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Is The Video Game Bubble About To Burst?

bubble burst

Destiny is costing Activision $500 million. Is this real life? Have any of us actually considered the implication of that?

GTA V was the previous record holder for most expensive video game – with $260 million. Using my sharp mathematical skills, I can tell you that this is “around double” that.

It’s also more than any Hollywood studio has been willing to spend on some enormous blockbuster or the other.

To me, it’s a symptom of a larger issue in the industry, a runaway train, an ever-expanding bubble that I feel may just be ready to burst.

The first of the new Disney-produced Star Wars films is expected to have a budget of around $200 million. That’s for a massively anticipated installment in what may be the biggest film franchise of all time.

So why is Activision spending $500 million on Destiny? Because, I assume, they feel that they have to.

That Escalated Quickly

The current state of the video game industry has devolved into a juvenile game of one-upmanship, where each new title has to be bigger, flashier and more powerful than the last.

This means studio execs throwing enormous piles of money at massive development teams, who work in some of the worst and most stressful circumstances possible.

The problem here, is that when you’re investing this much money in a single game, you can’t afford to take a risk. That’s why we have an endless procession of franchised titles coming out every year – they’re an easy sell.

Franchises like Madden, FIFA, Call of Duty, Battlefield etc. are what keeps these studios in the green. Can you imagine dropping $200 million on a game that flopped? Some studios couldn’t recover from a loss like that, they’d fold within the year.

What if ambitious new IP Remember Me had cost $500 million?

What if ambitious new IP Remember Me had cost $500 million?

Your only other option is to build your next big thing on a foundation of hype. Enter Destiny. Spending $500 million on a brand new IP seems risky, but less so when the people behind it created one of the biggest video game franchises in the world.

You had better believe Activision is hammering home that Halo hype until release, heaping on generous helpings of tech demos, videos and heavy-handed marketing.

People are probably really excited for Destiny, but it’s arguably not because of what we’ve seen of the game or the people behind it, but because we’re told to.

We’ve been told that is The Next Big Thing, we’ve been told how much money has been spent, how awesome the developers are and how our brains are going to explode out of our noses the second we get past the menu. We’ve been told that, so we believe it, and thus we buy it.

It’s the same reason we buy Call of Duty or Battlefield; almost as some kind of twisted force of habit rather than on the merits of the game itself. We buy it because everyone else is buying it; the group consciousness dictates that these will be the multiplayer shooters of the year – pick one and tell owners of the other one that they’re stupid.

Haha, Call of Duty players are such casuals.

Haha, Call of Duty players are such casuals.

The Tipping Point

However, if Call of Duty: Ghosts tells us anything, it’s that gamers are getting weary of recycled crap being shoveled down our throats.

The reviews were mediocre, the game was quite universally panned by consumers and the sales, for the first time, did not exceed that of the previous title.

Perhaps when the next Call of Duty game comes out, we might actually wait a while and see what it’s like before handing over our money. Maybe we won’t pre-order just because Kevin Spacey and guns and stuff.

Perhaps the same thing will happen with Destiny. I said quite some time ago in a column that Destiny may just be the next World of Warcraft. In hindsight, that opinion was probably based on Bungie, Activision and enormous amounts of cash.

Is that enough? Early opinions of the game have been somewhat lackluster, and I’d be lying if I didn’t say I’d lost a significant amount of enthusiasm for it. It may just be a somewhat generic, not-that-interesting shooter.

A generic shooter that needs to sell 15 million+ copies just to recoup the expenses.

Of course, we saw all this before with the famous 1983 video game crash, the one that resulted in all those Atari cartridges becoming a landfill that documentary makers would dig up 20 years later for our amusement.

That crash happened because a bunch of mediocre games were pushed out too quickly to try and capitalise on hype and holiday seasons. You know, kind of like Call of Duty‘s mandatory November release, which arrives so riddled with bugs and lacking so much basic functionality you feel like you’re playing an early access alpha.

Will we see another crash like that? No, fortunately not. Video games are here to stay, in one form or another. But we may soon see a significant change in how these games are created and consumed.

Kind of like this, except Kevin Spacey's face instead of E.T.'s.

Kind of like this, except Kevin Spacey’s face instead of E.T.’s.

