🗞️ Theorycraft vs. Singularity 6: Is the biggest investment thesis in gaming at risk?
Plus 1. Amazon Games and the future of transmedia and games IP and 2. XBOX Cloud Gaming + Amazon Fire TV Sticks
Hello GameMakers,
The newsletter publishing schedule for the past week and maybe next week has been hit and miss. As it turns out, game development is not easy!
Lol. Sorry, I’ve been very busy.
Gamemakers Impact discusses the top 2-4 news items with the highest potential to impact the games industry.
Please look forward to a more consistent Friday news segment moving forward… I hope.
Regardless, Have a Great Weekend!
Theorycraft vs. Singularity 6: The recent announcement of Supervive from Theorycraft is an important market indicator for one of the biggest game investment themes over the past few years: big bets on ex-Riot/Blizzard/LA game veterans building experience-informed bets on new games. Some view the recent Singularity 6 acquisition as the canary in the coal mine regarding the overall viability of this investment theme.
Plus:
What do Amazon Games' published plans portend for the future of games related to transmedia and IP? Do any of these companies have a viable strategy? What is the outlook for media or technology companies to deliver transmedia offerings?
Xbox Cloud Gaming will be supported on Amazon Fire Sticks, potentially creating a game-changing distribution picture and a radically different “console” model for the Xbox in the future.
🔮 Will Supervive thrive or just survive?
“Sorry, why is Palia so important? Why do we all need to root for Singularity 6?" I asked.
This wasn’t the first or last time I’ve asked questions that seemed obvious to everyone else in the room.
In a private conversation with a group of games industry CEOs, many of them from LA, including former Riot and Blizzard employees, I learned more about why Singularity 6 is so important for the games industry.
In an extremely tough market for new gaming start-ups, Singularity 6 was supposed to be the bellwether. According to some, an entire investment thesis was at stake.
Everybody in the group had extremely high respect for Singularity 6. The company's founders also have incredible reputations as great game development leaders.
The Investment Thesis
The venture investment community’s consensus view has been that companies like Blizzard and Riot have aggregated some of the most talented game makers and video game tastemakers in the entire industry. It was thought that these employees, shackled by their corporate overlords' organizational overhead and restrictions, would have greater success outside the confines of their big company employers.
Many studios were funded from the same playbook and investment thesis: Give all-star, veteran teams from Riot/Blizzard the freedom and funding to create big new games. These veterans would come with deep, experience-informed insights from working on games at their former employers. Fund these teams to free them from the organizational molasses of their former companies and give them huge start-up financial incentives to achieve massive success!
This has been the investment thesis to date and continues today. Further, it has been one of the most funded investment strategies for games over the past five years, perhaps with the only exception being crypto. And certainly, the primary investment thesis more recently.
Singularity 6, with an all-star team, many formerly from Riot, fit the investment thesis perfectly, and given the high hopes, it was easy to justify ~$100M in venture investment.
More recently, Singularity 6 was acquired by Daybreak Game Studio (a wholly owned subsidiary of Enad Global 7) for an undisclosed amount. However, rumors suggesting a minimal acquisition price (potentially wiping out common equity because of liquidity preferences) and upside mainly baked into Palia's earnout targets have raised private concerns.
Many worry about the viability of the overall investment thesis.
🐉 Enter Theorycraft.
Theorycraft
“They got 10M views in the first four hours!” he said.
Looks about right.
“Of all the venture-backed game studios, who’s doing the best? Which company has the highest potential?” I asked a partner at a game-focused venture capital firm recently.
“Oh, that’s easy, Theorycraft,” he said.
For better or worse, the new standard bearer for the “LA Riot/Blizzard” investment thesis now passes to Theorycraft.
CEO Joe Tung was formerly EVP, EP, and Gameplay Lead at Riot on League of Legends. If anyone has insights into the next evolution of League of Legends, this dude would likely be one of the top candidates. He’s also one of the most respected game execs in LA. I don’t think I’ve ever heard a negative comment about the guy; instead, I’ve heard gushing praise more often.
Respect.
Supervive
Supervive is an isometric (like League of Legends) team-based hero battle royale with many small innovations to gameplay.
Here is a good overview of the game:
How well will Supervive do?
Some of the smartest people in games aren’t sure how well Supervive will do. I’ve spoken to them. However, the game certainly seems off to a great start.
