The Video Game Industry is Dying!!!

[stof]

mrstickball said:

stof said:

WiiStation360 said:

 

This graph excludes:

1) The subscription to all MMOS and Xbox Live fees.  (WoW alone is well over $1B anually in subscription fees)
2) All WiiWare, Steam, XBLA, PSN, games
3) all DLC or paid content for games (Activision will probably get $100m+  for MW2 DLC alone in 2010)
4. Non tradition gaming revenue from sources like the Apple App store and web games (Facebook etc)

So every revenue source that is growing is not included in these numbers.  And a lot of this growth comes at the expense of retail sales.

You've mistaken what the graph is saying. He's not saying sales are shrinking, he's saying that 2008 and 2009 have been the two highest years of all time for revenue. And that's even without what you mention. He's talking about why so many devs are shutting down and laying people off in what is clearly a golden age of game sales. I mean look at those numbers! Revenue is almost twice what it was 4 years ago! How on earth does an industry double it's revenue AND shed thousands of jobs at the exact same time!?

The reason devs are shutting down is because their business models don't work. They are producing games that, although consumers are buying in droves, are costing too much money to develop. Because of that, there was/is a glut of workers in the industry, which caused more and more to be layed off.

Here's the way to look at it:

Development costs among blockbuster titles has gone up considerably in the past few years. We all know that. What are development costs? Artists, coders, programmers, Q&A testers, ect. The intrinsic cost of video games are the people that make them. Outside of human costs, there is very little else that goes into making a game...Which is unlike many other industries. Humans are the machine tools, the cars, the machines that build games (I use that terminology comparatively to other industries where humans aren't the soul producers of goods).

So if development costs go up considerably, it means that it takes a lot more people to make any given video game. The market could not, and cannot handle that. When companies finally realized that they couldn't sustain as many workers as they have, they've had to scale back on production budgets, which means a smaller workforce.

So the shrinking of developers - layoffs and studio closings - is tied to how much money the development studios are willing to put forth for gaming titles.

It is part of the business cycle. Having said that, things can and will change. Developers will scale back. New types of games like mobile and browser-based casual titles will lead to new studios hiring some of the old workforce. The workforce will go to better-managed companies that produce games that bring in revenue without costing an arm and a leg to develop. Life will go on.

That's what I was saying. Costs went through the roof and a lot of companies couldn't handle it, so they shut down or laid people off. And many companies have stated that they're still going for this model, which is why the industry isn't ouf of the woods yet.