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The gaming industry is dying.
No witty remarks, no cute little anecdotes. I'm cutting right to the chase. The current development model is unhealthy. Dozens of companies have already gone under and thousands of personnel have lost their jobs with many more guaranteed to join their ranks. This is not a "what if" scenario. This is actually happening.
And the worst part? There is nothing, nothing, you or I can do to stop it.
Do you think I'm fear-mongering? Do you think I'm making a mountain out of a molehill? Well, I wouldn't expect most of you to know or care. You are too busy enjoying the games themselves and bathing in the communal waters to be bothered by the business end. Why should dollars and cents matter to you?
It should matter. It should scare you shitless.
Take a look at this list of closures, bankruptcies, and staff reductions from 2009. More than a dozen studios were affected in some other capacity in January alone! The rest of the year is a graveyard: Ensemble Studios, Midway Games, GRIN, Factor 5, Pandemic Studios, and many more. Even the big players like EA, Sega, THQ, Sony, and Microsoft were rushing to get rid of their dead weight.
Since 2008, roughly 11,500 people have been kicked to the curb. Talent is vanishing at a record-breaking rate all because most companies are unable to keep up with the demands of the changing market quickly enough. There is simply no room to breathe.
This has become a hit-driven industry. Everyone is racing to make the next big blockbuster epic and it is causing development costs to soar astronomically. Today, the average budget is $10 million up from $3 to $5 million for a single-platform title, between $18 to $28 million for multiplatform, and that's before considering other costs like marketing and shipping. To get an idea what the upper echelon is like, Gran Turismo 5 is pegged at $60 million and Grand Theft Auto IV was figured at a mind-numbing $100 million!
One of the biggest success stories this past year has been how Call of Duty: Modern Warfare 2 generated over $1 billion in revenue. If you want to follow in Activision's footsteps, however, you should be prepared to plunk down big bucks for that initial investment, $200 million to be exact. That breaks down to about $40 to $50 million for actual development and the rest for production, distribution, and a disgustingly ostentatious advertising campaign. Activision Blizzard CEO Bobby Kotick made some mad bank and all it took was raising the stakes so high that the competition willingly moved into the next quarter, missing crucial holiday sales.
Big brands are so popular that smaller companies want to do everything in their power to emulate them. Make a huge game pumped full of Hollywood shine and watch as the units shift in the millions! They rarely stop to realize that the potential losses are just as severe as the potential gains. All it takes is one screw-up to knock the foundation out from underneath a business. Let's not forget how following Lair, Factor 5 was faced with cancellation after cancellation as well as a short-sighted union with movie-license publisher Brash Entertainment before its eventual death.
Ironically, most companies think the solution is to invest even more into subsequent projects, thus hastening their downward spiral. Smaller companies cannot compete at this level, and so the behemoths of the industry get to run away with the majority of the market share. At least they are successful, right? Wrong again.
Take-Two Interactive just recently posted a net loss of $138 million for fiscal year 2009, compared to a profit of $98 million for 2008. Despite Borderlands and Carnival Games showing big numbers, Take-Two flounders without a mainline Grand Theft Auto. EA announced back in May that it lost $1.09 billion the previous year despite earning over $4 billion in revenue; now it is warning investors not to hope for much in fiscal 2010. And despite Activision's success with Modern Warfare 2, the game is merely a distraction from how the company squandered the viability of the music genre.
The big scapegoat in all of this is the recession, but that's bullshit. This past year may have seen a decline in overall game spending from 2008, but total sales amounted to $19.7 billion, the second-biggest year in the industry's history. That would make 2008 the biggest year with over $21 billion in sales. On top of that, this past December was the best month ever. With consumers so willing to spend big on video games despite the economic downturn, how is it possible that the industry as a whole could fuck up so badly?
There has been a lot of mismanagement and restructuring as noted in some of the links above. More importantly, no one can seem to follow the needs of the market well enough to keep from bleeding. It shouldn't be too hard, right? The biggest spenders are the enthusiasts who buy multiple games per year, per month, per week. All those "casual" gamers and fickle soccer moms can't possibly support this industry, so it's best to target that nucleus.
And that's the kicker.
