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OMG! Level 15! - Level 15
Could there ever be another crash...?
You guys ready for some history? How about a horror
story? You want both?
The video game industry is changing a lot right now. Some
good, some bad, but some largely immeasurable—a lot of unknowns haunt these
changes. Technology has changed more
over the past generation than in any other console generation, pretty much
ever. We didn’t just add more technology this time. Everything’s changed. For
the first time, fully digital consoles are viable. For the first time, gaming
is easily available to everyone without
the need for consoles. For the first
time ever, the future of used games is in question.
A game console. Starting at $1000.
Think about that last one for a second—we could be as much
as one or two generations away from GameStop’s extinction. Now, why would I think their end could be so
soon? Nintendo, Microsoft, and Sony are
very clearly still giving us physical games, but they are just as clearly moving
towards a digital-heavy future. As it is
right now, Nintendo makes almost every single retail title available as a
downloadable. Nintendo could, at this
moment, almost go to a full digital standard since they are already set-up for
it. Over this past generation, both Sony
and Microsoft have also been increasing the number of retail games available
for download. I think it’s a safe bet that all three major console makers will
make this their standard over this generation—as MS had originally intended for
the Xbox One.
Then, of course, we have the digital-only consoles. Ouya, GameStick, Shield, and the Piston “Steambox”
(which is not an official “Steambox”), Valve’s actual Steambox (if it ever
shows up), are digital-only. Google’s
purported console (which is likely to use the Chrome OS) and the announced
Amazon Android console are also very likely to be digital. Digital sales will completely eclipse
physical on all platforms before this next generation is out. Possibly before we even reach the halfway point.
But this is a change that will really only hurt one
element—GameStop. I doubt many gamers
would be sorry to see them go. (I
personally avoid GameStop now, and part of that stems from having worked there.)
But our digital future is not the focus here. Rather, I’m
talking about eerily similar “new changes” that may, in reality, be reflecting
The Crash of ‘83
I doubt I’m the only one who’s sauntered over to Wikipedia
to indulge myself in the gritty past of gaming, when the industry was ruled by
the United States, and promptly ate itself nearly into extinction over the
course of a single generation. It’s a
truly fascinating read and equally horrifying.
Common remarks on it are often along the lines of “when E.T. killed gaming,”
and when Atari buried unsold and returned cartridges in a New Mexico desert. To be fair, E.T. was not the only high
profile disaster, nor is there a singular cause of the crash.
Firstly, E.T. was joined by Pac-Man (Atari 2600 version)—both
notoriously over-produced, both seeing massive shortfalls in sales, and both
notoriously awful. Pac-Man, it should be
noted, was one of the biggest games in the world at that time, along with
Donkey Kong. Any console that got those
titles would see some real success.
Coleco famously snagged Donkey Kong for the ColecoVision, and Atari
snagged Pac-man, which was essentially a disaster. Donkey Kong later appeared on other platforms
as well—somehow always crappier than the arcade perfect title Coleco had.
Arguably the single biggest problems during the waning years
of the 2nd Generation (which lasted from roughly 1976~1984!) was that of simple
over-saturation. There were too many
consoles for one—Atari had 2 completely incompatible platforms with the 2600
and 5200—the former of which was the darling of the generation, the latter of
which, the pariah due to its high price, gigantic size, absurdly breakable
controllers, lack of backwards-compatibility, and lack of games. There was also the Vectrex, the ColecoVision,
the Intellivision (the first 16-bit console), the Fairchild Channel F, the
Microvision, the Sega SG-1000, the Magnavox Odyssey2, Emerson Arcadia 2001, and
the Bally Astrocade.
That is 11 consoles over a roughly 8 year period.
This is my image search find for "deregulation."
There was no regulation and no licensing. Atari famously fought to keep actually third
party developers (the first of which was Activision) from developing on the 2600.
ColecoVision had an add-on that allowed users to play Atari 2600 games,
and the console makers would actually make games on their competitors platforms
(of lower quality, of course).
Intellivision cartridges were repurposed to be Atari 2600 cartridges (I
have some of these), the Coleco logo would appear on Atari 2600 games. Pretty soon, the market was swamped with
games—but consumers could barely tell the cream of the crop from the crap of
With the market in chaos, no regulation, and two major high
profile releases (E.T. and Pac-Man) being little more than total trainwrecks,
consumers promptly viewed video games as a dead-end fad and turned their backs
on the industry. It was all just too damn much.
Stolen from Old-Computers.com.Metallica's first album came out around the same time.
