The Blockbuster is Dead:
Long Live the Blockbuster!
Raphael van LieropFounder & Creative Director
HELM Studio
Montreal International Game Summit November 2nd, 2011
PREAMBLEThe thing that comes first
Some existential questions.
Who am I?What have I done?
Why am I here?What is the meaning of this talk?
Why are you here?
Raphael van LieropCreative DirectorHELM Studio
Who am I?
What have I done?Why am I here?
What is the meaning of this talk?Why are you here?
Who am I?What am I doing?
Why am I here?
What is the meaning of this talk?Why are you here?
Half-Life (Valve, 1998)
Who am I??What have I done?
Why am I here?
What is the meaning of this talk?Why are you here?
Who am I?What have I done?
Why am I here?What is the meaning of this talk?
Why are you here?
THE THREAT TO BLOCKBUSTERS
You never hear the bullet that kills you.
The market has become polarized
Massive triple-A hitsHuge casual games
Not much viable in between
The Truth, Pt. 1
The boxed retail business model and $60 price-point have helped kill the “middle class” game, & have strangled the PC games market so that retail is basically unviable.
The Truth, Pt. 2Bigger investment in blockbusters
means higher risk for publishers means less risk-taking.
We face a future with much less choice in the “high end”
Fewer franchises releasing less often and with less meaningful advancement between iterations
This is a recipe for stagnation and ultimately, failure.
(…that would be bad.)
ECONOMICS OF SAMEHow did we get here?
For a long time, the games industry was synonymous with pioneering exploration and a glory-seeking, cowboy attitude.
It was the haven of mavericks and iconoclasts.
There is still innovation and risk-taking, but the economic engine of the industry is the boxed-product retail-driven console cycle, and this fuels an unhealthy dynamic for publishers, developers, and gamers.
CONTENT WARNING:
The next slide is one of the most disturbing images you will see today.
PROBLEM
Physical boxed product enforces scarcity economics:
Supply/demand Access/availability
Marketing spend & promotionsShort sales cycle (price pressure!)
Current TrendSo far, the hardware improvements with each console generation have enabled vast possibilities that have resulted in a massive increase in project budgets.
Star Raiders (1979)
GTA4 (2008)
Blockbuster budgets by generation:
PC/SNES/PS1 era = ~$500kXbox/GameCube/PS2 era = ~$5M (10x)
Xbox 360/PS3 launch = ~$15M (3x)Xbox 360/PS3 current = ~$50M-$75M (3x)
Next gen = ??? ~$100M-$150M? (2x?)
But, overall profitability has not really kept pace:– Top sellers in industry are from last-gen– Console install base has shrunk– 2-3x development cost but not 2-3x the
revenue
Some Loose NumbersTotal unit sales for top-5 games on PS2/Xbox = 70M unitsTotal units sales for top-5 games on PS3/Xbox360 = 57M units (81%)
Install base for PS2/Xbox= 169M consolesInstall base for PS3/Xbox360 = 111M consoles (65%)
Top-seller for last gen* = GTA: San Andreas (19M units)Top-seller for this gen* = Call of Duty: Black Ops (13M units)
*non-bundled games; single platform
Conclusions
1. Games cost (on average) 3x as much to develop than last gen, but we’re selling fewer copies to fewer gamers.
2. Also, blockbusters are much more prominent this gen vs. last
RESULTS:
Publishers doubling-down on fewer, bigger betsRisk-aversion increases
Failures hurt a lot more (company killers)
SAFE BET STRATEGY: Sell more of the same.
Recap
Blockbuster games cost more to make,
are riskier to market and sell, and sell less than they have,
historically.
TOO HIGH A PRICE/CANNIBALS
Money, Money, Money…
Pssst…Games Cost Too Much$60-dollar price point = Too expensive!
Not an impulse buyValidates rental & resale
Evokes risk-aversion from consumersDiscourages experimentation
& purchase commitment
RESULT:– Consumers stick with brands they know– Rental and pre-owned are viable value
propositions– Save money for ‘sure bets’
Rentals/resales dynamics
Hurting the publishers/developersValue-add for the consumer
We need to find a way to add value to the consumer but still get paid for it!
Still more rental/resale dynamics:
Higher retailer profit margin on resold gameDirect cannibalization of sales
No revenue for publisher/developerForces unpopular defensive measures
Gamestop 2008 : $1B from used (32% rev/44% profit)
Lions Become Lambs
No other industry allows its primary retail channel to cannibalize its sales
so thoroughly, viciously, and efficiently,
and at point of sale!
But, The Customer is Always RightExistence of rental/resale tells us some interesting things about what
our consumers want:
– Easy access to a wide variety of games– Low-cost ‘try-before-you-buy’ opportunity– Fling vs. Relationship– Flexibility is more valuable than ownership– Sales of second-hand games show an interesting pricing trend: ~$30– Renters/second-hand buyers don’t want to feel second-class!
We must learn from this stuff!
Another unhealthy dynamic: “Release Fatigue” AKA “Sequilitis”
Def’n:– An economic condition whereby an industry, out of fear,
invests in the “tried and true” at the expense of the new, until innovation is starved and the consumer becomes bored and abandons the industry in search of a better value proposition.
Free2PlayDef’n: Giving the game away for free, and generating revenue through in-game monetization.
– Exciting business model…– …not always natural– Superior to full-product retail (in many ways)…– …but often adopted out of desperation.– Switches emphasis from experiential engagement (i.e. escapism) to
psychological engagement (ex. gambling & addiction psychology)
Recap
State of the Industry:
Massive change and ‘turmoil’Huge, but uneven, growth (mostly outside console)
Boxed retail is threatened (frightening for conservative publishers)
There be monsters!
WHAT IS A BLOCKBUSTER?
