Theres no doubt that the gaming industry is in transition, and things are changing at a breakneck pace. As the GDC Online conference in Austin, Texas approaches (October 9-10), I sat down with three industry experts and GDC Online advisory board members: Eugene Evans, former GM of BioWare Mythic, an EA studio; Valerie Massey, director of community development at the community analytics company CLARA (and former director of communication and public relations for CCP games); and Gordon Walton, VP and Executive Producer at Playdom Austin (formerly VP and co-Studio General Manager at BioWare Austin working on Star Wars: The Old Republic). They shared their industry experience and knowledge about the transitioning online gaming industry. Are we heading for a painful revolution as payment models change and studios announce layoffs more frequently than ever, or is this all part of the evolution of an ever-changing industry, leading us to newer and better things? Read on for our insiders takes on the current hot topics.
What trends have you spotted in the industry lately? Are they having a positive or negative impact?
Valerie: From my perspective, and Im not a game developer, it seems to me like theres a disconnect between what the financial expectations are for a product and what it can deliver. Everybody sees the incredible success that Blizzard had with World of Warcraft, and they want to recreate that. They build these humongous teams, and expect this huge return on investment thats just impossible.
Its not unusual for a game studio to step up just before a big launch, when you have your final crunch, and add more people than they need to run the live game. But to see the numbers of studios that are doing significant layoffs or shutting down completely...it seems to me thats happening more often than ever. From my perspective, it seems like it goes back to having unrealistic expectations as to what these games should bring in. The amount of money it takes to create them just doesnt justify how much youre going to make. And people arent content to just make a nice profit thats enough to sustain a studio anymore.
Eugene: I would agree with what youre saying, yet take a slightly different point of view. I think that what were seeing is a very disruptive and uncertain time where people are trying to figure out what sort of product to deliver, how to deliver it to players, and how they should pay for it. In a lot of cases, if youre not talking big, if youre not saying, Hey, were going to reach for the brass ring! its hard to get funding, either internally or externally.
were in a time of great disruption, a lot of change, but at the same time there are a lot of opportunities.
- Eugene Evans
I think whats most interesting about the space right now is that we do see an incredible range of products on the market that are appealing to gamers, scratching an itch theyve always had, and they range from mobile games to Facebook games to downloadable free-to-play client games all the way up to attempts to make the next big MMO.
I think what was just said is absolutely right about the level of uncertainty and the number of companies that are looking at what has been successful and going, I want one of those. That very rarely works because that game--whatever it was, whether it was WoW, League of Legends or Angry Birds--caught people at a particular time and appealed to them in a particular way and then they changed. Great games change peoples world view. They give them something new, interesting, innovative, and it shapes the space making it that much more difficult [for other games] to follow it up. Theres always room for something innovative or new, whether its a different type of offering on a different platform or with a different payment model...theres always room for that, and thats what wins. Even if its something thats been done before but its executed incredibly well. There was no real innovation in WoW, but otherwise it was a very well executed MMO. League of Legends followed a number of games in a similar vein, but it was executed very well.
So, were in a time of great disruption, a lot of change, but at the same time there are a lot of opportunities. And thats kind of been reflected in the evolution of GDC--what was GDC Austin and is now GDC Online--in the last 10 years. Its gone from being very PC and MMO-focused in the first year, as I recall, to being increasingly diversified in terms of the platforms, and the type of people who attend. And I think the organizers have done a great job of letting the event evolve. Im very positive about it, and I see this as an amazing period of creativity and innovation.
Valerie: Its the whole evolve or die thing, right? I mean, the subscription model is going away and if you dont evolve youre toast. We see that every day, too.
What Val was just talking about dovetails into my next question. Were hearing a lot about the death of the subscription model lately. Are we going to see another big subscription-based game?
Eugene: One thing Ive learned in this business is never say never. If something came up with the right offer and the right type of game and the right sort of compelling experience, then I think people would be willing to subscribe to it. I will never write off a business model as done.
But the free-to-play model is very attractive, if done right, to both consumers and developers. For the consumer, they get to play the game and then decide whether theyre going to spend their money or move on to the next. For developers, its a great model if they can succeed because people are willing to come try their games.
Valerie: I agree. When people talk about the free-to-play thing, the first thing I think about is Dexys Midnight Runners. I love the song Come on Eileen, but I would never buy that whole album. But, because I have access to iTunes and I can buy just that one song, instead of going to the record store to buy one record where I know I wont like half the songs on it, I go to iTunes and find myself buying 20 songs at a time. So, it all comes down to Come on Eileen for me.
