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Indie Game: The Movie. Dir. Lisanne Pajot. Perf. Edmund McMillen,Tommy Refenes,Jonathan Blow,Phil Fish. Cinedigm Entertainment Group (USA), 2012. DVD.
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Video Games: An Industry in Transition. Digital image. Statista, 27 June 2012. Web. 9 Apr. 2014.

Video Game Marketing: The New Bible

Scott Steinberg is the CEO of TechSavvy Global and is a frequent keynote speaker and for video games. He also had his own series of videos called Game Theory in which he educated people about game development. In this piece of Steinberg’s, Steinberg attempts to inform people how to market a video game and what guideline people should abide by in order to be successful in making a profit. He both tells what people should do and what people should not do while marketing.

Video Game Marketing: The New Bible

Scott Steinberg

Pop quiz: What’s the biggest challenge that video game developers and publishers face today? Congratulations – if you said “discovery,” give yourself a pat on the back. With hundreds of free to play games, digital downloads, online offerings, social network titles and smartphone apps flooding virtual aisles each week, suddenly, it isn’t just about creating great games anymore. Given infinite selection, growing audience fragmentation across platforms and devices and an endless barrage of white noise competing for consumers’ attention, you’ve also got to find ways to instantly stand out from the pack… hence the importance of video game marketing and public relations (PR).

Just one problem: Developers continue to wrestle with appreciating the value of, plotting effective campaigns for, and otherwise wrapping their heads around the magic of video game marketing and PR efforts. This is of chilling concern as the shift to digital distribution and direct consumer relationships intensifies. Even the smallest, most specialized shops are suddenly faced with the prospect of having to think like standalone publishing houses: Skills not necessarily in their wheelhouse. Worse, having travelled from the Game Developers Conference to Festival of Games and toured several continents as a consultant and talent scout for industry-leading publishers and developers alike, a running theme keeps presenting itself. Not only do most game makers say that they don’t know how to drive public awareness to their titles. Many can’t even identify their core audience, beginning the question “if you don’t know who you’re making a product for, why build it in the first place?”

Regardless of whether your motives are altruistic, artistic or commercial though, let’s be sensible: The more people who play your games, the better. Taking the time to target an audience, build a title that meets their needs and craft features that address their concerns and interests isn’t just good business. It’s also a handy way to boost player enjoyment, and keep your development efforts tightly focused, helping minimize the risk of budget overruns, wasted time and overall feature creep. Those seeking a publishing deal also gain the added benefit of being able to better, and more efficiently, present a clear case for why their game deserves one of precious few slots, and better placement, within a strategic partner’s portfolio.

Even if you’re simply making a game in the off-hours for friends and family to enjoy, understand: Marketing is not the devil’s work. In fact, to survive the transitions presently rocking the gaming business, designers and marketers need to embrace a new fundamental truth – they’re actually one and the same in today’s increasing value-driven climate. Case in point: Every feature that graces your game – level editors, social video sharing, options to team up and tackle quests, etc. – is in fact a form of advertising and promotion. It’s impossible to underscore the point enough, in a world where increasingly social and mobile shoppers have limited time and budget, and a never-ending range of alternate options to pick from. (Many accessible free or for just pennies on-demand right from a device, e.g. Apple’s 187 million strong-army of iOS gadgets, that’s already nestled snugly everyday in your pocket.)

To wit, splashy billboards, glossy print ads or fancy online banners aren’t enough alone in this era to drive continued excitement and awareness. Rather, today’s most effective form of marketing are games and surrounding features themselves, and the way in which they organically drive players to actively want to seek them out and engage with these amusements. Translation: Video game marketing has evolved far past the age of simple push, pull and viral content creation. In this modern, more enlightened day and age, it’s become virtually indiscernible from the end product itself.

Also worth nothing – we’ve entered into an era where adding long-term value and building/managing customer relationships, not simply driving sales and fuelling market awareness, have suddenly become paramount. To this extent, promoters can no longer afford to act purely as a mouthpiece for the message, nor allow creatives to serve in outside supporting roles alone. Instead, they must proactively work hand-in-hand with (and increasingly begin to think like) actual game designers themselves, just as game designers must think more like marketers – building every feature to have a purpose, whether it’s boosting player enjoyment, growing one’s user base or directly driving purchase intent.

Be forewarned: To achieve maximum return on investment going forward, marketing must be deeply embedded into actual product development, ideally from day one, and viewed as an organic extension of any given title or campaign’s core feature set. Because in its purest essence, video game advertising circa 2011 isn’t about just providing a temporary groundswell of support for a specific title or brand. It’s about creating a persistent, standalone entertainment experience with real, tangible worth unto itself.

Given this sweeping change in focus, it’s also important to note. Promotional content must not only be designed from the beginning to live on in a dedicated, persistent space. It’s vital as well that users be given the tools to interact with, shape, share and make of media what they will – as well as connect and communicate with fellow enthusiasts while doing so. In essence, tomorrow’s most effective advertising campaigns are actually metagames in disguise. And, while we’re at it, will be designed so that users actively and regularly seek them out in order to sate their desire to gain exclusive access/knowledge, a perceived boost in social status or tangible physical reward. Make no mistake: Audience empowerment is the key to success. Unbounded by time, budget or political constraints, your user base can act as an eternal wellspring from which greatness springs. And – more pointedly – serve to drive new customer adoption and content refresh rates far beyond that which is within the capacity of any given agency or enterprise to reproduce.

Still, even more crucial to grasp if you want to survive the sea changes sweeping the business is the following concept. Marketing is no longer a one-way street, where value accrues only to the advertiser’s benefit. To succeed with any meaningful degree of effectiveness, it must also serve as a trusted and transparent vehicle through which the user ultimately feels he or she achieves some degree of participation in (and influence over) the shape of the end-product. In other words, commonality begets community, community begets empathy, and empathy begets enthusiasm. Specifically, the kind money cannot buy, and sort which turns video game customers – or shoppers in any vertical, for that matter – into evangelists worth many times more than their weight in gold.

