The Rising Expense of Creating High-Definition Games
- By Geoffrey Calver
As profits fall and production costs increase, how will high-definition games such as Metal Gear Solid 4 continue to be worth the investment for publishers?
The rising of cost of game development is sending shockwaves through the industry, it was revealed today by the Star Telegram that the production of Ghostbusters cost developer Terminal Reality between $15 and $20 million dollars to make. This figure sounds exorbitant, but it reflects the realistic and rising cost of creating titles that are interactive, immersive, beautiful, and long on gameplay.
This article comes on the heels of an interview in which Ubisoft CEO Yves Guillemot was quoted as saying that developing an AAA title for the Xbox 360 or Playstation 3 platform costs between $20 and $30 million to make. He also said that it would cost up to $60 million to make one in the future, and these numbers raise the question of how game developers are going to be able to continue creating gorgeous, highly interactive and innovative games and how they will increase their sales as well to keep up with costs. The article, on CNBC, said regarding rising production costs, “The Ramifications for that are unknown. It could mean higher retail prices or lower return on investment.”
And that sort of observation is what’s troubling the industry. It’s becoming obvious that as the cost of making games increases, the pressure to move huge numbers of units becomes even more intense. Like big-budget films that can cost up to several hundred million dollars to make, there is a huge risk involved in producing such expensive gaming titles if they aren’t guaranteed to sell. The developers, producers, and staff all strive to create a stunning title, but they also need to ensure that the product will move off the shelves. And the only safe way to guarantee that a product moves is to make a sequel or stick to the basics and avoid doing anything too innovative and different.
Worry rippled through the industry in 2007 when Bioshock was released. Stunning reviews came from reviewers in all corners (Bioshock for the 360 has a 96% Metacritic ranking) but several noted that perhaps the world of Bioshock would be too unique to attract a large audience. In Gamesradar’s review of Bioshock they said, “Really, though, the only glaring weakness we can find in BioShock is that it may be too unusual, too original, too artistic and too genius to be embraced by the general public. Please don’t let this game become that forgotten, one-of-a-kind masterpiece.”
This sentiment is worrisome. If an original title that is beautiful, hugely ambitious, and an amazing gaming experience is considered a “risky investment”, then gaming as we know it will change.
Bioshock required a prolonged development and a big budget, but it became a blockbuster hit
How will it change? For starters, if a game such as Bioshock had flopped, it would have marked a moment for serious consideration around the industry. Executives at publishing companies may have become more hesitant to risk high-budget, unique games when movie tie-ins such as the Spiderman games sell huge quantities without requiring nearly as large a budget or development time as titles such as the Half Life series, Killzone, or Bioshock.
While these franchises have ultimately been incredibly successful, the rising cost of video game creation causes worry because as expenses increase, profits fall, making these games less feasible in the future.
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“Development is typically a third to a fourth as much for a Wii game…”
An unstable economy pared with a rising interest in games that appeal to large audiences across all genres and age groups, such as the titles on the Wii, may cause developers to abandon AAA games in favor of cheaper, safer investments.
This trend has already been evident in Hollywood. As noted in a recent article in the New York Times technology section, “The problem is a marked shift in the economics surrounding the PlayStation and Xbox consoles. Makers cannot charge enough or sell enough games to cover the cost of producing most titles. As with the Hollywood movie studios, video game makers have to hope for a blockbuster.”
As the cost of producing films has risen, Hollywood has chosen to take the safe road. Rather than investing huge budgets on Oscar-destined films with amazing scripts, unique cinematography, and stunning acting, Hollywood tends to invest in franchises, trends, and low-budget comedies such as the “Scary Movie” films. Oscar-destined films often have significantly lower budgets than summer blockbusters because they just don’t turn the same types of profits because they appeal to a niche audience.
Expensive to make, and gorgeous-looking games like Call of Duty: Modern Warfare face an uphill climb against rising production costs and falling profits
For now, the gaming industry continues to invest good amounts of money into AAA titles. However, in the future, it may become standard to invest far less of a publisher’s total expenditures into several AAA titles and instead distribute that budget over a larger selection of games that cost less to produce and take less time to get to consumers.
A recent article on Joystiq.com only further highlighted the changing dynamics of the gaming industry. “EA’s John Riccitiello has made a strong argument for why EA is looking to increase its Wii development. It boils down to the fact that developing for the Wii is a lot cheaper than for other current-gen consoles. Riccitello said during EA’s Q3 2009 earnings call that ‘development is typically a third to a fourth as much for a Wii game than it is for a PS3 or an Xbox 360 game.’ When put like that, it’s a wonder anyone develops high-definition games at all,”
This trend is worrisome because it suggests that the days of story-driven, cinematic, highly interactive games featuring advanced graphics and unique ideas may be going down the tube.
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The Wii and Its Effect Upon The Industry
Which brings us to the Nintendo Wii.
The Wii has made enormous contributions to the gaming industry. It brought motion controlled gaming to households around the world and more importantly, it managed to make gaming an accessible activity for people of all ages and of both sexes. No longer was gaming confined to a largely young male audience, now, the Wii features advertisements showing grandparents playing with grandchildren and having a blast together.
