Column

Fortnite, copyright and the legal precedent that could still mean trouble for Epic Games

Posted by | Column, copyright law, Gaming | No Comments
Anne Friedman
Contributor

Anne Friedman is of counsel at DLA Piper where she focuses her practice on structuring and negotiating large scale sourcing and technology transactions.

Andrew Deutsch
Contributor

Andrew Deutsch is a partner at DLA Piper concentrating on intellectual property litigation and advice, including copyright, trademark, defamation and other First Amendment concerns, trade secret, unfair competition and misappropriation, advertising law, and law of the Internet, social media and electronic databases.

Ric Flaggert
Contributor

Ric Flaggert is a partner at DLA Piper where he focuses his global practice on entertainment, media, and communications matters.

A new U.S. Supreme Court decision is pitting entertainers and video game developers against one another in a high-stakes battle royale.

The decision in Fourth Estate Public Benefit Corp. v. Wall-Street.com LLC raises interesting questions about several lawsuits brought against Epic Games, the publisher of popular multiplayer game Fortnite.

In Fortnite, players may make in-game purchases, allowing player avatars to perform popular dance moves (called emotes), such as the Carlton, the Floss, and the Milly Rock.

Five performers, all represented by the same law firm, recently filed separate lawsuits against Epic Games in the Central District of California, each alleging: (i) the performer created a dance; (ii) the dance is uniquely identified with the performer; (iii) an Epic emote is a copy of the dance; and (iv) Epic’s use of the dance infringes the plaintiff’s copyright in the dance move and the dancer’s right to publicity under California statutory and common law.

In short, the dance creators argue that Epic Games used their copyrightable dance moves in violation of existing law.

The building battle

What do these Fortnite lawsuits in California have to do with the US Supreme Court?  US copyright law says that a copyright owner can’t sue for copyright infringement until “registration of the copyright claim has been made” with the US Copyright Office.  Prior to the recent Supreme Court decision in Fourth Estate, lower federal courts split over what this language means.

Some (including the federal courts in California) concluded that a copyright claimant could sue an alleged infringer upon delivering a completed copyright application to the Copyright Office.  Other lower federal courts held that the suit could not be brought until the Copyright Office issued a registration, meaning that the Office viewed the work to be copyrightable.

Because the Copyright Office now takes over seven months to process a copyright application and issue a registration, claimants often chose to sue in California federal courts, which had adopted the quicker “application approach.”  This was the route chosen by the plaintiffs in all five Fortnite cases.

Down (but not out)

On March 4, 2019, in Fourth Estate, the Supreme Court ruled that California federal courts and others following the application approach were wrong, and that a plaintiff cannot sue for copyright infringement unless the Copyright Office has issued a copyright registration.

This had an immediate impact on the Fortnite lawsuits because the Copyright Office had not yet registered any of the dances and, indeed, had found two of the plaintiffs’ dances uncopyrightable.  Recognizing their vulnerability, plaintiffs preemptively withdrew these lawsuits, announcing they would refile the complaints once the Copyright Office issued registrations.

Epic question #1: are the emote dances copyrightable?

The central question is whether the dances used in Fortnite emotes are copyrightable material  protected under US law. If not, then Epic Games’ use of the dances is not copyright infringement, and in-game sales of the particular dances may continue unfettered.

Dance moves fall into a gray area in copyright law.  Copyright law does protect “choreographic works,” but the Copyright Office says that “social dance steps and simple routines” are not protected. What’s the difference between the two? The Copyright Office says that choreography commonly involves “the composition and arrangement of a related series of dance movements and patterns organized into a coherent whole” and “a story, theme, or abstract composition conveyed through movement.”  Dances that don’t meet this standard can’t be copyrighted, even if they are “novel and distinctive.”

So are the Fortnite plaintiffs’ dances “choreographic works” in the eyes of the Copyright Office?  Herein lies a clash of cultures. The performer-plaintiffs undoubtedly feel they have created something not just unique, but a work entitled to protection for which they are owed damages.  But the buttoned-down Copyright Office may not agree.

The Copyright Office has already denied Alfonso Ribeiro a copyright registration for the Carlton, a widely recognized dance popularized by Ribeiro during his days as Carlton Banks on the show Fresh Prince of Bel Air.  The Office stated that the Carlton was “a simple routine made up of three dance steps” and “is not registrable as a choreographic work.”

The plaintiffs’ lawyer in the Epic Games cases has disclosed that 2 Milly’s application for copyright in the Milly Rock was also rejected, but that a long “variant” of Backpack Kid’s Floss dance was accepted for registration.  The Copyright Office’s view on the other two plaintiffs’ dances has not yet been reported.

If a registration is denied

Denial of a copyright registration is not necessarily a dead end for these lawsuits.  The Copyright Act allows a plaintiff who has been refused a copyright registration by the Copyright Office to still sue a potentially offending party for copyright infringement.  However, the Copyright Office can then join the lawsuit by asserting that the plaintiff’s work is not entitled to copyright protection.

Historically, the federal courts have usually followed the Copyright Office’s view that a work is uncopyrightable.  If the other Fortnite plaintiffs are denied registration, as Ribeiro and 2 Milly were, they will all face an uphill fight on their copyright claims.

Other issues to overcome

Even if the plaintiffs’ copyright claims survive, they face other problems, including originality, which is a requirement of copyright.  If their dances are composed of moves contained in dances previously created by others, the plaintiffs may fail to convince the court that their dances are sufficiently original to warrant their own copyright.  For example, Ribeiro has stated in interviews that moves by Eddie Murphy, Courtney Cox and Bruce Springsteen inspired him when he created the Carlton.

Ownership of the dance can also be at issue if the dance was created in the course of employment (such as while working as an actor on a television show), as the law may hold that the employer owns the copyright.

Epic question #2: the right to publicity

The plaintiffs’ right to publicity arguments could go further than their copyright infringement claims. The right to publicity claims were based on the assertion that plaintiffs’ dances are uniquely associated with them and that Epic Games digitally copied the plaintiffs performing the dances, then created a code that allows avatars to identically perform the dances.  Some side-by-side comparisons of the original dance performances and the Epic emote versions (speed adjusted) look strikingly similar for the few seconds the emote lasts. According to plaintiffs, this use misappropriated their “identity.”

Their assertion is not as far-fetched as it may seem, given the broad reading courts in California have given to the state’s common law and statutory publicity law.  For example, the Ninth Circuit has previously ruled that an ad featuring a robot with a wig that turned letters on a board wrongfully took Vanna White’s identity, and that animatronic robots sitting at airport bars vaguely resembling “Norm” and “Cliff,” characters from the popular TV show Cheers, misappropriated the identities of the actors who played the roles, George Wendt and John Ratzenberger.

There remains an open question on whether the courts will be willing to take another step and find that a game avatar having no physical resemblance to a performer misappropriates the performer’s publicity rights just because the avatar does a dance popularly associated with the performer.

Once the Copyright Office announces its decisions on the outstanding copyright applications, the Fortnite plaintiffs may choose to re-file their cases; and this question could eventually be decided.

Powered by WPeMatico

Despite short-term questions, games software/hardware to top $200 billion by 2023

Posted by | Column, Gaming | No Comments

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 record $5.7 billion investment in games 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 Games Report, 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 mobile/online games 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 sharetopped $100 billion for the first time in 2018. Mobile games delivered around three quarters 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 Clash of Clans and Clash Royale have delivered over $10 billion revenue 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 $100 million revenue within its first two months. Swings and roundabouts.

