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Riot Games and Disney have changed their relationship status.
After initially being exclusive, Disney’s priorities have shifted. There was and is a lot going on with Big Mouse: after taking full ownership of BAMTech, it is now dis-intermediating from Netflix (removing most notably its Marvel content), it made a $52bn bid for most of the media assets of Twenty-First Century Fox, and it recently released ESPN+ (an OTT subscription service). All work and no play.
If previously the Riot/BAMTech deal was any indication of esports becoming real, the new arrangement creates questions about its future.
Certainly, it’s increasingly difficult to ignore that competitive gaming is currently in the midst of a process of rationalization. Companies currently involved are trying to prove out the business case that their effort will create value because that is not yet clear to everyone.
Looking beyond the ever-optimistic market sizing exercises that make the rounds, you find a host of more serious questions. I’ve previously written about the question how esports is going to show an initial return on investment and the demands from brands that must be met to unleash more capital. All of these are predictable developments for an emergent entertainment market.
But now that Disney is seemingly running back on its original plans (no matter how coincidental) it also raises questions with regards to esports as a viable media rights business. It is not surprising that after the massive hype around esports over the last 18 months the main office has requested proof of concept. It also suggests that as far as marrying its fortunes to the emerging category, Disney is going to delay the wedding a bit longer. Riot has instead agreed to non-exclusive content rights, which is legal speak for ‘seeing other people.’
With the faith of one of the most important relationships uncertain, we may question whether this is a temporary delay en route to the altar or one backward.
I’m all out of puns. On to this week’s update.
NEWS
Sony: “VR market growth below expectations”, PS5 in 3 years
The PSVR remains a unique device but from the beginning its future was contested. Since then Sony has come to two important realizations. First is that sales for the PSVR were disappointing. With a little over 2 million units sold the PSVR has not been the success it had hoped, despite having the largest console install base. To chase a losing hand would be unwise and, more importantly, go against its recently announced second realization, namely that Sony is going to be focusing more on digitally distributed content. Under the new leadership of CEO Kenichiro Yoshida, Sony spent for $2.3bn on an additional 60% stake in EMI Music Publishing just this week and revealed its plans to focus on subscription revenue from online gaming and streaming music and video. It is not immediately apparent how a PSVR 2 would fit into that strategy.
This also puts the first signs of its next hardware generation in perspective. Until details of the PS5 are public, sales for PS4 should continue to be strong. It is the top dog in the console market and we're looking at a strong release slate in the console market for the foreseeable future: the recently released God of War (which sold 5MM units in its first month), Take-Two's upcoming Red Dead Redemption 2, and the new Spider-Man game are likely to help drive hardware sales, too. Especially in combination with discounts to reel in price-conscious consumers, we are not yet at the end of the line for the PS4. Link
EA acquires GameFly cloud-gaming subsidiary
Previously EA stated that is planing to launch a streaming service in the next couple of years. It seems that it has now made its first public move towards that goal. Despite limited available information a vertically integrated service that allows EA to own both the content and distribution makes sense. In particular now that it has control over all of the relevant sports licenses (acquired UEFA, ditched PG), it would be revenue accretive to control the pipe and monetize the more-or-less stabile consumer base in new and innovative ways. Link
PROMO: Forsaken Forest: A Survival-Horror Strategy Game
I’m making an exception to promote someone’s work: please go help fund the Forsaken Forrest. Disclaimer: Alec is one of my colleagues at SuperData. He’s a former pro-tour Magic player and one of the sharpest minds in the games industry. He made something beautiful. You should check it out (and help fund it).
Apple rejects Steam Link app
In a rare instance of the rejector being rejected, Valve’s Steam Link app for iOS did not see the light of day. The app meant to serve as a remote desktop and access the game library from a mobile device and stream directly for touchscreen play is, however, live on Android. Apple cited “business conflicts with app guidelines” which is corporate speak for “this is difficult and we have to go ask someone on a higher pay scale.” It is unclear how both firms plan to navigate the App Store/Steam vortex in which each ostensibly claim 30% of sales when a user buys a game. It will likely end up in legal for weeks. Link
Michelle Obama and her husband to create Netflix show
Post-presidency the Obamas have struck a multi-year agreement under their production company, Higher Ground Productions, to create content for distribution on Netflix. It just looks better to do TV after living in the White House, doesn’t it? Link
Apple Services now generates $9bn
As the second largest source of revenue, Apple reported a +31% increase y/y in the amount of money it makes from its App Store (games!), iCloud storage, and budding Apple Music subscriptions. Different from the volatility of earnings that come with its primary revenue driver, the iPhone, its services business is slated to bring in $50bn by 2020. That seems ambitious, certainly, but with an install base of 1.3 billion devices, Apple is well-positioned to get close to that number in the next two years. Link
YouTube launches its music service to much meh
In an effort to break up the Spotify-Apple streaming music duopoly, YouTube launched its music offering last week. After signing licensing agreements with the big music firms, YouTube is about to find out just how effective Spotify’s custom playlist feature really is. Link
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