Predictions are a dicey business. The year 2020 was one of the most unpredictable in all of human history. And now I think about predictions in a different way, with both a sense of hope and a sense of dread.
The pandemic threw off our ability to predict what will happen life, and it did the same in the game industry. Game companies had a record year in 2020, and I wondered if it was a one-time bump thanks to the coronavirus forcing lockdowns. People played games to survive, repair their social lives, and distract themselves.
And that helped power even better financial performance in 2021. Even though the Microsoft Xbox Series X/S, Nintendo Switch, and Sony PlayStation 5 were all in short supply, the industry powered through the shortages and managed to grow.And yet while it was hard to top 2020, the game industry once again outgrew expectations, with market researcher Newzoo saying the entire game industry — PC, mobile, and console grew to $180 billion in 2021, up from $174.9 billion in 2020. That was unexpected since 2020 seemed like a one-time anomaly that was temporary in nature. But it turned out that new gaming habits adopted in the pandemic proved to be longer lasting than expected, at least so far.
And in 2021, we saw a huge surge in venture capital investments in game studios, and a big wave of acquisitions as well, with more than $71 billion pouring into games via investments, public offerings, and acquisitions in the first three quarters of 2021, according to Drake Star Partners.
Esports went through a whipsaw as it shifted to a digital-only format, prepared for physical events again, and then faced the fears around the Omicron variant again at year-end. But digital audiences grew, and the esports industry positioned itself for some kind of return to physical events.
Game conferences are one of the places where we can catch up on future trends, but so many of those events have been canceled or gone digital (our second annual GamesBeat and Facebook Games Summit and GamesBeat Summit: Into the Metaverse 2 will be online-only events on January 25 to January 27).
So it feels like our compass, informed from the patterns of the past, is broken. But I’ll wager we can expect games to continue to outgrow other forms of entertainment. Movie and TV production has been hobbled, and cinemas are still suffering. With that limited horizon, I’m going to boldly make my bad predictions once again.
For the usual comparison and embarrassment, here are my predictions from 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, and 2012. At the bottom of the story, I’ve also given myself grades for the predictions I made a year ago for 2021. Lastly, I’ve been very publicly calling for ideas on social media about my predictions, and I appreciate all of the followers and readers who have pitched ideas to me. Many of these ideas were adopted from my social media conversations.
Thank you for your help, and Happy New Year! May it be a better one than the one we just endured.
2022 Predictions
1) The war between game devs and platforms will get worse
Game platforms became flashpoints in 2021 as Epic Games sued Apple for antitrust violations. Epic decried Apple’s policy of collecting a 30% fee on every in-game transaction in titles like Fortnite. While Epic largely lost most of its case, it did win on one important point that could give alternative payment providers and game developers more hope of capturing the revenues they generate. The courts have stayed that decision so far. But it offered developers hope that they will be at least able to promote lower prices for digital goods on websites that are off the app stores. It underscores the duality of modern platforms, which hold game developers captive yet offer internet browsers that can take players elsewhere.
While Yvonne Gonzalez Rogers, the federal judge in the Epic v. Apple case, concluded that current antitrust law doesn’t protect smaller companies as much as it does consumers, she did point out flaws for legislators to address that could curb the power of big tech.
On top of that, Epic still has an antitrust suit pending against Google over Google Play Store practices, and that is sure to flare up in 2022. And regulators around the world such as the European Union are investigating the big tech companies and the leverage they hold over developers. Add to this Valve’s decision to ban nonfungible tokens (NFTs) in games on Steam (only to see the Epic Games Store embrace NFT games) and you have more developer anger boiling over.
Adding fuel to this developer unrest is Apple’s decision to emphasize privacy over targeted ads. That move also upset game developers, who face lower revenues thanks to the deprecation of the identifier for advertisers (IDFA). As the industry chases the metaverse and blockchain monetization, the rules of engagement for platforms and developers will matter more than ever. Apple has the right to do these things for now, but it can’t afford growing developer resentment.
Nor can any big tech platform that wants to benefit from the stickiest applications of all: games. I expect to see more flashpoints over time and movements by game devs to bypass big tech altogether. Both platforms and developers need each other, but they’re still figuring out which side is more powerful.
2) A patchwork metaverse will emerge without interoperability at first
The metaverse has to start somewhere. It will likely begin with a patchwork of walled gardens that don’t work together. A lot of people could legitimately argue that this isn’t a metaverse at all.
