The End of the Console Wars
In 1983, the game market crashed. I doubt I need to delve deeply into what happened, but suffice it to say that the first generation of consoles was over, and from the ashes of that collapse came the basic form of our current gaming industry. Nintendo released the NES/Famicom soon after the crash, and Sega soon followed with the Master System, initiating the console wars and the 8-bit era of gaming simultaneously. While Sega itself is no longer a player in consoles, and indeed if news be believed is in difficult financial shape, Sony and Microsoft -two of the world's largest corporations- are competing with Nintendo for the console market.
Make no mistake, some argue over whether or not gaming has become "mainstream," but in my opinion, ever since the likes of Microsoft and Sony debuted their own consoles, that argument was settled; these corporations are sprawling and massive, with literally hundreds of thousands of employees the world over, and any argument against the "mainstream" status of games is drowned by sheer numbers and resources.
Currently, the WiiU is set to launch, and Microsoft's plans for its next-generation console have been leaked to the web. Whether this was done intentionally by Microsoft after E3 to take attention from the WiiU is a matter of opinion, but suffice it to say, the next generation of console gaming is coming. And it is certain to be the last, for the cost of the video game is simply too high.
Recently, EA games executive Frank Gibeau said of the Dead Space franchise: "In general we're thinking about how we make this a more broadly appealing franchise, because ultimately you need to get to audience sizes of around five million to really continue to invest in an IP like Dead Space." Meaning, that is the forthcoming Dead Space 3 does not sell around five million copies, EA will rethink investing in the games. Let me put this into perspective for you, because five million is a big number. At $60 USD each, the game will gross $300 million dollars, that is about the same as the 2008 blockbuster film Iron Man grossed at the US box office. As of march last year, SquareEnix had claimed to have shipped five million copies of Final Fantasy XIII worldwide, while the so-called "game of the year" in 2009: Batman: Arkham Asylum sold well over three million in its first six months of release. Legend of Zelda: A Link to the Past while still on the SNES sold 4.61 million copies worldwide. I am not a fan of hyperbole, but please, try to think of a game that has had a better reception or is more widely respected than A Link to the Past. It is just simply not possible, even after twenty years, it is more rare to see a "top-ten of all time" list that omits A Link to the Past than one that contains it.
Arguments can be made that in the intervening years, consoles and computers capable of games like Dead Space are more common, thus higher sales are expected, and this is true. However, the sheer audacity of the statement Mr. Gilbeau remains; that EA is -in a way- holding its own franchise as a hostage to its fans at a ransom of $300 million USD, eclipsing even Arkham Asylum by at least one million sales. This cost -as some have called it: "excess"- is due to several factors, but the two in my opinion that stand out are the cost of production and the cost of administration.
As technology evolves, the cost of making a game like A Link to the Past diminishes. Indeed, any triple-A game developer could make what is essentially a clone of that game in less than a month, at a cost that is a fraction of the original 1990 production. But, instead of reducing the costs of production, the industry instead decided to increase production costs of games, not just the actual costs in dollar amounts, but also the costs relative to older generations of gaming, adjusted for inflation. These extra funds derived from a business plan that one could charitably call "aggressive," and more accurately call "insane." Essentially, these business plans call for a veritable Fibonacci Sequence of expansion in the market, and while the market could sustain aggressive expansion throughout the 1990s and 2000s, the predominance of the console is reaching a head; it is peaking, and these models are quickly becoming unsustainable. The major issue is not one of console sales, but rather developers failing to account for a slowing in console sales when making projections for profits, budgeting new titles, and deciding executive pay and marketing dollars. By intensely pushing these costs forward, they place themselves off balance for any downturn in sales, thus making them, and their companies, vulnerable to outside economic forces.
The book of James chapter 5, verse 5 comes to mind: "You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter." [NIV]
Well, perhaps that is a bit too dramatic, but it gets my point across: that the excess of the industry brings it into the realm of the moribund. It is certainly a possibility that we could see another crash in the industry like in 1983, but what form this "crash" could take is anyone's guess. Suffice it to say though, that in order to avoid such a crash, steps must need to be taken, including a reduction of production investments, marketing funds, and executive pay. With the goal of allowing the company to continue to produce quality games even during a downturn of console sales and digital distribution.
If another crash were to occur, it would certainly mean the end of the console as we know it. Home Computer platforms like Steam are becoming more and more popular, with fewer and fewer titles being exclusive to one console or another. This current generation has produced no clear winner, with Wii and Xbox sales on top, but Sony boasting the most powerful hardware and functionality. In the last generation, Microsoft proper had to bail out the Xbox console, because of lagging sales, until a certain FPS game -exclusive to the console, because Microsoft had purchased the developer- came and almost single-handedly save the console. But even before that, both the Xbox and PS2 consoles had been marketed before their release as upgradable. A promise that proved to be for naught when the consoles saw production. The PS2 -in terms of sales and third-party support- was the winner-by-descision of the last generation. On top, but failing to give a knockout blow to Nintendo or Xbox, largely due to Microsoft's intense financial support of the platform, and Nintendo's keen development teams that released a slew of fantastic exclusive titles, not only Metroid, Zelda, and Smash Bros, but also games like Eternal Darkness and Resident Evil 4, which had nearly a year of exclusivity on the GameCube.
