Hi Everyone. As you saw last week and in our correction email (sorry about that!), we’re launching a job board this week! If you’re in the market for a new role (or at least curious about what’s out there), check it out. It’ll give you all the details you need and link to where you can apply. You’ll also notice that we’ve added a new section to the newsletter, which showcases our job board’s featured roles. Thank you to everyone who helped make this launch possible!

Lastly, if your company is recruiting (now or in the future), you can continue to post your open roles with us in order to gain visibility to thousands of industry experts each week. For those interested, here’s a link to be able to do so:

Naavik Exclusive: IP, Games, & The Future of Transmedia

Bytedance Character

Transmedia — telling connected stories across mediums — is the final frontier of storytelling. It’s also increasingly important to the entertainment titans, who are trying to dominate with brands like Star Wars, Marvel, and DC.

This essay, written by Naavik consultant Jimmy Stone, discusses what makes transmedia work, why video games will play a larger role, and how leading entertainment companies can adapt to changing times. Check it out!

#1: Bytedance’s Gaming Aspirations

Bytedance Game

Source: TechCrunch

TikTok and its Chinese counterpart, Douyin, are arguably the most interesting consumer social apps in the world. It feels like there’s something on the app for everyone, with top content ranging from DIY recipes to full-blown serialized shows. With a seemingly unlimited amount of niche content and a reported 600M+ MAUs, Bytedance, the company behind the platforms, has already been exploring ways to productize its diverse array of user interests including:

The focal point behind each new product launch is consumer attention; the company is essentially turning the videos that do the best on the platform into features. It’s a simple, yet effective, approach that when executed correctly will drive users to spend more time using the apps. But among the company’s myriad of product efforts, there’s one that seemingly presents higher upside than the rest: Games. As Aaron mentioned in his piece regarding Snap’s gaming strategy last week, the gap between socialization and gaming is undoubtedly shrinking, and the apps where people hang out (like TikTok) are best positioned to dominate this new pseudo-social gaming market.

Bytedance knows this. The problem is they haven’t been able to execute super well on it (yet). According to The Information, the company has been trying to build games for the better part of the last five years, with multiple in-house titles reportedly never even breaking 1,000 downloads. It's part of the reason the company opted to spend $4 billion to buy Moonton, maker of Mobile Legends: Bang Bang earlier this year. It takes time to figure out how to make good games, and mobile acquisitions allow the company to keep innovating their platforms for the day when an in-house title finally does make waves. We’re already seeing this in action with integrations like seamless gameplay upload and Twitch-esque live streams for Mobile Legends.

But even more so than in-house development, it’s the potential of TikTok as a gaming distribution platform that makes me so interested in Bytedance’s gaming prospects. In that regard, I see the company having two incredibly valuable competitive advantages:

Distribution Dominance

TikTok understands the content preferences of everyone who consumes videos on its app. Think about it: that’s data on the hobbies, demographics, and tastes of hundreds of millions of people worldwide. That kind of data is undoubtedly more valuable than any ad or retargeting could ever be. We’re already seeing the company leverage that information in China, where Bytedance targeted consumers with sponsored posts for a new game using the platform’s top influencers. Thanks to the app’s native distribution network, the title in question peaked at #4 in the Chinese App Store, and is still in the Top 20 today. And while a WeChat or Snap-esque messaging experience might be better for facilitating social interactions on a one to one basis, TikTok’s short form content is viral by nature, meaning you don’t have to rely on word of mouth to get it in front of the right people.

A Product to Game Pipeline

TikTok is the easiest platform to create content on. Streaming, recording, editing, advertising, and distribution are all handled on a single app. And with the introduction of third-party integrations, there’s multiple other use cases on the horizon. In theory, that means a developer could advertise, convert, and monetize a player without ever having them leave the app. Add in cloud gaming, and technical limitations no longer become a factor in getting the best game in front of players. In the long-run this could even allow the company to circumvent the App Store completely, opting to distribute products through their own distribution network. As a16z’s Jon Lai aptly puts it, a true product to game pipeline could incentivize companies like Apple and Google “to be more curator than gate-keeper.”

The above aside, the bear case for TikTok Games is real: it’s possible that big mobile titles wont live on just one social platform like TikTok, or that Western users have a lower appetite for instant mobile social games. But if the modern console era has room for both cross-platform and console-exclusives, shouldn’t certain mobile social games have that too? Add that to the fact that the average user is already on TikTok for nearly an hour a day, and I’m quite optimistic that Bytedance will play a substantive role in the future of games. (Written by Max Lowenthal)

#2: EA acquires Golf Clash maker Playdemic

Bytedance Playdemic

Source: GameCompanies

On Wednesday, Electronic Arts announced that it will acquire UK-based Playdemic from AT&T and Warner Bros. for $1.4B in cash.

Playdemic, headquartered just outside Manchester, England, is a free-to-play developer founded in 2010. Playdemic first saw success with invest-and-express games on Facebook, such as Gourmet Ranch and Village Life; but it didn't really hit the jackpot until Golf Clash released in early 2017. Ever since its release, Golf Clash has remained a steady moneymaker for Playdemic.

It is, in fact, the third time that Playdemic is getting acquired. It was first acquired in the MySpace era in 2011 by fellow startup RockYou. When RockYou's star fell, Playdemic founders bought the company back. Years later in 2017, Playdemic was acquired again by the Warner Bros. subsidiary TT Games. The details of the 2017 deal were not disclosed.

At least this time around, the price tag is juicy: $1.4 billion. According to Sensor Tower, Playdemic made $134M in mobile net IAP revenue ($193M gross) in the last twelve months. Assuming that there are no notable revenue streams in addition to Golf Clash's mobile revenue and that 10% to 25% of Golf Clash's total net revenue is ad revenue, the backward-looking revenue multiple is somewhere in the 5.9x to 6.7x range. This places Playdemic’s valuation at the high end in comparison to recent industry acquisitions, hinting at either high profitability or sizable expectations of future growth.

Playdemic does, indeed, seem like a cash cow. So why is Warner Bros. selling? The official reason is that Warner Bros. is focusing on building games based on their own IP. To put it in the bigger context, AT&T recently announced the upcoming WarnerMedia-Discovery merger, which in turn comes three years after finalizing the Time Warner acquisition. It's easy to see that for AT&T execs, a European mobile games company might seem like a distraction. And considering AT&T's outstanding debt, $1.4B is a very welcome windfall.

EA is more than happy to jump at the opportunity. As the mobile games market exploded in the 2010s, none of incumbent gaming giants acted fast. EA's inaction, in particular, was so pronounced that it almost became an industry meme. With Glu Mobile and Playdemic in EA's pocket, perhaps investors can now sigh in relief: finally, a mobile strategy! Dotting the line of recent EA acquisitions from Codemasters (F1, Dirt) to Metalhead (Super Mega Baseball) to Playdemic also reveals another pattern: working towards a platform-agnostic sports strategy. It's easy to forget that even Glu has a history in sports games.

All in all, we're only half way through this year and we've already seen more high-profile acquisitions than I can count with my fingers. If the pace continues, the industry will soon run out of acquisition targets. (Written by Miikka Ahonen, Co-founder at Lightheart Entertainment)

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Bytedance Spiketrap

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#3: Tencent Becomes Majority Owner of Yager

Bytedance Tencent Yager

Source: TechRaptor

This week it was announced that Chinese tech giant Tencent increased its stake in Berlin-based studio Yager and became a majority shareholder of the company. Founded in 1999, Yager has come a long way before receiving its first minority investment from Tencent in February 2020.

Let’s walk through some historic context: The studio’s first game was a combat flight simulator, Yager, which was released in 2003/2004 for Xbox/PC. The game didn’t sell incredibly well and received quite average reviews from both gamers and the press. However, the company received acknowledgment in 2012 when Spec-Ops The Line, a third-person shooter it developed (published by 2K) became a cult hit.

Its next game Dreadnought, released in 2017, once again accommodated its niche players but failed to attract a wider audience. However, this was Yager’s first free-to-play game, which proved that the company could work with a different model of distribution. Soon after the release, the company announced The Cycle — a new multiplayer FPS with PVP, PVE, and battle royale elements.

In 2019, the company released The Cycle in early access on the Epic Games Store (EGS). When Tencent invested in February 2020, some of the proceeds from the investment went to support the development of The Cycle, but the game remains in early access on EGS today. Given its recent investment, we suspect that Tencent is satisfied with The Cycle and its development process.

With the majority stake, the German developer gets access to Tencent's vast development and publishing resources, which could ultimately boost The Cycle’s production and distribution. Moreover, Tencent’s multi-platform expertise will help Yager release the game cross-platform and to a global audience. The Yager strategic investment falls in line with Tencent’s established M&A strategy and helps strengthen the position of the Chinese company in the European market. In this case, Tencent can leverage Yager’s expertise in PC & Console games development.

Tencent is well-known for its diverse strategy of acquiring various sized companies, as well as making a plethora of big and small corporate investments. Interestingly, Tencent’s recent focus has seemingly been on PC & Console developers, plus gaming ecosystem projects (Ubitus, Huya, Bilibili, VSPN). In 2020, Tencent made a total of 28 transactions (including those of its subsidiaries). 15 of the targets were gaming companies outside China with 10 of them being from Europe. This year, Tencent has already struck 50 deals, 11 of which are non-Chinese companies (and 8 out of those 11 hailing from Europe). We’re tracking Tencent's continuous interest in the Western gaming market, and 2021 is on its way to becoming one of the most active investment years for the company. (Written by Andrei Zubov and Vladimir Sergeevykh of InvestGame)

#4: Insights from Soulgate’s Prospectus

Source: SoulgateToday, I’m going off-script and writing about a company — Soulgate — that technically isn’t gaming-related but sits at the intersection of many of the same trends. The Chinese social media company behind Soul caught my eye this week after it published its prospectus to go public and then pulled the plug at the last minute. Weird! However, IPOing aside, details about the company portray an interesting view on where certain aspects of virtual economies are heading.The company’s (admittedly cringe) mission is to build a “soul”cial metaverse. Soulers, its users, create pseudonymous avatars, which are then sent to various “planets” based on their personalities and interests. Within those interest-based communities, users create and engage with all sorts of content — chat rooms, video stories, private messages, customized emojis, etc. Similar to TikTok, content is easy for all users to produce, and it’s distributed in a similarly algorithmic, decentralized way. I think there might even be a dating component, too.If that’s hard to conceptualize, I’m with you! What most caught my attention, though, was Soul’s traction. According to Sensor Tower, Soul is now the 5th most popular social media platform in China. The platform boasts 33.2M and 9.1M MAUs and DAUs, respectively (essentially 2x last year), 74% of which were born in or after 1990. These young users spend 40 minutes on average using the app each day and heavily engage with each other. The company is still in the early stages of monetization (therefore burning significant cash), but both the number of paying users (1.7M in March) and the average monthly revenue per user ($6.74 in 2020) is rapidly scaling. And that revenue entirely comes from users buying Soul Coins (no ads!), which are then used to buy digital items (like avatar enhancements and virtual gifts). It’s also worth mentioning that Tencent owns 49.9% of the business.I have zero confidence predicting anything about Soulgate’s future — for all I know it could flame out like many platforms do — but it’s really interesting! Most importantly, even though Soul resides in a drastically different internet ecosystem across the globe, it hits on many of the same trends we often talk about: virtual avatars, user-generated content, digital economies, interest-based communities, etc. If that sounds like buzzword bingo, you’re 100% right and it needs to be taken with a grain of salt. Not everything will become pseudonymous or user-generated, for example, but there’s also truth here, and we see inklings of it in “platforms” like Discord, Genies, VR Chat, and elsewhere. What ultimately happens in the West will of course look different from what’s being built in China, but there’s certainly inspiration to draw from breakout platforms like Soul, and you can bet that gaming communities will be in the center of the action. (Written by Aaron Bush)

Source: Soulgate

Today, I’m going off-script and writing about a company — Soulgate — that technically isn’t gaming-related but sits at the intersection of many of the same trends. The Chinese social media company behind Soul caught my eye this week after it published its prospectus to go public and then pulled the plug at the last minute. Weird! However, IPOing aside, details about the company portray an interesting view on where certain aspects of virtual economies are heading.

The company’s (admittedly cringe) mission is to build a “soul”cial metaverse. Soulers, its users, create pseudonymous avatars, which are then sent to various “planets” based on their personalities and interests. Within those interest-based communities, users create and engage with all sorts of content — chat rooms, video stories, private messages, customized emojis, etc. Similar to TikTok, content is easy for all users to produce, and it’s distributed in a similarly algorithmic, decentralized way. I think there might even be a dating component, too.

If that’s hard to conceptualize, I’m with you! What most caught my attention, though, was Soul’s traction. According to Sensor Tower, Soul is now the 5th most popular social media platform in China. The platform boasts 33.2M and 9.1M MAUs and DAUs, respectively (essentially 2x last year), 74% of which were born in or after 1990. These young users spend 40 minutes on average using the app each day and heavily engage with each other. The company is still in the early stages of monetization (therefore burning significant cash), but both the number of paying users (1.7M in March) and the average monthly revenue per user ($6.74 in 2020) is rapidly scaling. And that revenue entirely comes from users buying Soul Coins (no ads!), which are then used to buy digital items (like avatar enhancements and virtual gifts). It’s also worth mentioning that Tencent owns 49.9% of the business.

I have zero confidence predicting anything about Soulgate’s future — for all I know it could flame out like many platforms do — but it’s really interesting! Most importantly, even though Soul resides in a drastically different internet ecosystem across the globe, it hits on many of the same trends we often talk about: virtual avatars, user-generated content, digital economies, interest-based communities, etc. If that sounds like buzzword bingo, you’re 100% right and it needs to be taken with a grain of salt. Not everything will become pseudonymous or user-generated, for example, but there’s also truth here, and we see inklings of it in “platforms” like Discord, Genies, VR Chat, and elsewhere. What ultimately happens in the West will of course look different from what’s being built in China, but there’s certainly inspiration to draw from breakout platforms like Soul, and you can bet that gaming communities will be in the center of the action. (Written by Aaron Bush)

🎮 In Other News…

💸 Funding & Acquisitions:

  • VRChat closed an $80M Series D. Link

  • Rivarly raised $22M for esports betting. Link

  • GXC raised a $4.7M Series A to continue developing its playtesting service, G.Round. Link

  • GamerzClass announced a $2.5M round to offer master classes in gaming. Link

  • Makers of Boom Slingers, Boom Corp, secured a $1.8M funding round. Link

📊 Business:

  • Microsoft announced its plans to launch tighter integrations between Windows 11 and Xbox Game Pass. Link

  • Overwolf, a mod service, will pay out $29M to its creators this year. Link

  • Medal.tv partnered with Immutable to enable creators to mint their clips as “moments” on Ethereum and monetize with them. Link

  • Niantic announced depth technology that transforms smartphones into 3D mapping tools. Link

📜 Culture & Games:

  • The 02, one of the world’s largest music venues, built a venue in Fortnite. Link

  • SEGA is reportedly turning Sonic into a Vtuber. Link

  • Fractl’s team created a story, arcade, and multiplayer mode game with GPT-3, an OpenAI text generator. Link

👾 Miscellaneous Musings:

  • Data dive: the anatomy of a Steam game launch. Link

  • The Evolution of Game Genres: NES, Gameboy, and SNES. Link

  • The Rise of Recurrent Revenue. Link

📚 Content Worth Consuming

The Future of Games is an Instant Flash to the Past (Fortress of Doors): “None of this makes sense under the traditional models of the game industry. Nobody pays money to buy this game [Friday Night Funkin] or unlock content for it. Further, there's no (official) version on the mobile App Stores, Steam, or home consoles. It's not remote streaming through Stadia or Luna, it's not hooked into VR, and it's not part of anything trying to be "the metaverse," the other supposed Next Big Thing. Most perplexingly to the traditional mindset, the game is not just free but open source, so nothing stops people from cloning it and making weird remixes and mods (which is exactly what they do). “ Link

Monopolies With Growth: Tencent (Vineyard Holdings): This is a 20,000 word deep dive on all things Tencent and their strategy: “Tencent sits at the nexus of several growth hubs currently: the Chinese consumer, the mobile/virtual world, and broader Asian B2B tech. While leading their markets, they still have large, growing, under-monetized and under-penetrated markets in mobile advertising, ecommerce, payments, media, and gaming. Theirs is a great business, with high margins, strong cash generation, recurrent revenue, and minimal capex requirements, plus they are founder-operator led with a strong executive team who’ve shown themselves to be focussed on sustainable, long-term value creation.” Link

Nexon CEO Owen Mahoney: Game companies say they love innovation but resist creators at every turn (VentureBeat): “Mahoney said he doesn’t want creators to tell him what he wants to hear. He acknowledges that creating games can be hard, scary, expensive, and complicated. Creators giving pitches in the board room often make the mistake of pitching what they think the board wants to hear. Instead of talking about how they make a game to ride on a market trend, they should pitch a game that no one else is pitching and make the game that they have always dreamed of making. And game business executives shouldn’t be the ones saying they love innovation and then throw roadblocks in their way at every turn. He said that innovation puts new demands on technology approaches, policies, and procedures for the organizations around them, and even new demands on customers to think in different ways. Fundamentally it requires people to change, to think in different ways. And for most humans, change is really hard. Change is frightening, he said.” Link

Disney’s Resurgence Into Video Games is Only Just Beginning (Gamesindustry.biz): This is mostly a PR-driven article with a hyperbolic headline, and Disney is not internally getting more into games, but it’s an interesting view on how they think about licensing and partnering. “In this line-up, plus the announcements from E3, you can see Disney's focus on more original, AAA stories based on its IP, rather than the 'watch the film, play the game' style of tie-in the company previously produced. Shoptaw says the excitement around games specifically tied to films has all but disappeared as the market has shifted and expectations for unique experiences have risen. Also, the company is "not looking to make as many games as we can" but instead focusing on "the right games with the right partner." Link

🔥 Featured Jobs

As always, you can view our entire job board — all of the open roles, as well as the ability to post new roles — right here.

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

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