Game development cost, technology and the future's trend

 Gaming as a technical whole has been progressively getting better and better each year; the technological aspect is being pushed to new benchmarks on both PC and consoles. The leap from last generation to this generation has been as visually significant as the jump from 2D to 3D (granted most of the stuff looked like shit in the early days of 3D, but I regress). We've been treated to some gorgeous looking games that hopefully shouldn't be nearly as much of an eyesore to look back at some 10-15 years later on. I think we're living in one of the best gaming generations depending on how you view things, with how games has stepped up so much with production value. 
 

However... The price has to be paid for this.

It costs $775 million to sustain this man once a year.
Development costs has soared since last generation. Typical game development cost from the 6th generation was around the $6-10 million mark (can't find a source, I remember reading it from a gaming magazine). That has been doubled to around $18-28 million. The most expensive game ever to make is Grand Theft Auto IV, costing some $100 million. Super blockbusters such as Modern Warfare 2 about $40-50 million for development costs alone (MW2 cost $200 million if you include marketing, producing and distribution of discs, a little behind the cost of making Avatar at $237 million). Hell, even Shenmue cost $70 million to make and that was on the Dreamcast (refer to the Grand Theft Auto IV source) and that was the second most expensive game ever to make! There's several of other biggest title's cost that you can see in this list here.
  
Apparently the Call of Duty franchise doesn't rake in high enough profits 'thanks to Kotick.
As games become more complex, the development costs tend to rise a lot. Developing original and new IPs are a risky venture, as a game is expected to only start making a profit when at least 500,000 units are sold. Promotional costs will rise the number of units needed to be sold to compensate for additional cost, but publishers know its worthwhile to spread the word about the game at least a bit.  
 
Because of this, IPs tend not to be explored nearly as much as churning out more sequels after sequels than last generation. Why? Because the risks are less and the name is known, its guaranteed to sell copies as long as they don't turn it into a truly terrible sequel and developers can reuse most or some old assets, a good example such as that of Call of Duty. Production costs are still higher in sequels, but it is somewhat negligible in the grand scheme of things (Assassin's Creed cost $20 million and its sequel cost $24 million). The sad truth is that at least some sequels is a necessity for publishers to make a profit and not crash and burn when things go wrong.

The pacing of technology now

 Imagine a world where everyone uses SpeedTree.
As of yet, the current trend of gaming seems to be "optimize the shit out of games on the console ports" for the most part (and leaving a mess of a PC port) to work with hardware limitations. While the jump from 6th generation to 7th generation was remarkable, the progress has slowed down a fair bit in recent years, as developers concentrate developing on consoles rather than pushing new technologies on the PCs.   

Yeah sure, there's Crysis, Metro 2033 with their graphical prowess, L.A. Noire for its amazing facial animation, Bad Company and Red Faction for its destructible environment, but that hasn't quite applied to every game out there just yet. For enthusiasts, this is a bummer. However, I suspect that the rising cost of development will be lowered as new software/firmware and technology become more affordable and when developers find new tricks to reduce production cost. The motion that Microsoft and Sony are going for a 10 year lifespan for their console is great for developers, publishers and gamers alike, as they are familiar with the console and whatever assets they have can be reused in some form of shape.  
 
 Windows XP. Fuck. You.
As a consequence, new technological advancements has been hindered, most notably features from DirectX 10 and DirectX 11 (such as Tessellation). I have a prime suspect that because of consoles do not support the newer versions of DirectX along with a overwhelming number of OS running XP, they have yet to see widespread use. Whatever new burst of features come out right from gaming will surely be determined by the specs of next-gen console and become a standard norm. PCs are this point of time have become more of pioneers of moving right along forward, while consoles and stubborn XP users are the massed market that is a lagging a little behind (and consequently again, lagging overall progress for everyone else). This can be hinted as a good or bad thing, as I said before, production costs are soaring high.
 

The future - what this could mean

I'mma let you finish, but Diablo II had the best procedurally generated content ever.
Publishers are interested in reducing costs while maintaining or increasing profits and they are aware of rising costs. As such, publishers will either be investing in technology or picking up some fancy middlewear gear that some other company is working on. Some dreaded game engines will finally cease to exist and become obsolete once people figure out they can't go on using the Unreal Engine 3 forever and expect to stay afloat having to do many things manually for art assets and programming. As such, I foresee a future where there will be more procedurally generated content to reduce cost, whether it is done to create levels on the fly or pick a random level generated while in development. There are already some impressive demos, such as one that demonstrates the construction of a city by using algorithms. Even if it isn't used religiously, it may see some use to create a basic template for level designers to work with. 
 
