Mergers and acquisitions are an alarming new trend emerging in the game industry. A common occurrence in most other mature industries, consolidation is a new beast in this industry, beset on devouring any vulnerable prey. As with other recently maturing industries such as the beer industry, it has become advantageous for companies to pool their efforts, this allows them to take advantage of larger economies of scale and create higher barriers to entry. A mature industry with a few mega-conglomerate organizations can rule the industry and bar or absorb the small/independent companies vying for success.
This poses a serious problem in any industry but is incredibly potent in the game industry because of its creative element and increasingly high start-up and development costs. In the beer industry, it would be virtually impossible for a small company to break onto the world stage and compete with companies such as Inbev and Anheuser-busch, soon to be one company themselves. However, it is possible for micro-breweries in the United States to succeed, because of their relatively lower start-up costs and the segmented nature of the industry. Small micro-breweries and brew pubs are not competing in the same market as these huge beer companies.
The same is not true in the game industry. The small companies have to compete in the larger market. Start-up costs for even small companies are astronomical. In the past, when the industry was much younger, it was much easier for independent developers to start-up and thrive. As technology progressed, the scope and breadth of game development increased ten-fold and with it, the resources to produce a game increased by at least that much. Now, it is not uncommon for major titles to cost around ten million dollars and some much more! This means no more developing the next great game in your basement with your friend. This means you need outside help. You need investors and many, many talented people working together.
There are really only two major companies ruling the game industry EA and BlizzardActivision. There are many smaller independent developers but these are getting fewer by the day and it is much harder for these companies to survive than it once was. These smaller developers will either be gobbled up or held at the mercy of the large publishers. This affects the game industry in severely negative ways, ways in which many other industries, such as the beer industry might not be affected by. Creativity is pivotal in the game industry, unfortunately these trends tend to stifle, limit, and snuff out the freedom and creativity that make games great.
In short, the consolidation of this industry limits creativity and exacerbates the bottom-line into the sole determiner of success and quality. Obviously, profit will always play a driving force in any industry, but it should not necessitate such a grim outlook on the game industry.
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3 comments so far
While mergers and acquisitions in any creative/entertainment industry can result in less actual creativity and originality and more mass marketing, I like to remain optimistic. With video games, more so than films or books, what is good tends to sell. In movies, there is a real divide between good art and profit-makers; in games (with the exception of just about everything on the Nintendo Wii), your AAA titles are your money makers.
Also, with gaming, it is easy for the indies to get seen. X-Box Live, PSN, and even WiiWare are playgrounds for indie titles; there is no centralized distribution for indie films.
Also, while EA and Activision-Blizzard are no doubt the big boys on campus, there are still numerous major development and publishing houses in the gaming industry; there is still remarkable diversity in the field.
I don’t see gaming going the way of movies, wherein maturity meant a decline in quality–at least by way of business practice. I’m more concerned with new gamers being so very casual and not recognizing the quality games.
September 16th, 2008 at 5:03 pm
The problem with investing so much money into these big AAA titles is investors and publishers are so gun shy about taking big risks. Most of them follow the established molds in one fashion or another, creating a virtual assembly line of computer games and endless sequels trying to cash in on previous success.
Indies truly are the saving grace in this business. Because they have low budgets they can never really compete with the gaming giants. But because of their low budgets they can afford to take risks and invariably steer the gaming industry into unknown directions. The giant companies are no doubt keeping a keen eye on the Indies, watching for original and attractive ideas and being able to see how the fan base reacts to things they wouldn’t normally include in their bigger titles.
September 16th, 2008 at 8:01 pm
I have to disagree somewhat with what you are saying Brandon. First, there are plenty of games that sell well, that in my opinion are lacking or at the very least, not particularly “good.” You might want to check out another article I wrote entitled “Originality (Where is it?).” It’s on a similar topic and also covers some of these issues.
I do agree that there are some distribution channels (digital) that are making it less costly for indy developers to get there products to consumers. However, the problem lies in marketing. These small firms can’t afford to dedicate the necessary funds to those endeavors like the large publishers can. Therefore, even if they can get the product to consumers, if no one knows about it, no one will buy it.
Also, I have to reference PC gaming. There is digital distribution but no real central marketplace for these products. You might cite Valve’s Steam, which is a step in the right direction and a great business opportunity but is far from all encompassing and far from solving these problems.
Finally, name some of these “major” developers/publishers that have no ties to those big companies. I can’t think of any that originated in the US (the market I was focusing on) of the top of my head.
Don’t get me wrong, I think there are many opportunities out there and this industry is far from mature. In any case, I do believe some massive changes are coming, and this industry’s landscape will be significantly altered in the coming years. The best practices are far from clear and in the near future these will definitely develop.
September 18th, 2008 at 3:51 pm
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