Because ultimately, no advertising campaign in this day and age can afford to remain stolid or static. Nor can a given marketer, however well informed, hope to understand the ever-changing wants and needs of their target demographic as well as members of said audience itself. Give users (especially passionate ones, the very definition of today’s game players) the opportunity to join forces and colour within the lines of your message, and you may be surprised what happens. They might just be happy to ignite interest in a particular campaign facet you overlooked, reboot a stale initiative or provide enough content and/or inspiration to capitalise on the unlikeliest opportunities.

That said, rather than fear this shift in thinking, it's time we as an industry holistically embraced it, and wrapped our heads around the fundamental change in strategic approach this necessitates. In hopes of opening lines of communications between development and marketing, and giving game industry newcomers and vets suddenly faced with the terrifying prospect of operating as full-service publishers a leg to stand on, I've put together the following ultimate guide to promoting, packaging and selling product in the new gaming economy. (Including new business models that can save your company's skin, give any studio more leverage in contract negotiations, and effectively act as ongoing marketing methodologies unto themselves.) No matter the size of your development team and budget, from zero-cost options to grand-scale strategies, you'll find a wealth of hints, tips and advice contained within.

In the first installment of this multi-part series, we recap the biggest challenges currently facing video game developers, publishers and businesspeople today:

Rising Development Costs

With average review scores in key genres in 2011 growing (FPS – 81%, RPG – 80%, Sports – 82%, Strategy – 85%), it's becoming more expensive to compete on an international level, let alone keep up with blockbuster brands. Launch dates are no longer the end of a developer's work either, but rather the beginning as well: It's vital to increasingly treat games as products, not services nowadays, and account for ongoing spend on servers, DLC, regular updates, etc. Although expected to grow 5X to a $5 billion market by 2015, according to Parks and Associates, the switch to social games won't save you either. From deeper, more traditional gaming experiences on Facebook (see: strategy outing Kingdoms of Camelot's 7.3 million monthly active users) to titles with broader multiplayer connectivity and user-generated content/location-based integration (e.g. Heaven's Diner, which involves quests at actual real-world locales and casual photo sharing), these games are becoming more complex and detailed as well.

Greater Competition for Share of Shoppers' Time/Budget

An endless flood of games (30,000+ presently available for iPhone/iPad alone, as compared to just 30 retail releases across set-top consoles in May), platforms and devices from Web browsers to tablet PCs are suddenly competing for consumers' attention and disposable income, as are a growing range of work demands and leisure activities. Lest you discount the danger, consider mobile gaming, expected to be a $10 billion market by 2014 according to Futuresource. Not only are smartphone apps killing portable consoles' share of the market, causing it to drop by 15 per cent to just 66 per cent between 2009 and 2010 in the wake of growing iPhone and Android alternatives, per Flurry Analytics. EA Mobile says that 47% of players play at home, and NPD tells us that home is likewise the most popular place kids enjoy apps as well, taking a chunk out of the time that would otherwise be spent with traditional set-top games (Frighteningly, in the latter case, eight out of every 10 gaming apps downloaded for kids are free too). To wit, a product doesn't just have to immediately stand out from the crowd and grab buyers' attention today – it also has to deliver compelling reasons to stay top of mind, and at a rapidly shrinking cost to the end user.

Less Shelf Space at Retail

Even the globe's biggest retail chains are devoting less room to boxed product, especially in the PC space, and increasingly focusing their efforts on digital initiatives. GameStop alone plans to spend $100 million on growing its online presence through downloadable, cloud and free-to-play efforts in 2011 – $30 million more than it will spend this year on new store openings or renovations. But along with a drop in space at retail, and in retailers' overall market impact, come ancillary concerns with advertising. Not only is there less chance to promote your game via end-caps or point-of-purchase in physical shops. These opportunities aren't being replaced readily or fast enough on digital storefronts. Yes, you can buy space on the Xbox 360 dashboard at a high premium. But what about platforms like the iPhone, or less sophisticated cellular handsets, where oftentimes promotional ops are limited to the name of the game, a single icon and possibly 140 characters of text alone?

Game Prices Dropping

Over half of all Xbox 360 games in May 2011 will retail for $49.99 or under, and retailers (e.g. those who can track inventory in real-time) can implement price drops in a matter of days, not weeks. Contrast the scenario with that of the average smartphone app, which is either free, or sells as a $0.99 - $1.99 impulse buy – and there's tens of thousands sitting in your pocket ready at any time to choose from. The twin pressures of the rising costs needed to keep up with modern quality standards, coupled with growing fan expectation surrounding getting more for the money, are quickly presenting a vise between which many game makers are being mercilessly crushed. As was illustrated with the sudden freefall in plastic instrument-based music video game titles over the past two years as well, downloadable content (DLC) is now cutting into new product sales too, providing value-priced ways to keep even older titles feeling fresh and new. That's good for businesses prescient enough to adapt to online business models (ironically, even Harmonix, often cited as a casualty of music gaming's collapse, says it's still doing one million in digital song sales a month). But it's also a serious wake-up call for anyone who's still hoping to hock boxed product, let alone on an annualised release schedule. Can't gauge the impact? Allow us to put it in perspective: Prior to recent issues with hacked accounts, the PlayStation Network boasted 75 million players, 70% of whom connected to it each week, and had downloaded 1.4 billion combined pieces of content, with free-to-play MMOs like Free Realms also arriving on the service. In other words, even the traditional console landscape is rapidly changing.

