3D Games Corp Blog

At its investors call this week, Activision revealed that it would be debuting a new mass-market all-ages franchise at this year’s Toy Fair. Today, that title has been revealed as Skylanders Spyro’s Adventure, a brand-new game featuring Spyro the Dragon, who gamers last saw in 2008’s The Legend of Spyro: Dawn of the Dragon. The real question is: why the debut at Toy Fair?

The answer? Augmented reality and action figures.

Skylanders is built around 30 separate action figures that interact with the game through a peripheral dubbed the ‘Portal of Power’. Each action figure represents a certain character, each with their own special abilities. The game and toy line are aiming directly at children and their vivid imaginations, with competitive and cooperative play being available. And the achievements and experience gained with play stay within the figure itself, so players can interact anywhere on any platform, including consoles, a mobile app, and the Skylanders web portal.

The game and the technology behind it are the brainchild of California-based developer, Toys for Bob. The story for the game is penned by Alek Sokolow and Joel Cohen, the writers behind the first Toy Story film.

“These are more than action figures. They are inter-action figures,” said Eric Hirshberg, CEO of Activision Publishing. “By pairing world class character design, world class video game design and world class story telling into one entertainment experience, we’ve given players a whole new genre that bridges the gap between the real and virtual worlds. From the first time a kid picked up a stick and pretended it was a sword, toys have unlocked kids’ imaginations. And how often have you wanted to bring those toys to life, to see them become animated and take them on an adventure? Skylanders Spyro’s Adventure does just that.”

Activision is also joining with Toys R Us to promote the line in stores, with the store receiving several exclusives this fall.

“We began discussing this concept with Activision and immediately knew merging the world of toys and video games together in Skylanders Spyro’s Adventure would capture the imagination of a wide range of consumers, including kids, toy collectors and video game enthusiasts,” said Jerry Storch, Chairman and CEO, Toys’R'Us, Inc. “We believe this product line is among the most exciting and unique offerings that will be seen at Toy Fair this year, and we are excited to partner with Activision to bring Skylanders Spyro’s Adventure to Toys’R'Us stores this fall.”

Recently, IndustryGamers revealed that in just six months Sony managed to shave off another 1.4 million units from Microsoft’s global installed base lead with Xbox 360. As it stands now, the gap between PS3 and 360 is around 3 million units, despite the fact that Xbox 360 hit the market a full year before Sony’s console. So the question has to be asked: Did Microsoft squander their lead?

We asked a few of the prominent games industry analysts that very question. DFC Intelligence’s David Cole noted that Xbox 360 simply lacks diversity – it focuses almost too much on shooters – and Microsoft probably should have targeted the European market a bit more heavily.

“We have been forecasting for the past 3 years that the PS3 would catch up to the 360 by 2011.  I think the big issue is that the 360 has been primarily the platform for FPS games and has lacked the diversity to appeal to a broader international market…mainly Japan and Europe where Sony is very strong.  The Xbox 360 was just much stronger in North America than it was globally,” he said. “The main issue I think is Sony (and also Nintendo) being so strong in Europe and Japan.  I think in terms of doing things differently they should probably have focused more on Europe and just given up on Japan. They would have had a better chance in Europe.”

Cole doesn’t see Kinect necessarily being enough to stave off the Sony attack either. “Going forward I don’t know if there is much they can do.  They will try with the Kinect but I don’t see that working.  I think the PS3 will soon pass the 360 for good,” he said.

Of the analysts we contacted, Cole was definitely the least optimistic for Microsoft. Other analysts chose to put things in a broader perspective, reminding us that Microsoft is still fairly new to video games compared to Nintendo and Sony and they should be commended for their accomplishments thus far.

“We do not believe Microsoft has in some way squandered a first to market advantage; particularly when you consider how most game pundits back in the day expected Sony to dominate the next generation,” said Janco Partners’ Mike Hickey, who’s clearly a bigger believer in Kinect than Cole. “Perhaps more important is where we go from here, with no meaningful console introduction in the medium term; we believe Microsoft’s Kinect system is the most identifiable organic installed base accelerator (aside from continued price cuts and/or aggressive promotional bundling), which will likely extend their global lead over Sony’s PS3 console.”

EEDAR’s Jesse Divnich sees things similarly to Hickey. “Nothing went wrong. The achievements of the Xbox 360 are incredible,” he stressed. “It went from fighting for a distant second place last generation to now being considered one of the healthiest platforms to develop for. The PlayStation 2 outsold the Xbox nearly 7 to 1 in Europe and nearly 40 to 1 in Japan.  In 2010, PlayStation 3 is outselling the Xbox 360 a tad over 1 to 1 in Europe and only about 10 to 1 in Japan. For a company that entered the video game space late, going up against two competitors with decades of loyal gamers, Microsoft should be proud of their accomplishments. Any faults to point out would simply be nitpicking.”

