With every new generation of game consoles, the racers line up to the starting line to begin the cycle anew. Actions in the previous generation will give some a head start or even golden shoes, but ultimately the race is starting again which means anybody can take the lead. Now all three next and new generation consoles have launched to shock, awe and indifference. Many things have turned out totally different than any analyst could have suspected at the beginning of 2006. Moving into 2007 and beyond each of the major manufacturers are going to be jockeying and elbowing past each other to gain the lucrative console market share lead and cross the finish line into a pile of money. This article examines each next-generation console from Microsoft, Nintendo and Sony, examines their current situation and determines what each can do, sometimes at the expense of the others, to gain the top position. These suggestions aim to be feasible and realistic, that can be implemented in the next year or two. And the discussion is limited to the 360, PS3 and Wii only, no handhelds are examined or the PS2, despite their significance to the overall video game landscape.
Microsoft Xbox 360
Microsoft is sitting pretty right now patting themselves on the back for launching at the time they did, for the price they did, and with the functionality they have. Many people suspected that the Xbox 360 would be crushed by the hype of the new console launches in November. However, by virtue of supply, relatively affordable price, and the biggest library of games, Microsoft outsold both Nintendo and Sony, in both November and December. In fact, in December Microsoft outsold both Sony and Nintendo's offerings combined. Worldwide, Microsoft has hit and exceeded its intended target of 10 million consoles shipped. For 2007 they're hitting the ground running launching an assault of games that make it one of the most exciting years for any console in a long time.
Strategy: Become Playstation and get the games
The fundamental strategy that Microsoft must employ to make the Xbox 360 the next market leader, is to copy and capture the current market leader. Microsoft is in the best position to take the torch that Playstation has carried for the past 10 years. It's not going to be a PS2 like situation where it dominates from the beginning, it's going to have to be a Playstation 1 strategy where Microsoft can capitalize on its unique position in the marketplace and become the de-facto standard. However, the 360 isn't there yet, and it all comes down to the games.
Microsoft has captured a good chunk of the PC market, which is actually new to the console space, they're also doing well to take the popular action, racing and sports gamers. For sports games Microsoft has to demonstrate why sports games on their system are the best choice compared to the competition. This can be accomplished through Live and the advanced functionality and infrastructure it provides to developers. 360 multiplatform games already come with extra features such as the advanced friends list and custom soundtracks, but Microsoft has to differentiate even more by ensuring the games have full online leagues, web access to league results, and other advanced functionality.
The next big segment of gamers that Microsoft has to capture are the hardcore Japanophiles that have grown up and matured on the Final Fantasies of the world. The Xbox was pretty poor in this situation with only a few token JRPGs and a few relatively unknown Japanese action games that didn't gain a lot of traction. Microsoft's 360 is already miles ahead of its predecessor with significant support from Capcom as well as significant and attention grabbing RPGs out of the land of the rising sun. This may still not be enough, having the big guns helps, but the Playstation consoles also had a large amount of smaller and niche RPGs that appeal to a small but extremely loyal audience. To get these smaller RPGs isn't a simple task as these companies made their bread and butter on the Playstation fanbase. Most likely these companies are just going to continue developing for the PS2 because it makes the most sense. Therefore, Microsoft has to give them some incentive to develop for the 360, either through shared development costs or distribution and publishing deals in the West.
Another audience that has not been well served on the Xbox platform are the party and casual games. Again, Microsoft is making some headway into this market with their Xbox Live Arcade games, and in March will have Guitar Hero 2. However, again it's not enough. The PS2 had a large amount of extremely popular party games, many of them revolving around EyeToy and the Singstar series. Microsoft has to release titles, or get titles onto the 360 that not only match but exceed these counterparts in terms of functionality, features and fun.
