The Grim Reality for Independent Game Developers and Publishers: Surviving the Challenges Ahead

Recently, we've been conversing with partners and customers about the industry's future, particularly for independent game developers and publishers (whatever "indie" means these days). The future doesn't look bright, which shouldn't surprise anyone who knows anything about marketing. As a games and game market researcher and marketer, I'll try to explain the challenges we've faced in recent years, why the industry has struggled, and what the future holds for developers and publishers, especially smaller ones.

When I asked what the biggest challenge for small developers and publishers in the coming years will be, one of my reasonable clients answered without hesitation: "To survive."

We have been through a difficult time of brutal verification of many projects and business assumptions by market reality, which not only exists – which not everyone seemed to believe in – but also treats exceptionally ruthlessly:

Many developers and publishers find themselves bewildered by this situation. However, the market's response should not come as a surprise. 

For years, I have been amazed that our industry still considers itself unique to the point that the general laws of capitalist economy and marketing do not apply. The industry's ways of thinking and acting, which I understood as the happy effects of its youth when I was a marketing director at Techland in the 2000s, today simply appear weird.

If gamedev differs from other industries, it’s not because of its more “artistic” nature or because it allows more “relaxed” marketing operations. On the contrary, it is much more brutal and uncompromising, as it is, and it creates even more VUCA (volatile, uncertain, complex, and ambiguous) environment than many other industries while not questioning the fundamental laws of economics.

If we were to present our work and processes to marketers in more mature industries, they would likely be astonished at the approaches or–let's be honest– a lack of marketing approach in many corners of the game industry. 

So, let's take a detached and humorous look at what was happening in our industry from a distance.

What's done is done?

I'm going to be a brewer!

Imagine, for a moment, that we are discussing beer instead of games. If the beer industry worked the way the game development industry does, we would have seen hundreds or even thousands of new beer ideas in recent years circling around; many of these would have been launched on the market in a more or less crippled way, with no promotional support. The brands would be unknown to consumers and never seen.

There would be many people around the world who believe they could create outstanding, globally acclaimed beer. However, because, at the moment, they don't have the financial resources or the expertise to produce the beer, they just start by designing a label for their beer idea!

They would approach investment banks or global beer companies and convince them that their idea is a guaranteed success that will make millions of dollars. They are confident that their beer will be a hit in the market, and all they need is multi-million dollar funding to establish a brewery, hire skilled brewers (who are hard to find), develop appealing recipes, engage in trial and error for several years, and eventually launch their dream beer globally.

They believe that viral marketing is the key to attracting people's attention, captivating them, and inspiring them to share their admiration with their friends. There is no plan B. They are confident that the multi-million-dollar investment will pay for itself, and their dream of launching a successful beer brand will come to fruition.

They plan to conquer global markets with this brewery, from the US to Europe and China. And, of course, we're not talking about craft beer but about the production of liquor aimed at millions of customers based on a craft recipe and a craft business plan.

Would you invest several million of your own dollars in such a venture?

I'm going to be a rock star!

Let's talk about the music industry since it's all about entertainment, just like our gamedev. Imagine a young person approaches you and claims she's discovered her talent and will become an exceptional solo singer on par with Lady Gaga. She plans to write excellent music and lyrics with the help of her collaborators, some of whom she already has and some she'll find soon. She intends to be as bold as Gaga but with a little less spectacle due to budget constraints.

According to her, the business plan is brilliant and indisputable: since millions of people worldwide listen to music, and she targets her songs to people aged 13-65, any gender, ethnicity, etc., millions of listeners will find her on Spotify, and fall in love with her.

She only needs a few million dollars to live on for the next few years, but she'll more than pay you back. She presented her plan impressively with some excellent slides, which she considers foolproof.

Moreover, Spotify's monetization model is solid, right? Would you invest a few million dollars in her? Any doubts?

I will be a streaming star!

Let's stay in entertainment. Imagine that you are a manager at a streaming platform. A group of kids has approached you, claiming they can create a show similar to Stranger Things. However, their idea is to set the action in a random place in Poland. Due to budget constraints, they will hire only one character and haven't decided who that character will be yet. Moreover, they plan to write the script only after receiving investment funds.

Despite this, the startup developers are enthusiastic about their ideas and believe their show will succeed and make millions!

The question is, would you approve the investment? You might say, "It depends" (e.g., on who this group of enthusiasts is). But what if it was your own private money?

I will mow down the leader in the popular car segment!

