79 Comments

Summary:

Someone recently asked me how the game industry lost the attention war. Paradoxically, interactive entertainment has never been more popular or lucrative, but the game industry— narrowly defined here as the major consoles and game publishers— is now, with one notable exception, but a sliver in […]

gamezincrisis.jpgSomeone recently asked me how the game industry lost the attention war. Paradoxically, interactive entertainment has never been more popular or lucrative, but the game industry— narrowly defined here as the major consoles and game publishers— is now, with one notable exception, but a sliver in a much larger interactive entertainment pie. Why? There’s a simple explanation, but first consider this recent litany of failure.

* Milestones of an Industry On the Road to Irrelevance
* Inside an Insular Industry
* A Future Business of Games Without a Single Industry

Milestones of an Industry On the Road to Irrelevance

* EA in Crisis: The industry’s largest publisher defenestrates their chief executive, citing sequel-itis, then drastically scales back its profit estimates, citing a failure to develop enough titles for the Wii.

* Nichification of the Next Gen Console: Xbox 360 eclipses Playstation 3, sending Sony into a tumult. But that conflict belies a more crucial truth: this generation, the console war is actually a duel between midgets. Selling in the low millions, each has little chance of reaching anything near the PS2’s truly massive installed base.

* Wii Victorious: At its E3 2006 debut, fanboys praise the Wii for its innovation, but because it lacks HDTV and hardcore gamer titles, dismiss it as a sideshow to PS3-versus-360. Instead, the Wii vastly outsells both and becomes a disruptive technology, forecast to eventually reside in nearly 1 of 3 homes.

* Rise of Non-Game Virtual Worlds: World of Warcraft premieres in 2004 and three years later, retains an uncontested monopoly on the fantasy MMO. The industry keeps churning out fantasy MMOs—all of which fail in comparison. Meanwhile, a slew of non-fantasy online worlds— Gaia Online, Club Penguin, Second Life, and more— attract millions of users, extensive media coverage, and investment dollars. None of them are produced by the game industry—which, after developing virtual worlds for some 20 years, represents a spectacular missed opportunity.

* Casual, Web-Based Games Rising: Dozens of free game sites like New Grounds and MiniClip rank in Alexa’s top 1000, attracting millions of casual players, especially women. Few have any relation to the game industry. Among the only fantasy MMOs to succeed post-WoW is the Web-based RuneScape—once again, not from a major publisher.

Inside an Insular Industry

Why is all this happening? The unifying explanation can’t be conveyed by strict business analysis, for it goes to a deeply rooted corporate culture: The game industry is Hollywood for Lost Boys.

It’s a business comprised almost entirely of young gamer dudes, serving an audience of young gamer dudes, covered by a gaming press of young gamer dudes, all of whom are only interested in creating, playing, and covering games that interest young gamer dudes—which they believe to be the pinnacle of entertainment. (For a cruelly accurate, street-level sketch of its oblivious insularity, read this excerpt from Smart Bomb, or immodestly, my own report from E3 2001.)

So of course EA would under-develop for the Wii: its low res graphics aren’t appealing to Lost Boys. Of course the industry would be slow to grasp the Wii’s disruptive power and fixate on the 360-versus-PS3 sideshow, since both can run the Hollywood-worthy epics like Halo 3 and Gears of War they’re interested in.

Of course they’d fail to capitalize on the rise of Flash-driven casual games, which appeal to women and older gamers. Of course they’d keep churning out fantasy MMOs they like, and ignore the rise of non-game virtual worlds, which they don’t. (As Will Wright once told me, developers are hobbled by a “moviemaker wannabe” streak: “You know: ‘Well, George Lucas made his world — here’s my world!’”)

And of course they’d be indifferent to user-created worlds like Second Life: the idea that amateur-produced content might provide a new and in many ways superior experience to traditional MMOs is entirely alien to them. Their peevishly incurious reaction is pretty much what you’d have got from a movie producer in the 90s, if you told him that film and TV would soon start losing their audience to a video clip site featuring stupid dog tricks and a dancing bald guy.

A Future Business of Games Without a Single Industry

Can the industry regain the attention? Not as it exists now, not without brutal changes to its gamer-centric culture. A few publishers, notably Ubisoft, are trying to steer their corporate ship out of Lost Boy territory, developing more Wii titles, more games for families and casual players. So the PS3 and the 360 will continue underselling, and as more publishers shift their dollars to the Wii, become even more niche.

As traditional MMOs besides WoW go extinct, user-created online worlds will thrive, and budget-conscious game studios will turn to Multiverse, Areae, Second Life, and other open platforms. Individual developers willing to make do with a little less geek glamor in exchange for more independence will leave the industry, and follow after the Flash-enabled success of games like Desktop Tower Defense.

After speaking at this year’s Game Developer’s Conference, venture capitalist and tech visionary Joi Ito described an industry steadfastly ignorant of the changing world outside, “making the same mistakes that the content guys have been making since the beginning of networked computers. They ALWAYS over-estimate the importance of the content and vastly underestimate the desire of users/people to communicate with each other and share.”

So in the short term, nothing will change for most of them; occasional tent pole hits like Halo 3 will soothe their cloistered delusions. They’ll keep ignoring non-traditional gamers, Web 2.0, and the user-created revolution, assuming like Hollywood that their core product has enough global appeal to get them through the latest media revolution.

And that will be their final disastrous turn. Because unlike the real Hollywood, there are only so many Lost Boys in the world willing to pay attention to them for so long.

Update, 6/6: Some replies to reader comments here.

Update 2, 6/7: Esteemed veteran game designer Ernest W. Adams offers his take here. As it happens, Ernest has related thoughts in his latest Designer’s Notebook essay for Gamasutra, “Is it Time to Dump EA?

  1. Yeah–core gamers (myself included) are an interesting bunch to say the least.

    Share
  2. Wagner,
    Excellent post. All these incidences of arrogance and indifference to the larger marketplace are their milestones towards obsolescence.

    “And of course they’d be indifferent to user-created worlds like Second Life: the idea that amateur-produced content might provide a new and in many ways superior experience to traditional MMOs is entirely alien to them.”

    This caused me to reflect on newspaper/periodical industries missing the mark about blogging, and the entertainment industry missing the mark on podcasting/vlogging. The absurd idea that amateurs can produce anything of relevance or of quality. Oh well…

    Share
  3. Fantastic article, beautifully and concisely written. I would argue that an extension to this piece might cover quality control issues as user-oriented content becomes more mainstream, but that’s a story for another day.

    Casual gaming is a frustrating yet tantalising development, but has to move beyond the shackles of Shockwave & Flash. I find cross browser / platform issues almost intolerable when making games

    Share
  4. A Real Gamer Monday, June 4, 2007

    This article has nice sentiment, but unfortunately ignores a lot of current FACTS of game consumption and online world usage(and blogging too!)

    8 MILLION people worldwide play WoW. 4 MILLION of those in North America.

    By contrast Second Life is mostly a bunch of media hype that hardly anybody really uses. Last report I saw said Second Life had something close to 2 million registrants. Which sounds great, until you learn that their ACTIVE user base is less than 300K. People are trying it out and saying “No, thank you.”

    And as for the HUGE popularity of blogging. Well, please read the recent Pew study on this. A WHOPPING 8% of the American population actually blogs — and guess what, half of this 8% are students. It’s just not a very popular activity at all among adult Americans.

