🎮 The $120m+ gaming flop


December 22, 2020

PLUS: Was adding Tesla to the S&P 500 a bad idea?
December 22, 2020
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Still can’t believe this is the 2020 “Year in progress” tracker right now: 

▓▓▓▓▓▓▓▓▓▓▓▓▓▓▓ 97%

The Big Idea
Cyberpunk 2077

Cyberpunk 2077 (Source: YouTube)

Cyberpunk 2077: A $120m+ game that could be the industry’s biggest flop ever

Here’s a useful heuristic: If Keanu Reeves is the face of your project and it flops, then there’s something wrong with your project.

Well, Keanu is the face of the game Cyberpunk 2077 and things have been so bad since its Dec. 10 release that the studio behind it (CD Projekt Red) has seen its stock fall 40%+ since the start of the month.

Set in a dystopian future (think Blade Runner), the game was one of the most anticipated of the decade — with the project launching in 2012 and costing $120m+.

CD Projekt Red was founded by 2 high school friends…

… in Warsaw, Poland, during the 1990s (per the New York Times).

According to a former employee, the studio’s leaders have a reputation as “deft marketers” and “storytellers” but their vision often runs “ahead of their engineering and technical prowess.”

The vision-to-execution gap plagues Cyberpunk 2077

The gaming industry is so notorious for its hectic work schedules that there’s a word to describe the rush to make a deadline: crunch.

Over the years, the Cyberpunk project has been hit by delays and leadership churn; in 2020, employees have been crunching furiously to make a holiday 2020 deadline.

A major red flag came up in the weeks prior to Cyberpunk’s December launch. Studios typically send out advanced copies of games to allow media outlets to write up (hopefully positive) reviews.

CD Projekt mostly kept mum withs various publishers, raising many eyebrows.

Cyberpunk was glitchy from its release

Twitter and Reddit are awash with game clips showing inexplicable character behavior like walking through walls, suddenly disappearing and — it seems — an affinity for no pants.

It’s gotten so bad, Sony pulled the game from its store and is issuing refunds. The entire episode is shining a light on the high-stakes multiyear creation of expensive “triple A” games.

When they hit, they print money (e.g., the Grand Theft Auto franchise has made ~$6B worldwide). When they miss (e.g., Cyberpunk 2077), investors may hit them with lawsuits alleging “misrepresentation in order to obtain financial benefits.”

It’ll take a lot of Keanu to salvage this one.

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Snippets
  • Defense giant Lockheed Martin got tired of watching billionaire tech dudes have all the fun in space, so they just dropped $4.4B to acquire Aerojet Rocketdyne (a company with expertise in space, propulsion, and munitions).
  • Privacy is kind of a big deal, which explains why OneTrust — a privacy platform that provides data management, data discovery, research, training, etc. — just raised $300m at a $5.1B valuation.
  • Home iBuying startup Opendoor debuted on the Nasdaq yesterday under the fantastic ticker $OPEN, closing with a market cap of ~$20B. (Read our previous coverage on Opendoor’s trillion-dollar opportunity.)
  • Ouch!: Alibaba founder Jack Ma is willing to give up parts of Ant Group — the $200B+ giant Chinese fintech firm — in an effort to placate Chinese regulators.
  • Wait, how much?: PE firm Thoma Bravo is ponying up $10.2B for RealPage, the full-service property management firm.
  • Finally, technology comes through: 3D printing is helping to produce better prosthetics for pets with missing limbs.
  • Biggest energy bill ever? The new stimulus approved by Congress has ~$35B earmarked for clean energy initiatives.
 
Next-Gen Delivery
Robomart vehicle

Robomart doesn’t deliver products… it delivers the entire store

In the classic 1984 mock-umentary This Is Spinal Tap, a guitarist turns a volume dial from 1 to 10… then to 11, showing how the upper limits of his audio system can be transcended.

A similar thing is happening in the delivery space.

While DoorDash’s IPO felt like peak delivery, there’s a new entrant turning the dial to 11: Robomart, which brings the entire store to your door.

It’s not delivery, it’s ‘store-hailing’

Robomart recently started beta testing a pharmacy van (selling fever meds to face masks) in West Hollywood.

Co-founder Ali Ahmed notes 3 benefits to the model:

  • No scheduling: Summon Robomart when you’re ready. 
  • No online cart: Save time by just grabbing purchases IRL.
  • No 3rd-party shopper: Pick your own (unbruised) bananas.

Like Amazon Go, Robomart’s products are RFID tagged and the entire process is contactless, with credit cards automatically charged.

Robomart plans to go fully autonomous with more products

An early leader in the space was Moby Mart, which launched an ambitious roving walk-in store in China.

Moby Mart’s founder previously told Insider Trends, “In 20 years maybe only 1% of the grocery store chains that are operational in the world right now will be still there.”

