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Epic Fail: The Losers of 2012

Epic Fail: The Losers of 2012

Fri 28 Dec 2012 12:00pm GMT / 7:00am EST / 4:00am PST
Business

These five stinkers were so massive that their impact was felt across the industry

What makes us select something as one of the Losers of the year? It's not just failure; there are plenty of games or companies that haven't done well in any given year. The quality that brings something to Loser of the Year status is scale; the failure has to be of a type, nature or size such that it has a significant impact on the games industry. In other words, you haven't just failed; you've failed in a way that has had a broad impact on the business.

While there may be some measure of relief (glad it wasn't our company) or horrified enjoyment (pass me that snifter of Schadenfreude, please) as we consider these exemplars of how not to succeed, we should not forget that each of these failures comes with a human cost. People have lost their jobs, families have been hurt, and the damage continues well after the news stories have faded. Perhaps unfortunately, those most responsible for these failures often suffered much less than the low-level employees who were just trying to do their best. Let's hope that the continuing growth of the gaming industry can help those who need it most, and that blunders on this epic scale will be rarer in the future.

38 Studios

There's not going to be much debate about putting 38 Studios on the Losers list. The high-profile studio created by baseball star Curt Schilling went bust in spectacular fashion this year, vaporizing a $75 million dollar loan from the state of Rhode Island's Economic Development Corporation. The head of the EDC later resigned, and the state has launched investigations into the whole debacle. The company declared bankruptcy after failing to make payroll and a payment to the state.

1

Many talented people worked with 38 Studios, including designer Ken Rolston, artist Todd McFarlane, and writer R.A. Salvatore, and over a hundred others. Some employees quickly found new positions as other studios stepped up to acquire talent; Epic Games set up Impossible Studios in Baltimore using many employees from 38 Studios. The fallout from this debacle will continue to affect people, probably for years, as the lawsuits and investigations unfold.

The fall of 38 Studios seems to have put an end to Rhode Island's desire to put state funds into bringing companies to the state. Other states who may be approached by game companies in the future, seeking tax breaks or investment, will certainly get a much greater scrutiny after what happened with 38 Studios. Investors are likely to be much more wary in the future about investing in game companies, especially those headed by fans instead of seasoned executives. More than that, it's going to be much harder to get investment in big RPGs or massive MMOs. In the end, 38 Studios' demise affected not just the company but also the state of Rhode Island and made it harder for other parts of the game industry.

THQ

The progressive disintegration of THQ has taken on the air of tragedy in the classical sense; at this point, the unraveling of the publisher seems like the inexorable workings of fate. THQ put itself in a tailspin last year with the ill-advised uDraw tablet which cost the company hundreds of millions of dollars. Once that damage was done, everything else continued to fall apart. Losing the UFC license this summer was another blow, removing one of THQ's most popular games from its lineup.

2

THQ brought in ex-Naughty Dog Jason Rubin to try make sure upcoming products would be top quality, but that's like an expert harbor pilot parachuting onto the deck of the Titanic after it's already hit the iceberg. Rubin's assessment that key titles would not be released in the next quarter precipitated THQ's suspension of providing guidance to analysts about future performance. The resignation shortly thereafter of CFO Paul Pucino was another symptom of a company in deep trouble (a CFO resigning when not immediately taking a position elsewhere is usually a sign of a very bad situation).

THQ is now searching for financing, or an outright buyer, in order to continue operations. The company is the poster child for the death of the non-AAA title; none of its titles would really be considered in the same category as Call of Duty, Grand Theft Auto or Madden. A once vibrant company with hundreds of employees is shrinking into irrelevance; its market capitalization is less than the budget for one of its titles, yet no one seems to be eager to buy. Apparently the evaluation by other publishers is that it's better to let the company go bankrupt and then pick up any desirable assets at the lowest possible price (what happened to Midway). That way buyers avoid any part of Brian Farrell, the chairman and CEO of THQ, who surely must bear the largest responsibility for the downfall of the company.

THQ's decline and fall will make investors even warier of game company stocks, and everyone will be questioning putting resources into console titles that are not already assured of success by virtue of their brand name. THQ is contributing to the decline of new console titles by its performance, and imperiling the release of the South Park video game. It takes a real Loser to do both those things.

Zynga

The word Loser was not something that could be associated with Zynga for most of its existence. The company got in early on Facebook and rode the skyrocketing growth of that platform, reaping the benefit of the massive viral marketing potential of Facebook in the heady days before restrictions on messaging your friends were put in place.

