Thought this story from Next Gen was interesting since I used to work at Intel as their PC Games evangelist. Back in the day, Intel always struggled with what to do with the burgeoning console market. There was a general belief that the PC was where gaming was at, especially online gaming, and that consoles wouldn't be able to expand much beyond where they were at. Obviously that changed, and Intel became a partner with Microsoft on the original Xbox. Unfortunately (for Intel), Motorola really swept the parts-provider role in this current generation... sounds like Intel doesn't intend to allow that to happen again.

Really can't say anything more since I know a bunch of folks who have left various companies to join Intel on their new effort. I will say that it's great to see a reinvigorated Intel getting back into the game!

Could be, according to this Next Gen article:

Halo 3, released on September 25, grossed a whopping $170 million in first day sales, a figure that had swelled to over $300 million by early October. In contrast, North American movie box office takings have been dwindling, reports Advertising Age, and Master Chief is being blamed by a number of film executives.

Total industry film ticket sales were only $80 million for the Oct. 5 weekend, down a massive 27 percent year-over-year. According to research firm Media by Numbers that’s the industry's worst performance for an October weekend since 1999. Fall domestic receipts are also down 6 percent compared to last year.

It's pretty interesting to see that gaming has gotten big enough to impact what was once a pretty much unassailable and invulnerable industry. After all, everyone wants to be entertained, no? And back in the day your major choices here were basically reading, dining, theater, live music, and movies. Appears gaming has gotten added to that list by enough people to impact the movie-going public.

What's really interesting to me here is that Halo 3 is definitely a game for the hardcore gamer - and that audience is pretty small compared to the vastly wider audience of people to whom casual or broader games can appeal to. Give us another ten years and I suspect you'll see gaming taking even more of an entertainment mantle.

... with another fine steak dinner on the line.

This time around my good friend N'Gai Croal of Newsweek's "Level Up" fame is dissenting with my assertion that there's a low-end $399 PS3 SKU coming this holiday. He firmly believes Sony will return to a one-SKU strategy, priced at $499. To quote:

We pinged him back with our prediction for the remainder of 2007 after store shelves had been cleared of the 60 gigabyte PS3: one SKU, $499. Not long thereafter, Vrignaud placed a call to Level Up HQ, challenging us to a wager on the subject of Sony's pricing plans for this holiday. We initially demurred, but Vrignaud persisted, and we acquiesced; this time, we won't even be able to blame intoxicants, seeing as we accepted during business hours.

The bet is as follows: Vrignaud says that Sony will start selling a $399 PS3 by Black Friday 2007, the official start of the holiday season. We say no.

Technically, I agreed to a badly-worded bet. All N'Gai has to do to win is have me be wrong on my $399 assertion; he doesn't need to be correct about the pricing of "his" single SKU. But so be it - that's what one gets when distracted by his flowing locks.

<sigh>

If only he'd agreed to wager on them yet again! Just think of the trophy "bead" curtain one could create across the office door. (For what it's worth, I wagered a shaved head on my part; probably not as potentially utilitarian as my bead curtain, which probably drove us to the more reasonable steak dinner.)

Sony announced a PS3 "value pack" (no sarcasm intended) for Europe at E3 this year. I've seen a bit of confusion as to what that means, especially as it relates to the "price cut" (sarcasm intended). There's actually not much to this - what you're seeing here is a channel-clearing exercise.

I linked to the vaguely-attributed ThreeSpeech purposely as they include a picture of the value pack packaging. You'll note the value pack is nothing more than a box containing a bunch of other boxes; this was repackaged in Europe using existing stock, and certainly didn't come from any factories as a new SKU.

So why the channel clearing? Simply put, it's in preparation for both a real price cut and new SKUs this holiday. You already have an 80 GB SKU for $599 in the US; it's basically the high-end version, especially if you ignore the gimped back-compat functionality. The old 60 GB SKU is being cleared out for $499 as quickly as possible - as you might recall, this was the supposed "price cut" that Sony announced. In reality, once supplies are gone in the next couple of months it'll be gone forever. However, that doesn't leave Sony in a good place. A single, $599 SKU would be untenable; if they don't move significant hardware this holiday they'll basically be dead for this generation.

My prediction is that you're going to see the creation of a new, low-end SKU this holiday. It'll likely remove integrated WiFi, memory card reader, and most controversially, all backward compatibility. (Remember, there's still some back-compat hardware in even the new "software only" back compat SKUs; removing the remaining CPU is a significant cost savings.) You'll see a new WiFi dongle made available. And finally, this low-end SKU will likely come with a smaller 40 GB hard drive. The low-end price will be set at $399, with the higher-end 80 GB SKU dropping to $499.

So there you go - nothing magic about the current value SKU. It's just a classic retail technique of clearing the channel for new SKUs. Now we just need to wait a few months for the announcement - it'll have to be before Thanksgiving, so I'd expect October.

Yes, I've seen the news about the PS3 "price drop." We've all known it's been coming for quite a while - heck, I even put a stake in the ground way back at the beginning of the year. To quote:

The Playstation 3 will have an effective price drop of at least $100 by Thanksgiving 2007. By effective, I mean that it’s also possible that the price will remain the same, but at least $100 of value will be added to the bundle.

And guess what? It's the latter that happened; the PS3 has remained the same price, but with additional value bundled in. Remember, six months ago the PS3 launched at two price points: $499 (20 GB SKU) and $599 (60 GB SKU). The 20 GB SKU faded away, leaving just a single 60 GB SKU. Today all that's happened is that the existing 60 GB SKU is now $499 and the new 80 GB SKU is $599 (with bundled Motorstorm).

Simply put, a few months ago there were two versions costing $500 and $600. Today there are two versions, costing $500 and $600. You get a bit more bang for your buck, but this isn't going to move the needle significantly on console hardware sales. At the end of the day, the price of entry to play a PS3 game is still $500, just as it was when the console first launched.

