cross-posted from: https://lemmy.sdf.org/post/2944272
Smaller subscription deals and the underperformance of certain titles have had a severe impact on Devolver and TinyBuild, says stockbroking firm Goodbody.
Both companies floated at the peak of the games business in 2021 and have seen their share prices plummet over the past two years. Devolver has seen its share price drop 92% since its peak in January 2022, while TinyBuild’s has fallen 95%
“We have seen from Devolver and TinyBuild that subscription is under pressure at the moment,” says Patrick O’Donnell, technology and video gaming analyst at Goodbody.
"The cheques coming from Sony and Microsoft are just not as big as they were. And that creates problems if you’re concentrated on that side of the market.
“TinyBuild, of all of them, was most exposed. Devolver was exposed, but not quite as much.”
They’re not going to suffer from weaker deals. They’re going to turn down deals that don’t make up for their lost sales.
Honestly, I would hope for that as well; but it seems very similar to the enshittification of Amazon (Wired link, archive link):
Basically the notion is once a storefront has captured the bulk of potential customers, they are able to extort their suppliers however they want, since it’s the only way the suppliers can reasonably reach the customers.
Hopefully in this case, the publishers can explore other sales avenues; but it all depends on the reach of the subscription service.
The ways those two businesses function are dramatically different. Microsoft has a near monopoly of the operating system that powers gaming PCs, and they couldn’t turn their store into the Amazon of PC gaming, not for lack of trying, because Steam already offers customers what they want in a far better way and any attempt to close off their operating system is met with market resistance. There’s also the fact that the games market is so broad and diverse that Game Pass and Microsoft’s stores are nowhere close to being the one-stop shop that an Amazon or a Walmart have historically been, and it’s why they’re nowhere close to capturing “the bulk of potential customers”. They’ve got about 25-30M subscribers last I checked, which is substantial, but it doesn’t even come close to the 100M+ monthly active users on Steam, let alone the wider games market. (Steam is easy to cite, because they make more of their data public, but obviously there are substantial pieces of the market on PlayStation and elsewhere.)
What developers and publishers get from Game Pass and PS+ is a lump sum that devs/pubs project will make up for the potential of lost sales, and if it doesn’t, that the word of mouth from offering the game with those services will make up for it in sales outside of those subscription services. If the offer is too low, they don’t take the deal. So the subscription service is either a subsidy or marketing or both, but that’s only if the figure they’re offered is high enough. Saying that Devolver or TinyBuild benefited from that boon in ramping up subscription offerings is one thing; in fact, it may have ripple effects that help them out long-term, as people are more familiar with their brands through subscription services now than they would have been otherwise. But if they’re truly “suffering” from those deals being less generous, that’s just going back to the old investing adage of “When the tide goes out, you can always tell who was skinny dipping”, or to put it another way, they weren’t adequately gauging their risk alongside a good deal that was never going to last forever. Judging by the article, Devolver will likely be just fine and TinyBuild is more of a question mark. I honestly had no idea TinyBuild was publicly traded. Both are making sensible long-term bets, at least for the most part…in TinyBuild’s case, I hope they didn’t invest too much into the likes of RawMen. Both companies were contrasted against Team17, who kept more consistently conservative projections.