In June 2020, leading games research company Newzoo released a fascinating breakdown of what they term the gametech ecosystem. In this episode, we’re joined by Newzoo’s CEO, Peter Warman, and Tyler Long, Market Lead of Game Developers and Publishers at Newzoo, to discuss this rapidly growing ecosystem, how they mapped it, and where it's headed.
Listen to the full episode here, or read the transcript below.
Game tech low down
9:42 Peter: “We see our mission as taking away barriers for game businesses to grow and, sometimes, that means providing insight into areas that are complex. I think game tech is a good example because the creative process of making a game is, of course, what everybody talks about. It’s genius and great and we put out great things, but games would not be as successful if they didn’t have the technological tools and business models behind it that power all kinds of special features. This whole ecosystem below it is something that outsiders don’t really see, but insiders really need to be successful. As this space is ever expanding through technologies and concepts, we thought, ‘let’s give it a go to organize it and see what we bump into.’ That might make it easier to predict where things are headed or which technologies might impact other markets outside games.”
11:10 Tyler: “We were really looking into ‘what is game tech?’ This is a new term, I believe. We know there’s so much different technology out there and we were trying to figure out what is game tech and how do we define it. We tried to first define what it is and we think it is the range of software, programs, tools and services that are used throughout a game’s lifecycle. That concludes from development to publishing to operations and even to marketing. What we think of game tech is anything that is used to make the game successful.
“What we really wanted to focus on is what we think is game focused tech. That’s the key difference between tech and game tech. We all use a ton of different technology in our lives, no matter the company, but we really wanted to focus in and make something useful for the end user, whether that’s an insider in the game industry or maybe brands just trying to understand the game industry.”
The diverse process
13:14 Tyler: “Inside of Newzoo, we have a really strong team, a very diverse team coming from different backgrounds inside the industry and analysts, as well. We brought a very diverse team together to start building the game tech map. Another key aspect, as well, is that throughout the whole process, we were working with our large network of game developers, publishers, and beyond that. We were trying to bounce ideas off of them and try to find the best fit throughout the whole process to make sure that everything we were doing made sense and that we had the right types of tools, the right categorization of all the different tools, and to make sure whether is made sense to include something like google analytics.”
“We did have some of that greyness. There are those things like google analytics which is obviously crucial to a lot of different companies, but is it crucial to the actual whole game lifecycle process? If it was super crucial, we did try to include it as much as possible because it really helps us to paint the whole picture even if other companies use it beyond game companies as well.”
Map breakdown
14:58 Tyler: “We were definitely looking, at the very beginning, at how to categorize this in the most useful and most representative way for the industry as a whole. The industry is very diverse from different types of platforms, PC vs. mobile developers and publishers. Different types of companies have different standards and different tool sets. What we really try to focus on are the key pillars and sectors of game development and publishing. We broke that down into development (making the games), operations (how to operate the game), growth (how to market the game to bring in new users), and market analytics (how to enhance all of these other three different areas).
“We try to make it look somewhat cyclical. The game development and publishing process, especially as things turn to games as a service, is becoming much more of a loop. It’s not a straightforward process from development to publishing. It’s also an iterative process in development as well. We know that all of these tools are really interconnected in a way and really helping this cycle of development to publishing to operations to growth, and continually go over and over.”
So, what did people think?
17:36 Tyler: “It’s definitely an iterative process. We had a lot of good feedback, for sure, and there’s always going to be people wanting different things. The overall structure shouldn’t have any large changes but definitely, when we dive deeper into, for example, these subcategories underneath development or operations, there will always be a little bit of a greyness that comes up. We are actively taking the feedback and we are definitely going to be looking into updating a future version that is hopefully even better than it is now.
“Another key point is that we, also, purposefully tried to pick a representative sample of each of these companies or solutions in each of these categories. We know that there’s quite a few infographics that can be exhaustive with the number of companies that they list and it can really affect the readability. For us, it was more about telling the overall story in the clearest way possible so we tried to be very representative.”
Game tech takeover
19:35 Tyler: “Each one of these main categories, I think, has been really crucial to growth. The last ten years in the game industry has just boomed across the board and these tools and solutions have been a big part of it. Just to take some examples in game development, obviously unity and unreal, the engines that are coming out, have become super powerful. They have been able to do some amazing things with them. I think even more interesting is that they really flatten the playing field. There’s a ton of people that would traditionally never get into game development and with these new technologies, it’s so much easier to start in development and there’s so many games that come out of it. I think that becomes kind of cyclical within itself. New tools help more people get in, new types of games come out which brings in more users, which makes more commercial sense to get even better solutions out there.
“The operations side of it has been huge as games before were never even considered a service. Games as a service, now, is the new standard and so many companies need help getting on board with that. All of these different solutions coming have really helped everyone quickly step up and get to that same level of service.”
21:35 Peter: “The developers getting so much help by third party tools allows them to focus on the creative part and the engagement part… it has, I think, freed up the game developers to really focus on the consumer. Therefore, this whole space has just accelerated faster than any form of entertainment. The creative people have embraced technological tools and that combination has been magic.”
