MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

The Blockbuster is Dead: Long Live the Blockbuster! Raphael van Lierop Founder & Creative Director HELM Studio Montreal International Game Summit November 2nd, 2011

PREAMBLE
The 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 Lierop Creative Director HELM Studio

Who am I?
What have I done?
Why am I here?
Why are you here?

Who am I?
What am I doing?
Why am I here ?
Why are you here?
Half-Life (Valve, 1998)

Who am I??
What have I done?
Why am I here?
Why are you here?

Who am I?
What have I done?
Why am I here?
Why are you here ?

THE THREAT TO BLOCKBUSTERS
You never hear the bullet that kills you.

The market has become polarized
Massive triple-A hits
Huge 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. 2
Bigger 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 SAME
How 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 & promotions
Short sales cycle (price pressure!)

Current Trend
So 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 = ~$500k
Xbox/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 Numbers
Total unit sales for top-5 games on PS2/Xbox = 70M units
Total units sales for top-5 games on PS3/Xbox360 = 57M units (81%)
Install base for PS2/Xbox= 169M consoles
Install 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
Games cost (on average) 3x as much to develop than last gen, but we’re selling fewer copies to fewer gamers .
Also, blockbusters are much more prominent this gen vs. last

RESULTS:
Publishers doubling-down on fewer, bigger bets
Risk-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 buy
Validates rental & resale
Evokes risk-aversion from consumers
Discourages 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/developers
Value-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 game
Direct cannibalization of sales
No revenue for publisher/developer
Forces 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 Right
Existence 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 .

Contributing to the rise of social/casual/mobile?
Surprising overlap in audience% and spending habits between core and casual gamers
(need data)

Free2Play
Def’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)

Game reviewing (“Journalism”)
Much greater meaning for games than for film
Most reviewers are not acting like critics, but “value police”
Reviews currently incorporate content quantity in evaluation of content quality
Should be separated, so consumers can decide

Example: Metacritic “value” dynamics:
High-quality game gets ‘dinged’ for lacking MP
Low Metascore can negatively impact sales
RESULT: Add MP to all games

Often non-rigorous evaluation of product, often based on opinion not knowledge or information
(esp. from bloggers and smaller sites)
Metacritic is now part of the value system, used by consumers and publishers
It’s become a thing that has to be ‘gamed’

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 .

Blockbuster games are becoming a replacement for ancient rites of passage (to adulthood) our society no longer permits.
Exorcise our demons and refine our identity as humans.
The Iliad, The Odyssey, Gilgamesh, Beowulf
Halo, God of War, GTA, Call of Duty

Provide common cultural ‘compass points’

Serve a purpose beyond simple entertainment:
Catharsis
Expression of shared values
Exert control over a chaotic world

blockbuster games  organized sports
… allow for a socially-acceptable outlet to exercise vital formative experiences in the form of escapist fantasy.

Cultural Resonance
They 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 tastes
Owns 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 Development
Concept Development
“ What are we making?”
~5% of budget
Preproduction
“ How are we making it?”
~20% of budget
Production
“ Make it!”
~75% of budget

$40M budget
Concept Development = $2M
Pre-production = $8M
Production = $30M

What else is going on?
Concept development = Low-cost, High-risk
Pre-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 value
Arms race for content breadth & fidelity
Consumers discouraged from taking risks
Avenues for risk-taking actually cannibalize the industry (ex. rental/resale)

But as digital becomes more prevalent:
Direct relationship with consumer
Pricing 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 budget
Heavy reliance on middleware
Highly optimized production methodology
Sub-2 yr dev cycle for first iteration
1-yr dev cycle for subsequent iterations
Sub-50 team
3-6 hours of play time
$20-$30 price point

What would a mid-core blockbuster franchise look like?
High frequency incremental iteration
Yearly installments
Digital-only
Online 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.

We need to find different ways to assign value to experiences.
We need a healthier body of criticism to help advance the state of the art
We need to abandon or tweak the Metacritic valuation system
We need to divorce game length from critical scores

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 transfer
Atomistic content purchase (ex. MP-only)
Subscription (weekly, monthly, annual, etc.)
Free trial
F2P
Sale 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. platform
Streamlined 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 cycles
Higher-frequency iteration
Production momentum
Process ‘hardening’
Larger individual body of work

Recap
The all-digital future is awesome
and 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 Conclusion
We 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 Lierop Creative Director HELM Studio CONTACT & SOCIAL Email: [email_address] Twitter: @RaphLife LinkedIn: www.linkedin.com/in/rvanlierop www.helm-studio.com

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MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

by Raphael van Lierop on Nov 07, 2011

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MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!! — Presentation Transcript