Couple of other thoughts to consider. The new 80 GB SKU at $599 doesn't have the backward compatibility hardware in it, so it's not even as full-featured as the launch consoles. And the 80 GB hard drive isn't that big a surprise. Drive prices drop and suppliers find it expensive to keep manufacturing older drives when they can migrate their production to higher-capacity drives at the same price. Sony very likely can't even get 60 GB drives in volume anymore; expect to see the 80 GB drive to become standard in the lower-end SKU when the next, hopefully real, price drop comes.

All-in-all, not much to see here. Sony is still in a tough spot. On the one hand, they desperately need to keep the price high to try and recoup some of their costs. On the other, they need to drop price to sell more units. My guess is we may see a second, "real" price drop as soon as this holiday if the needle doesn't shift much after a few months.

Sorry - just couldn't resist the title... and it's all the funnier because there's really nothing to beware here. Just that inflammatory yellow journalistic streak taking a cheap shot.

Anyway, just saw over on N'Gai's blog his announce of Nintendo's Wiiware initiative - basically bringing original arcade games to their downloadable platform, versus the old-school classic content they've had previously. Many of us in the industry have known about this for well over a year, but interestingly, it hasn't leaked. Guess there's still a bit of professional courtesy out there.

I'm really looking forward to seeing what arcade developers can do with the Wiimote. I've said before that I don't think the Wii will have long legs. Even today, I struggle to find games I want to play. I honestly haven't turned the box on in months, and am currently just waiting on the next Mario.

That said, this arcade initiative is very interesting and could be just what the Wii needs to survive. Imagine (as I think is unfortunately likely) that third party support falls off the map by next year (meaning third parties just haven't been able to duplicate the Nintendo magic). Toss in a price cut or two, and the Wii could well become a $100 online-connected, arcade box... one that would fit well in every dorm room in the world. Obviously there will be price cuts from the other guys as well, but Nintendo is well-positioned to be the lowest cost console out there. If the games start flowing, I could easily imagine the Wii becoming a significant player in the arcade space - coincidentally, a space where higher-end graphics don't matter as much. Not a bad place to be.

A good friend of mine, N'Gai Croal, just posted an interesting discussion he had with Geoff Keighley about April's NPD report. I've known N'Gai for a long, long time now... perhaps ten years or so? We tend to disagree a great deal about certain topics, particularly Sony's strategy around the Playstation (including PS2's online "strategy" as well as almost everything about the PS3). That's led to some (sincerely) fun discussions over dinner and wine at trade shows (with hopes of many more!) That said, this time around I found that I actually agree with many of his thoughts. Take this for example:

The reason nearly a million fewer people have bought PS3s than bought PS2s during each system's first six months on the market is that at $599, the PS3 isn't as perceived to be as good a value as was the $299 PS2. At this point in the PS2's lifespan, it had the following meaningful exclusives: next-gen Madden, SSX, Onimusha, the Metal Gear Solid 2 demo with Zone of the Enders packed in, NBA Street and Medal of Honor Frontline, with Gran Turismo 3: A-Spec a couple of months from release. PS3 has Resistance: Fall of Man, MotorStorm and...what, exactly? Many of us were waiting to see how much the PS3's positives (brand strength, Blu-Ray playback, superior computing power) would offset its negatives (high price, lack of killer apps, tricky architecture, Xbox 360's lead and Nintendo simultaneous arrival) during its first six months in stores. Now we have the answer: not much.

Bravo! I completely agree! This is a bit of a shift for N'Gai as I recall him being a very strong believer in the ability of the Sony brand to sell PS3s early on (with me just not buying it.) Welcome to the light, N'Gai!

Also in the discussion Geoff summarizes another of Sony's challenges quite well - the fact that the Xbox 360 is the lead development SKU for the vast majority of platforms. This bit us last generation with the Xbox (which is why so many multi-platform ports looked similar to the PS2). This time around the shoe is on the other foot, and developers are leading on the Xbox 360.

As to your point about third party support for the PS3, I agree that most publishers will continue to produce PS3 SKUs no matter the near-term hardware sales numbers. But programming for the PS3 is a challenge, and I'm not sure I buy Yves' suggestion that porting a 360 game to PS3 only costs 10% of the budget. (This is coming from the publisher that still hasn't shipped Rainbow Six: Vegas for the PS3 six months after it was due out.) The likelihood of ports aside, the most important trend to watch is which system publishers use as their base development platform. Sony maintains that publishers will soon switch from the 360 to the PS3, but as of yet I've seen very little evidence to support that claim. Over the past few months almost 100 percent of the third party games I've seen have been demonstrated on the 360. Will things be different at E3? For Sony's sake I sure hope so. But even if publishers port 360 games to the PS3 I don't expect the games to look any different on Sony's platform. And that's a major problem for the PS3, especially given its premium price.

Finally, there's a bit of discussion around the Wii's current impressive sales. I think I tend to agree a bit more with Geoff here as he struggles to imagine a long life-cycle for the Wii, as well as sales remaining as robust as they have been through holiday. Don't get me wrong, I love the Wii for what it is, but I (and a lot of people I know) just aren't playing it right now. We're waiting for the next round of impressive games (the "holy trinity" of Super Smash Bros Brawl, Super Mario Galaxy and Metroid Prime 3 as Geoff puts it.) And we continue to be disappointed by the quality of game visuals.

It is worth stating that there really may be a significant crowd of gamers out there who just aren't as hardcore, and who are completely happy with the Wii as-is. But as the 360 and PS3 come down in price and broaden their portfolios to more family-friendly and crowd-engaging content, I just can't see Wii's momentum continuing. To quote Geoff again:

As for your question about Nintendo storming to first place, it's creating concern but not panic. Most of the executives I speak with still think the Wii has a shorter lifespan than the other consoles and may begin to slow down sales-wise later this year. That being said, it's hard to ignore the continued strong software sales for the Wii, including the bafflingly good sales of Wii Play. Again, I look back to those 115 million PS2 owners as the tea leaves. How many of those 115 million will decide to move to the Wii instead of the PS3 or 360? There's certainly a scenario here where Sony gets attacked on two fronts: The 360 starts to steal away the enthusiast gamer crowd that bought the PS2 in year 2 or 3 and the Wii starts to steal away the broad mainstream crowd who bought the PS2 in year 4 or 5 (and is still buying it now.) If that happens I don't know where Sony goes from here. Do you really think a $100 price drop solves any of Sony's problems? Is that disruptive event that the PS3 needs to kick it back above 150,000 a month in sales?

