Painting into the Corner of the Conventional

Berglund Authority Level 3

by Chris Pruett <c_pruett@efn.org>



Games are a medium defined by interactivity, and they are designed to use interactivity to entertain.  Before we can discuss video games as art, or the role of games in modern society, or the potential impact of games on game players, it is important that the medium itself be well defined.  Though video games vary greatly in style and construction, they all share the same fundamental goal: to entertain the player through interactivity.

This simple concept has blossomed into a vast and profitable entertainment industry.  Beginning with the release of Pong in 1972, game developers have found that a marketable game can be an incredibly lucrative investment.  The difficulty for people wishing to invest in video games has always been predicting the next big hit; it turns out that making interactive software that people find genuinely entertaining is much more challenging than it seems.  

The difficulty of the medium is reflected in the high number of bad games on the market.  Sometimes these are games that simply failed to excite their target audience, but usually they are games that fail because there was not enough time or effort spent on ensuring entertainment quality.  One famous example is E.T. the Extra-Terrestrial [1] , a game released in 1982 for the Atari 2600 game system, coinciding with the release of Steven Spielberg’s movie of the same name.  In order for the tie-in to work, Atari needed to release the game at the same time that E.T. hit the theaters, which left only five weeks to develop the title from scratch [2] .  When the game hit the market, it was so bad that many copies were returned outright .  That quarter Atari lost $536 million, which lead to an industry-wide crash in 1983.  Though E.T. was not the only mega-flop of the period, it is widely considered to be the quintessential symbol of the gaming industry’s early failure.

Twenty-three years later, the industry continues to struggle with the same fundamental problem that destroyed Atari.  In an industry where product quality is difficult to guarantee, how are investors to ensure a profit?  Investors realize that producing a hit can result in very high returns, but there is no way to reliably predict which titles will turn out well and which will fail.

The never-ending forward march of technology, and the increased costs that come with developing on the cutting edge, has caused game development costs to balloon.  Hardware developers like Microsoft, Nintendo, and Sony have relied heavily on the perception that there is a correlation between hardware power and game quality.  As a result, a modern game for Sony’s Playstation 2 system can cost anywhere from $5 million to $20 million to develop, and can require large teams of people to work for years to complete.  If the game is a hit, its investors stand to make huge profits [3] , but if it flops they will lose everything.  Since predicting hits is so difficult, investors are taking a huge risk by bankrolling game development.  

Investors look at the video game market and see cost rising at an exponential rate.  And while the size of the market is also increasing, it is not growing at a rate sufficient to guarantee profit.  So, in order to reduce the risk that they will lose money on their investment, the check-writers of the game industry are removing the most volatile and unpredictable variable from the equation: creativity.

Reducing creativity in the game development world means simplifying the game design and relying on game mechanics that have already proven successful in other games.  It also often means association with a brand or license that is intended to draw a larger audience.  Investors are worried that new brands may not appeal to game consumers, and that new game mechanics may not prove enjoyable enough to turn their investment into a hit.  So they rely on historical data: they select brands and game formats that have proved popular in the past in hopes that they will continue to perform well in the market.  

The problem with this approach is that the actual game--the part where the player interacts with the software and is entertained--gets dropped from the equation.  If sales can be guaranteed by selecting the right combination of game mechanics and branding, what point is there to improving the quality in any other area?  Even if we know that the difference between a good game and a bad game is only a matter of several development months, why spend money on that extra time when sales are ensured by the brand the game is attached to?  This line of reasoning actively removes the creation of new methods of interaction, the part that is both the most risky and the most important, from the game development process.  This is, in a nutshell, what happened to E.T. in 1982.

Despite abysmal failures like E.T. , a lot of investors lean towards this approach because it seems to make their investment much less risky.  But as a result, the market is flooded with terrible games.  Sites that show game reviews in aggregate report hundreds of games released in 2005 alone that garnered lower than a 70% average score [4], the bare minimum for most enjoyable games.  This is a terrible situation for game consumers because it makes purchase selection difficult: after a gamer has purchased a bad game for $49.99, they will be much more careful about what they buy in the future.  In the end, the games that are heavily marketed, connected to a brand that is associated with quality game design (such as Nintendo’s Super Mario), or gain popularity by word of mouth sell the best.

The next generation video game systems are orders of magnitude more powerful than their predecessors, which means that development costs will continue to rise in the future.  Sony’s Playstation 3 and Microsoft’s Xbox 360 are locked in a battle to convince gamers that one system is more powerful than the other, and will therefore host superior games.  But the push for better technology has driven the price of these systems up dramatically from their predecessors: $599 and $399 respectively.  For game developers, creating games for these systems means spending more money and incurring even higher financial risk than before.  Unless the market stabilizes enough to quell investor fear, increased costs will mean a decrease in innovation and creativity on both systems.  Sony and Microsoft are betting that development risk will be mitigated by a large audience, but the high cost of both systems threatens to keep the number of customers down.  Both systems run the risk of being more expensive to develop for than the market can sustain [5].

At least one major player in the industry has recognized this trend and is trying to do something about it.  Nintendo, a company with over one hundred years of game creating experience, is taking a decidedly different approach for their next game system.  They have publicly decried the narrowness of the video game market, and believe that for the game market to expand, major changes must occur in the way games are played.  To that end, their next generation system, the Nintendo Wii, features a unique controller.  Rather than relying on buttons and joysticks, the Wii controller itself can detect spatial movements, allowing games based on sweeping arm moments, rotations of the wrist, or pointing at something on screen.  Nintendo’s aim is to get people who are intimidated or unacquainted with a normal video game controller to play games, and to that end the Wii system itself is expected to hit store shelves at a much lower price that the competition.  Analysts also expect that the Wii will be much less powerful than Sony and Microsoft’s new systems, but Nintendo is banking on the idea that most consumers do not care much about computational capability.

If Nintendo’s approach is successful, the industry may shift away from titles that require high budgets and incur high risk to smaller, less profitable titles that can be developed quickly and regularly.  Nintendo has already won a similar battle for handheld game machines, with its DS system outselling the more powerful Sony PSP thanks to a plethora of low-cost, high quality games and a unique input system.

Should Nintendo’s approach prove unprofitable, the game industry may be heading for another crash.  At some point, the technological arms race that Sony and Microsoft are locked in will cause prices to rise above the level that the market is willing to sustain, at which point investors for those platforms will have nowhere to go.  It is possible that consumers will continue to accept higher prices for bad games, but if the events of 1983 are any indication, it may take only one terrible flop to damage the entire industry.

Notes

[1] Wikipedia has much more information on E.T. the Extra-Terrestrial and its legacy: http://en.wikipedia.org/wiki/E.T._the_Extra-Terrestrial_(Atari_2600)

[2] Five weeks was amazingly short for video game development, even in 1982. At the time most games took between four and six months to produce.

[3] For example, Microsoft's "Halo" has generated over $170 million since it was released in 2001. See http://www.next-gen.biz/page1.html for more information about how games from the current generation have done in the market.

[4] Such as www.gamerankings.com , which shows 200 games below 70% released in 2005.  Note that there are some duplicates in this list for games released on multiple platforms.

[5] This is already happening in other parts of the industry. Sony's Playstation Portable, a handheld game system that retails for $249.99, is the most powerful handheld machine on the market.  However, the cost of the system has prevented many people from buying it, and consequently it is too expensive and risky for developers to make games that take full advantage of the hardware.  As a result, most of the games for the device are ports from other systems.