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Gaming chat startup Discord raises $150M, surpassing $2B valuation – TechCrunch

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Chatty gamers are apparently worth billions.

Discord, the gaming chat startup with more than 200 million active users, announced Friday that it had secured $150 million in funding at a $2.05 billion valuation. The round was led by Greenoaks Capital with participation from Firstmark, Tencent, IVP, Index Ventures and Technology Opportunity Partners.

The company announced this past April that they had raised $50 million in funding at a $1.65 billion valuation. With this latest bout of cash, Discord has now pulled in more than $280 million in funding.

The influx of new money comes as the chat startup goes full speed ahead on one of its most ambitious offshoots to date, taking on games giant Valve with a gaming store meant to rival the ubiquitous Steam store. The company launched a global beta of the Discord Store in October; they recently announced that starting in 2019, they will be establishing a revenue split of 90/10 for developers that are self-publishing titles on the store, a margin much friendlier to indie devs than the 70/30 split on Steam.

The company’s bread-and-butter remains its chat service, which brings voice and text communications to gamers looking to talk with teammates and fellow enthusiasts during and outside of gameplay. Discord isn’t the only service that offers this capability, but it is definitely one of the most popular with hundreds of millions of users coming to the app every month.

We chatted with CEO Jason Citron at our most recent Disrupt SF event, where he talked about the opportunities available in the online games sales market and what challenges the company had up ahead.

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Maggie Lane is a writer and producer of virtual reality experiences and covers the industry …

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Stranger Things hints at return of Eleven’s “Papa” in new teaser

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We might see the return of Matthew Modine’s Dr. Martin Brenner in Stranger Things S4.

Our favorite psychokinetic, Eleven (Millie Bobby Brown), might be confronting her childhood tormenter and “Papa,” Dr. Martin Brenner (Matthew Modine), in the fourth season of Stranger Things, based on a brief one-minute teaser that was just released. We knew it was coming, since an initial teaser appeared yesterday, featuring a simple piano score and a wall of TV screens, cutting between static and brief images. The YouTube description simply read, “Due to technical difficulties, Hawkins National Laboratory will be closed until further notice. We will be back in service tomorrow at 9:00AM ET.”

(Some spoilers for prior seasons below.)

Series creators Matt and Ross Duffer (collectively, the Duffer Brothers) already hinted that S4 would open up the storytelling to include plot lines outside of Hawkins, with the Russians and their captive Demogorgon playing a major role. A mid-credits scene following the S3 finale showed two Russian guards approaching a prison door. “Not the American,” one guard says. Instead, the guards drag off a Russian prisoner and lock him in a room with a captive Demogorgon, which proceeds to devour the screaming prisoner.

There was much online speculation that “The American” was a reference to fan-favorite Jim Hopper (David Harbour), who somehow survived the S3 explosion back in Hawkins. We never saw a corpse, after all. A teaser released last January confirmed it, set in a military encampment in the winter wasteland of Kamchatka, Russia. The camera showed a long line of chained prisoners working on railroad tracks and then focused on one prisoner, who pushed back his hood to reveal Hopper with a shaven head.

That teaser came with a Duffer brothers statement conveying their excitement to finally be starting S4 production—an excitement that proved short-lived, as the global pandemic shut everything down two months later. (The series resumed filming last September.) But the Duffers did offer some additional hints, adding that Hopper would “face dangers both human… and other. Meanwhile, back in the States, a new horror is beginning to surface, something long buried, something that connects everything.”

The entire regular cast is returning along with Harbour, Brown, and (one presumes) Modine: Winona Ryder, Finn Wolfhard, Natalia Dyer, Noah Schnapp, Charlie Heaton, Joe Keery, Caleb McLaughlin, and Sadie Sink. Maya Thurman-Hawke returns as Robin, Brett Gelman will be back as Murray Bauman, Cara Buono returns as the Wheeler matriarch, and we’ll be seeing more of Priah Ferguson, who plays Lucas’ sassy younger sister, Erica (“You can’t spell ‘America’ without Erica”). There will also be a number of new faces. Robert Englund (of Nightmare on Elm Street fame)Jamie Campbell Bower, Eduardo Franco, and Joseph Quinn are all joining the cast, along with Sherman Augustus, Mason Dye, Nikola Djuricko, and Tom Wlaschiha.

