PlayStation Now - Where does it fit in?

            It was CES 2014. The PlayStation 4, Sony’s next installment in its flagship PlayStation console series, had been released into the wild for a few months. At its CES press conference, Sony unveiled plans about its cloud gaming service that it was bringing to consumers after its acquisition of Gaikai. PlayStation Now (read: Netflix for video games) was pitched as an attempt to make the entire PlayStation library playable on all of Sony’s consoles and eventually a slew of other devices. Loads of people were excited to see what work Sony and Gaikai could do together.

Fast forward a year. The PlayStation Now service has made its entry into a very small market. It’s gone through a series of transformations since its original pitch a year ago. At this point, all of the titles that are available as a part of PS Now are titles that can be found on PlayStation 3.

Who knows whether or not we’ll be able to access titles from more generations as time goes on. My guess is that Sony has started with PlayStation 3 titles because they have the easiest access to those games because the development deals weren’t struck that long ago. This is also seems part of an experiment to observe the success of PS3 titles with PS Now. If the service does well enough with PS3 titles I could see Sony expanding the service to include titles from the older catalogs.

I want to take a second to consider where this service fits into the entire PlayStation ecosystem. Obviously this can be seen as an answer to backwards compatibility requests that occur in each successive console as the PS4 has no backwards compatibility to run PS3 games. So right now the service acts as a way for people who either skipped out on PS3 games or want to revisit them to access the titles on their PS4, Vita, or PS3. I think that the current platform can be seen as a service geared toward new PS4 owners to give them titles to play on the PS4, which some argue doesn’t have a lot of titles out.

A big question about PS Now I have is about the effect it would have on other platforms if the service expands to other titles in the PS library. If PS Now expands its catalog to offer other kinds of games, what will happen to the PS Vita? I don’t think Sony is really worried about it but I know that for a lot of people, along with being able to play first-party exclusive titles, the allure of the PS Vita lay in its ability to play PSP and PS1 titles. I can say that about my experiences with the Vita as it gave me the ability to go back and play all the Final Fantasy games I missed on PS1 as well as titles I never played because I never purchased a PSP, like Valkyria Chronicles 2. PS Now has the potential to cannibalize Vita sales.

Since its official launch in January of 2015, I honestly haven’t heard very much about PlayStation Now. So what’s holding it back from becoming more successful? I’m sure the pricing geniuses of Sony have figured things out, but pricing remains a hard selling point for many people. Is the service worth the price? It depends on what you purchase and how you derive value. If you purchase a game a la carte, value could depend on how many hours you put into the game. On the other hand, if you purchase the plan that allows you access to a number of titles on the service, like the Netflix subscription-based model, then value depends on the number of titles you play during the duration of the service. You’d derive a greater value from playing more games.

Perhaps the biggest obstacle to PlayStation Now is that it doesn’t feel like it’s fully rolled out yet. Why hasn’t PlayStation fully committed to the service? Well it could be a financial reason such as the amount of money it would take to put run many titles from the cloud, or because there’s no way to really know just how much money this new service could net the company. Furthermore, Sony is offering a limited amount of titles because it’s weary of betting all of its chips on the subscription-based model, especially since PS Now exists alongside the current setup of the PlayStation Store which has existed since 2006. As long as both exist simultaneously and Sony doesn’t put all its eggs into the PS Now basket, I can’t see the new service fulfilling its potential. I think the market is there, but it’s also hard since no attempts to offer a service of this size with this scope has been attempted before.

PlayStation now represents Sony’s attempt to address complaints about the lack of backwards compatibility for the current PS4. Perhaps more importantly, Sony is attempting to embrace the current trends of the day and future proof itself. Companies talk big about the power of the cloud, but few companies have the capability to experiment with its power. Sony is one of the few companies that have the power and the gusto to explore this territory. 

The world is watching. There are rumors that Microsoft is watching the success of PlayStation Now as it looks to launch its own cloud-gaming service later this year. Hopefully one day, I’ll be impressed enough to subscribe to PlayStation Now, but for now I’ll stick to purchasing lifetime use of my games.

