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Here’s your weekly roundup and analysis of what’s happening in the video game industry.

✍️ My Latest Article

Why Nintendo Isn’t the Next Disney (And What It Will Be Instead) — Ever so often, someone puts forward the idea that Nintendo could be so much more than it is today. This time around it was ValueAct, which invested $1.1 billion in the business. However, close observers know that Nintendo’s goals and methods aren’t what many would expect. My article dives into the Nintendo Way, observes the company’s strengths and weakness, and helps show how Nintendo can both improve where it’s needed but still stick to its principles. Link

📰 News

A strong quarter for mobile games. I first saw these charts in Konvoy Ventures’ weekly email, but they’re great so I’d like to share them here too. First off, hours of playtime in mobile games was up 62% in Q1 (hitting 90+ million hours in the final days of March):

Playtime Global

Second, the rise in mobile playtime has converted into a rise in transactions:

Change in Total Transactions Global

The link has plenty of other takeaways in terms of how specific genres have been impacted, but I have two main thoughts: 1) the lockdown has been great for gaming and is accelerating certain trends, but we shouldn’t extrapolate any of this data into the future, and 2) economic turmoil will almost definitely affect the unit economics of games in ways backwards looking data hasn’t yet picked up on. Link

Microsoft / Xbox earnings. The headline is that gaming revenue dropped 1% while “Xbox content and services” revenue increased 2%. Some people think this is surprisingly low given present circumstances, but ultimately it isn’t a huge deal. Fewer consoles being sold at lower prices dragged down overall performance, but engagement rose (despite Fortnite’s year-over-year decline). As I’ve mentioned previously, what matters most is how the next console generation sets Xbox up for longer-term success. The launch may not be as big as PlayStation’s out of the gate, but the ~90 million Xbox Live MAUs, 10 million Game Pass subscribers, and the hundreds of thousands of xCloud users indicate that the business is moving in the right strategic direction. Link

Epic Games is raising money. Apparently Epic Games is raising between $500 million and $1 billion at a valuation well north of $15 billion (its previous valuation). Building a metaverse, fighting a storefront war, and scaling up platforms like Houseparty all add up to be an expensive undertaking. Plus, Fortnite’s revenue isn’t what it used to be. It’s also worth briefly mentioning that Fortnite is back on the Google Play store, probably because the financial benefits of being off the store (not paying the 30% platform fee) aren’t as meaningful now that the game’s stratospheric hype has waned. Link

Lastly, if you haven’t yet seen the latest Fortnite event, showcasing Travis Scott, check it out. The creative ambitions were definitely raised a notch compared to previous in-game events:

The Facebook Gaming app is now live. I’ll reserve full judgement until more results start trickling in, but it’s unsurprising to see Facebook lean more into gaming. Over 700 million of its 2.6 billion MAUs consume gaming content, the company already is already investing in live streaming, and it’s certainly a timely moment to roll this out. Video game live streaming is an increasingly crowded space, but it is true that owning the customer relationship provides immense user acquisition advantages for Facebook Gaming. The product probably has the best hopes in regions like Southeast Asia and Latin America where mobile gaming is surging in popularity. Also, the app makes it easy for anyone to start streaming, but Facebook will still need to pay up for talent (like everyone else) if it wishes to effectively compete over time. For now, it’s just a question of how well Facebook can execute. Link

More changes to Google Stadia and Nvidia’s GeForce Now. Getting cloud gaming services off the ground is proving harder than these companies initially thought.

  • Stadia’s branding remains super confusing. “Stadia have revealed that they have moved away from the “Stadia Base” name – the original branding for Stadia’s free tier – following this month’s reveal that Stadia is now available to everyone with a Gmail account, alongside offering 2 months free of Stadia Pro.” This led to an uptick in users, but it’s still a marginal amount. Link

  • GeForce Now continues to see publishers pull their games away. This time “GeForce Now will no longer be able to play titles from Microsoft’s Xbox Game Studios, Warner Bros. Interactive Entertainment, Codemasters, and Klei Entertainment,” which is in addition to Activision, Bethesda, and Take-Two from weeks earlier. Microsoft pulling out makes total sense (xCloud is a competitor), and Nvidia’s team is definitely racing behind the scenes to get new deals in place. Apparently 30 out of the top 40 games on Steam are supported, however. Link

Summer Game Fest. Geoff Keighley, a staple of E3 for many years, announced his own competing “event.” E3 has been weakening in relevance for a few years, and building a more digital-first, interactive replacement will be cool to see. I’m very curious to see how it unfolds.

Stillfront acquires Candywriter. I’ll have to do a deeper dive into Stillfront at some point, but the publisher continues its acquisition spree, this time with the creator of BitLife. The deal is a mix of cash and stock and represents at least $74 million. Link

India sets new investment policies. India’s foreign direct investment rules now require additional government approval. This change was designed to keep Chinese entities from taking over Indian companies during the COVID-19 crisis. Obviously, this news is much bigger than gaming — and it will certainly stir up a lot of noise — but it could hold major implications for how companies like Tencent can invest in the region. This is something to keep an eye on. Link

Overwatch’s MVP is switching games. “Reigning Overwatch League MVP and 2019 Overwatch World Cup champion Jay "Sinatraa" Won will retire from competitive Overwatch and instead now compete in VALORANT as a part of esports organization Sentinels.” This is a blow to the Overwatch League and Sinatraa almost definitely won’t be the only pro to switch games. On one hand, esports orgs may be overreacting to Valorant in the short-term (especially if they’re already signing tons of costly talent contracts), but it will be fascinating to watch how the rise of Valorant could affect other esports leagues. Normally, the rise of one game doesn’t necessarily steal a ton of core viewers from other games, but if there’s a major talent exodus (and potentially player exodus) then the effects could be more meaningful. Link

Republic acquires Fig. One of Master the Meta’s readers shared this news with me, and it’s interesting. Republic is a crowdfunding platform where unaccredited investors can invest in startups, and Fig lets similar investors invest in games / studios. On the surface, mixing these two audiences together makes sense. In reality, though, I always felt that Republic’s deal quality needed improvement, not to mention deal terms or the level of information that’s shared. I bet with Fig it will take similar work to find the rare nugget of gold (like Outer Wilds) among all the trash, but it makes sense why Republic would want to roll up Fig. My hunch is that, like on Republic, companies who failed to raise money from VCs/elsewhere go here as a last resort. That said, I’m all for platforms and tools that aim to democratize investing of all types, so I wish the teams the best of luck. Link

🖥 Content Worth Consuming

Jon Lai (of a16z and previously Tencent) shares his reflections on why Tencent has been so successful. (click through for the full tweetstorm)

From MLG to Vindex: The story of Mike Sepso. “In October 2019, MLG co-founders Mike Sepso and Sundance DiGiovanni launched a new venture, Vindex, with $60 million (£46.6 million) in funding. When they first started working together back in the early 2000s, they couldn’t convince anybody to invest in their ideas. What happened in that period that saw them evolve from zeroes to heroes?” Link

Dalane Parnell (CEO of PlayVS) on This Week in Startups.

Matthew Ball’s thoughts on the Travis Scott X Fortnite Event. (click through for the full tweetstorm)

Minecraft RTX Deep Dive: How Nvidia Delivered A Game-Changing Ray Tracing Upgrade. “Before we put together our own Minecraft RTX coverage, we met up with key Nvidia graphics developers *in the game itself* to get the inside story on what is undoubtedly one of the most transformative game-changing graphical upgrades we've seen from hardware-accelerated ray tracing.”

See you next week!

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