GameStop's midlife crisis
GameStop's midlife crisis
Apple's road to nowhere good, Supercell's having triplets, and Topps' $1.3bn valuation
OMG, sweet heavens.
After a string of false starts, this week the 8-year-old returned to five days a week of school. I mean in the actual building. Away from home. Wow.
It’s been amazing.
The kid has been playing his heart out. After all this time, he’s finally able to run around carelessly on the playground. There’s tiny people drama again (“She has a crush on me!”), juice packs in the sun, and the electric crackle of roughhousing with all of his little friends.
So, too, my wife Janelle has been released. She has been the one doing the heavy lifting with remote schooling (Thank you! ❤️). Not having to be a full-time teacher means a new beginning for her, too.
And I’m happy to report that I’ve finally started driving school and have managed to schedule my first vaccination. Look for the enormous yellow sticker that reads “Student Driver” and wave. Spring has finally sprung.
On to this week’s update.
NEWS
Apple is now just sh!t-talking Epic Games
In its most recent filing, Apple is quoted saying: "Epic just wants to free-ride on Apple's innovation.” The implication is that team Sweeney’s Project Liberty is nothing more than a deliberate attempt to reinvigorate the momentum behind its flagship title Fortnite.
That’s short-sighted in two ways.
First, most of Fortnite’s earnings comes from platform PC and console. Mobile represents a minor revenue stream: in 2019 roughly 1 out of every $5 dollars that Fortnite generated came from mobile. As the game’s momentum declined somewhat in 2020, with a revenue decrease of -12% y/y, mobile’s share grew to 22 percent of total revenue. Okay, cool. But Apple shouldn’t flatter itself: with its B-I-L-L-I-O-N installs worldwide, it represents about the same in terms as revenue as Xbox which counts about 50 million sold units. Get over yourself.
Second, the practice of hiring scary lawyers using intimidating rhetoric is part and parcel to lawsuits. But as this case begins to escalate, Apple’s PR is going to suffer if it continues to pursue this strategy. Siding with David isn’t a choice; it is culturally mandatory because Goliath is a bully.
Why not be the benevolent benefactor instead? Apple claims that its effective tax rate is 24.6% (less than the 30% it charges app developers), and subsequently boasts that it is “the largest taxpayer in the world.” Well, no shit. It’s one of the largest companies in the world, too. There’s no props for doing what’s expected from you. [Interestingly, if you go looking for this information online, Apple has ensured that you are directed to their site."]
Here’s an idea: how about we set the App Store rates based on the income taxes that Apple pays instead?
Minecraft speedrunner couldn’t outrun quick maths
Check out this excellent 9-minute piece by the BBC on a statistical analysis of drop rates of ender pearls from trading with piglins.
Succinctly, by backing into the number of times a speedrunner named Dream randomly managed to get the critical items needed to complete Minecraft, several statisticians/rival streamers were able to prove it a fraude. There’s only a 4.7% chance of receiving ender pearls when trading with piglins (everyone knows this, keep up pls). Across six live streams, Dream did 262 trades which resulted in 42 occurrences of ender pearls, compared to the anticipated rate of just 12. B-U-S-T-E-D. But at least he wasn’t taking performance enhancing drugs.
Twitch adopts policy to hold users accountable off-platform
I know one swallow doesn’t make spring just yet, but there’s a deafening silence now that a gaming platform is showing all of the large gorilla-sized social networks how to properly self-regulate. Why is that games always get blamed for social ills, when decision-makers clearly lead the way in ensuring a healthier interaction for both supply and demand?
But let’s not get complacent. There’s a lot more work to be done here. Fortunately Twitch regards the new measure as iterative and plans to update and adjust over time. Big up!
Cloud gaming’s bleeding edge in Austria
Huh? Did Austria suddenly jump the line in the race towards unlimited access of cloud gaming? They seem to think so. A1 Telekom Austria proudly announced its partnership with Blacknut. Titles include LEGO Star Wars (Disney), Overcooked (Team 17), Metro 2033 Redux (Deep Silver), Lara Croft GO (Square Enix), and Asphalt 9: Legends (Gameloft).
It all looks a lot like that time when we were promised white label gaming services via cable providers to play on our TV sets at home. Some intermediary service provider aggregates a bunch of content and strikes a deal with an infrastructure-level firm seeking to distinguish itself from the herd in a struggle over subscribers. While well-intended and initially backed with substantial marketing budgets, it all quickly fades to grey. Like a raincloud.
Supercell expands its franchise into other categories
After all its success, even supernova Supercell cannot escape one of the common laws in entertainment: you’re only as good as your last game. Innovation, managing success, and the continued push forward is what separates the one-hit wonders from the long-term franchises.
