Activision Boss Predicts Rising Game Development Costs

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Activision Boss Predicts Rising Game Development Costs

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Activision CEO Bobby Kotick says every new console generation has resulted in higher development costs and this one will be no exception.

We may not know exactly what the next generation of game consoles has in store but we do know that it's coming soon, and however it works out the big dog at Activision says the cost to make games for it is almost certainly going to go up.

"This is my twenty-second year doing this, and every single console transition we've seen an increase in development costs," Kotick said in a post-earnings call to investors. "Over long periods of time it gets smoothed out, but I would say this is not a transition where that's going to be an exception."

"We're going to have to figure out how to take advantage of the unique abilities of new hardware and that requires new skills and investment in tools and technology and engines and so yes, that's likely," he added.

Kotick's comments have a bit of an ominous ring to them, in that they could be an early hint of higher game prices in the next console generation. Activision recently reported revenues of over $4.8 billion in 2012 so it's not as though it can't afford to eat some rising expenditures, but it didn't get to where it is today by being a charity.

On the other hand, Take-Two Interactive CEO Strauss Zelnick expects development costs will stay more or less flat into the next generation. "We don't have any reason to believe our dvelopment budgets will change significantly," he said. "If anything we have become - group-wide - much tighter in terms of how we spend our money. We can't say specifically, but no, we don't expect to see a meaningful change in what it costs us to release these top quality products."

Source: Develop

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Why does Kotick remind me of a demonic version of Chancellor Gowron?
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That's hilarious. I was going to say he looks like a cross between Palpatine and Skeletor.

Will we still have to push buttons as well Mr. Kotick?

Soviet Heavy:
Why does Kotick remind me of a demonic version of Chancellor Gowron?

It's the forehead

I'm pretty sure that I've read in numerous places that the relative cost of game development is cheaper now than it was in the early days and the increased costs are based in the massive amounts of money these guys spend on marketing. Making a new engine is pricey, but once an engine is established and widely used, like Unreal regrettably is, the costs drop off significantly.

It seems like development costs going up would be pretty self-evident.

DVS BSTrD:
Will we still have to push buttons as well Mr. Kotick?

Soviet Heavy:
Why does Kotick remind me of a demonic version of Chancellor Gowron?

It's the forehead

You know it's bad that the Klingon is for once NOT the demonic version of something.

Maybe he and other executives could take a pay cut so that the people actually making the games can get paid to cover the extra costs? HAHAHAHA!

Well here's a thought:

You could always just not spend millions on marketing, or on trying to get the best graphics ever, or on having celebrities voice characters in your games.

In other news: ice is cold, the sun is hot, water is wet, and space is really, really big.

Amazing work there, Creskin.

No shit... thank you captain obvious, might has well announced a new COD this year while your at it, never mind they already did. =p

Soviet Heavy:
Why does Kotick remind me of a demonic version of Chancellor Gowron?
*img snip*

Because he is.

OT: Yeah go ahead and jack up the prices publishers; my fat ass could use an extra incentive to exercise instead of play video games.

Soviet Heavy:

DVS BSTrD:
Will we still have to push buttons as well Mr. Kotick?

Soviet Heavy:
Why does Kotick remind me of a demonic version of Chancellor Gowron?

It's the forehead

You know it's bad that the Klingon is for once NOT the demonic version of something.

image

That's Racist!


He really more like emperor Palpatine: Keeps releasing the same product but it's more insubstantial each time!

They could cut marketing spending significantly by simply using YouTube and social networking sites instead of spending millions on live action trailers, CGI trailers, TV commercials and giant posters around cities. Also, stop using Hollywood actors in video games. It's a big immersion breaker and how many people really choose to buy a game because someone famous is providing a voice for one of the characters?

There is some truth to this. New architectures need to be learned, resulting in slower development cycles (fewer game releases, more man hours, less income) and additional costly training. Of course, if they weren't so focused on making AAA games, they might be able to push out some smaller-scale games to bridge the gap while they're learning the new system... Actually, I take that last part back. These big companies only know AAA and shovelware, nothing in between. It's only the smaller devs that can be arsed to make medium-scale games.

P.S. Thanks

This is what I've been saying, and it's also worried me. Games are expensive as hell to make now. Now sure how many are going to cope with games costing more to make. I really hope costs don't go up, but since with each generation costs have risen... yeah I'm not too hopeful on that.

If they do go up, and these publishers don't figure out how to cope, I can guarantee more will be joining THQ.

cidbahamut:
It seems like development costs going up would be pretty self-evident.

To be fair, he said this while talking to investors (who may not understand the industry all that well). He wasn't really trying to present this as some kind of great revelation, just saying "here's how things work, and they're probably not gonna change".

