Hiroshi Yamauchi, Nintendo's president, has some interesting observations about games in this interview at Video Senki. Here's his comment about all the venture capital that has been poured into game companies the last couple of years.

"They give money to people that really should be unemployed, and they in turn round up some friends, start a company and begin creating software. But is this really the best way to go about this right now? The more amazing graphics and sound you put into a game, the longer it takes to finish. Not just a year, but now, more like a year and a half or two years. So then your development costs balloon, and when you finally put it out you have zero guarantee of it selling. That's what the game industry is today.

"Because of that, I've been saying since last year that this industry will undergo a major shakeout between now and next year. The general public doesn't realize it yet, but most people in the industry know it's happening. I've just been saying that pretty soon, even the public will be forced to recognize what's going on."

Is Yamauchi right? Have game companies been seduced by the promise that better graphics equal higher sales and are in for a rude awakening?

It was expected. The world is going towards a general recession (slowly hopefully). The first to go are usually these type of businesses, which we are already seeing in the overhyped E-business area. Many of the game producers are virtual black holes where money burns faster than a supernova. When VC firms see their capital shrink they will (and are already) scale down and go for sure investments (ie traditional business).

So yes I am expecting it too.

Marcus

I think he is definitely right! I read the article yesterday, and he brought up the multi-platform argument. He felt that the budgets of some of these games are outrageous. On the PC side, look at diakianta, max payne, Duke Nukem forever, and the many other titles that have been in production for 2-3 years. By the time the games see the light of day, there all ready million of dollars in debt. How the hell are you suspossed to make a profit, when your deep in debt! Yamauchi said he understands multi-platforming, but he also understands that consoles make mnost of there money off exclusive titles. Look at nintendo: Zelda, Mario brothers, Donkey Kong, etc.. If you want to play these titles, you better get a Nintendo system because the PS2, X-box and dreamcast will never have these games. Then you look at the PS2 and X-box. A lot of the games that are going to be on the PS2 will be on the X-box as well. So it doesn't force the consumer to buy that one system, cause the other console will have the same games. And I agree, it can and will hurt the console industry. In addition, why get the x-box when you can play halo, Munches oddysee and probably the majority of there other titles on the PC? I also agree with Yamauchi when he stated early that microsoft is going to get killed in the console industry. Yamauchi is a very smart man, and I have to agree with everythinghe had to say.

I know a shakeout is happening. However I assume that it was mostly in the computer gaming industry. I have several friends in the game development field and they are having trouble finding work. Companies are looking for people with console experence or game projects that can be done in under a year. However Hiroshi Yamauchi perspective is mostly towards the Japanese market and whats good for Nintendo and I'm not sure how much of his comments apply to the industry as a whole. The multiplatform strategy only hurts "nintendo" They were able to grab a strangle hold on the market in the 80s because if you wanted to make a game on the NES you had to only make games for the NES. Multiplatform has been going great for years and I can't see it stopping. It doesn't hurt the game makers to have their title available to the most customers, customers aren't hurt by the selection, and the console maker isn't hurt for having a beefy library. The only time someone is hurt is when a title isn't available. Yes there is some danger of a port not selling but I think the risk are small.

Any shakeout in the console market is just because of the generation change over that happens at every generation change over. There where similar reports that the "crash of 84" would happen again in 89 and 95. I think the same is happening here and 2002 things will be going great again.

Interesting enough, a link from that article talks about how sega is "behind the ball" when it comes to the Xbox. Since the Xbox is basically a pc, which the Dreamcast is sort of like, it isn't a big leap.

there is a "shakeout" though i dont think it will hinder the ppl who love to make games. . . look at Sega of Japan. . . they're a poor horse finishing last yet they keep on trotting (and making fine games as well).

this shakeout will be felt not only console but in the pc market. . . but there will be developers that dont care so much about money (at least not the first priority) and only want to make great games. . . sounds cheesy but i am optimistic that the better developers will stick with it. . . and if not theres always the yung ones to pick up the slack.

many of these developers are "highly" employable (ie. the Valve ppl gave up cushy 6 figure income jobs at MS to make games), his saying they are otherwise unemployed workers is kind of an insult imo. some of these game developers (those that dont make "hits") are better off in a non gaming field where the work is steady and probably offers more income(generally speaking).

but anyway, it all ties into the slow tech market and whatnut. ..

Yamachi looks to be feeling the crunch like everybody else, since all Nintendo has left to bank on is Mario, Zelda, Pokemon etc. .. they wont last forever. . . he sounds desperate.


etc

"Yamachi looks to be feeling the crunch like everybody else, since all Nintendo has left to bank on is Mario, Zelda, Pokemon etc. .. they wont last forever. . . he sounds desperate."

I think Nintendo is bulletproof. Not only do they have those great licenses you mention, but they own the handheld market too.

The rumor is that they're shooting for a $199 pricepoint for Gamecube, also. If they hit that and Microsoft and Sony don't also lower their prices, they'll be in a nice position.

They need to get the Gamecube out this year, though.

"Any shakeout in the console market is just because of the generation change over that happens at every generation change over. There where similar reports that the "crash of 84" would happen again in 89 and 95. I think the same is happening here and 2002 things will be going great again."

I think it will be great for consumers because we'll have a lot of games and systems to choose from. The problem will be felt by game companies that are banking on sales of next gen games. 3DO has already been hurt by lower than expected PS2 game sales. The console market hasn't been big enough for three systems in the past, so I'm not sure that three can make it this year when the new ones are released.

