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Tencent's CEO Criticized that the Game Sector "Accomplished Nothing" During 2023.

Tencent's CEO, Ma Huateng, stated during the company's annual meeting that the gaming sector “achieved nothing” over the past year. Ma expressed concern that the gaming sector faces a significant threat because it has been complacent, relying on past successes, while competitors have continued to deliver new hits.

Ma emphasized that Tencent's primary competitors, miHoYo and NetEase, have each successfully launched major hits like Genshin Impact and Eggy Party in recent years. In contrast, Tencent continues to heavily depend on its older titles.

Tencent's game business heavily relies on free-to-play games, particularly on mobile platforms. Honor of Kings has been Tencent's most popular title in recent years, generating revenue significantly higher than that of all other Tencent-published games, including PUBG Mobile combined. However, in 2023, Honor of Kings experienced an 18% decrease in revenue, possibly attributed to intensified market competition.

To capture more market share, Tencent introduced Dream Star in 2023, a party game similar to Eggy Party. Even with a substantial investment of $197 million in an incentive scheme for content creators, Ma acknowledged that the performance of the newly launched games did not meet the company's expectations.

Nevertheless, Tencent's game business has undeniably maintained its strength on a global scale in terms of revenue. According to Newzoo's data, Tencent secured the top spot in 2022 and H1 2023, boasting a total gaming revenue exceeding $15 billion respectively. This accounted for nearly 30% of the total gaming revenue generated by the top 10 public companies.

For Tencent to achieve breakthroughs, a shift towards investing more in enhancing player experiences and introducing innovative new games is essential. The previous strategy of creating “Tencent versions” of popular hits in the market might no longer be suitable to yield significant success in the Chinese market.

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The GTA Trilogy Joins Netflix Offerings on December 14.

On November 29, Netflix announced the introduction of Grand Theft Auto: The Trilogy – The Definitive Edition to its expanding collection of Netflix games. The game will be accessible to Netflix members starting December 14 on the App Store, Google Play, and within the Netflix mobile app.

Grand Theft Auto: The Trilogy — The Definitive Edition is a remaster of GTA III, GTA: Vice City, and GTA: San Andreas, originally launched by Rockstar Games for consoles and PCs. Rockstar made this bundle available on iOS and Android as early as 2011, priced at $11.99. The Netflix version is now open for pre-registration on the App Store. Notably, it appears identical to the original, with the only distinctions being the absence of a download fee and a modified logo featuring the Netflix icon. It's worth mentioning that unlike other Netflix games, the Trilogy doesn't utilize Netflix’s cloud streaming service; instead, it requires 2.9GB of storage directly on the device.

It’s been two years since Netflix announced that they would take gaming seriously, yet the streaming giant seems to still be 'crawling'. As reported by CNBC, the average daily users reached a peak of 2.7 million in January 2023 but experienced a decline, dropping below 2 million from March to July and hitting a low of 1.45 million average daily users in March. These figures indicate that less than 1% of Netflix's vast subscriber base of 247.15 million utilize the gaming service on a daily basis.

However, it is indeed exciting to bring a bundle of games from one of the most popular franchises in video game history to Netflix. Though it is not cloud gaming, it is somehow promising in bringing Netflix viewers to try the games without any extra payment. Also, GTA VI is coming out in 2025 with trailers released this month; those who would like to revisit the classic series might as well try the Netflix version.

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Ubisoft Blames ‘Technical Error’ for the Full-screen Pop-up Ads in Assassin’s Creed

Ubisoft blames a "technical error" for displaying full-screen pop-up ads during gameplay in Assassin's Creed Odyssey over the Thanksgiving week. According to The Verge, this advertising feature has received numerous complaints from players who find the full-screen pop-up ads "disgusting" and highly disruptive to the gaming experience.

An Error or A Test?

Ubisoft clarified in their post on X that their original intention was to showcase a promotion for Assassin's Creed Mirage's Black Friday Sale as part of the franchise news in the main menu of other Assassin's Creed games. Unfortunately, due to a technical error, the sale ad appeared in unexpected in-game menus, such as when the player navigated to the map screen in the game.

While Ubisoft has clarified that the issue was caused by technical errors, there is a possibility that it was an experimental attempt to test the effectiveness of this advertising strategy. Despite the negative reception of Assassin's Creed Mirage’s full-screen pop-up ads, it cannot be denied that in-game advertising has proven effective in less disruptive instances. According to Statista, 50% of gamers aged 25-44 believe that certain types of in-game advertising enhance the gaming experience, while another 25% believe that in-game advertising does not significantly impact gameplay.