    The fact is that the games that are being produced today are being consumed by a MASS audience. And the gaming industry, as it exists today is growing extremely rapidly. It is already a several billion dollar industry and one of the fastest growing segments in computer software and Internet services. And the computer games that are published today are increasingly being played by mainstream consumers, not just hardcore gamers.

    The data supports all of these trends.

    Share
  5. What will be amazing to witness is when amateurs produce game platforms by gluing together open modules, repurposed hardware, and web APIs to attract communities who previously had never considered owning a game device.

    Share
  6. Jim, I think you’ve largely nailed this but I think there is a sort of a meta cause of this problem. It’s the fact that console game platforms are closed. If their platforms were more open, EA’s problems wouldn’t be as much of an issue because there would be other game companies or teams there to take up the slack. Ditto with the focus on young men — by broadening the base of developers you naturally get more diverse titles.

    Share
  7. Well written, but a bit of a circular argument… you say the game industry is too narrowly focused on core experiences, but limit your critique to the major publishers (except Ubi) and the console developers (except Nintendo). You should add XBox Arcade… in it you’ll see another example of the real trend in the videogames industry: its reach is expanding to encompass a much broader audience. Some platforms will adapt (Wii, XB360 Arcade), new platforms will emerge (mobile, casual PC), and some will stay focused on their traditional business – Sink or swim.

    All of these, and the many examples you cite above ARE the new, broader, more expansive, and more interesting videogames industry. Your article is just a wake up call to Sony, EA, and the core developers who serve them.

    Share
  8. This is quite possibly the worst critique of the video game industry I’ve ever read. Blanket statements supported with mere speculation rather than hard data will win you few cases in the court of reason. You criticize the closed mindedness of companies like EA, yet fail to recognize that this company and other large publishers are major participants in many of the new trends you applaud and cite as their undoing. Were you aware that EA purchased cell phone game company JAMDAT and owns Pogo.com, one of the largest casual game hubs on the web? Probably not. Perhaps you also missed the announcement of Sony’s new Home project and its upcoming title LittleBigPlanet at GDC, both of which feature player interactivity and user generated content as staples of the base experiences. Consoles and game publishers aren’t going anywhere.

    Share
  9. Soapboxman – I think you’re right that the major publishers are taking steps, but Wagner’s point that the overall culture is messed up is dead on.

    I was the Technical Director for Pogo until about a year ago. Pogo and Jamdat were both acquisitions EA made because their own internal efforts fell flat (EA.com and EA mobile).

    That’s one of the reasons I left and founded Kongregate – http://www.kongregate.com. It’s a community site for Flash games – sort of an Xbox Live service for web games, with games uploaded by the developers, who share in ad revenue.

    Share
  10. “The game industry is Hollywood for Lost Boys.”

    So blogging is journalism for lost boys?

    Share
  11. Great Article!

    EA buys companies to round out an extensive market strategy and minimize risks to its shareholders. At the same time, nearly 30% of EA’s revenue come from a single game – Madden. Sports gamers are at the core of core video gamers. But even here, its questionable whether consumers will continue to pay $60+ for what are essentially roster updates.

    If EA was seriously interesting in “moving the ball forward,” They would turn Madden into a combination sports video game / ESPN-like user content broadcasting platform.

    Don’t forget that the Sim’s played a significant role in the development of avatar / identity social entertainment.

    Now to it’s credit, EA is making decisions to turn the ship away from the island of misfit boys towards the broader mass market. The have announced a deal with Steven Spielberg. Whether this marriage will produce a surviving evolutionary innovation is yet to be seen.

    My hope is that they will focus on a delivering an emotionally powerful narrative experience that has opportunities for interactivity without being dependent upon them.

    Share
  12. Interesting read, but why would traditional MMO’s go extinct? As long as subscriptions exceed expenses, there’s no reason to shut them down (and a lot of incentive to recoup development costs over the long haul). Even the first generation titles and some really ugly dogs are still chugging along. I can only think of one or two that have been shut down after launch. They may become niche products, but that’s a far cry from extinction.

    Share
  13. I have no comment on the article better than the comments I have read here. These are, by a wide margin, the most intelligent, articulate, and relevant collection of comments I’ve ever come across reading game-related articles. My faith has been restored in that the internet isn’t completely overrun with rabid, flame-happy, ignorant fan-boys. Thank you.

    Share
  14. I pretty much agree with everything you’ve said about consoles, and almost nothing you’ve said about MMOs.

    First of all, I find it kind of comical that you’re deriding game developers for not making non-game virtual worlds. By definition, game developers make games. That’s what they do. Would you deride a crime novelist for not writing more medical textbooks? Because, you know, that’s a real “spectacular missed opportunity,” there. (That said, in spite of all this, Sony actually is working on a social world for the PS3.)

    Secondly, you seem to have been suckered by the hype. Second Life had a peak concurrent users of about, 34,000 in early 2006 (according to Linden Labs’ own reports). That’s very close to perennial underdog Eve Online’s 33,000, that same spring. Many non-WoW industry MMOs pull down a fair bit more than that (by a factor of ten, in at least one case). Aside from getting completely disproportionate amounts of press attention, I don’t exactly see how Second Life is running circles around the industry MMOs.

    You seem to be under the impression that an industry MMO is a failure if it doesn’t beat WoW’s numbers. That just doesn’t add up. You can launch an extremely successful, profitable game, without coming anywhere close to WoW’s numbers. If all those other games were failures, as you suggest, they’d shut down — because it costs to much to run them, otherwise. I can think of only two industry-produced MMOs that have shut down permanently, to date. Both of them predated WoW, and only one of them was a fantasy game.

    The much greater danger, with MMOs, is that you never make it to release. If they can get that far, most of them manage to survive, even if they don’t always meet their creators’ expectations.

    Share
  15. Emily Greer Monday, June 4, 2007

    I agree with your comments about the rise of casual web-based games, but am puzzled by your examples of Newgrounds and Miniclip, which are dominated by young males, and include a lot of games that are essentially smaller versions of console games? I would think that sites like Pogo, Real Arcade, and Big Fish are much more representative of the point that you were making.

    Share
  16. A few comments:
    1. Notice that the single most popular game todate is WOW and it is PC based. It is not free ($14.95/mo)and very profitable.
    2. If EA could focus on just two platforms their numbers (Revenues) would be very different.
    3. Second Life is an interesting exeriment in Social Networking that will ultimately be converted to a COnferencing network by corporations.
    4. One of the big limitation to the growth of the Multiplayer games is the fact that the big three MicroSoft/Sony and Nintendo are attempting to control the customer base (and IP address) by forcing their console users (and select PC) to come to their big data centers to game over a best effort Internet.
    5. Would love to see Google introduce a universal Gaming Service out of their network of nationwide Data Centers (interconnected via Fiber) with limited latency/jitter and high quality link management. As a service provider we’d jump on that in a heartbeat and bypass all these marginal game centers.

    Jacomo
    4.

    Share
  17. This is a very well-written article about the state of the games industry. A number of the companies in the virtual world and casual games spaces mentioned in this article will be participating in the upcoming Virtual Goods Summit at Stanford (http://www.vgsummit.com). It’s interesting to note that so much of this interesting work is happening outside of the traditional game publishers and developers.

    Share
  18. Have to agree with most of this article.

