The Law of Diminishing Returns

Late last month, Microsoft was partying and releasing celebratory press releases to commemorate a landmark that many were surprised to discover had not been passed a long time ago: the Xbox 360, after three years on the market, has finally surpassed the 24 million sales of the original Xbox.

While Microsoft should be congratulated for the fine work it has done in improving almost every aspect of the original Xbox with the 360, the milestone it has passed should not be a cause for celebration, but for reflection. Let’s consider the advantages that the 360 enjoys over its predecessor, some happy quirks of fate, others the results of the lessons MS learnt the first time through. The 360:

• made it to market a year earlier than its closest rival, rather than a year later
• launched with one of the best-designed controllers around, not one of the absolute worst
• is home to a far more diverse line-up of games, with strong support in areas like RPGs
• has the benefit of working in an era where third-party console exclusives are dying, leading to games like GTA launching on MS’s console at the same time as Sony’s
• enjoys the benefit of competing against a misfiring profit-troubled Sony, instead of Sony at the very top of their game
• launched with a highly advanced online system right from the box
• has support from day one from the biggest third parties from the West, such as EA, as well as many of the biggest publishers from Japan
• has far superior design and branding than the original fat black box
• is, needless to say, far more powerful, looks beautiful on the latest HDTVs and can do things the original could only dream of

With all these advantages, it’s curious that the take-up rate of the 360 has been only slightly above the curve of the original Xbox. A look at that list begs the question – why aren’t more people buying the 360? Could the Red Ring of Death, the failure to break the Japanese market in a meaningful way, or 12-year-old Xbox Live racists be the problem? Or is this even something we should consider a problem to begin with?

The question isn’t about what this means for Microsoft, which is generally meeting the targets it has set for itself and is turning its operation into a much sleeker, more profitable – and more importantly for us – much more entertaining one. The question is what it means for gaming in general. To wit: who is buying our machines, and for what purposes – and will they continue to do so?

The sales of PS3s have yet to set the world alight, and while the console is performing respectably, Sony is going to need every year of the ten it has set aside if it doesn’t want the PS3 to lead to a massive loss of market share. At an equivalent stage of the previous generation, three years from launch, the PS2 had sold 60 million consoles – and it was only just getting into its stride. Only the Wii has any hope of coming close to the PS2’s massive install base, and from where we stand now, it is questionable whether the combined sales of the 360, PS3 and Wii will ever equal the 190 odd million units from the previous generation.

The fact that the entire industry is spending more money, more time and, as many smaller publishers and developers are finding, risking more than ever before without any reward in growth is a stark contradiction in the midst of the breathless praise we are too often eager to heap on ourselves.

The success of the Wii is often placed on the so-called “casual” gamer, gamers who are new to gaming and/or not as discerning as the risibly-termed “core” gamer (the people, presumably, who are reading this article). But it seems this is a tune that has been repeated over and over again by every successive popular machine. One in three households in Japan were said to have an NES at the height of its success. The GameBoy, with its omnipresent Tetris, was said to appeal to businessmen and commuters because of its pick-up-and-playability. The original PlayStation led to the “post pub crowd” of gamers in Europe as trendy games like Wipeout made games hip business. The PlayStation 2 supposedly was a gaming Trojan horse, finding its way into millions of households with the benefit of its affordable DVD drive.

Yet if we were really picking up these customers as we should have been, where are they are now? If all of these consoles were truly opening up new markets and creating new gamers, why should the 360, with its diverse catalog of critically acclaimed games, struggle to overtake its much-troubled predecessor? Are those customers still stuck behind in the PlayStation 2 generation, content to play the trickle of games that we condescendingly bestow on them? Have they given up altogether – or worse, were they never there to begin with, and really did just use the PlayStation 2 for DVD playing and nothing more?

Perhaps it’s the season talking that is making me depressed. A slew of Christmas blockbusters this year offers little more than sequels to games it seems I only just played – Gears of War 2, Resistance 2, Prince of Persia, Call of Duty: World at War, Animal Crossing: City Folk. The innovative titles that seemed to promise so much in summer have seen their stars fade much quicker than we might have been expected them to – Mirror’s Edge, Little Big Planet, Banjo-Kazooie: Nuts & Bolts and yes, Wii Music.

Even Nintendo seems to be struggling for ideas, having captured my heart with the sparkly newness of the DS and the Wii in holiday seasons past. And while it’s unreasonable to expect a Super Mario Galaxy every Christmas, it’s telling that the game I’m most looking forward to unwrapping is Chrono Trigger, a relic from another generation.

Perhaps it’s the recession sweeping across the globe like a chill wind. Recent problems at one-time heavy-hitters like Eidos and Midway point to the fact that mid-level publishers are struggling. Given the quality of their recent output it is unlikely that either of them will be mourned for long, it is worrying that fewer and fewer companies seem to be capable of finding ways of making money from this business, when by all rights the industry should be exploding.

It’s called the law of diminishing returns. Beyond a certain point, more effort merely returns less and less output. It’s what we see in games that are little more than HD remakes of titles that have gone before – only now they cost three times as much and take 100 people three years to produce, and if one fails it could take your whole company down with it. It’s what we see in the industry over and over, or at least what we saw until the DS and Wii broke the mold – more and more power pumped in to technology, for less and less valid reasons. And that is certainly what Microsoft is seeing right now. Because, for all they have done to make the Xbox brand into a viable gaming platform, they have a right to expect more than they have gotten. For all we know, they may have done nothing more than to convince the same 25 million people to buy their console again.

Christian Ward works for a major publisher, and says bah humbug to the whole industry.