Games in Crisis

1
Games in Crisis

• When an exponential curve meets a linear one

2
Games are a Commercial Artform

• My main interest design innovation and game
  culture
• In a commercial medium, design choices (and
  cultural response) are shaped by business
  pressures
• The game industry today is under severe pressure
• You can approach games from many vantage
  pointsbut today, Im going to talk about that
  pressure, and what it means for the medium
• as odd as it may seem to want to talk about art,
  and wind up talking about business. (But perhaps
  theyre inseparable in a commercial form.)

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Empirically Rapidly Increasing Development Costs
4
Theoretically Driven by Moores Law

• Machines get better quickly
• Processing power
• Display capabilities
• CD-ROMs permitted (and demanded) application
  bloattwo orders of magnitude over a few short
  years
• Today, art assets are the main cost drivermore
  polygons more cost and faster machines can
  push more polygons

5
From the field

• A Doom level took one man-day to build a Doom
  III level takes 2 man weeks.
• Tools not advancing as quickly as hardware
• Middleware doesnt always help (Spector not sure
  whether using the Unreal engine for Deus Ex
  actually saved him anything)

6
You have no choice

• Audience expectations
• No Indie game aesthetic
• Marketing demands
• Games often sold on basis of demo reel, not
  gameplay
• Distributors/retailers buy on the basis of look
• Graphic glitz acts as a first barrier gameplay
  may determine eventual sales, but you need a
  level of media quality to get there
• Feature list approach to marketing (particle
  effects, check)

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Demand for ever-increasing media drive by

• Narrowness of retail channel
• Most stores stock lt200 SKUs
• Thousands of games released yearly
• Typical shelf-life lt4 weeks
• Compressed sales vital to hold shelf space
• Industry belief that technology sells
• So your game has to take advantage of the latest

8
Empirically Sales increase too, but not as fast
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Theoretically Sales growth is a linear curve

• Increasing game penetration in the population as
  a whole
• Leisure time activities set as an adolescent,
  followed as you age
• Anyone whos been a teenager since 1982 has been
  exposed to games (thats why almost no one over
  35 plays gamesbut many 35 and under do)
• In 30 years, demographics of game players will
  match demographics of population as a whole
• Population growth (a few percent annuallyby
  comparison to doubling every 18 months)

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Average game loses more and more money.
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Caveats

• All numbers off the top of my head
• Not like Ive actually done any actual research
• Assumptions
• Unit price 40 throughout period gross margins
  of 50 COGs marketing equal to development
  cost (doubling investment)

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And its going to get worse

• Moores law drives increasing power of machines
• an exponential function
• Sales increase with penetration of games of games
  into population and size of population
• A linear function.

13
Market Implications

• Field more and more hit-driven
• Few hits have to carry 90 of games that lose
  money
• At any time, 80 of sales generated by top 10
  games

14
Implications for Publishers

• Industry consolidation
• The more titles you publish, the better your
  chance of having a hit to carry the firm
• Medium sized publishers disappearing (Interplay,
  Acclaim, Midway all in trouble)
• And even big publishers arent immune (Atari,
  VUG, Sony)
• All Games should be like Sports Games
• Minor annual updates, stable predictable
  development

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Implications for Publishers (cont)

• Desperate search for way to cut costs
• Overseas development (particularly for lower-cost
  titles)
• Pressure on developer margins
• Increasing use of middleware (but everything
  starts to look alike)
• Desperate search for way to alleviate risk
• Licenses
• Version Six in a franchise
• All games must be AAA titles
• No point unless you have a chance at a hit

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Theres no point in publishing a game that isnt
attached to a brand. --Edmond Sanctis, former
COO of Acclaim, speaking at Games Mobile
Entertainment conference
ltsnarkgt(Is there a reason Acclaim is now
threatened with NASDAQ delisting?)lt/snarkgt
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We always look for something unique and
innovative. --Tom Frisina, VP General
Manager, EA, speaking _at_E3
But dont you believe it. Tom is one of the good
guys, but they want checkbox innovationa
selling point to differentiate your game, but not
whole cloth innovation.
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Implications for Developers

• You wont sell a pitch unless the marketing
  weasels know how to sell the game
• RTS, FPS, RPG, action adventure, driving,
  sportsit had better slot into an established
  marketing category
• Innovation can be on the margins only
• Unless you are Will Wrightand EA tried to kill
  The Sims many times before it went gold

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Implications for Developers (cont)

• Virtually impossible to sell a title unless it
  is
• Based on a license, or
• Part of a franchise (Coasters of Might Magic)
• At best incrementally innovative

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Implications for Developers (cont)

• Margins are squeezed
• Impossible except for top tier developers to make
  a deal with royalty gt15 (of gross, not retail)
• Virtually impossible for advance to be recouped
• You live from contract to contract, and if you
  dont land the next deal, youre out of business
• Publishers increasingly willing to kill games
  even after substantial development (better to eat
  dev cost than throw good marketing dollars after
  bad)
• Publishers want every dollar on the
  discdevelopers rarely net anything from a deal
  (and often lose money)

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Implications for Developers (cont)

• It sucks to be an independent developer
• Very hard today to establish yourself as an id
• Increasingly being acquired by major publishers
• Harder to land deals at all
• Hard to land any deal that isnt attached to a
  license
• Even if you do an original title, publisher
  owns the IP

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Developer Responses?

