Did sales in the final quarter of 2008? Did I miss something? Or did you miss the DS selling 3 million units in December? 3 million fucking units.
Did the recession cause people to buy many more Wiis rather than cheaper 360s? Nintendo is eating the rest of the industry alive, furthermore 3rd parties obviously bet on the wrong horses, I don't see how the recession comes into it.
I feel like you completely are missing the point. This isn't about "Nintendo versus the rest of the games industry". The Wii selling more than the PS3 and 360 are an interesting, but seperate, discussion. Not sure why you always feel a need to mention that. We're well informed about this, thankyouverymuch.
This is about EA not making as much as they thought they would. This is about the same thing happening with Sony. With MS. With Sega. With Nintendo. About studios closing down. And if you take a greater view of things, of job losses and cuts at IBM, Nissan, Toyota, Circuit City going out of business, etc.
But, please explain how the global recession is affecting gaming companies. Any data for that?
Well duh, go look at the last few pages of news reports and press releases. Heck, go look at Nintendo's own financial statements. There are many examples of companies missing earnings and sales forecast for a variety of reasons.
Now, you might think that it's only because companies didn't focus enough on making games for Nintendo's platform or due to the platform decisions made by Sony/MS/Nintendo or ballooning game budgets. While I certainly agree that this is a large part of it, I think it's absurd to think it's the only part.
Heck, I bet there is a game company out there that focuses on only making Wii games ... and I wouldn't be surprised at all if they are struggling too. I hope you don't think that "ooh, let's make Wii games!" is suddenly the magic bullet that is going to cure all. Because I think that would be a disaster for the industry.
Like a couple of people have already suggested, I think the general games industry is long overdue for some consolidation, some changes in business practices, etc. Frankly, I would love to see things like digital distribution kick off and really help publishers/developers increase their overall margins, while also having the side-effect of combating piracy. That would be a good thing, and that has little to do with "Nintendo vs HD consoles".
The latest issue of Game Informer has an article on how the recession could affect the gaming industry with some interesting quotes. (I get the magazine for free because they won't stop sending it to me, so, no jeers, eh? :P ) I couldn't find the article on their site, and I think scans are no-go here, so I've typed out the things I thought were interesting, and bolded a couple of interesting quotes, including a couple from Pachter.
....Arthur Bruno, ex-Iron Lore lead designer (now with Crate Entertainment), tells us that a game's success can unfortunately have little to do with a studio surviving. "Well, I think people assume that because a game is good, the developer must have profited from it. This isn't necessarily the case. When an independent studio signs a publishing deal, they're taking advances on royalties to cover the cost of development. Depending on how the development deal was structured, the publisher may have to earn back the cost of development and marketing before the developer receives any royalty payments. With the average full-scale PC or console title now costing around $14 million to develop, plus additional marketing expenses, a game could potentially sell a million copies without the developer earning any royalties."
....Overall, [Michael] Pachter believes that this will force snake-bitten publishers to take fewer chances and simply make fewer games. "The economics of publishing are now to the point where it doesn't make sense even to outsource a game--the reward is just not great enough, so you just don't make it."
....Moreover, Pachter thinks that things will get worse before they can get better. "Fewer overall games means less internal development, and that means consolidating studios, closing studios, and letting people go."
The question is why they are struggling. As has been pointed out, consumers are spending more than ever on video games. December had a 9% increase YoY in the US while a 19% increase overall for 2008.
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The question is why they are struggling. As has been pointed out, consumers are spending more than ever on video games. December had a 9% increase YoY in the US while 19% increase overall for 2008.
Well, I think the answer is clear. Some companies are doing gangbusters. Nintendo is obviously the biggest example. Others would be developers/publishers that happen to have the hit franchises (like Epic with Gears, Bethesda with Fallout and Oblivion, etc.).
Additionally, some companies are likely still growing, but not as much as they thought they would. Let's take Nintendo, for a theoretical example. Assume they thought they would sell X units for Y profit. So, they take out a budget of Z billion that they spread to their teams, etc. So, the recession comes along and it hits sales. They're suddenly selling X/2 units for Y/2 profit. Okay, so that may still be an amazing amount of money, especially compared to other companies. But they still have the problem that they allocated Z billion in budget. What do they do? Eat the difference? Or start cutting costs (closing studios, etc.)?
That's an example of how thought even things may seem good to an outside observer (us), it may actually be a challenging situation inside the company. Now imagine this playing out throughout dozens of companies, many of which are on a much thinner line regarding profit and revenue.
Second Kyoto office to focus on software and hardware development
Nintendo has revealed plans to build a new research and development centre in Kyoto.
According to a Nikkei report, the company invested £95 million last year and secured a 40,000 square foot plot of land in Kyoto's Minami-ku district, close to the company's headquarters.
Due to an increasing number of development staff, Nintendo moved from the Higashiyama district of Kyoto in 2000 to its current location, renaming the old office 'Kyoto Research Centre'.
It has been conducting research at both sites ever since.
According to the Nikkei report, the plans have been put in place to reunite these two facilities, which it's hoped will increase efficiency. It's unclear as to when construction of the new facility will begin.
Maybe the new one will be less soul crushing than most of Nintendo's buildings.
Rooks is pretty close to the target there with budgeting and not having the money come in that they expected for said budget.
I think also it is affecting them from ballooning expenses from HD development as well as other administrative costs that weren't a problem before (more speculation on the administrative costs than actual fact). Also, considering most game houses probably thrived on a loan business, where they loaned out money from a bank to make game x, sold game x to pay back the loan, and then took another loan out to start game y. With banks being in trouble and affected, they are having a harder time getting that loan for game y, despite the fact that they are selling game x just fine.
Some of it is greed, not willing to eat into profits but rather cutting costs to appease the shareholders, which is fine, because it's a business, not a goodwill program to provide us entertainment, but it makes the industry appear weaker than it could actually be. Plus it has a ripple effect of the people who are losing their jobs rather than keeping them.
EDIT: Post was better before the accidental "back" button.....
Second Kyoto office to focus on software and hardware development
Nintendo has revealed plans to build a new research and development centre in Kyoto.
According to a Nikkei report, the company invested £95 million last year and secured a 40,000 square foot plot of land in Kyoto's Minami-ku district, close to the company's headquarters.
Due to an increasing number of development staff, Nintendo moved from the Higashiyama district of Kyoto in 2000 to its current location, renaming the old office 'Kyoto Research Centre'.
It has been conducting research at both sites ever since.
According to the Nikkei report, the plans have been put in place to reunite these two facilities, which it's hoped will increase efficiency. It's unclear as to when construction of the new facility will begin.
Maybe the new one will be less soul crushing than most of Nintendo's buildings.
Maybe it's just a Japanese company thing, but their headquarters and buildings never seem very insipiring. My friends and I went to visit the Square-Enix headquarters in Tokyo, and it was extremely unassuming. Just a set of offices hidden in a generic office complex. It was the same way with the Square-Enix company store too. (Now inside in the very back, was very cool ... especially the sleeping Sepiroth, but those pictures are for another day ...)
We were thinking of visiting the Nintendo HQ in Kyoto, but figured it would be much the same thing. I haven't visited the Nintendo of America HQ in Redmond yet, but the outside of it at least is very bland and arguably "soul crushing". Friends who visit are always surprised by how low key Nintendo is. This is in direct contrast to the neatly manicured and sprawling campuses of a lot of US tech companies, such as Microsoft and Google. (You should see the campus that's nearly completely for E&D ... it is shaweeet)
These new, web 2.0 buildings that have become rather vogue since the dotcom bubble can't be cheap to build and maintain. That can't be helping matters any. I'd imagine cheap and unassuming to be more cost effective in the long run. Provided the networking infrastructure is sound and not too complicated to install.
These new, web 2.0 buildings that have become rather vogue since the dotcom bubble can't be cheap to build and maintain. That can't be helping matters any. I'd imagine cheap and unassuming to be more cost effective in the long run. Provided the networking infrastructure is sound and not too complicated to install.
In down years, I agree. People don't need swanky buildings and such, especially when the alternative is possibly losing your job. The problem is that when you're not in a down year (and recessions are still the exception, not the norm), companies need to be able to attract the best and brightest talent in the industry. Great campuses, along with good benefits and pay, go a long way from getting that smart college grad to go to your company instead of the competition.
For MS, and E&D in particular, the challenge is going to be getting folks to come work at MS instead of, say, Apple or Google. And even once they're hired, you want to be able to retain your top talent. Having a great office where you almost look forward to coming to work every day, is a good thing.
Now this is very much an American line of thinking. Japanese companies are quite different, culturally speaking. At least until recently, you joined a company out of school and you were pretty much a "lifer". There wasn't a mentality of jumping around companies, so not nearly as much of a need to have a great looking campus, etc. This is certainly changing over the past decade, as I've been told by friends in Japan though.
