January 2007


PS3 and the Wii

You have to appreciate great journalism — and few newspapers dish out consistent quality like the New York Times (the Washington Post is probably the closest, and don’t even think about mentioning the WSJ. That paper and NYT don’t belong in the same sentence). The NYT provided a piece on the State of Videogames the other day, and it’s a nice read — much to the delight of Wii fans, Sony continues to absorb a barrage of negative publicity, and the situations made worse by idiotic comments from Sony Reps that either make no sense or are SO deliberately PR spin that they’d make Tony Snow proud. GameSpot kindly posted these comments from the NYT — without the rest of the article, they are akin to when Atari Reps insisted floundering Jaguar sales were not a reflection of apathy but of consumers wanting to hold out for 2-3 more killer apps. And some of us who use it as a paperweight are still waiting on those killer apps.

To gamers, the fact that Wii outsold the PS3 during the holidays is not news — after all, Sony barely got enough machines out the door after several production delays. Nintendo, on the other hand, didn’t run into that problem — and I think that’s primarily because the Wii’s infrastructure is indeed GameCube’s on steroids. I don’t mean that as a dent to the Wii (so fanboys stay at bay!); come on, it’s a technological fact based on the specs and many 3rd party developers have expressed the same sentiment.

So should Sony be running scared about now? The answer? “Not yet.” Sony is right to say this is a marathon, not a sprint. However, a little anxiety is healthy, and may help take Sony’s hubris down a few notches. While economists always try to predict markets, the fact is markets are unpredictable, and that alone is why Sony should be a little worried about recent trends. While the past suggest console penetration ranks can be altered, that window has gotten smaller and smaller each generation. Sony’s troubled leap from the gate might have done enough damage to keep PS3 down for a long time, and given most consumers don’t spend $600 on consoles until the Holidays, that means Sony will have an even harder time moving hardware while 360 and Wii continue to sell and grow their libraries. Sometimes, being an “impulse buy,” as Sony describes the Wii, isn’t such a bad thing.

This scenario might be improved if demand for PS3 was still high, but that craze has clearly come and gone. PS3s are now sitting on most store shelves for weeks before they are claimed. In fact, stores in my area have them in ample supply — and no one is buying them. Of course, a system is only as good as its games, so Sony is hoping exclusives will show PS3’s muscle in the coming months. Unfortunately, there is cause to worry in this department, too.

How “good” (and I mean visually for now) games will be and for which system they release for depend in large part on penetration. All these rumors about MGS4 going 360 and Ubi Soft dropping Assassin’s exclusivity are happening because PS3’s penetration numbers are falling well short. It doesn’t help that PS3’s development costs a whole bunch more than 360’s, and that the software backing the system is notoriously complicated. You know it’s pretty bad when Hideo Kojima goes on record to say the PS3 architecture is outright confusing.

Exclusive titles drive console purchases — it’s what has kept Nintendo in the game and the reason why Microsoft wines and dines Japanese developers on a weekly basis. Without killer exclusives, differentiation in the console market is hard. Perhaps in this sense, Sony is right — its real competitor is the 360, not the Wii (Though I’d argue that either way, it loses ground). As more publishers/developers decide to include 360 versions, what will happen is graphics downscaling; PS2’s huge penetration meant Xbox ports looked decidedly less stellar (since the games were being made first for PS2 and then for the Xbox). Poetic justice may exist because the 360 looks like it’ll be returning the favor this generation. If Microsoft keeps a penetration lead, there won’t be enough to make consumers fork over the extra $200-$300. Most gamers will settle for a 360 and see the few games they don’t get as a wash since Microsoft has its own killer exclusives. Sony’s decision to ignore the Wii might prove fatal in this scenario. Like what Ross Perot did to Bush, Sr. and what Nadir did to Gore, Wii might swing in to steal Japan’s market, which will compel developers there to hop on board Nintendo’s development train. That’ll mean PS3’s edge in the Japanese market (the one place 360 can’t break into) could be gone or at least diminished. With fewer games coming out of Japan, more pressure would be applied to Sony’s 1st party teams. That wouldn’t be ideal. Sony would be draining more funds to make more games — and that’ll be a losing proposition. Look back at PSX and PS2 — all of Sony’s best games came from 3rd party exclusives. While Sony has made some headway with its own titles, the fact is SCEA, SCEJ, and 989 can’t compete alongside HAL, Bungie, or Lionhead.

