RaychelSnr's Blog
In-Depth Analysis: Why the Decision to Extend One Year Just Bought Madden a Decade 
Posted on February 14, 2011 at 09:39 PM.
Ok everyone, let's relax and take a deep breath -- because I really don't want a bunch of irrational hate following the words I'm about to type. Not because I'm a wuss, but because what I'm about to explain is really a brief manifesto of the future of gaming and hits on a lot of different topics.
But what I want to stress at the onset for the short-attention span crowd is that by extending their deal out one more year, it's very likely EA Sports has bought Madden at least the next decade: exclusive license or not. But that's not where the story can be explained fully -- the real story is in exactly how we're getting to this point in sports gaming.
Sports simulations are an expensive undertaking in this era, they are games which require to simulate very complex interactions between human beings in a believable manner and they must be pushed out once a year. To say just any company can jump in and compete with the big dogs of the industry today is to be naive of the current situation in gaming.
Companies everywhere are cutting back on the number of titles they develop and focusing on profitability on the big consoles. The reasoning is the amount of money you have to put into your games is more than it used to be.
That's also why you don't see five MLB Games and three NFL games anymore. The smaller companies have already been weeded out of the business, and only a few companies have the ability and resources to make sports games in 2011.
Why is that? Just look at this graph, which loosely represents the point I'm making:
But what I want to stress at the onset for the short-attention span crowd is that by extending their deal out one more year, it's very likely EA Sports has bought Madden at least the next decade: exclusive license or not. But that's not where the story can be explained fully -- the real story is in exactly how we're getting to this point in sports gaming.
Sports simulations are an expensive undertaking in this era, they are games which require to simulate very complex interactions between human beings in a believable manner and they must be pushed out once a year. To say just any company can jump in and compete with the big dogs of the industry today is to be naive of the current situation in gaming.
Companies everywhere are cutting back on the number of titles they develop and focusing on profitability on the big consoles. The reasoning is the amount of money you have to put into your games is more than it used to be.
That's also why you don't see five MLB Games and three NFL games anymore. The smaller companies have already been weeded out of the business, and only a few companies have the ability and resources to make sports games in 2011.
Why is that? Just look at this graph, which loosely represents the point I'm making:
Basically, the more console hardware power there is to take advantage of, the more Development for the game costs. For big IP games like Grand Theft Auto, developing a title every few years spreads the development cost out a bit, allows for more innovation, optimal quality and maximum profitability. For sports games, development time is squashed, costs are higher, and profitability is nowhere on the level of the other titles.
So if you are wondering why most companies don't make sports games, even when given the opportunity in sports like Basketball -- the reasoning is the cost is just too high this generation.
Now add another console generation on top of this one. More power, more complexity required, more costs to develop the game each year. Then add the likelihood that we will be down to just 2-3 Publishers maximum with the resources capable of making a yearly sports title.
Now I hope you see where this is going.
The next console generation, by most estimates, will start in 2013 or 2014 -- the timing of which is insignificant at this point. What that means is that EA has effectively made a deal which ends any hope of another NFL Game this generation. To get into the NFL Development game, another company will have to basically start from 10 year old technology and bring it up to speed with whatever EA has in another four years -- and then that same company will have to go beyond what EA has in order to attract an entrenched fan base to their title.
Conservatively, even if the license was no longer exclusive in 2014 (which I have serious doubts it'll be open for a long time to come) -- any company, including 2K Sports, will basically be playing from a couple of years behind in a best case scenario where Madden treads water in quality the next three years.
To develop a game which could rival Madden in quality would take two years minimum on the next generation of consoles under the best case conditions -- to gain some semblance of profitability would be a three to four year process under those same conditions. People rave about NFL 2K in a lot of places, but the simple fact is the game didn't sell exceedingly well compared to Madden -- it took a $20 price tag for the game to even begin to enter the realm of competitive in terms of sales. In three more years, that environment NFL 2K was trying to compete in will be even more harsh towards competitors trying to gain a slice of Madden's market dominance.
