Emerging Trends in Gaming

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Even before COVID, gaming and virtual entertainment was a rapidly growing and innovative industry. Today, gaming is a $150B industry globally with mobile games representing $70B of the market. The global lockdowns and work from home for many has served to pour rocket fuel on the industry and accelerate a number of trends in gaming and interactive media that I am following:

A Person’s Community is in Game: The next wave of social media, networking, and community is being built in and around games as seen by Roblox, Fortnite (millions of people watch their virtual concerts), and Animal Crossing. COVID has just served to accelerate this trend of game communities becoming people’s Third Place. Epic Games realized this trend early on and pivoted from the legacy gaming business model of selling the actual game, to offering the full featured game for free and monetizing based on virtual goods within the game itself. This insight has made them wildly successful with most not realizing that Fortnite’s revenue per user ($96) is double that of Google, Facebook, Twitter, and Snapchat’s revenue per user combined.

Dramatic Shifts in Advertising Spend: Viewership of traditional sports is aging dramatically (the average age today of a baseball fan is 57) and younger generations tend to watch eSports in lieu of traditional sports while spending more more time in games. Expect to see new monetization methods in games based purely around advertising as advertisers desperately seek to reach that coveted younger demographic. Advertising dollars have already started entering the space and will grow rapidly in the coming years.

Cloud Gaming’s Rise: Cloud gaming is initially facing a host of challenges, with the technology just not being good enough yet, and the business model not figured out (a lot of publishers push against the subscription business model since you cap your whale customers). Google’s Stadia offering has publicly had a very rocky start as Google wrestles with these challenges. Over the coming years these challenges will be ironed out with 5G adoption strengthening the case for cloud gaming as it goes mainstream. Cloud gaming enables greater scale, turns games into ever-changing live entertainment platforms, and enables infinite complexity in games while removing the hardware constraints.

Apple as a Catalyst: The leaks from Apple are that their first VR/AR headset will be out in ~2022. I expect this will act as a catalyst for VR and AR gaming, and bring these games to a mass-market consumer, just as Occulus brought VR games to the hardcore gamer demographic. Mobile games existed before the iPhone, but it acted as the primary catalyst for mobile game adoption by the mainstream.

Game Infrastructure & Tools: Roblox and others have shown that by providing tools and an environment for creators to create games, amazing things happen. I am very excited at the new wave of startups providing game makers infrastructure and tools for everything from enabling competitive multiplayer to in game economies with unique virtual goods built around blockchain technology.

On Where the US Economy is Right Now with COVID-19

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Currently, in the US it’s basically a question of how long the Federal Reserve can hold the sky up on its back while fighting heavy gravity.   The way I see things right now:  

1) In 2 months we hit the 2nd highest unemployment levels in modern US history, at the fastest rate in US history.  

2) There is no real end in sight to the shutdowns or the virus.

3) There is no plan from the Federal US government.

4) Unemployment is and will continue to get worse on a daily basis for the foreseeable future.

5) The US government will be printing TRILLIONS of dollars over the next several years.  The US (and rest of the world’s too!) debt levels and deficits will go higher then WW2 likely by end of 2020.

6) Every day this continues consumer confidence continues to slowly drop, meaning even if we partially re-open, people aren’t going to be buying stuff.  It will take years, even once a vaccine is invented, for people to go back to the levels of spending/confidence as at the end of 2019.       

My buddy who is a life long hedge fund guy sent me the following this morning: "I have no clue how the market works anymore.  Maybe I never did.  I checked the S&P500 this morning and I could barely believe it”  

For those who know what the relatively new theory of Modern Monetary Theory consists of, well we are about to find out in a global real world experiment if it is right or wrong.  Buckle up.

Nori

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Overview

Nori is a cleantech company launching a carbon dioxide removal marketplace in 2020. It will allow anyone globally to pay farmers to remove a set amount of carbon (in tons) from the atmosphere, store it in their farmland soil, and verify the work was completed. Farmers can sequester carbon by planting certain crops (called cover crops), not tilling their soil, and other techniques that are known to pull CO2 out of the atmosphere and restore nutrients to the soil.

The way it works is US Farmers earn Carbon Removal Certificates (CRCs) by removing carbon from the atmosphere and independent 3rd party verifiers are paid to verify that the carbon was actually removed. Buyers purchase Carbon Removal Certificates through the marketplace that are then retired. Suppliers (initiallly at launch farmers but could be others) sell their CRCs to these buyers to get paid for their work. The Nori marketplace utilizes its own blockchain to make it easy to transparently verify the work was completed.

The system has a double benefit to farmers - it directly pays them but it also helps them change to farming practices that fix soil erosion, a huge issue facing farmer globally

The team is based in Seattle, Washington.

Why I like Them

This is an extremely innovative solution to reversing climate change, not just slowing it down like most solutions out there. Will it work to make an impact on climate change - I have absolutely no idea! However, its easy to see this or a similar mechanism potentially catching on. Nori’s model would incentivize farmers to switch to farming practices that help regenerate the health of their soil while pulling greenhouse gases out of the atmosphere. Buyers of these CRCs include everyone from governments, companies that pollute or want to do a public relations actions, or individual citizens that see this as a form of charitable giving.

It will be a fascinating experiment to see if business models like these take off in the coming decades as the planet gets ever hotter.