Blockbusters & Diversions: The New Digital Games Market
Wednesday, 20 October 2010
What are the games that succeed in making money today? It is not those which gamers love, or not exclusively or wholly those games. On the one hand it is the blockbuster titles that manage to court communities of millions of mass market players, and on the other it is those games of simple diversion which operate among Facebook's mega community of hundreds of millions of people. This is the surprising new shape of the market for digital games.
When I first starting blogging about games back in 2005, I characterised the marketplace as being divided into three strata: an upper market of prestige console products, a middle market of licensed products and console titles developed on a modest budget, and a lower market of budget game developments of various kinds. This no longer adequately describes the shape of the market for digital games. For a start the "middle market" is dead. As a game designer and writer who used to be getting most of his work in this space, I have watched it dry up and blow away in the wind as the rising cost of development for the power consoles (the PS3 and the Xbox 360) have squeezed the viability of moderate development budgets. If you haven't the money to compete at or near the top of the pile, you'd do better to grab a slice of what is usually called the Casual market – what has come to replace the lower market, and simultaneously redefined the economics of digital games to a point that was previously inconceivable.
Let me begin with a point I have been making for ten years now: brands have more power than games, and pretending that brand doesn't matter is naive. The myth that "a great game sells itself" will almost certainly lead a game developer into bankruptcy. The games industry isn't about making "great games" – this phrase doesn't even have a coherent meaning – it's about selling games to an audience, or making money from an audience (via advertising, for instance). Gamer hobbyists, those of us who spend a lot of our time playing games, want to believe in the cultural value of the games we enjoy because we know (contra Ebert's fence) that games are art. But not all art is great art; a Summer action movie is not on par with an Ingmar Bergman movie, and neither is the latest action game on a par with The Graveyard, Façade or Shadow of the Colossus when it comes to cultural value. What's more, these artistic games are not great money spinners. Outside of the auction house, art is seldom concerned with profit.
To understand the new market for digital games, we need to look at it through fresh eyes and appreciate how wildly different it has become in just a few short years.
The Blockbuster Market
What I used to term the upper market is the market for blockbuster games. Whereas twenty years ago a million units sold was a sign of astronomical success, now selling a million units is the minimum target for a game that seriously wants to compete on the consoles which are most important to the gamer hobbyist: the 360 and the PS3. When a title clears 5 million units (what I have termed Gold sales) it's brand is strong enough that it will not only be guaranteed at least two further sequels but it will be guaranteed competition from new rivals. Thus, while Gears of War is too brutal a game to sell at a level higher than Gold it has still persuaded Sega/Platinum Games to make Vanquish as a competitor (significantly, I believe, a less brutal competitor). It says a lot about the new upper market that even Japanese companies, who have traditionally avoided twin-stick control mechanisms because of a general lack of appeal in their home market, are now forced to use these schemes in order to target a viable share of the massive US market for games.
I have said before that the successful games on the power consoles at the moment all make use of three basic elements: detailed worlds (e.g. cities and/or wildernesses), detailed progress structures (i.e. rewards for continued play) and – perhaps most significantly – communities of players (e.g. strong multiplayer modes). The role of community to the success of blockbuster games cannot be underestimated. Some brands can hit Platinum (10 million) and Diamond (20 million) sales without expressly courting a community – New Super Mario Bros. is an example of Diamond-level sales, for instance, having sold more than 22 million on DS and 16 million plus on Wii – but outside of Nintendo's carefully managed brand catalogue you will struggle to find an example of a game hitting at this top level without courting a community. The best example of this right now is Modern Warfare 2, which just became the first Platinum game on the power consoles. This game sells more units because more people are playing its multiplayer mode; it's success thus encourages more sales via the community, a pattern we have already seen with World of Warcraft, which has all but cornered the subscription market for fantasy MMOs. Gamers form the initial community, and once enough of them are playing the mass market players are drawn in.
Characteristic of the Blockbuster market is that the big hits mark out approaches that support at least one and perhaps as many as two or three rival titles. The top competing titles will not make it to Gold sales, but they will often clear the million units required to be viable. The majority of competing titles will fail miserably. Even to compete on the relevant scale requires massive marketing spends, and as such this market is not open to all comers. If a new developer is expecting to compete in this space it had better either have technology well ahead of the curve or friends in very high places, because a good idea is worth next to nothing in the boardrooms where the shape of the blockbuster market is determined. As I have remarked before, because the marketing executives of the major publishers tend towards high levels of testosterone, the blockbuster marketplace is competed over testosterone-fuelled games, despite the manifest evidence that commercial success can be found in many other ways.
