GDC 2024: The state of the gaming industry, from layoffs to the metaverse and more
Presented by Xsolla
Live on the show floor of GDC 2024, GamesBeat lead writer Dean Takahashi took the temperature of the game industry in a conversation with Xsolla’s president David Stelzer and Chris Hewish, chief strategy officer at Xsolla.
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Their discussion focused largely on the company’s most recent State of Play report, recapping the last five years in the game industry — from where revenue is going, current player counts, ecommerce versus mcommerce to trends like gaming web stores, alternative payment methods, and social issues like women in gaming and diversity. The report also dives into the topics that are keenly important to developers, such as current investment trends, opportunities for developers to launch or grow their companies and more.
A light at the end of the tunnel
In the hangover after COVID, the mood is shifting in the industry as revenues start to stabilize again. Mobile gaming revenue continues to grow 50% year over year. The number of players has nearly doubled, while in-app purchases dominate player spend in a playing field where the Digital Markets Act (DMA) has finally kicked into gear. Developer layoffs continue to cast a pall over the creative side of the industry but the game industry is cyclical, Stelzer said. Fewer games are being made right now – but the number of deals is picking up pace.
“We’ve heard from companies around the show that they’re already starting to increase hiring,” he added. “They’re starting to increase their portfolios, retargeting what those portfolios need to look like based on what the future of games is starting to look like.”
Changing investment portfolios and new sources of revenue
Deals in the game industry aren’t about making big game companies rich nowadays – there are more VCs, and they’re putting money into indies and game startups, arguably the source of creativity in the industry. The opportunity here is that the way deals get done is reset. Mega-deals are swapped out for smaller deals that offer better returns on investment, while the price of IP drops – which means more can be bought and sold, and more games get made.
And as production picks up again, the co-dev industry will pick up as well. Services that help smaller companies scale, such as Unreal Engine and Unity on the production side, will pop up. On the post-production side, monetization strategies will change and new services and platforms that help smaller businesses grow will gain traction. For instance, the Xsolla web shop platform is expanding along with the needs of smaller companies, as is cross-platform technology.
The opportunities of diversity
Right now, 48% of the gaming audience is made up of women, but the industry is still lagging behind. Women employees make up 30% of the workforce but only 16% are in leadership roles. And women remain hesitant to play multiplayer games because of unchecked toxicity in chats. Developers recognize they need to create a more welcoming environment, which includes better moderation in games and diversity efforts in hiring, even as a very vocal minority of mostly male players protests. The fear is that “catering” to marginalized folks will somehow take away from the hardcore games they tend to play.
“The wider the reach of games, the greater the appeal, the more diverse the audiences, the more diverse the characters in games, it means that games can be more successful and generate more returns that can be reinvested into bigger and better games for everyone,” Takahashi pointed out. “We don’t get a diluted game industry out of this. We get a stronger game industry.”
Opportunities around the Digital Markets Act
The DMA, a result of the anti-trust lawsuits brought against Apple and Google around their draconian app store policies, has finally come into effect. A fairer market means more opportunities to connect directly to players, and give them more ways to pay for the content they consume. It also gives developers powerful new insights into who is playing their games.
“When they hear about direct to consumer, a lot of people may think that it’s all about a financial or commerce play,” Hewish said. “That’s part of it. But the real benefit is getting to connect directly with your player, with that consumer. You get their email addresses, a full complete picture of their data — not just what happens in the game, but what happens on the payment side, the ecommerce side, all of that. That allows developers to make better end games for their players.”
Generative AI, today’s hot topic across industries, is still many years away from being an active piece of game development, but it’s already playing an important role in content moderation. It’s also primed to enhance and speed up mundane but crucial tasks for developers like translation, localization, testing and so on.
“What we’ve seen with most productivity tools over time is they just lead to bigger amounts of content as opposed to a shrinking work force,” Hewish said. “We’re bullish about cloud because we see things moving in the right direction to address some of the issues that have held it back,” he added.
Cloud gaming services, such as Xbox Cloud with the Game Pass product, are doing well as developers start to iron out the business model. For mobile, casual gaming cloud represents a frictionless direct-to-consumer opportunity: the ability to offer an instant version of a game that spins up without a client download or the need to redirect the user to another site. It’s an opportunity to reach new customers and get them playing right away, rather than just advertising to them.
Cloud also has an important role to play in the ongoing development of the metaverse, Stelzer said.
“How do you connect all of the experiences and touch points that players are engaging with behind the scenes into one connected metaverse?” he said. “In that sense, we see cloud as another touch point.”
The metaverse still has some evolving to do, even as entertainment applications like Roblox are taking center stage. That includes figuring out the interoperability piece, as well as a way to maintain consistency across a user’s journey, but Stelzer is optimistic.
“Those things are being solved,” he said. “It’s going to take time, and may need to be adopted, but we’ll get there.”
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