The State of Technology & Culture
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THE STATE OF TECHNOLOGY & CULTURE: Gaming Takeover 1 TableTABLE of Contents of CONTENTS 3...Introduction 11...Traditional Film 13...Construction + 18...New Formats of Content + Television National Defense 4...Games and Culture 18...Widening Access to Game 11...Content + 14...The Battle Ahead Creation 5-6...Big and Getting Content Creation Bigger 15-19...Where Opportunities 19...Synthetic Reality 11...Game Development Lie 7-8...Why Is This 19...The Metaverse Happening Now? 12...Traditional Sports 15...Game Creators 20...Conclusion 9-13...The Gaming Takeover 12...eSports 16...Diversity in Gaming 21...Acknowledgements 10...Music 12...Other Leisure 17...New Content Creation Activities Methods 22...About MaC Venture 10...Fashion Capital 13...Health + Medicine 17...Content Distribution + 10...Retail Engagement 13...Education INTRODUCTION MaC Venture Capital is an early stage venture capital firm focused on finding ideas, technology, and products that can become infectious. We invest in technology companies that benefit from shifts in cultural trends and behaviors in an increasingly diverse global marketplace. Periodically, we compile a list of cultural/ behavioral trends that we believe are influencing global popular culture, termed “Culture Shifts: The State of Technology and Culture”. These shifts represent areas that we believe hold great opportunities for growth, innovation, and of course, investments in the coming year. In this installment of our State of Culture series, we look at how the gaming industry is changing the world and where we see opportunities for growth, innovation, and investment in the years ahead. 3 GAMES AND CULTURE Imagine we are back in 1988 in the middle of another US presidential election. Michael Dukakis is running against George H. W. Bush. The Nintendo Entertainment System (NES) premiered to great success three years prior, launching Super Mario Brothers and Zelda into the public consciousness. To reach younger voters Michael and his running mate Lloyd Bentsen decide to put up digital campaign yard signs next to each castle in Super Mario Brothers and outside each dungeon in the Legend of Zelda. Of course, even if it was technically possible to do that (it wasn’t), the world would have looked at the candidates as certifiably crazy had they done it. Flash forward 32 Nintendo years, and the current Democratic candidate for president, Joe Biden and his running mate Kamala Harris recently announced Source: that they are doing just that—putting up virtual campaign signs inside of Nintendo’s social simulation game Animal Crossing—and the collective thought is, what a great idea. What started in the early 1970s as a way to bounce an electronic ball between two paddles on your home television screen has morphed into a massive industry that is influencing and shaping culture and business on a global scale. The $160 billion video game industry is the melding of physical and digital worlds that is literally pulling everything from education, music, movies, TV, sports, medicine, national defense, construction and politics into the future. In fact, while the video games themselves remain a central part of the industry, the reverberation these games have on the world produces an outsized impact far greater than revenue alone. The Verge Source: Source: 4 BIG AND GETTING BIGGER In 2020 we have seen three gaming average of six hours, 20 minutes each week companies reach incredible milestones: playing games, with those aged 26-35 spending the most time playing at seven • Roblox raised $150 million and was and a half hours a week. However large all valued at $4 billion. In July, Roblox of this is, people still spend over three hours users spent a collective 3 billion per day watching TV, or 23 hours per week, hours on the platform, up 100% meaning there is much mindshare that from earlier this year. can be taken by video games—which is almost assuredly why Netflix feels Fortnite • Epic Games raised $1.78 billion is a bigger competitive threat than HBO. at a valuation of $17.3 billion and unveiled its next-gen game engine All of this news has made its way to the Unreal Engine 5 that melted just public markets, where gaming companies about everyone’s