Distribution Is Everything

Hi Everyone. Welcome to another issue of Naavik Digest! If you missed last issue, be sure to check out our analysis on the surge of funding going toward modern MMOs. This issue, we discuss the state of game distribution and how vital it has become in the modern game industry. As platforms proliferate and the number of games increases, game discovery only grows more challenging. Check it out!

Elad Levy on Game Analytics — Tactics, Advice, and Lessons Learned: Game analytics may sound easy in theory, but can be extremely complex in practice. Every game and genre is different, and every team works with different levels of talent and resources. So what tactics, advice, and lessons learned can help teams level up their use of data? To explore this topic, Elad Levy, founder and CEO of Dive, joins Naavik co-founder Aaron Bush to discuss his insights and share how Dive helps dozens of teams better master game analytics. Website | YouTube | Spotify | Apple Podcast | Google Podcast.

Sky Mavis, Delegated Proof of Stake, and Building on Ronin: Sky Mavis — the developers behind the OG web3 game Axie Infinity, which has generated $1.3 billion in lifetime revenue — have been busy beefing up the security of their Ronin blockchain and opening it up to third-party game developers. On March 30th, Sky Mavis announced the Ronin blockchain’s upgrade to Delegated Proof of Stake (DPoS), and unveiled the genesis batch of game studios that will be building and launching games on Ronin: Directive Games, Tribes, Bali Games, and Bowled.io. Your host, Niko Vuori, chats with Kathleen Osgood, Director of Business Development at Sky Mavis, about what this means for Sky Mavis, Axie Infinity and third-party game developers looking to build on Ronin.  Website | YouTube | Spotify | Apple Podcast | Google Podcast.

Coming off of an epic GDC week, I keep coming back to distribution as a major theme. The idea seemed to be one of the topics de jour at the conference — not distribution in the sense of necessarily marketing, but also distribution in the broader sense of how publishers and developers get games in more players’ hands. In other words, what does game discovery mean in this new era of subscriptions, ATT, TikTok, and more? How can you stay on top of new platform shifts / avoid platform saturation and create marketing arbitrage? Alongside creating a great game, distribution has become a more important topic than ever (and in many ways reentered the conversation).

I’m very much a macro person when it comes to games, so I love to map out all of the big trends that touch on distribution. Here are a few that leave me thinking:

A central crux to this piece is that game developers are increasingly weary of traditional middlemen and platform economics. Nowhere is this more apparent than with Epic Games. Ultimately, it’s the Epic v Apple case that kickstarted this 3.0 era (1.0 being the transition to digital storefronts and 2.0 being mobile) conversation of distribution by proposing a lower tax than 30%. It turns out this was harder to do than simply commoditizing the fee. Two notable examples: Discord tried to launch their own storefront and Epic spent $400 million-plus in minimum guarantees to get games on the Epic Game Store and recently opened the doors to self-publishing.

There are so many other instances of this. Xbox Game Pass has so far emerged as the most successful subscription platform, reaching tens of millions of customers. Whereas Stadia’s cloud push largely failed because Google fumbled its content library and business model (full purchase vs. add-ons or subscriptions).

What it boils down to today is creating or finding new platforms and services for distribution, whether they be exclusive or cross-platform / store. Game developers need to tap into these new modes of distribution to succeed or become the companies that own distribution in much the same way as Valve, Apple and others have in the past (much harder). And today, there are so, so many ways to think about how to reach an audience. Whether explicit or not, we’re always exploring novel distribution strategies at Naavik. To name a few, we’ve looked at how:

In other words, it’s not enough just to launch a game and hope for the best. Game developers also need a sophisticated distribution strategy that includes understanding what platforms to launch on and how to tailor a game’s business models and monetization strategies for said platforms.

That’s what makes this period in the game industry so difficult, scary, and interesting. Cracking the distribution puzzle means pushing a game to rise above the rest. It also means that it’s not just the AAA games that will necessarily find success, but also indies that now have an opportunity to grow into viral mega-hits. What will be the next game to challenge the meta?

One of my favorite recent examples of this is the recent wave of alternatives to the App Store, and the burgeoning idea of a web-based game distribution. This is in large part due to incoming regulations directed toward Apple, which allows for alternative payment methods. My colleague Carson wrote a great piece on the subject: “There are a wide variety of unique Android app stores that receive little attention in Western markets but are set to become increasingly important in the near future. Many of these third-party Android app stores already feature large audiences and major games, and they arguably deserve more consideration from developers than they receive.”

In a recent interview, Flexion CEO Jens Lauritzson said the company targets major third-party Android app stores to generate incremental revenue. On average, the other stores combined add about 10% to a game’s overall Android revenue. To ground this in a more tangible example, Supercell reported $1.88 billion in revenue in 2022. Data.ai shows $1.2 billion, which means there is roughly $700 million of unaccounted revenue. We could probably attribute 10% (or $180M million) to alternative App Stores, $450 million to $500 million to China revenue, and the remaining $10 million to $50 million to web store purchases (for which Supercell has the most robust bespoke system built out of any other mobile game I’ve seen). This is a significant shift away from the App Store and Play Store!

