The closure (or near-closure) of Humble Games was another brutal headline in what has been a bleak 18 months for independent game publishers.
We’ve seen stock price declines, layoffs, a reduction in game deal signings, and entire companies closing down. Of course, publishers are stuck in the same nightmare that the entire video game industry has been facing: a decline in gaming revenue combined with overinvestment and rapidly rising costs. However, there are also some fundamental (and potentially permanent) changes in the market that are making it harder for publishers to compete.
“I've been in publishing for almost ten years and there's always been uncertainty,” says Simon Byron, current CEO of Yogscast Games. “You can never predict exactly how a game will perform before it's released. You can have an idea, of course, but accurately predicting sales of a game is impossible – I've never been completely right. And that's difficult for certain companies that are under pressure to provide certainty to their shareholders.
“What we're seeing right now are huge shifts in the marketplace, where forecasting models have failed to keep up with oversaturation, the impact of subscription services, and the prevalence of aggressive discounting. Companies that were doing their best in times of plenty now find themselves in a world where more agile, better performing companies are entering the scene.
“I'm still incredibly excited about the market. Great games are released all the time, and blockbusters are coming out week after week. It's not that people aren't buying games – far from it. It's just that the foundations on which some companies have built their operations are based on games selling in unrealistic numbers. Many of these companies are still very profitable, which makes it all the more heartbreaking.”
Unrealistic expectations are something that came up several times at the companies I spoke to. Snow Rui, CFO and president of publisher Hooded Horse, says that exaggerated expectations are a challenge for companies with demanding investors and shareholders.
“A lot of the cuts and unrest are due to shifting corporate priorities at publicly traded companies,” he notes. “I think there's some inherent tension between the desire of publicly traded companies to have a predictable revenue trend at quarterly and annual intervals, and the reality of game development, which is fundamentally unpredictable both in terms of timing and outcomes.”
“There is some inherent tension between public companies' desire for predictable revenue and the reality of game development.”
Snow Rui, Hooded Horse
Unpredictability has made some publishers risk-averse and look for more predictable and reliable revenue streams.
John Clark, who has held a number of publishing roles at Sega, Tencent and most recently was CEO of Curve, said: “Publishers are rebalancing elements of stability and risk within their businesses. A more predictable catalogue and long-running game performance supports stability for publishers, while risk is largely focused on investing in new IP and new games from existing IP.
“Overinvestment in new games and, in some cases, lack of quality in delivery have been factors[in the situation facing publishers]. This, coupled with continued strong performance of core titles and the increasing number of new games, has created the most competitive environment we have ever seen. This has tested publishers’ expertise in releasing games and affected the ability and confidence to invest in new games.”
Last month, an indie developer told me that his strategy for his next release was to “put yourself in the best spots to get lucky.” He had noticed that while there had been a lot of indie hits in recent months, there didn’t seem to be “any rhyme or reason for it.” So we asked our editors if spotting potential hits had become harder.
“It's an impossible task, really,” admits Nigel Lowrie, co-founder and chief marketing officer of Devolver.
“Most people look at various indicators to explain success or failure after the fact and then say that it was all written on the wall, but no one In fact You know what's going to happen in advance. Sure, you can look at what's been successful lately and check off a few boxes, but in the end there are so many variables that it seems almost impossible to predict what will succeed. And I think that's what happens when games that seem to have everything going for them fail, while games that didn't live up to their hype at launch go haywire.
“In the end, it’s about finding something compelling that offers your audience a unique experience and connecting with them by any means necessary. There are some great metrics out there, like wishlists, reach data and so on, but all of that gets a little stifled when you launch a game and start asking people for money and time.”
Byron agrees: “The nature of business is that sales will constantly surprise, both above and below expectations. But that doesn’t help when you’re running a business, so it’s understandable that we cling to whatever pre-launch metrics we can.
“But publishing isn't a science. And there's a real danger in treating it as such, particularly when we put value on pre-release wishlists and the idea that there's a quantity you 'should' have and a range of sales you can expect from those wishlists.
“Last year I was talking to a publisher about the topic of wishlists. They told me they wouldn’t release a game unless it had more than a specific amount. I told them how many we had when we launched PlateUp! and they said it wasn’t enough. We sold over 200,000 units in the first month, which was significantly more than anticipated. And they subsequently issued a profit warning.”
