5 x Tactics for the Volatile PC/Console Gaming Market with Newzoo's Devan Brennan

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the combined company will offer customers even stronger and more detailed insights on the full Digital customer Journey exciting times lie ahead a sensor Tower and data Jo enforces go to data. or sensor to.com and get on board with undeniably the best data partner in the business now back to the episode hello my name is Adam tver and I'm here speaking with Dev Brennan from newu regarding their latest market report yeah first off really excited to be here I've been a longtime listener of the podcast so it's super cool to finally be on here as you mentioned I'm with nuu I'm actually a senior consultant from nuu spent the better part of the last four years working with different game developers and Publishers across the globe helping them with both their publishing strategy as well as their kind of assessment of the overall market and how they want to approach different spaces Beyond nuu what's your

job history beforehand I was a consultant at deoe Tech consultant and then even earlier than that I was uh pursuing a startup in the video game Space focused around discoverability for Indies but that's a long time ago okay all right so this is why we're digging into Indies today this is great yes absolutely all right great to meet you before we get into a ton of details here on the news reports i' love to chat a little bit about how news who pulls together these reports and like how the data is extrapolated can you go into that yeah absolutely so as a warning there's a lot really we're pulling in information from so many sources it sometime is hard to keep track of but to structure this a little bit with our core Global games market report there are really two main metrics uh one is the players and payers and then the other side is the revenues and for the players and payers how we get there is a

combination of our own primary research from our Global gamer study where we go to 36 markets and do online interviews with over 70,000 participants and that helps gives us an understanding of the distribution of players and payers in those markets we then combine that with online population metrics from un as well as Internet penetration metrics from itu to get to those player and payer type figures and then the second part of that is the revenues where we are actually combining an immense amount of different sources so we dig into over 140 companies detailed financial information we combine that with our own live game level tracking of Engagement and revenue we also have partner data from folks like app twe to help with mobile and then lastly we pull in macroeconomic figures like household income and GDP per capita and GDP per capita from un

and other major bodies amazing and on the players and peers run you also have that live data in terms of Dow wow Ma at a title level that you're estimating does that factor into the player accounts or is that mostly just extrapolations from your um survey data so for the players and payers the total sizing they're really the macro sizing figures those individual engagement metrics we don't factor in we do compare and and see if there's an alignment across these two different methodologies but those don't initially factor into the modeling for those player and payer figures interesting okay great so in terms of today we've chatted a little bit and looked at the report we're going to split this up into three different sections first let's talk a little bit about General market trends in terms of where the market is growing second section we'll be talking about premium games in terms of the current status of sort of single player premium games as well was diving into the status of dable

a in indie games and then lastly looking into the sort of future prospects of live service on PC console all very very important but let's first dive into General market trends in terms of what's growing shrinking and why I've read through the report obviously looking forward to the report every single time it comes out to start diting into the data start to figure how how things are changing the global market is now expected to grow at roughly 2.1% over year in 2024 how does that compare to sort of earlier forecast you could have down yeah so so to contextualize this number because for some that might sound optimistic for some that might sound pessimistic some extra context to provide here is in say the three years leading up to covid so 2017 2018 and 2019 we forecasted the market was growing at roughly a 4.9% so that's before the impact of covid on the games Market it's important to to note

here that when we're forecasting we are returning to growth this is not the same level of growth that the overall Market was experiencing before the impact of covid on the market however we are happy to say that the market is returning to growth last year in 2023 we forecasted that it was quite flat so we are on a positive trajectory when we look at growth over this year and the coming years okay so in terms of pre rates of that 4.9% the flattening through 2023 now we're back into 2.1 but in terms of comparing this to like May or to your January forecasts how has that Outlook changed because I know like if I remember previous news year reports we were talking pretty pessimistically about the games Market is this a more bullish outl look of what games is doing so it's it's slightly more bullish we were a bit more conservative with our initial estimates for 2024 we expected it to be a bit more FL however we have seen some initial

early indications in the year that have made us slightly more positive but a very marginal increase in our overall expectation for the year okay I will take that marginal optimism let's let's Dive Right into that might be the theme for the podcast episode marginal optimism marginal optimism I like that okay what do you believe are the key drivers of that sort of like marginal optimism right now of what's changed since since the previous forecast there's two different segments that are actually growing when we look in 2024 the first is mobile we actually see mobile returning to growth for the first time in a little while since really the peak of covid and the impact of the Privacy changes the reason for why we think mobile is returning to growth is partly due to the improvements of many economies across the globe combined with several heavy hitter mobile titles performing very well in this year

already so mobile is one factor you can dive a bit deeper into that in a second PC is the other factor and it's actually the fastest growing segment this year PC is quite an interesting platform in that it now has a very sound foundational base of live service revenues that are very stable and predictable typically coming from titles like legue of Legends counter strike DOTA valerant titles are exclusive to the PC platform and on top of that stable level of Revenue we're also seeing a nice Boost from the crossplatform strategies that primarily PlayStation is executing on with many of their first party franchises arriving on PC this year giving a nice boost to the segment as a whole amazing okay and before we kind of go into the platform specifics in terms of mobile and PC console

what about regions is there any sort of like regions specifically that are underperforming or overperforming right now uh so from a regional perspective the ones that are underperforming slightly are slightly underperformance okay slightly underperformance marginally maybe is a better word are really the more developed Nations so North America Western Europe and uh Japan and that's because the one segment that's enter performing is the console segment the console segment is the segment that is most reliant on having a strong slate of AAA releases in a year and this year we're quite light on that and so because of that it's a bit of a reduction in growth for the regions where console is most prevalent which is typically Japan Western Europe and North America whereas the actually the emerging regions the mobile first markets markets like Middle Eastern Africa Latin America and Southeast Asia central Asia are really strongly growing

