GDC Shakeups

foreign [Music] gaming podcast where it is our mission to explore the business and future of video games we bring together the industry's brightest Builders investors and thinkers to keep a full sun current events dissect emerging Trends and games share Lessons Learned and have a great time this podcast is also part of novik's growing ecosystem which ranges from free and premium research to Consulting and advisory services for more information visit www.navic.com now let's jump into the episode hello and welcome to another round table episode here with novik I'm your host Kevin Becker and today I am joined by as usual at this point uh Aaron Bush co-founder of novik here we got Matt Dion a regular Nava contributor and Felipe Mata head of Studio at fun plus how you guys feeling feeling good

hello good good and then I got a question I know you went on your honeymoon to Japan and Malaysia recently you said you ate a lot of food what was the the best cuisine best food that you ate on your trip uh I I I will be skewered by my in-laws if I don't say the Malaysian Cuisine was the best um so I mean we it's it's like a Melting Pot of Chinese and Indian and Malaysian food and so you get all sorts of amazing um you know dishes from each sort of um Heritage and so you know we had some amazing Curry we had some amazing dim sum I mean it was it was really good looking forward cool well we got a lot of good stuff to talk into talk about today and dig into which is it's I mean post GDC right so lots of good stuff um today we've got uh CMA coming around on the Microsoft Activision deal Unity

joining the AI party as everyone else's at web3 games Collective being formed a bit of controversy around dark and darker are probably named in Rovio rejecting platika's bid should be interesting and some good deep Dives on 10 cents earnings Counter-Strike two's announcement which you may have heard of and epics Creator economy 2.0 so if you want to dig into that on CMA coming around Aaron yeah we got lots of good topics to dig into but the the first one the the UK is competitive and markets Authority otherwise known as the the CMA it lightened its opposition regarding Microsoft and the Activision Blizzard deal this past week so in short the CMA no longer believes that the acquisition would hamper competition in the console market and according to a statement that they put out they said um and I quote it will not result in

substantial lessening of competition in the console gaming Services because the cost to Microsoft the withholding Call of Duty from PlayStation would outweigh any gains from taking such action so uh they're finally coming around to the idea that Xbox will keep Call of Duty multi-platform which if anyone has been paying attention has been super obvious from the very beginning but I guess congrats to the CMA for for finally catching on um strangely they also made clear that this that this change of mind does not represent a change in their earlier research about the deal's threats to the cloud gaming market and so my guess is they're they're really just sloths at digesting information and making these decisions because you know so we've talked about this many times before like not only is that like the wrong thesis to like hinge this deal on or to like stop a deal going through based on cloud gaming of all things uh but Xbox has recently struck deals with

a bunch of like third-party um cloud gaming companies to bring the entire Xbox PC catalog to those businesses so um you know the bottom line I think this is a win for Activision and Microsoft that tilts the odds even more favorably towards the deal growing going through I do suspect that the cloud gaming piece that'll get cleared up sooner than later it's just these regulatory bodies are are slow to to take action and you know get their statements out um and then once that happens probably with the CMA I would guess the other Regulators fall into line if you look at the stock of Activision Blizzard it's risen from 75 to 85 over the past month and the buyout price is ninety five dollars so there's still the market still is pricing in some uncertainty but basically that uncertainty got cut in half over the past month because of statements like this um so um it's looking more likely that the deal goes through and I would guess a

month from now that we'll have some final answer to this Saga and I can't wait because I'm tired of giving giving these updates they're really annoying well hopefully that goes soon who is the main main one mission to to give and to say something I think the in the US the FTC still has some a lawsuit or something out that needs to get cleared up I forget the details on what exactly they're held up about I'm sure it's similar regarding Call of Duty and exclusives and things like that um and I don't even know if the EU has given full approval either so I think like those three we're still waiting for final takes um but you know how these things work is they all I think they all tend to come in line pretty quickly uh once they make some more decisions but um yeah once those big three get approved or not well get an answer hopefully shortly

well hopefully in the meantime everyone's actually preparing for the merger so when it actually happens it doesn't take forever and everyone drags their feet like the rest of the government does so it should be good if I remember when this was first announced they initially predicted it would be completed by July of 23 something like that um so you know they're still on track fair enough well Matt uh you got a good update here about the web 3 games Collective yeah yeah this will be a quick one I I thought this was interesting caught my eye so um a group of four web three gaming companies let's say have come together to form what they're calling the web three games Collective so the four entities are ygg yield Guild games uh game seven Phoenix games and Magic Eden um and I'm gonna quote here the founding members will leverage their Collective expertise and resources to focus on improving Discovery distribution and sustainable growth for high potential quality blockchain game projects

um the reason I thought this was noteworthy is because of the entities involved coming together uh you know we've seen some other groups form like I think there's like a blockchain gaming Alliance there's some others out there um but the sort of parts that make up the hole here you have ygg which is like a guild slash Dao slash investor game seven which is a Dao or plans to be a Dao um Phoenix games a publisher slash investor and Magic Eden a Marketplace so you have some of the kind of major components of the web 3 gaming ecosystem kind of coming together and supporting each other with the parts that they individually cannot do um and then the last bit I'll mention here um you know back at the at the turn of the year when navik did their predictions um one of my predictions I'm gonna Pat myself on the back here was that there's going to be some consolidation in the web three space now no one is acquiring anyone here but they are coming together

