Why “DJ Hero” Isn’t Selling Well

DJ Hero was supposed to invigorate the flagging genre of music games. Yet in its launch month, the hip-hop game with the turntable controller only moved 123,000 units in the U.S. What happened?

It’s not the game. As with all forms of entertainment, people will reasonably disagree about what is fun or exciting, but DJ Hero was well-reviewed, with Metacritic scores ranging from 84 to 88 depending on platform.

And it’s not the marketing. Clearly, Activision is putting serious muscle behind the game with a TV spot that features Eminem, Jay-Z, and uh, some random white dude at the turntable. That spot, incidentally, seems to be a minor hit, with nearly half a million views on YouTube and an average user rating of 4-1/2 stars.

I don’t necessarily think Activision over-estimated the size of the market for the game, as Bill at Dubious Quality posits. It won’t ever outsell one of the flagship Guitar Hero releases, but it should do at least as well as, say, one of the band-specific offshoots of Guitar Hero, like GH: Metallica or GH: Aerosmith.

So what is it? Quite simply, it’s the price. At $120, DJ Hero costs twice as much as Modern Warfare 2 and Assassin’s Creed 2 combined. And it’s about a third more expensive than the early Guitar Hero games. On top of that, you have the $200 Renegade edition being heavily promoted in stores, where customers could overlook the fact that there’s a cheaper version.

The original Guitar Hero games succeeded because the extra $20 or $30 they cost seemed like a fair value for a fun and innovative guitar controller. The DJ Hero turntable is a fantastic piece of hardware, but it’s clear that consumers aren’t seeing it as worth another $60. Not in this economy.

My hunch is that DJ Hero needs to hit the $99 price point to really take off, but that it could see a decent Christmas regardless as it ends up being the “big gift” under the tree for many kids.

“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.

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?

I guess people really like “Guitar Hero”

 

 

 

 

 

 

SAN FRANCISCO (Reuters) – Activision Inc is adding drums, bass guitar, and microphone to its popular “Guitar Hero” video game, a move aimed at winning away fans of MTV’s rival musical title “Rock Band”.

“Guitar Hero World Tour” will include the ability for two groups of four people each to compete online, as well as let players compose and play their own music, Activision said on Thursday.

The game will feature songs from bands such as Van Halen, The Eagles, Linkin Park and Sublime, with every song being an original master track, unlike past games where many of the songs were cover versions.

Due out in the fall, the game will mark a new direction for the “Guitar Hero” franchise, in which players push colored buttons on a plastic guitar-shaped controller to match notes on the screen.

“I certainly think it takes the edge off ‘Rock Band’,” said Mike Hickey, an analyst with Janco Partners. “What’s ‘Rock Band’ going to do now, add a flute and banjo?”

Activision’s money-spinning franchise got its first real competition last November when Viacom’s MTV unit launched “Rock Band”, which featured drumming and singing in addition to guitar playing.

The “Guitar Hero” series has raked in more than a billion dollars for Activision and has helped drive a 72 percent rise in the company’s stock over the past 12 months.

That compares to virtually flat performance in the shares of Activision’s top rival Electronic Arts Inc, which distributes “Rock Band” for MTV.

Shares in Activision were up 19 cents, or 0.6 percent, to $32.82 in late morning trading on Nasdaq.

Activision did not say how much the new game will cost. Last year’s “Guitar Hero 3″, which came with one wireless guitar controller, sold for about $90. “Rock Band”, which came with one guitar, a drum kit, and a microphone, sold for $170.

“World Tour” will be the third “Guitar Hero” game coming out this year.

Next month will see the launch of “Guitar Hero Aerosmith” focusing on the best-selling American rock group, as well as a portable version called “On Tour” for Nintendo Co Ltd’s popular DS handheld device.

“Guitar Hero World Tour” will come out in versions for Microsoft Corp’s Xbox 360, Nintendo’s Wii, and Sony Corp’s PlayStation 3 and PlayStation 2 consoles.