In A Strange Turn Of Affairs, EA Decides to Recognize Reality Of Game Pricing

from the not-what-you-said-before dept

This is a strange one. A few months back, we highlighted some comments from EA in which it postulated that deeply discounted games were bad for business. This comment from the head of EA's Origin digital distribution service was in response to Steam's sales that it holds regularly. In this comment, DeMartini claimed that such sales devalue the games and trains people to only buy cheap games. Perhaps this comment was a prophetic statement of sorts, because EA is now recognizing the reality of cheap games.

In a recent interview with the folks at MCV, another EA exec, Nick Earl, stated that people are making the switch to free games and there is no stopping it.

The future is not about one-time payments, the future is about freemium. A decent number of people convert to paying and they may not pay a lot but most of them actually pay more than you’d think.

I don’t know if freemium gets to console but I do know that humans like free stuff. I also know humans who will pay for something if they’ve tried it out and they like it.

I’ve wondered if freemium expands beyond the tablet, Facebook and smartphones, and out into consoles? I don’t think it’s impossible for that to happen.

It is actually quite refreshing to see someone in a large game studio willing to accept this fact, something that his counter parts in publishing are incapable of doing. But this is the reality. We have seen it happen in rapid fashion, particularly in the mobile space. Because of the nature of the market, game prices quickly dropped to $1 and then to freemium or free to play. These options allow for potential customers to limit the risk of acquiring a new game. This is also forcing the games industry as a whole to reconsider how it prices its software, which some still seem unwilling to do.

Another interesting thing about this comment is that Nick realizes that it is only a matter of time before free games come to consoles. This is something else we have observed with the recent announcement of the Ouya console. One of the Ouya's biggest selling points is that all games available for it must offer some form of free option, something not currently available on any current console. This idea and the low cost of the console itself led to a huge positive reaction from the gaming community, shooting the Ouya into record breaking pledges on the first day. So yes, people are shifting to free games.

As the market for games shift toward cheap and free options, it will be interesting to see what the current console leaders do in response. Will they all follow Nintendo's lead and continue on the course of "premium" prices for console games, or will they recognize that there are more ways to make money from gaming than retail sales? If they do continue down the premium path, they are quite liable to be left far behind when the market shifts. Something that EA seems to be preparing itself for.

Filed Under: cheap, free, pricing, video games
Companies: ea

Why Apple Will Not Be Part Of The Real Tablet Revolution

from the but-still-hugely-profitable dept

You don't have to be a marketing genius or industry pundit to foresee that tablets will be an extremely hot sector in 2012. The launch of Apple's iPad in 2010 largely defined the category, just as the launch of the iPhone defined a new kind of smartphone in 2007; in 2012 we will probably begin to see Android tablets start to gain major market share just as Android smartphones have done this year.

Currently, the tablet is something of a cross between the hipster tech toy of choice and a trivially easy-to-use computing device for couch potatoes. But those early sectors are incidental to the tablet's real potential to revolutionize education, particularly in emerging economies.

The devices are perfect: they are compact, connect to the Net wirelessly, run off battery power for hours and can be used by children and adults alike with little or no training. There's just one problem, of course: the typical tablet's high-end pricing – hundreds of dollars – places it so far out of reach for most of the world's population that it might as well not exist for them. That is what makes India's Aakash tablet - basic cost around $50, but only $37 for Indian students thanks to a government subsidy – so remarkable, and so important.

Of course its specifications are somewhat limited compared to the iPad – 256M RAM, 2 GB Flash memory, 7" 800x480 pixel resistive touch screen – but that's not really the point. The key issue is whether it is good enough for the educational purposes governments around the world have in mind. For although the Aakash began as a project purely for India, it has been swiftly taken up by a number of other countries, as this fascinating feature about the creation of Aakash by the Canadian wireless device maker Datawind explains:

[Datawind's CEO] Suneet was invited to meet with Thailand’s Minister for Information Communications Technology (who was so interested in purchasing 10 million tablets that he attended their meeting even as flood waters descended on Bangkok). Calls arrived from Turkey (which wants 15 million tablets), Sri Lanka, Trinidad and Tobago, Panama and Egypt.

