On Gaming's Future: AAA Reality Check

So yeah, this post going up by the end of the week of my last post obviously didn’t happen. Turned out to be a crazier month than I predicted (tons of new hires at work and they just announced we’re buying another company), plus I was getting ready to leave for what was an amazing week’s vacation in Iceland (which I’ll post about in the future). But enough excuses.

Last time I talked about the mobile gaming landscape and how despite what the iPress is claiming, the reality is that the mobile industry is not nearly as rosy as many think and is in many ways steaming head first into the challenges the rest of the industry has been struggling with for years. The biggest challenges of all–those impacting AAA development–are what I’m going to talk about this time.

I love big AAA productions with heavy story, characters, worlds and production values with deep, immersive gameplay. I have nothing against smaller indie titles and have enjoyed many of them but bigger scope titles are where my heart is and it’s where I go first with my gaming time and money. Most of what I’ve played in the supposedly revolutionary mobile space has underwhelmed me to say the least. Not to say there isn’t strong potential there but touch controls (which on the iPad at least I find very laggy in most games) limit how complex you can make a game and I’ve yet to see anything on the platform which has strong characters, narrative and storytelling. I’ve looked and not even the best examples I’ve been cited can hold a candle to something like Mass Effect or Dragon Age, unless they’re titles that originally began on a dedicated gaming system. Many are claiming that tablets will render all consoles obsolete in a few years and that they’re already as powerful as the current systems. That argument however is full of holes. Going into the boring technological reasons would be a post unto itself but suffice it to say that tablets are a long way from being able to play even current-gen AAA games in a meaningful technical way, forget what we’ll end up seeing next year when the new Xbox and PlayStation systems are out. Mass Effect, Skyrim, Call of Duty, Battlefield, Forza Motorsport, Gears of War, Uncharted; these simply can’t be done on a tablet right now and will not be possible for many years to come.

The CEO of respected AAA developer Remedy Entertainment recently stated that we’re very close to having AAA experiences on tablets (both technically and in design terms) but then he pulled out Infinity Blade II as what he called the “benchmark” for that argument. Having played Infinity Blade II, I can’t believe he said that seriously. It’s a very good looking game for the iPad (though only because it has super tiny levels and basically no AI, it’s all trickery) but is simply a treadmill of one-on-one timing based battles with a meaningless filler plot, it’s stuffed with immersion-breaking elements like random gold bags you have to tap on quickly during cutscenes and it’s primary hook is making you replay the same 15-20 minute section over and over again as you grind out higher levels, all while nagging you to post positive reviews and buy power through microtransactions. If this game was released for PC or consoles, it would have been ripped apart in reviews as being shallow, boring, criminally short and a sub-standard experience but for some reason, being in the mobile space seems to give many titles a pass for weak design with the depth of a spoon. And this is one of the biggest budget, highest production value titles I’ve seen on iOS. If this is what Remedy thinks AAA gaming is due to become, I guess I better take up knitting or something.

Despite the fact that the AAA industry pulls in more revenue that pretty much every other form of gaming combined, it’s an industry that has been in a profit struggle (many would say a death spiral) for years. Back in “the day”, selling 50,000 units of a title was considered a massive success. Today sales in the millions are often required to recoup development and marketing efforts and aside from a decreasing number of runaway hits, very few even cross a single million. There’s fewer publishers now than there used to be, several are struggling badly and even the big players are relying on a couple of key franchises to drive all their profits. The vast majority of AAA releases lose money and lots of it. No one is launching new AAA publishers today and I can’t remember the last time I heard of a new studio starting up in the sector either. Big publishers are required to bring AAA games to market but almost all of them are making games internally now, rarely relying on external partners and when they do, it’s with contractual terms that ensure the developers barely survive, even if they craft a hit. Many of these people from the industry who are forming mobile and social studios I think are doing so not just because they want to but because that’s the only place they have a chance of success, even if it’s not that much greater.

On top of that, year over year AAA software sales are in a free fall and the current generation of console hardware is also starting to see sales drop as they reach market saturation. Many believe that while the increasingly niche hardcore demographic is still buying stuff, many of the more casual players who would normally only buy a couple of games a year have shifted to mobile and social platforms, taking their money out of the AAA space entirely. For a long time, I said I was fine with the current consoles and was in no hurry to have new ones to worry about. Now I would say that with more and more people touting how tablets are taking over everything (whether they’re correct or not), it’s time for new consoles to grab and refresh people’s attention. However, Microsoft has told us to expect no console announcement from them any time soon and by all accounts, Sony will be focusing on Vita and late PS3 releases only at E3 this year. Even when they do put those systems out, higher technology means even higher costs which means even greater sales are needed to turn a profit. Nintendo has said that they plan to release the WiiU in 2012 but much like its predecessor, it will only sport current generation technology and will not be the step forward that AAA gamers are looking for and it’s unique tablet controller will require that developers devote additional resources to it.