Def’n: A big-budget experience emphasizing epic action, grand spectacle, and the best production values.
Highly realized visuals, music, audio, etc.Offers an escape through adventure
Narrative-driven action
Historically, have been:
Games that have pushed the boundaries and (re)defined genres.
Current trend:
Massive marketing push behind relatively safe iterations on existing
formula.
A big part of gaming’s adoption by popular culture can be attributed to the success of the blockbuster.
WHY SAVE THE BLOCKBUSTER?
Blockbuster games are modern mythology.
Main cultural compass point for Generation Y/Generation “Me”.
Blockbuster games take us out of regular life, connecting us to something vitally important to our existence as human beings.
“The myth is the public dream and the dream is the private myth.
If your private myth, your dream, happens to coincide with that of the society, you are in good accord with your group.
If it isn’t, you’ve got an adventure in the dark forest ahead of you.” Joseph Campbell
Mythologist, Writer, Lecturer
Blockbuster games are the public dream, the private myth, and often, our dark forest.
Provide common cultural ‘compass points’
Serve a purpose beyond simple entertainment:
CatharsisExpression of shared values
Exert control over a chaotic world
Cultural ResonanceThey are the modern, interactive equivalent of the Anglo-Saxon ‘skop’*, telling and retelling Beowulf around the campfire.
*storyteller
Recap
Blockbuster games perform an important role in cultural definition and expressions of shared values.
They are a ‘safe’ place for modern individuals to
experience rites of passage.
DEATH OF THE MIDDLE CLASS. RISE OF THE MID-CORE
We’ve formalized the notion of a player and consumer that falls between hardcore and casual – Mid-Core.
• Def’n: Mid-core gamer
A gamer with a wide range of tastesOwns and plays on multiple platforms
Purchases multiple games per year, but not many
Will not invest the same time or $$ as hardcore gamer
Huge and growing audience
What might a mid-core blockbuster look like?
A lower price point (~$30-40)Shorter, and/or more compartmentalized experience
Made easy to get in and out (retention)A “smaller, big game”.
HOW TO MAKE A SMALLER, BIG GAME
Typical Phases of DevelopmentConcept Development
“What are we making?”~5% of budget
Preproduction“How are we making it?”
~20% of budget
Production“Make it!”
~75% of budget
What else is going on?
Concept development = Low-cost, High-riskPre-production = Med-cost, Med-risk
Production = High-cost, Low-risk
Result: Risk is front-loaded. Lion’s share of budget is spent on high-cost, low-risk content.
Q: How do you build a mid-core blockbuster?
A: Make a smaller game.
Less content, shorter, and sell for a lower price.
Historically, the retail boxed-product paradigm has made this impossible.
Price-point = need to deliver $60 of valueArms race for content breadth & fidelity
Consumers discouraged from taking risksAvenues for risk-taking actually cannibalize the industry (ex.
rental/resale)
But as digital becomes more prevalent:
Direct relationship with consumerPricing flexibility (absolute + interval)
Atomistic content (DLC, microtrans, etc.)The iTunes model (song vs. album)
What would a mid-core blockbuster game look like?
$10-15M budgetHeavy reliance on middleware
Highly optimized production methodologySub-2 yr dev cycle for first iteration
1-yr dev cycle for subsequent iterationsSub-50 team
3-6 hours of play time$20-$30 price point
What would a mid-core blockbuster franchise look like?
High frequency incremental iterationYearly installments
Digital-onlyOnline marketing only; emphasis on grassroots social
Revised market breakdown:
Triple-A Blockbuster• $60-$120 (!!) price point
Mid-core Blockbuster• $20-$30 price point
Recap
There is a market opportunity for a mid-core blockbuster game, that delivers a high-quality experience but is shorter and costs less to make and purchase.
ROADMAP TO A BETTER FUTURE
Stagnation is a real risk, perhaps even a truth, in
the mainstream blockbuster games market.
Going to an all-digital world is incredibly exciting!
Direct access to consumers will empower creators.
Reducing costs = higher profits!
Gradual ‘drip-feed’ monetization can help promote health of independents & industry.
Playtest metrics & live telemetry are taking the guesswork out of development
Objective vs. subjective
All-digital permits widespread pricing flexibility:
Rentals and ownership transferAtomistic content purchase (ex. MP-only)
Subscription (weekly, monthly, annual, etc.)Free trial
F2PSale dynamics (ref: Valve Steam sales)
We need to find ways, through technology, process, and business models, to emphasize exploration and sales success for innovation & experimentation.
At $60, players want innovation but are scared to pay for it
Current digital distribution platforms are habituating a new generation and normalizing away from boxed product.
Cloud-based gaming promises a platform-agnostic future.
Emphasis on content vs. platformStreamlined development process
Ideal: Should help drive dev costs down while increasing access to market
A viable mid-core blockbuster games market could be great for dev teams:
Shorter dev cyclesHigher-frequency iteration
Production momentumProcess ‘hardening’
Larger individual body of work
Recap
The all-digital future is awesomeand will help save the blockbuster
game!
FUTURE OF RISK-TAKING
New types of gameplay and new experiences?New characters, stories, and subjects?Content with more ‘mature’ themes?Games that push social awareness?New ways of interacting with the game?New ways for the game to interact with the player?New ways for players to interact with each other?
…in general, experimentation!
In ConclusionWe are at a turning point.
The current model isn’t sustainable.
We need experiences that fall between GTA and Farmville.
Those with the means – and the courage – need to blaze a new path.
Countless new opportunities lie just over the horizon…
Questions & Thank You!
Raphael van LieropCreative Director
HELM Studio
CONTACT & SOCIAL
Email: [email protected]
Twitter: @RaphLife
LinkedIn: www.linkedin.com/in/rvanlierop
www.helm-studio.com
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