Jonathan Grenier

Is Technology Bankrupting The Gaming Industry?

Ever since the beginning of the personal computing era, technology has been said to enhance our lives and ever since someone said that, we’ve been doubting that this is really a productivity boost. One area that’s interesting to look at is the effect of technology on businesses and business models. Take the gaming industry for example.

20 years ago, a team of 1 programmer could create an entire game in 2-3 months. He would write the text himself, do the graphics and code the engine. The money required to create a game was minimal and so were the risks. As time went on, teams grew first to a few more people (2-5) and then more (10-20) and again and again. As it is now, graphical technology is so powerful that it takes an army of artists , programmer, writers, Q&A and managers to create a “triple-a” game. The result is that a major game will now cost upwards of 15-20M$ to create and that 1M copies sold is now a bad result. You may well lose money on a project that has sold 1M copies. To cope with the increased price to create a game, the retail price of games have gone up.

The software industry is lucky enough that so far, we’ve been exempt from the technology race. It has actually had the opposite effect: as new processors and more memory become available, we get to be more and more lazy about the way we create our application. Gone are the days where we had to carefully plan every byte, we now have garbage collection and scripting languages to help us out.

What’s true for the gaming industry is also partly true for the movie industry. When special effects, green screens and virtual actors became the norm, the price to create a movie went up. So did the ticket prices at the local theater.

The real question then becomes when do we stop. 20M$ to create a game is a big number, but as we add more resolution and as 3D displays become standard, where do we stop? The race to create the next big “hit” means that every year the price to create 1h of entertainment goes up but as we’ve seen, there’s a limit as to how much people are willing to pay for said entertainment.

Over the last few years we’ve seen new platforms come out that has rekindled the market for smaller games. Digital games download on consoles and portable gadgets like the iPhone have enabled programmers to go back to more manageable budgets and mitigate the risks. Unfortunately, as these gadgets become more and more powerful, the budgets will increase.

So when does it stop?

Lessons From The Game Industry : Innovation Fails

While I’m a programmer first and foremost, I’ve spent years working in small agencies where you need to find money or you’re out of a job. Now that I’m on my own as the owner of Techniconseils, I still love to analyze business trends and see where things are going. Today’s post is about the game industry and the lessons we can learn from it.

Just like anything else, that industry has been hit hard by the current recession but there’s something fairly interesting that’s happened over the last few years. In that industry, there are 2 huge publishers, Electronic Arts and Activision. For several years up until about 2 years ago, EA was known as the “evil” one because it kept rehashing game ideas and coming up with sequels years after years. About 2 years ago the John Riccitiello (a former CEO) came back and decided to change things around and make EA a more innovative company, betting that the new titles would outsell the sequels.

Around the same time, Activision decided to go the other way and pump out sequels at an alarming rate. Innovative games like Guitar Hero went from cool game to major franchise with 2-3 releases a year. Activision now treats any game as a franchise and if your game is not something they can pump out every year then it’s not a game they want.

As with everything, you have to balance the “right thing” versus the business decision. Today, after 2 years, it seems clear that EA’s strategy of supporting new franchises and new innovative games has mostly fail. Contrast the huge successes of Guitar Hero and Call of Duty with the very slow sales of EA’s Mirror Edge, Dead Space and Brutal Legend and you get a better understanding of why EA had to lay off 1500 people this year.

So what does that mean for us indie developers? Does that apply to the iPhone market for example? Well, it could be argued that coming up with Tap Tap Revolution 3 is probably a safer bet than a completely new game. As an indie developer, my first instinct is always to do the right thing, but there’s no denying that perhaps the right business decision is not always the “right thing” to do.

How do you balance your business decisions?