In today’s Exponential Investor…
- A little slice of history
- I was almost right
- The hottest, most lucrative industry right now is…
On 9 January 2019 I wrote a piece for Capital & Conflict, one of our other daily e-letters we publish here at Southbank Investment Research. It was before my time as your lead editor here at Exponential Investor.
I’m going to reproduce the piece for you here (and remember to keep in mind this was January 2019) because it’s relevant, which I’ll get to afterwards…
The title of the piece was, Kill Dad, Chop Up Body, slightly edited for brevity:
The first time around it took me five hours before I could stop. The second time around only two. I’ll do it again, but I can’t really say how long it’ll take this time. I’m down the hole, and there’s no turning back.
There were some key decisions in finding myself down the hole.
First was to yell at dad. Then not long after, kill dad. And not long after that I decided to chop up the body.
That did result in the outcome I was hoping for. But then I thought, what if I buried the body instead. And maybe I should jump off the balcony…
So many decisions, so many possible outcomes.
Frosties, Thompson Twins, decline the work, yell at dad, follow Colin, take the acid, tell Colin to jump, throw out the pills, kill Dad, chop up the body… go to jail.
Or, sugar puffs, Now compilation, decline the work, don’t follow Colin, still kill dad, bury the body, kill Colin… go to jail.
The ways this could go are immense, maybe I’ll never really explore all the ways this could go. But I’ll give it a shot at least.
137 million ready-to-go gamers
I assure you I am not writing this e-letter not from jail. That’s because I haven’t actually killed anyone nor disposed of any bodies. What I have been doing on and off for the last week, is watching, “playing”, the latest Netflix event, Bandersnatch.
Now if you haven’t yet taken the leap “down the hole” I highly recommend it. Bandersnatch is a movie that was released to Netflix globally about a week ago. Except this isn’t your typical movie. You don’t just hit play and sit back for the next couple of hours.
With Bandersnatch you have to make choices throughout the movie. Using your remote you get to certain parts where you have to make a decision. These decisions take you down an alternative path branching out to various storylines, different endings and wildly different events.
It’s the first ever “choose your own adventure” movie of its kind to hit the mainstream. However, the truth is this really isn’t a movie. It’s more a game than a movie. You “play” Bandersnatch rather than just watch it.
It should be noted there’s been a wave of interactive games in this choose-your-own-adventure style format before. These were PC games back in the 80s and 90s that resembled movies. Some of the titles that helped pioneer this genre include Phantasmagoria, Under a Killing Moon and Voyeur.
These were at games, not movies, but behaved like a hybrid of the two. Bandersnatch is clearly a movie but with the elements of gameplay. And I don’t know of any other “movie” in the modern era with this kind of sophistication.
However, there’s more to this movie/game experience than you might think.
This is actually the next great leap forward in the “gamification” of entertainment. I expect that Bandersnatch will be the first of many “choose your own adventure” style experiences. These new events put you in the movie more than you’d ever be just sitting and watching.
When watching with our wife she remarked, “This is great for people like me who sometimes zone out during a movie.” And she’s right. It’s viewer engagement on a whole new level.
In fact, I believe this is the early indication that Netflix is turning into an “immersive entertainment” company, rather than just a “streaming service”.
To reinforce this view, Netflix has also just poached Spencer Neumann to fill its CFO role. Neumann is the (now former) CFO of Activision Blizzard, the US$35 billion gaming giant.
I don’t believe this is a coincidence that Netflix has poached one of the gaming industry’s biggest executives. I think it’s going to make an intentional effort to develop more game-style experiences.
This may come in the way of “choose you own adventure” movie/games like Bandersnatch…
It may also come in the way of a full-blown shift into online gaming, taking the fight to Sony and Microsoft who’ve collectively dominated gaming for the last 20 years.
Here’s the thing. Sony’s PlayStation Network has around 80 million active subscribers now. Xbox Live has around 57 million active subscribers.
Interestingly, Netflix alone has as many as Microsoft and Sony combined with 137 million active subscribers. If Netflix were able to deliver a hardware controller for its platform and deliver online games, it’d instantly be the world’s biggest gaming company.
Is it too much of a stretch to see Netflix release a game like through its platform? Not at all. I think this makes near perfect sense for Netflix to pursue. In fact, I’d be shocked if over the next few years it didn’t develop into an online gaming company.
I also wouldn’t be surprised to see it make a strategic acquisition in this space – perhaps a company like Activision Blizzard. The way we consume and deliver entertainment is continuing to evolve. Movies, games, digital experiences, these are all forms of entertainment.
Netflix isn’t just a streaming company, soon it’ll be a gaming company too.
Almost nailed it… still might
I’ve republished this piece of history because I’ve been looking at gaming over the last few weeks. I see gaming as being one of the hot investment arenas for investors over the next 12-24 months.
And I still believe Netflix will stretch into game streaming.
However, it might be too late to the party. Last week at its big annual Amazon event, Amazon made a huge, game-changing announcement for online gaming.
Amazon, not Netflix, is launching head first into game streaming. I was close, but not quite right… albeit I still think I’ll be right.
Amazon is launching a game streaming service called Luna complete with an Alexa-enabled connected Amazon game controller. It will be a subscription-based service that allows people to access a library of games they can stream from Luna for just US$5.99 (to start with).
Unsurprisingly it’s going to integrate with the Amazon-owned game streaming service Twitch.
This now makes it three of the big tech companies to get heavily into game streaming, Google Stadia, Microsoft xCloud and now Luna. Sony does have its PlayStation Network, but it’s not quite the same thing.
The question though, is this a smart move from Amazon? Nvidia tried game streaming and to date has failed significantly. Amazon has far greater reach and scale. So does Google and of course, Microsoft and Sony.
What it all comes down to for gamers though is content and performance… and then price.
There’s a reason Sony and Microsoft still dominate gaming. There’s a reason why Activision Blizzard, Electronic Arts Inc and Take-Two are so big.
Google and Amazon muscling into gaming makes sense, but is it an investment dream? And when does Netflix pop its head into the equation?
Or from a little more left field… when does Spotify realise there could be an opportunity for them too?
Gaming is big business – lucrative business. That’s why Amazon is leaping in head first. It could give the company another leg up. Or it could inadvertently be an utter failure and play into the hands of another upstart looking to snatch gamers from Sony and Microsoft.
Either way, this is an industry that’s getting hotter and more exciting by the day, and soon enough that’s going to spill out into smaller, game industry-based stocks that will all benefit as big tech goes full throttle into big gaming.
Editor, Exponential Investor