Video games industry review, May 2021
What to look for during upcoming earnings calls
In the lead-up to the upcoming earnings season I’ve compiled a few observations and thoughts on key topics and protagonists in the industry. Feedback always welcome.
TL;DR
Platform Power. As major platform holders struggle over dominance, their interests are less aligned with those of content providers. Continued pressure on app stores rates across PC, console, and mobile will divide the industry further.
Disappearance of the Middle Class. Flush with cash and eager for IP, industry will consolidate and squeeze out middle class creatives with less access to capital.
Cult of Personality. To distinguish themselves amidst the glut of available content on digital platforms and storefronts, game makers will have to offer a transparent brand promise. This applies equally to publishers (e.g., EA’s leadership as a sports video game label) and platforms (e.g., Epic Games’ rainbow colored aesthetic with Fortnite, Fall Guys and Rocket League).
Innovation will come from novel revenue models. Legacy game companies are historically slow to adopt novel revenue models. The newfound viability of subscriptions, in-game ads, user-generated content, and crypto-currency will fund a new generation of creative firms. Fast-movers will take advantage of these emergent monetization strategies.
The cloud is yet to come. Despite overall optimism, current models concentrate on distribution and largely ignore cloud-native capability.