Any gaming publisher looking at this task from a pure business perspective will see a path full of landmines and booby-traps for sure. Profitability in the future of gaming lies within the internet and mobile gaming -- each major gaming company has shown its strongest profit gains in those areas. With such announcements as a quad-core mobile processor coming out, mobile gaming will become a relatively low cost, high margin platform to enter into with quality on par with consoles of the past decade.
A company could take a risk on 20 new mobile projects a year, each with profitability prospects much better than an NFL title or they could dump money into a project that will at best be a losing proposition for a couple of years before it might start making a slight profit. Any gaming CEO will almost certainly choose the sure-thing in the coming decade where economic prospects are going to be unsure to put it lightly.
What EA and the NFL agreed to today was more than just one more year, it has effectively bought the next decade and probably beyond. So long as video games are in their current format (which is not guaranteed through the end of the decade), it appears Madden NFL Football will be the only choice for gamers looking for an NFL fix on their TV screens.
Of course, this isn't just the NFL you'll see this trend continue in. Indeed, this is a trend which is carrying over into every other sport, and it is likely each sport will only have one game carrying its banner by the start of the next console generation. That's harsh news to deliver, but it's the most realistic scenario given the current business environment -- there isn't enough room in the marketplace for two games to be profitable enough to sustain high quality yearly releases anymore. Costs are higher, profits are more unsure, and many franchises are going to have to go away.
Let's just hope that the options that are left are worthy of our time and attention.
So if you are wondering why most companies don't make sports games, even when given the opportunity in sports like Basketball -- the reasoning is the cost is just too high this generation.
Now add another console generation on top of this one. More power, more complexity required, more costs to develop the game each year. Then add the likelihood that we will be down to just 2-3 Publishers maximum with the resources capable of making a yearly sports title.
Now I hope you see where this is going.
The next console generation, by most estimates, will start in 2013 or 2014 -- the timing of which is insignificant at this point. What that means is that EA has effectively made a deal which ends any hope of another NFL Game this generation. To get into the NFL Development game, another company will have to basically start from 10 year old technology and bring it up to speed with whatever EA has in another four years -- and then that same company will have to go beyond what EA has in order to attract an entrenched fan base to their title.
Conservatively, even if the license was no longer exclusive in 2014 (which I have serious doubts it'll be open for a long time to come) -- any company, including 2K Sports, will basically be playing from a couple of years behind in a best case scenario where Madden treads water in quality the next three years.
To develop a game which could rival Madden in quality would take two years minimum on the next generation of consoles under the best case conditions -- to gain some semblance of profitability would be a three to four year process under those same conditions. People rave about NFL 2K in a lot of places, but the simple fact is the game didn't sell exceedingly well compared to Madden -- it took a $20 price tag for the game to even begin to enter the realm of competitive in terms of sales. In three more years, that environment NFL 2K was trying to compete in will be even more harsh towards competitors trying to gain a slice of Madden's market dominance.
Any gaming publisher looking at this task from a pure business perspective will see a path full of landmines and booby-traps for sure. Profitability in the future of gaming lies within the internet and mobile gaming -- each major gaming company has shown its strongest profit gains in those areas. With such announcements as a quad-core mobile processor coming out, mobile gaming will become a relatively low cost, high margin platform to enter into with quality on par with consoles of the past decade.
A company could take a risk on 20 new mobile projects a year, each with profitability prospects much better than an NFL title or they could dump money into a project that will at best be a losing proposition for a couple of years before it might start making a slight profit. Any gaming CEO will almost certainly choose the sure-thing in the coming decade where economic prospects are going to be unsure to put it lightly.
What EA and the NFL agreed to today was more than just one more year, it has effectively bought the next decade and probably beyond. So long as video games are in their current format (which is not guaranteed through the end of the decade), it appears Madden NFL Football will be the only choice for gamers looking for an NFL fix on their TV screens.
Of course, this isn't just the NFL you'll see this trend continue in. Indeed, this is a trend which is carrying over into every other sport, and it is likely each sport will only have one game carrying its banner by the start of the next console generation. That's harsh news to deliver, but it's the most realistic scenario given the current business environment -- there isn't enough room in the marketplace for two games to be profitable enough to sustain high quality yearly releases anymore. Costs are higher, profits are more unsure, and many franchises are going to have to go away.
