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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

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

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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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Page 1: 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

Page 2: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

PREAMBLEThe thing that comes first

Page 3: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Some existential questions.

Page 4: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 5: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Who am I?

What have I done?Why am I here?

What is the meaning of this talk?Why are you here?

Page 6: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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)

Page 7: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Who am I??What have I done?

Why am I here?

What is the meaning of this talk?Why are you here?

Page 8: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Who am I?What have I done?

Why am I here?What is the meaning of this talk?

Why are you here?

Page 9: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

THE THREAT TO BLOCKBUSTERS

You never hear the bullet that kills you.

Page 10: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

The market has become polarized

Massive triple-A hitsHuge casual games

Not much viable in between

Page 11: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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.

Page 12: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 13: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

This is a recipe for stagnation and ultimately, failure.

(…that would be bad.)

Page 14: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

ECONOMICS OF SAMEHow did we get here?

Page 15: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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.

Page 16: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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.

Page 17: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

CONTENT WARNING:

The next slide is one of the most disturbing images you will see today.

Page 18: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!
Page 19: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

PROBLEM

Physical boxed product enforces scarcity economics:

Supply/demand Access/availability

Marketing spend & promotionsShort sales cycle (price pressure!)

Page 20: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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)

Page 21: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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?)

Page 22: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!
Page 23: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 24: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 25: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 26: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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.

Page 27: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Recap

Blockbuster games cost more to make,

are riskier to market and sell, and sell less than they have,

historically.

Page 28: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

TOO HIGH A PRICE/CANNIBALS

Money, Money, Money…

Page 29: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 30: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

RESULT:– Consumers stick with brands they know– Rental and pre-owned are viable value

propositions– Save money for ‘sure bets’

Page 31: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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!

Page 32: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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)

Page 33: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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!

Page 34: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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!

Page 35: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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.

Page 36: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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)

Page 37: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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!

Page 38: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

WHAT IS A BLOCKBUSTER?

Page 39: MIGS_2011: The Blockbuster is Dead. Long Live the 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

Page 40: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!
Page 41: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Historically, have been:

Games that have pushed the boundaries and (re)defined genres.

Page 42: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Current trend:

Massive marketing push behind relatively safe iterations on existing

formula.

Page 43: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!
Page 44: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

A big part of gaming’s adoption by popular culture can be attributed to the success of the blockbuster.

Page 45: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

WHY SAVE THE BLOCKBUSTER?

Page 46: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Blockbuster games are modern mythology.

Main cultural compass point for Generation Y/Generation “Me”.

Page 47: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Blockbuster games take us out of regular life, connecting us to something vitally important to our existence as human beings.

Page 48: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

“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

Page 49: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Blockbuster games are the public dream, the private myth, and often, our dark forest.

Page 50: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Provide common cultural ‘compass points’

Page 51: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Serve a purpose beyond simple entertainment:

CatharsisExpression of shared values

Exert control over a chaotic world

Page 52: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Cultural ResonanceThey are the modern, interactive equivalent of the Anglo-Saxon ‘skop’*, telling and retelling Beowulf around the campfire.

*storyteller

Page 53: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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.

Page 54: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

DEATH OF THE MIDDLE CLASS. RISE OF THE MID-CORE

Page 55: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

We’ve formalized the notion of a player and consumer that falls between hardcore and casual – Mid-Core.

Page 56: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

• 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

Page 57: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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”.

Page 58: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!
Page 59: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

HOW TO MAKE A SMALLER, BIG GAME

Page 60: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 61: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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.

Page 62: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Q: How do you build a mid-core blockbuster?

A: Make a smaller game.

Less content, shorter, and sell for a lower price.

Page 63: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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)

Page 64: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

But as digital becomes more prevalent:

Direct relationship with consumerPricing flexibility (absolute + interval)

Atomistic content (DLC, microtrans, etc.)The iTunes model (song vs. album)

Page 65: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 66: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

What would a mid-core blockbuster franchise look like?

High frequency incremental iterationYearly installments

Digital-onlyOnline marketing only; emphasis on grassroots social

Page 67: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Revised market breakdown:

Triple-A Blockbuster• $60-$120 (!!) price point

Mid-core Blockbuster• $20-$30 price point

Page 68: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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.

Page 69: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

ROADMAP TO A BETTER FUTURE

Page 70: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Stagnation is a real risk, perhaps even a truth, in

the mainstream blockbuster games market.

Page 71: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Going to an all-digital world is incredibly exciting!

Direct access to consumers will empower creators.

Page 72: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Reducing costs = higher profits!

Gradual ‘drip-feed’ monetization can help promote health of independents & industry.

Page 73: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Playtest metrics & live telemetry are taking the guesswork out of development

Objective vs. subjective

Page 74: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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)

Page 75: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 76: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Current digital distribution platforms are habituating a new generation and normalizing away from boxed product.

Page 77: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 78: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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

Page 79: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Recap

The all-digital future is awesomeand will help save the blockbuster

game!

Page 80: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

FUTURE OF RISK-TAKING

Page 81: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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!

Page 82: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

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…

Page 83: MIGS_2011: The Blockbuster is Dead. Long Live the Blockbuster!!

Questions & Thank You!

Raphael van LieropCreative Director

HELM Studio

CONTACT & SOCIAL

Email: [email protected]

Twitter: @RaphLife

LinkedIn: www.linkedin.com/in/rvanlierop

www.helm-studio.com