migs_2011: the blockbuster is dead. long live the blockbuster!!

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

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There has never been greater competition for the hearts, minds and wallets of players. Most publishers have responded to these new realities by massively increasing focus around the development of smaller titles that exploit social media and online monetization models. On the other end, many publishers are also pouring resources into fewer big bets, recognizing that our hit-driven business rewards a smaller number of titles with a much greater piece of the revenue pie. In the midst of this turmoil, many developers talk about the death of the middle-class game. But there will always be an audience for the blockbusters. In this talk, van Lierop touches on the realities of the game business, the development process, and opportunities for creative expression to show there is a future for smaller big games, and in fact, that embracing a focus on delivering smaller big experiences to our players is necessary for the ongoing success of our exciting medium.

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1. The Blockbuster is Dead: Long Live the Blockbuster! Raphael van Lierop Founder & Creative Director HELM Studio Montreal International Game Summit November 2nd, 2011 2. PREAMBLE The thing that comes first 3. Some existential questions. 4. 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 5. Who am I? What have I done? Why am I here? What is the meaning of this talk? Why are you here? 6. 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) 7. Who am I?? What have I done? Why am I here? What is the meaning of this talk? Why are you here? 8. Who am I? What have I done? Why am I here? What is the meaning of this talk? Why are you here ? 9. THE THREAT TO BLOCKBUSTERS You never hear the bullet that kills you. 10. The market has become polarized Massive triple-A hits Huge casual games Not much viable in between 11. 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 . 12. 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 13. This is a recipe for stagnation and ultimately, failure. (that would be bad .) 14. ECONOMICS OF SAME How did we get here? 15. 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 . 16. 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. 17. CONTENT WARNING: The next slide is one of the most disturbing images you will see today. 18. 19. PROBLEM Physical boxed product enforces scarcity economics : Supply/demand Access/availability Marketing spend & promotions Short sales cycle (price pressure!) 20. 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) 21. 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? ) 22. 23. 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 24. 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 25. Conclusions Games cost (on average) 3x as much to develop than last gen, but were selling fewer copies to fewer gamers . Also, blockbusters are much more prominent this gen vs. last 26. 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. 27. Recap Blockbuster games cost more to make, are riskier to market and sell, and sell less than they have, historically. 28. TOO HIGH A PRICE/CANNIBALS Money, Money, Money 29. PssstGames 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 30. RESULT: Consumers stick with brands they know Rental and pre-owned are viable value propositions Save money for sure bets 31. 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 ! 32. 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) 33. 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! 34. 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 dont want to feel second-class! We must learn from this stuff! 35. Another unhealthy dynamic: Release Fatigue AKA Sequilitis Defn: 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 . 36. Contributing to the rise of social/casual/mobile? Surprising overlap in audience% and spending habits between core and casual gamers (need data) 37. Free2Play Defn: 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) 38. 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 39. Example: Metacritic value dynamics: High-quality game gets dinged for lacking MP Low Metascore can negatively impact sales RESULT: Add MP to all games 40. 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 Its become a thing that has to be gamed 41. 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! 42. WHAT IS A BLOCKBUSTER? 43. Defn: 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 44. 45. Historically, have been: Games that have pushed the boundaries and (re)defined genres. 46. Current trend: Massive marketing push behind relatively safe iterations on existing formula. 47. 48. A big part of gamings adoption by popular culture can be attributed to the success of the blockbuster. 49. WHY SAVE THE BLOCKBUSTER? 50. Blockbuster games are modern mythology. Main cultural compass point for Generation Y/Generation Me. 51. Blockbuster games take us out of regular life, connecting us to something vitally important to our existence as human beings . 52. 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 isnt, youve got an adventure in the dark forest ahead of you. Joseph Campbell Mythologist, Writer, Lecturer 53. Blockbuster games are the public dream, the private myth, and often, our dark forest . 54. 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 55. Provide common cultural compass points 56. Serve a purpose beyond simple entertainment: Catharsis Expression of shared values Exert control over a chaotic world 57. blockbuster games organized sports allow for a socially-acceptable outlet to exercise vital formative experiences in the form of escapist fantasy. 58. Cultural Resonance They are the modern, interactive equivalent of the Anglo-Saxon skop*, telling and retelling Beowulf around the campfire. *storyteller 59. 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 . 60. DEATH OF THE MIDDLE CLASS. RISE OF THE MID-CORE 61. Weve formalized the notion of a player and consumer that falls between hardcore and casual Mid-Core . 62. Defn: 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 63. 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 . 64. 65. HOW TO MAKE A SMALLER, BIG GAME 66. 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 67. $40M budget Concept Development = $2M Pre-production = $8M Production = $30M 68. 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. Lions share of budget is spent on high-cost, low-risk content. 69. Q: How do you build a mid-core blockbuster? A: Make a smaller game . Less content, shorter, and sell for a lower price. 70. 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) 71. 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) 72. 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 73. What would a mid-core blockbuster franchise look like? High frequency incremental iteration Yearly installments Digital-only Online marketing only; emphasis on grassroots social 74. Revised market breakdown: Triple-A Blockbuster $60- $120 (!!) price point Mid-core Blockbuster $20-$30 price point 75. 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. 76. ROADMAP TO A BETTER FUTURE 77. Stagnation is a real risk, perhaps even a truth, in the mainstream blockbuster games market. 78. 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 79. Going to an all-digital world is incredibly exciting! Direct access to consumers will empower creators . 80. Reducing costs = higher profits ! Gradual drip-feed monetization can help promote health of independents & industry. 81. Playtest metrics & live telemetry are taking the guesswork out of development Objective vs. subjective 82. 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) 83. 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 84. Current digital distribution platforms are habituating a new generation and normalizing away from boxed product. 85. 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 86. 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 87. Recap The all-digital future is awesome and will help save the blockbuster game! 88. FUTURE OF RISK-TAKING 89. 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 ! 90. In Conclusion We are at a turning point. The current model isnt 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 91. 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