Gaming Industry: Game Over

Entrepreneurship, Game

 Gaming industry is very risky business, just like any other entertainment industry. Generally players have to bet in a very narrow set of products, which demand high volumes of investments. If we think it thru for a project manager perspective, we have a very very very risky business to invest. These companies invest mountains of money in very few products that we very weird correlation on quality/

Big investments

Latest graphics, motion capture, Hollywood actors for voice overs all cost money. Trucks of money. Like films, the AAA titles consume millions of dollars to be built.

Small portfolios

Because the volume of money required to create a game is very bulk, the companies that want to great a portfolio (publishers) have to choose the projects very carefully and criteriously. Even that, they can only concurrently create a very narrow range of games.
Essentially they have to bet on very few horses to generate very large amount of money to finance another cycle. The problem relies on the worst scenario: the current bet do not pay out. The whole company puts itself in a very dangerous financial position.

Game is Art

But the final analysis must consider games as art products. You cannot follow a formula to make people to fall in love for your product.

Now always they pay off. The recent cases of THQ and 38 Studios illustrate this.
38 studios, the makers of the very good Kingdoms of Amalur: Reckoning, recently backrupted. The company took around 100 million from the government to create a AAA title, but the game, while selling well, didnt sell the amount needed

THQ invested in few AAA titles that demanded loads of money. When the failure rate rises a bit, the whole operation start to be financially compromised.

Homefront, unfortunately, will be remembered as the milestone for the THQ’s potential fall. Unfortunately because it was a critically acclaimed game (at least it receive good greats), but due external reasons it didnt sell well to the point that compromised the THQ cash flow. ¬†Homefront was being considered the cashcow internally, the new IP that would generate loads of money, safetly. But the forecasts were nothing but dust.

It basically answer the question several gamers make: why game makers keep build sequels? Now you know…