Topic: Is the Game Industry Heading for another collapse?

In the 80's the video game market was flooded with systems, many of which were either clones or or different versions of the same console, this lead the industry to collapse under it's own weight and it got me thinking, MS have just released their 3rd version of the XBOX ONE and Sony has 3 versions of the PS4 even Nintendo is guilty of this with the numerous versions of the 3DS

so my thoughts were this, "Is the industry heading towards another collapse?" are the "big 3" over saturating the market?

what do you think?

I don't think console versions are too big a risk to the industry, possibly a sign that hardware sales are healthy.

I think that games development though is possibly starting to flounder a little bit. With all technology that can be be brought to bear on AAA titles, the cost of producing and then marketing these games is becoming very large. A game can take a studio years to make and then easily not make back its production + marketing budget. So publishers are now trying to maximise profits and encourage business practices that squeeze more from gamers (DLC, micro transactions, always online etc).

I think this means a couple of things - 1) Publishers without manufacturer support are going to always play it safe and re-release known quantities as much as possible. It is why so many nostalgic games are coming our way because they'll have a built in fan base. 2) More and more dubious practices like special editions, season passes, micro transactions etc.

This is all fine as long as consumers keep buying it but in the end you can only squeeze a certain amount out of consumers before they start to be put off by the practice. In turn, re-releasing the same game year after year will soon bore gamers and those returns will start to dip.With the apaprent exception of sport games!

We have seen this already a little with games like AC and COD whereby the games have become a pastiche of themselves and sales have dipped considerably. In games like For Honor and Star Wars Battlefront, season passes and micro transactions have clearly hurt the player base for those games.

It certainly isn't doom and gloom (I mean we have a great slate of games and sales are good) but the industry needs to experiment more to excite gamers and keep them buying titles. Also, if AAA development costs keep rising then the whole industry becomes harder to sustain.

@FullbringIchigo As @KratosMD states, there were multiple revisions of consoles last gen and the gen before. Sometimes it was just a size/shape change to us but often it had more 'changes' inside - a smaller APU resulting in better power consumption and/or quieter use. Then of course you had similar models with different HDD sizes, different cases (custom variations). This is very different though to the 80's because in the 80's, those systems were competing with each other. The various PS3's or the 3 PS4's are not in competition with each other, all play exactly the same games, and developers aren't left trying to release 8 or 9 versions of the same game for every console. They are releasing basically 3-4 versions now - the PS, XB, PC and/or Nin Versions. Also the difference here is that most games these days are multi-plat so if you own one of the consoles, you don't miss out on the majority of the best games but back then if you bought a Sega, you only got Sega, Bought a Neo Geo, only got Neo Geo.

The industry has proved to be capable of sustaining the market and growing with the 2 big consoles, PC's and of course Nintendo capturing their unique market too.

My issue is indie games are having a tougher time to break out at the moment. Around 2008 onwards we had the likes of Trials, Geom Wars, Braid, Super Stardust, Fez, Super Meat Boy, Castle Crashers. These days we still get some excellent indie releases but the really successful ones are less. Perhaps only Rocket Leauge has done extremely well this generation? Doubt Nex Machina gets the attention it'll deserve, and I'd say Hyper Light Drifter definitely didn't either.

Of course at the time when indies were doing so well, AAA gaming was a COD obsessed blur of brown and grey, so they were a welcome antidote. Despite too many formulaic open world games still being released, big budget gaming is in a better place these days, so maybe the creativity of indie games isn't such a requirement anymore. Plus, there are a ton of junky indie games, which can make it harder for the gems to shine.

@kyleforrester87 Good point about indie games, I think post PS4 launch the marketing push is less by Sony etc. though MS put on a good show at E3 this year.

I think there are a few reasons - the first is that publishers have got in on the action and releasing smaller games. Secondly, in 2008 indies felt really new (on consoles at least) - here were games made by smaller groups that just felt fresh and easy to view and download from your console. These successes meant a slew of copy cats and poor quality games. Indie games have become a victim of their own success.