Epic Games had the biggest breakout mobile games hit of 2018, with Fortnite contributing significantly to a reported $3 billion profit in 2018. It also anchored part of the interest behind a record $1.25 billion fundraising round last year. Yet the company removed once-dominant mobile franchise Infinity Blade from the App Store, and redirected internal development resources to focus on Fortnite by closing Paragon and stopping further development on Unreal Tournament. 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 returned to approving their games this year. However, the regulator again stopped accepting games in February, only to approve more games in March. 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 Pokémon GO took just over 1 percent of mobile games revenue 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 GO Snapshot challenging Snapchat, and the Niantic Real World Platform 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 Stadia 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 a domestic app store rival with its “mini-programs,” 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 10.7 million concurrent attendees, 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 building its own app store 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.

Powered by WPeMatico

Law enforcement needs to protect citizens and their data

Posted by | Android, Australia, Column, computer security, crypto wars, cryptography, encryption, european union, Facebook, Federal Bureau of Investigation, General Data Protection Regulation, human rights, law, law enforcement, national security, privacy, Security, United Kingdom | No Comments
Robert Anderson
Contributor

Robert Anderson served for 21 years in the FBI, retiring as executive assistant director of the Criminal, Cyber, Response and Services Branch. He is currently an advisor at The Chertoff Group and the chief executive of Cyber Defense Labs.

Over the past several years, the law enforcement community has grown increasingly concerned about the conduct of digital investigations as technology providers enhance the security protections of their offerings—what some of my former colleagues refer to as “going dark.”

Data once readily accessible to law enforcement is now encrypted, protecting consumers’ data from hackers and criminals. However, these efforts have also had what Android’s security chief called the “unintended side effect” of also making this data inaccessible to law enforcement. Consequently, many in the law enforcement community want the ability to compel providers to allow them to bypass these protections, often citing physical and national security concerns.

I know first-hand the challenges facing law enforcement, but these concerns must be addressed in a broader security context, one that takes into consideration the privacy and security needs of industry and our citizens in addition to those raised by law enforcement.

Perhaps the best example of the law enforcement community’s preferred solution is Australia’s recently passed Assistance and Access Bill, an overly-broad law that allows Australian authorities to compel service providers, such as Google and Facebook, to re-engineer their products and bypass encryption protections to allow law enforcement to access customer data.

While the bill includes limited restrictions on law enforcement requests, the vague definitions and concentrated authorities give the Australian government sweeping powers that ultimately undermine the security and privacy of the very citizens they aim to protect. Major tech companies, such as Apple and Facebook, agree and have been working to resist the Australian legislation and a similar bill in the UK.

Image: Bryce Durbin/TechCrunch

Newly created encryption backdoors and work-arounds will become the target of criminals, hackers, and hostile nation states, offering new opportunities for data compromise and attack through the newly created tools and the flawed code that inevitably accompanies some of them. These vulnerabilities undermine providers’ efforts to secure their customers’ data, creating new and powerful vulnerabilities even as companies struggle to address existing ones.

And these vulnerabilities would not only impact private citizens, but governments as well, including services and devices used by the law enforcement and national security communities. This comes amidst government efforts to significantly increase corporate responsibility for the security of customer data through laws such as the EU’s General Data Protection Regulation. Who will consumers, or the government, blame when a government-mandated backdoor is used by hackers to compromise user data? Who will be responsible for the damage?

Companies have a fiduciary responsibility to protect their customers’ data, which not only includes personally identifiable information (PII), but their intellectual property, financial data, and national security secrets.

Worse, the vulnerabilities created under laws such as the Assistance and Access Bill would be subject almost exclusively to the decisions of law enforcement authorities, leaving companies unable to make their own decisions about the security of their products. How can we expect a company to protect customer data when their most fundamental security decisions are out of their hands?

phone encryption

Image: Bryce Durbin/TechCrunch

Thus far law enforcement has chosen to downplay, if not ignore, these concerns—focusing singularly on getting the information they need. This is understandable—a law enforcement officer should use every power available to them to solve a case, just as I did when I served as a State Trooper and as a FBI Special Agent, including when I served as Executive Assistant Director (EAD) overseeing the San Bernardino terror attack case during my final months in 2015.

Decisions regarding these types of sweeping powers should not and cannot be left solely to law enforcement. It is up to the private sector, and our government, to weigh competing security and privacy interests. Our government cannot sacrifice the ability of companies and citizens to properly secure their data and systems’ security in the name of often vague physical and national security concerns, especially when there are other ways to remedy the concerns of law enforcement.

That said, these security responsibilities cut both ways. Recent data breaches demonstrate that many companies have a long way to go to adequately protect their customers’ data. Companies cannot reasonably cry foul over the negative security impacts of proposed law enforcement data access while continuing to neglect and undermine the security of their own users’ data.

Providers and the law enforcement community should be held to robust security standards that ensure the security of our citizens and their data—we need legal restrictions on how government accesses private data and on how private companies collect and use the same data.

There may not be an easy answer to the “going dark” issue, but it is time for all of us, in government and the private sector, to understand that enhanced data security through properly implemented encryption and data use policies is in everyone’s best interest.

The “extra ordinary” access sought by law enforcement cannot exist in a vacuum—it will have far reaching and significant impacts well beyond the narrow confines of a single investigation. It is time for a serious conversation between law enforcement and the private sector to recognize that their security interests are two sides of the same coin.

Powered by WPeMatico

How to build The Matrix

Posted by | Column, Gaming | No Comments
Rizwan Virk
Contributor

Rizwan Virk is executive director of Play Labs @ MIT, a serial entrepreneur and author.

Released this month 20 years ago, “The Matrix” went on to become a cultural phenomenon. This wasn’t just because of its ground-breaking special effects, but because it popularized an idea that has come to be known as the simulation hypothesis. This is the idea that the world we see around us may not be the “real world” at all, but a high-resolution simulation, much like a video game.

While the central question raised by “The Matrix” sounds like science fiction, it is now debated seriously by scientists, technologists and philosophers around the world. Elon Musk is among those; he thinks the odds that we are in a simulation are a billion to one (in favor of being inside a video-game world)!

As a founder and investor in many video game startups, I started to think about this question seriously after seeing how far virtual reality has come in creating immersive experiences. In this article we look at the development of video game technology past and future to ask the question: Could a simulation like that in “The Matrix” actually be built? And if so, what would it take?

What we’re really asking is how far away we are from The Simulation Point, the theoretical point at which a technological civilization would be capable of building a simulation that was indistinguishable from “physical reality.”

[Editor’s note: This article summarizes one section of the upcoming book, “The Simulation Hypothesis: An MIT Computer Scientist Shows Why AI, Quantum Physics and Eastern Mystics All Agree We Are in a Video Game.“] 

From science fiction to science?

But first, let’s back up.

“The Matrix,” you’ll recall, starred Keanu Reeves as Neo, a hacker who encounters enigmatic references to something called the Matrix online. This leads him to the mysterious Morpheus (played by Laurence Fishburne, and aptly named after the Greek god of dreams) and his team. When Neo asks Morpheus about the Matrix, Morpheus responds with what has become one of the most famous movie lines of all time: “Unfortunately, no one can be told what The Matrix is. You’ll have to see it for yourself.”

