Economic Climate Still Bumpy for Game Studios

By Matt Ployhar

Over the last few weeks, I’ve been cleaning out my contacts database. This is something I’ve been dreading for a long time, since the database currently has something like 16,000 contacts in it. That’s right: 16,000. Frankly, it was getting a bit unwieldy and difficult to find active contacts, so it was time for me to roll up my sleeves and just tackle it.

Well, after three solid days of cross-checking to see who was where and what the status of the company was, my ISV (independent software vendors) contacts tab alone went from nearly 13,500 contacts down to a little over 10,000. I’m guessing only a third of my entire database still contains what I’d call “active” contacts. So what happened?

I’m now kicking myself for not tagging them all from the beginning to give a more exact accounting of the total number, but what I uncovered was definitely a downer. Of the 3,300 contacts I had to put in my inactive tab, over half of those contacts and their respective companies were casualties of going defunct in the past three or so years. This is now up to, and including, the most recent announcement of JoWooD’s bankruptcy. The other half of those contacts and companies were casualties from the period of 1999 to 2007.

The range of stories attached to a lot of these is also a bit nutty. Cases of employees being called redundant, companies going into administration, defunct, Chapter 11, acquisition … the list goes on. A few stories have come up of entire staffs not being paid for months on end. Also of executives being charged or indicted. In so many cases, I was seeing some great contacts actually leave the games industry altogether. There’s really no appropriate way for me to convey all this, so I’ll just say one word: Ugh.

The other big story behind all this is that it’s really been the small- to medium-size ISVs who have had the roughest time of it. Many of them were acquired by larger ISVs. Not necessarily a bad thing, but I believe there always needs to be a healthy and vibrant mix.

Lastly, I’m sure there are some of you out there who follow the PC Gaming Alliance [1] Horizons report. Some of you might be asking how there can be all this growth occurring in PC gaming at the same time as all the layoffs and defunct companies. That is largely a function of globalization and new innovative formats and business models picking up steam. A very large proportion of the gaming market has shifted to the Eastern Hemisphere. So the growth is most marked in those markets.

However, even domestically, PC gaming still continues to do relatively well, which is rather miraculous when you consider that there isn’t a single entity investing or dumping billions into the PC gaming ecosystem like you see occurring with the console manufacturers. To spell this out, it’s largely the advent of digital distribution, free to play/freemium, microtransactions and so on.

I don’t want people to walk away from this depressed about my observation. It’s merely an observation with no real methodology attached to it. However, I’m definitely interested to know: Has anyone else seen a similar trend or tracked the games companies over the past decade or more to actually apply more diligence behind my observation here? And to the small- and medium-size game studios: Hang in there, and be extremely cautious of tying yourself too closely to a single platform.

Matt Ployhar focuses on graphics, multimedia and gaming in Intel’s visual computing software division [disclosure: Intel is the sponsor of this website]. Prior to that, he worked at Microsoft for more than 12 years. His passions are graphics and gaming. And when he can get away from his computer, he also enjoys the great outdoors and reading.