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
AndriyP
April 2, 2013 at 12:42
Yes
No need to substantiate that answer, one just has to go to a store and count the games
There are way more sequels than new games
Admiral Chief Erwin
April 2, 2013 at 12:42
I dunno, I really, honestly, don’t know. I also don’t know if a crash will be a good / bad thing.
OVG
April 2, 2013 at 13:10
Just get Dead Space 3, Hitman, Max Payne3, Tom Raider and the like while you can, because the work model of polish and high budgets have failed.
OVG
April 2, 2013 at 12:52
140million consoles and AAA Games cant catch 3% of that market to make profit.
RE6, DS3, HITMAN, MP3…..Tomb Raider 🙁
John Riccitiello and Wada are the first to go. They should have just made cheap games like Dark Souls that only sold 750 000 and made mega profit.
So cheap games is the future unless its ROCKSTAR, because gamers vote with their wallets and the stats show.
CRASH COMMING
OVG
April 2, 2013 at 13:38
I understand that out of those 140million consoles half are broken, shared houses or for the casual crowd. So lets say 50miliion…10% still sounds shit for market share.
Remember that it took 3 years for todays consoles to hit that number.
So I hope the game developers for next gen dont expect 5miilion sales and 60million on marketing costs while the next gen is going to be 10% more expensive to make games.
Baffles my mind
Jim Lenoir (Banana Jim)
April 2, 2013 at 13:49
lol, if your game is running above 200 million in total costs (from R&D and marketting), and you’re yet to sell anything… you’re DOING IT WRONG!
Sir Captain Rincethis
April 2, 2013 at 12:54
Well put together piece here. Agree, we are DOOOOOOMED.
AndriyP
April 2, 2013 at 13:03
Im feeling particularly ranty today…
Games are made and then chopped into to pieces and charged separately as DLC
THE CRASH BE COMIN
Game are made that are very bad in quality with constant updates that sometimes take months to actually play a working game
THE CRASH BE COMIN…
The figures that are being “invested” into the games are absurd thats why their sales targets are absurd
And it still doesn’t make sense for games to cost so much money to make because most of the games are SEQUELS!!
THE CRASH BE COMIN…….
No new ideas, the lack of innovation is appalling im just tired of same type of games the past few years
if you have played Assassins creed 1 you dont need to play the rest there wont be anything new thats worth the cost of the game
if you played COD theres nothing new that comes up in the latter CODDDDSSSS that are worth the cost of the game
What happened to gripping stories?
Deus Ex was the last game that really amazed me with the story from the last 4 years
Theres just too many issues and when combined makes me want the damn crash to come so that a new era can begin from the start of gaming so that one day my kids will have great memories of things they experienced when they grow up because of one of the best forms of entertainment that was once alive..
OVG
April 2, 2013 at 13:21
😛
AndriyP
April 2, 2013 at 13:23
Funny enough i did think about crash bandicoot just now
sigh that was freaking fun
Jim Lenoir (Banana Jim)
April 2, 2013 at 13:07
The Crash… it comes!
I agree with the OP, I don’t think a new videogame crash would destroy gaming, I actually see it as beneficial (if it came to pass). In Cape Town, the life-cycle of fynbos depends on the destruction of the old and the dead by fire. The fire also stimulates seeds to germinate. There’s no denying, that the industry is in a creative funk at the moment. We’ve seen games in the last few years that should have blown us away (especially triple A titles), yet instead, failed to deliver. Just think of Dragon Age 2, Mass Effect 3, even Erwin’s favourite, Skyrim. Recent releases that should have been spectacular, but instead found themselves sucking the nipple of failure or even mediocrity, includes, the new ALiens game (an example of failure supreme) or the latest Gears of War game (and example of soul-destroying mediocrity wrapped in stained toilet paper)
And then there’s the annualised titles, who are slowly strangling the creative life blood out of the industry… (the Call of Duty games… the AssCreeds).
