Gamasutra: The Art & Business of Making Gamesspacer
View All     RSS
October 1, 2014
arrowPress Releases
October 1, 2014
PR Newswire
View All





If you enjoy reading this site, you might also want to check out these UBM Tech sites:


 
Are AAA Studios DOA?
by Josh Bycer on 12/11/12 02:11:00 pm   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

Another year of the game industry has been marked by lower profits and studio closings. Today's post examines the problems facing AAA development and what could be done.

When we look at development studios, there are three categories that we can group them into: Indies, middle tier and AAA studios. Over the last decade, the move to digital has aided Indies and middle tier developers, while AAA has been feeling the burn.

With reports of losses and lower quality titles going around the larger development houses, we need to ask: What is going on with AAA development? 

The Preconception of AAA Studios :

AAA Studios

When we talk about the differences between the different studios, there are preconceptions based on the quality of the work that comes through.

A consumer, who buys an indie game, doesn't expect graphic fidelity on par with looking out their window. And at the same time, someone buying an AAA title expects a bug free experience, wrapped up in amazing design and graphics.

In all consumer industries, the quality of the product should be reflected in the price. That is one of the main reasons why people are willing to spend more at 5 star restaurants as they expect a premium product for that price.

However, gamers have been seeing a drop of quality and uniqueness among the AAA studios.  The number of First Person Shooters and online games has increased, with more titles being developed with multiplayer options and DLC.

Even established brands are being affected, with Resident Evil 6 designed more as an action co-op game then a horror title. Then there was a report about Dead Space 3 was going to go the same route with adding co-op to a horror designed game.

Now it's safe to assume that the developers and publishers are reading fan reactions and seeing the criticisms levied at them. But what has happened is that the culture of the industry has changed and AAA studios are not adjusting.

The Cost of Development:

There is a basic rule of any major business: The company has to keep making a profit to stay alive. If you have a day where you're not making money, then you are doing even worse then you may realize.

The reason has to do with operating cost. Every day that your business is running there are daily costs that have to be factored in. Electricity, rent, hourly wages and more are just some of the costs that come up every day.

When you have profit lost or no productivity one day, you are even worse off than before due to operating costs. This is why companies based around selling are so aggressive about daily sales, as they need to cover the operating costs to make a profit.

While a video game studio is considered a consumer product industry, their profit structure is different from other industries while having the same cost. Every day that a game studio is working on a title, is a day where they are losing money due to operating costs. But at the same time, they are not making money every day to cover that.

Instead, the studio expects a massive pay out once the game is released to cover all the expenses and of course, make a profit.  Because of the profit structure, it forces larger development studios into the publisher-developer relationship.

A normal studio does not have the hundreds of thousands or even millions of dollars of savings to cover the cost of development in preparation for that payday.

Publishers have a major say in the development of AAA titles, as if the developer doesn't keep the publisher happy, then they won't have the funding needed to finish the game. This also means that publishers are more adverse to risky or niche titles that may not sell enough to cover the cost of making the game.

There are two scenarios that no publisher wants to see with their titles:

  1.  The game bombs with horrible reviews.
  2.  The game gets positive reviews and fans liked it, but the game doesn't sell enough to cover the costs.

While a fan would consider the 2nd scenario a win, to a publisher they are both failures.

This is part of the reason for the homogenizing of AAA game design. When one publisher sees the success of a game like Call of DutyGears of War or World of Warcraft, they want the same results with their series. And that means spending millions of dollars on developing a game with similar design that may or may not make that money back.

But there is one area that has become a huge boon to Indies and gamers and a nightmare to AAA studios: Sales.

The Pricing Paradox:

With the growth of digital distribution from sites like Steam, Amazon and many more, has allowed both designers and the online retailers to introduce sales. Before, retail chains like Best Buy and GameStop had the final say on what a game would cost.

The rate that games have become discounted, has caused many gamers to no longer buy games at release, or what would be considered full retail ($60.)

In other industries, products retain their value due to the quality of the brand and the product itself. For example, I will never be able to buy a brand new Lamborghini for $1000 no matter how long I wait.

AAA studios
Skyrim is one of a few games whose scope and production values justify setting its price at full retail.

Likewise, car companies know that they can't make every car like a Lexus or Mercedes as it would just over saturate the market with high end cars.

That's why cars are made and priced at different levels, obviously the more money you spend means a higher quality. But at the same time, lower priced cars still have a standard of quality to them that lets them retain their price.

But in the video game industry, specifically AAA studios, there is no differing value. A $60 price tag can be attached to anything from Halo, to Dead Space or Playstation All Stars Battle Royale. But as we're seeing, the $60 price doesn't come with the same standard of quality, as evident by the review scores games are getting.

There is just more value these days in Indie and mid tier developers then there are in AAA studios. The smaller studios can get away with more out there and unique games, as their costs are smaller compared to the larger studios. The smaller cost means that they can price their games lower and more affordable and still make money.

One of the reasons why we've seen a decline in single player AAA titles is the issue of value. A typical single player game is usually designed around 8 to 10 hours of gameplay (not counting side quests and extra content.) But even with that low number of playtime, they are still being priced at $60 new.

Instead of lowering the price and to create more value, designers have been adding more multiplayer and DLC gameplay to extend the play-time. What ends up happening is that instead of getting an amazing single-player game or an amazing multiplayer game, we get an average single player with a possible above average multiplayer.

Last year my two most played games were The Binding of Isaac and Dungeons of Dredmor. Between the two I've spent over 100 hours combined playing them. Buying them both cost me a total of $10 at launch. Now if I could get all that value out of two $5 games, why should I spend $60 on an AAA title?

The answer sadly, is that I and most gamers shouldn't. There are very few games being released at $60 that are actually worth that amount in terms of player value. Only a few studios like Bethesda, Bio-Ware and Rockstar for example makes games that match the price tag.

These games are either huge in scope and production values (Skyrim, Red Dead Redemption), or a massive story carried across multiple games (Mass Effect). But that doesn't stop every publisher from pricing their game at full retail and saturating the market.

Now you may ask yourself:" Then why don't publishers just lower the retail price?” The problem is that they financially don't have the option.

