China's Regulations / Microsoft & EA Earnings / Apple’s Legal Challenges

[Music] welcome to the navit gaming podcast where it is our mission to explore the business and future of video games we bring together the industry's brightest Builders investors and thinkers to keep a pulse on current events dissect emerging Trends and games share Lessons Learned and have a great time this podcast is also part of novic growing ecosystem which ranges from free and premium research to Consulting and advice services for more information visit [Music] www.nic.edu zeid provides a plug-in playay API and SDK for seamless integration of instant borderless and low-fee payments using the Bitcoin lightning network with fees less than 1 cent zeid Powers over 4,000 developers across sector

processing millions of transactions monthly you too can unlock the potential of borderless transactions to better engage and monetize your Global user base including the unbanked and simplify the way you handle payments start for free at zeid doio integrate with just a few steps and monetize your experiences again that's z. or check out the link in the show notes and with that let's jump into the episode hello everyone welcome to another novic Roundtable I'm your host Devon Becker and with me three great panelists as always Dave Matt and Felipe how you guys doing great thanks Dave I think you had something you want to share with everyone yeah absolutely so um I wanted to announce uh in conjunction with Navi that I'm starting up a fractional coo and operations consulting services so these days we know the teams are focused on making great games um but everyone needs to make sure they're also focused on having a great business and with the reality of the games business today many Studios

want to focus their cash on those games and may not want to or be able to afford a full-time operations person so a fractional operation spell Specialists can help ensure uh you structure your business for Success while focusing on a great game so the services I'll be offering are around production company pipelines and processes such as overseeing HR recruiting Finance uh as well as you know helping with business development uh and contracts um and for those really tough questions if don't have the answers on hand even though I'm bringing you know 30 years of experience uh to the table I do have an extensive network of experts to be able to call upon so um y looking forward to uh seeing if there are teams out there that I can help you know it's a very interesting time inside the industry a lot of people you know looking for uh for new roles and a number of people thinking about starting up potentially new companies or companies trying to figure out how can they do the best at stretching the uh the funds that they have uh so instead of hiring full-time

staff you know looking at uh some some people to help out be it uh you know fractional coo as what I'm offering fractional CFO or such so uh details around it will be in the show notes and uh yeah I'm really looking forward to uh helping out anybody that I can awesome well how how should they get a hold of you through novic or you directly uh either way so uh through either Dave von.com uh website again will be uh inside the show notes um or through navic uh navic will be able to point uh Point folks to me as well awesome well I'm sure you've all heard quite a bit of Dave here to know that he knows what he's doing and what he's talking about so hopefully uh that'll be a great a great thing to see kickoff here this year as uh like you said a lot of people may need that as things Shuffle around quite a bit I imagine this year in general so awesome well great to hear Dave we have a a full just docket of topics today uh as well

as a Full House of people so I think a lot of uh great stuff to discuss we'll see if we get to all of it uh but we've got some stuff around China and their uh gaming restrictions maybe maybe a pullback maybe U-turn 10 cent on on a similar topic but uh maybe not the good news that they would hope to be sharing uh EA and Microsoft with some earnings and more discussion around Microsoft in general after their acquisition some layoffs uh Apple in a very interesting spot in general we'll definitely be digging into that one and then just some uh statistics we've got around uh young Gamers and smartphones versus consoles so why don't we just jump right into the first one around China and relating to the uh the proposed band and why don't you recap the ones that were up as well make sure people know for context yeah yeah so China proposed some some some bands uh on several widely used mation tactics uh from its uh like by the government and the proposed bands had included like daily login rewards in incentives for repeat or firsttime

Spenders uh I would say like many many of the monetization tactics that like many like not just Chinese games but like maybe GAA systems that I use like for many many type of games so this was like really really I could say dangerous or like problematic for many companies like Bas the business model is based on those and like they like May face and in certain times trying to figure out how to change and adapt to to the regulation H indeed the adoption I mean the the adoption by the market was like the the stocks for several Chinese companies like really drop heavily H after this announcement and uh it was taken as very severe changes uh which has like like all these criticisms probably has uh forced the the China government to to make a a U-turn and remove these these proposals

uh or at least like the the web page that was hosting this like is no longer having them um and I think like the market also has like responded to this and like several of the of the company stocks have like regained uh some of the value I don't know exactly if to the same level or not but at least like it has been perceived positively by by the market so so yeah this is H the update uh I don't know what would do you think if this is something temporarily while they work on something that maybe makes more sense or is something that is still could could be applied without creating like a huge harm to to the existing companies or is something that they will like take it back forever uh correct me if I'm wrong here Felipe what I had heard I don't know how true this is but like I I had heard that the original intent of the restrictions was to limit them to children rather

than all Gamers and some of the um backlash and concern from the Chinese game development industry was related to this unexpected application of these restrictions to all gaming um and uh that was at least in part why there was this like vitriol and and and backlash like my thinking is if that is the case um so these will come back in some form or fashion right like um I don't think it's fair to say that it's like open season on game development in China by any means like there's still going to be restrictions there's still have been restrictions historically um so I would be surprised if these don't come back in some softened uh paired back fashion but I don't know did did you hear the same thing um when you were doing your research this was originally intended for children but I feel like it was long time ago that they

they had something like more focused on on children and I think also like limiting the the time they they spend on the game not just like like attacking the monetization this time I didn't see like that was only for children I thought like it was for trying to protect all the customers uh so I don't know if others have have heard something yeah I didn't hear whether or not it was for children only um you know it's been you know any thing around the announcement is uh world you know across everyone um and maybe that's why the uh you know the the hammer fell on the people that did the announcing that the announcement was wrong potentially that's why rather than the people that are actually building out the uh um the terms themselves uh I do expect that they will be back in some manner uh you know China's continue to say that they're their main goal is to protect the children um but I do know that they also have uh you know some some desire

