To these people games are about one thing and one thing only: making fast money.

But games are not just that. They are like film. They are a medium. They have a cultural impact.

You have to ask yourself: do you want to make empty calories for a quick buck, or do you want to produce quality that makes a profit but actually has a beneficial and successful pay-off outside of that? That is successful in a wider spectrum? That has depth?

The gamer nerd in me says "boooooooooo." The business man inside says "ya your right."

With costs excelling faster then profits I can't help but think this console cycle will last for at least five more years. Also add to this the potential of motion games on the 360 and PS3.

What consoles really need to boost revenues is a successful MMO. This genre by it's very nature necessitates teamwork, and is more "viral" then traditional games. Notice I didn't write MMORPG. I believe a MMOFPS is a better route for consoles. Borderlands is close, but not quite there yet.

Well there's my low man on the totem poll opinion.

I am with you Tim, 100%. For example Heavy Rain debuted in the UK at #1. I wonder where it is now. But I do know that it is making a good amount of cash. Star Craft 2 will make more money than these Social Game creators would know what to do with. Let's also not for get the 800 ton gorilla in the room named Modern Warfare 2. Uncharted 2 is another than is raking in the loot. Sure not all AAA games make super tons of cash, but lot's of them are more than breaking even.

@ Alan & Tim, even though you are right that some AAA games are still very profitable, you have to compare development costs with revenue. In this case I think the social games are more interesting. And I don't think making sound business decisions makes an instant "bozo"....

I'm talking about sustainable growth... not quick flash-in-the-pan growth. How is quick, empty-calorie business investing "sound"? Investment into a type of game that is literally built on addicting your audience and sucking them dry of their free time - as opposed to providing a quality product that can be enjoyed within a balanced life?

20 million players means nothing if they aren't paying customers.

'social gaming' is a vague term and many of these products or neither social nor games. but anyway:

im sick of seeing soundbites like "20 million users" thrown around. thats a meaningless number. show me how many of them actually pay and pay regularly. this sounds like the same business plan used during the dotcom bubble: get the users first then figure out how to make money off of them (and in a sustainable way). it doesnt seem to me that many have figured out the second part yet. its typical short-term modern corporate thinking.


i still think 'social' games are largely a fad. a small number have legs, but most will fail. especially facebook games. everyone is in gold rush mode right now trying to get in on the action. pretty soon we will see articles about the "great decline of social gaming".

Can't agree more with Dave on the gold rush model being used by these experts. It gets increasingly more difficult to believe the "experts" who focus on a recent fad and claim that, this time, it will mean the end of traditional consoles as we know it. In the past few years, I can think of two other trends you could substitute the term "social game" for and the expert's statements still sound the same, rhythm games and the Wii fitness/grandma fad.

All three were quickly flooded with similar titles and reaped huge profits and are now starting to decline as the "casual" audiences they attracted move away. Each still retains a core of followers, but the hype is over. Just like these two, social games will likely suffer a flood of generic titles and users will get bored and move away.

Unfortunately, we probably have two or three years before then. Like others here have stated, they are cheaper to produce and companies will take advantage of that until there's nothing left in it. But it won't be the end of the 30+ year old console market and their followers.

Pretty much in agreement with everyone. The panelists lose a fair bit of credibility when they say there are no big games that use mechanics to drive social interaction. They've never heard of Alternate Reality Games (ARGs) such as I Love Bees for Halo 2? That's their whole purpose, to create communities that solve problems within the game universe, which tend to bleed into the real world, often requiring your friends and real world locations. These games have been around for several years and are growing in popularity. This area might be next craze, but it won't be a flash in the pan like social web games.

I would look at console games as a "real assets" industry; a proven set of product classes, well-developed models for building and selling the product that are all based on brick+mortar distribution, and platforms with sole manufacturers tied to real hardware.