One explanation is, of course, that the mobile games market today looks very different than it did even just a few years ago. Where previously the lion’s share of a firm’s resources could still go towards a creative pursuit, today success in mobile demands the same 50/50 split between development and marketing that we know from conventional publishing. Arguably, Brawlstars was born at a time when its older siblings like Clash Royale had paved the way. Supercell is now a household name in the industry and has a fully operational marketing machine.
It makes sense then that the firm announced not one but three of its current projects. By applying familiar set pieces from its larger ‘Clash universe’, it aims to capture some of the momentum that exists in adjacent categories such as the match-3 ‘Puzzle and Dragons’ style, auto-chess, and action-RPG. Granted, things are in an early stage of development and therefore likely to garner criticism from, well, errbody. But perhaps that is precisely the formula to help break out of the industry’s samsara.
Baseball card company Topps goes public at $1.3 billion valuation
Talk about appreciation: now-former Disney boss Michael Eisner acquired Topps in 2007 for a little under $400 million, because it had “great emotional appeal.” The plan was to “make it digital.” Most thought it would amount to no more than a quaint collectible in the man’s portfolio. But, according to Eisner, Topps is
“now able to participate in the secondary market, where before we were only able to participate when we put the cards out.”
The tricky part with Spacs candidates is that few can point at revenue growth. As a relatively new vehicle to take companies public, it also lacks a lot of the grooming and vetting associated with a traditional public offering. But Topps can point at some impressive growth figures: revenue increased +23% in 2020 to $567 million.
What makes all this extra exciting is the firm’s legacy in managing collectibles, especially now that everyone and their mother are diving head first into NFTs. It also holds the rights to franchises like Star Wars, Disney, MLS, NHL, and Garbage Pail Kids so there’s plenty of opportunity ahead. Not a bad investment at all.
BIG READ: GameStop raising $1 billion to buy its mojo back
Look, as a 44-year who’s been out of a ‘real’ job since February last year, I can totally relate. Not being busy is hard as hell. It is often also a clear signal that, perhaps, it is time to try something new. Now that GameStop has some fresh new decision-makers onboard, it looks like things are headed in the right direction.
The overall macro environment has shifted in favor of digital and the overwhelming part of the consumer audience plays on mobile. That puts games retail in a tight spot. GameStop reported an +11% increase y/y for global sales for the nine-week period ending April 3rd. Accordingly, those Wall Street analysts that understand the space continue to believe that GameStop will be “a primary beneficiary of the new console launches.”
Almost in spite of itself, GameStop has managed to hang in there. Even as younger, more nimble competitors have managed to carve out a place in the market.
Over the past twenty years its share of the overall physical entertainment software market in the US has held steady as hardware manufacturers continue to heavily depend on retailers to sell their wares. From 1999 to 2019, GameStop’s market share has grown from 8% (when still part of Barnes & Nobles) to 25%. An important reason is the consolidation of the market over those two decades.
Nevertheless, it’s time for a makeover.
First, it needs to lose the love handles. GameStop’s imminent need to be a more significant online player puts its immense monthly retail costs in an awkward spotlight. It feels, though, that ever since the acquisition of Electronics Boutique, GameStop continued to expand to the point where a new GameStop opened inside the bathroom of an existing GameStop. I joke, of course, but its store count has to go down.
Second, it needs new attire. The throwback 90s store design reeks of Radioshack. Have y’all been inside an Apple store at all, like ever? I get that we’re optimizing for product display but does it have to look like I’m walking into the storage section? Its sci-fi ‘performance center’ has been closed due to Covid-19 but holds some promise for a global redesign. Get on that.
And, third, it needs cooler friends. Already did GameStop sign sponsorship deals with CompLexity Gaming, Envy Gaming, and Infinite Esports. Ok. That’s a start. But there’s a generation of newcomers like Vindex that are looking to occupy the real-world esports category. Take some risks. Don’t be shy.
It is unlikely that GameStop will return to making more than $9 billion annually as it did at its peak. But better to have a healthy business that’s moving than a behemoth that gets jammed because of a captain who has lost his touch. After years of buybacks that reduced outstanding shares from 168 million a decade ago to 88 million in 2020, this tanker is going to have to get itself unstuck. And so I’m totally on board with GameStop raising up to $1 billion by selling an additional 3.5 million shares.
Get yourself a few dollars, go work out, eat right, and get back out there. You got this.
🎙 Join my fireside with Raph Koster on April 16
Here’s the snippet from the organizers:
No More Islands: True Multiplayer Game Design & the Cloud
Please join us for a discussion on the opportunities presented by developing multiplayer games using cloud-native technology. Veteran game designer Raph Koster (CEO of Playable Worlds, designer of Ultima Online and other massive titles) will share his thoughts on the evolution of online games into multiverses, and what we can expect in the years to come. The conversation will be moderated by a Dutch person.
PASS/PLAY
Pass. The persistent loss of digital game libraries as platforms discontinue services.
Play. Lego larceny is on the rise. You know who you are.