Mar
31
Tough Times for Video Game Makers
The New York Times recently ran an article outlining the health of the video game software development industry. This article states that despite a 19% growth in sales this year, video game makers are still losing money. Sales increases of this magnitude should be excellent news, but the costs of developing games for today’s systems is so large that game developers are seeing profits on fewer and fewer game titles.
According to the New York Times, the costs for developing new software for the latest video game systems like the PS3 and XBox 360 can easily exceed $25 million. After licensing fees and marketing costs, game companies typically need to sell over 1 million copies to make a profit. The problem is, most game titles sell no more than 150,000 copies.
These increased costs, along with a host of other factors like the slumping economy, free online games, and cheap games on mobile devices like the iPhone, are putting tremendous pressure on console and PC software development companies. Companies like OnLive, which I reported on last week, are trying to change the game industry, but this probably won’t help the game developers. OnLive will try to win over current gamers and could attract some new users, but their software licensing business model won’t do much to boost the bottom lines of the software developers.
I assume, like so many other industries today, the game development industry is about to do some downsizing and re-organization. There are simply too many game titles on the shelves and development companies creating them. I expect sales will slump this year because gamers will be buying less, due to the fact that so many gaming options exist. I have a great time playing simple online games and iPhone apps that are completely free. This definitely takes away from the amount of time I spend playing the newest games “real games” on my PS3 or PC, and in turn causes me to buy fewer software titles. At $60 per game, do these full-featured titles provide me with more entertainment than a simple iPhone game? It’s these questions that will bring down many companies in the game software development industry.
Companies that develop blockbuster titles like the Grand Theft Auto and Guitar Hero franchises won’t be going away any time soon, but the smaller companies producing more obscure games will definitely face some tough choices this year.
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