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Game Companies Face Hard Economic Choices
Hugh Pickens writes "The NY Times reports that the proliferation of free or low-cost games on the Web and for phones limits how high the major game publishers can set prices, so makers are sometimes unable to charge enough to cover the cost of producing titles. The cost of making a game for the previous generation of machines was about $10 million, not including marketing. The cost of a game for the latest consoles is over twice that — $25 million is typical, and it can be much more. Reggie Fils-Aime, chief marketing officer for Nintendo of America, says publishers of games for its Wii console need to sell one million units of a game to turn a profit, but the majority of games, analysts said, sell no more than 150,000 copies. Developers would like to raise prices to cover development costs, but Mike McGarvey, former chief executive of Eidos and now an executive with OnLive, says that consumers have been looking at console games and saying, 'This is too expensive and there are too many choices.' Since makers cannot charge enough or sell enough games to cover the cost of producing most titles, video game makers have to hope for a blockbuster. 'The model as it exists is dying,' says McGarvey."
As we discussed recently, OnLive is trying to change that by moving a big portion of the hardware requirements to the cloud. Of course, many doubt that such a task can be accomplished in a way that doesn't severely degrade gameplay, but it now appears that Sony is working on something similar as well.
am i missing something, or is the answer to this 'crisis' painfully obvious to everyone?
stop making these huge, expensive games.
go back to making small, experimental fun games.
it seems so simple.
every game should be a new experience, or at least bring something new to the table. adding a few more polygons, and some better shading algorithms does not make a game more fun.
-I only code in BASIC.-
Exactly
Reggie Fils-Aime, chief marketing officer for Nintendo of America, says publishers of games for its Wii console need to sell one million units of a game to turn a profit, but the majority of games, analysts said, sell no more than 150,000 copies.
That's because the majority of wii games are shit that SHOULDN'T turn a profit. Why people aren't changing that I don't know. It seems to me that if you put out a crappy game for the wii and it sells crappy, that might tell you something.
(Hint: put out a good game for the wii for good sales)
It's true that the cost of game development is significant, and growing all the time. The answer isn't to flail desperately at the latest fad or wow potential customers with marketspeak, though. Here are a few suggestions:
1) Focus on quality instead of marketing hype. If a project isn't coming together, it's better to cut your losses than to shove a piece of garbage out the door and lose the confidence of your customers.
2) Develop your code with reuseability and extensibility in mind. Never accept quick hacks or shoddy workmanship. It never pays off in the long run. Also: quick hacks for funding milestones = long-term disaster.
3) Don't work your employees insane hours at crunch-time. You'll just lose the best ones after the project is over. Treat them with respect, pay them decently, and give them a stake in the financial success of the company.
4) Invest in internal tool and systems development. It's a longer-term payoff, but high-quality internal tools allow a small team to do what otherwise requires a small army to accomplish.
5) Betting on safe and sure things is a surefire road to stagnation and failure. You can't be afraid to shake up the status-quo and innovate. There's nothing wrong with sequels per se, as fans of your first are likely expecting a second (I'm working on one now), but you can't just remake the same game and expect everyone to buy it a second time.
Pretty boring list, huh? But I'd bet 9 out of 10 companies probably don't really follow this advice. It's sort of like advice on how to lose weight: eat healthy and exercise regularly. Stupid and simple, but it's just to tempting to take the easy road.
The game development company I work for seems to be adhering to these principles pretty well, and is hiring developers while other companies in the area are laying employees off. We'll see if it pays off in the long run.
Irony: Agile development has too much intertia to be abandoned now.
Actually, the technical part of OnLive on a small scale isn't that impossible, you could imagine that if your ISP hosted some OnLive servers close to you, you'd get a pretty ok experience.
No, the thing that makes OnLive completely ridiculous is the economy of it. They're promising the latest games, that require the best gaming-specific hardware. So how is their datacenter going to cope with 1000 people playing Crysis at the same time? Are they virtualizing the games? I could imagine that for lesser games that can be entirely CPU-rendered, but you can't use the CPU for modern games, you need a GPU. Or two. Have they found a way to virtualize that? Or do they have multiple GPUs per server? How the hell are they gonna cool it and power it? And how are they gonna afford it? How could it possibly be cheaper to buy and host and manage a server that can serve, say, 10 players at the same time, than for those 10 players to just go to a store and pick up a game console each?
Console hardware is dirt cheap and has really good price/performance. Server hardware is very expensive, and has really bad price/performance. And on top of that, you need server hardware for the overhead of virtualizing, and you need server hardware for the video encoding.
And then, assuming they could magically assemble this hardware for a price that is competitive with cheap consoles, they choose to do GAMES with it? I could think of dozens of other uses for hardware like this, and games is way, way down on the list.
No, this whole thing smells fishy...
3) Pay less to or fire the managers and executives who are clearly not making good decisions.
That makes the most sense to me.
If you are going to make a huge expensive game, make it worth buying.
The problem is this, there's a lot of games out there with massive budgets that are simply crap.
I'm not really sure the complaint in the article is exactly. They seem to be effectively complaining that the market doesn't reward games that have had a massive budget but are still crap? Well isn't that just the way business is? if you spend a fortune developing something that no one wants then you fail?
There's a reason we've always had certain studios come back time and time again with new releases - id Software, Blizzard, Square Enix etc. It's because they produce good games people want, even if they do spend a fortune developing them.
I don't see how it's a crisis that market forces affect the games industry like they affect everyone else exactly? What are they saying? That we should have to be more open to funding shite we don't actually want?
Expanding on your point - the key is to make games fun and that people want, whether it's a high budget or low budget production. What consumers wont tolerate are games that aren't fun even if companies have spent $25 million on them - that's their problem. Huge, expensive games are still perfectly valid and I'd certainly be sad if we didn't get anymore Call of Dutys, Gears of Wars, Half-Lifes and that sort of thing, but they still require the fun factor than smaller games require too.
Well, there is one problem there: everybody also competes with older games at bargain bin prices.
There was a time when that was a lot less of a problem, since Doom II looked like crap compared to Quake (and games based on the Quake engine), and then when you had Quake II games the old Quake I started to look like crap by comparison. Nowadays improvements are a lot more incremental. I've even played some ~10 year old games recently and while you can tell a difference, they're not exactly visually offensive either.
Gameplay has also been OK for quite a while now. It's been a long time since we had too little RAM for anything too complex, so you can go quite a bit back in time with your gaming before you run into problems.
Basically what I'm saying is this:
A) I could buy a new cutesy mini-game for casual players for 20 bucks or so. Like, say, Build-A-Lot, which I actually bought recently. Except it feels like there's a whole game missing around it. The complexity and difficulty are about right for one of the dozens of minigames in a $60 RPG, so I don't think I got much of a bargain with it.
B) I could get Fallout I, Fallout II _and_ Fallout Tactics on a DVD for around the same price. Seriously.
C) I could get a 1 to 3 year old game for the same price. E.g., The Sims 2 costs about that much by now, and it's actually a better value for casual gamers. (Though if you're a l33t FPS-er, you might not necessarily like it.) E.g., Settlers 6 is actually almost half that by now. E.g., Warcraft III including the expansion pack is also about 20 bucks by now. Slightly more money gets you Civ IV with all expansion packs. Etc.
So I think there's a finite niche for simple cutesy games.
Of course, that might not apply if you can come up with a radically new game concept that everyone just has to play. But that's a bit harder than it sounds. Designers which managed to come up with a whole new concept are very few and far in between, and even they rarely manage to repeat that. It's hardly a model for staying in business for the rest of your life, is it?
A polar bear is a cartesian bear after a coordinate transform.
Cost for the developers is $25m
Huge mistake right there.... budget breakdown is more like:
30% various licensing fees for theme, art, and music.
30% for marketing, tv commercials, paid for advertorials and complimentary copy in magazines and online, print ads, posters in stores, parties for the media, show expenses.
30% for executive management bonuses, HR, finance, other non-frontline cost centers
8% for customer service to handle all the bugs, purchasing/shipping department, technical writers, etc.
2% for developer pay, at most.
The percentages vary slightly from megacorp to megacorp, but not much.
The question that will not be asked, is why the overhead approaches 99% yet provides so little impact on the final gameplay experience.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger