It was another astounding week of news for video games. Grand Theft Auto V sold more than $800 million on its first day of sales. Electronic Arts named its relatively young EA Sports chief, Andrew Wilson, as its new CEO. And, sadly, Nintendo’s pioneering former president Hiroshi Yamauchi passed away at age 85.
These events were disconnected from each other, but they happened against the backdrop of change in the modern video game business. What do they mean? Let’s take a minute to digest them together and interpret them in the big picture of the industry.
Rockstar showed that investing in good old-fashioned AAA console games still pays off. I was completely stunned that Grand Theft Auto V could sell so many units so quickly, with an estimated 13 million copies sold through on day one. At a time when digital games are coming to the fore, Rockstar Games proved that designing a great traditional open-world console game is still the path to riches.
Sure, the digital future is coming. Online and mobile will take over. But this is still a time when midnight launches of physical games can rule the industry. The big franchises can still get bigger if the designers, in this case teams led by Sam and Dan Houser, have a relentless focus on quality. They took five years and an estimated $260 million to make their game, but they appear to have made that money back in just eight hours of sales.
GTA V is the revenge of AAA games against all of those who prematurely buried the traditional game business. Sure, GTA Online will take the franchise into the digital future. But GTA V doesn’t have to be the last hurrah. We’ve seen stellar games this year like BioShock Infinite, The Last of Us, and others. Those games are pumping new life into sales, and by year’s end, we’ll see two new game consoles. If you predicted that the consoles were dead, you’re wrong. Rockstar has made its comeback by reinventing the console game so that it is relevant in a digital age.
But now is no time to coast. It’s no time for hubris. Rockstar still has to nail its execution on next-generation consoles, and it will eventually have to make a bigger leap into digital. Otherwise, it’s just going to be emperor for a day.
EA’s surprise choice
I was again totally surprised that Wilson got the top job at EA, which was once the top company in the industry. After all, the EA Sports division that he ran has had its troubles with its NBA and college football games recently, and it isn’t necessarily the division that is burning the boats and leading the charge into digital games. EA is still hoping that its hybrid strategy of straddling both console games and digital games will pay off. Wilson plans to execute on that strategy.
I would not expect Wilson’s former bosses, Frank Gibeau, president of EA Labels, and Peter Moore, chief operating officer, to stick around for long working for Wilson. They may stay long enough to enable an orderly transition, but Wilson will need to establish his own authority, and that would be hard to do with the other experienced executives around. In that sense, it could be a costly decision for EA’s board to reach into the lower ranks to pull Wilson into the top spot, as it will lose some very experienced talent.
On the other hand, if it was clear that John Riccitiello did not do what shareholders wanted, then it was equally clear that his two top lieutenants might be too attached to the old regime to take the top job. To get real change, EA’s board had to take a risk on someone new. The cost is that two executives may move on to top positions at EA’s enemies. But EA still has its former chief executive, Larry Probst, sticking around to guide Wilson as needed.
The CEO choice is another recognition of the fact that EA hasn’t been victorious. Rivals such as Rockstar clearly showed that the quality bar can be higher. And now EA has to live in a world where it is no longer the giant company on the block. EA can no longer afford to have hubris and hope the status quo works out. Wilson has work to do. He needs to hijack Rockstar’s reinvention book or somebody’s reinvention book.
A sad farewell
Lastly, Yamauchi’s death was like the passing of an era. I never met the man. But his reputation inspired huge respect. He moved Nintendo into the video game business and beat his rivals for many years. But he also was extremely tough. He pushed hard to make his visions happen, and he tolerated no dissent.
His business success made him into one of Japan’s richest men. But he died a few hundred million dollars poorer, since Nintendo’s stock has been in a downswing.
I can’t find fault with anything that Yamauchi did while he was the boss. Nintendo created enduring brands like Mario and Luigi. When he launched new Nintendo devices, he was ready with software, such as the hit game Tetris.
During his watch, Microsoft moved into the video game business and established itself, even as Sega exited. If Nintendo and Sony had not been arrogant toward game developers or publishers like EA, that opening wouldn’t have existed for Microsoft. He appeared to make the right choice in his successor, Satoru Iwata, whose team launched the Nintendo Wii. The Wii and the portable 3DS were huge hits.
But the Wii U’s failure in the market may mean that Nintendo will have to exit console hardware. That may seem unthinkable, but the need for reinvention is evident. Nintendo launched the Wii U without big hits. Now it is paying the consequences. Iwata may have to take a lesson or two from Yamauchi, who always launched bold plans. Yamauchi’s death is a reminder that, in the game business, empires don’t last forever.