Published as part of our sister-site GamesIndustry.biz's widely-read weekly newsletter, the GamesIndustry.biz Editorial, is a weekly dissection of an issue weighing on the minds of the people at the top of the games business. It appears on Eurogamer after it goes out to GI.biz newsletter subscribers.
It may just have scored an enormous commercial hit with the latest Call of Duty title - which probably means sighs of relief all around, after the embarrassingly public split with Modern Warfare's creative team earlier in the year - but all is not rosy in Activision's garden, it seems.
Indeed, the main activity in said garden this week has been pruning. Iowa-based Budcat Studios, which the publisher picked up two years ago and put to work on PS2 and Wii ports of Guitar Hero titles, has been shut down, and many jobs have been cut at the firm's US QA department - more than would be normal at this time of year, and probably a direct reaction to slowing sales in the music game sector.
It's always unfortunate to hear of any industry layoffs, but news of Budcat's closure and the QA layoffs was eclipsed by a disturbing statement from the publisher which said that it is presently mulling over the future of Bizarre Creations. The British studio, formerly most famous for the Project Gotham Racing franchise, was bought by Activision in 2007 and employs around 200 people.
Activision is careful with its words - it's considering a sale, it says, and is presently simply exploring its options. The giant publisher acts as if stung by the implication that it's going through the motions before shutting down the studio, and everyone undoubtedly hopes that it's not just saying that, although "exploring our options regarding the future" is a term commonly taken to imply that the aforementioned future is looking pretty bleak.
How did it come to this? How does a studio go from being a darling of the industry - and there's no question that Project Gotham Racing and Metropolis Street Racer before it were stupendously successful and well-loved games - to being considered more liability than asset?
The reason is not simple, and is not solely related to Bizarre's output. Certainly, its recent outing in the James Bond franchise hasn't been well-received - although then again, the last time any James Bond videogame was genuinely well-received, the N64 was still the world's most powerful home console - but its previous title, Blur, saw the studio back on its home turf and delivering a broadly well-liked racer which picked up over half a million sales.
In Activision's view, however, this constitutes a failure to find a "commercial audience" for the Blur franchise. Our first hint as to what's gone wrong lies right there.
The games business has always been a hit-driven one, and we've always accepted the basic contention that a large number of games flop and fail to make back their investments - but the firms behind them are supported by the smaller number of games which do stunningly well and turn enormous profits. In the middle lies a fairly thick layer of games which do "okay" - enough to earn back their costs, pay the salaries and the rent, keep the lights on and keep everything in the black.
Larger companies, with their fingers in many pies, succeed in this environment because they can survive a few flops off the back of a decent hit. Smaller firms, aside from those content to follow the work-for-hire path, either produce a hit and get rich, produce a string of mid-level titles and stay in business, or go bust, dispersing their staff elsewhere and often giving rise to new start-ups from their ashes.
That's the model, and those in the industry all know and understand that model. However, there's been a change in recent years which has tipped the balance - a fairly simple and direct change in the ratios involved. Put bluntly, the threshold at which a game is considered a "hit" has become much higher. Costs have risen, driving up the risks in the market. In tandem, boxed game prices have failed to deflate appreciably and have even risen, which also makes consumers more risk-averse.
So we simultaneously see a flocking behaviour among consumers, with high-profile titles and well-established franchises being favoured more than ever, and a concentration strategy among publishers, with the entire resources of large firms being poured into an ever-narrowing selection of surefire hits. When the risks are this high and the gap between success and failure this wide, the old approach breaks down a little. Your hits don't support so many misses any more, and the middle layer, the games which did okay and provided bread and butter for a host of studios, simply disappears.
Want to see proof? Look no further than Activision itself, and the dramatic gap in the performance of various titles in its catalogue in the past months. On one hand, the company has sold millions upon millions of copies of games like Call of Duty: Black Ops and StarCraft II. On the other hand, titles like Tony Hawk: Shred and DJ Hero 2 dramatically under-performed, with the Tony Hawk title in particular raising eyebrows by shifting a paltry 3000 units in its first week on sale in the USA.
