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So, I'll admit this topic has been on my mind for a while, but I've held off on posting it for a few reasons. I will always root for the industry to succeed; I love video games and feel happy that they've really come into their own as a dominant force in the world of entertainment. Having said that... can things keep going as they are now? Is the Industry sustainable, or will something have to give sooner or later? And if something does have to give, will publishers be willing and able to adjust?
As a disclaimer, I am well aware that the COVID-19 pandemic has been a rough time for video game development and has been very disruptive towards schedules. We've seen games have cycles for development extended by years that otherwise wouldn't have been. It is definitely something to keep in mind as I make some of these points.
Part 1: The Iron Triangle
Having said that, as expectations have increased for modern video games, game development has become increasingly resource and time intensive. Some of you may be familiar with a concept known as the Iron Triangle, or the Triple Constraint Triangle, a tool for project management that looks like this:
The idea behind this diagram is that projects have three components that ultimately determine the quality of the product: Scope, Cost, and Time. If you reduce any of these components, it must be made up for by one of the others, or else the quality of the product drops. If you shorten the project's schedule, you must either increase the resources spent on it, reduce the scope of its features, or sacrifice QA and other quality measures. Reducing budget is a similar idea. Scope is perhaps the most important to manage, and can also be the most difficult. Scope Creep is a term used for when a project subtly increases in features as it is being executed, which will inflate the cost and schedule. In the world of video games, this is typically the reason for delays. One of the hardest parts of managing a project is limiting Scrope Creep. However, the AAA world of Video Game development is an arms race to outdo your competition. To have more features than ever before, larger worlds, more lines of dialogue, and of course, better graphics. The temptation to not limit the scope of your project seems almost antithetical to the idea of a world of video game marketing driven entirely by hype.
A good example of how this works is Call of Duty. Call of Duty is an annual game that is expected to have top of the line visuals and features. Time is the ironclad constraint. Because of this, Activision has had to pull resources away from many of their development studios to support Call of Duty. This is an opportunity cost for whatever else they have produced with those resources, but shipping the game on time is just that important. And of course, constraints on time and scope potentially take a toll on Quality. This isn't to say the games are buggy but Call of Duty is famously unoptimized for the platforms it is played on, taking massive amounts of memory to install, and often needing many patches. Another example in a similar vein we could look at is Pokémon, which is similarly time constrained (perhaps more so due to the media empire of anime, trading cards, and merchandise the games anchor). Pokémon's massive scope and tight schedule mean the games are often not on par even with other Nintendo series in terms of visuals or animation quality.
So why bring this up now? Well, you may have noticed that the Xbox brand has been having a very rough last 12 months, which is what got me thinking about all of this initially. You may recall that last E3 (RIP) Xbox had a showcase for many games that would all debut within the next year... and then failed to deliver. The game that we did get in that window, Redfall, was by all accounts an unfinished game. They've delayed Starfield until later this year because it is a game that absolutely cannot afford to let fail. These last 12 months have been absolutely brutal for Xbox, and there's a perception that the only way they can come back is to really impress with their upcoming showcase and the games it will feature. Schedule and quality are massively important for keeping mindshare in the gaming public, and Microsoft is now in a position where they need to recover from their prior shortcomings.
Part 2: Running out of GAAS
But this sort of feels like... foreshadowing? Xbox has tried to embrace the idea of it being an online multiplayer focused console and brand, and many of their flagship games (Halo: Infinite, Forza, Sea of Thieves, even Minecraft) reflect this. It's what they see as their value proposition. And that's certainly not a bad thing. And that is not to say they don't have a robust focus on single player games coming up. But something else has recently taken over the idea of multiplayer in the world of gaming. Something... bigger.
