Video games are not just a business it is so much more. The games industry does not need Xbox or competition to drive innovation, just well-paid and properly appreciated developer.
Historical examples, such as Nintendo‘s transition from the Wii U to the Switch, illustrate that innovation can arise from internal talent development rather than external market pressures.
Competition does not drive innovation in video games
One recurring trope regarding the demise of the Xbox brand, is the effect this has on competition. I, as many readers are, am appalled by the merciless culling of jobs to increase shareholder value and the detrimental effects of rationalisations generally on video games as an industry and art form.
While it is a basic truism that all privately owned companies exist primarily for profit, profit can be generated through practices, as Nintendo testify, that do not sacrifice jobs and job security to maintain surplus value (the value a worker adds above the amount they receive in wages).
What Nintendo recognises, that Microsoft and even Sony seem oblivious to, is that quality and profitability does come at a price, the price of maintaining wage levels that attracts talent and job security to enable that talent to focus on producing great video games.
Under pressure to perform
For those directly or indirectly under the employment of Microsoft, no matter how talented they are or committed to producing great video games, their focus today is more likely to be on maintaining a job, seeking other forms of employment, and worrying about paying their mortgages, rents, and supporting families.
Under pressure from a blinkered managerial class obsessed with shareholder value, where that talent is still of use, it is put to the service of making games that chase trends rather than marshalling the collective imagination to produce genuinely innovative and fun video games. It is not competition that drives innovation, but the nurturing and harnessing of talent by establishing the material basis for people to do the things they are passionate about, many entering the industry in the first place because of their love of the medium, not simply to earn a wage.
But wages are crucial, as is working in an industry in which satisfaction can be drawn from the activity itself. It is why many people, if given the chance, prefer to work in so-called creative industries, preferring even to work in occupations that’ll never make them rich. Nobody wants to make a living from stacking shelves, few want to work in administration and, even when it may well make them richer, high finance.
As someone who also works in a creative field, subject to managerial diktat and in fear of how the latest series of rationalisations risk not only job security but my ability to do the very things I entered the profession for in the first place, I cannot begin to imagine what many people working in the video game industry are currently going through.
Despite working in a different profession, I stand in solidarity with every worker whose livelihood is under threat and encountering the soul-sapping effects of being made to serve the narrow and short-term interests of CEOs, managers, and shareholders.
What would happen if Microsoft pulled out of the video game industry?
Let’s take a well-documented example of how competition, or more precisely a loss of profitability and share of the video game market, has seemingly driven innovation: the Nintendo Wii U.
Leaving to one side Satori Iwata’s famous reply to shareholders, that culling the workforce would make for unhappy workers detrimental to the long-term business interests of a company whose reputation and success depends on quality and innovation – instead he took a cut in salary due to the Wii U’s failure – and focus instead and what did result from that failure, the commercially successful Switch and its conservative follow up Switch 2.
Companies do sometimes innovate to tap new markets, reduce costs, and increase company value; as Nintendo did when abandoning the Wii U and introducing the Switch as its replacement. They do so as a matter of survival. But competition alone does not explain the turn to Switch. They could just as easily have followed Sony’s lead (and to a lesser extent Microsoft) and produce new hardware that focused on processing power, to compete with Sony on their terms. Or they could’ve used some of those billions in reserve by buying up companies in the vein of Microsoft.
For sure, they probably recognised that either strategy would come with significant risks and ultimately prove counterproductive. Instead, they doubled down on where they do have a competitive advantage, their reputation for producing innovative and quality video games by harnessing the talent of the workers under their employment to do what they do best.
Their platform is the talent they have accrued over many years and, crucially, how that talent is utilised by providing the material support and conditions to enable it. That the Switch 2 is a conservative iteration, relative to previous consoles, does not in itself contradict the model when the real innovation lies in the games that the console serves as the platform for. After all, novelty alone does not determine interest or quality (as the Wii U proved).
None of this is to suggest that Nintendo is not in it for the money. Ultimately, they too must chase the bottom line. But it is not a race to the bottom, where the lesson is to ape the managerial practices of its competitors and focus on the short-term gains of shareholders that would ultimately lead, as it surely will with Microsoft’s gaming division, to their downfall.
Sony may well be welcoming the demise of the Xbox brand, shareholders popping the champagne corks even. But even if they could afford the champagne from which to pop the corks, few under the employment of Sony will be doing so.
If the lesson for Sony is that they can carry on as they have, knowing that there is no effective competition from a rival console manufacturer – notwithstanding competition from Nintendo, which always seems to be forgotten about (but which Sony no doubt takes seriously) – they will ultimately go the way of the Xbox brand too.
Consumers are not dupes. Sooner or later even the most dedicated fans of Call Of Duty, or whichever live service game occupies their time, get bored. After the experience of the PlayStation 5, gamers – of which I include myself, who foolishly purchased a PlayStation 5 in anticipation of new and exciting games from their first party publishers – will feel less inclined to upgrade to the inevitable PlayStation 6 for more of the same.
Every company – even Microsoft and Apple – must innovate or ultimately die by the hands of competitors who introduce new and exciting products, consoles and video games (especially if more affordable). And such innovations do not happen in appeasement to shareholders alone. Nor by chasing fads, however temporally successful they are.
Without the talent and a working environment that nurtures and rewards such talent, no matter how dominant they are, sooner or later such companies fail. Which is why, even from the perspective of the chief beneficiaries of the current culling of the workforce such practices are counterproductive, not only to gamers but to the companies too.
This doesn’t mean to say that Sony won’t temporarily profit from Microsoft’s demise, but less competition will not secure their long-term success. If anything, in the case of Sony at least, and based on current managerial priorities, it could well achieve the opposite.
Is rivalry really necessary?
It is not more competition that the video game industry needs, but as with every other creative industry, a secure and well-paid workforce and management practices that attract and enable those who possess the talent. If practices do not change few will want to dedicate time (and the considerable cost of education) to developing the skills the industry needs, when there are no jobs available or ones they would want to take up.
In the hypothetical scenario where only Nintendo exist as a private entity making video games, this too would be detrimental to the medium. Especially if they owned or had a stake in every independent developer. But no such scenario will ever exist in a capitalist economy. Genuine monopolies do exist (though few these days) that are not generally considered problematic. Few celebrate or welcome competition between the providers of basic utilities, such as water or electricity. It is entirely rational for states to publicly own and monopolise the train industry and for its users to welcome this.
Competition between train services in the UK has not driven innovation or improved services. Far from it. Art, like good transportation and water, is vital to a healthy society, and sometimes requires the curtailment of competition to ensure such services are provided. Video games are an artform too. If the market cannot secure the future of video games it is the role of states to regulate businesses and criminalise practices that, if not curtailed, will lead to its downfall. Ultimately, it is the conditions of labour that will determine the future of video games as an artform.
