The Games Publishers Facing Extinction
Much has been said of the death of games publishers. As digital distribution hubs like Steam and Xbox Live eliminate the need for large marketing-led organizations, they must fall away like cherry blossom. Or so the argument goes.
This issue has been brought into focus in the past week by some words from Take Two boss Strauss Zelnick predicting that one or two large publishers will cease to exist as we transition through the next generation of consoles.
Also, THQ’s appearance in the news, as benefactor of the Humble Bundle, is a reminder that we already have games publishers in a state of extreme peril, even before we properly migrate to the new world of PlayStation 4 and Xbox 720, or whatever they will ultimately be called.
If two or more publishers were to slip away it might look like carelessness.
Zelnick told bigwigs at a financial conference in Arizona (as reported by Gamespot), “Historically, in every transition that’s occurred in this business, one or two third-parties have gone out of business. Last time around it was Midway and a couple of others. Reasonable people can argue about which one it’ll be this time. I have my own point of view, which I haven’t exactly been quiet about. We make sure we’re not on the list of casualties; to the contrary, we’re on the list of winners.”
Of course, Zelnick has previously predicted that THQ will soon go out of business, not exactly a case of mystical clairvoyance, given that company’s well-documented financial troubles. For the games industry to lose one large publisher will be unfortunate, but if two or more were to slip away over the next few years, it might look like carelessness.
Back when Midway went blazoom, we also saw the number of publishers diminish with the merger of Namco and Bandai. Things fall apart, but sometimes they come together to form something new.
THQ’s troubles have made it the betting man’s favorite to go bust sooner rather than later. But this has had the effect of taking some of the heat off other publishers that are not exactly flush with major hits or hills of moolah.
All publishers are seeing sales slip away, year-by-year. Most have cut back costs by shutting or ‘merging’ studios. Some, like Capcom and Square Enix, have shifted their focus in order to stave off particular declines, like that in the domestic Japanese markets.
Remember when Medal of Honor was the crocodile’s cahunas of games?
All change implies risk and all risk, in business, implies cost. Even the most solid, dependable sectors of videogaming, those pillars of predictable revenues that keep Wall Street’s fat-cats grinning, can and do decline.
This week we have heard dark whispers about Call of Duty, with one analyst downgrading Activision as a result of a 15 percent predicted drop in sales of Black Ops 2 against last year’s Modern Warfare 3. The analyst’s point is that CoD makes up so much of Activision’s revenues, that any wobble in the franchise’s fortunes must be a “cause for concern”.
Not that Activision is about to turn its gloriously rotund belly up to the sun. But everything dies, most particularly games franchises. Remember when Medal of Honor was the crocodile’s cahunas of games IP?
Midway Games, which Zelnick mentions, is a sobering example of how large entities decline and fall. This company once sent its sales-suits into battle armed with such fearsome clubs and staves as Mortal Kombat, NBA Jam and NFL Blitz. But a series of management gaffes and bad bets left it bankrupt. Creatively, the company got left behind. The world changed and it failed to adapt.
THQ is being marked as this generation-leap’s Midway. But, to be fair to THQ, it is making a virtue of necessity, embracing the free-to-play future as well as a limited slate of AAA boxed games. Those publishers still draped in attractive franchises, like Call of Duty or Grand Theft Auto or Bioshock or Dead Space or Metal Gear, may not feel quite the compulsion to abandon that which they know so well.
It’s interesting though, that few companies are as keen to flirt with new business models as Electronic Arts. This merry old dame will happily strut her stuff with the dashing young bucks of social, mobile, FTP, digital or whatever, such is her instinct for survival in video game publishing’s glittering ballroom.
In a column earlier this week I wrote about the long length of this console generation and how it is holding publishers back from releasing their new franchises. It’s also true that new franchises have a high failure rate, with successful introductions such as this year’s Dishonored, relatively rare. Also, that old franchises have a habit of slowing down from one console generation to another.
Taken as a whole, this amounts to a lot of lost revenue, wasted expense and severe risk for games publishers. Their numbers are diminishing and Zelnick is right to predict casualties, although, at this point, it would probably be foolish to guarantee any individual company’s survival over the next five years or to wholly confidently predict one publisher’s inevitable demise.
As for the species as a whole, well, there’s a good piece in today’s GamesIndustry Biz, interviewing Don Daglow, who has been around since the very first console generation of Intellivision et al.
He believes that games publishers will have a crucial role to play through the next generation, because they are so very good at acquiring players.
He explains, “There are fabulous people who work inside the publishers who really understand how to go out and acquire players, how to match players that they’re going after with their marketing with the games those people will really enjoy”
This is a skill that’s equally important with boxed, retail games as with free-to-play titles or digital episodic content. The next generation is going to look a lot different from previous generations because of the enormous diversity of ways to buy and sell games. And while publishers diminish in importance as the packaged retail model goes away, great marketers become more valuable in a complex ecosystem where buying shelf-space at GameStop and billboards and TV is less important than persuading people of your product’s merit through social media, online conversation hubs and digital storefronts.
There is no doubt that, in the next five years, some of the current publishers will cease to be.
Daglow says, “Brilliant marketers know how to go out and help people find games they want to play. So instead of being mad at the marketer for sending them junk mail, they’re thanking the marketer. That isn’t a skill that just everybody can have and sometimes those in the game design community live under the illusion that we’re also marketers.
“It’s a different specialty and the people who are good at it are incredibly good and they enhance the game experience. That knowledge is going to stay heavily concentrated in publishers. The idea of the publishers falling apart and ceasing to be I don’t think is the case because the publishers are going to have that kind of skill they can bring to bear. Especially for smaller teams, newer teams, some of the publishing partner programs from the really good publishers may get bigger 10 years from now and broader than they are now.”
So, those publishers that wish to survive will need to adapt by bringing their core skills – selling games – to the aid of those developers who wish to create independent from publisher restrictions. While, of course, continuing to realize new gaming franchises and promoting those that are still popular.
There is no doubt that, in the next five years, some of the current publishers will cease to be. But the idea that THQ is uniquely predestined to fulfill this role, and somehow offer a free-pass to everyone else, as if this were an episode of Dancing With The Stars, is fanciful. Every publisher will need to be at their best, and will need to change according to new realities.
For daily opinions, debates and interviews on games you can follow Colin Campbell on Twitter or at IGN.