As game engines become more powerful, so does the cost of using them. Art, music, voice acting, graphics are all additional costs to making a title. What ends up happening is that publishers have no choice but to release games at $60, if they want to have any chance of recouping the development cost.

Besides the cost of game development and maintaining a studio, there are also advertisement costs. AAA titles are commonly seen on TV, websites and magazines. And the cost can be huge.

But a middle tier and Indie developers have a lower development cost allowing them to price their titles cheaper and still turn a profit. This lower cost gives the developers wiggle room when it comes to sales that the big developers don't have.

AAA studios
Even though Darksiders 2 received decent reviews and sales. It still hasn't made enough money to cover THQ's expenses.

Helping matters further is that most indie and mid tier developers don't spend much on advertisements and rely on word of mouth and positive reviews to drive sales.

Both don't cost the designers any money and can be in some cases just as powerful (if not more so) as advertisements.

The Impact of Sales:

Because the price of a game has less relation to the quality of the title, we don't see the variety of pricing when it comes to video games. Because of that, the concept of sales is the same for every video game as a way to get a title to the price point of the spender. The lower the price of a video game, the more people will be interested in buying it.

Raise your hand if you ever bought a $2 game for no other reason then it was cheap. We all have an impulse buy threshold when it comes to games, for me its $10 or less.

The closer a game gets to our perceived value raises the chance that we're going to buy it. That doesn't matter if a game was originally priced at $15 or $60, but what it is priced at now.

Because of the lower development cost, it allows smaller developers the ability to make money with their games on sale. If a game was released for $15, dropping that down to $5 will still help them thanks to the increase in sales and lower cost of development.

But if a $60 game that cost several millions to make is dropped to $5, the developers have a very hard time recouping the cost. Recently THQ announced problems with Darksiders 2. Even though the game was reviewed positively and sold around 1 million copies, THQ needs it to sell at least another million for them to break even.

Dead Space is also feeling the burn, as EA reported a few months ago that in order for the series to be considered viable, the next game will have to sell at least 5 million copies for them to justify continuing the series.

Something Has To Give:

AAA development is in dire straits, if publishers are asking such huge numbers to continue smaller series. Publishers are looking at advertisements, DLC and other monetization as a way of improving profits. It's hard to tell from the outside at what point greed is taking over necessity.

As more studios are closed and publishers are reporting losses, something has to change. AAA studios are still operating the same way as they did in the last decade. But with the rise of cheaper, more accessible titles and the move to digital, the marketplace has changed.

It has become very difficult to justify spending $60 on any game these days, but that is still the standard retail price publishers are asking. And with the rise of monetization, gamers are getting less for the same amount of money.

With the next wave of consoles fast approaching, it can only mean further raising the cost of AAA development. This is not good for the publishers who have to invest the money and the gamers who are still feeling the effects of the economy.

We need to ask how much longer large studios can sustain the costs and development under a publisher-developer relationship. Further complicating matters is the rise of Kickstarter this year, allowing developers to fund a game of their choosing without a publisher's intervention.

My prediction is that either publishers will have to find a way to cut costs and hopefully lower the price barrier of games, or they will have to switch focus to smaller budget titles. The last decade could be summed up with the description "the rise of the digital market", if publishers aren't careful this decade could become “the crash of AAA development."

- Josh Bycer

Reprinted from my site: Game-Wisdom 


Related Jobs

Raven Software / Activision
Raven Software / Activision — Madison, Wisconsin, United States
[10.01.14]

UI Lead - Raven
DoubleDown Interactive
DoubleDown Interactive — Seattle, Washington, United States
[09.30.14]

Game Designer
Machine Zone
Machine Zone — Palo Alto, California, United States
[09.30.14]

Game Designer
Raven Software / Activision
Raven Software / Activision — Madison, Wisconsin, United States
[09.30.14]

Lead Engineer - Raven






Comments


Fernando Fernandes
profile image
IMHO, "AAA" is a marketing thing. Fuck.That. If the game is good, the game is good. People will buy it, people will pay for it. Enough of these freakin' marketing tags. Yes, the crash of "AAA" games, YES!

Frank Washburn
profile image
I think "AAA" refers more to the size and potential capabilities of a studio, and the possible market share of whatever gaming genre they're gunning for. In my own mind, "AAA" means you have a studio that's gainfully employing at least 50 people, using either a high tier established game engine like Unreal or Unity, or using your own sophisticated developed internal software. I think it's a valid distinction, and that's the colloquial definition that this article draws upon.

Joe McGinn
profile image
AAA will be fine. But the traditional business model (console retail games) for them has been disrupted. League of Legends is a AAA game and it's doing just fine.

Harlan Sumgui
profile image
League of Legends has a pretty low price barrier to entry.

Groove Stomp
profile image
Interesting. Most of what I've been reading on Gamasutra has been saying that Indie and AAA are here to stay, where as the middle tier developers are disappearing left and right.

Ryan Duffin
profile image
All this comes off like another "games are too expensive" article and assumes a lot of about both the business model of games and the auto industry. It also assumes a correlation between development cost and hours of player time (there isn't one) and worst of all, that value is defined by hours of your time a game consumes (subjective; depends on how valuable your time is). Do you buy your groceries based solely on price/calorie correlation too? Or do taste and nutrition also matter? Organic? Fair trade?

Also, how can AAA studios be DOA/Dead on Arrival? They can be dead or dying but if they have shipped a game and survived it, they're not DOA.

Joe Cain
profile image
The most insipid part of the "pricing paradox" mentioned in this article is the fact that a number of the most popular free-to-play titles (which, presumably, represent the pinnacle of cost-to-play value) utilize IAP to squeeze enough out of their players to average significantly more than $60 in lifetime value per player - it's just broken up over a long enough period of time that players *feel* like they're paying less than that, even though they end up spending more - sometimes significantly so - than they realized due to the piecemeal (and, dare I say, parasitical) nature of those purchases.

I'm all for games that provide true value for your money, but that doesn't necessarily equate to more hours of play. I bought two copies of Portal 2 for my girlfriend and I to both play the single-player and co-op missions, and we played the hell out of both modes for about a week, maybe 2. We haven't gone back since the last new set of co-op missions was released, but I still feel like that was a great purchase and totally worth the money I put out to have that experience. Personally speaking, buying that same experience one test chamber at a time would actually have cheapened the experience for me, and I'm pretty sure I'm far from alone in that regard.

