Tuesday, 26 February 2013

How the Next Generation Could Kill Gaming (as we know it)

Back in the 1980s, when I started gaming, it took a few people perhaps a few weeks to make a good game. Even the mighty Elite - the first proper 3D game and arguably the first proper open-world game - took two guys a few months to put together. A few years later, during the 16-bit era of the Commodore Amiga, SNES and Megadrive (Genesis for you American types), this had increased to teams of a dozen or so taking a few months to a year, tops, to put together a game. The gaming industry was in the good health, with the biggest mega-hits making tens of millions of dollars but even a game selling just a few thousand copies could still turn a profit.

How times have changed. Today, it takes teams of several dozen people anything from two to six years to make a game, with budgets in the tens of millions of dollars. Dozens of game development studios have closed over the course of the last generation of gaming (which began in 2005 with the release of the X-Box 360), in many cases despite selling millions of copies of games. It's no longer enough to be successful. Now you have to produce a fast-selling megahit from day one, otherwise your company might go bust.

It's been a disturbing period. Several of my favourite games of all time are Hostile Waters, Anachronox, Planescape: Torment, Freespace 2 and the Homeworld trilogy, all moderately-budgeted games that sold reasonably well on release but nothing to write home about. Those games simply would not exist in today's publisher-driven marketplace. The entire midlist of gaming - those games that are well above the indie level in terms of both cost and sales but below the mega-hits - has simply evaporated.

A good example of this is Rockstar's May 2012 release Max Payne 3. This game cost an estimated $105 million, not including marketing. The game was required to sell 3 million copies at full price in its first few weeks on sale to break even, which it rather spectacularly failed to do: the game 'only' shifted 440,000 copies in its first month. It is questionable if the game has broken even yet, and if it has it's only a moderate success, especially by Rockstar's standards. Their previous game Red Dead Redemption (released in 2010 had sold 8 million copies since release and, before that, Grand Theft Auto IV (2008) has sold more than 25 million.

Rockstar obviously aren't going bust over this disappointment. Their latest game, Grand Theft Auto V, launches in September and will likely be the biggest-selling game of the year (this year's Call of Duty title notwithstanding). However, with a much vaster gaming environment that GTA4 and with three major protagonists to voice and write rather than one, GTA5's budget is likely considerably larger than even the $100 million of its predecessor.

Last week, Sony announced the existence of the PlayStation 4 console, due for release later this year (probably November). In April Microsoft are expected to announce the release - either this Christmas or early next year - of their successor to the X-Box 360. Both of the new consoles are going to be more powerful and more impressive than their forebears. The PS4 has 16 times the memory and a vastly more powerful graphics card and CPU than its forebear. Crucially, it's also based around off-the-shelf PC hardware rather than dedicated technology, keeping costs down and making games development and porting between the platforms much easier. Nevertheless, the arrival of the new consoles is hugely problematic for studios. Games will now require more advanced graphics and even more resources to make them look as good as possible. Some gaming companies are already warning that budgets for the next generation of gaming could balloon out of control and leave very few companies and franchises standing. The massive popularity of Facebook games and mobile games is also begging the question: do gamers really want even moar graphics? Sony desperately need the PS4 to be a huge hit to help arrest their company's decade-long decline, but it's far from certain it will be.

Some companies are already taking avoiding action. Obsidian Entertainment are developing their new epic fantasy RPG, Project Eternity, for PC and Mac alone (but don't be surprised to see mobile/tablet versions later on), forsaking the console race altogether. Project Eternity is a game using hand-drawn 2D artwork for its background and 3D character models. This keeps costs and development time down immensely. The game was greenlit (via the Kickstarter service) only in October, but is expected to ship in early 2014, after less than 18 months of development. The Dragon Age games, on the other hand, are full 3D titles, which each item in the game taking anything from hours to weeks to create and texture. The original Dragon Age title took about five years to make, with its sequel re-using many of its assets. Dragon Age III, due in 2014, will have taken about three years to develop. All three games had budgets comfortably in the tens of millions, whilst Project Eternity's budget is only about $5 million ($4.1 million or so of that from Kickstarter). As the above screenshot shows, Project Eternity is still a good-looking game by any measure. Obsidian have simply been a lot more careful about where to put its money and to minimise its risks.

