Next-Gen=Bad Business?

Razor05 · 08-10-2006, 01:25 PM

An interesting perspective...
As per TeamXbox:

Next-Gen=Bad Business?
By: Nate Ahearn - "NateDog"
August 9th, 2006

It’s the way it has always been in the gaming industry. A console launches to hordes of fans grappling to lay their hands on those monstrous boxes that house the latest and greatest video game systems in the land. For the next four years game after game is released, played, tossed into the trash then the process is repeated. As the console’s life rolls on games begin looking better than the initial efforts seen at launch, third and fourth generation games looking almost nothing like what the first games on the system presented to players. Then there are the inevitable price drops which help push the given system (or systems) deeper into the consumer market as sales charts almost assuredly spike at the news of a reduced price tag for the system that was once too expensive for Little Johnny. Simply put, it’s the way our industry has always been, and it’s likely the way it will always be.

But this generation is proving to be a beast of a different color, a monster of a different size, and it’s due largely in part to the two top dogs in the industry Sony and Microsoft and their new consoles, the Playstation 3 and Xbox 360 respectively.

Typically when companies launch new consoles they’re prepared to take some kind of a loss with every system that they move off of store shelves. What it comes down to is the fact that each console is sold for much less than the sum of its parts. But even still, the price tag that these companies have slapped on their new hardware gems could lead to less market saturation than any consoles that we’ve seen in quite some time. With the Xbox 360 retailing for 400 dollars, which will later increase to around 600 dollars if you want that HD-DVD add-on that Playstation 3 users get bundled with their system in the form of a Blu-ray player, that means that both systems will be flying off shelves at twice the price of their successors which were released in 2002 (Xbox) and 2000 (PS2) at an MSRP of $299.99.

What we’re getting down to here is the point of this article, the one undeniable fact that has remained absent from next-gen discussions until right now. That being that next-gen gaming is actually bad for business and just may very well be a plague on gaming itself.

It’s all in the numbers

So Microsoft is the first to enter into the next-generation. It has the lead that the company has been clamoring about for months now, they’ve beaten the PS3 to market just as Sony’s previous console was able to do when it launched. It’s interesting to note however that thanks to shortages in parts and manufacturing difficulties (remember the issues with chip yields?) that there has only been one month in the seven that the Xbox 360 has been available that the system has been able to outpace the Playstation 2 in terms of sales. Yes, it’s true that the number of Xbox 360 on store shelves was, and is, much less than that of Sony’s second console, but as Microsoft’s second system has entered its eighth month of existence it’s tough not to think that it’s nothing more than a monetary issue. And as we all know it’s money that makes the world go round.

With the Playstation 2 currently retailing for a paltry $129 (which means you can buy three PS2s for the price of an Xbox 360) it’s easy to understand how the common consumer would choose the proven label of PS2 over the relatively unproven Xbox 360 with its much smaller library of games, and news of faulty systems flooding cable news networks. So why not simply lower the price of the 360 to move a few more consoles and increase market share in order to build up as large a force of Xbox 360 users as possible until the PS3 drops later this holiday season? Now we’ve arrived at the catch 22 that manufacturers must deal with when deciding on prices for their systems. They want their respective system in as many homes as possible, but with the huge monetary loss that each company takes when they actually do sell a system they would almost certainly be sent into the red if they dropped the number on the price tag any further. And with the technology that they’re now packing into these little boxes it’s understandable for companies to want to make as much money as they possibly can on every system that moves off of shelves.
Taking a look at history however this actually doesn’t differ very much from how things have been in the past for the most part. There have always been shortages when systems launch, and the cost of the parts of the system have always exceeded the cost of the parts within the console. In other words entering into the “next-generation” of gaming has always been bad business as far as numbers go, but where this latest onslaught of consoles is making an even greater misstep is in the effect that they’re having on game creators.

Stifled creativity

As we all know the Playstation 3 and Xbox 360 are the first systems to feature multi-core architecture, and are also the first to operate natively in high-definition. What those two factors amount to is skyrocketing development costs for the latest and greatest in gaming. Even the smallest of titles are now garnering millions of dollars for a development budget, when back in the day it took a handful of guys in a stuffy office somewhere in Indiana to churn out a million-seller. But how does that affect your gaming experience? How is it bad for you, the gamer?

