Let’s start with some fun Naavik news: we’re excited to announce our expanded partnership with MMA Gaming, an emerging play-and-earn guild! Like many guilds, MMA’s origins began with Axie Infinity, but now — and especially after a successful IDO — the team is hard at work not just deploying capital but building critical financial tooling that will help many guilds and games better manage the volatility across their in-game economies and assets.

As MMA describes it, “we’re plugging the Naavik brain into the MMA body.” Naavik is helping MMA build a comprehensive and dynamic investment framework, providing ongoing insights and advice, and plugging the team into our growing network. We’re excited to work more with this talented team and can’t wait to see what MMA ultimately builds. If you want to learn more about the relationship, check out MMA’s announcement article.

Also, before jumping into today’s issue, just a quick note that because of GDC festivities, we’ll be taking this Wednesday issue off. See you next week!

Roundtable #39: Could Thatgamecompany Be The Pixar of Games?

In this Metacast episode, Aaron Bush, Anil Das-Gupta and Matt Dion join your host Maria Gillies to discuss:

  • Thatgamecompany’s $160M Investment

  • EA’s Lootbox Fine Overturned

  • Ukraine and the Games Industry

If you’d like us to discuss any other gaming-related topics, do reach out at [email protected]. We’d love to hear your general thoughts and feedback, too!

#1: Unpacking Razer’s Hardware Growth and Services Shift


Source: Razer

On this light news week, let’s shift gears and talk about a segment and company we don’t frequently cover. Razer — a leading gaming peripherals brand — recently reported its full year results, and even though COVID tailwinds may have inflated short-term growth, the results are still pretty impressive.

Unsurprisingly, hardware sales — laptops, keyboards, mice, chairs, and more — still drive 90% of Razer’s business and the brand still has strong market share positions across North America, Europe, and Asia. You wouldn’t guess it from looking at the company’s stock chart, which is still well below its 2017 IPO price, but the hardware business has grown at a 32% CAGR over the past four years. Even over the past year (which, remember, is inflated by COVID tailwinds), it experienced 34% growth, taking modest market share in the process.

Razer Graph

Source: Razer

This hardware-driven scale has also led to expanding gross margins, which have grown from 20% to 24% over the past two years. This is obviously low compared to most software-driven games businesses, but it’s still a positive development. Notably, today’s high freight rates and supply chain disruptions may mean that there’s even more room for improvement. We’re seeing similar improvements in operating expenses (things like admin, marketing, and R&D expenses), which means that Razer has become more profitable as a whole. The business is also very efficiently run from a working capital cycle perspective.

The part that’s most interesting to me about Razer is how it’s attempted to at least partially shift away from being a non-recurring revenue business. Using Razer products usually means also using Razer software, which allows the company keep track of how many users remain in its ecosystem. As you can see below, it’s total userbase has grown pretty quickly to 178 million.

Razer Graph

Source: Razer

Of course, “total users” is a generous calculation, but even if all of these users are active, it doesn’t mean they are active purchasers. This is what Razer is looking to change through its young services arm, which represents about 10% of revenue. Its primary service is Razer Gold (plus the lower tier, Razer Silver), a virtual credits platform that aggregates storefronts, provides discounts and rewards, and provides a centralized wallet for gaming purchases. It’s personally hard for me to see this becoming a massive service, but by tapping into a large userbase it’s already driving decent growth in Razer’s services revenue.

Source: Razer

The second component of services revenue is Razer Fintech, which has faced some turbulence since launching in 2019. The original goal was to build a prominent consumer-facing Razer Pay ecosystem across Southeast Asia, but that didn’t pan out, and the company has since refocused on B2B merchant services. Total services revenue only grew 26.6% over the past year (slower than the 34% growth in hardware), so it’s clear that there’s more work to do.

Shifting a hardware-driven gaming audience to software-driven services is a tall task (especially when moving outside of gaming). I’m skeptical the services component will ever meaningfully move the needle for Razer, but there’s still some upside (especially regarding margins) and I have to give the team credit for trying. Razer also won’t be alone in this endeavor; for example, Logitech acquired Streamlabs a while back to get more into software itself. It makes sense to expect more tuck-in acquisitions, but it’s hard to see hardware companies (minus the titans like Sony / Microsoft, which already have massive ecosystems) lead industry consolidation.

