Hit Points
Independent games industry analysis and commentary by Nathan Brown (ex-Edge).
Documents
Build Back Worse
The return of Fortnite to mobile devices via Microsoft’s Xbox Cloud Gaming platform serves as the focal point for a broader critique of the ongoing conflict between Epic Games and major platform holders.
- Fortnite has returned to iOS and Android devices via Microsoft’s Xbox Cloud Gaming, providing a workaround for the game's removal from the Apple App Store and Google Play nine months prior.
- The FTC has launched an investigation into Sony’s proposed $3.6 billion acquisition of Bungie, a move that could delay the deal's completion by approximately six months.
- Embracer Group acquired Square Enix’s western studios and associated intellectual properties, including Tomb Raider and Deus Ex, for $300 million.
Embracing the Future
The acquisition of Square Enix’s Western studio network by Embracer Group represents a significant strategic realignment for both entities.
- Embracer Group acquired Square Enix’s Western studio network—including Crystal Dynamics, Eidos Montreal, and Square Enix Montreal—along with IPs like Tomb Raider and Deus Ex for $300 million.
- The acquisition adds over 1,000 development staff to Embracer Group, bringing its total headcount to more than 14,000 employees across 124 studios in over 40 countries.
- Square Enix offloaded these studios to reduce costs, viewing the Western division as a high-expenditure operation that consistently underperformed relative to expectations.
Crouch End
The primary focus of this analysis is the impact of Sony’s mandate requiring developers to provide two-hour game trials for titles priced at $34 or higher on the PlayStation Store.
- Sony is mandating that developers provide at least two hours of trial gameplay for any PlayStation Store title priced at $34 or more, to be made available within three months of launch for at least one year.
- While Sony's PlayStation Store team will handle the creation of these mandatory trials, developers have expressed concerns regarding Sony monetizing their work without sharing the resulting revenue.
- Activision Blizzard shareholders have voted to approve Microsoft’s proposed acquisition of the company, though Wall Street remains skeptical regarding the deal's ultimate success.
Our Legacy
Recent updates to mobile app store policies, specifically those implemented by Apple and Google, have created significant challenges for independent game developers.
- Apple and Google are removing older, infrequently updated apps from their stores, forcing developers to update their software within 30 days or face permanent removal.
- The technical burden of these policies is significant, as updating older games often requires upgrading development environments, operating systems, and game engines simultaneously, which can break existing projects.
- These platform policies create a bias toward live-service games with recurring revenue, effectively penalizing smaller, self-contained titles that lack the resources for constant maintenance.
Hit Points #114: Ad Astra
The April 2022 analysis examines Microsoft’s strategic pivot toward integrating in-game advertising within the Xbox ecosystem.
- Microsoft is developing an in-game advertising platform for Xbox, primarily targeting free-to-play titles to expand its service-based reach beyond traditional console hardware.
- The initiative aims to attract mobile-style free-to-play games to the Xbox ecosystem, aligning with Microsoft's goal of reaching a broader audience across all devices via Azure.
- Sega is rebooting 'Crazy Taxi' and 'Jet Set Radio' as free-to-play, cross-platform titles modeled after the 'Fortnite' live-service revenue model.
Odd Numbers
The game industry faces a complex trade-off between the financial stability offered by subscription services and the potential for commercial success through traditional sales.
- Lorne Lanning, head of Oddworld Inhabitants, stated that including 'Oddworld: Soulstorm' in PlayStation Plus was 'devastating' for sales, as the game was downloaded nearly four million times for free.
- The deal was originally signed under the assumption that low PS5 hardware availability would limit sales, but subsequent release delays meant the game launched into a much larger installed base.
- Subscription services like PlayStation Plus and Game Pass provide a stable financial floor for developers but can significantly limit a game's revenue ceiling by cannibalizing potential full-price sales.
Breaking Point
The gaming industry’s push into non-fungible tokens (NFTs) and blockchain-integrated titles is failing to gain meaningful traction, despite significant venture capital investment and corporate posturing.