For VCs this is not a sexy thing to focus on; the funding should go to the new and risky business models. Brick+mortar and pay-to-play are very "old-school," and by a lot of estimates, "dying." Everything is supposed to be virtual and online and cloudy and social. But even I, a strong proponent for those things as the _future_, don't see them destroying consoles within the near-term business cycle. Any decline will match the movement seen in music and news - a gradual, decade-long shift over that doesn't completely obliterate the old models, but leaves them serving the purposes they're best suited to.

The "what will people pay for" question is always going to be a tricky one for art and entertainment industries. But just think of basic desires: "it's novel and I want more," "I identify with this brand/ethos," "I want to get a superior experience." They can all apply. Social gaming and virality don't have to factor in.

Raise your hand if you think 83 million people wanting to play games with their friends at their own convenience is a fad and is going to be replaced any day now by those same people figuring out how to hook up an xbox, pay up front for xbox live, and play a first person shooter with strangers.

If your hand is up, it's time to take a step backwards; you're too close to see the big picture.

The arrogance of these social games companies is astounding. They basically crap on many of the tenets of game design and think that they're suddenly pioneers of the industry because they're making tons of money. There's only one thing that they've done that they should even be modestly proud of, and that's bringing games slightly more advanced than solitaire into the mass market.

All it is going to take to utterly destroy these companies, is just one major player that understands solid game design and doesn't do stupid crap like interrupt the player's experience with a pop-up every 3 minutes of play, and everyone will stop playing their garbage.

There's a LOT of money being left on the table here. Last I checked, these games making tons of money only have 2% of the buy through. So for every 100 players, only 2 pay anything. Can you imagine what they could make if they actually bothered to make a good game?

The mind wobbles.

If you are funding shovelware social/web games at this point you are just buying lottery tickets. Investing $200K to build Farmville and making millions on it sounds very exciting, but these things are so cheap and easy to make it took less than a year to supersaturate the market. Even if you do get lucky, catch fire, and touch a few million users, somebody will just copy+1 your idea by the end of next week.

Do games need to continue to get more accessible? Yes. Is it a good idea to integrate social networks into your games? You betcha, and a lot of the AAA folks are doing that already. Are sub-million dollar budgets and month-scale development cycles the path to sustainable growth? No.

@ andrew: why do they have to? several thousand people drove by my house today. not one left me any money. traffic isnt revenue. if you need millions of unique users per day, and only 2% (if that) actually pay anything, that doesnt sound like a very sustainable profit model.

it has fad written all over it.

People who play social games as a rule will probably not even own a console. Different markets and they'll exist in parallel. If VCs want to load up on social games companies good luck to them but some are going to get burned horribly. It's nothing to get worked up at. But it does surprise my how niave the finance industry are when it comes to gaming (of all types) and definitely looks like another blind leading the blind gold rush. I was chatting to an institutional shareholder with a large holding in ATVI earlier in the week and he was worried about his holding because "the price of consoles is coming down". It's very worrying these people are investing our savings and 401ks.

@ J Smith and Dave- I think the focus is on making a quick buck and not growth. 2 in 100 paying is great when you have over a million users.

Make a popular game or app and then cash out.

@ Dan-Fitness games are far from a fad. At least not one that is over unless you missed the sales of Wii Fit+ and EA sports active. I'm thinking that Zumba Wii will be a very popular game too if done the right way.

Come on guys, think about this. These so call "social games" are racking in the cash and more importantly, "gamers".

From what I see, there's still a huge growth coming to the traditional gaming. Why? These "Social Gamers" will demand more and eventually out-grow the technology a web can do. Where can they go? What will they look for?

It's interesting to see this angle of things really come to a boiling point.

I'm eager to see where the next-gen social MMOs end up, but I'm reminded of a quote from a few months back:

. "If we continue on our current path, we'll end up in the pop cultural ghetto where comics are. An alternative path is where film, books, and music ended up."
-Chris Hecker (http://www.gamasutra.com/view/news/26077/IGDA_Forum_Asking_Why_Will_Keep_Games_O
ut_Of_The_Ghetto_Says_Hecker.php)

In the immortal words of Paul Gauguin:
"Where Do We Come From? What Are We? Where Are We Going?"

