Video - A Second Game Industry Crash?

XanderDavis 101 Sep 12, 2011 at 11:48

Hey guys! We’re back with another episode that addresses the growing concern over a Second Game Industry Crash.

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With the unprecedented popularity and flood of video games today, especially with the iOS marketplace’s “race to zero” pricing, many in the industry see parallels to the first crash in 1983: over-saturation, over-supply and under-demand. We discuss whether history is doomed to repeat itself.

What do you think?

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rouncer 104 Sep 12, 2011 at 12:41

Well its the same for everything really, as the bar is raised (especially in the art world) noone cares about second grade art either, the same goes for programming and games themselves.
You have to be the best to make it big, thats never changed.
People want something new and fresh, and having a decent name for yourself like id software (or maybe in the music world, Alice Cooper) that would help sales tremendously too.
If it was true everyone and his dog could make AAA titles, then wed all be out of a job, but will that ever happen?
maybe it will :)

XanderDavis 101 Sep 12, 2011 at 12:45

excellent point! it can all implode if consumers lose confidence though, but i don’t see the same thing that happened in the early 80’s happening exactly again. digital technology’s ubiquity today and 25 years of perfecting game design theory has both virtually guaranteed a market for games forever. we may see instead bubbles within the total industry that pop, but not the whole thing.

rouncer 104 Sep 12, 2011 at 13:06

Got any guesses for big money opportunities coming out for game developers in the next few years?

Im guessing microvoxel technology, if that doesnt make money id be extremely suprised, and realtime global illumination, when cards get a bit faster, thats when games really will look real… then once games all look real then there will be another crash. hehe

alphadog 101 Sep 12, 2011 at 14:03

It helps to remember that the “Video Game Crash of 1983” happened during the much broader North American hard double-dip recession of the early 80s. Given that video games are non-essential entertainment, it’s not surprising that the budding market underwent severe restriction.

I don’t believe in the traditional reasons for “The ‘83 Crash”: oversaturated market, low quality, and the competition of personal computers.

On “oversaturated markets”, I think that the North American market does not have more or less consoles than before. It was pretty much Atari, Coleco and Intellivision only in the Eighties, much like it’s always been three or so systems since then, just different ones.

Signal-to-noise has always and will always be bad. Much like movies or litterature, it’s an entertainment device, it’s hard to get “right”, whatever that is, and people are fickle. However, there is a difference now in that people have more information at their finger tips to help avoid bad purchases that they did not have before. And, digital distribution means you can find a game that meets your lifestyle better than before too. This is helping indies. It may be hurting big companies as those dollars flow away from their generic, mass-market games, but it doesn’t hurt too deeply. It’s similar to how microbreweries are viable now and it hasn’t caused a “Beer Crash of Late 2000s”. (Phew! :) )

Lastly, the opening of markets into consoles + personal computers was what participated in creating growth opportunities in coming years. I don’t think it did anything to precipitate a “crash”.

I think the distinction between the market of the early 80s and now is that it’s bigger, but much more fragmented. Casual games, serious games, Flash-based freebies, mobile games, MMOs, AAA titles. But, there are many more people buying.

On the ‘race to zero pricing”, is it that those kinds of games are cannabalizing sales of AAA titles, or just opening and reaching a market that was underserved before? Will the availability of cheap games cause the AAA market to crash?

I just bought Deus Ex and Angry Birds Seasons pretty much about the same time. The former is for lengthy play sessions to chill in the evening, the latter is for a “distraction quickie” while I wait for my wife to finish trying her umpteenth pair of shoes. How is that bad? Just because, in the Eighties, I wouldn’t have had something like Angry Birds doesn’t mean it’s current incarnation is hampering sales of bigger/different titles.

TylerBetable 101 Sep 15, 2011 at 17:31

Hey XanderDavis, I like your videos (I started watching a couple more) but I have to disagree with your hypothesis. In 1983, video gaming was a niche market, and therefore very vulnerable to overall market change (the recession that alphadog mentioned).

Now, video games have gone truly mass market. Over 60% of Facebook users play games (I can’t find my source for this, but I saw it about a month ago) and that market penetration is made more incredible when you remember that Facebook is an international market with over 750M users. Also, by bringing games to smartphones, everyone essentially has a PSP or Nintendo DS on them at all times. I think the overall market dynamics have lead to the explosion you’re talking about, but because of the mass market appeal, there is little danger of ‘under-demand’ like you mention.

At the end of the day, I think there’s a decent chance of an industry contraction that wipes out all the Zynga me-too companies, but the gaming market is now forever going to be large enough to support a huge ecosystem.

Either way, your videos were good. Keep us up to date on them :)

fireside 141 Sep 15, 2011 at 20:52

In order to have a true crash, you have to have the opposite of prices heading to zero. For instance, with real estate, the costs kept rising and people thought it was a no lose situation because real estate never went down. Prices heading to zero means more people will leave the market and find something more lucrative, which means the ones remaining will be able to charge more, eventually. That really only applies to the casual market, and there are so many that do it as a hobby, it may not even apply. Console and professional PC games have remained steady. There has been some decrease in growth lately due to entertainment competition, but it’s not going anywhere but up in the long term, especially as professional games reach less hardcore gamers by increasing story depth and making games somewhat easier to play for people that aren’t twitch gamers. The entertainment industry in general can only increase as we use machines to do more and more of our labor.

TheNut 179 Sep 16, 2011 at 01:12

I wasn’t in the 80’s scene, but I don’t see any signs of stagnation or decline in the game industry. I see quite the opposite actually. What does change is the way in which games are delivered and experienced. Portable gaming players for instance are losing market share as more people move over to smart phones. There’s a bit of that mentality with tablet devices as well (ie: why bother). Although that destroys one industry, it strengthens another (law of conservation). Wait until the multi-screen experience matures. You’re going to see a whole new wave of development and how that will dramatically affect video gaming.

With regards to the saturation of games, that’s always been around. It’s more noticeable now because when you combine of a technologically literate population with a mainstream delivery mechanism, you get an abundance of selection. The market continues to work and do its job. Some win, others lose. The distribution of wealth continues to circulate, and indeed much more now than ever before as video gaming expands out into different demographics.