It's hard for people to forget the sound performance in the gaming industry in 2021. Developers' talent policy and investment, the concept of meta, etc. all lead to people's belief in the development of mobile games. However, 2022 witnesses fewer people suffering from the epidemic and are prone to spend more money on games. The policy in this sector becomes stricter, thereby attracting less investment. As such, game developers and publishers begin to review their own development philosophy. 

Gone are the days of gaining more benefits. Reducing cost and improving efficiency begin to emerge in the internet sector, and then spread to the gaming sector. There is no doubt that the industry has also competed to reach a high level.

Looking back to 2018, only 10 to 20 million RMB can develop an ACGN game. The game can be listed as the top seller via users' recommendations. But, according to a financial report, this category game cost roughly 70 million RMB in sales. And the threshold for users to download and top up is increasing by leaps and bounds.

The SLG category, which is considered by many developers and publishers as a life-saver, has gradually become a gamble. It is rumored that one of the top SLG developers spends more than $30 million per month on promotion, and most projects are able to gain profits after 18 months. In addition, it should be ignored that the developer cost is mounting rapidly 

Therefore, how should we gain insights into the game industry in 2022?

Learning from NOT Experiences BUT Practices

It seems that the experience learned from the past is hard to live up to the current status. In the past 10 years, apart from the demographic dividend, the gaming industry has been in the midst of pioneering products. Card, APRG, MMO, and SLG are emerging. Following that, a large number of imitators come to the public. However, they are hard to follow the steps of Genshin Impact. 

On the one hand, it appears that people can learn a lot to develop from this game, including the idea of an open world, content packaging, a large number of investments, industrialization, multi-platform, global distribution, IP, and branding. But on the other hand, the vast majority of people feel a great sense of powerlessness. They think about how could it be possible to learn various things from Genshin Impact. 

Not every team wants to compete with miHOYO, thus many companies have chosen a more cautious path to develop a product and then slowly build up their R&D strength with continued cash flow. It is natural for developers to choose the path of SLGs.

However, the performance of SLG developers seems to be on a tough track. An insider states that a product might have a chance to become a next-generation flagship simply by doing iterative innovation or gameplay fusion in past few years. But nowadays, there are more and more leading products with a monthly cash flow of over $50 million. And core SLG players are basically attracted by these products, making it harder for users to give up current games. In this context, only those who have made innovations in every aspect, or who understand a certain type of players, will have a chance to become the top-notch product. But it's not easy for developers to differentiate in the gaming sector. A list of seemingly differentiated products ultimately lose due to the content and gameplay. As a result, teams seek the chance to enable their products to go overseas. 

Unlike in mainland China, no Android channels or communities such as TapTap are provided. Most of them are almost dependent on purchasing users. It's required for them to test lasting for nearly six months, which indicates more investment should be put at the primary stage and more stringent cash flow requirements are allowed for the company. Amid the backdrop of the fact that more competitors in this sector are emerging, game companies that want to survive in this new era are doomed to uncertainty.

Development Path in Gaming Industry

It's not just a matter of wandering, but of facing up to the moment and finding a path to develop. Dramatic transformations have long since fallen out of fashion. Every direction is becoming more and more systematic, and it must be more and more difficult to change business lines, enabling game companies to be capable in the industry. 

As is known to all, there is still an opportunity in the open world, but this track is really difficult to follow. Even the leading players in the sector become more cautious than ever before. Currently, a variety of firms seek to cooperate with others to relieve the risks.  

In terms of specific R&D, some try to think beyond the commercial 'category' to a subtle 'experience'. Imitation, following, and skin swapping is also no longer popular in the R&D process. At a time when mobile games are becoming fiercer, some are also paying attention to the direction of Steam, etc.  

A firm notes that they want to get the global Steam distribution business off the ground. It's common that publishing a small-volume commercial mobile game may cost at least millions to sign up and tens of millions to promote, but publishing a Steam game may only cost a couple of million. Although the former may have a profit margin of more than a dozen times, the latter may have a profit margin of less than 100% but less risky. For small and medium-sized enterprises, the latter may have a chance of surviving in this era.

It is sure that these insufficiently proven paths are absolutely reliable, but the logic is fairly consistent: emphasizing the differences while reducing risk. After all, in an era without a demographic dividend, each firm explores its own development path and finds the right track for its growth in the final.  

A Possibly Promising Future in Sector

In 2021, gamers experienced unprecedented heat and fantasy. While in 2022, gamers need to review their own development path and initiate plans to meet expectations. 

If not pursuing scale and growth rate, perhaps developers will not fall into uncertainty and anxiety. Some note that as long as the team number is controlled and stable cash flow, the publisher and R&D department can gain sound performance. There is a reasonable revenue model for any category, but now people are talking about long-term profit while striving for the highest LTV and more new users.

Looking ahead, people no longer believe that the gaming industry can still grow with the ceiling. As an industry structured on top of other industries and the economy, there are a number of issues that are out of control, including the economy, financial leverage, and policies. Only when the macro environment picks up can the industry pick up. According to Sensor Tower, total global revenue from App Store and Google Play is expected to return to growth in 2023 and grow at a CAGR of about 5.6% over the next few years.

Perhaps behind the current uncertainty in the gaming industry, there is also a time when such a wind is rising.