Half Life 2

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At your Leisure - 08 November 2004

Half Life 2

On November 16th, 2004, the PC gaming industry breathes a sigh of relief as the 'next big thing' hits the stores. The release of the new game, Half Life 2, has been a long time coming. Its creation, marketing and release is an excellent case study of new product development. It is likely that Half Life 2 will become almost an instant success, with sales expected to revitalise the PC gaming market. In this At your Leisure, we look at how Half Life 2 was brought to market and show how in the leisure sector, just as in more traditional industries, the birth of new products can be a painful process as well as a cause for celebration.

The global games software industry was estimated in 2001 to be worth in excess of £11 billion. Industry analysts, Spectrum, forecast that annual games software sales will reach £20 billion by 2007. Most of this growth will be in console games, which are expected to grow year-on-year by 15%, whilst PC games are forecast to grow more slowly. It is this slow growth that products like Half Life 2 are expected to boost.

Image: The original Half Life game was launched in 1998, but due to a series of extensions is still a popular seller.

The most successful PC games can achieve incredible sales levels when they 'go gold' (an industry term for a game being released onto the market). Some current (November 2004) examples illustrate this:

A new PC game, if it is successful, can set sales growth for years to come. The original Half Life game, developed by Valve, a games software company based in Washington, USA, was launched in 1998. It led to a series of extensions to the game including the development of a variant of Half Life called 'Opposing Force'. A multi-player community ensured that new versions of the product were created and new products for the retail market emerged, including 'Day of Defeat' and 'Counter Strike', a counter-terrorist version based on contemporary real-world weaponry.

Product lifecycle extension in PC gaming

Products can be seen to have distinct lifecycles: they are released to the market, grow and become mature sellers, but eventually their sales decline and manufacturers have to choose whether to 'kill off' the product and introduce something new, or to revamp the original product and relaunch it. There are large numbers of re-launched products in consumer retail markets. But how can a PC game developer ensure that their product has a longer life than could be expected?

Most computer games have a series of different levels, through which players can pass. You might think that once a game has been played a few times, its original allure would fade and consumers would find new products to entertain them. So the developers of some computer games have found ways to extend the natural life of their products. This is based on their willingness to support what are known as 'mod' authors. 'Mods' are modifications which are made by games enthusiasts, to refresh the games' entertainment value. The original game developers can help 'mods' by:

In certain cases some 'mod' teams are brought in-house by the game's original developers to work on new versions. This is how the hugely successful 'Counter Strike', a multi-player game, played across the Internet, came about. These new variants of the original game are then offered for sale, bundled up with Half Life, to produce what are referred to as 'expansion sets'.

Players of computer games can also play an important role in protecting the integrity of certain products, as we will see later.

What's the big deal with Half Life 2?

The firm that made the game, Valve, spent five years working on it, with an average of thirty people involved in the project at any one time. Industry observers estimate that Half Life 2 incurred development costs of approximately $40 million. But this figure is believed to include Valve's investment in 'Steam', its new content delivery system.

The level of technical sophistication of Half Life 2 is believed to be highly advanced. The 'engine' that drives the simulated worlds in which its characters interact is based on a 'texture set' - meaning that every surface that you see in the game has a certain look - and a 'material set' - which means that surfaces have specific properties that mimic the characteristics of real-world metal, tile, wood or brick. The effect of this is that objects that come into contact with these different surfaces react differently according to whether they hit a tiled wall, a brick wall, or a metal barrel, for example.

Image: Gaming technology has moved on considerably since the introduction of the humble Pacman in the 1980s. Copyright: Davide Guglielmo, stock.xchng

Half Life 2 is divided into twelve large 'chapters' which are then split into many different parts. Each chapter takes approximately three to four hours to complete.

It is what is known in the industry as a 'first person shooting game'. The person is Gordon Freeman, a laboratory technician who was the main character in the original version of Half Life. The player sees the game through the eyes of this main actor and help is provided by other characters, such as Alyx Vance, the daughter of Eli Vance, and Barney, the security guard.

The player (or Gordon Freeman) fights the military, uses vehicles to get from one area to another and uses human and alien technology to make progress through the game. Weapons include a crowbar, machine gun, shotgun, pistol and a gravity gun.

