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The game industry is in a huge period of flux, but 2019 only set the stage for enormous paradigm shifts that the coming year will solidify. Companies are shattering long-held “rules” as cross-platform play becomes the norm rather than a dream. How we interact with content is evolving, even as the quantity of media we outright own erodes due to subscription services and the growth of service-based games. And the word “exclusive” carries new meaning as platform-holders look to increase their presence far beyond the living room.
The end of the year is a time of reflection. As we try to make sense of how the industry will take form in the coming year, it’s important to look back at how trends have developed and where they’re likely to go as we turn the calendar page.
The walls are tumbling down
Origin, Uplay, Battle.net, Bethesda Launcher, Rockstar Games Launcher, GoG, Steam, Epic Games Store … there are a lot of places to purchase PC software (and these are only a handful run by companies that also make games). Over the past nine years, since EA launched its Origin service, we’ve seen a number of large publishers build out their own clients.
Some, like EA, have chosen to horde content, making it unavailable on any other PC storefront (cutting out Steam and its 30% fee). Others, like Ubisoft, which requires a Uplay login regardless of where you purchase, are in it primarily for the data collection. After nearly a decade of siloing, the content diaspora is starting to shift back toward consolidation.
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In a landmark move, EA has decided to once again sell its PC games on Steam for the first time since Battlefield 3 debuted in 2011. With the publisher also adding Star Wars: Jedi Fallen Order to Epic Games Store, the era of Origin exclusivity seems to be coming to an end … but why?
EA did the math. Sure, it was pocketing the 30% platform fee it wasn’t paying to Steam, but it was also cutting itself off from an enormous audience of 90 million users (as of January). The calculus is straightforward. EA determined that it wasn’t saving as much money in platform fees as it was losing by not making itself accessible to the market leader’s audience.
When you consider Star Wars: Jedi Fallen Order, the numbers might not seem impressive. However, EA has also confirmed it’s bringing The Sims and FIFA to other storefronts. In fiscal year 2019, the publisher booked $739 million in full game download revenue. In that same year, the company reported live-service revenue, including The Sims DLC packs and Ultimate Team card pack purchases, in the amount of $2.4 billion.
No longer content to leave money on the table, EA is going to be tapping into a much larger audience. With Ultimate Team and The Sims usership way up in the most recently reported quarter, expect big growth as FIFA, Madden, and others come back to Steam and join Epic Games Store.
Looking ahead …
EA’s decision is part of a larger trend happening across the industry. Exclusives aren’t exclusive anymore.
Microsoft has been building out an ecosystem with its Xbox/Windows 10 “Play Anywhere” approach. Sony has announced intent to bring some of its games, including Death Stranding, to PC, while MLB The Show is going multiplatform. And Nintendo has gotten cozy with the Xbox team, playing host to Super Lucky’s Tale and Ori and the Blind Forest. Acquiring a customer used to require selling a piece of hardware or getting someone to install your launcher. Now, content on other platforms (or even in the cloud) is just as viable a method to get someone to play in your sandbox and stay for a while.
Cross-platform play started tearing down walls that have existed since the beginning of the medium and were solidified when online multiplayer stormed into the living room with Xbox Live and PlayStation’s online offerings. While the barriers between platform holders (especially in the living room) won’t disappear, expect to see more content make its way across formerly hostile waters. Don’t look at this as a cease fire, though. Console warriors will still have their battlegrounds. They’ll just look a bit different.
Inexpensive subscriptions: The backdoor to a (mostly) digital console generation
One of the best ways to understand where the home console market is going is to look at how platform holders innovate and adapt at the end of a generation. Microsoft has been leading the charge with its Game Pass subscription program since it was announced and launched in 2017. However, the company’s big play came this year as it moved to expand to PC, while also offering a package that bundles Game Pass on both platforms with Xbox Live.
Additionally, Microsoft is tying its fledgling cloud streaming service, xCloud, to Game Pass subscriptions. At the same time, Sony remembered it had its own subscription service, bringing PlayStation Now’s pricing into line with competitors.
With aggressive acquisition efforts in full swing, more players are giving Game Pass and other services a try. And the results are bearing out the experiment. In an interview with the Sydney Morning Herald, Microsoft stated that Game Pass subscribers are playing 20% longer and trying 40% more games. EA echoed similar data, telling GameDaily this year that its EA Access subscribers play three times as many games as non-subscribers.
