Mobile vs Steam, the rise of DTC, and why market forecasts may be missing the real story

I'm smart. And I'm right. And we are smart, right? Oh God. It's never gonna not be funny, man. I'm telling you that it's so cringey. Oh my God. I'm just thinking of the conferences where everyone's gonna be coming up. It's not. I'm smart. And this is episode two. It is episode two. Well, you might have to get a second. It's impressive. We've got this far already. What are we gonna talk about? We need to think about something to talk about here. I don't know. Have you got any ideas? I just wing it. I mean, you're the brains of the atmosphere. I'm just here for community value. That's the one I'm bringing. Just here for comedy effect. All right. Well, I've got something that I've been working on recently that I'm kind of I'm kind of a bit passionate about. I'd say about sort of 80% probably something like that. Like, I don't know. We both do a bit on LinkedIn, right? Like we've, you know, we've been known to frequent it once or twice. I'm seeing a lot of doom and gloom over the gaming industry. And to be honest, I thought it'd be quite fun. If we take some examples of that and we kind of dig into them a little bit and we see what we think about them. Very in mind, we want to keep this a short episode today. I thought we'll just dive in and I'll start talking about some of these things. So the first first one. There's three in particular that I want to talk about. And they're all kind of connected. So first up, the wonderful Yoni from Dreamlook Games posted something discussing mobile versus steam. I think he sort of came out with the, or his conclusion to all of this was really that steam is growing by, I think he put about 13%. Yeah, it's like revenue is growing massively. Mobile had grown or is projected to grow about 1% or this was this was 25. I think it was 25, not 26. Then we've got Lawrence post from a baning company. They basically, he's saying that they cut their own forecast for gaming industry and took quite a chunk off of where they thought it was going to land. Yeah, it was quite a big watch is by about 30 billion from now to 20, 30, I think. Yeah, yeah. And then we also heard the, I don't know if you saw it, but the FT released a graph recently that was really sort of it was showing a massive drop in gaming revenue. And it from the app store in particular. So it's a Apple app store revenue sort of was almost the negative numbers. It was, it was quite a big thing. It sort of got picked up by quite a lot of press agencies and that kind of thing. So I thought, why don't we start with steam. And first up, I wanted to try and pull numbers for steam. Obviously, steam's private company numbers aren't a thing. Valve hasn't hasn't hasn't IPOed or anything so they don't have to release numbers. However, I did find that Alina and analytics company recently projected steam's revenue growth at 15% for 2026. And they reckon it is likely to exceed 20 billion gross for again for 2026. Now, at the same time, news is estimating for the whole PC and console market in 2026 that it's going to be around the 92, 93 billion mark. 45 to PC 45 to console of 46th console. And also, at the same time, news is saying that the gaming industry projected for 2026 mobile gaming industry projects since 2026, 121 billion. So in terms of steam in comparison to mobile gaming industry, that's quite a big difference in terms of the numbers there, the 20 billion to 121 billion. And I know which one I would prefer to enter at this point in time. But like what are you saying? I mean, you were, you were quite for a long time. You've been at multiple different companies. You've seen how hard it is to work on mobile and how hard it is to work on steam. What's your take? So, so look at it. In my opinion, steam and mobile are two very different things. The way that you actually launch games on them is very different. There's different strategies, the different ways of works, there's different metrics that you look at. There's just, it's just very, very different. And I think over the past couple of years or traditionally mobile should we say was much easier. It was much more scientific, much more data driven. It was, you know, we understood the KPIs on launch games. If you've got to this percentage revenue at this day and this day. And you have told the ability of cause and effect, didn't you? Exactly. But this happens. And I know one to one. But the idea was we knew if we launched the game, we would get a certain amount of organics, and then we would do an X amount of UA and all in the unit economics would be positive, depending on if it would be pure profit on the UA or including the organics, right? Depending on if you aggregate it or not, these are two different ways of doing it, of course. But it was, it was very kind of a calculate. It was, okay, we understood how it worked. Then we, we knew the system, we followed the plan and everything was kind of like that. And obviously more games died than launch because that's the nature of building something that's great and can be a standalone business, right? And it's own P&L, etc. But it's all about training, I mean, like it's all about throwing enough things out there until wanting to make sure that you take a super sell approach to like. Yeah, yeah, look, I mean, I've probably prototyped a thousand plus games in my career. And out of those thousand plus games, we might have gone to soft launch with a hundred. And out of those soft launch hundred, maybe 30 made it. And 10 of them made nine figures. And the rest of them made a couple of million, right, a lot of, you know, so, so if you once you've broken it down, you look at it as a pipeline, you know, he's drop off points for that. But, but look, it was, it was much more easy to understand like where you were, how to do, what to implement, what to change. And last couple of years, post ATT and everything else with the industry