Even if you haven’t seen “The Matrix,” you’ve probably heard what happens next — in perhaps its most iconic scene, Morpheus gives Neo a choice: Take the “red pill” to wake up and see what the Matrix really is, or take the “blue pill” and keep living his life. Neo takes the red pill and “wakes up” in the real world to find that what he thought was real was actually an intricately constructed computer simulation — basically an ultra-realistic video game! Neo and other humans are actually living in pods, jacked into the system via a cord into his cerebral cortex.

Who created the Matrix and why are humans plugged into it at birth? In the two sequels, “The Matrix Reloaded” and “The Matrix Revolutions,” we find out that Earth has been taken over by a race of super-intelligent machines that need the electricity from human brains. The humans are kept occupied, docile and none the wiser thanks to their all-encompassing link to the Matrix!  

But the Matrix wasn’t all philosophy and no action; there were plenty of eye-popping special effects during the fight scenes. Some of these now have their own name in the entertainment and video game industry, such as the famous “bullet time.” When a bullet is shot at Neo, the visuals slow down time and manipulate space; the camera moves in a circular motion while the bullet is frozen in the air. In the context of a 3D computer world, this make perfect sense, though now the camera technique is used in both live action and video games.  AI plays a big role too: in the sequels, we find out much more about the agents pursuing Neo, Morpheus and the team. Agent Smith (played brilliantly by Hugo Weaving), the main adversary in the first movie, is really a computer agent — an artificial intelligence meant to keep order in the simulation. Like any good AI villain, Agent Smith (who was voted the 84th most popular movie character of all time!) is able to reproduce itself and overlay himself onto any part of the simulation.

“The Matrix” storyboard from the original movie. (Photo by Jonathan Leibson/Getty Images for Warner Bros. Studio Tour Hollywood)

The Wachowskis, creators of “The Matrix,” claim to have been inspired by, among others, science fiction master Philip K. Dick. Most of us are familiar with Dick’s work from the many film and TV adaptations, ranging from Blade Runner, Total Recall and the more recent Amazon show, The Man in the High Castle.  Dick often explored questions of what was “real” versus “fake” in his vast body of work. These are some of the same themes we will have to grapple with to build a real Matrix: AI that is indistinguishable from humans, implanting false memories and broadcasting directly into the mind.

As part of writing my upcoming book, I interviewed Dick’s wife, Tessa B. Dick, and she told me that Philip K. Dick actually believed we were living in a simulation. He believed that someone was changing the parameters of the simulation, and most of us were unaware that this was going on. This was of course, the theme of his short story, “The Adjustment Team” (which served as the basis for the blockbuster “The Adjustment Bureau,” starring Matt Damon and Emily Blunt).

A quick summary of the basic (non-video game) simulation argument

Today, the simulation hypothesis has moved from science fiction to a subject of serious debate because of several key developments.

The first was when Oxford professor Nick Bostrom published his 2003 paper, “Are You Living in a Simulation?” Bostrom doesn’t say much about video games nor how we might build such a simulation; rather, he makes a clever statistical argument. Bostrom theorized that if a civilization ever got the Simulation Point, it would create many ancestor simulations, each with large numbers (billions or trillions?) of simulated beings. Since the number of simulated beings would vastly outnumber the number of real beings, any beings (including us!) were more likely to be living inside a simulation than outside of it!

Other scientists, like physicists and Cosmos host Neil deGrasse Tyson and Stephen Hawking weighed in, saying they found it hard to argue against this logic.

Bostrom’s argument implied two things that are the subject of intense debate. The first is that if any civilization every reached the Simulation Point, then we are more likely in a simulation now. The second is that we are more likely all AI or simulated consciousness rather than biological ones. On this second point, I prefer to use the “video game” version of the simulation argument, which is a little different than Bostrom’s version.

Video games hold the key

Let’s look more at the video game version of the argument, which rests on the rapid pace of development of video game and computer graphics technology over the past decades. In video games, we have both “players” who exist outside of the video game, and “characters” who exist inside the game. In the game, we have PCs (player characters) that are controlled (you might say mentally attached to the players), and NPCs (non-player characters) that are the simulation artificial characters.

Powered by WPeMatico

Will the gaming industry clutch up in 2019?

Posted by | Column, Gaming, TC | No Comments
Joost van Dreunen
Contributor

Joost van Dreunen is the co-founder of the game analytics firmSuperData, a Nielsen company.

2019 promises to be a great year in games. Innovation and competition will elevate the industry’s offerings and drive more inclusivity among a broader range of audiences.

Cloud gaming emerges as the new frontier and brings about unlikely partnerships.

Collectively, gamers will serve as the canary in the coal mine as large tech companies look to introduce new technologies to mainstream consumer audiences. Companies like Amazon, Tencent, Google and Microsoft already own and operate massive data centers that virtually run enterprise applications. In 2019, we will see continued investment in infrastructure and content acquisition as these billion-dollar companies seek to claim the consumer market.

Cloud gaming is a massive market opportunity that extends beyond just interactive entertainment. Microsoft already generates significant revenues from cloud-based services, and doubling down on gaming will open the door to broader adoption by consumers and a bigger piece of the market.

It also comes with significant competition, each player with their own motivations. Tencent, for one, got hit hard with a slowdown in mobile game approvals by the Chinese government, causing its share price to drop. Since then, things have started to improve somewhat, but it has incentivized Tencent to reduce its exposure in gaming and look for other non-content business segments that generate steady revenue and require less government regulation. For the first three quarters of 2018, Tencent’s cloud operations generated $864 million (RMB 6 billion) in revenues and more than doubled year-over-year.

Google has also been trying to wiggle its way into the cloud gaming business. Its cloud operations make about $10 billion annually, and recently appointed a new CEO likely to expand Google Cloud’s vertical product capabilities in non-tech categories.

And there is, of course, Amazon. With currently more than 50 percent market share in cloud computing and a strong user acquisition and engagement channel with Twitch, Amazon is uniquely positioned. But its previous efforts around interactive entertainment have so far not produced any real tangible results despite it ramping up expenditure. This makes it more likely that Amazon will become a third-party infrastructure provider for companies like Sony and Nintendo instead.

As these titans double down on cloud gaming initiatives, we can expect to see some surprising partnerships. For instance, Tencent and Google are currently working together in China. This gives the latter an entry point into a market that has long been out of reach. Meanwhile, incumbents like Sony, Nintendo and legacy game publishers will have to decide on going at it alone, as is the case of Electronic Arts, or buddying up and surrendering a piece of revenue.

Gamers win as the PC games market breaks into pieces.

It’s not a bad thing. But after more than a decade of a virtual monopoly held by Valve, new contenders have emerged. We already saw how Valve tried to get in front of Epic’s announcement that it was lowering its platform fees. And not long after, Discord popped up with an even better rate.

Breaking with the standard 30 percent cut, which is what most platforms (Apple, Facebook) claim in exchange for their services, Valve announced a few major changes. Two key sentences from the announcement. First, Valve’s new revenue distribution: “when a game makes over $10 million on Steam, the revenue share for that application will adjust to 75%/25% on earnings beyond $10M. At $50 million, the revenue share will adjust to 80%/20% on earnings beyond $50M.” Succinctly, make more and keep more.

Part of what is driving this is consolidation at the top. In the PC market the top-line firms have been growing at an incredible rate. Between 2013 and 2017, Activision grew its PC operations at +10 percent compound annual growth rate. EA’s was +30 percent, and Bethesda’s +36 percent. Meanwhile, the share of the top four public companies, based on PC gaming revenue, grew from 44 percent to 60 percent in that same period. It’s getting less crowded at the top and digital stores will have to compete.