Second Kyoto office to focus on software and hardware development
Nintendo has revealed plans to build a new research and development centre in Kyoto.
According to a Nikkei report, the company invested £95 million last year and secured a 40,000 square foot plot of land in Kyoto's Minami-ku district, close to the company's headquarters.
Due to an increasing number of development staff, Nintendo moved from the Higashiyama district of Kyoto in 2000 to its current location, renaming the old office 'Kyoto Research Centre'.
It has been conducting research at both sites ever since.
According to the Nikkei report, the plans have been put in place to reunite these two facilities, which it's hoped will increase efficiency. It's unclear as to when construction of the new facility will begin.
Maybe the new one will be less soul crushing than most of Nintendo's buildings.
Maybe it's just a Japanese company thing, but their headquarters and buildings never seem very insipiring. My friends and I went to visit the Square-Enix headquarters in Tokyo, and it was extremely unassuming. Just a set of offices hidden in a generic office complex. It was the same way with the Square-Enix company store too. (Now inside in the very back, was very cool ... especially the sleeping Sepiroth, but those pictures are for another day ...)
We were thinking of visiting the Nintendo HQ in Kyoto, but figured it would be much the same thing. I haven't visited the Nintendo of America HQ in Redmond yet, but the outside of it at least is very bland and arguably "soul crushing". Friends who visit are always surprised by how low key Nintendo is. This is in direct contrast to the neatly manicured and sprawling campuses of a lot of US tech companies, such as Microsoft and Google. (You should see the campus that's nearly completely for E&D ... it is shaweeet)
I once walked by Lionhead Studios before I knew where they were without even knowing.
It's like in a business park. A generic fucking business park.
I haven't seen the Media Molecule offices but I do know that the Future publishing offices in Bath are like out of some post apocalyptic sci fi movie. I've seen prettier buildings in Kosovo.
Though speaking of developer hqs it was funny listening to invisible walls today and how the Gametrailers guys have a telescope pointing out of their fifth floor window directly into the meeting room window of Naughty Dog. Apparently they know 'everything' about Uncharted 2, bastards.
Additionally, some companies are likely still growing, but not as much as they thought they would. Let's take Nintendo, for a theoretical example. Assume they thought they would sell X units for Y profit. So, they take out a budget of Z billion that they spread to their teams, etc. So, the recession comes along and it hits sales. They're suddenly selling X/2 units for Y/2 profit. Okay, so that may still be an amazing amount of money, especially compared to other companies. But they still have the problem that they allocated Z billion in budget. What do they do? Eat the difference? Or start cutting costs (closing studios)
Wait, so your theory is that devs and publishers budgeted for a bigger than 20% increase in industry revenue? I'm sorry, that's laughable.
3rd parties have 2 problems, 1) they can't control their costs 2) they bet on the wrong horse. It really is that simple.
Let me put it this way: "HD gaming, it's not consumers don't want to settle down, they're just aren't that into you."
lowlylowlycook on
(Please do not gift. My game bank is already full.)
Additionally, some companies are likely still growing, but not as much as they thought they would. Let's take Nintendo, for a theoretical example. Assume they thought they would sell X units for Y profit. So, they take out a budget of Z billion that they spread to their teams, etc. So, the recession comes along and it hits sales. They're suddenly selling X/2 units for Y/2 profit. Okay, so that may still be an amazing amount of money, especially compared to other companies. But they still have the problem that they allocated Z billion in budget. What do they do? Eat the difference? Or start cutting costs (closing studios)
Wait, so your theory is that devs and publishers budgeted for a bigger than 20% increase in industry revenue? I'm sorry, that's laughable.
3rd parties have 2 problems, 1) they can't control their costs 2) they bet on the wrong horse. It really is that simple.
I have no idea what devs and publishers budgeted for. That's obviously very confidential data for many. Who knows? Maybe some companies did expect that growth? (It's certainly not unheard of, especially in the games industry which has seen double-digit growth for quite some time)
Much more likely is that a business budgeted for something like 10% growth and instead saw flat revenue. Or even losses. That's still bad.
Also, no one is denying the first 2 problems. We're just pointing out the obvious to everyone, except for you: 3) The economy sucks. People are buying less.
If we weren't in a global recession, would there still be a problem? Sure! How bad would it be though? It's hard to tell. Again, when every other industry is also tanking, it's pretty silly, stupid, and arrogant to think that you're not affected.
And once again, let me point out that even almighty Nintendo has had to reduce their forecasts. You can bet that they are wary about the state of the many other Japanese companies (like Nissan, like Toyota) who are seeing drastic reduction in sales and earnings. It would be completely idiotic to not take things into account and readjust as necessary. The smart thing to do, at least, would be to reset expectations to something lower and more conservative, with the hope that you can beat it later. Which is what they've done, and good for them.
Additionally, some companies are likely still growing, but not as much as they thought they would. Let's take Nintendo, for a theoretical example. Assume they thought they would sell X units for Y profit. So, they take out a budget of Z billion that they spread to their teams, etc. So, the recession comes along and it hits sales. They're suddenly selling X/2 units for Y/2 profit. Okay, so that may still be an amazing amount of money, especially compared to other companies. But they still have the problem that they allocated Z billion in budget. What do they do? Eat the difference? Or start cutting costs (closing studios)
Wait, so your theory is that devs and publishers budgeted for a bigger than 20% increase in industry revenue? I'm sorry, that's laughable.
A 20% increase in industry revenue doesn't mean a whole lot, if say, there was an equal or greater increase in the # of companies that make up the industry. Yes, lots of companies are going out of business, but that doesn't mean that there aren't just as many new companies getting started.
Isn't a lot of what made Nintendo reduce their forecasts an unusually strong yen, which hurts their overseas businesses? The same could be said of basically every other Japanese company.
American video game companies don't exactly have the same excuse if that's the case.
Yes, the economy is bad, but the huge deficits that Western 3rd parties have been piling up can't be exclusively be laid at the feet of the economy. The changing video game landscape and their inability to properly control costs also need to be blamed.
Second Kyoto office to focus on software and hardware development
Nintendo has revealed plans to build a new research and development centre in Kyoto.
According to a Nikkei report, the company invested £95 million last year and secured a 40,000 square foot plot of land in Kyoto's Minami-ku district, close to the company's headquarters.
Due to an increasing number of development staff, Nintendo moved from the Higashiyama district of Kyoto in 2000 to its current location, renaming the old office 'Kyoto Research Centre'.
It has been conducting research at both sites ever since.
According to the Nikkei report, the plans have been put in place to reunite these two facilities, which it's hoped will increase efficiency. It's unclear as to when construction of the new facility will begin.
Maybe the new one will be less soul crushing than most of Nintendo's buildings.
Maybe it's just a Japanese company thing, but their headquarters and buildings never seem very insipiring. My friends and I went to visit the Square-Enix headquarters in Tokyo, and it was extremely unassuming. Just a set of offices hidden in a generic office complex. It was the same way with the Square-Enix company store too. (Now inside in the very back, was very cool ... especially the sleeping Sepiroth, but those pictures are for another day ...)
We were thinking of visiting the Nintendo HQ in Kyoto, but figured it would be much the same thing. I haven't visited the Nintendo of America HQ in Redmond yet, but the outside of it at least is very bland and arguably "soul crushing". Friends who visit are always surprised by how low key Nintendo is. This is in direct contrast to the neatly manicured and sprawling campuses of a lot of US tech companies, such as Microsoft and Google. (You should see the campus that's nearly completely for E&D ... it is shaweeet)
I once walked by Lionhead Studios before I knew where they were without even knowing.
It's like in a business park. A generic fucking business park.
I haven't seen the Media Molecule offices but I do know that the Future publishing offices in Bath are like out of some post apocalyptic sci fi movie. I've seen prettier buildings in Kosovo.
Though speaking of developer hqs it was funny listening to invisible walls today and how the Gametrailers guys have a telescope pointing out of their fifth floor window directly into the meeting room window of Naughty Dog. Apparently they know 'everything' about Uncharted 2, bastards.
Leigh Loveday at Rare once posted this photo of the outer gates to the Rare complex (along with scribbles from people who sit next to him):
Isn't a lot of what made Nintendo reduce their forecasts an unusually strong yen, which hurts their overseas businesses? The same could be said of basically every other Japanese company.
American video game companies don't exactly have the same excuse if that's the case.
Yes, the economy is bad, but the huge deficits that Western 3rd parties have been piling up can't be exclusively be laid at the feet of the economy. The changing video game landscape and their inability to properly control costs also need to be blamed.
And why do you think the yen is unusually strong? When the global economy is out of whack, lots of things happen. Currency fluctuations are among then.
I do think it goes beyond just currency issues though. For example, it doesn't explain why fewer Wiis were sold in Japan than Nintendo had expected (around the order of a million).