and a lot of that is fueled by the improving internet infrastructure as well as accessibility of mobile phones becoming quite cheap in those markets and a rising middle class as well in many of those countries interesting okay let's dive first into that console comment you made in terms of this year the Slate being relatively weak especially what we compare you over here and that's why the decline I think it's a 1% decline down in console when I compare that to say last year what was the growth rate of console last year given the strength of that slate so I think it ended up being at a couple percentage points I think it was around 2% or slightly above 2% growth last year but coming into 2023 we actually forecasted a higher growth rate for console because of the projected release light and how strong it was going to be and what we found out during the year when we were digging into company financials is that those AAA releases

were far more cannibalistic on the existing live service Revenue in the console market and it was actually the PC market where the live service Revenue was more resilient and it had a bigger Boost from the AAA release slate so in 2023 in our revised forecast PC actually outgrew uh console because of that impact interesting to did you really see data that was showing that cannibalization from people say purchasing Zelda Al warts and boulders gate that it was cannibalizing engagement or all or just Revenue in terms of live services so both when we dug into specific public company financials those companies that had live service titles but not necessarily large releases in those quarters so for example I think take two with Rockstar and GTA revenues in those period in times we saw dips that corresponded to launches of major AAA

titles but we also saw it in our tracking data with our monthly active users and Revenue data where we could see dips in those live service titles that corresponded to the releases of those major AAA titles interesting okay so then this year obviously the slight is weaker sorry Star Wars El I like it I'm I'm going to play but next year we've got GT6 so as we start to look a little bit into the future is the expectation that console will grow next year with GTA 6 or will it be another repeat of what happened 2023 where GTA 6 eats all of our lunches no actually I'm happy to say that we're we're quite optimistic for 2025 that it'll it'll be a good year for the industry not just for Rockstar and Nintendo and that's a few different reasons but of course GTA 6 is the the 9,000 PB gorilla in the room of this conversation we do expect it will have probably the largest launch in the

history uh probably AAA PC console titles but we don't think it's going to suck the total air out of the year so much that other Publishers and developers suffer so we do actually believe that in 2025 console and PC are actually going to slightly flip in that console is one of the fastest growing segments of that year okay and then how does that continue because I'm assuming as a let's say is not Nintendo and not GTA six as a developer I'm trying to say like what where should I be placing my bets mean is the PC console is a combined bucket growing through that time or are you saying that like they're just kind of swapping right yes so PC will still be growing we do expect PC to grow through that period of time 2025 through till 2027 so combined when we're looking at PC and console we do expect both of them to grow and to build on that when we're talking about other developers in the space as they're planning for 2025 I know I've spoken

with several of them they're of course looking to avoid any launches in Fall of next year but there's an interesting additional consideration here with GTA 6 and that's it is only launching on Next Generation consoles and it is going to be a very strong motivator for a lot of the more patient console players or patient PC players to finally make that generational upgrade and 2025 has a really strong release slate outside of GTA 6 titles like Civilization 7 AOW Monster Hunter Wilds Fab doom and a lot of those titles are only coming out on Next Generation consoles and PC so the fact that GTA 6 is pushing people to finally convert and upgrade to those Next Generation consoles could have knock on benefits for those other titles that are releasing specifically to Next Generation conso as well interesting

okay and that kind of implies that the the current health of this generation do you have a sense there in terms of where PlayStation and Xbox are in terms of their attachment rates versus previous generation yeah so there's a happy story and a difficult story there as well so from a broad perspective comparing old generation to New Generation for Xbox and Playstation we're kind of at an even 5050 split so from an active install base roughly half of PlayStation's active install base is still on PlayStation 4 and the same for Xbox as well so we still have a very sizable active install base that is on the previous generation and we're hoping to see in 2025 quite a shift of those players up to the Next Generation largely motivated uh by GTA 6 but we can dive a bit deeper into uh some of those platforms I think Xbox is a bit more let's definitely dive in on Xbox because I want to get your

sense of like the the health that platform obviously with the recent needs around Microsoft moving the more cross platform relases what's the health right now of the Xbox this is a tough one for me it hits a little close to home Adam I got to be honest with you because I grew up on the 360 uh Halo and Gears of War are some of my personal favorite franchises but I got to be honest it's not been a good couple generations for Xbox and this is no secret I think people know this and understand this very well as it sits right now the active install base for Xbox is roughly half what PlayStation's active install base is and while the Xbox one was definitely a big Miss for Xbox the series X has not been performing that much better it's interesting to note that actually in the initial months of the series X launch it was outpacing Xbox One sales but of course that was a big benefit from covid

but now that we're quite a bit removed from the impact of covid the series X has actually fallen behind the sales pace of the Xbox one which is a very worrying sign of course for the hardware side of Xbox especially now when you're adding in the new Xbox crossplatform strategy where they are essentially eliminating any motivation to have an Xbox from a Content perspective if you're able to get access to a PC yeah and so in terms of new's forecast are you pretty bearish then in terms of what the tale of Xbox will look like in this generation yes yeah generally we don't have a marginal optimism for the Outlook of this generation of Xbox and it'll be a very interesting question to see what the next generation of Xbox consoles look like I'm concerned that a simple technological leap will not be

