
The Rise of Costs, the Fall of Gaming - pclark
http://www.notenoughshaders.com/2012/07/02/the-rise-of-costs-the-fall-of-gaming/
======
jdietrich
Exactly the same thing is happening in the movie industry.

The critic Mark Kermode has written at length about the phenomenon of the
"motion picture event" - a movie so expensive that it is newsworthy regardless
of creative merit. People will go and watch lousy-but-expensive films, just to
see what all the fuss is about. The canonical example is the 2001 film "Pearl
Harbour", which was an absolute stinker but made a profit of $60m on a $140m
budget.

We're currently in the era of the mega-blockbuster - vastly expensive
superhero and fantasy films that are a relatively safe bet financially,
because they very effectively capture the casual market that might only see
one or two movies a year. Even adjusting for inflation, nearly all of the most
expensive films of all time were shot in the last decade.

At the other end of the spectrum, it's possible to make a genre movie for a
niche audience on a tiny budget, knowing that even without a theatrical
release you can promote it virally and turn a good profit on DVD sales.

You can spend $150m on Call of Warfighter XVII, knowing that it'll sell a
gazillion copies in every superstore in the developed world. You can also
spend a tiny fraction of that on Garbage Truck Simulator, in the knowledge
that 100% of your potential customers will be able to find it on Steam with no
real promotional spend necessary.

~~~
WhaleBiologist
[http://warhorsestudios.cz/index.php?page=blog&entry=blog...](http://warhorsestudios.cz/index.php?page=blog&entry=blog_007)
is a very good blog post, outlining how poisonous executive management of
large video game companies is, and how there are inordinate numbers of
useless/inefficient positions in games development.

I remember reading a blog post by the guy who did the fire for Far Cry 2. He
spent a year on it. He didn't even do any of the graphics. He spent an entire
year just playing around with fire spreading algorithms. An entire man year,
spent on making the effect of one weapon look cool. Absolute madness.

On your mention of Garbage Truck Simulator, Euro Truck Simulator 2 came out
not too long ago. All you do is drive a truck, that's it. It's selling pretty
well, and has a development team of about 10 guys.

Why don't people in the big games companies realize all they need to do to be
successful is make small, focused, FUN games, that have development teams of
10 or so. The rise of the indie game genre pretty much proves that it is
financially viable.

~~~
patio11
_Why don't people in the big games companies realize..._

It is roughly similar to "Why doesn't Google realize you can ship a product
with $1 million of yearly revenue with 2 engineers working for 3 months?" No
needle at Google would move if they did that -- it's objectively a worse use
of those engineers' time than supervising A/B tests which marginally affect
the display of 3% of all searches in South American Portuguese.

Similarly, you could ball up a hundred ludicrously successful indie games and
still not hit the numbers that World of Madden's Duty 2013 will hit within two
weeks of retail launch. Those also have much better characteristics to
leverage the non-gaming capabilities of game studios, like the ability to
spend $60 million (1x~2x the development budget) on saturation-bombardment
coverage for all US men between the ages of 15 and 30 and thereby sell $90
million worth of WoMD2013.

AAA games companies would be interested in creating Minecraft _if_ you
successfully sold them that you had a reproducible process to Minecraft, like
they have a reproducible process to create Call of Duty games. Non-
reproducible Minecraft is not a victory condition. Reproducible name-a-
successful-indie-that-isn't-Minecraft is not a victory condition. ("We skim
30% of the top off of a catalog of titles, which in aggregate must include
successful-sub-Minecraft in a reproducible fashion", on the other hand, _is_ a
victory condition, and that's why all the AAA companies are trying their
damndest to be platform companies and leave the game development to
suckers^H^H^H artists.)

