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Will small publishers still have game?

With rising development costs, the little guys are facing tough choices when it comes to new consoles.

At the Game Developers Conference in San Francisco seven months ago, there was an undercurrent of fear.

Would sharply rising development costs, game developers worried, make designing games for the impending next-generation consoles--Microsoft's Xbox 360, Sony's PlayStation 3 and Nintendo's Revolution--prohibitive for all but the biggest publishers?

With the Xbox 360 finally hitting store shelves Tuesday, little has happened to assuage those fears.

Certainly, games for the next generation of consoles being led by the new Xbox will come from a wide variety of publishers. And fears that the little guys won't be able to keep pace arise every time a new platform--whether it's the new version of Windows or a new game console--hits the market.

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What's new:
With Microsoft's Xbox 360 finally hitting store shelves Tuesday, little has happened to reassure developers who worry about the costs of designing games for the new consoles.

Bottom line:
Some insiders say smaller developers are likely to see much more upside in the coming months developing for current-generation consoles than for next-generation consoles and their initially small install bases.

More stories on next-generation consoles

But it's increasingly clear that game development costs are squeezing the little guys. Richard Doherty, an analyst with Envisioneering, said that while it's impossible to put a dollar figure on the base cost of developing games, the next generation of consoles, with their high-definition technology and motion captures, can double costs.

For giant game publishers like Electronic Arts and Activision, that's not so difficult. But for a little outfit, such development costs mean that one disappointing game can put the whole company on the ropes.

"It's really only big-name publishers that are going to be able to bring large numbers of next-generation titles to market," said Simon Jeffery, president and COO of Sega of America, whose "Condemned: Criminal Origins" is one of 18 Xbox 360 titles that will be on shelves when the console goes on sale Tuesday.

For most everyone else, the margin for error is going to be smaller than ever.

"Success (of a game) is that much more crucial," said Jeffery, "and the barrier to entry higher."

Microsoft executives say their roster of launch titles is the strongest in console history. In fairness, the original Xbox launched with 11 titles. And some analysts, like IDC's Schelley Olhava, agree that Microsoft has put together a formidable set of games spanning most of the crucial genres such as sports, first-person shooters and racing.

But other analysts note that a lot of publishers decided that it would be better to wait on developing games for the new consoles because they didn't have the wherewithal to produce titles Microsoft would want with the initial launch and decided instead to continue developing for the current-generation consoles and 20 million-plus users.

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"I think there were decisions made in the last 12 months," said Doherty, "that (publishers either) want to be one of the (launch) titles or, 'Nah, we'll be part of the second group.'"

Since the initial 18 games come from only seven publishers, it seems the real innovation--that is to say a wide variety of genres and types of games--in next-generation titles will come after the initial console buzz.

"Most developers had to decide to wait for the second stage of games," Doherty said, referring to the period in the months after the console launches when the number of people who have bought the consoles justifies the development costs for a new game.

The games that hit the market in the earliest days of the Xbox, Sony's PlayStation 3 and Nintendo's Revolution will largely be franchise titles--those that publishers update again and again, like Electronic Arts' "Madden"--and not the massive budget games that may take the most advantage of the state-of-the-art graphics and sound capabilities of the new consoles.

Sony's PlayStation 3 is expected to launch in Japan next spring and in North America in the fall, while Nintendo's Revolution is expected to be out in the spring. "These (games) are not going to (have) 100-person art teams," said Daryl Pits, president and COO of the small Santa Monica, Calif., publisher Jailed Games. As an example, he pointed to "Tony Hawk's American Wasteland" by Activision. "They certainly didn't spend $20 million on that game. So it's certainly possibly to develop a game without spending $20 million. You can take the work done this generation and move it over to the next-generation fairly easily."

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Essentially, Pits argued, the costs of game development mean that in the first few months, publishers that do take the plunge into the next-generation consoles will be forced to stick to existing franchises because they can't take the risk of putting tens of millions of dollars into games that may not do well. And that is even more true for small publishers like Jailed Games.

In the meantime, say industry experts, there should be no shortage of new game development for the original Xbox, and especially the PlayStation 2, which Sony seems primed to continue manufacturing and supporting through 2010.

Doherty said that he has been told by Microsoft that the company has enough parts and supplies to continue manufacturing the original Xbox through next summer and that it will evaluate its plans for that console at that point.

John Baez, a producer at The Behemoth, the small, independent San Diego publisher of "Alien Hominid," agreed. He thinks that a lot of smaller developers are likely to see much more upside in the coming months developing for current-generation consoles than for next-generation consoles and their initially small install bases.

"I think (that) would be a smart move for a smaller publisher that knows it can't go head-to-head with EA and Activision," said "There are millions of the current-generation consoles out there today, and people are not going to trash them the day the new consoles come out."

Still, Jailed Games' Pits explained that publishers who are working on new titles--as opposed to the latest versions of franchises--are going to feel pressured to build their games for the new consoles. And that's something the EAs of the world are in a much better position to do, given the tens of millions of dollars they can more easily throw at the problem.

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"If you're doing something from scratch," Pits said, "you need to be on next-generation systems. It's always better to launch a brand new game on new hardware."

And therein lies the problem for publishers who can't easily toss tens of millions of dollars at development: How to justify the development of brand new games that may or may not resonate in the marketplace. Game innovation, at least in the short term, could end up suffering.

"Once people become locked into that world view, that cycle, it becomes self-fulfilling," said Russell Williams, an executive producer at tiny Flying Lab Software. "'I can't make a game for less than $30 million, and if I get someone to give me $30 million, I'm not going to take a risk on something original.' Everybody ends up saying, 'Let's do what someone else has done that was proven in the market.'"

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