As the industry moves rapidly towards online-based business models like cloud gaming, digital distribution and social gaming, game designers and executives need to adapt or die.
That's the takeaway message from a GDC Online panel today featuring four game executives closely monitoring and pushing emerging online business models. Among other topics, the panelists debated whether some social games are "evil" and predicted a mixed fate for brick-and-mortar retail.
Although emerging online models are growing and evolving rapidly, physical retail will still remain relevant for years to come, according to game industry David Perry, CEO of cloud-based gaming service Gaikai.
"Everybody really needs to start to embrace that retailers can help them find customers, to do everything in their power to work with the stores," Perry said. "There are moments in time where [the stores] have a lot of leverage."
But the industry won't stay that way for long. While Perry said , packaged goods remain "super-important" in the near-term, he also thinks that "long-term, they're gonna be toast," he said.
Sean Ryan, EVP and general manager of News Corp. Digital, which plans to release its first game soon, agrees that while physical retail will remain a force for another five years, it will eventually undergo a rapid decline.
Physical retail will "still be important for big-budget games," Ryan said, but growth for indie and social games will continue to accelerate online.
Even with the advantages that online distribution grants game makers, there are still issues that need to be worked out, particularly with full-game downloads and digital storefronts, Ryan said.
"You spend $20 million to make a game and all you get is a little static image [on a digital storefront] to sell the game," Perry observed. On top of that, he said, the major storefronts -- Xbox Live Arcade, PlayStation Network and the Wii Shop Channel -- are owned by console makers, who release their own games that compete with third-party games.
"It's like if GameStop made games," said Perry, who added that the big breakthrough will be when someone finds out new and better ways for players to share and discover games.
The burgeoning social game market has its own set of challenges, such as increasing virality, monetizing users and engaging players who just happen to come across a game during a Facebook session.
But one of the touchier debates in the space is whether social games like FarmVille are more about fun and deep design or simply focused on extracting revenues from players through psychological manipulation and exploitation.
"I think as an industry we have a financial obligation to be more profitable, but ethically we should make games that treat people like human beings [and not] cattle" being herded through a marketing system, said Susan Wu, CEO of City of Eternals creator Ohai.
She not so subtly implied that social game leader and FarmVille creator Zynga used techniques akin to a crack cocaine dealer.
News Corp.'s Ryan interjected, "All this babble about cattle. You're not obligated to play the damn game." Ryan said he strongly disagreed with the "weird backlash about how these games are inherently evil ... Either people really like farming, which I doubt ... or the game mechanics really work."
"I feel like we're at the French Socialist meeting. I thought we were in Texas," he said.
Ryan went on to assert that the most successful game companies will be the ones that can meld virality with great game design, and that social games will get deeper as social game makers like Zynga hire on more traditional game designers. "You have to understand that deeply," he said. "This market is evolving at a ferocious rate, and gameplay expectations are going up."
With recent policy changes to Facebook, many developers are concerned about the ability to market their games. "Everybody is saying viral is dead on Facebook," said Wu. "I think that's bullshit." She said that good gameplay will drive virality. "Minecraft is a great example."
Perry called Zynga extremely efficient "human psychology manipulators" â€"- and that's not an insult, he later told Gamasutra, explaining that knowing what's going on inside players' heads is important for any game designer.
Brandon Beck, CEO of Riot Games, developer of the hit online "freemium" PC game League of Legends, said that, with free-to-play games, the quality needs to be of a particularly high standard if game makers expect players to buy extra items. "If players feel like they're getting value, they will pay for stuff," he said.
As for how to pay for that stuff, the executives agreed that business models like the $60 packaged game or fixed monthly subscription fees limit developers' chances of making money.
"You've got to let people spend as much as they want," said Perry.
Ryan went further, saying, "Subscription is dead as a model," while also admitting that it's certainly working for Blizzard's World of Warcraft.
With all of these new businesses coming up, more traditional game makers should not write off these trends, Perry said. He likened game designers to rock stars â€"- they need to evolve to stay relevant. "If you can't accept that social gaming is here, I think you'll be done. ... Are you evolving, or aren't you?"