After Crisis | Games & Life in a Post Coronavirus World

you everybody joke in here everyone right now is trying to jump on the coronavirus content bandwagon so just to be clear I think coronavirus issues have been discussed a lot already and likely way too much so the objective of the discussion Nikolas and I will have today will revolve not so much on the typical stuff and how coronavirus is impacting the game industry but we want to focus more on what happens after the crisis and more philosophical and longer-term ramifications what we're calling after crisis so what are the long-term implications and how can we better prepare for the world after coronavirus and specifically we'll be talking about one the long-term economic impact to deal making and psychology in crisis 3 what do you do to adjust to the new reality war business model dichotomy in

five how game how gaming will be impacted longer term and so joining me today for this discussion is Nick Nicholas herger formerly of gondola which was acquired by tilting point Nicholas you've been on a few times with me already but maybe can you do like a really quick intro just to give our audience a bit more context sure so hi Joe hi audience thanks for having me and thanks for the very kind introduction allah career began quite untypical as a intellectual property lawyer in new york then i started an indie game development shop back in 2009 we focused on mobile games made a total of four and from there I co-founded aanava' the company you just mentioned we were a machine learning based in-game offer and dynamic pricing platform and we got a quiet per tilting point last year and now I have started 8-bit coaching which is a premium service that works

exclusively with technical professionals helping them become great leaders through customized one-on-one coaching so that's my short intro all right great so maybe we can jump right in so the first topic is really around the long term economic impact so we don't have to confine the discussion to just gaming but we certainly want to focus with that lens but just starting more generally from my side I believe a few key things will happen due to the current coronavirus crisis the first is we will have massive stimulus and quantitative easing measures by our government and I'm talking primarily us here in the central bank what we've seen is that you know we've had two trillion and stimulus that took let's say one and a half years during GFC the global financial crisis in 809 but we got that in two months this time around so it's pretty clear that things are moving very fast in that we are likely to have additional stimulus and central bank

intervention we also have a ton of corporate debt like really shitty debt as well a mountain of this stuff and the Fed is buying this crap and other crap like mortgage-backed securities with an unlimited checkbook to keep this pyramid scheme going so we are in crazy times and the reason I raise this issue has to do with equity prices we're likely at in my opinion we're likely to be at the top or near the top of what Ray Dalio popularized as a long term debt cycle so if we are in a regular debt cycle this puts downward pressure on equity prices for say the next potentially eighty four months in an inflationary debt cycle there will be shorter term of downward pressure on equity prices but then equity prices start to shoot higher again after the depression-era phase of the inflationary debt cycle so I do think there's a lot of broad interest in the public game company names I hold

Electronic Arts from last year which I'm still up on is what we've seen is that video games are an incredible hedge against economic recessions in particularly for shelter-in-place in isolation policies in I won't dive into the nuances of of that but there is a lot of nuance there in terms of boosting to gaming particularly online gaming based upon geo based upon platform gameplay type P monetization all that kind of stuff but long stay we're short on this is that we're not only seeing public game company names hold up or even increase during this time but on the venture and investment side I'm seeing a lot of recent activity in terms of investments in interest in investments in gaming as again investors see the value from investing into online video games so just to bring this home I'd say we have some short and medium-term risk on equity prices pricing however public video game

companies have some resistance to that pressure but longer-term I think video games should outperform the broader market by a bit especially under recessionary situations and we should also mention that video games still serve as the greatest value from a cost perspective to consumers Nikolas what do you think well first of all you went pretty deep there right now so I'm not sure if I can compete with that a couple of things that come to mind first of all you said you know I'm talking about the u.s. here only as you can imagine you know having lived in the US for more than a decade but being from Germany I also watched which German and thereby European news closely so as far as stimulus packages et cetera go you know the the European Union and you know in itself as well as Germany and other countries are also like going going pretty deep and pretty fast at that so I think everybody has has taken some lessons from there from the 2008-2009

global financial crisis and is acting fast at the same time you know how many more stimulus packages will there be you know is this all sufficient I don't think that that is within the scope of our discussion today but there are certainly question marks that I have about that so as far as your assessment goes I agree with most of what you said I think as a whole the video game industry is doing really well right now steam I think already reported record numbers of concurrent users a couple of weeks ago right and and and I know from from talking to a bunch of people over the past couple of weeks in my own network that that a lot of publishers are seeing a similar trend with their existing games right so and when you talk somebody has a bunch of established games in the market doesn't really matter what platform it is you will hear you know they all say something like oh I don't want to jinx it but overall you know this is actually this is actually good we are we're at least level most of

