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Predictions are a dicey business. The year 2020 was one of the most unpredictable in all of human history. And now I think about predictions in a different way, with both a sense of hope and a sense of dread.
The pandemic threw off our ability to predict what will happen life, and it did the same in the game industry. Game companies had a record year in 2020, and I wondered if it was a one-time bump thanks to the coronavirus forcing lockdowns. People played games to survive, repair their social lives, and distract themselves.
And yet while it was hard to top 2020, the game industry once again outgrew expectations, with market researcher Newzoo saying the entire game industry — PC, mobile, and console — grew to $180 billion in 2021, up from $174.9 billion in 2020. That was unexpected since 2020 seemed like a one-time anomaly that was temporary in nature. But it turned out that new gaming habits adopted in the pandemic proved to be longer lasting than expected, at least so far.
And that helped power even better financial performance in 2021. Even though the Microsoft Xbox Series X/S, Nintendo Switch, and Sony PlayStation 5 were all in short supply, the industry powered through the shortages and managed to grow.
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And in 2021, we saw a huge surge in venture capital investments in game studios, and a big wave of acquisitions as well, with more than $71 billion pouring into games via investments, public offerings, and acquisitions in the first three quarters of 2021, according to Drake Star Partners.
Esports went through a whipsaw as it shifted to a digital-only format, prepared for physical events again, and then faced the fears around the Omicron variant again at year-end. But digital audiences grew, and the esports industry positioned itself for some kind of return to physical events.
Game conferences are one of the places where we can catch up on future trends, but so many of those events have been canceled or gone digital (our second annual GamesBeat and Facebook Games Summit and GamesBeat Summit: Into the Metaverse 2 will be online-only events on January 25 to January 27).
So it feels like our compass, informed from the patterns of the past, is broken. But I’ll wager we can expect games to continue to outgrow other forms of entertainment. Movie and TV production has been hobbled, and cinemas are still suffering. With that limited horizon, I’m going to boldly make my bad predictions once again.
For the usual comparison and embarrassment, here are my predictions from 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, and 2012. At the bottom of the story, I’ve also given myself grades for the predictions I made a year ago for 2021. Lastly, I’ve been very publicly calling for ideas on social media about my predictions, and I appreciate all of the followers and readers who have pitched ideas to me. Many of these ideas were adopted from my social media conversations.
Thank you for your help, and Happy New Year! May it be a better one than the one we just endured.
1) The war between game devs and platforms will get worse
Game platforms became flashpoints in 2021 as Epic Games sued Apple for antitrust violations. Epic decried Apple’s policy of collecting a 30% fee on every in-game transaction in titles like Fortnite. While Epic largely lost most of its case, it did win on one important point that could give alternative payment providers and game developers more hope of capturing the revenues they generate. The courts have stayed that decision so far. But it offered developers hope that they will be at least able to promote lower prices for digital goods on websites that are off the app stores. It underscores the duality of modern platforms, which hold game developers captive yet offer internet browsers that can take players elsewhere.
While Yvonne Gonzalez Rogers, the federal judge in the Epic v. Apple case, concluded that current antitrust law doesn’t protect smaller companies as much as it does consumers, she did point out flaws for legislators to address that could curb the power of big tech.
On top of that, Epic still has an antitrust suit pending against Google over Google Play Store practices, and that is sure to flare up in 2022. And regulators around the world such as the European Union are investigating the big tech companies and the leverage they hold over developers. Add to this Valve’s decision to ban nonfungible tokens (NFTs) in games on Steam (only to see the Epic Games Store embrace NFT games) and you have more developer anger boiling over.
Adding fuel to this developer unrest is Apple’s decision to emphasize privacy over targeted ads. That move also upset game developers, who face lower revenues thanks to the deprecation of the identifier for advertisers (IDFA). As the industry chases the metaverse and blockchain monetization, the rules of engagement for platforms and developers will matter more than ever. Apple has the right to do these things for now, but it can’t afford growing developer resentment.
Nor can any big tech platform that wants to benefit from the stickiest applications of all: games. I expect to see more flashpoints over time and movements by game devs to bypass big tech altogether. Both platforms and developers need each other, but they’re still figuring out which side is more powerful.
2) A patchwork metaverse will emerge without interoperability at first
The metaverse has to start somewhere. It will likely begin with a patchwork of walled gardens that don’t work together. A lot of people could legitimately argue that this isn’t a metaverse at all.
Over time, it will become interoperable with easy transit between worlds, open source standards, and trade agreements. Standards always take a long time to establish, but they eventually happen when enough of the power brokers conclude that working together is better.
We’re just not at that stage yet. Right now, everyone who is trying to build a metaverse will attempt to establish themselves as the first mover with the largest audience.
