Are the people in charge of the videogames industry completely insane? It sometimes seems that way.

The videogames industry is about making money. This is essentially the goal of every industry, and since adults need employment in order to earn the money to live, those of us who work in this sector should be glad that commercial reality overrules artistic aspiration (yet equally glad that we are finally getting an "art house games" community with the reverse priorities to help explore the creativity of the medium).

But what kind of "commercial reality" is it that informs the heads of Nintendo, Microsoft and Sony? Because examination of the marketplace makes me question to some extent all three companies' strategies.

Nintendo

Nintendo are doing extremely well right now, and I have the least criticism for them at the moment. Nonetheless, Nintendo are sitting on a timebomb that is almost certain to hurt them in the future: the alienated gamer hobbyists. On the one hand, the mass market players love what the Wii does and the light and forgiving games Nintendo are making for it (yes, even Wii Play meets the play needs of many players who previously could not find a game simple enough for them to enjoy). But on the other hand, those hobbyists who helped put the Wii into the hands of its audience are feeling a little left behind. Of course, it does take time to make a gamer-friendly title like a Zelda, as Nintendo state, but name one new franchise proposed by Nintendo that appeals to gamers... if you can.

Obviously, Nintendo are raking in the cash right now and certainly they will do better to continue to make forgiving, mass market friendly games than to fall into the trap of trying to service the needs of the fickle and callous voices of spite that lurk in the dark corners of every internet gaming forum. But where do Nintendo go at the end of this generation? Wii Too? The mass market players already have a Wii, and many of the gamers feel burnt by their little white box gathering dust. The next home console transition will surely hurt Nintendo unless they either have another innovation on the scale of the interface-simplification of the Wii remote, or a plan to make peace with their disgruntled hardcore fans.

Microsoft

Meanwhile, Microsoft are feeling pleased with themselves because they have taken the lead over Sony. Congratulations, Microsoft, you've spent billions to take second place in this round... not long ago, 'second place' in the videogame market was called 'losing'. But fortunately, since Microsoft are the most gamer-friendly company around right now (and since many gamers pretend the Wii and the DS aren't really happening) it's made to seem like winning. 30 million 360's to 50 million Wii... and if you look at hardware sales as a graph, it's hard to see Microsoft's position that positively.

Furthermore, for a console which is putatively the gamer's choice, the sales figures are remarkably lopsided. GTAIV not withstanding, what game has sold in good numbers other than shooters? Halo 3 is coming up on 10 million, and best-selling FPS of all time Call of Duty: Modern Warfare looks to have sold 7.6 million on the 360, while third-best Gears of War and Gears of War 2 both flatlined at 5 million units - those are great sales figure, make no mistake, but these genre-restricted successes hide serious problems in the wider view.

The biggest racing game on 360 (Forza Motorsport 2) has managed 4 million... the top Gran Turismo on the PS2 pulled in more than twice this (9.5 million). Fable 2's 2.9 million is the top selling title of all RPG-like games on the console; Oblivion pulling in something similar (2.7 million on 360), and Fallout 3 is heading for the same sort of number (2.4 million on 360 currently).

Think these numbers sound good? You have to remember that the cost of development has skyrocketed, and these numbers represent a fall in sales with respect to the previous generation (on PS2, Final Fantasy X sold 6.6 million, Final Fantasy XII sold 5.2 million and Kingdom Hearts sold 4.7 million). With costs an order of magnitude greater and returns apparently halved, it would be a strange kind of economic assertion to suggest things were going well for Xbox 360 developers outside of those lucky enough to have clawed their way to the top of the pile.

So what do publishers do? They commission more FPS games. Which largely fail to sell, unsurprisingly, because the FPS market is saturated and Halo 3 and Call of Duty soak up most of the available audience for such games. Honestly, as an economic proposition, developing an upper market title for the 360 seems like a fairly weak business plan right now.

Sony

And finally, poor Sony. The Wii Balance board has nearly outsold the PS3 (21 vs 23 million units), and despite the PSP being the most credible attempt to take on Nintendo in the handheld space, it is barely stocked anywhere outside of specialist game stores now. The PS3 itself is a nice piece of kit, but it's high price tag and serious shortage of "killer ap" exclusives puts it in a very weak place next to its rivals. (There are some great games, but none which have sold well). On the Vgchartz worldwide total sales chart, the highest positioned PS3 title is Grand Theft Auto IV at number 78 at 5.68 million. The 360 version of the same title sold 7.15 million.