Anyway, I'm certainly not a fan of "ooh, let's blame bad business purely on the economy". That's silly. But so is the opposite, assuming that the games industry is somehow completely independent of global economic conditions. For those that want to know more about how this it's affecting businesses across the world, I really suggest checking out the business section of your friendly neighborhood newspaper or website. For example, I've got the Silicon Alley Insider in my RSS feed and it's pretty sobering to see how many companies are being affected, across numerous industries.
Just so folks here have a better idea of what the frak we're in for, and because folks here like graphs, here's a very interesting article and chart that covers the job losses from the current recession compared to others this century:
The dramatic chart Nancy Pelosi's office put out comparing job losses so far in the current recession with those in 2001 and 1990-1991 has gotten a lot of play in the Internets. As well it should–it paints a dramatic picture (job losses in the current recession have been much more severe). But we already knew this recession was a lot worse than the last two. It would be far more informative to have comparisons with the deeper recessions of 1981-1982 and 1974-1975. So here's a chart of what happened to payroll employment during every recession since the mid-1970s. I've done everything in percentage terms because there are a lot more people in the labor force now than in the 1970s, but otherwise followed the format of the Pelosi chart:
What do we learn? So far the fall in employment is comparable to that in 1974-1975 and 1981-1982. If the comparison holds, the declines should end within the next four or five months. But we of course have no idea whether the comparison will hold. Past performance is no guarantee of future results.
Another lesson brought home by the chart is how weak the recovery from the 2001 recession was. It was a mild recession, but it took four years for employment to return to its February 2001 peak. Setting aside the worst-case scenario of a continued downward employment spiral that puts 1974-1975 and 1981-1982 to shame, a recession that combines a severity akin to that of 1974-1975 and 1981-1982 with a recovery as anemic as 2001-2002-2003-2004-2005 would be not a whole lotta fun.
See that light blue line? That's us. Now. We're already far beyond the '01 recession that, arguably, didn't affect the games industry that much. We're in the territory of the '81 recession, which is a bit scary because it's near the date of the 1983 North American video game crash. (Granted, I don't think we're due for another such crash of that magnitude, but it's an interesting coincidence nonetheless)
Now, I think it would be absolutely crazy to take a look at that and think that it has no bearing on any industry. Again, I'm not saying that it's the sole reason why many game companies are struggling (far from it in fact), but to deny that it's a factor is like, well, an ostrich sticking his head in the sand.
I think what I was getting at is that the main reason for Nintendo missing revenue goals was macroeconomic in nature, mostly out of their hands. Still, even missing their revenue goals they are a profitable company and will likely continue to be in the near term.
Electronic Arts, probably the third biggest publisher worldwide lost 800(?) million dollars the last quarter. They obviously are working in the same generally shitty conditions as Nintendo is, but they're also not hurt as badly by currency fluctuations since a majority of their income doesn't come from outside their country (unless Europe is a larger market than the US, which I don't believe is true). That large of a deficit, I think, points to the fact that there is a lot more wrong with the industry right now than just the shitty economy.
The economic woes obviously magnify the issues to a large extent, but I think these issues would have come to a head fairly soon either way.
I think what I was getting at is that the main reason for Nintendo missing revenue goals was macroeconomic in nature, mostly out of their hands. Still, even missing their revenue goals they are a profitable company and will likely continue to be in the near term.
Electronic Arts, probably the third biggest publisher worldwide lost 800(?) million dollars the last quarter. They obviously are working in the same generally shitty conditions as Nintendo is, but they're also not hurt as badly by currency fluctuations since a majority of their income doesn't come from outside their country (unless Europe is a larger market than the US, which I don't believe is true). That large of a deficit, I think, points to the fact that there is a lot more wrong with the industry right now than just the shitty economy.
The economic woes obviously magnify the issues to a large extent, but I think these issues would have come to a head fairly soon either way.
Oh, I certainly agree. I don't mean to imply that Nintendo was doing anything wrong for missing their revenue goals. Certainly a lot is outside their control. I just wanted to point out that the same can be said for other companies, to a degree.
I think pretty much everyone here is on the same page, except for maybe lowlylowlycook. The economy is bad. It just makes an already crappy situation even worse. That's all.
Additionally, some companies are likely still growing, but not as much as they thought they would. Let's take Nintendo, for a theoretical example. Assume they thought they would sell X units for Y profit. So, they take out a budget of Z billion that they spread to their teams, etc. So, the recession comes along and it hits sales. They're suddenly selling X/2 units for Y/2 profit. Okay, so that may still be an amazing amount of money, especially compared to other companies. But they still have the problem that they allocated Z billion in budget. What do they do? Eat the difference? Or start cutting costs (closing studios)
Wait, so your theory is that devs and publishers budgeted for a bigger than 20% increase in industry revenue? I'm sorry, that's laughable.
A 20% increase in industry revenue doesn't mean a whole lot, if say, there was an equal or greater increase in the # of companies that make up the industry. Yes, lots of companies are going out of business, but that doesn't mean that there aren't just as many new companies getting started.
The thing you're ignoring Rooks, is that sales aren't down, they're UP. You can't say people are spending less on the video game industry because that simply is not true. Maybe this is a case of too many hands reaching into the same cookie jar, or Activision hogging all the money, but to say wary consumers is the reason for the current struggles of many video game companies is fabricating an excuse. Certain companies struggling to meet sales projections doesn't mean that the consumers were buying less, it means they were spending elsewhere.
20% growth in revenue does mean a lot. It means the economy isn't the source of the problems. If someone starts up a company to compete in the same area, it spreads the money thinner. This effect will happen regardless of the economic conditions.
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The economy certainly affect things, but I would agree that a larger problem is over saturation. Not just over saturation of games, but over saturation of consoles.
It's very possible that neither of the HD twins will turn a net profit at the end of their life cycle. Because there simply isn't enough demand for HD gaming consoles. The Wii will likely end up selling more than both combined.
I just think that though some contraction was necessary, the buying up of tons of smaller developers has left a lot of companies large, hulking masses unable to move swiftly to react to the market.
Also, as I've said before, the split market, and the lack of a PS2-like system to make the likelihood of failure a lot smaller.
Of course, what made the PS2 as successful as it was is the full-fledged support of developers and the general buying public.
This time, the developers picked one horse and the public picked another one, leaving us in an odd situation.
What the solution is I'm not sure, but cost-cutting will have to done somewhere. At the very least, assets and engines are going to have to be leveraged and recycled more heavily that ever in order to make games at the end of the generation a better chance to make money. Also, a smaller generational leap to avoid the nightmarishly high costs of starting a generation---let developers slowly evolve and update their existing assets as opposed to having to start fresh yet again.
The thing you're ignoring Rooks, is that sales aren't down, they're UP. You can't say people are spending less on the video game industry because that simply is not true. Maybe this is a case of too many hands reaching into the same cookie jar, or Activision hogging all the money, but to say wary consumers is the reason for the current struggles of many video game companies is fabricating an excuse. Certain companies struggling to meet sales projections doesn't mean that the consumers were buying less, it means they were spending elsewhere.
20% growth in revenue does mean a lot. It means the economy isn't the source of the problems. If someone starts up a company to compete in the same area, it spreads the money thinner. This effect will happen regardless of the economic conditions.
Again, 20% is an aggregate. It's across the entire industry. It's not like every company is seeing 20% increase in earnings. If that were the case, I'd agree. But as we very well know, it's companies like Nintendo and Activision-Blizzard that are responsible for much of the growth. If you're not them, it can be a problem. And even they aren't totally immune to the effects of the economy either.
And as we've discussed before, even if a company is growing, if it wasn't as much as expected, that's an issue. There are likely a lot of companies out there that expected to grow 10% and remained flat. That's still a problem.
This is why looking at total industry numbers in absence of everything else can be problematic. Essentially, you're spinning the data. Sure, if all you did was look at the year-over-year 20% number, it's easy to think that everything is fine. But obviously all of the missed earnings, lowered sales estimates, closing studios, etc. tell a different story.
EDIT:
I think one problem is that you're thinking it's a mutually exclusive type of thing, that consumers are either spending money in other categories (the Wii) or they aren't spending at all. I don't think that's the case. Many consumers have certainly shifted their spending to the Wii, which is why companies like Sony are having massive problems. I agree. But I also contend that there are also fewer consumers spending as well. Have you see how bad retail sales tanked this holiday? It was bad. It's silly to think that games weren't affected by it. Instead of buying 3 games for the holiday, maybe Bob only bought 2. Instead of paying for that new copy of Fallout 3, Charlie traded in and got a used one instead.
The thing you're ignoring Rooks, is that sales aren't down, they're UP. You can't say people are spending less on the video game industry because that simply is not true. Maybe this is a case of too many hands reaching into the same cookie jar, or Activision hogging all the money, but to say wary consumers is the reason for the current struggles of many video game companies is fabricating an excuse. Certain companies struggling to meet sales projections doesn't mean that the consumers were buying less, it means they were spending elsewhere.
