Happy New Year! 2010 already?

It seems like forever since I last blogged. That can be explained. From Carlsbad to Redwood City, it has been a busy time since joining Xfire’s marketing and business development team in June. Xfire is an interesting company located in Menlo Park and situated at the forefront of video game marketing. We run targeted advertising campaigns and events. I write and publish website data, content, and create post campaign analytical reports. These past couple months we’ve been getting ready for a gameplay video contest like none other- the “Video Capture Awards,” a gameplay video festival uniting gamers and publishers in an unprecedented “machinima” competition.

The VCAs (as we’ve come to call them) welcomes players from any game to upload videos and encourages machinima film makers to submit their best movies to win prizes. A number of publishers are involved: Turbine, Codemasters, Nexon, S2 Games, Ijji, NDOORS, Outspark, Uforia, Games-Masters, Aeria Games, YNK Interactive, G4 Box, and more.

Sponsored by iBuyPower, Gunnar Optiks, Roccat, NZXT, Antec and Xfire, the event boasts 2 grand prize achievements, 6 general categories, over a dozen publisher sponsored specific game categories, and more than $25,000 in prizes. Each week we’re also announcing a special Xfire Reels category.

To win a particular category, participants need mad gaming skills, a network of friends to deem their videos cooler than their opponents and luck of the draw for the player with the most cool votes wins!

The contest can be found at http://www.xfire.com/cms/xf_vcas with the specific publisher categories at http://www.xfire.com/cms/xf_vcas_pub.

Commentary

What is really unique about this contest is the way we are bringing machinima to the average gamer; we’re making it simple for users to upload, watch, and manipulate gameplay video content all the while interacting with friends in a very social way. Prizes go a long way towards making the contest fun and rewarding. So far we’ve had over 1000 entrants. That number looks to grow. I predict  30,000+ for the contest!

Confirmed. Sony is launching a new ad campaign surrounding the PS3.

Today Microsoft announced they are cutting the price of the Xbox 360 Elite to $299, signaling the beginning of a mini price war. The announcement comes on the heals of Sony’s PS3 price cut a week ago in Cologne, Germany.  Effective Friday August 28, the $100 price cut puts the PS3 slim and Xbox 360 in a position to vie for gamers this holiday season and marks the first time this console cycle that gamers will be able to choose between equally priced consoles. As part of the price cut, however, Microsoft will no longer offer an HDMI cable. Online play remains free on the PS3 and $50/year on Xbox Live.  360 slim rumors were denied.

Xbox 360 Offering

Microsoft may have lowered the price of the Xbox 360 Elite, but in the process also cut one important value item out of the mix. Buyers will no longer receive an HDMI cable. Given a high retail value, HDMI cables carry high accessory profit margins, creating an add-on easy way to cut the price. In terms of game compatibility, however, the Xbox 360 remains stronger than PS3.

Commentary

Sales from here on out are a clear indicator of console entertainment value. Its probably safe to say the 360 will continue to out perform the PS3 slim both in terms of games, movies, and overall community. The best online gaming is not free. The Xbox Live Arcade, Netflix streaming video, and well-connected community system makes it a stronger offering and one that should continue to resonate well with both casual and dedicated gamers alike. Furthermore, Nintendo has a ripe opportunity to capitalize on the tusstle. However, Wii gamers are not the droids were looking for.

Eugene, OR

As competitive sports video gaming continues to grow, video games are spilling back over into sport, creating interesting mutations. Combining e-sports, brain games, and athletic events under the moniker of “Team Sports,” law students from the University of Oregon are having one last summer bash before classes begin. Friday marks the beginning of the Summer Olympics 2K9, a curious two-day social event that fuses gaming and physical competition.

After the opening ceremonies tonight, the “highly decorated athletes” will take part in 14 mentally and physically demanding games of skill. Team events include 4×100 Relay, Medley Relay, Soccer, Dodgeball, Volleyball, Tug of War, Halo, Rock Band, Random Object Toss, and a secret event where patriotic garments are encouraged. Individual events are traditionally more brainy and athletic in scope: Mile Run, Spelling Bee, Obstacle Course, and Speed Multiplication Tables. The festivities close Saturday evening with Rock Band, Awards, and an Olympic party event.

There shall be four teams, each representing a country/entity (Canada, Denmark, North Korea, Principality of Sea Land). Teams have been selected by means of a draft, with the team captains being the members of the Olympic Committee. Either the whole team, part of the team, or an individual team member will compete in every event, as further specified by the rules of individual events.

So I’m headed to Eugene to do a little gonzo journalism and add a culinary twist to the event. I’ll also be on hand to lead some hand-crafted pizza competitions….and school spartans between matches.

Some links:

• Overview
• Schedule of Events
• Event Details
• Matchups and Lane Assignments

Commentary

Although discussions about Health and Games typically revolve around hardware’s ability to “serve as useful tools in the fight to preserve well-being,” it’s easy to forget that physical fitness is first and foremost an activity and a lifestyle. This event is interesting to the gaming industry and community for its ability to fight sedentary leisure by offering physical fitness, healthy habits, and plenty of video game fun to go all around. That is if the beer isn’t flowing too quickly. Simultaneously, the event draws into question the place of video games in modern sport and culture, restoring much needed balance to this gaming life.

