Rule of the gamers

While other tech sectors flail, the gaming industry thrives—and still strives to innovate.

THESE ARE DARK TIMES for high tech. Even the venerable hardware manufacturers—the Intels, Ciscos, and Suns—have seen their profit margins and stock prices melt away like sand castles at high tide. Through it all, one island of hope has remained, where small, fiercely independent companies still pursue the dream—the realm of games.

Games are big business in the postindustrial global economy. At a time when only a third of Americans work at making things, entertainment has become our principal export. And with an estimated $20 billion in sales worldwide (according to The Economist), computer games—counting the ones for those deceptively small boxes that plug in to your TV set—bring in as much or more annually as all the Hollywood blockbusters put together. Lara Croft and Pikachu stir up bigger box office than Julia Roberts and Brad Pitt.

Yet producing the games is still largely a cottage industry. While a movie like The Mexican has to struggle to keep production costs below $40 million or $50 million, a good action-adventure or thrill-ride game will have a development budget of $2 million or less, with a truly huge budget rising up to about $5 million. Part of the explanation is that the virtual stars of the game world do not collect salaries, but it is also the nature of the business. Although the names on the box typically belong to a handful of large publishers, the games themselves are usually the creation of small independent studios with names like Zombie, Valve, or Gas-Powered Games.

Chris Taylor, the creative force behind Gas-Powered Games in Kirkland, says the basic arrangement between a game developer and the publisher is like the deals that record labels make with their artists or book publishers have with authors.

"The developer or the person writing the book or making the record gets an advance from the publisher against the future revenue or future profit," says Carter. "That's how the business model is set up. Then when the game ships, they subtract those advances out of the profits, and then, if there's anything leftover at the end, that's what the game developer would earn as an extra bonus. If you're a developer with a good publisher, and the checks keep coming, and you can keep working on your game and making a high-quality game, then you really don't have anything to worry about."

However, says Zombie Studio President Mark Long, technology is pressing changes on the industry from two different directions.

"We're trying to tell a story in an interactive way, but the tools are like [filmmaking] back in the day of Edison," Long says. "None of the tools are compatible. They're all hand-built. But they're transitioning into a standardization of tools. Increasingly, those tools are available to anybody [for] free on the Internet." Using the ready-made development tools and connecting in virtual groups called mod teams over the Internet, he says, "they develop a story or a game, and then they release it virtually on the Internet for free.

"Increasingly, we're moving away from the really laborious, engineering-heavy requirements of game development and into the creative expression," Long notes. A prime example of this new distributed development is Counter Strike, the last megahit in the interactive gaming world. Counter Strike was created as a mod, or add-on scenario, for Half-Life, a well-received first- person shooter in which players see through the eyes of a character carrying guns around a three-dimensional mazelike building, blasting opponents as they appear.

AT THE SAME TIME, the demands on the creators for more realistic and more complex games are pushing the established development studios to a new level. In Carter's case, his Gas-Powered Games is employing 24 people working 14 hours a day to make what people in the industry keep describing as the next big thing in computer gaming. Reportedly it is a marriage of standard-issue action-adventure games like Tomb Raider that rely on fast reflexes and the fantasy-quest role-playing games (RPGs).

"We've got a new concept called 'continuous world,' which means when you immerse yourself initially, you don't come out of that until you decide to be finished. There's no loading screens. We don't pop you out of the game; we leave you in it," Carter says. "We use the hard drive and the technology available to us to stream in the data real-time as you play, so as you walk through the world, the data is constantly coming in. There's no reason to leave this gigantic fantasy world the whole time."

He says Dungeon Siege will combine the rich experience of massive multiplayer games like Everquest, which involves thousands of players interacting in real-time in an online fantasy world, with the storytelling abilities of a strategy or role-playing game that has genuine objectives and difficult obstacles blocking your way. "Our aim is to provide something completely over-the-top and rich," Carter says. "Just because it has an action tilt doesn't mean that we've turned the experience back. There's a full-blown story: You encounter characters and you go on quests and the world is huge."

Zombie's Long says that the storage capacities of DVDs—which can hold up to 100 times the data of a standard CD-ROM—combined with the extraordinary graphics capabilities of the latest generation computer systems has removed one of the gaming industry's fig leaves. "Up until now, we've been all about little tricks or sleights of hand to create the illusion in 3-D that things looked real. Suddenly the hardware has leaped so far forward that . . . you can't cheat anymore. Characters can have full expression. They can talk in sync and blink and have full emotional response," says Long.

"Xbox," he says, referring to Microsoft's still unreleased entry into the game-console business, "has a lot of people on the one hand excited and on the other hand scared that they're not up to it."

"It's kind of like an invitation to fail," Carter says of Xbox. "Are we going to be able to rise to the occasion of building fantastic worlds to be able to use all this incredible hardware, let alone the storage medium that this thing is being shipped on?

"I think the answer is yes, we're going to do it, but it's going to separate the developers," he says. "Not only do you need a skilled group of people who can put the product together, an organization and an infrastructure that can hook all those people up, you need a concept that can exploit all those capabilities, and you need a backer who's got the confidence that you can pull it all off."

Carter predicts that while the giant epic projects will continue to grow, the game publishers will also be placing a number of side bets on smaller, simpler games that they can sell at discount prices. "You're going to have these big thirty-, forty-, fifty-people teams making these huge games that cost ten to twenty million. Then you'll have a lot of little chickenshit developers making things that cost a million dollars."

At the same time, he believes that "the creative energy is going to stay right here.

"It's been trying to go offshore for years; it always comes back," says Carter. "Video games are just way more complicated than anyone can imagine. I talked to someone who made films and made video games. He said if you can make video games, you can make films in your sleep."

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