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Game Business and its Crisis of Attention

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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?

79 Responses to “Game Business and its Crisis of Attention”

  1. 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.

  2. 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.

  3. Wooster

    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.

  4. Thomas

    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.

  5. 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.

  6. Steve

    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.

  7. Steve

    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.

  8. Steve

    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.

  9. 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.

  10. 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.

  11. Dan Hussey

    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.

  12. Tony Stewart

    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.

  13. 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 ( It’s interesting to note that so much of this interesting work is happening outside of the traditional game publishers and developers.

  14. Jacomo

    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.


  15. Emily Greer

    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.

  16. 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.

  17. 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.

  18. Yukon Sam

    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.

  19. 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.

  20. 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 ( and EA mobile).

    That’s one of the reasons I left and founded Kongregate – 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.

  21. S0APB0XMAN

    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, 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.

  22. 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.

  23. 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.

  24. 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.

  25. A Real Gamer

    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.

  26. 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

  27. 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…