Could Rising Production Costs Pwn Video Game Innovation?

By Bobby Miller

Back in 1985, Super Mario Bros., one of the top-selling games of all time, was made by a crew of about ten people. By 2008, Grand Theft Auto IV, also one of the top-selling games of all time, was made by a team of over five hundred people. In 1982, Namco made the hit Pac-Man with a budget of roughly $100,000 whereas the average PlayStation 3 game today costs roughly $15 million to develop.

Nintendo Super Mario Brothers Rockstar Games Grand Theft Auto Screenshot

Although graphics play a huge role in why Super Mario Bros. and Grand Theft Auto IV have vastly different budgets, other factors, such as the rise of voice acting and online play, are important as well.

So why the difference? The increasing complexity of games – in graphics, artwork, sound, and story – also requires more programmers to tackle difficult problems. With online gaming becoming the norm, often servers must be maintained as well. As the technology advances with each new generation of gaming consoles, the stakes grow higher. Budgets rise, development teams expand, and the cost of failure soars.

With its budget of $100 million, Grand Theft Auto IV currently holds the record for most expensive game to develop. And that does not even include the cost of advertising, which is more important now than it was decades ago, since there are many more games competing for people’s attention. Of course,Grand Theft Auto games are widely known and acclaimed: each entry is basically fail-proof.

More commonly, video games in this console generation (with Sony’s PlayStation 3, Microsoft’s Xbox 360, and Nintendo’s Wii) have budgets that usually range from “only” $10 to $20 million. Compared to a Hollywood film, which can easily have a budget far above $100 million, this may not seem like much. But for video game developers, the issue is not the budgets themselves, but rather the rate at which they’re rising. In the previous console generation (2000-2006), the average game cost between $3 and $6 million to make. Since then, budgets have at least tripled.

With the Wii U coming out later in 2012, don’t be surprised if Microsoft and Sony are planning to release new systems sometime in the next few years. If budgets continue to increase at the rate they have been, the average game on these systems could cost well over $30 million to develop. In early 2010, the PlayStation 3 game Killzone 2 was the tenth-most expensive game ever developed, costing $45 million. In the next console generation, that might just be a budget on the high side, nothing too special.

The effects these costs have on the video game industry cannot be exaggerated. To begin with, when it costs so much to make a game, it should not be surprising that only 20% of completed games earn profits. Because of this, many companies rely on long-running franchises, ones they know will rake in the dough.

After all, with such high stakes, just a flop or two can devastate a company. THQ, a mid-sized company, recently took a risk by releasing the uDraw GameTablet, along with some games that required the special controller. Unfortunately, 1.4 million tablets went unsold, resulting in a painful loss of $30 million. Remember, the average game budget for this generation is at least $10 million, so the failed controller could be counted as three complete flops. And that does not even include the losses from games supporting the device.

THQ Udraw Game Tablet Nintendo Wii accessory

As THQ has learned, mid-sized companies can take serious blows if their attempts to try something new fall flat.

With horror stories such as these being shared among video game developers, maybe it shouldn’t be too surprising that so many of the games we play have a number tacked on to the end of the title for safekeeping.

Since development is so costly, the industry is dominated by large production studios, ones with the resources necessary to churn out large-budget games. They keep on raising the standards, making it difficult for even mid-sized companies to compete. In the past, handheld systems such as the Game Boy series and the Nintendo DS often served as a refuge for smaller teams with smaller budgets. However, the current round of handhelds, the Nintendo 3DS and PlayStation Vita, have graphics not too far behind those of consoles. With this in mind, little companies such as Majesco have taken shelter in the app gaming market, currently the least costly form of video gaming out there.

The costs and risks associated with game development may be intimidating, but it is a lucrative industry. Today, consumers as a whole spend more money on video games than on movies. So, the games that succeed stand to make huge profits. Halo 3 was a very expensive game to develop at $55 million, but it made a record-breaking $170 million on the day of its US release.

Nintendo has shown a different path. Their games rarely have the flashiest graphics or many lines of voice acting, yet they manage to sell millions. For instance, Super Mario 3D Land, which sold nearly five million copies in its first ten weeks available, only had a production team of about sixty-five people, quite small for such a high-selling game. While some cynics criticize Nintendo for being behind the times in terms of production values, supporters argue that the company knows how to create appealing games by focusing on the gameplay, not costly bells and whistles. Whatever the case, Nintendo’s strategies often result in huge profits for the company.

Just remember that, for every giant company out there making millions, there’s probably a runt getting trampled on. Expect the number of successful video game companies to narrow in coming years as mid-sized companies either sink or swim. As the standards continue to rise, expect developers to put their efforts into a few big-hit games as opposed to many smaller titles, and take fewer risks with new ideas.

Like Hollywood, the number of sequels will only rise, and it will increasingly fall to small, independent game developers to take the risks on far-out game concepts.

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