The Entertainment Software Association seems to be losing a lot of major players lately. LucasArts pulled out last week, followed by Activision Blizzard earlier this week, and now iD software. EA has stated they have no intention of leaving, but nevertheless, this smells strongly of a divisive precipitating event that’s cleaving apart the ESA’s members. I find it hard to believe that this is a coincidence, so what’s the triggering factor?
As previously mentioned, I went on vacation last week, and apparently the world does not stop while I’m laying on the beach.
Big news of the last week. Apparently it was GDC or something. I wasn’t there, so if you want juicy GDC goodness, you’ll have to look elsewhere.
Microsoft
Sony
On the Sony side of things, Phil Harrison, one of the founding members of Sony Computer Entertainment, and the president of SCE Worldwide Studios, has submitted his resignation. Changes in leadership often come with widespread changes across the board, but it depends on the size and momentum of the company in question, and Sony is rather largeish, so I would not anticipate a massive change in the direction of their games.
Australia
Australia is talking about finally getting a new rating that will allow more mature titles to be sold there. Unfortunately, I doubt this will alleviate the massive delays they usually incur before North American/Japanese release, and release to the land down under.
Electronic Arts
EA is offering to buy Take Two! I would suggest in reaction to the recent Activision/Vivendi merger, EA is looking to add some more meat to its already colossal frame. EA’s new CEO John Riccitiello has mentioned that he’s extremely unhappy with the scores EA’s games have been getting of late, so there might be some incentive to own some games that are critically acclaimed (which might have fueled the recent acquisition of Bioware as well). Take Two is brimming with talent, including the developers of the Grand Theft Auto series (Rockstar), Bioshock (2K Games), and Civilization (Firaxis). While EA’s initial bid is a bit lower than Take Two is looking for, most analysts are expecting this deal to go through eventually at some price point.
On a side note, Take Two is the current owner of one of my favorite IPs of all time, the Tex Murphy series. This series was created by Access Software (later renamed to Indie Built) in the 90s. Microsoft acquired them for the Links Golf series, and then sold the company to Take-Two who then shut it down. While a revival is not likely at EA, it’s marginally more likely than at the parent who shut them down in the first place.
EA has a habit of killing great teams by using simple business math. If you have everyone using the same tools and processes, costs are lower. Unfortunately, this slows down and breaks the dynamic that produced the great team in the first place. This is something you can do with teams that are having trouble realizing their full potential, perhaps due to infrastructural problems, but when you acquire a really solid team, it’s important that you just leave them alone to do their thing. Riccitiello seems to be aware of this, so perhaps Take Two’s properties are not going to join the legacies of Westwood, Bullfrog, and Origin.
Havok
Havok is free, to which I say, OMGWTFBBQ. Well, okay, it’s only free on the PC, but as of May 2008, you at home will be able to download your very own copy of Havok Complete (which includes the Physics and Animation packages). This is a non-commercial license, but it allows hobbyists to get their hands dirty with the most widely used physics engine in the PC gaming space, which is good for companies looking to hire people who know Havok already. This theoretically lays some groundwork for Havok’s more specialized products for behavioral animation, deformable solids, and cloth rendering.
And that’s all that happened this week, I’ll be posting on a more semi-regular basis now.
Rockstar and Valve announced yesterday that many of Rockstar’s games are now available for download through Steam. This includes both the Max Payne series and the entire Grand Theft Auto series. Notably absent is Bully. Valve continues to do very well for itself, and at this rate, will corner the market in Digital Distribution of PC games.
It was announced earlier today that Activision is merging with Vivendi Games (the interactive entertainment division of Vivendi that includes Blizzard) to create what is now the largest console video game publisher - Activision Blizzard. Jean Bernard-Lévy, CEO of Activision was said to have stated: “Blah Blah Blah, Share-holder value, blah blah significant opportunities, blah blah Growth Prospects”.
Every gaming blog in the world responded with “OMFG… merger… what does this mean for WoW?”.
I’m going to put in my vote for “not really a whole lot”. As far as Blizzard is concerned, despite the fact that their name is now on the publisher as well, it’s really just a changing of the guard above. Blizzard has over and over again proven itself to be massively successful and profitable, and any new executive management would be foolish to screw with that.
This is interesting news, but shouldn’t be really suprising. As in the music and tv/movie industry, video game publishing is what’s referred to as an oligopoly - a market in which there are a relatively small number of firms who control the majority of the market. Oligopolies tend to emerge in areas where the costs and risk are extremely high, but barriers don’t exist due to ownership of capital assets (e.g. telephone, power distribution) or intellectual property (e.g. operating systems). When an industry meeting these characteristics begins, the market is very fragmented, and usually dominated by several start-ups who understand the particulars of that business. As the industry as a whole grows, more traditional investment companies will begin forming merges and buy-outs to conglomerate the small players into a larger, more financially stable whole. We have observed this happening in the music industry with record labels, and in the tv and movie industry with film studios.