Lastly, to put the nail in Sony's coffin Microsoft has to steal Sony's 3rd party weapons of mass destruction: Devil May Cry (now releasing simultaneously for PS3 and 360), Metal Gear Solid (Microsoft has failed here) and Final Fantasy. Right now is the best time to strike as Sony is the most vulnerable it's ever been, and may ever be. Demand is currently much softer than expected in both North America and Japan, which puts Europe into question as well. Capcom has already achieved massive success on the 360 so convincing them to port DMC4 won't be very difficult. Capcom has already confirmed that all subsequent games after DMC4 will head to both platforms, so just get DMC4 and Microsoft is good there. Konami is another big publisher that could fall pretty easily. All Microsoft has to do is point to Capcom as an example of major success, and give them some hats full of money. (note: At Sony's E3 2007 Press Conference, it was confirmed that MGS4 will only be on the PS3.)
Lastly is the Final Fantasy series. It's extremely unlikely that FFXIII will go to the 360, the way the games are made just make that too difficult of a process to happen this late in the game. However, Microsoft can lay the groundwork now to ensure FFXIV comes out on the 360 day and date as the PS3 version. Start co-funding some smaller Square-Enix projects to get them familiar and comfortable with the platform. Throw in some extra marketing their way so they see some nice returns on those initial small projects. At the same time build the JRPG audience through the suggestions made above, so Microsoft can point to other successful RPGs and say "These guys accomplished this much, imagine what FF could produce." (note: Square Enix has licensed the Unreal Engine 3, but they are still using the White Engine for FFXIII. It's it extremely unlikely that FFXIII will go to the 360. Square-Enix has also announced that they have no plans for any Final Fantasy on the Xbox 360.)
Essentially, give gamers the confidence that they'll be able to purchase an Xbox 360 in the knowledge that no matter what kind of game they like they'll be able to find some great titles to play. This is the number one most important feature of why the Playstation franchise is as successful as it is. It appeals to all kinds of gamers.
Chances of success: Medium to High
While there are a lot of things that Microsoft needs to do, not one of them is that unreasonable or out of the question. In fact, many of the suggestions are just a continuation and expansion of initiatives that Microsoft is already pursuing. The original Xbox was a learning process for Microsoft and forced them to focus on the console industry and examine what does and does not work. Unfortunately for them, the generation they chose to launch, is also the generation that saw the kind of domination of the entire industry that hasn't been seen for 20 years. But this also gave them the perfect opportunity to see exactly what worked so well, and now emulate and improve upon it for this generation.
By providing a diverse lineup of games that appeal to everyone they will secure their lead in North America by a very large margin. They'll most likely be the lead in Europe as well. The numbers out of Europe are more difficult to ascertain, so it's difficult to determine just how successful the Wii has been thus far, however, it doesn't seem like the Wii is dominating in the same way it is in Japan. As for Japan, the best the 360 can hope for is to get a niche and hardcore audience, and if the PS3 continues performing way below expectations then duke it out with Sony for a middling 2nd place.
The early signs show that Microsoft did pay attention to their previous beat down and learned well. This only speaks well to the future, and barring a massive shift brought upon by the Wii, or a loss of resolve by Microsoft's top brass to put their money where their mouth is, should lead them to success. Extra features such as IPTV and Media Center functionality are great, but they're not a deciding factor that MS can rely upon, in the game industry it really is all about the games.
Nintendo Wii
The Wii is the toast of the town. The Wii is making games fun again. Everyone in Dr. Phil's audience gets a Wii. The Wii is everywhere! So then why aren't the sales numbers there? Analysts and industry watchers everywhere expected absolutely massive numbers for Nintendo's flagship console as the reports of country-wide lineups didn't stop throughout the entirety of 2006 and beyond. However, once the sales numbers were released the truth was determined that a massive shortage of supply was the culprit. As a result of this shortage the true demand is still unknown. From the media attention and lineups and everything, demand very well could be in the million a month range, or it could be in more traditional console levels. Until supply catches up to demand we won't know. One thing we do know though, is that the Wii is still selling predominantly to Nintendo fans as Zelda has an attach ratio of over 90%. Note, all of this uncertainty is in North America and Europe. We don't know if it's a success or a massive dominating success. In Japan the Wii is a massive dominating success.
The other danger of the Wii is that the sales are extremely front loaded. Everybody who wants a Wii will get one right away for the concept alone, and therefore new title releases will do very little to spur demand. Instead, once the demand for $250 is exhausted, unless Nintendo comes up with different content they'll see a stall in sales until a price drop where they hit a new plateau of demand. Again, the big question is how big are these price groups and if they're in the 20 million range then it's all a moot point. If they're in the 5 million range however, then Nintendo will be required to come up with new content that will attract people on its own merits.