• Kiss the whip that scourges youI really,
  truly, don't see how a license or previous game
  significantly limits the ability to introduce
  original GAMEPLAY elements Warren Spector
• AngerThe machinery of gaming has run amok An
  industry that was once the most innovative and
  exciting artistic field on the planet has become
  a morass of drudgery and imitation It is time
  for revolution!Designer X in the Scratchware
  Manifesto

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Developer Responses (cont)

• Desperate Search for Some Way Out
• At GDC huge crowds around IGF booth, at panels
  about online distribution, at the Experimental
  Gameplay Workshop
• One reason for the high interest in mobile games
  (despite scant revenues) Low budgets, short dev
  cycles, dont have to spend 3 years of your life
  on a fucking Scooby Doo game that will probably
  die at the software store anyway

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Why This is Bad

• Games industry was built on a ferment of
  creativity
• In PC games particularly, the most successful
  titles have generally been creative leaps
• SimCity
• Doom
• WarCraft/Command Conquer
• The Sims

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Why This is Bad (cont)

• Entertainment media get stale unless
  reinvigorated
• Role of independent music and film cheaper
  creative laboratories for the mainstream field
• Games industry has nothing comparable
• The comicization of gaming?
• Narrowing of field to superhero books narrowing
  of audience marginalization

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Ridiculous, Anyway

• Software is enormously plastic
• If you can imagine it, you can code it
• So are games
• Litterally hundreds of different game styles,
  many styles successful in paper games or older
  digital games that are no where seen in the
  market today
• Weve explored only a tiny portion of the
  possible in games
• Doubtless dozens of commercially feasible styles
  not yet discovered
• Innovative novels published every year, and
  thats a medium 300 years old
• And in the long term, youre better off
  developing your own IP than paying for someone
  elses

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Somethings going to blow

• Inexorable business forces--fuelled at least as
  much by the lack of imagination of publishers as
  their risk averseness--have nonetheless squeezed
  the range of the commercially possible down to a
  few hackneyed lines. Yet at the same time,
  developers have become far more aware of the
  potential, far more respectful of their own
  history and the promise it held, far more
  educated about the possibilities of design--and
  consequently far more frustrated at the narrowing
  paths into which their talents are channelled.
• A specter is haunting gaming--the specter of its
  own oblivion
• But gaming is young, and restless, and not ready
  to die.

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Possible Solutions?

• Conspiracy to keep budgets down
• Industry consolidation makes it possible
• Feasible so long as nobody squeals to the Feds
• Find another big source of revenue
• as the VCR did for film
• Bing Gordon at EA on subscription based games
  (Majestic, Earth Beyond, Sims Online, 130m
  down the rathole that is EA.com.)
• Mobile games?
• Online rental

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Possible Solutions (cont)

• Online distribution
• Working for puzzle games (RealArcade, Yahoo!
  Games, etc.--100m annual market now)
• Marketing a big problem not much review
  attention, no shelf exposure, rarely any
  substantial promotion budget
• Not many successes (except for MMGs in Korea)but
  maybe broadband solves this

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Possible Solutions (cont)

• Revival of shareware
• Broadband makes it feasible
• In its heyday, it wasnt that impressive Doom
  sold 150,000 units as shareware, 1.5m at retail
• Mods?
• Counterstrike, Desert Combat
• But no real business model (except pray for a hit
  and hope a publisher picks it up)

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Possible solutions (cont)

• Parallel distribution channel for independent
  games
• Analogous to indie music scene, art houses for
  film
• No obvious retail channel
• Indie movie music marketing largely tied to
  artist recognitionfew in game industry are known
• Audience aesthetic isnt there

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Possible Solutions (cont)

• Advergaming
• WildTangent thinks sotoo bad their games are
  imitative schlock
• Possible to do interesting work (e.g., GameLab)
• But its work for hire
• And not growing fast

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Possible Solutions (cont)

• Mobile games
• Nope Going to move up the same cost curve. 64k
  J2ME/BREW games today, 2MB Smartphone/Symbian
  games next year, and on
• But will be another profitable platform for
  publishers

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Possible Solutions (cont)

• Academia Not-for-profit sector
• Free grad student labormm, tasty
• Funding an issue
• Increasing interest in games for learning
• Increasing interest in game studies
• Increasing interest in vocational game
  development instruction
• Many IGF entries now from universities
• Hard to view this as the solution, but a hopeful
  development

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Possible Solutions What is Good Enough?

• Were close to cinematic quality video
• When you can do that, is there a point in doing
  it? (Photography leads to abstract art)
• These powerful machines mainly used to push
  pixelsrarely much innovation in processor
  intensive realmsgameplay still largely similar
  to 1985
• Maybe the trend tapers off?
• (But everyone is terrified of what it will take
  to support PS III.)

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Conclusion

• Developers are desperate to get out of the trap
• Were going to see a lot of innovation in the
  next few years
• Perhaps a concerted effort to build an indie
  games distribution channel
• Also experimentation with online-only (Laser
  Squad Nemesis?). Portal deals?
• Print-on-demand?
• Audience aesthetic as big of a problem as the
  business challenge

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References

• Interaction Digital Software Association
  www.idsa.org
• Games Art Design Culture blog
  www.costik.com/weblog
• Scratchware Manifesto www.the-underdogs.org/scrat
  ch.php
• Experimental Gameplay Workshop
  www.indiegamejam.com
• WildTangent www.wildtangent.com
• GameLab www.gmlb.com
• Digital Games Research Association www.digra.org
• Independent Games Festival www.indiegames.com