The new one-minute teaser brings us back into the secret laboratory for “gifted” children (The Rainbow Room), with young kids participating in various cognitive tasks. A shadowy figure, shown only from the back, enters the room and is greeted as “Papa.” This may or may not be a flashback. But next, we hear a voiceover say, “Today, I have something very special planned for you,” followed by, “Are you listening, Eleven?”

The final shot is a close-up of Eleven’s eyes popping wide open. Clearly, Brenner is trying to reach his star pupil through her psychokinetic abilities.

As marketing attempts go, the teaser is fairly disappointing, with additional details thin on the ground. But I’m pleased we may be exploring the storyline of the other gifted children exploited by Brenner over the years. Hopefully, we’ll see the return of S2’s Kali (Linnea Berthelsen), aka “Eight.” That entire S2 standalone episode (“The Lost Sister”)—where Eleven briefly runs away from Hawkins and ends up in Chicago with a merry band of outcasts who use their abilities to commit crimes and take revenge on those who imprisoned them—had to be leading to something other than teaching Eleven a bit more about controlling her formidable gift. Kali also told Eleven that Modine’s Brenner was still alive.

There’s no specific date yet for the return of Stranger Things, but it’s most likely to be sometime in 2022.

Listing image by YouTube/Netflix

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Nintendo warns global chip shortage to hit Switch production

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Japan’s Nintendo has said that production of its popular Switch gaming console could be hit by global chip shortages, following a similar warning from rival Sony last week.

At its full-year results on Thursday, Nintendo forecast a 12 percent drop in sales of its flagship Switch in the financial year ending in March 2022, citing potential issues with procuring important components.

Nintendo’s comments contrast with its performance over the past 12 months, when the Kyoto-based company’s fortunes were boosted by coronavirus pandemic restrictions that forced entire nations into lockdown and increased demand for home-based entertainment.

The company said it expects to sell 25.5 million Switch consoles for the fiscal year ending next March. That follows a blockbuster year in which Nintendo sold 28.8 million units and benefited from roaring demand for popular first-party titles such as Animal Crossing: New Horizons and The Legend of Zelda: Breath of the Wild. Nintendo also expects sales of Switch software to fall 18 percent to 190 million units.

Worries over the potential hit from chip shortages are broadening. The initial focus of concern was the automotive industry, but analysts see a wider range of manufacturers being affected.

Production “might be affected by obstacles to the procurement of parts, including the increase in global demand for semiconductor components,” Nintendo said in its financial statement.

Hiroki Totoki, Sony’s chief financial officer, said last week that the group would not be able to dramatically increase the production of its new PlayStation 5 console, predicting that the semiconductor shortage would continue throughout the financial year that started in April.

Nintendo, which is famous for its overly conservative guidance, projected its net profit would fall 29 percent to ¥340 billion ($3.1 billion) during the 2021-2022 fiscal year. That came in below analysts’ forecasts of ¥412 billion ($3.7 billion), according to S&P Global Market Intelligence. Nintendo expects revenue to fall 9 percent to ¥1.6tn ($14.6 billion).

Nintendo also said it plans to appoint Chris Meledandri, the chief executive of animation studio Illumination and producer of the Despicable Me franchise, as a non-executive director pending shareholder approval in June.

The choice of Meledandri fits with Nintendo’s recent shift in strategy as its chief executive Shuntaro Furukawa has sought ways to more effectively monetize Nintendo’s intellectual property outside its games console business.

Those efforts include the recent opening of the Super Nintendo World attraction at the Universal Studios Japan theme park in Osaka. In presentations to investors, Nintendo has also described plans for an animated Mario film.

For the year that ended in March, profits from its IP and mobile games rose 11.3 percent, helping Nintendo’s annual net profit surge 86 percent to an all-time high of ¥480 billion ($4.39 billion).