enough and and could see a very significant additional drop off in install base for Xbox in the future okay well shifting gears then to the switch 2 what's new's Outlook in terms of the switch chose prospects yeah this is this is a fun one because we're not far away from the launch but we actually don't really know a whole lot and I mean so what we do know is Nintendo has had a massive success with switch it is by far the largest active install base of all of the consoles at the moment it's been super successful over the last eight years but looking at Nintendo's history they've had a bit of a struggle transitioning their players across generations of course Wii to Wii U is the example that's going to immediately come up where there was quite a lot of struggle transitioning those players across however Nintendo's trans media strategy has been incredibly effective

over the last few years it's both helped them unlock certain markets that they've underperformed in it's also brought back churned players who had stopped playing with the switch to really help boost those active install base and the timing is really good for the switch too by all rumors and what Nintendo has been saying there are no Supply constraints see if that plays out but they're saying there are no Supply constraints that they're aiming to have enough stock to avoid any issues with scalpers so there are a lot of Tailwinds behind this launch for switch but also I would highlight that the Nintendo switch was probably the platform that benefited the most from covid the reason I say this is because it has the broadest demographic of users for the platform and it also captures the largest amount of casual users and it was those casual users that we really saw boosted during Co and that was one

of the parts that has made Nintendo switch such a successful console but obviously those market dynamics are no longer there with this launch to switch 2 so what that will mean for the console is yet to be seen but it'll be very interesting to see how that plays out next year interesting yeah no certainly things like Animal Crossing New Horizons are remember that moment during covid and just the sales figures coming out and how impressive that that launch was and it absolutely made sense at that sitee of time but we switched to not having those market dynamics and as well obviously everything is just speculation at this point around the technical changes towards there switch to feels like it is just that technical we so far obviously let's wait for Nintendo's announcements but if it is just that like incremental technical leap do you expect this to be a repeat of the switch to so switch generation or like a or a significant decreas it's tough to say at the moment we don't exactly know what the release late of these titles are going to be I expect this will be very dependent on having a very strong

first-party release late of course we know about Metroid Prime which should be good I imagine they'll have a Mario title to accompany it along with several other titles but will they have a breath of the wild type title to help convert people to this next Generation it's tough to predict I think a lot of switch 2 is going to ride on whether or not Nintendo is able to bring compelling nextg content that is going to really push switch users to make that upgrade yeah yeah and even as a like massive Metroid nerd as I am I don't think Metroid Prime will be the the console Fisher unfortunately okay so let's Circle back to PC before we get into Mobile so you talked a lot about the rise of PC is it all steam or is it all store FRS yeah I mean the short answer is yes it's all steam unless you're part of the very exclusive Club of developers and

Publishers who have been able to successfully manage their own proprietary storefronts Riot games is the the main example here of course blizzard as well with bz Nets as far as competition for a general storefront steam is still King I think epic last year they did their epic game store year in review and within that they mentioned that there was roughly 300 million in annual revenue from third party game sales on their platform and that was a 133% year-over-year decrease so 300 million that is that is a very small chunk of the overall piie steam far far far exceeds that so steam is very much still King when it comes to Distribution on PC and in your report you talking a lot about PC being kind of the benefactor of crossplatform play that rise a PC has been of a lot of games coming onto that platform I'm Xbox

bringing PC games Sony bringing PC games can you want more detail on it yeah absolutely I mean so historically PC has kind of always been seen as the Pinnacle of the gaming platform Gamers will talk about upgrading from a console to PC they won't talk about upgrading from a PC to an Xbox it's so it's always been seen as the Pinnacle of gaming by core Gamers but the biggest drawback for PC has always been there is a significant amount of cont content that you cannot get if you do not have one of these consoles of course there's also a cost barrier typically with PC as well but still Within These core gamer groups that have that disposable income it was really the content exclusivity that was the major drawback for PC Gamers well now if you're willing to be patient there's no reason to own any consoles because all Xbox titles are going to come to PC and Playstation will launch all their live service titles day one

and their tent pole franchises probably after a one to twoe delay so the patient PC Gamers and really the PC segment as a whole are the true winners and to highlight this when we looked at the top 200 games by monthly active users across PC Xbox and Playstation so far in 2024 only 11 of those 200 titles were not available on PC and seven of those were PlayStation exclusive titles six of which will probably eventually end up on PC within the next two years so that just kind of goes to show you PC players essentially now have access to any and all PC console frch chanes I I'm thinking about this as a player experience where over last years on PC yes they have gotten PC games on the platform but they have typically been buy or like ports right like they were obviously built for console first with

PC as a secondary kind of extrapolating from this Insight would your advice then be to developers to prioritize PC over console moving forward in terms of the the target platform or would it continue to be console first port to PC there are some genre nuances in the type of genre in the game of course say if you're making a sports title then absolutely you need to be focusing on consoles still over PC but for most genres I would recommend that PC is as high of a priority as console if not a higher priority than consoles uh I think unfortunately probably Xbox is on the priority list will need to be at the bottom with PC and PlayStation at the top interesting and with Xbox as well being that split generation are you seeing I low attach rate at the series s level versus the series X like do developers need to prioritize or like

work on Xbox and on the series s is a bit of a cost benefit analysis at a certain point but my expectation would be for most developers the additional Tam that you get access to with the series s does not justify the cost uh porting or kind of descaling your game to make it available on that platform just based on the install base interesting great I'm I know it's all speculation but it's still like yeah it's important questions these are important questions exactly as well we've also seen a lot of sort of like mobile games move over to PC including things like on Steam are you seeing success there and like what's kind of the commonality about that success so the transition of mobile to PC is a very interesting one because there's a few different ways in which mobile developers are approaching this the most obvious one are really the direct ports where people are just taking their mobile game and slapping it