People Don’t Really Understand the Industry

Now let me put a disclaimer here – I’m not saying that I understand the industry either. But the fact is, the enormous rising success of video games in the last 10-15 years has been so fast, it’s apparent that nobody really knows where the ceiling is or what is actually valuable.

The biggest indicator of this has been the casual games market, in which companies like Zynga have really demonstrated the volatile risk it poses for shareholders.

You just don’t know if you’re going to have a sustainable franchise like Angry Birds, or see your shares dive off a cliff with an investment in a game like Draw Something.

King.com had a massive IPO recently, but that company is almost entirely Candy Crush Saga. They have tons of games, but that one game alone is basically that company’s entire value; they haven’t been able to recreate that kind of success with their other games. So what happens if tomorrow everyone decides they’re tired of hopping lollipops around?

What happens if everyone decides the military shooter just isn’t that interesting anymore?

Honestly, how people haven't lost interest in this yet I'll never understand.

Honestly, how people haven’t lost interest in this yet I’ll never understand.

People like to demonise people like Bobby Kotick (myself included), because he runs his company like a businessman, not a passionate gamer.

The industry has shifted from hardcore developers like John Romero and John Carmack running the company to bringing in business-savvy CEOs to make the tough decisions and drive profits. Kotick isn’t interested in what is fun, he’s interested in what will sell.

The problem sets in when people like Kotick are making creative decisions – which, as we know, they are. Developers aren’t given freedom, they’re told to stick to the formula that works until it stops working, at which point the franchise is discarded.

I think people like Kotick believe they have this all figured out – the formula, the behaviour of their consumers, what sells and what doesn’t.

But we’ve learnt from television, movies, books and music that things aren’t quite so cut and dry. If you don’t have your finger precisely on the pulse of what your audience wants, you’re headed for a fall.

I think we’re headed for precisely that. These games will continue to push and push each other into dizzying heights, budgets will continue to inflate and all the while our games will become increasingly stale, until the entire house of cards comes crashing down around us and the studios are forced to re-evaluate what kind of product they’re putting out there.

Honestly, I can’t wait.

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  • BinaryMind

    Bring on the chaos! :)

  • Squirly

    I’m way too old to fall for the hype so I tend to just watch this as a bit of an outsider, waiting… waiting… any day now….

    I don’t know if it’s going to “crash” but it will land flat on it’s face sooner or later. It’s actually the same with a lot of industries, but especially in the entertainment part. Companies sell a million copies of their game or movie. Then they sell 2 million for the sequel. And more for part 3. And pretty soon they think that it’s just going to go up and up and up and there is apparently no top limit or ceiling where we’ve reached “full saturation” so to speak.

    How anybody can justify spending half a billion on a game is beyond me. And the joke is that, no matter how good or fun it is, no one will be able to say “yep, money well spent” because HOLY SHIT HALF A FUCKING BILLION. There is no game that can actually justify that amount mostly because half that budget doesn’t go towards making the game actually good, it goes towards making the game LOOK good, ie marketing.

    • Alex Rowley

      GTAV and CoD already prover that kind of money is still a reachable goal for games, so while it’s a ridiculous amount of money to spend (Especially on marketing which I believe doesn’t have nearly the same affect gaming companies think it does on their games) it’s still justifiable if the game makes the money back. Destiny is supposed to be a game that sticks around for 10 years and if it gets anything like the hype Halo gets then I think it could make the money back

      • Squirly

        But it’s still a ridiculous gamble and it basically comes down to “is this gamble worth it?” Kotick seems to think so, but I guarantee you there are a thousand or so Activision and Bungie employees who’s heads are on the chopping block for “downsizing” if Destiny doesn’t pull in ALL the sales.

        I disagree that it’s worth it, but that’s me, maybe.

        • http://www.facebook.com/pages/Wesley-Fick/184346154999538 Wesley Fick

          Considering the expense and the lack of a PC release, I think that will happen sooner rather than later.

          • Alex Rowley

            Not releasing it on PC is massive mistake on their part.

          • Squirly

            They could take half the budget for marketing and spend it on adapting the game for PC and get more out of the end result than the marketing. But again, that’s just me assuming.

          • http://www.facebook.com/pages/Wesley-Fick/184346154999538 Wesley Fick

            Activision wants so badly to see the game succeed because it is a Bungie title. They’re betting entirely on that Halo legacy and I don’t think it’s going to work for them.

