The AAA Gaming Industry Is Going To Crash

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For year on successive year, sales records have been broke for video games: MW2 sold the best ever, then Black Ops sold the best ever, then MW3 sold the best ever. The gaming industry is now FILLED with multi-instalment franchises that release a new game annually, with virtually every new IP that sells even moderately well getting a sequel. However, at the same time as the videogame industry swells and expands, the economy does not. Across all of the most major markets for these games, the economic situation continues to deteriorate, with people all over the western world finding themselves increasingly strapped for cash to be spent on luxury items. Why should the gaming industry continue to grow when the related music and film industries contract?

The warning signs of a crash in gaming are there: Bioware's massive budget SW:ToR "failing", forcing layoffs in one of the most prosperous game developers in the world, massive over-saturation of popular military shooter AAA genre (such as the failure of Medal of Honor, underwhelming sales of Battlefield 3 and the decreasing multiplayer population retention of the Call of Duty series), the gaming landscape, scarred with the abandoned husks of failed MMO's as even the F2P model that has been so lucrative for the past 3 years starts to teeter on the brink, and all the while the Casual market, selling cheap games to people who can't afford any of the hundreds of $60/40 titles pumped out by the AAA industry, leeches away at the "hardcore" market share.

As it becomes increasingly difficult for developers to guarantee a profit on their games, developers turn to increasingly desperate cash-grabbing methods like Project Ten Dollar, On-disc DLC and over-use of Micro-transaction mechanics, however even these are showing the strain, with the sure-fire-success DLC packs of Halo: Reach and Call of Duty's new Elite system selling well under target.

The gaming industry, whilst apparently growing to an unprecedented size and becoming one of, if not the most profitable media, has actually become a much harsher place for developers, covered by a veneer of prosperity, new IPs are strangled in their cribs and, as E3 this year has so far shown us, all most developers are willing to do is make comparatively risk-free sequels to existing franchises (even if they didn't need them): Halo 4, a new Gears of War, a new God of War, Bioshock Infinite, Borderlands 2, Farcry 3, Crysis 3, Lost Planet 3, with, obviously, new instalments in the cashcow franchises like Call of Duty and Assassin's Creed. Think of the ratio of sequels showcased as E3 2012 compared to new IPs: besides the glorified tech demos of Kinect and Move, you'll probably struggle to name more than 5 new IPs.

All of this is symptomatic of an industry bloated to a size well above what the market can afford, with archaic business models and massive over-saturation of the MMO market, both P2P and F2P and FPS market. We've already seen the Rhythm game market, just 3 years ago one of the most lucrative genres in the industry, die a sudden and absolute death, and if publishers don't get wise to what they're doing to the market, I wouldn't be surprised if we see similar crashes across the rest of the industry within the next couple of years.

Oh lawd, not this again.

It's the 'PC gaming is dying' thing all over again.

The industry will regulate itself long before a crash ever happens.

IMO, you are both correct and wrong.

You are correct about the symptoms, about the bloating of the industry, the cash grabs, the oversaturation of certain genres, etc. But you are wrong about the industry being close to a crash. Why? Because you're missing one big point - no matter how poorly the industry has been treating its customers lately, the customers are happy with it. Heck, they want more of it.

Overpriced DLC, always-on DRM, content withheld on release, copy/pasted shooters... to all of that the general public has responded with "Please sirs, can we have some more!". You see, the outcry of gaming enthusiasts on forums and such counts for very little. The one way that the gaming public can respond and be heard is with their wallets, and the sales figures speak for themselves. ME3 was controversial on a ton of issues, it sold like crazy. Diablo 3 brought about a wave of outcry and it's topping the sales charts. You could pretty much put feces in boxes and stick a CoD sticker on it and it would sell.

In general, people are fine with where the industry is going. Sure, there's a vocal minority pointing out how we're all getting fucked over, but there's also an equally vocal minority who are enthusiastic about having to pay more for less, so not even the enthusiasts are unified on these issues.

Sure, there's the occasional fail, like TOR (from a monetary/publishing standpoint, I'm not saying the game itself is good or bad), but by and large the industry is happily marching forward fueled by tons of money that's being thrown at them.

And it's not all gloom and doom. The Kickstarter craze stands to bring us some good games, digital distribution has provided an easy venue for low budget indie games, but also mid-range B-level titles, F2P is growing every day. Sure, you could argue that those aren't AAA games, but the AAA industry is also standing strong. And it'll continue to stay strong until the publishers reach the point at which the customers aren't willing to pay more.

That point hasn't been reached yet and for the forseeable future we can anticipate higher prices, less content for the price, more outrageous DLC and DRM. Shame, but until they piss off enough people, that's how it's going to be...

