Hi everyone. Welcome to Naavik Digest's first-ever Tuesday edition! As a reminder, our new publishing cadence is Monday, Tuesday, Thursday, and Sunday.
If you missed our last issue, be sure to check out our dive into likeness licensing and how the star power of celebrities and athletes has become a vital economic force in game development. In this issue, we’re taking a closer look at what catalyzed the current moment for TV and film adaptations of gaming IP and what it means for the industry’s future.
#1 Game Studios Get Behind the Camera
Written by Carson Taylor, Naavik Contributor
It’s no secret that gaming IP is enjoying a long-awaited blossoming in television and film after decades of poorly received adaptations. In fact, this has been a consistent and widely publicized phenomenon over the past few years, and one that we at Naavik have covered ourselves a few times.
But the frequency and quality of video game adaptations and transmedia initiatives are only increasing, and it’s worth a closer look at what catalyzed the current moment, what has changed about how gaming IP is translated to other mediums, and what it means for the industry’s future.
Hollywood’s Struggles with Gaming
Today’s gaming-based shows and movies are markedly different from those produced even as recently as the mid-2010s. Since the establishment of mainstream gaming IP like Super Mario Bros. and Pac-Man in the 1980s, film studios and entertainment conglomerates have led the translation of gaming content into other storytelling mediums, following a model established by book and comic adaptations.
Practically all of these films — and most adaptations were films, as television adaptations of gaming content are a product of today’s SVOD era — were considered failures, both critically and commercially. From the film studios’ perspective, comics, books, and the occasional toy brand were providing enough source material for their blockbuster slates of action, sci-fi, and fantasy fare — plus gaming content had clearly proven difficult and unprofitable to adapt.
The Changing Economics of Gaming IP
In the meantime, however, the entertainment landscape had been shifting, and for a number of reasons, gaming’s currency and adaptability was on the rise.
First, over the long term, gaming’s cultural (and financial) impact has become impossible to ignore, and the characters and stories that constitute gaming IP are now more and more central to mainstream pop culture. These larger audiences, many of them multigenerational, have dramatically boosted potential demand for film and television adaptations. Especially relative to other sources of blockbuster IP, gaming is an increasingly popular and relatively untapped well.
Second, the decade-long boom era of “peak TV” and the streaming wars incited a new rush among platforms like Netflix to create quality content in order to better retain and acquire new subscribers. While movie adaptations are still popular, it is television that has become the best format for a game’s transition to linear storytelling — a shift that can mitigate high production costs, spread risk across an entire season instead of a singular movie, and allow for greater long-term upside if the show is renewed for multiple seasons.
The episodic format of television also lends itself better to the adaptation of quest/level-based storytelling from games. Of course, new show orders have declined as streaming services shift to profitability over growth, and this may endanger upcoming gaming adaptations that have not yet entered production.
Third, and perhaps most importantly, game publishers have realized the growing value of their IP, as well as the unique benefits they may accrue and risks they can avoid if they take a more active role in film and TV development. Licensing revenue from services like Netflix or Paramount Plus is not very substantial, especially if the game publisher sells the right to produce the film or show to a third-party production studio to create the work, which is the typical model.
Yet in many cases, the profitability of any one show or movie might be viewed as ancillary to revenue from re-engaging and re-monetizing fans via the surge in interest in the original game that a show or movie provides. While this model has worked, it means the game publisher is kept at arm’s length from the adaptation, which not only limits the financial upside, but also exposes the publisher to greater risk from a brand quality perspective, since creative work is effectively outsourced.
Do Game Publishers Want to be Movie Studios?
What we’re now seeing is that gaming companies are taking more control of their film and TV adaptations, just as the value of their IP in those adaptations is increasing dramatically. This increase in value is both a carrot and a stick incentivizing greater and greater creative involvement. A publisher can capture more revenue directly from the film or show if it helps produce it, while simultaneously mitigating the risk of the product being a brand-damaging, low-quality adaptation.
This is the strategy both Riot Games and PlayStation have pursued with Arcane and The Last of Us, respectively. Riot invested in production studio Fortiche and co-produced its show with the company; Fortiche has also long supported Riot’s music business. Naughty Dog’s Neil Druckman and Evan Wells were heavily involved in writing, directing, and producing HBO’s series, and Sony is well-positioned to capitalize on synergies between PlayStation and Sony Pictures as it builds PlayStation Productions.
In addition to capturing greater potential revenue and maintaining brand quality, moving into a video content production, and potential distribution, role ensures gaming companies can enhance and optimize their IP’s prevalence in the broader entertainment ecosystem, instead of relying on third parties (that may have competing IPs). As venture capitalist and thought leader Matthew Ball described, “the growth in value of popular IP is exponential over time, not linear.”
This is not to say that venturing into new mediums is straightforward, easy, or necessarily the right path, even if it is the path Riot and PlayStation have been pursuing with success as of late. Though the traditional model has long been film studios exploring the gaming business, Riot and PlayStation are not the first gaming publishers to poke around linear media. Activision launched Activision Blizzard Studios in 2015, and rumors of movies and shows based on franchises like Overwatch and Call of Duty have persistently echoed since.
