3DS, Kinect Plans

THQ, Ubisoft Encouraged by Initial 3DS Sales, Company Executives Say

April 11, 2011 by Jeff Berman|Top News

SAN FRANCISCO -- THQ and Ubisoft executives attending the MI6 Game Marketing Conference told Consumer Electronics Daily they were encouraged by the initial sales performance of the 3DS despite the handheld remaining widely available at major U.S. retailers. THQ continued to ready its first 3DS games, said Danny Bilson, executive vice president of its Core Games group. Ubisoft already backed the 3DS launch with four games and will field more than 15 titles for the system by this holiday season, Tony Key, Ubisoft senior vice president of sales and marketing and MI6 co-chairman, told us.

The 3DS “had a really great first week” at retail, Bilson said. “Early adopters went crazy for it,” he said. “We'll see how it goes. … There’s a lot of competition in the handheld space,” he said. New hardware systems from the major console makers are typically only available in spotty quantities at retail initially. That was not the case with the 3DS, in part, because Nintendo “probably shipped a lot” to meet demand, he said. But he said another factor could be that the 3DS “is a pretty high-end little device right now -- it’s not exactly the thing that in the spring you buy for every kid in the household like at Christmastime you might do with a DS.” The 3DS costs $249.99, much more than prior DS systems.

THQ’s first 3DS release will be SpongeBob SquigglePants May 17, from the company’s Kids, Family and Casual Games division. But the first 3DS title from the Core Games group won’t come until later. “We have a couple of things that we haven’t announced yet” in development for the 3DS, Bilson said, declining to elaborate. Nintendo, however, said at last year’s E3 that THQ was developing Saints Row: Drive-By for the 3DS. THQ didn’t have any 3DS titles ready for the system’s launch because it “couldn’t get to quality in time” on the games it was developing, Bilson said. He hinted that at least one of the 3DS titles that THQ was working on could be part of a “brand” that THQ hadn’t announced yet.

Ubisoft was “really pleased with the way” the 3DS has “taken off,” Key said. Nintendo said clearly ahead of the launch that it planned to ship “a lot of units” initially to meet demand, he said. Console makers are often criticized for not shipping enough supplies of a new system to meet demand, so it seemed silly to now criticize Nintendo for making enough supplies of the 3DS available to meet demand, he said.

None of Ubisoft’s initial 3DS games -- Asphalt 3D, Combat of Giants: Dinosaurs 3D, Rayman 3D and Tom Clancy’s Ghost Recon Shadow Wars took full advantage of all the features the new device offers, including augmented reality (AR) and StreetPass, which enables certain games and applications to wirelessly swap small bits of game data as the device user passes other 3DS users. But Key said Ubisoft plans to take advantage of every 3DS feature via future games. “The general consensus” is that AR, in particular, “will be a very big selling point” of the 3DS, he said.

Ubisoft also is hoping to use AR in future Kinect for Xbox 360 games, Key told us. It’s the No. 1 third-party publisher of games that use Microsoft’s motion sensor, with about an 18-19 percent market share in the U.S., he said. “I think we're just scratching the surface on” what the Kinect is capable of after only about six months of availability, he said.

The first Kinect game from THQ’s Core division will be UFC Personal Fitness Trainer in “late June,” Bilson said. There were no other Kinect games from the Core games division that he was able to talk about now, he said. THQ kept UFC “in development to be the best fitness product on the market,” he said. The title is also being released for the Wii and PlayStation Move for the PS3.

Ubisoft plans to support Sony’s coming NGP handheld system at launch, Key said. But specifics weren’t available yet. THQ will support that system, but there was “nothing that we can talk about yet,” Bilson said. He told us he didn’t know if THQ would be ready at the system’s launch with software.

The publishers weren’t significantly impacted by the Japan earthquake and tsunami, the executives told us. THQ’s UFC development team in Osaka was “untouched by” the blackouts there, while “a lot of” the WWE team in Yokohama “lives within walking distance to the studio, so they haven’t missed a beat,” he said. THQ is collaborating with independent Tokyo developer Valhalla Game Studios on the coming title Devil’s Third for the PS3 and Xbox 360. That studio “shut down for a week or so in the middle of the crisis, but then they put their team on six-day weeks to make up for the days that they shut down,” he said. Key told us the Japan disaster didn’t have much of an impact on the business of its Osaka and Tokyo offices.

