Once again it's that time of year where we all start feeling reflective and look back on the year just gone.
So to that end, we thought we'd ask our Mobile Mavens - a collection of games industry experts - a few questions about the year gone by, and what lies ahead in 2024.
Here we ask:
What were the biggest games industry trends of 2023?
You can read part one of this article here.
We can certainly view the ongoing market consolidation as one of this year's most significant industry trends. Smaller teams face increasing survival challenges, with major players offering investments and mergers and acquisitions.
However, securing these investments has become tougher as companies reduce funding, leading to the shutdown of studios lacking major projects, which in turn affects market dynamics.
We also observe that the hypercasual boom is slowly fading, with more developers moving towards the hybridcasual niche.
This shift, not overly complex for studios, allows them to escape the endless cycle of prototyping and focus on developing and enhancing the performance of a single specific game. Such a game can sustain a studio for a considerable period, offering a sense of stability.
Here are the three main trends I’ve observed:
- Reducing headcount and embracing lean operations, driven by investors’ skepticism about gaming and general profitability concerns. However, many redundant activities with no clear goals or KPIs have been eliminated, leading companies to focus on efficiency for perhaps the first time in their history. As a growth and creative agency, our performance-oriented approach aligns well with this focus.
- Refocusing on product development, with many gaming publishers returning to their roots by creating new games. There’s a noticeable increase in marketability tests for both new and existing games, involving exploring potential creative directions (themes), defining unique selling propositions, and testing various art styles. For existing games, it includes developing new narratives and testing mini-games in the form of video ads before their development and implementation.
- Intense experimentation with AI, with game teams using it to quickly produce new assets and marketing teams to test different ideas and executions. AI is also making the production of ad creatives more efficient, a trend that will likely continue.
It was basically user acquisition as The New Frontier of Game Development! Playtika has temporarily suspended the development of new games, and will not launch any new titles for the foreseeable future. The change in strategy was announced alongside the publisher’s Q4 financial results and was attributed to various challenges in mobile marketing.
They saw that their new games received positive feedback from players and achieved strong retention numbers. The marketing environment and increasing CPIs for new games made it challenging to scale these games profitably because the CPI vs LTV didn't work.
Based on the current marketing environment, Playtika temporarily suspended the new game development pipeline until the ROI for new games is economically viable.
I guess some companies can launch new games in this brutal environment: read the case study about the Frozen City and Whiteout Survival. Century Games, the developer of these two games, was so clever that it implemented the idle game from Frozen City to the 4X strategy game into the onboarding of new players. You are playing an idle game and suddenly in level 7, the game zooms out and you are playing a 4X strategy game without even noticing it. So smooth!
Obviously, we have to mention the hybridcasual trend, where all the hypercasual studios are moving. We talked about this quite a lot in our podcast. For example, the latest Voodoo Block Jam 3D is doing super well. Check it out here:
For the me the biggest trends were:
- The grand return of in-person conferences (after covid-related restrictions impacted the previous three years), with Gamescom being a personal highlight.
- Hardware innovation on mobile devices geared towards gaming (the Apple iPhone 15 in particular) making triple-A gaming possible on mobile.
- The games industry innovating and evolving the gamer experience across various platforms, including Sony’s handheld PS5 to VR games.
In 2023, the games industry has seen several key developments:
- AIGC technology: Game companies are increasingly utilising AIGC (AI generated content) technology in their development processes to reduce costs and improve efficiency. This technological advancement is revolutionising how games are created and delivered.
- Esports growth: The esports sector continues its rapid growth trajectory. Notably, high-profile sports stars like Lionel Messi are now investing in esports, highlighting its expanding appeal and potential.
- Chinese games revenue: Games developed in China have seen their global revenue share continue to increase, reflecting the growing influence of Chinese game developers in the international market.
- Impact of short video apps: Platforms such as TikTok and Reelshort are increasingly encroaching on users' gaming time. This shift in user behaviour is reshaping the gaming landscape, as players' attention is diverted to these new forms of entertainment.
- Data privacy and user acquisition: Changes in data privacy regulations have made paid user acquisition (UA) more challenging and expensive. Tracking and acquiring users effectively has become a significant hurdle for developers.
