I’d like to start this month with the FTC’s case involving Microsoft’s acquisition of Activision Blizzard. On July 12, Japan time, the application for provisional injunction by the FTC (Federal Trade Commission) was rejected. As a result, with the exception of the UK’s CMA (Competition & Markets Authority), there are no barriers to takeovers.
The view that the Sony Group will be at a disadvantage if Call of Duty (hereinafter referred to as CoD), which can be said to be the biggest title in the United States, is acquired seems to be prevailing in the capital market.
However, Toyo Securities does not see it that way. The game industry has already become a very large industry, and it is no longer an environment that can be influenced by one CoD in the first place. In fact, when it comes to Nintendo’s Switch platform, it’s doing business even without AAA titles coming to PlayStation or Xbox.
I think that the recent trial has revealed how hard the Sony Group, including AAA, is trying to monopolize titles, but from Toyo Securities’ point of view, it must be said that it is a waste of capital.
In the past, when “Monster Hunter 4” was released for 3DS during the SCE era, I saw SCE being very angry. In addition, there is an urban legend that FF7 decided the game for the original PlayStation, where SCE established the game business.
These two events are now legendary confirmations for SIE. And as long as AAA is secured, the overwhelming market share will not be shaken. It seems to have created the idea that business is forever safe.
However, in this series, based on various data, I have repeatedly explained that the victory or defeat of a game machine is not determined by the game software. If it’s determined by the hardware, I think it’s a problem that a lot of money is wasted on AAA, but it’s almost impossible within the Sony Group to object to this. I’m the only person outside the company who says this, and it’s common knowledge that the late Mr. Yamauchi’s hardware is being reluctantly bought for the sake of the software, so it’s unreasonable to believe the heresy. But even so, I want to make it clear that investing a lot of capital in securing AAA is a waste of money.
Game hardware is bought only for the charm of the game hardware itself, and the effect of the software is very limited. This may be an unacceptable heresy to the SIE/Sony Group and the managers of game software companies, but it is an undeniable fact.
If the software line-up alone was the deciding factor, the Switch wouldn’t have sold at all, and all the games would have flocked to the PlayStation platform. The fact that FF7, MH4, and Pokemon decided the victory of the hard game inevitably looks like an urban legend.
The outcome of this lawsuit will not have the kind of impact that capital markets are worried about. In the end, it’s the charm of the hardware that determines it.
This can be seen from the fact that FF16, which was released on June 22nd, has only had a ripple effect on hardware sales in Japan. I will discuss this matter in more detail later.
In the middle of writing this manuscript, Phil Spencer announced that he had entered into a binding contract with SIE for CoD.
Reports suggest that the Nintendo platform will have Activision Blizzard titles for 10 years, while SIE will be CoD only. For SIE CEO Jim Ryan, it’s safe to say it’s been his biggest failure since taking office. In the beginning, Microsoft offered better terms, so it is undeniable that they failed in their struggle for terms.
Especially if CoD is such an important content, the FTC and CMA should move on the premise that they will lose in the trial, and I think it was too optimistic to act on the premise of winning the lawsuit. .
Since last year, I have repeatedly pointed out that SIE is an organization that becomes sad when it is criticized, and I believe that the problem that I feared has been exposed.
The author strongly objected to Nintendo’s easy use of the restart as a factor in the slump in sales. He also directly told Nintendo that an organization that uses external factors is dangerous and should be warned by Nintendo. Then, President Furukawa expressed his regret (details will be described later), but Jim Ryan only replied with the usual words that he did not take Japan lightly. If this continues, the same thing will be repeated.
Once again, I would like to make a complaint to the Sony Group.
(1) Despite saying that it respects diversity, it is a problem that it is negative about anime culture
(3) Because I think that the current strength is invincible, I am being scooped by other companies
. not However, I would like you to understand that there was a statement of regret from Nintendo.
Next, I would like to talk about FF16, which I mentioned a little earlier. What is known by the time of writing is that
(1) the total worldwide cumulative number of package shipments and download sales (sell-through) reached 3 million in the first week after its release (2) The second week
package in Japan Sales decreased by 88.8% compared to the previous week
(3) And this decrease rate is not much different from the recent decrease rate of FF15 and FF7R
The number of actual sales was 401,853 (according to Famitsu research), and it became clear that it exceeded the cumulative total of FF16 in Japan. I also hear people saying that they fought hard. But I think what the supporting SIE expected was to make PS5’s victory decisive. Considering that the purpose has not been achieved, Toyo Securities considers it a failure.
And the fact that there is no other choice because of this precondition is the same reasoning that SIE gave when pointing out that the PS5’s initial shipment was small and that the Japanese market was being neglected. SIE said that unlike the PS4, the PS5 was released in Japan at the same time, so it can’t be helped that the quantity is small. However, from the perspective of Japanese users, it’s nothing more than being neglected.
