2004 In Review: The Year's Top Stories - Part Two
As 2004 draws to a close, there's no doubt that it's been a momentous year for the videogames industry. Characterised by the extremes of stunning commercial success and potentially hugely damaging controversy, the year has changed the face of handheld gaming forever and given us our first glimpses of the future of interactive entertainment consoles.
This week, we're be looking back at a selection of five of the most important stories for the industry this year - five news stories chosen from over 1,300 articles published on GamesIndustry.biz this year, which we feel reflect the biggest issues of the year and the events which will continue to shape the market for many years to come. Yesterday we examined two major stories; today we complete our look at the headlines of the year with three more of the stories that defined the industry in 2004.
War in the Pocket: Nintendo and Sony limber up
In the nigh-on twenty years since Nintendo introduced the Game Boy, two things have remained completely unchanged about the handheld console industry - one being the basic layout of the controls for playing games, and the other being Nintendo's utter dominance of the market. This year, however, everything changed.
Sony, of course, announced its intention to join the handheld console market back at E3 in 2003, but we didn't actually get to see the PlayStation Portable in the flesh until a year later, back in Los Angeles once more. The system wowed the crowds (although the lack of software did not), while Sony's decision to bump the amount of RAM in the machine to 32MB made many developers heave a sigh of relief - as did the firm's comprehensive set of libraries, which made creating PSP games much easier than PlayStation 2 development was originally.
It hasn't been plain sailing for the new entry into the market, though. Plans for a global release in November were scrapped, and instead a mere 200,000 units of the console scraped out in Japan on December 12th, with the North American and European launches set to come in early 2004. Worries about battery life continue to persist even after the launch, while new concerns about build quality have come to the fore in recent weeks.
Rocky start or not, though, the 200,000 unit allocation of the PSP sold out within a day, assisted by the incredibly surprising price tag of under 20,0000 Yen - less than 100 UK pounds (although early adopters have been paying over five times that amount for import units). Analysts were mostly taken completely by surprise by that price point, which is thought to see Sony taking a huge loss on hardware sales, but have hailed it as a positive and aggressive move for the firm in its quest to steal market share from Nintendo.
Sony will have a fight on its hands, though. Two decades of uninterrupted and largely unchallenged rule of the handheld industry haven't left Nintendo complacent, and the firm's response to the PSP was to completely rewrite the rules of portable gaming with a console that utilises two LCD screens, a touch panel and a microphone as its control mechanisms. Whether this constitutes a gimmick or a genuine stab at a brand new control mechanism is still a matter for some debate, but Nintendo itself is convinced that moving away from traditional console controls will let it penetrate new markets and attract players who would never even consider conventional systems.
More importantly, this challenge from Sony directly into its heartland has stirred Nintendo into rediscovering some of the spark with which it used to engage in the console wars of yesteryear. The company's pricing, positioning and marketing of the Nintendo DS has been aggressive from the outset, and it's been rewarded with well over a million sales in the USA and Japan to date - with 2.8 million units set to have shipped by the time January 1st rolls around, compared to 0.5 million for the PSP.
This year, of course, has only seen the opening skirmishes in the handheld console war - the real battles will come in 2005. At last, however, there's a real challenge in this market, which has been a one horse race for far too long. Both companies have exceptionally strong but yet radically different products, and it may even be that there's plenty of room for both of them on the market - but in the absence of any proof of that, expect to see them fight tooth and nail for every percentage point of market share over the coming years.
King of the Jungle: EA flexes its muscle
It's been a year of mixed fortunes for the industry's biggest publisher. On the down side, it made unwanted headlines when tales of mistreatment of development staff made their way into the national press, and perhaps more worryingly, a lacklustre line-up of games in the crucial fourth calendar quarter has seen the company's market share dropping in the face of stiff competition from the likes of Microsoft (Halo 2) and Take Two (GTA San Andreas).
However, on the positive side, 2004 was arguably the year when the company often described - with varying degrees of awe or venom - as the industry's 800 pound gorilla actually started to flex some of its incredibly substantial muscle, signing a series of contracts and acquisitions which have left the stock market ecstatic and competitors terrified.
"Acquisitions over the next three to five years are probably likely to occur," EA CEO Larry Probst told GamesIndustry.biz at E3 back in May. "I'm not sure that it's going to be us acquiring other companies and I don't think that anyone's going to acquire us in the industry, but I think you're going to see consolidation in the next three to five years, where there are fewer competitors to us in five years than there are today."
Within months, the truth of Probst's statement was revealed, when EA acquired UK-based developer Criterion in a deal which not only gave it ownership of games such as the Burnout franchise and promising FPS title Black, but also handed over the reins of the industry's most popular development technology, RenderWare, and an almost ready-made solution for next generation development. Despite EA's assurances that it would continue to provide RenderWare as a solution to third parties, many developers and publishers panicked at the realisation that their biggest competitor now owned the technology they were building their games on. More importantly, though, the scope of EA's ambition became clear - with RenderWare, a software platform which is rapidly becoming the de facto standard for cross-platform game development, the company has the opportunity to become as powerful as a platform holder without the expensive and messy business of actually bringing a piece of hardware to market.