    But the upcoming Little-Big-Planet for the PS3 is the closest the games industry has gotten to using the Myspace/User created content/Web 2.0 ideal and putting onto a console.

    I guess the success of this game will determine whether the rest of the industry looks at changing it’s ways.

    Share
  19. Interesting article, just a shame the whole MMO bit was based on… well I don’t know what.

    I’m struggling to think of a major MMO that has died a complete death. Asheron’s Call 2 I guess, but the original is still running I believe. Even the game generally recognised as being the orginal, Ultima Online, is still running with in the region of 135,000 paying subscribers. And that’s a 10 year old game with the graphics to prove it.

    Certainly there’s been a lot of false starters and badly thought out “jump on the band wagon” games that don’t make it, but this happens in every industry every day. The reason they tried to jump on the band wagon is the potentially huge financial rewards.

    Comparing the actually small scale Second Life to World of Warcraft is ropey in the extreme. As the folks above have pointed out, just look at the WoW current “subscribers” vs Second Lifes registrations. No comparison.

    Share
  20. Strange I look around this office (games dev/pub) and I see a pretty even split between men and women working on titles that appeal to both equally. And Second Life is nothing more than a playground for Corporate Marketing in the mainstream and sexual deviants in the shadows.

    Share
  21. wow, i can’t imagine a bigger pile of rubbish, presented in such nice terms, so as to make it sound valid. I’m sorry, but who is this guy?
    I’m constantly reading about how videogame revenue is set to eclipse movies and music, but apparantly they’re wrong, because this guy has the inside track.
    This is little more than an attack on the industry by someone that doesn’t understand it, doesn’t want to understand it, and can think of nothing useful to say, excepting some basic points, with little or no relevance.
    A few centuries ago, i imagine this person would be out shouting about how books and reading were a dead end.
    The worst thing about this rubbish, is that some people might take it seriously because it’s well presented.
    Wagner, if you dont like the industry, and people that play the games, then just say you don’t like them, don’t hide behind your pleasant words.

    Share
  22. This is the most spectacularly uninformed view of the games industry I think i’ve ever read. There are so many errors I don’t even know where to start. Please stop shouting your delusional views to the world, it makes me sad that I found this blog post from a link on BBC news.

    Share
  23. Sorry I have to say more, I can’t let it lie because I cannot believe how bad this article is.

    1. You go on about ignoring non-traditional gamers but make no mention of the 360 and PS3’s arcade offerings which bring small simple games into homes with free demo’s and trials.

    2. Second Life and it’s ilk are not games. maybe thats why the games industry isn’t clamouring to add to the pile of failed ‘second lives’. But you have failed to mention the one major new social networking portal, PS3’s Home service.

    3. Second Life is not as popular as you may think. Millions of members does not mean millions of people are playing it all the time. Usually only a few thousand are logged on at one time.

    So to sum up, I wish I had the power to delete your uninformed ramblings from the internet to make it a better place for everyone.

    Share
  24. Oh and you’re also missing the fact that loads of games feature user created content –

    Forza2 has a whole vehicle customisation feature including online auctions amongst other things.

    Spore by EA (Yes that EA that’s in so much trouble)Is set to become the king of user created content, allowing you to build entire worlds from single celled organisms.

    I have to stop now, but I could go on finding errors in this article.

    Share
  25. A pretty decent assessment of the situation of the gaming industry. A few comments especially to address things brought up by “A Real Gamer”:

    First things first, this article gave it’s props to WOW. Using it’s numbers to compare to games like Second Life is irrelevant because the author clearly stated WOW was not failing. Think more games like DDO, City of Heroes/Villians, and Guild Wars whose followings are much more limited. Also, even dismissing Second Life, Gaia Online is a vibrant, thriving community that is not associated with the gaming industry and focuses more upon player interaction than on grinding/questing.

    Second, the author was very clear his main assessment was on the state of console game systems and their developers, primarily the “Big 2″. PC gaming is and shall remain strong. Why? Because they can afford to market to a niche audience. The difference between a PC game and a console game is that a console game requires the purchase of a system dedicated primarily to the task of playing those games. (Yes, they might play movies and allow limited interaction within their own networks, but that’s frill.) A PC can be used for gaming, and for playing movies, but that is not it’s only use. And while only a limited few can expend the resources to buy a specialized machine to play their favorite titles, most people can afford to buy a PC and receive less flak for it by the non-gamers in their household because the entire family can find use of the PC. Given that PC’s are not going to go away anytime soon, developers making games for the platform can risk investing capital into a wide variety of games because they can expect a return for the investment without having worry about whether or not they system they are developing for will have only very limited market share of go obsolete too quickly.

    Third, attacking blogging is irrelevant to any argument made by the author. Written blogging is a very limited enterprise in the US, that is true. Posting amateur video content on sites like YouTube, rather, is a large and growing industry very much in competition for peoples’ time with activities like gaming. In fact, gamers will often record and post videos of gaming sessions on such sites to share their experiences and impressive victories.

    EA has for a long time been falling down a long and painful slope as they focused to heavily on too few sorts of titles. They also depended on third-party developers who are now starting to release content without the need for a mega-company like EA to sponsor them. EA games are, for the most part, more focused on console gaming, which as above stated, is a very limited market. In the future, developers like Blizzard and Shiny shall continue doing well because they develop games people like to play, focus on quality, and haven’t sold out to the console crowd and instead have kept their bases primarily in the PC market.

    Share
  26. This is ridiculous, the alternative MMOs you talk about have meagre fractions of WOWs subscribers and an even more pathetic slice of its income.

    Second life is only easy to grasp by old fashioned media, if sales and influence governed media coverage then WOW would be where all the press went to to show off MMO games.

    Furthermore you seem to state that the games industry is stagnant and not diversifying, but you make this point true by simply stating that all the new innovations are either not innovations or by placing them outside the games industry. The Wii is wholely within the next gengames industry , even if it is not a direct competitor to 360 or PS3.

    If the game industry does have a problem it is spiralling development costs, a problem shared by almost all modern media.

    Share
  27. yep, you’re an idiot.

    Share
  28. Another consideration here would be the popularity of system/PC due to piracy. For example, a colleague of mine will not buy a Wii nor PS3 because he is capable of pirating games for his Xbox360. I think its a moot point about who losses in the end. I think he does since after buying a Wii I almost never play my Xbox. My Ps2 gets time in because it has games I still enjoy playing. I hope the PS3 can live up to its ancestor.
    While its controversial, I think the ease and ability for someone to mod then pirate software will figure in big as the hard core gamers go towards a “discount”. How this may effect the publishers requires a more economics driven mind than mine.

    Share
  29. A very bitter-sounding tech journalist uses selective and misleading examples to reach a conclusion that serves his own (Second Life bandwagon-riding, buzzword-spouting) ends.

    It’s fantastic that the games industry is learning to cater to new demographics. But this broadening of the market has no detrimental effect on the tens of millions of people of all ages and genders – who WJA laughably disparages as ‘Lost Boys’ – who are willing to invest more time and money to get deeper, richer game experiences.

    The high-end consoles aren’t going to remain at niche prices forever, and the Wii (like the DS before it) isn’t going to be relegated to only providing trivial casual games.

    I’m in full agreement with Malkyne’s earlier comment regarding MMOs. Second Life is free, and yet is only attracting a tiny fraction of the audience other free social networking tools and virtual worlds are seeing. That suggests to me that it’s broken.

