The Manifold Failures Of The N-Gage, Part the Third

As every avid BuzzSponge reader knows, we're no stranger to taking pot-shots at the strategic and design shortcomings of Nokia's hapless GameBoy/cell phone, the N-Gage. This will probably are last N-Gage-related potshot. Not only is making fun of the N-Gage's shortcomings like shooting fish in a barrel, we're sure after failing to understand its target market (see our article on the subject here), launching the N-Gage to, uh, less than impressive sales (selling 5000 units worldwide, despite Nokia's insistent claims that it would sell in the "millions and millions"), and then having their N-Gage hacked (yesterday, hackers devised a way to not only copy the N-Gage's games, but to play them on other--much cheaper, and better--phones), the team behind the N-Gage is well-aware at this point that they're probably about to become a case study in how not to launch a product. But before we invoke the mercy rule, we couldn't resist but post a link to the following site devoted to making fun of the N-Gage's ridiculously stupid (and not stoopid fresh) design, SideTalkin. (With only 5000 users worldwide, most people won't have seen an N-Gage in use, so we'll take a second to explain the joke behind the site: in order to make the N-Gage more cool, avant-garde, or possibly just more obtuse, Nokia's product designers decided to make users hold the phone like a pizza slice to their head in order to make calls. To explain this, take your cell phone, and hold it sideways to your head, rather than simply so that the speaker/mike face in front or behind you. Looks cool, doesn't it? The N-Gage's designers also thought so!). Anyways, you know you've got a problem when hundreds of people in your target demographic start up a website devoted to making fun of your product's ridiculous design, as is the case here. Enjoy.

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Online Gaming For Fun And For Profit

There’s a thought-provoking article in this week’s Economist about the spectacular growth of online video games. The highlights:

[In 2002], Americans spent over $6.9 billion on games for a personal computer (PC) or a console (ie, a television-based unit such as Microsoft’s Xbox, Sony’s Playstation, or Nintendo’s Gamecube). Polls show that more than half of all Americans above the age of six play video games. Nor are the players all spotty teenagers: in 2002, 42% of console-game buyers and nearly two-thirds of PC-game buyers were over 36. A poll for the Entertainment Software Association said that 26% of all gamers are women: video gaming, it seems, is a more heavily female pastime than subscribing to The Economist print edition (just 8% of its subscribers are women). Young men dominate professional gaming, but that is bound to change, just as women broke into the previously male world of professional poker as the game became more popular and respectable.

We’re thrilled that the Economist is effectively validating a guilty pleasure of ours—we defy any of our readers to match our mad Halo skillz on a PC/mouse set-up, and we’ll gladly challenge some of you to some Rainbow Six action as soon as we pick up our copy—but (wearing our business hats for a moment), we were more intrigued by the Economist’s description of gaming for fun and for profit. Specifically, the Economist described something called “the World Cyber Games” that was held in Seoul, South Korea this summer, where video gamers competed for cash prizes and rewards:

On October 18th the fourth annual World Cyber Games (WCG) in Seoul ended with Germany victorious over 600 competitors from 55 countries. The German team will split a $350,000 purse stumped up by the South Korean government and by several corporations; Samsung alone spent $12m to back the tournament. The team had to beat a field of about 300,000 to qualify; Britain’s qualifying tournament saw about 10,000 people vying for 15 spots on the national team.

Reading about the popularity—and the size of the purse—of online gaming got us to thinking: how long will it be before Microsoft, Sony or Electronic Arts start holding online tournaments with significant prize money as a way to generate interest in their games? Imagine playing in a Madden online where the winner could garner cash (or other) prizes. Similarly, what about a basketball game that culminates every spring in an online tournament that parallels the NCAA’s march madness. Not only would such events further accelerate the growth of online gaming, they might provide marketers with another way to reach customers: e.g. Anheuser-Busch or Miller could sponsor the NCAA tourney as a way of reaching ever-so-hard to contact 21-34 year-old males. There’s already a huge number of individuals who attend LAN parties (events where sometimes as many as 128 users lug their computer gear to a rented space to play games in close proximity with one another over a lag-free LAN) where cash prizes—usually in the range of $500-$1500 are awarded, and it would seem to make sense for corporations to start sponsoring such activities. At the very least, it would certainly generate some buzz, if only because it would be so unusual (at first).

