E3: ‘Palpable’ Concern Regarding Packaged Media Gaming, Pricing

As trade shows go, Electronic Entertainment Expo (E3) 2019 in Los Angeles featured the usual blizzard of new-release announcements and industry scuttlebutt about the future of gaming consoles on land (hardware) and in the cloud.

Sony’s gaming unit – Sony Interactive Entertainment – skipped the event entirely, leaving much of the floor to rival Microsoft.

And it took full advantage.

John Wick franchise front-man Keanu Reeves created the most non-industry buzz early when he made a surprise visit to Microsoft’s pre-show presentation for the April 16, 2020 launch of Cyberpunk 2077 (also available on PlayStation 4 and PC), which features the actor as a rebellious punk rocker in a dystopian California where pretty much anything goes.

Keanu Reeves in ‘Cyberpunk 2077’

During the presentation, an attendee yelled out, “You’re breathtaking!,” to which the actor returned the compliment, adding that everyone in attendance was “breathtaking.”

The comment soon went viral, tracking more than 2.1 million views on Twitter and elsewhere.

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But to industry old-schoolers, a future of online gaming and subscription streaming supplanting $60 discs is breathtaking for the wrong reasons.

While Microsoft disclosed that Xbox One replacement – dubbed Project Scarlett – is still slated for launch for the 2020 winter holidays and would include an optical disc drive, the company remains laser-focused on streaming.

In October, it promises to preview the xCloud platform, which it claims affords Xbox One users the ability to stream games.

With advances in technology and changing consumer habits, global tech companies such as Google, Apple and Amazon are eyeing gaming.

This has rattled some investors, who heretofore marveled at gaming’s ability to stave off digital distribution in favor of high-margin packaged media played in venerable hardware consoles.

Yet, The NPD Group said that by the end of Q3 2018, 86% of gaming content was sold digitally across console, portable, PC, and mobile.

“There is a palpable level of concern that the traditional $60 upfront price for video games [on disc] is looking a bit long-in-the-tooth given changes in how people now choose to consume music and television, with all-you-can-consume subscriptions becoming the dominant forces in those markets,” Wedbush Securities media analyst Michael Pachter wrote in  June 14 note.

The analyst agrees that secular change within gaming is happening and will expose the industry to increasingly wider audiences demanding diversity (i.e. lower costs) in distribution.

Pachter said that while subscriptions to music and TV/movie streaming services “make some sense” given the long-tail of the content and the large quantity of consumption, he contends that a shift from an a-la-carte business model to subscription is unlikely to become popular except with hardcore gamers.

“We think concerns about pricing are overdone,” he wrote. “The average gamer plays three to four games per year on console or PC and another five to six games on mobile, compared to typical consumption of over 1,000 TV shows, at least that many songs, and dozens of films each year.

“We are skeptical that a Netflix-like service will emerge with thousands of choices at a low monthly price and think investor concerns about the erosion of the current business model are unfounded.”

Game-Based Feature ‘The Division’ Starring Jessica Chastain and Jake Gyllenhaal Coming to Netflix

The Division, a feature to be based on Ubisoft’s Tom Clancy video game, is coming to Netflix.

Jake Gyllenhaal and Jessica Chastain will star in and produce the project.

Rafe Judkins, who is creating the upcoming series “Wheel of Time” based on the fantasy novels for Amazon, will adapt the screenplay. David Leitch (Deadpool 2) will direct.

In the film, set in the near future, a pandemic virus is spread via paper money on Black Friday, decimating the city of New York and killing millions. By Christmas, what’s left of society has descended into chaos. A group of civilians, trained to operate in catastrophic times, are activated in an attempt to save who and what remains.

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At launch, The Division quickly became the fastest-selling new IP in video game history and currently has more than 20 million players, according to the Netflix release.

The Division 2 launched in March 2019. During E3 June 10, Ubisoft announced it would offer the game free to play June 13-16 on Xbox One, PS4 and PC. Players have the option of purchasing it at a discount through June 24, keeping progress made during the free period.

