As previously mentioned, Nintendo is following in the footsteps of Disney and will be building theme park attractions. Bloomberg recently published more details on what that may look like ahead of Super Nintendo World opening at Universal Studio Japan:
Super Nintendo World is slated to open this summer in Osaka, featuring a Power Up Band wearable that lets visitors collect coins and battle bosses while exploring a physical environment. Users track their progress via a smartphone app, according to the theme park operator owned by NBCUniversal LLC.
Universal Studios hinted it will follow classic Nintendo game themes, revolving around a mission to recover a golden mushroom stolen by Bowser Jr., a perennial Mario antagonist. The attraction will also house familiar game locations including the Mushroom Kingdom, Mario Kart, Peach’s Castle and Bowser’s Fortress. Super Nintendo World will also make it to the operator’s parks in Hollywood, Orlando and Singapore, though no dates are available.
The world of media/entertainment and video games are converging. The video game industry is already larger than many traditional media industries (i.e. music, print, movies), yet punches below its weight in terms of cultural relevance. Many signs everywhere that this is changing.
On that front, Matthew Ball’s (renowned VC and former media executive) recent piece, 7 Reasons Why Video Gaming Will Take Over, is worth a read.
Uber surprised investors with an accelerated timetable to profitability:
Our progress in 2019 and our 2020 plans gives me the confidence to challenge our teams to accelerate our EBITDA profitability target from full year 2021 to Q4 2020. It’s important to emphasize that we plan to achieve this profitably target assuming only modest improvements in the current competitive environment and with — without the assumption of any significant changes to our current portfolio of businesses.
Although Uber was the single best performer in the paper portfolio in January, Uber is very likely to also be the best performer in February as well. Year-to-date the stock is already up ~37%, but investors were highly skeptical of Uber’s ability to turn a profit, especially since Uber skepticism coincided with Wework’s implosion. I think this recovery has a lot of runway as skepticism eventually gives way to optimism.
Casual observation seems to suggest that skeptics continue to believe that Uber is unlikely to be profitable or only likely to be somewhat profitable in the sense that Tesla is somewhat profitable…I think that is a misguided comparison. Tesla is and will very likely remain a highly capital intensive business. Uber is and will likely remain a non-capital intensive platform business with network effects. And in comparison to WeWork, while Uber and WeWork both have higher operating expenses than more established software/internet companies because they are working with physical assets rather than bits in the cloud, Uber is not capital intensive whereas WeWork is/was.
From the mouth of the CEO, Dara:
Further long-term, we remain confident about achieving our overall company adjusted EBITDA margin of 25%. Specifically, we expect Rides to deliver adjusted EBITDA margin of 45% with a 25% take rate and our Eats business to deliver adjusted EBITDA margin of 30% with a 15% take rate.
Also interesting how unprofitable the Eats business is despite oligopolistic nature of the market already:
What this tells me is that it won’t be too hard for the market to eventually rationalize since only a few players need to adjust how they are doing things. Or…weaker players will run out of money and then whoever remains will essentially control the entire market with 50%+ share. My bet is on Uber because skeptics seem to not understand that it doesn’t really matter if Uber continues to burn $1-3 billion of cash per year because it has >$10 billion of cash on the balance sheet and, on top of that, Uber holds equity stakes in Didi, Yandex.Taxi, and Grab that are worth ~$15 billion in the private market. Even if you take a buzzsaw through all those numbers, Uber has enough money to outlast anyone.
Facebook pulled off an incredible flex last week after Google disclosed Youtube revenues for the first time:
Instagram, the photo-sharing app Facebook Inc. acquired for $715 million in 2012, generated more than a quarter of the social-media company’s revenue last year, according to people familiar with the matter.
The app brought in about $20 billion in advertising revenue in 2019, said the people, who asked to remain anonymous because the figures aren’t public. That beats Google video unit YouTube, which recorded $15.1 billion in ad sales — a number parent company Alphabet Inc. revealed Monday for the first time.
Instagram was acquired for $715 million in 2012, whereas Youtube was acquired in 2006 for $1.65 billion. Youtube today generates $15 billion of revenues, and I don’t know anyone that doesn’t think Youtube is now chocked full of ads. Yet Instagram, a much younger company, generates $20 billion of revenues! Yes, ad load has gone up, but the level of complaints seem to be a lot lower.
This is before even getting into the difference in economics. On the revenue side, Youtube needs to share revenues with the video creators. On Instagram, Facebook keeps all of the revenues. On the cost side, it’s almost a certainty that Youtube spends way more money on datacenters/bandwidth than Instagram does given the higher requirements for video.
More importantly, Instagram is already >25% of revenues for Facebook as a whole. Even if investors are negative on core Facebook app, Facebook has a very, very large life boat. And despite all the negativity, core Facebook app is still doing well as it continues to grow in the emerging markets. What other app has a user base closing on 3 billion?
Although I am most excited about the prospects for Instagram (and the shift towards ecommerce), we haven’t even considered the long-term potential for WhatsApp as a platform. WhatsApp is also putting in place a lot of foundational work that can eventually transform it into a powerful tool for ecommerce and payments as well:
People love chatting on WhatsApp with their favorite small businesses, but having to exchange multiple messages and photos to get product information is tedious. Today we are making it easier to learn about the products and services businesses offer with the introduction of catalogs in the WhatsApp Business app.
WhatsApp has also been testing payments in India, and Facebook intends to rollout payments into more geographies soon.
The faster Facebook moves away from advertising, the better for all of us.
Disclosures: I own shares in UBER and FB. I have no intention to trade any shares mentioned in the next 48 hours.