Soon, the game industry will implode upon itself. There are a whole bunch of signs occurring now that point towards this very event (note: these do not apply to Nintendo, more on that later):
1.) Development studios are closing left and right. While the small fish have always been bought out by the bigger fish, these times are completely different in that all the fish in the pond are in danger of collapse, big or small. I don't need to provide any proof on this. It seems that every week, another studio is closing down.
2.) Publishers are losing money. Even with gigantic releases like Grand Theft Auto 4, 2k still lost money on the quarter. Electronic Arts is the most massive conglomerate of games, and they reported 31 games selling at least a million for the year, and they still lost a whopping 1 billion dollars. Hardly anyone is making any money nowadays.
3.) Console makers are losing money. Sony and Microsoft's game divisions are still in the red (though the 360 did pull of a very small profit last quarter), and the justification for keeping these divisions is wearing thin. If the 3rd party publishers continue to lose money and go out of business, Sony and Microsoft would have no choice but to pull out of gaming, since most of their games are made by third parties.
4.) Most new IPs aren't selling well enough. While it can be argued that games like Littlebigplanet sold pretty well, the cost to advertise new IPs nowadays may well be far more than what sales they make, and most of the time they don't meet that cost.
5.) Established franchises are on the decline. Grand Theft Auto, Devil May Cry, Metal Gear Solid, and most of the other big name 3rd party franchises seem to be losing steam compared to their previous iterations.
Now the reasons for these things are quite simple. They are:
1.) Competition is unbelievably fierce. For the first time in this generation, we have three consoles that actually have decent comparative market share, and that is forcing each company to spend more on advertising. Game publishers too are receiving a lot of pressure to make bigger and bigger games, which results in:
2.) Game development costs are now ridiculously high. Nowadays, to hire a decent team to make a AAA title requires a whole lot of funding, a whole lot of advertising, and a whole lot of luck. Most of the time, the cost of making a game is higher than can ever be recovered.
1.) + 2.) Because of these two things, developers refuse to think outside the box, and when they do, the people don't respond. A lot of games are in danger of losing fans because of the lack of innovation brought from successive iterations of each game. Resident Evil 5, for example, received a lot of heat for its last generation controls, and may possibly lose sales when they start selling Resident Evil 6. Unfortunately, when developers do try something new, the public doesn't respond well enough to justify the risk. Littlebigplanet was hyped to hell, and sales were supposed to spike to Wii-like levels, but it failed to deliver on that promise.
It's a vicious cycle.
This is a problem that has risen due to costs and competition, and may well bring about the crash I'm talking about. Eventually, people will tire of the same old games, with each iteration of Call of Duty, for example, losing steam with every sequel until it dries up completely. Unfortunately, the developers won't be willing to refresh the mechanics because people don't seem to respond to change.
About Nintendo:
A lot of people will argue that Nintendo is actually preventing this crash from happening. I argue that even if Nintendo continues to do well, it will not prevent a gaming crash.
We all know that Ninty only controls less than 50% of the games market, which primarily consists of casual gamers. The other 50 something % of the market isn't really in tune with Mario, Zelda, and the rest of Ninty's game style.
In other words, sure, Nintendo will stay in the market and probably will gobble up every gamer in the planet when Sony and Microsoft decide to cut up their game divisions. But that will be a market that would be substantially smaller than today's market, as the other 50% that bought a 360 or a PS3 probably aren't fans of Mario.
To make things clearer, if today's market consisted of 10 people and Ninty controlled 5, tomorrow's market could consist of just those 5. If you think about it that way, a 50% crash is possible even if Ninty is still doing incredible business.
In conclusion:
When are Sony and Microsoft going to leave the gaming division? It depends on when third party games plummet to a level of overwhelming crap. If:
DEV COSTS KEEP GOING UP + COMPETITION KEEPS UP =
MORE STUDIOS CLOSE =
PUBLISHERS LOSE MORE MONEY =
LESS GOOD GAMES ARE MADE =
LESS SALES =
CRASH (Sony and Microsoft leave the business altogether).
thoughts?