Trying to compete against Halo 3 with Killzone 2 was a losing battle from the start (although Sony obviously do need some FPS titles in their line up); competing against Microsoft where they are strongest - the FPS genre - is asking to fail. LittleBigPlanet was a much better idea on paper - a platform game in a market with very little competition in this space (only Nintendo are making platform games currently) - but the game suffers from being too hard for mass market players, and its excellent level design tools allow the hobbyists to make yet more difficult levels, thus ensuring the community around this game remains small.

In fact, Sony's basic problem is that they want both the mass market audience that Nintendo have and the hobbyist audience that Microsoft have, but aren't willing to cut their price to make that plausible, nor are they apparently able to carve out a niche of their own. There are numerous gaps in the market for games that a powerful and impressive piece of hardware could take advantage of, but a market opening is denoted by its negative space, and it takes good intuition and serious moxie to seize these kinds of opportunities - Sony's rigid corporate structure rarely allows people with these traits to flourish.

I believe the PS3 could still steal second place from Microsoft under the right circumstances. But sadly, I don't believe Sony can engineer those circumstances without a shake up, and my overall impression is that they have given up trying to compete and just want to lick their wounds and wait out this generation, clinging onto some proportion of their loyalist gamer fanbase. If that's the case, they might just as well get out of the hardware game now.

Diagnosis

In closing, here's what I suggest each company should do to improve their current or future fortunes:

• Sony: ignore the Wii for now and commission exclusive games in currently under-represented genres, some with mass market appeal (platform games, for instance) and some with hobbyist appeal (RPGs, for instance) - carve out a niche of your own instead of trying to tackle your rivals where they are strongest. It should be possible for players to say "I bought a PS3 because I like such-and-such a genre", rather than "I bought a PS3 to go with my Wii and 360". Let game diversity become your selling point again, just as it was on the Playstation and PS2.
• Microsoft: abandon your futile attempts to steal the Wii audience from Nintendo: the female-inclusive mass market are not likely to want an Xbox now that you have spent so much time and money establishing Xbox as a "boy brand". You've made your bed, and it's relatively comfortable - now guard it from Sony either by beating them to genre diversity or by better supporting the indie developers - they are young and keen and too dedicated to their ideal of gaming to be dissuaded by the troubling commercial disasters of the upper market.
• Nintendo: what advice can I possibly offer a company enjoying such tremendous success? Just this: you blew it before by abusing your power, you could just as easily blow it again. Give the hobbyists a reason beyond nostaligia to turn on the Wii. Commission some games without mass market appeal for a change - strategy and adventure games both seem like viable genres for the Wii's unique controls, and you could always commission sequels to beloved but underachieving past titles. Lose money if you have to... you can afford it. You know you still need the gamers hobbyists for your continued future success - take steps to ensure they know it too.

Agree? Disagree? Share your views in the comments!

Following on from the discussion of Time & Punishment, what is the effect of punishment on players?

When we are punished by a game, we experience sadness or frustration – if we experience frustration (i.e. anger), we might become riled up and continue to pursue the challenge that drove us to anger. If we experience sadness, we are more likely to stop playing. (It looks as if a lot of players in the wider market have been kept out of playing games by the focus on punishment, hence the success of casual games, i.e. forgiving games).

But more than this, the knowledge that we might be punished acts as a source of anxiety (i.e. fear), and fear is an enhancing emotion for play. The same chemical (adrenalin or epinephrine) is released into our bodies when we feel excited or when we feel scared or anxious – it is our state of mind at the time that resolves it into excitement (when we are having a positive experience) or anxiety (when we are not). So punishment can make games more exciting – provided the player will put up with being punished – and that increased excitement also results in increased reward (i.e. a bigger hit of dopamine) which means punishing games can also be more addictive.

So punishing games can be more rewarding games, you just have to overcome the dislike of punishment. This, perhaps, is why the games industry has taken so long to get away from games of punishment – as an industry primarily made up of videogame addicts, it seems crazy to most developers to make a “sugar” game when you could make a “crack” game.

It just so happens there are a great many more people looking for a sweet game than are looking to become videogame crack whores...

