Friday, March 18, 2011

THQ Defends the Homefront: Life Imitating Art Edition

Despite massive investments on the front end, most publishers abandon recently released boxed titles, leaving to fend for themselves like orphans in Dickens' London. Can anyone point to support for Ride from Activision, or Saboteur from EA after launch. Even Mercenaries 2 was left flapping in the wind. But THQ either picked something up during the development of Homefront - thank you John Milius - or chose this time to display the massive set of balls tucked away in the closet for so many years.

As I wrote a couple days ago, the company took an unfair valuation hit due to the compounding effect of a low Metashitic score coupled with an overzealous gaming press. The press ignored the downward trend of the entire industry for the days leading up to the decline and slammed THQ, leading to uncertainty in the financial market. Those guys in mainstream somehow believe the game journalists are experts and use their drivel to provide advice to their clients. The problem is exacerbated by the publisher silence endemic to boxed game release. For a nano second it looked like it might be business at usual at THQ. The press reported the low Metashitic score, and the company was silent. Then the press gleefully reported price cuts at Walmart and Amazon - bite the hand that feeds you much? Then, with the responsiveness of a protective parent, THQ immediately went on the offensive citing first day sales of 375k units. Knowing the nature of the gaming press, THQ took it direct to the world. Mainstream outlets like USA Today and Forbes printed the real story and questioned Metashitic. Unlike the apparently biased James Brightman of Industry Gamers who feels a strange compulsion to add unsupported personal negative commentary to every positive statement, these outlets reported THQ's statements and statements from the company, and analyst reports, shockingly, as analyst reports without commentary. THQ further stuck back regarding the price reductions indicating they were one day only and not an attempt at inventory clearance.

With a strong air campaign in effect, THQ put boots on the ground. Danny Bilson led the charge with his announcement of the need to add servers for multiplayer. He has been touting multiplayer all along and judging by the server access and forums, people seem to like it. I would like to think THQ did not have their hand in it, but in stark contrast to their own review Joystiq posted a curiously positive metareview with each excerpt nailing the THQ multiplayer talking points. I would like to think Joystiq is independent and they did it on their own, but it was posted the same day as a bunch of other THQ posts which give it the feel of coming out of a press call. Anyone who remembers the initially negative reviews of COD: Modern Warfare 2's single player knows multiplayer is the key to longevity for a shooter and THQ is wise to make it a focus of the fight.

I am not going to defend Homefront as the greatest title ever made. There is no question it is a waffle product. Fully baked and hints of greatness in some spots, raw in others and burned in a few more. The title, the sales, the quality and the longevity are completely irrelevant The question the financial community should be asking is not how the critics like it, but whether it will sell. THQ set a realistic goal for break even and a number of analysts are confident they will hit the goal. The message to take away from the launch is there is a new THQ. THQ can now stand proudly as the shining publisher on the hill that supports its developers and stands proudly behind its own product, even after it is out the door. While the gaming press does not have the ability to sense the humiliation of being so completely wrong and change, THQ gained credibility in the eyes of the consumers, Wall Street and the mainstream.

Wednesday, March 16, 2011

Metacritic Attacks on the Homefront: Call to Arms Edition

Metacritic is an intrinsically flawed concept based on a corrupt ecosystem. It would not be an issue of the game business, like film, music, television and everything else tracked by Metacritic ignored the numbers. I have never seen a film’s failure supported by a headline pointing to Metacritic. Nor have I seen the film press trumpeting the unthinkable number one position at the US box office of Battle: Los Angeles despite its score of 37 – a number which would get any game development executive fired. Why then, do all of the major game news outlets report THQ’s lost 26% of its market value yesterday because Homefront got a 71 – unless you look at the sidebar which says it got a 72, or PS3 which got a 75. Using this logic, we must also conclude the most recent add on DLC for Call of Duty: Black Ops did not sell well because it scored an anemic 78. and we should be stumped by Take Two’s decline despite the 88 achieved by Top Spin 4 on the same day as Homefront. Maybe this is because even Metacritic acknowledges the score does not influence sales. Ironically, and as suggested on this very blog months ago, the same site reported NPD finally acknowledged the company does not really know how many games are being sold. The industry is able to acknowledge NPD is flawed and acceptance of the numbers caused harm. NPD finally admitted we cannot use hindsight to determine how many units are sold. When will be able to acknowledge Metacritic cannot use foresight either?