them actually report that they are up and I've had somebody compare this to what they generally see during summer breaks right when the kids all of a sudden get home from school and just play more so that being said video game industry as a whole is is doing good and long-term this will rather helped and hurt the industry no doubt however and that's also what I'm seeing individually I know a bunch of people that are hurting right now and so from from what I see a lot of the individual transactions that were in the making this spring you know whether that's investments whether that's publishing deals whether that's you know a freelancer who was securing you know a new gig or something are I either hibernating or have simply been called off so if you were caught by this in the middle of you know pushing something you know through the pipeline I think you feel slightly different about the state of this industry right now because the

the long-term perspective you know equity markets etc don't really matter to you that much what matters to you is that what you were planning and what you you were trying to push through is not really happening right now yes there is interest from institutional investors I also seeing that a lot but I I think and that goes back to my previous point there's a big difference between interest and closing a deal right so people fishing around versus versus people actually doing something to support your [ __ ] your point however I spoke to her to a founder of a game company this week that is not looking to race because they are in a really good spot and and that seems to be the exact reason that the VCS are taking the interest in them right now and and he literally was telling me dude I'm having inbound interest right like they are approaching me and and I think yet that's that the exactly this that you know they are looking

pretty good they are not really looking for any financial help right now and that seems to be a relatively safe bet from an institutional investors point of view but I also know a bunch of gaming VC deals that didn't close or that are in serious jeopardy there are companies that have the momentum on their side just six weeks ago and now that momentum is completely gone and it's very unlikely that they will get their rounds closed and those are all companies that are in growth mode and they are now finding themselves in a situation where they all of a sudden you know have to you know readjust to a new reality from where they were doing I think most things right and you know trajectory was like this too now they are in a situation where they suddenly bit off more than they can chew right and and the house of cards starts crumbling a little and to go further I also know if two companies that will probably announced layoffs next week or the week thereafter one for financial reasons the other one because a big

publishing deal that they you know that they had virtually done will actually not come through so that means you know the game will not be produced as they had planned and that will have impact on their staff and then the last thing that I wanted to say is I know a bunch of freelancers as I'm sure you also do you know in marketing in graphics sound editing that are you know really crucial to the industry and when you talk to them it's a dire situation I mean they report that they have already lost more than 50% of their business and it looks like that's already that's only the beginning so I really feel for these guys and and I think that's probably the most extreme example I can make between yeah industry as a overall you know kpi's looks looks really good and the the long-term outlook is strong but the short term impact in some instances is catastrophic that everything that's not mission-critical is on the chopping block and some companies that look really good in early february are

probably in a situation right now and where they're not gonna make it so I think as always they're two sides to the story what do you think right and I said it's also partially situational contacts or depending on the depending on your situation the interest is gonna be different but maybe another point to make would be the phase of the thinking process right so doing the first phase when we first started seeing you know shelter-in-place policies when we first started seeing the increased engagement people were thinking about video game companies especially the online games as a hedge against other types of investments so there's that interest from maybe four to six weeks ago but now I think phase two is uh-oh looking at key economic indicators looking at unemployment numbers looking at where things are starting to go now investors may be thinking are we headed for a recession depression then you know going from being kind of like you know trigger-happy to like wanting to wanting

to maintain some dry powder right right right because you know generally when we talk about you know spending during a recession there's there's certainly a shift away from luxury and discretionary spending in those kinds of environments so I think that maybe the phase two of the thinking and then I think phase three is really gonna be happening once we once we start getting more clarity around the longer term impact how long is this going to be how real is a recession depression going to be and then how will games and especially mobile gaming if you're a mobile gaming company or the online gaming spend how's that gonna hold up right like and without data people get nervous yeah but moving on let's let's move on to this more subjects to cover yeah yeah that's okay so I think our second second topic that that you already introduced during the intro we we are calling you

know deal-making in human psychology in crisis and and I think I want to introduce this section so given the discussion we just had and given what you what you just said you know strong player turn our pretty perfect product for a lockdown situation in general right video games are the financial incentives and you know lots of opportunity I think it's interesting to look at the human side of things also you know in our general spirit of this of this discussion you know we want to look you know ahead and you know beyond the crisis and the human side of things during a crisis is is always an interesting one to yard because it impacts deal-making in particular so a lot of done deals right I say done deals because you know people talk about deals whether it's in development or in publishing or or in financing or currently you know paused and and I think a lot of that is not

