The Future of The Games Industry - Investor Predictions

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Video Game Investor Predictions

At RLC Ventures, we believe that our relationship with games and entertainment will continue to evolve through rethinking the Access, Distribution and Monetisation of games.

If you're a games company in the UK looking for pre-seed/seed funding, please do get in touch with RLC or myself via Twitter (https://twitter.com/kickso) or email (it's on my LinkedIn).

In the first part of our Video Games Series, we looked back to the mid-20th Century and the advent & rise of video games.

Consistently, technological innovations such as the Personal Computer (PC), The Web Browser and Mobile Phone have irreversibly shaped the landscape of games today, fundamentally transforming the ways we access, distribute and monetise games.

Throughout this piece we speak to some of Europe's leading investors and get their thoughts and predictions on the directions the industry is heading:

Project A Ventures&#39; Jack Wang on the kind of companies and projects they&#39;re  inte | Pocket Gamer.biz | PGbiz

Jack Wang, Principal at Project A Ventures

Former software engineer turned product driven tech investor. 10+ years in software development, product management and investments working with tech industry leaders across US, UK, Europe and APAC. Jack loves all things machine learning, SaaS, Cybersecurity, Fintech, Consumer Tech and Gaming/eSports. He also used to play semi-pro Counter-Strike 1.6 in its height.

Piers Kicks - Crunchbase Person Profile

Piers Kicks, Senior Associate at Bitkraft Ventures

Piers is a Senior Associate at BITKRAFT, where he identifies and evaluates new investment opportunities with a particular focus on the rapidly evolving crypto landscape. Prior to joining the team, he was a Founding Partner in the investment arm of the leading institutional research firm covering the digital asset market—Delphi Digital. He remains a Venture Partner in the fund to cover the earliest-stage crypto opportunities across NFTs, gaming, and interactive media.

Joakim Achren, Venture Partner at Play Ventures

Joakim is an entrepreneur, with fifteen years of experience from two venture-backed gaming startups, including Next Games which IPO'd in Helsinki Nasdaq First North stock exchange in 2017. Joakim is now running Elite Game Developers, a company that helps entrepreneurs in starting their first games company. He's also an angel investor in Talewind, Funcraft, Skunkworks Games, Lightheart Entertainment, Savage Game Studios, and more. Since early 2021, Joakim has been a Venture Partner with Play Ventures, which is an early-stage fund focusing on the games industry. Joakim is based in Helsinki and writes on Twitter under @joakim_k

Parin Shah, Principal at Lego Ventures

I'm Parin and I'm an Investor at LEGO Ventures, the venture investment arm of the LEGO Brand. I invest in what we call Digital Play, looking closely at experiences where play and creativity are closely integrated to enhance connectivity between users. Prior to LEGO Ventures I was at Babylon Health where is spearheaded a number of growth initiatives, and I started off my career as an Equity Analyst.

What was the First Game you ever properly played?

The first games you play (both physical and digital) truly shape the way you think, learn and socialise. Peoples first experiences online often began as games, leaving a long-lasting impressions on the way you think about the internet and entertainment. As a consequence of playing thousands of hours of Runescape growing up, I have never been that into films and TV, always favouring more immersive, social experiences enabling you as the character to control the narrative and story.

There's a lot you can tell about someone first video game (beside from just their age), so lets see what other games investors spent their childhoods playing:

Joakim Achren

Civilization (video game) - Wikipedia
Civilisation I. (Image Credits -Wikipedia)
"I would say it was Civilization 1 on my Amiga 500, back in 1991, when I was thirteen. I had read about the game in a Finnish gaming magazine called Pelit, and the reviewer was raving about it as the best game ever. So once I finally got the packaged Civ 1 in mail order, I couldn't understand the game. It was really hard to play. And I didn’t know what a Granary was and what you’d do with one. Since it was the first building you could build in a city, I just started building them in each city.But I couldn’t stop playing, as I started picking up more skills like how to use troops to invade other cities and take over land. I still think about the game to this day, and the coolest thing was that I was on a Pocket Gamer panel earlier this year, and the moderator was CEO of Microprose from back in the day when Civ 1 was developed. It was so cool to ask all sorts of questions from him about those days."

Old School Runescape celebrates the Falador Massacre glitch | PC Gamer
The Falador Massacre. (Image Credits - PC Gamer)

Piers Kicks

"Runescape - me and my brothers spent countless hours skilling, scamming, pking and trying to build our own servers. The game is still going strong today, and it definitely influenced many of the great thinkers and builders in Web 3.0 today. "

15% Diablo + Hellfire on GOG.com
Diablo 1. (Image Credits - GOG.com)

Jack Wang

"Diablo 1 - many many hours grinding on 28k to 56k dialup which costed my parents quite a bit back then. Secret cow level ftw!"

