Microsoft Points Still Don't Make Any Sense

Ever since my little brother convinced me to try out Steam back around 2008, my consumption of PC games has increased dramatically. Steam is such an incredibly convenient service; it only takes a handful of clicks to buy something, and their occasional super sales allow you to pick up some great stuff at good prices. It should be no surprise that Valve has reported 100% growth for the platform in 2011.

All the money I've spent on Steam has made me wonder why I've hardly spend any money downloading games or videos from Xbox live. I've owned my 360 since the fall of 2005; through that whole time, I think I've bought one movie rental, two TV episodes, and one game (Dead Rising: Case Zero). In contrast, I own at least twenty games on Steam.

I think the reason that I've been so hesitant to spend money on Xbox Live downloads is because of Microsoft's ridiculous insistence on pushing Microsoft Points as a means of currency. You can buy Microsoft points in 400 ($4.99), 800 ($9.99), 1600 ($19.99), 4000 ($49.99), and 6000 ($74.99) increments. Games and rentals on Xbox Live seem to run around $15, so customers tend to be forced to purchase larger increments of points, with the remaining point balance just sitting uselessly on one's account. I suppose Microsoft thinks that it can make more money by connecting content to their make believe currency (and now that I think of it, I suppose it simplifies things across the global market), but for me it's another step in the process and makes me less likely to want to purchase anything. Steam tells me exactly the price of a game, in real US currency, and in a few clicks I can purchase what I want. Microsoft throws an extra step into the mix by forcing me to figure out how many points I'd need, and then add them to my account before I can buy what I want. I think Steam's success (and iTunes success in the music and video rental marketplace) proves that it's important to make it as easy as possible for customers to pay for the exact content they want. Any extra step, like Microsoft forcing customers to buy its abstract currency, is an added step that could force a lot of people away. I really think they could make more money off their digital downloads if they just charged for the cost of the content in local currency, rather than forcing people to buy their points. Of course, I have no actual research to back this up, simply my own personal experience. I'd be really interested to see if Microsoft carries along the points system to the new console they're working on. I'm sure they're always looking for ways to maximize their revenue stream: if they wind up ditching the Microsoft points system, then I suppose I wasn't the only one with an aversion to buying from Xbox Live.

Sony, Nintendo, and the Death of Handheld Gaming

The blog Dubious Quality is probably one of my favorite blogs on the internet. Whenever a new post pops up on my RSS reader, I tackle it immediately. I don't really know much about the blog or where it came from, other than that the guy who writes all the posts is someone named Bill Harris. He posts all sorts of stuff, from funny little stories about his precocious ten-year old, to random interesting links all across the internet, to musings on new indie games.

I find myself totally fascinated by any post in which Harris decides to analyze console sales numbers and revenue; I really can't look away. He's really sharp when it comes to analyzing the business side of the console industry, and I've haven't found anywhere else in the video gaming blogosphere (with the possible exception of Matt Matthew's Behind the Numbers column at Gamasutra) that can make me so interested in the business strategy of our three major video game console companies.

All that said, I really want to spotlight this post over at Dubious Quality. In short, things are looking ugly for Sony and Nintendo. How ugly? Take it away, Bill:

In summary terms, only three months ago Nintendo and Sony were projecting a combined fiscal year profit of $997M dollars. Three months later, they're forecasting a combined fiscal year loss of $1.381B. 

Yikes. Harris goes on to break down these numbers, explaining that both companies have very different problems and reasons for this loss. Sony was betting on sales of LCD TVs to fuel the overall company's growth and offset losses in other divisions. Unfortunately, LCD TV sales didn't hit the crazy-ass target Sony set (60% growth from last year) and worse yet, they're projecting LCD TV sales to shrink next year. There's barely any growth in the PS3 division, so Sony can't count on that long-term money sink to offset losses elsewhere. It makes me wonder about Sony's strategy for the next generation. We already know about Nintendo's Wii-U and we're starting to hear rumors about Microsoft's new console, but I can't say I've heard much about what Sony will roll out to replace the "future-proof" PS3. I'm not sure, however, that Sony can afford to roll out a very expensive and flashy console this time around, especially if Microsoft is going to make the new Xbox cheaper than the 360.

Now for Nintendo. Boy, did I love Nintendo back in the day, but I've been off the bandwagon since the Gamecube, when it seemed to me like the company was starting to ignore third parties and instead rely on constant re-releases of their nostalgic franchises. Anyway, enough of what I think. Here's what Harris has to say:

Net sales for the first six months of the fiscal year were down over FORTY PERCENT from last year. Catastrophe. Surprisingly, though, it wasn't caused by the Wii, which is still forecast to sell 12 million units this year in advance of the release of Wii U.

What pushed Nintendo off the cliff were handhelds. They've lowered the annual forecast for DS sales from 9 million to 6 million, and guess what those 3 million people aren't buying? The 3DS, apparently, because even though Nintendo stubbornly stuck to its forecast of 16 million units for the fiscal year, they've sold only 3.07 million in the first six months.

Harris goes on to say that handhelds have always been a cash cow for Nintendo, and he's absolutely right. The Wii's sales will continue to decline, and I am not at all sold on the Wii-U, which seems to me as much of a gimmick as the Wii was (perhaps I'll post about that another day). The 3DS rollout has been a mess, and it's not going to get any better. As Harris says in his post, traditional handhelds are in serious trouble from cellphones (Android and iOS) and tablets. There are already tons of great games for these platforms, their install bases are much greater than what a traditional handheld could offer, and the pricing structure of cellphone and tablet games is much more attractive to the consumer ($5 or $10 for a great iOS game, versus $40 for a traditional handheld? Harris calls this "apocalyptic" for traditional handhelds, and he's right.)

It may take a few years, but I think cellphone and tablet gaming will ruin the market for traditional handheld gaming, and Nintendo's golden goose will be dead. I'm not sure if Wii-U will be able to make up the slack, and if it doesn't, I can't help but wonder if that forces Nintendo out of the hardware business much like Sega many years ago.

But then again, what do I know? I'm just some random blogger.