Sega knows its own strengths and weaknesses. Sitting down with Mike Hayes, president of the Western business, you don't get the usual marketing script and bullish product placement. Instead he talks openly about the wider market, happy to share observations about the changing console and wider gaming landscapes from Sega's perspective
This interview was conducted at E3, following big first-party announcements for new hardware. Here, Hayes talks for the first time publicly about the Wii U and support for PlayStation Vita, how Sega ring-fences budgets for individual formats, and his observations on the evolving European games market.
Q: What are you impressions of E3 this year, of the three platform holders?
Mike Hayes: Well there's a lot of good news from first party. We've talked about this so much over the last few days, anything that's new is good, isn't it? It's something for us to talk about, something different. We've given a lot of support to Vita. I think we're the only playable third party code on the stand actually, Virtua Tennis 4. And we gave a commitment to Sony quite a while ago that we would support Vita, and you'll see a lot more announcements on that over the coming months.
And as you know, Sega's reasonably close to Nintendo, so again, we had the first look on Wii U. With Aliens: Colonial Marines we've actually been using the controller, but because we were the only third party that has something working it was decided not show that, quite rightly. And I think Nintendo were right to use that concept approach. Remember when we first saw DS? And it was just concept rather than actual game, and I think that makes sense. So we're really excited about that. I don't think just for the fact that we can convert 360 and PlayStation 3 games over to it, I think what the controller can do it really quite innovative, so that's cool.
Aliens: Colonial Marines is definitely the core franchise that will do best for us as a company
And on Kinect we've definitely bought into that with what Microsoft has been saying, they've done a great job on Kinect, so we've got Rise Of Nightmares exclusively on it, and we're using Kinect functionality in our games going forward. So it's ticked a lot of boxes.
And then I think for us the thing we're most thrilled about is Aliens: Colonial Marines, on the basis that we announced that quite a few years ago and we made a decision to craft it and spend more time with Gearbox, and I think we've been proven right by the response we've had at the show.
Q: It's one of the busiest demos on the show floor.
Mike Hayes: Yeah, and for us, Sega's quite a broad church of games, I think Aliens is definitely the core franchise that will do best for us as a company. And the response that we've had has just been absolutely second to none. So that's good for us.
Q: That's good to hear. You said about PS Vita, presumably you're going to be there with releases on day one?
Mike Hayes: We would like to think so, but that's subject to when does the hardware come out, you know, Sony approval, there's a lot of things. That is our ambition and that is our wish to be out day and date with the hardware machine whenever it happens.
Q: It's still important for Sega to do that? To be first when those new platforms come out?
Mike Hayes: I think so. I mean, we do it because we think it's commercially appropriate but we do believe in the Vita system, and therefore that's why we've given it our support and we think being out first when there's relatively fewer titles is quite important. One of the first titles, Tennis World Tour on PSP, was one of the biggest selling titles. It just suited the platform ideally and as you can imagine with the kind of flick motions that you've now got it suits a tennis game and it's a good demonstrator of what the machine can do.
And our tech guys are really quite excited with other things, and there is a game that we've got in the pipeline, this new IP that we can't talk about yet that will be, I think, of all the things I've seen, this game will show off the technical attributes of Vita in quite an exciting way. So yeah, being out first is quite important for us, but it has to be commercially relevant to do that.
Q: Do you think there's any hesitation in supporting the new Wii console initially? Obviously, with the Wii there were complaints that it wasn't great for third parties. That it was mainly a first party success machine, although you kind of disprove that theory with Mario & Sonic. But the 3DS has launched to slow sales because of the high price. Was there any caution there from Sega that maybe you shouldn't be in there straight away on Wii U?
Mike Hayes: First of all on Wii, I mean, at some point we were the biggest, certainly top three third party publisher on Wii so for us it was a great platform, initially with Sonic Rings. Even our redux, things like Ghost Squad, House Of The Dead. And then of course Mario & Sonic which is absolutely huge, so we've got absolutely no qualms about that. And I think there's of similarities in terms of Sega characters and Nintendo characters because of the era and the love that the fanbase has got.
And I just think we're all a bit premature in being a bit glass half full on 3DS. Everyone was clamouring "oh please bring it out in March, you must bring it out" and then it's like you get to June and it's all "sales aren't very good... well they haven't got the software yet."
Then Nintendo announced those five brilliant titles, I mean for me, Starwing - as I still call it, because I gave it that name when I was at Nintendo - Starfox, that for me, my two girls have got a 3DS, and I'm going to be taking it play that. What a brilliant game. And then with Mario, Mario Kart, we've got third generations, and we're going to have Mario & Sonic, will it be as big as DS? I've got no idea, probably it won't be. Will it be a very viable hand-held project? Absolutely.
Will 3DS be as big as DS? Probably it won't be. Will it be a very viable hand-held project? Absolutely
So you know, we'd like to be selling more Monkey Ball right now, but I've got no issue that come Christmas that's going to accelerate, particularly those titles. You know what Nintendo platforms are, they need that killer Mario or that killer Zelda title to make it fly. And they haven't been there. If it had been launched with Super Mario Brothers and the sales were like they are now then I think we'd be slightly more nervous, but that's all to come.
Q: What kind of additional pressure does creating products for Vita and Wii U put on your development budgets?
