Uplink 9
The Euro-Gaming Issue
July 2007
Contents:
• The Great Microsoft Meltdown of 2007
• Superpower EU
• World Media Markets
• Russia Levels Up
• Updates from Crytek, Croteam, Remedy
Introduction
While videogames have been a multinational industry from the start, coverage of the European game culture tends to be scanty. This is unfortunate, and not just because the European Union (27 countries and half a billion people) is the single largest economy in the world. It also has a fast-growing semi-periphery, stretching from Eastern Europe to Russia, Turkey, and selected countries in the Maghreb and Central Asian regions. Unlike East Asia’s semi-periphery, which is still going through the initial stages of urbanization and industrialization, the European semi-periphery is heavily urbanized, literate and media-savvy. This means Europe is primed to become one of the most important game markets in the world.
But before we examine this rising superpower, Uplink begins with a story about the crisis in a declining superpower. No, not the US Empire – we’re talking about the poster child of US neoliberalism, Microsoft. Read on!
The Great Microsoft Meltdown of 2007
US Senator Everett Dirksen famously quipped, “A billion here, a billion there, pretty soon it adds up to real money.” The same could be said about the losses of Microsoft’s game division, a tale of self-destruction which is assuming the epic proportions of Vedic mythology.
Recently, Microsoft stunned the videogame world by admitting its 360 console has severe manufacturing flaws. The problem is so severe, the company will repair any unit which experiences the so-called “red ring of death” for free (a red light on the 360 comes on when the console dies). Furthermore, all existing 360s will now be covered by an unprecedented three-year warranty. The price tag for the new policy is a cool $1.1 billion.
No, that’s not a typo. Microsoft just booked a loss of one billion dollars. It’s the biggest hardware fiasco in videogame history.
What went wrong?
Like most tales of mythic doom, this one has a long and winding prehistory. Long-time observers of Microsoft have noted the company’s core strength was never its managerial savvy, but rather the cash from its operating system monopoly. Instead of lowering prices or embracing the open source revolution, Microsoft has tried to retain its monopoly while diversifying into unrelated areas – set-top boxes, hand-helds, and consoles.
The results range from the barely adequate to the dismal. While some of these ventures earned decent returns, its console business has been an unmitigated financial disaster. Microsoft lost $4 billion on the original Xbox, and its game division has never turned a profit.1 Another $1.5 billion was sunk into the launch of the 360, but Microsoft promised investors things would be different this time around. Thanks to efficient design and aggressive cost-cutting, the next-gen console was supposed to turn a profit starting in 2008.
From a programming standpoint, the 360 is a fine machine which delivers plenty of power. But from a consumer standpoint, the 360 had a number of serious flaws even before the current debacle. It ran far too hot, it generated far too much noise, too many of its drives ended up scratching DVDs, and it had no next-gen DVD capacity. On the other hand, the 360 was cheaper than the Playstation 3 and did deliver a fine gaming experience.
But then the rumblings of discontent began. For months, large numbers of gamers complained about their 360s dying on them. Everyone assumed this was due to the usual launch-day hardware bugaboos which affect every platform, and that any problems would be quickly sorted out. Microsoft extended the warranty on the platform to one year, and its PR machine assured us that everything was fine.
Still, the reports of 360 failures kept coming. Repeat customers found their 360s breaking over and over again, triggering a write-up by Dean Takahashi, the renowned gaming journalist at the San Jose Mercury News. A long-suffering 360 fan even posted this wickedly funny parody of a Johnny Cash classic on Youtube. European journalists and regulators started to take an interest in the matter, going so far as to grill Microsoft’s customer service operation in Britain. Adding to the mess, Dutch consumer watchdog TV show Kassa did an objective and scientific study proving that the 360 does indeed scratch DVDs, probably because of the penny-pinching design of the drive. Then major retailers began to chime in, saying failure rates were shockingly high for the 360 – anywhere from 5% to 33%, far above the failure rates for the PS3 and Wii, which are below 1%.
The staff at Uplink will be the first to concede we didn’t give these rumors too much credence. After all, Microsoft is a Fortune 500 behemoth, and would never be foolish enough to sell large numbers of defective consoles to gamers, who just happen to be some of the best-educated, vociferous, and demanding (but also generous and loyal) consumers around... right?
Wrong.
On July 5, 2007, Microsoft VP Peter Moore finally admitted the 360 has unacceptably high failure rates, and announced the new warranty policy. Gamespot, one of the leading newszines covering gaming and a generally fair and impartial news source, noted that eight out of the twenty-six 360 units purchased by Gamespot editors between 2005 and 2007 expired, while two others have intermittent hardware problems.2 You know your brand is in deep, deep trouble when the editors of one of the leading game review sites in the world experience a thirty percent failure rate on your machines.