The Specialist Market
The middle market, the commercial space just below the blockbuster games, has effectively disappeared. In its place we can now find a particularly unusual space which I will call the specialist market. This is a marketplace for niche titles, each of which has its own loyal audience. It you are a fan of fighting games, or computer role-playing games, or strategy games, or RTS games, or flight games, or even racing games (for the most part) the titles you will be playing are a part of this viable but treacherous specialist market. (Shouldn't there be a specialist market for platform games too? Alas, the insistence of including gunplay in environmental games has nearly killed this possibility). The top titles operating in the specialist market, those with the big brands and the capacity to attract a good marketing spend, can make it into Gold sales, but that's as high as it gets in this space (although the well-managed Pokémon and Final Fantasy brands do make it to blockbuster status).
This is the only marketplace where the gamer truly is king or queen of all they survey. To succeed, titles in this space must be able to push the buttons of their target audience; they must be close enough to other games the players already know to be accessible, but unique enough to seem to have something new to offer. There is no such thing as a "Casual game" in the specialist market – these are games made by gamers for gamers. And like the titles competing with the blockbusters, most of these games fail miserably. As a result, investment in this space is low – what kind of investor wants to support a specialist title when they could be backing a potential blockbuster? Only the sheer volume of gamers who want to make games sustains the creation of specialist content, and only the sheer dedication of the specialist players' love of their chosen genres allows any of the developers in this volatile space to survive.
Publishers who are big enough to compete in what used to be the middle market tragically misunderstand how to operate in the specialist market, frequently taking titles aimed at a niche of gamers with specific play needs and trying to tweak them into something closer to a blockbuster. This is almost always a mistake: a new computer RPG title is not going to sell like a blockbuster title no matter what you do to it, and attempting to nudge it somehow closer to recent blockbusters is more likely to alienate your target audience than to achieve anything worthwhile. It is striking that Japanese RPG developers always sell at least 250,000 units, while games which try to straddle action and RPG typically sell 50,000 units or less. The intersection of two markets is always smaller than either individual market, as a quick look at a Venn diagram will convince you. You don't make specialist games succeed by making them more like the games that sell at the blockbuster level: you make them succeed by understanding why the audience for these games enjoys them and then making a game that meets their needs.
Oddly, the specialist market also supports a lower or budget tier (something impossible for blockbusters, and meaningless for Casual games). Microsoft's "Indie games" fulfils exactly this role, delivering quirky (and often terrible) content for gamer hobbyists to buy for a low price, and to play for just a little while. A few developers also make this work on PC; Introversion Software, the "last of the bedroom coders", spring to mind as a rare example of a company surviving in this space. This is perhaps the only space in which a really innovative title has a chance, but with the inevitable absence of marketing at the bottom of the specialist market, most titles are lucky to even break even.
The Diversions Market
Finally, we come to the space of "Casual games" and other smaller, cheaper and lighter games. I'm calling this the diversions market because for the most part the games that compete in this space are not being sold to gamer hobbyists but to mass market players who are looking for a game to pass the time now and then. They may play the games they like often and over a long time – players of Tetris, Bejewelled or Brain Age might play every day for a year, for instance – but they don't generally play for very long, and they don't tend to play a great variety of different games either. Players looking for a diversion game can be put off in myriad different ways, and when they find a game they enjoy they stick with it.
Unlike the previous two markets, the market for diversionary games has a full range of strata. At the upper end, Nintendo (and only Nintendo) have Diamond sellers in the form of Wii Sports, Wii Fit, and Nintendogs, while Platinum sellers in this space include Nintendo's Brain Age and Animal Crossing franchises and EA's perennially popular time-waster The Sims. Unlike blockbuster titles, games that succeed in the diversions market are never dominated by testosterone. They almost always appeal to both men and women, and are either non-competitive, indirectly competitive, or competitive only in familiar ways such as sports.
I'm uncertain where the middle of this market lies, but I have a feeling it must be on Facebook, the 500-million strong social network that provides the community for you to sell to, rather than you having to court your own community. Zynga made $600 million this year targeting this space – that's thirty times more than Digital Illusions or Bioware, for context. The trick here is in the volume of potential players in the community (hence the advantage of competing in Facebook where the community is pre-existing); once you have the attention of a large number of people, either advertising revenue or microtransactions will net you large sums of money simply because of the number of players caught in the net. They don't even have to love your game. They just have to dabble with it for a while.
