Analyze This

Catchy title, check. Inexhaustible vocabulary and willingness to say in fifteen words what could be said in three, check. Basic understanding of gaming industry mechanics, check. Prominent outlet with available pool of readers, check. Certainty at the superiority of own comments, double check. With just these easy to acquire tools, anyone can be a gaming analyst. No seriously, anyone. Which, as it turns out, is pretty much what most amateur gaming analysts already know and hope secretly that no one finds out.

And now that there is lots of great negative press to feed upon, it's easier than ever to tap into that growing sense of disquiet and gloom that's washed ashore in the wake of Holiday Season 2005. You're likely to see a lot of articles that start like this: Reading the gaming news of late, it would be easy to conclude that our favorite past time is suffering under a significant downturn. Headlines speak of layoffs, cancelled games, legislation, closing studios, and declining sales ... How do I know? Because that's very nearly the opening you read on the front page today, just another diminished third in the perpetual minor harmony of gaming editorials. It's the sort of thing you'll probably read a lot in the coming weeks, because a significant slump in sales is, if you're a self-proclaimed gaming analyst, like picking the trifecta at Pimlico and then on the way out the door hitting the progressive on the dollar slots.

And, most important, it's all smoke and mirrors. You see, kiddies, there is no downturn. Allow me to explain"…

Wait, before I explain, let me lay out the mainstream argument a bit. I offer, for your delicate consumption, a host of dismal and melancholy links about gaming's current sad state. Feed, my young ones, on the luscious ennui of an industry! Lament, children, for the king is dead, the queen is in cahoots with the enemy, and Hamlet's got poison on his blade. Cry havoc physics engine, and let loose Dogs of War III Extreme Edition, for gaming is doomed. Additionally, PC games, the Xbox 360, the Gamecube, Nintendo corporation, last generation systems, and independent developers are, to varying degrees, also doomed.

Just look at the carefully chosen numbers. There are eighteens, and percentages, and minus signs, and arrows pointing down. We are in the last days, the end times, the Y2K6 of gaming's inevitable spiral into anachronistic oblivion, and man isn't it fun to point out the intricate weaving of our express handbasket to hell. You'd think so, at least, should you believe everything you read.

I concede, things are not bright sunshine and frolicking puppies for the gaming industry at the moment. There's a less-than-stellar Xbox 360 launch, a lot of very proficient people pocketing pale pink slips, a disappointing sales sheet from the most recent holiday season, and a lot of industry insiders wailing and gnashing their teeth. Now is the winter of our discombobulation. In short, gaming seems to be at its own throat lately, and from the cheap seats, watching happily, cackle the pundits, cheering the bloodletting.

There's no news like bad news.

The argument can, and is, made that a series of serious issues have coalesced to form a muddy quagmire into which gaming has begun to spin its wheels. Issues like used game sales, piracy, the rising costs of development, and the lack of stellar AAA titles have conspired, as if in a smoky war-room with giant televisions projecting spinning wire-frame globes, to stall the gaming juggernaut. The argument has some merit. Well, not the smoking war-room part, but there's definitely some serious issues that are proving particularly troubling for game companies.

Piracy is a rampant and continued problem, evidenced by the fact that some of the most prominent purveyors of copywritten media like games, movies and music rank among the top 1000 of all websites (source: Alexa), with more than a hundred million page views per day, traffic that ranks equal to sites like Gamespy. But, then, piracy is hardly a new issue, is it?

On the mall front, retailers have indicated they don't give a flying hyena how people like Mark Rein feel about their sales of used games. I spoke to several specialty retail managers in researching their feeling on used game sales and whether they felt bad about killing gaming, and the response is unambiguous: Corporate says used is a priority; period, end of discussion. At the beginning of 2005, prior to the merger, EB alone was expecting to increase it's total revenue from the sale of used games into the double digit percentages of all sales, a leap that would mean nearly doubling their used output for the year prior. One manager put it best like this, "It all comes down to profit. Used games make more money for my store, so it's what I sell."

