Could there ever be another crash…?


You guys ready for some history? How about a horror story?  You want both?

The video game industry is changing a lot right now. Some good, some bad, but some largely immeasurable—a lot of unknowns haunt these changes.  Technology has changed more over the past generation than in any other console generation, pretty much ever. We didn’t just add more technology this time. Everything’s changed. For the first time, fully digital consoles are viable. For the first time, gaming is easily available to everyone without the need for consoles.  For the first time ever, the future of used games is in question.


A game console. Starting at $1000.


Think about that last one for a second—we could be as much as one or two generations away from GameStop’s extinction.  Now, why would I think their end could be so soon?  Nintendo, Microsoft, and Sony are very clearly still giving us physical games, but they are just as clearly moving towards a digital-heavy future.  As it is right now, Nintendo makes almost every single retail title available as a downloadable.  Nintendo could, at this moment, almost go to a full digital standard since they are already set-up for it.  Over this past generation, both Sony and Microsoft have also been increasing the number of retail games available for download. I think it’s a safe bet that all three major console makers will make this their standard over this generation—as MS had originally intended for the Xbox One.


Then, of course, we have the digital-only consoles.  Ouya, GameStick, Shield, and the Piston “Steambox” (which is not an official “Steambox”), Valve’s actual Steambox (if it ever shows up), are digital-only.  Google’s purported console (which is likely to use the Chrome OS) and the announced Amazon Android console are also very likely to be digital.  Digital sales will completely eclipse physical on all platforms before this next generation is out.  Possibly before we even reach the halfway point.


But this is a change that will really only hurt one element—GameStop.  I doubt many gamers would be sorry to see them go.  (I personally avoid GameStop now, and part of that stems from having worked there.)


But our digital future is not the focus here. Rather, I’m talking about eerily similar “new changes” that may, in reality, be reflecting “old mistakes.”




The Crash of ‘83


I doubt I’m the only one who’s sauntered over to Wikipedia to indulge myself in the gritty past of gaming, when the industry was ruled by the United States, and promptly ate itself nearly into extinction over the course of a single generation.  It’s a truly fascinating read and equally horrifying.  Common remarks on it are often along the lines of “when E.T. killed gaming,” and when Atari buried unsold and returned cartridges in a New Mexico desert.  To be fair, E.T. was not the only high profile disaster, nor is there a singular cause of the crash.


Firstly, E.T. was joined by Pac-Man (Atari 2600 version)—both notoriously over-produced, both seeing massive shortfalls in sales, and both notoriously awful.  Pac-Man, it should be noted, was one of the biggest games in the world at that time, along with Donkey Kong.  Any console that got those titles would see some real success.  Coleco famously snagged Donkey Kong for the ColecoVision, and Atari snagged Pac-man, which was essentially a disaster.  Donkey Kong later appeared on other platforms as well—somehow always crappier than the arcade perfect title Coleco had.


Arguably the single biggest problems during the waning years of the 2nd Generation (which lasted from roughly 1976~1984!) was that of simple over-saturation.  There were too many consoles for one—Atari had 2 completely incompatible platforms with the 2600 and 5200—the former of which was the darling of the generation, the latter of which, the pariah due to its high price, gigantic size, absurdly breakable controllers, lack of backwards-compatibility, and lack of games.  There was also the Vectrex, the ColecoVision, the Intellivision (the first 16-bit console), the Fairchild Channel F, the Microvision, the Sega SG-1000, the Magnavox Odyssey2, Emerson Arcadia 2001, and the Bally Astrocade.


That is 11 consoles over a roughly 8 year period.


This is my image search find for “deregulation.”


The Issues


There was no regulation and no licensing.  Atari famously fought to keep actually third party developers (the first of which was Activision) from developing on the 2600.  ColecoVision had an add-on that allowed users to play Atari 2600 games, and the console makers would actually make games on their competitors platforms (of lower quality, of course).  Intellivision cartridges were repurposed to be Atari 2600 cartridges (I have some of these), the Coleco logo would appear on Atari 2600 games.  Pretty soon, the market was swamped with games—but consumers could barely tell the cream of the crop from the crap of the pot.


With the market in chaos, no regulation, and two major high profile releases (E.T. and Pac-Man) being little more than total trainwrecks, consumers promptly viewed video games as a dead-end fad and turned their backs on the industry.  It was all just too damn much.


Stolen from
Metallica’s first album came out around the same time.

