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Market Consolidation

 
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PostPosted: Sun Jun 08, 2008 11:17 am    Post subject: Market Consolidation Reply with quote

With more and more money being made by fewer and fewer people it saddens me how video games continue to be more and more like the film and music industry. As the mainstream market continues to consolidate behind a growingly smaller number of genre kings.

NES 53 Games sold over 1 million
SNES 43 Games sold over 1 million
N64 37 Games sold over 1 million
GameCube 26 Games sold over 1 million
Wii 22 Games sold over 1 million


Sadly just like the other industries more people are losing money then making it. 90% of video games dont make a profit, and publishers rely on block buster titles to make up for the years losses on every other title.

Atari are the worst for this too. In 2003 they were DEPENDING on the success of Enter the Matrix and in 2004 they were DEPENDING on the success of Driv3r. Granted both games were financially successful and they made it - they were fucking lucky.


They only made it because they bet the farm on the the title and performed saturated marketing, both games were critically slandered but sold by the truck load. They were very very lucky.

Eventually after endless warnings it caught up with them and Atari couldn't raise the 15 million required to stay on the stock exchange and got delisted late last year. About time. I seriously don't know how they got suckers to invest in them after the 2003 stunt, let alone repeating it a year later.

Thankfully Infogrames has now taken control of Atari completely now headed by Phil Harrison fresh from Sony.


Sorry to go off topic there, but that case study hi-lights the risks of extreme market consolidation and the importance of a diverse portfolio. But where is the sweet spot? Is the market going to have only 50 games over a 5 year period (10 games a year) that are massively successful? Is that the future of the mainstream industry?
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PostPosted: Sun Jun 08, 2008 11:39 am    Post subject: Reply with quote

I would imagine that fewer games are selling over a million copies because there's a lot more games to choose from. Total game sales overall today would eclipse total game sales from the 80's, surely? That doesn't mean that the games are any worse.

I think the games industry just had a big boom period in the mid/late 90's, followed by a bit of a bust period as loads of companies leapt into the market and overloaded their budgets and stuff, which will probably become another boom once everyone's finally settled down and figured out what to do with/about the Wii.
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PostPosted: Sun Jun 08, 2008 12:17 pm    Post subject: Reply with quote

Nice theory... but...


(not including PC or handhelds)
5th Generation == 9078 Games
6th Gen == 3621 Games
7th Gen (so far) == 1431*
Software Consolidation

(*This figure is actually inflated more then the others because this generation more attention and titles have been placed on Consoles, so the 7th Generation stats will of absorbed many people who jumped ship from PC gaming, like many Europeans have done this generation.)


Platform Consolidation (very unscientific, but you get my point)



And I cant be arsed demonstrating it because its 4:17 in the morning, but there is also Publisher consolidation.
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PostPosted: Sun Jun 08, 2008 2:05 pm    Post subject: Reply with quote

I think that the funniest part about all this is that people are now looking to Metacritic to tell them how successful their games are. A completely different problem, but I'm sure it stems from the same starting point here (which you brought up about profit).

MS is funny because it thinks that just because it's going to hide their dirty laundry (anything under 65% on Metacritic) that they can suddenly say they focus on quality.

Also, while I think you have a point, I just think that games will have a completely different course soon, not a crash. After this generation downloadable content will play a much larger role next generation. I don't know how it's going to be implemented, but it will and the bottom line next time is actually going to come from getting good games out there, not just PR machines.
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PostPosted: Sun Jun 08, 2008 2:40 pm    Post subject: Reply with quote

Your charts don't account for the rise of casual/mobile games though. The culture's different now; I'd say we're out of the era of science fiction aspirations and into a world intimidatingly large and complex to the average consumer. You have to be really dedicated to the idea of gaming to take the time to figure out a dualshock or xbox controller. But with the rise of internet use and mobile platforms (not to mention DS and Wii), more of the population is gaming in some capacity than ever before.

Personally, I wouldn't be sad to see a collapse of current model of big budget publishing. I think they're mostly headed the wrong direction anyway.
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PostPosted: Sun Jun 08, 2008 9:34 pm    Post subject: Reply with quote

My graph didnt consider indy/casual games because it was outside the scope of my question. There is a boom in casual, independant, flash based games, downloadable content, and that will go on for as far as the eye can see.

Just like there is a massive boom right now in Indy films and Indy music while core markets continue to consolidate around a industry of genre king block busters.


My question was one a futurist might ask. Will block busters continue to decrease in numbers with a booming indy sector subsidizing the rest of the industry or something else?

And no, I don't predict a crash either.
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PostPosted: Mon Jun 09, 2008 12:32 am    Post subject: Reply with quote

So 53 out of 9078 titles sold over a million copies in the 5th generation, where as in the current generation, 22 out of 1431 titles sold over a million copies. Hmm!
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PostPosted: Mon Jun 09, 2008 4:41 pm    Post subject: Reply with quote

I don't worry too much about market consolidation. Competition's finally back in the handheld arena, the newfound commonality of broadband has led to the advent of the indie game, indie games are getting more exposure than ever through things like Xbox Live or by just being noticed like Every Extend, and modern console hardware is hackable, allowing people to make their own games for even the biggest consoles. To top it all off, emulation is competent for almost everything from the first videogames ever to the Dreamcast. We're in the golden age of the independent gamer.