    Share
  30. As a chosen career choice I was worried when I read the headline of this article. However, many of your statements, as pointed out by other posters, are incorrect. WoW makes hundreds of millions every month from subscription fees and as for saying consoles aren’t selling, that is yet to be seen.

    “It’s a business comprised almost entirely of young gamer dudes, serving an audience of young gamer dudes, covered by a gaming press of young gamer dudes, all of whom are only interested in creating, playing, and covering games that interest young gamer dudes”

    Hmm is that entirely true? Seeing as the industry really gained momentum in the late 80s that would make those who worked in the industry then 27 years older. These people are probably leading teams of eager, young workers but many ideas and values come from those experienced workers.

    Share
  31. “Hmm is that entirely true? Seeing as the industry really gained momentum in the late 80s that would make those who worked in the industry then 27 years older.”

    I mean late 70s.

    Share
  32. From what I have seen of web 2.0, it is also dominated by young males. (myspace, youtube, facebook, flickr and too many bloody blogs)

    Share
  33. the above article is just wierd, a rant does not make an article and as a gamer from over two decades I would say the situation has dramatically improved, yes the big boys like EA produce sequels like they’re going out of fashion but if millions of people still buy them they must be doing something right. The number of great games released per year IMO is getting better and better we just need the need those rich “gamer dudes” to pass on some of their wealth in the form of cheaper games

    Share
  34. What are you talking about…people have been slow to accept user generated “amateur” content? Ever heard of Counter-Strike, one of most popular online games (and certainly FPS)? That’s right, it started as “amateur” content around 8 years ago.

    Share
  35. Games are for pussies anyway

    Share
  36. so explain to me how getting non-gamers involved will be somehow better – because that doesn’t seem to be working out so hot for EA.

    Share
  37. Mark Thornson Wednesday, June 6, 2007

    I don’t understand. The premise of your article seems to be that an industry where a monopoly can’t forever dominate is one in crisis?

    Surely the opposite is true. As you admit, more money than ever is being spent on games; so what if the media monoliths aren’t always getting it right?

    This is a good thing as it leaves open spaces for the smaller guys. If you look at the past 20 years nearly all the mega-hits have been developed by small players: Doom, Warcraft, Golden-eye, Half-life etc. all by then unheard-of groups.

    The games industry is a hard one to predict, always has been, hopefully always will be. Please tell me what is wrong with that?

    Share
  38. Mark Thornson Wednesday, June 6, 2007

    Also, can someone please tell me why the mainstream media love second life so much? I bet there are more journalists playing it than people. WoW, Everquest, Entropia, heck even Puzzle Pirates has more users, but the media always talks of Second Life as if people actually play it. It shows how little journalists as a whole actually know the industry they’re commenting on.

    Share
  39. Bananas in the Falklands Wednesday, June 6, 2007

    We where asked to buy a xbox and f1 game (and controller) for a promotion for a client at a trade show – i thought the thing sucked when we set the thing up.

    The graphics,gameplay seemed rubbish.

    Childrens toys. Nothing to match the quality of lemmings, or doom 2.

    Share
  40. Lots of interesting comments, some of them bringing up points I elided for brevity’s sake. Some selected replies:

    “Ever heard of Counter-Strike, > one of most popular online games”

    Yeah, actually– I wrote an extensive history of modding a few years ago:
    http://nwn.blogs.com/nwn/2002/04/triumph_of_the_.html
    The trouble is while the game industry relies on modding to extend their titles’ shelf lives, and Valve does a good job promoting TCs like CounterStrike, as a whole it remains a niche. Why? Because most (all?) publishers aren’t willing to give modders any IP rights to their work, and because most serious modders treat their projects as calling cards to break into game development– not a great way to expand the industry as a whole.

    “I’m constantly reading about howvideogame revenue is set to eclipse movies and music, but apparantly they’re wrong”

    Yes, they’re wrong, at least when it comes to movies: taken as a whole, counting international market, ancillary revenue, especially DVDs, the business of the major studios still far outgrosses the revenue of the major publishers/console makers. For example, WoW grosses around a billion dollars a year– which may seem like a lot, but that’s the absolute high end the industry has so far managed to deliver, far outstripping any other MMO. Trouble is, that’s roughly equivalent to the total revenue of a single hit movie like *Spiderman III*, which will gross nearly a billion in box office receipts alone– and go on to gross hundreds of millions more in ancillaries. And Hollywood turns out several hits like that every year, not once in the last 3 years, like WoW.

    “You go on about ignoring non-traditional gamers but make no mention of the 360 and > PS3’s arcade”

    Why should I care about what goes on with the 360 and PS3, when they remain so niche? But the fact that casual games are so popular on these platforms rather proves my point– even hardcore gamers are starting to devote more attention to casual games, than the big gamer epics.

    “Second Life is not as popular as you may > think… Usually only a few thousand are logged > on at one time.”

    Actually, no, SL currently has a max concurrency close to 50,000 (meaning an active user base of about 500k)– and that represents almost a tripling of the world’s growth in just six months.

    “the alternative MMOs you talk about have meagre > fractions of WOWs subscribers”

    Actually, no; the three I mentioned add up close to WoW’s numbers– Club Penguin has an estimated 4.5 million uniques, Gaia, 2 million, SL, 500K. And that’s not counting Habbo Hotel (7 mil), CyWorld (20 million)(!), and many more.

    “Seeing as the industry really gained momentum > in the late 80s that would make those who worked > in the industry then 27 years older.”

    You’d think that, but far more typical is developers in their 40s and 50s get burnt out by the grind and get out of the industry. (This was part of the underlying theme of the threatened strike by EA workers last year– developers are assumed not to have a life or family outside of games.) Most developers are guys in their 20s and early 30s. Most older statesmen developers like Will Wright are in their *40s*, and that’s the high end.

    “can someone please tell me why the mainstream media love second life >so much”

    Many reasons, some of them more valid than others, but the most important three: 1) burgeoning internal economy and rapid growth rate, 2) explosion of user-created content and industry, and the amazing success stories around it, 3) Prototype applications which suggest it’s the beginning of Web 3D, i.e., the next generation of the Net. More here.

    Share
  41. As a rapidly ageing gamer myself, I’m well aware of the narrow mindedness of games developers. Now that I have a full time job and family commitments, I am no longer able (or willing) to invest large amounts of time playing games and to my cost have found more and more games requiring a significant investment in time to get a payback.

    I find myself looking back to the “good old days” back in the 80’s where it was possible to dip in and out of games for a quick fix…

    I used to think that maybe it was just my age and changing circumstances, but now I’m wondering why the gaming industry fails to adequately cater foe me and those in the same situation.

    I now know why anyone over the age of 35 ends up playing solitaire…. *sigh*

    Share
  42. “But the fact that casual games are so popular on these platforms rather proves my point– even hardcore gamers are starting to devote more attention to casual games, than the big gamer epics.”

    Nice try. It’s more indicative of there now being a delivery method that allows publishers to sell smaller, simpler games without demanding the full retail price. Arcade/casual and more involved games have always coexisted and will continue to do so.

    I’m not sure what you’re trying to prove by citing the sales figures for social apps like Second Life, Gaia, Cyworld, Habbo, etc. against actual games.

