Wednesday, August 24, 2011

Publisher Trash Talk: The Cadillac of Game Publishers Edition

EA and Activision's back and forth banter is making a lot of press - and is certainly fun to watch - but it is sadly nothing new. Those of us enjoying our formative beer imprinting years during the rise of Corona may remember the workers are pissing in Corona rumors started by US Heineken distributors and there are many other similar stories over the years. While at a car show in Pebble Beach over the weekend I came across an old Cadillac ad providing the best way to address these campaigns. In those days they did not use the press, they did not use a whisper campaign, they just talked about themselves.

In 1915, when Cadillac was establishing its reputation as the "Cadillac" of cars, it was the first to market with a V8 Engine. Packard, the major competitor, did not like this and responded by spreading rumors about reliability. The lead copywriter was frustrated by all of the misinformation in the market and tried to figure out the root of the problem. After much thought, he identified it as "The Penalty of Leadership" and sat down and dictated what would become the "Cadillac of responses" for use in the Saturday Evening Post:

In every field of human endeavour, he that is first must perpetually live in the white light of publicity. Whether the leadership be vested in a man or in a manufactured product, emulation and envy are ever at work. In art, in literature, in music, in industry, the reward and the punishment are always the same. The reward is widespread recognition; the punishment, fierce denial and detraction. When a man’s work becomes a standard for the whole world, it also becomes a target for the shafts of the envious few. If his work be mediocre, he will be left severely alone - if he achieves a masterpiece, it will set a million tongues a-wagging. Jealousy does not protrude its forked tongue at the artist who produces a commonplace painting. Whatsoever you write, or paint, or play, or sing, or build, no one will strive to surpass or to slander you unless your work be stamped with the seal of genius. Long, long after a great work or a good work has been done, those who are disappointed or envious, continue to cry out that it cannot be done. Spiteful little voices in the domain of art were raised against our own Whistler as a mountback, long after the big would had acclaimed him its greatest artistic genius. Multitudes flocked to Bayreuth to worship at the musical shrine of Wagner, while the little group of those whom he had dethroned and displaced argued angrily that he was no musician at all. The little world continued to protest that Fulton could never build a steamboat, while the big world flocked to the river banks to see his boat steam by. The leader is assailed because he is a leader, and the effort to equal him is merely added proof of that leadership. Failing to equal or to excel, the follower seeks to depreciate and to destroy - but only confirms once more the superiority of that which he strives to supplant. There is nothing new in this. It is as old as the world and as old as human passions - envy, fear, greed, ambition, and the desire to surpass. And it all avails nothing. If the leader truly leads, he remains - the leader. Master-poet, master-painter, master-workman, each in his turn is assailed, and each holds his laurels through the ages. That which is good or great makes itself known, no matter how loud the clamor of denial. That which deserves to live - lives.

The ad was a huge success. When asked why it worked, Theodore MacManus, the author had a simple reason. “The real suggestion to convey is that the man manufacturing the product is an honest man, and that the product is an honest product, to be preferred above all others.”

I know we do not talk like this any more, but its sure gets to the heart of the matter. It is really the same message Steve Jobs conveyed years later in the Think Different campaign - but with teeth and venom. He is not weighing right or wrong, or high road or low road. It is a collection words assembled to completely and articulately deflate anyone who chooses to challenge them off the playing field. If you have a product to put against my product, have at it. Otherwise, keep your mouth shut.

How much cooler, and more effective, would either side have sounded if they read this before they responded. I realize you can not use such a large collection of words in our age of sound bytes and sub 140 character strings of characters. But translated in today's terms, they could have just said "The two games are releasing within weeks of each other. We are confident the market will prove us right."

