The Industry is Changing whether you Like it Or Not

I think we can all agree that in another ten years the videogame industry will be all but unrecognizable compared to today.  Join me as I take a look at some of the biggest changes that have hit the industry over the past few years and how these changes will likely affect the industry moving forward.

This was only the beginning.

A few months ago Double Fine made history with their first Kickstarter project.  Originally asking for $400,000, the developer eventually managed to secure over $3.3 million in financing for an old-school point and click adventure game.  From there other developers jumped on the bandwagon.  We’re now getting a sequel to Wasteland, an HD remake of the original Leisure Suit Larry, a new Shadowrun, an incredible looking SRPG called The Banner Saga, and a really unique iOS game called Republique.  This is just the tip of the iceberg though.  Since Double Fine proved Kickstarter a successful means of getting financing for publishing and developing videogames that major publishers deem too niche, the entire industry has been flipped on its head.

Tell me your mother doesn’t play this.

More and more developers are turning to Kickstarter to create games based on genres long thought forgotten.  Virtually all of these games are PC and Mac-bound, which also leads into the recent resurgence of PC gaming.  Ever since Facebook introduced videogames like Farmville, Bejeweled and the like, more and more casual gamers have flocked to the PC.  Just in my immediate family, every single person up to and including my parents now play videogames, most being on Facebook.  Sure these aren’t traditional games as those seen on consoles, but the amount of revenue these games are bringing in is outstanding.  One need only look at the major success Nintendo had with the Wii to see that sometimes thinking outside the box is the best move to take.

Yes this is an in-game screenshots, and it’s also the very last game Crytek is releasing that isn’t free-to-play.

Speaking of forward thinking, last week Crytek CEO Cevat Yerli said that all their new projects moving forward would be free-to-play.  This move is seen as the next huge leap for the videogame industry.  Imagine having access to something like Skyrim for free!  The way these games work is they limit you in one way or another.  Either you have to pay once you reach a certain level, or you use real-world money to acquire special skills, items, etc.  Whatever the case may be, you’re going to see more and more free-to-play games pop up in the next five years, and eventually I wouldn’t be surprised to see 90% of videogames in the PC market be FtP.

Are we coming to the end of consoles as we know them?

The console space already feels archaic to some.  Constant revenue streams just aren’t there.  A developer makes a really sweet game, a publisher than gets it on consoles, but the shelf life is exceedingly short.  If a game doesn’t make its money back within a few months after release, it’s considered a flop or at least doomed for the bargain bin.  The PC market has shown an uncanny ability to extend shelf life considerably.  Steam is the perfect example of this, by ditching the traditional brick and mortar stores entirely.  With three to six million active members online at any given moment, older games (sometimes years old) will frequently be in the top ten sellers list, and the way Valve does this is by reducing prices astronomically.  It’s not uncommon to see a six to eight month old game discounted by 75%.  It’s not just the crap games that get reduced frequently either, but huge AAA blockbusters that typically retail for $40 on consoles, after many months post-release, will be available on Steam for as little as $10.  That sure gets people interested, and keeps them that way.  It also encourages people to try new games.  While some say this is a bad business strategy as it encourages people to wait for deals, I say it’s brilliant as it allows those with less money to experience the games far sooner than they would on consoles.  How often do you see Xbox Live Marketplace or PlayStation Network reduce prices by 75% on full Xbox 360 or PS3 releases?

Smartphones like this one are eating up the gaming industry at levels never seen before.

There’s also a seismic shift taking place right now is in the mobile market.  Justin and I discuss this frequently, and he’s now got a new podcast up on the site called COE Mobility.  iOS and Android command the lion’s share of revenue, and are making huge inroads into the gaming industry.  Apple’s App Store now generates around $2 billion in revenue every three months!  The entire videogame industry brought in approximately $27 billion last year.  Do the math and it becomes obvious that before too long the mobile scene will make up the bulk’s worth of the game industry.  Please note that the $2 billion from the App Store includes all apps, which is why it’ll still take some time before Apple’s App Store and Google’s marketplace both combine to make a real dent.  It’s going to happen though, especially if the rate of new users continues to climb as fast as it has these past three years.

Infinity Blade more profitable than Gears of War, yes sir, that’s right.

Today Epic Games CEO Tim Sweeney let it be known that their most successful title they’ve ever released in terms of pure man-hours invested to profit is Infinity Blade.  Sweeney now says that it’s evident to him that all future games will be free-to-play and global products.  It’s the only way to recoup the sometimes $30 million dollar investment needed to make a AAA high caliber videogame in today’s market.

Will we really need dedicated gaming consoles when our television sets will be able to process equal amounts of data?