Edit for elaboration: Rough numbers so non-gamers can follow things: Minecraft
is an independently developed game with north of $50 million of sales spread
over several years. Minecraft is sui generis: hitting 6 figures makes you
notable enough to achieve press coverage on that fact alone, and a
supermajority will never come close to matching imputed opportunity costs.
Call of Duty is an architypical AAA ("big budget from big company") game; the
most recent version sold $400 million ( _not a typo_ ) in _twenty four hours_
on a development budget in the mid 8 figures and a marketing budget probably
in the high 8s or low 9s.

~~~
WhaleBiologist
>it's objectively a worse use of those engineers' time

If you are ActivisionBlizzard, or EA. What do you do if you're not them? THQ
is a good example of a publisher that tried to mimic the big dogs, and failed
dismally because of it. There's a huge difference between AAA games company,
and wannabe-AAA games company, and the expansive graveyard of
developers/publishers is a testament to that.

It seems incredulous to me that when facing a distant bankruptcy, the best
choice is to keep doing what you've been doing, dump all your remaining cash
into finishing the AAA games you've got going, and betting it all on black.
Are these companies completely oblivious to the fact that smaller, indie-style
games are, at the very least, profitable?

Maybe the games industry culture really is this self-destructive. Or maybe,
with budgets so high, even for a huge company, solvent to insolvent can be 1
or 2 poor releases away.

~~~
dagw
Once past a certain size and far enough in the hole, being marginally
profitable isn't going to help. It's go big or go home that counts. Investors
aren't interested in a +-3% annual return, they want 1000% or nothing.

------
ekianjo
ANother rant on "big budgets are killing the industry!". We see this coming
every 4-5 years and this never ceases to make me laugh. There's never been as
many games sold as now. And of course there will be winners and losers, as
always.

~~~
NoPiece
I agree with you, and am sure if you could make large list of small developers
that closed during any given period of time.

But there are downsides to the current trends. When big companies have to take
bigger financial risks they are less likely to take creative risks. So while
we are seeing really beautiful well crafted games, many are cookie cutter
sequels and copies. The industry is large enough that there is innovation (and
a vibrant indie scene), but I wish there was more interesting AAA stuff.

~~~
ekianjo
Well the AAA stuff does things right too. Look at Far Cry 3. It's hardly a
indie game, and most people who played it loved it and found it refreshing.

Look at Witcher 2. Hardly a small game either, and they managed to pull off
one of the best RPGs in recent history, with non-linear paths in the story.

Indie or AAA, there's crap everywhere anyway. There's a lot more people buying
crap than ever, too, and that is exactly why crap endures : it's profitable.
This would not have happened in the same way in the 80s/ early 90s when gamers
were more of an "elite", educated and curious bunch of people, rather than the
average Joe nowadays who buys Video Games just because they can.

~~~
NoPiece
I liked Far Cry 3, but it is the perfect example of what I was talking about.
Far Cry 2 took a lot of risks (and failed in some ways). Far Cry 3 is polished
as hell, but basically dumbed down so that anyone can pick it up and play.
Objects you should pick up glow and even beep when you look at them. There is
a mini map with arrows telling you where to go. There are pop ups constantly
telling you what to do. And it is the third game in a franchise. I liked it,
but found it very safe.

The Witcher 2 was developed in Poland for ~8million. Great quality from a
relatively small company and team. Compare that to Call of Duty Modern Warfare
2 (I know it is old, but wanted to find citable numbers). $50 million dollar
dev budget, and $200 million dollar launch budget according to the LA Times
([http://articles.latimes.com/2009/nov/18/business/fi-ct-
duty1...](http://articles.latimes.com/2009/nov/18/business/fi-ct-duty18)). I'm
sure the spent lot more on the development the most recent Call of Duty -
Black Ops 2.

~~~
ekianjo
There are not many games that spend as much as Call of Duty. There is probably
NONE, in fact, so it can hardly be used as a benchmark for the whole industry.
And the numbers for the expensive productions are never really given so I
doubt what the real numbers actually are. It's far from being as transparent
as Hollywood.

Most AAA games spend about 10-20 millions for multi-platform titles, that much
we know, and it has not increased significantly over the past few years.

