Weak AAA launches are a precursor to industry transition

As top games under perform, the industry must prepare to shift with consumer behaviour

It's turning out to be a pretty tough year for big games at retail. Watch Dogs 2 just experienced an eye-watering 80% drop in UK launch week sales compared to its predecessor. It's another data point to add to a spreadsheet of gloom that also includes far weaker retail launches for Call of Duty: Infinite Warfare and Dishonored 2 than the previous titles in those series enjoyed. Titanfall 2, sandwiched in between two other major FPS titles, also took a dramatic hammering. Meanwhile across the pond, the world's biggest bricks-and-mortar games retailer GameStop cut its forecasts for the last calendar quarter of 2016 by between 5 and 10%, calling out November in particular as being likely to see a double-digit decline in the videogames sector.

There are two stories here, as Christopher Dring outlined in his feature on Monday. The first story is familiar and a bit dull; more and more people are buying their games digitally instead of physically. Precise numbers are elusive, but the trend of purchasing games online - through Steam, PlayStation Network or Xbox Live - clearly accelerated with the arrival of the current generation of consoles. While some optimistic voices opine that digital purchasing could complement rather than cannibalise physical sales, that sunny version of events does not appear to have materialised in reality. It's not exactly a zero-sum game, but for the most part, a dollar spent on Steam or PSN is a dollar not being spent at GameStop.

"one major driver of launch-week sales declines may be that people who have bought digital games cannot trade them in for credit in order to buy mint games at launch"

So far, so inevitable; and from the perspective of the broader games industry (as distinct from the perspective of the long-term decline of physical retail), that's not really a problem. It has side-effects, of course; one major driver of launch-week sales declines may be that people who have bought digital games cannot trade them in for credit in order to buy mint games at launch, a behaviour which has been hugely common especially among younger consumers. Overall, though, game publishers and developers are perfectly happy for their revenues to come from digital rather than physical products; if anything, the removal of inventory management issues and costs associated with warehousing and physical distribution is a major boon.

That story, however, doesn't explain everything. All of the available data suggests that revenue from launch weeks is not moving cleanly over to digital outlets; in fact, that transition may only account for a small fraction of the declines we've seen in so many of the industry's top franchises recently. Adding in second-order effects (like the aforementioned loss of the trade-in credit option for buying new games, which has quite probably been artificially inflating first-week sales for the past couple of decades) explains significantly more of the data, and economic conditions (especially among the industry's core consumers) aren't helping, but there's still a major fall in sales that needs to be accounted for.

That's where the second story comes in - a much more interesting story that has much more troubling consequences for the games business in general. It can be summed up in a single personal anecdote. To the great detriment of my wallet, there's a late-opening games and media store right next to the station I get off at on my way home every night. Several times in the past few weeks I've dropped in to browse briefly, and lingered over the shelf holding copies of Persona 5; a game which I've been looking forward to for a very long time, having played through its predecessor multiple times on both PS2 and PS Vita.

"I don't do much with my PS4 that isn't Final Fantasy XIV (a game I bought more than three years ago) and Destiny (a game I bought more than two years ago)"

I haven't bought it yet, though I've picked it up and ruminated over it several times. I haven't bought it for one simple reason; of late, I don't do much with my PS4 that isn't Final Fantasy XIV (a game I bought more than three years ago) and Destiny (a game I bought more than two years ago). Though I've played and enjoyed other games since getting into those two, the huge proportion of my gaming time that's poured into these two long-lasting, regularly updated titles has largely negated the desire to buy new games at launch.

I am not alone in this tendency. What massively multiplayer games such as World of Warcraft and Final Fantasy XIV began has been continued aggressively by a new kind of game, wolves in sheep's clothing which present themselves as common-or-garden AAA titles but actually require a classification all of their own. Unlike AAA games which offer weeks or perhaps a couple of months of entertainment, these "AAA+" titles are engineered from the ground up to have incredible staying power. Some, like the MMOs, ask for subscription fees; most monetise themselves through selling expansion packs and season passes (Destiny, Battlefield, Call of Duty), or through charging for cosmetic items (League of Legends, Overwatch) or in-game items (LoL again). All of them are capable of sucking in players for hours and hours each week, or even each day, over an incredibly long period of time - often on the span of years.

