With studio closures seemingly popping up left and right (Iron Lore, Stormfront, Sega Racing Studio, Castaway, Pseudo Interactive, Perpetual Entertainment, to name a few) in this age of massive next-gen budgets and continued industry consolidation, we decided to get some perspective on just how tough it really is (or isn't) on today's video game developers and discussed some winning strategies for staying in the game.
There have been many studio closures in the news recently. Is it really a difficult time to be a developer right now?
Denis Dyack (President of Silicon Knights): Yes. The rising cost of development and a divided console market are making it difficult for both developers and publishers. Even with the growing popularity of video games, there are still too many games in the market, and we are approaching, if not there already, a state of performance oversupply for games.
Tom Kang (CEO of Wideload Games): It's an interesting and opportune time to be a developer. It is definitely more risky given that this is a hit-driven industry and games are more expensive to produce. In addition, we're relatively early in the transition to next-gen consoles. However, there's also more opportunity since there is lot of investment coming into the industry due to its high growth rate. At this point, you can get projects funded from diverse funding sources, i.e. established publishers, media conglomerates, new publishers, private equity, mezzanine finance, IP development funds, etc. Developers have to be smarter business people now and learn to manage risk better.
Chris Charla (VP of Business Development for Foundation 9 Entertainment): Short answer: It's always a difficult time to be a developer!
No, seriously, we are still as an industry recovering from and fully embracing the change to the next-generation of development systems—and games—and we're seeing some studios going through more trouble than others. Especially as consolidation in the publishing industry increases, the first half of 2008 has been a little volatile for developers. We believe scale matters, which is why we've built Foundation 9 the way have. As the costs of development go up, the publishers are expecting more from developers, and rightly so. We believe having a large, well-capitalized, stable company that can deliver on multiple platforms, is a big plus right now.
Mario Wynands (Co-founder and managing director of Sidhe Interactive): Consolidation, rising development costs, and fracturing of the market have created great challenges for developers under the traditional model. There seem to be fewer projects out there and margins are under immense pressure. For those projects on the table, publishers are taking far too long in the greenlight process now, shortening development timeframes and hampering quality as a result. It's a tough period where it can be hard to avoid signing the wrong sort of deal in the face of possible closure. And it's going to get worse before it gets better.
Developers will have to be nimble and responsive to opportunities in order to successfully negotiate this period.
Josh Williams (CEO of GarageGames and InstantAction.com): It is a challenging environment for many developers. Project scopes and budgets are huge for traditional retail games, and that makes projects long, hard to get done, and risky for all involved. The model that we see working is smaller games with just as much fun, but that can evolve over time. The alternative and much riskier path is trying to do the traditional big bang approach of huge retail titles. That model works, but it gets costlier and riskier over time, so only bigger and bigger companies can play with it.
Eric Peterson (President/CEO of Vicious Cycle Software): Competition is steeper than in the past, and the consolidation of developers and publishers is occurring again (a cyclical event in the industry). Game development costs are higher than before, which results in larger studio/team sizes and that can equate to more risk.
Creating more interesting and compelling content is on the rise, developing for the latest and greatest consoles is more challenging than with past systems, and so on. So, yes, I would say it is a bit more difficult than it has been in the last decade or so.
Don't get me wrong, quite a few of these points have existed in the past too. Some of them are a constant issue we all have to deal with, but when you throw in larger staff sizes and bigger budgets in order for you to compete with other top notch titles and developers on the market, then I would say that those added factors are the ones that tip the scale.
With the cost of development continually growing, how important is outsourcing on major projects?
Dyack: Most studios these days are outsourcing to help control costs. However, Silicon Knights strongly believes that this commodifies the talent within companies and ultimately will weaken the companies that outsource. Many developers and publishers will be facing some very difficult decisions now and in the near future.
Kang: Very important. Outsourcing has allowed Wideload to maintain a small core team and still have the ability to do large-scale projects. A small core team has several advantages. 1) From a cost standpoint, a low burn rate allows for longer staying power, which allows us to be more selective and strategic about which projects we put into production. In other words (and point number 2), we're not forced to take on projects that don't fit our strategy because we have to pay bills. 3) This is important when transitioning between projects, and very important for us since we focus on original IP. Outsourcing helps us better manage risk.
Charla: At this point, developing an entire, major project without any outsourcing is actually fiscally irresponsible to our clients and ourselves. We've gone from publishers being suspicious of outsourcing to being—rightly—suspicious of large bids that don't include some level of outsourcing. The games business is a global one, and smart development processes are not afraid to use the best resources available, worldwide, to maximize development dollars.
That said, outsourcing can have downsides of its own, and F9 in particular is pursuing a variety of strategies, including creating wholly-owned studios in low-cost geographies. We've realized great efficiencies from our "insource" studio in Pune, India, which features team members who are wholly integrated into the development process, not simply a "black-box" for churning out art assets, and in many cases the cost and efficiency we've realized is better than with traditional outsourcing.
Wynands Outsourcing is part of the solution to keeping development costs in check. But fundamentally there is a lot that can be improved about the development process itself that can have a significant, perhaps greater, impact on costs.
Key areas that should be focused on include better planning through more considered prototyping and preproduction periods, tighter publisher and licensor feedback and approval loops, improving internal communications, better quality control on the developer side, close management of feature creep and change requests, and building publisher production department relationships based on open communication, collaboration and support. Taking this approach not only keeps costs in line by minimizing wasted and inefficient development time but also reduces project risk and raises product quality.
