Death to the Games Industry, Part II is continued from Part I, in last week’s issue of The Escapist.

How Do We Get There?
I first started talking about the problems in the gaming industry in a soapbox piece in Game Developer magazine back in 1999, but at the time, I had no clear idea how to address the problem. Today, however, I think a confluence of technological, cultural, and business trends make the outline of a solution visible. But to make it happen, we have to do three things:

  1. We have to attack the business model.
  2. We have to attack the distribution model.
  3. And we have to change the audience aesthetic.

Attacking the Business Model
Let’s look at the conventional industry’s value chain the way business types do. It looks like this:

When an independent developer is involved (and of course a lot of games are developed at publisher-owned studios), the developer does one thing: the actual work of creating a game. The publisher takes on three roles: It provides development funding; it does the marketing; and it distributes the physical product to the retailer. The retailer also does one basic thing: It sells games to consumers.

One thing developers can try to do – and should do, if they can – is to take over that first additional piece of the value chain. They should try to fund their own development.

If you can fund your own development, you get some big advantages. First, you can negotiate a higher royalty rate with the publisher, because they have less capital at risk. Second, you are not utterly at the publisher’s mercy during the development process; if the publisher-side producer wants you to do something really stupid (and horror stories abound), you can tell him to screw off. And third, you can retain ownership of your own IP, so if you build a successful franchise, you (rather than the publisher) reaps the benefit.

Where to get the money? That’s a good question, because it isn’t easy. But of course, getting a publisher to greenlight something isn’t easy, either. One possible answer is “from VCs.” That’s the route Mythic took with Dark Age of Camelot; they sold equity to get capital. But this route isn’t easy, because venture capitalists typically shy away from product businesses – they’re in the business of investing in risky ventures, but the fact that 90+% of all games lose money makes game developers a particularly risky business. It’s not impossible, though; there’s a lot of venture money nosing around the game industry at the moment.

Another route is to look for project finance. This is something that’s very common in the film industry: Investors put up money in exchange for a share of the product’s revenues. This has its good side and its bad; you’re mortgaging future revenues for money to bring the product to market – but you also aren’t selling equity, so you retain control of the company. Because it’s such a common model in the film industry, the sorts of people who provide this kind of money – typically rich people, but sometimes funds devoted to film industry investments – are comfortable with the idea. Finding and networking your way to them is a challenge, of course, but it’s feasible; this is the route IR Gurus took with Heroes of the Pacific.

Funding your own development doesn’t completely solve the problem, however. For one thing, many publishers won’t look at a deal if they don’t wind up with the IP. For another, they may not devote the same marketing resources and attention to your game, because they don’t have dollars at risk from the inception; Heroes of the Pacific was dropped in mid-development by one publisher because of this – the publisher was short on money, and wanted to spend it marketing its own games.

And you’re still marketing, distributing, and selling your product through the same channel – the same hit-driven, glitz-obsessed, narrow channel, with all the problems that entails. You don’t need a publisher’s greenlight, but you still need a publishing deal – and you’re still facing a two-week sales window and a glitz-obsessed market.

For developers to take on the funding role is a start – but to really solve the problem, we need to…

Blow Up the Retailer
The casual game space shows that it can be done. Some of these games get into the conventional retail channel (there’s a boxed version of Bejeweled, for instance), but 90+% of all sales are through portals like Yahoo! Games, RealArcade, and the rest.

Broadband is spreading. More than 50% of net-connected homes now have it – and the proportion is higher for gamers, and higher still for online gamers (80+% for MMOG players). With broadband, even a multi-hundred megabyte application can be downloaded in reasonable time.

Not, it should be noted, in the casual space; casual game developers say there’s a big dropoff in sales if you go from 10 megs to 15. But that’s casual gamers; hard-core gamers will spend a half hour on download, if they want a game. Hell, it takes at least that long to drive to the mall, park, and find the Gamestop.

When I first downloaded NetHack using my 1200 baud modem back in pre-Internet days (I was on GEnie), I had to let the download run over night (at $6/hour connect-time, too). And I was glad.

