Machina’s Machinations: Beneath The Bottom Line

Machina’s Machinations will be around every Monday to school you about something new. Or old. Or exciting. Who knows. Just stay tuned. — Ed

If you play games, troll forums, look at the pretty pictures on gaming news sites and are actually capable of the cerebral phenomenon known as thinking, then you must have questioned the gaming industry’s development choices at times. Maybe you wonder why the long dead Max Payne series is getting another game to further ‘enrich’ its already concluded storyline while your beloved Warcraft III will probably never get a sequel. Or maybe you wish there were original games with new ideas or great stories, but instead all you get are 3rd person shooters made in the Unreal engine voiced by that guy who does Nathan Drake.

Well all these questions have the same simple answer, and most of you will know it already; it’s all about the money. So why am I then writing this article? Well besides the fact that it’s in my best interest to make this column as long and as tedious to read as possible, because I get paid by the word and not per article, there’s actually a lot more to it than: ‘it’s just about the money’. Running a gaming development company, or pretty much any company, is not as easy as it looks on TV — so hopefully by the end of this article, you’ll have an idea of why developers make the choices that they do.

The Fanboys will go on about how much Microsoft cares about them and would do anything for them and only wants them to be happy, but the big dark secret — that everyone knows — is that it’s all about the money. When game developers decide on which games to produce, the first question that has to be answered is: is it profitable? Now this isn’t really a bad thing. Picture yourself in the following scenario: you work for this website owner (let’s call him Dean) and every Friday, you kayak across the Atlantic Ocean to mow the lawn at his Canadian beach house and all he does is pay you back for the lawnmower petrol you used, you aren’t going to be very happy. You’re going to want extra compensation for your time and your effort, and there’s where profit comes in. When game developers decide to make profitable games only, it’s so that you don’t rip them off.

The concept of profit is pretty much timeless and it should come as no surprise to you that developers will only make games which are profitable to them. It’s a decision that you can’t really blame them for because people in general are simply not self-sacrificing altruists who only want the world to be a better place. Now it should come as no surprise that developing video games is very expensive. When you pay R700 for just a disc and a plastic box — and feel cheated, you should take a second to wonder how the developers feel. Regardless of how many plastic boxes and discs you manage to sell, you still have to pay a whole lot of other things. There’s the salaries of the professionals that you have to pay over several years of development, all the development and testing equipment you need,  the advertising and marketing of the game and these are only the direct costs. Remember that they still have to pay for rent and electricity and toilet paper over the years of development and the only time they actually get rewarded for this is if they even manage to finish their game… which takes about 2-5 years usually. When they finally do finish a game, the box and the disc may only cost them like R30 or so but game retails at R700 because they need to recover years worth of development costs and make a reasonable amount of profit for their efforts.

But consider this as well: development of a game takes several years and during those years, companies have to pay costs that number in the millions. They only make money when they actually sell the finished product,  so for years and years they’re just losing money. And the game only retails a tiny fraction of their total costs so they need to sell millions of copies just to break even. And in two to five years, a lot can change. How do they know that their game is even going to be popular, or if it’s going to sell well? Throw in inflation, interest and changing consumer tastes and the only certainty is that they’re going to lose money one way or another. So game developers have to be really, really careful about the games they produce, and they have to be even more careful when they take risks. Which leads me to my next point:

The title is pretty much self explanatory. The more a company knows about anything related to their game, the less uncertain they are about their future. Gaming companies are interested in as much information as they can get, and you’d be surprised by how much they actually know. Using mostly statistics and other methods of extrapolation, gaming companies can usually work out their development costs for games years in advance and, scarily, they can even accurately predict how many copies of the game they expect to sell. Obviously they don’t publish all of their findings, but often enough you get companies that will release their expected sales before a game is even released and more often than not, they’re usually right.

Now you might wonder how they know this. Maybe the reason you didn’t buy Alpha Protocol was because you have a mental disorder that discourages you from buying anything that starts with a vowel, or perhaps you bought God of War, not because of the excessive violence, but because it was the last message your dog left to you in his Will. But despite your otherwise strange motivations, in the end, there’s only one choice you make: do you buy the game or don’t you? And using this information from previous games, in conjunction with all their advertising and whatnot, allows video game developers to predict which choice you’re going to make. Because while the behavior of individuals tends to be invariably complex, the behavior of a giant consumer group is surprisingly easy to predict. The point that I’m so laboriously trying to make, is that game development companies know long in advance, whether or not their games are going to be profitable.

