The Xbox Game Pass and PlayStation Plus subscription services are one of the great highlights of this generation. Indies in particular have been taking advantage of this new trend, but it seems not to have been profitable for everyone.
After its peak of business in 2021, Devolver has seen its stock drop 92% since then, while TinyBuild's are down 95%, very worrying numbers for both companies.
Patrick O'Donnell, technology and video game analyst at Goodbody, commented:
We've seen from Devolver and TinyBuild that the subscription is under pressure right now. The checks coming in from Sony and Microsoft aren't as big as they once were. And that creates problems if you are focused on that side of the market.
In addition to some deals with lower than expected values, Devolver would still have been affected by several postponements of its future projects, which had the date changed from 2023 to 2024.
Despite the problems, O'Donnell believes that Devolver still has the potential to turn around, coming with a strong catalog of games and having turned down some signature.
You have to look at the caliber of Devolver. The track record and quality of their products is almost always good. They have that success-driven potential, which they've demonstrated time and time again. This will be one of the key factors that will keep investors in Devolver. Ultimately they are protecting their intellectual property. They mentioned that they turned down some big signing deals. And in 2024, Devolver will have the next Human: Fall Flat. The numbers for the first edition were impressive.
As for TinyBuild, the situation does not look so promising, due to the disappointing commercial performance of Hello Neighbor 2. studio will now start betting on premium releases.
The first game looked like the start of a decent franchise and so all eyes were on the second in December 2022. Steam data show it didn't do well at all.
Now TinyBuild is talking about moving into more premium, full-priced games, and that's a risk in terms of how they execute that in a challenging third-party publishing sphere.
Both TinyBuild and Devolver are very cheap stock and there is a potential takeover scenario here. There are a number of strategic investors in your business. Both have Netease as investors, and Sony is an investor in Devolver. These investors could seek to acquire these businesses and take them out of the market. Some in the market expect this around TinyBuild as many of the investors have already left.