SEGA: Death Of Packaged Games A ‘Total Exaggeration’

[ROJM]

Mike Hayes in a recent interview with industry gamers stated that digital games will not replace package titles and that they will continue that side of things.

Posted August 12, 2011 by James Brightman

Sega's been in the packaged goods business a long, long time, and while the company is making efforts to focus more on digital, it doesn't see physical software evaporating anytime soon. Retail game sales were down to 71% last year, according to the EMA, and this July's retail performance (per NPD) was the worst since October 2006, but there's no reason that digital and physical can't coexist successfully for years, Sega West boss Mike Hayes told IndustryGamers.

"The day of the double-A game is over."

"Net-net people are playing games more, net-net, the business is still growing, and in a way, some of the new businesses we’re growing are less risky. So I think that the death of packaged games is a total exaggeration. But I think there’s probably going to be a lot of necessary pruning and good husbandry [across the industry], which means that the quality for the consumer in the end is actually going to be better, because people are going drill into what they know is going to be successful," Hayes commented.

"I think everyone’s saying it’s becoming all digital and no packaged; I just can’t see that. I think both are going to coexist to a greater or lesser degree. I do like the comment I heard at GDC, which is that the day of the double-A game is over," he added, referring to Epic's Cliff Bleszinski, who said the "middle-class is dead."

"I think that that’s something that we would absolutely agree with. If you’re not going to be in there with a product to really compete then your chances of making a return on that are going to be really limited," Hayes observed.

In an increasingly hits-driven business at retail, the risks associated with investing anywhere between $40 and $100 million in a project (when you add in marketing) have only gotten higher. On top of that, consumers don't want to spend $60 anymore on most games. Can the industry really sustain itself this way? It's clear that the economics are changing, and digital is having a huge impact.



For Sega and other publishers this will mean narrowing a product slate to focus on IP that's likely to do well at retail. Sega highlighted Sonic, Aliens, and the Total War and Football Manager brands. Beyond the core IP, Sega can then experiment with its growing digital business.

"So basically our strategy is we focus on our core IP, the triple-A for the console platforms. We will put in one or two new IP and innovate on those platforms where we can. And at the same time, we’ve set up separate groups which are focusing in on the digital side. In fact, 15% of our revenues are now from this broad digital area, whether that’s iOS or ESD (Steam, Direct2Drive, etc.) or XBLA or PSN and so forth and we figure that’s going to grow to around 20 a quarter within another 2 years. So we’ve spent the last 2 years already transitioning that. So we have divisions set up for all those different groups," Hayes explained.

And the nice thing about narrowing the core IP slate at retail is that money can then be allocated for more digital products, Hayes said.

"One of the interesting things for us is how we allocate the development budget. Because at the end of the day, that’s the most important thing. So for every new IP that we don’t try, that releases $30 million - that $30 million is being allocated across the mid-console download and on the low end apps," Hayes told us. "And what we’re announcing over the next few months are a lot of new IP on XBLA and PSN, which are pretty cool. So we’ve been able to use our development monies in a more spread about kind of way."

"I don’t think we’re in any way unique in that process. I think where Sega does benefit is our IP, because a lot of it can now be unlocked. So traditionally, we have spent $20 million to try and build a Golden Axe or a Sega Rally. Now, the great thing is we can unlock all that IP, particularly on console download, and particularly on a lot of smaller apps. And that’s where we have that big difference and that’s our strength."

http://www.industrygamers.com/news/sega-death-of-packaged-games-is-a-total-exaggeration/

[cube_b3]

Good Post, thanks for sharing.

[Sega Uranus]

Yeah, I really think the rise of platforms like the Xbox Live Arcade and Apple's App Store really works so well for SEGA. They have so much incredible games lost in their backlog such as titles that only ever received arcade releases that would have been a gamble to release to retail. Not to mention, smaller more easily assemble and instantly enjoyable games are more of what SEGA is about in general.

At the same time, I do not think they are spending their money in the best ways. Mainline Sonic games like Sonic Unleashed only receive around 15 million for budgeting, which is pretty silly considering they know something like that would sell good enough and that a high quality mascot game helps their overall image more than any other random title. That is not to say I think they should spend their entire quarter of profits on one game, just that it would not hurt them to spend a bit more.

It is even more silly when you consider games like Valkyria 2 and 3 getting similar budgeting. Sure they do good enough, but most people into the industry ignore the handheld market, especially PSP. Why not spend a similar amount of cash on a new original HD IP that is not from PlatinumGames?

[Trippled]

They have so much incredible games lost in their backlog such as titles that only ever received arcade releases t Not to mention, smaller more easily assemble and instantly enjoyable games are more of what SEGA is about in general.

I totally agree, and I hope SEGA takes that route. I know no other company that has so much unused( and great) backlog.

[ROJM]

Look, the trouble with Sega is despite having the reputation of being risk takers, they always act conservative when it comes to back catalouge games. Its only now that they are starting to release an arcade pack(if you can call the Wii,LA/GUNBLADE an arcade pack) they should as some have called for not only release arcade packs on the bigger systems via download(which i wouldn't necessarly want to see) but release canned games that are all but complete via these channels. Digital distrubutuion is much cheaper than the traditional package channels so the actual costs would be minimal and if they adopt a pay rate element to some of these games they could make extra cash. PROPELLER ONLINE would be a perfect choice as some have advocated. But they won't of course. Its only release countless versions of OUTRUN, SEGA RALLY PHANTASY STAR or the GENESIS, SONIC back catalog in numerous collection packs before peeps get tired of it.