I've written about Metacritic way too much already, but I just can not stop doing it. Just when I think the site has stretched credulity to the limit, it goes further – and the press buys it. I wrote about the inherent lack of integrity,t he questionable scores that do not get corrected and the critics, who are somehow, but not directly, related to the scores. I find myself having to do it again. I am not going to try to defend Homefront, but once again, it leads to questions about the system itself. The Metacritic score is more a function of THQ’s poor management of the critics , marketing budget and the consumer than the game itself. Little things, like the company’s failure to release a demo removed the core gamers’ ability to make a decision on their own and forced reliance on those who actually had an opportunity to play the game – the critics . The critics who give the scores must be nurtured, supported, provided information and in some cases, publications must be bought. If the words of the critics about the publications themselves are not enough to solidify the point, gamers need only look to the correlation of exclusive covers and game scores. Cover exclusives are secured months before a game is ready to actually be put on the cover. Is there any possible way the magazine with all the game ads in it can know the game will get a 9 out of 10 when it secures the exclusive? So how does it always happen? How about those great big site ads on the sites with the high scores? These are the only the obvious ones. This corrupt system is then passed through an admittedly bias filter to provide a gentle butterfly’s kiss of influence on a Metacritic score.

If we accept the most recent high scores on Metacritic we would conclude XBL/PSN games are better than boxed product. Not only do the new ones score disproportionately higher than boxed product, old games, when released on XBL/PSN seem to age like fine wine. Homefront's lower scores mentioned dated gameplay, but then I noticed the re release of Beyond Good & Evil scored an 85, only two points lower than the score it received when it was first released eight years ago. Of course the sites selected by Metacritic were different than the ones selected for Homefront.

I became curious as to how an eight-year-old game with refreshed graphics is able to outscore Dragon Age II. Sure, a classic is always a classic and if you are looking for a game with a girl, a pig and a camera, nothing else could compare, but in this day of immediate gratification and ever improving interaction, but when bits of old games are maligned, how does the entire assembly retain its rating? So I clicked through to the reviews. I usually start with the highest and lowest scores. The highest was a perfect 100. As in the past, Metacritic gave the score to a bunch of words without a number. If no score is given Metacritic gives one based on what the company believes to be the tone of the review. Unfortunately, I could not determine whether Metacritic was right because the review was written in Greek and there was no translation on the page. Really, I cannot make this stuff up. Google's translate application gave me this:

The gaming industry is a little more time passes quickly, but it is the same or even more relentless and without grief. The Oblivion is not slow to come, and a masterpiece may just within months of its release, becoming a "classic creation" of those who, as usual, nobody has played.

I guess that could be a perfect score – on some planet. I do not have all the data In front of me, but I am going to go out on a limb and say the Greek game market is not one of the world’s largest. Moving further out, I would venture to guess the portion of the audience influenced by game reviews written in Greek is neither the majority nor the most influential. Why is this review given the highest score and included in the computation despite its outlier status?

How and why do we take this site seriously and why are we not up in arms when the completely arbitrary score, purporting to be an aggregation of an irrelevant and corrupt ecosystem can remove a quarter of the value of a company in a day? This is no less than an attack on our business. An attack on THQ is an attack on the advances in the eyes of Wall Street made by EA, Take Two, Activision and every other company in our industry. When will we mature enough to know a rising tide lifts all boats? EA and Activision both stood up this week to finally point out the fiction perpetrated by NPD for all these years. Isn’t it time we did the same to Metacritic?