EA Reveals New Mode in ‘EA Sports FIFA 20’

Electronic Arts announced a new mode in EA Sports FIFA 20, Volta Football, inspired by the small-sided form of football played in the streets, cages and futsal courts across the world.

The mode launches worldwide Sept. 27 on PlayStation 4, Xbox One and PC.

Volta Football lets players build their own character, express their individual style and immerse themselves in a realistic street football experience.

“This year, we are embedding a whole new experience with Volta Football into the game that reflects how many footballers started out their careers in the streets. This is a unique aspect of the sport that gives our players an experience unlike anything they have ever seen before in EA Sports FIFA,” said Aaron McHardy, executive producer for EA Sports FIFA. “We’ve also focused on delivering key gameplay updates that raise the level of realism and quality across the game. And with small sided football ingrained in FIFA 20, players can take the learnings from the streets and apply them to the stadium or vice versa.”

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GameStop Bowing ‘Modified Dutch Auction’ to Buttress Stock

With its stock in decline, GameStop, the world’s largest video game retailer, June 10 disclosed plans to buttress shares through a so-called “modified Dutch auction.”

Such a strategy enables a company to repurchase shares within a select price range in a short period of time. A typical share buyback program on the open market can take longer and is subject to not receiving the lowest price for investor shares.

GameStop, which saw shares plummet more than 35% on June 7 following lackluster financial results, wants to purchase up to 12,000,000 shares of its Class A common stock at a cash price of not greater than $6.00 and not less than $5.20 per share.

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On June 7, 2019, the closing price of common stock was $5.02 per share. The tender offer is expected to commence June 11 and to expire at 5:00 p.m., New York City time on July 10.

The offer is being made under GameStop’s $300 million share repurchase program announced on April 2.

“While improving our operations and capturing efficiencies in our business to drive returns for our shareholders continues to be the top priority for the new leadership team, we view the purchase of our shares to be financially compelling at this time,” CEO George Sherman said in a statement. “We are committed to leveraging the core strengths of our business, implementing longer-term growth initiatives and continuing our disciplined approach to capital allocation.”

GameStop Q1 Revenue, Profit Decline as New Management Arrives

GameStop, the world’s largest video game retailer, June 4 reported first-quarter (ended May 4) net income of $6.8 million, which was down almost 76% from income of $28.2 million in the previous-year period.

Revenue fell 13.3% to $1.54 billion, from $1.78 billion a year ago.

New hardware sales decreased 35%, with an increase in Nintendo Switch sales more than offset by a decline in Xbox One and PlayStation 4 console sales.

New software game sales decreased 4.3%, driven by weaker new title launches in the quarter compared to last year. Accessories sales increased 0.6% on the continued strength of controller sales.

Pre-owned game sales fell 20.3%, reflecting declines in hardware and software. Digital receipts decreased 6.7% to $255.4 million, driven by weaker title launches in the quarter compared to last year.

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Meanwhile, collectibles sales increased 10.5% to $157.3 million, with continued growth of trend items in both domestic and international stores.

Chris Homeister
Jim Bell
Frank Hamlin

 

 

 

 

New CEO George Sherman, who joined the company in April, said he has been taking a “thorough” review of the business to improve operational and financial performance, address challenges and execute both “deliberately and with urgency.”

Indeed, to enhance organizational structure, GameStop May 30 announced the hiring of Frank Hamlin as chief customer officer and Chris Homeister as chief merchandising officer. The chain also hired James Bell as CFO. All three report to Sherman.

“We believe we will transform the business and shape the strategy for the GameStop of the future … driven by our go-forward leadership team that is now in place, a multi-year transformation effort underway, a commitment to focusing on the core elements of our business that are meaningful to our future, and a disciplined approach to capital allocation,” Sherman said in a statement.

Best Buy Widens Q1 Entertainment Sales Decline

Christmas is officially over. The post-winter holiday blues hit Best Buy entertainment sales with a thud.