When MMOs first boomed, quite a few figures in the industry voiced concerns about what this would mean for everyone else - but we were still experiencing rapid growth of the "core" gaming demographic, which meant plenty of new customers to go around, and minds were quickly distracted from the hypothetical impact of MMOs by the very real (and for many studios, utterly catastrophic) collapse of the AA game sector. We live in a different world today. Budgets continue to rise inexorably, but the market isn't growing all that much (at least not fast enough to keep pace with budget growth) so margins are being squeezed and risk profiles are looking ever less attractive. Meanwhile economic pressures on younger consumers have barely eased at all since the financial crisis, with occasional positive movements in overall national economic figures hiding a disparity in the recovery that disproportionately hits the games industry's most important consumer groups.

Now, this wave of long term, hugely absorbing, AAA+ titles is adding to the strain by simply removing very active consumers from the marketplace for months or years at a time. Of course, they're still generating revenue; Activision Blizzard, Riot, Square Enix and the other creators of AAA+ titles are doing quite nicely from these titles, although the danger of hurting sales of their other franchises in the process is a constant concern. That revenue, however, is captive. The success of an AAA+ game locks up a portion of the market behind iron gates; other developers and publishers cannot compete on even ground against something like a Destiny expansion, a Battlefield season pass or an Overwatch transaction, because those players are already deeply embedded in that game and its ecosystem.

" Swathes of the AAA game market now face an attention vacuum as huge AAA+ titles suck up the focus of consumers long-term"

That is, of course, an entirely reasonable thing for a company to do; it may not be terribly healthy for market competition, but a company that can create a game compelling enough to be played for years on end is perfectly entitled to benefit from that ability. What's worrying, though, is the effect this has on the AAA market - parts of which suddenly start to seem just as threatened as the now-defunct AA market was only a few years ago. Swathes of the AAA game market now face an attention vacuum as huge AAA+ titles suck up the focus of consumers long-term; meanwhile their budgets continue to rise, margins continue to be squeezed, and a great many publishers probably find themselves thinking that the only way to compete with these new titans of the gaming landscape is to make the huge, risky investment required to try to build one of their own.

That investment isn't necessarily an appealing one. While Blizzard, Bungie and their ilk have a track record with this kind of game, few others studios can say the same. Given the investment required to create a game with such long-term appeal, and the requirement to sustain that investment on an ongoing basis post-launch, the financial burden is huge; and since success requires pulling players away from dominant titles in the market, the risks are vastly higher than they were in conventional AAA publishing, itself not a field for the risk-averse in the first place. In summary, the dominance of these titles and the damage they are doing to sales of AAA games threatens to ratchet risk and competition in the games business up yet another notch, launching the bar to entry skyward. We would be left with an industry that looks uncomfortably like the present status quo in mobile gaming; dominated by a handful of increasingly long-in-the-tooth games whose enormous revenue is funnelled into high-cost marketing for player acquisition, while new games struggle to pick up scraps from the tables of the giants and innovation, for the most part, falls by the wayside.

It's not an appealing future, and I may be painting it a little more bleakly than it deserves. If this year's tough climate for AAA launches does not recover as we move into 2017, though, we are most likely looking at an inflection point where the business model of console and PC gaming follows mobile in abandoning its boxed-game roots. That would be the death knell of physical retail and would signal a transition that would likely pull the rug out from under many studios and even publishers. Follow the data; it's not just a few tough launches, it's a major change of market climate whose impact will be far-reaching indeed.