The big publishers like Activision, Ubisoft and EA already have their digital storefronts and distribution platforms. Different from the brick-and-mortar space, publishers managed to build their own rather than rely on third-parties. For years, the big guys have had no interest in putting their content side-by-side with a growing number of small and medium-sized game companies.

Epic’s wild success with Fortnite has afforded it a much broader range of strategic options. So far it has lowered its store fees and retroactively paid developers on its platform. And now it is budding into the digital PC market by using its vast financial resources to compete head-on with Valve. Finally, Discord’s entry should be noted, too. Adding a content offering to an existing community, rather than the other way around, Discord is the new hot thing. Certainly, it has yet to lay claim to a hit title of its own. But it has both the expertise and critical mass to become an important next store front. It raised an additional $150 million right before the holidays.

All this takes place against the backdrop of a declining physical games market. It’s been a tough few months in meat space. In its recent earnings, GameStop came in at $2.08 billion and +4.8 percent in global sales, but Wall Street was not impressed. GameStop blamed Call of Duty and “sports titles.” With the recent sell-off of Spring Mobile to lower its debt, the specialty retailer continues on the hunt for new leadership, either in the form of a new CEO (unlikely) or new owner (likely). Whoever is going to scoop up GameStop is probably waiting for 19Q1 when sales dip and its valuation will be lower.

The breaking up of Valve’s dominance is good for players and companies that make games. Consumers will get better prices and more choice, and the various digital stores will compete over functionality and improved user experience. This is a win-win for all.

Walled gardens will be broken down, enabling cross-platform play with anyone, anywhere.

Despite digitization, the bulk of interactive entertainment has remained within one of the various walled gardens. That is going to change. Like telecom networks that allow people to speak to each other irrespective of their phone provider, so, too, will online gaming break down silos. In 2019, cross-platform play will become ubiquitous. The end of 2018 has already shown the potential of this as Fortnite’s success resulted in each of the platforms agreeing to play nicely with one another.

Legacy publishers like Activision Blizzard have also tasted what cross-platform play can do for their franchises: Hearthstone has continued to dominate the collective card game category, because it works seamlessly across PC and mobile, and offers a smooth integration with live-streaming platforms like Twitch.

Cross-platform play should be at the top of every studio’s design agenda in 2019.

Subscriptions and bundled content will drive sales in 2019.

After seeing the initial success with subscriptions enjoyed by Twitch and Microsoft’s GamePass, more companies will adopt this monetization model. Large platform holders like Sony and Apple are looking to grow their revenues by offering content subscriptions. Both of these companies have indicated they have plans to increase services revenue as a direct response to reaching the limit of how much hardware they can sell.

Game publishers have been experimenting with micro-transactions to great success. Tentpole franchises like FIFA, Hearthstone and GTA V Online have made a mint from what they call “recurrent revenues.” Beyond up-selling their audiences on a regular schedule with content updates, they will explore subscription models that will provide massive discounts and unique content to players in exchange for a more predictable revenue flows.

Video games will face more and new regulation with a focus on kids.

Now that gaming has emerged as a mainstream form of entertainment, the industry can expect more scrutiny. In addition, there will be sharper focus on kids and technology in 2019. Data companies will be increasingly under the microscope. Similar to the loot box scandal that resulted in various governments speaking out, we will see an effort focused on protecting children. This means that game companies will be held to a higher standard with regards to how they handle data on minors. Against the background of a festering trade war between eastern and western economies, data ownership, in particular around children, will emerge as a political topic and strategic business challenge.

It also means that titles like Fortnite will be fingered as culprits in narratives around an erosion of culture and well-being (although this is largely driven by misinformed industry critics). The title’s appeal to younger audiences will make it a likely scapegoat as the usual choir sings its disdain for video games. This year’s congressional hearing in the U.S. more than satisfied our need for examples of how disconnected government representatives are from technology used by literally everyone else. Different from previous generations, however, I expect the companies currently at the top of the food chain to know exactly how to respond. They will push titles that offer a safe, pleasant space for kids to play, uninterrupted by broader challenges found everywhere else.

Next year will, however, not be a continuation of exuberance as we’ve seen previously. Trends in related industries suggest that gaming, too, will move toward a more concentrated competitive landscape and closer government monitoring.

Image: Bryce Durbin/TechCrunch

Further consolidation is imminent for the games industry.

In response to the slowdown in consumer spending, some game companies will go out of business and others will gobble up the failing ones to strengthen their market positions. Nothing new here, but it does leave room for speculation as to who will buy whom. I previously speculated that Amazon would buy GameStop and still think they might. Only it will happen when GameStop reaches its wits end, probably at the end of Q1 2019.

Across Europe there have been a series of smaller acquisitions throughout the year, some of which are now turning sour. Starbreeze had its offices raided (which I’m told sounded worse than it was). Even so, this year the ambitious portfolio approach of buying up smaller studios and leveraging their IP against efficient distribution networks became, perhaps, too popular.

Finally, I expect companies like Tencent to continue satisfying their appetites for foreign assets. If nothing else, this year has cemented Tencent’s need to diversify as they look to mitigate some of its recent stresses by lowering its exposure to games revenue and further investing in western companies and platforms. Over the past two years its success with this strategy has greatly lowered competition across PC and mobile, the two most innovative categories.

This does not mean that innovation itself is at risk. It just means that the stakes will be higher for any firm that does not make a billion or more in revenues.

Courtesy of Feodora Chiosea/Getty Images

The coming winter brings a slowdown in growth, and possibly in revenue and innovation.

I’ve been writing about this for a while now. But don’t misunderstand: I want to be wrong about this. While I would like to predict that 2019 will bring even more growth and more money for everyone, the supporting evidence simply isn’t there.

For one, mobile gaming is showing saturation across different markets, including in China. It has evolved from insignificance to become the biggest games market worldwide and is now starting to slow. We are also at the end of the current console cycle. This simply means that the platforms are going to discount their hardware and the bulk of consumers looking to spend are disproportionately price conscious.

Overall economic indicators suggest that consumer spending, especially in the U.S., is headed to a slowdown. Following the tax breaks earlier in the year, overall spending surprised even the retailers. But that party is going to end soon. Finally, as gaming has become mainstream, its underlying economics have shifted. In broad terms this means that where previously the games industry may have seemed “counter-cyclical” it is going to follow suit with whatever happens to consumer spending at large. In addition, investors have become savvier and are starting to trade aggressively against game stocks. This means game companies are less inclined to take risks on content innovation (as in the case of EA).

The long-term silver lining here is that this imminent stagnation is the precursor of the industry’s overall transition. But before spring comes winter.

Live-streamers and influencers embark on a drama binge.

Yes, newfound fame will get the better of them and stupid things will be said. This is still the very first generation that suddenly finds itself thrust into the mainstream spotlight — they don’t have the benefit of the intense vetting that other industries have subjected their rising stars to before sending them on the main stage. With many still amateurs and competing against one another to win the favor of audiences and aggregators alike, the stakes are substantially higher.

In their hunger for attention, aspiring streamers will sacrifice their authenticity and some will undoubtedly ruin their careers before it even starts. Mounting pressures from growing competition will drive this new generation of tastemakers to “keep it real” and remain authentic. Twitch and YouTube will do what they can, I’m sure. But for many, this authenticity will be too much.

