Is the Video Game Industry broken?

Seems every week if not every day there's more news of shut downs and closures of recognized development studios these days. Yes gaming is a business much like any other and when something fails to bring in a profit, you have to look at the bigger picture and cut the fat where needed in order to survive and compete against others that are doing the same. But what is a profit these days? What really is success anymore in the video game market? In my personal opinion it seems like that particular bar is raised far higher than it would be for any other creative medium such as Television and the Movie industry. I know it may not always be entirely fair to compare the video game industry to Hollywood but when you have big budget games with production cost that rival summer block busters and have just as much marketing put behind them it sounds like it's not too big a stretch.

Keep in mind I'm only looking at the business side of things when making these comparisons not really the actual work that goes on behind said production. We all know it's hard and difficult work whether it's movies or games and I'd go far enough to say it's much harder work making a game than any movie. But from a business and financial stand point, what equals success? What do you have to do in order to keep a franchise going and still be able to compete against other companies in the same line of business as you?

Usually when I think of a game being successful from a business side of things it means that it was able to sell enough units to re-coup the cost of it's creation. Whether it reaches main stream appeal or not, if it sells and sells well then it should be successful right? Well with the recent goings on at Radical Entertainment being possibly shut down by Activision after Prototype 2 "failed to reach a broad enough audience".

I couldn't help but be confused by this. Sure Prototype 2 didn't get the most stellar reviews but if history of this business has taught us anything is that good reviews don't mean good sales and the same goes for games that get critically panned. If I may quote an article from Destructoid's Jim Sterling on the matter,

"Prototype 2 was the best selling game in North America when it launched back in April, but still managed to perform so underwhelmingly in Activision's eyes that the studio is now in the can."

While I don't have the sales numbers for the game, based on this statement as well as others I've seen on Prototype 2 the game sold pretty well. Yet why did Activision still see it as a failure? Was the cost of making it just that high? Moving on we now have EA saying that Dead Space 3 has to sell at least 5 Million units to be considered viable. Are you kidding me? 5 million? Let's take some perspective on this. I think it's safe to say that Dead Space is a franchise that is pretty well recognized. Sure we all know what it is, but how about the folks who don't always follow gaming sites like this one or just aren't in the know?

Last time I checked with friends I know locally many of which don't really keep up with this sort of thing or even pay attention to reviews, they know what Dead Space is. Hell even my mother knows what Dead Space is, not because of me mind you, but because of the ads she saw on TV for Dead Space 2. That to me sounds like the marketing did it's job and got the word out about the series. Dead Space 2 by itself was able to reach 2 Million units sold very quickly and not long before the original game managed to bring in those numbers as well. In any other business that would be a booming success and to any other developer they could only hope for 1 million units sold. But in the eyes of EA that's still not enough they want a whopping 5 million units to be sold. A number higher than the combined sales of it's previous games. Tell me I'm not the only one who sees something wrong with this line of reasoning? From a business stand point this sounds like EA is shooting for a target that can't really be hit.

I know it's been said by the GiantBomb staff themselves that it's amazing that a video game even gets made at all given their knowledge of what goes on behind the making of a triple A game and knowing just how bat-shit crazy it all would look in the eyes of someone who would analyze how the business is run. I know these are only a few examples but I'm curious what you guys think? Is there something incredibly wrong with the triple A market? Is the industry just straight up broken?

Just blow into the bottom it will clean out the dust and work fine. 

@The_Laughing_Man said:

Just blow into the bottom it will clean out the dust and work fine.

don't forget to blow out the compartment where the game is inserted as well

@The_Laughing_Man said:

Just blow into the bottom it will clean out the dust and work fine.

don't forget to blow out the compartment where the game is inserted as well

@The_Laughing_Man: I'm so glad you fixed all that. From now on, things will change.

I don't really understand your point.

anyone tried switching it off and on again?

It's not broken, it's just a lot bigger than what it was in the PS2 era where development cost was lower and risks were easier to take. P2 might of sold well, but it still might not have been enough to cover development costs and marketing costs. Sucks but them's the breaks.

@Atary77: From a business stand point it makes perfect sense. Allow me to address some of your points individually.

But what is a profit these days? What really is success anymore in the video game market?