Well for starters it’s unlikely that we’ll see any true chances taken by marquee publishers, at least not until the Xbox 360 and PS3 have been given awhile to work their way into the mainstream. By chances we mean true gameplay innovation. Something that comes along and really turns the gaming world on its head. Publishers are less likely to pump millions and millions of dollars into an unproven idea, an idea that could wind up flopping if it doesn’t perform well in terms of sales and thus could reflect poorly on the company’s financial standing. And as we all know, it’s all about the bottom line. So for now we’ll just have to be content with common gameplay conventions and mechanics that we’ve all seen before. Does that sound like next-gaming to you?

Another casualty brought on by heightened development costs is third-party exclusives. I suppose it all started with Grand Theft Auto IV making its way to the Xbox 360 on day one, but we expect the trend of third-party games being released across both the PS3 and the Xbox 360 to continue for as long as the systems remain on the market. It’s simply too expensive to develop a game that will be reaping in the dough based on how it performs for a single system. In order to maximize profits and to have the greatest chance of making back the millions of dollars spent in development companies are going to be forced to make their games multi-platform, whether they were originally meant to be or not.

If you can believe it this also affects Microsoft a considerable amount. Think about it. Why do people by an Xbox 360 instead of a PS3? Sure, it might be the hardware, maybe it’s the ergonomic look of the console, but what it really comes down to is the games. In order for a system to differentiate itself from the crowd it’s got to have games that you can only find on that system. That means exclusives, and as we just said they’ll likely no longer be coming from third parties which equates to heightened pressure on the Big M. Games like Gears of War and Mass Effect will now be expected to carry even more of the load, sell even more systems than they would have in years prior. Luckily that means that there’s even greater incentives for Microsoft to make those games the absolute best that they can be.

Is the Wii the answer?

If you haven’t noticed we’ve made absolutely no reference to Nintendo’s upcoming next-gen console, the Wii. The reason? Simply because the Wii is setting itself completely apart from the field by offering, what is essentially, a slightly beefed up GameCube (think of it as a GameCube 1.5 as far as hardware capabilities). The real selling point won’t be some fancy new graphics processor, nor will be a truckload of RAM tossed into the machine, but instead will be the new play mechanics that are allowed by the Wii-mote; the first party peripheral that will be the driving force behind enjoying Nintendo’s new system.

This affects Nintendo’s business plan in one huge way. For the first time in a great while, a company will be taking little to no loss by selling a system in stores. Because of the relative simplicity of the hardware and the lack of high-definition support the systems are manufactured at a much lower cost than the Xbox 360 or PS3. All of that budget-minded thinking and it will still deliver a next-generation gameplay experience through the use of the Wii-mote and the multitude of different uses that developers will surely be able to find for Nintendo’s funky new controller.

But thinks may not be quite as bright for Nintendo’s new console from a business stand point as you might think; at least as far as developers are concerned. Remember how we were saying that developers are going to have to release their games across multiple platforms in order to make some decent cake? Well, thanks to the Wii game makers are now going to have devote (which means employ) a whole separate development team to work with the funktified controller and the applications they can find for it within their game. Granted the fact that they’re developing games in lower resolutions on a single core system, but it would be much less of a headache to make a simple port as they’ve done in the past.

And the winner will be…

So who’s the winner going to be in this generation? Well, as always, it’ll wind up being the consumers who are the real winners. Companies are going to have to joust for position, both from a price tag standpoint and from a game standpoint. Maybe we’ll wind up seeing more exclusive deals between big-name publishers and the big three of gaming, or perhaps we’ll see significant price cuts in the near future to bring their next-generation product to the masses. This coming generation is going to be prove to be a very high stakes game for the two companies who have chosen to take part in the push towards hi-def gaming. Now, more than ever, it’s important to choose your side wisely, you never know who will come out on top in the end.

ViperVenom18 · 08-10-2006, 06:02 PM

Just making a big deal out of nothing... The last sentences says the stupidity already: choose your side wisely?

It doesn't matter which system sells more. They all sell, and will sell good, so its just a matter of what games you like to play on whatever system. Did I get screwed last gen becuase I liked my xbox and gamecube more than my ps2, but the ps2 was of course the "winner" in sales? Absolutely not, and who cares?

It's of course fun to wonder, but articles like this are just to put words out there for people to read when it really doesn't matter one bit.

MrRadman11 · 08-11-2006, 01:21 AM

Yeah I like my XBOX alot more than my gamecube and PS2, too.

