The Great Video Game Business and Financial (In)Stability Thread

Minarchist wrote:

Wow, I think that just filled my trope bingo card.

Mine, too, but it was fun collecting.

http://www.theverge.com/2014/2/5/538...

$50K a day in ad revenue...from a game that is about as simplistic as they get.. this is what people talk about when they say the demographic shift in gaming. I tried this game for 2 min before removing it from my phone.

Supposedly we can blame PewDiePie or bots for the sudden interest in that game.

it's honestly not that one title or any one title.. its exactly the nature of this new era.. no one has defensible properties anymore.. its just one "out of nowhere" hit after another... almost complete chaos.

It's a gold rush and the race is on to pan the right stream at the right time.

That's the android/ios gaming market, though.

It's always been random. The same thing happened with Kairosoft and Rovio. And in all honesty, it's pure luck. Someone with an audience notices your game, features it, and all of a sudden you're getting major downloads.

I think that the major lesson here is that the mobile gaming market is basically identical to the flash game market that showed up in the early 2000's. These are people looking for short timewasters, not mechanically complex experiences. Which is a shame, because I think there's potential for some very good "real" games on the platform. Unfortunately, those just don't sell, especially if they're not free.

AAA game development is on the precipice of imploding, mark my words.

Thank the nine for indie developers on the PC scene, I think that's where all the really interesting work is going to get done in the next 5 years or so.

I don't have much hope for the mobile market to rise above the dregs it has settled in to. It showed promise the first couple years but everything is getting crowded out by F2P and Energy mechanics. Oh great, I get to wait 5 hours to "play" your game for 5 minutes so I can wait for another 10 hours to "play" for 10 minutes. It's so considerate of developers to not let me waste too much time playing their games.

I also hate touch only controls. Maybe I'm alone, but I haven't played a single touch game that I didn't think would be better with a controller and/or mouse/KB.

MojoBox wrote:

AAA game development is on the precipice of imploding, mark my words.

Eh, there will probably be a reshuffle to get rid of some of the oversaturation (I'd be surprised if Square Enix survives the next 5 years), but I don't think demand for major budget, big publisher "core" games has really gone anywhere. Console sales have gone way down because the Wii audience moved over to mobile, but as far as I can tell, those people weren't playing (what we think of as) "AAA" games anyway. Grand Theft Auto V just made -- and I want to be careful not to exaggerate here -- but I believe it literally made $842 quadrillion dollars. Publishers can take info like that to their investors and say "hey, this space is still very lucrative." So I don't really see any danger of those kinds of games going away soon.

Yeah GTAV did well but I think that's more an anomaly than a sign of health for the rest of AAA. GTAV took, what, five years of development? No other AAA publisher is doing that, instead we have the likes of Ubisoft and Activision crapping out Assassin's Creed and COD games every stinking year. And the general lack of new franchises being announced for the next gen systems is very depressing to me.

Is Rockstar privately owned? Either way it occupies a privileged sort of position in the industry where they can take their time, which also builds excitement which is one part of why sales are so strong. We hadn't had a GTA in aaaaaaaages and the market was salivating from it. Do you expect EA and Activision to NOT pump out their franchises on a yearly basis? I don't. They have investors to please and quarterly growth to show.

I have to admit, I knew GTA V was a terrible example when I wrote that, but I decided to sacrifice my actual point for a "literally" joke.

No, no, you're priorities are spot on!

(is it just me or is the GWJ smiley vaguely threatening/menacing?)

Yeah, it kind of looks like a face you'd imagine peering through your window at night.

Anyway, I think the market is going to readjust over the next few years, and some big players will drop out, but I don't think it will be the end of AAA gaming. It will just be the beginning of a better-managed AAA games business. Right now, we are in a tough console transition that hurt sales. But there are some huge new IPs on the horizon (Titanfall, Destiny, Watch Dogs) that are all very likely to be successful and spawn equally successful sequels. And thus, the cycle will continue.

But I do agree that the indie business is stealing some of the AAA thunder right now, and will continue to do so.

MojoBox wrote:

Do you expect EA and Activision to NOT pump out their franchises on a yearly basis? I don't. They have investors to please and quarterly growth to show.

In related news, Call of Duty just shifted to a 3-year cycle. There will always be a special room in my house with a nice TV/surround and nicer couch for big-budget AAA titles. Always.

Ok, until the Oculus Rift is consumer-ready. Then I won't care about the TV/surround.

MojoBox wrote:

Is Rockstar privately owned? Either way it occupies a privileged sort of position in the industry where they can take their time, which also builds excitement which is one part of why sales are so strong. We hadn't had a GTA in aaaaaaaages and the market was salivating from it. Do you expect EA and Activision to NOT pump out their franchises on a yearly basis? I don't. They have investors to please and quarterly growth to show.

Rockstar is a division of Take-Two Interactive (who also owns 2K Games), a publicly traded company.

Ah. Take-Two is certainly an interesting company as they also allowed Irrational the time they wanted/needed for Bioshock Infinite (ambivalent as I may be on that title). I've generally gotten the impression that their SOP is hire talent and give them the resources to work.

