Game Industry 2021 Vision

See the history of gaming revenue here.

A new year lies ahead of us, and everyone is looking for the year to be a better one than 2020 has been. The pandemic still rages (over 1.8 million deaths worldwide and nearly 350,000 in the US as of this writing) but vaccinations are beginning, and we can see a time when life begins to return to normal later this year. I hope everyone stays safe and has a better year in 2021 than they did in 2020!

First, I’ll look at some stats for the games industry in 2020; then I’ll make some predictions for the games industry in 2021, and finally, I’ll look over my predictions for 2020 and see how well I fared in prognostication. 

Overall, 2020 was a banner year for games due to the pandemic lockdowns, which kept people inside looking for something to do. For many of them, that was gaming. Early forecasts for the games industry were $159.3 billion, but in November Newzoo raised their estimate to $174.9 billion for the entire year, up nearly 20% over 2019. Mobile gaming leads the way with $86.3 billion, followed by console with $51.2 billion and PC games at $36.9 billion (the rest being from miscellaneous categories like XR/AR/VR and cloud gaming).

Where will the industry go from here in 2021? Higher still, but don’t expect the same level of growth. New consoles are off to a strong start, as are the latest PC graphics cards – all are in short supply due to both demand and supply chain issues from the pandemic. Those issues will take months to iron out completely, so it may be a while before you can just buy a new console or one of the latest graphics cards and expect to have it right away.

On to some predictions for the 2021 games industry:

1)      Games industry growth continues, but at a slower pace. I expect we’ll see somewhere around 10-15% growth in revenue, depending on how the pandemic continues. Of course, this won’t be evenly distributed among companies or sectors, but in general it will b a good year for games.

2)      Digital stores will be taking a lower percentage of revenue in general. This has already started with Apple lowering its fee to 15% for publishers whose revenue is less than $1 million annually… which is about 98% of all the app publishers. So far, other digital stores have not followed suit, but I expect Google might. Steam will probably hold out the longest, and I don’t expect them to make a change in 2021 or any time soon after that, unless and until they really start seeing their revenues fall or publishers stop distributing games through them.

3)      Indies will have a good year. Certainly those indies who publish iOS games will be getting twice as much money, which can’t hurt. Also, more attention will be paid to indies through things like Apple Arcade and other game subscription services, which should mean more revenue.

4)      Games subscriptions will continue to grow strongly. Microsoft’s Game Pass is doing well, and represents a strong selling point for the new Xbox Series X and Xbox Series S. Google’s Stadia seems to be getting a bit of traction finally. There are plenty of companies offering a variety of subscriptions: EA, Sony, Utomik, Ubisoft… there’s plenty to choose from, and there will be more.

5)      Game streaming will grow, and evolve. More and more people will watch games being played, and the entire process will continue to change. Already some games are including a “streaming” mode to get around copyright problems with music. More games will be built to take streaming into account, and how streamers interact with their audience will change as well.

6)      AAA games will continue to generate huge revenue, but also big problems for publishers. Look no further than Cyberpunk 2077 to see the future, a massive game with massive problems that was rushed out too soon. They’ll get the problems fixed and the game will end up being one of the biggest sellers in 2021, but it’s emblematic of the problems publishers face. Just trying to implement 4K textures will make development cost more and take longer… and open-world designs cause huge amounts of content generation, and are difficult to debug. These big games will get bigger and more expensive to make, but they will also generate even more revenue… if successful.

7)      User-Generated Content (UGC) will be ever more important in games. Look at how Roblox and Minecraft continue to absorb huge amounts of time, and generate massive revenue. Sure, those are aimed at kids, but now look at Manticore Games’ Core engine, which is providing a wide audience with the tools to make all sorts of gaming experiences. I expect giving users the power to create or modify their games will be even more popular, and lead the way to more industry expansion.

 

So, how’d I do with predicting 2020?

 

1)     The games market will continue to grow. Yeah, that was a gimme, but I really nailed it! 100%.

2)     Both the PS5 and the Xbox Series X will sell, but not in significant enough numbers to be a good market – but that’s not important. They have sold well, but constrained by supply and late in the year – so not very many units are out there. But they’ve helped console game sales grow, and drawn great attention to the segment. 100%.

3)     Esports will continue to provide enjoyment for fans and disappointment for investors. The pandemic helped esports by cancelling much of traditional sports, but it’s still not clear that investors benefitted yet. More ad dollars are flowing into esports, viewership is up, but the ROI is still not quite there yet. 80%.

4)     Streaming games and the streaming game market will continue to underperform. Still not there yet, but getting better – that’s the story of 2020. 100%

5)     Game subscriptions will do well – with the right content and features. Apple hasn’t released figures on Apple Arcade, and none of the other subscription services have either. So it’s really hard to tell how well they are doing. 75%.

