Bits Blog: Apple Sued by Former Retail Workers for Unpaid Wages

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Video Games: Video Game Retail Sales Decline Despite New Hits

More than 200 million Wii, Xbox 360 and PlayStation 3 systems were sold worldwide. Sales of portable gaming machines surged as well. Upward of 12 million subscribers were paying $15 a month to play the online game World of Warcraft, and competitors were plotting to develop worthy rivals. The motion-sensing Kinect system from Microsoft generated considerable buzz, with its promise of freeing players from having to push buttons and wave wands.

And yet the gaming world has found itself teetering at the edge of a financial cliff. In the first eight months of this year retail sales of video games plummeted 20 percent in the United States. That followed a lackluster performance in 2011, when sales fell 8 percent. An analysis on the Web site Gamasutra this year said it was possible that 2012 would be the worst year for retail video game software and hardware sales since 2005.

The struggling economy has certainly been a factor in the decline, especially considering that young men — long a core audience for games — were hit so hard during the recession. Another development will sound familiar to anyone who once had a groovy record collection: the democratizing, disrupting effect of less expensive digital downloads has changed the business model. Nearly everywhere, it seems, people have been sharing Words With Friends, slinging Angry Birds at pigs or springing their creatures through a precarious Doodle universe. All those games, made for smartphones, sure are popular, and the financial picture improves when their sales are included, but they can be had for pennies and seemingly become disposable almost as fast as they are released.

The video-game industry barely survived the brutal recession of the early 1980s: 29 years ago this fall Atari buried millions of unsold video games — believed to be mostly copies of Pac-Man and E.T. The Extra-Terrestrial — in a New Mexico landfill. Are video games facing another devastating crash? Have developers been putting out inferior work, or is something beyond their control going on? What should they do to adapt? The company credited with saving the industry last time was Nintendo, which finally plans to introduce its new Wii U, the successor to the 2006 Wii, next month. Can Nintendo lead the way again?

To try to get a handle on some of these issues, two video-game critics — Chris Suellentrop, deputy editor of Yahoo News, and Stephen Totilo, editor in chief of the gaming site Kotaku.com — recently discussed the challenges facing the industry.

STEPHEN TOTILO This has been a year of underachievement for many of gaming’s top achievers. How very 2012 it was for a game like Draw Something to capture the world’s attention in February; attract about 14 million players a day in April; seduce the FarmVille company Zynga to buy the game’s maker, Omgpop, for $180 million; and by the end of the month have its daily player base fall to 10 million daily. How very 2012 it was for the vaunted hit-maker Blizzard to release a game, Diablo III, that was 11 years in the making and then have to repeatedly apologize for its shortcomings. The Kinect might be selling Xboxes, but it isn’t helping sell that many games, because there are hardly any Kinect games that anyone talks about and very few that sell. It’s just a watered-down repeat of the Wii phenomenon.

This has been the year of sinking game company stocks, stagnating console sales, creative miscues from some of the medium’s best creators and a lack of many blockbuster games — from big companies. Note those last three words. It has been a very bad year for corporate video games. You know, gaming’s elite.

CHRIS SUELLENTROP Yes, it’s been a bad year for games that require the purchase of a physical disc with cover art and liner notes — I mean, an instruction booklet — an oddly retro aspect of the medium. And to take the baton you’re offering, yes, 2012 has been a remarkable year for downloadable titles, many of them created by independent developers working outside the traditional studio system. I wouldn’t call three of the year’s best games — the downloadable Journey, Fez and Papo & Yo — representative of gaming’s peasant class. Still, I don’t envision the next title from thatgamecompany, the developer behind the artful, downloadable PlayStation games Flower and Journey, making up for the industry’s 30 percent revenue decline.

Besides, do you really think that the quality of individual titles is the cause of this collapse? The nation is facing nothing less than a fiction crisis. Four of the five best-selling books last year on Amazon were works of nonfiction, and the fiction title, “Mill River Recluse,” was a Kindle download. The theatrical box office recently saw its worst weekend in 10 years. Narrative television — the quality of shows like “Breaking Bad” and “Mad Men” notwithstanding — is in decline. The most-watched shows are sports and reality spectacles. Anyone who has engaged in the make-believe required for most video games to work their magic knows that games are fiction too. Why would games be immune?