to protect the populace as a whole uh given some of their other restrictions they have in place but I agree I think it will be back um I think they're just going to do a different a different roll out yeah I'm reading now I think like part of those word tailor specifically for for children like for instance loot boxes cannot be sold to Children uh but the others were like generally applied to anyone like the daily login rewards and all that like was for everybody I think it does make a little more sense for China to be doing that targeted towards kids not just because well in general that kind of makes more sense to Target those things but also they have more of an ability to enforce that because of the previous stuff that was mentioned around enforcing hours where they were doing like an hour a day uh on these specific days and like they were really curbing big time the amount of kids can play games and they would do that through things like facial identification with an ID and things like that to actually verify uh that it was a minor playing or not now of course kids get around that especially they happen to look like their siblings that

are have not be minors they tended to find ways to get around that pretty easily but it did have there was an enforcement mechanism uh and I do like I think this is stuff that we could see eventually roll out towards the us or the EU around like you know we have like the Copa stuff uh that has been a big deal like even I I believe there was like you know a number of lawsuits around like that fortnite even just had to settled like epic settled around Market stuff to kids or selling stuff to kids and there's like it's a constant ongoing battle obviously China can do a bit more top down enforcement on that whereas we're kind of like you know peac mail laws and things like that but this does sound like something that you know e even if uh it doesn't roll out here anytime soon is very likely to probably come back to China because they seem to want to kind of weaken the ability of games to kind of have a strong effect on the populace for at the at the Young level to make sure that you know they're doing their studies and stuff like that I mean obviously can't speak to their objectives but that seems to be the pattern uh and very likely possibly to and the question is of course like what

amount of the audience is Kids versus you know adults because if it's all kids then obviously you're targeting everyone right like then it then it is just the same effect as if it was applying to everyone so I mean we'll see where that goes but on the topic of you know affecting Chinese stocks and things like that uh I believe 10 cent was one of those ones that got hit by that uh and they had some maybe not so great news uh kind of reflecting back recently as well uh yeah thanks de was it interesting the 10cent recently had like their annual meeting uh I guess it was at like a a stadium in in shenzen um and so this news kind of leaked out of that it was sort of unnamed sources but um the coverage of this was interesting which I I'll come back to in a moment but the headline was that the CEO of tensent Pony ma he's also one of the co-founders um was quoted as saying that their games business quote achieved nothing during 2023 um and this is obviously like attention grabbing for the largest

gaming company in the world to have achieved nothing in 2023 maybe that's um putting it a little bit strongly um but uh that you know he cited that some of the new games tensen had launched had not performed as well as the company had hoped but didn't reference any specific titles um for reference gaming is 30% of 10 cents Revenue I was actually surprised I thought it would have been higher um and the stock is down about 29% from a year ago uh today so year ago end of January um so certainly it's taken a hit um you could say that a lot of Chinese stocks have taken a hit in that same time but uh worth noting um and then you know I mentioned earlier the coverage was kind of interesting um when I was doing some Googling around this um this report you know you see Reuters says 10cent Chief says gaming business under threat but they're catching up on AI but the South China Morning post says 10-cent chairman pony

m sets confident tone for internet Giant in 2024 so by the way both of these things can be true um it may be that he had a confident tone but that he was down on the games business and was looking for improvement in the coming year um and and of course this is related to our our last topic um when those restrictions were announced on uh Chinese gaming um you know 10 cent and others netes and what have you their stocks just went in 10 and then when the restrictions were removed their stocks rebounded um so you know I thought this was interesting um tensent is still the biggest gaming company in the world do you guys think that just because they've had some um some underperformance let's say in 2023 according to their CEO that they're in danger of losing the crown whether it's by their own um efforts or macro conditions in China and and gaming conditions in China like any any concerns that they might be over overtaken by another company were there

companies that had Optics last year I think I think it really was an industrywide situation um and in terms of their stock uh I think so it did rebound some after the um the new terms were paused by the Chinese government but I don't think they recovered all I don't know that any of the Chinese stocks really covered all and I think that's in part because you know people are still building in the that those will probably still come back in some form or another so I think there's still worry for uh for 10cent and for nettis and uh other uh Chinese companies in terms of what they'll be able to do Revenue wise in the uh in China um do I think they'll lose their position number one no no they're they're a behemoth they they own um you know some uh some Blue Chip stocks I'd say inside the the games landscape uh so

I really don't see them uh seeing any threat to their Crown this year um I think they're going through a lot of the same challenges that a lot of companies are right now in terms of what their results are comparative to a year ago two years ago and and where things are going just in general uh an overall General sense um I mean tensen companies have gone through a large number of layoffs as well um they've been uh you know doing the same same sort of approach to how they're uh G how they're handling their game companies yeah we just talked about Riot being part of that recently as well which is under 10cent and uh you know I'm sure a number of their companies had to do a lot of scaling back but there was I mean it is worth highlighting there despite all like the the stock problems going on in China like the economic problems especially real estate things like that there has been some positive as like things that have happened uh two of which in in the some reason future one was around when this the announcement of that restrictions happened they also uh passed through a

whole bunch of approvals on licenses which they'd been kind of holding out on for quite a while I mean say what you will of the typing that maybe was like you know let's kind of distract from that or whatever but it did it did offer an opportunity especially for a company like tensent that does a lot of partnering to then start to allow companies you know start to get back games back in to the country uh and then on that same note you know we just recently talked about uh nety and um blizzard activation blizzard like kind of making up and then that could lead to the instruction games like Diabla 4 uh and bringing some of the other blizzard games back and that could also again help with that so that if that trajectory continues that could still be good for recovering for 10 cent but obviously that's a big if right because they tend to be hot and cold in terms of those game approvals and for all we know that you know none of those blizzard games even get back into the country you know we can't really be sure on that but I mean in terms of a Microsoft activation blizzard all that we actually switching over to them had some earnings reports along with EA to discuss uh yep so very quickly I'm going to

start off with uh EA and then we'll get to Microsoft um so EA released their earnings report for Q3 of fiscal year 24 so the three months ending uh December 31st uh their revenue was uh 1.95 billion uh net income 290 million uh net bookings overall 2.37 billion so breaking that down their revenue fairly flat uh up 3% year-over-year uh their net income up 42% year-over-year uh and their bookings again was flat about 1% um a couple of noted uh a couple of points to note inside there uh so their live Services uh accounted for revenues about 1.71 billion up 3% year-over-year which is uh I believe a new record for uh for the live Services inside the company and Life Services now makes up about 73% of EA's total

