Recent events, namely the dissolution of THQ, oddly get me thinking about the effect of piracy on the video game industry. No, this is not anything like a claim that piracy is responsible for their demise, far from it. This is about the beliefs underpinning the claims of publishers and many developers that things like DRM, microtransactions and full price digital distributions are essential to their success and survival.
THQ's failure was not due solely to mismanagement, responsible for some pretty out-of-touch ideas like the UDraw, there was a more mundane, and some might say discouraging, issue with the company: demand for their products did not justify the magnitude of their investments. By the time Darksiders II was being developed, the company was already in trouble. The UDraw cost them dearly, but they stuck to the massive gamble that was Darksiders II, some claiming that the company was putting all of their hopes on its success. The game cost enough to develop that, according to at least one analyst, the game needed to sell a lot more than it did to break even.
The choice of Death as the main character was rather prescient, perhaps Freudian.
The important question to ask is: were the expected sales reasonable enough to justify the risk? The games we enjoy today are often classed into "AAA" and "not AAA", with the former essentially translating to "expensive". With THQ, the expectation seemed to be that a "AAA" publisher would continue to pony up for expensive development costs so that their games could have the full voice acting and modern grapchical capabilities that have become commonplace. There was eveery reason to think that this business model was failing long before the company finally imploded, and the insistence on putting all eggs in certain very expensive baskets may have been their doom. More to the point, it may be indicative of a fundamental, and baseless, assumption made by major publishers, including EA, Activision and Ubisoft.
Publishers seem to think that they are entitled to success.
Rather than consider that their biggest franchises are no longer in high enough demand to justify their significant financial risk, publishers revel in a grotesque blame game cum money-grubbing circus. Ubisoft's always-online DRM was because pirates are draining sales! EA's microtransactions are because new players need to be attracted! It may be difficult to face for fans of the major franchises published by these companies, but it may be that these games are bigger, prettier and more costly than they can afford to be. Maybe the sprint for bigger, better graphics and bigger, longer games has become untenable.
In any other industry, this would be the conclusion. Department stores have extensive measures in place to reduce the theft of jeans, but a significant chunk of capital is lost to the shoplifting of jeans every year. Despite this, jeans still sell enough that retailers can safely assume that this loss is entirely due to theft, not a lack of demand. A more appropriate example may be music. Music has a big pirating problem, as well, but the most successful bands are doing just fine. Of course, the recording industry has an equally large whining problem: they're not making as much money as they would like, so this must be because of piracy, and not a lack of demand for bad products.
This debate has been had ad nauseam, but it's safe to say that piracy does cut into profits to some extent, but this is not the serious sort of damage that shoplifting causes. Shoplifting leads to the loss of irreplacable units that cost money to make, but the pirate is only the loss of a hypothetical sale. The fact is, either way, piracy is not going away, so companies have to adapt. CEOs, most of them, are not idiots, they know this, hence the DRM and the microtransactions and the day-one DLC. What they don't want to face is the fact that the people who buy their games represent the only demand their games actually have. If that is not good enough, then the development costs are just too high.
The only reasonable choice for game publishers may be to give developers a tighter budget. We may not like to admit it, but there may not be enough of a market for these games to keep all of them going. These games are not entitled to success, and we are not entitled to games of this magnitude. Look at Logitech's recent abandonment of the console peripherals market. Many people were fans of their console peripherals, but not enough were, so now those people don't get logitech console peripherals. This is the sort of reality THQ should have been willing to face. The UDraw would never have happened if they hadn't been so desperate to keep a sinking ship afloat with the same amount of gold on board.