2011 Losers Of The YearAlthough 2011 was in general a good year for gaming and gamers (if not necessarily for all publishers), this year has seen a number of losers as well. IndustryGamers took a look through the sad stories of 2011 to identify the year's worst issues. We're not talking about a game that underperformed or had a few bugs, or about missing a sales projection by a little bit. We're talking about pain and suffering here, although not without a bit of schadenfreude.
Our sympathies to the Losers. We are consoled when we realize “Better them than us.” The Losers have to hope that 2012 will see a turnaround and that people in the industry have a blessedly short memory sometimes. Not us, though. We remember, and bring an extra helping of snark to the feast. Join us as we dig in.
#5 Current Console Hardware
It may seem like a bit of a stretch to declare the current generation of console hardware a Loser for 2011. After all, isn't the Xbox 360 doing pretty well? Yeah, but it's barely going to hit the level of last year's sales. The PS3 should do a little better than last year... but then again they cut the price $50. If the PS3 was really performing well, they probably wouldn't have lost so many top executives. The Wii has dropped so far in sales that even cutting the price down to $99 in some sales isn't enough to bring overall units to anywhere near last year's level. The hardware is past the usual expiration date for consoles (the Xbox 360 is 6 years old, the Wii and the PS3 are 5; consoles are typically 5 or 6 years old when a new generation succeeds them). Sure, the games are looking better than ever... as they always do just before a console generation passes away, as all the developers have finally figured out how to wring every last bit of performance from the hardware.
You can see the symptoms in the declining game sales for consoles overall, even though some individual titles have performed brilliantly. Over the whole console game industry, though, sales are down. Look no further than the fact that consoles are spending an ever-increasing percentage of their time streaming video instead of playing games. It's up over a third of the usage time of a console, and climbing. That's not a good sign if you're trying to sell games.
Rumors about an Xbox 720, a PS4 and exactly what the Wii U will look like are flying thick and fast. Developers are said to have hardware in hand and are busy programming, getting ready for a 2012 release for the Wii U at least. Supposedly the next Xbox and the next PlayStation will hold off until 2013 or maybe 2014... but some are whispering about a 2012 introduction.
It all adds up to the fact that this generation of consoles may well have seen their last good holiday season. We'll see some good software in 2012, but the hardware sales figures of yesteryear will be a pleasant memory as new consoles get closer and buyers begin holding off on purchases. You'll hear plenty of spin from manufacturers, but the handwriting is on the wall. The End Is Near for this generation of hardware. Worse yet, some people are beginning to wonder publicly if the next generation of consoles may be the last, overcome by a combination of mobile, social, and digital distribution. The manufacturers will be putting on their happy faces in 2012, but they'll be crying inside as they contemplate having to produce new hardware with low or even negative profit margins and spend millions in marketing to convince people to buy all-new hardware yet again. Developers will be wrestling with new buggy tools and cranky development hardware that costs far too much and comes with razor-edged NDAs and sleeepless nights of coding and wondering whether the bug is in your code or the manufacturer's. Good times ahead... for masochists.
#4 Physical Retail Sales
If you're a PC gamer, you may not have even realized that some people still buy their software in little boxes in stores, having to physically drive down to the mall to get them. And pay full retail price, too, instead of waiting for that great sale on Steam you know is coming up. How Twentieth Century, you think. Quaint, and somewhat endearing to watch, but kind of odd that it's still around. Blame the console manufacturers who don't want to offend their retail partners by suggesting they lose the revenue stream of software sales. Everyone in the business remembers how Sony got kneecapped by retailers over the PSPgo, the handheld console that would only take downloaded software. Many retailers refused to even stock the subversive device that threatened their very way of life... and not surprisingly, it flopped.
The software lineup this year has been pretty damn good, and yet industry sales of physical retail product (hardware, software, accessories) looks to be down as much as 3% from last year. It's the third year in a row that sales have dropped at retail. The best you can say is that at least it didn't drop in the double digits this year. That is not enough to celebrate.
It's increasingly obvious that digital distribution is taking over fast. Just try to find a PC game in a retail store these days. Look at how GameStop bought digital distributor Impulse, and downloadable game maker Kongregate. And how they're pushing digital business even as they still try to sell you physical products. They know their traditional business is threatened.
