Lessons Learned - Visions of the Future

In general game companies, even the very indie-minded ones, see their future as bright. The level of professionalism in Finnish game industry has increased, and most developers understand that a viable business plan and cashflow are a necessity, even though creativity is essential to game development. Combining an indie spirit with business thinking is not easy, but it seems that to a certain extent, Finnish studios have been able to do so. However, the future brings both new challenges and new opportunities. Based on the company interviews and together with its European umbrella organisation EGDF, Neogames has identified the following key trends.  

Technological Trends

Mainframe Industries - Concept Art

- Towards post-mobile: Mobile became the biggest platform for games during the 2010s and it is likely to remain the leading platform at least for the first half of 2020s. In other market segments, old market leaders like Steam (PC) and Nintendo eShop (consoles) and underdogs like GoG (PC) and Epic Game Store (PC) are still doing well.

- Cross-platform games and cross-platform stores are here: Over the past few years, the processing power of smartphones has reached the level of some laptops and consoles. As a result, game genres that were once exclusive to PC or console are now exclusive on certain (cross-platform) stores like Microsoft Store (Xbox console + PC) or Google Play (mobile + PC). Apple is rumoured to start merging its iPad AppStore and Mac AppStore during 2021. Apple’s subscription service, Arcade, is already available on mobile and Mac.

- Cloud gaming services are here: Alongside the traditional storefronts, game distribution platforms are developing their cloud gaming services like PS Now (PlayStation console) and Xbox Gamepass Ultimate (Xbox console + PC) and Google Stadia (mobile + PC). It will be increasingly difficult for alternative cloud service providers to compete against them. A bigger transition is coming with the next generation of cloud-based consoles that allow players to play their console and PC games on their mobile devices. Mobile-first cloud gaming is not likely to challenge other cloud gaming platforms before 5G and 5G based mobile cloud gaming platforms like the Finnish Hatch go mainstream.

- Faster and better infrastructure and more affordable data: The growth of mobile and cloud games, in particular, relies on constantly improving global telecommunication network infrastructure (e.g., the availability of 5G) and increased availability of cheap access to unlimited data. The wide-scale collapse of digital infrastructure due to, for example, natural disasters like tech destroying solar flares, terrorist attacks on electricity networks or hostile hackers attacking telecommunication infrastructures would have a devastating impact on the game industry.

- Increasingly unreliable manufacturing chains and games hardware speculators: Supply chain roadblocks, COVID-19-related manufacturing and distribution delays, second-hand market speculators and suddenly increased demand lead to a slower market uptake of the latest console generation and cutting edge PC graphic grads.

Business Model Trends  

Bugbyte - Space Haven

- Premium - pay per download: Sustainable success in premium games markets is increasingly based on games that stand out with their high quality and strong brands and create long term value for the players.

- Games as a service – the rise of freemium: The F2P gaming business is still growing through continuously updating and improving key live games as well as by developing and releasing new games. Companies strive to release games that become long-lasting digital hobbies through continuously introducing new features, new business models, and in-game events that increase player engagement and monetization. At the same time, the players’ expectations for leading F2P games are constantly increasing and some of them are becoming closer to AAA productions.

- Subscription renaissance: New subscription-based services like Apple Arcade and Google Stadia are becoming increasingly interesting publishing channels for premium game developers. However, the limited access to player data might become a serious roadblock for game developers operating via those platforms. At the same time, a number of game developers are experimenting with new in-game subscription models like season passes.

- Short & fast development (and maintaining) cycles support the growing trend of hyper casual.

- From ads to smart playable ads: Playable ads specifically have become an increasingly popular ad format, as they provide players the chance to experience a game before downloading.

- From onsite eSports to online: Mass gathering based eSports business models were seriously damaged by COVID-19 and the global pandemic is likely to significantly slow down the development of physical eSport infrastructure (like eSports arenas). However, as the pandemic closed down traditional sports, it turbocharged the growth of eSports popularity and has attracted traditional sports actors into eSports markets.  

- Rise of followers and influencers as marketing channels: The COVID-19 pandemic has only accelerated growth in the numbers of new streamers, other content creators and their followers. This has placed new pressures on game developers to create content that maximises the marketing potential of streaming.  

- Blockchain-based business models: Due to significant regulatory uncertainty, the uptake of blockchain-based content as in-game assets has been slower than expected. However, blockchain-based technologies will be an interesting way to address a number of other industry challenges like copyright management.

- Platform featuring in i.e., Apple Store, is estimated to have less impact than it used to have.

- Cooperation projects between companies are now more common than some years ago. Cooperation projects lower the risk and investment of an individual studio, but also offer a possibility to learn from the development partner over the course of the project.

Game Design Trends

Futureplay - Merge Gardens

- More responsible game design and working environment: European studios have increasingly focused on safe and responsible gaming for players of every age and background. Other main focus areas include, but are not limited to, the sustainability of licensed products, employee well-being, equality and diversity, responsible operating methods and the environment. In particular, game design is increasing based on risk-avoidance, trust, transparency, ethics, fairness, interpretability, accountability, safety and regulatory compliance from diversity, data protection, consumer protection, protection of minors and AI self-regulation perspectives. Through their games, European game development studios play a role in the lives of hundreds of millions of people globally every day.

