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Sony Shares Slide as Microsoft Buys Bethesda-Owner ZeniMax to Boost Games Lineup

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By Reuters | Updated: 23 September 2020

Sony’s shares slid as much as two percent in Tokyo trade on Wednesday after Microsoft said it would buy the parent of games publisher Bethesda Softworks, in a deal to bolster its games slate as it eyes cloud gaming expansion.

Sony’s PlayStation 5 is expected by analysts to outsell Microsoft’s next-generation Xbox consoles when the devices launch in November, bolstered by Sony’s stronger games pipeline including exclusives like Marvel’s Spider-Man: Miles Morales.

Microsoft’s $7.5 billion (roughly Rs. 55,223 crores) acquisition of the publisher behind hit franchises like Doom, and Fallout helps close that gap, as it pushes into cloud gaming with the launch of a subscription service last week for Android devices.

The Xbox Game Pass is central to Microsoft’s counterattack, with the rival PlayStation Now service from Sony, which has a dominant hardware install base, seen as lagging in terms of games on offer and by being limited to PlayStation and PC.

It will take time for the deal to feed through to Xbox’s games pipeline, with Bethesda contracted to bring titles Deathloop and Ghostwire: Tokyo to PlayStation 5.

The concentration of studios in the hands of established players puts clear blue water between a wave of challengers like Amazon and Google parent Alphabet that are moving into gaming but lack killer titles.

“Given the expansion of streaming services as we enter the era of next-gen consoles, we expect this industry consolidation to continue,” Jefferies analyst Atul Goyal wrote in a client note.

Japan’s markets reopened on Wednesday after national holidays. Sony’s shares have risen by almost half since March lows as the gaming industry benefits from demand brought about by stay-at-home policies during the coronavirus outbreak.

© Thomson Reuters 2020

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Tencent Games Reinstated on Huawei’s App Store, Said to Be Removed Over Revenue Dispute

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By Reuters | Updated: 2 January 2021

Tencent’s online games were removed and then reinstated on Huawei’s app store on Friday in a dispute over revenue sharing by the Chinese companies.

Huawei was insisting on a 50-percent cut of Tencent’s game sales on the app store and the Tencent games were removed because the companies had been unable to agree a deal, a Tencent source said.

Tencent sells some of the top-ranked online games worldwide while Huawei has a 41.4 percent share of the China mobile phone market and 14.9 percent of the global market, data from market researchers IDC and Canalys shows.

The games were reinstated on the app store after further negotiations, Tencent said, adding that “both sides will continue to work together to bring better experiences and services to consumers”.

Huawei did not immediately respond to a request for comment.

A number of game developers have opposed Huawei’s revenue demands, including Shanghai-based Mihoyo, which last year decided not to place its hit game Genshin Impact on Huawei’s app store because of the sales commission structure.

© Thomson Reuters 2020

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Tencent Games Said to Be Removed From Huawei App Store Over Revenue Dispute

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By Reuters | Updated: 1 January 2021

Tencent’s online game offerings have been removed from Huawei’s app store since the two companies failed to reach an agreement on revenue sharing, Tencent and a source said on Friday.

“Due to the failure of Huawei’s mobile game platform to renew its contract with our Mobile Game Promotion Project Agreement as scheduled, relevant products of Tencent Games were suddenly removed from the shelves early this morning,” Tencent said in a statement.

“At present, active communication is being made to try to resume as soon as possible,” it said.

Tencent sells some of the top-ranked online games worldwide, while Huawei has a 41.4 percent share of the China mobile phone market and 14.9 percent of the global market, according to data from market research firms IDC and Canalys.

A source said the games were removed because the companies could not agree on a revenue sharing deal for the app store sales. Huawei insists on receiving a 50 percent cut, the source said.

Huawei did not immediately respond to a request seeking comment. Tencent did not immediately respond to a request seeking comment on whether the firms had disagreed about revenue sharing.

There was already some resistance from games developers to Huawei’s revenue demands. This included Shanghai-based developer Mihoyo, which last year decided not to place its hit game “Genshin Impact” on Huawei’s app store because it did not agree with the commission structure for sales.

© Thomson Reuters 2020

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ByteDance in Talks to Buy Stake in Mobile Games Company CMGE: Sources

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By Reuters | Updated: 22 December 2020

China’s ByteDance is in talks to buy into mobile games publisher CMGE Technology, four people with direct knowledge of the matter told Reuters, as the owner of short video app TikTok moves to strengthen its next pillar of growth.

