Gaming Downturns

[karlhenning]

Harmonix Music Systems Inc.
Number of layoffs: 26-36 out of 240 total workers.

The Cambridge-based video game developer, most well-known for the "Rock Band" franchise, recently confirmed that they will be laying off a number of their employees due to declining sales. Sales have dropped by almost half from $1.7 billion to $850 million since 2008. This comes in the same week that Activision Blizzard Inc. announced the discontinuation of the "Guitar Hero" franchise.

[karlhenning]

Obviously, I'm not combing their balance sheet . . . but I confess to some initial surprise that $850 million in sales revenues is insufficient to sustain a workforce of 240.

[Scarpia]

Obviously, I'm not combing their balance sheet . . . but I confess to some initial surprise that $850 million in sales revenues is insufficient to sustain a workforce of 240.

That may be the retail gross, parts of which get kept by various participants on the supply chain.

There are lots of financial mysteries, like how did Stravinsky eat, when he only got paid $2500 for the Symphony in C, for example.

[karlhenning]

Good point.

[Lethevich]

Activision is currently one of the worst publishers out there, mainly interested in milking franchises until they die, and pioneering the ripping off of inexperienced/gullible customers with additional charges for extra content that doesn't merit a price. Any financial hit that they take I greatly support

[Todd]

From what I have read in the business press, games can cost a fortune to make (Red Dead Redemption reportedly cost over $100 million to make, for instance, though I can't vouch for that figure), with even the "average" games costing an arm and a leg.  What all that money goes to, I don't know for sure.  I assume a fair chunk may go to other software firms for licensing certain software (eg, graphics engines), and then there's salaries, marketing (probably pretty pricey), etc.  Since most game firms don't crank out only hits, cash flow could become a real issue quite quickly.  What happens if you generate one hit and six misses in a one year or two year timeframe?  Obviously the answer is to produce only hits . . .

Of course, gaming will end up like all other digital entertainment, delivered via the net, which is already happening, so whatever business models were working will have to change, and some companies will not make it.

[Grazioso]

Sad to hear about folks losing their jobs, but who can be surprised that an oversaturated gaming genre has lost steam? Maybe try something new instead of milking the same old ideas and franchises. Of course, with all the money it takes to develop a title, gambling is frowned upon Remember the days before games had lifelike graphics and celebrity voiceovers: more experimentation, less cookie-cutter crap.

[Lethevich]

The PC games industry has already made the full transition to being tied online: the latest generation of DRM in blockbuster games requires a constant internet connection to run even in single player (and indie games are often impossible to get elsewhere). And of course, the pirates manage to crack that DRM, often before the games are released, revealing that these measures only punish paying customers. After losing progress from my router resetting I now only pirate games which employ this technology.

The developmental inflation that games experience is because they take at least as long to develop as they always have, but as little as 10 years ago, major games could be produced by a room full of people (5-30 or so, often dedicated amateurs), but nowadays they require enormous amounts of programming to keep up with the expectations of the customers, often large sandbox style or inanely detailed environments and the fear of failure leads publishers to even further encourage an emphasis on these superficial aspects, hugely inflating costs on what is usually extremely simplistic gameplay. It means that the medium hasn't evolved particularly much at all since around 2002, it's just gotten dumber, prettier and more tied to big-named franchises which have money thrown at them like it's candy. With a small group of developers you can easily keep costs under control, but when production becomes an industry rather than a glorified hobby simple jobs which an older developer would just multi-task need alotting to seperate people and things seem to go crazy.

[Todd]

but when production becomes an industry rather than a glorified hobby simple jobs which an older developer would just multi-task need alotting to seperate people and things seem to go crazy.

The goal is to make money.  The industry must change to do that.  That's how segments of the economy mature.  It's a good thing.  Managers at the involved firms need to come up with better ways to deploy resources.  Video games must meet customer demands, otherwise customers spend their discretionary income elsewhere. 

[Grazioso]

The PC games industry has already made the full transition to being tied online: the latest generation of DRM in blockbuster games requires a constant internet connection to run even in single player (and indie games are often impossible to get elsewhere). And of course, the pirates manage to crack that DRM, often before the games are released, revealing that these measures only punish paying customers. After losing progress from my router resetting I now only pirate games which employ this technology.

The developmental inflation that games experience is because they take at least as long to develop as they always have, but as little as 10 years ago, major games could be produced by a room full of people (5-30 or so, often dedicated amateurs), but nowadays they require enormous amounts of programming to keep up with the expectations of the customers, often large sandbox style or inanely detailed environments and the fear of failure leads publishers to even further encourage an emphasis on these superficial aspects, hugely inflating costs on what is usually extremely simplistic gameplay. It means that the medium hasn't evolved particularly much at all since around 2002, it's just gotten dumber, prettier and more tied to big-named franchises which have money thrown at them like it's candy. With a small group of developers you can easily keep costs under control, but when production becomes an industry rather than a glorified hobby simple jobs which an older developer would just multi-task need alotting to seperate people and things seem to go crazy.

