EIF 08: Deering issues warning

Festival chairman and industry luminary presents a future filled with opportunity and fraught with danger for the games industry.

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EDINBURGH--Chris Deering used his opening keynote at today's Edinburgh Interactive Festival to issue a warning to the games industry while discussing the opportunities presented by new platforms and technologies. Deering led Sony Computer Entertainment Europe's charge during the PlayStation and PS2 years, and is now chairman of Codemasters as well as the EIF.

Pointing toward the future of the industry, Deering suggested that there would be 2.5 billion game players by 2011 across traditional, handheld, and mobile platforms. He cited the advances in high-speed mobile-phone networks and the potential of nontraditional gaming platforms as the most promising but challenging new technologies, highlighting Apple's iPod family of products, Facebook, and GPS-enabled phones as the key growth areas for interactive entertainment.

The talk was also tempered with some warnings for the industry. Despite the projected growth, Deering claimed that global retail software sales will be lower in 2011 than they are in 2008. He warned about the dangers of publishing on traditional games platforms, making the point that less than 3 out of 10 games recover their development and marketing costs.

Deering was speaking at the Edinburgh Interactive Festival, which since 2001 has formed part of the city's cultural fringe festival to celebrate games and other forms of electronic entertainment.

Game screenings are open to members of the public and supported by publishers such as Codemasters, Ubisoft, and Frontier Developments. The industry-facing conference programme is much more eclectic. Established game makers rub shoulders with lesser-known creators. For example, Codemasters managing director Rod Cousens and Dan Hon from alternate-reality games startup SixToStart are set to talk about the future of their respective industries.

Stay tuned to GameSpot UK over the coming days for the latest on both sides of the event.

20 Comments

  • 02sfraser

    Posted Aug 12, 2008 2:55 am GMT

    its true that development costs are gettng extermely high due to HD consoles and the huge number of programmers needed to make the game. hopefully by 2011 thing wont be to bad cause i will be in uni by then learning to become a game programmer

  • grigjd3

    Posted Aug 11, 2008 2:47 pm GMT

    @amber_jade, if you think about it, it doesn't seem that hard for a game's development to cost so much. Say the average salary is $50,000 (I don't know, I'm just throwing a number out there). Say there is two-hundred people on payroll. That's ten million dollars per year of development right there. Consider cost of facilities, hardware, power bills, legal department, customs, marketing etc, You can easily triple that value. Now we're talking thirty million a year. Next consider that games take a long time to make, say three years and you're at ninety million total production costs. Making games is expensive.

  • smiguelv

    Posted Aug 11, 2008 1:46 pm GMT

    If you think of it all these current gen systems have come out in a low point in our economy (U.S.) yet the business is making more money then before, with better quality games more people are willing to buy. Look at major games like Gears, GTA, and Metal Gear just to name a few, they pushed the units they needed. Personally I dont mind if games put more advertisements with in the game or in the booklet as long as it doesnt interfere with the atmosphere of the product, there are many things that can be done to lower the price of the development.

  • amber_jade

    Posted Aug 11, 2008 12:04 pm GMT

    darkride66 - "GTA4 was very well received but it's costs were pushing 100 million". Bloody hell! I didn't realise it cost anywhere near that much. How did they manage to rack that up?

  • Viral-venom13

    Posted Aug 11, 2008 11:26 am GMT

    Prediction of industry in trouble in terms of game developmental cost, i guess more and more games will be going multiplatform rather than remaining exclusives as we have already began to see!!

  • 0678

    Posted Aug 11, 2008 11:09 am GMT

    wow only 3 out of 10 games making a profit? that blows! price of the new generation i guess. im not looking forward to games cost maybe 120 bucks or 60 pounds but it seems possible if we want to keep the industry afloat .

  • markharris31

    Posted Aug 11, 2008 8:36 am GMT

    That is a distince possibility. I'm just hoping that those of us who grew up as gamers will create a much more positive environment for gaming when we attain positions of power and influence.

