Game Development Costs Triple for NGP, 3DS

Angry Birds plush toys at an open-air market in Seoul, South Korea.
I don't think these were authorized, but I wasn't able to ask.

One of the key "features" of new consoles, handheld or otherwise, is not readily apparent to consumers, but it's very important to developers. New consoles inevitably result in a rise in development costs. It's a consequence of higher resolution graphics, which require more time spent on art, and of the sheer difficulty in learning to use a new console. Not to mention working with a tool set that's inevitably incomplete and bug-ridden. At the earliest stages there are no third-party tools to switch to; you're reliant on the tools the console manufacturer gives you.

More than that, when the console maker throws in new features like 3D or various sensors or motion control, or even added buttons, it all takes time for developers. They have to spend time experimenting with the new features, learning how they work, and hopefully coming up with useful and fun ways to use the features in a game.

How high are we talking about? Game budgets for the 3DS and the NGP are expected to be over $1 million dollars. That's your price of entry... so you can see why a small developer used to iPhone games might balk at the idea. As a contrast, Angry Birds cost $140,000 to develop, and that was considered a very high budget for a smartphone game. Many smartphone games from small developers are costing thousands of dollars to develop, and even then many don't make back their investment. Which is why independent developers need to tread carefully when deciding on budgets for their games.

And clearly, if you are thinking about bringing your smartphone game to the 3DS or the NGP, you'd better have a lot of resources handy... And a great deal of confidence in how many copies you can sell.

A New Game Development Model

If only sales rose as fast as game development costs.

Electronic game development has undergone many changes over the years since the early years when a lone programmer could create a game, put it in a zip-lock bag and bring it to a store to sell. The lone programmer became a team that sometimes can be over a hundred people, and budgets are routinely in the tens of millions and occasionally go over $100 million... and that's before you count marketing costs, and the cost of manufacturing and shipping out games.

Now we've come full circle, in a way, and once again a lone person can create a game for a computer, or a smartphone, or even a console. The huge up-front costs of distribution have largely disappeared, and the need for a dedicated sales force has too. Sure, many games are still done that way... but there have been a lot of new games being created by individuals and small teams for all platforms, and some have seen big successes.

Which is perhaps why a long-time industry veteran, Peter Oliphant, is proposing a new way to structure a company to produce games. He's trying to put the focus on the creators of the game, not on the company. It's a fascinating concept (based on how the movie and comics business structure projects), and worth your time if you're interested in developing games:

http://www.colab-games.com

Board Games on iOS

Steve Jackson's games on iPhone... you know you'd buy some.

Board games are getting a new life on iPhones and iPads, as this article on Ars Technica discusses. (Pinball games too, which is cool, but not so interesting to board game geeks.) Many board games can move easily to the iPad; the iPhone is tougher due to the small screen size. Usually the big difficulty is working out a suitable AI in order to let people play the games by themselves. This can be a very tricky task if the game has a deep strategy.

(Though I wonder if this AI problem might not be solvable the way Google has dealt with translation: Brute force. Google's done wonders with translating, not through research into languages and careful rule-tweaking, but by having a zillion text samples to work with. Similarly, if you could track a board game's players over time, and record all their moves, you might be able to reverse-engineer a strategy AI... Nah, probably not feasible except for an immensely popular game.)

This does lead me to wonder: What if you took the money that you would spend on printing a board game and instead put it into developing an iPad version of the game? You could easily spend north of $50,000 printing up a board game, not even counting your production costs for artwork and such. If you weren't worried too much about the AI programming (by having a simple AI, or no computer opponent at all), you could get an iPad game created for less than a board game could be printed. True, you could only sell it for a fraction of the physical game... but then you could probably get an iPhone and an Android port for not much more, once you've got an iPad version. Let's say you can clear $3.50 on a $4.99 iPad game; sell 15,000 copies and you're in the black. That's a big number to sell, but if you could make $1 on an iPhone version and an Android version you'd have a shot at it.

Better still, if you had a number of board games (or card games) that were similar you could probably reuse a lot of the code, and get a whole string of board games onto iOS and Android. Now your economics would look a whole lot better... paging Fantasy Flight Games... Steve Jackson Games... c'mon, Christian, Steve, it's time to make the jump, isn't it? You've got a loyal following, enough properties to pour into a code base to amortize costs, a web presence...

Social Games Revenue Revealed

The Call of Duty numbers are slightly cut off in this view, but it's 12 million players.

While it's pretty clear that social games are virtually printing money, since the major players are private companies the exact height of their stacks of cash has been a matter of some conjecture. Estimates appear in the press, but they're just educated (or wild-ass) guesses. Now we have a bit more of an attempt to add up the numbers by IGN, and they compare the results to some of the top console games. The results probably shouldn't surprise you: Zynga's making a lot of money. More so than any console game except the latest Call of Duty title, which has set new records for a console game.

These numbers are guesses, though, for the social games. They may well be wrong... probably on the low side, is my guess. This gives you some insight into why EA and Disney are trying to buy their way into the social game market with purchases of Playdom and Playfish. (Though it doesn't explain why Activision is avoiding it.)

