2024

2024‍

As we reflect on 2024, it is clear that this year brought both challenges and opportunities that impacted the gaming industry. At Konvoy, we have documented the upsides and challenges of these evolving trends throughout the year in our weekly newsletters and quarterly Gaming Industry Reports. As we approach the year's end, we want to take the time to reflect on a few of the most significant trends this year and their implications for the future of gaming.

‍2024: Key Trends in Gaming

‍In this year-end note, we will focus on the following key trends in gaming for 2024:

1. The Gamification of Everything
2. Emerging Alternatives for Payments and Distribution
3. The Era of the Indie Game
4. Fundraising Challenges in Gaming
5. AI: Overcoming Hurdles

Trend 1 - The Gamification of Everything

‍This year, we saw an exciting exploration and expansion of gaming strategies across different industries, with both non-gaming companies and gaming-adjacent businesses attempting to find ways to engage with gamers:

• LinkedIn: In May 2024, LinkedIn publicly launched 3 games: Queens, Pinpoint, and Crossclimb. Drawing on the popularity of word games such as Wordle for The New York Times and the explosive growth of the Puzzle genre, the intent for this new gaming strategy at LinkedIn was to “spark conversations and friendly competition among professionals around the world” (LinkedIn). Since the launch of these 3 games, the user interface of LinkedIn on both mobile and PC has been modified to allow for funneling to the games feature. LinkedIn rolled out another set of games in October 2024, signaling that games is a strategy that LinkedIn will continue to invest into.
• Chick-Fil-A: In August 2024, Chick-Fil-A announced that they would be launching a streaming service (Deadline). In November, the company launched Chick-Fil-A Play, a family-friendly entertainment app with original shows, podcasts, recipes, books, and games.
• Netflix: While the Netflix gaming division has been heavily invested in by its $1bn investment, the restructuring of the organization (i.e., leadership changes, layoffs) and its content library indicates that Netflix does not intend to pull back from gaming.
• Discord: While Discord is certainly considered “gaming-native” (its initial core audience for its core communication product was gamers), in recent years, Discord attempted to expand its appeal to non-gaming communities. This year, Discord embarked on an experimental endeavor anchored by their gaming roots and introduced Discord Activities, “a way to instantly enjoy shared experiences with friends, such as games and media, on Discord.” Leveraging its reach of >150m monthly active users, Discord is likely trying its hand at becoming the next big game distribution platform (much like Facebook did in 2009), and it just might work.

While there have been successful attempts at introducing games onto non-gaming platforms, we believe there have been even more failures. This is primarily due to the misalignment of the product’s value to the company’s core value proposition and the compatibility with the core user’s existing usage patterns. Games or gamified features are not a one-size-fits-all solution to bump up engagement or monetization - instead, any gaming initiative must be a natural extension of what the platform already offers.

Newsletter: Games Are For Everyone… Except You‍

‍Trend 2 - Emerging Alternatives for Payments and Distribution

‍At Konvoy, we have long believed in the power of the web as it pertains to distribution and accessibility. We believe that the walled ecosystems built by companies like Apple and Google will only continue to be brought down brick by brick. This is evidenced by the progress clawed by Fortnite publisher, Epic Games (Epic Games v Apple, Epic Games vs Google) in the fight for developer optionality around payments and distribution, as well as the ongoing lawsuits of the US Department of Justice against Google regarding its monopolies over search and advertising.

2024 saw progress in ability for consumers to spend off-platform and for developers to earn more share of the revenue. We are seeing more startups offering tools and infrastructure to help developers get out of walled gardens and leverage alternative payment methods. While the standard fee for 1st party app stores remains 30%, iOS and Android have introduced reduced fees for smaller businesses (15% if you generate less than $1m annually) and subscription services (30% the first year, 15% for the second year). Interestingly, both Android and iOS have been pushed by separate regulators (Apple in the EU, Google in the US) to allow for 3rd party app stores but the legal battle is ongoing.

Newsletter: The Web: Tearing Down the Walled Garden‍

‍Trend 3 - The Era of the Indie Game

‍Earlier this year, we predicted that 2024 was the year of the indie game. Based on our latest research, this has come true with 58% of games sold on Steam and 48% of revenue on Steam coming from indie titles.

In addition to known standouts such as Palworld, games like Last Epoch, Stardew Valley, Content Warning, and Lethal Company boasted over 250k peak players on Steam, Hades 2 reached 100k concurrent users, and Balatro impressively has similar concurrent user numbers on Steam as it did upon release (not including any mobile success).