    Share
  43. I work in the games industry. All of it is so true.

    Share
  44. “It’s more indicative of there now being a delivery method that allows publishers to sell smaller, simpler games without demanding the full retail price.”

    But again, the PS3 and 360 are niche, and destined to become even, well, nichier, as publishers put more money into the casual/non-gamer friendly Wii.

    “I’m not sure what you’re trying to prove by citing the sales figures for social apps like Second Life, Gaia, Cyworld, Habbo, etc. against actual games.”

    Most of these worlds have mini-games within the larger context, actually. But the larger point is in the title– attention. Except for WoW, the bulk of the attention is going to worlds like these, not other old school MMORPGs.

    Share
  45. I fell asleep playing a game recently because of a long full motion video scene which to me was stealing from my playing time, I’m an older gamer in his 40s who started out on a Sinclair ZX Spectrum, and only with the PS2 moved to consoles.
    For me now the fun can be had in MAME or Emulators of the old Sega, Nintendo systems or even emulation of the old C64. When you want to play a game you want to play, not listen to a B rated hollywood actor do a 20 minute voice over of jaded FMV sequences which are used as ‘padding’.

    Bring back the games where you press the start button and hang on for dear life!!

    Share
  46. Supercilious rubbish.

    So casual web-based gaming is suddenly rising, is it? Strange that I can recall casually playing flashgames online in 1995, which is incidentally when NewGrounds was established. Just because you have only just discovered it, doesn’t mean it’s a new trend.

    It’s also rubbish to imply that casual online games are going to rise up and be part of the demise of the big scary games industry. Casual online games have been around a long time; some of them make money for their creators through subscriptions or advertising, and they have a large fanbase of casual players – I realise you only noticed their existence last week, but none of these facts make them the nemesis of the games industry.

    I also resent the implication in your article that because older gamers and female gamers are reported to make up a lot of the casual gamers out there, we can’t also be part of the so-called “lost boy” fanbase of mainstream games. My male friends who are hardcore gamers don’t feel the need to shoehorn me into a “casual gamer” stereotype because of my gender; I don’t appreciate jumped up journalists who don’t know what they’re talking about stereotyping me because of my gender either, thank you.

    Why don’t you try doing actual research into the gaming industry, rather than picking up everything from other news articles written by people just as clueless as yourself?

    Share
  47. Never more popular and lucrative yet…headed for irrelevance. Come agin?

    Anyway, with regard to casual, Web 2.0, and virtual worlds, if you follow the money, you’ll quickly understand that all three of these are just becoming interesting enough from a revenue perspective for the big guys to even pay attention. Does IBM jump on ever new shiny bauble that the cool kid startups are playing with? No, it uses them as outsourced R&D and then buys the winner. Same is true here. Does that mean the industry leaders are asleep at the wheel? Yes and no. They’ve got legacy businesses to deal with which are vastly more profit and less risk than all the new unproven stuff. Enter the startups. Queue the acquisitions. This is not rocket science.

    I also take exception to the characterization of this industry as being “a bunch of young gamer dudes” read unaware business neophytes too busy trying to reach level 60 to run a spreadsheet. Spend some time inside EA, Ubi, and Activision and then tell me that. These are savvy businesspeople out to make money. Are there gamers there? Sure. There better be – that’s the damn product. But, at the end of the day these are companies that operate along the same profit motive lines as any other. Why not support the Wii super aggressively before launch? History says that Nintendo home platforms (not handheld) sell crap and only Nintendo games do well on them. Oh, and the licensing fees are high. If you were a VC, would you invest in that plan? ‘Course not.

    Share
  48. “I can recall casually playing flashgames online in 1995″

    Of course, but in terms of popularity, they’ve been exploding with the broad adoption of broadband– a much more recent phenomenon.

    “I also resent the implication in your article that because older gamers and female gamers are reported to make up a lot of the casual gamers out there, we can’t also be part of the so-called ‘lost boy’ fanbase of mainstream games”

    You’d be less offended if you look at the numbers and not take them personally. Not “a lot”– most online gamers are women: 64% according to Nielsen. Certainly there’s a sliver of hardcore gamers who are women, but it is a sliver.

    “These are savvy businesspeople out to make money.”

    I’m not even sure of that. If they were really interested in making money, why would they spend so much on epic games which only appeal to Lost Boys, and mostly ignore a far larger audience?

    Share
  49. “You’d be less offended if you look at the numbers and not take them personally. Not “a lot”– most online gamers are women: 64% according to Nielsen. Certainly there’s a sliver of hardcore gamers who are women, but it is a sliver”

    I’m aware of the statistics. I just really dislike the way most tech media can’t bear to mention the word “women” in the same article as “gaming” unless the word “casual” is hurriedly stuck in there too. You complain about games producers ignoring a potential wider audience but they’ll hardly feel encouraged to make games for a wider audience by the constant “omg women and people over 25 only ever play casual games lol” mantra from journalists such as yourself.

    Share
  50. What brought CD to computers? Gaming. What drives processor speeds faster? Gaming. What drives the need to makes powerful video cards capable of rendering 3d models for amateur architecture and home design at home? Gaming. What drives faster bus speeds? Gaming. What drives better Computer audio systems? Gaming. What drives the need for better computer monitors? Gaming again. What drives computers in the home? The answer by now should be obvious.

    Without the so called “nerd” gamers and “hardcore” gamers, the home technology industry would never have gotten off the ground. Why are 360 and PS3 “niche”? its not their titles. It’s their price. For the price it would have cost me to buy a PS3 at release, I could have bought most of the parts for a new PC. A PC that’s easily upgradable. A PC that will probably outlast the PS3 in usefulness too. So why spend $600 for a PS3? The designers didn’t design the wrong games. The Wii is winning because of price. Sure, it’s innovative and fun, but the PS3 and 360 are fun as well. Equally so. Their price is beyond absurd for most of the market though.

    Don’t doomsay the real gamers until you find out why the real gamers aren’t buying what you claim they should be buying.

    Share
  51. “Strange that I can recall casually playing flashgames online in 1995″

    Very, very strange – given that Flash wasn’t released till the latter end of 1996… ;)

    Share
  52. Interesting article but I saw no mention of XNA. Microsoft is giving users free software to create games that can be played on the PC, or for a subscription fee, an Xbox 360.

    I attended the launch event at Warwick University and some of the games really stood out. They weren’t studio quality but they weren’t created by complete amateurs either.

    Further along the line gamers will be able to share games with friends via Xbox Live. Sure, coding a game is nowhere near as simple as filming and editing a YouTube video but the freedom for creativity is there.

    So at least Microsoft seem to have noticed the whole user-generated vibe going on and are on the way to catering this audience for what you describe as a niche console.

    Share
  53. “But again, the PS3 and 360 are niche, and destined to become even, well, nichier, as publishers put more money into the casual/non-gamer friendly Wii.”

    Don’t get me wrong, I love the Wii. But I’m not labouring under the misconception that it can do everything that gamers might want. Once the PS3/360 hardware prices come down, their user bases will grow rapidly. And of course, they can play casual games too.

    I’ve learnt why the article’s argument is wrong from hard experience. I worked for an independent developer for the last three years. We made commercial products as well as casual downloadable and free web games.

    We learned, unsurprisingly, that if you make a game available for free, you can generate millions of hits and lots of attention from online communities. But critically (with extremely rare exceptions), this does not translate into revenue.