II think Hyper Light Drifter is an absolute classic that is more of a cult hit then cultural hit and is my favourite gaming experience of the last year. I'd also rank Bound and Edith Finch up there as well but they don't seem to be as heralded as much as they used to.

@Rudy_Manchego Games may take longer and cost more but that is leading more to a drop in the number of releases. Gamers are still thirsting for new games to play. Games are no longer that little kids play thing, the thing that parents bought for kids for their Birthday/Christmas but something Parents are buying for themselves. Games are now becoming more costly to make than a big Hollywood blockbuster but taking a LOT more in their opening week. CoD may not be selling 25m+ with every yearly title but can be the biggest media release of the year. We hear that FFxv, a game that cost millions to make over the 10yrs it was in development, only needs to sell 10m units to break even too. That's to the 80/90m console owners, the millions of PC gamers... Cinemas are struggling more than the games industry.

The problem is though that with all the extra costs, the extra time it takes to make a game, and the fact that developers/publishers aren't recuperating costs on 'smaller' projects in the mean-time, the risks increase. If you can churn out a game every year or two, if one flops, its not that long before the next comes in that can recover some of those losses. The losses are not so significant because the investment is much lower etc etc. Companies like EA and Activisio, despite having the biggest franchises are also releasing far fewer games a year.

It would be like the Movie studios releasing 4-5 big movies a year when they were releasing a movie virtually every week. They are putting more and more money, time and effort into those 'big movies' that at most, they can take a risk on 1, maybe 2 new 'games' but need to put big money in to ensure they match up to the quality of those 'big' names but because they are not releasing those 8-9 smaller games that may still of been 'profitable' they are sticking in ways of making 'more' profit from the big games.

You can blame Season Passes (although still better for the consumer overall - I would rather buy a Season Pass than be expected to pay more buying individually), micro-transactions (as long as purely cosmetic and totally optional) etc as a 'need' to reimburse' escalating development costs but most of the 'big' games are profitable in the first week - if not on the opening day. Admittedly some may take a bit longer but the fact is that Publishers are releasing 'fewer' games that keep 'profits' coming in because they are having to spend more time and money to keep the bigger games getting bigger/better.

CoD may not of sold 25m+ this time but it still made a massive profit on day 1 - before any DLC, Season Pass or Micro-transaction. Same with Destiny but Activision are releasing maybe 2-3 games a year - CoD, Crash and Destiny this year, last year it was CoD and Skylanders - with a Destiny Expansion. Its not just Activision but EA too so they are propping up their 'profits' by things like micro-transactions rather than releasing 'smaller' projects that may not be as 'profitable' as they still take some investment.

@KratosMD It is a shame, because there is still the occasional excellent (and even phenomenal) indie release.

@kyleforrester87 What do you have in mind?

I've been enjoying a number of indy titles recently like Downwell, Lumo, forma.8, Oceanhorn, NOVA-111

@Wesker I see you've been playing a lot of Downwell, I'm assuming on Vita though I maybe wrong? I missed it in a recent sale but I will pick it up as it looks kinda cool.

But for me, the standout indie games of the generation are Hyper Light Drifter and Axiom Verge. I'd also personally rate Momodora: Reverie Under the Moonlight, The Swapper and Hotline Miami. Of course these are just my picks but I think in general there isn't the same buzz when a quality indie game gets released these days. It can be fun to sift through the rubbish to find the good stuff though, if you're that way inclined.

@BAMozzy It is interesting you mention FFXV in your points because I would take that as an example for my argument!

SE announced that they would need to sell 10m to turn a profit. Well, six months from release (traditionally the most lucrative period of a launch) estimates of sales range from 4.66 to 6 million units. It may be more, I think that was April May time. Now that game may have had an overly expensive development cycle, the threshold for other AAA titles isn't going to be as high but it shows how tough it can be for games to reach their budget. How has SE decided to get more revenue from their title? DLC - clearly content has been chopped out or not included in the initial release to sell back to people as DLC. They are keeping devs on the title to try and keep generating revenue.

