* 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

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!

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.)

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.

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.

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.

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.

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.

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.

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).

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.