If a lot more companies take steps like these, the next generation could be a fruitful time for innovation in gaming. However, the blunt forces approach taken so far by Sony, and likely by Microsoft as well, is not encouraging. If sales of the new consoles and their games are down whilst budgets continue to escalate past the point of sustainability, we could see the entire notion of a video game console disappear altogether. Of course, that may not entirely be a bad thing if it results in more rewarding and original games appearing on other platforms. As always, time will tell.


masalam said...

What are your thoughts about procedural approaches and procedural 3D engines like Outerra, especially with regards to the increasing amount of content needed for the games?

Alex said...

I was looking at the cinema vs video game markets in North America earlier on today in light of all the publicity over the Oscars. Game revenue dropped by 22% from 2011 to 2012 but standing at $13.3bn it comfortably eclipsed the cinema take of $10.8bn.

That obviously doesn't include the DVD/BD sales but equally it doesn't factor in 2nd hand game sales either.

With an average age of 35 for a gamer, against 25-39 for movies, I find it baffling how games are still seen as niche and treated as such by mainstream media. You don't even get a consumer electronics show on the BBC (apart from Click), and there's never been a gamer show targeted at adults. It's baffling, we have to resort to podcasts etc.

But back on topic; in the context of the value of the market, a $100m budget isn't excessive. The real issue lies in the funding model. Basically the proceeds from your current release fund your development work on the next title. There isn't enough cash floating around in the industry to support commercial failures. Which is odd, because the money must be going somewhere.

And then there's the second hand market, which in most ways is fairly similar to piracy, inasmuch as publishers get to money but the punter gets a game. Much less prevalent in the film industry.

Anyway, apologies for the rambling comment :)

WordTipping said...

I doubt the next generation will kill gaming simply because there are so many viable alternates to consoles. I think consoles as we know them could be dead in this generation without some major changes to their strategy.

I think you are absolutely correct in pointing out how inefficient game developers are in regards to re-using assets. It always amazes me how often game developers re-invent the wheel for every game that is released. I think better asset re-use and better cross team tools would help reduce costs.

That aside, I think the current renaissance in indie gaming is going to be the wave of the future. Platforms such as Steam, Humble Bundle, Android, and iOS are giving smaller developers a way to release reasonable priced games that only need to sell modest numbers to be profitable. That model simply doesn't work in the retail space w/ consoles.

So while consoles may die, I think the proliferation of powerful and connected devices will provide fertile ground for legions of game developers.

Brett said...

I think the publishers are trying to circumvent the $50-60 Standard Price-point in response to these trends, without actually increasing the obvious sticker price - which would raise the wrath of gamers, or worse, lead to greater video game piracy. It's why you're seeing all kinds of add-ons to games, like DLC and micro-transactions.

This is a good essay, Wert, and I particularly like those links you provided (although the one with game production costs seems unfortunate in light of the Wii U's softer than expected launch). The Dead Space 3 one was a particular eye-opener, and the sheer unreality of the amount of sales needed to continue the franchise makes me wonder if that was just the publisher's way of letting everyone know that there won't be a Dead Space 4 except under some very unlikely circumstances. As is, the ending makes it unlikely anyways.

@Alex Walsh

But back on topic; in the context of the value of the market, a $100m budget isn't excessive. The real issue lies in the funding model. Basically the proceeds from your current release fund your development work on the next title. There isn't enough cash floating around in the industry to support commercial failures. Which is odd, because the money must be going somewhere.

I'm not sure what the alternative would be, aside from developers big enough to fund multiple AAA games at the same time and use the successes to pay for the losses. We've already seen some of that with the mergers and acquisitions, like EA and Activision-Blizzard.

The film industry tends to have an easier time with these kinds of budgets, simply because they have more potential revenue streams. Imagine if mega-blockbuster films had to support themselves just off of the box office proceeds remitted to the studio-distributor - they'd be in the exact same boat as the video game industry right now, with the "mid-list" films dying off under the weight of marketing and production costs.

Adam Whitehead said...

An interesting point to this is the lack of longevity to games versus films. Films made 70 or 80 or even 100 years ago are still making money. Games, particularly console games, released even 10 years ago aren't making any money at all. Recently that's changed with iOS reissues of games like GTA3 and Vice City, and re-releasing classic titles via X-Box Live and PSN, but for a long time games had a very limited shelf-life compared to other forms of entertainment.

GoG and Steam have also shown the value of taking older games, making sure they work with current systems, and re-releasing them so they can continue to make money (as SYSTEM SHOCK 2's recent re-release shows, or Double Fine's belated port of BRUTAL LEGEND to PC, which came out today).