A big part of the problem is that it's a form of entertainment tied to an ever-advancing technology. If we can create insanely detailed 3D graphics, mocap animation, motion sensing, etc. well, we better pay to have all that in the game--even if the gameplay is just more of the same old stuff. Forget that. Give me 2D isometric graphics and really unique, engaging gameplay, and I'd be much happier than playing what amounts to Doom with a very fancy paint job.

[karlhenning]

I'm good with a 52-card deck.

[Todd]

Give me 2D isometric graphics and really unique, engaging gameplay, and I'd be much happier than playing what amounts to Doom with a very fancy paint job.

Perhaps you would, but how many other consumers would? 

[Henk]

The PC games industry has already made the full transition to being tied online: the latest generation of DRM in blockbuster games requires a constant internet connection to run even in single player (and indie games are often impossible to get elsewhere). And of course, the pirates manage to crack that DRM, often before the games are released, revealing that these measures only punish paying customers. After losing progress from my router resetting I now only pirate games which employ this technology.

The developmental inflation that games experience is because they take at least as long to develop as they always have, but as little as 10 years ago, major games could be produced by a room full of people (5-30 or so, often dedicated amateurs), but nowadays they require enormous amounts of programming to keep up with the expectations of the customers, often large sandbox style or inanely detailed environments and the fear of failure leads publishers to even further encourage an emphasis on these superficial aspects, hugely inflating costs on what is usually extremely simplistic gameplay. It means that the medium hasn't evolved particularly much at all since around 2002, it's just gotten dumber, prettier and more tied to big-named franchises which have money thrown at them like it's candy. With a small group of developers you can easily keep costs under control, but when production becomes an industry rather than a glorified hobby simple jobs which an older developer would just multi-task need alotting to seperate people and things seem to go crazy.

There are simple, but original, games and there are highly realistic games. Considering the realistic games, piracy can only be reduced, I read today, when prices are lowered.

I don't play computer games however.

Henk

[Lethevich]

A big part of the problem is that it's a form of entertainment tied to an ever-advancing technology. If we can create insanely detailed 3D graphics, mocap animation, motion sensing, etc. well, we better pay to have all that in the game--even if the gameplay is just more of the same old stuff. Forget that. Give me 2D isometric graphics and really unique, engaging gameplay, and I'd be much happier than playing what amounts to Doom with a very fancy paint job.

I partly view advances in graphics as a process of diminishing returns, which is curently at the gradual shallowing of the curve. I wasn't old enough to play Doom when it was released, and when I did a few years ago, although I was surprised that it was enjoyable, but I have no interest in repeating the experience - modern updates of it offer more immersive and enjoyable experiences. Modern graphics are a desirable thing, and don't have to come at a premium (there are indie games based on the Unreal 3 engine, for example).

The problem is that people like me are a minor demographic. Retros will be happy to retreat into the back catalogue, current kids will enjoy new released, but my gateway experience to gaming was via Deus Ex, a last gasp of innovation before the monetisation of the genre partly caused by excessive console influence. At the time it seemed like the future of gaming to me, but it was simply its epitaph. The primary difficulty is that a game like Deus Ex was produced with a budget that indie developers can't afford to invest, and modders don't have the time for. It has the text of a 2D game, but requires the visuals of a modern game to fully complete the experience, and there isn't a market for that.

As we have reached a point where games can produce an effect somewhat approximating realism with current technology, it's down to the fanbase to grow up and begin to support independant developers in producing worthwhile games with the reasonable tools now available to them. In 5 years an Unreal 3 engined game won't look half as ugly as an Unreal 1 engine game did after the same elapsed time.

I suppose I'll just weather this, let the big money games do the legwork in engine development, and pray that by the end smaller developers will be able to utilise the scraps (cheaply licenced engines) left behind potentially make something good. But it's already been 11 years since DE has been released with no sign of any improvement.

[springrite]

I don't suppose gaming downturn is a bad thing.

[Henk]

I partly view advances in graphics as a process of diminishing returns, which is curently at the gradual shallowing of the curve. I wasn't old enough to play Doom when it was released, and when I did a few years ago, although I was surprised that it was enjoyable, but I have no interest in repeating the experience - modern updates of it offer more immersive and enjoyable experiences. Modern graphics are a desirable thing, and don't have to come at a premium (there are indie games based on the Unreal 3 engine, for example).