The enthusiasts, though reliable, are a very picky and demanding bunch. Thanks to the industry's drilling of the mantra that technological progress is the only progress, gamers have come to expect more and more for less and less. The retail price of games ten and twenty years ago was not much different than that of today. There were even some cartridge-based games that went up to $70, $80, or $90! On average, prices have stayed relatively steady while the costs to make these games have exploded. Who could miss the brick wall ahead?
Titles all need online multiplayer which in essence is like making a second game, just consider BioShock 2 and how the multiplayer mode is being handled by a completely different studio than the main team. Additional content that once appeared in expansions and sequels are now demanded as free DLC. Games need hi-res art assets, top-quality voice acting, and heavy cross-promotion. Is your game viewed from a side perspective? It better be a $10 download on a digital delivery platform!
I know what you are thinking. I'm probably going to say that the answer to everyone's misfortunes is to go full-on Wii. Sorry to disappoint you but no, it isn't. As we've seen over the past few weeks, third parties are slowly realizing that the Wii is not some magic money-making machine. Nonetheless, I'd be ignoring the 800-pound gorilla in the room if I didn't mention Nintendo's position in all of this.
Back in 2005, Nintendo CEO Satoru Iwata asserted that the only way for the industry to grow was to aggressively target new and former gamers. Thanks to the Wii and DS, Nintendo has shamed the industry by offsetting most of the biggest losses every year by itself. Nintendo was successful because it correctly identified an underserved market and did everything in its power to cater to their interests.
Many gamers and third parties can't seem to wrap their heads around Nintendo's accomplishments. All they choose to see are minigames and grandmas, completely missing the real reasons these games sell. These customers value ease of use, local community, and arcade-style gameplay, all values that the traditional model avoids. I've often heard gamers muse that the Wii would have been even more successful had it matched the specs of the 360 and PS3, not realizing that then Wii software would have been held up to the same expectations as traditional software from the broken model. Just bringing so-called AAA titles to the Wii isn't the answer either because then you'll be propagating the arms race that forces out smaller developers and publishers.
Most companies are so invested in the traditional model that turning around and making games for a different audience would be cost-prohibitive. The big companies like Capcom and Ubisoft have the resources to develop strong expanded audience titles but refuse to devote serious time and effort because of the associated risks. For years, making games has been a relatively simple process of building upon the sustaining innovations of the past. All this accumulated knowledge and tech is useless when it comes to making games for people who aren't impressed by the number of shader effects on screen. These companies know they've screwed up but can't admit that they misread the market since that would put them in even hotter waters with their investors.
There needs to be a serious push into non-traditional and handheld gaming spaces. There needs to be a scaling back of promises and features in order to streamline development. There needs to be more transparency in publisher relations. Companies need to stop forcing industry standards and allow the market to set standards for itself.
That news doesn't make you happy, does it? Video games are supposed to push boundaries! Video games need to become a credible medium! We demand advancement! We demand new hardware every four to five years! Companies are so convinced that they have to pursue these core audience demands or risk losing everything that they are driving themselves of a cliff regardless! They don't have the skills to change their output and are too afraid to learn.
I already said that there is nothing you or I can do about this. This is not our fault. There's no sense in giving up the games that we've grown to love. Besides, it would make no difference if we banded together to boycott the big studios. All that would do is send companies down the toilet faster when they fail to move their excessively budgeted product.
No, the onus is on the industry to change, but how can it be convinced to do so if the current environmental train wreck hasn't already? What are these companies waiting for? More red ink? More layoffs? They must be waiting for one of the big players to kick the bucket. Imagine how scared everyone will be once someone like EA begins pawning off subsidiaries to the lowest bidder. If it ever reaches that point, though, it may be too late.
Video games will live on, of course. Unfortunately, the industry as we know it now will cease to exist. Whether today's companies wise up or more adaptable companies replace them, the landscape will inevitably change. How long before your favorite studio files for Chapter 11? Five years, two, one? Next week? Think you can deal with that?
Welcome to the future.
Contest:
5:30 PM on 01.19.2010
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Production costs increasing, companies going out of business or restructuring... this is different from the past how?? Shenmue 2 apparently cost 70 million or so to make, over 10 years ago. Does Sega still make hardware? Where is BlackIsle Studios?
