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I’ve formed a lot of opinions about the game industry over the years. And I recently got the chance to spout them in a conversation with Steve Goldstein, president of Turtle Rock Studios, the maker of the Evolve video game published by Take-Two Interactive*’s 2K label in February 2015.
At UCLA, we gave a talk before a group of game industry lawyers from the Video Game Bar Association. We were encouraged to talk about the whole industry’s trends, and we started by noting how conservative the console game industry has become, with huge budgets that are forcing publishers to be very careful when it comes to launching original games. Sequels rule, and that’s a sad reality.
We also talked about the cycles that favor the creation of new kinds of games and platforms, as well as the cycles where big game companies either retrench or expand their investments in games. Joseph Olin, executive director of the Video Game Bar Association, peppered us with questions toward the end.
Here’s an edited transcript of our conversation.
Above: Dean Takahashi (left) of GamesBeat talks about the game industry with Steve Goldstein of Turtle Rock.Image Credit: VGBA
Steve Goldstein: For the past four years now, I’ve been the president and general manager at Turtle Rock Studios. We’re an 80-person developer. Our latest console release was Evolve, which came out in 2015. Prior to that, we created Left 4 Dead, which was a big hit a while ago.
Since that time, up until last year, we’ve been a one project studio. But starting in the tail end of 2016, we split the studio into two departments. One is focused on service-based games, and the other is focused on VR.
GamesBeat: When you’re looking a few years out and you’re going to make one bet on one big game that will take you a few years to make, how do you plan that? How do you decide what to target, what the market will be like, what the audience wants?
Goldstein: There isn’t an opportunity anymore, unfortunately, to try to guess what’s going to happen a few years out. The industry’s changed quite a bit when it comes to large-scale games. When you look at the console environment, that’s no longer a space for independent developers to work in. Our last game had an enormous budget, yet it’s competing with games that are internally developed by publishers, which have budgets that are anywhere from two to four times the amount that we spent.
That’s a problem in a couple of ways. One, publishers don’t want to make bets on new IP given the cost of development. Two, if they are going to make a new IP for console, they’re probably going to do it internally, just because they feel they can control those costs better. How many new, successful franchises have been created with the latest generation of consoles? Bloodborne?
GamesBeat: Nintendo*’s Arms is coming soon.
Goldstein: Well, Nintendo is a separate issue. Their games don’t cost as much as development on PlayStation* and Xbox*.
GamesBeat: Horizon Zero Dawn.
Goldstein: It’s not a franchise yet, but I agree. That’s two. How long have the consoles been out? 2013? That’s not a good sign, guys. When you look at the state of the industry, if we can only name a few new franchises for this console generation, I don’t see how they continue.
GamesBeat: There’s a trap for the industry, though. There’s no better way to squeeze innovation out of games than to leave behind this tent-pole strategy. Justin Bailey of Fig just did a talk at our GamesBeat Summit. He pointed out that there used to be a tent-pole strategy, where you had a big flagship game to make all the money and pay for your bets on everything else. EA in 2008 had 60 games. Last year, it had eight — all of them big bets and none of them [were] really experimental.
Goldstein: It doesn’t even have to be experimental. It’d just be nice if it was another IP, something that’s not going into the fifth or sixth iteration. Going back to what you asked earlier, how do we figure out what we want to do? We figure out what fun game we want to play, but we also look at the market and say, “Here’s a hole right here.” We start targeting that. But we don’t target boxed products anymore. We just won’t approach publishers with a concept where we say, “This’ll cost $60, and then, we’ll make another $50 worth of DLC.” It doesn’t make sense for us as a business to get into that space. There’s no benefit for an independent studio.
It’s unfortunate. I love consoles. I like making cool stuff and pushing the envelope. But it doesn’t make good fiscal sense anymore.
GamesBeat: There are still areas where there can be some innovation — like on the PC and mobile. Dead by Daylight is a brand new IP that came from Behaviour Interactive. It’s an online game about trying to escape from a serial killer. You have one killer and four victims.
