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The Year In Review: Game Biz Analysts On The Worst Happenings Of 2010

The Year In Review: Game Biz Analysts On The Worst Happenings Of 2010

December 21, 2010 | By Chris Morris

December 21, 2010 | By Chris Morris
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[What are some of the worst things to happen in the game biz this year? Game biz analysts from Wedbush through M2 and beyond comment to Gamasutra on Supreme Court battles and the "bifurcated market".]

Having picked the brains of Wall Street analysts on the best things to happen in the video game industry in 2010, there was no way we were going to let them go without talking about the worst as well.

This year, after all, might end in positive territory when all is said and done, but it’s going to be tough to look at it as a winner from several perspectives. Retail sales continue to spiral and developer-publisher relations took another blow to the chin. Meanwhile, stock prices of publicly traded game companies continued to lag.

Here’s what the analysts thought went wrong in 2010.

Michael Pachter, Wedbush Securities

Pachter’s worst of the year echoes what a lot of gamers and game executives have mentioned: The most important legal fight the industry has ever had on its hands.

“The worst thing that’s happened so far this year is the idea that we’ve escalated the idea of prior restraint of free speech to the Supreme Court – and there’s actually a possibility that the Supreme Court could rule against the gaming industry,” says Pachter.

“What I thought was interesting was there were nine people you could get into a room and not one of them has ever played a video game. You have to be a gamer to know that Postal 2 is not the poster child for all video games. Most people don’t know that.”

Colin Sebastian, Lazard Capital Markets

Sebastian noted the iPad was a boon to the larger gaming industry in his ‘best of’ thoughts – but the ubiquitous tablet is something of a dual edged sword, he added.

“The worst thing?,” he said. “Maybe also the iPad, since the traditional game publishers might not get their ‘fair share’ of the market on new connected devices, and price points for games are also a lot lower.”

John Taylor, Arcadia Research

Taylor, in some ways, agreed with Sebastian’s sentiment that iDevices could be trimming back revenues at traditional publishers. However, he added, those same publishers have themselves to blame for a rather surprising reason.

“[The iPhone and iPad and social network games] increase the audience largely by offering really fun to play games at a low cost or no cost,” he says. “So the combination of these two presented the traditional games business with a challenge it has not seen in the past 25 years.

“That business is still very much struggling. It is an industry that has too much capacity. There are too many high quality, high production games coming for an audience that’s increasingly looking like a niche business.”

Eric Handler, MKM Partners

Handler notes that the gaming world of haves and have-nots is growing – which could lead to some thinning. That’s less the economy’s fault, though, and more due to the way the industry has evolved.

“Even though the economy is improving, it’s still very much a bifurcated market,” he says. “Very good games can sell quite well. The middle tier, though, is bad. The herd is getting thinned out. A title is either a big hit or big disappointment – and I think that’s going to continue for the rest of the cycle.

“What’s so different in this cycle is the online component. Before, a new AAA game would come out every few weeks; you’d buy it and play for 30 hours or so, then buy the next one. Before, even if the game wasn’t that good, you’d buy it anyway because you needed to do something to fill the time until the next one came out. Today you don’t have to do that.”

Billy Pidgeon, M2 Research

While Handler might give online gameplay a lot of credit (and Pachter called it one of the best things to happen this year for gamers), not everyone is a fan. Pidgeon notes that while multiplayer elements have grown exponentially, developers have really done little to advance the style of play.

“Developers and publishers have not come up with more interesting ways to play together online,” he says. “Online games continue to suck. It’s generally... melees, bad behavior and poor matchmaking. There are more ways to play together. I think there’s a lot of potential and it’s not being picked.”

“I’m not seeing any innovation. It basically continues to be deathmatches. Worst case, they’re totally mismatched and that doesn’t grow the category. And even when you do match properly, you’re either catering to the hardcore or you’re doing this asynchronous FarmVille bullshit. I’d like to see other ways to play together online that are challenging, easy, inspiring and that are more fun than we’ve seen before.

Jesse Divnich, EEDAR

Divnich’s worst of the year likely resonates with the development community. The bifurcated market that Handler mentions, added with high development costs, has resulted in some major changes in the environment for independent developers.

“One of the biggest disappointments for myself was seeing all this third-party consolidation,” he says. “What publishers are doing is bringing stuff internal. That’s whey we’re seeing so much news on third-party developer closures as publishers become less reliant on them.

“What we’re going to see is a lot of third-party publishers are going to contract work out to these third-party developers, but it will be smaller work. We used to have a third-party developer community that was working on AAA games, but now they’re being forced to work on mobile and smaller titles – and because of that we’re seeing a lot of downsizing and studio closures.”

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