Tag Archives: business

‘A thin blanket against the cold reality’

Michael Futter, Polygon:

The sad truth is that the die was cast at Activision Blizzard months, if not years, before these layoffs were first hinted. What makes this so exceptionally painful is that there is an understandable mental link between layoffs and poor financial performance. It’s nigh impossible to rationalize or justify 800 people being shown the door as a company reports record sales.

And yet, here we are. Poor planning, a failure to adapt to current market conditions and consumer desires, and too much investment in trends (like toys to life games) has left Activision Blizzard in a place where it needs to make drastic cuts. That’s a thin blanket against the cold reality that executive pay is broken and now hundreds of people are out of work.

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Activision Blizzard cuts hundreds of jobs despite ‘record revenue’ year

Allegra Frank, reporting for Polygon:

Before announcing the layoffs, Activision Blizzard noted that it posted record revenues for the 2018 fiscal year. According to its fourth-quarter earnings report, the company made $7.26B in physical and digital sales, compared to $7.16B in 2017. But CEO Bobby Kotick explained that the numbers failed to meet expectations.

“While our financial results for 2018 were the best in our history, we didn’t realize our full potential,” Kotick said in the report. During the Q&A portion of the investor call, he described the layoffs as a “top-five career-difficult moment for me personally.”

Despite the self-proclaimed underwhelming revenues and the layoffs, Activision Blizzard said that it plans to expand its development teams on key, internally owned games (like Call of Duty, Candy Crush, and Overwatch) by 20 percent. Funding this will come through “de-prioritizing initiatives that are not meeting expectations and reducing certain non-development and administrative-related costs across the business,” according to its fourth-quarter fiscal earnings release. Other non-core positions will be eliminated to rededicate resources toward beefing up its development slate, the team said on the call.

This news is awful. No way around it. Record revenue and cutting 800 jobs. Sure, increasing margins, non-core development, loss of Bungie, blah blah. But 800 jobs?! Banking on a single IP (Destiny) and not anticipating what CEO Bobby Kotick called a “top-five career-difficult moment for me personally” is insane. And how is the loss of 800 jobs not number one?

Per Kotaku reporter Jason Schreier, Kotick took home 28+ million in 2017. I get the reasoning behind highly paid executives; I wouldn’t want their jobs. But to say the loss of 800 jobs is “top-five” is an insult. It should be number one, with a bullet.

I feel for the employees. I feel for fans. I don’t see a great outlook for core Blizzard properties outside of World of Warcraft — a recurring revenue behemoth. And that’s sad. I would have loved to see the A/B 800 reallocated to other Blizzard franchises. If the focus is entirely on a Call of Duty, Overwatch, and Candy Crush, I fear the end of Blizzard as we know it.

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Activision-Blizzard Employees Brace For Massive Layoffs

Jason Schreier, reporting for Kotaku:

This news comes after a tumultuous year for the publisher, which consists of two entities, Activision and Blizzard. Both Activision and Blizzard operate autonomously but are governed by the same C-suite of executives, including CEO Bobby Kotick (whose salary in 2017 was roughly $28.6 million). 

At Blizzard, 2018 was a year full of cost-cutting, under chief operating officer Armin Zerza, whose mandate has been to reduce spending and produce more games. (Other than expansions and remasters, Blizzard has not released a new game since Overwatch in May 2016.) Employees all across Blizzard have been told to cut their budgets and spend less money, and there’s general concern about Activision’s creeping influence as the company looks to make more financially-driven decisions. In October, Blizzard CEO Mike Morhaime stepped down, to be replaced by Blizzard veteran J. Allen Brack—not as CEO, but, notably, as president. In December, Blizzard abruptly killed the Heroes of the Storm esports program and cut down the development team for that game, its least successful.

People who work or have worked at Blizzard told me that they expect Tuesday’s layoffs to be primarily in non-game-development departments, such as publishing, marketing, and sales. Some of those jobs and roles may then fall to Activision proper, further reducing Blizzard’s autonomy.

My recent piece Activision, Microsoft, and Platforms amounted to what I’d consider a nothing-burger. I’d considered the question “what now for Activision?” after they ended their partnership with Bungie, and sought an answer. After laying everything out, short of spelling doom, I didn’t really net out with much other than an allusion of the company leveraging Blizzard’s IP to build a paid platform:

This is certainly a “let’s spend Activision Blizzard’s money” post, but short of spelling doom for Activision Blizzard with the rise of Fortnite, departure of Bungie, and Microsoft’s “Netflix of gaming”, Activision Blizzard needs a model that will continue to drive revenue in a PC world without the friction of a hardware platform. If the battle is lost, Activision Blizzard titles join the ranks of third-party titles vying for the top-spot on other launchers and platforms.