- Green game design: The most significant environmental impacts of the gaming industry are related to energy consumption, both in the game development stage and while gaming, and the manufacturing of gaming hardware. The reduction and compensation of CO2 emissions caused by gaming is one of the key emerging industry transformations in the early 2020s.

- AI-driven game design and content: Shared tools and best practices across games are essential to carry out efficient live operations. Game developer studios are investigating opportunities for the utilization of machine learning and artificial intelligence. AI tools are increasingly embedded in games and game development tools. Step by step, AI will take over other parts of game design like coding. Hyper casual will be among the first genres to face a wave of AI-generated games. At the same time, thanks to AI and big data, games will become even more personally tailored.  

- Data-driven game design: Especially freemium game developers are increasingly investing in both tools for data analytics and data-analyst talent. Player data has become the key route to player-centric improvements in gameplay, identifying bugs, building less toxic online communities and improving monetisation and marketing of games.

- Early access continues to gain popularity: Early access is becoming an increasingly important way for game developers to co-develop their game together with their fan community.

- From multiplayer to metaverse – the rise of shared digital events and other social features: One of the most significant drivers of success in the biggest games in recent years has been the efforts made by game developers to make it easy for old and new friends to play games together. This has turned games into key online gathering points for people to socialise and experience live events in, which also means that players are increasingly expecting more (social) content from their games. At the same time, improving access to the internet makes global player communities increasingly diverse and multinational.

- Emerging AR games: Although Pokémon GO brought a number of handheld AR games to markets after 2016, none of them has been able to repeat its success. Head-mounted AR-games currently mainly exist as early B2B products. With head-mounted AR displays combined with mobile 3D scanners, they are likely to slowly enter B2C markets during the second half of the decade.

- Emerging VR ecosystem:
Virtual reality B2C markets are slowly growing, thanks to more and more affordable consumer devices (e.g., PlayStation VR and Oculus Rift). The growth of the VR games market is, however, hindered by the fact that virtual reality arcades were particularly badly hit by the COVID-19 pandemic. At the moment, many VR game developers are increasi

Market Trends

Dazzle Rocks - Concept Art

- Growth continues: There are 2,8 billion players on Earth. The global gaming market was valued at around US $189 billion in 2021 and is expected to reach US $300 billion by 2026.

- Market saturation continues: The threshold for becoming an amateur game developer will continue to fall, but carrying out profitable games-related business operations will be increasingly challenging as competition gets tougher.

- Consolidation continues: 15 years ago, the competition was about technology, 10 years ago it was about design. Now it is about money. The one who has a large enough budget to do meaningful user acquisition, has the impact. At the same time, Apple IDFA changes are underlining the importance of direct access to a large enough player data pool. All this is likely to lead towards market consolidation.

- The 2020s will be the first Chinese decade in the games industry: During the 2010s China grew to become one of the biggest game markets on the planet. At the same time, the leading Chinese game industry companies have made significant investments in the European games industry. Due to the huge home market, huge investment in R&D by leading tech giants (e.g., Tencent) and rapid uptake of 5G networks, it is likely to widen its dominance from markets and investment to game industry technology (e.g., VR) and digital distribution platforms.  

- Global regulatory fragmentation: Especially companies relying on free-to-play monetization models (like in-game micro-transactions and data-based advertisement) continue to experience regulatory challenges, as new countries are continuously introducing new regulations and guidelines on data and consumer protection and protection of minors in a digital environment. At the moment there is a significant risk of the global games market being fragmented to different regional markets with different regulatory limitations for game development.

- Digital trade wars and protectionism: Digital trade wars and protectionism are making global games markets increasingly unpredictable for game developers.  Following regulatory reform in China, it has become increasingly difficult for Western developers and publishers to release their games in the most important game market globally. Meanwhile, India for example has banned a number of Chinese apps and games as an outcome of the border dispute between the countries escalating to a digital trade war.

- Mobile platform wars: Apple’s decision to block access to marketing identifiers for third party services without explicit approval from the players is going to widen the gap between the Android and iOS mobile ecosystems. In practice, advertisement-based business models (including user acquisition) are going to become much more difficult on iOS. On the positive side, both Apple and Google are cutting down their fees from 30 % to 15 % for game developers with less than US $1M annual revenue. Meanwhile Epic Games has launched an antitrust case against both Apple and Google in order to launch its own mobile store on iOS and Android and a number of other service providers are trying to bypass Apple’s restrictions through browser-based cloud games. On the regulatory side, governments around the world are looking at both Apple’s and Google’s dominant position and are currently examining different ways forward on introducing new rules that would make market access for smaller service providers easier.    

- Ever increasing requirements for investment: On PC and console, the publisher requirements for co-operation are constantly increasing. Now a playable demo or soft launch data is often required for signing a deal. This favours bigger studios with larger resources and experienced developers with a strong track record.

- Increased importance of strong IP: Big global entertainment brands (e.g., Marvel) are increasingly becoming also leading game brands. IP recognition provides a strong organic pathway to user acquisition, which will become even more important in a post-IDFA world.  

- Foundations of the new economy are built in the game industry: In addition to constantly creating new professions in game development, the game industry is increasingly mapping out the possibilities of creating jobs through playing games as well (player community content creators, game trainers etc.). As the co-operation between game developer studios and other content creators is constantly increasing, some streamers are becoming professional third-party content creators for game developer studios and are paid to play and stream a game. Professional eSports players and streamers are just the beginning.