There is an argument that the games market will remain strong throughout recession as more people choose to find what is perceived as high-value, long-lasting entertainment at home. Yet the games industry is by no means recession-proof. High development costs with relatively low success rates means that publishers and investors are now likely to be even more risk-averse than usual, continuing to prefer successful licences and franchises over risky new titles. Nottingham-based developer Free Radical has already gone into administration, with the loss of over 140 jobs, and more may yet follow.
Games companies are increasingly looking to develop lower cost games that are more likely to offer a faster return, with a booming demand for casual games distributed digitally via platforms such as X-Box Live and iPhone App Store. One US-based VC firm, Archangel Ventures, has already been established to capitalise exclusively on this market, concentrating on investing in titles with budgets of no more than US$200,000 but with an aim to let developers keep 60 to 70 per cent of revenue and retain control of any intellectual property.
Meanwhile, Seattle’s Big Fish swallowed up $83 million in financing from venture capitalists in September – just the biggest of dozens of similar cash injections fuelling a global race to be the biggest casual games publisher and distributor. At the other end of the scale, start-up portal Kongregate secured a useful $3 million in May for its user-generated and ranked Flash games site. The man buying into the plan was Amazon founder Jeff Bezos.
Amazon itself has acquired Reflexive Entertainment, a major player in casual gaming but – more importantly – in digital distribution, which will doubtless lead to a games-on-demand solution from Amazon to rival the likes of GameTap and Steam.