Eugene: And in a way, when that first started to happen, its not dissimilar today to consumers, and more importantly developers, saying, Hey, theres something impure about that payment model. When they started to sell tracks individually there were a lot of bands that were offended by it and thought it took away from the purity of them creating an album experience, a complete story, a complete theme, something the producers spent a lot of time putting together. And its not dissimilar to game designers today deciding that they dont like whats happening with free-to-play.
Valerie: At first you think that not having a subscription, being free-to-play, somehow means that the game is inferior. But giving consumers a chance to select what they want to pay for empowers them, and actually makes them more generous with their disposable income. Im amazed when I hear about some of the money being made from free-to-play games, because people are willing to pay for how they want to play. My daughter was all excited because she bought some kind of sparkly horse in WoW--I havent played that game in a while--but she could use it with all her characters and for her it was worth that 25 bucks. Five years ago, I wouldnt have spent $25 on anything virtual because it wasnt a real thing. But weve kind of had to rethink the value of virtual items, and its certainly made a big impact on the industry.
Gordon: The consumers have more choices and, basically, it draws more innovation on the business side as well as the game development side. Free-to-play really came into its own in Korea where the hyper-competitiveness of all those MMOs wanting to charge a subscription made them realize they couldnt do it. So now it basically is a free-to-play market.
Consumers have more choices and, basically, it draws more innovation on the business side as well as the game development side.
- Gordon Walton
Eugene: Yeah, theres a lot more competition there. At a conference I spoke recently about how free actually leads to higher quality rather than lower quality because if everyone has moved to free, then quality is going to be the key thing that differentiates one game from another. That forces quality up not down.
Gordon: It also sharpens everything up, meaning that you cant afford to sit there and spend money on things that players dont want. Whereas a lot of times we build wonderful games with lots of stuff in them, and were always disappointed to find that we spent a lot of money on something that players either dont like or dont use very much. Free-to-play changes the focus to building things that players are really going to care about.
As a follow up to that, weve seen a lot of games make the transition from subscription to free-to-play. Ive seen speculation from players in the MMO community that some of the more recent subscription-based games seem to have been built with the intent to go free-to-play, and that the initial subscription was a means to foot the bill for development costs. I dont want to point any games out specifically, but do you think this sort of thing is happening? And, if so, is that fair to fans?
Gordon: [laughing] Oh, cmon...call somebody out.
Valerie: Whos gonna tell? Its not like we know anybody...
Gordon: You know, I think its almost ludicrous myself, that supposition. A smarter developer is actually thinking about, What if I have to go free-to-play? But whatever business model you choose really has a major impact on your design choices. So, I think if you are building a subscription-based game today, youve got to think about your fall-back position. But youre going to make design choices around subscription that are not compatible with design choices around free-to-play. So, you have to go through a significant redesign phase if you go from subscription to free-to-play.
But does the public opinion make sense to you? I mean, can you see why people might be drawing these conclusions?
Gordon: I think theres always a vocal minority. But a lot of the old games that are subscription-based are trying to have their cake and eat it too, right? Theyre trying to do subscription and sell you stuff, which makes sense, because youre thinking, How can I raise my margins? The down side of subscriptions is that youre capping your revenue. The upside is that you get steady revenue and you can create a steady consumer base. So, its just a tradeoff.
I think when you ask, Is there ever going to be another big subscription game? Id never say never, and I think its possible, but I think its a bigger row to hoe right now because the market trends are against it. It doesnt mean it wont come back five years from now.
Eugene: The hardest thing about big games right now is the development period, and the likelihood that the market will change during development. Thats the problem with these bigger products that can take three, four, five or even six years to develop. Look how dramatically the market has changed in just the last five years, I mean, the iPad didnt even exist then, and most people didnt have a Smart Phone then. The longer the development time, the more likely it is that the world will change around you, and thats always the risk when delivering a big product.
The hardest thing about big games right now is the development period, and the likelihood that the market will change during development.
- Eugene Evans
Do you think its getting easier or harder for games to find funding? Every day Im seeing something new in my inbox for an indie game trying to build funds via Kickstarter. Val mentioned how publishers can have unrealistically high expectations for their games, and how that can make it difficult for future games to find funding. Are we going to see a transition now to more independently funded games and niche titles?
Valerie: I think Kickstarter is an amazing thing. Im excited to see where thats going to go. Because it gives people, any guy off the street, a sense of ownership in a product that he believes in, and I think thats awesome.