But even if a game would be profitable, and the developers know this, there’s still a very good reason why they may not produce it. Therefore even if you and all your friends at the Harry Potter fan club would buy “Gossip Girl: The Legend of Chuck Bass” and enough people would be interested in it to make it profitable, it’s highly unlikely that the developers will develop it. And the reason for this is simple:

IT’S NOT ONLY ABOUT MAKING MONEY; IT’S ABOUT MAKING LOTS OF MONEY

Which leads me to my next point:

The concept of Opportunity Cost is quite easy to understand, but in case you don’t understand what Mathematics is (you know, that thing with the numbers?), I’ll explain it using the diagram above. Imagine that the World is going to end in 10 minutes and it takes 5 minutes for the fat guy to walk to a pedestal and 5 minutes to eat something. He can either eat the Cake or the Bucket of Glass, but he can’t eat both. No matter what he does in his limited time, he has to make a choice and the option that he forgoes will be forever lost to him (because the world will end). The smart thing to do is to decide whether or not he will benefit more from eating the Glass or the Cake, and the option he loses is called the opportunity cost. If he decides that he likes pain more than chocolate and cream, and he eats the Glass, then the opportunity cost of that decision is the Cake (and vice versa of course).

Now the same concept exists in the games development industry, however it’s infinitely more complex. A games development company only has a limited number of people working for them and because the development process takes such a long time, they simply can’t produce everything. In the same way the fat guy doesn’t have the time to eat the Cake and the Glass, a games development team doesn’t have the time to develop all the games that they want to, even if they are profitable. Instead, they have to look at all the possible options for games that they can develop, and only then go with the one which they think will benefit them the most. It makes sense really, because if you were the fat guy, you wouldn’t waste your time on the inferior option, you would go straight for the Glass — assuming you’re not an idiot who actually thinks that the cake is better. In the same way, a games development company will only turn the best idea that they have into a game. This is also the reason why games aren’t always the best that they can be, especially in the first installment in a series. Developers weigh up the option between spending another year making the game perfect or releasing it now and using that year to start work on a sequel; and they’ll pick whichever option is more profitable.

Which leads me to my next point:

Opportunity Cost is the main reason why so many games nowadays have so many sequels. Take the God of War games as an example. God of War I was amazing where God of War II was considered to be even better, and sold much more copies. However, God of War I took 5 years to develop and God of War II only took 2 years to develop. So even though God of War II was a superior project for the company that developed it (better game, higher profits), it took far less time to develop. And the company didn’t even need to advertise as much because people who knew about God of War I already knew what to expect. Even more important is the fact that the developers knew that God of War II would be successful even before they started developing it, because of the success of God of War I. So it’s really as simple as: developing sequels is better than developing new games.

Developing games from scratch is a lengthy and expensive process that carries a high amount of risk. Following up a successful or well established game with a sequel, is cheaper, has a shorter development time, is much less risky, and it can sell just as many copies as the first game. For this reason, games like Call of Duty and FIFA will receive a sequel every single year as long as they continue to be successful and many other game development companies will follow up their successful games with as many sequels as they can. That’s not to say that developers won’t make new games ever, they just have to be more careful about it. If a developer feels that a new idea has a chance to be successful, they develop them for the long term, usually with a whole trilogy planned out before the first game even goes into development. I’m sure you can see this with games like Dead Space, Mirror’s Edge, Too Human and Mass Effect. In this way, the moment that a game is completed, development of the sequel can begin and, in the rare case that the game is a failure, development can be shut down without the company having wasted too much time. Taking this kind of approach is really good for developers because even if they make a loss on the first game, they can go ahead and develop follow ups to it anyway because the sequels are so much cheaper to develop.

The end result is that game development companies no longer simply develop games; they develop franchises. There’s a lot more to it than just making a single game and hoping that it sells well, it’s all about creating a long term project that will only get more profitable as time goes along. And I suppose that it works to an extent. So, until people can no longer stand the sight of a football or a Greek God, there will always be another FIFA or God of War.

Hopefully that clears a few things up for you and gets you thinking about other industries as well. In the end, developers are not evil; they’re only looking out for their best interests and you can’t really blame them for that.

If anyone has any questions, comments or feels that I missed anything, drop me an email or post a comment. I’ll try to find the time to reply between the long hours I spend stroking my cat and grooming my moustache. If you have any suggestions on what I should speak about next week, then those are welcome too…

Till next week… don’t get eaten by Sharks.