through a port company and then putting it on PC we have not really seen a high level of success with that approach to the market I think personally the far more interesting approach is say a shift up the Korean developer behind Nik who essentially used the success of Nik to fund the development of Stellar blade a title specifically meant for the console Market that is I think a more winning formula than just making a straight Port of a mobile game onto PC I think all you're really doing with that is getting more engagement out of the players that you already have as mobile players because now they can play on a few more platforms interesting yeah no I would say the shift up example is a weird one in terms of the developer being able to have that skill set so Broad being able to build you know triaa Blockbuster

tunnels as well in this you know very very successful mobile like all the power shift up but I don't believe a lot of developers have both of those capabilities all in House at the same time so Kudos I think that's fair I think that's definitely fair so then kind of transitioning into Mobile we talked a little bit about that like mobile is now expected to grow roughly 3% year over year and now you're you're starting to say like a little bit more bullish like slightly positive marginal positive expectations on mobile you mentioning things like heavy hitter titles driving that significant growth can you go into more details about what those titles are there are two different categories of Heavy Hitters I would say there's really the tried and true Heavy Hitters that have been around for a long time these are honor of Kings Royal match pubg mobile Roblox these are really consistent Revenue drivers for the mobile platform but we've really had some new entrance to the space as well a lot has been said about Monopoly go uh

and they're really incredible 2023 that incredible 2023 has still translated into an incredible 2024 they reported themselves that by end of July they were up to three billion which was up from two billion in March so incredible results another one to point out is dnf Mobile in China which 10cent launched in May 2024 and it's already the third highest grossing game in China reaching around half a billion just in one market alone so really an incredible success story and in in terms of like the most mobile developers are not Monopoly go are not dnf are from cutting out those sort of like major Blockbuster Elites how is kind of the overall prospects for the average mob developer changing I think

it's a very tricky Market unfortunately it seems to be a very topheavy Market where we don't see a lot of mid- tier developers with new entrance that are able to get a very steady level of success there's been a lot of within each of the different genres a lot of winner take most type realities and unfortunately I think with the Privacy changes that happened they didn't really benefit anybody but the biggest companies that have multiple games out in the marketplace were the ones that had the most amount of data and could really rebound or handle that situation the best so I am a bit concerned about what the future for smaller mobile developers looks like in that space and so I guess my key Insight here is like that obviously the market is growing those Heavy Hitters are continuing to grow we are marginally positive on the mobile Outlook right now but marginally negative in terms of mobile Developers going after new entrance especially ones that don't have

sort of like entrench franchises that they can W brid data audiences to Tak R brid yeah if I was to put one additionally positive note on for those smaller developers as we see these mobile ecosystems open up and more thirdparty app stores come into the space there is potentially an Avenue for discoverability for these smaller developers Within These thirdparty app stores but we still don't know for sure how successful these third party app stores are going to be in actually bringing users into them but if that does happen then I can see that being a opening for mid- tier developers to gain visibility on their titles and better discoverability great this podcast is brought to you by apps flyer in today's Digital World understanding your apps Journey from Discovery to download is more than just insightful it's essential enter apps flyer the leader in Mobile attribution

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heroic Labs has solutions for all of these challenges and it's not just us a deconstructor of fun praising heroic Labs the company works with some of the world's biggest Publishers on many of the Beloved games focus on your game save a big chunk of cheese and avoid Tech risks with heroic [Music] Labs so I feel like we've covered enough of General market trends that was in depth so that was the first topic the second topic let's get into sort of like premium game Outlook getting into single player games double A and Indie titles so what's been most interesting to me in this report is looking through your your thesis on this recort around single player games just to kind of set this up how have forecasts for sort of box games or non-li service games changed since Co it actually has not shifted did much at all we've seen a fairly consistent

contribution of these single player these premium titles in the market and even when we look at say the revenue distribution by Channel or type of purchase in 2023 both on PC and console roughly 54% of Revenue in Western markets came from the premium purchase of games so the premium The Upfront purchase of titles still counts for the majority of Revenue within the Western PC and console markets and that's stayed fairly consistent over the past few years as well and when we look to the future we don't see that shifting significantly interesting okay so and also through these last few years we talked about last year in the Slate but I think we tend to kind of stick with certain examples on our hand and the Assumption has been that you know the work is growing and you're getting bigger and bigger Blockbusters so I think of like 10 years go and like what a single player game would sell and then

now you're hearing headlines of things like Hogwarts reaching 12 million of a month littering 12 million in a month hell divers I think 12 million was their recent headline power world obviously having a stellar January Diablo's monster launch how do we sort of put these the context of these like monster launches in that like hey box products have mostly been a stable Market these last years they definitely show you what the side of that type of business model is and these are obviously outliers in today's market the vast majority of Premium games entering the market will hit some fraction of the sales that these titles will hit but what I want developers to take away from this is in a time when we're so much focused on things like multi-game subscriptions from Xbox game pass and PlayStation Plus they're discussing live service business models and free to play the tried and true pay to-play Straight premium model