getting harder, but obviously that's changed and those drop off points have become bigger and there's fewer games coming out of the funnel, right? And we always look at this graph, which is, although there's two graphs in particular, the percentage of revenue coming from games that are five years old, old or older. And we look at the number of new games that make a million a year, okay? And if you look at those, the older games are still getting bigger and bigger, so the percentage, I think, is now over 60 something percent, 65%. And if you look at the number of new games launched, you're going from like five 600, you know, four, five years ago to like 200 now. So, you know, 70%. But also the majority, it's worth pointing out that the majority of the 200, you know, the new, the new games coming through are mostly APAC. Like we're seeing a huge proportion of that shift, the all of the new games seem to be coming from APAC rather than the West at the moment. Yeah, and there's, there's reasons why around that in terms of just operational effectiveness, like them, they're able to develop very quickly. They have a huge amount of resources, you know, they, they have a lot of advantages in Asia right now. But look, going back to steam versus mobile. So, so yeah, like mobile was predictable in a certain way. If you had enough data and you saw these signals and et cetera, et cetera. The last year or two, it's become much more difficult. And a lot of that isn't, I think, I mean, we speak about 80 to a lot, but I'm not going to go into that because I think we've spoken about that a million times. But, you know, a big one for me is going back to how we found profitability and positive unit economics. So, you know, a couple of years ago, when we were, we could guarantee like 20% of organics. That 20% became your, basically, your profit, right? So, you would spend one for one CPI to, to LTV. And then the organics would be the point of your profitability. And if you were lucky, you could bid 80% to your LTV, right? And then you would have a big margin. But, you know, organics that isn't, isn't anything these days. It's, it's nothing. So, like, I mean, even featuring on the stores now, isn't anything like what it used to be, right? I mean, exactly, exactly. And all of that kind of predictability around getting featured and the impact it would have, like where you would get featured one day and your revenue would treble in a day. None of that's happened for years now. It really isn't just, it's not a factor. You can't do that point. And I think that's part of the reason, sorry, I'm getting excited now. I think that's part of the reason that people are viewing steam in that kind of way, because it almost feels like it's the app store, but in like 2014. Yeah, but again, look, so let's wrap up mobile. And I'll go into my opinion about steam. But, but yeah, so mobile, mobile has got harder the last couple of years. And a lot of people have been shining a lot on it, a very negative light. And we'll go into some of the other stuff that you discussed earlier about the bane adjustment and stuff like that, because there's a few reasons why I think the spot looks, and we need to go into. But, but yeah, look, again, mobile has got harder. And so what, what people have done is maybe there's a quite a few mobile teams that I know that maybe didn't have the business acumen or the experience on UAE or monetization. You know, the people that, you know, the purists, right, the people that are just wanting to make an amazing game and don't have to worry about user behaviors, triggers, motivate. is you know, balancing shop economy, all of these things, people just want to build a killer game, which is fair play to them, you know, if that's what they want. But in mobile, in a free-to-play landscape, all of those things are important factors to get to the point where games are soft and large and hard launch. And in Steam, when you're having a premium, right, you're just saying, okay, this is $49.5 price point, then that's different. You're not factoring in all of that work, it's a very different type of development. But people are kind of making it sound like Steam is easier. Steam is not easier than mobile, it's different. I mean, to me, it's kind of a dangerous sentiment in like, stop developing from mobile and go develop for Steam. I mean, maybe as another channel, yes, possibly. But in terms of actually changing from one area to another, I think the amount of revenue that's available within mobile, you know, that is there in the pool for mobile is far greater than the revenue that's derived from Steam at the moment. Yeah, you're talking about 5 to 6X, right? If we talk about TANs, pure TANs, we're talking 5 to 6X, mobile is bigger than Steam. But people, people see Steam right now, and I think it's very dangerous at it, if I'm honest, people have this false opinion that all they're going to do is build a killer game, launch it on Steam and Steam will look after them. It doesn't work like that. Steam's algorithm is one of the biggest black boxes in the industry. I have had serious debates with like, you know, dozens of industry execs who try and, like, we try and talk about what we've learned through our own testing protocols to try and figure it out, right? We're not trying to gain the system here, but we're just trying to find out what it is we need to do because that's what you did in mobile, right? Yeah, I found out what creative worked, what creative format, what channel, like, we're trying to analyze it the same way we would, but it's like impossible because Steam doesn't give anything away. You do have, you know, websites like SteamDB and all of this stuff, but that's scraping data. And it still doesn't give enough to be able to come up with a formula of this is how you launch a game which is truly successful every time. Exactly. Exactly. And make, look, the thing is, with my opinion, with Steam, and what makes