Amazon UK on the next-gen race, Nintendo’s plight, microconsole rumours and ‘accidental’ leaks

Amazon announces $199 Kindle Fire tablet

Amazon moved into the hardware business with Kindle, and there are persistent rumours that it is preparing to launch an Android-powered microconsole. Our interviewee isn’t aware of any plans to that effect, however.

If you’re looking to check the pulse of the videogame market, ask the world’s largest online storefront. Amazon’s power in the retail world isn’t matched by its presence in the media, though, and for years it has been quite deliberate in keeping a low profile in the press. That’s changing.

At Amazon’s Summer Wish List event in London last week, we sat down with Amazon.co.uk’s category leader of videogames and software Ketu Patel, who was happy to discuss the market’s recent successes and failures, next-gen console sales, Nintendo’s struggles and, indeed, whether Amazon itself might be entering the console market. And we couldn’t resist asking why online retailers seem to post listings for unconfirmed or unannounced games so often – Amazon’s most recent indiscretion being the appearance of an expected PC release of GTAV on its French and German stores.

Sitting at a set of faux garden chairs with plastic grass underfoot, the Amazon event was intended to showcase the best of this summer’s new products, but we began by discussing the past year, one which Patel says was unquestionably the biggest ever for videogames at Amazon. Naturally, that was led by PS4 and Xbox One’s arrival, but also existing consoles’ game sales.

“Even excluding our next-gen business, our current-gen performance is strong and growing as well,” he tells us. GTAV was an obvious highlight, and there were surprises that outperformed Amazon’s sales forecasts – The Last Of Us and the Skylanders games sold better than expected, and an exclusivity deal with Warner on LEGO Marvel Super Heroes ensured that Amazon was “very happy” with the performance of that title.

The Last Of Us and Skylanders outstripped Amazon’s expectations in 2013.

There were also releases which didn’t meet expectations. “Well, I presume it’s more of a segment issue, but Call Of Duty didn’t perform to the level of its predecessors,” says Patel. “I think there are a number of reasons – there is a bit of fatigue in the franchise, and obviously next-gen has influenced things. I think there has been a consumer reluctance to buy into next-gen to the same extent as current gen so I think people are waiting. Generally, if you look at a lot of the franchises – Call Of Duty, Assassin’s Creed, Battlefield – they all struggled on current-gen formats more than you’d expect.”

Those disappointments are indicative of a more gradual transition when compared to previous console generations, says Patel. More than ever, players are waiting or saving up until they can afford a PS4 or Xbox One and as a result, Amazon expects a spike in game trade-ins, which will help players reduce the cost of buying new hardware.

PS4 and Xbox One are digital storefronts in themselves, of course. One would expect outlets like Amazon to curse the very name of PSN and Live, then, as they’ll increasingly remove the need for retail. Not so at Amazon, says Patel. “We’re selling Live and PSN games and they’re doing very well,” he tells us. “What we’re seeing is not a cannibalisation of our physical business but we’re actually seeing incrementality. We’ve seen only a small downturn in our physical business and we’ve got all of the digital business on top of that, so at this point in time it’s actually driving our category rather than diminishing it.”

Amazon’s solution is to sell codes for downloadable games that customers can then send on and goft to friends and family, or in the case of some PC games, download them directly. It has its own app store, and especially since Kindle arrived, Amazon has been edging more and more into digital-only sales, selling Kindle Fire as a tablet with a ready-made Amazon storefront built in. Rumours persist that Amazon is building a standalone Android console of its own; it has also hired from within the game industry recently, adding further weight to the speculation. “I don’t think you should believe everything you hear on the net,” says Patel. “We have lots and lots of businesses besides games. We’ve got developers driving our Kindle and Kindle app business, so obviously we have developers in the business. As far as I know there’s no truth in those rumours.”

Amazon denies it is looking to enter the console market itself with an Android console. The highest-profile contender in that space right now, Ouya, ‘hasn’t set the world on fire,’ says Patel.

In any case, existing Android consoles like Ouya and GameStick represent a very small proportion of Amazon’s games business, says Patel. “They’ve performed to the level that we’d expect them to perform,” he says, diplomatically. “Personally, I don’t think there’s a huge market for that so I wouldn’t say they’ve underperformed but I also wouldn’t say they’ve set the world on fire. In the context of quarter four – October, November, December – they’re such a small proportion of our total business, which was driven by next-gen activity, that they haven’t really moved the needle. And you wouldn’t expect them to either.”

