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Thread: Video game market could collapse according to this article.

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    Default Video game market could collapse according to this article.

    Last edited by BricatSegaFan; 12-19-2013 at 02:34 AM.

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    Yeah definitely. There's a few third party companies I'd like to see lose their limelight so some of the once popular, now niche ones can regain their lost thrones. And also make way for new ones.

    If EA hadn't bought out so many studios we'd still have more companies and creativity.
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    Quote Originally Posted by Rickstilwell1 View Post
    Yeah definitely. There's a few third party companies I'd like to see lose their limelight so some of the once popular, now niche ones can regain their lost thrones. And also make way for new ones.

    If EA hadn't bought out so many studios we'd still have more companies and creativity.
    See thats the problem. EA is what i think we can say a "video game sweat shop" they just want the money. So thier theory is to eliminate all competition by buying them out and letting them collapse on themselves so they get all the profit. Wouldn't surprise me if EA has tried to buy out other mega hit companies like valve and such

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    Good article.

    Mentions a lot of important issues:

    - project budgets spiraling out of control, coupled with the pressure to sell tons of product in order to recover costs.
    - the wrong people making the creative decisions/too many cooks in the kitchen.
    - falling back on 'what sold last time' comfort zone advice from investors (this is what's plaguing the film industry right now).
    - biased reviews (not all that different from the payola system that influences what music gets played on commercial radio).

    I think scaling projects down to smaller budgets with smaller teams could help. Of course then there'd be the argument of. "Can we still sell it at the price of a bigger/badder game?" Question is, do they HAVE to sell it at the $60.00 introductory price to make a profit if the budget was lower and the game was good enough? I suppose it then enters the realm of marketing budgets. Distribution is a pain too. Ugh. It seems they've worked themselves into a corner.

    For me though, there are a lot of things that cost money that I don't need in my games. So if they need so save money, they can:
    - model less cars for racing games (I only need a maximum of ten vehicles to choose from).
    - skip the elaborate intros and cut scenes for racing and flight games (I don't need these either).

    The shotgun approach to game development might be a smart approach for some studios. Same idea as Sundance Studios for motion pictures. Fund four smaller projects with what you'd normally fund one and if two out of four do well, then you're okay. If one does amazingly well, then you're still okay. That would also give the designers more flexibility and take some of the pressure off of them.

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    Quote Originally Posted by Neb6 View Post
    Good article.

    Mentions a lot of important issues:

    - project budgets spiraling out of control, coupled with the pressure to sell tons of product in order to recover costs.
    - the wrong people making the creative decisions/too many cooks in the kitchen.
    - falling back on 'what sold last time' comfort zone advice from investors (this is what's plaguing the film industry right now).
    - biased reviews (not all that different from the payola system that influences what music gets played on commercial radio).

    I think scaling projects down to smaller budgets with smaller teams could help. Of course then there'd be the argument of. "Can we still sell it at the price of a bigger/badder game?" Question is, do they HAVE to sell it at the $60.00 introductory price to make a profit if the budget was lower and the game was good enough? I suppose it then enters the realm of marketing budgets. Distribution is a pain too. Ugh. It seems they've worked themselves into a corner.

    For me though, there are a lot of things that cost money that I don't need in my games. So if they need so save money, they can:
    - model less cars for racing games (I only need a maximum of ten vehicles to choose from).
    - skip the elaborate intros and cut scenes for racing and flight games (I don't need these either).

    The shotgun approach to game development might be a smart approach for some studios. Same idea as Sundance Studios for motion pictures. Fund four smaller projects with what you'd normally fund one and if two out of four do well, then you're okay. If one does amazingly well, then you're still okay. That would also give the designers more flexibility and take some of the pressure off of them.
    While I think the article raises some interesting points, it's the same basic points that gamers and industry analysts have been debating for well over a decade now. Frankly, people were claiming the same things about budgets, the same movies or sequels year after year, biased critics and non-creative decision makers in the movie industry in the 1970s and 80s and yet the movie industry continues to make increasing profits year after year by raising ticket prices and pushing premium experiences like 3D and IMAX. The same thing will happen in games.

