Devolver Digital has long been a champion of subscription services, having released titles on a variety of platforms including Apple Arcade and Netflix Games. However, the company has now cited subscription services as one key reason for its underperformance in the first half of 2023.

The company drew $43.877 million in between January 1 and June 30 2023, a 17% decrease from $53.003 million in the same period of 2022. Gross profit almost halved over the same period, standing at $9.394 million compared to $18.260 million in the same period of 2022, for a total decrease of 48.6%.

Expected performance for the company has been impacted by three key factors: a fall in revenue from subscription deals, the relatively weak performance of the company's back catalogue - barring notable exceptions such as Cult of the Lamb - and the delayed release of games.

The company highlighted four titles - The Plucky Squire, Anger Foot, Stick It To The Stickman, and Pepper Grinder - all of which were due to be released this year but were delayed to 2024.

"After a period of strong growth in subscription deals in 2021 and 2022, we expect the trend of reduced revenues from subscription deals to continue into 2024," wrote the company in its latest financial report. "We expect to continue to turn down subscription deal proposals that undervalue the titles' value and revenue opportunity in 2023 and 2024."

The company has also seen a 34% year-on-year reduction in administrative costs ($18.380 million, compared to $27.875 million in H1 2022). While Devolver reported operating losses of $9.577 million, this is 0.3% below the $9.610 loss reported in H1 2022, and interest income rose a massive 3550% from $26 million in H1 2022 to $897 million in H1 2023.

Steps to success

Despite the lacklustre financial results, Devolver expects to meet its guidance for 2023.

"The first half of 2023 was a reset for Devolver, with delays to new releases as we prioritise the quality and long-term potential of major titles scheduled for the second half of 2023 and 2024," noted chair Harry Miller.

"Devolver's DNA is to commit relatively low spend on high-quality titles that stand the test of time. We look forward to returning to our normal cadence of releases in the rest of 2023 and 2024 with big titles to come such as Wizard With A Gun and The Talos Principle 2, as well as The Plucky Squire and Baby Steps.

"As a result of our busy upcoming release schedule, steps to improve our return from our back catalogue and active management of our cost base, Devolver is on track to meet its previous guidance of break-even EBITDA profitability in 2023, a return to profitable growth in 2024 and then an acceleration in 2025."

We listed Devolver Digital as one of the top 50 mobile game makers of 2023.