The whole discussion is well worth reading as it gives you some very different viewpoints. But I should again highlight that for once, I'm in more agreement with N'Gai than not. That's rare and noteworthy. I'm just not sure whether one of us owes the other dinner or not.

Saw an update from Compete (a company that tracks and analyzes online store searches to understand consumer demand). This time they're focusing on the Elite SKU, and asking the question of whether there's market demand for it. The whole article is interesting, so head over and take a read. But I'll pull a couple of interesting charts.

The first shows that Wii continues to be most sought after console, though its launch numbers have come down (as would be expected). It also shows that PS3 demand is declining month to month (also confirmed by the latest NPD numbers). Makes it all the more likely we'll be seeing a price cut this year. In general, all the platforms (including the 360) are holding relatively steady as we'd expect for spring months.

What's more interesting to me is a chart showing online retail demand for the Elite system as compared to different 360 SKUs/bundles. Remember, the Elite isn't even out yet, so this shows pre-order demand only - we'll need to see how that translates into real sales once available.

Most interesting to me is that it appears the Elite may be driving incremental shoppers to 360. To quote:

Interestingly, the Elite launch has driven incremental shoppers to the 360 brand. Looking at the aggregated** total shoppers, there has apparently been very little overlap elite shoppers and bundle or “lesser system” shoppers.
** Aggregated 360 demand measures the total number of shoppers for a 360, regardless of overlap: If someone shopped both a 360 Elite and a Bundle, they would only be counted once.

Although we'll have to see how many Elite purchasers are upgraders vs. people who have been waiting on the sidelines, the idea that the total market might be expanding is exciting. That's good for everyone, whatever platform you might care to hang your hat on!

No other way to put it. And I'm not even talking handhelds, where the stomping was even greater. To quote:

February's NPD hardware figures continue to show Nintendo's Wii selling well ahead of the other Gen Now consoles, PlayStation 3 and Xbox 360. In February, Nintendo's $249.99 Wii sold 335k units according to the NPD group. Microsoft's Xbox 360 sold 228k units at roughly $389 per system sold across the two SKUs. Sony's PlayStation 3 sold 127k units at roughly $598 per system sold. Despite being available for ages, Sony's PlayStation 2 continues to outsell every home console not named the Nintendo Wii. In February the system sold 295k units at a per unit price of $129.80.

That's 100k units over 360, and more than 200k greater than the PS3. What I still can't wrap my head around is whether the momentum is going to continue or not. PS2 continues to sell well because it's dirt-cheap and has an incredible software library. (For that matter, if you're a huge PS2 fan and unsure where PS3 backward compatibility will go, why not pick up a spare?)

Wii has some cost benefits as well (though by the time you buy extra controllers it's really not that much cheaper), but what worries me is that it continues to only be successful as a first-party machine. Check out the top ten titles for February (as well as a few others):

Top Ten Software for February 2007:

360 Crackdown 427K

Wii Play w/ Remote 371K

NDS Diddy Kong Racing 262K

WII Legend of Zelda: The Twilight Princess 130K

PS2 Guitar Hero 2 w/Guitar 130K

360 Gears of War 119K

360 Major League Baseball 2K7 113K

360 Lost Planet: Extreme Condition 111K

WII Wario Ware Smooth Moves 109K

360 NBA Street Homecourt 102k

Software Tidbits:

Viva Pinata 18k

Hannah Montana DS 30k

Resistance: Fall of Man 70k

Virtua Fighter 5 53k

Sonic Secret of the Rings 83k

Rayman Raving Rabbids 60k

Red Steel 26k

There isn't a single third-party title in the top 10 for the Wii. Rayman Raving Rabbids, arguably one of the best third-party controller implementations on the Wii, sold just 60k, or just over half the worst-selling first-party Wii title. This just can't go on if Nintendo expects to get solid third-party support going forward.

This year will be a key test. We should see Wii supplies stabilize in the coming months and everyone who really wants the console will be able to get it. And third parties will release their second and third waves of Wii titles. The hope is that they'll come to grips with the controller and release some magical games - think LittleBigPlanet sort of stuff, but for the Wii. If that doesn't happen, I think the Wii will turn into another Gamecube - a great box, some great first-party games (that make it worth having in its own right), but third-parties will likely reduce (not remove) their investment.

The funny thing? Nintendo found a great niche focusing on fun and approachability, and are making money even now. Even if a "worst case" scenario like the above happens, Nintendo will still be very financially successful this generation and be laughing all the way to the bank. They deserve a lot of credit for taking a big risk but proving that there's an audience for lower-cost, approachable gaming. I suspect the "next" next-generation from all hardware providers will be taking that lesson deeply to heart.

Appears Sony finally bit the bullet and paid up to Immersion.

The cost of manufacturing the PS3 is a huge problem for Sony. When we look at best-case scenarios for the PS3 business it's quite obvious that there's nowhere near as much money to be made over the life of the program (as compared to PS2) due to those costs. Blu-Ray is a big bet to offset that, but if Blu-Ray fails, the PS3 P&L is in big trouble.

There have been plenty of exterior hints to this issue for quite some time. Non-bundling of a high-def cable is a minor example (could easily save tens of millions over life of program). Removal of hardware-enabled backward compatibility is another. And the attempt to not support rumble in the PS3 program (and have to pay royalties to Immersion) is yet another.

What we don't know is what drove the settlement. My best guess is that the case wasn't going well for Sony around back-royalties for the PS2 program. Reading the tea leaves, they could see they'd be paying up for that, and when you add in the almost universal pressure from gamers and the press to support rumble they probably figured they might as well go all the way. The interesting question is what happens next.