-

Excuse me for gettin' a bit macro but perhaps Sid Meier and others are right with saying the way we have played and consumed games for the last 30 years has been a kind of 'bubble' or anamoly. We only have this console + disc focused marketplace because the graphics hardware was rapidly pushing the market forwards while telecommunications, bandwidth, and infrastructure for content delivery lagged behind. This also greatly influenced how, and why we designed games [ anyone for Seventh Guest? ] as well as the scope and of course business model. Do people believe that in 5-10 years we'll still be happy to pay top dollar for an expensive 'magical' box that plays games well and doesn't do much else proficiently? I'm not so sure.

The social gaming thing as we know it is just a piddly drop in the wave that's about to crash over our heads on how we will be consuming entertainment in general. Facebook games may be rudimentary, plain shitty and not appeal to us but its how people are spending their time which is important to consider. In many ways hardcore gamers already are 'bridging' that gap between a solitary gaming experience and the online space by participating in forums and communities. What happens when this stuff all gets smushed together and ideas of a disc product, subscription, and social aspects blur?

Its also worthwhile [ and kind of frightening ] to look at how social media is so meshed w/ kids and the next generation of 18-35 year old gamers. Will they want to sit in a room and play games by themselves? Not to say that Farmville is the answer, but it's a beginning and with all things people are still trying to figure out how to make it all work as a business. Better web technologies, more networked connectivity across different devices, these are interesting things to think about with regard to game design and accessibility. Sony and Ericsson are invested in this vision, and Apple is even trying to displace the desktop computer -- and why not? Its kind of stupid to be hunched over a keyboard and maybe we're just one small seachange away from a big paradigm shift. If somebody can invent a cheap, super-portable data projector then the nature of 'screen' displays and how we utilise them could dramatically change as will the 'how', the 'where', and the 'what' of playing games.

I'm sure there will still be quality and depth in the games but I'm hoping that the idea of networked assets and extensibility will mean that we can move into a more lean style of production that doesn't have so much risk associated with it -- and then maybe we can also take more risks with content. I'm done with this linear single player style of game design that emulates the way film + television rides the viewer and all these attempts to try and psychologically pamper w/ achievements and polish. It's hollow and bores me shitless now, and as a gamer I crave interesting experiences or at least a feeling of dynamic interaction.


-- Chuan

Much ado about nothing, really. So they're predicting that you can make money with social games? Congrats, they win five internets. I'm with Gus on this one, console gaming (and the equivalent on PC) is a totally different space then light social games. There is room for both, and both will live on. Does anyone here really think that Farmville and Mass Effect are similar experiences that compete for the same audience? It's the difference between sitcoms and movies, magazines and novels, blah blah ad infinitum.

Yes, the opportunity for quick cash from the perspective of a VC is greater in the social space at the moment, but that doesn't spell doom for the AAA console title.

My gut reaction to this article was that the Venture Capitalists were exaggerating that, although a significant trend, social games weren't as big as they were saying...

And then I read the comments and realized that we have proved their position right with our rabidly defensive response. We're in denial about the significance of this trend.

Games have historically been social experiences. It wasn't until rudimentary game intelligence replaced the second player that we saw a sharp decline in the social aspect of games as they shifted toward single-player experiences. At their core, MMOs are social games... albeit with a large scope. MMOs depend on their community to thrive.

As an indie developer, I'm no stranger to the idea that it doesn't take two years to create compelling content, and there is no reasonable excuse for our inability to create a compelling social game in a few months time. Thanks to the current recession, most investors are risk-averse and are hesitant to fund big budget games when market conditions indicate that small budget games are the safer route to go at this time. I'm going to design a small social game as an experiment to see how it fares. Once released, I'll give you a comparison of its performance compared to an XBL community game that we have in development and a single-player iPhone game that's in pre-production.