    Sure, there may be some massive failures and some publishers that go under in the coming years, but in an industry where games with hundreds of millions of dollars in development and marketing costs (i.e. COD, GTA, etc...) recoup that within a day or two of launch, the financial incentives are far too great for these large developer/publishers to change what they are doing. I think if anything you will continue to see more and more smaller and mid-size developers either fold completely or be absorbed into these larger companies and in a few years there will only be massive developer/publishers like Activision, Ubisoft and EA and tiny publishers doing mobile and download games on a true shoestring. The sad thing is that unlike digital low budget film-making, there is a certain level of technical expertise needed to make games, so it's not exactly as open as other forms of creative expression.

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    Given the sheer numbers of PS4/One consoles sold this month, I kind of doubt any crash is coming.
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    Quote Originally Posted by Greg2600 View Post
    Given the sheer numbers of PS4/One consoles sold this month, I kind of doubt any crash is coming.
    The original collapse of the gaming industry in 83/84 wasn't caused by lack of sales it was caused by too much crap on the market and the backlash of customers refusing to continue to purchase it. If you want to read something interesting Spielburg (spelling?) has been warning of a major "restructuring" of Hollywood due to a lot of similar concerns being raised in the gaming industry.

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    Quote Originally Posted by Bojay1997 View Post
    While I think the article raises some interesting points, it's the same basic points that gamers and industry analysts have been debating for well over a decade now. Frankly, people were claiming the same things about budgets, the same movies or sequels year after year, biased critics and non-creative decision makers in the movie industry in the 1970s and 80s and yet the movie industry continues to make increasing profits year after year by raising ticket prices and pushing premium experiences like 3D and IMAX. The same thing will happen in games.
    The difference is that when a movie is completed it can keep making money for years and even decades. Back to the Future is still a viable moneymaker for Universal. Even films that flop at the box office can earn money through various means. When movies age they don't lose their relevance. People will watch A Christmas Story on TBS or buy a Blu-ray of Terminator 2. Video games, though, age like computer software. After a few months they've essentially exhausted their entire revenue stream. And they generally can't be resold or repackaged as-is unless it's bona fide classic like Super Mario Bros. 3, and even then it won't sell for more than $5 or so. Budgets need to reflect this reality.

    It's specifically because games are competing with Hollywood that this mess started. Back in the mid-90s a budget could only be so big, regardless of what a game's vision was. A flop could only do so much damage under these circumstances. But the shackles came off and the beast ran loose. With those technical limitations no longer an issue and 15 years worth of unchecked growth, here we are in a state of unstable equilibrium in which the majority of publishers are operating under the constant threat of total collapse. It's unsustainable.

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    Quote Originally Posted by Greg2600 View Post
    Given the sheer numbers of PS4/One consoles sold this month, I kind of doubt any crash is coming.

    Yeah, I mean 2 million for each of them, is pretty impressive indeed, and there are still a lot of days till Xmas. Could they both sell 3 million worldwide by New Years day ?

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    Quote Originally Posted by camarotuner View Post
    The original collapse of the gaming industry in 83/84 wasn't caused by lack of sales it was caused by too much crap on the market and the backlash of customers refusing to continue to purchase it. If you want to read something interesting Spielburg (spelling?) has been warning of a major "restructuring" of Hollywood due to a lot of similar concerns being raised in the gaming industry.
    Um....isn't that the definition of lack of sales?

    Honestly, the majority of the arguments in that article are not going to be the reason the market collapses. The only one with merit is the out of control budgets. Once the cost to make games exceeds the profits made from them, then it's an unsustainable business model and everything will come crashing down. The price of games will rise, nobody will be able to afford them, and people will stop buying them. It's no different than any other market.

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    Quote Originally Posted by TonyTheTiger View Post
    The difference is that when a movie is completed it can keep making money for years and even decades. Back to the Future is still a viable moneymaker for Universal. Even films that flop at the box office can earn money through various means. When movies age they don't lose their relevance. People will watch A Christmas Story on TBS or buy a Blu-ray of Terminator 2. Video games, though, age like computer software. After a few months they've essentially exhausted their entire revenue stream. And they generally can't be resold or repackaged as-is unless it's bona fide classic like Super Mario Bros. 3, and even then it won't sell for more than $5 or so. Budgets need to reflect this reality.

