Why Publishers are obsessed with 'Games as a Live Service'
Updated: Jan 23, 2020
Let's chit-chat about 'games as a live service' for a minute (or five).
In a recent interview with Gamespot, Amy Henig - a former head writer and director for the Uncharted series - revealed why the Star Wars game she had been heading over at Visceral Games before the studio's closure was canceled. According to Henig, EA is "looking more at games as a service, the live service model. More open-world stuff... versus this more finite crafted experience."
I have no doubt that this interview will only spark more concern from gamers about the future of AAA singleplayer focused titles, but it's not exactly unexpected. The 'big three' multi-platform publishers - EA, ActivisionBlizzard, and Ubisoft - have all debuted 'games as a live service' IPs in the forms of Anthem, Destiny 1 and 2, and The Division 1 and 2 respectively. While Destiny 2 was recently repossessed from ActivisionBlizzard by Bungie after 'failing to meet ActivisionBlizzard's financial expectations,' 'live service' games aren't slowing down. Two 'live service' titles are still in the process of releasing - Anthem just came out on February 22, and The Division 2 is slated for release on March 15. Meanwhile, Destiny 2 - again, now divorced from ActivisionBlizzard and (hopefully) safe within the hands of Bungie - is about to see a significant content update with the release of the Joker's Wild season.
Although the releases of 'live service' games are often rocky - take a look at Anthem right now, which is in hot water for crashing Playstation and Xbox consoles, amongst a variety of other poor design decisions - it's no surprise that big publishers are pushing them so hard.
It's become widely accepted at this point that the financial expectations of AAA publishers - or to be more accurate, AAA investors and shareholders - are probably unsustainable. You don't have to believe me, but the writing's on the wall for this one. ActivisionBlizzard laid off 800 employees in early February after CEO Bobby Kotick announced that while the company's "financial results were the best in our history, we didn't realize our full potential."
Although ActivisionBlizzard claimed that the layoffs were part of an effort to divert more manpower to its development teams, it's also likely that the company laid off the employees at least in part to facilitate stock buybacks for the company. ActivisionBlizzard's shares dropped a whopping 44 percent in value over the last fiscal quarter of 2018, more than any other publisher. The ActivisionBlizzard layoffs - again, despite record profits - have been touted by many as just the latest symptom of unfeasible shareholder expectations negatively affecting the AAA gaming market, and I can't say I entirely disagree with that assessment.
Remember how Bungie re-acquired Destiny 2 from ActivisionBlizzard earlier this year because the game 'failed to meet expectations'? Well, Destiny 2 isn't the only game to miss financial benchmarks in recent years. EA announced that despite pushing 7.3 million copies, Battlefield V failed to meet expectations. Square Enix stated that its 2013 Tomb Raider reboot Rise of the Tomb Raider failed to meet expectations after selling 3.4 million copies. Even worse, sequel Shadow of the Tomb Raider had similar first week sales despite costing Square Enix an estimated $135 million to produce and market. That's a lot of AAA titles across a lot of different genres, all 'failing to meet the expectations' of their publishers.
Here's the thing. I don't doubt that some games - particularly those that experience marketing blunders before releases such as Battlefield V - do indeed sell less than projections would indicate. But once AAA games failing to meet financial expectations becomes a trend, you have to ask yourself: is it more likely that all of these games are underperforming, or that publishers and shareholders have unrealistic financial expectations for AAA videogame sales?
Since 2012, EA's value has risen from $4 billion to $33 billion. Activision's value increased from $10 billion to $60 billion over the same period. Those are meteoric growth-rates, and they aren't sustainable. However, shareholders expect constant growth from their investments - otherwise, they don't see the ROI that they want. This puts publishers in a bit of a predicament. Making games with cutting-edge graphical fidelity - such as EA's latest' live service' effort Anthem, for example - isn't cheap. Putting up huge billboards on Time's Square to market games - which EA also did for Anthem - isn't cheap either. As a result of these investments, publishers have to expect games to sell huge numbers to see significant profits. If they don't - well, ActivisionBlizzard lays off 800 employees to 'streamline' development teams and buy back stocks.