it a little bit harder is, again, it's around the markets inside of the things because it's predominantly influencers. You need to have actual one-to-one personal relationships with people that are on Metacric and an actual people that are going to review the game publicly. And that then gets taken into a lot of the, you know, the gravitas that the game can build because it feels like a closed community. That's for sure. It feels like something you have to be part of in order to be able to sort of push your game through. But then that's where it sort of feels a lot more like I've used this terminology a lot, but it feels a lot more like the movie industry where you have the sort of Oscars side of the movie industry, which is all of the art house films pushing the boundaries of what's possible on film and that kind of thing. And then you have all of the films that people actually watch, you know, like the mission impossible is those kind of films. The box office films and we don't have that two-tier measurement or those two different circles to measure in, it feels like. I mean, we've got Indies and AAA, which is similar, but, you know, there's some Indies which are built as, as, you know, the sort of blockbuster hits anyway. Yeah. But this is the other thing, man. People are looking like, like schedule one, Manelords, Blattro. What was the other one? Mecha Chameleon or whatever is called that just came out? Yeah, yeah. Like people were looking at this thinking, oh my god, Indies can be successful and that's true. That's true. But you know, the number of games being submitted on Steam is going up tremendously, right? So that one, so the rate of submissions going up, but you're only getting one of those massive breakout successes a couple of times a year really, maybe three, four, five times. So obviously that means that the conversion to success is going down because more people are submitting, right? So that means the conversion rate is getting lower because the number of launching or the number of big successes is still the same. So people are kind of pinning their hopes on having a breakout Indies success. But they are, they're very, very rare, man. And like, so I think it's dangerous people kind of pinning their hopes on that being what they're going to do because these are really sort of like very, that's a very rare situation. Things you can't predict. They get a bit of gravitas behind them. A few people pick them up. They get this kind of, you know, a tailwind in the industry behind them. Word of math goes crazy. People are talking about on Discord and forums and ready it to do. And like I said, to get that, that's like the perfect storm, man. You know, like that's not predictable. But hope is not a strategy, right? You can't hope you're going to be successful. And with Steam, I feel like hope is a much bigger part of it. Whereas mobile is much more scientific. And that's why I always agree with it. Lent to it rather than Steam. And again, I've done both of my career. I started off in PC console 15 years ago. And then I got into mobile after about a year. So I've had different spells in my life. And I've invested in PC console companies as well. And it's just, it's just a very different thing Adam, you know. And I think this leads us on to kind of the next point, which we're going to talk about is the financial projections and the current kind of like Kagar view from these. I think there's two sides to this whole conversation. And like when you take into account that the mobile side of the business, you know, with people, there's a bit of negativity towards it and everything else now. I think you have to look at where that revenue is coming from. And one really, really, really dangerous. And I do genuinely feel it's incredibly dangerous for the industry is need to see. Now, I'm not talking about D2C as companies using D2C. What do you mean by D2C? I don't want to get the best back in the last couple of years. What are you saying? I'm saying Adam, you're crazy. It's the best thing to happen to gaming. It's nothing to do with that. What I'm worried about is the way that the industry is now perceived because there is a growing chunk of revenue that's going to be missing from all of these predictions from all of the analytic tools that the mobile industry has been built on. It's completely changing. And, you know, when you look like you look through some of the company's earning reports recently, you know, you've got a double down that's now at 52% D2C, which is just like insane. Play Taker over a billion percent of the company is on D2C. Play Taker is almost 40%. You've got an MTG or now a play amp. It's incredible, like the amount that has switched and the difference, the different level of what's visible now is insane. And I think taking, you know, when you look at the financial times one, all right, that's across apps and games. So that's got a big area. And it may not be fully this that's had an impact, but you're talking about such a big slice of revenue now that is missing from any of these calculations. That is going to have an impact, especially when you're looking at financial institutions, looking at investing or VC side of things, that's a massive area that you're not having visibility of anymore. Yeah, I think it's a very good point. And I think there's a few things that you kind of raised on this. And the thing is we don't know exactly but how much money total is going through D2C now. Again, we can have a look at certain companies that are posting their figures, but all we're seeing really is a discrepancy in Sensea Tower, right, which is the main sort of data place where we check for mobile, especially. And yeah, look, I've been saying to them for a while, when are we going to be able to see D2C revenue and I think they're figuring out a solution and I think it's in their benefit to figure it out. But I think it's going to be a difficult thing to do because effectively