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The N-Gage's Demise, As Predicted

As our erstwhile readers may recall, a scant two weeks ago we predicted the imminent failure of Nokia's new handheld video game device/PDA/cell phone, the N-Gage. We hate to say that we told you so (actually, we kind of enjoy gloating, but keep it under your hat), but it looks like our assessment was right on target: early sales figures reveal that the N-Gage sold less than 5000 units in its first week on the market. These low figures are especially stunning in light of the amount Nokia spent to hype the product in the US (an estimated $117m), and are hugely disappointing when you compare the N-Gage's sales figures at launch to similar technology products. For example, Microsoft's XBox managed to sell 1.5m units on the first day of its launch in the United States at an identical price point to the N-Gage ($299), while Nintendo's GameBoy Advance handheld--the N-Gage's closest competitor--sold 540,000 systems in its first week of launch. Ugh. We're sure that the N-Gage launch team is keeping a low profile @ Nokia HQ in Finland right now, particularly when you consider that just days ago, they were telling anyone who'd listen that the N-Gage would easily sell several million units through 2004. For the handful of analysts who continue to think that Nokia is a good bet, we'd suggest that they try to remember when the last time that they'd purchased a Nokia product that worked well (we've had problems with every Nokia phone our cell carrier has saddled us with), and adjust their ratings accordingly.

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The N-Gage: Count The Days Until It Dies

Tomorrow morning marks the launch of Nokia’s Frankenstein-like fusion of a cell phone/video game player/MP3 player/mobile phone/FM radio/”Generation Y Lifestyle Accessory,” the N-Gage. As exciting as the multifaceted N-Gage may sound on paper, we’re betting that this device is going to be as short-lived as Michael Jordan’s baseball career. (Sorry that we couldn’t come up with a better simile—it’s been a busy Monday, after all.)

For those of you aren’t in the highly coveted 18-25 year old demographic that Nokia’s targeting (e.g. if you’re the Man), the N-Gage represents Nokia’s attempt to capture some of the revenue being generated within the phenomenally quick-growing video game industry, by releasing a “gamedeck” phone capable of playing games and making phone calls. (You can take a close-up gander at the ins-and-outs of the device here.) While such a device might sound cool to the non-cognoscenti, there are some caveats: it’s prohibitively expensive (Nokia expects “hardcore and active gamers” to shell out $299 for it), it has several fatal design flaws (click here for complete details), the product itself shows virtually no understanding of its end-users, and how they use “gaming devices.” In fact, the only thing that is cool about the N-Gage, really, is the very slick marketing push that’s accompanying the product’s launch.

In describing why the N-Gage has no future, let’s start with its price. In a Wall Street Journal article published last week, an equities analyst was quoted as saying that his “main concern” was that “the price point might be prohibitive to a significant launch,” in what might actually be the understatement of the fall season, given the pricing of the N-Gage’s competition. (A quick aside: the title of said Wall Street Journal article, “Nokia Scores Point With Game Plan: N-Gage Could Be Surprise Hit, Critics Say” has to be the most misleading title we’ve ever seen, given that the article is filled with highly negative comments from industry experts like “to the kids I’ve spoken with, there’s not much incentive to sign up for or buy the N-Gage.”) Not only will the N-Gage compete against Nintendo's $99 GameBoy Advance, it will actually compete against a variety of other cell phones from Samsung, Motorola, and surprisingly, Nokia, which can already play some of the same downloadable games, albeit with slightly less sophisticated graphics. Not only are these phones substantially less expensive than the N-Gage, in many cases, they’re given away free or at a steep discount with a cellular contract. This presents two problems for the N-Gage. First, unless it can offer much better or more games than these products (which is unlikely, given the staggering range of games available for download, and the far superior games available on the GameBoy Advance, it’s unlikely that buyers will get over the high price for the product. Secondly, for whatever reason, Nokia has chosen to sell the phone “without activation,” meaning that that you can’t purchase the phone with a contract—and perhaps, a sizeable discount—from your cell company. Consequently, there’s no incentive to pay a premium for the N-Gage, and no way of getting the price down, at least initially.

