Nacon exec says industry's problem is "too many games"

The industry is starting 2024 in much the same way as it spent most of 2023, with news of layoffs and "for sale" signs and closures arriving alongside charts showing modest sales growth for the industry.

Speaking with GamesIndustry.biz before the holiday break, Nacon head of publishing Benoit Clerc acknowledges the frequency of setbacks coming alongside less-than-dire news for the industry, and points to a specific culprit for the seeming mismatch in events.

"There are too many games currently on the market," Clerc says. "We're seeing today the results of investment made after [COVID] when the market was bursting, and every game was making a lot of money so there were a lot of investments being made. This is two or three years after that, so the games we're seeing now on the market were financed in that time and there are simply too many for customers to be able to play them.

"When you look at Steam some days, there are 50 or 60 games released in one day only so it's more difficult to get enough traction to expose a game. We're seeing releases that are without a day one, to use the old retail expression, without any exposure of a title that has been properly marketed."

The key for publishers now is to have a strong positioning for each game being released, Clerc says. He points to Nacon's November release of Robocop: Rogue City as an ideal example of what a game might have – "a big mainstream brand with a product that is super high quality" – in order to reach its target audience.

As a mid-tier publisher, Nacon can't compete head-to-head with AAA blockbusters, Clerc acknowledges. But if the company can effectively reach audiences in a niche that isn't being fully served by the AAA set, the company had an opportunity to succeed.

"I'm not spending $200 million on promotion, so I need to target gamers that have a passion and expertise for off-road racing when I'm doing WRC, that have an expertise in rogue-like games when I'm doing Ravenswatch, or that have an expertise in sports games when I'm doing Cricket 24. They know the sport and game mechanics very well, and I need developers in front of that who have the same expertise and share the same passion in order for those two groups to talk together."

A niche audience also has to be appropriately sized to accommodate the amount of competition going after them, with Clerc saying he wouldn't feel great if he were trying to launch a handful of deckbuilding games in today's market.

"You're in a different situation in the market currently when you have games that have nothing super specific to say to a specific group of gamers," Clerc adds.

Of course, one thing we've seen in the past when there's an abundance of competition for a market is that pressure mounts to increase production values and budgets as companies decide throwing money on the screen is a helpful way to stand out from the crowd.

"We do need to invest more than we did in the past, like any other mid-tier publisher"Benoit Clerc

Clerc says there's still a long way to go before Nacon's budgets would come anywhere close to AAA, but he adds there's definitely an escalation of investment going on even when you're looking to serve a niche.

"There is indeed pressure from the market because the standards in terms of production values, length of experience and knowledge of our medium from customers are going up," Clerc says. "And our medium is waiting for innovation, so we do need to invest more than we did in the past, like any other mid-tier publisher."

The Lord of the Rings: Gollum may have been a product of that pressure, as it was an example of the game's developer – Nacon subsidiary Daedalic – aiming for a more mainstream audience than it was used to.

It didn't go well, with the team releasing an apology statement for "the underwhelming experience" of the game shortly after launch and halting its internal game development operations shortly afterwards.

Clerc acknowledges that Nacon had a "difficult time" with Gollum, but stresses that an organization often learns more from its failures than its successes because people spend more time reflecting on them, and Nacon has been doing that with Gollum.

"When you take a hit like the one with Gollum, you learn quicker," he says. "And we have updated our processes and the way we organize ourselves as a publishing company with our developers to avoid going through such a story in the future.

"When you take a hit like the one with Gollum, you learn quicker."Benoit Clerc

"But those are small steps that have been made since the beginning of Nacon as a publisher, so I don't think there's a super takeaway we've discovered through the Gollum experience. This is an ongoing iteration of feedback and learnings."

Escalating budgets isn't the only industry trend Nacon has been part of. The company has also been adding to the consolidation we've seen throughout the industry, acquiring 16 studios in the past four years. And while that expansion hasn't turned out great for a number of parties, Clerc says integrating those additions into Nacon has been "quite smooth" to this point.

"We did not try at the beginning to get a very centralized vertical process with the headquarters deciding everything," Clerc explains. "We know in our industry that the studios are the authors, just like for novels or comic books. They are the creative entity. And I need to respect the fact that creativity is coming from them, not from me.

"My goal as the publisher is to create the link from their creativity and talent and making the link between that and the market, to be sure that their creativity will meet with the widest audience possible. That's what my job is about, not being involved in the real creative process. I think this is where we are different from the major [publishers] in our industry. We give a lot of creative freedom to our developers."