um to do something collectively and another sort of data point in that Trend that you could look at would be the news that we saw recently from immutable and polygon for example again coming together to lift all boats in the web 3 gaming ecosystem so anyways a small bit of news but I thought it was interesting to see these groups coming together and and trying to move the space forward yeah we've definitely seen quite a few of these put together I think this is the third or fourth one we've seen from the the web three metaverse side of things and it seems like a lot of early alliances being formed people just kind of establishing some ground realizing you know if they're in early they need to establish some territory so I expect to see people actually bounce out of these some other people join late more of these being formed it's uh it's it's interesting to see this like kind of early forming in the space but I can't imagine all of these will like really last or have like relevance long term but I I gotta imagine some of them will and it's you know people consolidating power to some extent early

on just you know just fine uh Felipe you have a update here on unity and AI that should be interesting yeah I think this is quite interesting but also maybe quite sure because they have inserted much much detail so while developing in unity has always been fast it looks like it might be about to get a whole lot faster with the use of AI so they absurd the video uh that this how this could be done in unity so they they saw just text uh so some prompts that illustrate a little bit uh options that you could do with AI like creating characters designing levels adding content like NPCs modifying the camera or changing the look and feel of your game but they just saw the text of the prompts and nothing visual on top of that which uh I don't know feels a bit strange right like with the nexgen AI being so visual like they haven't shown any anything and it's a bit interesting

and I I was here a few weeks ago speaking about the Roblox uh also announcing that they are going into Ai and they were like so in a demo with how uh using AI could enhance the capabilities of the developers but in the unity case they haven't uh shown any details so they just saw the video and then they have a call to action to join their registration for for a better for a beta so I don't know what do you think are they trying to hide their cars or just uh you know buy some time my guess is they're just trying to get in on the hype because it's certainly at a frenzy um and might as well capitalize as much as you can and when people are talking about Ai and looking at all the tools and stuff so much right now and if it it takes them a bit of time to you know build out those tools

um I mean that makes sense I mean I imagine doing that in a super complex system like Unity it will take time to to get right and really build out but uh yeah it feels feels a bit like a PR move now uh more than substance but I imagine it'll translate in the substance eventually yeah also last week there was a tweet feed about uh a proof of concept of integrating chat dbd with unity which looked very promising and very powerful but also like it was a profound concept and the developer admitted that it's hard to make it work uh nice like many times like it doesn't do exactly what you what you need but yeah I think like if Unity managed to to to make it right it's going to be what did that what did that mean I'm just curious integrating chat GPT with the unity just like you type in prompts and it spins out visuals or yeah yeah you can make make uh prompts and and make actions like the

the demo was showing like creating 100 blocks then placing them and yeah you I put the problem like place them in this location and immediately you have all of them moved and then adding some some layers and making them fall like I'm curious if this maybe we don't know but was this an announcement that came out of GDC or just a sort of Standalone announcement yeah I I just wonder like I haven't Unity sort of has to has to say something um you know if people are putting together as you say like prototypes to use chat gbt in unity and you know certainly Roblox is doing it I'm sure epic is is working on it as well like Unity needs to show something if only to say like hey we're working on it so you know the street knows that they're working on it people get excited as investors you know they can attract potential new hires they can attract developers to their platform they don't want to get left behind even if their

stuff isn't necessarily ready to show the worlds they kind of have to say something especially since we kind of live in a two-engine world at this point right and both of them have to like try and keep some kind of parody between the two otherwise they look pretty bad I mean uh all the stuff that I feel like is going to take time for people to actually integrate just some real world workflow like people that are in the middle of working on a game unless they've got some some slack time in there are not going to get a chance to utilize this stuff right it's like maybe a hobby project where you try and figure out how to use it um but all these kinds of tools are going to take time to actually be part of games I think I mean outside of the the only one I can remember actually being part of like a major game was the the procedural or the AI art stuff that was used on high on life to try and help prototype stuff um so you know it'll it'll take time before we see more of this but I doubt doubt that will be the last we hear from Unity about AI stuff even if the stuff they actually uh introduce is not that great and uh Aaron we got some news on Rovio in playtica

yep so it was announced that Rovio has now rejected playtika's bid to get Acquired and if you've listened to previous episodes this shouldn't come as a surprise um but also the Saga for for Rovio uh isn't over yet Rovio is still in discussions with other unnamed suitors um and at least in my opinion it wouldn't be shocking if some kind of deal is announced or goes through in the next few weeks I guess we'll uh we'll see just because um bravio has great IP and it's a it's a company if you just look at their stock it's pretty much treaded water since they ipo'd six years ago um so you know as they're looking to best sure serve shareholders getting an exit could make decent sense for them but uh obviously as we're seeing it they're being picky about you know not just taking the money but picking a right destination for the business as well um what's interesting too is that play

Tikka is stock also Rose when the when it was announced that the deal wasn't going through um which maybe is the opposite of what some people would expect because even if you think on a qualitative level um that sure this could make sense for why play Tico wants Rovio they have great IP proven games ads genre diversification Etc but when you start looking at the numbers it is kind of hard to swallow it would have been an all-cash deal of 735 million I think is what was said which essentially is all the cash that placeika has on hand and platika is net debt right now of 1.6 billion dollars is already like 40 of its market cap um so any big deals put a bit more financial strain on play Tikka and as we've seen in the past with playtika they haven't exactly created the best track record for m a and integrating Studios and have those Studios and their

their big games succeed and so perhaps the the market kind of viewed this as like uh as like nice like the side steps and other value destructive M A Move um which is an unfortunate position that platika is in that that's what the market might think of something like this but um I think that is the reality of it right now so so that's that I also just wanted to quickly ask you all if you have any guesses on where Rovio ends up or if they even do end up going anywhere if not that's okay too is are there any like big Publishers looking to acquire or are they kind of like tightening their belts and we should be looking at like private Equity or something like that uh yeah I don't know about private Equity I do think that companies are looking to acquire they're just being very selective and I could imagine in Mobile right now how that's just harder um in particular but I mean we we do know I mean obviously