This crash was a major turning point for gaming. It moved the center of the gaming universe
from the United States to Japan. In the
same year the US gaming market was crashing and burning, Nintendo launched the
NES in Japan, and made the first in-roads to a new future in video games. Nintendo carefully observed the failures of
the US gaming market, and they cracked down—notoriously hard at that. Consoles
featured lock-out chips and designs. Developers were trapped in strict
contracts. They maintained powerful
control over their console. It horrible,
but it prevented the kind of unfettered chaos the 2nd Generation
This model still exists today among the major console
makers, but has become much more “friendly” to third party developers and
I want to drive that.
But Wait a Minute, Surely We Know Better Now?
I think one of the best ways to grow as an individual is by
making mistakes. We always learn good, hard lessons from terrible, terrible
mistakes. Unfortunately, in my
experience, from what I’ve seen of the world—people do not always learn from
their mistakes. Not permanently, at any rate.
Why don’t we illustrate this point with horrifying tragedy?
By 1986, NASA was flying high. The Space Shuttle was a total success. It was a model of a nation at its economic,
scientific, and technological peak. So
much so, that the Space Shuttle had become a pretty standard routine. Perhaps too routine, as bureaucracy and
complacency had set in and become the norm.
In 1986, wanting to avoid further delays and goading from higher-ups in
a bureaucratic nightmare, NASA launched the Space Shuttle Challenger in a
frigid early January morning. In a
public spectacle, that bureaucracy killed an entire Space Shuttle crew as it
exploded without ever leaving our atmosphere.
All hell broke loose.
Why could this ever possibly happen?
With so many checks, so many double checks, so many checklists, so many people to ensure that nothing like this would ever happen? There is never an easy answer for this kind
of thing—but what it ultimately boiled down to was bureaucracy. The men in
charge knew the O-rings on the
booster rockets were unreliable at very low temperatures, but they had to worry
about public image, about results. Suits
and bureaucratic nonsense had gotten in the way of safety.
NASA resolved never to let this kind of horror happen again.
Fast-forward to 2003, and we see that learning lessons, even
hard ones, is not a magical immunity for repeated mistakes. NASA had almost 20 years to once again become
bureaucratic and complacent and routine.
Once again, NASA’s decision-making was called into question. Schedules seemed to take precedence over
February, 2003, the Columbia space shuttle burns up on re-entry. The TPS - Thermal Protection System (heat-shield) had been damaged by debris falling off the external fuel tank. Bureaucracy had allowed the Space Shuttle to become damaged, and bureaucracy had allowed it to re-enter the atmosphere with structural damage that would very likely prevent that successful transition. In the aftermath, it was even noted that the Atlantis could have been sent up in a rescue mission. But alas, seven more human beings, and millions of dollars were lost in another very public catastrophe.
NASA had forgotten its own hard lesson.
Now, why the bloody hell would I choose to highlight such
horrifying moments in our history for this?
It is precisely because of the level of the horror that I did. These were incredible disasters, costing
millions if not billions of dollars, and worst of all, human lives. Because people let history repeat
I could just as easily have spotlighted New Orleans, with
its history of flooding and hurricanes and reliance on levees—and Hurricane
Katrina, where it was clear that the local New Orleans and Louisiana
governments had not been paying attention.
Years of warnings that “one day these levees would fail if not repaired”
landed on deaf ears until they did, in fact, fail.
Video games. Another win for Google Image Search.
Yeah, but these are video games we’re talking about, right?
True, human lives are not at stake here. But jobs, careers, and livelihoods are. And
here’s where my point finally comes in.
History can repeat itself, and this industry can always crash again.
We are at a point of over-saturation, once again. There are more games and developers than ever
before, and more platforms than ever.
This year, 2013, is the single most crowded year in the history of console
gaming, and features all of the following consoles as new, in-coming, released,
or still relevant:
Wii Wii U DS 3DS Playstation 3 Playstation 4 PSP PS
Vita Xbox 360 Xbox One Ouya GameStick Shield Piston Neo-Geo X Google’s “Chromebox”
and Amazon’s Droidbox as recently noted upcoming consoles.
consoles and game systems. That dwarfs
the entire second generation—and this is just a single year. The
ColecoVision, Intellivision, and 5200 were all late-comers, hitting shelves not
long before the crash itself set in—for a generation that started in 1976~1977
with the Fairchild Channel F and Atari 2600.
Believe it or not, actual size.