Roblox can make a case that its user-generated games platform is the leading candidate for the metaverse, while Epic Games can make a similar claim for its Fortnite game, and Facebook will say its Oculus (renamed Meta) VR platform will win.
It’s not a real metaverse until we get that interoperability, of course, but we’ll see islands emerge thanks to the launch of tools such as Epic Games’ Unreal Engine 5, which is coming in 2022 with a free city that developers can use as a foundation to make metaverse-like games.
On the non-gaming side, we’ll also see cool experiences arrive for enterprises in Nvidia’s Omniverse simulation world. In fact, the biggest chance for us to see the real metaverse emerge in the long term could come from the Omniverse, as Nvidia CEO Jensen Huang believes that his company will use the powers of AI and supercomputers to build a digital twin of the Earth for climate change predictions. And once that is build, Huang believes we’ll get the metaverse for free. Some game developers like Brendan Greene, creator of the PUBG battle royale game, really do want to build a digital twin.
These, too, will start out as patchwork like BMW’s digital twin factory. Over time, the connective tissue will form — such as NFTs that make it easier to identify digital items that can cross worlds. But it will be like the early days of the internet, like when users on The Well couldn’t talk with those on Compuserve or AOL. At some point, a shared ecosystem or commons will emerge, but probably not in 2022. And maybe not for years.
The hardest thing will be for the industry to come together and put selfishness aside in favor of the greater good of establishing open standards for the interoperable metaverse. We’ll see if advocates like Epic’s Tim Sweeney can convince others that coming together is a matter of enlightened self interest.
3) NFT games will go mainstream amid a divided audience of lovers and haters
Foes of NFTs were gleeful at the backlash that Ubisoft faced when it announced NFTs for Ghost Recon: Breakpoint — a move that gamers roundly criticized. They further reveled in GSC Game World backing off on NFTs for Stalker 2. But I don’t think those foes realize just how much financial might has lined up to make NFT games into a mainstream passion.
The true believers in crypto and smart capital are betting that mainstream adoption of NFTs is coming, and they are pouring billions of ideas into the opportunity. This is why we already see so many unicorns created so early in the emerging market among the makers of NFT game infrastructure and platforms. These platforms being created by companies like Forte pledge to make it easy for the best game developers to create mainstream NFT games that take advantage of blockchain technology. These platforms could also simplify the adoption of cryptocurrency through the simplicity of gaming.
I’m confident that the innovation will come from blockchain and cryptocurrency and rewards-based business models. I don’t know what that innovation is yet, but when the smartest people in the industry band together to make it happen, I bet that it will happen.
I don’t have a stake in this race, but I talk to a lot of people. I have seen this kind of innovation cycle happen before with the derision that free-to-play faced at the outset of mobile games and the ultimate victory it has won with the majority of all games now being free-to-play and mobile. While others scoffed at free-to-play, those that embraced it — like Supercell, Machine Zone, King, and Zynga — won the market. These were mobile-first companies wrecked the premium-price model embraced by incumbents.
It is not a foregone conclusion, however, that NFTs will win. The game developers who are integrating them into games will have to win over gamers, who are skeptical, through skillful game design. Skeptics have pointed to problems such as environmental damage from blockchain computing, scams, money laundering, weak games, and profit seekers. But all of these problems can be overcome as the quality developers and companies move into the space.
Perhaps the stickiest criticism is that NFTs don’t enable you to do things that you can’t already do in games in some way. I think that this criticism fails to recognize the cleverness of game developers and the value of decentralization — where NFTs can be used to bypass traditional distribution mechanisms and enable peer-to-peer transactions — in cutting out big tech. In this way, NFTs are an arrow in the quiver of independent-minded game developers, much like web games and instant games are.
Among the professionals moving into NFT games are Zynga, Mythical Games, Com2Us, Ubisoft, Jam City, Will Wright, Peter Molyneux, Graeme Devine, Austin Grossman, Gabby Dizon, Naomi Augstine-Lee, Chris Clay, Chris Akhavan, and others. Josh Williams, CEO of Forte, which raised $725 million to build NFT game infrastructure, said that all of the major game companies are investigating NFTs.
And the NFT game companies raising the most money are the ones that have veteran game developers. Meanwhile, the big companies will get stuck waiting for regulators to say the coast is clear. As Amy Wu of Lightspeed Ventures pointed out, the crypto natives and gaming natives have to come together. When they do, I think that is when we will see mainstream adoption of NFT games and the resistance from gamers may melt away.
4) Game deals will grow so long as the global economy stays healthy
As noted above, game investments hit record levels in 2021, with $71 billion pouring into game startups, acquisitions, and public offerings in the first nine months of the year, according to Drake Star Partners.
