Is the Future of Social Gaming to be Decided by Traditional Industry Heavyweights?

Last week saw huge changes at gaming giant EA Games. They announced 17% (1500 employees) of their workforce are being laid off to potentially save them $100 million in the coming year. They also announced the $275 million USD acquisition of Playfish with a further $25M in options and $100M if certain undisclosed targets are met by the end of 2011.

This purchase has gone a long way towards validating the virtual goods model in social gaming and may signal for other big name gaming companies to enter the social gaming market. It also makes us think about indie developers vs. big developers in the social gaming space.

In the AAA game industry large companies dominate. They have two major advantages over indie developers in this space:

• Money (multi-millions) to invest in large and complex games.
• Relationships with major publishers to handle advertising, marketing, localization, and many other factors that allow for a game to be successfully released on a global scale.

In the social and casual gaming space, indie companies have had an advantage of being able to take huge risks. Whereas AAA developers and publishers work within proven models and gameplay mechanics that almost guarantee to make profit. Millions are invested and typically an ever decreasing percentage (due to ever increasing costs) of profit is found at the end.

As with many businesses this means small indie groups develop original, innovative ideas that are later purchased by larger companies. One example being Westwood Studios, creators of the Command and Conquer series, who were purchased by EA in 1999 and have had their franchise continued on through EA since.

A necessary relationship can be seen from this, since larger and indie studios can benefit from each other to achieve large commercial success. Unfortunately, a balance was not found as two issues arose. Developing AAA games has become increasingly expensive due to the demand of complex gameplay and graphical experiences. So much so that AAA games now require investments comparable to Hollywood movies. In the last 5 years this barrier to entry has become almost impassable for independant developers. The second major issue is the competitive release window for new games, which are often eclipsed by newer titles in a matter of weeks. So indie developers who make great games, are often missing (if any) opportunities to properly market and release their games. Take for example the game Startopia, released by Muckyfoot in 2001. It won awards and was a great game but sold very few units.

The lack of indie games released for consoles and PC has directly impacted bigger companies because there is now less well established IP to be purchased. It has created an imbalance , causing the AAA games market to stagnate. Indie titles have not disappeared however, they are beginning to find a new success in the world of social networks, mobile platforms, and console download services (XBLA, WiiWare, PSN, etc).

The world of social and casual gaming is dominated by indie developers because they do not suffer from the aforementioned disadvantages. Thanks to the help of cheap middleware solutions such as Flash or the Unity game engine, indie developers can create great games without a huge budget. Some of these middleware solutions, such as Unity, allow for simple deployment of your game onto multiple platforms (Mac, PC, iPhone, Wii, web). It has also been easier for these games to be noticed from free viral marketing on social networks such as Facebook. When indie developers take aAdd these with the fact that the audience is already collected in one place and you have a powerful business opportunity.

This is where the entrance of traditional gaming heavyweights into social becomes an interesting question. It will be interesting to watch to see what extent this will effect both costs of competitive development and the ability of games to attract attention and audience. Hopefully this will ensure a better balance so that the games industry can stay creative rather than continue to recycle the same old tired material without end.