EA takes a hit in 2019.

Among the Big Three, Electronic Arts will have the toughest year. Despite its aggressive expansion effort illustrated by the acquisition of GameFly’s streaming division, EA is going to face the music with investors. This is somewhat undeserved, because financial investors insist on continual growth and generally can’t see past the next quarter. And, to be fair, EA has a few weaknesses: its revenue and its margin are highly dependent on the continuing success of FIFA Ultimate Team. In addition, it has relatively little new IP in the pipe, which makes it even more difficult for investors to care about the longer-term future. Simply put, EA can’t free itself from Wall Street’s needs as several analysts have already started to lower their expectations for the year ahead.

Photo courtesy/Getty Images/Guido Krzikowski/Bloomberg

GameStop sells, but it’s not a party.

I already predicted this last year and was almost right: GameStop has been trying to get acquired for the past six months. Its C-suite has seen better days, most recently resulting in a letter from one of its largest shareholders, Tiger Management, to get its sh!t together (aka perform a strategic review). The company has been unable to find a buyer and now finds itself forced to essentially abandon the diversification strategy it initiated in 2014 by acquiring retail chain in parallel market segments. Just recently GameStop sold off Spring Mobile and is likely to use the money to pay off its debts and improve the likelihood of some private equity firm or a company like Amazon to buy it. No one expected it to be a great year for games retail, but it’s getting sadder.

Powered by WPeMatico

Virtual reality gaming and the pursuit of ‘flow state’

Posted by | Column, creativity, Gaming, instagram, Los Angeles, Oculus Rift, Orpheus, player, smartphones, Virtual reality, virtual reality games | No Comments
Maggie Lane
Contributor

Maggie Lane is a writer and producer of virtual reality experiences and covers the industry for various publications.

You need to stop procrastinating. Maybe it’s time for some…

Bulletproof Coffee, Modafinil, nootropics, microdoses of acid, caffeine from coffee, caffeine from bracelets, aromatherapy, noise-canceling headphones, meditation, custom co-working spaces or productivity apps?

Whatever your choice, workers today (especially in the tech industry) will do just about anything to be more productive.

What we seek is that elusive, perfect focus — or flow state. According to researchers, someone in flow will experience a lack of sense of self, a decline in fear and time distortion. It is peak performance coupled with a euphoric high. All your happy neurotransmitters fire, and your dorsolateral prefrontal cortex performs differently — you do not second-guess yourself, you quite simply just flow into the next stages of the activity at hand. And you happen to be performing at the highest level possible. Sounds amazing, right?

But how do we invite this state in? A detailed piece in Fast Company outlines how extreme sports (professional surfing, steep incline skiing, skydiving, etc.) are the quickest way we’ve found to tap into human flow. Yet, these hobbies are just that — extreme. They require a large amount of skill and can be dangerous. For example, Steven Kotler, a pioneer in flow state research, broke almost 100 bones as a journalist researching the topic.

It all leads back to our collective (and very American) obsession with input versus output — are we achieving the most possible with the energy we put in? For all the bells and whistles at our disposal, we as a society are steadily declining in productivity as time goes on.

In 2014, a Gallup Poll found that the average American worker only spends a depressing 5 percent of their day in flow. A 2016 Atlantic article hypothesized that the main reason we’re decreasing in productivity as a workforce is that we’re not introducing new technologies quickly enough. Tech like robotics and smartphones could add a productivity push, but aren’t being integrated into the workplace. Business models are for the large part not that different from 10 years ago. In essence, we’re bored — we’re not being challenged in an engaging way, so we’re working harder than ever but achieving less.

But what if getting into flow state could be as easy as playing a video game?

Gameplay in RaveRunner

I first met Job Stauffer, co-founder and CCO at Orpheus Self-Care Entertainment, when I was, in fact, procrastinating from work. I was scrolling through Instagram and saw a clip of Job playing RaveRunner. As I love rhythm games, I immediately requested a build. Yet, I’d soon learn that this wasn’t just a simple VR experience.

RaveRunner was built for Vive, but easily ran on my Rift. When I first stepped into the game, I felt a bit overwhelmed — there was a lot of dark empty space; almost like something out of TRON. It was a little scary, which is actually very helpful for entering flow state. However, my fear soon dissipated as before me was a transparent yellow lady (Job calls her “Goldie”) dancing with the beat — providing a moving demo for gameplay. Unlike the hacking nature of Beat Saber, where you smash blocks with lightsabers, in RaveRunner you touch blue and orange glowing circles with your controllers, and move your whole body to the rhythm of the music.

There’s a softer, feminine touch to RaveRunner, and it wasn’t just Goldie. Behind the design of this game is a woman, Ashley Cooper, who is the developer responsible for the gameplay mechanics that can help a player attain flow. “Being in the flow state is incredibly rewarding and we strive to help people reach it by creating experiences like RaveRunner,” says Cooper. RaveRunner is a game you can get lost in, and by stimulating so many senses it allows you to let your higher level thoughts slip away — you become purely reactionary and non-judgmental.

In essence — flow.

After playing in this world for an hour, I called Job and learned more about his company. Apart from RaveRunner, Orpheus has also rolled out two other experiences — MicrodoseVR and SoundSelf. I got my first hands-on demo of all three products in one sitting at a cannabis technology event in Los Angeles, Grassfed LA. Grassfed is specifically geared toward higher-brow, hip tech enthusiasts; and the Orpheus suite of products fit right in.

As I lay in a dome with meditative lighting, a subwoofer purring below me, SoundSelf gave me one of the most profound experiences I’ve ever had in VR. I chanted into a microphone and my voice directly influenced the visuals before me. It felt like my spirit, the God particle, whatever you want to call it, was being stimulated from all these sensations. It was such a beautiful experience, but also was pure flow. I felt two minutes pass in the experience. I would have bet a hundred dollars on this. But I was inside for 10. Time didn’t make sense — a key indicator of flow state.

Next up was Microdose VR. I first tried Microdose VR in 2016 at the Esalen Institute in Big Sur. Esalen is the birthplace of the human potential movement, and so it was fitting that it was there, where I initially grasped the potential of VR for transformational experiences. Every other experience I had tried up to that point had been First Person Shooters or 360-video marketing pieces. And not to slight those experiences, but I felt that VR must be able to do MORE. Android Jones’ Microdose blew my mind. Like with SoundSelf, I completely lost track of time. I was directly impacting visuals with my body movements, and sound was a big factor as well. It was the first time I could easily imagine staying in VR for hours. Most of all, it was an experience that was only possible within VR. The game was the biggest euphoric rush I’ve felt in VR, and that feeling occurred again at this event.

We have the power as consumers to play games that tie in intrinsically with self-care but often don’t have options available. Job was propelled down this path when he asked himself “if I invest one hour of my time per day into playing a video game, what will I personally gain from that time invested, and will I even have time left over to do genuinely good things for myself?”

Orpheus is pioneering the fusion of game design with traditional self-care practices like meditation, dance/exercise, listening to music and creating art: “In short, we simply want players to feel amazing and have zero regrets about their time spent playing our games, allowing them to walk away knowing they have leveled up themselves, instead of their in-game avatars alone.”

One thing that will make it easier for people to try these experiences are portable headsets such as the ViveFocus and the Oculus Quest. Being untethered will allow people to travel with VR wherever they may go. Job sees this fundamental shift right ahead of us, as “video games and self-care are about to become one in the same. A paradigm shift. This is why all immersive Orpheus Self-Care Entertainment projects will be engineered for this critically important wave of VR.”