Brandon Van Every
profile image
So "pay as you go" is not for you. There's nothing insipid about pricing differently if the consumer doesn't hand over more money up front. In that case the developer is assuming more financial risk. Go to a grocery store and you're going to see deals for buying more of some item all at once. The seller makes less money per item but gets more cash up front.

George Booth
profile image
I think the key here is going to be smaller, more flexible teams. If you look at indie and mid-tier developers, they don't have the hundreds of people working on all the assets for the game. They have anywhere between one and ten people working on a unified vision for a game. Less people on a team means less operating costs (considering you just chunked down about 30 paychecks on a single project).

With the smaller team, they can afford to do those things that indie and mid-tier can do. Also, when the game is not physically manufactured, the manufacturing costs are completely removed. This is why I have a hard time believing most publishers when they say "rising costs" yet they have freed up millions of dollars in packaging/distribution and still charge full price for digital downloads. I only have to point to a company like Square Enix, which is insistent that their digital downloads are worth upwards of $15 for titles that you could get in the bargain bin not too long ago.

The only difference is that it's on your phone/tablet instead of that outdated PS1 (though the graphics will remain mostly unchanged)!

Justin Sawchuk
profile image
I will buy the shit out of dead space. But why oh why did it cost that much to make dead space 3, how much did dead space 2 cost. You think it would be cheaper to make the sequel.

Stuart Brown
profile image
This is an important point, I feel. Surely any sequel should require less investment, unless you are taking all your hard work and throwing it in the bin and restarting with a blank sheet of paper.

If Dead Space had used its universe and engine to say something meaningful, or tell an entertaining story over its three games then the additional spend shouldn't have needed to be so high. If it was never planned out as an experience at all, but rather always intended to focus on shocks and novelty to gain fans, then you are always having to one-up the previous entry, become more bombastic and (urgg...) visceral which requires much more investment in new game engines.

Maria Jayne
profile image
I wonder what portion of a triple A game budget is actually spent on making the game. As opposed to paying Hollywood voice actors, marketing, making facebook mini games, public stunts, creating day one dlc etc.

I want to believe it's the majority but somehow I feel it's closer to 50%.

Ryan Duffin
profile image
All else aside, marketing budgets exceeding development costs is not something new to this generation.

Harlan Sumgui
profile image
50%? waaaaay too high.

Joshua Wilson
profile image
I'm not an expert on production budgets but I'm fairly certain most of those things would have their own budgets, as they would be considered separate products. Aside from voice actors, but it could be argued that they pay for themselves by raising awareness for the product. Marketing is it's own thing.

The idea that money spent on something else could have been spent on the original development just doesn't work. It's nice to think that the millions spent on marketing, or additional products, could have been put into development of the core title until you realize you spent tens of millions on a game that no one knows exists, or was never going to sell more then a million units to begin with.

Mathieu MarquisBolduc
profile image
So, looking at the sale estimates of some recent releases:

COD: 16 millions year to date.
Halo: 4.5 millions in only 4 weeks
Assassin's Creed: 6 millions first 5 weeks
Fifa: Something like 12 millions. *yearly*

and Farcry 3 just released to both critical and user's acclaim. How many great new IPs did we get this generation? Dark/Demon souls, Uncharted, Assassin's Creed, Arkham, Borderlands, Red Dead Redemption, Bioshock, Mass Effect, Gears of War, The Witcher, Fallout's revival, Left 4 Dead, Skate, tons of others.

AAA is dying? Really? These assertions are undocumented and unsuported and thus this whole article is built on wind. If the author loves The Binding of Isaac, thats great! Can he acknowledge that there are still *millions* of other people that loved some of the aforementioned titles?

Some people seem to think that console or AAA need to die in order for mobile and indie development to succeed. Thats not the case, the market is diversifying and thus different games can appeal to a wider audience. And its great!

Brandon S
profile image
Sound like a bad night in Vegas. The problem with those games are essentially a glass canon and the cracks are showing since the since these studio are dependent on few select games to support there Empire . Cost are Rising , Next iteration of hardware exponentially increases the development cost and complexity ,while not exponentially increasing the audience for these games or Profit from them (Sure more console are selling , because there internet browers, Media center or I can watch Hulu with my family or I can watch Netflix , the increase in audience isn't buying call of duty. Even Hardware is increasing moving away from focus only on games , to recoup losses by these advance hardware ). Games are getting shorter with more and more DLC in order to prevent the studios from going bankrupt . Something gotta give . No Company has infinite resources and the amount of money coming from the increasing homogenized games isn't enough to maintain the accelerated exponential development complexity despite selling millions . With no Magical Development tools/hardware to reduce the cost it will eventually crash taking what left of the AAA industry with it

Unless you think a healthy industry is Fifa and Call of duty ,

Harlan Sumgui
profile image
"Unless you think a healthy industry is Fifa and Call of duty "

couldn't have said it better.

Mathieu MarquisBolduc
profile image
Thats pure snobism. Fifa is a fantastic game, acclaimed and enjoyed by millions. Its bad because of what exactly? Yearly releases? Each year they push the boundaries of what they do, and they are at the cutting edge in most of it.

If you think AAA is going to die in the future, well I dont know the future and neither do you. But its not dying now and it certainly hasnt been dying in the last 10 years, as claimed by the author.

Ian Torn
profile image
I can account for EA pushing a lot of boundaries in some of their titles just to say they were the first to do it.
But I do agree that triple is is not dying, in fact, it's changing form. For those people who can't see the change, then they are doomed. All the massive closures are because they could not see the change and adapt. New big franchises will come and new AAA titles will start appearing in force when the new AAA formula has evolved enough.

Erin OConnor
profile image
My issue with AAA titles is this.

The developers expect me to play $60 for the game initially.
They then expect me to fork over $10-20 for every DLC they put out. The "end cost" of the game then ends up more around the $100-120 mark.

So yeah. I wait until the platinum or diamond version comes out that includes EVERYTHING.

