There’s two ways to look at GTA IV. One is as the ‘Savior of Next Gen’ and the other is in regards to Rockstar itself. Let’s start with the latter.

Rockstar’s first games were on the PC. The first and second Grand Theft Auto were ported to the Playstation platform. No one noticed the game. When GTA III came out, it created a ‘wow’ sensation and as its sales took off, it rocketed the PS2 with it. It became acknowledged that the PS2’s rapid growth, especially when the Gamecube and Xbox came out, was being driven especially by GTA III. The sequels of Vice City and San Andreas also sold massive amounts as well.

It is no surprise that Microsoft and Sony fought over GTA IV. We do not know how much Microsoft spent to get ‘downloadable content’ for GTA IV, but we can be sure there was much fighting over the game. Peter Moore unveiled the news of GTA IV at E3 2006 with a ‘tattoo’ on his arm.

The analysts wouldn’t shut up about the game. The question wasn’t if GTA IV would move systems but how many. Some even specified that it would move PS3 systems ‘more’. All and all, GTA IV was considered the ‘game of the generation’ and when it came out, boy, those PS2 gamers, who apparently were sitting on their hands, would immediately go to the store, buy a PS3/Xbox 360, because they just couldn’t wait for GTA IV!

This didn’t happen. The game sells much in volume, but it isn’t moving systems. What does this mean? Is GTA IV a failure?

There is a difference between ‘failure’ and ‘disaster’. The most expensive game ever made that didn’t sell would be considered a ‘disaster’ and be placed in history books beside E.T. the video game. ‘Failure’ would mean disappointment that the game didn’t do what everyone hoped, namely, to move hardware at all.

“But Malstrom,” pants a hardcore. “The game is selling millions! It is making tons of money! It cannot be considered a failure!” So does Call of Duty. But it is failure because now Rockstar is no longer seen as the mover and shaker of console marketshare. Rockstar is now just another third party. Do you think that console companies will fight over GTA V like they did over GTA IV? No.

Third parties like ‘console war’ and want the markets to be competitive because then they get special treatment. The console companies begin catering to them, begin fighting over them. They don’t like PS2 like dominance (gamers do since all games appear on one system). The failure of GTA IV is very real in the sense that Rockstar no longer has its pedestal.

As viewed as the ‘Savior of Next Generation’, the story of GTA IV becomes more funny. GTA IV, even if it fails to save when it comes out, is constantly resurrected the following month. One journalist says the ‘Savior’ will be resurrected at Christmas.

Yes, I’ve been saying for a long time that the false promises of next-gen were bound in time to fall apart at the seams, but I don’t see Grand Theft Auto IV’s performance as anything but a success. Au points out that GTA IV’s sales after two months are only half of San Andreas’ totals, but fails to even consider that GTA IV sales will likely get massive boosts during the holiday season and after they drop to budget-level pricing, both of which San Andreas has already enjoyed.

But even Au’s larger point — that because Grand Theft Auto IV failed to move Xbox 360 and PlayStation 3 consoles, the market for said consoles has dried up — is flawed. The lesson we should take from GTA IV’s failure to get hardware off the shelf is not that no more hardware will ever sell, it’s that the power of a new game to sell systems absolutely pales in comparison to regular old price drops.

Of course, since Microsoft and Sony are still both losing money hand over fist on their hardware sales, they can’t quite afford to slash prices yet. So they remain stuck between a rock and a hard place. Hi-def gaming continues to stall, but the problem isn’t nearly as fundamental as Au seems to believe.

I had to make several checks at the by line to make sure that Anita Frazier hadn’t begun blogging on Game Life. Come on, Kohler. You have the book, “Innovator’s Dilemma”. Now its time to use it. There is a reason why Iwata, when unveiling the Wii-mote, said, “If we can’t expand the market, all we can do is wait for the market to die.” Why is Iwata saying this? Why is he being so… dramatic? Was it an anomaly? Was Iwata just whooping it up for the Wii-mote announcement?

But here he does it again: “Innovate or die” he tells the industry. The year is 2004.

Keep in mind, this is not to say that Cinema Era gaming will fall off a cliff and vanish instantly. It is to say that the Hollywood model, which the gaming industry, in a childish egotistical stroke, desires to emulate, will crumble. The costs keep skyrocketing and the demand is stagnant if not shrinking. In entertainment, surprise is everything. Sequels that are little more than technological enhancements to an existing formula are doomed to eventually get boring. Keep in mind this game costs $100 million. It is stunning and eye opening that ONE VIDEO GAME is now approaching a fraction of a billion dollars. Insane!

But back to Kohler, I thought he knew his Christensen or else he wouldn’t be citing price drops. The constraints to HD Twins growth is not the price despite what a recent survey says. You need to watch how people behave than the replies they give to surveys. People are buying Wii systems more than the $250 price. What does that mean? The HD Twins and the Wii sport different values which is triggering different responses. The bigger problem is that the market is momentum based. The HD Twins will one day be $100 each… but by then will anyone care? I want to know why Gamecube’s price cut to $99 didn’t remove the constraints to catch up to the PS2 or move systems in any significant long term manner. Perhaps it is because price cuts are nothing more than a temporary bump. Increasing the reasons as to WHY people should buy a console sells more systems than simply price cutting.

