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Cogs in the Brazilian games industry machine January 22, 2010

Posted by Cesar in working me.
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Gamasutra recently published a great article from Divide By Zero CEO James Portnow. In the article, Portnow makes a very interesting analysis of Brazil as an ecosystem for the games industry, investigating aspects from law and taxation to technical quality and piracy.

If you are just looking for the conclusion, here it is:

Now is the time to get into Brazil. The margin is right. If I were a betting man, I’d say the odds are about three to one that the Brazilian industry never gets off the ground. But at the same time, I’d say the return on resources invested in Brazil at this point will be at least ten to one if the industry does get past its infancy. I also believe that foreign entities have an opportunity to better those odds of the Brazilian industry becoming successful.

I find the probabilities he estimates very interesting. It’s like analyzing pot odds in poker: in a nutshell, it means he does not think his pair of 8s will win, but if it does he’ll get much more than he put on the table.

While I do agree with most of what is in the article, I believe some remarks are in order.

First let’s talk about piracy. It truly is, like Portnow says, an elephant in the room. In Brazil, every time there’s a debate about the games industry, the subject comes up. It is almost boring. I think Brazil will not bring the numbers down any time soon to be honest. And to expect the government to drop taxes on external games to something that would cause an impact is a distant dream. That being said, I noticed a significant improvement with the new generation of consoles. No one bought original PS2 titles. On the 360, however, I believe the piracy percentage is better. Unfortunately, like someone mentioned in a comment on the aforementioned article, most of these purchases are made from stores that get their products illegally across the border. Nonetheless, while it is still a crime, it puts some of the money back into the games industry (probably in Miami somewhere) and I think that represents an improvement. Microsoft also officially distributes 360 games in Brazil. I don’t have the figures, but I would love to know how that’s going.

Anyway, even a small drop could make the market very interesting, as the base of gaming platforms is very significant. Mexico also had a high piracy rate, above 90%. When NAFTA came and games became cheaper, it dropped to around 80% if I am not mistaken (if someone has the exact numbers please let me know. I couldn’t find them). And while that’s still a huge percentage, those 10-15% meant a huge increase in sales, enough to get the Mexican games industry going.

I found it very curious, however, that Portnow didn’t talk to Abragames. It doesn’t matter if you agree with the association actions or not, it is an important organization that could have added even more depth to what already is a great article. I also had the pleasure of working at TecToy Digital and went back to visit one and a half years later. Boy did they grow. They are behind the Zeebo platform and are a sound example that game development can go very well in Brazil.

The other interesting point I would like to have seen in the article was the 2008-2009 financial crisis. It had a major impact in the Brazilian games industry and the waves are still propagating now in 2010. I fell victim to that, when in 2008 Gameloft shut down their development studio in São Paulo as a measure to cut costs during the crisis. And I know other game studios struggled with the lack of new projects. For that reason, I would say the industry in 2010 is still crawling back to where it was in 2008. So when you look at the industry now, you have to dig deep to get past the crisis ripples and see the actual potential for game development in the land of Samba and Bossa Nova.

Finally, my experience as a game developer in Brazil, specially when helping with recruitment, is that Brazil has a long way to go in a whole cultural aspect associated to game development. Until recently (I’m talking 2004-2005) the industry was so small it wasn’t considered a career option. That means students fresh out of the top universities in Brazil were getting to the market lacking the drive or the background to jump right into game development. But that’s slowly changing. With that cultural change alone, with the undergraduates knowing the number of opportunities in game development is not so small, we should have a pretty qualified work force. The quality of the computer science/engineering courses in Brazil is well known and a reason to be proud.

So all in all, I have more faith in the Brazilian game developers than James Portnow. I think the cards on the table are low and that pair of 8s has a good chance of winning the pot.

See you space cowboys…

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