The “Death” of PC Games

29 Nov
29 November 2009

I gave Dusty a hard time for his recent assertion that the death of PC gaming wasn’t due to MMOs but rather five years of shit games.  I probably should have beat him up for suggesting that there has been any “death” at all….

I’m not overly averse to reality and I can read NPD’s data as well as the next guy, so I’m not trying to suggest that the PC games market hasn’t been suffering based on that metric.

But that isn’t “death”.

Death is when something goes away and doesn’t come back.

Whale oil?  That’s a dead business.  You probably don’t want to go looking for VC for an 8 track cassette factory either.  Rotary phones?  Butter churns?  Traditional  retail stores for games?  Elvis, Elvis, and Elvis.  (Ha ha, just kidding about that last one, GameStop, everything is going to be fine.)

“Death” happens when the demand for a product shrinks, generally because something comes along and satisfies the need it served better (and / or cheaper).  Why don’t you ride a buggy to work anymore?  Because your horseless carriage has AC and it doesn’t eat the begonias when you park it out front.

So, if PC games are “dead” what is it that’s replacing them?

Is it consoles?

That is (or was) a popular hypothesis, but no.  These two platforms have coexisted since the dawn of time (Atari 2600 – 1977, Apple II – 1977).  They have always served different audiences.  In 1980 you weren’t plugging a keyboard into your Intellivision to play Zork.  Today you aren’t plugging a guitar into your PC to play Rock Band.

(Stop there for a second — attempt to even imagine the series of events that would lead to you and three of your friends standing around your monitor playing Rock Band.)

These are different animals.  If you draw a Venn for the content (or the audiences) there is plenty of intersection but they continue to exist independently because there are other things in their sets.  Consoles deliver a different gaming experience, generally in a different place (the living room), and vastly more suited to group entertainment.  But the key word is “different” — console games aren’t PC games but better or PC games but worse, they’re just console games.

Maybe it’s the “social network” games that are getting so much press now?

No again.  And for similar core reasons, just amplified to a billion.  As much as I love reading twelve thousand messages an hour about the scared turkey you found or the poker chip you’re looking for, this really doesn’t scratch the same gaming itch that, say, Dragon Age does.

PC gaming isn’t going away because there’s no reason for it to go away.  There’s nothing replacing the experience delivered by PC gaming.  (Console gaming and social-casual gaming aren’t going away either, for the same reasons.)

Ok, so if they aren’t dead, what’s the deal?  Something is clearly happening, right?

Well…

For the most part, the market forces in the games business have been the large publishers, companies like EA and Activision.  These companies are public.  As public companies, they have stockholders and their stockholders influence their behavior by buying and selling their stock.

Now, this might come as a shock but, many stockholders (individuals and institutions included) are (A) irrational and (B) fairly clueless about the fundamental operation of the company they own shares of.

Irrationality includes a general disdain for return on investment.  The big players in the business aren’t exciting to many investors if they’re “just” making money.  The excitement is in growth.  Growth is what makes a CEO’s shares go from oh, say  $1.03 each to between $11.43 and $11.54 each.  Hence, these companies pursue strategies with the potential for growth.  The bigger the better.

Now stir in general cluelessness.  Let’s say you’re an analyst at an institutional investment firm.  You don’t really play games or know much about games or understand how games are made but you know that Microsoft is into this whole games thing and your firm has a zillion billion shares of MSFT.  Along comes Nintendo with the Wii and all you hear is Wii bowling and Wii-motes and Wii sports and people are saying things like “the future of” and “revolutionary” and “mass market” and it’s making your little head hurt.  You can’t even annihilate the value of thousands of pension funds for ten freaking minutes without hearing something about the Wii.

But you know MSFT doesn’t have a Wii…and sooooo many people are talking about it…so you start asking MSFT some questions.  Questions like:  “As people who own zillions of shares of your stock and who might sell a giant chunk of that if you disappoint us, can you tell us what you are doing to get a piece of the casual space Wii thing goldmine?”

Don’t think that’s how it works?  Why do you think EA paid $680M for Jamdat?  Why do you think they dropped $300M on Playfish?

2005 EA investor meeting: “What’s our strategy for this cellphone games thing?”

2009 EA investor meeting: “What’s our strategy for this social games thing?

Now remember, these are the guys who determine, to a great extent, what games get made.  Historically, few developers have been able to self-finance and very few have been able to self-publish.  If a dev wants funding and to make a game and retail space, they generally need to deal with a publisher.

