to test a new story line. Even a lucky turn in videogames won’t free the streaming giant from the need to keep playing Hollywood’s game, though.
Netflix used its second-quarter report Tuesday afternoon to confirm previously reported plans to enter the videogame business. No timing was given, though the company said the offerings would be included in its current subscription plans at no additional cost. The company isn’t backing away from its work on movies and TV shows, but said in its letter to shareholders “since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games.”
That news comes as Netflix remains mired in somewhat of a post-pandemic slump. It added 1.5 million net new paying subscribers in the second quarter, which was a bit better than it had forecast but still its lowest level of growth in nearly a decade. It also projected 3.5 million net adds for the third quarter—about 29% less than what Wall Street was hoping for. That would bring the total number of new subscribers to about nine million for the first nine months of 2021. Netflix added more than 28 million paying subscribers in the same period last year.
A foray into games might make sense for a company with an intimate knowledge of the viewing habits of a user base that now numbers over 209 million. It is also a tough business to crack—even the mobile gaming market that Netflix says it expects to target initially. There are many participants, but most of the money is still made by long-established properties. Games like “Candy Crush” and “Clash of Clans” remain in the top-five grossing charts even after nearly a decade on the market.
Netflix will need to keep battling it out for video streaming eyeballs. The company expects its pace of new releases to pick up in the second half of this year; analysts from Wedbush count 42 original shows and movies expected for the third quarter alone. But the company still has its own track record to compete with: Last fall included popular shows such as “The Queen’s Gambit,” “The Crown” and “Bridgerton.” Netflix shares are down nearly 2% this year, lagging behind many internet and entertainment peers. Streaming investors hyper-focused on subscriber growth aren’t playing games.
IFIT Health & Fitness Inc. will acquire Sweat, an online fitness training platform, ahead of an initial public offering that is expected in the fall, according to people familiar with the matter.
IFIT is buying Sweat, which was co-founded by trainer
in 2015, for around $300 million, some of the people said. IFIT plans to keep Sweat, which is based in Australia, as a stand-alone brand and Ms. Itsines and Mr. Pearce as executives.
IFIT is beefing up its content offerings ahead of its anticipated IPO. The company, which owns NordicTrack, was recently valued in excess of $7 billion in its most recent round of funding in late 2020 and is expected to attain a valuation in excess of that in its IPO.
Should the company debut as planned later this year, it is expected to tap a market hungry for fast-growing companies in the busiest year for public offerings on record. IFIT’s closest competitor,
made its debut in late 2019, and while its stock price has tumbled this year after a recall of its treadmills, investors had raced into the stock. Even with the pullback, Peloton shares have more than quadrupled from their IPO price.
IFIT, formerly known as Icon Health & Fitness Inc., has been moving swiftly with its IPO plans and confidentially filed papers recently with the Securities and Exchange Commission, according to people familiar with the offering.
Shares of Peloton are down 28% so far this year versus a 12% gain for the S&P. But if you think you have finally found an attractive entry point, you might want to douse yourself in some cold Gatorade.
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After a wild 434% run-up in its shares last year, Peloton’s Chief Executive
continued to stoke the fire, telling investors in September at the company’s analyst day he believed 100 million subscribers was a reasonable goal for the company, capturing half the number of gym goers world-wide.
The time horizon on that goal is a bit fuzzy. In a note this week, BMO Capital Markets analyst
points out that, in a presentation for the same investor day, Peloton pegged its own serviceable addressable market, or estimated number of households interested in purchasing current Peloton products at current prices, at just 15 million, something he feels Peloton’s most fervent fans have perhaps overlooked.
By Mr. Siegel’s math, Peloton’s current fully diluted market value implies investors already are giving the company credit today for capturing 16.5 million subscribers, or 110% of that addressable market size. Wall Street is forecasting Peloton will have roughly 2.3 million connected fitness subscribers as of June. But even at 5 million subscribers, to justify Peloton’s current market value investors are effectively betting those customers will be paying to sweat and bleed Peloton for the next 24 years, his estimates show.
Peloton fiends better pace themselves.
