NEXT-GEN CONSOLE MAKERS TOUT FEATURES, BUT CONTENT IS STILL KING
When Microsoft touts its Xbox 360, when Sony praises its PlayStation 3 (PS3), when Nintendo lauds its Revolution, it's the same pitch. All three forthcoming next-generation video game consoles are stuffed with the latest technology, support online gaming and are backwards compatible with earlier console versions. But what's most important to a video gamer, industry analysts agree, isn't the hardware -- it's the software. What games will each system play?
Content is still king, thank you very much.
That's why, when Microsoft threw its Xbox Summit 2005 bash in Japan this week, the star attraction wasn't the Xbox 360, it was the roster of more than 38 publishers and developers who had pledged their support for the new system, including such big-name Japanese content providers as Capcom, Konami, Sega and Namco.
Apparently Microsoft needs to prove that the Xbox 360 won't fall flat on its face in Japan the way the current Xbox did, which last year sold 21,000 units to the sizeable Japanese market, according to Media Create Co. Ltd., less than 2% of the 1.4 million PlayStation 2 consoles Sony sold there during the same 12 months.
"All three systems impress me for different reasons," says Anita Frazier, entertainment industry analyst for Port Washington, NY-based NPD. "But, ultimately, the system that has the greatest amount of proprietary marquee titles -- the ones that drive hardware sales the soonest -- will have the greatest ability to lead the share race."
She's talking about games like "Halo," which was released in November of 2001 and could only be played on the original Xbox console, which launched that same month. It sold more than five million copies, helping the Xbox top Nintendo's GameCube for second place in the U.S. market.
Titles on the launch pad
But this time around, analysts say, no such "killer app" launch titles have yet been announced for any of the three consoles. "This isn't going to stop any savvy customer from buying any of the systems," says David Cole, principal analyst at San Diego-based DFC Intelligence. "All three companies have such strong track records that no one is going to feel that there won't be strong game support down the road. This time it may just take a little longer. The battle is going to be more about the 2006 holiday season when the killer titles start to come out ... the ones we don't even know about yet."
In the meantime, information has leaked about some of the games that will be available either as "launch titles" or as "launch window titles," out within 45 days of the console's release date.
Microsoft, for instance, expects there to be 25 to 30 launch window titles for the Xbox 360, including Tecmo's "Dead Or Alive 4"; 2K Games' "NBA 2K6"; Activision's "Call Of Duty 2," "Quake 4," and "Tony Hawk's American Wasteland"; Electronic Arts' "Madden NFL 06," "Need For Speed: Most Wanted," and "Tiger Woods PGA Tour 06"; Majesco's "The Darkness"; Microsoft's "Perfect Dark Zero," "Kameo: Elements Of Power," and "Project Gotham Racing 3"; Epic's "Gears Of War"; THQ's "Saint's Row"; and Ubisoft's "Ghost Recon 3." Microsoft reportedly shipped more than 4,000 development kits to game developers and it is said that there are currently 160 games in development for the Xbox 360.
Meanwhile, Sony hasn't revealed word one about its launch titles.
"We have just deployed 100 development kits into the market," says Molly Smith, senior director of PlayStation brand development, "and we're still in the initial stages of being able to supply the development community with the tools they need. At E3, we showed a large sampling of products under development from various companies, but we didn't talk specifically about the library, what's being released, or what's even being slated for launch period. All of those things will be revealed in time."
Similarly, a Nintendo spokesperson would only say that it will have "a number of WiFi-enabled games ready at launch ... new IPs and those that play off of our existing games, characters, and franchises."
Backwards compatibility
The console makers may choose not to be specific about their new games, but all three have announced that their systems will be backwards compatible to some degree -- in other words, games designed for the previous generation of consoles should play on the new machines.
NPD's Frazier believes the PS3 is likely to have the "greatest pure backwards compatibility," meaning that it will probably be able to play all the previous PlayStation 2 (PS2) and original PlayStation (PS1) games.
Sony's Smith admits that it's impossible to guarantee that all its older games will play on the PS3. "Certainly we haven't tested every single asset," she says, "but we have 13,000 PS1 and PS2 games worldwide -- 10 years of assets -- that will still be able to live when PS3 comes to market."
The Xbox 360, on the other hand, may only run some Xbox games -- Microsoft has said its "top-selling games" -- a library that is clearly a lot smaller than Sony's with its longer console track record.
However, that may not negatively affect Xbox sales, say analysts.
"Backwards compatibility is a nice little marketing tool, but it can be over-rated," says DFC Intelligence's Cole. "Most of the people buying the new systems already own the older systems and it's real easy to hook up both to the same TV to allow you to play both the new and old titles."