I think what we're looking at is a bit like the story of cinema vs. television. Cinema is all about large, complex spectacle. A single project may cost hundreds of millions of [insert your favourite currency here]. In addition to large businesses, there's also indie cinematography that does essentially the same, if on a somewhat smaller scale. Interestingly, cinema is mostly about direct payment - if you want to watch a show, you need to buy a ticket.

Television is all about news, game shows, episodic fiction. It's bite-sized content. And it sustains itself with advertisement and subscription. Projects may cost a few million, sometimes more, but they're generally smaller and more disposable. There are less "shows" and more "events".

The point is, cinema and television coexist, and they offer business and creative models that complement each other, rather than competing. They operate side by side, in large part because they cater to different needs of the audience. Whether or not new technologies are making the old system obsolete is another matter.

The good thing about having a variety of models to choose from is that you can pick one that caters to your needs as an author / developer / publisher. Those are more than just "profit". Creative agency, net income, income-to-investment ratio, risk management, ease of development, availability of relevant talent - these are just a few of the factors that can potentially drive your choice.

The AAA segment's relative monopoly has resulted in a number of less than desirable phenomenons - high failure rate, creative stagnation, high rates of audience burnout, rampant management issues, etc. The emergence of new alternatives is going to benefit everyone who is not content with the current state of things (i.e. pretty much everybody). Paradoxically, the AAA may benefit most, because it is in need of a shock therapy, such as mass extinction of its "dinosaurs" (i.e. the biggest and bulkiest publishers).

By the way, the cinema went through this kind of mass extinction in the 50s and 60s. It emerged from the process as stronger and more credible creatively than ever before. I don't want to stretch the analogy too much, but part of that shift was that directors largely took over from producers. Think of it as one of many possibilities created by current shifts. Personally, I find it exciting.

However, what I really despise about debates like this one is people whose only notion of "the industry" boils down to chasing after the biggest pile of cash in sight. They're making the world a worse place to live in. They're also sabotaging their favourite market of the day with their shortsightedness. They are the people who abandoned niche genres when it turned out first person shooters yield more money. Now we have tons of FPS's, all alike, and guess what, most of them don't sell. They were the ones to ditch PC and switch to consoles - and it didn't make them any happier. Of course, now that digital distribution is all the rage, they're the ones crying about the end of the retail. They are the ones who went blindly after multiplayer games, even where it didn't make any sense. They're the idiots behind all those failed WoW clones. And now they're all dreaming of becoming browser moguls. They jump from ship to ship, they sink it, jump to another one, and so on, drowning customers and developers in the process.

Also, they usually end up bankrupt. :->

@Daniel Kromand - I was just trying to point out that while "social games" are increasing I don't believe that traditional consoles will die out. Neither will PC games. It is all hype and BS.

This is hilarious considering the only real ROI these investors of social games have seen were the sales of companies like Playfish to EA.

I'm really sorry to say this, but the Wii/Farmville/Rithm games did not bring more "gamers" in. They brought people that would play those specific games and did not have interest in any other game, these are not gamers as most of us perceive the term, these are people playing with a game like a toy.

Like I always say these are one shot people, they play THIS game and will play no other games. They are not interested in games in general only that specific game.

How many of these "new" market audiences would buy a Wii2? Or play Farmville 2 for so long? Can I guess a number? 0? 42? probably lower...

The same with FarmVille they may play it but they dont buy it, they wont play the next game for so long, they wont buy any more consoles and in the end its not about generating more gamer's is all bout the one shot quick buck.

who's being defensive? it just sounds like a fad to get venture capitalist money before it goes boom. sorry if thats defensive.

