The European way to think the Digital World
www.idate.org
Video games:
NextGen gaming is on its way!
Laurent MICHAUD Carole MANERO Mathieu MASSOT Laurence MEYER M23304 - 2004
IDATE – BP4167 – 34092 Montpellier cedex 5 – Tel : +33(0)467 144 444 – Fax : +33(0)467 144 400 – info@idate.fr
Copyright IDATE 2005, BP 4167, 34092 Montpellier Cedex 5, France Tous droits réservés – Toute reproduction, stockage ou diffusion, même partiel et par tous moyens, y compris électroniques, ne peut être effectué sans agreement écrit préalable de IDATE. ISBN: 2-84822-040-6 All rights reserved. None of the contents of this publication may be reproduced, stored in a retrieval system or transmitted in any form, including electronically, without the prior written permission of IDATE.
Video games : nextgen gaming is on its way!!
Table of contents
Executive summary............................................................................................................................... 9 1. The console wars ........................................................................................................................... 15 1.1. Home consoles: heading for the next generation! ................................................................. 15 1.1.1. Battle of the 3 giants .................................................................................................... 15 1.1.2. Sony wins the 128-bit home console battle ................................................................. 22 1.1.3. Scheduled release of nextgen consoles...................................................................... 24 1.2. Handheld consoles: the end of a monopoly........................................................................... 26 1.3. Video games and TV.............................................................................................................. 33 1.3.1. Hollywood cosying up to the video games industry?................................................... 33 1.3.2. TV programmes devoted to video games.................................................................... 34 1.3.3. Interactive TV programmes dedicated to gaming........................................................ 35 2. Publishers’ challenge: negotiating the sector’s globalisation .................................................. 41 2.1. All grown up! .......................................................................................................................... 41 2.1.1. Electronic Arts, enjoying the lion’s share..................................................................... 41 2.1.2. Development strategy.................................................................................................. 44 2.1.3. Editorial strategy .......................................................................................................... 45 2.1.4. The next technological turn.......................................................................................... 46 2.1.5. The sector’s concentration........................................................................................... 47 2.1.6. Development of online operations ............................................................................... 51 2.1.7. Developing mobile handset operations ....................................................................... 52 2.2. Strategic analysis of the world’s top 15 publishers ................................................................ 54 Activision ............................................................................................................................... 54 Bandai ................................................................................................................................... 60 Capcom ................................................................................................................................. 65 Electronic Arts ....................................................................................................................... 71 Infogrames Entertainment/Atari ............................................................................................ 80 Konami .................................................................................................................................. 89 Microsoft................................................................................................................................ 95 Nintendo .............................................................................................................................. 100 Sega Corporation ................................................................................................................ 106 Sony Corporation ................................................................................................................ 113 Square Enix Co ................................................................................................................... 121 Take-Two Interactive Software ........................................................................................... 128 THQ..................................................................................................................................... 136 Ubi Soft Entertainment ........................................................................................................ 144 Vivendi Universal Games.................................................................................................... 153 3. Year One for mobile gaming ....................................................................................................... 159 3.1. Personal Digital Assistants (PDA) and Smartphones .......................................................... 159 3.2. Hybrid mobiles ..................................................................................................................... 166 3.3. Upgraded classic mobiles .................................................................................................... 168 3.4. The mobile gaming market................................................................................................... 173 3.5. A selection of market evaluations ........................................................................................ 174 3.6. Underlying hypotheses......................................................................................................... 174
2004 edition
© IDATE
3
Video games: NextGen gaming on its way!
3.7.
3.8.
3.9.
Mobile games: typology ....................................................................................................... 176 3.7.1. Single player mobile games....................................................................................... 176 3.7.2. Multiplayer mobile games .......................................................................................... 177 The value chain.................................................................................................................... 178 3.8.1. Copyright holders....................................................................................................... 179 3.8.2. Platform providers and mobile game publishers ....................................................... 182 Leading players.................................................................................................................... 183 3.9.1. Incumbent video game publishers ............................................................................. 183 3.9.2. Other mobile gaming publishers ................................................................................ 187
4. Online gaming: current state & future prospects ..................................................................... 199 4.1. Web-based games ............................................................................................................... 199 4.1.1. GSP ........................................................................................................................... 201 4.1.2. Massively multiplayer games: allure or a lure?.......................................................... 206 4.1.3. International tournaments: both spectacle & electronic sport.................................... 215 5. Market forecasts........................................................................................................................... 219 5.1. Console market estimates: equipment and software........................................................... 219 5.1.1. Home console market estimates ............................................................................... 219 5.1.2. Handheld console market estimates.......................................................................... 224 5.2. Estimates for the PC game market ...................................................................................... 225 5.3. Estimates for the video game market, worldwide ................................................................ 226 6. Framework data: equipment and markets ................................................................................. 231 6.1.1. Germany .................................................................................................................... 231 6.1.2. South Korea ............................................................................................................... 235 6.1.3. Spain & Portugal ........................................................................................................ 238 6.1.4. France........................................................................................................................ 242 6.1.5. Italy ............................................................................................................................ 247 6.1.6. Japan ......................................................................................................................... 251 6.1.7. The United Kingdom .................................................................................................. 255 6.1.8. The United States ...................................................................................................... 260 7. Survey............................................................................................................................................ 267 7.1. French gamers’ profile ......................................................................................................... 267 7.1.1. Socio-economic factors ............................................................................................. 268 7.1.2. Time spent gaming .................................................................................................... 273 7.1.3. Gamers and the internet ............................................................................................ 281 7.2. Profile of North American gamers........................................................................................ 284
4
© IDATE
2004 edition
Video games : nextgen gaming is on its way!!
Table of figures
Table 1: Estimated worth of the video game market, worldwide 2003-2008 (million EUR) .................. 10 Table 2: Breakdown of the 128-bit console base on 31/12/2003.......................................................... 10 Table 3: Number of massively multiplayer game subscriptions worldwide ........................................... 13 Table 4: Xbox sales worldwide as of 31/12/2003.................................................................................. 15 Tableau 5: GameCube sales worldwide as of 31/03/2003.................................................................... 17 Table 6: PS2 sales worldwide as of 31/12/2003 ................................................................................... 18 Table 7: The Phantom ........................................................................................................................... 21 Table 8: Breakdown of the worldwide base of 128-bit consoles as of 31/12/2003 ............................... 22 Table 9: Evolution of console prices in Europe, 2000-23003................................................................ 23 Table 10: Price of consoles in Japan in 2003........................................................................................ 24 Tableau 11: Number of Nintendo handhelds sold worldwide as of 31/03/2003.................................... 28 Table 12: Leading digital TV platforms around the world which offer interactive TV games ................ 35 Table 13: World’s leading interactive TV game publishers ................................................................... 37 Table 14: Leading iTV game developers in the UK............................................................................... 39 Table 15: World’s top 20 video game publishers, 2002-2003 ............................................................... 42 Table 16: World’s top third party publishers, fiscal 2002-2003 ............................................................. 43 Table 17: Evolution of pre-production & development schedules ......................................................... 44 Table 18: Effect of technological shifts on production teams ................................................................ 45 Table 19: Effect of technological shifts on development budgets (K EUR)........................................... 45 Table 20: Principal acquisitions in the video game industry since 2001 ............................................... 48 Table 21: Principal mergers in the video game industry since 2001..................................................... 49 Table 22: Principal business closures in the video game industry since 2001 ..................................... 49 Table 23: Principal start-ups in the video game industry since 2001.................................................... 51 Table 24: Massively multiplayer games marketed by SOE................................................................. 120 Table 25: Summary of the mobile data services marketed by Japan’s three operators ..................... 173 Table 26: Comparison of market forecasts for 2006, published by a selection of market research firms (billion USD) ................................................................................................................................ 174 Table 27: Comparison of market forecasts for 2003, published by a selection of market research firms (billion USD) ................................................................................................................................ 174 Table 28: Selection of partnership agreements between game publishers/content providers and mobile telephony players ........................................................................................................................ 180 Table 29: Selection of mobile game publishers and platform providers ............................................. 182 Table 30: Selection mobile game publishers and platform providers, from the video game or PC world ..................................................................................................................................................... 183 Table 31: Selection of content providers ............................................................................................. 183 Table 32: Incumbent mobile game publishers..................................................................................... 184 Table 33: Other publishers and providers of mobile gaming platforms............................................... 197 Table 34: Services offered by GSPs ................................................................................................... 201 Table 35: Number of subscriptions to persistent universe massively multiplayer games................... 208 Table 36: Massively multiplayer titles.................................................................................................. 215 Table 37: Estimated home console base 2003-2008 (32-64-128 bit-Next Generation) .................... 219 Table 38: Estimated home console sales 2003-2008 (million units).................................................. 220 Table 39: Estimated home console sales turnover 2003-2008 (million EUR)..................................... 220 Table 40: Estimated home console gaming software sales 2003-2008 (million EUR) ....................... 222 Table 41: Estimates for the home console market: software + equipment 2003-2008 (million EUR) 224
2004 edition
© IDATE
5
Video games: NextGen gaming on its way!
Table 42: Estimates for the entire handheld console market: software + equipment 2003-2008 (million EUR)............................................................................................................................................ 224 Table 42: Estimated PC gaming software sales 2003-2008 (million EUR)......................................... 225 Table 43: Estimated gaming software sales(home consoles + PC) 2003-2008 (million EUR) ........... 225 Table 44: Estimates for Europe’s video game market 2003-2008 (million EUR)................................ 226 Table 45: Estimates for Japan’s video game market 2003-2008 (million EUR).................................. 227 Table 46: Estimates for the US video game market 2003-2008 (million EUR) ................................... 227 Table 47: Estimates for the world video game market 2003-2008 (million EUR) ............................... 228 Table 48: Geographical breakdown of the world video game market 2003-2008 (million EUR) ....... 229 Table 49: Installed hardware base in Germany (2002) ....................................................................... 231 Table 50: Video game software sales in Germany (2002) .................................................................. 231 Table 51: Software market in Germany (2002) ................................................................................... 231 Table 52: Breakdown of the home console market by manufacturer in Germany (2002) .................. 232 Table 53: Breakdown of the latest generation home console market in Germany, by producer (2002) ..................................................................................................................................................... 233 Table 54: Players on the German market ........................................................................................... 234 Table 55: Installed hardware base in South Korea (2002).................................................................. 235 Table 56: Video game software sales in South Korea (2002)............................................................. 235 Table 57: Software market in South Korea (2002).............................................................................. 235 Table 58: Breakdown of the home console market in South Korea, by manufacturer (2002) ............ 236 Table 59: Players on the Korean market............................................................................................. 237 Table 60: Installed hardware base in Spain & Portugal (2002)........................................................... 238 Table 61: Video game software sales in Spain & Portugal (2002)...................................................... 238 Table 62: Software market in Spain & Portugal (2002)....................................................................... 238 Table 63: Breakdown of the home console market in Spain & Portugal, by manufacturer (2002) .... 239 Table 64: Breakdown of the latest generation home console market in Spain & Portugal (2002)...... 240 Table 65: Players on the Spanish and Portuguese markets ............................................................... 241 Table 66: Installed hardware base in France (2002)........................................................................... 242 Table 67: Video game software sales in France (2002)...................................................................... 242 Table 68: Software market in France (2002)....................................................................................... 242 Table 69: Breakdown of the home console market in France, by manufacturer (2002) ..................... 243 Table 70: Breakdown of the latest generation home console market in France (2002) ..................... 244 Table 71: Players on the French market ............................................................................................. 245 Table 72: Installed hardware base in Italy (2002) ............................................................................... 247 Table 73: Video game software sales in Italy (2002) .......................................................................... 247 Table 74: Software market in Italy (2002) ........................................................................................... 247 Table 75: Breakdown of the home console market in Italy, by manufacturer (2002).......................... 248 Table 76: Breakdown of the latest generation home console market in Italy (2002) .......................... 249 Table 77: Players on the Italian market............................................................................................... 250 Table 78: Installed hardware base in Japan (2002) ............................................................................ 251 Table 79: Video game software sales in Japan (2002) ....................................................................... 251 Table 80: Software market in Japan (2002) ........................................................................................ 251 Table 81: Breakdown of the home console market in Japan, by manufacturer (2002) ...................... 252 Table 82: Breakdown of the latest generation home console market in Japan (2002)....................... 253 Table 83: Players on the Japanese market......................................................................................... 254 Table 84: Installed hardware base in the UK (2002)........................................................................... 255 Table 85: Video game software sales in the UK (2002)...................................................................... 255 Table 86: Software market in the UK (2002) ....................................................................................... 255
6
© IDATE
2004 edition
Video games : nextgen gaming is on its way!!
Table 87: Breakdown of the home console market in the UK, by manufacturer (2002) ..................... 256 Table 88: Breakdown of the latest generation home console market in the UK (2002)...................... 257 Table 89: Players on the British market .............................................................................................. 258 Table 90: Installed hardware base in the US (2002)........................................................................... 260 Table 91: Video game software sales in the US (2002)...................................................................... 260 Table 92: Software market in the US (2002) ....................................................................................... 260 Table 93: Breakdown of the home console market in the US, by manufacturer (2002) ..................... 261 Table 94: Breakdown of the latest generation home console market in the US (2002)...................... 262 Table 95: Players on the US market ................................................................................................... 263 Table 96: Structure of the gamer sample, according to age and sex ................................................. 268 Table 97: Date and price of purchase of the 3D card ......................................................................... 270 Table 98: Consoles owned by gamers ................................................................................................ 271 Table 99: Average time spent gaming per week, according to favourite platform .............................. 273 Table 100: Leading times of day spent gaming................................................................................... 274 Table 101: Top three favourite types of video game........................................................................... 277 Table 102: Video game buying modes................................................................................................ 279 Table 103: Preferred payment method................................................................................................ 280 Table 104: Time spent on the internet................................................................................................. 281 Table 105: Propensity to pay for a downloaded video game .............................................................. 284 Figure 1: Installed base of PlayStation 2 to end July 2003 ................................................................... 18 Figure 2: Installed base of PlayStations and PS Ones in PAL zones ................................................... 20 Figure 3: Installed base of PlayStations and PS Ones in Western Europe .......................................... 20 Figure 4: Installed base of PlayStations and PSOnes other territories ................................................. 21 Figure 5: Home console manufacturers’ share of the market as of 31/12/2003 ................................... 23 Figure 6: How to use Sky Gamestar ? .................................................................................................. 38 Figure 7: Third party publishers’ market share in fiscal 2002-2003 ...................................................... 41 Figure 8: Menu and applications (examples) on O2’s PDA portal ...................................................... 160 Figure 9: Examples of downloadable games ...................................................................................... 161 Figure 10: Examples of applications on the MDA II ............................................................................ 162 Figure 11: Menu and applications (examples) on T-Mobile Germany’s MDA II.................................. 162 Figure 12: Menu and applications on the SonyEricsson P900............................................................ 164 Figure 13: Chess game pre-installed on the P900.............................................................................. 165 Figure 14: Screenshot of the V-Rally game on P900.......................................................................... 165 Figure 15: Examples of games on the N-Gage (download) ................................................................ 166 Figure 16: Examples of games on the N-Gage (MMC Card) .............................................................. 167 Figure 17: Java "over-the-air" download applications ......................................................................... 169 Figure 18: Screenshot of Darts and Drinks 2: Favorite enemy ........................................................... 170 Figure 19: Screenshot of Bubble Soccer............................................................................................. 171 Figure 20: Screenshot of The Black Citadel........................................................................................ 173 Figure 21: Market forecasts for the mobile entertainment and mobile gaming sectors, 2003 to 2008 (billion USD) ................................................................................................................................ 175 Figure 22: Breakdown of turnover for the mobile entertainment segment, by type of service, in 2003 and 2008 (billion USD) ................................................................................................................ 175 Figure 23: Geographical breakdown of the mobile gaming market, in 2003 and 2007 (million USD) 175 Figure 24: Screenshot of the Mogi game ............................................................................................ 178 Figure 25: Mobile gaming industry value chain ................................................................................... 179 Figure 26: Value chain according to CodeToys .................................................................................. 188
2004 edition
© IDATE
7
Video games: NextGen gaming on its way!
Figure 27: Examples of games available on In-Fusio’s ExEn platform ............................................... 192 Figure 28: In-Fusio’s business model.................................................................................................. 192 Figure 29: Panasonic handset equipped with ExEn............................................................................ 193 Figure 30: Screenshot of the Lord of the Rings: Return of the King game, from Verizon Wireless.... 194 Figure 31: Screen shot the Mogi game, offered by KDDI ................................................................... 196 Figure 32: Growth of subscribers to the leading massively multiplayer games .................................. 208 Figure 33: Growth of the home console base 2003-2008 (32-64-128 bit-Next Generation)............... 219 Figure 34: Estimated home console sales 2003-2008 (million units)................................................. 220 Figure 35: Growth of home console sales turnover 2003-2008 (million EUR).................................... 221 Figure 36: Home console sales turnover in Europe 2003-2008 (million EUR) ................................... 221 Figure 37: Home console sales turnover in Japan 2003-2008 (million EUR) ..................................... 221 Figure 38: Home console sales turnover in the US 2003-2008 (million EUR) ................................... 222 Figure 39: Growth of home console gaming software sales 2003-2008 (million EUR) ...................... 222 Figure 40: Home console gaming software sales in Europe 2003-2008 (million EUR) ...................... 223 Figure 41: Home console gaming software sales in Japan 2003-2008 (million EUR) ........................ 223 Figure 42: Home console gaming software sales in the US 2003-2008 (million EUR)....................... 223 Figure 43: Growth of the entire handheld console market: software + equipment 2003-2008 ........... 224 Figure 44: Growth of the PC gaming software sales 2003-2008 (million EUR) .................................. 225 Figure 45: Growth of the gaming software sales (home consoles + PC) 2003-2008 (million EUR) ... 226 Figure 46: Growth of Europe’s video game market 2003-2008 (million EUR) .................................... 226 Figure 47: Growth of Japan’s video game market 2003-2008 (million EUR)...................................... 227 Figure 48: Growth of the US video game market 2003-2008 (million EUR) ....................................... 228 Figure 49: The world video game market 2003-2008 (million EUR) ................................................... 228 Figure 50: Video game market segmentation ..................................................................................... 229 Figure 51: Growth of the world video game market 2003-2008 (million EUR).................................... 229 Figure 52: Geographical breakdown of the world video game market in 2003 and 2008................... 230 Figure 53: Pyramid of gamers’ age ..................................................................................................... 268 Figure 54: Breakdown of gamers by professional status .................................................................... 269 Figure 55: 3D card............................................................................................................................... 269 Figure 56: Favourite platform .............................................................................................................. 270 Figure 57: Structure of the French base, by manufacturer – Q1 2004 ............................................... 271 Figure 58: Intended future purchases – consoles ............................................................................... 272 Figure 59: Hours per week devoted to gaming ................................................................................... 273 Figure 60: Gaming times, according to sex......................................................................................... 274 Figure 61: Gaming times, according to time spent gaming per week ................................................. 275 Figure 62: Number of video games owned ......................................................................................... 275 Figure 63: Average number of games owned, according to age ........................................................ 276 Figure 64: Swapping games between friends ..................................................................................... 276 Figure 65: Number of second hand video games purchased ............................................................. 277 Figure 66: Favourite type of video game............................................................................................. 278 Figure 67: Annual video game budget ................................................................................................ 279 Figure 68: Estimated monthly entertainment budget .......................................................................... 280 Figure 69: Type of connection............................................................................................................. 281 Figure 70: Online gaming on console.................................................................................................. 282 Figure 71: Types of games played on the internet.............................................................................. 282 Figure 72: Types of product ordered online ........................................................................................ 283 Figure 73: Type of product bought online............................................................................................ 283
8
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
Executive summary
The next technological turn
The next generation of consoles is scheduled for release in 2006, bringing with it a range of technological features that developers will need to master. This naturally involves an accelerated learning curve on the new development tools supplied by console manufacturers. In the past, this step has sometimes been underestimated which, in turn, has had a considerable impact on production budgets. But technological advancements and their budgetary impact are not the only elements that game designers have to take into account. Software sales in the video game sector are highly seasonal, and hardware sales are affected by the consoles’ lifespan. This last element has now become a key factor in the business. The video game market is driven by console sales and, almost simultaneously, by the sale of the games themselves. A console’s lifespan is between 5 and 6 years. Sony, however, is attempting to prolong this longevity by recycling their PlayStation into the PSOne and their PS2 into the PSX. The Japanese giant thereby hopes to be marketing the latest version of their console for 10 years. Here, Microsoft, in a bid to outdo the competition, plans to shorten the lifespan of their consoles. The Redmond-based firms has announced the release of their Xbox 2 for the end of 2005. But will this be enough to gain a strong foothold? Sega had also opted for this strategy, and launched their Dreamcast console a year before Sony’s PS2. Three years later, they announced that they were pulling out of console production altogether. The release of each new home console means a new catalogue of games, the new titles taking advantage of the machine’s new technological features. When a console is launched, 20 to 40 new games are marketed alongside it. The catalogue grows only gradually, and cannot be considered consequential until roughly 18 months after the console’s release. During the fifth year of a console’s shelf life, software sales begin to drop, and gamers are by that time beginning to look forward to the release of the next gen console within the next two years. The sales cycle for games generally runs the same course as for the consoles themselves, but running 6 to 12 months behind. Added to this, the growth curve of the console software market is longer than the curve for hardware sales. Publishers and developers are caught in the consoles’ growth cycle, and must conform to the demands of a market which is increasingly competitive from a design and publishing standpoint: quality of the products, time to market, production costs, ubiquity of licences, increased marketing budgets… Technological leaps require players along the value chain to adapt their marketing tools, the size of their investments, their distribution structure… A great many players were incapable of adapting their operations, and either closed up shop or were taken over by the few lucky survivors. The most critical year for the industry was in 2002. Of the 52 operations in the industry, over half involved shutting down a business. The PC gaming software market is growing slowly but steadily. It will continue to expand in the coming years since personal computers continue to be the sole platform for several categories of gaming: massively multiplayer games (although they are beginning to emerge on home consoles as well, e.g. Final Fantasy), real time strategy games which need a keyboard to be played, Flash games, online titles for casual gamers… But consoles are establishing themselves more and more as the leading edge gaming platform, even amongst gamers who own a PC. Because of this, we can predict that when the next generation of consoles and games is released, households will elect to devote a sizeable share of their entertainment budgets to them, at the expense of other forms of entertainment and PC games. This market could therefore experience a seasonality opposite to the one experienced by consoles.
2004 edition
© IDATE
9
Video games : nextgen gaming is on its way!
Table 1: Estimated worth of the video game market, worldwide 2003-2008 (million EUR) 2003 Home console market (hardware) Home console software market Handheld console market (hardware) Handheld console software market PC gaming software market Total 7 453.3 10 300.0 1 521.2 2 741.0 3 525.0 25 540.5 2004 5 096.7 9 805.0 1 596.5 3 611.2 3 849.0 23 958.4 2005 2 773.3 9 175.0 3 803.1 5 087.9 3 953.0 24 792.3 2006 8 281.7 11 475.0 4 674.8 5 725.0 3 930.5 34 087.0 2007 12 673.3 13 780.0 4 795.6 5 868.6 3 657.0 40 774.5 2008 13 426.7 15 150.0 3 939.0 5 501.5 3 493.5 41 510.7
Source : IDATE
Sony wins the battle of the home consoles
At the end of 2003, there was a worldwide base of 97.64 million latest generation home consoles. Sony emerges victorious in the 128-bit console wars, in large part thanks to a wise choice of features (standard issue DVD player, compatibility with PlayStation games). The Japanese firm boasts a 70% share of the world market. This consoles war was waged over technology, the machines’ features, the catalogue of available games, marketing and pricing.
Table 2: Breakdown of the 128-bit console base on 31/12/2003 Microsoft Xbox Number of consoles sold (million) 13.70 Nintendo GameCube 13.94 Sony PS2 70.00
Source: IDATE, based on industry data
Manufacturers of the next generation of consoles are keeping quiet about the technical features and functionalities that will equip their machines which are scheduled for release in 2006. But, there is no doubt that the next batch of consoles will boast an expanded range of features to include family multimedia. To increase the size of their user base, consoles need to attract the whole family. The goal needs to appeal to father, mother, sister and brother to meet the demands of the maximum number of users, and to create a consensus within the family when shopping for a new home entertainment device. This means that the PS3’s built-in DVD player/burner and hard drive could seal the deal with parents in the same way that the PS2’s DVD player did. The same holds true for the inclusion of Web browsing capabilities as a standard feature. This feature can enable ecommerce, browsing, access to e-learning applications and, of course, massively multiplayer online gaming. Connection to the Web also opens the way to a number of possibilities for electronic content distribution that have been a laborious process over PCs up to now. A number of prospects are also opened up in the areas of film, music and digital photography. Nintendo may, however, remain faithful to their longstanding gamer and gaming-centric strategy. The expansion of consoles’ functionalities to include a full range of interactive family entertainment could therefore involve only Microsoft and their Xbox 2, and Sony and their PS3. The consoles’ placement in homes, next to the TV or the stereo is highly strategic. Their simplicity of use make them the ideal platform for hosting related content. This means that it becomes entirely imaginable for a console to become a device for acquiring music or films off the Web (via download or broadcast in streaming). Ultimately, new generation consoles could well become portals to new technologies for all of the home’s audio and video based entertainment. They will embody convergence and enjoy a very good chance of succeeding there were PCs (too complex) and set-top boxes (too little deployed) have failed up until now, and while awaiting the development of 3G networks and the 3G mobile handset market.
10
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
Handheld consoles: the end of a monopoly
Nintendo is the world’s leading producer of handheld consoles. For now, they have no serious competition. In March 2003, the worldwide base of their latest handheld, the GameBoy Advance, totalled more than 45 million units. But Nintendo’s hegemony could begin to be undermined by Sony in the coming months. Aside from games Sony’s PSP can read video and music. By marketing a handheld console, Sony complete their product range and aim to be able to reach all types of gamers. The mobile PSP for youngsters, the PS2 (in the living room or bedroom) for teenagers and the PSX (in the living room) for the whole family. Nintendo are not resting on their laurels, however, having announced the Nintendo Dual Screen for late 2004. The console will be equipped with 2 three-inch LCD TFT screens, an expanded 128 Mb memory and Bluetooth technology. Faithful to their existing policy, rather than going head to head with their rivals, Nintendo will be offering a radically different product. The Nintendo DS will offer bleeding edge playability to give their customers an entirely new gaming experience, whereas Sony will be expanding their PSP’s features to include multimedia capabilities. Phone manufacturer Nokia’s N-Gage phone-console could be the dark horse here. The first version of their machine, which was released in late 2003 was a flop. The Finnish producer is tightening its aim with the follow-up version, baptised N-Gage QD, which will correct its predecessor’s flaws.
Year one for mobile gaming
Game publishers are displaying a growing interest in mobile devices. Two years ago, a string of titles for PDA came onto the market, while 2003 was marked by the rising number of games available for mobile phones and web-enabled portable devices. The success of i-mode and Nokia’s arrival on the scene have both had a clear impact on the market. EA is banking on the N-Gage and its future versions, having signed an agreement that plans for the release of some 20 titles in the coming year. Others, like Infogrames, are waiting to see how the situation evolves, remaining cautious and porting only a small number of games to mobile devices. Several publishers have created a subsidiary in charge of developing and/or publishing titles for mobile devices: Bandai Wireless, THQ Wireless, Konami Online, Sega Mobile. Others have preferred to sign agreements with players who are already present on the mobile device value chain: content providers, service providers, technology providers, distributors and even telcos. Noteworthy here are the deals that have been struck between: EA & Jamdat, EA & Ziosoft, EA & Nokia, Capcom & NTT DoCoMo, Capcom KDDI, Bandai & ATT Wireless, Infogrames & Jamdat, Konami & NTT Docomo, Konami & Verizon, Konami & ATT, Konami & Vodafone, Sony & Verizon Wireless, SquarEnix & NTT Docomo, SquarEnix & UIEvolution, THQ & Orange, THQ & Vodafone, THQ & ATT, Sprint and Verizon, VUG & In-Fusio... Of note too is the connection between Ubi Soft and Gameloft, which have a common shareholder (Guillemot Corporation). Some publishers are not confining themselves to porting their titles to mobile handsets, getting involved in distribution as well. Here, THQ and Konami have joined forces to create a video game download service on i-mode. THQ has gone one step further by also operating a website devoted exclusively to their games for mobiles (www.madtap.com). Even though incumbent video game publishers are releasing more and more titles for mobile devices, their catalogues are still fairly small, comprising between 5 and 8 games. A benchmark for the rest of the world thanks to the success NTT DoCoMo’s i-mode service (40.6 million subscribers at the end of February 2004), Japan now has a base of 68.7 million mobile data services subscribers, out of total base of 80.5 million mobile phone subscribers, which means a mobile internet penetration rate of 85.3% at the end of February 2004. At the end of December 2003, operator NTT DoCoMo reported having 21.6 million users of their i-appli service out of total 40.5 million i-mode subscribers. So the market’s prospects are very good, and a great many observers forecast a market value of several billion dollars by 2008. The European market promises to be the most dynamic, accounting for over half of total turnover.
2004 edition
© IDATE
11
Video games : nextgen gaming is on its way!
Video games and TV
Video games and TV make an ideal couple. Their efficiency is unmatched when combined with a console. But their relationship does not end there and currently involves three facets, in fact. • TV’s involvement in the area of video games appears to be going more and more by way of licences and the launch of video games whose characters, settings and plots have been borrowed from popular TV programmes; • Coupling video games and TV is becoming increasingly prominent in the form of TV channels or programmes entirely dedicated to video games; • And, lastly, since 1998, players involved in developing and publishing interactive products for the small screen have been able to adapt themselves to the constraints of digital TV decoders and to offer increasingly popular interactive TV services devoted to games.
Electronic Arts, unrivalled dominance
Electronic Arts stands out from their rival third party editors in terms of turnover and net profits. Their turnover (2.5 billion USD in fiscal 2003 and close to 3 billion USD for fiscal 2004) represents close to a quarter of the total revenues generated by the world’s top 20 game publishers. The company reports a more than 40% rise in sales since fiscal 2002. With 1 billion USD in turnover in fiscal 2003, Take Two Interactive ranks as the world’s number two independent publisher (behind EA by 1.5 billion USD). The gap between the leader and its top competitor has never been so wide.
Globalisation of publishing
The arrival of four 128-bit consoles shook up the publishing and development sector. To reach a greater number of gamers, publishers needed to create a version of the same game for several platforms. The production cost for a game can run into the tens of millions of dollars (over 20 million USD for the titles SquarEnix’s Final Fantasy and Konami’s Metal Gear Solid), not to mention the marketing costs. The average cost of producing a console-based game is 5 million EUR. To earn a profit on a game, publishers now need to sell several hundred thousand copies, and even several million for the more costly ones. While American and Japanese companies can rely on their home markets, European publishers need to woo gamers on other continents as well. Here, they are inclined to invest more in the North American than in the Japanese market whose gamers remain harder target and to keep faithful. The salvation for European publishers now lies in outsourcing all or a portion of their operations overseas. Fiscal conditions are more advantageous and public authorities, notably in Canada, have set up attractive policies for video game designers.
Developing online operations
Publishers’ initiatives to develop their online operations have diminished. It is not that the internet is without appeal, but the burst of the internet bubble put a damper on players’ enthusiasm., so publishers put an end to unprofitable operations. But, over the past two years, video game publishers’ Web strategies has begun to pick up steam. The overriding trends in this area are: • Developing of a showcase portal for the publisher that presents and markets their entire catalogue. • Developing games that can be played online, first on PC, this option is becoming increasingly common on consoles. • Porting popular home console games to an online computer version. • Making old offline titles available for online gaming. Electronic Arts, for instance, offers 17 titles, including FIFA Soccer 97 and NHL 97. • Managing an online gaming portal, offering matchmaking, access to massively multiplayer games, Flash games, e-commerce services… • Developing, publishing, distributing and managing massively multiplayer games. In addition to Sony, Microsoft and Electronic Arts which are already involved in MMG, the past two years have been marked by the arrival of several players who had been playing it safe. Infogrames has decided to invest in the sector, Ubi Soft has signed a series of publishing and distribution
12 © IDATE 2004 edition
Video games : nextgen gaming is on its way!
agreements for Europe with Verant Interactive, a Sony Online Entertainment subsidiary and creator of Everquest. Among other things, the French publisher plans to market a massive version of Myst. SquarEnix offers a massively multiplayer version of their core game, Final Fantasy, on PC and on the PS2 console. The MMG market is fiercely competitive. Some 20 titles are available and only a handful can boast having reached their target. The outstanding market here is still South Korea where several titles enjoy a base of over a million subscribers. South Korean publishers are now setting their sites on neighbouring China, a hugely promising market.
Table 3: Number of massively multiplayer game subscriptions worldwide 1999 Number of subscriptions 1 345 000 2000 2 650 000 2001 4 167 000 2002 4 797 000 2003 6 713 000
Source: IDATE and Bruce Sterling Woodcock
2004 edition
© IDATE
13
Video games : nextgen gaming is on its way!
1. The console wars
1.1. Home consoles: heading for the next generation!
1.1.1. Battle of the 3 giants
Microsoft, eyeing top spot
• Xbox The launch of the Xbox in 2001 marked Microsoft’s entry onto the consumer electronics market. This console is positioned as a high-end product, equipped with an ad hoc graphics card (Nvidia), standard PC components, plus a DVD player and the ability to decode MPEG-2 to combine it with video games. The Xbox is enabled for broadband access via an Ethernet card (since April 2002). The console’s memory supplies HDTV quality if the connected TV set allows it. This high-speed connection to the Web constitutes an asset for Microsoft which has a solid mastery of the techniques and business end of internet access.
Table 4: Xbox sales worldwide as of 31/12/2003 Geographic zone North America Europe, Africa, the Middle East Asia/Pacific Total Source: IDATE, based on Microsoft Units sold (million) 8.6 3.7 1.4 13.7
The Xbox ranks number two on Europe’s console market. Sales in Europe have been sustained by special offers and by the launch of new games (Counter Strike in exclusivity, Need for Speed, Star Wars, Project Gotham Racing 2, Top Spin...). In just over a year, Microsoft cut the price of their console in Europe by close to 60%, from 480 EUR to 199 EUR. The Redmond giant hopes to thereby meet its sales objectives, and to become one of the world’s top two suppliers of video game consoles. The console’s global sales target of 14.5 to 16 million units is expected to be met by the end of fiscal 2004 which ends on 30 June of this year. To attract a greater number of players to their new console, one of Microsoft’s main selling points is the existence of a large community of developers based on PC-Windows and the low cost of porting games from PC to the Xbox. In August 2002, Microsoft rolled out two solutions to help development studios to design games for the Xbox at a minimal cost: • The first solution is the Independent Developer Programme. Microsoft offers a free development kit which allows developers to create a beta version of a game before signing an agreement with a publisher who holds an Xbox licence; • The second solution is the Incubator Program, whereby Microsoft advances a copy of the paid development kit to the studio which then looks for a licensed publisher to sign with; • All projects need to be submitted for approval to the Xbox Team. Microsoft launched an online console-based gaming service called Xbox Live in November 2002 in the US, and in January 2003 in Japan. It operates on a subscription bases (49 USD a year in the US and 59.99 EUR a year in Europe). Users have to buy the Xbox Live kit to access the service. The kit ships with a headset and a microphone. The Xbox Communicator lets gamers communicate verbally with other subscribers. It is supplied with demos of Xbox Live compatible games, but does not include the Ethernet cable needed to connect the console to a cable or ADSL modem. At the end of December
2004 edition © IDATE 15
Video games : nextgen gaming is on its way!
2003, there were 750,000 Xbox Live subscribers worldwide (of which 100,000 in Europe). The most popular games on Xbox Live are Project Gotham, Racing 2, Rainbow Six 3 and Counter Strike. In early January 2004, 50 Xbox Live compatible games became available in Europe. European cablecos were involved in the launch of Xbox Live. In France, Microsoft joined forces with cable operator Noos for the European launch of Xbox Live in March 2003. A joint collaborative platform was designed especially for the occasion by Noos and Microsoft. Microsoft has been offering paid content on Xbox Live since late 2003, even if the vast majority of content is still free. Publishers tend to supply targeted paid content (the game MechAssault switched to paid download format in December 2003). In late 2003, Xbox Live was launched in Australia, Austria, Ireland, Finland, Denmark, Switzerland and Norway. Following Japan, South Korea become the second Asian country where Microsoft introduced their online gaming service (October 2003). In February 2004, Xbox Live had a base of 6,500 subscribers. South Korea is considered a highly strategic market given the level of broadband penetration there, and the massive popularity of online gaming. In early February 2004, Microsoft expanded the presence of their online service in Asia; Xbox Live is now available in Taiwan, Hong Kong and Singapore. Aware of the fact that gamer communities are at the heart of their online service’s success, Microsoft, which is already very involved in managing communities (MSN, massively multiplayer games, portals…), plan to expand the features offered on Xbox Live in the coming months. In late February 2004, Microsoft unveiled the latest developments: • Download of the Xbox Live interface; • Extension of online (out of game) communication between gamers via MSN instant messaging; • Offering gamers the ability to organize and manage tournaments; • Integration of online backups and gamer tags to promote the creation of teams.
Nintendo, become the outsider
• GameCube The GameCube, Nintendo’s latest 128-bit home console, was launched in Japan on 14 September 2001, at the price of 25,000 JPY. The console enjoyed Day 1 shipment of 500,000 units. On 18 November, the GameCube was released in the US (5 days after the launch of Microsoft’s Xbox), retailing for 199 USD, shipping 1.1 million units on Day 1, including Canada. In Europe, the console was unveiled on 3 May 2002. Since then, Nintendo has been responding systematically to Microsoft’s sales offensive, cutting the price of their console several times. Available for 99 EUR since October 2003, it now retails for much less than Sony’s PS2 and Microsoft’s Xbox. Nintendo has slashed the price of their box by 50%, making it cheaper than their handheld console, the Game Boy Advance SP. Here, Nintendo is carrying over to Europe the aggressive commercial strategy that they began in the US in September 2003. The company’s American division cut the price of the GameCube from 149.95 to 99.99 USD. Thanks to this drop in price, between the end of November 2003 and the start of January 2004 sales of the console rose by 70% worldwide, compared to the same period in 2002. With the GameCube, Nintendo has cemented their commitment to a gamer-centric machine. They have switched from cartridges to CDs whose mass production is less costly. Unlike the PS2, the GameCube does not have a built-in DVD player. GameCube sales have not reached the targets set by Nintendo: in Japan, only 70% of the 500,000 units shipped to shops were sold in the first week. In the US, however, over 500,000 units of the 740,000 shipped were sold during the first week in shops (twice the number of Xboxes and 25% more than PS2). In June 2003, Nintendo reached the 10 million GameCubes sold worldwide mark. Over the course of fiscal 2003/2004, Nintendo’s target had been the sale of an additional 6 million consoles, a figure which seems relatively ambitious given the 5.76 million GameCubes sold the previous fiscal year. Note that in August 2003 Nintendo decided to put GameCube production temporarily on hold. Since October 2002, Nintendo have been marketing two adaptors in the US that allow gamers to connect their console to the Web to play several games online. Retailing for 34.95 USD a piece, the first is compatible with a dial-up connection, and the second with broadband. Phantasy Star Online Episodes I & II were the first GameCube titles available for online play.
16
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
In September 2003, Nintendo signed un partnership with Internet service provider AOL. The Japanese firm does not however have any plans to design online games. They have specified that this agreement is aimed at third party studios that want to develop games with online capabilities. These developers will have to use the AOL network. 2003 marked Nintendo’s expansion into three new markets: Taiwan, South Korea and China.
Tableau 5: GameCube sales worldwide as of 31/03/2003 (million units) GameCube Japan 2.47 North America 5.13 Europe and other PAL regions 1.95 Total 9.55
Source: IDATE, based on Nintendo
Mid-February 2004, Nintendo announces that they have sold just under 14 million GameCubes worldwide, of which close to 3 million in Europe. In France, 750,000 households are equipped with a GameCube, which places Nintendo’s console behind Sony’s but ahead of Microsoft’s. • Q With the GameCube, Nintendo made a deliberate choice to market a console whose multimedia features were geared primarily to gaming, whereas their competitors elected to integrate a DVD player as well. But, to avoid being completely cut out of the commercial potential that DVD brings with it, Nintendo allied themselves with a consumer electronics giant to market a higher end GC in Japan, equipped with a Panasonic DVD player. Called the Q, the console was released in August 2001, at a price of 38,000 JPY, in other words 13,000 JPY more than the GameCube without a DVD player. The Q can also read MP3 CDs and V-CDs, but has not been terribly popular, particularly since the price has not budged. In December 2003 Matsushita announced that they would no longer be producing the Q. • iQue (www.ique.com) Like Sony which recycled their PlayStation into the PS One, Nintendo are seeking to prolong the lifespan of their 64 bit console, the Nintendo 64, with the launch of the iQue console in China on 21 November 2003. To do so, Nintendo created a 50-50 joint venture with Dr Wai Yuan (ex Silicon Graphics and ArtX) called iQue Ltd. (Shinyu Technology Ltd. in China). The company is in charge of producing, marketing and distributing the machines. The iQue was first released in three cities: Shanghai, Chengdu and Guangzhou. Priced at 598 Yuan (roughly 57 EUR), the console is in the form of a joystick that connects to the TV set. Based on the N64’s technology, the iQue (central processor produced by NEC; video processor by Samsung) offers the same level of performance and the same catalogue of games as the N64, plus games made for the Super Nintendo console. This means that the games are already amortised. The platform used for the iQue is a 64 Mb rechargeable cartridge. iQue Ltd. has proved innovative in the area of game distribution. The games can only be downloaded from kiosks located in retail shops (chiefly Carrefour outlets), called "iQue Depots". The goal here is to limit distribution costs, and therefore the price of the software, a key element in appealing to Chinese gamers’ budgets. The average price of a game is therefore 48 Yuan, or roughly 4.60 EUR. Later on, downloading off the Net will be offered as well. Added to this, the iQue depots allow users to upgrade their console’s operating system, if necessary. Nintendo’s ambition is to penetrate this market whose potential is unrivalled: 1.29 billion inhabitants. This marks the very first console distribution initiative in China that does not involve imports. The main reasons for this lack of initiative are widespread piracy, a high level of protectionism, both economic and governmental, and households’ very low buying power. Now, however, thanks to China’s growing economic openness, the rise of its GDP and the emergence of a middle class, long term prospects are bright. For now, the goal for Nintendo and Sony (which have been marketing their PS2 in China since early 2004) is to occupy the field and to gradually introduce their products, while not expecting a return on investment anytime in the near future.
2004 edition
© IDATE
17
Video games : nextgen gaming is on its way!
Sony, top dog
• PS2 The PS2 went into shops on 26 October 2000 in the US, retailing for 299 USD. 500,000 units were shipped on Day 1. It was released on 4 March 2000 in Japan, where roughly 1 million units shipped on Day 1. To date, 70 million PS2s have been sold worldwide.
Table 6: PS2 sales worldwide as of 31/12/2003 Million units sold Japan North America Europe and PAL zones Total 16.18 29.26 24.56 70.00 Source: IDATE, based on SCE data Launch date 4 March 2000 26 October 2000 24 November 2000
Figure 1: Installed base of PlayStation 2 to end July 2003
Source: SCEE
Sony reports good results in South Korea where 700,000 consoles were sold in 2003, a 21% increase over the previous year. In Japan, the online gaming service for the PS2 has been up and running since May 2002. By March 2004, there were over 50 games available for online play. The Ethernet adaptor was launched in August 2002 in the US. By 30 June 2003, 2.4 million adaptors had been shipped (400,000 in Japan and 2 million in the US). In early July 2003, the service had a base of over 500,000 users. At the start of March 2004, the American community of PS2 gamers had a total 2.6 million members. The peak hours on the service are between 5 pm and 11 pm, and 65% of members are men between the ages of 18 and 34.
18
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
In the UK, Germany and Spain, the PS2 online service was activated in June 2003. Users need to purchase a Sony kit for 24.99 GBP, which includes an Ethernet adaptor, and an independent broadband connection, which is billed extra. The first titles available were SOCOM: American Navy Seals and Twisted Metal Black Online. At the end of 2003, between 15 and 20 games were available. The service was launched in France in July 2003, and Sony made 30,000 connection kits available for the price of 39 EUR. In addition, a partnership agreement was signed with Wanadoo which allows the ISP to market a package that includes a Wi-Fi modem and an Ethernet adaptor for the PS2. The PS2 online gaming service is free, but does not include broadband access to the Net. SCE opted for an open management mode for their online service. They plan to leave service architecture and customer billing up to the publishers. Sony has also decided to market the PS2 in China. It has been on sale since January of this year in two cities: Shanghai and Guangzhou. The console sells for 1,980 Yuan (roughly 190 EUR). Only the ICO (SCE) game is available. Sony hopes to generate a turnover of 4 billion USD in China by 2005, compared to 1 billion in 2002. Chinese mobile operator, Cellstar, is in charge of distributing the console there. In late December 2003, SCE reports that they have sold close to 2 million Eye Toy Plays in Europe and 3.4 million worldwide. This accessory that plugs into the PS2 is a camera that lets gamers replace the face of the game’s hero with their own. The two most popular titles are “Eye Toy Play” and “Eye Toy: Groove.” This accessory was unveiled in Europe on 9 July 2003, as a world premier. The PS2 also has space to hose a hard drive. The new hard drive with a 40 Gb capacity was announced for March 2004 in the US, priced at 99 USD. It is shipped with SquareEnix’s core title, Final Fantasy XI. The hard drive lets gamers back up their games, store and play MP3 files, photos and record TV programmes thanks to a built-in TV tuner. Thanks to Qcast Tuner software from BroadQ and to Sony’s network adaptor, the PS2 can also be connected to a PC. An application lets users watch audio files from a PC on their TV screen. It is DivX compatible. In March 2003, Sony announces that it will be outsourcing all of their PS2 production to China to cut manufacturing costs. This outsourcing is expected to begin in fiscal 2004, up to March of this year. Production will be taken over by two plants located in Taiwan: Hon Dai Precision Industry and Asustek Computer. • PSX In May 2003, Sony announces the marketing plan for their PSX, a platform that converges video games and consumer electronics. On the video game side of things, the PSX is a PS2 and, on the CE side, the console is equipped with a DVD player/burner, a satellite TV tuner and a hard drive (160 Gb or 250 Gb). It is therefore capable of storing and/or recording TV programmes and of making DVD video copies. It can read audio CDs and serve as a player for digital videocams. Like the PS2, it supports a broadband connection to the Web thanks to a network adaptor. Sony’s Memory Sticks can be used for data storage and transport. The PSX has been available in Japan since late 2003 and is scheduled to be in shops in the US and Europe in late 2004. Its retail price ranges from 79,800 JPY and 99,800 JPY (618 and 773 EUR). In the first week of sales in Japan, Sony sold 100,000 units. Sales of the PSX made Sony the number one producer of DVD burners in the month of December 2003, with a 35% share of the market, ahead of Matsushita Electric Industrial.
2004 edition
© IDATE
19
Video games : nextgen gaming is on its way!
• PS One The PlayStation was unveiled in 1994. In 2000, it got a makeover and changed its name to the PS One. The goal here was to prepare the transition to the PS2. By the end of May 2004, over 100 million units of the PlayStation/PS One console had been sold worldwide. In April 2002 SCE announces the release of an LCD screen for the PS One. The PS One was released in India in February 2002, and has been available in the US since 8 June 2000.
Figure 2: Installed base of PlayStations and PS Ones in PAL zones
Source: SCEE Figure 3: Installed base of PlayStations and PS Ones in Western Europe
Source: SCEE
20
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
Figure 4: Installed base of PlayStations and PSOnes other territories
Source: SCEE
Infinium Labs, a risky bet
In January 2004, Florida-based firm Infinium Labs (www.infiniumlabs.com), unveiled their home console, the Phantom (www.phantom.net) at the Consumer Electronics Show. This much-awaited console was scheduled to be marketed via e-commerce only, starting on 31 March 2004, with preorders being possible on Infinium Labs’ own website. The console is equipped with a PC that can be plugged into a TV screen, running on an operating system that is none other than Microsoft’s Windows XP. The Phantom can host PC games, which allows the company to tout an unrivalled catalogue of games, compared to the other consoles on the market. Thanks to its built-in broadband modem, its designers can boast that the Phantom is an "Always on broadband device", enabling gaming on-demand, rentals via download, OS upgrades, patch management and network gaming (including with PC-based players) via the PhantomNet Game service. Gamers pay a monthly subscription to access the PhantomNet service. The system is equipped with a Digital Rights Management system designed by Digital Interactive Streams.
Table 7: The Phantom Features of the Phantom console AMD XP 3200+ processor operating at 400 MHz Dolby Digital Surround Sound 5.1 with digital audio output 80 Gb hard drive, upgradeable to 120-320 Gb. 256 Mb RAM DDR, upgradeable to 512 Mb or 1 Gb Options: Wi-Fi card, ADSL modem ADSL, speaker, flat screen display nVidia NV36 Full DirectX9 graphic card Wireless keyboard and mouse 2 USB ports Nforce-2 Ultra 400 motherboard 10-100 base T Ethernet network card S-Video output, RCA, video and PAL component 4-port controller Radio frequency module Source: IDATE, based on Infinium Labs
2004 edition
© IDATE
21
Video games : nextgen gaming is on its way!
The challenge for Infinium is a big one. The firm has little public recognition, which is a major drawback when hoping to go head to head with Sony, Nintendo or Microsoft. To avoid fading into obscurity, which has been the demise of companies like Indrema (Console L600) and VM Labs (NUON technology), in mid-February 2004, Infinium hooked up with Trology Capital Partners. Trology will be in charge of Infinium’s financial marketing, investor relations and the dissemination of information with shareholders and the industry.
Digital Interactive Systems Corporation (DISC), a bridge between PC and TV
In January 2004, American company DISC, presented DISCover (www.discoverconsole.com), a technology that allows gamers to play PC games on TV. DISC’s goal is to make the massive library of PC games available to the world’s largest mass market, banking on the ease of use of the forthcoming DISCover consoles. The principle behind DISC’s "Drop & Play" technology involves transforming PC games into console games using a driver, a Bios chip, a proprietary application and a database. When a CD is inserted into the player, DISC’s drive recognizes it and launches the game, or installs it if necessary. The database and video games can be upgrade via the Net. When the gamer removes the CD from the player, the game is uninstalled, but saved games remain on the hard drive. Apex Digital, a company which has specialised in producing DVD players up to now, has integrated DISC technology to create a full console, called ApeXtreme. The device is equipped with other features, comparable to those produced by the competition: a DVD player, MP3 player and photo viewer. Other optional features are also possible such as a CD/DVD burner, or a PVR (Personal Video Recording), thanks to the machine’s 40 Gb hard drive. ApeXtreme also comes with a keyboard, a mouse and USB ports. In terms of hardware, the console’s Biostar motherboard is equipped with an AMD AthlonXP2000 processor and an nVidia nForce2 IGP graphic card. ApeXtreme operates on Windows XP. It will be available in the US at the end of 2004, at a price of 399 USD for the standard version, and 499 USD for the full-options version. The company Alienware has also acquired a DISCover licence from DISC, and will be producing the Media Center Edition. Their machine is equipped with an AMD FX-51 processor, 1 Gb of RAM and an nVidia GeForce 5950 video card, and also operates on Windows XP. For matchmaking, Apex and Alienware are working with the firm, Gamespy which supplies an application that locates servers, downloads patches if necessary, and lets gamers go head to head.
1.1.2. Sony wins the 128-bit home console battle
The worldwide base of the latest generation of home consoles represents a total 97.64 million machines. Sony is the big winner in the 128-bit console war: boasting an over 70% share of the world market. The war is waged over technology, the consoles’ features, the catalogue of games, marketing and pricing.
Table 8: Breakdown of the worldwide base of 128-bit consoles as of 31/12/2003 Microsoft North America Europe, Africa, the Middle East Asia/Pacific Total 8.6 3.7 1.4 13.7 Source: IDATE, based on industry data Nintendo nd nd nd 13.94 Sony 29.3 24.6 16.2 70.00
22
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
Figure 5: Home console manufacturers’ share of the market as of 31/12/2003
Microsoft 14.0%
Nintendo 14.3%
Sony 71.7%
Source: IDATE
The console’s technical configuration and features are a success, particularly the presence of a DVD player as a standard feature. Providing an add-on external hard drive and an adaptor also helped to limit the risks of losing market share. Sony had ruled that because of current practices at the time, it was premature to provide this hardware as standard features, added to which they would have had a considerable impact on the price of the console. Microsoft had opted to include a 40 Gb hard drive as a standard feature, which was costly and well over the required capacity needed for gaming software. The time saved for loading games that the hard drive allows was not a major factor among consumers for favouring Microsoft over the PS2. The compatibility of PlayStation/PS One games with the PS2 is also a plus. By offering a catalogue of over 6,000 titles, Sony boasts a major asset when seeking to gain gamer loyalty. Microsoft’s pricing strategy can be qualified as offensive. The new kid on the market, the American firm needed to take away a portion of their rivals’ market share, and to limit their console’s chances of failure. So it was that less than a month after having released their new product, Microsoft slashed the price of the machine. Sony has always aligned their prices with Microsoft’s but that which may at first appear to be a defensive strategy was in fact a systematically offensive response, because their console was being outsold by the competition. Microsoft’s task quickly became a complicated one. Their multifunction console was competing directly with Sony’s, but also having to compete with Nintendo’s much less expensive, single function machine.
Table 9: Evolution of console prices in Europe, 2000-23003 In EUR 2000 24/11/2000 PlayStation 2 425 Xbox GameCube 2001 29/09/2001 299 14/03/2001 17/04/2001 480 299 03/05/2001 199 2002 29/08/2002 249 29/08/2001 249 199 2003 10/04/2003 199 10/04/2003 199 25/09/2003 100
Source: IDATE In Japan, the latest price cut was at Sony’s initiative. It took place in November and, two days later, Nintendo, then Microsoft (a week later) followed suit.
2004 edition
© IDATE
23
Video games : nextgen gaming is on its way!
Table 10: Price of consoles in Japan in 2003 Console PlayStation 2 Xbox GameCube Date 04/11/2003 12/11/2003 06/11/2003 Source: IDATE Price (EUR) 155 131 87
Up until the end of March 2004 in the US, the Xbox and the PS2 were both retailing for 179.99 USD, compared to 99.99 USD for the GameCube. But Microsoft plans to keep the price wars going. They announced that, starting in April, the price of the Xbox would drop to 149.99 USD. If Sony does not react to the move, Microsoft could well steal away a portion of their rival’s market share in the coming months.
