Although this is by no means a prediction based on any scientific data, I am already seeing big trends this holiday gift season that will impact game companies significantly. By talking to my children and their friends, visiting major retailers and getting virtually every online retailers newsletter, it is becoming clear there will be some big winners and losers this holiday season that also show how the industry will continue to evolve.
Nintendo and Microsoft look like the losers
I expect two companies that I respect greatly, Microsoft and Nintendo, to have poor Q4 product introductions. Unlike the iPad and some of the Android tablets, nobody is advertising or discussing the Surface. Although Microsoft has set up stands at malls and is leveraging retailers that normally sell PCs, most consumers who are in the market for a tablet are deciding between the iPad or the Kindle Fire (at least the people I spoke with). Retailers are drawing traffic by selling cut-price Android tablets (normally under $100),showing that they believe consumers will go out of their way to buy such a tablet (say what you want about traditional retailers, but they still understand their customers very well). Worse for Microsoft, the Surface is not even on people’s radar; outside of Microsoft ads I have not heard it mentioned once.
The other company that is having a very troubling holiday season is Nintendo. Normally with a new console launch, gamers are focused on the platform for months and it’s all they talk about or play. I have not seen similar enthusiasm for the Wii U. Stores are not sold out and kids are talking more about the newest app they downloaded than Nintendo’s new console. What is even more troubling is that retailers are not featuring the Wii U prominently in their marketing or in-store displays. As I mentioned earlier, retailers keenly understand their customers and use things like in-demand electronics to lure customers in. The fact that retailers do not feel the Wii U will draw customers shows the lack of enthusiasm for this new console. If the Wii U goes the way of the 3DS (another device that is not featured prominently this holiday season), Nintendo might be dealt a blow from which it could never recover.
Activision looks like the surprise winner
My biggest surprise this holiday season is the strength of Activision’s Skylanders franchise. Skylanders had as much or more shelf space in the electronics section than anything else, more than any other gaming franchise or device and more than any individual tablet (and almost as much as all tablets combined). More importantly, many of the kids I have spoken with have Skylanders at the top of their holiday lists. For those not familiar with this product, the Skylanders game is sold with physical toys that “come to life” on screen when they are connected to consoles (i.e., Wii, PS3 or Xbox 360). When figurines—priced from $10 to $15—are placed on a small electronic portal, a chip inside them interacts with the console and records a player’s achievements and progress. Outside of tablets and TVs, it seems that Skylanders will have the biggest Q4 (and they have a much better margin than TVs and tablets).
First, take my impressions with a grain of salt. They are largely anecdotal and the actual sales data may prove a surprise. If it turns out that my initial impressions are correct, it shows the Win8 experiment for social game companies is likely to fail and you should not devote programming resources to it (keep in mind that I was cautiously optimistic when the Surface was announced). Also, if you thought Nintendo might bridge the gap between console and social gaming, put that thought on hold. Nintendo will need to get lucky just to survive. With Skylanders, there is probably not an immediate opportunity but it is worth looking at the business model and understanding if there is a similar opportunity in our space (the Skylanders app does not seem to have nearly the traction of the console versions). Happy Holiday Shopping!