Technology is not the problem. There are any number of cheap e-commerce suites that can handle sale via direct download. And yes, there are Digital Rights Management issues, but they’re solvable.

Many niche publishers are doing this today. Matrix Games, for instance, still publishes its games in boxed form – but they say they sell far more copies of games like Gary Grigsby’s World at War via direct download than they do at retail.

The reason that’s happening is simple: Many PC game styles that, in years past, got huge attention from the PC game zines and consumers now have a hard time getting distribution. Retailers don’t even like stocking PC games – they take up too much space, and they don’t sell as well as console – and have cut way back on the titles they’ll stock. As a result, if you’re a computer wargamer, a flight sim fan, a fan of 4X space conquest games or of graphic adventures, or even of turn-based fantasy – you’re going to have a hard time finding product you like on the shelves. Those gamers are beginning to learn they can find what they want on the net.

But “if you build it they will come” doesn’t work; stick a game up on your own website, and you’ll be lucky to sell a thousand copies, even if it’s good. And even for the gamers who have migrated online, it’s not ideal; you may know about Matrix’s site, but there are a lot of other decent computer wargames out there, and to track on the field, you have to visit a half-dozen different sites. And the magazines and review sites no longer bother with the kind of games you like, so it’s hard to figure out what’s good and real.

There are any number of developers out there just itching to find another path to market, a way to develop games outside the conventional model – and to make a decent living by so doing. But at present, they don’t have a clear path to market – and though the technology exists, the Internet can act as a distribution mechanism, it’s not obvious to them how to reach their potential market.

In other words, technology isn’t the problem…

Marketing Is the Problem
Even though the PC magazines are starting to devote some attention to “indie” games, it’s still scant. And in general, download-only product isn’t taken seriously; the assumption is that if it doesn’t get published conventionally, it isn’t “real,” it must be of lower quality. And, of course, the conventional publishers buy most of the advertising space, so the magazines naturally pay more attention to them.

Additionally, a box on a shelf serves as a billboard for your product; someone browsing a game store might see it, pick it up, and decide to buy. If you look at it as advertising, you’re reaching a highly targeted audience – people in a game store are there to buy games.

If you’re online somewhere, you’re inherently hard for consumers to find. Yes, Google helps, but in general, if someone doesn’t already know about you, he’s unlikely to find you, without a big advertising spend.

And finally – changing consumer behavior is hard. Most people still expect boxed product, and assume that they’ll find everything of importance at a brick-and-mortar store. They have not been exposed to, yet alone have adopted, the meme that says “indie is cool, gameplay is more important than glitz.”

To solve the marketing problem, we need a new kind of business.

You need an operation that aspires to be the place to go for indie product. Not casual games; there’s no point in trying to compete with the likes of Yahoo! and Real, the casual games market is well served already. No, you want to be the place to go for hardcore gamers looking for something beyond what the conventional machine gives them.

And the company needs to be marketing driven. Developers (and if truth be told, many publishers) suck at marketing. It’s not a core competence, and it’s not something they’ve ever done. The purpose of this intermediary company must be to figure out how to get exposure for independent games and niche/indie product – and it needs to spend the bulk of its revenues on advertising and PR.

In other words, the Internet allows you to avoid retailers and solves the problem of distribution; what it does not solve is the problem of making consumers aware of your product, and getting them to want to buy it. There’s a role for an operation that steps up to the plate and says “We know how to sell online, and we will spend good money to make sure your product does.”

Developers can and should figure out how to stop relying on publishers for development funding – but they will always need help on the marketing side. And moving online not only doesn’t solve the problem – it makes it worse, because moving gamers online requires a change to consumer behavior.

And yes, that means some revenues need to go to the intermediary – but developers should still wind up with the bulk of the revenues, not the risible 7% they typically get today. And developers will of course own their own damn IP.

And anyway – our product consists of bits. So why are we still shipping boxes of air when we have a network designed to ship bits?

