2021 Perspectives

GGP 2021 Perspectives

In place of this week’s newsletter, we wanted to take the opportunity to reflect. 2020 was unprecedented in so many respects. This was a profoundly challenging year but it also marked a step function change in the gaming market. It ended up being a productive year despite its many trials. We closed 8 advisory transactions in 2020, including Phoenix Lab’s sale to GarenaFoxNext’s sale to ScopelyAppLovin’s acquisition of Machine ZoneSkillz’s SPAC merger with Flying Eagle Acquisition Corp.TSG’s investment in Scopely, and Daybreak’s sale to EG7. We expect the frenzied pace of transaction activity to accelerate further from here.

We co-founded Griffin Gaming Partners with Phil Sanderson and Peter Levin and have some of the world’s largest strategic investors backing the fund. With ~$250 million in assets under management, Griffin is now among the largest venture vehicles focused on gaming and is proud to support some of the most promising companies in the sector. The first fund is over half deployed, having made investments in SkillzDiscordAppLovinTactile Games, Wave, N3TWORKSubspaceFunzySuperSocial, and Spyke, among others. Our objective is to be the definitive resource for companies raising capital at all stages and are excited about the progress we’ve made to that end.

Sitting at the intersection of so much movement, we wanted to share predictions for the coming year from our vantage point.

BROADER PERSPECTIVES: OBSERVATIONS FROM THE PAST DECADE

The last decade has proved a dramatic transformation for gaming companies. Electronic Arts, for example, traded at less than 1x its next year’s estimated revenue and less than 4x its anticipated EBITDA. The reasons were relatively straight forward: many investors believed its performance to be unpredictable and it depended on third-party licenses. Shipping packaged software was a hard business and even more so when one owed royalties for the use of third-party IP.

Margins for the largest Western gaming companies have naturally expanded over the past decade as consumers shifted from purchasing physical copies of software to digital. As EA has diversified, demonstrated a track record of relatively consistent execution in marquee titles like FIFA, and exploited new adjacent opportunities such as Ultimate Team, the market has come to ascribe very different multiples: 6x and 17x 2021 revenues and EBITDA, respectively. EA is not alone in this “re-rating”; Take-Two, Activision Blizzard, and Ubisoft have all grown revenue and earnings but not nearly enough to explain the ~1000% appreciation in their stock prices since 2011.

This has proven to be a wildly sentiment-driven sector. As Activision Blizzard was perceived to be driving a significant proportion of the emerging momentum around eSports, its trading multiples expanded significantly. When EA’s acquired studio Respawn launched Apex Legends, its market cap increased by $5 billion over the next two weeks without much visibility into users, revenues, or profits from the new free-to-play hit franchise. Similarly, Nintendo’s market cap was up 36% in the two days following its announced partnership with mobile game developer DeNA without providing much detail on the specifics of the business terms. These are just a few of countless examples.

IMPLICATIONS FOR MOBILE GAMING COMPANIES TODAY

Mobile games companies have long suffered public perception created by King’s trading post-IPO. King marketed an IPO story centered around its unique approach to game development that produced one of the largest entertainment franchises of all time: Candy Crush. Yet, despite this meteoric success, which pushed King to over 500 million monthly active users at its peak, King failed to produce similar successes outside of the Match-3 genre. Candy Crush and its progeny seemed at the time to many public investors to be on a “decay curve” given low switching cost for users on mobile and resulting churn, which many investors extrapolated asymptotically ad infinitum. As a consequence, King traded as low as 2-3x its EBITDA.

So how is King doing today? Activision Blizzard acquired King in 2015 for $5.9 billion, representing less than 6x its expected EBITDA. Candy Crush users did indeed decay to a nadir of just under 250 million but the user numbers stabilized there.

Let that sink in: King owns and operates an entertainment franchise that a quarter of a billion people interact with each month, generates $2 billion of revenue and approaching $1 billion of operating income annually based on its Q3 2020 run-rate. This dwarfs almost every traditional entertainment franchise on the planet and although buried within Activision Blizzard, we estimate King may account for as much as $20 billion of Activision Blizzard’s $73 billion market cap today. It seems that Activision Blizzard saw something in King others did not.