    It's specifically because games are competing with Hollywood that this mess started. Back in the mid-90s a budget could only be so big, regardless of what a game's vision was. A flop could only do so much damage under these circumstances. But the shackles came off and the beast ran loose. With those technical limitations no longer an issue and 15 years worth of unchecked growth, here we are in a state of unstable equilibrium in which the majority of publishers are operating under the constant threat of total collapse. It's unsustainable.
    It really depends on the movie. Universal has a back catalog of thousands of films that generate no net home video revenues and no net licensing revenues even when you account for the typical accounting tricks. For every Back to the Future there are nine other films that never recoup their initial investment even decades later. Movies absolutely do lose relevance and resale value. I actually do a lot of television and film licensing and you would be shocked at how little of the catalog of major studios actually generates any revenue at all in any given year.

    While I agree that the future revenue prospects of many games is weaker than films (although with various services like GOG, Steam and various budget publishers re-releasing games in bundles and slimline packaging and in enhanced editions, there certainly is some revenue to be had), the cost of entry for purchasing a game is anywhere from $60+ at release to usually no lower than $20 in the bargain bin (admittedly, there are some games that eventually go lower). That's a much healthier chunk of revenue than the half of an $8-$15 for a movie ticket a studio gets or some percentage of $10-$20 for a DVD or Blu-Ray which most consumers won't even buy anymore or even the lucrative packaging deals studios get by bundling hits and selling them to cable, broadcast or streaming services.

    People have been making these same predictions of doom and gloom for years. With Sony and Microsoft both selling record numbers of their new consoles, the console and video game business looks healthier than ever. While things can always change down the road, until some amazing new form of interactive entertainment comes along that makes video gaming obsolete, I just don't see the video game market collapsing.

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    Quote Originally Posted by Zthun View Post
    Um....isn't that the definition of lack of sales?
    Not exactly, it was the backlash from the mountain of sales of crap. THEN a complete lack of sales. But if they hadn't flooded the market with regurgitated garbage and killed consumer interest the market wouldn't have crashed. Basically they shot themselves in the foot. If the industry continues to crank out sequel after sequel on an annual basis and not take risks they run the risk of the same thing happening. But honestly right now people seem perfectly happy to buy the same game annually and they'll just keep making them. It's if suddenly people DO get tired of call of duty part 20, assassins creed 10, and halo 12 that they'll have a massive problem on their hand as they count on those revenue generating series to fund everything else.

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    Quote Originally Posted by Bojay1997 View Post
    It really depends on the movie. Universal has a back catalog of thousands of films that generate no net home video revenues and no net licensing revenues even when you account for the typical accounting tricks.
    But video games don't even have a "depends on the game" caveat. They pretty much universally can't generate any meaningful revenue past their brief window of relevance unless it's an MMO but those are expensive to maintain. That's why we're in the double digits of many long running franchises. Because even a smash success like Final Fantasy VII isn't worth much anymore. The value is almost exclusively in the IP rather than the product. Plus, people don't expect movies to be updated. But games, even the most beloved ones, just get old and people hold that against them. People expect remakes and sequels. They won't pay more than a pittance for a PS1 game on the PS4. Games are just too tied up with technological advancement. They suffer from obsolescence a lot more than any other entertainment medium. Especially since, unlike film, hardware needs to actually support the software or the software has to be modified to work with otherwise incompatible hardware. Movies are open to any delivery method. Cable, Netflix, every home format, etc. Games don't have that luxury. Things have gotten better in that regard but it's still not exactly comparable.

    I don't see a crash coming but if things don't improve I do see a lot more Kingdoms of Almur situations in which publishers wind up going out of business despite moving millions of units of otherwise perfectly good games that will never get the chance to thrive because of the surrounding insanity. Wasn't Square Enix bitching that Tomb Raider failed to meet its 10 million units sales goal? There's no rationality anymore. These publishers are living in the land of fairies and unicorns.
    Last edited by TonyTheTiger; 12-13-2013 at 07:08 PM.

