The Blog of Dato' Dr Anuar Md Nor

In The Tines London on September 7^th, 2019, Simon Parkin analysed the British video games industry. He is the author of A Game of Birds and Wolves: The Secret Game that Won the War, which would be published in November 2019 by Sceptre. The analysis is published below.

When Brandon Beck and Marc Merrill, the founders of the video game company Riot Games, began planning its sprawling, multimillion-dollar campus in Los Angeles, they knew that it had to be luxurious. In the early days Beck, 36, and Merrill, 38, former room-mates at the University of California, were content to moonlight out of poky office rooms. However, when their first project, League of Legends, became one of the most widely played games in the world they had started to compete with Google, Facebook and the like to entice the brightest and best engineers in the world to work for them. At one point Beck offered to buy a Ferrari for a programmer whom he was desperate to recruit.

In 2015 the pair installed a vast cafeteria as the centrepiece of the new complex, with a battalion of chefs cooking cuisines from around the world for Riot’s 2,500-strong staff. An orange grove was planted near an outdoor chessboard with human-sized pieces. Rather than fell trees to deter pigeons from gathering around the campus, Riot hired a falconer to scare them off. No expense, in other words, was spared.

Such extravagance is possible in a business that, for the winners at least, can be unimaginably profitable. Recent figures show that the video-game market in the UK alone is worth £5.7 billion, more than the nation’s film and music industries combined. And while film production companies and record labels must regularly release new products, many games outfits, including Riot, concentrate on one, which they nurture and grow over many years – more like a social media company than a Hollywood studio.

Sustaining a game with millions of players requires a king’s ransom in funds, which often come from surprising sources. Riot, for instance – in which the Chinese conglomerate Tencent bought a majority stake for $231 million in 2011 – has made its fortune principally from the sale of “skins”. These are digital costumes that change the look of one’s character, much like paying a few pounds to dress your chess pieces in a different outfits. The outfits bestow no tactical advantage – they are purely cosmetic. And yet the sale of virtual fashions is, by all accounts, preposterously profitable. The digital fashion industry was pioneered by Riot Games, which made an estimated $1.6 billion in 2015, much of which came from the sale of virtual clothing.

Digital fashion is only one of the factors that make today’s games industry almost unrecognisable to anyone who grew up playing video games in the Eighties. Where games once came on temperamental cassettes or cartridges, most now are bought from digital retailers and stored on hard drives. Socialising was once done around wooden Pac-Man or Space Invaders cabinets in arcades that smelt of beer and truancy. Today players can go on month-long quests together, via the internet, without stepping foot in each other’s countries. While in the Eighties there were no international video-game tournaments, today young men and women join well-paid professional teams and live together in luxurious penthouse training dojos with dieticians and psychologists on hand to improve their chances of winning glittering prize pots.

Success came quickly to the video-game medium. In the early Seventies games spilt from the room-size university mainframe computers on which they were invented into bars and arcades, where they often made fast fortunes for their creators. However, the market crashed in 1983, a year after Atari paid $25 million for the rights to Steven Spielberg’s E.T.; the game was terrible and duly tanked – thousands of unsold copies were buried in the New Mexico desert.

The subsequent recovery of the business has been steady and stratospheric, propelled by advances such as 3D graphics, online play and virtual reality. One recent market report estimates that consumers will spend $138 billion on games in 2019. This success has been agitated by scores of video-game companies – and not just those based in North America. Analysts reckon that Grand Theft Auto V, which has been at the top of the charts since its release in September 2013, has earned more revenue than any book or film in history, with more than 95 million units sold, making $6 billion. GTA’s creators, Sam and Dan Houser, are the sons of Walter Houser, who co-owned Ronnie Scott’s jazz club, and the actress Geraldine Moffat. They grew up in London and their games are principally developed in Edinburgh.

The industry’s ever-expanding commercial clout has not, however, been matched by an upswing in cultural status. The stereotypical image of the lone teenage boy twiddling his thumbs in a darkened bedroom has persisted, while a readiness to blame violent crimes on the influence of games has focused attention on the baser aspects of a medium that is far richer in theme and substance than tabloid headlines suggest.