Noticeably, some of the most popular games on this list were not released this year and this was a trend that was seen across all games. Only 15% of all Steam play time was spent playing games released in 2024, 47% was spent on games released in the last one to seven years, while a staggering 37% of time was spent in games that have been out for eight years or more. This is exacerbated by the fact that the median number of games played on Steam was only 4 per player (Steam).

Advancements in development, distribution, live ops, and analytics will only continue, contributing to the success of indie games and the games industry as a whole.

Newsletter: The Era of the Indie Game‍

‍Trend 4 - Fundraising Challenges in Gaming

‍2024 was a continuation of fundraising challenges for the gaming industry that we also saw throughout 2023.

In particular, over the past year, we have seen gaming startups struggle to “graduate” from Seed to Series A. While this metric has declined across all sectors, the decline within gaming has been much more dramatic: there has been an 80% decrease in the number of gaming startups who raised a Seed that successfully raised a Series A vs 50% decrease across all Series A deals in venture capital.

Despite the struggles over the last 24 months, we believe that gaming, as a secular trend, remains a key focus area for investment firms (across venture capital, private equity, hedge funds, etc) as games continue to increasingly be where consumers spend their time and money.

Here is an update on our 2H 2024 predictions that we outlined over the summer:

1. AI inertia will fade: To be determined; we believe that AI investment and inertia will cool to more tempered levels of sustained investment, however, this has not yet been reported on for Q4 2024.
2. Gaming VC to remain sluggish: True; based on our preliminary analysis, Q4 2024 marks the end of a similar year of VC funding as FY 2023; a new normal
3. Interest rate cuts will be marginal: True, in the face of wildly optimistic expectations
4. IPO market to remain calm: True, everyone is waiting for 2025/2026
5. Valuations will stay low: True, multiples were down across the board in tech/gaming
6. Growth equity will unlock: To be determined; We are most bullish on the unlock of growth equity checks in 2025, as their 3-5 year time horizon will be well timed with lower valuations in gaming alongside a visibility on improved exit environments on the midrange horizon. To that end, we expect the growth investment activity around gaming to dramatically improve in 2025 (likely $1-2b of net new equity investment is our expectation).

Newsletter: Fundraising Challenges in Gaming, Failure to Launch: The Series A Crunch‍

‍Trend 5 - AI: Overcoming Hurdles

‍While advancements in Artificial Intelligence this year have continued to roll out in 2024, the impact this technology could have on the gaming industry has been stunted for a few core reasons:

• Scalability of Compute and Data Availability: Training foundational models (compute) and access to high quality data continues to be cost prohibitive for a majority of businesses. In gaming, this means limited training data for features such as quests or genre-specific dialogue.
• Latency: While gaming is not a necessary use case for AI, the lack of speed (in addition to power and efficacy) can be prohibitive when attempting to have characters respond and react in real-time.
• Copyright Law: Regulatory uncertainty on Fair Use has created an environment where developers may be fearful to utilize AI-powered developer tools due to fear of public or regulatory scrutiny.
• Data Quality: Model hallucinations are still a regular occurrence for end users, which in a gaming environment will break immersion. This is a concern that is very prevalent in children’s games.

AI tools are accelerants, not substitutes for creativity. While they enable many developers to work more efficiently and focus on what truly matters—creating compelling content—sustaining a player base still depends on delivering unique, high-quality experiences. We at Konvoy remain cautiously optimistic on the long-term benefit that developers will have from these AI tools, and are excited about the pace of development that we are seeing in the industry.

Newsletter: AI Won’t Save Mediocre Games‍

‍Takeaway: In 2024, we saw a variety of new trends that will shape the future of gaming. Notably, gamification is becoming a core feature for platforms and this focus is beginning to extend from simply adding gaming features to evolving into what could be seen as a games platform. Developers are starting to come to terms with the perils of walled gardens and this is quickly changing the landscape for consumers, a shift being led by regulatory bodies.Additionally, indie developers have proven that quality games don’t need AAA budgets as tooling becomes more accessible and gamers are looking for new innovative types of experiences. While gaming continues to be a significant market (3b gamers, $190b in revenue) and fundraising has significantly cooled off compared to the 2021 peaks, we believe that macro trends will begin to catalyze more funding opportunities in 2025. Lastly, as with many industries, AI has been a hot topic for gaming but we have yet to see it proliferate as there are still many challenges with how it can be integrated into the development process or gameplay.

Great things ahead in 2025.