Consumers Spending More Time with Digital, Mobile

Nielsen studies show that household budgets are up, but people are spending less money on gaming. Why? They're going outdoors and socializing more, and shifting interest to cheaper, more convenient outings for mobile devices. With nearly half of all full video game downloads occurring on these platforms, according to the NPD Group, it's obvious that smartphone, free to play, web and online outings present a growing threat. Not just in terms of pricing, but in terms of how much time they're eating up that would traditionally be spent with the involving $50-$60 blockbusters needed to keep large-scale firms afloat. On a happy note, digital distribution is also opening new frontiers: Expected to nearly double to a $4.2 billion market on PC in Europe by 2015, per DFC Intelligence, spot markets such as Romania and South America are suddenly becoming viable concerns for selling digital downloads and virtual goods. Because of this, even niche genres – e.g. war games – once seen as dead can live again, as illustrated by hardest of hardcore themed title World of Tanks' 1.7 million players in Russia alone. The new challenge, though: How to reach players via these territories and new operations strategies, where you may not be accustomed to doing business, and adapt to marketing and business models that may be based on making more from a smaller user base than is typical? Interestingly, gaming is also the top activity on tablet PCs – 84% of owners use them for play, says Google AdMob, more than employ the devices for searching online, checking email or reading news. This would appear to be a positive for the games industry, with nearly a third now using the devices as their primary computer. The Catch 22, however: These devices primarily play apps delivered through dedicated app stores, Flash web browsers and online titles – not the traditional AAA products that have, historically, fuelled grand-scale concerns. Worse, 77% of owners say they now use their desktop and laptop less, driving them even further away from traditional retail product

Branded IP, Game Sequels Winning

Of the top 10 selling games in March, only one (Homefront) was based on a new IP. No secret there: Shoppers tend to go with what they know, and are spending money on trusted and proven quantities – e.g. the well-known games they're certain will deliver high-quality experiences, or that they know friends are also playing, ensuring hours of multiplayer fun and more bang for the buck. Publishers are therefore increasingly shying away from innovation and sticking with the trusted brands, franchises and familiar concepts that they believe will ensure predictable and steady returns on investment. This presents a fundamental problem for small shops or more cash-constrained studios: How does your latest creation compete with more well-known and beloved properties and/or you can't afford the up-front licensing fees or revenue splits needed to secure these deals?

Fewer, But Bigger Titles Having More Impact

Following on the above bullet points, we're seeing greater activity around bigger, more blockbuster games such as Red Dead Redemption or Call of Duty: Black Ops. These marquee releases are starting to become so overwhelmingly powerful at retail that they're actually acting as black holes – sucking in and crushing any competition in their surrounding release orbit. Worse for rivals, games such as COD: Black Ops aren't just being purchased less for what's in the box than not (e.g. online multiplayer components) and constantly being refreshed, so that they never collect dust on the shelf (thereby prompting the need for new games to fill the void, as in the past). With 2.6 million players logging 5.9 multiplayer hours on launch day alone, they're clearly cannibalising time and money that would, in previous years, have been spent buying other products. Also worth nothing: As free to play web based titles such as 3D outing Battlestar Galactica Online (which clocked one million users in just six weeks) become deeper and more technically advanced, expect them to present a growing threat as well.

Convenience Winning Over Size and Scale

How much game is enough? Developers struggle to continue to "rightsize" titles, delivering just enough features to justify the price and please consumers. We're not only seeing this design and business strategy reflected in the launch of social network and smartphone games such as FarmVille and Trade Nations, which continue to steadily roll out regular updates, expansions and iterations faster than traditional gaming titles. We're also seeing the rise of web games like Everybody Edits, a Flash title which went from a minute side-project to growing $10,000/month concern through steady, constant expansion. But the real issue isn't whether or not hybrid titles like MX vs. ATV Alive can succeed by offering a base game at a lower ($40) retail price, then upcharging for content on the back-end, as would a typical online microtransaction-based outing. It's whether, if shoppers have 30 minutes to kill and are in the mood for an online fantasy role-player, it truly matters if they scratch the itch by playing World of Warcraft, on their PC or a less sophisticated iPhone and iPad MMO outing like Order & Chaos Online. In other words – if the key variables are simply "X amount of time" and "in the mood for a medieval dungeon crawl," do shoppers really care how big, beautiful and grandiose the game world is? Or would they be equally satisfied with something cheaper, more convenient, similarly thematically styled and just as enjoyable in its own right that equally satisfies the urge?

Players Have Endless Choice

Digital aisles burst with free and impulse buys, making it harder to justify a full-price launch, and necessitating that game makers increasingly look towards alternate business models to monetize, e.g. subscription fees, virtual goods purchases or upselling users micro-transactions on the back-end. But even more troubling is how these trends affect consumer loyalty: If you're paying zero, or next to nothing for a game, what's to stop you from moving on to a competing product? It's well-known that Zynga spends millions in advertising each month managing user churn. And if 67 different Facebook games all promise to allow you to build the city or café of your dreams, and none cost a penny up-front, why not skim or idly browse half a dozen? Note that's before you even ponder the impact of used games, regular add-ons and expansions, and mobile/social/online games that can change at a moment's notice as developers quickly update and iterate them to optimize returns based on analytics and player feedback. Translation: There's no shortage of titles, or competition, to pick from.