There are many reasons to believe in a favorable outcome. Here are a few:
Team: Super experienced, veteran team from Riot who have learned many lessons from League of Legends.
Competitive Alternative: While League of Legends has a durable, long-term gameplay model, it has also aged. Hence, many existing League players should be open to new game experiences, and battle royale as a concept is fairly proven. Further, new players jumping into League, which now has 168 champions, presents a difficult learning curve vs. a new game without hero saturation.
Player Validation: Supervive has been extensively playtested and iterated upon by their huge pool of playtesters for over a year. The game’s discord community also currently boasts tens of thousands of playtesters as part of their discord community. Comments from Supervive playtesters are almost all positive about the game.
While there are some potentially critical concerns related to the game and its core loop, I’ll save that for another day.
So What?
So why should you care and root for Theorycraft and Supervive to succeed?
Peer Love: As a fellow operator and “man in the arena,” I hope not only for the massive success of Supervive but also for the Singularity 6 team to turn things around and complete the mission of making Palia a hit. As one of the most talented teams in the games industry, we should all root for Theorycraft’s success.
League Cannibalization: League of Legends is one of the biggest games in the world, making billions in revenue. No real competitive threat has existed, but Supervive should be viewed as a game that could take share from League. While Valorant didn’t kill or seriously hurt Counter-Strike, one shouldn’t completely discount the potential for Supervive to impact League. To be clear, I remain a huge fan of League and consider the game one of the world's most important games. However, we should continue to monitor whether there will be significant cannibalization.
The New VC Bellwether: Since the Singularity 6 acquisition, all eyes have been on Theorycraft. They are the new standard bearer for the “LA ex-Riot/Blizzard” investment thesis. The success of Theorycraft will likely have a big impact on the continued investment in similar teams against this thesis.
🎦 The future of transmedia and IP for media and entertainment companies: Amazon Games interview
In an exclusive Variety news article, the head of Amazon Games, Christoph Hartmann, discussed the current and future plans for Amazon Games.
What do we know about Amazon Games’ plans?
F2P MMORPG “Throne and Liberty” set for release September 2024
ARPG “New World: Aeternum” set for release October 2024
8 games in development, with a focus on 2-3 games per year
High-profile upcoming titles include “Tomb Raider” and “The Lord of the Rings” based video games
What is Amazon Games’ stated strategy?
Focusing on Triple-A titles and becoming “the best game publisher out there.”
- Variety
Based on the interview with Hartmann, unlike Amazon, Amazon Games’ strategy seems relatively vague and unclear. Having said that, a few themes emerge:
Best Publisher: Becoming “the best game publisher” somehow and whatever that means.
Internal and External: Amazon Games will make some number of games via internal development and publish some externally developed games without a clearly defined approach.
Amazon Synergy: Transmedia/synergy with Amazon as a more holistic entertainment company via Prime Video.
Original IP: Transmedia suggests the importance of original IP, which adds value to Amazon Prime; however, they will also publish and develop external IPs without a clear structure or guidelines.
Big, Focused Bets: Focus on a small number of big-budget titles.
A bit disappointingly, these articulated themes sound more like high-level concepts or objectives to me. Amazon Games lacks a clear strategic plan for achieving its stated themes/objectives, and it doesn’t seem to have articulated the value of achieving those themes.
As an early fan of Amazon, this is surprising to me. Amazon proper has always had distinct philosophies and strategic approaches, which seemed much better defined.
Whether it was customer obsession, investing in massive-scale logistics and supply chain, vertical-by-vertical expansion, developing a sophisticated recommendation engine, or its loyalty/prime membership program, each of those specific initiatives was rooted in a longer-term strategic plan designed to increase customer value and reduce operational costs through scale. Further, it was always clear that the ultimate objective was to deliver customer value through low cost, speed, and convenience.
Compared to Amazon, Amazon Games’ strategy seems a bit fluffy and “high concept.”
What’s the future of transmedia in games
For me, the article's biggest takeaway was its reminder of the potential value of transmedia rooted in leveraging video game IP.
What they are learning and what they’re realizing more recently is the importance of a position where they can do amazing things, provided they own the IP. And so we saw in the case of the ‘Fallout’ series, which is intellectual property owned by Microsoft, it was big success and so all this viewership — but then all the playing and in game spending goes directly to Microsoft. And so you can see a world where Amazon would do well to release a game simultaneously available to play on PC, console, mobile, as well as launching a TV series or an animation on its Prime Video service.
