What's Next? How games-as-a-service is changing everything

[In advance of November's GDC Next, GDC's Director of Online Community Patrick Miller reached out to many games industry luminaries to see where they think the future of video games is headed. This interview is the latest installment of a multi-part series that will run up until shortly before the 'future of games' conference, which takes place in Los Angeles, CA from November 5-7, co-located with the App Developers Conference.] As a general partner at Signia Venture Partners, Dan Fiden's job is to figure out the future of the games industry as best he can -- so, naturally, he was a perfect pick to talk about the future of games. Read on to find out why he thinks freemium and games-as-a-service models are only beginning to catalyze changes that will reverberate through the entire industry. Patrick Miller: Over the last few years, we've seen many game dev studios mirror the software-as-a-service and freemium models adopted widely by devs in the broader tech industry. As a longtime games veteran, how do you see that shift changing the way games are made and sold? Daniel Fiden: By now, pretty much everyone recognizes what an upheaval the shift to digital distribution that began in about 2000 was for the music industry. Some of the most powerful incumbents on the publishing (labels), distribution, and retail sides of that business disappeared, others shrank substantially. Meanwhile, a company like Apple, previously a complete non-factor in the music business, became almost hegemonic. Sometimes you hear people compare what's happening in the game business to that change. But I think that only captures part of the story, and the least interesting part at that. The craft of making music -- recording techniques, how songs are written -- hasn't changed. Sure, the tools and techniques have evolved, but not more than in any decade prior to the business model shift in 2000. And the basic act -- write a song, perform and record the song, distribute the song -- is the same. The shift to game-services is a complete rethink of what it means to make a game. Production processes, the composition of teams, what a shippable product is, how products evolve once they're live -- these are all fundamental changes that Western companies are just figuring out. To extend the music metaphor, it's a shift from a composition-based approach to a completely improvisational approach. So, yeah, I think it's kind of a big deal. PM: What future consequences do you see result from moving away from the pay-once model? DF: The consequences are up to us. The removal of the payment barrier forces us to to rely on gameplay to make a business, not trailers. I think that's a good thing. But we're just beginning to understand the mechanics of the free-to-play model. Unfortunately, there are a lot of talented game makers out there who seem to have an emotional reaction to the model as its sometimes implemented today. They refuse to entertain trying it out. To me, that's a bit like refusing to make television because The Big Bang Theory is stupid. It's those great, skeptical, creative people who will push the model in interesting new directions. PM: What's the next major change you see coming up in terms of how games are made and sold? DF: I think we'll be learning how to run game services for the next decade. I hope to see interesting evolutions in what it means to operate a game live; specifically, what an event means. There are a few companies out there that understand how impactful events can be for your business and as a catalyst for your community. But I haven't seen much in terms of pushing events creatively. I can't wait to play a game that uses the events cadence to drive lore and storyline, and that leverages the community to help tell those stories. Paul Preece, one of the founders of Kixeye, talks convincingly about EVE and the epic storylines that exist and evolve in that world. Live game operators could guide those stories through events, just as events could reflect the stories that users create. PM: Correct me if I'm wrong, but I'm under the impression that VC has a bigger presence in games than it did, say, 20 years ago, and that the latest tech boom has kind of brought games along with it. As a longtime game dev, how do you see the presence of VC changing the way games are made and sold in the long term? DF: There's been a great debate about VC and games this year, driven by smart folks like [general partner at Benchmark Capital] Mitch Lasky. It's true there has been a good deal of VC activity in games over the past five years, but perhaps that was driven more by VCs trying to invest in Facebook and mobile than it was by their interest or insight in games specifically. This year there's been a reversal in that interest, probably driven by Zynga's struggles on the public market. I do believe that the broader industry is in the middle of what I think is a massive transition -- one that doesn't have much to do with Facebook and mobile, but has everything to do with games-as-services. In my opinion, that's a bigger opportunity than casual games on any one platform or another. It's about a