User generated content is on the rise and it is undeniable, with games that are basically entirely reliant on the users to generate content, such as Spore and LittleBigPlanet. Developers give the necessary tools for the mass to use and you will keep seeing new content created by users, free of charge from the developers (aside from developing the tools, anyways). They will be giving more tools that is accessible and easy to use, with content that is arguably always more better than what the developers can put out if the tools are competent enough (see Forza Motorsport 3). And even if that doesn't work out, PCs always have modders who will create content for everyone else. 
 
 Steam sales are the bane of my wallet's existence.
Distributing discs is a royal pain in the ass and costs a lot of money to mass produce, never mind ship across the entire bloody world to every large retailer. This is where digital distribution may be seen as a rise, as speculated by analysts and gamers. The cost of discs will be entirely eliminated from the factor, especially important for huge games like Call of Duty where several million discs need to be made and shipped to maximize profits. It will come soon surely enough, but I doubt we will see the retailers out of business when it comes to games by the next gen. Still, it appears to be inevitable when almost everything is going digital now. Additionally, we will also see less independent developers who are not owned by a publisher, not until digital distribution is widespread. So yes please to digital distribution. 
 
On less optimistic moods, we may however, see another price increase by some $5-10 dollars if the market demands a game enough to warrant the price hike. This may not apply universally to every game, but it may be a trend for big AAA titles like (once again) Call of Duty. Because you never know, Bobby Kotick is fucking insane. 
 
There's also increase interest in developing more half-baked games for the Wii, PlayStation Move and Kinect. The casual market is a necessity to funnel more money into making some games for us hardcore nerds, or well entirely just ignoring us and our pleas. The money has to come from somewhere, people. 

Conclusion

Cut production cost with whatever fancy technology they have (which will additionally benefit us, the gamers) and maximize profits so the gaming industry won't be so damned volatile that it will collapse on itself. I'm done with my wall of text. God that was too much time spent typing shit up that nobody will ever read.
8 Comments
9 Comments
Posted by Meteora

 Gaming as a technical whole has been progressively getting better and better each year; the technological aspect is being pushed to new benchmarks on both PC and consoles. The leap from last generation to this generation has been as visually significant as the jump from 2D to 3D (granted most of the stuff looked like shit in the early days of 3D, but I regress). We've been treated to some gorgeous looking games that hopefully shouldn't be nearly as much of an eyesore to look back at some 10-15 years later on. I think we're living in one of the best gaming generations depending on how you view things, with how games has stepped up so much with production value. 
 

However... The price has to be paid for this.

It costs $775 million to sustain this man once a year.
Development costs has soared since last generation. Typical game development cost from the 6th generation was around the $6-10 million mark (can't find a source, I remember reading it from a gaming magazine). That has been doubled to around $18-28 million. The most expensive game ever to make is Grand Theft Auto IV, costing some $100 million. Super blockbusters such as Modern Warfare 2 about $40-50 million for development costs alone (MW2 cost $200 million if you include marketing, producing and distribution of discs, a little behind the cost of making Avatar at $237 million). Hell, even Shenmue cost $70 million to make and that was on the Dreamcast (refer to the Grand Theft Auto IV source) and that was the second most expensive game ever to make! There's several of other biggest title's cost that you can see in this list here.
  
Apparently the Call of Duty franchise doesn't rake in high enough profits 'thanks to Kotick.
As games become more complex, the development costs tend to rise a lot. Developing original and new IPs are a risky venture, as a game is expected to only start making a profit when at least 500,000 units are sold. Promotional costs will rise the number of units needed to be sold to compensate for additional cost, but publishers know its worthwhile to spread the word about the game at least a bit.  
 
Because of this, IPs tend not to be explored nearly as much as churning out more sequels after sequels than last generation. Why? Because the risks are less and the name is known, its guaranteed to sell copies as long as they don't turn it into a truly terrible sequel and developers can reuse most or some old assets, a good example such as that of Call of Duty. Production costs are still higher in sequels, but it is somewhat negligible in the grand scheme of things (Assassin's Creed cost $20 million and its sequel cost $24 million). The sad truth is that at least some sequels is a necessity for publishers to make a profit and not crash and burn when things go wrong.