One of the key features of the game is the musculature and facial expressiveness of the characters. The ability to model human facial movements is said to be based on research into autism carried out at University of California in San Francisco. Where most computer games are inhabited by characters with 'flat' eyes, the personnel in Half Life 2 have eyes which are elliptical, sometimes off-centre and that give the impression of being wet - with the result that light reflects off them. As the characters speak, their lips move automatically in time with the dialogue.

OK, I'll buy it! How come so much is known about Half Life 2?

In September 2003, hackers broke into the email system at Valve and stole Half Life 2's source tree from the laptop of company founder Gabe Newell. The hackers who acquired the code to Half Life 2 published playable versions of the game on the Web. Valve immediately shelved plans for the game's release and thousands of gamers prepared for a long wait.

But the computer gaming world is a highly networked environment and Valve asked the community to watch out for and try to track down the perpetrators of this theft. In fact, game fans themselves tracked down the thieves within weeks of Valve enlisting their support. The company, in effect, relied upon its customers to police the store. By June 2004, the FBI (USA Federal Bureau of Investigations) had made the first arrests and a new schedule was set for Half Life 2's release.

Image: Games enthusiasts such as these at the World Cyber Games 2004 finals in Warsaw have long awaited the release of Half Life 2. Copyright: Michal Zacharzewski, stock.xchng

The end of the story?

Not quite! We did say that developing a new product can be a painful process and so it has proved in the case of Half Life 2. A copyright infringement dispute between Valve and their publishers, Vivendi Universal Games (VUG), has added further complexity to the picture. Valve served a law suit on VUG in August 2002, alleging copyright infringements as a result of Sierra Entertainment (a VUG brand) placing Valve games in cybercafes.

As often happens in commercial legal disputes, VUG counter-sued, hoping to wrest control of some of the best known game titles from Valve. Whilst this wrangling can involve poring over some tedious legal documents, it also sheds light on some of the commercial arrangements in the industry.

For example, the original Half Life game was released by Valve to its publishers for a down payment of only $30 000 with an additional $800 000 paid as a further advance. Half Life has won innumerable prizes and awards and in 2001, three years after its initial release, one of the game's spin-offs, Half Life Generation still reached eighth place in PC gaming sales in the UK. Advance payments received by Valve are dwarfed by the total sales of the whole product.

The high development costs associated with creating a best-selling game require large advances to be paid to game developers. To recoup these advances, publishers such as VUG need the games they fund to sell greater numbers in the retail market. Once they have made enough revenue they can start to pay royalties to the developers. Increasingly, only 'hit' titles produce royalties for developers, so they often find themselves unable to fund new products in order to grow their business.

A further complication is that Valve has created a system known as 'Steam' (referred to above), that allows players to buy and download their games directly over the Internet. If Half Life 2 is sold through traditional stores, Valve receives about 30% and VUG 70% of the revenue. But if the game is sold through Steam, Valve would receive 70% and VUG 30%. Clearly, tensions between game developer and distributor can be expected to simmer away.

Finally, there is something naïve about certain parts of the computer gaming market; whilst Valve could rely on the support of gamers to hunt down those responsible for the theft of the source code for Half Life 2, they can suffer for their commercial decisions at times.

Recently, it was announced that graphics chip-maker, ATI paid an estimated $6 million in order to have a version of Half Life 2 bundled with their new product. The gaming community was reported to be infuriated at this rampant commercialism. They argue that it is the gamers themselves who made Half Life one of the best computer games ever. When the successes of gamer modifications to Half Life are considered, it is hard not to feel some sympathy for gamers' fury. But the fact is that games software companies are commercial organisations and the ATI example illustrates clearly the lengths to which some are prepared to go in order to be associated with successful products.

Rarely does a product launch open such a window on the world of the entertainment and leisure industry. With UK sales of Half Life 2 likely to be brisk in the run-up to Christmas, it's useful to remember that the game's development involved huge research and development costs, high tech theft, the FBI, legal battles between developers and publishers, and public relations trials and triumphs.

Updates

Activity

Access and print out the product life cycle diagram, available from the 'Resources' box at the top of the page, under 'Theory'.
Think about what action Valve have taken to extend the life of the original Half Life PC game.
Draw a product lifecycle diagram that applies to Valve's Half Life product. Show how the actions the company takes extends the life of its games.
You should take the following actions into account when drawing your diagram:
- 'Place': the different channels that the company uses to ensure that its games reach consumers
- 'Product': how sufficient complexity is designed into games, to ensure that they provide sustained entertainment
- 'Customisation': that consumers have the ability to modify the games they buy, in order to maximise their entertainment value

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