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    Quote Originally Posted by TonyTheTiger View Post
    But video games don't even have a "depends on the game" caveat. They pretty much universally can't generate any meaningful revenue past their brief window of relevance unless it's an MMO but those are expensive to maintain. That's why we're in the double digits of many long running franchises. Because even a smash success like Final Fantasy VII isn't worth much anymore. The value is almost exclusively in the IP rather than the product. Plus, people don't expect movies to be updated. But games, even the most beloved ones, just get old and people hold that against them. People expect remakes and sequels. They won't pay more than a pittance for a PS1 game on the PS4. Games are just too tied up with technological advancement. They suffer from obsolescence a lot more than any other entertainment medium. Especially since, unlike film, hardware needs to actually support the software or the software has to be modified to work with otherwise incompatible hardware. Movies are open to any delivery method. Cable, Netflix, every home format, etc. Games don't have that luxury. Things have gotten better in that regard but it's still not exactly comparable.

    I don't see a crash coming but if things don't improve I do see a lot more Kingdoms of Almur situations in which publishers wind up going out of business despite moving millions of units of otherwise perfectly good games that will never get the chance to thrive because of the surrounding insanity. Wasn't Square Enix bitching that Tomb Raider failed to meet its 10 million units sales goal? There's no rationality anymore. These publishers are living in the land of fairies and unicorns.
    I won't dispute that the vast majority of hit games don't have the shelf life of a hit movie. Having said that, a hit game has the potential to generate far more revenue in a much smaller period of time than all but the biggest blockbuster hit movies. GTA V did $800 million day of release and over a billion within three days. Even the biggest hit movie of all time hasn't come anywhere close to those numbers in the first week of release. In fact, in the entire history of cinema, only 17 movies have ever exceeded $1 billion worldwide. In comparison, in just the past few years, several games have exceeded $1 billion including GTA IV at about 1.3 billion, Mario Kart for the Wii $1.4 billion, Black Ops at $1.5 billion, etc...

    So yes, those are insane numbers, but frankly, the risks being taken by those publishers seem pretty rational in relation to the rewards. Spending $265 million to create GTA V seems like a wise investment on revenue of $1+ billion. To you it might be the land of fairies and unicorns, but to the entertainment studios, it's just another well calculated risk no different than television and film. The reality is that a small start up using taxpayer money had no business trying to launch such an ambitious IP like Amalur. Square may need to look for merger or sale opportunities to have the financial assets needed to compete. Frankly, I don't have sympathy for either company when EA, Ubisoft, Activision and many smaller Japanese publishers and tons of indie publishers are doing just fine either targeting the masses or the niche to maintain profitability.
    Last edited by Bojay1997; 12-13-2013 at 08:07 PM.

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    Well given the tendencies of the big shift in how game companies operate since the middle of the 2000s a crash of some sort, or at least a good boot to ass adjustment I think will happen, just not sure when or how severe. You have these very poor but functional business models being used where it's all about putting only the safe bet to physical media and that's few genres and little else far between. Because of this you get a bad case of me-too-itis where people just one up each other but really if you take the rosey glasses off, there's little different to see, yet this same polished turd pops up every year. People will wear out on it over time, and a mini bubble of this could be seen as how far along Rockband/Guitar Hero went and look where they're at now...unsellable shit guitars and parts at goodwills for a buck. If someone wants to take a chance, you're better off going to a handheld, a kickstarter(ugh) project, or doing just a lame digital download because it's a safe bet, cheaper to develop since you can cut a lot of big budget corners, and no packaging/marketing either really is needed. Things are getting stale, but at the same time NOT stale enough is the problem.