08-10-2006, 01:25 PM	#1
Razor05 HD = 65 beautiful inches Join Date: Jun 2005 Location: Canada Posts: 3,296	Next-Gen=Bad Business? An interesting perspective... As per TeamXbox: Next-Gen=Bad Business? By: Nate Ahearn - "NateDog" August 9th, 2006 It’s the way it has always been in the gaming industry. A console launches to hordes of fans grappling to lay their hands on those monstrous boxes that house the latest and greatest video game systems in the land. For the next four years game after game is released, played, tossed into the trash then the process is repeated. As the console’s life rolls on games begin looking better than the initial efforts seen at launch, third and fourth generation games looking almost nothing like what the first games on the system presented to players. Then there are the inevitable price drops which help push the given system (or systems) deeper into the consumer market as sales charts almost assuredly spike at the news of a reduced price tag for the system that was once too expensive for Little Johnny. Simply put, it’s the way our industry has always been, and it’s likely the way it will always be. But this generation is proving to be a beast of a different color, a monster of a different size, and it’s due largely in part to the two top dogs in the industry Sony and Microsoft and their new consoles, the Playstation 3 and Xbox 360 respectively. Typically when companies launch new consoles they’re prepared to take some kind of a loss with every system that they move off of store shelves. What it comes down to is the fact that each console is sold for much less than the sum of its parts. But even still, the price tag that these companies have slapped on their new hardware gems could lead to less market saturation than any consoles that we’ve seen in quite some time. With the Xbox 360 retailing for 400 dollars, which will later increase to around 600 dollars if you want that HD-DVD add-on that Playstation 3 users get bundled with their system in the form of a Blu-ray player, that means that both systems will be flying off shelves at twice the price of their successors which were released in 2002 (Xbox) and 2000 (PS2) at an MSRP of $299.99. What we’re getting down to here is the point of this article, the one undeniable fact that has remained absent from next-gen discussions until right now. That being that next-gen gaming is actually bad for business and just may very well be a plague on gaming itself. It’s all in the numbers So Microsoft is the first to enter into the next-generation. It has the lead that the company has been clamoring about for months now, they’ve beaten the PS3 to market just as Sony’s previous console was able to do when it launched. It’s interesting to note however that thanks to shortages in parts and manufacturing difficulties (remember the issues with chip yields?) that there has only been one month in the seven that the Xbox 360 has been available that the system has been able to outpace the Playstation 2 in terms of sales. Yes, it’s true that the number of Xbox 360 on store shelves was, and is, much less than that of Sony’s second console, but as Microsoft’s second system has entered its eighth month of existence it’s tough not to think that it’s nothing more than a monetary issue. And as we all know it’s money that makes the world go round. With the Playstation 2 currently retailing for a paltry $129 (which means you can buy three PS2s for the price of an Xbox 360) it’s easy to understand how the common consumer would choose the proven label of PS2 over the relatively unproven Xbox 360 with its much smaller library of games, and news of faulty systems flooding cable news networks. So why not simply lower the price of the 360 to move a few more consoles and increase market share in order to build up as large a force of Xbox 360 users as possible until the PS3 drops later this holiday season? Now we’ve arrived at the catch 22 that manufacturers must deal with when deciding on prices for their systems. They want their respective system in as many homes as possible, but with the huge monetary loss that each company takes when they actually do sell a system they would almost certainly be sent into the red if they dropped the number on the price tag any further. And with the technology that they’re now packing into these little boxes it’s understandable for companies to want to make as much money as they possibly can on every system that moves off of shelves. Taking a look at history however this actually doesn’t differ very much from how things have been in the past for the most part. There have always been shortages when systems launch, and the cost of the parts of the system have always exceeded the cost of the parts within the console. In other words entering into the “next-generation” of gaming has always been bad business as far as numbers go, but where this latest onslaught of consoles is making an even greater misstep is in the effect that they’re having on game creators. Stifled creativity As we all know the Playstation 3 and Xbox 360 are the first systems to feature multi-core architecture, and are also the first to operate natively in high-definition. What those two factors amount to is skyrocketing development costs for the latest and greatest in gaming. Even the smallest of titles are now garnering millions of dollars for a development budget, when back in the day it took a handful of guys in a stuffy office somewhere in Indiana to churn out a million-seller. But how does that affect your gaming experience? How is it bad for you, the gamer? Well for starters it’s unlikely that we’ll see any true chances taken by marquee publishers, at least not until the Xbox 360 and PS3 have been given awhile to work their way into the mainstream. By chances we mean true gameplay innovation. Something that comes