*Note- Yes, Blizzcon is this weekend and unfortunately it is sold out. Dare I fork out 40 bucks to watch Ozzy in concert on the Live Stream or DirectTV? I’m going off the rails…

Introducing LudoGrind Arcade, entertaining escape from pixelated boredom.

A few months ago, I got to thinking it would be nice to have an arcade on the site featuring Filler, one of my favorite flash games. In an attempt to make that happen, installed a few plugins, ran it by SimianLogic and voila, ludogrind is flash compatible! 

Filler 2 by SimianLogic: The object of the game is to fill 2/3 of the screen with filler balls. Click to expand a ball. If a ball collides while you are expanding the ball, it will burst and you will have one less ball. Easy at first, addictive always!

Play It Now!

G4 reports that the Center for Disease Control (CDC) has taken a look at the health hazards associated with playing video games and found that addicts are fat and sad. Emerging Health Threats suggest that the hazards of playing video games are not limited to children. The CDC has found a correlation between gaming and health risks in a sample of 500 adults living in the Seattle-Tacoma area. However, correlation does not mean causation as Dr. Primack points out in the study, “people’s lifestyles are getting more sedentary, but maybe games are an effect rather than a cause.”  But why then have people become so much more inactive?  If TV and video game entertainment is not to blame, what role do video games play as coping mechanism? How do we explain the positive and negative affects of video games and their exploding popularity?

“How do we simultaneously help the public steer away from imitation play-like activities, harness the potentially positive aspects of video games, and keep in perspective the overall place of video games in our society?”
-Dr Brian Primack, University of Pittsburgh School of Medicine

Study findings

• Female gamers reported greater depression and poorer health than non-gamers
• Male gamers reported higher BMI (body mass index) than non-gamers
• Gamers of both genders reported a higher than normal reliance on the Internet for social support.

Commentary

When it comes to games and health, it seems the biggest challenge we face is getting gamers to understand balance. Sitting in front of a tv or computer screen with no exercise everyday isn’t healthy as the study from Washington shows. In an era of pixelated entertainment and broken health care, what is to become of outdoor activities? They obviously become more and more important and raise a number of cultural questions. In a couch potato world, reinforced by sedentary living, how do we pull gamers away from boobtubes? Perhaps the beter question is more socio-economic in nature…

Cologne, Germany

In analysis, Sony has responded well to market pressures, cutting costs and passing that savings on to gamers. Although industry folk may wonder if its too late in the competitive game given Microsoft and Nintendo’s momentum, too late for what? At the end of the day, the move looks sell more units and make development on the system much more attractive. Furthermore, the announcement should quell fears and silly threats from Activision’s Bobby Kotick and others that publishers may need to kill support for the platform due to falling attach rates and low ROI. Sony CEO, Howard Stinger may have brushed off such threats publically, but their underlying economic sense resoundingly wins. Sony may now be able to meet its sales projection of 14 million unit, overcoming premium priced dreams in a quest to gain considerable market share– that is depending on how and when Microsoft and Nintendo react.

Despite claims by Sony executives touting profit over market share and industry pundits’ assertion that regardless of price-cuts it may be too late for the PS3 in the current economic climate, I beg to differ. From a mass market perspective looking beyond the hardcore gamer, I argue that not only do these price cuts matter, significantly stimulating demand, but the future of the next console generation crucially depends on market saturation gained in the next quarter or two. And while its been said before, Sony continues to ignore economic forces greater than its premium priced dreams. A PS3 price cut today will directly correlate to network effects that will fuel software development, sales, and lead to a larger pie tomorrow.

Market Saturation

Market share is more important than you think: its how Sony grew the game development and market presence it enjoys today and risks losing if it more PS3s don’t make their way to living rooms across America. Sony is at a crossroads. However, flooding the market with below cost hardware (i.e. a price cut) provides an immediate boost to the console installed base, laying the foundation for game development and future sales. Under the umbrella of home consumer electronics, PS3 demand is highly elastic. In economic terms, this means that consumers are very price-sensitive: even small price cuts lead to significant increases in quantity demanded and revenue. Technically, elasticity is calculated as percent change in quantity demanded divided by percent change in price.

Given that video game entertainment is rather recession-resistant, in practice, this suggests that a PS3 price cut would provide a buying catalyst effect, resulting in higher sales in the current environment. I estimate the PS3 to have an elasticity of between 4 and 6.25, rather high for consumer electronics and demonstrating its place as a luxury good. Given that Sony was able to double sales with its last price cut from $599 to $499 (16% change in price) in July, 2007 and that elasticity tends to fall as the market clearing price is reached, this means that the current speculated 20-25% price-cut ($100) will fall in this elasticity range resulting in an immediate 125% increase in sales. Price is the ultimate market mover.