because either party is not interested anymore right so if if I'm a great development studio and I have a publishing partner and you know we have been you know in this in this dance with each other for a while my opinion of the developments to if I'm the publisher is probably not gonna you know go from positive to negative overnight and and the same holds true for the perspective of the development studio and the publisher but at the same time it's these deals then still you know go into a hibernation mode or or simply cut off because at the end of the day there are humans who are the decision makers and humans have a tendency to hunker down and wait right now rather than take action the reason is that at the end of the day I think we are we are hurt animals meaning we're strongly influenced by what our peers are doing you know it's like when everybody is

moving in one direction I have a strong tendency to follow and it takes a log a lot of cognitive power to actually resist that urge and in the end the the the question is always where's your attention right and where is our attention now there's a lot of insecurities out there first and foremost because this is bad nobody really long knows how long it will take and I think skepticism has an infected people's minds everybody's looking around what are the other guys doing and and what that quickly creates as a downward spiral where investors have a tendency to fall like dominoes and the defaults at before answer for certain transactions goes from yes to no right so I might have been you know very interested and you know it's like they were fishing around and all of that but you know there's skepticism hesitation and all of these things creeping from my perspective that has two consequences the first one is that some companies that were in a good position all of a sudden have the rug

pulled underneath them just because the timing turned out to be terrible there's I don't think there are there are any other reasons nope fundamentally it's it's still a good deal it's still a good company to invest in whatever it is it's just the timing is just killing it at the same time there's also a lot of opportunity out there and you're already you spoke about that earlier for the bold that are bold enough to swim against the stream and secure deals right now that otherwise wouldn't be accessible so those can be deals that became available because somebody else backed out those can be deals that become available because the asking price you know dropped significantly and all of a sudden this is you know within the range of what somebody can afford or it can even be deals that only surface because people running for cover and one out so example would be you know somebody was not in the mood to to sell their company and all of a sudden you know seeing what's going around them you know they might all of a sudden be be open to to be acquired or something so the bottom line for me is then this I

think in times like these if you want to be you know swimming against the current if you want to be a good deal maker and if you want to take advantage of this and and and find opportunity in this crisis and there undoubtedly is is tons of opportunity but you really got to be able to control your emotions which is something that's much easier said than done right what has always worked for me you know both during my my years as an entrepreneur as well as you know when it comes to to investments is talking to somebody that has a great understanding of the subject matter but that is neither financially nor emotionally involved in in the decision that you know I have to make so so in the gondola days you know we had a really great advisory board where we just had you know experts for all of the you know crucial area for us and I would frequently reach out to these guys when we were stuck and and just you know talk things through them

and you know I got a got a common collected answer nobody would ever make decisions for us but it was really helpful you know in in order to react control your emotions and see what's going on so in other words you got to find a way through all the noise in your head and assess the facts rather than follow the hurt which i think is a worried worthwhile exercise but as I said earlier it's much much easier said than done right in just a point in terms of getting input from other folks I would say that one other way to think about that is the way that a lot of like these hedge fund investment guys think about it which is if you have an opinion that's important you try to find really smart people that have the opposite opinion right correct yeah you can get that contrarian viewpoint as well but overall in just about that I I think it's you know people and and I don't want to get political here but they're you know we always accuse you know people of

different political views that they are living in this echo chamber where just surrounding themselves you know by the media and the people that actually have the same opinion and I think what you just said is super crucial you want to find somebody that is is you know well-informed and really smart but has an opposite opinion because then there are two possible outcomes right one could be you're actually persuaded that whatever your approach was is not the right one that you should you know back out of that deal that you actually should do the deal whatever is going on or the other guy might be you know well prepared and have a lot of good arguments but it doesn't change your opinion and it actually hardens your conviction and makes you feel more confident in you know staying the course and doing what what you were intending to do in the first place so either way you win and and I think that's that's really where where the magic of these kind of conversations is right in the one other just to add a little bit of nuance to that part as well is that I

think that the most successful investment guys have that approach because they have a lot of transactions in their industry and you have to be but I will say for industries where you don't have a lot of transactions which is like in gaming you know you make a game over two years and a lot of different and not to go to off-topic but a lot of different cultural contexts you just have to have the perception that you're right actually be ready so I think that we have in the gaming industry a lot to learn from the people who have to actually be right and to adopt some of those best practices but overall in terms of your assessment as far as the typical psychology is concerned I have to you know I definitely agree I also believe that one other way of thinking about this is from the perspective since we're talking about psychology in terms of motivation and fundamentally I think that people are either motive motivated by greed or fear but the psychology in crisis is as often confusion right so should I be

