It’s been a strange year in a strange business. The video game industry came into 2021 with a lot of momentum, with millions of new customers, high sales, and venture capitalists falling over each other to put more money into the system.
It couldn’t last forever, though. Video games were the only form of mass-media entertainment that didn’t seem to be affected by the lockdown measures in early 2020, but that was primarily due to how the industry’s release calendar works. The disruptions from quarantine only started to show in early 2021, as developers were forced to slim down, delay, rework, or cancel multiple projects, right as their audience was at all-time highs.
There have still been successes, surprises, and big hits, but 2021 in games has been a story about what could have been. Even the good games in 2021 often felt half-finished, like they’d been hastily trimmed down to hit their deadlines; Halo Infinite in particular shipped with several major features, such as Forge mode, pushed off until later patches.
This hasn’t meant that games have lost their audience gains from 2020, as was initially the question. Sales are actually up slightly overall year-to-year, going by the most recent numbers from the NPD Group. The demand’s still here; it’s just been tricky to meet it.
Many of the stories out of 2021, then, have been less about games and more about the industry itself, as it tries to work through its unique issues, as well as dealing with the same workplace evolutions as everywhere else. The landscape has shifted more than usual, and it’s anyone’s guess to how things will land in 2022.
Here are the top 10 storylines from 2021:
Industry practices come under scrutiny
The last few years have been punctuated by allegations of workplace abuse against many significant players in the video game industry. This has ranged from the unfortunately common reliance on “crunch” to meet strict deadlines to truly bizarre, wide-ranging allegations of harassment. This has been percolating in the background for years, with press exposes and whistleblowers coming out against major companies such as Riot, Ubisoft, and Quantic Dream.
The overall situation hit a new high in 2021 when the state of California filed suit against Activision Blizzard, the merged mega-developer behind both Call of Duty and World of Warcraft. Employees testified to an internal culture at Blizzard in particular that was stranger than fiction, with developers reportedly encouraged to treat the office like a billion-dollar frat house.
That touched off a wave of similar stories from other companies, as more people were encouraged to speak out. The Fullbright Company in Portland, Ore. had its next big project, Open Roads, delayed by the behavior of creative lead Steve Gaynor, who was forced to step down in August.
Other companies, comparatively, have taken the opportunity for some self-reflection. Bungie, headquartered in Bellevue, Wash., has pursued preemptive internal reform, with some success, while growing startups like Bellevue’s ProbablyMonsters have specifically organized their offices to put employees first.
Some other abuses are taking place outside of companies’ offices. Roblox, the popular kids’ game, has come under fire for its exploitative rewards system, where it makes billions off the backs of aspiring game designers. The story here, reportedly, is that Roblox developers end up with few useful skills, since programming for Roblox bears little resemblance to making a game anywhere else, and the poor conversion rate on the in-game “Robux” awards means they’re effectively working for pennies.
Other companies have been accused of outsourcing their design work to overworked companies in Southeast Asia, effectively removing “crunch” from their office by allegedly putting overseas contractors through the wringer instead. This controversy stayed remarkably quiet, but reportedly involves companies as big as Sony, Microsoft, Square Enix, and Activision Blizzard.
The bottom line, really, is that the video game industry has been in a prolonged adolescence for years. The last few years have been a series of necessary shocks, dislodging longtime bad actors in favor of new practices and new talent, and the work continues.
The chip shortage
You can’t have an Internet of Things if there aren’t any things.
The computer chip shortages created by the pandemic have continued throughout 2022, and are apparently likely to keep going well into 2023. The industry has moved to try to address the issue, but unfortunately, not even billion-dollar corporations can make semiconductor factories open by wanting it.
With the rise of smart technology being incorporated everywhere from your appliances to your home, the demand for chips had never been higher. Before COVID, the factories in Southeast Asia building all those chips were already working at maximum capacity, so when quarantine measures forced them to shut down, they had no flexibility with which to deal with the shock.