PUBLIC MARKETS ARE OPENING BACK UP FOR GAME COMPANIES

With King’s lackluster performance and Zynga also trading poorly in the years immediately following its IPO, Western public markets were generally regarded as inhospitable for game companies. In dozens of strategic assignments for clients in the sector, only a very small minority considered a public exit as a serious alternative.

Today, we see euphoric appetite among public investors for the “picks and shovels” of the gaming ecosystem. Unity, for example, offers the most prolific game development software and has 1.5 million developers using its tools on a monthly basis and 2.5 billion monthly active end users who consumed content that was created or operated with Unity solutions.

Unity went public in September at a $16 billion valuation, which represented a 15x multiple of its expected revenues but has traded up dramatically to as high as $55 billion. Unity is only expected to grow sales 26% next year and is unprofitable according to consensus analyst estimates.

Unity is, in our view, among the best positioned companies to execute against the opportunity to bring ad-based monetization to the billions of users that play mobile games but don’t spend on in-app purchases. While approximately a third of all mobile downloads are games, only $3 billion of the $133 billion mobile advertising market is accounted for by in-game advertising. This represents a staggering opportunity but it is also a testament to the market environment to witness the degree to which Unity is credited for its potential future execution against this opportunity (and others) by current trading levels.

Skillz is another extraordinary example of a recent enormously successful IPO. We helped broker a merger with a SPAC at a $3.5 billion valuation just months after it raised capital privately at a significantly lower valuation. Skillz trades today at an $8 billion market cap and commands a 21x multiple of its expected 2021 revenue. Skillz is notably expected to grow revenues next year by 63% and also has profitable unit economics.

While SPAC mergers are extremely complex and require significant negotiation with the nominal acquirer, in this case, we believe it produced a superior outcome relative to a traditional IPO and a much lower cost of capital for Skillz going forward than had it stayed private. It is a sharp example of why we believe SPACs are more than just a flash in the pan, especially for sectors like gaming where public investor sentiment is rapidly evolving.

One interesting note from the process: Skillz was marketed to public investors without reference to mobile gaming companies like Zynga, Glu, or SciPlay given Skillz’s position as a platform. Skillz enables casual eSports tournaments and head-to-head contests with prizes for millions of mobile game players. Only time will tell but this mechanism for monetizing game content may end up rivaling that of in-app purchases, which today represent over 80% of all mobile App Store revenues according to AppAnnie.

IN THIS GOLD RUSH, IT WILL BE GOOD TO BE LOOKING FOR GOLD TOO

There is something incongruous with how public markets require companies like Zynga, Glu, and SciPlay to “show me” before ascribing much credit for potential new games or more importantly, to acquire businesses that accelerate growth and add to scale in a business that will ultimately benefit immensely from it.

In 2021, expect that to fade as a host of both gaming infrastructure and content companies, including Roblox, Playtika, and others that have demonstrated an ability to sustain growth, tap public markets. Many of these businesses, with enhanced cash war chests and a public currency will aggressively pursue acquisitions to accelerate growth much the way Zynga, Stillfront, Embracer, MTGx, and EG7 have.

Mobile gaming has emerged over the past decade as one of the most significant developments in entertainment. A niche business a decade ago has transformed into an $86 billion global market and one of the fastest growing entertainment markets today. One-third of the world’s population plays mobile games according to TechCrunch. With such incredible reach, lightning-in-a-bottle moments like Niantic’s 2016 launch of Pokémon GO are possible and allow for a piece of software to reach a billion users. As mobile screen resolution and compute power increase, and broadband cellular networks proliferate, increasingly immersive and social experiences are being created “mobile-first” in gaming.