More than $4 billion went into blockchain games. More than 100 game venture capital funds and dozens of private game unicorns (or startups with valuations above $1 billion) are feeding money into games. Public stock markets have rewarded merger-happy companies like Embracer Group (which has made dozens of acquisitions) and Zynga. This money comes from the top of the food chain, with big investors pouring money into different parts of the ecosystem on the belief that games are benefiting during the pandemic.
While that is true, it’s an effect that can wear off. We saw how some companies (Roblox) hit continuous growth targets with each quarter compared to the anomalous quarterly results of 2020 while others (Take-Two, Zynga, Activision Blizzard) barely grew their revenues this year compared to last year. So it’s clear that game companies can’t defy the laws of gravity. If the global stock markets head south, all bets are off.
But I don’t really expect that to happen. What is unprecedented at this time is that all parts of the gaming ecosystem are thriving and fueling each other.
5) A new kind of gaming-first transmedia will blossom
One of the conclusions from that last point is that games will become the center of the entertainment universe. And that could mean that movies and TV shows will follow gaming.
Gearbox Software’s Randy Pitchford has been touting the opportunity to turn Borderlands into a movie franchise. That’s the opposite direction that Hollywood studios usually pursued when trying to extend entertainment franchises from one media to another. Transmedia became a dirty word because it promised too much in years past. The notion was that properties such as Mickey Mouse could spawn everything from theme parks to video games. But now that games hit the key demographics and have mainstream adoption, extending them into other media makes more sense. Games are now the lead horse.
We saw that with Riot Games’ Arcane (based on the League of Legends game) animated television series that became a big hit on Netflix. And we have high hopes for Naughty Dog’s games The Last of Us and Uncharted, which are both being turned into major releases from Hollywood. Microsoft is getting there on its Halo television series. The great hope is that these will come off as compelling films rather than cheesy live-action role-playing (LARP) events.
And in the end, streaming subscriptions for the combination of games and movies will make sense. In the end, bits are bits, and Netflix has shown that it is happy to stream either kinds of bits to its audiences. Microsoft would also be happy to offer exclusive game-based movies with its Xbox Game Pass.
6) Game console shortages will continue amid strong demand
Microsoft, Sony, and Nintendo all continued to ship more and more consoles throughout 2021. But it’s hard for them to meet demand because of the voracious appetite for games and the shortage of key semiconductor chips. That shortage is widely believed by companies such as Intel, Nvidia, and Advanced Micro Devices to last into 2023. And that makes it easy to predict that the consoles — which can depend on hundreds of suppliers of thousands of parts per console — are still going to be in short supply in 2022.
By now, Nintendo’s Switch should cost a lot less than the introductory price of $299 when it debuted in 2017. But it has topped 100 million sales and still continues to sell well, so Nintendo has no motivation to cut the price. It finally did cut the price on the old Switch in September as it introduced the new Switch OLED model, but nobody really has an incentive to push a price war when we’re still in a pandemic-induced supply shock.
If anyone has an opportunity here, it’s the makers of mobile gaming hardware and mobile games, as they can make games more accessible to a wider market. And it’s no surprise that Qualcomm recently introduced a model for a mobile-based game handheld. Now if its manufacturers can get a hold on enough parts to manufacture it, it could exploit the opportunity.
7) Play-and-earn will spread in emerging markets
Games are great at motivating players to play because of their intrinsic value. People enjoy them, and they enter a mental state of “flow” when they get really engaged with games. That’s intrinsic value. Extrinsic value is something like getting paid to play games.
But the difference between intrinsic and extrinsic value is blurry. We saw the blurriness emerge this year as games like Sky Mavis’ Axie Infinity offered rewards to people who played the game. By investing in unique game items via NFTs, players could acquire unique game characters and make them more valuable through gameplay. They could then resell those characters to other players and make a profit. In the Philippines, hundreds of thousands of players took advantage of this “play-to-earn” game to make more than triple the minimum wage in a country that had 40% unemployment during the pandemic.
NFT resales can easily be tracked and credited to either the original creators or the owners themselves. And so players or even the original creators can benefit from item resales. It’s part of a Leisure Economy that is lifting people out of poverty around the world.
The small amount of money to be made won’t really appeal to gamers in richer countries, but those gamers might like games that have both intrinsic and extrinsic value.
Critics say that Axie Infinity wasn’t inherently fun and it gave players a profit motive rather than pure enjoyment. This extrinsic motivation would eventually wane, the critics said, and the players would give up the game if the ability to make profits went down. But while some praised the life-changing potential of play-to-earn — Sky Mavis said 20% of its players were unbanked — others saw it as just the first inning.
Miko Matsumura, cofounder of Gumi Cryptos, believes that NFT-based play-and-earn games — where the game is designed by game veterans to be really fun — that also give players ownership and ability to reap profits will become the prevailing model in gaming.