Edward Williams, managing director of Manhattan-based Harris Nesbitt, agrees: "Backwards compatibility is a phenomenal selling point and it's a reason why people will choose to buy a certain system. But it's extremely under-utilized in practice. Most people just don't play the old games when they can get better-quality graphics and a better gaming experience from the newer games."
The clear exception is when nostalgia kicks in, and Nintendo is counting on lots of nostalgic gamers to get excited about its huge collection of 20 years of classic games which, it says will be available for download.
"Nobody has the vast library of games -- for such previous platforms as the NES, the SNES, the N64 -- that Nintendo has," says a spokesperson. "Imagine being able to play the original Mario Bros. game or others you haven't seen in a while." She would not comment on what fee will be charged or which titles will be available first, although it is likely that it will be the games that Nintendo published and owns, she notes.
"That will be a good -- not a great -- selling feature for the Nintendo Revolution," says Edwards. "That's because, at the end of the day, people who want to play those old games (aren't) a big audience. The younger gamer is going to look at the original Mario Bros. game and, well, it's kind of like watching black-and-white TV. Your dad is going to try to point out how great it is, but the younger gamer just isn't going to get it."
Online 'out of the box'
What will be cool to the young gamer is the wireless online capability of all three systems. But, as with backwards compatibility, it's not clear how many gamers will actually take advantage of this so-called Wi-Fi feature and play head-to-head against each other rather than solo.
"Our Hits Monitor data shows that online play for games that have that capability is relatively small," says NPD's Frazier. "Even for titles that have a relatively high level of participation with online play, like 'Halo 2,' the time most players spend playing offline versus online is significantly larger. So while all three companies are poised to take advantage of the assumed growth of online -- and the additional revenue streams that ensue from online play and micro-transactions -- online is still in its infancy."
While Sony has been in the console business longer, Microsoft is much further along on the online learning curve with its Xbox Live subscription service.
"And it's a fairly steep learning curve," says DFC Intelligence's Cole. "It's a hard service to provide and there are a lot of issues. We don't know what kind of online service Sony intends to offer, although I'd imagine it'll be similar to Xbox Live since they've been talking about micro-transactions. We just don't know the details yet."
Meanwhile, Microsoft intends to offer an enhanced version of Xbox Live for the Xbox 360, and it'll be a cinch to access it since all Xbox 360 games will be "Live-aware." That means that, by pressing the button in the middle of the console, gamers will be able to see which of their friends are online, and they can take advantage of new features, like spectator mode, an online marketplace, and large-scale tournaments.
Whether Sony's online service will be similarly configured remains to be seen.
Nintendo will only say that its Revolution will feature its "Wi-Fi Connection," enabling head-to-head play on games that include that function.
If you could only buy one console ...
While all three consoles will surely appeal to a segment of the gamer audience, it's likely that the PlayStation 3 will attract the largest share of the market if history repeats itself. Sony has sold more than 90 million PS2 units worldwide, while Microsoft has sold just 22 million Xbox consoles globally.
Monterey, CA-based Kagan Research predicts that Microsoft will hit 11 million consoles sold by 2007, but "the first-mover advantage won't last long."
David Cole of DFC Intelligence expects that by 2009, Sony will have captured 53% of the worldwide console market, followed by Nintendo with 24% and Microsoft with 23%.
But, on a personal basis, which console appeals most to the analysts?
"To be clear about this," says Edward Williams of Harris Nesbitt, "I think Microsoft is positioning the Xbox 360 very well and they've put in some features -- specifically the online aspect -- that are going to change the face of how games are played, how long they're played, and what the business model will be for games ... instead of there just being a shrink-wrap sale, publishers will get an ancillary revenue stream from micro-transactions.
"But given what I know about all three consoles, at this point I'd have to say the PS3 is the one to buy. And that's because of the full backwards compatibility and the strong brand awareness. I think the gaming audience is going to agree with me ... and that in five years, the PS3 will be the one with the largest installed base."
DFC Intelligence's Cole puts his money on the PS3, too. "Sony is so strong on a global basis, it will be hard to beat. Until we see a major mistake from Sony, we see no way a rational bettor cannot consider the PS3 the favorite.
"As for which one I'd buy, you're never going to get me to choose one over the other. Let me just say, it depends on what kind of consumer you are. Many, like kids, want to go out and buy them all. I prefer to wait until all of them have been on the market for at least a year and see what kind of software comes out. Then I'll make my decision. I'm pretty happy with my systems now and, as far as I'm concerned, there's no rush to upgrade. My best advice to the budget-conscious consumer who can only afford only one is to do the same."
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