United Gamer Online (UGO)

by Chris Morris
2010 hasn’t exactly been a good year for the video game industry. In fact, it’s been pretty lousy so far.

While the quality of major titles has been top-notch – with Red Dead Redemption, Super Mario Galaxy 2 and God of War 3 leading the way – consumers, on the whole, just aren't buying games.
To date, software sales are 8 percent off of last year’s pace, while hardware sales are down a blistering 16 percent. In real dollars, that means the industry is $67 million behind where it was last year, when the only noteworthy releases of the first six months were Resident Evil 5 and UFC 2009 Undisputed.

There are still a couple of blockbuster titles in the wings -- including the just-released StarCraft II and competing first-person shooters Halo: Reach and Call of Duty: Black Ops -- but many executives and analysts are pinning their hopes on new motion controllers from Microsoft and Sony.

“While a number of ‘core’ game titles continue to sell well, lukewarm sales of many casual console and handheld games remain a significant headwind to industry growth this year,” said Colin Sebastian of Lazard Capital Markets. “[I] believe that Kinect, along with Sony’s Move … are new potential catalysts to drive renewed interest in video games.”

Both Kinect and Move are being aimed squarely at the casual audience this year, in hopes of luring in new players and selling more hardware. Both peripherals, though, could be a bit outside of the pricing sweet spot to attract that audience.

Kinect carries a standalone price of $149 and the complete Move experience will cost $130 for one player – and $210 for two. (Some games can be played with just the PlayStation Eye camera and a Move controller, which are bundled together with a game for $100. A secondary navigation controller, which is required for some games, is sold separately for $30. Standalone Move controllers will run $50.)

Mass-market consumers, though, tend to get interested when peripherals are $100 or less. And the initial lineup of games for both systems doesn’t have a lot that appeals to the early adopter/core gamer.

“Although 2010 has been a difficult year for the video game industry so far, consumers have shown a willingness to spend money on unique content,” says Michael Pachter of Wedbush Securities. “[However,] we think that the standalone price for Kinect is too high, and expect core gamers to be put off by the price. Most core gamers will wait for pricing to come down.”
Kinect

The Kinect is just one motion control coming to consoles.

To encourage casual gamers, both Microsoft and Sony are offering the peripherals bundled with the Xbox 360 or PS3 – a wise move, since the target market likely doesn’t own either system. Microsoft, in fact, says it’s much more interested in the performance of the bundle than the standalone unit.

“Our focus, first and foremost, is on the console bundle … which we think will drive new customers into the Xbox 360 environment,” said Aaron Greenberg, director of product management for Microsoft.

While Sony would certainly disagree, most of the excitement in the industry seems to surround Kinect. No one is writing off Sony’s Move, but many seem to feel there’s a potential for pricing confusion, since all of the pieces aren’t sold together. Also, critics note it may be too similar to the Wii’s motion controller to turn consumer heads.

“Sony’s Move is truly impressive, but [I] remain concerned that initial sales could disappoint,” says Pachter.

So will the combined sales of Kinect and Move (and their respective games) be enough to push 2010’s sales above 2009? Probably not. Given the weak state of the software business – and the tough comparisons the industry will face at the end of the year as it goes up against last year’s Modern Warfare 2-influenced numbers -- the best anyone is hoping for is to match 2009’s disappointing take.

But hey, there’s always 2011.