Microsoft is out there still you know trying to get a big deal done um uh I mean take two recently made a small acquisition and um all these companies have a ton of cash for the most part that they can put to work and historically have wanted to be pretty diligent with M A so I don't think it's out of the realm of possibility and you know with Rovio and their IP it's at least a conversation um it's but yeah I don't know maybe nothing happens I guess we'll see I think this is the second time like political bits on on probably right so do you think that maybe they try again like before the deal closes with somebody else I doubt it uh maybe it's not impossible but if they have to throw even more money to get played zika or to get Rovio locked in I I feel like that'd be even more destructive for playtika yeah especially the way the stock

responded right it's like all right guys you're done with this deal acquisition We're Not Gonna See play Tikka outside rovio's window with a Boombox at some point trying to make this work so hopefully that was the last time we see someone that's actually a better suit or show up for Rovia also 10 cent could be a random Dark Horse in all of this too um I know they're still looking to conduct a lot of M A they've still been making deals um and it's slowed down but I'm sure they'd be willing to pick it back up at some point but yeah I mean there's so much uncertainty around this right now but I'm excited to see where it ends up well hopefully uh Rovio ends up the right hands we don't want to see how the IP go to waste of course speaking of a IP issues here we've got some controversy around dark and darker uh takeaway Matt yeah so I don't know if you all have heard of this game dark and darker it was in like a early play testing phase and not a full release on Steam kind of an extraction shooter but it's

it's set in like a fantasy setting so like Knights and wizards and skeletons and things like that and so you go into this dungeon You're trying to extract from the dungeon with different weapons and magic and things like that so this game um had had garnered a bit of attention um during its early play test but it's also embroiled in some controversy um the developer which is called iron mace is made up of at least one X Nexon developer probably more and and this developer has been accused of acquiring and transferring without authorization more than 11 000 key build files from a previous project at Nexon for which they were terminated from Nexon um and so so Nexon filed a complaint and had this game removed from Steam as a result of this actually iron mace's uh Studios their offices were raided by the Korean police and so of course they have denied all

these allegations there's no clear resolution at this point other than the game is not on Steam anymore um and who knows what's gonna happen um I I you know I played it a little bit I don't know if you all had a chance to play it I first read about it um ran Mo wrote an article about it shout out to ran he's a great writer that's where I first learned about this game and it's fun it's punishingly difficult in my opinion um but yeah I only played it a little bit before it was taken down so I don't know did you all play it yeah brutal game uh it had a lot of hype too and I think pretty pretty warranted to some extent for especially for the the extraction genre being something very different and and something that I think people were are still really excited about with so few extraction games actually really kind of seem to hit the right Mark so this is a pretty big deal for a game that had a huge amount of potential I think to get take it down completely pulled off steam like this do

you think this slows down the growth of the extraction Market just single-handedly this issue because I know we've talked before and written elsewhere that like the extraction shooter Market especially as Battle Royale dies down um that something new needs to come in and extraction shooter might be like among like the Best Bets of an emerging Trend in the shooter's market and obviously you know dark and darker isn't the only player in that space but to in order for you know a genre like that to go to the next level it does need those new games to push it there and so it's dark and darker being removed and I guess we'll see what happens next but does that like actually have like an impact do you think on the trajectory of extraction Shooters maybe being the next wave or is that Trend much bigger than what this game provides from my perspective I think it's only going to accelerate the trend like you know there was such positive Buzz around the game before it was taken

down even if it never resurfaces you know they sort of prove the concept um that you know this can be done in different settings outside of your traditional military simulation um and there's other ways to apply it now this is first person doesn't have to be a first person shooter it could be third person could be I don't know like an arpg type of game it could be all sorts of things I'll be interested to see what happens with um tencent and Arena breakout which is their big title that's coming on mobile granted that's more of a traditional extraction shooter military simulation but um I don't think this is going to slow things down at all I think it's going to speed it up I mean you see a window right you go hey if they're if they're held off for now that's one less competitor I have to deal with if I get out sooner than later we actually saw some some pretty good feedback and and hype around Dead Drop as well from Dr disrespects company the the Midnight Society one that that looked pretty phenomenal as well and also pretty different so now's a great opportunity really to try and get this

stuff out there I mean the the big hype was just around the Early Access play test for dark darker right so it's like now is the time for other games to look at that opportunity like hey maybe we should do an early access thing get the hype built up for our stuff while people can't potentially even try dead or darker darker anymore so yeah I mean you know if this game truly was you know pilford from Nexon surely Nexon has their own game that they're working on that they're gonna try and push out um and even beyond that there are a number of companies out there that are known for let's say fast following or um cloning would be a less charitable way of saying uh saying that so there are plenty of companies out there that are opportunistic and look for these sorts of scenarios to step in and you know they see a business opportunity they're going to take it I mean could you imagine if Nexon was somehow to uh able to turn this into a legal battle where they're able to actually just acquire darker darker essentially and be like all right cool now we have all the hype behind this we can just keep it going and and build off that but I imagine if there's pending court cases