Full-Screen Pop-Up Ads Proven Unwelcome Once Again

Many gaming companies have chosen to incorporate ads into some of their games. While ads running on billboards are generally more acceptable, attempts at full-screen ads have proven to be unsuccessful. In a situation similar to this unwelcome one, Electronic Arts previously had to retract its unskippable, full-screen commercial in UFC 4 due to the considerable negative feedback from players. Similarly, Microsoft faces complaints with its full-screen advertising promoting their own games, even though they only display the ads from time to time when an Xbox is booted. While attempting to explore another source of revenue through in-game advertising, companies should be very careful in disrupting players' gaming experiences, particularly with games that have already cost players a lot to download and play.

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After a Decade, Grand Theft Auto VI is Finally on the Horizon

Finally, after a decade since the launch of Grand Theft Auto V, Rockstar Games has announced a trailer for the "next Grand Theft Auto," planned to release in early December. Compared to the previous gaps between entries in the series — a five-year gap between Grand Theft Auto IV and Grand Theft Auto V, and a four-year gap between Grand Theft Auto: San Andreas and Grand Theft Auto IV — the ten-year period indicates a substantial time and cost investment in the development of the next Grand Theft Auto.

According to Game Developer, Take-Two Interactive, the parent company of Rockstar Games, suggested in May of this year that FY 2025 would be a very promising year with the release of an "incredibly robust pipeline of projects" that the company had been preparing for years. CEO Strauss Zelnick further stressed that the upcoming titles would “set new standards” in the gaming industry, hinting at the possibility of GTA VI's launch during Take-Two's next fiscal year.

The previous GTA V achieved immense success, establishing a substantial fan base over the years. Even in 2023, a decade after its initial release, GTA V remains among the top five Xbox games by monthly active users and the most downloaded PS5 game in Europe as of August 2023. The popularity of GTA V has endured, continuing to attract new fans rapidly. As of November 2023, GTA V surpassed a total of 190 million sales worldwide, marking an increase of 35 million sales in the past 12 months. According to IGN, with approximately 190 billion sales, Grand Theft Auto is the third best-selling game of all time.

The release of GTA VI and other projects is anticipated to contribute to over $8 billion in net bookings across FY 2025. According to Statista, Take-Two generated approximately $5.3 billion in net bookings for FY 2023 and $2.6 billion for the first two quarters of FY 2024. If GTA VI is launched in FY 2025, there is a high likelihood that the total amount might surpass the projected $8 billion.

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Call of Duty: Warzone Mobile Will Come Out in Spring 2024, Will It Be Another Success Entering the Mobile Space?

Earlier this month, in celebration of the 20-year-old Call of Duty franchise, Activision Blizzard released a new trailer for its upcoming mobile version of Call of Duty: Warzone, with plans to deploy it in Spring 2024. This isn't Activision Blizzard's first attempt to enter the mobile gaming market. Last year’s Diablo Immortal proved to be highly successful, reaching 20 million installs within two months. As described in Activision Blizzard's 10K report, Diablo Immortal's success played a crucial role in the increase of Blizzard's segment net revenues in 2022(50).

This previous successful example highlights an important business trend: the migration of large franchises to mobile gaming. According to Newzoo's 2023 Games Market Report, mobile gaming generated $92.6 billion, accounting for a significant 49% share of the total gaming market revenue, and it continues to exhibit a trend of expansion(20). The substantial potential of the mobile market has captured the attention of gaming companies. Mobile gaming offers advantages such as the ability to introduce major franchises to a broader audience. As Activision Blizzard believes, mobile gaming allows players to try out new games with no upfront costs. Additionally, without the limitations of running on consoles or PCs, mobile versions can reach wider age groups and regions while eliminating the need to play at home(43).

According to Game Developer, Call of Duty: Warzone Mobile not only has the potential to expand its audience but also aims to retain its existing player base from the regular version. Warzone Mobile will feature cross-progression and Battle Pass integration, linking it with the regular counterpart and the upcoming Call of Duty: Modern Warfare III. This continuous content update feature ensures that Warzone won't lose a substantial portion of Call of Duty's player base as they transition from one new release to the next.

If Call of Duty: Warzone Mobile achieves another success, it will undoubtedly strengthen Activision Blizzard's (and Microsoft Xbox's of course) presence in the mobile gaming market.

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Microsoft Successfully Completes $69 Billion Acquisition, Welcoming Activision Blizzard to the Xbox Family

On October 13th, Microsoft announced that they had completed their $69 billion acquisition of Activision Blizzard, closing the megadeal that had been in progress for two years.

Over the past two years, Microsoft has successfully addressed numerous objections from regulators, including the Federal Trade Commission and Competition Market Authority, as acquiring another gaming giant might have led to Microsoft's potential monopoly in the future.

Activision Blizzard owns many large franchises, including Call of Duty, World of Warcraft, Overwatch, and Candy Crush. These franchises will significantly enhance Microsoft's first-party production capabilities, giving them a substantial advantage for Microsoft's Xbox consoles and related products. Although Microsoft has agreed to provide continued access to Activision's major titles, like Call of Duty, on rival platforms from Sony and Nintendo, it still raises concerns about excessive competitiveness.