© 2021 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any way.

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At trial, Epic and Apple squeeze Microsoft over Xbox, xCloud restrictions

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The monkey wrench of the legal system.

Microsoft Vice President of Xbox Business Development Lori Wright took center stage at the Epic versus Apple trial today. The executive’s testimony served up some interesting comparisons and contrasts with Epic’s complaints and addressed questions about the Xbox consoles’ closed, iOS-style app market and the difficulties Microsoft faced getting xCloud streaming on iOS devices.

Open vs. closed

In defending Microsoft’s iOS-style 30 percent commission on apps sold on the Xbox store, Wright pointed out that the company has never made a profit on the sale of an Xbox console. That’s in contrast to the profit-generating iPhone and iPad hardware and to a company like Nintendo, which doesn’t take a loss on Switch hardware sales.

“The business model is set out to be an end-to-end gaming experience,” Wright said. “Hardware is critical to delivering that experience. We need gamers to be able to have a console. We make money back in the long run on game sales and gaming subscriptions.”

“Part of that [30 percent] commission goes to make it possible for us to build a console,” Wright continued later. “[It’s] required for us to even build the console.”

Wright contrasted the 30 percent Xbox commission with the situation on the Windows-based Microsoft Store platform, which recently lowered its commission for games to 12 percent. Wright said this move was because “there are other stores that compete on Windows” and because Windows users can “download games directly from publishers themselves. So for our Windows Store, where there are more competitors, we can’t demand the same commission.”

Microsoft's internal documents shows closed platforms rake in a larger share of profits than open platforms.
Enlarge / Microsoft’s internal documents shows closed platforms rake in a larger share of profits than open platforms.

A 2019 Game Industry Profit study produced by Microsoft (and presented in redacted form at the trial) suggests that PC platform-holders capture only 5 percent of all PC gaming profits, compared to 39 to 46 percent for closed platforms like console and some mobile platforms. That’s because so much of PC-based game spending flows “directly from consumers to publishers,” Wright said, making “open [platforms] much more profitable for developers and publishers.”

Xbox vs. Windows

Of course, there is a lack of competition in Xbox app distribution because Microsoft designed the platform that way, similarly to how Apple designed the iOS App Store. Under cross-examination, Apple lawyers pressed Wright on whether she thinks it is unfair or anticompetitive for Microsoft to enforce restrictions on digital downloads, in-app purchases, or competing stores and streaming gaming services on Xbox. Apple counsel also got Wright to admit that she’s not aware of any publishers, including Epic, that have complained about Microsoft’s strict controls over the Xbox ecosystem.

Apple’s lawyers also tried to point out hypocrisy in the way Microsoft’s restrictions on Xbox app distribution break Microsoft’s own 10 principles for the Microsoft Store on Windows, as published last October.

The Xbox, Apple’s lawyers highlighted through questioning, breaks the first three of these Windows-based principles:

  1. Developers will have the freedom to choose whether to distribute their apps for Windows through our app store. We will not block competing app stores on Windows.
  2. We will not block an app from Windows-based on a developer’s business model or how it delivers content and services, including whether content is installed on a device or streamed from the cloud.
  3. We will not block an app from Windows-based on a developer’s choice of which payment system to use for processing purchases made in its app.

While Wright said that she’s not an antitrust expert (and thus can’t speak to the legal fairness of these differences), she defended the separate models because of one basic difference between the Xbox and PC: “How they’re used and how many people they reach”

General purpose vs. special purpose

Epic’s counsel took pains early in today’s proceedings to confirm with Wright all the things users can do on an iPhone but not an Xbox. If you’re looking for driving directions, taking a photo, ordering an Uber, or playing a game while in line at the DMV, an Xbox is not helpful, Wright agreed. An Xbox also needs to be actively plugged into an outlet and connected to an external screen to work, and the console doesn’t have the cellular or touchscreen capabilities of the iPhone.

“Part of that [30 percent] commission goes to make it possible for us to build a console… [It’s] required for us to even build the console.”