However, in this current generation, the exclusive title has become largely a thing of the past. Barring a few exceptions, the most popular titles are multi-platform, as well as available on PC. This is expounded by the prevalence of the First-Person and Third-Person Shooter in this generation, which almost invariably control much smoother on a home-computer platform, due to mouse input taking the place of an analogue stick for precise aiming. With companies like Steam offering accessibility to the majority of games without a console, and also -as a consequence- evading the console game price mark-ups, this makes the previous console generation's strategy of marking down the console price itself into a loss for the company, only to recover that loss in games sales, into a liability. While this strategy allowed the Playstation and PS2 to thrive, doing so now further weakens their position.
If one adds this change in the industry to the change in the world economy since 2008, we see that the current business models carried over from the prior generation are unsustainable. Made all the more so because of the single-minded fury with which the console and game industry is attempting to expand. As I said before, we are left at a breaking point, and what comes next is anyone's guess.
It is very likely that the WiiU will be Nintendo's final console, but this could actually work in Nintendo's favor. Take -for example- the launch of the Xbox 360, in doing so, Microsoft halted production of Xbox 1 games, and basically corralled developers into the 360 fold. This allowed the 360 to get a head start on the PS3, one which Sony is yet to overcome. But, if Microsoft goes ahead with its next-generation plans while applying this same strategy, things could work out very differently. If the cost of development for the nex-gen Xbox proves too high, developers could run for the WiiU and PS3, leaving Microsoft in a terrible position, unless it wishes to reimburse production costs to developers in advance of sales. If production costs for the new console are high, and Microsoft continues the policy of marking the console cost down hoping to recoup losses from game sales, this could leave them in a hole that not even the massive funds from Microsoft proper could pull them out of. These same arguments can be applied to Sony's next-generation console, but without the added benefit of Microsoft's cash-on-hand. Though, the PS2 did not suffer the same halting of development that the Xbox did, and it is unlikely that the PS3 will either.
In order for a new generation of consoles to be financially feasible, they must, above all else, reduce game development costs, not increase them. Just as the PSone greatly reduced production costs by eliminating the cartridge, the next generation must reduce production costs through technological advancement.
This, however, will not likely be the case. 2K games president Christoph Hartmann recently said: ". . .certain emotions can't be recreated. Recreating a Mission Impossible experience in gaming is easy; recreating emotions in Brokeback Mountain is going to be tough. . . Until games are photorealistic, it'll be very hard to open up to new genres. We can really only focus on action and shooter titles; those are suitable for consoles now." It is interesting Mr. Hartmann mentioned Brokeback Mountain, which is based on Annie Proulx's novella of the same name. Meaning that the emotions in Brokeback can be rendered in programs as ancient and limited as Notepad. The obvious hypocrisy of this statement aside, it shows the determined ignorance pervading the triple-A gaming industry today, and what will ultimately lead to a major change in the industry.
Now many may think me out-of-line for saying this, but I will say it anyway: these types of attitudes from gaming executives will lead to a major reconstruction of the industry, simply because these people -have by their own words- proven themselves incapable of understanding their own industry, let alone being leaders within it. Irrespective of outside market and economic factors, the reconstruction of the industry would be a necessity, and together with those factors only raises the stakes and the extent of that reconstruction.
Indeed, the first mention of Photorealism in gaming that I remember happened back in 2001, when Hideo Kojima gave an interview for PSM magazine. Shortly after the release of Metal Gear Solid 2 for the PS2, Mr. Kojima noted that: "games are quickly moving to realistic graphics, and when that is achieved, all that will be left for games to expand are the areas of gameplay and storytelling." [This is a paraphrase, as PSM folded and there is no online archive for interviews this old.] So, more than ten years ago, Mr. Kojima had already realized that what is needed is an emphasis on game play and story, not on realistic graphics. Though for others in the industry, the intention seems to be the opposite.
So, what does all this talk of photorealism have to do with consoles? The fact is that even next-gen consoles will not have photorealistic graphics, and the first platform to achieve the mark will likely be the PC, with its upgradable structure. With the erroneous push for photorealism comes the last nail in the coffin of the console, as console makers seem reluctant to make their products upgradable, fearing a loss in sales, even though they actually lose money on those sales. Here we have a logical fallacy from which there is no escape but an upgradable console, available at a similar price to a personal computer.
I think I will leave things there for this week, as this essay has run over-long in any event. Next week, I hope to talk about the Ouya console, and about my personal ideas for an ideal console. But for now, thank you for reading.
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