    If you’re interested in making good games (unlike the hundreds of VC-funded casual games companies cloning match-3 games) it’s more prudent in the long term to cater to people willing to spend money on games than trying to make a quick buck out of online fads.

    Share
  54. Xbox360 and Playstation 3 are niche solely because the non-gamers running Microsoft and Sony got it entirely wrong on how much people are willing to pay for a console. If the Playstation 3 had come out at the same price as the Wii it would be selling like crazy and well on its way to the 100 million odd that Playstation 2 played.

    Also, Spider-man 3 making a billion dollars. Sony doesn’t get that. That is box office, the cinemas take at least half that. Sony probably barely broke even on the cinema run, they’ll make their profit on DVD. Blizzard, on the other hand, gets all the money from subscriptions and is certainly running at a fair rate of profit.

    Share
  55. The 360 and PS3 are not niche. There are expensive adverts on TV for them, they spondor major events, Chris Moyles and others regularly discuss them on the radio.

    They have sold less, yes, but that does not make them niche! The PS3 has been available for purchase a fraction of the time of the PS2 so it’s hardly surprising. The same thing happened when the PS2 was released, it was expensive and take up was slow. Do some proper research.

    Share
  56. Personally the PS3 is too expensive for me, and that’s the only reason I’m not getting one. I’m a casual gamer only because I find that there are so few newer games that are catching my interest and it’s a shame because game companies are missing out on a large base of people who are willing to pay for quality games that they enjoy! Young boy gamers are catered to, and that’s great. But what about young girl gamers? We don’t get the titles that interest us anymore!

    Share
  57. A very cogent and well-reasoned article, and I agree completely. Any game publisher that continues to count exclusively on the traditional video game market had better watch out or it will get left behind. Back in 1994 the biggest, best-looking games on the market were point-and-click adventure games. Those companies (e.g. Sierra On-line) that continued to rely on that market, and failed to see what 3D acceleration was going to do, simply faded away as they could no longer compete. Adventure games are now a niche.

    The PS3 and the Xbox 360, while clearly the most cutting-edge technology out there, actually represent a missed opportunity — one that Nintendo has capitalized on in spades with the Wii and the DS. The PS3 and Xbox 360 are a niche now because gaming has moved on. It may be painful for hardcore gamers to admit it, but they are no longer the majority. There was a brief period when they were opinion-leaders for the less-informed casual gamer, but those days are over; casual gamers now have other outlets they can go to for information.

    Just yesterday Electronic Arts announced the creation of a new casual games division, and put Kathy Vrabeck, formerly of Activision, in charge. I think they can see the writing on the wall.

    As for Second Life: the mainstream media is interested in Second Life because it’s about money, sex, and creativity, and it crosses over into the real world (as when presidential candidates establish offices there). World of Warcraft, despite its popularity, is about killing imaginary monsters — hardly a newsworthy pursuit.

    Video gaming started off as a childrens’ pastime; then it became the province of geeky technoid fanboys; now it is truly mass-market, for the first time in its history.

    Share
  58. Looking at the comments above it is not the Games Industry that refuses to evolve but the core gamers themselves.

    They will happily devour the next 50-hour RPG or action-packed First Person Shooter but will dismiss games like Brain Age as a fad. As soon as companies realise it is more lucrative to market casual games to women, middle aged couples and old people they will stop relying on core gamers to make up their turnover and they will get left behind.

    Halo 3 will probably sell upwards or 5-6 million copies in its first month on sale but this is just a flash in the pan. It will be Brain Age 2 that STILL resides in the top 10 this time next year.

    Share
  59. I think most journalists spurt about Second Life because of the stigma it conjures out there in the land of the unconverted. It is based upon fear. Nothing more.

    Share
  60. Ernest, there’s a bit of a difference between the decline of the point-and-click adventure and the assertion that any game more sophisticated and rewarding than Bejeweled or a glorified chatroom is obsolete.

    As you well know, casual gamers have vastly outnumbered so-called ‘hardcore’ gamers since at least the mid-90s. The EAs, Rockstars and Nintendos of the world have thrived thanks to making games accessible to newcomers as well as offering something to keep the attention of more experienced players.

    WJA can rant and rail all he likes against the ‘Lost Boys’, commercial reality gives the lie to his interpretation.

    Share
  61. I find your article a good read, however i am a little dismayed that you seem to think its a big problem that for once an industry is not concerning itself with money but more so appeasing it’s customers.

    This is as you correctly pointed out due to the relationship between developers and end users.

    Don’t get me wrong, i am sure the industry wants to make money, however for the past decade i’ve played some wonderful games as i am sure many of you have and am very greatful to so many developers as i am sure many of you are. Yet what is truly a shame is that the industry is considered a failure not because it didn’t satisfy it’s customers, but because it didn’t make lots of money.

    Share
  62. ““These are savvy businesspeople out to make money.”

    I’m not even sure of that. If they were really interested in making money, why would they spend so much on epic games which only appeal to Lost Boys, and mostly ignore a far larger audience?”

    The problem with this idea is that the audience is not as big as people try to make out. Don’t get me wrong, it’s huge, but it’s also NOT EVERYONE OUT THERE.

    Let me put it in perspective. I play games and I’m a 20something male. Most, if not all, of my friends (my age) play. However, the idea that people who currently don’t touch games will suddenly start playing is completely misguided. It doesn’t matter whether you try to sell them a PS3 or a Wii, they’ll have none of it.

    Let me explain further. Someone like my father, who plays games that I buy, will sit at a FPS on a PC for an hour. Maybe once a week. However, he’d never buy a game himself and has a hard enough time installing a game.

    My mother would never play games in her life. She thinks their stupid and pointless. That’s her opinion and she’s entitled to it. She’ll never be a gamer. A lot of people will never be gamers.

    So yeah, there are Lost Boys, tech geeks etc out there. There are also more ‘casual’ players who try flash games and things. There will always be a market leader in the console race, and this time it’s the Wii.

    The best selling game on the Wii is Zelda – which apparently takes around 50 hours to complete well. This is NOT a casual game. People see potential, interest, a lower price point and most of all FUN in the Wii. It is not however necessarily a call to arms for the casuals.

    N.B. If you take a look at the Wii games lineup, it’s arguably suffering the worst drought seen in a while. Without more new (and good) games, it’s unlikely to appeal to anyone.

    Console growth will continue apace for all three, none will be really niche and those who would never play games will never do so. When I’m old though, my generation will be. Then games will be cross-generational and appeal to the widest section of society with varied offerings from developers.

    Share
  63. If you take a look at the Wii games lineup, it’s arguably suffering the worst drought seen in a while. Without more new (and good) games, it’s unlikely to appeal to anyone.<

    Except it’s the best-selling home system in the world. And it’s not even CLOSE anymore. The Wii software isn’t likely to hurt it until there’s a compelling reason for the non-hardcore player to buy either the PS3 or the 360, and that’s not going to happen until GTAIV or Halo hit later this year. Of course, all Nintendo has to do is sell Mario Galaxy in a reasonably similar manner as they did with New Super Mario Brothers last year and they’re likely to outpace both those games.

    Also: Zelda isn’t the reason people buy the Wii. They buy it to play Wii Sports (which by being packed in with every system outside Japan, may rank up there with the smartest business moves Nintendo’s ever made). Zelda’s the bone tossed to the traditional Nintendo fans while they transform their user base.