6)     4K gaming will be used to sell hardware, but it really won’t be significant – no billion-dollar games will be 4K only. So far there are no 4K exclusives – versions of games optimized for 4K, yes, but they are also on non-4K systems. 100%.

7)     Watching people play games will continue to grow in popularity. Another easy one. 100%.

8)     E3 will continue to shrink, while true consumer-oriented conventions will grow. Missed this one depending on how you count it. E3 2020 was cancelled, and though they claim it will be back, it’s hard to see why. Other game conventions/conferences were cancelled or moved to online-only shows. So E3 shrank to nothingness, while consumer shows shrank. 50%.

Overall Score for 2020 Predictions: 88%.

 

Happy New Year!

Games Industry 2020 Vision

I like to take some time at the end of each year to look ahead for the games industry and predict the important trends. As a bonus feature I’ll go over my predictions for last year.

Some stats for 2019 to chew on: The global games market will likely reach over $152 billion in revenue, with the US being the largest market (at $36.9 billion) and mobile games the largest segment ($68.5 billion worldwide).

What’s going to happen in the games industry in 2020? As you might expect, it will continue to grow. The growth will be uneven, of course, with some companies doing very well and others not so well. The biggest and oldest publishers will find it hard to grow significantly, as they mostly rely on a few proven brands and have very few new titles. The mid-range publishers like Riot Games and Epic Games will have more potential for some breakout hits while their mainstay games will continue to generate immense revenue.

A continuing issue that doesn’t get much open discussion is the difficulty many publishers have in creating games profitably. Notably, a number of companies are shying away from single-player games because they don’t easily lend themselves to microtransactions. Why buy a slick costume for your character if you’re playing a game by yourself? And yet single-player experiences are compelling, and the top games can generate a lot of revenue and attention (see God of War or Death Stranding, for instance).

The tough task here is to make a single-player game that looks great, plays great, has a depth of story and great polish… and that doesn’t cost far more to create than it seems likely to bring in. This is the reason Telltale Games failed – they made beautiful games that sold pretty well and garnered many awards, but they worked their staff beyond reason and ultimately couldn’t make a profit. I hope the revived company can figure out where and how the costs grew out of control, and figure out how to make story games that will sell and at the same time generate a reasonable profit for the company, all while letting the creative staff leave the office after a mere 8 hours of work.

We’ll continue to see strong brands extended, as that’s a clear path profit. There’s going to continue to be new Call of Duty titles, and you don’t have to see an announcement to know there’ll be a new Call of Duty coming this fall. Now, though, we’re getting Call of Duty on mobile – and it quickly hit a hundred million downloads, which shows the power of a strong brand. Look for other major game brands to be extended into new platforms and game genres. Riot Games, for instance, is extending its powerful League of Legends IP into a number of other genres with the help of other game studios. It’s impossible to say right now how well those games will do in the long run, but the one thing you can be sure of is they’ll see a lot of downloads very quickly because of the massive number of League of Legends fans.

There will probably be some acquisitions during the year, and some surprise hits. Ultimately, though, more gamers will be playing more games and spending more money, and more people will be spending time watching people play games. This cultural force will continue to grow in power and influence.

And now, some specific predictions for the 2020 games industry.

1)     The games market will continue to grow. It’s an easy thing to see, but gaming continues to reach more people worldwide, and the growth shows no signs of stopping yet.

2)     Both the PS5 and the Xbox Series X will sell, but not in significant enough numbers to be a good market – but that’s not important. Why won’t their sales be important? Because both Sony and Microsoft will be making their profit not from the hardware (which likely will, at best, show a small profit, and perhaps lose money on each unit at launch) but from the software – and both the new consoles will be backward compatible. Their launch should get people playing console games more, and buying more console games – and buying more game subscriptions.

3)     Esports will continue to provide enjoyment for fans and disappointment for investors. Not every esport is continuing to grow, and some seem to have plateaued (like Hearthstone). There’s plenty of investment, but it’s going to be a while before big profits arrive – and they won’t be evenly distributed. Changes to games may help strengthen their esports appeal, or they may weaken it. It’s still an open question as to whether any of the current esports will even be played in ten years.

4)     Streaming games and the streaming game market will continue to underperform. Google’s Stadia is still trying to find the right features to appeal to a mass audience, but it’s not clear at all if it ever will. It’s one of those ideas that sounds appealing to executives who don’t know much about the details – but it’s those technical details that have continued to trouble every streaming game service that’s come out, and there have been more than a few.

5)     Game subscriptions will do well – with the right content and features. Apple Arcade is a good example of the right offering in the right market, and it will grow strongly. This service is only $5 a month, and your whole family can use it – and we’ll likely see it get bundled with other Apple services in the future. It’s a great value, and that’s what a subscription game service needs to have if it’s going to succeed.

