Hi Everyone. Welcome to another issue of Naavik Digest! If you missed our last one, be sure to check out our analysis of Roblox’s Creator Marketplace and how the platform continues to empower independent developers. In this issue, we take a look at Apple’s new Vision Pro headset and what it could mean for XR gaming. 

MENA Region Growth / Supercell’s Dueling Betas / SEC Web3 Actions

Apple Podcast

In this week’s Roundtable, Huuuge Games' Q1 results provide us with some insight into the ongoing impact of user acquisition changes on the mobile gaming business. We also tackle the driving force behind the growth surge in the MENA region’s gaming and esports sectors and Supercell's uncharacteristic release strategy with its betas for Flood Rush and Squad Busters. Lastly, we wrap up by discussing the rationale behind EA's decision to integrate Nike NFTs into its sports games, as well as the significance of the SEC lawsuits against Binance and Coinbase and what they might mean for web3 gaming. Join us for all the latest game business news with David Kaye, Tammy Levy, Abhimanyu Kumar, and host Devin Becker.

You can find us on YouTube, Spotify, Apple Podcasts, Google Podcasts, YouTube, our website, or anywhere else you listen to podcasts. Also, remember to shoot us any questions here.

#1 What Apple Vision Pro Means for Gaming

Written by Max Lowenthal, Naavik Business Lead

Apple Gaming
Source: Apple
Apple Podcast

Early last week, we got our first look at Apple’s entrance into the XR headset space with the Apple Vision Pro. Boasting a whopping $3,499 price tag, the product has been at the center of the tech media rumor mill for the better part of the last few years, and Apple’s long-awaited first-gen device promises to redefine how we look at the headset market as a whole.

However, despite the hype — and XR’s historical tether to the gaming industry — games did not take a front seat in the announcement. In fact, details on gaming were surprisingly sparse for a company that operates a top gaming platform, one on which the five biggest games have generated over half a billion dollars in revenue since the beginning of 2023. With all eyes on Vision Pro’s capabilities and price tag, I thought it’d be worth understanding what exactly we might see when it comes to gaming with Apple’s newest device. 

Understanding the XR Market

To best understand where we expect Vision Pro to go, it’s worth understanding the market it's entering — and it is a crowded one. Earlier this year, we wrote an analysis of the broader XR market that helps paint a clearer picture. On the positive side, revenues in the VR space alone doubled from 2020 to 2022.

While explosive, the expansion can be attributed to a handful of less-than-repeatable factors that don’t exactly paint a strong longer-term outlook for games. The most notable of these is pandemic-fueled tailwinds, which we’ve already seen normalizing starting last year, along with the vertical’s expansion into non-gaming use cases like remote work and education that stand to position XR as a “general productivity device” and relegate games to a niche afterthought.

Meanwhile, even VR’s doubling revenues haven’t meant the space is getting cheaper. Competitor Meta has spent, by some counts, nearly $56 billion on its XR efforts since 2012, generating only $7 billion in revenues over the same period. While 2023 and 2024 should prove to be record highs for Meta after over 10 years of investment, it still seems clear that net profits are not on the horizon, while cumulative losses continue to compile in the meantime.

Considering all of the above, why Apple chose to paint Vision Pro in a non-gaming light becomes a bit clearer. Gaming has so far only had a limited impact on VR ecosystem sales and engagement, and other contenders like Sony's PSVR 2 still command low attach rates and lackluster growth, despite the newer Sony headset outselling the original. It’s also the case that Apple is clearly targeting more of an enterprise and early adopter market with its steep $3,499 pricing, which stands in stark contrast to Meta’s Quest pricing strategy. Perhaps in time, as pricing comes down and developers build more apps and games for the platform, Vision Pro might become more attractive to the mass market consumers who want to use it for gaming.

Apple Vision
Workspace and Computing examples dominated the Vision Pro presentation | Source: Apple

It also doesn’t help that XR gaming continues to be dominated by a very small number of entrenched titles: Beat Saber, Half-Life: Alyx, Pokémon Go, to name a few. Aside from the business considerations, even the form factor of Vision Pro isn’t gaming-centric. The device is seemingly AR-forward, layering on top of the reality we see around us. Juxtapose this against games, which are about rewriting this reality, and it's obvious why the company’s ads show people at work meetings and watching movies instead of playing their favorite titles. It is worth noting that Apple showed off the quintessential “play games on a virtual screen” example we’ve seen from Meta and others in the past, but it was a minor part of the overall presentation.

Even with all the above said, I’m still fairly optimistic that we’ll see gaming have a somewhat substantive role to play in Vision Pro’s long-term development, even if the path isn’t written by Apple itself. The product’s announcement quietly came with the news that it would support over 100 Apple Arcade titles at launch and would also come with support for Unity's AR/VR development engine. The demo also showed how users can even connect their favorite Bluetooth-compatible controllers to play games at launch. 

