Achievement Unlocked 01.24.09: Shuffling the Deck

Posted by Rod Oracheski on 01.24.2009

411's Rod Oracheski takes a look at recent financial deck shuffling from several game-related companies. Who's making moves with an eye on the future, and who's reacting late?



  It's a new year, but the same old story keeps coming up - companies in financial trouble. The subtext of that story doesn't change: costs being cut, people being fired, and divisions being consolidated, reduced, or shut down entirely. News from both Sony and Microsoft on the financial front this week - though one company is definitely in more trouble than the other, along with Sega making a move that EA and Midway both already made.

Now this is going to sting a little...

  Sega of America leads things off, with 30 people laid off in recent downsizing. Sega isn't alone in cutting back on their active workforce, of course - EA made several cuts, including some at Tiburon, developers of their cash cow Madden franchise, in addition to NCAA and a slew of other titles. Midway, whose financial issues are well known, has also taken steps to reduce costs in recent weeks.

  It's possible that Sega was hit hard by lower than expected sales of their holiday lineup, which included Golden Axe: Beast Rider, Sonic Unleashed, and Valkyria Chronicles. Valkyria Chronicles, for example, was largely ignored in its debut despite receiving good reviews, selling just 33,000 copies in November and failing to crack the top 100 titles.

  Holiday sales are a huge part of any video game company's yearly ledger and with Sega's lineup being more more miss than hit, that has to have an impact on future titles.

Spend money to make money
  The company still has a slew of early 2009 releases with the potential to turn things around for the floundering publisher, including MADWORLD, The House of the Dead: Overkill, The Conduit, and Alpha Protocol. Three of those are new IP, so we'll have to see if Sega is willing to shell out for the marketing hype required to get those titles into the common consciousness prior to releasing them to retail.

  If none of those four catch on in any significant way, Sega might be going back to the cutback well once more.

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Just taking a little off...

  Then there's Microsoft, who announced they'd be cutting 1,400 jobs over the next few days, with another 3,600 over the next year and a half. Cuts will reportedly come from finance, human resources, information technology, marketing, sales, and research and development, and will be completed by June, 2010.

  The company as a whole isn't exactly struggling however, reporting a net profit of $4.17 billion (down 11%, year over year) on revenue of $16.63 billion (up 2%, year over year). The games division (lumped in with other products like the Zune as part of the Entertainment and Devices Division) reported a $151 million profit on $3.18 billion in revenue.

Hedging their bets
  With a healthy profit on the books the cuts appear to be hedging against future weakening of the economy - making light cuts now to prevent a situation where they'd need to make severe cuts later. That theory is strengthened by the announcement of future hiring (adding 2,000 employees over the next 18 months) within key areas.

  On the surface it appears Microsoft is taking steps to stave off potential losses, cutting operating costs where possible but still willing to increase costs in areas they consider key for future growth. It's possible they might see the need to cut again in the future, but with a sizable profit and even more sizable supply of ready cash to draw from, it seems unlikely that Microsoft will find themselves in any sort of financial disaster in the foreseeable future.

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Keep on Walking, buddy.

  Sony's troubles are a bit more serious, falling perilously close to that 'financial disaster' territory. Sony's changes are reactionary as the company is already in financial trouble, announcing Thursday that they'll post an operating net loss of $2.9 billion, far higher than early estimates of $1.1-2.2 billion and admitting to the rumoured increases to their restructuring plans they had denied just days earlier.

  Sony will increase their current restructuring plan, which aimed to save approximately $1 billion per year in operating costs, closing at least one additional manufacturing plant and reducing 'headcount' by 30% in their television design operations. Though the company has already reduced its workforce by 16,000 in the first restructuring, it's believed there will be future layoffs across multiple divisions within the company as a whole.

  While no specific cuts have been announced for the games division it, along with the LCD TV division, has been incurring major losses in recent years. The electronics division as a whole was tagged by Sony as being responsible for the bulk of the year-over-year decline, causing $3.8 billion of the $5.1 billion swing from profits to losses.

Lost markets
  Sony's problems seem to stem from losing their market share in key industries - namely video games, portable music players, and televisions. After two generations of ruling the home console market, Sony is running third behind machines from Nintendo and Microsoft and has lost ground each year it's been on the market.

