Level 70: Microsoft's Big Buy

Lots about game studio consolidations and bundles, big tech prevails

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📜 This Week’s Notable News

Microsoft Spends Big

In one of gaming’s biggest shake-ups this year, Microsoft purchased ZeniMax Media for $7.5B. The acquisition brought all of ZeniMax’s IP under Microsoft’s ownership, which includes Fallout, Skyrim, Starfield, Doom, PREY, Wolfenstein, Quake and many more classic titles. Multi-billion dollar acquisitions are not everyday occurrences in gaming, particularly ones that brings this many historic franchises under one roof. There are a couple key questions to unpack here:

  • Why Did This Happen + Why Does It Matter?

  • What Happens Now? 

  • What Does This Mean for Games?

#1: Why Did This Happen + Why Does It Matter?

In last week’s issue, we touched on the polar strategies of Xbox and Playstation as we move into the next generation. Xbox’s goal is to build a successful bundle, and every good bundle has what’s referred to as a Leaders & Fillers. Leaders are the core products that get people to purchase the bundle, and fillers are medium value extras that people find are “nice to have”. Until this acquisition, Xbox Game Pass had very few “Leader” products, and without a compelling reason to buy GamePass, people are going to jump ship to Sony/Playstation. In what has essentially become a war for content across the two consoles, this purchase allows Microsoft to simultaneously lock-down major titles for first-release, keeping away from Sony some of the most successful games in the process. 

#2 What Happens Now?

In the short term? Nothing will happen. The deal isn’t reported to close until early 2021, and even then all of ZeniMax’s current obligations, including two PS5 exclusive titles, will need to be fulfilled. However, when all is said and done, we could be looking at a vastly different landscape for our next Fallout or Elder Scrolls title. Both franchises are so successful that it would be foolish to make them Xbox-exclusives from a revenue-standpoint, but it’s feasible that we start to see first-releases and exclusive content on Xbox alone. Microsoft CEO Satya Nadella has already gone on the record stating that this could easily be the first of many investments in the gaming space. Yet, it’s still feels unlikely that Microsoft will lock ZeniMax content behind the Xbox-platform.

Interesting to note here is that this historic purchase will likely drive up the value of the other larger competitors remaining that could still be acquired. As the supply of successful AAA studios diminishes, purchase value goes up. AAA studios have also been on a famously slow decline: essentially, the $60 price tag is no longer enough to cover the development costs of large scale games, it’s no longer economically feasible. For ZeniMax, Microsoft’s unlimited coffers offers a respite to the stresses of having to put out perennial hits.

#3 What Does This Mean For Games?

Earlier this week over pizza, Fawzi noted how he believes this is just the most recent step in a continuous cycle of centralization that's happening in games. Unique and thoughtful creators are building fantastic, historic companies only to be gobbled up by massive offers from major platform creators. As fans, it's not the worst thing in the world because the value delivered from MSFT/Playstation is certainly greater as a result of these purchases. But when you take a step back and consider video games as an art-form, innovation has primarily been driven by independent studios like Bethesda or id Software. Is this consolidation with all console games eventually coming under platform ownership/influence really the best thing to push the medium forward? Developers are increasingly losing their bargaining power with larger platforms as subscription services become a consumer’s default purchasing vector.

Further Reading

  • Why Microsoft Bought Bethesda - The Verge Link

  • A Breakdown of Microsoft’s Big Buy - Geekwire Link

  • The Value of Software Bundles in 2020 - Ben Thompson Link

  • Bethesda Announcement Link

💡 Industry Content

A Very Large Series A: Playco, a mobile gaming start-up built by one of Zynga’s co-founders, raised $100M at a $1B valuation. As game development studios become increasingly consolidated under larger tech companies, Playco presents a particularly interesting thesis, which is to bypass all app stores with “instant games”. Put another way, Playco games lets you access any game on any device with just a link through a variety of platforms: FB, Snap, iMessage, etc. Link

Where Are The Consoles In China?: Xbox’s and Sony’s pre-order console launch is conspicuously absent in China, the biggest gaming market in the world. Nevertheless, why miss out on this starkly open market opportunity? Our guess is it’s probably a mix of content/media regulations + COVID-related production concerns in a predominantly mobile market. Check out this interesting look into how these next-gen consoles — despite never having an official launch — find their way into China via various loopholes like Taobao. Link