20% growth in revenue does mean a lot. It means the economy isn't the source of the problems. If someone starts up a company to compete in the same area, it spreads the money thinner. This effect will happen regardless of the economic conditions.
Again, 20% is an aggregate. It's across the entire industry. It's not like every company is seeing 20% increase in earnings. If that were the case, I'd agree. But as we very well know, it's companies like Nintendo and Activision-Blizzard that are responsible for much of the growth. If you're not them, it can be a problem. And even they aren't totally immune to the effects of the economy either.
And as we've discussed before, even if a company is growing, if it wasn't as much as expected, that's an issue. There are likely a lot of companies out there that expected to grow 10% and remained flat. That's still a problem.
This is why looking at total industry numbers in absence of everything else can be problematic. Essentially, you're spinning the data. Sure, if all you did was look at the year-over-year 20% number, it's easy to think that everything is fine. But obviously all of the missed earnings, lowered sales estimates, closing studios, etc. tell a different story.
The reason it has been said that the video game industry is recession proof is that it is theorized that consumers won't be affected in their decision to buy video games. The 20% growth is evidence of this. Individual companies won't necessarily get a piece of that pie and thus they can struggle even when the money is still pouring in. If a company doesn't meet its projections, there will be problems. Failure to meet those projections however isn't economy based in this case. As I previously theorized, perhaps there are simply too many hands reaching in the cookie jar. Spreading the same amount over a wider area is going to cause lots to miss their projections and fail financially. This doesn't mean the poor economy played a part. Heck, most of EA's losses were deferred to this quarter which means this quarter sucked badly for them because of what happened long before the economy took a nose dive.
Also, Sony's struggles are more based in their other divisions than in their video game department.
And the NPD doesn't track used sales do they? NPD is where the 20% growth number is coming from. Basically consumers are spending more on new games than ever before.
Rakai on
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EDIT:
I think one problem is that you're thinking it's a mutually exclusive type of thing, that consumers are either spending money in other categories (the Wii) or they aren't spending at all. I don't think that's the case. Many consumers have certainly shifted their spending to the Wii, which is why companies like Sony are having massive problems. I agree. But I also contend that there are also fewer consumers spending as well. Have you see how bad retail sales tanked this holiday? It was bad. It's silly to think that games weren't affected by it. Instead of buying 3 games for the holiday, maybe Bob only bought 2. Instead of paying for that new copy of Fallout 3, Charlie traded in and got a used one instead.
If there are fewer customers buying in general, it would have to mean that the consumers that are buying are buying more if the 20% growth number is correct. I know the gap between rich and middle-class has been widening, but I don't know that this really affects video game sales that much.
Part of me wants to say that games like Wii Fit, Rock Band 2 and Guitar Hero: World Tour are inflating the average sell price of games, but then again that would likely be counteracted by cheaper 360's and less sales of the PS3, as well as the fact that Wii games made up a bigger percentage of game sales than ever before, which would likely lower the average sell price thanks to the lower price point.
See that light blue line? That's us. Now. We're already far beyond the '01 recession that, arguably, didn't affect the games industry that much. We're in the territory of the '81 recession, which is a bit scary because it's near the date of the 1983 North American video game crash. (Granted, I don't think we're due for another such crash of that magnitude, but it's an interesting coincidence nonetheless)
o_O
Post hoc ergo propter hoc
Wow, just wow.
o_O
Really?
OK, back to the subject at hand, I don't see how any business that loses money in an industry that had revenue growth at 20% from the last year can blame anyone or anything but themselves if they are losing money. Furthermore up till now, it was accepted that the game business was if anything countercyclical.
If the crisis had occurred earlier, when the 360 and PS3 were more expensive than the Wii then perhaps someone could have convinced me that in making console gaming more expensive Sony and MS had managed to make HD gaming vulnerable to a recession. But the Wii isn't even the cheapest console out there anymore so I think that line of reasoning is out, except to perhaps explain some of the PS3's problems. Even that is probably more due to direct competition with the 360.
Beyond that I guess I almost think it is a matter of definition. You can't claim to be adversely affected by a recession unless at the very least your market's growth has slowed significantly. It just seem absurd to claim that when your industry is setting records for sales month after month after month.
Really I would just like someone who thinks differently to provide evidence that without the recession the games industry wouldn't have brought in less money, let alone evidence that they would have brought in more.
I think one problem is that you're thinking it's a mutually exclusive type of thing, that consumers are either spending money in other categories (the Wii) or they aren't spending at all. I don't think that's the case. Many consumers have certainly shifted their spending to the Wii, which is why companies like Sony are having massive problems. I agree. But I also contend that there are also fewer consumers spending as well. Have you see how bad retail sales tanked this holiday? It was bad. It's silly to think that games weren't affected by it. Instead of buying 3 games for the holiday, maybe Bob only bought 2. Instead of paying for that new copy of Fallout 3, Charlie traded in and got a used one instead.
You need to come to terms with the fact that in general retail sales were down means there was a recession but games had record sales and that is because the games industry is essentially immune to recessions. That doesn't mean there is no effect, but it isn't even clear that the overall effect isn't positive instead of negative.
Your contention about gaming sales goes against everything we've learned from NPD and Chart track. Again Japan might be different but it isn't obvious that the drop in sales there has anything to do with the recession either. Rather the HD consoles have totally failed and the Wii is only a comparative success, thus making for a bad "gaming generation" cycle.
Finally consumers haven't shifted their spending to the Wii. For one, consumers have simply bought every Wii shipped to the US and that has been the case since launch. For two, 360 sales were mediocre before the Wii even launched and the PS3 did far far worse before the crisis than since it started. Sales of the 360 and PS3 seem more determined by price cuts than by any macro economic goings on. Which is no surprise.
Again, 20% is an aggregate. It's across the entire industry. It's not like every company is seeing 20% increase in earnings. If that were the case, I'd agree. But as we very well know, it's companies like Nintendo and Activision-Blizzard that are responsible for much of the growth. If you're not them, it can be a problem. And even they aren't totally immune to the effects of the economy either.
So you do realize that a "recession" is an aggregate thing by definition, right? There is a reason that not every company is seeing 20% revenue growth and that reason is called competition. It happens all the time some companies do better than others. But there is an additional piece of this puzzle and that is the fact that cost growth is out of control and that means even the companies that are seeing even record revenue are failing to make a profit at all.
Again neither some companies out competing others nor unchecked growth in costs have anything to do with a recession or lack thereof.
lowlylowlycook on
(Please do not gift. My game bank is already full.)
Wasn't there a chart from Nintendo which said they accounted for 99% of industry growth in 2008? If thats the case and other big companies grew (Activision Blizzard) then the difference (aka LOSS) has to come from everyone else. That's a significant amount of money
The industry might be recession proof but people are shifting there spending to only the best of the best games. When you have 20+ A+ games released in a small window, only the strong survive.
Aside from Nintendo, its a Dog-eat-dog industry. You only survive be beating your competitors out of it, which is not the case for other industries.
Mgslee on
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0
Dr Mario KartGames DealerAustin, TXRegistered Userregular
edited February 2009
Thats about what Iwata said recently. People are buying from the top of their list even more and widening the gap between what sells and what doesnt sell.
See that light blue line? That's us. Now. We're already far beyond the '01 recession that, arguably, didn't affect the games industry that much. We're in the territory of the '81 recession, which is a bit scary because it's near the date of the 1983 North American video game crash. (Granted, I don't think we're due for another such crash of that magnitude, but it's an interesting coincidence nonetheless)
o_O
Post hoc ergo propter hoc
Wow, just wow.
o_O
Really?
Ugh. I guess you don't know how to read. Notice how I said it was merely an "interesting coincidence"? I like how you try to discredit my post with an attack like this. Smooth move.
Anyway, any thoughts on the fact that we're in a pretty bad recession? (Assuming you actually read the article or looked at the chart) Or do you not believe that's actually the case?
OK, back to the subject at hand, I don't see how any business that loses money in an industry that had revenue growth at 20% from the last year can blame anyone or anything but themselves if they are losing money. Furthermore up till now, it was accepted that the game business was if anything countercyclical.
If the crisis had occurred earlier, when the 360 and PS3 were more expensive than the Wii then perhaps someone could have convinced me that in making console gaming more expensive Sony and MS had managed to make HD gaming vulnerable to a recession. But the Wii isn't even the cheapest console out there anymore so I think that line of reasoning is out, except to perhaps explain some of the PS3's problems. Even that is probably more due to direct competition with the 360.
Once again, you're missing the point, as well as bringing in the whole platform console war in again. This is not about the "console warz". You keep bringing in arguments regarding the 360 and PS3 and Wii, forgetting that the industry is more than just Nintendo, Sony, and MS.
