After four days, Palworld, an early-access survivor game described as “Pokemon with guns,” grossed ~$108M over three days en route to the 2nd highest concurrent player count for a paid title on Steam. It’s an outstanding success for Pocket Pair, a 50-person Japanese team with $7m raised. But like early access hits Valhiem, Battlebit, and Temtem before it, an inability to quickly deploy capital hampers compounding return. Instead of these titles having their best days to look forward to, they’re in the rear-view mirror, the equivalent of peaking in high school, but this time, you get millions in cash for the ordeal. Teams should follow the Kikta Studio model: prove a trajectory and let someone else build the bow. When founders sell games, they retain control of their destiny and find themselves newly rich with modelable capital, allowing games to grow into their best selves.
Despite explosive early access launches, Valhiem and Battlebit grew back to as little as 55% of their early access peaks, while Temtem managed 10,000 players for global launch. 4 to 50 studio headcount support the games, compared to 400-800 devoted to Candy Crush alone, a count common among top live service titles, including Apex (4+ support studios) and Rainbow 6: Siege (Ubi Montreal: 4,000 employees). Even with lucrative venture deals, capital takes time to be deployed, given early studio maturity. It’s much easier to grow 100 headcount of 1,000 employees than to grow 10 headcount of 100 employees. At the very least, full-title sales outweigh marginal costs, allowing the title to become a “lifestyle” business that founders indefinitely chip away at. Likewise, No Man’s Sky delivered an impressive roadmap for a single-player title, enough to support a moderate margin for 50 headcount studio.
We don’t yet understand the headcount to support a live-service survival crafting game. It’s unclear how “productive” content is in buying units of retention from players. Millions of players will see the inaccessibility of choosing a resetting server for 30 days or more in 2024 – there’s a reason top Steam survival games Rust and Ark have yet to scale to consoles meaningfully.
Blizzard should be all smiles, given their announced genre entry. Survival-crafting accruing breakout after breakout; where there’s smoke, there’s fire. Palworld seemed to discover the trojan horse: Pokémon. Boy, players really want a Pokémon MMO, as Temtem and now Palworld remind us.
However, it’s a conversion funnel, and Palworld’s most valuable contribution is wild marketing assets at the top. Focus groups must have gone crazy when a researcher put an AK-47 in Pikachu’s hand. The trailers didn’t disappoint either, with one memorable scene demoing Pichu’s assembling M-16 rifles. The next part of that funnel is the difficulty of converting early hype into lasting retention. Palworld will need more capital to get there.