Monday, March 14, 2011

In Defense of Console?: The Sky Is Not Falling Edition

Before I get started I have to say a word about priorities The first quarter is always a tough one. Products, trade shows and return to work always conspire to make this period a difficult time to prioritize our lives. Last week I was smacked in the face by the deaths of two people well before they were done living. They both spent extended periods of time fighting disease, so the deaths were not a surprise, but nothing can prepare kids who are still kids bury their parents, or parents to bury their child. It is the wrong order of things. I hope no one reading this has to see these things around you, and especially not coming in pairs in a single week. Then we were all struck by the incomprehensible tragedy in Japan. With all of our friends and colleagues in our business tragedies that seem so distant when they happen in other parts of the world, suddenly strike very close to home. At the risk of sounding overly dramatic, I must put down in text that as much as we get wound up in what we do and how important our business is, we are just making games. Games can inspire, entertain, illuminate, educate and a whole bunch of other great things, but at the end of the day, we are not curing cancer - yet, and we are not bringing world peace - yet, so I took a few moments today to remember my priorities.

The big news coming out of GDC seems to be the attack of the mobile device. Stories seem to fall into two camps. People with vested interests in the devices or the games say the days of the Microsoft/Sony/Nintendo triumvirate are over and people on the console side of the world who look at iOS/Android games as a horrible virus, threatening to infect the hearts and minds of gamers and developers alike. Of course journalists continue to the stoke the fire, like James Brightman of who seems to be losing faith in the console business model. Everyone assumes the two markets are some horrible combination of cannibalistic and mutually exclusive. They are neither.

I may be relying once again on my brilliant grasp of the obvious and therefore cannot fault others for missing the parallels, but we have seen this same scenario play itself out in every other form of media. iOS, Android and digital distribution are not new media or even new games, they are new distribution channels. Media will adapt and specialize just as stage plays turned into movies and movies turned into sitcoms, but right now, they are just removing friction between game makers and customers. Whether we are talking about the impact of printed books on storytelling or DVDs to film, over the entire history of media expanded distribution expands the opportunity for content creators. But no one sees it immediately. Every time a new format is introduced the old formats feel threatened. Film was perceived as a threat to live performance, but a walk down Broadway or London's West End proves the concern to be overblown. Similarly, television was perceived as certain death for film, DVDs for theatrical release and even the remote control to sponsored television. In each case, the market only expanded - and we are seeing it in games.

According to Appdata, at one point Cityville hit a high of over 101 million monthly average users. This is over 10 times the sales of a blockbuster console game, just about 10 times the size of Warcraft and 5 times the purported life to date sales of Grand Theft Auto 4. Rovio is reporting similar numbers with Angry Birds. These titles are reaching and converting tens of millions of new consumers our industry never reached before. These consumers never knew they liked games, and they are finding they do. We joke about the crack model, but it works. They will get hooked on iOS and a chunk of them will move to mid core on the PC and a chunk of them will chase the high right onto the console. We already saw this with the Kinect. I remember a time not too long ago when a platform was considered to have achieved critical mass if it did 1 million units the first holiday season. Kinect has done 10 million to date and these are not core gamers. Social games core audience of middle age women and Kinect’s target marketing on places like Oprah are no coincidence. Consumers already accepted the up sell, all we need to do is convert them to game buyers.

I used this quote about half a year ago, before Call of Duty: Black Ops and Red Dead Redemption, when these same people were saying the console business was dead and I pointed out it why it is not. It comes from an investor in Avatar explaining why he went ahead and invested a film would not earn out unless it was among the biggest films of all time.

“I was really impressed by their understanding of the business, that there is so much competition these days for people’s leisure time that you have to create something you won’t find on TV, on computer games, the Internet, to draw audiences into the theater,” [Avatar Investor] Clayton says. “This wasn’t purely a creative process for them, like it is with some producers. Jon and Jim absolutely understood the need to cater to audience tastes.”

