Gaming Under Fire: U.S, China, Tariffs & More

Hello. Today we have a is it a great day? I don't know. You you will decide afterwards. We are with Polo and um his friends call him as politics politics. There was a joke but he he will tell you. So we will discuss why all these things in US happening and like we were about to chat about gaming, mobile games, production then like the hot topic is like super hot. We we cannot miss that. He has a like he's already in US. I have a has a game studio. He studied political science which is maybe his favorite or I don't know. So welcome Paulo. Polo. I also have a cat who will walk across the screen a few times. Um yeah, good to meet you. And yeah, funny we were just talking a little bit about the political climate and some crazy stuff going on this week and I mentioned to Omar that I actually have a degree in political science. So yeah, so I tend to have a little bit of education on on the

topic, but yeah, lot lots of also interesting things going on with uh gaming. So yeah, would be good to discuss these topics. Yeah, like I I think we should start with literally uh the the big why, you know, like right now there there are so much going on like from sweeping tariffs and like trade stuff, market volatility, economic implications and like so on so forth. You said that there are like you know many people on the streets the inflation is going up already. There are like crazy plans from Trump's side like as you mentioned from producing iPhone in US to many more like what is going on Paula? Um yeah I mean um I think the we have a very polarized like uh politics here in the US you know between the Democrats and the Republicans. They definitely are are trying to do things very differently. And then um the new um administration is is uh you know to uh

you know make some changes in in the way that they do it. It's very uh uh very chaotic here. But yeah, I think you know we were coming out of high inflation and so you know a lot of people were kind of worried about the economic situation and uh this week has been uh a lot of turmoil here um with the stock market and everything. So yeah, it's just scary. I think uh a lot of investors and businesses are are a little bit worried. So yeah, it's just a a stressful time I think for any business owner, you know, whether you own a big business or a small small company. It's really weird like there was nothing. I mean like US was US and everything was the same and like one day hey like crazy tariff here like US against China and everything will be changing etc. Like what do you think about what triggered this the

first shot? like is it literally against China like there is something that we don't see in the bigger scale. What is behind um yeah I mean I think some of it is just politics so the administration the current administration you know will follow looks like they're following through on on their promises um you know going into the campaign that they were going to you know be tough on on international uh trade in certain countries. Yeah, I think it's some of that. I think the other part of it is, you know, in economics there may be different ways to deal with inflation or different ways to deal with these things. And I guess they they see tariffs and this like strategy as a way to deal with with some of the problems. Um, and so, so yeah, like I think I try not to get too too into uh political bias, uh, at least publicly. But, uh, yeah, I think that this is the way that they think that they they might be able

to turn around the US economy a little bit and, uh, and improve things. But I think in the short term because it's just a shock, you have investors reacting, you know, a lot of people thinking about whether they should sell all their all their stocks here in the US. So yeah, just really stressful time. Yeah, like I think earlier we were chatting um China will be actually benefiting from that although the tariff is like mainly on China but is there a really a winner? Can we say okay like uh now US is losing here is the data and like it what do you think like short run long run what is the picture out there? Um yeah, I don't think we can know yet. I mean I think um you know the US has outsourced a lot of its manufacturing and jobs overseas. Um you know we had some pretty high unemployment recently but now our unemployment's pretty pretty

okay. And then you know AI is giving people and I guess you know coming out of COVID there was there was you know a lot of a lot of funkiness in salaries that people were getting paid and then once the the revenues dipped postcoid they had to lay off a bunch of people and kind of restructure a lot a lot of companies did that you whether they did it silently or or very loudly. So yeah like a lot right now a lot of people are unemployed especially in the tech sector. Um, and I think in gaming that's probably the biggest thing that everyone's probably talking about. And uh, you know, people are worried that there still will be more layoffs and you know with the economy going into a difficult period then yeah that's very likely that companies will will kind of try to be a little me leaner to survive. I think in general that's kind of the story of game companies and studios is uh here in the west is try to be as lean as possible. I think that's where there was a discussion on LinkedIn this week

