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Fortnite is the harbinger of more pain for the already struggling toy industry

While it is rather clear to us why Toys R Us is filing bankruptcy and even Star Wars themed toy sales weren’t enough to help Mattel (MAT) this past holiday season, in-app purchases for the new iOS version of Fortnite are rather revealing. The recently launched gaming app, which sits at the center of our Connected Society and Content is King investing themes, typifies the shift toward gaming, and mobile gaming, in particular, that has changed the kinds of toys that children of all ages play with.

At Tematica we like to say confirming data points for our investment themes are all around us in everyday life. In this case, all one has to do is look at the kinds of “toys” being used by children, tweens and teens as well as some adult – smartphones and in some cases tablets to play games, read or even stream movies and TVs. With a nearly endless choice of games, books and video content, one has to wonder how long traditional toys, such as action figures and dolls, can survive? Perhaps they will in a limited form that powers licensable content to gaming and content producers much the way the struggling comic industry is being utilized at the movie box office.

That would mean companies like Mattel and Hasbro (HAS) understand what it takes to pivot and capture the benefits of our Asset-lite Business Model investing theme.

 

Though it launched on iOS as a limited “early release” last Thursday, Epic Games’ Fortnite is already sitting atop the App Store’s free app download charts and, according to fresh estimates from Sensor Tower, has grossed more than $1.5 million in worldwide in-app purchases.

Players spend real money to buy V-Bucks, which can be redeemed for skins, accessory modifications, character animations and more. Currently, V-Buck packs range from $9.99 for 1,000 currency units to $99.99 for 10,000 units. Larger purchases net additional in-game currency, for example the $99.99 tier comes with an extra 3,500 V-Bucks on top of the standard 10,000 units.

According to the report, $1 million of Epic’s total estimated earnings came in the first three days after in-app purchases were activated. The performance puts Fortnite well ahead of similar battle royale style games Knives Out and Rules of Survival, which earned approximately $57,000 and $39,000, respectively, when they debuted.

A separate report from Apptopia adds color to Epic’s release, noting the game now sits in the No. 1 overall App Store spot in 89 markets. Currently the second-highest grossing game in the U.S. behind App Store stalwart Candy Crush Saga, Fortnite appears in the top-ten highest grossing charts in 15 markets, the analytics firm says.

 

Source: Fortnite estimated to have grossed $1.5M in in-app purchases after 4 days on iOS App Store

Holding steady with MGM shares after the December Macau gaming data

Holding steady with MGM shares after the December Macau gaming data

While today marks the start of the 2018 trading year, and as we shared in today’s Monday Morning Kickoff (MMKO) it means “back to work” and the resumption of both economic and industry data. Not to be overly repetitive, in that issue of MMKO I detailed the coming economic data I’ll be looking at this, but early this morning we received the December report from the Macau Gaming Inspection and Coordination Bureau. Per the report, December gross gaming revenue rose14.6% year over year, but viewed on a sequential basis the month’s gross gaming revenue fell 1.5% and more than 22.5% compared to November 2017. For 2017 in full, gross gaming revenue reported by the Macau Gaming Inspection and Coordination Bureau rose more than 19%.

Here’s the thing – expectations for December gaming revenue in Macau were looking for a near 20% figure on a year over year basis. Odds are we could see our share price pressure in our Guilty Pleasure holding that is MGM Resorts (MGM) shares given the relative miss. My most thoughts on MGM is we have are in the middle of a seasonally slow time of year for the gaming industry given the holiday season. Furthermore, MGM has several refurbishment projects underway that will last into 1Q 2018, which should improve their competitive position in both Las Vegas and Macau.

We will continue to be patient with the position, as we look for both a seasonal pick up in gaming industry and better-operating metrics for the company in the coming months.

  • Our price target on MGM shares remains $37; we would look to add to the position closer to $31.

 

MGM Update: August Macau gaming revenue shrugs off Typhoon Hato

MGM Update: August Macau gaming revenue shrugs off Typhoon Hato

Early this morning the Macau Gaming Inspection and Coordination Bureau reported August gross gaming revenue rose 20.4% year over year, with a month over month dip of just over 1%. While this sequential dip may catch some off guard and could rattle the shares of gaming and resort companies operating in the Chinese city somewhat, as we head into the holiday weekend, let’s remember that as of late Houston was not the only city hit by a natural disaster. Earlier this month, Macau was hammered by the severe Typhoon Hato, which shuttered casinos and resorts for several days.

Adjusting our view for that, the year over year growth in Macau gaming revenue remained impressive in August as the city continues to woo tourists and gamblers, particular VIP gamblers. This was one of the key aspects for the addition of MGM Resorts (MGM) in June to the Tematica Select List as part of our Guilty Pleasure investment theme. With MGM slated to open another Macau based resort in 2018 — the MGM Cotai that will include a spa, theatre, and 1,500 hotel rooms — the company continues to expand its presence in this market. As a reminder, Macau is the only part of China where casino gambling is legal, and odds are China’s rising middle class (a key part of our Rise & Fall of the Middle Class investing theme) is embracing our Guilty Pleasure theme as are tourists to the region.