1.1.3. Scheduled release of nextgen consoles
Sony PS3
On 21 April 2003, SCE and Sony announced that 200 billion JPY (roughly 1.6 billion USD) will be spent between fiscal 2003 and 2005 on designing and building a semi-conductor that will be at the heart of the new chipset, code named CELL, which will equip the PS3. 73 billion JPY (roughly 580 million USD) were spent over the course of fiscal 2003 on designing the new microprocessor. The chipset is being developed in partnership with Toshiba and IBM. SCE’s next home console is already in the works, and is scheduled for release in 2006. In September 2003, Ken Kuturagi announced that the machine will be compatible with PS One and PS2 games, a feature that contributed to the success of the PS2 by extending the longevity of the PlayStation catalogue of games. In addition to the 1.6 billion EUR that Sony have earmarked for R&D between 2003 and 2005, the company will also be investing 120 billion JPY (roughly 988 million EUR) in building three plants for producing the CELL processor. 53 billion JPY (400 million EUR) are tagged for the SCE plant in Nagasaki, 36 billion JPY (272 million EUR) for the IBM plant in New York, and 42 billion JPY (317 million EUR) will go to Toshiba’s factory in Oita. In early February 2004, Sony announces that production is scheduled to begin in early 2005. Since 1999, the Emotion Engine chipset that equips the PS2 has cost Sony 2.73 billion USD. The PS3’s memory, which is based on Rambus Yellowstone technology, was developed by the Hitachi-Nec joint venture, Elpida Memory. Theoretical data transfer rates clock in at 6.4 Gb/s on a 16 bit bus running at 400 MHz. For the microprocessor, Sony upholds their faith in Mips Technologies, the chief supplier of Silicon Graphics graphic stations. Sony has acquired an Mips64 licence from the American firm which had supplied their technology (R3000A and Mips IV) for the PS One and the PS2. Sony could draw inspiration from Grid Computing and connect the PS3 to a home network so that the machine can take advantage of the processing and storage capacity of the other Sony devices in the home. To this end, Sony has forged a partnership with IBM and Butterfly. The principle of taking advantage of unused resources, an area in which Butterfly specialises, could be used for online gaming, and help cut the risks of overload on servers that are hosting gamers.
Nintendo N5
Nintendo has signed a partnership agreement with graphic card producer, ATI, to take part in the creation of their new products. It appears that the two companies will be joining forces to design Nintendo’s forthcoming home console, code named N5, which is expected to be on the market some time in 2005 or 2006. In terms of processor, the N5 is expected to be equipped with a PowerPC, produced by IBM.
24
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
Microsoft’s Xbox Next
Microsoft – via Yoshiro Maruyama, head of the Xbox division in Japan – has confirmed that the next generation console, called the Xbox Next, will not be available until 2006 in Japan. The American release could take place in late 2005. It is likely that the European launch will take place after the US and Japanese launches. The Xbox Next could be equipped with several PowerPC processors designed by IBM (the rumour is at least 4 processors). The graphic chipset will be supplied by ATI, which replaces the firm nVidia that supplied the pioneer Xbox. A hard drive might not be a standard feature on the Xbox 2. Should Microsoft opt for this solution, it would mean that Xbox 1 games will not be compatible with the new machine, unless users buy an external hard drive as well. Added to this, Microsoft is changing graphic chipset suppliers. The games developed for the current Xbox use a proprietary algorithm developed by nVidia and which Microsoft’s new partner, ATI, will not be able to use, unless it opts for emulation. The compatibility of catalogues is still a major selling point when marketing new consoles and seeking to cement gamer loyalty. On the other hand, the removal of a large capacity storage drive will have a significant effect on the price of the console, at a time when Microsoft is losing money on each unit sold. The hard drive could be replaced by a removable storage unit. Here, in late February 2004, Israeli company M-System announced that they had signed a contract with Microsoft to develop personalised high-capacity memory units. In early April 2004, Microsoft announces that they have signed an agreement with the world’s leading producer of semiconductors, Taiwan Semiconductor Manufacturing Company (TSMC). Microsoft’s announcement did not stipulate which types of semiconductor TSMC would be producing (central processor, graphic chipset), but the company already manufactures graphic chipsets for nVidia and ATI. A number of industry observers are speculating on the release date of new generation consoles. Here, Microsoft might get a jump of a couple of months on the competition since, back in February of this year, Apple development kits were already being distributed to a selection of developers. In addition, at the end of March 2004, Microsoft unveiled their new Windows, Windows Mobile and Xbox compatible development tools. Baptised XNA, these tools include billing, security, identifier, community and matchmaking management for Xbox Live. Microsoft’s goal is to facilitate the development and portage of titles for platforms on which the Redmond firm is present. These tools could have a sizeable impact on the cost of developing games. Developers could be encouraged to design titles for Xbox/Xbox Live and so port them more easily to PC or mobile phone.
Home consoles: for the whole family
Companies in the process of creating their next generation console are remaining secretive about the machines’ technical features and functionalities. They will reveal details only gradually, like they did last time around. Gearing up to a commercial launch in 2005-2006, the battle of the press releases on the consoles’ technology and features, and later on third party game publishers and the games themselves (exclusive or not), is likely to start heating up later this year. But, they would be wise not to get ahead of themselves with their announcements, thus running the risk of either disappointing gamers, or of revealing too much too soon to the competition. Added to this, consumer behaviour is somewhat unpredictable. The announcements that preceded the launch of 128-bit consoles put a freeze on gamer spending, as they began to save up for the forthcoming machines. Despite the manufacturers’ discretion, it is clear that the next generation of consoles will offer an expanded range of multimedia features for the whole family. The components that are being marketed as peripherals are expected to be offered as a standard equipment on the future machines. DVD player (already standard on the PS2), DVD burner (already standard on the PSX) hard drive (already standard on the Xbox), Ethernet adaptor (already standard on the Xbox). Nintendo could, however, remain faithful to their longstanding strategy of marketing consoles bereft of any features that are not related to gaming. To expand their user base, consoles need to attract the whole family. The goal is to appeal to father, mother, sister and brother to meet the demands of the maximum number of users, and to create a consensus within the family when shopping for a new home entertainment device. This means that the PS3’s built-in DVD player/burner and hard drive could seal the deal with parents in the same way that the PS2’s DVD player did. The same is true for the inclusion of Web browsing capabilities as a standard feature (Ethernet adaptor + hard drive + broadband flat rate + keyboard + mouse). This
2004 edition © IDATE 25
Video games : nextgen gaming is on its way!
feature can enable e-commerce, browsing, access to e-learning applications and, of course, massively multiplayer online gaming. Connection to the Web also opens the way to a number of possibilities for electronic content distribution that have been a laborious process over PCs up to now. A number of prospects are also opened up in the areas of film, music and digital photography. In the music sector, there now exist a host of legal downloading services. After the fruitless attempts made by PressPlay (Sony, Vivendi Universal), MusicNet (EMI, Warner Music, BMG) and Listen.com (later taken over by RealNetworks), success appears to now be at hand, particularly thanks to Apple’s iTunes Music Store and Roxio’s Napster 2.0. As to films, there are far fewer offers. There is only one of consequence in the US: Movielinks, which is backed by Universal and Sony, and which offers films downloads via subscription. To this should be added RealNetworks’ Real Gold Pass, which is more akin to TV, and which has a base of 450,000 subscribers. The consoles’ placement in homes, next to the TV or the stereo is highly strategic. Their simplicity of use make them the ideal platform for hosting related content. And so it becomes entirely imaginable for a console to act as a device for acquiring music or films off the Web (via download or broadcast in streaming). Ultimately, new generation consoles could well become portals to new technologies for all of the home’s audio and video based entertainment. They will embody convergence and enjoy a very good chance of succeeding there were PCs (too complex) and set-top boxes (too little deployed) have failed up until now, and while awaiting the development of 3G networks and the 3G mobile handset market.
1.2. Handheld consoles: the end of a monopoly
GamePark’s GP32
GamePark (www.gamepark.co.kr or www.gamepark.com) is a Korean firm that was founded in 2000. The GP32 is one of the most powerful handheld consoles on the market. Its prime assets are a 3.5inch TFT 16:9 screen, with 320x240 definition: better than the PlayStation’s. It is equipped with a 32bit Risc processor operating at 66 MHz (overclockable to 166 MHz) compared to 13 MHz for the GBA, along with 8 Mb of SDRAM. In addition, the GP32 is equipped with a wireless radio frequency communication module for 4-player games and game transfers. Software is stored on a Smart Media Card (SMC) and can be downloaded off the internet. The GP32 can be connected to a PC. The console owner uses his computer to acquire content off the Net and install it on the console. GamePark drew their inspiration from MP3 players and PDAs which are more and more common. Thanks to a simple and user-friendly interface, consumers are now used to synchronisation and to browsing on this type of device, as well as being aficionados of miniaturised multimedia technologies. But the most significant innovation with the GamePark is the availability of free development tools. The developer community in Korea has got hold of these tools and releases new games on a regular basis (close to 80 titles have been developed this way), coming to flesh out the existing, rather small catalogue of official games. At the end of 2002, there were only 16 official titles on offer, of which 4 were developed by GamePark. Twelve titles were announced for 2003, but no information on the subject is currently available on the company’s website. As it stands, no major publisher has taken part in the development or publication of games for the GP32. Negotiations are, however, underway with Capcom Sega and Activision. The console is in fact a mini computer. It runs on an OS that can be upgraded via the Net. The open platform operates on the same philosophy as a PC, and the browsing system draws its inspiration largely from the same concept. Aside from gaming software, the console can support other applications, both GamePark proprietary and from other developers. The developer community, for instance, has released GPCinema for reading Divx files (www.entware.com). For their part, GamePark offers their own software, MoviePark. The GP32 can also read MP3 files, thanks to its Player MP3 software. The TextViewer application is a light text application. It enables text file reading and formatting, and offers a handful of basic functions: text colour, font, background colour… ImageViewer software is compatible with jpg, tif, gif, bmp and pcx formats.
26
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
And, lastly, the GP32 can be transformed into a phone thanks to the communication kit which is sold separately. Like the PC, and thanks to the impetus of the gamer community, the GP32 is in a constant state of evolution. GamePark is currently in talks with Nanotek to integrate back lighting in the machine. Other projects are also in the works: upgrading the USB ports, transforming the console into a joypad for PC games, marketing multiplayer titles, BIOS upgrade with Team Kyaa, portage of the J2ME standard onto the GP32. The console is marketed only in South Korea at a price of 235,000 Wons (roughly 200 EUR). Imports cost roughly 170 EUR or 209 USD. It is available for sale online at www.lik-sang.com. At the end of October 2003, GamePark announced that their console would not be distributed in Europe, even though the gamer community was eagerly awaiting it. Mitsui, which currently distributes the GP32 in Europe, as well as being in charge of distributing Nintendo’s handhelds, did not want to take the chance, given GamePark’s ongoing financial troubles. As an import, it is in France that the GP32 has sold best. According to a GamePark spokesperson, 150,000 units have sold worldwide since the console was launched.
Nintendo’s GameBoy
Nintendo is the world’s leading producer of handheld consoles. The adventure began in 1988, with the worldwide release of their first model, the GameBoy. As sales had begun to lag, the GameBoy Pocket was unveiled in 1996. Two years later, at a time when the handheld console market appeared to no longer appeal to gamers, Nintendo released their GameBoy Colour which, thanks to the line of Pokemon games, enjoyed massive success. Despite the overwhelming popularity of the GBC, Nintendo is having to compete with new services being offered on rival consoles: the Bandai’s WonderSwan Color handheld in Japan, and above all the development of games for mobile phones (the success of i-mode in Japan) and PDAs. Nintendo needed to react quickly, and offer a new handheld console. • GameBoy Advance & GameBoy Advance SP The GameBoy Advance – equipped with a 32-bit microprocessor and an LCD screen that is larger than the GBC’s, along with an active matrix designed by Sharp – was launched on 21 March 2001 in Japan at a price of 9,800 JPY, before being distributed in the US, starting on 11 June 2001 at a price of 99.95 USD. The console was launched in Europe on 21 June 2001, retailing for 130 EUR, with game cartridges priced at between 46 and 56 EUR. In March 2003, Nintendo launched the Game Boy Advance SP (Special Project) in Europe, the enhanced version of the Game Boy Advance (new back lit, foldable screen). In September 2003, Nintendo announced that they had sold over a million units. The GBA SP is released in Japan in February 2003, shipping 300,000 units. Starting in August 2000 in Japan, the GBA is shipped with a cable that lets users connect to the Web from a mobile phone, and enables gaming for up to 4 players. GBA games can be downloaded off the GameCube. In December 2003, Japanese firm Digital Act Co releases the Campho Advance (roughly 98 EUR), a plug-in for the Game Boy Advance that enables videophony. By March 2003, 33.8 million GameBoy Advances had been sold worldwide. Its popularity in Europe was particularly strong, selling 3 million units in 6 months (versus 1.2 million in the US). In October 2003, Nintendo report over 2 million Game Boy Advance SPs sold in Europe. After the GameBoy Advance, Nintendo launched a new handheld called the Pokemon Mini, devoted entirely to the world of Pokemon characters. Available in Japan since 2001, then in March 2002 in Europe, this mini LCD console is sold with the Pokemon Mini game and three other cartridges. Nintendo has not released any sales figures for this handheld, which does not appear to have met with the success the company had hoped for.
2004 edition
© IDATE
27
Video games : nextgen gaming is on its way!
Tableau 11: Number of Nintendo handhelds sold worldwide as of 31/03/2003 million units Game Boy Advance Game Boy Advance SP Total Japan 10.06 0.82 10.86 The US and Canada 15.37 0.83 21.33 Other 8.38 0.46 10.79 Total 33.81 2.11 45.47
Source: IDATE, based on Nintendo Co
Sales results for the GBA and GBA SP are remarkable: after two and half years in shops, over 10 million European households, and over 20 million American households are now equipped. As a reminder: in the US, 2.4 million GB and 14.3 million GB Color have been sold in the two and half years since their release. At the end of 2003, there was an installed base of 1.85 million GBA and GBA SP consoles. In June 2002, American firm nReach perfected a Bluetooth adaptor that connects the GBA to a mobile phone or a computer, which enables Web browsing and network gaming with distant opponents. Still other features have been added, notably by the US company Majesco. The company developed GBA Video technology which lets users view 45 minutes of video stored on a cartridge on the GameBoy Advance. The first available products were cartoons from the Nickelodeon channel. • Nintendo Dual Screen In early 2004, Nintendo announced their plans to market a new handheld console, code named Nintendo Dual Screen. Very little information on the product has been released. But, it is known that the hardware will be the same used on the GameBoy Advance. The Nintendo DS console will be equipped with a dual ARM7 and ARM9 processor. It will have two 3-inch LCD TFT screens, an expanded memory of 128 Mb and be Bluetooth enabled. The new handheld was unveiled at the E3 show in May 2004, and will be on the market by the end of the year, on the world’s top three markets (Europe, The US and Japan). Nintendo intend to continue to operate on the handheld market, at a time when Sony will be launching their PSP. As usual, instead of competing directly with their rivals, Nintendo plan to offer a radically different product. The Nintendo DS will offer bleeding edge playability to give their customers an entirely new gaming experience, whereas Sony will be expanding their PSP’s features to include multimedia capabilities. Nintendo have not yet shed any light on whether GBA games will be compatible with the Nintendo DS. But, this compatibility would help boost the new handheld’s sales since it would benefit from an existing large and varied catalogue of titles. Namco and Konami have already confirmed their desire to develop games for the Nintendo DS, while Electronic Arts is still testing the new device.
Nokia’s N-Gage: communicate
Nokia, which has gained their reputation on the mobile phone sector (on which they are number one, with a 40% share of the market), are now investing in the video game sector, having released a handheld console in October 2003 that combines video games and telephony. It is equipped with the following: • Processor: ARM9 104 MHz • Operating system: Symbian version 6.1 • User interface: Nokia Series 60 • Shared memory: 3.4 Mb (for data storage) • Additional memory: 1 MMC slot (cards of up to 128 Mb) • Screen: TFT backlit 176x208 (35x41.5 mm) 4096 colours • Audio: PCM 8/16 kHz, 8 bits, mono or stereo • Data transfer: USB 1.1 • Wireless connectivity: Bluetooth
28
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
• Telephony: Tri-band EGSM 900/GSM1800/GSM 1900 • Battery: BL-5C Li-Ion • Autonomy: Telephone 2-4 hours, stand-by 150-200 hours, Music 8 hours, Radio 20 hours, Games 3-6 hours And has a wide range of features: • Vibration mode • Built-in antenna • FM stereo radio (20 station memory) • MP3 + AAC player • AAC (TBC) coding, via stereo or radio input (analogue recording) via • SMS + Multimedia messaging (audio, video...) • E-mail (IMAP4, POP3, SMTP, MIME2) • Web: XHTML (GSM data, HSCSD to 43.2 Kb, GPRS to 40.2 Kb) with iMode extension, SyncML • Java: Java 2 Micro Edition (J2ME) • Multimedia: RealOne • Ringtones: MP3, AAC, Midi, WAV • Speaker: calls, music, games (not for the radio) • PC connectivity: N-Gage PC Suite/Nokia Audio Manager PC software (Windows 98, ME, 2000 professional, XP) • Keyboard: 21 keys (12 digital keyboard keys, Music and Radio short cuts, 7 multifunction keys) • Directional pad: 4 directions + button (8 directions in gaming) • Applications: Calendar, address book, to do list, downloadable applications for Symbian OS, Java... The consoles are manufactured in Germany. After a sneak preview release in Hong Kong, Australia, Singapore and Thailand, Nokia launched the N-Gage worldwide on 7 October 2003. The company invested 150 million EUR, in what was their largest marketing campaign ever. 30,000 shops in 60 countries around the world will be selling the console-phone. Nokia’s target is to sell 6 to 9 million units by end of 2004. In the US, the console retails for 299 USD, and games cost between 30 and 43 USD a piece. The NGage is available through several retail chains, including Best Buy, Circuit City, Electronics Boutique, GameStop and Target. In late October GameStop and Electronics Boutique’s online shops dropped the price of the console to 100 USD. To turn the tide on poor sales, some retail chains in the US, including Wal-Mart, began to market bundles that included three games + a 64 Mb MultiMediaCard + the console for 299 USD. The UK’s daily paper, The Sun, is offering an N-Gage for 0.01 GBP to anyone signing up for a 2-year subscription. In Europe, the list price from Nokia ranges anywhere from 299 EUR to 349 EUR for a basic console. But, the prices depend on the agreements that Nokia have with telecom operators. In France, for instance, the N-Gage is available for 149 EUR to future Orange subscribers and for 99 EUR to future SFR subscribers who sign up for a one-year subscription. The games sell for between 39 and 49 EUR a piece. The core target is gamers between the ages of 18 and 25. A spokesperson for a consumer electronics specialist nevertheless points out that, two weeks after its release, the average age of N-Gage buyers was 15. Nokia want to distinguish themselves from Nintendo whose clientele is generally quite young (8 to 14 years old for the GBA). Thanks to the GBA’s facelift with the GBA SP, Nintendo was able to attract older gamers who had got their start on the first generation GameBoy. Four distribution modes will be used: in department stores, in retail shops specialised in video games (ScoreGame, Strat Games), in retail chains that specialise in consumer electronics and entertainment (Virgin, Media Saturn, FNAC), and through retailers that specialise in mobile telephony (Internity, The
2004 edition
© IDATE
29
Video games : nextgen gaming is on its way!
Phone House). It is worth pointing out that, in France, games specialist Micromania has refused to market the console. N-Gage is enabled for multiplayer gaming. A maximum six gamers can go head to head via the Bluetooth communication port. Here, Nokia contribute their expertise in community management over mobile phones. The company hopes that gamers will be aware of the uses of SMS to call other gamers to arms. To do so, they are creating a service called DuelZone which, during its test phase, increased the firm’s ARPU (average revenues per user) by 15% to 20%. Seeking to develop an online gaming service to match their ambitions, in late August 2003, Nokia took over the Sega subsidiary, Sega.com. Thanks to this acquisition, the Finnish firm gains control of the Sega Network Application Package (SNAP) online gaming management platform. SNAP will help to improve Nokia’s online gaming service, N-Gage Arena. The service offers the following features: access to a library of tips and codes, download of other gamers’ ghost (available for Tomb Raider, Pandemonium and Tony Haw's Pro Skater 4), video game sequence capture and sharing, access to cheats (game solutions) and downloading bonus add-ons. In terms of software and technical performance, the console has gained unanimous support. Leading publishers were not wrong, and a great many of them have elected to be candidates for developing and porting games onto the Finnish machine: Sega, Electronic Arts, Eidos, Vivendi Universal Games, Capcom, Taito, THQ Wireless, Gameloft and Activision. Here, it is worth noting the absence of Atari, Take Two Interactive, Konami and Namco. The games come on Multimedia Cards cartridges. To avoid piracy, Nokia chose not to offer paid downloadable versions. When the console was released, 6 games were available. By February 2004, the catalogue included 15 titles. 15 more games are likely to be available by the end of the year. To compare: the catalogue of games available for the GBA includes 1,300 titles. Planning on a long-term involvement in the video game industry, Nokia announced in mid-February that they would be publishing the game Ashen, which is currently in the development stage. In late 2003, Nokia reported that they had shipped 600,000 units of the N-Gage to retailers. France’s Day 1 shipment was between 3,000 and 4,500 units. Up until now, the Finnish firm has said very little about the console’s sales, but has admitted that initial targets are still far from having been met. In fiscal 2003, Nokia had set a target of 3 million users, and planned to have a base of 9 million in order to be in the black and become a major player on the market. At the end of February 2004, the GameStop retail chain announced that it was pulling the Nokia console from the shelves in its 450 points of sale in the US. Four elements account for the failure of the Nokia console: • Marketing of the N-Gage began at a time when market leader Nintendo was enjoy very high sales of their GameBoy Advance SP. The market does not yet appear to be saturated, but Nintendo came early to the game, were able to renew their product line (GBA SP), enjoy a strong relationship with most of the leading publishers, and have a very large catalogue of games. • The N-Gage retails for between 299.99 EUR and 349 EUR, 2.3 to 2.7 more than the price of its chief rival, the GBA SP. Sponsoring from telcos (notably T-Mobile, O2, Orange and SFR) has not been enough to boost sales. • Gamers are not used to buying their consoles from phone shops. • The N-Gage has come under fire from the gamer community, particularly for the awkward process of changing MMC game cartridges, the battery’s limited autonomy, the unappealing phone function, screen size… Nokia will be drawing up a balance sheet after two years of operation. But, it is clear that the Finnish giant has not dealt their last hand. To prove it: in April 2004, they released a new version of their game deck: the N-Gage QD. From a technological standpoint, the N-Gage QD is an N-Gage, but several improvements have been made, notably longer battery life and the screen’s luminosity. In addition, Nokia appear to have learned their lesson from the failure of their pioneer console. The MMC cartridges can now be accessed more easily. The speakers and the microphone have been moved, and games can now be launched with a single click. The console is also equipped with a programme for launching N-Gage Arena, which lets gamers interact with the community (swaps, challenges, chat...).
30
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
The N-Gage QD was released in May in Europe, in Africa and in Asia Pacific, with a price tag of 99 USD when signing up with a mobile operator, or 199 USD, unsubsidized. It was on shelves in the US in June. N-Gage games are compatible with the new console. Since early September 2003 another leading mobile phone manufacturer, Sony Ericsson, has been marketing a joystick that can be plugged into their phones, called the EGB 10. The mobile is thereby transformed into a handheld gaming console, but does not compare to the N-Gage in terms of power, ease of use or the type of games available.
An American player enters the market: Tapwave and their Zodiac multimedia console
Tapwave (www.tapwave.com) is a California-based company that was founded in March 2001 by four ex Palm executives. The Zodiac, which was initially baptised Helix, comes in two versions: the Zodiac 1 (299 USD) equipped with 32 Mb of RAM and the Zodiac 2 (399 USD) equipped with 128 Mb of RAM. Aside from the quantity of RAM, the two consoles are equipped with the same technical components: • Motorola® i.MX1™ ARM9 processor (200 MHz) • ATI Imageon W4200 graphic accelerator with 8 Mb of SDRAM • 3.8 inch transflective, 16-bit colour backlit display (65,536 colours), 480 x 320 resolution • Yamaha audio component and stereo speakers • Vibration mode • Support via Secure Digital Cards (SD), MultiMediaCard and DSIO • Wireless Bluetooth connection for multiplayer gaming & file exchange • 2 USB ports • Rechargeable lithium battery • PC connection The software configuration is as follows: • Proprietary OS based on Palm OS 5.2T • Integrated word processing • MP3 player • JPG photo viewer • Video games and game downloads via PC • Kinoma Player for video • Video creation and conversion to AVI, QuickTime, MPEG-1 & MPEG-4 with Kinoma Producer • e-Book Palm Reader • Organizer: address book, planner, to do lists … • Other features: MP3 alarm clock, wireless chat and shared whiteboard, graphic calculator, Microsoft Word compatible, Web browser and SMS client for use with compatible Bluetooth enabled phones All Palm OS compatible software can be used on the console. A number of partnerships have been established in addition to those signed with technology providers. Several American and European video game publishers will be developing and publishing content for the Zodiac: Activision, Atari, Midway Games, Apogee, Id Software, Sega. Given the features that are specific to the device, the Zodiac could find itself competing directly with Sony’s PSP. Both consoles target an older clientele than Nintendo’s. According to Tapwave’s directors, its rather large target market is gamers between the ages of 18 and 34. The console was available for online ordering starting in September 2003, and sales began in November in the US with a dozen games, including Tony Hawk's Pro Skater 4 (Activision), Neverwinter Nights (Atari), Doom II (Id Software), Spy Hunter (Midway Games) Stuntcar Extreme
2004 edition
© IDATE
31
Video games : nextgen gaming is on its way!
(Vasara Games) and AcidSolitaire (Red Mercury). In early 2004, 20 titles were being promoted on Tapwave’s site. Over 1,200 development kits have been distributed to studios so far.
The PSP: Sony’s 21st century walkman
On 13 May 2003, SCE announces that they will be releasing a handheld console in the last quarter of 2004 in Japan, the US and Europe, simultaneously. A few months later, Sony opt out of a worldwide release, fearing that the associated catalogue of games will be too small. So the device will appear first in Japan, still in late 2004, while marketing in the US and Europe will take place some time in 2005. The console uses the Universal Media Disc (UMD), a 60 mm optical disc developed by the Sony Group, and which can store up to 1.8 Gb of data (games, 4 hours of video or music). The device will be equipped with a 16:9, high resolution TFT LCD, 4.5-inch, backlit screen produced by Samsung and Sharp. The agreement published at the end of March 2004 is worth 330 million EUR a year. The PSP will be compatible with MPEG-4, which offers DVD quality imaging. It will also be compatible with Memory Sticks. The handheld could also benefit from the deployment of a wireless network that enables multiplayer gaming. A USB 2.0 port means that gamers can connect the device to a PC, a PS2 or another PSP. The PSP can be connected to a PS2 or a PSX in the same way that Nintendo’s GBAs can interconnect or interface with a GameCube. During a meeting of developers, Ken Kuturagi hinted at the fact that the PSP’s processing power will be 10 times that of the PlayStation, thanks to a 32-bit processor, in addition to enabling 3D images and stereo sound. The development tools were made available in early 2004. A number of development gateways exist between PS2 and PSP tools. This means that it will be easier for developers to create new titles thanks to a shorter and simplified learning curve. Several major publishers have already announced plans to market games for the PSP, including THQ, Koei and EA, while Sony could also promote the development of musical and video content. Sony plan to market accessories that would allow the PSP to work as a mobile phone, and even as a digital camera. The price of the PSP has not yet been set, but Chris Deering has said that it will be closer to 200 GBP than to 300 GBP. The price of the games should be somewhere between 20 and 60 EUR, while films will retail for between 20 and 30 EUR. Unknown in Europe and in the US, the Pocketstation is a handheld console comparable to Sega’s Dreamcast VMU. On the market since 1998, 4.9 million units have been sold. But, in July 2002, Sony announced that they were putting an end to the device’s production. By marketing a handheld console, Sony complete their product line, and cover the full range of gamers. The Japanese firm will have a line of three consoles, for three different locations and aimed at three complementary targets. The PSP handheld for youngsters, the PS2 (in the living room or the bedroom) for teenagers and the PSX (in the living) for the whole family.
Bandai’s Wonderswan line
Bandai has designed and markets a line of handheld consoles called Wonderswan. Three versions have been released: Wonderswan, Wonderswan Color and Wonderswan Crystal. The main element that distinguishes the Wonderswan from the GameBoy line is the ability to play both horizontally and vertically by turning the handheld. The latest addition to the Bandai line is the Wonderswan Crystal, which came out in July 2002. It is equipped with a 16-bit processor, a 2.1 inch LCD TFT screen that can display between 241 and 4,096 colours. Available only in Japan, the Wonderswan handhelds were never a match for Nintendo’s, selling only 3.5 million units in all. In February 2003, Bandai announced that it was putting an end to the console’s production.
32
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
There are other handhelds on the market, but none have been terribly successful: • NEC Interchannel’s Turbo Express System (PC Engine GT, in the US); • Tiger Electronics’ Tiger Game.com (USA); • Japanese firm SNK’s NeoGeo Pocket which has risen from the ashes and is now focused on developing and publishing games.
1.3. Video games and TV
Video games and TV make an ideal couple. Their efficiency is unmatched when combined with a console. But their relationship does not end there and currently involves three facets, in fact. • TV’s involvement in the area of video games appears to be going more and more by way of licences and the launch of video games whose characters, settings and plots have been borrowed from popular TV programmes; Coupling video games and TV is becoming increasingly prominent in the form of TV channels or programmes entirely dedicated to video games; And, lastly, since 1998, players involved in developing and publishing interactive products for the small screen have been able to adapt themselves to the constraints of digital TV decoders and to offer increasingly popular interactive TV services devoted to games.
• •
1.3.1. Hollywood cosying up to the video games industry?
Among the 20 top selling video games in 2002-2003, 5 were derived from recent feature films, most of which were produced by Hollywood. Up until now, Hollywood has been involved in the video game industry chiefly in two ways: • For a long time now, in the development of licences for making films into video games ("Star Wars", "James Bond") and vice-versa ("Tomb Raider", "Mortal Kombat"); • More recently, using existing talent (script writers, directors, actors) in the development and production of original video games ("True Crime: Streets of L.A.”), or a spin-off of a feature film ("Enter the Matrix"). Exchanges between the world of film and TV production and the video game world are now taking place higher up the chain: movie directors are lending their expertise to game developers in how to set up shots (John Woo has signed a contract with Sega and Tiger Hill), while actors (Jennifer Garner (Alias), Gary Oldman, Arnold Schwarzenegger) are lending their voices and image to the characters in some of the games. This cooperation is in fact beginning to take the form of a true alliance: • A number of recent films ("The Matrix", "Terminator 3", "Jurassic Park 3") appear to have been written with a future video game in mind. • In the same vein, Hollywood agencies are more and more on the lookout for projects which offer both a view of a film script and the various components of a video game, allowing for a simultaneous release of the movie and the game, like what was done with "The Hulk" in June 2003. It is worth noting that this trend is not taking place only in the US, but is infiltrating the world of TV as well. In February 2004, in the UK, BBC Worldwide announced that they had a project to develop a video game based on the popular police show, “Spook”, which tells the tale of three MI-5 agents. The game is scheduled for release at the same time as the programme’s third series. Developed by one of the programme’s writers, the game lets players control the MI-5 agents, and battle wits with an international crime ring.
2004 edition
© IDATE
33
Video games : nextgen gaming is on its way!
1.3.2.
TV programmes devoted to video games
The range of video games on offer is increasingly broad. This means that gamers, and particularly gamers’ parents, need to be properly informed about what they plan to buy. This is where TV programmes devoted to video games come in. They also allow certain TV channel operators to cement their viewers’ loyalty. At the same time, thanks to these programmes, video game publishers can offer existing content in a new gaming environment, and to reach a potentially large audience. This helps them reduce the costs of their advertising campaigns. The programmes being broadcast are largely geared to providing news and information (the latest releases, strategy, tips…), while some are also adventure series or interactive shows, most of which are produced in collaboration with websites that are also dedicated to video games. In North America, there are more and more TV programmes devoted to video games. In Canada, the firms Game Nation Inc. and Viewz both produce a weekly show. “Game Nation” is broadcast both over the Net and on cable. The programme focuses on the latest releases, tournaments, and testing games. In the US, Tech TV1, which is owned by Comcast, broadcasts a daily half-hour programme called “X Play.” The Game Show network offers a weekly two-hour show called “GSN Video Games” which picks up segments from the British programmes "Game Sauce" and "Gamer.tv". In late 2003, the channel Spike TV, whose target audience is young men, broadcast the first ever video game award show and, in the near future, plans to begin broadcasting a weekly two-hour show devoted to the latest industry news. For their part, MTV is planning to offer at least 5 programmes focused on video games ( "Ultimate Videogame Countdown.") UPN too appears to want to enter the video games on TV market, broadcasting a programme called “Game Over” starting in March 2004. This sitcom puts the Smashenburns family in a video game universe, after a long day at work, to tackle the problems of everyday life. And, lastly, 11 million households have access to the G4 channel whose entire line-up is dedicated to gaming (including a talk show and a reality show), broadcast 24 hours a day. In Europe, TV viewers also have the choice of several channels whose programming focuses on gaming. Italian group Digital Bros operates the Game Network TV channel. Founded in 1999, it was the first ever Free to air channel dedicated to video games and multimedia entertainment. Its programmes are broadcast round the clock in the whole of Europe (55 countries), using the Astra and Eutelsat satellite systems. In 2002, Game Network TV’s had a total viewership around Europe of 610,000. Launched in 1998 by Canal Plus in collaboration with Atari (since renamed Infogrames), French channel Game One also offers an entire line-up focused on video games. More recently, music channels MTV Networks Europe acquired a 50% share in the Game One specialty channel which is currently broadcast on cable and satellite in France, Poland, Hungary, North Africa and the Middle East. But its internationalisation is only just beginning2. Despite having a niche position, Game One is very popular among the 15 to 24-year old crowd and, in France alone, boasts a base of 3 million viewers. Game One offers just under ten programmes: DVD news, video game news, a high tech and gaming industry news magazine, reports on the most highly awaited releases, game previews, plays of the first level of video games, along with tips and cheats, patch downloads … North American channel, GSN, is part of British operator BSkyB’s basic package. It offers 55 hours a week of interactive programmes, along with programmes dedicated to video, of which some offer PCTV synergy (use of the PC to play on TV). Still in the UK, and like Spike TV in the United States, for the second year running, ITV in March 2004 broadcast the Game Stars video game award ceremony, as well as the final episode of the game "The Hunt for the UK’s Greatest Gamer". And lastly, the UK is also home to Gamer.tv, which produces programmes devoted to video games (a subsidiary of TWI, the TV branch of IMG and PCCW). Over the past two years, Gamer.tv has clocked
1 2
Broadcast to a base of 40 million viewers. MTV Networks channels in Europe (MTV, VH1, TMF, Nickelodeon) can be accessed by 110 million households in Europe
34
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
over 900 hours of programming, including the series "Game Sauce", "Gamer TV" and "Evolver". In Europe, the producer’s shows are available in Italy (Mediaset) and in Sweden (TV4).
1.3.3.
Interactive TV programmes dedicated to gaming
Along with electronic programme guides, games are undoubtedly the most popular interactive TV (iTV) application. Viewers perceive games on iTV as a new form of TV entertainment, in and of itself. In the UK, a survey conducted by BMRB reveals that 43% of viewers with access to a digital TV offer have already played an interactive game on their set at least once. This means that interactive TV services dedicated to gaming are now being considered by channel operators as an efficient means of fostering viewer loyalty, boosting their channel’s image and, at the same time, generating additional revenues. Consequently, virtually all digital TV platforms worldwide now offer iTV games.
Table 12: Leading digital TV platforms around the world which offer interactive TV games Digital platform Sky Digital Digital Plus Active Digital Canal Satellite TPS Noos Digital+l Sky Italia Stream Canal Digital TV Cabo Cyfra+ Matav ATT Digital Cable DirecTV DiSH Network Oceanic TW Rogers Cable Bell Express Vu DirecTV Latina Jupiter Telecommunications Austar Sky Television Type of platform Satellite Cable Cable Satellite Satellite Cable Satellite Satellite Cable/Satellite Satellite Cable/Satellite Satellite Cable Cable Satellite Satellite Cable Cable Satellite Satellite Cable/Satellite Cable/Satellite Cable/Satellite Operator BSkyB NTL Telewest Canal+ Group TF1, M6 UnitedGlobalCom Sogecable Telecom Italia, News Corp Telecom Italia, News Corp Telenor/Canal+ PT Multimedia Group Canal+ Group Dankner Investment ATT Broadband Hughes Electronic Corp. Echostar Time Warner Roger Communications, Inc. Bell Express Vu Galaxy Latin America Liberty Media, Microsoft, Sumitomo United Global Communications News Corp Source: IDATE The UK The UK The UK France France France Spain Italy Italy Scandinavia Portugal Poland Israel USA USA USA USA Canada Canada Latin America Japan Australia New Zealand Country
Features of the offer
There are several types of game on offer. The most common are: • Board games/game show games, running parallel to eponymous TV programmes ( "Who wants to be a millionaire?", "Wheel of fortune", "Monopoly”, "Jeopardy"…); • Classic puzzle, labyrinth, skill and brainteaser games ("Tetris", "Battleships", "Darts", "Clue"…); • Quizzes ("Movie Trivia Quiz", "Trivial Pursuit"…);
2004 edition
© IDATE
35
Video games : nextgen gaming is on its way!
• Games linked to sports (snowboard: "Scuzzboarding" on Sky Gamestar, volleyball: Channel 4, tennis: MTV, football: "FantaCalcio" Stream TV, "TV Goal" on Digiturk, "David Beckham soccer International Challenge" and "Dream Team Fantasy" on Sky Gamestar); • And, chiefly in the UK, adventure, action or combat games ("Tomb Raider", "The Hulk", "Space Invaders", "Pac-Man", "Duopolis”, "Dexter’s Robotic Revenge"…). In terms of graphic quality, the interactive TV games that are currently available are comparable to those offered on first generation consoles. But, in terms of playability, they are far less sophisticated than the games that are currently on offer on the PS2 or the Xbox. This lack of quality is expected to gradually be erased parallel to the deployment of new generations of digital set-top boxes (equipped with a hard drive) and of PVRs. New digital TV devices are likely to help interactive TV game developers to create games equivalent to those that run on the PS1, within the next 5 years. Digital TV platforms generally offer two types of access to interactive games: • • Interactive games on TV can be either offered on a stand alone basis, in other words supplied directly by game publishers or developers. Or they can be associated with a TV programme, either: - synchronous. Here, the game often has a direct relationship with the theme of the broadcast TV programme. Viewers can also access the game from the channel broadcasting the programme, and play along while watching the airing programme; - non synchronous. In this case, the TV programme simply offers a direct link to the game, 24 hours a day. The game usually carries the TV channel’s brand, but not always.
When a game is associated with a channel, it is generally designed for the following purposes: • as a cross promotion tool. By offering games related to a programme, or to the animation studio or popular characters on the channel (i.e. branded games), and by ensuring the promotion of interactive games on the air, channel operators ensure efficient cross promotion. Channel 4 recently launched a volleyball game that involved one of the channel’s presenters, Graham Norton. Children’s channels often use this technique as well. Kids’ channel Cbeebies offers access to a range of games, most of which star characters from the cartoons that air on the channel ("Bill and Ben", "Bob the builder"). More recently, and still in the UK, Discovery Kids launched their first interactive TV game, free of charge, based on the series "Mystery Hunters" and on the most popular Discovery Kids characters. This service, which can be accessed directly from the channel, lets children play while also watching the programme. French channel, TFOU, launched in May 2003, also lets their young viewers switch to an interactive universe using the remote. When it launched, toy manufacturer Mattel associated some of their brands to the games being offered to children; • as a means of heightening the effectiveness of advertising screens: when a commercial comes on, by hitting the remote control’s interactivity button, the main screen broadcasting the advert is shrunk to a quarter screen, and a game carrying the channel’s or the advertiser’s brand takes up the remaining three quarters. Instead of leaving their seat, like they generally do when commercials come on, viewers stay to play, keeping one eye on the advert being broadcast. This technique, referred to as "Break bridge", is becoming increasingly prevalent in the UK.
The leading interactive TV game publishers
The growing popularity of interactive TV games has naturally provided the incentive from most iTV applications developers to position themselves on this market segment. There are a fair number of players on this market, but the “incumbents” continue to hold the top spots.
36
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
Table 13: World’s leading interactive TV game publishers Country Shareholders Brand Broadcasting platform Sky Digital, NTL, Telewest, CanalSatellite, TPS Cablevision Echostar Revenue sources Advertising, Sponsoring, pay-per-play 11, 6 million households initialised 1.3 million gamers in the UK at the end of 2002
Static 2358
The UK
OpenTV
PlayJam
Two Way TV
The UK
NTL, Liberate, SMI Two Way TV Invest
NTL, Telewest, Austar, Advertising, Matev, TV Cabo and Subscription, Chello pay-per-play Pay-per-Play Subscription 22 million households initialised 200,000 subs. at the end of 2002 Sponsoring, Advertising
Visiware
France
3i
40 pays, TPS, Noos Canal FoxKidsPlay Satellite, Sky, Casema, LudiTV/PLAYinTV Digital+, Digiturk, Playin'Star DirecTV, Echostar, Nova… Sky Digital Telewest NTL Freeview
YooMedia
The UK
Columbia Pictures Digital YooPlay Foresight Technology VCT plc
Visionik
The UK
NDS
Sky Austar Communication Viasat TPS Visionik games and TDC Kabel TV portal UPC Digital Casema Com Hem DirecTV
Pay-per-Play Subscription Sponsoring Advertising
Buzztime USA Entertainment
NTN Communications
Buzztime Trivia Channel
Comcast Digital Cable Susquehanna Communication (Penn.) Time Warner Cable n.d. (Portland, Maine) Charter Digital Cable (via Digeo Inc.)
Source: IDATE
Interactive games on TV in the UK
A dual conclusion can be reached here: • Over the past two years, the UK has been home to a thriving interactive TV market; • The UK is undoubtedly the country where the offer of interactive TV games is the most extensive. BSkyB have been developing their interactive TV services platform since the autumn of 1999. Now, over 500,000 subscribers connect to Sky Active every day. Sky Active offers a range of services: news, shopping, betting, messaging… The Sky Gamestar portal, which provides access to interactive TV games, comes to complete BSkyB’s offering. By the end of 2003, over a million viewers were
2004 edition
© IDATE
37
Video games : nextgen gaming is on its way!
accessing the service each week. 40% of the gamers are female, and the average time spent playing is around 15 minutes. Sky Gamestar offers permanent access to some 30 games: BSkyB subscribers can access some of the most popular arcade games, ("Pac-Man", "Space Invaders", "Tomb Raider"), as well as simpler games ("Tetris", "Battleships", "Monopoly", Pong…), or can take part in quizzes that air alongside TV game shows ("Who wants to be a millionaire"). The titles on offer are often published by leading publishers from the video game industry, including Atari, Rage, Empire and Team 17. To play, BSkyB subscribers simply use their remote or, since December 2002, the Gamepad. The Gamepad is a wireless device that was designed specially for TV-based games. Among other things, it enables multiplayer games (up to 4). Its retail price starts at 19.99 GBP. Some games are offered free of charge, but most of those available on Sky Gamestar are subject to payment. Several models are offered: • Pay-per-play which, for most games, means a cost of between 50p and 75p per game, for an unlimited number of plays. But, to play "Who wants to be a millionaire?", viewers must pay 50p for each round, or 1 GBP for three rounds; • Time-based billing: to play "The Dream Team Fantasy", BSkyB charges gamers 25p a minute; • Viewers can also now buy a day pass for 1 GBP, which lets them play a series of games as often as they like during a 24-hour period.
Figure 6: How to use Sky Gamestar ?
How to use Sky Gamestar ?
Choose your fun from all of the great games available. There's something for everyone Select the game you want from the onscreen options. and select Sky Gamestar
Source: BSkyB
Included in BSkyB’s offer is the PlayJam gaming portal, developed and distributed by Static 2258, as well as Go Play TV (soon to be renamed YooPlay) published by YooMedia. YooMedia recently took over GoPlayTV which, up to then, had been published by Sony Pictures Digital. Go Play TV offers a permanent selection of 11 games via Sky Digital. PlayJam offers between 4 and 9 games which are refreshed, once or several times a week. PlayJam currently has a catalogue of 70 gaming engines which they are continually expanding thanks to
38
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
techniques that enable quick game refreshment (particularly the games’ appearance). Unlike their main competitors, Static 2258, which publishes PlayJam, has not based their business model on subscriptions, but rather on advertising and sponsoring. In April 2002, Static announced the launch on PlayJam of the first remote network game (a dart game) for interactive TV in the UK. The game was created using JIVE technology, developed by Pixel Technologies, and enables simultaneous access to the same interactive application for several players. On cable, NTL and Telewest also offer several interactive games, notably those published by TwoWay TV, Static 2258 (PlayJam) and YooMedia (GoPlay). YooMedia recently launched the Cartoon Network Interactive gaming portal on NTL Home. Since 2003, Britain’s digital terrestrial TV service, Freeview, has been offering viewers games connected to the channels that make up the service. The first on offer was a quiz relating to the Big Brother programme on Channel 4. Developing a game for interactive TV is not overly costly, and relatively quick to do. Faced with the structural inflation of development costs, and video games’ increasing time to market, some developers have set their sites on new gaming platforms, including interactive TV. The British market is therefore home to a sizeable number of developers, including some of the world’s leading interactive TV players.
Table 14: Leading iTV game developers in the UK Studio Denki Yoomedia Platforms Mobile/TV TV/Mobile Main titles "The Hulk" (Sky Gamestar) Yoo Play Cartoon Network interactive game portal Tetris (cable and Freeview)
Two Way TV Visionik (NDS) Static 2258 Minds Eye
TV/mobile TV TV TV MTV Doubles week Tennis (MTV) Chomp (Discovery Kids) Tetris Tomb Raider part I and II Banzai Pinball Space Invaders Clue Worms video games
Rockport Entertainment ltd Team 17
TV Consoles/TV Source: IDATE
2004 edition
© IDATE
39
Video games : nextgen gaming is on its way!
2. Publishers’ challenge: negotiating the sector’s globalisation
2.1. All grown up!
2.1.1. Electronic Arts, enjoying the lion’s share
Electronic Arts is miles ahead of their rival third party publishers, in terms of both sales and net profits. Sales (2.5 billion USD in fiscal 2003 and close to 3 billion USD in fiscal 2004) represent close to a quarter of the total revenues generated by the world’s top 20 game publishers. The company’s earnings have risen by over 40% since fiscal 2002. Take Two Interactive is in second spot with 1 billion USD in turnover for fiscal 2003: a gap of 1.5 billion USD in sales between the number one and two spots, then. This is the largest gap ever between EA and the runner-up. • Fiscal 2000: runner-up: Activision/gap of 850 million USD • Fiscal 2001: runner-up: Infogrames/ gap of 600 million USD • Fiscal 2000: runner-up: VUG/ gap of 880 million USD Compared to fiscal 2000, the companies which have made the most significant rise through the ranks have been: • Take Two Interactive, moving from 8th place to 2nd place • Konami, moving from 11th place to 5th place • Infogrames, moving from 6th place to 3rd place • THQ, moving from 9th place to 6th place. The most notable drops in the ranks belong to: • Vivendi Universal Games, moving from 4th to 12th place • Bandai, moving from 7th to 13th place • Titus Interactive, which is no longer ranked among the world’s top 20 publishers, after having been in 16th place in fiscal 2002 with 143.6 million EUR in turnover. Sega is currently ranked 7th in the world. In 2000, the Japanese firm had been near the top, but a portion of their revenues came from console sales. SquarEnix, born of the merger between Square Soft and Enix, occupies 8th place in the world ranking for fiscal 2003. Retrospectively, SquarEnix would have been in 3rd place in 2000. South Korea’s NC Soft ranks as the world’s 16th largest third party video game publisher.
Figure 7: Third party publishers’ market share in fiscal 2002-2003
Other 17.5% Ubi Soft 4.6% Square Enix 5.0% Sega 5.1% THQ 5.6% Vivendi Universal Infogrames Games 7.1% 5.8%
Electronic Arts 23.7%
Take Two Interactive 9.9% Activision 8.3% Konami 7.4%
Source: IDATE
2004 edition
© IDATE
41
Video games : nextgen gaming is on its way!
Table 15: World’s top 20 video game publishers, 2002-2003 Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Publisher 2000 2001 Variation 2001/2000 2002 Variation 2002/2001 2003 Variation 2003/2002
Sony Computer Entertainment Nintendo Microsoft Home & Entertainment Electronic Arts Take Two Interactive Activision Konami Infogrames Vivendi Universal Games THQ Sega SquarEnix Ubi Soft Capcom Namco Bandai Acclaim Koei NC Soft Eidos Midway
5,029.7 4 229.3 1 626.0 1 420.0 364.0 572.2 277.9 554.2 607.8 347.0 1 485.0 963.4 198.2 337.3 259.7 398.8 188.6 134.9 46.5 129.8 229.7
5 271.0 3 688.6 1 143.0 1 322.3 451.1 620.2 519.6 763.8 698.1 379.0 923.5 490.2 276.1 255.9 241.0 386.0 197.6 160.1 99.7 98.1 117.3
Source: IDATE
4.8% -12.8% -29.7% -6.9% 23.9% 8.4% 86.9% 37.8% 14.9% 9.2% -37.8% -49.1% 39.3% -24.1% -7.2% -3.2% 4.7% 18.7% 114.2% -24.4% -48.9%
8,004.9 4 424.7 2 453.0 1 724.7 793.9 786.4 697.1 953.6 843.7 480.5 678.7 495.8 392.0 359.2 283.3 346.9 268.7 191.7 123.7 85.9 190.4
51.9% 20.0% 114.6% 30.4% 76.0% 26.8% 34.2% 24.9% 20.9% 26.8% -26.5% 1.1% 42.0% 40.4% 17.5% -10.1% 36.0% 19.7% 24.1% -12.4% 62.3%
7 616.6 4,020.3 2 748.0 2 482.2 1,037.1 864.1 769.7 744.6 606.7 584.5 531.2 522.0 481.3 400.8 338.7 304.7 250.0 213.8 133.1 100.9 92.5
-4.9% -9.1% 12.0% 43.9% 30.6% 9.9% 10.4% -21.9% -28.1% 21.6% -21.7% 5.3% 22.8% 11.6% 19.6% -12.2% -7.0% 11.5% 7.6% 17.5% -51.4%
42
© IDATE
2004 edition
Video games : nextgen gaming is on its way!
Table 16: World’s top third party publishers, fiscal 2002-2003
Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Publisher Electronic Arts Take Two Interactive Activision Konami Infogrames Vivendi Universal Games THQ Sega SquarEnix Ubi Soft Capcom Namco Bandai Acclaim Koei NC Soft Eidos Midway
2000 1 420.0 364.0 572.2 277.9 554.2 607.8 347.0 1 485.0 963.4 198.2 337.3 259.7 398.8 188.6 134.9 46.5 129.8 229.7
2001 1 322.3 451.1 620.2 519.6 763.8 698.1 379.0 923.5 490.2 276.1 255.9 241.0 386.0 197.6 160.1 99.7 98.1 117.3
Variation 2001/2000 -6.9% 23.9% 8.4% 86.9% 37.8% 14.9% 9.2% -37.8% -49.1% 39.3% -24.1% -7.2% -3.2% 4.7% 18.7% 114.2% -24.4% -48.9%
2002 1 724.7 793.9 786.4 697.1 953.6 843.7 480.5 678.7 495.8 392.0 359.2 283.3 346.9 268.7 191.7 123.7 85.9 190.4
Variation 2002/2001 30.4% 76.0% 26.8% 34.2% 24.9% 20.9% 26.8% -26.5% 1.1% 42.0% 40.4% 17.5% -10.1% 36.0% 19.7% 24.1% -12.4% 62.3%
2003 2 482.2 1,037.1 864.1 769.7 744.6 606.7 584.5 531.2 522.0 481.3 400.8 338.7 304.7 250.0 213.8 133.1 100.9 92.5
Variation 2003/2002 43.9% 30.6% 9.9% 10.4% -21.9% -28.1% 21.6% -21.7% 5.3% 22.8% 11.6% 19.6% -12.2% -7.0% 11.5% 7.6% 17.5% -51.4%
Source: IDATE
2004 edition
© IDATE
43
Video games : nextgen gaming is on its way!
Most video game publishers’ fiscal year ends on 31 March, with the exception of Acclaim (31/08), Eidos (31/06), Microsoft (31/06) and VUG (31/12). The ranking provided here corresponds to the publishers’ fiscal year, despite the different year end dates. Sony Computer Entertainment and Nintendo’s turnover includes revenues from both publishing and marketing consoles. Their year end reports do not provide a breakdown of the two. SCE, however, does not include the revenues generated by massively multiplayer games whose operation is handled by Sony Online Entertainment, a Sony Pictures subsidiary. Microsoft’s video game revenues include earnings on publishing, console sales and software sales to consumers (Encarta encyclopaedia, Money…).
2.1.2.
Development strategy
All of the major publishers have in-house development structures. It is even the route that some companies took to gain entry to the video game sector. For others, the incorporation of a development structure is generally the result of growth of their publisher operations. A publisher that owns its own studios also relies on third party publishers, chiefly to flesh out its catalogue. Growth of a publisher’s in-house development operations now goes almost exclusively by way of the takeover of independent studios. The studios taken over by a publisher will remain more or less autonomous in their choice of projects, and the way they are run. A prime example here is the Blizzard Entertainment studio, now a VUG subsidiary, and creator of the Warcraft, Starcraft and Diablo series. Having gained a solid reputation in the gaming community before being taken over by Vivendi Universal, Blizzard was able to maintain their independence from the parent company’s executive branches, and manage their teams and projects as they see fit. The same goes for Naughty Dog, now an SCE subsidiary, Neversoft, an Activision subsidiary, Rare Ltd, a Microsoft subsidiary, and for Infogrames subsidiary, Shiny Entertainment. It should also be said that independent studios enjoy powerful enough brand name recognition to have significant leverage when choosing among the projects submitted to them by publishers, and even to finance their own preproduction of titles that will be snapped up by leading publishers. BradyGames, Argonaut Games, BullFrog, Cyan Worlds, Epic MegaGames, Eurocom Entertainment, Factor 5, Firaxis Games, Id Software, Ion Storm, Monolith Production, Pandemic Studios, Relic Entertainment, Valve Software and Vicarious Vision are among this group. 128-bit consoles led to a considerable rise in development costs and time to market. But this holds true for any technological leap triggered by increasingly powerful devices, be it home consoles, mobile phones or personal computers.
