Cerny: Blockbuster game economics no longer make sense

With tech evolution stalled, now's the time to reassess budget sizes, says 30-year vet

Mark Cerny, 30-year veteran of arcade and console game development, told the audience of the DICE Summit today that the economics of the blockbuster videogame business no longer make sense.

Not only have costs risen to new highs, in order for businesses to hire new team members they have to make others redundant to balance the costs, said Cerny.

"We've had ten years where every year that went by the industry got bigger and more successful. But the natural growth has now gone. In fact, now that we're in decline if you want to add a person to your team to make the local industry economics add up, someone else has to layoff something like a person and a half.

"And there aren't many of these high budget games. Last year there were only about 50 or 60 games that sold over a million units - that's multiplatform and international. And only half only sold two million. Of course if you spend over $20 million you want to sell a million units. And if you spend over $50 million you want something well north of two million unit sales."

Cerny said that only six years ago a blockbuster console game would cost around $20 million rather than $50 million to make - but asked was it possible to reduce costs to that level now that the industry is used to spending $50 million?

"Frankly, the economics of the $50 million game are looking a little shakey. By contrast with a $20 million game I'm pretty sure I can make that money back - multiplatform, international distribution. But that raises the question, can we make the $20 million game?

"Historically, we never had much money to spend. Can we do it? Maybe not. The problem is we've learned how to spend the money. If I go back to 1994 and somebody says 'here's $20 million to spend' I would have absolutely no idea what to do with that money."

"We had no specialisation what-so-ever in 1994," he continued. "In 2011 we have the creative director, the game director, the director of actors, stunt co-ordinator, the guy who makes the plywood props, the audio scripter, the lighting designer, and the most recent of creations - the combat designer.

"If you say to your team we only have two combat designers, what you're going to hear is 'that game's going to suck'".

But Cerny said that with no new consoles on the horizon, now was the perfect time to assess the costs of game development, reduce spend, and take the time to refine the craft of games creation.

"We are in a very rare time now. Technology is not changing. It's a quiet time and they don't happen very often. We have a revolution every five years and we have to go so many hoops just to make games for a next generation.

Transitions from one generation to the next can be "brutal" Cerny said. "I'm sure all of you will remember, it's been tough going to the modern consoles. Every team I worked with wasted - or spent - at least a year mastering the transition."

"But now it looks like we're done. Unless a new wave of consoles come out... we're done. And that means we can take our time and to learn our craft. To learn what is important to spend money on. And get out of the spiral where we spend $5 million more every year making that next title.

"And at the same time bring back that diversity and excitement, because that's what is going to keep the industry growing," he concluded.

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Latest comments (18)

Greg Wilcox Creator, Destroy All Fanboys! 10 years ago
FINALLY. Someone gets it... no go put that into practice, folks...
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James Prendergast Process Specialist 10 years ago
I've been saying this for a long time now. The industry never grew as large as people said it had and the annecdotal sales numbers have backed that up for the last five years - the console space has pretty much been static since the mid-end of the PS2 lifecycle.

But instead of reducing budgets and reigning in silly spending on pursuing graphics/artwork (as was the problem on PC all those years ago) publishers and developers blamed pirates, fickle fans, simultaneous release dates..... anything but their actual development and marketing reality. Most games don't get enough marketing and so are bound to fail. Some games get the wrong marketing and so are less likely to succeed. The making of games has been playing to expectations that are just not based on reality so i'd love to see this sort of mentality change.

One thing i've been calling on and that i think the consumers would like is reuse of worlds and technology for cheaper installments of new games. To some extent this has been adopted by Take Two for their GTA4 episodes and Red Dead: Undead Nightmare but overall the industry is terrible at using assets that they have at their disposal.

Take something like Fuel or even Red Dead Redemption. Those worlds exist and (like the sets created by movie studios) are ripe for the using by other studios or development houses. Think of buying a game like Fuel where you play the game and put it down, however, 4-6 months later there's a 'new' game that you can download or buy on disc from a different developer using the base game engine and world with new content and gameplay. This idea used to be called a total conversion but you don't see it much anymore because it's a lot harder to keep an amateur team together to get that sort of job done on a modern game/engine.
There's no reason why, say, there couldn't be a Wasteland/Fallout style action game set in the Fuel universe and using their maps and tech. Then another 6 months later (or however long), another studio releases a faction control strategy game akin to UFO:Aftermath in the game etc. etc.

Episodic gaming doesn't just have to be one studio churning out sequels to a story and you can retain the sale (reducing resales or increasing rebuying of the original base game) and increase customer satisfaction with the game, reduce development costs etc. etc.

