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's become an oft-repeated mantra - the mid-range of gaming is on the way out. Squeezed between the top tier of million-selling blockbusters and the surging success of low-priced online, mobile and indie games, the future for any title that dares to charge a top-end price for mid-range content seems extremely bleak.
Publishers have reacted to this new reality with a variety of different strategies. Activision's well-documented approach has been to withdraw entirely from any aspect of its business which doesn't deliver blockbuster results, abandoning the low- and mid-range entirely. Electronic Arts and other major publishers have taken a more balanced approach, focusing resources on building high-end franchises while simultaneously exploring the potential of more niche low-cost games as well as mobile and social markets.
That's the top end of publishing, though. Companies like Activision, EA, Ubisoft, Take-Two, Square Enix and their ilk have huge blockbuster titles on which they can rely even while the market is in flux. Their business models require huge adaptations thanks to the sweeping changes in the market, but franchises like Call of Duty, Madden, Assassin's Creed, Grand Theft Auto and Final Fantasy are ports in the storm, guaranteed top sellers regardless of market conditions - for now, at least.
Other publishers, however, are not in such a lucky position. Two classes of company find themselves in seriously troubled waters right now - those publishers who have largely survived off mid-range titles and licensed IP over the past decade, and new companies attempting to break into a full-priced console game market which increasingly high barriers to entry.
"The actual impact of critical reaction to a game on its sales remains a matter for debate."
A pertinent example of the extreme risks involved in the former of those positions can be seen in THQ's launch this week of Homefront, a military FPS title on which the company appears, on some levels, to have "bet the farm". The firm's management would probably reject that characterisation - the stock market, which hammered THQ share prices in the wake of mixed reviews for the game, clearly begs to differ.
As it stands, it's tough to say whether Homefront is going to hit THQ's targets for the title or not. Despite the heavy emphasis which most publishers place on Metacritic scores, even determining developer bonuses based on certain score thresholds, the actual impact of critical reaction to a game on its sales remains a matter for debate. In spite of the weak scores, 375,000 copies shifted on day one, and the full-year sales target may yet be met.
However, there's little doubt but that THQ's top brass would sleep a lot easier if the game was cruising safely in the higher echelons of Metacritic - and so, it seems, would the firm's shareholders. Weak reviews may not have harmed day-one sales, but if they're a pointer to ongoing poor word of mouth, then the combination may sink the game's ongoing appeal at retail. Worse, a poor critical and public reception could ensure that the IP fizzles and dies after one game, where what a publisher like THQ really wants is a top-tier franchise.
The problem here is one of balancing risk. If you want serious blockbuster title, you're faced with much higher bars to entry than ever before - so you have to be prepared to spend a lot of money. However, once that kind of money is on the line, it's extremely hard to avoid an intense dose of risk-aversion, which casts aside any kind of sweeping originality in favour of copying successful formulae and trying to claw onto any passing cultural zeitgeist.
Thus you end up with a game like Homefront - which, for all its production values and the undoubted talent of the team behind it, falls into the role of being a camp follower for Call of Duty, a position which undoubtedly limits its potential as a break-out franchise. This is exactly the problem which mid-range publishers face at this point - top-tier title development and marketing budgets are so high that it seems suicidal to back anything original, but without doing so, it's nigh-on impossible to establish a meaningful franchise and start properly playing in the big leagues. Catch-22.
This isn't to say that THQ won't get anywhere with Homefront - although so openly inviting constant comparisons with Call of Duty is unlikely to do the game any favours either critically or commercially in the long run. As an illustration of the problems faced by companies big enough to fund large titles, but not big enough to comfortably absorb the loss from a big title flopping completely, though, it's a good illustrative case.
Of course, the creative issue at the heart of this problem - that of cloning successful titles as an antidote to risk - is decades old. Every successful title generates clones, and while they're usually creatively bereft, some of them even make a genuine contribution to gaming. The evolution of the medium, after all, usually happens not through revolutionary leaps forward but rather through the accumulation of new ideas, better presentation and technological progress applied to well-understood existing genres.
"Either learn the ropes of an emergent platform and capitalise on that niche, or aim for the top with big-hitting, high-budget titles."
The difference now lies in the sheer level of risk at play. The huge decline in THQ's stock price this week shows just how heavily the company has bet on this individual title. Development costs have skyrocketed, but so too have marketing costs for any game that wants to notch up serious retail sales. If you're a major publisher with a catalogue of million-sellers, you can handle this. If you've spent the past decade getting by on a solid portfolio that's largely made up of second-tier games, though, the numbers are now looking very, very frightening indeed.
So, wherefore the mid-range publisher? Like the top-ranked firms, the answers we're seeing so far are varied. THQ's approach is clear - having spent years working (largely successfully) to dispense with the negative, shovelware image which was once attached to the firm, it's now not content to be consigned to a rapidly shrinking mid-range publishing role. It's going to invest and aim for the top - but whether that can really work while it lacks the courage to let its big products step out from the shadows of last year's blockbusters is a major question. This is a company which has reformed itself massively in recent years, however, and its determination to reach the top may well overcome this hurdle, too.
For other firms, as the budgets involved spiral ever upwards, the window of opportunity is closing - and many are choosing to move sideways instead. Mobile and social gaming offer fresh pastures, albeit heavily contested ones. Portable platforms, including the upcoming 3DS, offer the chance to stay in the game without engaging with huge HD console budgets. Perhaps most exciting for former mid-range publishers, however, is the resurgence of the PC - a platform long written off due to piracy, which now appears to be coming into its own again thanks to digital distribution platforms and a proliferation of new price points and business models.
One thing is certain - the days of the second-tier publishers are numbered. It's only a matter of a few years before those firms will have made a choice - either learn the ropes of an emergent platform and capitalise on that niche, or aim for the top with big-hitting, high-budget titles whose success will propel you amongst the big boys. Some will succeed - THQ, hopefully, among them. Some, however, will die trying. As yet it's hard to guess which will be which.