#57: “Entertainment Funding”

Published in 2016/04/14 issue

Game development costs money. I realize that everyone knows this, but I want to point out that for HD console games in particular, it’s become the norm for development costs to be measured in hundreds of millions (of yen). When I first got into game development, the highest it ever got was 50-70 million yen (US $450-650 thousand), and a typical PlayStation game was 20-30 million (US $180-270 thousand). Now, an AAA title[1] costs upwards of 5 billion (US $45 million) to develop, and marketing costs can bring it close to 10 billion (US $90 million). The average development costs are ten times higher than they were 20 years ago.

I find that there are two general reasons for the steep rise. The first one is labour costs, i.e. our salaries. 20 years ago, game developers didn’t get paid much at all. Salaries are probably still all over the place, but it’s at least recognized as “skilled labour” now, so the base salary has gone up a lot. I’m the head of Business Division 5, so I know all of my division’s employees’ salaries. I can tell you that Square Enix’s game developers definitely get paid above average wages.

The second factor is the upward trend in graphics quality. Creating graphical assets for games takes drastically longer than it used to. HD games also require more than just 3-D technology—you need to implement things like physics for characters’ clothing and hair, which also takes time. But I feel that these things lead back to “graphics quality.”

Pixel art used to be the mainstream for video games. Well, it wasn’t so much “mainstream” as it was “there was nothing else.” Designers[2] used tools to draw characters and backgrounds by placing coloured pixels together. Hardware processing power was really low back then, so games were more like 2-dimensional slideshows. For example, if there was a cutscene with characters talking and their hair was supposed to blow in the wind, we would add pixels that made it look like it was, and animate the sprite as such. However, doing this for every scene would require too much work—plus we had limited space—so we couldn’t include much of that data.

As storage space increased and 3-D graphics entered the scene, the challenge became modeling hair in 3-D. There was just no way we could draw moving hair by hand. That was where physics engine technology came into play, and the end result was using that to make game graphics more realistic.

In the past, we would have a few designers plotting their pixels while battling with space constraints, but now, it can easily take 6-12 months to finalize a main character. Of course, a game has more than one main character, so multiple character designers are working concurrently. The same can be said for backgrounds/environments. This is why I believe that the sharp increase in game development costs is caused by labour cost × development time.

Lately, it feels like Japan has been developing fewer large-scale games—but it’s more than just a feeling; the numbers really are decreasing. We conduct business by creating games and selling them to customers, so we face the full brunt of skyrocketing development costs. No matter how much we want to make bigger games and show them to the world, simply calculating the development costs reveals the soul-crushing reality. For better or worse, this is what Japan’s gaming industry is facing right now.

Of course, some people are of the opinion that we just have to spend money and make games that sell well—and they’re completely right. However, it is far too risky for a game company to invest so much money by itself. Any company out there would hesitate to put all their eggs in one basket when failure results in bankruptcy. Console game sales in Japan have been declining, but if we don’t keep making games, the market will stagnate. It’s a painful state of affairs.

Meanwhile in the West, AAA games are still booming. Not only is the market healthy, there are many companies investing in games, which has a huge impact. Tens of millions of dollars are generously invested into the games thought up by groups of innovative developers with powerful technology at their disposal. Of course, the deadlines that they face are on a whole different level from Japanese games—a slight development delay or deviation from the plan and the contract is void. The idea of “We’re paying you, so make it the way you promised” is strongly enforced.

In America, this isn’t limited to just video games—there are many businesses and individuals who invest in entertainment. The number of wealthy people and the amount of wealth that they own is incomparable to Japan, to the point where there is uproar over wealth inequality. Additionally, they believe that money is something to be spent; nothing will come out of storing it away. So, they make careful investments, supervising them to avoid loss. This is the case for both films and HD games, which have already reached a scale where they aren’t even viable without investments.

On the other hand, Japan has finally reached the point where films are starting to get this kind of funding. I think we’ll need another 10 years before video games will get this treatment. Japan has cries of wealth inequality too, but the people who are considered “rich” here don’t have that many assets when compared on a global scale. Our wealth redistribution is quite effective. If manga, anime, and games are considered “Japanese culture”, then I wish the country would fund them as such, even though some may complain that it’s a waste of tax money. And I don’t mean financial aid; I mean a real funding system where they’ll profit if the game succeeds. Honestly, I think the console game industry in Japan is in a crisis right now.

[1] An AAA title is a giant-scale work. Nowadays, this classification of game costs about 5 billion yen to develop—or rather, it’s because they spend that much that they’re called AAA.

[2] In Japan, “designer” is a general term for people who work with graphics, and it is used as such in my writing. However, in the English gaming industry, the word refers to game designers. What we call “designers” in Japan are called “artists” there.