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Analyze This: Are Gamers Really Saying "I Want My HDTV!"?

Gamasutra quizzes top analysts from Wedbush Morgan, ABI Research and Creative Strategies on the state of the high-def era, asking what affect HDTV will have on next-generation console gaming, and whether gamers even really care.

They are the professional analysts whose job it is to research, keep track of, advise their clients, and opine to the media about the gaming business. Analyze This cuts right to the chase: Rather than reporting on a subject, and throwing in quotes by analysts to support or refute a point, Gamasutra offers up a timely question pertaining to the business side of the video game industry and simply lets the analysts offer their thoughts directly to you.

Each person's opinion is his or her own and will (probably) not necessarily agree with their fellow colleagues'. In this month, Michael Pachter of Wedbush Morgan, Mike Wolf of ABI Research, and Ben Bajarin of Creative Strategies discuss what affect HDTV will have on next-generation console gaming, and if gamers really care about it.

Question: Are Microsoft and Sony emphasizing HDTV too much, not enough, or just enough? Has Nintendo made a mistake by not providing HDTV resolution for the Wii? Microsoft intends to sell an HD-DVD add-on player for the Xbox 360. But the device won't be used for game content, just for playing movies. Standalone HD-DVD players will likely come down in price. So, practically speaking, what's the point for Microsoft?

Capcom got criticism for not taking standard definition television sets into consideration when they developed Dead Rising -- vital on-screen text became illegible on non-HDTV sets. In another instance, some environments in Peter Jackson's King Kong appeared too dark when viewed in standard definition. Are game developers prematurely jumping into HDTV, and if so why?

xbox360_kingkong_01.jpg
Early runs of Peter Jackson's King Kong were too dark when run at standard resolution.

Which do you think may be the most important factor in persuading consumers (not necessarily hard-core gamers) to upgrade to an HDTV set: movies in one of the high-definition disc formats (HD-DVD or Blu-ray) or video games that take advantage of high-definition resolution?


pachter_headshot.jpg 99_icon_arrow.gif Michael Pachter, Wedbush Morgan Securities

I think HD resolution is the essential difference between this cycle and the last. Although it is clear that there will be much more happening on-screen, with more independently acting characters, the visceral improvement in graphics is probably the first thing noticed by consumers.

I'm not sure that Capcom's mistake implies that others will repeat the mistake, and don't think that the industry is "prematurely jumping into HDTV." HDTV is the second fastest growing consumer electronics product (behind the iPod), and it's going to end up the household standard in a few years.

With that said, Microsoft and Sony are struggling with how to market the concept, given that HDTV has penetrated only around 20 percent of U.S. and less than 10 percent of European households. It's worth emphasizing, but if they over-emphasize it, the majority of the market may feel that it's not important to buy a next-generation console until they purchase an HDTV.

I'm with you on the [Xbox 360] external HD-DVD drive. Since it's unlikely that 100 percent of 360 owners will buy one, it is equally unlikely that any publishers will create game content on HD-DVDs. As a result, it's merely a movie peripheral. It has value to Xbox 360 owners who want to add that functionality, but no real value to someone who has as yet to buy a console. In the final analysis, it makes the PS3 (with HDMI and a 20 GB hard drive at $499) a better deal than the combined Xbox 360-and-HD-DVD drive at $579.

deadrising.jpg
Capcom's Dead Rising caught many non-HDTV owners off guard with an unusually tiny typeface.

On the Nintendo front, Nintendo has sacrificed graphics that can be viewed by the minority for a price that can benefit the majority. So, no, I don't think that they've made a mistake in the short run. Over the long run, we'll have to see: If HDTV adoption rates accelerate, the differences between the Wii and the Xbox 360 and PS3 may become more important, and it may end up that sell-through of the Wii begins to decline. That's a couple of years away, and my crystal ball isn't quite that clear.

Movies are a bigger driver than games. It's not even close. Movies and broadcast television (also available on DVD in many cases) are the reason we own TVs, and video games are a peripheral activity. It's true that the hours spent playing games rivals the hours spent watching TV, but the purchase decision for HDTV tends to be made by the head of household, who is not usually the primary gamer.

