A lot is wrong with the games industry, if you haven’t noticed, and a lot of its issues can be traced back to the same place: studio executives prioritizing the shareholders at the reins of publicly traded companies. Indie giant Devolver Digital, which went public in November 2021 and has seen its share value nosedive since, is the latest company to learn this firsthand.
Devolver plans to go private again, and its reasoning offers a clear and timely explanation of how shareholders hobble, hollow out, and otherwise hurt companies, and especially game companies.
An announcement posted to Devolver Digital’s investor relations page confirms that the company has proposed to be delisted from the UK’s AIM market. The proposition will be voted on at a September 8 general meeting.
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But it’s the “Reasons for the Cancellation” that really stand out. Devolver went public on the back of, among other games, Fall Guys, an enormous hit that injected a ton of cash into the company. “Since then,” Devolver says today, “the global video games industry has undergone a period of significant disruption and volatility, characterised by widespread layoffs for studios and publishers, platform rationalisation and substantial impairments across the industry.”
Devolver’s directors also “believe that the Company’s share price does not reflect the true market value of the Company and that the stock market has not rewarded the Company” for its successes.
But it’s not just rough times that drove Devolver to this decision, though the company says it does stand to save about $1.6 million annually by going private. Devolver quietly spells out how the shape of a publicly traded company conflicts with the needs of games and the people who make them, indirectly explaining how games further clash with the inherent toxicity of any business model built around securing infinite growth in a world of finite resources.
For example, “As a publicly-quoted company, Devolver has faced the ongoing challenge of delivering growth in line with market expectations despite those difficult sector conditions, resulting in a valuation disconnect that does not take account of the lifetime and long-tail revenue delivery inherent in the video games business.”
This reads like a very nice way of saying that shareholders want their money, and they want it fast. The problem is that games are not fast, and if you try to make them fast, they probably won’t be very good.
On this point, Devolver says the nature of video game development butts heads with constant demands for growth.
“Development timelines can be unpredictable, and, as a result, financial performance can vary significantly between reporting periods and may not follow a linear progression,” it says. Again, you can’t ship massive, revenue-boosting hits every three months.
“The Board feel this irregularity has not been readily compatible with the requirements of the market for semi-annual reporting with an emphasis on predictable, sequential growth,” Devolver adds.
It’s when math isn’t meeting shareholder demands that corners tend to get cut. Make no mistake: shareholder expectations are a primary factor in a lot of obviously unfinished games being released (to squeeze into a fiscal target) or in developers being laid off (to reduce reported costs, even after a successful launch).
Abolishing shareholders (and private equity) would not instantly solve all of the games industry’s problems, but if you size up all those problems, you’ll find that many distributaries come from this river. Several publicly traded game companies have, of course, found success, but behind them is a graveyard of companies and games that were ground to bits trying to get a line to meet arbitrary milestones. Devolver’s bid to go private is one of the best summaries I’ve seen of the situation in some time.
Here’s a key line from Devolver that seems to echo the threat of cut corners: “Consequently, the Company has at times faced increased pressure to deliver short-term market expectations that do not necessarily reflect the underlying long-term value creation potential of its portfolio and development pipeline.” (This is also where enshittification comes from: squeezing more money out of the same stuff by sacrificing quality or displacing values.)
A Devolver spokesperson minced no words in a comment to GamesIndustry: “Being private will allow the Devolver Digital team, especially the finance, legal, and executive team, to singularly focus on the long-term health of the company and less on satisfying the requirements of the public market, which have nothing to do with being a successful game publisher.”