In games for the right reasons?

Poor execution makes you an easy target

There’s growing criticism around the two giants’ efforts to break into gaming now that we’ve seen some of what they’ve been working on. One article even argues that Amazon and Google are in it for the “wrong reasons.” 

I disagree.

Poor execution makes you an easy target. But to dismiss this next generation of aspiring platform holders because “neither company actually has a proper rationale for being in the games business to begin with” is fatally shortsighted and lacks historical perspective. 

What reason did a consumer electronics firm like Sony have to enter the games market other than to sell TV sets, DVD players, and audio equipment? It had done the exact same thing with music and film when it acquired studios to ultimately give consumers a content-driven reason to buy devices. Is that different from what Amazon and Google are trying to accomplish? Is that the right reason? 

Similarly, Microsoft didn’t enter gaming because it was in it for the artsy experiences; it was penetrating a new vertical that was adjacent to its existing business units and would fortify its existing position in PC gaming. Does that count?

More so, the current issues around a seamless cloud-based experience and compelling content are just that: growing pains. Or did we forget about the red ring of death that lit up all over E3 the year it was released? 

I agree that the current entry by big tech in gaming needs more work. I’ve written extensively about how crappy, in fact, this has been so far. But the billions of dollars spent on new services and platforms also bring an opportunity for innovation and disruption in the existing games market. Remember: games are now mainstream--a bigger market means a different market.

Will everyone be a winner in the end? No.

Are the incumbents better positioned to succeed? Perhaps.

Do we need competition and investment from a consortium of global multinationals to ensure new, innovative experiences for everyone in gaming? Definitely.

And that’s a good enough reason for me.

On to this week’s update.

NEWS

Can Sony survive Tencent?

The consolidation in the current games market is musical chairs for high rollers. Sony’s overall position of its games division, which is arguably at its most vulnerable as the console business resets this year, is making bids left and right to secure its long-term future. But the immense success of newcomers like Tencent, which , remember, was a measly $3bn firm a decade ago and generated $54bn in 2019, means that incumbent platform holders need to get busy. 

When the Sony’s CEO, Kenichiro Yoshida, took over in 2018 he immediately refocused the firm’s attention to innovation as it had in the past. To accelerate that process, and given the current landscape of major tech firms spending to break into gaming, Sony is clearly investing on internal innovation and through external acquisitions. Along these same lines it recently spent $400MM on streaming platform Bilibili. It also paid $250MM for a 1.4% stake in Epic Games (valued at $18bn or roughly double that of category leader Valve). That’s a lot less than when Tencent paid $330MM for a 40% stake in 2013. 

Seemingly, Sony was just pushed out by Tencent in a bid for Leyou, a Hong Kong-based game developer and parent owner of, among other, Digital Extremes which is known for its ridiculously popular Warframe (which, btw, features a guitar-like instrument, the shawzin, if you needed a sense of what they’re all about). Tencent now has the exclusive as it readies to finalize a bid.

With a position that is much less secure than it was in the past around services, devices, and technology that will drive future growth and the number of capital-rich newcomers, Sony may yet be facing its real challenge in gaming for the first time in years.

Sims’ reality show now an immanent reality

The best crossover ever to come out of the Sims was the IKEA expansion pack. So I’m not yet on board with this new TBS show. Sure, there are competition/reality shows around make-up artists and bakers and people that design aquariums (I don’t know about that last one. I’m guessing.) So why not have one on EA’s Sims franchise? The underlying rationale at corporate is undoubtedly that ‘everyone’s a gamer now’ (can confirm). But my hope is that instead it will serve the niche audience that enjoys exploring the presentation of self in everyday digital life in the most fantastic ways possible. I’d watch that.

Amazon delays New World

With the minimal levels of success from The Grand Tour Game and, more recently, Crucible, Amazon is 0 for 2. Better to regroup before releasing its scheduled MMO, New World. Miyamoto’s dictum that “a delayed game is eventually good, but a rushed game is forever bad” here speaks to the viability of Amazon as a game maker. It’s also refreshing to observe some modicum of humility in the Amazon juggernaut after it benefited from the turmoil in recent months. (BTW, when do those trickle-down economics kick in?) Amazon’s share price is obviously decoupled from its success in gaming or too small to register. Let’s see how they fare in round three. Link

Fornite’s BLM panel went as well as you could expect

Hosting a serious discussion that deserves attention in an online game is a gallant effort and exactly like having a debate in a stadium filled with football hooligans. This type of overreach distracts from the actual issue. Link

I know what happened to DrDisrespect

Of course I don’t. And from the looks of it, neither does he. DrDisrespect was one of the biggest streamers on Twitch until he got permanently banned mid-stream. It’s a mess and Twitch has been silent on the whole thing.

More broadly, just like YouTube’s magical iridescent demonetization algorithm, tech platforms that employ millions of people in basements everywhere to supply content are doing a crappy job. Content creators continue to be at their whim. I get it. You want to protect your advertiser clients, especially as Facebook is getting publicly chastised for slacking. What follows is the drama among content creators to stay top-of-mind which invariably leads to inappropriate conduct and the scrutinizing of teeming extroverts with an obvious end result. ( I told you this was going to happen.) But Twitch had recently spent a bunch of money to make DrDisrespect an exclusive, only to kick him off out of the blue. What gives?

With Microsoft’s recent offload of Mixer onto FB, which effectively terminated Ninja’s contract stipulations and allowed him to switch to YT instead, it seems that we’re still in the early stages of how this market segment will shake out. This type of uncertainty and lack of transparency does not make it easier for content creators to invest. And audiences don’t enjoy being the last to know anything.

Hey, here’s an idea: can we get back to playing games? Please?

Clouds are gathering for Stadia, Sony

This week saw two announcements. First was a Stadia event that had a few worthwhile tidbits but was largely met by a lukewarm response. I continue to maintain the position that (1) as a consumer I really like the service which works perfectly fine at my house and I’m enjoying the ability to switch between devices, but (2) as an analyst I’m wholly unimpressed by the rollout so far. This platform release is a real grind. The most recent features include Crowd Play and Crowd Choice, which allow viewers to influence live-streamed games. That’s pretty cool. It is also snowed in under the barrage of mediocre filler content. I hope that Google stays on mission and continues to develop the service. But with Sekiro, a samurai fighting game from the makers of Dark Souls, which requires pinpoint timing to defeat bosses, Stadia is taking one hell of a risk.

Second was Xbox’ announcement that it’ll include its xCloud service to the Game Pass Ultimate subscription (which it already offers for $15/month) means that the 10+ million subscribers will have access to what is arguably one of Xbox’s strongest competitive advantage over Sony and Google. It’s a land grab and one that’s executed in a way that is difficult for competitors to follow. After ditching Mixer, Microsoft clearly decided to double down on the cloud service instead as its spearhead for the years to come.

Here’s why that matters: on a title-basis spending ‘more time’ doesn’t equate to spending ‘more money.’ The major concern for big publishers is that despite the increase in the number of hours we’ve all seen over the past few months, consumers don’t necessarily spend more money. While the increased server expenses are virtually marginal, the core revenue model prescribes that avid fans also spend more money, which isn’t the case.

However, on a platform-basis, they do. Bouncing between titles seemingly encourages people to loosen their purse strings. What Microsoft is trying to do is establish itself as the de facto, first choice, low-risk cloud-based gaming subscription (the ‘DFFCLRCBGS,’ for short) and entice people to stay playing a whole lot. It’s a deviation from the conventional blockbuster approach and makes sense in an era when service-based revenues represent the bulk of the industry’s income.

Clouds are gathering indeed. Let’s see if Xbox can make it rain. Link