I'm also not saying there is no merit in AAA games, simply that the business model as-is is extremely unhealthy and most of these companies are so set in their ways it will take massive setbacks to get them to change, setbacks I see coming down the pipe soon. And I'm also saying that, on average, AAA development is not where innovation is happening by design.

I'm also not saying there is no merit in AAA games, simply that the business model as-is is extremely unhealthy and most of these companies are so set in their ways it will take massive setbacks to get them to change, setbacks I see coming down the pipe soon. And I'm also saying that, on average, AAA development is not where innovation is happening by design.

I think its less than they are set in their ways but more that they are now victims of their own success in a rapidly changing market. Why AAA even became this "thing" is that certain companies became bigger and bigger and the development budget became larger and larger thus the company around it became larger and larger. When you are EA and you have to justify all sorts of employees around the business of making games (IT, Marketing, Sales, Financial Analysis, Accounting, HR, Training, Network Ops etc..) then that impacts your scale and operating expense.. thus demanding more revenue thus demanding games that sell more than a few hundred thousand copies.

You can't walk into EA in the structure they are in now and not be able to justify something that moves the needle only a little bit.. you need projects that move the needle alot OR are have ridiculous margins (all the EA F2P games have crazy margins since they are produced so cheap and cost peanuts to run vs the $$ they bring in). If I'm the mobile guy and I can spend $1M at 60%margin thats a win.. vs a PC indie game that might only make 20% margin on that same million (though laughably EA would probably take that right now as well given the AAA space now)

These big pubs will eventually implode as the market changes..or become much leaner and smaller in scope and perhaps go back to their "roots" so to speak.

I already see the Platform holders trying to change their own images around from consoles that play big budget AAA titles to more well rounded platforms that offer something for everyone.

ScurvyDog wrote:
MojoBox wrote:

Do you expect EA and Activision to NOT pump out their franchises on a yearly basis? I don't. They have investors to please and quarterly growth to show.

In related news, Call of Duty just shifted to a 3-year cycle. There will always be a special room in my house with a nice TV/surround and nicer couch for big-budget AAA titles. Always.

Right, but they added a 3rd studio working on the franchise, so we'll still see yearly installments of Call of Duty games.

"[The change] will give our designers more time to envision and innovate for each title," Hirshberg said. "It will give our content creators more focus on DLC and micro-DLC which ... have become large and high-margin opportunities and significant engagement drivers. It will give our teams more time to polish, helping to ensure that we deliver the best possible experience to our fans each and every time."

http://www.polygon.com/2014/2/6/5387...

It will give our content creators more focus on DLC and micro-DLC which ... have become large and high-margin opportunities and significant engagement drivers.

Again, it's all about the money, and not about the game. It's gaming cancer.

The only constant in life is change.

TheGameguru wrote:

These big pubs will eventually implode as the market changes..or become much leaner and smaller in scope and perhaps go back to their "roots" so to speak.

*nods in agreement*

I've been thinking AAA is doomed since the start of the last generation. There was a lot of hand wringing by developers at GDC 2005 about the cost of development, and that was back in the XBox Original Recipe/PS2/Gamecube era. I think we're seeing a market shift or evolution of the industry into leaner and more focused experiences. Maybe it's more of a devolution as the trend seems to be heading back toward experiences akin to the mid-90's era.

I also think that a lot of the problem with AAA is that the budgets are growing faster than the size of the audience which is the reason for the financial woes of most big publishers. There's also the issue that the audience might be growing but not uniformly across all platforms, which is why mobile has been a huge factor lately. Or that some of the audience has moved to a different platform, or opted to stop playing games for a spell (there's some really good stuff on the TV these days so it's possible).

I already see the Platform holders trying to change their own images around from consoles that play big budget AAA titles to more well rounded platforms that offer something for everyone.

I don't think the platformer holders care what their hardware is being used for so long as the machines are selling If the market is on overall downward trend then Sony and MS made the right moves in the last generation to ensure that at least they've got a lifeboat ready when the ship hits the iceberg. If things aren't going bad, then it's extra cash in their vaults.

I don't think the platformer holders care what their hardware is being used for so long as the machines are selling If the market is on overall downward trend then Sony and MS made the right moves in the last generation to ensure that at least they've got a lifeboat ready when the ship hits the iceberg. If things aren't going bad, then it's extra cash in their vaults.

Very true..the numbers already show people spend more time watching video on their consoles than playing games. Microsoft is positioning the Xbox One to be more of a media hub with its live TV integration.

AAA can die and the publishers can all implode but I could still see consoles being relevant. A fixed hardware living room system that multiple people can play will still be viable for all sorts of developers to make money on.

http://www.engadget.com/2014/02/28/s...

It's amazing to me to see so many articles about Microsoft's failures where Sony seems to be very much under the radar.. but in comparison Sony is far more financial trouble than Microsoft. There is zero fear of Microsoft going anywhere for some time.. several business units are enjoying double digit YoY growth. The UC (Lync/Skype) group is now a >$1B unit and growing.. Projections and Trends are showing MS might dominate this market in 10 years like they dominate the Enterprise Messaging market now. Avaya hasnt sold a new PBX system to a single company over 1,000 users in 2 years! 900 of the Fortune 1000 companies have Lync deployed in some fashion and the list of companies that have 100% replaced all UC infrastructure with Lync is growing rapidly.