The deal would come as the gaming industry continues to benefit from COVID-19 pandemic countermeasures which have forced people to stay at home, boosting game downloads.

ByteDance plans to buy part or all of the 27.6 percent CMGE stake held by Fairview Ridge Investment, controlled by CMGE chairman Xiao Jian and vice chairman Sin Hendrick, said two of the people.

ByteDance is looking to offer HKD 4 (roughly Rs. 40) to HKD 5 (roughly Rs. 50) per share to purchase the stake, said another person. The range represents a premium of 30 percent to 62 percent above the stock’s Monday close of HKD 3.08 (roughly Rs. 30).

Following the news, CMGE stock reversed losses and rose as much as 21 percent to HKD 3.75 (roughly Rs. 35) in Tuesday afternoon trade, their highest since mid-October.

Xiao and Sin are the biggest shareholders of Hong Kong-listed CMGE, holding 33.9 percent and 32.6 percent respectively through a number of entities, regulatory filings showed.

A 27.6 percent stake is worth $275 million (roughly Rs. 2,000 crores), Reuters calculations showed based on CMGE’s market capitalisation of $997 million (roughly Rs. 7,400 crores) on Monday.

Eight-year-old ByteDance has identified gaming as its next strategic growth area and has been scouting for investment opportunities for months to build up its gaming portfolio, three of the people said.

Market leader Tencent proposed a $1.5 billion (roughly Rs. 11,100 crores) acquisition of Leyou Technologies in August. That made CMGE more of a target for ByteDance, said two of the people.

A successful transaction could make ByteDance CMGE’s single largest shareholder, said one of the people. The deal is yet to be finalised and is subject to change, the person said.

The people declined to be identified as the information is not public. Neither ByteDance nor CMGE responded to requests for comment. Reuters could not reach Fairview for comment.

ByteDance has already been relatively successful with casual mobile games that mainly make money through advertising. It plans to release its first “hardcore” game in the April-June quarter, said two other people with knowledge of the matter.

Hardcore games can be a steady source of revenue as users tend to keep playing popular titles for years and are willing to make in-app purchase for items that enhance game play, such as weapons.

CMGE boasts the second-largest intellectual property reserves among Chinese games firms after Tencent, and counts The Legend of Sword and Fairy and Xuan-Yuan Sword in its portfolio. It has exclusive licensing agreements with ByteDance for two titles – The King of Fighters: All Stars and One Piece: The Voyage.

ByteDance entered gaming in early 2019 with casual titles. By the end of last year, 13 of its games had became hits on Apple’s App Store in China. It has a games division with around 2,000 employees working on hardcore games.

© Thomson Reuters 2020

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Cyberpunk 2077 Pulled From PlayStation Store by Sony Following Bug Backlash

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By Agence France-Presse | Updated: 18 December 2020

Sony is pulling the much-hyped Cyberpunk 2077 from PlayStation stores around the world, the firm said Friday, after a flood of complaints and ridicule over bugs, compatibility issues and even health risks.

The dystopian-themed title is reportedly one of the most expensive video games ever made, and its December 10 release was hotly anticipated, but the rollout has been far from smooth.

Some gamers have posted videos of glitchy graphics on Twitter, with others pairing screenshots from much older games with sarcastic comments such as: “I’m blown away by the graphics and environment of Cyberpunk on PS4!”

“SIE (Sony Interactive Entertainment) strives to ensure a high level of customer satisfaction, therefore we will begin to offer a full refund for all gamers who have purchased Cyberpunk 2077 via PlayStation Store,” Sony said Friday.

“SIE will also be removing Cyberpunk 2077 from PlayStation Store until further notice.”

This week, the game’s Warsaw-based developer CD Projekt RED had issued an apology and vowed to “fix bugs and crashes” with patches in January and February, while also offering refunds to gamers not willing to wait.

Cyberpunk 2077’s release had been delayed twice this year and CD Projekt RED was forced to add health warnings after one reviewer complained it had caused an epileptic seizure.

Last week, the Polish company said it was looking into a “more permanent solution” to tackle the health risk “as soon as possible”.

The delays, which the firm blamed on the coronavirus pandemic and the complexity of creating such a vast world for nine different platforms including Xbox consoles and PCs, sparked a fierce backlash, and even death threats.

‘Night City’

Despite the problems, entertainment rating website Metacritic has given Cyberpunk 2077 a score of 87 out of 100, based on 69 reviews.

