THQ Defunct: Is This the Beginning of the End?

Every year, more and more video game developers are becoming bankrupt, falling into administration and being wiped off the face of the earth. The most recent of these, and arguably one of the largest, is the announcement of THQ’s bankruptcy. Until now it had only really been small, plucky developers but THQ is the first big dog to fall. Some remnants of THQ have been saved by other companies but some like Vigil, developers of Darksiders, weren’t as lucky. Thus many people have unfortunately lost jobs, something that seems almost too common in the industry. Don’t be mistaken, for the winners the industry is profitable and lucrative bringing in billions for some, but if this is the case why are there so many unfortunates in the world of video games?

Average day in the life of a video game developer

At the moment the video game industry is largely top heavy, meaning it is a few companies who hold most of the wealth. Though there may be many different developers, many of these developers are owned by large conglomerates and even the ones that aren’t have their games published by huge companies like EA or Take-Two. With so many layers in the business model the profits of a successful game don’t always filter totally down to the actual developers who created it all and hence although a game may be hugely popular, the developer may not get as much as you’d expect.

Often, a game with a big publisher won’t have just one developer. One developer will get the lion’s share of the work, but much of the work will be outsourced to other teams within the parent company that have no other ties to the developer itself. For example, LA Noire was mostly developed by Team Bondi (who are now defunct), but Rockstar (who are in turn owned by Take-Two, see what I mean when I say business layers) dealt out a lot of the work. The MotionScan system which records actor’s faces, which LA Noire is most famous for, was created by Depth Analysis. 1940s LA was recreated with a huge input from Rockstar North (GTA) and the PC port was made by Rockstar Leeds. Rockstar San Diego (Red Dead) also played a part. LA Noire was a huge commercial success, but remember this profit goes to Take-Two, Rockstar, Rockstar North, Rockstar San Diego, Rockstar Leeds, Depth Analysis, amongst others. This is a huge ‘sharing’ of the wealth and this is from a game that was a success and made money, just imagine what happens when a game doesn’t do well.

Not every developer gets this Life line

Making a game is a long and expensive process. It requires a whole development team to be dedicated for at shortest a year. Games rarely take less than a year to be developed and even hitting the one year mark is difficult and only usually reached by larger developers with huge resources. Hence, a developer can go a long time without any income, particularly if it is a start-up. So when the game is completed and released, the all the developers hopes are pinned onto that game. If the game flops, it can spell disaster. During the process, developers can invest thousands if not millions into a game and if that is not recouped by the game that required that investment, then the company has lost money. Sometimes this can be such a great loss that the company gets such little income that they can’t pay their debts, so go bankrupt, into administration and just hope that someone saves them. There is little room for error in the gaming industry, developers put all their eggs into one basket and if nothing hatches, it’s curtains. This is often the way many developers find themselves at the mercy of big publishers. The developer has a reputation due to good games they made in their past, but their current project has ended in failure. Thus a big publisher swoops in saves the company and now owns them. The advantage of this is that when you have a big company looking over you, you get some of their money for development, you get help from them both business wise and creatively and if anything does go wrong, they can help thanks to their huge cash flow. On the other hand, if the parent company doesn’t believe the developer is going anywhere it can choose to sell or just close the company, and you’re back to square one.

This idea of big companies owning smaller ones happens everywhere in the world. The film industry is also a largely top-heavy industry with a handful of Hollywood companies owning pretty much everything else in existence. Arguably, the film industry is more top heavy than the video game industry and the often have much larger budgets than video games, so why are there not the same level of redundancies there?

This comes back to the development cycle of a game being longer than a year, whereas a film can be all completed in roughly five months with three of those being for filming. In some cases a film can be all done and wrapped up in one or two months! Although a film studio will pin all its hopes on one film like a developer will, the fact that it doesn’t take as long to make a film means, that you go less time without income if the film flops, thus you can keep the bailiffs at bay for a little longer if all goes pear-shaped. 

Films also often have larger budgets than games, so surely there is less room for failure. But turn to the other side of the spectrum, films with small budgets. Simply due to the nature of games, producing a game that is polished and of high technical quality is expensive. It is much easier to produce a film on a low budget. Aside from huge CGI effects and planes exploding most of the best technical qualities of a film can be made with most cameras and a creative director. Also, commercially available editing software is often sufficient in editing a film. Often also, artistic creativity is less dependent on technology in films than in games. Hence, you can make an amazing film on a low budget and though it might not have the blockbuster effect of a big budget Hollywood film, but the artistic merit can still shine through. With a game this is more difficult, as a community we focus so much on graphics and how visually stunning a game is that this makes up a huge portion of our opinion of a game. Creating a Crysis like environment takes time and is expensive and so if a game really wants to be one of the best, it has to invest huge amounts into technical achievements like LA Noire’s MotionScan. Therefore, it is harder for a game to stand solely on its artistic and creative merits, these are often upheld by the underlying technology upon which the game has been created. Also, due to video games’ largely computing based roots, developers cannot keep the same technology. Technology is constantly evolving and hence part of the budget needs to go into Research and Development of new technologies, which is very expensive.

A real danger if you're a "Video Game Nerd"

But then returning to the Big Budget films, Hollywood consistently makes films with huge budgets and consistently makes a profit on them. This is largely because their target audience is much bigger than that of the video game industry. Watching a film is a mainstream activity, there is no social stigma to it. It can be social if you go to the cinema, or relaxing if you stay in and watch something at home. When you say you are going to watch a film, no one thinks “so he’s going to waste 2-3 hours and not do anything productive”. Video games on the other hand have a very different image to the general public (some people still believing they are the work of the devil). Telling someone who does not play games that you are going to stay in and have a few hours on Xbox can have a negative effect. Gaming still to many sounds antisocial, lazy and a damaging way to spend your time. People who watch a lot of films can be considered to be cultural or arty or that they have a hobby. Someone who plays a lot of games can be considered a lazy, nerdy loner with nothing better to do with his time. Video games, though rapidly gaining popularity, are not a mainstream past time and still have a large social stigma that other forms of media do not have.

The entire video game industry is structured so that is cruel and punishes mistakes. Though the victors gain hugely, the losers can often face fatal blows. Large companies still make large profits but small developers can have a hard time surviving. The industry will either become more top heavy with fewer companies gaining more power, or developers must find a different way of structuring business models to survive. On the other hand, we could help as a community and praise artistic achievement on the same level as technical achievement allowing for smaller developers to make a name on a smaller budget. This will also help the indie market grow. The Video Game industry is still young in comparison to other media industries, it is still developing and learning how to work in some cases. There is still maturing that needs to occur with those making games and those consuming it. Video games are not a mainstream industry yet and until it is, it’s difficult to predict where it’s headed. Films are a mainstream industry and have been for a long time, they are a top heavy industry, so there’s a good chance a Hollywood of gaming may emerge, but then again, they are two very different industries.