The problem is that people like me are a minor demographic. Retros will be happy to retreat into the back catalogue, current kids will enjoy new released, but my gateway experience to gaming was via Deus Ex, a last gasp of innovation before the monetisation of the genre partly caused by excessive console influence. At the time it seemed like the future of gaming to me, but it was simply its epitaph. The primary difficulty is that a game like Deus Ex was produced with a budget that indie developers can't afford to invest, and modders don't have the time for. It has the text of a 2D game, but requires the visuals of a modern game to fully complete the experience, and there isn't a market for that.

As we have reached a point where games can produce an effect somewhat approximating realism with current technology, it's down to the fanbase to grow up and begin to support independant developers in producing worthwhile games with the reasonable tools now available to them. In 5 years an Unreal 3 engined game won't look half as ugly as an Unreal 1 engine game did after the same elapsed time.

I suppose I'll just weather this, let the big money games do the legwork in engine development, and pray that by the end smaller developers will be able to utilise the scraps (cheaply licenced engines) left behind potentially make something good. But it's already been 11 years since DE has been released with no sign of any improvement.

Why not just go for the new games? There will be released new games which will be satisfying. The "gameplay" of old games will be recycled.

Henk

[Lethevich]

Why not just go for the new games? There will be released new games which will be satisfying. The "gameplay" of old games will be recycled.

The problem I find is that they don't copy well enough - all the interesting elements have been watered down, or applied to uninteresting gameworlds. They seem to be aimed towards people with very limited attention spans and no interest in anything other than action. Some games are worth playing despite that, though.

[Josquin des Prez]

The goal is to make money.

The goal has always been to make money. Same for the music industry. Same for the movie industry. And yet, great music and great films have been made. Same with video games. I guess some people just aren't in it for the money. Well, at least that was the case until recently. Now it seems like the suits have firm control over every single creative element of a given entertainment form, and the result has been the same whether we are talking about music, movies or video games.

The industry must change to do that.  That's how segments of the economy mature.

The industry must leave room open for creative individuals and innovative projects. There is no economic growth without innovation.

Video games must meet customer demands, otherwise customers spend their discretionary income elsewhere.

By the same token, i guess classical companies can just call it quits and focus on promoting the next Lady Gaga. I mean, isn't this what customers want?

The truth is that there are always alternative or niche markets which however small can turn out to be relatively lucrative, and a company can very well expand its business to all lucrative outlets, big and small. Where ever there are customers, there are profits to be made, and customers come in all forms and sizes. The idea that you can maximize profits by focusing exclusively to one single market type merely because it happens to be the largest is inherently flawed. Gaming companies are trying to cater to the largest and most lucrative markets, the big dumb blockbusters of the console world, the profits of which are driven by the lowest common denominator. They have always been doing this of course but the problem is that its only now that they are doing it at the expense of everything else. Unfortunately, you can't have all blockbusters. Black Ops selling over ten million copies is impressive, but how many games do you think are going to even approach that? And what's going to happen when your 100 million dollar game fails to live up to such a lofty figure? And the game after that?

Besides, how long do you think such a market is going to last? Consoles have already lagged behind the PC in terms of hardware evolution for years. Gaming companies have been able to prevent any serious advancement on the PC by sticking to console hardware limitations, but now the discrepancy has grown too large. Games like Crysis 2 are already being criticized for actually being technologically inferior to its three years old predecessor (a thing unheard of), and the promo for the latest Id software game looks equally shitty (we are talking about a company which for years has been the lead for new, cutting edge technology) and there's an enormous amount of buzz surrounding Battle Field 3 (a PC exclusive), the graphical prowess of which is evidencing just how technologically outdated a game like Black Ops really is. People are going to flock away from consoles to buy the latest PC hardware, and all the effort poured by big gaming companies to snuff the light out of the PC platform and coerce gaming companies to develop exclusively for the console is going to blow up in their faces, as the next batch of games begin to take advantage of technologies which have been dormant for the past three years and younger, more entrepreneurial companies are going to make big giant dinosaurs like EA or Activision obsolete. You can't play it safe in business, and there is no such thing as laying dormant in comfortable markets. You always need to be ahead of the curve and in the near future a lot of gaming veterans are going to learn this lesson the hard way.

[Josquin des Prez]

Perhaps you would, but how many other consumers would?

How indeed? But if 2d isometric games are a thing of the past, as gaming companies have come to believe (based on whatever idiotic marketing predictor they happen to rely upon), how come a large company like Blizzard is releasing two major isometric games (Starcraft II, and the imminent Diablo III), and are raking millions in the process? What was the highest selling PC game until very recently? Ho yes, the Sims, an isometric game. What is the single highest selling game today?. Ho yes, its a 2d, isometric game called Farmville. I rest my case.

[Josquin des Prez]

There are lots of financial mysteries, like how did Stravinsky eat, when he only got paid $2500 for the Symphony in C, for example.

He didn't.