TOTILO Because video games aren’t all narrative fiction. Apologies to fans of the interactive storytelling pioneers of BioWare, the studio behind Mass Effect, and to those still searching for Bowser’s motivation for repeatedly kidnapping Princess Peach, but few people play video games for the story. Or for the acting. Or for many of the other cinematic aspects that can’t mask a bad game.

On the subway I ride daily the only video-game-related decline is the tilting down of heads so people can see the narrative-free games on their cellphones. These people could, of course, be reading books or watching movies. Many of them are not. They have an appetite for the interactivity of a game. They want to poke at a system and have it, or an opposing gamer, respond. They want to play.

Chris Suellentrop, the deputy editor of Yahoo News, and Stephen Totilo, the editor in chief of the gaming Web site Kotaku.com, write about video games for The New York Times.

Apple's Retail Expansion Falls Short in China

SHANGHAI — Apple has more retail stores in Pennsylvania than in all of China — where it earns a fifth of its revenue — and a slow pace of expansion may cost the firm more than just sales.

Apple’s six stores in China are routinely packed, and customers often wait in long lines for iPhone repairs. Scalpers are known to camp out to be first in line for new products, which they then resell for a tidy profit.

The California company is notoriously fastidious when it comes to its flagship stores, and has said it is taking its time in China to ensure that it secures the right locations. But its retail expansion has fallen well short of its own goals.

In 2010, Ron Johnson, then Apple’s retail head, forecast that the company would have 25 stores in China by this year.

“There’s certainly more demand than Apple can serve with their store footprint currently,” said Torsten Stocker, a partner at Monitor Group, a business strategy firm.

The clamor for Apple products has spawned a bustling gray market where smuggled goods are peddled by unauthorized resellers. Copycat Apple stores have popped up in smaller mainland Chinese cities.

The Apple frenzy will only intensify now that the company has agreed to pay Proview Technology $60 million to settle a lawsuit over the iPad trademark, freeing it to sell its latest tablet computer in mainland China.

Apple has two retail stores in Beijing, three in Shanghai, and one in Hong Kong. Chinese government officials said last month that the company is looking to open two more in the major cities of Chengdu and Shenzhen.

In Pennsylvania, a state with a population of 12.7 million, Apple has eight stores, including three in the city of Pittsburgh alone. The population of China is 1.3 billion.

Apple declined to comment for this story.

The shortage of retail stores and authorized resellers leaves ample room for unlicensed resellers to move in. Bad consumer experiences at unauthorized shops are common, and they run the risk of eventually eroding confidence in Apple’s products, said David Wolf, chief executive of the Beijing-based consulting firm Wolf Group Asia.

If Apple does not expand its network of stores and authorized resellers, it “loses not only near-term sales, it also endangers the sustainability of its success in China,” he said.

Apple products can also be bought online in China, but many consumers prefer to buy at the store after testing the product.

Apple’s flagship stores in China are packed with people tinkering with the company’s latest gadgets, even on weekdays. Last October, Apple’s chief financial officer, Peter Oppenheimer, said the China branches were the highest trafficked stores, and among those with the highest revenue, for the company.

Demand for new Apple products is so high that scalpers lined up outside a Beijing store this year for the latest iPhone, only to pelt the store with eggs after Apple decided against selling the phone there over security concerns.

Apple competes with Samsung as well as the homegrown Chinese technology firms Huawei and ZTE in China’s fast-growing smartphone sector.

The pace of retail expansion may not be dictated entirely by Apple. Red tape often hampers foreign companies’ expansion plans in China, and that may be holding back growth.

“There are complications around opening stores in China that you don’t get in Western countries,” said Andrew Milroy, vice president of information and communications technology research for the Asia-Pacific region at Frost & Sullivan in Singapore.