Scott Steinberg on E3 and beyond

Expert talks OnLive, motion control, the Wii and Sony's bath-time

Games industry analyst Scott Steinberg has foreseen the future of the business in publications such as CNN, ABC, CBS, the New York Times and even Playboy. With E3 2009 kicking off in LA imminently, and a host of big announcements expected, we sat down with the host to gaze into his crystal ball.

What are your highlights for this year's E3, Scott?

Far and away, the biggest highlight this year is seeing the show itself return to grand form. While a far cry from the decadent 70,000-strong spectacles of yesterday, at least the event should recapture some of the magic lost in its previous two, shall we say, underwhelming, incarnations. As one of the world's most exciting and dynamic industries, it's about time we realized the importance of having a public face that projects this image.

But in terms of games themselves, it's hard to fault with an overall lineup that includes titles like Modern Warfare 2, The Beatles: Rock Band, Dragon Age: Origins or Guitar Hero 5 - my top pick being BioShock 2, which aims to pick up where its predecessor left off in terms of sheer intensity, storytelling and overall cinematic impact (God of War 3 is a close second - hooray, high-definition killing rage!)

That said, expectations are also high for possible new hardware from Sony (the PSP Go!, a rumored UMD-less, digital-download-oriented update to the popular handheld, and a potential motion-tracking controller) and Microsoft (the Fluid, a 3D camera which supposedly tracks physical motion, allowing players to use actual gestures to control games). But with the potential reappearance of games like APB and Alan Wake, new announcements from Peter Molyneux's team at Lionhead and more, I'm confident many of the best surprises are still yet to come...

Do you think Microsoft can crack a wider audience through the introduction of motion control technology for the Xbox 360?

Not simply through introducing motion control technology, no - alone, this kind of measure promises incremental audience gains at best. What's more, at this point, it's sure to be perceived as a secondary add-on to the console itself, and therefore a footnote to its established feature set, unlike the Wii, where it's been a well-publicized, core system selling point for some time. However, the company might be able to achieve a more pronounced success here if it introduces software that makes new and innovative use of the control method, allowing players to experience games in a more intuitive or organic manner. Which is to say that it's not enough simply to ape what Nintendo's doing. To making meaningful inroads here, Microsoft will have to raise the bar in some way, or attack the problem from a fresh angle, else the manufacturer runs the risk of solving a problem which there was little demand for addressing to begin with.

Do you see any signs of the global downturn impacting video games?

Unquestionably: Titles aren't selling at the same volume as they previously were, countless publishers are scaling back plans for development and expansion and 8450 jobs have been lost, with a large fraction of that representing 12% of the total North American game industry workforce. Given such a risk-averse financial climate, you're also seeing less risk being taken across the board, resulting in more sequels and licensed properties, less innovative new IP and a harder time for cutting-edge startups such as MicroProse's founder Wild Bill Stealey's Thriller New Media or Curt Schilling's 38 Studios. Mergers and acquisitions are also rampant, e.g. Square Enix's purchase of Eidos and Time Warner's impending bid for Midway, while other studios - Free Radical, Stormfront, etc. - are closing outright.

That said, these sorts of downturns are cyclical, and much of the money that would've gone to large corporations such as Electronic Arts or THQ is instead winding up in the hands of producers of cutting-edge indie titles or online worlds. While audiences inevitably cut back spending on luxury goods in times of crisis, history further shows that people value their escapes, as evidenced by the game industry's overall resilience in the face of tough times. On the one hand, realignment is good for everyday shoppers, who deserve a broader range of options and price points. On the other, games still represent incredible value for the money, even at $60 for 20-30 hours of play time. Wherever you choose to purchase titles - direct from the developer online, via internet portal, using a digital distribution service such as Steam or Impulse, in a free-to-play 3D MMO via the microtransaction model - the fact remains that this is an industry that, as compared to virtually any other, is actually thriving.

How are third-party game makers fairing on the Wii now? Is the lack of big third-party success stories a concern?

