Develop Jury: Recession over?

This week’s Jury Service discusses whether the industry has fully recovered from the global economic downturn.

High levels of studio restructuring, workforce reductions and cancelled projects has left developers approaching the issue with a degree of caution, though there was an air of optimism in the responses.

All have been republished, in full, below.

Order!

Develop Jury Service#9

Is the worst of the recession over for the game industry?

Adam Green, Managing Director, Assyria Game Studio
Well, I unfortunately think there are likely to be more closures as over the next few months for the larger studios that ordinarily work on large scale retail titles, while smaller studios working on digitally distributed content are likely to do ok and may even expand…

Publishers during the recession didn’t sign a great deal of product. This is leaving a quarter next year where there is a lack of new releases. This is a gap they will be looking to fill, and realistically developers can’t produce retail scale titles in the given time, therefore it is likely that publishers will look to the smaller-scale digitally distributed games to fill this gap; as they can be produced quicker, cheaper and can get to market faster.

In addition, many publishers are quite cash-strapped at the moment and are looking to minimize risk, digital product is far less risky in terms of an initial outlay (no need to prints CD’s, product packaging etc), and the margins are therefore higher…

I have no doubt that the retail side of development will recover given time; however for the next few months I think it will continue to struggle until publishers have a bit more cash and are able to spread their risk over several retail-scale titles a bit more easily

Ed Daly, General Manager, Zoe Mode:
Yes I think we should be past the worst of the layoffs from internal studios. But I could imagine more problems for independents as across the board publishers seem settled on releasing fewer and fewer titles, relying on a few key brands that can developed by the remaining internal teams or by long established external partners.

With the heat gone out of the DS and increasingly the Wii market this could leave some independents short of work. As for individual developers, well I imagine it’s a matter of “playing the percentages” and leave the start-ups and new IP till another day.

Lol Scragg, CEO, Cohort Studios
Studio closures are a painful side of independent game development. As most developers still struggle with work-for-hire business models, any downtime between projects can be catastrophic, especially when a typical 50-man studio can have overheads of £150k+ per month. Personally, I think there are two reasons why products are not being commissioned at the moment and only one of those is due to the recession.

Firstly, a fair few publishers don’t seem to have access to the finances they previously did (or it has become far more expensive), which has reduced commissioning. Retail sales may have dipped but I don’t think this is the second reason – I would suggest there’s some discomfort with publishers determining their medium term strategies and pondering when emerging trends like digital downloads will reach tipping points over the next 24 months. These things are concerning publishing execs more than current retail sales, I feel.

Whatever the reasons, commissions are down and that makes for a particularly tough world for indies at the moment. For any independent studio, retaining existing customers has to be key, but there will always be some that are simply unlucky and can’t remain viable for a wide range of reasons.

Looking on the optimistic side, I would have to assume that we are coming towards the end of this lull in commissioning as publishers are going to need both quick turnaround product for Q4 2010, as well as longer term original product for 2011, surely. Maybe there will be a reinvigorated move towards external development as internal costs continue to rocket – good for independent developers, but bad for those internal guys who have to start looking for jobs as internal studio headcounts are reduced.

Given the lack of demand for services, developers have to look at the obvious to stay in business – simply speaking, that is retention of their current customer base! Any marketeer will tell you that selling to your current customer is far easier than selling to a new one, and when customers are reining in external commissions, they are more likely to place a project at a studio with an existing positive relationship rather than take the risk on a new one. If you have worked with the customer before there is a knowledge of each others processes and systems and there (should) be trust between them.

Simple reason tells that with the market continuing to expand, publishers are soon going to have to start placing projects for release in 2011 and most developers who have managed to adapt and survive the last 18 months, should hopefully see the same turnaround in outlook that we see in other industries – we certainly all hope so!

Simon Barratt, Director, Four Door Lemon
As a small independent studio we’ve had a pretty tough time since December 2008 when one of our publishers went under.

We’ve been fortunate that we’ve not had to make any redundancies and mainly thanks to our success with our trivia title QuizQuizQuiz on the App Store managed to finish 2009 quite strongly.

This year started very quietly for us and while we have a few really interesting projects on with partners the work-for-hire front did seem very quiet.

Things do seem to be picking up slightly now and hopefully project funding options will increase as we go through the year.

Developers such as ourselves are having to stay as dynamic as possible to jump on opportunities to first secure our businesses and then hopefully move them forward as the world recovers.