Against this incredibly constructive market backdrop, extraordinary competition has emerged. The stakes are so high — billions in revenues and profits for the market leaders — and the cost of entry so low, more than a million mobile games have been created. Predicting those explosive hits like Pokémon GO is possible, we believe, but difficult. At Griffin, we have already evaluated close to a thousand venture financing opportunities since launching the fund.

While the market leaders in China, such as Tencent and NetEase, moved aggressively against the market opportunity for mobile games, and now generate ~80% of their games revenue from mobile, Western leaders have been much slower to increase their exposure to mobile, with such revenues representing only 10% - 30% of their total games revenue with WB Games as a notable exception.

Producing mobile hits is tough business, even for seasoned AAA gaming companies, given how many companies there are launching new games each year. Switching costs for most users are low, producing, as Kevin Chou, formerly Kabam’s CEO, observed, “shark fin” patterns of early success but high churn and rapid decay of user bases. Many of the larger gaming companies have opted to buy instead of build, creating an increasingly constructive market for mobile games businesses to find buyers willing to pay premium multiples.

ACQUIRED GROWTH IS GROWTH -- AND, FOR MANY, SUSTAINABLE

In examining recent consolidation in mobile gaming, Zynga’s history is illuminating. Notwithstanding its choppy start to life as a public company, Zynga has been on a terrific trajectory since Frank Gibeau took the CEO mantle back in 2016. He brought on a seasoned team of operators and set a new strategic vision for the business to focus organic efforts on Zynga’s biggest franchises (i.e., a “fewer, bigger, better” strategy akin to what had worked at EA), reducing costs, and most importantly, with an explicit intention to grow through acquisitions.

If we take the beginning of 2017 as the line of demarcation, at which point, Frank’s credible and compelling strategy had been clearly articulated, there are a number of remarkable dynamics to the next four year’s trading. At that point in time, Zynga’s beta, which takes account of both volatility and the way Zynga’s returns vary with market returns, was 1.3, Today, Zynga’s unlevered beta is an incredibly low 0.19. To distill this down to practical implications: the less volatile the returns and the less those returns move in line with the market returns, the lower the required return should be for an investor to hold the security. An investor who bought Zynga at the beginning of 2017, is up 3.8x, having produced an IRR of 40%. If the expected returns needed only be low double digits and the multiples it trades at today are similar, Zynga must have performed unforeseeably well to explain these anomalously high returns?

Zynga has performed well but not that well. If you drill down into Zynga’s growth, it turns out that nearly the entirety of its tremendous growth has been driven by its acquisitions. It has embarked, just as Frank said he would, on an aggressive string of acquisitions. It bought Peak’s card game assets, Gram Games, Small Giant, the remainder of Peak Games, and Rollic. Each deal has its own nuances, of course, but notably missing is the analogue to Caesar’s acquisition of Playtika in 2011 for ~$100 million. It of course sold the business to a Chinese consortium in 2016 for $4.4 billion.

Zynga, by contrast, has paid relatively full prices for its acquisitions. In the case of Peak Games, Zynga paid $1.8 billion for a company whose two hit titles, Toy Blast and Toon Blast, had category-leading user retention statistics. The business had single digit top line growth and still garnered a reported 15x EBITDA multiple. While almost 3 times the multiple Activision Blizzard paid for King, the market responded quite positively to the deal, with Zynga’s market cap increasing $630 million on the day of announcement. While Zynga has paid up and derived little benefit from synergies thus far, they are, as a package, strong strategic moves. However, in a market so thoroughly fragmented, with so many opportunities to buy, it’s hard to resist concluding that Zynga was mis-priced and materially undervalued back in 2017.

MANY MOBILE FRANCHISES WILL HAVE LONG LIVES

The key risk factor for mobile game developers has always been sustainability of growth. In the lead up to the sale of Kabam, we highlighted to potential buyers an important dynamic among the millions of players in the hit Marvel Contest of Champions game. The metrics for the whole population of players masked what was going on with a subset of players, dubbed Regulars, or players that had played 7 of the past 7 days. Those were players, we argued, that had often formed a sustaining habit. For many, the game had become a way of life. Regular customers, it turned out, monetized more like a subscriber. Cohorts of these users paid a very consistent and high sum each month despite being under no obligation to do so. They also had almost no propensity to churn. In total, Regulars accounted for approximately 80% of the overall game’s revenue.

