ECGC 2011: Is the Gaming Market About to Crash?

During ECGC 2011, famed game developer Mark Cerny indicates that the console slump over the last two years could be just a "hiccup" or the sign on an impending market crash.

Thursday during ECGC 2011, famed game developer Mark Cerny presented the second keynote of the show called "The Long View." He raised an important question given the pattern the industry has taken over the last forty years, and the erosion of console game sales during the last two: is this just a bump in the road, or a prelude to another gaming market crash?

For those unfamiliar with Mark Cerny, he's had a hand on numerous popular franchises like Crash Bandicoot, Spyro the Dragon, Ratchet & Clank, Resistance, Uncharted-- the list is rather lengthy and impressive. He's also noted for designing and programming 1984's Marble Madness for Atari coin-op and overseeing the creation of Sonic the Hedgehog 2 (programming, development support) over at Sega. That said, Cerny brought his extensive experience to the ECGC 2011 platform to prove his case, and indicated that-- in order for the industry to survive-- it needs to shift to monetization and socialization, or cough up another generation of consoles.

He noted an overall pattern the industry has taken in the last forty years, shifting from the arcades to the PC and then to consoles. "The only constant I've seen over the last thirty years is change," he told the audience. "So 1971, Nolan Bushnell creates Computer Space, and for ten, twelve years the arcade was the center of the universe. If you look at the top consumer (Atari 2600, etc) games, those were actually by and large conversions of the arcade games like Pac-Man. By the end of the 80s, computer games were the center of the world."

According to Cerny, by the 1990s, the home and handheld consoles ruled the scene and was expected to be followed up by downloadable "cacheable" games in the next decade. But that didn't happen. Instead, Apple swooped in during the latter half of the 2000's with the iPhone and iPad which changed the roadmap with broader, thinner, cheaper games. Then social networking crashed into the scene. Cerny claims the core consumer games market has now gotten "soft."

"We lost 5 to 10-percent of the marketplace in 2009," he said. "We lost about the same in 2010. And as a guy who has been through some gaming crashes, some upheavals in the industry, I really have to start wondering if this is the end."

After describing a graveyard of console cartridges littering department store discount bins in 1983, he blamed the Arcade Crash of 1982 on manufacturers raising the fee to $0.50+ on some machines (to battle the declining value of the quarter), and creating 2- to 4-player titles and simulators with extensive cabinets, thus starting a "vicious cycle" that has steered the industry on its present course. Eventually players stopped spending the money, thus operators (arcades) stopped buying the machines from distributors who in turn stopped buying them from Atari, Midway and so on. It was a market free-fall that kept going and going. Sega abandoned the business and went back to Japan.

Decades later, publishers are dumping million and millions into one specific title in an industry flooded with a variety of genres and sequels. Development teams have exploded in size and incorporating job descriptions unheard of twenty years ago. Why does game development need to cost $50 million? Because more and more content has been added over as the years roll on, building a larger audience who thus bring in more consumer dollars. It's a "vicious cycle" where player and publisher feed off each other, adding an extra slice onto the plate each time.

But Cerny thinks the industry needs to step back and focus on what should and shouldn't be in games to keep the budgets from spiraling out of control-- maybe even to keep the industry from repeating the same mistakes from the early 80s. Developers also need to go through a phase of "unlearning" and to ditch the idea of knowing the true definition of a consumer game-- meaning not every genre has to use the same template (aka this is the way gameplay is and you suck if you can't figure it out). Is FarmVille a game? It doesn't have a story, it doesn't have a real beginning and there doesn't seem to be an end. Minecraft falls in the same category, yet both are raking in millions.

By the end of the keynote, Cerny said that games will need some type of revenue after the final sale, whether it's in a DLC or virtual items sold within the game. He noted that there will be titles where the monetization model doesn't fit, using virtual currency within Heavy Rain as an example. Although he didn't come right out and say it, monetization will seemingly help bring in extra revenue to offset the outrageous expense of developing and marketing. Games will also need to integrate social features like multiplayer or in-game messages from other players.

So is this the end of an era? Is the gaming industry getting ready to crash? Cerny said he's looking forward to the monetization and socialization "revolution," indicating that perhaps the industry is shifting into its fourth phase. Apple has already proven that bigger isn't always necessarily better, and that monetization and socialization can be two key factors for an extremely lucrative title. So far we've seen these two factors thrive on iOS, Android and the PC. The digital distribution aspect has also resurrected the indie developer, indicating that perhaps we won't see a market crash at all... at least, not on the PC and mobile front.