Almost two years later, the industry’s still dealing with that production bottleneck. Everything with a chip in it is scarce on the ground, and supplies of next-generation video game consoles are so constrained that it’s had a measurable negative impact on sales.
The good news for Americans, such as it is, is that new domestic factories will open up to address the issue. Samsung in particular has invested billions into a new plant in Texas. In theory, this means jobs and less reliance on overseas manufacturing. In the meantime, though, we’re suffering through the unanticipated downside of the smart-technology revolution, and it’s likely to continue for a while yet.
Amazon Games finally wins one with New World
It’s a testament to the power of persistence. Also, an effectively infinite operating budget doled out by people who were not willing to accept failure, but mostly it’s the persistence thing.
After being forced to shut down the hero shooter Crucible last year and the subsequent cancellation of a planned Lord of the Rings MMORPG, Amazon Games had a lot riding on its biggest project, New World. It wasn’t just a question of getting a return on its years-long investment, but also proving that Amazon was capable of making a successful video game at all.
New World’s development was plagued by multiple delays, and a problem with its beta test where players’ high-end video cards got “bricked.” (This was eventually established as a manufacturing defect that occurred with a specific batch of cards from EVGA, according to Amazon’s internal testing.)
New World finally came out toward the end of September. It immediately set records for its concurrent player count on Steam, acquired a healthy audience on Twitch, and pulled in almost a million users.
New World is still dealing with some growing pains three months later, and has made a number of unusual mistakes. The retail client has been riddled with bugs and exploitable glitches, while Amazon’s quirky take on an in-game economy resulted in a short-lived deflationary spiral that rendered its currency nearly useless.
It’s a bit of a microcosm, really, for Amazon’s overall efforts in the gaming space. It’s never come off like it just wanted to make games, but that it very specifically wanted to make games its way.
(Also, come to think of it, New World is a game about making inroads into hostile territory, which is being used by Amazon to create a beachhead in a brand-new industry. It’s pretty on the nose.)
Amazon’s dev team on New World has been transparent and reactive, however, fixing the game’s issues as quickly as they arise. As a result, the game’s population seems to have stabilized at around 110,000 players, who sign on every day to fight one another for control of the magical island of Aeternum.
It’s a healthy population, particularly in the face of heavy competition from Final Fantasy XIV’s latest expansion, Endwalker. Amazon’s still got work to do, but with New World, its video game efforts are at least in with a chance. Its most recently announced project is as a publisher, for a new, original game from the English studio Glowmade.
Everyone’s getting into NFTs
Perhaps the year’s dumbest story (in my opinion) was the widespread adoption of “non-fungible tokens,” or NFTs, where vast sums of cryptocurrency changed hands in exchange for digital baseball cards that the new owner did not actually, in the classical sense, own.
The initial idea behind NFTs, according to one of its co-creators Anil Dash, was to let artists on the internet have some more control over their work. Anyone who’s ever had an image go viral also has to deal with a couple hundred thousand would-be art thieves, who’ll monetize other people’s art to infinity without giving the creator a dime. In theory, the blockchain could help solve that problem.
Fast-forward seven years and it has not done that. What it has done, it seems, is make a few people a lot of money; CNBC reported in October that NFT trading volume had hit $10 billion. Cryptocurrency enthusiasts were apparently willing to trade small fortunes to be able to claim they owned a procedurally-generated, blockchain-enabled image of, say, a really stupid-looking ape.
Some of the NFT hype appears to have been entirely artificial, with some NFT sellers allegedly engaging in insider trading. Other reports indicate that 17% of NFT owners control 81% of the NFTs on the market, with anecdotal reports of traders moving a given NFT back and forth between alts to massively inflate its apparent worth before trying to unload it.
Fraud is rampant in the field, with analysts raising alarms over how NFTs are an easy way to launder money. Multiple artists have reported NFTs being made from their work without their permission, with no way to address the issue. In general, it’s hard not to take away the notion that a lot of what’s happened in the NFT space in 2021 was an attempt by a handful of well-positioned traders to get as much money out of it as possible, by any means necessary, before the SEC got involved.
