richardhutnik said:
If the person I was responding to is correct, then there is NO segment of the videogame market that is profitable, because they named them all. If you look at it, the two biggest names in the videogame industry: Blizzard-Activision, and EA, are seeking buyers. You don't seek a buying unless you are gearing up for retirement or have concerns for your financial future. Zynga has peaked also. MMOs are becoming free to play, so shifting there, hoping they can get micropayments. And then if the 99 cent realm is not going to cut it, what is left, particularly in light of question the OnLive model? Having a few winners on top, with most everyone else losing money, is not a viable model for business. I didn't say the industry was going to crash like it did during the 1980s, but there are risks there of contraction and repositioning. You can't just say, "Based on revenues, the industry is stronger than ever" because it fails to account for profitability. If they industry has costs exceeding what it generates revenue-wise, to get the revenues, it is going to end up having to contract. And revenues could shrink also. The market may not decide to jump on next generation either, or in ways the industry would like either. |
The issue with profitability is that a lot of companies placed a lot of bets on what would, and wouldn't happen during the generation, and a lot of them failed, hard.
You've had a huge transition from AA to AAA+ publishing in the console realm, which left a lot of smaller developers hemoragging cash on their $20m+ blockbuster games. You've also had the same thing happen in most fields, sans maybe mobile gaming. (EA's The Old Republic is a great example of a huge failure of an MMO).
But you can't throw the baby out with the bathwater. There are tons of profitable companies in each industry. The problem is that the major studios aren't on the list, and the ones that are doing well are usually private companies unwilling to sell shares, like Valve and Bethesda. Furthermore, you have players in each field like Nexon (MMO), Rovio (Mobile) and Wargaming (F2P) which are getting larger, yet aren't really talked about because they aren't valuated like retail companies which can at least have their data validated by services like NPD.
DirtyP is somewhat wrong in his assessment about cost considerations, and I should have mentioned them. When it comes to profit, you always have to consider the cost of development. It may be cheaper to develop a F2P game incrementally and create a user base via microtransactions versus a AAA, $60 game that costs $50 million in development & marketing. That is why the indie scene is doing pretty well - there are other price points that work fine.
In the end, what we're seeing is the diversification of the industry, which is a sign of maturity. Most entertainment industries do this, and do well because of it. Ancillary income is a very important thing, and its something that video game publishers have failed to monetize since the arcades dried up. Because of downloadable/online gaming, you can see additional churn for veteran titles, which helps. You can also diversify your cost curve on games, helping to monetize everyone. Call of Duty is a good example of this. You have some people that get in only when the title is cheap at $30, others buy it @ day-1 for $60, and still others buy the game and purchase the download content at $15 a pack. Its a much different world, and it'll be beneficial for everyone, once the stupid players get shaken out.
My argument about revenues still stands, because gaming is more ubiquitous than ever. It will continue to get larger. Yes, some companies may die. Others will be sold. But it still remains one of the stronger, and growing, sections of entertainment.
Back from the dead, I'm afraid.