Opportunity for success
22:27 Melissa: “Which category do you think offers the best opportunity for success?”
22:51 Peter: “This may be a bit high level but the technology that processes various levels of engagement around a game, you could call it IP, all the way from viewing to playing to social community behavior and, maybe, all the way up to your brand merchandise and hardware… some of the software is limited or focused on one of those and I think there’s room for technology that runs across that.”
24:05 Tyler: “The game industry and game tech is getting more and more mature and there’s definitely more competition in the space. I would say for new companies trying to get into the game tech space, they should really be careful about finding that right niche or angle… there’s always new stuff, new experiences, and new platforms coming out for gaming. For example, VR, and cloud gaming. These new areas are going to pop up and they’re slowly growing now, but when they do become more mature, there’s definitely going to be a lot of space there. The larger game tech companies will join into that but there’s always going to be those parts they miss as a big company… Another interesting point I will point out is the combination of game tech with some other tech or other angle. By that I mean something like AI or machine learning. We know it’s going to be huge across the board in all kinds of industries so how can we combine that or make some new game tech around that.”
What makes gaming special?
26:47 Peter: “A lot of the trends of this traditional media IP thinking and creative tech game developing, on the other side, are merging now that the convergence of both worlds is accelerating… indie game developers suddenly see that their youtube videos about their games are not free marketing but a very strategic tool for the lifecycle of their product. Streamers are the most important partners in your game launch and is of equal importance to popularity and viewing. There’s a realization on the gaming side, but on the other side, what is accelerating the most is actually the Disney type companies looking at games to see how they can do a better job or do engagement differently that suits more with games that are setting the norm for the new generation… I see small mechanics from gaming now suddenly pop up in Spotify, “contribute money to your favorite band.” There’s all kinds of mechanics that are now mixing and I think that is super interesting.”
Resilience of gaming during COVID-19
29:10 Tyler: “Games, as an industry, has been really solid and able to perform really well across the board… I think what is really interesting with games as a whole is that it has that interactivity, play and interaction. I think that’s actually quite an interesting angle considering what we are all going through with quarantine and everyone not being able to interact with their friends, family, and such. I think one reason the game industry is doing so well is that it is that one medium, compared to something like movies or books, where you can really interact with those that you love… even single player where you can go on an adventure and play in an open world game and really get outside. These are some really interesting points that really resonate with people and become super important in these difficult times. I think gaming as a whole, no matter the situation, has very strong advantages of why it can perform really well and people really want to engage with it in the times we’re in.”
30:27 Peter: “Games companies have a direct relationship with consumers and rely mainly on consumer income. What makes games unique compared to other mediums is that in a single environment of a game, they entertain people that have no money but a lot of time and people who have a lot of money but no time. That is unique and that also makes it very flexible. It adjusts itself to the circumstances. If your circumstances change you can spend more time on it or you can spend more money. It’s very elastic and game companies own the relationship with the consumers whereas in other mediums, you put out content direct to the consumer but the business model relies on the whole industry or market in between that can suffer from a crisis. So, the structure is just different and we’ve created environments where we can cater to more time or more money… Creating communities around games, around streamers is something that is really lacking in other mediums or sports. The digital strength of communities is something we now see coming together to raise money or raise awareness for COVID or raise awareness for black lives matter. Gaming and the communities play a big role there and I think that’s due to the fact that the communities are so strong, vocal, and feel that they, together, can make a change.”
Dare to predict for 2020
33:10 Tyler: “I think we’ve seen some interesting patterns recently. I won’t say any predictions for sure, but I think definitely some consolidation and MMA. For example, if we look at the development side, unity, unreal, the larger engines, have really grown a lot over the last few years but they’re also doing a lot of interesting consolidation, as well. Unreal has recently purchased a couple of different tech solutions that are also limiting development but they’re bringing all of these different tech solutions into one engine. I think that is going to be a strong pattern going forward that these engines are trying to be an all-in-one stop for any kind of development needs. I think most of the engines are really enjoying that where they’re able to get so many different solutions in one stop without having to integrate different solutions together and having so many problems… I think there will be some new categories, for sure. I don’t know what it will be but maybe something like AI machine learning… Hopefully, there will be something interesting and new popping up soon, maybe, VR, AR and cloud gaming will start taking off more. I think we will see a lot of these new tech solutions following behind that.”
35:05 Peter: “I think you will see a lot of tech companies being acquired by the big tech giants. But, I also think you’ll see new aggregates of tech with companies, like a Discord, that have a central place in the gaming community creating storefronts or something that they might expand themselves into suites of tech. Personally, I would look, as an investor, into game tech itself and see where the game tech will impact other markets where the impact might be even bigger. If you bring marketing and business mechanics around digital games and streaming to traditional media that is now accelerating and adopting digital, that could be really interesting.”
38:22 Peter: “One of the things that I hope is that game tech will be applied to real life problems. If you think of the currency system developed in games based on A/B testing with hundreds of millions of people. We’ve ended up with a 2, 3, 4 layer currency system that allows people without money to enjoy it as much as people with money and that is exactly the challenge we have in the real world. The currency is too hard so we end up with a lot of poor people and a handful of very rich people.”