The second reason the N-Gage will die quickly is that it is plagued with some of the worst product design choices in recent memory. We’ll start with a little known fact about the N-Gage’s phone capabilities, specifically, if you want to use it as a phone, you should know that the device itself is incompatible with roughly 50% of the cellphone market in the US. This last little tidbit was revealed to us in the San Jose Mercury News this morning:

Everyone knows how to buy a mobile phone. You pick a carrier such as Verizon Wireless or Cingular and go to a store owned by the company or an authorized reseller. After you pick a particular model of phone, the clerk signs you up for service and then activates the phone you want. N-Gage doesn't work that way. Most retailers will sell the phone without service and the buyer then has to arrange for service separately. Inside the N-Gage is a slot for an SIM card, a tiny memory chip that authorizes a network connection and establishes the phone number. SIM cards work with the GSM network popular in Europe, now being adopted in the United States by AT&T Wireless, Cingular and T-Mobile. But the other three national wireless companies -- Nextel, Sprint PCS and Verizon Wireless -- use different, incompatible technologies. For marketing and technical reasons, Nokia is unlikely to ever make a version of the N-Gage for the other networks. So N-Gage owners will never be able to play with friends whose carrier of choice is Nextel, Sprint PCS or Verizon Wireless, eliminating about half the existing market.

That’s not the end of the N-Gage’s massive design flaws, however. Check out this review from CNN/Money:

The N-gage's biggest problem is an astonishing design flaw that all but eliminates the machine's functionality as a mobile device. Better put, you can play games on the go -- but should you decide you want to play another game once you're out, good luck. To play a game (or insert a new memory card with your MP3s), you'll need to • turn the N-gage off • remove the back cover • remove the battery • insert the cartridge • replace the battery • replace the back cover • power on the N-gage • wait just shy of 30 seconds for the machine to power up • load your game All totaled, it's about a 90 second process. Worse, it's practically impossible to do if you're on some form of public transportation. And because the games are on MMC cards (wafer thin and about one inch long), if you drop one in a crowded environment, recovering it could be tricky. At $30 a game, that's a risky proposition.

The phone itself is a quality piece of equipment, as you'd probably expect from Nokia. Using it reveals another design flaw, though. While Nokia encourages N-gage owners to use a headset, if you ignore that device and use the phone in a more normal fashion, you have to hold it against your cheek lengthwise. Essentially, it looks like you've had a taco surgically grafted to your head.

If the (lack of) design hasn’t convinced you, perhaps this will. The N-Gage completely fails to consider how “mobile” games are different from traditional console games (e.g. the games you play on your PlayStation 2 or Xbox). Given the limitations of cell phone technology—a small screen, tinny sound, and short battery-life—and the fact that you’re liable to be playing games on your cell phone on the go (on public transit, in a waiting room, etc) the types of games that are most popular on a cell phone are simple ones that can be played quickly—and put down—quickly. This observation has been corroborated by no less a publication than the Economist, in its recent article about the N-Gage’s (lack of) prospects:

New gamers want something different from existing players. They want not an immersive experience, but a time filler, akin to doing a crossword, says Ben Wood of Gartner, a consultancy. Classic arcade games, such as Pac-Man and Space Invaders, are particularly well suited to mobile play. But Asian trends suggest that while such “retro-gaming” classics appeal to early adopters, the balance shifts towards simpler games, such as card games, as women and the middle-aged start to play. For example, “simple” games like cards, Ms. Pac Man, or Snake work. Games that require you to sit down for several hours, concentrate, and play over several days—e.g. the N-Gage’s entire library of games at launch—do not. What this ultimately suggests is that Nokia’s “legendary” product designers have little idea of who their users are, and how they use a video game device.