These factors, combined with several others, are leading to what I believe is a major trend: an oversupply of mobile games in the market. This glut is making users more discerning and selective, consequently making it harder for developers to turn a profit.
This trend raises a crucial question for all developers: what path should we choose for the next 20 years? It's particularly relevant in China, where, aside from the major players, many small and medium-sized firms are quietly contemplating their future direction in an already crowded market.
Layoffs - massive ones across the gaming industry - have affected thousands of employees. This stands as one of the biggest layoff waves in gaming history, following the unprecedented growth of 2020 to 2021 and a surge of talent. However, we perceive this as an opportunity for successful gaming companies to acquire much-needed talent. On the other hand, those who left their corporate jobs could start new businesses, potentially leading to a new indie/double-A renaissance.
Active strategic investors - increasingly from companies, particularly of Asian origin - are entering the investment game, funding early-stage companies, or launching new internal studios. This trend offers founders alternatives and choices.
Emerging markets. There's a growing interest in emerging markets. As developed markets like the US, Israel, Western Europe, and South Korea become exceedingly expensive, investors are seeking alternatives. Simultaneously, developers in emerging regions have enhanced their skills and development pipelines, enabling their entry into the global arena.
A shift towards PC/console and cross-platform development is evident. Due to struggles in the mobile sector, many developers and investors are turning towards larger platforms and even premium (paid) games - a shift that was not observed previously.
Record-breaking releases defined 2023, with standout titles including Baldur's Gate 3, The Legend of Zelda: Tears of The Kingdom, Harry Potter: Hogwarts Legacy, Resident Evil 4 Remake, Starfield, Diablo IV, Remnant 2, Sons of the Forest, Monopoly Go, Lethal Company, Lies of P, and the continued growth of Fortnite
The rise of double-A games sees an increasing number of developers and investors exploring games with budgets under $20 million. Modern development tools allow seasoned, talented teams to deliver outstanding games and fantastic experiences without requiring exorbitant budgets. Titles like Stray, Robocop, SiFu, Kingdom Come: Deliverance, Valheim, and Hi-Fi Rush exemplify this trend.
Continuous challenges in the mobile market. The industry remains tough, yet big wins are still possible. The mobile market has matured, becoming a space dominated by either big players with substantial budgets or guerilla marketing underdogs who've discovered ways to sidestep direct competition through virality, influencer collaborations, and community engagement.
Piracy, especially for free-to-play mobile games, has become a significant problem. Pirate stores have become highly convenient, leading to games being hacked almost immediately upon release. The most troubling aspect is that, in some cases, when players search for a game on Google, the first two to three links direct them to pirate sites rather than the original game. Platforms and governments should take notice of this issue and collaborate in combating piracy by taking down pirate websites and related advertisements.
Fundraising (both developers and VC funds) amid market crisis. Despite the challenging market conditions, we witness the best games companies still raising capital on favourable terms. Additionally, an increasing number of new VC funds are being launched. It means that capital is available, but getting it requires more time and effort.
First and foremost, the rise of the metaverse and online ecosystems was a major game changer. Gaming experiences have become more immersive, with virtual worlds where players can interact in more complex and meaningful ways.
This isn't just about playing games; it's about living in them, experiencing them. Cloud gaming also made significant strides. The ability to stream games from powerful servers directly to any device has democratised gaming.
It's no longer about owning the latest console or PC; it's about having a decent internet connection. This shift has broadened the accessibility of high-end gaming experiences to a much wider audience.
AI development has been the primary trend for gaming in 2023. Recent innovation in the space has shown creative applications of AI technology supporting and accelerating the game ideation process.
As our chief technology officer, Ahmed Sharif, shared at PGC Helsinki, there has been rapid continued adoption of 5G. This is particularly evident in the MENA which is a promising sign for the overall growth in the number of local mobile gamers and the quality of experiences they can access.
The same could be said of the launch of triple-A-style gaming on mobile. In terms of game releases, it’s been a big year for established IP with many of the nominees of The Game Awards being from existing series. Gamers have loved seeing the return of their favourite characters, so strong IP has been hugely important.