This crash was a major turning point for gaming.  It moved the center of the gaming universe from the United States to Japan.  In the same year the US gaming market was crashing and burning, Nintendo launched the NES in Japan, and made the first in-roads to a new future in video games.  Nintendo carefully observed the failures of the US gaming market, and they cracked down—notoriously hard at that.  Consoles featured lock-out chips and designs. Developers were trapped in strict contracts.  They maintained powerful control over their console.  It horrible, but it prevented the kind of unfettered chaos the 2nd Generation wrought.


This model still exists today among the major console makers, but has become much more “friendly” to third party developers and publishers.



Where’s the driving sim for this?

But Wait a Minute, Surely We Know Better Now?


I think one of the best ways to grow as an individual is by making mistakes. We always learn good, hard lessons from terrible, terrible mistakes.  Unfortunately, in my experience, from what I’ve seen of the world—people do not always learn from their mistakes. Not permanently, at any rate.  Why don’t we illustrate this point with horrifying tragedy?


By 1986, NASA was flying high.  The Space Shuttle was a total success.  It was a model of a nation at its economic, scientific, and technological peak.  So much so, that the Space Shuttle had become a pretty standard routine.  Perhaps too routine, as bureaucracy and complacency had set in and become the norm.  In 1986, wanting to avoid further delays and goading from higher-ups in a bureaucratic nightmare, NASA launched the Space Shuttle Challenger in a frigid early January morning.  In a public spectacle, that bureaucracy killed an entire Space Shuttle crew as it exploded without ever leaving our atmosphere.


All hell broke loose.  Why could this ever possibly happen?  With so many checks, so many double checks, so many checklists, so many people to ensure that nothing like this would ever happen?  There is never an easy answer for this kind of thing—but what it ultimately boiled down to wasbureaucracy.  The men in charge knew the O-rings on the booster rockets were unreliable at very low temperatures, but they had to worry about public image, about results.  Suits and bureaucratic nonsense had gotten in the way of safety.


NASA resolved never to let this kind of horror happen again.


Fast-forward to 2003, and we see that learning lessons, even hard ones, is not a magical immunity for repeated mistakes.  NASA had almost 20 years to once again become bureaucratic and complacent and routine.  Once again, NASA’s decision-making was called into question.  Schedules seemed to take precedence over safety concerns.


February, 2003, the Columbia space shuttle burns up on re-entry.  The TPS – Thermal Protection System (heat-shield) had been damaged by debris falling off the external fuel tank.  Bureaucracy had allowed the Space Shuttle to become damaged, and bureaucracy had allowed it to re-enter the atmosphere with structural damage that would very likely prevent that successful transition.  In the aftermath, it was even noted that the Atlantis could have been sent up in a rescue mission. But alas, seven more human beings, and millions of dollars were lost in another very public catastrophe.


NASA had forgotten its own hard lesson.


Now, why the bloody hell would I choose to highlight such horrifying moments in our history for this?  It is precisely because of the level of the horror that I did.  These were incredible disasters, costing millions if not billions of dollars, and worst of all, human lives.  Because people let history repeat itself.


I could just as easily have spotlighted New Orleans, with its history of flooding and hurricanes and reliance on levees—and Hurricane Katrina, where it was clear that the local New Orleans and Louisiana governments had not been paying attention.  Years of warnings that “one day these levees would fail if not repaired” landed on deaf ears until they did, in fact, fail.


Video games. Another win for Google image search.


Yeah, but these are video games we’re talking about, right?


True, human lives are not at stake here.  But jobs, careers, and livelihoods are. And here’s where my point finally comes in.  History can repeat itself, and this industry can always crash again.


We are at a point of over-saturation, once again.  There are more games and developers than ever before, and more platforms than ever.  This year, 2013, is the single most crowded year in the history of console gaming, and features all of the following consoles as new, in-coming, released, or still relevant:


Wii U
Playstation 3
Playstation 4
PS Vita
Xbox 360
Xbox One
Neo-Geo X
Google’s “Chromebox” and
Amazon’s Droidbox as recently noted upcoming consoles.

That’s 17 consoles and game systems.  That dwarfs the entire second generation—and this is just asingle year.  The ColecoVision, Intellivision, and 5200 were all late-comers, hitting shelves not long before the crash itself set in—for a generation that started in 1976~1977 with the Fairchild Channel F and Atari 2600.



Yes, the Wii, DS, and PSP will see 2013 likely as their last year of relevance, and the Neo-Geo X and Shield are mostly niche products—but that doesn’t change the fact that they are here in the marketvying for shoulder room and shelf space.  These seventeen platforms are joined by Windows, Linux, and Apple computers, Android, Windows, and iOS tablets and phones, and browser games.


