The Collapse of Complex Video Game Development?

Posted by Rampant Coyote on April 8, 2010

A few days ago, a friend of mine sent me this link to an an article entitled, “The Collapse of Complex Business Models.” Deep stuff. I’m not sure I entirely comprehend it. But it made me think about the videogame business.

The article was inspired / based upon the 1988 book by Joseph Tainter, The Collapse of Complex Societies. I’ve never read the book, but it explains the downfall of highly sophisticated civilizations – Roman, Lowlands Maya, etc. – as being inevitable when a society becomes too complex. The levels of specialization – which for a time add value to all processes – eventually become a hindrance to the society’s ability to adapt and grow, or ends up extracting “one tribute too many” and the only real recourse is to hit the reset button – let it all collapse and start over.

The article’s author, Clay Shirky, posits that a similar thing happens to businesses. In general, the added complexity adds value to the process / end product of a business – just as adding an index to a non-fiction book adds value to the book. Or, as he provides in his example, making sure the land-line telephone network runs on its own power grid.

But as things change, it is hard for these layers of complexity to change as a group, simplify, and adapt. Shirky is principally speaking of traditional media industries making the transition to the Internet. The complexities they accrued that served them well in the pre-Internet age impede their ability to make inroads in the modern era. It is true that a new complexity may take over, but it won’t be the same as the old complexity. In other words, a whole new process with new complexities may be what is required.  And if that doesn’t make sense, read the article.

So what it boils down to is that, for example, a television network well adapted to producing competitive television in 1970s-era technology will have a very tough time making video for Internet consumption. Because in order to do so in a cost-effective manner, they basically have to give up the competitive advantage that has allowed them to survive and thrive over the decades and effectively start over from scratch. It requires a fundamental change that they, culturally, may not be able to make.

It was with this idea in mind that I saw this Buzz by Jeff Tunnell, commenting on the estimated value of the young “Social Gaming” emperor, Zynga, at $5 Billion. Is that actually possible? No wonder there’s such a gold rush fever about Social Gaming. (Personally, I believe that’s a massively over-valuation based on hype, but that’s not to say they aren’t phenomenally profitable and successful). This same principle applies to the video game business model.

Times have changed a lot in the last five years, since EA VP for Corporate Communications Jeff Brown bragged that the era of the small developers was officially over, and that “it is now impossible to ‘Blair Witch’ this business.” That’s gotta go down with classic misstatements like Bill Gates “640K ought to be enough for anybody” and IBM President Tom Watson’s 1943 comment, “I think there is a world market for maybe five computers.” Except that those latter two statements are apocryphal, and Jeff Brown’s was quoted for posterity in the New York Times.

While the new market may peacefully coexist with the old one for a while, there’s no doubt that times are a-changin’. The video game business had to adapt quickly, borrowing from legacy media business models just in time for the rules of the entire game to change underneath it. I almost feel sorry for it. It had maybe a decade and a half  to enjoy its hard-learned business model.

So the question is – how to adapt? Zynga isn’t the model I would like to use for being a young turk kicking butt in the new world – they’ve admitted to doing some pretty unethical things to get their company started. Sorry, but I place a higher value on my soul. But even being a small indie game company doesn’t mean you’ll survive the changes. It just means that there’s enough of us that are nimble enough to form an interesting experiment in Darwinism.

Right now, the “social gaming” phenomenon has everyone rushing to it. But I tend to side with the belief that social gaming is merely one aspect of a broader evolution in the business. It’s frustrating to me in some ways because I really like my big, deep games  full of value-added complexity – whether they are “big” indie games like Din’s Curse or Eschalon: Book 1, or big AAA games like, uh, well, all of ’em). I think there’s still a market for them. Maybe only a market of one, but it’s there.

The market may be there, and these kinds of games probably will continue to be made. But I think the current business model that has evolved to support the production and distribution of these games – the old mainstream studio / publisher / distributor model – is seriously going to go the way of the dodo. It’s going to collapse – the complexity built into the system supports an old way of doing things, and may not survive the transition. Things like Steam and the new Indie Fund and small third-party marketers may very well be aspects of the new complexity that goes into the process.

I think even how indies traditionally do things may have to change. But at least for these tiny development shops, there are not a lot of layers of complexity gumming up the works. Collapse may not be necessary.

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