    Share
  64. “I’m constantly reading about how video game revenue is set to eclipse movies and music, but apparently they’re wrong”

    Wagner, I find your response to this fascinating. Your entire argument is based on your future projection that the industry is in trouble, yet when I mention a projection myself, you refute using CURRENT data on the movie industry.

    How solid and secure is the movie industry? Spiralling costs, rampant piracy, out of control stars, these all bode ill for its future. The movie industry is itself, a terrible example for you to use. It lacks imagination, it churns out the same rubbish year after year.

    A final irony, you criticise EA for its sequels, yet the vast majority of the super successful movies that Hollywood churns out have all been franchises, Spiderman, Pirates of the Caribbean, Lord of the Rings, Harry Potter, etc. Tell me, do you think the next Spiderman will be a billion dollar hit, when the stars don’t return? Still think its a safe bet. Where would half the revenue have come from, if not from sequels?

    Finally you compare an industry that has existed for almost a century, to an industry barely in its third decade. This seems hardly fair. You say that the games industry has only produced its first billion dollar hit. Not bad I think for an industry barely in its adolescence.

    Wagner, you don’t seem prepared to give the industry a chance at all. You show an ALARMING like of foresight, and I look forward to the day you eat your words.

    Oh, and for God’s sake, stop rabbiting on about Second Life. It’s a stop gap, a minor, frivolous pass time for people to look at. You’re continual defence of it is looking both desperate, and ill informed, while at the same time undermining your already diminishing credibility.

    Share
  65. @Mr. Butterscotch: The best selling game on the Wii is Zelda – which apparently takes around 50 hours to complete well. This is NOT a casual game. People see potential, interest, a lower price point and most of all FUN in the Wii. It is not however necessarily a call to arms for the casuals.

    This is incorrect. The best selling game for the Wii are:

    1. Wii Sports. Yes, it’s included in Europe and USA – but not in Japan.

    2. Wii Play – huge seller, more sales than Zelda so far.

    And I think that most people who are not hard core gamers would disagree that the Wii has any drought at all. If you’re a 20 year old without a family and lots of time after classes/work/whatever to play, then yeah, there’s a drought. If you’re a father of 3 or a retired person or someone who pulls it out on the weekends play with friends who come over (like my hair stylist was telling me about), then there’s probably more games than you can keep up with.

    Now, one other issue: I see several comments of “Well, the 360 and PS3 are going to have casual games! Look at Xbox Arcade!” And I reply “Yeah – for $400! If I’m already spending $1000 on a laptop, am I really going to spend $400 just to play Pac-Man or Geometry Wars?”

    What’s the #2 console seller right now? The PS2 (depending on the week, the Wii is outselling it). Why? It’s cheap. People can justify $250 (with a free game) for a gaming device. People can justify $130 for something that plays games/plays DVDs. But $400 for casual gamers?

    Sony and MS are fighting over the same people. And yes, eventually both systems will get very cheap and look good to the average gaming person – and by then the Wii will be even cheaper, and online games for the PC/Mac they already own will be cheaper still.

    I believe the article’s ideas are very accurate and evident to anyone who is not a “hard core gamer”. Then again, I’m no longer one of those – I’m a guy with 3 children who the second I get home will want to play Mario Party, a lovely wife who’s only game she likes is either Luxor or Brain Age, and then there’s me who have to wait until the children go to bed to play my games (and I’m not paying $400 – $600 for the hour or two I can squeeze in before bedtime).

    Share
  66. This guy sounds pretty spot on to me. Most of the people arguing with him sound like the “lost boys” he was describing. I’m 32 years old, gaming off and on since the Atari 2600/NES and games no longer interest me. I WANT to play. I even buy a lot of games and systems. But the games are for 16 year old boys in most cases. Games used to be fun for anyone, now they are targeted with razor sharp accuracy at a very specific market. If not for the Wii, I would probably drift away from gaming altogether. Hopefully, some people in the industry are reading this and paying attention.

    Share
  67. If they were really interested in making >money, why would they spend so much on epic >games which only appeal to Lost Boys, and >mostly ignore a far larger audience?

    This “larger audience” is just now showing up thanks to broadband penetration and isn’t exactly demonstrating a great interest in parting with their cash. Downloadable casual games (think Diner Dash) have a 1% conversion rate. Millions of non-paying customs is not a win. The smart company has a measured strategy to these emerging areas and still bets heavy on the cash cow…because that IS where the money still is today. Tomorrow may indeed be a different story but, we’re not there yet. Don’t forget…the big publishers are built on acquisitions. If the Gaia Onlines or Club Penguins of the world show consistent, strong revenues (getting press and spending investor’s cash aren’t really what matters), the big guys will be at their door. The big guys in almost every industry don’t do bleeding edge. What’s the big surprise that the same is true in games? I don’t get the drama. Crisis! Not.

    What’s more your base thesis is wacky. Games lost the attention war? Says who? Certainly no research I’ve read…and uh…none that you’ve presented. You’ve cited some interesting current events but no data. Sony is down, Nintendo is up…blah, blah…the games industry has its ups and downs. This is a surprise? While particular companies may be up/down, the industry as a whole (and yes this includes casual, etc.) is doing great.

    Share
  68. “Downloadable casual games (think Diner Dash) have a 1% conversion rate. Millions of non-paying customs is not a win.”

    Um, dude:

    http://gigagamez.com/2006/12/22/casual-game-serious-profits/

    “Published by Playfirst and largely sold over the web for $19.95, Diner Dash was developed by the New York-based gameLab for an estimated $100,000-200,000… [and] has sold, as of this month, a million units.”

    I’d call a $20 million gross on a $200K product a monumental win.

    Share
  69. “I’d call a $20 million gross on a $200K product a monumental win.”

    1. Diner Dash is one of perhaps a dozen casual games in the past 5 years to do phenomenally well. The other 99.99% don’t do anywhere near these numbers.

    2. Playfirst undoubtedly spent far more than $200K in developing, promoting and distributing the game over that period.

    3. Playfirst would have netted a fraction of that $20m gross, as a large proportion of their sales are made through third party portals.

    Yes, it’s possible to skim a decent amount of money from the casual market, but it’s also possible to make money by offering something of genuine value (i.e. which can’t be cloned pixel-for-pixel by a dozen other companies) to a smaller (thats, smaller than the entire internet, but still in the tens of millions) but more heavily invested audience.

    Share
  70. Looking solely at Diner Dash a model for downloadable casuals is the same as using Madden as the model for console games. Plus the cost of creating downloadables is skyrocketing. 200K to get 20M is from several years ago when that market was undiscovered and small. With even EA getting into casual with both feet now, expect the production values and costs to only go higher.

    Share
  71. I found your post very thought-provoking, if a bit…dramatic. Where I agree is in your pointing out that the same top-down model that left newspapers, television and the recording industry troubling deaf heaven with their bootless cries, is starting to become an issue within gaming. Whether it’s as big an issue as your post makes it out to be remains to be seen. But my primary feeling surrounding this, as someone in the game industry, is this: Why on earth would anyone not acknowledge the power and attraction of “user-generated content” and social media in general?

