Key Topics in Gaming

What is Top of Mind in Video Gaming?

Over the last three months, we’ve seen a flurry of activity in video gaming through IPOs, M&A, cloud gaming launches, and quite a bit of commentary on trends within video gaming. Many of my conversations this week continue to reference a few key topics, trends, and companies.

Below are a few notes we’ve written over the last 12 weeks that remain topical:

• Discord - a heavily undermonetized asset, growing users (our note)
• Unity - a successful IPO (U), $24B mkt cap, +35% since listing (our note)
• Skillz - the SPAC (FEAC) is up +26% since Sep 2nd (our note)
• Microsoft - their strategy in console / cloud gaming (our note)
• Amazon - launched “Luna”, their cloud gaming service (our note)
• Roblox - announced their plans for an IPO, I’m bullish (our note)
• AppLovin - announced their plans for an IPO, strong business (our note)

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5 New Things I Found Interesting this Week

Below is a quick reflection on a few things I found most interesting this week:

1) Merger: Huya and DouYu have merged and Tencent has 67.5% of the voting power. The combined streaming entity will have 334 million MAUs (primarily in China). Recently, Microsoft announced it was shutting down Mixer, its streaming platform for gaming, and directing that traffic to Facebook Gaming. Consolidation in the streaming market (>900M viewers) has now resulted in Huya (Tencent), YouTube Gaming (Google), Twitch (Amazon), FB Gaming (Facebook), and then a few smaller ones. These top platforms are backed by some of the largest balance sheets in technology, which means they will likely be acquisitive and will push for market share.

2) Smart TVs: UMG.TV’s 24-hour esports channel will now be on VIZIO smart TVs. As the second largest TV maker in the United States, VIZIO’s partnership with UMG should be a meaningful distribution channel for UMG’s esports content. Looking ahead, I expect more of these channels to make their way onto the home screens of smart TVs around the world. TV makers will have no incentive to sign or agree to exclusive gaming channel providers, who will all be bidding for the best content, leagues, shows, and broadcasts.

3) Esports: JuJu Smith-Shuster has launched his own esports team: Team Diverge. He is not the first traditional sports athlete to get involved in esports, but it is unique that he is starting his own team. This is not dissimilar to David Beckham’s recent involvement in Guild Esports, who recently did an IPO on the LSE. I expect more traditional sports athletes to continue looking to gaming as a way to create further longevity for their personal brands.

4) Gaming Influencers: Tyler “Ninja” Blevins has signed with CAA (leaving Loaded). CAA also represents Dr. Disrespect, a prominent streamer in gaming Rogue Company let him build his own custom map). Talent agencies will continue to sign gaming talent as video gaming commands a stronger foothold in global entertainment. For context, video gaming is a ~$160B industry versus Music (~$20B) and Film (~$42B), both of which are struggling right now while video gaming is thriving.

5) Prize Pools: The world championship for Dota 2 is now at $40M. Dota 2 is owned by Valve, is similar to League of Legends, and their world championship is called “The International”. Every year, this specific championship continues to break prize pool records. In 2019, each member of the winning team walked away with $3.1M. For context, this is more than the winners of Wimbledon ($3M), Masters ($2M), Daytona 500 ($1.5M), or the Tour de France ($550k). Prize pools in gaming are the combined result of a supportive underlying community and the increasing viewership of these tournaments.