Table 17: Evolution of pre-production & development schedules Platform Development schedule Pre-2000 Home console Handheld console Mobile phone Personal computer 16-24 months 6 months 15-18 months In 2004 18-24 months 6 months 5- 10 months portage: 1 month 15-18 months Pre-production Pre-2000 1-2 months 4-5 months In 2004 5-6 months 2-3 months
Source: IDATE, based on industry data
44
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Table 18: Effect of technological shifts on production teams Platform Human resources – full time equivalent Pre-2000 Home console Handheld console Mobile phone Personal computer 15-30 4-6 10-15 Source: IDATE, based on industry data In 2004 50 6-7 4-6 portage: 2 people 15-20
Table 19: Effect of technological shifts on development budgets (K EUR) Platform Pre-production budget Pre-2000 Home console Handheld console Mobile phone Personal computer 100 150 In 2004 500 75 Total development budget Pre-2000 2 500 3502,000 In 2004 5 to 8,000 600 150 / 1 to 10 per portage 1,000 500
Source: IDATE, based on industry data
2.1.3.
Editorial strategy
The arrival of four 128-bit consoles shook up the publishing and development sector. To reach a greater number of gamers, publishers needed to create a version of the same game for several platforms. Leading the pack here is Electronic Arts. The company’s financial resources are such that they can sustain the development of games for all available consoles, including handhelds. EA even goes so far as programming worldwide simultaneous marketing on all platforms, although it is not systematic. This type of operation is only undertaken for titles with massive commercial potential. Such is regularly the case with games based on feature films, such as Harry Potter, or recurring titles, such as FIFA, where a new version is released every year. The production cost for a game can run into the tens of millions of dollars (over 20 million USD for SquarEnix’s Final Fantasy, and Konami’s Metal Gear Solid), not to mention the marketing costs. The average cost of producing a console-based game is 5 million EUR. To earn a profit on a game, publishers now need to sell several hundred thousand copies, and even several million for the more costly ones. While American and Japanese companies can rely on their home markets, European publishers need to woo gamers on other continents as well. Here, they are inclined to invest more in the North American than in the Japanese market whose gamers are more difficult to target and keep faithful. The salvation for European publishers now lies in outsourcing all or a portion of their operations overseas. Fiscal conditions are more advantageous and public authorities, notably in Canada, have set up attractive policies for video game designers. The constraints involved in globalising the video game sector require an editorial policy adapted to the largest possible population. A catalogue therefore has to contain adventure, action, role playing and sports games, which provide stimulation for both hard core and occasional gamers, for the very young and older gamers, for both men and women. This is the strategy that most publishers have now adopted, with varying degrees of success. Publishers with the greatest chance of success are those which have the financial means to back production of a wide variety of games. Rotating the titles is also a crucial part of a publisher’s strategy. A game’s shelf life ranges from a few weeks to a few months. As soon as a game’s lifecycle in shops has ended, publishers need to have
2004 edition
© IDATE
45
Video games : nextgen gaming is on its way!
another exciting game lined up to replace it. This increasingly short lifecycle allows publishers to stay front and centre, always in gamers’ sights. To reach the maximum number of gamers, players focus their efforts on expanding their catalogues to include all genres. This trend was consolidated with the arrival of 128-bit consoles. Sports are a particularly strategic genre for all publishers. Five of the most ambitious are vying for top spot in this area: Konami, Sega, Microsoft, Sony and EA. In the second quarter of 2004, Microsoft and Sony Computer Entertainment announced that they would be pulling the plug on some of their recurring sports titles in 2005. Both publishers want to give their teams time to develop and improve their games which have been unable to compete with those produced by top dog, EA. In 2002, Sega had signed a partnership agreement with sports TV channel ESPN. Sega was hoping to give birth to a brand of sports games in their catalogue, but the games that Sega marketed through the ESPN franchise were unable to compete with EA’s games. Only Konami is giving the leader a run for its money, thanks in particularly to ISSX Pro Evolution Soccer, and has forced EA to rethink the design of their popular FIFA game.
2.1.4.
The next technological turn
The next generation of consoles is scheduled for release in 2006, bringing with it a range of technological features that developers will need to master. This naturally involves an accelerated learning curve on the new development tools supplied by console manufacturers. In the past, this step has sometimes been underestimated which, in turn, has had a considerable impact on production budgets. During the last campaign, the technological turning point was particularly difficult to negotiate for some game designers, their financial backers and publishers. A good many of them are still scarred by the experience, while others were forced to close up shop. But the technological advancements and their budgetary impact are not the only elements that game designers have had to take into account. Software sales in the video game sector are highly seasonal, and hardware sales are affected by the consoles’ lifespan. This last element has now become a key factor in the business. The video game market is driven by console sales and, almost simultaneously by the sale of the games themselves. Gaming software is subject to two types of seasonality. The first corresponds to year end sales: the Christmas season during which publishers will earn as much as 60% of their annual sales. This seasonality applies to all gaming software, regardless of platform. A console’s lifespan is between 5 and 6 years. Sony, however, are attempting to prolong this longevity by recycling their PlayStation into PSOne, their PS2 into PSX. The Japanese giant thereby hopes to be marketing the latest version of their console for 10 years. During the first years of a console’s life, households will have a high rate of equipment. Sales will begin to drop during the fourth year, a period during which console manufacturers begin to pave the way for the release of the next generation of machines. The release of each new home console means a new catalogue of games, the new titles taking advantage of the machine’s new technological features. When a console is launched, 20 to 40 new games are marketed alongside it. The catalogue grows only gradually, and cannot be considered consequential until roughly 18 months after the console’s release. During the fifth year of a console’s shelf life, software sales begin to drop, and gamers are by that time beginning to look forward to the release of the next gen console within the next two years. The sales cycle for games generally runs the same course as for the consoles themselves, but running 6 to 12 months behind. Added to this, the growth curve of the console software market is longer than the curve for hardware sales. Publishers and developers are caught in the consoles’ growth cycle, and must conform to the demands of a market which is increasingly competitive from a design and publishing standpoint: quality of the products, time to market, production costs, ubiquity of licences, increased marketing budgets… Technological leaps require players along the value chain to adapt their marketing tools, the size of their investments, their distribution structure… A great many players were incapable of adapting their operations, and either closed up shop or were taken over by the few lucky survivors. To limit the effects of the consoles’ lifespan, Sony has committed to making past generations of games compatible with the new consoles. Begun with the PlayStation and the PS2, this compatibility will no doubt be prolonged between the PS2 and the PS3. This helps to cement gamer loyalty and to
46
© IDATE
2004 edition
Video games: NextGen gaming on its way!
extend the games’ longevity, and can help counteract the drop in sales that inevitably takes place in year 5 or 6 of a games cycle. A gamer will naturally be more inclined to buy a game for PS2 if he knows that he will be able to play it on his new PS3. The goal for manufacturers could in fact be to make users forget about the hardware and its lifecycle, so that the software market is no longer subject to ups and downs. But, in this highly competitive sector, market share is won with the hardware, and console producers need to tout their machines’ features and functionalities. Consumers cannot avoid being aware of the console itself and, consequently, its lifespan. The PC gaming software market is growing slowly but steadily. It will continue to expand in the coming years since personal computers continue to be the sole platform for several categories of gaming: massively multiplayer games (although they are beginning to emerge on home consoles as well, e.g. Final Fantasy), real time strategy games which need a keyboard to be played, Flash games, online titles for casual gamers… But consoles are establishing themselves more and more as the leading edge gaming platform, even among gamers who own a PC. Because of this, we can predict that when the next generation of consoles and games is released, households will elect to devote a sizeable share of their entertainment budgets to them, at the expense of other forms of entertainment and PC games. This market could therefore experience a seasonality opposite to the one experienced by consoles.
2.1.5. The sector’s concentration
Since 2001, over 140 operations have been recorded in video game sector trade papers. The list presented below is not exhaustive. The operations break down as follows: • • • • 53 acquisitions; 45 businesses folded; 32 businesses created; 5 mergers.
27 operations were recorded in 2001, 52 in 2002, 39 in 2003 and 17 in 2004 (at the end of April). In 2002, over half the operations involved businesses folding. 62 operations were recorded in North America and 62 in Europe, as well.
2004 edition
© IDATE
47
Video games : nextgen gaming is on its way!
Table 20: Principal acquisitions in the video game industry since 2001 Buyer Microsoft (USA) Microsoft (USA) Sony (Japan) Ubi Soft (France) Ubi Soft (France) Infogrames (France) Sony (Japan) Pacific Century Cyber Works (Japan) Digital Illusion (Sweden) Electronic Arts (USA) SquareSoft (Japan) Unique Development Studios (Sweden) Activision (USA) Electronic Boutique (USA) THQ (USA) Argonaut Games (The UK) Activision (USA) Infogrames (France) Infogrames (France) Mindscape (France) THQ (USA) Sony (Japan) THQ (USA) Activision (USA) Argonaut Games (The UK) Microsoft (USA) Emme (France) VUG (France) Take 2 Interactive (USA) Doki Denki (France) Mad Catz (USA) Rebellion (The UK) Take 2 Interactive (USA) Vicarious Visions (USA) Nokia (Finland) Point Group Holdings (USA) Sales Curve Interactive (The UK) Activision (USA) Electronic Arts (USA) Target Ensemble Studio (USA) Turbine Entertainment Software (USA) Naughty Dog (The UK) Blue Bytes (Germany) The learning Company (USA) Hasbro Interactive (USA) Red Zone Interactive (USA) VR-1 Sandbox (USA) Black Box Games (Canada) Quest (Japan) Add Games Treyarch Invention (USA) Score Games (USA) Rainbow Studio (USA) Particle System (The UK) Shaba Games (USA) Eden Studios (France) Shiny Entertainment (USA) Montparnasse Multimédia (France) Outrage Entertainment (USA) Incog Inc. (USA) ValueSoft (USA) Gray Matter (USA) Morpheme (The UK) Rare (The UK) Modern Games (Germany) Massive Entertainment (Sweden) Barking Dog Studios (Canada) Delphine Software (France) GameShark (USA) AudioMotion (The UK) TDK Mediactive (Germany) Intrinsic Alchemy (USA) Sega.com (Japan) Veegeez.com LLC (USA) Pivotal Games (The UK) Infinity Ward (USA) Studio 33 (The UK) Date 2001 2001 2001 2001 2001 Jan-01 Jan-01 Feb-01 April-01 June-01 July-01 July-01 Oct-01 Oct-01 Nov-01 Jan -02 April-02 April-02 April-02 April-02 April-02 May-02 May-02 June-02 July-02 Sept-02 Oct-02 Oct-02 Nov-02 Jan-03 Jan-03 Feb-03 Feb-03 May-03 Sept-03 Sept-03 Sept-03 Oct-03 Oct-03 Dec-03
Dynamic Animation Systems Entertainment (USA) Freedom Games (USA)
48
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Table 20: Principal acquisitions in the video game industry since 2001 (cont’d) Buyer Activision (USA) Activision (USA) MC2 Entertainment (France) Ubi Soft (France) Hip Interactive (Canada) Electronic Arts (USA) BAM! Entertainment (USA) Eidos (The UK) Ubi Soft (France) SquarEnix (Japan) Rockstar Games (Canada) THQ (USA) Kuju Entertainment (The UK) Target Luxoflux Corp. (USA) Z-Axis (USA) Wanadoo Edition (France) Tiwak (France) Light & Shadow Productions (France) NuFX (USA) VIS Interactive (Scotland) Io Interactive (Denmark) Wolfpack Studios (USA) UIEvolution (USA) Mobius Entertainment (The UK) Relic Entertainment (Canada) Wide Games (The UK) Source: IDATE Table 21: Principal mergers in the video game industry since 2001 Buyer Jaleco Entertainment (USA) SquareSoft (Japan) ConnectivCorp (USA) MC2 Entertainment (France) Epic Games (USA) Target VR1 Entertainment and Jaleco USA Enix (Japan) Majesco Sales (USA) Microïds (France) Scion Studios (USA) Source: IDATE Table 22: Principal business closures in the video game industry since 2001 Company No Cliché (Sega - France) FASA Corporation (USA) Topware (Germany) Katarsys (France) Amazing Studio (France) Bellevue Studio (EA - USA) Captain Interactive (France) Caravan (France) Chaman (France) Dramaera (France) Gamesquad (France) Hermione Interactive (France) Date 2001 Jan-01 Feb-01 Oct-01 2002 2002 2002 2002 2002 2002 2002 2002 Date Oct-02 April-03 Dec-03 2003 March-2004 Date 2003 2003 2003 Jan-04 Feb-04 Feb-04 Feb-04 March-04 March-04 March-04 April-04 April-04 May-04
2004 edition
© IDATE
49
Video games : nextgen gaming is on its way!
Table 22: Principal business closures in the video game industry since 2001 (cont’d) Company Kalisto (France) Lankhor (France) Nemosoft (France) Planet Interactive (France) Polygon Studio (France) Rayland Interactive (France) T-Bot Interactive (France) In Utero (France) Acclaim Studios Teeside (USA) Probe (Acclaim - The US) 3DO (USA) Appeal (Belgium) Trilunar (USA) Presto Studio (Spain) Binary9 (The UK) Westka Interactive (Germany) Bellevue Studio (EA - The US) Cryo (France) Acclaim Studios Salt Lake City (USA) 4X Studios (France) 4X Technologies (France) Irvine Pacific (EA - The US) Rage Software (The UK) Westwood Studios (EA - The US) Milipitas (Midway Games - The US) Œil pour Œil (France) Data East (Japan) Computer Artworks (The UK) Capital Entertainment Group (USA) Digitalo Studios Titus Interactive Studio SARL (France) Origin System (EA - The US) Doki Denki (France) Source: IDATE Date 2002 2002 2002 2002 2002 2002 2002 Feb-02 May-02 May-02 June-02 August 2002 Aug-2002 Sept-02 Oct-02 Oct-02 Nov-02 Nov-02 Dec-02 2003 2003 Jan-03 Jan-03 Jan-03 Feb-03 March-03 July-03 Oct-03 Nov-03 Nov-03 Jan-04 Feb-04 March-04
50
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Table 23: Principal start-ups in the video game industry since 2001 Company G2Interactive (USA) iDeal Games (USA) Lodestone Games (USA) Three Rings (USA) Vivendi Universal Interactive (USA) Konami Online (Japan) THQ Wireless (USA) Carbon Entertainment (USA) Acclaim Manchester (The UK) InXile (USA) Trauma Studios (USA) Turtle Rock Studios (USA) Sigil Games Online (USA) Destineer Studios (USA) Ozo Interactive (USA) Black Label Games (USA) Tigon Games (USA) Dream On Studio (France) Circle Studio (The UK) Deep Silver (Germany) Hra01 Ltd. (Czech Republic) Infinite Interactive (Australia) MC2 Entertainment (France) NEC Interchannel, Ltd. (Japan) Skylab Entertainment (USA) Datura Studio (France) Flagship Studios (USA) Level of Detail (France) White Birds (France) Beautiful Game Studios (The UK) Emogence LLC (USA) Wideload (USA) Source: IDATE NEC (Japan) VUG (France) Acclaim (USA) Vivendi Universal (France) Konami (Japan) THQ (USA) Parent company Date 2001 2001 2001 2001 2001 Jan-01 May-01 June-01 2002 2002 2002 2002 Jan-02 June-02 July-02 Aug-02 Nov-02 Dec-02 2003 2003 2003 2003 2003 Feb-03 March-03 Sept-03 Oct-03 Oct-03 Oct-03 2004 March 2004 April-04
2.1.6. Development of online operations
Publishers’ initiatives to invest in the internet have dwindled somewhat. Not that the Web has lost its appeal, but the dotcom debacle back in 2000 put a damper on most players’ enthusiasm. The industry has become more reasonable, economically, as instigators of web-based projects are aware that they can no longer anticipate usage, nor solvency of demand. And so publishers have put an end to their unprofitable operations. Infogrames, for instance, pulled out of their online gaming platforms: even though they were popular, users were not supporting the site’s business model. Electronic Arts
2004 edition
© IDATE
51
Video games : nextgen gaming is on its way!
stopped operating their title Motor City Online, Microsoft put an end to their massively multiplayer game, Mythica, Ubi Soft stopped developing Matrix Online, VUG is selling off their online gaming subsidiary, Flipside. That said, over the past two years, video game publishers’ online strategies have been taking shape, the following trends being the most prevalent: • Developing of a showcase portal for the publisher that presents and markets their entire catalogue. Some publishers, including Nintendo and SquarEnix, also offer a dedicated website for each game. • Developing games that can be played online, first on PC, this option is becoming increasingly common on consoles. • Porting popular home console games to an online PC version: Tony Hawk Pro Skater (Activision), Return to Castle Wolfenstein (Activision), Resident Evil Outbreak (Capcom). • Managing an online gaming portal, offering matchmaking, access to massively multiplayer games, Flash games, e-commerce services… The most outstanding examples here are the sites run by Microsoft (www.zone.com), Sony (www.station.com), VUG (www.battle.net) and SquarEnix (www.playonline.com). • Developing, publishing, distributing and managing massively multiplayer games. In addition to Sony, Microsoft and Electronic Arts which are already involved in MMG, the past two years have been marked by the arrival of several players who had been playing it safe. Infogrames has decided to invest in the sector, Ubi Soft has signed a series of publishing and distribution agreements for Europe with Verant Interactive, a Sony Online Entertainment subsidiary and creator of Everquest. Among other things, the French publisher plans to market a massive version of Myst. SquarEnix offers a massively multiplayer version of their core game, Final Fantasy, on PC and on the PS2 console. VUG enters the fray with a game drawn from their Warcraft licence (World of Warcraft). Publisher EA, which is already indirectly involved in MMG through their Origin System subsidiary, is getting involved directly by porting the very popular Sims game, along with the title Earth & Beyond. The MMG market is fiercely competitive. Some 20 titles are available and only a handful can boast having reached their target. The cost of entering the market is high, and the gamer community is merciless with the games it tests. It is not uncommon for a game to be trashed very quickly, since news travels quickly from gamer to gamer by word of mouth. After having invested massively in this segment, some publishers are pulling back or pulling out. Microsoft has put an end to Mythica, and is selling the Asheron’s Call franchise to its developer, Turbine Software, Sony Online Entertainment has stopped developing Sovereign. • Making old offline titles available for online gaming. Electronic Arts, for instance, offers 17 titles, including FIFA Soccer 97 and NHL 97.
2.1.7.
Developing mobile handset operations
Game publishers are displaying a growing interest in mobile devices. Two years ago, a string of titles for PDA came onto the market, while 2003 was market by the rising number of games available for mobile phones and web-enabled portable devices. The success of i-mode and Nokia’s arrival on the scene have both had a clear impact on the market. For Nokia’s N-Gage, publishers have opted to port their already popular titles, rather than invest in creating new ones for a device whose future is uncertain. EA is banking on the N-Gage and its future versions, having signed an agreement that plans for the release of some 20 titles in the coming year. Others, like Infogrames, are waiting to see how the situation evolves, remaining cautious and porting only a small number of games to mobile devices. Several publishers have created a subsidiary in charge of developing and/or publishing titles for mobile devices: Bandai Wireless, THQ Wireless, Konami Online, Sega Mobile. Others have preferred to signed agreements with players who are already present on the mobile device value chain: content providers, service providers, technology providers, distributors and even telcos. Noteworthy here are the deals that have been struck between: EA & Jamdat, EA & Ziosoft, EA & Nokia, Capcom & NTT Docomo, Capcom KDDI, Bandai & ATT Wireless, Infogrames & Jamdat, Konami & NTT Docomo, Konami & Verizon, Konami & ATT, Konami & Vodafone, Sony & Verizon Wireless, SquarEnix & NTT DoCoMo, SquarEnix & UIEvolution, THQ & Orange, THQ & Vodafone, THQ & ATT, Sprint and Verizon, VUG & In-Fusio... Of note too is the connection between Ubi Soft and Gameloft, which have a common shareholder (Guillemot Corporation).
52
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Some publishers are not confining themselves to porting their titles to mobile handsets, getting involved in distribution as well. Here, THQ and Konami have joined forces to create a video game download service on i-mode. THQ has gone one step further by also operating a website devoted exclusively to their games for mobiles (www.madtap.com). Even though incumbent video game publishers are releasing more and more titles for mobile devices, their catalogues are still fairly small, comprising between 5 and 8 games.
2004 edition
© IDATE
53
Video games : nextgen gaming is on its way!
2.2. Strategic analysis of the world’s top 15 publishers
Activision
USA
Founded in 1979, Activision is an American company that develops, publishes and distributes interactive gaming software for PC and consoles. Most of the titles that they market are developed by studios, although agreements are signed with independent developers as well. In the US, this California-based firm relies on a direct distribution strategy with retailers.
Contact info
Activision 3100 Ocean Park Boulevard Santa Monica, California 90405, USA Tel.: (310) 255-2000 Fax: (310) 255-2100 http: //www.activision.com/
Executive body
President & Chief Operating Officer Ronald DOORNINK Chairman & Chief Executive Officer Robert A. KOTICK Co-Chairman Brian G. KELLY 1,214 employees around the world on 31 March 2003.
Shareholders
Directors Putnam Investment Ark Asset Navellier & Associates 30.00% 8.23% 5.57% 5.48%
Organization
Activision flow chart
Activision Publishing International Distribution Foreign
International presence
The US, Canada, France, Belgium, the UK, Germany, the Netherlands, Australia, Japan, Scandinavia.
Development
Marketing Distribution
Online operations Source: Activision
Economic & financial performance – Fiscal year ending 31/03
Turnover and net profits - million USD 1999 2000 2001 2002 2003
Turnover Net profits
436.5 14.9
572.2 -34.1
620.2 20.5
786.4 52.2
864.1 66.2
Source: IDATE, based on Activision data
54
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Evolution of financial performance – million USD
1 000 900 800 700 600 500 400 300 200 100 0 -100
1999
2000 Turnover
2001
2002 Net profits
2003
Source: IDATE, based on Activision data
Steady growth
Activision generated a turnover of 864.1 million USD in fiscal 2002-2003, which represents 9.8% growth on the year, and a 39.3% increase in two years. Following a shaky year in fiscal 1999-2000 (due to a choice of rapid external growth), Activision is reporting profits for the third year running. The company’s sound financial health is a reflection of the strategic choices made since 2001, targeting investments in quality games, rather than in companies. In late January 2004, Activision announces third quarter net profits of 77 million USD (versus 44 million USD for the same period the previous year). For fiscal 2003/2004, the group has targeted a turnover of 910 million USD.
Turnover by region - million USD 2002 2003
Breakdown of operations
Turnover in North America Turnover in Europe Turnover in other zones
404.900 368.800 12.700
432.300 413.100 18.700
Source: IDATE, based on Activision data
Growth of turnover by region - million USD
500 450 400 350 300 250 200 150 100 50 0 2002 Turnover in North America Turnover in other zones
Source: IDATE, based on Activision data
2003 Turnover in Europe
2004 edition
© IDATE
55
Video games : nextgen gaming is on its way!
Breakdown of turnover by region - fiscal 2003
2%
48%
50%
Turnover: North America Turnover: other zones
Turnover: Europe
Source: IDATE, based on Activision data In 2003, generating 432.3 million USD in turnover, North America remains Activision’s number one market (50%). Activision has been beefing up its presence on European markets since 2002, generating a turnover in fiscal 2002/2003 of 413.1 million USD.
Breakdown of turnover by platform - fiscal 2003
15%
85%
Turnover: consoles
Turnover: PC
Source: IDATE, based on Activision data
Sales of console games generated a turnover of 738.7 million USD for Activision in fiscal 2002-2003, or 85.4% of total sales (versus 75.3% in 2001). The firm is focusing its editorial policy on Sony consoles (PSX, PS2 and, soon, the PSP). PC-based game sales having been dropping since 2001. In 2003, they generated a turnover of 125.4 million USD versus 153.4 million USD in 2001.
Stock market information
Activision is quoted on NASDAQ (NASDAQ: ATVI). Activision’s market value was 1.5 billion USD in January 2004. In March 2003, Activision launched a buy-back plan for its stock, worth a total 350 million USD. This is a follow-up to the operation begun earlier in the year, when the company bought back 3.3 million shares.
56
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Positioning on the value chain
Development
Development & publishing subsidiaries
Since 1997, Activision has been accelerating its external growth. The company undertook a series of 15 takeovers between 1997 and the end of 2003: Activision Value, Neversoft Entertainment (Tony Hawk's Pro Skater), Treyarch, Take Us!, Raven Software (Soldier of Fortune), CentreSoft, NBG Distribution, Head Game Publishing, CD Contact Data, Expert Software (specialised in publishing educational and low cost software), Elsinor Multimedia, Grey Matter, Z-Axis and Luxoflux Corp (True Crime). The latest acquisition, the Infinity Ward studio, took place in October 2003. In April 2002, Activision acquired California-based development studio, Shaba Games which was behind Shaun Murray's Pro Wakeboarder for PS2, Xbox and GameCube. Previously, Shaba and Activision had worked together on Mat Hoffman's Pro BMX and Tony Hawk Pro Skater 3 on PSX. In June 2002 Activision acquired development studio Grey Matter, which created Return to Castle Wolfenstein. Activision already owned 40% of studio, so took advantage of its option to take full control of the firm. To increase the quality of its games, Activision has often called on third party developers specialised in a given market segment: Rainbow Studios (since taken over by American publisher, THQ) for the development of Matt Hoffman's Pro BMX; Climax for rally simulations in its Race of Champions game; GameSpy Industries to develop multiplayer properties for Tony Hawk’s Pro Skater™ 3, the firm’s first title for PS2; In December 2002, Activision announces an exclusive agreement for the development of real time strategy games by the company Stainless Steel Studios, and this for a period of several years. Canadian studio Beenox developed Tony Hawk's Pro Skater 4 for Activision, which was released on PC and Macintosh in August 2003. Activision creates games based on extreme sports stars: Tony Hawk (skateboarding), Matt Hoffman (BMX), Shaun Palmer (snowboarding), Kelly Slater (surfing), Shaun Murray (wakeboarding). In 1998, the Santa Monica-based firm established a partnership policy with owners of popular franchises, and earned the right to exploit the following brands: Star Trek, for a 10year period (Viacom Consumer Products), Disney Films (Toy Story 2, A Bug's Life and Tarzan). Also in 1998, Activision signed an agreement with comic book publisher Marvel, and has created games based around the top heroes (X-Men, Spider-Man, Iron Man, the Fabulous Four). In January 2003, Activision and Marvel extended their partnership to 2009. And, in 2002, the company bought the rights to the world famous Quake II and Quake III Arena. From Michelin, the studio obtained the licence to Race of Champions (car rally). Activision is a preferred publishing and development partner for games derived from films produced by Sony (Tenchu). Along with Sony, Activision was also awarded a licence to create a video game based on the Spiderman movie in 2001. In December 2003, Activision announces the signature of a partnership agreement with US production giant, DreamWorks, to develop and publish video games (on home console, handheld and PC) based on DreamWorks’ new film Shrek 2. In February 2004, Activision acquires the licence to develop the Shrek 2 game, based on the film of the same name from TDK Mediactive (taken over by Take Two Interactive). The studio Luxoflux will develop the game for new generation consoles, while Vicarious Visions will develop a version for GBA and Amaze Entertainment for PC. Activision also holds the exclusive rights for the development and publication of video games based on DreamWorks’ next three animated features, to be released in 2004 (Shark Tale, Madagascar and Over the hedge).
Development partnerships
Licensing policy
2004 edition
© IDATE
57
Video games : nextgen gaming is on its way!
Publishing
Platforms
The group has adopted a strategy of publishing for all gaming platforms. Activision publishes more titles for PC than for Mac computers. The company co-publishes certain games with the firm Aspyr (Tony Hawk's Pro Skater 4 in 2003), which specialises in video games for Macintosh. On the console market, Activision develops and publishes games, particularly for Sony’s PS2. It is, however, very involved in publishing for Microsoft’s Xbox as well, having published the console’s most popular games for its launch in the US and in Europe. In November 2001, Activision announces that it will be publishing Medieval Total War (exCrusader Total War), the next game to come from Creative Assembly, after Shogun Total War. Released in 2002, it can be played in both solo and multiplayer mode. In March 2003, Activision signs a multi-year publishing contract with Peter Molyneux for the rights to The Movies, to be released on PC and consoles in 2004. In April 2003, Activision obtains the exclusive international publishing rights to the upcoming games produced by Valve (notably Day of Defeat). There is still no word on whether Team Fortress 2, Half Life 2 and Counter Strike 2 will be included in the deal. The types of games that Activision publishes cover the following themes: action, adventure, sports, racing, role playing, strategy and simulation. The games are aimed at children (Toy Story), teenagers (Heretic), and grown-ups (Cabela's Big Game Hunter). Activision centres its development and publishing strategy primarily on titles that are likely to become franchises. For the firm, the most popular games, recognized by their brand name, guarantee greater revenues, and are therefore more profitable. A key development path is the creation of the series Tony Hawk 1, 2, 3, 4… while the acquisition of development studios allow Activision to expand its catalogue. A new label (O2) was created that groups all of the extreme sports games released in 2001, with each title being associated with a champion of the given sport (surfing, snowboarding, etc). In 2002, Activision signs with Travis Pastrana to use his name for a new dirt biking game, Pastrana's Pro Moto X. Tony Hawk's Pro Skater, Return to Castle Wolfenstein, Spider-Man, X-men, Battle Zone, Soldier of Fortune, Bomberman Tournament. Tony Hawks Underground (PS2, Xbox, GameCube, Game Boy Advance), True Crime (PS2, Xbox, GameCube), Call of Duty (PC), Cabela's Dangerous Hunts (PS2, Xbox), Tenchu (Xbox), Tony Hawk’s Pro Skater 4, Spider-Man: The Movie, Street Hoops. As to innovations in its catalogue for fiscal 2003-2004, Activision announces the 2004 release of MTX (PS2, Xbox, GameCube), Pitfall (PS2, Xbox, GameCube, Game Boy Advance), Tenchu: return from darkness (Xbox).
Publishing partnerships
Editorial policy
Most popular titles Latest titles
Distribution
Distribution network
In fiscal 2003, Activision’s distribution operations accounted for 28.3% of its turnover (248.1 million USD), versus 30% for fiscal 2002 (236.9 million USD). In the US and au Canada, the company’s distribution partners are retail chains: Best Buy, CompUSA, Computer City, Electronic Boutique, Babbages, Wal-Mart, K-Mart, Target and Toys "R" Us. The company also relies on general distributors such as Ingram Entertainment. Activision operates its international distribution through a network of subsidiaries in the UK, Germany, France, Belgium, the Netherlands, Japan and in Australia. Activision has created a distribution network in Europe, which provides logistic services and a commercial presence for the company’s games, and for its third-party publishers: CentreSoft in the UK (sole distributor of games published by Sony for the PlayStation to independent British retailers), CD Contact in Benelux, and NBG in Germany. In fiscal 2003, sales of games for Sony consoles represented 32% of Activision’s distribution earnings (versus 7% for Nintendo and 5% for Microsoft).
58
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Distribution partnerships
Among other titles, in fiscal 2003, Activision distributed games published by Lucas Arts, Fox Interactive, Interplay, Codemasters, and Encore Entertainment, in a range of geographic zones In April 2003, Activision announces the signature of a long-term exclusive distribution agreement for games developed by Spark Unlimited (Call of Duty, Medal of Honor). Since May 2003, Activision has been distributing Lucas Arts titles in France.
Other business areas
Network gaming
Activision is well aware of the rising popularity of online gaming, and offers a network gaming module with some of its games, notably Quake III Arena, since 2002. In fiscal 2002/2003, Activision developed the network version of Tony Hawk's Pro Skater 3 and Tony Hawk's Pro Skater 4 for the PS2 and a version of Return to Castle Wolfenstein for Xbox live. Activision develops and publishes a few games for wireless platforms, such as Nokia’s NGage. Tony Hawk's Pro Skater is one of the games developed in 2003 for these consoles.
Mobile devices
2004 edition
© IDATE
59
Video games : nextgen gaming is on its way!
Bandai
Japan
Bandai is a company whose chief business area is game production. It is the firm behind the Tamagochi phenomenon: a mini console that houses a virtual pet, which first appeared in Japan in 1996 (36.5 million units sold). In the area of content, in 2001 Bandai launched the Digimon digital monsters. In 1998, the company began producing handhelds with the WonderSwan, a direct rival for Nintendo’s GameBoy Advance. In 2000, Bandai releases the colour version of their handheld, going head to head with the GameBoy Advance Color. And, In July 2002, the company launched a new handheld, the SwanCrystal. Bandai develops, publishes and distributes video games, primarily for Nintendo consoles and for Sony’s PlayStation. A central event in 2004 is Bandai’s launch into the production of games for Microsoft’s Xbox. The company has been diversifying its operations by forging itself a position in online gaming and by developing games for mobile devices.
Contact info
HEAD OFFICE 5-4 Komagata 2 Chrome Taito-Ku Tokyo, 111-8081 JAPAN Tel: +81 338475005 http: //www.bandai.co.jp
Executive body
Chairman & CEO Takeo Takesu President & COO Ryohei Tsunoda
829 employees around the world on 31 March 2002. 844 employees around the world on 30 April 2003.
Shareholders
Japan Services Trustee Bank Master Trust Bank of Japan Santa 13.7 % 9.1 % 5.2 %
Organization
Bandai: flow chart
Bandai Co. Ltd Business Strategy Division Contents Strategy Division Production and Copyright Management Entities Bandai Toys&Hobby Co.Ltd Bandai Life Style Co.Ltd New Business development Strategy division
International presence
Japan USA France The UK Spain Hong Kong China
Bandai Video Game Co.Ltd Bandai Networks Co.Ltd Banpresto Co.Ltd Bandai Visual Co. Ltd
Source: Bandai
60
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Economic & financial performance – Fiscal year ending on 31/03
Turnover and net profits - million USD 2000 2001 2002 2003
Turnover Net profits Turnover: Video games & Arcade Net profits: Video games & Arcade
1 663.64 10.37 398.76 21.53
1730.63 102.88 386.00 15.95
1817.56 84.54 346.92 17.55
1953.14 100.49 304.65 49.45
Source: IDATE, based on Bandai data
Evolution of financial performance – million USD
2 500 2 000 1 500 1 000 500 0 2000 Turnover Turnover: Video games & Arcade 2001 2002 Net profits Net profits: Video games & Arcade 2003
Source: IDATE, based on Bandai data
Drop in video game operations
Turnover for video game operations (Video Game software, which includes video games for consoles and arcade games) in 2003 represented 38.2 billion JPY (or roughly 15% of Bandai’s total turnover). Revenues generated by video games are down slightly compared to 2002, when they accounted for 20% of the company’s total earnings (23% in fiscal 2001). In fiscal 2003, 80% of Bandai’s earnings were generated on the Japanese market. North America remains their number two market, ahead of Europe and Asia. Bandai’s stated target is to be generating 25% of their revenues outside their national market by 2005. Bandai is quoted on Tokyo’s Stock Exchange Listings.
Japan: core market
Stock market information
Positioning on the value chain
Development
Development subsidiaries
Bandai owns two development subsidiaries: Bec, which has developed several titles for the WonderSwan console and for Sony’s PS1. Dokodemo Hamster is the Japanese firm’s most popular game. Bec also develops games for mobile devices. Banpresoft is the developer behind the Super Robot Battle series, among others.
2004 edition
© IDATE
61
Video games : nextgen gaming is on its way!
Through its subsidiaries, Bandai develops games only for the PlayStation and Nintendo consoles. At the end of 2003, Bandai had yet to produce any games for the Xbox, but several titles for Microsoft’s consoles are scheduled for release in 2004.
Development partnerships
In fiscal 2003, Bandai created no new partnerships for developing new games.
Publishing
Editorial strategy
Bandai’s editorial strategy is based on capitalising on the company’s most popular characters, which are already present in cartoons, comic books or as toys (Gundam, Dragon Ball Z, Power Rangers…). The company then adapts its policy according to the different national markets. Bandai does not publish the same games in Japan as it does in the US, even though there appears to be a growing trend towards convergence for 2004. The game Shonen Jump, for instance, will be released in both US and Japan in 2004. Bandai publishes video games primarily for Nintendo consoles and for the PS2 Sony and, in 2004, the company will begin producing for Microsoft’s Xbox console. In September 2003, in partnership with Atari, Bandai released the game Hack on the French market. Hack is an ambitious project which is present on several platforms (comic books, cartoon, video games), with each exploring a different period or portion of the same universe. In terms of licences, Bandai establishes international licensing agreements which allow them to make use of popular brands: Knights of the Zodiac, Dragon Ball Z (TOEI),..Hack, Lupin the Third, Ultimate the muscle. Bandai owns several licences: Digimon, Inuyasha, Gundam, Jagun Fighters, Power Rangers, Strawberry Shortcake, Hello Kitty, Superior Defender, Godzilla. Bandai’s chief target market for its games is teenagers. The vast majority of the games published are adventure games centred around a star character. Dragon Ball Z on PS2 (over 2 million units sold worldwide at the end of March 2003). Mobile Suit Gundam, Hack on PS2. Ultimate Muscle on GameCube. Digimon Battle Spirit on Game Boy Advance.
Publishing partnerships
Licensing policy
Editorial policy Most popular titles
Latest titles
Among the latest game added to Bandai’s catalogue was Dragon Ball Z Budokai, released on 28 November 2002 in Europe (2 million units sold at the end of February 2003). On 13 February 2003, the games was released in Japan (250,000 copies sold the day of its release).
62
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Titles published by Bandai and announced for 2004 Title Lupin The Third RibbitKing Digimon Tumble Arena 2 Inuyasha RPG Ultimate Muscle Digimon World 4 SD Gundam Force Mobile Suit Gundam Seed Cowboy Bebop Platform Release date
PS2 PS2, GameCube PS2, GameCube, Xbox PS2 PS2 PS2, GameCube, Xbox PS2 PS2, GameCube, Xbox PS2
February 2004 May 2004 June 2004 July 2004 July 2004 August 2004 September 2004 October 2004 October 2004
Source: IDATE, based on Bandai data
Distribution
Distribution network Distribution partnerships
Bandai distributes its video games via its subsidiaries: Bandai America, Bandai France, Bandai España, Bandai PTE and Bandai Taiwan. Atari is Bandai’s French partner for the distribution of games from the Hack series, on the various consoles.
Other business areas
Internet and online gaming
In October 2001, Bandai created a joint-venture with the Korean firm Game Venture, with the goal of forging itself a position on the online gaming market. Bandai controls 60% of the JV, baptised Bandai Game Venture, which offers games based on the Japanese firm’s most popular characters (Gundam and Digimon). Bandai also offers a version of the South Korean game, Fortress. Eight months after launch, the service had a base of 200,000 subscribers in Japan. Through its American subsidiary, Bandai Wireless, the Japanese firm has positioned itself on the United States’ mobile content market. Bandai has been developing games for American carrier AT&T Wireless’ “mMode” service since August 2003. Bandai offers four games (G Fighter Battle, SD Gundam Battle, Airstrip Landing and Climber Panic) for a unit price of between 4.99 USD and 5.99 USD for unlimited playing time. In August 2003, Bandai America and Bandai Networks joined forces to create four Java games for AT&T Wireless’ “mMode” service. Bandai America distributes the content developed by the Bandai Networks teams. The first mobile games were released in Europe in November 2003. Bandai launched a video game site called "Bandai Pocket", which is geared to French mobile operator Bouygues Telecom’s multimedia i-mode service. Hello Kitty and Gundam are the most popular of the 7 titles on offer. The games can be accessed for a monthly flat rate (a maximum 3 EUR for two games) for unlimited playing time. In February 2003, Bandai put an end to the production of its WonderSwan handheld console, aimed mainly at the Japanese market. In February 2004, Bandai announces the launch of new Tamagochis for the following month in Japan. These new electronic games that simulate the life and death of a virtual chick sell for roughly 15 EUR and are available in six colours. The manufacturer has targeted 2 million units sold by the end of March 2005.
Mobile devices
Handheld consoles
2004 edition
© IDATE
63
Video games : nextgen gaming is on its way!
Toys
Bandai was originally a toy manufacturer. Even though the firm is now diversifying operations, game production is still a core business area. Revenues generated by the sale of toys totalled 132 million JPY in fiscal 2003. Japan is the company’s principal market for this segment, but there are plans to expand into Europe and the US thanks to its three most popular brands: Power Rangers, Gundam and Digimon.
64
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Capcom
Japan
Created in Japan in 1979, Capcom was originally an arcade machine manufacturer and distributor. Thanks to the success of arcades in Japan, in 1983 the company began to diversify into publishing games for home consoles. With the creation of a publishing subsidiary in the US (Capcom USA) in 1985, the company rapidly forged itself a position on the Japanese and American markets with popular franchises such as Resident Evil, Street Fighter, Breath of Fire, Mega Man and Onimusha. In 1993, Capcom created a publishing structure in Hong Kong for the Chinese market, then in Europe in 1999. Europe remains an under-explored market for Capcom, despite the efforts made since 2002. The Japanese firm opened a distribution subsidiary in the UK in November 2002 and one in Germany in February 2003. Capcom has recently fallen prey to severe financial troubles. Over the course of 2003, a number of games did not enjoy the expected success, including Devil May Cry 2, Clock Tower 3, Resident Evil Zero, Chaos Legion… In late December 2002, the company’s Vice-President hinted that Capcom could be withdrawing from the arcade sector. In April 2003, Capcom’s VP, Heiji Oshima, announces the cancellation of 18 titles under development or scheduled for development in fiscal 2003.
Contact info
Capcom 1-3 Uchihiranomachi 3-chome, Chuo-ku Osaka 540-0037 Japan Tel: +81 06 920 3635 Fax: +81 06 920 5134 http: //www.capcom.com
Executive body
President Kenzo TSUJIMOTO Executive Vice President & CFO Heiji OSHIMA Senior Managing Director & COO Haruhiro TSUJIMOTO Managing Director Tamio ODA
1,150 employees around the world on 31 March 2001. 1,117 employees around the world on 31 March 2002. 1,072 employees around the world on 30 September 2003.
Shareholders
Public Crossroad Limited Kenzo Tsujimoto Japan Trustee Services Bank State Street Bank & Trust Company Master Trust Bank of Japan, Yoshiyuki Tsujimoto 66.77% 11.99% 7.21% 4.01% 3.54% 3.52% 2.96%
Organization
Flowchart: Capcom
International presence
Japan USA Latin America (Mexico) Europe (the UK and Germany)
Asia (Hong Kong)
Source: Capcom
2004 edition
© IDATE
65
Video games : nextgen gaming is on its way!
Economic & financial performance – Fiscal year ending 31/03
Turnover and net profits - million USD 2000 2001 2002 2003
Turnover Net profits Turnover Home Video Games Video games, operating profits
486.547 91.509 337.292 114.622
395.831 48.444 255.863 59.710
471.752 36.932 359.165 84.639
516.966 -163.317 400.750 56.342
Source: IDATE, based on Capcom data
Evolution of financial performance – million USD
600 500 400 300 200 100 0 -100 -200 Turnover Home Video Games turnover Net profits Video games operating profits 2000 2001 2002 2003
Source: IDATE, based on Capcom data
Breakdown of operations
Breakdown of turnover by region - fiscal 2003
13% 1%
26% 60%
TO: Japan
TO: North America
TO: Europe
TO: other
Source: IDATE, based on Capcom data
66
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Stock market information
Capcom is quoted on Tokyo’s Stock Exchange Listings (code: 9697). The group’s market capitalisation was valued at 27.37 billion JPY (220.7 million USD) on 31 March 2001.
Positioning on the value chain
Development
Development subsidiaries
Capcom’s Home Video Games division is made up of several development studios, including Flagship, Studio 6 in Japan and Studio 8 in the US. At the end of March 2004, Namco announces the closure of two of its development structures based in Tokyo and in Nagoya which specialise in developing games for PC. But, Capcom continues to farm out production to third party developers. Growth of European operations goes by way of subcontracting agreements with European studios. Capcom associated itself with T&E Soft, which specialises in golf simulations, for the development of Disney Golf Classic (PS2).
Development partnerships
Publishing
Editorial strategy
In Japan, publishing is handled by Capcom Japan. Publishing in the US and in Europe is handled by Capcom USA. This subsidiary manages Capcom Entertainment (the US), Capcom Studio 8 (the US) and Capcom Eurosoft (the UK). Capcom develops, publishes and distributes its games for all of the market’s platforms: PlayStation, PS2, Dreamcast, Nintendo 64 and GameCube, GBA, Xbox and PC.
Number of titles published by Capcom at the end of 2003 2003
PC Xbox PS2 PlayStation GameCube GameBoy Advance GameBoy Color Nintendo 64 Dreamcast PDA
Total
5 9 23 19 14 17 11 1 2 5
106
Source: IDATE, based on Capcom data
2004 edition
© IDATE
67
Video games : nextgen gaming is on its way!
Genre
Shooting Action
Fighting RPG Adventure
Total
Capcom’s most popular titles Principal titles Number of titles published 6 1942 Series 13 Ghosts 'n Goblins Series 3 Commando Series 82 Megaman Series 29 Disney Series 8 Final Fight Series 6 Onimusha Series 3 Devil May Cry Series 47 Street Fighter Series 12 Breath of Fire Series 32 Resident Evil Series 10 Dino Crisis Series 251
Units sold (thousand)
1 300 4 100 1 200 20 000 12 900 3 100 4 900 4 400 23 000 2 800 24 000 4 200
105 900
Source: IDATE, based on Capcom data
Growth of game sales, by platform
Source: Capcom
Publishing partnerships
In fiscal 2002/2003, Capcom signed licensing agreements for the publication in Japan of titles owned by European publishers. Grand Theft Auto III (Take Two Interactive) Getaway Splinter Cell (Ubi Soft) Fire ProWrestling Z Way of the Samurai 2 The Japanese firm does not invest in acquiring licences to existing characters or universes for developing and publishing its video games. It does, however, sell the rights to its games for creating TV programmes or films based on them. Here, its Mega Man game became a cartoon in Japan on TV Tokyo (broadcast starting in October 2003) and in the US on channel Wbkids. Mega Man was scheduled to be on small screens in Europe in the spring of 2004. Street Fighter was made into a feature film and a sequel, and was made into both a cartoon and an animated feature. Resident Evil too was made into a film. A sequel is
Licensing policy
68
© IDATE
2004 edition
Video games: NextGen gaming on its way!
scheduled for release in October 2004. Other Capcom games as well are to be adapted to the big screen, including Onimusha (in 2005) and Devil May Cry (in 2006). Rights to the games are owned by Capcom Japan. Capcom Entertainment (the US), Capcom Asia (Honk Kong) and their subsidiaries manage licence sales in the US and in Asia.
Editorial policy
In the area of home consoles, Capcom publishes mainly games for young adults (genres: RPG, platform-action, adventure and fighter). For Nintendo handhelds, Capcom publishes chiefly games for children aged 6 and up. The series: ● Over 23 million copies of Street Fighter (1987) and Street Fighter II have been sold worldwide (in 16 different versions). Street Fighter EX3 was Capcom’s first title for the PS2. 100 licenses for derivative products to these games have been sold. ● 20 million copies of Resident Evil have been sold worldwide (in 22 different versions) since its release in 1996. Resident Evil II (1998) broke all the records in the US in 1998, with 19 million USD in sales during its first week on the market (380,000 copies). Resident Evil 3 Nemesis (1999) was one of the best sellers for the N64, as was Resident Evil Code: Veronica, released in March 2000 (Dreamcast). ● Mega Man (1987) and Mega Man Legends, Capcom’s first 3D game (1998) and Mega Man X5. 62 20 million copies of this game (62 versions) have been sold up to now.
• • DinoCrisis (4.2 million units sold worldwide), Devil May Cry, Toki Tori, Project Justice, Onimusha: Warlords (PS2, 2001), March Matrix, Giga Wing 2.
Most popular titles
The Onimusha series (4.9 million units sold). In 2002, Capcom created Devil May Cry, and sold 4.4 million units.
Latest Capcom titles
•
Platform
Titles
Release date
GC PS2 GBA PS2 PS2 XBOX
Mickey & Minnie Trick & Treats Biohazard Outbreak Rockman EXE 4 Red Sun / Rockman EXE 4 Blue Moon Hyper Street Fighter II The Anniversary Publishing Hyper Street Fighter II The Anniversary Publishing SPECIAL PACK Automodellista U.S.-turned Source: IDATE, based on Capcom data
04 December 2003 11 December 2003 12 December 2003 18 December 2003 18 December 2003 29 January 2004
Distribution
Distribution network
The 5 Home Video Games subsidiaries are in charge of distributing Capcom’s games: Capcom Entertainment (USA) Capcom Asia (Hong Kong) Capcom Eurosoft (the UK) CE Europe (the UK) CEG Interactive Entertainment (Germany). In February 2001, Capcom Eurosoft elected to contract European distribution of PS2 games to American publisher Electronic Arts. The first two titles for PS2 to benefit from the agreement were Street Fighter EX3 and Onimusha. The agreement does not apply to the UK, however, where Virgin and Eidos distribute Capcom’s PS2 games on a case by case basis.
Distribution partnerships
2004 edition
© IDATE
69
Video games : nextgen gaming is on its way!
Other business areas
Internet and online gaming
Capcom has consolidated its multi-platform positioning with the development of its online gaming strategy. In November 2000, the Japanese firm perfected emulation software capable of operating the same programme on several platforms. This compatibility allows Capcom to cut the development costs of its online gaming projects by 25%. In May 2001 Capcom created Koko Capcom, a joint venture with South Korean firm Koko. Based in Seoul, this new company is in charge of designing online gaming through platforms that can connect to the Net. Made up of a team of 30, Koko Capcom’s prime focus in the Korean market where online gaming enjoys massive popularity. In fiscal 2003, Capcom joined forces with telco KDDI for the development an online gaming service for PS2. The titles published under this agreement are Resident Evil Outbreak, Monster Hunter and Auto Modelista. Capcom also offers two titles for Xbox Live: Steel Battalion Line of Contact and Auto Modelista.
Mobile devices
In 2000 Capcom launched mobile games for Japanese operator KDDI (Marvel vs. Capcom). The company has developed a sizeable quantity of gaming and music content for operator NTT DoCoMo’s i-mode subscribers. For the Chinese market, the Hong Kong publishing subsidiary, Capcom Asia, has published three games for mobiles (WAP format): Pocket Fighter, Breath of Fire IV and Street Fighter III. They were released in July 2000. In early 2004, Capcom released 11 titles for mobile phones in 17 countries (including Asia and Europe), generating a turnover of 8 million USD. For the American market, Capcom has a catalogue of 5 titles for PDA. In Japan, Capcom owns a chain of arcades Arcade operations accounted for 20% of its turnover in 2000 and in 2001; but dropped to 15.5% in 2003. Over the course of 2002, Capcom’s directors speculated over retreat from this market altogether, given its decline in Japan.
Arcade
70
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Electronic Arts
USA
Electronic Arts is an American company that was founded in 1982. They develop, publish and distribute interactive entertainment software. EA’s products are geared to PCs and game consoles. Based in Redwood City (California), the company distributes its products in 75 countries. EA has invested in the most prestigious development studios, including Maxis and Kodiak Studios. EA is organized into 2 divisions: EA Core and EA.com. The first is in charge of the creation, marketing and distribution of video games. The second is in charge of creating, marketing and distributing titles that can be played or sold online. Electronic Arts’ editorial strategy, which is based on recurring sports titles, is the cornerstone of the company’s success, and consolidated by the creation of the EA Sports Big label, which covers all extreme sports titles.
Contact info
Electronic Arts 209 Redwood Shores Parkway 94065 Redwood City, California, USA Tel.: +33 (650) 628-1500 Fax: +33 (650) 628-1413 http://www.ea.com
Executive body
President and Chief Operating Officer Lawrence F. PROBST III President Worldwide Studios Don MATTRICK
3,600 employees around the world on 31 March 2001. 4,000 employees around the world on 31 March 2003.
Shareholders
Institutional 60%
International presence
Austria, Australia, Barbados, Brazil, Canada, China, Denmark, Finland, France, Germany, Hong Kong, Italy, Japan, Korea, Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Puerto Rico, Taiwan, Thailand and the United Kingdom
Putman Investment Management Company Montag & Caldwell Inc Janus Capital Corporation
Founders
13.2% 13.5% 11.9%
40%
Organization
Flowchart: Electronic Arts
Electronic Arts EA Core EA Studios DICE Minority Equity EA Studios USA, Canada England EA Publishing EA Games EA Sports Firaxis Software Minority Equity EA Square KK Japan (70%) EA Distribution
Australia, Sweden, Japan, Brazil, Holland, USA, France, United Kingdom, Singapor Canada, Spain, Germany, South Africa, Malaysia
EA.com EA Distribution Square EA USA (30%) EA Games Jeux massivement multijoueurs EA Sports Big Pogo.com EA Sports
EA Sports Big
Source: Electronic Arts
2004 edition
© IDATE
71
Video games : nextgen gaming is on its way!
Latest news
March 2004
John Riticello, EA’s CEO resigns, announcing plans to created a private investment fund.
Economic & financial performance – Fiscal year ending 31/03
Turnover and net profits - million USD 1999 2000 2001 2002 2003
Turnover Net profits Research & development Marketing & Sales
1 221.863 72.872 196.137 163.407
1 420.011 116.751 255.694 188.611
1 322.273 -11.082 376.179 185.336
1 724.675 101.509 380.564 241.109
2 482.244 317.097 400.990 332.453
Source: Electronic Arts
Evolution of financial performance – million USD
3 000 2 500 2 000 1 500 1 000 500 0 -500 1999 2000 2001 2002 2003
Turnover
Net profits
R&D
Marketing & Sales
Source: IDATE, based on Electronic Arts data
Breakdown of operations by geographic zone Turnover by region - million USD 2001 2002 2003
Japan North America Europe Asia-Pacific
52.582 831.924 386.728 51.039
58.597 1 093.244 519.458 53.376
87.569 1 435.718 878.904 80.053
Source: IDATE, based on Electronic Arts data
72
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Growth of turnover by region - million USD
1 600 1 400 1 200 1 000 800 600 400 200 0 2001 TO: Japan TO: North America 2002 TO: Europe 2003 TO: Asia-Pacific
Source: IDATE, based on Electronic Arts data
Breakdown of turnover by region - fiscal 2003
3% 4%
35%
58%
TO: Japan
TO: North America
TO: Europe
TO: Asia-Pacific
Source: IDATE, based on Electronic Arts data
2004 edition
© IDATE
73
Video games : nextgen gaming is on its way!