But ratings by gamers on Metacritic were somewhat less upbeat, with Cyberpunk 2077 earning a score of 7 out of 10 based on reviews from more than 20,500 users.

The main character is the gun-toting “V”, who makes his way through Night City, a conflict-ridden American megacity.

The game also features the face and voice of Hollywood star Keanu Reeves, best known for the Matrix trilogy and the John Wick films.

Metacritic describes the game as “an open-world, action-adventure story set in Night City, a megalopolis obsessed with power, glamour and body modification”.

CD Projekt RED spent an estimated 1.2 billion (roughly Rs. 2,400 crores) to make Cyberpunk 2077, according to analysts at Polish bank BOS, which would make it one of the most expensive games ever made.

The company rose to global prominence five years ago thanks to its hugely successful The Witcher 3: Wild Hunt, a sombre fantasy whose monster-slaying hero is endowed with superhuman powers.

But it has lost billions in value since the Cyberpunk 2077 launch last week, stock figures showed on Monday.

On Friday morning Sony’s stock was up 2.7 percent at JPY 10,295 (roughly Rs. 7,300).

Delays are becoming increasingly frequent in the gaming industry as games get bigger, more expensive and with more people involved.

This year, the coronavirus pandemic has complicated things further, with many studios forced to operate with developers working from home.

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Electronic Arts to Buy Codemasters in $1.2 Billion-Deal to Deliver Better ‘Racing Experiences’

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By Reuters | Updated: 14 December 2020

Electronic Arts said it had reached an agreement to buy Codemasters in a deal worth $1.2 billion (roughly Rs. 8,800 crores), trumping an earlier agreement between the British company and rival Take-Two Interactive.

Shares in London-listed Codemasters surged 18.7 percent to GBP 6.37 (roughly Rs. 600) by 08:45 GMT (2:15pm IST) above the GBP 6.04 (roughly Rs. 580) per share offered to the company’s shareholders by EA.

UK-based Codemasters, known for its Formula One games for Playstation 4, said it considered the new offer to be superior to Take-Two’s cash-and-stock buyout offer of GBP 4.85 (roughly Rs. 470) per share.

Electronic Arts said it had reached an agreement to buy Codemasters in a deal worth $1.2 billion (roughly Rs. 8,800 crores), trumping an earlier agreement between the British company and rival Take-Two Interactive.

Shares in London-listed Codemasters surged 18.7 percent to GBP 6.37 (roughly Rs. 600) by 08:45 GMT (2:15pm IST) above the GBP 6.04 (roughly Rs. 580) per share offered to the company’s shareholders by EA.

UK-based Codemasters, known for its Formula One games for Playstation 4, said it considered the new offer to be superior to Take-Two’s cash-and-stock buyout offer of GBP 4.85 (roughly Rs. 470) per share.

Take-Two said it was considering its position.

California-based EA, as well as rivals Activision Blizzard and Take-Two, have benefited from a surge in videogame sales in the United States fuelled by the trend of people spending more time indoors due to the COVID-19 pandemic.

But that trend could reverse next year as countries begin vaccinating people against COVID-19.

“With the full leverage of EA’s technology, platform expertise, and global reach, this combination will allow us to grow our existing franchises and deliver more industry-defining racing experiences,” EA Chief Executive Officer Andrew Wilson said.

EA’s offer represents a premium of 13.1 percent to the last closing price of the company’s shares and it expects the deal to be completed in the first quarter of calendar 2021.

“We think Codemasters is an attractive asset with a lot of the qualities a consolidator might look for… It also has a strategic relationship with Chinese operator NetEase, offering a direct route in the lucrative Chinese market,” Citi analysts said.

EA, maker of The Sims, Need for Speed, and FIFA, said it expects the deal to grow net bookings and underlying profitability.

UBS Investment Bank is acting as financial adviser to Electronic Arts, while Jefferies is the financial adviser for Codemasters.

© Thomson Reuters 2020

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Treasure Hunt for PlayStation 5: Why It’s So Hard to Find

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By Reuters | Updated: 8 December 2020

Seven times last month, Benjamin Karmis, a 26-year-old priest from Wheaton, Illinois, US, failed to get his hands on the latest Sony PlayStation 5 video game console from retail websites including Walmart and Facebook Marketplace. But it wasn’t because another person beat him to the purchase. Instead, Karmis and other shoppers were outgunned by so-called “scalper bot” software, that resellers use to snatch up products online and relist them moments later at significant mark-ups on eBay and Amazon Marketplace.