The pacing of technology now

 Imagine a world where everyone uses SpeedTree.
As of yet, the current trend of gaming seems to be "optimize the shit out of games on the console ports" for the most part (and leaving a mess of a PC port) to work with hardware limitations. While the jump from 6th generation to 7th generation was remarkable, the progress has slowed down a fair bit in recent years, as developers concentrate developing on consoles rather than pushing new technologies on the PCs.   

Yeah sure, there's Crysis, Metro 2033 with their graphical prowess, L.A. Noire for its amazing facial animation, Bad Company and Red Faction for its destructible environment, but that hasn't quite applied to every game out there just yet. For enthusiasts, this is a bummer. However, I suspect that the rising cost of development will be lowered as new software/firmware and technology become more affordable and when developers find new tricks to reduce production cost. The motion that Microsoft and Sony are going for a 10 year lifespan for their console is great for developers, publishers and gamers alike, as they are familiar with the console and whatever assets they have can be reused in some form of shape.  
 
 Windows XP. Fuck. You.
As a consequence, new technological advancements has been hindered, most notably features from DirectX 10 and DirectX 11 (such as Tessellation). I have a prime suspect that because of consoles do not support the newer versions of DirectX along with a overwhelming number of OS running XP, they have yet to see widespread use. Whatever new burst of features come out right from gaming will surely be determined by the specs of next-gen console and become a standard norm. PCs are this point of time have become more of pioneers of moving right along forward, while consoles and stubborn XP users are the massed market that is a lagging a little behind (and consequently again, lagging overall progress for everyone else). This can be hinted as a good or bad thing, as I said before, production costs are soaring high.
 

The future - what this could mean

I'mma let you finish, but Diablo II had the best procedurally generated content ever.
Publishers are interested in reducing costs while maintaining or increasing profits and they are aware of rising costs. As such, publishers will either be investing in technology or picking up some fancy middlewear gear that some other company is working on. Some dreaded game engines will finally cease to exist and become obsolete once people figure out they can't go on using the Unreal Engine 3 forever and expect to stay afloat having to do many things manually for art assets and programming. As such, I foresee a future where there will be more procedurally generated content to reduce cost, whether it is done to create levels on the fly or pick a random level generated while in development. There are already some impressive demos, such as one that demonstrates the construction of a city by using algorithms. Even if it isn't used religiously, it may see some use to create a basic template for level designers to work with. 
 
User generated content is on the rise and it is undeniable, with games that are basically entirely reliant on the users to generate content, such as Spore and LittleBigPlanet. Developers give the necessary tools for the mass to use and you will keep seeing new content created by users, free of charge from the developers (aside from developing the tools, anyways). They will be giving more tools that is accessible and easy to use, with content that is arguably always more better than what the developers can put out if the tools are competent enough (see Forza Motorsport 3). And even if that doesn't work out, PCs always have modders who will create content for everyone else. 
 
 Steam sales are the bane of my wallet's existence.
Distributing discs is a royal pain in the ass and costs a lot of money to mass produce, never mind ship across the entire bloody world to every large retailer. This is where digital distribution may be seen as a rise, as speculated by analysts and gamers. The cost of discs will be entirely eliminated from the factor, especially important for huge games like Call of Duty where several million discs need to be made and shipped to maximize profits. It will come soon surely enough, but I doubt we will see the retailers out of business when it comes to games by the next gen. Still, it appears to be inevitable when almost everything is going digital now. Additionally, we will also see less independent developers who are not owned by a publisher, not until digital distribution is widespread. So yes please to digital distribution. 
 
On less optimistic moods, we may however, see another price increase by some $5-10 dollars if the market demands a game enough to warrant the price hike. This may not apply universally to every game, but it may be a trend for big AAA titles like (once again) Call of Duty. Because you never know, Bobby Kotick is fucking insane. 
 
There's also increase interest in developing more half-baked games for the Wii, PlayStation Move and Kinect. The casual market is a necessity to funnel more money into making some games for us hardcore nerds, or well entirely just ignoring us and our pleas. The money has to come from somewhere, people. 

Conclusion

Cut production cost with whatever fancy technology they have (which will additionally benefit us, the gamers) and maximize profits so the gaming industry won't be so damned volatile that it will collapse on itself. I'm done with my wall of text. God that was too much time spent typing shit up that nobody will ever read.
Edited by Jeust

Good article. 
 