In the meantime, the NFT market got hot enough, fast enough, that major brands got involved, including video game companies. The Ukrainian team behind the forthcoming action game STALKER 2 briefly planned to include NFTs in the game, but was subsequently talked off the ledge by its fans; Ubisoft has released multiple NFTs that are attached to its tactical shooter Ghost Recon Breakpoint (which is not, notably, anywhere near Ubisoft’s most popular game), but appears to have lost its shirt on the deal.
Other game companies have maintained a healthy distance from the issue. Xbox head Phil Spencer told Axios’ Stephen Totilo in November that “some of the creative that I see today [with NFTs] feels more exploitive than about entertainment,” and Steam outright banned games that feature NFT/crypto exchanges in mid-October.
2021 was probably the “gold rush” period for NFTs, as they got big enough quickly enough that analysts anticipate significant government intervention in the future. Whatever happens next is likely to be more regulated, as developers and customers try to figure out what NFT technology is actually good for.
Epic vs. Apple: The fallout
In September, nobody exactly won, but nobody exactly lost, either. Epic vs. Apple, a lawsuit that Epic hoped would tear down the “walled garden” around the Apple app store, ended in what’s probably safest to call a draw.
Epic Games broke Apple’s store rules on purpose, in hopes to start a legal battle that would end with Apple being forced to relax its notoriously inconsistent terms of service. Specifically, any app on iOS with microtransactions, such as Epic’s mega-hit Fortnite, had to send buyers directly through Apple, who’d then take a cut off the top. Apple had also exhibited a willingness to change those terms of service on the fly in order to keep specific apps out of its ecosystem.
When the suit was over, the judge stopped short of agreeing with Epic that Apple’s control of its storefront was effectively a monopoly, and ordered Epic to retroactively pay Apple 30% of the money it had earned off of the iOS version of Fortnite in the previous 13 months.
However, Apple is now no longer able to enforce direct control over payment processes within iOS apps, which means mobile game developers can now offer discounts or sales straight from the source. It’s a decision that could cost Apple billions in the long run.
Epic vs. Apple had the additional side effect of revealing a lot of insider information about the business of video games, which made coverage of the trial required reading for industry analysts throughout the summer of 2021. In addition to a few interesting data points, like behind-the-scenes details for the Epic Games Store, the trial revealed that in 20 years, Microsoft has never made money on Xbox hardware sales.
Dungeons & Dragons takes over the world
One of the other knock-on effects from the COVID-19 pandemic has been a groundswell of interest in Dungeons & Dragons, which is owned and run by Renton, Wash.-based Wizards of the Coast. It reported early in 2021 that 2020 had been D&D’s highest-grossing year on record, so much so that Wizards’ parent company Hasbro reorganized itself to throw more support behind D&D. We’re in a golden age of tabletop RPGs at the moment, and D&D is currently more popular and visible than ever before.
According to Wizards execs, the D&D boom is driven in part by a rise in live-play broadcasting, ranging from the small production empire that surrounds Critical Role — which turned out to be one of the highest-grossing shows on Amazon’s Twitch — to a variety of podcasts.
Being able to watch other people play the game has demystified it, so when socially-quarantined people found themselves looking for things they could do via Zoom, D&D was right there to take the case.
Wizards has capitalized by supporting more live-play shows on its own, such as a recently-debuted program, Battle for Beyond, run via livestream on the official D&D Beyond network. Wizards also entered into a partnership with the recently-relaunched gaming network G4, which saw the debut of another D&D-themed show, Invitation to Party.
D&D’s releases for the year included Fizban’s Treasury of Dragons, a draconic-themed supplement that reintroduced several classic monsters to the game’s 5th edition; Strixhaven: A Curriculum of Chaos, a long adventure set within a wizards’ academy in Magic: The Gathering; and Van Richten’s Guide to Ravenloft, an update and adaptation of the classic D&D horror setting.