I know it's a simplified view but i'd love to see the game industry at least explore down this rabbit hole.
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Sam Brown Lead Audio Programmer, TT Games10 years ago
The other thing about 1994 for me was that we only had five programmers and five artists on the team to make a full-price game. Sadly we didn't get 2 million each. :)

Edited 1 times. Last edit by Sam Brown on 11th February 2011 9:42am

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Show all comments (18)
Tadhg Kelly CCO, Simple Lifeforms10 years ago
It's been apparent for at least 5 years that the console market was shaky. What happens next is continued pressure to vertically integrate from the platforms, fewer key titles, and bloodletting among third party publishing. The console industry will soon only produce 50-100 big budget games per year across all formats.
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I think "marketing" is right on the money. From my point of view, as a PS3 owner, I cannot really see what the Kinect offers me that is so different from what I already have on the PS Eye (I know about the depth perception and skeleton tracking and such), however the Kinect has been a great success over xMas whilst I hardly heard a thing about the Move.
I believe that this has a lot to do with marketing since Kinect ads where on everywhere and all the time on TV, whilst Sony had only a single so-so move ad that would air occasionally.
Though this example was about hardware, the same does end up repeating itself on the software side, I believe.
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Mike Clegg Marketing/Design 10 years ago
It isn't all doom and gloom. Because of the fall-out from the console industry the UK industry will re-organise - mostly because they don't have much choice and also because they possess the skills to do so - into a much more partner-based business model. It's already happening with micro-developers springing up across the UK.
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Rick Lopez Illustrator, Graphic Designer 10 years ago
I think now is a great time to focus on game creativity and what you can do in a game, rather then the horsepower hardware has for games. Spend money on good writing, create a good story and characters, intelligent A.I. and physics. If you look at it this way, the possibilities for current hardware are endless.

I think the hardware stalling is good, so developers can relax a little and find new ways to make games. Games now a days are losing the fun factor. I mean the game engines are there. You got the Unreal engine, the Cryengine for example. Its just finding ways to use them in differant ways.

I could care less about all these shooters with beefed up graphics coming out. They are mostly the same game with better graphics and many bugs. But a good example of what Im saying is Bulletstorm....

... judging by the trailer it has something new to offer encouraging you to find differant ways to take down your foes, being able to kick them and using that electric lasso thing, scoring points in how you take down your foes. Im judging it based on the concept, it could be executed poorly and suck. We'll see when the game comes out. But the idea is great. Mass Effect was a differant take on RPG's since it mixed it with incredible shooter gameplay. Its one of those shooters and RPG's were i actually look foward to the battles.

On a short note. I loved Mirrors Edge. It tried something new with a first person and I personally loved the game. I just only wished it had more people and cars on the streets and you could run and wave through bystanders and crowds to get away from the police, similar to how its done in assasins creed. I think a sequel to mirrors edge has potential. the idea is there and its a matter of executing it effectivly.
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Didn't we have an solution to this for large titles? The episodic content?

something like 1st and 2nd level development for ~$20m, money comes in via online sales, then develop the 3rd level (or 4th or online tech) for $5-10m, etc. while gamers are playing the 1+2 levels??

If the first release doesn't sell then you don't spend anymore money?? (Sin episodes)

Are people creating DLC 'thinking' about episodic content but in reality still building up massive (tech, art, infrastructure) costs?

Theres still room for the $50m AAA titles, but there is more scope for the less complex, smaller games or homebrew phone apps/minis.

(That said we still need a $50m meal occasionally for our 5 a day)

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James Prendergast Process Specialist 10 years ago
@Mark.... I think the problem with a series that is individually "episodic" as it has become defined, is that they don't sell that well if not tied onto content that caters to specific uncatered niche market or without being attached to a strong IP. Telltale are an outlier in this field whereas the only other successful "episodic" content i can think of is something like the minor updates to new instances etc in MMOs.

Valve essentially never did episodic content in either their development timescales or user playtime. Sin Episodes (i think) sold enough but didn't have enough money left over to continue on with the series - partly due to customer service costs due to their DRM (i.e. pirates were contacting CS for help) - 150,000 sales for an episodic game should be a good number to be able to continue development! Even PA:OTRPOD failed to do well enough to finish up the last entry in their trilogy - despite their fanbase.
On the indie side of things, up-front game finance appears to be more palatable than episodic development and on the consumer side of things, having something you've bought into die by the wayside before you get any closure (whether it be a game, book or TV series) really sucks.... so it's a big risk for the consumer too. I'd have loved to get more Sin Episodes!

Just my opinion on the subject.
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Norman Tajudin Operations & Strategy 10 years ago
Cerny's comments are spot on. Take a look at what's happening in the entertainment industry now as a corollary to what is starting to occur within the game development/distribution industry. The studios are struggling to figure out the economics of their business as the cash flow from physical media sales (DVD/BD) rapidly declines. The studios quickly learned how to spend all of that excess cash on huge payouts to talent, job title and pay escalation amongst the executive staff, large teams of highly specialized people, acquisitions, and huge marketing budgets. Now they're laying off people, pruning their product lines, and shedding non-core businesses haphazardly as they try to hit their quarterly numbers. At the end of the day, good content always sells whether it's movies, TV shows or games. Good content always can always be tracked back to strong creative teams not large bureaucratic organizational structures and crazy marketing budgets.

Edited 2 times. Last edit by Norman Tajudin on 11th February 2011 5:18pm

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Luis Morales Public relations, Med Mercs10 years ago
Man, all of you are absolubtly right. I think the industry needs this time to re-focus on creativity and simplicity that we have lost.....Take a deep breath and focus.