Microsoft if not for the fact they operate under more DoJ scrutiny today than even Apple.. could bury their competitors with an extend price war.

Also is some fairly not surprising news... a tiny % of users contribute to a large amount of IAP revenue

http://www.engadget.com/2014/02/27/s...

TheGameguru wrote:

http://www.engadget.com/2014/02/28/s...

It's amazing to me to see so many articles about Microsoft's failures where Sony seems to be very much under the radar.. but in comparison Sony is far more financial trouble than Microsoft.

I was under the impression that the two companies are basically opposite each other's situations: Microsoft's main product is doing very well whilst its console/games division is struggling, whereas Sony as a whole is in the crapper whilst its games division is about the only profitable piece of it. So, while not reflective of the companies overall (or their stock prices), if you read a lot of games news it'd make more sense to hear more about Microsoft. All games writers care about is whether Microsoft is going to spin off their console division or not to focus on core competency.

At least they're temporarily off the whole "Nintendo is doomed and should just make smartphone Mario games" thing.

Minarchist wrote:
TheGameguru wrote:

http://www.engadget.com/2014/02/28/s...

It's amazing to me to see so many articles about Microsoft's failures where Sony seems to be very much under the radar.. but in comparison Sony is far more financial trouble than Microsoft.

I was under the impression that the two companies are basically opposite each other's situations: Microsoft's main product is doing very well whilst its console/games division is struggling, whereas Sony as a whole is in the crapper whilst its games division is about the only profitable piece of it. So, while not reflective of the companies overall (or their stock prices), if you read a lot of games news it'd make more sense to hear more about Microsoft. All games writers care about is whether Microsoft is going to spin off their console division or not to focus on core competency.

Pointless to spin it off.. Unless some company see's value and profits somewhere in the division once it was separate and made lean? Doubtful since it costs a ton to bring a major console to market.

TheGameguru wrote:

Pointless to spin it off.. Unless some company see's value and profits somewhere in the division once it was separate and made lean? Doubtful since it costs a ton to bring a major console to market.

Were I the CEO (and it seems the new CEO does think this way), I would want to get rid of a division that loses me $2B a year pretty much however I could. It's a huge revenue sink and doesn't make money. Why wouldn't they spin it off? They've not managed to build any whole-life Apple-esque integration. It takes time to grow a brand, especially in a market with such a high barrier to entry, but after tens of billions of dollars flushed down the drain and 13 years of trying…I'm with the CEO.

Were I a Microsoft shareholder I'd be squealing to dump that boat anchor of a division.

I also kinda wonder about the infrastructure requirements involved if they sold off the Xbox division. I imagine the XBL and cloud processing stuff makes some pretty heavy use of MS's worldwide server backends. Currently, they probably get that access for free or at super minimal cost. If you sell off Xbox, does the new independent company keep getting that kind of access, or would they have to pay a lot more or build out their own infrastructure? Since the Xbox brand is heavily built on the online component, that's a pretty vital piece of things.

I get this sense from Microsoft in general, ever since the launch of Windows Phone; where they're trying to reestablish their brand, look and feel, and haven't made up their mind.

Every Microsoft product in the last couple of years, whether new or just redesigned, feels out of place, out of touch, unsure of itself. Like Katy Perry in that video pretending to be from the 80's; a full makeover where she looks painfully uncomfortable while pretending she's someone she obviously isn't.

I admit that I've always looked at the XBox with contempt, and yet I applaud the original XBox and 360 for staying independent of Microsoft's sphere of influence.

The XBox One feels like a console that has been repurposed; from gaming machine to Microsoft stronghold in The Living Room (TM). Microsoft has taken a great, established product and turned it into something not quite for gaming, capable of aggregating video feeds, being forced to use Windows 8/Windows Phone/Metro live tyles look and feel, regardless of what the best UI for a gaming console should be.

The Internet loves to hate, and Wall Street loves to exaggerate. Microsoft tampered with a winning formula; of course it's gonna get picked on.

Minarchist wrote:
TheGameguru wrote:

Pointless to spin it off.. Unless some company see's value and profits somewhere in the division once it was separate and made lean? Doubtful since it costs a ton to bring a major console to market.

Were I the CEO (and it seems the new CEO does think this way), I would want to get rid of a division that loses me $2B a year pretty much however I could. It's a huge revenue sink and doesn't make money. Why wouldn't they spin it off? They've not managed to build any whole-life Apple-esque integration. It takes time to grow a brand, especially in a market with such a high barrier to entry, but after tens of billions of dollars flushed down the drain and 13 years of trying…I'm with the CEO.

Were I a Microsoft shareholder I'd be squealing to dump that boat anchor of a division.

I think that the point GG is trying to make is that there's nobody would even think about buying a division that loses that much money, especially since it's a consumer sales based division.

The MS games IP portfolio is really just limited to the franchsies, which aren't valuable outside of the console realm. All of the tech IP is still locked up in the OS, research and cloud divisions.