Ever since the explosion of the Battle Royale genre and other multiplayer hits, the industry has been in a gold rush to create the next big GAAS hit. If you have been paying attention to how this has worked out for some publishers... it often hasn't been great. Square Enix has had multiple attempts to try to leverage the Final Fantasy brand and to be fair, their MMO is doing amazingly well, but other offerings like Chocobo Racing, or the Final Fantasy 7 Battle Royale have been critically panned or outright canceled. Then they had the Avengers game, which bafflingly seemed to develop a narrative heavy introduction before giving way to a mission based, Destiny-like structure.
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Remember them?
Well, that's not exactly fair, it's not like anyone else is going to try to make a mission-based superhero multiplayer game heavily supported by microtransactions, or season passes with fairly uninteresting gameplay that has had a rather tepid reception and seen delays and has otherwise wasted the resources of an acclaimed developer and...
Oh... right...
And do we even talk about what is going on with Ubisoft? Like, exactly how many free to play games, or games with a significant amount of microtransaction supported multiplayer, have they announced in the last 5 years or so? Heck even before that? Does ANYONE remember Skull & Crossbones, the game that was supposed to come out before Sea of Thieves? Because it's supposedly still coming! And that's not even getting into all of the other issues Ubisoft has had with management, harassment, etc. There are legitimately valid reasons to be concerned for the future of the company.
And I can see why GAAS is so appealing. We've seen just how much money Fortnite has made, as well as Apex Legends and the very few others who actually reach that promised land of profitability. But it also exposed the underlying concern that a lot of developers have. That traditionally published games without a long tail of revenue earning potential are not seen as sustainable.
At least none of these companies would do something ill-advised like bank heavily on NFT integration into their future gaming projects in the hopes of some quick easy cash flow, right?
Right?
Part 3: Let's talk about Sony
So, I've been pretty critical of Xbox so far, and by comparison, Sony has been having an INCREDIBLE last year. The PS5 is seeing huge momentum, and major releases like God of War Ragnarök, Horizon Forbidden West, and The Last of Us Part 2 (and Part 1) have shown a commitment to high quality single player games. But... will it last? I'm not trying to be unnecessarily pessimistic; I think it's generally unwise to bet against Sony, but after Spider-Man 2 releases this year, we really don't know what's on their road map. With the news of the Last of Us Factions being delayed and possibly scaled back, is it possible that, with Xbox potentially poised to come clawing back with Starfield and other announcements, and the relatively muted reception to their most recent PlayStation showcase, the clean runway they've enjoyed for the last year might suddenly become a bit rougher? Of course, they can lean heavily on the partnerships they've secured with third parties (Street Fighter IV, Final Fantasy XVI), and they are still in a much healthier place than Microsoft at the moment.
But let's come back to Factions being delayed and scaled back. It's pretty obvious that Sony ALSO has a vested interest in GAAS and would very much like to be the home of that next big hit. This is of course the very reason they bought Bungie, and we've seen from their most recent financial report that they see live service games as a very important part of their future financial picture.
Current momentum will do a lot to keep Sony successful. But they are not immune to the Iron Triangle or the allure of striking gold, and their business relies on keeping ahead of Microsoft in the video game arms race, and Microsoft is becoming increasingly committed to gaming. The Xbox might not even be Sony's biggest worry. Game Pass, if it takes off, is a direct threat to Sony's premium release strategy, and it is growing more than ever in the PC space. There is a reason why Sony is fighting hard to try to make sure the Activision-Blizzard-King acquisition does not go through.
Part 3.5: What about Nintendo?
Also, where does Nintendo stand in all of this? While Nintendo has famously pursued a Blue Ocean strategy and largely avoided competing directly with Sony and Microsoft on their own terms, Nintendo is certainly a AAA developer and is bound by the same concerns I've outlined above. Tears of the Kingdom is a monster hit, but one that took 6 years of development. I am skeptical we see many more flagship EPD series (3D Mario, Mario Kart, Animal Crossing, etc) this generation. But they have a few factors working in their favor, most notably the absurd popularity of their IP, and traditional focus away from realistic graphics. I think Nintendo is going to face challenges like everyone else, but having somewhat side stepped the arena everyone else is competing in, I do think they are more insulated than others about a looming threat.
