Do not trust Intel

So, this story's been percolating for a while, but it seems to be coming to a head all of a sudden, and is providing a number of object lessons is how not to do any of this in the process.

Long story short: Intel 13th and 14th gen processors (a.k.a. Raptor Lake, and including essentially all CPUs made and sold from October of 2022 to the present), have a degeneration issue. For details on the nature of the problem, your best bet is probably Wendell at Level1Techs, or Steve at Gamer's Nexus, or both.

The situation is developing rapidly, though, and Intel are failing to get ahead of it. The latest reporting comes from Ars Technica:

On Monday, it initially seemed like the beginning of the end for Intel’s desktop CPU instability woes — the company confirmed a patch is coming in mid-August that should address the “root cause” of exposure to elevated voltage. But if your 13th or 14th Gen Intel Core processor is already crashing, that patch apparently won’t fix it.

Citing unnamed sources, Tom’s Hardware reports that any degradation of the processor is irreversible, and an Intel spokesperson did not deny that when we asked. Intel is “confident” the patch will keep it from happening in the first place. [...] But if your defective CPU has been damaged, your best option is to replace it instead of tweaking BIOS settings to try and alleviate the problems.

And, Intel confirms, too-high voltages aren’t the only reason some of these chips are failing. Intel spokesperson Thomas Hannaford confirms it’s a primary cause, but the company is still investigating. Intel community manager Lex Hoyos also revealed some instability reports can be traced back to an oxidization manufacturing issue that was fixed at an unspecified date last year.

This raises lots of questions. Will Intel recall these chips? Extend their warranty? Replace them no questions asked? Pause sales like AMD just did with its Ryzen 9000? Identify faulty batches with the manufacturing defect?

This is bad. This is epic levels of bad, and may be Boeing levels of bad.

Futility, thy name is XBox

I was looking over the VGChartz table that I linked in my previous post, and I noticed something interesting.

I used VGChartz's Tie-Ratio tab for my cost-benefit analysis of Game Pass, but gaming system Tie-Ratios aren't the only data available to us. Tie-Ratio is the number of games sold for every console. To calculate a Tie Ratio, you naturally must know: 1. the number of games sold, and 2. the number of consoles sold. And VGChartz have, helpfully, broken those numbers out separately.

And if you switch from Tie-Ratio to just look at the hardware numbers, you can see something interesting.

Microsoft changes the deal

XBox Game Pass, already not the best deal in gaming, has just become a worse deal. As reported by Polygon:

Microsoft has announced sweeping changes to the pricing and structure of its Game Pass subscription service. There are price rises across the board; Xbox Game Pass Ultimate is going up to $19.99/month, an increase of $3. And the basic console tier is to be phased out and replaced with a new Xbox Game Pass Standard tier that will not include day one releases like the forthcoming Call of Duty: Black Ops 6.

The changes were reported by Windows Central and confirmed by Microsoft on an official Xbox support page.

[...]

Death Watch 2024, Continued -- Embracer Group will cease to exist, and XBox (!) is starting to spiral

About five months ago, Dan Olson AKA @foldablehuman AKA Folding Ideas, posted a two-and-a-half hour video about the meme stock movement with the catchy title, "This Is Financial Advice." I won't try to recap the entire thing (although you should definitely watch it if you haven't), but I do want to draw attention to the portion about Bed Bath and Beyond's desperate last-ditch attempt to stay afloat: a financing arrangement known as "death spiral financing."

Very quickly, the arrangement involves a company with more debt than they can repay, not enough revenue to meet operating expenses, and no fat remaining to trim from their operation. This company, BBBY, accepted a financing deal from a private equity firm, with the understanding that they would release shares to the market in order to raise the funds needed to repay them.

The simple fact of such a deal is enough to drive down share prices on its own, and a flood of new shares will also depress the share value, which means that the number of shares needed to repay their PE financiers keeps increasing, in an ever-increasing spiral of share dilution and devaluation that ultimately failed to repay all of their debts, let alone raise enough money to continue operating.

BBBY was forced to file for bankruptcy, was de-listed from NYSE and NASDAQ, and no longer exists. And this was the model that immediately came to mind when I learned of Embracer Group's latest galaxy-brained plan to save themselves from a very similar situation, using a very similar-sounding financing scheme.