The simple fact is that more and more people are buying games online, or playing free games online and occasionally buying some virtual goods. There's more game playing than ever going on, but those game players aren't bothering to come to a store to buy things. Big retail chains like Walmart will shrug and look for something else to fill the shelf space. GameStop can't afford to be quite so sanguine about the majority of their revenue. It's gonna be hard to sell used digital goods. Can physical retail sales find relevance in a digital distribution era?
#3 THQ
You might say we're kicking them when they're down, but we're only doing it to try to help them back on their feet. THQ has had a rough year, which is putting it mildly when your stock loses nearly 90% of its value and is trading at under a dollar. Investors seem unconvinced that THQ is going to turn things around any time soon, and it's not hard to see why when you look at the company's performance this year.
2011 has been a litany of problems for THQ; before the year even began (on December 31, 2010) they were closing their offices in Korea and canceling the development of WWE Smackdown vs. Raw Online. In January 2011 THQ sold off its wireless division to a Swedish company. In March THQ released Homefront; the game was so poorly received (Metacritic score of 70) that THQ stock dropped 26% shortly after launch. That lead to THQ closing Kaos Studios (developers of Homefront) in June, they threw in the closure of THQ Digital Warrington just because. Later that month, after Red Faction Armageddon debuted to poor ratings (Metacritic: 71), THQ killed the Red Faction franchise. In August, THQ closed more studios: THQ Studio Australia, Blue Tongue, and THQ Digital Phoenix, killing the MX vs. ATV franchise.
The big plan was that the introduction of the uDraw tablet for Xbox 360 and PS3 would turn things around. After all, the tablet was a hit during the 2010 holidays for the Wii, and THQ figured they could extend it to the high-definition consoles and be able to sell a stream of software for the tablet. Alas, it turns out that Xbox 360 and PS3 players are more interested in running, jumping and shooting than in drawing. The uDraw flopped, and THQ has laid off 30 employees connected with the tablet and revised its revenue forecast downward by 25% for the quarter, projecting another loss for the year.
Here's Wedbush analyst Michael Pachter, rubbing some salt in the wounds: “Given its declining licensed and core properties (apart from Saints Row), and an uncertain release schedule next year, we remain unconvinced that FY:13 will be profitable. We think its cash position may be compromised. The company's debt covenants suggest to us that its line of credit must be repaid to avoid default, and we think that THQ is at risk of running out of cash by the June 2012 quarter.” Ouch.
THQ has now lost money in 4 out of the last 5 years, and its market capitalization is hovering around $50 million. In other words, it could be picked up for the loose change under the couch in Zynga's lobby. On the good news front, THQ did revise its logo in January, though it's unclear how that will help turn things around. And Saints Row The Third seems to be doing well, as does their latest WWE title. It's not clear at all how THQ is going to pull out of its tailspin in 2012, but we wish them the best of luck. They're going to need it.
#2 The 3DS Launch
Pride goeth before a fall, and Nintendo certainly had plenty of pride in the 3DS. They made the cardinal mistake of believing their own press releases, and listening to all the folks at E3 who told them how neat the 3DS was and how cool the idea of 3D without glasses would be in a handheld console. Why, 3D was going to be The Next Big Thing in movies and games, and here Nintendo was ahead of everybody else with the hardware that delivered the 3D experience. It'll be a hit!
How else to explain Nintendo's decision to launch the 3DS at a $250 price point? They obviously believed the mere existence of 3D hardware that didn't require glasses would have everyone eager to buy. Why, the hardware is so exciting we don't even need to worry about having great software for it! Sure, Pilotwings will be good enough, there's a system seller for you. Those kids are 3D crazy, they;ll buy anything we throw at them. Here's Nintendo's software lineup for launch: Pilotwings Resort, Steel Diver, Nintendogs & Cats. Can you feel the excitement building? Neither could anyone else. Oh, wait there's third-party titles... like Ridge Racer and The Sims 3 and Bust-a-Move Universe. Be still, my beating heart.
Really, who needs a Mario or a Zelda or even a Kirby or a Donkey Kong? Who cares about those guys apart from millions of Nintendo fans? And there's really no rush on the whole eShop concept, that online stuff is never really going to be all that important, right? It can wait a few months. Best of all, there's really no need to spend a lot of money on marketing or advertising, because this device is going to sell itself through word-of-mouth. From all those excited Pilotwings players, no doubt.