These announcements help emphasize that Apple isn't ignoring gaming. The use case may take a more central role over time as adoption grows, the tech improves, developers learn best practices, and pricing becomes more reasonable. The same was true of the iPhone, which launched in 2007 without the App Store. Only later, when third-party developers began flocking to the platform and its more robust direct distribution model, did the iPhone become the major driving force of the mobile gaming boom.

This lineup of gaming features for Vision Pro is also reminiscent of Apple’s investments into gaming over the past few years, which include the launch and subsequent expansion of Apple Arcade, the Mac’s new Game Mode (announced last week), and the announcements of Mac ports for Hello Games’ No Man’s Sky and Hideo Kojima’s Death Stranding Director’s Cut. At its core, Apple is a hardware and services company, and Apple-driven gaming initiatives have always been a means to an end in deepening investments in that space to help drive ecosystem growth. It doesn’t mean that Apple won’t support games; rather, we just shouldn’t expect the company to lead with gaming until it has the data to prove it's worth the time and investment.

Apple Vision
Source: Apple

The Future of Gaming at Apple

That being said, what would give Apple the push to put gaming at the forefront of Vision Pro’s use cases? The potential examples are interesting to consider. As Ben Thompson defined it in his recent analysis of Vision Pro, headsets are destination devices. While COVID certainly proliferated the idea of work as a true, virtually-serviceable destination, games have always occupied that space to a tee. 

If early examples are any suggestion, the best Vision Pro apps could look like scaled-up versions of the AR experiences we see today. Apple has been trying to encourage developers to build AR apps for years, and the company even added a special sensor in devices starting 2020 to try and bolster development. Who’s to say we couldn’t experience something to the scale of Pokémon Go, but in a more immersive context at larger scale? It’s also easy to imagine immersive viewing experiences taking a leap forward using Vision Pro. Apple has already shown upgraded sports viewing capabilities, points of view, stats, scores, and other info displayed live alongside a game. 

Why not imagine the same from your favorite Twitch team or LCS match? Going even further, what role will the device's AR and VR flexibility or tight eye and finger interfaces play in game development? Titles that seamlessly blend between the two formats or create new interactive designs reminiscent of the pitch and swipe motions of the early mobile days all feel realistic and feasible. And with Vision Pro launching early next year without a definitive “killer app,” the space for exploration seems primed for innovation.

However, even if we expect change to come, we may need to wait a while. The company is only expecting to produce less than half a million headsets in year one, a clear declaration that the current Vision Pro is still in its early days of development. By comparison, it took Apple about two years to sell 1 million iPods, only 74 days to sell 1 million iPhones, and less than a day to sell 1 million Apple Watches. So we’re in for a slow burn when it comes to the proliferation of this device if current estimates hold. 

It’s also worth noting that Vision Pro, particularly with Apple’s “see-through” lens design, is still very much a single-player experience. As analysts have noted in their write-ups of the device, Meta’s Quest leans into a more digitally-immersive design with no see-through lens, which likely lends itself well to longer periods of game time and interaction with online communities in social games like VRChat. That isn’t to say that Apple is outclassed here, but rather that the development timelines for the device might take longer as developers explore what gaming means in a Vision Pro world. 

In the meantime, Meta and Sony will continue to dominate the XR/VR gaming landscape, considering their substantial investments in the space and their desire to target both the gaming market directly and mass-market consumers who can more readily afford a device priced less than $1,000. Earlier this month, Meta announced the $500 Quest 3 headset, making gaming a central focus of its marketing push, and also lowered the price of its Quest 2. On the other hand, Sony boasted last month that its PSVR 2 headset is selling better than its predecessor, despite its higher price point, lack of backwards compatibility, and its requirement to own a PS5. Both companies clearly see demand for VR-driven gaming, and Apple has a long road ahead to make Vision Pro an appealing alternative to the much cheaper competition.

Analysis aside, Apple has an unparalleled track record when it comes to launching new devices, and Vision Pro is clearly positioned to become the most advanced XR device on the market. Even with gaming not playing a central role in the product’s announcement, I’d be hard-pressed to believe that we won’t eventually see game developers flock to the device in droves. The timing, success, and depth of the titles they launch is still a question mark, but if executed correctly, we may be on the cusp of a new chapter when it comes to XR’s gaming exploration. 