Game development costs are, of course, far lower for social games than for console games. I have no doubt that Zynga spent a lot more developing CityVille than they did on previous titles... and I also have no doubt it's still an order of magnitude or two less than Activision spent developing Call of Duty: Black Ops. Another key advantage of a social game is that the developer can continuously tweak it to optimize revenue (and user enjoyment). Given the number of players, social game developers have a huge stream of data to work with, and they can try things out and see the results very quickly. And they see how those decisions affect revenue right away, so they can optimize revenue rapidly.

It's because of this inherent feedback advantage that I see social games continuing to expand their revenue. They'll keep finding ways to get new players, and ways to get them to spend money. I've been resisting playing social games too much because of the time required, but now that my son has beaten my gladiator in Spartacus I'm tempted to buy a new fighter to whup him good... and so the social games tweak my amygdala to make themselves some money. Damn, that combination of game design, marketing and psychology is powerful...

3DS, PSP2 May Lose To Smartphones

This is not a picture of the 3DS.

Here's the proof of what I've been saying... the smartphones are taking over the handheld gaming market.


Money quote: "The report, "The Phone Gaming Revolution: Do the DS and PSP Stand a Chance?," found that 43.8% of the phone/DS/PSP gaming market plays games on phones, which represents a significant 53.2% increase over the past year. At the same time, Interpret says that the proportion of those who play on the DS or PSP has fallen by 13%." 

Interpret also said "Gamers appear to be defecting from their handheld gaming devices to phones to get their gaming kicks: a full 27.2% of consumers who indicate that they play games on their phones only (and not on the DS/PSP) actually own a DS or PSP, but do not actively use the device(s)."

So even people who own a handheld gaming device as well as a smartphone are spending more time playing games on the smartphone and leaving the handheld alone. It makes sense; how many portable devices do you want to lug around? You're always going to make sure you have your phone... so the DS gets left behind. As we've seen before, the multifunction device beats the single-purpose device. The PDA got eaten by the cell phone (or what was previously called a smartphone). Who carries a calculator these days? Phones do it. Cell phones are even taking away market share from point-and-shoot cameras... as the cameras in smartphones get better and better. Why carry a camera or a video camera when your phone does a pretty good job?

The prospects for the 3DS and the PSP2 look dimmer. Not that the hardware won't be powerful; the latest reports on the PSP2 indicate it may have almost half the processing power of a PS3. And while the 3DS may have a fairly low-res screen, the 3D without glasses is a neat trick. The difficulty is both of these devices will likely only play games. So you're going to leave it behind if you only have room for one device when you go out, because you always want to take your phone so you can stay in touch.

Another problem for the 3DS and the PSP2 is the parent problem. When the parental units are considering what to buy for their young techlings, the 3DS and the PSP2 will be in the range of $250 to $300. OK, an iPod Touch is $225... and it also plays music, videos, is a high-powered camera and video camera, it surfs the web, sends email, can even make Skype calls. Or for $99 they can get an older iPhone model and make it a full phone, with the data plan. Oh, and games for the 3DS or PSP2 will be at least $30, maybe even more. Versus thousands of free games or games that cost a few dollars.

So it's not about hardware specs; it's about multifunctionality and the business model.  Downloading and installing new software instantly, for free or a few dollars, is far more attractive than having to find a game store and spend $30 and then remember to keep the cartridge around with you at all times.

One more hidden problem: We already know the 3DS will require higher development costs for publishers than a DS, and if the PSP2 has near PS3 level graphics, you can bet development costs will be much higher than for the PSP. Which makes it even harder for publishers to make money, which will make them warier of developing for those platforms, which means not as much software, which means the platforms are even less compelling to buy.

Even at the rosiest assumptions, how many 3DS or PSP2 units would be selling a month? 1 million units would be amazing at those price points... yet iPhones are already cruising at north of 4 million units per month, and Android phones at 6 million per month. And newer, more powerful versions are introduced every few months.

This is a race that does not look good for the dedicated gaming machines.

How could they compete? By opening up to multiple applications and allowing developers to create software as easily as they can for iOS or Android. Have a killer online store for downloading everything, including the latest full game titles you can find in the stores. Have a 3G option to include phone service. Will either Sony or Nintendo do that? Highly unlikely... too difficult and painful for them. I suspect they'll continue to say everything is fine, no cause for alarm, and hope that a massive asteroid strike destroys Apple and Google in one blow.

Instant Action, Gamebryo Shut Down

A couple of high-profile companies serving the game industry announced last week they are ceasing operations. Emergent Technologies, which has offered the Gamebryo middleware for a number of years, has decided to liquidate its assets and shut down. Their middleware had been used by many companies, including EA and Activision.

Lou Castle's InstantAction browser-based technology (which allowed to play Secret of Monkey Island, among other things) is also shutting down. They're looking for buyers for their Torque engine. It's too bad, because the idea was pretty cool: You could start playing a game right away without a lengthy download, and you could embed a pretty cool game on a website or a blog.

It's hard to tell from the outside why such efforts fail. Sometimes the idea isn't compelling, or sometimes they just don't have a revenue model that works (or works fast enough to overcome the initial capital outlays). Sometimes it's the structure of the company, or management issues, or just financial overreach.

I'm hoping that some buyers step forward and grab these technologies, because I think middleware is a very important part of the industry going forward. Middleware makes it easier for developers to bring creative game concepts to market and reduces development costs. InstantAction had some very interesting ideas that could bring gameplay to a much wider audience, and offer smaller developers ways to reach an audience and make some good money.