Major game publishers flee the bottom end because it feels good

In this Gamasutra story, Take Two talks about how it is best to stay with AAA titles. While Take Two and other big publishers ‘rationalize’ staying in the upmarket, they are setting up their companies to be gored.

Let us remember this chart:

A disruptor enters the market only at the low end, for those low quality users. In this case, Wii entered with non-gamers and grandparents and parents with Wii Sports.

We have witnessed the big publishers try to sell to the low end and fail. So they are retreating upward. The cream at the top of AAA games feels good to the publishers. It is highly profitable and has high prestige. The games at the bottom are lowly profitable and have low prestige. So it is no wonder that publishers and the employees, those man-children who would ragequit if they were assigned to work on a non-HD system, like the AAA games.

But as the big publishers abandon the lower ends, the disruptors are going to move up. Their games are going to get more sophisticated, more interesting.

This is how an industry gets disrupted. The steel industry is very famous for this. The integrated steel companies abandoned the lower tiers and let the new mini-mills have them. The integrated steel companies relied on the top, most profitable and with most prestige, type of steel. They couldn’t wait to abandon the rebar and other lower steel at the bottom.

It is hard to see it as we are in the middle of it, but it seems clear the big publishers are moving upmarket and abandoning the lower tiers. Good.

This means the disruptors can move upmarket some more. Eventually, these big companies are going to be cornered. Then what?

Then they die.

Hasta la vista, “Game Industry”.