The Game Crash of 2013?

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I'm by no means an expert but isn't gaming a lot bigger and a lot more diverse than it was in 1983? Today there's many different markets, different business models and different ways of playing games. If one game market has a crash, I don't see others following suit.

If the console market has a tough time and the new generation doesn't kick off, I don't see PC or mobile gaming going anywhere. League of Legends doesn't rely on consoles to have 30 million players. If the big publishers go bust that's not going to stop Mojang, Paradox or other small developers from making new games. I'd like to think that core gamers are smart enough to find what they like and the developers who make it for them.

The comparison that always baffles me is AAA development vs CD Projekt Red. How is it that Tomb Raider sells 3 million copies in a month and Square Enix considers it to be a failure when The Witcher 2 sells reasonably well, so much so that CD Projekt is able to fund the development of a brand new enigine, The Witcher 3, Cyberpunk 2077 and a whole second studio?

I think if we're ever going to see a crash it will be in the big budget, AAA blockbuster market. The EA's, Activisions and Ubisoft's of the world will spend hundreds of millions of dollars trying to make the biggest and best games that suck up as much money as possible. When their bubbles burst they'll be the ones who hurt a lot. Everyone else who can keep a reasonable budget, aim for the right audiences and realistic expectations.

WarpZone:
And if making a good product and being in touch with your audience is such a big deal, why hasn't some indie upstart swooped in and stolen EA's lunch by now?

Who says they haven't? People for some reason keep assuming that EA is the behemoth of the gaming industry, and that they swallow up cash like an oversized cookie monster. The books tell the story, EA is barely breaking even, and with sales of $3.8B per year and a market cap of $8B it is on both measures smaller than Activision Blizzard. If you compare EA to big technology companies like Microsoft, Google, Intel, IBM and Apple, it is not even 1/10 the size of these.

https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Logarithmic&chdeh=0&chfdeh=0&chdet=1375905600000&chddm=484058&chls=IntervalBasedLine&q=NASDAQ:EA&ntsp=0&ei=vYoCUsGlMqaUwQPfIA

Indies combined make way more money than EA do.

I disagree with Shamus on one key point:

I find this argument always seems to centre around the fact that the industry now is not the same industry of 1983. To be honest, I don't see how that's exactly relevant. Wall Street of 2008 was very different to Wall Street of 1929, yet the sucker crashed both times.

When we're talking about whether the videogame indsutry is going to crash or not, we shouldn't be trying to draw parallels with '83. We should simply focus on the economics of the industry, and try and extrapolate where those economics will lead.

It is pretty undeniable at this point that the industry is not in great shape right now. We saw a huge rise in development costs this generation, but we didn't see a huge rise in the numbers of people buying consoles. The gamer demographic is about as big now as it was during the PS2 era. Maybe a bit bigger, but not to the point that game sales have noticeably improved.

When games cost more to make than they did in the previous generation, yet aren't on average selling much more, then that means development costs are inherently going to eat into profits. This is what we have seen, with the major publishers all becoming increasingly wary of funding anything that isn't already a pre-established franchise or hit. More importantly, most of the major players have been posting rather worrying financials of late, with many repeatedly posting losses. When companies like Square Enix are in a financial mess, when Capcom doesn't even have the money for a Street Fighter V, and when Sony's Playstation department has been posting consistent losses since 2008, then it is time to start worrying about just how sustainable the current industry is. An industry cannot last on negative losses forever. Sooner or later, the money runs out, the debts pile up, and companies go bankrupt. If Square Enix cannot get their money back on FFXIV and XV, then they won't have a future. Simple as. If Capcom doesn't start making money soon, then they won't be able to make a Street Fighter V.

When the industry is no longer able to support itself, when publishers cannot afford to keep themselves going, then a crash is the only logical outcome. It's not going to be some big dramatic event. It's not like we're going to wake up one day, and there'll be flames and smoke and the gnashing of teeth. We'll just see publishers and developers wink out, one after the other, until they're all gone. We've already seen THQ go. Capcom and Square-Enix are on the brink, and Konami isn't looking too hot either.

Things are actually worse if you look at the casual game market. I think if we're going to see '83 repeat anywhere, it's with smartphone games. We're actually seeing a scary amount of the same trends in casual gaming- the majority of games being cheap cash-in efforts by companies only nominally related to gaming, with a focus on squeezing money out of consumers over providing genuine experiences, with the quality and polish of many games being utterly, utterly laughable. Sooner or later, I think consumers will get fed up of crappy smartphone games, and the market will collapse in on itself.

flarty:
Unfortunately a crash might be a good thing in the long run. It might make the ones left standing take a good hard look at themselves and see why they are standing. Everyone will say Look at activision and their cod and their billions.

Or, very possibly, it might kill off mainstream gaming entirely as the ones left standing decide it's no longer worth it.