is still an incredibly effective and successful strategy in today's market it has stayed successful and commercially viable over the past 5 to 10 years and it will very likely continue to be commercially viable as we look to the Future that is I think for me the big takeaway and what I would want developers to think of when they see the performance of those titles yeah but when we talk about sort of like commercially viable let's get into profitable because when we talk about like Revenue being roughly flat these large titles taking up a chunk we've also heard stories of like franchise over franchise SQL over SQL declines in units or stabilization of units while costs have gone up significantly your report kind of goes through a thesis sort of like hey how to how do we control for this and and build the right commercially successful product do you want to go into that yeah absolutely so of course there's a few different levers

on what affects the cost of titles and one of those that we think has somewhat ballooned out of a necessary proportion is the length and sometimes the scope of single player titles some of these titles are reaching 60 70 80 hour play times which just might be unnecessary in today's market and today's entertainment landscape we dove into a bunch of these large single player titles and looked at what was the lifetime playtime of users within these titles and what we saw over and over in many of these titles was that the average was roughly 21 to 25 hours lifetime playtime in these games so the actual completion rate of these games was quite low overall and I think this idea that these titles need to be quite long it's a bit of a relic of the

past when game time length say 10 years ago was one of the main feedback criterias any game reviewer would put first and it was a priority for users to understand how much value per dollar they were getting but today's consumer is far less concerned about hour per dollar they spend on a game this is even in the context of sort of the the $70 price point increase that you're seeing that games that have that shorter time span can still sell theana units and be profitable even with significantly shorter time frames and like what what time frame are you suggesting here for like a $70 game so for a $70 game there are some genre Nuance here but I think a 20 to 30 hour duration window is actually an optimal window especially if it's a more linear or wide linear as people say or metrov Vania style for the more open World style games I think

their core content can stay within that 20 to 30 hours and then the additional content of the open world can Acro on say the 40h hour to 45h hour mark But growing to the 60 hour 80 hour or maybe even 100 hour plus in some game examples seems quite unnecessary and actually becomes a deterrent for some players as well we saw this with Assassin's Creed Valhalla one of the biggest criticisms of alalla was the game was too big which is not a criticism actually you see very often but in the case of something like an Assassin's Creed valala if we're looking at like an average play time obviously they're not building by the nature of how people play games not everyone's going to finish the game the average player will not do the full completion is rout and as far as I understand about off's business model they're trying to aim for those kind of like under hour things so they can keep players playing that game game to be able to then go on and sell DLC MTX over

time if they go to the strategy let's say with the Texas sreed they start coming into that 20 to 30 hour range is there tradeoffs that they have to be aware of of like business imps of like say ASP for players leaving early or DLC MTX conversion given less players playing the game that would pull us down absolutely there will be DLC trade-offs on the longtail revenue performance of those titles 100% you see that even just in comparison comparing Mirage to Valhalla Mirage has a very small amount of DLC and very little Revenue coming from that aspect of the title where Valhalla drives a fairly sizable chunk of revenue from that so that is a trade off for sure average sales price I actually looked at a comparison of the post launch average sales price trend of both Val and Mirage and in the first eight months

they actually follow pretty nearly the same Trend so it's not like these smaller titles are getting discounted at a quicker and higher rate I also did the same comparison for Miles Morales and Spider-Man 2 for average sales price over time and once again their Trend was almost identical for average sales price so I don't think there's a significant trade-off other than the obvious difference in price to begin with and is that average sales price or sort of accumulative so I'm just thinking like when do players kind of pull into that sales curve if it's average that's more of a a measure of like the strategies and obviously Spider-Man and Assassin's Creed they're probably going to use SAR discount strategies accumulative won be able to say like hey more people come into the sales curve later during those deeper discounts because they might see value differently for something like a mirage so it was a combination it is an average sales price so it's a fair point on the cumulative side but even when we look at the the overall sales curve the unit sale curve of both titles they have

very similar unit sales curves um so that plays out in the same way like you're talking about very interesting okay and as we dive into something like Assassin's Creed and you look at Mirage and you look at hold maraja was a lower price title and starting from that lower price point if they go down to that 20 to 30 are they still able to go out if at 70 price point and like that because the the idea that I have in my head and obviously this is different is the like hellblade 2 example where they went down to that 50 price point and the hours that that game had I forget I think it was something Med hours that obviously drew a lot of criticism from players or something like Modern Warfare 3 were yes renowned the campaign is insanely small yes and even though they had all of the multiplayer content around it there was a significant amount of Discord from from at so at that $70 price point with the 20 to 30 hours I'm assuming there has to be some version of

like what's the differentiation what's the quality difference like are we talking about like a Uncharted level amazing golden path experience or are we talking more like the Assassin's Creed sort of like Sor to throw into Assassin's Creed on the bus but thinking more like more repeatable types of mission types the expectation with a shorter more condensed game is you get a higher level of entertainment value per hour I think in I idea that is the tradeoff that you're making in reducing the overall scope of the game you're able to more condens put the quality per hour up like for example Spider-Man 2 it was actually an 18- hour game for the core content like so it's a very short game but obviously the per hour entertainment value of that title is exactly kind of that that Golden Road that you're talking about it's through the roof and I didn't see very many people having issue with the length of that title despite them being at that higher price point so I do agree when

developers shrink these titles there is an expectation that they're getting a more condensed quality with the shorter level of hours yeah yeah I guess just to jump on that as well like even in the Spider-Man example there's all the discourse online around the amount of cost increases that they saw to even reach that 18 hours in order to go from Spider-Man's number of to Spider-Man to reaching 18 hours that quality of golden paths it take a significant amount of cost increase yeah yeah the the last I saw was 300 million development costs I believe for getting to those 18 hours which is crazy and and what that highlights as well here is obviously game length is not the only lever to pull to pull down development costs we need to be thinking of other ways to reduce development costs especially for these AAA size titles but what we're highlighting here is for many of these developers there is room to reduce the scope of your titles but then there's

