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

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

✍️ Recent Deep Dive

Unity: Analyzing the First Game Engine IPO — Unity is stirring up noise within and outside of the gaming industry as it prepares to IPO, so we decided to take a deeper look at this swiftly growing business. We originally emailed this piece out on Wednesday and have made a handful of edits since. Also, if you don’t feel like reading the entire 5,000 words, feel free to skip down to the “Our Verdict” section at the bottom. Link

Lastly, please fill out this form to let us know how you want to receive deep dives going forward — as a separate email or as part of the Weekly Metas? Also, tell us what other topics you want covered!

📰 News

Nvidia unveils new graphic cards. The company showcased its highly anticipated RTX-30 Series GPUs on Monday. Check out the launch event:

By all accounts, the GeForce RTX 3070, GeForce RTX 3080, and GeForce RTX 3090 lived up to most people’s expectations, from a performance and pricing perspective. For comparison, the “lower-end” $500 GeForce RTX 3070 boasts superior performance than the $1,200 GeForce RTX 2080 Ti. Here’s a handy graphic:

The $1,400 GeForce RTX 3090 will be the first GPU capable of playing games at an 8k resolution, ray tracing and DLSS (using machine learning to boost frame rates) will be easily supported, and any doubt of the power behind Ampere’s architecture should be put to rest. For more nitty-gritty hardware detail check out these two links.

It’s also important to note that Nvidia is supporting this launch with software improvements, too:

• NVIDIA Reflex helps reduce latency by up to 50 ms, which will help many gamers become more competitive.

• NVIDIA Broadcast “turns any room into a broadcast studio” by using AI algorithms to improve things like Audio Noise Removal, Virtual Background Effects, and Webcam Auto Framing.

• NVIDIA Omniverse Machinima “gives you the power to remix, recreate, and redefine animated video game storytelling.”

In general, Nvidia’s speed of innovation is incredibly impressive, and these announcements — high performance at a reasonable price — will make it extremely tough to compete against. I’m still curious to see how the rise of cloud gaming will one day affect the high-end PC market (and therefore the GPU market) — I’m unsure how well positioned Nvidia is — but that’s clearly years away and in the meantime Nvidia is simply crushing it.

CD Projekt Group earnings. Over the first half of fiscal 2020, CD Projekt’s sales jumped nearly 70% YoY and net profits nearly tripled as a result. The company is still riding the tailwind that The Witcher Netflix show provided, but it’s also benefiting from its games launching across new platforms. For example, The Witcher 3 sold well on the Switch this year, GWENT debuted on iOS in late 2019 and on Android earlier this year, Thronebreaker: Witcher Tales performed well on the Switch, and Thronebreaker also launched on mobile. It’s great to see that The Witcher 3 still has legs (although likely fading at this point), and the strategy of porting games over to mobile appears to be modestly working. The GOG.com platform is also performing alright but doesn’t move the needle much.

Of course, all eyes are on Cyberpunk 2077, which now releases in November and faces extremely high expectations. Topping those expectations will be challenging, but early reviews seem positive, which is a good sign. There’s also already a Cyberpunk Netflix anime in the works, which is a testament to how much people trust CD Projekt to wow consumers.

All in all, India’s gaming future looks brights no matter what it does or doesn’t ban, and this banning ordeal simply leaves significant upside for others to capture. China’s loss will simply become someone else’s gain. LinkManagement seems to recognize this — hence the push into mobile and launches of games like Thronebreaker — but it will take years to better diversify the product suite. That said, the company has roughly a year’s worth of revenue in cash on its balance sheet, and winners tend to win. If the past is any indicator of the future, then CD Projekt will continue to excel. Link

India bans additional Chinese mobile apps. Back in late June — as China-India tensions were rising because of border skirmishes — India banned 59 Chinese apps on the basis of national security. At the time we noted that the gaming industry got by easily but more bans are possible. On September 2nd, India banned 118 more apps, which included top games like PUBG Mobile (#1 grossing game in India) and Mobile Legends (#10). Here are some takeaways:

• PUBG Mobile was extremely important to India’s gaming ecosystem (~200 million downloads) and will leave a void. Sea Limited’s / Garena’s Free Fire is probably the best positioned to fill the void, but expect a burst of competition. For example, nCore (an Indian development team) just announced Fearless and United: Guards (or “FAU-G”, note the acronym similarity), which looks like a pro-India version of PUBG. Also, the entire esports and streamer market will need to pivot, which is potentially easy for content creators but takes more work for businesses and teams.

• One of the things Chinese games companies want most is international expansion, but geopolitical tensions may very well continue to pose headwinds… in India and beyond. More bans are possible.

• There’s tremendous upside for the Indian game development market, and nationalist moves like banning foreign games make the odds of home-grown successes even more likely. Of course, even though India is pushing a nationalist agenda — as another example, just look at how many US tech titans are aligning themselves with Reliant Jio (an emerging gatekeeper) — that doesn’t mean India shuns foreign investment.

All in all, India’s gaming future looks brights no matter what it does or doesn’t ban, and this banning ordeal simply leaves significant upside for others to capture. China’s loss will simply become someone else’s gain. Link

Skillz plans on going public via a SPAC. We took a deep look into Skillz a couple weeks ago, so there’s no need to rehash everything. At a high level, Skillz is a platform that allows any skill-based mobile game to convert itself into an esport with real money winnings. However, unlike typical esports-friendly and male-dominated core games like League of Legends or Dota, Skillz prides itself on opening up the top of the funnel by making esports experiences accessible to the casual mobile gaming audience (with a focus on females) through a portfolio of casual mobile games across a variety of genres.

According to its recent SEC filing, the company appears to be doing just fine. In the last quarter, MAUs were 2.6M (+88% YoY), GMV spiked 101% to $413M, and revenue jumped 111% to $59M (~14% take rate). 34 games on the Skillz platform had >$1M in GMV in the first half, and even though the company is burning cash today the business projects 30% long-term “adjusted EBITDA margins.”

Momentum is strong and the team does a great job piecing together a pitch, but there remain questions. Big TAM numbers look fancy, but how many “casual” players actually want to compete for money? How many developers are interested in building on this platform, and how many have found success versus failure? What’s the customer concentration within the top games? How does Skillz expect to double its take rate? There are a lot of assumptions to poke through in order to believe Skillz’s projected growth numbers. Based on hesitations and critiques I’ve seen it’s worth taking the time to dig a layer deeper.

The SPAC itself (called Flying Eagle Acquisition) is raising nearly $850 million in cash at a $3.5B pre-money valuation. That means public market investors will wind up owning approximately a quarter of the business once the transaction finalizes. I believe this is the first gaming-related SPAC, and given the cons of traditional IPOs (primarily how big day-1 pops mean companies leave a lot of money on the table) I doubt it will be the last. (Note: this explanation of SPACs is the best I’ve seen.) Link

AT&T backs away from selling WB Games. I’m glad AT&T is holding onto WB Games, but I don’t blame the company for assessing its options given the parent company’s excessive debt load. Everyone is reporting that AT&T decided WB Games is “too valuable” to let go. Maybe there’s some truth to this — I think WB Games can create a lot of value given the brands it has access to and the talent within the team — but the truth is probably closer to 1) no one could settle on a price, and 2) AT&T’s desire to continue licensing IP (like Harry Potter and Batman) made the deal more complicated and less compelling to buyers. I also think it’s in AT&T’s best interest to maintain a gaming division that both generates profits, gives the company exposure to an increasingly important sector of entertainment, and offers the potential for broader ecosystem tie-ins. AT&T may not execute on that last point anytime soon, but in the meantime projects like a Suicide Squad game or Harry Potter RPG could still generate big wins. Also, even though the team has experienced mobile success (like with Game of Thrones: Conquest) there’s still plenty of upside left to capture, in my opinion. Link

A head-scratcher from Nintendo. In the latest Nintendo Direct presentation, the company mentioned that Super Mario 3D All Stars — which includes Super Mario 64, Super Mario Sunshine, and Super Mario Galaxy — will launch on September 18th. It’s a fun announcement, but it’s bizarre that the game will only sell until March 2021. It’s typically weird for a game like this to have a limited release window, so it makes me wonder if/what Nintendo is scheming. Maybe it’s nothing… or maybe Nintendo is priming a digital subscription service that gives members access to previous-generation games? If true, that’s a big deal. Maybe it will coincide with a “Switch Plus” announcement? The timeline feels right. In summary, I have no idea what will happen beyond speculation — or even if anything will happen — but there’s a chance that the game’s limited release window actually signals a much more important announcement to come. TBD. Link

Here’s the full Nintendo Direct, if interested:

Quick hits:

• Tencent acquired a 10% stake in Yunchang Games. Link

• Bytedance is testing cloud games in Douyin (the Chinese version of TikTok… very interesting). Link

• WinZO Gets $18 Million In Series B Round. Link

• Huuuge Inc. is preparing for an IPO. Link

• Potato Play Raises $1.75M Seed Round To Publish Hybrid-Casual Games. Link

• Spotify is launching an exclusive League of Legends esports podcast. Link

🖥 Content Worth Consuming

Epic Lawsuit vs Apple & Google | Expert Legal Opinion. “Antitrust Specialist Ryan Tisch from Crowell & Moring and Video Games Lawyer David Hoppe from Gamma Law explain Epic's lawsuit against Apple and Google.“ Link

The Digital Future of Tabletop Games. “D&D’s growth is illustrative of a larger trend. Tabletop games—a quintessentially analog experience that encompasses board games, card games, and parlor games—are being dramatically improved by digital tools. While the first attempts at modernizing tabletop games sought to merely replicate games in the digital realm, the next generation of games goes a step further, integrating tools such as live-streaming, user generated content (UGC), audio products, and community platforms. This digital transformation is reinventing the way we learn, play, and connect with one another over tabletop games.“ Link

N.B.A. Brings Flash to E-Sports, but Can It Hold On to Its Viewers? “Since its introduction two years ago, the National Basketball Association’s e-sports arm has struggled to draw viewers. Then, with Americans forced to shelter in place in early March, the N.B.A. had a captive audience. Within days, players for the N.B.A. affiliate, known as the N.B.A. 2K League, were livestreaming games. The league leaned on its counterparts on the courts, setting up online tournaments with W.N.B.A. players. N.B.A. stars even staged their own tournament, which was broadcast on ESPN and drew as many as 387,000 viewers. Sportsbooks took bets on the action.“ Link

From Unknown Title to Viral Game: 12 Growth Lessons From Spellbreak. “Today I’ll be talking about how we used Imgur, Reddit, YouTube, and Discord to gain 600,000 pre-alpha signups for a new IP from an unknown studio. I think a lot of the folks are probably in a similar situation to Proletariat’s—we wanted to build a new IP, but we weren’t an existing developer that had lots of previous traction and a large existing customer base. This was how we worked through the summer of 2018 to build our pre-alpha sign up. It’s still relevant today.“ Link

Thanks for reading. See you next week!