Although I hate to give them sympathy, AAA publishers are in a bit of a 'damned if you do, damned if you don't' situation right now. They have to spend hundreds of millions on development and marketing to make shiny new AAA titles and increase the value of their brands, but taking risks with unique IPs or singleplayer experiences will never sell copies to please shareholders. The solution? 'Games as a live service.'
In my last article, I wrote a little bit about how GTA Online had helped make Grand Theft Auto V the most successful media title of all time. GTA Online's microtransactions and DLC - its' live service' elements - contributed hundreds of millions of dollars at the very least to the total $6 billion in revenue that the game has brought since its release in 2013. The financial success of GTA Online foreshadowed just how much money 'live service' games were capable of generating, and soon other publishers were jumping on board.
In a AAA economy where it's almost impossible for publishers to 'meet expectations' (I'm starting to really hate typing out that phrase), 'games as a live service' makes sense as a business model. It allows publishers to hype up one game and then devote money to that game post-launch, avoiding the costs associated with developing and marketing multiple games. It also allows microtransactions and low-effort DLCs to be sold at absurd mark-ups, helping publishers recoup the revenue they may lose from other titles.
'Live service' games can also be great for branding, allowing publishers to rake in accolades after supporting and improving a game that was initially buggy or underdeveloped at launch. For example, Destiny 1's The Taken King expansion was widely credited with making Destiny 1 the experience it should have been on launch. This effect was also noticeable for Destiny 2 after the Forsaken expansion launched, for The Division after patch 1.8 released, and for Rainbow Six: Siege after a few months were taken to improve that game's net code and performance. We'll likely also see this happen with Anthem, although fortunately The Division 2 seems to be releasing a good state judging from its betas.
In other words, the 'live service' model is a way for publishers to appease shareholders momentarily. However, what will happen when even 'live service' games stop making money for investors hand-over-fist is anyone's guess. The big question is: what does this mean for singleplayer games?
To this question, I'd like to pose the answer: nothing we don't already know.
My prediction is that big, AAA singleplayer games and new, innovative IPs will start to be published more and more by console-makers who can afford to be loss leaders in the industry. I'll show you what I mean by that. In 2018, two of the biggest singleplayer releases - God of War and Spiderman - were published by Sony. Red Dead Redemption 2 was also noticeably favored by Sony, hitting the PS4 with exclusive content.
While Sony is a publisher, it's also a console-maker and a huge electronics manufacturer in general. Sony, unlike EA, ActivisionBlizzard, or Ubisoft, can afford to be a loss-leader and publish games that 'fail to meet expectations' because they recoup their revenue in other departments. For Sony, losing money to brand the PS4 as the most reliable or valuable gaming console is worth it, particularly with the next generation of consoles right around the corner. For publishers like EA, ActivisionBlizzard, or Ubisoft that don't own consoles? Not so much.
In the future, I suspect that more and more singleplayer titles will either be pushed by console-makers - Microsoft, Nintendo, and Sony - or will come in the form of great indie games such as Bastion, Dead Cells, and Celeste. On the other hand, I expect that publishers such as Square Enix, EA, ActivisionBlizzard, and Ubisoft will shift their focus to 'live service' model games that can be milked for profits years after release.
Of course, this won't always be the case. For example, developer CD Projekt Red of Witcher 3 fame receives government funding that allows the studio to make well developed singleplayer games at a leisurely pace. Singleplayer games founded in already successful franchises such as 4A's recent Metro Exodus will probably continue to be developed. Lastly, publishers will undoubtedly continue to hedge their bets on IPs that they consider to be surefire hits, such as Sekiro: Shadows Die Twice, a game from developers FromSoftware of Dark Souls and Bloodborne fame that's being published by ActivisionBlizzard. Overall, however, I'm willing to stick to my guns and bet that more and more new or unique AAA IPs will be published by console-makers, while other big publishers will move more and more towards the 'live service' model games.
I don't think singleplayer games are dead. If anything, the fantastic singleplayer releases that we got in 2018 should only serve to highlight the fact that singleplayer games can and will thrive when given a chance to do so. The more interesting question to me is: what happens when 'live service' games' fail to meet expectations' for big-name publishers? Will we see a total implosion of the videogame market? Will publishers lay off hundreds or even thousands of employees to compensate for unrealistic shareholder expectations? Only time will tell, but I have to say - I'm not all too eager to find out.
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