The Sky is Falling…

Someone has to say the sky is falling. It might as well ought to be the guy who cried “Wii!” in 2006.

April NPD numbers are in, and it is bad. Even software sales have declined 25%. However, the NPD analyst has circulated the Kool-Aid. Do you want to sip that Kool-Aid, reader?

“Despite overall declines, April title launches in 2013 fared better than games that launched in April 2012, up 118 percent in unit sales and 130 percent in dollar sales. This increase was driven by games like Injustice: Gods Among Us, Dead Island: Riptide, and Lego City Undercover: The Chase Begins,” said Callahan.

He added, “Overall declines are stemming from the performance of games launched prior to April; for example, the decrease in sales performance of March launches. Specifically, when looking at video games launching in March 2012, month 2 sales represented 25 percent of the total first two months of sales, which contracted to 17 percent for March 2013 launches. One reason for this might be the decrease in the number of new titles, which can cause sales of a title to be ‘front loaded’ with a greater amount of sales happening in the first month of its release.”

‘The decline is actually growth.’ Who does Callahan think he is? Ben Bernanke?

Xbox 360 sales were 130k for the month. That is the high selling hardware. Wii U was around 35k. Wii was higher. Vita was worse than Wii U.

Oh, I so, so hope the Game Industry passes the Kool-Aid around saying that this falling sky is really just Nintendo’s problem or Next Generation cycle. Sure, you can cite Vita and PSP data.

What you should be looking at is Wal-Mart sales. Oh yes. They are beyond disastrous. Many, many people are living hand to mouth.

“OMG! Wal-Mart sucks!”

But hardcore, I bring up Wal-Mart’s disastrous sales because Wal-Mart is the big bird canary in our economic mine. Wal-Mart is a bellwether. So are Target, Macy, and Family Dollar which are suffering in sales.

The American economy is becoming a two tiered system with the Middle Class shrunk with more poor people with a few overlords at the top. Rich people don’t need video games because they have money for real entertainment (like the ‘opera’ or whatever else rich people do). Poor people can’t afford video games so they are out.

The Video Game Industry might as well sound like that internal Wal-Mart email: “Where are the customers? Where is their money?”

Those who point to the decline as symptoms of the cycle will have to face reality sooner or later (I prefer later because I enjoy watching insanity). As I said years ago, not even Shigeru Miyamoto has had to face such an economy going backwards. Relatively speaking, the economy was consistently good and growing throughout the 80s until 2008. The ‘recessions’ there were said to be were never really actual recessions (or panics as they used to call them). Reggie Fils-Aime going being nonchalant over the recession affecting video games was relying on a spoiled definition of recession which used to be a reduction in the rate of growth. Now, we see actual contracting.

One very significant trend in the American work force is that older people are still working and some have come out of retirement to work while younger people cannot find jobs. Since younger people are the ones to buy video games, it appears that they don’t have the money for this hobby.

But what is the probability of the Durango and PS4 coming out and selling gangbusters? It has a low probability. They were both sell strongly during the holidays as everything sells well then. But there will be a significant decline.

How do I know this probability?

1) HD+ games are going to take much longer to make than HD games. This means less games coming out.

2) There are less game companies today than there used to be making games. This means less games coming out.

3) Unless Microsoft gives credit for their Xbox (and I wouldn’t be surprised of idiots thinking their Xbox is an ‘investment’), both Durango and PS4 are going to be more expensive than the Xbox 360 and PlayStation 3 today.

4) PlayStation 2 didn’t exactly slow down in sales when the Seventh Generation approached. In some markets, the PS2 kept outselling the Xbox 360. A Next Gen cycle symptoms show some consoles declining and some not so much. What we’re seeing is decline across the board which is a symptom of the macro-economics.

In other words, it is MUCH HARDER to sell a game console and games in 2013 than it was in 2006. The hill is much, much steeper.

I actually think Nintendo is in a better position than many think (sans the account system. Nintendo has to get that going in today’s world). With the subject of third party games, third party games are only relevant when they sell. If they don’t sell, they aren’t relevant. I think the Game Industry gives a rosier picture to the importance of third party games because the Game Industry literally is a cartel of third party companies. The fact is that the Gamecube could survive and make a profit with mostly just first party software and the PlayStation 2 took effort to make the same amount of effort with all the third party companies and massive install base.

Does anyone think the Wii U will be another PS2? (laugh) Or the PS4? Or the Durango? How are these console companies going to make money? Microsoft just admitted that Windows 8 has bombed. Sony is in financial trouble. There are high risk for Microsoft and Sony as well as every third party game company out there.

People ask me, “Malstrom, why don’t you do the same type of analysis for the 8th Generation that was done for the 7th Generation?” Aside from the fact that Microsoft hasn’t played their card and Sony hasn’t fully yet either, the issue of the 8th Generation is the macro-economic hell. How do you want me to say something which is easier said with ‘the economy is crap out there’? Sure, there will be a ‘Console Victor’ but no one will care because everyone will be losers. Everyone. The only way I can see an 8th Generation console perform better than its 7th Generation predecessor is if it cannibalizes another console to a large degree (such as PS4 cannibalizing Xbox 360 owners away from Durango).

There will be no Wii phenomenon this generation. The next Wii phenomenon will likely appear slightly earlier than 2030. These type of gaming phenomenons have a 20 year gap in them. Phenomenons only appear when no one even remotely dreams they could occur (like NES in the 1980s or Wii in the 2000s).

I am seeing many similarities of the market blindness that affected the Game Industry in 2006 occurring today in 2013. In 2006, I could talk over and over how the PlayStation 2 generation was a generation in decline. If you removed population growth, new territories that were unavailable generations ago, and the rise of hardcore gamers (people who grew up with gaming now spending tons of disposable income on it), you boosted ‘sales’ but the actual popularity of gaming was declining. The Game Industry thought this argument was the stupidest thing ever and they hotly denied it.

Then came the Wii. Hehehe.

The home console market performance in 2006 was predicted by the handheld market performance. There was rapid growth in the handheld market then. Today, there is stagnation in the handheld market and decline. I expect that to translate to the home console market.

The similar blindness is that the Game Industry doesn’t wish to see the ‘Big Picture’. In this case, it is the macro-economic hell. I have no idea why they are moving to HD+ which will slaughter their budgets and the consumer won’t notice much difference. Another big blindness is Microsoft’s approach to the general market. A generalized entertainment console won’t work for the same reason it didn’t work with Xbox 360, PS3 or the PS2 (sorry gentlemen, the PS2 sold due to games, not to it being a DVD player. Look at how many games flooded the PS2 early on). Another blindness is Microsoft believes its Kinect was successful and on the right track (hahahaha) so it will ‘double down’ on its marketing and approach for Durango. To you in the Game Industry who are ‘hoping’ Microsoft pulls a rabbit out of their hat, look at Windows 8 again. If Microsoft totally fucks up on its operation system, why do you even have any optimistic priority of Microsoft’s game console? It is like the closer we come to Next Gen, the blinder the Game Industry becomes. It is incredible.

The good news is that DS sales have now surpassed 3DS sales in launch aligned comparisons. No more comparisons from NOA about how 3DS is ‘outselling the DS’.