More stories

Raven Software QA group becomes the first US major video game union

The testers' majority yes vote to unionize follows after efforts that began in January with the Communication Workers of America

By Jeffrey Rousseau

God of War Ragnarök to feature 60+ accessibility options

Controller remapping and UI have been redesigned from the ground up, among others

By Marie Dealessandri

Latest comments (21)

The other issue is day one RRP in UK
For years, games have been marketed between £39.99 to 49.99 - and frankly, my wallet allows me to be patient...patiently patient to wait a month, 2-6 months later, because there is frankly no must have market leader games since Destiny that is work forking out for

A bargain for today is the £20 Titanfall 2 in store at Oxford Circus. Now that is a fantastic scoop :)

If retailers want to push prices up in 2017, well ---> thats just a loaded gun to the foot/head
I for one am content to play re runs of Civ 6 or Destiny...all year long

so, its simple.
May better complete day one games, because there doesnt seem to be some awesome game on the horizon begging for the wallet to splurge on...Maybe Destiny 2 and FFXV
3Sign inorRegisterto rate and reply
Klaus Preisinger Freelance Writing 5 years ago
Spot on describing the trend of playing few games a lot, instead of playing very little of many games. It can be seen on Twitch how little of a dent AAA releases make, when it comes to the Top6 games. The amount of time a new game can hold a Top6 spot seems to get shorter and shorter.

There is another elephant in the room of course. At the point where a $60 AAA game is but a momentary distraction, a well crafted indie game is certainly the better choice. There is absolutely no shortage of well crafted indie games these days. So if you spend 10h of not playing that one game you play all the time, what will it be? The game which sunk most of its cost into presentation, or the one with the most attractive gameplay? AAA games are too often shorthand for visual fidelity combined with lowest common denominator game mechanics. Good riddance for that 'recipe'.
4Sign inorRegisterto rate and reply
Renaud Charpentier Game Director, The Creative Assembly5 years ago
Yes, very rightful observation, some games now capture player's time for years, reducing the need to search for new experiences and so products. Already true on mobile, settling in the PC world with Dota, WoT and WoW players, coming to consoles with Warframe, Destiny, The Division and others. That is effectively a major change for everyone, and it is more than "games as a service" sums up. This is probably the biggest sea change for our industry in the next 10 years, especially for AAA. Smaller games are much less impacted as they are complementary to that. You play WoW and Dota for years and once in a while you have 4-6 hours break playing "Inside" or "Firewatch", it's needed and complementary, these will keep doing well.

On the unique subject of retail/box decline, is there really a discussion to be had here? Who believes that boxed games will still be a thing in 15 years? 10? 5ish? I mean exist as an important share of the market: vinyl disk still exist and are "growing", but they are not a major part of the music industry.
5Sign inorRegisterto rate and reply
Show all comments (21)
James Prendergast Process Specialist 5 years ago
@Renaud: I guess boxed sales depend on what happens to/at the FCC during the next presidency, whether data caps are extended across EU and whether console manufacturers decide to ship consoles with decent sized storage! (Okay, MS has Sony beat on this point at the moment). Finally, it will also heavily depend on the younger generations getting paid fairly and being able to sort out their lives.

Personally, I prefer to buy discs and larger HDDs due to not having to delete and constantly re-download titles. Plus the game is there for immediate use regardless of PSN or Live issues.

On pc it's the opposite - but only because they stopped shipping the game on the disc. Of course, although I do by games on steam, GOG is a big part of my library and will be getting bigger.

Of course, I'm not young and have a well-payed job so I don't really limit my game purchases (except bloody destiny - just couldn't stomach going through the same environment another time) but there's no way I would pay for locked or ephemeral 'content' if I couldn't afford it...
0Sign inorRegisterto rate and reply
Robert Barrow Information Security Analyst 5 years ago
I usually pre-order games that I'm interested in and always have done. But the growing trend of releasing a game that's BoA (Broken on Arrival) and the blasé approach to relying on day one patches to provide the game you should have got out of the box... I just don't see the point in paying for that. I'd much rather wait and buy it once the thing's working properly. And that boils down to the cost. They're simply too expensive. It's not like we're actually getting anything extra with each price hike.

