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04/27/23: Microsoft leans into cloud gaming; Riot adds crowdfunding for MSI; can pay-per-view esports work?

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Medias First Morning Read
Thursday April 27, 2023

Good morning! It’s Thursday and this is your early morning Esports and Gaming brief.
Microsoft’s latest quarterly results show cloud gaming is leading the way as hardware sales revenue continues to dip. The company’s Q3 2023 report showed a 30% year-over-year dip in PC and laptop revenue for Microsoft, as did devices revenue and Xbox revenue, which are separated out in the report. However, overall gaming revenue for Microsoft has only dipped 4%, in large part thanks to Xbox Game Pass, the company’s cloud gaming services.

Xbox’s gamble on cloud gaming and non-platform exclusive titles seems to be paying off, though the games business is just one small part of Microsoft’s story. Synergies between Xbox, PC and other Windows devices have allowed players to get additional utility from purchases, which while possibly affecting hardware sales has also given the company noteworthy improvements in subscription revenue (about $1 billion in Q3) and record-setting totals for monthly active users and monthly active devices, according to CEO Satya Nadella.

Microsoft expects to see gaming revenue growth in Q4 and “low to mid teens” growth from Xbox’s content and services, according to CFO Amy Hood, despite ongoing supply chain issues for hardware. The message is clear: Microsoft is staking its games business not just on the hardware it’s known for, but on the ability to reach, and monetize, gamers on any device they choose.

COMPETITION AND GAMING NEWS

Riot Games is taking a page out of Dota 2’s book by providing an in-game event pass and skin that will contribute to the prize pool for the 2023 League of Legends Mid-Season Invitational. The approach mimics Dota 2 developer Valve’s system for providing an additional prize pool for The International, Dota 2’s world championship. Riot will earmark 25% of earnings from its Inkshadow event and related skins, and 50% of revenue from its MSI 2023 Esports Premium Bundle, to go toward the pot for the first international League of Legends competition of the year. MSI is scheduled to take place in London at Copper Box Arena from May 2-21.

Esports as a pay-per-view product? It might be a path to profitability, longtime esports caster Erik “DoA” Lonnquist said on Twitter, as the industry continues to struggle with monetizing productions outside of third-party sponsorships and advertising. Content creators have recently taken this path for events, with boxing matches between streamers at events like Creator Clash 2 taking place behind a paywall. The difficulty, much like what traditional media has come across since the internet boom in the 2000s, is putting free content back into an exclusive box – and convincing an audience that grew up with free entertainment to pay for the product. While leagues and publishers have toyed with this model through things like Pro View for League of Legends, the interest has been minimal, and nothing short of wide-ranging adoption of pay-per-view practices would stand a chance of shifting consumer habits.

The Snapdragon Pro Series, the world’s largest multi-game mobile esports league, announced an expanded program and nearly $2.6 million prize pool for Year 2 of competition. The coming year for the SPS, which launched in April 2022, will include expansion of the SPS into Latin America; the addition of a $150,000 standalone event in Mobile Legends: Bang Bang; and Garena Free Fire, alongside Call of Duty: Mobile, as the league’s premier Mobile Masters titles. “Alongside Qualcomm Technologies and Samsung, we’re continuing to expand opportunities for mobile gamers by offering more games and more ways to compete than ever before,” said Sam Braithwaite, parent company ESL FACEIT Group’s newly announced Vice President of Game Ecosystems, Mobile.

The ESL Impact Season 4 finals will take place at DreamHack Valencia, organizer ESL FACEIT Group announced. The change brings the Counter-Strike: Global Offensive all-women’s circuit to Spain from Dec. 8-10 instead of their initially planned stop in Germany for DreamHack Hannover from Dec. 15-17. The decision, ESL said, was made to avoid competition between the event DreamHack Hannover’s ESL Challenger tournament. DreamHack, also an EFG product, has become the de facto home for ESL Impact since its 2022 launch, with ESL Impact’s Season 3 finals coming up at DreamHack Dallas from June 2-4. Players from around the world will compete for their share of a $123,000 prize pool.

SPONSORSHIP & ACTIVATION

Betting platform Rivalry announced a $10 million strategic investment led by online bookmaker Pinnacle to expand its esports offerings, which accounted for 90% of Rivalry’s betting handle in 2022. Rivalry’s latest funding comes after a marquee year for the company, which has grown to 1.5 million user registrations – 97% of which are Gen Z or Millennial users, according to the oddsmaker.

Guild Esports has cut short a partnership with cryptocurrency exchange Bitstamp and announced a three-year apparel deal with hummel, according to statements from the company this week. Guild, a U.K.-based esports brand, said it terminated its Bitstamp agreement, which was valued at $5.6 million over three years, to pursue other contracts. Hummel might be one of those, though the Danish apparel company’s three-year agreement with Guild is worth just less than $873,000.

STREAMHATCHET
Video Game Streaming Trends Report

Our latest quarterly report offers a detailed outlook into the past and current state of the live video game streaming market, and its relevance to the popularity of streaming platforms, game publisher IP, creators & esports.

Twitch still leads the industry for platform market share, and YouTube has carved out some more space as well. Facebook Gaming has officially dropped to an insignificant percentage, and smaller platforms continue to grow in influence, like AfreecaTV and Steam.

Download the Full Report Here

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YOUGOV LIVING DATA INSIGHTS
How do US gamers source their games?

Across various genres, online video game shops like Steam are the most popular destination for American gamers looking to acquire new titles, particularly among those who play MOBA games (66%). Console-specific video game stores are also very popular, with roughly half the gamers from various genres using the likes of PlayStation Store or Nintendo eShop to buy games. Not all video game destinations are equal among players of different genres though. For instance, those who play Indie games are significantly less likely to shop at offline video game shops (37%), which is a lot more popular source among those who play fighting (50%) or battle royale (52%) or sports titles (50%).

TEAMS

Former Overwatch League world champion Matthew “super” DeLisi will return from retirement to compete for the U.S. in the Overwatch World Cup. Super, who won an OWL title with the San Francisco Shock, retired in March 2022 but is back on the roster for Team USA as the Overwatch World Cup makes its return. He is one of two tanks listed on the roster, with Toronto Defiant starter Colin “Coluge” Arai also at the position. Overwatch 2 supports one tank in each lineup, so the two will likely either split time or super, who won with Team USA in 2019, will be a backup for the squad.

Shanghai Dragons support Bae “diem” Min-seong is leaving the team following a short-lived reunion after the former DPS player came back from retirement in March. Diem’s departure is due to “personal health issues,” the Overwatch League team said, and diem will be a free agent moving forward. Overwatch League competition is scheduled to kick off today, with Shanghai competing in its 2023 debut on Saturday.

TSM Apex Legends pro Phillip “ImperialHal” Dosen is taking a break from the game due to burnout and recent issues with the game. ImperialHal, who led TSM to a first-place finish at the Apex Legends Global Series Split 1 Playoffs in February, said he is “at an all-time low” in his mental approach to competing and that the team’s performance since their title during Split 1 also played a role.

INDUSTRY

Nearly 70% of gamers over 50 “feel like an afterthought” in the games they play, according to research from the American Association of Retired Persons. The AARP’s study, which surveyed nearly 7,900 players over 50, showcased the size of the older gamer demographic and their preferred ways to play: More than 80% of gamers over 50 play on mobile devices, but only 30% of that cohort play only on mobile, showing preconceptions about their willingness to play non-casual titles might be incorrect. The number of 50-plus gamers has reached 52.4 million in the U.S., according to the AARP, with about 45% of people over 50 playing games at least once a month.

The U.K.’s Competition and Markets Authority has blocked Microsoft’s acquisition of Activision-Blizzard over concerns that the deal could restrict choices for gamers in the country and impact innovation in the gaming space. The CMA took issue with Microsoft’s cloud gaming product specifically and Microsoft controlling both a large sector of that market and some of the most popular game titles in the world. “The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft,” the CMA said in a statement. “Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.” Microsoft can appeal the decision, which as of now is a deal-breaking blocker to the company’s near-$69 billion purchase of Activision-Blizzard.

Apple won its appeal of an Epic Games antitrust lawsuit that has been in the legal system for years, with the iPhone and App Store developer once again winning its fight against the Fortnite publisher. The legal battle, which began in 2020 after the removal of Fortnite from both Google Play and the App Store to avoid the 30% commission those storefronts put on in-app purchases, took its latest turn Monday as a California appellate court found that the App Store does not have a monopoly. However, the court did determine Apple is still in violation of anti-steering laws in the state, which mandate that Apple cannot ban third-party app stores from providing software for Apple products.

A group of 144 Sega of America staff are moving to unionize, according to a report from The Verge, in an effort to secure better pay, advancement opportunities, benefits, and resolutions to staffing and workload at the Irvine, California, office. The Allied Employees Guild Improving Sega has applied for a union election with the National Labor Relations Board and would become the largest multi-department game union in the U.S.: AEGIS includes “a supermajority of 144 employees across Sega’s [quality assurance], localization, live service, marketing, and product development departments,” The Verge said.

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TRIVIA
Could Legend of Zelda: Tears of the Kingdom be the next Elden Ring? Gene Park of the Washington Post thinks so. Now, for the trivia: What date is Tears of the Kingdom scheduled to release? (Email [email protected] with your answer, and be sure to include your name, company and city).

Answer to Our Last Trivia Question
When did the original Angry Birds game release? Answer: December 2009. Kudos: Ken Karlen | Creative-image technologies, Shelbyville, Kentucky; Tom Moore | Kalt Productions, Los Angeles; David Westberg | SAG•AFTRA Federal Credit Union, Burbank, California

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