For Activision, profit typically means making money off of an IP. The proportion may be ludicrous to some people, but then again the same can be said for the size of Activision as a whole. A larger business demands a larger monetary profit if it is going to invest any time on a project. Even if Prototype 2 sold enough to recoup all the costs, Activision may not have seen much a future in maintaining that IP for very low profits compared to some other things they may be doing.

~Dead Space Example~ Tell me I'm not the only one who sees something wrong with this line of reasoning?

I would have to agree with you there if we are limited to release date sales in NA. I think that EA believes that the changes in Dead Space 3 will be enough to reach that target. However I don't know if that figure is aimed at life time sales or worldwide sales; you'd have to get more specific on where you found EA's sales target.

Is there something incredibly wrong with the triple A market? Is the industry just straight up broken?

There might be some problems from an video game player's point of view. With the focus being on long-term profits, the point to making a game is for profit. The fact that a game is of good quality is incidental to them. Because of this, life time sales numbers for the life of an IP are the focus and thus a game caters to the lowest common denominator. Because the costs are high, so are the stakes. However, people are getting what they want and companies are making a profit still. From an industry standpoint, nothing is broken.

The new consoles need to come out, then sales will go up and more new IP's will be created and people will stop losing their jobs.

JUST BLOW DUDE'S DICKS

everybodys allways saying it's the end of times.movies,books,music,games,real life.theres ALLWAYS sombody proclaiming this is the end. yet by some miracle,the world keeps moving on.

You absolutely can compare the gaming industry to Hollywood. In fact, many of the problems you're talking about are very similar to big budget tentpole movies, which nowadays often need to break 200 million domestically just to recoup production and marketing costs. What was a megahit 10-15 years ago is now just splits, even counting inflation. Similar thing with games.

I don't know if that means the industry is broken or that it's just gotten to be a major player and has adopted the ills of other giant media industries. Probably a little bit of both

Of course the industry is broken, has been for years and its only gotten worse. It is a complete and real possibility right now that within the next two years Sega could cease to exist, Nintendo could become solely a software developer and any one of the supposed "big and safe" studios could collapse after a single bad investment. The "middle man" games are dying because no one can afford the risk anymore and the big games are getting so expensive that innovation and new ideas are practically a taboo.

I would say that industry is the thing is broken.

@DoctorDanger99 said:

everybodys allways saying it's the end of times.movies,books,music,games,real life.theres ALLWAYS sombody proclaiming this is the end. yet by some miracle,the world keeps moving on.

yup, nostalgia is a helluva drug. its like those douchebags that say the 80's had the best movies. yeah sure, it had a ton of great movies, but they dont remember the never ending stream of shit movies that was the majority of the 80's.

same thing with games, sure you might remember all the great classics for previous generations. but there was ALOT of shit. the standard quality of games is only increasing as time goes on.

Yes, you could say it's broken. It seems that these days the publishers are being run by the same type of people that caused the financial crisis: greedy, only aimed to squeeze more money out of gamers. The fact that most excecutives of publishers talk about selling 'products' instead of games is really sad

I think the game industry has just passed its 'monolith' moment. In the PS2 era big budget games meant big bucks. Piracy, the cheapening of dev kits and expertise as well as the general mainstreaming of the industry as a whole have changed this, and the industry is now in an 'adjustment' phase. Smaller, more interesting games (Minecraft, Portal, etc) have become major successes, and the big wigs are realising if they want a block-buster they need to do more than spend money on graphics and explosions (not that they'll stop doing that). Particularly with the wider recessions, the industry needs to learn to get more bang for its buck. It's not broken, just changing, and yes, there will be growing pains.

@Inkerman said:

if they want a block-buster they need to do more than spend money on graphics and explosions (not that they'll stop doing that)

Call of Duty kind of goes against that, also didn't Max Payne 3 sell over like 3 million?

Yes, the video games industry is completely broken and in 10 months we'll all be playing in the street with hula hoops and twigs.

@Sooty said:

Call of Duty kind of goes against that, also didn't Max Payne 3 sell over like 3 million?

Call of Duty is an existing (and massively successful) franchise though. Existing franchises generally will do well because the overheads (in terms of story and setting design, maybe even reusing old parts of the prequels) are lower, and there's a guaranteed audience. Even then, look at games like Portal and compare profit margins. Even with the CoD franchise, Black Ops made more than MW2, and I would argue in part that was down to changes Treyarch made, as well as changing the setting.