Play Habits Are Changing

On the bright side for traditional game developers and publishers, core gamers are spending as much, if not more time with AAA blockbuster titles as ever. You can clearly see this reflected in the rise of so-called "whales," or super users who pay many times more than what you'd expect for a boxed purchased or monthly subscription in online games such as The Lord of the Rings Online. But at the same time, we're also seeing casual consumers become more fickle, and fragment across devices, platforms and play styles, making these users harder to capture. They may squeeze in a few minutes of Angry Birds on the bus to work, play a little Millionaire City between filing TPS reports and then sit down to enjoy half an hour with Portal 2 before packing it in for the day. Also of note, and deeper foreshadowing: Nearly half of Facebook's 600 million users play Zynga games monthly, and titles like CityVille are attracting 100 million players in just 43 days, making them among the fastest-growing, most successful games ever. Consider what this means to your audience moving forward: We're raising an entire generation that will come to think of FrontierVille as a "strategy game," view Restaurant City as a "simulation," and consider Ravenwood Fair their definition of an "RPG." Think about what this means to your future fan base, and the need to design games with core depth, yet casual accessibility – you know what they say about first impressions. We're already seeing these shifts in thinking reflected on the charts: As of April, just one market leader – Electronic Arts – was a recognizable name from the traditional gaming space.

Fans Are More Informed Than Ever

Thanks to user reviews, online websites, social networks and general word-of-mouth, which nowadays travels at the speed of tweet or Facebook update, there's no pulling the wool over shoppers' eyes anymore. If your game is bad, they'll know in minutes. If you slip up and treat fans poorly, online forums can be ablaze without warning. If a rival developer or publisher decides they want to release a competing game in the same general vicinity, they can quickly do it, and steal your thunder. Knowing this, to stay competitive today, you have only one real option when it comes to marketing: Excite, engage and empower end users, as word-of-mouth is everything in the new social economy.

No Room for Average Anymore

Finally, if you look at what's happening on the game development and publishing spectrum, you'll see much is happening at the poles. At the bottom end of the scale, zero- or low-cost outings such as apps, free-to-play online games and web browser based titles are exploding in popularity. At the high end, smash hit AAA releases are gobbling up the lion's share of dollars, and forcing boxed product to go ultra-premium, pairing first-rate solo experiences with a wealth of value-adds including ongoing downloads, expansions and multiplayer options. Everything in between is getting crushed. Think you can ship a nondescript product for $60 and hope to go platinum? Guess again.

Why does the author use the second person so much in the article?

The author intended the article to be used as a guideline and a how-to guide for people wanting to market their video games. As such, he addresses the reader directly to talk about how to approach their own marketing.

How does the first rhetorical question attempt to grab the reader’s attention?

The rhetorical question tries to mimic a question a person would have and would like to have answered. The reader then is interested to know more about what the author has to say about a topic he is interested in.

What is the organization of the piece and how is it appropriate to the genre?

The piece is organized with an introduction then an enumeration of the different considerations video game personnel have with advertising and general guidelines for success. This is a straightforward approach in order to inform individuals of the good and the bad of video game advertising. The list format makes it simple and easy to run down the list and do as the article says.

The State of Games

Polygon is an video game website part of Vox Media. It was formed in 2012 by Christopher Grant and replaced The Verge, the previous video game website that they were on. In “The State of Games”, the members of Polygon detail what the games industry is like in a five part article. Here are three of the parts form the full collection, The State of Development, AAAs and Indies. In each, the staff at polygon discuss how industry and development is at 2012 and what the future might be.

The State of Games

Polygon Staff

The State of Games: The State of Development

If the first four parts of our State of Games series have made any one thing clear, it's that the video game industry is experiencing great and sudden change. Just as in Mary Shelley's classic consideration of science and technology, this metamorphosis is causing pain. But in an industry defined by technological progress, change shouldn't be a surprise to anyone. In the eternal struggle between stability and opportunity, the latter is taking a decisive lead. The good news is that stability may ultimately be the end result anyway.

The modern game developer should expect a constant diet of change and opportunity, as painful as that can be. But these transformations that rack the game industry are also what make it so resistant to collapse; where one business fails, many grow to take its place. And for the young student eager to break into the industry, or the AAA veteran, this is good news.

Stay in School

"Just like games themselves, academic programs are popping up across the globe," Executive Director of the International Game Developers Association Gordon Bellamy told Polygon.

Where once we had only vocational programs like the Portal-producing DigiPen in Washington or the Florida-based Full Sail, we now have a variety of elite university programs like NYU's Game Center or USC's Interactive Media Division offering eager students academic approval of their one-time hobby. And while those examples are all in the U.S., schools around the world are also joining in.

For the self-learners, a community of bloggers focusing on thinking critically about games has taken root. These blogs are written by professors, designers, journalists, and hundreds if not thousands of enthusiastic hobbyists. An abundance of intelligent criticism of games is available to anyone with an internet connection. Gamers are growing up, and being educated, within a historical context that didn't exist 10 or even five years ago. They are now able to learn more about games than just what the editors of a few magazines feel like covering.

The result is a growing knowledge base of all sorts of games. While previous generations of game developers may have grown up wanting to work on Madden, today's game developers have another set of role models: indie developers.

Indie Again

Nearly 20 years after two guys named John founded id Software in a lake house in Shreveport, Louisiana, in 1991, Markus "Notch" Persson turned down what many would consider a dream job at Valve Software in order to start Mojang and continue development of his soon-to-be mega-hit Minecraft. In the late '90s and early '00s, the promise of fame and fortune offered by success stories like id Software mostly evaporated while gaming publishers, and their AAA franchises, grew increasingly massive (id itself was bought by ZeniMax Media only three years ago). Now, thanks to digital distribution, new platforms, and easy-to-use middleware like Unity, it's possible to make commercially viable games in your garage again.

While navigating the rocky shores of distribution options may be intimidating, would-be indies have far more data available to them than ever before. Gaming websites, blogs, social networks, forums, and digital acquaintances combine to provide a density of support that made such navigation all but impossible just five years ago. Want to know why Xbox Live Arcade may not be the best choice for a young studio? Let Hello Games and Team Meat tell you, via conference coverage from video game websites. Want to read up on PlayStation Network's "Pub Fund," in which Sony invests in indie game development and allows indie studios to self-publish? Sure, there's plenty on that.