If the acquisition of Criterion is the most important deal that EA did this year, though, then its recently announced contract with the NFL must be the most controversial. Faced with mounting competition and a damaging price war with Take Two over sports titles, EA responded as only a $20 billion company can - it opened its purse strings and forked out for a five year exclusive license with the NFL and its players' association, effectively locking its competitors out of doing any straightforward takes on the genre until well into the lifespan of the next-generation consoles.
Plucky Midway, currently rising on a wave of good fortune after coming under the control of majority shareholder Sumner Redstone, has already capitalised on the wave of outrage which followed the deal by announcing an unlicensed football title, Blitz: Playmakers, which seems certain to upset the NFL as much as anyone else thanks to its depiction of on-pitch violence and off-pitch boardroom antics, but this brave effort aside, most commentators seem to be of the opinion that EA's coup has locked up the entire American Football genre for half a decade. Take Two has raged about how damaging the deal will be for consumers, which is certainly a legitimate concern, but many believe that this is simply the shape of things to come. Only EA and a handful of other companies - Microsoft and Sony, essentially - have the kind of financial prowess required to lock up this kind of deal, and in future this difference may see the divide between the top tier of publishers and the lower ranks growing ever more difficult to cross.
EA doesn't always get everything to go its way though - there were red faces all around when a group of shareholders at Digital Illusions announced their intention to reject a buyout offer which would have given the giant publisher ownership of the Battlefield franchise, one of the most powerful brands in the PC gaming market right now, as well as the services of one of the most highly regarded independent developers in the world right now. However, the firm remains undaunted; we don't doubt that a deal for DICE will go through within the coming months, albeit perhaps at a slightly higher price than the original offer, and in the meanwhile EA has just announced that it's also chasing much bigger fish - picking up just short of 20 per cent of one of its main competitors, French publisher Ubisoft, in a deal worth up to $100 million.
Retail Therapy: PS2 shortages hit the industry's bottom lines
Sony chose not to reveal its new slimline PlayStation 2 at E3 this year, leaving the stage free for the PlayStation Portable and, of course, not depressing sales of the original console before it was strictly necessary. However, the signs were all there throughout the summer, as stocks of the PS2 gradually dried up and some retailers started to experience severe shortages in early Autumn.
Retail must have heaved a collective sigh of relief, then, when Sony finally unveiled the "PStwo", as it has been unofficially dubbed, a few weeks before its early November launch. The new slimline console promised to excite sales of the leading platform over the vital holiday season, and it explained why stocks of the original console had dwindled, with Sony bleeding the channel dry before introducing the new stock.
Unfortunately, retailers' woes were just beginning. Within weeks, it became apparent that Sony couldn't even begin to match the consumer demand for the new console, with shipments disappearing from shelves within hours of arrival - and the arrival of the blockbuster Grand Theft Auto San Andreas did little to help matters. Bouyed by the launch of Halo 2 and the PS2's difficulty, Microsoft's Xbox received a major sales boost - at least until its stocks also started to run dry.
The situation was worst in Europe, where a tanker stuck in the Suez Canal held up a huge shipment of PStwo consoles for several weeks, and desperate parents resorted to massively inflated eBay auctions in order to acquire consoles for their offspring. "Sorry, no PS2s in stock" signs popped up outside retailers all over the UK, and what should have been Sony's triumphant Christmas 2004, trouncing all its rivals once again despite aging hardware and blockbuster title slippage, turned into a PR nightmare thanks to shipping mishaps and hugely underestimated demand.
The company did respond by chartering huge cargo planes to airlift PS2 stocks directly from China to Europe and North America, and the stock situation is gradually improving - but some damage may already be done, with overall videogame retail sales in the USA in November showing a disappointing slow-down in growth which is largely attributed to the PS2 shortage.
Just how many sales have been lost is something we'll never know, but while the publicity gained from watching stocks of its console selling out in minutes and desperate shoppers paying huge premiums to pick up Christmas' hottest toy is invaluable, the reality on the ground is that this almost certainly isn't what Sony wanted. Many companies are guilty of choking supply a little in order to make a product appear more desirable and garner mass media attention, but in this instance, supply was choked so badly that sales have genuinely been lost, competitors' products have been bought and the industry as a whole has suffered. Expect to see the finger of blame pointed at Sony repeatedly when publishers announce results for calendar Q4 - although as usual, it'll be impossible to separate the real damage from the attempts to make Sony carry the can for simple poor performance.
Did you miss the first half of this article yesterday? If so, you can find it right here.