This is about everyone. Game developers and publishers, such as EA and Sega, many of which that are multi-platform, struggling. It also includes the platform holders themselves lowering expectations and revising forecasts, such as Sony and Nintendo. The fact that you keep dragging this back into a 360/PS3/Wii (or HD/non-HD) sales discussion tells me that you don't really understand the issue.
Beyond that I guess I almost think it is a matter of definition. You can't claim to be adversely affected by a recession unless at the very least your market's growth has slowed significantly. It just seem absurd to claim that when your industry is setting records for sales month after month after month.
Really I would just like someone who thinks differently to provide evidence that without the recession the games industry wouldn't have brought in less money, let alone evidence that they would have brought in more.
Question:
I’d like to ask about the financial forecast of the current fiscal year and your prospect on the next fiscal years and afterward. As for this fiscal year, you said that Wii and DS hardware are increasing its sales even after the turn of the year. However, when I subtract the shipment numbers of the past 9-months from your annual shipment forecasts, both DS and Wii show slowing ratio of growth. You are also expecting approximately a 20% decrease in software for both platforms in comparison with the corresponding quarter a year ago. Tell me about the reason of this discrepancy, and how have the software sales been going since the start of this new calendar year?
Iwata:
For sometime now, I have repeatedly said that the game business is comparatively less susceptible to the changes in the economy but the gap between what sells and what doesn’t sell become obvious (in an economic downturn.) The products that are listed at the top of a consumers’ wish list can sell at the same level in a good economic time as during a bad economy. But those ranked #5 or #10 on the list become the receiving end of the impact of the changing economies. As a result, I am pretty certain that there must be software that our third parties have prepared to sell, which did not live up to their original expectations. The rather conservative impression Nintendo received during our preliminary meetings with software publishers must have reflected such background (as software publishers are making a purchase order plan based upon the intentions of their distributors and retailers as well as by taking into considerations the situations surrounding the distributors.)
He's a smart guy. The way I read it, yes, the games industry is "comparatively less susceptible to the changes in the economy" (and I agree). But, it's not immune. In a bad economy, consumers are less likely to spend money on games that aren't surefire hits (for example, the "#5 or #10 on the list"). As a result, some of the third parties that Nintendo have talked to have been on the "receiving end of the impact of the changing economies". As a result, Nintendo has decided to change their forecast for the future.
And yes, this is precisely what DMK was referring to in the post below.
Anyway, I chose not to respond to the rest of your reply because my post is already too long, and I think I've already made my point. Honestly, if you want to stick your head in the sand and think that the games industry is just fine and that every company aside from Nintendo just sucks, then sure, whatever floats your boat. As they say, we can "agree to disagree".
While reading the rest of the statement, I came upon another good gem from Iwata-san:
We announced the new financial forecast as the result of reviewing many aspects comprehensively, including what I just mentioned. So, the current situation includes an aspect that it is experiencing a momentary repercussion of the large shipments the software publishers made at the end of 2008 by looking forward to large sales volume. I do not think that the industry has entered into a structural spiral where software cannot sell. In fact, in the U.S., (even in this bad economy,) they realized approximately 20% growth over 2007. So, I believe there is nothing for us to be pessimistic about.
He's spot on. I very much agree with Iwata. Despite the sour economy, there's much to be optimistic about regarding the overall game industry. The industry as a whole is still growing in a time where many other industries are shrinking. This is a very good thing. I am very happy that I'm in this industry and not in others.
The challenge, of course, is that the growth is not even. There is that report, after all, that Nintendo alone is responsible for 99% of it, which doesn't leave much for the rest. But the optimistic side of me says that growth is still out there for companies that get it. (The games unit in MS actually happens to be one of the few companies that is growing pretty decently ... folks like you forget the income that come from things like subscriptions, downloads, advertising, etc. There's a lot more to earnings than mere console sales ...)
Also, Iwata says later: "Next, about the next fiscal year, now that the situation surrounding us is rapidly changing, I do not want to make any irresponsible forecast today." Of course not. Things are really bad out there, and it would be irresponsible not take that into account. That's really all I'm saying.
Finally, another quote:
It is too premature to tell how much momentum Wii will have at the end of this calendar year. My job is to consider how we can prevent sales from sliding even with today’s appreciation of the yen and even consider how we can increase sales. I will not provide you with any concrete figures today because this is not our financial forecast announcement conference for the next fiscal year. I am, however, enthused to come up with plans in order to realize our ideal sales in the next fiscal year and, to do so, to identify and start executing the necessary plans from the start of this year.
I'm not sure when Nintendo will report their volume forecasts, but that will certainly be interesting to watch.
This is about everyone. Game developers and publishers, such as EA and Sega, many of which that are multi-platform, struggling. It also includes the platform holders themselves lowering expectations and revising forecasts, such as Sony and Nintendo. The fact that you keep dragging this back into a 360/PS3/Wii (or HD/non-HD) sales discussion tells me that you don't really understand the issue.
But that is part of the equation, to be honest. Despite the fact that many of the struggling companies are multi-platform, they have invested a disproportionate amount of their money into making games and creating assets for the PS3 and 360. The preeminence of Wii is at least tangentially responsible for the failure of many of these games, so the "console warz" aren't an unimportant part of this conversation.
Which was a double whammy--higher expenses for making games but less of a market for those games than they thought.
I hate what happens to this thread when we don't have real numbers/stories to talk about.
It's interesting to see how fast the pace is going on such little news. Perhaps JC took a new position to become offical PA spokesperson for the MS opinion.
I don't really believe this, but I will say this: I payed way more attention to you when you had the Kyon avatar, not the avatar avatar. :P
This is about everyone. Game developers and publishers, such as EA and Sega, many of which that are multi-platform, struggling. It also includes the platform holders themselves lowering expectations and revising forecasts, such as Sony and Nintendo. The fact that you keep dragging this back into a 360/PS3/Wii (or HD/non-HD) sales discussion tells me that you don't really understand the issue.
But that is part of the equation, to be honest. Despite the fact that many of the struggling companies are multi-platform, they have invested a disproportionate amount of their money into making games and creating assets for the PS3 and 360. The preeminence of Wii is at least tangentially responsible for the failure of many of these games, so the "console warz" aren't an unimportant part of this conversation.
Which was a double whammy--higher expenses for making games but less of a market for those games than they thought.
Yup! And I completely agree. But like I said before, this isn't an "either/or". Are the "console warz" an important part of the conversation! You betcha! I've never said otherwise. I'm just pointing out that, gee whiz, the fact that the rest of the world economy going to hell, has to matter in some way as well.
Now, how much that impacts the industry ... is a good question. I don't think it's a negligible amount, nor do I think it's a positive effect. And if the graph I posted earlier is any indication, the recession still has a ways to go. Even if we're not seeing much effect over the past 6 months, who's to say that it won't have a much larger impact over the next six? Nintendo is certainly smart enough to lower their forecasts, and many other companies are following suit (cutting expenses, etc.).
Hmm, I guess when you take a look at it that way, the recession is already making its effects known. If not in previous sales, but in slashing costs, fewer dev teams, consolidation, and more. And I think we all agree that this is arguably a good thing.
@Xenogears
Someone in the Secret Santa thread gave my Kyon avatar a santa hat, so I used that for a while. Then I forgot where I placed my original Kyon avatar. I've been too lazy to make a new one. I'm thinking of finding another anime character to replace it with anyway. Suggestions?
EDIT:
Done! A cookie for whoever manages to guess who that is.
Well given the quotes from Iwata, it'll be very interesting to hear what he says at GDC.
We can praise Nintendo for growing the industry but even they are cautious about the road ahead.
It doesn't look good for new IPs, kinda funny I'd be cheering for EA on this front.
Rooks: My wife says its Chiaki Shinichi from Nodame
I think we may be understating the situation regarding the yen for Nintendo and Sony and overplaying the demand-side. When Sony's gaming division lowered their revenue expectations for Q3 by 30 billion yen, they blamed 50% of the reduction on the yen. It's even worse for Nintendo:
The company is now expecting a group net profit of 230 billion yen for fiscal 2008, down from an earlier forecast of 345 billion yen on Oct. 30, and a pretax profit of 370 billion yen, down from 580 billion yen, with currency-related losses estimated at 200 billion yen.
Sales are now projected at 1.82 trillion yen, down from the previous estimate of 2 trillion yen, and operating profit at 530 billion yen, down from 630 billion yen.
Do some math. They reduced net profit for the entire year by 115 billion (the 33% flashed about) and sales revenue down by 180 billion. Then they estimated currency losses of 200 billion yen - these losses alone represent nearly 2x the reduction in net profit.
Which is why it's silly to go nuts about the 33% decline thinking "holy shit they must be fucked in Q4, it's a demand issue and the Wii fad is over!" The 33% isn't just a reflection of next quarter's expectations, it's retroactive for the whole year. All those US/EU sales from last April and May still happened but are worth much less now since Sony and Nintendo kept them in dollars and euros (specifically, Nintendo kept 70% of their cash in the form of dollars and euros).
