Why most video games aren't profitable
Although video game revenue is at its highest level in history, most researchers believe the industry is "recession-proof," and there are more gamers across the globe than ever before, not everything is so blissful for the video game industry.
According to the Electronic Entertainment Design and Research institute, just 4 percent of games that go into production will turn a profit and only 20 percent of titles that make it to store shelves will achieve profitability.
That shouldn't surprise us. When I look at the video game industry and the countless number of titles that I fire up on my consoles, it's not hard to see why the industry is struggling to develop profitable games: too many titles are the same basic game in a different box with different characters.
How many first-person shooters and sports games need to flop before the industry realizes that although shooters are the highest-grossing titles and sports games perform well thanks to EA, it's time they stop wasting their time with more of the same and start moving towards better titles that offer something unique?
Too many developers get bogged down in the statistics. According to EEDAR in a study it conducted last year examining the industry, mature-rated titles comprise 10 percent of all U.S. retail games and have the highest average gross sales in the country. The action genre is most prevalent and shooter titles have the highest gross sales.
Armed with that knowledge, developers should tell their teams to stop developing games for the Wii and start developing mature-rated first-person shooters, right?
Think again.
During 2007, only two of the top 10 best-selling games of the year--Halo 3 and Call of Duty 4--were first-person shooters. Most of the titles left on the list--Wii Play, Super Mario Galaxy, Guitar Hero III: Legends of Rock, and Pokemon Diamond--span varying genres and offer a relatively unique experience. Combined, those titles sold over 10 million units, compared with just 7.86 million units for the two first-person shooters.
Judging by those figures, it's clear that developers are trying to increase profitability through shooters and action titles, but Nintendo's success with the Wii's unique style of gameplay, as well as the success of unique titles last year, suggests they're wrong in following that strategy. After all, even though the industry is dominated by mature titles, only a select few have performed well.
It's time developers stop looking at statistics and the perceived popularity of first-person shooters and start realizing that as consumers, we crave innovation and fun. We want a compelling storyline and a new battle system that takes aim at current conventions instead of copying them. And more than anything, we want games that provide an enjoyable experience instead of another FPS with another crappy story and the same design.
If developers really want to make games profitable, they can't maintain status quo. First-person shooters are fine if they're unique and created with value in mind, but if they're not, they'll be thrown back into the heap with the vast majority of video games that simply don't make the cut.
Say what you will about gaming, but I don't necessarily think we need more games; I think we need better games.
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Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
I recently bought Shaun White Snowboarding for my Wii, which works with the Wii Fit board. No, the graphics aren't high-def, but controlling the on-screen action by standing on the controls makes for an extremely fun gaming experience. Nintendo gets this - Microsoft and Sony do not.
I've covered the game industry freelance for a number of websites for years and I even worked in the industry briefly. Each year there are plenty of titles that are released that are creative, new, and enjoyable, but they slip under most people's radars and those titles flop. If people really wanted these kinds of titles, they'd buy them...but they don't. Why?
There a number of reasons, but the industry structure itself is partly to blame. Game consoles are fairly short-lived devices and games themselves live even shorter life spans. Most games only stay on retail shelves for a few months or a year at most major retailers. If you want to find a game that didn't sell well at a console's launch, you'll likely have to head over to GameStop to find a copy. Availability and visibility thus becomes a problem, and means a game has only two real avenues to get a public's attention: via marketing (often expensive) and word of mouth (cheap, but hard to come by). Factor in the costs of making a game along with the time needed to (most console games takes 2-3 years, and the average console life span is ~ 4-6 years), there's not a whole lot of leeway to risk millions of dollars on an unknown product.
Besides, most consumers really don't want dramatically new experiences. They're fine with refined experiences of old, provided there's a new twist, stronger marketing, or some brand familiarity. The latest Pokémons don't dramatically alter the formula and the success of Guitar Hero and Rock Band has less to do with innovation, than with a marketing twist. Music games of their nature have been around for years (Frequency, Amplitude, SingStar, etc. etc), but it was when the games' appeal were broadened to American's affection for rock coupled with strong marketing, that helped propel the games into the mainstream.
What the industry needs in particular is the growth of an online structure and downloadable games/demos (akin to the iTunes Music Store), so consumers can try games, get centralized access, and gain availability to older games. This will help bring down costs, broaden the market, and help developers recoup some of their costs and potentially earn profits over a longer period of time, rather than being forced to deliver a sure thing to move off shelves within 6 months. We're starting to see some of it thanks to the growing availability of online play and new capable gadgets like the iPhone, and that's a step in the right direction.
Every time they do that, they don't sell well...
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by d--keller
November 25, 2008 10:11 AM PST
- Speaking of new ideas... how many times are you going to write this same article Don?
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(15 Comments)Look, for the future of gaming it's important to get new ideas and games out there. I agree. We probably all agree, but why do you keep insisting that this ties in to profitability somehow? Look at LBP sales. By all accounts it has been a total flop. It's new, different, critically acclaimed... by your reasoning it should be a huge seller and a big money maker. But it's not.