Bizarre Situations

Published as part of our sister-site GamesIndustry.biz's widely-read weekly newsletter, the GamesIndustry.biz Editorial, is a weekly dissection of an issue weighing on the minds of the people at the top of the games business. It appears on Eurogamer after it goes out to GI.biz newsletter subscribers.

It may just have scored an enormous commercial hit with the latest Call of Duty title - which probably means sighs of relief all around, after the embarrassingly public split with Modern Warfare's creative team earlier in the year - but all is not rosy in Activision's garden, it seems.

Indeed, the main activity in said garden this week has been pruning. Iowa-based Budcat Studios, which the publisher picked up two years ago and put to work on PS2 and Wii ports of Guitar Hero titles, has been shut down, and many jobs have been cut at the firm's US QA department - more than would be normal at this time of year, and probably a direct reaction to slowing sales in the music game sector.

It's always unfortunate to hear of any industry layoffs, but news of Budcat's closure and the QA layoffs was eclipsed by a disturbing statement from the publisher which said that it is presently mulling over the future of Bizarre Creations. The British studio, formerly most famous for the Project Gotham Racing franchise, was bought by Activision in 2007 and employs around 200 people.

Activision is careful with its words - it's considering a sale, it says, and is presently simply exploring its options. The giant publisher acts as if stung by the implication that it's going through the motions before shutting down the studio, and everyone undoubtedly hopes that it's not just saying that, although "exploring our options regarding the future" is a term commonly taken to imply that the aforementioned future is looking pretty bleak.

How did it come to this? How does a studio go from being a darling of the industry - and there's no question that Project Gotham Racing and Metropolis Street Racer before it were stupendously successful and well-loved games - to being considered more liability than asset?

The reason is not simple, and is not solely related to Bizarre's output. Certainly, its recent outing in the James Bond franchise hasn't been well-received - although then again, the last time any James Bond videogame was genuinely well-received, the N64 was still the world's most powerful home console - but its previous title, Blur, saw the studio back on its home turf and delivering a broadly well-liked racer which picked up over half a million sales.

In Activision's view, however, this constitutes a failure to find a "commercial audience" for the Blur franchise. Our first hint as to what's gone wrong lies right there.

The games business has always been a hit-driven one, and we've always accepted the basic contention that a large number of games flop and fail to make back their investments - but the firms behind them are supported by the smaller number of games which do stunningly well and turn enormous profits. In the middle lies a fairly thick layer of games which do "okay" - enough to earn back their costs, pay the salaries and the rent, keep the lights on and keep everything in the black.

Larger companies, with their fingers in many pies, succeed in this environment because they can survive a few flops off the back of a decent hit. Smaller firms, aside from those content to follow the work-for-hire path, either produce a hit and get rich, produce a string of mid-level titles and stay in business, or go bust, dispersing their staff elsewhere and often giving rise to new start-ups from their ashes.

That's the model, and those in the industry all know and understand that model. However, there's been a change in recent years which has tipped the balance - a fairly simple and direct change in the ratios involved. Put bluntly, the threshold at which a game is considered a "hit" has become much higher. Costs have risen, driving up the risks in the market. In tandem, boxed game prices have failed to deflate appreciably and have even risen, which also makes consumers more risk-averse.

So we simultaneously see a flocking behaviour among consumers, with high-profile titles and well-established franchises being favoured more than ever, and a concentration strategy among publishers, with the entire resources of large firms being poured into an ever-narrowing selection of surefire hits. When the risks are this high and the gap between success and failure this wide, the old approach breaks down a little. Your hits don't support so many misses any more, and the middle layer, the games which did okay and provided bread and butter for a host of studios, simply disappears.