Hi Everyone. This is our last newsletter reminder that our essay contest ends October 17th. We’ll feature the top three essays and any honorable mentions in the newsletter on our website. Additionally, there are cash prizes: 1st place, $1000; 2nd place, $500; 3rd place, $250. Members of the Naavik team will not only act as judges, but will also provide the finalists hands-on support and feedback to get their essays ready for publishing.
Whether you’re hoping to dip your toes in games analysis for the first time or are an experienced writer, we’d love for you to participate and are excited to read your work. You can submit your interest here and please be sure to check out the contest guidelines here. We’ll send out a last reminder privately via email to keep you on pace. Good luck!
This Week on The Metacast
Is X-Hero Mobile’s Latest Top Grossing Anti-Hero? — In this Metacast episode, Joost van Dreunen, Tammy Levy and Abhimanyu Kumar join your Maria Gillies to discuss the success of mobile breakout X-Hero, and if it can grow sustainably in the future. The group also discusses meta mechanics in casual games, and how the power dynamics between platforms and publishers have changed in the last decade.
#1: VK Sells MY.GAMES for $642M
Russia-based tech giant VK announced it would be selling international game developer and publisher MY.GAMES to Alexander Chachava. He is a serial entrepreneur and managing partner at Cayman Island-based LETA Capital, a VC company that invests in software-related startups.
On the surface, Chachava seems like an appropriate buyer: he heads a venture capital firm with more than 30 companies in the portfolio, including projects in the field of AI/ML technologies, process automation, Big Data analytics, and VR/AR — all businesses that operate in global markets, and engage in innovative IT developments.
Chachava will pay $642M for 100% shares of MY.GAMES. The co-founder of MY.GAMES will leave VK to continue managing the gaming company. Under the terms of the deal, Chachava will receive all business assets of MY.GAMES, including all of its subsidiaries and assets. LETA Capital didn’t have any gaming-related companies in its business before the MY.GAMES acquisition. To understand why the deal happened, let’s take a closer look at MY.GAMES.
MY.GAMES (HQ in the Netherlands) was launched in 2019 as a gaming brand of VK (previously Mail.ru Group, before its rebranding as VK in Oct’21), with a focus on developing and publishing platform-agnostic games. Currently, MY.GAMES operates dozens of first-party development studios across 13 global offices. Its games pipeline includes more than 150 titles. As for VK, it is a Russian tech company, a provider of popular online services for the Russian-speaking segment, including the two biggest social networks in Russia, VKontakte and Odnoklassnik and streaming platforms VK Music and VK Video. It also includes advertising, email and blogging platforms, and many other services.
The rumors about MY.GAMES preparing for the separation have been around since late 2020. In Mar’22, the deal speculations started in earnest. Moreover, 80% of MY.GAMES’ revenue comes from international sources, so cutting the company off from the international business might have had a significant impact on the business. Nevertheless, MY.GAMES managed to overcome the challenges and has continued to monetize and scale its games, thanks to its international business structure.
MY.GAMES constitutes a significant share of VK’s overall revenue. In Q2’22, the gaming division brought 28% of all the holding’s revenue, while bringing in 32% back in Q2’21. Despite the geopolitical market situation, the diverse business structure allowed MY.GAMES to keep its revenue at around the same level last year:
- In Q1’21, the company earned ~$147.9M, while in Q2’21 revenue reached ~$149.4M.
- But the situation has since changed in 2022. In Q2’22, the gaming division reported ~$139.5M revenue vs. ~$132M revenue in Q1’22. Despite the fact that revenue increased in USD, it has dramatically fallen in RUB, which has had negative impacts to the business.
This isn’t good news for the company since before it showed a stable growth performance. Total revenue in H2’22 dropped by almost 9% to ~$271.5M vs. $297.3M in H1’21, despite the strengthening of the Russian ruble.
There are both upsides and possible downsides to the deal. As a business unit of the public company, MY.GAMES used to have access to all the possible resources of VK. Aside from that, MY.GAMES will now have to either attract additional funding or go public in order to get significant new resources for further game development and business growth. On the other hand, MY.GAMES has much more independence in its decision making. Another point here is that MY.GAMES won’t need to consolidate its financials with other business segments. This is significant in considering that ~30% of the whole group’s Revenue was generated by MY.GAMES. As an independent gaming company, the focus and growth will be now based solely on MY.GAMES’ own plans.
Global gaming market consolidation will continue despite economic and political uncertainty. This acquisition is yet another example. From our perspective it seems like a win-win scenario for all parties: selling the gaming business means VK will have more focus around developing its media ecosystem, a buyer will get attractive viable gaming assets and diversify its portfolio, and MY.GAMES will have a renewed intention on international expansion. It’ll keep doing what the business does best — providing players with fun.
Editor’s Note: There’s likely more than meets the eye here. Given geopolitical tensions with Russia and broader ‘tech sanctions’, it might just be the case that VK ~had~ to sell its gaming division. We know that Apple is scaling back its presence in Russia, and with it, MY.GAMES had some of its games deleted off the App Store. This acquisition could be more so a rescue effort to restore the games back on the App Store — in effect saving the company — rather than a true M&A effort. This also saves costs for VK. What this unique M&A implies on valuation multiples and broader consolidation efforts, I’m not so sure. A ~1x revenue multiple does seem like a bargain deal given broader consolidations trends (but perhaps not given the unique geopolitical challenges involved). I wonder if there’s more to understand here that press releases aren’t sharing.
#2: Mythical Games Overview + Insights from CEO John Lindon
This essay, spearheaded by Alex Summers, was first published in Naavik Pro, but we’re making it free for everyone today. If you’d like to receive games deconstructions and market analyses like this each week, please be sure to sign up or request a demo.