and things like that it'll probably take a while I mean I'm not sure how the law Works down there in regards to IP whether it's different than the states but that would be a pretty interesting battle but hopefully if they're uh if there is you know all the stake down there actually is proof but at the same time I would hate to see a game with a lot of potential like this go down and I would love to see it just dismissed and they get back to work what can you do though speaking of 10 cent uh you mentioned earlier Aaron that we got some some news around their earnings so tencent reported it's Q4 and full year results last week and since it's the largest gaming company in the world by Revenue why not talk about it um and also just as a short plug navik pro also just released its full report on this instance quarter which will dig into stuff we probably won't today so if interested to check that out but big picture um overall revenue is essentially flat for the quarter and the year uh but obviously with a company as massive as 10 snow there's a million pieces that

play into that the company is also on a major quest to cut costs right now it itself is accelerating into AI it's finding new growth Avenues and it's social apps like WeChat and much much more that we won't talk about the gaming piece though which represents about 30 percent or a third of overall Revenue uh was also unsurprisingly mixed and its results and if you look at the the fourth quarter domestic games Revenue was down six percent while International games Revenue which is half the size of the domestic business it increased 5 set and even though there are a zillion games and Studios at play here that have that impact those numbers one way or another the bottom line really is that regulatory pressures continue to harm tension at home so tencent has an increasingly prioritized growing elsewhere uh but despite the domestic game approvals freeze that lasted you know a whopping 18 months for 10 cent

that has finally come to an end and the CCP has now improved several new domestic games as well as more recently in the past week I think the first import games uh approvals as well so I think that 10 cents domestic growth engine will start to return again over the next year but obviously the the government's demeanor toward gaming has proven to to not be something that can be fully relied on so I guess we'll just continue to see how how that goes um we'll also continue to see 10 prioritize growing and the rest of the world I think so in the earnings call management essentially stated that they have mid single digits market share of the global gaming market so that there's there's much more room to grow and for them to continue taking share and you know we all have seen 10 cent operate over the past few

years enough to know generally what its levers of growth have been they've done you know a ton of M A and Investments they have you know created their own games uh much of which you know launched domestically some of which get taken overseas um you know third they have co-development deals with leading Western Publishers um and then fourth they've started launching new studios around the world that are more that are more Western in DNA made by Western talent for Western players um and it's my hunch though that given the changes in the market the changes at 10 cent and changes geopolitically that the company is prioritization of those levers uh may change or maybe already have changed so um my my question for the group that I think will be interesting to discuss is whether you think there are certain intern National growth levers for tencent that they will lean less into or

more into in the next few years compared to the Past like how is tencent strategy fundamentally going to to shift going forward so I have one question like most of the of the revenue of attention in gaming is from mobile right um I think it's a big piece but obviously it extends well beyond that as well but yes yeah I would I would bet that they're like when one of the levers is to go cross-platform and create like cross-platform experiences so elaborate to the the position that they have uh strong uh with with as you said like IPS and development capabilities and like great fully cross-platform experiences that's an interesting point um didn't they just release uh like a gentian um kind of Clone uh Tower of fantasy or something like that um maybe I haven't played it so maybe I'm you know completely talking on my

ass here but um I thought that they made like a gentian clone uh so to your point about cross-platform but um I think also they're gonna start to um Trend upwards in terms of like Fidelity and like head more towards PC console um as they if they're going to be expanding overseas you know larger PC console Market overseas um you know I'm in the process of finishing up a piece for navic digest that will come out this coming weekend about MMOs and they have a number of uh companies in their portfolio that are actively working on MMOs so that could be cross-platform but that could also be PC console audience as well so I think there's a lot of momentum um uh both with tencent and other Publishers towards MMOs as a genre to capture consumer attention to reach consumers where they are no matter what platform they're on and build this sort of like social space social third space

in the digital realm I'd be interested if given the um the recent issues with Activision Blizzard and Chinese Publishers that we see the opportunity maybe for 10 cent to come in and be the one to help them move over I mean I know there was quite a few IPS that especially on the blizzard side that kind of got pulled from from the Chinese market as well as like there's stuff from the Activision side that's kind of contentious like with the new war zone mobile like that do you think there's an opportunity here for tencent to kind of be be their their date over there yeah I mean I I think they'll continue to be pretty well positioned as like the partner of choice for imports um and but that I think is different from you know kind of treating them as like a co-developer for games around the world and if anything I think the trend has been more the other way recently where um you know companies like Activision and EA are leaning more away from working with these these big co-development teams uh but yeah I mean

I think the the cross platform point is spot on and that's not just gonna be a tencent thing that's just going to be like a wave across the industry but I do expect that we probably will see maybe less of that code development bent although it certainly will exist it's just going to be harder to lock that down with some of these like the biggest Western Publishers it seems but maybe that pendulum will continue to swing um so we might see less of that also I suspect we'll see less of the such like rapid fire of M A and Investments and that already has slowed down I just have a hard time seeing that come back like even if the the market becomes more vibrant again for attention to operate that same way like it's just like a different industry it's a different um geopolitical environment um and maybe they can still continue to be part of Investments but even that there's more competition and you know VC space and such these days

um but yeah the thought of them conducting like much bigger Acquisitions like if you know they were to acquire Riot games today like I don't know if that would happen like I don't probably not um and so that that could kind of put a hamper on some of their m a abilities compared to the pass going forward which means that if like the partnership angle and the m a angle or maybe less drivers than they were in the past than what they have to lean more into is like the building and Publishing themselves and so I suspect that on top of the cross-platform trend we'll probably see more games that tencent makes for its own domestic Market be taken to other parts of the world more and I don't know I guess it'll probably be a mixed bag of how well those companies perform and you know since it has its whole you know long list of Publishers and development teams too

