Who are Sony and Microsoft's Real Customers?

In the latest battle of the console wars, Microsoft and Sony are once again facing off as rivals and adversaries to take over the share of gamers.  But this time, things are different, even if a lot of it appears to be the same.

Both companies plan on releasing their consoles in November this year, which no longer gives Microsoft the first mover advantage it had with the Xbox 360 over the Playstation 3.  The Xbox 360 released in 2005, with the Playstation 3 coming almost a year later.  This gave Microsoft the ability to position itself as the leader of the last console war.  They released exclusives and got the world buzzing with its HD graphics and (at the time), HD-DVD drive that was meant to oust Sony's Blu-Ray technology.

However, even with the much more expensive price point, Sony did manage to sell lots of consoles.  Their marketing plan was a little different; they realized that they, along with Microsoft, would lose money on the consoles outright, and that the true money to be made was from licensing and software.  Sony managed to build a mound out of a molehill and got researchers on-board with their machines.  Considering how much processing power their console had, they managed to get researchers to use their machines for data analysis and supercomputing by networking the devices together, and for a time also unofficially pushed the fact that YellowDog Linux could run on their platform.  Microsoft certainly did well with the core gaming market, but managed to lose to Sony in this particular department.

After all of the controversies of the "Anonymous" hack on the Playstation Network and security credentials being stolen, it seemed clear cut that people were willing to pay for the online gaming service run by Microsoft (Xbox Live) since there haven't been any major outages or breaches with the Xbox 360 console.  But now, with this next generation, it seems like Microsoft may be shooting themselves in the foot due to poor strategic planning and changing their customer base.

From the technical side, both consoles roughly are the same.  They both sport 8-core 1.6 GHz processors, custom AMD graphics chipsets, and Blu-Ray drives. They have the same amount of RAM, but Sony chose to go with GDDR5 as opposed to Microsoft's DDR3.  This should give Sony a slight advantage in graphics, but will it really matter if the gameplay is roughly the same?  In short: yes.

This is where Microsoft made some poor decisions and seemed to decide that their customer base is more of their partners and other vendors rather than customers.  With consumer-adverse decisions such as not allowing users to play used or borrowed games without paying extra, an "always-on" internet connection to verify that the game and console have not been modified (of which it checks once every 24 hours or even locks you out of single player), and the "always-on" Kinect which creates privacy issues, the community was outraged.  Microsoft also demoed more TV-centric features, which again takes away from the hardcore gamer market they had the strangehold on with the last generation.  The community in turn has humorously referred to the new console as the XBONE.

Microsoft's new customer at this point are the publishers and developers.  While it's great that we can go to Gamestop or Amazon to purchase a used game, the original developer and publisher get exactly $0 of these transactions except if the user purchases downloadable content (DLC) or has to pay an additional fee to play online.  By effectively disallowing this practice unless the user pays again, Microsoft has taken away the ability for gamers to trade and swap games and thus put power back in the hands of the devs and publishers.  This may indeed lead to more exclusives from big names since they'll be able to cash in far more than with Sony, but if customers stay away from MS as well, this could be devastating.

Microsoft also is no longer allowing indie developers to publish games like the PC market allows on Valve's Steam service.  They must now either find someone to distribute the game for them, or come to Microsoft directly.  The advantage that devs had with the last generation was that they didn't have to pay additional fees for this to happen, which caused amazing games such as Braid, Limbo, and Trials HD to become indie smash hits.  If they are taking away rights from the "little guys" to do what they do creatively, gamers may also refuse to buy the console.

Sony launched this short video (below) insulting Microsoft's decision while quietly moving towards charging for the online gaming service.  But considering that many people would indeed pay to play online if they knew their credentials were secure, there has been less backlash than expected on this topic.  Presumably, the extra costs should go in to additional security needs and features, although that hasn't been explicitly said by the Sony camp.  They also managed to hurt Microsoft's launch event by announcing that their console will be approximately $100 cheaper at launch, which has really sank Microsoft's ship.  Even if the PS4 is better, Sony made some smart moves to make sure that Microsoft would be hurting straight out of the gate.

So where is Nintendo in this picture?  Well, they seem to have found themselves in a rather different market, taking the Blue Ocean approach and going for the casual and non-hardcore gamer crowd.  There is much debate when it comes to Nintendo and where they plan on going, but with this split personality of trying to be a gaming machine while trying to appeal to everyone young and old has left it winning practically nothing.  Sure, the Wii sold amazingly well when it was released, but how many Wii owners do you know who are still playing games aside from showing the random friend how "Wii Sports" works?  The Wii U was certainly catching many people's eyes, but I do not know a single one of my friends who bought a Wii U.  Many of them had bought the Wii and did not want to get burned again, and I certainly don't blame them.