Goldstein: Sounds familiar [laughs]. It’s a great example, actually. We put out Evolve with a similar concept, four versus one, but it was an enormous experience in a $60 box. We look at how Dead by Daylight got picked up. It had a $20 price point, cost $7 million to develop, and it’s a much smarter move for doing that kind of innovative stuff. It’s a small ask for the user to embrace it, and it’s also a small ask when it comes to development.
What I’ve seen in the market lately — the games business is more Dickensian than it’s ever been. It’s the worst of times for guys making big budget titles, but it’s the best of times for people who are able to put something out that cost them $5 million or less. What Justin’s doing is fantastic. I’ve also seen lately that the elusive “game fund” is starting to happen now. These funds are coalescing where they can put in [$1 million to] 2 million to see [if] an independent studio can develop something well.
But when that happens, all those companies are going to be PC focused. Console will be an afterthought for them.
GamesBeat: It’s interesting how these cycles happen in the game industry. You think it’s going all in one direction. Disney, for example, invested heavily in games and then decided to blow it all up. They let go of Avalanche Studios in Utah, the maker of Disney Infinity, and shut the game down. That was a huge investment. But then, Warner Bros. picked up about half of that developer. Yesterday, NBCUniversal* announced that they hired Chris Heatherly, who had been doing mobile games for Disney. He’s going to create a 50-person game publishing operation focused on mobile and VR.
There’s a cycle here that happens. While Disney lost its religion as far as internally produced games, now Universal is picking that up. There are still opportunities. It’s a $110 billion business. Parts of it are growing — like mobile games. While in many ways it’s a bloodbath right now, it’s currently $38 billion, and it’s projected to go to $65 billion by 2020. There’s continuous renewal in the game industry. It does grow bigger over time. But there’s a lot of risk.
Goldstein: It depends on where the renewal is coming from. You’re talking about multinational conglomerates expanding their presence in the games business. That’s great for those companies, but then, the question becomes, what happens to independent developers in that ecosystem while this is going on? It feels like Amazon* is almost taking over the industry with the amount of hiring they’re doing, but that’s all being built internally. You have a lot of people, a lot of more senior people getting pulled into these larger organizations and, I think, leaving this chasm where there used to be a lot of independent developers. Those are all going away.
The reason we still have a lot of independent developers in the business is largely because of VR. I’m sure that anyone representing developer clients, you’ve probably done at least 10 or 15 VR deals in the past year. For us, working with Oculus* was pivotal. We weren’t seeing that ability to take on a larger project, and yet, here come these guys, and they need a ton of content quickly. Google is like this as well. They’re offering the best deals in the industry. They’re incredibly developer friendly.
Going back to the panel yesterday, when they were talking about all the various contract points that publishers will focus on — these guys are great because they understand that they need an independent development community to exist. In order to make sure that community exists, they’re incentivizing developers to make cool stuff. Under those deal terms, you’re making royalties right off the bat. One of the coolest things that’s happened to us in the past couple of years is we actually had a profit distribution to our employees because of what we were able to achieve on Oculus. That’s never happened with large-scale development.
I’m hoping that, as other companies start entering the VR space and also see a need to populate their hardware with a bunch of content, that they follow suit. Maybe we can dial back terms that have become very difficult for developers now in games and adopt those friendlier terms from VR. Those are the things that are going to sustain this business.
GamesBeat: I get a drift from you that the life of an independent game developer is hard and getting harder. But collectively, if you see the opportunities for independent developers, that’s encouraging. There’s always some other source of wherewithal to get your games done, whether it’s money or new platforms. And there are cycles to this.
I remember when Microsoft* entered the console business. They were seen as the great hope for a revival of the American game development industry. It had weakened a great deal. Everyone felt like they were dependent on the Japanese platforms. Microsoft funded a lot of ideas out there, and some of them were very bad, but one of them was Halo, which made the Xbox take off. Eventually, Microsoft figured out where their hits were coming from and reinvested a lot of money there.
They went through a cycle during that console generation, and you can see Oculus doing the same thing now. Facebook put $250 million into VR startups. They pledged to put in another $250 million. But they’re starting to cull things now. They just decided to cut Oculus Story Studio. You can expect that these patterns happen, and it’s good for developers who — they might view VR as the part-time job they take while they figure out what to do in the future.