Sony's already getting flack for removing features (such as hardware-enabled backward compatibility) before they're even finished launching worldwide. Now we're in a situation where there's yet another feature that early adopters could be missing out on. This assumes, of course, that Sony releases a new rumbling version of the controller in the coming year - and I think it's pretty likely. Game developers have been asking for this support since day one, and as soon as it's in the PS3 SDK they'll enable it in their games. (Why not? In many cases the work is already done for the 360 version.) Consumers will buy the new controller to play with rumble support. And ironically, Sony "wins" and has a new peripheral to sell... and one that will likely cover the costs of the settlement within a few years.

All that said, I just wonder why they didn't pay up at the beginning before launching and save themselves the pain of flagellating early adopters yet again. Probably a case of believing the brand would carry them through.

Anyway, on a different topic, a bunch of you have written asking what I thought of the whole Sony/Kotaku dustup. I didn't write about it because, frankly, it was just dumb. While there's a fair point about having a relationship where a company can share information with the press and have reasonable expectations about it not being shared until the time is right, that expectation just doesn't apply to information received outside of those channels. Sony should have simply "no commented" it and ignored it, even if it was 100% true. The story would have faded away, been "OMG confirmed!" next week at GDC, and in the end, Sony would have gotten an extra week of positive press coverage. Trying to shut down the story was just embarrassing, and I think Kotaku did the right thing. That said, I have to say I'm impressed by how quickly Sony backed down and basically apologized. They're learning - six months ago the company would have put their head in the sand and tried to bluff their way through. There's hope for the future.

[Edit: brainfart, and erronously had Joystiq instead of Kotaku throughout the article.]

... as we discussed in this post earlier.

Received my daily update from gamesindustry.biz discussing backward compatibility changes in the PS3, and how Europeans were getting the short end of the stick. Good read, but I found one paragraph particularly interesting (bolding my emphasis):

This latest debacle over backwards compatibility simply adds to a long list of woes which Sony faces - a litany of PR problems which are winding their way through the mainstream press, no longer confined to the specialist media. In America, reports of PS3 units sitting on shelves unsold are rife, and SCEA's public firefighter Jack Tretton has lost vast amounts of credibility for his much-derided attempts to claim otherwise - with his statements having done little but fuel hostility towards the platform and the company. Here in the UK, the official line is that PS3 pre-orders are remarkably high; but with PS3 bundles being downgraded in price already, it doesn't take the flood of anecdotal reports to the contrary which we've seen from retail insiders in the last week to see that this claim is on shaky ground.

Appears the press in the UK are hearing that those claims aren't quite as high as retailers might have liked you to believe. Not a terrible surprise, of course. But this is yet another indication that a price cut is likely this year for the PS3. Mark my words (and earlier prediction): $100 off PS3 by Thanksgiving.

[Edit: added link to full article.]

Just wanted to point you all to this interview Phil Harrison of Sony did with gamedaily.biz. My personal favorite quote is around the "unprecedented demand" for the PS3:

BIZ: That actually leads into my next question, because a lot of the analysts have been making a big deal out of the fact that retailers seem to continue to sell out of the Wii while PS3s are found in stock at more stores. What do you make of that?

PH: I think you should talk to the people who are running those stores. Talk to the people who run GameStop, talk to the people who run BestBuy, and they'll tell you that the demand is unprecedented and that they give us kudos for managing to keep a very sophisticated supply chain moving. What our competitors are doing I can't speak to but I know we are achieving our goals of keeping the market supplied and working closely with retailers to make sure they get informed about when supplies are coming in so that they can match their internal and external communications to store managers and consumers about when to buy a PS3. If that means that for Wednesday through Friday there were a few machines on a shelf in a store in Milwaukee, great!

There are just so many things one could poke holes into in this interview that it's basically not worth it. I'll just suggest you go read for yourself and make up your own opinion.

Actually, here's an interesting angle. Take a read and see what statements he makes that you might actually agree with, and post a question about it in the comments to this post. I'm happy to give my opinions on specific questions you might have, especially if you think a point is credible. Should be a fun conversation.

Feel free to try and ask the hard questions - I'll answer as best I can as long as it's not confidential.

You can read all the details over at GamePolitics.com. To quote:

GamePolitics has learned that controversial Miami attorney Jack Thompson faces a disciplinary hearing before a referee appointed by the Florida Supreme Court.

The pending judicial review follows a recent recommendation by the Florida Bar that five counts of professional misconduct against Thompson should proceed to the state’s high court for action. If the charges are eventually upheld, Thompson could face disciplinary action up to and including disbarment.

Won't go into all the sordid details - frankly, I dislike writing anything about this guy at all. However, thought it was worth sharing because it may be that we're finally beginning to see the shifting of the needle of attacks on the video game industry. Over the last few years we've seen a variety of suits attempting to ban/bar the sale of video games as being dangerous to youth or immoral. They keep getting batted down, and Jack's usually around to try and pick up the pieces. Should he be disbarred, you have to wonder who would try to keep up such a useless fight? Crossing my fingers on this.

Just saw this interesting post from Matt Pace of Compete, a company that specializes in collecting and analyzing online traffic metrics. The company collected data this holiday tracking US video game console demand, and the results are pretty interesting (if somewhat predictable).

I won't quote the entire article - it's worth a read. However, as anyone who has tried to find a Wii can attest, the platform has had significant demand, outstripping both the PS3 and the 360. The PS3's launch was reasonably strong but quickly fizzled, with the PS3 and 360 running neck and neck toward the end of January. If that trend continues, it's going to make it tough for the PS3 to catch up to the 360's headstart.

Also of interest is their analysis of cross-shoppers, or people who were initially shopping for one platform who then sought out another (likely because the first choice wasn't available). It's clear that momentum shifted from the PS3 to the 360 for buyers of those two platforms. It's also pretty obvious that the lower price point of the Wii seems to be appealing to a different audience, one who is less willing to consider shifting their purchase to a higher-priced platform.

