No fairy-tale end for Disney’s metaverse division
Once upon a time in the not-so-magical kingdom of Disney, a small and plucky division was born, with dreams of exploring the great unknown – the mystical metaverse.
Alas, the kingdom’s rulers, faced with the need for some financial belt-tightening, have extinguished the tiny flame of this next-gen storytelling and consumer-experience team.
Indeed, the company’s dedicated metaverse division has been eliminated as reported in a Wall Street Journal exclusive last week.
At the helm of this valiant division stood Mike White, a knight of the realm with a background in Disney consumer products. His quest? To dive deep into Disney’s treasure trove of intellectual property and forge immersive tales in new technological realms. But, alas, the dream has crumbled.
Like the sad, squashed dreams of so many theme park churros, the entire 50-strong team now finds itself out of work. Yet, Sir Mike endures within the kingdom, with whispers on the wind about his mysterious new role.
In the before times, when Bob Chapek ruled as Disney’s chief executive, he welcomed Mike White to the land in February 2022 with high hopes. Chapek envisioned the metaverse as “the next great storytelling frontier” and tasked his new recruit to “create an entirely new paradigm for how audiences experience and engage with our stories.”
Yet, as the throne passed to Robert Iger in November, the sands of time wore on, and Disney’s metaverse strategy remained as elusive as the pot of gold at the end of a rainbow.
Sketches of grand plans hinted at wondrous applications in the realm of fantasy sports, enchanted theme park attractions, and other consumer delights.
But, as the sun sets on the once-promising metaverse division, we can only lament what could have been – a world where the dreams of Disney fans young and old could soar like a majestic, technologically advanced Dumbo.
The roulette record-breaker
Bloomberg set the scene beautifully this week in a long-read called: The gambler who beat roulette.
Your interest has surely been piqued, and rightly so.
This fascinating article tells the story of Niko Tosa, a tall and thin Croatian man with rimless glasses that seemingly defeated London’s Ritz Club casino in the early noughties.
As you know with hot copy, we usually try and rewrite a previously published story in our own words, as a mini tribute to our media colleagues if you will.
But honestly, nothing we could say would do this article justice, so we strongly suggest you click the link and have a read for yourselves. It also looks fantastic on the page. Enjoy!
High stakes politics
The gambling sector has bet big on MPs, having increased their lobbying spend tenfold over five years, as revealed this week by The Guardian’s detective work.
Public records show that many Labour and Conservative MPs have had their pockets lined with corporate treats worth thousands of pounds, all thanks to some of the nation’s most extravagant wager-wizards.
The news comes just days after Conservative MP Scott Benton was caught on camera offering to break parliamentary rules to further the interests of gambling industry investors.
Plenty of cash has been splashed, mainly on sports tickets for MPs, and these numbers are likely just the tip of the iceberg according to The Guardian as gifts under £300 fly under the radar.
This cash-crazed bonanza has some parliamentary peeps worried about the growing influence of the industry.
Carolyn Harris, Labour MP for Swansea East and a crusader for gambling reform, points out that the industry’s deep pockets are painfully obvious around parliament.
According to Harris, a trip to the bar will likely have you bumping into someone from the gambling world, buying drinks for everyone.
She said they persuade MPs with exclusive invites to events like the Brit Awards or Manchester United matches.
Ultimately, she says, the industry is scared of regulation. And with the white paper review set to be published in the coming days, who can blame them?
Targeting ‘illegal’ slot machines
The Wall Street Journal reported this week that the US casino industry has launched a campaign against what it considers to be gambling in certain states: video game machines that resemble Las Vegas-style slot machines.
These machines have been placed in bars, convenience stores and social clubs. Games developers argue that, unlike slot machines, these games require players to use skill to win money.
However, casino industry lobbyists claim that these games are actually gambling, and provide a way to circumvent gambling regulations and avoid taxes.
The American Gaming Association, a trade group representing the casino industry, recently released a report estimating that Americans play $109bn on these “unregulated gaming machines,” with the machines generating nearly a billion dollars in estimated revenue.
The AGA has asked the US Justice Department to investigate these games and classify the machines as gambling devices under federal law.
The Justice Department responded by stating that it considers illegal behavior related to gambling a priority and has forwarded the information to the FBI.