While the now defunct Sony Protection Group has argued that price cuts actually hurt PS3 sales in the long run, “all the spike has done is shift some sales sooner but real extra sales are non evident,” this argument fails to understand market clearing dynamics: a price cut does not create demand, it merely captures it by unloading merchandise at a reasonable price. The publicity surrounding a price cut, however, can significantly augment demand through informative and persuasive advertising. The trick to a successful price cut is to aggressively communicate that news to potential buyers, something that is all too often left to a Sunday paper.

Publisher, Developer, & Retailers’ Expectations

No matter how you look at home console entertainment, success always boils down to content: games, movies, and music. It’s a hit driven marketplace and unfortunately for Sony this cycle, a console with no games is about as fun as a pool with no water. Luckily, however, there is an escape route should they choose to take it: follow publisher and retailers’ price cutting expectations and before you know it, consumer acceptance will spur game development. The PS2 is a case in point having become one of the most attractive platforms for worldwide development, especially in “developing” nations such China and India. It owes its resurgence to an extremely prolonged life cycle, huge installed base, cheap dev kits, and relatively little liscencing restrictions. As the PS3 stands, however, Sony’s pricing structure puts them in a precarious position as third-party publishers push for a price cut and begin diverting resources. EA, Ubisoft, and Activision-Blizzard have been especially vocal about possible “reallocation” of development resources. As early as 2006, EA began ramping up Wii development and in February John Riccitiello announced that EA plans to increase focus on the Nintendo Wii thanks to low development costs.

Retailers have also expressed concern that PS3 prices are too high. GameStop CEO Daniel DeMatteo has publically questioned hardware manufacturers’ touch with reality, “these hardware prices have stayed up longer in this cycle than in any other time before, and in a very dire economic environment…there will have to be price cuts in order to get the hardware moving.” In a CNBC interview, DeMatteo has stated that he would like to see a $100 PS3 price cut to lubricate the market. In the same interview, he also criticized Sony’s price cutting strategy surrounding the omnipotent PlayStation 2, questioning their decision to reduce the console’s price by $100 a year after publishers had ceased developing games on the platform. Too little, too late?

The clock is ticking for the PS3, fast.

Without any game changing announcements at E3, Sony needs to quickly rethink their premium-priced strategy, reducing barriers to development on two key fronts: retail price and development costs. Analysts seem to agree. Not only are PS3s outrageously expensive on the consumer-side, they are even more prohibitive on the development side. Granted we did see reduced prices on the PhyreEngine 2.4 in conjunction with GDC back in March and despite the announcement of over 300 PS3 games to be released this year, the platform lacks hit games and exclusive titles. To make matters worse, Activision chairman, Bobby Kotick, has threatened to withdraw PS3 support minus a price cut. Low ROI relative to the Wii and Xbox 360 is making it less cost effective to support the system. Time is of the essence.

Competition Demands

As video games continue to go mainstream, catering to a larger and larger swath of the general public, console sales will continue to become increasingly driven by price, innovation, entertainment value, and significant product differentiation. While Nintendo is king of mainstream gimickery, Microsoft is leagues ahead of Sony in terms of home console entertainment. With the highest priced system since the early days of console gaming, the PS3 is not poised to compete in the current marketplace moving forward, even after announcements made at E3 including a large and significant slate of PS3 release titles and motion controllers. Not only did Microsoft have a more impressive unveiling, showing its innovative muscle with project Natal, but its entertainment arsenol provides mainstream accessibility and recession-generous entertainment value. It all comes down to streaming and downloadable content. From Xbox Live Arcade to Netflix streaming videos, the PS3 cannot compete, leaving its premium price tag foolish.

On the base level, however, it all comes down to installed base numbers coupled with hit games and exclusive titles.

Installed Base Scoreboard:

Wii: 50 million

Xbox 360: 30 million

PS3: 22 million

As of announcements made at the time of E3, Nintendo has sold more than twice as many consoles as Sony and just under twice as many as Microsoft. Despite shipping 10.1 million console units in fiscal 2008, forecasting 13 million in 2009, Sony will unlikely reach this goal without a significant price cut. Although Sony predicts 14 million units will fly off store shelves this year, this number seems overly optimistic. It will be interesting to see where these numbers end up this holiday season…

Average MetaCritic Game Scores By Platform: 

N64 wins! It appears that, overall, portable gaming platforms outperform home entertainment consoles and vintage consoles outperform recent releases.  Among the Big Three consoles, PS3 outperforms Xbox 360 and the Wii. Interestingly, Wii is the lowest rated platform in terms of metacritic scores, giving credence to recent remarks that these scores matter much less than core consoles. It should be noted that older consoles benefit from small sample sizes, inflated by less reviews and overall hit bias and the PS3 benefits from less overall games and hence a hit bias effect. As a side note, metacritic scores have trended downward over the years, lending credence to the hit bias effect just mentioned. 

Metacritic Scores have trended downward, revealing a nostalgia reviewer bias coupled with less overall reviews.

Koster notes that this is not surprising given the substantial size of the industry in China, estimated to be 25 times the size of the US market. See link for report and slide show.