This Just In: We’re All Screwed, Maybe

Sebastian did note that some EA franchises have sold “fairly well this quarter, including Dead Space, FIFA 09, and Left 4 Dead, helping to offset some of the weaker performing franchises”, but he also expressed concern about the company’s release schedule going forward, “due in part to greater uncertainly over the long-term potential of the Rock Band franchise and the EA Casual label”.

Note that two of those”franchises” that are doing well are original titles, not installments in an existing franchise, while the 2 of the ones that are not doing well (racing and music titles) require extra peripherals (try playing Need For Speed without a racing wheel, I dare you), and the third (Mirror’s Edge) is a weird hybrid of Tomb Raider and an extreme skating title, and confusing and non-intuitive to play for most people.

EA has underperformers every year, and purges another class of burned out CS graduates every year. Their bigger problem is that a universally tanking stock market means they need to save up cash for executive compensation and franchise contract renewals, since stock options are worthless paper, new issues for financing the renewal of their sports licenses aren’t going to get subscribed (and will tank the price further), and big-ticket loan markets are going to be somewhat…unreliable, for a while yet.

As for Sony, they’ve got a lot going on besides games, the PS3 has turned out to be the loser of this generation, they’re still selling every unit at a loss and still the most expensive (and poorest selling) console. That limits their headroom on revenue from titles sold, especially since they’re having a hard time getting exclusives that might act as a hook for the console.

Also, the PS2 did so well in part because it was competitively priced with a simple DVD player, so you could get one as a DVD player that also played games. BluRay players are running half the price of a PS3, and are much better at playing upsampled standard DVD’s (Google returns 271,000 hits for “PS3 DVD playback issues”, and 4 million for “PS3 DVD problem”). The $5-15 premium for BluRay discs probably isn’t helping as the number of people with the 60+ inch screens and 7.1 channel sound systems that really gain from Blu-Ray is somewhat limited (my brother-in-law is one of them, we watched an entire movie in his $30K home theater man-cave, and he didn’t realize it was a standard upsampled DVD until he went to put the disk back in the case). All of that is offsetting their gain from being the last man standing in the HD disk format battle.

Meanwhile, their efforts to promote MemoryStick by making it the only format accepted by most of their portable digital electronics are tanking their marketshare there, and that’s been the big growth sector over the last few years. Sony-Ericsson phones continue to slide against the competition as they are perpetually a generation or two behind on features (they still don’t have a competitive media-phone, and their smartphone/internet appliance efforts are non-starters and no-shows).

Premium gaming, especially high-ticket packages like Rock Band or whole console systems, may take a hit as people get more price-conscious and less elastic with their entertainment budgets. But I don’t expect that to be a major hit for the industry overall, and I see no signs it’s having any negative effect on MMO’s at all (other than a general reluctance to invest in new projects that reflects an abundance of caution by investors in general).

You had a job and family in 1908? (I assume you mean 1980)

Anyway, people don’t cut entertainment out of their lives, and internet is at least as much of a “need” as phone service (actually, it can substitute for phone service), and you can use pre-paid/flat rate cell services like Virgin, Boost, or Cricket as needed, and it will be less for most people than land-line service.

I *did* have a job and a family in the 1980′s, actually. And what people want most in uncertain economic times is *predictability*. They don’t want to invest large amounts in frivolities (so console unit sales are going to take a hit, and if they try to roll out a new generation of consoles they are DOA), but they still need to be entertained. They just want to be able to budget for that entertainment and be sure they’ll get what they want.

This is going to be a very dark time for cable companies, because they are not price-competitive with satellite for TV service (you can equal or better channel lineups for half the price) or the phone companies for internet (and as fiber-to-the-home expands, they lose their quality advantage). But it should be very good for MMO’s, because people will be able to predict that for the cost of internet access and a predictable amount of cash per month, they can get a known quantity of entertainment value.

Not that there aren’t other perfectly valid business models to explore. But if you think recession means people will cut off the most predictable and lowest cost-per-hour entertainment option they enjoy, you don’t remember the 1980′s as much as you think.

It’s worth noting that for much of the population, this recession started years ago. Which goes a long way for explaining why the best selling console of this generation has been…the PS2. There have been more PS2′s sold since the launch of the PS3 than of any of the “current” generation consoles, and until SCE deliberately blocked the pipeline of new games the new PS2 titles were consistently outselling their current-generation equivalents.

No, I *don’t* know that D-0ne, in fact I would be surprised if they failed to grow. But there’s growth and there’s growth, they may fall off the 60% year over year we’ve been seeing since UO, and that may be because of the economy or just because we’ve entered the beginning of the plateau on market growth.

At an average cost per user of 20 cents per hour, the existing subscription model is a hell of a good deal for your entertainment dollar, a lot cheaper than bowling or neighborhood bars and other “third place” commercialized social settings. And a *lot* better than your typical single-player premium title ($50-60 for 100 hours or less of gameplay, although it comes off a bit better if you factor for the used games market).

The bleeding edge hardware game market is going to take its last blow, but it’s been non-economic for years, anyway. Digital distribution is probably going to have to cut prices in some way (downloadable expansion packs for episodic gameplay, with a new pack every 3-6 months at $10-20 a pop, looks promising). EA may be over-crowding the sports market all by itself, at least at $60 a unit for 2-6 franchises per sport, every year.

EA has been stock-focused for a very long time, and a bear market where people are fleeing to certainty and predictability is getting them dropped from the diversification plans. Since their entire business environment, philosophy, and culture are predicated on a rising stock price, they’re in for some pain, and they may not survive. Making less games, and less innovative games, and focusing on premium titles, is probably exactly the wrong thing for them to do, but it’s also the most natural reflex for them.