Players, he believes, will see playing games as an investment, just like in the old days when they bought console games and then sold them as used titles to GameStop in years past. Those profits from the used game sales enabled them to reinvest in new games. Players in the West may scoff at this. But those in emerging markets could enjoy earning their digital goods through gameplay and then sell them to labor-averse players in the West. And who doesn’t want to own their own stuff in games they love to play and also make money from it?
8) The metaverse promise will revive VR/AR dreams
Augmented reality and virtual reality went through their hype cycles in the past five years. Many game developers gave it a try and then reverted to making traditional games. But the hopes of creating a metaverse to offset the woes brought on by the pandemic have given new hope to those AR/VR dreams. Companies like Niantic, the maker of Pokemon Go, have shown the path for innovations in AR.
Niantic has invested heavily in making the leap from location-based games to next-generation AR, which can deliver useful information to you while you’re on the move. And Facebook/Meta continues to double down on Oculus/Meta Quest hardware. In fact, Facebook’s $10-billion-plus-per-year investments make Magic Leap’s $2 billion-plus in funding for its own metaverse ambitions look like chump change — or maybe a couple of months of Facebook’s spending.
The belief is that these investments, while still based on nascent markets, will be worth it because AR/VR are the most immersive platforms when it comes to accessing the metaverse. It’s good to see AR/VR startups getting investments again, but we still want to see more hits before this market becomes the reality that we all want to see. In the meantime, on the ground level, I see AR/VR startups getting funded again after a fairly long drought. Of course, the biggest boost of all will come whenever Apple decides to launch its AR/VR product. But predictions about that have been pretty bad so far.
9) Game companies that fail to change will get acquired — or left behind
When change comes, the losers fall victim to the innovator’s dilemma of sticking to the old cash cows when they should embrace innovations that cannibalize the old. Activision Blizzard is a good case in point. It has reached huge revenues with games like Call of Duty, World of Warcraft, and Candy Crush Saga. But most of its games in the works are sequels or remakes.
Where are the original titles? The bar is evidently so high in the company’s R&D ranks that the opportunity cost of investing in older franchises versus new ones is too hard to overcome. Activision Blizzard’s stock price fell dramatically in 2021 as Call of Duty subsided from a 2020 high and it was hit with a sexual harassment lawsuit by California regulators.
The latter fact showed that other kinds of change are also necessary for modern game companies to keep up with the times. Failing to recognize when it’s time to change has always been fatal, and that failure often comes from unexpected directions.
Activision Blizzard is now a potential acquisition target from possible buyers such as Disney. And nobody expects Activision Blizzard to be a leader when it comes to acquisitions or investments in NFTs, VR, the metaverse or other innovations.
It’s worth noting that Roblox, which innovated in a platform for user-generated content, is now the most valuable video game company in the U.S. The results could lead in a variety of directions. Employees may leave the big company for startups. The lesson is a steady-as-she-goes strategy is good until it isn’t, and then change will happen.
10) God of War: Ragnarok and Horizon: Forbidden West will signal Sony’s real next-gen arrival
I figure if these potential blockbuster games from Sony got delayed in 2021, they should arrive in 2022, right? And I believe both will highlight Sony’s competitive strongpoint of funding games with huge single-player campaigns with strong stories.
These games and others like them represent Sony’s unique advantage over Microsoft, which until recent acquisitions didn’t have the giant single-player brands in the same way. Microsoft took a major swing with Halo: Infinite, which is my favorite game of 2021 and represents the best it can produce on the console/PC. But strong narratives are part of Sony’s DNA.
If anything should set the PlayStation 5 apart from the Xbox Series X/S, it will be these expensive narrative titles. It takes brave executives to greenlight budgets of hundreds of millions of dollars on projects that take years to complete — even as everyone else focuses on games-as-a-service — to make the hardest core gamers happy.
I have the highest expectations for both God of War: Ragnarok and Horizon: Forbidden West. They are carrying a very important torch. I believe they have strong teams and budgets behind them, and this is one of those things that Sony shouldn’t change.
11) Labor will be tight, and labor unions could form
Just like my No. 9 prediction, this prediction about unions forming seems like a perennial one for games. Game developers have often been exploited and made to work long hours without sufficient pay — known as crunch. Work conditions are sometimes dreadful for diverse workers such as women at companies like Activision Blizzard and Ubisoft. That has always made labor unions appealing, and a survey by the International Game Developers Association (IGDA) in January 2020 showed that 54% of developers favored a game union.