Still there is a point I don't think you covered. The fact that with better and more advanced technology and higher expectations from players, less developers will feel and be deemed fit to deal with a budget and a development cycle able to provide a satisfying experience.  A lot of great developers even in this generation are getting shafted.  And with higher expectations less companies will be able to launch a competitive product. 

Posted by vidiot

Big development costs is one of the many reasons why Japanese gaming in the last few years, looks like their hiding in under the shelter of handhelds. 
 
My ability to personally track what constitutes as a "successful game", has become more skewed and warped over the years. Selling more than your development costs is one thing, but I find the Kotick mentality of "everything must sell X-billion copies to warrant any form of success" really confusing. On-top of that, you have the "did they, didn't they?" mess over whether or not Mafia 2 made a profit. Yakuza 3 apparently sold enough to warrant a western release of Yakuza 4? I'm happy for that, but what threshold did they use to decide that? Last I checked, Sega was over-selling western sales for Yakuza to the moon and back. 
 
The development time-period between certain titles these days seem ludicrous. Large budgets sometimes have a tendency of breeding long development cycles, and that's not a good thing. At the same time you have the time-honored tradition of publishers scared with what developers are going to do with their money, and there's not going to be a whole lot of people wanting you to do something experimental in Call of Duty. Not that anyone want's CoD to do something "crazy", but when other publishers start using "everything CoD" as their personal barometer to what should be in a game, regardless of what the game is or budget: That's when I get concerned. 

Posted by Meteora
@Jeust: Good point. I just had an impression that such conclusions are a little skewed because of the economic recession that we are in, so more developers are a little bit more vulnerable to being shafted or have personnel relocated to another development team. Because prior to that it the normal case to me was the case of development teams that were unsuccessful commercially or EA was being a dick and shutting down studios. The future may see a lot less games being made at the expense of these huge budget title games. I'm not sure how the hell they can cope with this unless video games is more widely accepted. 
 
@vidiot: Yeah that's what I felt about Japanese games in my previous blog. Their games did very well in their local market and held a western market dominance for quite a bit of time. Now that they lost their grip, development costs are soaring, cultural and game design clashes with accepted western design and their lagging pace is putting them far behind in the next gen. 
 
The western market is hard to penetrate in for Japan now. At least its not nearly as bad as penetrating the Japanese market with western games. That's nearly impossible.
Edited by Jeust
@Meteora said:

" @Jeust: Good point. I just had an impression that such conclusions are a little skewed because of the economic recession that we are in, so more developers are a little bit more vulnerable to being shafted or have personnel relocated to another development team. Because prior to that it the normal case to me was the case of development teams that were unsuccessful commercially or EA was being a dick and shutting down studios. The future may see a lot less games being made at the expense of these huge budget title games. I'm not sure how the hell they can cope with this unless video games is more widely accepted."

But I have an impression that this started happened this generation even before the economic recession. Look at Silicon Knights, creators of Eternal Darkness and Too Human for example. They haven't released no game for a lot of time. Or other publishers that finding difficult to secure a publisher and choose to close doors. 
Posted by Meteora
@Jeust: Apparently our Canadian government has been granting them some $4-5 million dollars. =/
Edited by Jeust
@Meteora said:

" @Jeust: Apparently our Canadian government has been granting them some $4-5 million dollars. =/ "

Nice life. ahah  
 
I hope something good comes out of it. ^^
Posted by ShiftyMagician

There definitely needs to be, more than ever, a push for more middle-ware developers to create technology and to be a great asset for game developers to reduce costs with.  
 
If game developers weren't solely generating assets manually and simply paid less for a respectable middle-ware company to provide them with let's say textures, sounds, and algorithms to generate common geometrical pieces at increased speeds and efficiency, that would cut quite a bit of work out for developers overall.  Then developers can spend more time on just tweaking the generated stuff to look more personal, as well as focus on story and game mechanics that cannot really be generated.

Posted by Meteora
@Jeust: I find it odd that our government would be giving money out like that... doesn't explain a whole lot. 
 
@ShiftyMagician:
 Yeah, middleware seems to have many advantages over developing their own propriety tools. Publishers need to either share whatever fancy tech developers have on their own, make their own for developers to use or start pushing for more middleware. Unfortunately publishers haven't really seen this just yet, as exampled by Bethesda not whoring out idTech 5.