“DJ Hero”: A Worthy Addition to the “Hero” Lineage

This is a review I just submitted to Amazon as part of their Vine program:

When the Guitar Hero franchise burst onto the pop culture scene, flooding living rooms everywhere with fake plastic instruments, hip-hop fans could do nothing but look on enviously and ask if such a concept could ever apply to their favorite music. (Yes, Konami pioneered this concept with Beatmania, but it never really caught on with home console owners, and Activision’s marketing muscle means DJ Hero will be the first title to gain mass-market awareness.)

Activision has finally answered that call with — surprise! — DJ Hero, what is apparently a well-polished product that should boast the right combination of great music, addicting gameplay, and gorgeous presentation to earn it a spot in the ranks of great music games.

Now for some disclosures: I obtained a demo of the product through the Amazon Vine program. The bundle consisted of a wired turntable controller and a demo disc featuring five songs: one tutorial track, one multi-player track and three for the main game. While grateful for the chance to get my hands on the product early, the demo disc was far too limited to be able to truly write a well-informed review. Hence, the weasel words in this review, such as “apparently”, “should”, etc.

Another disclosure: I am not generally a fan of rap, hip-hop or dance music. Rock, be it of the classic, blues, southern, punk, alternative, or even country variety, is where my soul lies. So it’s a testament to DJ Hero that it managed to draw me in despite a near-total unfamiliarity with the genre. The game will grab many die-hard rockers right from the tutorial, which features a mix of Queen’s “Another One Bites the Dust”. While I’m hard-pressed to name the other tracks from memory, I found them fun and enjoyable.

Other reviews have expounded on the gameplay in great detail, so I’ll just say here that if you enjoyed having your dexterity and sense of rhythm challenged by any of the Guitar Hero or Rock Band games, you’ll probably get a kick out of trying to master the tricks of the turntable. The three finger buttons on the turntable look like the fret buttons on a guitar controller, but the similarity ends there. In the course of a song, you’ll be asked not only to hit those buttons, but to “scratch” the turntable, quickly crossfade from one part of a mix to another, and add your own effects in a way similar to the whammy bar in the Guitar Hero games. It’s an intriguing mix of actions that add up to a good challenge.

In a stroke of genius by developer FreeStyleGames, a second person can join using a guitar controller to play the guitar bits of the mixes. This is a great way to get other people to jump in since there’s a good chance you or someone you know already has a guitar controller. It not only up the game to rock-oriented folks who aren’t interested in working a turntable, but it also allows people to play together without requiring another pricey turntable accessory.

A word about the turntable. Rarely does a new controller boast this level of sturdiness and attractiveness. It’s a handsome little unit that turns heads and feels solid and well-built. The on-screen visuals are also top-notch, featuring different house-party and club settings from around the globe. Again, since this review was limited to a demo disc, I was unable to check out the bulk of locales and playable characters. In another nice touch, the game also features an autoplay mode that will just play the music for a party or whatnot. That’s a great feature and one that needs to come to Guitar Hero. Hopefully it will also support tracks you add via download.

So in the end, does DJ Hero work? It does, and it will be interesting to see if the title can succeed in expanding music games to other genres, attracting new audiences and fans as people tire of the rock-based games. If you are a fan of hip-hop who couldn’t get into “Guitar Hero”, this is could be your game. If you’re a huge fan of music games in general and want a fresh challenge, this could be your game. And if you’re simply looking for something to liven up your next party, this could be your game.

Four Ways Amazon Can Have Fun with the Kindle Business Model

After the last price cut on Amazon’s Kindle, I was kicking around some ways that Amazon could make the Kindle even more attractive, besides cutting price, that is. I was finally spurred to write these up by Prof. Bogost’s interesting post on Kindle economics (key revelation for me: it’s actually dirt cheap to print a physical book).

Each of these addresses either a barrier in the adoption of e-books, or a way that e-books can improve upon the physical format, making them attractive despite other shortcomings. Some of the most interesting things e-books will do will come from what they enable that physical books never can, and digital distribution is part and parcel of that.

