Hi everyone — welcome to another issue of Naavik Digest. If you missed our last one, be sure to check out our breakdown of Apple’s most recent legal victory in the long-running antitrust feud with Epic Games and how it relates to the current state of App Store policy.  

On Tuesday, Naavik published its first F2P genre report as part of the Open Gaming Research Initiative covering the Strategy and Card Game genres, and you can read the in-depth report here.  In this issue, we have another earnings roundup covering Electronic Arts, Nintendo, and Paradox Interactive.  

We’re also excited to be at Gamescom next week! Naavik Co-founder Abhimanyu Kumar and Consulting Partner Jordan Phang will be in Cologne, Germany on August 23rd (Day 1) and available to discuss consulting relationships, content contributions, Naavik's new Open Gaming Research Initiative, and new team additions. They'll also be free if you just want to catch up and hear what Naavik has been up to lately. Submit a meeting request by clicking on the link below, and we look forward to seeing you at the business area!

More or Less: Gaming Podcasts & Blogs / The Gaming Industry's Data Nightmare

There are more than 3 billion gamers in the world, but the number of gaming professionals interested in business and development content pales in comparison, with approximately 300,000 people employed in the U.S. games business, according to market researcher IBIS World. Niche content curation and content creation companies like Deconstructor of Fun, GameMakers, Elite Game Developers, Naavik, and more cover the space and, importantly, compete with each other for mindshare across this small pool of professional game developers.

Is it possible to build a profitable enterprise off this type of organization, and if so, how and through what revenue streams? We bring together a super team of games podcasting and blogging: Joakim Achren, Joseph Kim, and our very own Aaron Bush to discuss.

Together with Dive, one of our Open Gaming Research Initiative partners, we’re exploring the topic of data and games through a limited podcast series called "The Data Corner."

Today’s episode covers the topic of “the data nightmare that the gaming industry faces." Games, in general, generate tons of player data every day, and within that data exists a ton of harvestable insight that can be used to drive better decision-making so as to drive more revenue and eventually drive better game-making. But such large data pools also require time, money, and people to analyze and harvest from it, and that keeps many game developers from spending their resources on data analysis to help them make better games. 

This tension is at the heart of the data nightmare the gaming industry faces today, and this conversation with Elad Levy, founder and CEO of Dive, is focused on unpacking that tension a bit more. It is a wide-ranging conversation that covers what the nightmare is all about, why the gaming industry is unique in facing it versus other industries, how game developers should navigate the problem, what developers are leaving on the table if they don’t navigate the problem, and more. So hope you enjoy episode No. 1 of the Data Corner, and do send me, host Abhimanyu Kumar, your thoughts, feedback, and questions so that I can address it all as I continue to build out this limited series.

#1 Earningspalooza(Part 2)

By Mario Stefanidis, CFA, Naavik Contributor

Source: Adobe Stock

With the first two weeks of August behind us, most global game companies have released earnings, covering either the three-month or six-month period ending June 30th. In this second part to the industry’s earningspalooza (part one here), we will be covering two large-cap gaming giants, Nintendo and EA, as well as mid-cap publisher Paradox Interactive. 


Source: Nintendo

Q1 FY2024 Highlights

  • Revenue surged 50% from the same quarter a year ago; net profit had similar growth, rising 52%.
  • Hardware unit sales increased 13.9% year-over-year (YoY) to 3.91 million, and software unit sales increased 26.1% YoY to 52.21 million.
  • Annual playing users rose 10.5% in the quarter to 116 million from 105 million a year ago. 
  • Shares outstanding remained the same as in the previous quarter.
  • There were no changes to the FY 2024 forecast.

Top Takeaways

  • The Super Mario Bros. Movie contributed materially to Nintendo’s financial results. Coupled with the release of critically acclaimed Tears of the Kingdom, this was the company’s highest Q1 revenue in history.
  • Revenue for the “Mobile & IP related income” segment rose 190.1% from a year prior, now amounting to ¥31.8 billion ($218.5 million) in quarterly sales, or 6.9% of the total top line. In Q1 FY2023 the segment was just 3.5% of total revenue. This segment includes “visual content, smart-device content and royalties.”
  • The film had a flywheel effect for all aspects of Nintendo’s portfolio. For example, Mario Kart 8, which was the only other material software contributor in addition to TOTK, sold 1.67 million units, a great outcome for a title in its ninth year of life.
  • While the results for the current quarter were great, the unchanged FY2024 forecast still calls for a 9.5% decrease in sales and 21.4% decrease in net profits. The company did not offer any information on future hardware, though there was speculation of a new Switch by 2024's holiday season.

