Are they really doomed?

It seems like every day we are getting new updates on who is losing money, and how that means our favorite consoles and games are doomed (well, it’s more like we get quarterly reports every 3 months, but work with me here).  It’s hard to know what to believe and what’s just click-bate, especially when most of the people reporting the numbers are gamers who don’t fully understand what’s going on themselves.  I don’t blame game sits for not providing context as they simply pass along some information that’s about video games and no one is claiming to be an expert.  I'm not either.  But I do know my way around a balance sheet, and know a thing or two about investigative reporting.   My goal here, as always, is to dispel ignorance and provide objectivity so I’ll be focusing on disproving commonly held notions rather than trying to pass myself off as an investment banker and provide stock advice.

Before I start, let me speak to the most common statements that get tossed around when talking about a company’s balance sheet, which are complete rubbish.

They are just lying about the numbers

As near as makes no difference to impossible.  As publicly traded companies, they have to submit to diligence are their books are open to review at least 4 times a year.   Due to both heavy regulation and a pretty strong desire to get the numbers right, a quarterly report is generally prepared by an independent firm and your own accountants at the same time, and any discrepancies are investigated.  It is a very serious crime to publish numbers you know to be false. It’s a reasonably serious crime to publish numbers that are wrong even if you thought they were right.

But they have billion in assets!

Imagine you own a retail store. You have a ton of assets; you have the store itself, you have the point of sale system, you have computers, you have office furniture, you have fixtures.  When you start losing money, can you go and sell your point of sale system to generate some quick revenue?  Obviously not, as it’s essential to running you store.  So are the computers, the fixtures, and the store itself.  You might be able to sell the furniture, but just this simple thought experiment shows the problem with that logic; even with a billion in assets, the amount you can sell without drastically impacting your ability to make money in the future is going to be a very small percentage.  Also your outstanding stock NEVER counts and an assist; if people wanted to buy your stock, you wouldn’t have a problem.

So let’s take a look at the big three, asking 3 important questions:  Are they making money from gaming, are they DOOOOOOOOOOMED, and would they ever sell off their consoles.

Sony

Once a giant of manufacturing, innovation and sales, Sony’s decline over the last 10 years has been as tragic as it has been spectacular. In 2000, Sony had a Market Capitalization* of almost $82 billion, making it one of the largest and most valuable companies in the world at the time outside of the energy sector.  They had positioned themselves as the cutting edge of numerous technologies including digital cameras, camcorders, MP3 players, and personal computers.  Sony TVs were considered among the best money could buy, with good reason.  Even at this stage, the PlayStation seemed an unstoppable force, taking market share from Nintendo at a rate higher than anyone expected and fending off any encroachment from the original Xbox.  However due to a string of poor decisions, declining PC sales, decline in demand for high end electronics, competition from Samsung and Apple, and dozens of other factors,  Sony today has only $17 billion Market Capitalization and is suffering yearly loses in the billions.

Is Sony making any Money from gaming:  It comes and goes.  Recently no, but that’s changing.

People often talk about PlayStation “keeping Sony afloat” but that has simply never been the case. The original PlayStation and the PlayStation 2 were money makers for sure, but at a time when Sony was extremely successful in other areas.  By the time Sony started to decline, PlayStation was contributing to losses.  The PlayStation 3 was not well received at launch and was sold well below cost despite being extremely expensive.  The PSP was a disappointment, never approaching the sales targets Sony had set for it.  By the time PS3 started to gain momentum and move units, the disastrous PSV was cutting into the bottom line.  It has yet to reach its first year sales target, despite being 3 years old.  SOE has been the only consistent bright spot, but has never made enough to truly make a difference with Sony as a whole.  But things are starting to turn around with the PlayStation 4.  This year’s PlayStation profit of almost $300 million US may be first yearly profit in almost a decade, but it’s a very impressive number well beyond even the most aggressive estimates. It’s hard to call a single data point a “trend”, but the market seems to be extremely receptive of PlayStation right now, and I think we can expect this profitably to continue with upward momentum in the near future.

Is Sony in any real danger - Very much so.