Goldstein: I’d disagree with that. I think a lot of developers are looking at VR and — we’re certainly looking at it as a requirement, a skill set that we’re building now because it’ll be an expectation in five years. Story Studio is a unique situation. Yes, Oculus is, I perceive, culling on the basis of some things are working and others aren’t. But Story Studio was a weird situation for them because that was an internal content team for Oculus. Facebook has never really been about building its own content, rather having others build it for them. They may have decided to go back to that old way of thinking, the more institutionalized way of thinking.
Question: Isn’t part of that just, it’s early in the cycle as far as hardware, and you need hardware installation to be able to sell your software? You’re spending X to make a story-driven experience, and it’s not appealing to the early adopter of your platform. So you close this down, and then, when there are 6 million headsets in circulation, you come back to it.
Goldstein: That’s a fair point, too. They were Rift only. That’s a rough installed base right now. Whereas Gear has 7 million units out there and probably much more than that as the [Samsung Galaxy* S8 smartphone] takes off this holiday. VR is going to happen. It’s just that the way it’s going to happen will surprise people. I don’t think anyone expected mobile to be the thing that most people experience VR as. Everyone pictured the big-budget crazy experience. But in reality, when you show up at the AT&T store and they hand you this thing, and your kid grabs it and puts it on and has a great time, that’s how VR is going to become mainstream.
GamesBeat: [Unity Technologies CEO] John Riccitiello has a nice comment about how everybody thought VR would be like this (straight-line growth) and reach $100 billion at some point in the near future, when in fact it was going to be more like this (a curved growth path that starts out slow). You still get to $100 billion, but it’s a much slower takeoff than everybody was originally forecasting. You adjust your business to deal with this kind of curve as opposed to a straight line.
Jason Rubin, the head of internal games at Oculus, was saying that VR is the hardest medium, or the hardest kind of product, to develop these days. There are no rules. You have no idea if you’ll get it right. You’ll fail a few times before you get to the right product. You have to do a lot of prototyping. And you can’t shortcut that process. You can’t just say, “I’ll make the successful one now.” You have to continuously experiment and deal with the fact that a few early efforts are going to fail. That’s a hard bet for any kind of business person or investor to make. It has to be fueled by the Facebooks of the world.
Goldstein: The weird thing about VR, one of the things I think about — when you think about the very early days of the games business, or the home entertainment business, where you had … even before the Atari* 2600, you had Pong*. Pong was this giant console you’d attach to the antenna inputs and that whole deal. That had a pretty rapid adoption rate. It was a mass market thing. People could grab it, take it home, and have a good time. That led to further advances and development of technology that resulted in the 2600 and so on.
With VR, it’s almost the opposite. VR is giant corporations determining that they are going to set their stake in what the future of computing is going to be in 10 or 15 years and then trying to force that on the mass market. It’s fascinating to watch. I don’t know how long it’s going to take for them to get there. Facebook is going to do it. Microsoft is going to do it. Google is going to do it. But it’s a long-term vision that’s not going to be adopted by consumers in the same way that other electronic entertainment devices were many years ago.
GamesBeat: I don’t necessarily believe that VR is the high school project sort of thing. I do think it’ll be transformative. It’s going to go by different names. Augmented reality is part of it as well in some ways. More recently, Tim Sweeney of Epic Games was talking about the metaverse. Ever since Snow Crash came out in 1992, everyone wants to build the metaverse. Second Life was a first attempt at that. Sweeney now thinks that within three years, somebody can do it. Somebody can go back to that original vision and build this virtual world that we can live in. You have things like Ready Player One, with the movie version coming out next year. It’ll be interesting to see what other things are timed to come out with Ready Player One.
Tim is very concerned about whether this metaverse is going to be open or not. He sees the platform companies making their plays to be the owner of the metaverse, to own it in every way — from payment platforms to content to data access — data that you may think is private but that’s really owned by them. You can see different companies jockeying for this position. We were talking about the cycle among the platform companies. It seems clear that to the platform companies, games are a means to an end. They want to control the platform and set it in the direction they want. Games are always great boosters for platforms, so they’ll support games.