All of this sets up subscriptions as a key factor in next-generation plans. And while physical media isn’t going anywhere for the Xbox Series X and PlayStation 5 (much to ailing retailer GameStop’s relief), Microsoft is already signaling that digital-only hardware may play a role. The Xbox One S All-Digital Edition was clearly a pilot program for a possible iteration of the Series X that will ship without a disc drive (and lean heavily on Game Pass and xCloud).
The market wasn’t ready for Microsoft’s vision of a digitally dominated, always-online console in 2013. In the six years since, platform holders have used regular, deep discounts on digital storefronts and buffet-style subscription programs to hook players on digital purchasing. We’re not quite where Microsoft wanted us in 2013, but we’re much closer than we were.
Looking ahead …
Next year’s new consoles aren’t pushing boundaries. Neither Sony nor Microsoft wants to repeat Xbox One’s miserable E3 2013. Instead, the new hardware is focused on quality of life improvements. Solid-state drives, powerful graphics processors, and ray-tracing aren’t earth shattering changes. They’re safe, iterative evolutions that solidify the concept that home consoles are affordable living room gaming PCs.
The real magic is in how platform holders are subverting our staunch beliefs about ownership. Subscriptions, cloud gaming, and the already established live-service titles chip away at the idea that we own the media we pay for. The deal is almost too good to be true for consumers, whether they play on PC, console, or even Apple Arcade’s mobile offerings. Whether the same is true for developers is another story.
Subscriptions and cloud services consolidate power with the platform holders. Right now, Microsoft, EA, and others seem to be offering deals that are mutually beneficial. However, there are no guarantees that after the new paradigm is solidified among consumers that things will remain benevolent.
Expect subscription services to grow throughout 2020 with sweetened pricing. However, once these reach critical mass and the focus shifts from acquisition to retention, we’ll see if the value continues to be quite so enticing.
VR makes headway, but not enough to go mainstream
Facebook-owned Oculus is having trouble keeping up with demand for its standalone wireless Quest headset. That’s good news for a segment that has struggled to take root with consumer users since the Rift’s 2016 launch. Still, the Quest has only moved approximately 400,000 headsets since its release earlier this year, with 180,000 coming in third quarter (double Rift and Vive’s sales in the same period according to Superdata).
It’s most certainly a breakthrough device in the segment, untethering users from PCs and ensuring that there are no tripping hazards during a vigorous Beat Saber session. And now with Oculus Link giving Quest owners access to the full Rift library and hand tracking in early access, the dream of fully immersive, cable-free VR is one step closer to reality.
Still, VR hardware isn’t catching on in huge ways (at least at the consumer level). Microsoft, which originally promised a VR solution for Xbox One X, has completely backed away from the technology in conjunction with its home consoles. Sony has so far only said that the current PlayStation VR hardware will be compatible with PlayStation 5, not yet sharing whether the device will get a refresh for the new console cycle.
Those who do own headsets are purchasing games in big numbers, with software set to hit $1 billion for the first time. That’s why we’re seeing big names, including Disney, invest in VR projects for properties like Frozen and Star Wars.
Enterprise VR, on the other hand, saw big gains in 2019 as companies use the technology for training and design. That’s enough to sustain the medium, but consumer use continues to be a crapshoot, as companies like Oculus, HTC, and Valve struggle to figure out how to move headsets beyond the enthusiast market.
Looking ahead …
All eyes are on Valve and Half-Life: Alyx, the company’s flagship VR title (and the first new entry in the franchise since Half-Life 2: Episode Two’s release 12 years ago). Thankfully for those who don’t have $1,000 to spend on an Index headset, Valve opted not to tie the software exclusively to its own headset. This makes Half-Life: Alyx an important release, as some have claimed that VR has been missing a “killer app.”
We’re also looking at how Sony handles VR on the PlayStation 5. With all of the innovations in the field, it’s not enough to simply enable last generation’s headset. If the company is truly invested, we’ll see a new model with inside-out tracking and other innovations (though probably not until 2021).
VR isn’t the only path forward. Apple is rumored to have more than 1,000 people working on augmented reality glasses. Magic Leap recently launched its mixed reality headset for a staggering $2,295, as the company moves to embrace enterprise over the consumer market. The best hope for XR reaching critical mass in the new year is Oculus Quest. It’s self-contained and affordable, with a healthy library of diverse experiences. Until another player in the market mimics that blend, XR is likely to continue being enthusiast-only.
