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Withstanding the Collapse of the Middle
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Withstanding the Collapse of the Middle

February 14, 2012 Article Start Previous Page 2 of 3 Next

Digital Distribution

"[n-Space was] too much relying on traditional boxed products with traditional publishers," O'Leary realized. "And [n-Space] was too reliant on Wii and DS, which had been really good choices. It put all of our eggs into one basket."

Diversification is key for independent studios. And O'Leary knew his studio must look at alternative business models and marketplaces to rebound and thrive in the future. A prominent way to fix the revenue stream for n-Space and other developers revolves around digital platforms, especially iOS (as well as Xbox Live Arcade, PlayStation Network, Nintendo's 3DS eShop, etc.).

WayForward (Might Switch Force, Contra 4), unlike many independent developers, continues to drum along at its own beat as others fail. The studio understands the importance of digital platforms and self-funded, self-published games, according to CEO John Beck.

"So, from my perspective, and there are others at WayForward who might see this differently, it's all about digital distribution and not having to sell your concept to a publisher," Beck said in an email interview.

"When you consider that DSiWare basically meant we could make a DS game and didn't have to find a retail publisher, you start to see why it was an obvious move for [WayForward]."

While DSiWare seems to have a rep for being unprofitable, Beck noted that the company has had profitable results. As such, the company looks to continue its handheld development on Nintendo's digital services.

"When you have certain content that is available exclusively on dedicated gaming devices, it really helps to set that content apart," Beck said. "The eShop will be a major part of our strategy for handheld games going forward."

Thus, developers become their own publishers, finally owning the revenue stream and users. As such, independent studios have to rely less on major publishers and potentially high-cost deals.

"More payment models definitely mean more ways to earn revenue and keep your development doors open," Boccieri said. "The lines between publishers and developers continue to blur... this is only a good thing for those willing to explore the new opportunities afforded by new commerce paradigms."

Add in low development costs, cheap prices for consumers, and ever-lasting shelf life for products and places like the App Store seem like a whole new world for developers. But everything with the App Store isn't as rosy as it may seem.

n-Space started pursuing the iOS market in 2010 with Golf Cart Ranger. On the day the game broke into the top 200 of all games on the App Store, it sold less than 200 copies, according to O'Leary.

"From a business point of view, [Golf Cart Ranger] was a disaster. We spent somewhere around $50,000 developing it. We've sold a little bit over 8,000 copies."

While n-Space learned valuable experience in the App Store with Golf Cart Ranger, it also highlights how bumpy the transition from boxed games to digital goods can be, O'Leary noted. Independent developers must find the right mix of investment and advertising on App Store games. Studios must find a business model that fits their sensibilities.

Ultimately, developers like n-Space can't follow the same method as two guys in a garage on iOS, O'Leary said. He elaborated that subscription-based models and outsourcing projects, with n-Space producing, might be viable options to explore.

It's a whole new world with iOS, O'Leary said.

The Middle Market Suffers

While digital distribution serves as a key ingredient for independent developers currently as well as the future, it also helped eat away the middle market of games. Many third-party and second-party studios made games that were good, but not at the epic scales critically and commercially of titles like Call of Duty and Assassin's Creed.

With low-cost games and free-to-play games available on digital platforms, many consumers fill their time with these in-between big franchises. "To scratch their itch, they turn to free-to-play or Facebook or to $1 purchases on the App Store," O'Leary said. "So it makes it hard on the middle ground."

Pete Collier, co-founder of Hogrocket and a former senior level designer at now-defunct Bizarre Creations, agrees that consumers understand their money can be better used with smaller purchases to fill the gaps between tent-pole releases.

"There is a flight to value on the part of consumers," said Collier, who makes iOS games now. "Value can be found at the low-cost end of the spectrum with free-to-play, Facebook and iOS games where you get a lot of bang for your buck. At the high-end of the spectrum, gamers have flocked to the games/franchises where it is most likely they'll also get value for money."

The low end of the spectrum basically bottoms out with the success of digital platforms, and the high end rises to incredible heights in regard to development costs. Requirements for a console game rose very dramatically with the PlayStation 3 and Xbox 360, according to Chico, who knows firsthand from his time at Pandemic. He estimated somewhere between $50 million and $70 million was spent on the now-closed studio's last project under EA.

"Both ends of the spectrum seem to offer lower risk exposure for the investment dollar than the middle ground," said Boccieri.

And then there's the economic financial crisis that hit the world in 2008. The after-effects continue to impact the middle market. Extra money has dried up and really hurt independent developers hard, Chico said. Publishers had to make a choice.

"In the current economic climate, the time of companies making high-cost but middle-of-the-road titles is over," said Collier. "That's the reality. In times of economic uncertainty, the middle is always squeezed."

"When times are tough and people are capable of less purchases, why would [publishers] take the risk on the middle ground? This, I believe, is why we've seen the strengthening of established IP and the collapse of the middle."

Like Collier alluded to, consumers also had to make a choice.

"The economy robbed people of their disposable income, and what money and time they had to spend was divided," O'Leary said. "There [are] so many choices that range from free-to-play, to a dollar, to $30, $40, $50, $60."

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