Abundance and joy

How is this wave of over-investment in games going to end?

Access to cheap capital, the explosion of interest in interactive entertainment, the entry of several non-endemic billion dollar firms, and a rash of public listings at enormous valuations has created a lot of froth.

This week alone, Sony sank another $200 million into Epic Games, which raised a whole new $1 billion and saw its valuation shoot up to $28.7 billion. AppLovin went public at a $28.6 billion valuation. Amazon continues to slosh money into gaming even in the absence of any demonstrable proof points as team Bezos opened a new shop in Montreal. And Apple just beefed up its Arcade subscription (see below).

All that activity is wonderful news, of course, because it provides funding to a broader array of content creators. Games that would otherwise struggle to obtain the necessary money to realize their creative vision now can and do. Financial logic, however, dictates that risk-mitigation is the most important part. As one contact phrased it:

“If you’ve held a somewhat senior position at Riot or Activision Blizzard, you can raise money with just a powerpoint.”

My contact is correct, of course. But if the business model behind your game is to be acquired, rather than to entertain audiences, perhaps we find ourselves in a market that is starting to look too frothy. That’s okay, but also requires a different strategy.

In the streaming video business budgets have consistently increased over the past years. As platforms look to build their catalogues, their content acquisition managers fly to LA to meet movie producers and celebrities. I can imagine it is a thrill to spend time with cool people while you pay for everything with that tech money. Nevertheless, it is obvious from the titles that currently feature on my Netflix recommendations that several famous movie stars did a few days of shooting, took their check, and went on their merry way. Art be damned.

The march toward brand dilution is well underway. The natural outcome of the different console makers offering multiple subscription plans that consumers now face a wall of options. Differentiation is necessary to help people navigate, so WIRED wrote an overview. But man, what if, hear me out, it was easier?

So one answer to the question how this will end is: with a return to quality.

We’ve seen what happens when game companies forget about what’s best for audiences. Too much money can be a huge distraction and tends to fund projects that carry little promise. It happened to Atari in the 1980s, in the 1990s it resulted in the disappearance of most console manufacturers, in the 2000s we saw the purge of the needlessly abundant MMO category, in the 2010s social gaming collapsed, and, I believe, something similar awaits the next wave of brilliant content that forgets to cater to audiences in the 2020s.

On to this week’s update.


🎙 Two quick event notes

  • The correct date for my conversation with Raph Koster is Tuesday April 20.

  • I’m part of a roundtable at Collison on blockchain, cryptocurrency, and gaming. Judging from the other registered attendees, I am a token civilian. I will be sure to give them the view from below.


NEWS

Apple expands its Arcade at others’ expense

Even as its lawyers busy themselves arguing that Apple is a benevolent benefactor and selfless protector of its users, the firm went ahead and claimed some more eminent domain. Specifically, the upgrade to its Arcade service to include a bunch more titles and improve its value proposition required Apple to change its policies. 

Previously it required any game subscription service to either own or exclusively license titles (clause 3.1.2). In combination with clause 4.3, which prevents the existence of multiple binaries of the same app, developers would have to decide to either (1) join a subscription service, or (2) keep the paid app. But not both. Essentially this limited third-party game subscription providers on the platform and is equivalent to saying that Netflix or similar services cannot offer films and TV series that are also available via Apple. Put differently, it limits competition.

Next, Apple changed the rules again in February. It removed the restriction but only after signing a string of new titles for its Arcade  service. It then proudly announced it was launching the 

“biggest expansion since the service debuted, now offering more than 180 great games that include new Arcade Originals, Timeless Classics, and App Store Greats.”

So far, trade publications have responded mostly positively by lauding the expansion of available content and describing the updated offering as a comeback success. But effectively, Apple quickly rewrote the guidelines to facilitate the rollout of its updated subscription service and to give itself an advantage over third-party service providers. Funny how that happens.

Among Us update is a dollar short, a day late

Entertainment giveth and it sure does taketh. After its spectacular success, fans of the game Among Us, had been eagerly awaiting an update. We wanted moar! And on April 1st we finally did. However, initial player numbers don’t inspire excitement. 

The new map that InnerSloth dropped almost immediately fell flat. Before its release, Twitch counted approximately 30,000 concurrent viewers for the game, which spiked to just under 700,000 on the day, followed by a straight drop down to its pre-release numbers within 48 hours. 

Verdict: people didn’t care.

That’s rough. It is also a common circumstance for an outfit that isn’t quite ready for the spotlight. Without a proper plan and a solid foundation, businesses tend to suffer when the getting is good. InnerSloth already canceled its plans to release Among Us 2 because absolutely no one had asked for it. People wanted more content. And when Airship finally did launch, reactions varied between finding the new map too difficult for newcomers and too easy for imposters

One of the worst things that can happen to a small company is success. There is no shame in that, of course. It has happened to loads of high-profile companies. We all know how Atari single-handedly decimated the games industry in the 1980s by releasing a crappy E.T. game. An important part that led up to that critical mistake was that Atari had been growing rapidly: in 1982, it added 4,000 new employees across 50 different locations. You can try to lead such an organization with coherence but it’s virtually impossible.

The same happened to Hasbro. It went on a spending spree in the late 90s and bought dev studios like Avalon and Microprose. As a result, revenues exploded from $35 million to $196 million in 1998. But it left the firm with a managerial nightmare and financially exposed right before as the dotcom bubble burst. You can guess the rest.

It’s not that anyone at InnerSloth would care, I imagine. Having made all the millions they’ll ever need means there are no financial repercussions for the core team that, of course, deservedly made bank. But here’s the curse: creatives can’t help themselves but to fall in love with a new idea even when an existing one is paying the rent. Even with a windfall, there’s a high in being the ‘it’-game for a hot minute. That’s a high they’ll be chasing from here on out.

Roblox partners with Hasbro

Last year my summer was cluttered with Fortnite NERF blasters, and I suppose I now know what the coming season will look like. For rainy days there’ll be Roblox Monopoly. I get the cross-pollination, but this sentence from the news release is pregnant with corporate politics and PR speak:

“Roblox values the incredible contributions of its community of creators, and our partnership with NERF is an ideal way to bring their inspiring creations on the platform to life for millions of Roblox and NERF/MONOPOLY fans to enjoy in the metaverse as well as in real life.”

Good lord. Just say you’re making some cool toys. Anyway, Wall Street analysts said it wouldn’t necessarily help improve either firm’s stock price, but expect Roblox to add an extra $1 billion in revenues from deals like this over the next few years.


PLAY/PASS

Play. Konami is an indie firm now, considering that Nintendo lumped it in there on its IndieWorld presentation. That title Getsu Fūma Den: Undying Moon tho.

Play. Since I’m now two whole driving lessons closer to motorized independence, I’m starting to become car-obsessed. So here’s the CORRECT order to watch the entire Fast & Furious franchise to, you know, get the plot. 🚙