Can Small Video Game Studios Compete With Microsoft-Activision Mega Merger? (Full Q&A)

For almost two years, Xbox maker Microsoft has been attempting to acquire Activision Blizzard, which produces World of Warcraft, Call of Duty and other massive franchises. At first the proposed $69 billion merger sparked monopoly concerns from U.S. and European regulators, but after legal proceedings and international lobbying, the deal appears all but sealed.

Microsoft and Activision had to make big concessions, such as letting Sony’s PlayStation have Call of Duty for 10 more years and selling off other streaming rights. But independent game developers, an oft-overlooked segment of the small business world — approximately 45,000 of which sell titles on distribution service Steam — are still asking: Is that enough?

The b. Newsletter spoke with Brandon Sheffield, creative director at Necrosoft Games (known for Hyper Gunsport and Demonschool) and Dave Proctor, founder and director at Mighty Yell (The Big Con, A Knight in the Attic).

b: How does corporate consolidation on this level change the landscape for indie developers? Do you foresee changes in the distribution platforms — or related systems — that keep your company afloat?

Brandon Sheffield: Consolidation is worrying because we wind up with fewer options, just across the board. The game landscape has gotten increasingly focused on the higher end, with live service games and triple-A releases. These days you’ll not as often see a new game break into the top 10 or even top 100 game sales, so independent developers often turn to alternate revenue sources like subscriptions, physical releases, platform deals, bundles, and other things to stay afloat.

The fewer players there are, the fewer reasons there are to take risks on smaller companies like ours. For example, if Microsoft, Sony, or Nintendo were to own all the major developers and publishers, what need do they have of our smaller, weirder offerings?

b: This deal brought particular attention to Game Pass, Microsoft’s leading game subscription service. What does a more subscription-focused future for smaller game releases look like?

Sheffield: I think subscriptions can potentially be a net positive for developers, but there needs to be extra care put into it. It can’t wind up becoming the only revenue stream we rely on because then it becomes entirely about who you know and whether you’re able to crack that code and get in with the right subscription service. Subscriptions need to exist alongside a healthy digital sales storefront that actually showcases what’s new and innovative, but unfortunately I don’t see most platforms being incentivized to do that. So for now, we indie devs will be begging for scraps at the table.

Dave Proctor: We’re a bit biased because we’ve had the privilege of being included in Game Pass. The beauty of a subscription model is that people are more likely to take risks with their time on smaller, stranger titles like the ones we make. The subscription services are going to want to spend less on those titles, but there’s a minimum amount that you can spend on a game to have it hit a certain level of quality. … I don’t think you’re going to see teams like Blizzard go 8-bit just to position themselves as affordable for Game Pass. I think there’s some bumps to iron out, but I don’t see it as purely doom.

b: Where do you fall on the Federal Trade Commission’s performance here?

Sheffield: In general, I feel that too much consolidation limits innovation, and while I don’t think the FTC did a fantastic job managing the Microsoft case, I’m all for anti-monopoly laws actually being put into practice in sensible ways. But really I think companies like Amazon and Google are the bigger problems.

Proctor: It’s hard to be excited about more consolidation. Honestly, I hope the FTC refiles because competition and separation at this level keeps people innovating. … I do not cheer on a future where there’s kinda one huge company that does everything.

b: How can consumers help indie studios as the industry becomes more consolidated?

Sheffield: I don’t think we can place too much impetus on individual consumers to have ethical purchasing practices because, frankly, consumers can’t buy what they can’t see — we need to put more emphasis on digital storefronts putting new games in front of a wider audience.

Proctor: Yes, buy content from those independent games. Tell your friends about them. Recognize that they are smaller by nature and don’t be upset if they don’t take you 80 hours to beat. We should be excited to spend more money on smaller games because they are being worked on by small teams that don’t have billions in the bank. Consolidated bigger offerings are going to seem attractive always but remember that there’s an indie that’s trying to innovate that is worth your time and your love.

b: What do you see for the future of indie game development?

Sheffield: I think the future of indie game development looks a lot like what you see everywhere else: consolidation, selling to investors, and subscriptions represent where the industry is going, because that’s where the money is. The game industry moves in cycles, and we’re definitely in a big consolidation period right now.

The difference between now and the Wild West days of indie development 15 years ago is I’m not sure we’re going to exit this phase into a new one. I think this might kind of be it! When the top 10 video games on your storefront earn enough money to fund your whole operation, there’s not a lot of incentive to look outside of that.

Proctor: We’re seeing the bigger consolidated studios start to do redundancy roll-ups and closures on the little guys they bought… those little guys were so excited to sell a couple years ago. No one is able to fully weather a recession, and we are going to see more of those closures soon, because the big company that buys the little company doesn’t need to care. They have one obligation, and it’s not to those workers… Any big publisher that buys a small studio gets a side eye from me; I’m watching to see how they handle that responsibility.

This article first appeared in the b. Newsletter. Subscribe now!