Championship Manager 2 (DOS) Game Download
Championship Manager 2. (Image Credit - Games Nostalgia)

Parin Shah

"The first game I was obsessed by was Championship Manager 2. I remember loading up the game using Command Prompt on our family PC. I was a Juventus fan at the time and managed to build an unbeatable side with a young Roberto Stellone playing upfront. This also led to me spending a lot of time playing Civilization IV during my teens."

What's taking a lot of your thinking time at the moment?

Joakim Achren:

"Currently I spend a lot of time thinking about how founders can stay independent as a game studio and build more billion dollar+ companies. So many studios get sold for a few hundred million, and so much value is left unattained. The process of developing games is not the same once you've been absorbed into a bigger games company... I mean there is not that drive, nor the competitive hunger to build something that takes on the incumbents.
The great thing about these recent mega rounds is that when you raise at a one, two, three or four billion dollar valuation, you can’t really sell for $300m anymore. You have to play the long term game. That’s what I’m thinking about a lot, how to get more game studios on that track."

Piers Kicks:

"The upcoming Golden Era of gaming fuelled by:
- Blockchain technology unlocking a new digital ownership paradigm, redefining community empowerment, and transforming labor structures as shared economics like play-to-earn appeal significantly to emerging markets.
- Better creator tools than ever before - dramatically dropping costs, whilst improving speed of production.
- More financing options than ever for founders exploring this domain.
- Major advancements in new mediums, particularly wearables.
- Unprecedented intraspeces connectivity as the next 1B+ people come online."

Jack Wang:

"VR is getting more mainstream and Half Life: Alyx did a lot to demonstrate AAA+ production quality game in VR (vs casual Beat Saber, which is also very fun). Valve Index and Oculus Quest 2 have done a great job at bringing the hardware prices down to enable a wider audience to access and experience VR. Now the industry is just waiting for more VR native content to be made, which will take time but is very exciting!
NFT's are at the top of the hype cycle and right now there are more crypto speculators than gamers in the 2D NFT games such as Axie Infinity. However, more experienced game studio heads are getting into NFT play-to-earn models such as EmberSword.
Another model is the "partnering" of NFT / crypto natives with "work for hire" studios e.g. Star Atlas - this is interesting because you have to integrate a layer of crypto ecosystem designers with a layer of game designers from an operational perspective. This means gaming investing now have to account for both crypto economic design and content design.
Also NFT pets seems to be a thing now... could be GenZ's tamagotchi."

Parin Shah:

"At LEGO Ventures, we're spending a lot of time thinking about the future of Digital Play and how it becomes the primary entertainment industry in the world. We're thinking a lot about how start-ups execute on that through the integration of creativity and social to enhanced shared experiences. We think there's a huge opportunity in this space and the potential to building multiple $1bn+ companies as well as deliver the next generation of playful experiences to a broad audience."

Plenty of exciting topics here to unpack:

  1. Joakim's call for game founders to dream bigger is apt, given his second company Next Games IPO'd in 2019. Whilst global interest in games is at an all time high, appetite for acquisitions by large games studios was also on the rise. In 2020 the industry saw $12.6bn in M&A activity across the globe, spanning 216 deals ($57m average exit size). For founders and their early employees these can be amazing outcomes, but VC's and Industry Veterans may want founders to emulate the journeys of companies such as Epic (rumoured to be looking to go public) and Roblox.
  2. Piers' lens is heavily blockchain heavy, following the announcement of Bitkraft's new $75m Crypto <> Games fund. Much like a growing corner of the ecosystem, BK believe the coming cryto-shift within the games ecosystem will re-arrange games business models around open, permissionless networks (e.g. Ethereum) and unlock new audiences, incentives, mechanics, routes to monetisation. It remains early days, but early innovation such as Axie Infinity, Yield Guild Games and OpenSea are showing us how new models and infrastructure are emerging in real time.
  3. Jack's comments around VR were written before the Meta (Facebook) news, and in light of these announcements are even more valid, especially with GTA San Andreas coming to Oculus Quest 2. With one of the worlds largest companies focusing billions of dollars of resources on advancements in AR & VR, we can expect a lot in the future. NFT's and games has attracted a lot of interest over the last few months. Traditional game studios are grappling with the concept and how ownership & in-game economies may change. And NFT pets too - we'll have to see about that one.
  4. Mark Zuckerberg, CEO of Meta, shares Parin's excitement around the roles social shared experiences will play in the future of Play and EdTech, and the opportunities created at these intersections. See their latest announced investment in Piepacker.

Who do you think is doing something right in games currently?

Animal Crossing (Nintendo Switch) review: Worth the wait
Animal Crossing by Nintendo (Image Credit: Pocket-lint)

Jack Wang

"Nintendo's original creation of the Wii and now the Switch generation is strategically impressive to me, as they specifically carved out a market intersection between mobile/handheld gaming and more hardcore consoles (Playstation and Xbox) in much the same way the iPad sits between the laptop and the iPhone.