Aussious
April 2, 2013 at 17:23
Come now James I get you calling Dragon Age 2 a farce but, Mass Effect 3 and Skyrim might have some flaws but they are hardly examples of gaming mediocrity with games like Aliens and the recent Walking Dead games being made. Give credit where credit is due James…
Daniel Keevy
April 3, 2013 at 01:05
Yeah, the quality is definitely there on some of the products.
That’s the insanely frustrating point. It’s not always the quality that’s limiting sales, it’s how business is done.
Jim Lenoir (Banana Jim)
April 3, 2013 at 05:54
Both Mass Effect 3 and Skyrim weren’t as polished as they should have been. That was really my point. Forget the Skyrim-PS3 drama, even on PC and xbox, once you gave it a decent amount of play-through the glaring issues became even more so.
But crucially, If you compared Mass Effect 3 to Mass Effect 2, in terms of quality, standards did drop, and that’s really the gist of my arguments. I enjoyed ME3’s MP, but from a purely critical standpoint, ME3 paled in comparison to the second game (instead of improving on it and the first). Gears of War did the same thing. The first game is still the one to beat in my book, with subsequent titles actually missing the mark. Uncharted is another, while I enjoyed the third game, if you compare it to the second, something was definitely lost along the way.
Now, I concede that “quality” is subjective in this sense, and you could ask, what do I consider “quality”? It really boils down to a few things. I look at “asset reuse” (copy and paste), I consider “characterisation” (are characters growing or remaining stagnant) which also ties into the general story of the game. For instance, is it improving the mythos or are we merely being strung along per title, in a never-ending cash-grab (i.e AssCreed). I could go on, but it’s 6 in the morning, and I haven’t had coffee yet, and one of the cats just vomitted up a hairball… 😛
Daniel Keevy
April 3, 2013 at 01:00
Yeah, there’s a definite trend. I also think it’s because Triple A titles are coming thick and fast. On my budget I can buy two Triple A games a year. So I can’t splurge on every game. And neither can most people.
Sadly, many publishers haven’t adjusted for this model, preferring to opt for the pre-order model.
caponeil
April 2, 2013 at 13:07
Gaming is a tight spot because of the following:
– COD, FIFA paving the way for other clones trying to cash in with deteriorating quality (RE6)
– Not enough support for fresh IP’s (Steam is doing some good work but it is a drop in the ocean)
– Reliance on AAA titles for the bulk of the money printing
– Piracy! (I really do feel that that is one of the reasons that titles are so ridiculously expensive) – Don’t get me started on this! (Diablo, Simcity, online-only) Dafuq!
– Lawmakers closing down certain regions becasue of religion, violence, propaganda etc. Need more freedom
– Justin Bieber
Jim Lenoir (Banana Jim)
April 2, 2013 at 13:08
Bieber is the reason North Korea declared war on South Korea… He is the Anti-Nice!
Twakkie
April 2, 2013 at 14:04
Lol, read this on FB this morning: “First South Korea went viral with Gangnam style. Then North Korea went nuclear with Pyongyang style.”
OVG
April 2, 2013 at 13:12
Its all up to Bioshock 3s sales to prove if gamers know what they want.
matthurstrsa
April 2, 2013 at 13:18
I don’t see a massive crash coming like it did in 1983. Publishers/developers are in a much better financial position and most don’t rely only on one IP. Sure, some companies (like THQ) will fail, but that’s bound to happen in a free market.
Slade Boender
April 2, 2013 at 13:19
I vote fuck the machine. Let it burn.
Anon A Mouse
April 2, 2013 at 13:21
The burial of the E.T cartridges is not an Urban Legend, it actually did happen. Brick and mortar sales of games have been steadily declining of the last couple of years but online content have been increasing rapidly. I wish a crash will come in order for the industry to go back to basic and start getting the basics correct from day one. However I don’t think there will be a crash like that, certain players will leave the industry while those left behind will shift their focus to digital downloads (I hope I’m wrong on this one.) I think the industry is too bloated as it is at the moment and it will see a bit of it’s flabbiness fall off but if that’s going to be a good thing for the consumer I don’t know. It might be a two bladed sword. Better quality games but at a much higher price because of less competition, or heaven forbid, crappier games at higher prices because of less competition.
