Exclusives are Dead, Long Live Exclusives

The era of exclusive video game deals is winding down, says an analyst for Reuters, citing rising development costs making third-party studios gun-shy about putting blockbusters like Grand Theft Auto IV on one-platform leashes. It's a situation exacerbated by a kind of console trifecta, a third-party software publisher's worst nightmare, where no one console establishes a dominating lead over the others and mutual success harms everyone.

Welcome to a future in which hardware manufacturers like Sony and Microsoft increasingly fund their own exclusives and justify their platform's existence by threading meta-services into proprietary operating systems, a future where independent studios struggle to maximize returns by hedging major releases across the entire hardware spectrum.

It's been awhile since the games industry looked as fractious. The last time was arguably the early 1990s, the so-called 16-bit era's heyday, where the Sega Genesis and Super Nintendo Entertainment System went chip-to-chip battling for hearts and dollars. Nintendo eventually clawed its way to victory to beat Sega by about 20 million systems worldwide, but in the U.S., the SNES only surpassed Sega's Genesis by six million units, a trifling victory by today's standards.

The so-called 32-bit era in the middle and late 1990s was Sony's to lose with its dark horse, record-shattering, over 100 million selling PlayStation. The PS's preliminary competitor, Sega's Saturn, was developmentally inhibited -- a dual-processor architecture that proved nightmarish to code for -- leading to crippled ports, a general dearth of titles, and total sales of less than 10 million units.

Even the vaunted Nintendo 64, with paradigm-shifters like Shigeru Miyamoto's Super Mario 64 and Rare's GoldenEye 007, failed to seriously threaten Sony's PlayStation. The Nintendo 64 -- nigh legendary in the minds of gamers -- only sold 33 million units worldwide.

Sega's superbly designed gun-jumping Dreamcast was a critical darling, but failed to get its hooks in before Sony's PlayStation 2 hit the market in 2000. Despite plenty of early garbage-ware, the PS2 went on to break the original PS's record by selling over 140 million units worldwide (and like the pink little bunny with the drum and sunglasses, that engine's still a-chuggin'). Microsoft's Xbox and Nintendo's GameCube took their turns in the spotlight with franchise-launchers like Halo and Metroid Prime, but the Xbox itself only sold around 24 million units and the GameCube about 22 million worldwide. Add them together and they're but a third of Sony's mammoth cut.

So here we are in 2008, unexpectedly awash in hardware, with one console (Nintendo's) pulling slightly ahead of the rest, but the market essentially split thrice and only tepid forecasts about where any of it goes because so many analysts have been so incredibly wrong about what's happened to date. If you're a third party developer with costs soaring upwards of $50 million, designing for both the 360 and PS3 literally doubles your returns. And if your game's not CPU and GPU intensive, add in the Wii to go for triplicate or more. The incentive to build for just one platform isn't there, and the cost to snare developers in exclusivity contracts just can't match the revenues gained by spreading your product around.

Given that, the future of exclusives is probably either what the Reuters piece suggests -- that exclusives will be increasingly first-party driven...or something arguably less satisfying: the demise of major first- and third-party exclusives altogether in favor of meta-service exclusivity, e.g. Xbox Live, PlayStation Home, and Nintendo's Mii Network. The latter entails a shift away from pure gaming and toward social networking and casual gaming services, kind of like MTV dropping music videos in favor of reality shows and celebrity exposes other sorts of mass appeal material. While I see the value in aspects of the latter, I worry that it could drive the industry's foundation -- enthusiasts and mainstreamers -- out of the picture. And in such a scenario, if gaming's newer, purportedly casual, who-knows-how-committed audience decides it's suddenly no longer interested? Market crash, big and messy.

A third scenario, certainly more intriguing, involves Microsoft and Sony sinking R&D into a steady stream of inexpensive but potentially groundbreaking properties. Maybe one catches, maybe three don't, but the one that does could be another Blair Witch Project, and when that gets old, whatever comes next on the low-cost innovation scale. Giving developers less to work with forces them to be more creative. Publishers need to remember that games aren't movies, and the best ones needn't have a single Hollywood voice-over or George-Lucas-like CGI-drizzled cinematic.

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