Somewhere in the middle, then, is a title like Blur, with its half-million sales. Once, that would have been fine - unremarkable, perhaps not the start of a franchise, but enough to keep the lights on at a studio, especially one with a solid pedigree and strong goodwill behind it. In today's landscape, there's only room for the behemoths. Blur, for all its critical acclaim, joins the ranks of the flops, and Activision's bosses cock an eyebrow at Bizarre Creations and ruminate over whether the studio can ever produce the multi-multi-million sellers which are, apparently, the only things worth having in the market nowadays.
Of course, that's not entirely the right question to ask, because while Bizarre Creations developed Blur, the reality is that any new franchise created by a wholly owned studio of a major publisher is by no means the creation of that studio alone. Building a game franchise within a publisher is a vastly collaborative effort on a whole lot of different levels. From concept approval through to the gold master, the publisher's fingerprints are all over the project, and from that point on, the ball's almost entirely in their court, with marketing and distribution playing a vital role in establishing the franchise and getting early sales moving.
In other words, if Blur didn't perform up to standard, it's as much Activision's fault as it is Bizarre Creations' - probably more so, in fact, given the fact that the critics liked the game and the public seem simply not to have heard of it. Of course, a new franchise - especially in a crowded genre like racing - is a tough thing to launch, and even the most experienced publisher can trip up. On the other hand, Activision right now needs new franchises like a desert needs rain, because if the corpse of the Tony Hawk franchise has stopped twitching and the music game sector isn't going to take much more flogging... Well, take the properties controlled by the fiercely independent Blizzard out of the equation, and Activision ends up looking much like Take-Two did a few years ago, a company with one world-beating franchise which comes along once a year and nothing but drought in between.
Where will new franchises come from? Activision's not much of a company for nurturing new talent. One gets the impression that it feels itself a bit beyond such things, perhaps not so much out of arrogance but out of a wise recognition of how easy it is for a large corporate body like itself to have a Reverse Midas Touch when it comes to creative endeavours. Instead, it's keen on opening its wallet to established franchise creators - like Bungie, on whose first original IP since Halo the publisher has pinned significant hopes.
In the medium term, of course, Activision will be fine. It has Blizzard, after all, a golden egg laying goose which the publisher's top executives are forbidden by restraining order from approaching with sharp objects. It has Call of Duty, another magical goose which has thus far proved remarkably resilient in the face of attempts to cut it open. It just launched a game which took $650 million in its opening week. Nobody's predicting doom for Activision.
But the Activision business model - the model of concentrating its focus to reduce risk and hiking prices to ensure that consumers do much the same - has been pursued blindly by many other publishers who view the firm's turnover with envious eyes, and some of those publishers aren't going to emerge from all of this looking quite so healthy. In a world where consumer spend on boxed games is being laser-focused on hits to the increasing detriment of all the misses, Activision has been left holding a few cards - but some publishers will find themselves holding none at all.
Of course, the wider context is important too - this is all happening at one end of an industry which has grown remarkably in scope to encompass all sorts of less risky, more adventurous and even more creative enterprises, distributed at a whole host of price points on a variety of platforms which didn't even exist five years ago. If many developers and even some publishers are sailing their business away from traditional console titles and into fresher waters, it's not just for the love of shiny new things - it's because they can see what's happening in console gaming, and recognise that it's an increasingly hostile place to try anything new, to take a creative risk, or even to simply survive as anything other than a multinational behemoth.
As to Bizarre Creations, caught in the midst of all of this - we can only cross our fingers and hope that everything turns out well for the studio. Nobody questions its ability to make good games. Sadly, however, this sector of the games business is one where making good games simply isn't enough any more.
If you work in the games industry and want more views, and up-to-date news relevant to your business, read our sister website GamesIndustry.biz, where you can find this weekly editorial column as soon as it is posted.