Our industry is much younger, but already is dominated by six major publishers: Electronic Arts, Nintendo, Ubisoft, Take 2, Activision Blizzard, and THQ.
What I find interesting is that when you’re in an industry like these three, where the costs to distribute content are so high, and the risks of success equally so - management gets very risk adverse. They’re responsible for profit to shareholders, and they live in a very financial world. As a result, you begin to see trends towards blockbuster hit titles. This is the nature of action movies, highly paid brand name actors, top 40 pop music, sports games and high visual fidelity first-personal shooters. Publishers like these things because they’re safe, and any portfolio requires some safe bets to hedge the rest.
Which isn’t to say the people on the ground floor don’t put their heart and soul into these titles, it’s just that they’re primarily a business construct designed to appease the shareholers, and so creative control is somewhat removed.
Now, here’s the shakeup. What we’re watching unfold in the music industry right now is going to happen to film and is going to happen to tv and is going to happen to gaming. Once upon a time, production costs for music were extremely high, and the distribution channels even more so. Technology has completely eroded the first, and the internet the second, and now an oligopolistic industry is watching their barriers to entry come crashing down. A further kink in the puzzle is that music piracy is rampant, and there’s no real way to deal with that in a model based around selling individual units of content. Every single publisher in the music industry today needs to completely revamp their business model in order to compete, or be destroyed, plain and simple.
Piracy is also rampant in the film industry, although it hasn’t gotten quite as bad as the music industry. As bandwidth availability continues to rise, the film industry will be even more screwed than the music industry is now. The production costs for tv shows and movies haven’t dropped at all, and in fact, for those ultra-safe blockbuster titles, they’re increasing massively every year. The home theatre experience becomes more and more accessible and continues to equal if not surpass the cinema theatre experience in nearly every way. Today it is still possible to throw a quarter of a billion dollars at a blockbuster title and triple your money. That multiplier is shrinking on both sides every year. Television networks are also slowly sliding into irrelevance as it become possible to watch commercial free versions of all the content they deliver through digital delivery. This alternative becomes more popular every year.
Video games are a little further down the road than both of the previous. Production costs for video games are an order of magnitude lower than costs for film production. Additionally, pirating of console games is much harder than pirating music or film because it requires hardware modication of your system - a modification that could be detected by the manufacturer through online connectivity. On the PC side, piracy is a nightmare for traditional retail channels. Digital delivery mechanisms can aliviate this to a certain extent through the use of non-intrusive DRM (such as Steam). Attempts to shoehorn DRM into retail delivered copies of titles (using such abysmal tools as Stardock) has largely met with outrage.
The content sales model is not long-term viable. The internet enables piracy too easily, excessive measures to curtail it harm your legitimate customer experiences as well. Mergers like the one announced today are not exciting. It just means we’ve moved to the next chapter of the same old story. I’ll be excited when I see those top companies merging with companies who know how to change the business model. I want to see reductions in the cost of production, massively if possible. I want to see seamless end-to-end delivery models that enhance the customer’s experience, not detract from it. And I want to see people really innovating what you can do with the content, coming up with brand new genres of gameplay and game mechanics, and for publishers to see those as a necessary portion of a balanced title portfolio as well.
So when that merger happens, put it on the front page of Joystiq, and I’ll be reading.
Steam, I still love you, but we’re moving into an open relationship.
After replacing the misbehaving video card in my frankenstein-esque laptop (Replaced the keyboard 3 times, case fan twice, hard drive, batteries, and now the graphics card), I decided to celebrate with a purchase from the bargain bin (Evil Genius, which then proceeded to eat my weekend. I’m a sucker for a short fat guy with a monocle). Having firmly planted myself on the side of the people who make the things I love, I absolutely cannot stand going to GameStop/EB Games/The Den of Despair. If I’m forced to due to exclusive packages, etc., I will always buy games new, even if they cost more, so as to support the publisher and developer. Gamestop’s draconian policies around pre-ordering and the fact that their business model of making massive profits on the secondary market at the expense of the people who actually are responsible for the content they sell makes digital delivery all the more appealing. Unfortunately these same retailers have a lot of power to essentially extort publishers by threatening not to stock their games, or to carry less copies when the publishers try to work around them via the digital route. One gets the impression that there’s a lot of cloak and dagger going on between publishers and retailers.