Microsoft Vice President of Xbox Business Development Lori Wright

For the Xbox and the PC, there are similarly “different reasons people use these devices,” Wright said. The Xbox is an example of a special-purpose device, she said, “used for a very targeted thing.” A Windows PC, on the other hand, is a general-purpose device that “can do a wide variety of things that change every day, [where] ideas are being created, [and it has] has the ability to do a bunch more things” than just run games.

Wright said the iOS ecosystem should rightly be grouped with the general-purpose devices since there is “a wide, wide variety of different ideas and applications” on iOS.

In cross-examination, Apple’s lawyers pointed out that Xbox consoles also do more than play games, through apps and services like Spotify, Netflix, Hulu, and YouTube. But on redirect, Wright said that Microsoft doesn’t believe people buy an Xbox for those non-gaming apps but instead are getting a game console “to play games.” (Someone should point this out to the TV-on-Xbox-focused Microsoft of eight years ago).

App-based streaming vs. browser-based streaming

Epic also questioned Wright on its struggles trying to get a version of its xCloud streaming service listed on the iOS App Store. Wright said Microsoft tried to work with Apple to comply with the App Store’s requirements for the service, including working out complicated financial agreements and technical fixes necessary to give Apple a cut of xCloud-based in-app purchases.

But Microsoft was eventually stymied, Wright said, by Apple’s onerous requirement that every individual streaming game be submitted and listed individually on the App Store.

Wright said that Microsoft “wanted to use the Netflix model” for having a single subscription-based streaming game app on iOS, and it was frustrated by Apple’s determination not to amend its rules to allow such a model. “[Apple] allows Netflix to do what Netflix does, but it does not allow us to do what Netflix does,” she said. “And it required making a separate application for every gaming title that has to be individually downloaded and put onto your phone.”

If Netflix was put under similar restrictions to xCloud, Wright said, “Netflix wouldn’t exist today [on iOS]. They would effectively not have a catalog of services that could be delivered on mobile. Every TV show, every movie would be a different application.”

Streaming xCloud games like this on iOS devices are only possible through mobile web browsers, not a native iOS app.
Enlarge / Streaming xCloud games like this on iOS devices are only possible through mobile web browsers, not a native iOS app.

Microsoft eventually stopped trying to fit xCloud into the iOS App Store and rolled out a beta version of the service through iOS’ WebKit-based web browsers. Wright described this as a “Much more challenging experience” for Microsoft “both to build and maintain.” Streaming xCloud on mobile browsers required developers to “use very complicated matrices” to account for differences between different environments that would not be necessary in a native iOS app.

Browsers on iOS, she said, are “well understood to be lacking in some of the features behind other browsers because [on iOS] you can only use WebKit you don’t get the browser competition [of other platforms]. Once you’re there and you do get it to work there are some very core elements of gaming that WebKit hasn’t historically supported, it’s just catching up.”

“There are some very core elements of gaming that WebKit hasn’t historically supported, it’s just catching up.”

Microsoft Vice President of Xbox Business Development Lori Wright

More than that, though, pushing xCloud through mobile web browsers is less than ideal, Wright said, because “the challenge is people don’t play games over browser on the iPhone. Look at the data, all the gameplay is through the App Store. People are not playing games on the browser on iPhone.”

In response, Apple’s counsel pointed to press reviews that say xCloud is “already a super solid experience on PC and iOS,” that the “overall performance was smooth and stable” on Safari, and that the iOS browser-based beta “is a remarkably polished one.” Wright agreed with all of these reviews, but noted that there was “a lot of work we had to go through to deliver that polish. We had to start from scratch and re-deliver” what was already working fine on a native app.

Apple’s lawyers also pointed out that Apple actively helped Microsoft in its efforts to bring xCloud to iOS web browsers (Wright characterized this help as just working out issues and bugs Microsoft encountered porting the service for WebKit). Apple provided this support even though it makes no money from xCloud streaming on mobile browsers, as Wright acknowledged under questioning.

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