Thursday, February 28, 2008

From Another Angle

Julian Murdoch, an excellent writer and often an agent provocateur to conventional thought, has an entirely different perspective on the potential EA acquisition of Take-Two.

Julian's perspective (I encourage you to read his entire column) seems to consist of two main thrusts. One is a persuasive defense of EA CEO John Riccitello, which is a separate discussion for another day somewhere down the road.

Particularly interesting, though, is the other thrust, which is contained here:
Large players - those with big, big capital reserves - are extremely important. While the Horatio Alger version of the American dream makes for good theater, the struggling ragamuffin rarely goes on to be Mr. President. Big companies like Microsoft, the old AT&T and HP can afford to spend money on science experiments. Without the occasional pool of unfettered funding, Bell Labs would never have invented radio antennas or discovered cosmic background radiation; HP Labs wouldn't have developed the atomic clock or the LED. Apple, which, with a market cap 5 times Electronic Arts, can hardly be considered scrappy anymore, would never have made the iPhone without cutting their teeth decades earlier on the Newton.

It's true that large amounts of funding, when dedicated to innovation, can foster innovation. That's entirely reasonable. And there are certainly certain industries, particularly involving scientific research, where well-funded, well-equipped facilities are incredibly important to creating an environment conducive to breakthrough discoveries.

But I think it's also entirely reasonable to say that the business of large companies, the vast majority of time, is to make money. If innnovation makes them more money, they'll innovate. Importantly, though, if it doesn't, and won't, then it is counter to both their best interests and the best interests of their stockholders.

This is also true when it comes to quality. When it would reduce profits to increase quality, and that reduction in profits would not be temporary, then it's highly, highly unlikely (in the U.S., at least) that a company will choose to increase quality.

So what about the gaming industry? Is the gaming industry a technology company in the sense that research and innovation can lead to patents that will greatly increase their profits or influence future products? No, not as far as I can determine.

Sure, developers use engines, and they use tools, but I don't think big gaming publishers have think tanks established for creating these engines. I don't think they have think tanks established for anything. Electronic Arts, for years, has treated games not as objects of inspiration but as commodities. Commodities must ship.

This is not science. It's entertainment.

Which is a problem, and here's why. It's not in EA's best interests financially to spend another month working on a sports game that is in no shape to ship. It's not in their best interests financially to release team sports games every two years instead of every year. The games would be much, much better, but they're trying to make money, not win awards. They have both employees and shareholders, and stock prices depend on profit, not accolades.

Contrast this to the "town" or "island" developer I alluded to yesterday. Most of these guys have one game, not dozens. They don't have marketing or ship date alignment or a hundred other levels of bullshit that big companies have. It is absolutely, 100% in their best interest to do everything they can to perfect their game. It's also in their best interest to innovate, because it will help get them noticed.

This, then, is the question: what circumstances would create an environment where it was in the best interests of giant gaming companies to innovate? I don't believe Julian is correct (this time), but I want him to be correct. I want big gaming companies to innovate. I want them to take chances. I want them to treat the games they develop and publish as something other than commodities on a spreadsheet.

With rare exceptions, though, I just don't think they do.

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