Platforms and consoles are not the only places that are crowded.  Libraries are crowded as well.  At one time, the estimate I read about Apple store apps and games numbered half a million, and upwards of 5,000 versions of just Solitaire.  This was from an EGM magazine about 2-3 years ago!  Angry Birds-style success is a fluke and not remotely the norm.  There are a lot of potential customers, but there is also almost as much competition.  Getting noticed is nigh impossible—and woe be to you if you actually charge money for your game.


My own experience saw my team’s finished game (GravBlocks) enter Android’s Google Play marketplace and struggle to sell 50 copies.  Mostly to friends and family, low enough to make us sad, but higher than some developers.  We had virtually no advertising other than friends and family that would listen to us, and still outsold another local studio that had a couple million dollars behind their game.  We worked in our free time with no money, and two failed Kickstarters.  Again, another local studio worked full time and had over a million bucks to support them—and they sold worse than us.


Then, of course, there is AAA gaming.  It’s now becoming common knowledge that there are far fewer AAA studios than there used to be, but they employ about the same number of people that used to work on AAA games.  I’ll give you the short explanation of this:  Games take so much more manpower and cost to make that major publishers are making fewer of them with larger teams.  Maybe that sounds fine, right?  After all, that means Mass Effect 4 will look and sound even betterand as it delivers largely the same overall experience as Mass Effects 1-3.  Well, maybe it’ll be different, but can they really afford to make too many changes to it?  Given the way their “fans” assaulted them after Mass Effect 3, I don’t think they’re going to take the risk…


Now, why would I say a bummer like that?  “Well, it’s just going to be the same as the previous games, but prettier.”  Because that’s the trap of this ultra-high-cost AAA development.  In order for publishers to make that money back, they need to scale back the risks.  Risks and new ideas could lead to low sales.  Better to stick with what works.  You just don’t take risks when there’s this much money involved—Grand Theft Auto IV cost $100,000,000 to develop, which is “big-budget Hollywood blockbuster money.”


Publishers may no longer be able to take major risks.  We will be seeing a lot more cookie-cutter games, possibly more annual releases, and a lot more sequels.  We will see far fewer risky ventures, far fewer niche titles, and quite probably, far less creativity overall.


Balk at this if you wish—some of you will.  But look at what sells—sequels that largely deliver the same experiences over and over again.  New Super Mario Bros, Madden (or almost any sports game), Zelda, Call of Duty, Grand Theft Auto, Street Fighter, Battlefield, etc.  It’s fascinating to a point to sit down and play Street Fighter IV and realize that moves I’d learned with E. Honda 20 years ago are still relevant now. They really stayed the course on that one.


Let’s look at some games that really didn’t sell, despite critical praise:  Sin & Punishment: Star Successor, Shadows of the Damned, Bulletstorm, Brutal Legend, Beyond Good & Evil, MadWorld, Okami, Psychonauts, etc.  Being different tends not to sell. If you’re a major studio and you’re shelling out a Hollywood budget to make a game, you aren’t going to be to inclined to put that money at risk.  You’re going to put it in a sure thing.

Fry is always relevant.


Some of you are fine with that, I’m quite sure.  Having worked at GameStop and Best Buy in the past, I’ve seen it.  The guy who bought a console just to play Madden and Call of Duty.  It’s a damn cliché.  But it’s real! Those people exist!  In large numbers!  They don’t want new, they don’t want different, they don’t want anything particularly creative.  And every single year, they make the same predictable purchase.  Pavlov’s dog of gaming.  Activision could totally cancel Call of Duty one year, and these people will probably still walk into the store asking for it.


The problem becomes one of industry stagnation.  When the majority of the games are all the same thing, and there are too few new ideas, concepts, games, or IPs—the industry will become veryvanilla.   Now, hold your further balking for a moment—because Ubisoft recently stated that this is exactly their focus now.


This is an issue that has the potential to cause a crash, but is unlikely to.  What I think is more likely is lowered sales because of industry bottlenecking.  We would see the AAA side of things move from a rich palette with a variety and quantity of releases squeeze down to a limited selection of high quality, though largely repetitive and predictable titles.  This is could lead to a self-destructive circle where the sameness and repetition cause consumers to lose interest, and as such, the industry attempts to fix the problem by making more repetitive and similar games.  Why would they do that?  Because even fewer potential customers means they must try to appeal to an ever-sinking lowest common denominator to reach paying consumers.


