Computer Graphics World

April 2011

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Editor’sNote The Business Side of Visual Effects and Gaming T he world of video games is not all, well, fun and games. While players enjoy the entertaining side of this industry, on the development side, the focus is all business. And lately, the business of making games has not been an easy one. Years ago, many analysts thought the entertainment industry—films in particular, but also video games—was recession proof. The belief was that when people were pinching pennies, video games, like movies, offered a relatively inexpensive form of entertainment. But lately, this theory has not held up. Despite the $50 to $60 price tag of many triple-A titles, they remain a bargain for players, who get upwards of 40 hours of enter tainment for their purchase. However, these games are not a bargain for developers. The current console titles are expensive to make, and this is having a wide-reaching effect on the industry’s landscape—a point hit upon at the Autodesk Media & Entertain- ment Backstage Pass event earlier this year at the company’s offices in Montreal. In his welcome address, Autodesk M&E’s senior vice president Marc Petit provided a discerning snapshot of the entertainment industry, iterating what we all know to be true: It’s difficult for studios to turn a profit. We used to think that this situation wreaked the most havoc on smaller indepen- dent studios that didn’t have the resources to ride out rough waves that rocked the economy. Now, however, we are seeing the toll that this economic storm has had on even larger facilities. On the film side, several well known studios have been forced to close their doors. We were all saddened when The Orphanage suspended operations in 2009, especially after working on such films as Live Free or Die Hard, Pirates of the Caribbean: Dead Man’s Chest and At World’s End, Fantastic Four: Rise of the Silver Surfer, and Night at the Museum; even the hugely popular Iron Man could not save the studio from a horrible fate. More recently, CORE, Asylum, CafeFX, and Image- Movers Digital have suspended operations. On the gaming side, the picture is similarly dire across the globe. Krome Studios (Star Wars: The Force Unleashed), Australia’s largest game developer, went defunct last fall, as did Realtime Worlds (Crackdown, APB) in Scotland. Even studios under the protection of big names suffered similar fates. Earlier this year, Activision—one of the largest third-party publishers—shut down midsize Bizarre Creations (007 Blood Stone), the London studio it had acquired in 2007. Disney Interactive pulled the plug on its Vancouver, British Columbia-based Propaganda Games (TRON: Evolution) this past January, as well. Perhaps the biggest shock of all came when Activision Blizzard announced two months ago that under its deep restructuring plan, it would no longer be developing or publishing a number of titles, including Guitar Hero—this after closing RedOctane, which launched the music-focused title. Another casualty be- came MTV Games, which sold off Harmonix (Rock Band) to a private investment firm for the price of a game—a mere $50—after writing off a $299 million loss for its 2010 third-quarter earnings. Also in financial trouble are EA, Disney Interactive, and THQ, which are reported to be in the red. So, what is causing this disturbing situation? More and more we are hearing that the demand for quality work in films and games is outpacing budgets. More to the point, the current economic climate and global marketplace have made it unrealistic for some companies to continue to deliver the highest-quality visual effects work at a competitive price—and sustain a profit. As a result, VFX facilities and game devel- opers are not just fledgling, they are failing. The cost of continued on page 45 2 April 2011 The Magazine for Digital Content Professionals EDITORIAL KAREN MOLTENBREY Chief Editor • (603) 432-7568 CONTRIBUTING EDITORS Courtney Howard, Jenny Donelan, Kathleen Maher, George Maestri, Martin McEachern, Barbara Robertson WILLIAM R. 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