Level 78: Long Live Small Businesses!

Big wins for SMBs = Strategic optics for Apple

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📜 This Week’s Notable News

Apple’s Tiny Concession: 

Apple announced a cut to its long-time commission rate for App Store developers. The policy change states that apps generating less than $1M in annual revenue will be subjected to a 15% cut, as compared to the standard 30%.  According to data analytics firm Sensor Tower, 98% of developers fall in this <1$M bucket, but only make up around 5% of the App Stores total revenue. 

What’s the Deal — Why Did Apple Do This?

With mounting antitrust concerns from the U.S. government, the decision to provide commission relief to the “little guys” is a pure optics play. While it’s true that Apple is removing barriers for small developers, the company is in reality only giving up a small fraction of the money they make. The goal is to show that Apple gives leeway for small developers to reach maturity in its ecosystem, much in the same way large players, whose scale can overcome a 30% margin tax, can do.

Following the news, the first place our mind went to is the ongoing litigation between Fortnite developer Epic Games and Apple. We’ve covered the case in detail in a previous issue, but as a reminder: Epic is suing Apple on the grounds that the company is exercising monopolistic practices via the App Store, proposing that its commission structure actively stifles platform innovation.

Since entering into formal litigation with Epic back in August, it felt increasingly clear that Apple wouldn’t get out of the crosshair unscathed. By preemptively taking matters into their own hands with this small business program, the company can try and mitigate any changes brought about by external legal powers, while simultaneously breaking Epic’s “Big Brother” narrative that they’ve worked so hard to create. 

This drives a huge wedge between small creators and Epic in the ongoing legal proceedings because it removes the important anti-trust basis for SMB creators. This is further compounded by that the fact that Epic’s own software, Unreal Engine, also has a rule to not collect commission for games making <$1M in lifetime revenue, favoring small businesses.

What Now — What’s Does Epic Games Do?

With Epic somewhat on their heels, the PR-strategy has pivoted to two new focuses: consumer spending and discount discretion.

Epic CEO Tim Sweeney has been all over Twitter the last few days noting that, despite the changes announced this week, 95% of App Store spend is still subject to higher commissions. In turn that means that an overwhelming majority of consumer purchases are still subject to overinflated commission-driven prices, as developers are forced to price products higher to fit Apple’s cut. 

The other approach the company is relying on is built around Apple’s commission discretion: offering special deals to companies like Amazon who have enough power and influence to bully the tech giant. Sweeney proposes this intentional “gerrymandering” is dividing anti-monopoly supporters in an attempt to kill legal momentum.  The problem with the argument, however, is that pricing deals based on size is common practice in the modern tech industry. Is it equitable to developers? Probably not. But logic follows that bigger companies that drive more revenue will get better deals. 


💡 Industry Content

Robox’s S-1: The long-awaited Roblox S-1 is upon us! There’s a lot to unpack for one of gaming’s hottest IPOs. We’ll recap a few key points. Link

Pros:

  • $589M in revenue on $345M in operating cash flow 

  • 31.1M DAUs cumulating to 22.2B hours engaged

  • “For the twelve months ended September 30, 2020, over 960,000 developers and creators earned Robux on the Roblox Platform, of which there were over 1,050 developers and creators that earned $10,000 or more and nearly 250 developers and creators that earned $100,000 or more in Robux”

Risks:

  • COVID has significantly affected their business by accelerating key trends. Can they maintain this growth moving forward?

  • 34% and 18% of revenue was generated through the App Store and Google Play Store, respectively. Further, 68% of total engagement hours happened on these platforms. A big risk is their reliance on certain policies or fees (e.g 30% platform fee) that can mercurially change. See our thoughts from last week.

  • Roblox will need to engage other demographics to continue its growth in core markets. Notable is how temperamental the nature of their player base is when it comes to “the next hot” thing. This is a crowded field with Minecraft, Manticore and other competitors; can they maintain interest?

These are awesome metrics. We’re particularly excited about APAC. Roblox is early in the process of building out an APAC office to expand their footprint in China. (Source: Roblox S-1)

An Acquisition Frenzy: Lots of tech in gaming-related acquisitions this past week.