revenues um and then but on the other hand so if you look at what the full game sales were like uh they were down about 5% uh year-over-year uh and down 27% uh compared to the third uh third quarter two years ago so you know going back into when the games industry is still seeing their Co High um but I think one of the real bright spots was uh EA Sports uh football club uh continued to outperform expectations again this quarter it delivered about 7% year on-year net booking and this is compared to uh the last FIFA which also had World Cup attached to it so uh typically the you know the yearly version of FIFA that does really well uh when the World Cup comes around every four years um so overall I think the Highlight for them was that you know uh they made the right decision when it comes to um you know stepping away from the FIFA

license uh so there's still you know football clubs doing really well for them uh but overall was uh fairly flat um now and this also does uh you know take in account uh that there are they they don't have some of their uh big titles or big franchises coming out this year uh no Battlefield and no uh no need for speed uh so switching over to Microsoft uh so Microsoft saw total revenues of around uh almost 16.9 billion dollar uh inside the Xbox content and services and revenue group um now interestingly we're curious to see what uh this is the first quarter where we actually see Activision Blizzard uh as being part of that uh and it certainly uh ended up offering some ups and downs so overall Revenue that that brought uh into the Xbox group was

uh just over2 billion um but they did take some uh some hits in terms of uh costs associated with the purchase uh so overall the operating income was at a loss of about $440 million um so definitely some pluses and minuses there uh looking at the very short version of the p&l impact of Activision uh once you remove those costs uh it would have been a net positive um so it'll be interesting to see how they continue to uh affect Microsoft's bottom line um but they certainly did you know talk about some of the the large amount of growth they had in terms of not just Revenue but also um you know time spent inside now Microsoft Activision Blizzard games um so adding a lot of Engagement inside that overall Microsoft ecosystem well cool I mean it's it and that's good news right because that was a long time coming in that that

acquisition obviously very expensive especially all the stuff they had to deal with going through all the concessions and everything like that and those concessions themselves may end up being like long-term a little bit expensive in terms of like maybe not being able to do the exclusivity of Call of Duty they were maybe hoping to you know quietly uh it's things like that I I'm curious too like what impacts something like King had um we talked about Activision Blizzard side but it's actually really Activision Blizzard King and Candy crushes still kind of doing quite well on mobile I believe it is and they're still they're bringing out new um adjacent titles to the the Candy Crush franchise uh trying out a bunch of new games uh in very quiet soft launch around the world so uh it will be interesting to see how the the king side uh increases their revenues over the next while as they release some new games um but it certainly has uh you know a lot of benefit to the Microsoft but certainly a lot of turmoil overall

not to uh put you on the spot here Dave but I'm wondering if they reported um Game Pass numbers uh from the items that I saw from the areas I was looking I didn't see a breakout for Game Pass numbers um I'm GNA go my personal opinion is I think that they probably are continuing to have some growth but not a lot of growth right now still not being able to match the numbers that they want to be able to hit with the with Game Pass okay yeah no worries um for for context for the listeners we're recording this podcast after they released earnings what after market hours last night so it's still still quite fresh I gotta imagine those those Xbox uh pass numbers will be important because that the company seems to be betting a lot on that in the future and and it would be interesting to see if and obviously they probably won't report anything like this if it's not good news

but what effect that's had on game sales because like there's some of the big you know the the day one launch titles that's a big seller for the past but also the risk of cannibalizing game sales now if those aren't first party titles may not have matter I mean obviously Starfield is kind of a first-party title but like some of the stuff like you know say payday 3 or some of the other ones uh that were kind of big ones but that maybe people were skeptical to play may have impacted sales you know in a situation where demos aren't normally as readily available as they used to be for example now you have the ability to try it on Game Pass first yeah and I do expect that we'll probably see um some continuing testing around monetization similar to what they did with Starfield where uh Game Pass subscribers you know will have access to the Activision Blizzard games uh day one but they'll have the opportunity to have some some upselling available to them you know through exclusive content content or um you know exclusive timing

Starfield subscri the Starfield players were able to get uh access a few days early if they um if they purchase some uh some um know some DLC above and beyond what their game pass offers yeah I guess we'll see I mean on the topic of of Microsoft activis blizzard also there was a number of things going on there around some some layoffs some uh position changes to fill uh Bobby cck's void things like that if you want to dive into that yeah uh a big time of change at Microsoft and Activision so the I mean the headline is the layoffs of course like there was uh 1900 employees at act Xbox and Activision uh let's say Xbox gaming broadly that were laid off and this represented something like eight% of the entire Xbox gaming uh Workforce um so a pretty meaningful reduction in force um this uh was was

joined by the news that um the president of Blizzard was stepping aside Mikey Bara as well as the chief design officer Allan Adam who was I guess a co-founder of Blizzard as well uh leaving the company um the survival game the the often cited much anticipated Survival game code named Odyssey at blizzard has finally been cancelled after more than six years and develop um so that's I mean that's sad I was kind of excited about that um but um in terms of uh you know shuffling the the deck chairs the new leader at blizzard uh is Johanna feries I apologize if I'm mispronouncing her name um she comes over from Activision where she was the head of Call of Duty Esports for like 12 years um and before that she worked at the NFL for a long time um and I guess there is there is some concern rightly

or wrongly that um she's an Activision person coming in to manage blizzard um and this is what you might interpret as like the last um I don't know um checkmark or success for Bobby kodic in in terms of like installing Activision Executives at all of the subsidiaries um you know blizzard King whatnot um so it's it's certainly a big change and uh for for her part she seems cognizant of that concern um she released uh or the organization released her statement uh to all the employees and and she seems um to be recognizing um that uh I think I have a quote here yeah walking into this role with sensitivity to those Dynamics very different organizations and cultures um so a lot of changes at Activision and blizzard we know that they're going to be integrating Activision uh sorry integrating um yeah

