38 Studios, SWTOR layoffs – is the MMORPG genre in danger?

Last week, major developer 38 Studios went out of business, in the middle of developing an MMO. Shortly before that, EA laid off SWTOR staff – many sources are reporting up to 40% of their entire team. Stock analysts are saying that many investors won’t touch MMORPGs in future.

Is our genre dying?

  • The legendary Scott Jennings, aka Lum The Mad, comes out of retirement to write a stunning denouncement of 38 Studios’ business policies and the state of the MMO genre“Loyalty matters, but character also matters. And in this case, Schilling’s failure of character has damaged an industry, to the point where it may be years before we see another investment in MMOs.”
  • Keen and Graev hope that the end of the MMO investment bubble might actually result in an MMO renaissance“Older games were made on small budgets. UO, EQ, DAOC, SWG, and many other older MMO’s from before this generation were created on smaller budgets, with smaller teams, yet lasted for years at a time and introduced what it meant to be a massively multiplayer game to the world.”
  • Alexander Sliwinski at Joystiq describes the denial of 38 Studios employees in a fascinating but upsetting article“Could the lesson be that we have the capacity to believe everything is going to be all right when the evidence is stacked against us? Who knows. Maybe I’m just trying to share a personal story I hope to never experience again, and get some clicks. “
  • The Rampant Coyote contrasts the failures in big MMOs with the success that many indie publishers are experiencing“Quite frankly, while I appreciate pretty graphics as much as the next gamer, I find my entertainment desire isn’t served a thousand times better by a game that cost a thousand times as much to make.”
  • Unsubject writes a curiously cheering article which finds that 38 Studios’ demise may have actually been thanks to bad government incentivisation (note – pretty heavy financial analysis) – “Pretty simple – in October 2010 38 Studios got US$13m up front from the deal to move to Rhode Island, and then another US$9m for announcing when it is making the move. You can see how FTE employee numbers ramp up over time. “
  • And Fulguralis asks how the movie industry can continue to make massive budget films and not entirely go out of business“Aren’t there a whole bunch of movies with ginormous budgets that completely tank and lose money. Yet, you don’t hear about huge layoffs at Universal, do you? (It’s an honest question, I confess that I don’t really know). It seems to me that perhaps video game companies are going about this the wrong way.”

A brief note on the last one, as my day job’s not a million miles away from that sector (albeit at the lower-budget end of the market): one aspect of moviemaking that games are mostly lacking is the capacity to earn out on the back end through multiple available revenue streams. Most movies – nearly all movies – don’t make money at the box office, but that’s OK. For most filmmakers, the correct way to look at a box office release is a marketing expense, not a profit center.

One a movie has come out of theatres, it has dozens of other ways to make money. Foreign rights sales for cinema distribution, DVD and Blu-Ray release, download, TV markets (which are where a lot of indie movies make at least some money). You’ve also got the entire merchandising industry, which computer games have mostly yet to master, but movie studios have down to an artform. Then you’ve got product placement and other ways to make money at the front end, which again computer games have yet to really exploit.

A conventional game has one way to make money – release. That’s one of the reasons MMOs became so appealing in the first place – ongoing revenue from subscriptions. But even a sub-based MMO has virtually no monetisation options compared to a film.

The games industry will figure this stuff out over time, but right now, a game release is a win-or-lose-right-out option, which a film, at least for a major studio, isn’t.

What do you think? Where is the MMO industry – going up or going down?