Game Business and its Crisis of Attention


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?



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.


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.

Carl James

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.

Ernest Adams

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.


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!


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.


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.


“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.


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.

Thomas Scovell

“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… ;)


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.


“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.

Wagner James Au

“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?


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.


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?

G Man

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!!

Wagner James Au

“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.


“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.


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*

Wagner James Au

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:
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.

Bananas in the Falklands

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.

Mark Thornson

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.

Mark Thornson

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?


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.


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.


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


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)


“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.

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