When game development implodes. Jumping the spike.

By Ninja August 16, 2010 3 Comments

 

When will the explosion implode?

  As the price of video game development continues to rise, we have to ask ourselves will something go wrong with the industry and if so when will it happen? We need to look at the numbers on this one. I admit i'm no business correspondant, but at the same time I'm no Leigh Alexander - "Hey Leigh I hear it costs $775 million" to rent out the staples centre, thats strange because it only cost $375 Million to build the damn place!" Sorry about that small dig it wasn't professional. Then again im not writing as a professional am I?

In 2004 the video game industry made $18 billion. This was the year of Grand Theft Auto: San Andreas, Halo 2 and Need for Speed: Underground 2. The 18 Billion number is based purely on software. Four years later the ESA predicted the worth of software sales in 2008 was a record breaking $22 billion in the United States of America. Thats a rise of 22% over four years which on average is a rise of 5.6% every year.

In a 2005 Japanese development costs reports from CESA (Computer Entertainment Supplier's Association) they found that by looking at 194 different titles for the Playstation 2 that the average cost of development was $877,634 and that looking at 13 Xbox titles the average development cost was $1.8 million. These numbers are quite different to the numbers used in the IGN story - The Economic of Game Publishing which said that game development for games on the Xbox, Playstation 2 and Gamecube were $3-$5 million. For this sloppy story I am writing im going to use a $4 million average development cost, so lets now look at current generation development costs.

In a 2008 system comparison analysis by Ubisoft they said that
   PS3/Xbox 360/PC titles averaging 12 million to 18 million euros ($18.8m-$28.2m) to create for all 3 SKUs

Let's take that average at $23.5 million, that means that from all last gen development from 2005 to the current gen development of 2008 means that game devopment went up by 162.5% annually or 487.5% over 3 years.

Looking competely at the numbers development is growing 162.5% annually where the size of the market in the United States of America alone is growing by 5.6% annually. I don't claim to be some kind of ecomonic god but I cant see this going on forever. At some point in the next 10 years I think it is a sure thing that something bad will happen to this industry. With every publisher going after the big budget release trying to ape the success of Call of Duty it's only a matter of time that every publisher is spending more than they could ever get back from the sale of a video game.

Over the coming ten years something's got to give, and let's hope it's not your favourite publisher or developer who ends up going tits up.

-Ninja 

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