Level 72: The No Good, Very Bad Games

The potential for one of the world's biggest companies, a recent esports IPO, and how video games really "die"

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📜 This Week’s Notable Article

Amazon’s Unlimited Gaming Potential

WIRED released a piece about Amazon's investments in gaming, and why almost none of them have worked out. Save for the acquisition of Twitch for $970M in 2014, nearly every gaming investment the company has made hasn’t yielded positive long-term results.

But the great thing about Amazon is that they’re Amazon. With a market cap of $1.6T, having a few multi-million dollar missteps doesn’t mean permanent failure. It’s why the company has continued to invest in gaming as a business for the last 12 years, and it's why the potential of Amazon’s gaming division is higher than almost any other company in the world. Let’s break down the underlying pillars of its gaming strategy:

The Back-End: When it comes to big and complex technical projects, efficiently scaling the cost per user is the name of the game, and it’s a game Amazon knows well. They already have a host of technical products via AWS that cost very little to leverage. Turning to the company’s choice of game technology, the CryEngine, we see Amazon’s cost-cutting strategy in full-effect once again. Companies like Unity and Epic Games charge a massive premium for someone of Amazon's size, and with the billion-dollar scale of both organizations, there’s almost no chance these costs go down over time. On the other hand, by infusing $70M into the previously-doomed CryEngine, Amazon has created a serviceable, low-cost base that they can spend the next 10+ years building off of. The economics and savings that come with owning/developing your own technology is something Amazon knows well, and is exactly why they’re technically primed to explode at a crazy pace…once they make a good game.

The Content: The #1 rule of games is that Content is King. This is no doubt the area where Amazon is weakest among its gaming stack, but don’t count them out just yet. Having an unlimited wealth of resources means that Amazon can afford to release flops like Breakaway and Crucible without risking the entire operation. At the worst, the company can dip into its funds to leverage existing IP (like Lord of The Rings) to release a game that has a low-risk high-support fanbase. While Amazon Game Studios will never be a true industry-titan without releasing its own high-quality original content, you have to think that there’s enough money to give them plenty of chances to try again. Or they can just keep acquiring their studios.

The Distribution: Unsurprisingly, the company known for efficiency and delivery has actually excelled at leveraging its potential when it comes to content distribution. As you think about the company’s investment into IP, Twitch feels more and more like an untapped gold mine just waiting for the right Amazon-made game to come along. As we’ve previously written, Twitch offers Amazon a cyclical platform that can simultaneously tap into the needs of creators, consumers, and developers. The area to keep an eye on here is the company’s recently rebranded Prime Gaming bundle. Imagine a world where an Amazon-created AAA title exists — suddenly Prime members can have early/exclusive access to in-game content, cosmetics, and modes. The Prime members become an untapped vein of superfans with which Amazon can test and develop its next projects. The Twitch + Prime Bundle combo unlocks a level of reach that almost no other gaming company has access to.

Amazon has certainly dropped the ball on games multiple times over the last 12 years, but their mistakes aren’t as dealbreakers like WIRED makes them out to be. The company has nearly limitless access to business’s two most precious resources, money and time, and they don’t seem to be slowing down anytime soon. We’re optimistic that when the company eventually does figure out how to make good content, its cost-effective back-end and Twitch-led distribution will propel it to be one of gaming’s biggest superpowers. The only question is, how long will we have to wait until that happens? Maybe until Luna?


💡 Industry Content

First Mover Advantage: Remember Drodo Studio’s Auto Chess? Probably not. Despite being the title that pioneered the Auto Chess format, the buzz around the original Auto Chess has largely been lost thanks to Riot Games’ entry into the genre via Teamfight Tactics. We haven’t thought about Drodo Studio for almost a year now and this read was a fun reminder that distribution and scale are just as important as a unique idea when it comes to competitive strategy. Link

Q3 Trends in Gaming: Gaming analytics company StreamHatchet released its Q3 2020 industry trends report. If you’re interested in the numbers behind streaming, it’s worth the look. TLDR (and unsurprisingly) is that streaming and viewing hours both rose significantly. Link

