The Week That Was 01/11/2019

GAMES CONNECTION PARIS

Kicking off the week that was the annual European version of Games Connection where the business of games dominated conversations between a large group of Developers, Publishers and a sizable contingent of game industry service providers ranging from work for hire studios, language service to full-scale third-party game operations providers.

Amongst the attendees there was an overarching general sense of confidence in the state of the industry and the coming roll out of several new platforms, subscription services and of course the next generation consoles. It may have simply been the circles that we moved, but there didn’t seem to be any attendees that we met that had meetings with next gen platform holders. A quick run through on the meet to match app showed a distinct lack of representation of Sony, Google Stadia and Xbox Scarlett. Without a direct understanding of why, and not wanting to speculate beyond the practical facts, we can only assume that most of the developers at the event where pitching early stage projects and perhaps the platform holders concluded that the games on offer at Games Connection were a little early in the development cycle to engage with.

From the developers that we spoke to, the optimism of the future was often juxtaposed by the lack of sales in the indie game sector and the challenges faced through generating Wishlist numbers or, more importantly, sales and revenue. There was a general expectation that as the platforms move toward a more subscription-based service, there will be a great deal of opportunity for third party developers and content originators to make deals with the platforms to supply content exclusively for subscription services in exchanged for advances against installs. This basically means that the subscribers of these services will expect more than just one game a month to make them feel good about contributing their hard-earned cash to the ongoing payment plan, and as we see in services such as Netflix, there needs to be an ongoing stream of content offers.

The other topic that was a key talking point at the bar was in regard to various European union subsidies and their increased availability this year for the benefit of the development community. Perhaps it’s no surprise given the governments behind these subsidies (or grants whichever you would like to call them) are also anticipating a bigger year in gaming in 2020 and beyond and a bigger return the investments. These grants are sometimes quiet contentious topics for discussion unsurprisingly. Depending of course whether or not you have been able to access them, some developers are very pro grants sighting the greater good of the overall sector, job creation and tax revenue generation whereas for those whom have not been able to access them they tend to be an unwelcome distortion to the level playing field.

For those in the industry that enjoy the conversational atmosphere of Games Connection and catching up with old friends and sometimes foes, the event certainly didn’t disappoint. Now, as like most attendees, we need to take the pile of business cards and distil it down into a series of transactional opportunities.

POLAND BECOMES THE FOURTH LARGEST EXPORTER OF VIDEO GAMES.

The Warsaw Business Journal is reporting “Polish exports of games, consoles, and video game devices in 2013-2018 increased by 3810.5%. The country is today the fourth largest exporter in this industry globally, according to data presented by PKO BP in a report on Polish foreign trade.

Although Poland is far behind dominant China, which exports goods worth €9.35 billion and has a 49.1% share in the global sales of games and consoles, the country accounts for a noticeable 6.5% of the global market with its exports valued at €1.24 billion. Poland is ahead of such countries as Germany and the US. The second and third place in the ranking is occupied by Hong Kong (exports valued at €1.74 billion, a 9.1% share of the market) and Japan (€1.95 billion, 10.2%).”

This article became one the top talking points in the Polish game community over the past week in Paris, but it’s a confusing number given the inclusion of “consoles” into the mix. It is fair to argue that Poland punches way above its weight when it comes to game development, not simply due to the enormous amount of game development talent found there, but also a result of both government and private investment in the sector and very competitive labour costs.

However, the devil is always in the details so perhaps it’s really not time to break out the champagne (or vodka) just yet. The inclusion of Hong Kong in the top five is a hint. Try and think of a world class games franchise, ala The Witcher, that originates from there and you have to admit, it’s not immediately obvious. The number is in fact made up of a lot of re-export revenue and if you consider that all game hardware manufacturers use Hong Kong as a thoroughfare for export then the number starts to make sense. In Poland’s case, it’s probably safe to assume that more and more companies (e-commerce, B2B distribution and warehousing) are attracted to the border regions to handle logistics operations and to take advantage of the competitive wage rates and therefore inflating the number substantially.

A software only, not including work for hire, study would be a very interesting one indeed.
(Story http://bit.ly/2WzkJh4)

PRETEENS GETTING THEIR CONTENT FROM YOUTUBE

Super Data hits us with some truth bombs. Roughly 78% of gaming preteens ages 10 to 12 watch online gaming videos, along with around 67% of children ages seven to nine, according to a study from SuperData.

If you happen to have some pre-teens in your house you will know that the terrestrial version of TV that we used to know of has almost entirely been replaced by content on demand services such as Youtube and Twitch.

Any game developer or publisher that hasn’t allocated a large portion of their advertising budget to content strategy hasn’t been taking notice. Of course, getting eyeballs on to the content remains a challenge for all content creators, but as with all art there is no rules and the teen audience is very hard to manipulate. As we tell ourselves and all our friends – to get a viral video going you will need to try at least a hundred times before you will find a recipe that works, and more than likely you will have to pay for at least 20% of your eyeballs.

EA COMES BACK TO STEAM

EA’s return to Steam is an absolute win win for consumers, removing the need to click around to get your EA games from the Origin store or other online e-stores. It’s likely a sign of things to come as games publisher’s operating their own service find there is a ceiling on the subscriber or user growth curve and that further growth requires some imagination. This imagination may not be too taxing and be anything more complex than considering the consumers convenience – the type of convenience that allows for the end user to buy games all in one place, in one shopping basket.

VALVE FINALLY CONNECTS THE DOTS TO MONEY LAUNDERING

The press was quick to correctly characterise Valves statement about the banning of Loot Box key resales. Most articles we found associated the move with Anti Money Laundering considerations however a close look at the post on Counter Strike .NET, sees Valve being very careful with their choice of words.

Why make this change? In the past, most key trades we observed were between legitimate customers. However, worldwide fraud networks have recently shifted to using CS:GO keys to liquidate their gains. At this point, nearly all key purchases that end up being traded or sold on the marketplace are believed to be fraud sourced. As a result, we have decided that newly purchased keys will not be tradeable or marketable.

World-wide fraud networks liquidating gains doesn’t quite roll off the tongue as easily as Money Laundering, but it is a step in the right direction. This is the first time we recollect having seen Valve publicly associating their steam keys (in whatever form) with the liquidation of criminally acquired gains.

In some circles, it’s very common knowledge that for years steam keys have been the preferred currency of those looking to launder money. That may be a fairly controversial statement to hear if you have not considered it previously but if you stop and think about how easy it is to purchase 100,000 keys of GTA V in one jurisdiction at 26.00 USD and email them to another jurisdiction. In the next jurisdiction they are quickly sold for between 22.00 – 26.00 USD to some other party and then the proceeds withdrawn, causing the transaction to be conjured into legitimate sales revenue. When you understand this, suddenly the global proliferation of cheap keys makes a whole lot of sense. The ultra-thin margins and losses made on high volume transactions in the game industry, especially within the AAA game space has been extremely suspicious to say the least. At a base level these keys are like cash with no denomination. Each key is a sequence of letters and numbers of which the only people in the world that knows its true value is the person the who buys it and the person who sells it.

If that is NOT the perfect tool to launder money, then it’s hard to imagine what would be. I think it’s only a matter of time that we will see the game key banished as a direct result. Direct activation of games, regardless of where they are purchased is a simple thing to do. Publishers such as EA and Ubisoft already allow for this method of activation by third party e-retailers.