Key also told us that Ubisoft was studying cloud gaming, weighing what the business “model can be for” it. He had seen “some really impressive presentations” of Gaikai’s PC cloud gaming service, he said. Cloud gaming was “something that all the videogame publishers are looking at,” he said. GameStop hadn’t “approached us yet” about its planned cloud-based service (CED April 4 p1), he said. GameStop has been “a long-term, very big partner” of the publisher, and he expected the companies would talk about the initiative soon, he said. It was “great that they're making acquisitions” to help them enter the category, and “I respect what they're doing,” he said. GameStop was merely “trying to prepare for a digital future."

MI6 Conference Notebook

The digital transition isn’t coming up -- “we're right in the middle of it” already, EA Sports President Peter Moore said. There’s never been a more “challenging” period for the game industry, he said, telling the conference we're seeing “a radical sea change.” But he said “change is good.” Moore, paraphrasing Bob Dylan’s song “The Times They Are a-Changin,’ said game companies “better start to swim or you'll sink like a stone.” The music industry was hurt significantly after it “resisted change” to digital offerings that consumers wanted, he said. Blockbuster and Hollywood Entertainment were similarly crippled when they resisted change to digital, and Netflix took control of that market, he said. Moore praised Netflix CEO Reed Hastings for being “bold” enough to name his company what he did even though its business was initially all packaged DVDs. Hastings had the “insight” to realize that his business would eventually shift to digital distribution, Moore said. Moore similarly praised Amazon’s Kindle e-reader strategy and Groupon for its digital coupon strategy. He predicted the game industry won’t be crippled in the same way as the music and home video industries because game companies have been investing in digital initiatives, and hadn’t been adverse to change. Electronic Arts made a significant investment in digital initiatives that cost it in the short-term, but will enable it to remain strong in the digital era, he said. The publisher already gained a No. 1 market share in mobile games and casual web games, and was No. 2 in social games, he said. EA estimated that digital revenue totaled $19.9 billion of the industry’s $44.2 billion in 2010, up from $12.4 billion of the $39.9 billion industry in 2008. New platforms including mobile, social and web gaming are “fueling this growth,” he said. Digitization is enhancing the social elements of gaming, and every EA Sports game is now being designed to be social to take advantage of that, he said. While “the old business models are crumbling” in gaming, Moore predicted that traditional game sales at retail will continue to “be around for a while” to some degree.

Greg Short, CEO of research firm EEDAR, suggested that game companies “balance brand building” with “one-shots” when deciding how much to spend on marketing a title. It doesn’t always make sense to throw a lot of marketing money behind a title’s release, he said. Game companies also need to invest in brands adequately to maintain them, do a better job of timing and pricing downloadable content (DLC) to meet consumer needs, and “leverage franchises across emerging markets,” he said. Research indicated there’s two main reasons why most gamers still aren’t buying DLC: Most of it is of “no interest to them,” and it’s released too late by companies. Ninety-percent of gamers want DLC for a game in the first three months of its release, he said. But DLC expansions for games on the PS3 last year arrived, on average, 32.1 weeks after a game’s launch and expansions for Xbox 360 games came 29.6 weeks after launch, he said.

Jirbo tested various business models, but it’s “seeing the most success with the freemium business model” for its mobile games, CEO Will Kassoy said. The company developed more than 200 applications to date and its titles have been downloaded about 32 million times so far, he said.

Microsoft’s Xbox marketing team was named the marketing team of the year at the MI6 awards presentation Thursday night. The Kinect launch campaign won the gold award for outstanding TV or theatrical ad campaign. Microsoft’s Halo: Reach “Deliver Hope” won gold for best promotional trailer. Ubisoft’s Just Dance 2 marketing campaign won gold for best overall marketing campaign in the family entertainment category.