Xsolla President’s Views on the Latest Gaming Industry Statistics

Predicting gaming industry trends, both macro and micro, takes more than instincts and guesswork. Longtime industry veteran and President of Xsolla, Chris Hewish, joined GamesBeat’s Dean Takahashi on stage at GamesBeat Summit 2023 to talk about what’s happening in the industry right now, and share exclusive, public data and insights. ideas from partners and Xsolla’s extensive gaming network. professionals.

M&A activity in the gaming industry fell 43% in the first quarter, compared to a year ago, according to DrakeStar. The report also noted some weakness in the sector, including the significant decline in investment in blockchain games, from over half of all investment to just 20%.

“You could predict that, seeing that things like the crypto crash and the NFT price drop, lots of scams like the FTX surface — all of that was hurting this industry,” Takahashi said.

“The first quarter of this year got off to a mixed start,” Hewish agreed, “but mixed positive.”

For example, while Games Industry.biz reported an 11% drop in game sales in the EU compared to the same period last year, the number of major releases increased, including Elden Ring, Pokemon Legends: Arceus, Horizon: Forbidden West and Gran Turismo 7. Console hardware sales also soared 67% in some European countries, driven by demand for the PS5, which saw sales 5x in March 2023 compared to the last year.

“When you think about console, flagship titles are always important,” says Hewish. “There are some really good indicators there that there’s a growing user base on the console side, with all these PlayStation sales. The second half of the year, that should translate to increased sales of games, because gamers want to play games.

Investments are also a strong signal of what’s happening in the industry, with plenty of big money still supporting games. Konvoy’s recent prediction that the gaming market will reach $201 billion in 2023, a 9% increase from $184 billion in 2022, was due in part to QoQ’s 29% increase in funding from VC game and transaction volume up 5%.

“If you look at a lot of reports now on the financial side in a macro sense, the consensus is that we can avoid a recession,” Hewish said. “Interest rates, cost of living increases are stabilizing a bit. This also bodes well for a second half of rising spending, rising consumer confidence and consumption.

The tech industry and the gaming industry were out of sync, Takahashi pointed out, with tech investment declining as gaming investment increased, and the tech industry layoffs in the fourth quarter didn’t really matter. started hitting gaming companies only in the first and second quarters.

But the gaming industry appears to be holding and continuing to grow in many of these trends, Hewish said, noting that Amir Satvat’s gaming jobs spreadsheet shows nearly 14,000 current job openings across the board. the game industry.

“It indicates, as you mentioned, that investment is coming back to traditional games,” he said. “Overall, we’re in a good position this year for the gaming industry.”

Upcoming Opportunities with Generative AI

While recession fear still looms large, generative AI is creating many new opportunities, Hewish said. Although it’s a buzzword at the moment, “this really is a new technology that is going to have a huge impact on the way we run our businesses. This is something you should consider.

While the idea that hot new trends kill previous trends is more common than ever, as evidenced by the Insider headline declaring the death of the metaverse at the hands of genAI, Takahashi sees it as an iterative process.

“The opportunity for the metaverse improves when you have technology like generative AI that can help users create their own content,” he said. “User-generated content is generally not of very high quality, but if you have something like generative AI available to you as a consumer, you can create better content. Now we have a better idea of how we could fill much of the metaverse.

New markets as walled gardens fall

Walled gardens are under siege, due to a combination of regulatory changes, legal challenges and the new Digital Markets Act (DMA) coming into force next year in Europe.

The DMA will force gatekeepers to open their app stores or ecosystems to allow sideloading and third-party app stores. That’s a huge opportunity, Hewish said — 10% of Android business in China comes from third-party Android app stores.

In the Epic v. Apple saga, the recent appeals court ruling found that Apple violated California’s anti-steering rules, which means developers should be able to direct people from the app to outside offers. via online shops or online offers. This allows publishers to connect with their communities in an entirely new way and drive more business – and it means the 30% platform tax on Google and Android will be a much smaller slice of profit margins.

“Matthew Ball, in his book, indicated that the 30% tax would prevent us from accessing the metaverse,” Takahashi said. “He argues quite convincingly that walled gardens have to go for the open metaverse to thrive – or at least before we get to the open metaverse, we need a more open gaming industry.”

The fall of walled gardens means direct-to-consumer marketing is now possible — and today it’s the key to profitability, Hewish said. It’s not just about avoiding the 30% tax, he says.

“You can use all the power of e-commerce that you can’t really use in an app store or on a third-party platform, with bundle offers, limited time offers, targeted offers “, did he declare. “This is a significant opportunity, and customer satisfaction is high.”

Develop direct relationships

In 2021, nearly two-thirds of mobile gamers indicated their preference for purchasing directly from a brand rather than through a third-party retailer, and studios like Niantic have established their presence in the market with online stores that eliminate friction and maintain the feel of the user’s gaming experience.

Xsolla has seen success in the direct-to-consumer model with its white-label online stores, Hewish said.

“It’s not just about taking a dollar out of an app store and moving it to the web — it’s about incremental growth for businesses,” he said. “We see them attracting new users, getting higher converting payers, people spending both in-app and in an online store.” For example, Tilting Point’s Star Trek game added 25% more revenue to in-game business without hurting App Store revenue, he explained. On average, other partners generate a total of 8-14% more revenue, without cannibalizing app store sales.

Of over 60 partners with over 120 games, 45% of overall revenue comes from their online stores and 80% of gamers are regular buyers, making five purchases per month on average. And 35% make more than 10 purchases.

“It works because they get personalized offers,” he said. “They feel more engaged with the developer, with the game. You can put videos in online stores. You use influencers to direct people to online stores. All those things you can’t do on a third-party platform, you can do them on your online stores.

This includes something like the Xsolla Drops program, which brings together game developers, media portals, and influencers to launch engaging B2C campaigns or drop events, which directly target gamers.

Watch the entire on-demand panel here.

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