Yes, the Wii, DS, and PSP will see 2013 likely as their last
year of relevance, and the Neo-Geo X and Shield are mostly niche products—but
that doesn’t change the fact that they
are here in the market vying for shoulder room and shelf space. These seventeen platforms are joined by
Windows, Linux, and Apple computers, Android, Windows, and iOS tablets and
phones, and browser games.
Platforms and consoles are not the only places that are
crowded. Libraries are crowded as
well. At one time, the estimate I read
about Apple store apps and games numbered half
a million, and upwards of 5,000 versions of just Solitaire. This was
from an EGM magazine about 2-3 years ago!
Angry Birds-style success is a fluke and not remotely the norm. There are a lot of potential customers, but
there is also almost as much competition.
Getting noticed is nigh impossible—and woe be to you if you actually
charge money for your game.
My own experience saw my team’s finished game (GravBlocks)
enter Android’s Google Play marketplace and struggle to sell 50 copies. Mostly to friends and family, low enough to
make us sad, but higher than some developers.
We had virtually no advertising other than friends and family that would
listen to us, and still outsold another local studio that had a couple million
dollars behind their game. We worked in
our free time with no money, and two failed Kickstarters. Again, another local studio worked full time
and had over a million bucks to support them—and they sold worse than us.
Then, of course, there is AAA gaming. It’s now becoming common knowledge that there
are far fewer AAA studios than there used to be, but they employ about the same
number of people that used to work on AAA games. I’ll give you the short explanation of
this: Games take so much more manpower
and cost to make that major publishers are making fewer of them with larger
teams. Maybe that sounds fine,
right? After all, that means Mass Effect
4 will look and sound even better and
as it delivers largely the same overall experience as Mass Effects 1-3. Well, maybe it’ll be different, but can they
really afford to make too many changes to it?
Given the way their “fans” assaulted them after Mass Effect 3, I don’t
think they’re going to take the risk…
Now, why would I say a bummer like that? “Well, it’s just going to be the same as the
previous games, but prettier.” Because
that’s the trap of this ultra-high-cost AAA development. In order for publishers to make that money
back, they need to scale back the risks.
Risks and new ideas could lead to low sales. Better to stick with what works. You just don’t take risks when there’s this
much money involved—Grand Theft Auto IV cost $100,000,000 to develop, which is
“big-budget Hollywood blockbuster money.”
Publishers may no longer be able to take major risks. We will be seeing a lot more cookie-cutter
games, possibly more annual releases, and a lot more sequels. We will see far fewer risky ventures, far
fewer niche titles, and quite probably, far less creativity overall.
Balk at this if you wish—some of you will. But look at what sells—sequels that largely
deliver the same experiences over and over again. New Super Mario Bros, Madden (or almost any
sports game), Zelda, Call of Duty, Grand Theft Auto, Street Fighter,
Battlefield, etc. It’s fascinating to a
point to sit down and play Street Fighter IV and realize that moves I’d learned
with E. Honda 20 years ago are still relevant now. They really stayed the
course on that one.
Let’s look at some games that really didn’t sell, despite
critical praise: Sin & Punishment:
Star Successor, Shadows of the Damned, Bulletstorm, Brutal Legend, Beyond Good
& Evil, MadWorld, Okami, Psychonauts, etc.
Being different tends not to sell. If you’re a major studio and you’re
shelling out a Hollywood budget to make a game, you aren’t going to be to
inclined to put that money at risk.
You’re going to put it in a sure thing.
Fry is always relevant.
Some of you are fine with that, I’m quite sure. Having worked at GameStop and Best Buy in the
past, I’ve seen it. The guy who bought a
console just to play Madden and Call of Duty.
It’s a damn cliché. But it’s real! Those people exist! In large numbers! They don’t want new, they don’t want
different, they don’t want anything particularly creative. And every single year, they make the same
predictable purchase. Pavlov’s dog of
gaming. Activision could totally cancel
Call of Duty one year, and these people will probably still walk into the store
asking for it.
The problem becomes one of industry stagnation. When the majority of the games are all the
same thing, and there are too few new ideas, concepts, games, or IPs—the industry
will become very vanilla. Now, hold your further balking for a
moment—because Ubisoft recently stated that this
is exactly their focus now.