For the analysts, insiders, and statisticians, however, used games simply don't exist, and the dollars that funnel toward "preowned", as retailers would have us call them, cross some fiscal event horizon and disappear entirely from the market. So, when these dour articles talk about a gaming downturn, they aren't actually talking about the number of games actually sold to people. They are talking, very specifically, about the number of _new_ games sold, and they are talking about a total dollar value. They are constraining the scope of the discussion so that pundits exactly like yours truly will bumble onto the internet, and the pages of magazines, and onto your television screen while you're waiting to watch reruns of The Man Show, and tell you that if you don't buy the right games, the ones that the industry wants you to buy, then it's all going to melt away like a witch in a rainstorm. Seriously, though, wouldn't the wicked witch have slowly melted over time just from the humidity in the air? I digress.

It's baloney. What isn't being talked about is the fact that consumers are buying more games than they ever have. They are just spreading the money out a bit more, putting dollars into the used market, into handheld devices, into services like Live Arcade, and into direct downloads. The handheld market alone, which just cracked into the billion dollar range in 2004, soared 62% to 1.6 billion for 2005 on the backs of the ever sturdy GBA, the largely successful launch of the PSP, and the coming of age of the DS. Let's also not be quick to forget that handheld titles usually run at a significantly lower price point than traditional console titles, so if there's a downturn in total dollar value, it doesn't reflect the sale of fewer titles from a volume standpoint. It just means that customers didn't buy into 2005's $2.00 leap in the cost of the average console title.

That is, if 2005 hadn't actually been a record-breaking year in total dollar sales for video games. Which it was. In reality, the industry cracked the ten billion dollar mark in 2005 with an annual growth of six percent , a number that doesn't take into account the growth of the used market which is better than another billion. So, the conclusion we must draw is that following another record-breaking year in gaming sales, more thumbs than ever flicking bad guys to pixilated dust, the industry is spiraling into a cataclysmic oblivion? Seriously?

The problem is that we didn't buy the right games. Go ahead, hang your head in shame. I can wait. We had the temerity to buy handheld games, the brass ones to shell out a few bones less for a used copy of the RPG The Spiky Hair Chronicles of Angst VII, the audacity to not be able to find an Xbox 360, and the unmitigated gall to buy budget games like Geometry Wars when we did find one instead of the quadriplegic Madden offering which fell onto store shelves like a hairball from a sick cat. Don't you see, gamers? You're killing gaming!

Nevermind, that there's a natural transition into a new generation of consoles. Nevermind, that the costs for developing for these new systems will drop rapidly in the coming year, opening the door for the large library of games to which we've grown accustomed. Ignore that fact that where in 2004 we saw Grand Theft Auto San Andreas, Halo 2, Half-Life 2, and World of Warcraft all released in a single month's span, where this past holiday we had our choice of Age of Empires III, Gun, Star Wars Battlefront 2, and True Crime 2. Pretend not to notice that the games just didn't drive gamers, crumpled and sweaty dollar bills in hand, to the point-of-purchase. Notice only that a few choice arrows point the wrong way, and rush out to buy whatever game this month's scar-ridden rap phenom of choice has whored himself onto.

If there is a downturn, a slump, a dip in the market, or a fluctuation in the financial profitability forecasts for quarter two fiscal 2006, then it might very well be attributed to the fact that consumers are trying tell the industry something. Maybe, just maybe, publishers can't slap a marketing budget on the aft-end of a lipstick-wearing mule, and convince the entire market to soul-kiss the donkey. And, if that's even a little bit true, then the industry is healthier than it's ever been.

Oh, and we're all doomed. Just thought you should know.

- Elysium


Fletcher wrote:

Stop it! You're destroying my carefully constructed circular argument against growing up! Curse you!

As long as you don't have any kids, I think you could probably fight the power indefinitely.

Podunk wrote:
Fletcher wrote:

Stop it! You're destroying my carefully constructed circular argument against growing up! Curse you!

As long as you don't have any kids, I think you could probably fight the power indefinitely. :D

Sadly, I know some folks who are still fighting the good fight even after having kids. Not sure what to make of that, and I can't judge, but it does seem fairly trying for all involved.

P.S. Where is Elysium's new bearded, creepy avatar? He owns the site and he does not get one?

I'm iconic, a cultural identity. I can't change! I must be a solid bedrock of immutable foundation.

Also, Elysia made this for me, and I like it.

Fletcher wrote:

Sadly, I know some folks who are still fighting the good fight even after having kids. Not sure what to make of that, and I can't judge, but it does seem fairly trying for all involved.

I think that's a fair assessment. I tried it for about 6 months and I am here to tell you that it sucks ass.