Tuesday, August 23, 2011

Gamestop: Used Games, We Just Can't Quit You Edition

After realizing my call for the destruction of Gamestop was for naught, I had to come to terms with the need to accept their business model as a fact of life - even though they are killing the geese who so lovingly innovate, fund, develop and so lovingly deliver golden eggs into their grubby, cold, clammy, unappreciative hands. I even moderated a panel with Gamestop's CEO, and kept my opinion to myself . . . mostly. But do I really have to accept their repeated efforts to persuade us their actions are good for the business. Does the crack dealer stand on the corner and say he is enhancing the junkie's lives, or does he just take their money? Gamestop senior executives do understand that if they have to keep repeating that their actions are good for the industry, they are probably not good and constant repetition will not make it so.

In a recent interview in Edge, Mike Mauler, EVP of Gamestop International said:

"I can understand the feelings," he tells us, "[but] we've sat down with developers and publishers and really gone through the data. I personally think there's a lot of benefit to the publisher.

"A great example is sequels, where there's a large percentage of people who are just not going to spend $60 every single year without being able to do something. They'll look at their shelf and see ten FIFAs, Pro Evos or Maddens.

"Being able to take the older one and do something with it in order to buy the next version is really important to consumers. That drives new sales quite a bit."

To say this is the stupidest thing I ever heard would be an insult to the memory of the pitch I heard for the sperm racing game. This whole new level of stupidity is inconsistent on it's face. He explained the data TO developers and publishers and HE personally thinks there is a benefit? He could not say the game makers see the benefit. He may as well have said he spoke with the plant in his office - or the other EVPs.

I understand they can no longer spew the used car analogy with a straight face, but couldn't they come up with something better than the rest of the argument? The sentence seems to be missing a few words "a large percentage of people who are just not going to spend $60 every single year IF WE GIVE THEM THE OPPORTUNITY TO SPEND MUCH LESS." Isn't this like saying, no one will pay to see Transformers 3 because they just saw Transformers 2 a couple years ago? If Gamestop was not reselling these games at 10% off the very same week they come out, and less every week thereafter, consumers would be pay the USD 60. Those who won't pay will go online and download the older version on XBL or PSN, where the publisher who funded the game and took the risk can be properly compensated. Gamestop, or should I say the Mother Theresa of the game industry, is really not helping anyone by taking the old games off their hands, or capturing all the money they generate. We still get back to the fundamental fact that publishers take risk to make and market games and only get paid on the one sale, while Gamestop profits from multiple sales of the game. Each downstream used sale is one less unit sold by the publisher and therefore less revenue on the game. This impacts initial sales as well as re orders. A healthy stock of used games means Gamestop will not reorder from a publisher.

If this was the whole picture, I could stop here, but you know my posts are never this short. It is time to for Gamestop to fess up and acknowledge their real business. Relative margins reveal Gamestop's actual business to be the collection and resale of used games. New game and accessory sales revenue may equal or exceed the used game revenue, but they do not come close to matching the profit. The stock of used games is financed by the very publishers who are being harmed by the market. They put up the risk capital to make and market the game and put the unit on the shelf. Publishers receive a one time, per unit fee for putting the game into the Gamestop system and are required to pay marketing development funds to Gamestop to have posters and other promotions in store. But Gamestop does not pay for the games, customers do. Gamestop only provides credit until the games are sold. The consumers' payment covers Gamestop's initial outlay, plus a profit. Because Gamestop pays on terms, the consumers' money is in the bank before Gamestop ever makes a payment on the new game units. If the consumers do not sufficiently cover the expense, Gamestop will call on the publishers for price adjustments and protection. While this business shows a profit with no downside risk, the entire retail side is merely a highly cost effective way of funding the used game inventory. To ensure return of the games, consumers who buy a games are bombarded with offers to turn them back in for credit. Each turned in game builds the used inventory, at no cost to Gamestop. When sold, the only person receiving the benefit, is Gamestop. When I put it this way . . . . I don't want to say it sounds like laundering, but . . . . . They take a game unit a publisher should get paid for, run it though a consumer, and turn into a game unit they can sell over, and over, and over, and over without compensation to the publisher.

I feel better now.

