When I wrote, Economics of Battle Pass Are Broken. Let’s Fix It in 2021; I argued that designers needed to play with ADMC (average daily monetization cap) to transform the pass from an engagement to a monetization vertical. Since then, every subsequent “innovation” has been a creative exercise in price increases.
Fortnite realized this long ago, which is why the direct store has ballooned in content and uses “the vault” to sell past pass-specific content; the 67% direct store, 33% battle pass revenue split leaked from the 2012 Epic v. Apple trial likely skews harder direct store since.
Does a new Call of Duty map generate superior engagement compared to a new weapon? Which drives higher retentive effects: a new Magic The Gathering or Marvel Snap card?
Call of Duty Black Ops 6 achieved the strongest paid Steam launch in franchise history. The franchise’s metamorphosis—from a modest war game that moved 5M units in 2003 to a cultural juggernaut shipping 20-30M copies yearly—is far more fascinating than marketing prowess—it’s a masterclass in industrial execution.
Like a Robber Baron Industrialist who strikes oil, Activision CEO Bobby Kotick’s primary innovation wasn’t in the product but in perfecting its extraction. The cascading studio system—a production architecture where three lead studios operate on offset three-year cycles—proved to be his equivalent of hydraulic fracking. Much less than “satiate” demand with an onslaught of entries, the annual releases grew demand.
Electronic Arts waited years before implementing strong support studios for Battlefield (and Apex!), and the cascading studio approach lived and died with Battlefield Hardline. The Battlefield franchise is a cautionary tale of hesitation, with Battlefield 1’s 21M copies the only time it outdid Call of Duty.
Kotick’s end-game is clear with Black Ops 6, as pieces coalesced around Modern Warfare III: horizontal and vertical franchise integration. Like Battlefield, players gravitate toward particular theaters of war, leaving them spread across different, non-monetizing franchise entries. A unified engine and single-app experience integrate the cascading model into a singular production line. This horizontal and vertical integration serves as another weapon in the Call of Duty “platform,” now functioning as a distribution center for diverse experiences: single-player campaigns, arena multiplayer, battle royale, extraction missions, and zombies—each feeding the central revenue stream.
As the game expanded, it doubled on the RPG foundations laid by Infinity Ward in 2007 to power each engagement pillar. Modern Warfare II “pro-tuning” created an almost infinite weapon permutations. Each annual entry embodied the “evolution, not revolution” mentality. However, consistent change, even if small, over many entries leaves a title nearly unrecognizable from its first entry.
Like Henry Ford’s production lines, Call of Duty has become gaming’s most robust engine—reliable, refined, and ruthlessly efficient—an anti-Ubisoft. While competitors chased innovation, Kotick proved that economies of scale are another path to dominance. While others hunted for the next breakthrough, Kotick built something far more valuable: a perpetual motion machine for manufacturing recurring revenue.
Ever wonder what Darude does on a Wednesday night?
1. Distribution
The mobile “meta” is getting games in players’ hands post-ATT. The unintended consequences of Apple’s destruction of mobile acquisitions haven’t been to regain distribution control but for firms to find alternatives. “Content Fortress” ad networks, messenger apps, fake ads becoming white-lie ads, web stores, a return to brand marketing angles, and yes, web3, are all in play.
2. Distribution
See above.
3. Distribution
See above.
Joining the chorus of voices-heaping praise, Play Ventures put on a fantastic three days. Incredible event staff, an excellent venue, beautiful weather, intriguing conversations (shout out to Arya‘s team for a great fireside chat and interesting thesis), two Anton Backman jokes I’ll never forget, and sauna, of course.
FYI, it’s never seems to be “a sauna” or “the sauna,” just a “sauna” reminding everyone that this is an institution.
In tech writer Ben Thompson’s infamous aggregation theory, economic power derives from supply ownership—train barons owned the track and leveraged that power up and down the supply chain. The internet flipped the relationship: with near zero switching and distribution costs, suppliers instead aggregated user demand to leverage suppliers. Consider Amazon: aggregating millions of customers gained power over suppliers, compelling them to compete on its platform and play by its rules. In a post-ATT and “black hole games” world, gaming unwittingly embraced this dictionary, and distribution has become all-powerful.
Previously, games saw a lite version of aggregation theory, as platform owners like Sony and Microsoft owned the track (and thus users), allowing them to set the game’s rules. But something funny happened: cross-play, progression, and commerce crumbled console platform power as Epic leveraged Fortnite’s popularity to insert itself between platforms. Roblox grew so powerful that it bent Apple’s will, which granted it a “game-within-games” App Store exception. Roblox’s MAU nearly exceeds all game platforms combined, while Fortnite console MAU ranks first monthly. This consolidation of player bases has dramatically shifted the balance of power. The conquest continues, with Sony now allowing Discord voice chat integration on PlayStation consoles. This was unthinkable ten years ago!
Strong platforms exploit their position in and outside of games. Early MCU actors like Chris Hemsworth and Chris Evans were paid in the low nine figures on the notion that their careers would take off afterward. Marvel’s power came from massive distribution, reflected in these economic relationships. The same thing almost happened at last year’s Super Bowl: Artists who performed at half-time would pay the NFL instead of vice versa. While the NFL backed away, it’s another example of contracting battle lines being redrawn.
Roblox has succeeded in this for the last couple of years, and Look North World’s (LNW) Gundam deal signals it starting on Fortnite. Meanwhile, the Lego and Disney deals amount to Epic paying for the privilege of player access. While Gamefam and LNW pay for licensing, Epic, and Roblox pay nothing. Instead, they benefit from the engagement uplift and revenue share from in-game items, while brands access hard-to-reach audiences and enjoy adjacent brand monetization (toys, etc). The next question is when other large games like Brawl Stars and Call of Duty will extract terms from licensors given their 150m+ MAU (nearly half the size of the U.S.).
However, growth in these mega-platforms is showing signs of deceleration. Roblox’s growth has been essentially tier three, while Fortnite’s MAU has regressed, much less grown.
Ultimately, the next phase of gaming’s evolution will test the limits of aggregation theory. Success will depend on platforms’ ability to amass players and exploit their economic power.
At the Eras Tour in Stockholm, my thoughts naturally turned to Ms. Swift’s untapped monetization potential. Despite her billionaire status, she’s barely scratched the surface. By embracing “Taylor’s Version” labeling, Era-specific merch, and friendship bracelet culture, Swift could double her “extras” ARPPU from $50 to $100. 1
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