Yet this image may be shifting. Many who started playing games in their teenage years have continued to play into adulthood, and the rise of smartphone games has broadened the demographic of game-players; a 2017 report found that 32.4 million people in the UK play games on a regular basis, and that almost half of the players of mobile games are women. As game-players age, developers are increasingly investing in games that appeal to a more mature audience – not in terms of sex or violence, but via game experiences that explore more complex subject matter, such as grief and parenthood.

As the industry has evolved, a raft of hitherto unimagined and hugely lucrative positions have emerged. Tyler “Ninja” Blevins, who is 28 and has hair that is routinely dyed the colour of toxic waste, is in perhaps the most famous of these newly coined roles: video-game streamers broadcast their game-playing live to a global audience via live-streaming services such as Microsoft’s Mixer or the Amazon-owned Twitch.

The idea of watching someone else play video games seems counterintuitive, but in March last year, when Blevins played Fortnite with the musician Drake, the rapper Travis Scott and the Pittsburgh Steelers athlete JuJu Smith-Schuster, footage of the play session broke the record for the most-viewed live event yet staged on the internet. Close to 650,000 viewers concurrently logged on to watch the match.

Streaming is making stars of young men and women who, in a previous era, might have followed a career into traditional broadcasting. Alastair Aiken, the 25-year-old British streamer better known by his online alias Ali-A, is a hero to British teenagers, who know him principally not from his appearances as a presenter on CBBC, but for his YouTube videos playing Fortnite, which have been watched more than 959 million times, earning him up to a million dollars.

Top-flight streamers such as Blevins and Aiken often stream for six hours or more at a time and command influence over millions of young fans (Blevins has 4.7 million Twitter followers). Blevins, whose six-day honeymoon last August was his first holiday in eight years, reportedly earned almost $10 million in 2018 through streaming. He has little time to enjoy his earnings, however – his manager and wife recently told ESPN that the couple can’t leave their million-dollar home inside a gated community about an hour outside Chicago without enduring a Beatles-esque mobbing. Moreover, Blevins feels a pressing need to always be streaming. A weekend off could cost him tens of thousands of subscribers and there is an army of streamers – 2.2 million on Twitch, in fact – desperate to usurp his position at the top.

As game worlds have increased in fidelity thanks to technological progress, so the costs – human and financial – of game creation have risen sharply. GTA V cost an estimated $137 million to make, with an additional $128 million spent on marketing. Some of the top-level members of staff at Rockstar, the game’s publisher, worked 100 hours a week during the final weeks of its latest game’s development.

These figures represent a significant risk to financiers. Then there is the issue of discoverability. With 300,000 games for sale on Apple’s App Store, convincing anyone to play your game is as significant a challenge as building it. A host of angel investors are constantly on the lookout for what might be the next big thing, but in an industry in which fashions are fickle it can be difficult for them to know where to place their bets. Last year Jay Chi, who spent 11 years at the management consulting company McKinsey & Co, leading its global video-games practice, co-launched the Makers Fund with an initial pot of $180 million to invest in projects with the potential to become the next League of Legends or Fortnite. (The team is yet to announce the fund’s performance.)

As more developers seek to make their games permanent fixtures in players’ lives, detractors fear that the wider ecosystem suffers, crowding out those whose aspirations lean towards the artistic or political, rather than the commercial. Games such as That Dragon, Cancer, an autobiographical game created by a mother and father that looks at what it is like to live with a child dying from terminal illness. Or Journey, an elegiac exploration of death and intimacy in which players drift into and out of one another’s stories, engaging in fleeting moments of care and tenderness.

These games explore emotional territory away from the sports-like texture of League of Legends and Fortnite. They too can prove enormously successful (the puzzle game Papers, Please sold 1.8 million copies) and are often more likely to be picked up by critics and awards panels on the lookout for games that demonstrate the artistic range of the medium, not just its money-making capability. And yet, while the significant profits are – this month, at least – to be made in the sale of digital costumes for virtual avatars, few of the big game publishers are focusing their investment and efforts on these kinds of personal expression.

This will, long term, have a restrictive effect on the industry. As Robert Yang, a professor at New York University’s Game Center, recently put it, the medium is in the process of reverse-engineering an art form from an entertainment business. For games to evolve into the art form that they have the potential to become, he said, “we have to convince funding bodies and governments that games are worth more than their sales numbers”. This has been a medium defined by restless change and technological momentum. There are more ways to make a fortune from games than ever, whether it is building, broadcasting or investing in them. Care must be taken to ensure that profit-chasing doesn’t hold this, the most complex, thrilling and arguably engaging medium yet invented, back from its full potential.