Friday, August 12, 2011

Privacy 2.0: Google and Facebook's New Definition Edition

A while back ago I wrote a big, long rant about the lack of privacy on line. I was, and continue to be, frustrated by the non-consensual insertion of Google and Facebook’s appendages into the most personal crevices of our lives. The growth engine of Web 2.0 - are we on 3.0 yet? - is the aggregation, analysis and leverage of personal information. Web sites are able to passively collect the very same information people used to have request in person. While this collection is the most significant invasion of our privacy since the Spanish Inquisition, We are not able to use the word “privacy” to describe the action because the major benefactors of our ignorant largesse co opted the word. Kind of like when liberals rebranded “progressives.” The current rebranding campaign was launched a while back and continued in earnest at panel discussion on social media sponsored by Marie Claire magazine. Ms. Zuckerberg, sitting with Eric Schmidt and Erin Andrews, victim of cyber harassment, told the audience:

People behave a lot better when they have their real names down. … I think people hide behind anonymity and they feel like they can say whatever they want behind closed doors.'

What kind of asshole could argue with this? Certainly not the one writing this post. But who said the privacy we are concerned about relates to our relationships with others on the web? Sure, the inner bully each one of us suppressed upon graduation from high school may be seduced by the anonymity afforded by the Web, but do Facebook and Google really have to be the Web police. Cyber bullying is a crime and when committed, offenders are prosecuted - Andrews offender is in prison. We do not need them to analyze the Web’s capture of our mental phenotype, but they need us. Facebook and Google were on stage with the victim of an egregious attack to steal the very relevant definition of the word “privacy” and create a new one more favorable to them. They cannot stop the public debate over privacy, but they can certainly change the meaning of the word. Change "privacy" from the ugly reuse of your communications and clickprints and turn it into the "we are here to help make sure no one hurts you."

I learned this one in Philosophy 1 at UCLA. If you frame the argument, you win. No one in the world would advocate anonymity as a shield for bad acts, but this is not the privacy we must demand. We should all be concerned with the access, use and sale of our data by Google and Facebook. Not only are they using the data in ways we cannot imagine to influence everything from loans to job applications, but our very worldview is being shaped by the targeted provision of the search results and newsfeeds we naively believe to be objective. As Eli Pariser outlines in his book The Filter Bubble: What the Internet is Hiding From You your Facebook news feeds and you search results arrive only after they have been filtered by algorithms to determine what “you will like best.” You are not seeing your most active friends lives on Facebook or benefiting from Google’s patented “Page Rank” algorithm. You are receiving what they “think” you will like based on your profile and their determination of how to maximize click through. The gap between our perception and reality is a cloud on our worldview and since Google holds the position of the number one search site in the world, the cloud is a breach of the public trust. Their excuse – “ we are only here to make things better for you” – kind of sounds like it should be coming from a disembodied voice while we sit in a clean white room eating Soylent Green.

Of course they cannot do all of this without our consent, and they say they have it. They hide behind a EULA to say we consented and the use of the information is explained in their privacy policy. They even send us emails every time the privacy policy is changed. But if they think we read the EULA, they are on crack. Some may say it is our own fault for not reading the agreement but the thing was not written as a disclosure document, it was written as a cover your ass document for lawyers forced to defend against zealous class action lawyers. The consent language in the document is incomprehensible to a non-lawyer and a big nebulous gob of ambiguity to lawyers. EULAs are the rufis of the contract world. Facebook and Google are not the only ones who use them.

Every piece of software we use takes advantage of this legal fiction. It is even the thing you did not read but clicked agree to be able to buy stuff on iTunes. Sure software is only rented and we cannot copy, blah, blah blah, but nobody was indexing and analyzing the words I typed after I clicked on the agree tab and started using Microsoft Word. This body of contract law, which was created to protect the creators of software after the fruits of their labor were released into the world somehow morphed into a tool to extract consent to data, capture from consumers.

Can we really consent to the use of our data if the consent was not knowingly granted and the party acting on the consent had reason to know the contract was never read?

How about getting rid of the EULAs and instead, use a nice, big, bold, cigarette pack statement: