Happy new year! We hope you all enjoyed the holiday break as much as we did. 2020 was a wild, change-filled year, and we’re excited to move on and make 2021 Master the Meta’s best year yet. As always, thanks for being part of the journey.

Also, a quick reminder that we kicked off our referral program in the last issue. If you’re interested in joining Master the Meta’s Discord community and getting access to future Q&A sessions with the team, make sure to check out the referral section at the very bottom.

Now, here’s your weekly roundup and analysis of what’s happening in the video game industry…

#1: New Year, New Predictions (Part 1)

Read Future

Every year, dozens of industry prediction posts get published across the web, and this year is no different. Here are 10 common prediction themes that I (Aaron, here) find myself mostly agreeing with:

  • Nintendo will unveil the “Switch Pro,” which should help maintain the company’s near-term momentum.

  • Many AAA games will experience further delays as companies continue to grip with COVID/work-from-home realities. At the same time, many forward-thinking companies will find ways to maintain a distributed workforce.

  • Heavy M&A will continue. The largest companies crave growth and have billions in cash to deploy, and there’s little reason to think ongoing mobile consolidation, in particular, will fade away. Of course, as demand for deals grows and the number of available targets falls, prices will likely increase.

  • Expect more gaming-related IPOs. Plus, like we saw with Unity last year, more types of companies across the ecosystem (not just developers and publishers) will start trading publicly.

  • Everyone recognizes how important the Epic Games vs Apple case is but few think they know how it will unfold. However, as a common theme most people expect storefront tensions to continue, for companies to continue finding ways to bypass Apple/Google, and for Epic to continue innovating on alternative approaches.

  • The rise of social games like Among Us will lead to a bunch of copycats and hopefully fun, new social concepts this year.

  • Following the Call of Duty: Mobile playbook, publishers will continue to take popular PC/console franchises and take them to mobile.

  • Subscriptions won’t take over, but Xbox Game Pass will continue to grow its influence, and the EA Plays and Ubisoft+s of the world will continue striking deals with other platforms. In the long run, not everything will turn subscription, but Game Pass is likely to emerge as a widely popular aggregator.

  • Mobile esports should grow more prevalent and become more accepted in the West as games like League of Legends: Wild Rift release.

  • The Oculus Quest 2 will continue to lead the way in terms of VR headsets gaining traction, but there’s still a long way to go before VR goes mainstream. There’s still a chicken-and-egg (users-and-AAA experiences) problem.

Here are five of our own predictions that weren’t popularly talked about. Also, while year-specific predictions can be fun, it’s more interesting and impactful to look longer-term, because that’s where the most compounding and change occurs.

  • As we discussed in our Genshin Impact deep dive, AAA is coming to mobile, and cross-platform free-to-play games — currently spearhead by Chinese companies like miHoYo — will gradually steal market share.

  • Trends like VR, cloud gaming, and crypto-influenced games likely won’t break the status quo in 2021, but these frontiers are where many of the most important game design innovations, new incentive models, and rising communities will be found. Pay close attention.

  • Many public gaming companies will lose investor interest as post-lockdown comps get difficult. However, companies that meaningfully grow their pipelines and lock down impressive acquisitions should buck the trend.

  • I’m surprised it wasn’t mentioned more often in others’ predictions — since it feels obvious and Roblox is going public — but UGC platforms should continue to empower new types of creators and drive growth for many years to come.

  • Gaming and pop culture will continue to merge. 2020 accelerated this trend as athletes, sports leagues, and other content creators started streaming during lockdowns. Some of this will still occur, but as streaming services start releasing more shows based on video game IPs, more brands partner with Fortnite and Roblox, gamers like Ninja start voice acting, and tech/media titans invest more to grow their presence, the more video games will become a natural part of culture.

And guess what? This is Part 1. We’ll be back next week with more wide-ranging — and hopefully less obvious — predictions.

#2: Playtika Prepares to IPO


Playtika plans to go public very soon and raise $1.6 billion at nearly a $10 billion market cap. In preparation of IPOing, Playtika released its S-1 last December, and there are lots of interesting details. Playtika’s mission is “to entertain the world through infinite ways to play” and they realize it through “Technology and Data.” This translates into a company that:

    1. Acquires companies whose product portfolios have broad appeal and are very fertile for live operations driven growth (Jelly Button, Wooga, Seriously, Supertreat).

    2. Plugs them into the proprietary Playtika Boost Platform, a technology rich suite of 13 services centered around automating, monitoring, and optimizing various product design, user acquisition, and backend game operations.

    3. Increases portfolio longevity using this platform and through a highly data-driven live operations process.

New Game Acquisitions + Development

The above strategy has resulted in decent business growth over Q1-Q3 2020, which of course also experienced a COVID bump -

    • Revenues grew +28% to $1.8 billion

    • Daily active users grew +15% to 11.4M

    • Daily paying users grew +39% to 290K

    • Average daily payer conversion grew +19% to 2.5%

    • Average revenue per daily active user grew +12% to $0.57

Given the above, Playtika has three notable future growth opportunities. However, it is also here where various business risks start to emerge:

#1 Continued portfolio revenue and MAU growth: Playtika has a proven track record in using its technology and processes to grow game revenues over multiple years. Four of its oldest casino-themed games still contributed ~65% of total Q1-Q3 2020 revenues. While doing more of the same will be key to their future growth, they do have a 20 active game portfolio indicating some amount of revenue concentration in old Casino games. Further, their method is still being proven out regarding the newer Casual game portfolio.

Playtika has a proven track record in using its technology and processes to grow game revenues over multiple years. | Source: Sensor Tower

Playtika has a proven track record in using its technology and processes to grow game revenues over multiple years. | Source: Sensor Tower

Additionally, Playtika’s MAU has suffered some stagnation since Q1 2019 and no growth over 2020. This could reflect hitting a portfolio-wide user acquisition ceiling, which has also been a long standing issue in the Casino genre. User acquisition is not going to get any easier post-IDFA, and Playtika’s cash cow games are typically dependent on finding, acquiring, and retargeting high value “whale” players. Playtika has made significant strides in personalization technology though, which will likely prove to be beneficial in a privacy first world.

Playtika’s MAU has suffered some stagnation since Q1 2019 and no growth over 2020. | Source: Sensor Tower

Playtika’s MAU has suffered some stagnation since Q1 2019 and no growth over 2020. | Source: Sensor Tower

All considered, squeezing the lemon can only go so far, which means there’s growing pressure for the next two growth opportunities to better contribute.

#2 New game development: Given Playtika’s product portfolio growth strategy, it is likely that new game development will come through their acquired studios. Unfortunately, none of them have been able to launch any significantly successful new games since 2017, a year when Wooga’s “June’s Journey” and Jelly Button’s “Board Kings” were launched. Playtika knows this and they did set up a Casual Games Lab back in 2019. While there are some new games currently in soft-launch, more recent and more frequent success with this growth avenue remains to be proven out.

#3 New acquisitions: M&A is a cornerstone of Playtika’s portfolio growth strategy, but they’re highly selective with only three casual game developer acquisitions in the past four years. Further, 2020 showed us how heated the mobile M&A market is and how quickly the potential target pool is drying up with Stillfront-like roll up strategies gaining prominence. It also means the remaining casual genre acquisition targets will likely grow more expensive. Further, Playtika has heavy debt ($2.3B) and paid 60% of its operating profits in interest over 2020! Strangely, it looks like they used cash flow for previous acquisitions, and this debt was taken on to provide a $2.4B special dividend in 2019. While Playtika can handle this debt, it does reduce flexibility to make big acquisitions. Wanting to pursue more deals may explain why Playtika’s going public to raise money, but the capital could also go to paying down existing debt. Either way, raising money is a means to increasing general flexibility, and there’s a chance Playtika targets new genres.

Overall, Playtika is a decent business with a great technology platform and a robust data-driven process to scale games. But we’re not blown away. Their casino revenue probably lacks meaningful upside, and a lot needs to be proven out in casual. MAU growth is stagnating and user acquisition will not get any easier post-IDFA. Success with new games is sporadic and needs to accelerate. And given the company’s heavy debt load, Playtika’s not entering the public market in excellent financial health, which could affect its ability to strike big deals at great terms. In a nutshell, while Playtika has executed well until now and there is abundant opportunity left, it’s unclear what exactly will drive long-term growth, which adds risk. We’re looking forward to following the company and updating you all on its progress over time.

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#3: What 2020 Says About Mobile’s Future

Mobile Games

The health crisis in 2020 had a unique impact on the way consumers approached entertainment. If you were working in mobile gaming in 2020, you might have experienced the unique situation where all performance indicators were going up with little or no input on your part. 2020 serves as a humbling reminder that mobile games are an important form of entertainment that provide comfort for players, and that some key aspects that make your game successful are out of your control.

Because more consumers turned to digital entertainment, it is no surprise that downloads and revenues increased (again) for mobile apps and games. According to Sensor Tower, consumers spent nearly $80 billion on games in 2020 – that’s 72% of total app spending. While downloads went up 33%, revenue went up by “only” 26%. The interesting thing here – aside from another year of growth in the mobile ecosystem – is the type of content that is stands out. First, as you can see in the images below, there is relatively little overlap between the top downloaded games and the top grossing ones.

Worldwide Downloads for 2020

Worldwide Revenue for 2020

Aside from PUBG, Gardenscapes and Roblox, top downloaded games are not the top grossing ones. Second, both in terms of downloads and revenue, none of the top games in 2020 have been released that year.

It will probably keep getting increasingly hard for newcomers to release hits. But that’s not necessarily a bad thing. The mobile gaming ecosystem might be entering an era of maturity – and this era of maturity concerns game developers, not the players. On the one hand it’s simply hard to make a successful game: a bit part of making a hit is out of your control. On the other hand, top games are consolidating their position and it’s getting harder and harder to take their spot. Despite the fact that it’s getting harder and harder to make a hit, the mobile ecosystem continues to grow. Mobile gaming has been defined as a hit-driven business, but the growing market does suggest there is a business case outside of hits. And the developers who are able to optimize their resources and portfolio will be the ones who will be successful in getting a piece of the growing pie. The days of the “hit or die” state of mind might be numbered. (written by Alex Macmillan)

#4: Understanding China’s App Store Wars

Huawei Tencent

On the first day of 2021, Tencent removed its massive portfolio of games from Huawei’s app store in China due to a revenue share dispute. Netizens in China broke out the popcorn and grabbed a front row seat in anticipation of the upcoming heavyweight duel. However, the dispute resolved itself within 24 hours, and Tencent’s games are now back on Huawei’s store.

This whirlwind of events spurred discussion about how revenue share is structured in China’s Android ecosystem, how power dynamics between game companies and platforms function, and it potentially foreshadows where the industry is heading.

Most of you already know that Google Play is unavailable in China, and Chinese Android users (80% of the market) rely on Chinese app stores to download apps. The standard revenue share for Chinese app stores is 50/50 (after payment processing fee - usually 5%). This is the legacy approach to Android game distribution in China, where app stores own the user traffic and have massive bargaining power. The app stores’ argument for charging 50% is that they drive traffic to your title, provide suggestions to optimize your game, and help run in-store promotions for their users. The brief disagreement between Tencent and Huawei is about the 50% revenue share, and the speed of which the situation resolved itself highlights the differences in power dynamics (especially compared to the Epic vs Apple trial):

  1. Tencent is dominant. Its portfolio of PUBG, Honor of Kings, QQ Speed, Peacekeeper Elite, and more are the top grossing titles in the market and are also culturally the most impactful. Not having Tencent games in your app store in China is equivalent to not carrying Nikes in a sports shoe store.

  2. Android is still an open ecosystem, and Huawei users can download Tencent’s games from other 3rd party channels or the official game page. Not having Tencent’s games listed will annoy and drive away Huawei users. It would also be lost revenue for Huawei but not Tencent.

Since Tencent’s games are now reinstated back on Huawei, one can speculate that Tencent got the revenue share it wanted. Going forward, the pressure from game companies to improve their revenue share split on Chinese Android app stores’ will likely increase — especially since miHoYo’s Genshin Impact and Lilith’s Rise of Kingdom succeeded massively while bypassing mainstream app store. While Tencent, miHoYo, and Lilith are outliers, more will try to bypass the app store’s legacy practices. Eventually the paradigm will shift, and even though there are differences between regions — Tencent’s influence and greater user choice, most importantly — it could inform on what’s possible in other parts of the world, too. (written by Owen Soh, China Market Entry Consultant)

🎮 In Other News…

  • Epic Games snaps up RAD Game Tools. Link

  • Call of Duty: Mobile launches in China with over 70 million pre-registrations. Link

  • Nintendo to acquire Luigi’s Mansion developer Next Level Games. Link

  • Niantic acquires community gaming platform Mayhem. Link

  • Roblox to go public through direct listing, not IPO. Link

  • Why Intel Capital invested in BoomTV amid the esports boom. Link

  • Eneba raises $8m for online gaming marketplace. Link

  • Distributed computing startup Salad raises $3.2m. Link

  • Voodoo acquires OHM Games. Link

  • TikTok owner reportedly in talks to buy stake in Chinese mobile games publisher. Link

  • Blackstone makes big investment in mobile ad firm Liftoff. Link

  • Moon Active snaps up mobile games dev Melsoft. Link

🖥 Content Worth Consuming

Crucible: Blueprints for the Open Metaverse. “Host Piers Kicks sits down for Episode 10 of Metaverse Musings with Ryan Gill & Toby Tremayne, the Co-Founders of Crucible. Both Ryan and Toby are two of the highest conviction operators working towards the Metaverse. Their strong sense of purpose and appreciation for the philosophical aspects of the world of tomorrow inform their unique mindset and approach. The business focuses on building infrastructure across the “in between” spaces for Web 3.0 technology, as well as tailoring the existing stack to gaming and virtual worlds.“ Link

Rise & Fall Guys: How to Save a Hit. “Just a few months on, the Mediatonic-developed title appears to be struggling to retain players. Fall Guys has been a success in many ways, and should be celebrated as such. It has sold tremendously well, made a positive impact with regard to the games’ place in mainstream culture, provided a meaningful refuge in a very difficult year, benefitted charity, enjoyed a bounty of critical praise, and propelled an already successful studio into the international spotlight. And yet the majority of its players do not appear to be staying with a game that for a moment felt like it was on a trajectory to enjoy Fortnite levels of success and impact. With Fall Guys’ continued slide, how now do you save a hit?“ Link

How Riot Games is gunning for its second big esport with Valorant. “Riot Games spent a decade building League of Legends into a huge esports phenomenon. And with the first-person shooter game Valorant, the company hopes that it now has a second big game to grow its esports business. The game sprang from the company’s 10th-anniversary announcement a year ago, when the company disclosed 10 games and other projects in a bid to transform it from being just a League of Legends company. As Riot Games itself said, the “s” in Riot Games is no longer a joke, and the company is making moves to be a big player in multiple esports genres.“ Link

Penny & Flo: Finding Home is the Perfect Sequel to Lily’s Garden. “Making a followup to a successful game is precarious: how much should the sequel stray from the game that came before? Do players love the narrative, thematic content, or game mechanics — which ones to alter and which ones to keep the same? Penny and Flo expands on the same fictional universe as Lily’s Garden, in-game and in the marketing, while differentiating itself just enough in its core game mechanics to make it the perfect sequel.” Link

Thanks for reading, and see you next week! As always, if you have feedback let us know here.

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