Shared knowledge allows for a more distributed video game industry, where development can coalesce around new aggregators, like schools, or shared workspaces, or affordable regions in which to develop a game (like Philadelphia, as noted in the sidebar below). It also simply makes for smarter developers, which in turn makes for a more stable industry.

The Sudden Viability of Cheap Games

There's a reason we're all suddenly (too?) familiar with the M word - monetization. Back when most video game developers were indie developers by default, we had experimental models like "shareware," which was successful enough to spread Doom across high schools like a virus. As AAA franchises exploded, and "premium" console experiences became the norm, pricing experimentation died. PC games still enjoyed the "expansion pack" but until the release of the Xbox 360 in 2005, $50 retail games were the standard.

With a generation of internet-connected consoles, a strong resurgence in PC gaming (thanks in large part to Steam), and entirely new platforms like touch-based mobile gaming, web-based social networks, and free-to-play games, the video game industry's focus on a AAA price point has been challenged like never before.

It's a brave, and lucrative, new world for video games, with an emphasis on the "world" part. For much of its history, video game development has been concentrated in Japan and the United States; however, Montreal is now a major capital of AAA game development thanks to some well-timed tax incentives. Blockbusters can come from companies as far away as Espoo, Finland (Angry Birds), or McKinney, Texas (Words With Friends).

As of May, Angry Birds has been downloaded over one billion times, with 648 million of those happening in 2011 alone. To put that into perspective, if Wikipedia's franchise numbers are to be believed, there are more downloads of Angry Birds in the world than there are physical Mario games. Weird, right? And that's from an independent company, founded by three university students in 2003, years before Apple's iOS App Store changed the rules for mobile game development.

When Microsoft closed the Dallas-based Age of Empires developer Ensemble Studios in early 2009, four new studios were formed. Though one didn't survive, the other three have shipped games across the monetization spectrum: Bonfire Studios released WeFarm for iOS and was purchased by Zynga in October 2010, then renamed Zynga Dallas; Newtoy shipped the immensely popular Words With Friends for iOS and was subsequently purchased by Zynga later that year and renamed Zynga With Friends; and the exceptionally prolific Robot Entertainment began work on Microsoft's free-to-play Age of Empires Online, and shipped the XBLA and PC game Orcs Must Dieand the iOS tactics game Hero Academy.

All of these studios have one thing in common: their games are less than $15. Most are free.

All of that output was born from the collapse of a single AAA developer and there are plenty of other examples (including more with "Zynga" in them). There are myriad new opportunities out there for the adventurous student or the veteran developer.

The Changing AAA Landscape

But what if you don't want to make the world's best free-to-play mobile game that totally leverages social? What if you've sharpened your teeth in the AAA space? The good news is, there's now a spectrum of project sizes that have been proven viable in the market. While the buy-in for massive AAA projects expands beyond the already enormous studio sizes to include multiple enormous studios; Ubisoft, in particular, has spread its AAA game development across its global studios to great effect with the Assassin's Creed series, and others — the opportunity for other products along the spectrum from free-to-play to AAA is growing.

You don't have to look far to find former AAA developers who've struck out on their own, forgoing the not-all-that-secure security of working for a major publisher to start their own studios. Last year's award-winning Bastion was made by former EA Los Angeles developers; Kickstarter project République is being built by Seattle devs, including some Halo 4 vets; none other than gaming luminary Peter Molyneux left Microsoft in March to start 22Cans, which he hopes can be more nimble than large developers. The list goes on and on.

Both inside and outside of AAA development, studios have an appetite for new skills that are applicable in this new landscape. Take, for example, foreign languages. While most global publishers have settled on English to organize their teams, being fluent in other languages could land you a spot at a big publisher in Europe or Asia. Or, if you're an indie, being fluent in other languages can help you with outsourcing components of your game. Have a background in statistics and analytics? Boy, has the video game industry got a job for you! The biggest publishers and the smallest mobile developers all paid attention when Zynga veep Ken Rudin said, "We're an analytics company masquerading as a games company."

If you're from the PR or marketing side and you're good with a Twitter account, direct-to-customer relationships are increasingly important as you vie for the attention of the increasingly nomadic gamer and the hard-to-please press.

With great change comes great opportunity. I can't tell you exactly where the industry is headed and if you know, you've probably already put all of your money eggs into that (potentially holographic?) basket. For everyone else, as painful and frightening as it may be to accept, realize that the industry is headed in whichever direction you take it. There is no roadmap and it's a big open world, full of possibility. The change is yours to make.

The State of Games: The State of AAA

We hear a lot of talk. At gaming events, at press conferences. At private functions or over dinner with well-connected friends in the industry. People talk, even when they shouldn't. And we listen, even when we can't quote them.

Here's what they're saying:

The state of AAA is chaos, bordering on impending doom.

AAA development is a high-risk, narrow margins game with only a very few winners, and too many players.

It's chaos.

It's falling apart.

No one is profitable.

The last is what we hear over and over. That no one is making money in AAA games. Costs are too high and the number of units that have to be sold in order to break even is in the mid-millions. Nobody is hitting those marks with any predictability, which means nobody is winning, or so they say.

Now let's look at the truth behind the rumor.

By the Numbers

Industry sales data posted last month by Variety points to modest gains in the last fiscal year by all three of the major third-party publishers, Activision, EA and Ubisoft. Although in each case the gains were posted largely in the fourth quarter, bolstered by online sales and non-AAA revenue.

Ubisoft is the winner of the door prize, posting $48 million in profits versus a $67 million loss the previous year. Virtually all of that growth, however, came from its virtual game sales, which rose 111%, and games for the Wii, which comprise a third of their total revenue.

