It all started with an article from TechCrunch called “The Console Market is in Crisis.” The quick of it is this - comparing this generation of consoles to last in terms of raw sales numbers shows a steep decline in total sales when looking at the North American market. All console sales combined were down almost 60% with the market shrinking from almost two million in sales to a little over 700,000 in a similar time period. But this really is only part of the picture of how the video game market is changing, several other factors are seeing the market evolve into something we haven’t seen in a long time, if ever.
CostA very real problem facing video games today is the sheer cost to develop a true, AAA title. Last generation saw some of the most expensive video games ever created. Grand Theft Auto V had an estimated 265 million dollar cost to produce, market and distribute. At $60 a pop, the game needed to sell 4.5 million copies just to break even. While the game generated $875 million dollars in revenue in the first 24 hours alone, you can easily see the risk vs reward scenario at play here is extremely high. Grand Theft Auto isn’t atypical though. It’s a long established franchise that only sees a new game in the series pushed out only every 4 to 5 years. With very few companies able to support that kind of financial investment, there isn’t going to be much content or competition against GTA.
Perhaps the best example of the unsustainability of the current AAA model in the gaming industry comes from 2013’s Tomb Raider. Tomb Raider is a franchise with a long history in the game industry with several successful titles. Square-Enix decided to reboot the game utilizing the original developer, Crystal Dynamics, full talents. The game’s budget was almost an estimated $100 million. Square-Enix called Tomb Raider a failure, despite selling 3.4 million units in just four weeks. It wasn’t until a full year later the game broke even and started to obtain profitability. The problem with this? Crystal Dynamics was already hit with layoffs.
These are just two opposing examples though of the sheer cost involved with creating games. In an article detailing game budgets, the New York Times estimates the average game cost between $18.8 and $28.2 million to develop during the Xbox 360 and PlayStation 3 era. With these costs increasing for every year the game was delayed.
TimeWhich brings us to the time it takes to develop video games today and how that time is increasing for AAA developers. Content is king in today’s game world, and what pushed consoles are the big AAA titles. Games like Madden, Call of Duty, and Grand Theft Auto grab the attention of the mainstream. Console manufacturers push big first party titles like Halo on Xbox and Uncharted on PlayStation. The one thing these games have in common is the fidelity of them are increasing.
The old saying is time equals money and the time to create these games comes from a variety of factors. Assets - that’s the 3D Models, Sounds, Textures and other media used to create the games - are becoming more detailed and therefore, take more time to create. Increased processing power are allowing developers to create more complex algorithms to solve, simulate, and stimulate players by mimicking real world actions and physics.
While EA and Activision have figured out a way to pump out yearly sequels to these franchises; maintaining the same level of sales figures have begun to prove even more difficult than before. While early on in the Xbox 360 and PlayStation 3 lifecycle sales numbers of games like Call of Duty or FIFA game increased year over year; as we tailed towards the end of the consoles life cycle into 2012 and 2013 we saw the same year over year figures decrease. Madden itself took one of the biggest hits dropping almost 30% year over year from its 2012 game.
But what about games that start from almost nothing? Fresh franchises and new AAA series. Let’s look at one of the best received new franchises from veteran developer Naughty Dog: The Last of Us. Under development from 2010 and released in 2013, the game took almost 3 full years to develop. Naughty Dog also managed to squeeze out three Uncharted games prior to this, with the studio splitting duties. Four games in seven years is a rarity.
The more common scenario looks more like what happened at 2K with the Bioshock franchise. The first game was released in 2007 after it’s own lengthy development. While the game saw a sequel, it was from another developer entirely. Instead the successor, Bioshock Infinite, went under development and didn’t see release until 2013 - almost 6 years later. The game went on to sell around 4.5 million copies, but with a hefty estimated development cost, it most likely lost the publisher and studio a lot of money.
Which brings us to studio closures, developers leaving their jobs, and more. The aforementioned Bioshock developer, Irrational Games - which was headed by longtime industry veteran Ken Levine - closed down earlier this year. There were numerous reason, some of which we’ll get into later, but it most likely comes down to financial reasons.
Studio closures are all too common - in fact - here are just some of the studios that closed down in 2013: THQ, Lucas Arts, Vigil Games, Bioware San Francisco, Junction Point Studios, Blitz Games Studios, Danger Close, Victory Games, and Time Gate. Some of these studios have been producing games since the early 1980s - like Lucas Arts. Others, like Junction Point, developed high profile titles like Epic Mickey and were helmed by industry veterans like Warren Spector.
Of course the biggest might have been THQ - which was actually a multiple studio closure and the end of a company that has been around the industry for a very long time.
But that’s just ONE YEAR. The entire generation also saw some other big name studios closed like Bizarre Creations, 3D Realms, Blackrock Studios, Blitz Games, Factor 5, Zipper Interactive, Pandemic, and Hudson Soft.
