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.

📰 News

Tencent’s annual games conference. 40+ games were revealed in Tencent’s digital event — some updates, some new IPs — and you can see a comprehensive list here. In general, Tencent’s scale is self-evident, and although the event didn’t dig into the tech side of things, it’s clear that Tencent is able to achieve this scale because of its massive platforms, numerous partnerships, and ecosystem ambitions. Here are some high-level takeaways:

• Tencent continues to take its leading PC franchises to mobile. Dungeon & Fighter (DNF) on mobile is the next in line and should be a major hit.

• Tencent’s internal studios clearly prioritize mobile, but the company is also increasing its console presence. Partnering with Nintendo for the Switch is the most obvious example, but announcements like a Metal Slug console game also showcase this.

• Tencent’s international aspirations showed too. For example, the company established its Lightspeed LA studio (under its broader Lightspeed & Quantum studio umbrella) to create a new open world game for next-gen consoles. Tencent usually acquires to gain global exposure, and this makes me wonder whether we should expect Tencent to open more international studios (like NetEase is doing).

• The company is also developing “functional games,” which do things like promote public health awareness and help with math or language improvement. This category is small yet growing, and the government is nudging Tencent to do more.

• Tencent is also working with universities to launch a talent training program for game development, which helps ensure it’s well positioned to hire top graduates in the future.

Tencent’s games conferences are a reminder of just how many projects Tencent, the largest gaming company in the world, is involved in. Having lots of great games is critical to maintaining a lead and hitting new revenue highs. Of course, business can still be lumpy — inconsistent release dates, failed games, government intervention, etc. — and other parts of the gaming ecosystem (cloud, social, storefronts, esports, etc.) collectively matter just as much. If anything, Tencent’s positioning is only growing stronger. That doesn’t mean other competitors can’t also succeed, but Tencent’s best days are still likely ahead.

India banned 59 Chinese apps (including some games). There’s a long history of different countries banning other nation’s sites and apps, but this news pops out because of India’s magnitude. Blocking TikTok, for example, provides a meaningful blow. This “mass banning” notes national security risks and seems to be in retaliation to ongoing border disputes with the intent of penalizing China economically. Of course, China, whose Great Firewall has blocked outside content for decades, obviously has little room to argue. Previous Chinese app bans by the Indian government were temporary, and even if these bans are also temporary (TBD) this is a larger, more serious move.

What does this mean for games? A small handful of games — like Clash of Kings and Mobile Legends — were banned, which isn’t many in the big scheme of things. That said, India was clearly targeting top companies like Tencent and Bytedance, which have gaming operations. If India decides to crack down further, additional games might get banned too. Also, while this specific news is about India, concerns about Chinese apps could (and probably should) flare up elsewhere. Geopolitical tensions are a real risk for Chinese developers wanting to scale globally, and it likely has an impact on how Chinese companies decide to tackle international markets. These actions also reinforce the iron grips Apple and Google have on app stores; governments make the call but Apple/Google execute the changes. It’s hard to see their grips weaken in our current paradigm, but there’s definitely a rising theme that companies and governments are growing tired of app store monopolies. Link

Video game streaming platforms shatter records. Stream Hatchet released their latest quarterly report (and blog post) on the streaming sector, and it was a blast to read through… mainly because everything is dramatically up! Some highlights:

• Twitch: Hours watched increased 83% year-over-year, the company maintains dominant market share, and it has a clear long-tail of streamers.

• YouTube Gaming: Hours watched doubled year-over-year, and because it’s done well acquiring (and showcasing) top streamers its share of hours watched (20%) is 3x larger than its relative share of hours streamed (6.7%).

• Facebook Gaming: Hours watched tripled year-over-year, which helped it quickly gain nearly 10% market share. Similar to YouTube, Facebook Gaming also sees leverage between hours watched (11%) and hours streamed (2.4%).

• Mixer is obviously shutting down — which consolidates the market into 3 main players — but I was surprised by just how many unique channels the underdog platform was able to add. Sadly, Mixer couldn’t convert having a rising number of unique channels into a rising number of unique viewers.

• Valorant simply crushed its launch, which means other companies will try to creatively “growth hack” streaming platforms (mainly Twitch).

While there’s certainly room to grow further, don’t expect to see this level of growth again. Also, even as Twitch grows from here, it will likely continue to lose market share from YouTube and Facebook. However, Twitch’s move toward non-gaming content should also provide an ongoing growth avenue that’s still in its very early days.

A couple Ubisoft topics:

• Ubisoft unveils Hyper Scape, a new battle royale game. Hyper Scape faces an uphill battle, in my opinion. The battle royale market is crowded, Ubisoft hasn’t done much marketing, a sci-fi setting is a cool idea but the output fell a little flat, it seems like hype on Twitch is already wearing off (despite drops being enabled), and retaining players may be difficult (especially if top streamers don’t retain). I hope to revise my take more positively in the future.