Wedbush Morgan analyst Michael Pachter was essentially in agreement as well, noting – unlike Cole – that Microsoft might even be able to remain in second place.

“What did people expect?  They have a huge advantage in Japan, have been roughly equal in Europe and pretty far behind in the U.S.  It is only a matter of time before the lead in Japan erodes the lead in the U.S. I would NOT say that anything has gone ‘wrong.’  At the beginning of the cycle, I thought PS3 would win because of greater loyalty in Europe and a stacked deck in Japan.  Nintendo surprised me greatly with their phenomenal sales, and after a year or two, I said that I thought Sony would still finish second due to the Japanese advantage.  I now think that with Kinect and a pricing advantage, Microsoft might hold them off, and I certainly don’t think that Microsoft has done anything wrong at all,” Pachter commented.

What do you think? Should Microsoft have made better use of the Xbox 360’s first year? Could things have been done differently so that the lead would be bigger now?

In advance of his presentation at Digital Interactive Gaming 2010 in London, Ontario, EEDAR analyst Jesse Divnich shared some highlights of his talk, and in particular he noted how important it is to have a strong brand. If your brand is strong enough, fans will jump on the next title in the franchise, even if there’s a slight dip in quality.

“Even though Fallout: New Vegas, Fable III, Medal of Honor, and Star Wars: Forced Unleashed 2 (top October 2010 releases) produced quality scores below their predecessors, the strength of their brand equity was enough to overcome any shortfall in quality,” noted Divnich. “The truth is, once a high consumer promise is established for a brand, the equity built plays a persuasive role with consumers.  As long as the slip on quality is not significant, sales are unlikely to be impacted as consumers are more forgiving.”

Publishers, of course, still need to be careful, especially if they aim to further their sales with the next iteration in a franchise. “It should be noted, however, that a decrease in quality for a brand rarely results in significant series growth, but rather producing sales in-line with its predecessor.  For some publishers, this is perfectly acceptable,” Divnich continued.

“After a high consumer promise and strong brand equity is established, publishers often use secondary developers for the next iteration. With the reuse of assets and lower development costs, publishers are able to generate greater profitability off the next iteration.  The increase in profitability can then be used to fund the next-iteration that will again re-establish that original high consumer promise, and grow the series.”

Building up a strong video game brand is a massive investment for most publishers, but as we’ve seen with Halo, Call of Duty and others, the pay off can be tremendous. “Consumers tend to forget the enormous amount of resources, risk, and difficulty of achieving a 90+ rated title (less than 1% of titles achieve this).  Often, publishers are willing to sacrifice significant profits in order to establish a high consumer promise and strong brand equity, so that future titles may focus on recovering those costs in order to continue to maintain a brand’s strong equity,” Divnich concluded.

At a Morgan Stanley TMT conference in Barcelona, the chief executive of Activision Blizzard parent company Vivendi said there was nothing to worry about in its handling of the Call of Dutyfranchise. The Financial Times (registration required) reports that when questioned about the long-term viability of the franchise, Jean-Brenard Levy, chairman of Vivendi, said that its current development teams would be just as successful as the classic Infinity Ward.

“The Treyarch studio, which made this year’s game, has done better than what Infinity Ward could achieve a year ago,” Mr Lévy said. “We have reconstructed Infinity Ward, we are very happy with the way we have been able to reconstruct it.”

“We also have a third studio, which was created a year and a half ago, called Sledgehammer, which is working on Call of Duty properties. We believe this set-up of studios. . . has demonstrated it can do very well, for sure,” he continued.

Since the loss of Infinity Ward founders Jason West and Vince Zampella, a number of senior employees followed the duo to their new start-up at Respawn Entertainment. Some were concerned about the strength of the franchise, but Treyarch’s Call of Duty: Black Ops destroyedModern Warfare 2’s previous records, making Activision quite happy.

“Call of Duty has become the first entertainment property in history to set five-day launch records for two consecutive years across all forms of entertainment,” said Activision CEO Bobby Kotick at the same event. “The title’s success illustrates the mass appeal of interactive entertainment as millions of consumers are choosing to play Call of Duty: Black Ops at unprecedented levels rather than engage in other forms of media. The number of people playing online and the number of hours they are playing demonstrates how online gaming has become a mainstream form of entertainment and certainly validates Activision Blizzard’s leadership role in online entertainment.”

The next title in the franchise is expected at the end of 2011. It was being developed by the newest third pillar of the Call of Duty team, Sledgehammer Games.

[Thanks Gamasutra]