And while Clerc says the company feels no urgency to keep acquiring studios, "our antennas are deployed" to see if there options out there that would fit the company's strategy for going after niches.

Nacon on the periphery

That's all about the software side of Nacon though. The company is also a licensed peripheral maker, putting out controllers, headsets, keyboards, mice, arcade sticks, gaming chairs, and other accessories for PlayStation, Xbox, Switch, PC, and mobile platforms.

That's more the domain of Nacon USA president Jack Reynolds. Given that same assortment of product categories has been the norm for peripheral makers for about a decade now, we ask how much room there is in the accessory market for innovation.

"Each time there is a new platform... there are often feature unlocks or additions that we as a third-party try to exploitJack Reynolds

"From an outside-in perspective, to some a headset is a headset and a gamepad is a gamepad," Reynolds acknowledges. "But in reality, each time there is a new platform, like when we move from Xbox One to Series X|S or from PS4 to PS5, there are often feature unlocks or additions that we as a third-party try to exploit.

"That's certainly become the case with gamepads over the past several generations for sure. You could almost express it in the number of buttons and sheer customization, maybe not driven so much by new features of the platforms, but giving players new abilities to do things they would want to do that aren't provided by the first-party."

He notes the addition of controller shortcuts, programmable paddles on the back of pads, and triggers adjustable to different depths as significant innovations of the past decade.

"That's all fallen on third-parties like us," he says. "First-parties tend to try not to change the familiarity and the muscle memory of their products as they move through generations so the experience is the same, whereas our goal is absolutely to exploit; it's an arms race from our perspective."

While officially licensed accessories get the benefit of consumer confidence that they will live up to certain quality standards of the platform holders, Reynolds concedes that complying with those platform holders' conditions does constrain companies like Nacon at times.

"There are some things maybe we would like to do that we can't because of these restrictions, but on the net I think it's a better experience for the consumer in this model," he says. "So the downside, if any, is that this aspect of universality or universal compatibility becomes harder and harder as the platforms try to make themselves more differentiated and distinct from one another. It makes it difficult to design a product that would then work for both."

"As titles become more ubiquitous across platforms, I think there's an expectation in the consumer's mind that their gear would also be compatible"Jack Reynolds

This issue came up last fall when Microsoft updated its Xbox platforms to disable the use of certain unlicensed peripherals that allowed people to use PlayStation pads on Xbox systems. We ask if it's frustrating being beholden to such terms when Microsoft itself is publishing games like Cuphead and Ori and the Blind Forest on Nintendo's Switch, while Sony is happy to sell the MLB: The Show franchise on Xbox.

"As titles become more ubiquitous across platforms, I think there's an expectation in the consumer's mind that their gear would also be compatible," Reynolds says. "In some ways we move toward that, and in other ways the platforms don't allow that to happen.

"There's some frustration and complexity both to our development, but also to how we express and market it to the consumer. Sometimes we talk about the two platforms, blue and green, but obviously there are many more between Switch and PC, but the reality is if you're playing on a console, you're kind of living in the blue world or the green world, and we do our best to support both of those platforms as well as PC gamers."

Finally, we ask about the future of a peripherals business where much of the merchandise is sold through retailers like GameStop, which has struggled to adapt to an increasingly digital industry. If the industry's evolution puts those retailers at risk, how does that impact Nacon?

"This trend has been happening for quite some time, and it's maybe in its final stages," Reynolds says. "The expectation is for it to continue to move more digital and also more mobile."

He notes that many of Nacon's first contacts with customers comes through mobile platforms, and he believes marketing and customer support is increasingly going to become "a mobile-first discussion."

That said, he isn't writing an obituary for the brick-and-mortar business just yet.

"I don't think retail goes away," Reynolds says. "Its business model is just needing to change. And as we see a return to normal, to go back to the initial discussion about how the market has been growing and shrinking, it does feel flat right now over maybe [2022], but we often forget that we're still way elevated over pre-pandemic [numbers] as there is just more of a shift to home entertainment and gaming. The market is doing fantastically in historical terms for accessories and consoles and things related to gaming and PC gaming."

For Nacon then, the challenge is in evolving its products and communications to reach peripheral and game software audiences with the same voice.

"I think we're one of the few, if not only, full play organizations that does have both a publishing arm and accessories, and that offers us [an opportunity] to create some unique propositions for our consumers, and that's absolutely what's in store for our future," Reynolds says.