Over time, it will become interoperable with easy transit between worlds, open source standards, and trade agreements. Standards always take a long time to establish, but they eventually happen when enough of the power brokers conclude that working together is better.
We’re just not at that stage yet. Right now, everyone who is trying to build a metaverse will attempt to establish themselves as the first mover with the largest audience.
Roblox can make a case that its user-generated games platform is the leading candidate for the metaverse, while Epic Games can make a similar claim for its Fortnite game, and Facebook will say its Oculus (renamed Meta) VR platform will win.
It’s not a real metaverse until we get that interoperability, of course, but we’ll see islands emerge thanks to the launch of tools such as Epic Games’ Unreal Engine 5, which is coming in 2022 with a free city that developers can use as a foundation to make metaverse-like games.
On the non-gaming side, we’ll also see cool experiences arrive for enterprises in Nvidia’s Omniverse simulation world. In fact, the biggest chance for us to see the real metaverse emerge in the long term could come from the Omniverse, as Nvidia CEO Jensen Huang believes that his company will use the powers of AI and supercomputers to build a digital twin of the Earth for climate change predictions. And once that is build, Huang believes we’ll get the metaverse for free. Some game developers like Brendan Greene, creator of the PUBG battle royale game, really do want to build a digital twin.
The hardest thing will be for the industry to come together and put selfishness aside in favor of the greater good of establishing open standards for the interoperable metaverse. We’ll see if advocates like Epic’s Tim Sweeney can convince others that coming together is a matter of enlightened self interest.
3) NFT games will go mainstream amid a divided audience of lovers and haters
Above: NFTs in games are starting to come on strong.
Foes of NFTs were gleeful at the backlash that Ubisoft faced when it announced NFTs for Ghost Recon: Breakpoint — a move that gamers roundly criticized. They further reveled in GSC Game World backing off on NFTs for Stalker 2. But I don’t think those foes realize just how much financial might has lined up to make NFT games into a mainstream passion.
I’m confident that the innovation will come from blockchain and cryptocurrency and rewards-based business models. I don’t know what that innovation is yet, but when the smartest people in the industry band together to make it happen, I bet that it will happen.
I don’t have a stake in this race, but I talk to a lot of people. I have seen this kind of innovation cycle happen before with the derision that free-to-play faced at the outset of mobile games and the ultimate victory it has won with the majority of all games now being free-to-play and mobile. While others scoffed at free-to-play, those that embraced it — like Supercell, Machine Zone, King, and Zynga — won the market. These were mobile-first companies wrecked the premium-price model embraced by incumbents.
It is not a foregone conclusion, however, that NFTs will win. The game developers who are integrating them into games will have to win over gamers, who are skeptical, through skillful game design. Skeptics have pointed to problems such as environmental damage from blockchain computing, scams, money laundering, weak games, and profit seekers. But all of these problems can be overcome as the quality developers and companies move into the space.
Perhaps the stickiest criticism is that NFTs don’t enable you to do things that you can’t already do in games in some way. I think that this criticism fails to recognize the cleverness of game developers and the value of decentralization — where NFTs can be used to bypass traditional distribution mechanisms and enable peer-to-peer transactions — in cutting out big tech. In this way, NFTs are an arrow in the quiver of independent-minded game developers, much like web games and instant games are.
Among the professionals moving into NFT games are Zynga, Mythical Games, Com2Us, Ubisoft, Jam City, Will Wright, Peter Molyneux, Graeme Devine, Austin Grossman, Gabby Dizon, Naomi Augstine-Lee, Chris Clay, Chris Akhavan, and others. Josh Williams, CEO of Forte, which raised $725 million to build NFT game infrastructure, said that all of the major game companies are investigating NFTs.
And the NFT game companies raising the most money are the ones that have veteran game developers. Meanwhile, the big companies will get stuck waiting for regulators to say the coast is clear. As Amy Wu of Lightspeed Ventures pointed out, the crypto natives and gaming natives have to come together. When they do, I think that is when we will see mainstream adoption of NFT games and the resistance from gamers may melt away.
4) Game deals will grow so long as the global economy stays healthy
While that is true, it’s an effect that can wear off. We saw how some companies (Roblox) hit continuous growth targets with each quarter compared to the anomalous quarterly results of 2020 while others (Take-Two, Zynga, Activision Blizzard) barely grew their revenues this year compared to last year. So it’s clear that game companies can’t defy the laws of gravity. If the global stock markets head south, all bets are off.
But I don’t really expect that to happen. What is unprecedented at this time is that all parts of the gaming ecosystem are thriving and fueling each other.
