The Inquisitive Blogger 29/31: Are We Made of Money? - Tim Gruver Blog - www.GameInformer.com
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The Inquisitive Blogger 29/31: Are We Made of Money?

If the video-game business have become anything to us, it's a matter of money. Players of all kinds frequently voice outrage over the industry's consistent stream of high prices for games, consoles, controllers, and the like. When we look at the vast technological progress that next-gen has already made, it's easy to defend the game biz for being one that demands such costs. With that said, expanding AAA game blockbusters to new audiences demands a meticulous and sensitive approach to players' pocket books-- simply trying to shake more money out of them is part of the problem.

The announcement, backlash, and quick withdrawal of Microsoft's short-lived DRM plans for the Xbox One isn't exactly a proud chapter for the games industry's history books. Plenty of gamers have already moved on from the subject, as it's probably been done to death by now. All the same, the Xbox One's traumatic first few weeks were revealing in their exposure of the chink in the game industry's armor. It brought all of the fears and nightmares out from the closet and into the light for all to see, revealing the vast gap between some game companies and their customers, and thehostility that exists on both sides.

The fear that AAA development isn't sustainable is what keeps some many developers awake at night. The fear, and perhaps very real one, that the business is broken, encourages a kind of desperation in game development all too often. Games cost too much to create and release and can sometimes fail to make enough money to produce the artistic sequels or successors that please fans' tastes. A handful of enormous hits generate most of the profit; everything else feels lucky if its losses aren't too huge. The industry has always been hit-driven, but never have studios before staggered from one release to the next just delighted that their work on the last game was good enough to get them a publisher contract for the next, probably unprofitable, title. In the end, it's just getting that next shot at making the next Call of Duty and another paycheck.

It's an awful state of affairs, and even if it's not always that depressing, the reality is right there in publisher financial statements -- the inclusive country club of money-making franchises dominates the industry more than ever, but gaining entry to that club has never been harder or more expensive. AAAs aren't working. Something has to change.

That's the root cause of perhaps the most common and illogical sentiment among supporters of Microsoft's old DRM policies --"at least they were trying something new". It's the frightened statement of someone who knows that the status quo is broken and is willing to embrace anything new, anything at all, which attempts to change the situation. It's also the basis of a more firmly rooted and even more worryingly notion that's taken hold of many people in the games industry. AAA isn't working, this notion says, and the reason for that is that consumers aren't paying enough cash for games.

The logic is simple, of course. The problem with AAA development and publishing is that it costs more money than games make. One solution--logically, mathematically--is for consumers to pay more money for games, increasing revenues and magically solving the problem. . . for a while. Supporters of this idea glance around the industry and see that while some consumers pay suggested retail prices, the average amount paid is dragged down by 2nd-hand sales, by lending and borrowing among friends and by steep retailer discounts to boxed copies of games. The SRP of a game may be $59.99, but factoring in all of those issues, the actual amount of money a publisher charges for a game, on average, is quite a bit lower--maybe half as much or even less. The last thing players need is the industry turning inwards on itself, perfecting its abilities to suck the maximum amount of cash from an ever-shrinking niche market.

The intelligent leap from that understanding to deciding that these practices are failures that hurt the industry is simple. Remove all of those factors, as Xbox One intends to do, and you end up with the average price paid by a consumer shooting back up to the $59.99, as the publishers intended. Consumers pay proper prices, games all make more money, AAA development is saved, and everyone's jobs are secure. It's a tempting and understandable line of argument, but it simply wouldn't work - in fact, it risks damaging an already troubled industry. 

That popular approach is saving AAA games by making more money from the same consumers, in a fair way. AAA development isn't in trouble because its consumers don't pay enough money--it's because its consumer base's growth is stalled. After years of meteoric growth, AAA games have hit a ceiling. New people are playing games in droves and interactive entertainment has gone as mainstream as anyone dared to dream, yet AAA experiences are failing to encourage new audiences to jump in and become fully fledged video game consumers. The problems are myriad and they're all interrelated as a content, marketing, and perception problem. The industry struggles with the difference between "adult content" and "content for adults", which still isn't entirely comfortable with women or minorities, which exists in thrall to risk-shy management that stifles any chance of opening up new genres or speaking to new audiences.

None of those problems are going to be helped at all bit by increasing the financial barrier to entering the industry's creations. When your ability to grow your market hits a barrier, you overcome that barrier with creative talent and strong management, not by hiking your prices to make your market more unappealing to newcomers. If that's the strategy, it's part of the problem.

That's not to say that there aren't valid strategies to increase average revenue from existing AAA customers, but they're focused on raising the ceiling, not the floor. Limited editions, merchandise, add-ons, events, DLC and many other approaches can allow your most devoted fans to spend vastly more money on your game. Focusing too heavily on this side alone risks breaking your covenant with your audience, but giving your top fans the option to spend more to feed their love of your game is a great strategy that some companies have been slowly mastering over the years. After all, even in the pre-DLC era, how much money have the biggest fans of Final Fantasy 7 and Super Mario Bros. spent on the game and its various tie-ins and merchandise since its release?

Merchandise, DLC and similar properties to increase revenue by raising the ceiling on how much people can spend. Crucially, the floor remains the same; the step up to enjoying your game is no higher than it ever was before. Raise the floor, and you limit your audience even more than it is already limited -- and it's limited enough already. We're at a crucial point for the games industry at present, and a thing we don't need are distracting cash-grabs in the midst of an all-hands to battle-stations.

Unfortunately, it can and has happened. The fear felt by people working in AAA gaming -- or people who love AAA gaming, as I do -- is completely understandable. The existing business model is not sustainable, and those who get their games in ways which drag down the average retail price (2nd hand, lending and borrowing, waiting for sales/discounts, etc.) are an easy target to attack. It's the wrong target. If AAA games are going to be a thriving part of the entertainment world and not a niche catering to a slice of the existing audience, their salvation must come not from price hikes but from a resurgence of creativity and a concerted effort to engage with a wider audience.

This isn't beyond possibility, but sometimes, it feels like we've given up on the dream and decided that the existing audience for games is big enough, and nobody else would be interested in the kind of experiences we could offer. We live in a world where offices nationwide are abuzz about The Walking Dead or Game of Thrones, where Avengers is one of the most successful films of all time-- where action, fantasy,and escapism have never had greater respect. There's a path games can take to a bigger audience and a secure future even for expensive AAA development --but coming up with ways to wring more cash out of people for playing games isn't a step on that path. It's a step down that leads to exclusion.

Only 2 days left in this series and I'm gonna try and make them special, or at least unique I suppose. I can't wait to share them with you and, also, remember to tune into my epic joint blog with some of my favorite fellow 31/31 bloggers--Smashed Up: The GIO 31/31 Fighter Championships! tomorrow. I dearly hope it'll be a treat. Until then and the Inquisitive blogger's finale, keep cool GIO. Later.

Up Next on the Inquisitive Blogger: Why Can't We be Friends?

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