More conclusions are available at the original post. Note that there is a typo in the URL (playstation is spelled wrong), so let me know if they fix it and the links in this post break.

... and if you believe that, I have a bridge to sell you.

According to this article quoting Game Informer magazine, SCEA's Jack Tretton is stating Sony won't consier a price drop until 2008 at earliest. To quote:

When asked by US magazine Game Informer whether Sony would cut the price of PS3 as soon as they did after the PS2’s launch, Tretton replied: “No… There’s a heck of a lot more under the hood and it costs us more money to make it.” He added that “it will be a lot more difficult” to reduce the recommended price of PS3.

I'm totally with him on the fact that it'll be a lot more difficult to cost-reduce the PS3. The Blu-Ray drive isn't going to be helping things any, Cell is still expensive to make, and the hard drive (much as everyone loves to have it) just doesn't cost reduce well either. The problem for Sony is that cutting the price this early in the console generation means they accelerate the price drop curve over the life of the console. And that means hundreds of millions of dollars gone from the bottom line - which just isn't tenable for any console manufacturer.

However, I still stand by my 2007 predictions, and believe we'll see a price cut by Thanksgiving of this year. I'll even be more specific and lay out the likely path. First we'll continue to see pricing weakness ($100 rebates from EBGames if you trade in a PS2, Japanese retailers cutting 20% off the price on their own initiative are examples). By March/April, if sales aren't picking up significantly, we'll see a new PS3 bundle deal become available. Price points will remain the same, but Sony will attempt to improve the perception of value by bundling in games, Blu-Ray movies, or peripherals (or some combination of the three). If by late summer that doesn't help turn sales around, we'll begin to hear rumblings of a price drop which will hit around the Thanksgiving holiday. And I'd expect to see at least $100 cut from the price of both SKUs.

I'd hate to be in Sony's shoes right now - they're caught between two huge rocks. On one hand they need to keep selling the PS3 at as high a price as possible to have a chance to recoup costs over the life of the program. On the other hand, they can't afford to fall off the popular interest train and become irrelevent. Ugh.

As promised, here are my game industry predictions for 2007. I wanted to publish them today, at the beginning of the year, with the intent of us all reviewing them a year from now. Should be fun, no matter what the result!

Note that I was unable to use many of your suggestions as they were Xbox 360 specific. Making predictions around the Xbox is problematic for me as I have to be very careful to not even hint at anything I might know. I apologize, but I hope you understand. And hopefully you’ll find the below predictions controversial enough for now.

There are only eight predictions here as I think I would have been stretching to reach ten (especially without Xbox bullets). Look forward to your comments – and Happy New Year!

2007 Game Industry Predictions:

• The original PSP (with memory stick) will be discontinued, and replaced by a new model with an integrated hard drive. The new model will enable connectivity to the Playstation store via internet connection, and allow you to purchase and download both emulated PS1 and native PSP games directly. Over time (meaning not in 2007), it will also allow you to purchase music and movies from the Sony store.
• The Playstation 3 will have an effective price drop of at least $100 by Thanksgiving 2007. By effective, I mean that it’s also possible that the price will remain the same, but at least $100 of value will be added to the bundle.
• Nintendo will release their own Live Arcade service for the Wii. Specifically, this means Nintendo will enable third-party developers to create, distribute, and sell casual games for the Wii and DS through a new Wii channel.
• The Nintendo DS will continue to outsell the PSP in 2007. It will also enable DS<->Wii wireless connectivity, enabling cross-platform gaming scenarios and the purchase of Nintendo DS casual games. It will not enable the download and purchase of full retail games for the DS, however.
• Apple will expand their gaming efforts significantly. The most likely scenario is investment in iPod and the (soon to be announced) iPhone devices to enable a common game development platform for developers to target. This platform will include WiFi wireless connectivity, user accounts and presence, and the ability to trial and buy content from a games channel in the iTunes store. Apple will not enter the gaming market with a home console of their own.
• HD-DVD will begin to pull ahead of Blu-Ray in the high-definition DVD format war. This will be measurable by number of DVDs available for either format on Amazon, and total player sales (including the Xbox 360’s HD-DVD add-on and the Playstation 3’s internal Blu-Ray drive).
• By the end of 2007, total lifetime unit sell-through of home consoles will be led by the Xbox 360, followed by Nintendo’s Wii, with the Playstation 3 third. This order will also be true of units sold-through solely in 2007 (ie, not lifetime sales).
• Google will show significant public interest in the gaming sector for the first time, including interest in acquisitions to bolster their Ad-sense business. The most likely target will be IGA Worldwide (to combat Microsoft’s acquisition of Massive). If unsuccessful, Google will seek to acquire one of the larger game publishers on the market to gain a foothold in the in-game advertising market. Likely targets include Electronic Arts (though it would be extremely expensive), Activision, or THQ.

I've been thinking about doing a "Top 10 2007 predictions" post to put some stakes in the ground that we can revisit a year from now and see how I did. I may try to go back into posts from this year and do a quick scorecard as well - won't be as elegant since I didn't have an explicit prediction post to review.

What I wanted to ask this audience is what topics/areas would you like to see thoughts on? Just throw out your burning questions/predictions in comments, and I'll keep them in mind as I pull together a top 10 for everyone to argue about.

[Edit: Should have mentioned this, but when you place a prediction/stake you'd like to track, please also include a measurable metric that we can review at the end of the year. In other words, if you were arguing that one of the HD movie formats would be on top, you should state by how much (X% perhaps), and how it would be measured (number of movies available on Amazon for either format could be another example).]
 

Saw an article on Gamesindustry.biz talking about the console war - and seeing as it gave me a chance to use the word "phoney" in a Title, just had to call your attention to it! Actually, in all seriousness, I thought this was one of the first articles I've seen this holiday that summed up the current state well. Simply put: nobody knows.