While making a good game is still important, it’s clear that isn’t enough as the industry undergoes this new paradigm shift. Distribution should be considered as much in planning as any other aspect of a game’s development and launch. And as we see new venture-funded games release in the coming months, all eyes will be on how these new titles can reach the widest audiences.

As a bonus, here are a few thoughts on what I’ve seen people experiment with or talk about regarding distribution aside from what we’ve covered above:

(Written by Fawzi Itani)

The F2P sports simulation category has long been dominated by real-world franchises from gaming giants like EA Sports and 2K (FIFA, MADDEN, NBA, etc.) that honed their respective pedigrees on PC/console before replicating success on mobile.

Franchise ties with prestigious sports clubs and the ability to play as your own favorite sports heroes like Lionel Messi or Michael Jordan organically attracts millions of fans and helps create a very engaged player base.

In 2017, a little known U.K.-based developer, Playdemic, launched a casual, real-time PvP golf simulator titled Golf Clash. Despite no real-world franchise ties, the game went on to become a massive hit and remains one of the most popular F2P sports games.

Playdemic was founded in 2009 in Manchester by Paul Gouge and Alex Rigby, both of whom initially set out to develop social games mainly for Facebook but later also for Android and iOS platforms. Both founders had a history at Rockpool Games, a U.K.-based developer that created content for mobile devices and other mobile companies before that.

Playdemic has a rich history of parent companies. The company was first acquired by software company RockYou in 2010. When RockYou faced financial instability later that year, Playdemic orchestrated a management buyout to reclaim ownership of the company. In 2017, TT Games (by then a subsidiary of Warner Bros.’ gaming division) acquired Playdemic to bolster its mobile footprint and four years later sold the company to EA.

Undoubtedly, Golf Clash is Playdemic Studios’ biggest hit. According to data.ai, Golf Clash has amassed $789 million in lifetime revenue and 64 million in downloads worldwide. With a revenue per download (RPD) of $12, Golf Clash has been a serious cash cow for Playdemic.

Before Golf Clash, the mobile market had its share of golf simulator games, but these were mostly poor ports of existing PC/console simulators that leaned far more heavily into the simulator genre. They felt unintuitive, hard to play, and unfit for mobile phones.

Golf Clash broke the mold with its mobile-first design. At its core, the game is still a golf simulator, but Playdemic incorporated modern multiplayer elements like real-time PvP matchmaking, ultra-intuitive slingshot control, realistic but casually styled graphics, and straightforward onboarding to make the game a breeze to get into it — even for players unfamiliar with real-world golf.

The success of Golf Clash can be attributed in part to its appeal among a wealthier player base that is acquainted with and engaged in real-world golf. This niche allowed Playdemic to cater to a dedicated audience, bolstering the game's popularity among enthusiasts of the highly competitive and somewhat expensive pastime. This factor also contributed to Golf Clash's popularity among older players with disposable income.

Golf Clash’s runaway success led to Playdemic’s subsequent acquisition by EA in September 2021 for a whopping sum of $1.4 billion. Many in the industry questioned the price tag, and later in this post we’ll examine the nature of the deal and whether it ultimately has proved successful for EA.

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The legal challenges of generative AI (Kostyantyn Lobov | Gamesindustry.biz): “From recent conversations, it seems like everyone is experimenting with generative AI (largely behind closed doors, at this stage) and thinking about how it could fit into their processes. In the games industry, the potential use cases are many: art, music, code, level design, pitch/marketing materials and even internal documents like first drafts of job specs and business plans. The speed at which new technologies become popularised often catches the law off guard, and there is a period of adaption as courts and law makers work out how they should deal with. This is happening with generative AI at the moment.” Link

Is Elden Ring an existential risk to humanity? (Julian Togelius | Blogpost): “Some of the game's main themes are civilizational collapse and vengeful deities. Would it not be reasonable to be worried that this game would take over the world, maybe spreading from computer to computer and improving itself, and then killing all humans? Many of the game's characters would be perfectly happy to kill all humans, often for obscure reasons. Of course, this is a ridiculous argument. No-one believes that Elden Ring will kill us all. But if you believe in some version of the AI existential risk argument, why is your argument not then also ridiculous? Why can we laugh at the idea that Elden Ring will destroy us all, but should seriously consider that some other software — perhaps some distant relative of GPT-4, Stable Diffusion, or AlphaGo — might wipe us all out?” Link

E3 2023 and the 'ocean liner' problem (Simon Carless | GameDiscoverCo): “There’s already good consumer game shows in the U.S. — ReedPop’s own PAXes looming large among them. And at least for now, the main meeting places for doing business in-person seem to be GDC (in the U.S.) and Gamescom (in Europe). So that’s the biggest takeaway I’d have from E3 not taking place in 2023. Actually, everything that (new E3 partner) ReedPop suggested for the revamped show made a lot of sense. But the drift was already in place — the ship was already moving towards the rocks. And in the end… there’s just not much you can do about that?” Link

The design secrets powering Habby’s hit machine (Neil Long | Mobilegamer.biz): “Habby is one of the hottest labels in mobile games right now. And after scoring huge success with Archero and Survivor.io, its latest game looks like it could be just as impactful. Sssnaker has that same top-down viewpoint and all-action gameplay. Having already remixed the shooter and crowd survival genres in its own Habby house style, it’s Snake’s turn for a mobile makeover.” Link

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