Aside: Wii's Uncanny Valley
The uncanny valley is a concept that describes an aesthetic phenomenon of computer graphics and robotics where real world reconstructions are very close, but not close enough, so we end up focusing on the aspects that make them unrealistic which often ends in a creepy and uneasy feeling (source). Many people feel that the 360 and PS3 are going to jump right into an uncanny valley that'll do a large part to undo any kind of graphical advantages they have over the Wii. I have a very strong feeling that the Wii is in a similar position when it comes to controls. What people don't realize is that the uncanny valley applies to all forms of the abstraction spectrum. Video game controls are just another form of abstraction and in that spectrum the Wii falls squarely into an uncanny valley of its own. Look at each Wii sport, you use the controller in a very similar way as in reality, however, you don't actually use the controller in the exact same way as in real life. This situation creates frustration, because we want to play the game the way we play in real life, however we're still playing a game with abstracted rules which necessitate playing Wii sports in the right way. Because the motions are so close to the real motions, we focus on what makes them not real, and this is frustrating. With smart design and implementation the uncanny valley can be avoided, and this situation is no different with the Wii. If that uncanny valley can be bridged, that will unlock the Wii's potential for unique and truly immersive gameplay experiences.
Strategy 1: Real and Online
The Wii is a fantastic console with a lot of potential, there just needs to be the right games that tap this potential. These early days are somewhat exciting, but they're frustrating as well. Wii Sports is great for parties and the mini-games are perfect bite-sized morsels, but then a lot of the Wii's early titles are focusing on mini-games. This doesn't have to be the case. Each mini-game is only the tip of the iceberg when it comes to Wii functionality, and to get the serious players on board there needs to be a full retail title that focuses on one form of play. And offer this online.
I'll examine Wii Boxing as one particular example, but the same concepts can be extended to the other 5 sports and more. Most likely it won't be Nintendo to create this game, but a company such as 2K Sports or EA, especially as EA already has the established Fight Night franchise. Working together, Nintendo and EA can create an advanced and sophisticated software system that can handle complicated motions. There should be something like a simple mode, that uses gestures like normal, but then a more advanced mode that accomplishes something that is much closer to one to one motion.
Accurate motion detection is paramount in this kind of situation, as the number of times I perform a hook and a hook is performed onscreen should be reaching the 95%+ mark. Due to the newness of the Wii's controls people are willing to let certain things slide when it comes to lost or misinterpreted actions. However, in real gameplay, 100% accurate control is a requirement. Just imagine playing a game with a normal controller and having your button presses or directions being entirely lost, nobody would accept that. Eventually the grace period on Wii's controls will run out, and people's demands for accuracy will skyrocket.
When I throw a hook, I want a hook to come out. Period. I don't want to have to tilt the remote left or right, I want to swing my arm like I'm bashing some fool upside the head. That's satisfying to me, and that's what will make the Wii stand head and shoulders above anything else. Combine this advanced motion system with true online head to head play and you have yourselves a killer app, guaranteed. Playing against human players is always a more visceral experience. Now you're adding in the immersion of real motions. It really would be an ultimate experience. Graphics wouldn't matter at that point, make it stick figures or better yet, Miis, and you're golden.
Strategy 2: World of Miispace
Miis are awesome. I love them. You love them. Everybody loves them. There's something so charming that only Nintendo could capture in creating Miis. Now take the idea even further. Make Miis a cultural icon alongside the traditional Nintendo mascots of Pokemon and Mario. Paste them all over the promotional material and make a real marketing effort behind the concept of the Miis.
Alongside that, put Miis in all the games. Instead of sticking to franchise characters that are starting to get tired after 20 years, have Miis start playing a central role in more games. Let people use their Miis in the next Kart racing game, and games like Super Smash Brothers and Super Mario Strikers. It's so much more personal, and thus compelling, to have your own little avatar running around the field instead of the fat plumber. Again, when you add online play into the mix, the Miis and online feed off each other, and take the whole experience to a level neither could achieve on their own.
