DESTINATION GAMES — Current state and future of digital games economy
The global computer game industry surely is a major driver of 21st century innovation. Every expert working in digital economy agrees upon the fact, that games are pioneering technology, creativity and growth unlike any other economic sector. And yet, this young industry is facing huge challenges in 2016. Quo vadis, games?
((For a German version of this article click here.))
“Games are more popular than white bread.”
Quite a memorable sentence that instantly sparks a radiant smile and some question marks in the audience. It is December 6th, 2016 and we find ourselves right in the middle of the conference “Games & Education 2016” in Cologne, Germany. Numerous speakers and around 250 participants have come together to discuss the latest situation within the computer & video game industry; more specifically: current topics ranging from the tight job market and career paths through young talent and up-to-date education up to current academic topics and new technologies.
No doubt: The interest in a games industry job is still unabated. Economic conditions for game designers, developers, producers and founders seem bright, as growth rates in this relatively young sector are increasing year by year: The German games industry grew by 4.5 % in 2015 and generated revenue of 2.81 billion EUR (nearly 3 billion USD) — more than Germany’s national football league “Bundesliga” (season 2014/2015).
Still, the past few months shed a darker light on the total figures, with 2016 regarded as a real crisis in German games industry. What are the reasons? And what needs to be done now? These questions and possible solutions were at the center of the second-day congress, which I accompanied as a professional presenter.
Disillusionment or market adjustment?
Now taking a brief look at the nationwide games industry coverage in 2016, some causes of the crisis begin to emerge fairly quick. A wave of layoffs has hit and shaken several companies: Hamburg-based Goodgame Studios announced the dismissal of more than 100 employees, Berlin-based Wooga dismissed 40 employees, Games pioneer Gamesforge of Karlsruhe closed its mobiledivision and Frankfurt’s Crytek appeared to be in rough waters just recently.
All of these are companies known and valued as successful players in Germany and abroad. And it is even more worrying, that they don’t even share the same business model or strategy: As the business division of each company is diverse, each new announcement of “business-related cancellations” or “business area restructuring” is disturbingly pointing out, that the whole industry has taken a beating.
It’s the story, business case and guts, stupid!
Whether the current shocks are now filed under typical growing pains, structural failure or “Gesundschrumpfen” (in other words: downsizing): It is worthwhile to look at the German games economy in 2016 from a different, rather neglected perspective: the next generation of young talent.
Precisely this viewpoint took centre stage during the opening panel, featuring three renowned industry experts debating video game biz: Björn Bartholdy (professor at the Faculty of Cultural Sciences of Cologne and Director of Cologne Game Lab), Thorsten Hamdorf (Head of Services, Market Research & Marketing at Trade Assocation BIU) and Stephan Reichart (Managing Director of Aruba Events GmbH).
The debate pursued the current state, feasible solutions and future outlook — and was defined by three core topics I am interested in now sharing and subsequently discussing with games industry employers and HR departments, associations such as EGDF, BIU, GAME, IGDA et al., scholars and educators:
Topic 1: QUALITY CONTENT
We need a rennaissance of great stories. The storyline needs to be made the focal point of game production again with great storytelling as an integral feature. For only by means of new, surprising and high-quality content, successful business models will strive in a B2C market — and be mantained at least medium-term.
Conversely, higher education institutions are well advised to provide young talents with these exact narrational skills. Because this underlying craft is capable of unleashing a more sustainable effect on success than any new technology and business hype. Accordingly, the three panelists assessed new courses of study, which focus exclusively on tech trends like VR, fairly critical and called for rather embedding and teaching those trends within the overall narrative context.
Topic 2: BUSINESS MODEL
But it’s not only time to get back to the roots in terms of storytelling & quality content. Chunks of the German games industry also need to revert to viable and more sustainable business models. By increasingly counting on business model “free-to-play” and the often related agressive monetization strategies, short-term profits replaced comparatively stable revenues generated by less risky high-grade game titles. According to the panel, the one ingredient falling victim to short-term monetization is what made German games once unique:
A compelling story, a clever and cunning narration. Following this path, games location Germany can regain lost grounds with (positively) addictive products, thus compete successfully in global competition and moreover score against the market dominance of several huge, attention- and time-absorbing titles. (For the sake of completeness, free-to play monetization is not everywhere judged as critical, though regular subject of controversial debate in industry and training.)
Topic 3: ENTREPRENEURIAL MIND
Concluding the call for quality content and corporate sustainability, all three experts also pointed at a third critical area, seen as a major structural challenge: Courage, entrepreneurial attitude and business knowledge. With every wave of redundancies, each major downsizing, skilled personnel is pushed back onto the market, brim-full of expertise: a new, unbalanced field of competition for graduates of games universities and academies. In a nutshell: Heavy competition, limited vacancies.
So while in training might be just the right time to deal with the whole topic of founding. Not only do young talent create their own job. By setting up a games start-up, they also infuse the whole industry with fresh ideas and innovative spirit. At institutions such as Cologne Game Lab, students continuously benefit of a practice-oriented training, that also includes tangible entrepreneurial skills. Apart from that, the panel and other industry experts in the audience, such as Prof. Linda Breitlauch, stressed how game studio founders need to prematurely contact students or experts with knowledge in business administration, marketing etc. in order to get them on board for a future enterprise.
Renaissance, outlook and progress
All topics were examinded thoroughly throughout the subsequent conference part. In track 5, for example, the audience gained insights by direct exchange with industry professionals: Which challenges and chances to face while founding a start-up? How to reasonably combine indie projects with consulting work? How does a typical day in the life of a producer, marketing boss, games designer and games journalist really look and feel like? And how about future opportunities in games economy as well as in distincly different industries such as automotive, logistics or health?
To end this article in light of this beautiful knowledge transfer, I am bound to say just what of a long-lasting impression the young attendees made during the course of “Games & Education 2016” conference: Besides their proactive participation, the young generation proved crucial requirements for future success: Comprehensive knowledge, curiosity, creativity and the fierce determination to shape and make games, to further establish games as a major economic factor — precisely: more popular than white bread.
Want to learn more about the 3 topics, further key points and collaboration on games industry and digital topics? Get in touch.
((For a German version of this article, click here.))
© Text: Nadia S. Zaboura