April 26, 2022
Illustration: Christopher T. Fong/Protocol
Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Tuesday, we’re discussing the roadblocks facing a subscription-first future for the game industry, Activision Blizzard’s tough quarter and Elden Ring’s continued reign atop the sales throne.
Video games aren’t experiencing a Netflix or Spotify moment after all. At least, not yet. While subscription gaming services have been on the rise for the past few years, thanks largely to the growth of Microsoft’s Xbox Game Pass platform, the shift in consumer spending and consumption hasn’t followed. Instead, subscription platforms — and the smaller cloud gaming services often bolted onto them — make up a tiny slice of the overall games market.
The shift won’t happen any time soon. It may take years or perhaps even decades before these distribution methods come close to supplanting the traditional retail model in gaming. Meanwhile, free-to-play and in-game monetization reigns supreme.
The tendency to compare games with music and video makes sense. Games are a relatively new form of media compared to film and recorded music, and yet all three simultaneously underwent the same forms of disruption caused by widespread internet access, digital distribution and the advent of streaming.
And then there are video games, which only saw the scales tip in favor of buying digital in 2020, thanks to the pandemic. Prior to that, most consumers bought video games on Blu-ray discs from big-box stores and ecommerce retailers. Millions of consumers still do, in part so they can resell them on the used market.
Sony made arguably the most public rejection of a subscription-first future when it rolled out an understated refresh of its PlayStation Plus platform last month.
Having a diversity of business models and price points, as Microsoft now concedes, is one reason why the gaming industry has ballooned into a much larger economic force than Hollywood and the music industry.
But it’s those same factors that make it difficult for new forms of distribution to catch on, at least not without significant investment from some of the most cash-flushed companies in the tech and gaming space. Microsoft, thanks to its Office, Windows and Azure businesses, can afford it.
For now, however, it looks like the “Netflix for games” moniker may apply only to Game Pass. And it may take a very long time until we know just how early Xbox has been to gaming’s next big distribution shift.
— Nick Statt
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“We know we need to deliver more content and more features more quickly. Staying true to priority zero means that sometimes we need to slow down in order to stay healthy and move faster later. But we’re also aggressively looking at ways to accelerate.” —Joseph Staten, the head of Creative for Halo Infinite at 343 Industries, discussed the team’s tricky balance between staying competitive in the live service space and ensuring employees aren't forced to crunch or experiencing burnout in a blog post published last week.
Activision Blizzard misses hard. The publisher’s Q1 2022 earnings on Monday came in under expectations for both sales and profit, "primarily reflecting lower results for Call of Duty and product cycle timing at Blizzard.”
How Hollywood should talk about climate tech. Technology will play a role dealing with the effects of climate change. Not overstating that role could be crucial.
Ubisoft becomes an acquisition target. The Assassin’s Creed publisher has seen its stock drop by more than 40% over the past year and private equity firms are now deliberating potential takeover bids, Bloomberg reported last week.
Revamped PlayStation Plus launching this summer. Sony’s redesigned subscription service will launch in Japan on June 1 followed by launches in North and South America and Europe later that month.
Nintendo’s contractors speak out. Like many tech and gaming companies, Nintendo relies on a large contract workforce, especially outside Japan. Now, following a labor board complaint, contractors are speaking out about poor working conditions at its American offices, according to an investigation from Kotaku.
Raven union vote gets the go-ahead. A group of 21 quality assurance testers at Call of Duty studio Raven Software will be allowed to participate in a union election, according to The Washington Post, after the NLRB shot down management’s attempt to broaden the election to the entire 230-person workforce.
Xbox just had its best March on record. Microsoft’s console was the bestselling gaming hardware device in North America last month, according to market research firm The NPD Group, and it was Xbox’s best March on record, beating out March 2014 in dollar sales and March 2011 in unit sales.
Meta will open its first store next month. The Meta Store is more of a test than a revenue generator: It’s housed in one of Meta’s office buildings, and walking to the next downtown area will take you an hour.
FromSoftware’s open-world role-playing sensation Elden Ring was again the bestselling game in North America last month, according to The NPD Group.
That means it remains the bestselling game of 2022 and now ranks as the second bestselling game of the last 12 months, behind only Activision’s Call of Duty: Vanguard. “Elden Ring showing an inverse decay curve, which is rare to say the least. Very strong [word of mouth], a true blockbuster,” said NPD analyst Mat Piscatella.
For a largely single-player game hailing from a lineage of ultra-difficult niche action titles, Elden Ring’s financial success is a monumental slam dunk for the Japanese developer. It’s also a testament to the resilience of single-player gaming in an industry dominated by free-to-play live service titles.
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