This is an issue that has the potential to cause a crash,
but is unlikely to. What I think is more
likely is lowered sales because of industry bottlenecking. We would see the AAA side of things move from
a rich palette with a variety and quantity of releases squeeze down to a
limited selection of high quality, though largely repetitive and predictable
titles. This is could lead to a self-destructive
circle where the sameness and repetition cause consumers to lose interest, and
as such, the industry attempts to fix the problem by making more repetitive and
similar games. Why would they do
that? Because even fewer potential
customers means they must try to appeal to an ever-sinking lowest common
denominator to reach paying consumers.
We have already seen inklings of this problem over the last
generation as more and more titles have become annual franchises, or
biennially. At the start of the
generation, it was pretty much just Guitar Hero and sports games that did
this. Now, we have Call of Duty,
Battlefield, Halo, Assassin’s Creed, Mario & Sonic Olympic games, and even
Zelda is nearing this level.
He's looking at the lofty expectations for his future.
The other part of this is that we are likely to see the end
of Third Party exclusives. Your next
Xbox, Playstation, and Nintendo consoles are going to be more dependent than ever on their First Party offerings. If you need evidence of this, look at the
X360 and PS3 game libraries. They could
hardly be more identical. Many have
scoffed that the Wii was missing out on a great deal of these games, but we
ignored the fact that, at the end of the day, the Wii’s difference is actually
a strength—it has a gigantic library of exclusives (and games released only
there and one other place) that can largely only be played there. Any self-respecting gamer would recognize
this value as every bit as important as having multi-platform titles. Without exclusives, a console’s value goes
Exclusive games are arguably the number one reason to buy
any console, and the console with the most exclusives also has the most
value. This is something Sony has
managed not to recognize twice. The PSP was very popular, but was heavily
flooded with PS2 games over the course of its life. The idea of a portable system that allows home-console
gaming on the go sounds nice on paper, but in practice, this has never been
what sold a portable system. Nintendo
ensuring that their portables had notable exclusives is the reason they have
long dominated the portable market, and are unlikely to see that change.
Let’s not forget how many companies like THQ and Acclaim that
have now officially vanished, and how many are still on the brink, like Atari. Atlus is being auctioned off. Let’s not forget that Capcom, Square-Enix,
and others have posted fairly hefty losses—and how some of these very companies
seem intent on suddenly entering that over-flooded mobile market.
Speaking of that…
The New Guys and the Looming Droid-iOS crash
This year is seeing the rise of the first ever crowd-funded,
totally indie game consoles. Every other
console maker in the past, from Coleco, Atari, Mattel, and Magnavox to
Nintendo, Microsoft, Sony, Sega, Nokia, and Panasonic, have been large
corporations and entertainment or electronics companies.
Now, we have new companies—so small that a couple of them don’t
even have corporate names really separate from their consoles—Ouya and GameStick. Shield, Amazon Box, Google Chromebox, and the
Piston. That’s an awful lot of new
entrants to console gaming.
There’s an interesting element here you may recognize from
the ill-fated 2nd Generation.
A near total lack of regulation.
Ouya is so unregulated, it has illegal (and if not that, highly legally
questionable) emulators built into the damn thing. On the surface, this looks pretty good for
indie devs—almost no hurdles to getting a game up and running. Make a game, and put it up for sale.
In reality, this is one of the major pitfalls of the 2nd
Generation rearing its ugly head. A
marketplace of unregulated, unfettered game releases had a disastrous effect on
the industry back then. It created
overwhelming consumer confusion, which led to consumer apathy, which led to
vanishing sales. Stories existed of
discount bins filled with games discounted to pathetic amounts with stores
simply desperate to get rid of them. You
know you have a problem when Quaker
Oats and Purina (as in the pet food company) are making video games.
When dog food made a video game.
The Ouya and Shield are very much designed with this
mentality in mind, which is likely to be grossly self-defeating. Ouya, for instance, saw a release of Sonic
CD very recently. The Sega
emulators cover Genesis, Game Gear, Master System, Dreamcast, and
Saturn. Sure, Sega-CD doesn’t appear to be directly listed on the
website linked, but let’s be honest here:
Who the hell is going to pay to download a Sonic game on the Ouya, when
the emulator of questionable legality is just another click away? This is only part of the reason no one is buying anything on the Ouya, and
likely, the Shield either.
Now, I like the Ouya so far—it’s far from perfect and has a
lot of flaws, but I think it’s a neat system and I’m going to give it the
benefit of the doubt for right now.
However, if these things don’t change (along with the broken “demo-everything”
set-up), the Ouya will never succeed, and developers will be driven away in
The wildly unregulated notion of these systems seems nice on
the surface, but it breeds images of unprofessionalism, questionable legal
status, confusion, and vanishing quality.
