VC games investment plummets

The amount of money invested in the video games sector by venture capitalists in North America was down 29 per cent in 2010 according to a new data from PricewaterhouseCoopers.

Boston.com reports that in 2008 money from venture capitalists funded the development of 35 games in North America, representing a total investment of $214m. The number of financed projects last year fell to 25, with expenditure dropping to $154m.

“There’s been a transition in the VC market to a more conservative view, with the economic meltdown in the last 18 months,’’ former president of online games developer Turbine and Quick Hit founder Jeffrey Anderson stated.

“It’s harder to find people who understand the business that you’re in. Therefore it makes it more difficult getting VCs to invest.”

Alex Finkelstein, a general partner at the Boston investment firm Spark Capital, added: “We don’t want to invest in hits-driven businesses.”

Sounds like what I was talking about in my editorial. Can't have your entire industry rely on being the next big thing because too many failures in between. Have to create products that establish themselves for long term success.

It surprises me that it took them so long to come to that conclusion.

ouch, and people thought it was bad just because developers were losing money. This is even worse as it prevents smaller devs from being able to fund a bigger title so they can have a break out game (like High Voltage was trying to do with The Conduit).

The one cool piece of information is that the average game cost a little over $6m. Obviously we don't know if these are SD or HD games, or if they are downloadable or retail. Obviously they are most likely a mix of everthing.

Probably because they don't think in the long term either.  Still built up on the Wii/DS hype of 2007 and 2008, and the expanding industry for all sectors in 2008 (all systems here) and just forgot to notice that they were starting to practice habits that are unhealthy.  Well that definitely showed in 2009 as layoffs and closures filled the year along with games that were either big hits or massive failures.  Analysts are guilty of the same thing here.  But in this day and age in general, people always seem to miss the big picture and that's not good. 

You would think with the education and experience they have they should have noticed sooner and not this late, on the other hand it´s easy to coment after the fact like i just did. Probably alot harder to see theese things coming when you are in the middle of it.

Well I don't have much remorse for them when it is their job to be able to notice these things early.  No one is perfect, but this one was easy to notice, even in the middle of it in 2009.  But they are human, but these analysts are the same people talking about "recession proof industry" back in 2008.  Saw how well that turned out. 

I suspect most of theese analysts have been in Sony´s or MS´s pocket and thats why they make theese stupid predictions, it doesnt make sense that grown men with and education and long experience in this buisness make so bad analysis when common gamers like you and me have seen this coming a year or two back.

pretty heavy blow to the model the HD twins have been based on, and this will put quite a pinch on smaller devs that need the capital just to complete a project.
Well if this trend continue this will pretty bad for medium and small devs.

Well maybe that but I think what a lot of it was, is they kinda discredited what Nintendo was doing.  They weren't seeing that the games Nintendo was getting to sell over long periods of time (namely Mario kart Wii, Mario kart Ds, Wii Play, Wii Fit, New Super Mario Bros. DS, etc) were because of Nintendo and not the market.  I mean that is the success of what Nintendo had been able to accomplish and most certainly not the case.  It was a little deceptive in 2007 and 2008 as the company was pushing huge expansion in the markets which benefitted games and hardware all around, and they probably just thought it was the market.  Well 2009 was a huge slap in the face when, Nintendo hadn't released one of htose long term games since May of 2008 (next would be October 2009) and saw the market start to falter (mainly on the Nintendo side especiall of software) but in the general market as well.

The problem was is Nintendo had been the sole reason a lot of those titles were able to do those long term sales and 3rd parties were trying to replicate it.  But they though it was about getting the "next big thing" or something similar to Call of Duty, which also what Activision hadn't done either.  And in doing that, it worked throughout 2008, but started to seep in 2009.  Same effect on Wii and DS, where they'd also try being the next big thing but trying to do it by releasing quantity rather than quality which completely backfired in the year.  These analysts, and a lot of us (including me), screwed up in not giving Nintendo credit, not seeing that companies weren't going for long term investments, and for under estimating the capabilities of the customer to choose products more "responsibly" than before. 

And maybe we are asking a lot of analysts to do a lot in figure that out, but if Nintendo and Activision and some other select developers were able to see it, then surely these analyts should have seen it.