Games in Crisis

When an exponential curve meets a linear one

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.)

Empirically: Rapidly Increasing Development Costs

$0.0$0.5$1.0$1.5$2.0$2.5$3.0$3.5$4.0$4.5$5.0

Millions

1985 1995 2003

Budget

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

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)

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…)

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

Empirically: Sales increase too, but not as fast

0

20,000

40,000

60,000

80,000

100,000

1985 1990 1995 2000 2003

Median unitsales

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)

…Average game loses more and more money….

$3,000,000$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0$500,000

$1,000,000

1985 1990 1995 2000 2003

Profit/Loss

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)

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.

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

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

Implications for Publishers (con’t)

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”

“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>

“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.

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

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

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)

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

Developer Responses?

1. 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

2. 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

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

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

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

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

“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 oblivionBut gaming is young, and restless, and not ready to die.

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

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

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)

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

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

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

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

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….)

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

References

Entertainment Software Association: www.theesa.comGames * Art * Design * Culture blog: www.costik.com/weblogScratchware Manifesto: www.the-underdogs.org/scratch.phpExperimental Gameplay Workshop: www.indiegamejam.comWildTangent: www.wildtangent.comGameLab: www.gmlb.comDigital Games Research Association: www.digra.orgIndependent Games Festival: www.indiegames.com