I seem to spend the majority of my time in games like Warframe which, though repetitive and blatantly fishing for every penny they can, just work and are pretty honest about what it is they offer.
0Sign inorRegisterto rate and reply
Anthony Chan5 years ago
I feel the industry is 'treading water' in unknown territory. When I read the reddits, the forums, and IRC, there is a common theme that every gamer wants. That is a game that will captivate them with an amazing story, wow them with wonderful and engrossing gameplay, and social aspects with constantly renewed content to promote longevity.

Now as devs, you might all proclaim, that is a unicorn! And to some extent, I do agree. But it also may explain partially why there is a reduced appetite to the listed games above, while there is a remaining appetite (though some might argue diminished) to aged games like World Of Warcraft, Minecraft, League of Legends, etc.

The aged games I listed excel in one or more of the things that gamers ultimately look for.

WoW with its dated graphics still manages to engross with a storyline built from lore that is quite deep (I consider WoW lore as deep as Tolkien Lore is to fantasy) with plot twists, family disputes, and evil the 'whole 9 yards'. Its gameplay is the original 'easy mode' 1st/3rd person RPG which is easily learned by anybody. And the social aspect in WoW is phenomenal.

Minecraft has simple gameplay, but it is the modern original. It has no storyline persay, but in many private servers it does. Playing on a private server, its the best of sandbox. People make the storylines, forge the relationships, cooperate and complete feats of construction that are worthy of Twitch streams and youtube recaps. This creates a social activity that people will be addicted to, starting something with strangers, and accomplishing/finishing something with friends.

If you compare that to what has come out in 2016 so far, there is nothing that delights in the manner the above games when first released. Sure, there is hype, but hype dies real quick. COD, Tomb Raider, Titanfall, even the amazing BF1 are suffering from players who view this as more of the same. In addition, I have yet to see any of these games create an interactive community IN-GAME that becomes more than I am playing with strangers who I will never see again.

That leads to my last point which was touched on in the article. Maybe these games are better setup as true 'game as services'. We don't need a new COD every year. Just release them as DLC. What they should do is put in place community building services, a system that encourages continued progression, perks that can be earned in one DLC pack (or game) and then be transferred into another.

The challenge to developers is to create content that satisfies the above criteria. Gamers don't want games that wait years for a sequel. They want a constant on tap of content, but they are definitely willing to pay for it if it's good. But at the same time, they want good value, not rehashing the same game with a couple extra bells and repackaging it for 100$.
0Sign inorRegisterto rate and reply
My kid ha hours of fun hogging goat simulator.....
1Sign inorRegisterto rate and reply
It almost seems as this is an outgrowth of fanboy consoles. We all know that some people have a very weird loyalty and personality trait tied to whatever console they have ( as it never seems to occur to them that you can have more than one) but anyway, it seems as if this loyalty and fanboism is leaking over to certain games and titles now. People not only tie a piece of who they are to what console they use, but now also what game they play. Some people routinely now play the same game month after month after month ad nauseam.. This never use to bethe way we played games, you bought a new game, enjoyed the experience for a month or so, and moved on to next game, that doesn't seem to be the case with a lot of gamers any more.

They seem to have a part of their personality tied to what game they play addictively.

Just another sign of my age I suppose, I dont get playing the same game for thousands of hours, I dont get fanboism, I dont get watching e games, but hey at least I get VR, that stuff I love.
1Sign inorRegisterto rate and reply
Shehzaan Abdulla Translator/QA 5 years ago
Maybe the industry will now see reason to challenge the convention that you can't release major games in the summer.

Over the last few years we've seen a transition of releases in Q4 to Q1 of the following year (and sometimes early Q2).