At any rate, I’ve already purchased every game Steam offers I have any interest in with a metacritic rating above 70. This has led me to Warcry. The deal is similar to Steam, only instead of a client, you download the game installer manually (and unless you have a download manager, potentially multiple times, as browsers don’t like massive file downloads via http). The good side of things is that once you install the game and validate your account with the installation, you’re done, the game acts just like the retail copy does, and no further DRM is in place.
In other news, Microsoft has announced that it’s going to add a new digital delivery service to compliment Xbox Live Arcade. The service entitled “Xbox Originals” will allow players to download through Xbox Live games for the classic Xbox including Psychonauts, Crimson Skies, Fable, and the original Halo (Maybe not as good as Nintendo’s back catalog, but I’ll take it). The service will kick off December 4th.
Looks like I’ll be buying my third copy of Psychonauts. Tim Schaefer must be making matresses out of my money.
I’ve recently finished reading Wikinomics by Don Tapscott and Anthony D. Williams, and it got me thinking about a new approach to game assets. Game assets are the “things” that go into a game. For example, artwork (textures, 3D Models, Sprites), Sound Effects, Music, Voice, etc.
The primary job of the Artists, Sound Engineers, and Designers is to create this content. As gamers continue to demand higher quality games, one of the most straightforward ways to increase such an ineffable metric as ‘quality’ is to increase the amount of content, especially artwork, as well as the complexity. While the tools to create these assets continue to evolve in parallel with increasing demands (and to a certain extent, driving these demands), Content developers can still only make new assets so fast. Developing these works is a rather specialized skill which requires a large modicum of creativity as well. As such, developing these assets is one of the most expensive parts of creating games. These costs have risen to the degree that barriers to entry in the video game industry are now quite prohibitive. This makes it difficult for small commercial studios and independent developers who have difficulty drumming up the resources to hire content developers to get off the ground.
It also makes life difficult for large developers and publishing studios. The Games Publishing Business, much like the recording industry, is a difficult and stressful business to be in. In the music industry, you have no way of speeding up creativity. The artist will create music at his or her own pace, so you have no real way of knowing when it will be ready. When it is ready, you don’t know if it will be good, and if it is good, you don’t know if the public will go for it. The games industry has mitigated these factors somewhat by sticking to formats which are well established. Publishers are less willing to fork over cash for a completely new idea that doesn’t have established sales potential when they could spend the same money to create a new first-person shooter. If the cost case is the same, they’re in the business of risk management. At the same time, however, completely original ideas are the seeds from which new genres, and thus new profit centers grow. Without fostering an environment in which these new ideas can be fleshed out, Publishers are choking off their own future revenues. What Publishers need is a way to promote methods for independent developers to bring out their new ideas in an inexpensive way, so that they can publish these titles without taking on large risk. Microsoft is already doing this to a certain extent through XNA and XBox Live Arcade. This does not, however, address the issue of expensive assets.
To resolve this issue, enter Wikinomics. There are several large publishing studios who also act as in-house development studios (Microsoft, Electronic Arts, Ubisoft, Nintendo). What this means is that they own large amounts of sound and art assets which they are not currently using. What these publishing houses should do is license a large portion of the assets from development studios they own to the public for free under some form of Creative Commons License. The license would allow for commercial works, including derivatives to be created, as long as the original artist and studio were credited in the final production. Access to large volumes of free and fully utilizable content would massively reduce the cost of developing new titles.
Okay, so you probably see why it would be of benefit to indies to have access to all the art assets owned by Microsoft Games (Lionhead, Rare, Ensemble, Bungie, FASA), Electronic Arts (Bullfrog, Origin, Maxis, Westwood, EA Sports), Nintendo, and Ubisoft for no cost, but why would they do this?
Simple. These warehouses of assets are not profit-centers for these companies, but they could be. By opening up these assets, at virtually no cost to themselves, they would stimulate significant growth in the independant games community. These indies would be able to take assets which were professionally developed, modify them to their own needs, and more easily deploy a marketable title. Many of these titles will be new and innovative, and employ gameplay that would be too risky for a major developer to secure funding for. These indies are then going to be looking for someone to publish their titles. And by providing them with all that content, that goes a long way for goodwill towards the publisher. Publishing these titles through more inexpensive mechanisms like Steam or Xbox Live is a low-risk cost to these publishers, and it’s more than likely that some of these new titles might be a major hit, allowing the publisher to thus have turned their old warehoused assets into major profit centers.
Merck did this with pharmacetuical prototypes, and encouraged other major players to join in. It resulted in a major cost savings for everyone involved, as much of the overhead being done simutaneously be each individual company was reduced. I don’t see why this tactic couldn’t work for major development studios as well.
Unfortunately, unless a CEO somewhere has a massive flash of inspiration and drives this initiative, we’re not likely to see it in the near future (Come on Reggie, we’re counting on you now).
