I just wanted to mention the fact that EA has developed some well made games for the Wii. Boom Blox springs to mind and the new versions of Tiger Woods, Fifa and Madden sound like they will be pretty good, despite the pointless box art choices. If I were EA, I'd release different covers of the game, one looking more serious than the big-head cover.

Ail said: HappySqurriel said: On a side note, my questions weren't there to imply "HD console's can not be profitable" but were serious questions that someone should ask the CEO of a major corporation ... The fact is he is legally obligated to maximize the profits of his company and that means (regardless of whether you like it or not) if it would be more profitable for EA to make 4 small games for the Wii than to produce Madden for the HD Consoles he is supposed to make the 4 small Wii games. There is a certain ammount of freedom he is given to focus on long term profits over shorter term profits, but he should be able to explain his motivations in an intelligent manner.   While small profitable games are good for revenue and profit and the short term bottom line they are not what impact significantly the stock price of a company. Successfull franchises with successfull iterations ( ie IP) is what make or break a company stock price. For how much did the success of Carnival games count into the EA offer to purchase Take Two ? very little I would expect... The issue with profitable/small costs games that don't develop into huge franchises is that every year you have to repeat the success story. Whereas future revenue is easier to predict with huge successfull franchises and this is what stockholders are looking for............. You need a mix of both to successfully run a game development company ( unless you are Blizzard) but in the end the sucessfull IP is what will most affect how the company is valued..

You're making an amazingly foolish assumption that a smaller game can not be a full fledged game in a major franchise ... Dragon Quest IX and Grand Theft Auto: Chinatown Wars will both be a tiny fraction of the cost (probably 5% to 10%) of what a similar game would cost to develop on the HD consoles and yet they will have a massive impact on the value of a company.

Carnivale Games doesn't factor that heavily into Take-Two's stock value at the moment because it hasn't sold that much on the grand scale of things and people are uncertain whether their success is repeatable; if Carnivale Games Minigolf exceeds the sales of Carnivale Games this IP will become far more valueable to their portfolio.

The other foolish assumption you're making is that you believe that known franchises are much more predictable revenue and profit streams than (current) unknown franchises. This industry has seen countless franchises rise to amazing heights only to fall to mediocre lows; consider Sonic the Hedgehog, Tomb Raider, Tony Hawk and several of previous generations' biggest selling games. Grand Theft Auto 4 and Bioshock are only one mistake away from being dramatically less popular games than they currently are; the mistake doesn't even have to be a bad or average game, several series saw massive reductions in popularity based on a bad movie.

Can somebody please quote me where it is said that it is the legal obligation of a CEO to maximize profits? I would be very interested in that, because I do not believe that is the case. I am fairly certain it is not the case at least in Finland, and I doubt the legislation would be that much different between western countries.

First to clarify corporate decision making:

Stockholders have the ultimate say in matters of the company, but except for a few rare cases, not directly. The general stockholder's assembly decides on the board of the company, which is the best way for them to control the company.

The board is legally responsible to the shareholders, and the board has an obligation to act in the best interests of the shareholders. This may or may not mean maximising profits, turnover etc. The board is legally responsible that the company is properly managed, hence the board appoints the CEO to manage the company as the board sees fit. The main responsibility of the board, in addition to ensuring proper management, is to make strategic decisions. In doing this, the board usually has to rely quite heavily on the CEO for detailed market information etc.

The CEO reports directly to the board. The responsibility of the CEO is to manage the operations of the company so that the company fulfils the legal and statutory requirements of the country of operation. It is also the responsibility of the CEO to execute the actions necessary to reach the strategic goals of the company.

As long as the CEO has the trust of the board, all is well. In that situation, the stockholders option is to replace the board if they wish for a different CEO. In practice, because the board members must act in the best interest of the shareholders, they are quite keen to cover their bases and change the CEO if things don't look the way they should.

