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So, we raised a round of financing.
What. Succinctly, after Janelle and I bootstrapped SuperData for the last 7 years, we recently received an investment from Makers Fund, a strategic investment fund with $200MM under management. We are one of 11 teams across eight cities in the US, Canada and Europe that received funding as part of a broader strategy to fuel innovation in interactive entertainment.
When. We closed late last year but have kept this under wraps because Makers Fund was still in negotiations with several other firms.
Why. We are doubling down on our success. Things have been going really well for SuperData. We’re now 35 people strong, and provide market data to both the creative and investment sides of the industry. When we first started the company in 2010, we were anticipating the digitalization of games. More specifically, with the development, publishing, marketing, and distribution of video games dramatically changing, we set out to become the premiere provider of research on this new market. The money is intended to hire more people (who really are our most valuable asset) and build out our tech offering.
How. First, our objective is to become the currency for interactive entertainment. Both supply and demand in entertainment media are changing in a big way, and we aim to provide the necessary measures to create for success. Second, here’s the obligatory write-up as to how it went down and what we learned along the way.
What’s next. Expect to see more of team SuperData. We’ve hit a stride and in spite of a lot of people talking, managed to get out ahead of all of it. Next, as we enter this next stage we will renew our commitment to our people and clients. You are what got us here. Thank you!
On to the regular weekly update.
MONEY, MONEY, NUMBERS
Amazon Games discontinues Breakaway
After putting the game on hiatus (never is a good sign) Amazon Game Studios announced the discontinuation of Breakaway, a multi-player title initially meant for competitive play. Amazon had acquired developer Double Helix Games, known for fighter title Killer Instinct, in 2014. Critics argue that rather than focusing on the studio’s strengths, its new owners imposed a creative agenda compiled by buzz words from the board room (esports, Overwatch aesthetics, etc.). In the absence of any announced layoffs, it is likely that there’s still more to come. However, the discontinuation gives strength to the argument that proprietary content development is to remain a challenge even for the most powerful of platforms. More broadly speaking, Amazon is heavily investing in film and TV series for its Amazon Prime and recently re-upped the appeal of Twitch by offering free loot in current hit game Fortnite. Link
Big Fish Casino constitutes illegal gambling says court
Following several years of legislation triggered by a lawsuit from one its players, last week a federal appeals court ruled that Big Fish Casino constitutes illegal online gambling. The crux of the argument revolves around whether buying chips constitutes “something of value.” The court of appeals reversed an earlier ruling, stating that the “virtual chips extended the privilege of playing Big Fish Casino,” and therefore constituted something of value. (However, the court rejected a second argument based on selling chips the secondary market.)
The ruling may prove a pivotal moment in the social casino space for two reasons. First, it comes at an unfortunate time as Churchill Down’s, which had acquired Big Fish Games in 2015 for $885MM, is currently in the midst of selling the asset to Aristocrat Technologies for $990MM. Second, Big Fish Casino’s mechanic is not unique to the industry and may be considered cause for additional lawsuits among social casino firms.
The social casino market is on track to generate $4.7bn in revenue globally this year, growing +9% y/y as spending away from social media ($1.5bn) toward mobile ($3.2bn). Link
Lindsay Lohan’s case against GTAV gets shut down
In more light-hearted legal new, the NY Court of Appeals upheld a lower court’s ruling rejecting Lindsay Lohan’s claim that Take-Two used her likeness in Grand Theft Auto V and its marketing. However, the court rules that “indistinct, satirical representations of the style, look, and persona of a modern, beach-going young woman that are not reasonably identifiable as plaintiff.” Link
Sinclair Broadcast Group mobiles anchors in support of US government
Ordering its 193 television stations to broadcast a must-run segment, the largest owner of TV stations in the US sent a “journalistic responsibility message” to all of its anchors. The message, ironically, argues against how “some members of the media use their platforms to push their own personal bias and agenda to control ‘exactly what people think’.” Yes, it really says that. Sadly, it is the latest and most explicit example of Sinclair’s support of the current administration.
It raises some worthwhile questions. First, where is the FCC? It is already mounting its strategy to argue against the proposed merger between AT&T and Viacom, on the grounds that it would harm competition and therefore consumers. As a vertical merger, AT&T has the full attention of the FCC. However, a horizontally integrated empire like Sinclair’s is clearly of no concern. The FCC is rolling back its involvement, paving the way for Sinclair to own around 230 stations country-wide with the proposed $4bn acquisition of Tribune Media and giving it access to 72% of television households in the US.
Second, how will this affect linear media? Here’s one recent academic study showing viewership declines following acquisition by Sinclair. If traditional media weren’t suffering enough under the decline of ad revenue, the increased consolidation of outlets and subsequent polarization of its output does not bode well for traditional media.
GameStop over-delivers on Q4 2017 expectations
As long as the gravy train keeps going, expect to see these headlines. Nintendo’s success with the Switch, which sold around 15MM units by the end of January, obfuscates the inevitable decline of retail. GameStop reported stronger-than-expected results for the last quarter of last year, totaling $3.5bn in revenues (roughly +6% higher than analyst consensus).
The big question for 2018 is what’s next for GameStop. Its effort to diversify into adjacent segments like mobile phones and AT&T plans haven’t really wowed investors so far and because of buying itself into these segments GameStop is now burdened with debt. To give itself some flexibility for the period after Switch sales start to soften, it will likely have to shut down a bunch of stores by the end of 2018. With 7,200 stores worldwide, however, if needed it can keep that up for quite a while. More so it is likely that the recent collapse of Toys R Us is unnecessarily souring investor sentiment on GameStop, especially since (1) consoles and software continue to sell well, and (2) several big titles are scheduled for release later this year. Link
Capcom signs deal for Street Fighter TV series
Ryu, Ken, Guile and Chun-Li are about to hit linear television. Entertainment One convinced Capcom to sign off on its third-most valuable franchise and have them produce a TV series adaptation based on Street Fighter. I’m tempted to say that the movie sucked and that this will be the same. But apparently the 2014 adaptation of the series for Machinima generated 16MM viewers. Link
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