A favorite analogy among media and analysts around the Kindle is how it compares to iPod. And those comparisons are indeed instructive. But the ways in which the two devices are not similar are often more interesting than the ways they are. For instance, the main factor in the iPod’s success was convenience: someone can listen to a dozen CDs in a single day, and he doesn’t know in the morning what he will want to listen to at night. So the ability to carry hundreds of albums in your pocket represented an awesome leap in convenience. By contrast, a paperback book is alread pretty damn handy. Most of us don’t read a dozen books simultaneously, but instead spend days or weeks working on a single title. Yet how many times hav eyou reached for your bookshelf to look up that funny passage, check a factoid, or even just remember who that one author ways, anyway? So like the iPod, convenience is a factor with the Kindle, just not in the same way. 

So here are some ways that the Kindle business model can really stand out.  

1. Get past purchases on Kindle for a one-time fee. Imagine an iPod or MP3 player that doesn’t allow you to put any of your existing music on it but only new purchases that are formatted just for that device. MP3 players are so successful because nearly everyone has an existing collection of dozens or hundreds of CDs that can be nearly instantly ported over to the new device. But with Kindle, all those books on your shelf are destined to stay there, collecting dust and forever separated from digital nirvana. But what if Amazon made an offer to all Kindle owners that for a nominal charge, say, $2 a book, you will be provided with a Kindle copy of every book you’ve ever bought from Amazon. Heck, for power readers who have ordered a ton of books, call it Kindle Prime and charge a flat $99 to cover every past purchase. This is similar to what Apple did with its iTunes store when it started offering unprotected MP3 files at a premium. For an additional 30 cents per song, Apple would upgrade your library of tracks to the new, DRM-free format. By doing the same thing with books early on in the Kindle’s lifecycle, Amazon would basically bootstrap the device and makes it instantly more useful to users by an order of magnitude.  

2. Get the physical and electronic editions together at a discount. A lot of people are intrigued by Kindle but still want a physical copy for their bookshelf at home, or as insurance in case Kindle flops or Jeff Bezos really does turn into Big Brother. Amazon already offerings pairings of popular products and books, so it’d be a snap to say, “Add the print edition of this book to your Kindle order for just another $5.” A colleague of mine also suggested that Amazon could notify Kindle users when the physical form of a book they’ve bought digitally moves down into discount bin territory.

3. “Lend” your books to other Kindle owners. This is a huge one for me. My parents and I trade quite a few books. In fact, there’s sort of an arrangement where nearly any book we buy each other for Christmas, birthdays, etc, we will lend it back to the buyer after we’re done with it. I’m sure a lot of families are the same. We are all bibliophiles and also technophiles, which should make us ideal Kindle consumers. But the inability to swap books is a big limiting factor on our purchase intent. So why not enable that with a sort of digital lending license that would let me, say, lend two copies of the book to any other Kindle user for, say, 30 days? It could be like transfering a file via IM: “Scott has offered to lend you ‘Outliers’ by Malcom Gladwell. Do you accept? You will have 30 days to read this book from the moment you accept.” Amazon could reap a huge amount of goodwill with a move like this. 

4. Give book lovers a way to show off their bookshelves. Another gem from my aforementioned colleague. Admit it, there are books you like having on your coffee table or bookshelf to impress visitors. What about when you’re at the airport and you see someone reading a fantastic book you just read? You sometimes start a conversation with them to see what they think, right? But with Kindle, there’s no way for any of this signaling to take place. What Amazon needs is a sort of virtual bookshelf that will let anyone browse your library, perhaps even leave comments. Sort of a social network for booklovers. There’s already something like it on Facebook called LivingSocial, which lets you display and review books, games, albums, movies, etc for other users to see. However, it’s clunky and obnoxious to use, and Amazon could either build something better or buy it and make it better. To be sure, iPod suffered from the same shortcoming, which has only been somewhat rectified with the recent introduction of Cover Flow.

