Wednesday, June 13, 2012

E3 2012: The Future of Gaming Hinges on the WiiU

So not a lot out of E3 this year, but that's kind of what we've come to expect. E3 has been pretty much underwhelming since the Wii caused enough of a kerfuffle to make them turn it into a press-only event so people wouldn't have to wait in 12-hour lines.

Even so, the big story is that Nintendo is going full steam ahead into the next generation and Microsoft and Sony aren't quite there yet.

People were surprised that neither Sony nor Microsoft unveiled a new platform, but I'm not. Doing that at this point would be a bad idea for both of them.

The thing that a lot of people tend to forget about video games is that most of the money is in the games themselves. The systems actually lose the companies money, particularly at launch. The most notable exception to this is the Wii, which sold at a profit, mostly because the system was so underpowered that they could sell it at less than all of the competition and still make a profit.

The Xbox 360 was a pretty substantial success for Microsoft, but not because of the hardware sales. In fact, given how many machines they had to replace due to the dreaded Red Ring of Death, I'd wager that Microsoft lost a TON of money on the systems themselves. However, Microsoft succeeded big time with its licensed games and with Xbox Live Gold, which essentially set the standard for online gaming this generation.

Then Microsoft decided to do a little experiment. Rather than create an entirely new system, what if they created add-on hardware and sold that instead? That would allow them to have a big hardware launch without all of the risks involved.

Microsoft wasn't the first company to try something like this. You may remember Sega tried to keep the Genesis alive by inventing the 32X. Sadly, this tactic doesn't usually work, but in Microsoft's case, the Kinect  was not only a huge success but it also increased sales for the Xbox 360, allowing it to significantly surpass the Wii in the casual gaming market.

Microsoft has no interest in launching an entirely new system when it currently has the most widely-played system in the world. That doesn't mean they aren't WORKING on a new system, but they aren't going to go full-steam ahead on production until they have a reason to. More on that later.

Similarly, Sony had a really rough time this generation, but the PS3 has finally been accepted. Partially due to the price drop and partially due to the more widespread acceptance of Blu-ray. They don't intend to repeat the same mistakes next generation, so they too are biding their time, though they are probably working on a new system as well.

So what are they waiting for?

My guess is that they're waiting to see how the WiiU pans out.

In other words, the shape that the next generation will take largely depends on the WiiU.

Allow me to explain. The WiiU represents a bold gambit on Nintendo's part. They had a lot of success with the Wii in terms of hardware sales, but due to lackluster third party support, the Wii isn't selling any games and thus isn't making them money anymore.

The main reason the Wii has no decent games outside of its first party titles (and a few notable exceptions) is because the machine simply isn't powerful enough to play the same games as the PS3 and the 360. Developers have to put in a lot of work to port a game to the Wii and the resulting game is often significantly inferior in quality. On top of that, developers don't really seem to know quite what to do with motion controls yet, so developing exclusively for the Wii never really pans out for them.

So everything basically hinges on just how powerful the WiiU is.

We know for a fact at this point that the WiiU is AT LEAST as powerful as the 360 and the PS3 based on the fact that it's getting a lot of ports for games that came out this year. With that in mind, there are two ways this can shake out:

1) The WiiU is just as powerful as the 360 and PS3. In this case, the ball is entirely in Microsoft and Sony's court. They could theoretically just sit around for as long as they want to since basically every game that could come out for the WiiU could come out on their systems. If an additional screen was essential for play, the 360 port could use SmartGlass and the PS3 could use Vita. They would have no reason to force a new system into development right away. Then they could take their time and develop a new machine that would be far superior to the WiiU and be able to sell it at a profit without worrying about early-adopter reliability issues. Then the WiiU would once again be unable to keep up in the next generation and ultimately lose third party support.

2) The WiiU is MORE powerful than the 360 and the PS3. Then the big question is "how much more powerful?" Ultimately, it would just need to be able to handle Unreal Engine 4. If it could do that, it would basically be set for the next generation of games. If that were the case, the pressure would be on for Microsoft and Sony to rush out their new systems for 2013, resulting in them probably losing a lot of money. Even if their new systems were technically superior to the WiiU, so long as the major development tools used could work about as well on the WiiU as it could on Sony and Microsoft's new systems, it wouldn't matter. For example, even though the PS3 is technically superior to the 360, they both share largely the same third party library because they both can support the same general development tools. So in this case, the WiiU would actually have a head start in the hardcore market and probably would actually be able to retain its third party support down the line.

So if the WiiU sells well this Winter (which depends largely on what the price is) and it is more powerful than the current generation of consoles, it is very likely that Nintendo will recapture the hardcore demographic as soon as third party developers release the first console game using Unreal Engine 4 as a WiiU exclusive simply because Microsoft and Sony aren't ready for it yet. But if the WiiU is only just as powerful as the 360 and the PS3, then Nintendo is poised to repeat history.

Oh, and regarding the WiiU Controller (which is known by some unofficially as the WiiPad), I don't honestly think it will make or break the system. It may attract the casual market and provoke the initial sales this Holiday season, but I don't think that it will be the albatross that the WiiMote turned out to be. It won't fundamentally alter the control schemes for most titles, it's easy to ignore or use in a limited capacity, and it seems to actually have potential that developers can explore without having to learn an entirely new control scheme. Developers for the DS already have a head start. That being said, even if it is used well, I doubt it will be enough to save the system if the WiiU can't handle the next generation of games. The casual gaming market is great if you just want to sell hardware, but you need the hardcore market to sell software, and the hardcore gamers these days have more loyalty to the games rather than the systems. If the WiiU loses third party support, it won't matter how cool the WiiPad turns out the be. Still, the WiiPad DOES look like it could be pretty cool.

So when we eventually get some solid idea of the technical specs on the WiiU, I can probably tell you exactly what Microsoft and Sony's next moves are.

If the WiiU is announced to be conservative in terms of performance, Microsoft and Sony will probably wait until E3 2014 to announce their new system. They may go as early as E3 2013, but unless the WiiU takes the world by storm, they won't be under a lot of pressure to rush things. Even if the WiiU is popular, they won't lose their third party support anytime soon. When they are ready, their new systems will be technically superior, sold at the same price (or even lower), they'll probably implement some sort of cloud gaming infrastructure, and they will quickly dethrone with WiiU.

But if the WiiU is announced to be a technical wonder, Microsoft and Sony will probably announce their next generation plans later this year. They probably won't wait for the next E3. They'll want to give gamers pause before purchasing the WiiU this Christmas. They'll want gamers to hold off for the promise of a new system that will probably cost too much, attempt to implement a second screen (probably at the expense of rumble or something), and won't actually be good enough to take away WiiU's third party support. They MIGHT hold off until E3 2013 just to make sure the WiiU doesn't flop before they throw their chips in, but I wouldn't bet on it.

All in all, Nintendo could have done the smartest possible thing they could have done, or they could have just dug their own grave again.