While I don’t believe that iOS is completely destroying the dedicated handheld gaming market the way the iPress says it is, there’s no doubt that those systems are also struggling. Initial sales of the Vita were strong but have fallen off a cliff since and while 3DS sales still seem decent, neither system has a huge slate of software coming out and a lot of what releasing from third parties is not selling well. These systems desperately need top-tier titles from companies that aren’t the hardware vendors and the vendors need to back them in a big way. I think E3 will be the real tell for those platforms. Either there will be a ton of big announcements for them, signalling that third parties are on board or there won’t be which will indicate to me that they’ve basically been abandoned.

All of these factors point to a sector that’s in real danger. Mobile and social is currently in a fashion trend driven bubble of growth that is pulling a lot of funding and interest away from the AAA space. That bubble is going to burst eventually and that growth will normalise as a result but for right now, it’s clear there is less risk in that sector than AAA which is why no one wants to invest in those kind of games. As a result publishers are struggling, the industry is consolidating, new releases are becoming fewer and less original and in spite of it all, almost no one’s making any money. Regardless of how much I and millions of others love big AAA games, if they can’t figure out how to start making money soon, they won’t keep getting made. The AAA space is currently in a tail spin towards another 80s style video game crash and such an event in modern times would result in many more billions lost and many more thousands of creative people being out of work. If AAA doesn’t get its house in order, crappy iOS and Facebook games may be all hardcore gamers have left. I don’t want that and I doubt they do either. I sympathise with this plight but I also think that the way publishers are trying to mitigate it is ridiculous and that in their desperate struggle to compete, they’re actually driving customers away when they should be embracing them.

So what can they do about this? Is the trend reversible? I absolutely think it is but much like in the music, movie and TV industries, it’s going to require a lot of “old guard” people at the top to make major fundamental changes to how AAA games are made, marketed and thought of. These are people who are still very arrogant and think they know what’s best, even as their companies and investor cash evaporate around them. It’s likely that many of them will try to stick to the old ways and fail as a result. I don’t want to see even less competition but at the same time, those who can’t face the realities of change need to go away and clear a path for those who get it. As I’ve said many times before, I’m not a business guy and I don’t work in the industry and never have. However, I’ve been an avid follower of the industry’s content, people and companies for many years now and I’ve learned a lot in that time. I know what’s worked and hasn’t worked both for myself and my gamer friends and I like to think that our group represents a decent cross-section of gamers as a whole today. I definitely have more to say to the AAA industry that I do to the mobile industry. So here are my long-winded suggestions for how they can make mount a return to sustainable success.

Firstly–and this is obvious to literally everyone who isn’t one of the big publishers–all the anti-customer garbage needs to stop, all of it. DRM doesn’t work and every single person who lives in the real world knows it. There may be an infographic somewhere that shows that publishers actually sell more copies of their games by using DRM than it costs them to purchase the technology but that doesn’t take into account the massive amounts of good will they burn with fans for it. Pirates are scumbag thieves but publishers can’t ultimately stop those who are determined to steal their stuff and making life harder for the paying customers is not the answer. Budget projects assuming a certain amount of piracy will occur and at least some of the losses can be mitigated.

Next, they need to stop using online passes. Much like piracy, I can understand how the used games market is parasitic and leeching money out of the industry that it desperately needs while giving more profits to scummy companies like GameStop. Once again though, this isn’t a new problem and it’s been the case for years and it may not even be as bad as they think. Publishers need to learn to work within the constraints they have rather than pushing new ones on legitimate customers. The few times the publishers that use online passes have talked about their results, they’ve openly admitted that they aren’t seeing much additional revenue from them. That means that people are either still buying used games and just not buying the passes or they are skipping those games entirely. It’s cutting off their noses to spite the faces and it’s not working.

Then there’s on-disc DLC. I don’t have a problem with DLC per ce when it’s done tastefully but when you’re charging $60 for what is supposed to be a premium product, locking away content on the disc behind a paywall–content which had to be completed before the game shipped in order to make it on the disc–is money grubbing. I don’t buy the excuses about idle teams or technical compatibility reasons. Those are your issues, not your customer’s. If you can’t do DLC without putting it on the disc, then don’t do it. For a more detailed version of this argument, refer to this Jimquisition episode.