When you add all of these things together it becomes easy to see just how different this industry is becoming.  The days of packaged media being sold for $59.99 is quickly coming to an end.  Even traditional consoles are expected to have perhaps another five to ten years left in them before they too become obsolete in favor or more mobile-friendly devices and PC-based interactive smart TVs.  Smaller projects are becoming fan-financed, free-to-play is quickly becoming the industry’s next poster child for success, and before too long I can see all of us at COE looking back and saying wow I remember actually have to pay for a physical copy and plunking it into a box we connected to our TVs.  Boy, those were the days.

5 thoughts on “The Industry is Changing whether you Like it Or Not”

  1. I don’t think it’s fair to compare a 75% off game on steam a success when a retail game in the bargain bin comes to pretty much to the same thing but should be considered a flop…

    1. The thing with Steam is that they do this with huge hits, not sleeper hits that people haven’t heard of before. For example the entire Deus Ex series was just on sale for $15, that includes the original two games, plus Human Revolution AND all DLC. That’s an incredible steal. The point I was trying to make with Steam was that they constantly offer huge sales on big blockbusters and indie titles all the time to encourage people to try new things, while Sony and MS frequently have their online prices higher than their retail counterparts. It has gotten better in recent times, but the prices remain uncompetitive compared to Steam. I think moving forward we’re going to see a real mix-up between sales to encourage players to give a game a try, and the free-to-play model.

      Steam has a sale going on right now for LA Noire. The Complete edition (the one with all the DLC) typically goes for $30 on Amazon, maybe slightly cheaper if you’re lucky. Right now you can buy the Complete Edition on Steam for $7.50. How can you possibly beat that? Portal 2 is $30 on the 360 and PS3, $20 on PC via Steam, and on sale for $15 at least once a month. Left 4 Dead was also reduced to insane levels. Essentially what Valve is trying to do is lower the prices on virtually all the games on Steam to keep their longevity by getting new people to try them out. I’ve bought games on Steam that are garbage, but at the prices they offer I’m more than willing to try them out. That equates to the same thing as a bargain bin you were talking about, except here they do it with everything, not just games that didn’t sell well within the first few months, and that’s the biggest difference.

  2. The game industry will make the shift to free-to-play games with microtransactions. It’s going to happen. The full content $60 game today will mostly be gone, but I think it will still have its place, just like consoles will still have some place. I think they will decline from mainstream relevance, to be sure. Gaming, to the general public’s concern, will be done through a variety of devices. Services will be the thing that people go to, not boxes. They want content like on social media or on things like Stream.

    However, with that being said, I don’t think the console or the handheld game-dedicated device will completely die, at least not that soon. The reason being is that gaming was a niche market years ago–seen as only for the “nerds.” Gaming has become more and more invested in mainstream culture, but there will always be a small subset of gamers with an attachment to dedicated game devices. If there is even a small pool of support for such a device (let’s say, for argument’s sake that it’s Nintendo), I think there will be at least a few people to support it. It won’t compete with the companies in the mainstream sphere and it will not be as profitable, to be sure. But I think that if there’s an audience for it and if there’s some money to be made, someone will do it. Or even in the case where it’s not buy a company, if fans are dedicated enough, there will be support for it.

    Even companies like EA are saying that microtransactions are the way of the future, but they intend to release a $60 game if the situation calls for it. I think there are a few instances where that kind of investment is warranted.

    As far as I’m concerned, as long as I can find games I want to play, I’ll go to them no matter what platform it’s on. And if it comes to the point where I’m honestly not excited about anything produced by the game industry in general, well, then I at least have a whole lot of games in my collection already (and there are still tons of old games out there) that I can play across many platforms.

    1. Yeah Tim it’s pretty amazing to think where we all started and where things will go. I think the main problem facing traditional consoles is that the development costs have increased to the point where you need to sell X million just to turn a profit. If consoles become niche then we can kiss these sorts of games goodbye. That said, I really don’t think the hardcore are suddenly going to flock to tablets and whatnot. They’ll demand the absolute best, but I’m wondering if we’ll be forced to become PC gamers, etc. I really love posting articles like this because in another five years it’s fun to come back and see if the industry headed in one direction or something else completely.

      1. Gaming is certainly unpredictable. I don’t think anyone expected Nintendo to rule the world when Atari was in homes, nor did anyone expect Sony’s PlayStation become the juggernaut of the late 90s and early 2000s, or Microsoft’s appearance.

        Like I said before, I think dedicated game machines will always have a place somewhere, for some people. It’s just that the relevance of these machines, at least to the mainstream gaming industry, is uncertain. I don’t think it’ll go purely into the realm of homebrew/fan community support, but I think we’ll see less support for them, or a huge change in the kinds of support. A lot of that will come from the business model we see. I think that we will still see the occasional big budget game a la Mass Effect, but they will be the exception.

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