Or, as the last parallel, suppose someone comes to you with a proposal claiming that their company, currently valued at a hundred dollars, will soon be worth millions. It's simple: they plan to announce their entry into the European automotive market by producing cars competing with Dacia, Toyota, or Volkswagen – they are hesitating yet. What they have now is a rented hall, and they hired a production manager who previously worked at Renault. Today, as a part of a special offer, they offer shares to investors at an attractive price. They require $10 million to begin production and capture the market – they're sure it suffices. They are sure that cars can be produced more cleverly than the sluggish automotive giants have done so far, right?

Would you buy these shares with 10 of your private millions?

“Surprisingly” – it all ended with tears and disappointment.

In each of the absurd cases mentioned above, one would probably not invest more than a few hundred dollars with such vague plans and limited information. However, some have invested hundreds of thousands or even millions, only to realize that their expected profits were nowhere to be found. Many dared to go for the gold and hunted unicorns with full enthusiasm. They believed in the success of their projects for years.  At one point, they even “cried and paid” to finally ask in despair: "Hey dear brewer (singer, director, CEO), then where are those promised ROI?". Well, if there was anyone else to ask.

While the global game market is growing and is about to reach €200 billion – including all platforms: 19% PC, 29% console, and 51% mobile market share – the gains from this situation are now and will be distributed very unevenly. Few remember about it.

Unsurprisingly, the gold rush was powerful, given the continuous increases recorded for years. Even otherwise wise decision-makers fell victim to it.

Although most daredevils had good intentions and a sincere belief in imminent success, I personally know studios or publishers who went for the gold and hunted unicorns with full conviction and enthusiasm. They often went for that gold for years, still believing in success. Only a few dozen succeeded. Thousands did not, and many projects got stuck in the realm of dreams of success. A few thousand at least did not lose everything.

Unfortunately, the profits were not, are not, and will not be there.

*

So, why did this happen? Is it possible to operate differently in our industry?

Problem 1: #noonecares (about your game).

The biggest challenge for game developers is getting recognition in an overcrowded market. It is still the same as it has always been but multiplicated. It's still a surprise to many gamedev people that they've to face it just like marketers in other industries, but it's only a more complicated task than in other industries. In gamedev, you must face a lack of recognition in a global environment alarmingly overcrowded with everything: every genre, sub-genre, mechanics, atmosphere, story type, and character type.

Establishing a brand in the minds of today’s gamers without a gigantic promotional budget is statistically impossible.

To understand the scale of this challenge, imagine a digital game store as a brick-and-mortar grocery supermarket. However, instead of seeing a few brands chosen by a supermarket manager to choose from, a consumer faces browsing thousands of products on every shelf, such as those with jams, yogurts, ketchup, or baked goods. The store owner is not limited by physical space, so new suppliers and brands are welcomed.

Every week, this store adds 250 new brands to its already vast collection of tens of thousands.

You are an Average Joe who wants to buy the best ketchup for your evening barbecue. You walk up to the shelf. And there you go: choose from not three or five, but a thousand brands of ketchup. Each one is described in a few well-written sentences and is well-packaged. They all fall into several price categories, say, two thousand brands each and a few hundred in the premium category. How would you choose?

Here comes the so-called "decision fatigue" gamers face due to the overwhelming number of options. One of our respondents recently shared their experience:

"I use Steam, on which, through humble bundles, I have so many games that instead of firing up any of them, I usually turn Steam off through decision paralysis or fire up some game I've already played for hours."

Such decision fatigue is a state of cognitive overload. It occurs when we are faced with too many options, and it becomes mentally overwhelming to make a choice. The stress of decision-making increases with each successive decision. This means that the tension builds up not only within the choices in a given category, but a gamer also faces a cumulative effect in sequence. For instance, have you ever ended a movie night at the browsing stage without watching any movie on Netflix? Now, imagine that after an hour-long session of looking for a film, you browse hundreds of new games.

Decision fatigue is often connected to recommendation models. As we become overwhelmed by the number of decisions we must make, we start to appreciate the advice and suggestions provided by stores and platforms. These platforms use various algorithms to match their recommendations with our preferences. Whatever model the recommendations are based on, they are crucial for the developers in terms of audience discovery of their games.

Being "suggested" to gamers by the recommendation mechanism means "to be or not to be" for developers and publishers.

Given the huge advantage of digital distribution over traditional distribution, staying out of the gamer suggestion stream can be a killer for a small studio. With today's hyper-competition, issues of "discoverability" are fundamental criteria for success and even survival. To succeed, you must stand out and maintain long-term players' admiration by adapting to the market. That's the survival of the fittest.

