Kill dad, chop up body

[Boaz Shoshan is ill today, so today’s note is brought to you by Sam Volkering, editor of Revolutionary Tech Investor.]

The first time around it took me five hours before I could stop. The second time around only two. I’ll do it again, but I can’t really say how long it’ll take this time. I’m down the hole, and there’s no turning back.

There were some key decisions in finding myself down the hole.

First was to yell at Dad. Then not long after, kill Dad. And not long after that I decided to chop up the body.

That did result in the outcome I was hoping for. But then I thought, what if I buried the body instead. And maybe I should jump off the balcony…

So many decisions, so many possible outcomes.

Frosties, Thompson Twins, decline the work, yell at Dad, follow Colin, take the acid, tell Colin to jump, throw out the pills, kill Dad, chop up the body… go to jail.

Or, sugar puffs, Now compilation, decline the work, don’t follow Colin, still kill Dad, bury the body, kill Colin… go to jail.

The ways this could go are immense, maybe I’ll never really explore all the ways this could go. But I’ll give it a shot at least.

137 million ready-to-go gamers

I assure you I am not writing this letter not from jail. That’s because I haven’t actually killed anyone nor disposed of any bodies. What I have been doing on and off for the last week, is watching, playing, the latest Netflix event, Bandersnatch.

Now if you haven’t yet taken the leap “down the hole” I highly recommend it. Bandersnatch is a movie that was released to Netflix globally about a week ago. Except this isn’t your typical movie. You don’t just hit play and sit back for the next couple of hours.

With Bandersnatch you have to make choices throughout the movie. Using your remote you get to certain parts where you have to make a decision. These decisions take you down an alternative path branching out to various storylines, different endings and wildly different events.

It’s the first ever “choose your own adventure” movie of its kind to hit the mainstream. However the truth is this really isn’t a movie. It’s more a game than a movie. You “play” Bandersnatch rather than just watch it.

It should be noted there’s been a wave of interactive games in this choose-your-own-adventure style format before. These were PC games back in the 80s and 90s that resembled movies. Some of the titles that helped pioneer this genre include Phantasmagoria, Under a Killing Moon and Voyeur.

But these were at their core games, not movies. Bandersnatch is clearly a movie but with the elements of gameplay. And I don’t know of any other movie in the modern era with this kind of sophistication.

But there’s more to this movie/game experience that you might think.

This is actually the next great leap forward in the “gamification” of entertainment. We expect that Bandersnatch will be the first of many “choose your own adventure” style experiences. These new events put you in the movie more than you’d ever be just sitting and watching.

When watching with our wife she remarked, “This is great for people like me who sometimes zone out during a movie.” And she’s right. It’s viewer engagement on a whole new level.

In fact, we believe this is the early indication that Netflix is turning into an “immersive entertainment” company, rather than just a “streaming service”.

To reinforce this view, Netflix has also just poached Spencer Neumann to fill its CFO role. Neumann is the (now former) CFO of Activision Blizzard, the US$35 billion gaming giant.

We don’t believe this is a coincidence that Netflix has poached one of the gaming industry’s biggest executives. We think it’s going to make an intentional effort to develop more game-style experiences.

This may come in the way of “choose you own adventure” movie/games like Bandersnatch. It may also come in the way of full-blown shift into online gaming taking the fight to Sony and Microsoft who’ve collectively dominated gaming for the last 20 years.

It’s wouldn’t be a surprising move from Netflix. You only need to look at the recent gaming mega-successes such as Fortnite to realise there’s a lot of money to be made in gaming.

Since its release in mid-2017, Fortnite has gone on to generate somewhere in the vicinity of US$2 billion for its maker Epic Games. The interesting aspect of Fortnite is it’s free to play. The game itself costs nothing, you just download it on to whichever platform (PC, Xbox, PS4, Nintendo Switch) you like.

But if you want to change your character appearance or “level up” your weapons and parts of the game, you have to do so with the in-game currency V-Bucks. To buy V-Bucks you have to use the platform marketplace to do so.

If you’ve got an Xbox, you buy V-Bucks through the Xbox Marketplace. Or on the PS4 you do it through the PlayStation Store. And as you’d expect for each purchase, Microsoft or Sony takes its cut.

This kind of game becomes hugely profitable for the likes of Sony and Microsoft. And is likely going to be a model that we see more of in the future.

Here’s the thing. Sony’s PlayStation Network has around 80 million active subscribers now. Xbox Live has around 57 million active subscribers.

Interestingly, Netflix alone has as many as Microsoft and Sony combined with 137 million active subscribers. If Netflix were able to deliver a hardware controller for its platform and deliver online games, it’d instantly be the world’s biggest gaming company.

Is it too much of a stretch to see Netflix release a game like Fortnite through its platform? Not at all. We think this makes near perfect sense for Netflix to pursue. In fact, we’d be shocked if over the next few years it didn’t develop into an online gaming company.

We also wouldn’t be surprised to see it make a strategic acquisition in this space – perhaps a company like Activision Blizzard. The way we consume and deliver entertainment is continuing to evolve. Movies, games, digital experiences, these are all forms of entertainment.

Netflix isn’t just a streaming company, soon it’ll be a gaming company too. Which leads us to the question, does that make Netflix an interesting target as an investment? Well consider the stock is trading at US$267 with a US$116 billion market cap. This is a massive discount to its 52-week high of US$423 we saw in mid-2018.

It is, however, also trading at an eye-watering 96 times earnings. Eeek! That’s Amazon level P/E ratios. Will the stock fall further with the volatile US markets? Quite possibly. But if you’re taking a long view of what Netflix could become, then it does look like a compelling stock.

It’s early doors on its gaming aspirations though. But with the success so far of Bandersnatch and the hiring of Neumann, we think it’s lining up for a move that could transform the company long term.

If it does get into gaming, then our view is this could be one of the stocks to own for the next few years. But if it doesn’t take that approach into a lucrative market, then the stock could struggle to get near its highs of 2018.


Sam Volkering,
Investment Director, Revolutionary Tech Investor

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Category: Investing in Technology

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