Go big or go home: Will higher development costs for the new generation of console hardware lead to the demise of mid-tier games?

Grand Theft Auto V has become the fastest selling entertainment product in history selling 11 million copies on launch day alone. The title also raked in over $1 billion after only three days, surpassing even the biggest Hollywood blockbuster movies.

GTA V

This success story comes at a price, £170 million to be exact, making it the most expensive piece of interactive entertainment ever created and on par with the largest movie budgets. While it was certainly worth the investment by Take-Two Interactive, the scale of the budget is a pipedream for the majority of studios. Not only is the budget astronomical but so is the risk, a risk few publishers want to make in the current economy.

There is no better way to look at the fear within the industry than looking at the UK’s current video game chart which is dominated by established franchises. New intellectual properties are few and far between and less come from studios that do not have budgets nearing the £100 million mark.

At the BAFTA Games Question Time in June 2012 Peter Molyneux claimed:  “seventy per cent of earnings are made through triple-A holiday sales. Metacritic shows people what to invest in.”

With many of these triple-A games coming out during the holiday season middle-tier games simply cannot compete with them so they miss out on this lucrative holiday period. For the discerning consumer the Metacritic rating (an average review score taken from multiple credible critics) for a video game title will be the determining factor when buying a game for £40, not an insignificant sum of money. For the average consumer these middle-tier games are not even on their radar whilst we have Call of Duty: Ghosts, Assassin’s Creed IV, and Grand Theft Auto V hitting consumers around the head with their marketing campaigns.

Ukie Week 48 2013 UK Video Games Charts - The Association for UK Interactive Entertainment 2014-01-22 12-32-37

During his panel at the Game Developer’s Conference in 2011, industry veteran Cliff Bleszinski, formerly of Epic Games, said that: “Middle class games that fall between triple-A and indie stools don’t stand a chance in the current climate.”

Samuel Mottershaw, industry insider and founder of UK developer networking event GameDevNorth, agreed with that assessment: “I would say the kind of games that Cliff Bleszinski was talking about are definitely dying hard and fast but I’d say that indies on their second game or so are going to replace that market, the Mike Bithells, Tom Francises, Sophie Holdens and the Mitu Khandakers of the scene will be making games of a higher budget than most indies but way lower than triple-A. PSN, Xbox Live, and Steam are going to be the place for them.”

Steam

The new generation of consoles does provide the rare opportunity for new intellectual properties as the video game library at launch is fairly limited which means launch titles are all bought by early hardware adopters. Despite this opportunity these original titles largely come from the established studios backed by large publishers.

That’s not to say larger publishers haven’t been trying to push the envelope. In 2012 Square Enix released its new IP Sleeping Dogs but despite selling almost two million copies it was deemed a failure as were other titles they released such as Hitman: Absolution and Tomb Raider, both selling more than three million copies each. To make these triple-A titles publishers are spending a huge amount of money which in turn places an unrealistic expectation on the product.

logohiresPete Bottomley, Co-Founder of independent studio White Paper Games says this is what leads to the closure of studios: “Those larger studios are owned by publishers who, on the most part, care about the monetary side of things and how many units the game is going to ship. If they don’t meet expectations or sales forecasts the game is seen as a failure, even if it did try to do something different and interesting for a niche market. Independent developers are exactly that, independent. We don’t need to worry about people telling us how to make our game. As long as we manage our finances properly then I’m not worried.”

While cutting out the publisher gives development studios more creative freedom it severely limits them to creating low budget titles. There is, however, another avenue that developers can take.

Crowd funding sites like Kickstarter and Indiegogo have shot up in popularity within the past couple of years. The idea of these sites is that anyone can donate money to a project they want to back which allows developers to bypass publishers or alternatively use it as evidence of interest in the product to pitch to a publisher.

Double Fine Adventure by Double Fine and 2 Player Productions — Kickstarter 2014-01-22 11-47-18These popular crowd funding sites have seen indie hits like Faster Than Light come to life and has seen Double Fine Adventure receive funding of more than $300 million. The funding of Double Fine Adventure is an anomaly though and its success can be attributed to the existing reputation of the developer Tim Schafer, not just the product pitch. This does however show that there is an opportunity for budgets nearing triple-A development costs.

Mottershaw believes that while it is a possible avenue for studios to get funding it is far from being a sure thing: “I think the gold rush is over, but there’s still a lot of potential in the model. I imagine at this point a lot of people are waiting to see how the big ones [game projects that have reached their target goal] do, I’m definitely a believer.”

He added: “I think it’s a realistic venture, but it’s a very difficult one, the pitch has to grab people on so many levels and then you have to convince them to give you money for something that might not even get finished, not an easy task especially for non-established developers with crazy ideas.” It is all evidence that the industry is evolving and adapting. What we traditionally viewed as mid-tier games are in rapid decline, however with digital downloads becoming more commonplace for consumers and the independent game development scene booming it is less that they are going away and more like they are in a state of transition.

Managing Director of Zyloware, Ryan Barker believes that it is up to mid-tier developers to adapt: “In the same vein as HMV and Blockbuster, we’ve seen a lot of companies go under as a result of ageing business models or a heavy reliance on dated franchises which is dangerous in a time where the economy is squeezing consumer spending.”

Blockbuster close

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