• Ubisoft is also making a bunch of internal changes to reduce harassment and improve diversity efforts. Link

A couple Amazon topics:

• Amazon’s Crucible is back in closed beta. Despite a disastrous launch — only a few hundred concurrent players despite a ~$300 million budget — the team is committed to improving the game. It’s hard to be optimistic, but watching Amazon figure out what it’s doing is an interesting case study nonetheless. I admire the boldness and think Amazon will develop the right skills to make a hit game, but I doubt Crucible is the answer. Link

• Amazon Studios is creating a show based on Fallout. This show will be produced by Bethesda (Fallout’s publisher) and the creators of Westworld, so it’s definitely intriguing. In general, the trend of gaming IP gaining traction in Hollywood continues. Legacy entertainment titans are dropping the ball when it comes to making gaming a core component of their business, but there’s still upside in turning gaming IP into movies/shows. There are rich worlds to pull from and large fan bases that are eager support their beloved franchises. This means gaming fans have Fallout (Prime) and The Last of Us (HBO) shows to look forward to. Link

Apple cancels less engaging Apple Arcade games. This is good business practice and shouldn’t even really be a story. Apple Arcade launched with clear flaws, and doubling down on content that keeps subscribers coming back for more makes total sense. My unpopular opinion is that Apple Arcade might wind up bigger and more successful if Apple changes gears and puts more capital behind making Joe Rogan-sized moves, but until that happens (and, let’s be real, it probably won’t) the service will continue to stay alive but not be a game-changer. Most good developers — especially larger teams — are still best positioned by ignoring Apple Arcade altogether. Link

Private market deals + M&A.

• Discord raises $100 million at a $3.5 billion valuation. Not only is $100 million a lot of money, but it’s going to help the business add new features and accelerate its non-gaming efforts. I think Discord will succeed in growing its users in new ways, but given how they struggled to monetize in the past, I wonder what that looks like in the future. I’m less concerned and more curious. Link

• Play Brain raised a $6 million Series A to continue building its full-service esports tournament business in Japan. It has a nice customer list. Link

• Koji raises $10 million to build its mini-app business. The idea behind Koji is that social media posts and websites can be more interactive (gamified) and remix that interactivity in a similar vein as TikTok. It’s essentially mini games that can be embedded into different social media platforms. I’m pretty bullish on the idea of a TikTok for mini-games; Koji isn’t exactly that, and it’s not alone trying to find a solution here, but it will be interesting to see if they gain further social traction. Link

• Paradox acquires Playrion. Playrion, best known for Airlines Manager, is becoming Paradox’s 8th internal studio. This is a small tuck-in, but should help Paradox continue to grow its high margin business. Link

🖥 Content Worth Consuming

More on Apple’s IDFA changes.

• Eric Seufert writes a bunch of great content about mobile marketing, and his recent coverage of Apple’s changes is excellent.

• This Forbes piece — Apple Killed The IDFA. What Else Dies? — is also worth reading.

I covered the “adpocalypse” last week, and Manyu has more to share about how these changes affect game developers:

Apple’s SKAdNetwork design has an immediate business impact on game developers, and we expect the conversations between Product and User Acquisition (UA) teams to now go in a completely new direction — a direction where the right balance needs to be struck between exploiting SKAdNetwork’s limitations (to drive business value) but also creating lasting game experiences that player’s enjoy. No doubt, the need for Product and UA teams to work even closer with each other has never been more important.

The way that Apple was able to turn an entire industry upside down within a couple of minutes does expose the fragility of building a long-term business with UA as a key pillar. We’re not saying UA is bad but just that it’s not completely in your hands. In other words, the larger point this underscores is the importance of building a strong product, where UA only behaves as a business multiplier but not the actual backbone. Supercell is heavily criticised in the industry for not exploiting UA more and only focussing on building games that last for years - but who’s having the last laugh now?

Blake Robbins, Partner at Ludlow Ventures, talks about gaming (Invest Like the Best podcast). “My guest today is Blake Robbins, a partner at Ludlow Ventures. We talk about all things video games, including the major companies in the industry, how games monetize, how in-game economies work, how e-sports has evolved and much more. This is a fast growing segment of consumer attention and interest, I believe we are in the very early days of gaming going mainstream.” Link

Snapchat & Bitmoji: Mobile, Social, Cloud Gaming, Identity (a16z podcast). “Recent Snap features announced around navigation redesign, Snap Games, and Bitmoji for Games have broader implications for the gaming industry and future of social networks. Especially when such messaging games (built on HTML5 and "mini programs" or apps-within-apps) merge the key trends of mobile, social, cloud gaming... and identity.” Link

World of Warcraft’s players came together in a huge way to mourn the loss of a popular streamer. Link

The creation of “breaking glass” sound in The Last of Us Part II. Link

See you next week!