Continuing this initiative is to make Miis a far more social experience. This is an incredibly ambitious suggestion, but would pay off in a massive way. Essentially release an MMO Mii channel for download. The absolute best will be if it's free, but a paid download plus subscription fee can work as well. There are already examples of this type of thing happening and being super successful, the most notable are World of Warcraft and Myspace, but even closer is Cyworld. However, this online service wouldn't just be an MMO, but also a social networking service in the same way as Cyworld. Even World of Warcraft is getting its own social networking site, Rupture, that ties your profile to your gaming character. Now Nintendo can either create their own social networking service or partner up with an already established player. Myspace would be a perfect fit. Considering the size of Myspace and how popular they are, any kind of partnership would lead to instant success.
Strategy 3: Cheap and easy media streamer
The web browser and built-in flash support already make this concept a reality, it's just a matter of marketing and expansion. Number one should be being able to play content that's located on your own network, that should be an obvious standard among all three consoles. Other than that, it's really just getting the word out there. Through the use of websites such as PeekVid and AllUC the Wii acts as an ultimate OnDemand movies and television set top box. It's already controlled with a remote so that makes the experience very similar to watching normal TV, and everything is already there. Just let people know what's possible and what they can do with your $250 box and they'll come in droves. Why buy something like an Apple TV for $300, when you can pickup a Wii that does a better job, plus a ton of other functionality like playing great games?!
Chances of success: Medium to High
Nintendo has a lot of momentum and they're the darling of the media. Nintendo has already vaulted past the two next-gen consoles in Japan by a very substantial margin and doesn't look to be slowing down anytime soon. Nintendo very well might not have to do anything more than what they've already done to reach ultimate success. I'm highly skeptical of this however, and feel deeper and more compelling experiences that go beyond existing Nintendo franchises are necessary to achieve leadership. There needs to be more than just mini games!
An integrated social network isn't likely to be released in 2007, but moving into 2008 if Nintendo assigns the proper resources it's definitely possible. Real and online games are much likelier to happen in the near future. Nintendo is already investing into its online infrastructure, and the Wii is an online console out of the box. A cohesive platform similar to Live isn't even necessary, just something that would allow online play against strangers and friends is enough as the immersive experience will provide the rest of the entertainment. Creating those experiences is another question, the technology of the sensors and processing capabilities of the Wii may not be enough to cope with the computations necessary. This is something that will come to light as the generation progresses and developers come to grips with the capabilities of the system.
Sony Playstation 3
How the mighty have fallen. From the most dominant leader the industry has ever seen to struggling for market acceptance. The PS3 is in a similar situation to the Wii in that during the holiday season the PS3 was supply constrained, therefore true demand is difficult to determine. However, in the beginning of the new year Sony shipped a very large amount of consoles that are reportedly having difficulty selling. We won't know the real situation until the sales numbers are released, but the very thought that PS3s would be sitting on shelves any time for the first 6 months of its life is surprising to say the least. In Japan the situation is far worse as weekly sales have plummeted to being a quarter of Nintendo's.
Console sales aren't the only thing below expectations as software sales are performing far below expectations. In Japan the tie ratio is at or just under one game for every console sold. In North America it's just over one. In comparison; when the 360 launched, in North America, on average 3 titles were sold for every console. The tie ratio of the 360 is now over 5.
As a result of these numbers publishers and developers are starting to reevaluate their situations. Already we're seeing the consequences as Virtua Fighter 5, a PS3 exclusive for almost a year now, is announced to be coming out for the 360 at the end of the summer. A much bigger loss happened at the end of last year though. In a special media engagement Nintendo and Square-Enix announced that Dragon Quest IX, the next installment in the most popular franchise in Japan, is being released for the Nintendo DS. This is a huge announcement as both Dragon Quest VII and VIII appeared on Sony consoles, and many people considered it a foregone conclusion that DQ9 would appear on the PS3, just like FFXIII. This has no doubt resulted in an extreme drop in confidence from the Japanese public. Needless to say, the situation for Sony right now is the worst it's ever faced since it's entrance into the console market 12 years ago.
