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Your essential guide to the business of gaming.
Image: Iron Gate

Are publishers thinking too big?

Valheim

This week in Protocol Gaming, your weekly guide to the business of video games: publishers might be focusing on the wrong thing, Cyberpunk 2077 gets a major patch and GameStop loses another senior exec.

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The Big Story

Are game publishers thinking too big?

Valheim, a Viking-themed multiplayer survival game, is one of the top five most-played games by player count on Steam (as of this writing). The $20 game sold over 2 million copies within two weeks of its Feb. 2 release, making it one of the most viral games to ever hit Steam. At the beginning of March, Valheim boasted 5 million downloads, 35 million hours of streamed gameplay on Twitch and 15,000 years collectively spent by players in the game.

What's most remarkable about Valheim is that it was developed by a team of only five people at Swedish studio Iron Gate. That means the developer team at Iron Gate had one developer for every 100 or so at competing studios such as Bungie and Rockstar.

Scroll a bit farther down the Steam charts and you'll find a game from a studio that makes even Iron Gate look big. Stardew Valley, the agrarian RPG, was created by one person, Eric Barone, who developed the game from scratch over four and a half years. Barone worked 80-hour weeks from his Seattle apartment, teaching himself game development along the way. Stardew Valley has sold over 10 million copies.

The success of Valheim and Stardew Valley supports the following ideas about gaming:

  • A game's mechanics usually supersede its graphic complexity when it comes to entertainment value. Good games can be roughly divided into two camps: those with so-so graphics and great gameplay, and those with good graphics and good gameplay. Tetris and Football Manager would fall into the former category, while The Last of Us and Mirror's Edge fall into the latter. No amount of graphical sophistication can compensate for bad gameplay, yet intensive graphics are a much more significant cost-driver for AAA games. Creating great gameplay is, by contrast, cheap but also exceptionally difficult from a creative standpoint.
  • Making a beautiful game doesn't need to be expensive. Making a photo-realistic game that looks good is going to be expensive, there's no way around it. But often the most beautiful games are those that adopt a signature artistic style, which can lower associated development costs (Stardew Valley, for instance).

One question these ideas raise: If indie games are cheaper to develop and have the potential to be more commercially successful than AAA games, why don't big publishers allocate more funding for them? Of course, games like Valheim, Stardew Valley, Among Us and Celeste are anomalies in terms of their success. But the funding for one AAA game (a few hundred million dollars at today's going rate) could be reallocated to support 30 to 50 promising indie projects. It doesn't seem entirely unreasonable that one or two of those projects could yield a viral hit.

  • A potential objection would be that indie hits can only come into existence outside of the world of AAA publishers. However, there are numerous examples of big publishers playing a pivotal role in the success of an indie game, even if it isn't through direct funding.
  • Epic Games has pioneered one such model in its pivot from developer to distributor, as it has offered indie studios favorable terms to launch exclusively through the Epic Store, according to Rock Paper Shotgun. For instance, Epic's funding of Untitled Goose Game gave the four-person development team the financial stability to work full-time on what eventually became a breakthrough game.

The focus on strategic investments in indie games paid off for Epic. It may prove to be a blueprint for other large studios to follow suit.

— Hirsh Chitkara

Overheard

  • "I'm desperate to change the industry for the better. This seemed like one of the ways maybe it could be far-reaching and impactful." —Former game producer Leslee Sullivant is using TikTok to point out some of the various problems — like lack of diversity and the terrible ways in which women are treated — in the game industry.
  • "He wants to change how games are made, but he hasn't really made any games." —CCP CEO Hilmar Veigar Petursson suggested that Herman Narula's Improbable isn't really living up to the hype. The Financial Times reported that NetEase's Nostos, built with Improbable's SpatialOS, has been canceled.
  • "Patch 1.2 is ready for you! ❤️ I know the wait has been awful and I'm sorry for it. Hope you will consider visiting Night City and check what it has to offer. Wish you an incredible time with #Cyberpunk2077" —Cyberpunk 2077 Lead Quest Designer Paweł Sasko on Twitter. CD Projekt Red released a 35GB patch on Monday, which includes hundreds of bug fixes and tweaks; you can read the full list of updates here.

A MESSAGE FROM GODADDY

Greg Goldfarb, who is VP of Products and Commerce at GoDaddy, admires the resilience and ingenuity of small business owners. "It is amazing to see entrepreneurs figuring out the new context really quickly to adapt and survive." We sat down with Goldfarb to talk about the rise in ecommerce, the impact of COVID-19, the major trends emerging this year and more.

Read the interview

Lootbox

  • Qualcomm is reportedly working on a cheaper, Android-based Switch knockoff to show off the company's Snapdragon chipset. No word on whether anyone is making an Animal Crossing knockoff for it.
  • Amazon says it's opening a new game studio in Montreal that will create original AAA games. The studio will be led by the creators of Rainbow Six Siege.
  • Armin Zerza is Activision Blizzard's new CFO. He was Blizzard's CCO, and will replace Dennis Durkin, who's retiring.
  • GameStop is losing its chief customer officer. That's the second senior executive to depart since Chewy.com co-founder Ryan Cohen joined earlier this month to lead the company's push into ecommerce. It hired yet another Amazon exec though: Elliott Wilke is its new chief growth officer. And ex-Chewy marketing execs Andrea Wolfe and Tom Petersen both joined, too.
  • Seattle-based social gaming startup Rec Room raised $100 million led by Sequoia Capital and Index Ventures at a $1.25 billion valuation, bringing its total raised to $149 million.
  • For a masterclass in in-app spending, look at the freemium mobile game Genshin Impact. It's the fastest title to reach $1 billion in player spending on the App Store and Google Play worldwide (it took just under six months), according to Sensor Tower.
  • New Zealand-based mobile game developer Ninja Kiwi sold itself to Swedish esports gaming group MTG for around $186 million.
  • Tencent's quarterly revenue jumped 26% to $20.5 billion in the quarter ended December, thanks to surging popularity in its online games business.
  • Sony is working on a live-action version of Ghost of Tsushima, the hit samurai game. Chad Stahelski, known for the "John Wick" movies, has been tapped to direct.
  • And Sony is closing the PSN digital stores on the PlayStation 3, PSP and PS Vita this summer. Pour one out for LocoRoco, the best PSP game that ever was.

— Karyne Levy

Look Out For

Gotta catch 'em all … and then go broke

A rare holographic Charizard Pokémon card in pristine condition sold this week for $311,800 after receiving 124 bids. (The starting price was $9.99). That's the third fire lizard card to sell for more than $300,000, so you might want to dust off your collection instead of figuring out how to mint an NFT.

— Karyne Levy

A MESSAGE FROM GODADDY

A MESSAGE FROM GODADDY

Greg Goldfarb, who is VP of Products and Commerce at GoDaddy, admires the resilience and ingenuity of small business owners. "It is amazing to see entrepreneurs figuring out the new context really quickly to adapt and survive." We sat down with Goldfarb to talk about the rise in ecommerce, the impact of COVID-19, the major trends emerging this year and more.

Read the interview

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