Corporate Shenanigans | Design Club

[music] Good time zone, internet. Hello and welcome to Design Club live. I am your humble design club host, Will. I'd like to apologize for the briefly late start. I had a halfbaked idea which ended up being like a quarterbaked idea and it was like
I wasn't able to bake fast enough.
Right. Yeah. We we we should not have been allowed to cook. Uh but we are here now uh ready to do a very special episode. Uh this is my co-host Jeff. Say hi to the people Jeff.
Hi to the people Jeff. Hey everybody. I am Jeffrey Zachin the studio director of Extra Credit Studios and more importantly for this longtime game designer joined here as always by my buddy and co-step Will.
Hi everybody. So today we have a different sort of episode. Normally on Design Club, if you've never been here before, we we pick a topic and we talk for, I don't know, a bit about it and we

try and break it down and we use Jeff's long-standing knowledge of the industry to maybe shed a different perspective on some of the the happenings or some of the concepts. We've talked to game designers, who've talked to all kinds of um folks about their about their work and about the things that they're making and that's always like a really cool fun thing.
Today, we're trying something today a little different. what we're calling a sliders episode. No, not the television show. Like the appetizer where you get like a bunch of mini burgers instead of one real burger. Um, and we have a series of topics uh for you uh today that we're going to we're going to talk about because we think each of these is interesting and important and relates back to the to the theme of corporate shenanigans, but none of them have enough substance to really be their own whole discussion. So,
they're not an hour and a half topic.
Correct.
But they're all interesting. So what if will we took a whole bunch of small interesting topics with a related theme

and squashed them all together?
Mushed them all together. We need to do a collab with the Hydraulic Press channel to to crush our our our topics together into one topic.
Oo. Oh, dude. We could send them the video or the audio of this afterwards and they could squash it together and make an AMR
ASMR of the Yeah. Okay, great. Yeah, I love that. Um because that's how that's how a hydraulic press works. We're scientists. That's That's exactly how that works. So, first up,
it is impressive.
Yeah. Um, first up on our list of topics today, we're gonna talk about Bank of America. Now, you might be like, "Well, I thought this was a gaming show. Why are we talking about Bank of America?" Uh, and the answer is because Bank of America has begun more openly and in a way that the gaming media in general is taking note of begun looking and talking about games and more specifically game prices. Um last week at Icon,

um a Bank of America stock analyst, that's important, mentioned that they believed it was in the best interest of both Take 2 and the industry for the upcoming much anticipated sequel to Grand Theft Auto 5, Grand Theft Auto 6 to be released at $80 US for the base version. Naturally, everyone remained very calm and reasonable in the face of this analysis that was done by someone in a suit telling people how much they should pay for their video games in an era where people feel like they don't have a lot of money in video games or one of the only escapes from the screaming hellscape that is modern capitalism. Uh so yeah, they they took it very Oh, no. They didn't take it well at all and everyone screamed around and ran around in circles like uh Chicken Little.
Um,
and it was funny because when Will and I were talking about this, I came in with a whole different Oh, this is why they

did that thing than Will did. So, Will, let's as voice of the people
Yeah.
Why do you think um some random per analyst from Bank of America
Sure.
saying this was mildly upsetting?
Sure. Uh, okay. So, there's a couple of reasons. one,
I don't know anyone who doesn't work for Bank of America in the US who particularly likes Bank of America. This is sort of like if you're outside the US or you've never interacted with Bank of America, consider yourself fortunate. Um because the general prevailing opinion of Bank of America is, God, I wish I had another bank that wasn't Bank of America. Um, so that sort of like poisons the well because the source is from a source that like not a lot of people like. And um, the other one is Grand Theft Auto 6 is much anticipated and I think while people might be willing to pay $80 for it, and that's a different conversation. Um, I think having someone

who is perceived as an industry outsider saying, "Oh, well, I know what's best for the industry in my very nicely pressed suit. I person from Bank of America say it should be $80 and you should pay $80 for this game because that feels beyond tonedeaf right now." Like, is there a big complicated conversation about game pricing in the industry right now? Yes, absolutely. as it has been since I started this job years ago, right? Like we've been having an ongoing conversation, but like this one just feels weird and not quite it. Um, so uh that's sort of my read on like why it's particularly upsetting. Not to mention, of course, that people feel like $70 for a Switch 2 game is already a significant price increase, let alone spending $80, right? Like we've been anchored to $60 for so long and $70 is for many people

unacceptably more than $60 and $80 is so much more than $70 from an anchoring perspective, right? $70 is$10.
We've talked about this before too like that. And it's a weird it's a weird thing because in some cases gaming prices are both higher and lower. And I'll get to the game, the Bank of America thing, because when you think about it, the $60 game came in the seventh generation of consoles. That was the PS3 and the Xbox 360 and the Wii. The Wii actually priced theirs at 50 or $49.99. We're going to round up.
And Xbox and PlayStation, the three or the Xbox 360 and the PS3 were $5099, so $60. And they stayed that way for almost 20 years.
Yeah.
Like no other form of And again, we've we've had this conversation, but this is just kind of
Yeah. The the brief catching up the brief

like no other form of entertainment in this style of thing has had its price remain steady for 20 years,
right? like movies haven't, books haven't, plays haven't, your cable subscription bundle or Netflix or Disney or any of those other things have not had a 20-year basically moratorum on prices.
Yes.
And of course, there were things like collector's packs and others that went higher. But the other thing that happened during this time specifically because of the move to digital because those were the first consoles that actually had built-in hard drives and internet connections and with the rise of Steam and the rise of mobile and the rise of good old games and a whole bunch of other things and back cataloges you know Apple came in saying games should cost 99
right
which was a huge blunder for the industry and we've also talked about that But we could ago and that's one of the reasons games moved to zero because

developers couldn't make a living on 99 but they could off of ongoing content. But because we could now download games and access back cataloges. Sure, new games might be $60, but we started seeing for the first time outside of say bargain bins and let's just call them Yeah. or
low tier games.
Yeah.
And with the hollowing out of middle mid-tier games, which also happened during that period, you kind of got budget games and you had the big games. And we suddenly started seeing the availability of pricing at a wide range that we hadn't seen before,
right?
Like we saw indie games starting to come in at that point at say $20 or $30 or $10. And before that, the only time you really saw game prices like that was when you went to GameStop or a Walmart and a game was 3 months old and they started marking it down from their $60

price down to 50 or 40. Or you went in and they were like, "Oh, would you like a gently used copy of this game so that we can sell it to you again and the people who made it get no money on this, but we GameStop are happy to buy something for $10 and then sell it for $40."
Hold on. We're getting to GameStop later. Keep going. Anyway, so there was this kind of whole thing in there where prices actually expanded out and especially with digital, you could start pricing things at different prices.
Yes.
And by the way, Will, this is weird.
Yeah.
Like if you go to the movie theater
and you go see indie art film
or you go see the next Avengers,
the
your movie ticket price is exactly the same.
Yeah. Like if you go to a baseball game and you know your local team is playing the Yankees or your local team is playing the Pirates, we'll take you know a high and a low kind of salary thing. Your prices are the same. It the price is where you're sitting. It's not who

they're facing. Like there's a whole bunch of entertainment
that's just there is a price
where they don't say oh we think this game is worth 20 versus
right. the the the um Autra Mall surrounding the art experience, surrounding the entertainment experience is different and that's what justifies the price differences when it comes to in-person entertainment, right? Versus the actual entertainment itself. Now, we do see that in like some stage production kind of thing, like you don't
um but that is that is it is a welltaken point, right?
Yeah. Yeah. Sorry, I'm Yes, I know I'm going to get some Bostononians and yes, minor and major league don't cost the same, but that's still if you go to a minor league game, it doesn't matter who they're playing.
Correct.
It will be a minor. So, there's a whole bunch of entertainment that's just kind of a one-sizefits-all pricing.
Yeah.
Where games have separated that out.