I’m sure there are tons of other cool things Amazon could do. Heck, it could even resurrect those old book clubs deals where you got five books for a penny if you promised to buy a book a month at regular price for the next year. Maybe you could get a Kindle for $99 if you could promise to buy a Kindle book a month ($9.99 minimum price) for the next two years. What other ways could Amazon innovate and use the Kindle’s digital infrastructure to light a fire under e-book sales?

Are Publishers Really Selling More on PS3 Than Xbox 360? No.

Last week, one of the biggest video-game publishers, Electronic Arts, reported quarterly results. In its reports, the company always gives a breakdown of revenue by gaming platform. Several enthusiast outlets, such as MCV, reported that EA’s revenue from PlayStation 3 games was bigger than that from Xbox 360 games. This would be unusual since the Xbox 360 installed base is substantially bigger than the PS3 installed base. In fact, Xbox 360 game sales continue to outpace those for PS3. Here’s why.

(Full disclosure: I work for Microsoft’s Xbox division and have no formal training in accounting or financial analysis. What follows is my understanding of the situation based on my 12 years as a business, technology and economics reporter for Reuters, and on recent informal conversations with financial analysts who cover the video game industry. This is also my personal opinion and does not reflect the view of my employer.)

Publishers report two sets of numbers in their quarterly reports: GAAP and non-GAAP. GAAP stands for Generally Accepted Accounting Principles, the set of rules that U.S. companies must follow when reporting financial information. The intent is to give investors and regulators a set of consistent, objective data that is comparable across companies and industries. But due to the circumstances of each industry, GAAP numbers often obscure, rather than illuminate, what is happening with an underlying business.

First, let’s look at EA’s GAAP revenue numbers for each platform (A side point: these are revenue or sales figures, not profits. Some reports have confused the two terms. Profit is what is left after a business deducts operational, marketing, administrative and other costs from its sales).

Wii: $161 million
PS3: $121 million
Xbox 360: $73 million

Sure enough, it looks like PS3 games are outselling Xbox 360 games. But here’s the twist. Because so many games now include a substantial online component that is maintained for several years, GAAP rules require a portion of revenue from the initial sale be booked over the life of the online service. So, in a purely hypothetical example, let’s say a $60 game is deemed to have half of its value come from online play. The company will then book $30 over a period of, say, two years, or $3.75 per quarter.

Game companies aren’t the only ones who do this. Apple does it with the iPhone because it delivers ongoing updates and services to the device. So of the $200 you pay for an iPhone, Apple records $25 of that each quarter for two years.

The thing is, this all happens purely on paper. In reality, EA gets that entire $60 all at once, and your $200 for an iPhone goes straight into Apple’s cash pile. Analysts pretty much ignore these GAAP numbers because they want to know what total unit sales were and what total revenue was. Indeed, here’s a line from The LA Times’ coverage: “Most Wall Street analysts say they pay attention to EA’s non-GAAP accounting as a measure of its financial performance.”

So let’s revisit EA’s numbers and look at the non-GAAP statement, which takes out the effects of the deferred online revenue.

Wii:  $184 million
PS3: $99 million
Xbox 360: $136 million

So non-GAAP, the number Wall Street actually cares about, shows Xbox 360 sales still leading PS3 sales. I’m guessing, speculating really, that given that Xbox 360 has the more robust and active online network, that EA is forced to record a larger chunk of deferred revenue, revenue that will be recorded over the next couple quarters.

Interestingly, Activision’s numbers are somewhat different. Here are the GAAP numbers:

Wii: $118 million
PS3: $152 million
Xbox 360: $231 million

And the non-GAAP, excluding the effect of deferred revenue:

Wii: $74 million
PS3: $105 million
Xbox 360: $140 million

Again, purely speculating here, I wonder if the GAAP is so much higher because Guitar Hero sales have been so high for a couple years, and now we are seeing a huge surge in deferred revenue from those past sales.

Anyone have any insights here?