Month: May 2012

Sony Rejects Web-Based PlayStation Console

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By Ian Sherr

Sony Corp. considered but ultimately rejected a download-only plan for its next videogame console, people familiar with the matter said, opting to include an optical disk drive rather than break with decades-old industry practice.

The Japanese electronics maker’s flirtation with dropping the optical drive underscores the rising importance of online networks in the videogame industry, which allow console users to download games, television shows and music without the need for disks or cartridges.

Sony is planning a 2013 release for the successor to its PlayStation 3 console, people familiar with the matter said.

Consoles without optical drives would likely add to pressures on brick-and-mortar and online retailers that sell game disks.

But Sony decided against a download-only model largely because Internet connections are too inconsistent around the world, one of the people familiar with Sony’s thinking said. Because game files are large, customers in countries where Internet connections are relatively slow would be hobbled by a requirement to download games, the person said.

A Sony spokesman declined to comment.

Microsoft Corp. is planning to include an optical disk drive in the successor to its Xbox 360 console, according to a person familiar with the matter. The software company also had concerns about access to Internet bandwidth, the person said.

A Microsoft spokesman declined to comment.

Both console makers have taken an unusually long time to update the hardware that is crucial to driving demand in the lucrative game category. Prospects for new consoles are likely to be a hot topic at the E3 videogame exposition in Los Angeles next week, though the only formal announcement expected is a successor for Nintendo Co.’s six year-old Wii, the Wii U.

The success of a new PlayStation is especially critical for Sony and new Chief Executive Kazuo Hirai, who is trying to stop financial bleeding in the company’s other electronics operations. As a bright spot in the struggling conglomerate, the games business is also the prime example of how Sony plans to deliver content to its devices using its online network.

To read the rest of the story, either contact me directly or read more online at the WSJ: here. (subscription required)

(Published May 30, 2012, in The Wall Street Journal.)

Zynga Defends OMGPOP Acquisition

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By Ian Sherr

Zynga Inc. has faced plenty of questions after buying the maker of “Draw Something,” a mobile game that was released only six weeks earlier and has since lost popularity. Now the social games company is trying to provide some answers.

The San Francisco-based company on Thursday plans to announce an agreement with animation studio DreamWorks Animation SKG Inc. to place additional advertising in the game. Zynga believes it’s the start of new revenue-generating possibilities that will justify the controversial acquisition.

Zynga, known for developing some of the most popular games played by Facebook Inc. users, has seen its stock fall by nearly half in the past two months. One factor is the company’s dependence on Facebook, whose own growth and valuation has come into question since its initial public offering Friday. But the decline began around the time of its March 21 purchase of “Draw Something” creator OMGPOP Inc.

The $183 million deal, though not expensive by many measures, was Zynga’s largest to date and came when the game may have hit at least a temporary peak.

“Draw Something,” which is a bit like Pictionary, asks players to make sketches that illustrate words and have others guess what they drew. It had been downloaded 50 million times in its first 50 days, making it one of the fastest growing games to date.

Players posted images of their drawings on Facebook and Twitter, where the game quickly garnered a following. At peak times, players were creating 3,000 drawings per second, helping to push it to the top of Apple Inc.’s mobile application store’s rankings as the most downloaded game, as well as its highest grossing.

But the excitement around the game appears to have quickly worn off. As of Tuesday, “Draw Something” had slipped to the 18th top paid app on Apple’s App Store, and the 23rd highest grossing. And although Zynga hasn’t said how many people play the game, the number of people who log into it using Facebook has fallen by nearly half from a high of about 14.5 million per day when the company was purchased to roughly 7.6 million on Tuesday, according to market researcher AppData.

The trajectory underscores the hits-driven nature of social games, and the concerns of many investors that Zynga paid too much for the game.

Zynga has defended the purchase, pointing to the game’s extraordinary growth and arguing that the millions of customers who still play the game makes it a strong franchise upon which the company can build.

“We think of it as a game that’s an evergreen franchise,” said John Schappert, Zynga’s chief operating officer. “It’s a game that will live on for years.”

 

To read the rest of the story, either contact me directly or read more online at the WSJ: here. (subscription required)

 

(Published May 24, 2012, in The Wall Street Journal.)