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GDC: Daglow: The Real Console War Is On Wall Street
by Kris Graft [PC, Console/PC, GDC]
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March 12, 2010
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Most people measure the console wars by hardware unit sales, but although those numbers can be indicative of a console's success, that's not where the real console war is taking place, independent design consultant Don Daglow said at GDC on Friday.
"The real war is the war on Wall Street," he said. That's where CEOs are judged, and those CEOs are expected to grow their business year after year, or else that stock price will flounder. "[The console war] is not driven by hardware innovation or even creativity," rather stock prices.
In order to grow year after year, companies like Sony, Microsoft and Nintendo need to find out new ways to expand. This is already clear with the "It only does everything" PlayStation 3, and the multifunctional Xbox 360.
The real console war is also occurring in the living room, he said. "If you conquered the workplace and conquered the den, you stick your head into the living room," Daglow said, referring to Microsoft. Services like Netflix, Twitter and Facebook are evolving to become part of the increasingly important console business.
Daglow added that intellectual property battles are also part of the overall war. Companies are expected to create "franchises" today, not just individual games, and these series go head to head in a highly competitive market as game makers try to create the next hit.
But while Daglow said it's important for creative-minded game developers to also know the business side, he reminded attendees, "Never lose sight of why you're doing this. ... You have a privilege and rare opportunity that most people don't have."
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I find it hard to believe your statement that Microsoft has lost money with the Xbox. They're raking it in right now. And PS3 seems poised for profitability in this year.
It is true however that Nintendo dominates them.
Keep in mind that while Microsoft may be making good money, they've also lost a heck of a lot of money honoring warranties on Red-Ringed 360's.
@ Homer (lol)
Did you notice Nintendo's nearly 10X stock price increase within a year after the Wii came out? It went from just below $9/share to almost $80. That means if you'd invested $10k into Nintendo as the Wii was announced, you would have had $100k worth in Stock within a year! *Kicks self*.
Everything is interconnected, too. Sure, stock price is important, but that comes from demand and investment, and you cannot have demand and investment without products and/or services that people want (for better or worse, of course) and that you can sustain in face of the passage of time and changes in tastes, resource supplies, distribution capabilities, and disposal.
I would not agree that Nintendo currently dominates anyone because each company is appealing to different market segments, for the most part. This has been shown in numerous studies that have been reported here on Gamasutra and elsewhere. It's like saying that a Ford Escort outsells a Ferarri. Maybe so, but that hardly means that Ford dominates because the market segments are (mostly) very different.
In fact, I would say that this is one big failing in the current console generation, especially for Sony. The PS2 had a lot of consumers who enjoyed RPGs, especially Japanese RPGs, with distinctly anime/manga/manwa style of art and presentation. There are very few offerings of that nature on the PS3 (or the Xbox 360, for that matter, but I'm mainly talking about Sony's previously established customer base). This means that those customers of Sony's PS2 do not have any products on the newer console that they desire.
Which is exactly why this industry, like so many in this country, is squeezing its people to death...For the love of God, when any of you out there create something successful, PLEASE do not sell your company or go public. When you put the control of your company in the hands of shareholders you effectively give up what it was that allowed you to become successful in the first place -- the ability to make decisions driven by factors OTHER than profitability. The only way to truly REMAIN successful is to have the freedom to make decisions that are not driven by margins and dividends.
As for the original subject of this article, it is a big silly. Microsoft is completely inured from competitive pressures because of its monopoly. No other company in the world except for those with monopolies could have taken the losses the Home and Entertainment division has had to face.
This guy sounds like some moronic self-help guru that actually doesn't know anything. It's not simply about growth, but profit margins. That being said there is a flip size.
For those that claim that shareholders ruin companies, there is the flip side as well where hippie developers waste time and money without pressure to release. The most notable example of this is 3d-realms whose millionaire founders squandered millions of dollars over 10 years from publishers and investors.
A focus on growth can be extremely beneficial to an industry as long as CEO's are focused on the creation of value and not on rent-seeking behavior. If you are not an economist and don't understand those terms, all you have to do is understand the example of what happened during the PS2 era. Sony focused its growth on securing triple-A titles within multiple genres. A Gran Turismo would have blockbuster sales, move consoles, and establish a market for third-parties to release racing games on the console. You saw the same happen with games like Final Fantasy which helped develop the market for RPG's and so on. A focus on growing the audience for video games is beneficial for everyone in the industry.
The more users with consoles out there that like to play games, the better for the developer.
I agree, this is a particularly troubling article. Nothing new, mind you, but troubling nonetheless.
@Tim---Thanks for posting that. One of the wiser posts I've read today.