“The game industry is recession-proof.” “NPD Group announces game industry grows 22 percent to $16.04 billion.” The good times are still rolling for games. Sure they are.
The times are so good that Sony is expected to post its first loss in fourteen years. They’re making up for that track record with an anticipated $1.1 billion deficit. Sony will also slash up to 16,000 jobs as well close about 10 percent of its manufacturing facilities. Good times for Sony, eh?
They aren’t alone. How many small/indie studios have shut down in the last year? If games are “recession-proof”, if the industry is doing so well, why can’t funding be found? Aren’t those numbers big enough?
Microsoft, a name not unknown in gaming, is dropping an entire studio, Ensemble, cutting off about 90+ people. And this is the bunch working on Halo Wars, due out around March.
Let’s not overlook Electronic Arts, dropping ten percent (about 1,000) of their workforce world-wide. In addition, they’re closing/consolidating nine studios and publishing locations. EA is not exactly a small operation, they’ve been around a long time, aren’t they getting their share of the pie?
THQ, Lucasarts, Eidos – they’re all cutting back, as well. These are big names. The “industry leaders”. They put out the “A-title” products. If the money is so good as NPD claims, why is everyone suddenly “consolidating”, or, in corporate-speak, “eliminating redundancies”? That last term sounds so much better than “firing people”.
One name is conspicuously absent from this list. Activision-Blizzard. Activision probably made the best move in its history buying Blizzard. World of Warcraft, currently sporting 11.5 million subscribers world-wide, is practically an automatic cash cow. Activision is likely the only “big” company not hurting for money, or anything else.
Perhaps that’s where most of the growth really is, in WoW? And if not, what’s happening to that “billion-dollar growth”? Where’s the money?
didn’t WoW put out a $50 upgrade, addon. at 11.5m that’s about 550M right there, add it 11.5M at $10/month * 12months/year and you get another 1,380m or almost 2b/year 2008.
yeah i’d say they are a big chuck of that 16b. then start factoring in the PSPs, 360 gaming cubes and don’t think much is left over for the ineffectiant bloated companies attempt to market the same old junk with new graphics.
I was laid off from last spring and now work for a startup formed by some of the folks involved in that layoff. The money is still there, but it’s probably not as plentiful. Bigger budget games mean more painful failures. Not every company can afford too many of them, and combined with the economy, lots of companies are scaling back. While I wouldn’t call them recession proof, they’re probably weathering things better than other industries. Also Sony’s problems aren’t related just to the PS3 or games. Indie studios and MMOs fail even in a good market, for a variety of reasons, but often simply because their games are… not so good. But even the makers of Titan Quest have reformed (2 of them I think) and bought back their in-development game.
No idea where that money went though, besides Warcraft and Guitar Hero. There were other hit games out there that probably add up, but with the price tag of development continually going up, every failure can have painful results.
There was an article earlier about Guitar Hero III being the first game to make over a billion dollars, though I would have thought WoW made that long ago.
http://arstechnica.com/journals/thumbs.ars/2009/01/12/guitar-hero-iii-first-game-to-reach-1-billion-in-sales
I think that games are more recession proof than other forms of entertainment, if nothing else provide greater value. If you can get 50 hours of entertainment out of a game that would be comparable on what you spend on 3 or 4 movies.
That’s not saying that the game companies themselves are recession proof. They have the same pressures that the rest of us have – increased costs and such. I am not sure Sony is a good bellweather either, since their losses are over the entire company, not just gaming. People aren’t buying the high end audio and video gear and other electronics during the recession and that is probably hurting their bottom line more than their gaming division.
It seems to me that several companies are taking advantage of the words “crisis” and “recession” to lay off people.
Let’s look at Sony: if they’ve had profits in the last 14 years surely they have enough “stashed away” to withstand a single year of bad results? Apparently not. Where did the money go?
And just like US carmakers, what has Sony done recently, even in terms of innovation, that would lead people to buy their products? Game consoles? – PS3 lost to the Wii (and 360). Music players? – the “Walkman” and “Discman” have been totally replaced by the iPod. TVs? – nothing new there.
The DRM fiascos, and associations with RIAA haven’t helped either.
So yeah, besides wondering where the money is, I can’t feel sorry for Sony at all.
Indie studios close with a big ratio every year, that’s normal.
Microsoft… read Sony above. Getting replaced by just about everything else out there (Macs for Windows PCs, Firefox for IE, etc) and other questionable markets not making a profit (XBox, Zune), bad things were bound to happen – there’s rumors of bad news coming tomorrow the 15th
EA – even if we consider only the EA Sports and Sims cashcows do they need to slash employees? I find that hard to accept.
IMHO a few companies out there just need better management…
Rumor has it that my former employer – formerly one of the largest independent game studios remaining in North America – hasn’t paid anybody since October. And that they “borrowed” all the employee 401k contributions to help make payroll earlier this year.
Unsurprisingly, there’s been a mass exodus from the company. Apparently I was only the beginning – but I was getting pretty tired of late & bounced paychecks. (They didn’t do matching, so I fortunately did NOT try to contribute to the 401k).
Two of our major publishers were Brash and Midway – companies which now no longer exist, and are teetering on the edge of bankruptcy, respectively. Strangely enough, when they have financial troubles, it trickles downhill.
I was wondering if indie games might still do OK, since they’re usually cheaper, and so might be considered a budget option. But yes, I suppose everything trickles downhill.
And I’m watching my own expenses a lot more carefully these days. In the past, I’d frequently buy an indie game mostly just to support the developer. But I don’t feel that I can afford that now. And I’m being much pickier about games entirely, feeling that I can always re-install an old game, or just download some mods.
But maybe there’s a bright side, too. (I hope so.) Maybe some people laid off from the mainstream companies might decide to start their own. It’s hard to give up a steady paycheck for a risky venture, but if you lose that paycheck,…
Coyote, sounds like you got out just in time.
WCG, yeah, it’s often the case that developers who’ve been “laid off” try to go the indie route. Or work on something in their spare time, like Coyote.
DB, yeah, a few big-budget losers can certainly hurt. Which shows that the “Hollywood model” of supporting yourself with a few “big title” products and a bunch of shovelware doesn’t work too well.
Xian, that’s in retail sales, not continuing subscription fees. That’s where WoW makes the money.
I know that indie game sales on my own website dropped off quite a bit during the last several months… but I don’t know how much of that is my own fault or not.
Coyote, possibly Xmas and the usual “cornucopia of A-titles” had an effect there?