Now is there a demand problem in Japan? Yes, however right now that largely serves to make the currency losses greater. I know everyone's going chicken little because Nintendo lowered their Wii forecast by 1m this past quarter. But go bigger picture. If you compare the hardware forecasts at the start of this FY to the forecasts released two weeks ago, they're unchanged for both Sony and Nintendo (in fact, Nintendo's current unit expectations are still above those from the start of the year). Software forecasts I'm less sure of, I'm relatively confident Sony's is unchanged but no clue on Nintendo's.
We've heard Stringer say it: "Sony is still on target to sell 10m PS3s this year". You've heard Iwata say it in his recent Q&A: Nintendo is not hoarding Wiis and not lowering production, they're just redirecting to America. So not only are they both getting fucked by the weaker euro and dollar for the majority of their revenue to start with, now they're going to make an ever larger portion of their sales in these regions.
So yes, the demand situation in Japan is hurting sales at home and will likely have an impact next FY, but currently both companies are still okay worldwide in terms of unit sales and worldwide demand. BY FAR the biggest concern is Sony and Nintendo being forced to allocate more units to less desirable regions for generating yen along with the devaluation of sales already completed.
Wasn't there a chart from Nintendo which said they accounted for 99% of industry growth in 2008? If thats the case and other big companies grew (Activision Blizzard) then the difference (aka LOSS) has to come from everyone else. That's a significant amount of money.
Pretty much this as well. Industry-wide revenue might be up, but it's consolidated in a few companies (extreme example from this past Nov here). The other problem is while unit sales and revenue may be up and could possibly still stay even, the financial situation is killing developers ability to make games. What's a respectable cost estimate, $10m? Most of these smaller companies don't have that kind of money in pocket cash and get credit from someone else. Previously they were all getting credit easy and the industry was riding the good times, but now who's going to give a company $10m dollars on a risky big-budget game, especially if their latest game under performed? It's a significant reason why companies are restructuring like crazy, and EA even said it point-blank in their financial report: development costs have to come down.
Our demand for games may be recession-proof but production of them is not.
The sad part about having to bring down costs is that pretty much everyone knows that game developers are not exactly the best paid bunch out there----somewhat thanks to the high number of enthusiasts who fill out their ranks---people willing to work for less just because they want to work in the game industry.
And since most companies #1 expense is labor, unfortunately I think that that's where most of the cost savings are going to come from.
Yet another example of how screwed up things are---developers who make too little, yet their companies can't make money.
Publisher now aims to further grow its Games for Everyone range
Ubisoft is celebrating after a stellar performance by its Imagine range over Christmas pushed the series to just under one million annual sales.
The line-up of mass-market titles shifted over 300,000 units in the four weeks to Christmas, MCV has learnt, with Imagine Teacher and Imagine Dream Weddings leading the way.
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I thought, like, a bunch of companies got hurt and/or folded, and EA's sales are suffering?
This is about EA not making as much as they thought they would. This is about the same thing happening with Sony. With MS. With Sega. With Nintendo. About studios closing down. And if you take a greater view of things, of job losses and cuts at IBM, Nissan, Toyota, Circuit City going out of business, etc.
Well duh, go look at the last few pages of news reports and press releases. Heck, go look at Nintendo's own financial statements. There are many examples of companies missing earnings and sales forecast for a variety of reasons.
Now, you might think that it's only because companies didn't focus enough on making games for Nintendo's platform or due to the platform decisions made by Sony/MS/Nintendo or ballooning game budgets. While I certainly agree that this is a large part of it, I think it's absurd to think it's the only part.
Heck, I bet there is a game company out there that focuses on only making Wii games ... and I wouldn't be surprised at all if they are struggling too. I hope you don't think that "ooh, let's make Wii games!" is suddenly the magic bullet that is going to cure all. Because I think that would be a disaster for the industry.
Like a couple of people have already suggested, I think the general games industry is long overdue for some consolidation, some changes in business practices, etc. Frankly, I would love to see things like digital distribution kick off and really help publishers/developers increase their overall margins, while also having the side-effect of combating piracy. That would be a good thing, and that has little to do with "Nintendo vs HD consoles".
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Well, I think the answer is clear. Some companies are doing gangbusters. Nintendo is obviously the biggest example. Others would be developers/publishers that happen to have the hit franchises (like Epic with Gears, Bethesda with Fallout and Oblivion, etc.).
Additionally, some companies are likely still growing, but not as much as they thought they would. Let's take Nintendo, for a theoretical example. Assume they thought they would sell X units for Y profit. So, they take out a budget of Z billion that they spread to their teams, etc. So, the recession comes along and it hits sales. They're suddenly selling X/2 units for Y/2 profit. Okay, so that may still be an amazing amount of money, especially compared to other companies. But they still have the problem that they allocated Z billion in budget. What do they do? Eat the difference? Or start cutting costs (closing studios, etc.)?
That's an example of how thought even things may seem good to an outside observer (us), it may actually be a challenging situation inside the company. Now imagine this playing out throughout dozens of companies, many of which are on a much thinner line regarding profit and revenue.
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http://www.developmag.com/news/31275/Nintendo-plans-new-95m-RD-centre Maybe the new one will be less soul crushing than most of Nintendo's buildings.
I think also it is affecting them from ballooning expenses from HD development as well as other administrative costs that weren't a problem before (more speculation on the administrative costs than actual fact). Also, considering most game houses probably thrived on a loan business, where they loaned out money from a bank to make game x, sold game x to pay back the loan, and then took another loan out to start game y. With banks being in trouble and affected, they are having a harder time getting that loan for game y, despite the fact that they are selling game x just fine.
Some of it is greed, not willing to eat into profits but rather cutting costs to appease the shareholders, which is fine, because it's a business, not a goodwill program to provide us entertainment, but it makes the industry appear weaker than it could actually be. Plus it has a ripple effect of the people who are losing their jobs rather than keeping them.
EDIT: Post was better before the accidental "back" button.....
Maybe it's just a Japanese company thing, but their headquarters and buildings never seem very insipiring. My friends and I went to visit the Square-Enix headquarters in Tokyo, and it was extremely unassuming. Just a set of offices hidden in a generic office complex. It was the same way with the Square-Enix company store too. (Now inside in the very back, was very cool ... especially the sleeping Sepiroth, but those pictures are for another day ...)
We were thinking of visiting the Nintendo HQ in Kyoto, but figured it would be much the same thing. I haven't visited the Nintendo of America HQ in Redmond yet, but the outside of it at least is very bland and arguably "soul crushing". Friends who visit are always surprised by how low key Nintendo is. This is in direct contrast to the neatly manicured and sprawling campuses of a lot of US tech companies, such as Microsoft and Google. (You should see the campus that's nearly completely for E&D ... it is shaweeet)
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In down years, I agree. People don't need swanky buildings and such, especially when the alternative is possibly losing your job. The problem is that when you're not in a down year (and recessions are still the exception, not the norm), companies need to be able to attract the best and brightest talent in the industry. Great campuses, along with good benefits and pay, go a long way from getting that smart college grad to go to your company instead of the competition.
For MS, and E&D in particular, the challenge is going to be getting folks to come work at MS instead of, say, Apple or Google. And even once they're hired, you want to be able to retain your top talent. Having a great office where you almost look forward to coming to work every day, is a good thing.
Now this is very much an American line of thinking. Japanese companies are quite different, culturally speaking. At least until recently, you joined a company out of school and you were pretty much a "lifer". There wasn't a mentality of jumping around companies, so not nearly as much of a need to have a great looking campus, etc. This is certainly changing over the past decade, as I've been told by friends in Japan though.
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I once walked by Lionhead Studios before I knew where they were without even knowing.
It's like in a business park. A generic fucking business park.
I haven't seen the Media Molecule offices but I do know that the Future publishing offices in Bath are like out of some post apocalyptic sci fi movie. I've seen prettier buildings in Kosovo.
Though speaking of developer hqs it was funny listening to invisible walls today and how the Gametrailers guys have a telescope pointing out of their fifth floor window directly into the meeting room window of Naughty Dog. Apparently they know 'everything' about Uncharted 2, bastards.
Wait, so your theory is that devs and publishers budgeted for a bigger than 20% increase in industry revenue? I'm sorry, that's laughable.
3rd parties have 2 problems, 1) they can't control their costs 2) they bet on the wrong horse. It really is that simple.
Let me put it this way: "HD gaming, it's not consumers don't want to settle down, they're just aren't that into you."
(Please do not gift. My game bank is already full.)
I have no idea what devs and publishers budgeted for. That's obviously very confidential data for many. Who knows? Maybe some companies did expect that growth? (It's certainly not unheard of, especially in the games industry which has seen double-digit growth for quite some time)
Much more likely is that a business budgeted for something like 10% growth and instead saw flat revenue. Or even losses. That's still bad.
