Console Makers Online and On Top
DFC Intelligence has spent a great deal of time researching the online game market and making forecasts on not only how this market is likely to grow, but also how it is likely to integrate into the existing video game and interactive entertainment market. One of the key areas of interest in today's market is how important will online games be for the new console systems coming on the market. The short glib answer is that online games will probably be a more important feature for console systems over the next several years, but once again the traditional retail model is likely to be the dominant driving factor when it comes to how the new game systems build an installed base. Over the past six years, all facets of online games have come a long way. However, online games are nowhere close to being the tail that wags the dog that many were predicting.Many hardware systems The goal of the three big hardware manufacturers (Microsoft, Nintendo and Sony) is to sell as many hardware systems as possible to build the largest possible installed base. Online games are only effective to the extent that they help accomplish this goal. This is especially true considering the current situation where an online service is expensive to build and maintain and even a full-fledged service like Xbox Live commands a low subscription rate. In other words in the reality of today's marketplace, most online console game services are loss leaders. We currently know Microsoft's online strategy, but things are a little more hazy when it comes to Nintendo and Sony. In March Sony did reveal some of their online plans and that has led many to argue that Sony is planning to go head-to-head with Microsoft on online games. On the contrary, we think that the sketchy announcements so far seem to indicate that Sony is looking at putting more of the emphasis on the raw horsepower of the PlayStation 3, with a limited emphasis on online games. Obviously many details have yet to be revealed, but so far that is the way it is looking and Sony clearly has some solid tactical and strategic reasons for not investing heavily in online games. In our view what Sony has announced so far for the PlayStation 3 and online connectivity looks a lot like the PlayStation 2 with an online store and some inexpensive community features added on. Open Internet Once again, with the PlayStation 3, Sony is emphasizing the open Internet idea. In our view this translates into: "we are not spending a lot on online services, but we will let others build it if they want to." Clearly this is not what Sony is actually saying, but like the PlayStation 2 the main point is that online game play is free right out of the box. If third-parties desire to build their own services and charge for them then they are welcome to do so. Sony is spending a great deal of money to build the basic system that makes the PlayStation 3 the raw horsepower leader. Right now they probably don't need the added expense and headache of a full-fledged online service, especially if there is no evidence it will get them to their goal of selling more hardware systems. We should emphasize that this is just our view and many will argue that the Sony PlayStation 3 Network Platform (the working name) will offer a more robust solution than Xbox Live. Online games were fairly prominently featured in Phil Harrison's recent GDC keynote. This has led many to speculate that Sony has finally become a convert to the online world. Harrison talked about such concepts as episodic content and games starting to have the social currency of TV shows like Lost and 24. It is the idea of a shift from a disc-based world to a network-based service business. This all sounds very cutting-edge, but it also gave us a strong sense of déjà vu. At GDC 2006 we started to wonder if we were back at GDC 2000.
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