This news of layoffs is what I was afraid of, and I think it will extend passed Activision employees.

At this rate, I see the brand “Activision” as an albatross around Blizzard’s neck. Sadly, at the expense of the employees, they should shed the name Activision, divert resources to Blizzard, and focus on Blizzard’s colorful core and new IP.

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Nintendo FY18 Q3 Earnings

A blockbuster holiday. Lowered expectations. Three pillars of business. Nintendo’s recent earnings report was interesting if nothing else.

Brian Crecente at Variety gave a tight business side recap:

Despite a strong holiday, Nintendo on Thursday lowered how many Nintendo Switch it believes it can sell for the fiscal year, dropping the goal by three million, down to a new target of 17 million, the company announced in its latest earnings report.

The company also increased its Nintendo Switch game sales forecast by 10 million, saying it will sell 110 million copies of games for the system in the fiscal year, which ends in March. Finally, the company nearly halved its estimates for the sales of the portable 3DS systems, down from 4 million to 2.6 million.

The following are pulled from the presentation:

On Switch sales:

And cumulative global sell-through, including sales outside of the major markets you saw on the previous slides, has surpassed 30 million units as of the end of January, and the Nintendo Switch business is on a trajectory for further growth. Also, all of the new titles released in succession during the holiday season also showed exceptional sales.

Comparison to PS4 and Xbox One sell-through looks like this:

console-sales-19-01-31

Comparison to the Nintendo 3DS looks like this:

switch-vs-3ds-19-01-31

On games:

Super Smash Bros. Ultimate has achieved a sell-through of over 10 million units. The title has continued to show explosive growth after its release, with the fastest start for any title on any Nintendo home console ever.

Right in-line with NPD’s numbers.

Continued:

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This chart shows the combined sell-through in Japan, the US, and Europe since April of 2018 for the four titles you see here. All four were released in the year before last, 2017. Sell-through of each title continued at a reasonable pace, then spiked upward toward the end of the year. As the spread of Nintendo Switch progresses, the number of new consumers is increasing. And to consumers who just purchased Nintendo Switch hardware, every existing title seems new.

One of Nintendo’s strengths is how easy it is for consumers with past experience playing Nintendo games to become interested in new Nintendo-brand titles. And if the steady sales of our evergreen titles can reliably support our overall software sales, we believe that will help fill any gaps between releases of new titles.

Mario Kart 8 Deluxe is the top selling title for the Nintendo Switch at 15.02 million units. Super Mario Odyssey is second at 13.76 million units. I still wouldn’t call Mario Kart 8 Deluxe a system seller, but certainly a must-have. Electrodome Boogaloo, indeed.

On third-party titles:

Titles from other software publishers are also seeing a steady rise alongside Nintendo Switch. Nintendo’s revenue related to software from other software publishers was more than twofold during April through December of 2018.

The idea that Microsoft would put games on Switch doesn’t seem so crazy.

On strategy:

Based on our basic strategy, we’ve organized the company’s initiatives into three pillars of business. The three pillars are the dedicated video game platform business, the mobile business, and the IP expansion business.

Each pillar has a different purpose and a different scale. They are each considered critical to the company, and we intend to grow them according to their unique traits and potential for growth. Let me explain each of these businesses in order.

Executives have made mention of IP expansion, but I don’t think I’ve ever seen it as core a pillar spelled out next to “video games”.

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Switch Is Selling Like Wii, Thanks To Traditional Nintendo Games

Chris Kohler, Kotaku:

NPD didn’t release the exact sales number for Smash, but it gave us enough to roughly figure it out. It said that Ultimate exceeded the launch month sales of Super Smash Bros. Brawl by over 70 percent. Since that number is known (2.7 million), we can add 70 percent to it to get rough first-month sales for Ultimate at a little over 4.5 million units—again, not counting download sales.

In fact, Ultimate’s debut was, NPD said, the best launch month for a console-exclusive game in “video game history.” The strength of the Switch overall also boosted the sales of its major games, sending 2017 games Mario Kart 8, Breath of the Wild, and Super Mario Odyssey into 2018’s top 20. Overall, NPD said, Nintendo made more money on software than any other publisher this year, a feat it hadn’t achieved since—you guessed it—the salad days of Wii, in 2009.

Back-to-back big years?