- Ubisoft has ended support for Ghost Recon Breakpoint, effectively rendering its NFT-based 'Quartz' cosmetics worthless shortly after the company claimed it was seeing the 'endgame' for the platform.
- Major blockchain gaming projects are experiencing significant user declines, with Axie Infinity daily average users falling 30% in one month to approximately 107,000, and The Sandbox reporting a 29% drop to just 1,180 daily active users.
- Activision Blizzard is transitioning temporary QA staff to full-time contracts with pay increases, though the company has excluded the unionized cohort at Raven Software from this offer, citing legal obligations.
109: Fall of Babylon
The cancellation of E3 2022 serves as a focal point for analyzing the shifting landscape of the video game industry’s promotional cycle.
- The cancellation of E3 2022, following the abandonment of in-person plans, marks a potential permanent end to the event as the industry shifts toward direct-to-consumer digital showcases.
- Four U.S. senators, including Bernie Sanders and Elizabeth Warren, have petitioned the FTC to review Microsoft’s acquisition of Activision Blizzard, citing concerns over CEO Bobby Kotick’s accountability and exit package.
- Capcom is raising base salaries for its employees in Japan by 30% following record-breaking financial performance and five consecutive years of projected profit growth.
EX Plus Alpha
The March 2022 announcement of Sony’s overhauled PlayStation Plus subscription service represents a significant strategic misstep, characterized by confusing branding, high pricing, and a lack of compelling value.
- Sony’s overhauled PlayStation Plus subscription service lacks day-and-date first-party releases, signaling that the company will maintain its existing high-cost business model rather than directly competing with Microsoft’s Game Pass.
- The new service structure is criticized for confusing branding and a high price point, with the premium tier costing 20% more per month than Xbox Game Pass Ultimate.
- Funomena is closing its doors following an investigation into CEO Robin Hunicke’s leadership, resulting in the termination of contractors and staff.
Off the Chain: Notes on the NFT Onslaught at GDC 2022
The 2022 Game Developers Conference (GDC) served as a focal point for industry discourse regarding the integration of blockchain technology and non-fungible tokens (NFTs) into gaming.
- NFT-related content at GDC 2022 was minimal, accounting for fewer than 1% of the 750 total sessions, with only 16 sessions tagged as NFT-related and seven of those being paid sponsored content.
- Market data for OpenSea indicates limited mainstream adoption, with daily active user counts hovering around 60,000 and a total user base of approximately one million as of January 2022.
- Polyphony Digital is rebalancing Gran Turismo 7 and issuing in-game compensation following player backlash regarding the game's monetization and progression systems.
Just About Managing
The game industry faces a recurring crisis of leadership, particularly within independent studios where the "auteur" model often grants founders unchecked authority.
- Recent investigations into Fullbright, Mountains, and Funomena highlight a recurring industry failure where creative talent does not equate to effective management, leading to toxic workplace conditions.
- The 'auteur' model of game development, where a single founder holds near-universal power, creates significant risks for small teams and complicates corporate intervention, as seen in Annapurna's reluctance to address leadership issues at Mountains.
- Sony has acquired Jade Raymond’s studio, Haven, marking a shift in its acquisition strategy toward securing live-service capabilities rather than relying solely on existing long-term partnerships.
Come and Get Me
The gaming industry is currently experiencing a significant shift in sentiment regarding corporate independence, driven largely by the high-profile acquisition of Activision Blizzard by Microsoft.
- Ubisoft CEO Yves Guillemot has signaled openness to acquisition offers, marking a significant shift from his previous strategy of defending the company against hostile takeovers.
- PlatinumGames CEO Atsushi Inaba stated that the studio would not dismiss acquisition offers, provided that the company's creative freedom is respected.
- The ongoing industry consolidation trend has continued with Nacon’s $60 million acquisition of German developer Daedalic Entertainment.