One runs the risk in data mining of confusing correlation with causation, but we’ve now had ample opportunity to test the hypothesis out of sample. After observing the subsequent performance of Marvel Contest of Champions and countless other games, we’ve found this to be a recurring dynamic.

Many games have huge subsets of their player populations that form daily habits. Their status in these games often matters. They have friends in the games. They sometimes have enemies. They engage for hours every day. They simply don’t churn like the average statistics would predict. In many cases, mobile game developers can come up with new virtual goods and services to offer them. Regulars represent a subset of overall users, but we believe valuing the business opportunity derived from those most highly engaged users should look more like a software-as-a-service company valuation than the historical approach to mobile game company valuations.

Moreover, mobile games are increasingly akin to living organisms which evolve continuously. Pokémon GO has transformed radically since it launched in the summer of 2016. It further altered gameplay specifically in response to the COVID-19 pandemic, which curbed some of its historical outdoor gameplay patterns. As a result, Niantic delivered record revenue and player engagement in 2020.

Just as the market came to appreciate that AAA gaming companies had competitive advantages that would sustain and allow for growth in core franchises, we believe markets will afford increasing credit to mobile gaming leaders. The best executing private mobile game companies have grown dramatically, not only by launching new, unforeseeable hits, but also by scaling existing titles through profitable spend on user acquisition and by acquiring complementary businesses. Market leaders like AppLovin, Jam City, Moon Active, Niantic, Playrix, PlayStudios, Playtika, Scopely, Wildlife, Zynga, and many others are larger (in some cases, dramatically) and more valuable today than they were in 2017.

SCALE WILL INCREASINGLY MATTER IN MOBILE GAMING

Mobile is a market where scale will ultimately matter. The paradox is that scale, at least thus far, has not demonstrated an ability to help companies discover the next big hit. If you look closely at the Among Us examples of explosive success, they are very rarely produced by the largest Western developers. We do expect some change to that dynamic over time. However, sustaining and growing a game is a business that already dramatically favors scaled operators. Most mobile games need to spend significantly to acquire users through paid marketing channels. They also benefit from scale in running in-game events, producing new content for hyper-engaged users, and managing complex virtual economies.

Mobile gaming gives the developer the benefit of the data from every player interaction with the software and ability to track and ultimately model the results. Did a particular game mechanic cause a player to engage more deeply? Did it cause the player to churn? Did it lead to increased monetization?

The very same stimulus may very likely lead to a different result for a different player. The largest mobile game companies are building sophisticated player segmentation tools, which we believe will ultimately allow for customized and nearly individualized player paths through games. This will be an incredible application of machine learning technology for companies to be able to ingest such enormous quantities of data and tune the player experience algorithmically in response. Given the near-infinite variability of virtual economies and that the marginal cost of the virtual goods is close to zero at scale, we expect some extraordinary business results as mobile game companies systematize and automate maximization of lifetime value of players.

MOBILE GAME ADVERTISING WILL PRODUCE BILLIONS IN NEW MARKET VALUE

The last and perhaps more immediate opportunity for mobile game developers is advertising. King is an example to illustrate the point. When King was sold, it received very little if any value for the untapped engagement of non-paying players. At the time of the acquisition, only 3% of King’s users paid for in-app purchases.

The aggregate engagement was astounding. Users played 1.4 billion games per day. As is very common in mobile gaming, which is almost entirely a market of products that are free-to-play, the vast majority of users were “free riders”. Introducing ads in a way that doesn’t cause future payers to churn or allow competitors to pick off your audience is a non-trivial exercise, but it is increasingly being done. As of its last public disclosure, King’s advertising business generated $150 million of incremental net bookings and is the fastest growing segment within King.