Fortnite becomes more than a game
Epic has been reshaping what it means to run a live-service game since it teamed up with Marvel for a time-limited Fortnite Infinity War event in 2018. This year, the company took its worldwide phenomenon and transcended what it means to operate a game.
Fortnite is now a destination for special cross-media events and promotions. In February, performing artist Marshmello held an exclusive in-game concert attended by a reported 10 million people. This month, Epic partnered with Disney and Lucasfilm to host a Geoff Keighley interview with The Rise of Skywalker director J.J. Abrams along with a sneak peek at a scene from the film.
While Fortnite’s viewership might be down, these events are going to continue attracting big attention and attendance. If only Epic could iron out its launcher problems so everyone could get in.
Looking ahead …
Fortnite isn’t going anywhere. While its usership numbers may come down to earth, Epic’s ability to be nimble while taking on huge partnerships will keep it in the conversation for years to come.
And if history (especially in the Battle Royale segment) holds true, other developers and publishers will try to emulate this model. We won’t be surprised if EA leverages its own relationships to turn Apex Legends into a cross-promotion wonderland.
Games are at their most relevant when they touch other aspects of our lives. And you can be sure that EA, PUBG Corporation, and other developers and publishers behind live-service games are sitting up and taking notice of how Epic is changing the ways players interact with Fortnite.
Government pressure signals decline of loot boxes
The game industry has always insisted on regulating itself. It’s part of why the ESA exists, after all. It’s why we have regulatory committees, like the ESRB and PEGI, that put age ratings on games that have physical editions for sale at retail. But when it comes to taking a hard look at how monetization is implemented in games, there’s been a fair bit of throwing hands in the air and shrugging.
As the war for attention heats up, publishers have had to find new ways of encouraging long-term player engagement, in addition to nurturing steady user acquisition, all while funding consistent content updates for games in its publishing portfolio. It’s a lot to balance, especially for smaller studios. In the early days of monetizing free-to-play games, studios were sloppy and set standards that were the equivalent of throwing spaghetti at the wall to see what sticks.
Well, there are things that stuck. Scarcity and fear-based marketing are extremely effective. It’s always been that way. When those darker marketing tactics became semi-indelible splotches on how companies capitalize on player engagement, the industry began to run afoul of players and governments alike.
Governments around the world have determined that the game industry is terrible at policing its own monetization schemes, much to the collective chagrin of the worst offenders of the lot. There’s in-game currency that encourage long-term engagement through cosmetics, which is fairly benign. And then there are “pay to win” microtransactions that split the player-base into the “haves” and the “have nots.”
The Federal Trade Commission got involved in the conversation this year, holding a Loot Box Workshop in Washington, D.C. in August. During the session, which was cut into two parts, a number of industry experts spoke about loot boxes, gambling addiction, developer and publisher responsibility, and the importance of regulating (or not).
Common Sense Media’s Jeff Haynes, who operates as senior editor of video games and websites, was succinct in his declaration that while loot boxes have permeated almost every genre over the past several years, especially, “not all of them handled [implementation] very well.”
“Unfortunately, poorly implemented boxes raised a lot of user complaints and issues, because some players felt that they had already paid for a game and were getting gimmicky play or were being squeezed for additional content that they had already paid for,” Haynes continued.
Haynes went on to explain that there are different types of loot box mechanics, including cosmetic add-ons and those that are “pay to win.”
“One of the biggest problems with the ‘pay to loot’ mechanics [is that] … these are kind of slot machine mechanics where paying extra possibly gives players more chances to win higher rewards,” Haynes continued. “But the developers control both the odds and the payout for these items. That tempts players into spending more money for additional chances to win rarer items, which could easily trigger people that have compulsive gambling urges.”
In response to the growing unrest about loot boxes and microtransactions in games, especially among parents, the ESA committed to disclosing “in-game purchases” through placing a label on packaging for “video games that offer the ability to purchase additional in-game content.” Unfortunately, a sticker on a box hasn’t done much to educate players or curb microtransaction spending habits for loot boxes or in-app purchases. And this is the crux of why the FTC had to get involved in the first place: the ESA claims that self-regulation should be enough, but vocal opponents aren’t going to let up that easily.
