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Next Gen Development: Beware the long tail
by Oliver Teckert on 05/30/13 01:22:00 am   Expert Blogs   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.


The games industry will undergo a transformation during the development of the next generation of AAA games. The early phases of the development cycle will closely mirror what is currently done today with almost identical concept, prototyping, and vertical slice phases of development. Since these phases are at the beginning of the project and last for many months, it will give the impression that the development cycle for large AAA games has not changed significantly.  Logically, this implies that development costs will be similar to the current generation of games.  However, that is only half the story. Getting a project off the ground is very difficult and getting it to market as a quality product is another huge problem entirely. This is where the increasing costs of development will balloon in the next generation of games; not at the start of the development cycle, but in the widening and fattening tail of the development cycle.  This is where features and assets need to come together to flush out an immersive gaming experience.

Controlling the message

Depending on who you listen to, next generation development cost will either be relatively flat with a small bump in costs or double the cost of current titles. EA CFO Blake Jorgensen believes that development costs will be largely flat, with an estimate of a ten percent rise in costs over this generation.  This statement, at face value, strikes me as shockingly optimistic, especially when you consider that Epic Game’s CTO Tim Sweeney has spoken about the exponential increase in development costs.  These increased development costs are estimated based on Epic Game’s own investigation of what it takes to produce a next gen demo using an industry leading tool. Activision as well has said that costs will rise, as they have in every previous generation transition, but give no additional specific details. Crytek founder Cevat Yeril has been vocal about getting ready for the next generation of games and said their last title, Crysis 3, was triple the cost of the original Crysis, costing an astonishing $66 million. Perhaps even more surprising than Blake Jordensen’s comments are those of Take-Two Interactive CEO Strauss Zelnick.  He stunningly believes that development budgets will remain flat, and also thinks that top quality titles will not see a meaningful change in development costs as Take-Two, and presumably other publishers, will become more cost conscious.

Early indication

When a publisher says that next generation costs will be flat, I tend to hear “Don’t spook the shareholders; they are a nervous bunch”. Given that next gen titles will rise to $70 there are numerous reasons why a publisher would not want to reveal an increase in the cost of development. If development costs are largely flat, why would publishers raise the price of a next gen title by almost 17%? Clearly more revenue is desirable from a sales perspective, yet in the highly competitive gaming market such an increase could easily price you out of the sales range of many gamer’s dollars.  Rising development costs is likely the primary reason explaining raising prices. Also, if rising development costs were not the cause, and next gen development costs are indeed flat, why would publishers feel they have to raise prices? 

Unlike publishers’ claims to the contrary, when a developer says that next gen costs will double, I tend to believe them. Why? There is certainly motivation for developers, especially those with engines and toolsets to market, to proclaim that their tools keep development costs down. It is in the best interests of the Epics and Cryteks of the world to produce tools that are powerful, intuitive, and as production ready as possible in order to keep costs down and appeal to developers. To market their products they need to make games that showcase their potential to the community. Without exception, the best way to do this is to put out a great game using ones tools. If the toolset does not live up to the developer’s hype, internal costs will rise and quality will suffer during development. This does not make for a convincing case to adopt ones tools, especially when contracts are often signed for a series of games on multiple platforms.  This development cycle will last years and involves an ongoing relationship between the tools provider and developer. Clearly some pains have already been felt by both Epic and Crytek as they push the limits of development to prepare for the next generation of AAA games. As a result, they make a very strong case for an increase in the cost of development for next generation games. What is not mentioned are which areas of development will drive these cost increases?

Army of artists

While the technology and tools for the next generation of games have already been developed, it is the assets for next gen games that will drive the bulk of the cost increase. More memory per console means more assets will be required to fill that memory. Next gen consoles are coming with a tremendous increase in memory over current consoles. This means that every environment and scene in a game will be required to be more densely populated with assets to take advantage of the additional memory and computing power provided by new hardware. Not only will there be more assets per scene, but the quality per asset will be higher. This means that to produce individual assets an additional percentage of time will be required over the current generation assets. When this is scaled out over tens of thousands of assets, the increased amount of time required for asset development quickly balloons, as do the associated costs. The art team will have to grow to deal with these assets, adding numbers to an already large group at most studios. 

A possible mitigation strategy is to increase the use of outsourcing for asset development.  Developers may try to take advantage of a small army of external artists to help speed up asset development. However, this strategy comes with its own risks.  Most notably are quality concerns and the turnaround time required for feedback and changes. What looks like a great way to keep costs down and get a quick turnaround on assets can quickly turn into a nightmare for developers. When quality falls below expectations, iteration and feedback become next to impossible and timelines are consistently missed. Also, let’s not forget that even with a quality outsourcing partner, assets will take longer to make regardless of where they are made or who makes them. This means developers will be faced with an increasing number of assets to produce, a longer timeline to produce each of those assets, and a greater difficulty iterating on the game as a whole. All of these factors will mean that the bulk of the team has to stay on longer during the development cycle reworking assets, and trying to piece together a game experience while dealing with huge amounts of assets and delayed deliveries. At some point as well, development is going to need to engage in large scale quality assurance to deal with bugs and prepare for platform certification and gold master. Of course, all of the issues encountered during the production phase of the project will now spill over into the alpha/beta phases of the project.

