Activision Blizzard Capabilities

Activision Blizzard Capabilities

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Identity, Security and Privacy in the Gaming Sector

Identity

In the past decade, video game characters have become moldable and specific to the user.  During the early years of simple computer games and the original Mario & Luigi, gamers had the option to select from a variety of pre-developed characters.  Gamers could identify with certain characters or simply pick a favorite, and adopt them as their own for use at every new game.  Choices were finite.

As video game structures have changed from short epics to longer, complex levels, video game makers have given gamers the opportunity to design themselves in their virtual worlds.  With the advent of Wii, gamers were encouraged to model themselves as a cartoon, choosing, for example, hair color and style. As technology advances and graphics improve, gamers will get the opportunity to create avatars that are the spitting images of the real thing.  There is tremendous potential to use such technology to educate individuals and influence behavior. For example, if someone creates a character with the same body proportions, goes on a binge eating rampage in the game and sees the results, an obese man who has difficulty completing tasks within the game, the individual might rethink how he conducts his real life. Seeing yourself and the effects of your choices on screen can send a powerful message.

Also, with interactive gaming gaining popularity, gamers will are able to modify their identities to project a persona that they wish to have rather than what the reality of the physical world dictates.  Their virtual lives can serve as an escape from reality, where they can experiment, test, and revert to their ideal state with the click of a button.

Security

Security in gaming came to the forefront and turned into a mainstream issue with news of a security breach of Sony’s PlayStation Network by a group of hackers that shut down the service for nearly a month and ultimately cost Sony millions of dollars in revenue and damage to the PlayStation brand. This security breach is now the largest breach in history with over 77 million accounts compromised, which surpassed the TJX security incident back in 2007 (http://en.wikipedia.org/wiki/PlayStation_Network_outage). Incidents similar to Sony’s will continue to occur in the sector for the foreseeable future, although at a much smaller scale, now that gaming has entered the digital era and online accessed content and platforms become ubiquitous. The spotlight is now brighter than ever on security in the gaming sector as Sony is still recovering from this incident, but security has always been an issue for all companies that are associated with gaming.

Security is a blanket statement in gaming because there are so many different contexts where security is applicable. Some examples include manipulating code in games, accessing online game servers, cheating to obtain an advantage, assuming another gamer’s identity, and so on. These are just a few examples, but the reality is that compromises in security can have a profound adverse effect in this sector compared to the other sectors where security may not be as vital. Game developers and publishers can lose millions with pirated software while gamers can become frustrated and lose interest when other gamers cheat to gain a competitive advantage in online video games. For the most part, security has been adequate in the gaming sector up to this point but the PlayStation incident brought the sector to its knees. While that incident was devastating to Sony and the PlayStation brand, it will serve as a reminder to the rest of the industry that security is going to play a major issue in the future and that companies must do everything they can to mitigate that risk. The digital era will usher in additional challenges and unforeseen risks that all companies must grasp or face a similar outcome that Sony experienced earlier this year.

Privacy
Privacy in video games is a challenge for game developers, console manufacturers, and consumers. Consumers could have their gaming experience in complete isolation and experience privacy, but the value added from having a connected gaming experience drives most gamers to open communication channels. The challenge then for the game developers and console manufacturers is to ensure privacy controls within the connected gaming experience.
For example, Microsoft Xbox Live shows a when a user is logged in, their achievements, the game they are playing or the movie they are watching at that time. Users are prompted upon first setting up their Xbox Live account to enable or disable this feature, and the choice can be changed at any time. The result is a value added connected gaming experience while enabling consumers to have a finer degree of control over their information.
The changes in the cloud computing era will also impact privacy in video games. Microsoft recently enabled cloud storage for game saves (http://www.youtube.com/watch?v=g77UF5tGfm8). This requires consumers to sacrifice a bit of their privacy for added value in a balance that Microsoft must consistently deliver.

Updated Gaming Bipartite Network

Updated Network Insights

As we look at the network model for the gaming industry over the next few years, a few trends emerge. Even over the past five years, more firms who were traditionally platform providers or content creators have moved into distribution, leveraged by content digitization and with the strategic goal of cutting the middle man. We have seen companies such as Microsoft, Apple, and Nintendo develop direct consumer relationships -- areas once controlled by GameStop, Target, and other brick and mortar retail stores. We have seen this play out in the music industry and more recently with ebooks.