Look, we all love PlayStation and it’s easy to think of Sony as “too big to fail” ... but they are not in good shape.  The easiest to understand indicator of a company’s overall health is “Levered Free Cash Flow” which is the most basic terms is the amount of money a company will have left to spend (or give back to investors) after it pays off all its debts that are due.  Sony’s Levered Cash Flow sits at -8.87B, meaning Sony needs almost 9 billion more cash than they are expected to bring in to pay for obligations like rent, wages, interest, and non-renewable loans, while they only have 7 billion in the bank.   If they cannot raise that outstanding 1.9 billion in cash some other way they will enter default protect and essentially be bankrupt. But that’s not going to happen just yet.  Sony is a well structured company and is able to sell valuable assist from one area without impacting others.  Still, selling $23 million in assists a day simply to survive is not sustainable for any real amount of time. The “already sold” list includes a  HQ in Tokyo and 250 million in shares in other companies,  as well as Sony’s E-book and PC business.  Not really anything people on a gaming site are going to care about, but It won’t be long until they are forced to sell something much harder to ignore.

Would they ever sell PlayStation – Almost certainly not.  And who would buy it?

PlayStation is very healthy right now and is extremely valuable.  Forbes rates its value as a brand higher then Sony itself,  and I think it’s easy to see why.  An educated guess at an acquisition price for PlayStation is in the double digit billions, which keep the potential buyer list extremely low.  Microsoft and Nintendo can both afford that, but what’s the benefit?  You rarely buy your competitors because Investing 10 billion in their own brands is the smarter play if you have the money to burn.  Amazon and Google are both already invested in the console game with systems focused on the market  they care about, content distribution.  While they might pay for PSN, having to buy the hardware and software business to get it is just a waste of money.  The same could be said of FaceBook, who might be interested in the social side of things but already have “gaming hardware”.  This leaves private investment funds, and they traditionally shun video games like the plague.  So let’s firmly put this speculation to bed; Sony isn't selling PlayStation.

Even if they want to.

It’s far more likely they will sell their phone business to Samsung or Microsoft, which will raise more than enough capital to keep them afloat until they can restructure and truly cash in on the success of the PS4.

Nintendo

Oh Nintendo, you crazy little games company.  With their 4th straight year of loses totaling almost 2 billion US dollars there has to be a lot of hurt to go around.  Worse, by their own sales estimates it looks like there is no chance for the Wii U to fully recover, they have no new hardware on the shelf to replace it with, and the DS isn’t paying the bills any more.  It’s easy to assume that Nintendo is in just as bad a bind as Sony ... and unfortunately  that’s about the only thing that’s easy to do.  Where Sony and Microsoft have the decency to neatly categorize everything in a logical fashion (Sony Music, Sony Movies, Sony PlayStation, Xbox Entertainment), Nintendo’s corporate stature is an a misrepresented  and tangled mess.   We tend to think of Nintendo and Nintendo of America interchangeable and that's lead is to think of Nintedo has just being a games company.  Nintendo of America is just selling games and systems (and owes a baseball team.  Because why the hell not?), but the global company has a hand in everything from hotels, a  taxi company, restaurants, food, candy, TV shows and movies without any clear department structure that makes it easy to track who is making and losing money, .  Given that Nintendo of America has seen double digit percentage stock price decreases (and hundred million market cap. loses) on days where Nintendo's global stock has seen an increase, it's clear that games are a unexpectedly small price of the Nintendo Pie.

Nintendo also owns this small little PRIVATE company which I’ll get to soon, and because it’s not publicly traded I can’t simple look at its balance sheet and tell you what’s going on with it ... and that’s a problem.

Is Nintendo making any Money from gaming:  Mother of god, yes

But 4 straight years of losses!  I know.  But the Wii U is failing!  I know that too.  But software sales are plumping!  I know, I know, I know.  Like I said, with Nintendo it’s not that easy.  Remember that small little private company I was talking about?  It’s called “The Pokémon Company” and it’s not really small or tiny.   By all estimates it is worth considerably more than Nintendo on its own or Sony’s global operations, at about 23 billion US.  It’s hard to accept, but nevertheless true:  For all the next gen hype and market share debate, for all the $100 million controllers and games with $500 million budgets,  even the most conservative estimates put Nintendo’s profits from licensing it’s video games characters as generating more money than Sony, Microsoft  and Nintendo themselves make selling gaming hardware and software.  Combined.