Take their comments on Xbox and Microsoft as one example:

In a few years' time, if Microsoft has done well in this generation of consoles, 2006 will be seen as a pivotal year in that success, and we'll write things like "Microsoft's strategy of launching a year in advance of its rivals proved decisive, as it built up a significant head-start which convinced third-parties to weigh in behind the system." On the other hand, if Microsoft fails to build on its market share over the coming years, we'll regard 2006 as equally pivotal - except that in that case, we'll write things like "Despite giving itself a full year head-start, Microsoft failed to exploit this opportunity - and a dearth of AAA software for the Xbox 360 during 2006, including a period of over six months with no first-party releases and a Christmas with only one major title on the shelves, negated much of the company's effort in delivering its system to market early."

 Or Sony, as another:

The same applies to Sony - I can imagine, in 2010, writing about this year as being a turning point which saw the tide turn against the PlayStation brand after long delays, a high price point, and a leaking of negative attitude over the firm's well-documented arrogance and cringe-worthy marketing slip-ups from the specialist press and blogosphere into the mainstream press and public consciousness. Equally, I can imagine dismissing 2006 as a blip on the radar, a set of particularly painful teething troubles which were all but forgotten within a year of launch and did little to stop the Japanese giant from striding forward to victory.

All-in-all, it's a good reminder of that fact that we're early yet. Take a read - it's a nice change from the usual "game/system/gaffe of the year" sort of article you'll be reading over the next few weeks.

Just saw over on Kotaku that someone's suing Nintendo for broken Wiimote straps. It's ridiculous. I think Penny Arcade said it quite well recently:

Nintendo has countered this behavior with a friendly and informative online brochure, whose bipartite wisdom can be expressed as

1. Hold On To The Controller,

and

2. Do Not Let It Go, respectively.

Indeed. <sigh> 

Also be sure to also check out some of the Japan-esque (yes, it's a word damnit!) illustrations warning you of the dangers of using your Wiimote. Good stuff, and a lot more credible than this suit in my opinion.

Just hit the web. Wanted to highlight it as it's a great, non-technical summary of the current console war that really boils the current state down quite succintly (and accurately, in my opinion). Couple of quick quotes:

If you or your loved ones are even halfway-serious gamers who want to experience world-class high-definition graphics and an online gaming service populated with millions of other players, go buy the top version of Microsoft’s Xbox 360 ($399). On the other hand, if you do not really care about the latest graphics and want instead a riotously fun experience that can be shared by the entire family, including the nongamers who usually flee from a joystick, try to get your hands on Nintendo’s new Wii ($249).

And what about Sony, and the Playstation 3?

No problem. In fact, if you are anything other than a complete Sony fanboy (that’s Internet lingo for an obsessed, myopic groupie) go ahead and forget about the PlayStation 3 this year. Even if you find one, the overhyped PS3 does not deliver an entertainment experience commensurate with its cost ($599 for the top version, not including special cables to connect to a high-definition TV), and falls short of its main competition in important ways.

The big picture is that Microsoft and Sony are duking it out for dominance at the top end of the video game business while Nintendo has essentially carved out the less hard-core, more budget-sensitive swath of the market for itself. The Wii (pronounced “we”) is a mass-market entertainment device. The 360 and PS3, by contrast, are each trying to be the world’s best top-end video game system and also high-powered living room media hubs.

The big problem for Sony is that the 360 performs those functions better right now, and for less money, than the PS3. Sony may get the PS3’s act together in the future, but right now there is basically no rational reason to buy a PlayStation 3 instead of an Xbox 360.

I'm personally amazed to see mainstream press writing articles like this. Last generation it was painfully obvious many writers weren't gamers themselves, and didn't really understand the topic they were writing about. As such, you'd see a lot of regurgitation of press releases and PR speak. This time around people are obviously using and playing the systems themselves, and writing what comes of that experience. Very cool!

I was in a conversation at Evil Avatar where some folks were doubting the veracity of Peter Moore's statement that Xbox 360 would ship 10 million units by the end of 2006. To quote the statement:

Peter Moore, vice president of Microsoft's entertainment and devices division which oversees Xbox, confirmed the company's expectation that Xbox 360 shipments would reach 10 million by the end of 2006, and 13 million to 15 million by the end of its 2007 fiscal year.

The primary reason is because Microsoft recently announced we'd shipped 6 million units, and people were struggling to believe the difference could be made up in just a few short months. The good news is that this is quite possible. To quote, well... myself <shrug>:

You have to remember holiday is something like 40-50% of the business... insane, I know, but that's also why so many games are targeted for Thanksgiving release - to take advantage of those sales.

What was particularly useful in this thread was that someone pointed to NPD data that shows this trend very clearly. Since I don't know what permissions are associated with publishing this data, I'll simply point you toward it. But you'll see that the holiday sales spike is very real in this industry, and it's the reason I believe we'll easily ship 10 million units of Xbox 360 by the end of the year.

The interesting question is whether having a ten million unit lead will matter. My guess is that it will - there will be plenty of folks who can't find a PS3 or Wii this holiday who will want to take something home to put under the tree. And common sense says sometime in the future (no, I'm not making any specific predictions or sharing confidential information), the Xbox 360 will drop in price. No matter when that happens, manufacturing scale and cost reductions will place 360 in a much better place financially to do so versus PS3. They may or may not choose to match, but the pressure will be on, and will be quite painful. All that's to say I look forward to the day when I can buy a PS3 for less than $600.

Ok. I'll stop kicking the puppy now.

News on the web today is that Xfire is suing GameSpy for how their GameSpy Comrade "Buddy Sync" feature creates friends lists. To quote:

Now Battlefield 2142 is caught up in a legal tangle between rival in-game instant messaging programs Xfire and GameSpy Comrade. On October 16, Viacom-owned Xfire filed suit against News Corp subsidiary IGN Entertainment over its GameSpy Comrade program, which comes on the Battlefield 2142 disc. IGN Entertainment also owns IGN.com, a GameSpot competitor.