Orpheus is not a VR-only company, although their first three experiences are indeed for VR. As they expand, they hope to open up to a variety of types of immersive experiences, and are continually looking for projects that align with their holistic mission.

At the end of the day, I love that Orpheus is attempting to tap into a part of the market that so desperately needs their attention. If we don’t make self-care a major part of VR today, then we’ll continue to use VR as a distraction from, as opposed as a tool to enhance, our daily lives.

As for me, along with the peppermint tea, grapefruit candle and music that make my focus possible, I’ll now be adding some Orpheus games into my flow repertoire.

Powered by WPeMatico

The new era in mobile

Posted by | Apple, autonomous vehicles, Column, Google, Mobile, TC, Tesla | No Comments
Joe Apprendi
Contributor

Joe Apprendi is a general partner at Revel Partners.
More posts by this contributor

A future dominated by autonomous vehicles (AVs) is, for many experts, a foregone conclusion. Declarations that the automobile will become the next living room are almost as common — but, they are imprecise. In our inevitable driverless future, the more apt comparison is to the mobile device. As with smartphones, operating systems will go a long way toward determining what autonomous vehicles are and what they could be. For mobile app companies trying to seize on the coming AV opportunity, their future depends on how the OS landscape shapes up.

By most measures, the mobile app economy is still growing, yet the time people spend using their apps is actually starting to dip. A recent study reported that overall app session activity grew only 6 percent in 2017, down from the 11 percent growth it reported in 2016. This trend suggests users are reaching a saturation point in terms of how much time they can devote to apps. The AV industry could reverse that. But just how mobile apps will penetrate this market and who will hold the keys in this new era of mobility is still very much in doubt.

When it comes to a driverless future, multiple factors are now converging. Over the last few years, while app usage showed signs of stagnation, the push for driverless vehicles has only intensified. More cities are live-testing driverless software than ever, and investments in autonomous vehicle technology and software by tech giants like Google and Uber (measured in the billions) are starting to mature. And, after some reluctance, automakers have now embraced this idea of a driverless future. Expectations from all sides point to a “passenger economy” of mobility-as-a-service, which, by some estimates, may be worth as much as $7 trillion by 2050.

For mobile app companies this suggests several interesting questions: Will smart cars, like smartphones before them, be forced to go “exclusive” with a single OS of record (Google, Apple, Microsoft, Amazon/AGL), or will they be able to offer multiple OS/platforms of record based on app maturity or functionality? Or, will automakers simply step in to create their own closed loop operating systems, fragmenting the market completely?

Automakers and tech companies clearly recognize the importance of “connected mobility.”

Complicating the picture even further is the potential significance of an OS’s ability to support multiple Digital Assistants of Record (independent of the OS), as we see with Google Assistant now working on iOS. Obviously, voice NLP/U will be even more critical for smart car applications as compared to smart speakers and phones. Even in those established arenas the battle for OS dominance is only just beginning. Opening a new front in driverless vehicles could have a fascinating impact. Either way, the implications for mobile app companies are significant.

Looking at the driverless landscape today there are several indications as to which direction the OSes in AVs will ultimately go. For example, after some initial inroads developing their own fleet of autonomous vehicles, Google has now focused almost all its efforts on autonomous driving software while striking numerous partnership deals with traditional automakers. Some automakers, however, are moving forward developing their own OSes. Volkswagen, for instance, announced that vw.OS will be introduced in VW brand electric cars from 2020 onward, with an eye toward autonomous driving functions. (VW also plans to launch a fleet of autonomous cars in 2019 to rival Uber.) Tesla, a leader in AV, is building its own unified hardware-software stack. Companies like Udacity, however, are building an “open-source” self-driving car tech. Mobileye and Baidu have a partnership in place to provide software for automobile manufacturers.

Clearly, most smartphone apps would benefit from native integration, but there are several categories beyond music, voice and navigation that require significant hardware investment to natively integrate. Will automakers be interested in the Tesla model? If not, how will smart cars and apps (independent of OS/voice assistant) partner up? Given the hardware requirements necessary to enable native app functionality and optimal user experience, how will this force smart car manufacturers to work more seamlessly with platforms like AGL to ensure competitive advantage and differentiation? And, will this commoditize the OS dominance we see in smartphones today?

It’s clearly still early days and — at least in the near term — multiple OS solutions will likely be employed until preferred solutions rise to the top. Regardless, automakers and tech companies clearly recognize the importance of “connected mobility.” Connectivity and vehicular mobility will very likely replace traditional auto values like speed, comfort and power. The combination of Wi-Fi hotspot and autonomous vehicles (let alone consumer/business choice of on-demand vehicles) will propel instant conversion/personalization of smart car environments to passenger preferences. And, while questions remain around the how and the who in this new era in mobile, it’s not hard to see the why.

Americans already spend an average of 293 hours per year inside a car, and the average commute time has jumped around 20 percent since 1980. In a recent survey (conducted by Ipsos/GenPop) researchers found that in a driverless future people would spend roughly a third of the time communicating with friends and family or for business and online shopping. By 2030, it’s estimated the autonomous cars “will free up a mind-blowing 1.9 trillion minutes for passengers.” Another analysis suggested that even with just 10 percent adoption, driverless cars could account for $250 billion in driver productivity alone.

Productivity in this sense extends well beyond personal entertainment and commerce and into the realm of business productivity. Use of integrated display (screen and heads-up) and voice will enable business multi-tasking from video conferencing, search, messaging, scheduling, travel booking, e-commerce and navigation. First-mover advantage goes to the mobile app companies that first bundle into a single compelling package information density, content access and mobility. An app company that can claim 10 to 15 percent of this market will be a significant player.

For now, investors are throwing lots of money at possible winners in the autonomous automotive race, who, in turn, are beginning to define the shape of the mobile app landscape in a driverless future. In fact, what we’re seeing now looks a lot like the early days of smartphones with companies like Tesla, for example, applying an Apple -esque strategy for smart car versus smartphone. Will these OS/app marketplaces be dominated by a Tesla — or Google (for that matter) — and command a 30 percent revenue share from apps, or will auto manufacturers with proprietary platforms capitalize on this opportunity? Questions like these — while at the same time wondering just who the winners and losers in AV will be — mean investment and entrepreneurship in the mobile app sector is an extremely lucrative but risky gamble.

Powered by WPeMatico

Everyday home gear made smart

Posted by | Android, Assistant, Belkin, belkin wemo, Bluetooth, Column, electronics manufacturing, Gadgets, Google, Home Automation, iRobot, kwikset, Nest Labs, Roomba, smart devices, smart thermostat, smartphone, Speaker, wi-fi, Wirecutter | No Comments
Makula Dunbar
Contributor

Makula Dunbar is a writer with Wirecutter.

Editor’s note: This post was done in partnership with Wirecutter. When readers choose to buy Wirecutter’s independently chosen editorial picks, Wirecutter and TechCrunch may earn affiliate commissions.

If you only have one smart home device, it’s likely something simple and fun like a voice-controlled speaker or color-changing LED light bulb. As you expand your smart home setup, you can begin to swap out gear that isn’t as flashy but you still use everyday.

Switching to connected locks, power outlets and smoke alarms are all simple installs that can improve your safety and comfort in your own home. We’ve pulled together some of our favorite essentials made smart for anyone looking to upgrade.

