Ah, irony of ironies. Two days after EA CEO John Riccitiello claimed the game industry is no longer ripe for mergers, Activision and Vivendi Games announced their intent to merge into Activision Blizzard. (Wonder twin powers, activate! Form of known IP! Form of Warcraft!)

Analysts will flutter, of course. But when they hype dies off, what will this ultimately mean for the game industry?

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Today’s session went pretty well. I didn’t stutter uncontrollably, pass out, or embarrass myself in any other highly-visible manner. Oh, and the discussion was nice, too. Some of my favorite quotes:

“The people who have a $600 graphics card know how Bittorent works.” - Mike Capps, on PC games and piracy

“EA doesn’t understand that Kellogg is our competition.” - Rich Hilleman, on the broader consumer market

There was also a great moment, which I unfortunately could not capture in writing, during which we discussed the potential benefits of the PC as a forum for adult-only (or otherwise “risky”) game content, as compared to “family-friendly” consoles. Mike Capps inspired the discussion by noting that adult mods can’t thrive on the console. Soren Johnson shared a story about the portrayal of religion in Civilization, and how political sensitivities around that could have been even sharper on the console. And Rich Hilleman noted that online poker is already a massive success on the PC — in other words, adult-centric PC gaming is already a big market — and also that pornography typically goes hand in hand with advances in media technology. Basically, my panelists were telling the audience to consider an, errrrrrr, “hardcore” strategy for the PC game market.  ;-)

One of the things that caught my attention at E3 was the Desperate Housewives video game, by Buena Vista Games and Liquid Entertainment. It’s a “sims-style” game that seeks to recreate the intrigue of the TV show. Players can customize their player, their home furniture, etc, when they aren’t indulging in morally questionable behavior.

When I first heard about this game, I thought it sounded like a promising attempt to reach outside the “core” gamer market, but was worried that the gameplay would prove stale. Fortunately, the demo I witnessed at E3 dispelled those concerns. The experience seemed quite rich; for example, I watched a player antagonize a character from the TV show, after which they broke into the character’s house (to “dig up dirt” that might help protect them from that newly-antagonized character). The player was caught sneaking around (they knocked over a vase), but then lied their way out of the situation (as tracked by a “composure meter.”) Not bad. Let’s hope that the rest of the game isn’t an endless repetition of that scenario with minor variations.

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Via Joystiq, an interesting controversy: id co-founder John Romero has accused the modding community of hurting the game industry by exposing or introducing inappropriate content (i.e. nudity) in PC games. His post was in response to the ESRB’s re-rating of Oblivion (which happened after a nudity mod surfaced.) John’s exact words: “modders are now screwing up the industry they’re supposed to be helping.”

There are a number of interesting comments on John’s original post which you may wish to read. Meanwhile, this raises a couple issues that I’ve been meaning to write about:

Whose Side Are They On, Anyway?

When consumers decide to create content for a game (or anything else), they’re doing it to indulge their own creative impulses, and/or to share something with friends, and/or to gain notoriety, and/or other reasons that have little to do with “wanting to help the industry” (or the developer, for that matter.) Let’s not kid ourselves: the guys who made Counterstrike didn’t do it to make Valve rich… that was simply a nice side-effect.

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Danc over at Lost Garden has an interesting post (in a multi-post series) analyzing the development model currently favored by most game studios. Lots to read in there; he does a good job of explaining how/why studios are pouring ever-more funding into licensed IPs, art, and “more of the same technologies”, why studios think this is actually a good risk-reduction strategy, and how this arms-race will hurt everyone in the long-term.

Juxtapose this with the latest unhappy news: a survey found that 80% of teens intend to cut back on time spent playing video games, and 70% said they are “losing interest” in games altogether. (Oddly, the survey-taker calls this a “stabilization”, since last year 75% of teens reported declining interest in games. Why does this fail to make me feel better?)

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Warning: serious stream-of-consciousness ramble ahead.

Today I tried to install Stubbs the Zombie on my PC, but the installation failed. I have no idea why. Three weeks ago, I spent two hours trying to recover from a driver update gone awry. This weekend I hope to find time (hah!) to format my desktop’s hard drive, in hopes of eliminating some serious Windows-related performance slowdown issues. Why am I writing all this? Because I think it helps explain why the AAA PC game market is shrinking, despite a recent surge in PC sales.

I’ve always loved PC games ever since I played Space Quest 1. I still think the PC is a superior gaming platform. The problem is, that’s just not enough anymore. PCs are finicky, bulky creatures. Consoles are (mostly) stable — pop in a game, and you know it’ll work. Much more importantly, consoles only cost a few hundred dollars. If you want to play the latest AAA PC games (as they were intended to be played), you need to spend at least a thousand dollars every few years in order to keep your hardware up to date. Unfortunately for the majority of Americans, that’s a serious problem. Given the reliabiliity and cost issues, as well as the fact that consoles are now amazingly powerful machines, I just don’t see great hope for the PC.

On the other hand, the rise of MMOGs does seem to help counteract PC game market shrinkage. I find it hard to imagine playing social games without a keyboard, and there aren’t (currently) enough consoles connected online to challenge PCs for MMO dominance. It’s also still much easier to facilitate user-created content on the PC than it is on a console, and I firmly believe in the revenue-generating power of user-created content. Counter-Strike isn’t the most popular online FPS of all time for nothing! (Read here about the positive effect CS had on Half-Life sales.) And Microsoft’s committment to the viability of the PC as a gaming platform certainly helps. Maybe these factors (among others) will serve to permanently preserve the health of the PC gaming market. As an avid PC gamer, I’d like to think so. But I won’t hold my breath.

PS. This post is US-specific. I doubt that the PC gaming market in South Korea will slump anytime soon!

Update: Forgot to emphasize — I’m talking about AAA games here, not casual games.

In the last couple of days, EA and Sega have both announced PC game digital distribution (DD) services. Content available for download appears to be extremely limited initially, but that should change.

When Valve took the DD plunge with Steam, many people called it suicide. Retail still accounts for the vast majority of games sold in the US (Walmart alone claims 25% of the market), and some predicted that retailers would punish Valve by permanently shunning its games.

Valve did take some lumps from its publisher, Vivendi, and lost some retail placement in the process, but the apocalypse never came. Now DD services are springing up everywhere, such as Turner’s GameTap and Verizon’s Game Network. The question is no longer “will retailers accept DD” but “what DD models will work best?” All-you-can-eat subscriptions to a library of games? One-time, one-game lump sum fees (as in the current retail model)? Episodic content?

Ultimately, game retail isn’t going away, just as Barnes and Noble didn’t go away. A huge percetage of games are purchased by parents who wander around stores like Walmart wanting to buy a gift for their kids. Those parents aren’t switching to digital distribution anytime soon. And people who want control over the content on their hard-drive may be turned off by anti-piracy systems in DD.

• Full story (Sega)
• Full story (EA)
• Yet another long tail article on entertainment
• Reader feedback to Gamasutra on DD’s future