When Lambo
Axie's $152M raise and Amazon's content curse
October has started and with it the year’s final quarter.
I’m expecting the remaining months to be a race to the finish. The games industry is at an all-time high and everyone is feeling flush. The question is now whether or not it can last?
One approach to the months ahead is that we’re entering the last bit of storm before the quiet sets in. I’m not talking about a full-stop slowdown. But there has been a lot of money sloshing around the industry. It seems far fetched that all of those dollars are going to result in new marvels.
For one, the pandemic has had everyone at maximum spending levels. Consumers have flocked to gaming and, in turn, fattened the already plumb balance sheets for the big dogs. Some proved fiscally prudent, such as EA, Take-Two, and Activision Blizzard, who all borrowed additional capital while interest rates were low. Others, like Nexon, stumbled into Bitcoin, allocating a cool $100 million, only to suffer its volatility.
Second, big tech released their first salvos. Netflix started hiring and just last week purchased a game studio. Amazon (more below) is enjoying its spotlight with New World and it opens the door to more widespread success in gaming. Maybe. If nothing else, these firms have and will continue to funnel large amounts of money into interactive entertainment to claim their stake.
And finally venture capital has been on an absolute tear throughout the games industry. If you haven’t received a wire transfer from Andreessen Horowitz at this point, you’re not going to. They’ve been funding errbody. According to Drake Star Partners, an investment bank, private game companies raised a total fo $9 billion across 493 deals in 2021 so far.
One has to wonder how much of that money is going to end up under management by some previously mid-level VP of whatever at a large publisher who is having an absolute ball of a midlife crisis right now. But if you’re still asking “When Lambo?” you may have missed it already.
On to this week’s update.
NEWS
Axie Infinity maker raises $152 million in series B
The second most famous game coming from Vietnam, Sky Mavis, is making the most of its momentum and announced its next funding round that values the firm at almost $3 billion. The plan is to become a platform, the Mavis Hub, to share the gift of crypto with everyone else. It strikes me as a rather conventional plan for a firm that is popularizing decentralized finance. Its objective:
“to bring economic freedom to gamers.”
No idea what that means.
What the hyperbole obfuscates a bit here is the first signs of a slowdown for Axie Infinity. Certainly, according to tracker CryptoSlam, the game counted 1.8 million daily actives in August and has racked up over $2 billion in total sales since March 2018. But in all fairness, September was a lousy month.
Month-over-month sales were down -39 percent, from $848 million in August to $518 million in September.
Its total unique buyer count did increase +5 percent from 305,264 to 320,886 but that is a lot less than the +42 percent increase for the month before.
Total transactions basically flatlined from 1.854 million to 1.819 million, and the average size of a sale dropped from $457 in August to $285 in September.
Don’t get me wrong: these are some spectacular numbers. Consequently, a flattening is easily explained by the fact that such a breakneck rally cannot sustain. Rather it is the sprint that most likely triggered the marathon. Hence, Sky Mavis is switching gears a bit and positioning itself as an intermediary for both crypto players and developers.
Looking beyond the success of Axie Infinity we can see that the real drivers of success here are (1) the introduction of Ronin, the game’s Ethereum sidechain in June, and (2) the unlock of staking the game’s native token AXS This last one means that you receive an interest payment for locking some of your currency away to help facilitate the proof-of-stake validation process. Since its introduction on September 30th, AXS has almost doubled in value from $75 to $140.
Infinity lies just beyond.
[P.S. The first most famous game from Vietnam is, of course, Flappy Bird. Remember that one?!]
Can New World break Amazon’s content curse?
With a well-deserved and long-awaited first hit title on its hands, Amazon Gaming is breaking new ground. An all-time high of 913,634 concurrents over the weekend resulted in a string of problems including melting its own servers and dealing with crowd control.
To a degree this is all quite normal. The narrative of big scary Amazon getting something right in spite of itself is an instant classic. Disproving its critics further amplifies the game’s momentum as more people want to see it with their own eyes. It does deserve mention, however, that New World is a premium game with both a standard ($39.99) and deluxe edition ($49.99). In an industry where top titles are generally free to play, that’s a genuine accomplishment.
Amazon seems to think so, too. At a conference earlier this week, recently appointed CEO Andy Jassy stated that gaming could end up being the largest entertainment category over the long haul. It immediately explains why Amazon has been so eager to do well in games and it suggests that we can continue to expect the retailer to keep spending up. It’s hoping to break its content curse.
Previously, Amazon had a rather difficult time becoming a vertically integrated book publisher. Its prowess in online book sales seem to position it well to also take on the role of book publisher. It found, however, that the rest of the industry wasn’t quite so keen on that idea. In response to its acquisition of Avalon in 2012 and its generous spending on advances to woo star authors, Amazon’s retail rivals boycotted its books. It effectively crippled its push into book publishing.
Now with gaming, Amazon finds more welcoming industry partners. Digital platforms are proving much more comfortable in carrying Amazon’s gaming content. That may be naive, given that this week’s data breach (see below) revealed that Amazon Games Studios had been working on a Steam competitor. Nevertheless, Amazon is proving relentless. And after Crucible proved a disaster, today’s hard-earned success with New World suggests a successful first step into a new world indeed.
FB suffers multiple outages. Good.
Within a single week everyone’s least favorite social media platform suffered two different blackouts.
The first, a technical one, originated in the firm’s vertical integration. What’s a big platform oligopolist to do? When data is the your primary source of revenue you simply cannot trust any third-party providers to build the internet backbone to host everything. For that reason, Facebook has been investing in its own servers and back-end infrastructure for years. It nevertheless failed them spectacularly this week and Facebook was really sorry. For a glorious 6-hour period no one’s suffered any self-esteem issues.
The second outage came in the form of Facebook getting suckerpunched by one of its former data scientists’ disclosure of several thousand of confidential documents. Most damningly, it showed the firm’s prioritization of revenue over ethics. No big surprises here, except for Facebook which clearly didn’t expect to get caught.
The silver lining is the timeline. We’ve known for a while that social media are rigged to trigger our worst possible responses rather than the advertised Kumbaya. In the case of Big Tobacco, it took 11 years before they were finally called to the mat. It’s a hopeful sign that the pace with which these horrible practices are uncovered is accelerating.
Twitch got hacked, badly
A 125Gb torrent file containing “the entirety of Twitch” appeared this week on 4chan. Ouch. Twitch confirmed the authenticity of the leak which contained its source code, proprietary SDKs, an unreleased Steam competitor by Amazon Game Studios, and creator payout rates. That last one quickly became everyone’s focus, of course.
According to the hacker, the motivation behind the leak was to “foster more disruption and competition in the online video streaming space,” because Twitch's community "is a disgusting toxic cesspool." Last August streamers refused to broadcast for a day to protest against the terrible way people speak to and treat each other.
PLAY/PASS
Play. Jamaican gamers don’t have the same degree of access to hardware and infrastructure. They make it work anyway.
Pass. Roblox updated its ToS and now prohibits any "experiences that depict romantic events, including weddings, dates, and honeymoons." There will also be no “kissing, hand holding, or other romantic gestures.” Sounds fun.
Play. Sora from Kingdom Hearts is final DLC character for Smash Bros Ultimate. YASSS.