After running into extreme financial trouble, 38 Games has officially closed down. It’s a sad day in gaming as the 300-odd headcount at the developer was a team with real potential. Kingdoms of Amalur, its first and only game, was not a bad game at all.
But it sold horribly, and 38 Games ended up with a massive debt it was not able to repay. There will be a lot of study and analysis of what exactly went wrong in the future – this is the kind of collapse that can have a ripple effect through the entire industry, but following on from a conversation I had with my good friend Coffee with Games in a previous story, here’s a couple of initial thoughts that could have resulted in a far healthier 38 Games.
Don’t put all your eggs in one basket
While I admire the determination to put together a studio to develop big games, and that in itself isn’t necessarily a bad business decision, by the same token, you need to have something else to help mitigate risk. Even an iPhone game, or a micro-transaction supported Facebook game based on the Kingdoms of Amalur world could have had the duel benefit of promoting the “real game” and earning a little income on the side. This is something every third party developer should be doing, and indeed that’s what many of them do do – did you know Grasshopper Manufacture, the folks behind Shadows of the Damned, No More Heroes and Lollypop Chainsaw also do smaller scale projects – right down to $0.99 iPhone apps?
Creating a revenue stream is critical to any business. Relying in a massive income from a single product is never going to be sustainable – no matter how good your game is.
Have a more aggressive DLC strategy
Many gamers hate DLC, but then many gamers aren’t trying to run businesses. DLC is a good way for a developer to earn more income from a single game. When sales are low, it’s even more critical. I remember reading about two DLC releases of fair size for the game, but that’s it. Perhaps 38 Games had more planned, but in contrast the Dragon Age games had three or four each.
It also would have been a good idea to release those silly little alternative costumes and the like (or more heavily promote, I never saw anything about such things), because while many roll their eyes at the idea, companies like Tecmo Koei with its Warriors games make a killing from that style of DLC.
Develop a game in an existing franchise first
While I understand that 38 Games was set up for the sole reason to develop an original game, creating new IP in the games industry is a challenging prospect. Gamers tend to wait for price drops with new IP, or buy it second hand, and neither situation helps the developer’s bottom line. As much as we all claim we want innovation and creativity, the reality is that when it comes to forking over money we prefer the safe bets. So to help build its brand as a developer, and build up some equity to create that dream new IP, 38 Games really should have kicked things off with a licensed title or contracted out with someone (EA, perhaps) to create a mid-tier game in an existing franchise first.
That would likely have helped smooth the development of Amalur, too, once a project was under the belt and the team had gelled.
I would be very interested to hear from people close to 38 Games some of the other reasons it was able to get into so much debt – say hello in the comments below!
"…here’s a couple of initial thoughts that could have resulted in a far healthier 38 Games."
I just have one more to add to the list. ADVERTISE! If you put all your eggs in one basket, you better make sure that basket and eggs have A TON of advertising so the general population knows about them. It doesn't matter if you have awesome gold eggs in a platinum knitted basket, if it's sitting in your garage and NOBODY knows about it…or only your neighbors passing by on the street, more than likely, nobody will know about it.
So, the question I'm wondering is how much this game was advertised…and budgeted for advertisement. If they planned on putting all the eggs into the basket, they had better of had the $$$$$ to back it up with advertising.
38 Games wouldn't be wholly (or possibly at all, depending on the arrangement) responsible for the promotion – that's EA's job as publisher.
And the game was marketed quite heavily – at least in Australia. Not necessarily "advertising," in the sense of TV and magazines, but advertising is an old and inefficient way to market a product anyway.
While they may not be wholly responsible, they are responsible for reading any publishing contracts they signed. If they knew EA wasn't going to advertise it, or the methods weren't clear, they should have clarified that first.
"…but advertising is an old and inefficient way to market a product anyway. "
I disagree probably 90% with that statement.
1) TV isn't that old
2) If advertising didn't work, companies wouldn't do it. Pepsi, Coke, Call of Duty, Madden…big, well established brands, advertise.
Maybe we're splitting hairs over "marketing" and "advertising"? Either way, you can't expect people to buy a game, that they don't even know about.
I just hope the employees can find other jobs quickly.
EA was very active in marketing Amalur, though. They held numerous events and gave every single journalist or blogger who requested a copy to review the game a copy – that's all very expensive stuff, but it's an efficient way to market a game.
I don't really want to go on a long explanation of modern marketing and advertising theory – it'll bore you as it bored me for a year and a half of my life, but not every product or service can be marketed in the same way, and not every form of advertising holds up in a cost/ benefit analysis.