Returning to comparisons with more mature industries, FMCG manufacturers wishing to enter a crowded market with a new brand of toothpaste, beers, or snacks treat this as the biggest challenge they face. They rarely decide to do so, and if they do, they precede such a move with dozens of strategic brainstorms, consultations, market research, focus groups, further market research, negotiations, preparation of huge budget plans, especially for promotions, and massive marketing communication plans (also considering specific research on the sensitivity of target groups). And yet they compete for the attention of their audiences with incomparably fewer other brands than we do in the gaming industry. In addition, the competition there is usually geographically limited; the products are relatively cheaper and require much less time and attention, which are the most precious resources of the modern consumer.

In gamedev, the supermarket is global - marketers are trying to attract Germans, Americans, French, Japanese, Koreans, or Chinese to their new brand. Nevertheless

Investors, developers, and even publishers often behave like gold prospectors in the Wild West. Someone once said in a Saloon that there is a vein of gold somewhere. So, let's take a pick, a shovel, and a strainer and go!

Somehow, we'll make it! Somewhere, we discover those millions! However, relying on intuition or "common knowledge" alone is not enough. Objective data is necessary to make informed decisions. Even though it may seem like a guaranteed path to success, there is no substitute for hard data.

Some people in the industry take risks and try to achieve greatness. They're like cowboys from Westerns who hope to become famous. This can be much more satisfying than simply trying to take over a small percentage of a well-established market for everyday goods like toothpaste. These daredevils expect significant profits, often in the double or triple digits. However, predicting their sales is difficult, like imagining the future using long-term weather forecasts.

Unfortunately, the reality is brutal—no one will be interested in the "375th game" in a given genre and setting by default, even from the developers of outstanding games X, Y, or Z. Moreover, even if it interests someone today, it will be covered in this supermarket tomorrow by another few similar or more exciting games.

To summarize this thread, one of the biggest challenges today, especially for small developers and publishers, is getting anyone to pay attention to their game, even if it is or will be the best in the world.

It is extremely difficult and will become even more difficult to break out in front of a player's eyes among tons of shovelware.

There is a lot of talk about this in the industry, but we rarely realize the practical dimension of the current market congestion. Meanwhile, the average gamer needs help to even learn of the very existence of the vast majority of games, let alone take an interest in any of them. It's unlikely that he will add one to his shopping cart. 

Gamers Funnel by Michał Dębek / Try Evidence CC BY-ND

Some deal with this problem by entering partnerships with Microsoft or Sony, where the crowd of competing brands is much smaller, and the potential profit is more certain (albeit also smaller). But there, too, competition is growing, and so it will soon become increasingly difficult to make satisfactory profits.

Therefore, it's vital to realize that success in this industry depends on promotional efforts and capabilities, specifically brand building. With a saturated market and low barriers to entry, traditional and expensive marketing methods like television, press, radio, outdoor, and influencer marketing are necessary on a global scale. The cost of marketing will continue to rise, as in other industries. Game marketing also necessitates complex strategies, branding, strong public relations, and media-publisher relationships.

Gamedev professionals must begin with the basic element that still tends to be neglected: brand building. It's also worth understanding that with such a massive saturation of the market and low barriers to entry into our “supermarket,” any success will more often require classic promotional methods. Unfortunately, these include the costly ATL formats—television (YouTube and other reach video platforms, etc.), press (all gaming media), radio, outdoor, and influencer marketing on a massive, global scale. Omnichannel will be the keyword for the smartest.

The marketing costs will be enormous and continually rising – as in other industries where there is an increasing amount of everything on the market.

Game marketing will also require the ability to create complex promotional strategies and classic marketing activities common to the general marketing world, including branding strategies. The importance of public relations activities and the value of the publisher’s relationship with the media (not only the traditional ones) will also increase.

I have heard here and there that a publisher's role is decreasing due to digital distribution's dominance; maybe they're dinosaurs on the verge of extinction. However, I firmly believe the opposite is true. In the future, the chances of achieving commercial success without an efficient and wealthy publisher providing excellent marketing and PR support to a developer will tend toward zero.

Raw power will be equally crucial as innovative thinking, quick adaptability, and well-executed artistic visions. That's the grim reality and a forecast for the future.

In the next episodes of this essay, I'll present:

Special thanks to:

Many thanks to Marta Adamska, Lukasz Adzinski, Jon Bailes, Andrzej Blumenfeld, Joanna Buganik, Tomasz Gawlikowski, Wojtek Gruszczyk, Wojtek Tina Janas, Marcin Jaskiewicz, Stan Just, Lorraine Kennerly, Blazej Krakowiak, Rufus Kubica, Paulina Kwiecinska, Anna Lada-Grodzicka, Kaytey Peaker, Nic Reuben, Krzysztof Salek, Ian Stokes, Kacper Ullman, Sebastian Wieczorek, Roger Zochowski, and all the other partners, clients and colleagues with whom we have discussed industry issues since the beginning of the year and thanks to whom I wrote this article including its subsequent episodes.