Also worth noting is that $48 million is the profit off of total revenues of $1.4 billion. That's a 3% profit margin, for those keeping score at home. Which is not great.

EA did slightly better for the year, posting total fiscal year profits of $76 million, versus a $276 million loss last year. But before we get all happy weepy over the turnaround, let's consider that $56 million of that profit came in the fourth quarter, and that EA's money-maker for that period was Mass Effect 3. That game's budget has been estimated at around $40 million, and look at those numbers closely. EA spent $40 million to make $56 million, and they had to ship more than 3 million copies to make a profit at all. That, my friends, is why people in the know are starting to panic. EA's $76 million in profits came in over $977 million in revenues, which is close enough to a round billion that it'd be exciting if it represented more than a 7% profit margin.

Now let's take a look at the 800 pound gorilla in the room: Activision. Activision posted a profit of $384 million in the first quarter of this fiscal year, down from $503 million last year. But hey, $384 million is still over $300 million more than anyone else, so what's to worry about? Plenty.

For one thing, that profit is driven largely by World of Warcraft, which posted flat subscriptions last year for the first time since it launched 8 years ago. Call of Duty continues to dominate AAA multiplayer gaming, but dominating that market will not yieldWoWnumbers any time soon unless Activision finds a way to make subscriptions palatable to console gamers. Even then, it'll be a stretch. Even WoW fans are beginning to question the wisdom of paying a monthly subscription. Which means Acti has another year, maybe three of guaranteed crazy-insane profitability before it needs Plan B to start paying off.

Also worth worrying about, Activision's $384 million in profit comes off of $1.2 billion in total revenues. Not only is that revenue number down 19% from last year, but it represents a $200 million shortfall against Ubisoft's yearly revenues, putting Activision into second place, revenue-wise. Its massive 30% profit margin has to be some consolation, however.

So, those are the numbers, and by themselves they tell a pretty compelling story, but why is the industry in such peril? Why is only one of the major AAA studios earning a double-digit profit margin, and why are everyone's profits coming off lucky gambles or marginal models like virtual purchases and Wii games? Why aren't AAA games making money?

The expense of developing a AAA game is old news. With teams often starting at 100 people and budgets soaring to multiple hundreds of millions of dollars, developing a AAA game is rapidly becoming one of the most expensive enterprises humans can undertake, outside of building battleships, launching space vehicles or making movies.

The Woes

1. Outsourcing

The once controversial (and now traditional) primary means of offsetting this expense, i.e. outsourcing low-to-mid-level coding and graphic development, continues, but the pace of the savings have failed to keep up with the cost of remaining competitive.

For one thing, outsourcing is difficult to scale. Each externally-developed component requires mid-level management, straining the talent pool precisely where it is typically most vulnerable: the creative leadership. Video games are not automobiles. You can outsource production of level design or texture development, but in an artistic enterprise, that outsourcing comes at a cost to innovation and quality control. It requires much more finesse and attention to detail to successfully manage multiple, cross continental game design teams than to import ready-made bucket seats. And the publishers who are most successful at this tend to be those who already have an edge in the market, making it that much more of a losing proposition for studios "on the rise" to catch a break in AAA.

2. Extended console cycle

AAA game development requires a broad base of potential players. No one is going to sink millions of dollars into designing games for a platform for which no one is willing to buy games. Unless that developer is Sony and that platform is Vita, but I digress.

Historically, there have been two or three concurrent AAA platforms. In the United States, as of now (i.e. "current gen") that platform is the Xbox 360, and to a lesser extent the PlayStation 3. These are two platforms inching into their 8th and 7th years, respectively. By the time the next generation of consoles hits the market (experts agree this will happen either late in 2013 or in early 2014 for the new Microsoft console) the current gen will be a decade old. That's more than twice the usual lifespan for a home gaming console.

On the one hand, the longevity of the current generation is a sign of the popularity of the games for the generation. In theory, it makes developing AAA games for these consoles relatively low-risk and somewhat less expensive. In practice, however, these gains are marginal, and are offset by the reduction in "wow" factor of games that look so much similar to games released almost a decade ago.

Developing AAA games for a decade-old console is, by definition, devoid of innovation, and this innovation deficit is opening the door for the PC platform (which continually innovates) to steal market share from AAA consoles and siphon off the attention of the hardest of the core gamers. New technology like Intel's Ivy Bridge processors are providing a compelling excuse for hardcore influencers to spend their gaming dollars on PC platforms and games, instead of on far less graphically impressive console titles.

Not only does the widening technological gap between consoles and PCs siphon profit and attention from AAA games developed for the consoles, but it puts the major publishers into a double disadvantage considering the staggering losses they generally attribute to developing strictly for the PC. Multiple sources speaking anonymously have pegged the PC game piracy rate at close to 90%, meaning only 10% of the people playing AAA games in the PC platform have actually paid for it. A new generation of console tech would cut that source of attrition off at the knees.

3. Graphic reach

One of the biggest fears about the upcoming console generation is that in spite of nearly 10 years development over the last gen, the graphical improvements just won't be all that shiny.

Ever impressive graphics are to most AAA games what ever larger explosions are to Michael Bay films.

As the goal of producing photo-real graphics approaches, there is very little room left for practical innovation. It seems very unlikely that the next gen will represent as significant a graphical leap as the last gen, and it's entirely possible the advances will be so slight as to be unnoticeable to most consumers. What this means on the ground is that your average gamer (i.e. the "broad middle") will be unlikely to see the next gen as a significant enough advancement to warrant investment. Early adopters will be few, and some consumers may skip the generation entirely. Which means some publishers and developers may skip it entirely as well.

The Core Problem

Yet none of this really gets at the heart of what exactly is ailing AAA development. These are symptoms, and serious ones, but not the disease.