Death Watch 2024, continued: Embracer's Downward Spiral Deepens

Embracer Group, who just last month sold a $550M acquisition for $249M, have done it again, but worse. As reported by Ars Technica:

Embracer Group has been backing away from its all-encompassing position in the games industry lately. The latest divestment is Gearbox Entertainment, the studio behind the Borderlands series it bought in early 2021 for a deal that could have been worth up to $1.37 billion to Gearbox had it stayed inside the Swedish conglomerate's grasp.

The buyer is Take-Two Interactive Software, which had previously partnered with Gearbox on publishing Borderlands and other titles. Take-Two will issue new shares of its common stock to pay $460 million for Gearbox, to be completed before the end of June this year. Embracer paid $363 million in cash and stock for Gearbox in 2021 but promised up to $1 billion more should the developer hit earnings goals over six years.

"Today’s announcement marks the result of the final structured divestment process and is an important step in transforming Embracer into the future with notably lower net debt and improved free cash flow," said Embracer CEO Lars Wingefors in a statement intended to start nobody's imagination running.

A few things leap out at me.

Death Watch 2024: Embracer Group Continues To Spiral

As predicted by me:

• Embracer will not balance their books. There's only so much more that they can cut from the operation, and still have an operation.
• Embracer's next step will be divestment: selling off the assets that they bought, probably for a lot less than they paid for them, since it's a buyers' market right now.

 As reported by PC Gamer:

A Bloomberg report says that Swedish holding company Embracer Group has reached a deal worth as much as $500 million to sell its Saber Interactive division to a group of private investors. The deal will make Saber Interactive a privately owned company, according to the report, with approximately 3,500 employees.

Embracer bought Saber Interactive in 2020 at the height of its acquisition spree. It was made the fifth operating group under Embracer's corporate structure and currently serves as the parent of numerous other studios including 4A Games, Aspyr, Beamdog, New World Interactive, Slipgate Ironworks, and Tripwire.

That's me, two for two, with two to go: only restructuring and liquidation remain. If you shorted Embracer stock two months ago, then good for you. If you doubled down on Embracer stock two months ago, then I'm sorry. I'm so, so sorry.

That $500 million figure, BTW? That's wishful thinking. Embracer paid $150 up front, with $375 million in performance bonuses to follow, and there's no fucking way they're getting all of that back in a fire sale of Saber. 100%, Embracer are losing money on this deal; they're only doing it because they have no other options, and are desperately trying to survive long enough, and reduce their own prince point enough, to be bought by someone more flush.

Just bad luck that the rest of the big players in the industry are also contracting, I guess; there will be few, if any, $70 billion Activision-style deals this year. I give Embracer six more months; nine tops.

UPDATED MAR. 15TH, 2024:

Told you so:

Embracer has sold Saber Interactive for $247 million.

[...]

Embracer originally acquired Saber Interactive for $525 million in 2020.

As expected, sold for less than half what they paid to buy. This will all be going to creditors; there's no way this is going to operating expenses. Selling Saber only bought Embracer a little more time.

I'm calling it now: Embracer isn't going to make it

As reported by The Verge:

Embracer Group, the company attempting to forge one video game publisher to rule them all, has just presided over another round of layoffs. Eidos Montreal is letting go of 97 game developers and support staff, the company announced today on X, shortly after Bloomberg’s Jason Schreier scooped that the studio has canceled an unannounced Deus Ex video game.

This is just the latest in a round of increasingly desperate attempts by Embracer to reduce their burn rate to something they can afford. This is deeply misguided, for several reasons.

1. Layoffs are expensive. A laid off employee still receives several months of pay in severance, and several months of benefits, which can't just be cut off cold because you decided they would be unemployed now, through no fault of their own.
2. Layoffs are destructive. Contrary to the popular beliefs of CEOs, terrified employees don't work harder; they spend work time hunting for better jobs elsewhere, assuming they don't burn out from their suddenly increased stress. Expect turnover and absenteeism to increase, and remain high, even as productivity drops and remains low.
3. Layoffs are short-sighted. Embracer Group does not makes games; they employ people who make games. Or at least, they did; every new round of layoffs mean fewer people to make the games which are their sole source of revenue. And good luck hiring new people to replace the ones you laid off -- nobody wants to get hired at a company that's as badly managed as Embracer.

This is a death spiral. 

Witnessing a moment of clarity... Unity edition

I hadn't spent much time commenting on Unity's attempted self-immolation of last month, mainly because I didn't really have much to add to the conversation.

