Game over? Industry suffers slowdown after decades-long winning streak
Game over? Industry suffers slowdown after decades-long winning streak
almost certain this is behind a paywall and usually FT is one you can't get around, so some choice excerpts:
The $200bn video games industry is reckoning with its biggest slowdown in 30 years, as the huge growth driven by smartphone gaming and the latest generation of consoles reaches its limits.
Hardware sales are slowing, with Sony cutting its forecast for PlayStation 5 sales this week. Consumer spending on mobile gaming declined last year, down 2 per cent to $107.3bn according to Data.ai, which forecasts low single-digit growth in 2024.
Many in the gaming industry expected to bounce back quickly after 2022's post-pandemic decline, last year did not deliver the growth initially hoped.
The latest quarterly numbers from some of the biggest publishers, including Electronic Arts and Take Two, has underwhelmed investors. Meanwhile, games developers have been forced to cut thousands more jobs this year after already slashing as many as 10,000 in 2023.
"There's a lot of commercial anxiety: about growth, about profitability, about keeping budgets in check and about making an impact in the market when there are so many established products," said Piers Harding-Rolls, games research director at Ampere Analysis, a market researcher. "We are in a much slower growth era."
Cutting prices is a double-edged sword. The huge popularity of free-to-play online games such as Fortnite and Roblox consumes hours of playtime that had previously been spent on $70 titles. The strong network effects of multiplayer games, such as Call of Duty, also make it harder for new entrants to succeed. "Thousands of titles are hitting every month and the success rate is very low," he said. "You're faced with significant challenges in trying to break new product into the market."
The rising costs of developing blockbuster games has also raised the stakes. "When you're talking about a budget that's $100mn plus, even for a big company, if you miss with two or three of those then commercially you're on the ropes," Harding-Rolls said.
That has driven a Hollywood-style dependence on rebooting the same big franchises by Sony, Microsoft, Electronic Arts and other big games companies. At the same time, entertainment giants are showing a renewed interest in gaming — adding new competition for existing players in a shrinking market.
Disney made a $1.5bn investment in Fortnite's creator Epic Games this month to create what the studio's chief Bob Iger called "a huge Disney universe that will be for gaming and for play", while Netflix is also expanding its games offering.
IMO the industry as a whole has breached the "trust thermocline" by consistently releasing broken unfinished games. There aren't as many people that will buy a game at release, and would rather wait for the bugs to fixed and buy it at a discount a year or so later; or, it's realized the bugs will never be fixed and no one buys it.
Also with the realization that digital copies (that aren't installed on your own HDD) can be taken from you at a whim. I think most people are fed up with it, and are sticking to games they already have or just not playing at all.
trust thermocline
Quality reference. Also, in reverse, companies such as Larian prove that trust works.
Baldur's Gate 3 is one of the buggiest messes I've ever played. In that, it gives me warm fuzzy memories of the originals, which were similarly buggy monstrosities.
Despite the bugginess, the deep involvement of Larian with the community at every step of the games development and release proves that trust can get you nothing but accolades, even when your game is a buggy mess for six months post-release.
I'm okay with the post-release bugginess because I can trust that Larian actually cares about resolving those things.
I've also stopped buying early access games. They may not be bad, but they're not finished, and I don't want to be bored with a game before I even get to see its finished form.
I noticed yesterday on Steam that a game I was interested in had a much higher percentage of negative reviews from its Early Access days. Since there weren't enough votes overall to offset these negatives, it really hurt the game's overall score.
The rising costs of developing blockbuster games has also raised the stakes. “When you’re talking about a budget that’s $100mn plus, even for a big company, if you miss with two or three of those then commercially you’re on the ropes,” Harding-Rolls said.
Oh boo hoo, is the only type of game you can think of to release is a"blockbuster" type game?
Because last I checked, small titles regularly do quite well, like Hi-Fi Rush did so well compared to the fucking bomb that is Starfield. Same company, small game vs. big game. Small game did well, big game tanked.