As a PC gamer somegame developers and publishers *cough* EA *cough* need to understand that they are losing sales becasue of their business practices and attitude toward PC gamers. I can only speak for myself here but:
-Mass effect 3 ? Lost sale
-Battlefield 3 ? Lost sale
-Dragon age 3 (upcomming)? Lost sale
-Sim City (upcomming)? Lost sale


And the single biggest thing that is killing gaming?
"When one publisher sees the success of a game like Call of Duty, Gears of War or World of Warcraft, they want the same results with their series"
Rather that being driven by the artists that create, they are being driven by the accountants.

k s
profile image
And the single biggest thing that is killing gaming?
"When one publisher sees the success of a game like Call of Duty, Gears of War or World of Warcraft, they want the same results with their series"
Rather that being driven by the artists that create, they are being driven by the accountants.

This!

Jonathan Jennings
profile image
I have argued for games having different pricing models for a while now . I would pay $80 for skyrim if that was the price of admission and i might have bought halo odst on release day at $40 . two different games and I expect and have different levels of respect from each dev team . I know some say this makes cheaper games look like they are inferior and therefore would turn away buyers but I personally am more irritated when a game has a neat concept that I want to try but can't muster up enough desire to open up my wallet for it. it's fine I end up buying the game cheaper when it hits the bargain bin anyway .....and i'd prefer not to give my money to gamestop for housing it for me until no body else wanted it and the price finally made sense to my wallet.

Josh Bycer
profile image
This is an interesting point. If games were cheaper I would be more inclined to try different genres that I wouldn't normally. For instance, when 2K released ESPN NFL 2K5 at $20, as opposed to $50 for Madden that year, I picked it up. And that was the one and only time that I bought a football game. Granted it didn't make me a Football fan, but I was able to appreciate the genre more, having played it.

[User Banned]
profile image
This user violated Gamasutra’s Comment Guidelines and has been banned.

Alexander Symington
profile image
This is something I'd like to see. It seems the main bottleneck is manufacturer license fees, which are apparently a flat rate per unit sold, meaning that publisher margins would drop unsustainably with the price of games. Changing the license fee to an App Store-style percentage of RRP might help to reinvigorate the retail market for everybody.

Michael Kelley
profile image
Are AAA Studios DOA? Of course! The least fit entities to survive in today's marketplace are those hindered by the inflexibility their multi-million dollar budgets and billion dollar revenue streams. Nigh limitless resources are a handicap that prohibit you from adapting or innovating. THQ's woes are indeed the new normal and going forward I predict that from 2013 onward, in direct contravention of the laws of the man-made universe, the rich will get poorer.

wes bogdan
profile image
With wii u and 720 ,ps4 the development costs are supposed to be 25% greater than todays costs so where will the likes of halo,kz,metroid or god of war go and more importantly will we see a return of the $79 base price. While i prefer consoles why would the same game on pc cost $49 rather than the console's $59 is something with a closed arcitecture that get's cheaper over time more expensive to be on then sony,ms and nintendo need to adjust with the times as royalitys could be hurting us all......or we could see gamefly as a streaming service for bygone games priced like netflix.

Why haven't systems prices fallen faster when a system hits $99 it's time for the next box but prices have remained steady longer which for a clueless public buying their first wii sd,360 or ps3 either last or this year good luck getting them onboard the next boxes....especially without backwards compatibility.

Luis Guimaraes
profile image
"25% greater"

That's optimistic for development costs. Might be about correct if you consider on development will cost more and marketing will stay the same.

But the tendency is that they (yes they) will spend more and more money with things that are more volatile, like set pieces that you get through in 15 seconds and never see again, Hollywood voice actors, animation stances that are only used in the intro so it can be shown in World Premieres in over-scripted sequences that don't reflect the reality of the game.

Ryan Duffin
profile image
"While i prefer consoles why would the same game on pc cost $49 rather than the console's $59..."

PC versions of most console-targeted games sell magnitudes less and get pirated magnitudes more. The best argument for PC games to cost the same as consoles is that if the margins on them are better for publishers and even then, some titles never make it to PC.

Also, PC often means Steam and just like Sony, Microsoft and Nintendo, Valve takes their cut.

k s
profile image
I've said it before and I'll probably say it again, there will be a market crash for AAA games. The costs of development is too high already and only growing. The future of gaming lies with indies not the massive studios that can't break even on 1 million sales.

Michael Stevens
profile image
The problem (or, a problem) is that the market is flooded with soulless high-budget gambles. The main thing foiling publisher's unreasonable expectations is their own impatience. It's not unreasonable to expect a Dead Space game to sell 5m, it's unreasonable to say "*this* Dead Space game needs to sell 5m or it's the last one, to achieve that we will gut it and replace its innards with things we know 5m people like". Quality and consistency are more important to growing a brand than the marketing and budget arms race so many publishers insist on and allow to erode their best ideas.

Josh Bycer
profile image
If we remember from the 80s, an over saturation of low quality games was one of the reasons for the game industry crash, the industry lost consumer confidence in their products.

Granted with the different facets of the industry today (digital and indie markets), that chance of us having a full blown industry crash is very low.

But I wonder how soon it will be before more people realize that there are better options then spending $60 on a single game? Either by buying indie titles, or using sales.

As a case in point I've spoken a few times to people who were casually interested in games, but didn't know much about the market. They had no idea that there were options outside of spending $60 at Gamestop or Best Buy to play games. Just picture if one day, everyone just says "screw it" and refuses to pay anymore then $30 for a brand new game. And what that would do to all the studios spending millions on creating a game.

Jeremy Reaban
profile image
"There are very few games being released at $60 that are actually worth that amount in terms of player value. Only a few studios like Bethesda, Bio-Ware and Rockstar for example makes games that match the price tag."

In the PS2/Xbox generation, there were a lot of budget/middle tier releases, but companies that published them went under shortly after the 360 launched.

It's really only the blockbuster AAA games that survived.

Lewis Wakeford
profile image
I don't think AAA is dying. There are some things that require a giant budget to achieve, and as long as that is true AAA isn't going anywhere.

That said, there are some genres that just don't need to be AAA to work well, multiplayer only or multiplayer focused titles for example. Games in these genres might as well be F2P or within the $15-$20 pricing range.

[User Banned]
profile image
This user violated Gamasutra’s Comment Guidelines and has been banned.

[User Banned]
profile image
This user violated Gamasutra’s Comment Guidelines and has been banned.

