Blizzard On Steam / CD Projekt Cuts / EA Post-FIFA / Earnings Reports

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here very often we've got Aaron Bush co-founder of novik Anil desk Gupta co-founder of FirstLight games and Jonathan NASA CEO of clash TV and uh you have some things you want to run through real quick yeah well first of all excited to be here with this crew again uh the one thing I wanted to mention before we dive into the topics today is that the open gaming research initiative is starting to pick up full steam so you probably heard us um announce this effort in the past few weeks but some of the the pieces that we announced are are starting to click into place and get published so this week for example we published our first fully public game deconstruction and sometime with many more plans so this latest one was about Xbox's mobile Doom game and it unpacks you know not just the game itself but also uh you know the issues with Xbox's broader mobile strategy tactics with Levering with leveraging key IP Etc so Sonique uh our our great writer for that did

um an awesome job so recommend people checking that out and also next week we're publishing our first public uh genre report which will cover the mobile strategy and Card Market and having read said the drafts of that so far I think it's it's really great and and people are going to love it and there's going to be many more genre reports um coming in the months ahead too so that's just two examples of the open gaming research initiative picking up those are going to be two um pretty pretty packed and like great hard-hitting um reports so definitely make sure you're signed up and paying attention to to navic digest where we link to all of these things and even if you're not interested in everything there's definitely going to be some good stuff and diverse stuff that I expect you still will like and will continue to wrap up so just wanted to give a shout out to those two pieces and make sure people know where to find them yeah definitely I think if uh if you have it if you're not already subscribed then you'll find out that we're definitely blowing up your inbox with lots and lots of good content now uh which is you know

fantastic probably a lot of backlog for people to read but make sure to hold on to stuff for the weekend when you have some time if you don't get a chance because a lot of good content obviously a little biased there myself but I think some good stuff we've got also some great topics to talk about today day you know some prescient news here uh just a lot of different things that spread across especially the earning Seasons uh here got 10 cent taking over a majority shareholding of tech land which should be pretty interesting blizzard starting shift some gains over to steam interestingly uh some earnings updates around Ubisoft still front some other companies uh some stuff around Twitter becoming X and how that might also relate to Brand transitions with EA having to switch over to football club from no longer being FIFA so why don't we dive right into the 10 cent stuff here just kind of get the uh the media money stuff out of the way sure um so as you all might recall when we did our half year review a month ago one of the questions was what are you keeping an eye on for the rest of the year and my answer was essentially to keep an eye on the companies with

significant Capital um including those who have been pretty quiet lately and tencent being you know a prime number one example of that um and since we had that conversation in July 10 cent has broken its effective silence within the realm of games deals twice and so the first one was was actually a quieter announcement to fund Lighthouse games which is a new studio uh console PC Studio I think with the goal of becoming one of the UK's prominent AAA Studios so there was that and then second this week Tennessee announced that it's buying a majority stake of tech land which is a long time studio founded in 1991 and is at least currently best known for its work on the Dying Light franchise but it's also worked on a bunch of other um you know IPs over the year like Dead Island called Juarez Etc um so anyways it's a talented studio and with a couple deals happening within a month after a long Hiatus I've just I'm

just noting noting this and just saying I think we should still keep an eye on tencent maybe things are starting to pick up a little bit there but at minimum one of my my favorite uh games of the past couple of years dying like two specifically um it's heading over to tencent land do you expect that to have any effect on dying light as a franchise or uh like any DLC for Dying Light 2 or anything like that was there anything announced in the short term no I don't think anything was announced and Dying Light 2 came out of you know a while ago at this point so I don't think this deal is going to have any profound impact on you know that specific games plans but I mean maybe being able to to fundraise or sell sell partial stake it'll have an impact on the next Dying Light game the timeline's there the scope there some of the broader planning around that or maybe even some other um other IPS too we'll we'll see but I don't think we'll see any immediate Major Impact from this deal well cool

hopefully it turns out to be a good thing we see a Dying Light three just even bigger and better right it is as you said a great franchise and we hope that any of these kinds of transitions are generally net benefit for those those kinds of things and not destructive in some way but speaking of Transitions and moving things over uh blizzard so you need to kind of capitulate and moving over things to steam yeah this is super interesting so starting 10th of August uh you'll be able to play blizzard games using steam you won't just have to go through Battlenet although they do state that you will have to make a Battlement account so it's still going to be adding a little level of complexity there and the first game is going to be coming over is OverWatch 2 and specifically it seems that they're going to be launching that with their PVE story missions if you remember that whole kind of hullabaloo and hurray about that that we've talked about a few times that's gonna be a first game that we come over to I think obviously this is really interesting for a number of factors I mean one we know that these days Activision Blizzard actually makes more money on PC than they do console which is quite a big change for them and that's without going steam so I guess

this really made sense to like widen that audience even further from from what they've got there seeing that it's working really well I think me and Devin are particularly looking forward to being able to play uh Diablo whilst they're in transit stroke on the toilet maybe I shouldn't reveal too much information ever on our steam decks being able to play your favorite blizzard games I think is a big win um yeah I do think it's quite interesting I mean it's you know they've they wanted a few that with battle in there I feel they do have it or they did have a lot of success with that comparative to other launchers because of the quality of their products but I feel maybe the decline of Blizzard as a whole over many years now is maybe they they can sort of see which way to win this blowing so maybe I thought it out to the panel but that's certainly yeah a bit a big uh step of change I would say from them um and of course what will happen with with the the Takeover now going through as well well you know how that are going to tie into Game Pass and things like that I think it's very interesting because you nailed kind of the pivot that Activision Blizzard from console to PC you know during my tenure the big

