Destructoid Checkpoint: Market Forces

This week is all business, as we focus on two of the biggest stories of the week. While I love games as art, we can never escape the fact that gaming is a business, and if we don’t attempt to understand it as such, we are in a losing battle as consumers.

Xbox In Decline

Microsoft has reporteda drop in hardware revenue for 32% year-over-year during last year's holiday season. This means that during the very busiest time of year, with price increases, they made a third less money from hardware than they did last year. 

Even more interestingly—considering Xbox’s slow and steady pivot toward the idea that a subscription service would save it—Game Pass revenue dropped by five percent, potentially due to a perceived lack of value. It is still a fantastic offer if you spend a substantial amount of time gaming, but for the average gamer, it is little more than a library of games that will never be played, acting as a slow but steady drain on your bank balance. 

Further layers of mystery can be added by the fact that the biggest Game Pass title of the year, Call of Duty: Black Ops 7, landed in that quarter and failed to stem the flow. 

When everything you do leads to less money being made, the only sensible course of action is to assume that there is just less money in circulation right now. I have been banging this drum a lot in these newsletters, always hoping to provide a degree of context that companies simply cannot PR their way around, but prices of most goods and services are simply too high now for the level of disposable income available.

The video game industry also needs to face up to the idea that the valuable 18-24 year old cohort of spenders is focused less on high scores and more on one-rep maxes. Spending among that bracket is down nearly a quarter when it comes to entertainment like gaming, and up when it comes to healthier foods, gym memberships, and fitness supplements.

Overall, the Xbox strategy is smart. With hardware sales down, and with their customer base squeezed for cash from the increasing cost of living or just newer interests, they are taking steps to broaden that customer base by aiming their games at other platforms. 

The console war has essentially been lost, and the smart move for Xbox is to redraw the rules about how it is fought in the future.

Where things get sticky is that the gaming division is not the only part of Microsoft that is feeling the heat. On Jan. 29, the company’s share value took a 10% shave, dropping its market cap by $357 billion. Some analysts are putting this down to a failure to focus on online services like Azure properly, or an almost total lack of interest in the company's AI offerings, while others say this is actually a good thing because it shows Microsoft is making the hard decisions and eating some loss now to earn long-term value. 

All that really means is that you will always find an analyst to tell you that spending your money the way you want to is the right thing to do. What it means for the gaming division in the long-term? Well, they might just shut the whole thing down to open a chain of MicroGyms, where AI assistants move your limbs for you.

Okay, that’s unlikely, but could you imagine?

Steam In Hot Water

A $901 million lawsuit in the UK that Valve hoped wouldn’t make it out of the gates has been given the go-ahead by the Competition Appeal Tribunal. The owner of Steam has been accused of using their place as the effective number one spot to buy games on the internet to force game devs and publishers into assorted restrictions, while also setting up systems that force gamers to keep spending their money on Steam even after they have entered a game’s ecosystem.

The person behind the filing, Vicki Shotbolt, has a long history of work with various charities with a focus on children’s digital rights, and she is being represented in the case by Milberg London LLP, which brought a similar, if much larger, case against Sony PlayStation for similar abuse of market dominance. 

According to the team, the claim “seeks to address Valve’s anti-competitive behaviour” and will make an effort to ensure that the platform is not being operated in a way that is detrimental to the consumer. The heart of the issue seems to be that Steam attempts to enforce Price Parity Obligations, where publishers cannot list a game on another platform as well as Steam, unless the Steam price is the same or lower. It basically means that no platform can ever out-work Steam on price, and if a game wants to be cheaper on any other store, it cannot be sold on Steam. 

There is also some scrutiny of the now famous 30 percent commission rate that Valve charges for sales on Steam, something that is often lower on other platforms, but doesn’t really have a huge market impact as prices are set by Steam anyway, due to the Price Parity issue. As such, savings on the commission price on other platforms can never be passed on to the consumer. 

 Valve countered by calling attention to what it saw as a lack of accurate detail, but ultimately,the tribunal has decided that the process can go ahead. 

Now, the interesting thing about this type of legal action is not whether the thing you have claimed is happening, but whether you can provide the requisite evidence to show that it is happening. Valve almost certainly has an effective monopoly on the PC gaming market in a legal sense, but whether that is something that they have forced, or something that everyone else just kind of opted into, is another story entirely. 

What’s happening, Destructoid?

Andrej Barovic is quite excited about the upcoming God of War TV show, and a part of this is the casting of Thor. - “And speaking of Thor, we now have the official casting choice for him as well: Ólafur Darri Ólafsson, an Icelandic-American actor known for his portrayal of Mr. Drummond in the Severance TV show, who I think couldn’t have been a more perfect choice.”

Scott Duwe got to talk to the Highguard team at a recent event, asking them about the trailer that closed out the Game Awards, and that didn’t seem to land too well with a lot of people. - “Without the backing of a publisher such as EA like Apex had, Welch says the money behind the game was going directly into the development, and not marketing. And at some point in the mid-last year, The Game Awards’ Geoff Keighley dropped by Wildlight to play Highguard as one of the first people from outside the studio to do so, and he ended up loving it. He loved it so much that Keighley told them he wanted to “do something really special” and “different” to highlight the free-to-play shooter at TGA 2025.”

Drew Kopp revisits a decade-old BBC show about the drama between GTA publisher Rockstar Games and noted anti-gaming crank, Jack Thompson. - “If The Gamechangers were a math problem, I’d tell it, “You’ve got all the right numbers.” The movie has a lot going for it: rich mise-en-scène, stylish lighting, and two incredibly talented actors helming the cast. Daniel Radcliffe plays Sam Houser, co-founder of Rockstar Games, while Bill Paxton steps into the Oxfords of Jack Thompson, delivering what would be one of his last performances before his death in 2016.”