that was interesting uh that brought up uh kind of how can Western studios compete with eastern studios. You know, you have the 996, you have the the difference in wages. You also have the fact that I think people thought for a while that folks out here in the west were just way more talented and just had a way better advantage in just the software and the hardware they had access to. I don't think that that's necessarily the case anymore. You know, you can buy a really nice PC online anywhere in the world, get it all set up with with uh you know, cloud software. So, so yeah, I mean that the I guess the kind of advantages that the west had are kind of gone and the east has a lot of advantages now. So, yeah, I mean I think outsourcing is like uh at an all-time high in gaming and publishers are shutting down studios in highcost uh cities. So, so yeah, I think I think the other factor was the war in the war in Ukraine

and Russia also kind of messed up some of the way that um studios had been working with uh with low, you know, pretty effective like goodost labor in that area. And in Poland as well, it all doubled between 2018 and now the cost of of of working in those areas has doubled. So yeah, like I think Latin America is becoming interesting now with with talent there and it being economically effective, but uh in the US it's very difficult um to operate with like with just how how people get paid here and the expectations of you know 40hour work week kind of thing like um you know having really nice amenities. Yeah, that that stuff is is kind of disappearing and actually considering it's like affecting the tech industry pretty much like we already see it jump to gaming right especially like I know

that the physical gaming goods like Nintendo etc like already having problems right now like how do you connect it to gaming industry like let's go abroad first without like diving deep into mobile but I think Especially the layoff thing has been there for already more than a year I think like it's literally a snowball effect over there like how would it affect the layoff in the gaming industry and what would be the next round for gaming space considering if these things go in a negative way that I don't want to like you know investment has been difficult in the gaming space um yeah like the last year was very difficult ult for almost anybody trying to raise funds whether it was web 3 or mobile like PC like pretty much in every single area there's there's a big problem right with mobile it's UA with PC it's the

fact that there just isn't as big of an audience on console as there used to be folks are talking about how Unreal is essentially making most of the money in Unreal Fortnite editor it's like are creators really making enough money you on Roblox. Can a studio really sustain just building Roblox games? I think there's only like two or three major Roblox studios and then everybody else is is really just uh kids and and and kind of indies. So, and then I think within Steam, it's becoming very difficult to compete. So, Steam is kind of turning into the app store where kind of discovery and figuring out how to, you know, keep a game popular for more than a month is is difficult. So, you know, when you look at all those things, investors are just it's very easy for investors to say, "Hey, there's too many problems here." Um, and then I think as large companies struggle to hit their numbers, then they're going to lay off folks as well, shut down studios. So, I think, yeah, there's right now it

doesn't look good from from either side. If economic outlook, you know, looks really bad, then both of those sides are going to hold on to their money and businesses are going to cost cut. So yeah, I mean uh I'd say most people are not optimistic uh after especially after this week about how things are going to be. Everybody I'm talking to is saying that you we you have to kind of brace on for another year. The studios are going to have to really work to survive through this year. It was at first it was like survive through last year and you know things will get better and now it's it's like no survive another year. Yeah. I think also the cost thing is really there right? Yeah. Yeah. I mean the cost of UA because there are companies that that have a lot of dollars to spend you know the the cost of UA has gotten pushed up and um there's less competition within the ad network and exchange space that that was a whole another story I think recently too where people have been calling out app in in particular. Yeah it's uh it's

just become very very hard. Yeah, I think like even before all these happen like we were seeing the app thing right like also there were problems in the mobile gaming at tech space. We were chatting about the monopoly how like there is almost no competition and there is no spot for new players and so in the end I think it will just looks like will double down the issues over there instead of like help. So like from the you know you have a studio basically how do you see from your own point you know considering the studio um studio and publisher side in the end? Yeah. Yeah. So I mean I I have uh some members of my team out here in Southern California but you know we're kind of a a bootstrapped kind of uh bunch. I think if you can raise funding, I think it's still kind of great to have a uh have a studio

where everyone can can work together, but that's becoming increasingly difficult. Whether it's, you know, where your developers are have to be located in like a cost-effective location, you know, or you have to kind of have a remote team that's a little bit spread out. That's kind of where things are going. So, so yeah, I think with the investment, especially early stage investment being difficult, I do think a lot of teams have to just like bootstrap like working remote and then, you know, if they're able to potentially either raise a good amount of funds or or, you know, u become profitable, then then they may be able to to start to have like more of a on-site culture. But that's kind of a little sad for me because when we when I kind of was working early in the industry, you know, where I worked when first launched was a small game company called Jerbo and we ended up, you know, building a bunch of games and then and then we we created ad colony out of that. It's hard to think that that could have happened in like a

remote setting with like just a few scattered people like so yeah I it's a little sad that that it's much harder to have that environment where the studios can just all work together in one place. I think that that's going to become more rare and as studios are shutting down in certain big cities they're just going to opt for studios that are kind of remotely in other places. So um yeah, I think that that's one of the challenges of this like new world and kind of the kind of having lowcost development like I guess if I'm understanding like a good good scenario is like you know all small team that has figured out how to kind of bootstrap a game and learning how to get feedback, build an audience, work with influencers. That seems to be kind of where the promise is. Whereas I think the bad scenario is the teams that you know just spend a whole bunch of money to pull together a lot of veteran talent

and kind of put themselves into like a 3 to fouryear development cycle before they can even have a playable shippable game. Like I don't think anybody wants to take on that sort of process anymore. And only I think only like trip established studios are going to be able to continue to to do that. So, so yeah, I think the process is going to I think the scenarios are going to move to more of a smaller teams, you know, getting games out, um, you know, trying to expose, you know, early access, you know, getting a community playing those games. It's but you know I think investors have to have patience in that like and also executives that are maybe used to more of like you know planned marketing launch where you know product launches and you throw all this money behind it and then you get this like you know immediate growth. You know it doesn't really happen that way with some of these games. you kind of have to grow them a little slower over a couple years as you, you know, find the the the best

KPIs and and and the best economy set up for these type of games. Um, yeah, I think that the the industry will just have to change and adapt to to that that scenario more. Yeah, like I think there were so many Turkish startups as well like many of them even took investment from like almost I would say random investors like uh you know some construction companies with a couple of millions. It was like you know give me ideas uh gaming is booming. There are already so many companies like Peak etc. I will give you $1 million. Just give me the project and that's it. Like right now I feel like it's really going in the opposite direction. Even if the project sounds good, the team is cool, like it still takes so long for investors to you know make the decision to okay like this is kind of safe to do that. Investors before were just excited by um by any if

you gave them three positive signs that you that your team is solid they will invest. And I think now it's back to where they have to check against a list of like 50 negative signs. And as long as you don't trip a more than a few of those 50 negative signs, then maybe they'll invest in you. And like how do you think this like what we chatted in the beginning the current US China tariff and whatnot stuff um do you feel it will in the short run let's say this year for example 25 just make it worse from investor angle even including the like UA budgets CPIs etc like how uh do you think it will shape up this year? Yeah, I mean I I think that maybe the the fastest effect is that just investors are going to be less willing to invest like crossborder. I think like I've heard recently that investors are already a little bit wary investing in

the US right now in general from outside the US. So so yeah maybe that it'll be very difficult to find investors willing to invest either from China into the US. So that that could be damaging in the short run. Yeah. I mean, I think that that the that I don't know how much the tariffs like are going to affect gaming directly, but some of the big game companies I'm sure will be affected and that might trickle down. You know, one of the things to also that I'm a little bit worried about is some of the regulation coming out of Europe as well because they're they're actually regulating against a lot of uh a like kind of mobile dark patterns in games. I mean, these exist in non-mobile games as well, but they are coming down, I think, harsher on things that are very common in mobile games and and already I'm I'm already thinking like, wow, it's it's tough enough to deal with like Apple and everything now to have to deal with dozens of countries and you like

regulating against, you know, things like like I was actually watching a little bit about it, but uh you know, pricing for example, when you price an inapp purchase bundle, it's very typical to, you know, price your bundles and what you're selling in in like an offset so that the person has like extra money or they need to buy an extra bundle. It's like kind of just psychology, like economic psychology, like pricing stuff. It's this is all normal, you know, you have your an your anchored price versus your, you know, what you want to spend and all that. And they're actually regulating against that stuff, calling it all dark patterns. And it's like, okay, how are you going to enforce this? It's very gray area. Are you going to like literally make it illegal for like people to price their bundles in a certain way? So, it's to me I'm I'm like scratching my head now being like really are you going to tell me that now, you know, games that have to change their economic model because of regulations in the EU? Um, and yeah, some of these

things borderline on gambling, right? A lot of it's like kind of gambling psychology, but unfortunately like there is a lot of overlap between like mobile game design and gambling psychology. So, it's a little bit worrisome to see how aggressive the EU is going to be on some of these things. Yeah, exactly. And also like I was checking the data from China side on that front like only 10 cent is like making more than 20 million every month just from US from inapp purchases and overall in the like lifetime performance they made like more than a billion and other companies similar like number two number three etc. So I think if it really as you mentioned goes beyond current level and like jumps bounces to mobile gaming side I think it will affect the whole attack ecosystem as well. That's that's my concern to be honest. Right. Yeah. I mean already, you

know, one of the problems with uh with China is that they have full access to the US market, but US companies don't have any access to their market, right? Because I think in order to access their market, you have to be working with like a local Chinese company. And there's only a handful that that I think you can really work with, which is like, you know, Netis and Tencent and stuff. So, so the reality is that uh you know US companies really don't have access to to those users like it's it's through a very complex process that it looks like even Scopely and large companies have a tough time getting it figured out. So yeah, like it's it's very lopsided there. Um is it a sign of WW3? No, I mean it's I think it's a sign of like uh like very good strategic strategy by them to protect their you know their

industry and and I guess their players right they have very strict laws in the country on interactive entertainment. So part of it is political, but but yeah, I guess for them, they've they've figured out a way to to insulate the US from affecting their their audience with with games and such. And whereas they have the ability to make games and they have the understanding of how to make like Forex games and and RPG games and certain types of games. They have a real understanding of how to make those games very profitable and very addictive. I think even in the US like not very many companies um have figured that out either. And like to to wrap things up like what do you think about the worst and best scenario like what is the big picture out here for you know wrapping up our chats? Yeah. I mean I think before before some of this economic stuff I was I was actually optimistic about 2025. like I thought that

investors would um would potentially start investing again. you know, the industry would have maybe a little bit of a beginning of a renaissance where, you know, indie developers and folks that were fired from these companies would start their own companies and, you know, platforms like Roblox and UFN and obviously game engines like GDO, Unity, Unreal, they're all so accessible today that like, you know, people should be able to figure out how to, you know, make some games without needing millions of dollars. So, I'm still optimistic that there there will be like a bunch of creative folks that you just cannot prevent them from from making making something and they'll put in the time and they'll make some cool stuff. But but yeah, you know, the reality is that if they have zero support, if they have no ability to market their games, if they have like awful economic kind of environment that they're building their

games in, then then it is going to make it extremely hard. So hopefully this year all of this stuff kind of turns around quickly. Um and and and I can be optimistic again. Yeah, please please let's be optimistic. Fingers crossed. So final words, what do you say to the industry folks? Um yeah, I mean I think there's there's some cool innovation going on in in some different areas like crossplatform games and and creators and obviously in AI. So I think I think if we once we get through the the tough period like I think we'll be able to to do some innovative stuff but but yeah hopefully this doesn't last very long and and people stay positive. The large companies are going to struggle but I can only hope that UPS and and small companies can uh can find some success. gaming has gotten so big that, you know, I mean, you you even heard the story uh this last week of a of a single

developer um putting out a game on Steam. I think if you calculate out he's made like over $30 million or something, right? Obviously, that's a fluke. It's a single guy made a lot of money. But just imagine how if if a single can make that much money, imagine how many 10p person teams can potentially put out a game that makes a couple million dollars a month, right? And that makes that team really sustainable and um and and allows them to uh to build a business, right? And so I hope that that that can happen more, but but it is challenging out there, especially without like publishing and investment support. So hopefully that improves. There are challenges as well as opportunities. So fingers crossed guys. Thanks for the cool chat, Paula. Mhm. Pursuer.