I think you exagerate. Very few MMOs have actually folded - even renowned flops like Warhammer Online are still ticking over, and the F2P boom gave APB a second chance after its genuinely catastrophic collapse. The smart ones are realising that they don't need hundreds of thousands of subscribers to prosper, and that's a good thing because it means they can experiment more.

As for TOR - the only reason SWTOR is "failing" is that EA and Bioware waltzed into the MMO market with no fucking idea what they were doing and with insanely unrealistic expectations that they could take on WoW.* Sure they're 'profitable' on 500K subs, but EA is on record as having said they'll feel it's been a good investment with over a million, and by the time the next set of figures come out they won't have that. Bioware's going to pay the price for that, and for the other horrible misfires they've had over the last few years, but that's just one company.

*And if I was Zenimax/Bethesda I'd make TOR's history from development to post-launch required reading for everyone involved in TESO, so they know what not to do.

DLC and other nickel and diming of singleplayer games is going to change things, and likely not for the better, but I don't think the industry as a whole is in danger of collapse.

I remember a few years ago this was the industry that they claimed was recession proof, bullet proof, fire proof, etc. I guess nobody thought a few tablets and more casual games was going to make a dent. It has been weak for a long time, and if this is all it took to show the cracks, it's only going to get worse before it gets better.

A couple of things to think about:

- One reason the gaming industry may do better than the movie or music industry is that, as much as we hate DRM, it has actually been a lot better at controlling piracy than the music or movie industry. Being able to worry about whether consumers are buying their products second hand is a luxury those other industries wish they had.

- The disproportionate ratio of sequels to new IPs isn't a sign of anything other than market demand. It's happening because we, the gaming public, buy those sequels in a disproportionate ratio to original IPs. It's being done for the exact same reason that the film industry keeps churning out sequels, reboots and remakes in such huge numbers: because it's what people pay to see.

- Do you have a source on the sales targets and relative performance of Halo and COD DLC?

Yeah, like the massive influx of summer blockbusters caused the entire music industry to crash.

Oh.

The only way the gaming industry would crash is if almost the entire Western World goes into either a deep recession or a full depression. Nothing short of that will stop it. It might slow down, we might see less blockbuster AAA games, but they will never die. Gaming is an established industry now, with billions buying games and putting money into it.

I've been hearing people say this for about six years now.

I didn't realise crashes took so long.

The last AAA pub and the last AAA dev will one day get together and make one last greywashed shooter about killing commie-nazis. And people will be *SO* bored with them it won't even be brought up around the water cooler.

DOOM!!!! DOOOM I SAAAAAAAAAAAAAAAY

well that was fun.....Im going to go finish of that backlog full of AAA games now..*sigh*

Vault101:
DOOM!!!! DOOOM I SAAAAAAAAAAAAAAAY

well that was fun.....Im going to go finish of that backlog full of AAA games now..*sigh*

LIES! LIES! THIS FILTHY EARTH WORM LIES!.. I mean no (Oh boy, I hope I quoted from the same show as you).

On Topic: We might see change but a crash? Don't think so.

I hope the AAA and console markets crash big time. I'd love nothing more for all this "modern" gaming to go away and gaming become more niche again.

SenorStocks:
I hope the AAA and console markets crash big time. I'd love nothing more for all this "modern" gaming to go away and gaming become more niche again.

As hipster as this sounds, it does remind me of what I miss most about gaming as a hobby.

##TONE/MODE/SET='GetOffMyLawn'

Back in the first age, when I was a wee lad, home video games were a newish thing. The market was small, comparatively, and the people you met were more likely to NOT play them. So when we were forced to leave our sweat-stained, hand-cramping little rectangles of digital happiness behind and venture out under the oppressive blaze of the DayStar, our little fingers still twitching with the urge for 'one more level,' coming across another video gamer was one of the little moments of joy.

It didn't matter if you liked Zelda and Mega Man and he liked Super Mario and Double Dragon. You were GAMERS. Bam. Instant friendship. You were just so thrilled to have someone else to talk to about it that you'd cluck your way through the entire school day/wedding/whatever dragged you away from the game.

Even if you never met again, you came out of it having had a good day.

Nowadays, too many gamers are just dicks.

##Cane/Execute/Wave

Well if the gaming industry takes a punch in the ovaries then I am happy for it. It will level out the playing field a bit and let the little companies have a chance to utilise an already competitive market on a more level budget so to speak. Well the show will probably go on and I am only generally speaking.

We will see a change, for sure. But will we see a crash? Maybe, maybe not. It's always possible, but a company as big as EA has a very long way to fall. I feel like they probably will get hit as the tides continue to turn, but I feel like they will have plenty of time to get themselves back in order before they hit rock bottom. I really feel like they know what needs to happen in order to regain gamers' favor. They're just waiting it out while the consumer base continues to feed them money for their horrible service.

