Kirill Gurskiy is Managing Director of GEM Capital, a leading Cyprus-based investment firm with a focus on game studios.
Investing in any particular industry, you should always be aware of what’s going on within it. Currently, the gaming industry landscape is going through a bit of reshaping with the IDFA (identifier for advertisers) limitations, Covid-19’s passing and other factors influencing the market. As director of an investment firm focusing on the gaming industry, I’d like to discuss the trends that can be seen now within the industry.
Mobile games market correction continues.
There are two main factors that have been impacting the mobile games market lately: rivalry over users’ attention against non-gaming apps (Instagram, TikTok, Youtube, etc.) and a decrease in efficiency of performance marketing caused by IDFA limitations recently imposed by Apple. In addition, with Covid-19 officially “over,” people are returning outdoors and spending less time playing games.
This has led to a market correction. It started in 2022 and continues to this day. However, I believe there’s some optimism within the industry, which can be seen in forecasts predicting the market to go back to growth after the correction is over, and game developers figure out ways to overcome their current obstacles.
More investments are going into console and PC games.
Naturally, since the mobile games market is currently undergoing correction, investors are looking to rearrange their portfolios. They seek to diversify their income streams and lower potential risks. Consequently, they turned to PC and console games and startups, including game-tech and game-ecosystem companies.
In my experience, many investors choose funding startups that help build communities and infrastructure around video games. Ventures building social connections between gamers or platforms for content around video games look promising to venture capitalists. Community trend is on the rise right now. Engaging with gaming communities is key for today’s developers and publishers.
PC and console market will grow.
Several factors indicate strong growth potential. The early days of the Covid-19 pandemic forced game developers to turn to remote work, which took some time to adapt. As a result, release dates for many games shifted from 2022 to 2023.
Speaking of PC and console games, 2023 is the year of Hogwarts Legacy, Baldur’s Gate 3, Diablo 4, Starfield, and many more much-talked-of titles. Additionally, 2023 so far has brought us two times more AAA releases than the entire 2022. Besides, everyone is hoping to learn the release date of GTA 6 this year. Naturally, it’s going to attract even more attention to traditional console and PC gaming.
I find another factor driving general interest in PC and console games is content created around such games. Developers have started to build cross-media ecosystems around their games based on popular entertainment franchises already, and the trend is going to grow. Such ecosystems may include movies, TV shows, music, etc. The Last of Us TV series released on HBO this year became one of the most-watched streaming shows and a cultural phenomenon.
More strong franchises will go mobile.
First of all, strong IPs should be present across all platforms—PC, console and mobile. Players should be able to enjoy their favorite game whenever they want—on the way to work, at lunchtime or at home with family. Secondly, for mobile game developers, it’s a chance to overcome IDFA constraints.
A lot of IP-based mobile games make it to the top 20 highest-grossing titles, especially in Asia. Also, such games attract a lot of high-spenders. Both developers and investors should be enthusiastic about it.
Cross-platform gaming is on the rise.
“Cross-platform” is a popular term in the gaming world. At present, one in four players plays cross-platform, switching between console, PC and mobile. It’s a lot, and the number can go higher if developers work smarter on cross-platform games. Multi-platform players tend to spend significantly more time and money on video games and related purchases than others. Many genres and settings can especially leverage cross-platform play.
Oftentimes, developers simply create two different games for PC and mobile within one franchise. In my opinion, developers could take it another step further. For a good example of a cross-platform game, one can look at Genshin Impact, which offers both console-style graphics on mobile and mobile-style marketing hooks on console and PC.
Web3 and blockchain games won’t get popular.
It seems the general audience finds such games much less captivating than traditional games in terms of gameplay. Those who play traditional games have seen little reason to turn to Web3 and blockchain games. As of now, the future of the niche seems unclear.
Investors have become more cautious about Web3 and blockchain games after a long string of failures, and as an investment, I don’t think it shows a lot of promise. In the first quarter of 2023, the deal value for Web3 games decreased in comparison with 2022 and seems likely to continue that trend.
AI is transforming the games industry.
In my opinion, 2023 is the year of AI in gaming. With the launch of ChatGPT, Midjourney, Stable Diffusion and other AI solutions, more games companies are reshaping their production pipelines to keep up with new trends.
AI has the potential to revolutionize the industry and dramatically increase game immersion. This can be achieved through procedural content generation, natural language processing and even personalized gameplay experiences. As announced by NVIDIA ACE in May 2023, AI-powered natural language interactions can even bring intelligence to non-playable characters (NPCs).
The gaming industry is as exciting as ever for players, developers and investors alike. It will be interesting to see how challenges are resolved and how new releases are received. Over time, the gaming industry will remain at the forefront of market growth as a leading entertainment segment.
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