According to D&D head of franchise Nathan Stewart in July, Wizards’s internal tracking had D&D on track to beat 2020’s numbers in 2021. The company’s also planning a local expansion, after saying it’s outgrown its old Renton headquarters, and signed a lease in Jan. 2021 to open a new office in Bellevue.
Seattle’s gaming scene heats up, with big companies moving in
The games industry has had a healthy presence in Washington state for decades, between Nintendo’s American offices, Microsoft’s Xbox project (which celebrated its 20th anniversary in 2021), the Renton headquarters of Wizards of the Coast, and Paizo Publishing in Redmond. If you were ever going to go up to the nerd pro leagues as a game designer or developer, Seattle and the Eastside have traditionally been good places to take that swing.
Despite the disruptive effects of the pandemic, Washington’s video game industry grew dramatically in 2020, to the point where it overtook Texas and became the 2nd biggest state in the business. Subsequently, over the course of 2021, multiple big companies made their move to open up branch offices in the area, including Riot Games, Electronic Arts, and the TiMi Studio Group.
Local companies with plans for expansion include Bungie, which broke ground on a new headquarters in Bellevue and plans to move into a new office in Seattle; ProbablyMonsters, which is fresh off a $200 million funding round in September; the indie team behind Rivals of Aether, which opened Aether Studio in April; Rec Room, which has expanded rapidly as its eponymous social app hits new heights; and the recent startup Starform. The Bellevue-based indie publisher tinyBuild also raised eyebrows in March after its IPO, which saw it valued at $474 million on the London Stock Exchange.
The Washington Interactive Network nonprofit cites several factors for Washington’s continued strength in the industry, including the lack of a state income tax for corporations and individuals, and a central location for easy international flights.
Steam faces competitors, goes portable
Valve Software, working out of Bellevue, Wash., has been busy but relatively quiet for much of 2021. It’s made routine upgrades and usability improvements to its digital storefront Steam, which still represents a sizable chunk of overall sales in the PC gaming market. Its most recent “Steam Labs Experiment,” released on Dec. 17, introduces a new, broad assortment of browsing options, including more powerful filters.
It’s a low-key response to a high-key situation, as multiple other companies have been moving onto Steam’s turf in the last few years. Epic has used its pile of Fortnite cash to buy its way into the digital storefront game, with a feature on its Epic Games Store app that gives away at least one free PC game every week, and seems to be gaining some ground.
Microsoft fired another shot across Valve’s bow in April by adjusting its revenue-sharing rules, offering an 88/12 split of revenue to developers who choose to publish games on the Microsoft Store.
Valve still offers a 70/30 split, which was once the industry average, but has proven to be one of the most common points of attack on Steam by both developers and other digital storefront owners.
In addition, a surprise leak in October indicated that Amazon had at least explored the possibility of competition with Steam at one point, via an unrevealed project codenamed Vapor. Steam had a few years in which it was the only game in town, but the next few years could see it coming under serious attack from a number of different angles.
Valve’s re-entry into the hardware business, using a custom-made portable PC as a platform from which to access users’ Steam libraries, is a surprisingly nice piece of hardware, which offers desktop performance at a Chromebook price. Its release was pushed back to early 2022, naturally, but it’s a potential game-changer for both PC gaming and Valve’s long-running, occasionally quixotic attempts to crack into the hardware market.
Another crazy year to be Twitch
On the one hand, Amazon’s livestreaming platform is more popular than it’s ever been, with a broader variety of topics, and still made up the vast majority of online broadcasting in 2021. If you say to someone you’re an online broadcaster, they’ll probably just assume you’re on Twitch.
On the other, it doesn’t seem like anyone at Twitch was at all ready for the service to become quite this visible. It’s been scrambling since last year, when the Recording Industry Association of America spent most of the summer throwing running punt-kicks at Twitch’s face over various broadcasters’ unlicensed use of music. By now, the market’s responded, with companies like Riot investing heavily in apps and playlists full of unlicensed music that streamers can use without drawing fire from the RIAA.
