Beyond 2023: What to expect in 2024

TWIG #263 The DOF Game Industry Awards (Listen on Spotify)

AI’s Transformative Role in Gaming (DOF Spotify 5:30)

• Development and Marketing Impact: AI’s influence on game development and marketing costs is a central topic, with diverse perspectives on its potential.

• Industry Shift Indicator: King’s acquisition of Peltarion highlights AI’s significant impact, signaling a major industry transition.

Major Industry Movements

• Microsoft-Activision Acquisition: A pivotal event, marked as one of the biggest acquisitions in gaming history.

• Unity’s Controversial Fee: Caused speculation and trust issues in an engine powering 70% of mobile games.

• Off-Platform Payments: Notably, Playtika’s off-platform revenues account for 30%, and Huuuge Games shows rapid growth in this area. (previous DOF podcast summary detailed analysis on Webshops)

Unlocking New Demographics in Console Gaming

• Harry Potter Hogwarts Legacy’s Success: Contrary to expectations, the game sold around 16-17 million units, broadening the console market to include more women and children.

Opportunities and Challenges in the Indian Market (DOF Spotify 15:15)

• Big Player Advantage: India’s real-time payment systems, like UPI, are creating significant opportunities, particularly for larger companies.

Rising Importance of Web Shops and Offline Payments (DOF Spotify 15:40)

• Industry Impact: The focus on web shops is reshaping strategies for user acquisition and revenue generation (link for more detailed analysis).

Questionable Industry Predictions (DOF Spotify 17:15)

• Speculative IPOs and Market Impact: Doubts about predictions like Supercell’s IPO and Farley 84’s failed success in the West.

• Overestimated Tech Influence: Initial expectations for Apple Vision Pro’s impact on AR/VR, priced at an estimated $4000, were premature.

Challenged Segments and Companies (DOF Spotify 20:00)

• Forte’s Transparency Issues: Despite raising $910 million, including $725 million in 2021, concerns persist about its role in Web3.

• Google’s Legal Hurdle: The antitrust lawsuit outcome could transform the app store ecosystem.

• Extraction Shooter Investments: Rapid but questionable VC investments reflect the industry’s fickleness.

• Mobile Shooter Genre Decline: A significant 50% revenue decline in the US market.

• Embracer’s Acquisition Strategy: Questioned for its lack of efficiency and centralized management.

Gaming Industry’s Growth Trajectory

• Expected Revenue Growth: Predicted to reach $268 billion by 2025.

• Adaptation Necessity: Emphasizing the need for companies to evolve with market and consumer trends.

2023 Game launches underperformers and good small titles (DOF Spotify 34:00)

• Noteworthy Underperformers: Titles like Forspoken, Starfield, Total War: Pharaoh, Red Fall, and Halo Infinite failed to meet expectations.

• Appreciated Smaller Titles: North Guard, Bad North, Pikmin 4, Final Fantasy XVI, and Match Factory received positive mentions.

Strategic wins in the Industry (DOF Spotify 49:30)

• Notable Acquisitions and Launches: Scopely’s acquisition, EA’s ‘FC’ brand launch, and Epic’s Fortnite innovations.

• Sony’s Profitable Steam Ventures: Horizon Zero Dawn sold approximately 3.3 to 4 million units on PC, demonstrating cross-platform success and highest ROI move to utilize existing IPs.

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Skeptical moves in 2023

• Netflix’s Gaming Strategy: Over 40 launches and 90 games in development, but the focus on quantity over quality (shotgun approach) raises concerns.

• Social Media Giants’ Gaming Exit: Snap (in early Jan) and Bytedance’s recent shift away from gaming viewed as a potential misstep. Immense potential to unlock social media and gaming synergies underexploited.

• Disney’s Web 3 Venture: Dapper Labs to introduce digital pins in partnership with Dapper Labs raises questions about strategic alignment.

• Supercell’s Rapid Expansion: Increasing headcount, with concerns over its impact on studio culture.

2023’s Notable Industry Layoffs

• Widespread Layoffs: Over 11,000 layoffs including in major companies like Embracer, Epic, EA, Ubisoft, and Unity.

Creative and Commercial Successes (DOF Spotify 1:02:00)

• High-Revenue Achievers: TikTok’s app purchases exceed $10 billion lifetime (with $4 Mn USD just in 2023), Monopoly Go’s $1 billion in less than a year, and Harry Potter’s 20 million units sold in 2023.