I think that the low to zero barriers to entry in the "social" game market is what excites the VC community (which has a vested interest in gold rush mentality to boost the value of their bets). The real value to AAA developers of this new gold rush is that it will hasten the distribution of AAA games to consumers via more open online channels rather than through first parties and retail. Similar to the original gold rush, the people who got rich in the long term are not the ones who showed up first, but those that built the railroads and building sustainable industries. When the companies with compelling content start showing up and offer gameplay that requires more than spamming your friends to advance, the Zyngas of the world will fade out like a bunch of grizzled prospectors.

I think the comments may not be defensive, but they do seem to be dismissing social and overstating the current state of the industry. The number of studio closures over the last 18 months has been very, very dramatic. The revenue of the industry has been slightly flat to being in decline. (defining the industry as the consoles and handhelds) Meanwhile, costs have been increasing in development.

Does that mean social/wii/iphone will replace consoles?
No.

...but, social/wii/iphone will partially replace consoles.

There will be less games made by smaller studios. That's already happening. EA cut the number of games by around 50% for the year, so did Activision, Ubisoft and THQ, while at the same time they've all focused on more sequels.

The industry is definitely in transition. However, many in the industry, are definitely "in denial" about these changes, even in the face of them.

To be clear, consoles are still going to be there. AAA titles are still going to be there, but there are going to be less of them, because the number of customers who are willing to pay for them has decreased. Some have transitioned much of their entertainment time and money to iPhone/Facebook/Wii. Will more people join them is a good question, but there is no question it has happened, and that much of the industry is trying to pretend it hasn't despite all the economic indicators.

I support social games and iPhone gaming. There is this huge market out there of people who for one reason or another have not, and possibly will not pick up a controller in the week, month or even year. But they are still human, they still love entertainment. Paying a $1-$5 a week on a social game they enjoy is not too outlandish in their world.

Social games are just another branch of the games industry and it's still moderately young so I don't understand this backlash. The social games 6-8 months ago, were pretty vapid and not very challenging. But have you even looked at Farmville? It has influences from farming simulations such as Harvest Moon. People are excited to invite their friends to a barn raising, and to find black sheep and to gift animals to each other. CafeWorld, whatever that island one is, people are enjoying these titles and pay to support them through one means or another(either through direct funding, ads, or cross promoting).

The social games right now are still in their infancy. Some may even be toddlers at this point. Why do they deserve so much hate? They are not any more shallow than Bejeweled.

Nobody who is critical of these VCs are denying the social dimension of games. The problem is they think that prior to so-called "social games" games were never social.

That is patently absurd. The issue we have with social games isn't about them being social. Far from it. Any quality game designer today knows about multiplayer games. Even old-school tabletop games, that have been around for decades, are multiplayer and therefore social.

The real issue here is about how flimsy the sub-genre of "social games", as it's come to be known, are in terms of depth of gameplay, quality and so on. And the pressure that is put on us in-the-trenches game developers to make this fluff.

Few of these VCs cares that much about games for the sake of games. Imagine if film producers felt the same way about films? We would never make a film with more than a digital camcorder, a few student filmmakers, and a month of shooting time.

We're talking about two different things here: Social gaming, and casual gaming. Let's not confuse them. The casual market is, almost by definition, hard to make money from, and I think it's a mistake to put faith in that market as the future of gaming. The social market need not be casual (as exemplified by the massive amount of money that Blizzard has made with WoW). The best bet for the industry is to allow a social experience among people who are willing to pay for a game.

How do you do that? I think the real problem with the traditional gaming model is that it requires that a group of friends each pay ~$50 if they want to play together. That's an unlikely and consequently rare event. If publishers and studios could decrease the cost of getting all your buddies on board with a game, I think the social experience could be far more rewarding than the casual social experience. If publishers sold games for retail price, but then gave you three or four copies of the game to give to your friends (easier with digital distribution), they could ultimately benefit from the same network effect that games like Farmville enjoy.

Alternatively, with digital distribution eliminating many of the costs of reproduction, publishers may stand to gain more money from selling lower-priced games. I think the first idea would work better, though.