The games industry is very much like the movie industry. People are hired for a project. Once the project is complete, many of these people complete their contract and simply have to move on. More and more qualified employees are available - making the field more and more competitive. Studios desolve, new one's evolve.
The industry really isn't much different than it's always been. There are ups and downs just like every other industry but with the growth of gaming in general (and all it's incarnations and options) the future is probably better than it's ever been. There are games everywhere... on the consoles, the PC, on iphones, on handhelds, on facebook. Overall revenues continue to increase, and likely will for many years to come.
Nobody gets a job "for life" anymore... anywhere. Look at job stats and you'll see outsourcing, insourcing, contracting, employee leasing - few people in any industry will work for one company and retire with a gold watch anymore.
Great article... but respectfully I have to disagree that the industry is in any way dying.
I think that so many games have come out in recent years that the industry could die and i wouldn't give a damn because I currently have 28 unfinished games and 30 must-buy games on my list of unfinished business.
The industry could die for ten years and I would still have well enough games to play. Oh, and think how fucking awesome online communities would get if everyone stopped playing WoW after activision's death. Finally some more delicious Republic commando mods... *yum*
Oh well. Maybe then all these devs can focus on true VR.
The real problem is that the development costs have grown faster than gaming revenue; and they can't raise prices any further because even less people will buy games. But more people need to buy the games as it is just to be profitable. And the only way to make more people buy these games is to spend more time and money cramming in all kinds of features and multiplayer. When all these features become common place our expectations grow even more, requiring newer, more expensive tech.
UE3 costs close to $500k which nets you the entire source code, dedicated support, etc. But $500k! That is a lot. And most games are built on UE3 because the consumer expects UE3-calibre content.
Of course, games will still be around, they just won't be the games you are used to seeing. The big blockbusters are going to slow to a crawl. Saying that the industry is "just fine" is disrespectful to all the people who have lost and have yet to lose their jobs.
Comparing the games industry to the film industry ignores the crucial detail that films have been around decades longer. Film is far more mature and far more socially acceptable than gaming. Game companies think they are on the same level or beyond in terms of capabilities compared to film houses, but they aren't.
Nobody gets a job "for life" anymore.
There is some solid job security over at Nintendo. Thinking hat should be the exception and not the norm demonstrates just how poorly most companies operate.
Besides, the numbers I've found go against everything you guys claim. Is there any proof that the industry as a whole is doing fine?
I still think that while a lot of other big blockbusters will die out, the "Modern Warfares" and "Halo" games will still always be around. I also think that the Wii is starting to legitimize gaming in the same vein as films, but as I noted, we aren't there yet.
When I look at a MadWorld and see a short game with a hook, no networked multiplayer and no open world, I kind of feel like that's where games disc games will be in a few years: Small bite, a few hook sand gimmicks, expanding itself in ways other than graphic horsepower, and about $50 new. To exist in a world of ridiculous blockbusters, I think that's the the direction. MadWorld didn't sell millions of units, but it also (I'm guessing) didn't take nearly as much capital or shear resources to create as ModernWarfare 2. The profit is smaller, but its competent profit.
I also look at the iPhone apps, Xbox Indie and Wiiware, and I think that small companies will thrive in the world of digital distribution. No blockbuster, no company jets, but smart, fun gaming that generates enough revenue to perpetuate itself.
As others have already mentioned, there are alternative outlets live digital delivery platforms, handhelds, and iPhone. By the end of this year, all three home platforms will feature motion controllers. There are many up-and-comers who will make great use of all these tools available. Many of today's small houses can become the leaders of tomorrow. The kind of games that are seen as "significant" today (which aren't actually significant, ironically) will thin out, leaving a few major players like GTA, CoD, etc. Stuff like Dark Void, Heavy Rain, and others will be less likely to be made.
The companies that follow the old model will have to man up and take the risks they don't want to make. If they don't, boom.
I await this article's front page exposure.
No, only kidding. Still, one damn interesting and opinionated article, dude. Heavy. Let's hope you're not right.
Blindfire posted this up a few days ago. Mine is, like, the exact same thing only with more melodrama and lots of external links.
