Image: Roblox

Taking the metaverse public

Protocol Gaming

Good morning! This week in Protocol Gaming, your weekly guide to the business of video games: a close look at Roblox's plan for its direct listing, a peek inside what went wrong with Stadia and a lot of canceled plans at EA.

Also, some news: Seth Schiesel, the original author of this newsletter, is joining Microsoft as director of executive communications for Xbox. If you're interested in becoming the next author of Protocol Gaming, we're hiring.

(Was this email forwarded to you? Subscribe here.)

The Big Story

Roblox is taking the metaverse public

After a couple delays — one in December 2020, to guard against a first-day pop; and again in late January, due to SEC scrutiny over how it recognizes revenue — Roblox announced that it's going to proceed with its direct listing on March 10.

What's so special about the company that describes itself alternatively as a "metaverse," "human co-experience platform" and "new category of human interaction"? Why would Roblox be worth its whopping $29.5 billion valuation?

  • Roblox is a video game platform that looks like a crossover between Minecraft and Lego. The use of "platform" is intentional: Roblox only provides the infrastructure to design and distribute games; its hyperactive community of mostly amateur developers does the rest.
  • Many of the core Roblox experiences are free, but Roblox makes money by charging users for the virtual currency Robux and through its subscription service, Roblox Premium. Robux can be used to customize player avatars, unlock premium games and purchase in-game perks; Roblox Premium offers discounts and access to exclusive content.
  • Developers have created more than 18 million games and experiences for Roblox, though users tend to gravitate to a much smaller subset of the available content.
  • Roblox users — half of whom were born after 2006 — spent a total of 30.6 billion hours on the platform in 2020. That's 2.6 hours per day for each active user.

The company isn't yet profitable, but just like in other parts of the gaming world, its revenue has been growing at an impressive rate recently. Roblox's highest expense is developer exchange fees, which accounted for roughly 36% of total expenses in 2020.

  • Roblox generated $923 million in revenue in 2020, which represents an 82% jump from the same period in 2019.
  • And it posted a $258 million consolidated net loss in 2020, more than the $71 million consolidated in 2019.

But what could go wrong for Roblox? There are three main risks that stand out with its direct listing.

  • Children's attention is notoriously fickle, and Roblox is asking investors to bet billions of dollars on its ability to remain relevant for years to come.
  • Roblox's access to distribution channels is contingent upon external partnerships, particularly with Apple and Google for mobile distribution.
  • Roblox needs to uphold high safety standards because so many children are on the platform; failing to do so would seriously damage its reputation.

Roblox has a tremendous opportunity in front of it, going public at a moment in time when it should deliver a blockbuster debut. The big question: Can it sustain that momentum in a world where children head back to school and are allowed to play with friends? At least some people seem to think so.

  • "Roblox is set to go public … and will create meaningful shareholder value," wrote NYU professor Scott Galloway in his No Mercy / No Malice newsletter back in December. "Roblox could be the first social media firm whose shareholder value isn't designed to extract value from the least powerful stakeholder, kids."

Want to know more? Read our in-depth guide to the Roblox direct listing here.

— Hirsh Chitkara and Karyne Levy


  • "The fish rots from the head." —Various sources described the toxic work culture at Techland, the studio behind Dying Light 2, where developers say there's a "creativity-killing vibe."
  • "I question how much the execs above Stadia leadership understand what they got into — the commitments made and overcommitments and the inability to keep those commitments." —Sources described Google's troubles with game development, after the company apparently couldn't stomach the complicated creative process amid Stadia's poor streaming numbers.
  • "I think it would be fair to say the messaging leading up to and around the launch was inconsistent." —Analyst Mat Piscatella thinks Google made some basic mistakes with its Stadia rollout, and some sources say it missed targets for controller sales and monthly active users by hundreds of thousands after spending tens of millions of dollars on games.


Azure intel

For corporate IT managers, there are many motivations to move dynamic workloads to the cloud. It provides an irresistible trifecta of flexibility, scalability, and costs savings for those managing varying workloads. Here's how to keep your data safe while it's in the cloud.

Read more.


  • This week's movers and shakers: "Pirates of the Caribbean" producer Jerry Bruckheimer is joining the board at esports company Skillz. Manuel Bronstein is Roblox's new chief product officer, joining from Google where he was VP of product for Google Assistant. GameStop CFO and executive VP Jim Bell is stepping down from both roles (no word on whether the meme stocks had anything to do with his resignation). And Sony is shutting down Japan Studio, its oldest first-party developer; the remaining staff will be rolled into Astro's Playroom maker Team Asobi.
  • It was a big week for canceling plans at EA: Last month, the company evaluated in-progress projects to decide whether they would move forward with production. Gaia, the highly anticipated game that's been in development since 2015, didn't make the cut, and neither did a revised version of Anthem, which bombed when it launched two years ago. The company also cut multiplayer mode from the next Dragon Age game.
  • And a big week for spending money, too: Tencent acquired a minority stake in Payload Studios, the developer behind sandbox builder TerraTech. Thunderful bought Headup for $13.3 million. And IronSource, a mobile monetization company, bought Luna Labs, which allows app developers to make digital ads, for an undisclosed sum.
  • CD Projekt Red can't catch a break: It announced that updates to the widely panned Cyberpunk 2077 are delayed because the studio was hit with a ransomware attack last month.
  • Valve has been ordered by a court to tell Apple how much money 436 games on its platform made as part of the Epic lawsuit. But in a win for Valve, the judge narrowed the amount of information Valve has to provide overall.
  • HP is buying gaming peripheral maker HyperX for $425 million, giving the company more of a foothold in the accessory space.
  • Dream Games closed a series A funding round of $50 million. The Turkish mobile game developer will use the money to grow the audience for its debut puzzle title called Royal Match.
  • Chinese esports company VSPN is weighing a U.S. IPO, sources told Bloomberg, and could raise hundreds of millions of dollars if it does.

— Karyne Levy

Look Out For

Gaming seven days a week

Unity published a big report last week looking back at last year's gaming trends, and among all the obvious "gaming is huge" data (HD DAUs were up 38% year-over-year!) was one particularly interesting tidbit: Players are playing more during the week. In May, weekday gaming actually overtook weekend gaming, and year-round the difference between the two was significantly smaller than in 2019. Tuesday night gaming sessions are the new big thing, everyone.

Shakeel Hashim

Thanks for reading. Tell your friends and colleagues to subscribe here, and send tips, feedback and ideas to See you next week.

Recent Issues