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Financial Issues May Force Changes On Games Industry 246

Posted by Soulskill
from the go-go-gadget-indies dept.
krou writes "According to comments made at the Edinburgh Interactive conference, operating costs of making games are spiraling upwards, and there has been 'significant disruption' to the games industry's business model. Games are getting much bigger and taking longer to develop, the console market is fragmented, and the cost of licensing intellectual property has gone up. All of this, says Edward Williams from BMO Capital Markets, means that 'For Western publishers, profitability hasn't grown at all in the past few years and that's before we take 2009 into account.' Recent figures suggest game sales have fallen 29% over the last 12 months. While westerners still relied on putting games on DVDs and selling them through retail channels, 'Chinese developers focused primarily on the PC market and used direct download, rather than retail stores, to get games to consumers,' and the lack of console users 'meant developers there did not have to pay royalties to console makers.' Peter Moore of EA Sports said that significant changes will come in the future, particularly in electronic purchasing of games."
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Financial Issues May Force Changes On Games Industry

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  • Not suprising (Score:4, Interesting)

    by dbIII (701233) on Sunday August 16, 2009 @04:33AM (#29081709)
    The last financial crisis killed Loki Games even though they were on track with their financial plans.
  • by KDR_11k (778916) on Sunday August 16, 2009 @04:36AM (#29081721)

    Many people are apparently buying wii games at random, the effect being that most of the games for the wii are barely playable.

    The data actually shows that sales are MORE concentrated on the Wii, most sales go to an even smaller number of games than usual (80% sales on 14% games, the usual values are 80-20). The few shovelware titles that managed breakthroughs did so because they did something people really wanted. AFAIK the sales of the shovelware are mostly really low and the market for it is so oversaturated (the developer of Carnival Games, a million-selling minigame collection said they wouldn't stand a chance in today's Wii market... yet they kept throwing money at more shovelware) that I wouldn't be surprised if they failed to sell enough to break even despite their low dev costs.

    The whole situation has made third parties run around like headless chickens, only able to clone what others succeeded with and not realizing that they could at least clone games from other consoles instead of only what was released on the Wii. As it is they keep cloning a very small pool of games with no understanding of why the original game worked in first place and then act surprised as the result bombs. EA's Peter Moore seemed to have a recent realization of how to sell Wii games, namely thinking about what the customer demands from a game of that type and then dealing with those demands instead of just taking an existing formula (that was probably developed with those customer demands even if it was by accident and so long ago that noone remembers what exactly happened). Maybe it was triggered by Wii Fit where everybody could immediately understand why a customer would buy Wii Fit: Because they wanted to lose weight! By knowing the customer demands they were able to make their own fitness games that worked. If you don't understand WHY something was done you probably won't be successful at copying it.

  • by KDR_11k (778916) on Sunday August 16, 2009 @04:56AM (#29081795)

    Their main commodities don't get easier to reproduce but they are demanded less by customers. Most if not all core values of gaming have overshot the majority of customers, i.e. reached the point where they offer more than the customer demands. The big publishers may be better at driving these values but since they've overshot a smaller company can come along, make a game with lower core market values than the big guys do and still not be too low for the customer's demands so the big guy just spent a whole lot of money on something that failed to give him a competitive advantage. Meanwhile some companies find values that were traditionally ignored but are undershooting the customer (i.e. not up to the standard the customer would like and improvements are much appreciated) and improve them, resulting in a MASSIVE advantage. This is a disruption (actual business term) and it usually ends with the incumbents being driven out of the market while the newcomer becomes the new master.

  • by Anonymous Coward on Sunday August 16, 2009 @05:25AM (#29081853)

    Why can't anyone be satisfied with a flat profit of several billion dollars a year every year for 10 years?

    Someone explain capitalism to me. If I ran my own business and I made 1 million dollars last year, and only $900,000 this year....well I just pocketed $900,000.

    If a big company does the same, they go bankrupt.

    Explain.

  • Re:Cost (Score:4, Interesting)

    by KDR_11k (778916) on Sunday August 16, 2009 @05:29AM (#29081873)

    One glaring exception would be Wii Fit, depending on whether you want to count that as a pure game or not.

    I think it's an important one. Wii Fit isn't just a game that manages to sell stupidly well without pricedrops a long time after its release and even sells consoles too, it's also a game that would be impossible to make online-only because of the balance board. As much as game publishers seem to love the idea of something like OnLive where you basically subscribe to a gaming broadcast Wii Fit would be a killer app against it. Peripherials can't be downloaded and Wii Fit cannot be done without the balance board (there are other fitness games but AFAIK they all come with at least one peripherial to get more data about your body movements). OnLive's promise of playing all games without upgrades is made impossible by games like Wii Fit.