Let's just hope that the options that are left are worthy of our time and attention.
# 2
ven0m43 @ Feb 14
I would be happy for 2-3 yr releases of sport games. I only buy them every 2-3 years anyways, since I only really see large changes every two years.
# 3
pietasterp @ Feb 14
Good read, reasonable analysis. I will extrapolate back, though, and say that the writing was on the wall 6 years ago when this exclusivity nonsense all started...if you still have archives of forums posts back that far, you'll see that many of us declared in 2004 that there would never be another non-EA NFL game, and with the most recent announcement, the prediction comes ever closer to fruition.
Minor niggling point: I realize the graph was just for illustrative purposes and not meant to represent actual data, but do you have any numbers that suggest that development costs are indeed exponential (as the curve in your graph suggests)? I suspect that might be the case in reality, but without actual data, I feel like putting up a graph like that could be a bit misleading...
Anyway, you're (unfortunately) dead-on in asserting that the future of sports gaming is more exclusivity, not less. The halcyon days of the early-to-mid 2000's are over. I'm not saying sports gaming is dead, but they've got a lot of shovels at EA and it looks like they're digging a pretty big hole out back...
Minor niggling point: I realize the graph was just for illustrative purposes and not meant to represent actual data, but do you have any numbers that suggest that development costs are indeed exponential (as the curve in your graph suggests)? I suspect that might be the case in reality, but without actual data, I feel like putting up a graph like that could be a bit misleading...
Anyway, you're (unfortunately) dead-on in asserting that the future of sports gaming is more exclusivity, not less. The halcyon days of the early-to-mid 2000's are over. I'm not saying sports gaming is dead, but they've got a lot of shovels at EA and it looks like they're digging a pretty big hole out back...
# 4
RaychelSnr @ Feb 14
@pietasterp I could probably dig up the numbers to show that the cost is probably in the order of exponential -- but probably not quite due to reasonable limits on detail which developers can create in a yearly development cycle. But the detail that needs to go into Madden today is probably at least twice what it was five years ago, if not more -- and that detail isn't cheap as you already probably know. I can say from vague memory that the top flight games today cost well more than 2x what they used to cost to develop.
In fact (rambling on) here's an article from two years ago:
http://www.gamepro.com/article/news/...-game-in-2009/
And the key quote:
"For previous console generations, she says, the cost of development has been between $3 - 5 million per platform. Nowadays, however, she estimates that the average cost of making one game for one platform is $10 million while multiplatform releases clock in at $18 - $28 million."
In fact (rambling on) here's an article from two years ago:
http://www.gamepro.com/article/news/...-game-in-2009/
And the key quote:
"For previous console generations, she says, the cost of development has been between $3 - 5 million per platform. Nowadays, however, she estimates that the average cost of making one game for one platform is $10 million while multiplatform releases clock in at $18 - $28 million."
# 5
tril @ Feb 14
Justin, you might be right in the long term, but the only way that will happen is if the cost of roster updates will cover development costs. Youd also have to take the ability to adjust player ratings and creations away from the user. That would be a bad marketing move for publishers.
its almost a no win situation.
its almost a no win situation.
# 6
gbombbay @ Feb 14
how much are they paying you MM? lol. stop making excuses about non sports games and the power they can maximize with those. The people just want a Football game that is on the level of a NBA 2k or NHL or a MLB The Show... which all come out with a game every year. So tell the people why the quality between those games and Madden are so far apart. The Problem is Football fans don't see what we see on Sundays translate to the game that we are playing. You say they don't have the time or funds to make things happen in a years time, and the problem is it shows.
# 7
DaSmerg @ Feb 15
Nice article dude. A couple of things...
In your diagram, the "console hardware power" isn't a rising curve really in any way. It's a steep step up, plateau, steep step up, plateau...etc. My meaning...your Xbox 360 or PS3 isn't any more "powerful" a system now than it was when they first launched nearly half a decade ago now. Likewise, before then, PS2 and original Xbox's didn't magically increase in system power from one year to the next.