The coronavirus pandemic that has kept millions of shoppers at home has also emboldened such resellers, whose high-tech arbitrage – legal in most countries – is bringing grief for everyday shoppers. “There is no possible way that I could have been more prepared to get one, and I have failed every single time,” Karmis said. This year, bots have also targeted pandemic-era essential goods, including P&G’s Charmin toilet paper and Reckitt Benckiser’s Lysol.

In Britain, bots have even snatched grocery delivery slots reserved for elderly people. Retailers are trying new tactics as the pandemic has broadened bot-powered reselling to new product categories and expanded the appeal of resale at a time when many people have lost their jobs, consultants and cybersecurity experts said. Some stores have vowed to step up cybersecurity measures.

Others have spread out availability or offered products only to a handful of established customers. “Given bot scripts are constantly evolving and being re-written, we’ve built, deployed and continuously update our own bot-detection tools that allow us to successfully block the vast majority of bots,” a Walmart spokesman told Reuters. He added, “Online volume has already been high this year due to COVID, and the release of next-gen consoles is creating traffic volume and patterns that have never been seen before. “Some customers said the company’s website crashed when they tried to buy one of the new consoles.” Walmart said that despite heavy traffic, its site stayed online.

‘Not for resale’

Scalper bots first gained prominence in the concert ticketing and limited-edition sneaker markets about a decade ago, with resellers cutting to the front of the online queue. Although US law prohibits ticketing scalpers under the federal Better Online Ticket Sales (BOTS) Act of 2016, no such protections exist for retailers. “It’s kind of nefarious, but is it illegal? No,” said Edward Roberts, application security specialist at cyber security firm Imperva. Nike, a major target of resellers, has come up with creative ways to battle the bots, such as giving established members on its SNKRS app the chance to reserve shoes that they can pick up at a Nike store. In 2018, Nike went so far as to offer a pair of red Air Jordan 1 sneakers stamped with the words “NOT FOR RESALE” on the sole.

Those now go for close to $1,000 (roughly Rs. 73,700) on online resale marketplace StockX. “It’s a major problem, but at the same time I think retailers are now figuring out ways to combat bots with better firewalls and by getting consumers more engaged with things like in-store raffles,” said Jay Somerville, a former apparel buyer at Nike. At Walmart, most of the “significantly higher” traffic for the new video game consoles came from bots, the company spokesman said.

On November 25, the world’s largest retailer blocked more than 20 million bot attempts within the first 30 minutes of a PS5 sales event that day, among other preventative measures.

The company also conducts after-sale audits, cancelling orders placed by bots and making those products available to regular consumers. Target and GameStop also said they have high-tech bot protection software on their websites, declining to offer more details. But as such bot usage expands across regions and product categories, their coders have remained a step ahead of corporate security officials. Most scalper bots reload web pages every few milliseconds to gain an edge in adding products to their shopping carts.

Some try to disguise themselves as hundreds of different customers from different locations. Sometimes, resellers take down a retailer’s website temporarily, distracting security programs to let scalper bots slip through the cracks, said Thomas Platt, head of ecommerce at Netacea, a bot security company. Resale bots can go for up to $5,000 apiece on online marketplaces, or through rings coordinated on social media sites.

Scalper bots have become increasingly mainstream, easily found by entering phrases like “Nike bot” or “PS5 bot” into online search engines.

People can buy limited-time access to them for as little as $10 (roughly Rs. 700) to $20 (roughly Rs. 1,400).“There’s significant money in this, and the PS5 is a great example,” Platt said.

Netacea has identified one console re-selling ring, for instance, that made about $1 million (roughly Rs. 7,4 crores) to $1.5 million (roughly Rs. 11 crores) in the last two weeks of November. UK-based CrepChiefNotify, a subscription service that teaches members how to use bots and alerts them to the availability of hot items, claims its customers have purchased about 6,000 new PS5 and Xbox consoles. The company said it has doubled its membership to 4,000 since the start of the pandemic, when many of its members lost their jobs.

It says its clients have generated a profit of about GBP 400 (roughly Rs. 40,000) on average per game console when reselling them. “These are businesses..people pay their mortgages doing this,” said Imperva’s Roberts. “They have a goal and it’s financially motivated, so they’re not going to go away.”

© Thomson Reuters 2020

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