Two Friends & Founders: In the first episode of his new podcast The Quest, Twitch co-founder Justin Kan invited his friend (and fellow co-founder) Michael Seibel to sit down and discuss the history of their success. The 90+ minute interview is filled with tons of wisdom, fun stories, and lessons to be learned about the history of Twitch and Silicon Valley. Link

The Esports IPO: London-based Guild Esports completed their public listing on the London stock exchange. The organization was valued at £41.2M, an insanely high price for an organization that is relatively unknown on the global stage. The problem with esports org IPOs is that value creation is still a huge question mark. What is the true standalone value of a company that can only succeed with a massive dependence on external forces like a game, esports league, or developer? The org’s part-time owner, soccer star David Beckham, is certainly helpful in driving up the valuation, but we’re approaching this news with a healthy dose of skepticism. Link


🎮 Fun & Games

Breath of the Waifu: Genshin Impact is reportedly set to gross $100M by the end of its first month, making it the most successful Chinese international launch to date, and one of the most successful game launches ever. But how is the game being called “Breath of the Waifu” different from 2017’s Breath of the Wild? Why are people enjoying it so much? And how has it avoided the scrutiny of microtransactions other companies haven’t escaped? Link

PS5 Breakdown: Sony shared a video of Hardware VP Yasuhiro Ootori disassembling the newest Playstation 5, piece by piece. The system’s use of liquid cooling, a first in the consumer-console space, caught our attention. Link

The Death of a Video Game: When does a multi-player game “die”? When it has 10,000 active players? 1,000 players? The answer isn’t so straightforward. In this video essay, gaming YouTuber Raycevick breaks down why some games can die within a year, while others continue to live on with a small, dedicated fan base years after their release.  Link


😎 Other Cool Reads

The Future of Linear Video Games: No studio encapsulates the AAA narrative-driven gaming experience more than Naughty Dog, creators of the insanely popular Uncharted and The Last of Us series. The studio seems to understand how to develop characters and create connections between the player and the characters they play as. In this video breaks down how and why this formula has worked well in the past for Naughty Dog titles, and why it’ll need to change if the studio wants to continue to remain the at the top of the single-player market. Link

Parenting + Video Games: In this piece by the New York Times, one mother explores the internal struggle between allowing her child to spend more time playing video games and the drawbacks of more screentime. Link 

The Virtual Economy: A must-read by L’Aterlier that explores literally every aspect of the virtual economy. Link


📊 By The Numbers

$13.49: The share price of GameStop following Thursday’s announcement of a partnership with Microsoft. We’ve written in the past about the gaming retailer’s history of mistakes; hopefully, this is the first of many decisions to get them back on track Link

10: The number of open roles at esports powerhouse 100 Thieves. We’re bullish on the future of this media/apparel/gaming company, and have written many times about how their unique approach to media is going to position them well in the long run. Link


😍 Our Current Favorites 

Fawzi (@fawzitani)

This past week I spent a lot of time looking through the archives of Roblox’s Developer Conference and getting up to speed with their operation priorities as they plan their IPO. I think we often celebrate their milestones as a company from a consumer perspective (e.g on track to pay out $250 million to developers in 2020), but we forget about the amazing tech powering the platforms. Two of my favorite initiatives they’re working on are machine learning algorithms for instantaneous language translation — a game that is truly “global” — and spatial audio, simulating real-life volume for conversations happening on their platform. There’s still a long ways to go for these technologies to hit adoption, but I love thinking about Roblox as a tech-first games company. Link

Max (@MaxLowenthal)

Back when I played competitive Super Smash Bros. Melee I would walk all over SF Bay Area to find people worth playing against. One place I frequented was Oakland’s Museum of Art & Digital Entertainment (AKA The MADE), which houses years of gaming history and technology. The MADE closed its doors back in March due to COVID-19, and relies on ticket sales for about 80% of its annual expenses. Now the museum is in danger of shutting down for good. If you’re able I’d ask you to throw a few dollars to the wonderful people of the MADE via PayPal, or at least check out/share this awesome documentary highlighting the history of one of my favorite gaming-related places. Documentary About The MADE | Link to Donate


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