If you look at SoftBank* as an example, what the heck is SoftBank doing? They own Sprint*. They want to merge it with T-Mobile*. They bought ARM for $32 billion. At the time, Masayoshi Son, the CEO of SoftBank, said that he’s preparing for the singularity — the day when artificial intelligence is smarter than the collective wisdom of all humanity. He’s preparing for this in a practical way. He’s raising a $100 billion fund to make the singularity possible in the next 30 years. He bought ARM to have a computing platform to make it, to have the artificial intelligence platform.
Then you ask, “Why does he care about games?” Last week, SoftBank invested $500 million in a 100-person startup in London called Improbable. Improbable is basically making a cloud-based operating system that enables very small game companies to make large online worlds. That’s the metaverse, a collection of worlds all running on Improbable technology. It’s interesting to see companies stepping up and saying, “I want to own this. Games are a way for me to get there. I’ll invest along the way.” Developers, in some ways, can foresee this and go along for the ride because they want to create great games.
Goldstein: Creating a metaverse is certainly above my pay grade. I just like making sure we can employ our people and make some cool stuff. I think the issue around that is, yes, conceptually this sounds like a great thing. If you read Snow Crash, it doesn’t sound like that great a thing to me. In fact, it sounds pretty horrible. But just because you have a giant world with tens of thousands or hundreds of thousands of people playing simultaneously, it doesn’t mean that’s going to be a fun experience.
There’s been a lot of these goals that very high-minded people will set around games. “I want to see a game with armies of 10,000 versus armies of 10,000!” That’s not necessarily fun. You as a player are inconsequential in that world. That’s not a good time. But when you bring it down to five on five, suddenly, you have games where people get all excited because that’s meaningful to the player. You’re contributing in a meaningful way.
I’m interested in what the Improbable guys are doing. It’s pretty fascinating tech. I’m also interested to see what kind of games actually come out of it because I don’t fully understand how to make something where you’re participating amongst thousands a really good time.
GamesBeat: There’s this top-down view of what makes sense to invest in, like Son’s point of view, and then, there’s a bottom-up view, things that happen in the game industry and bubble up through creativity. It’s nice when those meet.
League of Legends is an example. Nobody would have predicted that was a game that was going to really take off. In fact, I remember being asked to meet with the Riot Games* people before they launched League of Legends, and I just did a phone call because I didn’t feel like I had the time to deal with them directly. I didn’t predict that whatever they were working on was going to be any good. But it bubbled up. Then, it came into the sights of Tencent*, and they eventually bought majority control of Riot Games. Now, it’s this essential community enabling Tencent to get to its larger platform goals over time. Games provide those huge, rabid, engaged communities.
Goldstein: That’s always the goal. When you talk to guys at Riot and other people that are getting into esports and trying to push that, it’s not about creating a particular piece of content. It’s about creating a lifestyle and building that content around the lifestyle. It’s a key distinction. If you’re creating a lifestyle, that means you have a huge community that’s embraced everything you’re doing. If you ask that community, “What do you do on the weekend,” they say, “I play League of Legends.” It’s not, “I play video games.” It’s, “I play League of Legends,” in the same way you’d say, “I play golf.” If you can build that kind of community, you don’t have much to worry about as a business. That game will go on forever.
How much room is there for multiple games like that? I’m not sure. Again, let’s name the successes. When you look at traditional sports, you have the NFL, NBA, MLB, things like that. I’m sure there’s a professional curling league for our Canadian friends, but it’s not doing the kind of numbers the NFL is. When you extrapolate that to games and the kind of investment VCs are making in esports, I don’t know if there can be a lot of NFLs.
Question: Wouldn’t you rather be a profitable curling league team than an unprofitable NFL team?
Goldstein: I’m a game developer. I don’t even understand profit [laughter]. So yes, to answer your question, but the profitable curling team isn’t going to make profits that are interested in the kind of people who want to invest in the hopes of you becoming the next NFL.
Question: Who is investing in games, then?
GamesBeat: An interesting fact from last week. Google* bought its first game developer, the makers of Job Simulator, Owlchemy Labs. That’s an investment.