Would Titanfall 2 be struggling as much if it was seperated from Battlefield 1 by 6 months?
2Sign inorRegisterto rate and reply
Klaus Preisinger Freelance Writing 5 years ago
Yes, because Titanfall is 'a' game, not 'the' game in most people's perception. For all its flaws, Destiny is still more of 'the' game than Titanfall is. Most of the backlash towards No Man's Sky can also be attributed to people not just wanting it to be just 'a' game (which it is), people wanted it to be 'the' game they play (which it clearly isn't). Look no further than Star Citizen, you can raise insane amounts of money based on promising players 'the' game.

Sure, you can still create 'a' game and make a lot of money. The yearly iterated upon, highly expensive AAA game can still be a thing. But it is no longer the top of the pecking order. League of Legends, DotA2, WoW, Counterstrike, they now play in a league of their own. The only company to consistently break into that type of market was Blizzard with both Hearthstone and Overwatch.

In my opinion, Call of Duty is a fine representative of the second best type of game there is. It sure has its fans to still make a lot of money, but boy does this game look old compared to even the most pixelated indie greenlight game on Steam.
2Sign inorRegisterto rate and reply
James Prendergast Process Specialist 5 years ago
@Todd. Maybe your experience has been different but in the 80s and early 90s people very much did buy a game and sit on it for months at a time. The thing that led to a lot of games played was rampant piracy...

Also, expecting people to buy more than one console is pretty weird. Not only are games mostly replicated across consoles/PC but their price of entry is pretty huge. Am I going to spend almost €700* on multiple systems (just XBO and PS4 as they currently retail where I live) when the games are incompatible in either system and the features of each system (mostly) replicate each other?

No way!

Sure, if you're a tech-head, you might but that's a very niche thing in the same way an audiophile will spend €100 on gold-plated, ultra-insulated cables - most people will buy the €5 cable from ebay.

*We're talking more like €1500 if you include a decent, from-scratch, gaming PC.
2Sign inorRegisterto rate and reply
Paul Jace Merchandiser 5 years ago
For me and many people I know, we no longer buy more than one game a year at launch. As already mentioned those $60 day one purchases add up pretty quickly. That's why I just wait for sales. The last few days have been very generous due to Black Friday sales. I was able to pick up Gears Of War 4, Titanfall 2 and Call of Duty: Infinite Warfare all for under $100. I suspect many other people go this route as well. There were even more games that I would have liked to pick up but free time is also an issue.
1Sign inorRegisterto rate and reply
Alex Barnfield Lead Engineer, 17-BIT5 years ago
As Dr Chee Ming Wong says, the increased RRP is a HUGE factor, especially combined with the ever increasing number of online sales. This Black Friday, no game on my wish list hasn't been on sale.
I honestly can't remember the last time I made a purchase that wasn't on sale; I don't buy day one anymore - it's far too much money for anyone in an economy like this. Knowing a £40 title might soon drop to £20 is one thing, a £60 title - I'll wait thank you very much.

Also its not so long ago that claims such as Assassin's Creed is the only remaining AAA franchise were being made - many fell out of the habit of putting aside an amount of money per month for gaming and started thinking in terms of how much they spent per year. Now suddenly we've had an excellent year for AAA gaming, anyone wanting to keep up would have to buy several titles a month.

Contrary to Klaus indie games for me aren't a factor, cheap as they are - as many as I receive for free per month due to various subscriptions personally I don't sink much time into them, the low price tends to be an excuse for so many things. I will try them, it's just so rare I get captivated by them.
The bigger competition are the well polished, well reviewed games I overlooked last year, or two years ago which are currently selling for next to nothing in the latest steam bundles.

Edited 1 times. Last edit by Alex Barnfield on 26th November 2016 7:01am

1Sign inorRegisterto rate and reply
A few other considerations to note

In 2015 - I still have a goodly pile,of unopened AAA games left untouched.
8nless it is for content tourism and research ie how did the client design, the level , was it a good representation of a genres gameplay , one finds that increasingly maybe a few hours on a weekend are all one has, to even consider gaming...