also room for these more smaller compact experiences like Miles Morales like Mirage that can fit within your portfolio plan in between your larger releases and they provide you interesting opportunities to test new mechanics Test new characters like Miles Morales a lot of interesting areas for Innovation which is something I think a lot of AAA Developers are going to lose out on as they now Focus just on their biggest franchises uh and cancel quite a few other projects to go into that like there's been the IEM chter 4 to Lost Legacy I believe like the smaller DLC version then there's Spider-Man CLS Morales to Spider-Man 2 or are you seeing success in those like smaller box products versus say if Miles Morales was a DLC to Spider-Man is the better approach to go with a brand new box in between that's maybe smaller scope it's

a little tricky to say is it better um I would argue it is and for two different reasons one these smaller more compact experiences are not attached to the original game in the same way that you're really only going to be able to access people who purchased the original Spider-Man whereas with Miles Moralis there's a very good chance you're going to access quite a few players who didn't actually originally purchase Spider-Man one and you might even then convert those players into Spider-Man 2 players even though they didn't purchase the first or vice versa so it potentially has the ability to access new players along with having a slightly larger scope than a traditional DLC gives you more room to test out characters test out Innovations in gameplay that might then show up in future iterations of that franchise okay so I will Fromm software that shadow Bear tree should have in a box Pro uh baz Zaki you would have sold more

baz Zaki no I'm even thinking that the context of like elen R could they have hit a larger player base if they had presented it as a new product alongside it's a really interesting question because it essentially is like a separate game the the content length of that title how they structure the item system in that game like you very easily could have kind of ripped that game out and had it been a standalone title I think in this case the reality is Elden ring sold so well that anyone interested in that type of souls like experience probably played Elden ring already and so the benefits that I was describing earlier are probably not really applicable in that situation and Miaki made the right decision in this situation okay we'll let them know that's good that's good um in transition year so what we've been talking about like the rising cost of Premium single player games the Slate

weakening for console especially as well reading headlines about things like the rise of Indie and the rise of daa what is the current state of on Indie and daa denov is this a good time right now to launch as a indie or daa I would say there's rarely been a better time at least in 2024 to be an indie or a doublea developer now as I highlighted earlier I'm biased I am a sucker for the Indie scenes so maybe I'm a bit more than marginally optimistic on this part of the market but the initial signs at least from 20124 are super positive we've already seen titles like power world Suns of the forest and shrouded batro manner Lords pulling in incredibly strong commercial performances and really what's behind this is 2024 as have been a light year for high impact AAA releases so there's a lot of additional airspace available

for these Indian ablea developers to sneak in and get those headlines get that visibility and is it just a fraction of that or a function of that in terms of like because there's less AAA now there's more space for doublea and Indie and given that development costs are going up appetite for incubation is going down like is is it expected for outside of GTA6 that these windows will continue to stay open in 6 27 so it is a healthy time so I would say no it's not just because of that of course in 2023 we saw many very successful Indie titles coming to mind Dave the diver contentious whether that's indie or not but that was a very successful Indie title during a year of significant AAA releases but it's certainly been a big benefit to the doua and Indie space that we've seen a lack of these AAA titles and when we look to the Future one unfortunate reality of the layoffs the industry has been experiencing over the last couple years is many projects have

been cancelled and so likely we'll see KnockOn effects over the next four five years where we'll have less AAA products or a smaller slate of AAA products coming each year especially as a lot of AAA developers are really just focusing their efforts on their main franchises in the goal to drisk their Investments so I do think one 2024 is a great year for the indianas but I think this is actually going to be a continuing Trend as we look to the Future you believe the beneficiary of the lack of slate will not be the live service gam so people are transitioning from the lack of a premium game to a League of Legends or to a DOTA they're transitioning to slay the Spire too let's say for a specific example yeah yeah absolutely absolutely I'm very much looking forward to that game but we

are I've been holding off in Hades too as well but yes absolutely I so to answer your question the players are already there they're already there on those live service titles and sticking with them but they're constantly taking vacations away from those live service titles and so now the selection for those vacations is slimmer and they're far more likely to pick these doublea and ind8 titles for their vacation destination and so I don't think it's that these life service titles are just going to take more wallet share and playtime share as there are less AAA releases each year interesting in terms of the doublea space there has been some headlines of struggling doua developers so for example like Allen week 2 I believe last year they were talking about the sales coming in relatively weak for that title there's also been a number of NDS coming out recently like Jonathan Blow talking like sales armers for Indies being significantly lower than expectations what you're seeing is

counter to that that like those are just those specific games but the overall Market is actually quite healthy for Indian no from what we're seeing on our end for a more macro picture of the Indie space we are seeing healthy sales figures within the Indie segment and the ablea segment of course there's quite a lot of nuance like in the Allen wake situation that was only launched on Epic gam store which I got to believe probably had a fairly significant impact on its sales performance but overall we do believe we're still seeing a healthy market for the Indie and daa scene and it's a healthy Market we expect to continue as we look to the Future and um do you expect switch to to be a lift to that market further or a detractor I think it's a little too soon to say I think probably for some types of more cozy Indie developers more narrative driven Indie developers there certainly could be an opportunity there but that opportunity mainly already exists with the switch platform so I'm

not sure it'll represent a big opportunity for the Indian doublea folks okay great so I think we covered a lot about premium games let's transition to sort of the future of PC console free toplay live service titles to kind of set the stage here there's been a number of notable free-to-play live services that have struggled and launch so not things like finals and xifi multiverses having struggles from those launch is it really Bleak out there for new live services or you seeing success stories outside of things I'm sad to say yes it is quite Bleak for new live Services especially new free-to-play live Services uh so for example if we just take the shooter genre to focus on uh as you mentioned already we've seen recent releases of the finals X defiance and then on the horizon in the future we have splitgate 2 Concord Delta Force