Those games are still gonna sell, the key is whether or not they're going to make enough money to make them worthwhile. Look at recent new shooter ips, most have tanked.

Not to be chicken little, but I'll echo an earlier post - the video games industry has some serious problems right now.

The cost of developing games has increased exponentially over the past two decades, and with new consoles that will require even more assets, the trend isn't likely to stop. What we're left with is a no-mans where anything that isn't a blockbuster means a financial failure for the game, and possibly complete ruin for the developer and publisher. For the player, it means we get fewer different games because game makers can no longer afford the risk. For the people that makes the games, it means brutal hours, scads of unpaid overtime and the never-ending threat of unemployment regardless of a game's success.

I think we're already starting to see a shift in the industry - it seems (to me at least) that there are more focused and original games coming from smaller teams lately.

No, the economy is. Derp. Don't you people ever go outside? Check the google news section for "Greece" duder.

@downtime58: I think you basically hit the nail on the head with what I'm getting at. No publisher wants to take any risk of any kind and unless a game does gang busters it's a failure. There's no middle ground anymore.

@MoleyUK said:

Yes, the video games industry is completely broken and in 10 months we'll all be playing in the street with hula hoops and twigs.

Hula hoops are baller

I feel like this thread keeps popping up every other week.

we are seeing the side-effects of publisher bloat. Remember back in 2004 when we had quite a few publishers? Then one by one they started either merging, selling ips, or just shutting down (and being devoured for ips, rights, and studios piecemeal). Now we've got, what, 4 major publishers in the west? (I think japan has quite a few still)

Basically, EA and Activision are continually upping the ante by throwing more money into projects, and TONS more into marketing. Video games are already a risky investment, but the big publishers are doubling down and the only people who lose are the studios.*

*Actually, EA's stocks lately seem to indicate that maybe their strategy isn't paying off so well. While they certainly aren't changing course, one has to wonder if there is a better way.

I don't it is any more broken that it always has been, it's just that today it is so much larger and involves more money, so it is harder to keep anything transparent or "secret".

As for your Prototype 2 example, it might have been the best selling game in America when it launched, but if that is still a big loss compared to the time and money spent on development and marketing and such. Being the best selling during your launch doesn't mean anything without looking at the competitors, sales numbers, profits and expenses.

will newer, more efficient game engines not make things much easier and cheaper for devs?

Make better games is all it comes down to and suits not knowing what they are doing.

@Atary77 said:

@downtime58: I think you basically hit the nail on the head with what I'm getting at. No publisher wants to take any risk of any kind and unless a game does gang busters it's a failure. There's no middle ground anymore.

Because we all know, back in the day publishers were fine with splitting even.

The "problem" with the industry is the same as it's always been with all commercial culture production (or indeed any business). Big, established companies are not interested in anything other than increasing profit. So original and unproven content is only rarely produced by them, but rather smaller production companies which have nothing to lose or are still idealistic enough to make what they want themselves.

I would argue that the current climate and tech allows for much better possibilities for these smaller companies to get their products out than a decade or two ago where your only option was to get a publisher to place your game on store shelves.

sexism.

No, the industry is not "broken". It's just young.

I would equate what many regard with signs of the end times as simple growing pains. There are problems, sure, and there always will be. But I have faith in the industry's publishers and developers capacity to respond to new trends and consumer feedback, and hopefully supply and demand will create a solid balance in which the gamers get quality experiences while the publishers and developers turn a worthwhile profit.

I don't mean to sound like a slave to the market and the invisible hand, but these sorts of threads always confuse me. Like the television and movie industries, the gaming one is extremely difficult to break into, and studios collapse all the time, all around the world. But I guarantee you that there will always be new studios, with new ideas, there to replace them. Will the majority of those fall as well? Probably. But eventually one or two will break through and become the next major video game corporation, and they will have to deal with a whole new set of problems. The cycle continues.

Last I checked Prototype 2 had sold a cumulative amount of under 1 million units - some number above the 900k mark. Not sure what the budget for that game was but if it was anything close to what we've typically been seeing these days of around $30 million then that number does not make back the costs of production which in turn makes it not profitable or a good sell for Activision.

