PixlBit

The industry's favorite business model is starting to collapse. It's time to change.

Take a moment and type in the world “layoffs” in the PixlBit search field. Press enter and see where it takes you.  Don’t worry, I’ll wait.

What you're looking at is a grim picture – the search took you to a place filled with articles, recent articles, reporting on massive layoffs and studio closures, most of which have occurred within the last four months.  I had the displeasure of reporting on the most recent series of firings as they occurred at Twisted Metal developer, Eat Sleep Play.  These kinds of things are inevitable in the world of business, but when they become as commonplace as they have over the past months it becomes something more.

The layoffs and closures aren’t the problem.  They’re a symptom of a greater sickness that has slowly infected the industry over a period of many years and is only now really starting to show itself.  And yet we just experienced arguably one of the best years in gaming to date.  How can an industry that is putting out so many quality big-name titles be hurting so badly?

The answer lies in the question.  The AAA business model, the very same model that resulted in Uncharted 3, Battlefield 3, Modern Warfare 3, Batman: Arkham City, The Legend of Zelda: Skyward Sword, Assassin’s Creed: Revelations, and Skyrim all being released within the same three month time period has also caused the industry as a whole to suffer. 

To be a AAA title used to mean that a game was given a certain level of polish and shine.  It equated to a standard of quality that was above and beyond the industry norm.  Before the video game industry was flush with cash, any title could be considered a AAA title if enough effort was put into it.  But now AAA has come to mean something else.  Bearing the label of a AAA title means that a game is backed by a major publisher and more importantly it means that millions upon millions of dollars are invested to ensure that not only is the game good, but that it sells even if it isn’t.

Each of the aforementioned titles was backed with a king’s ransom with nearly as much put into marketing.   The respective publishers made it clear that these titles had to succeed -- and they did.  But these weren’t the only games to be released at this time.  What happened to those other titles?

This is the genesis of the problem.  The 2011 holiday season was so jam packed with major releases that there was no possible way for the average gamer to get their hands on everything they wanted to play.  Human nature dictates that when given a choice between the unknown and the familiar, we’ll go with the familiar.  It’s hard to criticize gamers for spending money on Skyrim, Modern Warfare 3 or Uncharted 3 over Rayman Origins.  By making this choice gamers were in no way saying that Rayman Origins was a bad game, they were saying that they couldn’t rationalize spending $60 on it.

In its first month of sales, Rayman Origins sold only 50,000 units in North America across all platforms it was available for (Wii, PlayStation 3 and Xbox 360).  Given that Rayman was poorly marketed in a season flush with AAA titles, it was understandable that even this fantastic game would falter. Sales like this quickly led to the title being reduced in price by retailers, but then something funny happened.  The game began to sell.  In the time since release, Rayman Origins has now sold over 420,000 copies in the US with the worldwide total coming in at 1.05 million (according to VGchartz).

In an industry where votes are cast with one's wallet, the gaming population was ultimately saying that they weren’t comfortable playing $60 for a Rayman title, but that they would gladly hand over $30-$40 for it, even in a season fat with higher profile titles.

I must point out that Rayman is an exception to the rule.  It is not at all usual for a title with poor sales out of the gate to get a significant boost once the price is dropped.  Shadows of the Damned made its debut at $60 and quickly dropped down to $40 within a few weeks.  At this point, the damage had been done and there wasn’t much that could be done to save the title, even though it garnered mostly positive reviews. 

Would Shadows of the Damned have fared better if it was initially released at a lower price point?  There’s no real way to know.  Consumers have a nasty habit of associating price point with quality and as such would have assumed that a game released at such a price is garbage – an assumption strengthened by budget releases, such as Atlus’ Cursed Crusade.

Because the industry has settled on this $60 price point as a standard, publishers are faced with the difficult task of instilling value into titles so that the consumer doesn’t immediately feel cheated by the cost of the game.  This generally leads to publishers making “safe” decisions when it comes to green lighting projects and then throwing money at these games like it’s going out of style.  Extraneous multiplayer modes are attached to games that don’t need them, like Dead Space 2, and bad games like Duke Nukem are shoved down our throats through expensive marketing campaigns.

