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Media conglomerates turn their backs on consoles

By on November 16, 2010

What a difference a week makes.

Last month, I wrote a blog post saying how I viewed the future of games in three parts: AAA blockbusters (the “movie” model”), persistent ongoing games (the “television” model) and independents.

I suggested that there was only room for, perhaps, seven or eight players making AAA blockbusters on a global scale. I said that EA, Activision, Disney and Warner were probably safe in their seats for now, but all the other major publishers were fighting for a positiion at the top table.

It looks like I was wrong about Disney.

Disney turns its back on console

CEO Bob Iger said that DIsney:

“probably will end up investing less on the console side than we have because of the shift we’re seeing in consumption.”

Walt Disney logo

Disney has been on an acquisition spree recently, acquiring social games publisher Playdom for up to $763 million in July 2010 and iPhone games company Tapulous just a few weeks before that. Iger has promoted Playdom CEO John Pleasants to co-president of the games business, a clear sign that social and online games are an increasing priority for the company. This latest announcement suggests that, notwithstanding Disney’s ownership of Black Rock (racing), Junction Point (Warren Spector’s Epic Mickey), Wideload (Alex Seropian) and Propaganda Games (Turok), Disney is moving away form the triple-A blockbuster and towards casual, social and online games.

Which means that there is another slot available at the top table of AAA publishers.

Viacom retrenches from games as well

Meanwhile, another major media conglomerate steps back from gaming ambitions. Viacom, which owns the Paramount film studio, is selling Harmonix, the makers of Rock Band that it acquired in 2006 for $175 million, and “exiting the games business”, according to the LA Times.

Viacom CEO Philippe Dauman is quoted as saying:

“The console game business requires an expertise and scale that we don’t have."

That’s pretty unequivocal. The LA Times reports that it leaves the future of Viacom’s console development partnership with Jerry Bruckheimer in jeopardy. .

Two majors down, how many to go?

I’ve always thought that film studios had the right investors and financial profile to make console games (if not the right skills, technology know-how or timescale expectations). But Disney and Viacom appearing to be withdrawing from the race, and News Corp never really entered it.

Both Warner and Sony are still very much in the game (I exclude Sony from my top-table analysis because format holders have a different set of pressures.)

So is Warner the only major movie business that expects to have its own console activities? And what does that mean for independent developers looking for publishers to fund their next title?

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
  • Anonymous

    Interesting.

    I doubt that Disney is departing console gaming entirely though: They have quite an investment in smaller-scale franchise tie-ins like DS games for their movies etc, but there’s less of a case for making AAA blockbuster games for those franchises.

    I agree that the number of available slots for being a big publisher is shrinking though. In real terms, it’s becoming like film in the there-are-only-7-seats-at-the-table sense. This leaves lots of interesting questions as to who will survive, merge or die.

    At the moment I think the only ones who can count on as being safe are:

    * Nintendo
    * EA
    * Activision
    * Microsoft
    * Sony

    Beyond that, there’s probably no more than 3 slots, as you say. Contenders for which include Konami, Capcom, Ubisoft, THQ, Atari, Take Two, Sega, Square Enix, Disney, Warner, Codemasters and some others. It will be interesting to see who gets bought, eaten or collapses.

  • Kai Oehler

    This is purely a subjective take, which doesn’t factor in business considerations much, but I’m wary of the trend of moving away from consoles. The move itself is great — I love downloadable content, games, extras, etc. But then again, I’m a lifelong gamer.

    What I fear is how the current definition of “games” may fade away as play-as-you-go ish models gain the larger market share. Personally, I don’t mind such a development; I like games regardless of the package or form.

    The rub is in the disappearance of physical media, the visible physical media that introduces younger/new generations of game players to the concept of video games. What I’m getting at is the transition to a strictly digital form of gaming may be too fast and shortsighted in terms of grooming the next generation of gamers as consumers. Right now the market that is gaining momentum are people who did not play games previously, or only sporadically, who are now willing to do get into it more on a casual basis. This article doesn'(t necessarily refer to games minus console equals casual gaming, but I think such the existence of such a trend is undeniable.

    It may be a very old-fashioned worry, but I do feel the concept of gaming changing too fast. Just because it works now, doesn’t guarantee anything for the future. Look at what the HD generation of consoles did/is doing to developer studios and the total job loss in the industry!

    The big picture needs to be evaluated. Perhaps this is the result of such evaluation, but it seems awfully shortsighted to me. Because whisking away package titles won’t impact the next digitized generation of children, so to speak, but I feel that physical media in one form or another is essential to capturing market share over the long haul.

  • Kai Oehler

    Er, sorry for the conclusion and grammar issues.

    Edit:

    PERHAPS whisking away package titles won’t impact the next digitized generation of children, so to speak, but I feel that physical media in one form or another is essential to capturing market share over the long haul.

  • Daniel Kromand

    What intrigues me about the Disney case is the lack of leveraged IP in their AAA portfolio: In the AAA section I can only find Epic Mickey, Kingdom Hearts (SquareEnix) and the newly canceled Pirates of the Caribbean. Furthermore their other AAA-titles have not been integrated with their other media channels, which seems obvious when you control several media platforms.
    Or maybe, it is simply a realization that they do long-term games (what you describe as the television-model) better and that their IP and target market fits this type of game better, for example Hannah Montana to use a slightly dated show.
    I can’t really supply any good answers myself unfortunately….

  • A G Aitcheson

    I’m not surprised it’s the TV and film companies that are ducking out. They have so many IPs to work with they would be much better off using their branding on a large number of small-scale social games rather than a handful of expensive high-risk AAA titles.

    EA and Activision are likely to stay because their major IPs are AAA console games, so that’s all they really have to work with.

    Take, for example, Disney’s Winnie the Pooh franchise. You could make a facebook game, a large number of iPhone games, educational PC games, all with a lot of freedom on what direction to take them. However, with EA’s Call of Duty franchise you can make FPS’s and that’s about it.

    The big established brands and franchises are so valuable, and with the large TV/film companies it’s probably more cost-efficient to use them in other forms of game than high-risk AAA development.

  • Kai Oehler

    What immediately comes mind after reading your post is the Halo series. Novel spinoffs in addition to other commercial goods whether it be trinkets or costumes, Bungie (and Microsoft, presume) has managed their brand quite well in extending it to other media forms.

    Another good example (other than the obvious pokemon) is the Inazuma Eleven series in Japan — first came the game, then created an animated television series, comic books, and other merchandise.

    I think just the opposite off your example can happen quite easily if publishers tiptoe the crossmedia line very carefully. In such case of developing a series, to me it makes most sense to start small and then expand based on reception. Live Arcade or Playstation Network may serve as good platforms for initial release. But the next super successful FPS, I agree, doesn’t leave much else to expand on, other than being optioned for a film (which in such case, there is an enormous stigma against game-movies to climb over.) A lose-lose situation is easily imaginable for publishers.

  • A G Aitcheson

    Good points. My point is really that, because of the versatility of TV and film franchises compared to game franchises, it’s a lot easier for companies like Disney to step out of the AAA market and focus on new game markets.

    I wonder how much Microsoft makes off of Halo merchandise as opposed to Halo game sales, though, although I do see that Pokemon is a great example of what you’re talking about. Looking at Disney franchises however, games can slot nicely into an already lucrative merchandise market. They don’t need to make a AAA game in order to sell other products based off of their franchises.

    I think that turning games franchises into transmedia products is a risk and effort that companies such as Disney don’t need to take, but something that could benefit publishers who work predominantly with games.

  • Anonymous

    (Sorry, don’t mind me. Just testing something with my commenting)

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