TC Weidner
profile image
The problems with AAA.
1) As pointed out, the cost associated with production has continually risen
2) Gaming price point seems to have topped at $60. That price point has remained for 2 decades now, taken inflation in consideration that price point is restricting revenue. Now to add to this price pressure, indie, mobile and so forth offer gaming closer to free all the time and you have a real revenue issue.

Its a perfect storm, cost continue to rise, while revenue continues to fall via price constraints of the market. The only saving grace and chance I see AAA having is digital distribution allows for the middlemen to be cut out and for revenue to climb using that avenue.

Its going to be an interesting few years coming up, with the world likely headed into another recession, and with the market unwilling to move past a 60 dollar price points, I personally think it will be the low overhead, agile, and inventive developers that will survive and thrive in this environment.

Ramin Shokrizade
profile image
What constitutes a successful business model in this space has change dramatically since 2005. Smaller studios have had no problem adapting, but it takes tremendous effort for a large company to change a business model they are founded on.

I also think that "AAA" has become synonymous with "male", at least in the US. The demographics for who plays our games has changed radically in the last few years and again the big players have had some difficulty adapting in that time frame.

Diana Hsu
profile image
"I also think that "AAA" has become synonymous with "male", at least in the US."

I never thought about it like that, but that makes a lot of sense. It would explain why the success of "Catherine," a more unisex game, made such a splash.

Pedro Mancheno
profile image
This is what happens when greed takes over.

Jeff Zugale
profile image
How about putting some serious effort into streamlining dev tools to the point where it takes a lot less time to build the in-engine parts of the game? Unreal and Unity and others have improved dramatically, but they're still pretty steep in interface learning curve when seen in spectrum of software as a whole, IMO.

Asset-building tools could use a lot of work too, but the process of building the 3D stuff isn't going to speed up as quickly as in-game design work could with tool UI/UX streamlining.

Also: truly professional project management. Bring in people from outside gaming who have done really complex projects like large building/infrastructure construction, aircraft manufacturing etc. and pair them up with people who know game production to more efficiently manage the pipelines.

IMO a big part of the problem is the game biz doing things the same way "it's always been done" and not looking at itself as a series of processes that should be examined carefully to see where time and talent aren't being used efficiently.

Mathieu MarquisBolduc
profile image
Im my experience the teams and studios that do focus on tools and pipelines succeed better.

As for the project management, I agree with your sentiment, but not with your solution. The fact is that software project management is very different from what you see in manufacturing. Proper software management need to be its own discipline and taught properly in universities.

Lewis Wakeford
profile image
This is a good point about the dev tools. The main bottleneck would probably be the art assets and voice acting though, you can't really streamline those away.

Vin St John
profile image
The beginning of this article seems to be implying that games become worse as they move more toward being multiplayer. The fact that more games are implementing multiplayer should generally be considered a GOOD thing for our industry. Multiplayer was ALWAYS the goal, it just used to be too expensive. Now it's more profitable! We should all be happy about this!

Richard Tarantula
profile image
I’d like to invite you to step into the People’s Octagon.
--
"In all consumer industries, the quality of the product should be reflected in the price. That is one of the main reasons why people are willing to spend more at 5 star restaurants as they expect a premium product for that price."

Oversimplification. All brand new NES games in the 80’s all came out at pretty much the same price. Newsflash, that price was the same as it is now adjusted for inflation. The only thing that has changed is an exponential increase in quality with a reduced profit margin, we don’t make games in a garage anymore. Instead of this article focusing on that premise which is actually interesting (e.g. how will publishers create value in a world while also balancing perceived quality where only the proven franchises can afford to truly iterate given new technology to appeal to as many people as possible – this is very expensive and a complex problem in a competitive environment) the author makes a useless and provocative statement about how AAA games are dead on arrival. Which isn’t surprising because it actually requires work and insight to delve into case studies and business models spanning the industry to see how the past has given way to the present technologically and business-wise which then would lead ideally to inferences about the future worth reading.

"However, gamers have been seeing a drop of quality and uniqueness among the AAA studios. The number of First Person Shooters and online games has increased, with more titles being developed with multiplayer options and DLC."

Uninformed and unsubstantiated subjective opinion. A drop in quality? How? Compared to what? An SNES game? Oh, right CoD is just a cookie cutter shooter right and is bringing the industry down? CoD is an extraordinarily polished title with nearly a decade of iteration and tweaking. Whatever serendipity that allowed it to initially take hold has been eclipsed by thousands of man hours of attention to detail and focusing of its trademark gorgeous cinematic experience along with an unparalleled multiplayer system. I wonder why developers are trying to mimic those systems? Because they’re the best in the industry on top of being outrageously profitable.

"Now it's safe to assume that the developers and publishers are reading fan reactions and seeing the criticisms levied at them. But what has happened is that the culture of the industry has changed and AAA studios are not adjusting."

Safe to say huh. Yeah. Publishers spend thousands and thousands of dollars to focus test games (scientifically done) and send works in progress to outfits employing former game journalists to get a bead on quality (e.g. metacritic score). This happens non-stop during the lifecycle of a major title. Fan reactions? Like the people complaining about fucking box art? Or is it just your reaction and 20 other people on reddit? All the box art looks the same these days, look how not-unique all these games are! How has the culture changed? How have AAA studios not adjusted? AAA studios have been creating franchise tie-ins in the form of Facebook games and mobile apps for a while now. But that ship is starting to sail already. The next-gen systems are going to pretty much guarantee that this is the norm and not the exception to the rule though and I think they’re going to pull it off in a targeted and competent way. A lot of money is spent gauging the quality and experience of a game before it hits the shelves now more than ever, designers and other folks usually have a good intuition about these things but they can be wrong too. This is a constantly recycled trope about the industry by lazy writers, this idea that games are just made in a bubble dictated by profit margins and how devs are slaves to the bottom line and tyrannical publishers. It’s pabulum. Is the industry risk averse? Yep. Does it still take risks? Yep. Are there only a handful (note, can count on one hand) of devs/publishers that don’t have to adhere to a deadline that have the luxury to push any envelope they see fit? Yep. Oh wait, you didn’t like Diablo III either did you.