Mythical Games is a behemoth in the blockchain gaming space. The company has raised more than $250M since 2018, is comprised of a team of industry veterans, and has launched a blockchain game with more than 1M downloads. Its larger aim is to build technology that will provide a blockchain enablement engine for games. It is top of mind for many industry analysts due to the announcement in June that Blankos Block Party (Mythical’s flagship title) will be the first blockchain game to launch on the Epic Games Store — a huge achievement as it is the first of its kind to reach mass audiences through a third-party storefront. This announcement marks a turning point for mainstream blockchain gaming.
To help us better understand Mythical Games’ ambition and strategy, we interviewed its CEO and founder, John Lindon (his quotes and insights are scattered across this essay). Before digging into the team’s strategy, games, and roadmap, let’s take a look at the team. Mythical Games was founded in 2018 by John Lindon (CEO), Jamie Jackson (Chief Creative Officer), Rudy Koch (Business Development), and Chris Downs (Infrastructure Operations).
All four co-founders worked at Activision, and John and Jamie were both studio heads working on Call of Duty and Skylanders among other franchises. After leaving Activision, John started Seismic Games, the developer of Marvel Strike Force, which later sold to Niantic.
Along with its veteran founders, Mythical has made a number of other key hires including:
- Jeff Poffenbarger (Chief Operating Officer), most recently he was a studio head at Oculus VR with extensive experience as a senior executive producer at Activision and Activision Blizzard, leading multiple game launches for the Skylanders, Tony Hawk, and Marvel franchises.
- Pete Hawley (Chief Product Officer), formerly CEO at Telltale Games and was a senior vice president of games at Zynga, chief product officer at Red Robot Labs, vice president of product development at Electronic Arts, and executive producer at Lionhead Studios.
- Nicole Yang (Vice President of Marketing), most recently VP of marketing at Telltale Games and product marketing at Zynga.
- Chong Ahn (Vice President, Head of Americas), most recently the head of product management at EA, and before that mobile-related director roles at Scopely, NCSOFT, and Take-Two Interactive.
- Greg Deutsch (General Counsel), formerly general counsel at Activision for many years.
As stated above, Mythical Games has raised more than $250M in venture funding, and this is due in no small part to the veteran team which also consists of several serial entrepreneurs. But how has the team managed to secure deals with Epic Games? What exactly in Mythical actually building with the capital it’s raised, and what’s on the roadmap ahead? Let’s explore the true story behind Mythical Games and learn how the business operates under the hood.
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#3: Weekly News Round-Up
Savvy Games Group’s Big Buys: Saudi Arabia’s gaming group has been on a bit of an investment tear this past year: they acquired ESL / FaceIT for $1.5B and invested $1B in Embracer Group (this doesn’t include previous investments in EA, Take-Two, Activision, Nintendo, and more). In latest news, they’ve allocated $18B for minority investments and $13B for a major acquisition. They’ve also earmarked $6B or so to start their own gaming companies. The big takeaway I’m left with here — why would a company sell to them vs. someone else? And what benefits (if any) does this accrue to the acquired (aside from seemingly infinite capital)? There’s certainly a reputation cost, but Savvy Games Group is also likely to pay up a generous multiple for an acquisition — it’s just… are they going to make the right investment choice and why Saudi’s concerted effort into gaming over other sectors?
Stadia Shuts Down: The rumors and speculations are true: Stadia is being sunset, and with it, all purchases are being refunded. From GM Phil Harrison’s blog post: “And while Stadia’s approach to streaming games for consumers was built on a strong technology foundation, it hasn’t gained the traction with users that we expected so we’ve made the difficult decision to begin winding down our Stadia streaming service.” Google spent tons of money rolling this out, marketing it, forging partnerships with big publishers, but they never took the plunge into buying a studio and vertically integrating the game stack. Despite this news, cloud gaming is here to stay. Key players like Xbox, Sony, Nvidia, Amazon, and more have made strong moves in the category but it’s yet to be seen is big tech can make a lasting play (e.g the denied rumors of an Amazon acquisition of EA). In the meantime, I’ll eagerly be waiting for my refund.
🎮In Other News…
💸Funding & Acquisitions:
- Saudi Arabia’s Savvy Games Group sets aside $13B to acquire a major publisher. Link
- Technicolor Creative Studio is spinning out its parent company at a $1B valuation. Link
- MY.GAMES was sold for $642M. Link
- Sunrise Sports and Entertainment acquired esports team FlyQuest (and their LCS franchise spot). Link
- Google announced it would sunset Stadia and refund all purchases. Link
- Netflix is chugging along with studio partnerships. Last week Ubisoft and this week Tilting Point. Link
- And with the Netflix announcements, gamer tags! Link
- New info on PlayStation’s loyalty program: points and digital collectables, sound familiar? Link
- Before and after PC port rankings of Sony games. Link
- Genshin Impact generated $3.7B in its first two years. Link
🕹Culture & Games:
- Star Atlas and Mythical launch playable demos / games on the Epic Games Stores. Star Atlas | Mythical Games
- EA and Koei Tecmo announced Wild Hearts. Link
- Pico Worlds sounds like a lot like Horizon. Link
- Podcasters are buying listeners through mobile ads. Link
- CD Projekt Red and the power of branding. Link
- Blaseball is back. Link
- The metaverse and real estate. Link
- Wishlists before the launch of game. Link
- Legendary Play: Senior System & Economy Designer (Remote)
- Bungie: Director of Product Management (Remote — US)
- Guerrilla Games: Technical Animation Manager (Amsterdam, Netherlands)
- Manticore: Head of HR and Recruiting (Remote)
- Disney: Investment Team Analyst (Remote)
- a16z: Business Games Analyst (Remote)
- Naavik: Content Contributor (Remote)
- Naavik: Games Industry Consultant (Remote)