THe Witcher2 's cost of 8 millions is not small by any standard. It was a PC-
only game when it came out, and spending as much for a PC-only title is fairly
expensive, on the contrary. ANd they spend some more when they made the Xbox
version, too - besides, take in account that 8 million in Easter Europe
probably means double the budget if it were made in the US or Western Europe.
It's not apple-to-apple.

~~~
NoPiece
I expect Battlefield 3, Assassins Creed 3, GTA V have similar development
costs. Halo 4's budget was reportedly $40 million, and Gran Turismo's was $60
million. Basically if you can't spend the big bucks to compete, you go out of
business (see THQ, Atari).

If it is true the average budget hasn't increased over the last few years, it
is because the current console hardware is maxed out, or because companies are
getting better at outsourcing asset production to cheaper labor in China. When
the next generation consoles from Microsoft and Sony roll out later this year,
I'm sure budgets will jump again.

------
pinaceae
interesting definition of gaming and its platforms. as if console-makers are
the only players in town.

let's see here: [http://www.asymco.com/wp-content/uploads/2013/01/Screen-
Shot...](http://www.asymco.com/wp-content/uploads/2013/01/Screen-
Shot-2013-01-16-at-1-16-2.11.50-PM.png)

xbox360, ps3, wii ... all child's play. a niche industry. the true gaming
platforms are android and ios, with ios users more likely to spend money on
apps/games.

serious game "journalists" dismiss casual gaming as beneath them. halo,
skyrim, yes, but angry birds? cut the rope? no.

interestingly the industry ignores journalists and goes to where the users
are. hence the release of titles like baldur's gate for iOS - taking an old,
known game and porting it back. no big budget needed. a lot of turn based
games are perfectly suited for touch, from Jagged Alliance, XCOM, Panzer
General to all the adventures to RPGs (where are all the Ultima games on iOS?
Final Fantasy and Chrono Trigger already are available).

and then you have indie gaming, Minecraft, Torchlight, FTL, Hotline Miami, etc
etc etc.

Big budget shit games are dying. Max Payne 3? yes, good riddance.

~~~
potatolicious
> _"all child's play. a niche industry. the true gaming platforms are android
> and ios, with ios users more likely to spend money on apps/games"_

I question this wisdom, and will continue to do so until the day an iOS title
breaks Halo 4's first-weekend sales record. Or hell, lifetime sales record.

The core gaming industry moves far fewer units than iOS/Android games (in
which case "units" is more ephemeral of a concept), but succeeds in extracting
$60-90 at a time, as opposed to $0.99.

We had our love affair with "casual gaming is the future" when the Wii came
out - that didn't pan out then either. Attach rates were abysmal, and people
soon bored of the platform after one or two titles. It failed to find a long-
term place in the living room, that's for sure.

This isn't about some supposed superiority of core gaming vs. casual gaming,
it's simply skepticism because every time someone has said that casual will
eat core for lunch, it has failed to occur.

Sales for iOS/Android games are _terrible_ on a per-title basis, and even
including only the top titles don't come close to console sales numbers. The
only real corner of that industry making eyebrow-raising amounts of money are
microtransaction-based, treadmilly, slot-machine type games, and I have my
doubts as to whether or not it's a sustainable trend.

> _"a lot of turn based games are perfectly suited for touch, from Jagged
> Alliance, XCOM, Panzer General to all the adventures to RPGs (where are all
> the Ultima games on iOS? Final Fantasy and Chrono Trigger already are
> available)."_

"Re-releasing old games on mobile" is a profitable segment, but it won't last,
mostly because we will very quickly run out of games people actually give a
shit about.

And once you start contemplating development _new_ adventure games, RPGs, and
strategy games, the economics of this falls over. Even without the notion of
modernizing graphics and gameplay, developing something like Chrono Trigger
would hardly be worth it when the market bears $0.99 a copy, or less.

More likely, we'll see Chrono Trigger, where enemies are overpowered and you
pay microtransaction credits to revive your party members when they die. This
is, after all, the only way mobile devs have found that generates any
substantial revenue. What a marvelous progression of this industry.