If the number was not enough, it would have been better to increase the production volume from the beginning. If you can’t do it, you should have postponed the release and got the number. It’s just a bias to lose if the Xbox gets ahead of you.
Let’s get back to the topic, business evaluation is unfortunately a harsh one. Square Enix explained that FF16 has a huge amount of expenses such as development costs, and that the profit and loss of HD games in the first quarter will be quite severe, and that the recovery will be around the end of this fiscal year.
Although the development costs are increasing, the number of units sold seems to be decreasing, so it cannot be said that it is very successful.
As Toyo Securities, the problem with FF16 is that
(1) it is optimized for HDR, which you can’t understand unless you play it,
(2) you want it to be played widely, but it has a CERO D rating, and
(3) you don’t want to avoid risks. On the contrary
, I would like to mention that it became risk taking .
Supplementally, for (1), there are few means to convey the beautiful graphics of HDR. This is what I thought when I actually played it, and I also tested the distribution, but there were many opinions that it seemed to be SDR and it was dark. Most of the screenshots posted on Twitter etc. are SDR, and it seems to me that they are dark.
With this, I can’t convey the goodness of the graphics. By optimizing for HDR, it seems that many users have not been able to convey its goodness.
As for (2), Producer Yoshida says that it is for a wide range of ages, but when I played it, there were some difficult scenes in Japan to play proudly in the living room. I wouldn’t be able to speak at school with this, and it wouldn’t look like the childhood FF I enjoyed. As a result, I feel that the layer that can be enjoyed is limited.
In the first place, I think it is contradictory that CERO D excludes some elementary, junior high and high school students.
As for (3), we took an analyst’s point of view and avoided risks by receiving support from Sony, but as a result, sales were affected by the spread of PS hardware, and we took on another risk. There is. This would put the cart before the horse.
It’s a bit difficult to talk about, but I think it’s difficult to explain that the payback period is getting longer when interest rates are rising and the cost of capital is rising. I don’t think it’s very good considering that the value of money is declining due to inflation.
However, I feel that Square Enix does not want to be criticized. Shigeru Miyamoto, CEO of Nintendo, said that a game becomes popular when it is criticized, but I think there is a problem with how it is interpreted.
Kiryu, the new president, talked a lot about limiting risks at briefings, but risks are inherent in management. I would appreciate it if you could consider avoiding risks and increasing other risks. However, in the current system, which does not like to be criticized, even the author’s complaints will not be heard.
Finally, there is Nintendo.
A little while ago, I had the opportunity to speak with President Furukawa. I touched on this at the Toyo Securities seminar held on July 7 , but in this series I complained about the fact that the reason for the decline in Switch sales in the third quarter was the impact of the restart. I think readers will also remember.
Mr. Furukawa never explained to the company that it was an external factor, but I think there was another word that he used because Sony’s explanation of the restart was often accepted by investors. I was speaking.
I didn’t expect to receive such words from Nintendo, and I thought it would be better not to blame external factors, as the late Mr. Iwata said at future briefings. While I was impressed by President Furukawa’s sincere response, I was reminded of the fact that SIE takes the stance of not criticizing SIE because it makes them feel sad.
In addition, they seemed to have a considerable sense of crisis about the increase in development costs.
In June, we talked with people from various companies, but high-end games are not selling well. This is evident from the fact that the sales of full games on the PlayStation platform in fiscal 2022 decreased by 40 million from the previous year to 260 million.
The Sony group blames the restart, but many third parties seem to think it’s because of the low quality.
But the problem is the vague word quality. I’m not sure if this is due to the lack of bugs, subjective enjoyment, or the fact that the metascore is 90 points, which is a fairly high difficulty score. In any case, the improvement of quality will lead to a further increase in development costs.
PlayStation 6 will surely run with higher performance, so the Sony group will aim for more beautiful graphics and volume expansion. I also discussed this point with Mr. Furukawa, but Nintendo has something that limits the capacity of ROM cards, whereas PlayStation, Xbox, and PC have loose storage restrictions, and developers don’t care about game size. We also agreed with Toyo Securities’ concern that development costs would reach 50 billion yen and the size of the game would reach 500 GB.
He also said that CoD would be released on the Nintendo platform if Microsoft’s acquisition of Activision Blizzard was decided, but he also suggested that the huge game size would be a bottleneck. This is probably due to the fact that it is difficult to store everything in a ROM card, even considering future expansion, let alone the current size of 32GB.
In addition, regarding the recent strong sales of Switch, the effect of the movie “The Super Mario Bros. Movie” and “Nintendo Switch (organic EL model) The Legend of Zelda Tierkin model” was cited. However, he said that even considering inbound demand, it is unclear whether sales have increased even in June. Last month, I said I didn’t know either, but I had the same opinion.
And what I found interesting was that President Furukawa also mentioned that the Tierkin model, rather than Tierkin’s software itself, had an effect on the sales of the Switch itself. So it seems that he feels that the design affects the sales of the Switch itself.