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How Big is Big Enough?

Lack of scale and weak management spells the end for smaller publishers.

Published as part of our sister-site GamesIndustry.biz' widely-read weekly newsletter, the GamesIndustry.biz Editorial is a weekly dissection of one of the issues 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.

British publisher Eidos is back on the auction block, if a report in national newspaper The Daily Mail is to be believed. Admittedly, anything written in the Mail deserves to be taken with a pinch of salt, but it's so rare for the tabloid to write anything about videogames that isn't "Murder Simulators Make Toddlers Stab Each Other With Spoons" that a sober report on the games business actually ends up with a peculiar aura of believability about it.

Besides, the industry itself has been abuzz with this particular rumour all week - and more importantly, it makes sense. Eidos has had what might charitably be described as an awful year. Top management have quit, studios have been closed, and the dreaded word "restructuring" has loomed over the company, the corporate equivalent of vultures flying overhead.

I should point out - before it looks like I'm simply being unpleasant to poor old Eidos - that the company is far from alone in this situation. In fact, although its recent problems have been somewhat embarrassingly public, they're far from unique. Many of the industry's mid-sized publishers are suffering from exactly the same underlying difficulties as Eidos - perhaps even most of them.

First, there's that basic lack of scale. The games business used to have a single 800-pound gorilla (EA), one platform holder that actually mattered (Sony), and a scattering of minor rivals whose relative differences in scale paled in comparison to the huge scale difference between all of them and EA.

Today, the jungle is a lot more crowded. EA is still a pretty big primate, but it has been joined by other companies who jostle for the top spot among third-party publishers. Mergers and acquisitions have led to the creation of behemoths like Activision Blizzard, while companies like Ubisoft have successfully grown their businesses into the top tier through more organic means.

Moreover, there are now three platform holders all vying for position - each of them keenly aware of the importance of first-party publishing to their ambitions, and each of them therefore representing a competitor as well as an opportunity for third-party firms.

It's not just top-tier firms which are bulking up, either. Look at the second tier of publishers, and consider how many of them suddenly have double-barrelled names - Namco Bandai, Square Enix, SEGA Sammy, and most recently KOEI Tecmo. In each case, the exact reasoning for the merger was different (access to IP, obvious business overlap, and financial support respectively) but the underlying factor was the same. Size matters - now more than ever.

As a direct result, a company like Eidos - which used to be seen as a relatively major publisher - has started looking rather diminutive. So, too, have several of its compatriots - Midway (sold this week for USD 100,000, but with a shocking debt bill attached), Atari, Codemasters and their ilk are minnows in a pond where the other fish keep getting bigger.

The lack of scale isn't, of course, an insurmountable obstacle to releasing hit videogames - but it certainly makes things harder. The budgets for next-gen game development are high, and the damage that can be done by cutting corners is immense - witness the poor reception for Atari's Alone in the Dark on Xbox 360, a game which could have been a runaway hit in the hands of a company with the scale and finances required to more thoroughly test, hone and refine it. Moreover, with television ads now de rigeur for almost every major game launch, and retail POS spending increasing all the time, the cost of effective marketing is making life even harder for smaller firms.

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About the Author
Rob Fahey avatar

Rob Fahey


Rob Fahey is a former editor of GamesIndustry.biz who spent several years living in Japan and probably still has a mint condition Dreamcast Samba de Amigo set.