My son, Mohd Harfiq, is a man of fast pace. He rides mountain bikes during weekends and play video games for most nights. During week days, he organizes many events, such as youth events and eSport tournaments. I ask how big is the eSport in Malaysia and globally. He said eSport is very big!!

My wife, Datin Azimah, is a keen free-to-play game of Candy Crush. She often “ignores” me for hours when she is playing against other players on the internet.

Recently, a 16-year old, Kyle Giersdorf, won US$3.0 million at the Fortnite World Cup tournament in New York. This week, a team of five teenagers shared US$15.6 million at the Dota 2 International tournament in Shanghai.

According to market research company, SuperData (superdataresearch.com) , the top ten free-to-play game revenue for 2018  were as follows:

The other segment of the digital game industry is the premium games market, which was about US$17,800 million in 2018, according to SuperData.

The premium games market by revenue for 2018 was as follows.

 The digital games industry is not only for casual gamers like my wife. There are a large number of professional gamers who participate in regional tournaments in the US, Asia and Europe. They can make huge monies by winning major tournaments like the Fortnite World Cup, its first world cup. The Fortnite World Cup is a 3-day tournament with a prize pool of money of US$30 million, shared among 200 final participants. To enter the Fortnite World Cup, about 40 million of Fortnite’s more than 250 million registered players competed in an online qualifying over 10 weeks for the opportunity to come to New York. The 200 finalists, with an average age of 16 years, came from 34 different countries. Fornite is technically a video game, and one with a simple premise. At the start, players are dropped onto an island and shoot at each other until one person is left standing. Each match lasts about 20 minutes and slowly, the numbers wittle down. A storm approaches, making the map smaller and smaller. If a player jumps the island, he/she dies.

Fortnite is so popular that it becomes more than just a game. Today, it’s a social media platform in its own rights, driving pop culture among teenagers, from clothing to dance crazes. It is at the forefront of eSports, competitive online gaming that is attracting more sponsors to sell bigger sponsorships. It is estimated there are more than 250 million users across the globe.

The main attraction is that the winner in the recent Fortnite World Cup, Kyle Diersdorf, won more money than  Egan Bernal, the cyclist who won the Tour of France, a gruelling 21-day riding competition.

eSport have exploded in recent years, helped by the popularity in Asia, which is more than half of world’s 454 million fans. eSports generated more than US$500 million in revenue last year according to consultancy company, New200. Games companies like Epic Games generate most of their income from virtual outfits to kit out their characters. In addition, the team that have grown around the games are also having real-world merchandize. A popular team, 100 Thieves, has created a premium streetwear brand.

Employment of video games industry

According the US Entertainment Software Association (theesa.com), in 2018, the video games industry in the US generated US$43.4 billion. Playing video games has become a leading form of entertainment and an integral part of the American culture. The industry directly employs about 60,000 and indirectly more than 200,000 people. The video games industry employs significant number of people in Japan, South Korea, China and Europe. Tencent of China is the world’s leading games company with millions of players in China. It is also a major investor in Epic Games, the developer/publisher of Fortnite. The video games industry had always been very big in Japan, home of Nintendo and Capcom, initially developers of arcade games.   .    

Tracking the eSport index

An index has been developed to track the performance of global video gaming and eSport segment. Known as the MVIS Global Video Gaming and eSports index, it includes companies with at least 50 per cent (25% for current components of their revenues from video gaming and/or eSports). These companies may include those that develop video games and related software/hardware, streaming services and are involved in eSport events. The MVIS Global Video Gaming & eSports index covers at least 90 per cent of the investable universe. Currently, the MVIS Global Video Gaming & eSports have 25 components.

My conclusion

The video games and eSport industry is likely to go bigger as children, future gamers, are exposed to video games at early age. In our family gatherings, our young members are usually absorbed with their tablets to play simple video games. I am also quite happy that my wife has yet to purchase virtual outfits using my credit card. 

