The world of console game development is very different today than it was just five years ago. In 2007, in the period when Sony’s PlayStation 3 and Microsoft’s Xbox 360 were relatively new, it was still common for small developers with limited funds to develop and release full retail games for consoles. Not so much anymore. The rise of mobile devices like Apple’s iPhone, social networks like Facebook, and digital distribution channels of all stripes changed that ecosystem, but more than any other factor, the dramatic increases in development cost of high-definition video games crippled many studios. With the next generation of machines just around the corner, will the business of console game development contract even further?
Not according to Take-Two Interactive CEO Strauss Zelnick. Take-Two Interactive is the parent company of 2K Games, publisher of titles like Borderlands 2 and next year’s Grand Theft Auto V. Development costs for the Xbox 720 and PlayStation 4, or Durango and Orbis if you prefer, may actually be lower than development costs for existing platforms.
“We don’t have a ramp-up of operating expenses for the next generation,” said Zelnick during an investor conference call following Take-Two’s recent earnings report having been asked how the transition will affect 2K Games’ costs, “I think I’ll answer a question you didn’t necessarily pose, which is, do we believe that titles to be a whole lot more expensive to make for next-gen, and the answer is we do not. In many instances we believe that it may be somewhat easier to make titles for next-gen depending on how the technology comes together.”
Sony is reportedly designing its next console specifically around affordability, a marked difference from the unwieldy, expensive proprietary technology that powered the PlayStation 3.
“In terms of timing, I think we are very mindful of the potential console transition. Of course, we rely on the information we receive from our hardware partners as does the market, and we typically don’t comment on it. We are very mindful of an upcoming transition and the consumer behavior puts a fine point on that, because as we head into the maturation of the cycle we see tie ratios come down and you’re see what happens when that happens.”
The video game industry likely can’t afford another increase in development costs like it did during the transition to current platforms. According to Ibis Capital, the average PlayStation 2, Gamecube, and Xbox game cost between $3 million and $5 million to develop. By 2010, though, the average console game cost between $18 million and $28 million, while blockbusters like Call of Duty cost as much as $50 million to develop.