Also as a result of the digitization of video games, it is becoming easier for new content creators ("indie studios") to reach an audience. The gaming platforms that are being developed also require a less formal knowledge structure to begin development. For example, the mobile gaming SDKs have a lower learning curve than the more robust XBOX or PlayStation SDKs. These dynamics have led to a proliferation of smaller independent video game development firms, who can create and deliver a video game with as little as one person -- a feat that was impossible as recently as five years ago.

All this trends are visible in our network of relation of the industry. When analyzing the network big picture it is interesting to observe that the bigger players in the Industry - Microsoft, Sony, Nintendo - are positioned in a central node that allow them to oversee the industry and influence in the different layers. Also is remarkable how heterogeneous the game development layer is. With game studios, movie makers and brands interacting for the content development creation.

In our view in the near future this network will continue its expansion towards the online and social gaming layers, those companies able to effectively incorporate this new trends in their value chain will prevail in the market. At the same time content creation will become even more competed since technology has increase the availability of tools for creative small player and also has lowered development cost.

Sony just won big with this one!

I know I have been dissing Sony a lot lately. Mainly, because the more I research them, the more I think they have fumbled big time and have let Microsoft take away their success. However, Sony is a big company, with deep pockets, and I am sure that they will not let the gaming industry get away from them. If we are talking about capabilities, Sony has just aligned all of them to come up with this fantastic video that has shown me that they are not ready to give up. Long Live Michael!!!! .... and Sony!!!!

Todd Valentine deserves credit for finding this one.

Sony's Not Dead (yet)

This post is in response to Carl's two excellent sets of graphs depicting Sony's recent decline.

There is no doubt that Sony has faltered in the last several years and is losing ground to more innovative companies such as Apple. However, there is at least some reason not to discount Sony quite yet.

The Wall Street Journal has a great article outlining Sony's intention to innovate internet-based TV. Howard Stringer (Sony's CEO) has also mentioned a innovative new line of television sets, which he claims will claim a premium price, restoring profitability to the ailing line.

Of course, we've heard these claims before. Apple tried and failed to negotiate with content providers over a more integrated set of broadcast channels to provide via the internet. Will Sony succeed where Apple failed?

We've also heard rumors that Apple is creating a Siri-voice recognition powered television set for the 2012 or 2013 market, so will Sony's new television be ground breaking enough? The path is certainly not clear for Sony, but there is at least a couple reasons to believe that they haven't checked out of the race just yet. Of course, going toe-to-toe with Apple in gaming may get even more challenging in years to come, further emphasizing Sony's gaming decline. It should be an interesting show!

Is Mario killing Tanooki?

Using the worldwide known Nintendo Brand, PETA is trying to push their own agenda about animal rights.

For me it is clear that PETA don't think that Nintendo is actually promoting animal torture but it is interesting how this organization is leveraging their animal rights campaign on Nintendo's launch of Super Mario 3D Land.

http://supermario3dland.nintendo.com/

http://features.peta.org/mario-kills-tanooki/

Warning: The video on the PETA webpage contains some strong but real images.

Sony - yet another post suggesting decline

Sony - Gaming loses money, insurance makes it

After making my last post on how I think that Sony is really messing up a great lead in the gaming industry, I found an article that clearly states the revenue generators for Sony (largest is consumer electronics) and the largest profit generator (insurance?!)

http://www.splatf.com/2011/11/sony-profits/

Sony - The Giant is Falling Asleep

SONY

Gaming Industry

Revenue 2010-11
networked products and services segment

$18,006 million

Summary

Sony is the major player when it comes to the gaming industry. Since the release of the original PlayStation console in 1995, Sony has earned this position in the extremely competitive market. With global sales of 102 million PlayStation units, and 150 million PlayStation 2 units, top design houses have battled to have their games released on the consoles before other systems and this has raised the barriers for competitors. With games such as Gran Turismo, Grand Theft Auto, and the Final Fantasy Series, Sony has become a part of every gamers life. However, most recently due to the PS3 release delay and the Security Breach of the PlaysStation Network, Sony has jeopardized this dominion and will most likely face stiffer competition in the future.

Present

Most recently, Sony has not been doing very well. First, they released the PS3 a year late and this cost the company a lot of customers who purchased an Xbox 360 instead. Because of this, Microsoft gained a substantial advantage in building brand awareness. As of 2008, 5.4 million PS3 consoles had been sold compared to 12 million for the Xbox 360 and 12.7 million Wii systems.

The second issue was that on April 19, 2011 the PlayStation Network was put offline due to a “compromise of personal information as a result of illegal intrusion.” This intrusion cost Sony a lot of loyal customers who no longer feel secure using PSN or simply can’t. Again, this has benefited Microsoft.