Strategy 1: Make the price worth it
The PS3 has launched a year later and costs anywhere from $100 to $300 more than the 360. Despite this time and cost premium, the games don't look or play any different. In fact, many multiplatform games look better on the 360. For your customers that have waited this long and paid this much, this is unacceptable. Sony needs to do whatever it takes to ensure PS3 games are always the cream of the crop when it comes to graphics, presentation and features. Sony first party are already at the top of the class, however the games are taking a long time to come out. The first party offerings that are launching later this year must meet and exceed the impossible hype to demonstrate that there really is a tangible difference between the two high-technology machines. These games must demonstrably show why Cell and Blu-Ray are the best technologies for the next generation and make the 360 obsolete.
These games can't simply come from first parties though. Multiplatform games must also show a clear difference between the two versions, a difference that is more than favourable to the PS3 version. Right now, in the West, the 360 has established itself as the lead development platform for many studios. This is a result of the excellent development tools that Microsoft has made available. Due to the substantial differences in architecture the PS3 version isn't properly optimized and often times ends up worse than the optimized 360 version. Sony needs to heavily invest in advanced developer tools that surpass Microsoft's offerings. This way developers will use the PS3 as their lead development platform and with the properly supplied Sony libraries will be able to optimize their games for the PS3's unique architecture.
Strategy 2: Get the games out there
For one reason or another, a lot of games that were supposed to be released during the PS3's launch have been delayed. Get those games released! But don't rush them, but get them out soon and at a high level of quality. If the games are rushed and end up being worse than their 360, that will do more harm for the PS3 image than not having them at all. Sony has to ensure a certain level of quality is maintained for these ports that shows the price is worth it. As a result of these delays, Sony should be showing that the games are coming eventually and start releasing demos. The demo to Motorstorm is a great start and has done a fantastic job of creating interest in the PS3, now get demos out of Lair and Heavenly Sword. Continue the trend of demos for great new releases that are coming out in 2008. Lost Planet's demo was released a full 8 months before the game hit retail and has done a wonderful job of spreading awareness. Sony needs to do the same thing and give people a taste of the future so they can withstand the onslaught that is the 360's 2007 release schedule.
Sony can't make the same mistake that Nintendo made. Sony, can't survive on their own first party titles. That's why they need to invest in their tools, and invest in outside developers to get the exclusives that make the system sing. Furthermore, investing in tools is really a double benefit since everybody, both first and 3rd party, benefits.
Strategy 3: Drop the price, but don't drop the price
Right now people think PS3=$600. Informed gamers and Sony fans will then be quick to point out the $500 alternative that is more than viable. This is a problem for Sony. The $600 PS3 takes the majority of attention since a majority of consoles that are available in retail are the more expensive 60GB version. Drop the price to $500, not by cutting $100 off the 60GB, but instead by quietly phasing out the 60GB version entirely. Through marketing efforts and partnering with retail get the general public to start thinking PS3=$499. This number is much easier to swallow as it comes a hair beneath the half a grand line. Sony is unable to drop the real prices of the console for a while. If they drop the price too early they piss off their core audience, and lose any kind of premium angle. If they don't start bringing the price down then they'll face soft demand for a long time to come. Start pushing the 20GB version and you move up the demand curve without the negative backlash. Due to supply, most people who want a 60GB version probably have one by now anyway.
Chances of success: Low to Medium
Before the PS3 launched people thought that the Playstation brand itself would be enough. It turns out that price is a bigger factor than most people could have imagined. Europe is the last region where Sony will launch. It's the region where the Playstation brand is the strongest, it's also the region where the PS3 costs the most. Through virtue of the advanced technology contained inside, Sony has put itself in a difficult position in regards to price. Sony took a gamble to take the premium route, but the gamble doesn't seem to be paying off. The suggestions outlined above are all extremely realistic and will have a large impact on PS3 demand. If Sony is smart with their resources and backs games that truly are not possible on the 360 then that will justify the extra $100 to consumers. Or at the very least it'll make consumers hold off on a 360 purchase and wait for the PS3 price to drop.
Sony still has the brand name. They still have a majority of Japanese support. Taking the necessary moves to ensure the games stay on the Playstation platform, and showcasing these games will let Sony move past these initial growing pains and retake the console gaming crown.
