GDC: How the Economy Affects Games

“It is not a time of panic, says Perrin Kaplan, principal of Zebra Partners, "but it is a time of opportunity.” The former Nintendo of America marketing exec assembled a diverse panel at GDC to discuss the opportunities and tactics that companies can leverage during the economic downturn—and gauge the state of the current hardware platform ecosystem.

When looking at the economy, Billy Pidgeon, a games analyst at the IDC Group, points out that the games industry is cyclical. In the midst of a console cycle, there is generally a shakeout among publishers and developers as they decide to make safer bets that will register with the majority of a console's install base. Now is a time where publishers and developers stop taking risks. The economy is making it worse.

Neil Young, the head of iPhone game developer ngmoco, agrees. “When the economy is really healthy and it is in this super-growth stage, you can afford to make a lot of ****-ups.” As the economy slows and install bases crystalize, you start to see the fundamental challenges within companies bubble to the surface. “I wouldn't say it is recession proof...it is recession tolerant.”

Since the industry is cyclical by nature, it is often in growth phases when others are in downturns. You are seeing a consumer flight towards the higher quality franchises that customers can trust with their $60 dollars. Marginal titles are no longer going to be purchased, he says.

Changing gears, the panel shifted to the discussion of multiple hardware platforms. “The console industry is like a giant engine that pulls the rest of the industry,” says Pidgeon. It's predictable. What has him excited is “new stuff"--what's happening on the PC with free-to-play games and the light, massively multiplayer online game space. He sees that world exploding, and World of Warcraft's death by one thousand cuts as developers release more MMOs that don't require you to sacrifice your entire life to play.

There are too many platforms competing for the same domains, says Young. The living room has three platforms fighting for it, but as Young sees it, the market can only support two competitive companies at one time. The Wii seems to be the clear winner, with the Xbox 360 taking second place, he says. Meanwhile on the handheld side, he predicts that the Nintendo DS will continue to be the prominent brand while the PlayStation Portable and iPhone start duking it out for market share. It will be a much harder choice once the iPhone has established franchises and platform exclusives.

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