Phil Spencer is right: AAA games are in big trouble (Article)

[Leasy]

In the past, those outside of the industry assumed this to be true based on dipping sales, poor working conditions, and a cratering of creativity — as publishers like EA, Activision, and Ubisoft have stopped taking risks, and have spent more time and money on their diminishing pools of hit franchises.

But today, thanks to this week’s Xbox leak, we can see how the turmoil appears from the inside. Tucked away in industry business conversations, the head of a major console platform has explained the challenges ahead — and what led to this debacle.

Quoted the interesting parts this may be the end of big publishers

Phil Spencer is right: AAA games are in big trouble

The Xbox leaks have provided a rare look into the fears and ambitions of those at the highest levels of the game industry

www.polygon.com

In just 650 words, Spencer summarizes how the shift to digital storefronts caught major game publishers flat-footed — and says that those publishers have continued to fail to adapt.

We should start with the question of why game publishers exist in the first place. And like many other forms of media the idea of a game publisher was created from an access “moat”; like movie studios locking up theater distribution, album companies locking up radio play, game publisher’s scale in physical retail game sales allowed them to secure retail shelf space, in-store promotion and margin structure beyond what any individual studio could dictate when games were primary sold in retail stores. If you were a studio, you needed a AAA publisher to reach a customer at an Egghead software.

This constriction in the access from creator to consumer stayed in place for years and in that time AAA game publishers increased their control. The creation of digital storefronts like Steam, Xbox Store and PlayStation Store eventually democratization access for creators breaking physical retail’s lock on game distribution. AAA publishers were slow to react to this disruption. The AAA publishers did not find a way to leverage the moat that physical retail created in the digital realm in a way that had them continue their dominance of the game marketplace. They have not found a way to effectively cross promote, they have not found a way to build publisher brands that drive consumer affinity (the way Disney has in video), they did note create a social platform that would allow them reach beyond their aggregate IP MAU. Without a lock on physical distribution the role of the AAA publisher has changed and become less important in today’s gaming industry.

Over the past 5-7 years, the AAA publishers have tried to use production scale as their new moat. Very few companies can afford to spend the $200M an Activision or Take 2 spend to put a title like Call of Duty or Red Dead Redemption on the shelf. These AAA publishers have, mostly, used this production scale to keep their top franchises in the top selling games each year. The issue these publishers have run into is these same production scale/cost approach hurts their ability to create new IP. The hurdle rate on new IP at these high production levels have led to risk aversion by big publishers on new IP. You’ve seen a rise of AAA publishers using rented IP to try to offset the risk (Star Wars with EA, Spiderman with Sony, Avatar with Ubisoft etc). This same dynamic has obviously played out in Hollywood as well with Netflix creating more new IP than any of the movie studios.

Specifically, the AAA game publishers, starting from a position of strength driven from physical retail have failed to create any real platform effect for themselves. They effectively continue to build their scale through aggregated per game P&Ls hoping to maximize each new release of their existing IP.

In the new world where a AAA publisher don’t have real distribution leverage with consumers, they don’t have production efficiencies and their new IP hit rate is not disproportionately higher than the industry average we see that the top franchises today were mostly not created by AAA game publishers. Games like Fortnite, Roblox, Minecraft, Candy Crush, Clash Royale, DOTA2 etc. where all created by independent studios with full access to distribution. Overall this, imo, is a good thing for the industry but does put AAA publishers, in a precarious spot moving forward. AAA publishers are milking their top franchises but struggling to refill their portfolio of hit franchises, most AAA publishers are riding the success of franchises created 10+ years ago.

 

[ColdSlither]

And he’s not doing anything to solve that problem.

 

[In The Zone '98]

Too many games are created to generate revenue rather than just being a great game.

 

[Leasy]

And he’s not doing anything to solve that problem.

Not his job too but it explains why publishers are accepting buyouts as the industry is changing.

 

[Cryptocurrency Scarface]

This is actually good maybe they can focus on making complete games with good content rather than annualised copy and paste jobs with micro transactions.

 

[Diondon]

All praise Sony for keeping gaming alive

 

[ColdSlither]

Not his job too but it explains why publishers are accepting buyouts as the industry is changing.

That’s precisely his job.

 

[CoolinInTheCut]

So this is the new excuse of the day? Why Xbox been shytting the bed for over 2 generations

 

[Rekkapryde]

So this is the new excuse of the day? Why Xbox been shytting the bed for over 2 generations

Never no smoke for Phil.

 

[MoshpitMazi]

Seems like the AAA gaming bubble is about to pop and very soon.

 

[MoshpitMazi]

Too many games are created to generate revenue rather than just being a great game.

Why would a publisher release a game other than to generate revenue, this is a biz.

 

[Rekkapryde]

Seems like the AAA gaming bubble is about to pop and very soon.

Studio reputation is critical. You release some bullshyt and cats will be skeptical. CDPR damn near ruined their reputation due to the suits/execs wanting to rush Cyberpunk to get their bonuses (for what exactly I don't know). They were lucky to recover. But you've seen others who have gone to shyt as well.

Whether cats like it or not, Sony has done a great job in this regard with their AAA 1st Party Games. But the care that goes into it is obvious as well. Naughty Dog, Insomniac, Guerilla, Santa Monica, Poly Digital, Sucker Punch have delivered with their titles. You know the games won't be ass from their studios.


Others have to be careful since they don't have that reputation and quality with their shyt. Or even the titles that did at one point have been run into the ground due to leadership and execs more worried about the stockholders than the product.

Good product will sell if it's good in general.

 

[Dorian Breh]

Studio reputation is critical. You release some bullshyt and cats will be skeptical. CDPR damn near ruined their reputation due to the suits/execs wanting to rush Cyberpunk. They were lucky to recover. But you've seen others who have gone to shyt as well.

Whether cats like it or not, Sony has done a great job in this regard with their AAA 1st Party Games. But the care that goes into it is obvious as well. Naughty Dog, Insomniac, Guerilla, Santa Monica, Poly Digital, Sucker Punch have delivered with their titles. You know the games won't be ass from their studios.


Others have to be careful since they don't have that reputation and quality with their shyt. Or even the titles that did at one point have been run into the ground due to leadership and execs more worried about the stockholders than the product.

Good product will sell if it's good in general.

Bethesda is finished, tbh. That's three sharts in a row, people are gonna be a lot more skeptical of pre ordering ES VI.

 

[Gizmo_Duck]

seems like more trouble for publishers that put AAA games on 10 dollar subscription services

 

[Canon]

Ms got it

They can support all those studios and more