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Video gaming's red-hot summer

A close-up of an Xbox controller being held by a player.

Good morning! This Monday, the video game industry is too big to ignore, Ethereum's co-founder is over crypto, Zoom loves call-center tech, and Netflix is in a New York state of mind.

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The Big Story

The video game industry is booming

The summer slowdown has skipped the video game industry this year. Amid a flurry of virtual events, the gaming market has seen an unusually busy few months flush with big acquisitions, major announcements from companies like Google and Netflix, frenzied VC investment and not one, but two game-changing portable hardware reveals.

This week also marks the beginning of the all-digital Game Developers Conference. Without the in-person dynamic, expect this year's GDC to be a quiet one, but it's still an opportunity for the industry to self-reflect, and we may get yet more news from participants like Epic, Unity and Microsoft.

The game industry is experiencing a massive growth moment. A mix of new hardware, record software sales and an explosion in mobile has made the game industry the biggest, most attractive entertainment sector from a business perspective.

Next-generation hardware is also here, and it's driving increased investment in software. New consoles from Microsoft and Sony, as well as new handhelds from both Nintendo and Valve, are spurring big acquisitions in the game development space and renewed interest in building top-down ecosystems.

  • Nintendo earlier this month announced a revamped Switch console with an OLED display. Although it didn't feature an upgraded chip as some were expecting, preorders of the device sold out in quick order.
  • Valve last week unveiled a Switch competitor of its own, the Steam Deck, that can play existing Steam games and even console-quality software on the go. It also sold out within minutes of preorders going on sale. Portable gaming is emerging as one of the biggest new hardware segments in the industry, and the Steam Deck may just be the beginning of a new handheld boom riding the Switch's coattails.
  • Microsoft's purchase of Bethesda last fall has spurred Sony to make a number of studio acquisitions of its own, including Returnal developer Housemarque. In the mobile space, EA has spent billions to acquire the makers of hit smartphone games. And Facebook is spending big on virtual reality studios to help build the software library for the Oculus Quest, with two studio acquisitions in the last six months, as well as its purchase of Roblox-like developer Crayta.

And everyone wants a slice of the gaming market. Entertainment and technology companies are trying to figure out the best ways to break into the industry, and Amazon and Google's repeated attempts have provided valuable roadmaps, and cautionary tales, for others in the industry to learn from.

  • Netflix is the latest such company to announce its interest in the game market. The streaming service said it's planning to feature video games inside the Netflix app as soon as next year, and it poached Oculus executive Mike Verdu to help build out its library. Adding games to Netflix may help it differentiate itself from Disney and HBO and better compete with Fortnite.
  • Google made a substantial change to how it shares revenue with game makers on Stadia, announcing a cut to its commission on digital game purchases and a subscription revenue share. Google hopes it can draw more developers to its cloud offering amid increased competition from Microsoft.
  • Facebook announced a $1 billion creator fund, some of which will be used to continue growing its Facebook Gaming live streaming platform as a viable alternative to YouTube and Twitch. Video games are a big business for both commerce and consumer attention, with gaming content among the most watched videos on the internet.

The game industry has long married the software chops of Silicon Valley with the artistry of Hollywood, but it's only in the past few years that companies from both ends of that spectrum have started paying attention to just how big a business video games have become. Even as the world starts to attend live events and travel once again, the cultural impact of games keeps growing. So it's no surprise the industry is now proving too big to ignore, and too ripe an opportunity for companies of all varieties to pass up.

— Nick Statt (email | twitter)

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People Are Talking

President Joe Biden criticized social media platforms for allowing vaccine misinformation:

  • "They're killing people. The only pandemic we have is among the unvaccinated. And they're killing people."
  • Facebook denied that it was to blame.

Former Google CEO Eric Schmidt thinks the United States needs to find more allies to maintain its lead in AI:

  • "We need much closer relationships with Japanese researchers, Japanese universities, Japanese government — the same thing for South Koreans and same thing for Europeans."

Ethereum co-founder Anthony Di Iorio is over crypto:

  • "It's got a risk profile that I am not too enthused about. I don't feel necessarily safe in this space. If I was focused on larger problems, I think I'd be safer."

In other crypto news, Coinbase CEO Brian Armstrong snapped back at Jackson Palmer's bitcoin blitz:

  • "Crypto is not going to solve wealth inequality — it's not trying to create the same outcome for everyone. But it does create wealth mobility and more equality of opportunity for everyone. It levels the playing field, at least to some degree."

Coming this week

A tech summit on cyber safety starts today. The event focuses on partner violence and abuse against women, with presentations on digital literacy and how tech can support survivors.

"The Cult of We" by Eliot Brown and Maureen Farrell comes out tomorrow. The book dives deep into the rise and fall of WeWork. No word on if the book tells us whether WeWork is a tech company.

The FTC will hold an open meeting on Wednesday to talk about repair restrictions, care labels and a policy that requires specific companies to tell the group about upcoming mergers.

India's Mastercard ban goes into effect on Thursday. The ban, imposed over a claimed lack of compliance with data storage rules, will be aggravating for banks that now need to work around it.

And the Olympics start in Tokyo on Friday! Spectators can't watch in person, but the event is being streamed across NBC networks like Peacock and Telemundo.

In Other News

  • The U.S. blamed the Chinese government for the Microsoft Exchange hack. Along with allies including the EU and NATO, it also blamed a broader "pattern of malicious cyber activity" on China.
  • Blue Origin may launch its second crew as early as September or October. Company leaders said they've talked with a few future customers, and they want to send two more flights this year after Jeff Bezos and his crew take off tomorrow.
  • Zoom bought Five9 for $14.7 billion. The call-center tech company gives Zoom an even deeper presence in the enterprise.
  • A Google employee is alleging "corporate racism" in her resignation letter from the company. Ashley Ray-Harris, a project lead for Google content creation, wrote in the letter that the company views Black women as "lesser than."
  • Dozens of smartphones were targeted using military-grade Israeli spyware meant to surveil only criminals and terrorists, according to an international consortium of journalists. The phones belonged to journalists, human rights activists, business execs and two women who had connections with Jamal Khashoggi, the murdered journalist.
  • Meet the second-largest smartphone vendor: Xiaomi. The company now takes a greater market share than Apple, but Samsung still has the lead.
  • Netflix is opening a 170,000-square-foot studio in Brooklyn this September. The company has pledged to pour $100 million into the city, a big sign that film production is starting to bounce back.

One More Thing

The rules behind the games

Watching the Olympics is pretty easy: Turn on the TV and find almost any NBC station, or fire up Peacock, and you're all set. But do you really understand all of the rules and intricacies of each sport? The book "How to Watch the Olympics" by David Goldblatt and Johnny Acton explains everything you need to know about the games. And although it came out for the 2012 London Summer Games, the book will still help you become an Olympics fan by Friday. Happy watching!

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Learn more

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Correction: An earlier version of this newsletter misspelled Jamal Khashoggi's name. This newsletter was updated on July 19, 2021.

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