So who will win the war?  It's tough to say when the consoles are still a good 4-5 months away, but if strategy and knowing your customer plays a part, Sony is running away with this one.

Sources:
1. The Guardian: Xbox One vs Playstation 4 at a Glance: http://www.guardian.co.uk/technology/gamesblog/2013/jun/18/xbox-one-vs-playstation-4-at-a-glance
2. Blue Ocean Strategy (Kim and Mauborgne, Harvard Business Review, Oct ‘04)
3. Official Sony Playstation Used Game Instructional Video: http://www.youtube.com/watch?v=kWSIFh8ICaA
4. Kotaku - XBONE Image.  http://img.gawkerassets.com/img/18ohlm7r18whljpg/xlarge.jpg

Wisdom Tree: Lazy, Uninspired Corporate Strategy at Its Finest

     It wasn't easy being an independent game developer back in the NES era. Nintendo was famous for its tight control over games released on its system. Nintendo considered its console a toy for children, and any hints of sex, blood, beer, or religion were forbidden. Passing Nintendo's quality checks wasn't easy, either. You had to have money, great programmers, a good reputation, and a relationship with Nintendo to get a game out on the NES.

The Color Dream team

     "Color Dreams" had none of these things. Just a few guys with a small company and a desire to make games, even if those games were sloppy rehashes of other NES games. Let's not pull any punches here; by their own admission, most Color Dreams games were terrible. The really impressive thing about Color Dreams was that, through the work of Dan Lawton, they were able to reverse engineer a way to beat out the NES lockout chip, which prevented unlicensed games from playing on the system.

The NES Lockout Chip

     From 1988 to 1991, Color Dreams was content making unlicensed knockoffs of other NES titles. Yes, some of these games were terrible, but you have to admire a company that puts out 6 titles a year! Even for Color Dreams' best titles, the problem was in distribution. At this time, Nintendo wouldn't allow retailers to sell unlicensed games (with the threat of stopping shipments if they did.) Since toy stores made up to 40% of their profits from NES game sales, most of them were too afraid to purchase Color Dreams' games. This, coupled with the general badness of many of the games drove people away from the brand.

Tell me you wouldn't play
 a game called Robodemons?

     Here's where the corporate strategy comes in. Now, remember that Nintendo's censorship policy meant that religious iconography was forbidden in games? In 1991, Dan Lawton had the strange idea of marketing the games to Christian Bookstores. Here's how he put it: "The Christian market was attractive because they didn't have any Nintendo games at all, and didn't give a fig about Japanese distribution. In fact, if you told them that Nintendo might be angry about them selling our games, that made them want to sell them even more. Christian book stores number about 9000 at any given time, and they all wanted to have our games. That's even more stores than Toys R Us." Now Dan wasn't a very religious guy himself. That same year he had licensed the rights to the movie Hellraiser, and made a game called Robodemons, but as you'll soon see, this was a genius move.

Bible Adventures

     Color Dreams became Wisdom Tree, and worked hard to promote their games in the new market of Christian bookstores. Wisdom Tree sent promotional materials such as Bible Adventures displays and VHS tapes showing gameplay. "This game promotes Bible literacy and teaches children about the Bible while they play a 'fun and exciting' Super Mario Bros. style video game!" said one video. Bible Adventures broke up gameplay with bible verses, and was basically very similar to Super Mario Bros 2.

     These games were no better than Color Dreams earlier games. In fact, many of them were exact copies of Color Dreams games with a few graphics changed. Menace Beach, a skateboarding game, was renamed Sunday Funday. The main character was redrawn holding a bible, and his girlfriend was redrawn into a Sunday School teacher.

    Whereas before Color Dreams had tried to use sex and violence to differentiate their games, now Wisdom Tree was able to use religion. Thanks to Nintendo's censorship policies, Wisdom Tree had found a completely untapped market. Bad gameplay didn't matter to Christian Bookstores, and Bible Adventures sold 350,000 copies. 

     The programmers and team had no interest in Christian games themselves, and after Wisdom Tree had become a successful business, many left the company. But Wisdom Tree kept going, making money by rehashing Color Dreams games and rereleasing them. In fact, Wisdom Tree is still around today, making a resurgence by rereleasing their games on their own plug-and-play consoles and for Windows. Google them, you can visit their website and play their games online!

Well, what can we learn from this strange tale? Here's what Color Dreams/Wisdom Tree did right:

• There was no law against unlicensed games-- Lawton's tenacity and engineering skill in reverse engineering the NES to make unlicensed games was a pretty clever move.
• They released a LOT of games, and worked long hard hours to do it.
• When they got locked out of their primary market by Nintendo, they found a new market and fulfilled a need there.

Rosstin is an indie game producer who is about to release a game called King's Ascent on Kongregate. Check out his latest game on Facebook! https://www.facebook.com/KingsAscent