Is the video game industry at risk for another crash?

http://www.forbes.com/business/newswire/2004/03/26/rtr1313656.html

Some key points that the article mentions:

The high up-front costs of developing games is also pressuring developers to rely more on sure-fire hits and take less risks on new, innovative titles.

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Electronic Arts Inc. , the gaming industry's largest publisher, has perfected the art of getting gamers hooked on yearly releases of sports games and turning out versions of movie hits such as "The Lord of the Rings: The Return of the King" and "Harry Potter: Quidditch World Cup."

EA's U.S. market share in 2004 is more than twice that of its closest competitor, and the company generates more revenue in the December quarter than its closest competitor does in an entire fiscal year, driven in large part by those repeat sports and film titles.

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Out of the top 100 games sold in Japan during 2001, 10 were original titles, but that number was halved in 2002 and fell to merely two in 2003.

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But it is not just EA chasing after proven material. Upcoming titles such as "Halo 2," "Half-Life 2," "Doom III" and "Grand Theft Auto: San Andreas" are all expected to top sales charts this year, in large part because the games that preceded them were so successful.

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And licenses for films and TV shows are being snapped up left and right by publishers counting on consumers to opt for something familiar when trying to decide how to spend their $30 to $50 per game in discretionary income.

Just this year, EA has licensed "The Godfather" and Take-Two Interactive Software Inc. has set up an ongoing licensing deal with the Cartoon Network.

Ubi Soft announced Thursday that it had licensed the early 1980s TV series "The Dukes of Hazzard."

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to put this bluntly.... YES.

With 3 systems out there.... 'every company is endangered slightly.

I honestly think the PSP is going to put the Pinch on Sony....
I think more developers are going to die in the next few years ALA Acclaim.

People think that 3 systems are good for the consumer (which it is price wise)... but remember.... if the companies get hurt with low profits and die off... what games wil you play in the future?

recommendations? Kill off Xbox :lol ... ok... um....
seriously... 1 of the systems will probably have to go.
I can guarantee you that it won't be Nintendo due to their Unique titles that normally ALWAYS sell well. heck.... I don't think a Nintendo game (meaning made by Nintendo) has sold less than 500,000 copies.... most sell over 1 million.

I seriously think that Nintendo pushes the market more than anyone:
1.) largest handheld maker with 95% of the market.
2.) #2 software producer/seller in the world next to EA... yes, Nintendo was just behind EA.
3.) Nintendo is smart. They profit on their systems even after price drops. ... they know how to manager their company. Xbox.... was losing hundreds of millions on their Xbox consoles even before the 1st price drop. Sony normally breaks even.... and then drops their price once their costs are all covered... then they are sucking in TOTAL profits on subsequent systems after that.

Take it as you want.... but there has been a few market shake ups since the game industry started.
You'll see AT LEAST a few more.

BTW... notice how arcades are dying off? That industry is about dead now.

†B†V† :hat

EA's U.S. market share in 2004 is more than twice that of its closest competitor, and the company generates more revenue in the December quarter than its closest competitor does in an entire fiscal year, driven in large part by those repeat sports and film titles.

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If EA's closest competitor is Nintendo, this is a really scary statistic, isn't it?

I would like to see it go back to only 2 consoles on the market. I favor a Nintendo/Microsoft alliance or a Nintendo/Sony alliance or even a Nintendo/Sega alliance with the second console belonging to either Sony or Microsoft depending on which alliance happened.

I do think Nintendo is on the right track with the DS, though. At Wal-Mart in the electronics department I posted a sort of pamphlet on the DS at our register, with the picture of the DS on the front. Two of my coworkers yesterday just noticed it and were asking about it. When I talked about the two screens and what they could potentially be used for, my coworkers got excited. One of them, who has all three systems but doesn't really follow the industry, was contemplating the possibilities of playing Zelda on the DS, where the touch screen could be used for inventory. The other one, who hasn't played much since the NES days, was pretty excited about it too.

I don't know how they would react to the PSP in comparison, but I do think that reaction towards the DS is encouraging.

that is an AWESOME idea for the use of Zelda... HECK YEAH... Inventory selection... that would be AWESOME!

You mean... Nintendo to be soaked up by another company?

actually... I couldn't stand that.... unless Nintendo bought Sega.. but remember... Sega is a time bomb... and its only a certain amount of time before they fully die off.

Microsoft has deep pockets... so I don't see them dying off.... but investors could get mad and start pulling money away if MS doesn't make good decisions.

Nintendo is too innovative to die off... honestly. I think Nintendo will never die off or be soaked up.
They are way too profitable as well.

†B†V† :hat

Well my version of any Nintendo alliance is this:

Nintendo makes the console and controllers.
MS/Sony does the publicity and marketing.