As of January 2013, there are over 775,000
iOS apps (including games). Damn,
that’s a lot of choice, right? Okay.
Tell me which ten are the best.
Name something other than the highly noted XCOM port, Infinity Blade,
and Angry Birds. The Android market is
hardly any better. In fact, given that
it’s regulated even less than iOS, it’s almost safe to say that it’s probably
worse. (My team’s personal experience
with iOS is that Apple is unnecessarily difficult to work with, and we have
sworn off ever attempting to put a game on there again.)
The problem here is that these markets are visibly
over-saturated. Making the next Angry
Birds is as much a fluke as anything.
Instant success is not even remotely the norm on phones or tablets—and one
might note that regular success or even breaking even can be pretty tough to
come by. This market is headed for a
crash. So much so that the initial
strong support of platforms like Ouya and GameStick may well stem from
developers desperate to get their games somewhere they might be noticed.
This part of gaming is walking to a future soon likely to be
littered with the corpses of indie studios.
When enough studios have failed to garner praise or profits in this
overcrowded, under-regulated mess, they will stop making games. And they may stop in droves big enough to
witness another crash.
In other news, Zynga’s horrors have been so wide-reaching
that it’s noted that investors
have been leaving gaming altogether.
There are investors that do not see the value in putting their money
into this industry.
We've all been there.
On the one hand, the industry is moving towards a generally
consistent high-quality AAA side, but with fewer and fewer new ideas, concepts,
games, and less originality overall. On
the other hand, we have a dangerously unregulated swamp with too many options,
too many of which are of an unfortunately low quality. There’s a lot of creativity there—but good luck
Now, this is all speculation. The industry is changing rapidly, and in a
variety of ways. What I see as
troubling, you may not. But what I do
find troubling is how AAA gaming is bottlenecking itself and that the reverse
of the spectrum is over-saturating itself.
The industry is heavily flooded with the most gaming hardware it has
ever seen. Last time this happened—the start
of the 5th Generation—the industry was left a new entrant at the top
(Sony), a stalwart stumbling (Nintendo), and a once-powerful rival failing
(Sega). Behind them, the corpses of the
Jaguar, 3DO, Philips CD-i, Apple-Bandai Pippin, NEC, and the Tiger game.com,
I myself question how long Sony and Microsoft can continue
to hemorrhage money to sell a game console.
The original Xbox and X360 spent nearly half their shelf lives losing
money. Sony’s overall financial
situation has been even worse since the release of the PS3 where only about 2
out of the last 7 years has seen the company as a whole showing profitable
fiscal years*. How much does each Xbox
One and PS4 cost to develop? One
hundred, two hundred dollars more than the MSRP? I’ll provide this
interesting, well-resourced link for you to ponder. Let’s keep in mind also that even with a
slight growth, people really still don’t care about the Windows
Phone and the Surface
Tablets appear to be performing quite gloomily. And we think the Wii U is the only thing
I am not saying there will
be a crash, nor that it’s guaranteed.
Only that it is entirely possible, because even lessons learned the hard
way have a way of being forgotten.
Because the industry is currently manifesting some of the problems that
hurt it when the 2nd Generation declined, as well as creating all
new issues. Because I question the
long-term logic and viability in taking huge financial losses at console
launches going forward. Because Sony,
MS, and Nintendo have all seen quite a few losses recently, or for quite a
while. Because the Android and iOS
market is eating itself to death.
Because AAA gaming can no longer take risks with creativity.
And to be fair, this blog isn’t looking completely at
everything. That would make it even
longer. Then only two people would read
it instead of four. There are some
bright spots. The increasingly strong
sales of the Nintendo 3DS, for instance.
The staying power of the X360 and PS3.
But the point here was to spotlight the horrors haunting the twilight,
not the shining sun of the following morning.
Sega has been profitable.
Nintendo has been profitable.
If there was a crash, and those two were the ones that
predominantly rose from the ashes… I think I could enjoy that. We could see a new golden age again, like the
16-bit (4th) Generation. With
everyone overly cautious about game development, but eager for it. Not that I have anything specifically against
Sony or Microsoft, only that my nostalgia is from when the game industry was
run by game companies.
*Edit: It is not my intention to make it look like the PS3 is singularly to blame for Sony losing money. Indeed, there were other events such as the lower electronics sales, the 2011 hacking, and the tsunami that also cost the company money. This is used as a reference of time.
*Edit 2: I realized I was actually missing a paragraph in the NASA section.