Development costs on so-called "next gen" platforms (namely Xbox 360 and PS3) have not dramatically increased...more correctly...while development fees are expensive and have increased over time, it's the licensing fees for putting those games on those systems (360 & PS3) that have seen the largest increases and also make it cost prohibitive for smaller publishers to make any kind of meaningful headway/inroads on these platforms. Not to be a total bummer but it's even expensive for the larger games manufacturers to put titles on these systems which many are predicting is going to lead to a fracturing of the market place leading to the creation of several deep niche's that (smart) smaller players can take up positions in. You raise a very valid point that it remains to be seen if consoles will be the place with the emergence of mobile gaming and hey, let's not forget about dear old PC.
When you have equity partners in business, never mind also stake holders in your business, what happens is that those equity partners and stake holders demand to see not only a return on their investment but also a timely return on their equity as the case may be. EA's exclusivity deal was purportedly what, a billion USD? And since then, what have we seen? We've seen a highly profitable game title, Madden football, have it's revenue resources diverted to repaying that investment in the most timely and effective way(s) possible...less development, more marketing and brand leverage.
Lastly, when you enter into partnerships like this deal with longer terms, it is not uncommon to see terms renegotiated when times of high uncertainty arise. As of the 1st quarter of 2011, there is still a high probability that there won't be actual football in the later 3rd and 4th quarters of 2011. This is all mute as there was most likely contract language that accounted for such and an additional year extension was built into the current deal.
Other than that, great yet terribly discouraging read.
But I'll remain hopeful. I see people start businesses everyday with the knowledge that they'll probably never make a dime. We just need a few of those folks in sports sim gaming because if done right, and not based on 20th century business models, it could actually make a couple of dimes for the right person/people.
In your diagram, the "console hardware power" isn't a rising curve really in any way. It's a steep step up, plateau, steep step up, plateau...etc. My meaning...your Xbox 360 or PS3 isn't any more "powerful" a system now than it was when they first launched nearly half a decade ago now. Likewise, before then, PS2 and original Xbox's didn't magically increase in system power from one year to the next.
Development costs on so-called "next gen" platforms (namely Xbox 360 and PS3) have not dramatically increased...more correctly...while development fees are expensive and have increased over time, it's the licensing fees for putting those games on those systems (360 & PS3) that have seen the largest increases and also make it cost prohibitive for smaller publishers to make any kind of meaningful headway/inroads on these platforms. Not to be a total bummer but it's even expensive for the larger games manufacturers to put titles on these systems which many are predicting is going to lead to a fracturing of the market place leading to the creation of several deep niche's that (smart) smaller players can take up positions in. You raise a very valid point that it remains to be seen if consoles will be the place with the emergence of mobile gaming and hey, let's not forget about dear old PC.
When you have equity partners in business, never mind also stake holders in your business, what happens is that those equity partners and stake holders demand to see not only a return on their investment but also a timely return on their equity as the case may be. EA's exclusivity deal was purportedly what, a billion USD? And since then, what have we seen? We've seen a highly profitable game title, Madden football, have it's revenue resources diverted to repaying that investment in the most timely and effective way(s) possible...less development, more marketing and brand leverage.
Lastly, when you enter into partnerships like this deal with longer terms, it is not uncommon to see terms renegotiated when times of high uncertainty arise. As of the 1st quarter of 2011, there is still a high probability that there won't be actual football in the later 3rd and 4th quarters of 2011. This is all mute as there was most likely contract language that accounted for such and an additional year extension was built into the current deal.
Other than that, great yet terribly discouraging read.
But I'll remain hopeful. I see people start businesses everyday with the knowledge that they'll probably never make a dime. We just need a few of those folks in sports sim gaming because if done right, and not based on 20th century business models, it could actually make a couple of dimes for the right person/people.
# 8
statum71 @ Feb 15
Good insight.
AS I keep saying...guys may as well retire NFL 2K to the Hall of Fame. It ain't coming back guys.
EA is the NFL game's developer. Whether its Madden or if they ever changed the name. Its gonna be EA for a long long time.
