Video Game Engines

This week we talk about Unity, Unreal, and Godot. We also discuss fee structures, user revolts, and indie game-makers. Recommended Book: How Big Things Get Done by Bent Flyvbjerg and Dan Gardner Show Notes * https://www.statista.com/outlook/dmo/digital-media/video-games/worldwide * https://www.billboard.com/pro/ifpi-global-report-2023-music-business-revenue-market-share/ * https://www.cnbc.com/2022/07/07/video-game-industry-not-recession-proof-sales-set-to-fall-in-2022.html * https://en.wikipedia.org/wiki/Video_game_industry * https://www.washingtonpost.com/video-games/2022/08/22/are-video-games-recession-proof-sort-experts-say/ * https://www.gamedeveloper.com/blogs/unity-s-pricing-changes-are-trying-to-solve-too-many-problems-at-once * https://www.gamedeveloper.com/business/unity-apologizes-to-devs-reveals-updated-runtime-fee-policy * https://www.theverge.com/2023/9/22/23882768/unity-new-pricing-model-update * https://www.theverge.com/2023/9/15/23875396/unity-mobile-developers-ad-monetization-tos-changes * https://www.theverge.com/2023/9/12/23870547/unit-price-change-game-development * https://www.washingtonpost.com/video-games/2022/08/22/are-video-games-recession-proof-sort-experts-say/ * https://www.investopedia.com/articles/investing/022216/how-microtransactions-are-evolving-economics-gaming.asp * https://digitalcommons.uri.edu/srhonorsprog/902/ * https://www.investopedia.com/articles/investing/053115/how-video-game-industry-changing.asp * https://finmodelslab.com/blogs/operating-costs/video-game-company-operating-costs * https://www.makeuseof.com/ways-the-rising-costs-of-games-affect-the-industry/ * https://codeswholesale.com/blog/5-ways-to-make-money-in-the-gaming-industry/ * https://gamemaker.io/en/blog/cost-of-making-a-game * https://www.gamedesigning.org/learn/video-game-cost/ * https://www.reuters.com/technology/video-gaming-revenue-grow-26-2023-console-sales-strength-report-2023-08-08/ * https://www.statista.com/outlook/dmo/digital-media/video-games/worldwide Transcript Depending on how inclusive you are with your measurements and the specific numbers you're tallying, the global video game market is expected to pull in somewhere between $187.7 and $334 billion in revenue in 2023. That's somewhere between 2.6% and 13.4% above 2022 numbers—and again, those figures are pretty far apart because different entities keeping tabs on this industry measure different things, some only looking at direct sales of video games and in-game items, while others look at connected sub-industries, like e-gaming events and service jobs that do customer support for game companies. Whichever end of that spectrum you look at, though, the global video game industry is a behemoth that's growing every year, and its income surpassed that of the music and film industries, combined, years ago, the global film industry expected to bring in around $92.5 billion in 2023, while the global music industry pulls a paltry $26.2 billion. The video game market is continuing to grow at a fairly stellar pace, compared to other entertainment categories, as well. And while it was shown not to be entirely recession proof, as had been claimed since the financial crisis of 2007 and 2008, when it remained one of the few industries still growing steadily, that growth balking a bit in 2022, when the industry contracted by 1.2%, it grew substantially at the beginning of the COVID-19 pandemic, and has largely maintained that growth since, which has allowed entities operating in this space to claim more and more entertainment-related marketshare, which in turn has shifted the center of gravity in the media world toward video games and away from other leisure options, including things like travel, vacations, and other things you wouldn't typically think of as being competitors of the video game market. Since video games really took off, hitting the mainstream in the 1980s, and becoming a big deal in the 1990s with the emergence of user-friendly consoles and 3D graphics, the economics of video games have changed substantially. Once, video game companies sold games that would play on a user's computer, then consoles—which are basically gaming-focused mini-computers that plug into a customer's TV, or can be carried around in their pockets—those quickly became the new default for many gamers, creating a more optimized gaming experience, though also introducing a new cost for game-makers, as they typically need to pay something to the console-maker to use their tech and have their products work on these platforms. Retail stores became increasingly important to the gaming industry's budgetary concerns around this time, as they would need to take a cut of the sale price of everything they sold, but also have the flexibility to offer deals to their customers, to incentivize purchases and lure them away from other game stores. And further toward the base of the development stack, as games became more sophisticated and refined, game-makers had to spend more money on high-end hardware, but also higher-end software tools that would allow them to develop the games, polish them so they could compete with other offerings, and in some cases use what's often called "middleware" to serve as a scaffolding for their game projects—software tools that are sometimes referred to as game engines. All of which has made the process of producing video games a lot more complex and expensive, and as the industry has become more popular, roping-in more and more customers, more and more entities have popped up, intent on making their own games; and that's fed a spiral toward higher-costs and more complex game-making processes, leading to a lot of enrichment in some cases, and quite a few new business models optimized for different platforms and styles of game, but also quite a few bankruptcies and hostile takeovers, even seemingly successful video game companies sometimes falling short or investing too much in a game that flops, leaving them with insufficient resources to keep the lights on or produce their next product. What I'd like to talk about today is a recent scandal in the video game industry related to one of those middleware, game engine-making companies, and how they're scrambling to make things right after seemingly losing much of their goodwill and credibility essentially overnight. — In early September, 2023, a game engine company called Unity announced that it would be changing its pricing structure, effective Jan 1, 2024, and that set off a wave of outrage and anger from its users, most of which are individual game-makers and game-making companies. To understand why this response was so widespread and vehement, it's helpful to understand a bit about how game engines work and their role in the modern video game industry. Fundamentally, a game engine is a piece of software that serves as a framework for making video games. So while it's not a simple "click a button, get a game" sort of setup, it does dramatically reduce the amount of time and effort required to produce a finished game product, giving users—game-developers of all shapes and sizes—level-editors, physics engines, rendering engines that help them more easily produce and edit 2D and 3D graphics, collision detection tools, which basically track and control how things bump up against each other in the game and what happens when they do, alongside more basic media tools like those that allow for the creation and editing of audio, animations, video content, text, and the like. Modern game engines also help developers keep the size of their games moderated without losing too much quality, they help with memory management on the developers' computers, they can provide artificial intelligence tools and software that helps them build-out multiplayer functionality—it's a really big and powerful toolkit, so the engine that game-makers choose to use is important, and it shapes every other decision they make, and in some ways the final product, too, because of how easy or difficult things are to do within their specific scaffolding. Unity m… This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit letsknowthings.substack.com/subscribe