So why is Nintendo posting a lose?  I wish I could tell you.  But without access to the balance sheet for the Pokémon company to make some educated comments about how their profits are being reported by Nintendo, or where the money is going, I can’t really say.  And that only compounds the fact that it’s hard to say where Nintendo’s money is coming from or going to, given its lack of structure.  For all we know, they could be losing a billion a year in a bad hotel deal, or own a race car driver who is under performing.  Wouldn't surprise me one bit.   What I can say without doubt is that game related sales (because selling a plushy of Pikachu is a game related sales) are extremely profitable for Nintendo when you look at the big picture.

Is Nintendo in any real danger – Not even close.

Nintendo has around $8 billion US in the bank, making them one of the richest companies in the world (top 25) when it comes to cash on hand.  Nintendo could support itself without operational income anywhere from 25 to 35 years, and that’s without having to sell another assists.  Most importantly, when compared to Sony, Nintendo’s burn rate** is extremely high, and they could shut that off at any time in order to balance things out.

Would they ever exit hardware (sell off isn't really a valid question for Nintendo) – No, but there is a strong “crazy” factor at work here.

Let me introduce you to Seth Fischer.  Everything you have ever heard negative about Nintendo’s current operations, including calls for the CEO to step down, calls to move out of hardware, calls to sell on mobile platforms ... Seth is personally (and generally solely) responsible for.   A US investor in charge of Oasis Management, Seth bought into Nintendo because he thought the Wii U would be another Wii.  This hasn't made him very popular with people who’s money he used to do that, and he has been doing everything he can to get Nintendo to follow a more “US” approach to profit.  He has influence in the US media, and we generally read stories about the crazy things he wants to do (like add micro transactions to Mario 3D world) as “Nintendo investors urges ....” when that’s simply not the case.  The board of directors, as a whole, have complete confidence in Iwata.  Sure, the Wii U is far from a hit ...but  he also brought the Wii and the 3DS to the market.  The Wii is the best selling home console of all time, and given time, the 3DS should overtake the original DS to be the best selling handheld as well.  So he’s got that going for him.

That said ... Nintendo is crazy!  It’s hard to predict where they will be even a year from now because more than other company in this article they have the money and freedom to just bet it all on a whim, and the historical data shows that every 8 years or so they like to do exactly that.

Microsoft

What can I say about Microsoft?  Comparing there balance sheet to Sony or Nintendo is like comparing a major league baseball player to some guy on the company softball team.   Currently the 23rd most valuable company in the world, Microsoft holds its own against banks, automotive giants, and power companies.  It’s annual sales total more than the combined value of the entire video game industry. They are worth 17 Sony’s or 23 Nintendo’s.  Microsoft is so rich, they could buy Nintendo AND Sony at current estimated market value (not subsidiaries or assists) with the cash they have in the bank and it wouldn't even drop them down a spot on the “most cash on hand” list.  So big fish in a small pound has never been more accurate.

At the same time, the Xbox is a tiny fish in a vast ocean.  Contributing less than 1% of Microsoft’s bottom line, it’s not uncommon to make it though earning calls without it even being mentioned.  It’s a big deal to all of us because we are gamers ... but it can’t be overstated how little most of the people at Microsoft care about it.  Put in perspective, Sony make more of its total bottom line as a percentage selling magnetic storage tapes then Microsoft makes from Xbox, and when was the last time you saw a tape backup at E3?

Is Microsoft making any Money from gaming:  Maybe?  Probably not though

Xbox entertainment has finished in the green every quarter since 2007, which seems to be a clear cut indicator that I just lied to you with the headline up there.  But I didn't ask if Xbox was profitable, I asked if Microsoft was making money off gaming.  From day one Microsoft has envisioned the Xbox as a content delivery platform and monetized it in ways that go beyond gaming, and they have done a fantastic job of it. While the average PlayStation 4 owner spends almost 90% of the time the console is on playing games, the average Xbox One owner spends less than 40%.  The other 60% of the times they are using apps, buying movies, buying TV shows, or buying music.  Unlike Nintendo who shipped all that non-gaming profit off to a subsidiary, Microsoft just reports all under the same line and the profits roll right into “Xbox Entertainment”.  That makes it impossible to tell how much money they are making from games, but I’m not going to let that deter me.