Goldstein: Google is pushing hard. Oculus is still greenlighting content and investing in games. There are several Asian companies investing, but you have to hit a certain threshold before they’ll invest. Development side attorneys, how many of you have done prototype deals this year? A couple. I’ve done more prototype deals this year than in probably the past five years. That’s where a lot of publishers are now heading. “We’re not going to greenlight your $20 million project, but we’ll give you a prototype deal, and then, we’ll see.”
That’s hugely problematic. One, it gives you anywhere from six months to, if you’re lucky, a year to put a team on something like that. Two, because it takes an average, as everyone knows, [of] about six months to get a publishing deal done, whoever’s financing that prototype is essentially ensuring that four or five months later, you’ll be shopping that prototype to all their competitors. But that’s how publishers are functioning right now.
The good news for developers in that is that once you’ve got somebody to fund your prototype, then you can approach these companies in Asia that won’t sign on with you unless you have a prototype to show. It’s become a very bizarre ecosystem, but that’s what’s currently happening.
GamesBeat: Tencent has become the world’s largest game company, with $10 billion in revenue. NetEase* is also in the top 10 for public companies reporting game revenue. On the platform side, Google, Microsoft, Sony*, and Apple* are in that bunch. EA and Activision Blizzard Entertainment as well. You can say that all of them are investing in games in some way. SoftBank just said, with the Improbable deal, that they’re investing in games. Magic Leap* raised $1.5 billion. All the companies that invested in Magic Leap are investing in games.
It’s not really good on the granular level, though, where you’re talking about making investments in individual studios or projects. There are a few funds that got created in the last six months or so. The Russians did one, a $100 million fund to invest in either user acquisition for mobile games or development studios.
Goldstein: There are more avenues of funding now, but it depends on the type of games you’re making. If you’re going for that $5 million budget or under, you have a lot of alternatives out there. I think Fig is one of the coolest things I’ve seen in a long time. Justin and his crew are smart. It’s like Kickstarter — for those of you that aren’t familiar. They have reward-based crowdfunding — spend $30 and get a t-shirt and get a copy of the game — but they’ve also used the JOBS act in order to create securities that are essentially a piece of the game. As an investor, you can buy into a Fig-supported game and reap profits, hopefully, later down the line when the game goes live. They’ve done well with that. I forget what they did on Pillars of Eternity 2, but I want to say it was [$4 million to] $5 million when they finished that round.
GamesBeat: Every one of their fundings has been successful, too. There hasn’t been a project that’s failed to meet its target yet.
Question: They’ve also been very selective.
Goldstein: Right. They curate.
GamesBeat: Kickstarter seems to have gotten a worse track record lately as far as hitting targets, but Fig and other equity crowdfunding companies seem to be picking up some of that slack.
Goldstein: The curation aspect is really smart. The problem with Kickstarter is people have had enough with funding games that never come out, or the developer implodes, or somebody flies off to the Bahamas with a suitcase of money. At least with Fig, they know because they’ve done their examination of what studios are coming, the type of IP that’s going to be made, how the game fits in their slate — they operate more like a publisher, at least from the standpoint of developing a series of games that people will be interested in. Because they’ve done that, that results in those games getting made and coming out.
Question: You were talking about stagnation in the industry, given the lack of new franchises in this generation. How much of that do you think is a market force, as far as gaming companies targeting their core audience, which has grown with certain franchises over time? If you have this core following for something like Zelda, it makes sense to continue to make Zelda games. How much of that stagnation is really just the market saying, “This is what we want. We want more of the franchises we’re familiar with?”
Goldstein: Everything you describe is part of the problem. People think they want new stuff, and then, when you put out new stuff, they decide they want to stick with the next whatever it may be, Call of Duty or something like that. Publishers looking at that are going to narrow their scope because they only have so many dollars to spend on development. They see that fewer games are coming out, but people are spending more per game. They’ll spend $60 bucks on the box and another $50 on DLC. It’s all combined.
It’s unfortunate because those systems provide a great opportunity to make new stuff, but new stuff is just too risky. Especially when you know that you can get a consumer for $100 [to $120] once you bake in ongoing content.