In the Financial Times, the CEO of OpenSea, the leading non-fungible token (NFT) marketplace, has attempted to differentiate NFTs from cryptocurrencies as the sector faces the fallout of several recent scandals.
Devin Finzer admitted that the crypto industry had seen “some setbacks recently”, referencing the fall of FTX, the cryptocurrency exchange that collapsed into bankruptcy in November helping to trigger a fall in the value of digital assets.
But the head of the New York-based company insisted that NFTs have a bright future and will continue to be bought and sold with real money.
“It is not necessarily the case that NFTs will always be bought and sold denominated in cryptocurrency as they are today,” Finzer said.
“There are a variety of reasons why that makes sense in the current ecosystem, but as we get broader and more accessible, there is no reason that NFTs could not at least be denominated in US dollars.”
OpenSea, which takes a 2.5% commission on each sale, has raised $423m in funding since 2021 and was valued at $13.3bn in its most recent funding round in January.
Governments and law enforcement agencies are also considering whether NFTs should be registered and disclosed as financial securities.
“It is really important that regulators and government officials understand that this is not the same as the broader crypto industry where there is a lot of focus around financial use cases,” Finzer was quoted as saying.
He added the value of NFTs should be decided by how people engage with it, whether through using tokens to attend exclusive events, play games, or display digital artwork in their homes.
Calls for regulation
Germany’s international broadcaster, Deutsche Welle (DW), zoomed in on India’s online gaming industry this week.
The article highlighted that the industry is set to more than triple in size over the next four years, but officials and mental health professionals are concerned about the potential for gambling addiction.
Although chance-based gaming is already banned in India, determining what is legal remains contentious, with fantasy sports and rummy being considered as skills-based games by India’s highest court, but as chance-based games by state courts.
Real-money online games and chance games are generally banned in India.
According to a Mumbai-based non-profit Responsible Netism, children are in particular at risk of online gaming addiction.
“We receive hundreds of calls from parents on a daily basis who approach us to counsel their children addicted to online gaming, like rummy.
“These children play with money, putting out thousands of dollars every day,” co-founder Unmesh Joshi told DW.
But few Indian states have started taking initiatives to address the surge in online gambling.
“There is an urgent need to establish regulations for online gaming. It is regulation and not outright banning that would address the problem,” Joshi said.
Elsewhere, lawyer Aditya Kumar also stressed that the Indian government should clearly distinguish between skill and chance-based games.
“We need to set up an independent commission that certifies what is a game of skill and game of chance.
“This will help the government deal with betting and gambling more severely,” Kumar said, adding that the states and central government need to work together concerning regulations.
Michael Rubin has said Fanatics will “absolutely” go public and is aiming to become the number one business globally for online sports betting and iGaming.
In conversation with the Wall Street Journal’s Jason Gay at the WSJ Tech Live conference this week, the Fanatics CEO shed some light on the firm’s ambitions in the gambling sector, having recently announced its intention to launch sports betting in select US states in January 2023.
When asked whether the business would partner with an established betting operator to launch its product, Rubin said: “No, not partnering. We absolutely are going to do it ourselves. We want to be the number one player in online sports betting and iGaming in the world, long term.
“And you could say that’s crazy, and who is this guy to say that? But you know, we weren’t in the merchandise business 10 years ago, and now we’re the number one company by far and away, and we weren’t in the collectibles business two years ago and now we’re number one.”
Indeed, Rubin hopes Fanatics will be able to lean on its success in those sectors to deliver a profitable online gambling division, in what he described as a “currently broken” US sports betting industry.
He believes the race between operators for market share has led to unsustainable business practices and the creation of an industry which falls well short of its potential when it comes to generating profit.
“If you look outside of the US, all these online sports betting and iGaming companies, they make a lot of money,” he said.
“And if you look offline in the US, they make a lot of money. But if you look at the online companies, they’re haemorrhaging cash. Why? Because the private equity firms and VC firms gave them free money between 2018 and 2021 and said ‘hey, take our money and just spend it,’ and they didn’t actually say to do it logically.”
With its 80+ million strong customer database of dedicated sports fans, Fanatics is hoping to gain a leg-up in the US online sports betting sector, although the likes of FanDuel and DraftKings already had hefty DFS databases to choose from.
As a result, Fanatics could commit less cash to advertising and marketing expenses when compared to other US operators, where in some instances, enormous customer acquisition costs have left the prospect of profits a very distant possibility.
