Twenty Fourteen has been, well VERY eventful for some of us…..
….But it was more than just several groups of people/companies at each other’s throats over their opinions on video games:
This year we saw massive changes that affected the game business at large, from selling games making games, to consuming them. The evolution will not end here, as these 2014 trends will also affect game development and the industry in the years to come.
Twenty Fourteen was the year of the “mega deal,” when even more massive, higher-profile companies acquired massive, high-profile companies. In March, Facebook acquired Palmer and co.’s rising virtual reality startup Oculus VR for $2 billion in that only the most clued-in insiders could have predicted, spawning at least one great Photoshop image. (Credit) https://twitter.com/jasonforal/status/448587145205133312 Then in August, another company that isn’t exactly game-centric made a major push into the games space when online retailer and e-book shifter Amazon bought Twitch, the game streaming and broadcast company that’s been shaping a new way of video game entertainment. That deal was worth $970 million. Just having those two enormous acquisitions in the same year would have been noteworthy, but then Microsoft came around in August to announce the single largest buy of the year: The Company behind Xbox would buy hugely successful Minecraft studio Mojang for $2.5 billion. These are not to mention a couple massive global deals: Chinese online video game operator Giant Interactive went private with an additional $1.6 billion investment from the company’s chairperson and two private equity firms; and social games company Fun Plus sold off some of its most popular game properties to Shanghai’s Zhongji Holdings for $960 million. This entirely helped make 2014 a record year for game acquisitions — the first three quarters of the year doubled total acquisition dollars for the entirety of 2013. Some of the biggest buys of the year show how massive, non-video game-centric companies are keeping a trained eye on what is happening in the games space to try to cash in on the future of tech. We have known for a long time that games drive tech that can be applied to other fields. Now, it seems that major companies like Amazon and Facebook are putting up the big dollars in recognition of that. Game makers and their innovation and creativity continue to push the tech industry overall in very meaningful ways.
The flood of Steam games
Valve Software has been making gradual steps towards opening Steam up so more developers can take advantage of the platform’s sizeable footprint of 100 million registered users for a couple years now. However, only in 2014 was it when we really started to see Steam open up, for better and/or for worse. As Valve lowered the barriers of Steam, it caused a massive influx of games to fill the storefront in 2014. This is evidenced in the statistics: We calculated that by mid-May this year, more games had released on Steam than all of 2013. Valve’s conscious decision to loosen up on its gatekeeping role means that many more developers are able to launch a game on the popular platform, but it also means it is that much harder for developers to stand out against the noise of thousands of other games. Fortunately, along with this trend — which Valve itself has clearly keeping an eye on — came the launch of new Steam discovery tools, including a new algorithm that follows each user’s activity and uses that data to put games they’re more likely to buy right on their personal store page. This discoverability update coincided with the launch of the Steam Curators feature. Discoverability has been an issue for a while now, and will be for years to come. And while moves like Steam Discovery are absolutely welcome, the best tack going forward is for game developers is to treat storefronts like the distribution channels they are, and to not rely on them too much as marketing vessels for your games. Do what you can to take the marketing into your own hands. (P.S.: that tends to be challenging, sorry.)
Devaluation of games
Everyone likes to get cool stuff for free or cheap. Moreover, 2014 was a banner year for acquiring games for next to nothing. There is PlayStation Plus, a $50 per year subscription that lets players download select games every month across three different platforms at no extra charge. Also Xbox’s Games with the Gold service; there are the Steam sales that are major events for players who were holding off on buying a game until it was just a few quid. There are the bundles that allow players to land a handful of games for just a few bucks; there is also the free-to-play business model that drives revenues on mobile, and so on. While all of these new models have important, valuable benefits, they have at the same time driven down perceived monetary value of games, and developers big and small have had to be especially sensitive to that. Game devaluation became an even more urgent issue this year, when in the upper echelons of the video game industry, top game retailer GameStop cited research that said consumers expect to pay $35 for triple-A game downloads — which is an issue when brand new big budget triple-A games sell for $60. In addition, even though players said that is what they would expect to pay, what they are actually paying is even less: $22 on average. The “race to the bottom” in pricing has been a topic of discussion for years now, particularly in the mobile game space, where “free-to-play” micro transaction-based games dominate the top-grossing charts, and where $5 is considered a “premium” price point. However, 2014 showed that being paid what your game is worth (and making a living) is something that requires added attention in all video game markets.
In 2012, we noted how Double Fine kicked the door down for video game crowdfunding for high-dollar projects. Since then, there have been notable successes, notable failures, and plenty of in-betweens. Earlier this year, Ico Partners issued a first-half 2014 Kickstarter report which put total pledges on video game Kickstarter is at $13.5 million — that’s compared to $58 million pledged in the first half 2013. The full-year numbers are not in quite yet, but do not expect the second half to make up the year-on-year difference. As Ico’s Thomas Bidaux put it, it is likely that the Kickstarter Honeymoon is over. In the two years after Double Fine’s Big Bang, enthusiasm for a new business model (one that gives developers more freedom over their creation, and players more emotional connection to those creations) convinced many people to open their wallets. The success of the forerunners led other game developers to jump on the Kickstarter train, which is seeming to slow down now. Part of this cooling could be because Kickstarter is kind of old news — it is just another funding model now (which is still a good thing for game Dev overall). Combined with that, many of the big properties from big-name developers and brands have already gone through the Kickstarter ringer. Additionally, potential pledgers have grown more cautious about these games and their promises for delivery (Kickstarter acknowledged this concern by updating its rules). Perhaps most notably, Steam Early Access has taken off, which lets players contribute to a game’s development while having access to a playable build, instantly. At the same time, developers can get crucial community feedback and build a relationship with players, being paid for the game along the way. Kickstarter isn’t dead, and crowdfunding overall is still viable for the right kind of projects (just ask Chris Roberts, whose Star Citizen has raised over $66 million in independent crowdfunding). The model has simply matured, which means that developers ought to consider it more carefully than in years past, before spending the time and effort to use it to try to fund their games.
YouTubers here to stay
People have been playing games for YouTube consumption for years now — ask anyone who has followed Let’s Plays. However, 2014 was an inflection point in which game developers (and game journalists) finally recognized that YouTube personalities — and not simply the format of video — are now part of the media ecosystem.
While there is the idea of YouTube personalities supplanting the traditional media, what is actually happening is the competition in an already-competitive media landscape is intensifying, as various formats, old and new, vie for attention from the same target audience. As far as YouTubers “ousting” traditional press or vice versa: the fact is that no one’s job has ever really been “safe” in games media, and now YouTubers are now just part of this grand party held within a rather volatile, rapidly-changing business. For developers and publishers, building relationships with YouTubers became important — paying a popular YouTuber to play your games, or having your game serendipitously show up on a YouTuber’s channel — can potentially move a whole lot of units. YouTubers, like the traditional games press, are definitely on the radar of PR and marketing-minded game developers, big and small. YouTubers are here to stay, and variety is a good thing for developers, players, and the media landscape.