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
points—but today, I’m 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
they’re inseparable in a commercial form.)

3. Empirically: Rapidly Increasing Development Costs

Millions
$5.0
$4.5
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
Budget
1985
1995
2003

4. Theoretically: Driven by Moore’s Law

Machines get better quickly
– Processing power
– Display capabilities
– CD-ROMs permitted (and demanded) application
bloat—two orders of magnitude over a few short
years
– Today, art assets are the main cost driver—more
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 doesn’t 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…)

7. Demand for ever-increasing media drive by…

Narrowness of retail channel
– Most stores stock <200 SKUs
– Thousands of games released yearly
– Typical shelf-life: <4 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

100,000
80,000
60,000
Median unit
sales
40,000
20,000
0
1985 1990 1995 2000 2003

9. 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 who’s been a teenager since 1982 has been
exposed to games (that’s why almost no one over 35 plays
games—but 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 annually—by
comparison to doubling every 18 months)

10. …Average game loses more and more money….

$1,000,000
$500,000
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
Profit/Loss
1985 1990 1995 2000 2003

11. Caveats

All numbers off the top of my head
Not like I’ve actually done any actual
research
Assumptions:
– Unit price = $40 throughout period; gross margins
of 50%; COGs + marketing equal to development
cost (doubling investment)

12. And it’s going to get worse…

Moore’s 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 aren’t immune (“Atari”, VUG,
Sony)
‘All Games should be like Sports Games’
–
Minor annual updates, stable & predictable development

15. Implications for Publishers (con’t)

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

16.

“There’s no point in publishing
a game that isn’t attached to a
brand.”
--Edmond Sanctis, former COO of
Acclaim, speaking at Games & Mobile
Entertainment conference
<snark>(Is there a reason Acclaim is now
dead?)</snark>

17.

“We always look for something
unique and innovative.”
--Tom Frisina, VP & General Manager, EA,
speaking @E3
…But don’t you believe it. Tom is one of the good guys, but
they want “checkbox innovation”—a selling point to
differentiate your game, but not whole cloth innovation.

18. Implications for Developers

You won’t sell a pitch unless the marketing
weasels know how to sell the game
– RTS, FPS, RPG, action adventure, driving,
sports—it had better slot into an established
marketing category
Innovation can be on the margins only
– Unless you are Will Wright—and EA tried to kill
The Sims many times before it went gold

19. Implications for Developers (con’t)

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

20. Implications for Developers (con’t)

Margins are squeezed
–
–
–
–
–
Impossible except for top tier developers to make a deal
with royalty >15% (of gross, not retail)
Virtually impossible for advance to be recouped
You live from contract to contract, and if you don’t land the
next deal, you’re 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 disc—developers rarely
net anything from a deal (and often lose money)

21. Implications for Developers (con’t)

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 isn’t attached to a
license
– Even if you do an ‘original’ title, publisher owns
the IP

22. Developer Responses?

1.
2.
Kiss the whip that scourges you:
“I really, truly, don't see how… a license or previous
game… significantly limits [the] ability to introduce
original GAMEPLAY elements…” –Warren Spector
Anger:
“The 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

23. Developer Responses (con’t)

3.
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, don’t have to spend 3 years of your
life on a fucking Scooby Doo game that will
probably die at the software store anyway

24. 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

25. Why This is Bad (con’t)

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

26. Ridiculous, Anyway

Software is enormously plastic
– If you can imagine it, you can code it
So are games
– Literally hundreds of different game styles, many styles
successful in paper games or older digital games that are
no where seen in the market today
We’ve 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 that’s a medium
~300 years old
…And in the long term, you’re better off developing your own IP
than paying for someone else’s

27. “Something’s 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.

28. Possible Solutions?

Conspiracy to keep budgets down
–
–
–
Industry consolidation makes it possible
Feasible so long as nobody squeals to the Feds
EA unlikely to go along
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

29. Possible Solutions (con’t)

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

30. Possible Solutions (con’t)

Revival of shareware
– Broadband makes it feasible
– In its heyday, it wasn’t 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)

31. Possible solutions (con’t)

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 recognition—few in game industry are
known
– Audience aesthetic isn’t there

32. Possible Solutions (con’t)

Advergaming
– WildTangent thinks so—too bad their games are
imitative schlock
– Possible to do interesting work (e.g., GameLab)
– But it’s work for hire
– And not growing fast

33. Possible Solutions (con’t)

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

34. Possible Solutions (con’t)

Academia & Not-for-profit sector
–
–
–
–
–
–
–
Free grad student labor—mm, tasty
Funding an issue
Increasing interest in ‘games for learning’ (Serious Games
Summit)
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

35. Possible Solutions: What is “Good Enough”?

We’re 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
pixels—rarely much innovation in processor
intensive realms—gameplay still largely similar to
1985
Maybe the trend tapers off?
(But everyone is terrified of what it will take to
support PS III….)

36. Conclusion

Developers are desperate to get out of the trap…
We’re 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

37. References

Entertainment Software Association: www.theesa.com
Games * Art * Design * Culture blog:
www.costik.com/weblog
Scratchware Manifesto: www.theunderdogs.org/scratch.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