    Long before technologies arose to allow such an easy expression of this, human beings valued exchange, expression and contribution. Before social media, you saw it in call-in radio shows and the letters page of the newspaper. Prior to that you saw it on market day and in taverns. People love to talk, brag, make, profit and all the other things that social media makes implicit. Any game company that does not acknowledge that and start thinking about it in terms of gaming is going to be sorry.

    At my company, we launched a social network for gamers called the Great Games Experiment, which is getting increasing traction among both gamers and developers. The dialogue between these two groups is particularly gratifying. Developers can show off early-stage versions of their work and knowledgeable, excited gamers can give the same kind of feedback that the industries I previously mentioned ignored for so long. Gamers are hooking up to play together.

    Social media is not going to “save” the game industry (not sure it needs to be saved), but you ignore it at your peril.

    Share
  72. I’d call a $20 million gross on a $200K product a monumental >win.

    Sure is. And congrats to the guys at Gamelab. However, you need to amortize that across their entire business over a multi-year period to get a real picture. Heck, if you just look at single franchise revenues EA looks fabulous – The Sims is a license to print money. If you do this more comprehensive math on Gamelab however and then divide by number of employees and then compare that nubmer to any of the large publishers/developers, I think you’ll see that downloadable casual games is still a small business with comparatively less money to be made per person than the traditional games biz. It is growing and the model is now somewhat proven however, which is exactly why the bigger players are getting in. Until now, it wasn’t worth their while to experiment with it. Complain as everyone will about sequel-itis, there is no denying that it sells for both games and movies. Big players in mature industries move incrementally and then buy whomever attempts to enter as a disruptor.

    If they were really interested in making money, why would they >spend so much on epic games which only appeal to Lost Boys, >and mostly ignore a far larger audience?

    Again, this is just math. Look at who actually buys what and how much they spend. “Old gaming”, and this includes the Wii, is simply much more lucrative right now. Large audiences that don’t pay are not interesting. Getting a model in place to monetize a large audience makes it interesting though. Let’s use China as an example. For over a decade, software piracy in China hovered between 95-100%. So, game publishers left it pretty much alone. Online gaming has changed that though. Shanda, Tencent, and The9 pull down millions per month in subscriptions and microtransactions on their server-based products. And good for them! They and their Korean counter-parts solved a tough problem. Is it a failure of EA, Ubisoft, and Activision that they didn’t do this first? Hardly. They had other fish to fry and any public company CEO that told the Street he was going to go off on a fishing lark in China back in 1996 would have had his head handed to him.

    Did EA misjudge the Wii? Yes. Did Ubi? Less so. Is EA also late to the online party? Yes (despite being first waaay back when with Ultima Online). But, they were late to mobile too and now pretty much own it thanks to their acquisition of Jamdat. With investments in both Neowiz and The9, I’d say their corrective action for online is in place.

    Sheesh. I’ve written a book here. Bottom line is that the game industry players adapt in direct proportion to the size of the opportunity…same as any other business. If you don’t believe this then I’d say you haven’t really run the numbers.

    Share
  73. Ernest Adams? Pro. Makes great games. Oh wait.

    Share
  74. I have both a 360 and a Wii and I think that they are both great in there own way. Casual games are fun fo 10 minutes, my wife loves them would this make her pick up the 360 pad for a session on GOW? I think not!

    Casual games/gamers are just that and will stay that. Yes they offer a good revenew stream.

    To use your movie analogy, some flims are fun but you forget them the moment you leave the cinima others you’ll watch again and again, the games market will settle to the same level. Casual games along side a more intense offering.

    Share
  75. Hi Wagner,

    I enjoyed reading this post because I think in many ways you’ve hit the nail on the head: non-traditional gamers are going to continue to exert more and more influence over the ways games are played. The industry has a lot of catching up to do, but I disagree that the rise of ‘user created worlds’ inevitably will contribute to the industry’s irrelevancy. As players demand an increasingly active role in the way games are created, independent developers are simultaneously seeking a more active role in the way their creations are developed, published and marketed. Indie developers and gamers are going to find more and more ways to directly connect, so that game creation and delivery is democratized without a loss of purity that hard-core gamers demand. The industry stands to gain, not lose, by inviting in players to create their own customized experience. (Full disclosure: I’m the head of ECD Systems, a gaming technology company that is working on a new portal engine that will do just that.)

    Share
  76. Wow, I’m utterly amazed at the failure of “gaming industry defenders” to fail to actually read what was said in this article. Instead they continue to bolster a main point and claim that they are defeating the author’s main argument. Arguments in the thread “Second Life (or other non-gaming MMO) isn’t very important and doesn’t do the business WOW does.” Ummm…hi…WOW got it’s props and I note none of you offer any other titles to bolter your claims. Did you fail to read where they author stated, “World of Warcraft premieres in 2004 and three years later, retains an uncontested monopoly on the fantasy MMO.” Wow, I guess that he must be wrong that WOW is an uncontested monopoly in the fantasy MMO genre since all of you are singing its praises. Gosh, people, read first so you don’t look stupid. Read a second time if you have to. I shall make a more important point: Back in the day (late 80’s early 90’s) almost any family with a TV had some form of gaming console (especially if they had kids). Be it an Atari, NES, Sega Genesis, if you didn’t have it the first year it was out, you got it the second. Why? People could afford one. The new generation of gaming consoles make it so that only the niche market of gamers is going to buy the console (with maybe the excpetion of rich or financially irresponsible parents spoiling their children or themselves.) Honestly if I’m going to spend half a grand on something, it’s going to do more than just play games and movies. I mean, heck, I paid a bunch for my flat screen tv, but it also duals as my computer monitor (hooray for hi-def). If the console gaming industry is going to survive to another next-generation release they need to find a way of making their product affordable and appealing to an increasingly diverse audience, much in the ways their products were back in the days of the NES.

    Share
  77. So…uh…Nintendo’s innovation with the Wii and the DS means they’re somehow magically not part of the “Lost Boy” game industry? Nintendo is the oldest game company of them all. Just because they design and target their games differently than the Vivendis and Activisions doesn’t mean that they’re not part of the very same industry. They just have a different strategy – one that it currently working well. But, rewind back a few years and look at the N64. Oh, and show me a company besides Nintendo that does as well on Nintendo hardware. The top publisher on Nintendo is always Nintendo. Wonder why nobody ran off to embrace the Wii…?

    Share
  78. Well the writing in this articles is good, however I have never heard of this guy. I have been writing about the industry for over 20 years and every year someone talks about the gaming industry in peril.

    Then the next year Electronic Arts, Activision and other game companies sell more than the year before.

    The reason the industry seems so fragmented is that there are three consoles, and casual games are taking hold.

    The point this article is missing is that revenues have been going up each and every year overall and game sales have been surpassing box office movie receipts.

    Maybe this guy is plant for the movie industry trying to get inside the head of the analysts and the buyers.

    I think this article is rubbish and the game industry will continue to thrive and be more and more healthy, because it is attracting more users and thus more revenue.

    The reason the industry is so healthy is mainly due to Nintendo opening up the industry to more gamers with the Wii and the Nintendo DS.

    It takes more to cover this industry than a Harvard degree in english literature!

    Share
  79. Your top 3 links don’t work!

    * Milestones of an Industry On the Road to Irrelevance
    * Inside an Insular Industry
    * A Future Business of Games Without a Single Industry
    

    Please fix ASAP

    Share

Comments have been disabled for this post