All of the studios point to a bubble being burst within the industry. It wasn’t easy to see while we were in the bubble, but now that it’s gone, the picture has become too clear.
Entire studios closing is only half of the picture. Several high profile developers left their longtime studios. Peter Molyneux left Lionhead after 12 years. Cliff Blesinzski left Epic Games after 20. Ken Levine rebooted Irrational Games after 12. All of these folks have one goal in mind - get out of the vicious cycle of the big huge AAA games and try to make smaller entertainment and gaming products.
The ChangeIndie Games rose to power this generation, championed by games that is almost too hard to consider indie. Minecraft rose from almost nothing to become a behemoth of a title but it laid the groundwork for many new ways we consume gaming.
Early access, open beta testing, direct feedback, Kickstarter.
These things did not exist before and now they’ve completely changed the games industry. Gamers are getting access to games earlier in their life cycle, they are influencing the decisions developers are making with the games, they are playing the games earlier than ever, and they are financially supporting the developers directly during a time when publishers would normally plant their seed money. Crowdfunding is the true definition of the word.
So what exactly is this change? Where is the market going? It’s the decline of the AAA. It’s not that these games won’t exist, it’s that they’ll be few and far between. Instead we’ll (continue) to see more mid-tier titles and lots of indie games. Lots and lots of indie games. The need for a developer/publisher relationship is shrinking.
Game development used to be something that was incredibly inaccessible for most. Whether it was cost prohibitive because of the tools involved, or access to the information required to create the content - creating a game required resources that many folks didn’t have.
Today though, it’s all changing. Whether it’s access to Photoshop on a cheap monthly cost or access to entire game creation suites for free or low cost, anyone can try their hand at creating their dream game and can do so with the resource power of the internet behind them.
Perhaps nothing better exemplifies this than with what Unity 3D has done. Splitting their professional game development suite in two, anyone can download and begin developing for Unity 3D. Best of all the engine is multi-platform supporting Windows, Linux, Mac, Xbox 360, One, PS4, Wii U, Android and iOS. Oh, and that’s all with the same code base.
Unity (the company) makes money in a few ways. Several high end features that professional developers want to use that involve some content pipeline tools and high end graphics rendering are locked behind seat based licenses. There’s also a content store which people can contribute graphics, sounds, textures, 3D models, scripts, and entire game templates for other people to purchase to ease their own development.
While Unity has pioneered this approach, we’re seeing previous industry leaders in engine development follow suit with both Epic Games (Unreal Engine) and Crytek (Cryengine) announcing their own engine development tools and assets available for low monthly costs.
All of this means we’ll have more developers out there creating content on every platform. The incentive to work you way up in the industry as part of a corporate development machine with the hopes of having your dream game created are becoming smaller and smaller. You can do it yourself or with a small team.
These cross platform engines are the key to sustainability for video games. And while many of them support consoles today, they are also making consoles less important.
Whether you want to believe it or not, the current generation of consoles of the Xbox One and the PlayStation 4 are, for the most part, not like any of the previous 30 years of console hardware. For the first time we’re seeing (almost) off the shelf PC components being used to power the systems. It’s also the first time we can easily benchmark the consoles against current PC hardware on an even playing field - and high end PCs are already ahead.
This is completely different than what we’ve seen in the past. Consoles usually have a head start of 2 years or more until PCs can catch up. The advantage of the closed platform, integrated hardware, and tight development libraries always gave consoles advantages. And while the Xbox One and PlayStation 4 are still closed systems, the other advantages simply don’t exist.
If consoles are getting weaker, PCs are getting stronger. The biggest complaint PC gaming has had over the years had to do with accessibility. Users don’t want to worry about drivers, upgraders, etc etc. But numerous technologies are pushing things forward. Steam is the obvious golden child here and Valve’s upcoming Steam Box initiative could push things even further down that path giving home users a console like experience for PC games.
Several other technologies are emerging too - streaming games between devices and datacenters are becoming more popular and even realistically possible. Amazon recently released the Fire TV - an Android based set top box for $99 backed by veteran game talent making...smaller indie style games.
It really seems as if the traditional game console is on its way out. It’s said almost every generation, but it’s rarely backed by trends or data. Which begs the question as to whether Microsoft, Sony and Nintendo will invest in a future device. If there’s one trend that transcends the console market it’s that software companies are turning into service companies. With most of the consoles already working towards PC architecture, could we see carefully curtailed services from Microsoft and Sony on PC next generation instead of an investment on hardware they barely break even on?
If the last generation is anything to go by, the industry is going to look a lot different in six or seven years. For now games have gone back to being smaller experiences with tighter budgets and smaller teams. But the quality hasn’t suffered, instead thanks to improvements in tools we’re seeing great games created by both veteran and new developers alike.