The Audit of Our 2023 Predictions

Throwing out predictions is easy. Tapping yourself on the back for a correct prediction is rewarding. But being open about your track record is essential. We certainly don’t get it always right. And you can count on us to be the first ones to call ourselves out when that happens.

Our track record for 2023 predictions:

• 4 correct

• 3 partly correct

• 1 wrong  

See what where we missed and why. Make sure to sign up for our newsletter to be the first one to read our predictions for 2024.

Prediction #1 Organic Discovery Will Be Declared Deceased

We predicted that in 2023, the iOS and Play stores will be officially declared dead - and no funeral will be held. Featuring has been a memory from the past for years. The k-factor, which measures the virality of a game, is at an all-time low. To get even more hyperbolic - the app stores are like that meme with the dog in a burning room.

This was an easy prediction. The importance of app stores as a discovery platform has been on a steep decline ever since Apple’s App Store received its design update in 2017, which puts emphasis on editorial over what users actually care about.  This year even the indie developers have had to admit that App Store discovery is dead.

Verdict: CORRECT (1 Point)

#2 Publishers Push to Off-Platform Payments

Webshops, enabled by companies like Xsolla, have had a breakthrough year.

We predicted that we would see heavy pushes to off-platform payments in 23 years. Which will result in a big win for companies like Xsolla.

What we love most about Apple and Google is that they know your credit card number. It is a beautiful thing; with a simple tap, the money goes from players’ wallets into ours. Beautiful! We will absolutely pay a premium for this. 

Yet today, everyone knows our credit card numbers. You pay with your watch, your retina, and your fingerprint. You can just walk into Whole Foods, grab stuff, and then walk out. Payments are easy now, especially micropayments. So why pay the premium?

Throughout the year we’ve heard publishers say that the web shop’s performance has exceeded publisher’s internal expectations. This led to them focusing on more aggressive promotion of web shops, increasing the number of players as well as the frequency of player purchases and the overall user experience. Publishers are also launching PC versions of their most popular titles to further capitalize on the off-platform trend.

Verdict: CORRECT (1 Point)

#3 Paid UA Becomes a Break-Even Game

Advertising is a commodity and in a race to the bottom. The advertising networks know that if we make $10 per player, it is their job to sell that player to us for $9.99. They have more data than the publishers, which means that we can't win. We can buy revenue and reach, but it is increasingly difficult to turn a significant profit through paid user acquisition.

Roughly put, 2023 created two groups of marketers. First ones are those, whose UA is the break-even game at best. They simply haven’t been able to adapt their marketing and/or their portfolio is ill-fitted to the current marketing landscape handicapped by privacy.

But there’s a smaller section of marketers that were able to grow despite the privacy changes. Think of publishers like Scopely and SciPlay to mention a few.

Yet one thing remains common for both groups. Downloads have decreased over the last year, which speaks of the challenges of acquiring users profitably at scale.

Verdict: Partly CORRECT (1/2 Points)

#4 The Safe Harbors Get Embraced

The combination of The App Tracking Transparency recession and the actual recession means that Apple Arcade, Netflix’s publishing deals, and IP partnerships are more interesting than ever. 

SEGA, Disney, Gameloft, Bandai Namco, GungHo, 2K, and Zeptolab are just the latest publishers launching their titles on Apple Arcade during the second half of the year.

These publishers would have never considered Apple Arcade just a couple of years ago. The guaranteed revenue of a few million is simply not worth the squeeze if you have the capabilities to launch and scale freemium games that reach tens of millions of players and can make hundreds of millions in revenue.

The fact that the big publishers are now making games for Apple Arcade is not because Apple Arcade is paying more or because the service is grown to reach a much wider audience. I believe that the big publishers are simply reducing their risk and cutting costs. Instead of killing a project they make it an Apple Arcade game and move the team to work on something else as Arcade games don’t require post-launch work. This approach is smart if you don’t see a way of launching and scaling a freemium version of the game.

Verdict: CORRECT (1 Point)

#5 Streaming Platforms Move into Mobile Games - for Now…

illustraion: VIP+

As Netflix doubles down on games in 2023, we predict to see the other streaming giants dipping their toes and leveraging their platforms to drive traffic to their games.

Disney, Roku, Amazon, HBO, Paramount, Hulu, and a heap of other Free advertising-supported television providers. This also means that the streaming giants will be looking to license their IPs so that they can get games into the market they can drive traffic towards.  

