Hi everyone. Welcome to another issue of Naavik Digest! If you missed last week’s edition, we wrote about how Chess.com took the chess world by storm and turned into a $100M revenue company. Check it out and let us know what you think!

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Today, we analyze Africa’s mobile gaming opportunity and hit on several important news topics — Sony’s outperformance over Xbox, EA Mobile’s continued struggles, Sea Limited’s spin-off of Phoenix Labs, and more.

Let’s dive in.

Microsoft, EA Earnings / Metacore x Everdale / Web3 Slotomania

Playstation Podcast

How can Microsoft drive further gaming growth? Why is EA sunsetting Apex Legends Mobile? Why is Metacore looking to take on Everdale’s mantle? Why is PSVR2 missing sales expectations? Why is Playtika looking to embed web3 into one of its most successful games? And what the heck is going on with esports these days? We dive into the latest game business news with Aaron Bush, Tammy Levy, David Kaye, and your host Maria Gillies.

You can find us on YouTube, Spotify, Apple Podcasts, Google Podcasts, our website, or anywhere else you listen to podcasts.

#1: Africa’s Mobile Gaming Market and Carry1st

Playstation Carry1st
Source: Carry1st

This research essay was initially published in Naavik Pro, but we decided to make it freely accessible for everyone. If you’d like to receive more research like this, make sure to request a demo!

You'd probably be right if you thought that India, SEA, and LATAM were the next big markets for mobile gaming growth. But you'd also be forgetting one part of the world that is increasingly getting more attention — Africa! And one mobile F2P publisher is trailblazing and unlocking gaming across the continent — Carry1st. This research essay breaks down the mobile gaming opportunity in Africa and how Carry1st looks to make the most of it.

#2: Sony Outperforms, EA Stumbles, and More

Playstation VS
Source: GameSpot

Sony outperforms Xbox. Last week, we noted how Microsoft’s quarterly gaming revenue fell 13%, driven by declines in both hardware and content/services. How did Sony’s results compare? In short, the exact opposite — Q3 “Game & Network Services” revenue shot up 53% year-over-year! Sure, some of that was driven by currency fluctuations, but PS5 units sold jumped from 3.9M (in the year ago quarter) to 7.1M, MAUs hit a new high of 112M, and network services revenue grew 19% — led by God of War: Ragnarok having sold 11M units (essentially now a $700M+ game). As a result, Sony pushed its fiscal year PS5 units sold forecast up to 19M (meaning it expects 6M+ units sold this upcoming quarter), and the company increased its profitability guidance, too. This stark contrast with Xbox also shows how far behind Xbox is with its AAA first party releases, which drive not only software sales but also demand for hardware and subscriptions. Expect ongoing solid performance from PlayStation in 2023 (except for PSVR2, which is predictably underperforming).

EA Mobile takes another step back. EA reported Q3 results this week that on the surface appear largely uninteresting. Net bookings were roughly flat year-over-year, operating cash flow is slightly down, and Q4 guidance was lowered mainly because the launch of Star Wars Jedi: Survivor got pushed to Q1. That said, the more interesting news here surrounds mobile. In particular, it was announced that both Apex Legends Mobile and Industrial Toys (which makes Battlefield Mobile, in soft-launch) are shutting down, which led to layoffs. Apex Legends Mobile, despite being an award winning game, is shutting down because it wasn’t scaling, retaining users, and monetizing at a satisfactory level, and those takeaways are being extrapolated to Battlefield Mobile as well. Interestingly, management has noted that it’s considering relaunching these franchises on mobile again but with more cross-progression and community ties with the PC/console versions. We’ll have to wait and see how that goes, but it’s yet another mark against EA Mobile, which continues to fumble its opportunities and now lags far behind its earlier expectations. Perhaps EA needs a much larger reset regarding mobile at large.

Sea Limited spins off Phoenix Labs. In 2020, Sea Limited — a Southeast Asian e-commerce company and gaming publisher (through Garena) — spent $150M to acquire Phoenix Labs, the developer of Dauntless (a popular F2P co-op action RPG on console/PC). At the time, especially with Free Fire surging, we understood why Sea Limited would want to diversify its gaming efforts and why M&A might be a viable path, but we didn’t understand why Phoenix Labs was the right fit. After all, even though Phoenix Labs said it wanted to expand its reach to other regions with Garena’s help, the team fundamentally builds for different platforms and is located on the other side of the world. We were right to be skeptical. Now, Phoenix Labs is going private again through a management/investor-backed buyout, and its newfound independence should provide it more control over its future again. The company’s next (curious) move will be to launch Fae Farm, a farming simulator Switch-exclusive. As for Sea Limited, the company appears to be reining in its focus, and fewer gaming efforts might be part of that effort, despite the fact that Free Fire remains well below its highs. 

Two quick regulatory updates. First, it was reported that Meta won court approval to acquire Within Unlimited (the creator of fitness VR app, Supernatural). This is a loss for the FTC, which initially tried to block the deal. In short, this approval makes perfect sense, since blocking small M&A when emerging technology is still so nascent harms ecosystem-building and innovation more than helps. And, second, the Biden administration called upon domestic regulators to take a deeper look at leading mobile App Stores who are limiting innovation, harming developers, and hurting competition. We’ll see if or when anything comes of this, but naturally it makes far more sense for regulators to focus their collective energies on where antitrust issues actually exist (i.e. Apple’s App Store) versus where they don’t (Meta buying Within).

Immutable works to simplify web3 onboarding. Improving the web3 gaming user experience has always been a challenge — especially given the disparate assets, wallets, marketplaces, chains, and games that impact security and onboarding — but teams like Immutable are working hard to simplify things. This week, the team announced Immutable Passport, “a non-custodial wallet and authentication solution that streamlines user onboarding through passwordless sign-on and automated wallet creation.” It’s a plug-and-play tool for developers (similar to something like Apple ID), and it should streamline the onboarding experience for users across many games too. Naturally, it’s also a way to incentivize developers to stick with the broader Immutable ecosystem. Launch is expected in April, but interested teams can already begin integrating the tool. Yes, it’s “just a tool,” but reducing heavy friction points like onboarding is very much needed to help unlock web3 gaming’s next era of growth.

In Other News

💸 Funding & Acquisitions:

  • Earnings: Sony | EA | Square Enix | Konami | Kadokawa
  • Prisms VR raised a $12.5M Series A led by a16z. Link
  • Nexus raised a $10M Series A led by GGP. Link
  • Skybound (makers of Walking Dead) invested in Mega Cat Studios. Link

📊 Business:

  • EA conducted layoffs around its mobile team alongside announcing the sunsetting of Apex Legends Mobile and Battlefield Mobile, among others games. Link
  • Tilting Point and NCSOFT West also conducted layoffs. Tilting Point | NCsoft
  • Sony reportedly slashed PSVR2 headset sales forecasts after a low volume in pre-orders. Link
  • Immutable launched Passport, an authentication and user-onboarding service. Link
  • Google provided alternative billing options in India for its Play Store. Link
  • Meta’s Reality Labs burned $14B in 2022. Link

🕹 Culture & Games:

  • Supercell reveals IP mash-up Squad Busters. Link
  • Restructuring at 343 indicates Halo might turn into a live service offering. Link
  • Iron Galaxy and Epic Games will sunset Rumbleverse. Link
  • God of War: Ragnarok has sold 11M units. Link

👾 Miscellaneous Musings:

  • Game Freak on bringing its cult classic Pocket Card Jockey to Apple Arcade. Link
  • Enderstellar — a love letter to my favorite movie. Link
  • Deconstructor of Fun’s 2023 predictions. Link
  • Japan’s top 100 software sales reveals how entrenched Nintendo is in that geography. Link
  • Video games are becoming more accessible (pair with this). Link

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