Final Thoughts
I do honestly think we are heading towards at least some form of reckoning in the AAA space of game development in the near future. Games are taking longer to develop, with larger budgets, to push an ever-increasing measure of quality, all while also trying to produce the next big thing to completely take over the market. And as we receive, fewer, larger releases over time, the mid-tier AA industry continues to dry up as well. Heck, part of the reason I'm somewhat more optimistic on Nintendo is because they are still a home to plenty of smaller Japanese developers who don't compete in the AAA space. Now, who can tell what form a crash would take. We aren't seeing a total market collapse like in 1983, but could we see more publishers go under? Could Ubisoft die in the next 10 years? Could publishers continue to consolidate to survive? Could increased demand on developers create striking conditions like we are seeing with the Writer's Guild right now? I don't have the answers, but I do think that something's gotta give eventually.
As a disclaimer, I am well aware that the COVID-19 pandemic has been a rough time for video game development and has been very disruptive towards schedules. We've seen games have cycles for development extended by years that otherwise wouldn't have been. It is definitely something to keep in mind as I make some of these points.
Part 1: The Iron Triangle
Having said that, as expectations have increased for modern video games, game development has become increasingly resource and time intensive. Some of you may be familiar with a concept known as the Iron Triangle, or the Triple Constraint Triangle, a tool for project management that looks like this:
A good example of how this works is Call of Duty. Call of Duty is an annual game that is expected to have top of the line visuals and features. Time is the ironclad constraint. Because of this, Activision has had to pull resources away from many of their development studios to support Call of Duty. This is an opportunity cost for whatever else they have produced with those resources, but shipping the game on time is just that important. And of course, constraints on time and scope potentially take a toll on Quality. This isn't to say the games are buggy but Call of Duty is famously unoptimized for the platforms it is played on, taking massive amounts of memory to install, and often needing many patches. Another example in a similar vein we could look at is Pokémon, which is similarly time constrained (perhaps more so due to the media empire of anime, trading cards, and merchandise the games anchor). Pokémon's massive scope and tight schedule mean the games are often not on par even with other Nintendo series in terms of visuals or animation quality.
So why bring this up now? Well, you may have noticed that the Xbox brand has been having a very rough last 12 months, which is what got me thinking about all of this initially. You may recall that last E3 (RIP) Xbox had a showcase for many games that would all debut within the next year... and then failed to deliver. The game that we did get in that window, Redfall, was by all accounts an unfinished game. They've delayed Starfield until later this year because it is a game that absolutely cannot afford to let fail. These last 12 months have been absolutely brutal for Xbox, and there's a perception that the only way they can come back is to really impress with their upcoming showcase and the games it will feature. Schedule and quality are massively important for keeping mindshare in the gaming public, and Microsoft is now in a position where they need to recover from their prior shortcomings.
Part 2: Running out of GAAS
But this sort of feels like... foreshadowing? Xbox has tried to embrace the idea of it being an online multiplayer focused console and brand, and many of their flagship games (Halo: Infinite, Forza, Sea of Thieves, even Minecraft) reflect this. It's what they see as their value proposition. And that's certainly not a bad thing. And that is not to say they don't have a robust focus on single player games coming up. But something else has recently taken over the idea of multiplayer in the world of gaming. Something... bigger.
Ever since the explosion of the Battle Royale genre and other multiplayer hits, the industry has been in a gold rush to create the next big GAAS hit. If you have been paying attention to how this has worked out for some publishers... it often hasn't been great. Square Enix has had multiple attempts to try to leverage the Final Fantasy brand and to be fair, their MMO is doing amazingly well, but other offerings like Chocobo Racing, or the Final Fantasy 7 Battle Royale have been critically panned or outright canceled. Then they had the Avengers game, which bafflingly seemed to develop a narrative heavy introduction before giving way to a mission based, Destiny-like structure.
Remember them?
