Level 66: Bringing Unity to the People

Unity's public filing, a new Nintendo Switch, and a prodigal son's return to Neopets

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✏️ The Pause Button Exclusives

PB + WorklifeVC - A Recap: Thank you to 100 people who attended our event earlier this week. We heard first-hand from executives at companies like Riot Games, Metafy, and 100 Thieves about how they’re thinking about gaming from Fall Guys to Epic’s ongoing clash with Apple. For those who missed it, you can find that recording here.

We’re already hard at work planning our next event, but if you have anyone in mind who you’d like us to chat with, shoot us a note, we’re always interested in finding new voices in the gaming industry.

📜 This Week’s Notable News

Unity Hits the Market

Unity Technologies, a beloved gem in the gaming industry, filed to go public this week. Unity’s business is primarily driven by it’s proprietary game engine, used to power companies like EA, Volvo, Tencent, and Niantic. Going toe to toe with Epic’s Unreal Engine (which you can learn more about here), Unity is already firmly entrenched as one of gaming’s most important technological cornerstones. 

As part of the public filing, Unity released tons of valuable data, including competitive analysis, previous earnings, and company history. The most noteworthy bit of information though, comes from Unity CEO, John Riccitiello, who gives us a hint into why Unity is going to continue to grow at a rapid pace:

Video and mobile games are among the most technically challenging forms of media to create from a technical and engineering standpoint. They are complicated to build...

We’re a company born from gaming. But we see so much more. Five years ago, we believed that the real-time 3D tools we build would have applications outside of gaming. We saw that many industries were still wed to create tools that were conceived and built in the 1990s and early 2000s, before the explosive growth of compute power in the personal devices we all now carry with us most everywhere, and in the networks of computers that live in the cloud adding even more processing capability...

The world is a better place with more creators in it. And, we intend to make that more true tomorrow than it is today, to the point where real-time interactive 3D is the dominant form of content globally. As a company, we will invest for the long term. And, through this long-term investment orientation, we plan to realize the opportunity we see to drive significant growth in the world of real-time, interactive 3D content. 

We distilled Riccitiello’s words into two core value props that bode well for the future of Unity:

  1. Video Games are really hard to develop: As John mentions, video games are “real-time and interactive” — the technology continues to rapidly innovate. Despite this, developers use Unity to build about half of the games on market. Unity already has an outsized advantagr about some of the most difficult technological challenges, including mobile and cross-platform development. 

  1. A Game Engine isn’t Just for Games: Unity is seeing more use cases outside of gaming. While video games were the company’s core growth driver, the next generation of Unity will be built on top of the increasing technological demands of other industries. It’s interesting to compare this approach to Discord, which is also pivoting to address use cases outside of gaming

The numbers behind the company tell an equally optimistic story:

  • 1.5M monthly active creators

  • Revenue grew 42% YoY to $541M at ~78% GMV (!!!) 

  • 50%+ of all mobile/PC/console games are made with Unity

  • 3B app downloads per month 

  • 15K new projects made per day 

  • Customers > $100K revenue: 600 in 2019 vs. 484 in 2018 over 190 countries

It isn’t often that we see gaming-focused platforms like Unity file their IPO, so this is exciting news. Although Unity has ~$500M of cash on hand, they’re still losing money, nearly $163M in 2019 in fact. It’s also still unclear what impact Apple’s new opt-in IDFA policy will have on revenue for Unity’s creators, and by extension, Unity’s revenue share program. Ultimately, Unity is still a nascent company in a $29B (and growing) total addressable market. They’ll have stiff competition in Unreal Engine but keep your eyes peeled as they come into the public view. Link

💡 Industry Content

What is Tencent: It’s rare that we go a week without discussing Tencent, the Chinese mega-corporation whose operations span gaming, telecommunications, and more. In this two part series, Not Boring’s Packy McCormick writes about Tencent, who they are, why they matter, and where they’re going. Packy’s work is some of the most digestible business strategy writing around, and a great place to start if you’re looking to get up to speed on this Chinese giant. Part I | Part II

Epic v Apple (Weekly Update 8/24/20): Lots has happened since we first reported on Epic v Apple in last week’s issue. Since last Thursday, legal teams representing Apple and Epic met to address the short-term block across the Apple Ecosystem on Fortnite & Epic’s Unreal Engine. Ultimately the ruling came in that Apple had no grounds for blocking Unreal Engine, but could continue to keep Fortnite off the App Store until Epic removed it’s alternate non-Apple payment methods. Microsoft also came out in support of Epic’s battle, adding yet another logo to the powerhouse of brands already behind the company. Link

Riot + Spotify: Riot Games entered into an exclusive partnership with Spotify earlier this week, solidifying it as the official “audio streaming partner for League of Legends global events”. The partnership comes with the launch of a LoL-based hub on Spotify, which aggregates League-related podcasts, playlists, and soundtracks. Link

🎮 Fun & Games

Nintendo Switch 3.0: Nintendo is expected to announce a third Switch model in 2021, focused on high quality graphics and performance. The reported 4K-resolution model is the latest in the Switch line-up, which already has a version for on-the-go players in the Switch Lite, alongside a more standard model in the regular Switch. A “pro” model that's optimized for a more traditional console experience will no doubt boost sales of some of the more traditional “sit on your couch” style console games, like Legend of Zelda: Breath of the Wild and Super Mario Odyssey. Link

How to Grow Communities: Fall Guys is massive, with the game topping Steam’s charts for weeks and influencers across the industry being drawn to the game’s simplistic yet addictive style. Much of the success is certainly attributed to the game itself, but part of it’s viral status (and 1.2M Twitter Followers) is thanks to Oliver Hindle, the game’s community manager. In this Twitter thread, Hindle breaks down his approach to steering the community of a viral smash hit, and how others can replicate his success with the right planning, skills, and a good amount of luck. Link

😎 Other Cool Reads

Getting Access to Neopets: Have you ever wondered what happened to your fluffy friends in Neopets since the last time you logged on? This Twitter thread follows one user's journey to gain access to his old accounts, and highlights his old Neopets side hustle business along the way. Link

Next-Gen Gaming: State of the Industry: Considering Unity’s IPO filing, this is a valuable juxtaposition coming from Epic & it’s Unreal Engine. The series highlights various personalities from around the gaming industry to get their take on the next generation of games, including topics like genres, platforms, business models, and more. Link

Clash Royale Revamp: Ever get stuck in a rut playing the same game with the same strategy? Author JB-Dev approaches how they would revamp the game design behind Clash Royale, one of the world’s top grossing, and most repetitive games. Link

📊 By The Numbers

100,543: The current high score of Dinoswords — a remake of Google Chrome’s classic dinosaur browser game — that launched this week as a collaboration between lifestyle brand/esports team 100Thieves and MSCHF. Link

$34,396,000: The total prize tool for Dota 2’s International tournament. No one knows when the tournament will actually happen due to COVID-19, so expect to see the prize pool only continue to grow. Link

😍 Our Current Favorites 

Fawzi (@fawzitani

I spent a large part of this week beta-testing a cool new platform called PiePacker. They’re “on a mission to professionalize video game emulation and beat piracy the same way Spotify beat music piracy”. A couple things stand out: they’re making a space for people to upload their legal games, giving people a way to play licensed retro games together, and making their own proprietary games. I can’t wait for this to integrate with Twitch. Link

Max (@MaxLowenthal)

Way back in one of our first issues, I came across Ateyo, a company with the lofty goal of becoming the “Nike of Esports”. The product of Rachel Feinberg and Breanne Harrison-Pollock, two fashion designers by trade, I spent some time in the Ateyo Discord this week, and was really impressed with the quality of the community they’ve built. Brands like 100 Thieves & FlyQuest have helped normalize clothing as an area of expression for gaming, it’s great to see companies like Ateyo take it a step further by optimizing their product with a gaming audience in mind. Also their sweatpants are comfy as heck. Link 

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