Doing some quick math it’s easy to figure the answer is “not much”.  Xbox Live Gold subscriptions alone are bringing in $700 million with almost no overhead, but Xbox is reporting profit numbers much lower than that.  In fairness, these are the people who spent $100 million to make a controller worse, so we can assume they have a burn rate** even higher then Nintendo.  Bottom line on the bottom line is that Xbox is making money, and it looks like a fair bit of money ... but games seem to be a loss leader in the overall strategy.

Is Microsoft in any real danger – No.

Obviously.  They are going to make 22 billion in profit this year and have 80 billion in the bank.  I’m done. (for maximum effect, please picture me dropping a microphone to the ground as you read this)

Would they ever sell Xbox – Why not?  Also ... why?

I don’t think there would be any objection to selling Xbox from the board, and if the motion was tabled it would more than likely carry.  As I talked about just last week MS started off more of a branding exercises then anything else, with a secondary goal of content distribution.  The Xbox investment, on this level, might better be served today focusing on cell phone and mobile destitution.  Not only is that where the money seems to be, but it fast becoming a better way to reach the youth demographic as the average age of gamers is going up every year (by about ... .one year ).  But the much more important question is why would they sell?

With 80 billion in the bank, they have too much money*** and selling off Xbox to raise capital would just be counterproductive.  Microsoft is actively looking for more ways to increase its brand awareness and product diversity, regardless of how much of a gamble they are, as they are in the same boat Google was when they bought a thermostat for no good reason, or Facebook was when they bought OR for about 10 times what it was worth. They are not going to give away something they already have, especially if it’s in the green.

The final word

So there you have it.  3000 words to tell you that regardless of what you read in the latest “The sky is falling” article, we can expect more of the same for the conceivable future.  Sony is struggling, Nintendo is stumbling, and Microsoft keeps doing their thing, but it’s all going to work itself out without any major shake down.  No one said it better than Mr. Kevin Butler ... Long Live Play.  And that’s exactly what’s going to happen, regardless of where you like to do your playing.

*Market Capitalization – The poor man’s “What a company is worth”, Market Cap. Is the value of each share multiplied by the number of shares issued.  It has no direct translation to value, but is a strong indicator of the trending of what a company is worth (as it goes up or down, so does the worth of the company)

**Burn Rate – The rate at which you tell your R&D, marketing, and other controllable spending to “burn” though money.  Companies with high burn rates are good investments because in hard time they can just “turn off the taps” and stop investing so much in these areas.

***Too much money -  This is very much a real thing.  Money is volatile.  If the US dollar went down 5 cents, Microsoft would lose 4 billion in cash.  Having this much cash on hand also means you haven’t been able to found ways to leverage investments, and shows you don’t have people in place to manage your cash flow.  It’s a very poor indicator.

Little Xbox in Big China

With the Xbox set to release in China, there has been a lot of talk, and not a lot of objectivity, about what that means for us as gamers.  Below, I do my best to give a no-bias outline of what we can expect.

Why Xbox?

Before we look at X-box in China, lets look at why we even have an X-box in the first place.  No one really wants to enter the video game market, and with good reason.  Traditionally a small slice of the entertainment pie, the industry had proven itself to be volatile and unforgiving from its conception.   You hardly have time to recoup development costs before your console is obsolete, and a single piece of unpopular hardware or even software could be disastrous.  Even Sony’s entry into the market in 1994 was more the results of a opportunity that presented itself after a Nintendo mistake then a real desire to be console makers.  It’s rather shocking, then, that in 2001 software giant Microsoft decided to enter the console business with the Xbox.  They had just seen the launch of the Dreamcast devastate Sega (a failure they played an important part in*) and launched alongside the Nintendo game cube to do battle with the PS2, a juggernaut of sales that showed no signs it was ready to give up market share (spoiler: it didn’t).  It’s seems almost self evident that Microsoft would have been much better off leveraging the PC as a gaming platform if video games were something they wanted to do, or by spending the money to market Windows to developers directly.  Why then, make an Xbox?