Yes. So anyway, pulling back other thing, the person who said that probably wasn't wearing a suit because something that most people don't know is almost and that I know because I happen to run a video game research studio for a decade and video game research studios talk to a wide range of people besides just developers and publishers.
Sure,
there's a lot of people who invest into those developers and publishers, usually the publishers. And one arm of investors is banks or specifically banks handle a lot of finance. Almost every bank has the ability for you if you are a member of the bank be of America or any of the others or an online trading platform Erade or Robin Hood or whatever is each bank and trading platform has its own set of financial analysts that look at the market and try and find deals for either mutual funds or as recommendations for their clients. Like if you go on to any of those, you'll be

able to see analyst rating next to stock or other thing. And so there are analysts right now from a wide variety of banks and other places that because Take 2 is a publicly traded company and you can go buy their stonss, there are ratings from financial institutions talking about how safe or how good or bad of a bet is it to go by that ston. And so by literal sheer definition, Bank of America and others are have at this point whole groups of analysts that look at entertainment and some of them have whole tiny divisions, but divisions nonetheless that analyze just video games.
Yeah.
And they keep up on all the majorly traded ones. They buy research from groups like my old company on how is it doing. And so they actually are surprisingly well informed about the what's coming out, how well they're expected to do, etc., etc., because they want to be able to say, should you buy or not buy that stock,

right? And I think so, yes, I think that that absolutely justifies their
so laying the groundwork. So a guy coming in or an analyst coming in and saying, "Hey, we think that this publicly traded company is undervaluing a key product that they're selling." Or from their point of view, "Hey, this company that has one of the bestselling games in history for the last couple games they put out and still sells more copies of a what is it 10-year-old game per year than most people than most games sell on their first year?"
Yeah. and have made billions of dollars on this and have just spent more than a billion dollars making their next game. This is making not even marketing it yet,
right?
Like if any game ever was going to come in at $80, it's Grand Theft Auto the next Grand Theft Auto.
Yeah.
Like there's literally no other game that could come in and just say, "Hey,

we've spent more than a billion dollars making it. We know you're going to go play this for the next four years." Like here's the thing,
right?
Take Two probably won't, but like the analysts going Take Two could make more money and we're investing in their stons. I can absolutely see saying you should do it. And also saying if we want to raise the video game sector, which they're interested in,
correct?
If Take 2 doesn't do it, no other group can do it
other than Nintendo with say Mario Kart, right?
But even that's an outlier.
Yeah. is going to be able to come in and raise their price because they're going to have to say, "Well, Grand Theft Auto is 70. Why are you charging 80?"
Correct. And in fact, that is the quote that I I want to read um from Stack analyst Omar Desiki.
I I hope I'm pronouncing that right. Um we also heard from attendees that the industry, which is perceived as struggling, would have difficulty selling games for $80 if GTA 6 came out at 70. We think it's in take two self-interest as a publisher and partner to many developers to raise the price

point for the entire industry. So I I I think that that that second piece is is directly on with they need to say this because this is like their one chance in the foreseeable future to try and get consumers to accept an $80 price point. I don't think they will. I think they're vastly overestimating how far how unique Grand Theft Auto 6 will be because I can't I'm not a person who enjoys the Grand Theft Auto series and I have no interest in buying Grand Theft Auto 6, but I do know that there are a lot of people who do and a lot of people who do value that series and I think it is
very risky to say, "Oh, well, Grand Theft Auto 6 costs $80, so our game can uh cost $80." because I don't know that you want to put yourself in the same bucket as GTA 6 because now you're being compared to GTA 6 and there are no games coming out in the foreseeable future that can be in that weight class. Right?

Just said it. They spent a billion. That's with a B. A billion dollars making this game. That's absurd. Nobody competes with that. Nobody competes with the size or depth or quality of a game that cost an actual billion dollars to make. And so you don't want to be in that same arena. So it like
while they may want to raise the price point for the industry, I think it is a little short-sighted to say ah yes, if Grand Theft Auto 6 does it, we can have a wave of $80 games.
Though what I think it would do was it would help anchor that 70 is the new price point for everything.
Correct. Like if Grand Theft Auto came out at 80, suddenly every other AAA STR game coming out at 70 seems more normal.
Seems more reasonable. Yeah. Because we have a big a big outlier to point at.
Yeah. And we're But it's interesting like uh who just said um

this is an actual really interesting mathematical question.
Yeah. you know, would them coming out at 80 turn less profit than at 70 with the way the economy looks right now? So, one of the things Grand Theft Auto or take to actually one of the things no game can do is a year or two after release its price. Well, excuse me. They can do that. Here's a here's the bundle of Grand Theft Auto with the first two expansion downloads,
whatever it is. So, and Grand Theft Auto, I guarantee you the internal analysts at Rockstar and at Take 2 are looking at how they're going to sell this for the next decade,
right?
Like, they're interested in their first year. They want to recoup that billion dollars plus the billion they're going to spend on marketing. They want to recoup that. That's a lot of money they've output. Y,
but they're going to do that. They're probably going to do that in the first week, as a guess. And I don't know, and

again, I'm not saying they should raise it. I'm just talking about what they're probably thinking right now.
Yeah.
And what some of the other analysts are,
I think that they think the market can bear it. I think that there is so many people who've been waiting so long for this game that if you told them it was $100, they would complain and complain and complain and they'd still go buy it,
right? We saw that a lot with the Switch 2, right? For instance, as a recent parallel, right? Lots of people complained about the launch price for the Switch 2. The Nintendo um live chats were full of people complaining about the price both of the system and of the games
and it did not matter game like the system still sold like hotcakes, right?
Yeah. And again, this is not in any way me recommending they do that, but I think that the Bank of America people said the quiet part that Rockstar and GTA or Take 2 had been thinking. I think they just said it out loud.
Yeah.
I think in some cases they might have

even been trying to give them cover
for doing it.
Yeah.
Like, hey, you know, we've been recommended this publicly. We weren't thinking about it, but hey, now that it, you know,
it also gives them a boost if they don't do it.
Yep.
If they say they don't lose either way now.
Correct. Yeah. because it's Bank of America, they get to uh Take Two and and and Rockstar get to be like, "Well, we've heard the industry analysis that we that it should be $80." And while we think our game is worth so much, and we believe that, you know, it's going to be a masterpiece that we can't wait to bring to you, we think it would be unfair to ask gamers to pay more in these economic times, which is why it's coming out at I I'll be I'll be devilish, $65. Mhm.
Do you know how many
75?
No, 65. I think I think if they sold it at $65, they would make up in volume immediately, right?
I don't think so, actually. I think

I think that the people don't I think the people who are going to buy it initially don't care. I think they could discount quicker than average.
Okay. I think that's Yeah. Yeah.
I think I don't think the 65 versus 70 would make any difference on the number of people that bought it. Interesting. I I think I don't think it would make a statistically significant difference now that I consider it. But yeah, right. Like I don't think there are that many people on the fence about it. I think I think people on GTA 6 are in one of two camps. Of course I'll buy it. It's the next GTA game. And of course I'm not going to buy it. It's the next GTA game. And I don't think there's a lot of middle ground on that just because not because there's anything particularly polarizing about it. just because it's been in the ecosystem for so long and nothing has changed that like those those opinions have sort of settled into those two clumps at the bottom of the of the industry tank as it were and they're just sitting there.
Yeah. But I honestly think you know this

is like will what was the price of slay the spire too on
if that had been 30
would have mattered
or 35 I don't think anybody would have noticed. I think people would have said, "Cool, it's the like I feel like Grand Theft Auto for the group who buys it is like that on Spire for us."
Yeah.
Where it's like, "Oh, that price is a little higher than I thought. I want the game."
Yeah.
Like, so in some cases, I think the most surprising part for a lot of people was that Bank of America was saying it.
Yeah. because they don't know that all of these different financial groups and stock trading groups and others actually have teams of analysts that their job is to analyze the publicly traded companies in the video game sector.
Yep.
And to issue guidance on what they think they should do.
Yeah. Um, and I'll tell you though, Take Two pays a lot of attention to that because Take Two executives like their stock price. And

so having groups that, you know, Bank of America may not be the first group people think of for a lot of this, but Bank of America has millions and millions of customers and has its own online trading platform and like stock buying for Bank of America and that Bank of America owns Meil Lynch. Are there a combo? So it's the Bank of America Maril Lynch like trading thing.
Yeah.
And Yeah.
Okay.
So, and all of So, yeah, it's just this is why they said it,
right?
They they are interested in, you know, a thing. They think it will do better for the industry. Like again, these are analysts hoping that the publishers make more money.
Yeah.
Because that helps them sell more stons.
Yep. That seems right. Okay. Speaking of stock prices and analysts not necessarily guessing what the industry is going to do the best, let's talk about Subnautica 2 chat. By show of hype emotes, how many of you are playing

Subnotica 2 right now? Because according to Steam DB, it's statistically likely that at least one of you out there watching this is right now playing Subnautica 2. So,
where is it on the list right now, Will?
Uh, it is currently
is it in top 10? Uh, I believe it is third.
It is good for them.
It is currently third. It is barely behind Dota 2. There are currently 444,378 people playing Subnotica 2. It is only behind Counterstrike and Dota 2 on Steam. It currently has more people playing it than PUBG and 5M, which is the uh mod loader for modded Grand Theft Auto 5 uh combined. Hey, where's Spire now? Spy was number one for a little while.
Spy 2 is uh number nine right now. It wasn't it wasn't quite number one, but it's it's still it's still doing quite well. It's about half its daily peak, but um
good for them. Yeah. As well.
Yeah, they're doing great. So, so okay.

So,
okay. So, Subnotica 2, we talked about Subnautica 2 what like half year somewhere?
A while ago.
Yeah. that Subnautica 2 had had some a whole bunch of weird things happening based on their owner. There we go.
Yeah, found them.
Based on their owners and the people funding.
Yeah.
The company ownership and the company investors.
Yes.
And there was an interesting thing where depending upon which side you believe,
right?
Either um the owners and the dev team who were set to get a payout if they shipped at a certain point. Yes.
From the publisher. The publisher was suddenly like, h, no, this doesn't look good enough.
And by the way, management team, you're fired.
Correct.
And so we can delay the game.
Correct.
So one side is, wow, big publishing, which group was it that funding them?
Craftton.
Craftton. Craftton's trying to pull a

fast one and yank all the money away from them.
Yes. The other side was this team is trying to push an incomplete game off and the leadership has been effing off um doing their own side projects.
Correct.
And not actually concentrating on the game.
Correct.
And there there is a whole bunch of weird tea getting thrown back and forth.
That is correct. It did look somewhat like Boston Harbor uh by the time that they were done. So um the first big update after the initial complaint and I don't think we did a whole thing on this is that
we never really did a lot of follow-up. Yeah, correct. So, the the the first big thing was that in March
the two months ago,
correct? Um the judge in the case ordered Crafting to reinstate the fired management.
So, Craftton was company funding, correct? Not company, not dev team or not executive team running.
Oh, yeah. Oh, yeah. Publisher versus developer. There we go.

Yeah. So um so uh and to extend the deadline under which the bonus the earnout could be achieved and furthermore they were enjoined from doing anything else that would hinder Unknown World's ability to deliver the product on time. Right. Essentially the judge said I see what you're doing. No
looks shady.
It looks shady. It turns out it looked even more shady. Uh because at some point in here, um yeah, uh the CEO of Craftton, had apparently used everyone's favorite hallucination engine, Chat GPT, to brainstorm ways that they could avoid paying unknown worlds. Um and this was one of the proposed suggestions apparently that Chat GPT came up with. So,
wait, how did that surface?

Uh, I believe Hold on. I'm gonna I'm gonna look at this. Um,
because that feels like the kind of thing that Craftton wouldn't want to talk about.
Uh, yeah. Um, so it came out during Discovery essentially.
Okay. There were there were Slack messages which referenced using chat GPT between the CFO of um the newly appointed CFO of Unknown World and the CEO of Craftton that came out during Discovery in this lawsuit and that is why they know.
So they also committed one of the classic blunders,
right?
They typed things into a chat thing that saves chat,
right? Yeah. Don't we are not legal advice. We are not offering legal advice nor we are offering advice on how to commit crimes. We are simply observing that it is beyond stupid to say, "Hey,

how would you like to commit crimes together in a thing that is known for saving its messages like
Yeah.
Okay. Anyway,
because there is a thing called discovery in legal. Yeah.
Yeah. Correct. Um that is correct. And uh Nova is also correct. Uh discovery is also how we know that Craftton's legal team told the CEO not to do any of this and that he did it all anyway. All right. Great. Excellent. So they got told, "You can't do that. Don't do that. Stop doing that. Undo the thing you did by the judge." And they harumped and shuffled their feet and kicked rocks around and said, "Fine." And then Subnotica 2's release date came out. Uh, and lo and behold, it's today. Uh,
happy launch day, Subnotica.
Happy launch day, Subnotica 2. You're off to a banger start. Important to note, however, is that um in between today and the announcement of early

access release,
the entire game got leaked as part of a massive as part of a massive leak of multiple games that were close to release or in development. Um and uh Lego Batman,
how did did they get hacked? Like what?
I don't 100% know. Um I just know that it ended up on the web.
Uh,
I'm seeing Forza 6 and Lego Batman.
And according to IGN, no one's really quite sure how it got there, but it did get there. Um, and so now between getting free publicity earlier this week that put it back squarely in everyone's news feed that they'd been hacked and leaked, and I'm not saying they did it on purpose, but man, is that good timing for them being in the news cycle and everyone wanting to thumb their nose at Craftton, who behaved in many people's opinion quite

poorly during this whole kurfuffle. Um, and uh, the craft and CEO has sort of become a standin for publisher overreach and incompetent CEOs and incompetent CEOs using Chad GPT for things that Chad GPT has no business being used for.
He had a whole legal department.
He had a whole legal department that said, "Don't do the thing." And he said, "I'mma do the thing." What? By the way, it is perhaps the biggest display of incompetence to pay a big expensive legal department and then not listen to your big expensive legal department about the big expensive legal thing you want to do because you think you know better because you looked it up on the internet. Even if like let's remove chat GBT from this. You looked it up on the internet and think you know better than the lawyers you hired to be in your legal department.
Mhm. What
I mean there there are absolute cases

where like it is worth the legal risk to try a thing because it is your lawyer's jobs to tell you
this part is bad you should not do and you as an owner
or CEO or whatever you have the perfect right to say I hear you but I ignore you.
Yeah,
but this is going to be an expensive mistake.
Yes, that's correct. So, um, uh, according to early estimates, um, and Jason Trier reported on this earlier, uh, it does appear as though this saga may be coming, uh, mostly to a conclusion as it appears as though they have hit their earnout target in like the first six hours that it's on the market. Um,
good for them,
which is great. Uh, it is. And, and here's the really important part, and we were talking bit a bit about this in like the pre-show. It's really good for all of the devs whose names never made it into the news, right? So, like we've we've been thinking about this a lot as like a clash between the personalities of the

the CEOs of Unknown Worlds and the the management team and the management team of Craftton. And there were a whole bunch of people working on Subnotica who just wanted to make a really cool Subnotica game.
Yeah. And now
I have a buddy who's on the dev team. As I said, it's
I'm actually looking I just realized I should message them and say happy release day.
Yeah. Right. Yeah.
I'll do that later.
Yeah. Right. So, I think it's really good that those devs managed to despite all of the nonsense going on
Mhm.
release a game that is currently rated 85% positive. 85% positive on Steam with a concurrent player count of 443,993 as I say this like smashing success. And I hope that they all I hope that Craftton stops dragging their feet and pays them what they are contractually obligated to and that those devs get compensated for making what by all accounts appears to be a great game.

And man, it's also tricky. Let me tell you, having been having been in development a while,
yeah,
nothing is worse than trying to make a good game while you're not sure if your publisher is going to pull the sheet out from under you in a variety of different ways and your management team may or may not be having to deal with all of that
plus the other stuff. Like,
it's hard enough to get a good game out.
Yeah.
When everything's working well and together.
Yeah. all of the mental load that gets put on you with all of the rest of this going on. Like I'm sure they burned some people out and that they lost a whole bunch of people just along the way that from all of the shenanigans that are just that are going to end up like not getting their earn out or other things around that because they didn't make it across the finish line or
you know the funding got pulled and they got let go and like didn't get like there's all sorts of things along the way.
Yeah. So there will still be a body

count from this both mental and physical just that comes with this that is irreoverable to some of those people.
Yeah, absolutely agreed. Absolutely agreed. This is the best ending I think that we could hope for for those devs right now. But that's it still shouldn't have happened.
Like I if if everything that came out in Discovery is factual, we have no reason to believe that it's not.
Mhm. It looks like Craftton just tried to screw him.
Yeah.
On on flimsy pretenses.
So my my gut says no to this. Do you think Craftton will make back payout to devs if the game sells well enough? Like I if a if the publisher was willing to be shady enough to try and do what they were doing, the chance that they're going to be magnanimous enough to go pay people they don't have to is low.
Yeah. I mean, the the only way I could see

that happening is if the owners of Subnotica of the studio who are getting a very big payout themselves, take it out of their personal pockets to go pay other people. And that is that was one of the claims that they had initially made was that their portion of the earnout that portion of the earnout that was contractually sent to be to the management team of Unknown Worlds would also be thrown in the spreading around money. Um
Mhm.
So it is impossible to say whether or not that is true until they get the money and do the thing. Right. Lots of people say lots of things about things that they're going to do with their money. looking at you, everyone who's ever won the lottery. Plenty of people win the lottery and they're like, I'm going to be responsible. I'm going to put it in a long-term savings account and max out my, you know, my retirement account every year. And and then they don't and they buy a really fast card, a really big house, and they fall behind on payments and it all goes belly up,

right? Like until people actually have the money and do the thing, we won't know what they plan on doing. Um, for real. So yeah, that's that's where that is now. And I'm I'm excited to see the next chapter of this and hopefully it's conclusion. Hopefully, like in my in my mind, the best place that this could go from here is Craftton pointing at a list of things that are stated in the contract are required to get the earnout and then pointing at their metrics or sorry, unknown worlds, pointing at the contract and saying, "This is what you required of us to get this earnout. here are metrics that prove that we've met every single one of these criteria. Money, please. And Craftton goes, I hate this, but here's your money. And that's the end of it. Right? I would really dearly love for that to just be the end of this story. Um, I don't think that's going to happen. I imagine we're going to have one more round of legal shenanigans, but that's my hope. My hope is that we're done.
We will see.
We will. I'm It's actually

I'm gonna have to see if my buddy can come on and talk any bit about it, but my guess is that there was so much going on that the chance that he will be allowed to come talk about Subnotica 2
is low.
But I'll put out the ask. He's a good person.
Yeah.
Like uh
and he'd be fun actually. He would be fun to have on.
Okay. Excellent. Um All right. Let's talk about another uh big ticket amount of money that got slung around a bunch over the past week. GameStop put in
I don't think you pronounced that right. What was that?
GameStop.
GameStok.
Stop it. Um [laughter] we need a ston counter down at the bottom. Okay. Uh, GameStop put in a 55.5 billion
with a
with a B offer to buy eBay.

Now, there are some problems with this. Number one, eBay has not indicated any desire to sell. That's it's not unusual to get unsolicited offers, but it is less usual than solicited offers. Okay. Uh number two, uh GameStop is worth like 12 billion. It's not worth 55 billion. Like the whole company, if they sold everything, is not worth 55 billion. And they were like, "Hey, we want to buy eBay."
And the way they did it, Jeff, did you did you get a chance to look at the investor press release for from GameStop?
I actually watched their CEO get grilled on a couple of news shows.
Yeah. He did not take he did not do well being grilled on news shows about this either.
Actually, the analysts were some of the best people. They were like chatting with him like
we're adding up the money like the money doesn't add up. How are you going to pay for it? And I was like it was you know a mixture of um what was it like

borrowed money and stock.
Yeah.
And they're like but that doesn't add up. Where are you going to get the rest of the money?
Borrowed money and stock.
Right. So, but
he kept saying he had like his couple talking points, but the talking points were very insufficient for the analysts when they're like, "You're mentioning this amount of money. You need this much.
Where's the difference coming from?"
Yeah.
And he seemed
the CEO literally seemed unable to comprehend,
right,
that they were curious on where this remaining part would come from
and he was not prepared to answer where the remaining part would come from.
Yep. Uh
it was actually it was mildly painful slash embarrassing to watch. Yeah.
On how flatfooted he seemed for this.
Yeah. So uh the the offer is in fact $125 per share of eBay comprising 50% cash and 50% GameStop common stock.
Okay. Oh, so it was cash. Sorry. No, it wasn't borrowed. So it was 50% cash, 50%

stock.
They don't have the cash is probably borrowed. Yeah.
Yeah, the cash is borrowed.
That's why I'm thinking Yeah.
Yeah. They don't they don't have the cash. So Okay, they're the it's really fascinating. They have to say how why they think this is a good idea and like how they're going to make this work.
And GameStop said that they were going to deliver $2 billion of annualized cost reduction within 12 months of closing. Okay. Put GameStop buddy 55 - 12 is 43 minus 2 over
41
is let's say let's say 10 years of $2 billion is 20. So you're still $23 billion short on this plan. Like I don't like you put this on paper as an

official press release and buddy the more I look at this the more the math ain't math. Right. And also the $2 billion is like um 1.2 billion from sales and marketing because they think that g that eBay isn't marketing well. I don't know that
may or may not be true. Like
right. Yeah. I also don't know that GameStop's in any position to tell any other company that they're not doing marketing well.
They're me well. I I don't know that GameStop has like much of a positive brand image right now.
No, that's very though. I did hear their CEO say, but there's a natural synergy. We sell collectibles, they sell collectibles,
and that'll buy, right? Because one of the ideas is one of the ideas that is put forward here is that they would um and Matt and I called this without reading this um is [clears throat] that they would use GameStop locations as pickup and drop off and merchandising locations for eBay. Right. That GameStop
Oh, that's not bad. That's not a bad idea.
Make good use of their physical loc.
Correct. Yeah. So they've got physical

locations that they could integrate with the eBay business model. And so this was the offer that got made and then the CEO did the talk show circuit and then oh dear and then [clears throat] it broke containment and made it to CNN uh from uh on on on the 12th um when eBay responded and uh the the the quote that I just think is the best quote possible
is from eBay is that GameStop's offer is, again, I'm quoting, neither credible nor attractive. End quote. Basically, we don't believe you and your offer sucks.
Yep.
Which
that is a very slapid response right there.
Yeah. Correct. Especially because like one one of the problems that we've run into over and over and over again in like American corporate drama is that because companies are required to act in

the most beneficial interest of their shareholders.
They really have to believe that this is not a good offer and that it's not credible. Um otherwise like shareholders can be like we think that you're not running the company in the best interest of making money, right? That's been a recurring problem recently is companies need to make all of the money possible um sort of as a um criteria for existing. Um but yeah, this is uh oh um and also to note the end result of this is that GameStop stock fell four and a half% in pre-market trading. just [laughter] as a little additional flick you in the forehead on the way out. Your sock takes a 5% hit. In fact, I'm I'm going to go pull up GameStop sock. It's It's an interesting thing again, and this kind of gets back to like

GameStop right now, their CEO and some of the people in it are performative.
Y
on how they do things.
Yep. like they ride the memes. They're looking for ways to stay in the cycle. They're looking for ways to get um the number go up crowd to keep investing and buying. And Folding Ideas did a really good video on this a couple years ago about how this was basically a big pyramid scheme.
Yep.
And that certain people are left holding the bag.
Yep. and that those people are still trying to get out by getting other people to now hold the bag.
Correct. Uh fun fact, here's here's your fun here's your fun fact about how this is going for GameStop.
Uh GameStop stock peaked in the recent history on May 1st at $2653.
Okay, so from when we're filming 13 days ago.
13 days ago.
So 26 what was it?

Uh $2653.
Okay. day.
It is not yet the end of the trading day. It is currently trading at $21.90, which is roughly a loss of about 20% in uh 13 days.
Actually, wait, tell me the numbers again. I want to see that exact percent. First number,
2653.
Okay, 2653
and it's currently trading at $21.90.
So, it's lost 534 in value. So yeah, that is
Yeah,
that's that's Hey CEO, brown pants, make three envelopes.
Actually that is literally exactly 20%. From like mental math.
Yeah. Um yeah. Uh I I I think the um the
Wait, when did they announce their when did they announce their bid?
That's a great question.
Was that the May 1st? was that that investor thing came out on

May 3rd.
In fact,
it had already dipped
the the peak from the 1st to the the next big day I have, which is the 4th. Uh it had already fallen $3.5 uh by the by the close of business on the 4th from the $26 mark. Um it hit a trough and then it just kept falling and falling. In fact, nothing about this appears to be good for GameStop. Um, which is kind of interesting because, uh, we've talked about this before. GameStop isn't like the last hold out of physical game sales, but it's one of the last specialty retailers for gaming in the US. Most other physical game sales are Walmart, Target, Costco, um, you know, Amazon. They're not individual stores.
Yeah. It's actually it's interesting. Years ago when I used to run my uh game research studio, we actually tracked um marketing done in physical game

locations. Yeah.
And that was a real surprise for me at that point. And so this was somewhere around say 2010ish,
12ish,
like when we kind of started tracking
that. And like GameStop was absolutely in the top five. But yeah, I hadn't at the time Walmart, Target, Best Buy, and Toys R Us. This is before Toys R Us went out of business, but those were the top five places in the US people physically bought video games. And part of that, too, is that a lot of people forget how many how much video game is a gifting kind of thing. people getting it for birthday presents or Christmas or you know mom buying a game for Timmy or you know you buying a game like and as we've had digital come up that's kind of been more and more an ability to do that but especially like will if you wanted to go buy a copy

of Mario Kart to give to your niece like you know unless you know a good out about her or her, you know, handle. It's It's still hard to give a gift digitally.
Yeah. The best way to do it is often to buy like if you're giving a digital download, it's to
get a card,
right? To buy a card. And plenty of places are doing that, but then you still have to like scratch it off and take a picture of it and send it to them if you're you're not giving them the card physically,
which is
Yeah. And then you also you don't know that they bought it. I for example gave my nephew something like that say two years ago and he bought a different slate of games than the ones my go buy these three these are the ones I want you to get.
Yeah. Right. Yeah. It's I don't I
it's still hard enough to
even for people in the know to do digital
that physical is still a thing. But anyway, so physical is still a big thing um in a lot of places. But yeah, GameStop is kind of the last specialty

one national chain in the US. Everything else is just part of a larger store that people walk in and like, "Oh, while I'm at Walmart getting my, you know, flipflops, milk, and so and so, let me go pick up that $80 copy of Grand Theft Auto."
Well, uh, a brief aside on this, since you brought up Walmart, and this is a Sliders episode, um, I don't have an article for this, but it is interesting. Walmart has said that for Switch 2 games,
they will be honoring the digital price.
Not the physical, not the physical MSRP, the digital MSRP.
Cuz we did a little thing on Nintendo is breaking price parody. Yes.
With some of their digital games. For those not in the know, which is probably almost everybody because again, you've never had to deal with this. Physical stores will give you a basically hugely hard time if you try and sell your digital product for less than they're allowed to sell it for
to the point of sometimes delisting you.

Yeah.
Like they will physically say, "Oh, so and so publisher, you want to keep selling your games in Walmart? These have to be the same price you sell them digitally online or we will never let you sell at Walmart ever again."
Right? And Nintendo's big enough that they recently despite having complied with this for a long time like eh screw it.
Yeah.
And they are trying one.
Yeah. Um so uh Yep.
And if they can get away with it, it's going to be an interesting other thing.
Yeah. The the difference Well, and and games are now a new loss leader. So don't think about don't think about a Walmart. Think about your local grocery store. If you're in the United States, most, not all, but most grocery stores are structured such that milk, bread, and meat are opposite the place you come in on.
They're at the back.
They're at the back. And you might be

like, well, that's cuz they need like the bakery and the freezer and the everything. No, they could put in a lot of places if they wanted to. They're in the back because you have to walk through the whole store to get there,
right?
Yep. And hopefully you see other things along the way. You're like, "Oh, I did need more Post-it notes."
Correct.
I did need to pick up a frozen pizza for tonight.
Correct. And in a similar way, at least in my experience and in my area, Target and Walmart are structured the same, but with the electronic section,
all the way in the middle in the back. So, you have to walk past toys and homegoods and clothing and uh you know,
all that stuff. You got to walk past all of it to get to that. So, if they're loss leading with this, which makes sense, they get to do a thing that no one else is really capable of doing. They can soak 10 bucks a copy if it loss leads for them, or they think they're going to make it up in volume, which they very well may if they're the lowest price going, everyone else either has to soak the same loss, in which case they're at par with the industry, or

they have to accept that they're going to lose some number of customers to Walmart.
Yep. And they may not just be losing the customer who's going to buy the game because the customer who walked into Target to get it
at Walmart might look around and be like, "Oh,
I can just get the same stuff I would have gotten at Target over here at Walmart."
Yep.
Like, so this has a bounce on effect that is And again, this is why the retailers have enforced with such strictness that digital and physical have to be at parody before. And I think Nintendo's at the point where they're like, "We don't care. You know, if people have to buy all our stuff digitally now, oh no."
Yeah. I I I I genuinely think Nintendo is at the point where they realize that they have enough bargaining power that even the big box stores just don't they can't really do like what there's not an alternative position.

Yeah.
Yeah. I almost can't think of anybody else like Electronic Arts couldn't do the same.
Like they don't have the pull. It's funny.
Rockstar with Take 2, sorry, Rockstar with Grand Theft Auto
might, but also they have such a long tale. They want people buying their game for 10 years. They want that
good relationship so that Grand Theft Auto just stays stocked there where people can just walk by and continue to buy it.
Yep. like there's there's some interesting stuff going around and this kind of came off spun off the eBay
Yeah.
or GameStop eBay thing, but um it's
it's fascinating.
There's stuff going on.
Yeah, there there is indeed stuff going on. All right, Jeff has
We mentioned Nintendo. Will
tell me about Xbox.
Okay.
Or specifically Discord because you said there's a story I haven't heard yet. I want to hear this one.
Yeah. Okay. So everybody member that

Discord said that they were going to do like really maybe not the best job at age verification a while ago and they might have had a good way to do it but the communication sucked. Right. I think like we can quibble about the the the efficacy of age verification or any of the legality or any of like the what you think of the children. That's not what I'm talking about. I'm talking about the way they communicated it to their customer base sucked. just like full stop. It was not a good
poorly.
It was not a good communication. It was not done well. It was not done elegantly. And as a result, they've lost a whole bunch of Discord Nitro subscribers. Matt and I actually canceled ours live on air as we were doing the story. Like they've lost a lot of paying customer, right? And so
the hard part for them is I want to jump in here.
Yeah.
Discord is Discord is great. Like Discord is a good solid thing. I enjoy having Discord in my life. I communicate on it a lot. They have had a hard time convincing people to pay for it because

the base service they offer is good, but a lot of the add-ons they want, most people don't care about.
Correct. And that was um we did a short on um on Discord uh Discord's plan to do age verification through facial recognition. And one of the most common, I didn't read all the comments cuz I don't have the mental stamina to tank that, but like a top level summary of the comments shows that one of the common responses is I can't cancel my Nitro. I've never thought it was worth anything. I didn't I didn't buy it to begin with. Right. I
if if Nitro was worth I I would love to give Discord money. Like I like giving companies money for things that I use,
but nothing on this on their paid plan particularly interests. I do. The only thing I ever bump into, Will, is I occasionally try and drop a file that's too large to transfer into Discord.
Yep. And I um I'm in Discord

too much. If I'm being totally honest, I'm in Discord from the moment I wake up to the moment I go to sleep, which is why I had Nitro. It offered small little quality of life improvement things. And using um our animated, weirdly, our animated emotes in other servers is like a good thing for a streamer to do. Um,
yeah.
So, there's a bunch of little little things um that I used it for, but nothing that was like irreplaceable for sure. Um, and so now they're trying to get everyone back in a good
real quick. Whoops. Hold on. Did Did it move? And did it come back here?
Um, wait. Oh, I'm clicking the wrong thing. There we go. So, just so you know, and we probably will have to come chat about this with an episode at some point. They won't get me back until I scrap the plan entirely. Age verification is going to happen because several states and countries have legislated it. They have said it will be illegal to operate your service past X date
until you can age verify.

Like Discord was not looking to go do age verification.
Correct.
Like Discord is having this forced on them through legislation.
And again, multiple states and countries.
Yep.
They just rolled out a plan poorly on how to It's funny. I've actually talked to one of their vendors. There's a very good vendor at doing this who was already in with Discord and Discord was like, "We're going to try out a second one for redundancy." That's the one that made the huge blowup mistake.
Yep. And so like but again we and at some point we should talk about like the thing but like if your whole if your whole reason for existence can be put out or excuse me if you can no longer operate because it's illegal to do so as a company you have to go somehow comply with that.
Yeah.
Your job is to try and comply well and not poorly.
Correct. Yeah. your job is to try and comply in a way that offers the that complies with the law fully while offering as little grief to your customers as possible. Um
and and so they've yeah they're um

yeah so again big complicated problem lots of people people feel lots of ways about it this isn't really about them doing the facial wreck thing um that's more why they why they are taking this next step
um which is that now
so yeah will what are they doing
they are bundling Xbox game pass with Discord Nitro
wait so if I pay for Nitro Oh, that pays for like the base level of Game Pass now as well.
The starter version. Yes. So, and you will be getting a discount on up to 30% off at Logitech DG, 15% off Steel Series, and 20% off Control Freak. Um, and so,
so that part cost them nothing. That's just a bundling deal where they are doing press for those groups. Correct. So, let's look at this.

The starter edition of Xbox.
I'm curious.
Does this make it cheaper to buy Gay? Actually, yeah. Tell me more.
Okay, so um I can't pull it up easily. Chat, I need someone to remind me how much the starter edition or how much the cheapest version of Nitra is. I can't look because I'm in streamer mode.
Let's see. Discord Nitro pricing AI overview. As of May 26, it's $9.99 per month or $99 a year.
Okay.
Nitro basic is $2.99 a month or 30 a year.
Okay. And the Xbox Game Pass tier at essential starter is
okay. It's not basic. Okay. I'm actually on the Discord web page now. It's not the basic. It's the

regular Nitro.
Yeah, it's the It's the regular Nitro that does it. Let's Let's say Let's say for a moment that it's the basic version of you have to pay the the $9.99 for Discord and then you're getting the most basic version of Game Pass. Okay.
Mhm.
Those are the same price. That's what I was curious about.
So if you if you were if let's assume that you have to spend the $9.99 for a month of Nitro
a month of game pass like the essentials version is $9.99 a month.
Well this let's see Xbox game pass it's called the starter edition. Yeah, I have I have it as the the on their website they have starting at $9.99 a month is the is the thing.
So I we will assume it's that one.
Correct.

So
there's a weird thing too where if you'd been paying for like a mid-tier Game Pass one like I doubt this is going to apply a discount.
Correct. It's you get this thing for free. Not this much value but you get this exact thing for free when you buy this other thing. Uh, I believe that is also correct that if you sub to um Xbox you get Nitro. Yes, if you get Yeah, if you buy Xbox Game Pass now, you also get Discord Nitro perks, which they're losing so much money here to get any money. I just want to be clear, right? So, let's say that they split it evenly and that it's pure profit. That nothing that they're giving away in either of these bundles actually cost the company anything, which isn't true. But let's assume that it is. And let's assume that they're splitting the profits 50/50 and that that's fine with

both of them. Okay, great. So, now they're both taking a 50% pay cut to try and save Discord Nitro. Like the amount of bailout that they are getting here from Xbox is wild because what is essentially happening [clears throat] it it feels like Xbox is the thing of value and that they are subsidizing Discord to try and save Discord right before Discord's IPO.
That's what it feels like.
I'm curious if Microsoft is an investor in Discord. Um, I believe they are, but like uh Medusa says, I don't think Microsoft fully owns Discord.
Well, if they're going to do an IPO, I'm pretty sure they don't fully own Discord,
right? Um, and as early as uh 2021, Discord turned down a 12 billion offer from um uh Microsoft for acquisition. Microsoft did make an offer to buy them in like 2021 and Discord said no, not

interested. So, which they could do because they weren't public.
Um, so that's weird.
I'm curious. So, they might have taken investment. So, Microsoft might have a vested interest in propping it up.
Yeah,
there will be a certain amount of people who buy Nitro but don't care about the Xbox. So, it's not exactly a onetoone like who won't go and then claim that offer it. And I'm curious, there's some weird other deals, too. Like, I believe if you have an Xbox pass, um, you get all the League of Legends characters unlocked because they also have a deal.
One of the tiers does do that. Yes.
I don't remember which tier. It's pretty high, I think, but
Oh, okay.
Yeah. Like, it is
it is
Xbox is used to doing deals.
Yeah.
To bring people into its ecosystem.
Yeah. In Germany, Game Pass is one euro cheaper than Nitro even. That's wild. Yeah. Yeah. You lose the

characters you don't have actually unlocked when you stop having Game Pass, which is one of the ways that they keep you having Game Pass because if you like the champ and you're like, "Oh, I can't unsubscribe from Game Pass because I'll lose all these champs that I really like." They've got you, right?
I'm curious how much they're paying Riot for that.
Yeah, probably a lot. Yeah. And and I think that this is this is not an unreasonable tank either from Disk, right? That they um could be trying to buy Discord again, right? But this is this is just another really weird happen stance thing that like
anytime something like this happens, I think we've grown to the point where we are now um defaulting to skepticism, right? And like plenty of people will chime in with, I've always been skeptical of company. Yes, absolutely. But I think skepticism is now a more common default response than the people who have like had problems with.

Yeah. So, um, the the idea that again that Microsoft would do this, right? Because again, I'm I'm firmly of the belief that Game Pass is the object of value here and that Nitro is sort of a freebie cuz again, Discord does not offer a lot of things of value. We were talking Jeff said earlier that he doesn't even perceive it to be of enough value that he would buy it even if he wanted to support the company, right? Like he does not perceive what is being offered with Nitro to be of value to begin with, right? So this very much bills to be like Microsoft is um uh buying them out um and or or or bailing them out, excuse me. And so I think that that is sort of the interesting um uh interesting sort of uh occurrence.

Sorry, I had not prepped for this one. This one literally came up as we were talking at the beginning.
Yeah, I was like screw it. Well, I'm putting it on the
I'm putting it on I'm putting you on the spot. All right, Jeff, my turn to put you on the spot. Tell us about this.
Let's close out the So, by the way, just on the closing out the Discord thing,
I'm really curious to see how this goes. I'm curious to see if this is a I think they should have announced it as a limited time offer. People who subscribe to Nitro within the next 3 months will get Xbox Game Pass at this price for at least Y amount of time. Yeah. Or X amount of time where you know the like I think because their job is to try and get people back in.
Yeah. And I think if people saw I think they needed to combine scarcity with it. This offer may go away. You're getting a really good deal if you sign up right now.
Yeah, I think that's definitely true.
Yeah. Okay. The last corporate shenanigan is not one that people would

probably think of.
Yeah. This is really weird and kind of cool.
It is. And it's a different kind of shenanigan. And I'll tell you why.
Yeah. will set us up.
So, many people may know that we're on YouTube.
Hi, YouTube. Everyone say hi YouTube. Um,
hi YouTube.
Jeff and I have some experience with the back end of YouTube, which is uh where we have to go to prep our videos and do things and and edit ad slots and do everything else.
Actually, let me say here, Will has some experience. Yeah, Jeff has a lot of
I have extensive experience because part of my job as the studio director is running the strategy of the channel, right?
And YouTube has a really good analytic section
that I pay a lot of attention to as well as things like playlists or you can, you know,
I I just finished hooking up our store. Oh, by the way, if you want to, if

you're watching on YouTube right now, I think it happens while live streaming. If you look down below you, that shelf now has all of the products from our store in it. You can actually click and buy the puzzle and the calendar and t-shirts. I can't tell you well how long I've been trying to get our store hooked up to YouTube so that people can like watch a thing and be like, "Oh, cool. I want that shirt."
Yeah.
Like find our product placement for our product right there.
Yeah.
Um Okay. So, uh, YouTube ads have been a thing that creators and users have gone round and round with YouTube about forever. There is an escalating arms race between YouTube and ad blockers. There is um a constant battle between creators and the algorithms that YouTube uses to put in ad slots and how many ad slots and where those ad slots play and how much those ad slots are worth and where the best place to do it is and all

and on and on and on and that's changing.
One more that you don't know, Will.
Yeah,
this is minorly relevant too. between the team that designs the um YouTube UI and between creators desire to be able to say, "Hey, look in the link for a description to Skillshare or Shade Raid Shadow Legends or, you know, whatever your average whatever your sponsorship is."
Those descriptions and other things aren't particularly sexy to the people who design the UI and keep getting hidden and pushed down in menus and other things. So your ability or like to link out of a short.
Yeah.
You can't link out of shorts anymore.
Like you can't we can't say hey this cool short about our calendar go to our Kickstarter and get it.
Nope. No external link works from a short. So a lot of the we're also battling against and this isn't them being malicious. It's like we don't really care about a user's ability to see a video's description.

You know, we want to spend more space showing the next video they could see or something,
right? Oh, catt's going on.
Yeah. Um, Pival is very happy. Um,
Percy loves sitting in my lab.
Yeah. Uh, oh, look at the ear wiggle. We got ear wiggles. Ear wiggles have been confirmed. Um, so now there's a change on the horizon. There's a new there's a new system, a new sheriff in town when it comes to the lawless west of ads on YouTube. Tell tell us about this.
Let me set the stage to get us here.
Yeah. So, for those who are at all interested about the economics [clears throat] of making shows for YouTube, there are two there's lots of ways people make money off and around YouTube. The merch shelf I just talked about is one of them. We have a really cool Patreon and YouTube memberships that help pay for the production of our extra credits and extra history videos. But one of the things that makes the most revenue, actually two things that

make the most revenue for majority of YouTubers are the ads that run when you watch a YouTube video and sponsorships. So the ads that run on a YouTube video. So like if you're watching it and you know, so you have to remember YouTube is owned by Google. One of the best things Google does is sell advertisements. like they're also an amazing search engine and they have cool Gmail and everything else, but they are very very good at taking bulk ads in finding the people most interested in watching them and serving them up the ad. And so if you make a video, like an extra credits or an extra history video, we put it up on YouTube and as long as we turn hit the little thing that says turn ads on, which is how we get paid, YouTube will either manually insert, excuse me, allow you to manually insert places where an ad could show or they'll algorithmically do it. And so if I went through on a 15-minute video and put four places an

ad could show, it doesn't mean an ad will show. We have zero control over that. It just means when it hits that space, it says, "Do I think a user would stay here if I show them another ad?" And if its answer is yes, it will show them an ad. And it has different ways of determining that that would take way too long to get into and is honestly pretty obiscated. So those are ad spots. And again, we can either choose where they go or they can do it for them. And then YouTube will choose if it serves up an ad. We have zero control over what ad it serves up right there. This is important. We have zero control of that ad that shows up other than our ability to block a category. So, for example, we don't let crypto or gambling ads show on our videos.
Seems reasonable to me given that the preponderance of people who watch our videos are students.
Actually, they're not. They're actually demographically older than students.
Really? I did realize.

Okay.
Um, yeah. Interesting.
24 to 34, I believe, is now our most viewed segment.
Interesting. All right.
18 to 24 and 34 to 44 are both high as well. But
how many of those I just I I've seen I've seen enough clips of this happening. I wonder how many of those are teachers putting extra history videos on in history class because I've seen that happen a lot. Anyway, not the point. Um,
yeah. Anyway, so ads get served.
The other thing that um people make their money from is hey this video sponsored by insert your friend by Nebula, Skillshare, HelloFresh, Raid Shadow Legends, take your pick, right?
Any of those things.
Not Honey, not anymore.
Thankfully.
Yeah.
Um those are not inserted by YouTube. Those are contracts done between the YouTube channels and the group doing that ad or by an intermedi intermediary

agency who books that for you gives you a rate. So, like if you went off and they look at how many views they think you're going to get and they run some, if you're talking with Skillshare, Skillshare is going to be like, "Okay, if I pay you X, I want to make sure that Y number of people sign up at this rate and if you know if they can make Z amount of money by those people saying subscribe for that long, the marketing, this was marketing, it was success or user acquisition marketing. It was successful. they have made money for their company and they will go sponsor you. Again, an interesting fact about a lot of this is that a lot of these companies are lazy.
Um,
efficient or lazy.
Yeah. They know once a YouTube video is up, you can't change it. We cannot go into an uploaded YouTube video and re-upload a thing. That video is as it

is. There is a YouTube editor that lets us cut parts of a video out, but it is not a great editor and
can confirm
um does not look particularly good when you do it.
So, Skillshare, for example, using them as a hypothetical might be like, "Cool, we want you to run an ad for this." They will track it for 90 days, how long people do things, and after that they're like, "Ah, nobody's doing this anymore." Despite And if you're some channels, that's fine. If you're a history channel or a gaming channel where people might watch your videos for years to come, Skillshare, again, hypothetical, is kind of getting a free ride there where they're paying you for 90 days, but people keep watching for
a much longer amount of time. know our Jon of Arc video continues to be watched and will continue to be watched for the foreseeable future
or some and particularly with history sometimes those videos become shockingly

relevant like if someone were to have a video on I don't know
a flu pandemic in the early 20th century that might
19th century flu pandemic did get a significant boost at that time can control
I can't imagine why it got a boost randomly about five years ago anyway yeah
yeah So anyway, this is setting the stage in a different kind of corporate shenanigan. YouTube, we have just been accepted into a beta program and I searched, there was zero in the invite saying, "Please keep this secret."
Mhm.
Mhm. Um I just remember that I missed one of their training sessions. I'm going to have to go back, but it didn't get put on my calendar. Yeah,
I will check it out. Okay. Um, sorry that just came to me. I'm like, why isn't that on my calendar?
Okay. Yep. Yep. Yep.
Anyway, um, there was zero in there saying anything about confidentiality.
Okay.
So, I can talk about it. YouTube has a

new thing that they are trying out. Hopefully, it's precursor to a larger thing which we've been asking for. Remember when I said we can't when we put ad inserts in of a place where an ad could show,
right? We don't get to pick what that is,
right?
That's served up. They're putting in the trial ability for us to say to actually do that kind of that we can go make a private video that they will at one of the ad breaks serve up instead to run it like an advertisement as long as that is associated with a brand they've cleared. So, let's take an example. Nebula, our creator um independent creator streaming service, happens to be registered as a formal advertiser with YouTube. So theoretically now we can go make a little 20 second ad for Nebula and instead of

random who knows whatever YouTube's going to stick in, we can serve that up instead if we want to for one of those ad breaks. Hey, this is pretty cool. This is in some cases saying you get to pick your own audience thing. This is theoretically a precursor. So that's basically taking over an ad spot that they would have served anyway. A precursor to saying what if you could designate a spot in your video and do that instead. So, like that hypothetical 90 seconds near the end of a video where you're advertising Skillshare from four years ago that they're not paying you for anymore. What if you could instead say, "Oh, yeah. Started here, ended here, serve up this little thing on the side to come in." And suddenly, as a YouTube channel, your whole back catalog might actually become a lot more valuable to you. and all of

those corporate entities like again Skillshare is purely a standin who are like ah we don't have to pay you anymore for that and you can't change your video so there's nothing you can do about it. Um their shenanigans might be overridden by a much higher level version of YouTube's one saying maybe our create you know maybe we can help the people who make videos for us get paid better so they'll go make more videos for us. This is a as as someone who uh is is not the person pulling up the levers, I gotta tell y'all, this feels like a massive amount of control for creators. So,
think about it this way, right? For for our channel, we have
500 back episodes of e more than 500 back episodes of EC and about the same number of extra history, I think.
Oh, way more than that of both, actually.
Yeah, it's Yeah. Right. So, if we could say instead of instead of doing sponsorship deals for
this particular video, we could do deals

for the entire back catalog that still gets watched because it's all still relevant because most of it is evergreen content.
Yeah. Of history. Oh, and mythology, right?
And oh, so you haven't read. Oh, and extra sci-fi,
right? All all of the stuff for all of time, right? This is a huge amount of power to give to creators because now we get to negotiate from a much from a place of more significant offering. We get we have a better product we get to offer to advertisers and have more control over that relationship. That sounds really good to me.
So, we're sure not sure. We're still not sure it's going to get to that part, but they're they are triing the beta
of the first part, which is that
let's override an existing spot we would have put an ad.
Yeah. Yeah. But man, that it would be a gamecher for a lot of YouTube studios um to be able to negotiate those spots better.
Yep.

Um because there's different kinds of YouTube channels, you know, being very honest, we're not a gaming news channel or a news news channel or a tech review channel. There are certain channels that'll get 95% of the views on a video in the first, say, two weeks and then nobody really ever watches it again. You know, if you're reviewing the new iPhone coming out, it's relevant for a very certain amount of time.
Yep.
And then it stops being relevant. So those channels have a much higher spike and a much lower tail comparatively. Certain other kinds of videos, storytelling, history, things like that, gaming culture, have a lower initial spike, but a longer tail that just kind of keeps going.
Yeah, this this is interesting as well. Um, Hippie says, "I think they might already be testing features for replacing sponsorship segments in current older videos because with YouTube Premium on my phone, I a button to jump to the end of sponsorship segments when they start."
Mhm. [clears throat]
Very interesting.
And this is in some ways also them

trying to combat the things. Remember I was talking about the UI team like doing things for the user experience. Sure, that's better for a user. Skip the ad or skip the sponsorship. Bad for the creator. We're trying to say, "Well, this is how I pay for the things that make the video." It also lets YouTube keep more things in house, right? This is not dissimilar to when Twitch began offering um individual sponsorships for creators through Twitch itself. Um
Twitch wants to be involved in some way with the monetization that's going on on their platform. So does YouTube, right? And that is
um if they broker that deal, they might get a little cut for doing nothing, right? And so in this case because YouTube has to approve the advertisers and host the private video they get to see how effective this is and maybe they get a little something something out of it too right and so that is another that there it's not completely altruistic
right this is there is something pretty

significant in it for them which is a degree uh an increased degree of control over sponsorships which were previously not done inside of YouTube now they would be
yeah because yeah this would be instead of a baked in you're referencing a video that is on YouTube's site to be the fill.
Yeah.
But regardless, like I'm really hoping this happens because this would be a really good thing for, you know, not just us and I'd be very happy for us, but for a lot of different YouTube channels,
a lot of Nebula creators actually, because a lot of Nebula creators have evergreen content, right? Like
a lot of this stuff is educational or longer form and sticks around. I guarantee you somebody like my other nebulous patched or tears right interested legal eagle interested Lindsay Ellis interested real engineering interested like um the jet lag crew like there's any number of people that put out stuff that you're just going to
keep watching. Yes.
You're like oh yeah.

Yep. Absolutely. Mhm.
So Chad,
so it's an interesting shenanigan in that it's in some cases it's corporate against other corporate,
right? In in the immortal words of Ken Watnabi, let them fight. Um it's great. I love it. It's awesome. Uh
which which movie was that from?
Uh it's been in so many
he uh he's in a movie where he's watching two people fight in a prison yard.
I think it might be one of the Batman's. I don't remember. Oh, it's Godzilla. Yeah, it's Godzilla. That's right. Yeah,
there you go.
Which makes sense because we're talking about Kaiju um as far as we're concerned. Uh so everybody, that is going to do it for our sliders episode. We brought you five distinct little itty bitty mini topics on corporate shenanigans. We hope you've enjoyed this. If you did and you like this format, leave a comment on YouTube or hit us up on Blue Sky and tell us that you like this format. This is something that we won't always have um the right

number of stories, right? Right. If we've only got one slider story in a week, it's a little hard uh to do these, but um we may do these every once in a while more often if if you all uh enjoy them. Um
uh that is good to impress. Join us next week here on Design Club. We'll be doing uh an episode on the discovery problem. More games than ever come out every year on every platform you can think of. How in the world does a game get discovered? We've got an industry professional coming to join us and talk to us about how companies of different sizes and different kinds
take a shot at
particularly indie
particularly indie take a shot at solving that discovery problem. So please join us next week for that. And then as always join me and Matt Monday for breakfast where we'll have a whole new buffet of gaming news stories to talk about. Last important note before we go. Uh we are changing the schedule. Um um we are changing the schedule in about the middle of June. We changing

design club to be on Tuesday,
not Thursday.
Not Thursdays. Breakfast will be moving to Friday mornings and design club will be moving to roughly the same time on Tuesday. So please look forward to that. Um we'll be we'll be changing things up. Uh some of that is honestly that metrics thing that Jeff was talking about and some of it is uh organizational stuff on our end. We think that uh both of those shows will do better in those spots during the week. So uh that is going to do
particularly by the way breakfast because at that point it isn't news that happened last week, it's news that happened this week.
Yeah. Which is a much a much better cell. So um I will see all of you whenever I see you. Uh I think all that is left is for someone to say bye to the people, Jeff.
Bye to the people, Jeff. Have a great week everybody.
Bye. [music]