ChillaxedUpgrader :
Hi Pinhedd, (sorry about the delay getting back on here
Really like your post - thanks. Your two drivers for this situation have made me think, and I would really value your opinion about my ideas. Anyone of course is welcome to respond.
"why even bother developing a singleplayer game that costs twice as much?"
Essentially the fact is that single player games have lower profit margins. We know they can be profitable from the work of, for example, Bethesda, who make wonderful single player games. Before online multiplayer came along, every games company was profiting from single player games. Therefore the current situation is clearly divided into two separate markets: Multiplayer and single player. The multiplayer market is being exploited well. But put yourself in the shoes of a games studio shareholder: You see the single player market being considerably under-exploited, despite the fact that it brings proven profit. The fact that the margins are lower is essentially immaterial, because we know that the company could further stimulate its own growth by exploiting both markets to the full, rather than just one. By analogy: Say Heinz, for example, produces two versions of its tinned soup: one under the 'Heinz' label and the other labelled for various supermarkets. The margins for each version will almost certainly be different. Therefore one is lower... Now if Heinz were to behave like many of the games producers, it would axe one of these two brands on the basis that the margins are lower - despite the obvious existence of a significant market for the product. In this scenario, the company's shareholders would justifiably be up in arms, as they are missing out on profit from a significant market. To conclude this bit: Any shareholder in games companies should be wondering why on earth the company isn't maximizing its profits, by exploiting the single player market.
"multiplayer content can't be pirated efficiently in the same manner as single player content can be"
This is true as far as games on removable media go. However, look at Steam and Uplay. I'm pretty certain that reports of piracy on these services are either minimal or non-existent. So it is entirely possible to sell single player games without any significant threat of losses through piracy.
Would you say that my comments are reasonable? Are there other angles on this that I am missing? I'd really appreciate your thoughts on this.
Cheers,
Chillx
What you describe is a core element of corporate strategy. There is no deterministic way to pick which markets to pursue when approaching the question from the perspective of marketing. However, it's a little bit more clear cut when approaching the question from the perspective of finance and that's what shareholders are concerned with.
A company has a certain amount of capital to work with and dedicate to pursuing new and existing projects. This capital is drawn from retained earnings and new investments.
Lets say that a fictional company has $100,000,000 in its coffers to do with as it pleases.
A profit maximizing company will pick projects that have the greatest net present value and pursue them in a top down fashion.
Right now market research and industry trends would seem to indicate that those projects would be comprised mostly of sports franchise iterations, cheap mobile pay-to-win games, and AAA budget multiplayer titles such as CoD/BF4/Titanfall.
Established singleplayer franchises such as The Elder Scrolls, The Witcher, Fallout, and Assassin's Creed will be on there too, but usually a little bit farther down. Existing popular franchises have immense brand power and are far less risky than creating brand new intellectual property.
If a production company has an unlimited amount of funds to work with they will pursue any and all profitable projects available to them. However, rarely do companies have sufficient funds to do this, and very rarely do they ever run out of new ideas that might pan out. They have to pay out some of their retained earnings to shareholders (if they are incorporated) and the cost of debt financing increases as they take on more debt.
The above is a very idealistic and very academic approach to corporate decision making. In reality, it is often wise to invest in projects that are a "sure thing" even if the possible returns are lower than would be acceptable with existing financing. This is called hedging, and serves to offset the risk of failure in other projects. Franchises such as The Elder Scrolls will be profitable no matter what; they may not be as profitable as some new IP but the risk of failure is much, much lower. Skyrim is approaching it's third birthday yet it's still being shopped around on Steam, almost as if it's on autopilot.
I'm not sure if I discussed this above, but the big publisher's change in focus from single player PC content to mobile and multiplayer PC content has left a rather large vacuum in the market (which you described) which is being filled by independent and non incorporated developers/publishers that do not have to answer to anyone except their own families. They can pursue development of new IP and risky ventures because they are passionate about them with far less regard as to whether or not they will be profitable.
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