Still, the unions have scored only small victories. The pandemic and fresh accusations of bad work conditions at big companies have opened the opportunity for labor unions to make new headway in games. We know that wages are rising amid a huge shortage of skill game developers as the industry enjoys an unprecedented expansion. Crypto game companies are picking off a lot of developers, and VCs are busy funding startups staffed by veterans. The shortage will continue in 2022, and that could once again create conditions for more unionization.
These are forces that will help union organizers, but these are forces that the leaders of benevolent and enlightened companies — if they exist — could and should address.
1) Apple’s IDFA change will hobble targeted advertising for iOS games
Letter grade: A
2021 notes: IDFA changes spurred a ton of acquisitions such as Zynga’s purchase of hypercasual game maker Rollic and game advertising firm Chartboost, but the impact of IDFA still affected Zynga’s bottom line by the end of the year. While the worst fears didn’t come true, IDFA created structural changes in game advertising, even as Apple sought to disable Facebook by prioritizing privacy over targeted ads.
Apple is on a quest to put user privacy above all else. But that means it will no longer allow advertisers to extract user data to do targeted advertising. And that’s what Apple’s retirement of the obscure Identifier for Advertisers (IDFA) is all about, and the game industry is caught in the middle in this fight between Apple and advertising companies.
Apple warned the change in its opt-in rules for IDFA usage was coming and it planned to launch it in mid-September. But Apple postponed the change after the ad, app, and game industries warned about the disruption it would cause. But the reprieve was only temporary, and Apple is moving ahead in early 2021 with plans to require users to specifically opt-in if they want to be tracked for advertising purposes. Without proper explanations for what it means for app pricing, most people are opting out. And that could cause a big disruption in iOS games, which generated perhaps a quarter of the industry’s $174.9 billion in 2020.
Since the effect is so unpredictable, some mobile marketing companies are raising the alarm bells, but game companies are saying it may not be a big deal. I predict it will have different effects on different players in the industry.
Eric Seufert, monetization expert and the owner of Mobile Dev Memo, believes this will impact both Google and Facebook. He thinks that those companies might better oppose Apple by noting how consumers could lose access to free apps and games that advertising allows them to enjoy. He thinks highly monetized strategy games, role-playing games, social casino games, and other titles that need to reach very specific customers will suffer, while casual games and games that naturally go viral on their own, without the need for targeted ads, should do well. He thinks we will see little impact on subscription apps and those that are only moderately dependent on ads or in-app purchases.
I worry it could trigger a recession in games and cause the fastest-growing part of the industry to stall. That said, I believe this is a very unpredictable but important issue that is far too opaque. For the opacity, I blame Apple. It might just come out and say it wants to change the way that games become successful on the app store, but that might mean more legal trouble for Apple. But one thing is clear. Ignore the IDFA change at your peril.
2) Epic Games may lose its legal case but win a wider war
Letter grade: B
2021 notes: Epic indeed lost almost all of the charges it levied against Apple in its antitrust case. But it won on the right to promote in-app alternative payment methods off the store, and that may be enough to spur discord among game and app developers against the status quo of app stores. The appeals court has stayed this victory while the litigation continues, but it’s a crack in Apple’s legal defenses. And the day may still come when legislatures modify antitrust law to protect companies as well as consumers.
The sad thing about the IDFA is that Apple is judge and jury, and the industry can’t do much about it. And that reminds me of Epic Games’ quixotic antitrust case against Apple. Epic Games has assembled good evidence, and it is a bold strike to fight back against Apple’s control of mobile gaming. At the cost of getting its own Fortnite game booted off the App Store by Apple, Epic Games is doing a big favor for game developers in standing up to Apple and trying to get rid of its 30% royalty cut on all App Store sales.
But antitrust law is antiquated, and it doesn’t necessarily protect a company like Epic Games when a platform owner like Apple decides to cut it off. If a judge decides that Epic has plenty of other choices where it can take Fortnite without much direct harm to consumers, then Epic Games could lose the legal case even though it has the moral high ground.
But if Apple does everything it can to crush Epic Games as it has so far, Apple could lose the wider war. Regulators could change their policies or Congress could amend antitrust law and curtail Apple’s power. But the game industry could also aggressively seek to escape the platforms and the app stores that the tech giants run. They could support HTML5 games such as Facebook’s Instant Games or Snap’s messaging games or Nvidia’s GeForce Now that use the open web to circumvent the app stores. By creating downloadless game experiences with HTML5 or royalty-free cloud games, game companies could bypass the gatekeepers and escape the rules of the tech giants. The open web could be a viable path to an industry that doesn’t have to pay the platform tax.
If regulators or the rest of the industry force Apple to become more open, then Epic will have accomplished its goals, even if it doesn’t reap benefits for itself. In the long run, the game industry and its platforms could become more open, and we could thank Epic’s Tim Sweeney for that.