- Joost van Dreunen, NYU Professor (from Variety)
There does seem to be an increasing shift in source materials for movies and TV. The shift from books to comic books is increasingly moving to video games.
Here’s an overview of some of the more prominent TV and films developed from video games and a list of those currently in development:
Released TV & Movies Based on Video Games
Castlevania (2017-2021) - An animated series on Netflix based on the Konami game series.
Detective Pikachu (2019) - A live-action/animated film based on the Pokémon franchise.
The Witcher (2019-) - A Netflix series based on the book series and popular video game series.
Sonic the Hedgehog (2020) - A live-action/animated film based on the popular Sega game series.
Mortal Kombat (2021) - A reboot of the film series based on the Mortal Kombat video games.
Arcane (2021-) - An animated series on Netflix based on Riot Games' League of Legends.
Resident Evil: Welcome to Raccoon City (2021) - A reboot of the Resident Evil film series.
Halo (2022-) - A live-action series on Paramount+ based on the popular game series by Bungie and 343 Industries.
Uncharted (2022) - Starring Tom Holland and Mark Wahlberg, based on the popular action-adventure game series by Naughty Dog.
Sonic the Hedgehog 2 (2022) - A sequel to the 2020 Sonic film.
The Super Mario Bros. Movie (2023) - An animated film based on the iconic Nintendo game series.
The Last of Us (2023) - A live-action series being developed by HBO, based on the critically acclaimed game series by Naughty Dog.
Fallout (2024) - A live-action series being developed by Amazon Studios, based on the post-apocalyptic game series.
In Development
Bioshock - A film adaptation being developed by Netflix, based on the game series by 2K Games.
Borderlands - A film adaptation directed by Eli Roth and starring Cate Blanchett, based on the game series by Gearbox Software.
Assassin's Creed - A new TV series adaptation being developed by Netflix, based on the Ubisoft game series.
Splinter Cell - An animated series adaptation developed by Netflix based on the Tom Clancy game series.
Tomb Raider - Netflix is developing an animated series adaptation based on the popular game series by Square Enix.
Mass Effect - Amazon is developing a potential TV series adaptation based on BioWare's game series.
Gears of War - A live-action film and an animated series adaptation being developed by Netflix, based on the game series by The Coalition and Microsoft.
Elden Ring - Early development stages for both film and television series.
So What?
All this to say that my key takeaways from the article from Variety are the following impressions:
The transmedia development of video game IP is already becoming a major and valuable trend. I would expect future game companies to find value in diversifying across multiple entertainment lines, similar to what Riot has done with League of Legends, the game, and Arcane, the animated television series.
Amazon Games doesn’t seem to have a clear direction or well-conceived strategy IMHO (could be wrong). I believe there are inherent big differences in philosophy and approach to achieve successful outcomes when comparing tech and traditional entertainment companies with game development and publishing. I expect continued challenges for tech and traditional entertainment companies building games/publishing as part of their organizations without a different approach.
🎮 Does Xbox Cloud Gaming on Amazon Fire Sticks move the needle?
On the face of it, this could be just another random product announcement: “Xbox Cloud Gaming is coming to Amazon’s Fire TV Sticks in July” (The Verge)
I almost ignored this news but then thought a bit more about this.
How many Fire TV Sticks have been sold, and how many are being sold each year?
According to company financial reports, while Amazon isn’t specifically breaking out Fire TV Stick units sold per year, the company announced in early 2022 that over 150 million Fire TV devices, including Fire Sticks, sold. In 2022 and 2023, we know that the Fire TV Sticks continued strong sales with growth and that the product remains a top-selling product.
Market research firm Pixelate further estimates that Amazon may have as much of 13% share of the global connected TV device market through Fire devices.
Long story short, it isn’t crazy to think that this partnership could significantly expand the accessibility footprint for XBOX Cloud Gaming.
Could the Fire TV Stick represent a new console strategy?
Couple that with a way to access XBOX games for a “console” price of $40-$60 USD and while it may not be likely, there is a potential for significant growth if this model for gaming takes off.
Getting to the point, while I originally dismissed this announcement out of hand, we should not ignore the potential that a fairly wide existing audience and a potentially new “console” model via a very cheap Fire Stick device could open up a huge opportunity to drive XBOX Cloud Gaming.
To be clear, I don’t assign a high probability here, but think we shouldn’t ignore the potential.