the company behind one of the world’s most popular game engines, could nearly double its reported valuation in a new round of funding. The company has filed to raise up to $125 million in Series E funding according to a Delaware stock authorization filing uncovered by Prime Unicorn Index and reviewed by TechCrunch. If Unity closes the full authorized raise it will hold a valuation of $5.96 billion. A Unity spokesperson confirmed the details of the document. The SF company builds developer tools that allow game-makers to build titles and deploy them on consoles, mobile and PC. More than half of all new games are built using the platform. Customers pay for the platform per developer once their projects reach a certain scale. Unity’s competitors include Fortnite-maker Epic Games, which has been able to rapidly startups and game studios in the past two years fueled by the profits of their blockbuster hit. Unity most recently , a “big chunk” of which went toward purchasing the shares of longtime employees and earlier investors. The round left the company’s valuation north of $3 billion. The company, founded in 2003, has raised more than $600 million to date. The company’s previous backers include Sequoia, DFJ Growth and Silver Lake Partners. Earlier this year, Cheddar that Unity was eyeing a 2020 IPO, though the company did not comment on the report.
(Amazon Web Services Photo) As bigger and bigger businesses take the plunge into cloud computing, Amazon Web Services is turning into a pretty big business in its own right. Revenue from the cloud market share leader , up 41 percent compared to the same period last year. Operating income was $2.2 billion, up 55 percent over the year-ago quarter. AWS has continued to grow revenue at better than a 40 percent clip over the last few years as competition from Microsoft and Google has heated up. Long-time customers continue to increase their spending on cloud services as their needs grow, and any chief information officer at a large enterprise without a cloud strategy . Coming off its annual re:Invent show last November, that AWS was seeing the lion’s share of big spending deals come its way, and it would appear that momentum continued into the first quarter. Operating margins have held steady during this period, coming in at 28.9 percent, up from the same period last year but down a bit from the second half of 2018.
Boeing’s first 737 MAX makes its way through the assembly plant in Renton, Wash., in 2015. (Boeing Photo) Boeing’s first-quarter financial stats took a serious hit in the wake of two fatal crashes involving its bestselling plane, the 737 MAX. The company estimated the additional costs associated with grounding the 737 MAX fleet at $1 billion, but more uncertainty lies ahead. Boeing executives held off on providing updated financial guidance until the impact of the 737 MAX issue becomes clearer. Revenue: Boeing reported first-quarter revenue of $22.9 billion, which is 2 percent below the year-ago figure but in line with analysts’ expectations. The shortfall is due primarily to fewer deliveries of 737 jets. Earnings: Net earnings for the quarter amounted to $2.15 billion, which translates to adjusted earnings per share of $3.16. That’s 13 percent below what they were a year ago but from Zacks Investment Research. Word from the top: “Across the company, we are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators and the flying public,” Boeing CEO Dennis Muilenburg said in the company’s . “As we work through this challenging time for our customers, stakeholders and the company, our attention remains on driving excellence in quality and performance and running a healthy sustained growth business built on strong, long-term fundamentals.” Word on the Street: Boeing’s share price rose 0.36 percent to close at $375.46, apparently reflecting investor relief that the quarterly results weren’t worse. The stock’s value has fallen about 8.5 percent since the beginning of March, just before the fatal crash of an Ethiopian Airlines 737 MAX. Quarter highlights Boeing said the $1 billion in additional costs comes primarily from reducing the 737 production rate from 52 to 42 airplanes a month, a move that spreads fixed costs over a smaller number of planes. That toll could rise if the uncertainty surrounding the 737 MAX’s fate continues into the long term. Muilenburg said Boeing is making “steady process on the path to final certification for a software update for the 737 MAX.” That update is meant to address problems with an automatic flight control system that has been linked to the Ethiopia crash as well as last October’s fatal crash of a Lion Air jet in Indonesia. Muilenburg said the fix has been tested on more than 135 flights but didn’t give a timetable for winning certification from the Federal Aviation Administration. This week as saying certification could come as early as late May, potentially leading to a return to flight in mid-June. The process that led to the 737 MAX’s certification in 2017 is the subject of multiple investigations, including inquiries by the FAA, the Justice Department and the FBI, and a panel of experts convened by Boeing. But Muilenburg said “there was no surprise, or gap, or unknown here, or something that somehow slipped through a certification process.” Because of the focus on the 737 MAX situation, Muilenburg said Boeing hasn’t yet decided whether to go ahead with plans for a next-generation midsize airplane known as the New Mid-Market Airplane, the NMA or 797. But 777X production is moving ahead as planned, with the model’s first flight expected within months and the first 777X delivery due next year. Boeing Global Services, which was broken out as a separate business unit in 2017, brought in glowing financial results. First-quarter revenue increased 17 percent over the year-ago figure, to $4.6 billion. Boeing said the increase was driven primarily by higher volume across the portfolio, including , an aerospace parts distributor. Boeing Defense, Space & Security also served as a bright spot in the quarterly report: Revenues for that business unit amounted to $6.6 billion, which represents a 2 percent increase over the previous year’s first-quarter figures. The first seven KC-46 tankers were during the quarter — a milestone dimmed only slightly by . Boeing said its CST-100 Starliner space taxi has gone through “successful environmental testing,” calls for an uncrewed Starliner to make its first demonstration flight to the International Space Station for NASA no earlier than August, with the first crewed flight to follow by as early as late 2019.
