Top News

#1: Niantic Cancels 4 Projects and Cuts 8% of Its Staff

An article by Bloomberg has revealed that Niantic, creators of the $6 billion behemoth that is Pokemon Go, have canceled 4 of its projects in development and will also cut 85-90 jobs. According to Niantic’s LinkedIn page, it has 1,114 staff, making this an 8% reduction in its workforce.

The news of the cancelations and job cuts was a shock because just a few days prior to Bloomberg’s article, Niantic unveiled a new game called NBA All-World. The 4 canceled games and NBA All-World were part of Niantic’s 10-game development strategy which they revealed in a blog post 2 years ago.

Using the powers of time travel, we in the future know what some of those games are (Blue Sky and Snowball are codenames of unannounced titles, and it’s unknown if Campfire, a social app, is considered part of the 10-game plan).

1. CATAN – World Explorers
2. Pikmin Bloom
3. Peridot
4. NBA All-World
5. Transformers: Heavy Metal
6. Hamlet (A collaboration with Punchdrunk)
7. Codename: Blue Sky
8. Codename: Snowball
9. Campfire?
10. Unknown

It’s no secret that Niantic has struggled to replicate the success of Pokemon Go. The cancelation of 5 games (Catan was canceled less than a year after it soft-launched in July 2020) from its 10-game plan, and the shuttering of Harry Potter: Wizards Unite earlier this year, means that its slump continues.

This begs the question of whether the two games left standing are performing well enough to survive or will they be next in the firing line. Peridot is two months into its soft-launch period in Malaysia and Singapore, so it would be too soon to make a judgment call there. On the other hand, Pikmin Bloom has been out for eight months (since October 2021), so it will be an interesting exercise to see if it will be given more time to bake or if it will be the next one to get cut.

According to Sensor Tower data, Pikmin Bloom (PB) has been downloaded 5.5 million times while generating revenue of $4.8 million over the past 8 months. Japan is the most important territory for the game, comprising 41% of its downloads and a colossal 71% of revenue. The US follows in a distant second place, claiming 20% of downloads and 16% of revenue.

While those are interesting data points, it doesn’t tell us if Niantic will cancel PB or keep it going. What might tell us more is pitting PK’s performance against its recently canceled sibling, Harry Potter: Wizards Unite (HPWU), so we can see if it can avoid the same fate. We’ll view the data aligned by launch date so we can do an apples to apples comparison.

Unfortunately, the signs are not good for PB, as it lags behind HPWU by a significant amount in both downloads and revenue. Why then has Niantic opted to keep it alive?

The chart above should tell you why. PB has incredible retention numbers! In our market update for June 16, we covered how Trailmix managed to raise a $60 million investment from Supercell because of strong retention numbers for its game Love & Pies. Well, the numbers PB is getting put it to shame. A 51% D7 rate is even better than Meta’s Facebook app. If you think that the numbers are getting skewed by absolutely maniacal fans in Japan, think again. The retention numbers are consistently high over all regions, with the least loyal players in Western Europe still putting up a D7 retention rate of 33%.

We know that Niantic is likely keeping PB alive because of its superior retention numbers, but why isn’t it blowing up like Pokemon Go (PG)? My hunch is that PB is too niche to be able to attract a large enough user base. While Pikmin are cute, they all look pretty similar, and your goal in the game is to grow a big squad of Pikmin. Unlike capturing rare and visually distinct Pokemon, the PB experience does not have as strong a sense of discovery and doesn’t lend itself well to virality. Niantic is probably keeping PB alive while it tries to figure out ways it can increase its player base, but if it can’t figure out a way to do it soon, PB will be on the chopping block, as excellent retention doesn’t matter if you can’t get players into the funnel.

Not including Pikmin and Peridot, there are only 3 at-bats remaining in Niantic’s 10-game development plan, and the pressure for each to be the next success grows higher with each failed game. It also puts pressure on the plan to ultimately become a platform (their Lightship SDK) that others can build on top of to drive additional future revenue (we covered this in the Digest last month).

Will Niantic ever succeed in releasing another hit game? From what I’ve seen of Peridot, I believe it could have a decent chance of success. The Peridots are adorable, and similar to Pokemon Go, there is a sense of discovery in the form of the breeding mechanic, which could drive virality. For Niantic’s sake, let’s hope I’m right.