greedy should I be fearful and so while the market sees potential discount and let's say the equities market and asset pricing you don't quite know what to do so you don't know whether to be greedy or fearful and then how do you process limited information how do we act on greed or fear with the little bit of information that we have and so it's my belief that just given where we are right now you know April 1st that in the coming weeks we're gonna start to shift towards fear rather than greed as we start to see not only be effects of some of our sort of dumbass prevention policies around coronavirus here in the US but also impact on the economy from unemployment from excess leverage from excess greed but that's also going to be a moving target against most likely in my opinion a bunch of extra stimulus that's gonna be coming our way so I think kind of shifting back to gaming what was does this have to do with

gaming well I think that when we're thinking about psychology and to some of the points that you raised before is that I think potentially the biggest beneficiary or beneficiaries of the current situation and environment will be gaming companies that are structured in a way to take advantage of the situation and it's generally been incredibly positive for our industry but III think that a lot of smart rational marketers are going to be thinking risk-off right they're gonna haircut our P curves broadly flatten revenues but what if you have a game that has an incredibly long life cycle if you've got a two or three-year PPAC window and you're seeing attractive CPI is against you know the threat of to potentially short or medium-term hits to your our COO and LTV profiles because of let's say recessionary or depression area pressures well what do you do and again to your point before you know Warren

Buffett is famous for saying be greedy when others are fearful and cheerful when others are greedy this speaks to your comments on a herd mentality so if you've got a game that can absorb lots of game play if you've got a relatively uncapped monetization model you've got a long term time window on your game life cycle my recommendation against advice if I'm sure you know others in the industry right now would be risk level zone right yeah risk on so and since we're talking about psychology I think I'm the other way to think about the current situation for a marketer is in terms of game theory so you've got multiple game studios playing in the same game buying traffic with limited information in an option based marketplace where most likely the default perspective is going to be risk off with all the recessionary stuff happening so this situation reminds me a lot of this card game that I played a lot in college called guts or two card

guts and in this game every player's dealt two cards all the players get a chance to stay in or out of a hand whoever stays in battles for the ante if you're the only player in you automatically win the Annie if you're a loser you have to pay the ante so you can mend an and it can get really big really fast but if everyone else is going to risk off and trying to let's say discover paybacks or train taking down big haircut on our profiles you can win by staying in the game at skiddo the other sort of card game way of thinking about this is like in the game of Texas Hold'em going for a flush draw on the turn is mathematically a losing proposition but if you go all-in betting your opponents fold then you can actually win so yeah I think there's a lot to think about and I'm glad you raised this issue about psychology because I think the other psychological thing I think about during

crisis is panic and you know you talked about it as well but emotion so generally speaking I believe human beings make really shitty decisions when they panic so excessive greed terrible horrible decisions right right yeah because because all reason goes out the window in that moment and that's usually not so great yeah sorry but yeah excessive fear excessive fear kind of [ __ ] up your judgment that's just the fact of this life we live in and of our biology the Stoics knew this and they've got a lot of philosophies on how to live to temper emotion but above all else they have this concept of what they call a ruling reason or ruling principle is you know Seneca once said life without the design is erratic so without that structure that system you know things are just going to go a little crazy the investor Ray Dalio calls it a system or as the book he authored is titled

principles so I would also encourage anyone in this context of psychology to create a system for themselves I'm advocating for a decision-making framework prior to panic prior to excessive greed so that when you're trying to make an important decision or judgment about something or someone that you do so without being adversely impacted by ironic thinking a flawed process trying to make a kind of spur-of-the-moment ad-hoc framework because you're in a hurry and you miss something critical so the summary of this just to wrap up the section of what I'm trying to say regarding psychology is that one there's opportunity based upon psychological behaviors so having a game theory medical perspective I believe can meet the opportunity and secondly that is you know we've both kind of agree on emotions screw people up so have a system don't rely on critical decision-making without having that system and plan and

so that's the point there yeah just to wrap this up fully agree with what you just said I think as far as what that system is this is probably a highly individual decision right so I mentioned before you know for me I I have always been able to surround myself with you know a couple of you know wise people that I can reach out to in certain situations and and I think for me it's really crucial that on the one hand they understand the subject matter but simultaneously if they are financially in the same boat that I am or or you know like like emotionally right so it cannot be you know a family member it it cannot be a co-founder or something like that it's it's got to be a bit of an outsider but that's something that's very helpful and then as I think as far as you know since you've mentioned Warren Buffett before and as far as investments go they are just like some some general rules that you should follow you know when in doubt and I think you know what whatever makes sure of these kind of frameworks you know