I will always be ready to play the Seventh Guest. :-)

It all depends on your priorities and why you got into this industry in the first place. I don't want to dismiss social gaming at the outset, because there are plenty of ways to make creative and yes, even artful, products in that space. The problem though, comes down to the consumer. I'm not convinced that the social gamer is really interested in the kinds of games I want to make. From that perspective then, I'm not "in denial," I'm just not interested.

Career satisfaction for me comes less from making money and more from being able to produce the kinds of games I want to play. Could I make more money investing in the social gaming space? Sure. Would I be satisfied with that as my career? Nope.

If your goal in this industry is to make boat loads of cash then social gaming and these emerging markets are for you. If you're content with less money in exchange for more artistic freedom then you're not "in denial" or missing an opportunity, you're just seeking creative expression elsewhere.

I find it funny when people obviously driven by money can't see the distinction there. No, really. I "get" social gaming. I "get" that I can own a Lexus, three swimming pools and fall asleep every night on my mattress stuffed with 100 dollar bills. But I'm not driven by that. At all.

Maybe when the technology moves forward and what we generally see as AAA games can be distributed vis-a-vis social networking platforms - then I'll re-evaluate my position. Until then, and as long as I can still feed myself, I'm not going to be trading in Heavy Rain for Farmville.

If maximizing profits and getting the best ROI on every dollar spent becomes the creative force behind the future of gaming then I'll pass.

This is "gold rush" syndrome. Low investment, high return? Please, let me drain my bank account.

It's all about supply and demand in the end anyways, right? Hardcore gamers and big budget games drive the tech end of the PC market as well as the home entertainment market which is millions of products at billions of dollars. Companies will invest in big budget games because too many bottom lines depend on them doing so.

@ Sean i think maybe you overrate social games a little. sure the Zyngas and a couple other groups that are already in the social space are making buttloads of money, but i have a feeling this second wave of gold diggers arent going to be sleeping on mattresses stuffed with cash anytime soon.

@Tiago Costa
You get my vote for winning the comments.

If anyone missed it, you should go scroll back up and give it a look!

@Jacek Great argument. I only hope that part about directors (ie designers) taking over from producers happens in the game industry. I see a lot of parallels between where games are at now and the early days of cinema, so I find your analogy pretty solid. I think most people would agree that hardcore gamers and social gamers are often very different types of users and that both segments of the industry are doing well. The blockbuster mentality of AAA producers, unfortunately, leads to lots of expensive failures, but I would argue that lots of social games aren't making very much money either. I think if someone made a really well crafted (ie AAA equivalent) social game they could put half of the people in that segment out of business, given how crappy the average social game is (not by hardcore standards, but by the standards of casual games).

"One thing the panelists say they've yet to see accomplished is a major game that's inherently viral by the nature of its mechanics -- not a game that spams friends or is Facebook oriented, but makes users require their friends' involvement in order to play, and requires or results in the accumulation of a community. That way, userbases rise simply as a consequence of the game mechanics".

Exactly what we are doing with www.eRepublik.com this results in slower but in my opinion much more solid growth.

Ok, I didn't read all the comments. But it's really simple: AAA has become too expensive for VCs to invest in (and also, you need actual knowledge in the game industry to know what can work and what can't), whereas social is an easy, hyped-up, and low-barrier-to-entry investment for them.

They're just tooting their own horn. VCs are all about making quick money in a high-growth segment, so of COURSE they're gonna say that! AAA is pretty mature and has a huge barrier to entry.

However, what's good for VCs is not always (never?) what is good for an industry as a whole; that's been proven time and time again.

To say "devs are denial"... that's somewhat showing that VCs themselves are in denial about the interactive entertainment industry as a whole and it's segmentation.

(Just read Jacek's comment -- couldn't have said it better myself)

This was a great roundtable at the GDC - the article just skims the surface... Main idea: the flow of players could be worth more than getting a few players to pay for the game. Think of your Game company as a Media company, going forward... So, measure and manage for Average Daily Plays growth!