  • Re:ARRRGH (Score:2, Interesting)

    by KDR_11k (778916) on Sunday August 16, 2009 @05:47AM (#29081941)

    Opera just freezes the page the way it was when you navigate away, that said I'm still using the old Slashdot interface so comments go on a separate page anyway.

  • Re:Cost (Score:3, Interesting)

    by Stevecrox (962208) on Sunday August 16, 2009 @06:32AM (#29082071) Journal
    I've been doing a similar sort thing with the PS3, when inFamous came out it was £49.99 in the shops. Its only been a few months but the games £26.99 now and if you get it second hand I paid £17. The price difference is extreme enough that a 3/4 month delay on games is really worth it. Plus you get a much more realistic opinion of the game (don't trust critics myself).
  • by bmatt17 (1494941) on Sunday August 16, 2009 @07:09AM (#29082173)
    "The big budget phenomena has been the very thing that's lowering my enjoyment of games. IMHO, the obsession with graphics, sequels/IP and marketing (all big budget things) has detracted from the biggest part of games: gameplay."

    I don't think that's quite the case. There have been some exceptional games released that have both excellent gameplay and great graphics. Call of Duty, Bioshock, Mass Effect, Dragon Age is looking to be awesome, the list of great games really goes on and on.

    What I have a problem with is the games that don't have cutting edge graphics and great gameplay yet still cost the same. $60 for a AAA title I have no problem spending. $60 for the latest movie tie in or just average game I refuse to buy. And will pick it up used for half the cost if I want to play it. I really think that games should be released in different pricing tiers. For example the new Katimari for PS3 that's coming out would be fun and worth buying new for 20-30 bucks, but not a good deal for 50 or 60 when compared to Uncharted, Gears of War etc. If publishers would release these average games at a lower price point I would buy a lot of them new. As it is, most games aren't worth the price of admission and as such instead of the publisher/developer getting $30-40 of my money gamestop gets it.

  • This is why the Wii is so popular. And as technology keeps getting better, it becomes easier and easier for independent developers to produce graphics, game play, and complexity that are passable

    But it still remains hard for independent developers to meet the minimum bar that Nintendo and Sony have set. For one thing, Nintendo is still openly hostile [warioworld.com] to a developer preparing its first title:

    We typically look for companies that are established game developers, or individuals with game industry experience. The authorization for Wii/WiiWare or Nintendo DS will be based upon your relevant game industry experience.

    We require that companies are working from secure business offices. Home offices are not considered secure locations.

  • by superphysics (1619033) on Sunday August 16, 2009 @09:14AM (#29082725) Homepage
    Actually, I happen to live in one of the countries I mentioned, and I happen to be involved in the related circles. I can tell for certain that all IT companies actually come back over and over again to these 'low cost' outsourcing centres. What surprises me is that no game developers ever do...
  • by MrSands (1605441) on Sunday August 16, 2009 @10:34AM (#29083193) Journal
    Go play them then but don't assume every one wants the same thing as you and don't live in the illusion that simplistic game play can cut it for the mass market today. When I was younger, tetris, pacman, mario, sonic etc. were all fun, very fun for me to play in fact. However, simplistic games can only go so far. Now for my serious money ($50+AUD) I expect a great story, excellent voice acting (this is actually very important, voice acting can ruin a game), sound effects and then also great game play and top notch graphics. Great gameplay alone doesn't cut it for me anymore. A game without a story isn't worth the time for me, a great story needs great dialog and a game with bad voice acting no matter how much it excels in other areas can be terrible. It's not like before where good gameplay alone is enough. Back then game developers only needed programmers and maybe a background musician. Now games need everything else and that means they need to hire not just programmers but also writers, actors, musicians (midi music doesn't cut it anymore). That increases the cost of the game, but it also provides jobs. Now it would be great if all game developers can make great games. However that's unrealistic. Just like everything that involves creativity, for every good work it is preceded by many bad works. It is experimentation and learning (take for example Too Human, they tried an innovative way to control the character - many found the controls bad, now many developers would know to steer clear of that control method or to improve it). Sure I will still play simplistic games, and will enjoy them. But those games better damn well be free (ie-Flash games) or cheap (iphone games -- less than $2AUD). But if the two types of games were mutually exclusive, I would prefer to have the big blockbuster games that breaks new ground (albeit expensive) rather than the cheap simplistic games (that are mostly a rehash of games already released). As for tie-ins and those kind of games, I personally don't enjoy them. But do I get pissed off that I think they are priced much more expensive than I think they should be? No, why? because I wouldn't buy them even if they were $5. But other people do enjoy them and do think they are worth the price they are being asked for (hence they buy them). Do I have the right to say that they should get rid of those games simply because I don't enjoy them? No I don't. And as for DRMs, if pirates didn't pirate there wouldn't be a need for them. Developers develop DRM because they have mouths to feed so more power to them.
  • by SerpentMage (13390) <ChristianHGross@yah o o .ca> on Sunday August 16, 2009 @10:45AM (#29083277)

    The problem is not content... The problem is fun...