Smart lock: Kwikset Kevo Smart Lock 2nd Gen

The Kwikset Kevo Smart Lock 2nd Gen is the most versatile smart lock that we’ve tested. Whether you prefer to use a wireless fob, smartphone app or key, you’ll be able to control the lock with all of them. When we compared it to similar models, the Kevo’s Bluetooth-activated tap-to-unlock mechanism was the easiest to use.

The second generation of the Kevo improved on security and has all-metal internal components for better protection against forced break-in attempts. With the optional Kevo Plus upgrade, you’ll add the ability to control the lock remotely and receive status-monitoring updates.

Photo: Liam McCabe

Robot Vacuum: iRobot Roomba 960

If cleaning is neither your forte or preferred pastime, a robot vacuum will come in handy. Our upgrade pick, the iRobot Roomba 960, is one of the most powerful models that we tested. It can be controlled through the iRobot Home app and uses a bump-and-track navigation system that helps vacuum an entire floor without missing spots.

If its battery is running low during a session, it’ll return to its dock to power up before finishing the job. It’s easy to disassemble for maintenance and is equipped with repairable parts that make it worth its price over some of our less serviceable picks.

Photo: Rachel Cericola

Plug-in Smart Outlet: Belkin Wemo Mini

We tested 26 smart outlet models over more than 45 hours and chose the Belkin Wemo Mini Wi-Fi plug as our top pick. If you’ve ever thought it’d be nice to remotely turn on or off home essentials such as lamps, air conditioners and fans from your smartphone, plugging them into a smart outlet makes it possible.

The Wemo Mini has proven to be reliable throughout long-term testing, it doesn’t block other outlets on the same wall plate and it’s compatible with iOS and Android devices and assistants, including HomeKit/Siri, Alexa and Google Assistant. The interface of the Wemo app is intuitive and easy to use. You can view all of your connected devices on one screen, set powering timers and from anywhere power on or off a device plugged into the Wemo outlet.

Photo: Jennifer Pattison Tuohy

Smart Thermostat: Nest Thermostat E

For a smart thermostat that’s affordable and doesn’t require extensive programming, we recommend the Nest Thermostat E. After about a week, it creates a schedule after learning cooling and heating preferences that you’ve set. It isn’t compatible with as many HVAC systems as similar Nest models, but it’s easy to install and doesn’t lack any features we expect.

It does come with Eco Mode — an energy-saving geofencing feature that detects when your home is empty (or when your smartphone is nowhere near your house). The Nest app uses the same technology to set the thermostat to a preferred temperature when it senses you’re on your way home. If you don’t have your smartphone on hand, you can still operate the Thermostat E by turning its outer ring and pressing selections on its touchscreen.

Photo: Michael Hession

Smart Smoke Alarm: Nest Protect

A smoke alarm is one of the most relied-upon safety devices in every home. Nonetheless, it’s easy to forget to do routine checks to ensure it’s in tip-top shape and functioning properly. With a smart smoke alarm like the Nest Protect, we found that its simple app, self-tests, monthly sound checks and consistent alerts are enough to keep fire safety worries at bay.

It isn’t difficult to install, has a sleek design and integrates with other smart home devices like the Nest Cam (which can record video of a fire) and the Nest Learning Thermostat (which shuts down HVAC systems that may be the cause of a fire). It’s sensitive to fast- and slow-burning fires, plus it monitors homes for both smoke and carbon monoxide.

These picks may have been updated by Wirecutter. When readers choose to buy Wirecutter’s independently chosen editorial picks, Wirecutter and TechCrunch may earn affiliate commissions.

Powered by WPeMatico

With a $10 million round, Nigeria’s Paga plans global expansion

Posted by | africa, alipay, Android, Bank, bank transfers, california, cellulant, ceo, Column, e-commerce, economy, ethiopia, Finance, kenya, M-Pesa, Mexico, mobile devices, mobile payment, money, Nigeria, Omidyar Network, online payments, p2p, PayPal, Philippines, Safaricom, San Francisco, Spotify, Sweden, Uber, vodafone, western union | No Comments
Jake Bright
Contributor

Jake Bright is a writer and author in New York City. He is co-author of The Next Africa.

Nigerian digital payments startup Paga is gearing up for an international expansion with $10 million in funding let by the Global Innovation Fund. 

The company is planning to release its payments product in Ethiopia, Mexico, and the Philippines—CEO Tayo Oviosu told TechCrunch at Disrupt San Francisco.

Paga looks to go head to head with regional and global payment players, such as PayPal, Alipay, and Safaricom’s M-Pesa, according to Oviosu.

“We are not only in a position to compete with them, we’re going beyond them,” he  said of Kenya’s M-Pesa mobile money product. “Our goal is to build a global payment ecosystem across many emerging markets.”

Founded in 2012, Paga has created a multi-channel network and platform to transfer money, pay-bills, and buy things digitally that’s already serving 9 million customers in Nigeria—including 6000 businesses. All of whom can drop into one of Paga’s 17,167 agents or transfer funds from one of Paga’s mobile apps.

Paga products work on iOS, Android, and basic USSD phones using a star, hashtag option. The company has remittance partnerships with the likes of Western Union and Moneytrans and allows for third-party integration of its app.

Paga has also built out considerable scale in home market Nigeria—which boasts the dual distinction as Africa’s most populous nation and largest economy.

Since inception, the startup has processed 57 million transactions worth $3.6 billion, according to Oviosu.

That’s no small feat given the country straddles the challenges and opportunities of growing digital payments. Only recently did Nigeria’s mobile and internet penetration break 50 percent and 40 percent of the country’s 196 million remain unbanked.

To bring more of Nigeria’s masses onto digital commerce, Paga recently launched a new money transfer-app that further simplifies the P2P payment process from mobile devices.

For nearly a decade, Kenya’s M-Pesa—which has 20 million active users and operates abroad—has dominated discussions of mobile money in Africa.

Paga and a growing field of operators are diversifying the continent’s payment playing field.

Fintech company Cellulant raised $47 million in 2019 on its business of processing $350 million in payment transactions across 33 African countries.

In Nigeria, payment infrastructure company Interswitch has expanded across borders and is pursuing an IPO. And Nigerian payment gateway startups Paystack and Flutterwave have digitized volumes of B2B transactions while gaining global investment.

So why does Paga—a Nigerian payments company—believe it can expand its digital payments business abroad?

“Why not us?,” said CEO Oviosu. “People sit in California and listen to Spotify that was developed in Sweden. And Uber started somewhere before going to different countries and figuring out local markets,” he added.

“The team behind this business has worked globally for some of the top tech names. This platform can stand shoulder to shoulder with any payments company built somewhere else,” he said.

On that platform, Oviosu underscores it has positioned itself as a partner, not a rival, to traditional banks. “Our ecosystem is not built to compete with you, it’s actually complimentary to you,” he said of the company’s positioning to big banks—enabling Paga to partner with seven banks in Nigeria.

Paga also sees potential to adapt its model to other regulatory and consumer environments. “We’ve built an infrastructure that rides across all mobile networks,” said Oviosu. “We’re not trying to be a bank. Paga wants to work with the banks and financial institutions to enable a billion people to access and use money,” he said.

As part of the $10 million round (which brings Paga’s total funding up to $35 million), Global Innovation Partners will take a board seat. Other round participants include Goodwell, Adlevo Capital, Omidyar Network, and Unreasonable Capital.