mind. are up on average almost 100% this year. However, gaming companies have a mean • Epic’s competitor, Unity raised $1.3B P/E ratio of 25 compared to the S&P 500’s in an IPO that valued the company mean of 30 (and that’s after the six-month at $13.7B after raising $525 million run-up since March). Given the many at a $6.3 billion valuation last July. reasons gaming is poised to continue its takeover of the entertainment industry, In 2020 2.7 billion gamers—32% of the it feels as if the gaming industry may be world’s population—will spend $160 million highly undervalued. on games, a number expected to exceed $200 billion by 2023. By comparison, the And what some may not appreciate is that Source: Newzoo global box office industry is worth $41.7 we may be coming up on the end of the billion while global music revenues reached beginning of the gaming industry, and $20.2 billion in 2019. Gaming is the largest that the next ten to twenty years will see and fastest growing segment of the entire gaming culture and technology having entertainment industry. Gamers spend an an even larger impact on how we live and 5 work. Later this year, Microsoft and Sony since March). Given the many reasons will release the 9th generation of video gaming is poised to continue its game consoles, the Xbox Series X and takeover of the entertainment industry, PlayStation 5 respectively. While these it feels as if the gaming industry may may not be the last hardware consoles be highly undervalued. to be developed and released, many feel that the 10th generation of gaming And what some may not appreciate is Comany Marke Enerrie Sok Prie Cange CY202E Oeraing Meri CY202E Vaaion Meri that we may be coming up on the end of Cap Vae will be cloud based or something more ays ays ays Revene Rev Growth EBITDA Margin EV/REV EVEBITDA PE the beginning of the gaming industry, US/Europe virtual. As we move away from individual Activision Bliard $61,81 $57,719 -5.0% -6.% 1.8% $7,826 22.5% 41.7% 7.4x 17.7x 4.6x and that the next ten to twenty years Electronic Arts $8,754 $3,790 -7.6% -11.0% 10.0% $5,781 7.8% 34.7% 5.8x 16.9x 4.7x consoles to the cloud where all game Take-Two Interactive $18,648 $15,895 -5.5% -8.1% 5.4% $,965 7.8% 1.5% 5.4x 5.0x 33.7x CD Projekt $11,403 $11,276 -4.0% 4.4% 9.6% $86 NM 79.3% 1.1x 16.5x 22.9x will see gaming culture and technology Zynda $9,978 $9,91 -3.4% -1.1% -.5% $,198 40.6% 2.8% 4.5x 19.8x 26.x logic, physics, image rendering and Ubisoft Entertainment $8,680 $9,078 -4.1% -6.% -2.6% $2,703 34.6% 1.7% 3.4x 15.5x 29.7x Embracer Group B $6,19 $6,04 -6.1% 8.1% 36.8% $861 66.% 41.6% 7.0x 16.8x 32.7x having an even larger impact on SciPlay $1,654 $1,498 1.8% -17.4% -10.1% $56 20.7% 3.8% 2.7x 8.1x 9.9x remote processing can be handled by Glu Mobile $1,43 $1,060 -.% -8.% -15.0% $554 0.9% 10.4% 1.9x 18.4x 2.x Rovio Entmt $591 $476 -7.4% 9.6% 15.6% $23 2.5% 1.0% 1.5x 7.0x 15.6x servers with ridiculous computational how we live and work. Later this year, Next Games $47 $44 -11.7% 8.1% 19.% $6 (6.7%) 1.7% 1.x NM NM Microsoft and Sony will release the 9th China power, the very nature of what a video Tencent $64,61 $62,265 -4.% -7.7% 19.3% $70,05 1.6% 37.0% 9.0x 4.4x 36.4x NetEase $67,064 $57,752 -.8% 0.9% 14.1% $10,620 5.8% 8.5% 5.4x 19.1x 5.7x generation of video game consoles, Bilibili $15,99 $14,815 -0.8% 3.% 36.6% $1,65 69.5% (17.9%) 9.1x) NM NM game is will change. Additionally, 37 Interactive Entertainment $1,50 $1,979 -8.0% -.9% 29.6% $,508 33.7% NA 5.x NA NA Century Huatong $1,119 $1,02 3.7% -4.% 0.7% $,785 5.5% NA 4.4x NA NA through these advancements, the the Xbox Series X and PlayStation 5 Perfect World $10,20 $9,802 -4.9% -4.% 15.3% $1,579 9.1% NA 6.x NA 28.x Giant Network $5,87 $5,89 -.% -.5% 4.8% $90 6.9% NA 1.8x NA 4.8x respectively. While these may not be the Yoooo $,118 $,244 -2.9% -8.8% -3.% $767 68.0% NA 4.x NA .1x ways in which gaming and gaming IGG $1,446 $1,19 0.8% 15.6% 71.8% $68 .% 27.1% 1.7x 6.x 6.9x Levou Tech Holdings $184 $1,91 -0.3% 7.0% 3.5% NA NA NA NA NA NA last hardware consoles to be developed iDreakSky Technology $846 $992 1.6% 2.7% 15.7% $46 17.7 17.1% 2.1x 1.5x 1.5x technology can shape other industries Japan and released, many feel that the 10th Nintendo $66,998 $55,66 6.0% 1.8% 30.4% $1,8 11.2% 6.0% 4.x 11.6x 2.8x will multiply.