The Chinese Video Game Market

This semester I’m taking a class called, ‘China in World Politics,’ where we’ve obviously been considering China (and its history) in the context of global affairs. After a few sessions I got to thinking, “what about video games in China?” As a passionate follower of events in the video game industry I feel it’s my duty to investigate know everything I can about the industry. Though, up until I did a few Google searches recently I didn’t know much about the state of video games in China other than the ban which was lifted in early 2014, while I was studying abroad in Tokyo.

The Ban

Arcades used to be a huge thing in the United States. As their popularity was being slowly eroded by the presence of new home consoles in the U.S., the popularity of arcades was growing in China. The rise of arcades was accompanied by an increase in the numbers of vocal parents worried that arcade games would have a corrupting influence on the minds of young people. This ostensibly led to a government effort to crack down on video games. 

Branches of government including the Ministry of Culture, the Ministry of Public Security, the State Economic and Trade Commission, the Ministry of Industry and IT, the General Administration of Customs, the State Administration, and the Ministry of Foreign Trade and Economic Cooperation came together to limit the power of video games. In 2000, a bill called “Feedback regarding the launch of special operation on video games arcades” was passed into law.

Here are two main sections of the law.

“As of the day this report is released, the manufacturing and selling of any electronic gaming equipment plus its parts and accessories headed to China are stopped immediately. No company or individual can partake in the manufacturing and selling of electronic gaming equipment plus its parts and accessories headed to China.”

“With the exception of processing trade, the import of electronic game equipment plus its part and accessories through other forms of trade is strictly limited.”

Originally meant to curb arcades, the bill’s influence extended to video games. Foreign import of video game consoles was banned, but it’s important to note that although the ban existed on paper, it was rarely enforced (especially in the case of internet cafes) and there were ways to get around it. 

Since the ban

As a result of the ban on video game consoles, the PC market took off and internet cafés along with them. PC (and increasingly mobile) hold a comfortable share of the video game market in China. Online gaming has also exploded since the ban, leading many to believe that the ban didn’t help the problem, but instead added fuel to the fire. 

Above is a chart of depicting the revenue of the Chinese video games industry in 2013. If you look at revenue from video game sales (taken from Chinese gaming website 17173) you can see a healthy upward trend. According to techinasia.com, 64.5% of the revenue in 2013 came from client-based PC games. I’m not sure what the revenue s made up of because I don’t read Chinese and can’t get the tidbits from the source article, but the trend is clear: Chinese markets have been expanding as more of a middle class emerges and they desire more expensive, ‘luxury’ goods. 

Relatively expensive consoles like the Wii U and PS4 are already on sale in China, despite them not being officially out yet. Why? The answer lies in Hong Kong. Due to its legal system, Hong Kong enjoys a space where video game consoles are perfectly legal. Retailers in other parts of the country will buy consoles from Hong Kong and sell them in their stores. From what I’ve read there seems to be no reaction from the police for this offense, as they have more important things to worry about.

Not only are there plenty of banned consoles on sale, piracy is rampant. The black-market for video games in China is quite large, fueled by high prices for legitimate items, lack of policing, and obviously lower prices. There are also a number of knockoff consoles like the PS Vita knockoff, the iReadyGo. 

Game makers realize that their games will be pirated within hours of release, causing many to hold off on any attempts to penetrate the Chinese market. In recognition of the problem of piracy, many developers have turned to towards a free-to-play business model. Through F2P, players are encouraged by low barriers to entry while developers can generate a steady cash flow. 

According to research firm Niko Partners, “publishers in the region have reportedly made over $9 billion in sales using free-to-play models…Niko Partners also reveals there are approximately 192 million mobile games in China, while only 150 million play on PC.” I can’t confirm because I don’t have the complete understanding of the data (I have no time frame to attach this info to), but it’s interesting to note that there are more mobile users than PC users in China. This becomes noteworthy if you consider the graph I talked about earlier and particularly the techinasia.com statement that 64.5% of revenue came from PC users. PC users, although smaller than the population of mobile users, bring in more revenue. (Note to self, if you ever go on to make video games in China, look toward the F2P PC market).

