I’ve formed a lot of opinions about the game industry over the years. And I recent got the chance to spout them in a conversation with Steve Goldstein, president of Turtle Rock Studios, the maker of the Evolve video game published by Take-Two Interactive’s 2K label in February 2015.
At UCLA, we gave a talk before a group of game industry lawyers from the Video Game Bar Association. We were encouraged to talk about the whole industry’s trends, and we started about by noting how conservative the console game industry has become, with huge budgets that are forcing publishers to be very careful when it comes to launching original games. Sequels rule, and that’s a sad reality.
We also talked about the cycles that favor the creation of new kinds of games and platforms, as well as the cycles where big game companies either retrench or expand their investments in games. Joseph Olin, executive director of the Video Game Bar Association, peppered us with questions toward the end.
Here’s an edited transcript of our conversation.
Image Credit: VGBA
Steve Goldstein: For the past four years now, I’ve been the president and general manager at Turtle Rock Studios. We’re an 80-person developer. Our latest console release was Evolve, which came out in 2015. Prior to that we created Left 4 Dead, which was a big hit a while ago.
Since that time, up until last year, we’ve been a one project studio. But starting in the tail end of 2016, we split the studio into two departments. One is focused on service-based games and the other is focused on VR.
GamesBeat: When you’re looking a few years out and you’re going to make one bet on one big game that will take you a few years to make, how do you plan that? How do you decide what to target, what the market will be like, what the audience wants?
Goldstein: There isn’t an opportunity anymore, unfortunately, to try to guess what’s going to happen a few years out. The industry’s changed quite a bit when it comes to large-scale games. When you look at the console environment, that’s no longer a space for independent developers to work in. Our last game had an enormous budget, yet it’s competing with games that are internally developed by publishers which have budgets that are anywhere from two to four times the amount that we spent.
That’s a problem in a couple of ways. One, publishers don’t want to make bets on new IP given the cost of development. Two, if they are going to make a new IP for console, they’re probably going to do it internally, just because they feel they can control those costs better. How many new, successful franchises have been created with the latest generation of consoles? Bloodborne?
GamesBeat: Nintendo’s Arms is coming soon.
Goldstein: Well, Nintendo is a separate issue. Their games don’t cost as much as development on PlayStation and Xbox.
GamesBeat: Horizon Zero Dawn.
Goldstein: It’s not a franchise yet, but I agree. That’s two. How long have the consoles been out? 2013? That’s not a good sign, guys. When you look at the state of the industry, if we can only name a few new franchises for this console generation, I don’t see how they continue.
Image Credit: Dean Takahashi
GamesBeat: There’s a trap for the industry, though. There’s no better way to squeeze innovation out of games than to leave behind this tent-pole strategy. Justin Bailey of Fig just did a talk at our GamesBeat Summit. He pointed out that there used to be a tent-pole strategy, where you had a big flagship game to make all the money and pay for your bets on everything else. EA in 2008 had 60 games. Last year it had eight, all of them big bets and none of them was really experimental.
Goldstein: It doesn’t even have to be experimental. It’d just be nice if it was another IP, something that’s not going into the fifth or sixth iteration. Going back to what you asked earlier, how do we figure out what we want to do? We figure out what fun game we want to play, but we also look at the market and say, “Here’s a hole right here.” We start targeting that. But we don’t target boxed products anymore. We just won’t approach publishers with a concept where we say, “This’ll cost $60 and then we’ll make another $50 worth of DLC.” It doesn’t make sense for us as a business to get into that space. There’s no benefit for an independent studio.
It’s unfortunate. I love consoles. I like making cool stuff and pushing the envelope. But it doesn’t make good fiscal sense anymore.
GamesBeat: There are still areas where there can be some innovation, like on the PC and mobile. Dead by Daylight is a brand new IP that came from Behaviour Interactive. It’s an online game about trying to escape from a serial killer. You have one killer and four victims.
Goldstein: Sounds familiar. [laughs] It’s a great example, actually. We put out Evolve with a similar concept, four versus one, but it was an enormous experience in a $60 box. We look at how Dead by Daylight got picked up. It had a $20 price point, cost $7 million to develop, and it’s a much smarter move for doing that kind of innovative stuff. It’s a small ask for the user to embrace it, and it’s also a small ask when it comes to development.
What I’ve seen in the market lately—the games business is more Dickensian than it’s ever been. It’s the worst of times for guys making big budget titles, but it’s the best of times for people who are able to put something out that cost them $5 million or less. What Justin’s doing is fantastic. I’ve also seen lately that the elusive “game fund” is starting to happen now. These funds are coalescing where they can put in $1-2 million to see of an independent studio can develop something well.
But when that happens, all those companies are going to be PC-focused. Console will be an afterthought for them.
Image Credit: Turtle Rock
GamesBeat: It’s interesting how these cycles happen in the game industry. You think it’s going all in one direction. Disney, for example, invested heavily in games, and then decided to blow it all up. They let go of Avalanche Studios in Utah, the maker of Disney Infinity, and shut the game down. That was a huge investment. But then Warner Bros. picked up about half of that developer. Yesterday NBC Universal announced that they hired Chris Heatherly, who had been doing mobile games for Disney. He’s going to create a 50-person game publishing operation, focused on mobile and VR.
There’s a cycle here that happens. While Disney lost its religion as far as internally produced games, now Universal is picking that up. There are still opportunities. It’s a $110 billion business. Parts of it are growing, like mobile games. While in many ways it’s a bloodbath right now, it’s currently $38 billion and it’s projected to go to $65 billion by 2020. There’s continuous renewal in the game industry. It does grow bigger over time. But there’s a lot of risk.