            The catalyst for the current crash slowly gaining momentum was when Square said that Tomb Raider needed to sell at least 5 million copies to yield a comfortable profit and be considered “a success.” Steam Early Access/Kickstarter started the shovelware era all over again and very few of those games have made it out of the gate to a release and to generally good reviews. Then the entire Xbox One campaign was dwarfed by the outcry over microtransactions being everywhere. Its anyone’s guess how long it will take until we reach the ceiling and things fall apart, but it’s getting there surely.

        • Alex Rowley

          Gambling and risk taking needs to be done in my opinion. You are most certainly correct about people jobs being on the line but if the game actually is true to what Bungie’s vision for it is then the risk would be worth it. they just believe the in the game I guess.l

          • Squirly

            See, I think it’s a matter of scale. When you’re gambling with such amounts then you need to step back a bit and think about what you’re doing. They’re not doing this because they HAVE to, like Actiblizzard is going to collapse if they don’t make Destiny the biggest thing ever, they’re doing it because they WANT to. They want the next biggest seller of everything and by spending a fortune on marketing alone they’re also fulfilling the prophecy on “we spent too much money on this and now it needs to recoup those losses by selling unreasonable amounts.”

            15 million. That’s how many copies need to be sold to break even. And that is a ridiculous amount to pin on one project, when thousands of people depend on the company.

        • http://www.mygaming.co.za Chris Kemp

          The way the industry seems to be, those heads are going to roll even if the game sells a billion copies. Work insane hours, finish the game, get fired. That seems to be the general pattern.

      • http://www.facebook.com/pages/Wesley-Fick/184346154999538 Wesley Fick

        The difference here is that it took six years to develop GTA V, not the two typically required for a new COD (or for Modern Warfare 2, which cost $200 million). GTA V’s development price and the sheer scale of stuff to do and see in the game far outweighs what CoD offers, especially when you consider how much stuff Rockstar was able to cram into ex-gen consoles with such limited memory.

        • Alex Rowley

          I was more referring to the games being able to make the money to justify their budgets. GTAV is a far superior game to CoD of by absolute miles.

          I fully believe that if Actvision skips at least one year of releasing a CoD game their sales would be better than ever. Anticipation is a powerful tool that Rockstar uses masterfully.

          • http://www.mygaming.co.za Chris Kemp

            Their sales would be great, but they would in no way be as much as they are when you add the two games together. Remember, before Ghosts every Call of Duty game beat the sales records of its predecessor. Hard to blame them for not wanting to keep that gravy train running.

        • http://www.mygaming.co.za Chris Kemp

          The hype on GTA V was basically unparalleled as well. Call of Duty games get the full marketing treatment, but you just can’t match the excitement of a Rockstar title with 6 years of work in it.

          And of course, the big difference being that Rockstar actually delivered on the hype.

    • http://www.mygaming.co.za Chris Kemp

      Pretty sure it’s happening in the movie industry too. Sooner or later people are going to get sick of all these comic book movies, a couple will lose some major money and that’ll be that.

  • http://www.facebook.com/pages/Wesley-Fick/184346154999538 Wesley Fick

    A lot of the expense is also advertising and paying for exclusive content and whatnot. I’ve said before that the exorbitant amounts of money spent on creating games needs to stop because there is a ceiling to it. $500 million for Destiny is way, way too much and overly ambitious, I think, for a title that will probably never see more than 10 million sales across the board.

    Look what happened to Titanfall – Microsoft should be crowing from the rooftops about how much its pushing Xbox One sales, but it isn’t. That house of cards is already beginning to fall.

    • Alex Rowley

      Marketing to me is just a massive sinkhole for money, sure you need to get the name out for your game but you can do that without the absolutely ridiculous price it seems to cost. Minecrafts marketing budget when it released was $0 and it’s insanely successful just as an example.