The lower end of the market is the kind of space where companies like PopCap and Big Fish are operating. The focus is on simple games – those that not only can be developed cheaply, but which can be learned easily. It is dominated by just three key genres: match 3 games such as Diamond-selling Bejewelled, hidden object games like the Mystery Case Files series, and time management ("plate spinning") games like Diner Dash. Because the variety of game styles able to succeed at the lower end of the diversions market is limited, it seems that the boom in this space is over. It's too late to compete here, and besides, everyone's greedy eyes are on those Facebook games right now.
There is also the bottom-feeding space below the lower market for diversions, such as mobile phone games. These for the most part don't even need to be games; they sell pretty much on the strength of the licensed brand, and are typically made in fewer than three months, and sometimes less than one month. Companies working this space have increased in recent decades, and many people who used to work in the old middle market have wound up working on these kinds of titles (often with great disappointment), but I suspect that like the lower market for diversions, the bloom is off the rose. For a while, it seemed that it was at least a stable space. Perhaps the market for iphone games has a little more life than most, but competing on itunes is not a desirable prospect for most developers: it may have been a gold rush, but like its historical predecessor, most prospectors risk bankrupcy chasing the motherlode.
It was not that long ago that the market for digital games could be understood as a continuum distinguished solely by differing budgets and returns – now, it increasingly must be interpreted as a series of related yet distinct marketplaces. Here, I have identified three divisions – blockbusters, specialist games and diversion games – but even these distinctions are somewhat arbitrary, and the diversions market in particular consists of many distinct spaces with only an emphasis on simplicity in common.
What is readily apparent, however, is that the gamer hobbyist – once the mainstay of revenue in the market for games – is now just one of many audiences that publishers are trying to reach. In terms of the prestige titles in the blockbuster market, the hobbyist is needed only as a means to generate the word of mouth that will take the mega-titles out to their wider mass market audiences. The games that gamers are most interested in playing can often be quite marginal in terms of the business of selling games, and as such their sway is increasingly curtailed to the treacherous specialist market. If your tastes as a gamer don't match the trends in the blockbuster market, and don't correspond to a currently viable specialist market, you may find yourself struggling to find games you want to play.
I've been playing digital games for some thirty years, and making them for fifteen. In that time, games have asserted themselves into the commercial landscape and blossomed into big business. As they have done so, I have found myself less and less able to find games I want to play. Have I changed? Certainly. But not as much as the marketplace has. The simple fact is that at nearly forty, I'm not a good target audience for commercial concerns that make their principal profit from teenagers. That's why I never let my own taste in games influence my opinion as an industry professional – it would be inappropriate for me to do so. It's a whole new world out there, one in which the biggest games succeed to an extent previously impossible, but where most games are met with a miserable commercial failure. Developers who want to keep their staff in employment need to recognise the new shape of the market before it is too late.
I found your article through Nicholas Lovell's post on GamesBrief, and I just wanted to add that I prefer your term specialist/niche market over "independent". I think the word independent in game dev can become a misnomer (somewhat similar to indie music), since I could envision successful publishers establishing a subdivision a la Fox Searchlights.
These games don't need to be independently developed or even hardcore (as some people expect indie games to be).
Posted by: Daniel Kromand | Thursday, 21 October 2010 at 11:14
Daniel: thanks for stopping by! I spent a while thinking about how best to construct the terminology for this piece, and like you it seemed to me that calling the niche markets "independent" was a half-truth at best.
A lot of companies in this space are indies - but by no means all of them. And for a lot of the genres in the specialist market the big publishers are major players.
Thanks for commenting!
Posted by: Chris | Thursday, 21 October 2010 at 12:00
Interesting, a few questions though.
You describe in detail the Blockbuster market, but you don't talk about the players of said market, I really wonder who exactly they are (aprt from knowing that they are in great number). You may say that it was not the point of your article, but I'd like to know. To me, a lot of players from the Blockbuster market are that same people as the Diversions market.
Unrelated, where would you put Starcraft 2? For the type of game, definitely in the specialist market (also it's only PC I think), but still it's testosterone fuelled, and I believe it has had a huge budget (and that Blizzard can afford it), your opinion please?
