This GB Live News is in partnership with VB Lab funded by Xsolla.
Video games have always been resilient, even in an increasingly volatile geopolitical climate. Long-time game players are fiercely loyal, and enthusiastic new gamers keep pouring into the market, says Chris Hewish, president of Xsolla. In the first half of 2022 alone, more than 651 deals were announced or closed, for a value of $107 billion. But in a fiercely competitive market, clouded by less economic certainy, studios and indie developers are exploring an increasing number of ways to reach the audiences.
“Game companies do need to look at how their business models can function in a macroeconomic climate, heading into a recession,” he added. “Capital is going to become tighter. If you have a business model based upon growth over profitability, it’s going to be harder to find fuel for that growth. Readjusting to focus on profitability is probably one of the biggest things game companies can do right now, if they haven’t already, to weather the storm in a macro sense. But the opportunity with players and the number of people playing and spending, that’s still looking good.”
Hewish recently sat down with Dean Takahashi, lead writer for GamesBeat at VentureBeat, to talk about the state of the game industry in the wake of the erratic pandemic tides (see full video above). The conversation touched on ways developers can tackle key strategic challenges, scale into bigger markets, reach broader audiences, as well as surfacing new data that reveals the secret to getting funded.
More access to bigger markets
Scale is the key for developers who want to tap into the growing market, particularly in the Asian market. The Asia-Pacific region is home to 55% of the overall global video game audience, and that audience has demonstrated strong brand loyalty. Xsolla is expanding its presence in the region, forming strategic partnerships with key payment methods to help developers market, sell and monetize their games in over 200+ regions, including Korea, China, Malaysia, India and Japan.
“It’s a huge opportunity, but anybody who’s been in the industry long enough knows that it’s been incredibly hard for western companies to succeed over in the east, and vice versa,” Hewish says.
Xsolla is now partnering with Alipay Plus, the number one digital wallet in China and Hong Kong, to give developer partners access to a wide network of digital wallets in Asia and worldwide. That means new payment methods allowing them to transact in new ways, and offer promotions and marketing support.
Embracing the NFT trend
The global NFT market is predicted to hit $97.6 billion by 2028, at a market growth of 31.6% CAGR during the forecast period. In the third quarter, blockchain gaming startups commanded 40% of all the money invested in game startups. To keep up with the market, developers need to process and manage NFTs securely and safely, so Xsolla added NFT checkout as part of its pay station for partners.
It not only allows players to sell NFTs and digital items, but to purchase them with a preferred method of payment. The NFTs are delivered directly to customers in their wallets, and the minting of NFTs will be available prior to or after the purchase of virtual items, and stored in the custodial wallet.
“This is just part of our continued efforts to provide any of the tools you would need to run your game business, regardless of whether it’s web3 or traditional,” Hewish said.
The data-driven secret to finding a market
The video game market is thriving — but that also means that competition is fierce. About 70% of indie games are commercial failures. Of the 30%, considered successful, only 7% will generate enough revenue to fund a second project. Why are so many developers having trouble finding funding, or finding a market? Xsolla took a deep dive into the data and uncovered a crucial strategy that many studios ignore.
“We found out that the number-one method for any game in development to find an audience is putting out a great trailer,” said Hewish. “If you have a great trailer, you’ll find many more people are interested in your game. That can be used to drive pre-sales or build up an audience. At launch you have a better chance of success. You’ll do better than the other half of games that barely generate any revenue.”
Most indie developers, and even a lot of mid-tier developers, pour all their limited funding into making the game, which is a great instinct. In the end, the game is your best sales pitch. But how do you get people to actually pay attention? A trailer is the best way to generate awareness.
Xsolla has developed a program through its game investment platform that offers companies funding specifically for creating a trailer. It isn’t an equity investment — it will count toward future revenue.
“What makes this really effective in our mind is not only have we created a vehicle to get funding for your funding, the best way to market your game and get players, but we’ve also partnered up with a number of amazing trailer houses,” he says.
These hand-picked trailer houses, Liquid+Arcade, Vivix and Trailer Farm, offer exclusive pricing tiers through this program. They have a proven history of success, delivering great game trailers for games like Borderlands, Love+Death+Robots for Netflix, Monster Hunter Rise and more.
Reaching new audiences on new platforms
Today mobile game companies can expand their reach with direct-to-consumer marketing efforts. A personalized web shop on your own website can reach more players, earn more revenue and grow a game worldwide, at considerably less expense than the app stores.
“This is a fast-growing business model for a lot of mobile companies out there,” Hewish says. “It’s something I really encourage more mobile companies to look at. It’s a great way to develop a great relationship with the player and generate more revenue through an entirely new platform and audience.”
Xsolla is leaning into the trend, expanding its platform to give developers better ways to improve communication and reward its users, make subscription and item transactions seamless, and offer more ways to pay globally.
“If you’re an indie developer, you can use these solutions and features to really operate your business in the same way as some of the big enterprise companies and larger studios,” he says. “You don’t have to worry about having the resources to build all of this back end. You can just focus on making a great game, and now making a great trailer or some great digital items, and getting those out to audiences on different platforms worldwide.”
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