There is an astounding amount of un-monetized time spent in mobile games. Users don’t get to “free ride” in Facebook, YouTube, or Snapchat, nor would many expect to. In the next year and beyond, we expect game developers to increasingly avail themselves of this ancillary revenue stream. The mobile game advertising ecosystem is evolving rapidly and stands to benefit many mobile games developers significantly.

CONCLUDING PERSPECTIVES

Although extremely difficult to forecast with precision, we expect public markets to increasingly “price in” the probability of growth in existing franchises, new games, successful acquisitions, and new monetization opportunities for games companies.

As games increasingly facilitate digital interactions, we believe we will see the creation of what pundits have coined the “metaverse”. One of the most reflective CEOs I know, Dave Baszucki, recently said quite artfully: “The Metaverse is arguably as big a shift in online communication as the telephone or the internet. Within the next few decades its applications will exceed our wildest imaginations. Perhaps the greatest opportunity it presents is to bring together people from all walks of life and foster a civil digital society. In 2021, that new society will begin to emerge for real.”

Whether Roblox or Epic will run one Metaverse or there will be a multitude of metaverses that emerge from the incredible engagement and immersion players have with their favorite games remains to be seen but it seems entirely likely that games will continue to consume more and more of our attention and facilitate an increasing proportion of social interactions.

Robert Putnam, in his seminal work Bowling Alone, decries the collapse of community engagement in modern society. We see gaming at the heart of a potential rebirth of social capital. Gaming, in many respects, has evolved in a way that facilitates social interaction, deepens relationships, and provides people around the world a new way to connect with one another. In games, we have the opportunity to “bowl together” at scale and perhaps build even deeper social roots than formed through community activities in the analogue world. For that potential, we are incredibly hopeful around the role gaming can play in bringing our world closer together.

THANK YOU!

Thanks to our clients and friends for all of your support. We hope to repay the kindness with creative ideas on how to support your growth. Feel free to reach out at any point if we can help provide advice or just to chat. Looking forward to the year ahead!

Best,
Nick

P.S. I’d like to thank everyone who contributed to this in one way or another and specifically, my team, Frankie Zhu, Jon Bikoff, and Seth Nutt, as well as Dean Takahashi, who kindly contributed to this directly with his suggested edits and whose work I hyperlink liberally 🙂

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Episode 2: Cloud Computing in Gaming

Hello again, and welcome to Episode 2 of "Griffin Gaming Perspectives," a series of biweekly installments from the team here at Griffin Gaming Partners. My name is Anthony Palma and I serve as Principal with Griffin GP. My background and career have been centered around technology within gaming, so for this week’s Perspective I’d like to share some basic information on a topic we find crucial to the future of the industry: cloud computing

For the past several years, consumers have been presented with the promise of “cloud gaming” and how it will change the way we access and play games forever. Before I get into the state of cloud gaming though, there is a very important distinction to understand: “game streaming” (eg. Google Stadia, PlayStation Now, GeForce Now, xCloud, etc.) is just one use case of cloud computing for gaming. Often we see the phrases “game streaming” and “cloud gaming” used interchangeably, but there are actually several other equally important use-cases for cloud computing in gaming beyond game streaming. Some of them have been around for decades, and some of them will come to mass-market fruition in the next several years alongside game streaming. 

So, while I could spend hours going through the specific technical details, potential market opportunities, and the exciting present and future of cloud gaming, I will start by giving you our 10,000-foot view of the six major use-cases for cloud computing that we see in gaming today for this Perspective. We may dive into more details on these topics in a future post, as we are excited to see the role of cloud computing continue to expand in our industry.

Digital Downloads

Overview

Digital downloads were one of the first and simplest uses of cloud technology in delivering games to consumers via direct online file downloads rather than requiring physical discs/drives. 

How it works

Digital downloads are any files - media or otherwise - hosted in a central cloud storage unit (essentially a hard drive in the cloud) that is accessible by anyone with a verified connection to it. These files can then be accessed and downloaded from that cloud storage directly to a user’s local hard drive, which then allows them to run locally on said user’s device. 