But therein lies the problem with the Wii. The Wii was created without a focus on high-definition gaming because, according to the New York Times, “…Nintendo recognized the economics were changing when it developed the Wii. He [Mr. Fils-Aime] said the company deliberately did not add high-definition capability to the Wii so games would be cheaper to make.” In other words, Nintendo recognized that game production costs were increasing and hedged their bets on the hope that the low-cost, quickly-produced games their platform has become known for would move more copies and turn greater profits.
The Nintendo Wii is much cheaper to develop for, and as a result game development for the Wii is far greater than that for the 360 and the PS3
But, that mentality has led to a dearth of poorly-produced, hastily put together games that have turned off the traditional gamer from the Nintendo platform. A quick glance at the many titles for the Wii highlight a lack of story-driven, cinematic games. While there are certainly some, from Super Paper Mario to Red Steel and Madworld, the majority of Wii games are titles that can be enjoyed at parties – such as Wii Sports, where people who are hanging out can play bowling or tennis .
While Resident Evil 4 did come to the Wii, it was a rare story-driven game for the console
So, in gaming there is now a divide. Traditional gamers opted for the Xbox 360 or the PS3. And they enjoy their experiences on the consoles because they have a wide variety of critically-acclaimed, story-driven, cinematic gaming experiences such as Uncharted: Drake’s Fortune and Fallout 3. Whereas the Wii is attracting people of ages and of both sexes, expanding demographics, creating a much larger install base, and, through lower production costs, being a much more profitable alternative for publishers as opposed to the Microsoft and Sony systems.
Chart: The Ten Best-Selling Games of This Generation (Wii, Xbox 360, PS3)
Wii Sports: 45.95 million (Wii)
Wii play: 23.76 million (Wii)
Wii fit: 20.92 million (Wii)
Mario Kart Wii: 16.61 million (Wii)
GTA IV: 12.82 million (Xbox 360, PS3)
Modern Warfare: 12.02 million (Xbox 360, PS3)
Halo 3: 9.92 million (Xbox 360)
Super Smash Bros. Brawl: 8.52 million (Wii)
Super Mario Galaxy: 8.03 million (Wii)
Mario & Sonic at the Olympic Games: 7.01 million (Wii)
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Where Does High-Definition Gaming Go From Here?
This trend of increasing cost causes a worry that games geared towards the “traditional” gamer set will become a dying beast. As development becomes more expensive, more units will have to move in order to turn a profit. And, as any MBA will tell you, profit motivates above all else. Inevitably, all developers will be asked by publishers: “Is it worthwhile to spend $40 million making this game? Is it risky to make this title because it pushes creative boundaries and takes place in a different setting than gamers are accustomed to?”
As profits slide, more gaming companies are going to look to cheaper gaming platforms and more expansive gaming audiences to turn a profit. Like Hollywood, the focus will be on moneymakers rather than on Oscar winners. Money talks, baby.
This worrisome trend needs to be addressed. And that is why developers and publishers are asking themselves now, “Is it reasonable to make this game? Is it worth the time and money?” They are re-evaluating their game development, which is especially obvious when considering the words of EA’s John Riccitiello, “Nintendo is the leader; they’re getting half our emphasis in terms of title counts,”
One only needs to wonder how long it will be before the Wii receives ¾ of the emphasis (spending).
In the end, high-definition, story-driven gaming will probably survive. But it will have to adapt, and soon, profitability from these high-budget AAA titles will depend on innovation in the industry. Publishers will cut out the middle man and deliver titles via online distribution such as Steam and Xbox Live, where they can sell a full product for much less because they do not have to sell it to retailers, package it, or produce discs. Publishers will also soon deliver games via the internet in order to eliminate reselling.
GTA IV cost roughly $100 million to produce and sold well, but how will gaming publishers and developers deal with rising costs and lowering profits?
According to a blog on the New York Times, “…there is another source of tension between retailers and game publishers: the growing popularity of resold games. Particularly at Gamestop, the specialty game retailer, there has been a boom in the business of selling second-hand games. It is a business that’s great for consumers and retailers but not for the publishers, who don’t profit when their game is recirculated rather than purchased new again and again.”
Online distribution will eliminate the reselling of titles, allowing publishers to pocket profits from every single copy of a game that is distributed.
And there is technology being developed to do so: OnLive hopes to one day stream video games to our televisions and computers, allowing users to purchase or rent games and play them without a console and only via a cable connection.
The future of high-definition, big-budget games lies in changing the rules of distribution to make production more profitable and thus, feasible. So that way, in the future, a $60 million dollar game will not be a major risk for a publishing studio.
http://terminalgamer.com/?p=423
A few things, I think it is an interesting read, but I don't see why he attempts to paint all Wii games with the brush of a "casual mini game fest like cooking mama" There seems to be an heir of indignity and arrogance that this is a bad direction for gaming to go. The only bad direction I see gaming going in is one which puts it in the same sentence as the dinosaur and dodo.
What do you guys think?
Bet between Slimbeast and Arius Dion about Wii sales 2009:
If the Wii sells less than 20 million in 2009 (as defined by VGC sales between week ending 3d Jan 2009 to week ending 4th Jan 2010) Slimebeast wins and get to control Arius Dion's sig for 1 month.
If the Wii sells more than 20 million in 2009 (as defined above) Arius Dion wins and gets to control Slimebeast's sig for 1 month.