integrating Activision Blizzard King into the larger Microsoft organization we've heard talks about maybe a mobile app store coming um they referenced several promising new projects that blizzard has in the early stages of development um but at the same time letting go a lot of you know certainly really talented employees hitting the market right now um what do we think is next for for this behemoth in the industry and I'll just leave it there for now I have some follow-up questions but what's next for Microsoft what do you make of these moves well I would say it's like the normal consolidation right like and probably uh in a different uh Market situation you would like let a bit more time to do this consolidation but probably at this at this stage and like with the uh many many companies stting the bels that they have decided to do it faster right like rather than than lat either uh I don't know I don't

have like much inside knowledge about this um and then I would say that this is trying to make the the integration more efficient as soon as possible right and trying to have like different heads doing the the same thing in different ways and like being harder to to to to focus yeah I think the integration is going to take time uh they're going to pick the items that they want to get uh figured out as quickly as possible I think part of that's going to be what their green light process is for projects going forward uh just because you know they're just the the large amount of cost associated with those um and you know when it comes to games that have been development for six years and not as and you know and still not ready for prime time then I think there's always going to be some questions about will they ever be ready for prime time um and where inside you know the the the previous blizzard style

of uh greenlighting games allowing games to continue on I think there will be a difference in you know Microsoft Style versus blizzard style and as you start looking at how they can um you know start bringing the the Microsoft culture in I think the green light process is going to be one of the first things that they're going to start looking at and I that wasain Reasons Why by the end of this though blizzard won't look anything like it looked like a decade ago because they were already kind of in a process of like sort of being taken over by Activision people like to an extent in terms of just kind of control of what the company was doing creatively in a lot of ways and obviously like the survival game getting canceled is probably part of that like you guys said the green light process you're you're not g to see the blizzard of old right where they're just kind of working on quote unquote sort of dream projects and long just stating sequels to to hit franchises and things like that yeah I mean because that's you know that's not Activision style right like they they pump out the call of Duty games every year they're not looking for for these long gation periods and now with this

bigger sort of takeover people leaving the company I got to imagine like at this point whatever kind of sort of Independence blizzard had is kind of mostly gonna be gone by the end of this uh I mean that it it could be for the better don't get me wrong that Microsoft might be like hey we actually really liked what you used to do and you know shake up things for the better but realistically I think at this point blizzard that kind of we all knew is pretty radically changed this point and a lot of the people are gone so I'm kind of curious what like the identity even of Blizzard looks like going for especially you know they can all this orts stuff obviously like that did work out super great with OverWatch uh I don't think we're g to see like Starcraft 3 all of a sudden or something like that you know Diablo 4 did pretty well as you mentioned the the earnings reports as well like it had a positive impact there but I don't see Diablo 5 getting instantly green lit for the off this or uh you know it's it's going to be interesting to see I mean we they did have the art the Warcraft game come out though which was kind of an interesting like sort of in the middle of this process getting put out but it's like I

do wonder what does blizzard have left to release after this because obviously they released you know expansions for world Warcraft but that's kind of a a little long in the tooth and uh you know they've got the two life service mobile games they can kind of keep going for a bit assuming those keep making money but I don't know what they've got I mean obviously like feel free to enlight me if if there's other stuff they've announced but outside of that Survival Game I can't think of a lot they've mentioned publicly and this kind of leaves it like are they just gonna help on the next Call of Duty game at this point I I do wonder what they're gonna be doing going forward uh that they want to be doing or you know at this point you've got people again leaving in the middle of this and possibly because of decisions like that we'll see yeah I mean blizzard has seen a lot of their long-term staff depart over the years I think even before this happened I think a lot of people would say you know the blizzard of three years ago wasn't the same as the blizzard of 10 years ago um but yeah I do think that you know as you

look at the the Topline infrastructure you know the the sea Suite of uh ABK I do expect to see some changes um especially in more the Activision Blizzard side just because that's more of Microsoft's wheelhouse they have their own exact team already in place and we'll want to have that um you know them staying in as the the the command group for the um for the the new version of Microsoft now including uh Activision Blizzard on the other hand I mean I don't really see Microsoft really being that company that does wholesale changes to cultures of of companies you know like if you look at um you know Bethesda there there hasn't been you know huge reports of Bethesda being absorbed into the the Microsoft uh Borg ship the same as what you typically find inside like Electronic Arts for example where you know

the the um the reputation for EA is that they just absorb everything into the EA culture and everything must be the EA way whereas I think Microsoft still allows um you know that the culture of the individual Studios to to be maintained um so I don't really while blizzard has changed over uh the last number of years I don't expect that they'll be um forced to really change you know 100% away from what the wizard identity is you guys are really hitting on like what my follow-up question was going to be um I think like the the two the two sort of reasons that well two of the biggest reasons in my opinion that this um acquisition uh gets so much play so much coverage is Call of Duty Activision and then blizzard like you know we as let's say more experienced Gamers senior Gamers um you know we grew up with a certain like image and brand around blizzard and their sort of

legendary titles and oh this is like you know place where creative Geniuses are pumping out these amazing games but you know I think you guys hit the nail on the head like that's the past like the founders are all gone the ogs are all gone they've all started their own other companies or they're working elsewhere um when's the last time blizzard released a hit you know like Diablo 4 was I think pretty successful um as a launch but as an ongoing service I think remains to be seen Warcraft uh Rumble I think is a really fun game personally I think it's a lot of fun but I don't know that it's going to be a successful long-lasting product um so you know what what's as as Devon said like what's in the pipeline um sh should we be excited I think that's like your point Devin like about them becoming a Call of Duty support studio is hilarious it would be the ultimate irony I don't think that's going to happen U but uh I think it's really fun funny um so I I guess my my

point or like question if you will is like does the blizzard brand the name like really mean anything anymore or is it just like a an artifact of our sort of collective Nostalgia for Starcraft and Warcraft and and these legendary games I think it's still a bit of both I think there's still some of the blizzard name there but that's more about what are the types of games that are going to come out of the studio um you know I agree it would be hilarious if well actually no it would be sad if blizzard became Studio number 612 to work on Call of Duty for Activision but um you know I think there still is relative feeling of what a Blizzard game is and I think they'll probably continue along those lines um but you know blizzard has gone through the same thing that Activision went through themselves where it was they're going to take a look at what are their what do they consider their key franchises and if something's not a key

franchise if it's not you know anticipated to provide you know X Millions hundreds of millions of dollars to a company Revenue then it's they're they're going to get shut down um you know I still remember blizzard as of you know lost Vikings blizzard the very very early days of blizzard and and they certainly took a lot of chances on things and they had some fantastic games and and and different styles of games but I expect that they'll be they'll you know they've been streamlined and I expect they'll they'll stay probably that way um for the firstable future it would be kind of interesting to see if this like sort of acquisition led to some Mobility over to other Microsoft properties like let's say the blizzard people are like ah we're not really doing RPGs here anymore but I'd love to be doing them and move over to uh you know bethesa for example because they clearly need some development support it seems like at times as well maybe a bit more than Call of Duty does uh so it

would be interesting to see maybe a little more Mobility across these obviously that could happen you know without being part of a bigger umbrella company but you know in these situations where there's rather than leave the company Al together and just kind of go out into the the woods so to speak like maybe there's some opportunity for some cross-pollination between these companies for some of those overlaps because bethesa say falls into that same sort of like old school you know uh back in the day computer game company that has been around for a long time made a lot of kind of somewhat beloved franchises I mean pretty much Elder Scrolls games for the most part but like you know they they made some cool Terminator games as well I don't want to I don't want to forget about those but uh there is some some opportunity there for these two to kind of work together stuff like that I mean we'll see obviously right I don't want to believe it the point because it could go a million different directions uh but one of the things you mentioned earlier as well uh Matt was around the um the the idea of them potentially launching an app store which of course you know would be would be pretty interesting in general and and that kind of leads to the other sort of big topic that we have today around that maybe the opportunity

for that opening up through some legislation on Apple so yeah I think this is a big one uh so according well Apple will open iPhone to alternative app stores but that's what they say but like what really they announce is a something that we we will discuss I guess for sure um so first of all this is just for the EU the European Union and it's in in regards to the dma the I forgot the direct direct markets uh how is the the digital markets act uh so this is um to to get the everybody on the same page let's start with what's the dma is and it's like a a set of rules uh from the UA to try to um prevent some practices from Gatekeepers and they mention Gatekeepers like companies like Microsoft Google uh Facebook Apple in this case right uh and

it's aiming to to try to avoid them like having self preference to their own products and I think that this case of the App Store uh belongs to to this one uh also like fostering data access and interoperability uh forbiding to to bundle services and then the customers having to have more Services than what they really want or need and having some advertising transparency to according to this uh uh legislation that will start to be applied in in the EU uh soon then Apple has proposed a solution specifically for for the EU um so they have unveiled the this plan uh that will allow users to install apps from outside of the App Store and use alternative Payment Systems as well uh the changes uh they

will take effect in March and will apply to all iPhones so in Europe I I think like it would be like directly applying to new iPhones and the existing ones they need to update to the new version that is coming with this in place uh with this apple will also lower its commission rates for in a purchase from 30% to 15% uh for developer that use their uh payment system and uh well they say that these changes will increase the choice and competition for app developers and consumers in Europe so like meaning that they believe that they are really compliant to uh what is required by this new legislation in the in the EU but uh there are some some things that are not so uh maybe publicly or transparently mentioned and this is something that we we could get to in more detail in a minute um but before that like well they

have been complaining that with all these uh the Apple ecosystem will become a less secure a less private space and it would be more dangerous to the to the users so that's probably why they have started the campaign about privacy one of the reasons probably was this like why why they started so so long time ago talking about privacy and what privacy was so important for for the them um so then on the things that are not like like the the other side of the kind so uh Apple has uh introduced some limitations to like who can uh create a new app store and what happens to the companies or uh developers that that enroll with this other app stores and basically what they're introducing is a a new um chart that the they will charge developers a fee for for every annual

install that goes beyond the the first million uh and developers can avoid this fee by remaining on uh Apple existing terms that means like not using uh third party storefronts or uh payment other payment providers uh meaning that this this this fee is optional and they can choose whether to to stay with the uh current terms and stick to Apple App Store and not use like third Department Services of they were they're really willing to to use these other services that they will be charged this this this fee uh and like it it looked like that they were trying to copy uh Unity because basically it's a very similar to to Unity runtime fee and I think like probably indeed was their intentions in the response from the unit to run time field so not any developers wanting to to have that so they say okay well if

you stay with us like you don't have to pay that that you don't want so that's the alternative probably they they choose that very very much on on purpose uh so what what do you think about all these moves what do you think about this cor technology fee that they would uh introduce uh well there's a couple of other things uh and some of it you know similarly is a little bit buried uh but one of the items in there is that um if you go through the developer terms if you decide to accept the business terms to allow you to go to a different um uh a different store you cannot go back they have stated flat out it's in their the agreement that you sign that if you stay with apple rules fantastic you get all you know you know exactly what it's like if you go this new way you cannot come back

um what I've heard but I still need to confirm is you know what what affect that is is that on a per game basis is it a companywide basis um you know can you have some games that are inside different marketplaces and others inside the Apple um knowing Apple I would probably suggest that they would say no it's all or nothing either you as a company follow uh you know or maintain the Apple rules that you've had up to this point or you go into a different store uh and then you know that's it's everything everything goes across um you know they've uh provided some calculators that allow you to kind of figure out well what does this actually mean in terms of the fees that they're uh still going to be asking for um and that uh you know Apple will also still be looking at uh trying to review the games that are available in other

stores not just the games inside their store I'll be interesting to see what they can do in terms of you know forcing takedowns of of games but uh they they still want to as you said want to maintain not just the privacy but the safety of uh of any apps that are are are usable outside uh iOS devices um so yeah I think the question is has has Apple reached their moment in terms of runtime fees and everything um it's interesting that you know the the same level of outcry isn't there in that um Apple has said hey yes we are uh you know we are in um in compliance with the with the new ruling around the marketplaces um but I think if you look at what they've done in the EU what they've done uh in the US and the Netherland South Korea in terms of their alternative payments when the it's just the alternative payment side that's

being forced um you know I I do think that they are kind of you know skirting within that yes we've uh followed the letter of the law but the actual um you know what what the intents were behind that um they're doing their best to make sure that still uh Apple is the winner not not the developers or the or the public um yeah I I I I think still trying to maintain as much control as they absolutely possibly can uh even with the court systems around the world trying to force them to open up open up some oh yeah I mean um it's interesting you make the comparison to Unity I think maybe one of the biggest points of difference here is that Apple uh is good at messaging and obfuscation where Unity kind of fell flat um but I mean let's be clear like this is malicious compliance um like it's it's really bad it's um uh you know you it's not just game developers who speaking out on this like

Daniel e the CEO of Spotify um was just like laying into this uh on social media and it's like it's not great like they're they're just um kind of giving the finger to developers like which is is not that different from what Unity did um apple is huge and they're going to continue to like move the goalpost for as long as they can to extract every sliver of uh profit that they can while they have this position of power you know uh we as little guys or mediumsized guys depending on where you work like don't have a whole lot of power to influence this uh at least not on an individual level collectively uh certainly there will be push back from the development Community for from uh big game Publishers um and obviously from other companies like Spotify um and uh you see some some other areas of resistance like for example um I think Spotify and Netflix and maybe a few

others have stated that they're not going to be um releasing apps on Vision Pro for example look droing the bucket for Apple like barely but uh it's something um the long-term concern would be like do developers start to abandon Apple um because of this anti-d developer stance um because clearly the the consumers are not at this point um so like who who's gonna budge first I I don't know I don't think it's gonna be apple yeah I and I think there's also the one of the other differences between unity and apple is Unity started off as a friend to the developers they were you know embraced by the development Community it was about all you know it was about you know the the tide raises all All Ships type of experience a lot of love there Apple's always been about Apple you know the number one the number one thing Apple's wanted you know always looked after is Apple and and I think this really is just a case people just

going all right here we go again it's just Apple looking after apple and as you said you know the consumers are are not making any changes the the amount of Revenue that you know developers would be forgoing if they decide to abandon apple and just focus on Android um it's just it's it's too much I think people will just suck it up and and take it unfortunately um I do hope that uh you know the the complaints not only by the developers and that um Tim Sweeney already has gone on multiple multiple TI rides about uh uh the various things that uh that Apple's done um uh so hopefully we will see some you know continuing movement on things um I think for me the the one plus side uh of of the recent Apple announcement has been the uh the game streaming apps finally being allowed on on

iOS um and that being worldwide but uh but yeah I think outside of that it's been a lot of frustrating news out of the changes that Apple's been been making but I would say also the the difference is that un did that like out of the blue without like anybody expecting it and here is like apple is saying okay like we are forced to do changes and like we allow you to keep as you are or like because we are forc we need to like do some changes and this is the changes so it's I'm not the bad guy it's the EU EU commission that is the bad guys so matet I think is like uh it's a they communicated much better I still think this is definitely like falls under that malicious compliance and I'd like to see that become a catchphrase because you're talking about Apple being good at messaging and like maybe some counter messaging and marketing being needed to really put the pressure on uh

it especially to the point where hopefully at some point users care not just developers like that idea of like malicious compliance and them like kind of sort of just spitting at the system sort of thing like through multiple court cases now not just this one would hopefully at some point make people go you know maybe Apple actually isn't like the friendliest company like they've convinced us they are when it comes to looking out for us obviously the price campaign was a great way for them to make themselves look like Hey we're looking out for your best interest when it could be argued that there was a lot of monetary incentives for the strategy that they employed so it would be interesting to see say you know some counterplay from Google for example because Google while they still you know are a little bit looking out for themselves and things like that can be a little more developer friendly uh and then especially you know there was uh talk during the trials of like trying to you know bribe Microsoft and things like that maybe there's an opportunity for those those two to like hey if you want to release an alternative app store why not do it over here on Android and we'll actually set

up some good terms and like make it a good case for you like and and maybe that starts to be you know something that maybe chips away things because Microsoft is also very developer friendly they've got a huge you know stable of games that they've just basically acquired through all this obviously like uh it would not look great if they made them exclusive to one environment after that whole thing with Call of Duty but if it's not Call of Duty that maybe that won't be a big enough deal but this this does feel like Mafia protection racket kind of things like oh we would hate for something bad to happen to you you know uh because one thing that's you know not said in here that I guarantee is gonna happen based off of how they complied with the uh the alternative payments is when you go to install something from an alternative app store it's going to pull up a scare screen be like whoa whoa whoa we can't we can't vouch for this like this could be bad like the way that uh you know Google does for the unauthorized sources because that's what they're going to treat this like hey you could install from from these stores but you know hey like it could just blow your phone up in your face we can't vouch for it and and there's also the other aspect which is still going to probably require code

signing uh from the the xcode side and things like that and certificates even if it's going through an alternative store it's still going to need to use the encryption all that stuff of the phone which means if a developer doesn't comply and things like that and they're like hey you know we want to like cease and desist that app they probably can just block that developer from being able to deploy apps that can be installed on the phone regardless of the source so Apple's still in the driver's seat here and clearly like making that that very obvious and I think as they implement this stuff it'll become even more obvious because we saw that when they start releasing the screens for how the alternative payments would work you could see it was even more malicious than you thought it would be which with the scare screens and stuff like that so I got to imagine like this is going to continue to push and see how far they can get away with because the problem is again that if the consumers don't care that doesn't offer a lot of power unless developers straight up say we're not going to release any good games on your thing and you're going to be at some point just left with nothing left on the platform but that would require like a a huge effort of you know Netflix pulling out Spotify pulling out as well and all

these other ones Amazon pulling off like all these ones that uh are not happy with the the ecosystem there especially around alternative payments just going elsewhere but that would also mean Google would need to put sort of a good welcoming environment there because Google also has their payment uh you know restrictions and stuff like that but if they were smart they would be like hey just come over here like we we'll be your homie and like even if it's only for a short while that could be enough to put a serious Dent uh in iOS if it were big enough I think but you know specula I wonder if it pushes more companies to look at uh crossplatform Play Just because they can then get you know Apple doesn't allow you to really push and say Hey you know go do all your purchases on the PC but you know through some decent UI you can certainly make it more interesting more appealing to purchase on you know platforms outside of the outside of uh iOS well the xcloud stuff is already like you said they're allowing that now so that will be actually something that is crossplatform because that's played

on Xbox servers which means they'll be playing with XX players yeah I believe it always does the Xbox servers for all the games that I've seen but yeah there might be some that do with the PC side as well and they they just put Power World on there so there you go you know everyone could join in on that as well uh potentially on iOS in the near future but uh speaking of uh smartphones versus consoles uh a study around young kids in terms of what they prefer maybe shifting absolutely so um the maggot Games Team uh which is a research uh company uh took a look at where players are being introduced to games um and I think a lot of people they they kind of have it in their mind that you know kids start off with the Nintendo as the uh the entry point into the games uh you know the games world the world of games um but magga did uh both quantitative and qualitative research talking uh with folks both their kids and their parents uh went directly into

their homes spoke with people from ages uh 10 years up to uh around 44 according to the report and what they've said is they certainly have seen a change in terms of where people are being introduced to the world of gaming and you know how long is it before they start um really taking um you know switching them terms of from Mobile to console and so forth so you know in earlier days you know they may have started off with a Nintendo handheld is sort of their first system um but when talking with 10 to 12 year olds these days uh 37% of them their first game was on mobile and interestingly for me the second platform uh was actually PlayStation at 19% uh before they got to Nintendo so um and that stays pretty consistent between the ages of 10 to 15 where uh you know

that those the vast majority of the kids were introduced to games through um be it a mobile phone or through a tablet um uh as compared to being uh introduced uh on on consoles um some other interesting facts uh by the age of seven over 80% of kids play video games monthly um and then uh 97% of kids have played a game by age 10 uh at age five 3 or 38% of kids uh have tried games um and so if you look at uh what that means generally if players have been you know introduced to the world of games through mobile and that still stays you know fairly consistent L high in terms of uh the kids you know the the the new generation of of Gamers playing on

mobile what does that mean in terms of um where the mobile industry goes uh what does that mean in terms of console uh are we going to see more crossplatform play uh as you look at the games that um you know are you know the games that we typically pull out as the ones being really successful for the younger generation be that uh Minecraft be that Roblox um be that fortnite you know you're playing these across multiple platforms you know fortnite I'm sure now that streaming and the alternate stores is uh coming around fortnite will make it back on the on iOS um you know are kids going to be looking at um more and more uh mobile as sort of their their platform that they remember fondly the most as a kid so you know growing up you know I I played the the NES I played the SNES I played psychogenesis as well but you know NES

was sort of that really big PL console to start off with um and you know that that helped ingrain Nintendo as you know that that quality provider of games does that mean that the kids that are growing up today are they going to have that same level of fondness for the iOS ecosystem or the Android ecosystem and will we need to make sure as we're building out games that we're making sure that we're covering off the mobile so really trying to work on that those crossplatform games um you know there's been a lot of questions around the mobile you know mobile uh business overall as it's become harder and harder for uh companies to do effective UA does this mean that the because the the upcoming generations of uh of players are still going to have a large focus on mobile that as an overall business the mobile industry is still going to stay

really really strong overall uh it's G be more of a case of trying to figure out how to better find those players directly um so overall I think some some really interesting statistics out of it um uh a couple of other pieces uh in terms of overall entertainment music takes over from gaming is the top entertainment activity uh By the time uh player has reached the reached the age of 18 um and the uh younger audiences are looking for uh definitely those social experiences that offer the crossplay uh abilities so you know we're playing Roblox uh or Minecraft as uh as examples again um so yeah so thoughts on you know now that we've got generations of kids growing up with mobile games what does that mean for the for the mobile industry versus cons console and PC uh I mean one thing I think it's important to delineate is like when we were growing

up playing Nintendo or or Sega or whatever like we weren't fans of the Nintendo or Sega ecosystem we were fans of the IP and so no one's going to be fans of like oh like well I don't know maybe not there are Apple Fans but like I don't know you grow up playing smartphones on your Apple like it's I think it's more about the IP and the games that you're playing I don't know about that I remember Nintendo versus Sega flame Wars oh my God those were hard I mean it still exists today right there's Xbox PlayStation flame Wars Android uh uh iPhone U battles for sure um I guess you have a point there but I I feel like it's more about the IP of the games that you play growing up than it is about let's say in larger part than it is about the U platform on which you're playing them um but um to sort of bring it back to like the data you know look it makes sense to me uh sort of intuitively um let's just say you're a

parent um and you want to see if your kids are interested in games or you just want to keep them occupied uh it's easier to download a free app and hand it to them than it is to go and buy a dedicated console um so I'm not entirely surprised that these are the findings although it's good to get some actual data behind it um and I don't see why this is going to change moving forward um yeah those are sort of my high Lev kind of knee-jerk reactions it's not just buying the the console as well it's also buying the game yeah I feel like my feeling is that like it's more like the platform relates more to the parents specifically at some 1 age than than what the really the kids want right like uh I don't know if you parent is a gamer and has a an Xbox you're going to be an Xbox player until like maybe you are a PS fan but until like you manage to to get a PS in your house is going to be extra right so like in this case is is that like parents hand

the the the mobile phones to the kids and probably even the kids are the ones that install like whatever and get the game right like I don't know I'm tired of YouTube and then I install the a game or I see the ad in YouTube I click it and whatever right so it could be even that like that that's why they they they start uh like like playing in in Mobile because they don't have access to to other platform right keep in mind also that like a lot more core games are coming over to Mobile so like obviously like the GTA ones were getting kind of like scooped up under Netflix there was just a new Devil May Cry game that came out uh on mobile like there's still like a lot of penetration from core and then the other direction as well like Roblox fortnite all that stuff on consoles that's crossplay potentially with mobile and things like that I think maybe the maybe the lines start to blur as well in this and we see like well smartphones is just what they have access to all the time uh you know because they're you're you're out and about or whatever it's easier to give them a smartphone as Matt was saying like it may just be pure

exposure at that point combined with the fact that more often than not the games are free to download so there's a like a higher chance they get you know the game because they don't have to ask someone to buy it for them and more often than not people parents aren't doing a great job of like securing you know the passwords to install games or to buy stuff or whatever anyways but it's I gotta imagine a situation where it's just as Matt said kind of inevitable or kind of like obvious from the situation the question is can they can consoles claw that back right like if Nintendo at least has the most popular handheld like there's some opportunity to like maybe chip away at that because part of the reason for the the smartphone or tablet being popular is it's handheld and therefore like you could shove it in their hand at the store or wherever you're at you need to keep them busy uh in theory you could do that with switch although switch uh maybe isn't as easy for for you to do that with potentially but switch to maybe who knows maybe they'll design for that give it some nice big uh you know like plush uh casing on it so it doesn't die when you drop it but there's there's opportunity and I was even just looking at like some

other analysis the other day trying to figure out like what kinds of games kids are playing and it was still a little bit of a mix between you know the Roblox fortnite all that stuff and still like Nintendo games it seemed like when it came to console where some of the more popular franchises like Mario Wonder Zelda things like that are still I think have some hold but it's clear that like this as a study shows like that's receding right like Nintendo is probably the one kid-friendly company out of all this uh and so that's I guess why this is a bigger deal because you're losing maybe the more kid-friendly one to just random mobile games I do wish this was a little more granular in terms of the number of G like the specific games uh to like really see okay what is is it just Roblox and fortnite because in that case it doesn't really matter as much like that's totally crossplatform that's all over the place it's not VR even at this point like you can't really use that as a great Benchmark obviously the PlayStation ones are maybe even the more interesting ones if that's still getting some people over what kind of games are compelling enough to bring people to console from uh from mobile and so I I

think a deeper study on this would be I think really useful and maybe even for mobile developers in the future to figure out how to better uh develop their games to address a future like future proofed audience and also not lose sort of the Aging adult audience that like may have grown up on consoles and kind of be like well where where' all my games go at that point you know I mean steam deck actually maybe even could uh help with right because there's a lot of people that are like hey as a dad team deck a blessing you know because I could play it while I'm taking care of my kid because I remember seeing that with stadia as well uh with cloud gaming stuff like that so there is that sort of like aging dat dad audience that also needs an IP iPad or phone in their hands for the same kind of reason or you know the mom out playing like Candy Crush or something on their phone like there's definitely these demographic audiences to hit and they people age up any these things so but I think as we look at what what styles of gaming did people grow up with uh how does that translate to game design how does that translate to genres going forward right so you know we're

seeing a lot of interest in the ugc side of things because of the games like Minecraft and Roblox and now seeing how does that actually progress into the older audiences so as those people that grew up with Roblox what are they playing as they get older so looking at um so yeah you know smartphones certainly are the easiest thing hand to a kid is you're looking to occupy them but if that's what they're gotten used to this is what a gaming experience is and this is what they consider fun how does that translate to older audiences like you know if you think of like the number of platform games that dominated when it came to uh Super Nintendo and Sega Genesis uh and what that meant you know as time went along there were still attempts to try and recreate that magic um you know somewhat successfully in uh in terms of Nintendo and I think you know a little bit more unsuccessfully

across other games in genres um but there was still the expectation of trying to do those platform games are there going to be expectations of trying to recreate some of those mobile game experiences uh across console and PC for the people you know for the players that are 10 years old today they've gotten used to a certain style of gameplay are we going to have to to try and recreate those types of gameplay as they continue to grow older and continue working through the various platforms and the overall gaming ecosystem but I think this is very tied to what is the input system right so in a phone in a tablet is like swiping is touching like that's something that is hard to like replicate and that's why probably the type of games that are more popular in Mobile are different than the ones that are in consoles that are different that other ones that are different that the the ones that are more popular in in PC right so I don't know I'm probably I'm I'm old and seeing this but I can't play a suitter in in in

console right I need to play on a PC I cannot play in the console yeah so I won't even ask if you play Shooters on mobile phones then I've tried but the funny thing is I find that easier than using thumb sticks actually uh oddly enough but it is yeah it's definitely a challenge for for those of us who grew up like on keyboard and mouse right but I think the other thing that that you mentioned earlier on that I think maybe he getting even ignored a little bit in this is the social aspect like when we think back to when we were social on these console games it was the neighborhood the friends coming over you were all playing like you think of what a big hit golden ey or Halo was because of their sort of multiplayer sort of party aspect in those days that that kind of helped them become a big force and you look at Nintendo now and sometimes they the antithesis of social when it comes to how like not online they are online friendly they they tend to like make it very difficult to do online stuff you have to deal with these friend codes and stuff like their inability to sort of like progress uh more smoothly into like the social

online especially postco is a situation where like things like Roblox fortnite those things become the lobbies for the kids they become the social experiences that we had more as a physical thing but now they're all doing online especially like I said because during Co they kind of had to that may be a big part of it if if the Nintendo can't make these more social more ugc friendly like at least they had Mario Maker but and and like I guess there's some pseudo ugc in in Zelda but it's it definitely sounds like that maybe an aspect you look at like even Among Us were some of these other like games that are very social driven or streamer driven like these all these different cultural aspects I think to what drives kids to play these games but I guess we'll have to see how this goes forward in terms of uh whether or not this has a long-term impact in Nintendo and they adjust obviously they you know have their strategy and will continue executing on it and they're not doing bad as a company so we you know at least for the moment we'll see how things shake out but in the meantime I want to thank everyone for tuning in and of course you guys for joining for a very in-depth discussion that I'm sure could

go on for a lot longer if we wanted to make this a three-hour special but uh a lot of interesting stuff happening this year especially when it comes to regulation both in China in the EU in the US like all these impacting video games on top of uh layoffs economic changes I think it's going to be a big year for gaming just hopefully in some useful directions uh but we'll see right it's only the very the kind of the end of the very month although if you're hearing this it's already February so hopefully um you know the groundhog scena Shadow I think is the good way to go but either way uh well we'll catch you guys I think after pun punks Tony Phil or wherever wherever you're from in terms of uh your Groundhogs Day but thanks everyone for listening and we will catch you guys 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 fstar review and if you want to reach out or provide feedback shoot us out at podcast nov. or find us on Twitter and Linkedin plus if you want to learn more about what novic

has to offer make sure to check out our website www.nic.edu and advisory Services again that is www.nic.edu [Music]