Edited 1 times. Last edit by Luis Morales on 11th February 2011 8:31pm

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Tim Carter Designer - Writer - Producer 10 years ago
Budget size is an idol.

It's barking up the wrong tree.

It's not budget size. It's communications.

Using a communications model from a $1 million dollar game to build a $50 million dollar game doesn't make sense.
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Andrew Goodchild Studying development, Train2Game10 years ago
I would agree with a caveat. I don't agree there is no room for blockbusters, but look at the film industry, the most expensive films cost double or more what the most expensive games cost, but there are only a few at this cost. Most of a large distributor's output costs nowhere near these levels, there is room for your Cod, gtas, or halos, like there is room for avatar, harry potter and batman, but the market can't sustain hundreds of these games each year. By all means spend $40m, $100m or more on the odd event game, but don't set it as the norm. Someone else pointed out the other day, we have a lot of AAA, And we have indie, but not enough tries to hit the sweet spot between, (some notable exeptions like the first portal).
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Jeff Wilson10 years ago
No-one has mentioned the cost of buying a new game. Like millions of other gamers, I would rather wait a few months and get a leading title at a much reduced price. Over 50% reduction in some cases. So, if I were Director of a Studio and didn't have a COD franchise to tempt the public with, I would seriously consider selling my game at a reasonable price in the first place. That way I may hit my unit sales before it is considered an outdated title. As an example, how many people actually paid 40 for Brink ? I was at the pre-release event and didn't believe a word of all the bollocks the Director was promising of new features and outstanding sales. Thanks for the free t-shirt anyway.

Edited 1 times. Last edit by Jeff Wilson on 12th February 2011 11:25am

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Krasimir Koichev Producer, Riftforge10 years ago
Frankly, you could say the same thing about movie... and many other entertainment industries. Yet, costs keep going up. Part of the reason, of course, is Bernanke printing money... they simply got to go somewhere. As Marc Faber said recently, it now takes less than 1 Swiss franks to buy a $1, when it took 5 franks 30 years ago.
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Toby Ross Studying Computer Science, University of Warwick10 years ago
One of the primary issues is that more and more, sales are centralised into a very small number of games. Games seem to sell almost exponentially - and while there are some stupendously high selling games, and many not great selling games, there are few which manage to justify their budget while not going viral.

Online gaming is one reason - the more social that console gaming becomes the more we will see sales streamline into small numbers of franchises. If my group of friends and their friends buy Call of Duty but I buy Halo I'm left with no-one to play with - Call of Duty sells well because it sells well. The design of the game itself hasn't improved a jot since Call of Duty 4 bar a few nice-but-not-needed features, but the sales rocket each time. The response by most competing games has been to try and take what makes Call of Duty sell so well - why else does almost every shooter feature a customisable class system nowadays?

The creativity of the industry is being bled dry by hyper-selling games. Why buy Halo/Battlefield/Crysis/Killzone/Resistance when all of your friends have CoD, are addicted to CoD, and when every one of those games is doing its best to steal Call of Duty's X Factor without realising that "Call of Duty" is the X Factor!.

Unfortunately, while there are games which are most certainly lowbudget which do sell well there are very few low budget games which do well in the sports, racing, action and shooting - these games are sold most of all on awe factor. The first time experience. The graphics. The sensationalism.

It seems inevitable that the more casual and connected the industry becomes the more centralised the sales and profits will be - and the more that happens the less room there will be for the risky development or a gamechanging popularity shift. A lot of people seem to not know when, if ever we will have another 'generation' of consoles. I want to fly the flag once again for why we need one: because it drives change. It drives opportunity and innovation. At the end of the day what is making this industry so predictable at the moment and so centralised into some specific games is how casual the market is at the moment - and casual gamers buy games for casual reasons. They don't buy hardcore games or innovative games or difficult games - they buy what is 'hot'. A new generation would represent a massive rebalance of the demographics firmly in favour of the hardcore - and that would change things up... and that's what the industry needs from a quality standpoint. Otherwise it is inevitable that 'blockbuster' games will become fewer and fewer. In an industry where it seems difficult to produce really high quality games in many genres without big budgets this can only be a really, really bad thing.
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The one BIG but is the rise of the platformless platform.

The problem is thus, whilst a push for continued innovation and realism and immersion seems to always be on the rise, we actually have hit a plateau whereby there is no need for a new platform.

The current mass of gamers and gamers to be, are hoping on to browsers and non pc/console type platforms which might eventually dovetail to the day whereby, a majority of games can be played on any platform regardless of make. In addition, with the rise of portable gaming - there are multiple battlefronts for a platform developer to attend to.

Now, this may not happen in the next 2-3 years, but its pretty close. Considering it takes a good 4-6 years to make a next gen platform. This is scary stuff indeed to justify such forward expansion.
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Adam Campbell Studying Games Technology, City University London10 years ago
From my personal observations, huge budgets have long been declining as a necessity.

Especially with the rise of internal and external technologies, speeding up and streamlining development.

I don't understand the mass of high budget games which have failed to innovate anything, surely strategies should have changed long ago..

Edited 1 times. Last edit by Adam Campbell on 13th February 2011 5:12pm

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