Indie Innovation Influx

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Although overall sales of video and computer games fetched a record $7.3 billion in 2004, the latter category, which accounts for games played on PCs, is down to $1.1 billion in sales, from $1.2 billion in 2003, according to the NPD Group. And industry veteran Greg Costikyan thinks he knows why. Gamers are growing bored of a market dominated by sequels, sports franchises, and movie-based titles.

The solution, he argues, sounding a bit like Sundance Film Festival's Robert Redford, is to tap independent developers, whose creativity will fuel the next wave in popular game styles. It's an idea that even Microsoft (MSFT) seems keen on, having begun courting independent gamers through its sponsorship of IndieGameCon 2005 (see BW Online, 10/13/05, "Indie Gamers Hit the Right Buttons").

Costikyan has consulted for a variety of corporations including Intel (INTC), IBM (IBM), and Nokia (NOK) -- where he spent the past year researching and designing games for mobile phones. In 2005, he left Nokia and partnered with Johnny Lee Wilson, the former editorial director of Computer Gaming World magazine, to start Manifesto Games, billed as an aggregator and online store for independent games. In early 2006, the company will launch with 100 titles for sale via download. Costikyan likens Manifesto to "the Miramax of independent games," exposing audiences (and big distributors alike) to rarely seen, non-blockbuster titles.

Not surprisingly, gamers are rallying to Costikyan's call for revolution. At this year's Game Developers Conference in San Francisco, Costikyan's rant against what he sees as a lack of innovation -- delivered during an appearance on a panel about what's wrong in today's gaming industry -- received a standing ovation. BusinessWeek Online reporter Reena Jana visited Costikyan at his home office in lower Manhattan to hear more about about how the best way to cultivate future hit games might be to pay attention to developers who break the rules. Edited excerpts of their conversation follow:

Why do you see a crisis of creativity in the gaming industry?

In the last 30 years, there has been an enormous fermentation of creativity in gaming. Most people think it's driven by technological advances. But I think it's really driven by game designers' startling creativity. The problem [is] that creativity will be hard to sustain under the industry's current model, in which major game publishers and distributors don't want to promote a title that isn't a franchise or a game style that isn't a proven seller. Generally, big publishers consider a game that sells less than a million units a failure.

When did that approach become the status quo?

I don't think there's an exact moment when the industry "jumped the shark." Instead, there has been an increasing trend of publisher conservatism for about a decade. Game sales are down in Japan and slightly down in the U.S. as well, from last year. So there are signs of a crisis down the road, although in the short term, sales still seem strong.

Why is it so crucial to support innovative game design, and how could a major publisher do so?

Think of The Sims. When the game was first released, it was so completely different from any other computer game. It seemed like a big risk, and Electronic Arts (ERTS) tried to kill it. But it went on to be a best-selling title and spawned other games that sold well.

These days, a company like Electronic Arts will spend $10 million on producing and promoting one title. Why not use that budget on 20 titles by independent gamers with original visions, who need $500,000 or much less to realize them? A diversity of ideas translates into the higher potential to cultivate totally new game styles, rather than stay stuck in the same old formulas. A parallel might be to think of diversifying an investment portfolio rather than banking on one moneymaker.

What about Microsoft's Xbox Live Arena, which offers audiences a look at games by independent developers? [See BW Online, 10/14/05, "Microsoft Seeds the Indie-Game Ecosystem."]

Yes, Microsoft has opened a laudable channel. But they're going to offer the same kinds of titles that are available on the casual downloadable market. It's not the direction I'm talking about, which is totally new game styles.

Other big companies, like Nintendo, say they're committed to innovation, too. But innovation in game design these days doesn't mean new styles. Instead, they're publishing and distributing, say, driving games or shooters repackaged as "new."

What makes Manifesto unlike existing sites that aggregate games for download?

Direct2Drive and Turner Broadcasting System's new Gametap are both trying to build an audience for older games that many fans have already been exposed to. Manifesto is offering games that haven't been widely seen. And while some sites do offer independent titles in one spot, like and, they only have a handful of products. We're starting with an inventory of 100.

As for pricing, we're avoiding the Gametap model of subscriptions, one that's also used by Pricing won't be standard, as it is for music on iTunes. We want to be easy for independent developers to work with individually. We will advise if they're pricing too high or too low. I want to get away from idea that $19 is the standard starting cost for games. A small retro game, for example, might be available for a $5 download.

What types of games will be available at Manifesto?

Existing game styles that are losing exposure in the retail market, like flight simulations, which aren't stocked because they won't sell 300,000 units. We can aggregate fans. For younger audiences, there will be more experimental games. We have a letter of intent from IR Gurus in Australia, who have a game out with UbiSoft, Heroes of the Pacific, but we would feature a hard-to-find title, like its Australian League Football.

Another company we'll work with is GameLab. While it's known for casual games, like Diner Dash (distributed by Playfirst), its designers are interested in games that break the mold.

Are you promoting casual games, which is clearly a large niche?

No. It's already a stereotyped genre. Some sites, like Big Fish and Oberon, have achieved a critical level of sales with casual-game downloads and show that it's possible to compete with Yahoo!(YHOO). While it's really cool and astonishing that casual games are selling to people who historically haven't bought games, we believe it's easier to succeed with targeting established gamers.

What evidence do you have that independent, niche games will sell?

A good example is an independent company called Her Interactive, which couldn't get a publishing arrangement for the Nancy Drew computer games it developed for a very specific niche. So it sold them solely on (AMZN). Atari (ATAR) picked up the titles after the Amazon sales proved there was a market. [Note: To date, Her Interactive has sold more than 2 million units of Nancy Drew titles].

That success can be replicated. Galactic Civilization is an indie game that has sold over 100,000 copies via direct download. World at War is another, selling in high tens of thousands, also via direct download. Yes, many of the titles that we'll offer can be downloaded elsewhere. But you would have to scan a dozen small developers' sites to stumble upon them, especially as they aren't reviewed that much in magazines.

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