The future of the indie gaming scene lies with the PC, and potentially
surprise core-gaming-targeted platforms like the Ouya. These are the only
platforms where users are prepared to spend any real amount of money on
gaming. Revenue extraction on mobile platforms inevitably involves fairly
unscrupulous (and simply not fun) mechanisms.

~~~
tluyben2
Casual will not eat core; they exist in their different places (phones are
definitely perfect devices for casual) and you need original content (RPGs,
strategy etc), but I think original content is not what drives the price up
for the studios. The whole package is what does that; Ultima can now be made
by two people in an attic; that doesn't cost a lot while it's fun to play. The
problem is that 'people' want a FPS with superior graphics and that whole
package is very costly. For me (but i'm old), the great graphics, like 3d
effects in 3d movies currently, wear thin after a few minutes of ooohhh and
aaaah and then it's about gameplay. Something which a lot of AAA 'sell $100
million' games lack. Nintendo their strategy (lowish graphics, small teams)
but with non-casual, original games would (and did in the past) work fine and
would be profitable IMHO.

~~~
ekianjo
Nintendo's strategy has limits: if they can't push enough hardware in the
homes their sales will plummet. The WiiU is nowhere near selling out and we
can already see it will not be like the Wii. The WiiU will not sell you any
new experience, it's just more of the same old shit. People will get tired of
it soon enough.

Nintendo still has an upper hand in handheld gaming, because that's become
their core business since the GBA days. But who know what happens 5-10 years
down the road?

Relying on past trends to predict the future is always doubtful at best. The
market is continuously in movement.

~~~
tluyben2
I didn't mean to say Nintendo is doing everything well, but I think gameplay
(should) trumps graphics every time in the long run. A lot of companies are
betting on non vital (for gameplay) assets too much; according to the chart in
the article, graphics are 25% cost of a game; I suspect it's a lot more in a
lot of AAA games. In my opinion that's not needed to get the masses playing
games. If the game is addictive and depends on a lot of content, simpler
graphics will make creating that content a lot easier and cheaper and will
make the game worlds bigger for a lot less money. And that's the part
Nintendo, IMHO, got right a lot of times.

------
msg
Holy moly that was tl. I did r, but I regretted it.

The big problem with this article is cherrypicking examples. Even though it
contains a list of 120 game companies (yes, tl) that folded between 2006 and
2012, it doesn't set them in context. How many companies are there of which
these are a subset? How does this failure rate compare with historical norms?
How big are these companies really? Other lists of large budgets, large
layoffs, large numbers of units required to break even make similar non-
points.

The larger point is that game art is expensive. Will Wright was making the
same point with Spore, I would say. The art was so expensive he outsourced it
to the cheapest laborers he could find, players. It turned out the tools were
better than the game itself; nevertheless I think you have to feel he was on
to something.

There is not going to be an asset apocalypse in a world with a Minecraft mod
API (Real Soon Now), the Steam Workshops, and procedural generation. Unless
you mean the kind of disaster that kills off dinosaurs.

Is AAA gaming unsustainable? Of course it depends on what you mean by AAA. But
I think the big studios have an eye on their wallet at all times. They make
big games because at the end of the day they are profitable on the average.
There is just a wide variance. If a smaller studio has all its money on black
on its AAA title, you might wish them luck, but not be completely surprised
when their success is raked away.

The AAA titles that succeed do so through solid gameplay. That is unlikely to
change no matter how shiny they become.

~~~
thisone
>Even though it contains a list of 120 game companies (yes, tl) that folded
between 2006 and 2012, it doesn't set them in context

Indeed. I went looking for Flagship and found it.

Flagship went under because Hellgate London was a MMORPG title, with AAA
MMORPG costs that, unfortunately failed in it's mission as a game. It,
unfortunately, wasn't very good. Failure meant not enough purchases and not
enough subscriptions, therefore not enough money coming in.

------
venomsnake
The game industry is in trouble (well except for PC, digital distribution,
indies which we assume don't exist)

And with Trine 1 & 2, Mark of the ninja, Bastion and Borderlands 1 and 2 and
Dishonored we have very successful and profitable example of studios and
projects that break with the graphic whoring and bet on an art style.

And majority of the failures listed were mediocre games anyway. We haven't had
the psychonauts, torment and Shadow of the colossus of this generation yet.
Top critical acclaim and no sales.

Budgets are insane and spend on stuff that don't add much value. Total voice
over of games is one of the things I can do without.

