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Daily Reaction: The Next Gen Epic Fail

November 13, 2012 Written by Dan Oravasaari

The next generation is fast approaching, and with it comes a number of hurdles that will play a major factor in the future of games development. Could rising dev costs put the industry at risk? The Daily Reaction economists of Seb and Dan calculate all the factors and prime numbers they can think of to bring you their thoughts on your wallet’s future.

Dan: We have always known that the cost of development for future titles will go up as the fidelity we expect from each generation also rises, yet will the costs really be that significantly higher this time around? According to GI.biz, who attended the Montreal International Game summit, Epic Games chief technology officer Tim Sweeney believes the costs for next-gen titles could double in cost to produce.

The beginning of the next gen will probably have reasonable dev costs, as publishers will cross develop on PS3 and PS4, simply uprezing, with Ubisoft saying:

For the first two years [of next gen development], because we are making our games on next gen and old gen at the same time, we expect the overall [development] costs will not increase. We don’t know about the third year, when we will take full advantage of the capacity of the consoles.

But when publishers truly begin to focus on next gen only games, it is to be expected that we will see a significant rise in costs. The development of engines will be need to be updated to match the current generation’s power abilities, or entirely redeveloped, along with improved AI and a million other things – all of which will increase costs. Hopefully, much like every generation before it, we will see a drop in engine costs as production can be streamlined, assets reused, and software packages becoming more readily available. The question will be – how will studios find a way to offset the rising costs, especially early on in the next generation?

Seb: This is an incredibly serious worry for gamers, publishers and developers – if it is indeed true. It’s always important to mention both sides of an argument, and Take-Two has suggested that game development could be easier next gen. Epic’s statements, however, come from its founder, a renowned technical mastermind who is involved in the development of the next iteration of the most used game engine in the world. He really should know how expensive game development is and will be.

The thing is, the only way developers expect to make any savings on next gen development is to rely on more and more middleware – stuff like game engines where someone else has developed it and it’s used in a bunch of games. So I’m sure Epic’s Unreal 4 will be used quite heavily in more games.

The problem with this is it leads to conformity. If you look at games now that use Unreal Engine 3, they often share a common look, and they have certain shared technical limits and design limits. It’ll be the same next gen, but probably worse. A lot of developers create proprietary engines for their games to be able to make exactly what they want. Unless they’re a very successful studio, or Sony is randomly investing in them for no logical reason, the studios will move to middleware.

Dan: The reason I believe there seems to be division between developers on the true nature of the imminent costs for future titles is simply that some titles will require bigger budgets than others. This is something that has been a part of the industry from the beginning and is not something that is ever going to go away. For studios that decide they want to be one of the first to develop a truly grandiose title early on, they are going to have to expect to be paying a premium for blazing the trail. The rest will be forced to develop smaller titles, and could risk being left behind when they try to create AAA games once middleware costs have dropped.

Epic Games is not only a games studio, they are also the team behind the Unreal Engine, a middleware tool that has powered countless games throughout the years. So it is understandable that they see the cost of development rising significantly, as they are also developing a toolset that will run on the other titles on new and untreaded hardware. Ubisoft, on the other hand, may not see the need to improve on their Anvil Engine until a few years into the cycle, which could account for their delayed cost increase projections. Either way, the costs are going to go up eventually.

Seb: I’m worried. This could be a terrible ‘Epic’ fail for the entire console games industry. Doubling game development costs simply isn’t viable for most titles. New IPs will dry up entirely – they’re struggling to turn a profit this gen, let alone if they had to double their sales. Hell, the Crysis series has sold 3 million for each iteration and they’re barely breaking even. That’s this gen.

Earlier this year I wrote about why the future is going to suck, citing increased development costs as one of the many, many depressing reasons. Publishers aren’t going to take risks with big games if costs double – that’s a fact. Also in the article I commented on how more and more big time developers were looking into free-to-play. Now, Crytek have huge plans for their F2P game Warface and Epic’s Sweeney has said that “free to play gaming is becoming more and more inevitable.”

We have to hope that development costs don’t double, it would be an incredibly troubling time for the console business. CoD and GTA can survive with that dev budget, but most games cannot, unless they try to force you into different ‘paying methods’ with F2P tactics that aim to get more than $60 out of you.

Everyone says they can’t wait for next gen because publishers will finally invest in new IP. And sure, at the beginning they might, but eventually it could lead to the death of console IPs as we know them.

Are you prepared for the most expensive gaming generation to date? Do you think costs will go up? Let us know in the comments, or by sending Seb and Dan all of your cash so they can spend hold it for you.

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