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Futures tied to the S&P 500 ticked up less than 0.1%. The broad market gauge has climbed for three consecutive weeks. Nasdaq-100 futures added 0.3%, pointing to a moderate rise in technology stocks at the opening bell.
Bitcoin jumped 6.6% from its level at 5 p.m. ET Friday to trade around $39,300, according to CoinDesk. Elon Musk tweeted Sunday that
was continuing its wild ride, adding 29% ahead of the bell. The Denmark-based biopharmaceutical company’s shares rocketed higher last week only to give up most of the gains. The company said it was unaware of the reason for the volatility.
shares gained 2.4%. Analysts at Raymond James lifted their rating on the stock, pointing to recent menu price hikes.
The Nasdaq Biotechnology Index rose 6% last week, after the FDA gave the green light to Biogen’s Alzheimer’s drug Aduhelm on Monday.
About 83% of recorded-music revenue in the U.S. last year came from streaming, compared with less than 7% in 2010, when paid downloads and CD sales still drove the bulk of the industry’s revenue, according to data from the Recording Industry Association of America.
On this day in 2000, the SEC, the FBI, and the U.S. Attorney for the Southern District of New York cracked down on more than 100 alleged mobsters and their cronies, claiming that the mafia—in cahoots with brokers, investment bankers, a money manager, and a retired New York City cop—manipulated the prices of 19 stocks, defrauding thousands of investors out of an estimated $50 million.
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Tesla and other companies that hold the notoriously volatile cryptocurrency often must record impairment charges when its value falls.
Here’s what we’re watching ahead of Wednesday’s opening bell.
U.S. stock futures fell, signaling that the major indexes will extend losses as investors await minutes of the Federal Reserve’s latest monetary-policy meeting.
Futures for the S&P 500 declined 0.8% and contracts for the Dow Jones Industrial Average slipped 0.7%. Futures on the Nasdaq-100 fell 1.3%, suggesting technology stocks will be among the biggest losers when markets open.
shares dropped 2.1% premarket. The home-improvement retailer reported quarterly results, with sales and same-store sales that rose above expectations. But even its upbeat outlook left investors unimpressed.
shares gained 2% ahead of the bell. The videogame publisher reported a big earnings beat for the recent quarter.
Bitcoin’s dollar value fell to as low as $38,585.86 Wednesday, its lowest level since February, according to CoinDesk. Bitcoin’s recent price fall accelerated after three Chinese entities published a statement that financial institutions should not accept virtual currencies for payment or provide services using them.
shares added 1% premarket. The cloud-based software company’s shares have wobbled over the past week along with broader markets. Jefferies on Tuesday maintained its buy rating for the stock, but cut its price target.
shares edged down 0.4% premarket. The New York private-equity firm agreed to buy U.K.-listed infrastructure investor and manager John Laing Group for $2.84 billion in cash.
The British pound on Tuesday hit a new 52-week high against the U.S. dollar, when it gained 0.35% to trade at $1.4188.
Walmart shares gained almost 3% Tuesday morning, which was notable given that its share price had dropped after every earnings call in the previous four consecutive quarters. Yet Walmart still trades more cheaply than peers at 0.7 times forward sales, compared with 0.9 times for Costco and 1.1 times for Target, according to FactSet.
On this day in 1568, one of the earliest known junk bonds was issued, as the Russia Co. borrowed 4,000 pounds, 8 shillings, and 10 pence from the British exchequer. The loan was priced to yield 13.5%, and the company had to repay it not with cash, but with hundreds of tons of cables and rope—making it one of the earliest “asset-backed” loans as well.
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This year has seen a slew of companies in Europe putting forward share repurchase programs, a trend that signals growing confidence among corporate leaders and marks a pivot in strategy in a region that has traditionally favored dividends.
Investors are pouring millions of dollars into land. But these lush fields and rolling hills only exist within videogames.
Just as physical land appeals to pension funds and family offices, digital real estate is luring both investors and dedicated gamers, said
the co-founder of Polyient Games, an investment fund and startup incubator focused on the intersection of gaming and so-called nonfungible tokens. Those are digital identifiers which help verify the authenticity of an asset.