I don't want to see a Sony/MS alliance though because they are already too much alike. It would be pretty redundant.

Next gen though it's still going to be a 3 console race. So far Nintendo already has me sold on the Revolution, and I will probably get the XBOX Next down the line. I haven't decided on the PS3 yet though.

I see where you're coming from BV, but for arguement's sake...

I see Nintendo folding before either Microsoft or Sony. Why? For one thing, Sony and Microsoft generate insane revenues from other sources, so even if the PS2 is costing the company millions, they probably easily make up for it on the Sony DVD's being sold and used on those PS2's. Microsoft, is, well, Microsoft. There's no way money is a concern to these guys, and the Xbox has definitely found an audience in NA, so I don't see it dropping out anytime soon.

Nintendo on the other hand relies solely on the success of it's videogames for revenue. The PSP is going to take a big chunk out of that profit margin, and if its becoming more costly to make games, Nintendo's gonna suffer the hardest blow. And as you said yourself BV, Nintendo is not accompanied to showing a loss, if they deem the industry is becoming unprofitable, they're gonna get out of it before they end up in the red.

Well, Nintendo could always go back to selling flower cards

stealth toilet said:

I see where you're coming from BV, but for arguement's sake...

I see Nintendo folding before either Microsoft or Sony. Why? For one thing, Sony and Microsoft generate insane revenues from other sources, so even if the PS2 is costing the company millions, they probably easily make up for it on the Sony DVD's being sold and used on those PS2's. Microsoft, is, well, Microsoft. There's no way money is a concern to these guys, and the Xbox has definitely found an audience in NA, so I don't see it dropping out anytime soon.

Nintendo on the other hand relies solely on the success of it's videogames for revenue. The PSP is going to take a big chunk out of that profit margin, and if its becoming more costly to make games, Nintendo's gonna suffer the hardest blow. And as you said yourself BV, Nintendo is not accompanied to showing a loss, if they deem the industry is becoming unprofitable, they're gonna get out of it before they end up in the red.

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I must say that won't be happening.

PSP.... @ $350, that isn't going to be taking a chunk out of any market. The buzz to my store and across the Internet is "Hell no I am not paying $350 for a handheld."
Honestly, PSP isn't taking over anything. I think the PSP is going to hit the challenge.... and I think the PSP could really hurt Sony.

You see... Sony has divisions... each division has to perform. IE they make computers, discman/cd players, monitors..etc..etc..etc.. Each division is different and seperate while performing for the company as whole. If 1 division fails, you better believe investors are going to be voting that part down.... we are not talking just over a 1 year period.... it would have to fail for 2-3 years UNLESS its really hurting the business.

Check out Nintendo's financials sometime. They are soaking in black. They say their estimates have been "off" on their profits... BUT they are still in the black. They were not bleeding red at all.... EVEN after console price drops.

Nintendo sold 4 million Pokemon upon release..... 4 miil of that 1 game. They sold 1 million of mario sunshine, animal crossing (I believe over 1 mil), Metroid prime, super smash bros melee (their biggest seller), 1 mil + Zelda Wind Waker...etc..etc..etc. Advanced Wars 1 & 2, Golden Sun.... and MANY more have broken big #'s.
NO OTHER SYSTEM puts down those numbers consistantly for games. I don't care what system it is.... People can argue the Ps2 sells more... and I agree they have sold more systems, but NO other company can put software sales anywhere near that except EA. BUT in EA's case, they have an extremely insane # of titles.... BUT per title.... they don't sell like NIntendo's do. Nintendo sells a ton more per title.... (not talking 3rd party). And when 3rd party makers bring along a product that is good (Phantasy star online, Soul Calibur, Monkey Ball..etc..etc..) they sell well.

SOrry to go into a rant there but the case in point... Nintendo is TOO profitable to fold. They know how to make the profits roll in their direction. You will not see Nintendo "unprofitable."

THE ONLY thing that hurt them is the online play issue.... and I have to say, not many people are playing online yet. The #'s show 10% or something to that manner... and its not profitable at this time. Nintendo said that when there is a good solution, they are going online.

Personally.... I see Nintendo back on top of the market someday, why? They are the innovators of this market. They are going to be like IBM..... granted Dell sells more, BUT IBM is known for their better quality.... better service, and better records. They also paved the way of the PC market (at least were one of the pavers).

Another Case in point.... Look at Atari.... Sony IMO is the Atari of today. Atari had great games, great licenses..etc... for the day. BUT once Atari started losing control of the market... hit upon bad ideas... too expensive of product.... they died off... and died off quickly with the Atari Jaguar. The Atari Lynx (Atari's Handheld) was AWESOME for the day... it offered decent arcade ports on a handheld... granted its not that great in many people's eyes of today... BUT it was expensive back in the day. The PSP could be the Jaguar of today. Sony has good contacts... but we'll have to see how the system sells.
Its up in the air right now... and I can tell you that $350 is not a good way to start ($350 is the leaked estimate price).