6)     4K gaming will be used to sell hardware, but it really won’t be significant – no billion-dollar games will be 4K only. We’ll hear a lot of hype about 4K – it will be mentioned in lots of marketing – but still 4K TVs do not have huge market share, and 4K monitor are even less popular due to their pricing. This is all changing, but not as swiftly as some would have you believe.

7)     Watching people play games will continue to grow in popularity. The popularity of game viewing continues to rise, but it’s not all evenly distributed. Top streamers are finding lucrative deals to change platforms, so Twitch has lost some of its top attractions. Meanwhile, Twitch is expanding into non-game areas. Talented streamers will be more sought-after than ever, but growing an audience from zero to ‘big enough to make a living’ will get even more difficult.

8)     E3 will continue to shrink, while true consumer-oriented conventions will grow. Sony’s leaving E3 again this year just underscores how unimportant E3 has become – Sony clearly feels it doesn’t need E3 (and the expense, and the hassle) to have a successful new console launch. And if Sony doesn’t need E3, does anyone else? You can bet that’s the question each exhibitor is asking, along with “if we took the money and time we spend on E3 and spent it elsewhere, would we get a better return?”

Last Year’s Predictions

1)     The market for games gets bigger. Yeah, that was an easy one, but it’s good to start with a win. 100%.

2)     Games will be increasingly scrutinized and regulated by governments around the world. Another fairly easy prediction to make, and we have seen more restrictions on loot boxes and China’s more strict approval process for games. 90%.

3)     The Digital Store Wars get into high gear. Well, there’s still a battle going on, but some of the combatants (like Discord) have stopped fighting. Epic and Steam keep going on, with more effort being put into marketing… but the fighting hasn’t gotten as bloody as it could have. 70%.

4)     Mobile games will continue to grow strongly and innovate. Pretty much true, with more traditional categories like Call of Duty coming to mobile and doing well. Growth is strong but innovation is still underperforming. 70%.

5)     VR/AR/XR will continue to underperform. Yep, we’re all still waiting for this to become a major segment. It didn’t happen in 2019, despite new hardware releases. 100%.

6)     Game streaming will continue to be a vision, not a viable market. Google’s Stadia launched to underwhelming reception, and it’s still limping along. Like VR/AR/XR, lots of interest but not much in the way of revenue or solid market reception. Yet. 90%.

7)     Indies will continue to have difficulty making a living until they put more emphasis on marketing. This will continue to be true, though more frequently an indie game will do very well. 90%.

8)     Games will continue to grow as a cultural force. This is true, as we see series like The Witcher become this due to the game influence, not the novels. 100%.

Overall 2019 grade: 88.75%

Happy New Year!

2020 Implications for Game Design

2020 Implications for Game Design

I was struck by an essay by VC Matthew Ball about 7 reasons why gaming will take over; stop what you're doing and read that essay, if you haven't already. It goes along with some of the things I’ve been thinking about, in particular how to best take advantage of the changes in the games industry and the game-playing audience. What follows are my thoughts on each of his 7 reasons as to why gaming will be taking over media even more in the future. You should go and read that essay, and refer to it as needed while reading this blog post. What I’ve looked at here is how I think his comments translate into actions game developers should consider when designing games. I am already doing this with StoryPHORCE Entertainment, and I’ll be detailing what I’m doing at www.storyphorce.com in the future.

#1 The Dominant Attention Medium, Television, Has Peaked and its Time is Being Redistributed

Yes, and gaming is taking a major chunk of that time. Perhaps more insidiously, that attention time may be split among several things – playing a game while keeping an eye on a video on another screen, and texting with friends on social media as well as in-game audio chat. The player’s attention gets focused more when one of these things demands it, but there’s usually a constant background of several things vying for attention.

What does that mean for a game you’re designing? Several things, potentially. You could just ignore that and make the game you have in mind, a perfectly valid choice. You could try to make the game’s experience more intense so it keeps players riveted and less distracted – but that only seems like a good idea if it makes the game more fun, not if it means populating the screen with little things you need to click on constantly just to stay alive. Or you could try to make it easy to share parts of the game with others as you play, letting your game contribute to the larger social context the players are often part of. Or you could make the game easy for other people to casually jump into, so a player could invite a friend in while the game is going on. Of course, many of these things depend on the nature of the game play in your particular game – but it’s worth thinking about in the design phase.

What do all those ideas have in common? You’re thinking about the player experience, their overall experience, and trying to improve it or take advantage of it for your nefarious marketing ends. Sure, when you’re designing a game it’s usually starting at “this is something I think is fun.” At some point, though, you should think about what the players are going to experience, and how you can make things the most fun for the most players. That’s how you get a bigger, happier audience, which should lead to making more money (assuming you’re handling the monetization of your game well).

