The Reverse-Blizzard Thesis

The reverse-Blizzard thesis has arrived. Firms like Blizzard, Supercell, Valve, and even Apple thrived on popularizing but not inventing mechanics and genres. Blizzard’s next fresh franchise, a survival crafting game, draws heavily from predecessors like Ark: Survival Evolved and Rust. Those titles failed to scale to mainstream adoption; if players need a server browser for play, it’s not ready for the mainstream. But both Supercell and Blizzard have struggled to scale their studios to meet modern content demands, and that’s left them open for a sort of reverse thesis: drop production values and win on the supply side. 

No game exemplifies this better than Path of Exile. Blizzard’s failure to establish and maintain a live-service team for Diablo III gave birth to Path of Exile, a game that recently reached an all-time high of 1.5 million DAU and is nearing a $100M run rate. To be clear: Diablo IV will far outgross Path of Exile, but it’s unclear if Diablo will win in the long run. And lest we not forget, Grinding Gear’s cost profile is likely half of Diablo’s team with a marketing budget that looks like a rounding error to Activision executives. While hero shooters outside of Overwatch (OW) and Rainbox 6: Seige died with Battleborn, Blizzard’s cancelation of OW’s PVE mode and the two-year content gap between OW 1 and 2 left blood in the water. Will upstart developers bite?

Netflix CEO Reed Hasting infamously claimed, “The goal is to become HBO faster than HBO can become us.” A similar paradigm is playing out between AAA developers (HBO) facing low-production values but high-content supply developers (Netflix). But unlike linear entertainment, AAA developers have been sharpening a secret weapon to swat away nibblers: UGC.

Fall Guys become an overnight success thanks to its fresh, accessible design and widespread PS+ distribution at launch. Never intended to be a live service, Mediatonic, the game’s developer, was compelled to build one in-flight. Over the last two years, the plane never reached sufficient altitude, and the reverse-Blizzard thesis reared its head in Stumble Guys. Scopley swooped in and ramped content, with rumors swirling the game is making some $30-$40m+ per month in ads alone. And don’t forget, on top of mobile; Stumble Guys maintains a cool 100k DAU on Steam. Mediatonic’s recently announced UGC mode for Fall Guys is their attempt to stem the tide of supply-side competition.

As Battlefield Portal, Halo’s repeatedly delayed Forge, and Fortnite Creative launched, these AAA developers must look to their next challenge: incorporating high-quality UGC content into the core experience. To ensure the success of the AAA UGC approach, UGC must not be viewed as a separate or “branded” experience but should be indistinguishable from first-party content. As always, Valve seems to hold the answers that the rest of the industry often overlooks. Perhaps this time, the industry will pay attention.

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