Tim Merel Contributor Tim Merel is managing director of . More posts by this contributor There has been some negative sentiment surrounding the games industry recently, with stock prices of public games companies in question in both the U.S. and China. While being contrarian to market sentiment is always risky, it’s also possible that folks might be taking a long-term solution to a short-term problem. Games industry software/hardware combined revenue could drive well over $200 billion of revenue by 2023, and there was a companies in 2018. So what’s going on? The games industry isn’t one monolithic sector. Depending on how you slice it, the market is made up of 15 sectors, eight platform types (e.g. mobile, PC, console) and even more proprietary hardware/software platforms (e.g. iOS, Android, Xbox One, Sony PS4, Nintendo Switch). Games software/hardware sector revenue share versus growth (2018-2023) (Note: See selected data below. Free charts do not include all the numbers, axes and data from Digi-Capital’s , with underlying data sourced directly from companies and reliable secondary sources.) Mobile games rule We first forecast mobile’s dominance of the games market way back in 2011. At that time, many traditional games companies didn’t believe could become the driving force for games. Some of those companies no longer exist, so what’s happening today is nothing new. Total global mobile app store revenues (gross across games and non-games apps, including app store revenue share) . Mobile games delivered around of that number, as they have consistently for years. So where mobile games drove more than $70 billion gross revenue globally last year, they could top $100 billion revenue (again gross, including app store revenue share) in their own right in the next five years. But like all games sectors, mobile games are hit-driven. And this could be the source of some of the mismatch between the market’s understanding of short-term trends and long-term potential. For example, Supercell’s to date. However, Supercell also saw revenues and profits decline in 2018 for the second year in a row as its franchises matured. Yet Supercell’s newest franchise, Brawl Stars, delivered . Swings and roundabouts. Epic Games had the biggest breakout mobile games hit of 2018, with Fortnite contributing significantly to a . It also anchored part of the interest behind a last year. Yet the company and redirected internal development resources to focus on Fortnite by and . We will come back to Fortnite in the context of mobile games becoming platforms in their own right. Perhaps the biggest concern for mobile games after last year is China, in which the regulator ceased approving new games for most of 2018. This weighed particularly heavily on market heavyweights Tencent and NetEase, although the regulator . However, the regulator again , only to . This regulatory risk has resulted in our downgrading Chinese games revenue growth rates until a clearer long-term pattern emerges. Niantic’s mobile AR smash globally last year, and has been reported to drive some astonishingly big numbers: 800 million downloads, more than $2.5 billion lifetime revenue, 147 million MAU, 5 million DAU, 78 percent of users aged 18 to 34, 144 billion steps taken by users, 500 million visits to sponsored locations and Niantic’s valuation of nearly $4 billion (Note: Not all of these figures have been confirmed by Niantic.) Off the back of this, Niantic is exploring Pokémon GO’s potential to become a platform, with , and the as a serious AR Cloud player. We’ll come back to these. PC games hardware/software is big, too PC games hardware/software is made up of four individual sectors, including PC games hardware (gaming computers, upgrades and peripherals), PC games, online (DLC, IAP and subscriptions), PC games (digital sales) and PC games (physical sales). While each subsector has different characteristics, scales and growth rates, together they make up the only part of the market close to mobile games long-term. Google’s new cloud gaming platform and competitors could also fundamentally impact high-end gaming across all platforms (not just PC). Mobile games software and PC games hardware/software combined could deliver three quarters of total games industry revenues by 2023. Selected multiplayer PC games (ex-China) While PC games hardware is massive, users are buying that hardware mainly to play MMO/MOBA games. This part of the market is consolidated around franchises from major public games publishers such as Tencent and Activision Blizzard, as well as independents like Wargaming and Bluehole. The console abides Console games were the market leader for games hardware/software for decades, and remain huge despite no longer being an engine of growth. The highest growth here could come from console games (digital sales) and console games (online), with console games hardware and console games (physical sales) both ex-growth long-term. Despite flattish platform growth for console games hardware/software, they could still deliver multiple tens of billions of dollars revenue by 2023. High-growth from a low base Of the remaining market sectors, a handful are small today but have high-growth potential long-term. These include VR games, VR hardware, AR games and esports. Yet taken individually, each sector is likely to deliver in the 1 percent to 2 percent range of total games market revenue in five years’ time. So great for indie developers, but more challenging commercially for the big guns in terms of scale. United nations of games Geographical games market discussions tend to focus on China and the U.S., but there are more than 