BBC report says price of game production has become a 'nightmare' for studios
Sure it's not breaking news for the industry professionals reading this - the price of games development is higher than ever when it comes to big triple-A titles - but a report on the BBC says that studios may be in danger as costs go up.
Comparing the costs of big blockbusters such as Halo 3 (budgeted at around $30m says the BBC), the average price of the PS3 game (around $15m) and the hits of yesteryear such as Pac-Man (which cost $100,000), UK industry execs spoke out on the sharp rise in costs, with Blitz' Philip Oliver saying "This is actually having a severe hit on the industry."
He added that the requirement for teams to devise new tools and keep costs low are placing tough demands on studios.
EGDF chairman and Tiga CEO adds that with margins becoming so tight "It is not unlikely that after Christmas, we may find there are some casualties.
"Companies would have banked on a lot of their expenditure coming good during the Christmas period, when a good quarter or more of games are sold in the UK and in Europe.
"Lack of success could mean downward share prices and some companies getting into difficulty."
However economists and analysts have added that the situation creates long term benefits.
"The key feature in all of these digital goods is that they are expensive to create in the first instance, hence the heavy research and development outlay," said Professor Quah of the London School of Economics. "But subsequently they are practically costless to reproduce in billions and billions of copies."
He added: "Because of these very high upfront fixed costs, the risks that these entrepreneurs have to undertake are likely expanded from before. That's not necessarily a bad thing, though. The fact is that with risk comes reward and the two go hand in hand. What we see is that the economy becomes much more in-your-face, much livelier, much more real for the people who are engaged with it."
Independent games consultant Nick Parker added: "There's long-term rewards in this. These products will last five or six or seven years and will increase the number of consoles out there, driving software sales.
"Obviously at the moment, it's high-risk, because there aren't so many consoles being sold. In the long term, there's the opportunity to get the money back. That's why we are in the business."