along and really turns the gaming world on its head. Publishers are less likely to pump millions and millions of dollars into an unproven idea, an idea that could wind up flopping if it doesn’t perform well in terms of sales and thus could reflect poorly on the company’s financial standing. And as we all know, it’s all about the bottom line. So for now we’ll just have to be content with common gameplay conventions and mechanics that we’ve all seen before. Does that sound like next-gaming to you? Another casualty brought on by heightened development costs is third-party exclusives. I suppose it all started with Grand Theft Auto IV making its way to the Xbox 360 on day one, but we expect the trend of third-party games being released across both the PS3 and the Xbox 360 to continue for as long as the systems remain on the market. It’s simply too expensive to develop a game that will be reaping in the dough based on how it performs for a single system. In order to maximize profits and to have the greatest chance of making back the millions of dollars spent in development companies are going to be forced to make their games multi-platform, whether they were originally meant to be or not. If you can believe it this also affects Microsoft a considerable amount. Think about it. Why do people by an Xbox 360 instead of a PS3? Sure, it might be the hardware, maybe it’s the ergonomic look of the console, but what it really comes down to is the games. In order for a system to differentiate itself from the crowd it’s got to have games that you can only find on that system. That means exclusives, and as we just said they’ll likely no longer be coming from third parties which equates to heightened pressure on the Big M. Games like Gears of War and Mass Effect will now be expected to carry even more of the load, sell even more systems than they would have in years prior. Luckily that means that there’s even greater incentives for Microsoft to make those games the absolute best that they can be. Is the Wii the answer? If you haven’t noticed we’ve made absolutely no reference to Nintendo’s upcoming next-gen console, the Wii. The reason? Simply because the Wii is setting itself completely apart from the field by offering, what is essentially, a slightly beefed up GameCube (think of it as a GameCube 1.5 as far as hardware capabilities). The real selling point won’t be some fancy new graphics processor, nor will be a truckload of RAM tossed into the machine, but instead will be the new play mechanics that are allowed by the Wii-mote; the first party peripheral that will be the driving force behind enjoying Nintendo’s new system. This affects Nintendo’s business plan in one huge way. For the first time in a great while, a company will be taking little to no loss by selling a system in stores. Because of the relative simplicity of the hardware and the lack of high-definition support the systems are manufactured at a much lower cost than the Xbox 360 or PS3. All of that budget-minded thinking and it will still deliver a next-generation gameplay experience through the use of the Wii-mote and the multitude of different uses that developers will surely be able to find for Nintendo’s funky new controller. But thinks may not be quite as bright for Nintendo’s new console from a business stand point as you might think; at least as far as developers are concerned. Remember how we were saying that developers are going to have to release their games across multiple platforms in order to make some decent cake? Well, thanks to the Wii game makers are now going to have devote (which means employ) a whole separate development team to work with the funktified controller and the applications they can find for it within their game. Granted the fact that they’re developing games in lower resolutions on a single core system, but it would be much less of a headache to make a simple port as they’ve done in the past. And the winner will be… So who’s the winner going to be in this generation? Well, as always, it’ll wind up being the consumers who are the real winners. Companies are going to have to joust for position, both from a price tag standpoint and from a game standpoint. Maybe we’ll wind up seeing more exclusive deals between big-name publishers and the big three of gaming, or perhaps we’ll see significant price cuts in the near future to bring their next-generation product to the masses. This coming generation is going to be prove to be a very high stakes game for the two companies who have chosen to take part in the push towards hi-def gaming. Now, more than ever, it’s important to choose your side wisely, you never know who will come out on top in the end. __________________ Panasonic TH-65PZ850U Sony KDL37XBR6 Panasonic TH-37PX50U Cambridge Audio Azur 640R & 740C Paradigm Studio 60's, 20's, CC-590 & Seismic 12 Panasonic DMP-BD35 Toshiba HD-XA2 & A35 Motorola VIP1200 Monster HTFS1000, PB2100 AA 1154a MW2 LE Xbox 360 & Halo3 LE + HD-DVD GT: Razor59 Sony PS3 slim GT:Razor_59 Sony PSP

08-10-2006, 06:02 PM	#2
ViperVenom18 High Definition is the definition of life. Join Date: Feb 2006 Posts: 641	Just making a big deal out of nothing... The last sentences says the stupidity already: choose your side wisely? It doesn't matter which system sells more. They all sell, and will sell good, so its just a matter of what games you like to play on whatever system. Did I get screwed last gen becuase I liked my xbox and gamecube more than my ps2, but the ps2 was of course the "winner" in sales? Absolutely not, and who cares? It's of course fun to wonder, but articles like this are just to put words out there for people to read when it really doesn't matter one bit.

08-11-2006, 01:21 AM	#3
MrRadman11 Hmmm... Join Date: Aug 2005 Age: 23 Posts: 473	Yeah I like my XBOX alot more than my gamecube and PS2, too.