If development costs were to increase for everyone, we'd see more publishers and developers go out of business, it's risky enough as it is. And the last of the independent developers would fall, I can't imagine someone like Obsidian could survive the market getting even tighter. We'd have Valve and CD Projekt because they're actually publishers basically, and maybe Epic could survive with their game engine, but no-one else.

Unless...

Covarr:
There is some truth to this. New architectures need to be learned, resulting in slower development cycles (fewer game releases, more man hours, less income) and additional costly training. Of course, if they weren't so focused on making AAA games, they might be able to push out some smaller-scale games to bridge the gap while they're learning the new system... Actually, I take that last part back. These big companies only know AAA and shovelware, nothing in between. It's only the smaller devs that can be arsed to make medium-scale games.

P.S. Thanks

This might be the thing to finally change that. If you look at the games everyone was talking about this year, The Walking Dead, Journey, FTL, Katawa Shoujo, XCom, (To The Moon, Super Hexagon, Thomas Was Alone), I reckon small scale games have attracted more attention than the big budget ones as far as gaming media goes. Maybe 5 big AAA games on everyones tongues, ACIII, ME3, Far Cry 3, Dishonoured, CoD (whatever one it was) but most the awards and best of lists have been taken up by small to medium budget games. And we#ve got the kickstarter business on top of that, with a lot of the big games coming out this year and next

If prices rise, maybe all but the very best games will be forced to stop competing for the top and we'll begin to see the niche games finally expanding at last

That was an astounding and insightful piece of analysis.

Gotta hand it to Kotick. Just when you start wondering why he's earning the big bucks, he goes about proving just that.

On the other hand, with better hardware, you won't have to spend so much resources optimizing your game, so cost goes down there.

UltimatheChosen:

cidbahamut:
It seems like development costs going up would be pretty self-evident.

To be fair, he said this while talking to investors (who may not understand the industry all that well). He wasn't really trying to present this as some kind of great revelation, just saying "here's how things work, and they're probably not gonna change".

I get that. I'm just sort of sitting here scratching my head trying to figure out why this is noteworthy enough to warrant an article.

But arent the bigger improvements of most game engines now the fact that they are a lot easier and faster to use meaning that it costs less while achieving better results?

Covarr:
There is some truth to this. New architectures need to be learned, resulting in slower development cycles (fewer game releases, more man hours, less income) and additional costly training. Of course, if they weren't so focused on making AAA games, they might be able to push out some smaller-scale games to bridge the gap while they're learning the new system... Actually, I take that last part back. These big companies only know AAA and shovelware, nothing in between. It's only the smaller devs that can be arsed to make medium-scale games.

P.S. Thanks

I highlights the issue of how obsolete the giant publisher are now. I get that we need some cash if we are going to get our GTA's and our Elder Scrolls, but this constant fruitless effort to hit this imaginary market of 5 million in order to pay for a budget that go bloated out of proportion that in turn was made to try and hit this imaginary market. It is like a circle of budget bloats.

Yves Guillmont of Ubisoft sai they would rise to $50-60 million USD for next-gen, meaning that either a) price points will have to go up to $65-$70 USD, or b) the triple-A industry will go bankrupt.

At the 2005 Game Developers Conference, Factor 5 (makers of Rogue Squadron) Predicted that PS3 dev costs would rise from $3-6 million USD for gamecube, then $15-17 million for their title, LAIR. Instead, LAIR cost them about $25 million, and dev costs for triple-A games are now averaging $30-50 million.

Of course dev costs will rise, not because of technology, but because people like Guillmont and Kotick are idiots. The issue is whether or not they are grossly underestimating how much costs will rise.

No no no no no. You are doing it fucking wrong. You have the technology, you have the potential labor force, so make games for fucking less. Rising costs are going to screw you over, as if you needed the help. Lower costs means cheaper games, which in turn means more and happier customers. It will mean less risk for you, it will reduce piracy, hell it'll probably cure cancer, just lower your goddamn development costs.

BrotherRool:
If you look at the games everyone was talking about this year, The Walking Dead, Journey, FTL, Katawa Shoujo, XCom, (To The Moon, Super Hexagon, Thomas Was Alone), I reckon small scale games have attracted more attention than the big budget ones as far as gaming media goes.

BrotherRool:

If prices rise, maybe all but the very best games will be forced to stop competing for the top and we'll begin to see the niche games finally expanding at last

I wouldn't necessarily call the smaler-scale games niche, as the word typically suggests a more limited appeal rather than limited scale or budget. Games like Train Simulator 2013 and Cabela's Big Game Hunter, which aren't necessarily bad games, but by design target a much more specific and less general audience than, for example, Battlefield 3. Journey and The Walking Dead were certainly quite different from other games on the market, but I think they still had a good deal of mainstream appeal.

