This article explores the value of being a first-mover in the gaming industry today. All opinions are my own. This is a repost from my blog, where you’ll find this and other takes on interactive media.
Part I: The Auto Chess Conundrum
In January 2019, a small Chinese game studio called Drodo Studios released Auto Chess. Set on the classic chess board, Auto Chess provided a common pool of champions for battle. The game combined unique elements of strategy and deck building.
Technically, Auto Chess wasn’t a standalone game. It was a mod of the popular game Dota 2, and it became an instant viral sensation. Over seven million players flocked to Auto Chess in its first three months of launch. Many saw Auto Chess as the most important gameplay revolution since Battle Royale.
At the time, it seemed like Drodo struck gold. When Valve and other large publishers approached Drodo with acquisitions offers, Drodo turned these offers in favor of building its own standalone game. After all, why let others capitalize on its success?
Unfortunately, Drodo’s decision did not pay dividends. Competitors quickly flooded the market with Auto Chess clones. Valve re-imagined Auto Chess as Dota Underlord. Riot redesigned Auto Chess for League of Legends, releasing Team Fight Tactics. Tencent launched Chess Rush. Blizzard introduced Hearthstone Battlegrounds. So many copycat games entered the market that the genre got its own name: Auto Battlers.
By the time Drodo built its standalone Auto Chess game (divorced from Dota) in late 2019, the market was crowded with fast-followers. Drodo became a sideshow in its own genre.
Drodo’s story raises an interesting question for the gaming industry: who captures the value of gameplay innovation? Business theories often talk about “first-mover advantage”. Drodo was the first mover in its category, but it accrued little of the first-mover advantages. How should we interpret that?
One interpretation is this: gameplay innovation is no longer a sustainable source of competitive advantage for the gaming industry. To better understand why, we need to trace through the state of the industry.
The original Auto Chess
Part II: A Changing Industry
Game development was traditionally a slow process. Two key factors gated the numbers of big releases each year. The first was access to engine technology: games engines were incredibly difficult to build. Few outside of the large studios and publishers had access to high quality engines. The second limiting factor was physical distribution. Best Buy, GameStop, and other gaming retailers had limited shelf space, largely reserved for franchise titles with large marketing budgets.
These limitations pushed the industry towards consolidation. Bigger companies could invest more towards central engine technology and publishing spend. This dynamic of bigger-is-better produced many of the gaming giants today: Activision Blizzard, Electronic Arts, Take-two Entertainment, Ubisoft, and so on.
This paradigm did not last. Over the past ten years, public engines in Unity and Unreal have caught up to (and in many cases surpassed) private engines in performance and tooling. Steam, App Stores, and other digital distribution erased barriers imposed by shelf spaces.
As industry barriers disappeared, smaller independent studios proliferated. Double-A studios like Asobo (a Plague’s Tale) and independent developers (Rimworld, Stardew Valley) started to take more market share.
But more studios also brought more competition. Thousands of new games were released on Steam and mobile App Stores every year. Successful game concepts were endlessly copied. As the business of producing hits became more unsustainable, companies looked for new ways to build steady, long-term revenue. This was done through live services.
Part III: The Emergence of Live Service Platforms
Riot’s League of Legends launched in 2009. It remains popular today, even as many competitors introduced similar gameplay. Two factors helped in its success: live-service platform and community.
Underneath the hood of League of Legends is a deep set of systems and tools: messaging and voice chat systems, social systems, matchmaking, internal development tools, event systems, cloud-based server infrastructure, post-game data analytics, and so on. These tools enhanced play experiences and supported the continuous release of contents, events, and updates.
League of Legends also spent enormous effort building up its competitive community through esports. It created regional league systems across continents and global championship tournaments. One such finals tournament was held at the 45,000-Seat Seoul Stadium and was streamed by over 30 million people worldwide.
To date, Riot launched three standalone games beyond League of Legends: Legends of Runeterra, Valorant, and Team Fight Tactics. All three games were adaptations of already popular games or mods. Legends of Runeterra was a reboot of Blizzard’s Hearthstone; Valorant closely resembles CS:GO; Team Fight Tactics followed Auto Chess. In fact, League of Legends itself was a reimagining of the original Dota mod in Warcraft III.
Riot’s process of thoughtful replication is a feature of its business model. It does not compete by inventing novel gameplay, which comes with creative risks. It instead leans on its platform strengths to compete in genres already proven to work. Team Fight Tactics shares the same client base as League of Legends for distribution. Legends of Runeterra uses the same live service architecture. Team Fight Tactics and Runeterra are set in the League of Legends universe. Valorant builds on League of Legends’ esports ecosystem, with many overlapping teams.
Part IV: The Reconsolidation of the Gaming Industry
As we trace through the history of the modern gaming industry, we see waves of consolidation and fragmentation, with power shifting from big companies to independent studios and back.
We’re likely entering a new wave of consolidation today, with new moats centering on live-service ecosystems that hold millions of active players: those of League of Legends, Fortnite, Roblox, and so on. They are enabled by a deep set of live-service tools and technology and deepened by familiar brands.
Video games fall at the intersection of media and technology. In years past, games were produced, priced, and distributed more like media products than technology services, with premium games sold as $60 products.
Game platforms more closely resemble consumer tech companies. Their starting points aren’t specific genres or modes of play, but rather the captive player network within their ecosystem. Fortnite’s goal isn’t to win in the Battle Royale genre: it’s to continuously engage its player base across new content and social experiences. It tries to outlive Battle Royale.
One way for platforms to accomplish this is to continuously introduce novel play experiences. When “viral hits’’ like Drodo’s Auto Chess surface, game platforms race to clone these hits for their captive player base. When Riot can distribute Team Fight Tactics to hundreds of millions of players on its platform, it matters little that Drodo created the genre. Platform ownership becomes more important than a first mover advantage.
Part IV: What the Future could Look Like
The value of owning platforms will continue to outpace the value of inventing novel gameplay. But what does that mean for the future at a more granular level?
One path will see existing live-service games/platforms (Fortnite, League of Legends, Roblox, etc.) grow stronger as they intersect more aspects of our digital lives. These gaming platforms will incorporate more modes of play over time. They will also open more doors to third-party content. In this path, indie developers will opt to create games within these platforms rather than develop standalone games. In doing so, they will further deepen the platforms’ competitive moats.
An alternative path will see live-service platform capabilities become more widely available. These capabilities — from social systems to matchmaking to in-game commerce to backend infrastructure — will be patched into some sort of SaaS offering. Think of it as the Shopify of gaming. Microsoft, Epic, and Amazon already offer elements of the tool stack. Startups are also getting in on the action.
When the indie game “Among Us” found viral success earlier this year, its creators at first opted for a sequel, before cancelling that plan to build live services for Among Us. This was the right choice. In the time between “Among Us” and “Among Us 2”, endless clones will have come out. Some will be created by or be on major game platforms, where they’ll have access to better resources and distribution. But if “Among Us” can leverage its viral success to build strong live service, community, and brand, it could avoid the fate of Auto Chess and capture the full value of its gameplay innovation.