Nintendo sold in a large number of 3DS units, then watched in shock and horror as for some reason sales fell off a cliff after the first week. Poor battery life, only one analog controller, and a screen that gave you a headache if you tried to move the device around to use the AR games included with it... maybe those were some of the reasons. And no software worth mentioning, either.
Don't feel too bad for Nintendo, though. With an astonishing $80 price cut they breathed some life into 3DS sales this summer, and once some actual good games that people were interested in showed up (like Mario Kart 7, Super Mario 3D Land, and Starfox) this fall (along with some marketing spending and some TV commercials) 3DS sales have revived to the point where it looks survivable.
Just think what the 3DS might have been doing if Nintendo had brought out Super Mario World 3D with it, and had an initial price of $169.99. They'd have a few million more units sold for 2011, you can bet. It only underscores the magnitude of the errors Nintendo made in launching the 3DS. Let's hope Nintendo learned some lessons here before they launch the Wii U in 2012. We don't want them to appear on this list again next year.
#1 Sony Network Security
Sony takes the big prize for this year's Losers, awarded for the astounding and appalling security lapses that lead to the exposure of over 100 million customer accounts by hackers between the PlayStation Network breach and the Sony Online Entertainment breach. This was not some simple security breach like leaving a laptop in a car with customer lists on it. No, we are talking about multiple security errors. Sony is reluctant to give details about what occurred, as you might well understand. Investigations are still continuing. Lawsuits have been filed, and Sony estimated the costs of their security problems at $171 million dollars. It'll probably be more than that when all is said and done; hopefully they're paying some good salaries to top computer security people, as apparently they didn't bother to before. The whole mess was just the thing a company planning to lose a billion dollars this year needs.
Adding insult to injury, Sony was slow to notify customers and the world about just what had occurred. It took weeks for the full extent of the damage to be known. Meanwhile, the outage that Sony initially projected to be fixed in a day or so continued. Ultimately it was nearly a full month before service was restored. Sony provided apologies and some free games to users, but the damage to Sony's reputation will not be easy to restore.
The repercussions continue, as Sony's new PSN agreement include a clause promising that you won't join a class action against them. Some security experts say Sony's security is still not all it could be, and they found numerous Sony web sites with inadequate security measures.
You know it's bad when your company president gets hauled in front of Congress to explain just how you managed to screw something up so badly. That's not a good thing, especially not when it all happens right before E3 when your fondest wish is to talk all about the neat new games your company is coming out with. Instead, you're spending time answering reporter's questions about security measures.
On the up side, the PSN actually gained members this year, so people either weren't paying close attention or they figured Sony had fixed things. There didn't seem to be any compensation for developers who had lost sales in the month of PSN outage, but perhaps something was arranged under cover of darkness. Losing a month's sales on PSN may not matter much to a big company, but if you're small developer who only has one or two titles it can really hurt.
Sony spent months and millions trying to get past this event, and going into 2012 it appears to be pretty much behind them. That's good, because they need to come up with a successful PS Vita launch in the US and keep PS3 sales rolling along while they figure out what to do about a new console. A new security breach would have dire PR consequences. Here's hoping they have some adamantium-reinforced firewalls and steely-eyed security experts guarding the ramparts against hackers.
Dishonorable Mentions
There were other candidates for Losers of the Year that didn't quite make the cut. Sort of like losing again, isn't it?
3D Display: The whole idea that 3D display, with or without glasses, would be a big factor in gaming, shriveled up and died. Even Nintendo backed away from promoting 3D on the 3DS. They probably wish they could take the name back.
Nintendo: Speaking of the Big N, they had big losses for the year as the 3DS stumbled and the Wii went on life support. But the 3DS showed a recovery for the holidays, so there's hope for 2012.
Zynga: Sure, they had a huge amount of revenue in 2011. But rising costs kept profits low, and the IPO finally took place months late and hasn't done well. Bonus points for some bad PR about CEO Pincus and some new game releases that haven't performed well (we're looking at you, Mafia Wars 2).
Ocean Marketing: A very late entry but certainly deserving of notice. This one-man marketing firm set a new standard for poor PR, and made the mistake of antagonizing Mike Krahulik at Penny Arcade, who posted the exchange on their web site. Whereupon the Internet delivered a righteous smackdown. Ouch.