Top Questions

  • Will Nintendo announce share buybacks again? Nintendo’s last buyback was initiated in May 2022, when it announced plans to buy up to ¥56.4 billion (at the time $432 million). This followed up on the August 2021 share repurchase which amounted to ¥100 billion (over $900 million at the time). If the stock continues to remain stagnant, this may be the best avenue to please shareholders. 
  • When will we hear about the next console? Nintendo’s forecast rules out any new console before April 1st, 2024. Other than wildly speculative rumors that its next device will be a spiritual successor to the Switch, we haven’t heard anything about future hardware from Nintendo. The company is known for throwing hardware curveballs at consumers (Nintendo Labo comes to mind), and there’s a chance the late 2024 console, if it comes at all, could look nothing like its predecessor. 
  • Will we get a Zelda movie next year? Switch sales and software sales alike saw a boost off of the Super Mario Bros. Movie, which brought in nearly $1.4 billion at the worldwide box office. Once TOTK sales start to tail off next year, and Switch sales decrease further from their peak, the reasons for a 2024 Zelda film start to add up.

Electronic Arts

Earningspalooza Electroni Arts
Source: Reuters

Q1 FY2024 Highlights

  • Net bookings for Q1 were $1.58 billion, a 21% increase YoY (25% in constant currency).
  • Live services and other net bookings: $1.18 billion, a 4% increase YoY (7% in constant currency).
  • Live services comprised 75% of total net bookings, down from last quarter’s record 83%. 
  • EA repurchased 2.6 million shares for $325 million this quarter; 10.5 million shares for $1.3 billion over the past year.
  • Expected net revenue between $1.83 billion to $1.93 billion for Q2, $7.3 billion to $7.7 billion for the current fiscal year.

Top Takeaways

  • Results this quarter were primarily driven by the EA Sports segment and Star Wars Jedi: Survivor. FIFA net bookings saw accelerated growth YoY with a record Q1. 
  • EA stock fell -7.2% after earnings were released and trended lower for multiple days after. Quarterly net bookings were narrowly below consensus estimates and below internal guidance from last quarter. Guidance for next quarter came in about 3% light at the midpoint. 
  • On the earnings call, CFO Stuart Canfield blamed the results on underperformance of Apex Legends, which kicked off its 17th season during the quarter. Players had a negative reaction to changes to the game’s ranked system, which impacted spending.
  • This is worrisome as Apex’s premier tournament (ALGS 2023 Championship) is coming up in September. Season 18 was released on August 8th to better reception, but it remains unclear whether this will lead to improved engagement.
  • EA stock remains unchanged from its 2017 level, after the company posted impressive growth in the early to mid-2010s. The company has struggled to follow up on the successes that were responsible for this growth, including prominent Battlefield and Titanfall releases. 

Top Questions

  • Will EA reevaluate its live ops strategy? Apex’s underperformance leaves the publisher without a growing live ops title outside of the sports portfolio. EA Sports FC 24 will be the first in its new soccer franchise following the termination of the FIFA partnership. The franchise feels like it is a pivotal part of EA’s future success, but scrutiny of EA’s loot box monetization strategy for its sports games has increased.
  • Has the recent internal reorganization posed challenges? EA has seen its fair share of management turnover since it announced the split of EA Games and EA Sports, with the former being renamed EA Entertainment. Most recently, Senior Vice President and Group GM Samantha Ryan departed the company in late July. Prior to that, Stuart Canfield was named CFO on June 20th, after Chris Suh abruptly left to join Visa in the same role. EA is no stranger to game delays, but it remains to be seen whether all the reshuffling will lead to further operational hurdles as the company attempts to kickstart growth.

Paradox Interactive

Source: Paradox Interactive

Q2 FY2023 Highlights

  • Swedish publisher Paradox, primarily known for its strategy game portfolio, published its interim report on July 27th, covering Q2 FY2023  as well as performance for the first six months of the year.
  • Revenue broke a quarterly record at SEK 737 million ($67.9 million), up 61% YoY. 
  • Operating profit for the second quarter reached SEK 293 million ($27 million) compared to SEK 214 million ($19.7 million) in the same quarter last year, an increase of 37%.
  • During this quarter, Paradox sold its 33% stake in Seattle-based Hardsuit Labs to Keywords Studios. It purchased the minority stake in 2018 for $2 million, and sold it for $4 million.

Top Takeaways

  • Shares of Paradox rose 5.8% in the immediate aftermath of earnings, just shy of its all-time high reached in October 2020. While most publishers in the $2 billion to 5 billion market cap range (Paradox’s market cap is $3 billion) have struggled in recent years due to challenging COVID-19 comparables and overexpansion, Paradox has kept its genre focus narrow to strategy, RPG, and life simulation games.
  • The company released 4x turn-based strategy title Age of Wonders 4 in May, the first new entry in the series since Planetfall in 2019. The game was well received, holding a Metascore of 83 and currently ranked as the 22nd Best PC Game of 2023 on Metacritic. 
  • Selling expenses rose materially from SEK 40 million to SEK 90 million ($3.7 million to $8.3 million) quarter-over-quarter. This was primarily due to marketing for upcoming titles such as Cities: Skylines II, Lamplighters League, Star Trek: Infinite and Life by You. Despite the increase, profit margins were still a healthy 42%.
  • Paradox stopped working with Hardsuit Labs in February 2021, after it removed the studio as developer for Vampire: The Masquerade – Bloodlines 2. Paradox sold Hardsuit after realizing the holding was no longer strategic, which is encouraging given studios like Keywords (which bought Hardsuit) are still scooping up assets in an environment that demands profitability.