Xfire is claiming that GameSpy Comrade's "Buddy Sync" feature illegally infringes on its copyrights. Buddy Sync retrieves users' friends lists from other instant messaging programs like AOL Instant Messenger and Xfire, and gives players the option of automatically inviting those friends who have GameSpy accounts to join the users' friends lists on Comrade.

If you read a bit deeper you find that what's basically being challenged is GameSpy's use of information (friends lists) that has been publicly published by Xfire on their website. Xfire claims that GameSpy's reading of that data is to enable GameSpy to bolster their own friends lists:

In a filing in support of the restraining order, Xfire CEO Michael Cassidy specified how his company believes the Comrade program works. First, Cassidy said it reads the user's Xfire handle from the XfireUser.ini file, then visits a formulaic URL on the Xfire site to get a list of the user's friends (for instance, to find the friends list of Xfire user Aragorn, Comrade would go to http://www.xfire.com/friends/aragorn). The names on that friends list are then compared with a central IGN database of Comrade users' Xfire handles, and if any matches turn up, the user is asked if they want to invite those people to their Comrade buddy lists.

I am not a lawyer, and can't definitively comment on whether information that's made public in this fashion can or cannot be harvested. My gut is that it's probably kosher - we have plenty of website scraping applications in the wild today that do just this, including best price searching sites. What does fascinate me is how this suit highlights how busted Sony's PS3 online network is, and how companies are fighting to position themselves to take advantage of this financially. Bet that seemed to come out of right field. But here's where I'm coming from.

I wrote earlier about why Sony's enabling of Xfire for PS3 games wasn't as exciting as it might seem. Take a read, and then let's talk about just what the experience of being an online user on PS3 is likely to be like.

So I buy my PS3, bring it home, and go online. The first thing I'm going to be asked to do is create some sort of Sony Network ID. That "Sony ID" will apparently bring basic presence and communication features via the crossbar interface. So far so good. Now I decide to play Insomniac's Resistance, which recently stated the following:

Insomniac's Ted Price: "The buddy list is specific to Resistance. And we decided not to bother people in-game with messages. If you have a new message sent to you while you're in a game, you'll see your "buddy list" tab flashing when you re-enter the lobby after playing a game. The buddy list tab is where you can access your friends, ignore list, messages, etc."

1Up (to reader): "Does this mean there's a system-wide friend's list, but you have to compile game-specific friends lists for each online game you participate in? That doesn't make much sense, and hopefully today's event will clear up the situation."

Yes Virginia, that's exactly what this means. Even though I already have a "Sony ID", I may have to create a new "Resistance ID" to play. And then start thinking about just how broken the experience is when you try to invite someone to a game. Do you send it via the Resistance UI? What screenname do I send it to? If I want to add you to my "Sony ID" friends list, do I need to send you an in-game message to ask you what your real "Sony ID" name is? What about game invites? How does that work across even just these two IDs?

You think that's bad? Now let's open up a few more games from different publishers. Each of these publishers had to make a choice of what online interface to use - again, because Sony's online network just isn't ready. So they'll choose between writing their own (as did Insomniac for Resistance), or perhaps licensing Xfire, or GameSpy, or Quazal, or Demonware. So now we have five potential networks with different namespaces, and an inherent  lack of ability to communicate (chatting, voice, invites, finding friends, etc.) between them, and even across to just the "Sony ID" namespace. Think we're done? Nope... what happens if each publisher doesn't stick with the same online solution for all of their games? This is very likely as most publishers use different developers - so even across a single publisher, you may find fragmented communities.

The only consistent tie all of these different community fragments has is that a user should always have their Sony ID. That gives you a lifeline to be see friends when they are online... but only in the crossbar UI. Will you even be able to see what game they're playing? What about what network that game uses, and whether that friend is logged into it? How will you get messages in a timely manner? Remember Ted Price's quote above? "And we decided not to bother people in-game with messages. If you have a new message sent to you while you're in a game, you'll see your "buddy list" tab flashing when you re-enter the lobby after playing a game." Doesn't sound like a user-centric design decision to me.

So... back to Xfire and GameSpy. I said earlier this suit is a direct result of how busted Sony's online network appears to be, and I just described some of the issues you'll likely be facing later this month. Yes, it's targeted at a PC title right now (Battlefield 2142), but that's just noise. What we're really seeing with this suit are online middleware companies trying to position themselves to become the eventual defacto solution that publishers will use. Just as with web search and instant messaging, these companies are trying to get momentum and user base that will cause them to be the "PS3 online" solution of choice. And this suit is simply one of many battles we'll see in this space, especially as PC and console crossplatform connectivity becomes more important in the coming years.

[Update: Today it was announced that all PS3 online titles would use a single login (the "Sony ID") to login to games. I wanted to highlight that to be fair, but unfortunately it still doesn't address the majority of my concerns below. If I log in with my Sony ID, I still don't understand how I'll communicate (defined as invites, messages, chatting, etc) with friends whose IDs are on different buddy lists that are enabled by middleware companies such as Gamespy, Demonware, etc. Simply put, the value of a single login is the seamless ability to do all of the above - and that feels like a mess.

Still, I have to give some credit to Sony for beginning to move in the right direction. With this announcement, you can look ahead to PS4 and imagine a world of a single login with consistent communication via a single interface. It's unlikely to happen in this generation because Sony can't cut the legs out from under existing titles and supporting middleware companies. But this will be a good backbone to build from next time around (and hopefully keep existing IDs).]

Just saw on Joystiq that Computer Gaming World has put a digital archive of its first 100 issues, dating back to November 1981. To quote:

CGW archive launched, download first 100 issues free

Computer Gaming World has opened a digital archive that includes its first 100 issues, dating back to November 1981. Each issue is available for download in PDF format via FileFront -- for free. Go getcha hoard on!  Keep in mind, the archive might not be online for long since Computer Gaming World will be transformed into Games for Windows: The Official Magazine starting with the December issue (released in mid-November). http://www.joystiq.com/2006/10/20/computer-gaming-world-archive-launched-download-first-100-issue/

I was just out visiting a developer who had a few ex-SSI compatriots working there, and we had a blast talking about those old, prehistoric PC gaming days. I'm going to have to grab some of these to read on my upcoming flights and remember the old days... ah, Star Control II, where are you now?