'Games as learning' is a popular lens through which to see videogame play, and one with many advocates, not least of which being Raph Koster. His book, A Theory of Fun for Game Design, is a wonderful defence of the videogame industry built around the 'games as learning' premise. But when we use this viewpoint, what are we missing?

I have a number of issues with the 'games as learning' paradigm, none of which invalidate the merits of this point of view. My principle complaint is that, excluding reflexes, all behaviour is learned; almost all experiences in life are learning experiences. All creatures with a sufficiently complex brain learn all the time from what's going around them. Thus 'games as learning' doesn't track directly – if we are always learning, what's the difference between watching a movie and playing a game? The reason that games become more associated with learning is because games teach specific skills, whereas the kind of learning that goes on with a movie (or some other activity)is considered more passive. Thus rather than a strict case of 'games as learning' we end up in the position that games are simply efficient tools for learning.

But here we run into a serious issue: games teach skills by offering challenges and assigning tasks, which the player must learn how to complete. Clear a level, beat a boss, collect items in an area, and so forth. The player then receives a reward, and goes onto new challenges and tasks. The reward could be any number of different things, but biologically it all comes down to triggering the reward system in the brain, which I have already written about at length. The connection between this reward system and learning is well established – in fact, most professional animal trainers (such as those who train the orca's at SeaWorld) use the principles of operant conditioning in their work.

So now we are facing a parallel between what a videogame does to its player, and what a trainer does to an animal – with one big difference. The trainer is seeking to elicit specific behaviours – sit, wait and so forth when training a dog, for instance. The videogame has not been designed on this paradigm (the 'games as learning' model reflects a perception of videogames, not a prevailing attitude in how to make them), and indeed most videogames are merely slightly reworked versions of previous videogames with no intentions beyond being “better than other games”.

What do videogames teach? Well, among other things they teach players to smash boxes to look for items, to search the dead-end first, and in many cases to save often. Most of these skills do not transfer to real life in any useful way, although of course, there are exceptions (anyone who used Microsoft Word in the 1990s, for instance, will have benefited from learning to 'save often'). It is the case that learning to play most games does exercise the decision centre of the brain (the orbito-frontal cortex), and thus can help people with their problem-solving skills, although this was perhaps far more true in the early days of videogames than it is now. (I'm at a loss to suggest what is learned by a player of Wii Sports or, for that matter, Call of Duty: Modern Warfare, that they can apply outside of a videogame context, although I'm sure people will have interesting suggestions!).

As a consequence, I find the 'games as learning' paradigm flawed. I do not deny the potential for games as tools for learning, although the videogames industry has not embraced this very well and the Serious Games movement seems to have problems delivering on its full potential right now. Since 'games as learning' equates to 'games as tools for operant conditioning' I wonder if it wouldn't be more prudent to consider 'games as rewards' (as with John Hopson's Behavioural Game Design model) – both learning and rewards being aspects of the operant conditioning process i.e. the mechanism by which behaviours are learned.

The problem with 'games as learning' in this context is that it draws the individual's attention to an outcome (learning) and risks misleading people as to what actually goes on while a player is enjoying a game. To make his theory of fun track, Koster has to eliminate all forms of visceral fun, since these are not based upon learning, despite the fact that, yes, rollercosters are fun even though they do not involve learning.

Conversely, 'games as rewards' does not fall prey to this limitation so easily – from this perspective, visceral enjoyment is intrinsically rewarding, and thus can be sought for its own sake. Furthermore, 'games as rewards' has specific lessons for game designers as to the mechanisms they can use for structuring those rewards. Admittedly, one can easily invert this and be back in the 'games as learning' perspective, but those simple, visceral rewards – such as the thrill of high speed and the delight some players derive from violence – will never comfortably fit into this model.

My suspicion, perhaps unfair, is that for those of us who perform well in the education system learning is intrinsically rewarding (or autotelic, as Csikszentmihalyi says) – and this, I believe, applies to everyone who advances the 'games as learning' perspective and pretty much all game designers. Because of this inherent bias, 'games as learning' looks like a stronger model than it perhaps should. I feel 'games as rewards' is a required counterpoint and, from the point of view of game design, potentially more useful, while acknowledging that (like the ridiculous narratology vs ludology debate) we're really talking about two sides of the same coin.