TV, which is usually what people think of when "advertising" or "marketing" is mentioned is a very, very expensive form of marketing, and is very inefficient – it only benefits a small number of products. As a rule of thumb if a product is the kind of product that 70+ per cent of the general population wouldn't be interested in using, then it's not worth a TV ad. Coke and Pepsi are products that almost everyone wants, and therefore TV advertising justifies its cost. With games like Call of Duty, Diablo III and Madden, TV advertising is justifiable for two reasons: 1) These games are guaranteed to be profitable, so a TV ad campaign is a low risk of turning the game into a negative result, and 2) When a game is that big, it's not so much about selling copies through the TV Ad. It's more about positioning the game as the #1 brand in its genre. You can only really afford to do that kind of branding when you've got a mega, mega hit franchise. A new IP? not a chance. Especially when Skyrim just blitzed the TV airwaves.
In reality, that's where things went really wrong: The game was released far too close to Skyrim, and at a time so soon after Christmas where people aren't really shopping for games. Where EA also probably went wrong with Amalur in terms of marketing is not making a bigger deal of the game in the retail shops. There was very little preorder hype over here, and that's a far too effective marketing strategy to ignore. As this was an EA Partners-managed game, I suspect they didn't have the budget to go that far, though.
I agree that I hope the employees can find new appointments – but in the US alone there's about 1000 game development staff who have lost jobs from the likes of Blizzard and now 38 Studios. Tough times 🙁
"They held numerous events and gave every single journalist or blogger who requested a copy to review the game a copy – that's all very expensive stuff, but it's an efficient way to market a game."
Holding events, might be expensive…review copies though? Very inexpensive way to "market" the game, and I would actually question how "efficient" it really is if that's the only two ways they went about advertising the game. Even if they had 1,000 review copies sent out (highly unlikely), that should have cost them no more than $10,000-15,000…at most.
"I don't really want to go on a long explanation of modern marketing and advertising theory – it'll bore you as it bored me for a year and a half of my life, but not every product or service can be marketed in the same way, and not every form of advertising holds up in a cost/ benefit analysis. "
Probably wouldn't bore me as much as you think, I enjoy the marketing side of things…A LOT.
"TV, which is usually what people think of when "advertising" or "marketing" is mentioned is a very, very expensive form of marketing, and is very inefficient – it only benefits a small number of products. As a rule of thumb if a product is the kind of product that 70+ per cent of the general population wouldn't be interested in using, then it's not worth a TV ad."
Actually, you can advertise on tv cheaply, and target the ads to only certain commercials, so you aren't just blind advertising. Just like Google has adwords, and certain ads that show up based on search history…companies can specify the budget and commercials their ads are to run on.
A guy showed how he spent less than $2,000 on an ad, and it was viewed/aired at least a million times when it was running. He wasn't even selling a product, and was simply testing an ad service out to see how effective it was.
I would say most people think tv advertising is expensive, because they always hear the outrageous Super Bowl commercial prices.
I guess the question is, did the game even have a tv advertisement? I found one 30 second ad on YouTube, but it didn't end with the typical "Rated M for Mature" or "Rated E for Everyone" that many ads do.
"
Holding events, might be expensive…review copies though? Very inexpensive way to "market" the game, and I would actually question how "efficient" it really is if that's the only two ways they went about advertising the game. Even if they had 1,000 review copies sent out (highly unlikely), that should have cost them no more than $10,000-15,000…at most."
You'd be surprised. For a major release (ie one that has a lot of review copies sent out) it's an exhaustive job for the comms person to track them, track the reviews, build the reports etc. It's a couple of weeks out of a $60,000 + wage, so add that into the cost.
These things build up. Individually they might no seem much, but if you have a marketing budget of, say $100,000, it disappears surprisingly fast.
As for the TV thing, once again, whether it's worth doing depends on whether it's the kind of product that benefits from a TV advertising campaign. Unless you're Diablo or Skyrim, you're not going to get much out of a TV ad for a niche RPG.
Think about it this way – Dungeons and Dragons. When was the last time you saw a D & D ad? It's by far the most financially successful tabletop RPG, though.
Smart marketing is about finding, and then exploiting, the best possible routes to your target audience. Not every product is designed for a broad audience (and they don't need to be, either, to be commercially successful), so the marketing strategies need to be adjusted.
Simply throwing together a TV ad and hoping for the best is not going to help sales – indeed, there's plenty of research out there that TV advertising has the lowest conversion rate of all marketing strategies.
I'll have to track down some of my old textbooks for you. 🙂
This announcement bummed me out in general. I enjoyed the game quite a bit. Four of my friends really did too. It wasn't perfect, but it was a lot of fun overall, and we were looking forward to seeing what might come of the series.
From an advertising standpoint? I know I heard quite a bit about it leading up. Gameinformer had some in-depth articles on it, it was splashed all over IGN for weeks prior to the release, Gamestop was doing pre-order deals and advertising it in all of their stores I walked into. I find myself wondering if it was hurt by being an RPG released between Skyrim and ME 3? Obviously there was a lot more wrong than that, but disappointing all the same.
You want to know irony? (Of course he does, because I asked right?)
I am reading this article, http://en.wikipedia.org/wiki/Television_advertisement, when you just made this comment and I saw it pop up in my mail.