We have an expanding audience of gamers - I hate use the word "gamer" someone who plays games is no more a "gamer" than someone who watches television is a "televisioner" or a movie lover is "movier" after this sentence, let's stop using it - If we want them to use a 3DS, NGP or console, all we have to do is give them an experience they cannot have on an iPhone. While NGP is moving dangerously close to the iPhone model and thereby begging the consumer question, “Why?,” Nintendo’s hardware telegraphs a different gaming experience. iOS and Android eliminated inefficiency, but so far, they have not made games better and even though Angry Birds sells well – amazingly well – we have not seen a platform defining game. To date they prove games are fun and people are willing to play them if we do not require them to leave their homes and pay USD 60. They did impact our ability to sell some handheld games, but their major impact on the dedicated market is eliminating the ability to sell crap. Before iOS, if Nintendo did not sell games for a dollar, they did not happen. Now Nintendo does not control the whole market. When Iwata-san or Reggie Fils Amie talk about the threat of casual, it should be music to consumers’ ears. What they call a threat, consumers call competition and it translates to better games. Now Nintendo and all other third party publishers must earn the premium dollars they are charging. We are already seeing it on console.

As the film business matured and downstream revenue and amortization opportunities emerged we saw the introduction of the blockbuster turn into the requirement of the blockbuster. If you want to see a return on your film, you are either making Transformers, or Paranormal Activity. We are getting to exactly the same place in games. The good news is the market responded and is turning out high quality, blockbuster product that cannot be played on anything but a console. Last week I watched my son play Killzone, with the Move controller and peripheral - until I stole it and started playing myself. We could not have this experience on an iPhone. Sure this is for core consumers, but anyone in the business will tell you, we sell into the core first and then expand the market toward the mainstream. The iOS/Android market is dramatically and exponentially expanding this secondary market. To really see the vibrancy of the market, we need not look to Killzone and peripheral driven games, just look at the player minutes in Black Ops or pent up demand for Dragon Age II. But no one will argue that making blockbuster games is hard, expensive and risky.

In his article, Mr. Brightman believes it is so hard we should quit making them and focus on the obscenely profitable model enjoyed by Angry birds. Mr. Brightman is absolutely correct. Paying USD 140,000 for a game that returns USD 70 million is much better than paying USD 20 million plus for a game requiring 2 million units with an average sale price of USD 60 to break even. He could say the same about the television model in which The Simpsons producers an entire season for a fraction of the cost of a tentpole film and goes into its sixth or seventh or twelfth syndication run generating tens of billions of dollars is a better model than the film business where a tentpole film needs multiple release windows to generate a much smaller return. But Mr. Brightman has only provided half of the equation. I am waiting for the follow up article telling us how choose Angry Birds as the game to pursue out of the other 99,999 being started right now, or instead of the 51 games built by Rovio prior to Angry Birds. Hollywood will pay big money to be able to extrapolate the model into television in film so they can start to know which of the 95% of the television pilots should not be made. It is very easy to focus on the profitable title after the fact. But in markets where half, or less than half of the product makes most of the profit, it is impossible to figure out which half not to pursue. Fortunately, the casual market helps out here as well.

Blockbuster games require large investment, making publishers risk averse. They tend to relay on proven forecastable formulas, quickly leading to clich├ęs. Consumer fatigue sets it in as originality wanes. While it is ill advised to introduce disruptive game play in a USD 40 million game, as the CEO of Rovio pointed out to Venturebeat as he argued console games are dying, iOS game allow for innovation (is it worth pointing out to Mr. Vesterbacka that iOS is in fact a console and he pays 30% more to Apple as a percentage of revenue than we do to Sony or Microsoft and even Android is a platform in the sense Google approves the apps for ads and keeps over 100% more of the revenue than Microsoft or Sony?). In fact, it is brainless not to take a risk in an iOS/Android game and short sighted not to try in a downloadable. Many original game ideas will fail – and that is the beauty. Once again, we have a market where identification of failure costs tens or low hundreds of thousands of dollars, rather than tens of millions. as we just saw with the investment in Rovio, investors and publishers can start to look at successful games and pay the “I did not have to pay for failure” premium to acquire games and the companies who make them.

Rather than looking at the casual market as a blanket threat, we should look at it as a return to the old days. More consumers coming to the market. More opportunity to test new game ideas. More downstream revenue windows and more amortization opportunities to support larger investment and hedge risk.