As part of London Games Festival this year, the Games 3.0 conference saw a number of key industry executives putting forward their views on various issues.
One such panel saw Sega A&R's head of content, Darren Williams talk about what he viewed as the main challenges the industry faces in the next 12 months, and here he talks further on that subject.
Q: At Games 3.0 you were on a panel discussing the challenges to the industry in the next 12 months - what's the biggest challenge as far as you're concerned?
Darren Williams: The topic is really barriers to entry, which is one that I know is quite resonant today. It's finding a way of trying to commoditise the high-def consoles - so the Xbox 360 and PlayStation 3, for all the success of the Wii, you're starting to see the trend emerging in Wii markets of software prices going lower and lower.
Nintendo is obviously dominating, because it always does on its formats. We obviously had great success with Mario & Sonic, but for all the growth in the wider spread of Wii gaming - and to a certain extent DS - it's hard to make a product stick on those.
So I think the entire industry is hoping that Xbox 360 can find a way to broaden its appeal, to go mass market. But particularly everybody is waiting to see what PS3 can do. Can PS3 return to what the PlayStation 2 did in terms of installed base and the wider adoption of gaming.
Now, there are arguments for and against - I think there are still barriers to entry in the industry, and I don't think we're necessarily accepting of what those barriers are. You can obviously make a very simplistic argument about price, and obviously with the churn you have on hardware cycles we're pretty good in the industry - even though I guess a lot of fellow publishers might say otherwise - by accident or design we're pretty good at keeping our prices high.
It's not hardware, we keep software prices high, and I don't see much planning or recognition that games are still essentially luxury items - you don't buy them that frequently, although there's a niche there. You're talking GBP 30 minimum, up to GBP 45 for a big release.
So it's not something you do lightly, and if you contrast that with other entertainment media, such as DVD - even with Blu-rays coming out now you're looking at GBP 20-25 maximum - and seeing a sweet spot of around GBP 8-11 maybe.
So it's quite basic I suppose to say that price is a key thing, but I think trying to find a means of economies of scale, economies of production to a point where we can get price points... I'm not saying GBP 15 for a PS3 or 360 game, I'm sure our business analysts would have a much better idea of where that sweet spot it, but we still feel quite expensive - which means we remain in a ghetto.
And it's a circular, almost incestuous vibe that then starts perpetuating in the industry - developers are gamers, they're making games for themselves and their friends. So you start feeding that need, and we still retain that kind of ghetto niche to it.
So barriers to entry still exist - some of them are price-driven, but I think there are some other attitudinal things in the industry that we need to stop and change about the content of the actual gaming itself.
It's been said that the number of core gamers is decreasing, and I think a lot of companies could find themselves out in the cold if they don't adjust attitudinally to servicing that market.
Q: On that price point level, EA's UK managing director Keith Ramsdale said that there was no evidence that the global financial meltdown was yet affecting the games industry (despite CEO John Riccitiello suggesting otherwise) - do you think price as a barrier to entry to become even more important as recession starts to bite?
Darren Williams: Well I think we've demonstrated through previous recessions that gaming is relatively recession-proof, and I think that belief still exists at the moment. I still think that price is an issue regardless of the credit crunch.
Having gone from PSOne to PS2, and gotten used to that five-year hardware cycle - pricing very high at the beginning, which then drops through - I think for the consumer it's still very, very confusing. You'll still FIFA still doing enormous numbers on PS2 for example, so the market's still there, but the reason the market is there is because of the hand-me-down console, or the GBP 100 price point - plus whatever you pay for FIFA nowadays.
I still think it's quite intimidating for a lot of consumers. We can see enormous success from big games, such as Call of Duty. We see healthy success from things like BioShock, Oblivion to a certain extent and hopefully Fallout 3. It would be interesting to see figures on how Dead Space has done so far. That's great, that appeals to a core gamer, it appeals to me.
But it doesn't seem to really deliver tangible benefits to that really casual consumer - whereas movies and music have such long lifecycles. There may be marketing of an artificial demand curve for those titles, but they are long.
I think that the predilection for technology that we have in the industry, which was necessary to a point - but at this point right now visual fidelity between the two high-def consoles is round about the same, online connectivity you'd still say that 360 is probably a better, but not ideal purpose, because we're yet to see how Home is going to do...
So I just look at it from a consumer's perspective, and now with Woolies taking the 360 down to GBP 100, you've got a GBP 100 high-def console where you can play FIFA, Call of Duty and Fallout 3. Then you've got a menu pricing system on the PS3 where the tangible benefit isn't really that great, so I think that aside from the PlayStation brand loyalty it's hard to see why a consumer new to gaming is going to go down the PlayStation route.
It's a different argument that I wanted to touch on, but I'm not entirely certain that hardware cycles are... they're obviously good because you need to innovate, but it's actually a barrier to entry, because you've got this constant churn of people who don't know what the hell is going on.
Q: What do you think will happen to the new audiences that have come in via the Wii - is the console an introduction to the high-def consoles, do you think? Or is there a danger that - when Miyamoto's software vision ends after Wii Music - that the audience falls away?
Darren Williams: There are two elements to that. There's the market for the Wii, which is still confusing, because if you see official statistics the average age of ownership is going to be a hell of a lot higher than I suspect it really is - because you've got the very obvious point of parents registering Wiis on behalf of their children.
I think on one hand the Wii has become the most expensive board game on Earth - it's the kind of thing that families will play at Christmas, and probably won't play again throughout the remainder of the year. So things like Wii Sports, Wii Fit to a certain extent, that's great.
Your point about a gateway, an entry point to gaming - certainly I think the Wii needs to have more titles. We've got two at Sega, but we're backing to attract us to the slightly older thirty-somethings that might hit nostalgia, and they'll feel they want to play House of the Dead: Overkill, and we've also got MadWorld. So we believe that the market is there and needs to be served. It's risky because new markets don't exist unless somebody goes to make them, so that's what we're backing.
So whether or not it will become an entry point to go onto different gaming, high-def gaming? It's an interesting one, and comes back to my point about tangible value. The Wii is great fun because it's a very physical machine. Any game that doesn't take advantage of the Wii's input methodology tends to be a little bit sneered upon.
Even Mario Kart, which at the end of the day is Mario Kart - a very good version of it, because it comes bundled with a steering wheel so it's a very physical experience. You aren't necessarily going to see that - I know there's been talk of Sony with a motion controller, there have been demonstrations of 360 tech, but that's slightly monkey-see-monkey-do, and it doesn't really have that tangible value to it.
So I think there's a market on the Wii for different tastes of gaming. Whether then people will graduate upwards, that's an open question. I'm sceptical about it, because I think what the Wii offers is a very physical, fun experience. Any degree of percentage from 10 to 30 to 40 per cent of the experience is the Wii remote - so I'm not so sure.
Our research indicates a lot more cross-platform ownership - some people have a Wii alongside a 360, PS3 or PC. Those consumers may already exist then.
But it will be interesting to see what Nintendo does with the Wii 2 - how they choose to combat Sony and Microsoft, because they've obviously won through with the input methodology, but where do they go next? The fact that we don't know, but Nintendo probably does, is why it's the biggest company in Japan.
Darren Williams is head of content at Sega A&R. Interview by Phil Elliott.