Real,life, seeing sights and living within a harsh economic environment takes precedent

As such, would it make more sense to release less content, but engaging product that afford a semi persistent and long tail success over the lifetime of the product

If games take at least 2 to 2.5 years to develop, refine and polish only to be sampled and discarded to the side after a few days at does us all a disservice
1Sign inorRegisterto rate and reply
Jeremy Glazman Programmer 5 years ago
I haven't seen anyone mention that all of the games listed in the article are second tier murder simulators. If the genre kings in that arena are now established as 'AAA+' experiences, then this drop off of the lesser competitors in that space shouldn't have surprised anyone.

Watch Dogs 2 is the only exception, in that it seems to be trying to expand the genre into other areas of gameplay. Their massive drop in sales shows what the console market thinks of such endeavors.

I don't get why there still isn't more of a push into new genres. Look at the success of Rocket League and Firewatch. The player base on console seems especially niche compared to PC and mobile, but still seems to have some kind of appetite for new types of experiences.
2Sign inorRegisterto rate and reply
Klaus Preisinger Freelance Writing 5 years ago
careful what you call "older shooters from past year". Overwatch, Doom, The Division, Gears of War 4/Uncarted 4, Farcry Primal, and Destiny Rise of Iron were all released in 2016.

Never forget Battleborn, another 2016 shooter which failed horribly despite being a good game. Tucked to a Humble Bundle as the $15 incentive 10 weeks after release is unheard of.
0Sign inorRegisterto rate and reply
Andrew Wilson 3D Artist 5 years ago
I'll be buying at least some of those titles mentioned in the future, once the price has come down and the issues have been patched. Week one purchases are a thing of the past for me and I imagine a lot of gamers who have grown older and no longer feel the need to have this week's game. I also play single player and don't really have any friends playing the same games so no reason to get involved early
1Sign inorRegisterto rate and reply
Adam Campbell Product Manager, Azoomee5 years ago
Pricing of boxed games has bothered me for a long time.
0Sign inorRegisterto rate and reply
@James Prendergast: I was a Buyer for a Eastern US Game Retailer in the late 80s , early 90's, I have a pretty good knowledge of how games sold back then, and pretty much every month or two we could expect a core audience of Genesis and Super Nintendo user to buy a new title. Gamers back then most definitely did not buy one game and play it for a year, not even close.
0Sign inorRegisterto rate and reply
Morville O'Driscoll Blogger & Critic 5 years ago
Gamers back then most definitely did not buy one game and play it for a year, not even close.
Generalisations (on both sides).

Final Fantasy 3 (VI) on the SNES lasted me... mmmm... over a year. I literally didn't buy another game (SNES/Megadrive/Amiga) in that year.

But then something like NBA Jam on the Megadrive lasted me about 4 months, and then I bought Super Metroid (second-hand). And whilst I was playing that, I rented Secret of Mana.

My point is that trying to ascertain the buying habits of consumers by pointing to simply one or two things does not work for such a large and disparate group.

You can, for example, point to the maturation of gamers for why AAA games aren't selling a well. People are complicated, and prorities shift, even if interest in games doesn't wane. I've recently resolved to stop buying games I'm "kinda" interested in, and donate to Planned Parenthood instead. Other gamers have grown-up, and realised that not only is £40 expensive for a game, but that time spent playing it is time spent not doing other things - dating, travelling the world, raising kids. Still other gamers want to get out their parents basements and move onto the property ladder - £40 every 3 months adds-up.

Analysis that doesn't take into account the human element (differing personalities, maturation) as well as the financial (spare cash, cost of games/consoles) will only ever give you an incomplete answer.

Edited 2 times. Last edit by Morville O'Driscoll on 29th November 2016 2:01pm

0Sign inorRegisterto rate and reply
The thing is, after rent, food, energy bills and travel - how much does one want to fork out for a game £45-50 (day one) ...or wait wait to buy 2 games at discount (affordable rate throughout the year)

So, unless its something ya wanna really really want...
0Sign inorRegisterto rate and reply

Sign in to contribute

Need an account? Register now.