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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Browsers: An Answer to Walled Gardens

Browsers offer a future for game developers that would give mobile and PC developers the ability to circumvent any and all walled gardens

Browsers: Solving the Walled Garden Problem

Arguably the most important topic over the next few years in gaming is the fate of walled gardens. Companies like Apple and Roblox have become market leaders by owning the platform which hosts content built by third-party developers for end users to consume. By providing a valuable distribution channel with a captive audience, they are able to take sizable revenue shares while maintaining tight control over the content housed on their platforms.

While this strategy has created some of the most profitable gaming businesses for the likes of Apple, Google, Microsoft, Sony, and Nintendo, this “walled garden” model has recently come under more public scrutiny. Generally speaking, the arguments against these closed ecosystems boil down to antitrust practices (see: Epic Games v Apple in August 2020).

For added context, the antitrust debate has officially restarted in the courts with 35 states, Microsoft, the Electronic Frontier Foundation, and other groups filing amicus briefs in support of Epic’s argument that Apple’s App Store policies are inherently anticompetitive. These court hearings recently began on November 14, 2022 (Techcrunch). Another important legal case is the recent litigation by the FTC to stop Microsoft's $68.7b acquisition of Activision Blizzard. The FTC is trying to argue that the acquisition would “enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.” (The Verge)

To briefly state our opinion on both examples above: 1) we believe that Apple is not a monopoly, yet Epic has every right to advocate for lower fees; and 2) we view the FTC’s objection to the Microsoft / ATVI acquisition as incredibly weak (if not totally off-base), as it hinges on what Microsoft might become versus what the business is actively achieving today. The FTC needs to drop the pursuit of the theoretical threat, as that is a dangerous precedent to set for the future of private commerce.

However, coming back to the main topic of this note, our team at Konvoy does not believe that the future of walled gardens will be determined by court rules. Rather, it will be primarily resolved by true business model innovation and product feature enhancements.

The Future of Gaming on Browsers

We believe that browsers offer the most opportunities for companies to circumvent walled platforms. Very few businesses have the ability to launch their own distribution platforms (like Epic Games or Activision Blizzard did to combat Steam on PC). When it comes to mobile, it is essentially impossible to launch your own app store given the restrictions set by the Apple Store.

From our perspective, there is a legitimate opportunity - if done well - for browsers to be the de facto channel for distributing and playing games on any device. One of the most compelling drivers for this is the fact that browsers have the potential to benefit both developers and players.

Benefits for Developers:

Direct To Consumer: Outside of the biggest AAA publishers, selling games and in-app purchases (IAPs) directly to your players through your own distribution platform is not financially viable. It requires a heavy technical lift and a marketing budget that most developers cannot afford in addition to their other operating expenses. When considering distribution for an individual title, it does not make sense to tell your players to download another new platform or launcher just to play.

When it comes to reaching the most users possible, you need to be where they already are. This has forced developers to release on platforms like Steam or the Apple App Store. The browser fixes this because developers can sell games directly to their players without the need for downloading new software.

WebGPU: The future of WebGPU, WebGL’s successor, is promising and will enable webpages to use the underlying system’s GPU to perform computations and draw complex images that can be presented on web pages (GPUWeb). In theory, this should give developers the ability to leverage the browser as a game launcher without the need for unnecessary downloads or launching on a pre-existing platform. At maturity, this would give mobile and PC developers the ability to circumvent any and all walled gardens.

Benefits for Consumers:

Access: Browsers also make it easier for users to access different games. If a developer builds a title that is compatible with mobile browsers, it can be accessed on any phone that supports that browser (instead of needing to build for each operating system). With time, as more games are built for the web, users will have a wider library of content they can play as long as they have access to a browser.

Cost Savings: Without the need to pay platform fees, developers could sell games and IAPs for less now that they are not required to pay a 30% fee. For example, developers could cut all of their costs by 15% and still make 15% more than they were within a walled garden while their players also save 15%.

Takeaway: Browsers offer a future for game developers that would give mobile and PC developers the ability to circumvent any and all walled gardens. With technological advancements in browser technology, browsers could be the ecosystem of the future for games and app access. While legal contention is currently trying to wrestle with the status quo of walled gardens, we believe that there may be a quickly emerging solution that will benefit both consumers and developers: the browser.