#2: Private Equity Firm Joffre Capital Acquires Minority Stake in Playtika

The private equity firm Joffre Capital (JC) has acquired a minority stake in casino and casual game publisher Playtika. The deal, worth $2.2 billion, sees Playtika’s majority shareholders, a Chinese consortium led by Giant Interactive Group, sell half of its shares to JC for $21 a share, resulting in JC owning 25.73% of the company.

Playtika may not be a household name like King or Zynga, but it goes about its business quietly with a portfolio of casino and casual games to the tune of $2.53 billion annual revenue (FY21). For comparison, Zynga had a record-breaking FY21 and posted revenue of $2.78 billion.

Playtika’s first product, Slotomania, was a slot-machine game released in 2011 that still earns around $10 million in monthly revenue more than a decade after it launched. The success of Slotomania prompted Caesars Interactive Entertainment, a subsidiary of the world-famous gaming group, to acquire Playtika. The acquisition gave Playtika the funds to strengthen their product slate, and it bought several casino-themed games over the next few years, including the World Series of Poker.

All that changed in 2016 when Caesars sold off Playtika to pay down its debt to a consortium of Chinese companies led by game developer and publisher Giant Interactive Group. From this period onwards, Playtika shifted its strategy away from solely being a publisher of casino games and began acquiring casual game studios to diversify its portfolio. The first of the studios to be added to the portfolio was fellow Israelis, Jelly Button. Playtika followed this by buying Wooga in 2018, Solitaire Grand Harvest and Seriously in 2019, Reworks in 2021, and Justplay.lol earlier this year. According to Playtika’s Q1 financial report, the company now sees 52.5% of revenue coming from their casual titles – a growth of 14% YoY. It hasn’t been smooth sailing for the company, though, as it recently laid off 250 employees and closed down three studios in London, Montreal, and Los Angeles.

The acquisition of the shares by JC came after the board announced in February that they were exploring strategic alternatives in order to “maximize value to their shareholders” — shareholders who would be understandably miffed at the circa $15 price of Playtika shares at the start of the year, which is half the value of its post-IPO peak of $33. There may have been additional pressure from the founder of Giant Interactive Group, Shi Yuzhu, as he has had almost $27 million of his Chinese assets frozen in a crackdown by the Chinese government.

What does JC see in Playtika for it to stump up a 46% premium on the price of Playtika shares ($14.39 the day before the announcement)? First, the purchase price of $21 is still 30% lower than its IPO value and allows JC to enter the gaming space and diversify its investment portfolio. JC’s prior investments were in the finance space, with the acquisition of fintech Coins.ph and financial markets platform Investing.com. Joffre may also see potential in Playtika’s Direct-To-Consumer technology, essentially HTML5 games, which allows them to avoid paying platform fees which, in turn, will unlock higher net income.

I think this has been a good piece of business by Joffre Capital for several reasons. Playtika is profitable and growing steadily with a forward guidance of $2.73 billion for FY22, representing an 8% growth in revenue YoY. The casual games in its slate also managed to grow their Q1 revenue by 20% YoY in contrast to the 6% decline that the market experienced. Its Direct-To-Consumer platform allows it to sidestep platform fees and will be a nice cherry on top, provided it can find a way to drive players there. It has also diversified away from pure casual games with its purchase of Justplay, exposing it to the mid-core action and battle royale genres. Perhaps another acquisition is in the cards for a studio in the sports and racing genres? We’ll be keeping our eyes peeled for any potential announcements.

Game Launch Radar

#1: Monopoly Go

• Publisher: Scopely
• State: Soft Launch
• Territories: Philippines
• Classification: Casual – Simulation – Tycoon

• Quick thoughts:

  • It looks great, with high levels of polish in art, animation, and audio, but though the traditional Monopoly board is present, it plays nothing like the board game. Scopely has been, shall we say, “heavily inspired” by Coin Master. The slot machine mechanic has been replaced with dice rolls on the Monopoly board, but it otherwise looks like a transplant of Moon Active’s game into a Monopoly world.
  • Scopely has taken a proven game and slapped on a new coat of paint, hoping that the brand recognition will help it stand out. It will be interesting to see if it can achieve the same success as its source of inspiration.

