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The video game industry is at a crossroads. Gaming has gone from something only geeks and nerds dabble in, to something approaching acceptance on the level of movies and television. Video games are consistently growing in scope, with larger teams and sky rocketing budgets. Can the industry’s current model continue to work?

Jason Rubin, co-founder of Naughty Dog, doesn’t think so.

“We’re entertaining more people in more ways than we’ve ever done before. But from a profitability standpoint, the console Triple-A stuff is, right now, not quite working.”

He sees a promising future for video games, but claims that publishers need to change their business models or risk being swallowed by those that do.

“We have lay-offs at Activision that happened a couple of weeks ago, we have very large lay-offs at Electronic Arts – both of them are very large – that’s not a sign of a healthy industry.”

This may be confusing to gamers who often hear stories of record sales. Why is Activision, publisher of Call of Duty: Modern Warfare 2, having to make large lay-offs? Rubin suggests that the problem is in how games are sold:

“The business model of putting it on a CD changed an $18 packaged good – $20, $24 depending what was in it – into a $2 packaged good. Suddenly, games became incredibly profitable again – the Crash Bandicoot era of $2 million games selling nine million units was the heyday, to a certain extent, of this cycle . . . We’re now at the tail-end of that cycle. We have… $80 million games being made, being put on a disc that still only costs $2. But we’re selling it through stores at, inflation adjusted, the price we sold it through stores ten years ago.”

Are publishers trending away from Triple-A games? The success of Plants vs. Zombies and services like Steam don’t go unnoticed. Even Jason Rubin, who was involved in series like Crash Bandicoot and Jak and Daxter , left Naughty Dog in 2004 to work on casual games with his social game startup Monkey Gods.

Personally, I don’t think this signals the end of Triple-A titles, but rather a major change in how gamers receive their media.

Where is gaming headed? What does this entail for hardcore gamers and fans of Triple-A titles?

Source: CVG

tags: PC, PS3, Wii

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