The nation’s largest consumer electronics retail chain May 23 reported a 12.7% drop in same-store entertainment sales to $424 million for the quarter ended May 4. The business unit includes DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software.

Entertainment sales declined less than 1% to $504 million in the previous-year period.

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International entertainment sales dropped 14% to $33 million, compared to an 8.3% decline to $41.8 million in the previous-year period.

Overall, Best Buy upped domestic operating income 24.3% to $332 million from $267 million last year. Revenue upped less than 1% to $8.48 billion from $841 billion.

The largest comparable sales growth drivers were appliances, wearables and tablets.

Domestic ecommerce revenue of $1.31 billion increased 14.5% on a comparable basis primarily due to higher average order values and increased traffic. As a percentage of total domestic revenue, online revenue increased to 15.4% versus an increase to 13.6% last year.

On June 11, CEO Hubert Joly transitions to the newly created position of executive chairman. CFO and strategic transformation officer Corie Barry becomes Best Buy’s fifth CEO and first female chief executive.

Joly appears to relish the transition from day-to-day operations to cushy board oversight.

“I am very proud of the seamless transition we have decided to implement, as it reflects positively on our momentum as well as our focus on executive development and succession planning,” Joly said in a statement.

Report: Sony PS5 Details Revealed

During a recent Sony investor relations meeting,  a PDF emerged with details on the “next generation” of PlayStation, including Blu-ray capability, according to a report in Dealerscope.

In addition to the new CPU and GPU, support for 8K graphics, 3D audio, SSD storage, ray tracing, disc support, and backwards compatibility with PlayStation 4 details already known, according to Dealerscope, the Sony PDF states, “We will leverage backwards compatibility to transition our community to next gen faster and more seamlessly than ever before.”

The move to next-gen previously required buying all new game titles, but Sony seems to be making the upgrade easier this time, according to the report. The Sony PDF also stated the PS4 “will remain the engine of engagement and profitability for the next three years.”

Sony listed Blu-ray, download and streaming options under the capabilities of the next gen in the “long term.” For the “medium term” Sony is looking to boost its PlayStation Now service.

Sony in the meeting also showed how much more quickly the PS5 was able to load and navigate cities in the Spider-Man game.

Sega’s ‘Rock of Ages 2: Bigger & Boulder’ Available Digitally on Nintendo Switch

Sega’s Rock of Ages 2: Bigger & Boulder is available now digitally on the Nintendo Switch at $14.99.

Anyone who buys the game, featuring a combination of surrealistic art, historically inaccurate storytelling, and chaotic gameplay, within the first two weeks of launch will receive a free Binding of Isaac Pack DLC set. The set contains a special Isaac boulder, three in-game avatars (Isaac, Azazel, and Blue Baby), and three Isaac-themed banners to adorn the battlefield and units. The offer ends May 28.

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Rock of Ages 2: Bigger & Boulder features up to four-person multiplayer gameplay; “Utter Chaos,” which expands on the first game with a more diverse selection of units and a larger focus on rock-smashing strategy; improved physics and destructible environments; “ACE Team’s Trademark Quirkiness”; and “Historically Inaccurate Bosses,”allowing players to take on works of art come to life in boss battles featuring the likes of The Thinker and the Great Sphinx, leading up to the all-powerful final boss.

Study: Women Represent Almost Half of Gamers, But Have Different Tastes

There are more than 1 billion female game enthusiasts in the world, representing 46% of that population, but they have different tastes, according to a study from NewZoo.

The recently launched Gamer Segmentation™ study separated gamers into eight personas, some over- and some under-indexing based on gender. NewZoo used new Consumer Insights from its latest round of primary research in 30 key markets.

Across all 30 markets, the top persona among female game enthusiasts is the Time Filler, a person who plays games, typically on mobile, to pass the time. Over a third of all female game enthusiasts fall within this group. The group also exhibits the biggest gender differences, with 36% of women fitting this persona vs. just 19% of men. In fact, almost two-thirds of all Time Fillers are women.

