GDC Follow up 2: 10 Predictions For The Game Industry

The most stirring talk at GDC this year had to be Manveer Heir’s talk “Misogyny, Racism and Homophobia: Where Do Video Games Stand?” but that’s already very well covered by the internet in general.  Go read about it, then come back here. This article is on the future of the game industry according to GDC presenters.

It’s easy to sound smart at GDC, or in games in general. Just talk about how we got the industry to the state we are now. Through the power of hindsight you sound like a genius with just a bit of research. The really brave GDC presenters were the ones making predictions about the future.

Dean Takahashi of GamesBeat was one of the brave ones this year, making ten predictions in just an hour, including a number of questions the industry really doesn’t want to hear.

1)    Are we in a golden age?

2)    Are we in a bubble?

3)    Do valuations of game companies make sense?

4)    Who is going to win?

5)    Who is the most efficient at making games?

6)    How many people do you need to make great games?

7)    Who is going to grow?

8)    What are the risks?

9)    How do you wind down a game?

10) What is gaming’s dark side?

So first of all, are we in a golden age? At 1.23 billion gamers we certainly are. It’s the largest gaming market ever and eventually even the concept of ‘non-gamer’ will go away because non-gamers are getting older and even the term ‘gamer’ will lose meaning like the term ‘movier’. The core of this golden age is of course tablet and mobile gaming, expected to reach 60% of the total market.

Are we in a bubble? This was the question most-avoided at GDC, one presenter even going so far as to tell me, “That’s not a real question”. Dean Takahashi predicts that yes we are, but doesn’t expect it to pop in 2014 as a number of large Asian and even Eastern European companies are set to make purchases of more established gaming companies are technologies.   Their stock markets are relatively inflated now, giving them a short-term advantage to buy up companies much like French companies had when they did a spree of game company buying in 2000. My observation was that the expo floor was crowded by adstream companies that support mobile games, all offering identical services and already buying each other up, this points to a bubble.

Do the valuations of game companies make sense? The current kings of the video game industry, Apple/Google/Microsoft/Amazon/Disney/Tencent, are companies that historically have not made games and don’t understand videogaming, but now sit on what Dean Takashi called “Accidental Game Empires”. The non-game industry CEOs are running the game industry and currently doing a better job than we’ve done historically. They allow their companies to do their work with a sort of benign neglect.  Pre-IPO King was valued at 7 billion while the much more established and larger company Take2 was valued at 2.1 billion, showing that investors are much more interested in mobile games, right or wrong.

Who is going to win? The impression of the future is that content companies are going to do well in the long run. For example Netflix is a content company, Apple is not. But despite being much larger, Apple can not push around Netflix.

Who is the most efficient at making video games? Efficiency per employee is a traditional way for investors to determine a companies desirability. But this question gives very skewed results when you look at the games industry because of the huge hits that small companies can produce, and the difficulties of following up. Zynga’s efficiency has dropped quite a lot as they failed to transition products like Farmville to mobile letting Supercell succeed with Hayday. King did much the same to Bejewelled.

How many people do you need to make a great game? Again traditional methods of analyzing companies give strange results in the game industry. King had 665 employees and 1.8 billion dollars in revenue. Zynga went public with 1 billion revenue and 3000 employees making King seem much more efficient and therefore desirable to investors. But using just efficiency as a metric, the creator of Flappy Bird is the most efficient company company in the world. Even his announcement to pull the game from the app store resulted in ten million more downloads.

Game Company Efficiency

Who is going to grow? Products taking advantage of new gaming platforms are set up for growth. Messaging services like Kakoa Talk are becoming huge in Korea and similar products in China, are turning into gaming platforms and delivery services just like Facebook did. Companies looking to those markets will grow, companies rooted in the past will not.

What are the risks? This ties into the ‘are we in a bubble’ question very closely. It currently costs two dollars and seventy three cents to acquire a new user, but the average android game sells for six cents. Costs are rising too fast with many mobile companies struggling to keep up. Players are eventually going to be asking “Who’s going to pay me to play games?”. Conversely, efforts to further monetize the existing players will push more of them out. In mobile games we refer to the prime money-spending customers as ‘whales’ and we clearly have fewer whales month by month.

How do you wind down a game? Modern game companies must learn to recognize that players eventually move on from games, even if the players have heavily invested in the virtual goods of those games. Zynga was completely blindsided by the numbers of players that sunsetted their game and similar player revolts will happen as new products and new gaming platforms gain speed.

What is gaming’s dark side? This question wasn’t answered quite to my satisfaction so I’ll use my own words here. The current state of gaming is that too many games make their players worry about them even when they’re not playing them, that the true cost of the games is obfuscated with peudo currencies,that  unethical selling practices are normal and acceptable and that the game play is almost non-existent. This obviously cannot stand and users are becoming more aware and more cynical of “Free To Play” games, demanding more of the industry and reforming us whether we want it or not.

Chris Mitchell teaches Pre-Productions Techniques and Game Theory at VFS Game Design