Social Media Leads The Way
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With studios struggling this year, social media and streaming companies have picked up the metaverse torch. Social networks and streaming services have become key discovery and distributional channels. Afterall, content is king:
- Meta may not be done with web3
- Meta and Tiktok experiment with ad-free subscriptions
- Netflix adding thematic games in October
- Epic Games may have a revenue distribution problem
- Layoffs and studio closures continue
- Redfall may not be done, but a revival may be pricey
Let’s dive in!
Meta May Have Use For Web3 in The Metaverse
During a recent fireside chat, head of Meta-owned Instagram, Adam Mosseri, noted that he is “still bullish on NFTs”. He did qualify that the technology offered meaningful change only for a subset of people, but that’s a start.
With Mark Zuckerberg recently giving an interview in the metaverse, it is clear that Meta is not giving up on its founder’s bold vision, despite the tremendous cost. It appears that the social media giant recognizes the tremendous opportunity it represents.
NFT technology can play a vital role in the metaverse stack, helping facilitate digital asset creation and transfer, identity and ownership functionality. However, it remains to be seen if Meta intends to make any part of its metaverse decentralized.
Meta and Tiktok Experiment With Ad-Free Models
While ads are a vital revenue stream for social networks, companies are exploring alternatives to diversify and reduce their dependence on ads. Both Meta and Tiktok are working on their individual plans.
With Meta developing a Metaverse, in the long term an ad-free plan may mean more than just a news feed with less noise. Gaming companies have been adding ads into all sorts of context. For instance, Niantic has recently introduced in-game AR advertisements.
In the case of Tiktok, it has the capability to rival long-form content platforms, just recently, Paramount dropped the entire movie Mean Girls as a collection of 23 posts. What remains to be seen is how new social media ad-free plans will affect creators who depend on advertising.
Netflix Adding Thematic Games
Netflix plans to add two more titles, Slayaway Camp 2: Netflix & Kill and Dead Cells, to its roster of games as the Halloween season rolls around. The content streaming giant appears intent on creating a presence in the gaming space.
The company already has a number of games across different genres available through its mobile application, and it appears that the effort will only grow. Netflix, giving its audience, is uniquely positioned to become a gaming distribution platform.
The synergies with Netflix-owned IPs cannot be underestimated. Games could enrich and extend the experiences provided by shows. Perhaps more importantly for Netflix, they can provide additional monetization opportunities.
Epic Games Has a Royalties Issue
While the web3 space argues over whether creator royalties should be enforced on all marketplaces, the traditional space still has issues paying out agreed upon compensation because of a lack of automated services.
Hato Moa, recently identified that she hasn’t received any royalties for the past two years for her Hatoful Boyfriend game. While the creator acknowledges that the amount should be small it is the principle that is concerning.
Delayed payouts have been a known burden in the esports and artists spaces for a long time, which is why web3-enabled automated payouts gained some traction. However, it appears the big game publishers, despite their size and clout, also share this issue.
Layoffs and Studios Closures Continue
The industry is continuing to suffer through difficult times. Just in the traditional space over 6.1K people lost their jobs, and studios continue to close their doors or pause operations. Last week sad news came from Dang! and on the web3 side, Metapixel.
The confluence of events has been unfortunate. The covid-fueld demand for content has subsided, costs are going up, and the macro market has created a risk-off back drop for investors. Recent unionization and strikes will likely further increase costs.
For web3 the situation has been exacerbated by the high valuations at which teams raised over the past 1–2 years, forcing studios to make difficult decisions. However, as it has been pointed out by some on twitter, layoffs are a sign that teams are determined to get through this.
A Poor Start is Not Always The End
From Redfall to Gollum, the industry has seen a number of disastrous launches this year. However, a poor start can be just that, a poor start. For instance, in the case of Redfall, Bethesda is determined to right the ship, and has already shipped a vital update.
The success of Cyberpunk 2077 is a good example of a turnaround effort, albeit a costly one, over $125M. That is roughly 40% of what it cost to build the game, so if it’s about ratios and not nominal amounts, this could be a silver lining.
A number of games ecosystems utilizing web3 have launched with very muted responses, or had unfortunate collapses. However, as the traditional industry shows there is always hope. Sky Mavis has been working hard to prove that with Axie Infinity.
This wraps it up for this entry. As always, if you are working on something exciting in the web3 gaming space, or are a traditional gaming team looking to explore the possibilities, don’t hesitate to reach out to any of us at Sanctor Capital. Have a great rest of your week!
Ilya Abugov (@AbugovIlya)
Disclaimer: This commentary is not investment advice. It does not purport to include any recommendation as to any particular investment, transaction or investment strategy, or any recommendation to buy or sell any investment. It does not reflect any attempt to effect any transactions or render any investment advice.
This post is solely for informational and entertainment purposes. It is inherently limited and does not purport to be a complete discussion of the issues presented or the risks involved. Readers should seek their own independent legal, tax, accounting, and investment advice from professional advisors. The views reflected in this commentary are subject to change at any time without notice.
