I promised myself I would post my essay here as soon as I had it finished, so here it is! Enjoy my two thousand word talking about a hell lot of stuff.

 

Different development practices and business models exist between an Indie Games Studio and an AAA Gaming company. Examine and evaluate these differences.

By Larissa Paes de Almeida

04/03/2016

 

           There has been a wide discussion about the state of the Video Game Industry since the market recovered from the recession that occurred from the years 1983 to 1985, and while some articles praise the XXI century as the most promising time to be creating games, others critics speculate that another crash in the blockbusters industry is imminent. This scenario is a direct consequence of the business model chosen by the biggest companies and the exponential growth of the independent games movement; understanding the differences between the development practices of Indie Studios and Triple-A Gaming companies is fundamental to perceive how two different models are shaping the future of a multi-billionaire market section.

 

            “Indie gaming today is frequently charged with being stylistically nostalgic; chronically recreating the 8- and 16-bit games of the creators’ youths, but that nostalgia can only come from the implicit rejection of the present.” (Lipkin, 2012). Independent movements emerge from many different cultural instances; from literature to music, artistic protests against the status-quo created material supported by a subculture that subverted mainstream throughout History. Hennig-Thurau and Marchand (2013) claim that during the past twenty years, the economic value of video games have shifted from a niche industry to an established blockbuster business with a significant contribution to the global entertainment economy. Videogames became mainstream; therefore, an opposing movement emerged, as Indie Studios grew to become a significant segment inside the market. In the same paper, the authors state that the mainstream game market became closely linked to other entertainment industries such as Motion Pictures. The creation of related content and transmedia generates a new world of possibilities with movies and books adaptations, resulting in games with a heavy cinematic appeal. The extensive use of Full Motion Video (FMV) has created an apprehension among players, which complain that titles are lacking their interactive aspect and becoming too similar to films. As a result, the community has encouraged the creation of independent games that valorized gameplay and praised the storytelling of early releases from the first decades of games development.

 

            The biggest companies have adopted a business model based on maximizing profit, resulting on countless sequels of successful titles, which cost millions of dollars to develop: According to ESA (2012b), 18 out of the top 20 bestselling games of 2011 were sequels. The prices of producing a game rise every year due to the complexity of new platforms, while sales and revenue hardly change, making the profit margin extremely tight (BBC, 2007). Applying the theory of centrality and homogenization in markets (Hotelling, 1929), Williams (2002) states that, as hit titles generate interest in a new game style, it is preferable to copy the format and split profits among the competitors for a guaranteed success, than to risk the failure of a more innovative game that might only appeal to a smaller niche. Consumers are getting tired of playing the same games, but publishers cannot take the risk of losing a millionaire budget trying to innovate.

 

           Izushi and Aoyama (2006) observe that the industry comprises large console manufacturers, video-game publishers, and large and small development firms; this market structure is also responsible for restraining new possibilities: The most expressive companies make money by selling consoles, and sales rates are directly linked to the success of released games (Marchand, 2013). An IfM research from 2011 showed that the three leading hardware manufacturers (Microsoft, Sony and Nintendo) are also the top three software producers, withal Binken and Stremersch (2009) state that high-quality softwares may increase console sales by 14%, therefore, investing in innovative titles may not only risk software profit, but also affect the whole console market. Independent Studios face large proportions of failure on title releases, but have less to lose: as third party developers that create games for existing platforms with smaller budgets, they have the freedom of experimenting with lower expectations, often releasing early prototypes with constant polishing and commercializing only if feedback is positive.

 

           Williams (2002) segmented the structure of the major Industry into five vertical stages, respectively Development, Publishing, Manufacturing, Distribution and Retail. Independent studios follow the same processes but rely on alternative production and distribution structures compared to mainstream game companies (Lipkin, 2012), however, democratization of softwares and distribution channels have strengthened the graphic and performance results between low and high budget softwares: 2014 Gamescom revealed games brought by small studios that would compete for players’ attention against the best titles AAA had to offer. Engines like Unreal became more accessible to small developers, elevating the graphic potential and game design, fund raising platforms as Kickstarter brought more security to developers and new distribution channels like Steam increased the target audience and allowed self-publishing. The nomenclature of what is considered an Indie game and what qualifies as triple-A becomes obscure, as the classification can no longer be qualitative, but describes the differences between budget and development structures.

