â??Publishers frown on risk more than everâ??

The impact of the global economic crisis has forced the game industry to play it safe, according to a studio head at a high-profile international publisher.

The source spoke to Develop anonymously for a special report published today: ‘Game budgets in sudden decline’.

He said that risk is “frowned upon more than ever”.

The last 18 months has seen confidence in the industry tumble, with the likes of EA and Sony cutting thousands of staff from their business arms, while Activision and Microsoft make hundreds of redundancies.

Our source said: “Certainly what I know from talking to biz-dev guys, it really seems like budgets are dependent on the IP.

“As I understand it, publishers are still quite keen to fully back their AAA products, and they’re prepared to pay for it. But, certainly from my experience, anything that has an element of risk to it has less investment.

“The global recession is bound to have had an impact on the availability of money – though it depends if the publisher is cash-rich or has credit lines which have dried up.”

Due to this drying up of finances, publishers are only backing sequels to their biggest hits, leaving less for the games that could go either way in a hit-driven market.

The source also pointed out that publishers are “switching to more internally-developed projects” – a measure that allows for greater control over costs.

Electronic Arts is one of the few publishers which has spoken publicly on its reduction plan for external partnerships. The firm’s COO John Schappert recently said EA is “modelling a reduction” in its distribution business as it concentrates on higher-margin titles.

Our source added: “Clearly there are several publishers feeling the financial squeeze, and it’s made them look again at how much they’re actually investing.”

“If a publisher’s not completely certain that their new game is going to be a hit, or come out at a busy time, then they’ll decide quickly to delay it, or even can it.

“Development budgets are only half the story, remember. Even when a project is past-the halfway point, a publisher still has an opportunity to cut their losses, because development budgets only make up half of the costs for a AAA game – the rest of the money goes in the growing need for marketing.”

More explanation on the matter can be found in Develop’s full report.