NFTs work on the blockchain, similar to cryptocurrencies such as bitcoin. The difference is that each bitcoin can be exchanged for another bitcoin while one NFT cannot be exchanged for an identical NFT. The craze has swept up basketball fans and art lovers alike. Just this month, a digital collage by the artist
sold at Christie’s for $69.3 million.
and Twitter CEO
have all started selling their own NFTs.
The market for digital real estate has been bolstered recently by a pandemic-fueled climb in electronic games and investor excitement around cryptocurrencies. Many see NFT-enabled games as a potential boon for the multibillion-dollar videogame industry.
What’s becoming increasingly more important are your digital items and identity. ”
— Blockchain gaming entrepreneur Jeffrey Zirlin
Gamers for years have spent big on gear—such as weapons, armor or tools to strengthen their characters—in games like Fortnite, Minecraft and World of Warcraft. NFT-enabled games now allow players to trade game assets for cryptocurrency, selling them for a coin that can be converted to dollars when they score something better or switch to a new adventure.
In some games, players can buy digital deeds for real estate in the form of an NFT, which proves the authenticity of a certain plot in a specific game. The real estate will appreciate as more players join the game and scarce land is sold to other players who require the plots for certain tasks and missions. Players can then rent out their land to other gamers, charge others for using it or even sell it—either within the game or on a third-party exchange such as OpenSea. The transactions are usually backed by a game’s unique cryptocurrency, which can be converted to ethereum and then into U.S. dollars.
Digital land purchases have already brought in millions of dollars.
A group of people last month paid $1.6 million for Citadel of the Stars, a large kingdom in the unreleased fantasy role-playing game Mirandus, said
and now chief executive of Mirandus creator Gala Games. That purchase topped the $1.5 million paid for nine adjacent plots in the virtual pet universe Axie Infinity.
Last month, virtual world The Sandbox sold about $2.8 million worth of land in a pair of well-received sales that now have the company valuing its digital properties at about $37 million. Players in the game can buy plots in five different sizes, the smallest of which is 9,216 square meters, or about 2 acres, and 128 meters tall.
The land in this virtual world hosts different games within each plot and players can move from plot to plot, changing the game they play as they explore the world. Digital land owners can build games within their borders using The Sandbox’s game-making tool. Games within The Sandbox virtual world will be playable for early users when the team releases the product in April.
“The first landowners and games in The Sandbox, and that are playable, are also potentially the ones that have the highest chances of monetizing early on,” said
co-founder and chief operating officer.
Mr. Russo, of Polyient Games, said his firm invested $800,000 in Mirandus’s Citadel of the Sun, another kingdom in the game, which is set to release a test version later this year.
Polyient Games is considering charging gamers who traverse its kingdom as part of a mission—the digital equivalent of a toll road. They also plan to split the digital land into smaller plots that the company can sell to other gamers, which those players can then monetize, said Russo.
Gamers have collectively invested billions of dollars in videogame loot, but NFT-enabled games are different because players actually own their in-game assets, said
co-founder of Sky Mavis, the company that made Axie Infinity.
“It doesn’t matter what watch you have anymore to a lot of people, what car you drive, what shoes you wear—we can’t even go outside,” said Mr. Zirlin “What’s becoming increasingly more important are your digital items and identity.”
Several analysts said the long-term viability of NFT-enabled digital games requires attracting mainstream users who are not deeply versed in cryptocurrencies or NFTs.
who runs a cryptocurrency-focused YouTube channel called Crypto Val, said he paid two ethereum for an outpost in Mirandus. That was equivalent to about $1,000 at the time of his purchase.
A similar outpost, which is now sold out in the game’s marketplace but still available on the secondary market, was listed on the third-party NFT exchange OpenSea for about three ethereum or about $6,000 at time of publication.
Mr. Schiermeyer of Gala Games said two dedicated players in the Philippines are in the process of buying a house—in the real world—with their earnings from another NFT-enabled game by Gala, Town Star.