Sony, Microsoft, and Nintendo have deeper pockets than Sega, at least.

Well the playstation 2 is a problem child. From the hardware buyer perspective its a great little unit. Play ps1, ps2 and dvds all in the same box. Thats the problem. Consumers have the choice of two other activities than buying ps2 games and that appears what is happening. Like most launches, the launch titles are rushed and aren't all that much fun. So ps2 owners are clearly just bidding their time until some good games come out. Sure, everyone bought Tekken2 and SSX so they are buying the unit to play ps2 games.

In my opinion, the Gamecube is going to have the thoughest time becoming the leader or even in second place. The PS2 and Xbox have far greater developer support than the GC. Around 270 and 200 with the GC at less than 25. Yes nintendo has the mario and pokemon universes to support the GC but both are fading. The ps2 is a lock for1st or 2nd place. Unless Microsoft screws up by making the Xbox amazingly expensive, poor quality, or something really stupid, I see the GC playing a very minor role in this generation. The GBA on the other had I see doing very well.

"I think Nintendo is bulletproof. Not only do they have those great licenses you mention, but they own the handheld market too. "

Yeah, I saw a chart in Inside magazine that showed sales of the most popular licenses, and Pokemon absolutely destroyed everything else out there: sports, X-men, everything.

But I also agree with Mtkafka, that gaming will feel the crunch, but it won't disappear. A few dedicated developers with some capital will continue to make titles, and if the competition is reduced, they may show good sales. Then investors see that and start looking at gaming again, until the market gets crowded again and profits aren't pleasing.

It's a cycle that sort of resembles an ecosystem, where a predator/prey ratio fluctuates around an equilibrium. Right now, I think we're on the down side of that fluctuation.

"But I also agree with Mtkafka, that gaming will feel the crunch, but it won't disappear. A few dedicated developers with some capital will continue to make titles, and if the competition is reduced, they may show good sales. Then investors see that and start looking at gaming again, until the market gets crowded again and profits aren't pleasing."

Oh yeah, I don't think it will disappear. One thing the game industry learned from the crash of the early '80's is that while you may be able to foist off drek, you can't foist off complete and utter drek game after game, especially with high profile licenes like Pac-Man and ET.

Can three console systems survive? Probably, because the parent companies are so strong. Can all three thrive? That's a tougher question.

I'm not very positive about the Indrema though. I have to think they're building that with the hope that someone is going to buy them out.

When you guys say gaming, what do you mean? If you mean console gaming is going to experience a downturn, I disagree. We're way too close to the success of Playstation to say that nothing can ever take its place right now. Consumers are in a waiting period thanks to system releases in the "next generation" being spread out over 3 years. Dreamcast's "failure" can largely be attributed to the waiting period. Everyone knew the games were great, but they held out to see if all the other hardware would be better. It makes no sense really because the hardware is only as good as the software and when all is said and done, the DC may end up having the best games overall. Certainly it has broken way more new ground through the online play and the variety of titles.

If you mean PCs, it's never going to disappear or come close simply because it's an open platform. It can't die. There will always be someone that sees the huge installed base of PCs and make a game for that audience. The costs are much lower and the marketing is often easier to do. Get a demo out there that's indicative of a great product and you most likely will succeed. We may see some large publishers decide it's not worth competing in the PC space, but that only means the little guys can do better. Personally, if it means a return to making great games instead of lousy cinema tied to mediocre gameplay, then I'm all for it. The PC was at one time well-known for its innovation. Many genres have basically started here including the first person shooter and the real-time strategy game as examples.

No, we're nowhere near any kind of true shakeout. I think Yamauchi-san is a great man and a lot of what he says is true. But he says it with a dual purpose. He knows that his company produces some of the greatest software money can buy. He also knows that exclusive games to systems sell the hardware and not the other way around. Hardware is only as good as the software on it and once again, I point at Dreamcast and the PS2 as examples of both sides of the spectrum. People will only buy hardware based on its potential in the first year of launch. After that it's put up or shut up time. Name recognition will buy you some time and a lot of votes (Sony), but in the end, if someone has an equally well-known name (Microsoft, Nintendo) and a whole lot of better software, you're just not going to make it.

Finally, I would also point out that many companies experiencing financial difficulty right now just blew it and backed a Christmas loser. Sony didn't have enough systems, the games they had weren't good enough and the promotion was next to non-existent thanks to the shortages. Finally, if these companies truly believed there was a huge pile of gold waiting for them with a game at system launch, I scoff at their business acumen. NO system has ever sold enough units to have the first wave of games get anywhere near the sales of the "old" systems. All of these companies would have been wise to hedge their bets and put some good stuff on PSOne. You can't blame Sony for all the incompetence *cough*Interplay, 3DO, EA*cough*.

--Dave

"When you guys say gaming, what do you mean? If you mean console gaming is going to experience a downturn, I disagree. We're way too close to the success of Playstation to say that nothing can ever take its place right now. Consumers are in a waiting period thanks to system releases in the "next generation" being spread out over 3 years."

I mean that the game companies may have some hard times this year because the market is going to overcrowded with too many titles. Releasing new console systems isn't necessarily going to grow the number of gamers by leaps and bounds, but we'll possibly see more games released this year than ever before. I think the games sale pie will get sliced a bit thinner, at least this year.