Barriers to market entry tumble down
We’ve been witnessing the rise of mid-level independent developers. In 2015 video game development became more affordable thanks to technological advancements, crowfunding and marketing automation, resulting in a surge of new titles coming to market. The genesis of easy-to-use and comparatively cheap engines (i.e., Unity, Unreal Engine and etc.) and other dev tools let smaller budget productions through the industry door. The availability of technology and the growing number of ad networks allowed marketers to streamline work between platforms and reach the right audiences across devices. Services like Steam Xbox Preview, Steam Early Access and etc. and initiatives like Kickstarter, Indiegogo and Fig continued to gain momentum. This enabled developers to reach potential customers without a publisher and build a dedicated player base ahead of product’s launch.
Statistics show that half of the games which have sold 1,000,000+ units on Steam in 2015 have been Early Access titles. It demonstrates there is demand for the types of games that big publishers aren’t interested in producing and points to a broadening of the video game industry. This trend is most vivid in mobile and PC segments. The barriers to entry in the former could be considered close to non-existent. Consoles have already embraced free-to-play, but remain less open a platform than Steam, iOS and Android. They are moving in the same direction, just a little slower than PC and mobile.
It’s not all unicorns and rainbows though, more like survival of the fittest in an increasingly saturated marketplace. Everyone’s fighting for control over players’ minds and hearts. And with production costs decreasing, creativity, quality and depth become the key factor.
Mainstream games are becoming services and independent developers are stepping into Double A
With the competition growing intense, data-driven planning and decision-making become instrumental in driving sales growth. Industry giants focus on interpreting player behavior and tweaking the experience accordingly. For mobile giants like Glu Mobile, Kabam and SuperCell development is becoming data-driven process that leans toward regular updates rather than launching new products. Popular games are being turned into GaaS (“game as a service”) with content built off customer wishes, difficulty levels tailored to audience and a network of game-related tools to support them.
It’s really hard to get noticed in an oversaturated marketplace, and small studios that aim at sustainable growth rather than short-term gain must re-think their strategy. One way to get noticed is expanding their teams and re-focusing from niche titles to double-A products. These are smaller in scale and with less technical prowess than their triple-A brethren, yet much more engaging. While deeper and more polished than casual games, double-A products have greater chances of resonating with a wider audience and getting players emotionally invested. Getting platforms on side is instrumental, because they have access to an audience bigger than that any small team could ever attract. A few small teams became large by making this switch, and other smaller teams are expected to step into mid-scale production in the coming year.
Mobile is where traditional publishers struggle and free-to-play dominates
The mobile market has seen yet another booming year with 23% year-on-year growth rate (~$30 billion generated by mobile games worldwide in 2015, according to Newzoo). This market is largely dominated by Japanese, American and Chinese companies and is predominantly free-to-play. If you look back at the top grossing charts of 2015 you’ll see that those are dominated by products that 1. have elaborate free-to-play monetization to them, 2. are constantly updated with new features and content, 3. operate both as games and social spaces. As the market has grown and matured, fewer and fewer amateur success stories happen.
Something that has become prevalent in the mobile market is that it's controlled by an entirely different line-up of companies than PC and console segments. The market is dominated by businesses that few people have ever heard of. Videogames oldies who used to have a stake in the market have lost their positions falling out of top grossing charts in 2015 while other traditional publishers failed to enter the market altogether.
Players transform into creators and producers
The relationship between gamers and developers/publishers has shifted. The level of player involvement in creation, streaming and sharing of gaming content has increased. Companies put emphasis on creating entertainment value not just for gamers but together with gamers.
Streaming services are on the rise and have become a force for publishers to use, not ignore. Companies have begun to truly evolve and embrace user-generated content. Streamers freely market your game and tell people your game is great. The question is how to get them to start creating value for your company. Devs puts extra effort on creating fun co-op modes and quirky visuals to encourage VOD production. The next step would be that products and video production tools are incorporated into the games themselves.
The other way players can help devs is through user-generated content (UGC). Your audience consumes new content fast and companies often don't have in-house capacity to fill the need for new features. UGC, when done right, solves this problem and gives players an opportunity to not only engage in a world but actively create features within that world, grab five-minutes of fame and earn money through ad video. It empowers the player, enriches a community, and makes a game come to life with the passion of its fans.
Just as with any other massively popular trend, after LPs became a trend, it was inevitable that people would start to make bad ones followed by community backlash. So, if you seriously consider going down the VOD path, watch a few tutorials, then get down to recording a video, unless you dream of becoming a target for trolls.
A big year for VR investments
VR technology is finally reaching a consumer-ready level. 2015 saw a few company’s showcase and release their first-generation VR sets (Samsung Gear VR, Cardboard, etc.). Excitement is expected to grow with Oculus Rift, OSVR and HTC Vive set to ship in 2016. Big publishers and hardware companies stepped up their research into this niche, which attracted even more angel investors and venture capitalists to an area that has already received nearly $4 bln since 2010.
Experiences and devices are evolving and getting bigger. The general vibe around this technology is only getting bigger. Developers with triple-A portfolios are experimenting with the tech, ironing out some of the technical problems. They are also forming the design conventions to create intuitive controllers, tackle the nausea issue and overcome other health and safety implications.
However, it will be a while before this immersive technology becomes mainstream (if it does) and the way to make money from it is clear. It may as well remain a niche.
What's the bottom line?
The marketplace is crowded and chances of building a hit game and holding it on the top positions for months with an inexperienced team are close to zero. Instead of shooting for the stars, developers should invest in their teams and focus on setting up efficient development and publishing processes in house, using the industry’s most successful businesses as an example.