Jim Lenoir (Banana Jim)
April 2, 2013 at 13:22
Let it burn, that’s what I say…
Marty Goldberg
April 2, 2013 at 17:53
No, it did not happen. The burial in New Mexico was overstock from the changing of the Texas plant. We have the full story in the book “Atari Inc. – Business Is fun.”
Daniel Keevy
April 3, 2013 at 20:13
I always thought it did, but I found a reference to your book kinda explaining what happened. It’s incredible to think that times could be that desperate.
Sir Rants-a-Lot Llew
April 2, 2013 at 13:27
Bravo dude! Bravo!
*Starts a slow clap*
silverscorpio
April 2, 2013 at 14:57
I think a crash is coming but not just yet. The upcoming PS4 and Xbox will stimulate the industry again but after that it may happen. The signs are there and the biggest problem facing the industry is the Publishers themselves. They are milking FPS titles at the moment and not innovating. I agree that Indie studios is going to survive but developers linked to Publishers are in for a hard time. THQ was just the beginning. Activision and EA will probably not survive a crash as they are the most guilty parties with Ubisoft not far behind when it comes to alienating their clients. These Publishers are banking on titles bringing in quick returns after launch and with game prices going the way they are people wont be able to afford a lot of releases a month. They will make their money during the year after launch but they cannot affors to wait, Look at Square and EA firing their CEO’s because titles did not make enough money after launch. It is clear that they are panicking.
The biggest problem that Publishers are facing is that they do not understand their clients. They will get a franchise that is brilliant and milk it with annual releases until people are fed up with it.The only thing they change is a texture here and there. Then they blame piracy and used games and go to the next franchise.
Irrational did everything right in my opinion with Bioshock Infinite. They took their time and gave a quality product that is fun to play. Even the hipe was done right. 2K clearly did not interfere with the development process and money was not wasted on a useless multiplayer.
Now Ubisoft is going to for annual releases of Assassins Creed and maybe Far Cry as well. They are going to exhaust the franchises and who do they blame, Piracy and Used Games. It would have been better to release Assassins Creed one year and the next year release Far Cry. That might be better because they can take their time and give a good product. At the moment Assassins Creed does not even feel like Assassins Creed. It feels like GTA set in the past.
Here is how I see the future of gaming after a crash. Mega Publishers are going to be a thing of the past. Developers will get funding from crowd sourcing like Kickstarter and then they will self publish on a digital service like steam or the PSN store. They consumer will have a lot more say about thing like DRM and other unwanted unfriendly things like always on internet requirement because they are giving the initial funding. Digital distribution houses will become a new version of publishers but with very little say in the end product. The Developers will be king again and the publishers will remain a means to an end and not the other way around as what is happening now. In other word you will see Mega Developer companies and not Mega Publishers.
Aussious
April 2, 2013 at 17:17
What concerns me the most is the rate at which game studios are being closed, a sad side effect of capitalism perhaps? The buck stops with us the gaming consumers as long as we keep supporting safe recycled so called AAA games the industry will continue to suffer we vote with our wallets.
W_TF
April 2, 2013 at 21:51
Fuck the new games. After the disappointing piece of horse-shit that is Hitman: Absolution, I’m gonna just stick with playing my old offline games. Frankly: I don’t trust the gaming industry to produce anything that isn’t crud any more. Bring on the crash!!!
Willem Swanepoel
April 3, 2013 at 05:28
The crash is coming, I hope it comes. It is the only way they will listen because our complaints are hitting brick walls.
I will feel sorry for all those developers who will lose their jobs but unfortunately the gaming industry needs the crash….
It will pick itself up again but it will be for the greater good.