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The death of single-A titles will challenge retail more than the rise of casual
I wrote a post yesterday about the liquidation of Chipsworld, bemoaning the fact that the official announcement seemed to blame the recession, rather than structural issues in the games industry.
Commenters on the original story on MCV (including Develop editor Michael French) disagreed with me, but Chris Bateman of International Hobo put forward some strong arguments that focused on the changing nature of retail releases. It was so interesting that I asked Chris if I could reproduce it as a guest post.
In your post on the liquidation of Chipsworld, you say “In short, we’re seeing fewer titles take a larger share of the revenue.” I’m not sure this is entirely the correct analysis here, although you’re certainly gesturing in the right direction.
The revenue distribution in videogames hasn’t obviously narrowed in the last 10 years as far as I can tell – we’re still seeing about 5% of the games take 50% of the revenue. What we have seen is fewer titles competing in the same space, probably because the cost of development has risen so the number of titles (for the power consoles at least) has declined. Now weirdly this suggests that *more* titles are pulling in the big numbers, since the rough percentages haven’t shifted much. But it’s still the same small slice of the wedge getting those good numbers, we’re maybe talking about 3-4 strong hits per year rather than 1-2. Also, the rate of incidence of mega-hits has increased – Modern Warfare 2 being the example of this kind of title. More on this in a moment.
What does appear to have happened is the middle market has dried up. It used to be that there was a lively A market below the AAA’s – now it’s difficult to find any evidence of this space. The drying up of the once plentiful license tie-in titles speaks of this problem.
The reason for the loss of this market probably matches your analysis here – but it’s been a big hit for both developers and retailers, both of which rely on a solid throughput of titles.
In the 90’s, 8 million was the ceiling for core market games, now this seems to have risen to about 12 million (give or take) and my unprovable suspicion is that this reflects a rise in the numbers of people in the core market. If so, the hardcore market isn’t declining or static, it is continuing to grow, as can be seen from the relative sales of titles targeting a purely core market (at least, the big ones that get the marketing spend) which can now sell 3 million whereas in the 80s they topped out at a million.
But the rate of growth of this market is considerably slower than the rate of growth of the mass market, and anyway, because of the rising cost of development of AAA console titles it’s become harder and harder to make good returns targeting this market at the top end.
It seems that a lot of indie developers are able to fill the huge gaps in the diversity of the market by providing niche hardcore titles at the bottom end, but the economics of this is harder to track of course.
So on the whole I suspect nothing much has changed at the top, and it’s rather the middle of the core market which has been stripped away… with disastrous effects for both developers and small retailers.
As for boxed product, the AAA games continue to require boxed product – the development budgets demand the higher RRPs which can only be acquired in a box product because of consumer psychology; people are willing to pay more to get a physical item (no matter how illogical this may be!). The fall off in boxed products in the actual data in Nick Parker’s chart probably reflects the fewer titles being fielded *and* the narrowing of the target market of those titles. His extrapolations look excessive to me although I don’t doubt that you are correct to think that a greater and greater proportion of revenue will be obtained via downloads going forward.
Unlike you, I don’t see an end to boxed product any time soon, but without the diversity of titles that there was, say, during the PlayStation era, the indie retailers can’t make up the numbers, and the ability for supermarkets to undercut only makes their position even more tenuous. CHIPs, alas, have fallen prey to these changes in the shape of the market for videogames.