree with this logic.

Argument 3: Advertising dollars

While I can argue most of the things surrounding what people say about the Wii U, the one thing that actually hits home is the lack of information surrounding the Wii U. "The commercials were awkward, and did little to nothing to provide the casual consumer any information about the nature of the new console" This is what people are saying on forums. With the 3DS, Nintendo did their best to get the product into the hands of the consumer, and that proved quite successful. With the Wii U, they tried to do the same. However, it's been claimed that the results aren't that successful.





The following videos you have just seen are some of the first commercials for the NES. It's pretty straight forward, and direct. "How will you play the Nintendo Entertainment System?" it says. Will you play Duck Hunt, or Hogans Alley? will you play Super Mario Bros.? Will you play with R.O.B. the robot? Will you use the NES Advantage? That's direct marketing. You're showing what's enticing about the product, and all the components. This was good marketing. Now let's look at the Wii introduction commercial.



Again, This is a clear showing of the console's capabilities, and the new control style of the Wii. Good marketing. Now let's look at the Wii U introduction commercial.



As you can see, the commercials are.... well... acutally not that bad. It shows the new console and the Wii U Pad, as well as the different ways you can play it's games. So what was the problem? actually, if you read the youtube comments there really wasn't much problem, except for the fact that some claim this ad was only shown sporadically. While I haven't the time to sift through television programs to see if these claims are valid, i'll give people the benefit of the doubt, and say that maybe there weren't enough advertisments on television. How ever would we be able to know more about the console? Well... we did have Nintendo Directs that flooded the internet post Nintendo's E3 reveal. Those did a good job in explaining to gamers what exactly the new console entails, but I'm guessing few of the expanded market from last generation view Nintendo Directs at all.

Demos were placed in just about every Best Buy and Wal-mart in the country. Where I work, we have people playing games on the Wii u kiosk all the time. Could Nintendo stand to do a bit more of an advertising rush? most likely, but Mario Kart 8 is steadily approaching (May 30th release) as well as a new Smash bros game for 3DS (stated for this summer). As it stands, Nintendo has a Mario Kart 8 bundle lined up, as well as an offer that allows people who purchased Mario Kart 8 to purchase a free game

Deals like this are proving that Nintendo are making an effort to appeal to new users, as well as sweetening the pot for gamers who haven't quite yet made the jump. We still don't have any idea what they have planned for Holiday 2014, either. Hopefully Project Treehouse, and a few other things planned to be revealed during E3 week will prove sucessful. While I don't think that will completely solve the problem of people thinking the Wii U is a periperal (I suspect that the information of that seem to be part of the expanded audience), I do think that a mix of media blitz and some strong software offerings could grease the wheels and cause some much needed momentum for the console's holiday performance.

Argument 3: Scrap the Wii U and fire Iwata

This is the strangest argument I have ever read.

The Playstation 3 had met with a hardware gap shortly after launch, glitched games like SOCOM 4, faulty console components and two console security breaches. The Xbox 360's technical problem, the Red Ring Of Death (RROD) had plagued the company since the release of the original Xbox. The core of the problem being anything from hardware failure to overheating to even AV cable errors. Despite all of this, neither company have ever considered scrapping the console itself and moving onto the next iteration. Yes, they produced slimmer modifications of existing hardware, but never once did Microsoft or Sony say "screw this!!" and jump to PS4 or Xbox One until it was clear that it was time to close the curtains on the previous console generation. So why on earth is this idea being thrown about with the Wii U? I would cite ignorance, but that's pretty clear.

Why would anyone state such a thing? Easy answer: The armchair analyst (much like the professional analyst) isn't involved in the intricacies of console development. They're not investing the millions of dollars that go into research and development. It's easy to apply the old "back to the drawing board" theory when you have no stake involved. Hell, even after purchasing a Wii U, if it doesn't strike your fancy, you can just take it to your nearest Gamestop and trade it in for something else. "My wii has been collecting dust after _______ ." We've all heard that old yarn. It's the battle cry of the so-called "jilted former Nintendo gamer" who decided that they should move onto greener pastures and play in the neighbor's yard. Meanwhile, a lot of gamers, like myself owned multiple consoles and usually occupied themselves with  discovering games they might of looked over while enjoying other games. Remember the old statement that the Wii was the companion console? People owning Wii60s or PSwiis got the best of both worlds, because they knew that sometimes consoles are going to have dry spells. 

