Shawn Layden, the former PlayStation executive, has been sounding the alarm about the infiltration of big technology companies into the gaming industry.
In recent talks at the GamesIndustry.biz Investment Summit, Layden has been unequivocal about naming the likes of Google, Netflix, Amazon, and Apple as the “barbarians at the gate.” These companies are increasingly seeing the billion-dollar revenues generated by gaming and are trying to carve out a slice for themselves.
Layden’s concerns don’t just stem from a protective sense over his own industry; he points to historical precedents set by non-endemic companies disrupting established industries. Apple virtually upended the entire music industry when it convinced everyone that 99 cents per song was reasonable, shifting the entire monetization model. Similarly, Netflix is still transforming how we engage with films and TV shows, moving the locus of entertainment from movie theaters to our homes. These changes weren’t just shifts; they were tectonic alterations that left the original industry models struggling to adapt.
According to Layden, these tech giants want a piece of the gaming pie and are willing to risk industry disruption to get it. But it’s not as easy as they might think. Gaming is a complex beast requiring more than just technological prowess, as evidenced by Google’s rapid rise and fall with Stadia. Three years after its launch, the cloud gaming service was shut down, providing a cautionary tale that technology alone doesn’t guarantee success in this highly competitive industry.
While Layden acknowledges the financial might and disruptive potential of these tech companies, he doesn’t see them as the only threats to the gaming industry. Two other major issues loom large: the rising cost of game development and industry consolidation. The exorbitant costs required to produce AAA titles are turning into what he calls an “existential threat.” Moreover, the flurry of acquisitions and resulting layoffs and studio closures stifle creativity, as per Layden. He even dubbed such consolidations as “the enemy of creativity,” highlighting that they could become significant hindrances in the evolution of gaming.
Sony’s experience provides an interesting counter-narrative to Layden’s warnings. He pointed out that when Sony went in the gaming market, it was also a non-endemic company. However, the difference lies in the approach. Sony wasn’t a one-trick pony, solely relying on its electronics arm; it formed a joint venture with Sony Music Japan, acknowledging a fact that gaming was as much about entertainment as it was about technology. Sony sought support from third-party developers like Namco, Square, EA, and Activision, resulting in historic moves like shifting Final Fantasy VII from Nintendo to PlayStation.
Interestingly, Layden observes that the concept of non-endemic companies entering gaming isn’t new. About 25 years ago, film studios like MGM, Fox, and Sony Pictures thought they could easily transfer their IPs into gaming. In his words, they “crashed and burned,” providing yet another testament that the entry barriers to gaming are far higher than they appear.
Rather than waiting for disruption from these tech giants, Layden advocates for the industry to “disrupt itself,” by being proactive to the changes to make it the first to successfully auto-disrupt rather than becoming the next victim of external forces looking to cash in on its profitability.
It’s a race against time and change, but for those willing to listen, Layden’s clarion call could serve as a crucial blueprint for survival. Either the gaming industry adapts and evolves, or it risks being another notch on the belt of big tech companies looking to diversify their already expansive portfolios.
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