Posted by: Roman Age | Friday, 22 October 2010 at 16:00
Roman Age: Good questions. The players in the Blockbuster market consist of a portion of gamer hobbyists (who play the blockbuster games along with their specialist preferences) and a small portion of players in the diversion market, but the bulk of the players contributing to this segment of the market are only participating in the Blockbuster market.
In the UK, a typical player of this kind will play FIFA, the big driving games and the big FPS titles (often excluding Halo).
In the US, the equivalent player will play Madden (or some other sports franchise), the big driving games and the big FPS titles (often including Halo).
They are, almost entirely, sports fans who enjoy playing the videogames based upon their preferred sports, and can be lured into playing games based on the most popular masculine props - cars and guns. Just don't expect them to play (m)any sci-fi or fantasy games. :)
It was accidently stumbling upon this portion of the market that made EA what it is today.
As for StarCraft, well, StarCraft 2 is probably a specialist title with respect to the US and European markets, but it is a blockbuster for Korea - and indeed, the *only* reason a StarCraft 2 has been made is expressly for sale to Korea. The game had sold about 5 million copies prior to release in Korea - at which point its sales more than doubled.
Now an interesting point here is that because the popularity in Korea warranted a blockbuster game budget the game *could* qualify for blockbuster-status in the Western markets. If it sells 5 million outside of Korea, I'd say it has done so. But it would not have been made in my estimation were it not for the popularity of the first game in Korea, and this was an artifact of circumstances.
South Korea had not had a videogames boom like most Western countries experienced in the 1980s arcades, but the arrival of widespread internet connectivity in the country opened the door to an internet play boom. StarCraft was the biggest winner in that boom outside of MMOs.
Hope this answers your questions!
Posted by: Chris | Monday, 25 October 2010 at 07:08
Yes it does answer the questions, thanks Chris.
Maybe I'm wrong, but I can feel you are a bit disdainful when describing the Blochbuster players, and certainly cynical about the market. If that's the case, I wouldn't blame you as it is not a very pleasant situation for someone who truly likes the idea of innovation in games.
The reason I was asking about Blockbuster players is that I would have be enclined to think that this type of players you are describing (the ones who only play Blockbusters) is actually quite rare, that most of them will definitely play the Blockbusters titles, plus some of the Specialist market games, just thinking if you own a PS3 or XBox, you are bound to try a few different things (after all a sci-fi movie like Avatar is hugely succesful, it doesn't mean that people will necessarily want an equivalent gaming experience, but at least shows that they are not impervious to this type of stories/worlds).
In any case, what I'm saying (even if it was true) would not change your description of the market (I believe you know what you're talking about), just make it less identified in terms of players.
As for me, I'm a mixed bag (but not very representative): on one hand I only play the most "diversion market" titles (mobile phones), on the other hand I have an interest in retro gaming (only occasionnaly again), especially from an Atari ST emulator, not only for the nostalgic factor, but also for what they represent, a certain idea of creation in games that has totally disappeared, and artistic value (in my opinion) that I can't find in modern games (often ugly to my taste).
Posted by: Roman Age | Monday, 25 October 2010 at 08:37
Roman Age: I don't mean to be disdainful of the Blockbuster players - I know many such people, and I have no problem with them whatsoever. If I am disdainful in respect to the Blockbuster market as a whole it is because I see it as quite problematic for the industry - a rising tide lifts all ships, but a rising cost of shipbuilding bankrupts all navies. :)
I think it's dangerous, though, to think about a "blockbuster player" in respect to a market sector which is, after all, a statistical abstraction. We can imagine such an "average player", but we know that the actual people are not average or normal or anything of the kind. But you would be surprised at just how many people have owned (say) a PS2 and only played (say) The Getaway or GTA. For a long while, the PS2 had an average tie ratio of 4.5 (i.e. the average player owned about four and a half titles for it). When you consider just how many hobbyists owned dozens of titles, you have to accept that many people only ever had the games they bought when they bought the console.
As for the artistic values of older machines, I am so very much of this mind, personally. I often play old Commodore 64, ZX Spectrum and aracade coin-op games because the aesthetics of both design and graphics from this era have a quality that is incredibly hard to find these days. The rising technical capabilities of computers have lead to a massive focus on 3D graphics in part because it is now all too easy to render this way. But I still prefer 2D, and I think that I always will. But I am at best a tiny bit of information buried deep in the specialist market. :)
All the best!
Posted by: Chris | Monday, 25 October 2010 at 12:05