Use Cases

Digital downloads are primarily used for full purchases of games in place of buying a physical disc. Since the game files exist on a user’s local hard drive after download, full ownership of the files makes the most sense.

Real-Time Pixel Streaming

Overview

Real-time pixel streaming (AKA game streaming) describes when a game is being run on a remote, powerful cloud server rather than running on a user’s local device, and the user interacts with a live video feed of the game running remotely.

How it Works

At a high level, the game itself is installed and run/rendered on a remote, often GPU-powered, cloud server. The user can interact with the game in real-time by viewing a live video feed of the game running on that remote server and sending input commands to the server via their normal controller/keyboards/mice via the internet. Because the game isn’t installed and running locally, there are no up-front download, storage space, or hardware requirements to play the game.

Use Cases

Real-time pixel streaming best enables higher-quality content on lower-quality devices as well as the ability to play “on the go” without having to wait for long download times or installs.

Progressive Downloads

Overview

Progressive downloads are an advanced form of digital downloads which allow games to be delivered to a consumer in very small chunks on an as-needed basis, or “on demand.” 

How It Works

Original full-size files are stored in central cloud databases, and then are sent to various smaller “edge server” data centers that are positioned in specific geographic locations to be as close to as many users as possible. These edge servers break up the full-size files into small chunks and send them to users as-needed to minimize data usage and local storage requirements.

Use Cases

While this is most common in video and audio “streaming” it is most commonly used in mobile games for delivering small content packages without requiring a full app update. It is also useful for platforms that allow users to download the first level/area of a game to begin playing quickly.

Cloud-Driven Computation

Overview

Cloud-driven computation describes the use of powerful cloud computers to handle complex and intensive computations in games rather than relying on a user’s local hardware. Think of this as expanding the upper limit, whereas real-time pixel streaming reduces the lower limit.

How It Works

Utilizing a cloud infrastructure for complex and large-scale computations allows game developers to create experiences that expand beyond the confines of a user’s local hardware. These computing needs are managed by cloud servers that can expand/reduce compute power as needed to provide whatever amount of resources are needed on-demand for a game.

Use Cases

This enables opportunities like physics simulations for fully destructible persistent cities in games, expanded MMO server user capacities, and massive seamless worlds cross-platform.

Networked Multiplayer

Overview

Networked multiplayer has been a common use of cloud computing in gaming. Multiple users, using different devices, can connect to the same game environment and interact in real time.

How It Works

While the game itself is typically running (processing and rendering) locally on each user’s device, certain data like user position, gunfire, etc. is communicated out to a cloud computer that is “hosting” some authoritative logic for the multiplayer session. This logic checks for possible exploits before relaying incoming data from one player back out to all other players to keep all their positions and information in sync across their various devices.

Use Cases

Real-time multiplayer may get the spotlight with big-brand competitive games, but asynchronous multiplayer where players can take turns at their leisure has also been huge in mobile gaming

Real-Time Analytics and Events

Overview

Real-time analytics and events driven by cloud computing allow developers to capture, process, rationalize, and act upon important user data in real time as users progress through games.

How It Works

As a user plays through a game, certain data can be collected on their habits, play time, spending, etc. and can be relayed in real time to cloud servers. The two main reasons cloud computing is important for this collection is for data security and for mass processing at scale, so developers can both better protect and understand their potentially millions of users quickly.

Use Cases

Games that utilize Live Operations have found real-time analytics and events incredibly useful for customizing the user experience to improve retention, engagement, and monetization for their games long-term. Being able to make tweaks on the fly based on real-world data has proven invaluable in the Games-as-a-Service category, particularly on mobile.

Our Perspective

Cloud computing has already played a major role in gaming for the past two decades, and we fully expect its uses to expand as the industry continues to evolve over time. The connectedness and expansive compute power it provides to gaming will give way to new types of content and new ways for players to engage with each other. Cloud gaming will continue to reduce the friction between players and the games they love, be it via easier/faster access, more content updates, or more ways to play with friends. This of course allows player to spend more time and money in their favorite experiences, which will ultimately drive the value of these games, and the industry as a whole, up. Cloud computing will also allow game developers to speed up their processes, work better remotely, and invent new types of experiences for their users to further reduce friction points and increase the value of their creations.