"In other industries, products retain their value due to the quality of the brand and the product itself. For example, I will never be able to buy a brand new Lamborghini for $1000 no matter how long I wait
Likewise, car companies know that they can't make every car like a Lexus or Mercedes as it would just over saturate the market with high end cars."

Games by their very definition are luxury commodities handled realistically by a “reasonable person” as a discretionary expenditure. The end. Your analogy is plebian.

"There is just more value these days in Indie and mid tier developers then there are in AAA studios."

Uninformed and unsubstantiated subjective opinion. How is a game like Meatboy (for example) inherently more valuable than CoD? It’s such a stupid comparison. Meatboy made what, a half mill or so probably, a mill? That’s awesome, and all congratulations are due to those guys, I like Meatboy, it’s really great to see an indie success story in this industry (note that I can count success stories like that on one hand) but that’s a drop in the bucket. Where is this amazing cadre of indie and mid-tier devs that you constantly cite? There’s like three success stories and a ton of actually shitty games. If it wasn’t for a AAA first party (Microsoft), the XBLA platform, and an install base of millions how much would Meatboy have made? You’re oversimplifying the relationships between first parties/publishers and devs of all stripes. It’s complex and always will be interconnected. There’s winners and losers in all industries, games are no different.

"The smaller cost means that they can price their games lower and more affordable and still make money."

Amazing deduction. Except publishers have an entire library of games which they use as leverage to diversify risk where an indie studio has one shot or they’re done (e.g. have to go get a real job again).

"Last year my two most played games were The Binding of Isaac and Dungeons of Dredmor. Between the two I've spent over 100 hours combined playing them. Buying them both cost me a total of $10 at launch. Now if I could get all that value out of two $5 games, why should I spend $60 on an AAA title?"

Your presentation of your narrow subjective anecdotal experience as proof that a 12+ billion dollar global industry is somehow going down the value toilet is patently ridiculous. You also don’t give any examples of titles that were released at $60 that weren’t worth it or any details like how fast titles were discounted after release. This would all be interesting and substantive data to support all of your anecdotal assumptions and conclusions. I bet if you did any legwork you’d probably be surprised by some of your conclusions. Indie titles are typically “casual” (the most successful, well-received are).

"Raise your hand if you ever bought a $2 game for no other reason then it was cheap. We all have an impulse buy threshold when it comes to games, for me its $10 or less."

Raise your hand if you’ve ever bought a game on the Apple app store you’ve never ready any reviews about that was priced at $0.99? I sure haven’t. Herein lies a fundamental flaw with your entire approach. You’re coming at this from the opinion of a closeted, hardcore gamer. That’s great. However, by far, the mass majority of gamers are not you. Not by a long shot. You’re entitled to have opinions just like anyone else but you’re just venting instead of actually giving us tangible information as to why your premise makes any sense.

"AAA development is in dire straits, if publishers are asking such huge numbers to continue smaller series. Publishers are looking at advertisements, DLC and other monetization as a way of improving profits. It's hard to tell from the outside at what point greed is taking over necessity."

Welcome to capitalism 101. You seem to not realize that the necessity of a publicly traded company (and hell even a privately held company) is to make money for its stakeholders. Companies (“makers of AAA games”) with fiduciary responsibility to its shareholders have to make decisions to strategically monetize its products in lieu of rising development costs and a shitty economy that’s having a huge impact on Joe Q. Gameplayer’s discretionary budget. This hasn’t changed. Ever. And never will unless the movie Red Dawn happens for real and Patrick Swayze doesn’t win. Publishers assume more risk to develop the AAA experience but have a greater chance for a huge payout. How is Dead Space or Darksiders a smaller series exactly? THQ has other troubles. Those are major franchises that have been pretty well received. Both of those were risks. There’s more to the equation that feed into a company’s bottom line than just sell x units to make profit. Brand recognition and large followings that drive consumers to other offerings in a publisher’s library help. Publishers take chances all the time. They also fold when they don’t pan out. This economy is reinforcing the risk-adverse nature of a volatile industry subject to the fickle wants and needs of a constantly moving target. I guarantee that Dead Space 20 will be green lit before “new unproven IP” is any day of the week. No amount of redditors voting EA as the worst company since the invention of the aeroplane is going to change that.

"My prediction is that either publishers will have to find a way to cut costs and hopefully lower the price barrier of games, or they will have to switch focus to smaller budget titles. The last decade could be summed up with the description "the rise of the digital market", if publishers aren't careful this decade could become “the crash of AAA development."

Switch focus to smaller budget titles, like say… Zynga’s actual business model? That seems to be working out really well. Quality is what matters. What is quality in games? This is an entirely subjective experience. Costs are actually only going to go up as you say. Publishers are always going to cram as much as they possibly can into as small as a budget as they can, this is not news. And we’re all going to crunch to make that happen. And publishers are going to diversify their offerings as appropriate to blend with the new reality that there is a market (albeit small) for a cool, niche casual title. Also, there’s a publisher in the AAA space who already tried this business model you predict – they’re called THQ and they had an entire division devoted to lower price barriers and lower costs of development. There was a whole game platform predicated on this business model, it was called the Nintendo Wii.

A more apt analogy is to the movie industry. On one hand you have blockbuster action movies that will always have a line out the door. Quality doesn’t matter per se in those peoples’ minds. They’re going to see a polished and directed experience. Quality is a given. Big bucks were spent to make all of those explosions and one-liners visceral and great. That’s great. There are also arthouse indie flicks which are made at a fraction of the cost (or not, there are also boutique indie flicks being made by big studios that have pretty big budgets) and do things to shake up the genre that aren’t cookie cutter and are typically more artistic with their treatment of actual technique or story. The parallel here is with the burgeoning indie movement in games. The only problem is that to make a game like Meatboy “indie style” takes a couple years and a lot of self-reflection at a Waffle House. An indie movie can be made in about 30 days if the funding and distribution to a certain extent is in place (yep, that’s right by one of the big studios, just getting that funding and distribution in place can take years of course). What’s cool is that thanks to Steam you can apply and get approved (if your game is worth a shit) and the distribution problem is solved or just sell that thing on a website. That’s a huge plus. That’s great. The death of AAA though it most certainly is not.

