Welcome to Master the Meta, the #1 newsletter about the business of video games.

Hi everyone,

It was a big publishing week for us, so this update is a bit shorter than usual. Without further ado, here’s your weekly roundup and analysis of what’s happening in the video game industry…

🔍 Deep Dive: Stillfront Group

We spent a lot of time learning about Stillfront Group this year and think they’ve done a great job creating value with a relatively unique strategy compared to other game studios. While some may say it’s a simple growth-by-acquisition story, we think that’s an over-simplistic view. Master the Meta teamed up with Joakim Achrén from Elite Game Developers to write up our analysis for all of you. A quick snippet:

“Stillfront Group is an emerging games business that both industry insiders and curious outsiders should prioritize understanding. Even though the company is making a larger name for itself — especially in 2020, which has turned into a breakout year — it remains, in our eyes, underrated and under-followed. It was (and maybe still is) a dark horse of the games industry. Tripling its market cap year-to-date certainly helps, but most don’t understand how Stillfront’s unique acquisition strategy, group operations culture, and capital allocation skill bring consistency and scalability to an otherwise lumpy, hits-driven industry. In other words, Stillfront’s success is the result of a well engineered strategy designed to predictably grow shareholder value in a highly unpredictable market.”

If you want to read the full deep dive, you can find it here. And if you just want the tl;dr, skip to the summary at the end.

We also worked with Joakim to interview co-founder and CEO Jörgen Larsson, which you can listen to here.

📰 News


ESL and DreamHack merge to create ESL Gaming. First, let’s provide some brief context. Both of these brands are leading esports event organizers and have existed since at least 2000. ESL is the larger of the two, but both host a large variety of in-person and online events, festivals, and tournaments that cover many popular esports. Interestingly, Modern Times Group acquired Dreamhack in 2015 and purchased a majority stake in ESL the same year. In other words, it took a global pandemic and horrible results to realize that these two brands, which were already under the same corporate umbrella, could gain efficiencies by merging. Hmm…

Will there be brand efficiencies? Probably not, at least in the short-term; both brands will continue to be used. Will there be economies of scale advantages? Not in a meaningful way, but, sure, certain operations and roles can likely be streamlined. Will merging spark greater innovation? Best practices should be shared more frequently, and they continue to experiment with online events, but it’s hard to see anything dramatically change. Does merging change the trajectory of the business? Likely not; in-person events are still a fragile part of the value chain that depend on publishing partners and macro realities. Plus, in-person events are not nearly as important or scalable in esports as they are in traditional sports.

As I see it, merging ESL and DreamHack is a minor net-positive, but if this merger makes sense today, then it made sense years ago. It’s clearly catalyzed by COVID-driven difficulties (esports vertical revenue is expected to decline 30-40% in the second half), and the company needs to takes any and all steps to minimize costs, share online best practices, and prepare for an eventual rebound. This merger is also occurring at the same time as layoffs, which isn’t a coincidence. Merging isn’t a game changer, but if management operates well then the company will be poised to bounce back once COVID retreats. That said, my instinct is that in-person events will take longer than many expect to bounce back 100%, at least in certain parts of the world. Fortunately, ESL Gaming has room to make online events even better in the interim. Link

Android 12 will make it easier to install app stores. Ever since Epic pulled its Nineteen Eighty-Fotnite publicity stunt, promoted its own in-app payment system, and sued Apple/Google, it’s been fascinating to watch the ongoing drama and ponder how app stores may change (if at all). It’s pretty clear that Apple is the most anticompetitive here, but Android is still a pseudo-open platform. That said, let’s break down some news about upcoming Android 12 changes:

  • Google will supposedly make it easier to install app stores other than Google Play next year, but it hasn’t shared much detail on what that looks like.

  • For context, it is possible to download other app stores on Android today (like the Samsung Galaxy App store, where you can download Fortnite), but Google still offers many warnings that would scare people away from doing so.

  • The tricky part is… how would Google make it easier for other app stores to succeed while not compromising on user security?

  • This changes nothing about Google Play, where Google still takes a 30% cut and forces apps to use its proprietary payments system. However, Google is being “generous” by offering a one year grace period for all companies to comply.

I’m supportive of this general trajectory, but I wonder how much will really change. Most users won’t want to juggle more than one app store, Google Play is where 99.9% of everything will still be, and the average user neither sees nor cares about Google’s take rate. Creating a more equal playing field that enables app store competition is definitely a start, and perhaps it’ll lead to more big brands bypassing Google Play. The ultimate goal for a company like Epic is to be able to launch and sell whatever it wants wherever it wants, which ultimately creates competition among app stores, pushes take rates down, and leaves greater profits for creators (not middlemen). It’s a very Microsoft-esque model, and it’s the type of thing Apple would never do unless forced to. Again, we’ll see what this actually looks like next year — because why would Google actively help competing app stores? — but I’m happy to see Android hopefully shift in an even more open direction. Link


Roblox prepares to go public. We’ll cover this more deeply in the future, so I’ll keep it high-level for now. In short, this is exciting news both for Roblox and public markets. Part of me is surprised to see Roblox go public so quickly after raising a $150M Series G in February, but on the other hand its journey is 14 years in the making, it’s had an insane year, and it’s a great time to go public. Roblox probably has over 150 million MAUs, 3 billion played hours per month (major YoY acceleration), a rapidly growing number of creators (and payouts), and the company’s revenue run-rate is likely nearing $1 billion. In other words, public markets are going to eat this up.

Roblox’s last valuation was $4B and a complete steal. I don’t know if Roblox will get as much love as Unity, another recent IPO that now trades at 35x TTM sales of $640 million, but there will definitely be immense hype. A $20-30 billion day one market cap isn’t out of the question. Although Roblox deserves immense respect — try naming other games valued at $20+ billion! — also keep in mind these multiples are historically abnormal and the company isn’t perfect. We’ll learn more in the coming weeks, but the two largest risks are likely 1) as kids grow up they move on to other games, and 2) there’s technical debt that may limit how Roblox competes against platforms like Manticore and therefore win over new audiences. Stay tuned for more on this one! Link

Quick hits:

  • Good Twitter reporting of this week’s Apple-Epic hearing. Link

  • Genshin Impact becomes the biggest international launch for a Chinese game. Link

    • Note: Expect this record to continue breaking and for Chinese studios to gain further market share in the West (assuming political headwinds don’t interfere).

  • Sumo Group acquires development studio Pipeworks to break into the US. Link

  • Tencent acquired a ‘major stake’ in GTFO developer 10 Chambers. Link

  • Resident Evil TV series will debut on Netflix in 2021. Link

  • Twitch’s soundtrack feature, which lets streamers play some copyrighted music while live, just debuted. Link

  • Farmville is shutting down… the end of an era! Link

🖥 Content Worth Consuming

Roblox is the next big games advertising platform. “Roblox has the potential to become one of gaming’s important ad platforms. With sufficient investment — at the very least, a rollout of the above functionality — the Roblox advertising platform could create important avenues to scale for Roblox’s developer community, allowing developers to reach relevant audiences without compromising user privacy.” Link

Trip Hawkins | The New High Score. “Trip Hawkins: Founder of Electronic Arts, 3DO, and Digital Chocolate amongst other companies. Trip is one of the most influential people ever in the video games industry. In this talk, Trip Hawkins speaks to the past and future of video games.” Link

TikTok is having a great time with Among Us. Players will relate to this one.

Thanks for reading. See you next week!

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