um so you can't just treat it as one monolith um but I think we'll see that it might be published under like various names that will come up to make it appear like it's not from tencent or or a Chinese company or something like that too I think we've already started seeing a little bit of of that and then the last thing that I do think we'll see more of is the trend of them creating more studios around the world um which uh I think they've already started this a bit with kind of like offshoots of like light speed for example like new Studios um in North America at least that are making new AAA console PSE games um so I'm curious to see what comes with that but it wouldn't surprise me if if they do more of that which is a higher risk activity than just m a where you throw money at something that you know works and it already generates revenue and profits um but if you do it this way it is higher upside if it works um and I suspect that it also will just

completely skirt regulatory scrutiny compared to deal making as well where they still own the full thing they'll still get full benefits but because it's you know Western Talent making games for the West it just won't The Narrative won't be the same so I do suspect we might actually see quite a bit of change that doesn't mean that all of the levers are going away or that they'll lean into any particular one's fully but um yeah I think it's it's fascinating to see that Evolution and how that might play out to your point Aaron around exporting some of their domestic games abroad and looking for growth there um just two weeks ago pocketgamer.biz honor of Kings becomes Brazil's most successful free mobile game um so you know honor of Kings is their like massive MOBA um and they brought it to Brazil and it's like you know it's this massive game two million pre-registered players before launch

um at least in terms of downloads not necessarily Revenue but I mean there's a good data point for your thesis right there I'm also curious maybe tangentially to that discussion um just your pulse you know having worked in studios we pay you know help helping round one um kind of the sentiment around bringing games to China has obviously shifted over the past few years and it's mainly just shifted more negatively just because it hasn't been allowed right so what's the point of thinking about it and going through the the hoops if it's probably not going to work anyways but if the the government starts allowing more import games do you think that we'll see a rebound in teams wanting to partner with a 10 cent again to bring the games to China if they're not necessarily like investors um or if do you think that ship has largely sailed and like the flurry that we've seen in the past to bring games to China that's mostly a remnant of the past no I think it could it could get

back I think the like uh Chinese market is quite big right and there are opportunities to to to together but it's really tough for a western uh developer to to to completely by themselves so they need to partner with with somebody and definitely 1010 is somebody that knows very well how to do that right so I think definitely that could happen again do you think the the slowdowns in approvals uh caused a bit more of the other side of things where uh they're like hey we can't release in China so let's start looking elsewhere and Beyond just even 10 cent like that that slow down caused everyone kind of developing China that needs to release stuff to start looking at how do we then end around China how do we release other markets like Western markets especially when you see big pushes like engine impact stuff like that to the point where maybe that becomes the irreversible Trend and maybe China actually uh you know the CCP actually hurt themselves from preventing all right by preventing games from coming

out to the point where maybe there's just less interest even from the local market doing so I don't think the CCP cares to be honest I think they would rather everyone put away video games and start you know building semiconductors or something um so I I don't know I have a feeling the battle could continue I don't really have a great take on kind of the first part of your question but I don't think the CCP is really worried about shooting itself in the foot or not regarding games well hopefully uh it doesn't it doesn't hurt the Chinese market you know they're still able to get games that they want to play right because uh it may not may not hurt uh CCP but it definitely could hurt the local players and having something I mean just it makes me think of like the situation with South Korea and web 3 games where you know they have to look to publishing stuff outwards and even if like suddenly um they start to allow web 3 games there there's already so much push outwards that you know you wonder uh would that actually even switch if they were suddenly allowed to do more locally I mean there was a lot of definitely a lot

of game studios that suffered from the lack of uh the approvals to the point where I think there was you know quite a few smaller ones having to shut down because they weren't able to develop so and you wonder where that Talent went right is it a possibility that that shifted over some of these bigger companies like 10 cent or did it just move on to other Industries probably both but yeah that is a good point because even though at 10 cent their growth was flat over the past year and even the the quarter I think there's a pretty clear case to be made that that you know they gain share domestically um and if I mean if you're gonna have a game approval freeze last for over a year really you can't like as a startup as like an early stage company either looking to start it or running it you really can't operate in that space easily at least and so um I'm sure it was a major disincentive for a bunch of you know more founder types and just Talent um to to not you know push forward in

that industry which leaves tencent who has the big games and the big IPS um you know in a very very firm position even though they have their struggles too well we've also got a pretty cool announcement we were teasing at the end of the last episode uh where we've got a new game sort of that was announced around GDC it's a pretty big deal there if you want to dig into that Felipe yeah so I'm excited to to share this because I'm a long-lasting player of control strike so finally we got the number two of Counter Strike at after four games is the first one with a number two so it was uh announced uh last week uh the full game is expected to release in in summer 2023 uh and it will be released as an update to control strike Go Global Offensive rather than uh another game that is out there at the same time of a global offense and that like they coexist so it's going to be an update to to CS go and they announced some key

interesting uh three key interesting features uh so three main changes the first one relates to a small grenades so now they are more dynamic volumetric they they behave like more naturally they they expand to fill the space in a more natural way they interact also with the lining so it's the writing so it's it's quite interesting and also they are responsive to the player actions so if you suit uh through the through the smoke you create a hole and then you can see through it and also they interact with with the type of grenades so quite interesting to see that it's not just a visual changes that they are adding but also gameplay changes um another change that also relates more to to the the gameplay or the playability is that they're changing the way that they evaluate the world and