news was actually ironically when Bungie became available on battlemet and it was the first time that you know an actual division title was available on the blizzard platform you know and that was about sort of the beginning of the shift towards the power of PC and now to see the shift become so large that obviously you know a massive PC gaming platform like steam becomes a beneficiary of the entire blizzard ecosystem you also sort of can't think a little bit you know putting your regulatory hat well they've been hugely successful opening the aperture to third-party platforms you know lessons any question you know around antitrust and anti-competitiveness so you know who knows this decision was clearly made before this announcement and you know given the strategy was it in fact another lever to prove that they're not building an anti-competitive distribution landscape I'll just add to really quickly that if you look at um like the earnings results of Activision it's been pretty clear that

blizzard has been struggling to you know maintain or grow it's monthly active users and even with the launch of Diablo 4 you can see that there are still strains um there so maybe it's even with the launch of Diablo 4 and the new users that brought on the company didn't really see an increase in users um you know too much you know quarter over quarter Etc which shows that you know there's some pressures on some of the other leading franchises there and I think just finding ways to tap into more distribution and adding more ways for people to get involved who is also at least partially a way to kind of help just get back to to growth in some sense esteem becomes more powerful of of force um you know this is just another Testament to the big companies still having to lean on on on these other platforms for their own growth Ambitions or else they do suffer too can I ask was it a conscious Choice from

Activision Blizzard to shift to PC or was that just the result of where the users move to because I do find that kind of unusual that especially with Call of Duty that used to be a beast on Console specifically right modern warfares especially so why has that not sort of stayed there's a sort of tentpole for them and it's moved to PC I can definitely understand mobile especially about activation in China and things like that because that's where you know those guys don't own you know so much of consoles and they can maybe move to but they'd be moved to more to mobile than PC so I'm just a bit curious because whilst I understand this move it does also sort of seem that like maybe they're recognizing that they just can't well Aaron just mentioned that their growth that they can't grow so they're just going to kind of keep sustaining what they've got maybe I bring too much into it I don't think it was intentional for shift you know again I go back to my tenure and there was three multi-billion dollar console IP right there were Skylanders there was Bungie and there was Call of

Duty two of them were Sunset and that came you know a couple years after sunsetting Guitar Hero which was another you know multi-million dollar console franchise so I just think frankly they've been unable to recrack the billionaires Club you know on console and excuse me and the hits that they've had have been sort of you know smaller scale you know the crash bandicoots of the world you know that said we obviously obviously know that the PC ecosystem is higher margin so if you can't find growth from Top Line growth you try to find growth from from margin and certainly you know pivoting towards PC if you're not seeing Top Line growth will increase margin so if you're under you know public shareholder pressure to you know continue to increase earnings per for share and you're not growing the Top Line your only pivot is towards where your highest margin customer is it's funny as well because this like you're talking about going One Direction but it's really they kind of seem to be going a lot of directions because for example the diable side they've gone towards the console a lot more right where you know they supported console

stuff with Diablo 3 they start eventually like late stagely supported uh switch uh and then like the Diablo 4 launch was a lot more across the platforms with cross play enabled and things like that so they seem to actually being supporting both sides of it with like a PC native game going more towards the console and then like the console heavy games maybe going towards the PC side and vice versa but you also have situations like where Call of Duty is also been on Steam for a while right like that's why I played the Modern Warfare 2 is on Steam that's not one that has to come over and I almost even forget it's on there I go to play Diablo 4 and I see it pop up with something about Modern Warfare I'm like oh yeah that's right I guess I could play it on here also and you have that with like EAS uh you know system as well and all these systems where they try to introduce their own thing even ubisofts they all still force their own logins and things like that but they also like give you this access now of course when they when they do that right they they go through seam they have to give valve a cut of that and obviously that's where like the compromise seems to come in right and and you know to Aaron's point is it is this a situation where they're

like you know what this game's not doing well enough that we are we're willing to take a 30 hit or whatever deal they strike to be able to bring this over to a platform with a new audience maybe even get some new exposure like from seeing what your friends are playing on Steam like obviously you're not gonna see what your friends are playing on Battlenet if you're playing on Steam and you know those sorts of like effects to grow exposure I mean is that like really do you think worth it for example for that 30 loss speaking of taking it Taking a hit here we've got CD project uh laying off about nine percent of its Workforce yeah so the era of efficiency continues and that's something we've been talking about for the past year or so and so it was just announced that CD projekt is laying off uh about 100 people which is nine percent of its staff which is a pretty big cut and another hit on a culture that is still recovering from all things cyberpunk and on one hand of course this is disappointing

especially for those it affects and it does seem like leadership is trying to be thoughtful about how these layoffs are conducted such as by giving you know several months advanced notice as to when certain employees will actually need to depart and stop working at the company but on the other hand it's really not totally a surprise given that the company has made pretty large changes to its product suite and one big example is that they are sunsetting all things glint the The Witcher themed card game at the end of this year and as of the last earnings report five or so percent of the company was still working on that franchise and it was actually closer to like 15 a couple years ago and so even with that main style of game um being removed it you know it has like natural repercussions for um who needs who needs to work on other

things and so the outcome of course is just going to be a slightly more focused more streamlined business and that's that really is a good thing and as we've mentioned before um you know what matters next for CD project is just crushing like the upcoming cyberpunk Phantom DLC to keep that franchise viable and humming and then of course moving on to the next big Witcher game and this is a company where those tent poles will Define the vast majority of the of what matters in the outcome for for this company um but but yeah through through that refocus saying um they're having to make some changes and so obviously this is big news for CD projekt but you know emissioning it more just to you know continue like pointing out the Milestones of some of these like broader themes that are that matter and are happening to the entire games industry and so again the era of efficiency it continues it's not over