Second is that mainstream AAA gaming has become too complicated. When most people hear this, it’s usually accompanied by a story of someone trying to sit their Grandmother down with a 360 pad and them having no idea what to do. I don’t accept that argument. While it’s important for games to reach a large audience, AAA gaming is an enthusiast hobby and that’s what it should cater to. If someone really finds big AAA games interesting but doesn’t know how to play them, their interest in seeing more will end up with them sticking it out and learning. That’s how all of us who grew up with games learned and there’s nothing wrong with that. This idea that all games need to be fully understandable within 30 seconds to be enjoyable is ridiculous and symptomatic of a society that constantly demands instant gratification for minimal effort. This is the reason I find many mobile games so boring. On this front, I don’t think things should change. So what do I mean then?

Remember back before consoles were online and you could just put a game in, play it and generally have a good experience? Having to patch and use hack workarounds to get your games working as advertised was reserved for crazy PC people but not anymore. In an era where console games can be patched, many ship with numerous bugs and in some cases, completely broken. This requires console players with limited technical knowledge to go into forums and find weird solutions no one should have to use to get their games working properly or sit and wait for weeks for a patch, if one even comes. Between this and the frankly obscene processes many games make you go through just to get started these days, many casual players are getting turned off by the complexity. The worst I’ve seen with any mobile game I’ve started up is a couple of logos, that’s it. The whole point of a console is you put the game in and play. The more layers publishers put between the players and the content, the less fun they have. I don’t care what middleware you used and no one’s going to convince me that EULAs need to be as long-winded as they are.

Third is that there are too many games right now. Yes, you read that right. When AAA games are required to be multi-million sellers to turn a profit, it’s impossible for that to happen when every quarter is filled with more titles than even people like me with a lot of free time and disposable income could ever hope to play. Publishers are spreading themselves too thin among their customer base and the result is a whole pile of games that don’t sell enough rather than a smaller number that do. We need fewer releases but they all need to be high quality and for the love of everything, they need to come out over the course of the whole year, not just in the Christmas quarter. I would take 5 really good games over 15 mediocre ones any day and I think most gamers would too. Publishers no longer have the financial resources to dump out a whole bunch of titles at once and see what sticks, they need to focus on making fewer releases shine.

Fourth is that the AAA pricing model is broken and no one wants to try to fix it. If mobile, social and PC digital platforms have shown us anything, it’s that you can charge very little for a good product and still make a ton of money from it. $60 for a AAA console game is actually cheaper than it used to be when adjusted for inflation but it’s still really expensive, especially in this economy. Publishers have to work very hard at overcoming this ridiculous and outdated public stigma that a retail console game that sells for under this price point is somehow inferior and less worthy of purchase. We’re in an era of $1 mobile games that make millions and free-to-play shooters on PC that are pulling in massive returns by selling meaningless cosmetic items. What better a time is there to put out products on consoles that cost say $30 but are made with a budget of $10 million instead of $50 million? I think a few titles like that with good marketing campaigns behind them can break the misconceptions and usher in a new model where riskier ideas can be attempted without such huge financial stakes. I know that when selling games in brick and mortar stores, a lot of different entities have their hands in the pie and that can eat into profits but there’s no reason why some of these titles couldn’t be released exclusively on the console download services, something Microsoft, Sony and maybe even Nintendo plan to back in a big way in the next generation. Cheaper games can sell, they just have to be quality games as well.

Speaking of free-to-play, this is something the hardware vendors really need to start getting behind. This concept meeting with massive success in the PC space and at least for multiplayer games, I don’t see that changing. There’s no better price to draw people in than free and those who like your game will step up and spend money. I frankly love the model when it’s done properly and some of my favourite games right now are free-to-play.

Sony is dabbling their feet in this arena with CCP’s Dust 514 but I think both companies need to make adopting this model a major part of their online strategies for next generation consoles. Aside from giving more of their customers a reason to put their consoles online, it forgoes brick and mortar stores entirely and gives every new title an immediate massive install base. If the hardware vendors take a reasonable cut, this can be a massive new market they can open up which compliments the traditional AAA space while taking little away from it. Allow free-to-play companies in (perhaps with some regulation to make sure they don’t rip players off too badly), give them an infrastructure to work with and watch the money roll in while laughing in GameStop’s face.