HappySqurriel said: Ail said: HappySqurriel said: On a side note, my questions weren't there to imply "HD console's can not be profitable" but were serious questions that someone should ask the CEO of a major corporation ... The fact is he is legally obligated to maximize the profits of his company and that means (regardless of whether you like it or not) if it would be more profitable for EA to make 4 small games for the Wii than to produce Madden for the HD Consoles he is supposed to make the 4 small Wii games. There is a certain ammount of freedom he is given to focus on long term profits over shorter term profits, but he should be able to explain his motivations in an intelligent manner.   While small profitable games are good for revenue and profit and the short term bottom line they are not what impact significantly the stock price of a company. Successfull franchises with successfull iterations ( ie IP) is what make or break a company stock price. For how much did the success of Carnival games count into the EA offer to purchase Take Two ? very little I would expect... The issue with profitable/small costs games that don't develop into huge franchises is that every year you have to repeat the success story. Whereas future revenue is easier to predict with huge successfull franchises and this is what stockholders are looking for............. You need a mix of both to successfully run a game development company ( unless you are Blizzard) but in the end the sucessfull IP is what will most affect how the company is valued..     You're making an amazingly foolish assumption that a smaller game can not be a full fledged game in a major franchise ... Dragon Quest IX and Grand Theft Auto: Chinatown Wars will both be a tiny fraction of the cost (probably 5% to 10%) of what a similar game would cost to develop on the HD consoles and yet they will have a massive impact on the value of a company. Carnivale Games doesn't factor that heavily into Take-Two's stock value at the moment because it hasn't sold that much on the grand scale of things and people are uncertain whether their success is repeatable; if Carnivale Games Minigolf exceeds the sales of Carnivale Games this IP will become far more valueable to their portfolio. The other foolish assumption you're making is that you believe that known franchises are much more predictable revenue and profit streams than (current) unknown franchises. This industry has seen countless franchises rise to amazing heights only to fall to mediocre lows; consider Sonic the Hedgehog, Tomb Raider, Tony Hawk and several of previous generations' biggest selling games. Grand Theft Auto 4 and Bioshock are only one mistake away from being dramatically less popular games than they currently are; the mistake doesn't even have to be a bad or average game, several series saw massive reductions in popularity based on a bad movie.

 

I never said known franchises coudn't fail.

But known franchises are typically more predictable in generating steady future revenue that unknown IP ( check the list of bestselling games all time, franchises massively dominate it). Especially franchises that have yet to deliver a weak showing...

If there was no uncertaintity at all there woudn't be a stock market at all because we would know in advance exactly how much each company would do as future revenue...

 

A company valuation is based on what is known.

Typically a steady franchise that has been doing well so far will have more impact on said valuation that an unknown never heard of future new IP...

The CEO is appointed by shareholders (through the board). Shareholders own the company and it is the obligation of the CEO to lead the company in a way that is in the interest of the shareholders otherwise they fire him.

That is normally making money (profit). But the emphasis of shareholders can be different. There are some who want to make as much money as possible short-term. There are people who have a more long-term investment and governments often also have shares in companies and care more about stability and job creation.

Ail said: HappySqurriel said: You're making an amazingly foolish assumption that a smaller game can not be a full fledged game in a major franchise ... Dragon Quest IX and Grand Theft Auto: Chinatown Wars will both be a tiny fraction of the cost (probably 5% to 10%) of what a similar game would cost to develop on the HD consoles and yet they will have a massive impact on the value of a company. Carnivale Games doesn't factor that heavily into Take-Two's stock value at the moment because it hasn't sold that much on the grand scale of things and people are uncertain whether their success is repeatable; if Carnivale Games Minigolf exceeds the sales of Carnivale Games this IP will become far more valueable to their portfolio. The other foolish assumption you're making is that you believe that known franchises are much more predictable revenue and profit streams than (current) unknown franchises. This industry has seen countless franchises rise to amazing heights only to fall to mediocre lows; consider Sonic the Hedgehog, Tomb Raider, Tony Hawk and several of previous generations' biggest selling games. Grand Theft Auto 4 and Bioshock are only one mistake away from being dramatically less popular games than they currently are; the mistake doesn't even have to be a bad or average game, several series saw massive reductions in popularity based on a bad movie.   I never said known franchises coudn't fail. But known franchises are typically more predictable in generating steady future revenue that unknown IP ( check the list of bestselling games all time, franchises massively dominate it). Especially franchises that have yet to deliver a weak showing... If there was no uncertaintity at all there woudn't be a stock market at all because we would know in advance exactly how much each company would do as future revenue...

 

But you did imply that a large franchise could not be used to develop smaller games, and you implied that it was a better idea to spend more money developing a large budget known franchise than taking that money and using it to develop several smaller (known or unknown) games ...

The important question is this:

Do you think that it will be better for Square Enix on the whole to have develop Final Fantasy XIII for the HD consoles, or would they have been better off taking the same money and developing Final Fantasy XIII, Dragon Quest IX, a new Crono Trigger Game, and Kingdom Hearts for the Nintendo DS and Wii?

In terms of investment is it better to have released 1 big-budget game in a well known franchise, or 4 smaller budget games in a well known franchise?

At the same time, being that gross revenues for one of these games will be similar regardless of the platform it is released upon, doesn't it make sense to lower the development cost on your large franchise games and work on improving the profile of smaller games (and developing new games) so you're less dependant on a particular IP?

 

@AIL

You said 3rd party but they you insinuated that EA couldn't make an equivalent revenue on Nintendo platform's solely. I'm just saying that Nintendo doesn't just have high profit they also have the highest revenue (software).