Quality suffers

Once the alpha/beta phases of a project begin bugs will begin to flood in. With an increase in assets comes an increase in asset related bugs. Tracking, coordinating, and ensuring that assets are fixed will require tremendous amounts of time from existing art staff. This means that internal artists will be unable to move to other projects and that the current project must absorb the costs of retaining art staff longer just to fix bugs. Asset development won’t be the only area where bug numbers increase. With the rise of social and multiplayer focus, bug numbers will jump up considerably in terms of adding additional devices and extra features. Larger feature sets consisting of never-before-implemented social media integration will require extensive testing, which will involve a large team of testers due to the nature of multiplayer testing. And of course, let’s not forget the costs associated with making changes later in the development cycle. With bug fixes come the inevitable changes to game mechanics and features that aren’t quite working as intended. Even worse is potentially reworking a feature or system that does not live up to expectations at all. 

Bracing for Pain 

The functionality, features, and considerable increase in assets in the next generation of games will require considerable expanded testing efforts.  This will put an increasingly heavy load on QA and push out the alpha/beta phases of the development cycle considerably. Given the vast amount of investment in fewer titles, there will be mounting pressure to hold back a game until its quality is up to a certain standard required for release. This means not just a longer tail when compared to the current development cycle, but also a fatter tail as more members from the development team are held back to deal with last minute changes and bugs. Though some think the development costs for next gen might look flat now, they should wait until AAA titles start getting closer to the end of their development cycle. Beware the long tail. 

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Benjamin Quintero
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The chicken and egg problem is going to break this industry =(. Salaries continue to rise with inflation, teams grow, expectations escalate, forcing game prices to get closer and closer to that $100 mark. This of course will exponentially reduce the target audience to only the people who can afford to gamble that kind of money on a single experience.

At $70 per game, you are now competing with $70 per month mobile phone service where you can download an endless supply of free games, or even a $60 per month with 10 unique $0.99 games. They won't have massive explosions and leg cutting but for many cash-strapped gamers out there 10 games is better than 1. We may see those core gamers who purchase 20 games a year cut back to 12 games..

(20 * $60) > (12 * $70)

Just saying...

Benjamin Quintero
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ehhhhh.... I don't know about that. I pay $10/month for a lot of "free" movies on Netflix right now and as a result I go to the theater maybe 3 times a year now, maybe. It might be nice to see Avengers or Dark Knight on the big screen but that what does that say about the other 50 movies that came out in that year?

The Youtube analogy isn't really the same unless you are talking about ad driven free content. But still, you might see the $0.99 market as the sort of Netflix idea of low price for lots of content, or the GameFly model (or PSN) of paying a flat rate for lots of free perks. Still cheaper than $70.

Curtiss Murphy
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"I pay $10/month for a lot of "free" movies on Netflix right now and as a result I go to the theater maybe 3 times a year now, maybe."

Once a year for my family now. I rarely pay $60 for a game. If $70 is the target for next gen... I may just have to wait.

Christian Nutt
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Movies on Netflix are the same movies; it's not a good analogy. After all, the video rental/streaming/etc revenue is baked into the budget of a movie. It's not like you're watching, oh, a bunch of tiny short cartoons on Netflix and big movies in the theater, or something, and THAT is cutting into it.

I keep wondering who all the people are who are supposedly giving up big elaborate video games in favor of mobile phone games. I do believe that mobile phone games CUT INTO some people's big console game time, but completely supersede? They probably were already bored and dissatisfied with console games, or too busy.

Daniel Lau
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"I keep wondering who all the people are who are supposedly giving up big elaborate video games in favor of mobile phone games."

I think something you're all missing here is the need to expand the gaming audience and not just preserve the core player. There is nothing you can say to me that would dissuade me from believing that the costs of a new console with $70 games is not going to chase away some fraction of core gamers. And as a parent, I'm in the position to judge what the next generation of gamers is going to look like, and mobile games are by far the preferred platform. If there is a non-mobile game that children are flocking to, its Minecraft, and Minecraft looks just fine on a Raspberry PI.

Benjamin Quintero
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Christian, I'm not implying that mobile is going to steal everyone away. There is a market for big core console games. But as the target price point rises for these games we are shaving off the people who are unwilling to spend that kind of money; that's my point. This is why the press is constantly asking, "when is console X going to reach that magic $100 price?" because they understand that the market has a number in their head and it has nothing to do with what is old or new or has big explosions. Every time the game price goes up $5 we lose somebody to a cheaper market; not always mobile, it could be PC.