Also, no one is denying the first 2 problems. We're just pointing out the obvious to everyone, except for you: 3) The economy sucks. People are buying less.
If we weren't in a global recession, would there still be a problem? Sure! How bad would it be though? It's hard to tell. Again, when every other industry is also tanking, it's pretty silly, stupid, and arrogant to think that you're not affected.
And once again, let me point out that even almighty Nintendo has had to reduce their forecasts. You can bet that they are wary about the state of the many other Japanese companies (like Nissan, like Toyota) who are seeing drastic reduction in sales and earnings. It would be completely idiotic to not take things into account and readjust as necessary. The smart thing to do, at least, would be to reset expectations to something lower and more conservative, with the hope that you can beat it later. Which is what they've done, and good for them.
Hey now, stop trolling. Really. You're better than that. At least, I hope?
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A 20% increase in industry revenue doesn't mean a whole lot, if say, there was an equal or greater increase in the # of companies that make up the industry. Yes, lots of companies are going out of business, but that doesn't mean that there aren't just as many new companies getting started.
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American video game companies don't exactly have the same excuse if that's the case.
Yes, the economy is bad, but the huge deficits that Western 3rd parties have been piling up can't be exclusively be laid at the feet of the economy. The changing video game landscape and their inability to properly control costs also need to be blamed.
Leigh Loveday at Rare once posted this photo of the outer gates to the Rare complex (along with scribbles from people who sit next to him):
Yeah, most boring thing ever.
And why do you think the yen is unusually strong?
I do think it goes beyond just currency issues though. For example, it doesn't explain why fewer Wiis were sold in Japan than Nintendo had expected (around the order of a million).
Anyway, I'm certainly not a fan of "ooh, let's blame bad business purely on the economy". That's silly. But so is the opposite, assuming that the games industry is somehow completely independent of global economic conditions. For those that want to know more about how this it's affecting businesses across the world, I really suggest checking out the business section of your friendly neighborhood newspaper or website. For example, I've got the Silicon Alley Insider in my RSS feed and it's pretty sobering to see how many companies are being affected, across numerous industries.
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Comparing this recession to the last five
http://curiouscapitalist.blogs.time.com/2009/02/09/comparing-this-recession-to-the-last-five/
See that light blue line? That's us. Now. We're already far beyond the '01 recession that, arguably, didn't affect the games industry that much. We're in the territory of the '81 recession, which is a bit scary because it's near the date of the 1983 North American video game crash. (Granted, I don't think we're due for another such crash of that magnitude, but it's an interesting coincidence nonetheless)
Now, I think it would be absolutely crazy to take a look at that and think that it has no bearing on any industry. Again, I'm not saying that it's the sole reason why many game companies are struggling (far from it in fact), but to deny that it's a factor is like, well, an ostrich sticking his head in the sand.
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Electronic Arts, probably the third biggest publisher worldwide lost 800(?) million dollars the last quarter. They obviously are working in the same generally shitty conditions as Nintendo is, but they're also not hurt as badly by currency fluctuations since a majority of their income doesn't come from outside their country (unless Europe is a larger market than the US, which I don't believe is true). That large of a deficit, I think, points to the fact that there is a lot more wrong with the industry right now than just the shitty economy.
The economic woes obviously magnify the issues to a large extent, but I think these issues would have come to a head fairly soon either way.
Oh, I certainly agree. I don't mean to imply that Nintendo was doing anything wrong for missing their revenue goals. Certainly a lot is outside their control. I just wanted to point out that the same can be said for other companies, to a degree.
I think pretty much everyone here is on the same page, except for maybe lowlylowlycook. The economy is bad. It just makes an already crappy situation even worse. That's all.
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The thing you're ignoring Rooks, is that sales aren't down, they're UP. You can't say people are spending less on the video game industry because that simply is not true. Maybe this is a case of too many hands reaching into the same cookie jar, or Activision hogging all the money, but to say wary consumers is the reason for the current struggles of many video game companies is fabricating an excuse. Certain companies struggling to meet sales projections doesn't mean that the consumers were buying less, it means they were spending elsewhere.
20% growth in revenue does mean a lot. It means the economy isn't the source of the problems. If someone starts up a company to compete in the same area, it spreads the money thinner. This effect will happen regardless of the economic conditions.
It's very possible that neither of the HD twins will turn a net profit at the end of their life cycle. Because there simply isn't enough demand for HD gaming consoles. The Wii will likely end up selling more than both combined.
Also, as I've said before, the split market, and the lack of a PS2-like system to make the likelihood of failure a lot smaller.
Of course, what made the PS2 as successful as it was is the full-fledged support of developers and the general buying public.
This time, the developers picked one horse and the public picked another one, leaving us in an odd situation.
What the solution is I'm not sure, but cost-cutting will have to done somewhere. At the very least, assets and engines are going to have to be leveraged and recycled more heavily that ever in order to make games at the end of the generation a better chance to make money. Also, a smaller generational leap to avoid the nightmarishly high costs of starting a generation---let developers slowly evolve and update their existing assets as opposed to having to start fresh yet again.
Again, 20% is an aggregate. It's across the entire industry. It's not like every company is seeing 20% increase in earnings. If that were the case, I'd agree. But as we very well know, it's companies like Nintendo and Activision-Blizzard that are responsible for much of the growth. If you're not them, it can be a problem. And even they aren't totally immune to the effects of the economy either.
And as we've discussed before, even if a company is growing, if it wasn't as much as expected, that's an issue. There are likely a lot of companies out there that expected to grow 10% and remained flat. That's still a problem.
This is why looking at total industry numbers in absence of everything else can be problematic. Essentially, you're spinning the data. Sure, if all you did was look at the year-over-year 20% number, it's easy to think that everything is fine. But obviously all of the missed earnings, lowered sales estimates, closing studios, etc. tell a different story.
EDIT:
I think one problem is that you're thinking it's a mutually exclusive type of thing, that consumers are either spending money in other categories (the Wii) or they aren't spending at all. I don't think that's the case. Many consumers have certainly shifted their spending to the Wii, which is why companies like Sony are having massive problems. I agree. But I also contend that there are also fewer consumers spending as well. Have you see how bad retail sales tanked this holiday? It was bad. It's silly to think that games weren't affected by it. Instead of buying 3 games for the holiday, maybe Bob only bought 2. Instead of paying for that new copy of Fallout 3, Charlie traded in and got a used one instead.
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The reason it has been said that the video game industry is recession proof is that it is theorized that consumers won't be affected in their decision to buy video games. The 20% growth is evidence of this. Individual companies won't necessarily get a piece of that pie and thus they can struggle even when the money is still pouring in. If a company doesn't meet its projections, there will be problems. Failure to meet those projections however isn't economy based in this case. As I previously theorized, perhaps there are simply too many hands reaching in the cookie jar. Spreading the same amount over a wider area is going to cause lots to miss their projections and fail financially. This doesn't mean the poor economy played a part. Heck, most of EA's losses were deferred to this quarter which means this quarter sucked badly for them because of what happened long before the economy took a nose dive.
Also, Sony's struggles are more based in their other divisions than in their video game department.
And the NPD doesn't track used sales do they? NPD is where the 20% growth number is coming from. Basically consumers are spending more on new games than ever before.
If there are fewer customers buying in general, it would have to mean that the consumers that are buying are buying more if the 20% growth number is correct. I know the gap between rich and middle-class has been widening, but I don't know that this really affects video game sales that much.
Part of me wants to say that games like Wii Fit, Rock Band 2 and Guitar Hero: World Tour are inflating the average sell price of games, but then again that would likely be counteracted by cheaper 360's and less sales of the PS3, as well as the fact that Wii games made up a bigger percentage of game sales than ever before, which would likely lower the average sell price thanks to the lower price point.
Post hoc ergo propter hoc
Wow, just wow.
o_O
Really?
OK, back to the subject at hand, I don't see how any business that loses money in an industry that had revenue growth at 20% from the last year can blame anyone or anything but themselves if they are losing money. Furthermore up till now, it was accepted that the game business was if anything countercyclical.
If the crisis had occurred earlier, when the 360 and PS3 were more expensive than the Wii then perhaps someone could have convinced me that in making console gaming more expensive Sony and MS had managed to make HD gaming vulnerable to a recession. But the Wii isn't even the cheapest console out there anymore so I think that line of reasoning is out, except to perhaps explain some of the PS3's problems. Even that is probably more due to direct competition with the 360.
Beyond that I guess I almost think it is a matter of definition. You can't claim to be adversely affected by a recession unless at the very least your market's growth has slowed significantly. It just seem absurd to claim that when your industry is setting records for sales month after month after month.
Really I would just like someone who thinks differently to provide evidence that without the recession the games industry wouldn't have brought in less money, let alone evidence that they would have brought in more.
