Stock Market Slippy-Slide – Weeeeeee!

August 14, 2012 in Editorial

I should tag this story “random idiot talking out his behind” because I know very little about how the economy works. Consider this more an case of a layman calling it as he sees it.  Zynga, Electronic Arts, Funcom, Activision, Take-Two Interactive, THQ. All of them giants in the industry, yet all of them showing a massive decline in stock value over the past two or more quarters. What the heck’s going on?

Maybe software companies should stay off the stock market.

From a distance it all seems like a Greek tragedy playing out.

Zynga suffered a crash, resulting in scandal and accusations of insider trading. EA is just EA , clueless as a bat with an iPod, but at least they get to sue Zynga for copyright infringement. Zynga is facing a possible staff exodus, and is offering them some of this worthless stock to get them to stay.

Funcom’s talking about possible layoffs. Apparently much like how EA/Bioware’s Star Wars: The Old Republic is not performing as they had hoped. The Secret World is similarly proving not to be the cash cow they were banking on. And of course MMOs aren’t performing. They are expensive to make and maintain, and with so many games to choose from, how many players do they think is going to subscribe to their MMO for years like WoW players did? Even WoW subscription is on a steady decline, no doubt to receive a boost later this year when the pandas teabag Azeroth, but likely to drop again shortly after.

Speaking of Blizzard, Activision is about the healthiest-looking of the lot, but their parent company Vivendi is trying to sell off their majority share of it, with some difficulty. Perhaps Vivendi realises that World of Warcraft and Call of Duty alone cannot carry it, and the downward slide is evident. Potential buyers seem to realise this too, since we’ve not heard of  any definite plans to buy.

THQ are just barely hanging in there. Predictions of their imminent demise are not new.

Stock prices are influenced by perceived value. One quarter of less-than-expected earnings or something as simple as a badly placed rumour can erode your company’s worth like a martian hurricane. A non-listed company can go home happy knowing that it’s paying the bills, but as soon as public investors get involved it all gets a bit weird. This collective group of faceless people do not care about you paying the bills, or even having reasonable success. They want to see growth.

It’s this desire for constant growth that brings out the worst in these companies. Every product gets tailored to milk the consumer for as much as it can, and every product is built with the most risk-adverse mindset. They’ll make sequels to whatever sold last year, or do whatever was successful for the competitor. WoW makes lots of money? Yeah ok let’s make an MMO, that must be were the money is! Oh hey how about that Farmville and Angry Birds there, golly we must hit the casual/social games market as hard as possible. 15 to 25 male demographic, you say? More blood and boobs!

It also messes with release cycles. A studio might get told they must release a game within a quarter so that that quarter’s earnings will be favourable, instead of when the game is actually done.

I’m sure the creative staff at these companies do their best to deliver the best quality products they can, and even try to innovate at times, but corporate structures will make you conform eventually, whether you like it or not.

It has become easier than ever for small independent studios to bring their own visions to market. Games are getting cheaper to develop, and digital distribution is becoming the accepted norm. There will always be a place for the big guns,  but it looks like it will be a lot smaller than it used to be.

Secretly I’m hoping for another “video game crash“, much like what we saw in 1983 to 1985. What a horrible person I must be, “Think of all the unemployed people!” “It’s not like that”, said the blogger to the straw man. The gaming medium as a whole cannot “crash” really. Not easily anyway. And the 1983 crash was purely a North-American thing. Europe, Japan, etc. all thrived. The “crash” is a just power-shift. A self-inflicted wound due to economies of scale. The big towers get too big to sustain themselves and topple over. The talent from within those walls gets scattered into the wind to perhaps join or form new studios, and suddenly all is fresh and new again. That’s my La La Land right there.

Take heart, gamers – you will have games to play – good and bad. And don’t worry, industry, gaming is not going anywhere, even if things look a bit bleak.

But perhaps this guy sums it up better: DIIIIIIIVE!