Williams: We find that a mix is key. There are resources you need in house and some you need out of house. We try to figure out the best use of the dollars. On top of that, we find having outsourced talent in some cases brings new ideas to the table.
Peterson: It can definitely play a role. If you have a shorter-than-normal timeframe to develop your game, if the scope of your design requires more people than you have on staff, or if you are in the process of growing your team, then you may think about looking to outsource shops to get a little boost.
Also, depending on the geographical location of your studio, you may be looking to outsourcing to help reduce your project's budget. By adding a few cost effective developers to your staff for a short period of time, you can offset your monthly burn while gaining a little boost in your production's timeline. Outsourcing can help you meet your deadlines a bit sooner and make it possible to reach your final goal on time.
Of course, with outsourcing comes other potential risks and more managing and scheduling issues. So you really need to weigh out your options and decide where the better solution is for you and your team.
2007 was the year of new IPs. With the economic downturn, are publishers becoming more conservative?
Dyack: Most publishers now realize that new IPs are the future for growth in a content-based industry. However, sequels are still currently a safe bet, so it is likely that we will see more sequels.
Kang: The economic downturn is not going to have a huge impact on our industry. Seems everyone is still looking for new IPs.
Charla: Not at all. Publishers are always eager to minimize risk—and we're eager to help them do that—but we haven't seen any downturn in the appetite for original IPs across the board. Everyone knows the next big thing isn't going to be a sequel, and while everyone is eager to exploit their franchise and back catalog, we find most publishers are really very forward looking when it comes to exploring new IP.
Wynands: It does feel like we have moved back into a more conservative period. While as an industry we are doing record numbers, the wide range of platforms in the marketplace has spread publishers thin and there have been a lot of individual titles that have failed in the marketplace, many of which were backed by large dollars. Franchises, licenses, and sequels are the obvious thing to fall back on.
While this has obvious implications for original IP, for me the biggest concern of the more conservative climate is the lengthier greenlight and due diligence process, which is shortening production timeframes. While it is reasonable for publishers to undertake the appropriate measures to ensure that they greenlight the right titles and place them with the right developers, the process seems so unwieldy that there is a direct impact on the feasibility and quality of these titles. Publishers have to find a way to short circuit this process to set developers up for success and avoid a negative quality impact.
Williams: I hope not. If anything, gamers are going to need to see more compelling content to spend their dollars on more games. There are so many great IPs lately that have helped to move us away from sequel-itis and have grown the industry.
Peterson: I don't think so. We always need to take chances on new ideas and concepts in our industry. There will always be a place for sequels and franchises in general, but if we keep peddling the same old thing to consumers and do not advance our medium, then they will eventually look elsewhere for their entertainment fix.
If anything, our industry could benefit more from an economic slowdown than other sectors of the entertainment market. With spent dollars versus hours entertained, I think you get more bang for your buck purchasing a video game than you do going to a movie, especially when you factor in rising ticket costs and concession stand prices.
One area where publishers might become more conservative is the number of products they make and ship in a year. With development costs on the rise and everyone expecting bigger and greater games all the time, companies may decide to limit their risk a little by not flooding shelf space. Only time will tell.
What are some good strategies when pitching your game to a publisher?
Dyack: Create something you would want to play yourself. At the very least, you know that you will please one person.
Kang: Optimize a risk/reward profile for them. Develop multiple platform, global titles to maximize market potential.
Remove execution risk by pitching games that fit your core competency. In Wideload's case, that is the development of new, funny IP. Finally, implement it with a strategic outsourcing model.
Charla: Oh sure, we tell you, you tell someone else…No, seriously, present your game and your vision as clearly as you can. After that, it's really just up to them if it happens to fit with their market vision and plan. We don't think you can manufacture an IP to fit a need. A truly great IP is something that's immediately appealing.
Wynands: It really helps to have done your own due diligence beforehand, both about the game and how it fits into the marketplace, as well as about the publisher and where the title will sit in their portfolio.
Williams: We are a game publisher too, so we have advice for developers. Ideas are a dime a dozen. The best thing you can do is bring a prototype that has fun gameplay at its core. There is no reason you can't quickly, cheaply produce a fun prototype if you know what you are doing nowadays, with so many affordable game technologies available to build on. We can fund your game or hook you up with other funders, but nobody wants just ideas. We need good teams and functioning gameplay that is well on its way to being cool. For us, we're particularly interested in digitally distributed games, and of course games designed for InstantAction.com on the web, first and foremost.
Peterson: It is always good to take your presentation seriously. As they say, you only get one chance to make a good first impression.
I think some of the best advice I could give anyone is to make sure your idea is solid before pitching it. Make sure to look it over quite a few times with colleagues. Find potential holes in the idea and make it is as bulletproof as you can.
Your idea needs to be as unique as possible or at least demonstrate that it advances a current concept, genre, gameplay mechanic, or technology in some way. The last thing you want to do is get your "latest and greatest" concept in front of a publisher only to find out they have already been pitched the idea ten times. Do your homework.
Include images, movies, or even actual gameplay footage, but make sure anything you show is high quality work. Any of these materials done poorly could sink your chances fast. It doesn't take much to turn someone off to a concept if they think that the studio creating it isn't capable of bringing the final product to fruition. If you don't have the time or money to add the extra production value, then just supply a great document that conveys the idea well.