#2: MMA Manager 2: Ultimate Fight

• Publisher: Tilting Point
• State: Launch
• Territories: Global
• Classification: Casual – Simulation – Tycoon

• Quick thoughts:

  • Prey Studios, one of the developers behind the game, specializes in management sims, with games like Fitness Manager and Horse Manager in its portfolio.
  • It’s only been a year and a half since the original MMA Manager was launched, and it’s surprising that Tilting Point decided to release a new version rather than continue servicing the original. A quick look at Sensor Tower shows that the first game was not much of a success, accumulating 2.8 million downloads and $1.1 million in revenue across both stores. Perhaps Tilting Point decided that the original was beyond saving and launched a new game to get more press and visibility.
  • The short turnaround between the first and second game means that there has not been much time for big changes, and reviews on the app stores seem to back it up as a slight improvement over the original, but essentially more of the same. I wonder if this quick sequel release strategy will pay off for Tilting Point.

Other Game Announcements

• Fire Emblem Heroes is Nintendo’s first billion-dollar game. Link
• Battlegrounds Mobile India crosses 100 million player registrations. Link
• HoYoverse cops backlash when leaks of characters in Genshin Impact’s upcoming South-west-Asia and North-Africa-inspired Sumeru update show light-skinned characters. Link
• A leak by Leakers On Duty APEXM on Twitter reveals that Apex Legends Mobile will be getting six mobile-only Legends. Link
• Flexion Mobile launches FunPlus’ King of Avalon on alternative app stores. Link
• High-profile Diablo Immortal streamers quit the game due to its “predatory pay-to-win system”. Link
• Uma Musume Pretty Derby’s launch in South Korea nets $2.3 million in 24 hours. Link
• Square Enix will shut down Final Fantasy Record Keeper outside of Japan at the end of September. Link

Company Announcements

• Supercell veterans form a new company, Bit Odd, to create “moments of wonder, weirdness, and delight”. Link
• 505 Games acquires D3 Go, the publisher for Marvel Puzzle Quest. Link
• Wildlife has opened its fifth independent studio, Moon Tavern Games. Link
• Tencent’s Tianmei J3 Studio Group splits into four separate studios, focusing on different genres of shooting games. Link
• Netease announces the expansion of its board of directors with the appointment of independent director Grace Hui Tang. Link
• Skill-based mobile game developer Tether Games hires former Zynga exec Sara Stapleton as Chief Business Officer. Link

Ecosystem Announcements

• Unity is laying off hundreds of employees two weeks after CEO John Riccitiello assured employees that the company was on good financial footing. Link
• The Spanish government intends to regulate the use of loot boxes. Link
• Apple launches a Founders program to highlight up and coming developers in Europe. Link
• India is proposing an increase in GST rates for several goods and services, including online gaming. Link
• Xiamen University in China, in partnership with Netease, launches a course that teaches Minecraft. Link
• Rustpunk Rascals, the result of Supercell’s Level Up program for graduates and students, is unveiled. Link
• A report by Research and Markets finds China’s player base has fallen to 706 million in 2021. Link
• Google reaches lawsuit settlement with app developers and will establish a $90 million fund to support small US developers. Link
• Applovin and Adjust lay off 12% of its staff, calling it “a proactive step,” given the current macroeconomic climate. Link

Content Worth Consuming

• Will Harbin On Lessons From Kixeye And Making A Comeback (Gamemakers): “Supercell was a tremendous loser on Facebook. They had their first game, I think was Gunshine, which was godawful. When we were playing that game, we were like, “Well these guys aren’t a threat”. I mean, it was a beautiful looking game, it was a fun little experience, but it’s like “Wow, these guys don’t know shit about monetization…or retention…or anything”.” Link
• Sonic On The Big Screen Boosts Mobile Games To New Heights (PocketGamer.biz): “For Sonic Forces: Speed Battle, data.ai found a clear correlation between markets where the movie performed well against the top markets by downloads for the game. These were led by Brazil, Mexico, Argentina and France, which were all among the top 10 international markets by gross box office earnings.” Link
• Soft Landing to Conversion – Introducing Onboarding Best Practices PART 3 (GameRefinery): “The first time a player makes a purchase in this shop with real money, they will immediately receive the full amount of “bonds” (character shards) needed to acquire a special character for their roster. This character’s passive skill is particularly useful for new players on low player levels since it boosts the experience points gained when offline. But wait, there is more! This conversion incentive is also cleverly linked to retention. After the initial purchase, for two days, the player will receive extra daily log-in rewards that are specially designed to aid in swiftly powering up your character roster”. Link