†B†V† :hat

I do like your analogy of Sony and Atari, but...

The PS2 was a good couple hundred dollars more expensive than the GC, and they've easily outsold Nintendo in that area. Plus, if one can assume that a good 75% of the PS2 fanbase will buy PS3's (though I imagine it will be even more) and if the PSP has connectivity features (which it's supposed to), it's an obvious choice for Sony fans (and that number will take a chunk of the market). It may not happen with the first generation PSP's but I think for sure Nintendo has got to watch themselves. I mean, they were on top of the console market too until Sony came and completely blew them away.

And as for Nintendo's "innovation" saving them, I doubt that will happen. It's Nintendo's franchises that are keeping them afloat. Well, afloat may not be the correct term, but aside from AC it's not games like Pikmin that are bringing in the big $, it's the Zeldas, Metroid's, Pokemon's, etc., that help them keep that hefty profit. Arguably they've innovated with those titles (excluding pokemon, which has remained the exact same game for years), but you and I both know people didn't buy it for the "innovations" made.

In my opinion, Sony knows what they're doing, and they wouldn't be putting out the PSP if they didn't think it was gonna sell well. All the buzz I have been hearing is "have you seen the graphics on the PSP" so I also contend that there's more hype surrounding the PSP than the DS. Nintendo also has a history of, well, being kind of "out there", and I don't know if the NA market is gonna go that far out.

I have to half agree with both BV and Stealth. I do feel that Nintendo may die out console wise, as its their handhelds that are keeping them alive. Sure, they'll make a good developer, but that's about it console wise. I remember reading on Gfaqs that U.S. general group of gamers aren't interested in anything new. Just look at EA, top developer, and what to they make? LotR, billions of sport games, and god knows what else. I think that most gamers are more interested on improvements upon the old, not something brand new.

stealth toilet said:

I do like your analogy of Sony and Atari, but...

The PS2 was a good couple hundred dollars more expensive than the GC, and they've easily outsold Nintendo in that area. Plus, if one can assume that a good 75% of the PS2 fanbase will buy PS3's (though I imagine it will be even more) and if the PSP has connectivity features (which it's supposed to), it's an obvious choice for Sony fans (and that number will take a chunk of the market). It may not happen with the first generation PSP's but I think for sure Nintendo has got to watch themselves. I mean, they were on top of the console market too until Sony came and completely blew them away.

And as for Nintendo's "innovation" saving them, I doubt that will happen. It's Nintendo's franchises that are keeping them afloat. Well, afloat may not be the correct term, but aside from AC it's not games like Pikmin that are bringing in the big $, it's the Zeldas, Metroid's, Pokemon's, etc., that help them keep that hefty profit. Arguably they've innovated with those titles (excluding pokemon, which has remained the exact same game for years), but you and I both know people didn't buy it for the "innovations" made.

In my opinion, Sony knows what they're doing, and they wouldn't be putting out the PSP if they didn't think it was gonna sell well. All the buzz I have been hearing is "have you seen the graphics on the PSP" so I also contend that there's more hype surrounding the PSP than the DS. Nintendo also has a history of, well, being kind of "out there", and I don't know if the NA market is gonna go that far out.

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Actually... their #1 seller is Super Smash Bros Melee..... and that is a relatively new concept (compared to metroid..zelda..etc)...
What... SSBM came out.... 5-6 years ago... max.
Pokemon..... another relatively new concept... that was just coming out (US wise) in 97-98... if I am correct.

Pikmin has sold relatively well....

There is 1 strategy against SOny that would work.. but would be hard to achieve. Get 3rd party companies to alienate it.
It probably would be near impossible..... BUT if you can achieve that.. Sony would die.

I think you all underestimate Nintendo. I am not wishful thinking on this either.

†B†V† :hat

Yes but SSB has since become a franchise, as well as pokemon, but, I do see your point.

However, SSB is not made by Nintendo and although it's technically not a franchise the reason it sells well is because it includes nearly every Nintendo franchise there is. If it had an original cast, with original themes, it would still be a great game, but would also not have sold half of what it did.

Pikmin has sold relatively well but it in no way brings in the kind of money the new Metroid will. The first Metroid was a pretty innovative game but this one isn't going to be nearly as much so, and I predict it will sell just as good if not better.

I'm don't feel I'm underestimating Nintendo, I just think they have some very tough times ahead and I don't think they can fall back on a strong Handheld system.