The idea of games making money over a long period of time seems quite alien to the industry. Sega originally declared that ALPHA PROTOCOL had bombed, for example, but apparently it quite quietly recently crossed over into being profitable via online sales, to Sega's surprise (and apparently Obsidian think it's been successful enough to revisit in the future).

Mike said...

I don't have alot of input on this subject, as I'm relatively new to the console gaming market.

But, I am/was a PC gamer for years. And, the same theory (Different reasons) that PC gaming was going to die.

And yet, it's still around. I think the market just fluctuates. I, for one, love my console. It's also a easy platform/delivery for great indie games. (Eg - Shadow of the Ninja, Limbo, Journey, etc)

Anonymous said...

Steam has changed the way I purchase games. It's rare that buy a game at full price anymore when I can buy top games for ten dollars on steam less than a year after release. I have more games than I can play for the price of a single just released game.

zs.gothpunk said...

I would't dig a grave for the consols. PS4 is targeting a consumer segment that has the money to afford it. Playing games with elaborate hd graphics is only one feature of the console, many use it to consume other media types (music, film, etc). And don't forget the classic reasons behind the console, if you don't want to build your PC part by part or don't want to install your games and update your drivers regularly, it's still an alternative.

Eric and the others highlighted other ideas that I think might increace profitability as well. I believe that big publishers are more responsible for the trends you mentioned compared to the consoles. However, the alternatives are there and these alternatives are thousands: mobile gaming, FB/flash/html5 games, indie games, good old games, etc. Now you have many options to play, not only the floppy disks or casettes of the 80-90s. Don't treat the consoles as living in a vacuum.

Anonymous said...

Sony desperately need the PS4 to be a huge hit to help arrest their company's decade-long decline, but it's far from certain it will be.

Might not have been such a terrible decline if they'd bothered to put backwards compatibility on the PS3. *grumble* This is just my opinion, granted, but I think Sony's downfall really started picking up speed when it became painfully obvious that they didn't give a rat's behind about the fnbase that had gotten them where they were, and instead put their focus only on getting new fans. Sure, it's great that they give people the option of purchasing virtual copies of older games now, but I can't say that I feel particularly inclined to spend money repurchasing games that I already have working copies of. That's why I didn't buy a PS3. That's why a lot of people I know didn't buy a PS3, in spite of spending years as Sony fanboys prior to the release of that system.

As other people commented, the increase of indie and virtual games has certainly played its downfall in console gaming too, which I'm not really happy about. Personally, I like my consoles. I like being able to sit comfortably on the couch to play my games instead of having to sit at my computer all the time. I like having a system that isn't hooked to the Internet and bombarding my with updates and ads every 10 minutes. I know I'm a bit of an oddity where this is concerned... or at least the marketing teams for gaming companies tell me so, because everything these days tells me that I don't matter unless I want to publish my gaming achievments on Facebook. :/

I hope consoles don't die. So much of my gaming career has been on them, they're comfortable things as well as nostalgic. But to me, they're getting to be rather like cell phones. A cell phone is no longer just a thing you can make calls on while you're away from home. It's an MP3 player, it's a pocket computer, it's a movie machine. Ditto new gaming consoles. Gone are the days when your console just lets you play the games you want to play. Now they have to let you watch movies, listen to music, all that stuff that I have no interest in using a gaming console for, and I don't doubt that plays a part in jacking up the price of both the system and the games. It's not enough just to play the game anymore. And that makes me kind of sad.

Unknown said...

Vintage games are making a comeback. Gamestop is preparing to start selling old 8-bit and later consoles and games again as they see a market for it.

I don't see next gen. killing gaming, I do see companies downsizing and filing for bankruptcy, if they do not meet their sales goals after putting a pile of money to fund the project.

Another issue that may hamper the market is the inability to play used games on the new consoles. PS has already stated they will not allow used games to work on the PS4. As far as I know, XBOX has yet to make that statement. Used games may hurt some companies, but if there is downloadable content, then they should be able to survive.

Easiest way to still make money on used games it to have players purchase a key. Most games now have you enter a key when you purchase it so, why not generate keys for a low price and then let the second hand game generate revenue for the publisher. You get die hard gamers buying DLC all the time.

I do see a trend of making the game free and the content (constantly updated) purchased for a small fee.