3

Zynga made few friends in the industry on its way up, dogged by accusations of copying designs, shady customer acquisition and outright poaching of employees from other game companies (hello, Electronic Arts). Zynga's audience grew to hundreds of millions, the staff grew to thousands, and the company went public just about a year ago with the stock at $10 per share.

It was soon after that things began to fall apart for Zynga, as Facebook had tightened up on notifications that drove new player acquisition. Zynga's high-profile purchase of OMGPOP for its smash hit Draw Something proved to be a waste of $200 million as the game's popularity plummeted. Revenues dropped, some of Zynga's new releases were not getting the enormous growth of past titles, and it all came together in a perfect storm. When Zynga announced that it would underperform analyst expectations, the bottom fell out of the stock, and its value plunged all the way to just above $2 per share.

Zynga was now valued at barely more than the cash it has in the bank, and executives found themselves with baskets full of valueless stock options. The possibility of millions of dollars in stock had lured many game execs to Zynga; seeing that possibility vanish led many of them to leave. The exodus has counted more than a dozen top executives so far. Zynga has issued new options to employees to stem the flood of exits.

Now Zynga is trying to recover from its fall, expanding its program to distribute games from other developers, working on real-money gaming and genres beyond the casual games they are known for, and pushing hard to get more products on mobile platforms. The fall of Zynga has led to a cooling of interest in the whole category of social gaming, with the very term becoming less popular. Zynga may yet claw its way back to growth and profitability and higher stock prices; after all, it still has $1.6 billion in cash in the bank and thousands of talented employees and an audience of over 300 million people who play Zynga games. Zynga's not about to go out of business any time soon, but for 2012 it has to be counted as a Loser.

Discs in boxes

Remember when you used to actually drive miles to a store to buy a cardboard or plastic box containing a disc if you wanted a game? It's not going to be too long before young kids will be shaking their heads in wonderment at the difficult life their parents had, having to go somewhere to get a game, and then actually put a physical object in a machine at home to be able to play a game.

4

That day is approaching faster than ever, as retail sales of hardware, software, and accessories continue their decline from the peak of 2008. NPD continues every month to try and put a cheery spin on the double-digit declines, but the statements are beginning to take on an air of whistling past the graveyard. Perhaps they should just quote the plague victim from Monty Python and the Holy Grail: “I'm not dead, I'm feeling much better!”

Some execs (usually those with retailers) say this is just natural decline that always happens at the end of a console cycle. This console cycle has been unusually long, hence the decline has been prolonged and deepened. Once new consoles ship, retail sales will recover to previous levels.

That may be, but never before in a console cycle has there been competition on computers, smartphones and tablets that have already grabbed a considerable share of game-playing time and money from gamers. Those lost retail buyers may be lost forever. Considering that retail sales of discs in boxes still provides the majority of revenues at publishers like EA and Activision, the continuing sales decline makes discs in boxes one of the year's Losers.

PS Vita

How could such a sweet piece of hardware be a Loser? Look at the little darling, with its beautiful 5” eyepopping color touchscreen, analog joysticks, laden with sensors, a rear touchpanel, and other bells and whistles. What's not to like?

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Perhaps it's the base $249 price point, or the lineup of games that's less than stellar. Or maybe it's just the fact that most gamers already have a gaming device in their pocket, and no room or need to drop a few hundred dollars on another one. Or maybe it's the uninspired marketing efforts, or the competition from the 3DS, smartphones, and tablets priced at or below the level of the PS Vita. Whatever the reason, the PS Vita has been a major sales disappointment for Sony.

How do we know this? Sony's own sales projections from earnings reports are telling. Initially Sony projected that it would sell 16 million PS Vitas by the end of March 2013, 15 months after its introduction in December of 2011. This August Sony lowered that figure to 12 million units, and at its last earnings call lowered it again to 10 million units. That's got to be disappointing to Sony execs.

Prospects for the PS Vita in 2013 don't look any rosier. We will continue to see increased competition from ever-more-powerful smartphones and tablets, many priced less than the PS Vita. Nintendo's 3DS continues to rack up sales, partly with great games and partly by being priced $80 less than the PS Vita. Meanwhile, Sony's weakened financial condition has apparently left it unwilling to take the one key step that might revitalize PS Vita sales - lowering the price.

The time for a price drop was before the all-important holiday selling season. Sure, Sony can lower the price any time, but a lackluster sales performance this holiday will keep more publishers away form considering the creation of PS Vita titles. If software support weakens, so do hardware sales... and thus begins a vicious feedback cycle. The PS Vita may still avoid that fate, but the verdict of 2012 is that it's a Loser.