Breakdown of operations by gaming platform Turnover by platform - million USD 2001 2002 2003
Turnover: PlayStation Turnover: PS2 Turnover: PC Turnover: GameCube Turnover: Xbox Turnover: GameBoy
309.988 258.988 405.256 -
189.535 482.882 456.292 51.740 78.363 81.679
99.951 910.693 499.634 176.656 219.378 105.386
Source: IDATE, based on Electronic Arts data
Growth of turnover by platform - million USD
1 000 800 600 400 200 0 2001 TO: Playstation TO: PC TO: Xbox 2002 2003 TO: PS2 TO: GameCube TO: GameBoy
Source: IDATE, based on Electronic Arts data
Breakdown of turnover by platform - fiscal 2003
5% 11% 5%
9%
45%
25%
TO: Playstation
TO: PS2
TO: PC
TO: GameCube
TO: Xbox
TO: GameBoy
Source: IDATE, based on Electronic Arts data Over the course of 2003, EA undertook innovative advertising initiatives. Following a multi-million dollar agreement, the publisher began to introduce advertising in its games. Two US firms are involved here: McDonalds and Intel. Advertising revenues totalled 32 million USD.
74
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Stock market information
Electronic Arts is quoted on the New York Exchange (NASDAQ: ERTS). Market capitalisation valued at 4.28 billion USD, on 16 May 2000. Market capitalisation valued at 14 billion USD, on 20 January 2004.
Positioning on the value chain
Development
Development strategy
Electronic Arts owns a number of studios: EA Sports, Jane’s, Bullfrog Productions, Maxis, Westwood Studios, Tiburon Entertainment, ABC Software AG, DreamWorks Interactive, Vision Soft, Playnation, Black Box Games... The company’s studios are located in Austin (Texas), Los Angeles and Walnut Creek (California), Orlando (Florida), Vancouver and Montreal (Canada), Tokyo (Japan) and London (England). There also exists a network of subsidiaries in 20 countries (Vancouver, Canada; Tokyo, Japan; the Gold Coast, Australia; and Chertsey, UK). Since May 1998, Electronic Arts has been operating an alliance with the Japanese firm, Square. They two companies formed a joint venture called Square EA, based in both Tokyo and California. Square controls 70% of the JV and EA the remaining 30%. In early 2003, EA restructured a portion of its development studios. Irvine Pacific and Westwood Studios (Lands of Lore, Command & Conquer) were shut down and their staff moved to EA’s new development campus in Los Angeles. This restructuring had begun in October 2002 with the closure of Bellevue Studio in Seattle, which had created the game, The Need for Speed. The 40 staff members were relocated to Vancouver (Canada). In February 2004, EA opts to shut down the studio that was behind Ultima Online and Wing Commander. Maxis studios is likely to be relocated to the campus as well. In addition, EA continues to buy up development studios: Black Box Games (2001) Studio 33 (2003) NuFX (2004) Electronic Arts Distribution (EAD) is the Electronic Arts subsidiary specialised in distribution and in co-development projects. EAD has signed distribution agreements with: DreamWorks Interactive, for the Medal of Honor series, among others Warthog for Looney Tunes: Back In Action co-published by EA and Warner Bros. Interactive Entertainment and based on the eponymous cartoon. The game is available on PS2, GC and GBA. LEGO: signature in December 2001 of a co-publishing agreement with Lego for 30 titles over 3 years. On 6 March 2003, EA and Nintendo announce that they are joining forces to develop 20 GameCube titles, of which at least 4 will benefit from the connectivity between Nintendo’s home console and its GameBoy Advance handheld. The first three titles are Madden NFL, FIFA 2004 and Tiger Woods PGA TOUR 2004. The latest development agreements to be signed have been with: Gas Powered Games New development studio, Castaway. Music and sound are two basic components of video games. Their integration increases gamers’ immersion in the virtual universe. Here, in late 2003, EA was awarded the THX seal, which was created in the 1980s by Georges Lucas. Initially, 5 of the company’s most popular titles were involved: SSX 3, The Lord of the Rings, Return of the King, Medal of Honor: Rising Sun, Need for Speed Underground and James Bond, 007: Everything or Nothing. Starting in August 2002, EA created EA Trax, which is in charge of acquiring rights to songs to be incorporated into games. Labels Electra, Capitol, Interscope, DreamWorks, MCA, Lava and Island have all signed agreements with EA.
Development partnerships
2004 edition
© IDATE
75
Video games : nextgen gaming is on its way!
In October 2003, EA signs an exclusivity agreement with video card producer, nVidia. EA’s development teams will introduce nVidia card features in their titles.
Publishing
Editorial strategy
EA publishes its own titles, but also co-publishes third-party titles. In fiscal 2003, EA published 70 titles, of which 34 were produced by its own studios. Since May 2001, Electronic Arts has elected to increase the titles published on all of the market’s available platforms: PC, PlayStation, PS2, Xbox, GameCube and GBA. Here, the Harry Potter and the Chamber of Secrets game was released simultaneously on all 7 platforms. The game’s release was backed by an unprecedented TV marketing campaign in three stages, on cable, satellite and terrestrial TV, in the trade and general interest press, on the web, toys inserted in cereal boxes, etc… No medium was overlooked. Not all platforms are the target of co-publishing, added to which some titles are published only for PC since consoles are ill-adapted to playing certain types of games (Black & White, Medal of Honor, Sim City, The Sims). EA Partners is in charge of EA partnerships worldwide, in addition to being responsible for publishing agreements. In early 2003, EA signed a long-term publishing agreement with Digital Illusions CE (DICE), the Swedish publisher which created the game Battlefield 1942 (over a million copies sold to date). EA also acquired a minority stake in the development studio, and enjoys exclusive publishing rights to the titles developed by DICE. EA co-publishes a sizeable number of titles with: Disney Interactive, Fox Interactive, Krome Studios, LEGO Interactive, IO Interactive, Warner Bros Interactive and Sunflowers Interactive Entertainment Software. EA has signed regional agreements with: NovaLogic in North America, Capcom, NovaLogic, Namco… for Europe, Lucas Arts, Square Enix, NovaLogic for Asia-Pacific and LucasArts for Japan. In October 2003, EA signed a re-publishing agreement for France with Micro Application. The latter is authorised to publish old EA games such as Sim City 3000, Command & Conquer: Red Alert and Need for Speed 3. In early February 2004, EA handed the publishing and distribution of Burnout 3 to Acclaim. Criterion Software remains the developer. EA thereby boasts the market’s top two car racing games in its catalogue, since it is also the proud owner of Need For Speed.
Creation of new titles, by platform, on 31 March 1999 2000 2001 2002 2003
Editorial partnerships
Nintendo 64 PC PlayStation PS2 GameCube GameBoy Advance GameBoy Color Xbox
Total
9 29 21 0 nd 59
8 31 30 0 nd 69
3 18 17 15 0 nd 53
0 16 5 18 5 3 3 10
60
0 nd 6 19 17 nd nd 16
70
Source: IDATE, based on Electronic Arts data
76
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Licensing policy
EAP (EA Partners) is in charge of acquiring licences to films for its parent company’s in-house studios. They sign international licensing agreements that allow them to create games around popular brands, including The Lords of the Rings (New Line Cinema), Harry Potter, Looney Tunes and Superman (Warner Bros), FIFA Championships, NFL, NBA including an agreement with Tony Parker, NHL and sporting events like Daytona International Speedway and The Superbowl. EA creates partnerships with publishers which are developing in the world of cinema, notably Fox Interactive, MGM Interactive (James Bond including a shortterm exclusive contract up to 2010), Universal Studios Interactive, DreamWorks Interactive (Medal of Honor). The company’s licensing strategy has led to the creation of 22 titles (including The Sims, over 10 million copies sold, Medal Of Honor – over 5 million copies sold, Harry Potter and The Chamber of Secrets – over 10 million copies sold, James Bond, 007: Nightfire – over 5 million copies sold, FIFA Soccer- over 5 million copies sold, NBA Live 2003 and Madden NFL Football 2003 – over 5 million copies sold) which have all sold over a million copies. Licences: Harry Potter, NBA Live, Tiger Wood PGA Tour, Madden NFL, FIFA Soccer, World Cup FIFA, NHL, James Bond, 007, Buffy the Vampire Slayer, The Simpson, Dune, Lord of the Rings (Films), Disney Golf, Looney Tunes, Superman (all platforms), Tony Parker… and mid-February 2004, Catwoman, based on a licence acquired from Warner Bros., with British studio Argonaut in charge of developing. In early February 2004, EA, like a good number of its competitors (Activision, THQ, VUG), signs an agreement with comic book publisher Marvel for creating video games based on popular action heroes. Here, Spider and X-Men are covered by the agreement. But, according to the terms of the contract, EA can also create new heroes that Marvel could then use in new comic books. Electronic Arts’ editorial policy is based on the popularity of four brands: EA SPORTS, EA SPORTS BIG, EA GAMES and its web portal, EA.com. The recurrence of popular titles is central to the company’s strategy. In 1997, EA completes its acquisition of Maxis, publisher of The Sims simulation series (Sim City, Sim Tower, The Sims, Sim Theme Park...), of which Sim City has sold close to 10 million copies worldwide. With EA SPORTS and EA SPORTS BIG, EA’s policy is focused first on sport games. The company owns a sizeable number of licences to football, golf, car racing, wrestling and boxing franchises, for which it releases a new game every year. In 1999, EA signed an exclusive 8-year licensing agreement for use of the FIFA (International Football Association Federation) and FIFA World Cup brands. In the same vein, the company holds the rights to championship football in England (The FA Premier League), in Spain (La Liga Futbol Profesional) and in Germany (Die Bundesliga). Fighter games too are a mainstay. EA’s subsidiary Jane is specialised in this area, and will benefit from EA’s acquisition of a share in the Israeli studio, Pixel Entertainment. EA also publishes games produced by small publishers. In February 2001, for instance, it released the STCC2 racing game developed by Swedish studio, Digital Illusions. Battlefield 1942, developed and co-published by Digital Illusions, named the best game of 2002 by the Academy Of Interactive Arts and Sciences (AIAS). 12 other titles have been awarded prizes by the AIAS: Medal of Honor: Allied Assault, Medal of Honor: Frontline, Madden NFL 2003, The Lord of the Rings: The Two Towers, The Sims Online, The Sims: Unleashed, Need for Speed: Hot Pursuit 2…
Editorial policy
Most popular titles
2004 edition
© IDATE
77
Video games : nextgen gaming is on its way!
Latest titles
EA Games: Battlefield Vietnam (PC), Black & White 2 (PC), James Bond, 007: Everything or Nothing (GC, PS2, Xbox), Medal of Honor: Pacific Assault (PC), Need For Speed: Underground (GBA), Sim City 4: Deluxe Publishing (PC), The Sims 2 (PC). EA Sports: EA Sports Fight Night 2004 (PS2, Xbox), MVP Baseball 2004 (GC, PC, PS2, Xbox). EA Sports BIG: NFL Street (GC, PS2, Xbox).
Distribution
Distribution network
EA’s distribution centre is located in Louisville (Kentucky). Electronic Arts’ strategy is based on agreements with local distributors such as Vision Soft in South Africa, Kingsoft in Germany, DROsoft in Spain and ABC Software in Switzerland and Austria. Electronic Arts operates a distribution network in the US and subsidiaries in 20 countries (Austria, Australia, Brazil, Canada, France, Germany, Hong Kong, Japan, New Zealand, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Puerto Rico, The Netherlands, Taiwan, Thailand, and the UK), which enables distribution in 75 countries. In the US and Canada, EAD distributes the products of publishers SquareSoft and NovaLogic and, since 2003, Namco. EAD Europe has signed exclusive distribution agreements with Capcom Entertainment, Delphine, Fox Interactive, LucasArts, NovaLogic, SquareSoft and Namco. EAD Asia-Pacific distributes games published by Lucas Arts and Fox Interactive in Asia, Australia and New Zealand and SquareSoft and NovaLogic’s games in the entire Asia-Pacific zone. EAD Japan distributes the games produced by Lucas Arts and Fox Interactive. In addition to the co-publishing agreement for 30 new LEGO games, EA has acquired worldwide distribution rights to all of LEGO’s video games. In early April 2004, EA signs a distribution agreement for Europe for the game developed by Koei, Samurai Warriors. This partnership allows Koei to launch its first action game on the Old Continent, and allows EA to complete its catalogue with Asian culture games which are increasingly popular amongst European gamers. Game distribution operations generated 375.8 million USD in revenues for EA in fiscal 2003 (15.1% of total turnover).
Distribution agreements
Other business areas
Internet and online gaming
Subscriptions to the various online gaming services earned EA 38 million USD last year. In December 1999 EA, in collaboration with AOL (10% share of the new venture), created a new division, Ea.com, an online gaming site. AOL broadband subscribers can sign up to EA’s gaming portal for 2.99 USD/month instead of 4.99 USD or 19.99 USD a year instead of 29.99 USD. In February 2001, internet subsidiary EA.com took control of Pogo, a company that develops an online gaming service financed by advertising. Pogo.com’s editorial policy is based on 37 free games for casual gamers (cards, puzzles, board games). At the end of 2003, the site had a base of 40,000 registered users. In the summer of 2001, EA launched a multi-platform, online subscription-based game, Majestic (40 USD + 9.95 USD a month). This spy game capped out at 14,000 subscribers, a far cry from the 45,000 that the world’s leading publisher had hoped to attract. In April 2002, faced with the game’s cool reception, EA elects not to publish a third instalment. In October 2001, EA announces that it is laying off 200 to 250 people, following 150 million USD in losses incurred by its subsidiary, EA.com. In September 2003, Motor City Online, an antique car racing game is closed down. It is less the business model (monthly subscription) that is at fault than the
78
© IDATE
2004 edition
Video games: NextGen gaming on its way!
size of the community surrounding the game which had dwindled steadily due to a huge gap between gamers’ levels. Old EA titles have been ported to the Net and can be played online for free: NHL 97, FIFA Soccer 97, NASCAR Web Racing and Knockout Kings Web Boxing… EA.com offers 17 free titles for online play. The adaptation to a massively multilayer online game of The Sims (20 million copies sold worldwide at the end of 2002, extensions included) hits the market in early 2003. Gamers each pay 9.95 USD/month to play. Despite EA’s hopes for the game’s success, The Sims Online had attracted a base of only 97,000 subscribers by July 2003. A number of observers had thought that the wildly popular game from the Maxis studio would transformed massively multiplayer online gaming into a mass market. Origin Systems is an EA subsidiary. This development studio is behind the massively multiplayer online game, Ultima Online. At the end of July 2003, it boasted a base of 250,000 paid subscribers (15 USD /month). EA publishes a third massively multiplayer game, Earth and Beyond, developed by Westwood Studios. The price of subscription is 12.99 USD/month. Gamers can also buy prepaid cards in kiosks which provide them with access to the game for 90 days. In July 2003, Earth and Beyond had a community of only 35,000 subscribers. In May 2003, after a series of fruitless negotiations, EA decides not to develop and publish games compatible with Microsoft’s Xbox Live service. EA does not want to allow Microsoft to have control over its customer accounts, as demanded by the Seattle giant. Sony is therefore the only console producer that enjoys EA’s backing for online gaming. The first titles available in the US were The Lord of the Rings: Return of the King, The Sims, Medal of Honor: Rising Sun and Need for Speed: Underground.
Mobile devices
Like its rivals, EA develops, publishes, co-publishes and distributes titles for mobile devices. So it was that The Sims was released for Nokia’s N-gage in 2004. This release was part of an agreement signed in August 2003 which plans on the publication of 20 EA titles on N-Gage. The distribution of these titles will be handled by the Finnish firm. In February 2002, EA and JAMDAT Mobile, a California-based developer of content and services for mobile telephony players, announced a co-publishing agreement for two mobile games (PGA Tour and FIFA World Cup 2002). This exclusive agreement between the firms covers the publication and distribution of games in North America, in Japan and in South Korea. They will be compatible with Qualcomm’s BREW, Sun Microsystems’ J2ME and NTT DoCoMo and I Appli’s cHTML language. In May 2001, EA signed an agreement with game publisher Ziosoft to adapt three games from its catalogue for PocketPC: SimCity 2000, Need for Speed and Ultima Underworld. Although EA has invested in this sector since 2001, the company’s involvement is now decreasing. In a drive to cement the loyalty of its gamer community, EA organizes a national, 10-round, console-based tournament for its game Madden NFL (www.maddenchallenge.com). Air Jamaica, Blockbuster and TV channel G4 are all tournament partners. In December 2003 the world cup final of Quidditch was held, an e-sport created from the world of Harry Potter. A number of other tournaments are organized online, and take place on the casual gaming site, www.pogo.com.
Tournaments
2004 edition
© IDATE
79
Video games : nextgen gaming is on its way!
Infogrames Entertainment/Atari
France
Infogrames Entertainment is a French video game development, publishing and distribution company, founded in 1983 by its current CEO and General Manager Bruno Bonnell and Christophe Sapet. In 1988, the company obtained a licence to the popular comic book character, Tintin, a strategy repeated in 1998 with Warner Bros then with Nike for the licence to footballer Ronaldo and Brazil’s national football team. Infogrames launched its IPO on Paris secondary exchange in 1993. One year later, it began its international expansion with the creation of subsidiaries in Belgium and in Germany. 1996 marked the onset of its acquisition strategy, with the takeover of British publishing firm Ocean Software, followed by the acquisition of GT Interactive in 1999 and of Hasbro Interactive in January 2001. On 7 May 2003, Infogrames changed its name to Atari. All of the subsidiaries are affected by the name change, with the exception of the French holding.
Contact info Atari
417 Fifth Avenue New York, NY 10016 Tel.: +1 212 726 6500 http: //www.atari.com
Executive body
CEO Bruno BONNELL General Manager Christophe SAPET General Manager & Chairman Thomas SCHMIDER 2,102 employees around the world on 30 June 2002, of which 750 in the US. In early January 2002 announces 280 layoffs in France, some 60 in Germany and around 100 in the UK. 900 jobs were cut following the takeover of Hasbro Interactive.
Shareholders
Public Founders General Atlantic Partners Hasbro Eurazeo Dassault Multimédia Shark repellent provision 76.32% 9.84% 4.46% 2.67% 2.60% 2.31% 1.80%
Organization
Flowchart: Infogrames Entertainment
International presence
Presence in 60 countries of which 22 European countries Source: Infogrames
80
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Economic & financial performance – Fiscal year ending 31/03
Financial restructuring
Burdened by massive debts following acquisitions and their incorporation into the company, Infogrames began a financial restructuring in 2002. In September 2003, the publisher announces plans to cut its debt by roughly 125 million USD by issuing 27 million shares in its American subsidiary, Atari. By the end of September, the operation is a success, with the French firm having managed to reduce its debt by 132 million USD thanks to the sale. Infogrames Entertainment’s share of its American subsidiary, which generates 60% of the company’s turnover, thereby drops from 88% to 67%. Its quotation suspended, in October 2003 Infogrames announces the launch of a public offer of exchange on all of its Oceanes 2004 and 2005 stock. The publisher offers the shareholders a swap for cash, Infogrames stock, and Oceanes 4% April 2009 stock, along with equity warrants on future Infogrames shares. On 10 December 2003, the public offer of exchange is accepted by the bearers, and represents 200 million EUR in compulsory convertible debt which will be restructured into cash flow. For the first 9 months of fiscal 2003, Infogrames announces a turnover of 660.8 million EUR, up 23.9% over the same period the previous year. Net profits totalled 98.5 million EUR and financial debts, 466.8 million EUR.
Turnover and net profits - million USD
2001 Net Revenue Operating Income Net Income 763.761 -67.897 -123.468
Source: IDATE, based on Atari data
2002 953.639 -7.332 -74.910
2003 744.635 2.763 -6.800
Evolution of financial performance – million USD
1 200 1 000 800 600 400 200 0 2000 -200 Turnover Net profits 2001 2002 2003
Source: IDATE, based on Atari data
2004 edition
© IDATE
81
Video games : nextgen gaming is on its way!
Breakdown of operations Turnover by region - million USD 2000 2001 2002 2003
Turnover: Asia-Pacific Turnover: North America Turnover: Europe
31.664 264.150 263.512
40.802 380.180 330.772
42.396 530.000 309.733
0 409.549 335.086
Source: IDATE, based on Atari data
Growth of turnover by region - million USD
600
500
400
300
200
100
0 2000 TO: Asia-Pacific TO: Europe 2001 2002 TO: North America 2003
Source: IDATE, based on Atari data
Breakdown of turnover by region - fiscal 2003
45.0% 55.0%
TO: North America
TO: Europe
Source: IDATE, based on Atari data
82
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Turnover by platform - million USD million USD 2002 2003
Turnover: PS2 Net Revenue: PC Net Revenue: GameCube Net Revenue: Xbox Other Net Revenue: (PSX, GBC) Net Revenue: Game Boy Advance
171.655 495.892 19.073 28.609 171.655 66.755
275.515 215.944 52.124 81.910 29.785 89.356
Source: IDATE, based on Atari data
Growth of turnover by platform - million USD
600 500 400 300 200 100 0 2002 TO: PS2 TO: GameCube TO: other (PSX, GBC) TO: PC TO: Xbox TO: Game Boy Advance 2003
Source: IDATE, based on Atari data
Breakdown of turnover by platform - fiscal 2003
12% 4% 37% 11%
7%
29%
TO: PS2 TO: GameCube TO: other (PSX, GBC)
TO: PC TO: Xbox TO: Game Boy Advance
Source: IDATE, based on Atari data
2004 edition
© IDATE
83
Video games : nextgen gaming is on its way!
Stock market information
Infogrames Entertainment is quoted on the Paris exchange (EURONEXT Paris – code 5257). ATARI Inc., the Infogrames Entertainment subsidiary is quoted on New York’s NASDAQ (ATAR), and in Germany (Frankfurt, Munich, Berlin, and on Xetra). Market capitalisation: 1,400 million EUR on 7 December 2001. 531.1 million EUR on 22 January 2004.
Positioning on the value chain
Development
Development strategy
Infogrames Entertainment’s development strategy is based on the acquisition and integration of studios: 1998: Gremlin, United Kingdom (Development and Publishing) 1998: Psygnosis, France (Development) 1999: Accolade, United States (Development and Publishing) 1999: Beam Software, Australia (Development) 1999: GT Interactive, United States (Development/Publishing/Distribution) 1999: Den-O-Tech, Canada (Development) 2000: Paradigm Entertainment, United States (Development) 2002: Shiny Entertainment, United States (Development) 2002: Eden Studios, France (Development) In-house development studios: Shiny Entertainment (Enter the matrix) Eden Studios (V-rally, V-rally 2, V-rally 3) Humongous Entertainment (Backyard Sports, Freddi Fish, Putt Putt, Pajama Sam, Spy Fox) Legend Entertainment (Unreal, Unreal 2) Oddworld Inhabitants (Munch's Odyssey) Paradigm Entertainment (Looney Tunes' Duck Dodgers) Reflections (Driver) In September 2002, Microprose in the UK (27 employees), creators of the F1 Grand Prix racing game, is shut down by Infogrames Entertainment. Only the American office continues to operate.
Development partnerships
Infogrames works with a number of partners. To obtain a specific property for its products, it has signed agreements with reputed development studios: Angel Studios (Transworld Surf) Deep Red (Monopoly Tycoon) Epic Games (Unreal Tournament, Unreal Tournament 2003) Firaxis (Civilization I, II, III) Rainbow Studios (Splashdown)
Publishing
Editorial strategy
Atari, which is currently the number one publisher of interactive entertainment software in the US, develops, publishes and distributes games for all existing platforms. Publishing operations are made up of 3 divisions located in the US (Santa Monica – California, Beverly – Massachusetts and Minneapolis – Minnesota).
84
© IDATE
2004 edition
Video games: NextGen gaming on its way!
According to NPDTechworld, Atari is, in the US: The number 1 publisher of PC games for children The number 1 publisher of PC action and combat games The number 2 publisher of PC role playing games The number 2 publisher of PC family entertainment games Atari Europe, a wholly-owned Infogrames Entertainment subsidiary, develops, publishes and supervises the distribution of titles in Europe. Atari publishes mostly for Sony and Microsoft consoles. In September, the company announces that it is cancelling two GameCube titles, Terminator 3 and Driver 3 Acclaim, while Eidos had already cut back production of games for Nintendo home consoles. The Atari catalogue includes over 1,000 titles of which 312 were being marketed at the end of 2003.
Catalogue marketed, by platform 2003
PC Xbox PS2 PlayStation GameCube GameBoy Advance GameBoy Color Dreamcast
Total
54 36 37 16 24 37 4 2
312
Source: IDATE, based on Infogrames data In January 2001 Infogrames Entertainment acquired Hasbro Interactive’s assets, a subsidiary of the American toy producing giant, for the sum of 100 million USD – of which only 5 million USD in cash, the remainder being paid out in 4.5 million Infogrames shares. The company thereby acquired a catalogue of 250 titles, 600 titles franchised titles, the brands Atari, Microprose and Games.com, and an exclusive agreement on the games developed by Hasbro. Among the most popular Hasbro titles are Monopoly, Clue, Scrabble and Roller Coaster Tycoon. Without having launched any new games, the integration of Hasbro Interactive generated 42 million EUR in turnover for Infogrames in 5 months (January to June 2001). Infogrames elected to relaunch the Atari brand which it now owns. This relaunch came into effect in October 2001, with the release in the US and in Europe of the first games carrying the Atari brand: Mxrider on PS2, followed by Splashdown. Infogrames Entertainment’s acquisitions:
• • • •
1996: Ocean Software, United Kingdom (Publishing) 1998: Gremlin, United Kingdom (Development and Publishing) 1999: Accolade, United States (Development and Publishing) 1999: GT Interactive, United States (Development/Publishing/Distribution)
• 2000: Hasbro Interactive, United States (Publishing) On 31 January 2003, Infogrames announces the sale of its Mac publishing subsidiary, Macsoft acquired in 1999 from WizardWorks Group. Destineer is the new owner of Macsoft. Editorial partnerships
Atari Europe has signed publishing agreements with Sega, Bandai and Square Enix for the publication and distribution of titles in Europe. These agreements cover the following zones: the UK, Scandinavia, France, Italy, Spain, Portugal, Greece, Israel, Germany, Austria, Benelux, Switzerland, and Eastern Europe. Australia and New Zealand are considered part of the Atari Europe zone, since both countries use the European PAL video standard. In 2002, Infogrames joined forces with developer BioWare for the publication and distribution of the PC role playing game, Neverwinter Nights.
2004 edition
© IDATE
85
Video games : nextgen gaming is on its way!
Licensing policy
Infogrames acquires licences in the areas of sports, comic books, board games, TV and film. These last two areas are particularly significant, and allow the company to limit chances of failure, having capitalised on Blue's Clues (Nickelodeon), Dragon Ball Z, Dungeons & Dragons, Harley-Davidson, Jeopardy, Looney Tunes (Warner Bros.), Men In Black, Mission: Impossible, Nicktoons, Survivor, Wheel of Fortune, World of Outlaws, The Matrix, Yu Yu Hakusho (FUNimation). Infogrames also sells licences to movie studios. In December 2002, the film rights to the game Alone in the Dark were sold to the German production company Boll Kino. In February 2003, rights to Driver were sold to Constantin Films. In August 2003, Atari acquires the rights to adapt the TV and board game Trivial Pursuit, and put Artech Studios in charge of its development. Given its debt level, Infogrames’ survival was tied to the success of two universally popular titles: Dragon Ball Z Budokai and Enter The Matrix. The first, released on 29 November 2002, was being played in a million homes by mid-January 2003. The second, of which 4 million units were shipped on day one, sold 1 million copies during its first week on shelves. By mid-June 2003, 2.5 million units had been sold, in line with Infogrames’ targets. Infogrames continues to have a keen interest in licences from Japan. It publishes the game Hack on PS2. In the land of the rising sun, this franchise has already given birth to comic books and a cartoon. Infogrames develops, publishes and distributes all types of games, from adventure to sports simulation, by way of action, role playing and cultural games. The prime targets are children/families and teenagers with action/adventure and sport/racing titles. Infogrames target segment is mass audience interactive entertainment products.
In-house franchises: Alone in the Dark, Backyard Sports, Big Price, Civilization, Deer Hunter, Driver, Freddi Fish, Independence War, Oddworld, Pajama Sam, Putt Putt, Roller Coaster Tycoon, Test Drive, Unreal Tournament, V-Rally, Duke Nukem 3D. Licensed games: Asterix, Clue, Digimon, Dragon Ball Z, Jack Nicklaus Golf, Le Mans 24 Hours, Looney Tunes, Lucky Luke, Men In Black, Monopoly, Mission Impossible, Scrabble, The Matrix (3 million copies sold mid-2003), NASCAR, Smurfs, Superman, Survivor, Terminator, Tintin. Infogrames’ release calendar Date Title Horizons - Empire of Istaria Unreal Tournament 2004 Unreal II Platform Genre
Editorial policy
Most popular titles
09.01.2004 06.02.2004 13.02.2004
(PC) (PC) (Xbox)
Action-Adventure Shoot/Beat 'em Up Action 3D
Source: IDATE, based on Infogrames data
86
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Latest titles
The third instalment of Driver, of which previous chapters have sold over 12 million copies worldwide, is scheduled for release in June, following a series of delays.
Distribution
Distribution
Presence in 60 countries including: 22 European countries Australia, New Zealand, Russia, Ukraine, the US and Canada 10 Asian countries, including China, Japan, South Korea, Thailand, Taiwan and India 10 Latin American countries 4 African countries (South Africa, Tunisia, Morocco, Algeria) 3 countries in the Middle East (Israel, United Arab Emirates, Saudi Arabia). The publishers operates a large distribution network with 50,000 points of sale. The company is number one in Europe (30,000 points of sale). In North America, it operates a network of 22,000 points of sale, including the Wal-Mart, Kmart and Toys'R'Us chains. Infogrames also owns distribution companies in over 20 countries: Gamecity (90%) in Switzerland, Axel Multimedia Private (40%) in India, Ozisoft Pty (62.5% control) in Australia, Emme Interactive (11.93%), CD & Co SA (27%), Welcom'Media, Bizarre Love Triangle; publishing companies such as Appeal (49%), Interactive World Productions, Eutechnyx (40%), DMA Design and the assets of Australian Beam International. In 2002, Infogrames signed a publishing and distribution agreement with Japanese publisher, Namco. Infogrames has elected to outsource the distribution of titles in Japan: starting in June 2002, the games published by its Japanese subsidiary will be distributed by publisher Konami. Infogrames acquisitions: 1997: Philips Media, Netherlands (Distribution) 1998: ABS Multimedia, Portugal (Distribution) 1998: Arcadia, Spain (Distribution) 1998: Game City, Switzerland (Distribution) 1999: Ozisoft, Australia (Distribution) 1999: GT Interactive, United States (Development/Publishing/Distribution)
Other business areas
Internet and online gaming
Starting in 1999, Infogrames began investing in the internet: acquisition of 50% control of Zonegames.com, creation of a portal in Spain, Hastajuego.com, launch of gamecitizen.com with its Canadian subsidiary DTI, takeover of the online gaming portal Games.com following its buyout of Hasbro Interactive. Currently, only Games.com is still active. But, in January 2004, Atari began negotiations with the company, Games, which could take over the Atari portal, as well as the online licences to Monopoly, Scrabble, Risk, Battleship, Boggle and Yahtzee, for the sum of 1.125 million USD. Previously reluctant to invest in online massively multiplayer gaming aimed at hardcore gamers, Atari announces in March 2003 the publication of Horizons developed by Artifact Entertainment. Monthly subscriptions are expected to cost 12.95 USD. In January 2004, the title was still not available in Europe, even though it had been scheduled for release in autumn 2003. In April 2004, Atari launches a paid online gaming portal (14.95 USD/month). It hosts 35 of the company’s games (Monopoly, Magic The Gathering – Battleground, Trophy Hunter 2003, Alone in the Dark: The New Nightmare, Atari Arcade...), accessible only online, comparable to Electronic Arts strategy in this area.
2004 edition
© IDATE
87
Video games : nextgen gaming is on its way!
New platforms
Creation in February 2000 of Infogrames.com whose goal is to assemble all of Infogrames’ online assets, whether in the area of mobile telephony (WAP), interactive TV, the Web or broadband networks (cable and satellite, ADSL). Infogrames plans to invest 200 million EUR to adapt its catalogue of games, develop innovative products and forge strategic partnerships for new technologies. This new market is currently being tested by Infogrames, which perceives it as a means of extending its licensing agreements to new platforms. In the autumn of 2001, Infogrames had released 6 games in shops for Palm OS including Centipede, Asteroids (adapted from Driver), Deer Hunter, Pro Bass Fishing and Beach Head 2000. All are available for sale, for a price of between 14.99 USD and 19.99 USD. In February 2002, Infogrames also signed a publishing partnership agreement with JAMDAT Mobile to offer the most popular Hasbro Interactive games for mobile handsets. Over the three years of partnership, mobile versions of Scrabble, Yahtzee, Boggle and Dungeons & Dragons (among others) will be published. Infogrames has made no recent announcement on the development and publication of mobile games. But, 4 titles are available: Asteroids on J2ME and BREW, Breakout on J2ME and BREW, Monopoly on J2ME and Space Invaders on J2ME. Infogrames has no games for Nokia’s N-Gage console in its catalogue. Infogrames holds shares in Game One, Europe’s first TV channel dedicated to video game news. Launched in 1998, Game One is part of the basic pay-TV package marketed by the leading cable and satellite operators in France (TPS, Canal+ Satellite, Noos, NC Numéricâble, FT Cable). The channel is also broadcast via satellite in Poland, Hungary, the Netherlands, North Africa and the Middle East, and broadcast through partnerships with local operators in Asia and in North America. In late May 2003, the MTV group acquired 50% control of Game One. Infogrames’ share was cut to 14.2% and Interactive Partners’ control now totals 35.8%. Infogrames remains cautious about investing in games for interactive TV. Its leading partners in this area are: CanalSatellite OpenTV MediaHighway NTL. In June 2003, Atari began marketing a new video game platform on TV. The BigBen device costs 29.90 EUR and contains 10 mythical games such as Pong, Asteroid, Gravitar and Breakout. Infogrames’ Unreal game is one of the most popular among LAN partiers, and is played at most of the leading tournaments: Cyber Athlete Professional League, World Cyber Games, and the ES World Cup. In late 2002 Unreal’s creator, Epic Games, even announced plans to create a professional version of the game.
Interactive TV
Online gaming and LAN
88
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Konami
Japan
From arcades to consoles Konami is a Japanese company based in Tokyo, which was founded in 1969 by its current CEO, Kagemasa Kosuki. Present in Asia, in Europe and in America, the firm’s operations cover console game development, publishing and distribution. Konami also continues to operate in its original business area, the production of arcade machines, for the American, Japanese and European markets.
Contact info
Konami 2-4-1, Marunouchi, Chiyoda-Ku Tokyo 100-6330, Japan Tel: 03 5220,0573 Fax: 03 5220 9900 http: //www.konami.com
Executive body
CEO Kagemasa KOSUKI General Manager Kagehiko KOSUKI General Manager Noriaki YAMAGUCHI
4,313 employees around the world on 31 March 2003.
Shareholders
Kozuki Holding Japan Trustee Service Bank Kozuki Capital The Master Trust Bank Kozuki Foundation for advanced information tech. 11.23% 7.87% 5.81% 5.77% 4.88%
Organization
Flowchart: Konami
Konami Group Computer & Video Games business Konami Computer Entertainment Studios Konami Computer Entertainment Tokyo Konami Computer Entertainment Japan Konami School Konami Digital Entertainment Konami of Europe Amusement business
International presence
Japan USA China Singapore Europe Australia
Konami Computer Entertainment Hawaii Konami Software Shangai Exercice Entertainment Business Toy&Hobby Business Gaming business
Source: Konami
Economic & financial performance – Fiscal year: 31/03
Imbalanced growth
Growth of the group’s turnover in fiscal 2002-2003 (+1.2% compared to the previous fiscal year) is due in large part to the solid performance of the new publishing divisions, derivative products, and entertainment and sport centres (Fiscal entertainment), but also to the rise in revenues generated by toy sales (Toy & Hobby) and slot machines (Gaming). Konami announced high profits for the first half of fiscal 2003/2004: up 149%, while turnover is up 14.8%, compared to the same period the previous year. Among the explanations given for these healthy profit levels, Konami cites high sales of its YuGi-Oh and Winning Eleven (Pro Evolution Soccer in Europe) series.
2004 edition
© IDATE
89
Video games : nextgen gaming is on its way!
Turnover and net profits - million USD
2001 2002 2003
Turnover Net profits Turnover Computer & Video Games Net profits Computer & Video Games
1 367.754 171.468 519.59 73.13
1 799.215 90.918 697.12 92.43
2 022.522 - 227.294 769.71 97.94
Source: IDATE, based on Konami data
Evolution of financial performance – million USD
2 500 2 000 1 500 1 000 500 0 -500 2001 2002 2003
Turnover Net profits Computer & Video Games turnover Computer & Video Games net profits
Source: IDATE, based on Konami data The Video Games division posted a further 3% decline in fiscal 2003 (to 87.5 billion JPY) while remaining Konami’s prime source of revenues.
Breakdown by geographic zone Turnover by region - million USD 2002 2003
Turnover: Japan Turnover: North America Turnover: Europe Turnover: Asia-Pacific
1 416.563 207.356 154.082 21.055
1 454.206 380.658 129.996 58.060
Source: IDATE, based on Konami data
90
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Growth of turnover by region - million USD
1 600 1 400 1 200 1 000 800 600 400 200 0 2002 TO: Japan TO: Europe 2003 TO: North America TO: Asia-Pacific
Source: IDATE, based on Konami data
Breakdown of turnover by region - fiscal 2003
6% 3%
19%
72%
TO: Japan TO: Europe
TO: North America TO: Asia-Pacific
Source: IDATE, based on Konami data
Japan: core market
Japan is still Konami’s prime market (182.3 billion JPY, of 72% of total sales). In fiscal 2003, the turnover generated in Europe was down considerably over the previous year (-15.6%), whereas earnings in North America rose by 83.6%. The IPO for Konami stock was launched in Singapore in November 1997 (KONAM.SI) and on the London Exchange in September 1999 (KON, 9766q.L). in addition, two subsidiaries were floated on the Tokyo Exchange: Konami Computer Entertainment Osaka (KCEO) in 1999 and Konami Computer Entertainment Tokyo (KCET) in 2000. Fiscal 2003 was marked by the introduction of Konami on the New York Stock Exchange. The group’s market capitalisation was valued at 3.42 billion USD in January 2004 on the NYSE.
Stock market information
2004 edition
© IDATE
91
Video games : nextgen gaming is on its way!
Positioning on the value chain
Development
Video games subsidiaries
Konami’s development operations are divided up between several studios: in Japan (Konami Computer Entertainment Japan, Konami Computer Entertainment Studios, Konami Computer Entertainment Tokyo) in the US (Konami Computer Entertainment America ) in the UK (Konami of Europe founded in 2000) On 26 July 2001, Konami spent 5 billion JPY (40 million USD) to acquire a share of Hudson Soft’s equity. This holding gave rise to a strategic alliance with the Japanese game publisher which specialises in developing online and mobile games. In August 2003, Konami signs a partnership agreement with the studio Hothouse Creations for the development of a new game which will be available on PS2, Xbox and PC in the summer of 2005. Among other things, Hothouse Creations is behind adaptation of TV games such as “Who wants to be a millionaire?” and "Pop Idol".
Development partnerships
Publishing
Platforms
In October 2003, Konami created a division based in Los Angeles, California baptised Konami Digital Entertainment. This subsidiary is in charge of publishing games for the American market. Konami’s publishing strategy revolves around popular titles created for Sony’s PS2 and Nintendo’s GameBoy Advance. Konami seeks to obtain exclusive rights: the games are published for a single platform. Metal Gear Solid 3 (scheduled for release in early 2004), Silent Hill 3 and ISS Soccer are all PS2 exclusives, Air Force Delta Storm, Silent Scope Complete are available solely on the Xbox. In April 2002, Konami announced the porting to PC and the Xbox of Shadow of Memories, one of its most popular PS2 games. The development of these two new versions was awarded to Konami of Europe. In late 2002, Konami elects to distribute the PC version of Silent Hill 2 and Metal Solid Gear 2 in Europe. In the first quarter of 2003, Konami releases two PC only games (Casino and Apocalyptica).
PC
Konami’s line-up Consoles Leading Games
PS2
Metal Gear Solid 2, Suikoden III, Tokimeki Memorial III, Professional Baseball Japan 2001, Clash Bandicoot IV, Castelvania: lament of innocence, Silent Hill 3, Firefighter, K1 World Grand prix, Yu Gi Oh! The Duelist of the roses Frogger Hikaru No Go, Captain Tsubasa, Rave, Boktai, Castlevania: Aria of sorrow, Yu Gi Oh! Dungeon Dice Monsters Air Force Delta II, Silent Hill 2: Restless Dreams, Teenage Mutant, Dance Dance Revolution Ultramix, Bloody Roar Extreme, Silent Scope Complete Hyper Sports 2002 Winter, World Soccer 2002, Rave, Frogger, MGS: The twin snakes Source: IDATE, based on Konami data
PS2 and GBA GBA Xbox GameCube
92
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Licensing policy
Under its own brand, Konami publishes and markets games developed by independent studios such as Hudson Soft (of which Konami owns 45.4%), Genki (of which Konami owns 37.2%). In addition to publishing games for its partners, Konami handles their distribution on the Japanese market. The Tokyo-based firm in also involved in its partners’ production, including American firm Universal Interactive. A case in point here is Nightmare Creature, developed by the French firm, Kalisto. In December 2003, Konami obtains the worldwide publishing licence to Japan’s most popular role playing game, YS VI, developed by the studio Nihon Falcom Corporation. The game is expected to be marketed for all home consoles in the winter of 2004. The games developed centre on the themes of sport, action and adventure, role playing and music. Konami is focused particularly on developing sport-related games, a market segment well dominated by Electronic Arts. To this end, Konami joined forces with US TV channel ESPN (Walt Disney Group) to produce basketball, American football and baseball titles. But, in April 2002, Konami opted not to renew its contract with the American sports channel. The Japanese publisher has therefore foregone the licence for future sport games. ESPN MLS Extra Time 2002 will be the last American title to be produced under this licence. On the Japanese market, games developed under licences drawn from Japanese Mangas remain a core element in Konami’s editorial strategy (Yu-Gi-Oh! VI, Hikaru No Go, Captain Tsubasa, Rave). In early 2004, Konami released a new type of game in Japan and the US: LifeLine which integrates voice recognition. This feature is used to control all of the heroine, Rio’s actions, eliminating the need for a game pad. Rio can interpret 5,000 words and 100,000 phrases. But, she does not necessarily obey orders. Gamers need to enter in a conversation with her and find the right words to convince her to act. In fiscal 2003, Konami reached the 21 million titles sold worldwide mark (8 million titles sold in Japan). Suikoden 3 and Metal Solid Gear 2 (5 million copies sold worldwide) are two of the company’s greatest hits. In the US, Yu-Gi-Oh too has become a best seller (4.6 million copies sold). Among Konami’s other hits on PS2 are: Pro Evolution Soccer (Winning Eleven in Japan), available on PS2, with 14 million copies sold worldwide (at the end of 2003). Winning Eleven 7 international was released in Japan in early 2004 Silent Hill II, launched in Japan on 27 September and in the US on 13 September, then in Europe on 23 November 2001 Zoe, Castlevania, Track and Field, Beat Mania (published only in Japan) PlayNovel Silent Hill on Game Boy Advance Powerful ProBaseball Pocket Air Force Delta Strike, Silent Hill 3, Frogger's Adventure on PS2 Silent Scope Complete, Bloody Roar Extreme on Xbox MGS: The twin Snakes, Frogger's Adventure on GameCube Boktai, Castlevania on Game Boy Advance
Editorial policy
Most popular titles
Latest titles
Distribution
Distribution partnerships
Konami distributes the products of over 20 game publishers, including all the games produced by Japanese toy giant, Takara. In fiscal 2003, Konami distributed 2.7 million video games for third party publishers. Konami has been the sole distributor of publisher Hudson Soft’s products in Japan since December 2001. Already Midway’s distributor in Germany, Konami signed a distribution agreement in January 2004 with the US publisher. The agreement allows Konami to release titles such as Spy Hunter 2 and Road Kill, two racing/action games available on PS2 and Xbox.
2004 edition
© IDATE
93
Video games : nextgen gaming is on its way!
Konami distributes some of its titles in the form of discount packages. In late 2002, Konami Europe launched a new PS2 budget pack called "The Collection", with games priced at 29.95 EUR (Zone of the Endres, Ring of Red, Age of Empires 2, 7 Blades, Silent Scope).
Other business areas
Online gaming
In July 2001 Konami launched the beta version of its website (konamionline.com) so that gamers who had bought games in retail outlets could network online from their PC or console (a specific adaptor had already been designed so that PS2 owners could access the site from their consoles). Access to the site is free, but is only for gamers who have bought the game in shops. In January 2001, Konami offered its first mobile internet application for Japanese incumbent carrier NTT DoCoMo’s i-mode subscribers. Buoyed up by the alliance with Hudson Soft, Konami develops a comprehensive mobile gaming offer in Japan, starting in July 2001, via its new subsidiary, Konami Online. Under the generic brand, "Konami Net DX", the Tokyo-based company now offers Java-compatible online gaming for mobiles for the country’s three mobile operators, NTT DoCoMo (i-mode), J-Phone (J-Sky) and KDDI (EZweb). The first games available on the Konami Net portal were Dance Dance Revolution, Money Game and Powerful Pro Baseball. At the end of 2003, over 200 games were available in Japan. For i-mode subscribers, two packages of 7 and 6 games, respectively, are available, along with single games (Kin'niku Banzuke - Muscle Ranking, Konami Sports Series, Captain TSUBASA and a series of ringtones, "Konami Music Hits"). In January 2003, Konami was offering 5 sport games ("MLBPA Homerun contest", "WWE Mobile madness", "Soccer", "Bowling" and "Rotoball") for 150 JPY a month on NTT DoCoMo’s i-mode service. For J-Sky subscribers: a catalogue of 10 titles, including Konami J-Appli and Konami Music Hits. For EZweb subscribers: a catalogue of 9 titles, including "Dance Dance Revolution" and Konami Music Hits. In January 2003, Konami began supplying content to mobile operators in Hong Kong and in Taiwan. That same month, in partnership with US publisher THQ’s THQ Wireless subsidiary, Konami launches "United States of Game", a sport video game download service (5 titles for 150 JPY a month), available via Japanese mobile carrier NTT DoCoMo’s i-mode service. In November 2003, the Japanese enterprise signed an agreement with American telco, AT&T. Konami also planned to launch two titles in early 2004 (Gradius and Castlemania) on US mobile operator Verizon’s "Get It Now" service. Konami of Europe in December 2003 announced the signature of an agreement with mobile operator Vodafone to supply content to the VodafoneLive! service. This agreement initially involves 13 countries (including Germany, Spain, the UK and Italy, but not France) and includes games such as Castlemania, Frogger and Gradius. The price of a game download is between 3 and 7 EUR.
Mobile devices
94
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Microsoft
USA
Microsoft holds the dominant position on the PC operating systems market, the web browser market and the desktop software market. The launch of its Xbox console in 2001 marked Microsoft’s entry onto the consumer electronics market. Microsoft banked on the creation of a high-end console, in terms of computing power, by equipping its device with an 8 Gb hard drive, internet access capabilities and a DVD player. The American firm is also involved in online gaming. Over the past few years, Microsoft has developed video games, of which some have enjoyed massive worldwide success, including the series Age of Empire and Flight Simulator and the massively multiplayer game, Asheron’s Call. The Redmond-based firm also operates one of the most popular gaming portals, The Game Zone. Since early 2002, Microsoft has been investing in mobile telephony with its preferred partner from the PC world, Intel. But, more important still, the firm is enjoying growing prominence on the PDA sector. It has developed the Pocket PC OS, and is gradually eating away at its rivals’ market share, notably sector leader Palm.
Contact info
Microsoft Corporation 1 Microsoft Way, Redmond, Washington 98052, USA Tel.: (425) 882-8080 Fax: (425) 936-7329
http: //www.microsoft.com/games http: //www.xbox.com/
Executive body
Chairman of the Board, Chief Software William H. GATES III Architect Chief Executive Officer Steven A. BALLMER President, Chief Operating Officer Richard E. BELLUZZO Senior Vice President, Home & Robert J. BACH Entertainment
47,600 employees around the world on 30 June 2001, of which 19,400 employees in research and development. 55,000 employees around the world on 30 June 2003, of which 23,200 employees in research and development.
Shareholders
Microsoft has over 90,000 shareholders, of which over 3,700 institutions (Fidelity Management & Research, Barclays Bank Plc, AXA Financial, JP Morgan Chase & Company).
Organization
Flowchart: Microsoft
Microsoft Corp PC Experience Server & Business Consumer & Devices CE Mobility
International presence
The US, the UK, France, Spain, Germany, Australia, Taiwan, China, Korea and Japan: over 70 countries.
Home & Entertainment MSN
Source: Microsoft Corporation
Latest news
March 2004
At the Game Developer Conference, Peter Moore, Microsoft’s head of gaming content, denied the rumour that the American firm was entering the handheld market, which would have put them head to head with Sony and Nintendo.
2004 edition
© IDATE
95
Video games : nextgen gaming is on its way!
Economic & financial performance – Fiscal year ending 30/06
Turnover and net profits - million USD 1999 2000 2001 2002 2003
Turnover Turnover: Home & Entertainment Net profits
19 747.000 1 148.000 7 785.000
22 956.000 1 626.000 9 421.000
25 296.000 1 143.000 7 346.300
28 365.000 2 453.000 7 829.000
32 187.000 2 748.000 9 993.000
Source: IDATE, based on Microsoft Corporation data
Evolution of financial performance – million USD
35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 1999 Turnover 2000 2001 2002 2003 Net profits
Turnover: Home & Ent ertainment
Source: IDATE, based on Microsoft Corporation data
Steady growth, despite operating deficit
Turnover for the Home & Entertainment division (formerly Consumer Software Services & Devices) was up 12% in fiscal 2003 compared to fiscal 2002. In fiscal 2003, the revenues generated by the Home 2 Entertainment division derived largely from the rise in sales for Xbox consoles, games and peripherals (779 million USD). The revenues generated by the sale of PC games and software dropped by 1% compared to fiscal 2002. Operating profits for the Home & Entertainment division were still well in the red in 2003. Microsoft continues to lose money on the sale of its Xbox consoles, with each device being sold at a loss. Microsoft is quoted on New York’s NASDAQ (NASDAQ: MSFT). The company’s market value was estimated at 365.5 billion USD on 31 December 2001. The company’s market value was estimated at 298.3 billion USD on 2 February 2004.
Stock market information
96
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Positioning on the value chain
Development
Development subsidiaries
For several years now, Microsoft has been building its video game catalogue through in-house development, by taking over other studios, and by adapting software originally developed for other uses (e.g. flight combat software from the US Army). The company has unified its acquisitions within a single development structure, Microsoft Games Studios. The year 2000 was the stage for a series of acquisitions: Microsoft takes over FASA Interactive Technologies (Mech Warrior), Access Software (golf game Links), American development studio Bungie Software (Halo, Myth), American development studio Digital Anvil (Freelancer) and American development studio Turbine Entertainment Software (massively multiplayer game Asheron's Call). In 2001, Microsoft continued the trend with the takeover in March of Texan studio Ensemble Studio (Age of Empires on PC). In September 2002, Microsoft acquired British studio Rare from Nintendo (Golden Eye 007, Perfect Dark, Donkey Kong 64…). Microsoft publishes and distributes PC games produced by independent studios (Argonaut Games, VR1, Bizarre Creations, Japanese studio Dream Factory, Swedish studio Digital Illusions). Sega’s withdrawal from console production in April 2001 was key to helping rally independent players around producing games for the Xbox. A number of luminaries from the video game development world have invested in creating games for Microsoft’s console: Electronic Arts, Infogrames, Konami, Acclaim, Eidos, Namco, Activision, Hasbro, Titus. In September 2003, Microsoft forms a partnership with Epic Games, developer of Unreal, and its subsidiary, Scion Studios, for the development of several new games, exclusive to the Xbox and on PC. These titles will be published by Microsoft. In February 2004, Microsoft Game Studios signs an agreement with the studio Blue Fang Games LLC for the development of the game Zoo Tycoon 2.
Development partnerships
Publishing
Editorial strategy
Microsoft continues to uphold its presence on PC, but its prime focus is naturally on the Xbox. In March 2004, a major change was made to the American giant’s editorial strategy. It opts to put the development of sport games on hold for a year. The titles involved are NFL Fever 2005, NBA Inside Drive 2005, Links 2005, NHL Rivals 2005, Top Spin and Amped. The only exception is the game RalliSport Challenge 2. Microsoft’s decision comes from the fact that this market segment is fiercely competitive, and requires the company to upgrade its skills in this area. In 2003, 63 new games were released for the Xbox. In early February 2004, the console had a catalogue of 390 games in the US, most of which are exclusives, and 37 of which are published by Microsoft. This constitutes a fairly sizeable choice, and includes a wide range of genres: automobile racing, snowboard, skateboard, BMX, team sports (basket + hockey), party games, action-shoot and action-adventure. Following its takeover of the studio Rare from Nintendo in September 2002, Microsoft elects to focus on the British studio’s upcoming catalogue, and pulls out of publishing Tork (Tiwak) in April 2003. In December 2003, Microsoft signs an exclusive publishing deal with Japanese developer Capcom in Europe, for the sci-fi game Steel Battalion. In early January 2004, Microsoft signs a publishing agreement publishing with Tecmo for the exclusive rights to Ninja Garden and Dead or Alive Online, which will become available on Xbox in 2004.
Editorial partnerships
2004 edition
© IDATE
97
Video games : nextgen gaming is on its way!