This gives an indication of the potential of the Aakash low-cost tablet: to provide portable computing devices and with them access to digital knowledge on a truly global scale. The feature also explains how exactly Datawind managed to produce a tablet for a tenth of the cost of an iPad:

Part of the difficulty in engineering such a device is that the underlying goal—that its final price should be within the means of those who can’t afford high-priced tablets—dictates crucial engineering and component decisions. A piece of high-impact-resistant glass, such as the touchscreen face of an iPad, can cost upward of $20. Datawind’s touchscreen glass, which the company had engineered down the street, costs less than $2, though it won’t allow for luxuries like pinch-and-zoom finger swiping. There were also compromises on processing power: Datawind’s 366 megahertz processor costs less than $5, a fraction of the $15-plus price tag on the chips that power iPads and other comparable tablets. And while the decision to run Google’s free Android mobile operating system on the gadget saves money, it requires coders to dig deep into the Linux kernel that underpins the software, tweaking it until it runs smoothly on Datawind’s weaker processor.

As that makes clear, one key ingredient in the design of the Aakash was Android – and hence free software. This meant that Datawind's software engineers were able to build on several years' work by Google – and two decades of coding by the Linux community – rather than starting from scratch.

It's a reminder that even if – as seems likely – Apple's iPad retains its highly-profitable hold on the upper end of the market, it will never be able to offer a model that is competitive with minimalist tablets built around free software at the bottom. And since it is precisely those ultra-cheap models that will be sold in their hundreds of millions, perhaps even billions one day, that means that the real tablet revolution – the one that will transform education in emerging economies and with it, their societies - will not be one in which Apple plays a major part, despite its early leadership here.

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Filed Under: cheap, poor, revolution, tablets
Companies: aakash, apple

Making A High Quality Film On The Cheap With A Digital SLR

from the and-it-looks-pretty-good dept

A few years back at a Cato Institute conference on copyright, a guy from NBC Universal challenged me with the question of "how will we make $200 million movies?" if content is freely shared. As I noted at the time, that's really the wrong question. No one watching a movie cares about how much the movie costs. They just want to see a good movie. The question for a good filmmaker or producer or a studio should be "how do I make the best movie I can that will still be profitable?" Starting out with a "cost" means that you don't focus on ways to save money or contain costs. You focus on ways to spend up to those costs. That's backwards, and it's how you fail as a business.

Imagine if Dell or IBM or HP went around saying "but how can we profitably make $5,000 computers?" It's a silly question, and it doesn't get you to focus on things like reducing costs. And, it's important to note that technology keeps making the cost of making, distributing and promoting content cheaper. No, it's still not cheap to make movies, but you can make better and better films for less and less money these days.

Jim Harper (who, it should be noted, was the guy who invited me to that Cato event in the first place), reminds us of this with a blog post jokingly entitled How to Make a $200 Million Movie, but which actually shows how it's getting cheaper and cheaper to make a film these days. Specifically, he shows an amusing new short film from Futuristic Films, which looks pretty good and notes in the opening that the whole damn thing was shot with a Pentax K-7 DSLR, which you can find these days for around $800 or so: After that he shows the following "making of" video that highlights how the fillmmakers were able to make such a film for very little money: Now, no one will claim that the quality is equivalent to a $200 million movie. But it keeps getting better and better and better... at the same time that it's getting cheaper and cheaper and cheaper. Oh, and you might recognize the filmmakers in question. They're the same folks who made the movie Ink and then celebrated when a copy was leaked via BitTorrent, helping the film become incredibly popular, shooting way up IMDB's movie meter, making it (for a time) one of the 20 most popular films on the site, despite being a small indie production.

I would bet these guys aren't going around whining, "but how can we make a $200 million movie?"

