Part 1 is here.
Ran Mo retraces the incredible fast follow of the auto-chess genre. Before you could blink an eye, what was a mod in Dota 2 (which itself was a mod) had spun off into three incarnations. The first was from the mod maker, Drodo Studios’ plainly labeled Auto Chess, the second was Valve’s Underlords, and the third was Riot’s Team Fight Tactics. It’s not clear any of them have done “well”. Certainly none of them are making any real money as there’s little to purchase amongst any of them.
Valve’s Underlords PSU Declines
But if there is a leader it’s Riot’s Team Fight Tactics (TFT) by virtue of content cadence (from a player count perspective it’s unclear if TFT is doing something meaningful). How do we explain the last entrant now leading the pack? Ran seems to argue for the power of the platform:
“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.”
Ran goes farther, explaining that “We’re likely entering a new wave of consolidation today, with new moats centering on live-service ecosystems […]”
I could not disagree more. Not simply on Riot’s platform power, but the wider value of game platforms all together. Game platforms have, and will always be, valueless: there is far too much game specificity and velocity for meaningful platform features to scale. “[…] messaging and voice chat systems, social systems, matchmaking, internal development tools”? While standard and required for live-service, they are not particularly “deep”. If these features are to form a moat then it’s the equivalent of a kiddie pool defending Versailles. The ever growing number of PC game launchers all of whom do these exact things suggests as much. The primary value of game “platforms” is discovery and perhaps security.
The deeper platform features of Steam (Marketplace and Workshop) have failed to see widespread adoption. Other platforms haven’t even tried building anything beyond a friends list and chat. None of them can justify a 30% cut, and for many games “multi-tentating” or listing on multiple platforms is the clear revenue maximizing strategy. Of the top 20 Steam games, only 35% non-Valve games use either Marketplace or Workshop. Furthermore, 59% multi-tenant or are on other PC launchers. Expect this to increase as Steam degrades as the sole game discovery launcher. Activision realized this long ago when they shifted Call of Duty to Blizzard.net and away from Steam. Blizzard titles anchor the launcher with eyeballs, but do little feature work. It’s 2020 and Blizzard still region locks many titles, meaning switching from NA to EU servers entails the loss of all progression for some titles.
Other firms take game platforms to eat at certain parts of the game “supply” chain. In addition to a given piece of technology working for games, these firms hope the tech will scale outside of games as well. This is an executive fetish that rarely, if ever, pans out. Machine Zone (MZ) is the latest failed entrant into “but we’re really a tech company”. Both Cognant, its internal ad-buying platform and Satori, its cloud platform, went up in flames. MZ ended up selling to AppLovin at 10% of it’s peak value. The jury’s out if Improbable, the latest “but we’re really a tech company” can dig out of $85M losses. A bigger hope is Unity, but even then only 8% of the 716 customers to spend $100,000 or more have been non-gaming firms. Epic’s PR team was out in full force trouting The Mandalorian using Unreal, but surely this a mingy share of Epic’s revenue. Games have similar challenges to tech firms, but tech firms rarely have similar challenges to games (all squares are rectangles but not all rectangles are squares). A common theme of this blog, reiterated in this series, is that games are distinct and unique medium. The faster we embrace this, the faster the industry can evolve.
While game companies may never be tech companies there may be a small place for game technology companies. Unreal and Unity are real and are here to stay – they solve difficult and prevalent problems faced by game makers. If the games industry grows, the total addressable market for game tech solution grows as well. Is there room for more game technology companies beyond Unreal and Unity? The previously mentioned Improbable seems to think so, but little additional evidence exists.
There’s more to be said for a given game as a platform, but even then the evidence is scant. Publishers haven’t been able retain the value of extensions within a given title (Auto Chess splitting from DOTA 2) or outside of it (MOBAs splitting from Warcraft III and Heroes of the Storm). The simple ability for players to build content within games hasn’t exactly accelerated either. If anything modding has become harder not easier since it’s assent in the early 90s. Can we think of a single major 2020 release to embrace mods? Much was made of Halo 3’s Forge but we’ve seen few copycats since its release in 2007. If we consider a corollary to Bill Gates’ definition of a platform it might go something like this: “A game is a game platform when the playtime of platform content eclipses the main game.” In this view there hasn’t been a modern game as a platform. A softer version might consider a game as a platform when “the playtime of additional modes eclipses the main game”. Despite a much lower bar, it’s not clear that Fortnite, with its concerts and social spaces, has reached it either.
We’re left with Roblox, a true game platform. Roblox provides valuable tools that make it easy for developers to create compelling games as well as providing for discovery. But the jury is out to consider this the future of games, especially with it’s elder sibling, Manticore, is going nowhere fast.
RPGs vary from CCGs which vary from FPSes. FPSes might need to solve for 64 player servers, while CCGs may need transfer markets and RPGs need deep customization systems. Central platform features haven’t been able to adapt to the specificity of particular game design (and the speed at which it changes). This specificity of these challenges shrinks the total addressable market for the tech solutions game firms have devised. As a result, we’ve rarely seen game companies make a successful transition to a tech firm.