50 country markets driving growth at a global level. Scales and growth rates vary dramatically from giant, stable growth countries such as China (even with its current uncertainty), the U.S. and Japan to higher growth markets like India and Russia. In aggregate, Asia could take around half of global games market revenue by 2023 (despite short-term concerns about China). Europe might deliver around a quarter of global revenue, followed by North America at around one fifth in the same time frame. Countries in MEA and Latin America make up the balance at a much lower level. Concentration versus growth The law of big numbers caught up with the games industry years ago, with the 10 largest publicly listed games companies taking three quarters of public games company revenues globally (Note: This ratio does not include private games company revenues, which are substantial). When you already produce billions to tens of billions of dollars in revenue, high growth rates aren’t easy to come by as new hits counterbalance maturing franchises. Public games company revenue share (Note: Heat map displays relative revenue scale of publicly listed games companies. Private games company revenues not shown on this chart.) Top grossing mobile games of recent years (outside China) often came from independents. Standouts include Supercell, King, Epic Games, Niantic, Machine Zone and others. Perhaps in response to this dynamic, there was more than $75 billion of games M&A over the last five years. Major games companies have been buying both growth and cash flow. Mobile games as platforms? The beauty of what Steve Jobs created with the App Store is that it democratized distribution of apps at scale beyond the early social games market. It also enabled indie games developers to build some of the rocket ships we’ve seen over the last decade. Yet despite massive growth, even the biggest mobile games couldn’t really be described as platforms in the traditional sense. Not yet. Where Tencent’s WeChat messaging platform looks like some mobile games pureplays are taking very different routes to becoming platforms in their own right. For Epic Games, the recent Marshmello concert in Fortnite held out the tantalizing prospect of the beginnings of the “Metaverse” on ubiquitous, affordable mobile devices. With , this represents a significant milestone in the evolution of games as platforms. Given Fortnite’s previous records for streaming on Twitch and concurrent esports tournament viewers, the savvy Tim Sweeney is beginning to leverage all that scale in a totally new way. Together with and the quality of its Unreal Engine, the lessons learned from Fortnite and partial owner Tencent are leading to new horizons. Where Epic Games is building a metaverse that is a little like Ready Player One without the headsets, Niantic has taken a different approach. Leveraging the real-world, big data stream coming from Pokémon GO, Niantic is building the core of an AR cloud ecosystem to challenge Google, Apple and Facebook. It could also move the company far beyond its entertainment origins for real-world navigation, social, e-commerce, advertising and more. Epic Games and Niantic could become two of the most valuable platform companies in the world, with long-term potential even they might not fully understand yet. To infinity and beyond All this potential doesn’t mean that short-term concerns aren’t valid, or that some games companies (even those currently at scale) might not fall from grace. Some of the volatility of recent times could turn out to be right on the money. When we talked to Epic Games’ CEO Tim Sweeney about all of this, he said “I think that we’re just in the final days of a long transition away from the old retail-centric game release model. Good times ahead.” With the long-term prospects for games still looking positive, the brave, bold and lucky could have a bright future.
Andy Jassy, CEO of Amazon Web Services, addresses the crowd at AWS re:Invent 2017. (GeekWire Photo / Tom Krazit) For the first time this week, Amazon disclosed how much revenue Amazon Web Services will eventually realize from multiyear cloud contracts, giving a slightly clearer picture of how companies are paying for the cloud. revealed that it will eventually recognize $12.4 billion “primarily related to AWS” over the next few years as it works its way through contracts that originally specified a relationship lasting longer than a year. It’s not exactly clear what “primarily” means, but it’s safe to assume a sizable chunk of that revenue was driven by . The company also disclosed that the weighted average remaining life on those contracts is 3.2 years. (GeekWire Chart) It’s not particularly surprising that AWS is pursuing multiyear contracts as it grows into the most influential enterprise technology supplier to emerge from the cloud computing era. Sure, AWS grew to prominence on the backs of startups, but some of those startups are now pretty big businesses with the confidence to sign new multiyear deals, and more and more enterprise customers are signing deals with the company. There are also lots of reasons why it makes sense to lock in a cloud deal for multiple years. Simply moving workloads to the cloud can be a multiyear process itself; it took Netflix seven years to go “all-in” on AWS, . It’s also easier to negotiate discounts if you’re willing to give a vendor several years of your business. Still, having $12.4 billion (or thereabouts) just waiting in the wings is yet another sign of the cloud leader’s position in the market, which accelerated during the last quarter. During 2017, AWS recorded $17.5 billion in revenue.