yet so my question about the era of efficiency is in this new arguably bull market does that remove some of the pressure for efficiency with stock prices re-increasing at a rapid pace is Wall Street no longer going to reward efficiency or do we think this is a trend that's going to continue I think it's going to continue I think that um what I mean we'll see I mean no one really knows what's gonna happen next in in the market but what feels different to me is that in the 2021 era it's just everyone was rewarded for growth at all cost and it seems like um at least even if we are entering more of an optimistic stage in the market there still is more is more of a well-rounded focus on not just driving Top Line growth but creating actual you know creating actual value through

cash flows and such to to kind of determine which companies should get rewarded in the market and which don't and so I don't think we'll be returning exactly to the way um it was before um but yeah certainly in in some cases the market will be more forgiving I think but not not fully the same way but curious if you agree or disagree with that well I mean I just think as we're starting to see it's bifurcation right you know Tesla returned to a world of extreme Top Line growth at the expense of margin and was not punished right so it's uh where I I think we're recalibrating I agree it will not go to back to the the irrational exuberance of 21 but I think we may be recalibrating to not be so hyper focused on ebitda and efficiency and start to reward growth at least in select outcomes I think that's

fair I guess the question I have then was it like specifically a CD project but also like probably applying to some of these other ones that have had to like really tighten the belt is when they're when they're relying on on couple Deadpool franchises like this does that limit their ability to grow out of these franchises like for example uh cyberpunk was a new franchise for CD project right they were relying pretty heavily on The Witcher before let's say cyberpunk is not able to pick up the same level of excitement for a continued you know growth because of the big initial failure that it had uh because all the problems right and let's say the next Witcher isn't an initial hit do they end up in a situation where they're just really having to like think about do we just start cutting huge amounts of people do we need like more investment how do we like grow out of that situation when we don't have another franchise in the wings that we've been working on because cyberpunk kind of was that franchise right where it was like that was supposed to kind of help with uh you know the gaps in in The Witcher and things like that is that a problem when you're a company that only has one

or two franchises and you don't have any room budget wise to or people wise to be able to continue to expand that out well I think what Aaron says is kind of intruder you know gwent was really their passion project they kind of allowed their team to work on it thanks to all their good work from The Witcher so it's got to be one of those that's painful but is I think professional and pragmatic to say look you've got to work on either the witch or a cyberpunk um I think as we reach more of a consolidation phase and you know even some of the previous stories that we've covered already on this you know this week's Mets cast it's you know sometimes it's about maximizing what you've already got rather than going for something new that's more of a gamble to pay off so I think to be honest I think it's one of those that we I I you know I don't want to kind of repeat his words but I grew Vera and it's like it might be pain for them to do internally but I think it really makes a lot of business sense and smart going forward deploy your resources in the best possible way focus on titles that are more likely to do well and and just take advantage of that

yeah not all not all IPS are created equally not all games are created equally right like if they if they really go fully focused on expanding like the core Witcher game or building out the cyberpunk universe like that could be all they need to to Really Turbo Charge the business for the next two years and also to their credit they still are you know creating new games working on new projects this is less deciding not to work on new things and more deciding to stop working on something old that's no longer delivering as expected and so I think the conversation is different but yeah absolutely I think um you could recalibrate too hard in the wrong direction at some point but um but I think for the most part getting getting leaner and more streamlined on what you know matters most is generally um a good decision yeah I guess we'll have to see how that Phantom Liberty DLC does too in terms of like the future of cyberpunk right if that flops hard uh

there's a possibility they're just The Witcher game company again at that point uh depending on how things go I doubt they're going to spin out a ccg from uh from cyberpunk anytime soon although that would be I'd be interested in seeing that I I actually do own the physical copy the original cyberpunk ccg so maybe they could just bring that back I was going to say it has been done in the past yeah remember that too right all of that around yeah but that was the coast wasn't it I think it was yeah yeah but you never know you never know right like plenty of opportunities if you should like you guys said a passion project so maybe they'll even just keep cyberpunk going even a phantom Liberty doesn't uh work out especially with the transmedia success at least with the with the show which was kind of a one-off uh but you know you never know they might be able to expand out in some other directions I know there's like graphic novels and things like that also so you know maybe there's some opportunity there but uh you mentioned earlier uh Tesla we've got Twitter rebranding to just x uh so that's gonna be awkward for everyone Xing about this podcast yes so you know

I think we've got a couple of topics this week that involve branding and rebranding and also involve brands that have baggage Legacy potentially damaged Brands and let me sort of lay out the two scenarios you referenced you know we've got Tesla moving to X you know we're not talking about gaming specific but we're talking about a platform where you know a lot of gaming content is distributed consumed Etc and we've also got FIFA rebranding to sports FC you know that in and of itself not new news it was announced last year but now we see it in the marketplace there's a couple of layers to this right layer one is how much brand matters on top of like ux and experience right to the marketplace Layer Two is how much does awareness whether it's good bad or otherwise how much baggage is on that brand matters more than something unknown or lack of brand and I think if both of those levers taking place in both of these examples right

