Games Industry Downturn is a Myth

Gamers with Jobs has a piece on the supposed industry downturn, stating plainly that any problems are figments in the minds of analysts. From the article: "I concede, things are not bright sunshine and frolicking puppies for the gaming industry at the moment. There's a less-than-stellar Xbox 360 launch, a lot of very proficient people pocketing pale pink slips, a disappointing sales sheet from the most recent holiday season, and a lot of industry insiders wailing and gnashing their teeth. Now is the winter of our discombobulation. In short, gaming seems to be at its own throat lately, and from the cheap seats, watching happily, cackle the pundits, cheering the bloodletting ... It's baloney. What isn't being talked about is the fact that consumers are buying more games than they ever have. They are just spreading the money out a bit more, putting dollars into the used market, into handheld devices, into services like Live Arcade, and into direct downloads. The handheld market alone, which just cracked into the billion dollar range in 2004, soared 62% to 1.6 billion for 2005 on the backs of the ever sturdy GBA, the largely successful launch of the PSP, and the coming of age of the DS."

Comments

It's not a downturn...

[Schmendr1ck]

It's just that game publishers can no longer push out "Successful Game XII - the Crappy Sequel" and expect gamers to buy it.

Times are tight for many people, including gamers, and we are more discriminating with our money. When you consider that many outstanding game titles get little or no marketing (two of my favorite examples are Psychonauts and Beyond Good and Evil for the XBOX) while the tired sequels get the lion's share of advertising dollars, it's not surprising that gamers are spending less.

My general impression in the GBA market is that they have a solid install base, a wider variety of titles, development costs are lower, and retail pricing is lower. These factors may explain why there has been a strong upswing in GBA game sales while console & PC gaming seems rather lackluster.

Re:It's not a downturn...

[Pxtl]

Yep. Growth has it's limits. Eventually you hit all the people who just aren't gamers and haven't played a 3d game ever - I don't think anybody will be reaching them until the Revolution comes out.

Plus, WoW is really hurting the PC gaming industry. I know a lot of gamers who've just stopped playing any game that isn't WoW.

Finally, Half-Life was a great game. The first time. The second time someone made an "immersive FPS adventure - like playing a movie!" it was pretty cool. But now they've all but pushed out half the industry, and the gameplay in those titles is pretty tired. Conversely, the online multiplayer FPS and RTS games are getting increasingly ferrocious learning curves that block anybody but hardcore teens from playing.

Plus, there is a real, massive demand for educational titles for young kids (not toddlers) that just isn't being exploited. I know tons of parents who're wondering where the next "The Incredible Machine", "Carmen Sandiego" or "Sim Earth" is.

But as long as everybody's trying to make the next Half-Life AAA blockbuster, they're stuck.

Console games are pretty much still mainly aimed at university/teenaged/preadolescent guys. The heavy focus on T/M titles (adults don't need blood, tits, and heavy metal to buy games) demonstrates this. Eventually, you hit the point where you've got every teenaged boy in your market - and then what? I think they hit that point and are still trying to grow, not realising that they've fully exploited the target market.

Every game that breaks out of that market and gets a little momentum going becomes an unparalleled success. The trick is (a) getting out of the market that all your developers fit into, and (b) getting that momementum outside of that market when all your marketting people think like teenaged boys.

Not a downturn?

[AKAImBatman]

What isn't being talked about is the fact that consumers are buying more games than they ever have. They are just spreading the money out a bit more, putting dollars into the used market, into handheld devices, into services like Live Arcade, and into direct downloads.

So there's no downturn because consumers aren't really abandoning games, they're turning to older , more nastolgic games and don't buy the new stuff? Hmm... I think there's a flaw in the logic there.

In my mind, if gamers aren't paying for new games to be developed, that means the industry is experiencing a downturn. The fact that gamers are buying older and used games only signifies that they don't want the new stuff that's being produced.

Why the holiday season sucked:

[RyoShin]

I can tell you exactly why the holiday season 'sucked':

1) XBox 360 is crap and was hard-to-stock

Despite how much I dislike it, I worked on the retail side during the 360 launch, and the demand was there. I don't know if it was a large demand, in terms of other launches, but it certainly exceeded the units we received (which only happened twice while I worked there, and both times they were small shipments.) As most know, the story was similar just about everywhere.