I clearly explained that it has nothing to do with the recession. These past two years have seen the most consumer spending in history. If a company can't make a profit when customers are throwing cash at them, there's a problem. When a game's budget is larger than that of a similar last-gen game a factor of 3+, there's a problem.
Games aren't going anywhere nor are gamers going anywhere. The calls of The End is Coming for the industry aren't going anywhere either it seems.
All I care about are games and the playing of them.
So if the games you like stop getting made...?
But neither that blog nor this one includes a clever titular reference to a well-known catastrophe like I wanted to put in.
You do realize that 2009 was a year of bad sales for everything right? Going into a recession isn't exactly good for any industry except
I don't think it is exactly rational to claim so suddenly that the video game world is crumbling because people are cutting down on their entertainment purchases. I guarantee if you looked at other forms of entertainment, whatever they may be, they would be lower this year than last as well... aside from the alcoholic forms of entertainment.
I just hate seeing a potentially good article turn into a vehicle to promote more Nintendo bullshit. When I saw the big Nintendo logo with the fellatio surrounding it, I lost interest. Nintendo isn't innovating anything. They opened up the gate for games to be simplistic themes with motion control tacked on. If anything, if gaming does die, it would be Nintendo's doing. Now Sony and MS feel like they need to enter the motion control game to keep up with Nintendo's pandering to people who can't understand the complex controls of the HD consoles... which you happen to be one of those people, judging from your past article on hard to understand game controls.
I just don't appreciate Nintendo's specific brand of "innovation", it reeks more of gimmickry to me. I know for a fact that a much larger demographic enjoys a good gimmicky game compared to the demographic that appreciates a polished, high definition, realistic experience that may have a steep learning curve. That isn't to say more gamers prefer gimmicks, just more [i]people[/].
I'll put it this way... there are a lot more people out there that would be entertained by something simple like the comedy of Jeff Foxworthy or Larry the Cable Guy. They have really shallow jokes, stale delivery, but man... they have those gimmicky catch phrases that people love. To me, the motion control is like those shitty catch phrases. I prefer a little more complexity to my humor... and my games.
I just think games like Mass Effect 2, Left 4 Dead, the Skate series, Uncharted 2, Fallout 3, GTA IV, Red Dead Redemption, and yes even Modern Warfare 2... are all great examples of innovation in the gaming industry. I would like to see my games offer a more realistic looking and sounding experience, and also continue to push the limits of current hardware capabilities. I think there are a great deal of gamers that feel the same. Innovation doesn't just mean making some supposedly "revolutionary" control device... it means pushing things forward in all aspects of gaming, visual, audio, online, multiplayer, story presentation, wrtiting, EVERYTHING.
I just feel like Nintendo shits on all of that with their unwillingness to create an HD Wii, or even their initial stance to just stick with Gamecube quality graphics when they made the Wii. I can appreciate a couple of games on the Wii for what they are trying to do, but I just feel like people don't understand innovation quite as well as they think they do. Innovation doesn't mean doesn't mean standing still and tacking on a gimmick. It means pushing things forward and trying to be a stand-out title in the sea of mediocre shit out there. It has always been like that, and the sad thing is... Nintendo used to be good at that.
I also don't understand what is wrong with trying to make video games a more credible medium. You think they should just be viewed gimmicky toys forever? I think this article is pretty over the top, dude. You just seem to be nothing more than a well-spoken Nintendo fanboy. It sounds like you should try to catch up with the future before you're just stuck living in the past.
I don't think there WILL be a demise. I just hate the fact that people view Nintendo as the only innovators and if you enjoy mainstream, HD consoles, somehow you are perpetuating the failure of gaming. Whatever. I'm going to go play some games. I just always read Megstryke's blogs to see if he can ever write something that doesn't bash the current HD consoles, or brown-nose Nintendo. He successfully accomplished both with this one.
Everyone seems to miss the part where I mention that these past two years have seen more consumer spending in the games sector than during any other period in history.
Also, you are the prototype of the kind of person who fails to understand why people like the kinds of games the Wii provides. Rather than try to see the real reasons, you yell "gimmick" and call it a day.