Well, we didn’t see this happen in 2023 and it seems like this won’t happen going forward either.

Netflix has been pouring a lot of capital into games over a short period of time. They’ve built a big publishing team, acquired studios, and set records on how much game industry professionals can expect to be paid.

Netflix's success hinges on both the games being extraordinary and Netflix being able to get its users to download games. The lack of success means they’ve missed on both.

The returns at this point are nothing to write home about. The streaming behemoth has been focused on publishing mostly canceled mobile games or ported PC titles. Neither of which has received an impressive level of downloads. This can nevertheless change as Netflix launches internal titles in the coming years.

It’s not how you start the race but how you finish it. Call me nuts, but I believe that Netflix will finish strong and other streaming services will regret not getting into the race while Netflix was stumbling.

Verdict: INCORRECT (0 Points)

#6 Venture Capitalists Will Face a Reckoning

We predicted that venture funds would continue pulling back on investing, especially in the growth stage investments. We also predicted that this would cause a mass extinction of startups, which hadn’t reached undeniable product market fit or were too far away from it.

According to InvestGame’s report we can see that the investments in the industry have fallen off the cliff. When comparing to last year, the amount of Dollars invested is down whopping 75% while the actual number of investments is down ‘only’ 25%.

What this means is that VCs are writing far smaller tickets to fewer companies. This paints a picture that VCs keep the activity of the fund alive by funding early-stage companies while at the same time being extremely conservative when funding growth-stage companies.

In plain English:

• If you’re starting a company with a couple of other fine people, you can still get funded, albeit at a lower valuation than a couple of years ago.    

• If you started a company a year or two ago but haven’t proven an undeniable product-market fit, VCs won’t fund you anymore and you will go out of business.

• VCs continue to invest in small tickets to show their LPs (Limited Partners are the investors in the venture capital) that they are actively deploying capital and not just idly collecting management fees.

VCs did decrease investing. At the same time, the founders tightened up their belts in 2023 and increased runways to get them into 2024. So, we got this partly right. And I’m afraid the startup deaths will begin to mount up soon.

Verdict: PARTLY CORRECT (1/2 Points)

#7 You Will Get Back to the Office - Fully Remote Becomes an Anomaly

For a while, companies have had the option to recall their employees to return to work on-site. Yet a lot of the companies were afraid to demand their employees to do so due to the fear of employees leaving the company to work for a company that allows for remote work.

But that was before the ongoing onslaught of tech jobs. Now the ball is firmly back in the employers' court, and we predicted that they would do what they see most useful for the overall good of the company instead of maximizing the benefits of individual employees.

As a result, we’ve seen most leading developers from Riot to Roblox mandate their employees back to the office for at least a few days a week while offering severance packages to those who refuse to comply. VCs have also become reluctant to invest in remote teams. Smaller companies on the other hand have taken advantage of the opportunity to hire talent they couldn’t hire before by offering them remote positions.

We’ll see how this will play out in the long run. Leading publishers are getting the boost of on-site creativity while less prominent studios have had to figure out how to outpace the leading companies with a fully remote setup (study: remote work reduces innovation and productivity in long-term).

I’m sure there will be more and more companies that figure out remote work just like Playrix has done over the last decade (Mastering Remote Work Culture: A Conversation with Playrix). But they will be still outnumbered by the number of studios that will fail to compete against the successful larger studios who now also enjoy the creativity advantage of on-site work.

In the long term, I believe that remote work will be reserved for specialized individual contributors while most of the team members will work on-site.

Verdict: PARTLY CORRECT (1/2 Points)

#8 You Might Get Laid Off

"I think many of our competitors overbuilt during the enthusiasm of the pandemic and they're rationalizing now. I think we were a little bit more moderate.”

-       Strauss Zelnick, CEO, Take-Two Interactive

As we were writing the predictions, we were less than a month into 2023, and already 185 tech companies have laid off 58,000 employees. And the pace of tech layoffs seemed to only increase.

The paradigm that gaming was recession-proof in 2023 proved to be wrong. Unlike in the previous recession of 2008, users are now prioritizing other sources of entertainment that didn’t exist before. Social media, streaming services, audio, and dating apps are all outpacing the growth of gaming when it comes to screen time for entertainment purposes.

Add the fact that the gaming industry over-hired against the booming lockdown growth pace and you have the situation where we are today. Layoffs are constant and will continue long into 2024 as the growth of gaming will be abysmal compared to the previous years.

Verdict: CORRECT (1 Points)