------
Tiktaalik
Charts that show a decline in console retail sales don't really reflect the
health of the gaming industry. One thing that must be kept in mind is that
there has been a shift toward online sales, both on the PC, which is currently
enjoying a renaissance, and on the console, and these are not reflected.
Furthermore the console industry is cyclical, and sales are expected to
decrease in this fashion prior to the launch of new hardware (Wii U just
arrived, more coming in 2013).

------
svachalek
I think economics will prevent the industry from going out of business by
spending too much, but the more visible effect of the high budgets is similar
to what we see from Hollywood -- total fear of risk resulting in tepid
sequels, remakes, and lowest-common-denominator titles. If the market gets
disgusted enough to stop buying Call of Duty 29 (Reskinned) we could have
another 1983 on our hands, but I don't quite see that coming, yet.

------
rvasa
Attention and time are also being split across a range of devices (esp.
tablets, smartphones) -- this may also be having an impact.

------
jonny_eh
I'm surprised they didn't mention the new Android powered game consoles. Wii U
game should be easier to port to these newer, cheaper, simpler devices.

~~~
stickydink
The problem with that (for this first generation; OUYA, GameStick et al.) is
that the hardware isn't comparable to the WiiU. When they're released in the
next few months, and even right now, most high end phones out-spec them. The
article points out that the WiiU would be comparable to an iPad 4, which is
well behind what any of the announced Android consoles are aiming for. They're
generally going for the 'we can use last years hardware and sell it cheap'
angle, rather than a AAA console experience.

Perhaps when/if this first round of consoles prove the concept, a second
generation high-powered Android consoles will appear.

------
nazgulnarsil
Why is this surprising? In the movie industry each blockbuster finances 2-10
flops IIRC.

------
brianchu
I think consoles are a dying segment. Casual won't eat console, though.
_Mobile_ will eat console, because of 1) greater audience and 2) a shift of
console-quality games from mobile to console.

We're talking about a platform that more than 50% of all US teens own (and
growing), a platform that is carried around nearly everywhere by most users, a
platform that is expanding globally.

Because of that audience, we're looking at ROIs that can outpace console
games. Halo 4's dev and marketing costs are estimated to be well over $100MM.
Its first weekend gross was $220MM. Halo 3's first weekend sales were roughly
$170MM and Halo 3 ended up selling roughly $600MM total (10 million copies
sold [1]). So based on that let's be generous and extrapolate Halo 4's total
sales as $800MM. Keep in mind that I'm not even taking into account 1)
eventual discounting on each unit and 2) retail markups and packaging costs.
Angry Birds (first version) cost $135k to develop. It grossed 7.35MM (after
Apple's "retail" cut) [3]. Angry Birds has a ROI of 54x. Halo 4 has a ROI of
8x (and I'm being liberal).

It's also a mistake to think that smartphones are purely for casual games.
Console-quality games are already moving to the iOS/Android platforms. So-
called mid-core games are very profitable on mobile. There is a trend of games
charging greater and greater amounts of money, as the Final Fantasy ports do.
The market most certainly _does not_ enforce a $0.99 price point. Games with
higher production values routinely push past that price point.

Bear in mind that the iPhone 5 is considerably more powerful than the Xbox,
and is roughly 1/4th as powerful as the Xbox 360 on one metric (texture
rendering). Given 1) exponential growth in mobile processing/graphics power,
2) the increasing delay between console launches which allows for catching up
(8 years between the Xbox 360 and Xbox next-gen, assuming a 2013 release
date), and 3) diminishing marginal returns in graphical quality when hardware
quality is increased past a certain point, in 2-3 years smartphones will be
capable of Xbox 360 games, and a few years after that will have caught up with
next-gen consoles. This gap is narrowing even faster with tablets. The article
mentions how the Wii U is comparable to an iPad 4. There are tons of startups
out there building game controllers to overcome/augment the limitations of
touch UIs. Mobile games are already being wirelessly hooked up to
televisions/monitors.

Big budget console games won't die. Not completely. There will always be a
market for the absolute bleeding edge. But I think it's clear that mobile
gaming will eat up huge segments of the console market. One "type" of console
that I see as a _potential_ commercial hit would be immersive AR platforms,
like the Oculus Rift. But there's no reason that mobile can't eat that too
after several years.

Looking even farther into the future, I think there is great potential for
other advancements in mobile such as actual physical buttons that are
programmatically generated over the touchscreen [4].

[1]
[http://www.vgchartz.com/article/4787/halo-3-sells-10-million...](http://www.vgchartz.com/article/4787/halo-3-sells-10-million-
copies-worldwide/) [2] [http://www.mobilewebgo.com/how-did-angry-birds-become-
blockb...](http://www.mobilewebgo.com/how-did-angry-birds-become-blockbuster-
rovio-video-interview-and-transcript) [3] [http://www.symbian-
freak.com/news/010/12/angry_birds_hits_42...](http://www.symbian-
freak.com/news/010/12/angry_birds_hits_42_million_free_and_paid_downloads.htm)
[4] <http://techcrunch.com/2013/01/13/this-is-the-future/>

