Axios Gaming

June 29, 2023
Happy Thursday.
No newsletter from me on Monday, as I take a short break for the 4th of July holiday. So you get a supersized edition today.
Today's edition: 1,769 words, a 6.5-minute read.
1 big thing: PlayStation’s game budgets revealed
Horizon Forbidden West. Screenshot: Sony Interactive Entertainment
Sony’s 2022 PS4 and PS5 blockbuster Horizon Forbidden West cost $212 million to develop over a five-year period, and its 2020 hit The Last of Us Part II cost around $220 million to make.
What's happening: Those normally closely held figures came to light via a poorly redacted legal filing that’s part of the FTC’s lawsuit to block Microsoft’s bid for Activision.
Why it matters: Development budgets, which are typically industry secrets, are generally said to be skyrocketing for marquee games — and these numbers confirm the trend toward massive Hollywood-style spending.
Details: The veil of secrecy applied to a declaration from Sony PlayStation chief Jim Ryan in the FTC case wasn’t sufficiently opaque.
- Some words and stats in the declaration were redacted by what appeared to be marker, leaving the underlying text somewhat readable.
- The Sony filing also included unsuccessful redactions of the Horizon game’s development timeframe (five years) and number of full-time staff (over 300).
- The Last of Us Part II had around 200 employees working on the game, according to the filing.
- Sony had previously touted huge sales for both games: 8.4 million for Horizon as of May, 10 million for Last of Us Part II as of last year.
Between the lines: Both games are sure to have been profitable, Wedbush analyst Michael Pachter and Cowen’s Doug Creutz tell Axios.
- Pachter pegs Sony’s profit on each at close to $300 million.
- His math includes cuts for marketing and physical retailers.
- It also helps that these are Sony-made games for a Sony console, so the game maker here doesn’t need to give the standard 30% cut to the platform holder. Economics for blockbusters, in other words, favor first-party games.
The big picture: Blockbuster game budgets rival production costs for Hollywood films, which can run $200 million, both analysts say.
- Within gaming, the increasing costs have triggered some anxiety about the risks that surround such expensive projects.
- Former PlayStation studios chief Shawn Layden said in 2020 that rising development costs are not sustainable for the size of the market.
- Layden has called for, among other things, shorter big-budget games that cost less to make.
The intrigue: It’s not clear who to blame (or thank) for the poor redaction work that led to this rare moment of game industry transparency.
- While the declaration — and requests to the court to seal (read: redact) part of it — came from Sony, the file had been entered into the case by Microsoft.
2. New revelations from FTC vs. Microsoft
The main event: Microsoft and FTC lawyers continued to spar in the final three days of hearings over a possible preliminary injunction against Microsoft’s bid for Activision. Their disagreement, no surprise, was largely over if Microsoft would take Call of Duty exclusive after buying Activision Blizzard and if that would hurt consumers.
- Microsoft CEO Satya Nadella testified “100%” commitment to keep CoD on PlayStation and Microsoft CFO Amy Hood stated making CoD Xbox-only was “never assessed or discussed with me."
- But the economist retained by the FTC said his models predict Microsoft will be incentivized to pull the popular series from PlayStation, harming consumers in the process via risks of increased prices and diminished industry investment by a financially wounded Sony.
The emails: In pre-recorded testimony, PlayStation's Ryan blamed an August 2022 email from Xbox chief Phil Spencer for making him anxious about a deal he initially said was “not an exclusivity play” and took in stride.
- That August note includes assurances from Spencer that new versions of Call of Duty would come to PlayStation through late 2027 with feature parity and no timed exclusivity, seemingly all things Ryan wanted.
- But Spencer raised concerns about “principles” set out in a May 26 email from Ryan. Reading back, Spencer had said in a May 23 email that Ryan had been proposing “some unusual terms” that it wanted Microsoft to agree to as part of its Call of Duty commitment (the terms are redacted, so the nature of the impasse is unclear).
Exhibit K: The 2019 email from Xbox studios chief Matt Booty, known to Axios Gaming readers and others as “Exhibit K” in the so-called gamer lawsuit against the deal, was finally released, with Booty saying, regarding potential content acquisitions, "We [Microsoft] are in a very unique position to be able to go spend Sony out of business.” A Microsoft rep told Axios the note “refers to industry trends we never pursued.”
The sideshows:
- One trial exhibit shows that, in 2019, Xbox officials considered trying to buy Final Fantasy-maker Square Enix and in 2020 requested approval from the company’s CEO and CFO to try to acquire Sonic the Hedgehog maker Sega.
- Another juicy exhibit: A late 2021 Xbox Game Studios mergers and acquisitions pipeline review identified Bungie (Destiny) and Supergiant Games (Hades) as top acquisition targets in console and PC, and Zynga (Words With Friends) and Niantic (Pokémon Go) as some of its top targets in mobile. The document, which included blunt risk assessments of dozens of studios — a “high burn-rate” at Bungie, for example — was later reissued with heavy redactions obscuring all of that.
What’s next: Closing arguments for the preliminary injunction hearings are set for late Thursday.
- A ruling by Judge Jacqueline Scott Corley could come next week.
- Microsoft has said that a ruling for the FTC will kill the deal, an assessment concurred by Activision Blizzard CEO Bobby Kotick on the witness stand Wednesday.