  Meanwhile the iPod has overwhelming market share on portable music players, having swept in to corner a market that Sony was slow to recognize. On the television side of things, Sony's sets have gained a reputation, whether fair or not, of being overpriced for the quality - both of the image presented and build quality of the sets themselves. The LCD market has proved competitive, forcing Sony to reduce their sales estimates for the year by six percent, with competitors like LG, Sharp, and Samsung eating into Sony's market share with lower-priced sets that offer quality and features that are the equal, or better, of their Sony counterpart.

Uphill battle
    CEO Howard Stringer will have an uphill battle ahead of him as he attempts to turn Sony away from disaster. It's rumoured he's already seeing significant resistance as Japanese executives oppose diverting from the planned course despite the tough economic times. The inability to accept failed planning and institute quick and decisive change is an issue that's long been acknowledged as a failing of Japanese companies.

  That was never more clear than in 2003, when a foreign reporter asked Nobuyuki Idei, Sony's chairman of six years, if he had considered stepping down. Though Sony's shares had plummeted during the four years under his guidance as CEO, with the company having just announced plans to lay off 20,000 workers over three years, Idei angrily told the reporter, "I am sorry you had to ask that question, which is incomprehensible to me."

  Two years later, Idei would be replaced by current CEO Sir Howard Stringer.

  It appears Sir Howard will have his work cut out for him, however, with Kaz Hirai, current President and CEO for SCEI, declaring - just prior to the announced losses - that he considers Sony the 'official industry leader' even today.

This is not meant in terms of numbers, or who's got the biggest install base, or who's selling most in any particular week or month, but I'd like to think that we continue official leadership in this industry.

  That's precisely the attitude that's kept Sony from admitting to missteps, even internally, and correcting them prior to problems resulting. Without the ability to realize how they've lost those key markets, they may never regain them.

Looks even better in motion!

  I've been gaming on a monitor this week after my 50" set, a Sony KDS50A2000 I picked up two years ago, developed an...issue. I've noticed it getting a yellow/green tinge for some time, but it's really gotten bad in the last week. The image at right (taken with my wife's crappy point and shoot as the only lens I had at home for my camera was a 70-200 that was a little too much glass for the situation at hand) is the screen as it looks when displaying an image I created in Photoshop - entirely filled with 50% gray.

  As a result I've been playing on a monitor, using a VGA cable. In a fortunate coincidence, I received a new monitor at the start of the week - a 23" Dell S2309W that was on sale a week or two back for $169 with free shipping. I have to say, anyone who's gaming in a dorm setting and doesn't have room for a good television set should definitely check out this monitor - full 1080p support and an awesome picture.

  I played through Lord of the Rings: Conquest, and there's no way I'd recommend it for a purchase unless you're just a huge LotR fan and also loved Star Wars: Battlefront. The game gives you 16 missions split evenly across Good and Evil campaigns, with four character classes (warrior, scout, archer, and mage) to choose from - in addition to the ability to control Trolls, Ents, and Oliphaunts on certain maps and Hero characters (Gandalf, Sauron, etc...) at certain key points during missions.

  Unfortunately the game doesn't capture the 'beat-em-up' magic that last-gen LotR games had, with simple combinations and stilted animations. The objective-based missions are woefully short and some are incredibly easy for the right character class (scouts on any 'kill this enemy' mission, for example) so the game's single player campaign won't last a weekend - if that long. The multiplayer is okay, certainly familiar ground for those who played Battlefront, but I just couldn't see much longevity there. Certainly not $60 worth, at any rate.

  The game's biggest flaw is its melee combat, which offers up death juggling - where enemies hit you and then keep hitting you in the air. It's frustrating when it happens to a mage or archer, but perhaps understandable - they're not meant to be in melee after all. When it happens to a scout or warrior just as easily, however, the frustration mounts swiftly.

  In addition, the game isn't afraid to use the scout ability to go invisible (you'll see a wavery Predator-like outline if close enough) in combination with their one-hit-kill backstab. During one mission I had to pick up a gem a boss mob had dropped - but doing so left me helpless while an animation played out. The first time I picked up the gem as a mage and I was backstabbed and killed by a scout during the unskippable animation of 'powering up.'

  Returning to the scene with a scout, I checked out the area and could find no stealthed enemies. Picking up the stone dropped my invisibility, of course, and I was once again backstabbed during the animation following the stone grab and killed instantly. Taking control away from the player is poor game design - killing them while they don't have control is terrible game design.

  Until next week, I'm out.