This Reuters story kicks off the much dreaded "E3 Media Blitz". It sure sounds good:

The video game industry, which supported 144,000 full-time jobs and accounted for more than $8 billion in game sales in 2004, had an $18 billion impact on the U.S. economy that year, according to a new study to be released on Wednesday.

A little quick math reveals that there is a little over $55,000 of sales for each of those employees. Remember that is SALES, not PROFIT. Assuming that these numbers are correct, what does this mean for the game industry’s future?

From what I can see this means the industry is in some severe trouble. A quick look at the Game Developer salary survey for 2005 shows a median salary that is well over that sales figure. How long can the industry continue to pay more in employee salary than it takes in via sales? This does not even account for benefits, production costs or overhead.

Now add to the mix that the “big guys” are turning a healthy profit, reportedly based on abusing their underpaid employees and driving them to burnout. What slice of the pie does that leave the little guy creating new and interesting games instead of “Madden Football 5137”? I have maintained that it is insane to start a game development company in this environment for quite some time, the fact that venture capital has all but dried up tends to validate this view.

My feeling has been that the game industry has been stagnating for at least 5 years. Publishers/Big Guys are unwilling to give new ideas a chance (with “The Sims” being a notable exception). Development and Marketing money flow to sequels and rehashes of other successful games. These games are seen as “Safer” bets than something new. We are truly heading toward a choice between “Grand Theft Auto 45”, “Major Theft Vehicle 3” and “EA Presents: The only sports game available 23”. The costs of development and the risks of flopping in the marketplace conspire to bring this about.

Eventually the industry will see a shakeup like in the 1980s. If it rebounds again, and that is a big “if”, it will need to have creative (i.e. not burnt out) people doing it for the joy of the hunt again. New genres need to be explored, new ideas need to be funded and creative people need to be encouraged for a comeback to happen. The current climate does not bode well for the industry.

Given all this, I still see game development schools advertising their degree programs based on the hopes and dreams of naive kids that think that working in games is “all that and a bag of chips”. These are the people that the EAs of the world exploit. One former boss once told me to “Hire ‘em all, let God sort ‘em out”. Nothing has changed except the scale of the crime.

Linked: basil's