The answer is hidden in plain sight; the Xbox name.  The brand has become so common place it’s easy to forget its origin as “The Direct-x Windows Box”, a modified Dell computer taken to market with the goal of doing exactly what Microsoft should be doing; selling the Windows brand to the 18-25 demographic, and selling Windows tech to game designers.   Even Bill Gates himself downplayed the video game aspect of the Xbox, refusing to call it anything other than a “Multimedia Device” when speaking internally. He sold it to shareholders as being in line with the goal of Multimedia Convergence, meaning his goal from day one with the Xbox was to use it as a content deliver platform.  Some say he spent more time and effort on getting professional wrestler “The Rock” to do the official announcement at GDC then he did on what they were going to say about the system, because the branding was more important to him then the product.  He just needed someone "cool" to say it ran direct-x, and call it a day.  It was brilliant.  A targeted marketing campaign to reach people that were moving off PC gaming to console would have a cost in the millions, and a re-branding of Microsoft as a whole to be a “hip” company the next generation would be interested in would be in the hundreds of millions.  By spending that money instead on a console, they were able to build that brand awareness with a key demographic and have something to show for it.   And it worked.  Brand awareness with young adults started to see double digit increases.  The numbers of developers that used Direct X sky-rocketed.  I think they sold a few copies of “Halo” as well, if that’s important.

Xbox One, take two

Over the last few years, Microsoft has seen strong increases in the US and global enterprise market, and has shown they are more than able to fend off powerful rivals such as Goggle and Apple in that space.  Unfortunately that’s the only space they are winning in.  Although they have yet to get to the point where they are losing market share in the consumer market at dangerous levels, just about everyone else is doing a much better job of getting a foot in the door, and over the last 2 years Sony has very successfully eroded their current console market share.  Because of this, China is both the Wild Wild West, and the land of opportunity.   With over 1.3 billion people already using knock off or pirated  Microsoft products ripe to be monetized and a market that is opening up to consoles for the first time in 14 years, it seems like the perfect opportunity to do more of the same; use the Xbox brand to sell the Microsoft brand, use the Microsoft brand to make money.  Given a head start of over a year, a contract with one of the most respected companies and China, and the fact that both major console competitors are Japanese** Microsoft looks like they are in an incredibly strong position to capture the market and it’s hard to say why we shouldn't take note of that.  After all, there are more gamers in China then there are PEOPLE in the USA, and that has to mean China will have a huge impact on the market moving forward.  Doesn't it?

What games?

There might be more gamers in China than anywhere else, but there is also a uniquely Chinese infrastructure at play.  The ban on consoles isn't doing anything to free up the ban on anything we here in the west would consider “a game”.  We all know by now that video games in China can’t have violence or drug use, but we often forget they (as well as all media in China) can’t feature ideologies that are not pro-china, can’t mention world events, can’t talk about themes that involve questioning the government, can’t mention religions other then Buddhism and Taoism*** ... and that’s just the big stuff.  Any published media needs to get by an “ethics” review, and that’s where things get subjective and subtle.  Maybe the map screen shows lines around Tibet.  Maybe you mention a date where something bad happened, and that needs to be changed.  Who knows.  Localization is a non-negotiable that you have no control over, and it’s obtusely corrupt to boot.   The games people play in China, therefore, are mostly casual and simple games on mobile platforms they already own.  Social games, like our “Second Life” are the most popular, as they allow people to interact from home in a society where going outside has heath risks, and personal interaction is riddled with class, ethnic, and  social stigma.  The idea that Microsoft is going to make money developing and selling traditional games is laughable, and predictably that’s not at all what they are looking to do.

Instead, they spent over a year working on content distribution and hosting agreements with one of China’s largest media outlets ... and that’s a big deal.  This will allow them to play on China's national and brand loyalty while taking a cut of everything that gets sold on their platform.  They will work on releasing casual MMOs, while repurposing games like Peggle to appeal to this market.  And while this isn't a core area of Microsoft’s focus, it’s important to note that by breaking down the huge barriers of entry to the China’s market as a publisher, they could easily set themselves up to be the  go-to console for indie and small developers looking for a breakout hit.  In addition, this puts them in a position to negotiate distribution of TV, Movie and Music to over a billion people for thousands of publishers who would otherwise be unable to get a foot in China’s door.  This could very well give them enormous power when it comes to distribution contracts in other markets.  But what’s that mean for the Xbox owner here in the West?