High import tariffs also deter foreign companies from releasing their products within China. There is however, one bright spot for foreign investment: the Shanghai Free Trade Zone. A government effort to promote foreign investment while at the same time control the types of products that enter the country, the Shanghai FTZ is a bright spot because policies that are tested in the area have the potential to eventually become practice in the rest of China. 

The existence of the Shanghai FTZ is pivotal to the console ban conditions. That’s because in order for a console to be legally sold it must have been manufactured in the free trade zone of Shanghai.

This is a big plus for China. Because of the huge untapped potential, foreign companies can’t ignore the Chinese market. As a result of the wording of the lift in the ban China reaps all of the benefits. If a foreign video game company wants to manufacture consoles in China, it must pay to build a manufacturing facility in China, hire Chinese workers, and divulge the know-how of its processes to the Chinese. China is in inheriting the know-how of its international competitors. One day China will use this knowledge to create and ship successful IPs catered specifically for the Chinese audience.

Microsoft, Sony, and Nintendo in China today

Microsoft officially launched the Xbox One in September of 2014. They sold 100,000 units in the first week. The sticker price for the Xbox One was around $700 with the Xbox motion control peripheral, the Kinect (~$600 without Kinect). If you consider that the GDP per capita in China is $6,807 (compared to the U.S. $53,042) and a significant amount of the population is below the poverty line, you understand that high-middle/high-end customers make up the target market. A sales figure of 100,000 units all of a sudden doesn’t that bad, though it’s not very good either. If there’s one positive note, it’s that Microsoft has the first-mover advantage of the big three international console makers and that has and will certainly count for something as the Wii U (or not the Wii U) and the PS4 hurry to join the market. 

Sony had plans to release the PlayStation 4 in China January 11^th of this year, but pushed back the release reportedly due to “various reasons” (specific I know right?). According to techtimes.com “included in the delay are the console’s various accessories and gaming software” and also the new product launch date will be announced in the future. 

There are 2 things that I think will determine success in the region. One is the security of the X1 and PS4 against piracy (either through hardware or aggressive firmware). Creating a legitimate market will no doubt be tough, but the companies have to create a reason to buy the systems. Otherwise there’s little reason to enter the market. I’m interested in whether or not Xbox One knockoffs have entered the market. I haven’t been able to find in information on the subject. The second condition for success is to focus on creating content for the Chinese market. With the rise of the F2P business model, companies should obviously take note. With a base that’s large enough with a F2P, it might afterwards make more sense to introduce pay-to-play titles. 

One obstacle for success (aside from the numerous barriers mentioned elsewhere in this post) will be the Chinese rules of censorship. The following types of games are banned:

1. Gambling-related content or game features
2. Anything that violates China’s constitution
3. Anything that threatens China’s national unity, sovereignty, or territorial integrity.
4. Anything that harms the nation’s reputation, or interests.
5.  Anything that instigates racial/ethnic hatred, or harms ethnic traditions or cultures.
6. Anything that violates Chinas policy on religion by promoting cults or superstitions.
7. Anything that promotes or incites obscenity, drug use, violence, or gambling.
8. 8Anything that harms public ethics or China’s culture and traditions.
9. Anything that insults, slanders, or violates the rights of others. 
10.  Other content that violates the law 

In short, there are a lot of ways that a game could fail inspection. A lot of titles that immediately come to mind would probably fail to meet these standards.

Sony and Nintendo will have a difficult time in China as escalating tension has caused anti-Japanese sentiment and ultimately the boycott of Japanese goods. This is difficult territory for the companies. Though, tension has died down in weeks so now might be a good time (for Sony) to get its PS4 into the hands of the Chinese. 

To sum everything up, there are a lot of barriers to success for foreign video game companies in China. The dominance of the grey/black market undermines the efforts of companies that try to put out games legitimately and right now, the market that can potentially purchase home consoles is relatively small. Yet international companies cannot afford to ignore the growing popularity of video games in China, especially given the new opportunity that’s been afforded to them by the lifting of the ban. 

