Charging more for games won't rescue triple-A

The announcement, public backlash and swift withdrawal of Microsoft's ill-fated DRM plans for the Xbox One isn't exactly the brightest or most glorious chapter in the history of the games industry. There are plenty of us who'd like to move on from the discussion - it's been done to death by now, surely? Yet to me, perhaps the most fascinating thing about the Xbox One's traumatic first few weeks has barely been touched upon at all in media commentary. The fact is, this controversy laid bare a fault-line in the industry - it brought all of the fears and nightmares of the industry out of the box under the bed and blinking into the light, revealing the vast chasm that has opened between some game makers and their consumers, and the awful hostility which exists on both sides of that gap.

"AAA development isn't sustainable. That's the fear that won't let some of this industry's most talented and creative people get to sleep at night"

AAA development isn't sustainable. That's it, in a nutshell; that's the fear that won't let some of this industry's most talented and creative people get to sleep at night. The business is broken. Games cost too much to create and release, and don't make enough money in the end. A handful of enormous hits generate most of the profit, while everything else feels lucky if its losses aren't too huge; the industry has always been hit-driven, but never has the gap between the hits and the misses felt so large. Studios stagger from one release to the next without ever seeing a royalty cheque, just delighted that their work on the last game was good enough to get them a publisher contract for the next, probably unprofitable, title - just another shot at making the next Call of Duty and actually working on something that doesn't piss money up the wall.

It's a bloody horrible state of affairs, and even if it's not always that bleak, the reality is there in black and white in publisher financial statements - the exclusive club of money-making franchises dominates the industry more than ever, but gaining entry to that club has never been tougher or more expensive. AAA isn't working. Something has to change.

That's the origin of perhaps the most common and illogical sentiment among supporters of Microsoft's late unlamented DRM policies - "at least they were trying something new". It's the frightened statement of someone who knows that the status quo is broken and is willing to embrace anything new, anything at all, which attempts to change the situation. It's also, however, the origin of a more firmly rooted and yet even more worryingly wrong-headed notion which has taken grip of many people in the games industry. AAA isn't working, this notion says, and the reason for that is that consumers aren't paying enough money for games.

The logic is simple, of course. The problem with AAA development and publishing is that it costs more money than games are making. One solution - logically, mathematically - is for consumers to pay more money for games, thus increasing revenues and magically solving the problem, at least for a while. Proponents of this idea glance around the industry and see that while some consumers pay the suggested retail price for games, the average amount paid is dragged down by second-hand sales, by lending and borrowing among friends and by steep retailer discounts to boxed copies of games. The SRP of a game may be $59.99, but factoring in all of those issues, the actual amount of money a publisher charges for a game, on average, is quite a bit lower - perhaps half as much, or even less.

"The last thing we need is for the industry to turn inwards on itself, honing its ability to extract the maximum possible cash from an ever-shrinking niche market"

The intuitive leap from that understanding to deciding that these practices are all bad, and wrong, and hurting the industry - selfish consumers! bad consumers! - is very simple to understand. Remove all of those factors, as Xbox One intended to do, and you end up with the average price paid by a consumer shooting back up to the $59.99 SRP, just as the publishers intended in the first place. All those bad, selfish consumers pay proper prices, the games all make more money, AAA development is saved and everyone's jobs are secure. It's a tempting and utterly understandable line of argument, but it simply wouldn't work - in fact, it risks being hugely damaging to an industry that's already in trouble.

Here's this approach in summary - "save AAA games by making more money from the same consumers". If you think you can rescue AAA by following that strategy, I'd submit that you're part of the problem, not part of the solution. AAA development isn't in trouble because its consumers don't pay enough money - it's in trouble because the growth of its consumer base has stalled. After years of meteoric growth, AAA games have hit a ceiling - new people are playing games in droves, interactive entertainment has gone every bit as mainstream as anyone dared to dream, yet AAA experiences are utterly failing to encourage new audiences to jump in, to swim upstream and become fully fledged video game consumers. The problems are myriad and they're all interrelated. There's a content problem, a marketing problem, a perception problem; there's an industry which struggles with the difference between "adult content" and "content for adults", which still isn't entirely comfortable with women or minorities, which exists in thrall to risk-shy management that stifles any chance of opening up new genres or speaking to new audiences.

