2014; A Tough Year Ahead For Consoles.

Some analysis of all the consoles for the coming year ahead.

If you thought that the worst was over, think again.

Each console manufacturer faces down serious challenges in the coming year; challenges that will need to be addressed and in some cases conquered in order to progress onwards. This isn’t doom and gloom though; these are challenges and they are, all of them, surmountable. But as I see it, the industry is often not really on-point at times in seeing the problem.

So here’s my breakdown on each consoles situation; and potential solutions.

SONY (PLAYSTATION 4) – STEM THE BLEEDING.

Sony’s biggest issue as a company is to stem the financial bleeding, and stem it as quickly as possible.

Whilst the PlayStation/SCE division is profitable – although only to the tune if $175 million – the business around it has been less so. Sony has faced severe challenges in other consumer electronics markets, and this has resulted in another annual loss. Sony cannot afford to sell off each and every arm; it also cannot afford to idly sell off real-estate, because such cash injections are one-time-only deals. With Sony selling it’s PC/Vaio arm, there is a focus instead on the SCE division and Televisions – the latter being where Sony originally made a lot of inroads in their early days.

I suspect their TV arm will not help them though; a focus on 4kTV at a time when it is still nowhere near financially viable for consumers (or indeed, anyone else!) is a mistake waiting to happen. But it’s the PlayStation 4 which will be their main focus; being the one thing they can bank on in terms of money, even if it is only a trickle.

To make it explode, Sony will arguably need more software; and it will also need to be smart with licensing deals for the PS-Plus service and the upcoming PS-Now cloud-streaming service; if Sony can get the Now service working without spending ridiculous amounts of money on it, then it could prove to be one of the cornerstones of its business and reopen masses of new content, content in a year which is looking as of right now drier than the Wii U’s first year. But it has to be beta-tested as well, and there is no talk of costs yet; details of which will be important if Sony are to attempt the gaming equivalent of Netflix or LoveFilm.

Sony may also need to realise that some users are keen to leave the PS3 behind; it’s current attempt at cross-gen upgrades are a smart idea, but it has other games people want to see on the system, namely a new version of The Last Of Us, with similar visual upgrades to Tomb Raider: Definitive Edition. This is trickier; the differences between the PS3 and PS4 will make a port more of a challenge. But details like that may serve to generate a little more goodwill.

But above all, Sony needs to work on reasons to make the PlayStation 4 desirable. The coming months will prove slower, and more troubling, if Sony cannot get a grasp on this. Sony must also be aware that it’s SCE division as a whole is only worth $4.4 billion; as a consumer electronics entity, that’s far less than it’s neighbour, Nintendo. The challenge will be making that part of Sony bigger; creating real value and real presence again. If SCE is to be the keystone in Sony’s future, it must broaden itself; and this will mean either creating or reviving IP, and getting new studios on board (despite the fact Sony shut down some of its better talent throughout the PS3’s life).

That will, however, cost money. But third-party alone cannot sustain. It doesn’t add actual value. And value is what Sony needs now.

MICROSOFT (XBOX ONE) – BOARDROOM DECISIONS!

Microsoft’s biggest issue is that some of it’s investors and board members don’t believe in the long-term future of consumer electronics.

This has been running for a few months; but even with a new CEO in Satya Nadella, his first full day of business ended up with him having to face down internal critics of the EAD Department. The XBox, itself, has been hiding many of its losses for many years; often behind other profitable enterprises, and there is deep concern that the XBox One will not create profit – and not just the XBox One; the division posted $900 million in losses on unsold Surface tablets alone! Couple this with the Online Services Division (which houses things like Bing) losing $1.3 billion and you get the picture; many of the consumer-orientated departments and hardware are simply not turning any profit.

So there will have to be some serious discussions at Microsoft HQ; for a start, this spilling out into the press is not good for business. Skittish consumers hearing that there is serious pressure to dump or spin-off the XBox will no doubt be thinking of the Dreamcast, and wondering if they buy it then how long will Microsoft continue to support it. It will also have to seriously consider the implications on this too; Steve Ballmer spent more than a decade trying to build up a whole new consumer-focused edge to the company. This was not cheap – current figures suggest it cost something like $10 billion to get to this point in the past thirteen years. That is money Microsoft may not see back.