I think Microsoft is mainly to blame for this: while something may have gone wrong with their manufacturer, they seemed to know the demand the system would elicit, but neglected to consider that when comensing production. I think they should have known that the capacity they had wouldn't meet demands (and I think they even said as such,) and increased production in some fashion. Certainly, there would have been a far larger number of 360s available under Christmas trees had their been sufficient inventory.

Also, problems that ran around the social circles soon afterwards probably turned off some of those who hadn't yet got one but were still interested, until that point. (Look, I can boil an egg on my power unit!)

2) Lack of new hit games

While I'm certain there were some gems, there were no "must have AAA games" that I can think of that were released around the time (and, again, I worked in electronics retail at the time, so I had an idea of what was "must have".) So there was no rush to get this game or that game.

The only game I can think of that would have been THE title of the season is Twilight Princess, and we know they moved that back to [April|June|November] (depending on where you get your information.) (Curse you, Nintendo!)

3) New Systems

We've already touched that the XBox 360 lacked the quantity to fill demand, but the demand for two yet-produceds system also slowed sales. People who already knew about the PS3 and Revolution (and, now, DS Lite) but didn't have a PS2 or Gamecube (or DS), respectively, most likely decided to save their money for the "new system right around the corner". With waivering release dates, most people were thinking mid-year. A six month wait to get the latest and greatest as opposed to getting now what will by then be old beans? They could wait.

Also, the release of Twilight Princess would have created a large surge of new Gamecube owners. I've talked to many who said they would get a GCN when Twilight Princess came out; now most are saying that they'll wait for the Revolution.

So, yes, the game industry is indeed throttling itself. Sequals of the Day and Cookie Cutter FPSes aren't helping, either.

Inflation

[Anonymous Coward]

There's this bit in Alice Through the Looking Glass where one of the characters talks about having to run as fast as you can just to stay in the same place.

Imagine that a company said "we're doing better, we made more money this year than last!" and then pointed out that their "profit" column this year has more dollars in it than their profit column last year-- but, they don't mention that the dollar is worth slightly less this year than last year, and the profit column isn't as large as last year's if you count in last year's dollars. By not taking inflation into account, this hypothetical company made a loss look like a gain.

Or imagine that a congressman stands up and says "our federal budget increases the size of medicare", and points out that the number of medicare patients they've allocated funding for is bigger than the number last year-- but, they don't mention that since people are being born all the time, the number of people demanding access to medicare is rising, and so you have to increase the number of medicare patients by a certain amount just to keep the same level of coverage. By not taking into account the inherent need to constantly expand the program to accomodate the growing population, this hypothetical congressman made a reduction in the size of medicare look like an increase.

This editorial here stands up and says "the game industry is doing better", and points out that the industry sold more games than last year-- but, he doesn't mention that since people are being born all the time, the number of potential game buyers is increasing. It's quite possible for gaming to simultaneously be doing badly and reducing in popularity, while the absolute number of games sales is increasing, so long as the number of new customers is rising slower than the population of potential new customers. The appearance of new potential customers can mask a decrease in the percentage of customers who want to buy, and this is something that Nintendo, one of the main "zomg gaming sucks now" soothsayers of doom, has been in particular harping on-- pointing out the number of households that exist is vastly larger than it is in 1982 but the number of households with video game systems has stayed pretty much constant. By not taking this into account this article has made a downturn look like an upturn.

Of course, it all depends on what we're measuring here. Why do we care if there's a "downturn"? Well, if we're gauging whether it makes sense for EA and Activision and whatnot to be laying off people, then aw hell no. The game sales went down last year but they're going up over longer periods of time, EA's dip in fortunes is just a result of mismanagement and misallocated resources. But if you're looking at things in terms of "do video games have a problem?" or "does something fundamental about video games need to change?", then absolutely yes, the gaming industry has a problem and a number of things about it need to reform. The game industry is running as fast as it can and it's barely staying in place.