Myst Opportunities : Game Makers Narrow Their Focus to Search for the Next Blockbuster

Production costs are soaring, top stars are commanding lucrative salaries while others struggle to get noticed, and a blockbuster mentality grips the industry.

The movie industry? Music? Network television?

No, computer gaming. For the same forces that have come to dominate those established entertainment industries are quickly taking root in this newest of media.

For most of its relatively brief existence, the game industry’s strategy has been to pump out as many titles as possible. But now, for the first time, companies are cutting back and taking fewer risks.

Virgin Interactive in Irvine, for instance, plans to release about 25 games this year, half what it shipped in 1996. These days only those games that look like sure hits get the green light at Virgin; nearly 40% are killed in development.

The old business model was “throw as much mud against the wall as you can and see what sticks,” said Martin Alper, president of Virgin Interactive. Now, he said, if a game doesn’t seem destined to end up near the top in its category, “we’re not interested in continuing its development.”

The old model had certain advantages for consumers, because they got to decide which titles would succeed. And it was good for game designers, because a large number of their ideas--good or bad--made it to store shelves.

That model worked well during the early rapid-growth years of the market for PC-based games, which is today a $1.2-billion industry.

But the very same strategy has become a problem for game companies confronting a wave of new competitive pressures amid slowing market growth. These include a battle for shrinking shelf space in electronics, software and mass-market retail stores.

Alper acknowledges that diversity is suffering but says that overall the changes will benefit consumers because only the best games will make it.

Still, many of the industry’s creative leaders fret that the chance to do innovative work is fading. Echoing the familiar laments of movie and music critics, they say that reluctance to take risks may mean not only fewer flops, but also fewer masterpieces.

Doug TenNapel, creator of critically acclaimed titles such as Earthworm Jim and The Neverhood, said consumers can look forward to a diet of sequels and conformity.

“Consumers are just going to get more combat games crammed down their throats,” TenNapel said, “because that’s what sells.”

Not so long ago, many in the industry believed the game business was poised for greatness. PC sales were booming, and every sale created a household of potential new customers.

This was accompanied by the hope that typically affluent and educated PC buyers might be ready for something more sophisticated than the shoot-’em-up titles that dominate the market for dedicated game machines such as the Sega Saturn and Sony PlayStation.

If any game served as a symbol of these lofty aspirations, it was an unheralded gem called Myst.

Introduced by Broderbund in the fall of 1993, Myst enthralled players with surreal graphics and sounds, right down to the lapping tide and screeching sea gulls in the game’s opening waterfront scene.

The game, in which players navigate an island, deciphering clues to solve a mystery, was one of the first to capture a truly mass audience. It became the top-selling PC game of all time, with more than 2.5 million copies sold.

But the game landscape has shifted so dramatically since the introduction of Myst that many executives say its prospects in today’s blockbuster-driven market would have been uncertain.

Myst was what the industry calls a “slow burner,” meaning its sales built momentum over months. These days, retailers often give up on slow-selling titles in a matter of weeks.

“If Myst came out in this retail environment today, it may never have even seen the light of day,” said Ronald W. Chaimowitz, chief executive of New York-based GT Interactive, one of the industry’s largest companies.

A few years ago, the business was dominated by specialty stores that stocked hundreds of titles and were more patient with slow-selling games. But today, big retailers are pushing the specialty stores aside, in the same way that giant bookstore chains are eradicating small shops.

A game has “to come out smoking or we have to move on to something else,” said Mark Dobberstein, head buyer of PC games for Target, the giant Minneapolis-based retail chain.

Dobberstein chooses which games will be stocked in Target’s 750 stores, a daunting task considering Target has room for only about 50 of the roughly 3,000 titles in release. Shelf space is doled out solely on a game’s projected sales potential, a criterion that tends to favor sequels and major titles from big, well-known companies.

Meanwhile, giant chains like Target are driving small specialty software chains to the wall. Dallas-based NeoStar, which owns the Babbage’s and Software Etc. chains, was taken over by new owners in a bankruptcy court proceeding in November. The company once had 650 outlets throughout the country, but only about 400 are left.

Issaquah, Wash.-based Egghead Software recently said it will close 77 of its 156 stores nationwide, including 20 of 22 in Southern California.

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Meanwhile, game sales at Target grew about 60% last year. But the company has no plans to stock more titles.

“We’re in the corral we’re going to be in,” Dobberstein said.

The shifting retail terrain puts pressure on game companies to concentrate on titles with top 50 potential.

Last year, Virgin for the first time created a review board to weed out weak candidates. Abandoning the “see if it sticks” model, it now pulls the plug on more than one in three games before they make it to store shelves.

Virgin executives say that overall quality is improving as a result and that consumers are less likely to be disappointed when they plunk down $50 or $60 for a game.