Mike Hayes: That's a really good question. The one thing now about Wii U of course it that its high definition, so there's now going to be a lot of commonality, but I think we've got to be careful that we don't just want to bring across everything willy-nilly because its another platform that we can advertise our cost on. That controller is absolutely brilliant and we have to think of innovative ways to use the controller. So actually the benefit of Wii U is that you can bring across... we're doing high definition Sonics, we're doing obviously Aliens: Colonial Marines, so you can bring them across, and that's relatively low cost, which is good news, then you spend your money on how do you use that controller effectively to make it unique and differentiate it. And that's kind of how we're thinking. So it's a relatively low cost way of getting into that.
The handhelds are a bit different actually because they're quite bespoke and there's very little crossover, but I think for us when you have IPs where you know you're going to get a pretty good critical mass in terms of sales, then those stand alone budgets that you have to find are relevant. The issue of course for us is, and I'm sure everyone talks about it endlessly, but the platform range now is just so big. Particularly because we're spending a lot of time and money on XBLA and PSN games, we've got Renegade Ops and we'll make a lot of other new IP announcements over the next few months. We're spending a lot of time on iOS and actually there's very little that you can cross-fertilise apart from the brand so it's quite interesting that we've actually taken a development budget and we're ring fencing certain amounts for each knowing that the amount of crossover there will be is going to be relatively limited.
What that does mean though is that in the high end we'll be spending less money. Like I think every other publisher is saying. What was is somebody said? "There's no room for AA games." So actually, just concentrate on the big ones that you know have got a reasonable chance of success, take out some of that money that you would spend trying to compete on something like a Call Of Duty - which let's be honest is more or less impossible - and allocate that to handheld or to console download or whatever, and it sort of spreads the risk and spreads the money. As a development model that seems to be working.
Q: I wanted to pick your brains about the European market. What's your view of the current European market for console games? What kind of locations are standing out as strong markets in terms of AAA titles and what kind of regions are maybe not as good as they used to be?
Mike Hayes: It's interesting, the Anglo Saxon territories, I know it's a terrible expression, but by that I mean the UK, Australia, Nordic, they are powering ahead with core games, and we've just seen it again with L.A. Noire and the fact that Microsoft is so strong in those territories, which has got this great core games symbiosis, and they are doing very, very well. However the bit that's below that, which is the more family orientated, has done less well. But then you flip into countries like France and Spain and Italy and they're actually doing very well in that middle market on PlayStation 3, and actually they're sort of balancing... there's a little bit more balancing that's going on.
What Microsoft did with Kinect, is very clever. They've expanded the use of that box. That to me is great innovation.
Having said all of that, there's no doubt that the markets are clearly down again. We're in quite a long period of the life cycle and its probably not unreasonable, particularly with Wii falling like it has done, that that market is going to dip. The question is will it get back up to the heady heights of two or three years ago with new platforms? That's an interesting question. My guess is probably not, only in so far as gamers are gaming elsewhere.
The total amount of time and money spent on gaming is growing consistently but the amounts spent on what we call traditional platforms is decreasing because people are spending more time on other formats. So overall, because I said that thing about how I was "staggered" how the UK had dropped, but there were two things about that. One is what I did say was actually, gaming overall is on the increase, but it's in different areas, and second I was just actually referring to Sega because we started out as effectively a UK company selling Football Manager and Sonic, and now we're across Europe and the UK share of our business has just shrunk. So it's kind of mixed. For us, definitely... Oh, and I missed out Germany as well! Germany is doing very well for us on things like Sonic, it's quite strong. And interestingly on Virtua Tennis, which did as well in the UK as we had expected, it's actually motoring ahead in Germany. So it's quite a mosaic, it really is a patchwork of different stories. If you've got a core game you can still blast, absolutely, and it sells big, big numbers.
Q: Would you expect a price cut on the 360 and PS3 now to boost those markets?
Mike Hayes: I never speculate on first party. That's their business.
Q: With Vita and Wii U it seems like it's almost the start of a next generation, or a step into the next generation. Would you agree with that and are you ready? Do you want a next generation in the next one to two years?
Mike Hayes: You're sort of defining what does that mean any more? I mean it's interesting isn't it? Again, probably wrong to speculate but does it need to keep getting bigger and bigger? It should probably be getting deeper and broader. You know, because the way people are consuming games.
Q: So if you look at Sony and Microsoft, it is getting broader for those products because they're constantly adding new services and features, whether that's Facebook or different ways of getting games, or last year's motion contollers.
Mike Hayes: But you see that's what I think Microsoft did, and to an extent Sony, with Kinect, is very, very clever. As developers we can make great Kinect games that cost relatively less, but what they've done is expanded the use of that box quite cleverly with that. I think that's what I'm saying by being sort of... That to me is great innovation. Rather than what we're used to, the next huge step change, for bigger better bolder games that's going to cost us ten million dollars more to make. I'm not entirely sure that's where it's headed but as I said, we don't know. We're just happy to see the first party make changes.
Q: It's really nice to see that you're investing in the UK with Creative Assembly and getting them working on new projects.
Mike Hayes: I think it's important actually. I think the UK development industry has had a bit of a knock recently, to say the least, and then there's all the scuttlebutt about if we don't get tax breaks then we're all off, but well, actually the reason we are there is the talent, it's got good talent. So there's nothing magical, there's a lot of good people in that area, we want to make a good game, so we just get on with it. Also Miles [Jacobson] is expanding Sports Interactive, we made less of a thing there, but we're doing some really interesting projects, again that we'll talk about them later, but there's quite a lot of expansion going on with Miles' team as well.