• Enduring and Innovative Games: Candy Crush’s continued global revenue dominance (excl. China) and Baldur’s Gate’s impressive sales (10-15 million units, $400-500 million in revenue).

• Free-to-Play Success: Naraka Blade Point’s successful transition to a free-to-play model led to a surge from 1 million to 2 million DAUs.

Our Games industry predictions 2024 (Naavik roundtable listen on Spotify)

ESRB Rating and Web 3 Games (Naavik Spotify 2:00)

• Gods Unchained’s Adult Rating: Received an adults-only rating from ESRB due to its integration of NFTs. Epic Games Store has carved out an exception to support Web3 games with such ratings.

Console Market Innovations (Naavik Spotify 3:00)

• Nintendo’s Focused Approach:

  • Handheld Strategy: Commitment to handheld gaming with a projected Nintendo Switch 2 launch in 2025.

  • Quality and Fidelity: Aims to compete with Xbox and PlayStation in terms of game quality.

  • Partnerships: A 10-year contract with Microsoft to include Call of Duty games, indicating a new openness to big publishers and indie games.

• Sony’s Ecosystem Challenges:

  • Walled garden approach: Focusing on a walled garden approach with products like PlayStation and PSVR2, which sold 600k units, falling short of expectations.

  • Cloud Gaming and Handhelds: Sony’s less defined strategy in cloud gaming compared to Microsoft and Nintendo, with future directions in these areas still uncertain.

• Microsoft’s Cross-Platform Strategy:

  • Open ecosystem push: Seeking to reach gamers across various platforms, including partnerships with entities like Meta Quest establishes Microsoft as a key player where they can expand the overall player base on mobile, console and PC.

• Meta’s Oculus Ambitions:

  • Viewed as Limited: Facing challenges in hardware and form factor, indicating a need for improvements in partnerships and VR quality.

Subscription Gaming Landscape (Naavik Spotify 19:54)

• Industry Shift: Increasing emphasis on subscription-based models offering a variety of high-quality games.

• Key Players:

  • Xbox Game Pass: Expanding with top-tier titles and considering tiered pricing, mobile store (anticipated), including an ad-supported option.

  • Netflix’s Gaming Foray: Utilizing its platform to promote games, benefitting from the rise in mobile phone quality.

  • Apple Arcade vs Netflix: Apple Arcade focuses on retention, while Netflix aggressively expands its gaming catalog.

Advancements in Mobile Gaming

• Technological Leap with A7 Pro Chip: Promises a 20% improvement over the A16 chip, paving the way for enhanced mobile gaming experiences.

• Cloud Gaming’s Mobile Potential: The shutdown of Google Stadia earlier notwithstanding, its technology could be pivotal for streaming mobile games.

AI’s Role in Game Development (Naavik Spotify 32:29)

• Broad Impact: AI is revolutionizing game development, from creating assets to optimizing advertisements.

• Ethical and Rights Concerns: Raises questions about job roles, creativity, and ownership of AI-generated assets creates problems for larger platform like Steam to launch new native AI games.

User-Generated Content (UGC) Platforms (Naavik Spotify 46:00)

• Fortnite’s User Trends:

  • MAU Fluctuations: Dropped from 275 million in Dec 2021 to 231 million recently in the last 30 days. Players spiked post the launch of Lego, Rocket League and Music Games.

  • Monetization and User Acquisition: Challenges in building experiences on Fortnite, similar to hyper-casual game focusing on core loops that interests users now. Developers expect to figure the games and experiences that work best to create more meaningful content in future.

• Roblox’s Strong Position:

  • DAU and Revenue: Boasting over 65 million DAUs and over 110 developers earning more than $1 million each year.

  • Developer Ecosystem: Housing 4.2 million developers but presenting challenges in substantial income generation.

Gaming Investment Trends

• VC Investment Declines: A notable 50% decrease in VC seed round investments with investments shifting from content to technology.

• Market Fluctuations: Diverse strategies from companies like EA focusing on first party IPs and Tencent pausing their investment.

Mobile Gaming’s Future Outlook – challenges and opportunities: (Naavik Spotify 1:01:00)

• Privacy and Competition Issues: Affecting strategies in user acquisition and monetization (link for more details). Epic vs. Google likely to promote off-platform payments (incl. web shops and instant payments link for more details here)

• Focus on Quality and Engagement: Emphasis on developing games with deep engagement and monetization designs.

• Graphics vs. Gameplay in 2024: The increasing importance of console-quality graphics. However, gameplay and content remain critical for success.