Hi Fi Rush had 3 million players, including Game Pass. Starfield had over 12 million players, including Game Pass. It was one of the most successful releases last year, the single best selling game in the US the month it came out. That's not what tanking looks like.
Did Starfield only cost 4x as much to make as HiFi? Doubt it. I'd bet the marketing budget of Starfield alone dwarfed the lifetime cost of HiFi. I agree that "bombed" is maybe too harsh but the problem that the article is talking about is ROI. As I continues to balloon, R needs to keep up and it's not.
I mean the dude has a point still.
Alan wake 2 was Remedy’s fastest selling game ever, and it’s still not even broken even on development costs.
I don’t know about you, but I loved that game and don’t want to see a world where the developers are too afraid to take a risk on a game like that.
I hate to be that guy, but if you're wanting to live in a world where you can spend an absolutely obscene amount of money on a game, and still have the studio able to succeed despite not recouping enough money to cover development costs... it sounds like you want to live in a fantasy world where money is meaningless.
Alan Wake 2 is a really bad example as its a sequel to an otherwise relatively obscure game with a large cult following. I liked Alan Wake as well, but I can see why they are struggling to sell enough to recoup costs. 1. The lack of popularity of the original (not that it was unpopular, just not popular enough) combined with 2. The length of time between the original and the sequel as well as 3. making it an Epic exclusive game are all things holding it back and every single one can be labelled as a "bad business decision."
There's definitely blockbuster games with big budgets that are making their development costs back and then some. Larian and Baldur's Gate 3, for one example. I don't think we should be making excuses for companies that can't manage it. They should go out of business instead of being the video game equivalent of the banking world's "Too Big Too Fail."
I mean, gaming exploded over the pandemic. Anyone who thought that was going to become some kind of norm was an idiot. Have we shrunk below pre-pandemic levels? Or is this just idiots who thought they could keep skimming free oil off the surface once the leak was fixed?
Also, I disagree with the idea that AAA games are performing poorly. Bad ideas in AAA games and chasing “easy money” in AAA is performing poorly. Helldivers 2 seems to be doing well, whereas Suicide Squad isn’t. Baldir’s Gate 3 killed it while Starfield kind of flopped. Final Fantasy 16 didn’t meet expectations, but we know Square Enix regularly sets expectations too high anyway.
Are people tired of the same Call of Duty games over and over? Are people full up on live service games and looter shooters? Yes and yes. But are people crazy excited for the new Final Fantasy 7 Rebirth? From the communities I’m in, very much yes. Did Alan Wake 2 release and sell faster than any other game from that studio? Pretty sure I saw that headline recently, yeah.
So when Diablo 4 dies on impact, was that the fault of the gaming landscape? Or was it because Blizzard execs pushed the team to maximize systems and balance they thought would bring in easy money but actually ended up alienating their core audience and reviewers?
I’ve seen this before when working in mobile. Execs want to chase the whales so badly that they don’t allow designers and devs to make the game actually fun to play. Doesn’t matter how “well” you monetize your shitty game if nobody wants to stick around to play it.
Yes. They thought they could keep skimming. The problem is that their (and everyones, really) business model is predicated on YOY growth and when it doesn't happen, they fire people to try and recapture funds.
The huge popularity of free-to-play online games such as Fortnite and Roblox consumes hours of playtime that had previously been spent on $70 titles
Wonder if people buy less of things if they are more expensive but not as good as the things they already have.
They almost certainly buy fewer things when the stuff they already have is designed to be played infinitely.
Meh, this is something that is hitting all industries, not just games. The raising of interest rates to combat inflation is making it more expensive to borrow money. The car industry is on the verge of calamity because they've priced cars too expensive to go with the new borrowing rates. Dealers (new and used) can't lower their costs because they bought cars under the old interest rates and now can't move them because borrowing got more expensive. Lowering prices too much more means taking a loss. It is hitting every industry. At some point the idiots out there have to realize that 3% inflation isn't the boogeyman they think it is.