Lastly, this is the only industry that creates teenager millionaires on a regular basis. Hopefully, not every teenager wants to be professional gamers at the expense of doctors and engineers!                                                                                                                                                                                                                                                                                                                                                                                                       

My Iranian MBA students proudly said that Iran produces the best caviar from sturgeons caught in rivers near the Caspian Sea. These sturgeons are now bred in commercial farms as wild sturgeons are declining in number. With the caviar selling at expensive prices in fancy restaurants, and travelers in first and business classes of airlines such as Singapore Airlines and Emirates are served caviar, many entrepreneurs in several countries are entering the aquaculture of sturgeons to harvest their eggs. An example was a commercial sturgeon farm in Malaysia, using South Korean expertise, which was started several years ago but failed.

Recently, it was reported by Jane Flanagan in The Times on July 6^th, 2019,    that now there are successful sturgeon entrepreneurs in Madagascar.  

A lake in the highlands of Madagascar has become an unlikely source of caviar in the race to meet demand for the delicacy amid a worldwide shortage.

Entrepreneurs in Madagascar have produced a tonne of caviar after a painstaking process that began six years ago using the fertilised eggs of rare sturgeon imported from Russia.

“We took the time to prove that this is serious,” Delphyn Dabezies, the head of Rova Caviar, said, admitting that the enterprise was rather a gamble.

Producers in the Caspian Sea still boast the most prized caviar from Beluga sturgeon but steadily constricting quotas in response to dwindling stocks of fish have led to farms springing up outside Russia. Lower supply and higher demand has only increased caviar’s currency as a symbol of wealth and prestige.

The French entrepreneur, who has lived on the island for years, sold her first harvest within weeks — at £90 per 100g — half the price or less compared with caviar farmed in Europe. Her customers are luxury shops and restaurants in Madagascar and its neighbours Mauritius, the Seychelles and Réunion.

The world’s most expensive caviar, from albino sturgeon caught off the coast of Iran, regularly fetches up to £2,000 for 100g.

Lake Mantasoa, which is perched at a cool altitude of 1,400 metres and east of the capital Antananarivo, was identified as an ideal place to develop a nursery to hatch the imported eggs. Three hundred staff have been trained to manage the exacting process of raising the sturgeon until they weigh 1.5kg, when only the females are kept until their eggs are ready to be harvested.

The quality and taste of the caviar tests the skill of Gaston Sovani’i Thomas, 23, who, knife in hand, has no margin for error as he extracts the precious black eggs from each fish. “At first I was afraid to destroy or contaminate the eggs, but now everything comes automatically,” he said.

We hope the venture would be hugely successful. Visitors would now be able to enjoy spoons of caviar after spending time at Madagascar’s parks to watch lemurs, which are the island’s famous tourist products.

At our small fruit garden at the back of our house in Seremban, Negeri Sembilan, Malaysia, snails are a menace, eating young papaya leaves through the night. These slow-moving snails can be found in the morning before they manage to hide under the stones and small logs or run across my neighbour’s fence. We will crush them with our feet, producing a crushing sound when their protective shells are broken. But some scientists are interested to study these menacing garden snails.    

We noted an interesting article on snails, which was written by Tom Whipple in The Times on June 19, 2019.  

According to him, scientists have long envied snails. When a snail wants to travel up a wall, it secretes a sticky mucus that holds it securely but still allows it to move. When it stops, the mucus hardens and fastens it even to rough surfaces with ten times that force. When it thinks it is time to move again, it releases more mucus and heads on up the wall.

Scientists struggle to do that: the glues they make are either strong and irreversible, such as superglue, or weak and reusable. A rare exception is Velcro, which can be extremely strong and can also be reused, but it requires a strip on each of the objects being joined.

Now, inspired by the remarkable mucus of snails, a team of researchers think they have cracked a glue that is both strong and able to be reversed: a Velcro in gel form. When wet the glue is wobbly like a snail’s slime. When dry it holds tight, then when rehydrated it returns to its mucus-like state.

The glue, described in the journal Proceedings of the National Academy of Sciences, was made from a “hydrogel”, a network of chemical chains that absorbs and swells in water. In experiments its creators showed that it was strong enough to hold up the weight of a human, who dangled off a support held by two square centimetres of the dried adhesive. He did not stay long enough for it to rain: when you add water the strength decreases tenfold.

The key, said Anand Jagota, from Lehigh University in Pennsylvania, US, was to make a gel that became strong only after it had shrunk. “Most of the time, in the process of drying, something shrinks,” he said. “When a gel shrinks, if it also stiffens it develops stresses that break the bonds.” This means that even if it stuck down before, the shrunken version releases the bond.