AS I keep saying...guys may as well retire NFL 2K to the Hall of Fame. It ain't coming back guys.
EA is the NFL game's developer. Whether its Madden or if they ever changed the name. Its gonna be EA for a long long time.
# 9
RUFFNREADY @ Feb 15
Great read. I can't say anything more; than, we as gamers are going to be stuck with EA and Madden for awhile; until someone comes out with an unlicensed football that employees all the wishlist(s) and great things we see on sundays into their game. That will be one heck of a hill to climb.
Here's to the "other GUYS"; may the Schwartz be with you!
cheers
Here's to the "other GUYS"; may the Schwartz be with you!
cheers
# 10
Dazraz @ Feb 15
I would argue as to whether costs are relatively higher on ths current generation of consoles as opposed to say the PS1. What has changed significantly is the levels of expectation from the consumer. For the first time ever in the history of videogame consoles we have hardware that is capable of delivering what is demanded from it.
We have seen with a selected number of games just how much can be done with a sports game this generation. Therefore developers can no longer stand behind the age old excuse of hardware limitation. The only limits are the developers own creativity, effort & of course financial.
I actually believe that the reduction in the number of games is not primarily financial. I actually think it relates more to the level of quality that the consumer expects, with most developers realising that they either lack the resources or the ability to get to that standard.
We have seen with a selected number of games just how much can be done with a sports game this generation. Therefore developers can no longer stand behind the age old excuse of hardware limitation. The only limits are the developers own creativity, effort & of course financial.
I actually believe that the reduction in the number of games is not primarily financial. I actually think it relates more to the level of quality that the consumer expects, with most developers realising that they either lack the resources or the ability to get to that standard.
# 11
cowboysfan440 @ Feb 15
all i know is on ps2 and xbox there was plenty of innovation in a single year dev cycle and on this gen we arent even at the same level as we were in 05 on ps2 and xbox
# 12
brettford @ Feb 15
Sure consumer expectations have changed...but current gen hardware is much costlier to develop on than previous generations. Much costlier.
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# 13
sroz39 @ Feb 15
It's a matter of when, not if, sports games will be released bi-annually. I say this because of all the things the writer mentioned in the article as well as sales of these games flat-lining. Sports games as a genre used to be the top-selling genre at one point in time (51% of sales at it's peak, IIRC). It's not at that level anymore and aside from a few exceptions, there really isn't that much innovation from one year to the next with all these games. Even worse, alot of these back-of-the-box features are broken features on release day and require a patch. Largely due to a lack of time for these developers to fully implement and test them.
As more and more people begin to skip annual releases, opting to buy their favourite series' every other year, it will make more sense to these big publishers to release the games every other year too. You see it in niche sports like boxing, MMA and others already. There just isn't enough of a market to release those games every year.
One thing that is holding all this back is how we buy games. Though the majority of people have the opportunity to download the latest rosters and patches online, not everyone does yet. Digital downloads are not at the mass-market levels required yet to make a $20 roster update possible for these publishers to consider yet. But I could see it happening with the next generation of consoles.
As more and more people begin to skip annual releases, opting to buy their favourite series' every other year, it will make more sense to these big publishers to release the games every other year too. You see it in niche sports like boxing, MMA and others already. There just isn't enough of a market to release those games every year.
One thing that is holding all this back is how we buy games. Though the majority of people have the opportunity to download the latest rosters and patches online, not everyone does yet. Digital downloads are not at the mass-market levels required yet to make a $20 roster update possible for these publishers to consider yet. But I could see it happening with the next generation of consoles.
# 14
rspencer86 @ Feb 15
If the barrier to entry (money + time to "catch up") is as high as you say it is, why would EA even bother to pay millions of dollars to preclude any other company from making an NFL game? Why not just let the exclusive agreement expire, knowing that no other company will have the resources to create a competitive game for another 5+ years?
# 15
Dramaking @ Feb 15
We need more people who wears the face of game developers not business men. Natural Motion is the only hope, since they dont have to do much catching up since their not stuck to a annual release.
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