This is going to be a difficult topic to write about, and one outside my usual product strategy focus. However, it is an incredibly important topic, and one that I have some frontline exposure to, thus I do want to exercise my mental muscles to put together some coherent points.
A brief recap
Underlying GaaS economics
It’s worth doing some dissecting of GaaS economics. Firstly, GaaS similar to many general internet services, exhibit strong winner takes all tendencies:
- Games, in particular those in a GaaS model, have sharp network effects (the more players you have, generally the better the experience for everyone, and conversely beneath a player-base threshold the game is unplayable)
- Games, somewhat unique to other forms of leisure (especially physical sports, which PVP games share many other attributes with), have a much higher threshold for extended time engagement. This leads to intense competition for players’ time and significant effects of crowding out alternatives. (Competitive PVP games are often intentionally designed with extremely high skill-ceilings, which reward skill acquired through a mix of natural talent and lots of practice, which creates the need for high time investment)
This means that in the realm of GaaS, game studios more than ever are in an arms-race – the profits windfall, if you make it to the top 1%, are a step-function compared to if you are “just average”. (To illustrate: Honor of Kings was estimated to have made over $1B in Feb – the Chinese New Year month – alone.)
To make matters worse – the means of production in gaming, the technology, hardware and tools are constantly evolving, and there is an ongoing variable cost in adopting and adapting your development to stay current; in mobile, there is also a Herculean effort required in device compatibility that is directly proportional to the addressable install-base your game can run on, which is a critical element to unlocking network effects.
Furthermore – as the biggest games have gone mainstream culturally (current representatives: Fortnite being the prime example in the west; PUBG Mobile in a swath of emerging markets such as India and the Middle East; and Honor of Kings in China), the content requirements are ever more diverse. When you are servicing a player-base of tens of millions (or hundreds of millions in mobile), you can’t just develop for the niche hardcore audience that your initial game thesis was founded on. You have to cater to a broad array of needs, for instance social networking, expression of individuality, vanity / showing off, and the pursuit of collecting content. You also have to work constantly to keep your game fresh, with novel product + marketing ideas such as an in-game concert or tie-ins with big brands outside of gaming.
Globalization and the China angle
To further complicate things, whatever fragile consensus or common language (or action, such as unionizing) studios and employees in the west can reach with regards to crunch, is almost immediately thrown out the window if we add in the Chinese studios.
Zooming out back to the tech sector at large briefly – it is obviously with a heavy dose of self-interest that in the past 18 months prominent voices in the Silicon Valley VC community have made statements such as this or the following:
“996” is the demanding work schedule many Chinese founders have organically adopted: 9am to 9pm, 6 days a week. To us, 996 captures the intensity, drive, and speed of Chinese internet companies, many of which are moving faster than their American counterparts.
The raw capitalist greed on display aside, there is quite a lot of factual basis to these statements. This is the by-product of a globalized economy and the comparative advantage of nations – many of the same factors that led manufacturing jobs (across many industries) to move to China (and then to Southeast Asia) are at play here. What’s relatively new to the gaming industry, but the impact of which will almost certainly be more measurably felt in the near future, is the head-on competition from Chinese studios for a slice of the global gaming market share.
The outputs of Chinese studios have historically been limited to emerging markets (Southeast Asia, for example) or “down-market” segments such as browser-based games. But we’ve clearly witnessed a turning point the past 12 months, with the likes of PUGB Mobile, Ring of Elysium on Steam (another Battle Royale, that got a decent 8.5 review by IGN) and Arena of Valor on the Nintendo Switch. The results are mixed, and there’s no shortage of “noob mistakes”, but it’s surely a sign of things to come. And whatever gaps there exist today between these hungry new entrants and the blue blood western studios, we could see them evaporate surprisingly quickly thanks to the “intensity, drive and speed of Chinese internet companies.”
When you are between a rock and a hard place
It feels like so far I’ve been very long-winded at painting a grim picture for employees from the perspective of crunch. So are there any hope at all with this confluence of industry trends?
First off, for the individual talents / employees – you have to follow your own life compass. Don’t let others or “the company” make the decision for you. In the big picture, and in the long run, your health and your family are generally more important than your passion and your work (and just to be clear, the games industry, perhaps more than most other industries, leeches off of your passion) – if you agree with this statement you should keep this in mind when you are making the short-term decisions at work. But aside from that point, I don’t think there are absolute rules. As a 25 year-old I worked the occasional 100-hour week as a management consultant, and while those days look comical in the rear-view mirror, I don’t regret doing them – I learnt some stuff and it was a memorable life experience. But I’d certainly have extreme reservations about doing anything similar these days.
Secondly, for studios, I don’t think there are any silver bullets, but the following might be able to move the needle:
- This is incredibly challenging to do, but having an honest conversation with players about scope, polish and the grueling realities of game development could help partially reset unrealistic player expectations. Make players demand for a better work/life balance on behalf of employees. For poor analogies, see “responsibly grown coffee beans” or “carbon neutral products” – basically anything where the cost of rising to a higher standard (offseting a negative externality) is passed on to the consumer in a feel-good way
- Don’t compete in red oceans; go for blue ocean opportunities. Stop participating in the scope and polish arms-race. For example, work on something like Minecraft when the rest of the industry is working on something like Call of Duty; or invest in a distinctive lower-fidelity art style that is cheaper to make given your pipeline and tools. Obviously, easier said than done
- As a more specific instance of the above – work on a low scope project. Supercell is the best example in my opinion of doing this repeatedly with great success, despite my critique of their challenges. Hearthstone is another famous example
- Collaborate with Chinese studios. For one thing, from an economics perspective, think of it as similar to industry consolidation, which helps with reducing competition (and thus reducing the arms-race). But more fundamentally, there are deeply complementary assets that western and Chinese studios could cross-leverage. This is why I still think Diablo Immortal was/is absolutely a right initiative for Blizzard – Netease to pursue
(…And with that, I’d like to wrap up this post, which has in its own way grown way out of scope. This has been one of the more difficult posts to write, and the longest time/energy I spent on one in years. I hope it sparks some thoughts.)