Amazon gaming has hit a rough patch

Where it has managed to build a respectable presence in categories like film and binge TV, its gaming division is having a harder time.

But not for lack of trying: Amazon spent a ton of cash on assembling some of the best talent in the industry and got them working on several games at once. It had already acquired Twitch and its share in games retail was growing at the expense of GameStop and others. More so, it sank a bunch of money into the Crytek engine to create its own middleware, Lumberyard. Developing its own content only made sense in the Amazon playbook of vertical integration and margin exploitation.

Twitch has been the shiny gem at the center of Amazon game’s crown. Live-streaming viewership has continued to grow and has allowed Twitch to build on greater and grander ambitions as it looks to compete on equal footing with traditional TV.

It has also been working on its own expansion. Just this week, it announced its acquisition of Bebo for a rumored $25MM. Not to be confused with the social network contender that AOL bought back in 2008 for $850MM and then sold back to its founders in 2013 for $1MM, Bebo got a new lease on life. Specifically, it focused on gaming streaming and esports events. It offers a tool commonly used by tournament streamers and build a platform for gaming events. Twitch, like its parent company Amazon, is looking to vertically integrate what is undoubtedly one of its most profitable content categories.

But Amazon’s gaming efforts have not fared as well. It already cancelled Breakaway in 2017, its racing game Grand Tour Game didn’t impress in sales, and the firm is now going through a shuffle around Crucible and New World. Its middleware engine Lumberyard has yet to deliver on its promise. To date there’s only two games released that use the engine: Coffence by Sweet Bandit Studios, and Amazon’s own The Grand Tour.

Not surprisingly, it’s now laying people off. Amidst the noise around E3, the firm announced last week that it was letting go of several dozen people from its games studios.

Okay. So content production is not going so well. But it’s Amazon, right? They’re one of the wealthiest companies in the world and basically operate and own a large part of the internet.

It adds up to one question: Does cloud gaming present another opportunity for Amazon to take market share? While its obvious competitors have wasted no time making a bunch of noise, we’re still waiting to hear what, if anything, will roll out of the Bezos empire.

One school of thought here is that Amazon isn’t set up all that well to host a solid cloud gaming experience. Unlike data centers owned by Microsoft and Google, Amazon’s internet backbone was built organically. Its infrastructure is optimized for a ‘web experience’ and not for a ‘cloud experience’. For that same reason, I’m told, Twitch has remained siloed.

But it is unlikely that a setback in game development is going to stop the Amazon train. I continue to believe that the behemoth will acquire the struggling games retailer GameStop, and Twitch has only started to get warmed up. This deck shuffling suggests that Amazon is going to have to rely on third-party publishers to create content for whatever platform solution it’s likely building.

Perhaps this time the margin isn’t its opportunity.

On to this week’s update.

NEWS

Netflix now making games, sort of

After the choose-your-own-adventure experiments proved successful, Netflix is now expanding further into interactivity. It is looking to turn some of its IP into other media properties. Most notably, Stranger Things 3: The Game is set to launch on July 4th, the same day its third season goes live. Given the nostalgia factor and rampant D&D references, it is not a long shot. Although Netflix is clearly at the start of something here and has yet to prove its ability to transpose its IP onto gaming, it has the makings of something novel. In addition it is also working on a title called The Dark Crystal: Age of Resistance, based on the 1980s Jim Henson film. These are the type of adventures I’d choose. Link

Rovio’s 2nd movie gambit

The Finnish game maker has managed to cement itself in the minds of telco execs who were all too eager to get Angry Birds as part of their marketing materials when smartphone adoption sky-rocketed and with it consumer demand for data plans. The success of its first movie convinced investors enough for Rovio to survive its IPO. And now a second movie is likely to seal its fate for all the marbles. If they pull this off, investors will have the second data point to prove (1) Rovio’s success in expanding its Angry Birds IP to another medium, and (2) there’s enough going on for the firm’s value to fling back up. Notably, Rovio’s share price has been increasing since December, when it hit a low of $4.25 per share, to $7.59 on Tuesday. That’s great progress, of course, but still a far cry from its IPO price of $13.50. Link

Russian esports tournament tanks

Despite a $500,000 prize pool, a FIFA 19 tournament in Moscow only managed to attract 10 (!) attendees. The organizer blame the lack of marketing. It leaves the question whether this was a singular screw up or indicative of a broader malaise in (Russian) esports. Link

It’s not a loot box, it’s a “surprise mechanic,” says EA legal council

The UK’s Digital, Culture, Media and Sport Committee held a hearing on Wednesday that included EA and Epic Games about loot boxes. When asked about whether or not loot boxes were ethical, one of EA’s legal reps stated: “We don’t call them loot boxes. We look at it as surprise mechanics.” EA’s stance is that loot boxes are akin to toy surprises (Kinder Eggs!) and therefore very common. However, unlike chocolates and small random toys, loot boxes in digital games (1) don’t have any intrinsic value (because they’re digital and cannot be owned or resold by the purchaser), and (2) are part of a player’s progression through the game. Kinder Eggs are neither. Here’s the full video of the meeting, for the fans.

The man behind Fortnite

The WSJ did a worthwhile profile on Tim Sweeney. My choice quote is:

“I think the thing I’m proudest of is not creating Fortnite, because I didn’t create Fortnite. But I did create and nurture the company that built Fortnite.’”

Creativity doesn’t exist in a vacuum. Building the infrastructure and support system necessary to pull off a big win like Epic did isn’t the result of unobstructed creativity. It comes from establishing an environment within which big win may occur. It requires, of course, to check your ego at the door.

During E3 I saw Mr Sweeney float by on the opposite escalator at the JW. It is safe to say that money has not corrupted this man. No Armani suits here or, ack, those leather jackets that everyone in gaming seems to wear. Do they assign those when you reach a certain level in the corporate hierarchy or do all PR departments use one and the same stylist? Nevertheless, it never ceases to amaze me that there are no groupies, no screaming fans, and no paparazzi--and thank God for that.