Mainstreaming Piracy

I’m not a piracy absolutist.  There was a period in the early part of the millenium when I was actually starting to think that it was becoming mainstream enough that it would actually begin to hurt the music industry (I don’t think gaming is quite there yet).  And so I understand counter-piracy measures that don’t severely and adversely impact law-abiding gamers.

Apropos of this, Mark Methenitis of Joystiq’s Law of the Game proposes that the game industry consider a variant on the RIAA’s strategy of using ISPs as their deputized policemen.  But I’ll be honest, allowing your ISP to determine whether or not you’re a pirate (IP address enforcement being a fairly unreliable methodology) seems like a lousy idea that will hurt pretty much everyone without doing much to deter piracy.  As Methenitis notes, probably a bigger concern is international piracy trafficking in hard copies of software. 

I bring this up because it seems to me that the biggest danger of piracy is in the attitude of countries towards it.  On the average college campus, students know that piracy is “wrong” but for a variety of reasons do it anyway.  But when I was in China, my Chinese counterparts saw absolutely no problem with stopping into a shop for a bootleg movie or PS2 disc.  And perhaps because of this, at least to some extent, the black market is actually a viable competitor to the real gaming industry… not a simple annoyance.  When these attitudes let piracy flourish to this extent, I start thinking that there may be a real problem for companies in that environment.  Perhaps some of the enormous sums of money now devoted to anti-piracy efforts could start working on developing more long-term strategies for these countries, like concrete notions of property rights; they may ultimately have more impact on gaming’s viability.

Video Game Theodicy

Leigh Alexander of Sexy Videogameland asks why bad things happen to good companies, or more specifically, why EA’s strategy of diversifying into more creatively risky properties hasn’t paid off.  I’m as sorry as she is that EA may shy away from this strategy in light of damaging blows to its stock performance.  But let me suggest that EA (and possibly we) may be drawing the easier, but more likely incorrect, lessons from this scenario.

Let me begin by challenging the basic premise of Alexander’s post: “A kinder, more creative EA does not make money.”

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Music Of The Spheres

Fascinating article on the newly lucrative career possibilities of video game scoring.  I rarely listen to the music playing in my games, but sometimes it can be quite effective.  I was a little sorry to see that many composers fail to take this seriously - sometimes they play for only seconds to compose a section’s music, leading me to believe that they may be taking advantage of people who are not musically inclined to begin with and who don’t have a clear vision for where their game’s mood needs to go (a gaming nouveau riche?).  Watching special features on Wall-E, I was surprised to see how involved Andrew Stanton was in the musical direction. 

Fallout and Bioshock get it right, though.

Cult Of The CEO

I’m of the firm belief that CEOs get too much credit when things go right and too much blame when they go wrong.  Hence my surprise that Bobby Kotick of Activision has recently been nominated for CEO of the Year by Marketwatch.

His accomplishments?  As far as I can tell, they’re threefold: Activision increased its revenues by nearly double as a result of its merger with Blizzard; second, he’s more profitable than EA; and third, his stock is only down 21% instead of EA’s 67% or the S&P’s 42%. 

These aren’t all that impressive.  With respect to the first, acquisitions are hardly winners in and of themselves.  I saw a statistic once that about 2/3 of mergers fail, for cultural or business or related reasons.  More to the point, there’s a well-known saw in business that points out that simply combining two companies to make a bigger company doesn’t actually make them more valuable than the two companies might be by themselves - and in some cases, might even destroy value (look at the companies that EA bought and then ran into the ground).  So why this acquisition is particularly impressive is neither stated nor, I imagine, considered.

For the second, this is fine, but is it sustainable?  Kotick infamously told investors that he was out to “exploit” Activision’s franchises for maximum profitability.  This makes sense to drive short-term profits but limits long-term potential when gamers get tired of the same franchises reiterated infinitely.  The jury’s still out on this - but I hardly see this as a clear-cut win, either.

Finally, the stock issue strikes me as damning him with faint praise.  Kotick has only lost 1/5 of his shareholders’ money instead of the 2/5 that the market as a whole has dropped.  I can see them partying in the streets now.  I can’t imagine there isn’t a single company out there that hasn’t actually made some money for its shareholders, which seems in and of itself to be superior to Activision’s share performance. 

Ultimately, Marketwatch’s list reflects an incredibly short-term view of shareholder value, and of CEO prowess.  It defines the good almost exclusively in the short term (which can create extremely skewed incentives at the executive level) and attributes everything now defined as good to Kotick as CEO rather than considering other alternatives.  History is littered with successful executives who have run companies into the ground.  Kotick may very well be competent - or even exceptional - but you wouldn’t know if from this nomination.

Weekly Column - 11/23/08

Whenever I have 86 unread messages in my inbox, I know the latest column has gone up.  Unsurprisingly, the RROD has drawn considerable commiseration.