We have already seen inklings of this problem over the last generation as more and more titles have become annual franchises, or biennially.  At the start of the generation, it was pretty much just Guitar Hero and sports games that did this.  Now, we have Call of Duty, Battlefield, Halo, Assassin’s Creed, Mario & Sonic Olympic games, and even Zelda is nearing this level.


He’s looking up at the lofty expectations of his future.


The other part of this is that we are likely to see the end of Third Party exclusives.  Your next Xbox, Playstation, and Nintendo consoles are going to be more dependent than ever on their First Party offerings.  If you need evidence of this, look at the X360 and PS3 game libraries.  They could hardly be more identical.  Many have scoffed that the Wii was missing out on a great deal of these games, but we ignored the fact that, at the end of the day, the Wii’s difference is actually a strength—it has a gigantic library of exclusives (and games released only there and one other place) that can largely only be played there.  Any self-respecting gamer would recognize this value as every bit as important as having multi-platform titles.  Without exclusives, a console’s value goes down.


Exclusive games are arguably the number one reason to buy any console, and the console with the most exclusives also has the most value.  This is something Sony has managed not to recognize twice. The PSP was very popular, but was heavily flooded with PS2 games over the course of its life.  The idea of a portable system that allows home-console gaming on the go sounds nice on paper, but in practice, this has never been what sold a portable system.  Nintendo ensuring that their portables had notable exclusives is the reason they have long dominated the portable market, and are unlikely to see that change.


Let’s not forget how many companies like THQ and Acclaim that have now officially vanished, and how many are still on the brink, like Atari.  Atlus is being auctioned off.  Let’s not forget that Capcom, Square-Enix, and others have posted fairly hefty losses—and how some of these very companies seem intent on suddenly entering that over-flooded mobile market.


Speaking of that…



The New Guys and the Looming Droid-iOS crash


This year is seeing the rise of the first ever crowd-funded, totally indie game consoles.  Every other console maker in the past, from Coleco, Atari, Mattel, and Magnavox to Nintendo, Microsoft, Sony, Sega, Nokia, and Panasonic, have been large corporations and entertainment or electronics companies.


Now, we have new companies—so small that a couple of them don’t even have corporate names really separate from their consoles—Ouya and GameStick.  Shield, Amazon Box, Google Chromebox, and the Piston.  That’s an awful lot of new entrants to console gaming.


There’s an interesting element here you may recognize from the ill-fated 2nd Generation.  A near total lack of regulation.  Ouya is so unregulated, it has illegal (and if not that, highly legally questionable) emulators built into the damn thing.  On the surface, this looks pretty good for indie devs—almost no hurdles to getting a game up and running.  Make a game, and put it up for sale.


In reality, this is one of the major pitfalls of the 2nd Generation rearing its ugly head.  A marketplace of unregulated, unfettered game releases had a disastrous effect on the industry back then.  It created overwhelming consumer confusion, which led to consumer apathy, which led to vanishing sales.  Stories existed of discount bins filled with games discounted to pathetic amounts with stores simply desperate to get rid of them.  You know you have a problem when Quaker Oatsand Purina (as in the pet food company) are making video games.


When dog food made a video game.


The Ouya and Shield are very much designed with this mentality in mind, which is likely to be grossly self-defeating.  Ouya, for instance, saw a release of Sonic CD very recently.  The Sega emulators cover Genesis, Game Gear, Master System, Dreamcast, and Saturn.  Sure, Sega-CD doesn’t appear to be directly listed on the website linked, but let’s be honest here:  Who the hell is going to pay to download a Sonic game on the Ouya, when the emulator of questionable legality is just another click away?  This is only part of the reason no one is buying anything on the Ouya, and likely, the Shield either.


Now, I like the Ouya so far—it’s far from perfect and has a lot of flaws, but I think it’s a neat system and I’m going to give it the benefit of the doubt for right now.  However, if these things don’t change (along with the broken “demo-everything” set-up), the Ouya will never succeed, and developers will be driven away in droves.


The wildly unregulated notion of these systems seems nice on the surface, but it breeds images of unprofessionalism, questionable legal status, confusion, and vanishing quality.  As of January 2013, there are over 775,000 iOS apps (including games).  Damn, that’s a lot of choice, right?  Okay.  Tell me which ten are the best.  Name something other than the highly noted XCOM port, Infinity Blade, and Angry Birds.  The Android market is hardly any better.  In fact, given that it’s regulated even less than iOS, it’s almost safe to say that it’s probably worse.  (My team’s personal experience with iOS is that Apple is unnecessarily difficult to work with, and we have sworn off ever attempting to put a game on there again.)