Cloud computing within gaming is here to stay, and we believe the industry is just starting to tap into its potential.

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Episode 1: Griffin Perspectives

Hello, internet friends. It is my pleasure to introduce the first installment of “Griffin Gaming Perspectives,” a series of biweekly installments from the team here at Griffin Gaming Partners. We are gamers and we are venture capitalists. These brief essays aim to afford our readers a little more clarity on what is happening in the ever-changing and deeply exciting world of video games.

The games industry is one that is profoundly susceptible, yet receptive, to massive changes. Everything changed when Ninja queued into Fortnite with Drake, JuJu Smith-Schuster, and Travis Scott 2 years ago. We saw an increased focus on cross-platform play, the rise of influencers on communities and the relevance of games streaming in popular culture. These unique events drive the industry forward in fun and exciting ways and we will strive to elaborate on these unpredictable catalysts of change in the coming writings.

Unreal Engine 5 and the Next Generation

The predecessor of Unreal Engine 5, Unreal Engine 4 has been at the forefront of games development since its release in 2014. While tech has largely kept up with the creative demand of developers, a new Unreal Engine marks a significant leap forward in graphical capabilities for entertainment. Unreal Engine 4, owned by Epic Games, boasts more than 2 million developers using the platform. A new iteration of this technology is critical for empowering titles for the next generation of games when new consoles (Xbox Series X, PlayStation 5) and graphics cards launch later this year. At Griffin, we can’t wait to see what this next generation of games will show wielding this new technology. Given the gaming industry’s embrace of live events and never-ending quest to get content to the next level, Unreal Engine 5 will greatly enable developers’ ability to tell stories within the gaming medium.

Worldwide Digital Video Game Spending Hits Record-Breaking $10.5B in April

Games now account for 87% of spend on mobile – a trend that we believe to be very indicative of the demand for premium content. Games have always represented a significant value proposition for the consumer when compared to traditional forms of media such as film. This has never been clearer than it is now given that people are starved for new content amidst lockdown and pervasive boredom.

Let’s look at two examples of long-form film and long video games to compare the amount of entertainment each provides. The Witcher 3: Wild Hunt takes an experienced player 25 hours to get through the core story, and about 200 hours to complete 100% of the content. To get through the entire Lord of the Rings Extended Edition Trilogy, it would take a viewer 11 hours and 22 minutes – which is still less than half of the playtime of the Witcher 3’s main storyline. In times of entertainment need, video games hold a large advantage over film and TV. The replayability and durability of content, especially considering the robust social offerings in games, are becoming increasingly necessary during global stay-at-home orders.

Fortnite Hosted a Psychedelic Travis Scott and 12.3M People Watched

What does this mean for live events? Concerts touring? Games-as-a-service? Fortnite has been a pioneer of digital live events that fuel the content desires of the community as well as the ever-expanding, multiverse narrative of Fortnite. Just this week, Fortnite ushered in the end of Chapter 2 Season 3 with a well-produced, experiential live event (The Device), which was viewed by 6.1M+ on YouTube and 2.3M+ on Twitch alone. In a post-COVID-19 world, when populations are still deprived of new traditional content, such as films and concerts, these digital live events will continue to grow in scope and scale. And the platform on which these events take place matters intensely. When Griffin looks at making an investment in content, our principal concern is: “Is it fun?” The Fortnite Marshmello concert or Travis Scott’s Astronomical have been enormously successful because they engage the audience in a familiar, fun and interactive environment. We believe that this trend is just getting started and we cannot wait to see where it goes.

We think there is no greater reinforcement of our stance than our recent investment in Wave – the next generation of concerts has already arrived, evidenced by Wave’s previous transformative digital concert experiences like the Church of Galantis concert earlier this year.