However, Activision Blizzard’s only output has been a short-lived Skylanders series on Netflix and a partnership with Legendary Pictures on the 2016 Warcraft film, the latter of which was a domestic flop, critically panned by U.S. critics, and saved only by a healthy run at the Chinese box office. Just as it has consistently proven difficult for movie companies to make games, game companies cannot instantly make great movies and TV (even with impressive leadership). PlayStation and Riot might be the exception, not the rule.
But these rule-breakers, and other publishers who may follow them, stand to benefit enormously. It’s not just that the value of gaming IP to other media formats has increased — creating high-quality adaptations of gaming IP actively increases its value further in a virtuous cycle. A good TV show increases demand for the game it’s based on, which increases demand for the blockbuster movie, which increases demand for the associated music content. Walt Disney famously figured this out in 1957, and some of today’s top game publishers intend to build their future around this logic.
Transmedia & Live Services
But why now? What unique advantages accrue to gaming publishers who pursue a successful expansion into other media in 2023 and beyond, if the basic model is over 60 years old? One of the fundamental innovations in gaming’s business model over the past decade has been the shift to live services, which has removed the ceiling from monetization of any particular game through microtransactions, DLC, subscriptions, and advertising. If the various nodes of Disney’s map work to increase demand for the IP they service, and that demand consists of acquiring new consumers, reengaging previous ones, and more deeply engaging existing ones, then the live service model is the best method for converting that enhanced demand into maximized revenue, particularly on a recurring basis.
Live service titles can perpetually capitalize on their latest transmedia release by engaging and monetizing players with in-game content and events directly tying into the crossover — exactly what Riot did with League of Legends’ RiotX Arcane event timed around the debut of Arcane in 2021. And beyond any particular event, players of a live service game that are re-engaged by a tie-in will tend to retain longer due to the nature of these types of games, compared with other formats. This is Riot’s strategy, which the company pioneered and fully embraced within League of Legends’ Runeterra universe, and has incorporated into its latest IP, Valorant, from the beginning.
PlayStation, however, relies on different tactics to capitalize on its film & TV business. Its two released projects, Uncharted (2022) and HBO’s The Last of Us, tie into premium, single-player products. In terms of monetization, this means the three sources of increased IP demand are each monetized differently.
New consumers, activated by a movie or show, must purchase the game, and possibly an entire console (greatly enhanced with a PlayStation Plus subscription). Re-activated consumers may or may not have to do this, depending on whether they still own the game and the console to play it. Meanwhile, existing consumers, whose engagement in the game deepens due to the movie or show, won’t pay anything additional whatsoever. The structure of these narrative games means these users will likely churn to another title after they complete the game, if they finish it at all. Still, Sony may see this mostly as an avenue for creating new fans, who may in turn buy future products and remain inside its ecosystem as a result.
This may reflect PlayStation’s current content portfolio and its reliance on console sales and ecosystem growth more than Sony’s long-term media strategy, which the company has been quite clear is shifting more toward live services. But compare this monetization model to Riot’s, and it's clear to see one reason PlayStation also wants to adopt live services: Riot’s media properties monetize all sources of heightened IP demand for its free-to-play, live services games without a cap on customer spending, even if it forgoes the up-front revenue from console and game sales that PlayStation enjoys.
The Future of Gaming IP
Looking ahead, the proliferation of gaming IP across other forms of entertainment is likely to only increase, although most likely with a correlating increase in both hits and commercial and critical flops. Still, we will also likely see gaming companies continue to take on creative leadership roles once thought to be the exclusive domain of film and TV studio executives and talent.
Three main themes emerge when considering what the future holds as these trends progress. First, there will be greater integration between projects using a shared IP across multiple media formats. As Naavik founder Abhimanyu Kumar pointed out, Japan’s “ACG” (Anime, Comics, Games) ecosystem already offers an example of what this could look like, where storylines from the same IP are present and unfolding continuously across multiple entertainment formats instead of simply retellings of the same story. Mega-franchises like Marvel, Star Wars, and Harry Potter offer somewhat comparable examples in the West. A gaming-native IP — especially one similarly driven by a deep, colorful roster of characters like League of Legends — could follow a similar path.
Second, even as a writer’s strike and a broader content slowdown loom over Hollywood, the pace of video game adaptations continues to accelerate. The success that Arcane and The Last of Us brought to Netflix and HBO Max (now known as Max) will not have escaped the notice of other streaming platforms, which are no less competitive with each other even as they try to reduce content spending. Paramount Plus renewed Halo for a second season even before its premiere and shows based on IP like Tomb Raider, Assassin’s Creed, and Fallout are reportedly being prepared for a host of SVODs. While not all game publishers will be as involved creatively and financially as PlayStation or Riot, on average gaming IP holders will take more control in order to realize more benefits and mitigate risk.
