Friday, November 14, 2008

Economy: Well, at least we all agree

I was at a business dinner last night where the subject of the economy came up. Opinions ranged from "everything back to normal in 6 months" to "slump for 3-4 years".

At least the games publishers are in agreement. From back-to-back articles on Gamasutra:

Ubisoft: Next year will be great! Yay!

Take Two: It doesn't look promising! Boo!

Microsoft: There'll be some impact, but we're pretty comfortable! Meh!

Brash Entertainment unavailable for comment!

It should be noted that the comments above were mostly in response to questions about this holiday season's sales. On that front, I fall in the camp of 'modest impact'. 

PS3 as the pricier platform is going to feel some hurt. Nintendo's going to further rocket ahead due to their price-focused hail mary with the Wii. Good for them. Xbox should do well too, offering value beyond the PS3 for the hardcore gamer. Title sales should be fine for the A titles, but I wonder whether the falloff curve for B titles will be steeper.

I'm really pessimistic about long-term prospects though. I think pubs are going to tighten the reins on any projects they don't feel are absolutely on track and solid prospects for AAA hits, which means a lot of projects that would have stayed afloat previously now will get canned. That's going to mean a lot of studios having the rug pulled out from under them, and if they aren't sitting on a pile of cash (and many aren't), there's no access to credit to make payroll & keep projects alive while they line up a new publisher. I really hope I'm wrong.

I had a lunch discussion with someone yesterday about a studio we'd done some work with that went under when their publisher funding got cut. Someone commented that it was stupid to be running a high-burn rate operation with no cash in the bank.

I made the analogy that it was like playing poker in the following situation: You are short stack or perhaps close to it. You don't have the money to buy in, but someone is willing to back you. You manage to double up every couple hands, but to your frustration, the blinds are actually doubling every couple hands as well. You are constantly at risk of getting blinded out. Logic would dictate that you go to another table with smaller stakes, but you look around and realize the other tables are playing blackjack, baccarat, etc, and you only know how (or only want) to play poker. You keep having to turn to your backer and ask for a little bit of money to buy in. If he at some point says he wants his money back, you're done.

The 'other tables' here might be XBLA, iPhone or Facebook games, but if you are a 30-person studio building a big FPS or MMO, that's not exactly an easy switch of gears.


Greg said...

"Someone commented that it was stupid to be running a high-burn rate operation with no cash in the bank."

Let me guess -- the commenter was some asshole MBA wanker with no emotional attachment to games.

Welcome to life as an independent game developer. Under what circumstances does one ever get to put cash in the bank? The short answer is "never," because your publisher insists that every dime of development funding goes to assets on the disc instead of to bankable profit, and the chance of the game selling enough to recoup dev funding and actually earn you something beyond that is nil.

So I guess all independent developers should just pull up stakes and go do something else, right? Like building web development or financial services.

Except guess what? They love games.

"It's stupid to..." Hell, it's stupid to be in games in the first place. There are easier ways to make a living.

Patrick said...

On the other hand Greg (if we had videochat this would be like an MSNBC pundit showcase) I think companies need to structure their burn-rates lower. The actual costs of designing a game and finding the qualities is very low, one person prototyping can do it. The problem is the structural momentum of contracts that demand content development rather than game development in the true sense. Hell, I'm in just as vulnerable a position, but if we get rugged out I guess I'll go do... financial services games embedded on the web. Now that's a good idea!

(Seriously, I am thinking in this direction.)