There are three huge differences between the crash and now that are important right now: cost, reputation and quality control. Now, quality control is a double-edged sword: the closed system of console gaming has made a lot of it off-limits to smaller companies. This is changing, and maybe it'll work to the industry's favour, but not so much right now. One of the major factors in the crash was a flood of shitware.

"Cost" refers to the cost to manufacture and store physical stock. This was streamlined due to the advent of Optical discs (CD, DVD, BD), which already had facilities in place and reduced the need to come up with your own technology. One of the big things that caused the crash was a huge stock of games (most notably ET) that didn't sell. They ate that cost and they ate it hard. This is hard to replicate, even with "disappointing" titles. THQ's failure is likely the closest we'll come, and that's because they banked on proprietary hardware. Is it possible to overstock with discs? Yeah, but a lot harder and prints tend to be more realistic. With a shift towards digital, it'll be even harder. There's also the fact that people are more willing to stock titles because....

Reputation: The crash came at a bad time because gaming was starting to take its first steps out of "fad" territory. Gaming is no longer a fad. It's big business. A crash might convince publishers, however, that the boom is over. Remember, these are the guys who will cut and run on a franchise if one game doesn't go over like gangbusters. It doesn't even need to fail, just fail to pwn.

It could fall to the indies, or just fall. there's really no middleware market anymore, so that's rather risky. Especially for a market that's supposed to be recession proof.

Shamus Young:
So you don't need to worry about some horrible crash. You just need to worry that things might not get better.

I don't think "worried" is quite the word to describe the people who keep going on about an impending crash. "Wishful thinking" might be more like it. (Not unlike 90% of people who talk about the world ending, frankly.)

Fearzone:

RicoADF:

Fearzone:

I believe that is not exactly correct because the games had their data on cartriges, which were like ROM and could hold more memory than that. My Vic-20 had 4k too, but plug in a cartridge and you could play much better games than what would fit on 4k.

Your getting storage and memory mixed up. A cartridge is like a DVD/Hard drive, it stores data for later usage. Ram, aka memory, is where data is located while a process is in action. Eg: To display this reply the quote and my reply is stored in the ram so the display can display the text. If it was a word document it would be saved on the HDD after closing. He's saying that it would run out of memory and thus not display/be able to load the whole paragraph of the raw text. Yet had to cram graphics, sound and text into the 4k to be shown on screen/heard as being played.

Hate to get into a nerd war over this one, but there is a difference between ROM and storage. Cartridges are ROM memory which are directly accessible by machine code, i.e. information on cartridges do not need to be loaded into RAM memory but can be directly accessed. So you would have the 4k internal RAM in additional to game resources on cartridge ROM.

So cartridges are basically like flash storage in a modern phone? Interesting.... (I've never touched a cartridge other than as a kid, far too obsolete/old to learn about)

RicoADF:

So cartridges are basically like flash storage in a modern phone? Interesting.... (I've never touched a cartridge other than as a kid, far too obsolete/old to learn about)

Other than being removable, no. The ROM in ROM memory means "Read Only Memory." What's there is there, and is not rewriteable - no different than a program distributed on CD or DVD. What was also being discussed was some manufacturers also added RAM onto a cartridge, but that was RAM to be used for the system itself and nothing to do with writable removable storage.

MartyGoldberg:

RicoADF:

So cartridges are basically like flash storage in a modern phone? Interesting.... (I've never touched a cartridge other than as a kid, far too obsolete/old to learn about)

Other than being removable, no. The ROM in ROM memory means "Read Only Memory." What's there is there, and is not rewriteable - no different than a program distributed on CD or DVD. What was also being discussed was some manufacturers also added RAM onto a cartridge, but that was RAM to be used for the system itself and nothing to do with writable removable storage.

Thats what I first thought, sounds like the extra ability some had added has been mistaken as a standard feature. Interesting that they added that upgrade into the cartridges. I'm suprised there wasn't any ram upgrade module for PS3 or xbox as they were seriously lacking it.

RicoADF:

Thats what I first thought, sounds like the extra ability some had added has been mistaken as a standard feature. Interesting that they added that upgrade into the cartridges. I'm suprised there wasn't any ram upgrade module for PS3 or xbox as they were seriously lacking it.

Well on the 2600, the cartridge port is the expansion port. It's the only way to expand the hardware of that system. It doesn't have to be a game cartridge to expand the system's ability, just fit in to the cartridge port. For example, they were also at work (with a 3rd party that had been hired to design it) with something called the Graduate Computer expansion, that would plug in through the cartridge port and add more memory, a keyboard, and the ability to code in basic and save on tape. Spectravideo actually was able to release something similar though far more scaled down to the market:
http://oldcomputers.net/spectravideo-compumate.html

Next gen consoles from the 2600 like the Intellivision and then Colecovision dealt with hardware expansion of the system's capabilities by adding a separate expansion port (both the cartridge port and expansion port are really just connectors to plug into the system's bus anyways). The Atari 5200 also has an expansion port, but also uses the cartridge port for some peripherals as well - such as the 2600 adapter when it was finally released (and the adapter actually contains a full 2600, just using the 5200 for it's television output).