At this point, things are looking grim for Microsoft. They obviously rushed the console to market, cut corners on quality, and refused to deal seriously with the resulting reliability issues until a massive crisis erupted. This is no way to run a kebab stand, let alone an allegedly world-class tech company. The financial damage is bad enough, but what’s worse is the loss of trust and credibility. Maybe US consumers will forgive and forget, but the quality-conscious East Asian and European shoppers who make up two-thirds of the world game market will not. This is a damn shame, because there are some terrific titles being released for the platform, ranging from Halo 3 to Alan Wake. Despite our criticisms of Microsoft, Uplink is a firm believer in console neutrality and platform diversity, and we wish the 360 only the best. But until Microsoft really and truly resolves its quality issues and starts treating its customers with respect, we cannot recommend their product.
-- DRR
1. http://members.forbes.com/global/2005/1003/036A.html
2. Gamespot. “Microsoft extending 360 warranty to three years.” Accessed July 3, 2007. Web: http://www.gamespot.com/news/6173633.html
Superpower EU
To understand the media culture of the EU, it’s helpful to step back a moment and consider just how different the EU is from the US. The EU is not a monolingual, monocultural nation-state. It is not the neoliberal recreation of the United States of America. Nor is it the junior power of an allegedly unassailable US Empire.
The European Union is indeed a genuine superpower. Its twenty-seven-member economy is bigger than the US economy. Unlike the US, which is addicted to foreign capital and runs vast current account and trade deficits, the EU is self-financing. More importantly, the EU is the world’s first (but hardly last) multinational democracy. It has its own currency (the euro), its own central bank (the ECB), its own parliament (the European Parliament), and its own constitution.
This constitution is not the so-called Constitution voted down by France and the Netherlands in 2006, which was merely a set of proposals to refine existing EU institutions. In fact, a recent agreement between the EU governments will result in most of those proposals being turned into a new treaty. Public opinion in the Netherlands and France strongly supports the new version of the treaty.
The real constitution of Europe is the massive, 3,000-page document called the “acquis communautaire”, which literally means the “community consensus” – European-wide legislation covering everything from trade deals to human rights, and social protections to food safety.
Here are just a few of the rights and institutions EU citizens enjoy which ought to be a shining inspiration to other societies: (1) universal access to quality health insurance, (2) the right to form unions and bargain collectively with employers, (3) political systems organized on the 21st-century principle of proportional representation, and (4) developmental states which fund civilian scientific research, education and renewable energy.
The EU also has one of the most vibrant and well-funded public broadcasting systems in the world. Public broadcasters routinely attract anywhere between fifteen and thirty percent of EU audiences, and create some of the most thoughtful and critical news programming in the world – mostly because their priority is informing the public, rather than maximizing profits. By contrast, the US has one of the most dysfunctional and broken media systems in the world, dominated by a handful of unaccountable giant corporations who practically own the government agencies charged with regulating them.
In addition to public broadcasting, the EU also underwrites Europe’s thriving cinema industry. EU governments are investing heavily in public broadband, the indispensable network for online gaming and new forms of media distribution. Meanwhile, the EU’s information society initiative is financing programs like Games@Large, a research project looking into go-anywhere, play-anywhere forms of online gaming.
One of the clearest signs of the maturation of European gaming is the annual Game Convention, traditionally held in historic Leipzig, Germany every August. The GC was created just five years ago, in 2002, but quickly became Europe’s leading game fair. Attendance mushroomed from 100,000 in 2004 to an astonishing 183,000 in 2006. Over two hundred thousand visitors are expected this year.
-- DRR
World Media Markets
One of the most startling features of the contemporary media is the rapid emergence of videogames as a heavyweight industry. Table 1 shows world media sales in the US, the European region (the EU-27 plus Norway, Russia, Switzerland, Turkey and Ukraine) and the major economies of East Asia during 2006. It should be noted that these are working estimates based on industry press releases and public domain data, so the true numbers may vary 5% above or below these figures. Still, the proportions are more or less accurate.
