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

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: raphael@helm-studio.com

Twitter: @RaphLife

LinkedIn: www.linkedin.com/in/rvanlierop

www.helm-studio.com