Tuesday, May 24, 2005

Slice at the Gaming Industry

So E3 is over and it seems like an appropriate time to take a slice at the gaming industry.

The video game industry is still in its wild west stage. There are still a lot of players, a lot of unconquered territory and there's definitely a gold rush feel to it all.

Walk around E3 some time and watch the suits hanging around some of the displays with their tongues hanging out. They literally smell money and are grinning ear to ear because of it.

It's also a very tempermental market place right now. Branding and game loyalty mean nothing. That can turn (and has turned previously) in a heart beat. If Microsoft thinks Halo 3 is 'assured' to keep its core audience and maybe even add to it, they are taking a heavy gamble. The core audience wired into Halo 2, could abandon Halo in weeks and adopt some new game, let alone by the time Halo 3 releases.

This is why I feel the Halo 3 strategy of Microsoft, (holding Halo 3 back to coincide with the PS/3 release, to diminish the attention paid to the PS/3 release), could back fire, and back fire hard.

This is not and will not be the first time Microsoft over estimated its customers' loyalty to one of their brands.

It also needs to be said, that "speed to market" is killing the creativity in the industry right now. It also means 70% of all video games released these days are garbage or so chock full of bugs, their innovation is not worth tolerating.

This is a similar cycle that the 'internet' suffered through from 1996 to 1999. Too many websites, too many DOT-COM companies, just cranking out crap to try and catch a genie in a bottle.

The internet, went through its Darwin phase, where the weak and the chafe died out and those bilion dollar stock option dreams went the way of the Dodo.

The video game industry is poised for this kind of cycle soon and I believe some of the casualties will be fairly important.

Look for Microsoft to ditch its online RPG soon, within a year. Look for PC based online games to slowly lose market to console based networks. Those who fail to port their RPGs to console in the next two years, will die, fast and hard, no matter how high they are soaring now.

Look for the 'life cycle' for RPGs to diminish. People will want to login and play for 6-8 months top and then abandon their characters and their game for the newest 'flavor of the month'. If your business plan is counting one a two year player loyalty cycle, you will die, because the percentage of players who will stick around that long will diminish even more.

Look for games that tap into socializing, to grow a niche market. SIMS had some popularity and boasted the highest percentage of female players than any online game ever developed. Someone will key onto this and take that style of gaming to another level and it will catch on. It may be a niche market, but it wil make money and the media will pay attention because it's the kind of "kitch" thing the media likes to talk about.

Most of all though, look for the secondary markets of gaming to become exploited by the companies that produce the games. I will talk about this in more detail in another rant, but I will leave you with this:

On various web sites, online stores and auction sites, people will actually purchase 'virtual' items to improve their experience in an online game. 'Virtual' currency, 'virtual' weapons and 'virtual' items can fetch a reasonable price. If you were to add a collectible element to that and control that market at some level through the very company that generated the game, how much more revenue would it generate? I believe the answer will surpise you and I will talk about that the next time I post.

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