Dean Takahashi of GamesBeat makes his annual predictions about where gaming will go. Let’s hope 2021 will be a better year all around.
This past year was one of the most unpredictable in all of human history. The pandemic threw off our ability to predict what will happen in the game industry. It surely messed up my predictions about where the games industry would go. Game companies had a record year in 2020, but I never would have predicted that in March as the world seemed headed into an unprecedented global recession caused by the coronavirus. But people turned to gaming as a solace, and the whole industry not only survived. It prospered. Market researcher Newzoo is predicting that the entire game industry — PC, mobile, and console games — will grow 19.6% to more than $174.9 billion in 2020. With two new consoles launched in November, the industry will likely grow again in 2021, helping gaming stand apart from the crowd. This year, we saw a huge surge in venture capital investments in game studios, and a big wave of acquisitions as well, with Microsoft buying ZeniMax Media (Bethesda) for $7.5 billion and Embracer Group announcing it had bought 12 game studios in one day. A continuation of this growth is the easiest prediction to make. But the pandemic has changed the predictability of the industry in many ways. Esports will continue to struggle as it moves forward in a digital-only format, and it’s not clear when we will ever be able to go to live esports events again. 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 (such as our GamesBeat/Facebook Summit on Driving Game Growth and Into the Metaverse on January 26-28). But we can expect games to continue to dwarf other forms of entertainment. Movie and TV production has been hobbled, and cinemas are all but shut down. 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 for 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 2020. 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. Thank you for your help, and Happy New Year! May it be a better one than the one we just endured. 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 owner of Mobile Dev Memo, believes both Google and Facebook will be impacted. 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 there will be 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. 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. 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, there’s still a way for the public to get in on the action and reward the best game makers with a market value that is inflated in the public markets and 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 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. 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. 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.