That means that if the game you (as a developer) want to make isn’t aligned with the current growth strategy of the publisher you’re talking to, your chances of getting a deal are very slim.  Go pitch a PC FPS with your startup team to any of the majors — you’ll get laughed off the planet (unless you’re good and you talk to someone smart, like, say, Valve).  This isn’t because nobody wants a PC FPS, it’s because a PC FPS doesn’t contribute to the current growth strategy.  Try the same with a pitch that includes words like “casual”, “social”, “Facebook”, and “MTX” and your relative chances of getting a deal go through the roof.

The same dynamic was in place in the late ’90s.  Then, you had the PS2 coming out in 2000 and Microsoft entering into the fray with the Xbox in 2001.  A few years later and the 360 and the PS3 are going head to head.  The growth strategy here is the console.

How do support that strategy?

Get your first party devs to make games for your console — guys like FASA and Digital Anvil?  Sure.

Go looking for independent developers who you can add to the stable — guys like Bungie and Rare?  Yup.

Shift the majority of your dev investment to Xbox and 360 titles? Absolutely.

Drop a few billion marketing the whole effort?  Of course!

All those moves make sense if you’re Microsoft and you want to support a console strategy or if you’re Sony and you want to defend your turf.

But what do they mean for the PC landscape?

Fewer games being made. The first-party devs are making launch titles  – they’re not making PC games.  The previously-independent devs were purchased expressly to  make games that would support the console strategy — they’re not making PC games.  The still-independent devs have switched over to console games because those are the only deals getting signed — they aren’t making PC games.

Fewer games being sold. If there are fewer titles being made, there are fewer to buy.  Also, since so much marketing cash has been poured into merchandising allowances that there are no shelves not filled with console titles (or now, the more profitable used games), brick and mortar retailers have PC games on display in the alley behind the store.  This doesn’t do great things for their sales.

Fewer deals being signed. My favorite.  Since the sales are dragging, publishers aren’t willing to sign deals for new titles (which, reinforces the loop).  Few publishers appear to appreciate the irony here — it’s like trying to sell your football team to a guy who shoots all your players and burns down the stadium, then says “I dunno, their record is pretty shoddy this year….”

So, Dusty, I still say there is no death here.  But, if you’re looking for a murder suspect regardless, it isn’t MMOs taking up all of our gaming time or years of shitty PC games –it’s the traditional developer-publisher relationship.  And that, while we’re on the subject, is something that has a pretty good chance of achieving ex-parrot status in the not-too distant future….

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2 replies
  1. dlangar says:

    heheh well I fairly clearly lost something in the translation of my own post, because I actually agree with pretty much everything here. A LOT of people: press, media, industry pundits, etc, have been clamoring about the death of the PC as a gaming platform for at least the last 15 years, if not more. I personally, have never believed the PC was dead as a gaming platform — namely because to this day it’s where I spend 90% of my gaming time.

    But the last 5 to 7 years have certainly been a mostly dead era for original PC games. For exactly the reasons you describe above. Microsoft orginally going after Sony’s customers (none of whom were on the PC), and then Nintendo’s customers (None of whom are on the PC), and pretty much effectivly abandoning their own orginal native development platform.

    And I may be wrong about this, but I also think the pendulum is swinging back right now and PC gaming is climbing out of that dark era. A large part of that is due to the explosion of social media games, which are mostly played in Facebook, through a browser, on a PC. This in turn, has publishers thinking “Oh heyyy maybe it *is* okay to put something on the PC again..” Not that the console makers aren’t scrambling to become “social media” aware as well.

    And for awhile, certainly many so-called experts were claiming “Oh well the only thing succeeds on a PC are MMO’s — and by MMO’s I mean WoW, and gosh it must be becuase those kids spend all their time playing WoW that they don’t WANT to play our crappy port of a console game..” Again, this was not necessarily a viewpoint I shared myself, but you didn’t have to swing a dead cat in 2007 to hit someone that was saying it.

    But when I see games that *aren’t* MMO’s, that aren’t casual, that aren’t on facebook — that don’t have any of the magic market buzzwords –succeed, it reminds me that the deal is — make the damn thing good, and people will play it.

    Unfortunately, for most publishers, “good” == “sequel to established IP with current industry buzzwords in it”. I mean.. we know it’s only so long before Activision makes “Modern Warfare 3 For the Facebook”. The death of the traditional developer/publisher paradigm can’t happen soon enough..

    Dusty

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