[fake edit due to internet being down, heh]
You need to come to terms with the fact that in general retail sales were down means there was a recession but games had record sales and that is because the games industry is essentially immune to recessions. That doesn't mean there is no effect, but it isn't even clear that the overall effect isn't positive instead of negative.
Your contention about gaming sales goes against everything we've learned from NPD and Chart track. Again Japan might be different but it isn't obvious that the drop in sales there has anything to do with the recession either. Rather the HD consoles have totally failed and the Wii is only a comparative success, thus making for a bad "gaming generation" cycle.
Finally consumers haven't shifted their spending to the Wii. For one, consumers have simply bought every Wii shipped to the US and that has been the case since launch. For two, 360 sales were mediocre before the Wii even launched and the PS3 did far far worse before the crisis than since it started. Sales of the 360 and PS3 seem more determined by price cuts than by any macro economic goings on. Which is no surprise.
[actual edit]
So you do realize that a "recession" is an aggregate thing by definition, right? There is a reason that not every company is seeing 20% revenue growth and that reason is called competition. It happens all the time some companies do better than others. But there is an additional piece of this puzzle and that is the fact that cost growth is out of control and that means even the companies that are seeing even record revenue are failing to make a profit at all.
Again neither some companies out competing others nor unchecked growth in costs have anything to do with a recession or lack thereof.
(Please do not gift. My game bank is already full.)
The industry might be recession proof but people are shifting there spending to only the best of the best games. When you have 20+ A+ games released in a small window, only the strong survive.
Aside from Nintendo, its a Dog-eat-dog industry. You only survive be beating your competitors out of it, which is not the case for other industries.
Anyway, any thoughts on the fact that we're in a pretty bad recession? (Assuming you actually read the article or looked at the chart) Or do you not believe that's actually the case?
Once again, you're missing the point, as well as bringing in the whole platform console war in again. This is not about the "console warz". You keep bringing in arguments regarding the 360 and PS3 and Wii, forgetting that the industry is more than just Nintendo, Sony, and MS.
This is about everyone. Game developers and publishers, such as EA and Sega, many of which that are multi-platform, struggling. It also includes the platform holders themselves lowering expectations and revising forecasts, such as Sony and Nintendo. The fact that you keep dragging this back into a 360/PS3/Wii (or HD/non-HD) sales discussion tells me that you don't really understand the issue.
Okay ... I summon ... Satoru Iwata!
http://www.nintendo.co.jp/ir/en/library/events/090130qa/index.html
He's a smart guy. The way I read it, yes, the games industry is "comparatively less susceptible to the changes in the economy" (and I agree). But, it's not immune. In a bad economy, consumers are less likely to spend money on games that aren't surefire hits (for example, the "#5 or #10 on the list"). As a result, some of the third parties that Nintendo have talked to have been on the "receiving end of the impact of the changing economies". As a result, Nintendo has decided to change their forecast for the future.
And yes, this is precisely what DMK was referring to in the post below.
Anyway, I chose not to respond to the rest of your reply because my post is already too long, and I think I've already made my point. Honestly, if you want to stick your head in the sand and think that the games industry is just fine and that every company aside from Nintendo just sucks, then sure, whatever floats your boat. As they say, we can "agree to disagree".
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He's spot on. I very much agree with Iwata. Despite the sour economy, there's much to be optimistic about regarding the overall game industry. The industry as a whole is still growing in a time where many other industries are shrinking. This is a very good thing. I am very happy that I'm in this industry and not in others.
The challenge, of course, is that the growth is not even. There is that report, after all, that Nintendo alone is responsible for 99% of it, which doesn't leave much for the rest. But the optimistic side of me says that growth is still out there for companies that get it. (The games unit in MS actually happens to be one of the few companies that is growing pretty decently ... folks like you forget the income that come from things like subscriptions, downloads, advertising, etc. There's a lot more to earnings than mere console sales ...)
Also, Iwata says later: "Next, about the next fiscal year, now that the situation surrounding us is rapidly changing, I do not want to make any irresponsible forecast today." Of course not. Things are really bad out there, and it would be irresponsible not take that into account. That's really all I'm saying.
Finally, another quote:
I'm not sure when Nintendo will report their volume forecasts, but that will certainly be interesting to watch.
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But that is part of the equation, to be honest. Despite the fact that many of the struggling companies are multi-platform, they have invested a disproportionate amount of their money into making games and creating assets for the PS3 and 360. The preeminence of Wii is at least tangentially responsible for the failure of many of these games, so the "console warz" aren't an unimportant part of this conversation.
Which was a double whammy--higher expenses for making games but less of a market for those games than they thought.
It's interesting to see how fast the pace is going on such little news. Perhaps JC took a new position to become offical PA spokesperson for the MS opinion.
Yup! And I completely agree. But like I said before, this isn't an "either/or". Are the "console warz" an important part of the conversation! You betcha! I've never said otherwise. I'm just pointing out that, gee whiz, the fact that the rest of the world economy going to hell, has to matter in some way as well.
Now, how much that impacts the industry ... is a good question. I don't think it's a negligible amount, nor do I think it's a positive effect. And if the graph I posted earlier is any indication, the recession still has a ways to go. Even if we're not seeing much effect over the past 6 months, who's to say that it won't have a much larger impact over the next six? Nintendo is certainly smart enough to lower their forecasts, and many other companies are following suit (cutting expenses, etc.).
Hmm, I guess when you take a look at it that way, the recession is already making its effects known. If not in previous sales, but in slashing costs, fewer dev teams, consolidation, and more. And I think we all agree that this is arguably a good thing.
@Xenogears
Someone in the Secret Santa thread gave my Kyon avatar a santa hat, so I used that for a while. Then I forgot where I placed my original Kyon avatar. I've been too lazy to make a new one. I'm thinking of finding another anime character to replace it with anyway. Suggestions?
EDIT:
Done! A cookie for whoever manages to guess who that is.
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We can praise Nintendo for growing the industry but even they are cautious about the road ahead.
It doesn't look good for new IPs, kinda funny I'd be cheering for EA on this front.
Rooks: My wife says its Chiaki Shinichi from Nodame
Do some math. They reduced net profit for the entire year by 115 billion (the 33% flashed about) and sales revenue down by 180 billion. Then they estimated currency losses of 200 billion yen - these losses alone represent nearly 2x the reduction in net profit.
Which is why it's silly to go nuts about the 33% decline thinking "holy shit they must be fucked in Q4, it's a demand issue and the Wii fad is over!" The 33% isn't just a reflection of next quarter's expectations, it's retroactive for the whole year. All those US/EU sales from last April and May still happened but are worth much less now since Sony and Nintendo kept them in dollars and euros (specifically, Nintendo kept 70% of their cash in the form of dollars and euros).
Now is there a demand problem in Japan? Yes, however right now that largely serves to make the currency losses greater. I know everyone's going chicken little because Nintendo lowered their Wii forecast by 1m this past quarter. But go bigger picture. If you compare the hardware forecasts at the start of this FY to the forecasts released two weeks ago, they're unchanged for both Sony and Nintendo (in fact, Nintendo's current unit expectations are still above those from the start of the year). Software forecasts I'm less sure of, I'm relatively confident Sony's is unchanged but no clue on Nintendo's.
We've heard Stringer say it: "Sony is still on target to sell 10m PS3s this year". You've heard Iwata say it in his recent Q&A: Nintendo is not hoarding Wiis and not lowering production, they're just redirecting to America. So not only are they both getting fucked by the weaker euro and dollar for the majority of their revenue to start with, now they're going to make an ever larger portion of their sales in these regions.
So yes, the demand situation in Japan is hurting sales at home and will likely have an impact next FY, but currently both companies are still okay worldwide in terms of unit sales and worldwide demand. BY FAR the biggest concern is Sony and Nintendo being forced to allocate more units to less desirable regions for generating yen along with the devaluation of sales already completed.
Pretty much this as well. Industry-wide revenue might be up, but it's consolidated in a few companies (extreme example from this past Nov here). The other problem is while unit sales and revenue may be up and could possibly still stay even, the financial situation is killing developers ability to make games. What's a respectable cost estimate, $10m? Most of these smaller companies don't have that kind of money in pocket cash and get credit from someone else. Previously they were all getting credit easy and the industry was riding the good times, but now who's going to give a company $10m dollars on a risky big-budget game, especially if their latest game under performed? It's a significant reason why companies are restructuring like crazy, and EA even said it point-blank in their financial report: development costs have to come down.
Our demand for games may be recession-proof but production of them is not.
Congratulations! Here is your cookie.
Ahh! That's a wonderful statement right there. That about sums up a lot of what I've been trying to say, but took too many words to say it.
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And since most companies #1 expense is labor, unfortunately I think that that's where most of the cost savings are going to come from.
Yet another example of how screwed up things are---developers who make too little, yet their companies can't make money.