Thirdly, game companies will expand this model beyond film and television, just as Disney mapped out and other media conglomerates have imitated. Perhaps Pokémon’s continuously updating mix of video games, TV series, feature films, and card games is the best example of this strategy (and is, not coincidentally, the highest-grossing media franchise of all time). Riot is not shy about its ambitions in this regard, declaring in 2022 that “whether it’s esports… or TV shows and music,” it viewed itself “not as a games company but as a gamer’s company.” And while the success of The Super Mario Bros. Movie has captured more attention, the opening of Super Nintendo World at Universal Studios Hollywood this past February is perhaps a more tangible example of the Japanese company’s similar plans to expand its IP across formats.
Despite expanding into several more entertainment categories, these companies will creatively remain rooted in games, just as Disney and Universal remain rooted in film and TV (though with the possibility that traditional media companies might further explore expansion into games through M&A or other gaming strategies). In fact, this may increasingly take the form of launching games featuring the same IP but across several genres, as Riot has done both internally and with third-party developers through its Riot Forge publishing arm. Film IP holders like Disney may expand how they license their IP to multiple game publishers in similar fashion, with the intention of cultivating PC/console action-RPGs at the same time as mobile CCGs.
For companies hoping to outlast the rapid rise and fall of new platforms and thrive in an increasingly competitive media environment, it’s now clear that a strong transmedia strategy — while absolutely not vital to every game or entertainment company — does provide ample new avenues for growth and sustainability.
#2 Game of the Week: Chrome Valley Customs
Written by Jordan Phang, Naavik Consulting Partner
Chrome Valley Customs
- Platform / Business Model: Mobile F2P
- Developer: Space Ape
- Publisher: Space Ape
- State: Soft Launch
- Genre: Puzzle
What You Need to Know:
- Chrome Valley Customs is Space Ape’s take on the Match 3 and decorate genres and is focused on, in Space Ape co-founder Simon Hade’s words, “a massively under-served market” of male puzzle game players.
- The way Space Ape is targeting this audience is via theme. Chrome Valley Customs is centered around running a restoration garage that takes beat-up cars and restores and customizes them. It’s not unlike the game version of MTV’s Pimp My Ride. Like the TV series, every episode (basically rooms in Royal Match) sees an owner with a backstory who wants to restore their car. This can also be seen in the game’s marketing videos.
- Structurally, it follows the puzzle and decorate game formula — you play puzzle levels to earn coins, which you use to complete decoration tasks.. Players have the opportunity to perform some light customizations, such as choosing body panels, wheels, and paint colors.
- Like other games of this subgenre, there is some light narrative, though some of the writing related to car culture feels a bit shallow. A particular line from one of the characters about how more airflow equals more drift was particularly cringe-inducing.
- Besides the theme, Chrome Valley Customs adheres faithfully to the Match 3 formula and doesn’t attempt to innovate on the core gameplay.
- The live ops strategy is not running at full tilt. There are some time-limited events after an update, but there are long gaps with nothing to do except play the campaign. This isn’t unexpected for a game still in soft launch, as Space Ape is likely still assessing the metrics of the core gameplay.
- Based on data.ai, early monetization data from Canada shows a 3-month RPD of $1.28, which is very competitive with other key titles in the category. It is slightly behind Homescapes ($2.43) and is ahead of both Project Makeover ($1.24) and Royal Match ($0.76).
- Based on data.ai, early engagement metrics are also looking good, with a D1 of 48.81% and a D7 of 16.92%, which is comparable to Royal Match’s D1 of 45.88% and D7 of 22.82%. It falls a little flat in the D30 mark, with a retention of 5.18% (Royal Match has 15.72%). But that is likely due to the fact that there isn’t a huge amount of content (10 episodes and 620 levels) and the reduced live ops cadence, both of which are easier issues to fix when a strong early-game foundation exists.
- Is the change of theme enough to attract more male players? Anecdotally, yes. Based on our research of user reviews, male car enthusiasts felt more engaged in restoring and customizing cars compared to decorating a house or garden.
- Initial data from data.ai further supports Space Ape's hypothesis. Chrome Valley Customs shows a 60-40 distribution between male and female players, whereas games like Homescapes and Candy Crush Saga exhibit the opposite split.
- One misstep from Space Ape is missing out on car culture authenticity, particularly in the dialogue. For a game aimed at a car-loving audience, greater care should be taken to ensure that the game presents itself as “in the know,” whereas it currently feels like it’s trying too hard. This could have an impact on maximizing the acquisition of its primary target group, which will probably be the group that monetizes the highest.
- The puzzle and decorate gameplay feels strong — Space Ape hired ex-Playrix, King, and Peak developers, and it shows. But the real test will be how Space Ape approaches live ops.
- Broadly speaking, male players have different motivations (competition, achievement) than female players (exploration, social interaction), so it’ll be interesting to see how the company approaches this in the long term. The 2.0 update in April featured a competitive event called Master Mechanic, so it does look like the studio is on the right track.
- Does Space Ape have a hit on its hands? It’s looking pretty good. Chrome Valley Customs compares favorably to key competitors, has good early engagement metrics, and demonstrates what seems to be a live ops plan catered to a male audience. While the game’s live ops and user acquisition strategy is yet to be proven out at scale, it is off to a great start and is definitely one to keep on your radar!
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