you know I think for all the hate that sort of this x-ray brand has gotten on the internet I think people have forgiven the baggage that Twitter brings to the table right like Twitter lost the scale War right Twitter's kind of stalled at 300 400 million users real Instagram meta and Tick Tock all went to multi-billion users right they never made money when they were a publicly traded company they were disparaged first as a platform for the coastal media Elite with right-wing background backlash and then after Elon Musk dismissed for being right-wing Tesla Fanboys you know so both ends of the political Spectrum have had issues with Twitter so I would argue whether X is the right answer or not Twitter is a brand that did not have all positive baggage right Twitter potentially brought a lot of negative baggage and so the question we're going to see is does a generic not particularly well thought out potentially trademark fraught brand

you know survive or not survive more or less than a brand that people somehow are having some Amnesia about the challenges around the Twitter brand right all of a sudden people have forgotten that Twitter was a challenged brand for a decade and it's like what happened to the Twitter that I loved you hated Twitter last week you hated Twitter last week you didn't love it right so why all of a sudden you love Twitter again X is not necessarily the solution and then as we move to the gaming side FIFA itself a damaged brand right if you go back a number of years the huge financial scandals around FIFA that sort of dies down and then you know there have been multiple articles written about the damage to the FIFA brand around this year's World Cup right and so a brand that was was not all positive is now no longer on a video game and is at a net positive or a net neutral right are people sure you know if I'm going to take the side of the FIFA brand is valuable somebody walked into the store they don't know what FC

is this isn't the game I bought before they're not sure they're going to buy the right game so they don't buy the right game or they don't download The Right game right it doesn't have the brand Equity but it also doesn't have the brand baggage right so I think in both of these examples we're going to decide or find out the marketplace is going to tell us is brand Equity baggage Laden or not more important than a last brand Equity with less baggage I was absolutely cracking up when you were saying some of the stuff about Switzerland X I was glad Jonathan tell us how you really feel right there it's not how I feel it's not the market videos I I was shocked and again it goes to how polarizing people can be yeah right you know like all of a sudden you know regardless of what you think about Elon Musk whatever he's doing now must be bad and again I am not saying X is the right word I am not saying he's rolling it out in a professional manner but all of a sudden all the things that people disliked about Twitter are forgotten and it's going to be interesting to see if all of a sudden the things that people disliked about

FIFA are forgotten right you know FC is nearly as generic as X right we've gone from like in both cases highly polarized highly known Brands to less polarized generic brand let's see what the marketplace says yeah I'll I'll touch on the the fifth one in a moment because that's pretty hilarious you're right to say that it's gonna how they came up with FC is got those but just on uh Twitter and X I mean I think that is relevant for games industry because I think influencer Marketing in my opinion is one of those things that isn't talked about enough is being one of the big Paradigm shifts and how games are basically sold to customers over the last 10 years but we've got to a state where things like YouTube and or twitch twitch is still not profitable despite being around for so long you've got to this kind of point where the top people are the top people it's hard for new ones to break in so how good is it really for getting out there it definitely plays a part in the strategy you know we touch upon it with blizzard with what they're going to do with

OverWatch and things like this but I feel like that is somewhere that is ripe for disruption and I think what is interesting I don't know if you saw this yourself on Twitter recently but they started sharing like what content creators were making and these guys were kind of retweeting it and I think that's like the big I know I say Innovation but it's probably the direction where it's going to go where people will say well look how much I made because I was a great content creator on this platform and without that one of the best things to create content for is games because it just it's one of the most efficient uses if you've got a great game it looks good I don't know about you but I feel like word of mouth or seeing something on on these sort of social media platforms really gains your attention like a little plug from me I don't know if you've seen armored Core from from software but boy that was a game that I I didn't even know was coming out and now I'm like I've I think my wallet's just been deleted of sixty dollars because that is that's gonna get purchased by me so that just shows you the the power of it so I think that is relevant and there is something they

could do there I would be interested to see though you know again kind of mentioned how you know IPS are not made equal content creation isn't made equal either these algorithmic feeds tend to be that the first sort of one to two percent they're getting early make all the bucks no one else can get in will this really change that model perhaps it will perhaps it won't like some of the rumors with this kind of x3 brand are that it will allow more kind of crypto payments and you know if you like a piece of content that you see you can donate or tip a little bit it's kind of similar to what you have like in WeChat in China which we know is kind of like where you Elon Musk has I guess is sort of ultimate aspirations where that product will go so even though I think the brown the three band is awful uh I'm kind of shocked as to like what Twitter's become recently I do actually find this stuff pretty interesting because I do think that there is something there to say that there is some disruption there in terms of influencer marketing that if we thought could actually be net positive and very powerful for games so that's my

stance on that then just moving on to the FIFA thing I'm a huge football fan so I kind of love talking about this this one I find very interesting so you know FIFA's been EA's one of their most successful franchises in fact makes more you know ultimate teammates I believe like 60 of their revenue yearly right so it's incredible that this game that was developed by the Canadian devs of all you know from their hockey game that they modded into a football game ended up becoming such a beast for them but what's happened behind the scenes is that basically FIFA themselves felt that they were not getting paid enough for the license that they were given and you know FIFA and liking money as you kind of aforementioned there Jonathan with the World Cup they are pretty corrupt and they will do anything to kind of monetize so actually EA's obviously decided Well look we're the ones that made the game and you know you stand to benefit from this as much as as we do so we're not going to pay this ridiculous license you made and that's why they've gone with this thing and I am curious to this because it's I can only think of one other time maybe