If that’s the case — and Robomart can execute — we’ll soon have to add a No. 12 to the dial.

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The NBA is back!
NBA highlight

What’s the most valuable NBA highlight?

The 2020-21 NBA season is kicking off today.

Back in September, we wrote about NBA Top Shot, a blockchain platform that sells NBA-licensed digital collectibles of basketball highlights.

Founded by Dapper Labs — the team behind the viral CryptoKitties craze — NBA Top Shot is currently sitting at the intersection of 2 extremely hot trends: crypto assets and sport cards.

In anticipation of the new NBA season…

… we caught up with Dapper’s CEO Roham Gharegozlou to get an update on the platform:

  • $5m+ has been spent on NBA Top Shot, making it the world’s biggest sports blockchain product. Of the revenue, ~65% is direct sales of highlight packs (95k+ packs sold) and ~35% is marketplace volume from secondary market trading.

    Gharegozlou expects the secondary market to become a larger part of the business as each highlight is traded multiple times.

  • The best-performing highlights on NBA Top Shot’s secondary market have been from a random dude named LeBron. The Lakers’ superstar is the subject of 8 of the 10 most valuable highlights, including the evisceration dunk that leads this section, which is currently priced at $7.3k.
  • The platform is targeting digitally savvy collectors and has seen adoption across all age groups. Further, a community is growing around the product with a dedicated Discord channel (4.5k+ members).

We asked if it would be possible to purchase nongame highlights (since the NBA is infinitely amusing on and off the court).

While NBA Top Shot does have editorial discretion over highlight selection, the criteria for inclusion considers the “highest quality athletic plays.”

If that ever changes, we’d pay a lot for whatever J.R. Smith is doing here:

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$TSLA
Tesla vehicle

Source: Smith Collection / Gado vis Getty Images

Was it a good idea to add Tesla to the S&P 500?

Investor Christopher P. Bloomstran sure doesn’t think so.

In a Twitter thread that has gone viral, Bloomstran lays out his rationale for why adding Tesla to the S&P 500 (the largest company ever added to the index) is a bad idea:

  • Tesla made the cut by financial engineering: To be added to the S&P 500 index, a company has to show a GAAP profit for 4 straight quarters.

    Tesla hit the mark not by selling more products profitably but rather by cutting R&D expenses, drawing down reserves, and using carbon credits.

  • Tesla will have to do crazy numbers to justify its valuation: Bloomstran’s napkin math shows that at the most industry-leading numbers (e.g., margins and growth rates), Tesla would have to hit a revenue run rate of $335B in 10 years (for reference, Apple’s 2019 revenue was $260B).
  • The S&P 500 committee is forcing a highly overvalued stock into many portfolios: Because so many passive index funds track the S&P 500, countless “passive” investors will now be holders of Tesla and could be burned in a sell-off.

The entire episode reminds Bloomstran of when Yahoo! was added to the S&P 500 at the top of the dot-com bubble. Soon after, Yahoo! would peak at $127B before losing 98%+ of its value over the next 2 years.

Bloomstran’s broader critique here is that the S&P 500 has a history of adding stocks based on momentum, rather than fundamentals.

On Monday — its first day on the index — $TSLA fell 6%+ and is now worth $616B.

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Meme of the day
Keanu meme

Sad Keanu — a paparazzi photo of a “sullen-looking Reeves eating a sandwich” — was taken in 2010 and became one of the decade’s most popular memes.

While Sad Keanu is probably back because of Cyberpunk 2077, this depiction of the superstar actor is a bit unfair.

He’s actually known to be one of Hollywood’s better dudes.

Most notably: After the success of The Matrix, Reeves used his significant leverage to restructure the deals on The Matrix sequels to give back-end profits to the special effects and costume crews.

The 2 sequels made $1.2B+ at the global box office, and the back-end profits he gave up were worth $75m by one estimate.

That’s very not sad news.

TRENDS

A digital haven the size of New Hampshire…

Quick trivia question:

Guess which nation –

  • Established the world’s first “e-government”
  • Was the first to hold nationwide elections with electronic voting
  • Pioneered the world’s first “Digital Nomad Visa” for remote workers

Have an answer?

If you correctly answered Estonia, you might have already read our latest Trends deep dive.

In it, our team of analysts break down the tactics and policies that this Baltic nation of ~1.3M people is employing to quickly become one of the world’s most digitally advanced nations.

When you read through the report, you’ll learn:

  • How Estonia is using it’s digital residency policies to aim for 10m “e-Estonians” by 2025
  • The record-breaking 18 minute process for setting up a business in Estonia
  • Ways that Estonia has taken advantage of the remote-work-revolution to increase it’s tech workforce
  • And much more.

If you’re not already a member of Trends, sign up today for a $1 trial to get access to the full report.

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