5) A new kind of gaming-first transmedia will blossom
Above: Scene from the upcoming Uncharted movie.
One of the conclusions from that last point is that games will become the center of the entertainment universe. And that could mean that movies and TV shows will follow gaming.
We saw that with Riot Games’ Arcane (based on the League of Legends game) animated television series that became a big hit on Netflix. And we have high hopes for Naughty Dog’s games The Last of Us and Uncharted, which are both being turned into major releases from Hollywood. Microsoft is getting there on its Halo television series. The great hope is that these will come off as compelling films rather than cheesy live-action role-playing (LARP) events.
And in the end, streaming subscriptions for the combination of games and movies will make sense. In the end, bits are bits, and Netflix has shown that it is happy to stream either kinds of bits to its audiences. Microsoft would also be happy to offer exclusive game-based movies with its Xbox Game Pass.
6) Game console shortages will continue amid strong demand
Above: Switch OLED.
Microsoft, Sony, and Nintendo all continued to ship more and more consoles throughout 2021. But it’s hard for them to meet demand because of the voracious appetite for games and the shortage of key semiconductor chips. That shortage is widely believed by companies such as Intel, Nvidia, and Advanced Micro Devices to last into 2023. And that makes it easy to predict that the consoles — which can depend on hundreds of suppliers of thousands of parts per console — are still going to be in short supply in 2022.
By now, Nintendo’s Switch should cost a lot less than the introductory price of $299 when it debuted in 2017. But it has topped 100 million sales and still continues to sell well, so Nintendo has no motivation to cut the price. It finally did cut the price on the old Switch in September as it introduced the new Switch OLED model, but nobody really has an incentive to push a price war when we’re still in a pandemic-induced supply shock.
If anyone has an opportunity here, it’s the makers of mobile gaming hardware and mobile games, as they can make games more accessible to a wider market. And it’s no surprise that Qualcomm recently introduced a model for a mobile-based game handheld. Now if its manufacturers can get a hold on enough parts to manufacture it, it could exploit the opportunity.
7) Play-and-earn will spread in emerging markets
Above: Axie Infinity lets players battle with NFT Axie characters.
Games are great at motivating players to play because of their intrinsic value. People enjoy them, and they enter a mental state of “flow” when they get really engaged with games. That’s intrinsic value. Extrinsic value is something like getting paid to play games.
But the difference between intrinsic and extrinsic value is blurry. We saw the blurriness emerge this year as games like Sky Mavis’ Axie Infinity offered rewards to people who played the game. By investing in unique game items via NFTs, players could acquire unique game characters and make them more valuable through gameplay. They could then resell those characters to other players and make a profit. In the Philippines, hundreds of thousands of players took advantage of this “play-to-earn” game to make more than triple the minimum wage in a country that had 40% unemployment during the pandemic.
NFT resales can easily be tracked and credited to either the original creators or the owners themselves. And so players or even the original creators can benefit from item resales. It’s part of a Leisure Economy that is lifting people out of poverty around the world.
The small amount of money to be made won’t really appeal to gamers in richer countries, but those gamers might like games that have both intrinsic and extrinsic value.
Critics say that Axie Infinity wasn’t inherently fun and it gave players a profit motive rather than pure enjoyment. This extrinsic motivation would eventually wane, the critics said, and the players would give up the game if the ability to make profits went down. But while some praised the life-changing potential of play-to-earn — Sky Mavis said 20% of its players were unbanked — others saw it as just the first inning.
Miko Matsumura, cofounder of Gumi Cryptos, believes that NFT-based play-and-earn games — where the game is designed by game veterans to be really fun — that also give players ownership and ability to reap profits will become the prevailing model in gaming.
Players, he believes, will see playing games as an investment, just like in the old days when they bought console games and then sold them as used titles to GameStop in years past. Those profits from the used game sales enabled them to reinvest in new games. Players in the West may scoff at this. But those in emerging markets could enjoy earning their digital goods through gameplay and then sell them to labor-averse players in the West. And who doesn’t want to own their own stuff in games they love to play and also make money from it?
8) The metaverse promise will revive VR/AR dreams
Above: Mark Zuckerberg said the metaverse will let you teleport to different worlds.
Augmented reality and virtual reality went through their hype cycles in the past five years. Many game developers gave it a try and then reverted to making traditional games. But the hopes of creating a metaverse to offset the woes brought on by the pandemic have given new hope to those AR/VR dreams. Companies like Niantic, the maker of Pokemon Go, have shown the path for innovations in AR.
