July 19, 2022
Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Tuesday, we’re breaking down the backlash against Unity following its announced merger with IronSource; EA’s new free-to-play Skate revival; and another set of damning forecasts for the game industry’s downturn after two years of major growth.
What may have at first glance looked like yet another game industry acquisition last week — one of many largely humdrum deals during a record period of M&A — has transformed into arguably the worst public relations crisis software maker Unity has ever faced.
Now, Unity CEO John Riccitiello has turned to his personal Twitter account to try to calm the backlash while scores of high-profile game developers have started denouncing Unity, its development tools and the direction the company has taken over the past few years. And in just a matter of days, the ensuing conversation around how video games are developed and funded has spiraled into a much larger debate around the ethics of art for art’s sake and financially motivated entertainment.
How Unity found itself here is a complicated tale, and it starts with a company called IronSource, which specializes in providing monetization tools like analytics and advertising to mobile game developers.
Why does anyone care which companies Unity buys? Major software firms acquire other companies all the time, and especially so in the game industry, where M&A activity has shattered records two years in a row. But Unity’s acquisitions have been all over the map, increasing in frequency since 2020, when it went public.
Riccitiello made everything much, much worse. Unity could have quietly moved on, chalking up the negativity around IronSource as the cost of doing business in the mobile free-to-play market. But Riccitiello poured gasoline on the fire in a now-infamous interview with PocketGamer.biz following the announcement last week.
The backlash against Unity is about the soul of the game industry. Riccitiello isn’t wrong to suggest that game developers could make more money and create stickier, more successful games if they focused early on monetization and incorporated player feedback directly into the development process. But his words have also fueled the near-constant tension at every level of the industry between art and business — between making products that siphon money from consumers and those that succeed at being fun, rewarding and creative works of art.
Riccitiello’s delivery, and the game industry’s messy and dysfunctional relationship with monetization, has created a perfect storm for Unity. Developers likely won’t stop using its platform en masse; Unity is used by 61% of the industry, the company said last year. But the company’s reputation has been dealt a major blow, and it may find that many of its most beloved success stories — games like Hollow Knight, Cuphead and Ori and the Will of the Wisps — are products of a Unity that doesn’t exist anymore.
— Nick Statt
Thinking outside your wall: How the path to net zero requires a new approach to collaboration and knowledge sharing: The emissions that make up a full greenhouse gas footprint can emanate from outside the four walls of your own manufacturing operations, like in the case of PepsiCo, where 93% of emissions come from its value chain.
“Our entire industry is dying. Every media outlet is dying; the entire world of journalism is continuing to change.” — Journalist Rod “Slasher” Breslau spoke to Digiday about the wave of layoffs among media outlets that cover pro gaming and esports.
“If I could go back and make Skate 3 in 2015 or something, I don’t know if it would have been a boxed product. I think it just makes sense for the franchise in terms of what the community wants. I don’t know if having an iterative title makes a ton of sense. It feels like — it sounds trite to say — the natural evolution of the franchise and skating and games and all of those things coming together seems like the right thing for us to pursue.” — Deran Chung, the creative director on Electronic Arts’ reboot of the Skate franchise, talked to The Verge last week about making the title (now simply called Skate and not Skate 4) a free-to-play game.
Nintendo ups its Hollywood investment. With an animated Mario film on the way, Nintendo is getting serious about translating its gaming IP into other media, and has now acquired a CG production studio called Dynamo Pictures, to be renamed Nintendo Pictures.
Crunchyroll lowers subscription fees in key overseas markets. The Sony-owned anime service is reducing monthly prices in close to 100 countries and territories; in India, people will now have to pay around $1.25 per month, as opposed to the prior $10 a month price, which should help the company better compete with local players.
Microsoft’s Activision Blizzard acquisition may clear the FTC. The game industry’s largest-ever deal could be on its way to closing, as Microsoft has provided the FTC with all of its requested information, according to Dealreporter.
Sony’s Bungie acquisition is a done deal. While Microsoft awaits closure on Activision, Sony's acquisition of Destiny developer Bungie apparently raised no red flags and closed last week, a little over six months after it was announced.
Disney raises ESPN+ prices by 43%. ESPN+ subscribers will have to pay $10 a month starting in August. At least it will make the Disney bundle look more affordable.
PlayStation acquires esports firm Repeat.gg. The pro gaming tracker and tournament platform is the latest esports investment from Sony, which last year invested in fighting game series Evo, according to GamesIndustry.biz.
NetEase establishes a new U.S. studio. The Chinese gaming giant has set up a new Seattle studio called Jar of Sparks, led by former Xbox employee and Halo Infinite head of design Jerry Hook.
Apple will introduce a second, more affordable AR/VR headset in 2025, according to Ming-Chi Kuo. Still waiting for the first one, though.
Market research and analyst firms have been sounding the alarm about the effects of inflation and the economic downturn on gaming for weeks now, and last week The NPD Group, the preeminent tracker of U.S. sales, had pretty grim news: According to lead game analyst Mat Piscatella, consumer spending is down — by a lot.
NPD reported on Friday that consumers spent 10% less in the first six months of 2022 than they did during the same time period last year, with game industry revenue down to $26.3 billion. Only subscription gaming is growing, Piscatella noted. This follows Ampere Analysis’ forecast that the global games business could in fact decline this year and Sensor Tower reporting that U.S. spending on non-gaming mobile apps surpassed mobile gaming for the first time in history.
The factors are complex: a mix of delayed games leading to a weak release calendar across the board, inflation and the macroeconomic environment, as well as more so-called experiential spending on activities now that pandemic restrictions have all but disappeared. NPD’s sales charts also indicate that most players just aren’t buying that many new games and are largely content playing Elden Ring and Nintendo titles, at least until something better comes along.
— Nick Statt
Thinking outside your wall: How the path to net zero requires a new approach to collaboration and knowledge sharing:Asking suppliers and associated companies to overhaul the way they work is no small feat, but PepsiCo is taking a three-pronged approach centered around the principles of educating, enabling and incentivizing. The Sustainability Action Center aims to engage and equip value chain partners with tools to undergo their own sustainability journey.
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