reinvention of the Western game business overall. There's money to be made in that transition, and not coincidentally the Asian companies most familiar with the power of those models -- like Nexon and Tencent -- are the most active investors right now. There's a separate but related question, and that's what game financing will look like in the future. But my experience is that the answer is very different depending on the scope of your game. For games costing less than $1 million, there are tons of options: crowdfunding, angels, film-style financing deals, publishing deals, and to some extent VC. If your game costs more than $1 million, your options narrow substantially and look much more like your options prior to 2008 -- pub/dev deals. However, my personal opinion is that the opposite should be true. For a small company making sub-$1 million games, there's no barrier to entry to limit your competition. You're also competing with hobbyist developers who don't care about making money at all. The barrier to entry exists in the $5 million range, financially and technically. This is the real opportunity right now, especially on tablets. PM: Seems to me like your success or failure in VC is in part dependent on your ability to predict the future, so: What's the one trend or buzzword you see around games that makes you skeptical when you hear it? What sets off your bullshit alert these days? DF: I've probably used 50 in the last few sentences! For games, probably "fast follow." It's a not used all that much anymore, which is a reflection of how effective it's been for most companies on platforms that are more frictionful than Facebook. PM: Read any good books lately? DF: Not particularly apropos this interview, but I did recently finish "A Dance with Dragons." PM: How do you think the mainstream game audience's expectations of a video game will change in the future? Will people be more receptive to games that make us feel more complicated emotions than simply "entertained"? If so, how do you think a studio or a publisher ought to prepare for that future? DF: This is one of the great things about the industry today -- the increasing depth to the art of games. How should publishers prepare? I'd take a look at the decline and fall of the vertically integrated studio system in Hollywood. In the early part of the last century, the studios had all creative talent under contract. They were employees of the studios. But by the 1950s, this system had broken up. Creative talent were now largely free agents. When you look at the big publishers today, it's still a big studio system in which game makers are employees. But with the rise of democratized development and business model and distribution disruption, I think the publishers are effectively being broken up. I think it will lead to a new era of game makers' and studios' names appearing "above the title." PM: It seems to me that much of the next wave of tech innovation in games is about reducing barriers to entry. Which tech barriers do you think will be coming down in the next 5-10 years, and which do you think will remain strictly in the hands of triple-A? DF: To be honest, I don't think technical barriers are what differentiates triple-A from indie development anymore. It's content. Games like Assassin's Creed 3, which I liked quite a bit, are differentiated primarily because there's just so much stuff in them -- so many game modes, so many locations and characters. [Canabalt creator] Adam Saltsman quoted an article saying how many hours of work went in to AS3. I don't remember the number, unfortunately, but it was stunning enough that we had a chat about what other human endeavors required as many hours to build. The Pyramids? The differentiation is purely a matter of access to capital and appetite for risk. In the next five years, I see that chasm reduced primarily because I believe that "indie" budgets will increase and triple-A budgets will decrease. PM: It seems like the best ideas in tech and games simply didn't happen at the right time. Is there anything you think we'll see come back (perhaps a spiritual successor) once the time is right? DF: In my very limited experience meeting with tech entrepreneurs, nothing was ever a bad idea -- it was just ahead of its time. I think the timing is a fundamental part of the validity of the idea. I also tend to believe that every idea builds on some previous idea. So how's that for a non-answer? Online registration is in full swing for GDC Next and the co-located ADC; register now and save up to $200 on ADC, GDC Next, or a combined VIP All Access Pass. For all the latest news on GDC Next, subscribe for updates via Facebook, Twitter, or RSS. Also, check out ADC's recently announced design talks: Intel on building scalable and secure APIs for enterprise apps, and ChaiONE on pairing the latest wearable technology with smartphones. Also, check out the previous 'What's Next' interviews with Kim Pallister, Robert Zubek, Greg Rice, Chris Crawford, Starr Long, Thomas Bidaux, Teut Weidemann, David Cage, Warren Spector, Sunni Pavlovic, James Paul Gee, Raph Koster and Chris Pruett. Gamasutra and GDC are sibling organizations under parent UBM Tech.