~~~
batgaijin
Bullshit. I dare you to show a video of CoD alongside any casual game to kids
under 10 and I guarantee that the kids would go nuts for CoD. That is assuming
no prior experience to video games.

Mobile is just making it 'fashionable' for people to play games and imho just
a funnel towards the diehard model.

Who stopped at just Pokemon?

~~~
brianchu
I very clearly made the point that casual gaming != mobile gaming. The rise of
mobile gaming does not mean the death of hardcore games. There is no reason
hardcore games can't exist on mobile. Console-type hardcore games are already
showing up on smartphones. Like I said, once smartphones catch up with
consoles and wirelessly connect to your television/external gamepad (the
latter already being a reality), smartphones will be able to do 95% of what
consoles do. The point is that CoD five years from now may very well be on
your smartphone-television-gamepad setup.

In fact, your example perfectly illustrates the potential of mobile gaming
(casual gaming particularly). First: getting CoD requires buying a $200
console and paying $60 for the game. That's huge. That requires a kind of
commitment (i.e. "I plan on buying and playing lots of games to make the
console worth it") that few customers have.

Second: I'm reluctant to hew to stereotypes, but hardcore gamers are
overwhelmingly male. In saying that your under-10 kid would go nuts for CoD,
you seem to be assuming that _he_ is not going to be a female. That's nearly
50% of the population that's ignored. Yes, I personally know many girls who
play FPS's. But the fact remains that girls are overwhelmingly unlikely to
play FPS's, relative to guys.

Who stopped at just Pokemon? The vast majority of women (iPad board games sell
particularly well among females). Most (but obviously not all) adult men.
Basically any people who gave up video games or never really got into them -
the vast majority of the population. Let me give you a data point. Me. I used
to play tons of games - Halo, CoD, PC MMOs, etc. Due to school and then
working at a startup, I've stopped. Now I only have time for quick game
sessions when I'm waiting in line, riding in the car/bus/train, and taking
quick breaks from work.

Hardcore games capture a tiny slice of the total market. The potential of
mobile gaming lies precisely in the fact that every demographic is accessible.

On an unrelated note, I'd like to correct a typo in my previous post. When I
said "a shift of console-quality games from mobile to console," I meant
"console to mobile."

------
LatvjuAvs
Star Citizen, Wastelands 2, Double Fine Adventure, many others.

It just looks like finally I can participate in making game I would like to
play.

I am tired of playing some half-assed interactive movies that costs half a
billion to make.

Niche will survive, and it just recently started to rise again, thanks to
niche people themselves funding games.

There is no void and there will not be, in death, something will born again,
and sometimes it is built upon recognizing failures of previous generations.
Call it evolution, as dire it might look, it is a progress.

~~~
zokier
> Star Citizen, Wastelands 2, Double Fine Adventure, many others.

how many of those has actually shipped?

...yeah.

~~~
LatvjuAvs
You know, when reading product description and watching some mock-up video
gives me more excitement than playing 8 hour epic AAA title, the industry for
sure is on wrong path :D