Just sit there for a second and consider the possibility that games like Mass Effect 2 are perpetuating a model that causes companies to bleed excessive amounts of cash into development. Even if you don't believe it, try to imagine that it was true. If it was true, how do you think the industry should respond? By doing more of the same.
Think about it.
I don't fail to understand why people like the Wii at all. The Wii is accessible. I understand that. The games are fun right off the bat, no thinking involved, no frustration in learning. That's great, throw the Wii into the board game section of Toys R Us. It will fit in well.
I just honestly don't see anything wrong with companies wanting to push big budget games and push boundaries in gaming in other ways other than motion controls. There is clearly room for both and I don't think one or the other should be done away with... just don't try to tell me that Nintendo is the secret savior of gaming and all those who didn't partner up with them before are foolish. That's crazy.
Games like Mass Effect 2 and Heavy Rain are pushing interactivity in our games to a completely different level. They provide us with unique ways to interact with the them in no other way that any other medium can provide. Why would I want to see that stopped? So we can be complacent and just sit with our sub-standard plastic toy machines that make us giggle for a half an hour? I think we both just enjoy different aspects of gaming.
Perhaps I am just a casual gamer that enjoys a different kind of experience than you. I am fine with that if that is the case. Just don't try to tell me that I'm wrong for wanting to see games progress as they have been progressing for years. I will continue to buy games like Mass Effect, Call of Duty, Left 4 Dead, Street Fighter IV-XIII, Assassin's Creed, and whatever other high profile, AAA games get released. I enjoy them. I enjoy what video games have become. I can't wait to see what the next cycle of consoles brings us. If the current business model fails, then so be it. At least they were pushing things somewhere and they will discover they were wrong if that is the case. In the meantime, I will have faith that the industry will thrive and I will continue to support the companies I have supported since the beginning of my gaming days back before the NES.
I'm having a good time with my 360 and would pick up a PS3 before I picked up a Wii. If that makes me some kind of mindless-zombie-tool that can't appreciate Nintendo's ingenious strategies, then so be it.
I'm particularly enthusiastic about the infrastructure that's set up now to support independent development. And, especially, the rise of powerful middleware. A few guys in a garage can do way more now than nerds from a decade ago would ever have dreamed possible. So even if the big players end up falling on their swords, I'm not worried about running out of games to play.
I didn't only include motion controls in my list of directions companies should pursue. I also mentioned handheld gaming and smarter uses of the digital distribution platforms. A few companies have thrown stuff onto the Wii that failed, so that should show that the Wii is not the be-all end-all. However, all companies could learn to restrain themselves a little when it comes pushing bigger and better. Yes, innovation is important, but innovation doesn't have to be a giant expenditure.
No one is telling you to stop liking the games you do. Just don't be surprised if they start appearing in fewer and fewer numbers.
And I'm glad you mentioned Pixar. Pixar movies are great, aren't they? Know what could use work? Every other company. Dreamworks and whatever other animation studios that churn out substandard CGI crap that no one cares much about. To be fair, Dreamworks is pretty hit or miss with their stuff. Shrek was fine until they started pumping out carbon-copy sequels. Kung-Fu Panda was also awesome. Know what wasn't awesome? Antz and Bee Movie and Madagascar.
You hardly see traditional animation anymore, which is a shame. In the case of animation, CGI actually expediates the development process. CGI movies are less of a hassle to make than hand-drawn films, can be made faster, and can be made for around the same amount of dough. In this case, there really isn't a parallel to the gaming industry.
Although, I still love watching a Miyazaki film and seeing honest-to-God pencil-to-paper creations. I love The Princess and the Frog (although Disney animated features go heavy on the CGI as well for scenery and such). Those are good movies despite using older methods. Like I said, though, they aren't analogous to gaming.
This mindless arms race kind of march combined with the expectation of high production values is killing the industry as a whole.
People cry and gnash their teeth about some of their favorite games going to handhelds or the impact of the Wii, but those are very smart moves.
I said this elsewhere earlier today, but a company like Atlus knows how to recycle its assets so well and keep production costs so low that even if a game sells only 50k in Japan, they're well past the break even point and can keep on doing what they do. If they sell 100k-150k, even better. But they never have to worry about production costs so sky-high that they have to sell 500k or more for it not to be a failure.