“… several video game industry leaders are announcing new initiatives to help consumers make informed choices about their purchases, including loot boxes,” the ESA announced on its website, following the first session of the workshop. “The major console makers — Sony Interactive Entertainment, operator of the PlayStation platform, Microsoft, operator of Xbox and Windows, and Nintendo, operator of the Nintendo Switch gaming platform — are committing to new platform policies that will require paid loot boxes in games developed for their platforms to disclose information on the relative rarity or probability of obtaining randomized virtual items. These required disclosures will also apply to game updates, if the update adds new loot box features. The precise timing of this disclosure requirement is still being worked out, but the console makers are targeting 2020 for the implementation of the policy.
“In addition, several of ESA’s publisher members already disclose the relative rarity or probability of obtaining in-game virtual items from purchased loot boxes, and other major publishers have agreed to do so no later than the end of 2020. Together, these publishers include Activision Blizzard, Bandai Namco Entertainment, Bethesda, Bungie, Electronic Arts, Microsoft, Nintendo, Sony Interactive Entertainment, Take-Two Interactive, Ubisoft, Warner Bros. Interactive Entertainment, and Wizards of the Coast. Many other ESA members are considering a disclosure. The disclosure will apply to all new games and updates to games that add such in-game purchases and will be presented in a manner that is understandable and easily accessed.”
The ESA’s chief counsel of tech policy, Michael Warnecke, further stressed that loot boxes aren’t all that dissimilar from the decades-old pastime of collecting and opening up packages of baseball cards. And as Belgium, Australia, and many other countries have taken a stance to the contrary, the science and psychology of loot boxes continues to refute that seemingly benign analogy.
Given the ESA’s propensity to obfuscate the truth about something as simple and vital as data privacy and security, the lack of trust in the lobbying group is staggering. There’s almost no reason to believe that the ESA is looking out for anyone other than the publishers that pay for an annual membership to keep the organization running.
Looking ahead …
The future of monetization in gaming isn’t going to be about “surprise mechanics,” gacha, or randomized rewards. Instead, we’ll continue to see recurring subscriptions, like battle passes, which enable players to receive that month’s rewards (usually in the form of exclusive cosmetics). The battle pass rewards are always laid out in full so that the player knows exactly what they’ll be receiving if they spend that $10.
No guesses. No disclosure of odds required. No hoping for that legendary drop. Instead, it’s a refreshing “what you see is what you get” approach that encourages the long-term player engagement and daily/monthly recurring play that publishers are hungry for.
Ethical monetization is also prevalent in mobile game subscription services, specifically Apple Arcade and Google Play Pass. Without the spectre of in-app purchases or advertisements, the games included in these services will receive some form of compensation that is still unknown to anyone other than Google, Apple, and the developers that have been invited to participate in these programs. For Apple’s part, they’ve invested over $500 million in Arcade to help fund the projects that will be a part of the program. Google, on the other hand, hasn’t announced any additional funding for Play Pass’ developers.
Unfortunately, some companies still rely on randomized rewards in their games, such as EA and Take-Two. They’ll likely be the slowest to react in removing them entirely.
For example, EA’s Ultimate Team mode, which is available in each of the company’s popular sports games, including FIFA, NHL, and Madden, represented approximately 28% of the 2019 fiscal year’s net revenue. With those numbers, any company would be reluctant to abandon that kind of revenue stream.
Going forward, we’re going to see more and more companies move away from loot boxes — Rocket League, Fortnite Save The World, and Call of Duty Modern Warfare all removed loot boxes in 2019 — and move toward “what you see is what you get” monetization schemes instead.
Cloud gaming looms large and takes its first awkward stumble
The cloud isn’t new. We’ve been talking about it for over a decade at this point, even in regard to gaming. (We’re looking at you, cloud saves on PC and console.) What is relatively new is the concept of gaming directly in the cloud and the idea of a frictionless future when playing solo or with friends.
This future truly began in earnest in 2018 (listen, OnLive, which launched in 2010 and shut down in 2015, was way before its time) with a number of cloud announcements, including Blade Shadow, Microsoft’s Project xCloud, EA’s Project Atlas, and what would become Google Stadia. We hadn’t seen much more than snippets and brief demos to communicate the value of each of these services. PlayStation Now has been a major player for a long time, but it isn’t a household name, per se, even with 1 million subscribers, according to Sony’s most recent financial statement.
