This article first appeared on The Gaming Recap, a weekly rundown written by The Gaming Shark. Please refer to the disclaimer for further information.
The Gaming Recap is the world of gaming, through the eyes of an investment banker. Each week we take a look under the hood of a key theme we’re seeing in the gaming industry, and sprinkle in some news from around the street.
Some news from a few of our friends in the world of gaming:
- Enthusiast (TSXV:EGLX) – Last week, comScore verified that Gaming Street publisher Enthusiast is the largest gaming network in the US with 64.3M monthly uniques. To put that in perspective, Twitch, which is the main focus in game broadcasting, has 20.8M unique visitors. Enthusiast is 3x the size of Twitch from a monthly audience perspective. In an industry that is all about eyeballs, and for an organization that is ~4 years old, it’s exciting to see what they’ve done to date. Their esports organization operates across 7 games, placed 2nd overall in the Overwatch League, and encompasses +60M esports followers. You can see a detailed look at their portfolio right here.
- The Vancouver Titans teed off against the NRG-owned San Francisco shock last week in Philly, and here’s the result. A big congratulations to Andy Miller and the entire team at NRG for taking the crown.
- Canaccord hit the street with formal research coverage last week, which you can read right here.
- A private on the radar: Influencers Interactive Inc. (“III”)
- Bodog is a big dog when it comes to gambling and anecdotally generates +US$1B to their bottom line annually. III has brought together a number of key guys from the Bodog team to build out Bodog 2.0 on the back of two acquisitions and leveraging the influencer firepower of guys like Floyd Mayweather. The US in 2018 opened up sports betting across states, and effectively, through the legislation, down to the states (think of it like US cannabis legislation). It’s a material catalyst for the gambling space and a driving reason why key guys in the space are positioning themselves with early equity exposure.
- The Stars Group was taken out this week by Flutter Entertainment for US$6B, making it the largest online gambling group by 2018 sales.
- Millennial Esports (TSXV:GAME) – Announced that they will be creating the world’s first dedicated esports racing arena in Miami
- I saw the site from the early days in the Wynwood district in Miami. They have secured $2.8M in construction financing to complete the buildout. It’s a nice tie in with their acquisition of racing sim manufacturer Allinsports.
A quick bit of other news before we geek out
- In real traditional sports advertising, average minute audience is sort of a ‘thing‘. Average minute audience is the total minutes watched of an event divided by the length of the live broadcast. For brands and advertisers, it is an absolute key number to determine advertising and is a big reason why the NFL is such a juggernaut when it comes to sponsorship. At the end of the day, it is simply a tool to measure engagement, which is critical when you’re selling advertisement slots. The graphic below lays it out for different sports and measures the change from 2018.
- Canaccord put out their esports quarterly update, which you can view right here
- They take a look at the esports space, trends, game trends, and break it all down in good detail. Definitely worth a read if you haven’t already.
- Turner Sports announced this week that TBS will be airing an “ELEAGUE | Road to the Rocket League World Championship” documentary series
- The slot for the initial broadcast will be right after a post-season baseball game tonight and underscores the exposure of esports to traditional sports fans.
- A glance at the viewership numbers for Fortnite, courtesy of our friends at Stream Hatchet (subsidiary of TSXV:GAME)
- Since the World Cup Finals, Fortnite has generated 17.5M hours watched. However, as expected, viewership has declined since the big day. The key takeaways are that the key broadcaster is Twitch and prize pools are not correlating with viewership for Fortnite.
- A closer look at China’s video game livestreaming duopoly
- Video game streaming is emerging as the strongest part of China’s vast livestreaming sector. Naturally, a duopoly has emerged, with both having central control from Tencent. At the end of the day, it doesn’t really matter from a macro perspective in terms of who wins, because there really is only one true winner in China, and that is Tencent. It’s a good short read on the state of broadcasting in China.
