The current state of the global games market is a “clusterf**k”, says Kando Factory CEO Bobby Wertheim.
During the Game Investment Landscape panel at the Global Top Round event, panelists were asked by moderator, The Powell Group Consulting CEO Jay Powell, to describe the state of the industry and the issues facing developers right now.
Kando Factory CEO Bobby Wertheim said that the sector faced a dip in 2022 after experiencing lockdown-induced revenue highs, and while he feels things have calmed somewhat in 2023, “a lot of people are suffering from that dip”.
“They overinvested, they overreached,” he said. “There’s a lot of people making a lot of money, but still they are having to manage their costs. We’re seeing an unprecedented level of layoffs. It’s really hurtful to see.”
Erebor Capital managing partner Greg Banas added that the challenges facing the industry meant that, with each passing event, tickets from publishers were “getting smaller and smaller”. Meanwhile, developers that are able to launch games are not seeing them perform as expected.
Post-lockdown reality check
Global Top Round chief strategy officer Pontus Mähler noted that while the landscape for indie funding and VC Deals looks poor, revenue in the industry is up this year. Market intelligence firm Newzoo claims global games revenue will reach $184 billion by the end of 2023, a rise of 0.6% year-over-year, following a 5.1% Y/Y decline in 2022.
Echoing Wertheim and the rest of the panel’s sentiments, Mähler said “the problem is we grew too quickly during covid”.
“Salaries got too high, deals were bloated in proportion, and too many games were signed and the publishers couldn't support them,” he said.
“So when new management came in they canned all the ones they couldn't launch very soon.
“I know that we all like to trash talk publishers and investors who cancel the deals, but I'd rather have a cancelled game than not getting support at all because there's no staff to support it.
“There are a lot of things going on behind the scenes that aren't necessarily talked about."
Powell questioned whether the industry might see a rubber-band effect during 2024, where publishers, short on new games, start signing more titles again.
Mähler said he believes renewed publisher activity will happen a lot sooner than that.
“All the publicly listed companies are going to be forced to sign games after the fiscal year is over, which would be the end of March and early April for most of them,” said Mähler.
“So that's when all the public companies will go on a signing spree. As for the private ones, I honestly think most of them are full. They can't sign more titles unless they hire more people, and they don't want to take that risk.
“And like I said, because salaries are going up so much for people who are still employed, there isn't really any cash left to hire. So I don't necessarily see a big uptick in private [companies] until maybe the end of next year.
“As for VCs, I know personally seven or eight funds raising right now, it's just a matter of when can they close all their LPs (limited partners).”
Full disclosure: My flights and accommodation for Global Top Round were paid for. Our coverage remains neutral.