3) Game IPOs will continue and change the game industry
Letter grade: A+
2021: Companies like Roblox, Playtika, and others made good use of the IPO craze, raising money and going public. SPACS — special purpose acquisition companies — also helped ease the IPO process and enabled firms like Nexters, Playstudios, Skillz, and IronSource take advantage of the public’s enthusiasm for games. Those companies will keep the industry competitive as developers get swallowed up.
Because gaming has done so well in the pandemic, more investors have noticed the industry and are moving money into it. One way is through initial public offerings (IPOs), and another is special purpose acquisition corporations (SPACs). Game engine maker Unity went public and is now valued at $40 billion, far more than the $17 billion value of the larger rival Epic Games at its last funding in 2020. Now Unity is too big to be acquired by most other game companies.
Skillz went public via a SPAC, and Roblox and Playtika are expected to follow up with IPOs soon. These companies are exploiting a historic window of opportunity that will enable them to stay independent. And that means that they won’t be acquired anytime soon by tech giants or the biggest game companies. And from our first two predictions, we can understand some of the danger of companies becoming too big, either through their own great business ideas or by acquisitions.
I don’t want to sound like a free-market-at-all-costs advocate. But if big game companies acquired a bunch of the big game developers, that could stifle innovation and creativity for a time. With the IPO window open, the public still has a way to get in on the action and reward the best game makers with an inflated market value that makes it impractical for another big game company to try to take them over. That’s good, as I don’t want to see all the good game developers get acquired. IPOs are the market’s way of saying that if you create something great, you don’t have to sell it to a big corporation to make it pay off. You can sell it to all of us, and keep control of it.
Don’t get me wrong. Money pouring into games instead of into other industries is a good thing. That’s happening on the level of game startups, and it’s good for the owners of mid-sized companies, and it’s good for the owners of the newly public companies. Hopefully, the markets will stay strong and it will be good for public stock investors as well.
4) Game streaming and movie streaming will get hitched
Letter grade: A
2021 notes: Netflix itself validated this idea with its own launch of a games division, headed by game veteran Mike Verdu, to launch games that will enhance the Netflix subscription value. We expect a lot more to happen as Hollywood recognizes the value of games.
The big Hollywood companies — and their owners — are all pouring money into the streaming of movie and TV shows in a bid to ward off Netflix. But Netflix itself is moving into games, where engagement with an intellectual property can be far higher and more lucrative. We have seen Apple, Disney, NBCUniversal, HBO, and more move into movie streaming.
At the same time, we’ve seen Google, Microsoft, Sony, Amazon, Nvidia, Shadow, and Facebook all move into the streaming of cloud-based games. Microsoft has launched its Xbox Game Pass subscription in the hope of becoming the Netflix of gaming. It may not make tactical sense, but big companies will see the strategy that they can pursue to become even bigger and lock up more users. In the words of former MIT Media Lab director Nicholas Negroponte, “bits are bits.” You can stream games or stream movies and make money from both.
Surely, someone in this vast marketplace will see that the convergence of technologies and the economies of scale could favor a company that brings game streaming and movie streaming under one roof. Disney could gain a lot of subscribers if it bought Electronic Arts and made its games available as part of the streamed Disney+ service. Strategically, such a service could be a way to aggregate consumers and concentrate media power into the hands of a single company with a single subscription. But this requires a skill that the biggest tech and streaming companies have not mastered: understanding gaming and allowing game companies to be their best. Let’s just hope that broadband technologies such as 5G networks will enable us to stream so much entertainment into homes.
5) The metaverse will begin to emerge as social gaming grows
Letter grade: A+
2021 notes: I didn’t know that Facebook CEO Mark Zuckerberg planned to embrace the metaverse by changing his company’s name to Meta and investing more than $10 billion a year to make the metaverse come true. But I’ll take the credit for it, as our GamesBeat Summit: Into the Metaverse 2021 event had 30 panels that foretold the popularity of the metaverse idea at a time when lockdowns are still painfully present.
Such a company as we’ve envisioned in the previous prediction could become so strong that it could launch the Oasis, a metaverse controlled by a single company, offering gaming, movie, TV, and other entertainment services so that you’ll never have to leave it.
We desperately need a metaverse to escape the Zoomverse that we have all been stuck in during the pandemic. We need something that is more immersive and enthralling than video. Realistic or fantastic game worlds can deliver that. While Ready Player Two has been criticized by many observers, I would love to hang out in the worlds of J.R.R. Tolkien, as envisioned in Ernest Cline’s latest book.
The metaverse should offer a rabbit hole of fun for everybody, whatever your particular preferences are. And I see many ways for it to emerge. Netflix could launch a vast game world full of its entertainment properties. Epic Games or Roblox or Microsoft’s Minecraft could create a metaverse for their fans. Every company that has amassed an audience has to make that audience more engaged and more social, and connecting fans in a world — preferably a game world — they never have to leave is my expectation for a real metaverse, not one that tries to trick us by being a metaverse in name only.