Spectre divide Marvel's rival all arriving within the next two years I will be shocked if in three years more than one of those titles is holding on to over a million monthly active uter and so which bet are you g to make which title will be that one title oh you're putting me in a danger zone at him I will say the one I'm most interested in watching is Marvel Rivals given its attachment to such a strong franchise it'll be very interesting to see how that performs uh but the rest I'm a bit it's just been interesting always watching these like pre-launch hype things of like Marvel Rivals obviously I think feels like the sentiment is quite high for Marvel Rivals we launch but in his finals you remember how crazy that beta was and how how much hype there was going into that and then the shadow drop kind of the tga's 10 million downloads

but the retention wasn't there right so I'm always kind of wondering like how much can I really predict based on this these pre-launch Hypes and based on beta performance when postlaunch these players aren't sticking to these live Services yeah it's actually really a double wh me because it's not only a retention problem for these games but we're also seeing a conversion problem for a lot of these free-to-play games when we went in and compared old free-to-play titles so free-to-play titles that released prior to 2021 to newer titles those old titles had a conversion rate roughly around 6.8% newer titles are sitting at an average conversion rate of about 3.6% so we're seeing a massive drop off in how these new titles are monetizing so not only are they struggling to hold on to their players they're also struggling to convert those players did is it is like comparing business model alike to life like Cosmetics only to

Cosmetics only types of conversion drops it doesn't seem like it's necessarily just a monetization St like problem like for example if you look at say Hearthstone Hearthstone based on our data we see a conversion of around 7.8% whereas Marvel snap a recent competitor is hovering around 3.6% and that's specifically for PC platform not looking at mobile platform for those two titles and snap it has some similar elements of a monetization strategy we shouldn't be seeing such a drastic drop off in conversion between these two very similar titles interesting so both on the conversion side and on the retention side are you seeing a similar drop off in terms of retention of post 2021 versus retention of pre 2021 title absolutely yeah yeah absolutely it's it looks a little dire for free-to-play titles that have released in the last three years there are very few success cases that you can

point to yeah and within those cases I think is it execution like is it the developers are just not coming out with enough features with enough scope with enough quality or is it actually that the audience is just not sticking them to them and returning back to their old live service obviously this is complete speculation but like this is the million dollar question for this is the million dollar question and if you ask me this question a year ago I would probably say it's a live op strategy a lot of these companies that are launching these new free to play titles they're not adequately prepared for the post-launch live Ops they don't have a strong enough content Cadence release to stick these players and that's why we're seeing this retention problem but even with say like the finals I've been following the finals relatively closely I actually think Embark has done a decent job with their liveop strategy around that title in the release of new content new modes

it's kept me engaged as a Casual Gamer but yet we've still seen a massive retention problem for that title so I'm not convinced it's purely an execution mismanagement what I think is actually happening really is it is incredibly difficult to pry these core shooter MOBA MMO RPG fans away from their entrenched live service title even if you do everything correctly you still might struggle to hold on to that audience well okay that's probably more than marginally negative now okay uh that's a little disappointing I'm Canadian I feel like I should no I'm Canadian too this is like a this is not going to go well where's our friendly positive manner we're letting go country down um so which games do you believe have actually reach that sort of escape velocity and become a successful life service over the last few years so I

would I would make a distinction here when I'm talking about this there are two categories I see there's the competitive live service titles the titles that are really focused on competitive PVP game modes and then there's the more Cooperative PVE Style live service games uh within that Cooperative I'm actually more modally positive about this group of live service titles uh of course we've seen hell divers be a success and we can touch on a little bit more on that category but for the competitive live service space we really have to go all the way back to 2020 when valerant launched to see a successful free-to-play title that released or that had that exit velocity exit velocity what was the term you used escape velocity that's the one it so we have to go back four years really to find a successful example of a competitive live service title which is quite far yeah and even in the case of say like OverWatch 2 what scale have they been

able to reach yeah OverWatch 2 is a funny one I don't really think of OverWatch 2 as a newly released title to be honest um they have actually been able to despite a rocky transitionary period they have been able to sustain a reasonably solid audience post the launch of OverWatch 2 yeah okay as you go deeper here then like as we extrapolate from this inside that the Assumption here is that it's not necessarily just execution that it's getting harder and harder to stick these audiences away from their existing live services and we compare that to the trend in Asia where engagement became increasingly and increasingly more concentrated but obviously in Asia there still are new live services that blow up and are still successful so plenty of live service successes in Asia is this kind of like continual concentration inevitable or really get to the point where there is sort of like healthy adoption and shifts between lime services like we seen is I had a