their player actions so before they have a discrete uh way of evaluating this and discrete intervals and now that they announce that they are going to this suptic uh World evaluations meaning that what you see in the game is exactly what happened and there are no like Corrections and based on like the communication with the server so that's going to enhance the the playability of the of the game and finally they announced visual changes to to maps of different depth so the ranging from like just pure visual changes so nothing else changes so players can evaluate the changes in the in the game with the new engine uh on that on those maps to a full overhaul of maps that they make profit of all the improvements on this new engine that will be also available for for players to create a new maps uh

so this is released as an update players will keep their items which makes a lot of sense right uh and they say that these items could look even better with the new engine and this announcement indeed arrives when uh csgo is thriving so conquerade concurrent users Peak last weekend twitch views are also close to all-time highs and other engagement factors like Google Trends also have Peak during March uh although there is still like incomplete data because we haven't finished the the month uh at the same time they have opened uh beta for a selected group of Lucky players so I was checking and myself I'm I'm not in unfortunately um so you have to enter the game and see if you received uh this message to to to participate in the video it's only available on Windows right now uh and that's probably why some people could could say that no that's why the

concurrent players speak last weekend but it's true that uh the concurrent players have been growing in the in the last month so for Miss is exciting news because I I'm really looking forward to be able to put my hands on on the game but I don't know what had your take on this like do you think that they needed such a big update now that the csgo is is working so well and it's still growing and maybe I'm a bit conservative here but I don't know there are also maybe some risk involved in in this so what are your thoughts yeah I can I can kick it off I I mean maybe the timing doesn't have to be now but it makes sense that they'll have to bite the bullet so to speak to you know modernize the game at some point so so why not now in some ways and it seems like they have from what I've seen they've done a pretty decent job of mitigating the risk and treating it like an update where everything important to players I think port's over

um so it shouldn't actually be too disruptive um but and you know some of the the changes uh like to the gameplay itself like it wouldn't surprise me if the response is a bit of a mixed bag especially at maybe like the most competitive end of things I actually I would be curious I don't know if you know Felipe or anyone like what the response from players has been so far I haven't paid too close of attention are people generally like very excited or is it sort of wait in C mode do you know well I would say that there is a excitement because there are a lot of people like looking for for these and like searching on Google and Google about it so we can see that in the Google Trends uh that I think a mix uh backup comments but you also know that people that complain that the the louder so it could be that just like that people just like complaint and these are the ones that you you realize more um but I don't know I think like uh if it's only a visual change I think that

well it's less risk involved right but when you change the gameplay as well there could be some players that are a bit uh like um not happy with that and they don't know until they play right so probably this is what they want to to assess with the with the beta right they they get players to start playing and they can see like because I think that for those players they could choose whether to keep playing CS go or play play the beta so then maybe they can check the engagement and see if like they're enjoying more the changes um I don't know like when when Source was was released and there were many people complaining that that's not like a good update of the game that they were keeping playing CS 1.6 so I don't know if that could happen again like they they still believe that these changes are not going in the right direction I like them very much I feel like that they they will be very fun to to play like that and they they give

like more ways to strategize especially as a team so I take them like positively but let's see let's see how hard one issue that I've that I've heard come up is uh around changing to an edge of a much higher system requirements than the original because Counter-Strike is one of those games that has you know infamously been an esport game that works on much lower end computers than you know some of the modern stuff like Call of Duty and things like that so I mean do you think that might potentially be an issue where especially maybe in developing countries or other areas where it's much more difficult to to get higher end PCS that this might actually end up because I don't think you're gonna have like a choice right like if they force everyone over you're either gonna be playing CS go or you're not going to be at that point uh that that might be an issue where they start losing out on players here rather than grow yeah that's what one of the other things that I was considering when saying like Okay maybe I'm playing a bit conservative but the game is still growing and there could be things that are not a favorable for for the audience that they have already right and there could be players that don't like the

update or that they can't play smoothly they update and they it's start like they start losing place right so that's why I was considering that it was like kind of a risky move it's true that we given the economy that they've built if they release CS2 as a separate game they are like going to split the audience and maybe they are going to split the value of the items that players have so I feel like yeah it's not maybe an easy solution to to this and it's quite interesting I get the sense that this is something that only valve can do um you know I'm not a CS player um so take this with a grain of salt but if EA spent X number of years updating Battlefield or Activision spent X number of years updating Call of Duty and the big headline was check out this new smoke grenades um they would be absolutely skewered like what have you been doing all this time um so you know again it's these are completely different types of Shooters but to me is like it's just an update

you know okay that's cool um but like only valve could get away with this if it couldn't be like some AAA massive publisher where they have a yearly release of the you know whatever Flagship shooter is and they they wouldn't be able to lead with something like this and to me this is like not a huge deal but again I'm not a CS player so take that with a great assault they mentioned that they are going to to have more uh updates but these are the only ones that they announced and they think it was also funny that they did this announcement at the same time that the uh epic was having their update in the DDC so I don't know it just was uh a move to to like have an impact there yeah and I was also speculating that maybe this this is comes like to prepare the game to to be more or to be playable in in the steam deck uh so I don't know if that's like also one one of the strategies here like uh change the engine to make it work better in Steam