Paga will use the Series B2 to grow its core development team of 25 engineers across countries and continents. It will also continue its due diligence on global expansion—though no hard dates have been announced.

On revenues, Paga makes money on merchant payments, bank to bank transfers, and selling airtime and data. “As we roll out other services, we will build a model where we will make money on savings and lending,” said the company’s CEO.

As for profitability, Paga does not release financials, but reached profitability in 2018, according to Oviosu—something that was confirmed in the due diligence process with round investors.

On the possibility of beating Interswitch (or another venerable startup) to become Africa’s first big tech IPO, Oviosu plays that down. “For the next 3-5 years I see us staying private,” he said.

Powered by WPeMatico

MallforAfrica goes global, Kobo360 and Sokowatch raise VC, France explains its $76M fund

Posted by | africa, Android, Column, designer, east africa, Emmanuel Macron, France, Ghana, kenya, kobo360, Lagos, Nigeria, Proparco, Rwanda, senegal, sokowatch, Startups, Tanzania, Uber, Village Global, Y Combinator | No Comments
Jake Bright
Contributor

Jake Bright is a writer and author in New York City. He is co-author of The Next Africa.

B2B e-commerce company Sokowatch closed a $2 million seed investment led by 4DX Ventures. Others to join the round were Village Global, Lynett Capital, Golden Palm Investments and Outlierz  Ventures.

The Kenya-based company aims to shake up the supply chain market for Africa’s informal retailers.

Sokowatch’s platform connects Africa’s informal retail stores directly to local and multi-national suppliers — such as Unilever and Proctor and Gamble — by digitizing orders, delivery and payments with the aim of reducing costs and increasing profit margins.

“With both manufacturers and the small shops, we’re becoming the connective layer between them, where previously you had multiple layers of middle-men from distributors, sub-distributors, to wholesalers,” Sokowatch founder and CEO Daniel Yu told TechCrunch.

“The cost of sourcing goods right now…we estimate we’re cutting that cost by about 20 percent [for] these shopkeepers,” he said.

“There are millions of informal stores across Africa’s cities selling hundreds of billions worth of consumer goods every year,” said Yu.

These stores can use Sokowatch’s app on mobile phones to buy wares directly from large suppliers, arrange for transport and make payments online. “Ordering on SMS or Android gets you free delivery of products to your store, on average, in about two hours,” said Yu.

Sokowatch generates revenues by earning “a margin on the goods that we’re selling to shopkeepers,” said Yu. On the supplier side, they also benefit from “aggregating demand…and getting bulk deals on the products that we distribute.”

The company recently launched a line of credit product to extend working capital loans to platform clients. With the $2 million round, Sokowatch — which currently operates in Kenya and Tanzania — plans to “expand to new markets in East Africa, as well as pilot additional value add services to the shops,” said Yu.

MallforAfrica and DHL launched MarketPlaceAfrica.com: a global e-commerce site for select African artisans to sell wares to buyers in any of DHL’s 220 delivery countries.

The site will prioritize fashion items — clothing, bags, jewelry, footwear and personal care — and crafts, such as pictures and carvings. MallforAfrica is vetting sellers for MarketPlace Africa online and through the Africa Made Product Standards association (AMPS), to verify made-in-Africa status and merchandise quality.

“We’re starting off in Nigeria and then we’ll open in Kenya, Rwanda and the rest of Africa, utilizing DHL’s massive network,” MallforAfrica CEO Chris Folayan told TechCrunch about where the goods will be sourced. “People all around the world can buy from African artisans online, that’s the goal,” Folayan told TechCrunch.

Current listed designer products include handbags from Chinwe Ezenwa and Tash women’s outfits by Tasha Goodwin.

In addition to DHL for shipping, MarketPlace Africa will utilize MallforAfrica’s e-commerce infrastructure. The startup was founded in 2011 to solve challenges global consumer goods companies face when entering Africa.

French President Emmanuel Macron unveiled a $76 million African startup fund at VivaTech 2018 and TechCrunch paid a visit to the French Development Agency (AFD) — which will administer the new fund — to get details on how it will work.

The $76 million (or €65 million) will divvy up into three parts, AFD Digital Task Team Leader Christine Ha told TechCrunch.

“There are €10 million [$11.7 million] for technical assistance to support the African ecosystem… €5 million will be available as interest-free loans to high-potential, pre-seed startups…and…€50 million [$58 million] will be for equity-based investments in series A to C startups,” explained Ha during a meeting in Paris.

The technical assistance will distribute in the form of grants to accelerators, hubs, incubators and coding programs. The pre-seed startup loans will issue in amounts up to $100,000 “as early, early funding to allow entrepreneurs to prototype, launch and experiment,” said Ha.

The $58 million in VC startup funding will be administered through Proparco, a development finance institution — or DFI — partially owned by the AFD. “Proparco will take equity stakes, and will be a limited partner when investing in VC funds,” said Ha.

Startups from all African countries can apply for a piece of the $58 million by contacting any of Proparco’s Africa offices.

The $11.7 million technical assistance and $5.8 million loan portions of France’s new fund will be available starting in 2019. On implementation, AFD is still “reviewing several options…such as relying on local actors through [France’s] Digital Africa platform,” said Ha. President Macron followed up the Africa fund announcement with a trip to Nigeria last month.

Nigerian logistics startup Kobo360 was accepted into Y Combinator’s 2018 class and gained some working capital in the form of $1.2 million in pre-seed funding led by Western Technology Investment.

The startup — with an Uber -like app that connects Nigerian truckers to companies with freight needs — will use the funds to pay drivers online immediately after successful hauls.

Kobo360 is also launching the Kobo Wealth Investment Network, or KoboWIN — a crowd-invest, vehicle financing program. Through it, Kobo drivers can finance new trucks through citizen investors and pay them back directly (with interest) over a 60-month period.

On Kobo360’s utility, “We give drivers the demand and technology to power their businesses,” CEO Obi Ozor told TechCrunch. “An average trucker will make $3,500 a month with our app. That’s middle class territory in Nigeria.”

Kobo360 has served 324 businesses, aggregated a fleet of 5,480 drivers and moved 37.6 million kilograms of cargo since 2017, per company stats. Top clients include Honeywell, Olam, Unilever and DHL.

Ozor thinks the startup’s asset-free, digital platform and business model can outpace traditional long-haul 3PL providers in Nigeria by handling more volume at cheaper prices.

“Logistics in Nigeria have been priced based on the assumption drivers are going to run empty on the way back…When we now match freight with return trips, prices crash.”

Kobo360 will expand in Togo, Ghana, Cote D’Ivoire and Senegal.

[PHOTO: BFX.LAGOS] And finally, applications are open for TechCrunch’s Startup Battlefield Africa, to be held in Lagos, Nigeria, December 11. Early-stage African startups have until September 3 to apply here.

More Africa Related Stories @TechCrunch

·         CowryWise micro-savings service opens high-yield government bonds to everyday Nigerians


African Tech Around the Net

·         More Than Half of Sub-Saharan Africa to Be Connected to Mobile by 2025, Finds New GSMA Study
·         Ethiopia’s Gebeya acquires Coders4Africa to accelerate its growth
·         Rwanda, Andela partner to launch pan-African tech hub in Kigali
·         Google’s free public Wi-Fi initiative expanded to Africa
·         Accounteer wins 2018 MEST Entrepreneur challenge
·         SafeBoda completes expansion to Kenya, now live in Nairobi
·         Uganda government sued over social media tax

Powered by WPeMatico