That depends how you define success - and how many copies of your game you need to move in order to thrive. With 54 Wii games now million sellers, it's obvious that Nintendo isn't the only publisher that knows how to move units in volume. Realistically though, many of the biggest success stories on the Wii aren't the sort you'd hear trumpeted across the newswires. "Hello Kitty Pajama Pals Parties to the Tune of 300K Units" just doesn't have the same ring as "The Conduit Tops 2 Million Sold," does it? Third parties can do just as well on the Wii as any system - the media simply tends to focus on the larger players in the space, who require that massive numbers of units sell through at retail. Several third-parties out there are doing just fine: They're just doing it by shifting lower-profile games at a fraction of the volume of the mega-blockbusters, and being less aggressive about publicizing it.

Can you see a Wii price cut being introduced anytime soon?

Unlikely: The Wii still continues to be one of the best value systems in gaming, and one that continues to resonate with mainstream and hardcore audiences alike. The laws of supply and demand being what they are, I suspect it'll be at least a year yet until we see any shift here, unless Sony and Microsoft can find a way to put the pressure on and better close the gap.

Can a rival offering ever defeat World of Warcraft's grip on the MMO genre?

At the current point in time, it's highly dubious. But given a couple years for MMOs to continue to soak into pop culture's collective consciousness, it's possible a contender might rear its head yet. Right now, the audience for these titles - due to hardware demands, cost barriers, lack of education, etc. - remains a fraction of its potential size, and the vast majority of that mindshare is concentrated in the hands of WOW. Moreover, people play these games as much for community as actual content, and it's hard to argue with 11.5 million possible friends and acquaintances.

Realistically though, WOW is a juggernaut at this point, and Blizzard remains at the top of its game - it's folly to compete head-to-head. Per The Art of War (and Get Rich Playing Games, but I digress), rivals will stand a much better chance of operating in its shadow by concentrating on more underserved genres, play styles, and business models. Defeating World of Warcraft? That's like saying you want to go toe-to-toe with Madden on the football field - imagine the kind of time and resources needed to even compete in the same league, let alone catch up with the kind of lead the competition has in terms of hands-on experience.

Never say never, but I'd imagine it's going to be a free to play game that speaks to a broad or mainstream audience at some point in the near future (when the total MMO player base is wider) that will be the first to give WOW a real run for its money.

When would you like to see Sony introducing a price cut in order to aid sales of the PS3?

ASAP, although given the system's raw power, Sony can't help but take a bath on pricing. While the console's engineered to be a viable platform for years to come, you can't argue with the public or current market conditions. Saying "let them eat cake" when all everyone wants is meat and potatoes currently is no way to prepare the banquet table for a successful feast.

What do you make of the OnLive 'cloud' gaming service?

It's an intriguing possibility at this point. Let's put it this way - if the company can pull it off technically, we may see the beginnings of a new way to experience games. But there's still a huge number of huge 'ifs' here, from whether it's actually a practically feasible solution to implement to whether or not someone who can't afford a decent gaming rig is going to be able to pony up for the required broadband speeds to begin with. Only time will tell...

Can you foresee further consolidation among big game publishers?

Undoubtedly - video games are a young industry, much as movies were back in the early 20th century. Just as the latter matured and power eventually consolidated in the hands of a few studios capable of footing the ballooning costs of production, so too do I expect we'll see a similar progression in the days to come for interactive entertainment.

Of course, that's at the high-end, AAA blockbuster level. You'll see a greater degree of fracturing at the opposite end of the spectrum as thousands decide to go it solo with guerrilla-style indie, casual, mobile, Flash-based and online productions. Realistically though, it's the guys in the middle - publishers such as Eidos and Midway - who'll continue to be squeezed out due to a lack of cash in-hand, less marketable or robust IP catalogue and games of nondescript or average quality.

Has the success of the iPhone as a gaming platform been a surprise?

Anyone who tells you that they expected just how huge a vehicle for video game sales the platform would become is lying. Even the platform's most ardent supporters' expectations have largely been blown away at this point. But realistically, to answer the question, it depends entirely whom you ask. To old-school publishing outfits who focused on multimillion-dollar blockbuster next-gen outings targeted at core gamers, perhaps. But a system featuring Apple's cachet and engineering expertise that's heavily marketed, most enjoyed by tech-savvy mainstream users and offers effortless access to thousands of titles at a variety of comfy price points anytime, anywhere, right from one's pocket? Let's just say that, per the same sentiments echoed in the Videogame Marketing and PR book series, I suspect most casual game developers are in a good position (were they feeling especially cheeky or pompous) to shrug their shoulders and say 'told you so!'

Thank you for your time Scott, enjoy this week's expo.

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