  • Epic Games acquired Hyprsense, a real-time animation company, to “deliver new solutions and experiences [Character Animation] at massive scale”. Link

  • Playr.gg joined Trufan (social rank) to better understand and engage social media followers. Link

  • Embracer Group announced their strategic acquisition of Snapshot games, expanding their IP into the FPS, Phoenix Point. Link

  • Corsair acquired Gamer Sensei, a coaching platform, to help gamers succeed not only through equipment but also through skill and play. Link


🎮 Fun & Games

Finding Mindfulness in Games: The NYT featured a few games that are great for unwinding and relaxing after a stressful day. The Pause Button had a recent discussion about how our recent COD adventures were actually contributing stress to our day. Heart-pumping, adrenaline = COD. After, recognizing this added sense of overwhelm, we decided to take a break and play A Short Hike, which touches on a similar sense of mindfulness that the NYT article mentions. Totally recommend taking that exercise in understanding how you feel when you play games. We can’t wait to dig into this list. Link (Thanks, Emily for sharing!)

Among Us x Twitter: Among Us finally has a Twitter presence! Will it be Fall Guys level of trolling? Link

Kakeland Newsletter: Josh Ye’s latest newsletter roundup was a particularly good insight into a variety of gaming trends in Asia: Among Us clones, game boosters & VPNs & Wild Rift, and how geopolitics fit in with the broader video game narrative. Link


😎 Other Cool Reads

Is Madeline Canonically Trans?: A poignant reflection on one of the Indie world’s favorite characters, Madeline in Celeste, by their designer Maddy Thorson. A must read. Link

Celeste is a game written and designed by a closeted trans person who was struggling with their gender identity, scored by a trans woman, with art and code and sound and other labor from their inspiring and irreplaceable friends. These are the perspectives that we approached this from, and I think that the game reflects that beautifully. I would never claim that anything I have ever done is perfect. I do think that we captured and preserved a few pieces of ourselves and a moment in time pretty nicely, and Madeline’s transness is one part of that.

Cultural Cringe: This was another phenomenal read written by Damon — an Australian narrative designer — on the concept of cultural cringe and prevailing narratives in media and games more broadly; particularly, nuances in his game that might not be understood (but should be) by a wider audience and critique. It’s a fraught decision: as an Australian writer to conform to the hegemonic and dominant American cultural context (for broader mass appeal) or to celebrate the Australian cultural nuances that might lead to more negative reviews and understandings of the game. Link (h/t Darya for surfacing this one)

But what we really truly need is for tastemakers and critics (particularly American ones) to put more effort into leading the way in championing narratives from other cultures, and to drop the assumptions that all English-speaking countries exist in a kind of bland monoculture: tastemakers’ horizons must be broadened, for everyone’s sake. Like it or not, Americans are the prevailing critical voice, and they need to start using that cultural power more responsibly and thoughtfully. The world extends beyond the borders of the United States. Out here, we’re all aware of it — Americans need to figure it out as well, and preferably sooner rather than later.

Game Cities: Konstantinos Dimopoulos has a unique job title: Game Urbanist & Designer. His bio states it best: “The digital cityscapes of gaming are made of bitmaps, textures, texts and/or polygons. They do not really need to be sustainable or cater to the needs of actual societies. Reality's constraints do not apply to virtual cities, and yet the cities of gaming do have to evoke reality if they are to allow the suspension of disbelief. They have to follow the internal logic contemporary humans have learned to expect from urban centres, while also knowing when to subvert our expectations, and when to ignore design's good practices in order to engineer specific feelings. They have to be clever illusions based on our understanding of existing, historical, and imaginary urbanism.” Website | Previous Essay


📊 By The Numbers

6: The number of games nominated for Game of The Year at the Game Awards. It’s a fraught field as so many games were delayed due to the pandemic, but we’re so excited by every game and creator involved. Hades, though 👀 ? Link

205.4 Million: Roblox payout to its game developers grew 190% year over year in the first nine months of 2020. Link


😍 Our Current Favorites 

Fawzi (@fawzitani)

The NYT wrote a fun thought exercise for video game enthusiasts, celebrating Mario’s 35th anniversary article. In writing and thinking about the questions, it reminded me why it’s so important to critically celebrate the video games we play and watch. Definitely encourage anyone with five minutes to go through it! Link

Max (@MaxLowenthal)

Getting a job in games is still weirdly difficult. The gap between professional development and passion is seemingly massive, with few people ever getting the opportunity to work on something they’re passionate about. Part of that has to do with discoverability — it’s just really hard to find jobs. I was pumped to find this indie games job directory the other day for just that reason. Indies are the embodiment of gaming passion, working at one reminds me a lot of start-ups in Silicon Valley. If you’re on the hunt for a role, check it out. Link


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