deck and then they cancel more more decks yeah well I mean if Call of Duty's come in the switch I mean maybe we gotta put Cs on the steam deck um I'm I'm only half joking but I think it will almost certainly come to steam deck right like they have to this whole thing makes sense to me I mean like I'm at your right like it's just an update I mean and it is like so maybe it's not as big of a story as the media is making it out to be but at the same time I mean it is a big update for a big game that has had a like an amazing decade of of steady growth and like continuing to top the charts on Steam and so making sure they do it right is important but I mean I think everything you you laid out Felipe of like how they've ported everything over how they're handling the beta it seems like they're super aware of that um and they're taking the steps they need to dude to mitigate whatever to learn about however to mitigate like any damage that's done and once the the

update fully rolls through I think it'll my guess is it'll just be back to business as usual I don't know how Counter-Strike is positioned for the next decade of Shooters I think that's like a different conversation of like whether it can last the test of time and just with how Counter-Strike Works compared to how something like Call of Duty has evolved pretty greatly or even how like we see like a fortnight now like like evolving an even crazier ways with its whole like creative mode and things like that so my feeling is that like yeah it'll just continue to be business as usual but the The Innovation with Counter-Strike is kind of less than what where we're seeing elsewhere in the market so as like its importance in the shooter Market even though this is cool it's probably gonna I would guess Wayne a bit over the 2020s well speaking of a epic and evolving uh despite CS go to stealing a bit of the Thunder as you mentioned from

the presentation we still had a lot of stuff uh come out of Epic if you want to get into that man yeah I mean it's a good it's a good segue so so epic definitely had a big GDC couple big announcements relating to uh fortnite so the first is that they've released epic has released the public beta for unreal editor for fortnite um which is a version of unreal editor that players can use to create and publish experiences directly into fortnite so you have a lot of those engine tools that can now be used directly in fortnite um and uh the other big announcement which we'll come back to in a moment is that epic is going to be sharing 40 of all fortnite revenue with creators um so let's go back to the the unreal editor a bit for a moment so um I'm just going to read a quote here this will sound very on brand for epic these tools are where epics rode to an

open Connected metaverse begins uh so they're really leaning into this um uh Creator ugc aspect of fortnite um and you know that's it's very much in line with the way that things have been going um you know I was reading some of the um press releases on this and they've stated that nearly half of all fortnite engagement is currently taking place on user created content already which is pretty impressive right for um you know this game is now about six years old fortnite it came out in 2017. and so um they've needed to shift you know Battle Royale and Shooters generally have stagnated a little bit um and they've been able to stay relevant through this Creator economy piece but also through their you know their General like pop culture integration with all these IPS and just kind of staying in the conversation um so I think that's really interesting they're basically making the creative uh

the Creator process in fortnite more accessible and more robust um and then on the other end where they're now sharing uh a bunch of this Revenue 40 of all fortnite revenue with creators um you know I view this as sort of like a shot across the bow at ROBLOX which we can get into a little bit because they they seem to have a much less favorable uh Revenue split with their creators um but just to dig into this a little bit so um epic is going to share 40 of fortnite Revenue with anyone who designs islands in the game in an island as I understand it is like a user created you know level or mode um and this includes um any any of the money that epic earns from purchase of the V bucks which is their in-game currency uh real money that's spent in fortnite on like starter packs or Quest packs um and also subscriptions fortnite crew subscriptions um so you don't necessarily have to spend the money in your created Island it can happen

elsewhere in fortnite but it will still be shared with you um and then the sharing is based on like I don't think they they laid it out exactly but I think it has to do with like engagement and player count in your specific um Island so there's a lot there um why don't we just start by talking about like what do we think about this these moves by epic and do we think that um this um emphasis on creators and the Creator economy will give a boost to Fortnight over some of their competitors whether it's Roblox or Call of Duty or you know name and MMO um do we think that this is this will give them a boost well I think content is very important for for this type of games right so making sure that the content get gets better and better and incentivizing that I think that that's what keeps players there right like

finding new experiences or making like new ways of playing we would just talk about Counter Strike and before right Counter Strike started as a mod of Half-Life so enabling the players to create this I think I will Foster better experiences yeah I have a couple thoughts I mean one I when I was reading about this I saw a stat that said like approximately half of the time people spend in fortnite is already in like creative modes which I thought was interesting that was that was a lot higher than I actually thought it would be um so but I think that says that like this is an audience is ready for for the creative mode to go to another level so I think that is exciting um maybe one like read between the lines points on the 40 number that I've seen critiqued is that I don't know if that 40 will all

go to external creators it goes to anyone who creates an island and epic itself can create an island and so I still think there's some fuzziness on like like how exactly that plays out or like did like I I don't how much of that is epic themselves going to take or not I don't know also I have a feeling they picked 40 because they're in you know like legal disputes with all of the app stores out there who take 30 you know or so they probably wanted to pick a different number uh so I don't know how that goes but in general I'm really excited for this Tim Sweeney has long said that fortnite is a game that's going to become a platform and like this is the moment really like where that is happening and it looks cool from what I've seen I think they've done a good job kind of setting it up and I want to play around with it more and kind of spend some time and various experiences to like really get a

feel for like I guess like the quality of like what thing what people can really make um but it seems differentiated from Roblox um and yeah bigger picture I mean I think there can be room for multiple winners but this should expand the market for ugc as a whole and we've seen a ton of companies try to compete and carve out their own you know niches in this market you have like the manticores of the world that are out there and you have other even earlier stage companies that haven't launched yet um and of course you know the web 3 players like a decentraland or sandbox too there's a ton of people with big ugc dreams but they all face like the cold start problem which is like how do you kick start your network effect of users and developers and there are so few companies that can really pull that off Roblox was able to bootstrap that from um you know being an early mover there but yeah epic just has so many

