The Video Game Market Will Change - And it Already Started

A thing I’ve been thinking about recently: The market will change. And it will change in a way, we cannot even imagine. Well. We can. But for some reason I’ve hardly read about it just yet. Everyone discussed the fact that Microsoft recently bought Bethesda. But hardly anyone tried to explain what this sign means for the future of games and gaming in general. People still think that this is a step in the console war. I don’t think so. And if you think so: I am probably not writing these words for you. I am writing this entry more for myself. To look back at it at some point and either say: “See, I was right” or maybe “Wow, I was so wrong”.

Consolidation
The market has been through this before: I still remember times when Publishers bought studios. It was a logical thing: Have your own teams which will work for you all the time, producing games you can sell. However, in the past, this model also led to situations where games which bombed (for one reason or another) ended in the closing of studios. And suddenly the indie scene became more and more vibrant and all of a sudden the market was more open and more spread than ever before. Heck, it was even questioned if Publishers are still needed.

This has changed. The market is still bigger than ever before. There are more studios. And more indies. But we are currently again in a phase of consolidation. THQ Nordic swallows every studio which is willing to sell. Ubisoft is expanding its own studio structure. Electronic Arts still buys a bigger studio from time to time. Even Focus Home now bought its first studio. And now Microsoft bought Bethesda (which already bought multiple studios before and opened new ones. Also don’t forget that Microsoft bought various other studios before as well). I think this will continue. And more publishers will step into this and start buying studios. And this time, I don’t really see this changing again in the near or mid distant future.

Why do I not believe that in a imaginable future studios will become independent again? Why do I believe that more Publishers will go that way? Why do I believe that the market will change forever?

The Art of Buying Games
The answer is: The way we consume and play games will change. And Microsoft is the reason. It could have been every other company as well. But Microsoft was the company which introduced the Gamepass. Sure, you can argue that there are still tons of accounts which only pay a few bucks (if at all) for the next two years. And yes, you are right, Sony has the exclusives. But if these are your arguments, you still don’t understand that in the so called console war, Microsoft is playing a completely different game than Sony. Sony, with the PlayStation 5, is heading towards another console generation. Maybe a more digital one. But Microsoft doesn’t even care for generations at this point. They use the console for those people who want a console. But their actual target is to convince people into subscribing to the Gamepass. They are doing the same with Windows. And now, due to xCloud, also with mobile devices (and yes, that market is damn huge, even if you want to downplay it).

And yes, I am a very physical person. I prefer my games in physical form. But did that stop Spotify or Apple Music to change the way how we consume music? Did it stop Amazon or Netflix from changing the way of how consume TV Shows or Movies?

Gamepass is still in its early days and yet it offers so much value. Hell, even I use it. And they keep adding more and more to it. Yes, they bought Bethesda. Sure. And everyone is looking at Elder Scrolls or Fallout. But everyone forgets that the Arkane games, the Wolfensteins, the Evil Withins are perfect material for Gamepass.

Yes. I do believe that the Gamepass (and probably one or two other subscription services yet to appear on the horizon) will change how we consume games. There is no need to buy the newest release anymore if I have so many awesome stuff to play first. I can wait a few months till I buy the next, say Assassins Creed. And if only 20% think like me, this will be enough to completely mess up every calculation the management did upfront. That’d mean 20% less buyers in the first months. That can easily lead to a cashflow issue, but definitely to very unhappy investors and shareholders for sure.

Let me put it this way: Why should I spent 70 – 80 bucks on day one? Cause it is an exclusive? Well, if I get used to subscription models, why should I? I can wait till it shows up in the subscription model or play something else instead. Exclusives will become a reason to subscribe to something. Much like Amazon Originals or Netflix Originals.

But why the consolidation?
The connection between this and the consolidation is: Join forces. Grow. Grow as big as possible to keep market shares. Grow so big that the mass of products still pays the bills. And that the mass of products you have give you at least some power.

Power will become important. Right now, the Shopsystem-War on PC (Epci vs. Steam) and Amazon Luna, Google Stadia (Yeah, we should still mention it) and Gamepass and PS+ are throwing huge sums of cash at the Publishers and Developers. Like, if they approach you, they usually make an offer where you’d be dumb to say no. But this will most likely change. So you’ll need some power to negotiate better deals. Like “So you wanna have this game in your service? Cool for you, but you also need to take this and that and pay something for it”.

This will also influence the way of how the industry actually makes money. It is likely that DLCs will become more and more important (even more important than today). And new ways of paying the creators through the subscription models will most likely appear in one form or another (not so much payment models through the Consume but through the Subscription-System-Owner). It is hard to predict, how this will end up, there are quite a few options (I maybe should write my 2 cents on this in a separated entry).

The ultimate consolidation
All this will, if you ask me, lead to an interesting future. Sooner or later, indies will have a hard time (“Why should I play this indie game and pay XYZ for it when I can have these other 100 Indies I am already looking at in my subscription system?”). And sooner or later the first midsized publisher who focuses on B- or AA-Games will struggle. And at some point, the first big player will struggle as well. And that will give the Subscription-System-Owner (e.g. Microsoft with Gamepass) allow to expand their portfolio by swallowing these struggling companies.

So yes, that is my prediction: The games industry is heading towards a situation where a very few big companies will dominate the market more than ever. And they will expand their studio structure by just buying up all the ones who’ll get crushed by the new market.

Is this… good or bad?
I don’t know. It has its downsides. And it has its upsides. It certainly seems like a dystopian view on the games industry. But on the other side: Creating games for the Subscription model also might take away the pressure of creating a product which needs to sell this and that amount of units to break even. Who knows?