    As long as you have an endless parade of idiots re-buying the same Call of Duty, Battlefield, Halo, Madden, Tiger Woods, ??? Racing, NBA 20XX, random MMO in the massive droves of millions that do, it won't stop. Until those people realize they're being screwed paying $60/yr for roster updates, same shitty shooter with new stages/graphics, and so on there's no motivation to stop taking advantage of sheep. We can hope eventually people catch on wondering why they can't just get a $20 upgrade to an existing disc or download and things shift back towards more genre diversity, creativity, and chance taking, but well you can hope in one hand and shit in the other and see what fills first.

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    The industry is too big, and too mainstream to collapse as it did in the early 80's, but I will say that there is an underlying evil that is brewing with this new generation of gaming. Now that I've had my Xbox One for awhile, I've noticed that Microsoft is interested in nickel and diming their customer at every possible juncture. Forza 5, as great a launch title that it might be, has microtransactions littered throughout the game, a full priced game no less.

    This is a very disturbing trend. Full priced games, that still try to nickel and dime you at every opportunity. If this continues unabated, and gets even worse, it could actually push me away from modern gaming entirely.

    Having said that, I'm an old dog when it comes to this industry. There is plenty of new blood out there that is growing up with F2P and Freemium and all that stuff, and they are more open to it. Personally, I prefer to pay a flat rate for my games, and be done with it. I don't want the constant pestering, and the unnecessary grinds that are added to the experience, to try to get me to pay $ to make them go away.

    I thought that if I bought a game for the full $65 (after tax), that maybe I could play the game in peace, but that doesn't seem to be the case. This really is a disturbing trend, and it's much more in-your-face on the Xbox One, but I'm sure Sony will see what MS is doing and they will also try to nickel and dime their way as much as possible.


    This crap is the only real threat to gaming imo, but again, like I was saying... I'm an old dog, and these tactics could get other old dogs like me to leave modern gaming with all the microtransactions to the young whipper snappers that have grown up with this model.

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    Therein lies your problem. The industry is too big to fail, but it's also not too big enough to fail as it's existing now. What needs to be done is enough people from the new blood, and much of the older (25+yrs) to just say no. The industry really has no right to be demanding more money off a full price game, but we allow it. If people would fight back to remain profitable they'd have to adopt a whole new design in game development, production, release and solid pricing on a project to sustain and then those lame DLC bits would purely have to be extras or get burned for it.

    It's a huge IF, but if it did happen it would fix the problem.

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    Quote Originally Posted by Tanooki View Post
    Therein lies your problem. The industry is too big to fail, but it's also not too big enough to fail as it's existing now. What needs to be done is enough people from the new blood, and much of the older (25+yrs) to just say no. The industry really has no right to be demanding more money off a full price game, but we allow it. If people would fight back to remain profitable they'd have to adopt a whole new design in game development, production, release and solid pricing on a project to sustain and then those lame DLC bits would purely have to be extras or get burned for it.

    It's a huge IF, but if it did happen it would fix the problem.
    Well, I'm playing my part. I rarely ever buy any new games and when I do it's usually from Nintendo who aren't really a part of the problem here. Did you hear that even though the new consoles are out the Wii U is still getting more sales than them? It says a lot about who is developing games with a good model for content. DLC on Wii U and 3DS is probably less rampant because they focus more on selling actual complete full titles digitally.
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    Quote Originally Posted by Rickstilwell1 View Post
    Well, I'm playing my part. I rarely ever buy any new games and when I do it's usually from Nintendo who aren't really a part of the problem here. Did you hear that even though the new consoles are out the Wii U is still getting more sales than them? It says a lot about who is developing games with a good model for content. DLC on Wii U and 3DS is probably less rampant because they focus more on selling actual complete full titles digitally.
    I'm sorry, but where are you getting your information? Microsoft and Sony each sold 2 million of their new consoles within a little over two weeks of launch. In that same period, Nintendo only sold 220K WiiUs. Indeed, this past year, Nintendo has sold less than 1 million WiiUs which means they were outsold by both the Xbox One and the PS4 on their respective launch days. Even great games like Super Mario World 3D only did a little over 100K units in the first week. Those are horrible numbers and a reflection of a failing console, not something to be pointing to as an example of success.

    http://www.forbes.com/sites/erikkain...n-from-launch/

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    No such thing as "too big to fail" guys.

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