    I just bought Geometry Wars 2 and it's a blast. Very addicting!

  • Irve

    Posted Aug 11, 2008 8:19 am GMT

    Well , in that case .......
    every xbox owner should download SWOS from XBLA
    this is the best game of all time .. and could take over your life for only 800 ms points
    anyways i agree that the transition is a long process ... i just don't think the market will ever evolve past the mass market being very casual gamers.

  • markharris31

    Posted Aug 11, 2008 8:05 am GMT

    There are always pitfalls, and corporate maneuvering will always pressure some sites. The good thing about the internet, though, is the abundance of variety. A company can't pressure EVERYONE, and so sites like Metacritic serve to give an overview of what the gaming press has to say about a particular product. As I mentioned, gaming has yet to gain the mainstream foothold that will legitimize reviews in mainstream publications (the ones you mentioned are good examples). I do, however, find it promising that even the Wall Street Journal is starting to pay attention to gaming while other "respectable" media outlets are posting reviews or commentary on the industry. The move to mainstream doesn't happen overnight, but the vociferous grass roots of gaming keeps on pushing the issue, and keeps growing. Gaming will find its place in due time. Until then, it's up to gamers to hold critics accountable and to spread the word of great underground hits through word of mouth.

  • Irve

    Posted Aug 11, 2008 7:58 am GMT

    markharris31 :
    trouble is , the mainstream games reviews ...
    newspapers , Maxim , FHM ... all those sorts of publications have terrible reviews
    i saw a review in the sun that ripped a game to peices and still gave it 79% ! but mostly thes magazine give glowing reviews to even the worst games.
    that won't change only have to mention Kane and Lynch to look at the pressure that might get put on mags for good reviews

  • markharris31

    Posted Aug 11, 2008 7:40 am GMT

    XBLA and PSN are the perfect platforms for innovation. The digital download model and limited graphics make for a perfect combination of low-cost distribution that small start-up companies, large company experiments, and groups of ambitious individuals can all use to introduce new concepts and gameplay techniques. As gaming becomes more mainstream the outlets for game reviews and critical acclaim will garner more attention, thereby giving more attention to games with little marketing dollars but great gameplay. The gaming industry is moving in the right direction, but doesn't quite have the exposure we see for other media. This will change as the industry grows and the gaming population gets larger.

  • Irve

    Posted Aug 11, 2008 7:35 am GMT

    the problem for the games industry is how and why games sell.
    Psychonauts is a good case in point
    critically aclaimed , this game should have got the word of mouth action going .. people who work in games stores should have been talking about it.
    but no ... when it comes to games the real money comes from people that don't really know much about games ... all they want is polished graphics a familiar name and simple gameplay.
    much like the film industry these sales should be paying fo the more experimental games that may turn out to be classics
    however unlike the film industry there is never a point where critical aclaim leads to strong DVD sales after the quiet box office results
    publishers have little incentive to invest in unproven games because, even if they turn out to be excellent, chances are they still won't shift in large numbers.
    so
    what we're left with is shelves full of bland FPS after FPS ... and the only real inovation coming on XBLA and PSN

  • markharris31

    Posted Aug 11, 2008 7:30 am GMT

    @VenomRitual : The car analogy works as an example of a mature industry where the price you pay for a car reflects the quality of the car and the cost of production. Much as the cost of Bioshock or GTA is higher than the cost of Geometry Wars 2. All are quality games, but there is much more to Bioshock and GTA in technology and development costs that warrant the higher price. The game industry is following the path of other, more mature industries.

    @darkride : Yes, I agree that the gaming industry will continue to evolve and find new revenue streams. Game quality is as you say, objective on technical issues, subjective on content and gameplay issues, much as movies. We can see from the movie industry that there will always be good movies and bad movies, as there will always be good games and bad games. However, there is room for both big budget productions such as the Dark Knight, and small budget surprise hits like Juno. The gaming industry, I believe, will be much the same. So as movies are judged by box office sales, industry awards, and critical acclaim, so will games. I do believe that the amount of bad software will slowly decrease over time as the industry contracts and balances supply with demand. Perhaps at some point 7 out of 10 games will be profitable by the very fact that the amount of quality games stays the same and the amount of shovelware decreases. As you say, there is no clear future, but I tend to err on the side of the proven industry model.