In a nutshell, given these massive flaws, we have no idea how Nokia will sell, in their words, “several million N-Gage units in 2004."
At the very least, we can’t see how the N-Gage will do anything good for Nokia’s slumping stock price and stagnant growth. We’d also say that were we shareholders—particularly if we were large, institutional shareholders—we’d be absolutely furious that Nokia looks like it’s wasted approximately a half-billion of our wealth (close to $500m on technology, and another $117m in marketing costs.) We’ll say one thing, though: Nokia’s advertising agency sure managed to come up with a great campaign, even if it was wasted on such a horrifically executed product.

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Video Games: The New New Thing

This month's issue of Fortune smiles upon the video game industry, in a very lengthy article detailing the increased pervasiveness of video gaming in America. Some of Fortune's highlights of the tremendously impressive scale of the gaming industry:

Let's play a little numbers game: On Aug. 14, Madden NFL 2004, a videogame pitting real-life NFL teams against one another, appeared on retailers' shelves. Within three weeks, the game grossed $100 million—two million copies sold at $50 a pop. In roughly the same period, the summer hit movie Seabiscuit returned $78 million. Madden doesn't just have better numbers, but better legs: By the time the next version comes out a year from now, gamemaker Electronic Arts will have shipped four million copies of Madden 2004, raking in $200 million. By comparison, last year's Oscar-winning Best Picture, Chicago, has taken nine months to bring in $171 million at the box office.

The average Madden 2004 player will spend, conservatively, 100 hours mastering the game over the year. That's four million sets of eyeballs times 100 hours. HBO's mobster smash The Sopranos drew an average of 11 million viewers for all 13 one-hour episodes last season. That's 143 million viewing hours for the most popular show on cable TV. Do the math.

To paraphrase Spiderman's uncle, with great numbers, come great opportunity (for marketers). This is something that Fortune hints at (but doesn't completely explore) in its description of how media-savvy rock-and-rollers (is that what the kids are calling 'em these days?) have wised-up to the fact that video games make a great way of connecting with the kids. Particlarly those cynical, media-savvy and hard-to-reach Generation Y types. Fortune discusses how "major 50 Cent and Mya are releasing new songs on videogames sometimes weeks earlier than the drop of their full CD. By the time the album comes out, demand among the kingmaking 16- to 34-year-old age group—in other words, the videogame generation—is stoked."

It will be interesting to see exactly how marketers figure out what looks to be a burgeoning opportunity. Thus far, most efforts to utilize video games as a marketing tool have been somewhat lame, falling into one of two categories. The first category is poorly executed movie tie-ins that move lots of units, but tarnish the franchise. The second favorite is in-game advertising--such as McDonald's buying space in EA's hugely popular (20m+ sold in the US alone) series, The Sims.

However, as game technology continues to improve, and online gaming over broadband becomes more widespread--games such as Madden 2004, and several notable XBox games will be paid primarily over high-speed internet connections. This presents some interesting opportunities--perhaps gamers can opt to receive advertising as a way of eliminating subscription fees to online gaming services like Microsoft's XBox Live? (Say, an ad streamed to the player every quarter over the broadband connection to the console's hard drive?). Moreover, will we start to see more sophisticated types of product placement--games built around a specific product, for example, like the US Army-commissioned first-person shooter/recruiting tool, America's Army? Finally, will we start to see product placement-esque games that appeal to demographic segments (e.g. women) that the video game industry still has yet to crack? (Perhaps an online version of "Ready to Wear?")? As usual, your thoughts on the matter would be most appreciated...

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