In 1983 the video game industry was worth $3 billion, but collapsed to around a $100 million in 1985. This resulted in many of the active game companies filing for bankruptcy. An interesting upshot from the collapse was Nintendo branding the Famicom system as a “Home Entertainment System” instead of a “Videogame System.” The industry began the long road to recovery in 1985, with the introduction of Nintendo’s NES in the USA. By 1988 Nintendo dominated up to 70% of the market share. Nintendo also set stricter controls on 3rd party developers, going so far as to blame them for the 1983 crash.
The reason why this crash is of special import for the current industry can be found in the three root causes. While the current generation of consoles aren’t as numerous as the 2nd generation there is a significant issue with oversaturation of games, especially in the casual gaming market. This is best exemplified by Zynga consistently downsizing since 2010 and Bioware closing its San Francisco studio (the studio responsible for Dragon Age: Legends and other Facebook games). While this issue hasn’t impacted the triple A market to the same extent as the 1983 crash, it is still necessary to note the uniformity of specific genres of games, particularly with the FPS market. While it can be argued that every FPS ultimately has the same story (or can utilise only a few storylines), this is only part of the problem. These games require a healthy multiplayer market to exploit their profits, but with the successive yearly clones the market is quickly being saturated. EA realised this after disappointing sales record of Medal of Honour: Warfighter. However, this cannot be argued to be a significant factor, presently, as Activision has proven. Black Ops 2 and Modern Warfare 3 have both netted in excess of $500 million, both claiming the title of “highest grossing game’ in their respective release years.
What is becoming a dangerous trend are the rise of high profile failures and the lack of production oversight. Currently 2013 has seen two titles that stumbled significantly out of the starting blocks. The first being Aliens: Colonial Marines and the second being SimCity. ACM which was developed by Gearbox Software and produced by SEGA was critically panned for being, essentially, a beta version of the game and not containing much of the promised content found in the E3 demo. ACM suffered from numerous delays during its production and development cycle; beginning development in 2006 and only completing the product in 2012. In an interview with the Official PlayStation Magazine, Randy Pitchford blamed the extensive delays on wanting to secure some of the original voice cast from the Alien movie.
This was another example of production oversight being sacrificed for profits and preservation of the film license. Further, it was revealed by Destructoid that Gearbox employees were being assigned to work on Borderlands, while still drawing full pay from SEGA who were the game publishers, and that several 3rd party vendors were responsible for developing the game due to Gearbox’s mismanagement of the project. This creates the very murky picture of a game, plagued by production oversight, which was allowed to fail through inaction. From SEGA simply throwing money at the developers to the developers continually failing to deliver, this all reeks of a troubling precedent in the modern-day industry. Gearbox themselves have become the recent poster child for titles with an anticipated launch that fail to deliver with failures such as ACM and Duke Nukem Forever on their books. Gearbox was also panned for intimidating reviewers and blaming consumers for the quality of their product.
The second high profile failure was SimCity, which was developed by Maxis and published by EA Games. While SimCity did not suffer from similar developmental issues and lack of oversight, it did suffer from another aspect of publisher dereliction. This was the issue of final roll-out and distribution. The initial release of the game, to American markets, in March 2013, was beset by serious server issues. The game itself requires that a permanent internet connection be maintained through the EA Origin platform server, which then connects to the SimCity servers. While both Maxis and EA have denied that they foresaw the high demand, this view must be questioned in light of the extensive pre-orders, which should provide for a minimum number of possible users, even if it’s only for the 6 month period around the launch. As a result, several “non-critical” features of the game were disabled, and the game’s extensive marketing has also been limited. Further Maxis have also been caught lying to consumers, when two players found a 20 minute offline cut-out in the code; thus disproving the Maxis argument that it is impossible to make SimCity an offline game.
Further triple A titles such as Dead Space 3, Tomb Raider and Devil May Cry have seen lower than expected sales. While the market is not in the exact same position as it was in 1983, it can be argued that it is occupying a similar position. As recent as 2012, THQ a massive developer and publisher had to shut down due to economic downturn. Gearbox, Nintendo and Ubisoft have all experienced a lower than expected net-income and companies like EA and Blizzard, while making profit year on year, have also experienced lower than expected sales. Currently the introduction of pay-as-you-play and free-to-play is being implemented to reverse this downturn.
It cannot be forgotten that the 1983 crash started with the consumer. Consumers who were unhappy with the product they received, either because there was too much product or the quality of the product was unacceptable. While it is impossible to argue that such a crash could happen again, the current gaming industry is experiencing a significant downturn. The fact that many of these companies are alienating their consumers through unsavoury business practices like always online DRM, poorly developed DLC, day one DLC, prohibiting the sale of second-hand games and pre-order bonuses that lock on disc content are only adding to the current sentiment. I myself have been gaming since 1992, on a clone of the Nintendo Famicom System, and I would be loath to give up on it. But if I am going to end up paying over a R1000 for a game (say R700 if it’s a PS3 game with two DLC costs of a R150 each) then it will force me to review how many games I buy or ultimately if I can afford to game.
Perhaps this is a necessary step. Perhaps the current system needs to fail, in order for future companies to realise the mistakes and attempt to correct them. Perhaps gamers need to start demanding their rights as consumers and staging stay-aways from unpopular moves. While one person may not derail the income machine that is EA Games, enough people insisting on their rights will force the industry to significantly rethink their business, or those companies following in their shoes. Gaming will not die out. Just taking a cursory glance at Steam’s Greenlight or Kickstarter will prove this, if there’s a crash there might not be triple A titles for a while, but gaming itself is too big to fail.
Last Updated: April 2, 2013