diversification or whatever comes to mind it works for you if you have have them down so that in an amount of crisis and when you're overwhelmed and maybe even you're close to panic you can you can reach into into that toolbox I think that's really really helpful maybe not even so much in order to you know make that magic decision that you're looking for but just in order to get some distance zoom out a little bit and just you know collect yourself and enable yourself again to you know view this more objectively than than you were before I think that's already half of the battle right alright so the next topic for discussion is what do you and I do right now to adjust to this new reality that we're living in and so for me I probably had my least productive three weeks of my life these past few weeks and so for me I've adapted incredibly poorly to the new reality at least for right now and so for me it starts with getting the freeing moving some people call it making the bow go faster so whether it's

a boat or train or whatever you want to call it in my own personal situation I'm trying to get a new game studio going so I'm focusing all of my energy and actions now on what are the things that will make things go faster how do I get this tree moving as fast as possible despite the environment that I'm in and so unfortunately I think you know the perspective I think that people should have although it sounds a little bit bad is that really the world just doesn't give two shits about your life I mean Cronus doesn't give a [ __ ] that I've got a burn I've got a family to feed and so I think that you know I just need to get things moving whether there is a coronavirus or not the other side of that is about hard choices there's a great quote from Marcus Aurelius not to talk about stew it's too much but that states chasing what can't be done is madness and so you know as our

situations has changed you know this is the time you do need a plan you need a system and but sometimes you also need to make hard choices about paths and possibilities that make sense or they don't make sense and sometimes we want something so badly but our environment has changed that we'll just hold on to those things and so again chasing that is madness and sometimes for those choices that we'd like and we can't pursue it's basically you know again it kind of sounds hard but the way that I talk to myself is you know I tell myself don't be a [ __ ] you know deal with the hand that we've been dealt that might sound a bit harsh but for me and adjusting to the new reality is about that about tempering expectations about being realistic about making hard choices and stepping up to face what the new reality actually is waiting Nicholas I think well said and you know and spoken from the heart I want to pick up

just where you left off you know speaking off the hand that you've been dealt I mean you have made the you know card game and and even like Texas Hold'em analogy before and and I think that every new reality that you're confronted with has to do a lot with timing right so how does what happens right now coincide with other events in your life so we just go back to the card game right playing the hand that you're dealt that obviously has partly to do with whatever it is that you're holding you know like two aces are certainly better than you know two seven offsuit but at the same time it also has a lot to do with with timing you know what's going on at the table how many opponents are there right just sitting with you how many are still in this game how many have already folded what's your chip step right what what what does your chip stack look like when when are the blinds gonna go up again right so there are a lot of

factors you know outside that can be attributed to time and time progressing that you can control that are really important so speaking of you know how how do I adjust to to crisis and how timing is crucial like an obvious thing that I can say is I'm obviously super happy right now that we sold gone a lot last fall but we had multiple offers to choose from putting us in a very good position and it would have been a totally different story if we wanted to start this process right now and that's sheer luck it's just timing it's nothing else so you know very happy about that but then at the same time you just said you know yet the least productive three weeks of your life and I'm not sure if that holds true for me but I have also been seriously affected but what's happening right now first of all anybody out there who has young children and I know you do Joe and those young children in our home 24/7 and need to be entertained will know what I'm talking

god when I say it's tough don't get me wrong I love my kids to death but they require a lot of time and energy right now that I don't have for other things so that is already you know time allocation how do I deal with that scheduling my workday is therefore so much more challenging than it normally is which also then means that I have to make a lot of choices and you spoke about hard choices before right priority' is one thing over over another and on the one hand that really sucks but on the other hand from an entrepreneurial point of view there's also something positive there because it forces me to focus and that's generally like if I have a forcing function that you know where I sometimes say oh I have these three things and I want to do all at the same time and they're all great but you know because of certain restrictions I can only do one more often than not that turns out to be actually the better process and the more successful attempt or approach then working on all of these things simultaneously a concrete example that I can maybe share how I have to adapt to

my new reality right now so I mentioned during the intro that I'm now running a new business called 8-bit coaching where I worked with technical professionals and I had planned to officially launch that at GDC two weeks ago right well so GDC obviously didn't happen right so what do I do what does that mean yet do I delay the launch do I find a different channel to announce this you know what should I focus on and the answer for me is that while I can't go out right now and launch the business the way I intended to there's also an opportunity for me in this crisis so what I'm considering right now is to switch to a completely different strategy where where I don't just try to you know push through what what what I had originally you know planned to do but where rather you know zoom out and recognize that that times are super tough and that people are completely overwhelmed and and then I think about what that means for

entrepreneurs and specifically for for technical co-founders out there the demographic you know that I'm working with and and based on that I've decided that in certain cases I'm I'm gonna be willing to sacrifice a significant part of my salary in order to help these guys with what they are dealing with right here and now so rather than focusing or how do I launch my new business focus on who can I actually help right now and let the business and that launch take take the backseat and and apply my my skill set in order to you to do something good because I think that's the right thing for me for me to do right now I like to help these guys and and then with a bit of luck you know I will be rewarded with a few long-term relationships that can potentially open up other doors for me and then you know that that might then you know funnel into a launch strategy later again

