Game industry leaders go head-to-head in GamesBeat’s Crossfire Lounge

It was a night of intense debate and verbal smackdowns at GamesBeat’s Crossfire Lounge, during the Game Developers Conference (GDC) in San Francisco. Dean Takahashi, GamesBeat’s lead writer, hosted three head-to-head conversations, tackling the AI apocalypse, direct-to-player marketing and sales, and the state of the game industry.

Round one: AI: Savior or saboteur of game development?

The first debate, moderated by Takahashi, featured Simon Davis, founder & CEO, Mighty Bear Gaming versus Dave Taylor, advisor, programmer, futurist and harbinger of doom. The knowledge worker apocalypse in the U.S. is coming, Taylor argued, and AI is hastening doomsday.

“There’s about 132 million full-time knowledge workers,” Taylor said. “In two to three years when big data, AI and prompt chains can handle just about any topic reasonably well, we’re going to see a huge collapse in that workforce.”

It’s not actually AI that’s directly at fault, he said, but instead the U.S.’s scalar money commerce, a broken system where the formal value of a good or service is attached to a single number — a price or a wage. It’s a system that directly impacts game developers, he added.

“In game design, especially MMO game design, scalar money commerce is generally disruptive to our games,” he said. “It’s like an invasive gameplay mechanic, a good example of being the auction house in Diablo,” which immediately undermined the game’s economy when it was introduced.

It’ll be disruptive in the short term, Davis agreed, but AI is an indisputably powerful tool for positive change. Mighty Bear Gaming is investing heavily in AI as part of their core development pipeline, which has transformed how the studio operates. One or two artists on the team are able to handle the work that previously would take up to 30 artists to manage.

“About a month ago I made a prediction that within the year you’re going to see one-man studios with someone that has no background in game development operating a game-as-a-service,” Davis said. “And that came true six days after I made that prediction. So that’s the kind of speed we’re operating at. You have one guy build a game in one day and he is making a hundred K a month.”

What’s going to become possible is very niche games and novel experiences that serve different interest groups and different communities, products that are really viable that you can build with just a couple of people. The net result may be many smaller, more experimental CEOs over time.

“The economics of making games have been broken for a long time,” Davis added. “So this goes some way towards addressing that and making it more cost-effective to develop games and develop content and try novel ideas.”

Before the apocalypse comes, anyone can while away the time by using AI to create games, Simon said: “Go out there, experiment, see what you can build, download Cursor, see what’s going on.”

Round 2: Game app stores: Gatekeepers or growth engines?                    

In the second showdown, Takahashi welcomed Berkley Egenes, chief marketing and growth office at Xsolla and Jake Ward, co-founder and CEO of Data Protocol.

The two traditional app platforms, Apple and Android, have long dominated the mobile app marketplace in the United States and Europe, while Meta’s Horizon store is the go-to platform for VR apps. Developers are arguably locked into an unfair system in which they have to pay an exorbitant share of their revenue in order to get listed. China, which doesn’t have the same privacy and other regulations, has a broad array of stores, giving developers far more choice, and greater control over essential player data and analytics that you can’t get in the U.S. 

Ward’s company, Data Protocol, onboards the developers that build in Meta Horizon, and predicts that the app platform market will actually continue to grow as technology evolves — and these stores are both gatekeepers and growth engines.

“I don’t think the issue we’re going to have is that there’s only two mobile app stores,” he said. “I think the issue we’re going to have is that there’s going to be 50 different app stores across technologies.”

These platforms lock developers into specific payment types, but they also are undoubtedly a critical way to launch a game, and the 30% cut of the profits shouldn’t be a deterrent. But strategies like the Epic Games lawsuit against Apple and Google, which loosened the platforms’ grip on the market, aren’t the answer, he added.

“30% is a lot. It also feels arbitrary if it’s not scaled to growth,” he said. “But my preference is never for judicial remedy. It’s always for kick their ass in the marketplace, and it can be done.”

Egenes agreed that app stores are still a critical way to get into the market, but developers — especially the smaller operations — have to change the way they consider monetization if they want to survive. That’s because launching an app, distributing it and marketing it is expensive, especially if the developer doesn’t own that entire ecosystem. Fees and revenue sharing schemes can be debilitating.

“You’re screwed if your developer,” he said. “You might have a great game with a great idea and it’s something cool, but how are you going to make payroll? How are you going to go to version 2.0, version 3.0 of your game? Or if you launch it here in say, San Francisco, and we want to take it to Paris? It’s not possible, because you don’t have the money and the capital and don’t understand the tax, legal and compliance that goes with it.”

Round 3: The future of the game industry: boom, bust, or rebirth?                      

In the final debate, Marie Mejerwall, games consultant at Mejerwall Consulting moderated the discussion between Susan Cummings, CEO of 10six Games and David Higley, partner at Perella Weinberg.

Cummings noted that there isn’t a traditionally investible space in video games right now, and the industry is more separated than ever. Companies backed by VCs a few years ago were told they’d get several rounds of funding and then launch, but that never happened. Many had to go find a publisher and ended up with the same publishing deal they would have gotten anyway, while also giving up a huge chunk of their company to the VCs.

“I think we need to course-correct, we need to look at building real businesses, smaller businesses that figure out their viability as early as possible before they scale and generate revenue,” she said. “It’s high time that we stop letting the game VCs tell us what our business is about. I’m tired of asking them for acknowledgement or approval of what I’m doing. We’re game developers, right? And it’s time we took our industry back.”

The investible space now is publishers, she added, saying VCs should be pouring money into publishers, so they can pour money back into developers and rebuild the industry.”

Unfortunately, Higley said, that means you’re dependent on the publisher.

“There are games out there that never saw the light of day because the publisher said, yeah, I don’t like it,” he said. “Maybe they’re informed, maybe there’s a reason. But part of it is, where should the gatekeeping happen? Being able to go directly to consumer, it’s quite powerful.”

Payment models are also changing the industry, with premium games, subscription, free-to-play and ads all in the mix. Subscriptions aren’t as popular and successful as other models, Higley said, in part because consumer expectations are far greater there than they are for free-to-play, for instance. But Cummings brought up MMOs like EverQuest and World of Warcraft, which are still both making money.

“There’s a really healthy model in having a small community that’s loyal and pays,” she said. “We don’t need 20-odd billion people to play. If you could get 50,000 people to pay 15 bucks a month, that’s a nice business. I think the industry is going to become a little bit more about niche subsets of the things that you love and you’re willing to support, and that’s really healthy.”

Games that are popular on Steam are also a good lesson in getting noticed and making a profit, she added, and it’s not because they’re pumping money into marketing. It’s all about community, she said.

“If you do something really good and you nurture your community and you get it right, you can succeed,” she said. “It’s about quality. Suddenly, when it’s really hard to make money, you better fucking believe in what you’re building, because you’re going to really struggle every step of the way.”

And while you have access to players, when you move out of the app store and publisher model, the downside is you have to do it yourself.

“We’ve seen a lot of people say, oh, I’m just going to self-publish. No, it’s actually a lot harder to do than they realize,” Higley said. “It’s not just slapping up on Steam and seeing what happens. But publishers have to get better if they’re going to step in and take the toll. They’ve got to actually do the job to move the needle for the content creator.”

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