Top Questions

  • How is Paradox thinking about console releases? On the earnings call, CFO Alex Bricca pointed out that unit sales on consoles brought in about SEK 100 million ($9.2 million), for a share of around 15%. PC remains the dominant platform for Paradox, given its genres lend themselves to keyboard and mouse, and the publisher has a strong presence on Steam. Cities: Skylines has been strong on console, and its sequel comes out for next gen consoles in October, eight years after the first was published. If the game does well on PS5 and Xbox Series X/S, Paradox can potentially look to publish more city-building games and expand into new console demographics.
  • Would Paradox ever branch out into other genres? Nearly all of Paradox’s catalog is concentrated in strategy, life simulation, and RPG genres. Its refined strategy has led to steady growth, solid margins, and great cash flow. However, games within these genres rarely have megahit potential due to their niche audiences, which may cap Paradox’s valuation. Does Paradox have ambitions of becoming a household name, and would the publisher consider branching into genres like action and FPS?

Sponsored by Lakestar: Partners to the World's Tech Entrepreneurs

Earningspalooza Lake Star

Lakestar is one of the leading pan-European venture capital firms. Lakestar’s mission is to find, fund, and grow disruptive businesses that are enabled by technology and founded by exceptional entrepreneurs in Europe and beyond. Founded by Klaus Hommels, the team’s early investments include Skype, Spotify, Facebook, and Airbnb. Since raising its first fund in 2012, Lakestar manages an aggregated volume of over €2.8 billion across both early and growth funds.

The team actively advises and supports portfolio companies in marketing, recruitment, technology, product development, and regulatory insight, accompanying founders from seed to early-stage, growth stage, or exit. Lakestar’s Games and Media team has made 18 investments, including in 1047 Games, Zebedee, Modulate, and Trace. 

#2 Game of the Week: Oblivion Override

By Nick Statt, Naavik Managing Editor

Earningspalooza Game

Platform: PC

Developer: Humble Mill

Publisher: Paleo

State: Early Access (via Steam)

Genre: Roguelike / Metroidvania

What You Need to Know: 

  • Oblivion Override is a new indie roguelike action game and the second release from developer Humble Mill. It draws heavy inspiration from Motion Twin’s Dead Cells in its aesthetics, combat, and game design. 
  • While Dead Cells was more of a fantasy setting drawing on the influence of Castlevania, Oblivion Override is a more sci-fi/post-apocalyptic take on the genre with a dash of Mega Man, though it still draws on the same hugely influential elements of  Konami’s Symphony of the Night. You can watch a gameplay trailer here
  • You play as the combat robot Crimson, and every death in the game canonically involves rebooting your character in a new body to retry the game’s combat trials anew. Progress is achieved incrementally from run to run by purchasing upgrades for Crimson, which the game refers to as evolution, and by unlocking new weapons that synergize with each run’s damage buff and other attribute-boosting combinations. 
  • Because Oblivion Override was only released as an Early Access title on Steam on June 14th, it can be a barebones experience compared to some of the roguelike competition on the market. There are no difficulty settings to adjust the game’s high level of challenge, and there are only three main biomes with six bosses in the current iteration of the game.
  • That said, there is already an impressive level of depth to the game’s combat system, upgrade tree, and weapon set of more than two dozen options, with plenty more to come on the developer’s robust roadmap as the game progresses through Early Access toward full release.  

The Verdict: 

  • If you’re a fan of Dead Cells, you’ll find yourself right at home with Oblivion Override and its extremely tight and responsive combat. However, the game is not without its flaws, and those not used to engaging with Early Access titles should probably do a fair amount of research on the experience — there is a playable demo on Steam — before diving in.  
  • Its story is shallow and underdeveloped, and it’s presented in an obtuse fashion that makes finding any narrative meat to the experience more cumbersome than it's worth. The sound design is also fairly average, which is disappointing considering the rich synthwave history similar games have brought to the indie scene. This may be improved in future updates as the game exits Early Access. 
  • If you’re comfortable playing an incomplete experience that may change drastically in the months to come, similar not only to Dead Cells but also other indie mega-hits like Hades and Hollow Knight, then it may be a good time to jump into Oblivion Override.
  • Part of the charm of playing Early Access games right around launch is that you get to experience how much they evolve over time. For those who like communicating with the developer, Humble Mill has a rather active Discord and is very receptive to player feedback. 
  • At only $18, the game is certainly worth a try for roguelike and Metroidvania fans, with the added benefit of getting to watch it grow and change for the better. But for those who don’t like ultra-challenging action RPGs, or who would rather play the complete product sometime next year or in 2025, it may be best to steer clear for now. 

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.

Don’t miss our next issue!

Sign up to receive the #1 games industry newsletter, straight in your inbox.