And, for certain, the ENTIRE AAA market is not going to fall. That is just silly. Valve and Nintendo certainly aren't going anywhere anytime soon. The brown FPS might finally go out of style (or at least be shelved for more novel ideas), but AAA games will still exist in one form or another.

Zhukov:
I've been hearing people say this for about six years now.

I didn't realise crashes took so long.

The people who always proclaim the death of the game industry always remind me of that one friend everybody has who spends every New Years Eve in a bunker.

It's very doubtful that the entire game industry is going to collapse, at least in the sense that every major publisher will go under. Things aren't that bad, nor is there any indication that they will.

... But there still seems to be signs that something is going give, quite possibly fairly soon. The gaming industry right now feels bloated, there's an overabundance of seemingly generic games coming out all the time; almost as if it's sitting on a "bubble", one whose popping may be imminent.

Similar things could be said regarding the economy in general; you can't always keep moving upwards, there has to be the odd downturn to allow things to balance out and to keep things from spiralling out of control. But just the same, things will endure after the inevitable downturn; things may get ugly for a while, but people will carry on and eventually climb out of the hole. The gaming industry could be facing a such a situation in the (very?) near future, but it won't be the end of it all.

---

The downside of this situation is that AAA games are probably going to be the ones which take the biggest hit; specifically, their budgets. Investors will be much more cautious while putting money into a project, so games will have to cost less to make. Making games shorter isn't much of an option these days, simply because games are already shorter; this is also because of the budget, as HD graphics are quite expensive (apparently). What we may be seeing is games with less graphical fidelity instead, and players seem to be fine with it (to an extent, and maybe if they get something else in return with all that freed-up budget).

It won't be all that bad either, a downturn may be the hint publishers need; people are getting tired of the same type of game coming out all the time, and all the obvious cash-grabs (day one DLC, online passes, constant sequels, et cetera) are getting annoying. Players are starting to clamour for quality releases, as well as new ideas (to an extent, deviations from established franchises aren't going over well right now). The cutting of budgets may also mean publishers may be more willing to try new ideas.

---

Nevertheless, the writing is (or might be) on the wall. The bloated gaming industry very well may be going on a diet very shortly; and when that happens, things won't be pretty for developpers & publishers.

The industry won't collapse, but it will be time for it to reconsider how it operates. Disaster may be averted if they start doing so now, but since when have humans (as a whole) been known for fixing things before the small problem has become a giant & unavoidable one?

Zhukov:
I've been hearing people say this for about six years now.

I didn't realise crashes took so long.

I've been hearing people say it since the 80's.

When Atari took the big plunge people said gaming was going to die. PC gaming has been dying since the mid 90's.

People keep saying it but it never happens.

Like the end of the world.

AD-Stu:
A couple of things to think about:

- One reason the gaming industry may do better than the movie or music industry is that, as much as we hate DRM, it has actually been a lot better at controlling piracy than the music or movie industry. Being able to worry about whether consumers are buying their products second hand is a luxury those other industries wish they had.

- The disproportionate ratio of sequels to new IPs isn't a sign of anything other than market demand. It's happening because we, the gaming public, buy those sequels in a disproportionate ratio to original IPs. It's being done for the exact same reason that the film industry keeps churning out sequels, reboots and remakes in such huge numbers: because it's what people pay to see.

- Do you have a source on the sales targets and relative performance of Halo and COD DLC?

Troof.

The industry is fine. It will change, adapt, and try to squeeze as much money out of gamers as possible, but it will be fine.

The problem I have is the death of the "B grade" boxed games, games that I like and are usually failures commercially. Its obvious the current economics of the console industry doesn't support them (ie retail bombs to the bargin bin too quickly and XBLA / is limited due to its cap on pricing and bad dashboard)

For these games to flourish there needs to be more ppl buying these games around the 20-30 price range. Atm the only option for them is to gamble on been a runaway success either at both ends of the scale

SenorStocks:
I hope the AAA and console markets crash big time. I'd love nothing more for all this "modern" gaming to go away and gaming become more niche again.

Exactly. The only games I really care about any more are old ones and some of these kickstarter projects.

Otherwise, I could give a fuck about like 99% of AAA games.

It's not going to crash. No chance.

My god, these false predictions never end, almost as bad as the people who bitch about games being art (almost) The industry is doing fine, no need to worry.

Well done for blindly parroting what people have been saying for years I guess.

Just like home-taping killed the music industry, then.

Daystar Clarion:
Oh lawd, not this again.

It's the 'PC gaming is dying' thing all over again.

The industry will regulate itself long before a crash ever happens.

What Daystar said.

Didn't we just have a thread about this last week?

And so another prophet comes bringing tidings of doom and woe, what else is new?

Like so many others before you come making these claims but you do not tell whats causing it and how it might be stopped. You just bring your predictions of the future and nothing else.

