How Big is Big Enough?

British publisher Eidos is back on the auction block, if a report in national newspaper The Daily Mail is to be believed. Admittedly, anything written in the Mail deserves to be taken with a pinch of salt, but it's so rare for the tabloid to write anything about videogames that isn't "Murder Simulators Make Toddlers Stab Each Other With Spoons" that a sober report on the games business actually ends up with a peculiar aura of believability about it.

Besides, the industry itself has been abuzz with this particular rumour all week - and more importantly, it makes sense. Eidos has had what might charitably be described as an awful year. Top management have quit, studios have been closed, and the dread word - "restructuring" - has loomed over the company, the corporate equivalent of vultures flying overhead.

I should point out - before it looks like I'm simply being unpleasant to poor old Eidos - that the company is far from alone in this situation. In fact, although its recent problems have been somewhat embarrassingly public, they're far from unique. Many of the industry's mid-sized publishers are suffering from exactly the same underlying difficulties as Eidos - perhaps even most of them.

First, there's that basic lack of scale. The games business used to have a single 800-pound gorilla (EA), one platform holder that actually mattered (Sony), and a scattering of minor rivals whose relative differences in scale paled in comparison to the huge scale difference between all of them and EA.

Today, the jungle is a lot more crowded. EA is still a pretty big primate, but it has been joined by other companies who jostle for the top spot among third-party publishers. Mergers and acquisitions have led to the creation of behemoths like Activision Blizzard, while companies like Ubisoft have successfully grown their businesses into the top tier through more organic means.

Moreover, there are now three platform holders all vying for position - each of them keenly aware of the importance of first-party publishing to their ambitions, and each of them therefore representing a competitor as well as an opportunity for third-party firms.

It's not just top tier firms which are bulking up, either. Look at the second tier of publishers, and consider how many of them suddenly have double barrelled names - Namco Bandai. Square Enix. Sega Sammy, and most recently, Koei Tecmo. In each case, the exact reasoning for the merger was different (access to IP, obvious business overlap, and financial support respectively) but the underlying factor was the same. Size matters - now more than ever.

As a direct result, a company like Eidos - which used to be seen as a relatively major publisher - has started looking rather diminutive. So, too, have several of its compatriots - Midway (sold this week for $100,000, but with a shocking debt bill attached), Atari, Codemasters and their ilk are minnows in a pond where the other fish keep getting bigger.

The lack of scale isn't, of course, an insurmountable obstacle to releasing hit videogames - but it certainly makes things harder. The budgets for next-gen game development are high, and the damage that can be done by cutting corners is immense - witness the poor reception for Atari's Alone in the Dark on Xbox 360, a game which could have been a runaway hit in the hands of a company with the scale and finances required to more thoroughly test, hone and refine it. Moreover, with television ads now de rigeur for almost every major game launch, and spend on retail POS increasing all the time, the cost of effective marketing is making life even harder for smaller firms.

Ironically, the newly competitive landscape of the console market doesn't help. Developing for both the Xbox 360 and the PlayStation 3 turns out to be tougher than most insiders had originally predicted - and if you want a Wii version of your title (it's the best-selling home console on the market, after all), you'll need to develop a totally new game, in effect. The outcome is that developing a multi-platform hit is more expensive, more time-consuming, and crucially, makes more demands on staff than most firms had planned for.

There's a second problem, however, which afflicts many smaller-scale publishers - not necessarily those on the short list I offered a few paragraphs ago, I hasten to add, although each of those has suffered from this problem at some point in the past few years.

This is, simply put, the problem of mismanagement. Smaller publishers are by no means cottage industry sized firms - they are large enterprises by anyone's standards - but for some reason, many of them have retained vestiges of the cottage industry management which they started out with.

The result? Overspending, poor work practices, shoddy products, weak sales and utterly lacklustre treatment of valuable IP. There is a litany of failure spread across the past decade of the industry's history which can be laid right at the door of rubbish managers and executives who would defend their positions by saying that they've been "in the business for years", which gives no indication, of course, as to whether they've had their eyes open, their brains engaged or their creativity in gear during those years.

This isn't to say that "veteran" is a dirty word - just that it's not necessarily a meaningful or useful one. The industry's best "veteran" executives don't hold on to their jobs and salaries because they've been doing it for fifteen years - they do so because last year's results were brilliant, with the previous fourteen being merely a footnote. Altogether too many of the industry's decision makers, however, can't claim that - falling back instead on past glories (and in some cases, largely stemming from an unfortunate period when videogames became a refuge for the music industry's least wanted, those past glories weren't even in this industry and may not actually have occurred at all).