Consumers in the U.S. spend $9 billion at the box office (around 1.2 billion tickets), $16 billion on DVD purchases (around 1 billion discs), around $8 billion on DVD rentals (another 2 billion transactions), and another $2 billion on pay-per-view (around 500 million transactions). In addition, we watch countless movies on HBO and free TV. In the final analysis, there are over 5 billion movie transactions in the U.S., and around 300 million game transactions (all purchases plus rental). Movies will migrate to HD at around the same pace as games, and virtually all new movies are shot in HD. Movies are the driver for HDTV adoption, and games are a distant second place.


wolf_headshot.jpg 99_icon_arrow.gif Mike Wolf, ABI Research

HDTV is a critical feature of the new generation of consoles, particularly down the road 2-3 years [from now] when adoption of HD TVs will be much higher than it is today. Sony is obviously using the same strategy it used with the PS2 by offering a low-cost version of the latest format for home video, which worked with the PS2 with regards to beating out the Sega Dreamcast.

Sony's strategy is a good one on its face -- a fully integrated game console with high-definition player is certainly more appealing to those looking for both, when compared to the "two-box" solution Microsoft is offering with the add-on. But the resulting higher price point for the PS3 at the outset has resulted in pushback towards the console in the press and among some gamers. I think that the company has recognized this and is willing to take an even greater financial hit if it needs to, as witnessed through the recent price drop in Japan before the launch.

heavenly.jpg
Heavenly Sword, one of the PlayStation 3's flagship HD lineup

Ultimately, the gamer is looking for the best gaming experience, and HD is a part of that, but not the end-all. Equally important is inventive game play, which is the main focus of Nintendo with the Wii. I don't think Nintendo will lose out on customers by not offering HD. Following Sony and Microsoft's lead on offering the latest in HD would have added too much cost and negated one of their greatest strengths for this generation.

A determining factor in market success will be if the [Blu-ray] format ultimately becomes the dominant one for high-def DVD. If it does, this will result in a very important advantage for Sony over the life of the console. Microsoft can counter-punch by delivering a Blu-ray add-on, which is the advantage of [their] modular approach, but, as I stated, a fully integrated box at price parity is a more attractive box for consumers.

Publishers have to consider both HD and standard definition in this go-around. When selling into markets in transition, which is the TV market today, publishers can't assume the consumer has one type of technology over the other. Capcom's lack of consideration for non-HD TVs was a big mistake, since the majority of gamers today do not have HDTVs.


bajarin_headshot.jpg 99_icon_arrow.gif Ben Bajarin, Creative Strategies

I personally feel Microsoft and Sony are emphasizing [HDTV] "just enough." HDTV is important to the future of gaming in general. I am seeing increasing interest on the PC gaming side, as well. HDTV is a big part of the next generation of entertainment, but it is hard to justify over-emphasizing it when HDTV sets are still not the majority of TVs in houses, and Europe in particular really lacks in HDTV set sales.

Practically speaking, Microsoft wants the Xbox 360 to be a "convergence device." They are banking on the idea that it will be more convenient for you to buy a HD-DVD drive for the Xbox 360 than to buy a whole new DVD player. I am quite disappointed, however, that the HD-DVD drive will not be used for game content, and is a negative next to the PS3.

It is hard to say [if] Nintendo made a mistake not including HDTV; I feel they made the decision knowing what their market wants. They continue to show that they understand their market, and what their market wants, incredibly well.

monkeyball.jpg
Wii titles like Super Monkey Ball: Banana Blitz will output in 16:9, but will not support HD.

I do not think the gaming industry is jumping in prematurely at all. There is great demand among the early market that flocked to buy the Xbox 360 and that will flock to buy the PS3. It is definitely important to give the market a 720p and 1080i/p gaming experience, but I would never advise a game developer to not support standard definition TVs for the foreseeable future. Although it is not premature to start to innovate game graphics and experiences for HDTV gamers, it is irresponsible to not support the still very large market of non hi-def TVs.

Consumers generally say they do not want to upgrade yet [to HDTV] because there is not enough content available. So if a person watches more TV and movies than playing games, then the answer is when more movies and TV become available, they will upgrade. If the consumer plays a lot of video games as well, then that only adds to the amount of hi-def content available for them to enjoy, so the decision becomes easier. My advice to consumers has always been if the majority of entertainment medium you consume is available in hi-def, then upgrade and enjoy.

Got a business-related question concerning the games industry that you would like to suggest for discussion in Analyze This? Are you a professional analyst who covers the market and would like to take a chance betting against a video-game company executive due to your comments? (Gamasutra neither endorses, condones, encourages nor shall be responsible for any online betting related to this column.) Feel free to send an email to [email protected]

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