- Just some cool content that may or may not have anything to do with gaming:
- The single most important internal email in the history of Amazon other than ‘???’ (if you work at Amazon you know what I mean): Link
Weekly Feature: Killer Queen
She’s a killer queen
Gunpower, gelatin
Dynamite with a laser beam
Guaranteed to blow your mind
– Killer Queen, Queen
Some of you may remember playing Ms. Pac-Man. For me, it remains one of the all-time great arcade games. As far as video games go, Ms. Pac-Man is one of the most successful and enduring video games of all time, and it still holds the all-time sales record for a standalone arcade video game in the US (Pac-Man holds number 2). Ms. Pac-Man was, for all intents and purposes, ‘the first lady of video games’. After debuting in 1982 in its original form as an arcade game, versions have since appeared on at least 28 different game and computer platforms. My first time playing was an arcade machine at my local hockey arena.
At the end of September, the news broke that the rights to the iconic Ms. Pac-Man are caught up in a messy legal battle between Bandai Namco (owns the trademark and copyright) and AtGames (which owns royalty rights on the game and is gaming’s equivalent of a patent shark).
Our story this week isn’t about the legal battle going on right now. As they say, that is what it is. The story this week is far more interesting: the little-known story about how Ms. Pac-Man came to be. Understanding how Ms. Pac-Man came to be is to understand the very essence of games – how to make them, in a word, addictive.
Let’s start with the beginning…
Unlike what most people think, it wasn’t Atari you have to thank for Ms. Pac-Man, it was a small group of MIT dropouts from New England. At the time of Ms. Pac-Man‘s release in early 1982, arcade mania was in full swing in the U.S. Concepts pioneered in coin-op games filtered down to console and home computer level, and advertisements for less-advanced home titles bragged of “arcade-like realism,” as if it were the peak aspiration of all games.
Kevin Curran and Doug Macrae were cofounders of General Computer Corporation, which, along with a solid group of engineers, would go on to develop Ms. Pac-Man. When they got to MIT, they had the idea of putting pinball games in their dorm (and others), which would become a pretty successful dorm business for the guys. They would end up buying a bunch of arcade games that they would own and operate, but they started losing revenue because people began to master the games. This is important, because it was the key to what would become Ms. Pac-Man.
This was when the guys would get into the business of enhancement kits. Back in the late ’70s, there were kits that would let you modify an arcade game. The MIT boys had the idea of modifying (‘mod‘) popular games from Atari – like Pac-Man – using enhancement kits and selling the mod. As guys at university, they would make about US$250k in 1981 selling mods for different games (not Pac-Man yet). This still goes on to this day (the wildly popular game DOTA was a mod for Warcraft 3).
…Enter Pac-Man
“Once you played it for a while, it was pretty much the same game.” – Doug Macrae on why people got bored of Pac-Man
It’s 1981, and after being a big hit in Asia, Namco‘s Pac-Man was released to the US arcade market by Bally Midway. Except there’s one problem: our MIT boys didn’t think it was sticky enough. They would go on to strip down Pac-Man to figure out why people got bored, why people wouldn’t be able to play for a long time. At the end of the day, it was the lack of variation and the fact that people could master the game easily (recall: the best casual games of today are easy to learn but difficult to master).
They started reworking Pac-Man‘s characters and visuals into something similar but not identical to avoid trademark issues. The game mechanics were redesigned from the maze to the characters, to the fruits around the maze, to even the monster AI. The original Pac-Man was ‘deterministic’ by design, meaning it was the same each time you played it. Their game, by comparison, added randomness, so it was always different no matter how many times you played it.
The idea for a ‘Ms. Pac-Man‘ came from one of the engineers, Mike Horowitz. Mike was driving to a friend’s wedding. It was apparently a long drive. He’s in the car with his wife and just thinking. That’s when he came up with the idea of a boy meets girl version of Ms. Pac-Man, where they chase each other and then find true love.
The Battle of Midway
I’m being dramatic. It was less of a battle and more of just a ‘duh’ for the owners of the Pac-Man US publishing rights. The real battle came a little later.
