There seems to be a lot of talk going on at the minute about the health of the games industry, based a lot it seems from what was perceived to be a fairly lacklustre E3.  Instead of being all gloom and doom about it, I think it’s time to have a look at what’s likely to happen next.  It’s actually a very exciting time to be a games developer as the audience for games is now bigger than ever before.  There’s no doubt that things are changing, so let’s have a look into the crystal ball and see what we can see…

A quick history lesson

All industries and economies are cyclical, and the videogames industry is no different.  Each cycle is roughly 6 to 8 years long, tied nicely to the big hardware releases.  In the PC market the cycles have often been driven by big hitting games that push new technology, often tied to the latest game that id software released. (I am aware this is a very broad generalisation – this is a quick history lesson after all.)

When a new console, or must-have graphics card, came out there was always the rush of early adopters: the hard core group.  These people want to show off their latest purchases, take days of work to play the few games that are released at launch and write their experience on forums across the globe.

Between a year to eighteen months later the price of the hardware drops, more games come out and the golden age for the console arrives: user bases rise, software sales soar.  Skip to the latter years and people have become a bit bored of the latest iteration of what was their favourite game and have become more picky about what they buy.  They want something new and shiny to play on.

We’re currently in the latter stage of a cycle right now.  But there aren’t any new consoles on the horizon.  (I’ll discuss the Wii-U in a future post I think.)  Why not?

Developers aren’t ready yet

I’m not trying to be controversial here, I’m simply stating facts: developers have not yet mastered the current technology sufficiently to bring costs of AAA development down.  In fact, quite the opposite is happening: costs are going up.  John Carmack summed up why in a recent interview with Eurogamer:

John Carmack: It’s interesting in that I don’t feel this current generation is close to tapped out. It’s different from previous console generations. If you go back a couple of generations, like a PSone or something, there were hundreds of programmers that knew what every bit in that machine did, and really had tried all the different reasonable directions you might go on there.

I don’t think there is a person in the entire world that even knows one of the current generation of consoles to that level.

Usually at this point in the cycle code bases have matured and the teams working with it know how to get the best out of it.  That is happening to some degree, but we’re not there yet.  To make a AAA release you either need lots of time (Rage is taking 5 years) or lots of people (Assassin’s Creed II apparently had over 450 at the end).  Ultimately we don’t yet have the tools at our disposal to create content cheap enough to populate the current systems.  And sales just aren’t cutting it enough.  It is possible to make insane amounts of cash but a lot of games aren’t doing that.

So why not?  Well, there’s the lull that always happens towards the end of a cycle.  But there’s a bigger change:

Gamers are changing

This isn’t to say that there isn’t still a whole batch of 18 year olds out there waiting to scream abuse down their headset at me when they kill me in the latest Call of Duty. That demographic isn’t going to change for a long time to come and I don’t think they’ll ever become bored of knife killing me from across a map, even if I have.

So, the early adopters are right there waiting for a new console to spend their money on.  But the spending power of that demographic simply isn’t big enough to support a new round of hardware.  Yet more money is being spent on gaming across the globe than ever before.  So what are all these people buying?

Well, you guessed it: they’re buying games on facebook and their mobile phones.  The types of games that are being bought and the price that they’ve being bought for has rapidly changed.  And here comes the reply from my crystal ball: I don’t think we’re going to see another round of “traditional” gaming consoles.  Consoles as we know it are going the same way as the arcade machines of the 90s and, while we’ll look back on them with rose tinted glasses, we’ll know we’re in a brighter future.

The interesting thing is that I’ve been pondering this article for a while now, and a few days before posting Brenna Hiller on VG24/7 has beaten me to it, which in turn reflects on the conclusion from David Wong’s article on Cracked (which I nearly didn’t link as pretty much every games related article in the last week has done so, but if you haven’t read it it is worth a look).  These in turn reflect on the thoughts of John Carmack, industry analysts and so on that cloud gaming is the future.

I think they’re wrong.

The power is in your hands

Computers get faster and faster all the time, because of Moore’s law (I’m not a relation as far as I know).  One of the top facts I used to love pointing out to people, even 8 or so years ago, was that you have more computing power in your cell phone than Apollo 11 had to land on the moon.  And that was before smartphones came along.  If space travel had progressed at the same speed as mobile phones do, we’d probably be able to get to Mars for a weekend break (assuming we’d found a loophole in the laws of physics).

The just announced PlayStation Vita is rumoured to have close to the graphical computer power of a PS3.  And it’s in your hand.  That’s pretty crazy, and faster machines are only going to get faster and smaller and, respectively, use less power.  And this is why I don’t think cloud gaming is the future.  Cloud computing definitely has a huge role to play in the future of gaming, but I think games running on distributed computers somewhere while you effectively portal into them isn’t going to be required.

With the combination of the amount of power you’ll have in your hands coupled with WiDi technology you’ll be able to transmit whatever is on your portable device onto whichever TV you like.  iOS5 will bring this functionality to iPad2 + Apple TV, and it’s only going to get better.  Cloud storage for games is definitely going to play a big part as well, Steam Cloud has been with us for over 2 years and you can save a game ‘Ruin’ on your PS3 and continue it on your PSVita.  But I think the computing power will be in your hand, that single device that can play whatever you want it to play.

This suits developers too – as the hardware in your pocket gets up to speed with the hardware we’ve working on for the last 5 years, toolsets and pipelines continue to get better.  APIs will develop to the point where it doesn’t matter what platform we’re working on – the game will just work.  There won’t be a single console manufacturer because the hardware won’t matter: the games will.

The games we’ll play

I think games are changing, because the desires of the audience are changing.  There is still going to be a demand for the big AAA games, but people are finding it harder and harder to justify spending £40 on a game they may not like when they can get lots of fun out of something for 79p, and play it wherever they are.  I don’t think we’re quite as close to gamification as Jesse Schell believes, but we’re definitely heading in that direction.

5 simple LEDs on the dashboard of my car have turned driving economically into a game.  My reward is cheaper fuel bills.  The smartphone era has made gaming more sociably acceptable than ever before.  We’ll still create 40-hour epic RPGs and Call of Duty games, and we’ll be able to play them whenever we like, wherever we are.  Against whoever we want.

And it’ll be fun.

Of course I could be completely wrong.  I won’t deny that I’ve struggled a bit with a nice tidy conclusion to this piece, so please jump in and give me your thoughts on where we’re heading.  What happens next?