A lot of companies will try and fail to create what author Neal Stephenson envisioned with Snow Crash back in 1992. I’d like to see it succeed soon (and that’s why we’re holding our own GamesBeat Summit: Into the Metaverse event on January 27-28). It will take years to build and perfect the metaverse, but let’s start it in 2021. I realize it will take time, but we need this. For our own mental wellness and every other reason as well.
6) God of War: Ragnarok will remind us of Sony’s greatness
Letter grade: F
2021 notes: OK, I guess I didn’t think that Sony might delay Ragnarok. Nor did I realize that Barlog was not actually working on this game and that someone else was doing it instead. But I have my fingers crossed for 2022.
At The Game Awards, Sony showed a small teaser for the next big exclusive game for the PlayStation 5, and it will be God of War: Ragnarok. The sequel to 2018’s winner of many Game of the Year awards will hopefully debut in 2021.
Cory Barlog, the game director at Sony Santa Monica, is busy at work trying to top his previous creation. But this game is much more than just a sequel. It’s a reminder that Sony believes in giant single-player games with a shitload of storytelling. Exclusives like God of War made the PlayStation 4 stand out and pull ahead of other consoles in the last generation, and Sony still has many studios working on such games for the PS5, which is off to a good start. Barlog took what might have been a weak God of War 4 and turned it into a father-son tale that was more widely appealing.
This next God of War title will have a heavy burden. It has to show that big, exclusive single-player narrative games still make sense when triple-A titles are under attack from free-to-play games that last forever. Sony has shown more than any other game company that it still believes in these narrative masterpieces in the face of competition from year-round franchises such as Call of Duty and FIFA.
7) Halo: Infinite will put Microsoft back in the game
Letter grade: A+
2021 notes: This game was too important to mess up. And even though it could have gone the way of Cyberpunk 2077, Microsoft took time to cook this baby right, and its reboot and delays ultimately paid off in the best game of 2021, in my opinion.
We haven’t seen shipment numbers yet, but it certainly feels like Sony had a more balanced launch for the PlayStation 5, with good exclusives such as Spider-Man: Miles Morales and Astro’s Playroom to stir demand. Microsoft showed up with Xbox Game Pass and lots of compatible games, but the launch lineup was underwhelming. The missing part of the console launch was Halo: Infinite, which got a poor reception in its preview. 343 Industries and Microsoft shook up the team’s leadership and brought in former Bungie leader Joseph Staten. Now the game will ship in the fall of 2021, so long as it doesn’t face any further delays.
Microsoft has always tried to align a good launch lineup with its console launches. It has also tried to launch new systems with new Halo games, but it has succeeded only in doing that once, with the launch of the original Xbox. With Xbox Game Pass available and a good strategy on backward compatibility, the company can focus on getting lots of units into the market even without a tent-pole title. By the fall of 2021, however, it will need a system seller to keep pace with the PS5. Titles from Microsoft’s acquired studios will only begin to show up around that time, and the development job should become simpler as making titles that run on both generations — Xbox One and Xbox Series X/S — should get easier with experience.
I’m hoping Microsoft will use the time to double down on content for Halo: Infinite multiplayer, esports tournaments, and bigger marketing plans for what could be its biggest Halo yet.
8) Nintendo will unveil the Switch successor in 2021
Letter grade: D
2021 notes: Well, Bloomberg and the Wall Street Journal got this wrong, and so did I. I have no inside information still, but Nintendo didn’t reveal a Switch successor and it said that the Switch OLED shipping this year was not the product that was rumored to be in the works.
The Wall Street Journal reported that Nintendo was readying a successor to the Nintendo Switch in 2020. But Nintendo didn’t announce the system, and it has focused on cranking up production of the Switch and the Switch Lite. At some point, however, sales of the PS5 and the Xbox Series X/S will start to eat away at potential Switch buyers. If we have something like an Electronic Entertainment Expo (E3) in 2021, that would be a good time for Nintendo to announce a next-generation system. Developers could get a head start on developing games for the system, and Nintendo could launch it in the spring of 2022, about five years after the launch of the original Switch. I’m not going on insider information, so this is speculation. But it would make sense for Nintendo to stay away from the launch cycles of its console rivals and pursue a strategy of being an alternative to Microsoft and Sony.
Nintendo definitely found a broad niche with the Switch, as a hybrid machine that is both playable on the TV and as a portable device. If Nintendo focuses on that niche and expands it further, it could withstand the forces around it such as cloud gaming, multiplayer universes, and mobile gaming.