Nope it's just going through a transition to a mature industry. When a new industry starts up profitability is often incredible. In the game industry pretty much anyone could make a profit in the 80s thats why you got that flood of crap games that caused the crash. Now we live in a world where Midway is bankrupt, EA is frequently losing money, companies are talking about needing multimillions in sales to even breakeven and developers close at least once a quarter. Competition has eroded profitability to a breaking point. Does that mean the industry is in trouble? Not really it will just have to change. In particular companies will need real business strategies going forward. http://www.youtube.com/watch?v=ibrxIP0H84M Just blindly competiting won't get you anywhere, just saying were gonna make better games than everyone is not feasible not sustainable and not a sound business strategy. Of the existing publishers only one that has a strategy that is clear to me an outside observer is Activision. That doesn't mean they are great but it probably means they will continue to outperform the industry.

Right... let's look at some hard numbers here... note that these are all pulled from the XBOX 360 achievement data here on GB (so we have a closed set - and while not representative necessarily of total real world sales [I suspect that we are a bit lower on the DudeBro front and much lower on the Casual "Ooooh! That box looks cool." crowd] it is likely a good indicator of relative sales trends -- or, to be more precise: just go with it Duder):

A super mega really popular game: GTAIV 28,615 players (yes, it's older, has been sold in 18,000 different packages, rented, lent, given away, etc., etc... but, still)

A very popular game: Batman: AA 18,407 players (Note that this does NOT count the GOTY edition. Not bad.)

Dead Space: 17,278 players (Good numbers.)

Dead Space 2: 7,139 players (Hrmmm. I'm not really surprised they want to try to get DS3 to sell more. Also [opinion here] I don't think you're going to get them by just going back to the first Dead Space)

Prototype: 11,122 players (Sure.)

Prototype 2: 1,134 players (Euuuughhh. You can be the bestselling game in a month, but if sales for that month as a whole are terrible, your game is not going to have sold well, now is it? THIS is underpreforming from any objective standpoint, really.)

The problem is everything is too expensive.

Customers have to invest far too much money. This prevents innovation.

This $60 price tage for each game is the problem.

Also the industry says that games have to be a certain length. To produce a game of this length they need to spend alot of money to make the game... and thus sell it.

I wish we would have far more "indie" like games but at the AAA level of polish.

Why cant we have shorter games, like 2-3 hours, but have those games are priced accordingly. And not suck!

We need quicker turn around of games. I want more short stories, rather than long drawn out boring titles which repeat themselves.

No more Halo 3: ODST dlc shenanagins

It's not broken, it's just experiencing growing pains.

The business side of gaming has hit a massive rise in popularity, profit, and cost; Activision and many other big name publishers don't quite seem to get that pumping millions of dollars into an IP isn't going to make it the next Call of Duty or the next Halo or whatever. They really need to get a grasp on how to handle smaller names in the first place.

Again, this is the place where I get to point to Valve and their Steam service and say "THAT'S HOW YOU DO THIS SHIT!"

In 2004 the entire video game industry had an estimated annual revenue of around 25 billion. Today I've seen some estimates put it's annual worldwide revenue as high as $100 billion. The industry has perhaps quadrupled in size in 8 years. It has enjoyed a period of unprecedented growth over this past generation. Granted, a lot of the more recent growth may not be in areas a lot of people around here are huge fans of, like social network gaming (Zynga), mobile gaming (Android/iPhone), and Wii shovleware, but there's more money coming in now than any other time in the history of gaming. It's true that there's been a bit of a downturn in terms of console sales and software sales recently, but that has more to do with the over extended lifespan of the current generation than with any grand impending doom.

The Wii is reaching the end of it's lifespan and the PS3 and 360 are 6 and 7 years old. There hasn't been anything particularly new or interesting in the console space in quite a while and it's starting to take it's toll. Hardware sales have been slacking since most people who have any interest in console gaming already own 1 or 2 or even 3 of the current consoles by now. Honestly at this point I believe the industry needs an infusion of new hardware to get people interested in console gaming again.

ITs been broken since the sega genesis and super nintnedo stopped having games made for it.

Like most industries it's evolving. Being cyclical in nature means it's not broken, it's just part of the cycle.