Game over? Industry suffers slowdown after decades-long winning streak
Game over? Industry suffers slowdown after decades-long winning streak
almost certain this is behind a paywall and usually FT is one you can't get around, so some choice excerpts:
The $200bn video games industry is reckoning with its biggest slowdown in 30 years, as the huge growth driven by smartphone gaming and the latest generation of consoles reaches its limits.
Hardware sales are slowing, with Sony cutting its forecast for PlayStation 5 sales this week. Consumer spending on mobile gaming declined last year, down 2 per cent to $107.3bn according to Data.ai, which forecasts low single-digit growth in 2024.
Many in the gaming industry expected to bounce back quickly after 2022's post-pandemic decline, last year did not deliver the growth initially hoped.
The latest quarterly numbers from some of the biggest publishers, including Electronic Arts and Take Two, has underwhelmed investors. Meanwhile, games developers have been forced to cut thousands more jobs this year after already slashing as many as 10,000 in 2023.
"There's a lot of commercial anxiety: about growth, about profitability, about keeping budgets in check and about making an impact in the market when there are so many established products," said Piers Harding-Rolls, games research director at Ampere Analysis, a market researcher. "We are in a much slower growth era."
Cutting prices is a double-edged sword. The huge popularity of free-to-play online games such as Fortnite and Roblox consumes hours of playtime that had previously been spent on $70 titles. The strong network effects of multiplayer games, such as Call of Duty, also make it harder for new entrants to succeed. "Thousands of titles are hitting every month and the success rate is very low," he said. "You're faced with significant challenges in trying to break new product into the market."
The rising costs of developing blockbuster games has also raised the stakes. "When you're talking about a budget that's $100mn plus, even for a big company, if you miss with two or three of those then commercially you're on the ropes," Harding-Rolls said.
That has driven a Hollywood-style dependence on rebooting the same big franchises by Sony, Microsoft, Electronic Arts and other big games companies. At the same time, entertainment giants are showing a renewed interest in gaming — adding new competition for existing players in a shrinking market.
Disney made a $1.5bn investment in Fortnite's creator Epic Games this month to create what the studio's chief Bob Iger called "a huge Disney universe that will be for gaming and for play", while Netflix is also expanding its games offering.
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I mean, gaming exploded over the pandemic. Anyone who thought that was going to become some kind of norm was an idiot. Have we shrunk below pre-pandemic levels? Or is this just idiots who thought they could keep skimming free oil off the surface once the leak was fixed?
Also, I disagree with the idea that AAA games are performing poorly. Bad ideas in AAA games and chasing “easy money” in AAA is performing poorly. Helldivers 2 seems to be doing well, whereas Suicide Squad isn’t. Baldir’s Gate 3 killed it while Starfield kind of flopped. Final Fantasy 16 didn’t meet expectations, but we know Square Enix regularly sets expectations too high anyway.
Are people tired of the same Call of Duty games over and over? Are people full up on live service games and looter shooters? Yes and yes. But are people crazy excited for the new Final Fantasy 7 Rebirth? From the communities I’m in, very much yes. Did Alan Wake 2 release and sell faster than any other game from that studio? Pretty sure I saw that headline recently, yeah.
So when Diablo 4 dies on impact, was that the fault of the gaming landscape? Or was it because Blizzard execs pushed the team to maximize systems and balance they thought would bring in easy money but actually ended up alienating their core audience and reviewers?
I’ve seen this before when working in mobile. Execs want to chase the whales so badly that they don’t allow designers and devs to make the game actually fun to play. Doesn’t matter how “well” you monetize your shitty game if nobody wants to stick around to play it.
Yes. They thought they could keep skimming. The problem is that their (and everyones, really) business model is predicated on YOY growth and when it doesn't happen, they fire people to try and recapture funds.
Baldir’s Gate 3 killed it
While I agree with your overall point larian studio is not a triple a studio by most definitions.
400 people across multiple countries and $100M spent on development doesn't count as AAA?
Not to mention, it was a licensed game. Shouldn't really expect an established brand to be licensed to 3 kids in a basement.
AAA is a title that is applied to studios not games. Larian is an independent studio, a big independent studio but still no where near the big giant companies. Compare them to insomniac, who is behind spiderman 2. Their budget was 3x larians, they are also part of a much larger conglomerate (sony), and they usually are creating several games with the scope of spiderman at once, leading to a release schedule every 1-2 years. Larian is releasing on a much longer schedule closer to 3-6yrs, they are less able to multitask. Larian studios have only produced 9 games across 2 franchises (baulders gate and divinity) while insomniac has ~40 games across 4+ franchises. BG3 was also a much riskier project than spiderman2, it was larian really betting the farm on something big compared to a pretty typical cash in from insomniac. They also don't waste money on stuff like buying a kpop group (like blizzard, epic or riot), running cons etc etc.
I think larian fits in with CD project red and other AA studios than with AAA studios like activision and insomniac. At the end of the day it's a fuzzy term though without a strict definition.
And to be clear this is not at all a knock on larian studios, or BG3.
CD Projekt Red is owned by a public parent company, and their last game was probably in the top 50 of most expensive ever made, with some of the highest production values we've ever seen, at least with the latest 2.0 update. Valve wouldn't count as a AAA developer by your definition, but it's difficult to call Half-Life: Alyx anything but a AAA game. I don't think most people would follow your definition.