someone else can correct me here where I've seen something like this and this was also a football game where Sega bought um the championship manager IP and they wanted to make their own team of it and so the original Championship manager team made a game called Football manager and Sega went on to make Championship manager and like if you're a friend like wow I'm gonna get a two football management games for you now instead of one but what happened very quickly is that the football manager just won out because the quality was so good and they had like 20 years experience and you know Championship manager kind of died um and that was an example of where even though they lost the IP they maintained the fans and they actually strengthened the franchise if not weakened it and that's the only time that I I can remember and so I wonder if it's going to be history repeating itself so as you say they're calling it eafc 24 FC Bing football club I guess I I can't be honest that's one of the worst names I think I think if I had to name a football game I could think about a thousand things I suppose it's not offensive that's probably about the best thing that I can say from it but I am

interested as to like how they'll go from it because again FIFA you know fair play to EA do you remember when that Peter Moore came in they did this amazing job where Pro Evo was always considered the better game in terms of gameplay um even though FIFA beat it on sales and these days people just don't talk about probably but that franchise kind of died they tried to bring it back as a free to play version they never did that was impressive I think in terms of sort of like corporate gaming to defeat a rival like that um so now they're doing this and they're definitely putting us on the stop so this week they announced they work in closely the Premier League they've got a lot of the star players on the game and everything like that but I'll be curious as to what the panel thinks here is like you know are they going about it the right way will it affect their sales will ultimately it just be maybe like uh you know will they make as much this year as last year because what is going to happen is that FIFA will allow that IP to be used by somebody else and so I do imagine when that game comes out that when it comes the Christmas time if you're like you know a mom and you just

buy your kids their game every year they're gonna be like oh yeah my kid loves FIFA I'll just buy them FIFA and then the kid's gonna be like oh Mom why'd you give me this piece of garbage I wanted FC 24 and you're gonna be like what is an FC 24 and how does it relate to it so sorry I've thrown a lot of thoughts your way I'll be curious what the panel thinks about it no I think you're right and it's interesting because I have one more example for you right and it's not an exact corollary but it's when Guitar Hero IP was purchased and Guitar Hero went on with a different set of studios and rock band went on with the originals yeah yeah yeah yeah yeah you're right yeah not as quite as cleaning up the middle but all of a sudden you know a category of one and one clear leader became a category of two and did you support you know the studio and you know the Creative Vision of the studio or did you support the IP but I think you just literally described the worst fear outcome right it's holiday 2023 and Mum goes and buys FIFA and you

know daughter wanted EA sport FC and returns ensue right not not good for anybody I think it's going to be a win for EA a pretty clear win um I mean on one hand I think Gamers know what's up like they're they're pretty smart and so they're gonna gonna flock with um most everyone to EA FC um I also don't think FIFA will be able to turn around anything compelling um anytime soon um and so all of the discourse all of the all of the you know even like shelf space online discussion digital storefronts it's all going to be eafc like people are going to know um what what's happening there but the biggest one is just losing the that licensing cost even if there is a slight

dip to sales which I don't know if there there will be because so much of the sales is also on the you know like the digital add-ons over the course of people playing the game um but even if there is a small dip in sales margins are still going to go up and there's a chance that profits will be even higher even if sales slightly fall um and then of course you know even if there's like an awkward one year period um then everybody will just get back on the eafc train probably and it'll continue to be you know continue its growth engine of probably increased sales and higher margins and so I think this is a very value additive move on EA's part that's going to be hard to to compete against also I think EA has just been on top of this like they're executing the transition from what I can tell pretty well and communicating early and often whereas FIFA doesn't even really seem to know what they're doing yet and has since even um like announced anything um so so yeah I'm pretty bullish on on

the EA side of the equation but also like um not you know we've said that um you know not all IPS are created equally not all contents created equally but also not all brand changes are created equally um and so this one actually seems pretty straightforward FC is like you know a very simple um term that kind of means nothing um but I don't think that really matters in this case because people will know exactly what it is and it's not going to change any behavior um and and the way that players play um and but I was thinking back on just even just connecting to the the Twitter topic about just like how many successful rebrands have there really been and you know what like what are the commonalities when it happens and I think that that often you see like consumer products have like light brand changes and it's typically

typically fine when it is more like on the shelf or just people know what it is um and we've we've seen also a lot of brand changes happen at earlier stages of companies um where like musically turned into Tick Tock but before like it went like crazy um viral um across the West um and we saw you know like Blue Ribbon Sports become Nike but that was like before Nike was Nike and so I think there are examples where that works in the earliest stages and when it happens in the later stages maybe it's like you know Facebook turning into meta but that's a parent company and not like actually Facebook the product turning into something else and even like Oculus turning in the quest like that still is like very early stages for them so something like Twitter is is interesting and is almost counter in some ways to where like it it isn't in that upstart mode anymore they're not they're

changing the name of the actual product in a huge way yeah um you know not just like a company so I put a bit more skepticism on on something like that working out and being a good call unless like the execution of expanding the purpose and Mission is done really well which you know Twitter has historically you know as it said been like a clown car and that hasn't really it hasn't really changed it's a clown car that drove into a gold mine I think is what someone said at some point which I think is is largely true so so yeah I'm I'm so much more bullish on something like an EA transitioning like a The Branding around one of its products so everyone already knows and we'll stick with versus um an already established company changing its branding to then also start changing its purpose Etc so I don't think we'll see too many of these changes happen in the gaming world but um I'm more bullish of it working here than perhaps elsewhere in the world or