Question: This is one maybe exceptional example, but a counterpoint would be something like Breath of the Wild. Zelda has a formula that’s worked for decades. To some extent, that bleeds into Breath of the Wild, but that game was also a huge departure for Nintendo in the way they designed it, and it was a huge success. It seems like there is still room, even if you end up following this trend as a developer — catering to fans with the franchises they like — there’s still room for innovation.
Goldstein: I don’t know. The question of budget is always going to come into play. Nintendo games, the budgets on them just aren’t equivalent to what you have going on with Destiny*, as an example. To Nintendo’s credit, they did create a franchise for this generation. Splatoon is a great game. It’s a lot of fun. There’s a sequel coming out and good for them.
I also think Nintendo has historically been a bit of an outlier when you talk about consoles. Is the Switch even a console? Is it portable? What is it? It’s a smart move on their part because I think they understand that people want their entertainment to be mobile, something they can carry with them at all times. I can’t tell you how many people I’ve talked to who say, “Man, the Switch is amazing. I was playing it on my TV, and then, I took it to bed and kept playing Zelda.” That’s a huge move on their part.
It also ties into — when you look at the direction of VR, AR, MR, wherever it’s headed, it’s all going to be essentially a portable device that you have on you at all times. That totally got off track, sorry.
GamesBeat: One thing I wonder is, why aren’t some of the portfolio strategy companies beating the companies that have focused down so much? You think of Activision* and how they used to be. Now, they’re a three-game company: Destiny, Skylanders*, and Call of Duty*. That switch they made was probably one of the most brilliant moves any company has made — to go down to just three games and focus on them and turn them into multi-billion-dollar franchises. They’re profitable. They’re in the top-10 public game companies because of that strategy.
Electronic Arts (EA)* is making more money. Its stock price is a lot higher. It also went from 60 games a year down to eight. But what seems healthy for the industry, to me, is more like the tentpole strategy I described, where you have a portfolio of games and you can experiment based on revenue coming in from your big hits. That’s a good thing, I think, when you have that level of experimentation within each company.
Glu Mobile*, though, is not successful as one of those kinds of companies. It a collection of many different genres of games within one mobile-game company. They logically should be more successful than Supercell or Machine Zone* or King*. But those companies are more like Activision. They have one or two or three games.
Goldstein: To be fair, Activision is more than a three-game company. It’s probably a seven-game company because you have to factor in Diablo, World of Warcraft, and Overwatch. Candy Crush as well. In some ways, I guess Overwatch really is an example of the tentpole strategy. Revenue from Warcraft and Diablo funded 10 years worth of development on what ultimately became Overwatch. Some companies can still afford to do that. It’s just that everybody else in the world, other than Blizzard, doesn’t really have that luxury.
Question: What we’re seeing to some extent — game concepts come from two places. They come from game designers or they come from marketing. The marketing department sometimes comes up with game ideas — a product person in a game company’s marketing department who’s been trained at Nestle or Procter and Gamble will sit there and run the numbers and say, “We need another Call of Duty. We need another Destiny.” I don’t think that person is going to innovate. That person is going to do what mathematically makes the most sense based on MBA training.
Where you’re going to get Minecraft is from one guy who has the passion to build something and becomes a game designer. Innovation is going to come from smaller groups. Hopefully, they’ll drive innovation. You’ll always have these huge companies, to an extent, like you have in the film industry. They’ll do another Fast and Furious movie because market research tells them how much money it’s going to make. They’re not going to do indie-style movies themselves. Indie studios will do those, and maybe they’ll get bigger distribution. But the real innovation will come from smaller companies.
Goldstein: Absolutely right. The giant publishers have essentially become Hollywood studios. I can’t tell you how many meetings I’ve had where someone will say, “We want to find a game like Rocket League.” And I sit there thinking, “No, you don’t. If you did, you would have signed Rocket League.” Everyone’s expecting that suddenly they can duplicate the innovative thing that they didn’t recognize in the first place.