Goldstein: It depends on where the renewal is coming from. You’re talking about multinational conglomerates expanding their presence in the games business. That’s great for those companies, but then the question becomes, what happens to independent developers in that ecosystem while this is going on? It feels like Amazon is almost taking over the industry with the amount of hiring they’re doing, but that’s all being built internally. You have a lot of people, a lot of more senior people getting pulled into these larger organizations and, I think, leaving this chasm where there used to be a lot of independent developers. Those are all going away.
The reason we still have a lot of independent developers in the business is largely because of VR. I’m sure that anyone representing developer clients, you’ve probably done at least 10 or 15 VR deals in the past year. For us, working with Oculus was pivotal. We weren’t seeing that ability to take on a larger project, and yet here come these guys and they need a ton of content quickly. Google is like this as well. They’re offering the best deals in the industry. They’re incredibly developer-friendly.
Going back to the panel yesterday, when they were talking about all the various contract points that publishers will focus on—these guys are great, because they understand that they need an independent development community to exist. In order to make sure that community exists, they’re incentivizing developers to make cool stuff. Under those deal terms, you’re making royalties right off the bat. One of the coolest things that’s happened to us in the past couple of years is we actually had a profit distribution to our employees because of what we were able to achieve on Oculus. That’s never happened with large-scale development.
I’m hoping that, as other companies start entering the VR space and also see a need to populate their hardware with a bunch of content, that they follow suit. Maybe we can dial back terms that have become very difficult for developers now in games and adopt those friendlier terms from VR. Those are the things that are going to sustain this business.
Image Credit: VGBA
GamesBeat: I get a drift from you that the life of an independent game developer is hard and getting harder. But collectively, if you see the opportunities for independent developers, that’s encouraging. There’s always some other source of wherewithal to get your games done, whether it’s money or new platforms. And there are cycles to this.
I remember when Microsoft entered the console business. They were seen as the great hope for a revival of the American game development industry. It had weakened a great deal. Everyone felt like they were dependent on the Japanese platforms. Microsoft funded a lot of ideas out there, and some of them were very bad, but one of them was Halo, which made the Xbox take off. Eventually Microsoft figured out where their hits were coming from and reinvested a lot of money there.
They went through a cycle during that console generation, and you can see Oculus doing the same thing now. Facebook put $250 million into VR startups. They pledged to put in another $250 million. But they’re starting to cull things now. They just decided to cut Oculus Story Studio. You can expect that these patterns happen, and it’s good for developers who—they might view VR as the part time job they take while they figure out what to do in the future.
Goldstein: I’d disagree with that. I think a lot of developers are looking at VR and—we’re certainly looking at it as a requirement, a skill set that we’re building now because it’ll be an expectation in five years. Story Studio is a unique situation. Yes, Oculus is, I perceive, culling on the basis of some things are working and others aren’t. But Story Studio was a weird situation for them because that was an internal content team for Oculus. Facebook has never really been about building its own content, rather having others build it for them. They may have decided to go back to that old way of thinking, the more institutionalized way of thinking.
Question: Isn’t part of that just, it’s early in the cycle as far as hardware, and you need hardware installation to be able to sell your software? You’re spending X to make a story-driven experience and it’s not appealing to the early adopter of your platform. So you close this down, and then when there are six million headsets in circulation you come back to it.
Goldstein: That’s a fair point too. They were Rift only. That’s a rough installed base right now. Whereas Gear has 7 million units out there, and probably much more than that as the S8 takes off this holiday. VR is going to happen. It’s just that the way it’s going to happen will surprise people. I don’t think anyone expected mobile to be the thing that most people experience VR as. Everyone pictured the big-budget crazy experience. But in reality, when you show up at the AT&T store and they hand you this thing, and your kid grabs it and puts it on and has a great time, that’s how VR is going to become mainstream.
GamesBeat: John Riccitiello has a nice comment about how everybody thought VR would be like this (straight-line growth), and reach $100 billion at some point in the near future, when in fact it was going to be more like this (a curved growth path that starts out slow). You still get to $100 billion, but it’s a much slower takeoff than everybody was originally forecasting. You adjust your business to deal with this kind of curve as opposed to a straight line.
Jason Rubin, the head of internal games at Oculus, was saying that VR is the hardest medium, or the hardest kind of product, to develop these days. There are no rules. You have no idea if you’ll get it right. You’ll fail a few times before you get to the right product. You have to do a lot of prototyping. And you can’t shortcut that process. You can’t just say, “I’ll make the successful one now.” You have to continuously experiment and deal with the fact that a few early efforts are going to fail. That’s a hard bet for any kind of business person or investor to make. It has to be fueled by the Facebooks of the world.
Goldstein: The weird thing about VR, one of the things I think about—when you think about the very early days of the games business, or the home entertainment business, where you had—even before the Atari 2600 you had Pong. Pong was this giant console you’d attach to the antenna inputs and that whole deal. That had a pretty rapid adoption rate. It was a mass market thing. People could grab it, take it home, and have a good time. That led to further advances and development of technology that resulted in the 2600, and so on.
With VR it’s almost the opposite. VR is giant corporations determining that they are going to set their stake in what the future of computing is going to be in 10 or 15 years, and then trying to force that on the mass market. It’s fascinating to watch. I don’t know how long it’s going to take for them to get there. Facebook is going to do it. Microsoft is going to do it. Google is going to do it. But it’s a long term vision that’s not going to be adopted by consumers in the same way that other electronic entertainment devices were many years ago.
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GamesBeat: I don’t necessarily believe that VR is the high school project sort of thing. I do think it’ll be transformative. It’s going to go by different names. Augmented reality is part…