In-store esports. YouTube rules. Hello bold ATVI. Bye Taylor Swift.

SuperJoost Playlist — February 13, 2018

Looking at the world through a spreadsheet and talking about video games in the abstract is not really where I had pictured myself. What I had planned on doing was play all day and figure out a way to get paid for it. Follow your dreams, they said. It will be fun, they said.

Some of us have managed as much. Maybe I should have become a streamer, even though I’m not much to look at on-camera and the mystique of my non-native English accent comes at the high cost of being incomprehensible most of the time (hence I prefer the written word). And by now the jig is up anyway:  successful streamers spend 14 hours broadcasting every. single. day. I mean, dayum.

Another avenue was to rise to the coveted position of games journalist. But here, too, I didn’t shine. After a successful ascension through the ranks with one of the market leaders, the crushing soft power of its PR firm claimed my aspirations. Or rather, I found out the hard way that you can’t both have drinks with the CMO and be critical of their latest release at the same time. (I’m keeping everything btw.)

No, better to slice and dice company reports and wade through consumer research by day, and play by night. Outgrowing the romanticized notions from my childhood has been liberating for both my work and play. Just because your company’s management team is trash doesn’t mean your games suck, too.

So now that earnings season is over, I can finally get back to playing again. I just deleted Mario Odyssey to make room for The Zelda BotW DLCs and can’t wait for the new God of War. I’m hoping it will provide me some much-needed parental guidance for both my five-year old and my inner child.

Ready yourself, boy.

 

MONEY, MONEY, NUMBERS

Tronc pivots to asset sell-off
Better paid than not paid is what my grandma always said. Apparently that’s what Tronc’s management team thought, too, when it decided to sell off trophy property LA Times to a bio-tech billionaire. Instead of making a credible pivot to digital as Tronc initially set out to do, it is now going to pay its debts with financial finesse instead of adding subscribers (something the NY times actually managed to do). Across the traditional media landscape we’re seeing divestitures and acquisitions in a desperate pursuit of scale. But that’s not the same as creating value. Link

Tencent invests $476MM in Shanda
Representing the largest investment in a gaming property since its Supercell acquisition, Tencent announced the deal last Thursday. A veritable buffet of corporate speak, the deal pursues a “new cultural ecosystem through strategic partnership, investment, resources sharing and IP operation.” Super-helpful. It probably means cheap resources and staff as Tencent is looking to either (1) stay ahead of Alibaba etc., or (2) help out a struggling Chinese game company with or without the help of the clearly visible hand of the Chinese economy. Shanda Games spun-off from Shanda Interactive in 2001, went public in 2009, and  is a pioneer of free-to-play monetization even among Asian firms. In 2005 the company converted its Legends of Mir from a subscription model to free-to-play and saw its revenues triple. However, the company struggled following the transition from PC to mobile forcing it to go private again and was finally bought out at a $1.9B valuation. In preparing to go public once more, Tencent stands to gain from mobilizing Shanda’s faltering title Dragon’s Nest (published by Tencent btw) which has seen monthly earnings drop from a high of $100M in early 2017 to under $20M last month. Link

British retailer GAME partners up to offer in-store esports
Offering arenas set in their stores, UK retailer GAME is looking to become the go-to destination for competitive gaming. Considering that the British love to play together this is a pretty resourceful answer to the decline in retail. It has the footprint. All it needs now is the traffic. It also offers an interesting suggestion for GameStop (which btw also off-loaded two of its key execs the other day) because the current hardware cycle is going to come to a close one day or another. Link

Glu Mobile axes famous people
Where previously the borrowing of a celebrity’s likeness presented a strong strategy and offered a differentiating avenue for mobile game development, that time is now behind us. During Glu’s earnings report ($83M in Q4 revenues), the firm also announced it is no longer pursuing celebrity-themed games following the disappointing results from The Swift Life, a game around singer Taylor Swift. Instead Glu made its money with Design Home, which accounted for 36% of total bookings, Tap Sports Baseball, and Covet Fashion. My guess is that celebrities and their representatives ask for financially unsustainable terms, especially considering the risk that comes with attaching your livelihood to the ups and downs of someone living in the spotlight. Dealing with fictional characters is much easier, because, well, they don’t have mental breakdowns or health issues, which explains why Glu signed a deal with Disney to develop a mobile game based on the Pixar characters. Kim Kardashian Hollywood, the title that started it all, was up slightly at $8MM compared to $6.9M y/y. Link

YouTube, Twitch forced to clean up their acts
There’s a distinct irony in the way that Big Tech are starting to realize what they’ve gotten themselves into. I’m sure they saw it coming that discovery would be an issue. But after years of arguing that content wants to be free (as long as it’s not theirs), sheer size has put them on an inevitable collision course with self and externally enforced rules. What to do if some of your star streamers and content creators turn out to be morally tone-deaf and, perhaps not entirely surprisingly, only doing it for the ratings? After a spectacular rise to popularity as the underdog, these platforms are now finding that they are the incumbents with all the self-regulatory accouterments and thought-policing that comes with that. Worse than getting slapped with a fee from the FCC is having your advertisers pull out. Link

Take-Two slowly formulating post-GTAV strategy
Grand Theft Auto V has sold 90 million units since launch which is an insane number. Such a massive user base has allowed the publisher to drive its recurrent revenue as it continues to release expansion packs and add-ons to the game, which greatly benefit the game’s overall retention and monetization. It’s likely that this money train will continue to ride for a while but you do want to plan for what comes after. And here’s where TTWO is slowly piecing together a more diversified approach. For many who are watching the firm, eyes are on the future with the release of RDR2 now in the Fall. (I already discussed some of this last  week.) Recent acquisition, Social Point, contributed to the overall investor excitement, adding around ~$20M for the quarter with titles like Dragon City and Monster Legends, and is expected to account for a bigger piece moving forward. Finally, Take-Two also announced the NBA 2K League, a joint-venture with the NBA looking to capitalize on the momentum in esports. My expectation is that outside of the sequels coming from 2K, this year will be about transitioning and establishing its core strengths for 2019 and after (PS5 anyone?). Link

Activision getting bolder
The company reported $2,640MM in revenue for Q4. For 2018 Activision is feeling confident, providing an initial earnings guidance of $7,450MM for the year, which is inconsistent with the firm’s practice of signaling a decline. Drivers of this confidence for 2018 include (1) optimism around a scheduled expansion for World of Warcraft later this year, (2) several new titles slated for release by King Digital, (3) digital monetization (micro-transactions, expansions, DLC) for its Destiny and CoD franchises, (4) and growing indirect consumer revenue (e.g. media rights sold to Twitch, OWL sponsorships).

Digital now accounts for 61% of Activision Blizzard’s total revenue, up +7% y/y. Last year the firm reported a figure of 62% which was largely the result of a spike in spending on a recent expansion for World of Warcraft at the time. BTW, WoWlaunched 13 years ago in Europe this week, which is an incredible accomplishment as very few franchises have had this type of staying power. Today, WoW still has 6.7M monthly active players worldwide, or roughly half from its heyday. Link

Bloomberg made a 80s retro mall-simulator
To explain the demise of retail, and specifically that great American institution the shopping mall, Bloomberg developed a browser-based game. Yes, I’m serious.

  • Last week’s write-up: here.
  • One before that: here.
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