|April 21st, 2006|
So here we are, in the next gen land of 75+ person teams and $30 million dollar budgets. What do I see when I look out across the future landscape?
I see an inflection point.
We’re hitting a wall on the financial side. Barring major breakthroughs, we’re looking at incredibly high costs for content generation. Unless we change how we make graphics completely, we aren’t going to be able to afford to make them. No publisher can afford to ante up $100m for AAA games repeatedly, not with a 90% miss ratio. We can call this Big Development, akin to how we used to speak of Big Iron.
We’re not seeing the sorts of alternative revenue streams that other media do. A book can spin off to a movie, an audiobook, a desk calendar. A movie can go to DVD, to pay-per-view, to premium cable, to TV. A song can go to radio, to sales, to TV or movies, to elevators. A game goes nowhere but downstream to lighter platforms or to embedding in other games. A lot of the high-end graphics we chase today will never make sense on a two-inch screen.
Because of this, movie-style alternative financing won’t materialize for the average project. Some big blockbusters maybe, but the ROI just won’t make sense. Instead, we will see the average industry game budget shrink for the first time, as nimble mammal developers run around the dinosaur developers making a different kind of game.
Our distribution channels are in upheaval. This coming generation, we learn that the sole remaining North American games retailer makes a majority of its revenue from used games that do not pay ongoing revenues to the publishers. We will see other retailers following suit, offering more and more used games and fewer new ones.
This means a shakeout of the current Big Development publishers. But the talent pool won’t shrink, which means it’ll flow to wherever it is still allowed to exist. The growing markets won’t be AAA games anyway. Some of the Big Development folks will adapt to the new models (most likely, the ones we see having done so today), but several won’t.
Because of the crunch, digital distribution will be the only logical play. Games will move more and more towards services, and away from box product. As the publishers get cut out, we will see some high profile failures. Instead of publishers, we will see more and more portals and aggregators; because of the economics, they will have less power than today’s publishers do.
Digital distribution will force a different style of game. Bite-size games with quick conversion and easy entry, a far lower graphical load so that content can be streamed or downloaded. Epic games will not be the norm, and fans of epics will have long waits between them. Instead, serialized and episodic games, and multiple varied games themed around IPs will be the norm.
The ecology of the game industry will shift to be more varied. As the big old-style industry falters, we’ll see even more indies and small developers spring up. Sometime in the next few years, we’ll hear that a web-based games portal is bigger in terms of revenues than one of the old-school publishers we’ve come to know.
The noise level in the marketplace will rise. So many small devs and games will eat up the infostream. We’ll have trouble hearing about games, even worse than now. Tastemakers and celebrity will matter much more than today as followings are established for certain devs, and as certain editorializers become the way to find fresh content. The challenge for new devs, as with musicians or writers today, will be getting noticed.
PC gaming will grow back with this market. Consoles are the last bastion of high-end graphics, closed platforms, and Big Development. The freer distribution channels and easy entry for development mean that everyone forced out of console, handheld, and mobile games will go to PC. Big Development will have toruble forcing open the channels they previously held closed — it’s not in their nature.
Consoles will specialize or become more like the PC. We’ll see a dramatic divide between console and PC developers until consoles acquire more of the capabilities of PCs — and by that I mean forums, blogs, news sites, and the fan ecology that makes gaming amidst too much product even possible. Epic games will continue to be made for consoles, but they will be the loss leaders subsidized by the hardware makers.
Everyone will be trying to lock customers into branded lifestyles associated with gaming brands, such as loyalty-driven sites, “club” sites akin to book clubs, demographically targeted portals, niche-driven aggregators, etc. A few will shape themselves into networks that combine several of these, via smart targeted partnerships.
Bottom line: The next next gen isn’t graphics; it’s stuff that fits into the new paradigm for distribution, and leverages the business models possible there. Assume a world where there are no game retailers, where there are no publishers (but lots of aggregators and portals), where there are a lot fewer artist jobs (but lots more procedural content jobs), where games are services and not products. In such a market of bite-sized games, celebrity is going to matter more than ever in order to gain eyeballs.
Only a few years ago, I was saying that developers could not lowball budgets or quality and play on the AAA field. Now, I’m saying the AAA field is so rarefied that soon even the AAA studios won’t be able to play there.
The current industry is dinosaurs highly evolved for an ecological niche that is changing out from under them at an extraordinarily rapid rate. Revenues from downloadable, casual, and MMO games equaled that of the entire PC games retail market this year. Next year…? Three years from now…? The only reason why even the current console model works is because of the captive platform and generally superior user experience.
Looking out at the future, what I see is an extinction-level event.
The nice thing about that is all the new species that spring up.