Fanatics CEO Michael Rubin: “If you look at the online companies, they’re haemorrhaging cash. Why? Because the private equity firms and VCs gave them free money between 2018 and 2021 and said ‘hey, take our money and just spend it,’ and they didn’t actually say to do it logically.”
Regardless of its future costs related to the launch of its online gambling operations, Fanatics will likely have the opportunity to unlock a great deal of capital through an initial public offering (IPO) at some point in the coming years.
“We’re absolutely going to go public in the mid-term,” Rubin said, but added that: “We’re in no rush. We have a company that’s pretty big, we make real money, we have a tonne of cash on a balance sheet, we generate real cash every year.
“So we’re in no rush to go public. At the same time, our company’s owned 50% by institutional investors, and they deserve a path to liquidity, so we’re going to get that for them.
“We also have employees that own 10% of the business and we want to get them liquidity, so we’ll definitely become a public company over time. It’s just a question of what’s the right time for us and we’ll do it in the right market as we continue to make progress on our journey.”
Fanatics’ sports betting operations are expected to commence in January 2023, with the goal to go live in 15 to 20 US states by the beginning of the 2023 NFL season, around September next year.
Rubin said earlier this month that the firm “will be in every major state other than New York, where you can’t make money.”
(Light &) Wondering just how big US iGaming could be?
VIXIO GamblingCompliance released a report this week, commissioned by industry supplier Light & Wonder, which estimated that the US could generate $6.35bn in annual tax revenue from an expanded legal iGaming market.
The estimate is based on the assumed development of legalised iGaming markets in all 42 states which currently have either legal land-based casino gaming or online sports betting.
Such regulatory development could lead to the creation of a US iGaming market worth more than $30bn annually, the report states, leading to tax revenue in excess of $6bn based on a tax rate of 20%.
“VIXIO’s report demonstrates that states are leaving billions of dollars in tax revenue on the table which could fund a variety of public programs and services without resorting to broad based taxes,” said Howard Glaser, global head of government affairs at Light & Wonder.
“The dozens of states that already have land-based casino gaming merely have to turn on the digital channel to realise tax revenues which are otherwise being syphoned off by the prevalence of illegal off-shore internet gaming.”
Although limited to a handful of states at the moment, the report points out that iGaming tax revenue has rapidly begun to make significant contributions to tax revenue in those regions.
“According to the American Gaming Association (AGA), the six states in which iGaming is currently legal generated $970m in gaming tax revenue in 2021, compared with $560m generated in the 30 states with sports betting,” it said.
UK exchange officials urge listing firms to stay at home
The Financial Times published a piece this week which claimed that bankers and exchange officials in the UK are boosting their efforts to promote London listings, in order to prevent firms from looking overseas when seeking to go public.
It lists examples including Luxury fashion website Farfetch and Soho House owner Membership Collective Group, which would be large enough to join the UK’s FTSE 250 index. Both are considered small-cap groups in the US however, where both firms opted to list.
The promise of higher valuations has tempted an increasing number of non-US firms to list in America recently, it said – as witnessed in the iGaming industry with the likes of Gambling.com Group, Super Group and NeoGames, among others.
Interestingly, however, the article pointed out that such firms have historically underperformed when compared to those opting to list closer to home.
“European companies that raised more than $100m in the US since the start of 2020 have fallen an average of 47% from their offer price, compared with a 29% decline among domestic US listings and a 19% fall for domestic European deals,” it said.
“Observers point to several possible reasons for the underperformance, including a lack of support from passive investors because foreign companies are excluded from big indices such as the S&P 500, and a belief that domestically focused US investors are more likely to sell “non-core” foreign stocks during periods of volatility.”
Despite this trend, perceptions of listing in London are thought to be experiencing something of a low, based on the City’s investor base and attitude, according to the article.
Efforts to reverse that could amount to little more than window dressing. “A lot of the people who want to champion London seem to be more interested in flag-waving,” one London-based adviser told the author.
“If the discussion was ‘come to London, you’ll get less volatility and a better valuation and a good platform to build the business’, it would be different, but we don’t help ourselves.”
Robinhood not so Merry now
The Wall Street Journal reported this week that the cryptocurrency trading unit of investment platform Robinhood was fined $30m by the New York State Department of Financial Services (NYDFS) for alleged violations of AML and cybersecurity regulations.
