How to avoid the next game industry crash

Bill Harris thinks the videogame industry is heading for a crash. I’m not sure if I like Bill, but I do respect him. His general antisocial ways probably appeal to my misanthropic nature and so I try not to have too much positive personal bias, but I can rarely argue with his analysis. He makes some good points about a potential looming crash, though I don’t think he goes far enough.

I don’t like to rehash other people’s blog posts, so I don’t want to talk about why we’re heading for a crash, just that I do think we’re heading for one. Right now the four big players are playing a four-way game of chicken except the only way to win is to not veer off course, crash into your opponents as hard as you can, and hope you’re the one who can still walk away. While there is the possibility that one or more participants could survive such a contest, a far more likely scenario is that all four wind up on life support.

Then it occurred to me this week that while the crash is almost certainly inevitable, there is a way for at least one company to win.

Instead of playing this four way game of chicken, one company needs to reverse course and completely change their whole approach. Almost every strategy being proposed by EA, Activision, Ubisoft, and Take Two focuses on nickel and diming consumers if not outright treating them like garbage. If one company starts to focus on making consumers happy, they win. That’s not a minor proposition though because it flies in the face of everything the movers and shakers in the market are working in.

Quit spending money on day one DLC. Either it’s in the game or not. Drop your prices for 360 and PS3 games to $50. Stop development on every game we all know is not going to sell. Do we really need a Kane and Lynch 2? Quit worrying about the secondary market. I’m not saying embrace it, just quit drawing attention to it and quit making it look like your trying to screw consumers. In general, start looking at ways to make gamers feel good about spending money on your products. Also, let’s face it, the current release model is unsustainable and the current economy will only make it worse. I don’t have the answer to how, but these companies are supposed to be full of smart people. Figure out how to make the “long tail” work for you and quit this ridiculous death march of trying to sell a million copies in the first two weeks of release just to break even.

Also, I know I didn’t spend much time on the above points but I’m sure the price point thing is going to stick with some people. Look, $30, $50, or $60, the actual price doesn’t matter so long as a game recoups it’s development costs. Once a game gets past the cost of development it is essentially printing money. Valve has proved time and again that lowering the price of games increases sales exponentially. $60 is an off-putting price. There are many more games I’d be willing to buy on day one for $50 instead of $60. There are many games I do buy when they hit $10 off. The difference to consumers between $40 to $50 is not the same as $50 to $60. It is not “just $10 more” in the minds of consumers. I’ve worked in software development for over a decade now and I promise you that a piece of software is only worth as much as someone will pay for it. Trying to sell $20 games for $60 is part of the reason the videogame industry is struggling so much in today’s economy. Trying to market $20 games as though they are worth $60 is just throwing money down the toilet.

The overall strategy needs to be a shift towards doing something good for the consumer.

Take Two in the ditch

So everytime I worry that I’m being too harsh about this recession, how it impacts my hobby in particular, I find a new piece of information that only helps reinforce my apparent pessimism. Take Two has announced more losses. Their new strategy is essentially “We’re going to be just like Activision and EA”, which is disastrous.

I swear this isn’t a segue, but am I the only one who remembers the dotcom days? How about the days when everyone was going to beat Microsoft at their own game? How about the days when everyone had the new “Doom killer”, “Diablo killer”, or their product catalog had some kind of upcoming Real-Time Strategy title? Am I the only one who remembers how that played out for most of the people involved?

The big problems with the game market right now is a lack of diversification. As more people jump on the bandwagon they’ll quickly realize there isn’t enough room for everyone. That means someone has to fail. Since Call of Duty came on the scene, the Medal of Honor series hasn’t done so hot. Brothers in Arms made a brief foray, but they’re largely getting dominated by Call of Duty as well. In other words, their just isn’t a huge market for quality World War II shooters. Ironic considering Infinity Ward doesn’t even make World War II games anymore. Likewise, games keep trying to be like Halo and keep finding out, the hard way, that we already have a perfectly good Halo.

I imagine that this may be Take Two’s swan song. I can’t see their being enough demand for three mega-publishers all pushing AAA titles. The problem with the “AAA” concept is that it only works when a handful of these super expensive heavily marketed games are competing with each other and a large number of non-AAA titles. If every title is “AAA” then what that really means is that a lot of money is going to be pumped into failure. In a way that’s good news because it will only kill this failing business model faster. The game industry has always had big releases, we’ll always have “big” games. What we cannot have is nothing but AAA games. There will be no sleeper hits, no innovation, and no risk. Either consumers will flock to one franchise or everything will fail as people lose interest.

So now I’m wondering if 2010 is the year gaming loses the mainstream? Actually, that will probably be 2011. If game publishers fail to move their business forward they’ll lose the public. Some gamers might think this is a good thing, but I think we’ve benefitted by having mainstream status.