    EDIT : In my example I'm assuming that these alleged companies are run with some modicum of business acumen... unlike Take Two.

  • darkride66

    Posted Aug 11, 2008 7:09 am GMT

    @ Calmed_Fury. But don't forget that great games are falling through the cracks. Just as I mentioned in my post, look at Take Two. Bioshock and Oblivion were fantastic and the company has been on the brink of bankruptcy for years.
    @ markharris31. Good post. The problem is, what's a quality game? Beside the obvious problems of technical flaws that render a game unplayable, good games, like good movies, are subject to opinion. How do you know when you're making a game what the reaction will be? Zak and Wiki was a great game that nobody played. Haze was a very solid shooter but mishandled it's ambitious social commentary and turned people off. I think downloadable content and subscription fees are here to stay. When you think about it, Microsoft's games division made $400 million last fiscal year. If you figure there are 12 million (or something close to that) gold subscribers dishing out $50 a year for the privilege of playing their games online, that's 600 million. Without charging for XBL fees, MS would quickly find it's gaming division in the hole once again. Companies will have to adapt and figure new ways to squeeze revenue out of their games and game consoles.

  • VenomRitual

    Posted Aug 11, 2008 6:49 am GMT

    @markharris31 that car analogy doesn't really work though. car manufacturers have standards so crappy(unsafe) cars don't get put on the market nowadays, as opposed to anyone that can release a crappy game on handhelds, iphone apps, consoles, and the internet.

  • Calmed_Fury

    Posted Aug 11, 2008 6:03 am GMT

    but that pushes developers to make better games so that there can be money made. if it is a bad game (ie. vampire rain) does it deserve to make a profit? if you make a good game (ie call of duty 4 modern warfare) then you'll be rewarded with profits.

  • markharris31

    Posted Aug 11, 2008 5:59 am GMT

    One of the biggest problems with the expansion of any industry is the inevitable contraction. Dark, I'm sure you've seen this plenty of times before. Emerging markets tend to grow rapidly as the sales, demand, and profit margins are high. As the industry becomes flush with startups and investors it eventually hits a wall where the demand doesn't justify the supply. The video game industry is still in a period of extended growth, but is nearing it's limit. One big reason only 3 out of 10 games make money is because only 3 out of 10 games DESERVES to make money. There is a glut of bad software that companies have rushed to develop just to be in the "gaming space". As the industry settles the companies that produce high quality software will continue to profit, while those who don't will either have to accept smaller profits or exit the industry altogether. There is a reason a BMW can sell for $50,000 and a Hyundai only sells for $18,000. Quite a bit of quality difference, and brand name, of course. Gaming software will eventually follow the same route as any other industry. Some companies will produce high quality software (cross platform, mostly) that can sell at the higher price points, while other companies fill in with smaller, cheaper games (XBLA for example). Those cheaper games can still be quite good, they will just have smaller development costs and won't use the most cutting edge graphics, etc. For every boom there is a bust, eh?

  • GamerbyDesign

    Posted Aug 11, 2008 5:58 am GMT

    That's because 7 out of 10 games suck nowadays.

  • darkride66

    Posted Aug 11, 2008 5:46 am GMT

    Indeed, one only has to look at a company like Take Two to realize the trouble that game developers can get themselves into. With great titles like Bioshock and Oblivion under their belts Take Two could barley stave off bankruptcy due to tremendous overspending. GTA4 was very well received but it's costs were pushing 100 million. If GTA4 had not turned out so well we'd be talking about Take Two in the past tense. Releasing game multiplatform is the only way I can think of for companies to recoup these costs - and still 7 out of every ten games don't make any money. This is troubling.

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