Luxury gaming
Opportunity is in the one percent
The SuperJoost Playlist is a weekly take on gaming, tech, and entertainment by business professor and author, Joost van Dreunen.
Three people were crying in the lobby.
Yesterday I visited the Wall Street Journal for an interview. Waiting for security to clear me, you could tell something had happened. Entering the elevator, I caught the news broadcast on the release of WSJ journalist Evan Gershkovich. He had been held captive in Russia on spying charges and was sentenced to 16 years in prison earlier this month. I had arrived right after a company-wide town hall to celebrate his release had ended. The building was teeming with joy.
It was a reminder that large companies are, in the end, made up of people.
So often can publishers of news, books, music, or games seem like soulless conglomerates. Motivated only by whatever their spreadsheet tells them, humans are mere cogs in a machine that exists only to grow and expand. An obsession with stock performance seemingly predetermines all decision-making. And when listening only to financial reports and analysis, why would you think otherwise?
But that’s not how cultural industries operate. People don’t just get up and go to work for years without a thought in their brain. They have ideas and ambitions. And when a firm struggles, it hits them, too. An exec at one of the large console makers recently told me how heartbroken he was after laying off three of his team members. A shared connection is among the strongest motivators for people to show up to work again tomorrow. It’s not this quarter’s sales target.
What makes the difference is people. Sometimes even just one.
On to this week’s update.
PODCAST: Interview on Mobile Dev Memo podcast
At long last Eric Seufert and I got together to discuss several notable trends in gaming. Having been a fan of his work for years, I was happy to finally get a chance to ask him a few questions, too. We discussed several examples of non-endemic firms that are leveraging games as a novel relationship model with audiences, including Netflix’s gaming strategy and the NY Times’ success in interactive entertainment. Plus, we explored whether mobile gaming as a whole has reached a ceiling, and what large devs like Supercell are doing about it.
Go listen to it here!
BIG READ: Luxury gaming
It is an intriguing paradox: video games have become mainstream entertainment, yet the industry has started positioning itself as a luxury category. This earnings cycle shows the first signs: to offset softening demand, game companies are focusing on the top 1 percent of players, adopting strategies reminiscent of high-end fashion brands and luxury car manufacturers.
Electronic Arts (EA), the largest independent US-based game publisher, is one example. Despite experiencing year-over-year declines in net bookings across all platforms, EA reported strong financial results that beat both their own guidance and analyst expectations. In the first quarter of fiscal year 2025, EA's total net bookings reached $1,262 million, with console platforms generating the largest share at $677 million (despite a 25% year-over-year decline). PC and other platforms contributed $295 million (a 21% decrease), while mobile platforms showed resilience at $290 million (only a 4% decline).
Despite these declines, Wall Street analysts are generally optimistic about EA's future, and several have raised their stock price targets. Bank of America increased its price target for EA from $150 to $170 per share, and Wedbush Securities raised its target to $170 from $162.
The key to EA's current success lies in its focus on high-value, brand-name properties that command premium prices and foster loyal audiences. It is a strategy that is particularly evident in the company's sports titles, which have become the cornerstone of its luxury pivot. During this week’s earnings call, EA’s CEO, Andrew Wilson, stated its newly released College Football 25 had 5 million players in its first week. In the days before the launch, no fewer than 2.2 million people pre-ordered the game at a $100 price tag.
EA's journey to this position is noteworthy. A year ago when it ended its 28-year-long relationship with FIFA, its prospects didn’t seem quite as strong. Like any recent divorcee hoping for more, EA did come out on top after the separation. But only after it got itself in shape, made some new friends, and worked on better listening.
For example, EA made notable improvements to its priced soccer franchise by including volumetric data collected from stadium cameras, allowing it to incorporate signature finishes from celebrity players. It also expanded its social circle by leaning into cross-play with new game modes. And, it introduced female players in its popular Ultimate Team component.
By leveraging well-known sports licenses and investing in innovative features, top publishers are creating products that demonstrably justify higher price points and recurrent spending. It is part of a broader shift that reflects a maturing market where profitability is taking precedence over growth, and where publishers are seeking to differentiate themselves in an overcrowded digital landscape.
Last week I argued that the recent price increases for the Xbox Game Pass subscription were both inevitable and more equitable. Despite getting itself into hot water with both audiences and regulators, team Xbox’s decision to increase prices for Game Pass makes sense for its most die-hard fans who are much less price sensitive and will gladly pay extra to have premium access. Charging casual players the same when they play less makes no sense and goes against the strategic objective of making games accessible to everyone.
It rhymes with the broader push of non-endemic brands into gaming in search of a new relationship model. Having gained the attention of billions across the world, audiences look for signals of quality to help navigate the enormity of available interactive entertainment. Conversely, publishers and brand owners, like toy companies for instance, leverage digital play to build the same type of relationship with consumers in the way that retail stores like Tiffany’s, Abercrombie & Fitch, and Apple do.
The industry's evolution from a product-based model to a service-based one, characterized by free-to-play games monetized through a small subset of committed players, laid the groundwork for this shift. Building a strong brand has become crucial in the crowded digital content landscape. While user acquisition through aggressive marketing remains an option, it is an expensive strategy that primarily benefits platforms. Instead, establishing a brand as a signal of quality insulates publishers from both macroeconomic challenges and rising ecosystem costs.
Building a brand in the ocean of available digital content is one of the few approaches to mitigate risk. Certainly, you can spend a lot of (investor) money on user acquisition and feed the mobile marketing industrial complex. But that only raises prices for everyone else and benefits platforms. By contrast, establishing or leveraging a brand as a signal of quality to audiences insulates from both macroeconomic challenges and ever-increasing ecosystem costs.
As the gaming industry continues to mature, the luxury pivot may well define its next era. The challenge for publishers will be maintaining this upmarket trajectory without alienating the broader player base that made gaming a global phenomenon. Current successes in a tough marketplace suggest that navigating this balance will likely shape the future of interactive entertainment.
PLAY/PASS
Play. The zombie Queen Elizabeth II character for Fallout: London is the cherry on top of this spectacular DLC-sized mod for Bethesda’s Fallout 4. The team, consisting of “a group of hobbyists, industry professionals, modders, and game enthusiasts”, delivered both a unique interpretation of the Fallout universe and a pioneering effort that shows what’s possible outside the traditional confines of game development.
Pass. Cavill’s dream of starring in a Warhammer 40,000 (big fan!) production by Amazon Studios may not become reality. In a recent earnings call, the firm stated that Amazon has until December to “agree on creative guidelines for the project.” LFGO already!
NEXT UP
The next two weeks I’ll be phoning it all in from upstate New York, provided the internet doesn’t let me down. Roblox’s glowing earnings will be a great starting point to see how brands have started to develop a new approach to audiences that like to play and socialize in digital environments.
Cavill/Cavali - tomato/tomatoe.