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The second-most prominent persona among female game enthusiasts is the Cloud Gamer, with 17%. Over a fifth of male gamers are in this group, making it their top persona. These gamers enjoy high-quality game experiences, preferably free-to-play or discounted titles, but only spend on hardware when necessary.

Meanwhile, 14% of female game enthusiasts are Popcorn Gamers, meaning they play a little but enjoy watching gaming content far more.

The No. 2 persona for men is Time Filler, followed by the Ultimate Gamer (15%). Ultimate Gamers love all things gaming — playing, owning, and viewing, and dedicate much of their free time and disposable income to the pastime. Male game enthusiasts are far likelier to be Ultimate Gamers than women: 15% vs. 9%, respectively.

Not all personas, however, exhibit clear gender differences. For example, around 6% of both men and women are Backseat Viewers, those who watch plenty of gaming video content/esports on Twitch and YouTube but hardly ever play games.

Filtering female game enthusiasts by age, women who are Ultimate Gamers were most likely to be between the ages of 26 and 30 (19%), whereas Conventional Players and Time Fillers were most likely to be aged 36-40 and 51-65, respectively.

In other findings, Ultimate Gamers were far likelier to be men than women, with men making up just under two-thirds of the group. In addition to all things gaming (playing, owning, and viewing), these consumers are likely to have an interest in computers, electronics, and gadgets and enjoy watching movies in their spare time. Compared to other personas, they are also likelier to live in a household with children. The largest share of Ultimate Gamers are males aged 21-35, accounting for over a third of gamers fitting this persona. Also, 19% of them are aged 26 to 30.

While Popcorn Gamers are also more likely to be male than female (54% vs. 46%), the gender spread is far more equal than some of the other personas. Still, the largest share of Popcorn Gamers are men aged 21-35, accounting for 22% of this persona. Typical hobbies of Popcorn Gamers include listening to music, watching movies and traveling. The largest share of this persona falls into the 21-25 age group (17%). Popcorn Gamers skew toward younger demographics with just under two-thirds of them aged 10 to 35.

Parks: Virtual Reality (VR) Headsets Remain Niche Video Game Product

Virtual reality (VR) has often been suggested as home entertainment’s future technology. New research from Parks Associates, however, finds that the video game industry remains the primary use case for VR headsets.

Parks found that while 25% of domestic broadband households are familiar with VR technology, just 8% of households use it. Among consumers who own or are familiar with VR, 54% use their headset or would use it for gaming.

“Sixty-two percent of U.S. broadband households play video games, and while gamers are a passionate market segment, they can be limited in scope, which has stalled adoption of VR to a wider audience,” analyst Billy Nayden said in a statement. “There has been some notable video content developed for VR, such as Alejandro G. Iñárritu’s short video experience Carne y Arena, which won an Oscar, but overall lack of quality, non-gaming content is inhibiting broader adoption.”

Parks Associates: Expected Virtual Reality Use Cases

 

 

 

 

 

 

 

 

Parks said 15% of domestic broadband households have tried VR, while 52% of headset owners report owning a smartphone-based system. PC-based systems and game console-based systems are the next most popular systems, with effectively the same adoption rate.

Another 28% of game console owners are familiar with VR headsets, and familiarity is even higher among owners of newer consoles.

Content quality remains a challenge for VR headset owners, with 55% of VR headset owners feeling that content for their device has remained the same since they bought their headset and 3% believe it has gotten worse. The report notes the main barriers for VR content development are costs, the demand for interactivity, and limits on content length.

Mobile headsets are capable of playing most non-gaming content in VR but often cannot play premium games and have much lower NPS scores than other headset types. For gamers, PC-based and game console-based systems are the primary VR headset option, though standalone VR headsets are promoted as a cost saver.

“The aim of standalone VR headsets is to offer much of the same premium content as game console or PC-based headsets, without the need for additional hardware like a gaming console or high-powered PC,” Nayden said. “This technology drastically reduces the cost for consumers, while providing a more premium experience than smartphone-based systems.”