Number, numbers everywhere.

Any other year, any other console generation, this would seem far less important.  But with fanboy devotion at an all time high, news sites posting “click bate” to drive comments and traffic, and information and sales figures being tracked and published at an unprecedented rate, this story is perfect to fuel the flames of the “console wars”.  Let’s not beat around the bush; it has an effect on a landscape people really seem to care about.  If you look at the plan, for all effective purposes the Xbox One has overtaken the global sales title from PlayStation 4, as they have already signed an agreement to “sell to” 5 million consoles.  If you’re a Sony fanboy who has spent the last 4 months defining your worth as a person based on the sales gaps between the systems, I can see where this might be a problem.  If you’re an Xbox One fan boy waiting for a chance to “pounce” on your enemy, I can see why you would care.  The obvious rebuttal is that the sales don’t count until the system launches, or that “sell though” is all that matters, but I have some good (or bad) news for you.  First, your fanaticism is not based in reality, so you never have to worry about FACTS.  Second ... China's sales numbers are completely meaningless.  They won’t affect Xbox’s ability to lure developers to Xbox One, and won’t result in Xbox One getting any new games (and why else would sales figures matter?)

If you look at everything I've been talking about to this point, it seems very clear that what Microsoft is doing is trying to make the Xbox One the best possible tool for developers and publishers who were ALREADY interested in the Chinese market.  Microsoft has paid off the right people on the ethics committee and already has a deal for distribution, so if you are planning on making a game for China putting it on Xbox One can save you a world of hurt.  But we would have gotten these games anyways, and they wont spend any more money on development just because the craps shot that is China now has slightly better odds.  At the same time, any new game made for China to take advantage of the console itself will need to be so “Chinese” that it’s not going to be ported to the west ... “Super Chairman’s Communist adventures” tested poorly in the US market. The only way we would see a port is if the game had a big enough budget to support localization, which simply wont happen any time soon.   Given how fickle China’s government is no one is going to invest in an AAA game, because what happens when the ethics committee pulls the plug because Xi Jinping decides he doesn't like the color blue any more and it can't appear in media?

The Final Word

The Xbox One in China  is already a winner for Microsoft.  Even if it crashes and burns, the money was well spent in creating distribution partners and brand awareness in this very difficult space.  But win, lose, fail, success ... the opening of the Chinese console market is not going to have any impact on gamers outside of China for a long time.  There is nothing to see here, and we should all move along.

Did I miss anything?  What do YOU think about the Xbox One coming to China?  Let me know in the comments below!

*The Dreamcast used a optimized version of Windows CE which was fully Div X compatible.  It took over two years to develop, and this was a large factor in both the huge development cost of the system and it’s high sticker price, which ultimately lead to its downfall.

**Anti Japanese sentiment in China can’t be overstated.  Protests and rallies in support of rejecting everything Japanese still happen to this day, when you think they would have bigger problems to worry about.

***This is a resent change, and like all things China, hard to make a definitive statement about.  While China’s leadership is STRICTLY an atheist organisation they recognize religion as a strong pillar of a functioning society and have allowed the practice of the two religions mentioned, as well as Islam, Christianity, and Protestantism.  Actions by Xi Jinping starting in 2012 seem to be eliminating these 3 religions in favor of the “traditional” values of Buddhism and Taoism.

Against the Flow - April 2014

At the end of the month I like to take a look at what the industry is talking about and see where I'm going against the flow.  These are opinion that seem to be prevalent in the industry with both fans and insiders, but I just can't seem to get my head around, important questions that are not being asked, or opinions that seem to run counter to what everyone else is saying.