Unity, for those that still somehow don't know, is the single most-used engine for game development, with something like seventy percent of Steam games being based on Unity, and an overwhelming presence on Android and iOS. Unreal, the second-most-popular game engine, has less than half Unity's presence on Steam, and no presence at all on iOS anymore, thanks to their "Project Liberty" stunt, and the Epic v Apple lawsuit which followed.

Confirmed: Epic's big loss was a much bigger loss than they were letting on

Back in 2021, when I was posting about Epic's big gamble having turned into a big loss for them, I suspected that they could only keep the con running for so long.

Of course, even Epic Games can't sustain this kind of burn rate forever; eventually, they're going to have to make changes in order the stop the bleeding, and put in place some sort of plan to "return to profitability" (corporate code of mass layoffs). Given that their legal battle with Apple has only served to make the industry-standard 30% cut to the platform look more essential than ever, and that Epic has done almost nothing to earn back the trust and good will of the Steam community (which, at this point, includes basically all of the PC gaming community), and also given that efforts to repair their brand and rebuild their business can't even start until the Apple lawsuit, at least, is either dropped or settled, I'm starting to have serious doubts about Epic's long-term prospects. I beginning to wonder if Epic will be able to survive at all, in the medium-to-long term.

Well, it turns out that I was a fucking prophet. Epic are indeed burning through cash faster than even Fortnite can make it, and have now resorted to mass layoffs to cut their burn rate.

As reported in Yahoo! Finance:

Fortnite and Unreal Engine maker Epic Games has confirmed that it is laying off approximately 830 employees, representing roughly 16% of Epic's total workforce.

[...]

The memo sent to employees by Epic CEO Tim Sweeney was later posted on the Epic Games website.

"For a while now, we've been spending way more money than we earn, investing in the next evolution of Epic and growing Fortnite as a metaverse-inspired ecosystem for creators," Sweeney said. "I had long been optimistic that we could power through this transition without layoffs, but in retrospect I see that this was unrealistic.

"While Fortnite is starting to grow again, the growth is driven primarily by creator content with significant revenue sharing, and this is a lower margin business than we had when Fortnite Battle Royale took off and began funding our expansion. Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics. [...] But we still ended up far short of financial sustainability. We concluded that layoffs are the only way, and that doing them now and on this scale will stabilize our finances."

I fucking called it. 

Witnessing a moment of clarity

Jesus. Was it really three years ago that I first posted about Game Pass?

There are users for whom Game Pass is a good fit; heavy users who really will save money using the service, wealthy gamers for whom the cost of the service is essentially irrelevant, and ruthlessly opportunistic gamers who will pay for a single month only, and only when they "need" it, to play exactly one newly-released game and then cancel [...]

Game Pass is not a good deal; its value proposition is not, and never has been, "insane;" it is not a value option at all, really, except for people who semi-professionally play a wide variety of games, or people who may well have burgeoning video game addictions. So, be honest with yourself. 

Do you have a problem? Are video games taking over your life, in ways that are possibly self-destructive and unhealthy? If so, then you don't need Game Pass; you need help, and there's no shame in asking for that help.

For a long time, I thought I was alone, screaming my frustration into the void. Because the deal really was bad, but nobody else seemed to be willing to call it out for the anti-consumer nonsense it was. Even as every multimedia conglomerate on Earth launched their own subscriber-driven Contentᵀᴹ service, only to watch them all beat hasty retreats after those services lost boatloads of money, Game Pass was made of Teflonᵀᴹ. Nothing ever stuck; the narrative never evolved.

That is, until today. From Ethan Gach at Kotaku:

It’s Time To Start Killing Your Subscriptions

The prices are going up and you probably barely use them anyway

I feel so seen right now.

So, you're tweeting a jpeg of an apology...

... here's how not to do it.

[Sigh.]

OK, first things first. 

Hey now, you're an all-star...

Recording this event for posterity, on this 12th day of December, 2022:

Most of the FTX news from the preceding 24 hours had been all about how SBF was going to testify before Congress, and what would he say when testifying before Congress.

SBF will not be testifying before Congress. Because he's too busy. Being in prison.

I want to know what the charges will be. I mean, obviously it will be some species of fraud, but I'm dying to know the specifics. Admit it... you're dying to know, too.

Happy Monday!