DICE 2012: Is the publishing model broken?
"Is the publishing model broken?" That's the question posed during a debate between two prolific games industry analysts at the Academy Of Interactive Arts and Sciences' DICE 2012 executive summit in Las Vegas on Wednesday.
"I think publishers were great in the 80s and 90s when consumers didn't understand what games were," said Wedbush analyst Michael Pachter at the Gamasutra-attended event. It was also a time when game developers didn't have the digital channels that they have today, through which they can sell games directly to consumers.
They needed someone to bring their games to market. But that's not necessarily the case anymore, so the traditional publisher's role has lessened.
Another problem with today's publishing model is that they're inherently risk averse, said Pachter. When games were cheaper to make, they could take risks, and companies could see profits if their games sold a few hundred thousand units. "Now, I think that if [publishers] look at a game, and it's not going to sell 3 million units, they don't even try [to release the game]."
To Pachter, the publishing model today is a broken system that exploits the creative talents of game developers. He stopped short of saying that publishers are completely going away, but said that there won't be new publishers like Electronic Arts or Activision emerging. The cost to get into that business on that kind of scale is just too high, and way too risky.
"I think you're going to end up with a lot more companies like THQ," said Pachter. The Agoura Hills-based publisher just announced 240 layoffs and made big cuts to its games lineup to focus on "core"-focused games and digital distribution. Middle-of-the-road publishers that don't have the ability to guarantee a couple big, regular, commercially successful franchises are getting squeezed out of the market.
"I think it's interesting that in the last eight years, we lost Acclaim, 3DO, Eidos, Midway. What new publishers have emerged? Yeah, Chillingo, Playfish, but they're not the same," he said.
Activision, Pachter pointed out, relies heavily on World of Warcraft and Call of Duty -- that's just two franchises. The cost to make and market games limits what a publisher can release. "That's not good for the industry, because not as many people are buying content. It's not good for the consumer."
With today's publishing model, Pachter argued, it's business that is driving the creative, instead of the other way around, and that's detrimental to the industry. "We are getting fewer choices as consumers because financial guys are taking over. Financial guys are making the decisions," he said.
Take-Two is one publisher that Pachter said was making good decisions within a broken model. He said the Grand Theft Auto, Red Dead Redemption and BioShock house is an "enlightened publisher" because the executives are letting the creative people at subsidiary studios like Rockstar, Irrational and Firaxis drive the business decisions. The publisher's theory seems to be that if it releases good games, success will come.
"I think the power is going to ultimately shift from the publisher to the developer," Pachter said.
Jesse Divnich, VP at video game market research firm EEDAR, argued that the publishing model isn't broken, and in fact it still plays a major role in the curation of video games in a time when there are more choices than ever for consumers.
"Innovation happens every day. ... But without publishers, there's no way for us [game players] to experience that." He said publishers act like a conduit for content, and without them "innovation would cease to exist."
He used the example of Harmonix and Guitar Hero. Activision identified the potential of the Guitar Hero franchise, Divnich said, and turned it into a mass market hit. (That is, before the franchise fizzled out completely.)
"Innovation doesn't occur at the publisher level, but they do put it in front of a mass market so that [the masses] can experience it," said Divnich. "Your Limbos, Braids, Bastions -- those games wouldn't have been successful without a publisher," said Divnich.
"At the end of the day the publisher plays a huge role broadcasting new IP," he added.
Pachter still isn't convinced that the publishing model is fine as-is, and while publishers have the ability to put a relatively small game in front of a large audience, he said independent developers run the risk of being exploited. The analyst said it's endearing, the humility of some indie devs who are just happy that someone wants to play their game.
But they also have shown their business acumen is nowhere close to their abilities as creative game makers. "It's endearing, but the publishers are going to walk all over them," said Pachter.