In 2002, video game developer Todd Howard was in his eighth year at Bethesda Softworks, and had recently led the development and launch of the company’s first blockbuster video game, titled “The Elder Scrolls III: Morrowind.” At the time, Bethesda Softworks was pushing up to five video games out of the door per year, and was receiving poor ratings by industry critics. Howard then spun off a new company titled Bethesda Game Studios (BGS) to focus on low quantity, high quality game development.
Business model: BGS’ business model is developing high quality video games to be published and distributed by Bethesda Softworks. BGS develops only two game franchises: “The Elder Scrolls” and “Fallout”, and stays loyal to these game series by developing in-depth stories that connect across each episode of the series.
While most video game studios release a new game either every year or every other year to cash in on the loyal fanbase, BGS takes a different approach by only releasing a new game in one of their two franchises every five to six years. For example, The Elder Scrolls IV: Oblivion was released in 2006 and The Elder Scrolls IV: Skyrim was released five years later in 2011, to much anticipation and even greater sales. BGS focuses on the quality of the game and providing unique value to the player.
BGS’ approach is similar to Gabe Newill’s company Valve in that Valve is committed to high quality games and does not operate on a firm timeline for releasing new titles, often to the frustration of fans. Unlike BGS and Valve, many video game companies routinely push out sequels on a regular basis, such as the competitors Activision and Ubisoft, which release the “Call of Duty” and “Assassin’s Creed” sequel games on a yearly basis.
Whereas Valve frequently disbands teams on a regular basis to promote creativity, BGS develops consistent, high quality teams that are intended to work together for years and are as equally committed to the team as the company is to their two series. BGS’ promotes the work life as becoming part of a new family, and encouraging loyalty and devotion to the project. The hiring process for each team is largely based on personality, including the person’s inherent interest in the game itself and familiarity with the previous episodes in the series.
BGS’ business model is consistent with the operating model because the lack of hard deadlines in the business model allows the developers to focus on their art and allow for repeated iteration and experimentation, which ensures high quality. For example, pushing out a new Fallout game every year (or other year) would likely require a surge in staff, which would reduce the closeness of the relationships between each “family” in BGS and could affect the deepness that the fans look for when playing a BGS game.
Cracks in the Model? While BGS’ business and operating models support high quality sequels to fan-beloved series, BGS may be losing out on opportunities to innovate. Whereas Valve promotes innovation in each new game, often times by refusing to develop sequels to fan favorites, BGS’ models tend to develop games that are “more of the same” since only two series are worked. BGS also avoids radical changes to the games since completely new ideas may not be well received by the fans that are intensely loyal to the series.
BGS is currently enjoying incredible success, including claiming the title of having the largest entertainment launch of 2015 with the release of Fallout 4 bring in a record breaking 750 million dollars worth of sales in the last month. However, BGS’ success may not be sustainable if their business and operating models do not change and provide space for innovation and risk-taking.