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The State of the Video Game Industry

The games industry hasn’t been in such a state of flux and uncertainty since the crash in the video games market in the 1980s, though the causes and implications are very different, it starts with a serious error in the way traditional games are made and published.

In the console space, the quickly increasing demand for high quality visuals has pushed development costs up and up, forcing development and publishing to require higher sales figures just to break even. For instance, there were reports that Modern Warfare 2 had a development budget of 50 million dollars and a marketing & launch budget of 3 times that number.

These costs are driving publishers to even more desperate measures to try and save money and guarantee high sales figures. Tax breaks offered in Canada that reduce development costs are already reshaping the development landscape. T

his includes a 600% growth in games development in Quebec in the space of a mere 7 years whilst in the UK there has been a 9% contraction in 2 years (The key factor is development costs, tax breaks are a symptom of this factor).

The development costs affect publishing decisions made at publishers at the highest levels; George Broussard neatly sums up a major consequence of this on his Formspring account:

Truth. Four years ago you couldn’t get a publisher to seriously consider a zombie game pitch. I know. I know developers that tried. Then Dead Rising, Left 4 Dead and others ship and zombies are so hot you see them as fucking modes in WW2 shooters, right?
“We all knew zombies were cool and hot. The publishers were stuck in WW2 mode and modern military mode. Publishers lack vision, hate risk, and play follow the competitor.

Meanwhile, there is significant growth outside of the large scale ‘AAA’ games development circles we know and love. The most distrusted of these being Facebook games which have relatively small start-up costs and do not require large amounts of continued investment. These small social games start up’s can give a ‘return on investment’ potentially within a period of 6 months making them.

This makes them particularly attractive to small capital investment companies and individuals that are looking for projects which might give them a faster return on investment than that of the 2-3 years of the traditional games industry (Plus the possibility of an explosive success like that of Zynga).