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#2 Summer Game Fest Arrives, Diablo Soars, Twitch Fumbles & GameStop Crashes

Summer Game Fest
Source: Summer Game Fest

Summer Game Fest delivers. Geoff Keighley’s now-annual summer gaming showcase took up the mantle from E3 in Los Angeles last week with a two-hour livestreamed trailer-fest packed to the brim with gaming reveals, release dates, and celebrity cameos. It was by and large an impressive showing, though in typical Keighley fashion it leaned heavily on guns, gore, and survival horror. That said, we did see some major announcements: Insomniac’s Spider-Man 2 is coming out October 20th, Square Enix’s Final Fantasy VII Rebirth is launching in early 2024 (on not one, but two discs!), Ubisoft is developing a new side-scrolling Prince of Persia game, and Remedy showed off the first gameplay trailer of the long-awaited Alan Wake 2. While E3’s absence is still being felt in what is usually a very busy video game news month, Keighley’s show has done an admirable job of trying to fill the gap alongside Sony, Microsoft, and Ubisoft. The latter two are taking the wraps off their future gaming roadmaps Sunday and Monday with the Xbox Games Showcase / Starfield Direct and Ubisoft Forward Live. 

Diablo IV sales come in hot. According to Blizzard, Diablo IV is now the company’s fastest-selling game in its 32-year history. This success topped the 3.5 million units Diablo III sold (on PC) in its first 24 hours, and that game went on to sell over 30 million units in three years (and eventually served over 65 million total players). Of course, modern-day pre-sales across both PC and console help set a higher benchmark, but the hot start is largely a testament to Diablo’s long-lasting fanbase and strong critical reviews. While the game retains its classic hack-and-slash RPG form from beginning to end, it does lightly innovate in a few places — including a more open world, mounts, and a greater emphasis on seasons (and the live ops revenue opportunities that come with it).

Twitch fumbles… again. Streaming is a corner of the games industry we don’t discuss often, but when we do it’s often about how Twitch finds itself in heated drama as a result of making decisions that aren’t favorable to its creators. This week was no different. Twitch unveiled a new series of branded content guidelines that severely limited how creators could showcase sponsors and advertisements on their streams — a big deal since sponsorships are how many streamers earn the majority of their revenue. It also potentially affected esports broadcasts and co-streaming. Naturally, creators rioted, and Twitch was forced to revert some (but not all!) of its changes. Why is this happening? To speculate, it’s likely that Twitch, which has faced slowing growth and profitability struggles, is hunting for new growth, and one clear avenue of expansion is to eventually become the middleman for all things sponsorship-related. However, as MrBeast puts it: “How about instead of handicapping what creators make, you help them make more? Seems more logical.” He’s right, and unfortunately, it’s a sign that Twitch’s strategy under its new CEO might not be so different from its last. Twitch is held together by powerful network effects, but the more the platform acts against the creators it relies on, the more it sparks the fire for them to seek out new and more friendly alternatives.

GameStop’s revolving door of CEOs continues. Somehow, GameStop is still relevant, but being a so-called “meme stock” can only save a company so much. Alongside first quarter results that showcased a 10% decline in sales and ongoing losses, GameStop announced that CEO Matthew Furlong has been fired after two years in the role, sending the stock tumbling on Thursday by nearly 20%. It would be more shocking if Furlong weren’t the company’s sixth CEO in the last 15 or so years. Executive Chairman Ryan Cohen (of Chewy fame) is taking the reins in the interim. GameStop’s main saving grace for now is the company’s $1+ billion cash position, which can absorb the company’s losses for a while. But frankly it’s hard to see any path to sustainability for the business as the industry turns increasingly digital and past efforts to diversify have largely failed.

In Other News…

💸 Funding & Acquisitions:

  • Web3 gaming startup Argus Labs raised $10M in a round led by Haun Ventures. Link
  • HyperPlay raised $12M for its cross-chain web3 game launcher. Link

📊 Business:

  • GameStop fired its CEO and the stock tumbled by nearly 20%. Link
  • Diablo IV is Blizzard's fastest-selling game of all time. Link
  • Microsoft met with the U.K. finance minister after the blocked Activision deal. Link
  • Sony CEO Kenichiro Yoshida warned of cloud gaming’s persistent technical problems. Link

🕹 Culture & Games:

  • Apple’s new Proton-like tool can run Windows games on a Mac. Link
  • Chrome Valley Customs is going global as Space Ape targets under-served players. Link
  • Summer Game Fest 2023: all the news and announcements. Link

👾 Miscellaneous Musings: 

  • Diablo IV marketing in New York City was a little too on point. Link
  • Final Fantasy IX: Memoria Project reimagines the classic JRPG using UE5. Link
  • The brilliant scholar who’s challenging racism in game design. Link

You can view our entire job board — all of the open roles, as well as the ability to post new roles — below. We've made the job board free for a limited period, so as to help the industry during this period of layoffs. Every job post garners ~50K impressions over the 45-day time period.

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