bottom line and the point I'm making here is this in times like these you know rigidly sticking to a plan that you had and then you know be frustrated that it doesn't you know come along the way you had intended is is usually not the best thing to do I think you know trying to zoom out you know getting the emotions out and all of that and thinking about what right now makes sense how you can play the hand that you have been dealt right to to the to the best of your abilities and adjust to these new realities is something really crucial it's obviously a crucial skill set for for any entrepreneur or a business person out there but there are also new opportunities that otherwise would have not been there and and if you can you know just to use the old saying with a lemon and the lemonade if you can put yourself in a position like this I think that's a much better way to adjust to new realities than just you know having to deal with the with the

constrictions all day long right all right moving on moving on next subject so I guess we call this business model dichotomy and I'll just quickly introduce that so we have already talked about this a bunch here and now obviously getting back to Corona again but Corona seems to be dividing society into two camps in many many different ways the most obvious one is know people that are suffering you know from the virus right now versus people that don't but then we also see you know people that have savings right now versus people that don't have savings people that have a job versus people without a job or a job in jeopardy I said before you know much much more trivial example but people with children and then note versus people without children and tons of time to you know read books and binge watch other stuff on Netflix but for the

game industry I'm also seeing a division and and that division among lots of others is when it comes to Biddle business models right now so from what I am observing subscription models especially though those with a small monthly amount like somewhere between five to ten bucks look great talk to a bunch of guys and and everybody's telling me I'm seeing zero impact right this is this is all just you know chugging along so they are in a pretty fantastic position while transaction based business models meaning oh I'm making a lot of money if the deal comes through but I don't do a lot of them are hurting pretty badly right now both on the on the level of big companies as well as individual or freelance as we spoke about that before so I guess the question I would like to raise is that does that mean that everybody should go out there and do subscription services right now it's also going to be

interesting you know with these kind of experiences how will our industry be changed and and I guess for you what I would like to hear your take on is what kind of opportunities do you see out there as far as business models go well yeah so I think first of all I think you're bringing up a really interesting point which maybe we could just more generally call the dichotomy of coronavirus okay because what the epidemic for me has revealed is all of the dichotomy that exists in our society today and it I think it really goes across the board right from Republicans to Democrats from Trump supporters to Trump Peters to the way in which you know these very same people interpret the same set of limited data in different ways depending on their politics or to support specific world views and just to take this conversation deep for just a minute here I do think the current epidemic has exposed a really fundamental dichotomy between the way America is divided so to be honest with you and again just to keep that

deep and real for just this one minute whether it's poor white people and rich white people are reacting to this virus has really made me rethink what it means to be American I'll be the first and last person to say that in my view the u.s. is the best country in the world without question but really I will say when we speak of dye economy there is a part of me that is very concerned of where our country is headed based on the the economy of the people here of wealth in my view what's going to happen based upon increasing wealth and societal gaps but now stick it back to business model I I still have to say I agree with that and I'm worried about that too in but taking it back to business model in the theme of dichotomy I a bit further you just take that game a bit further I'll go ahead and actually take the opposite side of your argument which is to say

that I do think subscriptions do become more valuable when you've got a lot of free time but I actually think a transaction based free-to-play model in this environment is great and subscriptions conversely could suck now you need to have this is situational right so you need to have the type of game that can absorb especially from a free-to-play and mobile perspective can absorb the increased game playing activity and you need to have a monetization model that's not like let's say a heavily discounted battle past that limits your monetization but if you're sitting on a transactions based engagement absorbing unlimited engagement monetization model you're likely minting money right now so subscriptions with the same price but absorbing increasing activity especially for content driven games where you have to content treadmill I'd actually rather be on the opposite side of that now what

are the games that you know can benefit from the transactions it's not across the board it's it's a more limited set but I can kind of see both sides of that the dichotomy agreed except for one thing I I have to say I think regarding free-to-play this has to be rather offset with premium than with subscriptions so I think subscriptions are a different animal in the sense that it is a recurring service or there's a recurring service nature to them while both premium and free-to-play are very transactional either with a you know one time premium purchase you know I'm spending $60 in order to buy you know fancy Playstation for a game or or it's not a purchase rather licensing deal or a stager deal you know where the base layer comes from free and then there is a bunch of small transactions so I agree with what you're saying you know there might be more opportunity

