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Video-Game Publishers Outsource Development
randomErr writes "According to a San Jose Mercury News article reprinted at the Miami Herald: 'Mark Vange is in the vanguard of globalizing the video-game industry. He employs 30 game developers in St. Petersburg, Russia, who have worked on everything from flight simulators to dragon-fighting games. 'We can get the work done for half the cost that it takes in the U.S.,' said Vange, president of Ketsujin Studios. Similar outsourcing of video-game production is being done in places like China, India, Vietnam and parts of Eastern Europe. California game developers, who are the creative force behind a $10 billion industry in the U.S. market, view the trend with a combination of fear and anticipation'."
<Sarcasm>This is great! No really -- now my video games won't cost $50+ each.
What? You mean the price won't go down? But we are saving so much money on the labor -- where is all that extra cash going?</Sarcasm>
Sarcasm aside I think those three sentences pretty much sum up my feelings (and most other /.'ers?) on all types of outsourcing (techie or otherwise). It's an excuse to pad the pockets of the fat shareholders at the expense of the middle class.
Too bad smarter people then me have looked at it and can't come up with a solution. I've said this before but I'll say it again: If this trend towards globalization continues I fear we may wind up proving poor old Karl Marx correct. It's really a crying shame too because capitalism actually does drive innovation. Too bad it also drives greed.
I want peace on earth and goodwill toward man.
We are the United States Government! We don't do that sort of thing.
Games outsourced to Russia are known for their quality
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Well, let's just hope that Vange gets paid half of what is normal in the U.S. and the price for the games are half as much so that the unemployed, underemployed, and those working a minimum wage to compete with Russia can afford the games.
Unless, of course, the primary market for these games is Russia.
I don't really see outsourcing as such a big deal. I just don't understand why some CEOs get paid so much money to supervise a workforce halfway across the world for a company that is officially located in a third world country. It really seems the company could increase shareholder values by moving the CxO to those cheaper countries as well.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
What? You mean the price won't go down? But we are saving so much money on the labor -- where is all that extra cash going?
Unfortunately, that isn't how the economy works.
When you are producing a commodity product, like lumber, coal, or oil, then competition drives the price of your product down to the average total cost of producing that product. In theory, in a commodity market the profit margins are enough by the end of the year to leave each firm in the industry with exactly zero profit. If games were a commodity, reducing either the variable costs or the fixed costs would result in a reduction in price.
Games, however, are not commodities. In fact, they are much closer to a monopoly market. When a company makes a game, no other company can produce that same game. If I want to purchase Diablo II, I have to pay Blizzard exactly how much they are asking - no one else can provide that product.
I can purchase Fallout 2 instead, and there is some price sensitivity there. However, I would not necessarily purchase Fallout 2 over Diablo if Fallout was $10 less. Game companies run the demand curve, and price their games accordingly - $50.
In general, when you are the sole provider of a product you should charge as much as necessary to maximize the equation:
Profit = (Price - Variable Cost) * Quantity.
Quantity = Func(Price)
Changing the cost of producing the game has no effect on the Variable Cost or the Quantity, and therefore should have no effect on the price you pay for the game.
Thank you Mario! But our princess is in another castle!
This is an outrage! Next thing you know, Nintendo will outsource to some obscure place, like Japan!
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Just because the US middle class hasn't been fully impoverished YET (and we're NOT better off than we were ten years ago!) doesn't mean that continuing outsourcing WON'T do it. Why should one expect a relatively highly-paid workforce with political rights and high expectations to be able to compete with much-lower-paid folk who can't unionize and don't get health insurance or retirement benefits, and will work for peanuts even by local standards 'cause any job is better than none?
With outsourcing trends as they are, we are rather likely to get what Neal Stephenson describes in Snow Crash as an globally-distributed layer of what a Pakistani bricklayer would call prosperity. Unfortunately for us in the US, *we* will call it "abject poverty".
"My strength is as the strength of ten men, for I am wired to the eyeballs on espresso."
I'm an independent video game developer and I'd like to point out that the indy scene has been international for quite a very long while.
Does anybody have a fucking clue about what country the words 'Nintendo' or 'Sega' comes from? Can you guess where the international headquarters for Sony is located?
Truth is that the video game industry has never been primarily American. It's always been international.
Everyone needs to quit bitching. Nothing to see here, move along, goddammit.
...is that just a generation ago, it was computer technicians and programmers who put millions of Americans out of work by replacing their positions with machinery. ...just sayin'....