Table 1. Media Sales 2006.1
|
Mass Media |
US |
Europe |
East Asia |
Total |
|---|---|---|---|---|
|
Videogames |
$12.6 billion |
$9 billion |
$8.1 billion |
$30.7 billion |
|
Box office cinema |
$9.6 billion |
$6.5 billion |
$2.5 billion |
$18.6 billion |
|
DVD (purchase plus rentals) |
$23.5 billion |
$12.0 billion |
$3.5 billion |
$39.0 billion |
In percentage terms, sales look like this:
Table 2. Media Sales by Percentage
|
Mass Media |
US |
Europe |
East Asia |
Total |
|---|---|---|---|---|
|
Videogames |
28% |
33% |
57% |
35% |
|
Box office cinema |
21% |
24% |
18% |
21% |
|
DVD (purchase plus rentals) |
51% |
44% |
25% |
44% |
While the videogame industry is a power to be reckoned with in the US, it has achieved preeminence in Europe and outright hegemony in East Asia. More extraordinary still, the game market is growing faster in these regions than in the US. Japan’s game market is on track to increase 25% over 2006, Korea and China are reporting growth rates in the neighborhood of thirty percent, while the launch of the Wii and PS3 in Europe is having a similar catalytic effect on European markets. Put bluntly, the East Asian pattern is not a holdover from the past, it is the pace-setter for the future.
-- DRR
1. Sources include press releases from NPD, the Motion Picture Association of America, Screen Digest, Variety, Enterbrain and ELPSA. Additional sources include:
Ian Mohr. “Box Office, Admissions Rise in 2006.” Variety. March 6, 2007. Accessed April 21, 2007. Web: http://www.variety.com/article/VR1117960597.html?categoryid=13&cs=1
“Japan: 2006 Sets Record for Video Game Industry”. GameBiz Daily. January 12, 2007. Accessed April 21, 2007. Web: http://biz.gamedaily.com/industry/feature/?id=14943
“Record Breaking Year for U.K. Games Industry.” GameBiz Daily. January 12, 2007. Accessed April 21, 2007. Web: http://biz.gamedaily.com/industry/feature/?id=14931
“South Korea: Video Game’s Crazed Capital.” Moon Ihwan. Business Week. March 26, 2007. Accessed April 22, 2007. Web: http://www.businessweek.com/globalbiz/content/mar2007/gb20070326_937184.htm
“Japanese Films Win Box Office Battle of 2006.” Mark Schilling. January 1, 2007. Accessed April 22, 2007. Web: http://www.varietyasiaonline.com/content/view/535/53/
“Japan Home Entertainment Sales Dip.” Mark Schilling. Variety. March 12, 2007. Web: http://www.variety.com/article/VR1117961012.html?categoryid=20&cs=1
International Video Federation, European Video Yearbook 2006. Accessed April 22, 2007. Web: http://www.ivf-video.org/site/share/dlm/Files/Europe06.pdf
Russia Levels Up
After a decade lost to the ravages of neoliberalism, Russia has come roaring back. This is terrific news for the world, but especially good news for gaming. Russia has a long and storied tradition of world-class scientists, engineers and programmers, as well as rich traditions of science fiction literature and film (e.g. the Strugatsky brothers and Tarkovsky’s Solaris). One of the best-selling videogames of all time, Tetris, was created by Russian programmer Alexey Pajitnov back in 1984. During the economic chaos of the 1990s, Russian gamers mostly played computer titles, though console sales have noticeably taken off in the last two years.
While the current Russian game industry is modest in size – most analysts estimate it at 5,000 individuals – it is producing quality titles for a wide range of platforms, while growing 25% a year. According to Russian exhibition firm Gamex, Russia’s game market raked in an impressive $250 million in 2006.1 This is approximately half the size of the entire Latin American game market.
Although the Russian boom was kick-started by high energy and raw materials prices, the real story of the Russian resurgence is the rise of Russia’s developmental state, or what Uplink’s staff have dubbed, in honor of East Asia’s own developmental states, “Bearzilla”.
Under the energetic and pragmatic rule of the Putin administration, Bearzilla has done far more than just claw back its natural resources from rapacious multinationals and Russia’s very own robber barons (the Yeltsin-era oligarchy) alike. First, long-overdue administrative and tax reforms stabilized the economy and re-monetized an economy previously limping along on barter relations. Next, key enterprises in the banking, energy, telecom and aerospace sectors were transformed into powerhouse national champions. The surplus profits of these champions were initially used to completely repay Russia’s onerous foreign debts. Later, they were used to build up Russia’s foreign reserves and to launch a flurry of national infrastructure projects, research networks and technoparks.2 The extraordinary growth of Russia’s liquid assets is comparable only to China:
Table 3. Russia’s Foreign Exchange Reserves
Source: Bank of Russia. Accessed July 4, 2007. Web: http://cbr.ru/eng/statistics/credit_statistics/print.asp?file=inter_res_07_e.htm
|
Year (period ending in June) |
Russia’s international reserves (billion $ US) |
|---|---|
|
1998 |
16 |
|
1999 |
12 |
|
2000 |
21 |
|
2001 |
35 |
|
2002 |
44 |
|
2003 |
64 |
|
2004 |
88 |
|
2005 |
152 |
|
2006 |
247 |
|
2007 |
405 |
As a result, Russia’s GDP recovered from its low of $250 billion during the depths of the 1998 financial crisis to $435 billion in 2002. For the past decade, Russia’s economy has posted sparkling 7% annual growth rates, while its currency has appreciated 5% a year, resulting in double-digit increases in disposable income. In mid-2007, Russia’s GDP reached $1.1 trillion, which means per capita Russian incomes reached $7,700.