3. Sony’s Roblox regret
An excess of caution about kids’ experiences on PlayStation is the reason for Roblox’s absence from the platform, PlayStation chief Jim Ryan told investors in early 2022, according to yet another exhibit from the FTC trial.
Why it matters: Roblox, a platform on which users create their own games that others can start playing for free, is available and popular on phones, computers and Microsoft’s Xbox, but it’s not on PlayStation.
- Roblox says it has 66 million daily active users across scores of games and experiences on the platform, with nearly half of its users under 13.
- Experiences on the free-to-play platform can encourage kids to spend Robux, a virtual currency purchased with real money, to have a better time.
What they’re saying: “Historically, because of the large number of children that play on the PlayStation, we have been very careful with regards to opening them up to anything that could potentially exploit them,” Ryan said when asked about the app’s absence.
- “Over the last couple of years, however, we have reviewed those policies and relaxed a little on this.
- “We have been conservative for too long, and now we are currently engaging with people at Roblox. We hope that the situation will change.”
Yes, but: More than a year later, Roblox still isn’t on PlayStation.
- A May 2022 Roblox job listing for a PlayStation engineer hinted that a PlayStation version of the app might be in the works.
- A Roblox rep declined to comment to Axios about this.
4. Drivers wanted
American Truck Simulator. Screenshot: SCS Software
A major trucking company is advertising for long-haulers in a video game, with the theory that the game, American Truck Simulator, might breed good drivers.
Driving the news: Schneider National began running in-game ads across six in-game billboards in American Truck Simulator this spring.
- The game, released in 2016 by SCS Software and regularly updated since then, allows players to drive authentic big rigs across the U.S.
What they’re saying: “We think that people who like the game, might like the real thing and want to drive with us,” Kara Leiterman, a media relations manager for Schneider, told Axios.
- The company got the idea to advertise after discovering that some of the drivers in their training program who received a commercial drivers license “showed skils above their experience level,” Leiterman said.
- “They credited their learning to the video game American Truck Simulator.”
Between the lines: Leiterman says it is too early to say if the ads are working but that the company is “optimistic.”
5. Need to know
🤔 Ubisoft has announced its first blockchain game, one of the first from a traditional publisher. Champions Tactics Grimoria Chronicles is an upcoming tactical role-playing game for PC, though Ubisoft hasn’t detailed how it will use blockchain features.
⚔️ Final Fantasy XVI sold 3 million copies in its first three days of release on the PlayStation 5, according to publisher SquareEnix, a little short of the 3.5 million sold of the last major release in the series, 2020’s Final Fantasy 7 Remake, which debuted on the PlayStation 4.
🏆 The Legend of Zelda: Tears of the Kingdom was the best-selling game in the U.S. for the month of May, according to Circana (formerly NPD). And that’s without factoring in digital sales, which Nintendo does not share with the firm.
- Spending on gaming content, hardware and accessories reached $4.1 billion for the month, up 12% from the prior year.
💰 Honkai: Star Rail, the newest game from Genshin Impact makers MiHoYo, has generated $355 million in consumer spending since its April launch on mobile and PC, according to Sensor Tower. It's launching on PlayStation later this year.
📺 Among Us, the multiplayer hit from Innersloth, is getting an animated series through CBS Studios, Variety reports.
🎮 EA CEO Andrew Wilson made nearly $21 million last year, according to the publisher’s annual filing. That’s a million up from the year before but lower than his 2021 haul of $39 million that fueled a shareholder revolt.
☹️ Several game studios have laid off workers in the past week: Hi-Rez Studios, Scavengers, Niantic and EA’s BioWare after a transfer of development of its Star Wars: The Old Republic online game to an outside studio.
👀 The online version of E3 in 2021 cost at least $6 million to operate, according to an IGN review of the Entertainment Software Association’s financial filings. The ESA is funded by its member publishers and through fees to rate games.
- One ESA member, Activision Blizzard, reported annual membership fees in excess of $700,000, used for lobbying and political contributions.
6. The week ahead
Crime O'Clock. Screenshot: Badseed
Note: A compressed calendar this week to reflect the light upcoming release slate.
Friday, June 30
- Everybody 1-2-Switch (Switch), Crime O’Clock (PC, Switch) and Ghost Trick: Phantom Detective (PC, console) are released.
Saturday-Wednesday, July 1-5
- Quiet days.
Thursday, July 6
- Gylt (PC, PlayStation, Xbox; formerly a Stadia exclusive) is released.
Friday, July 7
- The Legend of Heroes: Trails Into Reverie (PlayStation, Switch) is released.
7. I played ... Untitled Goose Game
Untitled Goose Game. Screenshot: House House
My kids and I finally tried House House’s comedic 2019 release Untitled Goose Game (2 hours played on Switch, also on PC, PlayStation, Xbox, mobile).
Quick take: A fun but surprisingly challenging mischief simulator. Not sure it’s wise to put a game with a dedicated “honk” button in the hands of a 6-year-old.
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🐦 Find me on Twitter: @stephentotilo.
Thank you to Scott Rosenberg for editing and Kathie Bozanich for copy editing this newsletter.
Lots of games about honking today.
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