Anomalous Materials – Finance in Games

by / 16/05/11

In any industry that bandies about six-figure digits on a daily basis, finance is a hugely decisive part of how things are produced, marketed and distributed.

Like the vast majority of blockbuster films, modern top-selling games now take millions of dollars and thousands of hours to ensure that they clear the bar of today’s expected standards.

Ensuring a game has appropriate art design, graphical fidelity, sound design and marketing is an intense and demanding process, and it is only increasing as the industry and its technology expand year by year thanks to increasing sales and ever-growing cultural relevancy. Technologies like motion-capture animation and professional voice acting are becoming commonplace in modern titles, all of which add significantly to the cost of production. But as well as cost, videogames have more than quadrupled in profitability since their firm establishment as an entertainment medium the 1970s, and continue to rise into the 21st century.

When it comes to the allocation of budgets and deadlines, the people shelling out to fund the game still have the final say, just as Hollywood studios have the final word on how their movies are produced. In the video game industry, distributors like Activision and Electronic Arts are analogous to studios like Fox Studios and New Line Cinemas. These are multinational conglomerates that incorporate sometimes dozens of individual development studios into the fold, funding and publishing the games that they produce. However, the relationship between developers, distributors and, most importantly, gamers, is where the film analogy falls short. More accurate would be a comparison with today’s music industry, where the last word on creative control over a product does not always fall to the moneymen. Instead, game developers have much more opportunity to explore the potential of their ideas, time and money being much more negotiable resources and even, in some cases, to be completely outlined by the developers alone.

This is where companies like Blizzard come in. Regardless of how profitable or well-received a big-budget film is, future production of sequels or related media is almost always at the mercy of its respective studio when all is said and done. With games however, the strength of the interaction between developers and their audience can mean that consistent quality (and sales, don’t forget) means the developer can have much more control over what resources it deems necessary to make the best experience possible. Blizzard, the herald of doom for social lives and bank accounts everywhere after the release of World of Warcraft, has been so successful as a development company with franchise after franchise that even after their acquisition by distribution juggernaut Activision, they set virtually all their own development schedules and budgets.

Straying further from the production/distribution dichotomy are industry darlings Valve, whose tireless dedication to their art and their audience, as well as their resoundingly successful digital distribution client Steam, have ensured them the resources necessary to facilitate both the production and distribution of all their own titles. Granted, without the success of Steam, the company would most likely have had to submit to the financial assistance of a distribution company. But their continued independence only speaks to the potential and innovation that can be found in this new and budding playing field of an industry.

These companies are still the exception to the rule though. There are dozens of developers that flourish, struggle or just stagnate under the executive of their publishers. Unreasonable expectations with regard to deadlines and budget constraints can cut short a game in so many ways, and unlike in the editing room of a film studio, it is much harder to cut corners in videogame development without serious detriment to the end product. Ever-increasing production costs are resulting in the growing disparity between fully-funded and independent development of games, and tightening economic demands can be felt in even the most prestigious of titles. Distributors are often hesitant to grant extended budgets or deadlines, keen to get the product out and on the shelves as soon as possible

There are a myriad of things in the next decade that will decide where the future of videogame economics will go. The contention between traditional boxed retail games and the reduced production values of digital distribution, more breakaway developers like Valve and the accessibility of next-gen gaming platforms to smaller developers will be deciding factors that shape our virtual experiences in ways we can’t yet imagine.

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  1. Alexandra says:

    Phenomeanl breakdown of the topic, you should write for me too!