According to IBISWorld, Microsoft has continued to lead the US game market in 2023, holding a 10.3% market share. Activision Blizzard, the fourth-largest game company, holds a 3.3% market share. Sony held a 9.9% market share, which is only 0.4% less than Microsoft. However, with the acquisition of Activision Blizzard, Microsoft’s new market share will rise to 13.6%, significantly surpassing other major companies in the industry.

For Activision Blizzard, the completion of the acquisition is worth celebration. In the company's 2022 10K report, a substantial section discussed potential risks related to the merger (pages 17-19). Additionally, Activision Blizzard will no longer need to worry about their high dependence on a small number of franchises (page 23) and their previous reliance on third-party platforms and consoles (pages 24-25).

The success of Microsoft overcoming objections from regulators and finalizing the acquisition of Activision Blizzard is a significant achievement for the company. With more power than ever before, Microsoft has the potential to reshape the gaming landscape in the future.

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SAG-AFTRA Game Performers Approved Strike Authorization on the Interactive Media Agreement Negotiations

On September 25th, SAG-AFTRA members approved a strike authorization with a 98.32% “yes” vote to support the union’s ongoing negotiations on the Interactive Media Agreement with large game companies. SAG-AFTRA President Fran Drescher reiterated earlier this month that the “yes” vote isn’t a vote to strike but rather a vote to provide the union with the authority to call for a strike if necessary.

Renegotiate the Interactive Media Agreement

According to SAG-AFTRA, the Interactive Media Agreement covers all performers engaged in interactive programs or video games, including off-camera (voiceover) performers and on-camera (motion capture, stunt) performers.

The 2020 Interactive Media Agreement shows that the wage for a 4-hour off-camera or 8-hour on-camera performer from November 2021 to November 2022 is $956.75 per standard day, representing an increase of approximately $28 compared to the $929 rate in the previous 2020 period.

The union has been working to update certain terms in the Interactive Media Agreement to better align with the "value [performers] bring to the multi-billion dollar gaming industry". The union is requesting an increase in wages to keep up with inflation, regulations on preventing exploitative uses of AI systems, and enhanced on-set safety measures for hazardous stunt work.

AI's Threat Has Reached the Game Industry.

According to DunDuncan Crabtree-Ireland, the National Executive Director and Chief Negotiator of SAG-AFTRA, voice and performance capture AI has become advanced and powerful enough to pose a real threat to job opportunities. However, he notes that despite five rounds of negotiations, game companies are not willing to address critical issues related to changing the agreement.

Currently, there is less public concern about AI's threat to capture performers, as this technology has not yet fully showcased its capabilities in any well-known franchise. However, the future job market for these performers is in jeopardy because there are no contracts regulating the use of AI to replicate and learn performers' actions or voices as a precaution.

Latest Update

On September 28th, after another three-day bargaining session, SAG-AFTRA announced that they did not reach a new deal on the agreement with the companies.

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Unity's New "Runtime Fee" Might Change the Game Industry

Recently, Unity's introduction of a new "Runtime fee" has outraged many game developers. To reassure its users, Unity later claimed that these additional operational fees would only impact Unity's top 10% of users.

What is a "Runtime fee"?

According to Game Developer, Unity's new "Runtime fee" is based on the times a game is being installed by an end user. The Runtime fee will be charged monthly after the game has passed a threshold, and this threshold is determined by the different license the game developer chooses. For Unity Personal and Unity Plus licenses, the fee will kick in after a project crosses both two hundred thousand dollars in revenue over 12 months and two hundred thousands total installs.

Why would Unity introduce such a controversial install-based fee?

Unity's president, Whitten, announced that the fee to maintain and update the Unity Runtime is "quite expensive", and by charging developers a “Runtime fee”, Unity could better "invest in their engine" as they are currently "working at scale." 

The chart from Statista shows that Unity Software's EBITA kept dropping during the past five years.

What would it bring to the industry?

Returning to Unity's latest reassuring statement that it would hurt the "Top 10%" of Unity's developers, Francis believes that it is somehow implying a barrier to individual game developers. This will frustrate their passion for making games since when they put in huge efforts to try to make a unique pop game, they know that there will be a huge amount of fees awaiting.

Maintenance fees have always been an inevitable high cost for the game industry, just as they are for service providers like Unity. However, when dealing with a vast user community, Unity should also be mindful of its capacity to influence the game industry. The "Runtime fee" could potentially cause small workshops, game development hobbyists, and individual developers to no longer view game making as an enjoyable profession; instead, they will need to carefully consider whether it's worthwhile to invest time and money in creating a great game.

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My Sector is Gaming

My sector is Gaming and I will be following the Game Developer, The New York Times, and The Wall Street Journal.