Cloud contenders are gathering support

Team up to stand out.

Playtime is over.

After a summer filled with fun and games (ostensibly) we collectively send our brood back to learn. Says the six-year old: “But I don’t care about learning. I’m more into playing.”

Yeah, well, obviously. Emergent play is always and infinitely more fun than structured play. Having had about four months to lollygag around the house and making up endless scenarios of figurines battling each other and arbitrary rules that were instantly sacred, now the children return to regularity, transparency, and predictability.

This summer I put a premium on spending time with the kid. To great success. He’s big enough now for me to throw him in the water and have him paddle back to me. It’s a blast. We floated, drifted, ran, threw things, made fires, peed on them, ate french fries, stayed up late, watched Star Wars, and had too much ice cream. Summer was, in a sense, emergent and unstructured.

“Life must be lived as play, playing certain games, making sacrifices, singing and dancing,” said Plato. He was right.

I saw a mother dance through the gates on her way out after drop-off. But me, I miss my playmate. Can’t wait for the weekend.

On to this week’s update.

NEWS

Epic looking to build a platform

Here’s a worthwhile read on what Fortnite-maker Epic has in store for us. Summarized: Epic is not just rich, it’s also smart. And the PC gaming industry is heavily concentrated around a single platform, Steam. It raises the question: will Epic use its newfound riches to disrupt the PC games market? Sweeney seems ready.

FTC fines Google a measly $170MM for violating COPPA

It’s a matter of concern that the US government is trying to protect children from having their data illegally harvested, without having the power to financially rattle any violators. YouTube’s parent company Google generated $36.4 billion in 19Q1, up from $31.1 billion a year ago. Despite the fanfare, this fine barely amounts to 0.11% of its anticipated annual revenue. Naturally it didn’t warrant sending a warning to investors.

Meanwhile Google is trying to judo this situation into a positive. YouTube CEO Susan Wojcicki posted her mea culpa to YouTube’s blog and to announce that the firm is investing $100MM in creating “thoughtful, original children’s content on YouTube and YouTube Kids” over the next three years. So $33MM/year, while Netflix and Amazon deploy billion dollar budgets annually for content creation. Not the overcorrection I'd expect.

Hey, I get it. Everyone is trying to sell something to someone. But where once Big Data was an exciting new avenue for building businesses, it’s now starting to look like less flattering predecessors like Big Tobacco and Big Pharma. Tech companies are immensely powerful, prove to be incapable of credibly managing people’s data, and are under pressure from especially advertisers to provide value. All of us have to do better. Link

The clouds are consolidating

As I discussed previously, to carry the imminent expenses involved with building a reliable, consumer-friendly cloud gaming service, we’re starting to see big firms teaming up to differentiate.

First, Razer and Tencent announced a partnership to “define the standards for cloud gaming” but I don’t know what that means. Is it consumer expectations? Costs? FPS? The apparent basic premise here is that Tencent’s cloud offering and some content will be baked right into Razer’s hardware. So it’s a hardware/content/cloud service partnership. From a high level this is a sensible alliance that targets the higher end of the gamer audience. It is here that Tencent will find the bulk of the early adopters for its cloud offering. It also gives Razer a solid differentiator. Razer is growing but continues to run at a (declining) loss.

To become the Apple of hardcore gaming, it is investing heavily in a myriad of marketing efforts and product innovations. Notable here is the growth in its virtual currency (“Razer Gold virtual credits”) which doubled to $36MM y/y. Interestingly, Razer here refers to its digital wallet as “services revenue”, probably to impress investors who put a high premium on recurring revenue. Partnering with Tencent is a big win for Razer, which is hoping to benefit from the lift the giant can potentially provide in content and services revenue. (Although that new Blade Stealth 13 ultrabook looks delicious.)

Second is the partnership that Microsoft and SK Telecom announced to establish “a joint 5G-based cloud game business.” It’s a shrewd move to capture key market share ahead of time. Rather than expanding an established install base and jumping through hoops as it did with the launch of the Xbox in China, Microsoft is (correctly) anticipating that South Korea will be a key market for its xCloud service. More so, historically, South Korean gamers have proven themselves early adopters and highly demanding. The partnership suggests to me that Microsoft is currently in conversations elsewhere, too (Japan, Europe!), and looking to make friends around the globe. Link

Ubisoft’s PC subscription service goes live

Welcome to the future. According to a survey Ubisoft ran, it is content quality and diversity that really moves its fanbase to commit to a subscription service. It makes sense, of course, for one of the biggest and best-known content providers to offer their own unique service. But it’s starting to get pretty cluttered out there with everyone and his mother offering subscriptions. Link

China tariffs gone suck this holiday season

Everything is proceeding as planned. After a growing cadre of electronics firms have been re-evaluating their presence and efforts in China, the recent exchanges between the US and Chinese government have exacerbated the trade situation. And it’s becoming evident among US retailers. According to Best Buy’s CEO Corie Barry, “the September 1 tariffs will impact televisions, smart watches and headphones. And starting December 15, goods tied to computing, mobile phones and gaming consoles will be impacted.” Apparently 60% of its total cost of goods sold comes from China. This holiday season is going to be a nail-biter. Link

PLAY/PASS

Play. What was old is new again. World of Warcraft Classic has been outperforming on many metrics: crowded servers, long wait times, it's all back! On a serious note, however, I'm told the average price paid for a subscription is the highest it's been in almost two years, suggesting that the majority of people of who subbed in August only paid for a single month of time. Right now the party is going strong, but let's hope it lasts.

Pass. PewDiePie now has 100MM subscribers on YouTube. Overheard: “For a handsome, unemployed Swedish guy he did pretty well for himself." Still meh.

Play. Scifi shooter Warframe now features a guitar-like instrument, the shawzin, and it’s a hit. Link

Pass. Hasbro's ill-informed Monopoly: Socialism. If you manage to even get the Zodiac Killer to throw shade at you, you know you done messed up.