    • http://www.mygaming.co.za Chris Kemp

      I find that kind of depressing to be honest, because Titanfall is a great game. it might follow similar formulas to the whole military shooter genre but it innovates enough to make it feel fresh and interesting. Just my opinion, but I’m addicted to it, 200 ping and all ;)

      The campaign is basically non-existent though :P

  • Alex Rowley

    I can’t be the only one who’s actually happy where games are now right? I really don’t want a game crash to happen and a whole bunch devs to close their doors because too me games have never been more diverse and if numbers start to fall I believe another game will pop up and show every one people are willing to buy games at a massive rate. Also you have to look at the companies that are making these massively overpriced budgeted games. EA I think can fund all their games just with FIFA sales alone I’m pretty sure and Activision is still raking in the money from WoW alone so I think if a bubble pop actually happens it won’t be everything collapsing at once or even any of the major players shutting it’s doors

    Good games sell is what I believe and as long as there are god games being made by these companies (Which I believe they are) then the gaming industry will be safe, companies will just need to realize we are not sheep to be herded and there isn’t one formula or a blue print to follow to a game becoming successful.

    • Squirly

      I can’t speak for anyone else, but I’m only happy for one aspect of the game’s industry and that’s the gradual loosening of the hold that huge publishers have on developers and gamers. But that isn’t down to publishers spending billions, it’s down to the change in environment that a pervasive internet has brought. Smaller publishers can make their mark by not being ridiculous and they don’t have to spend millions on packaging. If a game is successful enough they can still chose to sell hardcopies, but until then they can rely on digital which costs them a fraction as much.

      I can’t stand the current mentality of “if it won’t bring in all the money it’s not worth pursuing” and that’s the mentality that the bigger publishers have. The bigger the budget gets the less risk they’re willing to take, the more boring our games get. Destiny has some cool aspects to it, but it’s still another shooter on top of all the others. Good luck seeing Bungie ever doing another Myth game – it doesn’t sell 10 million copies so fuck it.

      • Alex Rowley

        corporate mentality is something I really do loathe about gaming I have to admit that, but I fully believe that if games become stale or the public gets over games like CoD there are so many other talented devs out that that some other game will take it’s place.

        Indies so far are the only ones that actually take more creative risks and don’t worry about sale numbers and with the rise of Kickstarter it also being alleviated. For AAA devs though I have no clue why they get so antsy about things like that, it’s been proven time and again that breaking the mold causes runaways successes. Sony seems to be at least partially willing to give their devs more freedom to do what they want but even then I was a little disappointed when Uncharted 4 was revealed.

      • http://www.mygaming.co.za Chris Kemp

        I hope you’re right, but for me it feels like the smaller publishers don’t stand much of a chance. They sit in the shadow of the giants and any original or creative new game they might have can’t match the budgets or the hype trains that the big studios can generate. The only creativity I feel like we actually see comes from indies now.

    • http://www.mygaming.co.za Chris Kemp

      Don’t get me wrong, I don’t want an actual CRASH. What I want is a couple of high-profile failures of lazy, over-franchised titles lacking originality from a studio that can recover from the loss, but that loss needs to sting enough for them to change the way they think about games. Fact is, the big publishers dictate the games market right now, the huge titles eclipse all the middle-of-the-road guys to the point where they cannot survive. You’re basically either indie, or you’re big budget AAA. There’s not much middle ground, which means there’s not much room for original ideas with big studios behind them.

      • Alex Rowley

        It might be happening a little already then. Irrational Games I don’t think can be considered AAA anymore with their downsizing and Ubisoft has made Child of Light which is by no means the norm for them. Epic games is also that weird F2P game fortnite.

        I think the gaming scene is slowly moving towards your line of thinking but I don’t think it will happen over night(Or the next few years). I actually think all it would need is CoD to fail for the industry to change significantly as that’s basically the figure head of the AAA market and everything a lot of people despise about gaming becoming so corporate.

  • Sharpshooter

    I think free to play is the new generation as to where games are going. Look at what has happened to Lol and Dota 2? I think the only reason wow can still charge their players for a monthly subscriptions is because it was the first of its kind, and people don’t want to let go of all their “hard work”.
    I mean why not play a game for free? If you like it, then you can purchase something which adds to your style, look and feel? Surely if you like the game you will spend money in the store. I think its a great way to show players that “our game is fun, and you can DECIDE if you’d like to support us”.
    Its the same for the mobile gaming industry, which is growing rapidly. Most games you can download for free, and then if you’d like add-ons, you can just purchase them in the store.
    There will always be unforeseen problems with games. But hey it is just a game? Your outcome in the game wont determine your outcome in real life, but who am I to say that players don’t feel the same way?
    If you like it, buy it. If you don’t, there are countless other games out there.

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