Studios Closing: The Good, Bad and Ugly

Gamers around the world are going to feel the pain in the 2009 holiday season after the economy shakes apart many great development studios. Electronic Arts feels the pain of being a public company as their investors complain about lackluster revenue, THQ deals with closing studios to extend their runway and other firms will lose more headcount in the coming months.

It’s not all bad. But, it’s going to get ugly before it gets better.

The financial market has played tricks on everyone in our global economy and companies across all industries are going to feel a bit of a tightening around the belt. Investors are shaken and doing their best to protect their investments and cutting loose those that aren’t projecting profits in the near future. Game studios are going to slow their financial burn rates, trim a bit of the fat and hunker down the long term. The end result, next years holiday season will have a few less games because those games are being dropped to the floor now.

Mid-sized studios within larger firms may find their projects canceled or put on hold and their employees re-structured or let go while big studios assess what projects will make the long haul. This is the ugly side of the business, having to make a decision on what games stay and what games go with the grief of having to tell some of your best talent “goodbye.”

The bad part of the industry is occurring today, with publishers posting mediocre profits and trying to convince their investors to be patient and trust they’ve got a firm hold on their destiny. The game industry is not alone in this, many firms are reducing head count and many startups are finding themselves without series A or B funding; they’re closing their doors because the money is being directed to more stable ventures.

What’s the good in all of this?

As studios close and projects are sold off/halted, jobless developers and their management will huddle together during the long cold winters of economic downturn. Some folks will look for new jobs while others will say to themselves, “I can do better than this,” and set out to define their own destiny.

Developers, artists, project managers and other talent left by the wayside will turn to innovation and creativity as an outlet to their frustrations. Those without jobs will click on the light in their garages and begin designing the next blockbuster title and work their ass off to complete it. These new innovative games will take 18 to 24 months to develop from start to finish, but what do these innovators have to lose? They’ve lost their jobs and their projects… but they’ve kept their passion.

Economists and investors predict this “recession” as being an 18 month or more stretch, with things getting a bit worse before they get a bit better. These next 18 months will be spent innovating and producing awesome games by developers living on Mac & Cheese and Ramen Noodles in the comfort of their own garage. When the economy starts to turn around and investors begin looking for fresh ideas these developers will be waiting with finish code and big smiles.

Many of the best companies were founded during bad economic times with Apple and Microsoft being two great examples.