14 Comments

Rey Samonte Sr. Technical Game Designer, Trion Worlds

10 7 0.7
It's very sad to see the Vita but very expected at the same time. It's definitely a great device and I use it more than my PSP. In fact, I'm usually not a mobile gamer by any means but the Vita, to me, provides a great feel and functionality for compelling games. Unfortunately, the content isn't there and the price for the device and accessories is high. The cost for the memory cards still makes me think twice even though I would like to have more storage space for it. The packaged games are still lacking in quality and quantity.

The only reason I bought the Vita was mainly because of Playstation Mobile Suite. If I didn't have the ability to toy around with it and make simple games on it as a hobby, I wouldn't have bought it.

Posted:A year ago

#1

Yiannis Koumoutzelis Founder & Creative Director, Neriad Games

363 207 0.6
It is very sad what happened to 38 Studios... i was so excited by the sheer magnitude of talent involved.
I wanted to see that MMORPG come to life and kick sum!

Zynga will eventually find its way. This was a huge lesson for them. And it is not something uncommon with companies that simply grow way too fast for their own good. Just the scale of the fall was so huge that you couldn't help but be shocked! It also sucks to see how people from the industry reacted to Zynga's fall from grace.

Regarding Vita.. it was kind of expected. 3DS, iPod and iPad swallowed PSVita whole. Mainly PS fanatics seem to buy it in US and EU. iPad is a better hardware. (And even certain Android tablets at $250!) Sony unfortunately came up with a poser, that tried to be a little bit of iPhone, and a little bit of DS with a the familiar PS "hardware superiority" spice. Nintendo pulled a nice "trick" by lowering the price of 3DS right on time and offering a genuine game device while keeping low development cost and offering a great upgrade to the DS line of products.

wiiU is repeating the same thing, and i am very curious to see how the next PS console plans to compete with a new xbox which i assume will be windows8 compatible, and a wiiU that at that time will be offering the second and expectedly more robust generation of its software line. Sony is in a very tight spot as it has lost almost every major market they dominated so far. Games is hanging on a thread. Thankfully PS brand name still carries a bit of weight with older gamers.. but not for long.

Posted:A year ago

#2

Paul Jace Merchandiser

942 1,428 1.5
The only thing I don't agree with is the buying disc in box part. As a predominantly console( and occassional handheld) gamer this is the way I will always purchase my games. I do buy DLC games and a few map packs from XBL but I've never spent more than $20 on a download-only title. That was only once(for Crysis) and will never happen again. For me DLC games have to be $10 or cheaper to be worth it and I'm sure I'm not alone. I just played the first episode of The Walking Dead and loved it. But that first episode is free on XBL rigth now. I want to play the other four but I will wait until the disc version goes on sale.

The day all games are download-only is the day I stop buying new games. To each their own but I would NEVER spend $30-$60 on a download-only game that can be removed or no longer supported at anytime the publisher chooses. Never mind the fact that you can't trade or sell them, they could completely disappear at the publishers wish and you are left with nothing to show for your $30-$60.

Edited 1 times. Last edit by Paul Jace on 29th December 2012 2:04am

Posted:A year ago

#3

Jamie Read Junior 3D Artist, Neon Play Ltd

129 67 0.5
I completely understand the whole paragraph on the PS Vita. I got one as an unexpected gift this Christmas and I am really enjoying it. There isn't anything that reaches the same depth and quality of LittleBigPlanet Vita and Uncharted: Golden Abyss on mobiles yet. I won't be buying a bigger memory card any time soon though.

Edited 1 times. Last edit by Jamie Read on 29th December 2012 12:55pm

Posted:A year ago

#4
The first three seem right to me - no issues.

Discs is boxes is just plain wrong - no way this is a "epic fail". Its just a slow & steady transition to digital - I have still never bought a "retail" game in "digital" form (usually because retail is still cheaper).

VITA is the most interesting - and I'm not at all convinced its dead yet.
In the US, the 3DS has been underselling (and the VITA overselling) - the sales ratio was around 2:1 for Black Friday week.
Japan is where the VITA has really failed so far. 2 weeks ago, the 3DS sold around 330k units - the VITA only 13k.

However, the interesting thing is this: looking at the upcoming games in Japan next year - there are now many, many VITA games being announced and coming out (and a lot of PS3/VITA hybrid games). So it still has a chance at redemption - its only going to take 1-2 hits to give the handheld some momentum, and make things turn around.

It is no certainty though: both COD & Assassins effectively flopped for the VITA (and both turned out to be much poorer games than expected, especially for COD). If the VITA just ends up with poorly done PS3 ports, it won't have a bright future. But if it ends up with a decent MH3 title (or even MH4 near launch...) - look out.

