State of the Games Industry 2008

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People wonder why I'm so pessimistic about the games industry, and the reason is this: I worked in it for 8 years, and managed to ship one game. Pretty much everything else that I was working got canceled or indefinitely postponed. I probably could have shipped more if I was working somewhere like EA, where I would have probably shipped 10 to 14 titles in the same timeframe. Everyone's fingers is in everyone else's pie at EA. What it really comes down to essentially is that there are two ways to ship a title -- you can do it the Blizzard way or the EA way.

The Blizzard way involves looking at the game, polishing it, making sure it's fun to play, taking as much time needed to make a game, and basically ensuring sales through quality. The EA way involves looking at the game, making sales projections based on other games in the market, and doing a cost analysis based on projected returns versus estimated cost of development. If it's not a proven product, it gets axed. A game like World of Warcraft would never have been approved at EA, because EA's estimates sales figures of an MMO wouldn't have supported the cost of development of WoW. Sometimes a Blizzard game just isn't good enough, and at that point, there's not much you can do -- you can keep throwing people on it, but something is wrong at the core of it, something that can't be fixed, that can't ever translate into fun, and Blizzard would rather not ship than ship a game that tarnished the brand. In the same situation, EA would rather just put enough money into the game to make it shippable, ship the unfun game and hope to recoup the development costs in the initial release.

Blizzard took a huge risk in developing World of Warcraft; it was then, and still is, the most expensive project in the history of Blizzard, and involved huge upfront infrastructure costs. These kinds of costs are what the risk-averse shy away from; publishers want games that recoup their costs quickly -- every game must make a profit. World of Warcraft was not profitable right away; I estimate that they were losing money for the first year or two they were in operation, but now at 10 million subscribers, there's no question that they're turning a profit every month that likely surpasses the original development cost of World of Warcraft. WoW has pretty much taken over the hardcore game market on the computer, so almost all efforts now concentrate on casual games and console games. The funny thing is, if you ask any of the developers who worked on World of Warcraft, they will all tell you that they never could have predicted the number of subscribers they have today -- the expectation was half a million, maybe one million at most, certainly not ten times that number.

Rather than taking risks, more companies are trying to do it the much safer EA Way,by running cost analysis, predicting their hits, and canceling the rest. This is what happens when business decisions come ahead of gameplay decisions.

A recent casualty of this method of thinking SCi, the parent company of Eidos (of Tomb Raider fame), who is restructuring, canceling 14 projects, and bringing their staff down to 800 people, losing 25% of their workforce.

"To get SCi on track we have to act rapidly and effect change quickly. We must allow the world-class people that we have within the Group to focus on strong, profitable titles which will create the value our shareholders deserve."

Of course any time you've got layoffs, combined with focusing on profitable titles, it sends one message throughout the games industry: the company is up for sale, and it's time to make the books reflect the offer they hope to get.

I don't see a bright future for the Games Industry, because it's becoming so business like, and personally I think it's likely that what we're going to see is a lot more franchised titles from here on out; forget innovative titles like Katamari Damacy, and while I love Zelda games as much as the next person, I don't want everything to be "Link's Crossbow Training" or Sim(something). The number of original titles goes down, while the number of franchised titles goes up, in a trend similar to that of the failing movie industry.

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An interesting post Michael. As a former WoW addict, it is sad to think that such games may be few and far between in the future as game companies become less and less prepared to take such (apparent) risks. The game industry, like many others, has become commoditized (new word?) where overall quality and user engagement are no longer important-- it's a simple formula-based assessment of whether a game can return a preset level of profit based on the projected sales.

And the saddest part of all is that kids of today no longer understand or appreciate good games and unknowingly perpetuate the problem by buying up all the crap. Unless there is some real innovation in the game industry, and soon, I fear it will fall further into an ever downward spiral.

Cheers; P.

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