Future

Sony is in a difficult position for the future. Both of the issues mentioned above have allowed competitors to catch up. However, they recognize the challenges ahead and have started preparing for the future.

The introduction of the Move has allowed Sony to enter the Immersive Gaming space, one that has proven very successful for Nintendo and Microsoft. Since the PS3 hardware is very powerful, they will surely take advantage of this and other immersive gameplay experiences. By incorporating Sony’s massive R&D they can connect the PS3 with Sony Mobile Phones, Bravia Televisions, and other Sony Home Entertainment Devices to take immersive gameplay experiences to the next level.

Also, Sony has announced their intention to make the PlayStation Network an “open” system, which means that the PSN will be open to systems other than the PS3. If they can make their system more secure, this may be a huge move for Sony. By commoditizing the online experience they may take customers away from Microsoft since players will be able to play against other systems and other friends.

Lastly, Sony has started testing online distribution models and this will afford Sony better margins, marketing research, and sales. They need to get on this like white on rice. However, they can’t fully take advantage of this until they solve the issues with the PSN. If customers don’t feel safe playing for free, it will be unlikely that customers will want to have their credit cards stolen.

I would say that Sony is not positioned very well for the future.

Insight

The industry as a whole is very similar for the three main console manufacturers: Sony, Microsoft, and Nintendo. All three are following similar business plans in regards to online distribution, immersive gameplay experiences, and online gaming. As far as games are concerned, partnerships don’t offer the competitive advantage they once did because developers have more leverage. The future lies in hardware development and being the first to market. If they make hardware that inspires developers, this is where a company can take the lead! Whether it is by making the new 8th generation console, or cloud computing, Sony needs to have developers on their side once again.

The immediate steps that Sony needs to take are to introduce an 8th generation system before everyone else, improve network security on their side, and really take advantage of the immersive gaming experience and the fact that they have so many other consumer products that Microsoft and Nintendo do not.

Thormahlen, C. Video Games in the US. IBISWorld Industry Report NN003. March 2011
Playstation Network. http://en.wikipedia.org/wiki/PlayStation_Network
Playstation. http://en.wikipedia.org/wiki/Playstation

Gaming Sector: Activision Blizzard, Inc.

Introduction

Within an extremely fragmented sector, Activision Blizzard, Inc. has been able to stand out from the crowd as the largest worldwide publisher of videogame content across all console platforms and is a sponsor for several online enabled games. Fiscal year 2010 proved to be the finest year yet as the company raked in revenues of $4.4 billion (GAAP) and net income of $418 million (Activision Blizzard 2010 Annual Report). While Activision Blizzard’s current performance bodes well for the immediate future, the company’s long-term strategy to remain competitive in an evolving sector remains unclear.

For those of you unfamiliar with Activision Blizzard, here are videos showing their most profitable franchises: Call of Duty and World of Warcraft.

Position in the Gaming Sector

Activision Blizzard remains one of the largest players in the content creation and publishing layer within the gaming sector. These two layers are undergoing a radical transformation as the separation line is becoming more and more blurry with each passing year. This is due to the recent trend of publishers, particularly EA and Activision Blizzard, acquiring third party content developers rather than investing capital to produce fresh and exciting intellectual property in-house. While this strategy may yield gains in the short-term, it is not sustainable as a long-term strategy. This business model is analogous to the pharmaceutical industry as the big players like Pfizer and Eli Lilly are struggling to find the next blockbuster drug that will support their on-going research and development efforts before their current blockbuster drugs lose their patent exclusivity benefits. Eventually this cycle will break when popular franchises get stale, all of the current mainstream content becomes oversaturated, and all that remains is niche content that cannot generate enough revenue to offset publishing and operating costs for a larger companies like EA and Activision Blizzard.

Future of Activision Blizzard

Activision Blizzard is currently at a crossroads that may define their future in the gaming sector. Currently, it controls two of the most popular content IP in the sector: Call of Duty and World of Warcraft. However, how long can Activision Blizzard rely on generating enormous profits off two key franchises before gamers’ tastes will change. Activision Blizzard learned a hard lesson with its Guitar Hero franchise that no longer exists. With an over-saturated market of first person shooters, how long can the Call of Duty franchise keep hardcore gamers entertained? The same can also be said about World of Warcraft now that it is about to enter its eighth year in operation this November. Activision Blizzard continues to operate under an old archaic and antiquated business model in the constant evolving gaming sector. Will Activision Blizzard pursue other avenues like the social platform before its too late? The next five years are sure to be interesting…

For the full report and analysis of Activision Blizzard's network, click here