Filed Under: cheap, movies, quality

OK, Hollywood Learns A Scary Lesson From 'Paranormal Activity'

from the sequels-are-never-bad dept

A few weeks back, I noted that the low-budget (but highly-profitable) Paranormal Activity movie might teach Paramount a thing or two about how the business of making movies could succeed without spending millions on big stars and overly-expensive sets. However, it doesn't look like that was the lesson learned here. Paramount's CEO Philippe Dauman was recently interviewed about the success of the movie and talked about plans to make a sequel that he said would require the right marketing to ensure a benefit to Paramount. There's also the following insight into Dauman's strategy:

Asked by an analyst if the "Paranormal" model of a low-cost, high-box office film could be easily replicated with other releases, he said no, pointing to how much time passed between similar surprise hit "The Blair Witch Project" and "Paranormal."

So apparently, the decade that passed between Blair Witch and Paranormal makes for some kind of justification that low-budget movies can't be made profitably at will. Um. But couldn't that decade also be interpreted to mean that a studio should want to try more low-budget productions, more frequently? I can certainly understand that Paramount might not want to adopt a "throw everything at the wall to see what sticks" kind of business model for its movies. However, the existence of two huge box office hits that were produced for a pittance sounds more like proof that such a business model could work -- not a "lightning sometimes strikes twice" argument against making low-cost movies. But on the other hand, looking at the returns from the $15 million sequel Book of Shadows: Blair Witch 2, that release grossed almost $48 million worldwide... and there's talk of another sequel for Blair Witch on the way. The scary ending to this story appears to be an endless cycle of horror movie sequels.

Filed Under: cheap, movies, paranormal activity
Companies: paramount

Will 'Paranormal Activity' Teach The Movie Industry A Lesson?

from the Blair-Witch-wannabes dept

I have to admit I don't usually like scary movies, and I didn't like the Blair Witch Project at all. But I can't help but be impressed that the Blair Witch movie cost just $60,000 and pulled in a cool $140 million back in 1999. That kind of return makes me wonder why more movies aren't filmed on really small budgets. So it's somewhat surprising to see that it took about a decade for another Blair Witch-like film to get promoted by a major studio... and that a perfect candidate was almost missed. The movie Paranormal Activity was apparently filmed for just $11,000 over 7 days, and it was bought by DreamWorks/Paramount -- which originally planned to shelve the low-budget flick and re-make it with bigger stars and a much higher budget.

Goodman also admitted that DreamWorks, formerly a leg of Paramount co-headed by Steven Spielberg, had swooped in and pocketed 'Paranormal Activity' with every intention of leaving it on the shelf and remaking it with a big budget and marquee stars. Then they wised up. 

They wised up indeed, and they also started promoting this movie in an interesting way, too -- by getting potential fans to demand it be shown in their neighborhoods and nationwide. Paramount promised to distribute the movie nationwide if a million requests for the movie were logged via Eventful. And it looks like they've already reached that goal.

As I said, I didn't like Blair Witch very much, and I'm not exactly looking forward to this movie, either. But from a pure business angle, it seems a bit shocking that movie studios wouldn't be trying to find/create more low-budget films that would appeal to moviegoers. Promoting the distribution of films in a way that actually target fans is a smart move, too. So with this example, there are about a million customers (or at least thousands, if you don't believe the Eventful numbers) willing to pay to see this movie that was made for (much) less than a $1 per fan -- and the movie studio's first gut-instinct was to try to re-make the film and drive their own costs up? It's a strange industry where insiders are always asking "how can we make a $200 million movie?" rather than how can they make good, but profitable movies, no matter what the cost. The industry seems so focused on what movies cost, that it so rarely seems to consider spending money more intelligently. Creating quality works for less, and targeting your best customers is a plan that's foreign to Hollywood, but perhaps it's about time they start exploring that plotline.

Filed Under: cheap, movies, paranormal activity
Companies: dreamworks, paramount