Who knows what 2015 will have in store for the Chinese gaming world. I’m eager to observe and I’ll certainly be along for the ride.

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Sources
https://www.techinasia.com/chinas-game-market-took-in-13-billion-in-2013-pc-games-generate-way-more-than-mobile/
http://www.hollywoodreporter.com/news/china-2013-video-game-market-668542
http://metro.co.uk/2014/10/11/the-truth-about-video-games-in-china-readers-feature-4901435/
http://kotaku.com/the-future-of-gaming-in-china-according-to-an-industry-1425638334
http://www.forbes.com/sites/lisachanson/2014/01/21/chinas-console-ban-is-lifted-but-what-does-it-mean/
http://www.techtimes.com/articles/25388/20150109/playstation-4-china-release-delayed-due-to-various-factors.htm
http://www.shacknews.com/article/87589/the-great-wall-consoles-in-china

Japanese Gaming Market Suffers Tough 2014

If there's one thing that's been on my mind the last couple of days, it's an article that was put out by Japanese video game news website, Famitsu, detailing the decline in software and hardware sales for 2014 to the lowest point in since the early 90s.

As you can easily see from the graph above, the Japanese video game market has indeed seen a decline in video game sales over the past few years.

2006 and 2007 were two huge years for the domestic video games market in Japan. Sales in those years were bolstered by strong receptions from the then newly-released Nintendo DS, PlayStation Portable, as well as Wii and Playstation 3 systems. Then as we all know, because of the global financial crisis, the video game market took a hit and has since been on the decline (though, the global recession wasn't the only reason the game market shrunk).

I'm going to attempt now to make sense of the meager 2014 that the Japanese video games market saw. The easiest and perhaps most obvious explanation of the decline in software/hardware sales is the rise of mobile gaming. Gaming on devices such as smartphones has rapidly expanded in the past few years and it's easy to see why. Playing video games that are relatively cheap on a device you already own makes a lot of sense. Why go out and purchase a separate system that primarily plays games when you already have one? Yes, I know that the most enriching experiences are more likely to be found on dedicated gaming consoles, but that doesn't eliminate the cheap and convenient option that mobile gaming brings.

2014 was also a bit of a struggle for the newer consoles. Although the PS4 released last year, it was met with mixed reviews due to a lack of blockbuster titles and post-release server issues for multiple games. Wii U did manage to get a bump in sales, largely from installments in the Smash Brothers and Mario Kart franchises. Xbox, which has traditionally struggled in Japan, failed to gain traction with its new system in 2014.

In Japan, software really drives hardware. So far into this console cycle, there has been a lack of software developed by Japanese companies, a stark contrast to the previous console generations. This represents a shift towards the west as the focus of early development. I've said in earlier posts that although this strategy hurts the Japanese game market, it's seen as a necessary evil because Japan has been locked down by the Japanese giants Nintendo and Sony. These two companies instead compete with each other elsewhere (Europe and the U.S.).

The first few years really set the tone for what's possible in the course of the life cycle of video game consoles, but I don't think that 2015 will follow the recent trend of a decline in sales.Where's my evidence? Well, call it intuition. Seeing as this year has big titles lined up, including a new Zelda game, Persona 5, Metal Gear Solid 5, The Witcher 3, The Order 1886, and so on, I think that we may be seeing titles capable of moving units in Japan (especially the first three I mentioned). Game sales could further grow in 2016 with the release of Final Fantasy XV (first quarter 2016?) and Kingdom Hearts 3 (late 2016).

In summary, yes, 2014 was a bad year for gaming in Japan, the worst in quite some time. However, I am optimistic that 2015 will be different because blockbuster games developed for the Japanese market are nearing release!

New Year. New Goals

New Year. New Goals.