Separate expansion ports of course became standard on consoles for many years to come.

balfore:
I could be way off on this, but as far as I'm aware inflation is the decrease in value of currency, where as in 1983 $40 has the spending power of almost $100 today. How are they misusing it? I understand there are many more factors such as median income but it seems completely appropriate in the context.

Two issues here:

The first is that inflation is not necessarily what might be thought of as a constant across everything. Housing getting far more expensive when other things do not is inflation, but it leads to misleading comparisons, as you can still buy, say, the same number of loaves per bread per video game you could buy, but you can't buy the same number of loaves per bread per rent you pay. Inconsistent inflation across different markets thus is rather confusing. Honestly, an easy way of looking at this is video games - video games cost the same now as they did in the mid 1990s! Many games cost $50 in 1993, and many games STILL cost $50 in release in 2013, despite 20 years of inflation. That would suggest a 0% inflation rate for video games. Other things have also gotten cheaper - a decent computer, for instance, is far cheaper today than it was 10 years ago in absolute dollar terms. Thus, inflation is not actually a constant value across markets, and so just blindly applying a number is confusing, because it doesn't necessarily mean what it seems like it should mean.

The other problem lies in the fact that your disposable income affects how much money you can spend on entertainment. So if I used to have, say, $1000 a month in disposable income, and now I only have $800 a month in disposable income, the cost of anything I MAY spend money on has effectively inflated by 20%, because I can purchase 20% less of it, even if its price has remained constant. So if you look at the graph that mdev posted, someone who was making 54k in 2008 (adjusted) is making 50k in 2011 (adjusted). That person has lost 4k of annual income, effectively, which means his discretionary budget has shrunk by likely several thousand dollars.

So, basically, if I had $400/month of entertainment money in 1983, and $500/month of entertainment budget in 1993, assuming I'm buying a $40 video game in 1983 and a $50 video game in 1993, the difference in cost is 0, even though, ostensibly due to inflation, the $40 game "cost more" post inflation - because it takes up the same proportion of my discretionary budget, it effectively costs the same amount regardless of inflation.

I think we may see another video game crash. However, it would not be the video game crash of 1983 all over again. Still, it could be very, very bad. That being said, I think it may not be possible for it to happen in the same way; rather, I suspect we'll see a more gradual crash over a number of years as large companies flounder and the mobile games market has real problems. The predatory pricing of apps is a big problem, I think, for the mobile gaming industry, and I could easily see it ruining the industry down there on the bottom, which wouldn't be good for us on top.

Additionally, there is the AAA market which may be in danger to some extent. If they can't keep people buying games, what happens? That being said, I'm not sure such a crash is possible; if a few of the big guys died, I think the others would be able to survive it because they'd pick up the lost sales. AAA games DO require huge budgets, and thus large numbers of players.

I think games are too mainstream now to really fail in the way they did before. On the other hand, I could be wrong; honestly, I expect that the television industry is going to start having very major problems in the next few decades. Old people watch TV; I don't, and many people my age do not pay for television. What happens when the internet takes over television's role? At some point, high-budget programming is going to become increasingly untenable, unless it is supplemented by some sort of income from the internet, but internet needs and television needs are far from identical.

I wouldn't be surprised if the console industry crashed entirely, though. It has like, one more generation left in it at most, and maybe not even that. Computers are getting too inexpensive to compete with; the consoles worked on the idea that you had to pay a lot for a gaming PC, and it would still be obsolete in less time than the console. That simply isn't true anymore; a new computer in 2013 will probably last the entire lifespan of the next console generation, because it has higher specs than said consoles. The Wii U's sales are "encouraging" the competition, but I don't think that it is actually encouraging at all - some people have pointed out that if people aren't buying the Wii U in any real numbers, what makes people think that the other consoles are going to be any better off with higher price tags and less innovation?

Incidentally, regarding:

While the "indies" are making games like "Thomas Was Alone", "Braid", and "Bastion" that would hardly have stressed last generation's hardware, the AAA people seem convinced that what we really need is photo-realistic hair on our dogs.

The problem is, more or less, Braid and Thomas Was Alone are very art-house type games. They aren't actually good games. Bastion isn't actually that great of a GAME either; it is the story which sold it.

Also, regarding Kickstarter: Kickstarter is no savior. Kickstarter is actually one of those routes to failure. Kickstarter itself is going to have a bunch of high-profile failures in the near future, and people are going to get stingier with it.

Tl; dr; I think the industry may be heading for something bad happening to it, but it won't be as abrupt as the video game crash of the early 1980s, and it won't be the same. I could see the smart phone gaming market completely crater, though, and utterly wreck mobile gaming, and indeed that industry already seems well on the way for it. I could see the console industry cratering too.

But PC gaming? I think it is fairly safe due to the lack of need for proprietary hardware and the fact that you can set your budget to whatever is reasonable, while still having broad distribution. It might even benefit from the death of the console.

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