colleague make the comparison to me the other day that these live service titles have now become like sports like League of Legends is like basketball and it's internal and that people are just sticking with basketball they might go and try another sport but they're always going to keep coming back to basketball I'm not convinced that's the case but there's no data at this point to suggest that the these longstanding live service titles are going to see an end fortnite still probably going to be the king for a very long time League of Legends valerant these titles League of Legends little questionable in their aging audience and their difficulty bringing in new players that's probably the biggest challenge for many of these longstanding live service titles is bringing in the younger audience so if we were going to see a shift in the future fut where we get a more healthy transition between different live

service titles I would wager it's off the back of the new generation of Gamers that are exiting Roblox and looking for different experiences okay so into that aging out category which is similar to like Minecraft to fortnite whether their their strategy at that time so as sort of like a PC console live developer you say look at the Aging of the Roblox audience how can you capture that audience is there any other tactics that you would take given the level of competition like embracing sort of like embracing lower adoption and trying to aim for sort of lower Mal higher retention games if you fall into that Co-op PVE live service style bucket what I think you need to do is embrace the lower retention reality so what that means is monetizing up front so don't go with a free to play approach make sure you're charging up front some type of soft premium $ 20 to $40 seems like the

optimal range for that soft premium and then accepting the fact that you're going to have a very Peak and trough engagement curve and having a monetization strategy based on maximizing your conversion in those Peaks because you're not going to be able to retain a very stable audience they'll probably come and go as you have major content releases and that's just something you need to Embrace and pl for your monetization strategy for the competitive PVP live service this is a tougher one if you're a major publisher if you're riots if you're blizzard it's realistically going to come down to spending a significant amount of money to try to acquire enough players to hit a scale that even if you have retention issues you're still going to land at a sustainable engagement level but even that is a massive risk and for smaller developers who are coming into that competitive PVP style service I think

you're facing a very difficult challenge but I would recommend probably trying to launch quicker expect the fact that you're going to have a low initial adoption and try to stay lean and grow organically over time with a smaller audience very interesting okay so much bleer perspective but at the same time hopefully ways to navigate to try to add a little bit of optimism in the end here what do you think could happen in terms of that would cause that pendulum swing to start swinging the other way for developers going after live service to be honest I I I go back to the the Aging reality and the maturity curve because there is an absolutely massive crowd of people playing Roblox at the moment and I have a very tough time believing that that crowd as they age up and they mature through their gaming experience is going to stay with Roblox I apologize Roblox but I think they're going to have a very difficult time aining that audience and so I think over the next 5

to 10 years we're going to see that audience decide on what their live service title is that they're going to stick with and we don't know yet if they're going to just jump to the existing live service titles in the market or if they're going to be more interested in new experiences new genre Blends things that we can't even imagine at the moment that really capture those audiences so for a lot of developers I would taking a close look at what are the play patterns arising in these ugc platforms these custom game modes because those might be very predictive of what the genres of Tomorrow are we've already seen this with mobas coming from a mod in Warcraft battle royale started as a Hunger Games mod in Minecraft so there will be evolutions and there will be develop ERS who capitalized on those Evolutions one place to potentially get

a head up on that is maybe looking at these ugc platforms to indicate what those might be okay there we go there's our optimistic end I like that that's good so kind of like going back through our key points today we talked a lot about the market and that how it's moved up our optimism slight optimism on mobile now uh largely driven by heavy header titles the Xbox ecosystem being slightly negative um given them AC crossplatform titles switch to being sort of business's usual PC in the rise of steam being a lot of beneficiaries of crossplatform plays with a lot of players coming onto the PC platform so overall PC consoles looking good especially with GTA 6 coming out next year but still with the difficulties here in terms of Premium games where premium games have been relatively stable on a revenue perspective how however the costs of it growing so talking through what are those cost mitigation strategies how do you avoid

escalating costs with stabling Revenue talking about things like playtime the rise of Indian triaa so while investment appetite for solid slate will be going down that will actually leave room for these doua and IND titles to take advantage and then lastly in terms of the future of PC console and free-to-play live Services talking through the relatively Bleak perspective around how difficult retention and conversion has been for these titles to become viable especially sort of in the competitive space with some strategies here on taking sort of a zag on the market and and not going directly competitive with PVP titles that are already sort of taken all the year that we've seen in the space any other sort of like key takeaways we should leave the audience with maybe I'll make one last Point uh and I'll end it here and this is almost bit of a plead to Publishers and the VCS who are watching this podcast given my love for Indies and daa I really encourage patience with

your Indie and daa developers in your portfolio give you a couple examples pocket pair the folks behind po World they took three games to get to PO World Arrowhead games the folks behind hell divers 2 they took four games to get to Hell divers 2 super giant games the folks behind Hades also took four games to get to Hades and there's many more examples like this with the India and the daa space so I'm concerned a lot of teams are going to get abandoned because they're not reaching those level of successes in their first title but it's really for most of these companies it's not till like the third or fourth title when they hit that level of success so for all the Publishers in the VCS listening I really encourage you to be patient with those Studios those teams that you have invested in and give them the space to grow you'll likely see the dividends of that in the future amazing so thanks a lot for taking the time i' love the level of depth we can get into and um amazing to have you over with pod happy to have you again as we talk through more of the forecast of this

change it was really cool to be here thank you Adam you did it you made it to the end of the episode as a fan of the show it would help us out if you subscribe and leave us a review on the podcast service of your choice more importantly are you a member of the deconstructor fund slack group if you have 5 years or more of games industry experience go to deconstructor of fun.com slack and apply to join join the game games industry's best professional Community filled with peers always willing to lend a hand or subscribe to our newsletter to get all the latest insights from the deconstructor of fund content creators thanks for listening