As for season passes, there is nothing wrong in principle with having a season pass to get extra content. I've bought them before. But increasingly publishers are pushing season passes on people with incentives when content hasn't even been announced yet, let alone reviewed. It can also be hugely overpriced in comparison to the base game with what you are getting. Also micro-transactions arent always cosmetic or can be earned in the game. In For Honor, some gamers worked out that to grind out all the content (that can be purchased) would require them to play full time for over a year. This is an attempt to get more revenue for less product. How is that better for the consumer?

Ubisoft have now pretty much made this a part of most of their new releases in an attempt to maximise revenue. Bethesda want to charge for some mods. All of these things are publishers countering risk with supplemented revenue streams.

Gamers are old now and we do, on the whole, have more disposable income but we are also more discernable consumers with more access to reviews and content then ever before.

Also, releasing less games in a year because of development time and cost is riskier to publishers. The same is happening in the film industry where studios are relying on tent pole films. In fact, they are taking less and less chances on smaller or medium films which is where I think publishers are starting to go.

@kyleforrester87 Yes, I play it mostly on Vita, like most other indie games. The indie releases are really slowing down, but I am looking forward to Undertale, the big E3 Vita announcement. Indie games are getting more hype on the Switch now, which appears to have replaced the Vita.

@Wesker Good thing I plan on getting a Switch before the years out, then!

@Rudy_Manchego I know FFxv is in 'trouble' in terms of selling enough games but the point I was making, is that if a game as 'big budget' as FFxv only needs to sell 10m (still a lot) when a game like BO3, Fifa 17 or GTAv sell more than 10m alone on just PS4, then those games must be making a LOT of profit. Even games that were considered 'poor' selling games - like Tomb Raider reboot for example was still profitable even if it didn't sell as many as Square hoped for a 'known' franchise. Profits were boosted by the remasters of course but the game was profitable before that.

Its difficult to know if Bloodborne for example was profitable but according to Sony, it sold above expectation - yet still sold less than 3m. Even games like Infamous, Killzone etc sold less than 3m but were still regarded as 'successful'. Its not just First Party games either but games like Watchdogs was 'profitable' enough to get a sequel. Destiny, another game that was a 'big budget' title, not just the development but marketing etc too was 'profitable' on Day 1.

If you look back, a lot of publishers had numerous games releasing through the year. Maybe not as big profits as others but still profitable enough. These games were keeping the profits coming in but now, the big companies are seeing they can keep that money coming in with 'less' investment. Even a 'smaller' game requires a studio to develop and market and a lot more cost than putting micro-transactions in a game.

The film industry is in a different boat really because they can't release DLC or micro-transactions but they can make money on paraphenalia - like toys, t-shirts etc and rely on DVD/Bluray sales, TV studio's/streaming services buying up the rights to show these movies, inc On Demand renting costs but these are 'almost' free profit where as taking a chance on a smaller movie, that might make a 'tiny' profit in the box-office and distribution deals because of the 'investment' into making it also has to be considered. Selling a 'licence' to make 'official' toys or clothing is 'pure profit'. They are not being charged with the manufacture costs, distribution costs etc but get a lump sum from the makers of these for the licence and a percentage of the profits for every item sold - no investment cost into these.

Point I am making is that Publishers are finding ways to keep the Profit margins 'high' but by releasing fewer and fewer games. They can afford to increase the development cost, take more time etc of the few games they have, without the need to ensure other games release to keep the profits coming in. Its the same with Movies because of all the 'extras' that come in. Activision/Blizzard had massive profits - net revenue of $1.73bn (yes Billion) - I know not all profit of course but that's just 1 Quarter! That's up by $297m from 2016 Q1 - Net income was $426m for a Quarter - If that continues for a year - they are going to make over $1.7bn in net income. That's essentially from 3 franchises - CoD, Destiny and Overwatch.

How many 'new' games could be made with that 'budget'? Its not just Activision, EA are expecting a 71% gross profit margin in 2017, up from 69% in 2016, and 68% in 2015 and a net revenue of $4.8bn. What this shows is that the industry is showing growth rather than a decline - even though the actual releases are taking longer, costing more and becoming fewer and farther between. It maybe why 'indie'/budget etc games are also showing growth and having that 'space' to flourish. Not having the competition from Big publishers, big studio's and 'big' releases.