The case marks the financial regulator’s first crypto-related enforcement action, and in addition to the fine, required Robinhood to retain an independent consultant to evaluate its compliance with the relevant regulations.
According to the article, NYDFS said it found significant failures resulting from management shortcomings through a supervisory exam and a subsequent enforcement investigation.
The identified shortcomings included “failures to foster and maintain a culture of compliance and to allocate adequate resources to the programmes, particularly as the company grew quickly, which exacerbated the issues.”
The business also failed to comply with consumer protection requirements, by not providing a dedicated customer complaint phone number on its website.
“We have made significant progress building industry-leading legal, compliance, and cybersecurity programmes, and will continue to prioritise this work to best serve our customers,” said Robinhood associate general counsel of litigation and regulatory enforcement Cheryl Crumpton.
The settlement comes as NYDFS welcomes new superintendent Adrienne A. Harris, who now aims to provide further guidance to the crypto industry and expand the department’s team dealing with digital currency.
In the bleak (crypto) midwinter
CNN revealed this week that cryptocurrency exchange Coinbase is laying off some 18% of its workforce, representing around 1,000 of its more than 4,900 employees at present.
Crypto markets have suffered a particularly tough few weeks, with the price of bitcoin tumbling from over $30,000 on 6 June to little over $20,000 today.
Coinbase CEO Brian Armstrong said in an open letter that the firm’s decision to cut staff was made to ensure the business “stays healthy during this economic downturn,” which he warned could extend beyond the current bear market.
“We appear to be entering a recession after a 10-plus year economic boom,” he said. “A recession could lead to another crypto winter, and could last for an extended period.”
Coinbase itself has not been immune to the effects of the economic downturn, either. The firm’s share price has taken a catastrophic fall over the past six months or so, from a 52-week high of $368.90, to just $51.05 today.
This, CNN said, was the result of investors continuing to sell off crypto, bailing out of risky assets as they expect sharp increases in interest rates to come their way.
Armstrong said in his letter that the firm “grew too quickly,” since listing on the Nasdaq last year, and that “in this case it is now clear to me that we over-hired.”
If the warning signs are anything to go by, crypto investors may want to prepare themselves for a long, cold winter.
Disney taking the Mickey on sports betting
Investment magazine Seeking Alpha published a story on one of the highest-profile non-endemic businesses to have expressed an interest in entering the gaming sector; Disney.
Specifically, the author asked: “Why is its ESPN unit, four years into the legalisation of sports betting, still waffling around with neither its own betting platform, or one launched in partnership with an existing online betting giant?
“Who was fast asleep at the ESPN switch when the Supreme Court ruling opened the doors wide to legal sports betting in May of 2018?”
A lack of commentary on the sports betting question in Disney’s latest earnings call was, according to the author, “a message to shareholders by the silence of its leadership.”
The opportunity for driving sports betting revenue from ESPN’s 76 million-strong viewership is too good to have passed up, author Howard Jay Klein argued, especially given its ability to advertise to the audience it has already amassed – in stark contrast to the big US players currently blowing hundreds of millions on costly marketing campaigns.
He then compared ESPN with Barstool Sports to show what an early entry into the betting market could have looked like for Disney.
“Note that Penn National Gaming recognised the value of a sports-crazy audience base by their acquisition of 38% of Barstool Sports for $163m largely due to its reach of 55 million online TV ‘stoolies’,” he said.
“On average, Penn’s promotional and media costs have run lower than the leaders. They have decided not to chase business with excessive dollars but be content to get into black numbers as a priority over empty calorie volume. They have made the right call here.”
Despite Penn’s success, it still remains to be seen whether Disney will get animated again about sports betting.
FanDuel staying out of college
FanDuel made a splash in the Wall Street Journal this week, as the paper published a story on some of the challenges faced by the firm’s chief executive, Amy Howe.
Namely, it explored how she must “satisfy a number of constituents: gamblers and sports fans, sports leagues, government regulators and investors looking for returns.”
Another significant part of Howe’s mission at FanDuel is to operate the business in the most responsible way. As part of that, she was adamant that “we don’t want the FanDuel brand associated with college campuses.”