I can’t understand how the @ID parity clause is so misunderstood (or seen as a bad thing at all)

Read the following pitch and see if you can find any flaw with it

“Here is the deal; I’ll give you a free dev kit.  I will pay for your middleware.  I will provide free tech support for both.  I will wave all publishing fees.  Pretty good, ah?  This allows a small startup that can’t afford the risk of console publishing to develop a game virtually risk free, opening up that market to 100s of strong, innovative dev teams that would otherwise have to bank all their hopes on being noticed on page 97 of Steam's Green Light program.  It seems like it’s almost too good to be true that a major corporation would just give away free stuff … and it is.  There is small price to be paid; the game you are making, using support I am paying for on a system I am paying for which I am going to pay to list and publish needs to come out on my system.  I know, seems like a no brainer right?  Without that, given the ease at which you can port a game between next gen consoles and the PC, people could abuse the program by getting me to pay for them to develop a game for another system.  But I know … limiting your game to only one system takes away a huge market, so I won’t even do that.  All we want you to do is put it out on our system FIRST, or at the same time as any other systems.

I understand this might not be for everyone.  As such, this is a completely opt in program.  If you would rather go the traditional path and pay me for a dev kit and publishing like you would on any other console, that’s fine too.  In that case, you can come to my system whenever you want.  It’s completely up to you”

No?  Me nither.  But when Microsoft made that deal the WHOLE OF THE INTERNET freaked the hell out, and are still bringing up the “parity clause” as the reason behind game delays from major publishers, games that are already on PC not coming to Xbox, and for why the last Radio Head album sucked.  There is ignorance, and that’s OK.  Cecil from straight dope and I make it our mission to fight ignorance in all forms, so it keeps me going.  But then there is WILLFUL ignorance.  Just flat out ignoring the material you’re commenting on.  That has to stop.

I think minimalist and retro indie games on console are really not a big deal (and a rip off)

Indie has become a meaningless word, so it’s important to start with a definition.  An “Independent” game is a game without a publisher, which are generally considered freer to experiment because the developers don’t have to answer to a second party who is cutting the checks.  They are a pretty wonderful thing to be honest, and without them the industry would be in serious risk of stagnation.  But let’s not confuse indie games with low budget games, and confine what I’m saying to apply specifically to minimalist games (Tomas was Alone) or retro graphics games (Spelunky).  Both Sony and Microsoft have invested very heavily in this type of game, with MS confirming that 75 games are in development for the Xbox One and Sony porting just about every indie game ever made to the PS4 (and then some).  To fanboy’s it’s the best thing ever when a game comes to the system they define their life by, and a pointless waste of next gen tech when it goes to other guys ... and I hate to say it ... in this case, the fan boys are half right.

Let’s call a spade a spade; a console is a discounted PC with a better OS for gaming.  If you could buy a PC that didn't need manually driver updates, didn't crash, and played Titanfall at 1080p/30FPS for $400, we simply wouldn't need them.  I personally find a lot of advantages in console gaming, but the PC will always win on one important point; distribution.  You can buy PC games anywhere, from anyone.  Not only do you have steam sales, but you have steam sale re-sellers and the humble bundle to make sure that building a games catalog on PC is quick, easy, and inexpensive.  On the console side, you have a single distributor, and sales (when they come) are often gated behind a $60 a year subscription.  For triple A titles, it’s not that bad a deal; the extra money you have to pay to have a computer that runs them doesn't lead to any long term savings.  But what about indie games?

You already have a PC that can play Indie games, because you’re reading this.  Even if you’re reading it on your cell phone, then you likely have a cell phone that can play most indie games.  They are designed to be accessible by everyone (as they bank on volume sales) and don’t use assets that require a lot of horsepower.  This also makes them pretty stable; even on grandma’s computer with drivers from the 1990s and 14 different search bars, your indie game is going to run smoothly and not crash.  So at this point you have a choice ... you can buy indie games on PC for prices like 7 for $1 (Humble Bundle) or you can pay $14.99 for them on console.  I’ve heard the argument that “I don’t mind paying full price because I support the developer” ... and for that may I direct you to the Humble Store.  Where Sony and MS both take at least 30% of the sale price, Humble Store only takes 10%.  If you want to support your developers, you should be getting all your games there.  Or ... buy from the developer directly.  It takes a bit of leg work, but then they get 100% of the price (not to mention how much better off they would be if they didn't have to port it to console in the first place)

All and all, I know there are some valid reasons to play indie games on a console, but I think they are minor when compared to the huge cost saving of playing them on PC.  I’m always the advocate of perspective, and if Sony put out a Vita game that cost $1 but if you wanted to play it outside your house you had to pay $14 more, everyone would say that was stupid. Yet when game that is $1 on steam is $15 on vita, the same people say it’s worth $14 it to play it on a portable.