Sony do have bigger issues though: company debt, poor sales - its more important for Sony to not go BROKE in the short-term really. The next qrt'ly sales update will be telling.

Posted:A year ago

#5

Daniel Hughes Studying PhD Literary Modernism, Bangor University

436 496 1.1
"How do we know this? Sony's own sales projections from earnings reports are telling. Initially Sony projected that it would sell 16 million PS Vitas by the end of March 2013, 15 months after its introduction in December of 2011. This August Sony lowered that figure to 12 million units, and at its last earnings call lowered it again to 10 million units. That's got to be disappointing to Sony execs."

It's worth pointing out that the sales figure given is for both Sony's portables--not just Vita.

Posted:A year ago

#6

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,271 2,440 1.1
^Daniel, that's true for the last 2 projections but that initial 16 million figure included 10 million strictly for Vita.

Posted:A year ago

#7

Andreia Quinta Creative & People Photographer, Studio52 London

227 603 2.7
Sony definitely doesn’t have that techie ‘edge’ anymore, hence they can't afford to severely overprice their products just for brand-sake and - I suppose - recover some 'lost' money. Several examples can be found of Sony products having higher prices on laptops and TV’s with the same (or better) specs and quality of competitors like Toshiba, Samsung or LG.

I don't know how they are planning to approach the above issues and the Vita/Move fantastic failures dragging into 2013, but Sony needs to get a grip in reality, pricing things accordingly and actually learn from customer/survey feedback about what people want built-in or are willing to pay for in their systems.

Posted:A year ago

#8

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
I'd say more Vita owners need to look outside the AAA titles and go for more sleepers, as that's where the best stuff is. Oddworld: Stranger's Wrath HD is excellent, as are Dokuro, Ogarhythm and a few other titles. In eight days, go play EDF 2017 Portable when it hits PSN and tell me those dozens of hours of gamplay, new character and online modes aren't worth a buy for content starved Vita fans. Sure, these games plus some of the others I'm reading about SHOULD have been launch window titles instead of dropping in after the barn was burning down. But I think the platform can be saved by focusing LESS on superfluous functionality and MORE on delivering game content.

2013 is looking like the start of some actual solid content on the Vita, but Sony NEEDS to address pricing issues on the system and memory cards (yep, a 3DS-like cut to get people to buy the damn thing), cough up some free titles, ditch ANY thoughts of "limited edition' systems based around certain high profile games (a waste of money) and keep its collective fingers crossed that more people bite. It's a damn good system that deserves a better fate than tossed onto lists like this like an old log on a fire.

Posted:A year ago

#9
Good article. For a rare treat I agree 100% with your calls. My only other comment is that SWTOR really deserved a mention as a high profile loser.

Edited 1 times. Last edit by Jeffrey Kesselman on 2nd January 2013 5:15pm

Posted:A year ago

#10

David Lee Chief Concepticator, Concepticate

18 12 0.7
For PS Vita, I would suggest not only free Vita titles for Plus subscribers but hardware discounts to get systems in the hands of more players. Plus is a good idea and it delivers fair value in my estimation but Sony could invest further in it to help expand its adoption. Even in the case of an across the board price cut for Vita hardware (which I agree is needed) a steeper discount for Plus owners could be an incentive for more players to pick Sony as a broad platform. Once you're in that subscription system I think you're more likely to stay loyal and looking for things to do and buy in that ecosystem.

Posted:A year ago

#11
It should also be noted that, while 38 studios had some good creative people, they also had a lot of dead weight and incompetent upper management. A company with no real income bulking up to be one of the largest industry employers on the east coast was a clear sign they were headed for the wall.

Edited 2 times. Last edit by Jeffrey Kesselman on 2nd January 2013 6:19pm

Posted:A year ago

#12
It should be noted, however, that your interpretation of Zynga's fall is very generous.

Given that they showed financial weakness from the moment they opened their books to go public (books which too many people ignored), I would venture that Zynga was *never* the money maker their carefully fed reputation made them out to be.

Wringing blood from a stone is just not a good business model no matter how many stones you pick up.

Posted:A year ago

#13

Craig Page Programmer

384 220 0.6
Calling discs in boxes a loser is wrong. Unless the game or movie comes from Valve, or Blizzard. I don't trust any other company.

Microsoft might be the worst for digital purchases because their 360s all die sooner or sooner, and the prices of their digital content never goes down.

No, Sony is even worse!! My first PS3 died after three weeks, their prices don't go down, and the company probably won't exist by 2020.

Nintendo is pretty awful too, their consoles don't actually have enough storage space to save games and movies. And the company is bad at using the internet or transferring your old digital content from your Wii to your Wii U.

Posted:A year ago

#14

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