The problem here is that these markets are visibly over-saturated.  Making the next Angry Birds is as much a fluke as anything.  Instant success is not even remotely the norm on phones or tablets—and one might note that regular success or even breaking even can be pretty tough to come by.  This market is headed for a crash.  So much so that the initial strong support of platforms like Ouya and GameStick may well stem from developers desperate to get their games somewhere they might be noticed.


This part of gaming is walking to a future soon likely to be littered with the corpses of indie studios.  When enough studios have failed to garner praise or profits in this overcrowded, under-regulated mess, they will stop making games.  And they may stop in droves big enough to witness another crash.


In other news, Zynga’s horrors have been so wide-reaching that it’s noted that investors have been leaving gaming altogether.  There are investors that do not see the value in putting their money into this industry.


We’ve all been there…

Winding Down…


On the one hand, the industry is moving towards a generally consistent high-quality AAA side, but with fewer and fewer new ideas, concepts, games, and less originality overall.  On the other hand, we have a dangerously unregulated swamp with too many options, too many of which are of an unfortunately low quality.  There’s a lot of creativity there—but good luck finding it.


Now, this is all speculation.  The industry is changing rapidly, and in a variety of ways.  What I see as troubling, you may not.  But what I do find troubling is how AAA gaming is bottlenecking itself and that the reverse of the spectrum is over-saturating itself.   The industry is heavily flooded with the most gaming hardware it has ever seen.  Last time this happened—the start of the 5thGeneration—the industry was left a new entrant at the top (Sony), a stalwart stumbling (Nintendo), and a once-powerful rival failing (Sega).  Behind them, the corpses of the Jaguar, 3DO, Philips CD-i, Apple-Bandai Pippin, NEC, and the Tiger, among others.


I myself question how long Sony and Microsoft can continue to hemorrhage money to sell a game console.  The original Xbox and X360 spent nearly half their shelf lives losing money.  Sony’s overall financial situation has been even worse since the release of the PS3 where only about 2 out of the last 7 years has seen the company as a whole showing profitable fiscal years*.  How much does each Xbox One and PS4 cost to develop?  One hundred, two hundred dollars more than the MSRP?  I’ll provide this interesting, well-resourced link for you to ponder.  Let’s keep in mind also that even with a slight growth, people really still don’t care about the Windows Phone and theSurface Tablets appear to be performing quite gloomily.  And we think the Wii U is the only thing selling poorly.


I am not saying there will be a crash, nor that it’s guaranteed.  Only that it is entirely possible, because even lessons learned the hard way have a way of being forgotten.   Because the industry is currently manifesting some of the problems that hurt it when the 2nd Generation declined, as well as creating all new issues.  Because I question the long-term logic and viability in taking huge financial losses at console launches going forward.  Because Sony, MS, and Nintendo have all seen quite a few losses recently, or for quite a while.  Because the Android and iOS market is eating itself to death.  Because AAA gaming can no longer take risks with creativity.


And to be fair, this blog isn’t looking completely at everything.  That would make it even longer.  Then only two people would read it instead of four.  There are some bright spots.  The increasingly strong sales of the Nintendo 3DS, for instance.  The staying power of the X360 and PS3.  But the point here was to spotlight the horrors haunting the twilight, not the shining sun of the following morning.  Sega has been profitable.  Nintendo has been profitable.



If there was a crash, and those two were the ones that predominantly rose from the ashes… I think I could enjoy that.  We could see a new golden age again, like the 16-bit (4th) Generation.  With everyone overly cautious about game development, but eager for it.  Not that I have anything specifically against Sony or Microsoft, only that my nostalgia is from when the game industry was run by game companies.


*Edit:  It is not my intention to make it look like the PS3 is singularly to blame for Sony losing money. Indeed, there were other events such as the lower electronics sales, the 2011 hacking, and the tsunami that also cost the company money.  This is used as a reference of time.

*Edit 2: I realized I was actually missing a paragraph in the NASA section.



About Nick

Nick is a huge, huge gamer. Not physically, but huge in his love and natural understanding of gaming and game design. Long fascinated by console gaming history, and the concepts behind game design, Nick is also a collector and he cherishes even the terrible consoles in his collection--including the Jaguar and Virtual Boy.