None of those problems are going to be helped in the slightest little bit by increasing the financial barrier to entry into this industry's creations. When your ability to grow your market has hit a barrier, you overcome that barrier with creative talent and brave management, not by hiking your prices to make your market even more unappealing to newcomers. Like I said - if that's your strategy, you're part of the problem.

This isn't to say that there aren't valid strategies which increase average revenue from existing AAA customers - but they're focused on raising the ceiling, not the floor. Limited editions, merchandise, add-ons, events, DLC and a host of other approaches can allow your most devoted fans to spend vastly more money on your game. Focusing too heavily on this side of things risks breaking your covenant with the majority of your audience, but giving your top fans the ability to spend more in order to feed their love of your game is a great strategy that some companies have been slowly mastering over the years (even in the pre-DLC era - how much money do you reckon the biggest fans of Final Fantasy 7 have spent on the game and its various tie-ins and merchandising items in the many years since its release?).

"Salvation must come not from price hikes but from a resurgence of creativity and a concerted effort to engage with a wider audience"

Merchandise, DLC and the like functions, however, to increase revenue by raising the ceiling on how much people can spend. Crucially, the floor remains the same; the step up to enjoying your game is no higher than it ever was before. Raise the floor, and you limit your audience even more than it is already limited - and believe me, it's limited enough already. We're at a crucial point for the games industry right now, and the very last thing we need is for the industry to turn inwards on itself, honing its ability to extract the maximum possible cash from an ever-shrinking and increasingly niche market.

You think that can't happen? It can, and it has. For a sobering example of where this policy of increasing the industry's costs of entry would lead us, look at where Japan's animation industry - which only a decade or so ago looked on the verge of a major international breakthrough - has ended up. After producing break-out hits in the late 1990s such as the internationally acclaimed and hugely popular Neon Genesis Evangelion, the anime industry in the mid-2000s ran into difficulty in further expanding its audience - and began to focus instead on jacking up its price of entry, concentrating efforts on those fans who were willing to pay large amounts for box sets and merchandise. The trend accelerated rapidly, resulting in an industry which - apart from occasional hits which break the mould - is largely focused on producing series which cater to the esoteric tastes of a relatively small band of hardcore fans who are willing to part with enormous amounts of money for Blu-ray discs and high-end merchandise, at the expense of any hope whatsoever of capturing a wider audience. Confined to this virtual Galapagos of its own creation, the stunted anime business is now deeply unlikely to make any significant headway as a global media force. Needless to say, this is not a path which anyone wants to see AAA development following - yet as soon as you start arguing for jacking up the price of entry to AAA gaming, this is exactly the path you are walking.

The fear felt by people working in AAA gaming - or people who love AAA gaming, as I do - is completely understandable. The existing business model is not sustainable, and those who get their games in ways which drag down the average retail price (second hand, lending and borrowing, waiting for sales and discounts, etc.) are an easy target to lash out at. It's the wrong target, though. If AAA games are going to be a thriving part of the entertainment world and not a niche backwater catering to an esoteric slice of the existing audience, their salvation must come not from price hikes but from a resurgence of creativity and a concerted effort to engage with a wider audience.

This isn't beyond possibility, but sometimes, it feels like we've given up on the dream - that we've decided that the existing audience for games is big enough, and nobody else would be interested in the kind of experiences we could offer. Yet we live in a world where offices across the country buzz with chatter about Game of Thrones or Doctor Who, where Avengers Assemble is one of the most successful films of all time - where action, fantasy and escapism has never had greater currency. In this world, there is a path games can take to a bigger audience and a secure future even for expensive AAA development - but coming up with ways to wring more cash out of people for playing games isn't a step on that path. It's a step down a road that leads to oblivion.