Professor Jagota, who worked with Shu Yang from the University of Pennsylvania, US, said that their gel did not do this. “The secret is to shrink when you’re soft then stiffen when you’re not shrinking. That’s the trick, otherwise any old gel would work. That’s what we think the snail does.”

Then when you add water, “it has a memory, the material remembers its original state. Everything becomes soft and it comes off easily. To a great extent it goes back to its original shape.”

He said they thought that the glue could be used in a range of applications. “You can imagine many cases where you want a bond you can release. Bandages, for instance. You could well want something strong that you could unglue easily by pouring water on it.”

Our Comments

Given the scientific secrets of the common garden snails, now, we feel we should not crush them but release them to a place that they can enjoy eating other leaves rather than our young papaya leaves.

New energy technologies require mineral resources such as copper, cobalt and lithium. A shift in the global energy system from fossil fuels- driven by cost reductions that are making new technologies  are increasingly competitive and by government policies to fight global warming and local pollution-is expected to result in steep increases in demand for some metals and other materials.

Demand for copper, for example, could rise by 275 to 350 per cent by 2050, according to research by Yale University in the US. The World Bank estimated in 2017 that action to limit the rise in global temperature to 2^OC from pre-industrial levels could a seven-fold increase in demand for cobalt and an eleven-fold increase in demand for lithium by 2050.

 Chinese companies have been investing to secure supplies of these minerals, buying up mines in countries from Australia to South America.

Simon Moores of Benchmark Mineral Intelligence, a research firm, said the importance of technologies such as electric vehicles and battery storage meant “whoever controls these supply chains controls industrial power in the 21^st century”.

Concern about mineral supplies has been growing in the US administration and Congress and has been heightened by China’s warnings of plans to curb export of rare earths. China accounts for mote than 80 per cent of world rare earths production.

The US commerce department has published a report in 2018 looking at 35 critical minerals, which found that imports accounted for more than 50 per cent of US domestic demand for 29 of them, and 100 per cent for 14 of them.

The list of the 35 critical minerals include the following:

1. Aluminum (bauxite), used in almost all sectors of the economy.
2. Antimony, used in batteries and flame retardants.
3. Arsenic, used in lumber preservatives, pesticides and semiconductors.
4. Barite, used in cement and petroleum industries.
5. Beryllium, used as alloying agent in aerospace and defense industries.
6. Bismuth, used in medical and atomic research.
7. Cesium, used in R&D.
8. Chromium, used primarily in stainless steel and other alloys.
9. Cobalt, used in rechargeable batteries and superalloys.
10. Fluorspar, used in the manufacture of aluminum, gasoline and uranium fuel.
11. Gallium, used in integrated circuits and optical devices like LEDs.
12. Germanium, used fir fiber optics and night vision applications.
13. Graphite (natural), used for lubricants, batteries and fuel cells.
14. Hafnium, used for nuclear control rods, alloys, and high-temperature ceramics.
15. Helium, used fir MRIs, lifting agent, and research.
16. Indium, used mostly in LCD screens.
17. Lithium, used primarily for batteries.
18. Magnesium, used in furnace linings for manufacturing steel and ceramics.
19. Manganese, used in steelmaking.
20. Niobium, used mainly in steel alloys.
21. Platinum group metals, used for catalytic agents.
22. Potash, mainly used as fertilizers.
23. Rare earth elements group, primarily used in batteries and electronics.
24. Rhenium, used for lead-free gasoline and superalloys.
25. Rubidium, used for R&D in electronics.
26. Scandium, used for alloys and fuel cells.
27. Strontium, used for pyrotechnics and ceramic magnets.
28. Tantalum, used in electronic components, mostly capacitors.
29. Tellurium, used in steelmaking and solar cells.
30. Tin, used as protective coatings and alloys for steel.
31. Titanium, used as a white pigment or metal alloys.
32. Tungsten, used to make wear-resistant metals.
33. Uranium, mostly used for nuclear fuel.
34. Vanadium, mostly used for titanium alloys.
35. Zirconium, used in high-temperature ceramic industries.

Source: www.usgs.gov.

Reference for article: Ed Crook Financial Times, June 12th, 2019.