BBC Ponders Another Games Industry Crash

weirdguy writes with a link to a BBC article that poses the same question asked by journalists every couple of years: is the games industry headed for another crash? "Yes, gamers are snapping up the new generation of games consoles — Microsoft's Xbox 360, Nintendo's Wii, and Sony's Playstation 3 [PS3], but at huge cost to the industry. Hardware makers are losing hundreds of dollars on every console sold, and games publishers face an "increasingly difficult environment, as rising development costs and small user bases [mean] that return on investment in next generation games development is unlikely to be achieved before 2008," according to media analysts Screen Digest. More importantly, though, the video games publishers are facing a revolution of their business model."

Re:Wii is not a loss leader . . .

[LWATCDR]

Nintendo's plan,
1. Sell the console for a profit,
2. Make fun games.
3. Make it cheap and easy to develop for.
4. Profit.

I still find it all very interesting. I still see the occasional article about how the PS3 will win in the end but I don't know anyone with a PS3 yet but I know a lot of people that have 360s and that want Wiis.

I predict that Microsoft will win the hardcore gamer market and possibly the video delivery market. The Wii will win the broad based gamer market. IE even the hard core gamers will have a Wii next to their 360.
Sony I just don't know. They may end up in third place this time.

Failed attempt

[Anonymous Coward]

This is another succesfull attempt at disinforming the masses.

We all know the reason for next gen consoles, excluding the Wii. They are here to satisfy another agenda.

Microsoft: Monopolise the gaming market. (DX 10, VISTA, Entertainment system)
Sony: Monopolise the DVD format market.

Move along nothing to see here.

Re:Wii is not a loss leader . . .

[shoptroll]

I think your prediction is on target if the current trends stay the course. They did a poll on GameFaqs a day or two ago asking who owned what "next-gen" system. The ranking (from top pick decresing) goes: None, Wii, XBox360, Xbox360 + Wii, PS3, All 3, PS3 + Wii, and finally PS3 + Xbox360. I'm not going even going to suggest that this is the most accurate polling system ever to grace mankind. Here's the poll results: http://www.gamefaqs.com/poll/index.html?poll=2722 [gamefaqs.com]

That said, I would not classify GameFaqs as a casual gamer's haven. Most of the traffic is going to be generated by Hardcore gamers looking for info. Maybe casual players looking for info on Zelda or Final Fantasy, but if you look at the Top 10 lists, this isn't casual corner.

So, the Wii is making inroads on the hardcore gamer. Actually, I'm surprised that the system is the only next-gen system in almost 25% of the responses. With 17% dual-booting with the Wii60 combo and about 12% going it alone with the 360, I think it's very very understandable why there have been a large number of PS3 exclusives going multi-platform. Sony has, for lack of a better word, been shunned big time by the community at large.

However, it's still to early to tell if we're truly in the middle of a paradigm shift. Nintendo's strategy of appealing to a large audience with a cheaper system is obviously working. MS is holding their own, and Sony can easily get back into the game if they want to. This is still too close to call.

Happens with every hardware cycle

[Tord]

There is always a shakeout between game companies at the beginning of each new generation. A few things combine to make this happen every time:

1. Many people stop buying games for the old system since they already have decided to buy the new system... as soon as it falls a bit more in price. This makes a gap in the market until the next generation has moved enough units. Many developers and publishers don't have enough cash to survive this.

2. Timing is hard. When should you stop developing for the old system and start developing for the new? With 18-24 months time-to-market it's hard to know if your new game should be made for the old or new generation. Make the wrong choice and you might find yourself move as much as two years too early or late.

3. Every new generation has so far demanded higher budgets and larger teams. Many companies that are too small will fail to make the switch.

4. It takes time and costs money to learn a new system and you will also need to develop new tools and engines. Either you will have to invest extra heavily in your first title for the new platform or settle for lower quality, which is likely to give you less sales...

I've been working in the industry for almost ten years (not anymore now though) and I'm surprised that everyone seems to be caught off-guard every time it happens....

Consoles are a retail loss leader

[tepples]

Generally retail stores buy product at 40-50% off of the suggested retail.

Except video game consoles. Retail chains sell consoles as a loss leader (after overhead) to get people to buy games and accessories.

I think the analysts are lying

[tkrotchko]

I think for the most part the analysts are lying when they say Microsoft or Sony is losing hundreds of dollars on each console. When you look into all these pricings, they generally including costs that are comparable to retail.

Not to mention that when you look at this article:
      http://www.ps3focus.com/archives/167 [ps3focus.com]
It claimed a $100 loss if Sony sold at $500. But the retail is closer to $600 suggesting at worst Sony is breaking even.

But then you look at this article:
        http://news.cnet.co.uk/gamesgear/0,39029682,492853 30,00.htm [cnet.co.uk]
Which suggests at $600 Sony is losing $240.

I say it's all nonsense. I think Sony & Microsoft like this analysis of pricing because people lap it up and think "Oh gee, for $600, I'm getting something worth almost twice as much! What a deal!". It plays on greed.

The only people who know how much the console makes (or doesn't make) aren't saying. Everybody else is talking out of their ass. Everybody.

Re:All you Wii naysayers, your number is up...

[fhage]

The source of this analysis is Ed Barton of Screen Digest http://www.screendigest.com/about_us/analysts/ed_b arton [screendigest.com]. They want $3600 for an analysis that forecasts the PS3 as dominating. While they seem to have reasonable insight as to the past, they've completely missed the mark as far as the Wii goes. They have failed to predict the very strong mass market appeal the Wii has and how this will open up new markets. Perhaps the sea change is hard to see without actually owning a Wii. However, as a long time - console and PC game collector and Wii owner it it very clear to me. Nintendo has hit a really sweet spot this time around.

My (free and mostly serious)Predictions for 2008:

• New TV's and DVD's will interoperate with the Wiimote. TV's will have built-in sensor bars. Using cursor keys to navigate the DVD menu? - How quaint. I suppose you still have a rotary phone too, Grandpa.
• One of Youtube's top browsers will be Wii Opera. I find watching internet videos much nicer on the HDTV. The new Wii version of Opera is much, much better than the beta version, and makes surfing a much more social experience. Javascript will grow support for multiple pointers
• Specialised Flash games will become huge and will be a good way to reach specific markets. The quality and appeal of sites like Wiiarcade are already showing this potential.
• Virtual console games will make lots of money. Customers like me are happy to spend 5-10 USD to get our old favorites up on the new HDTV. (I check weekly for Pilot Wings 64! :-)
• Somebody will make a billion dollars catering to Seniors who own a Wii. 3-D shuffle Board! - CSPAN Interactive, oh yeah....
• "RV Mayhem" replaces GTA as the top seller. "Compete with others for the best parking spots:- Pimp your virtual RV with the latest hardware and paint jobs. - Gather with friends in the online Coffee Shop" ;)