in other Industries I was going to say that my hot take is that I think five years from now it will be called FIFA again because FIFA will realize that it was much better to have the IP associated with this game than something else the the only way I could see that not being the case is if there's some sort of startup also based in sort of Saudi or something that really pulls out all the stops but I just think a football game is so hard to make from scratch like you're not going to catch up with someone who has 30 years of experience of like the animation needed the logic the gameplay the feeling unless you literally took the top people from there and got them to recreate it and yeah that's my hot take anyway I can imagine there's there's marketing channels as well that they've established with a lot of their fan base you know that are looking for being a yearly game right where where people are looking forward to news and updates about whatever the next year's model is going to be stuff like that uh not to mention other you know marketing channels that might be affiliated with their account in some way I gotta imagine they're been pretty proactive

about pushing that out to fans of the the game series like yeah maybe if you're new and you're like I hear about this FIFA game all the time and I'd love to buy the new one yeah there might be some confusion but I think if you've been buying it for the last few years consistently your your hardcore into it you're I mean really at the end of the day their target audiences the people who are going to spend tons of money on uh Ultimate Team right so as long as those people know that's that seems to me like where the revenue is going to come from uh and it's like whatever maybe we lose a few retail sales and as Aaron said like uh if they're if they're also shaving off the licensing costs might end up being a net uh positive in terms of like Revenue because they're like hey we retain the people spending money we don't really care about the few people who are like just confused yeah maybe some grandmas don't buy it you know come Christmas season but they probably weren't buying it for the the kids every year anyways they were just randomly buying one off if that's even a thing right we see also even like that idea of the the physical shelves going away more games starting to announce they're going to have digital only copies and stuff like that so maybe the

retail storefront starts to matter even less for that sort of Christmas holiday shopping and instead it's just hey uh give me a gift card so I could buy FC on you know my my Playstation or Xbox or whatever when Christmas time rolls around and I'm just gonna buy it on the digital storefront anyways like I don't think I think Grandma's gifting digital copies of games off of this stuff anyway so it's like you know a gift card at best so maybe that mitigates a lot of it um but on the naming side I think maybe they should just go with the Ultimate Team a little more on the nose right than they could have been clear about what they're really selling but I guess we'll see you know uh and I think on the X thing as well like maybe maybe just Eli making such a huge think about this publicly uh are you know just making this kind of this crazy thing everyone will find out about it so I don't think there'll be any confusion and and that would argue that maybe he's still in kind of startup mode given the amount of changes he's trying to make pretty radically to the company pretty fast but but we'll see this does seem like a bit of a maybe a slow motion

disaster maybe not but uh we have some interesting earnings updates across a variety of companies here want to dive into yeah so I'm going to do a quick earnings palooza and cover three companies and a somewhat rapid fire way just kind of covering the the most interesting pieces and then we can discuss whatever um stands out um so uh three companies Xbox Ubisoft still fraud I'll just go quickly in that order so first with Xbox within Microsoft of course if you look at the results right now it really is A Tale of Two Cities and that's probably unexpected Revenue was up one percent but essentially flat but content and services we're up five percent while Hardware was down 13 and so again probably none of that is surprising if you've listened to this episode or this podcast over the past year and understanding how you know Xbox has kind of been lagging behind um and and console sales but uh perhaps

the Silver Lining to all of this is that the company did see record active user engagement for this particular quarter which I'm sure was helped by Game Pass hours being up 22 percent over year over year and naturally all of this is going to change in the next few months but I I just sort of want to highlight it as as sort of like a final snapshot that kind of confirms where we're at in terms of knowing just confirming yes Xbox Hardware is still lagging but yes uh the content is doing okay when and yes you know they're doubly leaning into to Game Pass subscription and so we might just see more prominent um uh you know like double underlining and Bolding of what's already going on right now but just with just at an even bigger scale and in a few months so so that's just Xbox really quickly I just want to cover it because it might even be the last time we cover it um with the

current state of the business depending on when the the deal closes um the second company is Ubisoft which on the surface the results were not great and because there were light declines across the board Revenue earnings Etc um however there there were a few things that signaled progress and not all of this is new um Ubisoft of course is committing to their heightened pipeline that we talked about before which includes Assassin's Creed Mirage Star Wars Outlaws Avatar Pandora or whatever that game is called and and they also teased another unannounced big release they also confirmed that tencent through level infinite will be publishing the Assassin's Creed mobile game which we kind of saw coming but it's confirmed and I think that's going to be a good step for Ubisoft and mobile leveraging their most important franchise and also the CEO confirmed that Ubisoft will continue to take steps toward cost cutting and so it's just good to see that still be top of mind because for

this company as we've discussed before the success where they go from here really is a function of those two things turning around the pipeline in a big more focused way and actually delivering on it and two dramatically cutting cost and like lowering the bloat in this business and it's still not as dramatic as it should be but the market is taking it well and since we we we last talked and I I kind of called bottom and just saying you know there might actually be a turnaround here the stock is up 20 over the past month and I'm obviously not going to take a Victory lap after just a month is just 20 percent but the market is at least confirming that at least this partial turnaround um could be on on track so so anyways those are just my quick thoughts on Xbox and Ubisoft I'll pause there if anyone wants to comment on any of those before moving on to still front or I can just jump on in I think you made a really good point that this might be a last clean slap snapshot of right the current