everyone's run out completely. They know they need to. So I think they'll figure it out eventually, but you're right. What's happened now? And it's the same as I keep seeing this message of, oh, apps is now bigger than games. And I don't believe it. I don't believe it for a minute. I think it's just that that we're seeing more trackable revenue coming through apps than we are seeing in games now. And look, if playtek is doing like a billion, right, and there's, I know they're one of the top five, top 10 developer globally and all of that stuff, or maybe top 20, depending on the Chinese. But if everyone's doing this now, and I'm playing like games like Asian games like from like century and stuff like that, and all of them are doing D2C. And if we're saying, so most of the Chinese have been doing this for a very long time. Exactly. Very true, mate. But but look, Adam, if we're saying that, you know, the industry is growing 1%, but we're seeing 10% of revenue going through D2C now. Again, I've done it. That's accurate or not. But that's a massive difference between which we actually, actually, you know what? The app charge app charge did a couple of months ago, app charge did a report with alongside GDC. And they, they estimated it was around 15% of the mobile gaming market is now going through D2C, which even at 15% of that entire market is, is insane. Looking at some of the earnings report we actually get the ability of, it could well be even more. Yeah. No, I mean, that's kind of nuts. I mean, that again, that could be anywhere between 15 to 20 billion, depending on the current mobile Kaggle, which is, and I'm not Kaggle mode, or total mode, or Tam, which again, is about to say 120, right? So 15%. percent of that is, yeah, it's about 20 billion. 20 billion, sorry. So, yeah, if that's true, then it changes the story dramatically. Which I believe, again, I believe these companies are basing projections on data they have accessible to them, which they don't have the D to C data. And they probably don't want to just put a random number or a projection against it, because there's no way for them to calculate how much it is. And if you're not in the know, you're not in the know. And yeah, look, I think this is a massive, you know, and to your point, you know, VCs and everyone else are making, like, judgments on the on the market health and how gaming is looking. Is it all doom and gloom at the moment? No, it's my opinion, right? Like, there's still businesses out there being successful. There's still money changing hands and investments are happening, but it's obviously not the same rate as it was five years ago. And maybe people should be, yeah, actually, because this, but I think that's where the innovation of the industry comes in. And, you know, the, the, my god, it is an innovating industry. And they will always work around different ways of doing things in order to be able to stay alive. I mean, it's, it's, it is incredible to watch, like technically. Yeah. But, but going back to your, your point about Bane Adam, right? That 30 billion hair car. I don't think that that personally is, yeah, like correct, in my opinion, right? I think they're probably basing it, not including something for it for D to C. And that's why they've made this changed. And, and it shouldn't be that negative, you know, you should be cutting off that amount of money from a projection. So, but I guess we'll, we'll see at some point. You know, we'll figure it out. On mobile or, oh, yeah, like we won't. And we'll just things will continue. I don't know. Or like always, maybe we'll be incredibly wrong in it. We'll see. We'll see. No, I mean, it's an interesting area for me. That's for sure. Yeah. And, yeah, I really hope that a lot of people, like people shift into steam. That is, that's their choice, you know, like that's what they want to do for their business, so be it, right? And that's their decision. But I really just implore them to think about it fully. That's, that's all I hope, mate, because again, I think people are jumping, thinking, you know, this, this traditional kind of creative, like mindset of building the best game and people will come. And it doesn't work like that without marketing, without traction, without virality and, and word of mouth. You could do the best game in the world, but if people are not seeing it, it doesn't matter. So, like people need to understand that just building and, and even on steam, like mecha, chameleon and things like that would never have taken off. Had it not have been for influences and that type of thing. Exactly. Which is the other thing, actually, which is probably the biggest, what I learned during my time in working on some PC console stuff, that the influences are the most important thing. And, you know, you have to, you, they are relationships, you have to, you can't just be like Joe blogs coming out of nowhere contacting them. You need to have, like, a, like, a, have a mutual connection, you need to go for an agency, you need to do this, you need to do that. And not all the time, just because they're popular, if your game doesn't match their audience, then it won't get the traction. And you could spend a lot of money on that, right? It would joke about how much Mr. Beast costs. But, like, there's, you've got micro influences up to Mr. Beast. And you could, you can spend anywhere from giving a free key to 10 million dollars, right? So, you, there's a lot of, it goes easily. So, that, that, people need to figure that out. I can't just think of an old game and not know it. Cool. Well, we said 20 minutes, and we're almost at time, which is quite impressive for us. You've got about the first five minutes. Good seconds, episode, I like this. Right. Appendulatory statements in 25 minutes. Yeah. That's, you know, it's good. We'll, uh, we'll be back next week with a bit more. That's it stays tuned for episode three. We'll see what we're going to talk about then.