Talk of struggling consoles brings our conversation around to Nintendo. Wii U has so far failed to meet Nintendo and Amazon’s expectations, of course, but 3DS remains a very strong seller, and that fact is being undereported, say Patel.

“Contrary to a lot of people’s opinion, Nintendo is here to stay and Nintendo will do very well this year,” he told us. “They’re not going to meet their expectations, absolutely, but they’ve still got strong franchises and strong hardware and if you look at the back end of last year when they had a fairly good release slate, it certainly drove their hardware. 3DS has done very well for us so that format is here to stay.”

Patel’s confidence in Nintendo isn’t shared by plenty of others, though. After disappointing financials, the media has been keener than ever to portray the Kyoto company as a fading force – a former giant in crisis. Amazon certainly doesn’t see it that way. “I think Nintendo have this imposed on them and it’s driven by a lot of the media, and the media drives perception,” continued Patel. “Nintendo are getting a lot of bad press and PR and as soon as anything negative is out there it’s a media frenzy. It diminishes what they’ve actually done. If you look at 3DS as a format, it has done very well last year – had that sort of performance been with Microsoft or Sony, my personal opinion is that everybody would be thinking ‘wow, what a fantastic job’. Because it’s Nintendo and they’ve been embroiled in this negative PR frenzy, everyone thinks it’s a dying format. It’s absolutely not.”

Nintendo is under fire in the media right now, but sales of 3DS remain strong – Amazon is confident the Kyoto platform holder is ‘here to stay’.

So while the media continues to give Nintendo a difficult time, even with the relative success of 3DS, one console that has apparently escaped such criticism is Sony’s PS Vita. Patel has concerns for the system. “Vita is struggling, absolutely, in terms of the market segment,” he tells us. “Firstly I think that the price point is too high. I think the compatibility with PS4 will give it a bit of a kickstart and Vita will have a better year, I just don’t know whether it will meet the expectations Sony had with Vita.”

Sony’s home console isn’t having any difficulties; PS4 sales through Amazon.co.uk have outstripped its rival Xbox One, a reflection of the hardware sales ratios Sony UK took great delight in revealing last week. “If you look at our bestsellers chart PS4 always has been, and still is, our number one best seller,” says Patel. “Xbox One will fall somewhere within the top five. Obviously one console has outperformed the other generally and we probably confirm that split between the two.”

Microsoft must now close that gap. Hopes are being pinned on the arrival of Respawn’s Titanfall to help do that, but even the arrival of a big-name shooter – and all the hype which surrounds it – might not be enough, says Patel. “[Titanfall] will be a big driver. I think Microsoft have got themselves a big coup there in negotiating that with EA. It will help close the gap, but personally speaking I think that gap is quite a big one at the moment. There’s a lot of catching up to do.”

The next big releases for Amazon include Watch Dogs and Destiny, though there are lingering doubts over when both might arrive. A second wave of true next-gen titles will come later on in the year, says Patel, so players can expect “a big slew of new titles and new IPs” near Christmas, PS4 and Xbox One’s respective release slates looking relatively sparse until then.

PS4 is ahead of Xbox One and Microsoft has “a lot of catching up to do,” says Patel.

Amazon itself has had a hand in boosting anticipation for one much-anticipated release, in fact. Rockstar hasn’t confirmed anything just yet, but when GTAV was listed for PC on Amazon France and Germany recently, the retailer generated headlines across the games media, driving new potential customers to those sites in the process. It’s a phenomenon that’s become rather familiar; one might even suggest that the regularity of these retail leaks suggests that that they might not be entirely accidental. “I can categorically tell you that not one time has it ever been intentional,” says Patel firmly. “We conform to publisher requirements, we strive to make sure we don’t break street date, we make sure we abide by embargo rules…yes, you do get the odd issue but that’s purely accidental.”

These mistakes can be made by Amazon or the game’s publisher itself, said Patel. So actually there’s a chance that these ‘accidental’ leaks are simply a trick publishers play to whip up some quick, easy publicity. Amazon itself maintains that it has never deliberately done so itself, of course. “It’s big exposure…if you make a mistake then it gets picked up everywhere and it blows up into a huge issue,” adds Patel. “We need to make sure that we have more and more controls to make sure these things don’t happen. We 100 per cent never do it intentionally.”