Niantic has invested heavily in making the leap from location-based games to next-generation AR, which can deliver useful information to you while you’re on the move. And Facebook/Meta continues to double down on Oculus/Meta Quest hardware. In fact, Facebook’s $10-billion-plus-per-year investments make Magic Leap’s $2 billion-plus in funding for its own metaverse ambitions look like chump change — or maybe a couple of months of Facebook’s spending.
The belief is that these investments, while still based on nascent markets, will be worth it because AR/VR are the most immersive platforms when it comes to accessing the metaverse. It’s good to see AR/VR startups getting investments again, but we still want to see more hits before this market becomes the reality that we all want to see. In the meantime, on the ground level, I see AR/VR startups getting funded again after a fairly long drought. Of course, the biggest boost of all will come whenever Apple decides to launch its AR/VR product. But predictions about that have been pretty bad so far.
9) Game companies that fail to change will get acquired — or left behind
Above: Activision Blizzard’s gaming characters.
When change comes, the losers fall victim to the innovator’s dilemma of sticking to the old cash cows when they should embrace innovations that cannibalize the old. Activision Blizzard is a good case in point. It has reached huge revenues with games like Call of Duty, World of Warcraft, and Candy Crush Saga. But most of its games in the works are sequels or remakes.
Where are the original titles? The bar is evidently so high in the company’s R&D ranks that the opportunity cost of investing in older franchises versus new ones is too hard to overcome. Activision Blizzard’s stock price fell dramatically in 2021 as Call of Duty subsided from a 2020 high and it was hit with a sexual harassment lawsuit by California regulators.
The latter fact showed that other kinds of change are also necessary for modern game companies to keep up with the times. Failing to recognize when it’s time to change has always been fatal, and that failure often comes from unexpected directions.
Activision Blizzard is now a potential acquisition target from possible buyers such as Disney. And nobody expects Activision Blizzard to be a leader when it comes to acquisitions or investments in NFTs, VR, the metaverse or other innovations.
It’s worth noting that Roblox, which innovated in a platform for user-generated content, is now the most valuable video game company in the U.S. The results could lead in a variety of directions. Employees may leave the big company for startups. The lesson is a steady-as-she-goes strategy is good until it isn’t, and then change will happen.
10) God of War: Ragnarok and Horizon: Forbidden West will signal Sony’s real next-gen arrival
Above: We got the first glimpse of God of War: Ragnarok.
I figure if these potential blockbuster games from Sony got delayed in 2021, they should arrive in 2022, right? And I believe both will highlight Sony’s competitive strongpoint of funding games with huge single-player campaigns with strong stories.
These games and others like them represent Sony’s unique advantage over Microsoft, which until recent acquisitions didn’t have the giant single-player brands in the same way. Microsoft took a major swing with Halo: Infinite, which is my favorite game of 2021 and represents the best it can produce on the console/PC. But strong narratives are part of Sony’s DNA.
If anything should set the PlayStation 5 apart from the Xbox Series X/S, it will be these expensive narrative titles. It takes brave executives to greenlight budgets of hundreds of millions of dollars on projects that take years to complete — even as everyone else focuses on games-as-a-service — to make the hardest core gamers happy.
I have the highest expectations for both God of War: Ragnarok and Horizon: Forbidden West. They are carrying a very important torch. I believe they have strong teams and budgets behind them, and this is one of those things that Sony shouldn’t change.
11) Labor will be tight, and labor unions could form
Above: Assassin’s Creed: Valhalla was a major hit for Ubisoft.
Just like my No. 9 prediction, this prediction about unions forming seems like a perennial one for games. Game developers have often been exploited and made to work long hours without sufficient pay — known as crunch. Work conditions are sometimes dreadful for diverse workers such as women at companies like Activision Blizzard and Ubisoft. That has always made labor unions appealing, and a survey by the International Game Developers Association (IGDA) in January 2020 showed that 54% of developers favored a game union.
Still, the unions have scored only small victories. The pandemic and fresh accusations of bad work conditions at big companies have opened the opportunity for labor unions to make new headway in games. We know that wages are rising amid a huge shortage of skill game developers as the industry enjoys an unprecedented expansion. Crypto game companies are picking off a lot of developers, and VCs are busy funding startups staffed by veterans. The shortage will continue in 2022, and that could once again create conditions for more unionization.
These are forces that will help union organizers, but these are forces that the leaders of benevolent and enlightened companies — if they exist — could and should address.