What this would mean is the end of Sony’s grand strategy …

The purpose of the PS3 is essentially twofold: (1) populate CELL and (2) win a format licensing war — let’s be frank about this. Sure, there will be DMC4, Heavenly Sword, and FF13 — but that’s not Stinger’s ultimate point now, is it? The reason Ps3 is so expensive is because the Co. spent billions in R&D to build those two elements. The PS3 is the frontline in making sure Sony not only recoups the investments, but profits many times over. Without enough PS3s in households, the CELL will remain expensive to produce, and the same will hold true for Blu-Ray discs and players. If Sony has to cut prices deeper to move PS3s then it might win the format war, but the time it’ll take to get back in black will be seriously lengthened, not to mention the jaunting reality that disc-based delivery might very well be gone next-gen, which would render Blu-Rays defunct right when Sony breaks even. Now you know why Stinger’s supporters are walking around like they have ants in their pants.

The irony in all this is that Sony’s consumer electronics and movie divisions are now as rosy as ever. What once were seen as the laggers dragging down the whole Sony empire are now what save Sony’s earnings report. The PlayStation division, on the other hand, is now looking more and more like the reason why Sony’s profit margins will be squeezed for years to come.

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The now netorious Wiinha Chip (Is it real?)

Every console maker dreads two words, and those words are “mod chip”. Thus far, Nintendo has gone the extra mile (sometimes arguably to the detriment of its success) to stop hackers from modding its systems. The N64 was the last cartridge-based console, which drove up publisher costs so much that it’s often used as the reason why then-Squaresoft abandoned Nintendo for the fledgling Sony PSOne (or as geeks call it, the PSX). The GameCube then used proprietary Panasonic-developed mini-dvd rom, which again foiled most attempts to mod the machine, since the discs were not widely distributed and the GCN could not play regular sized discs (the Panasonic Q was likely halted from a stateside release to prevent widespread modding).

When it was announced the Wii would play regular sized DVDs, you have to think there were some basement hackers cheering and smiling. It didn’t take Hackers long to get the job done. The Wiinja (we REALLY have to stop with these stupid puns) has supposedly KOed the security of the Wii. In a video posted on YouTube (above), you can witness the player using what appears to be burned DVD Roms to play Wii games.

Should this be authentic, this now makes the entire library of Gamecube titles available to hackers the world over. For now, let’s presume this video is authentic and that the Wiinja chip is indeed real. The immediate reaction by Nintendo (and its loyal followers) might be to engage in direct legal battle to stop the modding as soon as possible. Nintendo might seek to release firmware updates to block its usage (much like how MS has sought to stop modding by id’ing it through its uber-popular Live service). This route may work, but given how few of Nintendo’s consumers are probably online in the first place, and the company’s relative inexperience in that department, it may not be the road to take.

Confronting modding is an interesting business in the videogame world. Undeniably, it creates a piracy channel for those willing to find games in the underground, but to look at modding as a means to an illegal activity is missing an entirely different side of the coin. Ken Kutaragi, the former head of Sony’s gaming division and father of the PlayStation, probably made a lot of publishing execs angry when he suggested that modding “helps” PlayStation more than it hurts it. And he’s right; as the console manufacturer, modding might indeed help early on. For Nintendo, it might do for the Wii what I think it did for the PSOne — and that’s rope in the hardcore and disbelievers.