Re-Engineering the Customer
In comics, film, and music, there is an audience that has what you might call “the indie aesthetic.” They prize individual vision over production values. They believe they are hip and cool because they like indie stuff. They like quirkiness and niche appeal. And they are passionate about the things they like.

We need to establish the same aesthetic in gaming. And while that’s hard, it’s also pushing at an open door – the meme exists in other media, so why not in games? In other words, some of the marketing you need to do is the conventional stuff – advertising and promotion. But the more important task is getting the meme out there.

And to do that, you need more than ads. You need manifestoes. Brickbats. Slogans. Outrageous stunts. You need to rabble-rouse.

Like, say, by writing articles like this.

Here are some slogans, if you like:

“Corporate games suck.”
“Gamers of the world unite! You have nothing to lose but your retail chains!”

And one more, but a little explanation: The PC is largely irrelevant to the publishers now – it’s the fourth, and weakest platform. When they publish a PC version, it’s usually because there’s an Xbox version, and the port is easy. But games designed for console controllers and TV screens twelve feet away just don’t play so good with mouse-and-keyboard and a screen two feet away… You’re better off playing the Xbox version. And so PC sales continue to slide… Except in the genres that just don’t work on consoles: MMOs, RTS, and sim/tycoon. PC games should be designed for PCs. Thus:

“Aren’t you tired of getting Xbox’s sloppy seconds?”

But Is There Enough Good Product Out There?
If you focus utterly on what might be called “true indie” product, the answer is probably not. If you look at the games at IGF each year, there are definitely some gems – but most are student projects, or incomplete, and in general nothing you’d be willing to spend actual money on. Astonishing, first-rate, unconventional titles like Darwinia or Rag Doll Kung Fu exist – but not enough of them.

But there’s another side. Because PC games don’t sell as well as console, the retailers have been dropping PC product they consider niche. Thus, a whole slew of game styles that still have passionate fans either do not get retail exposure any more, or don’t get much. We’re talking about games that are unlikely to generate six figures in unit sales – but can unquestionably hit five. Computer wargames, graphic adventures, 4X, and the like. World at War, Galactic Civilizations, Dominions II – if you haven’t heard of these games, you owe it to yourself to check them out.

So what you need to do is aggregate the games from developer and smaller publishers who are already finding themselves squeezed out of the conventional market – along with quirky indie product – as well as such things as European graphic adventures that just don’t see a US release any more. I think you could launch with over a 100 decent titles. And once you build a pathway to market, and developers see how they might be able to succeed with indie product, the floodgates will open.

Or to put it another way, we need to aggregate…

The Old Farts and the Young Turks
There comes a time in the commoditization of any creative industry when the Old Farts, the people who pioneered it, look up in dismay and say, “This is not what I had in mind.” Talk to say, Chris Crawford, Bob Bates, Hal Barwood, Julian Gollop, or Noah Falstein, and I think you’ll get that in spades.

And there comes a time in any creative industry when the Young Turks, the people getting into the field who have learned what the score really is, look up and say, “Screw this! There has to be a better way.” Talk to say, Jason Rubin or Eric Zimmerman or Chris Delay, and you’ll hear that story, too.

Typically, the older generation is dead before the revolutionaries show up. The games industry today stands at an unusual moment; the Old Farts are still around, and the Young Turks are arriving.

We have, in short, a unique opportunity to combine the experience and cynicism of the older generation with the rage and energy of the new, and to create from that union something that will shake Redwood Shores down to its 10Qs.

The game industry is broken. It’s up to us to fix it. From now on, we must all strive resolutely to bring about the overthrow of the existing order.

We have a world to win.

Greg Costikyan has designed more than 30 commercially published games in various genres and platforms. He has written about the game industry for publications including the New York Times, Salon, and Game Developer magazine. At present, he works for Nokia Research Center’s Multimedia Technologies lab as a games researcher.

Anime: Fafner #1

Previous article

The Contrarian: Roll the Dice

Next article

Comments

Leave a reply

You may also like