Eugene: Id like to slightly challenge your point of view. Im actually worried at times about Kickstarter. I sort of view the transition like this: it seems to have gone from, Hey, will you be my friend on Facebook? to Will you give me a recommendation on LinkedIn? to Will you give me money for my project on Kickstarter? Its an amazing model, and its an amazing thing that its done--there are some great projects that have come out of it that have received funding. I think, though, that many games work and survive because they have a passionate community around them. They feel a strong sense of entitlement and ownership already from the money that they spend either on a subscription or that they invest in the free-to-play model.
Valerie: [laughing] They feel entitled as soon as they pick up the box in the store.
Eugene: Well, thats true. So, the idea that people actually truly have a stake in the product, like with Kickstarter, all I can say is good luck to all the developers. My concern is that the backlash...I dont know that weve actually seen a game delivered yet that has been funded through Kickstarter. And I hope that those projects can deliver what the consumers want, what the people who are investing in those projects want, because thats going to be a big challenge. The people who feel like they helped bring that game to market are going to feel a strong sense of entitlement about what that game should be.
You have to be careful what you promise or youre going to have a rude awakening.
- Valerie Massey
Valerie: You have to be careful what you promise or youre going to have a rude awakening. Isnt it you, Gordon, whos always quoted as saying, Making games is hard? I mean, it is. I think Kickstarter is going to be a great thing, and its going to sort of re-educate people that you have to have more accountability.
Eugene: Whats interesting is that weve seen some great people, with great experience, who, for one reason or another, have had challenges getting funding to produce their products and are now finding [a way]. I hope it works out really well for all of them, but I would approach it with great caution.
Gordon: Lets say were in the midst of a Chinese curse: we live in extremely interesting times. And youll find the best of times and the worst of times simultaneously. Were in the middle of a down-shift--we are down-shifting to smaller, more niche oriented games. The upside of this is that games are everywhere, on every damn platform you can think of, and youre going to see a lot more innovation as to what kind of games get made.
As for Kickstarter, I think its just an outgrowth of social media that allows people to define customers as people who will pre-pay for games. I think itll get a lot more sophisticated over time.
So, what things--what trends or specific ideas--have you most pumped about the future of the industry?
Eugene: For me, its the diversity of platforms on which we can play games today and on which we can deliver them. I think that, as more and more people become passionate about games ...there are more people playing games today than ever before, and theyre doing so because were able to deliver games that can let them play any way, any style, and on any platform that theyre interested in. And that represents a tremendous opportunity.
Lets say were in the midst of a Chinese curse: we live in extremely interesting times. And youll find the best of times and the worst of times simultaneously.
- Gordon Walton
Valerie: Thats kind of my answer, too. I mean, its the great equalizer. When I started playing video games my mother would never touch one--when I said games to her shed think Bridge or Scrabble--but now everyone in my family plays some kind of computer game. We talk about it at Christmas while were opening Christmas gifts, and its awesome, its a shared interest even if we dont play the same kinds of games. Everyone in the family plays something, and we can talk about it, and it brings us closer together. I imagine this as the modern-day equivalent of how in the 40s families used to gather around and listen to the radio. And to me thats an awesome thing--anything that can keep us having these great relationships with people. Through gaming, its opened up a whole world for me. I mean, Ive got friends in India. There was no way I ever would have met anyone in India if I didnt play games and I wasnt involved in these communities. So, to me, it just makes this big world a little bit smaller.
Gordon: I think its a wonderful time right now because the major players in the market over the last 20 years--you know, the surviving two, those guys--are able to redefine themselves. And thats an interesting challenge culturally and business-wise for all of them. I think the role of the publisher has been diminished, and its going to be interesting to watch this epic change going on at hyper-speed.
For me, when we started doing games online, it was the beginning of the disruption. You know, we began having direct conversations with consumers as opposed to just putting stuff on store shelves, or reaching them just through advertising or PR. [Being online] changed the level to a much more intimate conversation with consumers. And now, all these platforms, all these different ways to distribute games, all these different ways to target much smaller audiences that are addressable...to me its a fabulous time. And its because of all the disruption. Its because its going to be something new that we havent seen quite yet when its all said and done. Its just like watching the meteors fall and the dinosaurs disappear all over again...
Eugene: Were all desperately trying to evolve into mammals; thats the key.
Gordon: Right, right! We want to go eat the dinosaur eggs, pretty much.
We'd like to thank Eugene Evans, Valerie Massey, and Gordon Walton for taking the time to share their insight into the gaming industry.