Fifth is marketing and the ridiculous excesses it has reached with AAA games. Every major publisher is guilty of this but some are more guilty of it than others. I understand marketing to large audiences is expensive and that there are so many things pulling at people’s time and money that the message often has to be bigger and better to convince them to spend some with you. But if you have a game that costs $50 million to make and it’s often costing two or three times that to market it, you’ve got a major problem somewhere. Does spending $100 million on marketing really bring in enough additional sales over spending $50 million on marketing? Did THQ sell enough additional copies of Homefront from that stupid stunt they pulled in San Francisco to justify its cost and the damage to their image? I have a really hard time believing that. And then there’s all the stuff EA does. The marketing agencies the publishers are working with need to be reigned in, have their budgets strictly controlled and be forced to sell more with less. The publishers need to look to indie games and how they market themselves as while they obviously aren’t reaching audiences in the millions, their techniques work and it’s why a successful indie can make a staggering profit ratio wise against a big publisher. There’s nothing wrong with making a big splash for a big game but the current ways simply cannot be generating enough sales to justify the splendour and when you spent twice as much marketing a game as making it, that’s now three times as many copies you need to sell to make a profit. The quality and uniqueness of a title are what needs to become the centre of AAA marketing, not simply screaming louder than the other guy.

Lastly is that the console manufacturers need to start embracing additional business models and adjust their operating practices to support them. I already talked about free-to-play but I’m also talking about things like small indie games, titles that are great small experiences that also come with a small price. Mobile platforms have this nailed and while there’s far more risk in mobile than many would have you believe, there are a lot of people making money there selling products for $5 or less in many cases. Microsoft and Sony have made experiments with this on both their platforms but they never received any kind of backing or promotion and as a result, both companies dismissed them as failures, driving those developers to mobile. That’s simply ridiculous and it needs to change. It costs so comparatively little to give small indie developers some promotion on both your systems and your web sites and can pay off in droves, particularly now when so much of the general public has learned than a $1 game can still be an amazing experience. Today’s $1 indie developers are the AAA powerhouses of tomorrow but they need to be given a vector into that space.

However, one major sticking point that’s constantly causing developers headaches and needs to change is the manufacturer certification process. Microsoft, Sony and Nintendo all have these and developers bemoan them endlessly. Before you can release a game (or update it) on any of the current home consoles, it has to be submitted to the hardware manufacturer for certification, a process that can often take weeks or months and can cause huge delays over often ridiculous issues. Microsoft, Sony and Nintendo say this process is necessary to ensure the games meet their quality standards but in reality, the process is built to ensure that the game says “Please don’t turn off your console.” when saving or to display the right error message when you pull the controller out by accident.

The process has nothing to do with ensuring your game isn’t a buggy mess at launch, something that can be demonstrated by the countless releases that ship with major issues, which of course can take weeks to patch because of the same certification steps. The process is inefficient, wasteful and frankly unnecessary. So what if a game fails to say that the console shouldn’t be turned off when it’s saving? Most people know that and the ones that are dumb enough to do it will do so regardless of the warning. Indie developers can’t afford the hassle and cost of this useless process and by streamlining or removing it entirely, it also takes a big cost sink out of the equation for large releases as well. I simply refuse to believe that the process in its current form is necessary to ensure that our consoles don’t explode when we put games in them, especially since the biggest scandal of this generation was the result of Microsoft’s faulty and poorly tested hardware.

I really think there is still a bright future for AAA games, particularly as the audience continues to grow. Many people who are playing Angry Birds on phones and tablets today won’t go deeper into gaming than that but there is a section that will and a growing audience just means more potential for success. But the AAA publishers have become so blind to costs that they’re outspending the audience growth and that can only result in more consolidations and bankruptcies and as a result, less titles and originality.  At the rate the current publishers are going, there won’t be many left to make AAA games soon and if others can’t fill that void, the main benefit of consoles goes away and suddenly, Microsoft and Sony have no incentive to keep making them. A world of simplistic and shallow mobile and social games is not one I welcome but the current way of doing things can’t continue and both the publishers and the console makers need to wake up and adapt before it’s too late. There’s a trail of industry bodies that’s already showing what happens when content creators refuse to go with the times and being such a young industry, I hope this one can realise that and be more agile. I love AAA games and I don’t want to see them go away and I hope this crazy long manifesto can maybe give someone in the the industry who is smarter than me some ideas on how to turn things around. It’s time for these executives to step up and think outside the box before their companies run out of oxygen within it.