No it's not. Now let's all stop saying this, eh?

Daystar Clarion:
Oh lawd, not this again.

It's the 'PC gaming is dying' thing all over again.

The industry will regulate itself long before a crash ever happens.

Yup.

To answer the question of what makes Gaming different to the rest of the economy... escapism. I'm not saying that that is enough to weather the storm without a hitch, but as the outside world begins to suck more and more, the entertainment industry sees a swell in business.

CAPTCHA: 'been there'. Indeed.

rob_simple:
Just like home-taping killed the music industry, then.

You mean the same music industry that has been losing billions of dollars, year in year out, for the last decade?

OT: Something's definitely going to give soon. The real issue is that most games are not as profitable as most gamers think. There are a few series like COD and WOW which make serious, record-breaking bank. There are occasional AAA games like Skyrim which end up selling over ten million. The majority of AAA games, however, struggle to just break even, let alone turn a profit. A lot of them don't even manage that.

You only have to look at the fact that triple-A companies like EA and Sony have been losing hundreds of millions over the past few years to realise that the game industry's financials are not as rosy as we would like to think. THQ is gazing down the barrel. Sony and EA have both been making massive losses. Sega is re-organising its entire corporate structure. The only AAA publisher who's really sitting happy is Activision, due to the combined income of both Call Of Duty and World of Warcraft.

This is what happens when you have everyone trying to compete for the 'most successful game EVAR' title. You'll have one winner, and everyone else will have bankrupted themselves trying to scramble to the top.

Everyone seems to think E3 has been a failure this year. Even with a new hardware launch for Nintendo, very few are impressed.

I think people are getting tired of the same ol same ol and also tired of what they perceive as gimmicks. I also think that as consoles become more and more PC like and PC's get cheaper and cheaper, consoles have very little to offer that people can't get from a PC.

I missed Nintendo's show but apparently the only interesting thing was Pikmin 3 and even then people thought the graphics looked dated.

j-e-f-f-e-r-s:

rob_simple:
Just like home-taping killed the music industry, then.

You mean the same music industry that has been losing billions of dollars, year in year out, for the last decade?

OT: Something's definitely going to give soon. The real issue is that most games are not as profitable as most gamers think. There are a few series like COD and WOW which make serious, record-breaking bank. There are occasional AAA games like Skyrim which end up selling over ten million. The majority of AAA games, however, struggle to just break even, let alone turn a profit. A lot of them don't even manage that.

You only have to look at the fact that triple-A companies like EA and Sony have been losing hundreds of millions over the past few years to realise that the game industry's financials are not as rosy as we would like to think. THQ is gazing down the barrel. Sony and EA have both been making massive losses. Sega is re-organising its entire corporate structure. The only AAA publisher who's really sitting happy is Activision, due to the combined income of both Call Of Duty and World of Warcraft.

This is what happens when you have everyone trying to compete for the 'most successful game EVAR' title. You'll have one winner, and everyone else will have bankrupted themselves trying to scramble to the top.

Sony's game branch is the only part of Sony that's in the black, the only reason they are hemorrhaging money and having record low stock prices is because their electronics are failing hard.

j-e-f-f-e-r-s:

rob_simple:
Just like home-taping killed the music industry, then.

You mean the same music industry that has been losing billions of dollars, year in year out, for the last decade?

You mean the music industry that's been forced to re-invent itself in a form that is now more supportive of old and upcoming musicians alike, and infinitely better value to the consumer than it ever was when only major publishers could pull the strings?

The music industry is in a better condition from an artist/consumer point of view than ever before; the only people really suffering from the billions in losses that you mention are the companies who spent decades extorting the consumer and paying many of their performers a pittance for their work.

If the same thing happens to companies like EA, then I'm all in favour of a AAA 'crash'.

I am worried about the gaming industry- I mean it may not crash but with EA around .. ugh they're certainly are pulling fast ones on us. Hopefully we can see some really nice featured games come out or so on but in all honesty, I keep seeing action shooting games similar to Gears of War and COD ... poor Dead Space had to take this path from it's original formula v_v

If we're speaking purely AAA market then I doubt there'll be a full 'crash' per se. The AAA publishers and developers will evolve and adapt to the demands of the market. Look at EA's attempts to steal a slice of the 'indie' pie (effectiveness not withstanding). Even the proliferation of F2P games are evidence of shifting business practices. Kickstarter warrants a mention too (although not in a AAA sense). Point being that changes are already in progress.
Yes, there's going to be market saturation of whatever the craze of the time is. But that's more an inevitability of the market and of businesses than a symptom of the AAA market crashing. Yes, those that can't make the change might be in for some hard knocks, but I sincerely doubt our current video game market is even still capable of 'crashing' in the same sense as the one in the 80s.

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