Riders on the Storm

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.

Last week's column outlined what I believe to be the ultimatum facing the core games industry - the harsh economic reality presented by spiralling development costs and seemingly stagnant market growth. It's a reality which is forcing publishers and developers to explore new business models and new markets, or to entrench deeply in existing franchises and proven genres - a reality which may even herald the end, at least temporarily, of the graphics technology arms race which has defined the games business' cycles for decades.

Most in the business seem to agree that we are reaching this kind of crossroads in the industry's development, although some are quick to point out that this kind of problem has been predicted before. Indeed, every console transition of the past 15 years (and probably further back than that) has been met with wailing and gnashing of teeth from those who hold the industry's purse strings, watching with horror as development budgets skyrocketed - and there have always been those who claimed that this time was the step too far, the straw that would break the camel's back and bring the industry crashing down.

Each time, of course, they were wrong - spiralling development costs have always been more than matched by the industry's powerful growth. Certainly, each transition lays low a certain number of companies who don't manage to weather the storm - but everyone else ends up enjoying the fruits of a rapidly expanding market, even if the stakes involved do keep getting higher and higher. So why should the boy who cried wolf get a hearing this time around?

Even as the world stumbles through its halting recovery, the core games business doesn't seem to be following suit

Firstly, it's worth pointing out to anyone keen to employ the "boy who cried wolf" analogy that while we always remember this tale as a parable against issuing false warnings, at the end of the story it's the villagers who ignored the boy who end up getting eaten. It might as well be a cautionary tale about letting your guard down because you've heard the same warning so often before. Secondly, it's important to note that the warnings this time around aren't actually the same as in previous generations.

In this case, it's not spiralling development costs that are being highlighted as the problem - those, quite simply, are a fact of life in such a technology-driven market. Clever tools and middleware ease the burden, but the reality is that if you want graphics and content that's markedly better than what's gone before, you have to pay for it. However, it's only worth paying for it if doing so makes more people buy your game - and that's where the problem lies this time. More people aren't buying core games.

The market started contracting around the time of the financial crisis, which allowed people to shrug it off as being the global recession's fault - even when plenty of commentators sounded warning notes about this being more fundamental to the games business than that. Now, even as the world stumbles through its halting recovery, the core games business doesn't seem to be following suit. The money is going elsewhere; the growth has slowed, stopped, and in some cases, may even have reversed.

But rather than bemoaning this situation, I think it's important to look at the sectors which can actually benefit from this change - because this is, undoubtedly, a change in the industry rather than a decline. The money is still there. The consumers are still there. The growth is still there - it's just switched focus, away from easily measured boxed-game retail revenues, and into a variety of new areas.