Before releasing their kits – which would allow their version of Pac-Man to be released to the world – the team would cold-call the President of Midway, which was the publisher of Pac-Man (Namco) for the USA. They wanted Midway’s blessing before releasing their game. That call would prompt an in-person meeting where the President of Midway would play their mod for Pac-Man. They liked it so much that, instead of just blessing the kit, they instead pushed the team to use it to put together a sequel to Pac-Man.
The team would sign a deal with Midway in October 1981 to begin developing a full-fledged sequel to Pac-Man. At the time, the name ‘Ms. Pac-Man‘ didn’t yet exist; the team had been working on a modified Pac-Man called Crazy Otto. It would take two weeks and a bunch of iterations before they would settle on Ms. Pac-Man.

The design evolution of the character that began as ‘Crazy Otto’ being morphed into ‘Super Pac-Man;’ it was nearly ‘Miss Pac-Man’ or ‘Pac-Woman’ before becoming Ms. Pac-Man
The rest, as they say, is history. Ms. Pac-Man would go on to be the number one selling arcade video game of all-time, with her digital lover Pac-Man coming in spot numero deux. She would also spawn comic books, t-shirts, and all sorts of other pieces of licensed content. The team would even make a follow-up arcade title called Jr. Pac-Man.
The success was both a blessing and a curse for the Ms. Pac-Man team. When the sequel deal was signed, the Midway guys were thinking one step ahead. They weren’t just thinking about the game, they were thinking about the licensing rights, and they claimed to own them. It brought forth a difficult issue: who actually owned the rights to Ms. Pac-Man? This was important, because while it didn’t impact the game, it impacted who got paid on every single piece of licensed content (like a t-shirt). At this point, only Midway was getting paid. This would spawn a big legal battle colloquially known as ‘the maternity suit’, which would end up in a three-way settlement between Namco, Midway, and our MIT boys.
How does it relate to today?
What was true then is true today. The same techniques that were employed years ago by the MIT boys to make the game stickier and more addictive are true today. Randomness, smarter AI, different maps… All of these are just words to say that we’re trying to make the game experience unique every time you play it and make it an easy game to learn but a hard game to master.
The real innovation for games hasn’t so much been on stickiness. The real innovation is all around accessibility and community. That’s the future of gaming, and what will continue to drive the gaming industry to new heights.
What’s out there
Enthusiast Gaming (TSXV:EGLX) – Verified as the largest gaming network in the US by Comscore
Gaming Street collaborators helped bring our publisher company public last year, and now the merger with Aquilini GameCo has finally closed to become a premium vertically integrated esports and gaming company.
Millennial Esports (TSXV:GAME) – Consolidating their share structure and changing their name to Torque Esports Corp.
Millennial Esports was fully recapitalized with C$15M over the summer and has had a complete restructure from the board and management side. It’s effectively a brand new company, and it is good to distance itself from the OG legacy of Millennial. Good to see.
Versus Systems (CSE:VS) – Signed a deal with HP
Versus makes the technology to let people play games for rewards.
In December they brought on Keyvan Peymani as their Executive Chairman (the former head of startup marketing for Amazon Web Services and a former VP ant Warner Bros and Disney) as they began to scale their platform to new games. They allow players to win real-life rewards while playing in-game and can be integrated into any Unity-based game.
Axion Ventures (TSXV:AXV) – Presented at the Gateway Conference
The only Canadian publicly traded game studio with a JV with the largest gaming studio in the world (Tencent). Their marquee game Rising Fire is distributed under JV with Tencent. They also have a AAA quality mobile game made in Thailand under JV with the True Corporation.
BRAGG Gaming (TSXV:AXV) – goes live with LeoVegas
GiveMeSport now reaches more than 95M monthly unique users (up from 29M in January 2019). Bragg’s core asset is ORYX Gaming, a B2B gaming technology platform and casino content aggregator.