there but I think that the you know what's going head to head is not so much subscription model versus for you to play I think it would be more free-to-play versus premium and and I and they're I would say you're definitely better off with free-to-play right now then then with premium in these times but I'm also sure there's somebody out there who would who would you know strongly argue against that and say right now you have no idea what you're talking about look at my data so it really depends but yeah other than that I think you're spot-on but I do think it's you know this this whole concept of Brown dichotomy you know society and business models and gaming and having the different perspectives and understanding your situational context against that dichotomy is probably a really good discussion to have but ok let's save that for another day let's close this this podcast out with the talk about our final topic which is how this epidemic could potentially

impact gaming longer term so we already talked about the potential financial impact but just to throw a little bit of additional flavor and specific nuance to that as well I think they ought to think about the financial impact is by looking at the impact of gaming companies from a stage perspective so for the one end for the large companies this should be great for stock price and the perception of value in holding a publicly traded gaming company as that hedge against recessions and things like that having a lot of great economic economic value for entertainment and for early-stage companies on the other side I'm hearing you know I think we're hearing a little bit of mix things maybe it's a little bit more risk off with the recessionary pressures but overall I feel like there's been a lot of increased activity in terms of friends that I know that have you know started getting the term sheets that have gone increased commitments to investment in their companies so that kind of leaves

the mid-tier right and I think they're left out a little bit and so if you play the typical try to grow and scale game at flat to negative margins you're likely feeling a bit exposed right now and the debt market is not looking so great right there's no nut so right now as our first topic and so as with all big crisis the other thing to think about is that you know we generally intend to overcorrect once we've had time to recover and analyze what happened and I think at that time I think people are gonna realize a lot of games missed a big opportunity more thinking about kind of what's happened right now both from a marketing and grabbing market share perspective as well as from a fundamental product model perspective not being able to take advantage of all the increased engagement and all this free time available to players so a couple things on that on the marketing side I think marketers are gonna have data from this

current crisis and if you give market a market or any curve or any bit of data they're gonna run with it so I think the next crisis that we have I think folks are going to be a lot more aggressive and there won't be as many opportunities from a market share in it sauce perspective but I do believe right now there's certainly a lot of opportunity and on the product side I think people are gonna try and really think about from a portfolio perspective having some games that can deal with higher engagement better can better absorb transactional monetization with that increased engagement and free time and thinking about live ops people are going to have events and promotions ready to go on this time to better capture share in people's attention so it won't be like the simple khaki you know 100% experience boost or tears extra energy type of dance we saw this time around I think the next time around the nest you'll see are gonna be specific more complicated more targeted and a lot more

effective yeah we thing I think you're raising a really interesting point especially your last comment here because I think one of the big questions is if the goal for the game industry you know but looking out has to be you know to adjust and adapt to a big crisis or should the question rather be how do we run with a crisis right so you know it's almost like carriage and horse right like how are you gonna do it so let me let me explain what I mean I think you and I and most people out there agree that the game industry as a whole will not suffer long-term in negative impact from this you know it's quite the opposite so we talked about this before and you know I think that's relatively well-established I also agree with your assessments whether your assessment that we have a tendency to overcorrect you think that's another human tendency that you see in crisis quite a lot but

what's the take away then take more risk next time around make bigger deals pull the marketing campaigns and you know double down when others hit rock bottom there's certainly some truth to that however the game industry is an industry that generates content and that content has been heavily influenced by live ups for many years you know as free-to-play came out you know live herbs really came about and now you know a lot of big games out there mobile certainly but but also you know console and PC have LiveOps needs right in order to keep audiences engaged and so so the question I think is like what's the play on live ups here is is is that try to be ready for the next time people are confined to their homes and have a ton of time or is it more that you that you could take an approach where you let the event is out there be part of the content so adjust the content

generation and the live ops in a way where part of the creation at the deployment is is linked to the to the events in the real world right and I actually know guys that I that have been working on something like this for for quite a while now and and I love chatting with them because it's just something really interesting and and the way they approach is is that the events that drive the content and the live ups don't you know need to be you know spun up in imagination but that they are influenced by events of the real world and those events by the way don't have to be you know a horrible crisis the way that we are going through right now right they can be driven by a lot of other things but conceptually I think it's really interesting or it's a really interesting question and yet another opportunity in the gaming space that could get accelerated through what we are all experiencing now the general idea of you know are we getting ready

for yet another crisis where people are confined to their homes by having a lot of things you know ready to deploy and doubling down or is is there a way to merge the two together and have you know real-life events be part of the narrative that gets you know injected or into games were merged with the games and and and and can be part of the appeal what what makes you know playing games in these times so interesting I don't know the answer but I think it's an interesting question right and I think that what this might actually speak to is some of the advice that you know we have in terms of having a system in a plan right so it might be more about having a playbook so the next time in around as we have you know shelter in place isolation policies or where you're gonna spend by the way you notice how we are already assuming that this is not the last time right I mean everybody's never it's not right everybody's calling it a once in a generation event and you know I'm 40