The other way around definitely is true, though; niche pretty much need to be smaller in scale and budget. Developers know going in that some of these games will likely never pass ten thousand sales, let alone millions (New Super Mario Bros. U says hi, Mr. Kotick! That game had no trouble succeeding!), and they budget and scale their games accordingly. This leads to an unfortunate situation of niche games frequently looking like shovelware, because a similarly small amount of resources put into them, even though they're often developed by people far more passionate than whoever Ubisoft puts behind Imagine gamez.

P.S. Thanks

So basically... "We gon' spend moh money on your gamez so we haz to sell them for moar" Yeahh... nop, fuck you ugly guy.

Better hardware means that games can have better graphics, higher polygon counts, richer textures, better sound, etc.

But those don't spring out of thin air. To create more detailed models, you need modelers spending more time creating and animating them. In the original Legend of Zelda, Link was 15x16 pixels big. In AAA games these days, the main character will be comprised of 30,000+ polygons. They are animated doing increasingly complicated things, which takes a lot of animators, and you've got huge numbers of high resolution textures to be created by visual artists.

Then you've got all the audio. Mass Effect 3 had 40,000 lines of spoken dialog and hours of orchestral music. The scoring, recording, editing, re-recording, all takes a lot of time, people-power, and money. And that's not even touching all the programming that goes into the graphics & physics engine, AI, game mechanics, play testing, multiplayer development and balancing. The list goes on and on.

If the next generation of consoles comes out and the games look just like the old generation, people will be up in arms and say "why the hell did I buy this new console if everything looks & feels the same?" To make things better takes more effort. There's no magic "make game more awesome" chip that goes into the next gen of hardware.

So a company spends millions and millions of dollars to develop a game, they need to make sure they make it back. So they do a big marketing campaign with billboards, posters, TV commercials, etc. If spending N dollars on marketing & advertising didn't earn them more than N dollars in revenue, they wouldn't do it. Think of your favorite game that didn't do well commercially, and is a "hidden gem." Chances are it's a hidden gem 'cause somebody botched the marketing.

Big companies like Activision will continue to make big games that cost a fortune, and hopefully earn them a fortune. Just like the big movie houses create blockbuster movies like the Transformers movies, which were critically panned but have made over $2.6 billion worldwide. Or like John Carter, which Disney apparently lost about $100 million on. Win big, or lose big.

jon_sf:
Better hardware means that games can have better graphics, higher polygon counts, richer textures, better sound, etc.

But those don't spring out of thin air. To create more detailed models, you need modelers spending more time creating and animating them. In the original Legend of Zelda, Link was 15x16 pixels big. In AAA games these days, the main character will be comprised of 30,000+ polygons. They are animated doing increasingly complicated things, which takes a lot of animators, and you've got huge numbers of high resolution textures to be created by visual artists.

Hi-poly models and hi-res textures don't necessarily take more money to make. In fact, one of the biggest timewasters in the industry today is in optimizing the work of overzealous artists to use FEWER polies and LOWER-res textures. Not to mention, as often as not, they need better models and textures anyway for pre-rendered cutscenes. Voice acting and orchestral music? That was an increase in costs when we started using them, but it's a continued cost for studios that already do that. The potential cost of sound design has largely hit a ceiling with the PS3 (since its biggest requirement is storage space).

I think the biggest technical cause for higher development costs is probably going to be in threading for these monster processors with so many cores. The vast majority of PC software uses a maximum of two cores, even if it would benefit from more, simply because it's so time consuming (and therefore expensive) to write adequate sync code for threading to work correctly and actually give a performance boost. But with modern architectures valuing more cores over faster cores, this problem is only going to become more prevalent.

That's not to say art or sound are going to get any cheaper. I'm sure as devs manage to squeak more performance out of the next generation of consoles, they will need to make more detailed assets. But since those already tend to be made in higher quality masters than are actually used in the game, I sincerely doubt it's going to make much of a difference.

P.S. Thanks

josemlopes:
But arent the bigger improvements of most game engines now the fact that they are a lot easier and faster to use meaning that it costs less while achieving better results?

That is true, but there is a bigger factor. Better hardware allows more detail which costs more money to produce. The 360/PS3 both have 512MB RAM, and I think the next generation will have 2GB RAM. That's four times the amount of polygons, four times bigger textures, and in general four times the amount of work required for producing art assets. Competition favours prettier games, so AAA developers who don't increase their art budgets will be overshadowed by those who do.