Licensing policy
Microsoft favours the publication of games exclusively for the Xbox, a stipulation made to third party publishers, at least for the launch. Microsoft managed to secure the exclusive rights to several licences, including Halo (Bungie Studios) and Munch Odyssey (Microsoft Games) for the Xbox. Microsoft Game Studios in April 2002 announced the addition of the NBA licence to its catalogue of Xbox games. Microsoft publishes all types of games. The multinational’s target market includes a broad range of consumers: children under 16 and young adults (16 to 35). The chief games published by Microsoft are action, strategy, simulation and sports. The Xbox catalogue of games from third-party publishers was particularly impressive at the end of 2003, including over 360 Xbox games (of which 350 were produced by third parties).
Halo is Microsoft’s most popular game for the Xbox (4 million units sold worldwide at the end of December 2003). The Age of Empires series is one of the leading products to come out of the Microsoft Game Studios. Age of Mythology surpassed the million copies sold on PC mark worldwide in March 2003. The first two episodes of Ages of Empires sold over 11 million copies each.
Editorial policy
Most popular titles
Latest titles
The leading Xbox titles released in 2003 were: Sega GT Online (Sega America), I-Ninja (Namco), Armed & Dangerous (Lucas Arts), Dance Dance Revolution UltraMix (Konami), Sphinx and the Cursed Mummy (THQ). The main titles scheduled for release in 2004 are: Sonic Heroes, released in January 2004 (Sega); Halo 2, Fable, BC (Microsoft Games Studio); Ninja Garden, Dead or Alive ultimate (Tecmo); Breakdown (Namco); Full Spectrum Warrior (THQ); Splinter Cell: Pandora Tomorrow (Ubi Soft); StarCraft: Ghost (Vivendi Universal).
Distribution
Distribution network
Microsoft distributes its products based on three major market zones: the Americas and the South Pacific (the US, Canada, Mexico, Argentina, Australia...), Asia, and the zone that includes Europe, the Middle East and Africa. Among the leading distributors and retailers of its products are Ingram Micro, Tech Data, Software Spectrum, Corporate Software & Technology, Softbank, Software House International, ASAP Software Express, and Tech Pacific Group. Microsoft also has a network of sales reps who work with resellers and retailers, and provide sales support for the company’s products. The console itself is sold through specialised retail chains and department stores (5,000 points of sale in the US, close to 10,000 in Europe) and online via ecommerce shops (amazon.com). To design the marketing and communication plan for the Xbox in the US, Microsoft chose SoBe (local events), Taco Bell (print and TV) and Vans (sporting events partner). For the launch in Europe, Microsoft hired Universal McCann. For online games, Microsoft works a great deal with the agency AKQA. Microsoft elected to outsource distribution of its console in Japan (at least at launch) to Bandai’s subsidiary Happinet. Japanese resellers would have preferred to go through Microsoft’s Japanese distribution network, and work directly with the company’s sales teams. October 2001 Microsoft also chose game publisher Activision to distribute the Xbox in Germany, and take advantage of the company’s distribution subsidiary there, NBG EDV Handles & Verlags. The budget for the Xbox’s initial launch campaign worldwide totalled 500 million USD, of which a third was spent in Europe (23 million EUR in France). The company chose to reach the mass market via TV, and hardcore gamers via online advertising (through Microsoft’s affiliate sites: tf1.fr, Sports.com). In Europe Microsoft distributes the online game Asheron's Call, developed by Turbine Entertainment Software
Distribution agreements
98
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Other business areas
Internet and online gaming
"The Game Zone" is Microsoft’s internet gaming portal. Access to the server is free. To play, gamers need only register on the site. The Game Zone offers: Access to information: news on video games, game previews, tips, cheats and solutions Online purchasing of most of the company’s video games, desktop software and other applications, hardware and electronic equipment, books, music and DVDs. Downloads of game demos in collaboration with the site Hot Games. A search engine, to find a game, a gamer, a team. Thematic forum and newsgroup management, matchmaking, online chats with personalities from the video game world. Organization of international virtual tournaments (Age of Empires II, Golf: Links 2001). For PC, Microsoft Game Studios also develops several massively multiplayer games. Asheron’s Call, developed by Turbine, is the firm’s most popular online game. The first version of the game, released in the US in November 1999, had a community of 90,000 subscribers worldwide in August 2003 (120,000 subscribers maximum in December 2001). Asheron’s Call 2, which was released in November 2002, did not enjoy the hoped-for success (50,000 subscribers in August 2003). The latest online game announced by Microsoft was Mythica, initially scheduled for release in 2004. But, in February 2004, Microsoft announces its decision to cancel the game’s release given the ferocity of competition on the market. In December 2003, Microsoft sold the Asheron’s Call to Turbine Entertainment. A few months Microsoft unveiled Vanguard: Saga of Heroes, a massively multiplayer role playing game developed by the studio Sigil Games, which was founded by Brad MacQuaid, one of the creators of Everquest. Microsoft publishes a number of games for its Pocket PC, for which it developed the operating system: Black Jack, Tropical Nights, Vegas Nights, in addition to offering network gaming for PDA (Mobile Poker, Mobile Chess). The games sell for between 7 and 25 USD, while some games are offered for free by Microsoft. British publisher Eidos Interactive in March 2002 announced the publication of its smash hit Tomb Raider on Pocket PC, using the 3D features that equip Ideaworks3D’s Segundo dedicated development engine. Pocket PC gamers will be able to save their scores, download pitches and have access to a community of gamers.
Mobile devices
2004 edition
© IDATE
99
Video games : nextgen gaming is on its way!
Nintendo
Japan
Created in 1889, with headquarters in Kyoto, Nintendo is a video games developer, publisher and distributor, as well as being a console producer (Nes, Super Nes, Game Boy and Game Cube). During the 1980s, Nintendo enjoyed stunning success with both its consoles and games, and the company remained the sector’s uncontested leader until Sony’s arrival on the market in 1995.
Contact info
Nintendo 60 Kamitakamatsu-cho Fukuine Higashiyama-ku Kyoto 605-8660 Japan Tel.: +81 07 5541 6111 Fax: +81 07 5531 7996 http: //www.nintendo.com http: //www.nintendo.co.jp)
Executive body
President Saturo IWATA Senior Managing Director Katsunori TANIMOTO Senior Managing Director Akio TSUJI
Shareholders
Hiroshi Yamauchi Bank of Kyoto Daiwa Bank Tokai Bank Sanwa Bank Bank of TokyoMitsubishi Chase Manhattan Bank Other 10.8% 4.9% 4.9% 4.9% 4.9% 4.9% 3.8% 60.9%
Organization
Flowchart: Nintendo
International presence
Japan, the US, Australia, Canada, Spain, France, Hong Kong, The Netherlands, Germany, Taiwan, South Korea.
Source: Nintendo
Economic & financial performance – Fiscal year ending 31/03
November 2002
Nintendo was fined 149 million EUR by the European Commission for having created a cartel with seven European distributors. Brussels accused the firm of anti-trust practices that locked in the various national markets.
100
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Turnover and net profits - million USD 1999 2000 2001 2002 2003
Turnover Net profits
4 565.030 684.276
4 229.272 447.411
3 688.551 770.409
4 424.666 848.566
4 020.321 535.936
Source: IDATE, based on Nintendo data
Evolution of financial performance – million USD
5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 1999 2000 Turnover 2001 2002 Net profits 2003
Source: IDATE based on Nintendo data
Operations drop in 2003
Compared to fiscal 2001, the Japanese firm’s turnover and net profits rose by 20% and 10.2%, respectively, in 2002. In 2003, Nintendo was still in the black, despite a drop in turnover that year. Close to 75% of sales were outside of Japan, which had a positive effect on profits, given the weakness of the yen. But, in October 2003, the company announced losses for the first time since going public in 1962: 3 billion JPY (or 23 million EUR) in losses in the first half of fiscal 2003/2004. The Japanese firm attributes a sizeable portion of these losses to the yen’s rise against the dollar (considerable loss of investments), but also to disappointing sales for its GameCube console. Nintendo had, however, generated net profits during the first quarter, ending on 30 June 2003, thanks to the successful launch of its new handheld, the Game Boy Advance SP. In early 2004, Nintendo announced that annual net profits would be down by close to 20% in fiscal 2003/2004 compared to the previous year (54 billion JPY), due to low sales in Japan of the GameCube and Game Boy Advance consoles, and to the yen’s rise on the dollar.
Turnover by region - million USD 2002 2003
First net losses announced
Operational breakdown
Turnover: Japan Turnover: North America Turnover: Europe Turnover: Asia-Pacific
1 366.159 2 260.184 752.066 46.256
1 050.340 1 959.518 965.802 43.864
Source: IDATE, based on Nintendo data
2004 edition
© IDATE
101
Video games : nextgen gaming is on its way!
Growth of turnover by region - million USD
2 500 2 000 1 500 1 000 500 0 2002 TO: Japan TO: Europe 2003 TO: North America TO: Asia-Pacific
Source: IDATE, based on Nintendo data
Breakdown of turnover by region - fiscal 2003
1% 24% 26%
49%
TO: Japan
TO: North America
TO: Europe
TO: Asia-Pacific
Source: IDATE, based on Nintendo data
North America, now the n° 1 market Stock market information
Since 2002, North America has been the number one market for the Kyoto-based firm. Japan, which had always been their core market, is being gradually overtaken by Europe. Nintendo is quoted on the Tokyo Stock Exchange (7974) and on the New York Exchange (NYSE: NTDOY). In June 2003, the company’s market capitalisation was valued at 9 billion USD.
Positioning on the value chain
Development
Development & publishing subsidiaries
Nintendo owns 8 development subsidiaries around the world: Nintendo of America, Nintendo Australia Pty, Nintendo of Canada, Nintendo España, Nintendo of Europe, Nintendo France, Nintendo Hong Kong and Nintendo Netherlands. In late April 2003, Nintendo opened a new R&D unit in Tokyo, geared to supporting efforts to create new games dedicated entirely to the Nintendo universe.
102
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Development partnerships
In addition to the games developed by its owns studios, Nintendo’s consoles also play host to titles produced by 66 other publishers, including many of the market’s leaders: Electronic Arts/EA Sport, Konami Inc, Namco, Take Two Interactive Software, THQ, Ubi Soft, Infogrames, 3D0… Nintendo of America owns several exclusive developers, namely Retro Studios, Silicon Knight and the Nintendo Software Technology subsidiary. In September 2002, Nintendo sells British development studio Rare (Golden Eye 007, Perfect Dark, Donkey Kong 64…) to Microsoft. Formerly an exclusive developer for Nintendo, American studio Left Field Productions (ExciteBike 64, NBA Courtside 2002, 1080° SnowBoarding) put an end to its partnership in February 2002 to begin developing games for all platforms. The GameCube developers kit was shipped in December 2000 (500 kits), 9 months prior to the console’s launch in Japan. In October 2002, Nintendo added a development tool: the DivX kit for GameCube, developed by the studio Factor5 and the firm, DixXNetworks. Independent developers will therefore by able to offer kinematics on GameCube. Nintendo has also called on third-party companies for the creation of its consoles’ computing engines and processes, and for the games its publishes: Alias/Wavefront, MIPS Technologies, MultiGen, Nichimen Graphics, Paradigm Entertainment, Rambus Online, Silicon Graphics, Softimage, Visteon Multimedia Systems.
Number of Nintendo games sold, by console, on 31 March 2003
In million units
Japan
The US and Canada
Other
Total
Game Boy Advance / SP Game Cube Total
29.88 10.39 40.27
54.04 36.24 90.26
24.98 13.87 38.68
108.90 60.51 169.41
Source: IDATE, based on Nintendo data
Publishing
PC
Up until now, the Japanese firm has not ported its most popular titles to PC. This platform has never been the focus of development projects. On 3 May 2002, 21 GameCube games accompanied the release of the new GameCube in Europe, taking advantage of the creation of Japanese and American catalogues of software for the console. At the end of 2003, some 250 games were available. Thirdparty publishers announced the following hits for 2004: Rebel Strike (Lucas Arts), Billy Hatcher (Sega), Viewtiful Joe and P.N.03 (Capcom), Harry Potter, Lord of the Rings: Return of the King (Electronic Arts)… Nintendo’s most popular titles for the GameCube are still Luigi's Mansion, Wave Race Blue Storm, Made in Wario, Metroid Prime, Super Mario Sunshine Mario Party 4… For 2004 Nintendo announces the publication of Pikmin2 and Zelda Four Swords. For the launch of the Game Boy Advance in Japan, 25 titles were available, including 4 games published by Nintendo. In the US, 17 titles were available, selling for between 29.99 USD and 39.99 USD, including Nintendo’s own Super Mario Advance. In 2002, Nintendo sold 11.2 million games in Japan, and remains the country’s number one publisher. Pokemon Ruby and Pokemon Sapphire (4.2 million units sold) were the two best sellers for the Game Boy Advance in fiscal 2003. In November 2003, Nintendo launches the "iQue Player" on the Chinese market: a console equipped with N64 technology and produced in China for the Chinese market, hosting games developed in that country.
Console
2004 edition
© IDATE
103
Video games : nextgen gaming is on its way!
Number of titles available by console sold, on 31 March 2003 Console Japan The US and Canada Other
Game Boy Advance Game Cube
373 99 Source: IDATE, based on Nintendo data
370 201
348 150
Licensing policy
The characters created by Nintendo and which star in its games are present only on Nintendo platforms, and developed only by the company’s in-house studios. Nintendo creates its own characters for its video games, including Zelda, Donkey Kong, Mario and the Pokemon band of creatures. These characters are among the best known of all the Japanese producer’s creations, and the last two have also been the subject of a great many off-shoot creations (films, cartoons, stickers, trading cards, clothing, toys, food…). The Japanese firm boasts solid mastery of the process of making use of its most popular characters. Mario, for instance, has been the hero of a extensive series of games over the years: Mario Bros, Mario and Luigi, Super Mario, Mario Kart, Mario Golf, Mario Party, Mario Story, Mario Tennis. Given their global popularity, the Pokemon too have been the centre of a great many titles. Following Nintendo’s acquisition of shares Bandai in October 2003, editorial ties with the Japanese toy giant – which also owns a number of licences (Dragon Ball, Gundman, YoGyoh !…) – could well become concrete in future. In Europe, GameCube games retail for between 50 and 60 EUR, the same as PS 2 games. In early 2003, a number games were discounted from 49.95 to 29.95 USD, under the “Player's choice” label that encompasses some of the most popular titles (Resident Evil, Mario Party 4…). In April 2003 Nintendo cut the percentage that it earns from publishers on GameCube games, with the goal of providing an incentive for third-party publishers to create more games for its home console. Traditionally, the Kyoto-based firm has offered games for children, ages 6 and up. This is notably the target market for the GameBoy Advance handheld console. Boasting enhanced graphics, the GameCube marks a shift in strategy, here, seeking to appeal more to young adults. Nintendo markets 7 types of game: action, combat, first person, puzzle, racing, adventure and role playing, sport. Sport remains the central theme in the games marketed by Nintendo. Nintendo is committed to developing and publishing games for the entire public. The company collaborates with the ESRB (Entertainment Software Rating Board) which classifies games according to their content. 2004 will see the release of a number of exclusive titles come from third-party publishers and from Nintendo: among the chief games scheduled for the Game Cube this year are Final Fantasy Crystal Chronicles; Metal Gear Solid: The Twin Snakes; James Bond 007: Everything or Nothing. Metroid Zero Mission and Fire Emblem will be released for the Game Boy Advance.
Pricing policy
Editorial policy
Latest titles
104
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Best selling GameCube games in January 2003 Ranking 1 2 3 4 5 6 7 8 9 10 Best sellers
Mario Party 4 Star Fox Adventures 007 Operation Nightfire Super Mario Sunshine Medal of Honor FIFA 2003 Super Smash Bros Melee Harry Potter Need for speed 2 Star Wars 2 Source: IDATE, based on GfK data
Distribution
Distribution policy
The group maintains full control of its products’ distribution (consoles and games that it publishes) on its principal markets. Nintendo of America invested 75 million USD in the launch of the Game Boy Advance in the US. Nintendo initially shipped the GBA to 6,000 points of sale. 500,000 GBA were sold in the US in the first week, and 1 million during the first 6 weeks. In France, 100,000 GBA were sold during their first week in shops.
Other business areas
Internet
Nintendo manages roughly 25 websites, dedicated either to one of the subsidiaries or to a popular game, including: www.marioparty.com, www.pokemon.com, www.banjo-kazooie.com, www.donkeykong.com, www.zelda.com. These sites offer information on the games (previews, release date, scenario, patches) along with game strategies. Nintendo does not publish games for mobile handsets or PDAs, maintaining the exclusivity for its own handhelds (the GameBoy line and, since March 2002 in Europe, the Pokemon Advance). Pirate emulators (PocketSNE9X) have, however, been designed for PDAs. With respect to mobility, Nintendo has elected to join forces with Motorola to counter the Sega/Nokia alliance and Nokia’s N-Gage handheld device but, up to now, the Japanese firm has not yet released any products to this end.
Mobile gaming
2004 edition
© IDATE
105
Video games : nextgen gaming is on its way!
Sega Corporation
Japan
A pioneer in the video entertainment industry, Sega put an end to console production in March 2001 following the failure of its Dreamcast, and is focused now on publishing video games. The Japanese firm aims to become one of the world’s leading suppliers of games for consoles. In May 2003, in a matter of days, Sega turned down the bid to merge with arcade games producer Sammy, and was then dropped by Namco which withdrew its merger proposal, while specifying that the deal could be back on the table at a later date. Rumours are now circulating over a possible merger on the North American market between Sega and Electronic. Microsoft too is said to be interested in a partnership with Sega in the US (not a full takeover of the Japanese firm’s operations, but rather the buyout of certain studios). In December 2003, despite the failed merger, arcade game producer Sammy does not renounce on the idea of taking control of Sega. The firm acquired a 22.4% of Sega stock from its parent company CSK. The deal, worth a total 45.33 billion JPY, makes Sammy the Japanese company’s leading shareholder.
Contacts Sega Corporation 2-12, Haneda 1chrome, Ohta-ku, Tokyo 144-8531, Japan Tel.: +81 03 57367111 Fax: +81 03 57367066 http: //www.sega.co.jp/ Shareholders
Sammy Other 22.4% 77.6%
Executive body
Chairman Hajime Satomi President Hisao OGUSHI Chief Operating Officer Tetsu KAYAMA
3,469 employees worldwide on 31 March 2003.
Organization
Flowchart: Sega
International presence
Sega Corporation (Japan), Sega Enterprises (USA), Sega Europe (the UK). Source: Sega
Latest news
February 2004
Following Sammy’s acquisition of a portion of Sega’s equity, and as part of an executive shuffle, Hajime Satomi replaces Hideki Sato as the head of Sega.
106
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Economic & financial performance – Fiscal year ending 31/03
Turnover and net profits - million USD 1999 2000 2001 2002 2003
Turnover Net profits Turnover: Video games
2 123.010 -342.138 675.503
2 704.406 -342.138 1 484.991
1 937.187 -412.320 923.533
1 645.293 -141.959 678.693
1 572.718 24.723 531.151
Source: IDATE, based on Sega data
Evolution of financial performance – million USD
3 000 2 500 2 000 1 500 1 000 500 0 -500 -1 000 Turnover Net profits Turnover: video games 1999 2000 2001 2002 2003
Source: IDATE, based on Sega data
Operations continue to decline in 2003 Positive net profits in 2003
The group’s overall turnover in fiscal 2002-2003 was down again, compared to the previous year (-4.4%). Video games and consoles earnings too were down significantly (-21.7%), totalling 66.6 billion JPY. After putting an end to console production in March 2001, and restructuring the company to focus on publishing games for all platforms, Sega began to reap the fruits of its new policy in 2003. The firm generated positive net profits totalling 3 billion JPY, and this for the first time since 1999. Arcade and video game sales surpassed projections. In the first quarter of fiscal 2003-2004, Sega announces net profits of 1.89 billion JPY. The group’s quarterly sales rose by 19.4% compared to the same period the previous year (42.4 billion JPY). For the whole fiscal year, Sega projects profits of 7.5 billion JPY for sales totalling 193 billion JPY. Over the course of the fiscal year ending on 31 March 2003, sales in Japan rose slightly, by 2.1% (163.4 billion JPY), compared to the previous year. The company’s turnover continues to drop in the US (-22.7% compared to 2002) and in Europe (38.7% compared to 2002).
Operational breakdown
2004 edition
© IDATE
107
Video games : nextgen gaming is on its way!
Turnover by region - million USD 2001 2002 2003
Turnover: Japan Turnover: North America Turnover: Europe
1 337.449 407.535 192.203
1 276.837 273.551 94.905
1 303.155 211.344 58.219
Source: IDATE, based on Sega data
Growth of turnover by region - million USD
1 600 1 400 1 200 1 000 800 600 400 200 0 2001 TO: Japan 2002 TO: North America 2003 TO: Europe
Source: IDATE, based on Sega data
Breakdown of turnover by region - fiscal 2003
4% 13%
83%
TO: Japan
TO: North America
TO: Europe
Source: IDATE, based on Sega data In fiscal 2003, the turnover generated by Sega’s games and consoles business dropped by 18.7% compared to the previous fiscal year. On the other hand, management of its amusement centres, and sales of amusement machines increased by 7.9% and 8.7%, respectively. Arcade games Virtual Fighter 4 and Initial D Arcade Stage Version 2 were among the best sellers in 2002-2003.
108
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Stock market information
Sega Corporation is quoted on Tokyo Stock Exchange (7 964) and on the Paris Exchange’s foreign securities market (012961). Market capitalisation valued at 124.775 billion JPY on 30 September 2001. Market capitalisation valued at 129.4 billion JPY on 28 February 2003.
Positioning on the value chain
Console production
History
Sega’s Saturn console (launched in 1995) was a resounding flop, particularly in Europe and primarily due to the lack of available titles and the difficulties in mastering the development kit. In November 1998 in Japan and during 1999 in Europe and the US, Sega began marketing the Dreamcast, the market’s first 128-bit console, the first to be webenabled and the first to be equipped with a broadband adaptor. Banking on this new console to gain an edge over its competitors, and to reverse their precarious financial situation, Sega launched a major marketing campaign, allocating 140.5 million USD to promoting its machine in the United States and in Europe. Sega had plans to be number one in online gaming via console. To this end, they equipped the Dreamcast with a 56 Kbps modem and a browser. Given the limited speeds available, however (56 Kbps in the United States and 33.6 Kbps in Europe), and the lack of multi-player online games developed for the Dreamcast, these services did not enjoy the hoped-for success. Looking for renewed impetus, Sega allied itself with AT&T subsidiary @Home in Japan, with British Telecom and ICL in Europe, and with American operator Genuity (ex-GTE). An investment of 82.8 million USD was made to develop broadband networks. Sega was the first victim of the console market’s streamlining, and the slow pace of broadband’s deployment, despite having sold 10 million consoles (of which over a million in Europe). And even though it cut the retail price of its machine in September 2000 by 40% to 150 USD (173 EUR), it was a commercial failure. In spite of the support of hard core gamers, the mass market appears to prefer rival Sony’s PS2. In March 2001, Sega confirms the rumour circulating over the end to production of its Dreamcast, having reached only 44% of its sales target. The group does not stop producing games for its machine, however. Sega sold licenses to Dreamcast technology to American STB manufacturer Pace Micro Technology and to Japan’s Studio Bullterrier in May 2001.
Dreamcast production halted in March 2001
Development
Development subsidiaries
Since July 2003, Sega’s development operations have been divided into 7 departments: Sega-AM2 WOW works (merger of WOW entertainment and OverWorks) Sonic Team (integrates former United Game Artists teams) Cinematic Online Games (50 employees in charge of developing online gaming) Hitmaker (Sega Rosso merged with Hitmaker) Amusement Vision Smilebit (dedicated to sport games)
2004 edition
© IDATE
109
Video games : nextgen gaming is on its way!
Development partnerships
Sega subcontracts game development for only a small number of titles: the group developed a third of the 366 video games published for the Dreamcast in-house, since the console’s release in November 1988, in other words an average 50 games a year. Sega does however frequently call upon computer programmers to create new types of games: - Borkov, its first game for mobile phones, launched in February 2001 in Japan, was developed in partnership with American giant Sun Microsystems. - Online game Quake III Arena (launched in June 2001) was developed by Activision and Raster Productions under the direction of ID Software.
Publishing
Publishing for the Dreamcast Multi-platform publisher
Sega still markets some games for the Dreamcast but is not releasing any new ones. After it decided to stop producing consoles, Sega opted to focus entirely on publishing games for all of the market’s platforms, including mobile. To this end, the group has signed a number of licensing agreements to export its catalogue of over 1,000 titles to new platforms (consoles and PC). The group also plans to launch new series including Rez and Super Monkey Ball on each of the platforms. 15 new titles are expected to be released during fiscal 2004. In January 2004, Sega of America signs a co-publishing agreement with Cartoon Network and Warner Bros for the Samurai Jack game on PS2, Xbox and GameCube. Sega nevertheless currently publishes primarily games for Sony’s PS2. Sega does not currently have any best sellers capable of selling copies in the millions. The company apparently needs to focus more on peripheral activities such as arcades and slot machines. Sega develops mainly games with original concepts, but also acquires licences for its sports games from leagues such as the NHL, the NFL, the NBA, and the Tsukuro series in Japan. In May 2002, American sports channel ESPN sold Sega a licence to use its brand in sports-related games, Konami having not renewed its contract with the channel. In June 2003, Sega America partners up with ESPN and re-baptises the line of sports games (ESPN NFL Football, ESPN NBA Basketball, ESPN NHL Hockey and ESPN College Hoops). In Japan, Sega launched a budget line in July 2003. Called "Sega, The best 2800", the offer involves the sale of old PS2 titles at a low price (2,800 JPY or roughly 20 EUR). The first two games in the collection, released in October 2003, were Power Smash 2 (Virtua Tennis 2) and Aero Dancing 4. Sonic the Hedgehog has become the company’s emblem, and one of its recurring characters. In Japan, there is even a Sonic cartoon. The rights to Sega’s hero under negotiation in Europe, and the series was expected to come to France early this year. With a strategy now focused as well on the internet and online gaming, Sega is targeting not only teenagers, but also children and adults Virtua Fighter Sonic Adventure The House of The Dead Sega Rally 1 and 2 Resident Evil Soul Calibur Phantasy Star Online 2, first massively multiplayer game on console (with close to 100,000 subscribers) Unreal Tournament.
Licensing policy
Pricing policy
Editorial policy
Most popular titles
110
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Latest titles
-
Virtual on Marz (developed by Hitmaker), Virtua Fighter 4 Evolution (AM2) on PS2 Billy Hatcher and the Giant Egg, Sonic Adventures DX, Phantasy Star Online 1 & 2 developed by Sonic Team Otogi (From Software) on Xbox. The top releases announced for early 2004 are Sonic Heroes (on GameCube, PS2, Xbox) at the end of January, Sega GT online on Xbox at the end of January, Nightshade in February on PS2 and Phantasy Star Online 3 in March on GameCube.
Distribution
Distribution partnerships
Distributor of Dreamcast products up until April 2001, Sega now outsources its products’ distribution in Europe to Bigben Interactive, France’s leading independent video game and accessory distributor, operating subsidiaries in the UK (planet distribution), in Benelux (Atoll Soft) and in Germany (Big Ben Interactive). In 2002, distribution agreements were signed with Sony for PS2 titles, with THQ for the Game Boy Advance and with Infogrames for the GameCube and Xbox In August 2001 Sega of America contracted exclusive distribution of all its products to Canadian firm Hip Interactive. For its entry onto the Chinese market in June 2001, Sega chose to create a partnership with Metrix Interactive Entertainment. In November 2001, the company forged a partnership with Japan’s Softbank Corp. and Taiwan’s Acer to distribute its games via paid download. The newly formed venture, Xsido Corp., distributes Sega products via its broadband networks directly to PC and console owners in Japan, Korea and Taiwan. In December 2003, Sega announces the distribution of Sports Interactive in Europe. Sports Interactive is the creator the Coach saga for Eidos. Sega will distribute Eastside Hockey in early 2004.
Other business areas
Online gaming
As part of the development of its online activities, Sega is beginning to publish, in collaboration with developers/publishers, PC-compatible games to be played online. A case in point here is Quake III Arena (launched in June 2001) and published by Activision and Raster Productions under the direction of ID Software. The firm Ripcord Games markets a compilation of its Blade Master games which were released on the Sega gaming portal in late September 2000. Sega’s online subsidiary, Sega.com created an online gaming portal, Heat.net geared PC-based players. Operating on a paid model, the portal offered news from the video game sector, on releases and gamer communities along with access to some 160 games. In September 2000, the portal was shut down and all the information relating to Sega games was transferred to the new Sega.com portal. Given that Microsoft’s X-Box offers web connection as a standard feature, in July 2001, Sega elected to begin developing online games for the console. The group awaited the initial sales figures on the web connection kits for the PS2 before deciding whether to develop online versions of PS2 games as well. In October 2002, Sega of America launched Phantasy Star Online 1 and 2 on the GameCube, the first online gaming offer available for Nintendo’s console.
2004 edition
© IDATE
111
Video games : nextgen gaming is on its way!
Mobile gaming
In June 2000, Sega released a mobile version of its best seller, Sonic The Hedgehog, for NTT DoCoMo’s i-mode subscribers. In the US, Sega released its first game for PDA in the spring of 2001: Borkov Basic. The firm signed an agreement with Qualcomm in September 2001 to develop video games for mobile phones compatible with the BREW mobile platform created by Qualcomm. In April 2002, the firm announces the creation of Sega Mobile, a new business unit in charge of porting Sega games to mobile phones and PDAs in North America. The latest mobile games published by Sega Mobile were Alien Chaos and Outrun. In April 2003, Sega launched 5 games for PDA (Shining Force 2, Sonic The Hedgehog, Shinobi, Super Columns, Dr Robotnik's Mean Bean Machine). In January 2001 Sega signed a partnership agreement with Palm, the world’s leading PDA producer. In August 2001 in the US, Sega signed an agreement with Synovial Inc. to develop Sega games on American PDAs. The first title was Virtual Game Gear, a Pocket PC-compatible version of Game Gear. In April 2002, Sega announces a new partnership with manufacturer Motorola: Sega is to develop un API with 3D features for the Motorola’s new generation PDAs operating over Palm OS. The API will be integrated into future versions of MetroWerks’ CodeWarrior development kit, which Sega will market directly to game developers. In August 2003, Sega signs an agreement with Finnish manufacturer Nokia to integrate Sega.com’s multiplayer technology into the N-Gage handheld. Under the agreement, Sega becomes the new owner of Sega Arena, the Japanese publisher’s online gaming platform based on SNAP technology. 4 games published by Sega have been available on N-Gage since October 2003 (Puyo Yop, Sonic N, Super Monkey ball and Virtua Tennis). In February 2004, Sega launched two more titles on N-Gage (Virtua Cop and Alien Front). Mid-March 2004, Sega announces its commitment to developing the first massively multiplayer game for Nokia’s web-enabled handheld. Pocket Kingdom: Own The World will use N-Gage Arena. Sega is number one in the world in the field of arcade games. The titles on offer in its Amusement Centres are veritable simulators (F1, motorcycle, skiing, snowboarding...). Any game that becomes popular in arcades is usually ported to console – noteworthy examples being House of Dead, Sega Rally, Virtual Striker, Virtual Cop, Virtual Fighter. In late 2002, Sega perfected an arcade machine based on Xbox technology. Sega has ported a selection of its titles to the platform, including House of Dead 3. Sega designed the machine in such a way as to facilitate porting to home consoles. Sega and Namco signed a partnership agreement in September 2001 for the development, publication and distribution of their arcade games, and for cutting their arcade management costs. Sega owns 550 amusement centres in Japan and Namco 376, after having closed down close to a hundred. Seeking to revive the sector, the two groups also have plans to link their arcades via high-speed networks. This alliance could prove highly significant given that Namco designed the motherboard for the 246 that makes it possible to adapt arcade games to Sony’s PS2. To equip its arcade terminals with online features, Sega joined forces with Japan’s leading mobile telephony giant, NTT DoCoMo: the communication technology that connects players will be based on DoCoMo’s i-mode system.
Arcade games
112
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Sony Corporation
Contacts
Sony Corporation 7-35, Kitashinagawa 6-chome, Shinagawa-ku Tokyo 141-0001 Japan Tel.: +81 03 5448 2111 Fax: +81 03 5448 2244 http: //www.sony.com, http: //www.PlayStation.com
Japan
Executive body
Chairman and CEO Sony: Nobuyuki IDEI President and COO: Kunitake ANDO President and CEO Sony Computer Entertainment: Ken KUTARAGI
181,800 employees worldwide on 31 March 2001. 168,000 employees worldwide on 31 March 2002. 161,100 employees worldwide on 31 March 2003.
Shareholders
Moxley & Co Chase Manhattan Bank State Street Bank & Trust Sakura Bank Mitsui Trust Sumitomo Trust Raykay Other
Organization
7.6% Sony operates 46 subsidiaries in Japan – including Sony Computer 5.4% Entertainment, the video game development studio "989 studios" – and 47 overseas subsidiaries, including Sony Corporation of America, Sony Europe, Sony Electronic (The US), Sony Music Entertainment (The US and Japan), Sony 3.5% Pictures Entertainment (The US) and Sony Computer Entertainment (Japan). On 28 November 2003, SCE became a wholly-owned Sony subsidiary. Up until 3.3% then, SCE had two shareholders: Sony with 99.74% and Ken Kuturagi who controlled a 0.26% share. 3.1% 2.6% 2.5% 79.6%
Flowchart: Sony Corporation as of 1 December 2003
International presence
The US, Canada, Panama, Brazil, Chile, Germany, the UK, Switzerland, France, the Netherlands, Austria, Italy, Spain, United Arab Emirates, Korea, Taiwan, Hong Kong, Thailand, Malaysia, Singapore, Indonesia, New Zealand, Australia.
Source: Sony
2004 edition
© IDATE
113
Video games : nextgen gaming is on its way!
Flowchart: Sony Computer Entertainment
Source: Sony
Source: Sony
Economic & financial performance – Fiscal year ending 31/03
For the fourth quarter of the fiscal year, ending on 31 December 2003, profits were down for Sony’s games division. Turnover totalled 367 billion JPY, down 4.5% compared to the previous fiscal year. Turnover generated by console sales dropped to due a retail price cut, and was not compensated by the volume of consoles sold, despite being higher than the same period the previous year. As to software, turnover is on the rise, even though the price of a number of games has been reduced.
114
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Turnover and net profits - million USD 2001 2002 2003 2003/2002
Net Revenue: Sony Operating Income: Sony Net Income: Sony Corp Net Revenue: SCE Operating Income: SCE Net Income: SCE
58 337.512 1 797.190 133.617 5 270.967 -407.679 26.629
60 438.463 1,073.715 122.101 8,004.865 661.267 228.778
59 604.053 1 478.929 921.292 7 616.606 898.435 193.121
-1.4% 37.7% 654.5% -4.9% 35.9% -15.6%
Source: IDATE, based on Sony data
Evolution of financial performance – million USD
9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 -1 000 TO: SCE 2001 2002 Operating profits: SCE 2003 Net profits: SCE
Source: IDATE, based on Sony data
Market capitalisation
In Japan, Sony Corporation and its subsidiaries are quoted on the Tokyo, Osaka, Nagoya, Fukuoka and Sapporo exchanges. Overseas, the Sony Corporation and its subsidiaries are quoted on the New York (NYSE: SNE), Chicago, Toronto, London, Paris, Frankfurt, Düsseldorf, Brussels, Vienna and Zurich exchanges. The company’s market capitalisation on the New-York Exchange was valued at 24.6 billion USD on 24 April 2003. Sony increased its R&D spending by 2.3% between fiscal 2003 and fiscal 2002, to a total 443.1 billion JPY (roughly 3.5 billion USD). R&D spending in the area of video games increased by 27.4% between 2003 and 2002 to reach 61.5 billion JPY (roughly 57.5 million USD). These expenditures are part of preparations for the PS3.
R&D
Positioning on the value chain
Development
Development strategy
SCE owns 11 video game design units: Psygnosis Polyphony Digital, Arc Entertainment Sugar and Rockets Contrail Deep Space Millennium's Games Development Teams (become Sony Entertainment Cambridge) Naughty Dog Incog (acquired in May 2002) integrated into the SCEA studio in Santa Monica
2004 edition
© IDATE
115
Video games : nextgen gaming is on its way!
Red Zone Interactive. Three studios, all SCEE subsidiaries, are located in London, Liverpool and Cambridge (UK). Liverpool is also the site of the European Quality Evaluation Department. The rest are subsidiaries of Sony Computer Entertainment of America. Verant Interactive is a Sony Online Entertainment development subsidiary, which is itself a subsidiary of Sony Pictures. The studio develops mainly massively multiplayer role playing games, including the Everquest series and PlanetSide.
Development partnerships
77 developers/publishers collaborate with Sony to port titles to the PSX and PS2. SCE released PS2 development kit, on Linux, at the end of January 2002. Sony Online Entertainment, has signed development partnerships notably with: Lucas Art for the massively multiplayer game Star Wars Galaxies Lodestone and SolWorks in August 2003 for the creation online gaming on PC. In late March 2004, SCEE signs an exclusive partnership agreement with Dutch studio Guerilla for the development of Killzone for PS2. One month later, it renews its partnership with the studio Insomniac Games for the creation of a sequel to Ratchet & Clank: Up Your Arsenal.
Publishing
Editorial strategy
SCE publishes games only for its own consoles. In fiscal 2003, the company marketed 551 games of which 71 were published in-house, in other words 36 more games than in fiscal 2002. When combined with the PS One, a total of 2,900 titles are available for play on the PS2. Growth of Sony’s PS2 catalogue 2000 2001 2002 2003 Number of titles marketed on PS2 17 53 239 551 Of which titles published by SCE 4 5 35 71 Source: IDATE, based on Sony data
Source: SCEE Gamers bought an average 5.7 PS2 games, compared to 5.2 for the PlayStation/PS One.
116
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Source: SCEE Durant fiscal 2003, SCE sold 61 million PlayStation and PS One games, as well as 190 million PS2 games. By March 2003, SCE had sold 51.2 million PS2 consoles worldwide and, by January 2004, Sony had exceeded 70 million mark.
Console and game sales (million units) Fiscal 2002 Hardware Fiscal 2003 Cumul. on 31/03/2003
PlayStation + PS One PlayStation 2
Software
7.400 18.070
6.780 22.520
96.410 51.200
PlayStation PlayStation 2
91.000 121.800
61.000 189.900
917.000 350.000
Source: IDATE, based on Sony data Some 20 PS2 titles are exclusive to that machine, including Burnout 2 (Accalim), Pro Evolution Soccer 2 (Konami), Ratchet & Clank (SCEE), Treasure Planet (SCEE), Kingdom Hearts (SCEE), GTA Vice City (Take2Interactive), Onimusha 2 (Capcom), Red Faction 2 (THQ), Automodellista (Capcom), TOCA Race Driver (Codemasters), Lord of the Rings: Fellowship of the Ring (EA).
Publishing partnerships
Contractually, SCE forges partnerships with all publishers wishing to publish games for its consoles. In addition, specific agreements are formed for exclusive publications: In May 2002 with Square Soft for publishing Final Fantasy X (PS2) In March 2002 with Eidos for Lara Croft Tomb Raider: The Angel of Darkness (PS2) In May 2001 with Disney for 5 PS2 titles (Atlantis: The Lost Empire, Monsters, Lilo & Stitch, Treasure Planet and Peter Pan: Return to Neverland).
2004 edition
© IDATE
117
Video games : nextgen gaming is on its way!
Licensing policy
-
Exclusive licensing agreement (May 2003) signed with the F1A for the Formula One 2003 (PS2) game Renewal (January 2003) of a licensing agreement with UEFA for adapting titles based on the Champion's League for the 2005/2006 season.
Editorial policy
Like its competitors, Sony is targeting a wider public in terms of age, and is expected to expand even further when the PS2 goes online in the near future. But, most Sony console owners are between the ages of 12 and 28.
Source: SCEE One of Sony’s chief selling points is the size of its catalogue. Geared to reaching the maximum number of gamers, regardless of age, in terms of numbers it is by far the largest.
Most popular titles
In fiscal 2003: Gran Turismo 3 A Spec & Byndle (2.519 million units sold worldwide) Gran Turismo 3 A Spec Platinum (2.265 million units sold worldwide) The Getaway (1.605 million units sold worldwide) Final Fantasy X (1.214 million units sold worldwide) WRC II Extreme (1.050 million units sold worldwide) Gran Turismo 4 is behind schedule, and now expected for summer 2004.
Distribution
Distribution strategy
Sony Computer Entertainment operates a distribution network for its consoles and games in 23 countries: The US, Canada, Panama, Brazil, Chile, Germany, the UK, Switzerland, France, the Netherlands, Austria, Italy, Spain, United Arab Emirates, Korea, Taiwan, Hong Kong, Thailand, Malaysia, Singapore, Indonesia, New-Zealand, and Australia. In the US, SCE of America distributes the products through a network of 20,000 points of sale. In Europe, SCEE is in charge of marketing the consoles and software in 102 countries in Europe, in Africa, Oceania and in the Middle East. Sony’s subsidiaries are present in 11 countries, and have offices in 91, employing a staff of 1,100. In late 2003, 39 million PlayStations had been sold in PAL territories, compared to 98 million worldwide. In the same vein, 24.5 million PS2s found a home in PAL zones, compared to 70 million worldwide.
118
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Distribution partnerships
The distribution strategy for SCE consoles is based on marketing packs that contain a PS2 and games, or a PS2 peripheral and a console. By way of an example: in September 2003, the Japanese firm was marketing the GTA 3 (Take2Interactive) and Pro Evolution Soccer 2 (Konami) games with a console for 230 EUR. At the end of October 2003, Sony offered a PS2 and, for 1 EUR more, a network adaptor. Like its rivals, Sony increases bundled offers during the Holiday season. In June 2001, SCEE and Sega sign an exclusive agreement for the production, distribution and marketing of Sega PS2 games in PAL zones. SCE forms partnerships for the distribution of bundles that include a PS2 console and one or several games: With Konami for a Metal Gear Solid II bundle – 35,000 bundles shipped.
Other business areas
Internet and online gaming
Faced with the arrival of Microsoft’s X-Box, Sony opted to deploy an offensive strategy on the web for its PS2 starting in May 2001, when it began forging a series of industrial alliances with: ● American ISPs AOL, Earthlink, AT&T WorldNet Service, SBC-Prodigy and Sympatico to provide internet access for PS2 owners, and the possibility of using the in-house browser, instant messaging and forums. ● Japanese ISPs Nifty (controlled by Japan’s largest ISP Fujitsu Ltd), Biglobe (NEC), Nippon Telegraph and Telephone Corp (partnership announced in February 2002). These ISP represent 70% of Japan’s broadband users. ● with Real Network for adapting Real Player 8 to the PS2’s OS. ● With Sun Microsystems, for which Sony adapted the browser to Java for the PS2. In addition for chats while playing online, this feature allows PS2s to communication with new generation mobile phones and interactive TVs. With RSA Security, developer of SSL encryption for communication and transaction security, to secure browsing and e-commerce based on the PS2. Unlike Microsoft, however, Sony had opted for free online console-based gaming. But, in April 2003, Sony rolls out a paid model of the Minna no Golf Online game. The games cost roughly 36 EUR in shops, and three subscription formulas are available: 3.80 EUR a month, 4.60 EUR for 3 months, or 11.50 EUR for six months. Sony Online Entertainment, a Sony Pictures Digital Entertainment subsidiary, which is itself a of Sony Corporation of America, is in charge of the development, publication and marketing of massively multiplayer games for PC, consoles and mobile devices. SOE is the world leader in massively multiplayer games with 15 titles published and one game hosted (Star Wars Galaxies). Its most popular game by far is, EverQuest (EQ), and its 6 sequels which include EQ The Ruins of Kunark, The Scars of Veliuos and The Shadows of Luclin. SOE, whose headquarters are located in San Diego, owns development studios in Austin and Saint Louis. The Everquest series on PC and PS2 are online massively multiplayer, with the exception of Lord of EverQuest which is a real time strategy game, with an online option. The EQ series boasted 445,000 active subscribers in June 2003. SOE has developed two other MMP titles: PlanetSide (60,000 subscribers in August 2003), a massively multiplayer first person shooter game, and Star Wars Galaxies (275,000 subscribers in August 2003 after only 4 months on the market), which is a role playing game. SOE markets a pass (Station Pass) for 3 other multiplayer games which do not require gamers to buy the CD in shops: Cosmic Rift, Infantry Online and Tanarus.
2004 edition
© IDATE
119
Video games : nextgen gaming is on its way!
Table 24: Massively multiplayer games marketed by SOE Title Launch date Platform Monthly subscription Developer
EverQuest Hero's Call EverQuest War on Faydwer EverQuest Chapter 1 EverQuest (4 extensions) EverQuest (6 extensions) EverQuest Online Adventures Frontiers Lord of EverQuest PlanetSide EverQuest II Star Wars Galaxies Empire Divided Cosmic Rift Tanarus Infantry Online Scoot! Two Cities
15 April 2003 28 April 2003 26 November 2002 23 June 2003 18 August 2003 October 2003 Autumn 2003 19 May 2003 Winter 2003 April 2003 2003 Winter 2004 2003 25 March 2003 June 2003
Mobile phone Pocket PC Pocket PC Pocket PC Macintosh PC PS2 PC PC PC PC PC PC PC Mobile phone Mobile phone
2.99 USD 19.99 USD 19.99 USD 19.99 USD Variable 12.95 USD 9.99 USD 12.99 USD Variable Variable 6.95 USD 6.95 USD 6.95 USD 2.99 USD 2.99 USD
SOE Emodiv Emodiv Emodiv SOE SOE SOE Rapid Eye Entertainment SOE SOE Lucas Arts SOE SOE SOE SOE SOE
EverQuest Attack on Qeynos 19 February 2003
Source: IDATE, based on SOE data Development of the massively multiplayer game Sovereign was stopped in February 2003. On 15 May 2003, SOE announces a premium offer which includes all of its MMP titles (including PlanetSide, EverQuest and EverQuest II) and games accessible via the Station Pass for 21.99 USD a month. SOE manages the online gaming site, The Station (www.station.sony.com). On 26 August 2003 SCE launches an online gaming site. This service is aimed at the sports gamer community, a segment where EA dominates, and where Sega is battling for a solid position. 989SportsOnline.com (www.989sportsonline.com) offers matchmaking over PS2, managed by the publishers, along with gamer rankings and tournaments. Also on 15 May 2003, Sony announces a partnership with AOL for the creation of an AIM Talk service that lets AOL subscribers who own a PS2 to talk to each other vocally via AOL’s IM service, whether over a PC or a PS2. The service also lets subscribers listen to music in streaming, watch videos and film trailers, and access game highlights in video format. Launch was scheduled for the first quarter of 2004, to coincide with the release of Sony’s new 40 Gb PS2 hard drive.
Mobile gaming
In August 2000 Sony had announced a partnership with Japanese operator NTT DoCoMo, aimed at developing a technology for connecting the PS2 to the web via mobile phone. In March 2001, Sony and NTT DoCoMo unveiled a cable for connecting Sony consoles with imode mobiles, enabling network gaming on mobile terminals. Five other operators associated themselves with the project in January 2001 (including AT&T, Hutchison, Telecom Italia and Dutch operator KPN Telecom). Following an agreement with Verizon Wireless, SOE, in charge of the development and publication of online gaming and mobile gaming, announces the release of three games compatible with BREW platforms (EverQuest: Hero’s Call, Scoot! and Two Cities) and three episodes of EverQuest on Pocket PC.
120
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Square Enix Co
Japan
Square Enix (Sqex) was created on 1 April 2003 from the merger of Square Soft and Enix. Founded in September 1986, Tokyo-based Square Co. Ltd develops and publishes video games for consoles and PC. The group specialises in publishing games for home consoles produced by Sony Computer Entertainment Inc.: the PSOne and PS2. The firm made its mark in 1987 with the launch of the first episode of Final Fantasy, for which episode 12 is in the works. Over 45 million copies of the entire series have been sold around the world. Square began its international development in 1989 with the creation of a development and publishing subsidiary in the US. In 1998, the group allied itself with Electronic Arts to create two joint ventures: one in the US and the other in Japan, with the goal of sharing design costs. That same year, the firm created a European publishing subsidiary, based in London. Square’s investment in the internet began in 2001 with the launch of its website, playonline, which offers services to its community of gamers. Enix is the publisher behind the Dragon Quest series, which has sold over 30 million copies worldwide. Sqex’s strategy involves the deployment of original content on a number of platforms (TV, consoles, PC, internet, mobile phone) and via several media: cinema, TV, music and the press.
Contact info
Square Enix
Executive body
Chairman Yasuhiro FUKUSHIMA President Yoichi WADA Executive President Keiji HONDA
Shinjuku Bunka Quint Bldg. 3-22-7 Yoyogin Shibuyaku TOKYO 151-8544 JAPAN http: //www.squareenix.co.jp
1,210 employees worldwide on 31 March 2001. 1,324 employees on 30 September 2003.
Shareholders
Public Yasuhiro Fukushima Fukushima Kikaku Master Trust Bank of Japan Michiko Fukushima 36.3% 40.4% 16.6% 4.6% 2.1%
International presence
Japan The US Europe China
2004 edition
© IDATE
121
Video games : nextgen gaming is on its way!
Organization
Flowchart: Square Enix
Square Enix Co., Ltd. Square Enix Co., Ltd. Square Enix USA Inc. Squer Enix Europe Ltd. Square Enix Webstar Network Technology Co. Ltd
Développement The Gamedesigners Studio Inc. Digital Entertainment Academy Corp. Square Enix Mobile Community Engine Inc. FF Film Partners Square Pictures, Inc.
Développement
Edition Dstribution
Edition Distribution
Edition Distribution
Source: IDATE, based on Square Enix data
Economic & financial performance – Fiscal year ending 31/03
On 26 November 2002 the merger of Square Soft and Enix is announced. The deal is finalised on 13 February 2003, and takes effect on 1 April 2003. Two companies reached a share swap agreement on the following basis: 1 share of Square for a 0.85 share of Enix.
Turnover and net profits - million USD 2000 2001 2002 2003
Turnover Net profits
963.426 64.504
490.246 -97.920
495.765 131.536
522.000 nd
Source: IDATE, based on Square Enix data.
Evolution of financial performance – million USD
1 200 1 000 800 600 400 200 0 -200 1998 1999 2000 2001 2002 2003
Turnover
Net profits
Source: IDATE based on Square Enix data
122
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Breakdown of turnover by region - fiscal 2003
5% 3%
22%
70%
TO: Japan
TO: North America
TO: Europe
TO: Asia-Pacific
Source: IDATE based on Square Enix data
Stock market information
Square Enix is quoted on the Tokyo Stock Exchange (TSE: 9620). Market capitalisation: 242,430 million JPY on 23 July 2003.
Positioning on the value chain
Development
Development strategy
In-house game development is structured around Square Enix headquarters in Japan. The studio Community Engine is in charge of developing online titles, and The Gamedesigners Studio, offline games. Another Japanese studio, the Digital Entertainment Academy, is in charge of developing content for TV. FF Film Partners oversees development partnerships. Square Pictures is Sqex’s development studio in the US. It is the unit behind the adaptation to a feature film of the game Final Fantasy: The Spirits Within. Square invested 135 million USD in the production of this digital image film, but earned only 75 million USD at the box office. Despite its fragile financial state, Square pictures continues to produce animated shorts based on The Matrix. Mobile content is developed by a division of Square Enix Japan, Square Enix Mobile. The merger that took place in April 2003 benefits Enix which, up until then, had farmed out production of its games. In June 2002, Square took over development studio Quest, creator the role playing game, Ogre Battle. Square Enix joined forces with Disney Interactive to develop Kingdom Heart. Published for PS2, the game was released in Japan in November 2001. The agreement was renewed in September 2003 for the creation of two Kingdom Hearts sequels: Kingdom Hearts – Chain of Memories (GBA) and Kingdom Hearts II (PS2). To date, 4 million copies of the game have been sold, worldwide. For the development of Final Fantasy XI on Windows, Square Enix allied itself with nVidia. The Sqex game marks the Japanese publisher’s entry onto the PC game development market.
Development partnerships
2004 edition
© IDATE
123
Video games : nextgen gaming is on its way!
Publishing
Editorial strategy
Sqex’s publishing operations are organized into 3 divisions. Square Enix Japan develops, publishes and distributes video games. Square Enix The US (Los Angeles, CA) is in charge of localising games produced in Japan, of their marketing and publication in North America. Square Enix Europe (London, England) owns the European and PAL zone publishing rights to Square Enix’s games. The European subsidiary is in charge of the sale, marketing and distribution of the games.
Number of games sold by Square Enix (million units) 1998 - 2002 1998 1999 2000 2001 2002
8.640
9.700
10.320
7.920
10.470
Source: IDATE, based on Square Enix data
Licensing policy Editorial policy
In September 2002, Square Enix markets its first joint game, Kingdom Hearts. Starring in the game are 100 Disney characters. Square develops and distributes titles that range from adventure to sport simulation, by way of action games. The company has earned an international reputation for its RPG.
Best sellers Volume of Final Fantasy sales
Source: Square Enix
124
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Volume of Dragon Quest sales
Source: Square Enix Among Square’s other titles that have sold over 1 million copies, are: Kingdom Hearts (3.3 million units sold), Chrono Trigger (2.65 million), Parasite EVE (1.99 million), Seiken Densetsu 2 (1.83 million), Chrono Cross (1.5 million), Romancing SaGa 2 (1.49 million), Malaitoushi SaGa (1.37 million), Romancing SaGa (1.32 million), Xenogears (1.19 million), Chocobo no Fushigina Dungeon (1.09 million) and SaGa Frontier (1.08 million). In January 2004, Sqex announces that title Final Fantasy X-2 had sold over a million copies. To date, the Final Fantasy series has sold 48 million copies worldwide.
Latest titles
-
Star Ocean (PS2), spring 2004 in the US. Drakengard (PS2), spring 2004 in the US. Final Fantasy Crystal Chronicles (GC, GBA), late 2003 in the US. Final Fantasy Tactics Advance (GC, GBA), late 2003 in the US. Sword of Mana (GC, GBA), late 2003 in the US. Kingdom Hearts II (PS2), 2004. Kingdom of Hearts – Chain of Memories (GBA), 2004. Final Fantasy VII – Advent Children (DVD-Video), summer 2004.