Razer’s growth should revert this year, and as it reinvests back into new products its margins may fall a bit as well. These growth charts may not look as pretty in a year, but what Razer’s accomplished over the past 5 years is still impressive. It’s also worth noting that the company has seen some strange moments. Recently, for example, the founder and CEO offered to take the company private, and many gamers attacked the brand after it failed to follow through on a Reddit giveaway. This is mostly noise — and low margin, competitive, and cyclical hardware companies are tough to steadily scale, much less pivot into software and fintech — but I’m curious to see how it evolves in the coming years. (Written by Aaron Bush)

#2: An Introduction to Crypto Raiders

Razer Raiders

Source: Tilting Point

This is the introduction to our premium game deconstruction of Crypto Raiders, which publishes tomorrow. If you’d like to read the full decon, plus get weekly updates and essays about the blockchain game space (and soon much more), make sure to go premium.

Crypto Raiders is an early-stage browser-based RPG that runs on Polygon (a layer 2 scaling solution for Ethereum). Players send their Raider NFTs on quests and dungeon raids to collect loot, level up, and (soon) earn tokens. There are also two other gameplay NFTs: Mounts, which give bonuses to questing speed, and MOBs, which are player-owned enemies that will eventually appear in the Endless Dungeon and give rewards for defeating other players’ Raiders. Gameplay is largely automatic and passive for now, but it’s built on top of a full set of RPG stats, gear, and skills, meaning more depth is likely to come.

Showing fewer than 5,000 wallets owning a Raider, the audience for the game is quite small, but it is growing steadily and is highly active, with 40% of those wallets active weekly. Thanks to incentivized liquidity pool token staking, the total value locked (TVL) in the liquidity pools is over $20M USD. Another $35M of Crypto Raiders’ governance token ($RAIDER) is time-lock staked, mostly for 12 months. Based on floor prices, the three NFTs have a combined market cap of $12.5M (an underestimation of the total but still meaningful). The team has also wisely maintained tight control over the NFT supply, only allowing players to recruit (mint) new NFTs during limited recruitment events. This all suggests a good understanding of some of the economic risks and requirements of blockchain-based games. The team’s hope for permadeath — players permanently losing their Raider NFTs in certain higher risk/reward dungeon raids — being the primary burn mechanism for the NFTs is a bit concerning, however.

The game’s core features of permadeath and play-to-earn are not live yet, but the team’s active engagement with the community and regular feature updates are encouraging. The team is managing an active Discord, running seasonal limited-time events, and providing weekly updates. This activity, it should be noted, has led to some organizational issues, especially evident in the inconsistent, scattered, and at times conflicting documentation.

The features planned for Crypto Raiders should continue to provide players with more ways to participate and engage with the game. Rudimentary versions of questing for ingredients, crafting, endless dungeon diving, and PvP are already in place and have expansions planned. Plus, the PvP system is quite active, with daily tournaments run with token prizes.

The biggest questions going forward for the project are “How will the audience respond to the high-stakes drama of permadeath?” and “Can the team generate enough revenue from players seeking fun to support the aims of investors and play-to-earn users?” In order to answer these questions and get a deeper understanding of the project, this essay explores the game’s history, KPIs, game design, tokenomics, future plans, and more.

This research essay was originally posted on Naavik Pro - the #1 research portal for blockchain and F2P games! We serve both investors and developers with our premium research. Make us your remote games research department today!

🎮 In Other News…

💸 Funding & Acquisitions:

  • Overwolf acquired Tebex, a server monetization firm, for $29M. Link

  • C2X raised $25M in a private token sale. Link

  • Lava Labs raised $10M for its multiplayer web3 game. Link

  • LILA Games announced a $10M raise for its F2P shooter. Link

  • Angelic raised $10M from Animoca Brands and Pantera. Link

  • Riot Games invested in Fortiche Production, an animation studio. Link

  • Tilting Point announced its acquisition of Budge Studios. Link

  • Triple Dot acquired Live Play Mobile. Link

📊 Business:

  • A new type of venture collaboration between Galaxy Interactive, Alameda, and Republic each with their own unique role in the partnership. Link

  • BAYC acquired Larva Labs and gave the NFT holders full commercial rights to their assets (here’s the company’s pitch deck). Link

  • Bob Iger joined the board of Genies. Link

  • F1 Delta Time is shutting down. Link

🕹️ Culture & Games:

  • On the power of video games as therapeutic mediums vis-a-vis DeepWell DTx. Link

  • GDC event list (unofficial). Link

  • Elden Ring has crossed 12M in sales. Link

👾 Miscellaneous Musings:

  • Andrew Friday Twitter thread on what makes a good web3 game. Link

  • How to Embrace your LBTQIA+ players. Link

  • Koh Kim’s web3 design pyramid. Link

  • Read Dead’s kindest posse. Link

🔥 Featured Jobs

You can view our entire job board — all of the open roles, as well as the ability to post new roles — below.

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

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