Why is Microsoft considering this? Because it’s main profits still come from software, and there are those who wish to see Microsoft refocus on the software, and pitch it back as an Enterprise company; dealing with businesses, and selling quality software. Indeed, this probably also suggests they believe in a future for game sales too, if not the long-term health of their own hardware. But primarily, the goal will be considered to be selling Windows to corporate clientele, and expanding it’s business software to run outside the Windows environment (possibly making Mac/Linux versions of the software).

Either way, it’s a cloud (narf!) hanging over the head of the company and such issues are obviously deeply held by those with a voice and financial clout in Microsoft. Therefore, Microsoft cannot ignore it, and must decide in the very near future if it sees a long-term, sustainable profit and business in the XBox, or only in its software. Personally, I don’t think I want to see the XBox One wilfully discarded because of some people deciding it’s not good enough; but then, it’s a decision that will be out of our hands.

Either way, with some growing doubts, Microsoft will need to decide soon. If the market gets too concerned and the sales drop off significantly, the decision could simply be made for them. Getting consumer confidence on side means confidently deciding on a future direction.

Even if that direction is only pretty vague; at least it’s a direction under Microsoft…

NINTENDO (WII U) – COMMUNICATION, COMMUNICATION, COMMUNICATION!

Nintendo’s biggest issue is simply; communication.

Unlike Sony, Nintendo’s value is primarily in its own IP; stacks of it, in fact, so it relies less heavily on third-parties to generate a sales pitch (although in reality, Nintendo needs to pick up the pace in this instance and release more of its own games pretty soon-ish!). But Nintendo’s issue has never really been software – which it often dominates in any console generation, or indeed hardware – for all the criticisms of it in terms of power, Nintendo hardware is often impeccably made and extremely reliable.

No, Nintendo’s main problem is that it cannot quite get itself dragged into an era of 24/7 Media News coverage, where information is fast, immediate and easy to access. Fighting against the tide of fast-action media reporting has seen many frustrated at Nintendo; indeed, with recent turmoils and dwindling third-party support, Nintendo has maintained radio silence throughout, allowing rampant speculation to dominate its headlines in a way that it shouldn’t be allowing, or tolerating. Without the ability to discuss things openly, or to react within the same working day to a given media issue, Nintendo has effectively allowed ‘The Internet’ to create any story about them and largely get away with doing it.

Nintendo does have some aces in the hole – it has new studios, and even brand-new studios from as far afield as Canada have signed up to create exclusive, second-party Nintendo games. This is alongside an increasingly more dominant indie selection, which is delivering new and interesting content. Couple this with other deals with Japanese third-parties such as Tecmo-Koei and Namco-Bandai (or is it Bandai-Namco now?), and as quiet as the Wii U is now, there is certainly a light at the end of the tunnel.

But Nintendo cannot keep ignoring the importance of media relations in the modern era; the game in that respect has changed from all recognition. Once, you could control the flow of information. Now, with thousands of blogs on the Internet (woo!), hundreds of big gaming media sites and even big news outlets like the BBC reporting regularly on this market, you cannot. And the Internet is such that any information can be made available almost instantly; and if you’re not providing the information, then some less-scrupulous individuals are more likely to create it for you. And then that will run wild and rampant unless you react to it.

Nintendo Direct was meant to be the start of a better flow of information; instead, it just stifled it back into monthly chunks like old-school magazines, and that’s just not how the Internet operates. Miiverse is a social media experiment that Nintendo needs to make more of; and it needs to be sharing more information, even if it is only through Miiverse (indeed, it might give some people a reason to turn on their machines every day!).

But most of all, if there’s bad news; respond to it. Don’t sit around hoping it’ll go away. People have spent years waiting for an excuse to beat Nintendo with a stick – they don’t care what the stick is, or how covered in excrement it is. They have spent (many sad, lonely) years waiting for this moment.

Nintendo must not let them have that pleasure. It must respond – or watch as the very thing it seeks to create, a social media platform, destroys its reputation completely…

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