Game Engines: A Widening Opportunity
The video game industry has gone through immense change over the past couple of decades; one outlier though is the game engine market. A game engine is a software framework that is used to build and create video games. This includes a few core components: game logic, 3D rendering, audio algorithms, physics engine, and artificial intelligence. Game creators typically re-use these engines and components to create new games, making a game engine increasingly valuable over time.
In the landscape of gaming engines, Unreal Engine (launched in 1998) and Unity (released in 2005) have come to be the dominant players. Unity geared itself towards mobile game development and gained traction and market share with the rise of smartphone pervasiveness. Unreal has always positioned itself towards more demanding games such as Fortnite or Borderlands.
While these two are dominant, there are many other players in this market (showcased below):
Technology, of course, has changed significantly over the past two decades and it's not clear that these two incumbents have kept up to date. Game developers are pushing the boundaries of these engines that are anchored in the technology paradigms of a decade (or two) ago.
These engines are not taking advantage of the technology advancements that exist today, let alone the ones that will be here tomorrow. They are also not prepared for the demands of gamers and studios in the future, where developers want to build massively resource-intensive systems and deliver those experiences through cloud gaming to larger audiences.
Unity and Unreal are still the main players in the market and we don't think that will change in the near term. But we are starting to think more deeply about how the engine market could shift over a longer horizon. We believe cracks have already started to show and that there may be an opportunity in the space. We'll keep you posted.
The Next Gaming Powerhouse: Facebook
This week, Facebook acquired cloud gaming service PlayGiga for a reported $78M. The term "Cloud Gaming" has been thrown around a lot this year and the majority of talk has revolved around Google Stadia. Stadia officially launched in November and according to Forbes, was a "technical, conceptual disaster." A big issue outside of the technical issues it currently has is that it doesn't seem like gamers want a new console - which could be even better for cloud gaming enthusiasts.
Facebook already has billions of users, is one of the top 3 game streaming services, is right in the middle of the "streaming wars" and their acquisition of PlayGiga showcases their continued intention of being a major player in the next iteration of gaming.
What's significant about cloud gaming is that it will eventually negate the need for powerful consumer hardware. This allows some services to create a complete gaming ecosystem directly in the browser or mobile app. With this acquisition of PlayGiga comes over 300 titles to pair with Facebook’s massive user base and continually accelerating gaming arm: Facebook Gaming.
Facebook is positioning itself to be a leader in the future of gaming. It’s working.