Don't believe all those recent articles about how video game manufacturers are headed to the poor house. The global market share for video games should surpass $40 billion by 2010. Thanks to powerful new consoles, their graphics are approaching CGI quality. And they now attract an audience well beyond teenage boys. Remember, this all started with two paddles and a bouncing ball.
But success can have a downside. Just ask Pong's creator, Nolan Bushnell, who often gripes that flashy game technology stifles creativity. Bushnell might be a dinosaur, but he has a point. Over the last decade, the costs of high-gloss, graphics-intensive titles have mushroomed. Console games are now so expensive that only a few companies can afford to make them. Today's game industry is like Hollywood in the first half of the 20th century, when an oligopoly of studios controlled the business. Instead of MGM, Paramount, and Universal, we have Electronic Arts, Sony, and Activision.
In today's movie business, it's possible for an indie film like Napoleon Dynamite to become a sensation. Saw, which cost a mere $1.2 million, grossed 100 times that amount. That just doesn't happen in video games. The average PlayStation 2 game costs about $8 million. Studios often need large development teams—usually 40 or more people—to meet their tight deadlines. They spend money to license everything from comic book heroes to graphics engines. They record A-list actors. And if they burn their own CDs or do their own marketing, costs can really soar.
Most independent developers take money from the big publishers in exchange for the rights to the games they've developed. The publishers market and distribute the games to retailers. The developers pay back the initial loan from the royalties they earn. Several industry types told me that an indie studio will typically get a $5 million advance on 15 percent royalties. If the game has a wholesale price of $30, the developer must sell more than a million units to get out of hock.In other words, the game has to be a blockbuster, something on the order of Tomb Raider or Splinter Cell. Thecost of the average PlayStation 3 game is expected to rise to $15 million-$20million, plus another $10 million or so for marketing. That means indie developers, who already go bust with great regularity, will have even less wiggle room.
For today's indie developer, a safety net is just as important as a good idea. Stardock, the company behind the hit PC strategy game Galactic Civilizations, gets most of its revenue from sales of office software. Other indies make deals with the government to work on defense technology then plow these funds back into game development.
Why should gamersand industry bigwigs care if it's tough for the little guy? Because back when games were cheaper to make, the independents came up with the ideas that moved the business forward. Richard Garriott peddled Ultima, the first major role-playing title, in plastic bags. Sid Meier's Civilization and Westwood's Dune II cracked open the strategy genre. Id Software's John Carmack and John Romero created the pioneering first-person shooter Doom. Will Wright gave us SimCity and open-ended "sandbox" simulations.
What happened to these pioneers? Garriott never produced another breakthrough like Ultima; he now works for online multiplayer giant NCsoft. Meier has spent most of the last decade updating his previous hits at a company owned by Grand Theft Auto publisher Take-Two Interactive. Id Software has clung to its independence but produced nothing further in the way of milestone games. Perhaps the lone indie superstar to retain his auteur status is Will Wright, who now has his own "studio" within Electronic Arts. Wright takes years to cook up his always-innovative games. In 2000, he released The Sims, which transported players into the first of many "digital dollhouses" and became the best-selling computer game of all time. Wright's next game, Spore, aims to simulate the evolution of life from microorganism to space-faring civilization. It will probably be the only innovative title EA releases next year.
But Wright and his studio, Maxis, are an exception. The most successful indies get bought by the industry giants, where they often become casualties of consolidation. Westwood Studios, which created the hit Command & Conquer, was bought by Electronic Arts in 1998 and shut down in 2003. Wolfpack Studios, which made the game Shadowbane, was bought by Ubisoft in 2004 and shut down last week.
Instead of adopting the solo developers' pioneering mojo, the risk-averse major studios stick with proven formulas. Can't wait to fire up Final Fantasy 13? It'll be out soon. So will the 19th iteration of EA's Madden football game, complete with updated player names and numbers. EA, the industry's leading publisher, had a nasty case of sequelitis last year. I've looked at nearly 50 games that EA released last year, and I've yet to find one that isn't a rehash like NBA Live 06 or a movie tie-in like Batman Begins.
With costs rising, the console market looks nearly impossible to break into. If there's a niche indie developers can make their own, it's PC gaming, which accounts for about 15 percent of the domestic market. Greg Costikyan, a purveyor of experimental PC games with less-demanding graphics, plans to bypass publishers' distribution chains by selling his games online. His online publishing effort, Manifesto Games, is due to launch this year with about 100 titles.
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