 

           Creative control is also repelling consolidated professionals from the mainstream market, who are leaving the big scene to open their own businesses and work with more autonomy. Cliff Bleszinsky, former lead designer at Epic Games left the company to found Boss Key Productions, a game development studio. The management approach in large companies with teams starting at 100 employees do not allow a full understanding of the creative process: investors do not recognize all stages of a game development, while highly specialized professionals are assigned quite specific tasks and often are left out of the major decisions. As opposed to this, independent studios composed by one single person or a small group of friends provide a more flexible team structure, with professionals being responsible for several stages of the creative process and holding equal responsibility for conceiving and producing a game; Indie studios are welcoming environments for reframing game making as an artistic and cultural practice. According to Bowen and Deuze (2009), the desire for more authentic, autonomous creation and discontent regarding hierarchical organization, mobility and management are common reasons developers are leaving more stable jobs for indie game production. Although the big Industry still holds responsibility and expectations for technological improvements, creative innovation is coming from small companies.

 

           Triple-A Gaming firms are aware of their own restrains and of the space conquered by Indie movement on the past years: recent release Ori and The Blind Forest, by Moon Studios, was acquired by Microsoft a year after its development started. The oligopoly of games have been agglutinating small successful companies and investing on conferences and events focused on this market sections. According to Lipkin (2012), when mainstream publishers involved themselves in the indie and digital gaming marketplaces, the discourse of indie could no longer maintain the same political and economic function it once had: they do not explicitly belong to a subset of games produced independently of the status-quo. Despite of the classification shifts, the acquisition of several Indie games and studios by the mainstream market does not necessarily change their development practices, management approach and creative control: Lipkin highlights that the support of big companies, while not necessarily as radical as expected, certainly shifts the landscape in favor of titles that enrich the community. Moon Studios became a Microsoft first party developer; nevertheless, its structure remains a collaborative network of team members spread over the world without the need of a settled office. Differences in the work environment of Indie Studios and AAA Gaming Companies remain evident, as the community support for independent development opposes the competitive aspect of the Triple-A market.

 

           Competition means maximizing sales. Big publishers either hire more professionals than affordable to hit all deadlines or push employees into unpaid overtime work, with an average of 61 to 80 hours per week to finish a project. According to the 2015 Developer Satisfaction Survey (DSS), 62% of game developers report having experienced ‘crunch’, nearly half working more than 60 hours per week and 17% more than 70 hours. It is common in the industry to have massive layoffs in the end of projects or when plans are cancelled, with people been rehired several times by the same company. With this background, independent environment seems appealing: Martin and Deuze (2009) examine that, although independent developers do experience intense crunch times, a job in an Indie Studio does not hinge on having to work under those conditions. However, a 2015 research by IGDA (International Game Developers Association) reports that 67% of employees in big companies make more than fifty thousand per year, while this number is reduced to 24% for freelancers and self-employed developers, with a majority of 37% making less than fifteen thousand per year. Furthermore, Indie Studios often deal with late, sometimes uncertain paychecks, mostly caused by poor management of finances and the oversaturation of the market.

 

           Indie games first found a way of disseminating content through digital distribution, whereas the big industry is moving quickly towards the same direction: the possibility for Big Data collection and elimination of retailers and production costs made the ratio of physically distributed games drop from 80% to 69%, and digitally distributed games rose accordingly (ESA, 2012b). However, all instances of the digital market are overflowing with material of which only a few Indie games are successful, compared to the amount of titles published every day. According to data compiled by Statista, App Store offered about 400,000 gaming apps in July 2015, with more than a thousand app submissions per day. Microsoft was heavily criticized after announcing that developers would not be able to self-publish games on Xbox One and took a step back to create an online platform for digital distribution of independent content. Its primary decision brought to light the issue that major channels are experiencing in a context where everyone can publish a game: the alarming amount of poor quality material. Crowdfunding has been actively used by studios to evaluate the viability of a title, and has been empowering Indie games on the run against mainstream, yet the majority of releases are created to failure. Still, successful titles do not always rely on good quality: independent games often fail due to a poor advertising and PR management. Budget for triple-A games is divided into development and marketing, with several instances of the second one being 50% to 100% higher than the first. A list of the most expensive games to develop created on Wikipedia based on Industry announcements shows that Activision spent 200 million dollars on marketing for Call of Duty: Modern Warfare 2, a game that costed 50 million dollars to develop. The big industry is highly concerned about pre-sales, despite lucrative games not always matching expectations of consumers, while Indie Studios risk on relying solely on quality.

 

           The game market is more than developing a title: while Williams (2002) describes the five stages of the Industry as a vertical structure, Indie Studios and Triple-A Gaming Companies focus on different stages, respectively Development and Publishing. Independent developers depend on the quality of the created material and put aside advertising; in a distribution channel with thousands of titles released every week, it is difficult to outstand from the mass of poor quality apps, while AAA firms rely on marketing and PR, which results on high sales with tight margins of profit, in addition to a decreasing reliability from consumers. The differences in practices and models between these two different business sections illustrated in this paper clarify their status in the games market, justifying the speculations around a recession in the Industry. At last, the most assertive characters of the models chosen by Independent Studios and Triple-A Companies do not compensate for the lack of management on other stages of the Industry.

 

 

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