In the not too distant past, almost all Russian game software was pirated. Russian gamers had no choice, because as late as 2002, Russia’s per capita wealth at market exchange rates was only $3,000. (It’s hard to buy $200 consoles and $49 games when average incomes are $250 per month.) Today, however, per capita monthly incomes are $640, and falling console prices plus discount software pricing has reduced pirating to a shadow of its former self.
Right now, Sony’s consoles are the most popular with Russian consumers, thanks to Sony’s long-term commitment in the Russian market and highly respected brand name. Gamex estimates that a million PS1 and 400,000 PS2 units have been sold so far, while PSPs have become a ubiquitous sight in most cities. By 2010, when monthly incomes approach $1,000, millions of Russian consumers will be able to afford HDTV sets, as well as price-reduced versions of the PS3 ($300) and the Nintendo Wii ($150).
Yet the true significance of the Russian game boom extends beyond Russia’s borders. This is due to Russia’s pivotal location between two of the fastest-growing regions of the world, namely Eastern Europe and East Asia. As such, Russia is the most prominent member of a vast semi-periphery of middle-income nations, ranging from eastern neighbors Belarus, Ukraine and Turkey to the Caspian nations of Armenia and Azerbaijan, all the way to the Central Asian nations of Uzbekistan, Kazakhstan, Tajikistan, Turkmenistan and the Kyrgyz Republic. The 202 million people of this semi-periphery are well-educated and urbanized, and have tremendous economic potential, provided they build developmental states capable of harnessing their mineral and energy wealth for the collective good. If this happens, the success of Russia’s game industry may be replicated across the length and breadth of the Asian continent.
-- DRR
1. Accessed June 20, 2007.
Web: http://eng.gamex-expo.com/files/gamex_market_report_eng.pdf
2. Peter Clarke. “Oil boom boosts Russian electronics.” EE Times Europe, June 18, 2007. Accessed July 3, 2007. Web: http://www.eetimes.eu/199905035
Updates from Crytek, Croteam, Remedy
There’s no better way to illustrate the dizzying complexity of Europe’s gaming culture than by looking at three of its most creative and successful game companies. Crytek is based in Germany, Croteam in Croatia, and Remedy in Finland. Each company successfully reinvented the American genre of the 3D action game or so-called “shooter” in their own unique way. The shooter was largely invented by id Software back in 1993, and raised to an art-form by Valve’s Half Life (1998). Crytek’s Far Cry (2004) emphasized graphics, visual detail and frenetic action; Croteam’s Serious Sam franchise focused on huge outdoor environments, entire playing-fields filled with opponents, and frenzied action balanced with slapstick humor; while Remedy’s Max Payne (2001) retrofitted the film noir and detective thriller with John Woo bullet-time game-play and a harrowing, suspenseful storyline.
For all of their visual finesse and graphical artistry, however, each company succeeded not by imposing a pan-European aesthetic on their material, but by being true to their own local cultural situation. Remedy lead designer Sam Lake transformed a snowbound New York into an action-adventure wonderland, replete with reference to Norse deities, anti-neoliberal jibes and Finland’s pragmatic, EU-oriented geopolitics. By contrast, Crytek’s shooter pastiched that hallowed Central European institution, the holiday vacation in the tropics. Similarly, beneath the slapstick comedy and frenetic energy of Croteam’s Serious Sam lurked a serious meditation on the awful war in the Balkans, and Croatia’s real-world EU accession process.
The stories behind the companies are just as colorful as the games themselves. Crytek was founded by three Turkish-German brothers, part of the vast Turkish diaspora within Germany, and its success has become shining beacon of what the new, multicultural Europe is capable of. Croteam was founded by a group of Croatian programmers who first met during their term of compulsory military service (reputedly, the group saw actual combat in the Yugoslav civil war). Remedy’s cultural roots lie in the Finnish demo scene, where fans gather to create their own noncommercial media works.
Although each company became successful on the PC platform, they are all diversifying into consoles. Remedy’s intriguing Alan Wake is set to be released on the 360 and will almost certainly be ported to the PS3, and Croteam landed a deal with Austin-based publisher Gamecock to create a brand new action game. Meanwhile Crytek is preparing to release Crysis, its latest magnum opus, for the PC sometime this fall, and for consoles sometime thereafter.
-- DRR
Stay tuned for Issue 10: The Final Fantasy Issue, September 2007!