@kyleforrester87 I might get a Switch towards the end of the year as well. Nintendo have basically done what the Vita was supposed to do and proven that AAA games can work on a handheld. I wish Sony would bring out similar product, but it looks like they're gonna sit on what they've got for a while.

@BAMozzy You are completely right in that revenue is increasing for major publishers. Not going to argue there but that isn't always an indicator that things are going well. You should see the money being made by major banks right up until 2007-2008

Over half of EA's revenue was digital sales and that is largely comprised of mobile games and additional content - mainly from its Ultimates sports teams. Digital sales and extras on games is by far the most profitable part of their business and the parts that have grown the quickest/most in the last few years.

So again, completely right that games are releasing less games and trying to milk those they already have for as long as possible. It makes short term business sense. Ubisoft, Activision, EA, Square etc. they are all making the squeezing of revenue from titles a fundamental pillar of game development. These things are only going to continue. If you look at Ubisoft's presentation, pretty much all except the Nintendo tie in were geared towards it.

Now this may be the future of gaming and that the growth in revenues show that this, as well as mobile gaming, is popular among gamers and what people want. But my thought is where this leaves the gamer and the industry as a whole? I feel that the most risks are being taken by first party studios, in particular from Sony but also from Nintendo and MS because they are probably don't need the same amount of profit to be deemed a success - rather they want well received games that promote their brand.

If every major AAA release is now being made with the intention of getting gamers to pay continually for content regardless of quality or whether they paid for the full base game then I personally think we might be heading for a dip if not a crash in the industry.

I'm not personally saying the games industry is doing badly or that the sky is falling, I think there are some ace games coming out and enough content that I like that I don't feel like I have to buy additional digital content. I like some DLC and extras - I'll be getting Horizon Zero dawn DLC the moment it is available. But, I do think that some trends in industries can yield big profits but damage long term growth. These things are cyclical.

That said, probably the biggest risk to the gaming industry is advances in streaming. If Netflix or someone can solve the latency issue for the masses then games may suffer the same issues as the music or film/tv industry.

yes i think about there is a crash coming
1.streaming games(i think there be a console that streams games soon which maybe is the atari box
2.The easy access to tablet and phone games(parents would get a 100-200 dollars devise that can play free games then a 400 dollars console with 60 dollar games)or get a pc so they can do there school work on or phone to call and text them
3.PC is becoming cheaper now and can pull some better games
4.over starteration in the market with mid gen consoles

The 80's crash didn't come because there were too many consoles or better options. It came because the market was flooded by crappy games, thus causing the consumers to lose faith in everything video games.

@Sinton There were a few factors (including this) to be fair, I won't list everything from the Wiki but it does state one of the reasons:

Flooded console market

At the time of the North American crash, there were many consoles on the market, including the Atari 2600, Atari 5200, ColecoVision, Odyssey 2 and the Fairchild II. In addition to this, Mattel and Coleco created devices that allowed them to play 2600 games on their consoles, and others created Atari 2600/Intellivision clones such as the Coleco Gemini, the Sears Tele-Games systems (private-labeled versions of the Atari 2600 and Intellivision), and Tandyvision (an Intellivision clone for Radio Shack).

Each of these consoles had its own library of games produced by the console maker, and many had large libraries of games produced by third-party developers. In 1982, analysts noticed trends of saturation, mentioning that the amount of new software coming in will only allow a few big hits, that retailers had too much floor space for systems, along with price drops for home computers could result in an industry shakeup.[7]

Either way, the current situation situation is quite different so I agree theirs no way to really draw any meaningful comparisons here.

Short answer No.

Video games are a more viable form of entertainment and make more money now then even some Hollywood Films. People are more accepting of video games and the industries is huge now.

Yeah you have some indie game companies pumping out shovelware but does the indie film companies hurt the film industry?

Anyone thinks that the game industry is going to crash like the 80's is either a fool, an idiot or is just trolling. I would sooner except the motion picture industry to crash before the gaming.

@Tasuki Bit harsh at the end there bud lol. Not many people saw the last financial recession coming either, at the time. These things wouldn't happen in the first place if they were easy to predict.