Grayish Friday

Despite news that retailers are praying for the biggest Black Friday to date, and discounting accordingly, I actually haven’t been too impressed by the bargains to be found.  Lots of products have already been discounted over the past year or so, but I’ve had a tough time finding anything that would be even remotely close to getting me out of bed at 5 am.  (Last year it was a Wii.)  As a result, I’m going to predict disappointing results - at least, in absolute terms, not relative to already cratering expectations.

As soon as Apple starts giving more than $10 discounts on iPods, I might actually consider getting one.

Always The Stick, Never The Carrot

Why game industry personalities feel compelled to speculate in public about things that can cause only blind rage in the larger gaming populace is something that defies most rational explanation.  Is it ignorance?  A trial balloon?  Confusion about the inner workings of the internet?  Epic President Mike Capps serves up this week’s helping of disaster with the bizarre idea that developers might charge separately for portions of their games to fight secondhand game resales.

Reasons this is a bad idea, off the top of my head: people resent being told what to do with what they consider their property; they don’t understand why developers consider it their “right” to take portions of it; they like to share with their friends; and many people only buy resold games and wouldn’t purchase the retail version at full price to begin with.

A modest proposal: why don’t developers enter the resale market?  Offer gamers the option to sell their games back to you instead of their neighborhood Gamestop.  You could potentially offer a lower price point, or even a higher one if you’re willing to create a “preferred gamer” loyalty program, with future game discounts, preferential news, gaming DLC, or what have you for those who sell their games back to you.  That way, gamers think you actually value them and are willing to reward them for their loyalty, instead of punishing them for doing what they feel they’re entitled to do in the first place. 

I have no idea if this is feasible, or if there are better alternatives.  But it seems like there’s plenty of room for win-win solutions here that don’t involve alienating your major customer base.

Creativity and Film

Valve’s Gabe Newell is interviewed here by Earthworm Jim creator Dave Perry on what it takes to become a successful entrant into the gaming industry with a developer.  I’m grossly underqualified to comment on any of the practical advice, but I thought one comment in particular deserved attention.

Newell:

Specialization and hierarchy are the norms in film production, and are antithetical to what needs to happen in the games industry. The reason for that distinction is that the game industry is more focused on invention than on repeatability/measurability. Programmers that can draw are going to be in much better shape than an animator specializing in putting talking mouths on cats. The solutions of tomorrow are not going to fall into the production or organizational categories of today. 

This may be true for a very specific sub-set of developers, but it’s not clear to me that this is generalizable to, well, most companies.

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An Interesting Season

As Penny Arcade so artfully notes, this is indeed a rough month or so for gamers - albeit in a good way.  One odd question, though: it seems like the “holiday season” gets earlier and earlier each and every year.  Normally, we might expect the biggest titles to begin coming out a little after Thanksgiving, in time for the Christmas/Chanukah gift-giving extravaganza.

But each year, it seems like this time window pulls back bit by bit.  One possible explanation for this might be simply rational behavior on the part of game companies: if you expect your competitors to go to the market in mid-December, you’ll avoid competing as directly if you try to make your own game reach its audience a little earlier.  Of course, everyone has the same thought, so the end result is simply to push the crunch slightly earlier in the year rather than actually alleviating it. 

At the same time, this strategy only really makes sense if you think your title doesn’t have a clear likelihood of success.  If you think it can outcompete the other products, you’ll happily throw it up against the competition, and you’ll do so as early as possible.  Committing publicly (and irrevocably) to move close to a given date means that your competitors can see how serious you are, realize that they aren’t likely to outsell you, and move their dates up or back.  You win by default.  To the extent that this doesn’t happen, I can only assume that the risks - of being able to make the designated ship date, of knowing whether or not your property is so clearly stronger than the competition - are just too unknowable or quantifiable enough to justify acting on.

But let me suggest a drastic alternative.  I’ve often complained about the rush to publish in the winter holidays at the expense of barren spring or summer months.  This clearly has negative financial impacts - people can only buy so many games at once and so even a period that results in a lot of sales for a few titles consigns many more to the loser pile.  But the rest of the calendar carries enough extra empty space that it could presumably do just fine if people pushed their ship dates ahead or behind by several months rather than weeks. 

It also makes less and less sense to push things back the earlier it goes.  At some point, you’re so far removed from the holiday period that it no longer pays to keep moving the dates.  Can we consider this as a possibility next year?

For What Doth It Profit A Man…

How EA can expand its sales by 20% YoY this quarter and still lose $300M is sort of beyond me - not in the theoretical sense, but in the practical one.  Spore, Madden, Warhammer, Rock Band, Burnout: all of these were highly successful by any stretch of the imagination, and yet the company still can’t turn a profit off of their success (and the same with the previous quarter).

The workforce reduction of 6% is, presumably a start in this direction, but I can’t imagine shareholders are too pleased with John Riccitiello at the moment.