BackSony-Microsoft battle comes to E3 as tablets dent consoles
Console makers battle to show they’ve the best plan for selling pricey machines in the age of phones and tablets
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San Francisco: Gun-toting fighters take a back seat to Microsoft Corp. and Sony Corp. this week as the console makers battle to show they’ve got the best plan for selling pricey machines in the age of cheap play on phones and tablets.
Both present on Monday at E3, the video-game industry’s annual conference running through 13 June in Los Angeles, with the $67 billion game market in the grip of two-year slump. Consumers have cut purchases of consoles and costly packaged games for inexpensive Web-delivered titles like Rovio Entertainment Oy’s Angry Birds, defined as more casual, mobile and social.
Microsoft’s Xbox One and Sony’s PlayStation 4, set to be in stores for the US holidays, tackle the shift differently. Sony is trying to coax casual and hard-core gamers to line up early for blockbuster titles and smaller exclusives that can develop into hits. Microsoft positioned Xbox One as the center of living-room entertainment, with programming from director Steven Spielberg, ESPN and Hollywood studios— leaving gamers to question whether it’s their best console choice.
“They’re having to resell to their consumer base again," said David Cole, an analyst at industry research firm DFC Intelligence. “It’s going to be very much a challenge for both of those companies to capture a casual consumer who is on the fence about replacing their console and buying a new system."
With Nintendo Co.’s Wii U player, introduced last November, selling below company expectations, Sony and Microsoft’s plans for console prices, game resales and recharging sales have broad implications for the industry.
Faster change
In the year since 50,000 gamers last gathered at E3, change has accelerated. THQ Inc., the maker of Saints Row and other titles, filed for bankruptcy and sold most of its assets, while Activision Blizzard Inc., the largest US game company, lost more than 1.3 million subscribers from its storied World of Warcraft multiplayer online game during the first quarter.
Even the maker of casual games for Facebook Inc., Zynga Inc., which once looked to be the biggest threat to traditional developers, missed a shift to mobile play and has been forced to fire several hundred employees.
US retail spending on games, including used games and rentals, fell 9% to $1.37 billion in the first quarter from a year earlier, according to industry researcher NPD Group. Digitally delivered content rose 8% to $1.59 billion.
Sony chief executive officer Kazuo Hirai, under pressure from billionaire investor Daniel Loeb to restructure the Tokyo- based company, said in late May the PlayStation 4 is first and foremost a game console that must establish itself with all players before assuming a broader livingroom role.
Design specs
At E3, the company probably will unveil the machine’s actual design specs and elaborate on its online strategy for games and other entertainment, said Michael Pachter, an analyst at Wedbush Securities in Los Angeles.
Both Xbox One and PlayStation 4 use personal-computer architecture from Advanced Micro Devices Inc., meaning developers won’t have to tweak games for a particular system, and the titles will look similar on both machines.
As a result, the competition for developers and gamers centers around services, exclusive titles and incentives for game-makers.
The PlayStation 4 will support free-to-play and episodic titles. Sony’s acquisition of cloud-gaming service Gaikai will allow users browsing the PlayStation Store to try a portion of a game before purchasing and eventually will make previous libraries, including older PlayStation 3 games, available on the new console, said Dan Race, a spokesman.
Indie Swag
Sony also is stepping up use of its Sony Pub Fund, created in 2009, to offer financial and marketing support to independent developers who might otherwise create games for Apple Inc. devices or Samsung Galaxy phones. Its companion incubation programme delivers office space, equipment and technical support, Race said.
“Sony has come out and given very clear signs to independent developers that they support us and that we’re going to have an easier time developing on that platform," said Brian Choi, 20, a junior at USC’s Interactive Media and Games school.
Smaller games offer less potential return than blockbuster titles, according to Pachter. He said they can become an incentive for a consumer to stick with a console after buying it for other reasons.
“I don’t think indie development is worth investing a lot of money from Microsoft’s perspective, but Sony obviously thinks so," Pachter said.
XBox exclusives
Sony has also begun promoting its $49.99-a-year PlayStation Plus subscription, a premium tier of its PlayStation Network with additional services such as game demos, automatic software updates and free content.
PlayStation Plus, introduced in 2010, has lagged behind Microsoft’s popular Xbox Live. Race didn’t say whether the company will add products from Gaikai to the paid service.
Microsoft, in unveiling the Xbox One on 21 May, said its new console will be the centerpiece of living-room entertainment. Hard-core gamers and independent developers initially cried foul as the Redmond, Washington-based company appeared to shift its focus to delivering exclusive content from Hollywood, sports and other forms of entertainment.
The company said its studios are spending more than ever on new content, working on 15 exclusive game titles, including eight entirely new properties, that will be introduced during the Xbox One’s first year of sales.
‘Close sale’
The company plans to showcase some of the games this week, Letty Cherry, a spokeswoman, said in an e-mail.
Microsoft needs to close its sale to the core gamer, said Doug Creutz, a San Francisco-based analyst at Cowen and Co.
Ahead of E3, Microsoft clarified its position on the thorny issue of the Xbox One’s used-games policy. Developers have said they’re losing millions of dollars through trade-ins at specialty retailers such as GameStop Corp. Gamers like being able to resell titles they’ve used, or buy a used game they wouldn’t pay $60 for new.
Microsoft said it won’t stop gamers from trading in used games for Xbox One, while leaving it up to Electronic Arts Inc., Activision Blizzard and other outside publishers to set their own policies. The company did set limits on the ability to swap games among friends.
For its own titles such as Halo, Microsoft said it won’t charge a fee for resales.
Cable deals
Microsoft aims to sell more Xbox One players than the current installed base of Xbox 360s, estimated at 76 million worldwide by the company. It could get a boost if pay-TV providers such as British Sky Broadcasting Group Plc and Comcast Corp. subsidize the potential $400 price, letting users purchase the new player for $200 and pay the rest in higher monthly bills, Creutz said.
“It becomes a lot less of a stretch," Creutz said in an interview. Microsoft’s focus on the living-room experience has the potential to broaden the appeal to a very mass market.
Microsoft has a number of pricing options. One deal offered with the Xbox 360 let a buyer pay less upfront for the device in exchange for a two-year, premium-priced commitment to Xbox Live, said David Dennis, a Microsoft spokesman. He declined to discuss specifics for Xbox One.
Even with new strategies, Nintendo, Sony and Microsoft probably will sell 10% to 20% fewer consoles than the previous generation, with Nintendo’s Wii U losing market share against the Xbox One and PlayStation 4, Pachter said.
“We’ve been waiting impatiently for new machines, and we’re really pleased to see them coming to market," said Tony Key, senior vice president of sales and marketing for Ubisoft SA, maker of titles such as Assassin’s Creed. “The industry needs a wake-up, and hopefully this time next week everyone is better informed about what lies ahead for this next generation of hardware."
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