American Game Development Has Never Been Stronger
It's just that our supply chain location has transformed. Epic's recent layoffs don't change that, although it is a blow to one of our shining stars.
I've seen a couple of posts about it online and messages about on Joost van Dreunen's recent Substack piece, "Epic decline". He writes:
"One major contributor now showing its true impact is the encroaching, disproportionate power wielded by platform holders. Over the ten years leading up to 2025, platform revenue, from app stores, console marketplaces, and digital storefronts, jumped from $14 billion to $41 billion, a 191 percent increase. By comparison, game publishers saw their revenue rise from $65 billion to $128 billion, a more modest 98 percent increase."
And cites Roblox's unprofitability (?) as a case example. In fact, so much of that data point is driven by Roblox's growth, one of the few examples we can cite. Roblox is certainly raising its rates and is no open platform (sorry, metaversers), but that's the fee to fuel this growth. The fact that they're unprofitable is merely evidence of their own reinvestment, which they spend an enormous amount on both infrastructure and paying developers.
It's certainly true that if players age up and stay on the platform, Roblox will capture an increasing share of the gaming LTV, but recently it's been on the decline. Bad for platform power!
The more significant reduction has been the introduction of web stores and alternative PC platforms. Remember, even Valve ceded ground, implementing a reverse marginal tax to combat EA Play and UPlay (the only time anyone's written threateningly about either of those products).
Google and Apple have been beaten back in many countries, and D2G is already 25% of revenue for many firms, sometimes more. Even just a 5% pp shave in platform fee is significant! However, that mostly gets reinvested at equilibrium back into marketing. Marginal propensity for marketing or something of the sort. Yet, the companies best positioned to capture this are American firms like Apple, Meta, Applovin, and soon Roblox, with all its new ad tools. Not to mention Discord, Twitch, and one day, Valve.
Cost is cited as a reason for the stunted growth of American development, with NetEase recently pulling back and even closing a NA-based Marvel Rivals studio. On the other hand, that reality is that cost is driven by American comparative advantage wages. The AI boom revitalized San Francisco, and OpenAI recently closed what is reportedly the biggest round ever.
At the top of all value chains sit platforms because they can maximize economic rent and, by virtue of their scale, capture a % of the ecosystem. Advertising platforms are the biggest, but remember this also includes dominate American engine firms like Unity and Unreal. Where will the inevitable future AI-driven game development platform emerge? I take a large bet on the US.
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