Distribution
Distribution strategy
Since its creation in 1996, DigiCube has been distributing the titles published by Square in Japan, as well as its licensed products. In the US, distribution is handled by Square Enix Japan with the support of its American subsidiary. Following the merger of Square Soft and Enix in April 2003, the distribution agreement with EA was not renewed. It had been in place since May 1998, and had led to the creation of two joint ventures: Electronic Arts Square KK in Japan (30% owned by Square) Square Electronic Arts in the US (70% owned by Square), which holds the exclusive US rights to all games developed by Square.
Distribution partnerships
2004 edition
© IDATE
125
Video games : nextgen gaming is on its way!
Other business areas
Internet and online gaming
Square Enix has ported two titles to massively multiplayer. Final Fantasy XI, released in May 2002, is available only in Japan but was scheduled for activation in the US in June 2004 on PS2. Its PC version has been available in the US since October 2003. This title is the one and only massively multiplayer game available on PC and home console (PS2). The games boast 282,000 subscribers, 105,000 permanent players and 617,000 different characters, in other words over two characters per subscriber. A subscription to play Final Fantasy XI online costs 1,200 JPY (12 EUR). The game reached the breakeven point after 7 months of operation, once it reached the 200,000 subscriber mark. Cross Gate has been available in Japan, China, and in Taiwan since July 2001. On 31 March 2003, it had a total base of 10 million subscribers. The turnover generated by Sqex’s online operations totalled 94 million USD in fiscal 2003. Three more online games are scheduled for release in fiscal 2004: Ambrosia Odyssey (beta version in spring 2004), Front Mission Online and Junk Metal. Each new title published by Sqex is given its own official website. In early 2004, publisher was providing access to close to 40 dedicated sites. Sqex owns the Playonline.com (www.playonline.com) online gaming portal. Three versions of the portal exist, one for each market covered by Square Enix. In Japan, three games can be played online via PC and PS2: Final Fantasy XI, Tetra Master (add-on to FF XI) and Vana'diel Bench 2 (add-on to FF XI). In the US, only Final Fantasy XI can be played on PC. In Europe, Playonline acts as Sqex’s shop front, and no date has been set for the launch of online gaming there. Sqex plans to expand its PlayOnline portal for mobile games, starting with Japan. The portal will be the mobile version of its internet gaming portal. In Japan, Sqex offers three titles for mobile phone: Choco Mate, Tenka Souran and Taisen Mah-Jong Hot Gimmick. Its catalogue is expected to be expanded with the addition of the mobile versions of Japanese publisher’s two most popular games: Final Fantasy and Dragon Quest onto NTT DoCoMo’s FOMA 3G service. In the US, the first and only Sqex game available for download is Brave Shot. It costs 1.99 USD a month or 4.99 USD to buy. The game derives from an agreement with Verizon Wireless (December 2003). The two companies formed the partnership in October 2003 with the goal of incorporating games developed by Square Enix into the US mobile carrier’s “Get It Now” service. In October 2003, Square Enix signs an agreement with Intel for the design and joint sale of video games on PC, mobiles and PDA. But Square Enix’s goal is to offer content that is compatible with the largest number of phones. To this end, on 16 January 2004, the company announces that it has joined forces with UIEvolution, a provider of mobile content development technology – a company which it eventually takes over in mid-March 2004. Square Enix USA had previously invested 4 million USD in the US technology provider to become its number two shareholder. UIEvolution’s platform is compatible with BREW, J2ME/MIDP, J2ME/DOJA, MS SmartPhone, MS Pocket PC, Palm OS Symbian formats… Sqex’s mobile turnover totalled 29 million USD in 2003.
Mobile gaming
Interactive TV
Two titles on DVD for the Interactive TV: Final Fantasy VII Advent Children will be released in the summer of 2004 and Kenshin Dragon Quest Yomigaerishi Densetsu no Tsurugi is now available in shops. Added to this, Square Enix has produced an animated programme for TV. Full metal Alchemist is based on a comic book which, in August 2003, had 3.5 million readers.
126
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Animated films
Square USA was in charge of the production of the digital image film drawn from Square’s wildly popular game, Final Fantasy: The Spirits Within, released in the US on 13 July 2001, then in France on 18 July 2001. In-house production of the film cost Square 137 million USD. It was distributed worldwide by Columbia TriStar. But gross box office receipts in the US, Europe and Japan totalled only 75 million USD. In November 2001, Square decides to withdraw from producing feature films based on its games. The Square USA techniques and teams will be used in future for co-productions with third-party film animators.
2004 edition
© IDATE
127
Video games : nextgen gaming is on its way!
Take-Two Interactive Software
USA
Created in 1993, Take-Two Interactive Software, Inc. is an American game developer and distributor, based in New York City. Recognized for the quality of its adventure games for young adults, Take-Two Interactive publishes titles for the PSOne, the PS2, the Xbox, the GameBoy Advance and for PC. The group boasts a number of successful titles including Duke Nukem, State of Emergency, Max Payne and Grand Theft Auto III. Take-Two Interactive markets its games under several brands: Take-Two Games, Rockstar Games, Gathering of Developers, TalonSoft, Pop-Top and Global Star and, along with its subsidiary Jack of all Games, operates a major distribution network across America.
Contact info
Take-Two Interactive Software 575 Broadway, NYC New York 10012, USA Tel.: (212) 941 2988 Fax: (212) 941 2997 http: //www.take2games.com
Executive body
Chairman Richard ROEDEL Chief Executive Officer Jeffrey C. LAPIN President of Take-2 Europe Gary LEWIS
939 employees worldwide on 31 October 2002.
Shareholders
Public NASDAQ: 100% TTWO
Organization
Flowchart: Take-Two Interactive Software
Take-Two Interactive Software, Inc.
Studio de développement Gathering of Developers Inc. Rockstar Games Inc. Tarantula (UK) Talon Soft Inc. Global Star Software Broadband Studios Inc. Take Two Interactive Software Europe Ltd (UK) Pop Top Software Neo Software
International presence
The US The UK France Germany Austria Denmark Italy Australia New Zealand Canada Japan.
Distribution
Accessoires
Jack of all Games Inc. (USA) VLM Entertainment Group (USA) Take Two UK Saxon House (RU) Take Two Interactive Software Pty Ltd. (Australie pour l'Asie du Sud-Est) Direct Soft (Australie) Neo Software Austria
JoyTech. Ltd (UK) Funsoft Nordic (Suède) DMA Design (UK) CD Verde Italia Spa.
Source: IDATE based on Take-Two Interactive Software data
128
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Latest news
March 2004
Ryan Brant, founder of Take Two Interactive, resigns as Take Two Chairman of the Board, and takes up the position of Vice-president of the Publishing division.
Economic & financial performance – Fiscal year ending 31/03
Turnover and net profits - million USD 1999 2000 2001 2002 2003
Turnover Net profits
304.7 16.3
364.0 6.4
451.1 -8.6
793.9 71.5
1037.1 99.9
Source: IDATE based on Take-Two Interactive Software data
Evolution of financial performance – million USD
1 200 1 000 800 600 400 200 0 -200 1999 2000 2001 2002 2003
Turnover
Net profits
Source: IDATE based on Take-Two Interactive Software data
Massive rise in turnover
In 2003, the group’s turnover was over 1 billion USD (versus 793.9 million USD the previous fiscal year), which represents a 30% increase on the year. This rise is due in part to strong sales of new titles (Max Payne 2, Desert Storm) and to the continuing huge popularity of Grand Theft Auto. 300,000 copies of Grand Theft Auto 3 sold in Japan during its first week on shelves The company reports record net profits of roughly 100 million USD for fiscal 2003. This comes after a major drop in profits between 1999 and 2001.
Turnover by region - million USD 2002 2003
Operational breakdown
Turnover: North America International turnover
634.700 159.200
746.700 290.400
Source: IDATE based on Take-Two Interactive Software data
2004 edition
© IDATE
129
Video games : nextgen gaming is on its way!
Growth of turnover by region - million USD
800 700 600 500 400 300 200 100 0 2002 TO: North America 2003 TO: International
Source: IDATE based on Take-Two Interactive Software data
Breakdown of turnover by region - fiscal 2003
28%
72%
TO: North America
TO: International
Source: IDATE based on Take-Two Interactive Software data
North America: core market
North America remains Take-Two Interactive Software’s prime market, generating 634.72 million USD in turnover in fiscal 2002 (up 85.5% compared to the previous fiscal year). The publisher elected to focus on the North American market and, in July 2001, sold its European distribution subsidiary, Jack of All Games UK, to Jay Two.
130
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Operational breakdown Turnover by platform - million USD 2002 2003
Turnover: PlayStation Turnover: PS2 Turnover: PC Turnover: Xbox
47.634 579.547 111.146 39.695
41.484 736.341 176.307 176.307
Source: IDATE based on Take-Two Interactive Software data
Growth of turnover by platform - million USD
800 700 600 500 400 300 200 100 0 2002 TO: Playstation TO: PS2 TO: PC 2003 To: GameCube TO: Xbox
Source: IDATE based on Take-Two Interactive Software data
Breakdown of turnover by platform - fiscal 2003
16% 4%
16%
64%
TO: Playstation
TO: PS2
To: PC
To: GameCube
To: Xbox
Source: IDATE based on Take-Two Interactive Software data
2004 edition
© IDATE
131
Video games : nextgen gaming is on its way!
Stock market information
Take-Two Interactive Software is quoted on the New York electronic securities market (NASDAQ: TTWO). The firm’s market capitalisation was valued at 1.41 billion USD in January 2004.
Positioning on the value chain
Development
Development subsidiaries
Take-Two Interactive favours in-house development of its games. The company’s development and publishing strategy is defined by its New York headquarters. The company also owns several studios in the US, Canada, the UK and in Austria: Take-Two Games Rockstar Games (Canada) Talon Soft Joytech DMA Design (developer of Grand Theft Auto 3) PopTop Software (developer of Railroad Tycoon 2 and Tropico) Global Star Software (Canada) Neo Software (with its development subsidiary in Austria) Tarantula (the UK, specialised in developing games for the GameBoy Color handheld) Gathering of Developers (acquired in May 2000) Barking Dog Studios Angel Studio Mobius Entertainment (The UK) acquired by Take Two Interactive Software’s Canadian subsidiary, Rockstar Games, in April 2004. The British develop, specialised, in games for handhelds, was renamed Rockstar Leeds. R&D costs tied to developing Take-Two games totalled 11.5 million USD in fiscal 2002, compared to 6.2 million USD for fiscal 2001. Take-Two Interactive calls on a number of developers to contribute to its games or simply to provide modules: Apogee Software (ex-3D Realms), creator of the popular Duke Nukem franchise Ritual Entertainment Terminal Reality Epic MegaGames Remedy Entertainment (Max Payne) Illusions Software Destineer Publishing and Atomic Games. The company also publishes games for other studios: in May 1998, Apogee Software hired Take-Two Interactive to develop two titles based on the Max Payne character.
Development partnerships
Publishing
Platforms
Take-Two Interactive Software publishes primarily games for Sony’s PlayStation and for Microsoft’s Xbox. At the end of 2003, the company had yet to produce any games for Nintendo’s GameCube.
132
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Publishing subsidiaries
TDK Mediactive, taken over by Take Two Interactive Software in March 2003 for roughly 12.8 million USD, becomes an exclusive subsidiary. Among TDK Mediactive’s assets are licences such as Pirates of Caribbean, Shrek and Masters of the Universe, which help round out Take Two’s catalogue thanks to their broad appeal. In addition, in April 2003, TDK Mediactive announces the release of the first game based on the popular “Muppets show”, on GameBoy Advance. Take-Two Interactive Software publishes games developed by other studios: Monte Cristo (Airline Tycoon, Political Tycoon, Stardom, Day Trader) Terminal Reality (4x4 EVO) Empire Interactive (Enemy Engaged: Comanche vs. Hokum, Ford Racing, Pipe Dreams 3-D, Pro Pinball: Fantastic Journey, Rowan's Battle of Britain, Spin Jam) Lost Toys (MoHo on PlayStation, PC and Dreamcast). Take-Two Interactive Software co-publishes certain games. In June 2003, it signs a partnership agreement with Japanese firm Capcom for publishing and distributing Grand Theft Auto 3 on PS2 and PC in Japan. In February 2004, Take 2 signs an agreement with Cartoon Network to expand its catalogue of games for kids. The first title produced under this partnership is Codename: Kids Next Door. The group publishes some of the market’s best-known franchises. In December 2000, it acquired the worldwide publishing rights to the Duke Nukem series from Infogrames, as well as the rights to Duke Nukem' Forever, the much anticipated 3D game developed by Apogee Software. From Microsoft, it acquired the publishing rights to Oni and Myth. Take-Two Interactive has also acquired the rights to publish online games based on the Austin Powers films (NewLine Productions), along with franchises on all of musical channel MTV’s products (Viacom). In October 2003, Take-Two published MTV's Celebrity Death match on Xbox and GameCube. Also in 2001, the firm acquired the rights to publish UEFA Champions League from the UEFA (on PS2; licence not renewed). With the takeover of TDK Mediactive in early 2003, Take Two obtained the exclusive North American publishing rights to the titles Haunted Mansion, Star Trek: Shattered Universe and Corvette, as well as licences for Robotech, The Muppets Show and Masters of the Universe. In Europe, the publisher applies an aggressive pricing strategy to its PS2 games: they retail for 45 EUR whereas other PS2 games generally sell for over 60 EUR. Take-Two has slashed the prices on some of its games (Nocturne, Project Blair Witch, Hidden and Dangerous), which now retail for 5 EUR a piece.
Publishing partnerships
Licensing policy
Pricing policy
Editorial policy
Take-Two Interactive’s games are aimed mainly at young adults, and are marketed under four brands: RockStar Games (publishes the group’s core products: adventure games), Global Star (general brand offering low price games), and Gathering (role playing and simulation games, mainly for PC). The latest label is Gotham Games, created in 2002. Among Take-Two Interactive Software’s most popular games are Max Payne (considered Take-Two Interactive Software’s most popular PC game), Oni, Austin Power, Grand Theft Auto, Midnight Club: Street Racing, Spec Ops, Darkstone, and Smuggler's Run. According to NPD Funworld, Grand Theft Auto 3 was the best selling video game in North America in 2001, all platforms combined, as well as still being one of the most sought-after games in the world. In late 2003, Rockstar Game launched Max Payne 2 on PC and Grand Theft Auto 3 on PS2 and on PC.
Most popular titles
2004 edition
© IDATE
133
Video games : nextgen gaming is on its way!
Take-Two Interactive Software’ best sellers in 2002 ( % of net publishing revenues) 2002
Grand Theft Auto 3, PS2 Grand Theft Auto Vice City, PS2 Grand Theft Auto 3, PC Max Payne, PS2
Top 10 best sellers
30.0% 7.6% 3.1% 6.7%
59.9%
Source: Take-Two Interactive Software
Latest titles PS2: Grand Theft Auto 3, Midnight Club 2, Conflict: Desert Storm 2 PC: Grand Theft Auto 3, Vietcong, Max Payne 2, Tropico 2 Xbox: Max Payne 2, State of Emergency, Midnight Club 2 GameCube: Conflict: Desert Storm Carve is expected to be one of the next releases for Xbox, scheduled for Q1 2004. Mafia is scheduled for release on the Xbox and PS2. Conflict: Desert Storm 2 is awaited on the GameCube. Duke Nukem forever will be released for PC.
Distribution
Distribution network
Jack of All Games is Take-Two Interactive’s American distribution subsidiary. In the US, the company’s commercial partners are retail chains Wal-Mart, Gamestop, Target, Best Buy, Circuit City, Kay Bee, Electronics Boutique, Toys "R" Us and Blockbuster, along with regional supermarket, drug store, discount and specialised retail chains. Its games are also sold online through Amazon.com. Jack of All Games is the sole distributor of some games published by Take-Two Interactive Software: Starsky & Hutch, MTV's Celebrity Death match, Ford Racing 2 and Ford Truck mania. In November 2000, Take2 acquired a new distribution structure in the US, VLM Entertainment Group. Take2 distributes its products abroad through its British subsidiary, Take-Two Interactive-Two UK Saxon House, which is also in charge of defining the publishing strategy for those markets. It manages marketing operations and supply to European markets (UK, France, Austria, Denmark, Italy), to Canada, Australia and Japan. For fiscal 2002, revenues generated by distribution totalled 225.8 million USD, or 28.5% of Take-Two Interactive Software’s overall turnover, compared to 46% in 2001. The group’s spending on advertising for marketing its products nearly doubled between 2001 and 2002 (+47.2%), to reach 77.9 million in fiscal 2002. Take-Two Interactive in October 2001 announced that it had concluded a distribution partnership for its Jack of all Games subsidiary with Microsoft for distributing the Xbox console games and Microsoft titles in the US and Canada. In the US, Take-Two Interactive also distributes games that it publishes for thirdparty development studios. In April 2002 American publisher SCi signed a distribution agreement with TakeTwo Interactive for Conflict Desert Storm in the US. The game was released in September 2002 on PC, PS2 and Xbox, then on GameCube in early 2003. In March 2004, Avalon Interactive (ex Virgin Interactive) signs an agreement with Take Two Interactive Software for the distribution of several games in Europe, including Fallout Brotherhood of Steel.
Distribution partnerships
134
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Other business areas
Online gaming
In 2000, Take-Two Interactive began to deploy its growth strategy on the internet. The company acquired a variety of assets to allow it to forge itself a position in online gaming: publishing licenses using broadband and multi-player technologies. This strategy has since been abandoned, and Take-Two began selling of its web assets in the summer of 2001. Since then, the company has been seeking to establish partnerships to publish new versions of its biggest hits with multi-player features. In late June 2001, Joytech (Take-Two Interactive’s console and PC accessory manufacturing subsidiary) concluded an agreement with Microsoft for the production and worldwide distribution of peripherals for the Xbox. In July 2001, Take-Two Interactive announced the takeover of Chinese manufacturer Techcorp Limited, specialised in producing computer and console accessories (all platforms). Techcorp and Take-Two Interactive had begun their partnership in 1993.
Accessories
2004 edition
© IDATE
135
Video games : nextgen gaming is on its way!
THQ
USA
California-based THQ Inc. develops, publishes and distributes interactive entertainment software for all existing video game platforms: PC, Sony, Microsoft and Nintendo consoles and mobile platforms. Its catalogue contains games that cover all genres. While close to 80% of its revenues are generated in the US, the company has been focusing over the past year on its development abroad, and particularly in France, Australia and New Zealand.
Contact info
THQ 27001 Agoura Road, Suite 325 Calabasas Hills, CA 91301, USA Tel.: +33 (818) 871-5000 Fax: +33 (818) 871-7400 http: //www.thq.com
Executive body
Creation date 1997 President & CEO Brian J. FARRELL Vice-President & Chief Operating Officer Jeffrey LAPIN Vice-President & Chief Financial Officer Fred GYSI
410 employees worldwide on 31 December 2001. 714 employees worldwide on 31 December 2002.
Shareholders Directors Institutions International presence
Publishing & distribution offices: The US, Germany, The UK, France, Australia. Commercial presence in 67 countries
Organization 1% 95%
Flowchart: THQ
Source: IDATE based on THQ data
136
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Economic & financial performance – Fiscal year ending 31/03
Turnover and net profits - million USD 1999 2000 2001 2002 2003
Turnover Net profits
303.500 31.300
347.003 24.100
378.992 36.000
480.529 12.900
584.510 22.720
Source: IDATE based on THQ data
Evolution of financial performance – million USD
700 600 500 400 300 200 100 0 1998 1999 2000 Turnover 2001 2002 2003
Net profits
Source: IDATE based on THQ data
Operational growth
In fiscal 2002, despite a rise in turnover of 26.8% over to the previous fiscal year, THQ’s net profits were down by 64.1%. In early 2003, THQ altered its fiscal year end. The company will now close its books at the end of March. Profits for 2003 were therefore down for the period running from March 2003 to March 2004. Results for the first three quarters of 2003 indicate a rise turnover (+29% compared to the same period the previous fiscal year). Net profits too are up, to 30.4 million USD (versus 10.2 million USD the same period the previous year). The American publisher projected a turnover a 90 million USD for the last quarter of fiscal 2003. THQ’s chief market is still the US, where the company generated 75% of its turnover in 2002 (358.1 million USD, up 36% compared to fiscal 2001). Turnover in Europe accounted for only 22% of overall income in 2002 (107.8 million USD) compared to 27% in 2001. The UK is the company’s leading European market, with 67.2 million USD in turnover in 2002. In 2002 sales in Europe rose, with the exception of France where operations were down by 3% compared to 2001. In 2000 began to introduce its products in Australia and, in 2002, generated 14.6 million USD in turnover there, compared to 12.4 million USD in 2001.
Operational breakdown
2004 edition
© IDATE
137
Video games : nextgen gaming is on its way!
Turnover by region - million USD 2000 2001 2002 2003
Turnover: North America Turnover: the UK Turnover: Germany Turnover: France Turnover: Australia
270.116 44.638 20.442 7.979 3.828
262.676 60.240 25.517 18.185 12.374
358.124 67.218 26.051 14.556 14.580
427.481 157.029 157.029 157.029 157.029
Source: IDATE based on THQ data
Growth of turnover by region - million USD
450 400 350 300 250 200 150 100 50 0 2000 To: North America 2001 TO: United-Kingdom 2002 TO: Germany 2003 TO: France
Source: IDATE based on THQ data
Breakdown of turnover by region - fiscal 2003
5% 3% 3%
14%
75%
To: North America
TO: United-Kingdom
TO: Germany
TO: France
TO: Australia
Source: IDATE based on THQ data
138
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Turnover by platform - million USD 2001 2002 2003
Turnover: PlayStation Turnover: PS2 Turnover: PC Turnover: GameCube Turnover: Xbox Turnover: Game Boy Advance Turnover: Game Boy Color Turnover: N64
60.340 110.642 38.814 5.111 119.614 62.569 17.097
37.270 167.032 45.046 49.004 34.143 83.830 26.185 0.277
18.982 224.140 70.320 52.849 60.332 147.590 2.940 -
Source: IDATE based on THQ data
Growth of turnover by platform - million USD
250 200 150 100 50 0 2001 TO: Playstation TO: PC TO: Xbox TO: Game Boy Color 2002 2003 TO: PS2 TO: GameCube TO: Game Boy Advance TO: N64
Source: IDATE based on THQ data
Breakdown of turnover by platform - fiscal 2003
1% 26% 3%
39%
10%
9% TO: PlayStation TO: PC TO: Xbox TO: Game Boy Color
12% TO: PS2 TO: GameCube TO: Game Boy Advance
Source: IDATE based on THQ data
2004 edition
© IDATE
139
Video games : nextgen gaming is on its way!
Stock market information
THQ is quoted New York’s NASDAQ electronic securities exchange (NASDAQ: THQI). Market capitalisation valued at 1,400 million EUR on 7 December 2001. Market capitalisation valued at 725 million USD on 23 January 2004.
Positioning on the value chain
Development
Development & publishing subsidiaries
THQ’s in-house development teams are located in the US, in the UK and in Australia. On 31 December 2003, THQ owns 8 development studios: Genetic Anomalies Pacific Coast Power & Light Company (PCP&L) Volition Heavy Irons Studios In November 2001 THQ takes over American game developer Rainbow Studios, specialised in action and racing games (Motocross Madness, ATV Offroad Fury on PS2, Tiger Woods PGA Tour 2000 on PC). In April 2002, THQ acquires US development studio Outrage Entertainment (exParallax Software) and opened a new development studio, Cranky Pants Games, in the US In late May 2002, THQ announces the full buy out of ValueSoft which develops low cost strategy games. THQ controls a minority share of Japanese studio Yuke's.
Red Faction, Red Faction 2, MX Superfly featuring Ricky Carmichael, Summoner, Summoner 2, New Legends Dark Summit, Moto GP, Rocket power, Scooby Doo.
Games under original licence developed in-house Development partnerships
THQ co-developed Buffy the Vampire Slayer, Chicken Run, Croc I and Croc II with Fox Interactive. The firm also developed the GBC version of Tomb Raider Lara Croft, for British publisher Eidos Interactive.
Publishing
Editorial strategy
THQ a published 118 new games over the course of fiscal 2002 (double the number published in 2001). The company is very present in publishing for PC and Nintendo consoles (GameBoy Advance and GameCube). Comparatively, THQ appears to have little interest in publishing for Microsoft’s Xbox.
Number of new titles published by THQ, 1998 - 2002
1998
Total Nintendo 64 PC PlayStation PS2 SNES GameBoy Color Game Cube GameBoy Advance Xbox Online games Mobile games 21 2 5 8 0 1 5 0 0 0 0
1999
42 10 11 10 0 0 11 0 0 0 0
2000
46 4 6 12 1 0 19 0 0 0 0
2001
51 2 13 10 5 0 0 15 2 2 2
2002
118 0 52 0 12 0 0 11 31 7 2 3
Source: IDATE, based on THQ data
140
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Publishing partnerships
In October, 2001, THQ signed a major co-publishing contract with Nintendo to publish 16 titles for the new GameBoy Advance by the end of 2003. In September 2003, THQ signs a publishing agreement with Disney Buena Vista Games involving several titles for the Game Boy Advance (The Lion King, Brother Bear, Piglet's Big Game, Spy kids 3D, Lizzie MacGuire and Kim Possible Revenge of Monkey Fist). At the same time, THQ co-publishes 5 Sega Europe for the Game Boy Advance (Sonic Pinball Party, Sonic Battle, Sonic Advance 3, Shining Soul 2 and Shining Force). A considerable portion of the catalogue of games published by THQ derive from licences purchased from a third-party from the world of film, television or sport, or from personalities. Here, the American group has acquired licences from World Wrestling Federation Entertainment, Nickelodeon, Disney, Sega, Time Warner, Tetris Company, Mattel, Lucas Arts and Marvel Enterprises. THQ currently holds one of the largest portfolio of video game licences. On 31 January, 2001, THQ acquired the exclusive publishing rights, up to 2005, to two brands (Hot Wheels and Matchbox) from American toy giant Mattel. THQ signed an exclusive licensing agreement with American pay-TV channel Nickelodeon up to 2005. Both groups will work on developing original games based on the TV series, films and children’s magazines produced by Nickelodeon (SpongeBob SquarePants, Tak and The power of Juju published in April 2003). THQ signed an agreement with MTV Sport and MTV Music to promote titles such as Snowboarding, Skateboarding and DMX. A contract signed in May 2000 with Fox Interactive (owned by News Corp.) to create games under licence to the Simpsons, Action Man, Power Rangers, Bob the Builder, Buffy the Vampire Slayer and Aliens: Thanatos Encounter (copublishing). A 5-year agreement signed in 1999 binds the California firm with dirt bike champion Ricky Carmichael for publication of the Championship Motocross™ game, and also includes a partnership with Carmichael’s sponsors including Oakley goggles. In 2002, THQ signs an exclusive licensing agreement with Disney Interactive and Pixar Animations Studios to publish video games drawn from Disney’s next three features (including "Finding Nemo" released in May 2003). The group has also acquired the exclusive rights to publish games based on the world of pop star Britney Spears, with the first releases planned for the spring of 2002 on PS2, GBA and PC. In April 2002 THQ acquired the licence to three Marvel Comics heroes: Captain America, The Punisher and Nick Fury. THQ holds the rights to the comic books, TV series and films featuring these characters up to 2007. Marvel Enterprises signed development agreements in 2002 with Universal (Hulk) and Activision (Spider-Man, X-Men, the Fantastic Four, Iron Man and Blade). The first THQ game created under the Marvel licence was The Punisher, in 2003. Star Wars Episode I, Star Wars Episode II: Attack of the Clones, Yoda Story, World Wrestling Entertainment, (Spears) Britney's Dance Beat, Charmed, The Simpson, Ricky Carmichael, Power Rangers, Superman, Jimmy Neutron vs. Jimmy Negatron, Action Man, Alien, The Punisher, Captain America, Nick Fury, A Bug's Life, The Little Mermaid, Rugrats in Paris, Toy Story 2, Scooby Doo: Night of 100 Frights, Scooby Doo The Movie, Scooby Doo & the Cyber Chase, Evil Dead, Danger Girl, Sponge Bob (Nickelodeon), Fairy Godfathers (Nickelodeon), The Jungle Family (Nickelodeon), Rocket Power (Nickelodeon), Rugrats Go Wild (Nickelodeon), Warhammer 40,000. Tetris, Earthworm Jim. The genres developed by THQ are adventure, action, driving, combat and role playing games, sports simulation, strategy and puzzles.
WWE Smackdown (10% of sales in 2002 and in Q1 2003), SpongeBob SquarePants Revenge of the Flying Dutchman, Red Faction 2, Scooby Doo on PS2; Sonic Advance on Game Boy Advance; Tetris World on Xbox. Big Mutha Truckers and Red Faction 2 are also among the best sellers on Xbox, PS2 and GameCube.
Licensing policy
Chief licence acquisitions
Proprietary licences Editorial policy Most popular titles
2004 edition
© IDATE
141
Video games : nextgen gaming is on its way!
Latest titles
Price FC, WWE Crush Hour on PS2. WWE Raw on Xbox. Summer 2, WWE Crush Hour on GameCube. Finding Nemo, Tak, The power of Juju and SpongeBob SquarePants on GameCube, Xbox and PS2. Fire Warrior on PS2 and PC. Full Spectrum Warrior is scheduled for release on the Xbox and PC in 2004. Scooby Doo Mystery Mayhem, is amongst the titles to be released early in the year on GameCube, Xbox and PS2.
-
Distribution
Direct distribution network
THQ operates distribution subsidiaries for its products in the UK (THQ England), in Germany and Austria (THQ Germany), in France (THQ France) and THQ AsiaPacific for Australia, Asia (excluding Japan) and Latin America. In November 2002, THQ opened an office in Korea. THQ has consolidated its presence on the various continents with distribution contracts signed with third-party publishers: On 13 February, 2002 signed an agreement with Japanese publisher Koei for the exclusive rights to distribute its games in European PAL format (therefore to France, the UK, Germany, Spain, Italy and Australia). In April 2002, the company signs an agreement with a new publisher, Encore, for the exclusive distribution in PAL zones (Europe…) of three titles (Circus Maximus: Chariot Wars on Xbox and PS2, Dragon’s Lair 3D on GameCube and PS2, and of Daredevil). In March 2003, THQ is chosen by publisher Empire Interactive to distribute its multi-platform game, Big Mutha Truckers on the American continent. In August 2003, THQ signs a distribution agreement with the studio Rare (owned by Microsoft) for the distribution of games for the GameBoy Advance (Banjo Kazoozie, Banjo Pilot, It's Mr.Pants and Sabe Wulf). On its prime market, the US, THQ has developed distribution agreements with the country’s largest retail chains, namely: Wal-Mart (16.4% of sales in 2002, compared to 14% in 2001) Toys "R" Us (12.6% of sales 2002 compared to 12% in 2001) Target, Electronics Boutique, GameStop, Kay Bee Toys and Best Buy. Its distribution network also includes regional retailers, discount chains and specialised retailers. THQ also signs distribution agreements with local companies on markets where its presence is still limited: Brazil (Gradiente Entertainment), Greece (CD Media), Italy (3D Planet), Spain (Proein Spain), Benelux (Atoll Soft), New Zealand (Atoll Soft), Scandinavia (Infogrames Nordic), Portugal (Ecofilmes), Singapore (Active Boekki), Taiwan (Interwise), South Africa (Ster Kinekor for PlayStation games, Multimedia Warehouse for Nintendo games).
Indirect distribution network
142
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Other business areas
Online gaming
THQ It entered into the operational phase of online gaming with the WWF: With Authority game, launched in February 2001. The second online game in the THQ catalogue was Sky Sports Football Manager, launched by NI Sports in November 2001 in the UK only, and distributed by premium sports channel, Sky Sports. THQ in August 2001 opted to outsource the development of its e-commerce operations to Digital River Inc. The company will not only build and organize THQ’s online sales service, but will also be responsible for managing transactions, routing product and online customer relations. Gamers can purchase games published by THQ online. In May 2001 the firm created a new division, "THQ Wireless", dedicated to developing games for mobile terminals. This new structure will be in charge of a technological partnership signed with Siemens in November 2000, and whose goal is to define a programming standard, based on Java. In June 2002, the joint venture between Sony Ericsson and THQ Wireless announces a mobile games development partnership. The agreement involves exclusive development rights for THQ for some of the games developed for Sony Ericsson mobiles, and the possibility of offering joint content. In partnership with Konami, THQ Wireless launches "United States of Game" in January 2003, a sports video game download service (5 games for 150 JPY a month), available via Japanese operator NTT DoCoMo’s i-mode service. THQ has been using the open technology and the development kits offered by JAMDAT Mobile, a California-based mobile game developer, since early 2002. In April of that year, THQ became a sponsor of the Mobile Games Interoperability Forum (MGIF) which was founded by Ericsson, Motorola, Nokia and Siemens in July 2001. (MGIF). The first games developed with this format were the World Wrestling Federation Mobile Madness and Tetris (available since 3 January, 2002; the SMS and WAP versions were scheduled for launch some time in 2002). In March 2003, THQ announces that the studio Monkeystone founded by John Romero (creator of Doom, among others) would be in charge of producing the NGage version of Red Faction. THQ Wireless has formed partnerships in Europe with Orange and with Vodafone for the development of mobile games. In March 2004, THQ announces the opening of an office in Helsinki, Finland to manage European operations. THQ Wireless develops games for NTT DoCoMo in Japan and for AT&T, Sprint and Verizon in the US. At the end of fiscal 2002, World Wrestling Entertainment, Major League Baseball, MotoGP and The Simpsons were the main titles developed for mobiles. The only distribution platform for mobile games published by THQ Wireless is the site "madtap.com".
Mobile gaming
2004 edition
© IDATE
143
Video games : nextgen gaming is on its way!
Ubi Soft Entertainment
Favouring in-house development
France
Ubi Soft is a French company that develops, publishes and distributes interactive entertainment software for several platforms (PC, Mac, DVD Rom, DVD Video, internet, console). It was founded in 1986 by the Guillemot family, and has received backing from American companies such as Electronic Arts, Sierra On Line and Microprose. In the early 90s, the firm began to expand internationally by creating its first subsidiaries in the UK, Germany and the US. Its teams are now present in 21 countries and its products distributed in over 56 nations. With the creation of Ubi Ventures, Ubi Soft has broadened its field of activity and has equipped itself with a structure that allows it to accelerate its professional development within the new economy. The company’s goal is to be among the world’s top 5 game publishers.
Contact info
Ubi Soft Entertainment S.A. 61, rue Saint Helier 35000 Rennes, France Tel.: +33 1 48 18 50,00 Fax: +33 1 48 57,07 41 http: //www.Ubi Soft.com/
Executive body
Chairman & CEO Yves GUILLEMOT Managing Vice President Gerard GUILLEMOT Managing Vice President Michel GUILLEMOT Managing Vice President Claude GUILLEMOT Managing Vice President Christian GUILLEMOT
1,836 employees worldwide on 31 March 2001 (+10.3% in 1 year).
Shareholders
Public Guillemot family Caisse des Dépôts and Consignations Credit Lyonnais Société Générale Assets Management Oppenheimer Funds CIC Gestion Ubi Soft Entertainment SA 63.00% 16.40% 5.77%
Organization
Flowchart: Ubi Soft
Ubi Soft Entertainment S.A.
5.42% 4.64%
Ubi Soft Développement 13 filiales de production Ubi Soft Edition 26 filiales d'édition Ubi Soft Distribution 25 filailes de commercialisation
2.49% 2.05% 0.23%
Source: IDATE based on Ubi Soft data
International presence
25 marketing subsidiaries located in 19 countries on the 21 production sites worldwide: France, the UK, sector’s chief markets: The US, Canada, Brazil, the UK, Germany, Spain, Italy, the US, Canada, China, Austria, Germany, Italy, Belgium, Spain, the Romania, Morocco and Japan. Netherlands, Denmark, Sweden, Norway, Romania, Morocco, China, Hong Kong, Japan, Australia.
144
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Latest news
March 2004
John de Mol (founder and former CEO of production company Endemol) announces that his share in Ubi Soft has reached the 5% mark, via the firm Talpa Beheer. He now controls 5% of the company’s equity and 4.64% of voting rights.
Ubi Soft flowchart
On 31 March 2003
Source: Ubi Soft
2004 edition
© IDATE
145
Video games : nextgen gaming is on its way!
Economic & financial performance – Fiscal year ending 31/03
In March 2003, following several internal restructurings, chiefly follow-ups to mergers, Ubi Soft acquires 1.2 million convertible shares of OCEANE for 35.394 million EUR. Previously, the publisher had bought 752,000 OCEANES 2.5% shares in September 2002. 77% of Ubi Soft Entertainment’s turnover derives from development, compared to 72% the previous fiscal year. 18% of its turnover is generated by publishing and 5% by distribution. Over the course of fiscal 2003/2004, Ubi Soft plans to reduce its debt by between 90 and 130 million EUR.
Turnover and net profits - million USD 1998 1999 2000 2001 2002 2003
Turnover Net profits
102.430 4.675
140.894 6.694
198.194 11.582
276.066 3.825
392.049 8.450
481.303 5.158
Source: IDATE based on Ubi Soft data
Evolution of financial performance – million USD
600 500 400 300 200 100 0 1998 1999 2000 Turnover 2001 2002 2003
Net profits
Source: IDATE based on Ubi Soft data
Breakdown of turnover Turnover by region - million USD 2001 2002 2003
Turnover: Europe Turnover: North America Turnover: Asia-Pacific Turnover: Rest of the World
187.725 74.538 13.803 -
224.400 144.029 20.486 3.135
265.882 195.020 17.426 2.975
Source: IDATE based on Ubi Soft data
146
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Growth of turnover by region - million USD
300 250 200 150 100 50 0 2001 TO: Rest of the World TO: Europe 2002 TO: North America TO: Asia-Pacific 2003
Source: IDATE based on Ubi Soft data
Breakdown of turnover by region - fiscal 2003
4% 1%
41%
54%
TO: Rest of the World TO: Europe
TO: North America TO: Asia-Pacific
Source: IDATE based on Ubi Soft data
Turnover by platform - million USD 2001 2002 2003
Turnover: PlayStation Turnover: PS2 Turnover: PC Turnover: GameCube Turnover: Xbox Turnover: Dreamcast Turnover: N64 Turnover: GameBoy
74.538 24.846 74.538 13.803 5.521 63.495
43.125 58.807 164.661 11.761 3.920 101.933
24.065 134.765 110.700 33.691 129.952 43.317
Source: IDATE based on Ubi Soft data
2004 edition
© IDATE
147
Video games : nextgen gaming is on its way!
Growth of net revenues by platform - million USD
180 160 140 120 100 80 60 40 20 0 2001 Net Revenue Playstation Net Revenue GameCube 2002 Net Revenue PS2 Net Revenue Xbox 2003 Net Revenue PC Net Revenue GameBoy
Source: IDATE based on Ubi Soft data
Breakdown of turnover by platform - fiscal 2003
9% 5% 29% 27%
7%
23% TO: PS2 TO: GameCube TO: GameBoy
TO: PlayStation TO: PC TO: Xbox
Source: IDATE based on Ubi Soft data
Stock market information
Ubi Soft has been quoted on the Paris Stock Exchange since July 1996 (Euronext 5447). In August 2000, Ubi Soft stock entered the SBF120 index. Market capitalisation valued at 34.18 million EUR on 11 April 2001. Market capitalisation valued at 377.6 million EUR on 23 January 2004.
Positioning on the value chain
Development
Development strategy
Ubi Soft owns 14 development studios, including those located in France, in Canada, in the US, in Germany and in Morocco: Tiwak, Ubi Pictures, Blue Bytes, Sinister Games, 3D Planet, Red Storm Entertainment, Ubi Soft Canada… 1,300 employees are directly involved in the production of games, making Ubi Sof the number two publisher in the field, second only to EA. Investments made by Ubi Soft in game production totalled 72 million EUR in 2003, compared to 77 million in 2002 and 61 million in 2001.
148
© IDATE
2004 edition
Video games: NextGen gaming on its way!
The company develops original games via its French, Canadian, Chinese, Italian, Spanish, American, Japanese and Moroccan studios, which it markets locally. Acquisitions since 2000: publisher 3D Planet (Italy), in May 2000 Grolier Interactive (UK) development studios, Sinister Games (US) specialised in strategy and role playing games, in September 2000, game publisher Red Storm (US) in February 2001, developer, publisher distributor Blue Byte (Germany), designer of the Settlers Series and The Battle Isle, The Learning Company’s (US) Video games division in March 2001, which holds the rights to close to 80 titles including Prince of Persia, Pool of Radiance, Chessmaster and Myst (10 million copies sold). In January 2004, Ubi Soft took over French development studio, Tiwak In early March 2004, Wolfpack (Austin, Texas), the studio behind the massively multiplayer game Shadowbane, joins the Ubi Soft stable.
Development partnerships
Ubi Soft has signed several development agreements: Eidos for the portage of Tomb Raider: The Prophecy on GameBoy Advance. In October a licensing agreement is signed with Cyan Worlds for use of the Myst brand up to 2008 Capcom for 7 titles GBA including Street Fighter II and MegaMan Team 17 for Worms Blast Mattel for Scrabble Crave Entertainment for Battle Realms Bethesda Softwaorks for The Elder Scrolls III: Morrowind NewKidCo for Tom & Jerry and ET, The Extra terrestrial Codemasters for Colin McRae Infinite Interactive for Warlords IV: Heroes of Etheria. Mid-April 2004, the US Army hires Ubi Soft to develop, publish and distribute a home console game carrying the Army’s name. In 2002, the US Army had already had a hit by offering gamers a free PC game called, America's Army.
Publishing
Editorial strategy
Ubi Soft operates 26 publishing subsidiaries in 21 countries. Ubi Soft markets 164 titles, including 98 on PC, 2 on Macintosh, 25 on PS2, 2 on PlayStation, 13 on GameCube, 8 on GBA and 16 on Xbox. In fiscal 2003, the publisher co-produced 10 titles less than in 2002, but distributed 6 titles more.
2002 2003
In-house production Co-production Publishing Distribution TOTAL
22 31 47 8 108
20 20 45 14 99
Source: IDATE based on Ubi soft data Like Take 2 Interactive (GTA), Activision (True Crime) and Titus Interactive (Kingpin), Ubi Soft has begun publishing games for adults. The French company does not however place violence at the heart of its upcoming games. Single is a game that simulates life as a couple: the gamer espouses one of the characters and leads it through a love affair.
2004 edition
© IDATE
149
Video games : nextgen gaming is on its way!
Growth of the number of games developed and published (fiscal year ending on 31 March 2003)
140 120 100 80 60 40 20 1998 1999 2000 2001 2002 2003
Source: IDATE based on Ubi Soft data
Publishing partnerships
Publishing agreements: 2002, with Rage Software for publishing the Rocky games on console. In May Ubi Soft signs an exclusive agreement with Sony Online Entertainment for publishing and distributing Everquest in Europe. 2003, in January Ubi Soft acquires the publishing rights to the Nightmare Creatures 3 game from development studio Kalisto, which closed down in 2002. A co-publishing agreement signed with Warner Bros. Studios in May for the launch of Matrix Online. In early November 2003, Ubi Soft announces the signature of a publishing and exclusive distribution agreement with Arush Entertainment for the title Playboy: The Mansion, scheduled for release in autumn 2004. In early April 2004, Ubi Soft signs an exclusive licensing agreement with MGM Interactive, a subsidiary of Metro Goldwin Mayer Studios, for the publication of Rocky Legend on PlayStation 2 and Xbox. The game will be developed by Venom Games, which created the first episode of the saga. Ubi Soft establishes international licensing agreements that allow it to create games around popular brands like comic book heroes such as Spirou and Papyrus, ‘from publisher Dupuis) and building games such as Playmobil which are adapted into interactive games on PC. The company also forges partnerships with players from related industries (TF1, M6, Playmobil...). Ubi Soft has signed licensing partnerships with both film studios and TV channels: Sony Pictures for Charlie's Angels, among others. Disney studios: Snow White, Peter Pan, Lilo and Stitch, Treasure Planet… Fox Interactive: Ice Age, Planet of the Apes… CBS for the programme Crime Scene Investigation whose first instalment is expected in shops in 2004. Ubi Soft acquired the series Might & Magic from the now defunct 3DO, for 1.3 million EUR. Ubi Soft presents its products in two categories: Children’s and Family games (Rayman, Disney's Tarzan, Untamed…), and games for teenagers and adults. This last category is divided up into 8 genres: Action/shooters (Tom Clancy's), Action/adventure (Batman), Adventure (Myst), Strategy (The Settlers), Puzzlers/board games (Chessmaster, Scrabble), Simulation (Silent Hunter), Role playing games (Pool of Radiance) and Racing (TOCA World Touring Cars). The company’s strategy revolves around the notoriety of its most popular brands which include the action strategy game, Tom Clancy's Rainbow Six (5 million copies sold), the Settlers hit strategy games (3.5 million copies sold), adventure games Myst (10 million copies sold since 1993) and Prince of Persia (2 million copies sold) adventure games, and the classic Chessmasters (5 million copies sold to date).
Licensing policy
Editorial policy
150
© IDATE
2004 edition
Video games: NextGen gaming on its way!
After the success of Rayman (over 12 million copies sold so far), a board game that features a character of the same name, Ubi Soft extends the brand to a cartoon and to educational games for the 6 to 12 year-old set: Rayman Maths/reading, Rayman Languages and Rayman dictations. The company hopes that by 2005, its hero will be among the world’s top 10 best-known characters. Ubi Soft has launched a website to promote its games for the wee ones: www.ubikids.com.
Most popular titles Tom Clancy's Splinter Cell (Xbox, PS2) sold 3.6 million units in 4 months), Tom Clancy's Ghsot Recon (Xbox) sold 1.8 million units in 4 months, Rayman 3: Hoodlum Havoc (PS2, GBA) sold 1.05 million units in 1 month. Tom Clancy's Rainbow Six: Rogue Spear on PC was voted the best action game in 2000. To date, over 6.7 million copies of Tom Clancy games have been sold.
Latest titles
Released in late 2003, Prince of Persia: The Sands of Time is already a worldwide smash. The same is true of the XIII games, derived from the eponymous comic book, and of Beyond Good & Evil, Far Cry, Uru: Ages Beyond MYST. In fiscal 2003/2004, Ubi Soft released 3 more titles in the Tom Clancy series. Ubi Soft has targeted sales of 10 million units worldwide for these games.
Distribution
Distribution network
Ubi Soft owns 25 marketing subsidiaries in 21 countries, which enables distribution of its products in 55 countries: The US, Canada, Brazil, The UK, Austria (takeover of Gamebusters in March 2000), Germany, Italy, Belgium, Spain, the Netherlands, Denmark, Sweden, Norway, Romania, Morocco, China, Hong Kong, Japan, Australia… The group also distributes the games of some 50 third-party publishers, including The 3DO Company, Lucas Arts Entertainment, Europress, Entertainment Software Publishing, THQ, Hasbro Interactive, Namco. In 2003, Ubi Soft opened two distribution subsidiaries in South Korea. 2002: exclusive agreement with Eidos for the distribution of the latter’s games in Denmark, in Sweden and in Norway. A similar agreement is signed with SCI Games in September. Also in September, Microsoft authorizes Ubi Soft to distribute 10 of its older games in Europe (except the UK), Canada, Latin American, Australia and the Asia-Pacific zone. The games in question include Age of Empire Gold Publishing, Microsoft Flight Simulator 98, Midtown Madness, Microsoft Combat Flight Simulator 1, Motocross Madness 2… In late November 2003, Ubi Soft signs a publishing and distribution agreement with American publisher Arush Entertainment for Playboy: The Mansion, drawn from the Playboy licence whose magazine is published in 18 different versions worldwide, boasting 5 million readers a month.
Distribution agreements
Other business areas
Internet and online gaming
Ubi Soft Entertainment and Sony On Line Entertainment signed a partnership agreement for distribution of EverQuest: The Ruins of Kunark, a benchmark in massively multi-player games. The game boasted 445,000 subscribers at the end of July 2003. The two firms had already signed an agreement for Planetside (roughly 60,000 subscribers in July 2003). In March 2003 Ubi Soft became increasingly involved in massively multiplayer games when its subsidiary Ubi.com began publishing and managing the online game Shadowbane (50,000 subscribers at the end of July 2003). Wolfpack, the studio that developed Shadowbane, was taken over by Ubi Soft in March 2004. Ubi Soft is also the European distributor of the massively multiplayer game Star Wars Galaxies, which was released in the US by Sony Online Entertainment in mid-April 2003. The game is a smash hit in North America, having attracted close to 280,000 subscribers in the first weeks. A third massively multiplayer game is in the works: Myst Online is the adaptation of the offline version of the games, which is currently one of the most popular PC games of all time. The French publisher was to release Matrix Online (developed by Monolith Productions) in the summer of 2004. The licence was acquired from Warner Bros.,
2004 edition
© IDATE
151
Video games : nextgen gaming is on its way!
and prospects for its success were particularly high (comparable to Lord of the Rings). But Ubi Soft pulled out of the deal in February 2004, selling out to Warner Bros Interactive Entertainment which has announced the game’s release for November 2004. Ubi Soft also positioned itself swiftly as a provider of online gaming via home console. Here, the company publishes Tom Clancy's Ghost Recon on Xbox and Tom Clancy's Splinter Cell on PS2, both of which are very popular. In November 2001, Ubi Soft launched the Ubi.com site. Community and information oriented, the site also offers matchmaking services. It hosts an average 5,000 games at any given time, battling it out over games like XIII, Rainbow Six, Chessmaster, Rayman vs. Culcutt.
Mobile gaming
In late 1999, Ubi Soft and Guillemot Corporation each invest 15.2 million EUR in a game server for the company’s gamer community: Gameloft.com. Over the course of 2002, Gameloft merges with Ludi Game, another firm in the Guillemot stable. The new company is involved in the development, publication and distribution of games for mobile devices. Aware of the growing potential of mobile gaming, in September 2003, Ubi Soft increased its stake in Gameloft, to a total 19.47%.
Structure of Gameloft’s equity
15.4%
8.9%
56.2% 19.5%
Founders
Ubi Soft
Guillemot Corporation
Public
Source: IDATE based on Gameloft data Gameloft owns 4 development studios that employee 150 engineers, developers and designers. The company offers some 30 games for mobile handsets produced by Nokia, LG, Motorola, Sagem, Samsung, Sharp, Siemens, Sony Ericsson, and for Pocket PC and Palm OS PDAs. Gameloft enjoys commercial presence in 9 countries (the US, Canada, the UK, Germany, France, Italy, Spain, Romania and China). It distributes its products in 30 countries through a network of telecom operators, handset producers, specialised retailers and via its portal www.gameloft.com. Its leading clients are: O2, Telia, Telefonica, Bouygues Telecom, SFR, Orange, T-Mobile, AT&T, Nextel, Sonera… The company has also established partnerships with the portals operated by leading telcos, device manufacturers, e-tailers (Handango, Palmgear) and general interest and gaming portals (Video games.com., Lycos, Tiscali…). Gameloft is in charge of porting Ubi Soft games to mobiles: Rayman 3, Rainbow Six, Splinter Cell, Chessmaster, Prince of Persia… Its games are compatible with Java, Brew and Symbian technologies, and all are downloadable. Gameloft markets a catalogue of 13 titles for Nokia’s N-Gage console, 7 titles for Pocket PC and 4 titles for Palm OS. Turnover in the first 9 months of fiscal 2003 totalled 5.9 million EUR.
152
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Vivendi Universal Games
France
VUG is one of the leading players on the video game market. The company develops, publishes and distributes games for all available platforms. It operates its own development studios: Black Label Games, Blizzard Entertainment, Fox Interactive, Knowledge Adventures, Sierra Entertainment and Universal Interactive. VUG also publishes, co-publishes and distributes games produced by third-party publishers: Crave Entertainment, Interplay, Mythic Entertainment, Simon & Schuster, among others. Vivendi Universal’s sale of VUG was long rumoured following the group’s restructuring. In October 2003, the company’s CEO, Jean-Rene Fourtou, put an end to all the rumours, stating that VUG, like VU Music were the subsidiaries most likely to fall prey to predators in their respective sectors, once the conglomerate’s debt was cut to 5 billion EUR.
Contact info
Vivendi Universal Games International Headquarters Bâtiment Energy 1 – Porte B 32, avenue of Europe 78457 Velizy Villacoubay Cedex France Tel.: +33 (0)1 30 67 30 30 http: //www.vug.com
Executive body
CEO Bruce Hack Chairman Rene PENISSON President & COO International Christophe RAMBOZ
2,074 employees worldwide on 31 December 2002.
Shareholders
Vivendi Universal 99%
Organization
Flowchart: Vivendi Universal Publishing
Vivendi Universal SA VUG 100% VU Australia Vivendi Universal Games 99% VU USA Universal Interactive 92.34% VU 7.66% Matsushita USA Sierra Entertainment 100% VU Papyrus Racing Blizzard Entertainment 100% VU Battle.net Impressions Games Coktel NDA Productions Black Label Games
Public International presence
1%
United States: Bellevue, Dallas, Philadelphia. Canada: Toronto Europe: France, England, Ireland, Germany, Spain, Italy, Sweden. Asia-Pacific: Hong Kong, Korea, Singapore, Australia, Japan.
Knowledge Adventure 100% VU
assive Entertainment
Source: IDATE based on Vivendi Universal data
2004 edition
© IDATE
153
Video games : nextgen gaming is on its way!
Economic & financial performance – Fiscal year ending 31/12
Turnover and net profits - million USD 2000 2001 2002 9 month 2003
Turnover Net profits
607.779 -43.565
698.095 19.126
843.665 66.941
606.716 -116.881
Source: IDATE based on Vivendi Universal data
Evolution of financial performance – million USD
900 800 700 600 500 400 300 200 100 0 -100 2000 Turnover 2001 Net profits 2002
Source: IDATE based on Vivendi Universal data Games
Blizzard studios generate 25% of VUG’s turnover. For the first nine months of fiscal 2003, VUG reported operating losses of 110 million EUR for a turnover of 502 million EUR. VUG’s analysis indicates that the decline is due to the return of more expensive products/guarantees on slow rotation games.
Positioning on the value chain
Development
Development strategy
VUG operates 4 development structures: Blizzard: created in 1994, Blizzard is the development studio behind the series Warcraft (Warcraft II – 2 million copies sold), Diablo (3 million copies sold) and Starcraft (2 million copies sold). The company publishes its games for VUG. Blizzard also manages the world’s most popular online gaming site Battle.net (www.battle.net), hosting gamers who battle it out it teams, or one on one. Blizzard has a staff of 150, including designers, producers, programmers, artists and sound engineers. In July 2003, faced with uncertainties over VUG’s future, the studio’s three founders resigned. Bill Roper, David Brevik, Erich Schaefer and Max Schaefer went on to create their own studio, Flagship Studios, in October 2003.
