Gaar: After rash of layoffs, what's next for video game industry in Austin?
Feb 09, 2013 (Austin American-Statesman - McClatchy-Tribune Information Services via COMTEX) --
Last month was brutal for the Austin video gaming industry.
Two major studios, Vigil Games and Junction Point Studios, were shut down. Vigil closed its doors after its bankrupt owner THQ couldn't find a buyer for the Austin company that created the well-regarded "Darksiders" games. Meanwhile Junction Point, which was started by gaming godfather Warren Spector, was shuttered by owner Disney after a disappointing holiday release.
Quantifying the exact number of jobs lost is difficult because neither studio would give figures, but Junction Point was 130 employees strong in 2010 and industry insiders estimated that Vigil was at least in the 80 to 100 employee range.
Making matters worse, Austin was already reeling from layoffs at other major studio outposts in town -- BioWare Corp. and Zynga both announced local layoffs last year.
Percentage-wise, a few hundred layoffs represent a small part of the total number of local gaming and digital media jobs -- more than 7,000 people worked in those fields in 2010, according to a report by Austin economic consulting firm TXP. But the lost jobs all came from high-profile studios that employed large numbers of people.
So, what does all this mean for video game development in Austin While local developers say the cuts are painful, some see a potential shift toward more independent development in town.
Patrick Curry, an industry veteran who is CEO of local developer Fun Machine, said the layoffs will hurt.
"Any time a studio closes it's definitely hard on the scene, because it usually means Austin is going to lose talent," he said. "People need jobs. It could mean they have to move somewhere else."
On the bright side, German developer Crytek opened a new Austin studio on the heels of the closures -- and took a significant number of Vigil's old team, about 35 people.
But that's only a fraction of what was lost.
Curry said the layoffs could be part of the natural transition that occurs every four or five years, when publishers slow or stop development for older consoles (in this case, Sony's Playstation 3 and Microsoft's Xbox 360) and wait for newer models to catch on. Both Vigil and Junction Point were console game developers.
"Games from the current consoles sell less ... people are holding out for what's new on the horizon," Curry said.
Such contractions particularly hurt Austin, which has long been used by out-of-town publishers as a development outpost.
Junction Point and Vigil were examples of large publishers coming to town and either buying a studio and scaling it rapidly, or building a new one from the ground up.
In addition, development costs for console games keep rising -- a 2010 study by entertainment analyst group M2 Research said the average cost of developing a game for the current generation of consoles is between $18 million and $28 million. That can get steeper for high-profile games like the "Grand Theft Auto" franchise, which are known as "AAA games."
The closures of Vigil and Junction Point illustrate that gaming is a hit-driven business, said Max Hoberman, founder of Certain Affinity, which assists in development of big-name games like the "Halo" franchise.
"It's costing so much to be competitive in the console game space that you either knock it out of the park or you pack up and go home," he said.
Austin also has a history of large companies making a big investment in a single product or product line, which Hoberman called "putting all their eggs in one basket."
That includes high-profile busts like "Tabula Rasa," a 2007 flop that permanently damaged developer NCsoft Corp.'s presence locally.
"In my mind, that's just risky business," he said. "If there's any pattern about Austin, in particular, it's for some reason people keep making really large, really risky bets in Austin. I really don't understand that."
Hoberman, who employs 75 full-timers in Austin and has about a dozen open positions, has never taken outside investment. He said that studios should push for a more diversified business model, so they won't live or die based on the success of one game.
"I think what we're seeing now, I hope and believe it's the tail end of something that started years and years ago," he said. "But I don't think it's normal, I don't think it's healthy at all -- and it's going to scare off future investors to the point to where it just can't be the new normal."
David Kalina, co-owner of local game developer Tiger Style, said the recent layoffs could force local talent to relocate to other development hubs.
One of the biggest risks to Austin is that "there aren't that many locally owned studios that employ a lot of people," he said.
Kalina's studio is a good example. It's independent and has developed some highly regarded mobile games like "Spider: The Secret of Bryce Manor." But Tiger Style only has two full-time employees (including Kalina himself).
Kalina said there's concern locally that "maybe AAA development here isn't all that sustainable," especially as gamers have moved to playing more and more on tablets and smartphones.
"I think that's a sea change in the industry as a whole," he said.
Meanwhile, some in the local gaming community are taking steps to nurture a burgeoning independent development scene.
After the closures last month, some area developers organized a workshop called "Nation of Indies," to help advise recently displaced developers and others hoping to break into the industry.
"When the bad news started dropping a week or two ago, and then unfortunately picked up the pace earlier this week, we were at first just disappointed and hoping for the best for our friends," wrote Adam Saltsman, co-founder of Austin developer Semi Secret Software, in a Jan. 31 post on the gaming blog Gamasutra. "We looked for other big studios in town that were looking for work, etc. But at the same time, we were wondering if maybe we couldn't propose an alternative to hopping back into the roller coaster lifestyle of AAA game dev in Austin."
Saltsman said the goal is to help attendees start their own projects, or to find a middle ground between starving and working grueling hours for a large publisher.
"For me, it boils down to there's only one 'Game of the Year' each year," Saltsman said. "Lately it feels like if you didn't make one of the five best games in the country, it might be hard to keep your doors open next year."
Kalina said independent development is becoming a "significant part of Austin." He's noticed such developers moving here to live and work because it's more affordable.
"I'm hopeful that Austin actually becomes the destination for independent developers," he said. "I feel like that really matches the spirit of the city."
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