Of course there is a limit to how much gamers will pay and some evidence that publishers are quite close to that limit. Orwellian DRM and absurd DLC practices seem like desperate attempts to squeeze money out of gamers who aren't really willing to pay what the games cost to make. Just as with Hollywood extravaganzas, AAA games need exponentially increasing budgets to sustain the wow factor and will inevitably become financially impossible, the novelty of high detail will wear off, players will be less interested, and suits will turn to projects with more reasonable budgets.

the7ofswords:
In other news: ice is cold, the sun is hot, water is wet, and space is really, really big.

Amazing work there, Creskin.

Dagnabbit, I was going to make that joke!

Here's an idea... avoid having superstars like Kobe Bryant show up in commercials. I like basketball, and I like video games but they are two different things (NBA 2Kx excluded), but I don't want to see Kobe run around with a gun, I would rather see gameplay footage or something else.

Covarr:

jon_sf:
Better hardware means that games can have better graphics, higher polygon counts, richer textures, better sound, etc.

But those don't spring out of thin air. To create more detailed models, you need modelers spending more time creating and animating them. In the original Legend of Zelda, Link was 15x16 pixels big. In AAA games these days, the main character will be comprised of 30,000+ polygons. They are animated doing increasingly complicated things, which takes a lot of animators, and you've got huge numbers of high resolution textures to be created by visual artists.

Hi-poly models and hi-res textures don't necessarily take more money to make. In fact, one of the biggest timewasters in the industry today is in optimizing the work of overzealous artists to use FEWER polies and LOWER-res textures. Not to mention, as often as not, they need better models and textures anyway for pre-rendered cutscenes. Voice acting and orchestral music? That was an increase in costs when we started using them, but it's a continued cost for studios that already do that. The potential cost of sound design has largely hit a ceiling with the PS3 (since its biggest requirement is storage space).

I think the biggest technical cause for higher development costs is probably going to be in threading for these monster processors with so many cores. The vast majority of PC software uses a maximum of two cores, even if it would benefit from more, simply because it's so time consuming (and therefore expensive) to write adequate sync code for threading to work correctly and actually give a performance boost. But with modern architectures valuing more cores over faster cores, this problem is only going to become more prevalent.

That's not to say art or sound are going to get any cheaper. I'm sure as devs manage to squeak more performance out of the next generation of consoles, they will need to make more detailed assets. But since those already tend to be made in higher quality masters than are actually used in the game, I sincerely doubt it's going to make much of a difference.

P.S. Thanks

Those words ring pretty true. It is a significant time sink optimising 3D models for game engines where as for cinema you basically just need to create a low poly model in 3DS Max, Maya, or Soft Image, sculpt 10 million polies worth of detail in Zbrush or Mudbox then paint it, retopologise it in Topogun, then finally export the hi-res version as a displacement and texture map to apply to the new model exported out of Topogun. There done.

In game making this is compounded by having to hyper optimise the model several times over to get it to function within the game engine, especially after triangulation which is far from a perfected art. More powerful computers and game engines can get over these kinds of things, here's hoping that future engines can smooth out the process.

I'm fairly sure that eventually companies are going to realise that this photo-realism race is not sustainable for their profits. Just sayin'.

Bad Jim:

josemlopes:
But arent the bigger improvements of most game engines now the fact that they are a lot easier and faster to use meaning that it costs less while achieving better results?

That is true, but there is a bigger factor. Better hardware allows more detail which costs more money to produce. The 360/PS3 both have 512MB RAM, and I think the next generation will have 2GB RAM. That's four times the amount of polygons, four times bigger textures, and in general four times the amount of work required for producing art assets. Competition favours prettier games, so AAA developers who don't increase their art budgets will be overshadowed by those who do.

Of course there is a limit to how much gamers will pay and some evidence that publishers are quite close to that limit. Orwellian DRM and absurd DLC practices seem like desperate attempts to squeeze money out of gamers who aren't really willing to pay what the games cost to make. Just as with Hollywood extravaganzas, AAA games need exponentially increasing budgets to sustain the wow factor and will inevitably become financially impossible, the novelty of high detail will wear off, players will be less interested, and suits will turn to projects with more reasonable budgets.

not competely true. for consoles, they create high resolution textures and then down-sample it to run on consoles. With new consoles being faster (and with current PC releases sometimes) donwsampling wont be needed, since console can already run it. automatically - higher resolution textures by actually cutting the costs since no downsampling is needed.
Of course i agree that there will be other csts added, but there are ways to cut costs too with having a better console. many of them
as for ram, i really doubt they will go with 2 GB, mre likely 4 GB. beucase with 2GB they would be using a medium-to-low PC from 2010 for a 2013 console release? that would be like releasing Xbox380 in 2009, its obsolete on arrival.

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