College sports sponsorships have become increasingly common among sports betting firms, which are exploring all possible avenues to help them carve out market share in the sector.
As the WSJ pointed out, though, young people are at higher risk for gambling addiction according to the National Council on Problem Gambling, and attempts to put a firm’s betting brand in front of as many college student eyeballs as possible is therefore more fraught than it may first appear.
According to the piece, FanDuel is also re-evaluating terms used in advertising promotions such as “risk free”, to assess whether they are a responsible way of marketing its products.
“I certainly feel a huge sense of obligation,” Howe said.
Weather alert: Microsoft opens Gates to Blizzard
Microsoft caught our eye and, well, the eyes of the rest of the world this week, as the Wall Street Journal broke the news that the software giant had agreed to buy video game developer Activision Blizzard in a deal worth somewhere in the region of $75bn.
Xbox, Minecraft and Doom creator Microsoft said the all-cash deal would make it the world’s third-largest video gaming company by revenue, behind Riot Games owner Tencent and PlayStation creator Sony.
After adjusting for Activision’s net cash — that is to say, $7bn in debt — Microsoft said the deal is valued at $68.7bn.
The WSJ reported that Activision’s long-time CEO Bobby Kotick is expected to leave the business after the deal closes, despite Microsoft’s claim that he would continue to serve at the helm of the business.
The deal marks Microsoft’s biggest ever acquisition by some margin, well ahead of the $26.2bn it paid for LinkedIn in 2016, its second biggest purchase, which is followed in the rankings by a $16bn deal for conversational AI specialist Nuance Communications in 2021, and the $8.5bn it paid for Skype back in 2011.
Facebook ain’t fungible: Meta to take a slice of the NFT action
According to the Financial Times, Meta-owned social media giants Facebook and Instagram are exploring plans to allow their users to make, showcase, and sell NFTs on the platforms.
Teams are currently preparing to launch a feature that will allow users to display their NFTs on their social media profiles, according to the report, while working on a prototype add-on to help users mint their own collectible tokens.
Meta has also discussed launching a marketplace to allow users to buy and sell the digital assets, too, according to the insider connections who spoke to the FT.
Apparently, Facebook’s digital currency wallet Novi, which launched as a pilot in the last quarter of last year, is likely to be central to Meta’s NFT objectives, with a lot of its supporting functionality used to power the yet-to-be-seen features.
Twitter threw its hat into the NFT ring this week too, as CoinDesk reported the platform had launched an official verification mechanism for NFT profile pictures.
By linking an Ethereum wallet, users can now have their hard-earned non-fungible profile picture appear in a “nifty new hexagonal border”, rather than the somewhat tired circular format used for old-hat, fungible profile pics.
Anyone attempting to steal your blockchain-registered asset will be easy to spot, then, as their worthless copy of the picture will appear in the classic circular shape. That’ll teach ‘em!
The ugly side of the beautiful game
The Athletic reported this week that the Football Association (FA) had opened an investigation into suspicious betting activity surrounding the award of a yellow card to an Arsenal player during a Premier League match this season.
Apparently, bookies alerted football’s governing body to unusual betting patterns after the match in question, during which a Gunner was given an official warning by the ref. It has not yet been confirmed which offence led to the booking, or for who.
According to sources, an “unusual” amount of money was placed on the particular player being given a yellow card during the match. Helpfully, the notoriously loose-lipped FA told The Athletic: “The FA is aware of the matter in question and is looking into it.”
While it’s hard to get a word in edgeways around rambling statements like that, previous high-profile cases of so-called ‘spot betting’ have led to top-tier players being banned from professional football in the past.
In 2018, Lincoln City right-back Bradley Wood was banned from playing for six years, after he was found guilty of intentionally receiving yellow cards during the team’s FA Cup run.
This is what Xhaka was booked for on the 86th minute mark against Leeds.
Doesn’t look great… pic.twitter.com/kBm2OEXvY5
— now.arsenal (@now_arsenaI) January 19, 2022
According to speculation on Twitter, Swiss-born Granit Xhaka could be the key to solving this mystery, as users took to the social media platform to share videos of his yellow card against Leeds United on 18 December last year.
Xhaka, who is currently serving a suspension for another red card he received against Liverpool at Anfield, was booked in the 88th minute for time-wasting, despite Arsenal leading 4-1 against the West Yorkshire club.