right I have never experienced anything like this and for me by the way the the single most see significant part of the experience is that I can't think of anything else that has happened worldwide right it doesn't matter who the person is that you're talking to everybody is affected by this to various degrees well a lot of other crises are you know either you know in one geographic right or or affect you know certain people you know in certain industries more than another's well that still holds true but everybody is affected on a day-to-day basis for this right now significantly so so that's something but then yeah the other thing I just said it's like we are I'm assuming the same thing I'm assuming this is certainly not the last time we have to deal with an outbreak like this and we're all thinking at you know what we can do better but sir interrupts this is yeah and it doesn't it doesn't necessarily have to even be the same thing right but in in the face of

increasing engagement or more freetime what is the PlayBook like let's say we're gonna see a spike in downloads how do you land grab against that in terms of events in terms of marketing in terms of things like that in the face of uncertain or pughnell TV profiles what's the PlayBook they're given the different kinds of games that you have and if you assume that people have a lot more free time and are gonna be consuming your content and much faster rate what is the plan how do you immediately understand okay this is a plan we're gonna you know ramp up our content by this much we're using these studios and having that plan in place is the way to more maximally take advantage of these kinds of situations whether it's from coronavirus or the next epidemic or something else but all right so that's I think that's it right I think we're basically done here and yeah I think I have no idea how long this has been but but I think we we we've been at it for a while so it's

probably a good good point as to you know to stop but maybe a final message just so we don't end on too negative of the note here is I would like to highly encourage people in this time given that a lot of people do have more free time to really do two things first you know we've talked a lot about this discussion in terms of systems and principles and I think in your regular life you because you don't have that much time to think deeply I think this is the time to do it so as the Stoics say hurry to your own ruling reason that the ruling principle right and so whatever your particular situation is what's coming for you I think creating a system to think through how to make the best decisions going forward will be very helpful know in my own personal life I'm both kind of talking going back to dichotomy fearful and greedy so like I've been sitting on cash for awhile so

the current investment environment seems pretty attractive and so I'm coming up with a system a structure for how to invest my cash in this environment where I'm greedy on the fearful side you know I'm fearful about what's going on with to start up on trying to start with my career with trying to feed my family longer-term so this is a part where I talked about like one not being a [ __ ] and stepping up facing the reality making hard decisions but also here calls for my opinion a system in a plan so you know my message would be please do think about this think deeply and create that system and plan for young specific situation and my final message would be that to your point when you talked about you know a lot of people hurting I think that I agree with you I think a lot of people are hurting right now that when you look at the statistics across America you know fifty-nine percent of Americans live paycheck to

paycheck forty percent of Americans can't take an unexpected cash yet of four hundred dollars and this goes back again to the dichotomy of the world we live in a bunch of other stuff that we talked about but there are a bunch of people with jobs and guaranteed income that couldn't care less right now I mean I don't have a care in the world they aren't hurting but I do think that now if you are in a position to help this is the time this is an opportunity to reach out to people and to help someone out if you can so I'd love to end yeah I wholeheartedly agree I I think I you know if I can share one more thing from my personal experience in crises doesn't really matter what the cause is right if the cause is this or if the cost is something you know in my personal life or in my business life or whatever but I think the single most

important thing that you can do as a human being is to keep on moving it sounds obvious but you know I'm speaking from personal experience you know if if if you are really under the gun there there there is a there's a deer-in-the-headlight reaction that's very possible right way just like freeze and you don't really know what to do and you get paralyzed and that's actually the reaction that makes makes a lot of things go go way worse than they otherwise would have to be so regardless of what it is that that you're facing and then what's going on if you can somehow keep on moving right even if it's just a little bit you know during that day if you can get something done if you can somehow make some progress that I think is the way to get yourself out of most situations right it's not always going to be possible but if it's possible then you know look for these opportunities because I've learned that

from a from a very dear friend of mine that I've known for you know almost my entire life and and and he's been a serial entrepreneur too and and he actually has has experienced bankruptcy and all that but then came back from it and and he taught me many many years ago you know you always have to keep on moving because when doors close other doors will open and I wholeheartedly believe that to be true this this whole story I think for for the United States for the world but also for all of us individually so you know be ready for these opportunities when they pop up and do what you can alright I think that's it thanks Niklas thank you Joe hey have a good one and looking forward to the next one sounds good bye