I really want to know what’s going on in Japan

5 months later, we seems to still talk about relative sales numbers like they mean something.  Fine, I can handle that ... fanaticism is a real thing we just have to deal with.  But can we please start talking about sales numbers as an absolute as well?  In particular, I don’t really have the time or money to hop on a plane and head to Japan to figure out what’s going on, and would very much appreciate it if a news organization could do that for me.

I was shocked when Sony told us they would be pushing back the launch of the PS4 in Japan, but I figured it was due to the obviously higher than expected pre-order numbers in the US and limited stock.  It’s not the nicest thing to do, but moving stock from the market you dominate to the market you want to dominate and have a real chance of doing so make sense.  And it worked!  The PS4 was a fantastic success and the bestselling home console of all time.

Imagine my shock then, when I learned that some of the biggest names of Japanese gaming development wanted nothing to do with it.  While Sony was bragging about 200+ developers making games for the PS4 the fact that none of them were Japanese went more or less unreported.  When Atlus said they had no games in development for PS4, Persona was going to be a PS3 exclusive, and NIS soft wasn't going to put out a PS4 game until 2016 ... again, it wasn't enough to take us away from the Xbox vs Sony troll wars.  What did it matter?  The PS4 wasn't even out in Japan, and given how much everyone loved it in the west, when it released there it would set records and everything would change!

Except that didn't even close to happen.  With only 560,000 units moved at the time of this writing* the PS4 is hardly a breakout hit.  Worse, it’s being consistently outsold by the Vita, a system that is rarely considered successful.  The most common argument you hear is that “it’s nothing ... the CRAZY Japanese are just slow up upgrade”, which like most things on the internet has no basis in fact.  The PS3 sold 615,000 units in the same time period at its launch despite the PS2 being nothing short of a religious symbol and the Wii U, universally accepted to be the bench mark of a failed console, outsold the PS4’s current total in its first month alone (with 633,000 units). The PS4 is tanking by the standards of its worldwide launch and, in retrospect, it looks like Sony and game developers knew it was going to happen.  Why didn't we?  If the Japanese game market has shifted so dramatically from the west, you would think this would be more important to write about then if a game is coming to the Xbox One in 720p.

It’s not just the PlayStation that is seeing disappointing sales.  We hear so much about Nintendo “slashing sales expectations” on the Wii U and the 3DS that it’s easy to overlook the fact that the 3DS is outselling its targets in NA and EU by a wide margin.  This means that not only is the 3DS missing sales projections in Japan, it’s missing them by so much that they even strong sales in other markets can't make up for it.  Game sales are also wonky, with the weekly top selling list reading like the barging bin of an anime convention.  Yokai Watch and Hatsune Miku-Project DIVA-F outsell Metal Gear and Final Fantasy.  DO NOT GOOGLE Hatsune Miku.  Trust me.

Rounding off the craziness, Microsoft announced a slew Japanese of game developers that will be supporting them with “launch window” titles for the Xbox one in September, including heavy weights like Atlus (the same Atlus, you may recall, that isn’t making games for the PS4) and level 5.  This, despite the fact that it’s a near certainty that it’s not going to have sales anywhere close to the PS4 or Wii U.  In fact the only positive thing I can say about the Xbox One’s chances in Japan is that it won’t sell worse than the 360, but only because that would require people to fly to the US, buy Xbox Ones, and RETURN THEM IN JAPAN on launch day.  So clearly these are US focused titles, for the US market … developed then ported to what used to be native Japan.  I don’t get it … and it bothers me that no one seems to want to know.  Speaking of far away places we know nothing about ...

I think China matters in a big way.  Just not to us.

This is already longer then I want it to be, and this topic is going to require a lot of context.  As such … it’s getting it’s own article!  Follow me or keep an eye out for this to come next week.

Edit: May 8th - This article is finished and you can find it here http://www.ign.com/blogs/headpirate/?p=278

Did I miss anything?  What did YOU notice this month that everyone else seemed to miss?  Let me know in the comments!

*This number is from an average of several different reporting sources and could be off by 50,000 or so in either direction.  Without paying for a full out NPD report, it’s the best I can do.