PSOne was modded not long after its debut and some will admit that played quite a role in keeping the console afloat until FF7 royally crowned the console with then-obscene penetration growth. The Wii, for its success, is bringing in new gamers, but there is a hardcore that still refuses to pick up the console. The modding might just help the Wii capture that audience. Let’s face it, the only gamers who mod are the hardcore. Most consumers, the ones Nintendo goes after, probably have never heard of modding, let alone the notion of taking apart your console to weld something inside it. These are the same folks who would give you the oddest expression when you tell them, “Don’t send your iPod to Apple. Just buy a cheap iPod battery to replace the one inside it.”

Modders include gaming’s elite — and by that I mean the people who influence decisions. No editor of respectable gaming publications will admit to it, but most do indeed have modded consoles and even burned games. While I have seen no graph trying to map the value they bring, I don’t think it’s a far-fetched argumenbt to say their positive conversations do more good than damage to a console company. And we all know that in the world of consoles, penetration is the key to success. If you have enough of an installed base, the percentage of modders will be pretty much negligible — one of the reasons I believe why Sony doesn’t really go after them.

Also, modders often get their hands on games not released stateside, and post reviews of them far before they do. Games like Ikaruga for Dreamcast arguably made it to the US on GameCube because of the mod penetration in the States, which kept conversation about the title alive well after Sega’s little beauty bit the dust. Speaking of the DC, that’s one console where modding probably did hurt the machine more than help it. Sega, also a viable publisher, was hurt financially by pirated titles. But I would argue the industry dynamics of 1999 up through the PS2 launch is markedly different than the Wii scenario; from target audience to system gameplay, the Wii presents a starker contrast from its competition than the DC did from PS2.

It should be noted Nintendo has a long-standing history of scouring the underground to hunt down hackers and piraters. This is a company that actually went after people modding its long dead NES Roms, and even sent out nasty emails to people who posted pictures of its classic franchises. Given Nintendo sells those games now for what I think are still ludricously high prices, it’ll be interesting to see how the “new” Iwata-driven Nintendo goes about this modding development. Iwata, a tech-geek himself, might see this the same way as Kutaragi does, and if so, we might see the Big N go quiet on this issue — and how 180 would that be? In less than a year, Nintendo goes from 3rd place to sucker-punching the entire gaming industry, and then shifts from an over-protective, closed circle to a pentration-crazy, who-cares-about-modding stance. If this happens, “Crazy Ken” might not be so crazy anymore.

ESPN NFL 2K5 (XBOX)

In a welcome move, Take Two Interactive announced it is bringing back the 2K football series to the console-verse with All Pro Football 2K8. The game is slated to appear on “next-gen” consoles only, which is an interesting move given the established userbase of current-gen systems. While resource might be a factor, it would have been nice to see Take Two bring the game to the PS2 at a minimum. Then again, the company might be doing this to blow the socks off Madden’s thus far less compelling visual presentation. The last two Maddens on 360 have offered very few upgrades, and no matter how many polygons EA boasts, there is something missing in these Maddens that have got hardcore fans scratching thier heads.

Anyone with a general Economics background, however, isn’t surprised by the lack of innovation from EA. After spending millions to secure the NFL and ESPN licenses, it’s only natural EA seek to recoup those losses through minimizing its game labor. Otherwise, the move would make little financial sense. Still, exclusivity has not stopped other companies from pumping out successful football games. Midway’s reenvisioned Blitz was a surprise — if you haven’t tried it, I highly recommend playing it — though football purists should be warned of its sometimes obscene and offensive content.

While it remains unclear exactly WHO will be in Take Two’s gridiron return, what is clear is Visual Concept’s brilliance in engineering exciting gameplay and equally compelling presentation. Personally, 2K did ESPN a far better presentation than what EA has done with it. The 2K series really imagined televised gameplay, and NFL 2k5 shined because of it. If Visual Concepts can deliver that same level of polish in 2K8, it’s very possible EA could see declines in its next Madden game. Review scores for recent Madden releases have started to fall (finally!), and it’s a good sign that writers on EGM and even sellout IGN are starting to derail EA’s lack of improvements with the title.

Here’s hoping Pro Football 2K8 delivers Madden the BIG wake-up call I’m sure NFL 2K6 would have done had EA not muscled away the NFL license.