Google announced Stadia during the Game Developers Conference 2019 and certainly generated buzz among tech enthusiasts, early adopters, and the media. There were far more questions than answers provided at the time. Meanwhile, Project xCloud launched an alpha test of its streaming and cloud gaming services in three countries in partnership with local telecom companies, including T-Mobile in the United States. EA’s Project Atlas has undergone its second technical test, as of September, but there hasn’t been much more information provided since then. We’ll likely need to wait until the end of the fiscal year for more.
A month before Stadia’s launch, around when Google announced the precise date, we didn’t know many more details than monthly pricing and what the Founder’s Edition would provide. Not much was known about the games that would be available on day one, even though Google was setting itself up for first-party development when the company hired noted game developer Jade Raymond and opened up its first game development studio in Montreal shortly after announcing when we could expect Stadia.
But that there were no first-party games in development at the time of Stadia’s announcement is a real indicator that Google isn’t necessarily sure about where it’s going with the technology. And as a result, Stadia took a huge stumble right out of the gate.
The technology is inconsistent across data providers and greedily gulps down over 100MB per minute when you’re connected and actively playing. If playing Stadia games somewhere that data caps are a real problem, especially when there are other services (like Netflix, Spotify, Disney+, Hulu, Amazon Prime Video, dare we go on) that also need attention and data, then players are going to hit that cap hard and fast.
As Jeff Grubb put it in his Stadia review: “Right now, Google Stadia is a platform for nobody. The company just doesn’t seem to understand any of the audiences it is trying to reach.”
Google is still trying to sweeten the deal for Stadia founders, while trying to entice new players to the service, even amid a horribly botched launch. The company’s answer to the “where’s the first-party content” question has been to purchase Montreal-based triple-A dev, Typhoon Studios, as the team continues its work on Journey to the Savage Planet, which 505 Games is publishing. But even then, this is playing the long-game, which isn’t usually what Google does with its products and services. (RIP Inbox, Wave, and Reader.)
2019 was a big year for cloud gaming, but it’s looking like 2020 is where the real growth is going to be.
Looking ahead …
If Stadia has shown us anything, it’s that the retail business model doesn’t work with the cloud. Consumers are looking for value-add for cloud platforms, which is why Microsoft bundling xCloud and Xbox Game Pass together makes so much sense. Stadia’s business model doesn’t make sense for either user acquisition or user retention, namely because it’s a walled garden, and all of our friends are on Xbox, PlayStation, or PC. And developers have to create a Stadia-specific build rather than using one already certified on PlayStation or Xbox for PlayStation Now or xCloud.
Even though “founders” can gift three months of a Stadia Pro subscription, it won’t be enough to keep folks engaged over a long period of time. Crossplay will help, of course, but it’s a bandage. Exclusive first-party content is crucial to bringing users in, but it might not be enough to retain them. In 2020, Google is going to need to channel Microsoft’s approach to first-party, where studios are purchased and timed-exclusive publishing agreements are inked early in the year to make an impact prior to the holiday season.
Microsoft’s slow ramp-up for xCloud will likely result in the service’s soft launch by the end of Q2 2020; bundling xCloud with Xbox Game Pass will provide a huge swath of users to test the service across a multitude of use cases, too.
Overall, cloud gaming services and their platform holders must do more than make promises in 2020; they’ll need to be transparent about what the limitations of the cloud are. Internet infrastructure is wildly disparate across the United States and Canada, especially, so what some folks are able to experience in a larger city won’t necessarily fit what’s available in smaller towns.
Additionally, if the content isn’t exclusive, Stadia needs parity across platforms. Even as games are launching on Google’s service, they aren’t updated with the most recent patches and DLC. (Stadia’s version of Borderlands 3 is months behind counterparts on other platforms.) What’s the point of purchasing a game on Stadia just to see that it’s not going to get the same attention from developers that it has elsewhere?
Looking ahead … one last time
2020 is going to be an excellent year for growth, but we aren’t likely to see huge strides in cloud gaming for a few years yet. Every company entering this segment needs to first convince consumers that the technology is worthwhile before making the individual case for their flavor of cloud gaming. So far, it doesn’t seem like people are eager to take the plunge. Next year needs to be about wooing a skeptical player base.
This year has been one of monumental shifts. What we play, how we interact with media, and who we can play with are all in the process of being rewritten. In the final year of a home console cycle, we’re used to the feeling of stagnation as our eyes fix firmly on the horizon.
Not so this time.
In 2019, change was a tempest in the living room, at our desks, and on the devices we carry in our pockets. Next year promises to thunder in without slowing down.
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