What’s next for big budget games?

As the cost of making games continues to soar, Ryan wonders what’s next for an industry where a title’s failure can spell financial disaster for the studio that made it…

If nothing else, APB had an impressive pedigree. The brainchild of David Jones, the respected creator of one of the most recognisable titles in gaming, Grand Theft Auto, APB had all the hallmarks of a classic online experience, a perfect storm of squad-based shooting, open-world missions and infinitely tweakable character customisation.

And then there was the vast amount of resources invested into its production. Over APB’s lengthy five-year development period, Jones’s studio, Realtime Worlds, is said to have burned through a staggering budget of $110 million.

Nevertheless, Jones was adamant that the game he was about to unleash was going to be a colossal success. Back in 2008, he insisted that it wasn’t possible to create a decent online game for less than $50 million, and in an interview with gamesindustry.biz, cited such properties as Call Of Duty and Grand Theft Auto IV as the “stuff to try to beat.”

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But when APB finally appeared earlier this year, the resulting product didn’t look like a $110 million game at all. To put its budget into perspective, a stunning-looking, triple-A title such as God Of War III cost a reported $44 million to produce, while Bungie’s spectacular Halo 3 cost an estimated $55 million – and in both instances, the cash was all there on the screen. APB, while not a bad game, wasn’t the title many had hoped, and there were signs that it had been rushed to meet a publication deadline.

In the face of mediocre reviews and lacklustre sales – APB only managed to net around 130,000 registered users – Realtime Worlds went into administration on 18 August. It’s a sad end for the studio that made the Xbox 360 classic, Crackdown, and a timely reminder of just how risky the creation of big-budget games can be.

And while APB represents an unusually costly failure – as The Guardian recently pointed out, it’s arguably the games industry’s Heaven’s Gate – the spiralling cost of videogame production has long made the creation of a triple-A title a risky proposition.

On the 25 August, it was reported that Warner Bros had pulled the plug on This Is Vegas, a sandbox adventure that was being developed by Surreal Software. Unbelievably, the game had swallowed up a budget totalling $50 million, yet was still some months away from completion.

“It’s a ridiculous waste of money,” an anonymous source told CVG, “a silly budget when you think that games like Konami’s Saw – which made profit – were built with around $3m.”

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The sums of money may be mind-boggling, but the abortion of a videogame project isn’t an unusual occurrence, as writer and games critic Kieron Gillen explained in a Den Of Geek interview back in July.

“I’ve got friends who have been in the industry for a decade, and they’ve never released a game,” Gillen told us. “They’ve had a full career, and gone from developer to developer, but the game’s been cancelled, all that kind of stuff.

“So, you can be involved in a game for two, three, four years, and the plug will be pulled, and no one will ever see what you’ve created [….] mainstream development is very high risk.”

The cost of producing a mainstream videogame has long since outstripped the average budget of some blockbuster Hollywood movies, and there are recent reports suggesting that the cost of producing a title for the PlayStation or Xbox 360 equates to around $15-30 million, with almost the same sum spent on marketing.

If a game costs an average of $45 million to produce and market, that game has to shift upwards of two million copies in order to make its money back – and with every month seeing a constant influx of new releases, it’s inevitable that only a tiny handful of titles will ever see those kinds of sales.

It’s unsurprising, then, that it’s the biggest publishing companies that often make the biggest losses. In 2008, the largest publisher of them all, EA, lost a mind-boggling $641 million. In the same year, another two big industry hitters, Activision-Blizzard and THQ, lost a respective $72 million and $192 million.

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The high-risk gambling of mainstream game development sounds like an unsustainable situation even to an industry outsider, and there are signs that things may indeed be starting to change.

In March this year, the industry website Develop reported that game budgets were in sudden decline, citing a quote from Avalanche Studios’ Christofer Sundberg, who suggested that the global downturn had impacted confidence in videogame investment.

“I have seen development budgets go down,” Sundberg said. “We’ve always been in the $20 million-plus budget area, but last year I saw things adjust to over $10 million, and I think it’s a sign of the global economy and the bad times we’ve gone through.”

This sentiment was echoed in a story at GamesIndustry.biz last week, in which EA executive David DeMartini said that “budgets for games have actually peaked and are starting to move in the reverse direction again.”

It’s likely, however, that this decline in budgets may only be temporary. With the PS3 and Xbox 360 now halfway through their life cycle, a greater understanding of their architecture means that research and development costs have begun to abate, making games cheaper to produce for the time being.

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When Sony and Microsoft are both ready to unleash their next generation of consoles into the wild, production costs are sure to soar once again, perhaps to higher levels than ever, as studios seek to invest their games with more detail and innovative new features.

For now, then, it seems that the games industry will simply continue along its current course – vast publishers such as EA will continue to take expensive financial risks, knowing that, sooner or later, one of their studios will produce a hit big enough to outweigh their losses.

There is, however, another possibility. The rise of online distribution, which will quite possibly kill off the sales of boxed videogames over the next decade, if not sooner, could see a radical shake-up in the way games are developed.

At the moment, selling games in discrete chunks, or ‘episodes’ is currently the mainstay of independent developers such as Telltale Games, whose point-and-click adventures have frequently been sold in regular instalments.

It’s possible that, by adopting a similar approach, larger studios could reduce the risk of developing a mainstream game, at least by a modest margin. Because while the expense of research and development, design and play testing would of course remain, releasing a game in episodes would give publishers and developers a better idea of its audience’s reaction, and allow them to adjust (or cancel) the game’s next instalments accordingly.

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This isn’t an approach that would suit all types of games, of course – and it probably wouldn’t have kept APB afloat – but it’s one possible solution in an industry where costs continue to soar, and making a game often constitutes a massive financial gamble.