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UK video games market is now 80% digital

Christopher Dring, reporting for GamesIndustry.biz:

It seems a bit negative for the physical market, but these figures do not include hardware. And actually more consoles were sold in 2018 than in 2017. GamesIndustry.biz can reveal over 2.4 million games machines were sold in the UK last year. PS4 was the biggest selling console, with sales flat year-on-year, but Nintendo Switch was the biggest growth area, with Switch console sales up more than 20 percent.

Indeed, physical remains a strong part of the games retail business. According to ERA, the best-selling game of the year was FIFA 19 with 2.5 million units sold… 1.89 million of those sales came physically. That means when it comes to AAA releases, digital sales only account for around 25 per cent of the games sold. However, that percentage is getting bigger. Last year, 20% of FIFA 18’s sales were digital.

I don’t find it terribly surprising that an annual sports title garners the top spot for physical game sales. I can already see the GameStop shelves littered with used copies of FIFA ‘19 this fall.

The trend of the rise in digital also comes as unsurprising when physical games are all met with a barrage of software updates. Sure, one may be able to save a few bucks on a physical copy — and sell it back — but in the world of instant gratification, digital download — albeit a tens-of-gigabytes download — is quicker than a trip to the store plus a tens-of-gigabytes update.

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The year in gaming controversies

Colin Campbell, Polygon:

These events must lead most observers to the view that game companies have a long way to go before they can truly present themselves as caring about their employees, their customers, or the world that they inhabit. But they are at least now subject to vociferous disapproval when they make their most grotesque mistakes.

Perhaps meetings are taking place right now, in which execs are noting the previous damage of their own actions, and making necessary alterations. More realistically, as we enter the new year, the issue of unions is in the air. If and when employees organize themselves into unions, game companies will have more to worry about than bad publicity. In 2019, maybe we’ll see a change for the better. Maybe.

This article is a great retrospective of an industry on the cusp of being held accountable. I don’t say that lightly. These are incidents on record. There’s bound to be many, many more that have not been to light. It’s wonderful to see focus put on these issues by media outlets.

I’ll admit that I remain glued to the video game industry for the fun and surprise of it all. But to see the harsher reality elevated more than ever is refreshing.

In any case, the comments on this article are something else. No one should ever be harassed. No one should ever be expected to work 100 hours per week. No one should be subjected to cheap gambling tactics or unjustified lockout to earn a company an extra penny or two. In 2019, maybe we’ll see a change for empathy and maturity from companies and audiences alike. Maybe.

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Hunch: Nintendo Revives “Super” Branding

Moments ago, WSJ broke news that WSJ breaking Nintendo news.

Earlier this evening, after seeing reviews for Super Mario Party emerge, it dawned on me the appropriateness of the “super” brand in an era of mid-cycle console refreshes. The Super Nintendo Entertainment System was a next-gen console at the time, but “Super” now feels like a supreme version of an existing console.

My crack-pot hunch is that this new Switch will be named the “Super Switch” (as opposed to “Switch XL”) and will feature a larger display (smaller bezel), richer speakers, better kickstand placement, and Bluetooth headphone support at a minimum. Just a hunch.

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There are too many video games. What now?

Excerpts from Steven Wright’s Polygon Cover Story, emphasis my own:

Everyone can make games, but be realistic. … It used to be that you could do something that nobody had ever seen before, or you could do something familiar really well. Now, it has to be innovative and have incredible quality.”

Games are surely easier to make than ever before. Easy for me to say as I’ve never made a game, but I have to believe that today’s technology has decreased the barrier of entry to development. That’s not to say it’s easy to create a good game. Like any good art or media, that is an incredibly difficult feat.

The tech to create games is more accessible than ever. Formal eduction to learn how to make games has become readily available. The distribution of games becomes increasingly easy via tools like Epic’s Unreal Engine which allows developers to “more easily ship games and seamlessly optimize gameplay across platforms.”

For those developers creating online experiences, the choice and complexity of platform to develop for and release to shrinks ever more with cross-platform play becoming increasingly popular.

It begs the question there is inevitably one experience everywhere, how do the plethora of games become seen? I believe indies will come to depend on large publishers for marketing budgets to cut through the cruft. But those publishers will be increasingly looking for guarantees on their investments. Not a chance on a new indie title.