    I grew up with defender, robotron and after a while I just stopped playing video games. I always wondered why? Then one day while in Redmond, Microsoft threw a gala and rented out an arcade for us. All games were free and we could play whatever we wanted.

    What happened? The games that promoted social interaction were red hot! This was around 99, and in those days there were only a few games. The one I played was car racing where six booths were side by side and you raced against your friends. It was a lot of fun...

    Then I looked around and I saw pools tables and other games where people got to interact. And that made me wonder if there are not two sorts of games;

    1) Time killers a'la pop-cap...
    2) Social games where the game are the people.

    It has been a while since I have been playing games, but I wonder are there games where the object is not to kill computers, but duel each other? I mean a sort of turf war, paint ball? Think of the success of Second Life... Completely social...

    Just wondering...

  • Re:Looks like (Score:2, Interesting)

    by Anonymous Coward on Sunday August 16, 2009 @03:59PM (#29085785)

    There's nothing ironic about it. It affects all platforms, PC or not. You lose more to piracy on PC than you do to royalties on a console title, this is just a plain fact. Our last game had a legit:pirated ratio of 1:50 last time we checked.

    By the way, this game had no DRM. There was no excuse to get a pirated version. The demo was 2/3rds of the full game, so there was also no excuse for people to pirate it to 'try before they buy' since most of the damn game was still available for free. Didn't stop it from getting pirated so hard that the amount of money we've gotten off the game is barely 4 digits. Want to know why all your 'indy' developers are dying? Because you can't sell a god damn game on the PC and make a profit because you have way too many people that think other people's work and property are something that they deserve to take.

    If we had been able to release it as an XBLA title or similiar, we would have made much more money. As it is, every pirated copy IS a lost sale and if all the pirates that stole the game (while using our server bandwidth and space) would have paid the measly price for it, we would have had the money to make more games. As it stands, we're barely solvent.

    posting anon because the piracy numbers are considered secret info or some other bullshit

  • by Eskarel (565631) on Sunday August 16, 2009 @09:44PM (#29087709)

    Do they really need all that?

    I personally find that while cool at first, voice actors just mean severely limited dialogue and character options. Certainly bad voice actors are horrible and can ruin a game, but I've played a lot of games with no voice acting at all, both new and old, which were perfectly acceptable. A great story does require dialogue, but it doesn't necessarily require voice actors.

    Musicians are really a fairly minor part of the equation as they don't get paid anywhere near as highly as actors and composers(who actually are expensive) have always been necessary. The mario music was as much the work of some creative composer as anything from a modern game, and hiring an orchestra to record something for you isn't really all that expensive in the grand scheme of things, there are plenty of musicians out there who just want to eat and can play well enough(though not write anything worthwhile) who are also cheap.

    Even graphics(which is where a lot of money goes) can be cut down a bit. The vast majority of players of any given game do not have a current state of the art gaming rig and so generally most of the top end features which took all the time aren't ever actually seen by anyone because they have to turn down the settings.

    DRM is also stupid. It's not stupid because game developers don't have a right to feed their families, it's stupid because it doesn't work, and realistically can never work. There are always more clever people trying to break any DRM scheme than there are people implementing it, and they can always dedicate more man hours. That's just the way it is. All DRM has ever done is inconvenience legitimate customers and prevent small incidental piracy. Preventing that small incidental piracy is perfectly fine, but the bar required to do so is far lower than the increasingly draconian DRM that companies are spending money on.

    The point of all of this is that companies have to do what makes them money. If the current model isn't working for them(and the article claims that it isn't) then changes have to be made. That probably means either increasing revenue or decreasing costs. While people do pay higher prices for games in other parts of the world than they do in the states(a new game is about $AU80-100 here in Australia), there probably isn't much wiggle room there. There's an argument to be made for selling more copies of cheaper games, but there's been no convincing arguments that this would actually create real profit increases. That essentially leave cutting costs, which basically means cutting some of the things they're talking about. That might not work either, gamers might not accept games without huge development budgets, but they're not accepting games with huge development budgets either so they can't keep going as they are.

    Most anecdotal evidence shows that some proportion of gamers prefer games which are fun to games which have flashy features. The Wii proves that such a market exists, though it may not translate onto more traditional platforms. Even if the number of sales does drop, even if it drops dramatically, if the per unit revenue increases faster than the sales drop, then they could still come out on top.

The superior man understands what is right; the inferior man understands what will sell. -- Confucius

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