Ah, irony of ironies. Two days after EA CEO John Riccitiello claimed the game industry is no longer ripe for mergers, Activision and Vivendi Games announced their intent to merge into Activision Blizzard. (Wonder twin powers, activate! Form of known IP! Form of Warcraft!)

Analysts will flutter, of course. But when they hype dies off, what will this ultimately mean for the game industry?

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Kim has already responded to my most recent post with a concise wrap-up. To avoid belaboring things, I’ll do the same.

This still seems to me like a case of “take no chances” vs. “take full advantage of the opportunities.” Kim argues that the FS team is already capitalizing on most of my ideas, but that’s not actually the case. For example, he notes that the FS team already helps third parties advertise, but my whole point was that FS can offer both free venues (as they do now) and premium venues — deriving more revenue in the process. Isn’t that a good thing?

At the end of the day, this is a bit like a liberal and ultra-liberal arguing about politics. We’re both platform fanatics. More to the point, we’re suckers for a vigorous debate. …But you’re still wrong, Kim. ;-)

Stay tuned till next time, when we’ll tackle the even thornier subject of peanut butter: “creamy or chunky?” It’ll be a battle royale!

Yesterday, I wrote that Microsoft should be doing more to tap the aftermarket for goods and services related to Flight Simulator. Kim, my friend and coworker here, took notice and essentially argued that I was wrong because: A) the 3rd party after-market is good for sales of Flight Simulator, and B) Microsoft could never think of and/or develop most of the aftermarket things that have arisen.

Permit me a bit of grumpiness. I hardly need reminding that 3rd party extensions, especially of the user-generated type, can be very good for business, nor that 3rd parties will think of & do things that Microsoft could not. My point was this: platform monetization strategies (be it for games, websites, or anything else) don’t need to begin and end with “releasing an SDK” or “building a community.” Yes, you can greatly increase the penetration of your platform (in this case, sales of a game) by encouraging 3rd party / hobbyist support of it. And sometimes, you can earn even more by remaining active in the aftermarket. You just need to be smart about it.

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Note: I think this post may be interesting to anyone creating, investing in, or distributing games (regardless of whether or not they are Xbox Live Arcade games.) However, I needed to ramble through some seemingly tangential stuff to make my point. Please bear with me. :-)

XBLA portfolio management is a complex thing… I’m one part cat-herder, one part traffic cop, one part talent scout, and one part “quality control.” (The latter part is especially tricky… who wants to be the guy who turned down Katamari because “the art was weak”, or one of the eight publishers who turned down Harry Potter because “the writing could use polish.”) I approach these roles with a healthy dose of humility (and even anxiety), knowing that at any moment I could become “the moron who turned down [fill in the blank].” Unfortunately, the longer I hold this position, the more likely that becomes!

Trying not to be a moron

So I’ve put systems in place to hopefully help reduce the risk of my own tastes (or lack of vision) from polluting the portfolio. I can’t really discuss the details, but they include a sort of “wisdom of crowds” feedback loop, in which indie submissions are screened and rated by a group of my colleagues within Microsoft (who are asked NOT to discuss the submissions with each other before rating them — mainly to avoid group-think.) The wisdom of crowds can make my forecasts more accurate, and it can help compensate for any subconscious biases I have. Unfortunately, what I don’t believe it can do is help me identify future mega-hits (i.e. “the next Geo Wars“.)

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Via Joystiq, an interesting controversy: id co-founder John Romero has accused the modding community of hurting the game industry by exposing or introducing inappropriate content (i.e. nudity) in PC games. His post was in response to the ESRB’s re-rating of Oblivion (which happened after a nudity mod surfaced.) John’s exact words: “modders are now screwing up the industry they’re supposed to be helping.”

There are a number of interesting comments on John’s original post which you may wish to read. Meanwhile, this raises a couple issues that I’ve been meaning to write about:

Whose Side Are They On, Anyway?

When consumers decide to create content for a game (or anything else), they’re doing it to indulge their own creative impulses, and/or to share something with friends, and/or to gain notoriety, and/or other reasons that have little to do with “wanting to help the industry” (or the developer, for that matter.) Let’s not kid ourselves: the guys who made Counterstrike didn’t do it to make Valve rich… that was simply a nice side-effect.

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If you haven’t already read it, I’d like to direct your attention to an absolutely fantastic book called Wisdom of Crowds, by James Surowiecki. In it, Surowiecki argues that the decision-making and predictive power of diverse groups of people greatly exceeds that of most individual “experts”. The book is remarkably comprehensive and convincing, and the case studies in it will inspire and amaze you.

Wisdom of Crowds opens with a nice example: 800 people at a livestock exhibition participated in a contest to guess the weight of a live ox (on display) after slaughter and preparation. Some of the 800 were butchers and so-forth; people who should make a good guess. Many contestants were ordinary people with less “relevant” knowledge. But no expert within the competing pool beat the average guess of the group as a whole, which came within one pound of the true weight (1,197 lbs instead of 1,198).

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Two rather conflicting bits of news for Sony today. On one hand, a survey revealed that the Sony brand is stronger than Nintendo’s, and much stronger than Microsoft’s. (Forrester Research, which conducted the survey, went on to claim that “Microsoft faces big consumer defection risk.” Ouch.)

On the other hand, rumors abound that Walmart will quit the UMD business. Universal Studios has already ceased UMD production. Losing Walmart is a bit like having your legs chopped off. I wonder: if UMDs had cost half as much, would consumers have stuck with the format? The price always seemed excessive… to me at least.

It’s strange to witness such a mismatch between technical achievement, great branding, and questionable strategy. Why is Sony obsessed with expensive proprietary formats that almost inevitably generate apathy (if not resentment)? Why did it take the company so long to realize that, shocker of shockers, an online service would be important in next-gen consoles? Why is Sony letting the Nintendo Revolution run away with the physical gaming market, when the Eye Toy has been around for years? Where is Sony’s next-gen response?

I know, I know. It’s easy to criticize from the bleachers. They’ve got smart people who’ve managed to win two console wars in a row. And maybe these missteps don’t matter, since brand strength may preserve Sony’s dominance in the console market. Then again, I’m guessing that Nintendo had A+ brand strength with consumers once… before the GameCube?