What Is Going to Get Gaming Software Development Booming Again?

Includes: MSFT, NTDOY, SNE
by: Bruce Everiss

There is increasing anecdotal evidence and deductions from news items that there is currently a big slowdown in games under development worldwide. Development staff are being laid off in quite a few studios. Yet the industry at retail is bigger than it ever was before and is booming like crazy, so what is going on?

A lot of it has to do with the console cycle. Each console has about 5 years of life as the premier platform from a manufacturer, then a further 5-ish years of life as the second string platform to the replacement premier platform. When a console is new to the market it is sold at a premium price to early adopters. This is a good time for game publishers to experiment with new products; it is easier to get new ideas and IPs accepted early in the cycle to a more geeky customer base. The blockbuster titles are held back till there is a big enough installed base to get the volume of sales needed, so they tend to arrive around the middle of the 5 year cycle. Then when the console becomes cheap, after 3 or 4 years, we get more family and children’s titles.

So in this generation most of the blockbusters are pretty much done and dusted. And the experimentation phase is well over.

Another major factor in the market is the catalogue of titles available for each console. You only need so many racing games, so many FPSs, etc. In other words there is little point developing games when there are plenty of similar games for the same platform out there. And we have reached this stage on the current platforms.

What about the non console platforms? The PC, DS and PSP are ripe with piracy so most publishers tend to largely avoid them for retail games - they have broken business models. The PC is still good for casual games and MMOs, but the competition in both these areas is now extremely intense. Which brings us to the iPhone, which just has too big a catalog now to be a sensible target platform unless you have a very strong USP and good marketing.

So what the industry needs is the next generation of console platforms. And they are due.. the Microsoft (NASDAQ:MSFT) Xbox 360 is coming up to four years in the market. But it will be different this time, all three new machines will almost certainly be backwards-compatible with this generation and will be just scaled Super versions of what we have now. So all the current generation games will run on them, which vastly reduces the impetus for new titles. More doom and gloom.

So what is going to get development booming again? The answer is gesture interfaces, like Microsoft’s Natal. And 3D displays. Both of these massively enhance the gaming experience, bringing new levels of immersion and new possibilities. They may well each create bigger booms than the release of the next generation platforms because they bring so much more to the table.

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