154
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Knowledge Adventure: development studio which publishes games for VUG. It publishes games for children, and its leading brands are JumpStart, Barbie, Jurassic Park, Butt-Ugly Martians, Curious George and Fisher Price. Sierra Entertainment: This studio develops titles for VUG, and is the firm behind King's Quest, Red Baron, Leisure Larry Suite, Hoyle, Space Quest, SWAT, Gabriel Knight and Police Quest. Sierra owns two development studios: Papyrus Racing Games and Impressions Games. The first, created in the late 80s is specialised in car race simulations on PC (Indianapolis, NASCAR). The second specialises in strategy games like Lords of the Realms and Impressions City Building. Sierra also subcontract the development of certain games to third-party studios. Its leading partners here are Valve Software LLC (Half-Life - VUG), Argonaut Game PLC (Harry Potter – EA), Relic Entertainment (Impossible Creatures Microsoft, Homeworld - VUG), Inevitable Entertainment (The Hobbit – VUG), 2015 (Medal of Honor – EA) and BreakAway Games (Emperor: Rise of the Middle Kingdom – VUG). Universal Interactive Studios: This division is a Universal Studios subsidiary. It is in charge of developing several series, including Spyro, The Hulk, Crash Bandicoot, The Mummy, The Scorpion King, Bruce Lee… Universal Interactive is in charge of 3 development studios Black Label Games: created in August 2002, this development studio produces games for young adults, including The Thing. Coktel: Studio in charge of educational software. Thanks to its Adi, Adibou and AdibouChou series, Coktel has made Vivendi Universal the world’s leading producer of educational software for children. NDA Productions: this studio specialises in the co-development of titles for VUG. It is notably the firm behind Judge Dredd vs Judge Death codeveloped with Rebellion Software and Die Hard: Vendetta co-developed with Bits Studios. In October 2002, the company acquired the Swedish development studio Massive Entertainment, creator of the Ground Control series. In mid-February 2004, VUG announces an exclusive development partnership with Canadian studio Radical. This developer had already worked with VUG on the titles The Hulk (1.3 million units sold) and The Simpsons (1.8 million units sold). The agreement between the two companies covers 6 new titles, and an option for VUG to buy out Radical at any time during the three-year collaboration period. Development partnerships
Sierra, along with other VUG publishing divisions, farms out the development of video games to third-party studios. Their chief partners here are Valve Software LLC (Half-Life - VUG), Argonaut Game PLC (Harry Potter – EA), Relic Entertainment (Impossible Creatures - Microsoft, Homeworld - VUG), Inevitable Entertainment (The Hobbit – VUG), 2015 (Medal of Honor – EA), Eurocom (Buffy the Vampire Slayer: Chaos Bleeds - VUG), BreakAway Games (Emperor: Rise of the Middle Kingdom – VUG), LSP (The Mummy, from a licence with Universal Studios), Warthorg (Mace Griffin Bounty Hunter – VUG), Saffire Studios – Van Helsing – VUG), High Voltage Software (Leisure Larry Suite: Magna Cum Laude – VUG), Amaze Entertainment (The Hobbit PC – VUG) and Rebellion (Judge Dredd). The same is true of Universal Interactive, which has signed an agreement with Canadian studio Radical Entertainment for the development of The Incredible Hulk.
2004 edition
© IDATE
155
Video games : nextgen gaming is on its way!
Publishing
Editorial strategy
VUG publishes games for all of the market’s available platforms. In late 2003, VUG was marketing 300 games for the following machines: Titles marketed by VUG
2003
PC Mac Xbox PS2 PlayStation GameCube GameBoy Advance/Color PDA Total
141 61 33 36 1 18 21 1 312
Source: IDATE based on VUG data VUG is the world’s number two publisher of PC games. The company favours this market segment because of the significant margins involved.
Publishing partnerships
Partner Publishing Group (PPG) is the division in charge of managing publishing, co-publishing and distribution partnerships with companies such as Empire Interactive, Interplay, Fox Interactive (agreement extended in March 2003), Digital Eclipse Software, Mythic Entertainment, Legacy Interactive and Simon & Schuster. Vivendi Universal Games creates original licenses, but the bulk of the games published are derived from licences acquired from third parties for creating games based on certain characters, films, comics or TV programmes. Integrated into VU Games in 2001, Universal Interactive Studio develops and publishes games for PC and consoles derived from Universal Studio productions. The division is also involved in a partnership with Fox Interactive, a subsidiary of Twentieth Century Fox. This latter already owns the rights to productions out of Fox Entertainment, of Twentieth Century Fox Film Corporation, of Twentieth Television & Fox Broadcasting Company. The titles produced via this partnership are The Simpsons, Buffy the Vampire Slayer, Alien vs. Predator. In May 2001 VU Games acquired a development licence for its studio Sierra, to create games based on Tolkien novels (Lord of the Rings trilogy, the Hobbit). The first game released was Lord of the Rings: Fellowship of the Ring, developed by WXP Inc. For its part, EA acquired the third-party rights to the film version of the Lord of the Rings. Following an agreement signed with Marvel Characters, Universal Interactive on 14 January 2002 acquired the rights to create video games based on a licence to The Incredible Hulk. Licences: Lord of the Rings (book), Bilbo the Hobbit, Hulk, The Mummy, The Thing, The Scorpion King, Die Hard, Bruce Lee, Jurassic Park, Dark Angel, Judge Dredd, Diva Starz, Antz Extreme Racing, Kill Bill, Barbie, The X-Files, Mace Griffin Bounty Hunter. VUG is the only publisher to offer a line of games that ranges from educational for the very young, to games for adults. VUG breaks down its line-up into 8 categories: action, role playing games, games for children, simulation & sports, adventure, online gaming, platform and strategy. Since their launch, several Vivendi Universal Games have sold over 10 million copies: · The Crash Bandicoot series: 25 million copies · Diablo, Diablo II and their add-ons: 12 million copies · -
Licensing policy
Editorial policy
Most popular titles
156
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Latest titles
Title
The Spyro the Dragon series: 12 million copies · The JumpStart series: 11 million copies · The Barbie series: 11 million copies Warcraft I to III and their add-ons: 10 million copies
Publisher
Developer
Platform
Category
Dr. Seuss’ Cat in the Hat Dr. Seuss’ Cat in the Hat Dr. Seuss’ Cat in the Hat Dr. Seuss’ Cat in the Hat Starcraft: Ghost Starcraft: Ghost Starcraft: Ghost Middle Earth Online Swat: Urban Justice Tribes Vengeance Men of Valor Men of Valor World of Warcraft FAHRENHEIT FAHRENHEIT FAHRENHEIT
Universal Interactive Universal Interactive Universal Interactive Universal Interactive Blizzard Blizzard Blizzard Black Label Games Sierra Sierra Sierra Sierra Blizzard TBD TBD TBD
Magenta Software Magenta Software Digital Eclipse Digital Eclipse Blizzard / Nihilistic Blizzard / Nihilistic Blizzard / Nihilistic Turbine Ent Sierra Irrational Games 2015 2015 Blizzard Quantic Dream Quantic Dream Quantic Dream
PS2 XBOX GBA PC PS2 XBOX GC PC PC PC PC XBOX PC XBOX PS2 PC
Action/Adventure Action/Adventure Action/Adventure Action/Adventure Action / tactical Action / tactical Action / tactical MMORPG 3D action FPS FPS FPS MMORPG Action Action Action
Distribution
Direct distribution network
The products published by Vivendi Universal Publishing’s subsidiaries are distributed by Partner Publishing Group (PPG), a Vivendi Universal subsidiary. This company also ensures operational marketing of the group’s interactive products. They are distributed in the US, France, the UK, Germany, Italy, Ireland, Scandinavia and in Australia. For the other markets, the products’ distribution is ensured by local distributors. VU Games has also established direct relations with major corporations and wholesalers on the leading new markets (Asia, Central and Eastern Europe). PPG distributes titles produced by third-party publishers, notably on European markets: All of Fox Interactive’s products, All of Interplay’s PC and console games in North America, All of Walt Disney Interactive’s PC games in France, A portion of Tivola’s catalogue in Germany, A portion of the BBC’s catalogue in the UK.
Distribution agreements
2004 edition
© IDATE
157
Video games : nextgen gaming is on its way!
Vivendi Universal Games signed an agreement with Empire Interactive in March 2002, for distributing its forthcoming releases on PC and consoles in France, Germany, Australia and New Zealand. Under the terms of the agreement, VU Games acquires the distribution rights to Empire Interactive’s upcoming titles (17 were planned for 2002) including Virtual Tennis and Crazy Taxi (except in Australia and New Zealand), Antz Extreme Racing, Starsky & Hutch, Ghost Master, Sheep and Total Immersion Racing on several new generation platforms. In late 2004, Konami and VUG’s North American subsidiaries signed a distribution agreement for the US and Canada. Under the terms of the contract, VUG will be in charge of distributing Konami’s PC titles in those two countries.
Other business areas
Internet and online gaming
VUG owns one of the internet’s most popular sites: Battle.net which boasts over 10 million active users. Vivendi Universal originally had two online gaming sites: PrizeCentral and Won.net. They merged in spring 2000 to create the new VUP site: Flipside.com Flipside was launched in the US in September 2000 and in France, in the UK and in Germany in October 2001. In February 2001, Flipside.com consolidated its position in the online gaming segment. VU Publishing acquired American gaming site Uproar Inc. for 140 million USD. The uproar.com, iwin.com and amused.com allow VU to enter the number 20 spot among the US’ most popular sites, boasting 12 million unique visits in December 2000. In July 2003, VU announces that it was selling its Flipside gaming site to California marketing firm Vendare Group. The deal also includes the Uproar site. Some of the iWin assets (a Flipside subsidiary) were later sold by Vendare Group to games provider, Next Game, whose site has a customer base of 24 million users. VUG, in collaboration with Valve, created the game Half-Life which was an instant hit. It won over 50 awards, including Best PC game of all time, awarded by PC Gamer in November 1999. The developer made a publishing tool available to gamers, allowing them to create new maps and a new graphic environment, which led to the creation of Counter Strike by a group of amateur developers – a title which remains popular among hardcore gamers. Despite being an oldie, this free game is still part of the line-up at a number of international tournaments, including the World Cyber Games organised by Samsung and the ES World Cup organised by French company LigArena. Given the popularity of Counter Strike, Valve developed several add-ons: Team Fortress, Day of Defeat, Steam. Absent up until then from the massively multiplayer arena, VUG sets things right in 2004 with the release of World of Warcraft developed by Blizzard. This entry into the realm of persistent universes could extend over the coming years. In September 2002, VUG signs a publishing agreement with Marvel Enterprises, owner of the rights to over 4,700 comic book superheroes. This contract stipulates that VUG can develop online games up to 2012, with the first release expected for 2005. In May 2003, VUG hires publisher, distributor and technology provider, In-Fusio to create a mobile version of Spyro the Dragon. This agreement marks VUG’s first foray into the world of mobile gaming. . In February 2004, VUG announces that it will port a game with its star character Crash Bandicoot to Nokia’s N-Gage. Crash Nitro Kart is scheduled for release in mid-2004, and will take advantage of Bluetooth technology. In December 2003, VUG announces an online tournament for The Lord of the Rings: War of the Ring. Prize money totals 40,000 USD.
Mobile gaming
Tournaments
158
© IDATE
2004 edition
Video games: NextGen gaming on its way!
3. Year One for mobile gaming
3.1. Personal Digital Assistants (PDA) and Smartphones
The potential of these devices to act as a video game platform is particularly significant even if their primary function is not interactive entertainment. The size of the screen, larger than most mobile handsets (although these are tending to increase) is suited to gaming. Processing power too enables satisfactory playability. After a long period during which PDAs on the market had black and white screens, which meant that games were less spectacular, several PDAs/smartphones were unveiled in 2003, equipped with a colour screen and offering a combination of GPRS technology (and its web-enabled functions), and the Microsoft Pocket PC 2002 OS platform – the market’s two dominant platforms. The PDA industry leader is Palm OS, producer of eponymous products, followed by Handspring and SonyEricsson. Microsoft is making major investments to impose its Pocket PC/Windows Mobile (currently Windows Mobile 2003, with a 2004 expected very soon). Content is generally offered on CD, and therefore must first be installed or copied onto a computer. Content then transferred from the computer to the PDA via USB port. The act of saving data consists of transferring data from the PDA to the computer; transferring data from the PDA to the PC or vice versa is referred to as "synchronisation". Autonomy is still a big problem for PDAs. Users demand high end performance, a large memory, a trans-selective screen, wireless technologies… The XDA and MDA are recent smartphones, equipped with a colour screen, and which combine GPRS technology and Microsoft’s Pocket PC 2002 OS. The Handspring Treo 60, the Qtek, the SPV and SonyEricsson’s P800/P900 line are also part of this group of well-designed smartphones with features geared to business use. With the XDA and the MDA, O2 and T-Mobile sought to offer an exclusive device to their corporate customers, combining GPRS connectivity with the PocketPC 2002, and later Windows Mobile 2003, OS and applications. O2 invested the most in developing its offer, and was the first operator to launch a smartphone carrying its brand, in partnership with Microsoft. This was not O2’s sole initiative in this area, however, having also been the first operator to offer the Blackberry in Europe. It also seems entirely possible that mobile devices equipped with a colour screen and a 3G telephony module, offered at affordable prices (e.g. the Palm Zire II sells for under 100 EUR) could increase in appeal and attract future adults who are currently teenagers who own a handheld. Operators are targeting a niche high-end market with these devices, whose potential in terms of number of subscribers is no doubt very limited but, in terms of value, could well enable them to increase their mobile business user ARPU considerably, by providing applications like e-mail and internet access. But PDA producers do plan to decrease the price of their devices, and Palm already offers some of its PDAs for under 100 USD. PDAs are used primarily for storing business contact information and managing diaries. They can also host word processing software, spreadsheets, an image reader, ebooks, an MP3 player, and even be equipped with a phone/modem module. Their features are particularly appealing to technology-loving men. There are roughly 20 million PDA owners worldwide, of which close to 70% are in North America. This market for high-end, web-enabled devices is becoming increasingly competitive, with offers like the Blackberry, Handspring Treo, SonyEricsson’s P800/P900, and Wi-Fi connection offers. At term, the development of specific business applications (CRM, sales force, ERP…) in a Microsoft environment, could provide these devices with the opportunity to appeal to more senior business people, going beyond high-end mobile office and geared to corporate heads.
2004 edition
© IDATE
159
Video games : nextgen gaming is on its way!
PDAs are not, however, entertainment platforms The game component on these devices is not key to securing their purchase, but does contribute to cementing their buyer’s loyalty. Aware that the mobile gaming segment enjoys massive potential, a significant number of development studios and publishers are beginning to produce games for Palm OS and Windows Mobile. And so we are beginning to see the release of titles based on licences that have been popular on other platforms, especially PC: V-Rally, Sim City and Sim City 2000, Serious Sam, Rayman, SCRABBLE, Tetris, Monopoly, FIFA. In the same vein, licences derived from film franchises are becoming increasingly common in mobile games, a case in point being the Sorcerer’s Stone Trivia Game.
XDA - O2
The XDA is available in all countries where O2 operates: the UK, Germany, Ireland, the Netherlands and in Asia.
Description - Content The XDA is equipped with Microsoft’s Pocket PC OS, and the applications that make up its Office suite (Outlook, Excel, Word, Internet Explorer). Users can also install a large number of applications that were designed specially for this operating system. In addition, Pocket Inbox, which is generally used to synchronise the mobile mailbox with the office mail server, via ActiveSync, takes on a new dimension with Server ActiveSync. This application is used to manage address books, diaries and e-mails. SMS are also stored in the inbox, and do not require an additional application to manage them. Successor to the XDA, the PocketPC based "XDA II" smartphone was released on 1 November 2003 by British operator O2. In addition to the applications offered by the XDA, O2 has developed a body of services and content specifically for XDA users. The home page for O2’s PDA portal looks like this:
Figure 8: Menu and applications (examples) on O2’s PDA portal
Home page
Internet Explorer – MSN portal
Source: O2 UK
O2’s PDA portal
Several applications are available for download from third-party providers. The Handango.com portal, for instance, offers several categories of applications and games.
160
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Device The XDA is equipped with an Intel StrongARM 32-bit processor, operating at 206 MHz. It has a default ROM of 32 Mb and 32 Mb of RAM. The screen has a 4,096-colour, 240 x 320 pixel graphic resolution. Users can also equip the device with an SD Card/MMC Card. The XDA is equipped with 128 Mb of RAM, an Intel PXA 263 processor running at 400 MHz, a large 400 MHz touch screen, an SD port extension, and a 300k pixel, VGA resolution digital camera and a Bluetooth module. The XDA is assembled by Taiwanese manufacturer High Tech Corporation (HTC). Examples of games on the XDA The games Solitaire and Jawbreaker are pre-installed on the XDA. Users can also play Tomb Raider and Rayman after downloading them off dedicated sites, like Handango’s portal, and use OTA3 services to configure the device remotely.
Figure 9: Examples of downloadable games
Source: Handango.com
Source: O2 UK, www.o2.co.uk
Rates, prices & conditions The price of the devices starts at 299.99 GBP (March 2004), when combined with a 12-month flat rate. Prepaid subscriptions are not available. The price per Mb of consumption is 2.35 GBP.
3
Over The Air
2004 edition
© IDATE
161
Video games : nextgen gaming is on its way!
T-Mobile’s MDA (in Germany)
The MDA is available in all countries where TMobile operates.
Description - Content In addition to classic internet access, the MDA lets users connect to T-Mobile’s t-zones mobile portal, with formatting specific to the MDA which takes advantage of the device’s leading edge features. The applications from the Microsoft Office suite for Pocket PC are also available, as are a number of applications from third-party providers.
Figure 10: Examples of applications on the MDA II
Source: http://www.t-zones.de/web/downloads/de/downloads/40games.jsp?toplevel=2438
Since February 2003, an application has been available that makes it possible to integrate the functionalities needed to send and receive MMS on the MDA. Device The MDA’s technical features are comparables to the XDA’s. The MDA is equipped with a TFT colour screen. It comes with 128 Mb of RAM, an Intel XScale processor, operating at 400 MHz, a large TFT, 64,000-colour, 240x320 pixel touch screen, an SD extension port, a 640x480 pixel digital camera, VGA resolution and a Bluetooth module. The device is produced only by HTC.
Figure 11: Menu and applications (examples) on T-Mobile Germany’s MDA II
Home page
Mobile Entertainment screen
162
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Game download Source: http://www.t-mobile.de/mda/1.4920.6979-_,00.html
Examples of games with the MDA The games available for the MDA can be downloaded from the t-zones portal. Rates & prices T-Mobile’s MDA II is available starting at 329.95 EUR (March 2004) with a 500-minute flat rate (Relax 500) and for 719.95 EUR without flat rate. The game component is not part of these PDAs’ central features, but does contribute to increasing purchasers’ loyalty and their level of satisfaction. Plus, synchronisation with a personal computer opens the way to numerous data storage and transfer possibilities, including gaming. Similarly, the infrared port lets users beam (i.e. transfer) content to other users, and play against each other in real time on games like Pong.
2004 edition
© IDATE
163
Video games : nextgen gaming is on its way!
SonyEricsson P900
Description - Content The Sony Ericsson P900, the P800’s successor, is a tri-band mobile handset that also acts as a PDA, an MP3 player, an MPEG-4 video player, a digital camera and a video camera. Device It is equipped with all currently available mobile messaging functions. Text entry is simplified. The P900 is equipped with a 65,536-colour touch screen and an integrated digital keypad. Operating on Symbian OS v7.0, this Bluetooth smartphone lets users view MS Office format attachments (Word, Excel, PowerPoint). It can be synchronised with Lotus Notes and Outlook (PC and Mac). On the fun side of things, it comes with three pre-installed games, can take 640x480 pixel photos, film short videos, and allows viewing of MPEG-4 encoded videos. It also comes with an MP3 player. Even though it has a small default memory of 16 Mb, it can be connected to the 32 Mb Memory Stick Duo that is included as a standard feature. In terms of software, the P900 is equipped with an Opera browser, an MP3 player and a Java applications platform. Bluetooth compatible, it is equipped with an infrared port that enables data exchanges with other devices. The P900 measures 115 mm x 57 mm x 24 mm, and weighs 150 g.
Figure 12: Menu and applications on the SonyEricsson P900
Source: www.planetese.net/index.php%3Fact%3DST%26f%3D39%26t%3D1328+Sony+Ericsson+P900+%2B+VRally&hl=fr&lr=lang_fr&ie=UTF-8
164
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Examples of games The SonyEricsson P900 has a chess and a solitaire game pre-installed. The CD that comes with the device also includes a demo version of the game V-Rally. More games can be downloaded off the net.
Figure 13: Chess game pre-installed on the P900
Source www.planetese.net/index.php%3Fact%3DST%26f%3D39%26t%3D1328+Sony+Ericsson+P900+%2B+VRally&hl=fr&lr=lang_fr&ie=UTF-8
Figure 14: Screenshot of the V-Rally game on P900
Source: www.clubic.com/n/n10315.html+Sony+Ericsson+P900+%2B+games&hl=fr&ie=UTF-8
Rates, prices & access Orange France offers the SonyEricsson P900 coupled with a subscription for 499 EUR (April 2004).
2004 edition
© IDATE
165
Video games : nextgen gaming is on its way!
3.2. Hybrid mobiles
Nokia’s N-Gage is the only device on the market that can be qualified as a hybrid phone-console.
N-Gage (Nokia)
Description - Content The N-Gage is the first hybrid phone-game console. It was released in October 2003, but has not met with the success that Nokia had hoped for. Version 2, the N-Gage QD, is currently in the works, its prototype presented at the E3 show in May 2004. The N-Gage QD needs to correct the problems found in version 1. Smaller in size, the device’s cartridges are still in the same location, but no longer under the battery, and the N-Gage QD will be more user-friendly in terms of its telephony features (more powerful batteries, brighter screen, better gaming features). The new console, which will sell for a maximum 200 EUR, was scheduled for release in Europe and in Asia in May and in North America in June 2004 (the N-Gage was originally sold for around 300 EUR). The N-Gage is a game console, an MP3 player and a mobile phone. It enables access to a number of games, and notably multiplayer games thanks to its Bluetooth connectivity: FIFA Soccer 2004 (EA Sports) on which gamers choose from 300 international football teas, and can play against reputed adversaries, Tom Clancy's Splinter Cell (Gameloft), Rayman 3 (Gameloft), Red Faction (THQ)… Even though Nokia admits that it needs to make certain “adjustments,” the manufacturer continues to believe in the value of mobility for the gaming market, and has maintained its sales targets for 2004. Aside from the questionable hardware choices that Nokia has made, one of the chief faults of the NGage is the limited number of games available: some fifteen on 31 December of last year. But, this figure is expected to rise to 50 by the end of 2004, including games published by Nokia itself. Public opinion on the N-Gage is still poor, as reflected in the meagre sales in the US during the critical Christmas season. The high cost of the device has prevented mass sales, and Nokia is beginning to shift its stance here, having dropped the suggested retail price considerably.
Figure 15: Examples of games on the N-Gage (download)
Coast Guard (Etirs)
Crazy Western (Atatio)
Escape Master (Blue Sphere Games)
Source: http://wgamer.com/gamedir/?section=ngage
166
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Figure 16: Examples of games on the N-Gage (MMC Card)
Puyo Pop (SEGA Mobile)
Rayman 3 (Gameloft)
Tom Clancy's Splinter Cell (Gameloft)
Source: http://wgamer.com/gamedir/?section=ngage
Device The N-Gage operates over the Symbian OS and Series 60 systems. Symbian OS v7.0, released in 2002, offers an appealing, icon-based user interface, and integrates the Java development environment (J2ME MIDP 1.0 and PersonalJava 3.0 with JavaPhone 1.0), along with IPv6 and IPSec technologies. In addition to its 4,096-colour, 178x208 pixel backlit screen, the N-gage is equipped with Bluetooth technology that enables wireless multiplayer gaming. An MP3 player and FM radio FM are part of the Nokia Audio Manager for PC; the N-Gage is also a triband GSM/GPRS phone, equipped for e-mail and with personal data features associated with an xHTML browser. In gaming mode, the device has roughly 3 to 6 hours of autonomy, depending on the type of game. In phone mode, autonomy is 2 to 4 hours, and 150 to 200 hours in stand by. The games on the N-gage eat up a lot of memory (between 8 and 14 Mb), hence the need to store them on cartridges. On the other hand, a number of games can be downloaded directly off another mobile device. Examples of games According to Nokia, network games are the most popular. These games are based on a local Bluetooth network on the N-Gage Arena (ex-Sega Arena) online gaming platform, which Nokia acquired last year from Japanese game producer Sega – a major asset for the Finnish manufacturer in the war against the GameBoy Advance and the future PSP. Nokia offers three N-Gage games (Pandemonium, Tomb Raider and Tony Hawk’s Pro Skater) on the N-Gage Arena option. This online gaming arena currently allows gamers to swap top scores in the form of ghosts, and to communicate with other N-Gage players the world over. In the near future, NGage based gamers will be battle it out with each other online. Rates, prices & access (March 2004) Examples: in France N-Gage is offered by the three national operators for 149 EUR, when combined with a subscription (2 hours minimum) and for 299 EUR without subscription. In the UK, Orange and retailer Phones 4U market the console-phone for 149.95 GBP, combined with prepaid flat rates, and Virgin Mobile sells it for 159.95 GBP.
2004 edition
© IDATE
167
Video games : nextgen gaming is on its way!
3.3. Upgraded classic mobiles
Following the massive investments made in building networks, mobile operators are now seeking to devise new services that will increase their ARPU (average revenues per subscriber), and enable a return on investment. The mobile entertainment market is now emerging as a major means of earning on these new infrastructures, as well as being a significant means of changing and increasing the ways in which mobile devices are used. Over the course of 2002-2003, mobile handsets underwent major technological upgrades, including the migration from 2G to 2.5G. Most of the new handsets released in 2003 were 2.5G, and the latest enhancements include: • the first mobile handsets with colour screen; • higher bitrates (2.5 G and even 3G); • screens with higher graphic resolution; • built-in digital cameras, initially as a plug-in accessory in 2002 (e.g. SonyEricsson T68); • more powerful devices, capable of hosting new applications geared to business users (PIM, email client…), and youngsters with a penchant for gaming (JAVA4 designed by Sun Microsystems, Qualcomm’s BREW and In-Fusio’s ExEn) and a number of download and messaging services (SMS, and later, MMS). In the medium term, multi-standard mobiles equipped with VGA screens are likely to become commonplace, while remaining small and light, to continue the focus on telephony and mobility. The high-end handsets of today are expected to become a mass market within roughly 5 years’ time. Given this context, mobile games are now widely viewed as killer apps, and poised to drive the growth of the consumer market. The industry does, however, need to continue to be very careful about their choices, to avoid coming up against technological and commercial obstacles that could hamper the segment’s development. But, even though, enhanced cellular phones enable a significant potential in the area of gaming, the devices are still first and foremost, telephones. This means that they are not likely to compete directly with handheld consoles any time soon, even if the trend is clearly towards increasing their features, and towards a convergence of platforms (beyond the mere carriage of digital data).
J2ME above all enables the download of micro-applications to a mobile device via the network. The chief appeal is to be able to use a mobile device as a multi-usage platform, enabling applications upgrades. In theory, use of Java makes it possible to download the same midlet (J2ME app) on all J2ME-compatible devices. But the devices’ inherent limitations (notably power and memory), require that only very basic Java applications (compared to PC apps) be used. Another, more prospective, use of Java involves running Java applications on a network (and not on the devices), and to send the results to the devices. IBM is planning on this type of Java use for its SPDE (Service Provider Delivery Environment) platform.
4
168
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Figure 17: Java "over-the-air" download applications
Source: Nokia
Nokia 3650
Description – Content The Nokia 3650 is a device with an original design and advanced technological content. The alphadigital keys on the keypad are laid out in a circle, like the old rotary dials on home phones.
2004 edition
© IDATE
169
Video games : nextgen gaming is on its way!
Device The 3650 is a GSM tri-band (900/1800/1900 MHz), GPRS, class 6 (3+1) phone, in other words capable of connecting to the web via WAP (WML and XHTML pages) or via PC, at high speeds (up to 40.2 Kbps), and with integrated Java. In addition to the Java software, J2ME, users can install, either on the phone, or onto a plug-in memory stick, Symbian OS compatible applications. As an alternative to GPRS, the device is equipped with an HSCSD browser for data reception. Connection to a PC can be either via the infrared port, or via Bluetooth. It comes with a 16 Mb memory card, on which users can store short videos, audio recordings, photos, and several types of programmes (but not all, however, since some need to be stored on the internal memory to operate). For video use (a maximum 20 seconds) software needs to be downloaded to allow saves (on the Nokia 7650). Several types of video and audio are compatible: H.263 and MPEG4 in 3GP format, RealVideo and RealAudio in RealMedia format. Photos are saved with a 640x480 pixel resolution. When taking photos, the handset’s screen acts as the viewfinder. Examples of games The Nokia 3650 has access to a large catalogue of downloadable games, notably a range of Java games from all categories (Arcade, adventure, sport, simulation, platform, puzzles, action and strategy).
Figure 18: Screenshot of Darts and Drinks 2: Favorite enemy
Darts and Drinks 2 is a chess-like game, wherein the player chooses his target. Darts and Drinks 2 lets users take any image or photo and insert it into the game, to personalise their avatar.
Source: http://supermoby.sonnerie.net/jeumobile/games.php?slang=FR&m=3&game=132&cat=3
Rates, prices & access In April 2004, on the France Mobiles (www.francemobiles.com) site, the Nokia 3650 was selling without subscription or commitment to an offer, for 399 EUR.
170
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Siemens SL55
Description – Content The Siemens SL55 stands out for the quality of its design, and unique shape, which includes a sliding keypad. Device This multimedia phone is equipped with a 4,096-colour screen, is compatible with the tri-band network, and comes with all current mobile office features. It too is Java-enabled, which lets users download additional applications and games. The Siemens SL55 offers a wide range of functions, including games, MMS and polyphonic 16-tone ringtones. It is a tri-band GSM (900/1800/1900 MHz), GPRS class 8 (4+1) device. Its browser is WAP 1.2.1. compatible. It is a very small handset, measuring only 81.6 x 44.5 x 21.9 mm, with a volume of 63 CC and weighing 79 grams. With the Li-Ion 500 mAh battery, it guarantees up to 200 hours of autonomy in stand-by, and up to 210 minutes in talk mode. Examples of games The Siemens SL55 comes with two Java games, and others can of course be downloaded, including Wimbledon tennis, golf, and a number that can be upgraded and personalised (Bubble Soccer, Magic Dance Floor…to name but a few).
Figure 19: Screenshot of Bubble Soccer
Derived from a classic arcade game, Bubble Soccer invites gamers to clear the football field of all rebel balls so that the championship game can proceed. With each frame, gamers need to combine dexterity and logic, anticipating incoming balls… while racing against the clock!
Source: http://supermoby.sonnerie.net/jeumobile/games.php?slang=FR&m=20&game=112&cat=X
2004 edition
© IDATE
171
Video games : nextgen gaming is on its way!
Rates, prices & access In April 2004, on the France Mobiles (www.francemobiles.com) site, the Siemens SL55 was selling without subscription or commitment, for 319.90 EUR. On its website, Bouygues Telecom offers the Siemens SL55 for 699 EUR without subscription or commitment, for 229 EUR with a flat rate and for 359 EUR with a mini-flat rate.
Sharp GX20
Description - content Following the commercial success of the GX10/GX10i, largely boosted by an agreement with Vodafone, the Japanese firm has launched its heir in Europe, the GX20, which has already amongst the must-haves of Vodafone Live! devices. Its form is comparable to its predecessor’s: shell-shaped with an external antenna, double screen and built-in CCD 310k pixel digital camera, with level 3 digital zoom, macro mode and 3 image formats. The Sharp GX20 is also equipped with a number of enhancements, and two new interesting features for video: built-in flash and the ability to record and copy short video clips with sound. The Sharp GX20 offers a wide range of functions, including games, MMS and 16-tone polyphonic ringtones. A tri-band GSM (900/1800/1900 MHz), it enables very fast class 10 (4+2) GPRS, over WAP (2.0), or for connecting to the web via PC and/or connection to the web or PC via its built-in infrared port. The device boasts high quality display (65,536 colours for the inside screen, the active matrix is TFT), and a series of resolution options. Device Despite its small size (25 x 95 x 49 mm), the Sharp GX20 has an ultra-high resolution, QVGA 240x320 pixel, 65,536-colour, System CGS LCD screen. The built-in camera is located just above the outside screen. It is equipped with a 4X digital zoom, with resolution ranging from 120x160 pixels to 320x240 (same resolution as the inside screen), up to 480x640 (VGA). The device is also equipped with a modem for connecting to the internet via PC or laptop, using the infrared port. The GX20 has roughly 2 Mb of RAM for storing pictures, audio and video.
172
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Examples of games No games are pre-installed on the GX20, but a number are available for download.
Figure 20: Screenshot of The Black Citadel
The Black Citadel is a role playing game that takes place in a fantastic Medieval world. The gamer plays a hero, plunged into a mysterious adventure.
Source: http://www.games-mobile.com/games_sharp.php
Rates, prices & access Examples: the Sharp GX20 is sold only by operator SFR in France as part of a Vodafone Live! kit. Since November 2003, SFR has dropped its in-shop price from 199 to 129 EUR. On the net, in April 2004, the retail price was 199 EUR with a Vodafone Live! subscription pack.
3.4. The mobile gaming market
According to the findings of a number of specialists, 2003 was “Year Zero” for the European market – a market which is already mature in several Asian counties, with Japan leading the pack. A benchmark for the rest of the world following the success of NTT DoCoMo’s i-mode service (40.6 million subscribers at the end of February 2004), Japan is now home to 68.7 million mobile data subscribers, out of a total of 80.5 million cellular subscribers, in other words a mobile internet penetration rate of 85.3% at the end of February 2004, versus 82.5% at the end of March 2003. At the end of December 2003, operator NTT DoCoMo reported a base of 21.6 million users for its i-appli service, out of a total 40.5 million i-mode subscribers.
Table 25: Summary of the mobile data services marketed by Japan’s three operators (late February 2004) NTT DoCoMo Data services KDDI EzWeb Vodafone KK Vodafone Live!
Name of the service Protocol and language Number of subscribers (million)
Revenues
i-mode
i-mode/c-HTML 40.6 14.8* 25.0
WAP 15.3 12.7* 22.2
MML 12.9 15.6* 24.6
Data ARPU (EUR/month) Data ARPU/Total ARPU (%)
*Q3 2003 Source: http://www.tca.or.jp/eng/database/daisu/yymm/0402matu.html
2004 edition
© IDATE
173
Video games : nextgen gaming is on its way!
3.5. A selection of market evaluations
Several market research firms have published forecasts on this market. Among the most coherent are those published by Frost & Sullivan, ARC Group, Informa Media and The Research Room. The ARC Group’s estimates, which are both coherent and relatively recent, provide a median view of the market.
Table 26: Comparison of market forecasts for 2006, published by a selection of market research firms (billion USD) Firm W2F Frost&Sullivan ARC Group Informa Media The Research Room
Entertainment revenues
1.90
7.00
5.92
6.93
9.80
Source: Market research firms
Table 27: Comparison of market forecasts for 2003, published by a selection of market research firms (billion USD) Cabinet W2F Frost&Sullivan ARC Group Informa Media The Research Room
Mobile gaming revenues
0.53
0.80
1.14
0.58
0.38
Source: Market research firms
British market research firm, ARC Group estimates that the global entertainment market will be worth a total 8.3 billion USD in 2008, versus 1.1 billion in 2003, with a base of over 940 million gamers. Mobile games are projected to account for 30% of entertainment turnover in 2008, versus 14% in 2003, or close to 2.5 billion USD (versus 154 million USD in 2003).
3.6. Underlying hypotheses
The ARC Group forecasts a rise in revenues generated by mobile gaming of around 60% over 5 years (or an average annual increase of around 10%). ARPU (average revenues per user) are therefore projected to total 8.90 USD by 2008. According to the ARC Group, ARPU will rise due to the combined effect of three major trends: • access to mobile games for an expanded population, under the combined effect of the growth of the world base, and the deployment of advanced mobile devices compatible with advanced mobile content:
- Mobile phones have gained in popularity worldwide at a stunning rate. At the end of 2003, the world base of mobile users was estimated at 1,335 million subscribers. Even though mobile markets in Western Europe and in certain Asian countries (Korea, Japan among others) are nearing saturation, the global mobile base is likely to continue to grow, given the still low overall rate of penetration on the planet. - The deployment of the installed base of Java and Brew-compatible phones initially represents a unique opportunity for game publishers to offer their products to a larger population than the class gamer population.
•
Growing popularity of mobile games, gaining ground on ringtone, music clip and image downloads. Significant rise in the number of users of advanced mobile content.
•
174
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Figure 21: Market forecasts for the mobile entertainment and mobile gaming sectors, 2003 to 2008 (billion USD)
9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2003 Turnove r: mob ile enter tainme nt 2008 % mob ile ga ming tu rnover 5 0 25 20 15 10 35 30
Source: IDATE, based on ARC Group data, 2004
Figure 22: Breakdown of turnover for the mobile entertainment segment, by type of service, in 2003 and 2008 (billion USD) 2003: 1.1 billion USD
2% 5% 14% 45% 1%
2008: 8.3 billion USD
6% 24% 20%
6%
33%
14%
30%
Music Adult content
Images Video
Games Betting
Music Adult content
Images Videoe
Games Betting
Source: IDATE, based on ARC Group data, 2004
Figure 23: Geographical breakdown of the mobile gaming market, in 2003 and 2007 (million USD) 2003 2007
10% 27%
21%
1%
51%
26% 62% 2%
USA
Japan
Canada
Europe
USA
Japan
Canada
Europe
Source: IDATE, based on Informa Media data, 2003
2004 edition
© IDATE
175
Video games : nextgen gaming is on its way!
3.7. Mobile games: typology
3.7.1. Single player mobile games
These games account for the majority of existing games. They can be broken down into four categories.
Pre-installed games
The first games on the market were embedded, pre-installed onto the terminals by the phone manufacturers (Nokia, Sony Ericsson). Often very simple, these games represent a particular appeal for terminal buyers, albeit one that disappears quite quickly. This type of game which still exists (several pre-installed simple games) does not generally generate any revenues for the operator, except in certain cases where access to higher levels requires payment, via SMS for instance. InFusio offers this type of service, baptised “Les Games,” on the Orange network in France.
Interactive games via WAP or i-mode
Most WAP portals do offer interactive games on WAP, and refresh them regularly to boost traffic, despite a level of playability deemed very average by users. An example here is Digital Bridges which offers Wireless Pet, a Tamagochi-Like game that requires users to feed, amuse and train a virtual pet, leading to online battles with other virtual pet owners’ trained charges. NGame offers online racing games, operating on a licence from the Paramount Pictures film Rat Race. And Jamdat Mobile has developed an online combat game based on the film Gladiator.
Interactive games via SMS or MMS
The development of this type of game is significant, in terms of revenues and traffic, and relies on the introduction of Premium SMS/MMS. They can be very simple quiz games (question & answer), lotteries, puzzlers (e.g. MasterMind offered by Vodafone in Italy) or games based on TV programmes. Some games relating to TV shows proved a highly efficient means of interacting with viewers, with the added bonus of being a substantial new source of revenues thanks to the use of Premium SMS. The most popular services involved viewers voting on reality TV shows via SMS channel and IVR (Interactive Voice Recognition). A perfect case in point here was the “Big Brother” programmer which let viewers eliminate the participants through their votes. In the UK, the “Big Brother 3” programme generated 5.4 million votes via surcharged SMS (24% of total votes). During the first 6 weeks of the game, SMS votes generated roughly 1 million USD in revenues.
Games downloaded from libraries (operators or specialised providers)
Games downloaded from libraries offer the possibility of a high rate of game refreshment, and the ability for operators to define appealing business models. This development appears promising for the future of mobile gaming, but the solutions will need to be based on a standard: here, J2ME (Java 2 Micro Publishing) appears to be currently coming to the fore. While awaiting the availability of standardised products, the first commercial games download services are based on proprietary solutions such as In-Fusio’s ExEn, Qualcomm’s Brew or Sinjisoft’s Swap.
176
© IDATE
2004 edition
Video games: NextGen gaming on its way!
3.7.2.
Multiplayer mobile games
These types of game, based on the interaction between several gamers, is virtually non-existent in Europe. A handful of initiatives have been launched, notably those by developers Newt Games and Ideal Work (which adapted Tomb Raider for the N-Gage). The principle itself is relatively simple: gamers connect to the gaming site, and can challenge other gamers who are also connected. Some games are multilingual, which means that an English-speaking gamer can go head to head with a Spanish-speaking rival, without there being any language barrier. It is therefore possible to imagine a wide range of possibilities for multiplayer games through the creation of communities and teams – the appeal of a game being directly proportionate to the size of its community. Thanks to the ability it provides to be permanently connected to the network, GPRS offers a great many entertainment opportunities, e.g. sending alert messages when one gamer challenges another, or when an event takes place in a game.
Multi-platform games
These games combine PC and mobile terminal access (via SMS, WAP, etc.). Examples include the Nokia Game and Electronic Arts’ Majestic. The first had a relatively short lifespan, having been unable to woo the public (only 14,000 gamers signed on for the first episode), which had little interest in the “paranoid” game in late 2001 The fourth edition of the Nokia Game took place over 10 days in November 2003. Over a million gamers from 35 countries went head to head or teamed up to play this interactive online adventure game. Throughout the game, they are accompanied by “Flo”, the virtual character created by the Finnish firm. The appeal of mobile is that it can contact gamers when they are offline, by sending an SMS, for instance, and the games can be enhanced by adding new features (e.g. gamers’ physical location).
Location-based games
Lastly, we can add location-based games which use players’ physical position as a key parameter for the game. But two constraints exist: • they require a high density of gamers to be appealing, and are therefore geared mainly to urban zones; • they are limited to a single operator since interconnection of localisation gateways between operators does not yet exist. Some perceive this type of gaming as an opportunity to create events based on users’ location. Each interaction between gamers (i.e. via the network) is a potential revenue-generator for operators. So multi-player mode could offer the possibility of generating greater revenues during game time than single player games would. But, location-based massively multiplayer games have not yet caught on, which explains why operators are communicating very little on the subject, and why so few new games have been released since the pioneer initiatives in 2002. • BotFighters was the first game of this kind, developed by the Swedish firm, It’s a Live, and Danish firm, Wireless Factory, for Swedish operator Telia Mobile. This interactive arcade game involves eliminating other gamers depending on their location, and has attracted very few subscribers to date. • It was followed in December 2001 by Orange and its Zonemaster game. Produced in collaboration with Danish company, Unwiredfactory, Zonemaster is a game that involves conquering territories based on gamers’ location. Gamers operate in a zone based on the country where they are situated. Information on their opponents’ location is communicated via Orange’s GSM network, and the information is used to advance in the game. • After running trials in Marseille in July 2001, French firm Gameloft sold Orange its location-based games Mobimushi, for an undisclosed sum. This arcade game was launched by the operator in July 2002. Gamers must take care of a virtual pet (similar to a Tamagochi) whose adventures will vary depending on where they are located. • Corsarios is a multi-player adventure game that makes use of gamers’ location. It was launched by Telefonica Moviles in August 2002.
2004 edition
© IDATE
177
Video games : nextgen gaming is on its way!
Games that combine the PC and mobile phone worlds (Mogi)
The company Newt Games was founded in October 2001. It has created location-based games which are hybrid mobile and web-based. The firm has received financial backing from Wanadoo/Orange subsidiary Inventmobile. Available in Japan since April 2003 through a distribution agreement with KKDI, Mogi (Kigen up to the end of 2002) is a massively multiplayer, location-based game which lets gamers make use of the outside world to enter into a life-size playing field. Geared to the Japanese market, it can be played over WAP phones, and is billed 315 JPY a month. In the city, located thanks to their mobile, gamers pick up virtual objects and walk around to further their quest, and join up with others to gather all of the elements needed for their team to advance. Gamers connected to the web help mobile gamers, and guide them through the 3D interface, or chat with one another and plan their strategy for the treasure hunt. The game makes use of Flash and Shockwave technologies, both common on the net, and pre-installed in the majority of computers, or downloadable in a matter of seconds. The game has a base of roughly 5,000 paid subscribers in Japan.
Figure 24: Screenshot of the Mogi game
Source: http://www.mogimogi.com/mogi.php?language=en
3.8. The value chain
The porting of existing video games to mobile phones allowed for the meeting of two, up to then separate worlds, and of two different value chains. The advent of new mobile, non-voice services has had an impact on the structure of the mobile telephony value chain, bringing in new players such as content providers, content aggregators, applications developers, mobile portals, and providers of middleware platforms offering new services. Cellular operators remain at the heart of the value chain, with control over services and billing. This segmentation of functions is likely to endure, given that mobile operators will be required to rely more and more on turnkey solutions providers. But, like i-mode, portals like Vodafone Live! and Orange Word are nevertheless seeking to be present on several levels of the value chain, notably in the supply and publication of content. Vodafone Live! is at once the owner of its brand, the holder of content distribution rights, and the access provider which organizes, selects and promotes services, as well as being the mobile operator providing data transport and billing customers.
178
© IDATE
2004 edition
Video games: NextGen gaming on its way!
But, some operators have had trouble in their bid to control all of these areas and could, in the long run, confine themselves to their core business area. In the UK, for instance, O2 receives 200 new games a week. It is very difficult for the operator to test the compatibility of all these games with its platform, and has therefore contracted out the task.
Figure 25: Mobile gaming industry value chain
Source: IDATE based on In-Fusio
3.8.1.
Copyright holders
The publication of mobile games immediately gives rise to the issue of copyright, a key stake when distributing games on this medium. Like in the world of PCs, consoles, PDAs and television, franchises are prominent in the world of mobile phones. A host of games rely on the use of copyrighted material: Jurassic Park, offered as part of In-Fusio’s catalogue, relies on a partnership with Vivendi Universal. After Sony and Charlie’s Angels, France Telecom’s mobile subsidiary Orange, acquired the rights to the popular film The Lord of the Rings to create services for mobile phones. A mini WAP site was created to host the game Forces of Light and Dark. SMS games have been marketed, as have ringtone downloads based on the film’s score; an operation repeated with the release of the two subsequent episodes of the famous JRR Tolkien trilogy. The pressure that mobile operators put on copyright holders appears to be balancing out: • • Leading publishers are tending to increase their offer. A few new entrants to the mobile telephony market plan to take advantage of mobile games’ growing popularity, but with fewer financial means than leading carriers, and with therefore less financial leverage when negotiating. On the whole, the number of video games ported to mobile could increase without players from the video game sector benefiting significantly, from a financial standpoint.
• •
The top video game publishers which hope to earn additional revenues, including those generated by mobile gaming, have understood that the marriage of games and mobility could well constitute a significant source of complementary revenues, while also increasing their base of gamers. Video game publishers would be wise to cooperate, and not compete only with each other, in order that their games be distributed by the largest possible number of operators, regardless of the mobile standard used, with the goal of increasing the number of potential gamers.
2004 edition
© IDATE
179
Video games : nextgen gaming is on its way!
Mobile operators too would be wise to cooperate, and not seek to compete with each other, but rather join forces (e.g. the partnership agreement between Vodafone KK and Verizon Wireless October 2003) and to sign group contracts in order to share the costs.
Table 28: Selection of partnership agreements between game publishers/content providers and mobile telephony players Game publisher/Content provider Type of agreement Partners Date
CodeToys
Distribution in 13 countries of the game "Who Motorola wants to be a millionaire?", offered initially only to subscribers in Finland and Ireland Development and distribution of mobile games Distribution of three mobile games starring Scooby-Doo Distribution of downloadable ringtones from the TV programme, "The Thunderbirds" Distribution of mobile games Distribution, among other things, of Java games for mobile (3.30 USD per game, via download, at launch) Distribution of mobile games via the Vodafone Live! portal in 14 countries Creation of mobile entertainment applications for the US market. Development of paid mobile entertainment applications for France and Italy IdeaNetworks TV channel Cartoon Network Carlton International AT&T Wireless Pannon GSM (Hungary) Vodafone Verizon Wireless TIM, Bouygues Telecom
February 2001
Digital Bridges Digital Bridges Digital Bridges Digital Bridges Walt Disney
January 2004 nd nd October 2003 April 2004
Walt Disney Walt Disney Walt Disney In-Fusio In-Fusio In-Fusio In-Fusio
January 2004 nd January 2003 March 2004 March 2004 January 2004 July 2003 May 2003 November 2002 April 2002 February 2002 January 2002 July 2001
Partnership for the development of mobile games Microsoft Game (Ages of Empires 2, Midtown Madness 3…) Studios Distribution of a selection of the most popular games (South Park, Streghe) Distribution of the game Lord of the Rings: Return of the King Distribution of a selection of its most popular games TIM JAMDAT Mobile Verizon Wireless Orange Netherlands Orange UK Telefonica Moviles Vodafone Italy, SFR China Mobile Orange France Vodafone D2 T-Mobile China Mobile Sprint PCS CosmOTE T-Mobile CZ (exclusive up to the end of May 2004)
Overloaded (Endemol) Gameloft Gameloft Gameloft
Distribution of 8 new Reality TV games (Big Brother, Fantom Overdrive...) Distribution of a selection of Gameloft’s best games, for Nokia Series 40 and 60 phones Distribution of mobile games Distribution of the game Tom Clancy's Splinter Cell and its add-ons (notably, Tom Clancy's Splinter Cell: Pandora Tomorrow launched in April 2004 on all platforms)
February 2004 February 2004 February 2004 April 2004
180
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Table 28: Selection of partnership agreements between game publishers/content providers and mobile telephony players (cont’d) Game publisher/Content provider Type of agreement Partners Date
Gameloft
Distribution of the games: Tom Clancy's Splinter Cell, XIII and Prince of Persia: Sands of time
Rogers AT&T Wireless, Telefonica Moviles Chile Telus Canada, Optus, Radiolinja
February 2004 April 2004
Gameloft
Distribution of Tom Clancy's Rainbow Six on China Mobile Nokia series 40, Rayman Golf(R) on Nokia series 40 and series 60, Prince of Persia: Harem Adventures and Marcel Desailly Pro Soccer on Nokia series 60 Distribution of a selection of games, including Tom Clancy's Splinter Cell, XIII and Prince of Persia: Sands of time, Marcel Desaillu Pro Soccer Prince of Persia: Sands of time, Rayman® 3, Tom Clancy's Splinter Cell® Extended Ops the smash hit, XIII. Distribution of a selection of games Distribution of a selection of games Distribution of a selection of games Orange France
February 2004
Gameloft
July 2003
Orange Romania
March 2004
Gameloft Gameloft Gameloft
China Unicom Swisscom mmO2 group Vodafone Telefonica Moviles Verizon Wireless TMN Microsoft Games Studio Vodafone -
May 2003 March 2003 November 2002
Gameloft Gameloft JAMDAT Mobile Eidos Mobile Scope/20th Century Fox
Distribution of a selection of Brew mobile games (Lock'em up) Distribution of a selection of mobile games Distribution of a selection of Xbox sport games on mobile Distribution of the game Tomb Raider International distribution of games, compatible with Brew, Symbian & J2ME (short term agreement for use of the Die Hard and Ice Age licences) Distribution of games for the Telia Mobile portal in Sweden Distribution of games Distribution of mobile games in the US
September 2002 September 2002 April 2004 September 2003 April 2004
THQ Wireless THQ Wireless Sega Wireless
Telia Mobile Verizon Wireless Verizon Wireless Qwest Wireless T-Mobile USA, Bell Mobility Alltel AT&T Wireless Sprint PCS February 2003 January 2004 October 2003 July 2003 February 2003 October 2002 August 2002 April 2004
Sorrent/Spike TV/Viacom
Distribution of mobile games in Stimpy Pinball, based on the Stimpy Adult Party, was the collaboration between Sorrent, Viacom).
the US (Ren & North American cartoon Red & operators, including first fruit of a Sprint PCS Spike TV and
Source: IDATE, based on company data
2004 edition
© IDATE
181
Video games : nextgen gaming is on its way!
3.8.2.
Platform providers and mobile game publishers
The mobile gaming sector is not populated by leading video game players, such as Ubi Soft, Infogrames or Sony, but rather by specialised firms such as Digital Bridges, Gameloft and In-Fusio. The limited functionalities that equip mobile devices requires specific solutions be developed, added to which the target market is not the same as for PC or console games. A great many of the sector’s players are positioned as game publishers and aggregators, and as technology providers.
Table 29: Selection of mobile game publishers and platform providers Company Type Selection of partnerships/clients Clients: T-Mobile, Orange France, SFR, Telefónica Moviles, Vizzavi, Vodafone D2, Vodafone Italy, China Mobile, TIM Manufacturers: Mitsubishi (Trium), Philips, Sagem Platform designers: Microsoft Games (January 2004) Video game designers: JAMDAT Clients: Genie, Telestra, AT&T Wireless Distributors: Carlton International, Cartoon Network Clients: Telefónica Moviles, Orange Manufacturers: Ericsson, Motorola, AirFlash Client: Telia Manufacturer: Sony-Ericsson Clients: Vodafone Italy, Wind, Telefonica, Cellcom (Israel), Pelephone (Israel) Clients: Over 50 clients operators around the world Manufacturers: Nokia, Motorola… Game designers: Disney… Clients: China Mobile, Sprint PCS, CosmOTE, Rogers AT&T Wireless, Orange France, China Unicom, mmO2, Vodafone, Telefonica Moviles, TMN…)
In-Fusio (France)
Provider of a game download platform • (baptised ExEn) and game aggregator (catalogue incluging games such as Jurassic Park, E.T., Ages of Empires 2, Midtown Madness 3 and Return of the King) •
• •
Digital Bridges (UK)
Publisher and provider of a multiplayer mobile games platform, based on a central server Provider of a platform to deliver games in multi-access, on mobile, PC, interactive TV Publisher of the first location-based game, BotFighters, launched with Telia Mobile game publisher (SMS, WAP, Java) Provider of a mobile gaming platform for operators, based on a server (no clients on devices) Platform provider and publisher of games such as Who wants to be a millionaire?, & Trivial Pursuit. CodeToys is the product of the March 2002 merger of Codeonline and Springtoys. Mobile game publisher for PDA (SMS, WAP, i-mode, Java), and interactive TV. Access to Ubi Soft’s catalogue since the merger with Ludigames
• • • • • • •
nGame (UK)
It’s Alive (Sweden) iFone (UK) Cash-U (Israel)
CodeToys (Finland)
• • • •
Gameloft (France)
Source: IDATE, based on player data
But, given mobile gaming’s potential, the leading publishers of games for console or PC are now diversifying, and offering multi-platform games, either directly or through a dedicated subsidiary. Cases in point here are Sega, via Sega Mobile created in April 2002, and THQ via THQ Wireless, founded in May 2001.
