interesting article on the global games market
polycounter lvl 18
http://news.bbc.co.uk/1/hi/technology/8201332.stm
Alarm sounded over game futures
A stark warning about the finances of the games industry has been aired at the Edinburgh Interactive conference.
The sector had suffered "significant disruption" to its business model, Edward Williams, from BMO Capital Markets told the industry gathering.
"For Western publishers, profitability hasn't grown at all in the past few years and that's before we take 2009 into account," he said.
By contrast, he said, Chinese firms were still seeing improved profits.
What makes the difference between Western firms and Chinese developers was the way they went about getting products to players.
Western publishers, said Mr Williams, still relied on the traditional develop methods of putting a game on a DVD and then selling that through retail channels.
Chinese developers focussed primarily on the PC market and used direct download, rather than retail stores, to get games to consumers.
Those Chinese developers were also helped by the low number of console users in South East Asia which meant developers there did not have to pay royalties to console makers.
Future models
Three factors, said Mr. Williams, were forcing the operating costs of Western firms to spiral upwards:
Games are getting larger, which meant longer development time and larger staff costs.
After its release in the 1990s the PlayStation accounted for 80% of the market. Today the console space is very fragmented, so developers have to work on many platforms at any one time.
The cost of licensing intellectual property or gaining official sports body endorsement (such as FIFA or FIA) has gone up.
These factors, said Mr. Williams, explained the stagnation in overall profitability despite sales in the games sector increasing by $30bn (£24.17bn) over the past four years.
Recent figures suggest sales are also coming under pressure. US game sales fell by 29% in the last 12 months suggest statistics from research group NPD.
PS2 console, AP
The PlayStation no longer dominates pushing up costs for game makers
Speaking to the BBC, Peter Moore - president of EA Sports - said that while the Chinese and Western markets were still very different, he expected to see some significant changes in the way Westerners buy games in the future.
"In China, PC and mobile platforms will continue to dominate," he said. "There isn't the necessity to buy other pieces of hardware and it is our job to service that."
"In Europe we are going to see more content that's delivered electronically, be that through Steam, Xbox Live or whatever."
Mr Moore added that while this may have some impact on retailers, the future of the high street shop was still bright, especially if you factor in sales of hardware, peripherals and game-time cards.
"The release of Tiger Woods online as a free to play experience will be the real test of the Western consumer's appetite for digital downloading," he said.
The game, scheduled for release in late 2009, has a segment which gamers can play for free online but can also pay for additional content as required.
Now in its sixth year, the Edinburgh Interactive Conference brings together industry figures, developers, publishers and the media to discuss issues facing the interactive game sector and to try to promote creativity.
Alarm sounded over game futures
A stark warning about the finances of the games industry has been aired at the Edinburgh Interactive conference.
The sector had suffered "significant disruption" to its business model, Edward Williams, from BMO Capital Markets told the industry gathering.
"For Western publishers, profitability hasn't grown at all in the past few years and that's before we take 2009 into account," he said.
By contrast, he said, Chinese firms were still seeing improved profits.
What makes the difference between Western firms and Chinese developers was the way they went about getting products to players.
Western publishers, said Mr Williams, still relied on the traditional develop methods of putting a game on a DVD and then selling that through retail channels.
Chinese developers focussed primarily on the PC market and used direct download, rather than retail stores, to get games to consumers.
Those Chinese developers were also helped by the low number of console users in South East Asia which meant developers there did not have to pay royalties to console makers.
Future models
Three factors, said Mr. Williams, were forcing the operating costs of Western firms to spiral upwards:
Games are getting larger, which meant longer development time and larger staff costs.
After its release in the 1990s the PlayStation accounted for 80% of the market. Today the console space is very fragmented, so developers have to work on many platforms at any one time.
The cost of licensing intellectual property or gaining official sports body endorsement (such as FIFA or FIA) has gone up.
These factors, said Mr. Williams, explained the stagnation in overall profitability despite sales in the games sector increasing by $30bn (£24.17bn) over the past four years.
Recent figures suggest sales are also coming under pressure. US game sales fell by 29% in the last 12 months suggest statistics from research group NPD.
PS2 console, AP
The PlayStation no longer dominates pushing up costs for game makers
Speaking to the BBC, Peter Moore - president of EA Sports - said that while the Chinese and Western markets were still very different, he expected to see some significant changes in the way Westerners buy games in the future.
"In China, PC and mobile platforms will continue to dominate," he said. "There isn't the necessity to buy other pieces of hardware and it is our job to service that."
"In Europe we are going to see more content that's delivered electronically, be that through Steam, Xbox Live or whatever."
Mr Moore added that while this may have some impact on retailers, the future of the high street shop was still bright, especially if you factor in sales of hardware, peripherals and game-time cards.
"The release of Tiger Woods online as a free to play experience will be the real test of the Western consumer's appetite for digital downloading," he said.
The game, scheduled for release in late 2009, has a segment which gamers can play for free online but can also pay for additional content as required.
Now in its sixth year, the Edinburgh Interactive Conference brings together industry figures, developers, publishers and the media to discuss issues facing the interactive game sector and to try to promote creativity.
Replies
ps. Im not sure why tiger woods golf is the defining factor of how consumers buy games O_O I dont care if its free, im not playing that boring shit! Toss up 12 months of wow for free, and see how many people download it.
The same rehashed golf game with a new tiger woods model...only for free...except you have to microtrans every bucket of balls.....EA spells Inovation
It is very true that the Western game industry is in a transition period. And its true that adherence to the older model of developing and distributing games should be questioned. But jumping on a recent trend that is proving successful in a region with a completely different situation and culture is not the right choice. Squid is a very successful food in China. That doesn't mean that Western countries should adopt it as a staple of our diets.
Companies should put a greater emphasis on developing quality titles with solid art direction, storytelling, and mechanics. It is quite simple to adhere to all those guidelines and still remain within budget. It's when games all try to be like Gears of War that things become unsupportable. An over-reliance on allowing marketing to influence design decisions is also a serious problem. Marketing does not make good games, it just make them marginally easier to sell. Placing design decisions in the hands of marketing is almost always a mistake. Following focus groups too closely is also a mistake. Marketing research is there to provide insight into the consumer, nothing more.