Well, that's not exactly fair, it's not like anyone else is going to try to make a mission-based superhero multiplayer game heavily supported by microtransactions, or season passes with fairly uninteresting gameplay that has had a rather tepid reception and seen delays and has otherwise wasted the resources of an acclaimed developer and...
Oh... right...
And I can see why GAAS is so appealing. We've seen just how much money Fortnite has made, as well as Apex Legends and the very few others who actually reach that promised land of profitability. But it also exposed the underlying concern that a lot of developers have. That traditionally published games without a long tail of revenue earning potential are not seen as sustainable.
At least none of these companies would do something ill-advised like bank heavily on NFT integration into their future gaming projects in the hopes of some quick easy cash flow, right?
Right?
Part 3: Let's talk about Sony
So, I've been pretty critical of Xbox so far, and by comparison, Sony has been having an INCREDIBLE last year. The PS5 is seeing huge momentum, and major releases like God of War Ragnarök, Horizon Forbidden West, and The Last of Us Part 2 (and Part 1) have shown a commitment to high quality single player games. But... will it last? I'm not trying to be unnecessarily pessimistic; I think it's generally unwise to bet against Sony, but after Spider-Man 2 releases this year, we really don't know what's on their road map. With the news of the Last of Us Factions being delayed and possibly scaled back, is it possible that, with Xbox potentially poised to come clawing back with Starfield and other announcements, and the relatively muted reception to their most recent PlayStation showcase, the clean runway they've enjoyed for the last year might suddenly become a bit rougher? Of course, they can lean heavily on the partnerships they've secured with third parties (Street Fighter IV, Final Fantasy XVI), and they are still in a much healthier place than Microsoft at the moment.
But let's come back to Factions being delayed and scaled back. It's pretty obvious that Sony ALSO has a vested interest in GAAS and would very much like to be the home of that next big hit. This is of course the very reason they bought Bungie, and we've seen from their most recent financial report that they see live service games as a very important part of their future financial picture.
Current momentum will do a lot to keep Sony successful. But they are not immune to the Iron Triangle or the allure of striking gold, and their business relies on keeping ahead of Microsoft in the video game arms race, and Microsoft is becoming increasingly committed to gaming. The Xbox might not even be Sony's biggest worry. Game Pass, if it takes off, is a direct threat to Sony's premium release strategy, and it is growing more than ever in the PC space. There is a reason why Sony is fighting hard to try to make sure the Activision-Blizzard-King acquisition does not go through.
Part 3.5: What about Nintendo?
Also, where does Nintendo stand in all of this? While Nintendo has famously pursued a Blue Ocean strategy and largely avoided competing directly with Sony and Microsoft on their own terms, Nintendo is certainly a AAA developer and is bound by the same concerns I've outlined above. Tears of the Kingdom is a monster hit, but one that took 6 years of development. I am skeptical we see many more flagship EPD series (3D Mario, Mario Kart, Animal Crossing, etc) this generation. But they have a few factors working in their favor, most notably the absurd popularity of their IP, and traditional focus away from realistic graphics. I think Nintendo is going to face challenges like everyone else, but having somewhat side stepped the arena everyone else is competing in, I do think they are more insulated than others about a looming threat.
Final Thoughts
I do honestly think we are heading towards at least some form of reckoning in the AAA space of game development in the near future. Games are taking longer to develop, with larger budgets, to push an ever-increasing measure of quality, all while also trying to produce the next big thing to completely take over the market. And as we receive, fewer, larger releases over time, the mid-tier AA industry continues to dry up as well. Heck, part of the reason I'm somewhat more optimistic on Nintendo is because they are still a home to plenty of smaller Japanese developers who don't compete in the AAA space. Now, who can tell what form a crash would take. We aren't seeing a total market collapse like in 1983, but could we see more publishers go under? Could Ubisoft die in the next 10 years? Could publishers continue to consolidate to survive? Could increased demand on developers create striking conditions like we are seeing with the Writer's Guild right now? I don't have the answers, but I do think that something's gotta give eventually.