Another significant controversy arose in September, when a number of high-profile streamers participated in the #ADayOffTwitch walkout, to protest Twitch’s slow reaction to organized trolling. Twitch also got hit with a massive data leak in October that disclosed a lot of its internal data, including a look at just how much money Twitch’s top talent actually earns from the service.
Even so, Twitch’s actual content has continued to diversify over the course of 2021. The lion’s share of broadcasters are still playing games for an audience, and Amazon proved capable of leveraging Twitch to secure a solid debut in September for New World, but the audience for topics like sports rebroadcasts, beauty tips, art, and ASMR has grown dramatically. Once again, however, the catch-all category for all sorts of live-blogging, “Just Chatting,” was the No. 1 topic for the year.
At the end of 2021, according to industry analyst Rainmaker.GG, both Twitch and the closest thing it has to a competitor, Facebook Gaming, managed to hold on to a lot of their momentum from 2020. Both platforms saw an almost 50% increase in their total hours watched in 2021.
The top video game watched on Twitch, by a healthy margin, was Grand Theft Auto V, or more specifically, the viral rise of “role-playing servers” set within GTAV’s fictional city, which let streamers play directly with their audience in what amounted to a virtual masquerade ball.
The rest of the top 10 for 2021 doesn’t hold many surprises, with a number of old favorites holding on to their audience shares; League of Legends, Fortnite, Minecraft, and Apex Legends all had millions of hours watched over the course of the year. Amazon’s New World, according to the Israel streaming firm StreamElements, came in at No. 18 overall for the year, although it only came out at the end of September.
Twitch’s next potential headache may come from the upstart new firm Trovo, owned by the Chinese mega-company Tencent. While Trovo has barely a fraction of Twitch’s overall audience, peaking at almost 70 million hours watched in the third quarter of 2021, it’s grown 715% year over year.
Wall Street Bets takes on short-sellers
Toward the end of 2020, it looked like the American video game retail chain GameStop was on its last legs. Sales of physical media have been dropping for years, and GameStop was forced to sell off its subsidiary Spring Mobile at a loss in 2018, which put the company in significant debt. A strategic partnership with Microsoft offered it a lifeline, but GameStop was distinctly in trouble.
As GameStop’s stock prices fell, traders moved to take advantage via short-selling: borrowing a share of stock from a plummeting company and selling it, then repurchasing the stock the next day once its value has dropped and pocketing the difference. In early January, so many stock traders were betting on GameStop’s imminent failure that they’d short-sold more shares of GameStop stock than had ever actually existed.
The members of the Reddit community Wall Street Bets stepped in here. In what amounted to one of the single most successful “troll raids” in Internet history, the WSB regulars bought up all the GameStop stock they could find, which dramatically spiked its value out of nowhere. Some well-positioned Wall Street Bettors made small fortunes, and traders who’d overreached on short-selling GameStop stock lost their shirts. Overextended hedge funds took billions in losses.
Wall Street panicked and went into damage control mode, with many prominent investors arguing that something, somewhere, had been illegal. At its apex, traders went so far as to deliberately cripple the trading app Robinhood, and r/WallStreetBets saw its Discord server suspended.
While the story died down in the mainstream press over the last 11 months, Wall Street Bets and those inspired by it haven’t gone away. In fact, they’ve become notorious in the world of finance as investors in what’s been called “meme stocks,” who deliberately buy shares from companies that hedge funds are betting against. As recently as Dec. 17, a company had to shut its hedge fund down after a bet on an AMC short-sell went bad.
For people outside of finance, this is primarily a story about schadenfreude. A small group of rogue, organized investors have spent much of the year kicking hedge funds in the teeth while also not doing anything technically illegal. It’s kind of beautiful.
[Errata: An Amazon representative provided additional clarification on what had happened with players’ video cards during New World‘s beta. The test has been adjusted accordingly.]