“I see a really interesting opportunity to provide a meaningful income for people around the world to tap into the games market,” Mr. Schiermeyer said.
has cut its commission in half to 15% for the first $1 million in revenue each developer earns every year. That is optically similar to a move Apple announced in November, though Apple’s program limits the 15% rate to developers making under $1 million a year. Google’s program applies to all developers regardless of their size, effectively creating a progressive fee structure for everyone.
The moves come as both companies face growing pressure from lawmakers and regulators over their market dominance in general and their app store setups in particular. But the impact of such changes on the businesses of two of the world’s largest tech titans remains unclear. Neither Apple nor Alphabet breaks out revenue from their respective app stores. Analysts surveyed by Visible Alpha put Google Play’s revenue at $10.5 billion for 2020, with Apple’s App Store generating an estimated $17.9 billion for the fiscal year ended September 2020. That amounts to roughly 6% of total annual revenue for both companies.
But app commissions are a more critical business for Apple. The company has publicly credited the App Store as the top driver of growth for its services segment for the past two fiscal years. The growth rate and profitability of services has been a key element driving Wall Street to rerate Apple’s stock over the past year. The stock has traded at an average of 30 times forward earnings over the past six months—double its average multiple from 2017 to 2019, according to FactSet.
That gives Google some advantage, in the sense that it can afford to make more changes to its app distribution business model without panicking investors. And more changes could be coming. Epic Games, which is suing both Google and Apple over their respective app store structures, said Tuesday that Google’s fee reduction fails to address “the root of the issue”—namely, the requirement that developers still use the company’s app distribution and payment services.
Lawmakers and regulators eyeing the business models underpinning the mobile operating systems powering nearly every smartphone on the planet may agree. Google’s and Apple’s recent cuts won’t buy them much favor from those with the biggest bills, who also can afford to make the most noise.
currently average multiples of a little under 6 times forward sales, according to FactSet.
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That said, Roblox’s unique business model should justify a premium. The company provides a platform for its users to design and run their own games, generating revenue through the sale of so-called Robux for players to use as in-game currency. That frees Roblox from the hit-and-miss cyclicality common in the videogame industry. And investors have taken a shine lately to alternative ways to play in the videogame space.
which provides tools and services primarily to videogame developers, has jumped 46% since its first trading day last year and is now valued around 27 times forward sales.
Roblox has been generating positive free cash flow consistently—even before the pandemic boosted its business last year. And the valuation looks a bit more reasonable if measured against the company’s bookings, which are projected to exceed $2 billion this year—about 40% ahead of projected revenue.
Roblox’s main challenge might be showing that it can expand beyond its core audience; about two-thirds of its user base is under the age of 14. Respondents to a recent investor survey by Bernstein Research put a 43% probability on Roblox’s being able to achieve a similar level of market penetration with older age groups. At its current valuation, Roblox can’t afford to be stuck at the kids’ table.
up 4.6%. But they’ll have to move a lot further to overcome yesterday’s drops of 42% and 21%, respectively. For our live blog of the action, follow this link.
—Pinterest and Snap are jumping in opposite directions after the platforms added millions more new users than expected in their latest quarters, showing strong growth in social-media use during the pandemic.
‘s results offered more evidence of people killing time through the pandemic playing videogames. The game maker’s shares shot up more than 8% premarket to $100.35 a share after its holiday sales and revenue outlook topped expectations. KeyBanc raised its price target on the stock to $120 from $102.
‘s stock dropped 7.1% after it reported sales and subscriptions more than doubled in the latest quarter despite long shipping delays that the company has promised to address as would-be customers vent their anger online.
shares lost 2.2% premarket after the wireless provider said its nearly year-old merger with Sprint will saddle the combined company with more costs this year as its engineers shift more subscribers onto a single network.
shares nudged up 2.6% before the open after the Detroit auto maker said its fourth-quarter earnings were dented by lower truck output, and it vowed to nearly double its investment in electric and driverless cars.
‘s online bond-trading platform topped $1 trillion in January, the company said Thursday. That marks the busiest month on record, beating March 2020 when plunging stock markets pushed investors into the safety of government debt.