I can't imagine why someone would ignore that, and yes I did prove your point if that was your point, but your not arguing my point so I'm not sure if we agree.

FishyJoe said: At least they admit it now. I don't know how forgiving their shareholders are going to be though. http://www.mcvuk.com/news/31365/We-should-have-bet-on-Wii-admits-Riccitiello We should have bet on Wii, admits Riccitiello Tim Ingham Today, 3:22pm Electronic Arts CEO John Riccitiello has admitted that the company put too much focus on PS3 and 360 at the beginning of the current console cycle – and largely ignored the potential of Wii. However, Speaking to the San Jose Mercury News, Riccitiello said that his company had since become established on Nintendo consoles – and that, for the first time in history, the second and third placed consoles were still ‘meaningful’. He said: “One thing that's different is we typically figured out who the market leader was going to be before the start of the cycle and bet with our development resources on that platform. “We made the wrong call there [by betting on the PlayStation 3 and Xbox 360], which made this transition harder than it would otherwise be. But now we're catching up, and I think we're fine. We've got some incredibly innovative Wii titles, [and] incredibly innovative DS titles coming. And so I think that issue's sort of behind us.” He added: “[What’s] unusual in this cycle is there's a second and third place that is meaningful, against which we can build a profitable business. That's a good and positive thing.” Riccitiello also said he was hopeful of pushing EA’s market share on DS and Wii up to match its dominance on PS3 and 360. He commented: “Can I make a big step in that direction this year? Yes. Can I continue to make steps in that pattern? Yes. Does Nintendo want us to do it? Yes. Does the platform set itself up for that to be possible? Yes. So, it requires focus.”

The corporate equivalent of falling down kneeling and begging so as to keep his job. Classic

 

Kyros said: Can somebody please quote me where it is said that it is the legal obligation of a CEO to maximize profits? The CEO is appointed by shareholders (through the board). Shareholders own the company and it is the obligation of the CEO to lead the company in a way that is in the interest of the shareholders otherwise they fire him. That is normally making money (profit). But the emphasis of shareholders can be different. There are some who want to make as much money as possible short-term. There are people who have a more long-term investment and governments often also have shares in companies and care more about stability and job creation.

Well, I already knew that, and I'd think it came across my post. My points is that I am not aware of any legal obligation for the CEO to maximize profits and/or turnover. And I don't think that there is legal grounds for shareholders to sue the CEO if the company doesn't do as well as they would like, barring gross negligence.

As for the shareholders, their intent in many cases is to maximize the share value and/or dividends, depending on the length of investment. As you pointed out, for governments and other similar entities, the intent may be totally different, such as ensuring the functioning of vital infrastructure.

In general, the biggest share owners are funds, often specifically pension funds. I have heard of cases where the representatives of the fund, in the general stockholder's assembly, oppose every single proposal. You might wonder why is that, but the explanation is rather simple: deniability. The fund is ultimately responsible for it's shareholders, and in case a company that the fund invested in does badly, they have to be able to show that it was not their fault. Unfortunately, in most cases the shareholders know next to nothing about the company or the market's where it operates, so they are unlikely to select the best possible board.

I hardly think the game you list qualify as budget games :P

And your original post in this thread never mentionned budget games in a known franchises...

I agree being less dependant on a particular IP is a good idea but you typically do that by trying to develop new successfull IPs and most of the time developing a new IP that will be dureable is a very significant investment, no matter what the target console is ( with marketing costs not negligible at all compared to development costs).

And wether we like it or not, one way developers have used to secure IPs and ensure their success is by pouring a lot of money into their development, making sure that the investment necessary to replicate those would discourage the competition ...

Why do you think there haven't been more successfull GTA, Wow, FF copies in the market ?

Because they cost a fortune to make and part of that cost is there to ensure they are not copied... ( that money isn't wasted but a lot of it is spent on things that really are not core to the game but end up being a differentiator).

If you could make FF for a few million bucks, the Japanese market would be flooded by FF look alike ( especially for a serie which resets at every new episode).

 

I mean, just look at Guitar Hero and Rockband.

These are games that are hugely successfull but costs very little to develop...

End result ?

Both are pouring millions of $ into exclusivity contracts to try to differentiate each others and stay ahead of the competition........( and prevent more players to enter the lucrative market segment they are in).

Same thing with Madden. Each new iteration really can't cost that much to develop, but there are huge exclusivity costs associated to it due to the contract EA signed with the NFL.

 

You just can't have a very lucrative product on the market without someone trying to copy it.

One way companies everywhere in the world have been using to prevent competitor to jump in is to make the entry price very steep, that and building a brand name as strong as possible.......

The issue with cheap casual games is that they neither rely on strong brand name or steep entry price so if they prove very lucrative the competition will do them too and the market will get flooded...