The disease is how games are developed in the first place, and, in some part, how consumers judge them.

The reason so many studios are willing to take a gamble on multi-million-dollar AAA development cycles, even knowing the odds of commercial success are slim, is that there really aren't that many other options. You can make a living making indie games, or making social and mobile games, but between that tier and AAA is a wide swath of budget and team sizes at which it is practically impossible to survive.

To explain why, let's compare games to film once again. In the film industry, the craft of filmmaking is relatively well-established, and costs a certain amount in terms of crew and equipment. Filmmakers can save money by cutting scenes and getting creative with locations, but by-and-large, the cost of making of a movie is relatively fixed. Yet the visual quality of the film being made does not change by a wide margin from film to film. Woody Harrelson looks like Woody Harrelson, whether he's in The Messenger or The Hunger Games.

In film, the difference between AAA and everything else is largely in the abundance or lack of computer graphics, explosions and other graphical effects that cost a great deal of money to create. So-called "B" movies may have fewer well-known stars, but are typically just as well produced and look similar to AAA films, minus the dinosaurs and rocket ships. In games, it's all computer graphics. The general consumer metric of quality is the pinnacle of graphical technology, which in games represents 100% of what is seen on the screen, as opposed to film, in which that percentage is much, much smaller.

The rising competition to mainstream, AAA games from the mobile and social sectors is creating a market for "B" level games entirely outside of the scope of traditional development. EA and Ubisoft are investing heavily in this sector for the express purpose of getting a foot in the door of what they believe will be the next big audience, but for core gamers un-interested in this market, the choices are slim. In video game development, there is nowhere to save money without sacrificing quality. "B" games look, to the consumer, like bad games. There is no market for "straight to DVD" or "second run theater" titles. There is no "made for TV." In games, If it isn't AAA, it's bargain bin. There is no middle ground.

This is why Ubisoft, which is concentrating heavily on the low-end market with Wii games and games designed for children and families, is pulling in revenues higher than Activision, which is focused almost exclusively on AAA development. This is why the iPhone, for which games are sold for under $10 and cost merely hundreds of thousands to develop, is currently the most popular gaming platform. This is why the MMO industry, which a half-decade ago employed close to a million game developers, is now shifting to a "free-to-play" model, where consumers pay only for premium extras, at a few dollars a piece.

This is also why the AAA developers are also looking at premium or "freemium" models, in which consumers may still pay for a game off the shelf, but will also continue to pay the more they play. If you think Call of Duty Elite and EA's online pass programs are a flash in the pan, think again. The next generation of consoles (and the one after that) will rely heavily on online distribution, and once that happens, the control of the market will shift from retailers to console makers, and then directly to publishers.

Having learned (through experiments with DLC and MMO subscriptions) that the broad middle will pay continuously to prolong an enjoyable experience, publishers are shifting to extend the process of paying for games into well after their release. The initial cost of a AAA will most likely not decrease, but it will also not go up. How you pay for the increased cost of the game’s production will depend on how you want to play it.

If you are a fan of single-player experiences and deep narratives, expect to get a short, open-ended experience for your initial $60 investment, and then pay for successive installments down the road. If you are a multiplayer fan, expect to get a very basic, no-frills multiplayer shell for your $60, and then pay a subscription for map support, and additional hard money for skins and other extras.

This is not supposition; this is happening. Right now. I predict that this will ultimately become a failed experiment and that the industry will have to take a hard step back to limited experiences with limited price tags (for developers and consumers), but the next 3 to 5 years of AAA development will look a lot like the airline industry; where you pay a little for a seat, then a little bit more for the peanuts.

In an industry where consumers have traditionally paid the same price for a product no matter how much that product cost to create, the publishers have traditionally eaten the margin. Those days are over. The bottom line of the state of AAA is that the cost to produce AAA content is soon to be coming out of your pocket. Get ready.

The State of Games: The State of Indies

By now, anyone reading this has come in contact with Angry Birds, Fruit Ninja or Minecraft - games that have inspired sequels, toys, movie tie-ins, conferences and even Halloween costumes. The indie game renaissance has finally gone mainstream.

And yet, the average person might not know what an indie game is - a game developed without the financial support of a publisher - or why the indie community is important - because it is the first legitimate alternative to the publishing system since the majority of video game designers left their garages for office spaces in the late 1980s.

Times they are a changin'. Expect public awareness of the indie moniker to improve this year, as indie developers and fans begin to attract more publicity with their charity work, dramatic life stories and increasingly popular games.

Indie Developers

The life of an indie developer can be dramatic, as they often scrape by on little to no income. This has led to a rush of mainstream human interest coverage. Earlier this year, the Atlantic ran a profile of indie superstar Jon Blow, and last year The New York Times Magazine told the story of brothers Tarn and Zach Adams, the lonely developers of Dwarf Fortress, a game played and funded by only a few thousand hyper-loyal fans.

At this year's Sundance Film Festival, Indie Game: The Movie, a documentary tracking the lives of three indie game makers, won the World Cinema Documentary Editing Award. Premium cable company HBO and superstar film producer Scott Rudin (The Social Network) saw enough material in the film's portrayal of the indie game scene that they optioned Indie Game: The Movie for a fictional television series. In June, following a short theatrical run, the film was released.

Indie Games on the Frontline of Games as Art

At large, the critical elite are beginning to shift away from the once widely held negative view of games, now supporting games as a legitimate medium, one that can be used for more than entertainment. Indie games, which generally lack the bombast and blood lust of AAA games, are playing an important part in winning hearts and minds.