Square-Enix was smart with DQIX. That game did not have a high production cost, but it went on to sell four million copies in less that half a year.The US version is paid for and our market just seconds mow - it doesn't have to be a sales success here. they've already made their bank on that.
Nintendo's been doing that for decades. Its why even when they are third place in a generation they are still one of the top developers and publishers in terms of sales. They are not being cheap or lazy, they're playing it smart.
Valve is another great example - they make games that just last forever. They put out Half-life, they put out mod tools. Some guy dreams up Counterstrike from doing mods, they hire him. Counterstrike is still a strong, long after people get fucking bored with Modern Warfare 2, people will go back to CS. And Then there's Half-Life 2 and Left 4 Dead. These guys push L4D faster because they have the time, they take thier time with Half-Life stuff because they have the money to. They played it smart and didn't take a tremendous part in this stupid arms race.
Then we have guys like Capy, Nippon Ichi, XSEED and more on the rise because like the others I've mentioned, its not about the race, its about knowing your audience or finding them and spending smart. They have adapted to the conditions of this market and do not march down the same old high-end path.
And I think that you're right, but I find myself on the other side of the issue. I think the system could use a good implosion, then we can see where the pieces land, and rebuild something even better. You don't have to spend tons of money to make a good game; you just have to put thought into it.
On a side-note, someone said GTA4 and MW2 were innovative--that's just nonsense. They didn't do a damn thing new, they just took what they already had and tried to do it awesome!
Nope. GOOD iPhone games are the future. Slight difference.
Like any other human, I refuse the possibility of death. I refuse to consider a world without my favorite consoles, developpers and games. *sniffling, hugs a Jack Frost plushie* So I'll just go Memento and bury that article in the far corner of my memories.
We have seen similar things in movie industry - once the more purist of consumers witnessed the large budget, heavily fore-casted works of the evolving hollywood, there opened up more cottage industry market for the alternative film.
I would never want the game industry to fail and i don't think it will. But i would like things to shake up and market share shift some from epic, big business game productions to high quality, creative, smaller productions.
Are HUGE AAA titles going to be around forever? Probably not. Only a handful of studios have the capital and backing to keep up with the cost of development for ever faster and more powerful hardware/software. The closures you see are from small studios reaching beyond their means of sustaining that type of business model.
If we apply your logic to the movie industry, it would have been "dying" in 2004, and then again in 2005. But sales from last year are the highest in 5 years, and the revenue is the highest for at least 14 years.
In short; Fear mongering, Statistics-fail, etc etc.
And as far as layoffs and studio closure gloom and doom goes you completely miss the studios that opened or expanded even in spite of an economic recession. i.e. Insomniac, Atlus, Lightbox (Former Incognito devs)and hell THQ is building a studio in Montreal that will employ 400 people when its done.
Oh and using Capcom as an example of the faliure of the hit-driven industry? Besides Bionic Commando this is probably the most profitable period in Capcom's history. From Street Fighter 4 to Dead Rising almost every HD game they've made in the past 5 years has been commercial success. The fact that all those games have been a success completely validates them in the eyes of their share holders.
Finally: "Companies need to stop forcing industry standards and allow the market to set standards for itself." If you (the market) buy a blockbuster game the industry interprets that as saying the blockbuster game is a legit business model and I think the platform holders are smarter than you given them credit. Hasn't Sony been beating that "10 year" mantra to death since the beginning of the generation and Microsoft a little while ago stated that their is plenty more life in the 360. When corporate execs are saying stuff like that 4-5 years into a generation I'm inclined to believe it, also I don't seen anyone pining for the PS4 and Xbox 720.
He gave numbers to support his statements. The only numbers I'm seeing in your post are years, SF4, Factor 5, 360, xbox720, PS4, and 400 jobs. Other than that you're just saying that you disagree, which is fine, but you can't imply that he's wrong and then give no evidence, even shaky evidence.
And studios like Atlus appeal to very niche crowds, they have to do things intelligently just to stay above water. They don't wander too far outside the things they know already and do well, which just goes to show that they know they can't afford to take huge risks.
400 jobs are nothing in the grand scheme of things. It's barely a drop in the bucket compared to what was lost over the last year, over 11k jobs I believe he said.