One thing I've noticed recently about the way I play video games is that, I pay less and less attention to the story and get wrapped up in the gameplay mechanics. In part I think that my gaming habits stem from the fact that games have become something that I use to relax, to numb my mind of the worries of everyday life at school. Instead of video games becoming a medium for interaction and discovery, they become a means of escape, often resulting in mindless playing for hours at a time without regard for the stories that developers spend years crafting. It's a shame because the reason I fell in love with video games in the first place was because of the rich tales of triumph, corruption, and sacrifice that shaped my childhood

I remember getting wrapped up in the pandemonium of Gaia in Final Fantasy IX, the war that ripped through the Highland Kingdom in Suikoden 2, and the journey to find Riku and Kairi in Kingdom Hearts. As a kid, I recorded my favorite scenes from video games on VHS so that I could relive them later. I still have those tapes.   

So 2015 is, among other things, the year I return to my roots, the JRPG. I'm going to set my sights high and aim to beat at least 10 JRPGs this year.

I have a number of titles sitting on my Vita that have been dying for my attention. I think that I may also invest in Vita TV so that I can play games on my lovely television.

First on my list is the classic and highly-regarded Final Fantasy VI!!

I've never played this game before. It's been sitting on my PS Vita for the longest time and I believe now is the time to play it!

I hope you'll join me on this journey. I have a feeling that I'll be posting a lot more often this year.

See you soon!

Xbox's Struggle In Japan

Over the years, I’ve been sort of perplexed by something: why has Microsoft historically struggled with the Japanese market? I noticed it a lot when I was studying in Japan last year. Whenever I would walk into a store, the video game shelf space would be dominated by Nintendo and Sony systems, with only a small area with Xbox products, if at all. I always attributed the lack of Microsoft products to a lack of effort on the part of the company, but it turns out that it’s much deeper than that.

In Japan, Nintendo and Sony reign supreme. Both have a demanding market presence, both have a long history of products that have sold well in the country and perhaps most importantly, both are Japanese companies. I’ve heard that people tend to favor products from their own country, but I haven’t considered it true, especially in a country where there are so many different types of people like America. In my case, I’ve historically taken a liking to Sony’s video game offerings. So while the idea that people identify with products from their own country is understandable, I don’t embrace it when it comes to what I like in video games.

Japan is a bit different though. It’s a homogenous country where 98% of the population is Japanese and historically they’ve been a nation that’s tried to keep to themselves and keep foreigners out. In a country where only 2% of the population is foreign, the word for foreigner, “gaikokujin,” (外国人) seems to be much more potent. Japanese tend to identify and endorse domestic products.

When considering why Microsoft hasn’t sold well, it’s also important to think about just how long Nintendo and Sony have been around in Japan. Nintendo came out with the Famicom (“family computer”) in 1983 and Sony came out with its first video game system, the PlayStation, in 1994. Microsoft’s first attempt at a home video game console, the Xbox, was introduced to the Japanese market in 2002.

With such a rich history with the likes of Nintendo, Sega and Sony, it was hard for Microsoft to win support from Japanese developers during the initial stages of development for the Xbox. It makes sense too. If you have a product that’s doing well in your country (from the Japanese perspective) and that’s the market you care the most about, then why would you manufacture products for another company? That could potentially alienate your collaborators and there’s no guarantee that the product would sell well. Profit was more easily assured on the existing systems. It was a huge gamble for Japanese devs and they went with the safe bet, sticking with the Japanese companies whose relationships they valued.

To put things simply, there are three monumental obstacles to the Xbox’s success in the country. First, there’s the competition. Sony and Nintendo have a dominant home-turf advantage. Second is context. It’s really hard to do well in a country where the substitutes are perceived to be better than your product. Lastly there’s perception. The perception of Xbox is that of a western gaming machine that’s being sold in the east. Japanese don’t feel as if there’s content there that was made for them (for the most part).

In the face of all that, Microsoft can’t ignore that market. To do so would be to give Nintendo and Sony free reign in controlling the Japanese video game market. I believe that the Redmond Washington-based company views their presence in the land of the rising sun as something that’s better there than not. In the transition to the current console generation, many people were saying that Microsoft should just skip the Japanese market where many believed it impossible to do well, but no matter how few units they sell, Microsoft will remain in Japan.