[Edit: Wanted to post a direct link to the Filefront archive of CGW PDFs. Also, had a good comment about the open source version of Star Control II being available here. Good stuff!]

I was talking to Bruce Dawson, one of our senior software design engineers here, about some questions I had around 1080i and 1080p. Frankly, I was particularly curious about why Sony has continued harping on 1080p as being "TrueHD", especially since the 360 has enabled 1080p output as well (coming soon to homes near you!) I was trying to figure out if I was just missing something, and his emailed answer was particularly clear and helpful to me, and since there's nothing confidential here I thought I'd share it with you.

The really interesting statistic that popped for me is how much less time a game console has to render a 1920x1080 scene versus a 1280x720 scene. (Remember this is on the same console, whichever one you like. This is not a comparison of different console's rendering capabilities to each other.) Simply put, for a 1080i/p game the console has 55% less time per pixel to render any special effects, anti-aliasing, illumination, etc. than for a 720p game. Yes, even Resistance has fallen off the bandwagon and admitted they can't hit 1080i/p as previously claimed. (It also helps explain why Gran Turismo HD is so underwhelming.)

Anyway, Bruce's text is below. Hope it helps clarify a few things for you!

Many developers, gamers, and journalists are confused by 1080p. They think that 1080p is somehow more challenging for game developers than 1080i, and they forget that 1080 (i or p) requires significant tradeoffs compared to 720p. Some facts to remember:

• 2.25x: that’s how many more pixels there are in 1920x1080 compared to 1280x720
• 55.5%: that’s how much less time you have to spend on each pixel when rendering 1920x1080 compared to 1280x720—the point being that at higher resolutions you have more pixels, but they necessarily can’t look as good
• 1.0x: that’s how much harder it is for a game engine to render a game in 1080p as compared to 1080i—the number of pixels is identical so the cost is identical
  There is no such thing as a 1080p frame buffer. The frame buffer is 1080 pixels tall (and presumably 1920 wide) regardless of whether it is ultimately sent to the TV as an interlaced or as a progressive signal.
• 1280x720 with 4x AA will generally look better than 1920x1080 with no anti-aliasing (there are more total samples).

A few elaborations:

Any game could be made to run at 1920x1080. However, it is a tradeoff. It means that you can show more detail (although you need larger textures and models to really get this benefit) but it means that you have much less time to run complex pixel shaders. Most games can’t justify running at higher than 1280x720—it would actually make them look worse because of the compromises they will have to make in other areas.

1080p is a higher bandwidth connection from the frame buffer to the TV than 1080i. However the frame buffer itself is identical. 1080p will look better than 1080i—interlaced flicker is not a good thing—but it makes precisely zero difference to the game developer. Just as most Xbox 1 games let users choose 480i or 480p, because it was no extra work, 1080p versus 1080i is no extra work. It’s just different settings on the display chip.

Inevitably somebody will ask about field rendering. Since interlaced formats display the even lines on one refresh pass and then the odd lines on the next refresh pass, can’t games just render half of the lines each time? Probably not, and even if you could you wouldn’t want to. You probably can’t do field rendering because it requires that you maintain a rock solid 60 fps. If you ever miss a frame it will look horrible, as the odd lines are displayed in place of the even, or vice-versa. This is a significant challenge when rendering extremely complex worlds with over 1 million pixels per field (2 million pixels per frame) and is probably not worth it. And, even if you can, you shouldn’t. The biggest problem with interlaced is flicker, and field rendering makes it worse, because it disables the ‘flicker fixer’ hardware that intelligently blends adjacent lines. Field rendering has been done in the past, but it was always a compromise solution.

Just saw on Gamedaily that GameStop has launched a PC digital distribution service (in addition to taking PS3 preorders for a short time this morning). The PS3 preorders are a drop in the pan due to limited numbers, but GameStop embracing ESD (Electronic Software Distribution) is pretty significant in my opinion. To quote the article:

Lazard Capital analyst Colin Sebastian predicted earlier this year that video game retailers may be prompted to get directly involved in the digital distribution market to complement their traditional business and ease their transition to a digital distribution future, if that is indeed what the future holds for the gaming industry. Sebastian specifically cited GameStop as a retailer that he thought would "introduce its own branded download service at some point."

Apparently that point came a lot sooner than we (and probably most) expected. Today on the GameStop website, consumers can find a brand new "Download Now" section. An official announcement on the new service has yet to be made, but the retailer is already offering "over 1,000 titles" for direct download to the PC.

"We offer a huge selection of games available for download directly to your PC. Simply select the downloadable games you wish to purchase and use our secure digital download checkout," reads an official description on the site. "You will be prompted to save these games directly to your PC using our robust download managing software. No rentals, no subscriptions - you own the game! In some cases, trial versions are also available, so you can even review the game before making a purchase."

The service initially would appear to feature a large number of casual games and budget titles, but there are also some more popular games such as Eidos' Tomb Raider Legend and Hitman Blood Money and 2K Games' Civilization IV.

It's encouraging to see retailers embracing ESD instead of trying to slow or hobble it. Recently there's been plenty of news about large retailers like Target and Walmart trying to protect their DVD sales turf by trying to force studios to sell electronic versions of their movies at the same price as they sell physical goods. This thinking will die a horrible death over time, of course - it's inevitable. But it makes it all the more encouraging to see forward-thinking traditional retailers like GameStop stepping up and embracing these new models.

It's pretty obvious that ten years from now ESD will be the primary channel you'll get your music, movies, games, and other digital media. In many ways the battle over HD-DVD and BluRay is irrelevant as we already know who wins a decade from now. My fear is that progress will be slower in those industries where artificial barriers are being put in place to protect traditional retail; my hope is that the gaming industry won't be one of those.