Amazon – The knife.

All change at games?

• There has been chatter for some time that Amazon’s new CEO will put his stamp upon the company by cutting back on some of its stranger products and projects but it looks like the knife is falling first on gaming.
• That is not to say that Amazon Game Studios is going to be cancelled, but its early years have not been a success and hundreds of millions of dollars have been consumed.
• This is why I suspect that Mike Frazzini, the long-term head of Amazon Game Studios is leaving the company to focus on spending time with his family.
• Most of the time, this means that the exit was not voluntary and given the new CEO and talk of as clean-up, I suspect that this is the case with Mr Frazzini.
• The main issue has always been that Mr Frazzini came from the books department of Amazon meaning that he had no experience with games.
• Amazon operates under a philosophy that anyone who is successful in one area can be successful somewhere else and to some degree this is true but there are limits.
• I think that the games division is one of these, and his tenure has obviously been problematic with most of its games struggling to even get published before being cancelled.
• The company did finally manage to get a decent game out last year which was a Massively Multiplayer Online (MMO) game called New World.
• It started with a bang and managed to peak at 913,000 concurrent users but this has fallen back hugely to just 26,500.
• 26,500 is enough to make an MMO work, but at that level, it is very unlikely to become a giant with longevity and high cash flow.
• Consequently, I don’t think that this will be regarded as a success at Amazon and it would seem that the new CEO thinks that new blood is needed.
• I have always thought that the future for Amazon Game Studios is not in making the games but in providing the tools to developers to create them.
• Its acquisition strategy over the last 5 years strongly points in this direction and given its lack of success in 1^st party games, this makes more sense.
• Providing tools to developers to create software is at the heart of AWS’s core competence and I suspect that eventually, this is where Amazon Game Studios will end up.
• Gaming has been an experiment but unlike some of its stranger offerings like the indoor security drone and Amazon Astro, this has a future with a relatively simple pivot.
• Hence, I would not be surprised to see someone from AWS take it over and pivot the business towards the provision of tools and integrate it deeply with AWS.
• This is good news for Amazon as it will help reduce the losses that games have incurred and also expand AWS’s market-leading offering further.
• That being said, Amazon still does not excite me in any way.
• Its valuation is far more reasonable these days but there are far more interesting value propositions to be had and so I continue to look elsewhere.