So if AAA is screwed and mobile is screwed, what’s left?
Posted by Rampant Coyote on January 14, 2014
These are an interesting (in the Chinese curse kind of way) pair of articles, if true…
First off, mobile is in trouble. The cost of acquiring a customer ($2.75) has officially exceeded the amount by which the average customer will actually ever pay ($1.93).
Funny (yet, completely unsurprising), considering how mobile was seen as such a goldmine not so long ago…
And on the flip side… according to Capcom, mainstream game development – the AAA stuff – is in for a world of hurt on the new console generation. While they are pulling out the stops to take advantage of every kind of procedural and automated system to offload some of cost of developing competitive content for the new systems, the work required (and, thus, cost) has increased by almost an order of magnitude.
Capcom: Next gen development is “eight to ten times” more work
The cost of AAA development on the previous generation of systems – in the mid-eight digits in USD – was already melting the industry. The number of AAA developers has fallen drastically over the last few years… but the team size has grown so much that it’s not been a drastic impact on the number of jobs in the AAA world (from what I have been told). It has just meant fewer games. While on the low-end mobile side, the market’s been flooded.
And in both, we’re seeing a massive rise in in-game purchasing to encourage players to spend more money on the game, to help offset the costs of development. It’s hard to sell a AAA game for more than $60, but with good DLC, the average cost of ownership might be doubled.
And of course, there’s squeezing the middle, as the low-end and the high-end dev shops move towards the always-economically-challenging mid-tier range. Meanwhile, the mid-tier folks desperately try and find a way to get noticed in an increasingly crowded field.
“May you live in interesting times” goes the Chinese curse. Or so I have been told. For game developers, it looks like times are certainly getting interesting. Indies are no exception. The Flipify guys have some thoughts on the challenge ahead for indie developers to actually, you know, make money in this brave, new world.
Ah, well. Who ever said it would be easy?
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McTeddy said,
Well, if history is any indicator… the AAA industry will remove those pesky gameplay sections so all people can enjoy a game without worrying about skill of effort. Mass market is no longer enough… full market must be assimilated.
Honestly though, I have no freaking idea what the future holds. The rising cost of AAA development and the lowering price of mobile are a horrible situation, yet I can’t see them being undone without a full blown crash.
– I see a continued rise of Unity and Unreal because developers are going to need tools to cut their costs.
– I see more invasive DLC and in-game marketing.
– I see more DRM as publishers look for scapegoats.
– I see more paid “Subscriptions” to various features such as “The Official tournament league!”
– I see more cross-product items. TV shows,movies, books, toys, etc. It’s common now, but I suspect it to go further.
– More in-game advertising and product placement. While it hasn’t worked well in the past… I expect publishers to try it again.
– I expect more psychological tricks for selling things.
– I expect more monetizing of “Let’s Plays” or other online streams. If they can’t stop it, Publishers are going to want a piece of the pie.
– I expect indies to keep being indy.
I’m not really looking forward to my expected future of games. Hopefully, I’m wrong.
Lee said,
https://en.wikipedia.org/wiki/May_you_live_in_interesting_times
PompiPompi said,
Err… I think your conclusion on Mobile is quite wrong.
Mobile is not in trouble it’s just that competition got harder.
On the bottom of the article you linked it said that total revenue from mobile gaming has increased from 3 billions to 4 billions.
So the problem is not that the market for mobile is shrinking, it’s that investors over spend to tap this market.
Also average cost per install is a quite limited data.
What is the average cost per install of a low quality game? What is the average cost per install of a high quality game?
In the past you could make money with a mediocre game, now your game must have a hook or be good to have any chance.
I don’t see it as mobile gaming in trouble, it’s just the gold rush of easy golden eggs is over.
The market has matured and now there is real tough competition. Like in any other mature industry.
PompiPompi said,
Also, could it be that increased development costs for next gen games will drive the industry to find more creative solutions?
Rampant Coyote said,
@Lee – Heh, more info than I ever needed to know about that “Chinese curse.” 🙂 I am now better informed!
@PompiPompi – Yep, the same can be said for all indies. You are exactly right. But it *IS* a lot harder / more challenging to get noticed (requiring more money, time, and / or luck). Quality of the game is not an insignificant factor, but it is far from the only factor or any kind of guarantee.
There’s going to be some serious consolidation taking place. This cycle has happened many times before, and that’s how it works. Consolidation, or companies find a new market. It will make it very rough for devs in the short / medium term, across the board as the gold rush comes to an end. In the longer term, things will stabilize, of course, finding a decent equilibrium. But there’s still an imminent “bust cycle” that has to be weathered first.
ShadowTiger said,
There is a fundamental problem:
Amount of content/Total amount of time available
That ratio is getting worse… unless games get shorter the average profitability will decline as market share becomes harder to acquire. It still remains to be seen how completely casual gamers will assimilate into core and eventually niche genres.
I don’t think the high growth in developing countries will offset the problem very much.