Games business grows with "persistent fads"

The games business grows and evolves because of persistent fads, which entice new consumers and bring new money into the industry, while a loyal core base of players can be relied on to buy and support more traditional blockbuster games.

That's the view of EEDAR's Jesse Divnich, who sees Microsoft's Project Natal as the next in a line of fads during the current generation that have included Nintendo's Wii, fitness games, casual gaming and the music genre.

"Our industry works off persistent fads. I say the word 'fad', and some publishers hate it, but fad shouldn’t have this negative connotation. It's a good thing," said Divnich, in an exclusive interview published today.

Project Natal is "going to be the greatest thing for this industry since the Nintendo Wii," according to the analyst. "Because consumers out there are already addicted to motion-based gaming, but we've realised the limitations of the Wii and we want something more.

"I hate to use the word 'gimmick', but that's what we need as consumers. We need a feature to stick out and grab our attention and being able to advertise a peripheral that completely drops the need for a physical input device, like a controller, will be huge. Although I personally believe Natal will deliver a very deep and sophisticated gaming experience. However, the non-traditional and casual side of the industry will look at Natal as an exciting new product that they will probably get bored of within 18 months," he warned.

Divnich said that fads are good for the industry – especially when they can last over three or four years like Nintendo's Wii, sales of which have begun to slow this year, or the music genre, which peaked in 2008 despite more titles released for the category in 2009.

"Consumer’s appetites change so quick in this industry that even the best products will fail without some sort of hook or gimmick to them. Entertainment is a crapshoot."

While the traditional games business – core games for dedicated console and PC consumers – is always reliable, Divinich said that less risk is being taken as costs are so high if a publisher or developer fails to find the audience.

This is where social gaming companies such as Playfish have been able to succeed and expand in the market – they have experimented with multiple cheaply-made titles until the right one has resonated with consumers.

"That's why Zynga and Playfish have done so well – they've just tossed Jello at the wall and seen what sticks," he said. "That used to be the philosophy of the old PlayStation and PlayStation 2 days. Research in games did not exist in 2000. If it sounded like a good idea, it would be made to see if it worked. It's much riskier launching a game title in this generation than ever before because of the increase in failures. And the extreme increase in costs."

The full interview, where Divnich, where he praises the PSPgo as "technology ahead of its time," the rebound of Sony's PlayStation 3 and why the music genre is in decline, can be read here.