You seem to be stuck in the mode where you are unsatisfied with the incremental progress and polishing of a major franchise which isn’t your favorite type of game vs. the potential disruption of a “quality” indie title. It’s just a poor comparison and your anecdotal “Look I played these games for 100 hours and nothing else all year!” is just silly. It’s not an either-or type of thing, it’s an all of the above type of thing if a publisher wants to survive. And they’re not all going to survive. How many “AAA” movie studios are there? How many “AAA” publishers are there? The big movie studios have indie divisions. A more apt premise for your article would be to wonder how indie is going to be folded up into future business models that are more inclusive of games with a small market presence but have a big impact for other reasons (nostalgia, whatever – really those games are essentially reinventing the wheel for a new generation). That’s the future. But I guarantee you’re going to be at the front of the line shouting down the sell-outs who get absorbed into larger operations and are forced to make “Casual Nostalgic Platformer 2: The Revenge” just like how indie bands “make it” and get big record label deals. I bet you were really pissed when Mannheim Steamroller got their first record deal.

Takeaways:

Blockbuster movies are never going to go away and there’s always going to be a line out the door to see whatever “god awful” iteration comes down the pipe. There are winners and losers. Blockbusters often make a profit.

Blockbuster games are never going to go away and there’s always going to be a line out the door to play whatever “god awful” iteration comes down the pipe. There are winners and losers. Blockbusters often make a profit.

Indie movies are never going to go away and there’s always going to be a venue and the Cannes film festival to celebrate and reward that genre. They’re also never going to make as much as a blockbuster movie (or break even) but their success should give them the leverage to continue to make disruptive films or be assimilated into the Borg (big studio movie environment).

Indie games are a recent arrival, and I don’t think they’re ever going to go away either. There’s always going to be the IGF to celebrate and reward that genre. They’re also never going to make as much as a blockbuster movie (or break even) but their success should give them the leverage to continue to make disruptive games or be assimilated into the Borg (big game dev. studio environment).

One hit wonders that snowball into franchises are just as important as a company building a brand over time even if there are speed bumps along the way or a loss here and there.

Will publishers that typically make AAA games take indie devs/studios under their wings and fund disruptive titles? This is already happening. It’s called DLC. DLC is usually contracted out to “indie studios”, this has the effect of shaking things up and giving the franchise a chance to get fresh legs (within reason). This doesn’t work all the time. And people like you complain because it’s not handled in-house. The newsflash for you is that AAA publishers aren’t going to be interested in your ideas unless they have franchise hooks, that’s just how the sausage is made unless you have the skills to blow someone’s mind (and even then, there’s still no guarantee). That’s how the movie industry has operated for decades. Risks will be taken but they will be calculated risks based on practical experience, the less risk the better. Meatboy is never going to make as much money as a well-executed game with franchise hooks and all of the marketing and business support to put it in front of as many eyeballs as possible. A successful AAA game is equal to about a hundred or even a thousand successful Meatboys. Ed and friends should be commended for executing the fuck out of that game. They’re obviously extremely talented. There’s always going to be a market for cool, casual titles but what we’re seeing isn’t the death of AAA and the rise of digital, it’s really the rise in my opinion of more noise, more garbage. Look at Apple’s app store. Look at the awful mess Steam Greenlight was before they were forced to make people pay to play. This is the most convincing/devastating example where it’s almost impossible to find anything of quality unless it has a positive endorsement or the backing of a recognizable brand that people trust. It’s a lot like reading Gamasutra these days. Sure, you can take a chance and play dollar store roulette but most people won’t especially in a shitty economy. Because you’re going to get burned plus you’re out a double cheeseburger.

The next-gen consoles are going to have all the leverage to provide budget titles, companion style apps and a whole bevy of options and tie-ins to make the most of the digital ecosystem whether they’re based on franchises or not delivered completely digitally because they have quality barriers in place that work. They’re not going away from making AAA games either. Are the margins for profit getting “harder” for AAA? Yeah I guess. Really that should have been the title and main body of your article. But guess what, this will force the publishers to *gasp* be even more creative, not just more creative when it comes to monetization schemes. Look at Zynga. They’re proof that reinventing the wheel endlessly to make a crummy buck a few cents at a time fucking fails.

There are millions of people out there who bought a CoD title and loved the shit out of it. Rightfully so, it’s a well-polished experience. At that point talking about quality in the context of CoD almost ceases to even make sense. Just because it doesn’t fit your narrow definition of “quality” doesn’t mean it’s the death of the industry. The truth of the matter is that publishers and devs are hiring people and working on designs to shake up a genre spectacularly all the time because the potential payoff is staggering. But these machinations are happening in a very controlled environment subject to quality control and careful revision... slowly. Yeah indie is like the wild west I suppose but it’s just as hit or miss if not more so than a well-thought out new AAA title, and I’d wager even more risky because you’re pretty much guaranteed to be out of the job unless you have rich parents or a lot of money saved once your shitty indie game fails to impress anyone. Are there wild cost differences? Yep. But hopefully the publisher has diversified their offerings spread out the risk across a whole library to make up for the risks that didn’t pan out. Would adding half a dozen “Casual Nostalgic Platformer 2: The Revenge’s” to a publisher’s catalog help? I guess? I thought that’s what DLC essentially was – big pub’s less risky version of a full commitment to a franchise without having to reinvent the technology wheel. Big pub can’t risk making a bunch of nostalgic rip-offs without entertaining the possibility of expensive legal troubles, it’s a hassle that they probably rightly avoid altogether as they vie for relevance and dominance. But they’ll happily publish the shit out of your clever Lego reimagining and take their pound of flesh that way. And you’ll have no choice. Remember the boners that all went limp and angry in Indie Game: The Movie when there was the problem on the day one release of Meatboy and it subsequently not appearing on the 360 dashboard? Yeah. That was their big payout, or the start of the snowball. The gatekeepers aren’t going away anytime soon.

It’s called business. Businesses take risks all the time. Is making games risky? Yes. This website is about the art and business of making games, not the “anecdotal and completely uninformed opinion about making games”.

[User Banned]
profile image
This user violated Gamasutra’s Comment Guidelines and has been banned.