Question: And it’s because that’s not what they do. If you’re a product marketer, don’t try to be a game designer. The game designers have the vision to say, “I have something new that people haven’t played before, and I’m going to pursue it. I may create what people are going to want to play next year.” People don’t necessarily want to play what’s hot now. They’re playing it, but they don’t know what’s coming out a year or two from now. It’s our job to figure out what they’ll want to play in two years. It’s not the marketer’s job to do that.
Question: The great irony of this whole thing is that, as the business has grown — we all talk about how the game business is bigger than the film business. Well, you get all the film business issues that way. You look at the movie business this summer. There’s a couple of enormous movies doing all the business. Everything else is either terrible or a big flop. This King Arthur movie that came out this week is going to be something like a $130 million loser.
As the game business, we take a lot of pride in how we’ve grown from selling games in baggies at flea markets to becoming what we are today. You get the good and the bad with that. What we’re focusing on here now is that there’s a bad side to that growth, too. You can lose innovation when you have such big money decisions that have to be made.
Goldstein: Going back to the console discussion and the major publishers, you’re losing innovation there. The company that I think has been doing it right for a long time now, actually, is Tencent. Riot is the big example, but Tencent has made investments in a lot of developers that people aren’t aware of. These developers are running their games on their own. They’re publishing games on their own. They don’t need to take heed of a third party pressuring them to go in a direction they don’t want to go. There’s going to be a lot of innovation coming out of that model, where you have developers building good, sizable businesses. They may not be billion-dollar franchises like League or an Activision game or an EA game, but they have a nice, respectable business that allows them to make the games they want to make.
Question: It may be a window, though. As that matures, then the window begins to close. What was once an opportunity like that is no longer there. Then, you have to look somewhere else.
Goldstein: Well, that’s always the case. We’re always scrambling.
Question: On the console side, we’re talking about boxed games and how there isn’t innovation. There is innovation on the download stores for the consoles. That’s where an indie can come in and do something on a smaller budget, try a new type of gameplay, and put it out there. It may be over time that, as retail decreases and digital increases — that’s already happening. It’s more than 50 percent of revenue for people like EA. But as that continues to become the primary method of distribution, it’s possible that that’s where you’ll see innovation. That’s the window for the indies into the console space, the PlayStation Store, and Xbox Live. That’s where they can distribute things that can’t get on Walmart* shelves.
Goldstein: You can certainly have companies doing a decent business from that. But I think those companies are few and far between, the ones that are successful at that.
Question: It really all comes down to what we talked about yesterday. It’s my personal belief, at least, that the industry has to be more developer friendly. Your joke about profit — developers don’t make money. It’s a rare developer that does, one in a thousand. You’re working a lot of hours and just hoping to make next week’s payroll.
Goldstein: We’re in the lottery ticket business.
GamesBeat: I like to think of forces in the industry and counter-forces or counter-strategies to them. Apple is very strong, but it’s also very proprietary. You’d expect a counter to arrive in the form of Android*. Steam is the counter to Windows.
Question:: It’s not so easy to put up an independent game from a studio no one’s heard of up on Steam and make your money back, though. People think it is, just like at one point they thought you could put anything on iOS and make your money back.
Goldstein: I’ve had plenty of meetings asking if I could make something like Ark. The new one now is Battlegrounds, I think.
GamesBeat: But the force that’s stopping some of this — FIFA is already huge. It sold 21 million units this past go round. It made $800 million in revenue from FIFA Ultimate Team, the DLC. Developers who once were available to do something else are now just making DLC, making Ultimate Team content nonstop. They’re doing live operations year round. That’s definitely the case across the mobile industry. Any successful games are live operations games. Those teams are preoccupied with the current hit. It does fund other games that are possible, but those teams are staying in place. The Call of Duty teams stay in place. They’re not doing original work.
Goldstein: I’m not going to say what publisher it is, but when it comes to these franchises, the developers that are working on them don’t want to make new stuff. New stuff isn’t allowing them to go buy a Porsche every other year. They’re all doing very well working on established franchises. There’s no incentive for them to say, “Hey, management, I’d love to pitch you my new idea.” That doesn’t make sense. Going back to the question that was raised earlier, why isn’t there more innovation? There’s no incentive for internal teams on successful franchises to make something new. Why take the risk?
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