I see three reasons to worry about market consolidation: Crowding out, higher prices, and the diminution of big-company but non-blockbuster titles. I don't see the first two happening (prices have gone up since the last generation but have gone way down since the 16-bit era, adjusting for inflation), and while the numbers in this thread clearly show evidence of the third happening, I still tend to think even non-blockbuster games released by big companies are of a fairly good quality these days. Even if most games are crap, I don't hold any reservations in saying the same thing for all the past generations. And I'd like to see those big number of titles weeded of clones and remakes with no changes.
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PostPosted: Tue Jun 10, 2008 12:39 am    Post subject: Reply with quote

Swimmy I think I agree with you.

But one problem with market consolidation is consolidation behind genres. I will mass quote from an article I really found rewarding to read and encourage all to read it in its entirety.

I apologize in advance, but I found myself just writing exactly what he did, but just less succinctly.

Quote:
Genre maturity leads to market consolidation
In past articles I’ve discussed two key concepts. The first is genre addiction and the second is the genre life cycle. These both have major market implications for both individual game developers, but also for the market as a whole.

To briefly recap, genre addiction is the process by which:

* Players become addicted to a specific set of game mechanics.
* This group of players has a strong homogenous preference for this genre of games, creating a well defined, easily serviceable market segment.
* Game developers who release games within a genre with a standardized set of play mechanics are most likely to capture the largest percentage of the pre-existing market.
* Over time, the game mechanics defining the genre becomes rigidly defined, the tastes of the genre addicts become highly sophisticated and innovation within the genre is generally punished by the market place.

Genre life cycle is the concept that game genres go through distinct stages of market status as they mature:

* Introduction: A new and addictive set of game mechanics are created.
* Growth: The game mechanics are experimented with and genre addiction begins to spread.
* Maturity: The game mechanics are standardized and genre addiction forms a strong market force. Product differentiation occurs primarily through higher layer design elements like plot, license, etc.
* Decline: The market consolidates around the winners of the king-of-the-genre battles that occurred during the Maturity phase. New games genres begin stealing away the customer base. With less financial reward, less games are released.
* Niche: A population of hardcore genre addicts provides both the development resources and audience for the continued development of games in the genre. Quality decreases.

What we see here is the consolidation of game designs over the life cycle of the genre. Early examples within a genre tend to have a wildly diverse spectrum of game mechanics that appeal to a broader spectrum of players. As the genre matures, the game mechanics become more standardized and the needs of the genre addicts more homogenized. As the market segment consolidates and standardizes, the majority of the players are well served. They get more polished games that have greater depth. Who could argue that a tightly polished game like Warcraft is a bad thing?

How maturity reduces the number of total game players
Goodbye people on the fringes: The people on the fringes, however, are left out. In the evolution of the RTS genre, there was an interesting offshoot in the form of the Ground Control games. These sported an interesting 3D perspective that was never truly adopted by the mainstream RTS producers. Most players within the identifiable RTS market segment did not enjoy these games and so it was not in the best interest of the game developers to include the innovative features in their designs.

However, some players enjoyed these titles quite a lot. As the mechanics for RTS games become highly standardized, these fringe players were alienated by games in the mature genre. A 2D Warcraft title just didn’t provide the same rewards that this fringe group was looking for.

Some of those gamers left gaming. It may take being alienated from several genres, but eventually a few decided that there were better activities to spend their time on. The market was simply not serving their needs. This shrinks the market.

Goodbye semi-hardcore: The mainstream group, however, fares only a little better. When you recycle the same standardized game mechanics, you put players at severe risk of burnout on a genre. There are only so many FPS many people can play before they don’t want to play them any more. This is less of a problem for the super hardcore players. However, it is a substantial problem for the less hardcore players.

As the less hardcore players burn out on the game mechanics of their favorite genres, they too are at risk of leaving the game market. The result is a steady erosion of the genre’s population.

What is left is a very peculiar group of highly purified hardcore players. They demand rigorous standardization of game mechanics and have highly refined criteria for judging the quality of their titles. With each generation of titles in the genre, they weed out a few more of the weaker players.

This is a completely self-supporting process with strong social forces at work. Players form communities around their hardcore nature. They happily eject those who do not fit the ideal player mold. They defend the validity of their lifestyle with a primitive tribal passion.

There is no internal force within a genre lifecycle that can break this cycle. Only external forces can do the trick. The question is, who would want to break this cycle and who wants to maintain it?

Who genre maturation is good for
Genre maturation is great for the very small minority of AAA developers that can serve the hardcore market. They release titles known as genre kings that are able to address the needs of a large percentage of an existing, well defined segment of genre addicts. Genre kings dominate a particular genre with impressive financial results. The amount of money genre kings such as Halo 2, Half Life, Warcraft, Grand Turismo and other rake in is an inspiration to both developers, gamers and publishers everywhere.

http://lostgarden.com/2005/09/nintendos-genre-innovation-strategy.html

Now to take his point one step further, I think market consolidation not only minimizes the number of games with a genre, I also think it minimizes the overall number of new genres created by rewarding developers who conform.


Granted Im not actually worried, the Independent sector I think will be our industries saving grace. I have seen more exciting original projects in the indy sector of gaming then alot of what ive seen in the last decade of the mainstream industry. It reminds me of the 8 bit personal computer era where every game could break new ground.
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