Microsoft and Sony have stopped price cutting not because they are scared of losing money, they have already lost billions, they know price cutting isn’t going to work. People line up to buy $600 iPhones but a $600 game console is ‘too expensive’. Perhaps it is because the ‘too expensive’ has more to do with how the consumer values the product as opposed to the price itself.

In the end, there is great fun with the fall-out of GTA IV. After all, analysts depend on the past for the future, a constant analytical report that might as well just say: “The Future? The Status Quo!” they are ignoring their own data for let us not forget:

It looks like it might be time for Sony and Take-Two (and fanboys) to concede that Grand Theft Auto: Liberty City Stories simply isn’t the PSP killer app that GTA 3 and its two sequels were for the PS2. That being said, LCS is still very much a success story. It was one of October’s best sellers, and is setting a pace to become one of the PSP’s top pieces of software (with a shot at reaching #1), after it has a few more months of availability under its belt.

The game is a technological marvel as well. Even without lighting the world on fire with 7-digit sales in the first month, Sony can still point to the title as an incredible illustration of just how powerful their system is. Showing off a fully realized, streaming Liberty City on the PSP’s crisp widescreen is a very powerful message.

Wow, this sounds SO FAMILIAR. Indeed, GTA on the PSP was thought to be moving PSP systems left and right. I know, back then that the industry, and analysts (because they said so to me), that GTA for PSP was ‘disappointing’. GTA PSP moved much software, but it didn’t move hardware. Still, the game was cited for its ‘technical’ accomplishments and in how it was the most sophisticated game on the Sony hardware. *yawn*

Of course, back then it was said because it was a handheld game. I think we should seriously consider PS3’s future to be similar to the PSP performance.

But reader, let us read on!

Strong Sales; No Hardware Impact

LCS moved just over 158,000 copies in October according to NPD, making it the month’s #3 overall SKU and the #1 portable title. For comparison, the month’s #2 handheld title, Konami’s latest Castlevania for the Nintendo DS, sold about 77,000 copies.

["LCS is likely to perform very well over the holiday season and is in an excellent position to become the ’go to’ game for new PSP owners."]

Thanks to the $50 premium that top-tier PSP games are able to command, the revenue gap between October’s handheld titles is even more pronounced, showing just how much of a winner LCS was for Take-Two. The game’s 158K in sales translated into almost $8 million in revenue. Castlevania’s 77K in sales totaled $2.65 million in revenue.

While the game was still one of October’s big winners, it’s worth noting that it simply wasn’t the system-seller many anticipated it would be. There are many possible explanations. One likely scenario is that despite LCS’s technological achievements, the game doesn’t really break much ground. GTA 3 was a revolutionary title that convinced gamers that they had to own a PS2. LCS is a great game and pushes the PSP hardware, but since it uses that same aging formula it wasn’t able to convince gamers to shell out $250 for the hardware.

Back then, they were saying sales would pick up at Christmas (well, all games pick up at Christmas). But let us read some more, shall we?

“One thing that did surprise me is that GTA: Liberty Stories didn’t drive PSP hardware sales. Liberty Stories was the best-selling PSP title introduction, yet October PSP hardware sales were lower than September,” NPD Entertainment Industry Analyst Anita Frazier told GameDAILY BIZ in early November. “Certainly the demographics align, as the PSP is the ’oldest’ of the three handheld systems. I definitely expect sales to increase dramatically in November and December.”

Impressive PSP Debut
It would be easy to write off LCS as just another PSP cash-in on a successful PS2 franchise. Easy, and incorrect. Liberty City Stories is the best reviewed PSP game yet according to gamerankings.com. Rockstar once again seemed to employ a group of magicians rather than programmers, as they have been able to squeeze things out of the PSP that other developers just haven’t (yet) been able to accomplish.

It is amazing how analysts are so ’surprised’ at everything these days. This is the same Anita Fraizer who is ’surprised’ at GTA IV not skyrocketing the HD Twins. What does this mean?

Did you ever hear anyone cite GTA PSP failure to spike PSP hardware as one of the reasons why GTA IV wouldn’t? I sure didn’t. In fact, everyone ignored GTA PSP as if it didn’t exist and talked only about the PS2 games and the marvels it did for Sony. Why do people treat handhelds and consoles like they are on two different planets? Both are game systems. GTA PSP not moving PSP certainly should have been seen as a forerunner to the GTA IV scenario.

Anyway, the best thing about GTA IV and its let down is how it has driven the hardcore absolutely bonkers. Now, reader, when you pass the walking dead, just pass them. When they say, “No! All gaming is doomed!” say, “Yup, all gaming is d00med!” and move on. If they go, “Hardcore gaming won’t die! You all are a bunch of idiots!” just wave and walk on. The Blue Ocean waters are swirling around them; their world is sinking. Laugh as they say they equate PC Gaming as the New Canada where they will ‘escape’ to. Watch and laugh at the screaming hardcore at the comments on this Kotaku story.

One thing I find ironic is that while everyone talks about Au’s story, “Next Gen Fail”, another writer got in trouble by saying the exact same thing except sooner.

I expect in several months that people will begin revising history by saying, “Oh, we knew GTA IV wouldn’t move hardware.” So let us end this post with a video that really captures the moment of the ’shock’.