182
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Table 30: Selection mobile game publishers and platform providers, from the video game or PC world Company Type Selection of partnerships/clients • • Manufacturers: Motorola Clients: numerous clients (NTT DoCoMo, North American operators…) Manufacturers: Qualcomm, Palm, Nokia, Motorola Clients: Nokia (N-Gage) Clients: NTT DoCoMo (i-mode), KDDI (Ezweb), mobile operators in Hong Kong and Taiwan, AT&T Wireless, Vodafone (Vodafone Live!, in Germany, Spain, Great Britain, Italy) Clients: NTT DoCoMo, Orange, Vodafone, Sprint PCS, AT&T Wireless, Verizon Wireless Manufacturers: SonyEricsson, Motorola, Nokia, Siemens (part of the Mobile Games Interoperability Forum) Video game publishers: Konami, JAMDAT
Nintendo Sega Mobile
Publisher of games for its own handhelds (GameBoy, Pokemon Advance) Multi-platform publisher, initially arcade games
•
Activision Konami
Multi-platform game publisher, initially PC Multi-platform game publisher, initially on console Manufacturer of arcade terminals for the Japanese and North American markets Development of mobile games
• •
Wireless (USA)
•
•
•
Source IDATE, based on player data
Table 31: Selection of content providers Company Type Selection of partnerships/clients • • Clients: Verizon Wireless, Vodafone, TIM, Bouygues Telecom... Clients: AT&T Wireless (mMode), Bouygues Telecom (i-mode)
Walt Disney Bandai Wireless
Publisher and provider of Disney brand applications Mobile content provider Originally a toy manufacturer, later a publisher of console games (PlayStation, Nintendo, Microsoft in 2004)
Source: IDATE, based on player data
3.9. Leading players
Incumbent video game developers and publishers have invested massively in the mobile telephony sector. initially highly concentrated, the offer has diversified with the emergence over the past few years of companies specialising in mobile gaming.
3.9.1.
Incumbent video game publishers
Partnership agreements have been signed with distribution platform providers, WAP portals, content aggregators, network operators and even handset manufacturers. For some, the best path involves the creation of a dedicated subsidiary for creating content, or at least the incorporation of expertise into a single division.
2004 edition
© IDATE
183
Video games : nextgen gaming is on its way!
Some examples of strategies implemented in this area: • In mid-2001, Activision published two titles (developed by Wireless games) for mobile internet, drawing on the Star Trek franchise. Since 1997, the company has been applying an external growth strategy, aimed at foreign publishers and/or distributors. In May 2001 THQ created a new division, THQ Wireless, dedicated to the development of mobile games. THQ also forged a number of new partnerships: in late 2001, the company joined forces with Intellivision Productions, which in 1980 had released and sold 3 million eponymous home consoles. 125 games were developed for the machine. In June 2002, SonyEricsson and THQ Wireless announce a mobile games development partnership. In April 2002, Sega announces the creation of Sega Mobile for porting Sega games to mobile platforms and PDAs in North America, and for forming new partnerships in view of having its mobile games more widely distributed. Through its American subsidiary, Bandai Wireless, the Japanese firm has positioned itself on the mobile content market in the US.
Table 32: Incumbent mobile game publishers Principal partners Market(s) Subsidiary
•
•
•
Capcom Eidos
KDDI, NTT DoCoMo
Japan, China Europe, North America
Capcom Asia Company
• •
Nokia, Motorola Orange, Vodafone, AT&T Wireless, Sprint PCS, Verizon Wireless
Electronic Arts Infogrames Konami
JAMDAT Mobile JAMDAT Mobile
North America, Japan, South Korea North America, Europe Japan, Hong Kong, Taiwan, North America, Europe
EA.com Infogrames.com Konami Mobile & Online Inc.
•
NTT DoCoMo, Vodafone KK, KDDI, operators of Hong Kong and of Taiwan, AT&T Wireless, Vodafone group (except France) Hudson Soft Motorola, Nokia, Palm, Synovial Inc. NTT DoCoMo, Verizon Wireless, Alltel
•
Sega
• •
The US, Japan
Sega Mobile
Sony
NTT DoCoMo, AT&T Wireless, Hutchison Telecommunications, TIM, KPN group Siemens, Motorola, JAMDAT Mobile, Mobile MGIF Orange Alcatel
Japan, The US, Europe
Sony Online Entertainment, Sony Pictures Digital Entertainment THQ Wireless Eyes One AS Gameloft
THQ Titus Interactive Ubi Soft
The US, Europe Europe Europe, Japan
Source: IDATE
Eidos Eidos is a British publisher of games, dedicated to producing for PC, PlayStation, GameCube, X-Box and N-Gage. Since the release of its worldwide smash hit Tomb Raider, the publisher has begun to produce the title for all platforms: In early July 2002, it became the first entirely 3D game for PDAs equipped with Pocket PC. Pursuing its goal of becoming the world’s leading video game publishers, beginning with its four core titles (Tomb Raider, Hitman, Championship Manager and Two Ex), Eidos has also released a series of new games: publishing a total of 13 new titles in 2003.
184
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Electronic Arts Electronic Arts was one of the first publishers to have ported games from its PC catalogue to PDAs. First released in 1999, the Tiger Woods PGA Tour game was a pioneer. It sold over 10,000 copies and generated 260,000 USD in revenues. One game that was very popular for years, Sim City 2000, has been ported to Palm OS and Pocket PC. The result on Pocket PC is remarkable, and could almost be mistaken for the original PC version.
Sim City 2000 (Pocket PC) – Zio Interactive
Since October 2003, several other Electronic Arts games have been ported to the N-Gage consolephone, including The Sims. A mobile version of the FIFA Football 2004 game has been available since early April 2004. Atari (formerly Infogrames) In December 2003, Infogrames adopted the name Atari – having acquired the rights to use the Atari brand following its takeover of Habro Interactive in 2001. Six games are marketed by Atari: Centipede, Asteroids, Driver, Deer Hunter, Pro Bass Fishing and Beachhead 2000. The goal of Europe’s leading third-party publisher is to develop and sell games for mobile platforms, with Palm OS being the top priority since it agreement with Palm in June 2001. It also plans to sell licences to its games so that they reach the largest possible audience. Among others, Motorola signed an agreement with Atari in May 2002 to provide Motorola phone owners with access to Atari’s Java games, that were previously available on PC. In late March 2004, Atari signs an agreement for the distribution via Mobile Digital Media of some of its games (Asteroids, Centipede, Missile Command and Pong) on PDA and mobile phone. MDM is a PDA software (notably Sega games) and holds the PDA licence to the SimCity game. Ubi Soft and Gameloft Gameloft and Ubi Soft are two companies founded by the Guillemot brothers. The first develops, publishes and distributes mobile games; the second develops, publishes and distributes games for console and PC. Gameloft has a catalogue of over 80 mobile games, of which some 30 action games, which are made available to mobile manufacturers and operators. This catalogue benefits greatly from synergies with Ubi Soft. Via licensing agreements, Gameloft systematically ports a mobile version of Ubi Soft’s most popular games. Operating on this principle, Gameloft is able to offer mobile versions of Rayman, and of Splinter Cell, an espionage game developed initially for the Xbox, and later the PlayStation 2 On the other end of the chain, the company is establishing agreements with leading operators. Gameloft has over 25 operators in its portfolio, including T-Mobile, Telefonica Moviles, mmO2 and Vodafone.
2004 edition
© IDATE
185
Video games : nextgen gaming is on its way!
In France, the publisher works with three operators, Orange, SFR and Bouygues Telecom. The business model developed by Gameloft is based on a commission system on game downloads. Earnings vary between 60% and 75%. Buoyed up by its heavyweight partners, the company has been making forays into Eastern Europe and Asia since 2003. In May 2003, it announced an agreement in Hong Kong with Hutchison Telecommunications, targeting the operator’s 3G subsidiaries. Along with operators, the company also enjoys preferential relations with the leading handset producers on the lookout for appealing mobile content. Gameloft also negotiates with mobile retail chains like The Phone House. Vivendi Universal Games Created in 1995, VUG is a leading publisher of interactive online content for PC, consoles and mobile devices, including the N-Gage. The company includes the studios Blizzard Entertainment (Starcraft, Warcraft, Diablo…), Sierra Entertainment (Half Life, Swat, Pharaoh…) and Universal Interactive (Spyro, Crash…). VUG also owns a licence to the Lord of the Rings and Simpsons: "Hit and Run" (VUG’s best seller in 2003, generating 67.3 million EUR). Through the Partner Publishing Group, VUG co-publishes and/or distributes interactive products for a great many strategic partners, including Coktel (Adi, Adibou, Adibout'chou…), Fox Interactive (Alien versus Predator 2, No one lives forever…) and Knowledge Adventure (Jumpstart, Sabrina, Franklin…). Following many months of rumours over the sale of Universal Games by Vivendi Universal, VUG is now likely to remain in the conglomerate’s stable of companies. With a turnover 2003 of 571 million EUR, Vivendi Universal Games a division of Editis (formerly Vivendi Universal Interactive Publishing). The partnership strategy applied in recent years continues: VUG stepped up its collaboration in February 2004 with Canadian studio Radical, by signing an agreement for the development of 6 multiplatform titles based on new or existing franchises. Among others, Radical is the creator of The Hulk and The Simpsons games. Despite all this, VUG’s health remains shaky: turnover in 2003 was down 28% (to 571 million EUR) with operating losses totalling 201 million EUR. But directors of parent company VU are predicting a rebound for the video games division. The UMTS version of Fahrenheit, a VUG game initially designed for PC and consoles has been announced for November 2004. Other games are expected to follow since Wonderphone, the company that ported Fahrenheit to mobile, has signed a more widereaching deal with VUG: the company will design 5 mobile games using characters from the Vivendi galaxy, geared mainly to European and Asian operators. The first game produced under this agreement, Crash Nitro Kart, for GSM phones, has been available since May 2004. Development studio Sierra has entered the PDA market with titles that include Hoyle Casino, Hoyle Card Games: Solitaire, Hoyle Board Game: Backgammon. THQ Wireless California-based THQ Inc. develops, publishes and distributes interactive entertainment software for all existing video game platforms: PC, Sony, Microsoft and Nintendo consoles and mobile platforms. Its catalogue contains games of all genres. While close to 80% of its revenues are generated in the US, the company has been focusing over the past year on its development abroad, and particularly in France, Australia and New Zealand. In May 2001 THQ created a new division, THQ Wireless, dedicated to developing mobile games. Among other things, this division is in charge of the technological partnership signed with Siemens in November 2000 and which defines a programming standard, based on Java. In June 2002, SonyEricsson and THQ Wireless announced a mobile games development agreement. The contract covers the exclusivity of some of THQ’s game developed for SonyEricsson mobiles, as well as the possibility of offering joint content. In partnership with Konami, THQ Wireless launches "United States of Game" in January 2003, a sports video game download service (5 games for 150 JPY a month), available via Japanese operator NTT DoCoMo’s i-mode service. THQ has been using the open technology and the development kits offered by JAMDAT Mobile, a California-based mobile game developer, since early 2002. In April of that year, THQ became a sponsor of the Mobile Games Interoperability Forum (MGIF) which was founded by Ericsson,
186
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Motorola, Nokia and Siemens in July 2001. (MGIF). THQ has used the standard to begin offering games tailored to Nokia’s N-Gage console-phone (MotoGP and Red Faction among others). The first games developed with this format were the World Wrestling Federation Mobile Madness and Tetris (available since 3 January, 2002). THQ Wireless has formed partnerships in Europe with Orange and with Vodafone for the development of mobile games. THQ Wireless develops games for NTT DoCoMo in Japan and for AT&T, Sprint and Verizon in the US. The only distribution platform for mobile games published by THQ Wireless is the site "madtap.com". Activision Founded in 1979, Activision is an American company which was among the video game industry’s pioneers. In this ever-changing industry, very few publishers can boast longevity. Activision’s success derives in large part from its catalogue of titles which include classic Atari 2600 games, such as Enduro and Pitfall!, by way of Rampage and Ghostbusters on Commodore 64, up to the more recent Quake III. Activision’s history is marked by hits, some of which have cult followings. To continually expand its catalogue, the company relies on exclusive contracts (like the one signed with Codemasters for North America), or the takeover of other studios. Since 1997, Activision has been committed to its external growth. The company undertook the acquisition of 15 companies between 1997 and late 2003: Activision Value, Neversoft Entertainment (Tony Hawk's Pro Skater), Treyarch, Take Us!, Raven Software (Soldier of Fortune), CentreSoft Ltd, NBG Distribution, Head Game Publishing, CD Contact Data, Expert Software (specialised in publishing educational software and budget games), Elsinor Multimedia, Grey Matter, Z-Axis Ltd and Luxoflux Corp (True Crime). The latest acquisition was of Infinity Ward, in October 2003. Activision develops and publishes a handful of games for wireless platforms, such as Nokia’s N-Gage. Tony Hawk's Pro Skater is one of the games developed in 2003 for these consoles. In early 2004, several of the company’s directors were accused of accounting fraud. Titus Interactive Present on all available multimedia platforms, Titus Interactive is a Paris-based game publisher which markets games for consoles (Sega, PlayStation, Nintendo, GameBoy), PC, Macs and, soon, on UMTS (in partnership with Orange). In addition to its vast catalogue (Superman, Xena the Warrior, among others) its development is based on a large distribution network: relying on independent distributors and licensing agreements on all continents.
3.9.2.
Other mobile gaming publishers
Other smaller publishers are forging themselves a place on this increasingly competitive sector. InfraWorlds Founded in 2000, InfraWorlds is a French company specialised in developing mobile games. In early 2004, the company closed a pool that helped raise a first round of funding of 1.35 million EUR from Sofinova Partners. This injection of cash will allow InfraWorlds to expand its game of catalogues which, in 2004, contained 12 titles, and to optimise its Java games. On the business side of things, following a first contract singed with Philips in late 2000, InfraWorlds is currently working with Nokia to offer its services. The publisher’s games are still not offered preinstalled on the Finnish operator’s handsets. They are presented in the User Guides that come in Nokia packs, and available on the manufacturer’s portal. To activate the games, users need only send an SMS. InfraWorlds earns on the game licences acquired by Nokia, and on the volume of games “opened” by end users. InfraWorlds has announced only its projected earnings, 2 million EUR for 2004, with breakeven planned to be reached in the last quarter.
2004 edition
© IDATE
187
Video games : nextgen gaming is on its way!
BeTomorrow Founded in 2002 in Bordeaux (France), BeTomorrow develops games and applications for mobile phones, with particular focus on online gaming, using J2ME/MIDP for instance. BeTomorrow also works on developing real time sport events viewing systems. The company has signed a number of agreements with some of France’s leading mobile phone and media players for the distribution of its games. Following a partnership with Symah Vision (Lagardère group) and Wavecom, at 3GSM 2004 in February 2004, Alcatel and BeTomorrow announced the launch of Xploded, the first Java game available for a UMTS environment, capable of hosting 40 gamers at once.
Major players on the mobile gaming market CodeToys
www.codetoys.com Presentation CodeToys is a Finnish company specialised in developing mobile games. Founded in 1998 under the name Codeonline, it attracted a number of investors in a short time, including Motorola Ventures, Bertelsmann Capital Ventures, Wellington Partners, Spinno-Seed, Shamrock Capital… Media groups as well have provided financial support: AOL Time Warner, Finnish firm Alma Media Group, as have operators (Sonera). CodeToys’ strategy has led it to forge a presence in Great Britain, in Germany, Japan and the US. In early 2002, it merged with compatriot company Springtoys, a video game developer. The new company announces that 250 million people around the world are playing its games. The company’s strategy involves working alongside all players along the value chain, handset producers, telecom operators and content providers alike. Clients and international presence CodeToys enjoys strong international presence, with a portfolio of clients that includes: AT&T Wireless, Vodafone UK and Vodafone Ireland, Orange UK and Orange France, Virgin Mobile, Telia Mobile, TIM, Telefonica Moviles, Telstra, Mobistar, Swisscom, Mobinil, Fastlink, T-Mobile, mmO2, SingTel and Telstra. Activities and products Codeonline offers manufacturers the chance to incorporate their games into the terminals. It has developed applications that require access via mobile handsets enabled for GPRS, EDGE and UMTS. An agreement with American toy manufacturer Hasbro, allows the firm to create mobile games based on Hasbro licences (Trivial Pursuit, Who Wants To Be A Millionaire?). Figure 26: Value chain according to CodeToys
Source: http://www.codetoys.com/
188
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Digital Bridges
Presentation Digital Bridges was founded in 1998. It provides and manages mobile phone and internet content. It develops, publishes and distributes the content, and provides an technical platform (UNITY), compatible with all existing and future mobile telephony standards, protocols, technologies and operating systems. Among its investors are Apax Partners (2001), Argo Global Capital (2001) and Openwave (2002). It has forged partnerships with telephone operators and licence holders with the goal of creating a Global Wireless Entertainment Network. Partnerships Digital Bridges boasts partnerships with some of the most popular franchises from the entertainment and media worlds, including Star Trek: First Duty, Scooby-Doo, Cartoon Network, Men in Black II, The Weakest Link, Space Invaders, Pac-Man, EA SPORTS FIFA 2004, Mobile International Publishing and EA SPORTS Tiger Woods PGA TOUR Golf 2004. Digital Bridges has also established partnership agreements with leading mobile handset manufacturers (Nokia, Siemens and Samsung among others) and with middleware providers (Openwave, Gemplus and PacketVideo). In early 2004, Digital Bridges announced a collaboration with IdeaNetworks in the area of online gaming. Clients and international presence The American firm’s contents are offered by a number of operators, mostly in the US. Among them are AT&T Wireless, ALLTEL Communications, Bell Mobility, Sprint PCS, TELUS Mobility and T-Mobile USA. Digital Bridges operates through a distribution network made up of operators, portals, retailers, TV channels and other e-tailers, representing over 300 million subscribers worldwide. The company has offices in Edinburgh (headquarters), London, Stockholm, Paris, Munich, New York, San Jose, Tokyo and Seoul. Activities and products Digital Bridges’ first colour games were released in mid-March 2002. In early 2004, Digital Bridges appeared to be acquiring more and more (and increasingly eclectic) licences.
2004 edition
© IDATE
189
Video games : nextgen gaming is on its way!
Gameloft
www.gameloft.com Presentation Quoted on Paris’s new technologies exchange, Gameloft is a French company, founded in 1999, which designs games for mobile platforms using Java, Brew and Symbian technologies. Founded by the Guillemot family, which also founded video game publisher Ubi Soft. In September 2003 and in April 2004, Ubi Soft increased its stake in Gameloft. In mid-April 2004, the company’s shareholders were as follows: founders (44.2%), Ubi Soft (29.5% since April 2004), Guillemot Corporation (17.6%) and public (8.7%). Distribution and international presence Partnership agreements with leading copyright holders such as Ubi Soft Entertainment allow Gameloft to produce games with popular brand names. Thanks to its direct commercial presence in 9 countries (the US, Canada, the UK, Germany, France, Italy, Spain, Romania and China), the company distributes its products in over 30 countries through a network of mobile operators, phone manufacturers, specialised retailers, and online at www.gameloft.com. Financial results The company’s financial situation improved considerably in fiscal 2003. Gameloft tripled its turnover in 2003 compared to 2002 (10.2 million EUR in 2003 versus 2.5 million EUR in 2002) and ended the year in the black (+ 1.2 million EUR in 2003 versus –8.2 million EUR in 2002), and with net profits also up substantially (+2.4 million EUR in 2003 versus losses of 8.9 million EUR in 2002). The company projects a 60% rise in turnover in 2004. Activities and products GameLoft was originally an internet portal geared to federating players by enabling the creation of online communities. Unable to turn a profit, Gameloft merged with Ludigames (developer of games for interactive TV), formerly Ludiwap, created by the Guillemot family in 2000. The merger received the French competition authorities’ approval in March 2002. The company’s operations were then recentred on developing, publishing and distributing content for mobile terminals and interactive TV. Gameloft develops and publishes games for mobile phones, SmartPhones, PDAs and interactive TV. It benefits from internationally popular licences such as Rayman, Prince of Persia and Rainbow Six. Since April 2004, the latest title developed by Ubi Soft, Tom "Clancy's Splinter Cell: Pandora Tomorrow" has been available for mobiles, and in PC and console format. The games developed by this Paris-based firm operate on Java, BREW, Stinger (Microsoft) and imode (NTT DoCoMo). They are either SMS and WAP-based (WAP-GPRS, WAP Push), or downloadable. The company markets its content to network operators and terminal manufacturers. The content’s management (activation, identification, ranking, hosting…) can be contracted to Gameloft. Its leading customers are portals: Vizzavi (Vivendi Universal), T-mobile, My-Siemens, Club Nokia; and telecom operators: SFR, Bouygues Telecom, Orange, Sonera, Telefonica Moviles, TIM, T-Mobile, Radiolinja, Optus, China Unicom, Hutchison Telecommunications HK, Rogers AT&T Wireless, Verizon Wireless… representing a potential of 750 million subscribers. Gameloft develops downloadable content with options that are accessible online such as player ranking or higher levels of play (add-ons). The games are sold for 3 EUR and are bought using the Audiotext principle. Subscription models may by introduced in the coming months. The cost of developing a downloadable Java game is roughly 10,000 EUR according to GameLoft. The break even point varies between 100,000 and 1 million units sold, and requires significant commercial coverage. A site dedicated to WAP-based games (http://wap.ludigames.com) offers a variety of titles, from chess to adventure games, by way of shooters and sports games.
190
© IDATE
2004 edition
Video games: NextGen gaming on its way!
In-Fusio
www.in-fusio.com Presentation In-Fusio was founded in Bordeaux in 1998. The company is controlled by several investment funds (Banexi Ventures, ParTech International, Viventures). Originally a game publisher and service provider, in 2001 it expanded its field of expertise and began offering telecom operators and phone manufacturers its ExEn (Execution Engine) utility. ExEn is a game download platform. Rather than confining themselves to the games included on their SIM card and WAP games, cellular phone owners can download games from a catalogue made available by their operator. The games offered for download can be developed and published by In-Fusio. The company earns on the royalties paid by operators for use of ExEn and for its games. Financial results Still a private company, In-Fusion reports a turnover of 11.3 million EUR in 2003. In 2002, the company continued to grow, with the goal of being present on Europe’s top 5 mobile markets. Starting in 2003, after a fundraiser in December 2002, In-Fusio, which has exceeded its geographic target, states that it now collaborates with either the number one or number two player on the French, Italian, German, Spanish and UK markets, as well as being present in China were InFusion enjoys national cover for SMS transmission and downloads. Strategic partnerships In-Fusio has built a dense network of partners with operators and handset producers in Europe and China. The company distributes its ExEn platform to phone manufacturers, including Philips, Sagem, Trium, and for certain Siemens handsets. It has also signed agreements with leading cellular operators such as China Mobile, Orange and Vodafone. In-Fusio is actively involved in standardization forums (Java Community Process), notably with the goal of promoting its API (Application Programming Interface). In this area, it enjoys the support of Sun Microsystems, creator of Java. In late November 2003, In-Fusio beefed up its publishing power with the takeover of America studio Cybiko, for an undisclosed cash payment. This takeover allows In-Fusion, which already boasts a solid distribution network, to move higher up the value chain by strengthening its publishing operations, which will keep the Cybiko brand, and by consolidating its presence on the North American market, where its presence has been limited. In 2004, In-Fusio announces a technological partnership with Swiss firm Esmertec, publisher of a Java virtual engine. Activities, products, clients In-Fusio markets simple games. The company offers complete packaged solutions dedicated to mobile game downloads. This solution includes: • A technological solution: operator side server, and game engine in the device: the unique feature of In-Fusio’s approach is to offer mobile operators a Java game download platform, baptised ExEn. • A catalogue of games and a game hosting system (call backs, invitations to play): the company federates and accompanies the video game publishers and developers and copyright holders (video game publishers and entertainment companies like Vivendi Universal). The games are created either by In-Fusio or by third-party publishers such as Cryonetworks, Infra Worlds, Iomo, Kalisto, Kaolink. • Back-office customer relations management In-Fusio’s sizeable portfolio of ExEn clients includes T-Mobile, Orange, SFR, Telefónica Moviles, le portal Vizzavi, D2 Vodafone, Vodafone Italy and China Mobile.
2004 edition
© IDATE
191
Video games : nextgen gaming is on its way!
In-Fusio’s ExEn mobile gaming platform Description Available since July 2001, ExEn is a platform that allows users to download games onto their handset, and which are compatible with all existing devices and all radio technologies. The ExEn principle centres on the use of a Java type virtual engine in the devices, occupying 80 Kb of RAM. Each game requires between 25 and 35 Kb of memory and can be downloaded in 1 to 1.5 minutes over a GSM network. The technology is In-Fusio’s own, but based on Java script, The service’s targeted clientele is the 15-25 crowd, initially targeting low to mid-range handsets. The games offered are either interactive action (sport, arcade), puzzle or adventure games. They generally exist in both black and white and in colour.
Figure 27: Examples of games available on In-Fusio’s ExEn platform
Brick Buster
Sport game
nteractive horoscope
Adventure game
Source: In-Fusio
Business model The business model is based on sharing the revenues generated by the games between In-Fusio and the operator. In-Fusio provides the operator with the means to generate revenues with the games, but it is the operator who defines the business model specific to each game, as well as billing modes. With ExEn, operators therefore have several options that can be combined: subscription, payment for a game download, free play up to a certain level, then payment to access higher levels, pay as you play associated with actions in the game itself. For now, SMS is the means used to validate payment.
Figure 28: In-Fusio’s business model
Source: In-Fusio
192
© IDATE
2004 edition
Video games: NextGen gaming on its way!
Analysis The strength of In-Fusio’s ExEn solution lies in the fact that it has been available since mid-2001 with a number of operators, and equips several mid-range terminals produced by Sagem, Siemens, Philips, Trium Panasonic, Siemens, Alcatel, CECT (a total of around 20 models in 2003). While awaiting the widespread availability of the J2ME standard on handsets, the company’s strategy with respect to ExEn has allowed it to sign contracts with a number of mobile operators searching for appealing services. ExEn is very similar to the i-appli service marketed on i-mode Java handsets since early 2001, on NTT DoCoMo’s network. In-Fusio’s prime obstacle is the proprietary technology installed on a large number of the GSM terminals being sold. Leading handset manufacturers such as Nokia and Siemens are developing their own Java download solution and therefore refuse to equip their devices with the ExEn client solution… except when demanded by the operator, as was the case in Germany with D2 Vodafone where the Siemens SL42 was launched, equipped with ExEn technology. These players have all been launching their own Java-compatible phones since late 2002.
Figure 29: Panasonic handset equipped with ExEn
Source: In-Fusio
2004 edition
© IDATE
193
Video games : nextgen gaming is on its way!
Jamdat Mobile
www.jamdatgames.com Presentation Jamdat provides entertainment applications and technologies for telecom network operators and manufacturers. It also publishes products created by its network of developers. The company’s financial partners at the end of December 2003 were Sun Microsystems, Intel, Apax Partners, Qualcomm and Benchmark Capital (December 2003). Jamdat defines itself as an intermediary between the copyright holders, game developers and telecom operators. Its technology provides the ability to develop, analyse and manage multi-player mobile applications. Clients and partners Jamdat creates partnership agreements with incumbent video game publishers, and acquires licences to leading sports leagues (NFL, NHL, NBA, EA Sports, among others) and films (Lord of the Rings). Among the company’s clients are American (Sprint PCS, Qwest, Verizon Wireless, Telus, ALLTEL, AT&T, Bell Mobility), European (Telefonica Moviles, TIM, T-Mobile, mmO2, Orange) and Asian (SK Telecom, StarHub, Optus) operators.
Figure 30: Screenshot of the Lord of the Rings: Return of the King game, from Verizon Wireless
Minas Tirith
Black gates of Mordor
Minas Morgul
Source: JAMDAT Games
194
© IDATE
2004 edition
Video games: NextGen gaming on its way!
The Mforma Group (nGame –Mforma)
www.mforma.com Presentation of Mforma Backed by investment fund eFund, Mforma offers mobile content, technology and mobile data management services, representing over 300 million subscribers via operators Cingular Wireless, AT&T Wireless, Verizon Wireless, Telefonica Moviles, Vodafone, T-Mobile, Sprint PCS, Nextel, Alltel, Telstra, Telus, Bell Mobility, Airtel Movil, Radiolinja, Smart Communications, Globe Telecom and Orange. Mforma’s catalogue of content includes over 250 of the best SMS, MMS, WAP and Java-based games and entertainment software. The company markets applications in Java, SMS and MMS Quick Start, CHTML, Brew and i-mode, a technical platform, integral content management services, websites dedicated to franchises such as Spiderman, Rat Race, Top Gun and Britney Spears Crossroads. Presentation of nGame nGame was created in 1997 in Cambridge, England, and taken over in September 2002 by the company Mforma, an international and multi-standard content publisher. The company provides multi-player games for new terminals, digital TV and mobile devices. It owns the SIN platforms that generates Java in particular, and enables the creation of multi-player games. It also markets the use of nCGS/2 servers that allow portal operators to manage content. nGame’s business model is based on sharing revenues with copyright holders. A major agreement was signed with British cable operator NTL. nGame has been put in charge of creating multi-player games that will be marketed on digital cable. Oxygen Capital Partners is one of the British firm’s investors. Its contribution of 1.5 million GBP in 2000, allowed the company to open an office in Redwood City, California. Over the course of 2001, nGame developed some 20 games for mobile phone, internet and digital TV. NGame offers a racing game based on a franchise to the Paramount Pictures’ film Rat Race. Clients Notable among NGame’s partners are Telefonica Moviles, Yahoo!, AOL, Freeserve, Mviva, Orange, T-Motion… Ericsson, Motorola, AirFlash, Liberate, Not a Number, Open Wave, Power TV.
2004 edition
© IDATE
195
Video games : nextgen gaming is on its way!
NewtGames
www.newtgames.com
NewtGames was founded in 2001 with the goal of creating location-based community games and hybrid web-mobile games. The company had begun working two years earlier on developing its platform thanks to an investment from France Telecom (Innovacom). In April 2003, the company launched its first location-based game for GPS phones in Japan, and the first Japanese location-based game ever. In early 2004, the game had a base of 2,000 subscribers. The company became aware that it was difficult to market the game, given high calling costs in Japan. Over 60% of subscribers are women between the ages of 20 and 30. The game continues to be enhanced, and is being adapted to other platforms and extended to other concepts.
Figure 31: Screen shot the Mogi game, offered by KDDI
Source: Newt Games
Other publishers and providers of mobile gaming platforms
Industrial consortiums The sector is extremely fragmented, with a host of small companies providing technical solutions. Two industrial forums have been created with the goal of promoting the coherent development of the mobile games market over the long term: • Mobile Games Interoperability Forum (www.mgif.org): Nokia, Motorola, Ericsson and Siemens in June 2001 formed the Mobile Games Interoperability Forum with the goal of defining a common specifications for an interoperable gaming platform and standard game APIs. The initiative is indicative of leading manufacturers’ desire to have a strong presence on mobile gaming platforms. Among the companies that have joined the initiative, of note are Capcom, Konami, iFone, Digital Bridges, Terraplay and Cash-U. In May 2002, the forum published its first draft of specifications.
196
© IDATE
2004 edition
Video games: NextGen gaming on its way!
•
Mobile Entertainment Forum (www.mobileentertainmentforum.org): the Mobile Entertainment Forum is a forum created on the initiative of service and content providers in February 2001. The goal of the forum is to promote the mobile entertainment sector by establishing technical and commercial rules. Among the forum’s members are Open Mobile, Digital Bridges, Terraplay, Packet Video, mBlox, Comverse, Purple Software and Cash-U. The organization is not geared to defining technical specifications.
Other publishers
Table 33: Other publishers and providers of mobile gaming platforms Company Type Examples of Partnerships/Clients
Cash-U (Israel) www.cash-u.com iFone (UK) www.ifone.com It’s Alive (Sweden) www.itsalive.com Upstart Games www.upstartgames.com
Provides a server-based gaming platform for mobile operators Publishes games for mobile terminals (SMS, WAP, Java) Published the first location-based mobile game, BotFighters, launched with Telia
Clients: Vodafone Italy, Wind, Telefonica, Cellcom (Israel), Pelephone (Israel) Partnership with Sony-Ericsson Telia
Developer of mobile games, distribution Partnership with Konami of Japanese game on the Brew platform. Source: IDATE
2004 edition
© IDATE
197
Video games: next gen gaming is on its way!
4. Online gaming: current state & future prospects
4.1. Web-based games
Casual gaming
Web-based games are not stored on a computer’s hard drive, and can usually not be downloaded. They are aimed at casual gamers who spend little time indulging in this activity, and most are quite brief (generally around 10 minutes long, up to a maximum 30 minutes). They can be chess games, backgammon, quizzes... The increasingly faster access to content thanks to broadband now makes it possible to develop and offer more graphically sophisticated web-based games. But, developers are still being careful about investing in this area, given the relatively low value of usage, hence a lower propensity amongst gamers to pay for the games. Web-based games have been incorporated into online gaming services which also offer matchmaking services to hardcore gamers. GSPs (Game Service Providers) aim to reach the largest possible audience by offering a very broad range of games. Here, casual games are rarely successful. Casual gamers do not appear to appreciate the mix of genres. So the game Wordox, for instance, which was originally offered on VUG’s online gaming platform, was later moved to its own eponymous site where play is subject to payment. Casual gaming services are usually offered for free to gamers – the provider earning off advertising on the site and on related e-commerce operations. Several providers have plans to make the transition from a free, advertising-based model to a paid model based on subscription. The success of this type of transition depends on the size of the community. Wordox is a game that thrives on its community, like chess. If free alternatives exist, the community could well migrate swiftly to them. But if, in addition to a large community, there is a strong sense of identity within this community, the transition to a paid model may well be successful.
The Flash phenomenon
Web users have matured. They are now used to browsing, and are becoming increasingly involved in communities, in taking part, in sharing and expressing themselves via the web. A great many sites are now appearing that seek to develop around the idea of casual gaming, offered for free. The goal is sometimes commercial, or becomes so but, most of the time, the goal is to offer a different type of game to a group of friends. The accessibility and simplicity of Flash programming tools have enabled the spread of this type of game. Some schools and establishments have even begun running Flash game development contests. And at all developers’ trade shows there will invariably be a race against the clock to program a Flash game, after which the contestants will compare and swap their work. Some games have enjoyed massive and swift popularity. A case in point here is the Penguin game (whose target is in fact an armless creature) which was a smash in 2003, with its players communicating via e-mail and instant messaging. The concept is simple to say the least: the gamer controls a snowman with a baseball bat, and the goal is to bat the penguin (which is attempting to leap onto a rock) as far as possible. Much to everyone’s surprise, not least the game’s creator, millions of people played the game within a matter of days, and compared their scores. Infra and inter-company tournaments were organized, and the phenomenon snowballed. The creators of Penguin have programmed several more games that can be played on their website (www.yetisports.org), all of which can be downloaded for free onto a PC or mobile phone. The firm YetiSport has now signed a publishing agreement with Jonwood, and represented at E3. A Penguin community how exists, and supplies the highest scores for online play.
2004 edition
© IDATE
199
Video games : nextgen gaming is on its way!
Other Flash games which have enjoyed comparable success include Fly (www.flythecopter.tk) and Globulos (www.globulos.com) which was designed by GlobZ.
the
Copter
Source: YetiSport
Source: www.flythecopter.tk
Source: Globulos
200
© IDATE
2004 edition
Video games: next gen gaming is on its way!
4.1.1.
GSP
Online gaming services
Game Service Providers (GSP) offer matchmaking services. In other words they put gamers in contact with one another so that they can battle it out online over a game that they have purchased beforehand in a shop. Matchmaking services are aimed at hardcore gamers. The titles that can be played via these services are mostly first person shooters and real time strategy games, including Quake III Arena, Counter Strike, Unreal Tournament, Warcraft III, Cossacks, Age of Empire... These are also the games played at LAN parties. They can be played either as a duel (Quake) or in teams (Counter Strike). Gamers communicate with each other prior to the match in virtual waiting rooms. Chat and audio chat are key to organizing their strategy, for challenging each other, etc. The contact between gamers is also forged in chat forums and via e-mail. During the matches, gamers can now communicate with headsets thanks to freeware applications like Roger Wilco. Game sites and services such as GameSpy offer web scanners that allow gamers to view the private and shared servers hosting their favourite games. The servers themselves are ranked according to their Ping (Packet Internet Groper), in other words the time required for a packet to make a round trip between the player and the server. With the growing use of broadband connections, the latency time (although incompressible) is shrinking. For an extra euro, access providers also offer broadband access equipped with an option for minimising ping. There are four types of service available on websites dedicated to video games. Not all offer all of the services listed below. Some specialise in offering the latest gaming news, others in e-commerce, while many seek to offer the broadest possible range of services. The goal for these sites is to attract the largest possible user base which, in turn, will boost the value of the site’s advertising banners (which are still the prime source of financing for these sites). Another key goal is to cement their users’ loyalty since competition in this area is stiff
Table 34: Services offered by GSPs Editorial content services • • • • • • • • • • • • • • • Community services • • • • • • •
News Preview/Screenshot Cheat Codes and solutions Video Directory Goodies Patches Adds-on
Chat Chat audio Web Cam Free hosting for gamers’ sites Gamer rankings & scores Theme based forums Personalised e-mail
Gaming services
Commercial services • • • •
Matchmaking for hosted games Scanning: directory of game servers, with ranking based on ping Hosting massively multiplayer games Hosting web-based games Organizing contests & LAN, WAN & Web tournaments Gamer stats and rankings Demo downloads
Game rental via download or streaming Video game marketing and downloads Marketing other content: audio CDs, DVDs, books Marketing or sale of computer equipment, consoles, gaming accessories (game pads, steering wheels, joysticks...) Marketing and sale of electronic equipment
•
Source: IDATE
2004 edition
© IDATE
201
Video games : nextgen gaming is on its way!
Although all of the major game publishers are also GSPs, a number of them offer only a portion of the services that are generally available. EA and Atari are attempting to intercept and capture demand by marketing an online gaming services which is partially subject to payment. The online catalogue is made up chiefly of older games, and which are now fully accessible online. While Atari offers only paid access, EA offers a few games for free. This tendency amongst publishers to offer online gaming under their own brand has become entrenched over the past two years. Developers have remained more cautious, however, offering only a few titles for play on the web. Given video games’ massive appeal, internet access providers (ISPs), portals and content aggregators have all entered the fray. The more or less high level of broadband penetration in households appears to have supplied the impetus for a great many players. No broadband, no efficient and appealing service, nor quality that users will be willing to pay for. Broadband is now ubiquitous, and video game content publishers plan to make the most of it. Companies that were born of the internet, and which specialise in gaming, such as GameSpy, enjoy an edge over their counterparts, and sizeable clout with gamers. Recognized by their users and industry players alike for their experience and viability, they are now key elements of the online gaming landscape.
Business models
Gaming service sites’ financial resources derive essentially from advertising revenues. If a site hosts as massively multiplayer game, it will also earn on monthly subscriptions. When the new economy’s speculative bubble burst, advertising revenues, which were already well disseminated across the web, became increasingly scarce. Advertisers and agencies are now extremely cautious over the space they buy on the internet. Given these economic conditions, it is difficult to operate a profitable gaming site on the web if relying solely on advertising. Only the largest sites can boast having reached or be nearing the breakeven point. To give an example: Sony Online Entertainment’s online gaming site, The Station, has a base or 750,000 active subscribers. In March 2002, EA.com reported 12.1 million visits, and 45% of the site’s revenues are generated by advertising banners. Regardless of the service deployed, shifting the business model to paid must include a higher value added for gamers, particularly when the same service was previously offered for free. The real difficulty for the service provider lies in being able to identify this increased value whose production cost must remain low, and the revenues it generates must cover the cost of operating services that had been free up to that point. Some publishers are implementing audiotext services that made France’s Minitel such a success. To access content, users connect to the web by calling a surcharged number, or call a surcharged number that provides them with an access code which opens their rights to content downloads. Two models co-exist here: one based on per-event payment, and the other on payment for access for a set period of time. Access to an enhanced line of community services is sometimes used a drawing card, e.g. matchmaking, access to forums, creation of teams, etc. These initiatives need to overcome a major obstacle however, namely: why pay for an online gaming service when a great many are still being offered for free? Online gaming’s players are seeking to multiply their revenue sources by multiplying and diversifying the additional services on offer. Over the course of 2002 and 2003, several players attempted the transition from a free to a paid, subscription-based model. Success was slow in coming for most, and never came at all for a number of independent GSPs. Ultimately, those which did survive were those operated by companies which were already involved in video games (Sony with The Station, Microsoft with The Gaming Zone, Square Enix, VUG with Battle.net), in online content distribution (RealNetwork, Yahoo!) or in providing access to the internet (Lycos, Wanadoo via Goa).
202
© IDATE
2004 edition
Video games: next gen gaming is on its way!
Boonty (www.boonty.com)
Cineticvision was born in 2001, initiated by Romain and Mathieu Nouzareth. The company provides a catalogue of video games, music and video via its Boonty content management and distribution platform which are marketed in business to business mode and as generic products. The company’s leading customers are web portals and internet service providers. In late September 2002, the Boonty platform was ready, and had already signed on ISP Club Internet as a client. Later, commercial agreements are signed with T-Online, Wanadoo, Voila, Goa, Yahoo! Europe, Noos, VirginMega, Tiscali Europe, Eresmas... Boonty offers the following services: • A catalogue of downloadable video games; • The possibility of testing a game before buying it; • Immediate availability; • A secured payment system. In late March 2004 Cineticvision, renamed Boonty, concluded a 2 million EUR pool with private investors and the OTC Asset Management fund. The latest operator to sign on with Boonty was Telecom Italia in early May 2004. The Italian incumbent is present in 19 countries, and boasts a customer base of 70 million individuals, including 2 million internet subscribers. Boonty feeds its catalogue by signing distribution agreements with video game publishers. Publishers are drawn to Boonty’s secured solution and to the audience that the service attracts via the company’s clients. At the end of April 2004, Sega France also signed an online distribution agreement for its title, Sonic DX Adventure. Boonty markets a catalogue of over 200 titles from major game publishers, including Infogrames, Ubi Soft and Acclaim. This French firm also signs agreements with developers, an example here being the American studio Wil Tangent which is part of Boonty’s catalogue. Boonty has joined forces with content host Colt and with Cap Gemini which has perfected a game encapsulation technology.
BT OpenWorld (www.btopenworld.com)
BTopenworld in the UK, Deutsche Telekom in Germany, and France Telecom in France have all launched their own online gaming portal. BTopenworld’s GamesDomain is expected to gradually expand to include pay-per-play and pay-per-download services. For 10 GBP a month, subscribers have access to a dozen multiplayer games, and to community events such as tournaments, gamer rankings and scores, etc.
Flipside
In France Flipside.fr (a Vivendi Universal Publishing subsidiary) is a site for casual gamers which now offers a paid version of its core title, Wordox. The community of some 40,000 people, which has built up around this game, pay 10 EUR for a two-month subscription, or 35 EUR a year, to access the second version of the game online. In July 2003, Flipside was sold to Vendare Group, an American marketing firm.
2004 edition
© IDATE
203
Video games : nextgen gaming is on its way!
RealNetworks (www.realnetworks.com)
Marketing a package of services (which includes video games) for a monthly subscription is another possible route. Some initiatives in this area have been hugely successful. American firm RealNetworks markets its RealOne services which includes a game download services, RealArcade, along with a video-on-demand service. In the US, close to 900,000 people were subscribing to Real One at the end of March 2003. Since its launch, RealArcade has generated over 15 million game downloads. In July 2002, RealNetworks announced the launch of a new online gaming service as part of its RealArcade offer: GamePass. For 6.95 USD a month with a three-month commitment, GamePass subscribers can downloaded a game a month for free, and enjoy a 5 USD discount on any game they want to download online. The titles offered by RealNetworks cost between 9.99 USD and 19.99 USD. Customers who already subscribe to the RealOne SuperPass service can sign on to GamePass for 4.95 USD/month. The catalogue of games offered by RealNetworks includes 250 titles. According to the American firm, over 2 million games have been downloaded off RealOne Arcade since its launch in 2001. In late January 2004, RealNetworks took over the firm GameHouse, which develops, publishes and distributes downloadable PC games. The sale totalled 35.6 million USD, of which 14.6 million USD in cash and 3.3 million in RealNetworks stock. GameHouse continues to operate as before. In two and a half years, the firm has sold over one million downloads. For fiscal 2003, RealNetworks reports an overall turnover of 202.4 million USD. The company’s video game operations, via RealArcade, generated 12.2 million USD in turnover in 2003, compared to 7.8 in fiscal 2002.
T-Online (www.t-online.com)
In the same year, T-Online launched its Vision broadband portal dedicated to video games. It offers game rentals (2.90 EUR for 24 hours, per game), free matchmaking, and access to video content.
TerraLycos (www.terralycos.com)
In 2002, Terra Lycos Spain launched a subscription-based broadband gamine service. Here, broadband means that gamers do not have to buy the game before playing it online. In-shop purchases have been replaced by streaming, i.e. real time distribution of the game. Terra Lycos’s commercial offer is comparable to the pay-TV model. A basic package is offered for 8 USD a month and includes a selection of family and action games. Other games are marketed as options for 5 USD a piece, per month. The first games available in the Lycos offer come from Infogrames and are all games which are popular on other platforms (Roller Coaster Tycoon, Deus Ex, Unreal Tournament). In early 2004, all of the services offered on the Lycos portal, begin the shift to a paid model (online dating service, website publishing...).
204
© IDATE
2004 edition
Video games: next gen gaming is on its way!
Yahoo! (www.yahoo.com)
In earl April 2002, Yahoo! announces the launch of a paid online video game service called Yahoo! Games All-Star. The service offers matchmaking, tournaments and discussion boards. Subscriptions go for 7.95 USD a month, 19.95 USD for three months or 59.95 USD for a year. Those games offered for free on Yahoo!’s site will remain free. The site boasts peak traffic of roughly 140,000 simultaneous gamers. Starting in September 2002, Yahoo! launched its PC game rental service, Games on Demand, with SBC Communications as the technical partner. The price is 4.95 USD for a game that can be played for three days, or rented for 30 days for 9.95 USD, or 5 games for 30 days for 12.95 USD, or 10 games for 30 days for 14.95 USD. A broadband connection is required. A catalogue of 40 titles was available when the service was launched, and include games from Eidos, Microsoft, Activision, Infogrames... By February 2003, the catalogue had expanded to 80 titles, of which some fifteen from Microsoft Game Studios were added on at that time. In mid-May 2003, Ubi Soft (Ghost Recon, Splinter Cell, Rayman 3) and Vivendi Universal Games (Empire Earth, Arcanum, SWAT 3) agree to add their products to Yahoo!’s Game On Demand. In July of that same year, Yahoo! offers gamers the possibility of accessing the entire catalogue, without any time limits, for 14.94 USD/month or 34.95 USD for three months.
An alternative: rental ZoneGames.com (www.zonegames.com)
In 2002, the French site ZoneGames.com, which is part of the Ixo groups, began offering online game rental. Baptised Gimme5, the service lets gamers order a package of 5 games online for 39 EUR for 4 months (plus 9.75 EUR for each additional month). Payment is made upon receipt. Gamers install the package which is activated via the web. When the rental contract is up, the package is also deactivated via the web. For now, only Infogrames has elected to be part of this game bank, offering games which have come to the end of their lifespan, such as Desperados, Driver, Slave Zero or Alone in The Dark: The New Nightmare. GSP ZoneGames.com has now closed down. The first attempt at game rental in France having failed. It will not, however, be the last to attempt it.
Metaboli (www.metaboli.fr)
In October 2002, French company Metaboli began operating an on-demand video game rental distribution platform. Three investment funds (Nicom Investissement, C-Source, Trio MD) fed the first pool of two million EUR. A second round of fundraising took place in June 2003. Netizens wishing to access the Metaboli service need to first sign up online, credit their account and install an application on their computer which manages the debits associated with game purchases and property rights, and which verifies their computer’s technical configuration. The protection system used by Metaboli is based on the streaming technology designed by Israeli firm Exent. Once the signup is complete, Metaboli customers choose the game they want to play. It is downloaded by packets, which means the user can begin to play while the download continues in the background. Once the rental period is over, the game remains on the customer’s hard drive. This means that if users want to rent the game again, they do not need to download it a second time. Starting in October 2002, 5 publishers agree to supply games to the site: Infogrames, Ubi Soft, Monte Cristo, Microïds, THQ and Eidos. The catalogue included some 30 games, at launch. In early 2004, it included twice as many, with 4 new games being added each month. In 2002, the company was forced to distribute older and lighter games to avoid excessive download times. Now, however, with the growing ubiquity of broadband connections in homes, Metaboli can offer games that have just come onto the market.
2004 edition
© IDATE
205
Video games : nextgen gaming is on its way!
Metaboli (www.metaboli.fr) (cont’d)
Three rental periods exist: 48 hours, a week or a month. Rates are set by the publishers themselves, but within certain boundaries: i.e. the price of a one-month rental cannot exceed the game’s retail price in a shop. So, to rent a game for 48 hours, prices vary between 3.80 EUR for an old game to 5.80 EUR for a recent release. The cost of renting a game for a month ranges from 5.80 EUR to 17.80 EUR. Metaboli hereby allows gamers to test a game before buying it in a retail outlet. Since its launch, Metaboli’s business model has evolved. The French firm has now signed agreements with ISPs (Wanadoo, Club-Internet, Noos, AOL and Free) which distribute the Metaboli service to distribution platform managers. Here, Noos offers, in addition to Metaboli’s rates, a Gamer pack of 24 games for 14.80 EUR/month, carrying limited access, and a Hardcore Gamer pack of 34 games for 28.80 EUR/month. In the US, a much larger number of companies offer game rentals, including: • GameLender (www.gamelender.com) • RedOctane (www.redoctane.com) • GoVoJo (www.gplay.com) • GameFly (www.gamefly.com) • Spunel (www.spunel.com) • VeeGeeZ (www.veegeez.com) • NonStopGames (www.nonstopgames) • NumbThumb (www.numbthumb.com)
4.1.2. Massively multiplayer games: allure or a lure?
The first online massively multiplayer games were called MUD for Multi-User Dungeon, and operated primarily in text mode. One of the most significant titles was the first version of Ultima Online. Images were added with Meridian 59. Now, 3D is a commonplace, and is key to appealing to gamers. Interesting attempts have been undertaken – notably in France with Canal+’s Le Deuxième Monde (The second world), and Cryopolis from the publisher, Cryo. But these persistent universes are only precursors of what could be the web browsing of tomorrow. It was in 1998 that the Garriott brothers launched Ultima Online version 3D, with a business model based on subscription. Before playing online, users need to first buy the game in a shop, for the price of around 30 USD. Over the past two years, the rate of broadband penetration in households has risen at a stunning rate. Competition between ISPs has led to price wars over broadband flat rates, which have naturally benefited consumers. So consumers can subscribe for high-speed internet at an affordable rate, and plan to pay for content. Here, video games are an appealing product. In 2002, there were close to 80 massively multiplayer games under development, and there are currently no fewer than 20 games available for play. PUMMG (persistent universe massively multiplayer games) have been marked over the past two years by a shift in business model, which appears to correspond to gamers’ demands. Gamers buy the games in retail shops, then pay the game publisher a monthly subscription to play online. Advantages for publishers Subscriptions constitute an asset for publisher. They ensure monthly revenues of between 10 and 15 USD on average, per subscriber (9.95 USD for Ultima Online and 12.95 USD for Everquest). The clientele is a loyal one. Some gamers spend over 20 hours a week connected to the gaming servers. Customer loyalty derives from gamers’ powerful identification with the avatar they create within the game. They gain experience with each round of challenges. They become more and more powerful. The gamer can join a team, or a guild, which unites the games’ aficionados. They swap tips and cheats, and travel the universe together in search of monsters to destroy. Access to the game is via the publisher’s servers. There is no need for gamers to download patches, or press new CDs. Games can be enhanced (new universes, fixes, new chapters) without gamers having to intervene.
206
© IDATE
2004 edition
Video games: next gen gaming is on its way!
This operating principle does not, however, prevent publishers from marketing add-on CDs that contain additional episodes of a game. A portion of massively multiplayer game publishers’ profits derives from the sale of add-ons, which are less costly to produce than a new version of a game. The lifespan of massively multiplayer games is roughly 5 years. Marketing campaigns for a game that can be played offline run for between 3 and 6 months, after which time the price of the game will drop. 70% of offline game sales take place in the first three months after the game’s release. Piracy in this area is limited. Since MMG can be played solely online, it is easier for ISPs and publishers to manage the licences and the subscriptions. Pirate Everquest servers have, however, been created, but the phenomenon is a marginal one. In the area of matchmaking, pirate software called Warforge lets gamers who do not own an original copy of the game, transform their computer into a server, and host online matches. As for other dubious practices, Everquest characters are auctioned off on EBay and other online auction sites, with bids running as high as 1,000 EUR. Some artefacts (objects used in the video games) are also auctioned off at times. There are, however, a few drawbacks involved in marketing persistent universe massively multiplayer games. Development costs for a MMG range from 7 to 15 million USD for Sony. This is, on average, one and a half times the cost of developing a classic PC-based game. In terms of operation, costs are still difficult to control. To give an example: scaling the servers that host gamers is a key issue for internet service providers in charge of managing the game’s platform. They need to forecast peak hours, and adapt the potential of the computers that manage the users. Servers can host an average 3,000 to 5,000 gamers simultaneously. NC Soft’s servers host close to 30,000 gamers simultaneously. Here, SOE, for instance, has deployed 43 servers for Everquest compared to 38 by NC Soft for its Lineage game. On the other hand, when an operator has achieved optimal configuration and is covering its operating costs, it can generate substantial margin