Game Pass Takeover: Overshadowed by the news of the ZeniMax acquisition this week, Microsoft also announced that its Game Pass service reached 15M subscribers, up from the 10M number announced earlier in 2020. A 50% in-year increase is big, and a new console will certainly balloon that number. That said, we really wish we could get some deeper data into the behaviors behind GamePass: How many games do people play/download on average? How long is the average person subscribed? Vanity metrics like the 15M number sound nice, but they don't tell us a lot about how customers use the product/what value the service gives. Link

What Dreams Are Made Of: Blizzard Co-Founder Mike Morhaime launched a new gaming company, Dreamhaven (along with two new gaming studios), which will be funded by Morhaime and his wife, Amy. Companies like Respawn Entertainment — makers of Apex and Titanfall — have shown that making good games predicates largely on having the right people with the right experience, so early signs look positive for Dreamhaven, consisting largely of old-school Blizzard vets. Link

🎮 Fun & Games

The Wagadu Chronicles: The Wagadu Chronicles is an Afro-futurist MMO with none of the combat mechanisms of World of Warcraft. Instead, it explores “roleplaying” in a pre-colonial Africa, drawing influences from a variety of ethnic groups and cultures. Get this: the team also created a 300 page lore book ahead of the game! Lots of incredible resources to dig into from this team. Kickstarter | The Verge | Riot Games Underrepresented Founders Program | Lore

“The Wagadu Chronicles is not simply just about Black representation. Its diversity is reflected in Twin Drums the studio, where the majority of its core team of nine are Black, female, and queer. You can see this early on in the game’s character creation tool. Even at this early stage where the only playable lineage are the horned Swala people (inspired by the Maasai), there’s nonetheless a nonbinary option.”

Luna: Amazon announced its cloud gaming platform, Luna, early on Thursday. The platform plans to partner with Ubisoft, and will most likely integrate into Twitch the same way Stadia flows with Youtube. More on this in next week’s issue! Link

The Legality of Buildings: 2018’s Spiderman was one of the best games of the year. Thanks in part to the game’s nearly 1:1 recreation of NYC, players got the chance to be fully immersed in the world of everyone’s favorite webslinger. But take a closer look, and New York regulars might notice something important is missing. In this blog post, explore the legality behind what it takes to get classic American Landmarks into a game like Spiderman, and why one noteworthy addition didn’t make the cut. Link

😎 Other Cool Reads

Supergiant’s Hades: Both of us have been playing a lot of Hades this past week, and aside from a general appreciation for the story and design, there are a few exceptional choices that makes the game all the more enjoyable. Notable is that “Hades’ pantheon of Greek gods is diverse. Athena is a dark-skinned Black woman. Dionysus is south Asian. Hermes is east Asian. Eurydice, my favorite, is a Black woman crowned with a beautiful afro made from the branches and canopy of a tree.” Link

Japan Indie Scene: Asobu (meaning “to play”) is a new development studio in Japan that aims to flourish the country’s indie scene. They give developers the resources, community, and time to build their games. Promo Video | Recent Showcase

Pathologic and Stardew Valley: In this thoughtful side by side breakdown, Maris Crane explores the similarities between two seemingly different games: Pathologic and Stardew Valley. Crane’s juxtaposition of player experience, game design, and art direction is a refreshing exploration of two famous titles. Link

📊 By The Numbers

130: The number of games made by studio Mediatonic before making viral game Fall Guys. They’ve had a few hits here and there but this is a humbling number that shows how hard it is to make a good game. Link

$15.00: The lowest price of the new Apple subscription bundle, which includes the company’s widely marketed Apple Arcade service. Bundles can be useful, will an afterthought like Apple Arcade really going to flourish under this model?  Link

😍 Our Current Favorites 

Fawzi (@fawzitani)

A good friend of The Pause Button, Jake Perlman-Garr, officially launched his product this week: Kanga.gg. The Kanga team is doing some really cool things around fan loyalty and fan interactions. Personally, I don’t know of any other platform that lets you engage and follow your favorite creators on a variety of platforms, from Instagram to Twitch to TikTok. If you have a chance, check them out! Link

Max (@MaxLowenthal)

It boggles my mind how sports games continue to be some of the largest revenue generators in gaming despite their stagnant game design. We get annual copies of FIFA & Madden that regularly produce tens of millions of dollars, but do very little to differentiate from their predecessors. Earlier this week we got an email from the DRL, The Drone Racing League, telling us a bit more about their recently released sports game. It was honestly refreshing to get a look at a sports/competitive game that isn’t just a carbon copy year after year. Link

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