Being the data junkies we are here at Tematica, we’ll look to the next report on Macau gross gaming revenue due in early October to see how quickly the city shrugs off the effects of Hato. Before then, we’ll get the August Nevada Gaming Revenue Report and that should shed some details on the recent Mayweather-McGregor fight had on Las Vegas, even though it wasn’t a sold out event.

Finally, one quick reminder, on September 8 MGM shares go ex-dividend to reflect the next $0.11 per share dividend, which will be paid on September 15. While the current annualized dividend yield of 1.3% is not the largest, we see the recent decision to pay a quarterly dividend as more indicative of the company’s multi-year strategy.

  • For now, our price target on MGM Resorts (MGM) shares remains $37.
Gaming and Collegiate Sports Collide to Form Varsity eSports

Gaming and Collegiate Sports Collide to Form Varsity eSports

Every once and a while we come across a data point that we even we shake our heads at and today is one of those days. We know gaming is a key aspect of our Content is King investing theme, but we were surprised to learn the Universty of Utah created a varsity sports program for gamers. With Madison Square Garden and other high profile venues selling out so on-lookers can watch gaming competitions, perhaps we shouldn’t be all that surprised. We will be on the lookout for data to see if this offering is followed up bother by others schools and if so what it may mean for our Fattening of the Population investing theme.

The University of Utah announced Wednesday that it had created a college-sponsored varsity “esports” program through its Entertainment Arts & Engineering video game development program.The program, the school claims, is the first for any college in the five so-called “power conferences,” which include the Pac-12, Big Ten, Big 12, Atlantic Coast, and Southeastern conferences.

Each of the team’s 35 members will be eligible to receive a minimum of a $1,000 scholarship each year. Eventually, the school plans to offer students full-rides through marketing and scholarship deals.

Utah’s esports team will play Riot Games’ League of Legends and compete in Riot’s collegiate league which includes more than 750 university club teams and 200 official varsity programs.

Source: One Major University Now Offering Scholarships For Gamers – Consumerist

Atari Banks Its Gaming Content On a  Television Future

Atari Banks Its Gaming Content On a  Television Future

While today’s teens and Millennials have enjoyed rich graphics and plotlines in their gaming experience, those of us that grew up with Missile Command, Asteroids, Centipede, Defender and many other classics fondly recall our Atari gaming system. Was it simple by today’s standards, absolutely, but we still spent hours saving the world or defending the galaxy. Now Hasbro, which acquired Atari in 1998, recognizes that Content is King, and is aiming to bring its gaming content to TV as well as the box office.

 

Atari has announced plans for a multi-pronged television strategy, reports Variety. The gaming company, which is best known for its late 1970s and early 1980s games and consoles, has several new television series in development, including a game show.Game On is an unscripted reality-style game show Atari in which contestants navigate through life-sized sets based on games from Atari’s library. Atari has also partnered with Discover on a TV series based on its 1978 game Codebreaker.

Source: Atari Aims For Television Future

As gaming’s influence grow’s, Facebook’s Gameroom was a matter of time

As gaming’s influence grow’s, Facebook’s Gameroom was a matter of time

We’ve continued to watch gaming become a growing force in our Content is King theme as it has spawned movies like Assasin’s Creed as well as live events that attract viewers worldwide. It was only a matter of time until Facebook focused on gaming, now we want to see how it brings its growing emphasis of monetization to Gameroom.

After losing mobile gaming to iOS and Android, Facebook is making a big push into playing on PC with today’s developer launch of its Gameroom Windows desktop gaming platform. After months of name changes, beta tests and dev solicitation, Facebook opened up the beta build for all developers and officially named it Gameroom.

The app is openly available for users to download on Windows 7 and up.Gameroom let users play web, ported mobile and native Gameroom games in a dedicated PC app free from the distractions of the News Feed.

Source: Facebook officially announces Gameroom, its PC Steam competitor | TechCrunch

Video Arcades Trump Most Amusement Parks, Not Disney or Universal

Video Arcades Trump Most Amusement Parks, Not Disney or Universal

What do you get when you mash together aspects of our Connected Society  and Content is King investing themes? One answer is gaming.

Add in our “Death of the Mall as You Know It” view and we are not surprised by the return of video arcades. These 21st-century arcades are filled with high-end 3D games and simulators that are chomping more than just a few quarters. But that’s where our Cashless Consumption theme comes into play as a player uses a topped off game play card that also keeps track of  prize tickets. While we still love our roller coasters, we can understand how the quasi-addictive nature of gaming. Add in some friends and some adult beverages a la our Guilty Pleasure investing theme and <boom> there is your Dave & Buster’s Entertainment (PLAY) business model.

For those of you who miss the old stand-up games of Galaga and Defender, there were more “amusement arcades” in 2014 than in 1998, according to the Census Bureau.

The amusement park has been on a roller coaster ride for two decades, one that—as the chart shows—is fundamentally headed downward. In some years, more parks opened than shut, but the small upticks have been wiped out by the near-regularity of a free fall. There were 48 percent fewer amusement parks in the U.S. in 2014 than in 1998.

Among these, the smaller parks which depend on local or regional customers, and often just during summer, are having the hardest time. Even such a well-loved brand as Lego met industry skepticism as it seeks to build a chain of regional parks. On the other hand, huge amusement and theme parks that double as vacation destinations are still going strong.

Source: Americans Are in Love With Video Arcades Again – Bloomberg