Distribution Is Everything

Apr 12, 2023 10:59 PM

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 Lessons Learned In Game Analytics + Sky Mavis, Delegated Proof of Stake and Building on Ronin


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.

#1: Distribution Is Everything

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:

  • Mobile Tracking: Today, mobile discovery is fraught thanks to ATT — while mobile games spending quantitatively (only) declined 5% year over year, according to our partners at data.ai, it qualitatively feels like a much more seismic shift. I talked to an inordinate amount of people at GDC who feel similarly.
  • Game Discovery: Roblox has 40 million experiences, Steam listed 11,000 new games just in the last year, and gaming now makes up roughly 20% of the entire App Store — or around 460,000 games. With game platforms hosting ever more games, it’s getting harder for players to find those games than ever before. In fact, my friend Simon Carless writes an entire newsletter on game discovery, focused primarily on Steam, featuring anecdotes and data-driven analysis on that very subject.
  • Top 10 Charts on Mobile: In an op-ed about game discovery on the App Store, our partner Neil Long of Mobilegamer.biz wrote about how the App Store Top Charts remain the dominant engine of game discovery on iOS: "Apple could have reinvested a greater fraction of the billions it has earned from mobile games to make the App Store a good place to find fun, interesting games to fit your tastes. But it hasn’t, and today the App Store is a confusing mess, recently made even worse with the addition of ad slots in search, on the front page and even on the product pages themselves.” Momentum is everything.
  • Top 10 Charts Everywhere Else: The top charts meta isn’t exclusive to mobile. In a recent newsletter, Simon Carless writes, New GaaS titles are finding top games tricky to dislodge: according to our estimates, we’re seeing just eight games with >1 million DAU on PlayStation, and less than 60 with >100k DAU, from the entire PS4/PS5 catalog. Many of those top titles (Fortnite, GTA V, Rocket League, etc.) have built up 5-10 years of content to attract and retain. And it’s just harder to compete with them than many realized.”
  • Subscriptions: The steady rise of subscription / cloud gaming are already upending traditional methods for funding, distribution, marketing and discovery. Today, there are over 25M people subscribed to Game Pass.

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:

  • Omega Strikers leveraged creators for its PC launch (and will likely do the same for its cross-platform launch later this month).
  • Groups like OfflineTV and Dream SMP have popularized recent games like Rust, Minecraft, and GTA through new game formats like role-playing.
  • Steam’s China version is a blue ocean opportunity for Western games to reach the biggest game market in the world.
  • Survivor.io cracked the App Store Top 10 through TikTok.
  • Creating a hit Roblox game is more difficult if you weren’t a first mover and how gift cards are allowing the platform to reach younger players and bypass traditional app store commission fees.

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:

  • Make your game co-op and multiplayer from the beginning. Think how do you get current players to bring other players in? What does it mean to play with friends? The canonical recent example of this is Wordle and its iconic green and yellow squares and built-in share feature.
  • Increasingly developers have started to launch, test, and iterate on PC first. If the game is successful and retention metrics look promising, a team can plan a console and mobile launch later.
  • There are various platforms with audience arbitrage opportunities. For example, Guerilla Tag leveraged an innovative use of the VR controllers to pass legacy titles (if we can even call them that!) like Bonelabs and Beat Saber on both the App Lab and Quest Store.
  • In my opinion, UGC platforms are inherently about distribution — they allow players to create, distribute, and monetize their experiences. What does this mean for newer UGC platforms with built-in distribution and more unique revenue share models like Fortnite Creative?
  • IP is always a great option. If the successes of Hogwarts and Marvel Snap are any indication, there is power in well-known IP to add legitimacy to a new product.
  • Community remains a powerful lever to operate from. Web3 games are great cases of this in that they’ve used Discord as a way to build community. DigiDaigaku’s partnership with Windwalk Games, gamifying the meta of community, is one example of this.

(Written by Fawzi Itani)

#2: The Turf War Between Golf Clash & Golf Rival

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 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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