Tisch School of the Arts at New York University is the latest college to operate both undergraduate and graduate programs in the study of video games, joining institutions like the University of Southern California, Carnegie Mellon and MIT. The NYU Game Center is run by Frank Lantz, who is an indie game designer on the side. His company Area/Code was absorbed in 2011 by Zynga, itself an indie game developer turned publisher. Under Lantz's supervision, the program has spawned a number of talented indie designers, along with programs like annual indie game showcases. In the fall, the program hosts designers speaking to the future of the industry. In the spring, it hosts a Street Fighter tournament.

The ivory tower highlights one of the key differences — real or perceived — between the independent and AAA gaming communities. Where the latter gauges success from profit and Metacritic scores, a division of the indie game community prides itself on the romantic artistic ideal. They create games because they have stories to tell, and believe games are the medium with which they must be told. Obviously this philosophy reaches beyond the indie game scene, but these developers are known for putting that priority above, say, financial comfort.

These artists cover topics commercial publishers will not, like the tough memories from being a child, in Aether by Edmund McMillen, or the emotional toll of undergoing hormone therapy, in Dys4ia by Anna Anthropy. The medium provides first-hand experience, allowing the player to connect with a story personally. Games allow us to walk a mile in the shoes of another, and thanks to indie games, those shoes no longer belong solely to white beefy men.

Small Games, Big Causes

The indie game community at large has begun to distinguish itself as the generous and collaborative division of the broader gaming community. The Humble Indie Bundles allow consumers to purchase collections of popular indie games at the price they deem fit, choosing to split the money amongst developers, along with Electronic Frontier Foundation and the Child's Play Charity. A number of imitators have appeared, each directing some portion of profits to similar causes.

Fans of indie games have also played a role in this communal undertaking of goodwill. Kickstarter and Indiegogo, websites that allow people to pay money to game creators (or anyone, really) in exchange for a promised complete product and other optional incentives, have helped to fund a number of projects that otherwise would have never made it off the ground. Developers can now go to the consumers directly for advance payment, rather than borrowing from a publisher or a bank.

Is There a Difference Between Indie Games and Independent Games?

Artistic integrity and goodwill pervades a significant portion of the community, but that doesn't make the indie development scene immune to money woes. Most indie developers are focused on becoming successful businesses.

Spelltower, developed by digital artist Zach Gage, has sold over 80k units. In an interview with New York Times Magazine, Gage confessed to not liking word games, and designing Spelltower as a sort of antithesis to what he didn't like about the genre.

Sword & Sworcery, developed by Superbrothers and Capybara Games, is the opposite of Spelltower. It is an ode to the AAA games of the late 80s and early 90s. It sold over 350k units on iOS devices, and has since expanded to PC and Mac.

Minecraft is what you might call a AAA indie game. Developed by Mojang, originally the trio of Markus Persson, Jakob Porsér and Carl Manneh, Minecraft has sold over 9.2 million units on mobile, console and PC platforms combined. It operates a now annual conference, the first held last year in Las Vegas, and the second to be held this year at an unannounced venue in Europe. A cottage industry has formed around Minecraft, selling everything from t-shirts to plush toys.

With this level of success, the line begins to blur between indie developer and something less defined. It's an interesting question: Are ultra successful indie games, with large teams and flush bank accounts, still indie?

An example of an independent developer generally not perceived to be part of the community is Rovio, which has seen its Angry Birds franchise nested atop the iTunes App Store since it landed in December of 2009. Like Minecraft, Angry Birds has spawned an entire subculture of fans. Unlike Minecraft, it is developed by dozens of people, and its fans are non-traditional gamers: older women, commuters, the star of Mad Men.

One could argue Angry Birds isn't indie simply because it doesn’t have a legion of gamer fans willing to define it as such.

A New Label

We've begun to see the fissures in the "indie game" space. We have a groups of a handful of men and women pounding code in dark apartments or rental office space. That's one side of the spectrum. On the other are flush juggernauts like Rovio.

In the next few years, I believe the key differentiating factor will be authenticity. Is this an authentic indie game experience, an authentic portrayal of the artist's vision? Was their development process authentically indie? Were they Davids to publishers' Goliath?

Developers connected to big companies or profit-driven projects will be pushed outwards. From the authentication of indie games and the creative collapse of AAA games will rise a middle ground. Creative and ambitious, but financially responsible. Neither flighty artist nor corporate pawn.

Rovio is an example of this in-between studio. Not a giant, but not a small fry. A company that produces what it wants and has enough in the bank to do so without worrying about paying rent. Their games, built by more people, may not have as pure of a vision, but they still take risks. Angry Birds Space is a weird, creative take on a property that could have turned out the exact same for the next half-decade. 

The state of the indie game industry is so strong that it’s birthing a whole new development culture. A rival for both itself and the publishers. We're witnessing the game developer middle class crawl from the primordial ooze to new office space, not owned by a publisher but by themselves.

What is the association between the AAA and Indie parts with the State of Development portion at the top of the article?

The general State of Development section gives an overview of the subjects in both of the subsequent sections. It describes the growth if indies and the role that they play along with describing the role that the AAA titles have in the industry. It contrasts the rebirth of indie games with the long established AAA industry and sets the stage for the next two parts.

How does Polygon’s coverage of AAA titles and Indie titles differ?

The coverage of AAA titles talks about the problems that AAA titles have while being developed and how companies are taking big risks with big money. It is shown as an industry plagued with problems that have to be fixed. On the other hand, Polygon covers Indie games as tiny gems that are able to produce entertainment. It is portrayed as a small company trying to make it big.

In the State of AAAs, how does the part that describes people’s preconceived opinions of AAA titles serve as an effective way to illustrate what the real problem is?

The short, terse statements stating people's ideas of what is happening in AAA game development helps people not only learn about what most people think about when it comes to AAA titles but also allows Polygon to compare the reality with what people think. In addition, the bluntness and the length of the statement cause people to draw their own attention to the problem and has them think about their own opinions.