Microsoft gaming and Xbox business before it's sort of gets co-mingled and I think you call that sort of the key trend lines because it was an Ever present topic on this podcast you know I can't I can't sort of like we have to go through and like sort of say like put the pin on it right which is like it is pretty clear now that the deal will close you know all remaining slight resistance will end be rolled back and that we're gonna see a sea change in the Microsoft business going forward today I think as all four of us called it it was my recollection yeah so final snapshot and then we can hopefully finally start talking about what's new and different and interesting about the combined entity but one quarter at a time um the the last company that I just want to quickly hit on this time around is in a completely different corner of the industry which is still front um and it's interesting because the

company's bookings were flat but their free cash flow grew 50 um and admittedly that might not be the best view since they're operating cash flow sorry for getting jar goody has also largely been flat but it's a major shift in focus on what matters what metrics matter and what type of results the company is trying to achieve and I suspect the largest lever of that free cash flow change is pretty heavily ramping down customer acquisition costs which you know honestly isn't great because that is the organic growth engine but working to optimize costs and get a slightly more direct to Consumer which they're doing too is is a good move and so today still front you know is a nicely profitable business but the other interesting thing I want to point out is that even talking about Acquisitions isn't

even a thing anymore it's not even being mentioned anymore by the business at least in any of their written materials and so still front has truly fully gone from their empire expansion mode to nurturing mode and it's in a better shape than like an embracer is which was just overly hyper aggressive um but it's you know it's really a group of these companies not even just a still front or or embracer that has so profoundly changed their tune in the past year and so it's just again just like along the journey it's just sort of like a note that's that's interesting to see and kind of and and you know just note that is is happening and I'm curious what you all think about this because obviously things cannot return to the way that they were before like when we talked about the market heating up this is not an area of the market that's heating up or becoming more forgiving it still is

very um people are very particular and critical because I think maybe the market has lost trust um in this growth by acquisition strategy and probably for for good reasons in a lot of ways but the thing that I'm curious about and I I'm curious what you guys think is what do these like previously hyped growth by acquisition companies even look like you know three to five years from now and when the market ramps up and M A starts happening more frequently again like how like how do these companies fit into that or will M A just be done in different ways than we saw in the last um bull cycle so anyways a couple things there but curious what what you guys think I don't think M A is dead M A might be dead in this case you know and as we talked about related to Microsoft there's been some regulatory pressure on M A but I think given the track record

and the f see in the U.S I you know I I think we're going to return to I as we talked about earlier sorry we're going to edit and we're gonna take this back so I'm gonna be a little more clear I started to lose okay related to your point about m a versus organic growth as I stated earlier about I kind of feel like a reversal from purefocus and ebitda back to some focus on growth given what's happened to the ftc's challenges and given what's happened to valuations in the public marketplaces I predict certainly not a return to the level of M A of 2021 but M A is not going to be as dead as it's been in the last six months and so I I predict and especially in like say the realm of Esports where evaluations are horrible and in fact you saw news yesterday that potentially FaZe Clan is being acquired um I do not think M A and gaming is dead

at all and I I predict an uptake in m a and gaming yeah I I agree with that actually I guess the the delineation I'm trying to make is that when M A returns I mean I don't it hasn't really left but you know if it like returns in some like higher volume kind of way it's the way that it's going to return be different and the kind of the main thing here is that I think M A can make a lot of sense when you have a strategy and you acquire something that helps you better achieve that strategy that that you have but for many companies Acquisitions were the strategy um and growth by acquisition was the game um and so I'm curious whether that side of things will will bounce back and if it doesn't like what do these companies that exist in order to primarily be growth by acquisition like that was

their their motive like what happens to those companies you know in like this next cycle that that rolls through I agree with you and you know I I think the market will delineate quality from you know lack of strategy and I think the canary in the coal mine to your question might be Vice and BuzzFeed right like if your growth strategy is just acquire stuff and raise more money you will not survive but we'll see a return to strategic acquisition and strategic growth and I think that's probably the best middle ground we could hope to land on I think we went from too hot to too cold and hopefully we'll return to some logical functioning Marketplace that neither the outsizedly rewards austerity or outsizedly rewards acquisition yeah well said I agree with all of that I feel that the Acquisitions went mad there was sort of no Rhyme or Reason to them now

they've gone too far the other way whereas like there's tons of good people out there but people are too scared from it and then when people figure out going oh like we're a great mobile developer and is a really great mobile Studio or we're a great console developer that makes narrative games and here's a great company that also does that then surely these dots will connect um but given current economic climate I don't think it really surprises me that right now you see next to nothing and as you say it will as the cycle it's a cycle for a reason it will come back I'm curious um I know what you think about like kind of the role that these some of these like more prominent growth by acquisition companies played in terms of being like a source of exits for like the the startup community and you know when people are creating mobile games or other games there are just a lot of options and interested parties um who are just looking to acquire and you know there's always going to be some of that you know coming from more

strategic lenses or maybe like you know a 10 cent will still be involved in building out its ecosystem in some way but do you have like any any early thoughts or observations on like how in the way that M A could change or just get more specific in this next cycle like do you think that'll have an impact on the startup landscape and how people kind of think about starting companies if their exits are potentially different definitely well I think we've seen a big change just in the last two to three years where a lot of startups these days tend to be more cross-platform more console PC focused than mobile the big reason for that is because acquisition changes really and that's the time to your question that is why it was so growth focused so I think what happened with the big players they thought oh right acquisition is dead so actually if you buy this game or this studio with these games that have combined 5 million 10 million daily actives actually if you look at it on the CPI basis it's quite

cheap it's like if you look at like when um Facebook meta bought WhatsApp it was like 20 billion or something like that and I think if you worked it out it was something like 6.50 per user that they were buying for but I would argue that now if we look at the current rate and probably a good deal to be honest if you were to extrapolate it like that so I think that was the reason why it changed so quickly and why people felt like they couldn't risk to be left at the station whilst everyone else was jumping on and then I think people have realized well you got carried away with that as you say maybe fundamentals are important stroke strategic Acquisitions so answering your question is like what it will mean for the space um see the thing is the thing that is all dependent on on what how the market is right so I don't think that was necessarily A a decision that startup Founders were making to go for that strategy it's just those were the ones that were being successful um I do know a lot of people who for example started making merge games

they're the ones that did really well because that was like the the hot thing on the market you could grow you could get the users but now that genre is really saturated and it's hard to break in so now there's a lot of people who made that decision are like stuck between the rock and a hard place and you know they've just adapted to what their market conditions are I mean that you could make the same argument with web 3D people thought okay this seems to be the way the industry's going so let's jump on that bandwagon see if it takes us anywhere etc etc will be the same with AI will be the same with whatever there is a certain thing to doing it but you know Jonathan hit the nail on the head comes down to Quality doesn't at the end of the day the ones who will always Survivor be the people that genuinely make great stuff um I don't know if you've seen it recently but there's three guys who made this game called battle bit not really a startup because I think they've been working on it for nine years but it's suddenly like hit the inflection point and turned the corner and if you play it great game you know okay it's got the kind of Graphics you'd expect that of three dudes making it in their spare time it uses kind of like very you know blocky type

characters and things like this but the gameplay is like fundamentally great so um yeah I do I think there's always that the danger here is that like people read the market now and then they will make certain changes based on that and then in two years time when they might even be at the possibility of getting acquired then it'll be a different flavor that is wanted and therefore the decisions that they made now will actually backfire on them hence like I say some people going for hyper growth or merge and things like this the best thing is always to go for quality but it is hard to deliver on quality without the necessary resources I do think that like um I would say certainly with like a lot of the web 3 startups I think the the big worry among some people is that they raise a certain amount to developer game but they didn't raise enough to truly finish their game and the quality that they wanted to because they were expecting that they'd get their second round so showing their traction so now they're in they're having to cut scope or reduce things and that's like a bit unfortunate because the traditional Playbook would have supported the way that they were going and they had the kind of rug pulled from

under them so you know it's not just those ones that's just a very recent example because so many people race so yeah I think that's a dangerous assumption as well is that what do you optimize for now and then it kind of changes so actually I think that what will happen is that you will get um Big M A going on just on growth again even though that's not the current fad because these things just sort of go in Cycles cool well hopefully there's there's good people left to pick up that's that's the thing is I wonder is is like you know you talk about uh we had these big waves right but it's like does it does it go from a buyer's market to a seller's market kind of thing if like if all the good ones were picked up then does that mean it's like well then you know you have trouble getting acquired at that point because the you know the thirst for acquiring the good quality companies is over or the the opposite where it's just like there's tons if you guys are saying there's tons of good companies left to be picked up then it's like well they're just waiting for you know the the checks to be written kind of thing and they're just biting their time and then you know it shifts right like because you get those those things like you said with Anil as well with with the what they're making and whether or not that's a hot part of the market and it's like you could end

up with those situations where you have these these Quality Companies making a quality product for a thing that's hot yesterday and then just their boat because they weren't one of those M A's that happened during the time when there was just large checks being written and so it it sounds like a real struggle of timing as as all these markets are right I think it always goes yeah I feel it always goes that way though right like that that is literally what happens is that it goes cool then someone buys someone and then they're like what the hell you're telling me you could get those guys I didn't even know that they were available to be acquired how can we miss this so then they go okay what's the next basically people just go down a list and people keep taking them and that's why you end up in a situation where we did where some of the ones I'm not gonna name sudo so I think that would be unfair but there were some Acquisitions that were going for like hundreds of millions of dollars when they had our best Apache record or you know just one sort of semi-successful game and we're way overvalued so then that leaves this sort of place where then okay no one's gonna buy anything right now and it'll go back the other way that that will kick start again if

someone will just pick up a great studio for a price that just seems like barking basement and yeah yeah everyone not in their heads because he's seen this happen like time and time again it's like you know you can set your clocks here almost I imagine it all it all starts to scatter some of the talent around as well right so then you see them scattered in new Studios to potentially be acquired and uh either cycle continues as you say but uh you know we'll see as the money turns around in the market of course because you know like that that goes in its own cycles and the seasons and everything else right it's all it's a try and time it as best you can but uh yeah let's let's get stuff I'm sure we'll be hitting this up you know pretty regularly as m a season picks back up again or when as you as you said a nil when when one big purchase happens and everyone gets excited gets the checkbooks out again we'll be right back on that train uh so look forward to that and hopefully it's uh the right people on the next time around as well but uh definitely a lot a lot of good stuff today I think yes for of course joining me great conversation as always thank

you to The Listener for coming out for listening and uh of course make sure to hit us up at the uh the old mail bag if you got any feedback stuff you want to say topics whatever uh at podcast navic dot Co and of course as uh Aaron was mentioning at the beginning make sure to subscribe to the digest a lot of good stuff happening there a lot of Articles a lot of deconstructions all kinds of stuff as we're really starting to ramp stuff up and I think it's a great time to make sure you're trying to stay on top of it as best you can alongside of course the podcast so you know not just this one but all the other ones we have here uh but in the meantime we'll see you uh next week if you enjoyed today's episode whether on YouTube or your favorite podcast app make sure to like subscribe comment or give a five star review and if you want to reach out or provide feedback shoot us a note at podcast navic dot Co or find us on Twitter and Linkedin plus if you want to learn more about what novik has to offer make sure to check out our website www.navic.com there you can sign up for

the number one games industry newsletter navic digest or contact us to learn about our wide-ranging Consulting and advisory Services again that is www.navic.com thanks for listening and we'll catch you in the next episode