When Finnish studio Housemarque released a twin-stick shooter called Nex Machina into the wilds of Steam in 2017, it didn’t exactly expect the game to to set tills alight. Even with those lowered expectations, however, the team behind the acclaimed defend-’em-up Resogun found itself shocked at the lack of impact that the Housemarque name seemed to have on the droves of consumers scrolling through Steam every day. When the sales numbers finally trickled t in — Housemarque declined to discuss specifics for this story, but SteamSpy and this recently patched achievement leak puts the number slightly below 100,000 copies sold as of summer 2018 — the mood was somber, with the studio’s head of publishing, Mikael Haveri, describing it as “devastating.”

The past few games I’ve played (and enjoyed!) on iOS have been published by Annapurna Interactive. The brand has made its impression. I couldn’t tell you the developer of any of these games.

The frequency at which a publisher for multiple developers can get its brand in front of the player is far greater than any indie developer. Recognition by saturation.

If the publisher is able to consistently publish top-notch experiences, they also become a trusted curator of which players will seek new titles.

If a developer seeks to have the same level of recognition, they are absolutely required to create something “innovative and of incredible quality” to compel a player to invest in their complete experience, thus building a relationship. The longer the experience lasts, the deeper the relationship becomes.

Blizzard and Epic have created addictive experiences that continue pull players back in over and over, again and again, for hours on end; drilling their brand in with each launch of the game as well as their proprietary launchers and stores.

Nintendo iterates on familiar and successful franchises to deepen the association of a particular IP to Nintendo, thus deepening the player’s relationship with and trust in Nintendo. Should a new Nintendo IP comes along, chances are those with a relationship with Nintendo will give it a try. And because Nintendo consistently creates stellar experience, the trust will likely grow.

Capybara Games released an innovative title of incredible quality for iOS in Superbrothers: Sword & Sworcery days after the iPad 2 was released — arguably the first experience of its kind. The title was of novel design, mysterious, tonally unique, integrated social sharing to encourage peer-to-peer marketing, and was immersive and long enough to draw players back in through to completion during the early days of a platform. While Capybara may not be a household name, their design and tone is now familiar.

All of this said, the chances of a developer becoming a household name are far slimmer than a publisher who’s essentially become a curator. The same could be send for indie record labels and film distribution/production houses.

Devolver’s Nigel Lowry says that although many industry veterans and gamers alike think of the gaming market as a finite amount of money that hungry consumers are willing to spend in a given time period — say, this bloody holiday season, which is particularly awash with high-profile franchises that must duke it out, such as Assassin’s Creed and Red Dead Redemption — in the past few years, it’s become apparent that the limiting factor isn’t measured in dollars, but hours. In a climate where every game is stuffed to the gills with five tiers of colored loot, massive open worlds, reams of optional content and a dozen content patches lurking on the schedule before the core package even hits store shelves, it seems that game developers are battering each other harder than ever before to compete for the attention of games worldwide.

“Even if the most hardcore gamer plays 14 hours a day, that’s still a finite amount of time,” he says. “And if you’re spending 10 of those in a PUBG, or a Fortnite, what does that leave for the rest of us? It’s true that timing of release is critical, sure, and I don’t think that single-player, smaller-scope games are going to go away; there’s always going to be room for that. But time is something that you really can’t move, and you have to account for that when people move into these long-term relationships with games.

See Self-competing and Time Blocking.

I truly don’t know what the future of indies is, but it doesn’t look great.

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Cross-platform play coming to PS4, starting with Fortnite

Ben Kuchera, Polygon:

Sony has finally stopped fighting the future: A beta for cross-platform play, including support for Fortnite, launches today.

“The first step will be an open beta beginning today for Fortnite that will allow for cross platform gameplay, progression and commerce across PlayStation 4, Android, iOS, Nintendo Switch, Xbox One, Microsoft Windows, and Mac operating systems,” PlayStation president and global CEO John Kodera wrote on the PlayStation Blog. “We see the beta as an opportunity to conduct thorough testing that ensures cross-platform play is best on PlayStation, while being mindful about the user experience from both a technical and social perspective.”

This is a major reversal of its longstanding policy of keeping PlayStation fans segregated from the rest of the industry, after arguing that cross-platform play might even be unsafe. Others in the industry had argued that the policy was due to monetary concerns. Many publishers, including Bethesda, had been pressuring Sony to make this change, and developers such as Psyonix have already spoken openly about how easy the change would be to implement from their end.

This is industry shaking news. With this breakthrough, cross-platform play will become a new norm.

Not to belabor the “console wars”, but I suspect this will encourage deeper investment in first-party exclusives (Nintendo’s game) leading to more studio acquisitions (Microsoft’s new game), as well as bigger deals for third-party exclusives (Sony’s game, traditionally).

Finally. Finally. Finally. Finally.

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