I'm not saying that mobile will reign supreme, but we may see a shift where cheap games and services are not the best on the market but good enough to keep them happy. Yes Netflix has lots of big content (not a direct correlation to the small media or $0.99 games) but my point is about the bottom dollar, not the direct relation.

I am spending $10 for hundreds of dollars in entertainment. If that model did not exist, I don't think my spending habits would change much. Back when Netflix was $12 and split their company and raised prices to $20, I cut physical DVDs from my plan and they lost $2/month from me as a result. So then the question is not about "what's the best I can get" but "what's the best I can afford." And for many people, mobile games is that solution; a solution that may increase as phones and tablets get more powerful and have TV integration and affordable games that are good enough.

If there was a phone today that you can dock onto your TV with PS Vita or PS3 visuals, and play with a Bluetooth controller on your couch, it would present a real concern for the next generation. Especially since that phone would be subsidized down to $100 and have games that were maybe $5-$10 each. It doesn't exist in easy fashion today, but in 1-3 years it might. That is scary if you are Microsoft or Sony.

Oliver Teckert
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From the developer side: Do you really want to continue making AAA games knowing that the risks are so high and failure means layoffs and further job uncertainty? There is a certain point where job security becomes more important to a developer than working on a huge title they love.

With more senior developers getting older, settling down with families, and becoming entrenched in the community is inevitable. The risks of working on AAA games, failing and having to relocate your entire family quickly is a very scary reality.

One of the worst trends that could develop in the next generation is that the most skilled individuals leave, simply because the industry does not provide a sustainable and secure future for them and their families.

Nate Anonymous
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@Christian I think Netflix is a great analogy. Personally, I have not paid $60, ever, for a video game this generation. I bet if we compared a list of 2011-2005 games that we have played, we would pretty much have played the same games. It's just that I happened to pay around $5 a title but have to usually wait around 6 months to a year. The Netflix of gaming is Redbox, Gamefly, Humble, Steam & others major sales, etc. Just like Netflix and Redbox the content is the same but either restricted by release date or the amount of time allotted to access.

A $70 price coupled with a new console buy-in and elimination of the used gaming market will just shift more gamers away from pre-order to cheaper options, similar to how blu rays turned DVD buyers into Redbox renters and Netflix subscribers. Costs have to come down, somehow, or games will need to be broken up into an episodic format similar to Half Life 2 or Walking Dead in order to broaden the customer base. Or publishers and studios will have to go out of business to allow for consolidation, which means less jobs for everyone. The amount of revenue going to the "core" games, counting for inflation, probably peaked a few years ago.

Mike Griffin
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Conversely, the power offered by advanced consoles can sometimes assist the indie dev.

I recall an interview with Jon Blow re: The Witness where he talks about being able to program in a slightly looser way because the console offers him so much overhead in computing power; he can afford to not be as ultra-optimized as possible. He recounts the same experience doing Braid on 360, where he didn't necessarily have to be as efficient as humanly possible to achieve smooth performance.

I'd love to see a lot of smaller, affordable, but still beautiful indie titles on PS4, for example.

Or (gasp) the rise of episodic AAA titles fetching a more approachable $14.99 to $19.99, where the studio can bet on a staggered, longer term revenue model -- instead of enormous up front investment and *cross your fingers, let's hope this beast sells a ton of copies in a week or we're screwed*.

Oliver Teckert
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The inevitable effect of rising production costs as well as a rising price point for consumers is that more and more large studios and publishers will either consolidate, go under, or completely change their target market to mobile/social. There are already a number of large publishers that have not found their footing in the current generation of consoles and are struggling to post profits, even with established IPs behind them. Simply put the business model of the the AAA game is becoming endangered due to the staggering risk associated with funding development. Finding more manageable business models and adjusting scope accordingly to offer more themed or niche products is a must. This is really where Indies thrive, in terms of innovation and creativity.

Why aren't more publishers engaging smaller developers or Indies for their games? Less risk with potentially huge rewards.

Benjamin Quintero
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In short, you can go broken supporting a bunch of wildcards. The sure bet is in decoding the formula, much like Hollywood has done for film. There is no exact formula but there are a fixed set of archetypes and story arcs that are used in pop films, just like mechanics and tropes in video games. It doesn't always succeed, but it's enough to almost always break even when it fails. $$$

TC Weidner
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I agree that 69.99 price ceiling is likely not gonna budge, as it has been there for 20 years.

To be honest I see the possible redo of 2008 financial crisis (only worse) and credit crunch as being AAA biggest potential obstacle these next few years. When the central banks turn off the "printing presses" and unwind their multi trillion dollar positions, all bets are off. Leverage companies with large overhead, not much cash are going to be in for a world of hurt. 50-100 million dollar bets on a game my become far and few between.

Clay Hayes
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AAA is doing a battle of the titans studios. An arms race in production values. The big studios are heading to a very highlander future to me, "There can be only one." AAA companies will fail as others succeed. As prices go up gamers will buy less titles, and if your title is number two on the gamers list it wont sell. Everyone has rising production cost, but far to few companies has rising sales.