Another theory: Last generation was pretty eye opening. A lot of people discovered that nothing was what it seemed when it came to who's saying what on forums. In my time researching information in order to deliver it to you, dear reader, I've found that marketing comes in different flavors. Any message said on a forum from "anonymous persons" could be simple marketing drones paid to destabilize one fanbase in order to convert users. This is marketing 101. Remember the movie "Thank you for smoking"? These things happen all the time, and we never really stop to realize this. The doom and gloom reception that has been plaguing Nintendo for the past couple years didn't come about due to the company's ineptitude. Niether was the strange suggestion about Nintendo going third party that sprung out of nowhere, almost overnight.

In order to fully understand what's going on, we have only to look to a single quote as made by The father of modern Psychology, William James.

 "There's nothing so absurd that if you repeat it often enough, people will believe it."

At this point you're probably asking "why didn't he say anything about Iwata?". Hmm.. What do you want me to say? From 2002 till now, he has went from meek unsure programmer turned president, to the person responsible for making the Wii what it became last generation. Even I know that you can't switch horses in the middle of a race, especially if the horse has a pretty decent track record for such a short period of time. Hiroshi yamauchi made his fair share of misteps as well, and the company still did well under his leadership. I wasn't behind Iwata at first. I thought he needed to not apologize so much, and he needed to be bolder, more fearsome like his predecesor. I was wrong. Satoru Iwata proved to be a very good fit with the company, and managed to turn things around almost overnight. Now they're pressed with a crisis; How to turn things around, again and sell a console that has some decent potential, but a lot of negativity surrounding it's misinformed audience. It's a large feat,  but not impossible.

Argument final: Conformity

Conformity is dumb. There, I said it. Making everything the same isn't going to help the market. Nintendo already knows this. This is the whole basis of why they claimed to not be competing in the "console wars" of the previous generation. No reason to. Nintendo's strength was never in making the most advanced PC-like entertainment device. They want to make awesome games, and cool hardware to play these on. Innovation seems to be the point of interest, here. So why would we want them them to be the same as everyone else? The video below is another example of this. Note that despite the fact that the temple of time is very shiny and realistic, it lacks the flair and style of the temples featured in games like Twilight Princess, and Skyward Sword.

            

If we take the diversity out of the market, will the market be more successful for pushing "more adult" and "more photorealistic" titles? How long would the industry survive on the same five games (FPS/Sports/Adventure/RPG/Driving) with a few other diverse offerings only coming along on the indie scene? While we're on the subject of conformity; If better processing power and better graphics are so important, why aren't more people leaving the console market to purchase PCs? One would suspect the price of upgrades being a barrier of entry, but the question is still there. Consoles aren't stable. they have shorter periods of existence, and according to whom you talk to they're constantly being foretold as being on the way out, and yet they're still selling. the answer to that, my friends, is practically the same reason as to why Nintendo shouldn't conform. They do the job that is needed for their intended audience.

---

I understand that Nintendo is in a rut this time around, and I'm obviously not going to say that they will discover the true meaning of Christmas and turn their fortunes around in thirty minutes or less. I do think that they will find a solution that will help them recoup a bit more of their losses, maybe even more than that. There seems to be a good lineup brewing, and that's definitely a good start. Building more awareness of the console and it's benefits could also help, but I feel like the real issue is going to be content that will keep the audience engaged, and a decent release schedule to make up for the publishing fiasco that was the launch period. And if i could add one more thing, Forget those fleeing third party developers, and put your indie devs in the spotlight. they're hungry and are more deserving of the chance.

Game On!

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