Josh Foreman
profile image
Ha. I was thinking most of these things as I read this article.

james sadler
profile image
For me it comes down to an issue with development. Its hard to pinpoint the exact time that it happened, but this idea of AAA isn't all that old. Somewhere along the lines the AAA studio business heads had this great idea that they should pop out a new incarnation of a popular game every single year. What happens then is that they bring more people on to create a game mill and eventually the public gets tired of it. That is one of the first things that needs to change. Stop putting sequels out every friggin year. It lowers the production value as well as reduces the audiences desire for the next one. Just look at the Call of Duty franchise. Next thing is reduce the staff set to work on a given game. The more people adding ingredients into a soup ruin it. It becomes formulaic and uncreative. There are too many layers of process and approval. I think more studios need to look at Valve as a business model. Yes they make a ton of money from steam, but they ship games when they're ready, not on a schedule. Quality over quantity. If AAA is to go down it will be for that reason.

I see more indie and mid tier companies going into the AAA spectrum. The tech is there for smaller teams to do the same level of stuff. It all comes down to willingness and skill.

Vishang Shah
profile image
I agree with Josh on lower price point. Indies drive more unit sales while keeping gamers' expectations fairly moderate. This is similar to 99cents app store model. Or microtransaction based F2P model. Barrier to entry is super low. Also to mention that similar to $60 retail's poor performance, subscription based MMO model has also seen some hiccups recently (e.g. SWTOR).

In terms of dev costs, cost of making a AAA sequel is usually higher than (or at least similar to) the previous installation. From content production point of view (design, art, animation, audio...), the team grows to make more & better stuff. And on tech side, base engine is ready but there are tons of new features to implement, optimize and make bug-free. On one side publishers are on board for a sequel but on other side the sales expectations are higher too.

This is where an entertainment product becomes an excel sheet having list of features put by design, executives, marketing... Dead space 1 had an eerrie feeling of being alone (hence vulnerable/alert) on the ship. And 3rd one has co-op. :-) But you got to have co-op by looking at competition.

I keep my $60 purchases to bare minimum since I don't want to spend it on "Yet another Shooter or Sport", and if I do, I am very brutal in terms of what I get out of it. At the same time, some of the most memorable experiences of recent times were Limbo, Bastion & Orcs Must Die.

I love Steam sales. What I love more than that is Humble Bundle. "Pay what you want model" has been great for indie games. Not only in terms of money & killing piracy but more importantly, growing a fan base around the developers who once satisfied will mostly likely buy their next game at launch.

Stock Watcher66
profile image
Wow, an entire article on AAA failing and no mention of the most important factor out of whack in the industry - WHAT ARE THEIR CUSTOMERS LOOKING FOR?

Let me be blunt. I have done a lot of research on this industry (specifically the MMO space) as a potential investor and I have never seen an industry so disconnected from their customers as this one. The rapid failings of AAA-titles after 4-6 years in development and the massive layoffs just after major title or expansion releases (this is NOT normal in business, this is only normal in the MMO space which is terrible at business overall), should be a wake up call to this industry. But alas, it is not.

For those in the business, I will pass a few hints here from my research in hopes I may see a pitch one day that actually starts with discussing the problems with the customers - rather than grandois schemes of how your design is better than the next guys.

1.) The F2P micro-transaction model is a temporary blip and the dumbest business model to start with. It's upsets customers, destroys long-term brand value (which most customers don't care about but an investor does since it has a direct impact on EV), has a market which is too small overall for a "churn and burn" approach. The traditional pay up front and pay $15/month is also dying. Here's a hint" there are more than these two business models available.

2.) Western and Eastern markets are NOT the same, nor should they be treated as such. You need to think global in game design and regional in business model.

3.) Come out of your offices and start reading forums and talking (or more importantly - listening) to potential customers. This is especially important in the MMO world with it's on-going customer commitment. Once a title is released, it is no longer your product and is instead your customers. Just once, I'd love to see a pitch about how a company is going to interact and listen to their customers and develop forward based on this feedback.

4.) Cool graphics and neat sound effects do not hide or gloss over bad game play. Hollywood has tried this many times and still cannot made a bad movie good with cool looking special effects. Stop being enamored with how cool you can make it look and instead focus on what matters.

5.) Focus on the game play and systems and figure out a way to engage a sample customer population in the development process (internal teams with obvious bias do NOT count in this regard) and actually listen to that feedback, even if you don't like it. At the end of the day, it is not about making a game you want to play, but a game that millions want to play. Most of you in the business DON'T align in your personal tastes with the general gaming population.

6.) Change the stale game play of the last decade and not with thinly disguised systems which present the same thing with a different face. In addition, figure a way to test this in the development process with an actual sampling of potential customers.

7.) The MMO space is not the same as the desktop or social spaces when it comes to games. Stop looking at those two as examples of what you should be doing.

8.) The most important point of all. Start treating your customers with the respect and care they deserve - they are the lifeblood of your business. Think creating fanatics, like Apple. Screwing your customers with current F2P MT models (too many titles to mention), RNG-based junk (GW2, SWTOR), ignoring their feedback (EA), giving them face time but no results (SWTOR) or thinking they are like horses being lead to the water trough (LOTRO) is stupid business in an industry built on long-term customer engagement. This industry is one of customer engagement and respect. Start there and you may actually stand a chance at building a business.

Anyway, I leave these to ponder.

Kirth Gersen
profile image
I have always wondered what is the real cost of an AAA game. Publishers/studios announce from tens of millions to hundreds millions of dollars. But how these millions are really spent ? did any journalist/blogger ever investigated this ?

how much goes to the people who make the "actual game" (the thing the players will really interact with), how much for all the 'shiny fat' around the game.

when I see all that marketing extravaganza around AAA titles, the crazy ads, the shiny cinematics that has nothing to do with the actual gameplay, the famous voice-over talents, expansive IP franchises, etc I something wonder why they do this.

I'm not sure this really help a good game to sell more or be a better game.
It may help a bad game to sell more, probably.
But it sure does allow them to justify a higher price and i'm a sure a lot of people and 3rd party businesses are securing their jobs and income by 'pushing' so these AAA games have all this 'fat' in them.

I may be wrong but I think all this 'fat' is slowly killing this industry.

[User Banned]
profile image
This user violated Gamasutra’s Comment Guidelines and has been banned.


none
 
Comment: