MCV has recently published this report suggesting that Electronic Arts is putting itself up for sale. This is on top of previous news suggesting that Activision is doing the same.
Around 2002 Rage closed in the UK. Other studios were closing too. At about the same time I remember reading that UK publishers had the biggest marketing spend ever at E3. I sat in my office and gulped. What I saw was so clear and so obvious to me. The industry was heading for a disaster. It might take five years, or it might take ten or more, but I was convinced that unless something was done, there would be catastrophe. When an industry is spending an incredible amount of money marketing and the creative elements within it are losing their jobs, it means that things have gone completely out of whack. An industry that was about entertainment through the most creative medium ever devised had been replaced with a poker game. The winners would be those with the biggest money to spend, the losers would be everyone else, including the game developers and gamers.
I contacted TIGA (I was a member at the time) and urged the importance of discussing this issue. The industry was not going to survive if it carried on like this, I argued. Apparently, the issue was raised by the TIGA board, but dismissed. I was told that this was simply consolidation and inevitable as our industry grew.
I left TIGA as it become clear to me that it was not at the time a friend of small indie developers.
Well the years rolled by, XBOX, Playstation 3, XBOX 360 and the usual cycle continued. The industry grew and many dubious claims were made about it being bigger than hollywood. Yet, I looked at the charts, and what did I see? The same games, the same brands, the same franchises… the same pattern I had witnessed since around 1999. Racing Games. FIFA. PES. Madden. An FPS.
I remember what the industry was like 20 years ago, and back then there was more invention, more variety, more… soul. Our industry had fallen victim to one of the oldest and deadliest forms of business disease: accounting.
Don’t get me wrong, if you run a business accounting is important. But you must never forget what accounting is for. Accounting is supposed to be about making sure that your company can continue to function properly as it tries to achieve some goal. Money is not an end in itself, unless you are a bank. The video game industry does not exist to make money; it exists to make video games. One of the symptoms of the accounting disease is forgetting this.
What any system creates is as a result of the core intentions of those that govern it. If the industry is governed by the creators of games, then what you will get as a result is a large variety of inventive games and a healthy market with many profitable niches. The output of the system becomes video games, and I believe that is all that matters (with money being a vital part of the process, of course, but not an end in itself).
If, on the other hand, the system is governed by accountants then the final output will not be games, but instead will be money. It’s really quite simple, and is what we have witnessed over the past 10 years. The video game industry became increasingly about shifting boxes, not about entertainment, and for a while the money rolled in for those who could afford to ‘play the game’ (leaving those who were merely talented at making games on the side lines).
Format holders perpetuated the problem by ensuring high barriers to entry. On the face of it, this was to keep the number of products sold on the platform lower and the quality higher, but I believe there is another unspoken reason. Markets often work by illusion. The value of a company depends significantly on its perceived ability to generate income in a way that competitors cannot. How could enormous companies like EA survive if thousands of indie developers could also publish to the same platforms? Do you think Notch is the only one out there who could make a hit game?
Minecraft has arrived on a console, but only after it proved itself through an avenue with a low barrier, and unfortunately that kind of mega success is too rare. You need to go viral to succeed and that’s a lottery (if it weren’t we’d be seeing a lot more similar cases). But that’s not the point here: the point is that the big players really did not want to think about this approach to video game development… the idea that sheer creativity could compete with accounting. I mean, what on earth is the point of having a 200 person team and a development budget of 100 million if you are going to be lucky to break even, or just make a 10 million profit, when one guy on his own and no marketing spend can make as much money?
All this money spinning did two things. First of all it closed the door to independent developers, who were left with one choice: the PC, with all its inherent problems. PC game development became a speculative hobby-like platform; few indies could make living from it and it certainly was not a robust business prospect (unless you had some special no risk USP, and who can prove that before you build the thing?). We all know about the successes, but what of the failures? My particular interest is in sustainable business models for the industry where the lottery is somewhat reduced. I don’t want to spend a year making a game unless I have a realistic opportunity at monetizing it, because I want to be a professional game developer, not an amateur.
The second thing the money spinning did was cause greater competition within the remaining genres that the accountants considered most profitable. And this made the poker game more intense. The primary technique for competing in this poker game was greater spending on production value and marketing. With this greater spending came greater risk, which meant that the variety of high value games diminished. Games tended to become derivative, and any new innovative game would probably not have the budget to compete with the big players and so would not get a fair testing in the market (which in itself perpetuated the idea that you should not take risks by innovating too much).
The problem with narrowing the choice of games and having less innovation is that the market tends to get bored. But that’s OK, because you can wow them with ever greater production value. This, of course, is what Sony was all about. Sony saw that better technology was a good way to grow the market. It worked for a while too, but in the end there is a limit to how much you can drive the market forward by ‘wow’.
This is a lesson learnt the hard way by hollywood. The reason the blockbusters such as “Ben-Hur” and “Spartacus” exist is because the film industry consolidated into major studios which competed against each other with ever bigger productions, until the inevitable collapse occurred. We have seen the same thing happen to the video game industry and now we are perhaps at a major turning point. Activision, Electronic Arts and relatively new upstart Zynga appear to be failing to deliver. Accounting is no longer enough. Production value alone cannot satisfy; you must also rely on the fundamentals, which in film is basically story telling.
Now we find that indie game development is on the rise. Instead of consolidation, we are seeing fragmentation; we are beginning to become something of a cottage industry again, and frankly the change cannot come too soon. This is positive stuff indeed, but I have a concern. The only platform I can currently consider developing for (without crowd funding investment) is iOS, simply because it is a relatively open platform (low barrier to entry and little censorship) with good monetization opportunities. I am not alone in this view and although this is without a doubt a very good thing, it does mean that indie game development is dependent to a large extent on Apple. Our industry will never be truly free until an open publication platform exists (that has effective DRM… see this ). Whether this will ever happen is anyone’s guess. Perhaps “Ouya” is for real and will start this ball rolling… time will tell.
Whether EA and Activision and similar traditional publishers have a
roll role in the future of our industry, I don’t really know. Probably, but they are going to look very different and I think it is a good bet that the future video game industry will resemble today’s movie and TV industry. In the future, we are most likely to be contractors. Holding companies will be formed for most projects and these companies will contract us to work on them. When we ship the game, we will move on to the next project.
I’ve been saying the above for years, and a common objection has always been job security. As we look at the modern video game industry with its litany of deceased video game companies all over the world, and as we look carefully at Activision, EA and Zynga, does that argument really hold up any more?