Entries from January 2008 ↓

Eight news stories 31.1

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Is the AAA games business doomed?

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The gold standard in the games industry is currently the AAA blockbuster console title. An investment of perhaps $10-20 million or even more from a big publisher on a big team over a couple of years. And the global marketing costs run into the millions as well. The result is games like Grand Theft Auto, Halo and Assassin’s Creed. Well crafted global best sellers. And they can make a lot of money. But often they don’t.

It could be argued that these games are actually a big part of what is wrong with the games industry:

  • They use up a disproportionate amount of the available development talent and finance.
  • They hold the focus of the media when, in fact, there is a lot more going on that doesn’t get the media attention it deserves.
  • They usually only appeal to a narrow demographic, thwarting the wider acceptance of gaming.
  • They are usually difficult, inaccessible, for a non gamer to get into.
  • Their genres and subject material are usually limited and intellectually and emotionally stunted. Let’s make another alien shooting game.
  • They are far, far too expensive for customers to buy. A factor of their high development costs, their limited appeal, their high risk and the large slice the platform holders take out of each one. Most games would still be too expensive at half the price.
  • They use the limiting distribution model of cardboard and plastic.
  • Usually they have no room for user generated and/or episodic content.

But now the winds of change are blowing through the industry. Nintendo, casual gaming, free MMOs, handhelds, social networking. All of these and more are changing the way the public look at games. And the industry, eventually, will have to follow the customer.

Quite simply a publisher will find that they can get a better return with less risk by not doing traditional AAA blockbusters. They will see that they can use their finance and development resources in ways that are better for their business.

The film industry learned this a long, long time ago. If you are going to invest a lot of money in a film make sure it appeals to a very wide audience. Don’t spend the big money on art house movies. We will follow suit and the current generation of AAA titles will be looked back at as an anomalous growing pain of the video gaming industry.

And less aliens will be shot.

The GTA IV hype machine

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For Microsoft this is their biggest play in this generation’s war against Sony. They paid a lot of money ($50 million?) to get several episodes of exclusive content for the Xbox 360 version of the game which gives them a great competitive advantage over the Sony Playstation PS3. A competitive advantage that could see former loyal Sony customers switch to Microsoft.

Rumours on Surfer Girl and NeoGAF seem to indicate that Microsoft are going to spend heavily, similar amounts to what was invested with Halo 3, just to market this exclusive content, which would be a first for the industry. It makes sense. If they drop the 360 console price and release a Halo 3 bundle at the same time the results would be seismic.

The launch of GTA IV (April 29th!) will be the biggest event ever in the video game industry and will set up the HD consoles (and especially the Xbox 360) for a massive Q4 this year. With many homes also owning a Wii for casual gaming there will be a huge range of purchasing options. This is going to hurt a lot of other (non gaming) businesses which are going to lose a big pile of revenue, especially in an economic downturn. Q4 2008 will be when the world finally wakes up to how massive video gaming is going to become. Bigger than film and television put together.

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Wii-itis

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It is inevitable really. The Wii gesture controller can involve far more athleticism in gameplay than the joypads of non gesture interface gaming platforms. Add to that the addictive quality of games that sometimes has people playing for longer than they ought. Then the competitive nature of gaming. Then older and less fit players not wanting to be shown up by younger generations. And you have a recipe for problems.

Of course people will learn as this becomes more of a part of popular culture. But in the meantime it is giving the popular press a field day for articles and has even led to the creation of websites  cataloguing people’s Wii stupidity. Imagine what is going to happen when there are a few million balance boards out there.

All this is good for the gaming industry. It has the real world talking about us. And the only negativity is people’s own stupidity. Which is a universal factor of life anyway.

Are we headed for free gaming?

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The internet allows so much competition for everything that prices drop to zero. When I was young rich kids had an Encyclopedia Britannica at home which cost a lot of money. Now the internet brings me Wikipedia which is bigger, better and free. We have become used to this, Google searches for free and gives me my office applications for free. I can blog for free, join online communities like MySpace and FaceBook for free, engage in forum debates for free and even trace my genealogy for free. And, most amazing of all, the providers of all this free stuff seem to often make a lot more money than the providers of the paid for stuff!

Video gaming has evolved gradually from stand alone devices to connected devices. The PC led the way, of course, but now the Xbox 360 (the best online console to date) only reveals it’s depth of capabilities if you are online with it. All the major platforms are now internet devices. With this comes the internet culture. And the internet culture is that free works best.

Now here is something very, very interesting. NPD released research in October looking at kids (aged 2 to 17) gaming habits in the USA. They found that 91% of their online gaming was free. This is, quite simply, a revolution.

As you would expect Electronic Arts are up to speed here. As we saw in yesterday’s news article on here with Battlefield Heroes being given away free online. Their philosophy is revealed in this article : “Riccitiello says the $31 billion gaming industry will suffer if it doesn’t start to reevaluate its business model. Game executives at Sony (SNE), Microsoft (MSFT) and Activision (ATVI) must answer some tough questions in the coming years, like how long they can expect consumers to pay $59 for a video game. Riccitiello predicts the model will be obsolete in the next decade.

“In the next five years, we’re all going to have to deal with this. In China, they’re giving games away for free,” he says. “People who benefit from the current model will need to embrace a new revenue model, or wait for others to disrupt.” As more publishers transition to making games for online distribution, Riccitiello says he expects EA will experiment with different pricing models.”

So what are the leading games in this free revolution? I have written in the past about Habbo Hotel for which over 86 million avatars have been created worldwide, there are over 8 million unique visitors to the Habbo websites around the world every month, with 75,000 avatars being created every day. MapleStory has a combined total of over 50 million subscriber accounts in all of its versions. And RuneScape has approximately nine million active free accounts and more than one million paid member accounts. These are immense numbers which prompted Gamasutra to make it their number one significant MMO moment of 2007.

So free gaming is now well past the thin end of the wedge stage. It has become by far the most rapidly expanding business model in gaming. We know that the $59 boxed game in high street retail is doomed, will free online gaming become the new industry standard? What will be interesting will be to see how the industry adapts, there are bound to be casualties. Most interesting will be the game console manufacturers. Offerings like Microsoft’s Xbox Live and Sony PS3 Home give them the flexibility to react well to virtually any business model.

Eight news stories 24.1

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  • Electronic Arts pushes ad-backed video games. This is important stuff, the business model for boxed PC games is broken because of piracy. So now EA are giving Battlefield Heroes away free online. There will be no retail version. Revenue will come from advertising and micro payments for in game enhancements. Already EA are making over a million dollars a month in South Korea by using this business model with FIFA. All this will not surprise people who read this article on Habbo Hotel. It is another nail in the coffin of high street game retail.

  • Another misinformed journalist has a go at computer games. This time Janice Turner of The Times who says that they are “Satan’s Sudoku, crack cocaine of the brain”. Which shows how little she knows. The Times was once a highly respected newspaper with judgements you could trust. Obviously not any more. What she doesn’t realise is that kids that play these games score higher on a whole range of tests, problem solving, hand eye co-ordination, social skills etc. By depriving her own children access to games she is putting them at a huge disadvantage to their peers.

  • World gears up for 100 Mbps broadband. Another nail in the coffin of distributing entertainment IP using plastic, cardboard and high street retail. Also, ultimately, a big step in the transition to server based games.

  • All sorts of sales records broken by video games industry during 2007 and over the festive season. Hardly surprising as interactive entertainment starts to show what it is really capable of. But this industry is still at it’s beginnings. It is still not mass popular culture, but it is getting there very quickly.

  • I am just recuperating from a surgical operation I had on Tuesday. So it is especially nice to see that surgeons can improve their performance using the Wii. This is the sort of positive thing that Janice Turner should be writing about.

  •  HD-DVD is losing the porn war. One reason that Betamax lost to VHS was that Sony were too prudish to allow porn on their format. Not this time round. However even if they do win over HD DVD it will be a hollow victory as distribution media become obsolete, replaced by online distribution.

  • GTAIV April 25th ? We all know it is going to be massive, but just how massive? Could this become looked back on as the historic date when the HD consoles cracked the market? It has the potential to be the biggest third party system selling game ever. Certainly Sony PS3s and Microsoft 360s may be as difficult to buy in May as Nintendo Wiis were in December.

  • Yet another AAA Wii game. But gamers games are not system sellers on Wii. For me the sales of Super Mario Galaxy were disappointing considering that it is universally considered to be one of the greatest video games ever. Wii Fit will possibly end up grossing a lot more.

Game industry management

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I have covered this subject on here before but recent events have brought it once more into focus. Basically the history of management in the British video game industry is a history of failure and contrasts very sharply with the massive success of British games development. All you have to do is look at a list of British games companies and look what happened to them: Imagine, Ocean, US Gold, Domark, Rage, Psygnosis, Argonaut, Codemasters, EIDOS and SCi. There are more.

This contrasts very sharply with America where companies such as Electronic Arts, Activision and Take Two have extremely strong management teams. Often when they recruit management it is from outside the games industry. And always they recruit strong, proven, trained, professional management. In Britain most game industry management is still amateur, untrained and unskilled. We have seen the results.

Yet it needn’t be. In many industries Britain has world class management. And world class companies as a consequence. These businesses would never dream of employing amateur, unqualified managers and they would never dream of promoting someone into a job they weren’t trained for. Yet this is what the games industry does. Britain also has several world class management schools. It is very easy to enrol and to get superb training. Yet it is something shunned by the games industry and we have seen the results.

But it can be so different. Between 1999 and 2002 Codemasters hired a professional manager to run development. He had an MBA alongside his BSC and MSC. And he had serious management experience at Gulf Oil and as a consultant at Pricewaterhouse Coopers. Within his remit and what he was allowed he did an amazing job. He organised a highly efficient yet highly creative studio system that was responsible for a string of top ten hit games. Perhaps he should have been running the whole company!

Of course it is too late for a lot of the British game industry to change their ways. They are history or soon will be. And the British games industry slides down the international rankings with a brain drain of development talent. The remaining independent developers are dwindling in number as they are bought up by Japanese and American publishers It is not a pretty picture. Yet it is one that the industry has largely mismanaged itself into. 

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