The publisher knows that $60 is a lot to ask for a game, but because it’s become the standard they have to ask this much.  Dead Space 2 was a wonderful single player game that could and would have sold on that mode alone, but due to the AAA model a multiplayer mode was slapped on to make the game seem bigger and more robust than it actually is.  Though it may not have seemed like it, that multiplayer cost EA a pretty penny to implement.  This expense may have seemed worth it as sales were pretty good, but imagine how many more copies the game would have sold if it didn’t come with a multiplayer mode but only cost $40? 

Sticking to this AAA model at all times just doesn’t make sense when you think of how it is affecting the development and pricing of games.  When a AAA title fails, the publisher ends up losing quite a bit of money, but it is the developer that usually ends up having to take the ax to its work force.

Chopping the price of a game and moving away from the AAA model alone won’t be enough.  There is still the issue of perceived value on behalf of the consumer.  If a consumer were to see a $40 copy of Dead Space 2 they would likely perceive that it was somehow inferior to the $60 copy of Batman sitting next to it.  This phenomenon of perceived value is unique to physical product though, so it gives us another option of being able to deliver a quality product at a reduced price without publishers feeling like they have to artificially pad a game’s value.

Digital Distribution

Digital distribution is by no means a new concept, but it is only now starting to be used as a means of delivering full length gaming experiences to the masses.  Ubisoft is releasing their long in development and much anticipated survival game, I Am Alive exclusively through the PSN and XBLA.  Reverge Labs, developers of the upcoming fighting game, Skullgirls, will also be delivering the title to gamers exclusively through PSN and XLBA, despite being published by Konami.

By sticking to digital distribution, the publisher assumes much less risk than printing discs to ship to retailers.  While some money will surely be saved by not having to physically distribute the game, the real benefit lies in the flexibility the digital method offers.  The amount of copies created for a game is determined ahead of time by a bunch of suits.  If they come to the conclusion that this would be a niche title they run a limited print, if they think it will sell gangbusters, they’ll print as many as they can.  Going digital takes all the guesswork out of this and the publisher doesn’t have to worry about under or over-shooting the run size. 

This allows even more freedom when it comes to the types of games that we could and will see in the future.  Without digital distribution we almost certainly never would have seen games like Flower, Castle Crashers or Minecraft come to fruition.  These games, among others, have helped to break the perception that downloadable means cheap, and titles on the horizon like the aforementioned I Am Alive and Skullgirls will continue to mold the views of gamers into the future.

Some gamers absolutely love having the physical copies of games (this one included) but wouldn’t you forgo the box if it would help to get Beyond Good and Evil 2 or Psychonauts 2 out there?  And remember, there is nothing stopping a publisher putting out a limited physical run after a game has proved itself on the digital market.  Going digital allows the publisher to sell a game below the market standard without it being devalued in the mind of the consumer.  It’s a logical progression that the next generation will almost certainly embrace.

The current AAA model is killing the creative drive and financial viability of the industry.  While the model has produced some fantastic games, the industry needs to learn to not use it as a rule.  The industry needs to evolve into a more flexible entity so that it can support not only its products, but the people who create those products to begin with.  Digital distribution for obscure or unproven IPs is just one of many different ways that the industry could improve upon, but like anything it will require that the community not only demand change, but support it once it’s implemented.

And just to hammer the point home, something amazing occurred after I handed this piece in for editing.  Double Fine Productions, makers of such wonderful digitally-distributed games like Costume Quest and Stacking, launched a Kickstarter campaign to fund their next title, Double Fine Adventure.  This strategy is unprecedented for a company of their size and if successful would prove that publishers and the AAA model isn’t necessary to get games made.

“If” is a bad word to use actually.  Within eight hours, Double Fine hit their goal of $400,000.  As I append these last few paragraphs to this article they find themselves sitting at over $890,000 and climbing fast.  And there are still 33 days left to raise funds.

Double Fine gets it.  The community gets it.  Reliance on the AAA business model has to become a thing of the past.