9) Regulators will come after both games and game platforms
Letter grade: A
2021 notes: Regulators didn’t take much action in games, but they started talking a lot about issues that concerned them, and we can see it in decisions like Valve’s move to ban all nonfungible token (NFT) games on its Steam platform. Regulation is meant to keep the game industry on its rails, and I expect more of it to come, and that shared expectation will cause the game industry to be wary.
Gaming has become front and center of the entertainment universe during the pandemic. But that means it will draw the attention of governments and regulators. China has cracked down on games with censorship, and slowed the approval of new mobile games to a trickle. It is removing games that don’t have proper registration. It has put limits on how much minors can play out of concerns about addiction. The rest of the world’s regulators won’t be as harsh, but they will pay more attention to games and their effects on society. I wouldn’t be surprised if more countries ban loot boxes as illegal gambling or regulate it as entertainment for adults.
The game industry is walking a delicate tightrope. Campaigns such as #PlayApartTogether, aimed at getting people to social distance during the pandemic, are broadly appealing. But free-to-play games that have pay-to-win mechanics, aggressive monetization that can prey upon the young or people with addiction problems, privacy-invasive advertising, or gambling-like hooks could prompt regulators to crack down. That’s all in the name of protecting people from game companies.
But as we’ve seen with Apple and Epic’s clash, regulators may also pay attention to the platforms that host games and whether they’re enabling fair competition. And I think we would like to see the platforms create an open metaverse to host the games of the future. If they don’t, the crackdown will come. It’s time for the game industry to get in front of this problem, aggressively.
10) Riot Games will establish Valorant as an esport, and other games will follow
Letter grade: A
2021 notes: Valorant has taken off as the second big video game franchise at League of Legends maker Riot Games. While esports is a long way from being profitable, even at Riot Games, it is taking root and still gathering a large digital audience that one day will dwarf traditional sports.
Counter-Strike: Global Offensive has been a staple of esports for decades. But Valve hasn’t invested much in the esports ecosystem, in contrast to Riot’s efforts to establish a permanent esports ecosystem around League of Legends. Riot will now leverage that ecosystem to establish its second major esports game: Valorant. It still has a long way to go to catch on with the masses of gamers. But esports pros have been switching over to Valorant from CS:GO. Valve will have its hands full trying to reinvest in its game as a counterattack, but Riot is a far bigger company with 3,000 people. It can afford to invest in Valorant, but the key will be to bring in new esports fans into the fold, rather than just stealing the audience from CS:GO.
For the past few years, esports has grown dramatically in terms of its audience, but it still needs fans to spend money in order to generate profits the way that traditional sports teams can do. That’s hard to do while we’re in a pandemic and physical events aren’t possible. But it is possible to grow a huge digital audience and ramp up the fan base for the day when physical events could happen again. I hope somebody knocks it out of the park because we could sure use another billion-dollar esports game.
11) Game startups will continue to thrive and generate huge game ecosystems
Letter grade: A+
2021 notes: Investors poured $71 billion into game companies in the form of startup investments, acquisitions, and public offerings in the first nine months of 2021, according to Drake Star Partners. Many of those companies are aiming for independence and cross-platform play, and they will replace the companies getting acquired by the biggest game companies.
During 2020, more than 30 game-focused venture capital funds set up shop to invest in game companies. Game investment site InvestGame estimated that more than 100 game studios received funding in 2020. Combined with acquisitions, the deals led to more than $20.5 billion in transactions in the first nine months of 2020.
When I started at VentureBeat 12 years ago and started GamesBeat, such venture capital funds didn’t exist. Traditional VCs slowly picked up game-savvy investors, and the specialty funds evolved out of that as game investors and entrepreneurs became successful and plowed the money back into new funds. March Capital is on its second game-oriented fund with a $60 million raise for its March Gaming Fund, and Griffin Gaming Partners has raised $235 million.
That new capital has barely begun to work, even though it feels like a couple of fundings per week is a bit much. What I enjoy seeing is the economic benefits of the job creation that happen alongside these investments. If you look at Turkey, for instance, it had the core of a mobile game industry arise with the success of Peak Games and Gram Games. Zynga bought those companies for enormous sums, and some of the people who got their first jobs with those companies have now splintered off into their own startups. Game VCs are investing in those studios, and Turkey is now a hot spot for games, with a lot of economic goodness resulting from that. Countries such as the U.S., China, the United Kingdom, and Canada still have the strongest ecosystems, but they don’t need to monopolize all the jobs. A strong game ecosystem can arise anywhere now, and the game VCs are the fertilizer for that growth.
These small studios will grow, launch hits, and then get acquired by the big publishers over time, starting the cycle over again.
Lastly, here is my scorecard for my 2020 predictions from 2019.
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