I'm keeping a close eye on Stadia, GeForceNow, Amazon Luna, Shadow.gg etc. as I see them to be the next high impact "device". While telco's bandwidth infrastructure limitations has held content to low poly single player games at the moment, both the content and the wider compute power already exists to grow this to potentially replace the console market in the next 5 to 10 years, which incidentally is also roughly how long Sony and Microsoft plans for the lifetime of each console generation."

What You Need to Know About &#39;Roblox&#39;—and Why Kids Are Obsessed | WIRED
Roblox (Image Credit: Wired)

Parin Shah

"I would say that Roblox is a great illustration of how gaming is becoming increasingly social, creative and accessed in a mainstream way. The desire for more expressive and creative experiences (across simulation and roleplaying genres) seen on Roblox is starting to be mirrored across all platforms, and the barriers to entry heavily lowered (mobile and web).

Lowering the bar for creativity and enabling game creators to build a community is something Roblox allows more creators to do. I think this has inspired other founders to extend this vision and build in other platforms, games and experiences that are grounded in this approach.

It's also pretty hard to ignore what's going on in the De-Fi gaming space and I think there are intersections with social, creative communities which might help amplify efforts in this space."

What is Fortnite? Beginner&#39;s Guide
Epic Games' Fortnite (Image Credit: Epic Games Store)

Piers Kicks

"Having cohesive multi-platform experiences across a wide range of device types is critical to achieving the types of deep connectivity that many of us desire in a multiplayer world. To my mind, Epic very much understood this to be the way to kick free-to-play into overdrive. They are now doing $3-5B a year in digital fashion, have aligned themselves with the cultural zeitgeist through events such as the Travis Scott concert, and even have a Balenciaga x Fortnite IRL crossover."

Turkish mobile games studio Dream Games wakes up to $155 million in funding  at a unicorn valuation – Tech.eu
Dream Games' Royal Match (Image Credit: Tech.eu)

Joakim Achren

"I’m a big fan of Dream Games and how they are going after the dominant players in puzzle games, like King, Playrix and Peak. So much of their success has been about brilliant execution, on being the best at product, the best at distribution and the best at hiring."

You all interact with early-stage founders - what 'buzzwords' should be avoided when speaking with investors?

Jack Wang - Project A

"NFT for NFT sake - think about the game design and the crypto economic / play to earn model together, not as individual design layers. Most sophisticated games investors have gone from looking at the speculative associations, and looked more to core game loops with long term crypto-economic designs."

Pirs Kicks - BITKRAFT

"Metaverse - It is so overused so as to be practically devoid of all meaning at this point. “My project is a Metaverse!” still doesn’t quite make sense to me.
Play-to-earn - Loosely adding some form of NFT integration does not qualify you for this. There needs to be a core economic loop that can actually sustain this as part of your game."

Joakim Achren - PLAY

"Metaverse, NFT, as long as you aren’t really investing time and resources to figure them out, you should probably avoid these terms."

Parin Shah - LEGO

"On the LEGO Ventures panel at GDC, we really tried not to use the "m-word" and still talk about the future of gaming. I think the term [Metaverse] still means many different things to many people and is likely a combination of the efforts of many companies. If you have to use it, I'd love to see precision around the unmet user need and the product vision that makes me think "wow, this person is really on to something"."

Finally, what are your three big predictions for the next 5 years in games?

Jack Wang - Project A

  1. Cloud gaming will finally be able to expand to high-resolution multiplayer games with tolerable latency - hopefully.
  2. VR will be more mainstream but largely tied to a handful of AAA+ titles that are VR native / first.
  3. AR wise there could be a re-launch of the Google Glass like devices for consumer, though smart glasses today are largely social media content focused.

Parin Shah - LEGO

  1. Users will be able to take games they love and personalise / remix them to create their own worlds that can be shared with their friends and family
  2. Community will become increasingly relevant to the full game lifecycle from ideation through to distribution all the way through to live operations
  3. I thinks games may not look like games as we know them - rather they may resemble generative experiences seeded by your favourite "Director" and then moulded by you and may even trend towards adaptive experiences like the Mind Game in 'Enders Game'

Joakim Achren - PLAY Ventures

  1. Better spectator modes, for Twitch and other streaming services.
  2. NFT 2.0 when we finally figure out why decentralization matters
  3. An approachable way for gamers to connect with other gamers, and create meaning for their gaming experiences through that connection

Piers Kicks - BITKRAFT

  1. Fundamentally new forms for interoperability
  2. Community-owned games will dwarf the legacy model (I think a crypto-native game economy will outgrow the market cap of the largest publicly listed pure gaming company).
  3. Hundreds of millions of people will earn a living through game (The largest game economies in the world will be fee-based business models enabled by blockchain (this doesn’t mean F2P etc won’t exist).

A massive thanks to Joakim Achren, Piers Kicks, Jack Wang and Parin Shah for their time and thoughtful responses. I have hyperlinked all their LinkedIn/Twitter's above so reach out to them there.