“Publishing is not a science. And there is a real danger in treating it as such.”Simon Byron, Yogacast
Byron adds that neither of them were right about how the game would perform, but that focusing too much on a wish list number could be counterintuitive, because if you have a good one, you can relax more.
“While the truth is that you need to maintain appetite through launch and beyond,” he says. “Given how easy they are to influence, I find wishlists to be a pretty ‘cold’ metric. In fact, a lot of conversion research ignores gameplay quality. At Yogscast Games, we prefer to look at how players interact with our games in more intimate ways, so average play time in demos and playtests is the key metric for us, followed by external growth on platforms like Discord. If you can see a game gaining traction outside of your core circles, that’s a bigger sign of success than a magic number on the wishlist.”
Devolver's Lowrie adds that, although it may seem counterintuitive, risk aversion is actually the riskiest approach.
“Those who are willing to experiment and stay agile will find their successes and build an engaged audience,” he says. “Playing it safe will never be a sure thing.”
Ultimately, the market has reached a point where some of the old methods adopted by more established publishers simply don't work, and that favours some of the specialists who have recently emerged on the scene.
“Relatively new publishers like Kepler and Hooded Horse are making a big impact, which is refreshing to see,” says Clark. “They seem to be well structured, with smaller teams, close to the games and the developers, with a very clear understanding of their niche.
“Referring to my earlier point about the balance between stability and risk, publishers that experienced a significant growth phase before suffering the corrective impact of the past few years are in transition. Newer, smaller publishers have been able to study the market in different ways. They can build a publishing business from a different starting point.”
Yogscast's Byron continues: “The market has changed so rapidly that we're still trying to understand how the different ecosystems interact with each other. Players have so much content available to them (often for free, for pennies, or as part of a subscription) that old models no longer apply.
“The era of generalist indie publishers is over. Publishers need to have a niche offering, something that no one else can replicate. We are already seeing a shift – just look at the rise of specialist publishers and labels that really focus on specific sectors. They seem to outperform those that don’t specialise in a particular genre. It’s much more effective to build a community around a publishing identity rather than through a collection of disparate games.”
It may seem bleak, but all our editors note that there have been numerous successes achieved through self-publishing, which is becoming an increasingly viable direction for independent teams.
“Self-publishing and the knowledge needed to do it successfully has never been more accessible,” says Hooded Horse’s Rui. “Publishers will have to prove their worth and offer good terms, as self-publishing is not a bad alternative at the moment, and that’s the way it should be.”
Lowrie agrees: “Self-publishing is a fantastic option for those who are able and willing to take care of everything themselves. Self-publishing has seen immense success in recent years and it’s inspiring to see.”
“The problem is that there are more developers and projects than there are resources to support them, and ultimately there is only a limited amount of money and, perhaps more importantly, time for players to support those projects.”
“I truly believe that this chaos will give rise to a new era of creativity.”Nigel Lowrie, Give Back
What does the future hold for the independent publishing scene? Everyone we spoke to said there was no turning back.
“There is a level of constant change,” Clark says. “Organizational disruption is resulting in excellent talent being available in the marketplace. We will see and are seeing new publishers starting up and building businesses in ways they wouldn’t have otherwise.”
And indeed, it is the formation of new publishers and creative studios that ultimately offers hope for those operating within the independent scene.
“It’s clear that the unfortunate shrinkage of studios and publishers will continue for some time to come,” Lowrie concludes. “But from those ashes I hope to see new small studios filled with talented developers from all areas of the industry who learn from the mistakes of their former executives and take measured creative risks to continue to push the medium in unexpected directions.”
“There seems to be a category of larger companies that have probably become too big to take real creative risks (if you can even call it risk) and will continue to stick to well-trodden territories that they know well and can sell to their existing audiences.
“These smaller studios will create new subgenres that will break out and the bigger companies that are not too risk-averse will follow suit with their later versions. We’ve seen this with battle royales, party royales, etc. and I have no doubt that we will see a flood of AAA versions of games like Lethal Company and Pacific Drive.
“We are certainly living in a dark time in the world of game development, but I truly believe that this chaos will give way to a new era of creativity.”