In fact, many games that get killed probably would have disappointed players. A new playground basketball game was recently nixed by Virgin because it had a glitch that let players score almost effortlessly.

But aficionados say many others killed by the company could be considered unfortunate casualties of the new business climate.

One centered on a news reporter sent to the middle of a former nuclear testing ground in the Nevada desert. He brings peace to a collection of radiation-scarred communities by uncovering the truth behind damaging urban legends.

“I fought tooth and nail for that game,” said Julian Rignall, vice president of design at Virgin. But he said that others on the review panel killed it because, given its highly stylized and bizarre characters, “it was too freaky.”

The skyrocketing cost of producing games is also making companies more reluctant to back risky or experimental titles.

Executives say it costs about $1.5 million to develop a game now, compared with $300,000 just three years ago. Those numbers don’t include other costs, such as marketing, that are also rising.

Much of the surge in costs was triggered by the huge data capacity of CD-ROMs. Given a bigger canvas, companies had to spend more on programming, sound effects and graphics to fill the space.

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All of these changes favor bigger companies that can afford the rising costs and have the muscle to get shelf space. And, through dozens of acquisitions in the last few years, the big firms keep getting bigger.

“The market is moving to a point where you have five to 10 companies controlling 75% of the business,” said Mike Wallace, an industry analyst with UBS Securities in New York.

Also contributing to the changes in the game industry was Hollywood itself.

Waving wads of cash, Warner Bros., MGM, Universal and other studios jumped into the game business several years ago by buying companies or signing development deals with artists. The new entrants helped create the glut of titles that caused releases to nearly double to 1,124 in 1995 from 664 two years earlier. They also set off a bidding war for talent.

As in Hollywood, star PC game artists could write their own tickets. TenNapel, for instance, was a hot commodity because of the success of Earthworm Jim. The title happened to be a favorite of Steven Spielberg’s son, and it wasn’t long before TenNapel signed a multimillion-dollar deal with DreamWorks SKG, Spielberg’s studio.

Hollywood was counting on a market for interactive movies and games based on hit films. But consumers haven’t shown much of an appetite for these hybrids, and now the studios are in retreat.

Crossover customers “are much harder to reach than Hollywood thought,” TenNapel said. “Now all the Hollywood types are looking at each other with their pants around their ankles, saying, ‘Man, you look stupid.’ ”

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Chastened by the experience, game companies are returning their focus to their most loyal audience: the hard-core game enthusiasts.

Myst was once again the top-selling PC game last year, partly because Novato, Calif.-based Broderbund slashed the price to about $30.

Most of the other top-selling games last year had the high testosterone quotient of a Schwarzenegger or Stallone action movie and the bloodthirsty title to go with it: Warcraft, Command & Conquer, Duke Nukem and Doom are among the hot games today. In another echo of Hollywood, half of the 20 top-selling PC games of 1996 were sequels.

“One way of looking at it is marketing and publishers are forcing customers to buy bad product,” said Bing Gordon, a co-founder of Electronic Arts, one of the industry giants. “Or maybe,” he said with a note of sarcasm, “the customers are right.”

By force of their own star power, developers such as TenNapel are still getting their artistic visions on store shelves. TenNapel’s latest release, a quirky Claymation game called The Neverhood, was a critical success, although sales have been slow and the game isn’t even carried by all of the largest stores, including Target.

The real casualties, TenNapel said, are the artists who weren’t fortunate enough to be discovered before the age of the blockbuster, and the people who might have liked their games.

“There are hundreds of artists out there with really good, creative ideas,” TenNapel said. “Unfortunately, consumers are never going to see them.”

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Hot Market

Computer game sales have grown steadily, increasing 76% in just three years. The number of titles introduced, however, has hit a plateau (dollar amounts in millions):

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Titles Sales 1993 664 $683 1994 1,064 830 1995 1,124 1,000 1996 1,042 1,200

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Top Ten Games, 1996

Last year’s bestsellers (dollar amounts in millions):

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Title Publisher Units sold 1. Myst Broderbund 853,765 2. Warcraft II CUC (Sierra/Davidson) 835,680 3. Microsoft Flight Simulator Microsoft 693,238 4. Duke Nukem 3D GT Interactive 620,791 5. Civilization 2 MicroProse 482,522 6. Barbie Fashion Designer Mattel 351,945 7. Command and Conquer Red Alert Virgin 347,844 8. Microsoft Return of Arcade Microsoft 335,176 9. Command and Conquer Virgin 330,891 10. Doom II GT Interactive 322,671

Sales 1. $28.8 2. 34.5 3. 32.9 4. 25.0 5. 21.1 6. 14.0 7. 16.5 8. 9.5 9. 15.0 10. 12.6

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Note: Does not include Macintosh or platform games

Source: PC Data

Researched by JANICE L. JONES / Los Angeles Times