#2 Gaming is Replicating the TV Package

The core of what he’s saying here is that games need to be more available and accessible to players, in several ways: Technology, cost, complexity, information. Sure, much of the time the game you have in mind creating is bounded by the technology required. Maybe, though, it’s worth examining your game concept and thinking about how it might work on a wider variety of platforms. Mobile? Tabletop? Browser? Is there a value in having a larger audience? Sure. Just look at Fortnite, for example, with $1.8 billion in revenue in 2019. Two-thirds of that revenue came from mobile, where Fortnite is clearly not as good as it is on console or PC. Yet over a billion dollars came from people playing it on mobile – because that’s what they happen to have with them when they wanted to play.

The other value in being on multiple platforms is that it enhances the discovery of your game. People hear about it, then want to try it… and if it’s not on the platform they have, oh well, there’s another game to try. And if you didn’t give them a way to try it for free? There are plenty of other games to try that are free, and there are probably games that sound similar to yours.

The essay points out that game subscriptions are great ways to sample games. Sure, you think, but maybe you won’t get hardly any revenue from your game being part of that subscription plan. You’re not thinking about it the right way – that game you put in Apple Arcade, or that’s in the Xbox Game Pass, that’s a marketing tool. You should have other games that are tied into those games with explicit links, and those games you make good money on. If you can get a game into the Apple Arcade, make it a good one… and then have a game outside of Apple Arcade that extends that experience, or uses the background or characters or essential game play elements in ways that practically demand those players from Apple Arcade get your other game. And maybe that’s for an upfront price, or you have microtransactions you can sell them.

Note also that engagement with games is now variable – many people are just watching others play games, and they’re having fun doing that. Part of the promise of streaming games is that you can get new players to jump in easily – but your game design has to not only allow that, but encourage it. Is there a way to make that happen outside of streaming games? Sure, I can think of ways to design a variety of games that would allow people to jump in and play, whether it’s an RTS or an RPG or a shooter. Think about designing some limited units/characters that are explicitly for people to jump into while play is ongoing. No, they might not have very much control, but they could have fun without the need to learn a complex set of controls. No, it’s not something an experienced player would like – but the idea is to get new players in, ideally in seconds.

#3 Gaming Has Unprecedented Content Leverage

What he’s really talking about here is UGC as well as all the ancillary content for a game. Look, if you’re going to the trouble to create a game, why not create one that can last for many years, and have vast expansion possibilities, and if possible allow users to contribute to the content? Yes, that’s all more work than just cranking out a game; but it’s less work than cranking out two games, and it has at least some potential to be far more lucrative in the long run.

#4 Social Signals, Effects, and Reinforcement

Games are social media… why not internalize that as well as enhance it externally? If your game is fun, people will want to share it with their friends. Make it easy in the game to do that – share clips, images, whatever is fun. Look, social media and messaging comprise 50% of all time spent with mobile devices. Gaming on mobile is about 10% of all the time on mobile – yet it’s about 80% of all the revenue from mobile. I see vast potential here to make money with games on mobile.

#5 Tightest Feedback Loops + Culture

The best games are constantly changing and adding new things, which in turn engages their audience and encourages them to spend more time in that game. Creator tools are important for that, of course, but even beyond that you need to think about how to reinforce the culture of your game. Really successful games these days have their own conventions, where people get together in meatspace to enjoy everything about the game (BlizzCon, MineCon, etc.) You don’t even have to set up your own convention – become part of one of the many conventions already being held that probably include some of your audience, and grow from there.

There should be vibrant online communities, on Facebook or subreddits or wherever, and you need to stoke those fires with good moderators and plenty of new information on a regular basis.

Oh, and your game should consider public data – leaderboards, sharing successful games, showcasing players and competitions, whatever seems to go with the nature of your game and the audience.

#6 Consistent Growth Through New Devices, Categories, Technologies, Content

This is crucial – keep extending your game into new areas. Add a VR version, or maybe for part of the game. No, the market isn’t huge – but if you can do it without great expense, it’s great press (see Half-Life Alyx). Missed opportunity: I though it would have been cool to be playing Star Wars Battlefront on PS4, and have a mission come up where you get into an X-wing using your PSVR and fly the mission in VR, then drop back into the main game – with extra experience, cool badges, recognition for that amazing service you performed.

Cross-game integrations should be explored. Find ways for players to move characters between games, keep DLC, maybe get some perks for having played other games. They don’t even have to be your own games! Do some cross-marketing here with other game companies to expand your potential audience.

Once you start dreaming about where your game could go if you partner with others, there’s no limits.

#7 IP Kiln

The point here is well-taken – generate a lot of material and some of it is bound to be good, and can be the seed for even more successful products. You may be starting with a game, but if you do you world creation properly you can be seeing spinoffs in the future in other media. If there’s UGC involved, you could get an amazing amount of content. (Just be prepared for the future IP considerations when Hollywood comes around; you should have the legalities already dealt with far in advance.)