advantages coming into the space from the developer side and the user side like it's a it's a no-brainer that they can like jump jump in quickly um and make their mark on the industry uh pretty rapidly I expect so so yeah still a lot of questions on how exactly it plays out what the experiences will be like who will be attracted to it will they attract more professional developers in the same way Roblox did I don't know but I'm really excited to see this play out it's a good point Aaron I wanted to to sort of double click on that bit about developers um you know it just sort of struck me as you were talking um you know Roblox you have to code in their Lua language uh whereas you know we're talking about fortnite is just an extension of unreal which many many developers already use and so maybe there's less of a learning curve or an adoption curve for let's say a third party Studio to come in and build these ugc experiences and try and build a

business on top of it like do we think that we'll see some of this professional developer um you know engagement in the fortnite creative ecosystem in the same way that we have seen with Roblox or Minecraft or some of these other ones eventually I would guess if it works I think that they won't be the first first adopters um but if it proves that what people create is used and they're making money that I could see them coming eventually the same way they did with Roblox the other thing here too is that like I think the economics of the ugc industry itself might change just by having more players so I mean you could look at like ride sharing as like a random example uh kind of analogy where when you have like an Uber and a lift competing with each other for example um it it's you know it skews the market a bit they have to start competing for users and user acquisition in a way that

you know Roblox probably hasn't really had to do that because it's been the One-Stop shop um and they have to start competing you know in the same way that the registering companies have to compete for drivers well you just see companies might now have to actually start competing more for developers and obviously like a percentage cut is a big important part of that but I think there are other factors that will come into play too that it's just like the competition for competing for both sides of that Network effect um should pick up and that probably will have like in terms of the unit economics like a worth like it'll lessen the economics of ugc as a whole um from the unidoc economics basis but probably still lead to a larger industry as a whole so there's definitely some give and take in there but yeah I'm just curious to see how once this really goes live and like it Finds Its footing how we start to see the industry itself start to shift as it gets more into competition mode

speaking of which the there's an interesting point of comparison I think with Roblox um that I'm curious what you guys thoughts are on which um I mean the the whole idea that epic will actually be a competitor now on this and I believe they mentioned that like this was actually their plan for Revenue going forward was to was to be part of that creative economy and actually pull from that 40 they get there although I imagine the other 60 you know they're always getting either way so like they you know they have a good backstop there but I correct me if I'm wrong but I don't think Roblox you know competes with their own developers within the game and builds a whole bunch of games as well so this is like a little bit of an interesting situation where the company itself is now competing with other developers like there's the pros and cons right because the pro is that they're dog fooding their own tools making sure that these like are things that are going to work whereas Roblox is notorious for having a bit of a janky tool tool set workflow and as you mentioned Matt you know like this is Unreal Engine like this is this is an engine they've been developing for a long time very familiar with so they have a little bit of you know extra knowledge of how to utilize it but they

also will be developing with these tools building these up in a way that I think will be natural for developers since they will be one but at the same time now like if they're competing with you know small time like they've got their huge staff and ability to execute on content versus like very small people coming in trying to create but then you've got maybe like other developers coming in like how do you see that playing out with epic actually competing in this economy it's an interesting thought exercise right like um the devil is in the details with how they share the revenues so if that's one question right like is epic eligible to earn their own Revenue share but also they control the discoverability as well and so you could end up theoretically in this like Amazon situation where you have um someone who controls the search but they're also filling the search results with their own stuff so you know is epic going to prioritize epic made uh Creations in the discoverability and therefore you know shut out some of the smaller creators this is all

hypothetical but uh it's a it's a really interesting thought exercise um and you know we'll see as I said the devil's in the details of how they arrange this it's not new right like they've like unreal has been competing with unity for a very long time and that's always sort of in like the difference between or one difference between the two of them too where you know unreal has fortnite and unity he doesn't produce any games it's just purely making the tools for everyone and it seems like you know both companies have found their position quite well so I think it'll just be a matter of Framing and my guess is that the fortnite team uh or at least you know probably like leadership among the company they want uh fortnite to turn more into a platform and increase like decreasingly compete um with other creators and then I don't know where they go from there but my that's kind of my hunch and if anything like fortnite being worked on is what is

a driver for all of the traffic to go to the other creators on the platform as well so if anything I would hope that the creators are cheering on you know fortnite getting better at some ways but yeah it is the devils are the details that you're right I guess if we're looking at like uh Manticore games which uh epic I believe is invested in um and he knows on their platform as well and stuff like that the uh the interesting point is is that Manticore you know develops a bunch of their own games as well as part of it right but that is actually a positive thing because they're I mean they're not competing economically the same way right although they they could be right because they could be competing for in-game spend and stuff like that but they also end up being like Flagship uh like examples right so that people can look to here's what you can build with the tool um here's like good initial experiences when you come in so to your point about discoverability Matt it'd be kind of interesting if like uh just to start with right like epics pushing their own stuff only because it's like hey when

you want to come try out these different experiences we want to make sure we have a couple of good ones for you to start out with so you get like a good first impression and then you can kind of explore a bit more from there and like treat it as sort of entryway ones but then like do they phase that out at a time or do they go like oh we want to make sure we want to keep a few pins there so that we have a little bit of flow but to mass Point like it is like it they probably should be spending a lot of time as well on fortnite itself to continue to bring people in instead of seeing it as like well let's just go a whole hog on you know making stuff for the Creator mode they've got to kind of divvy between the two and it's an interesting point to be because Roblox again doesn't have to develop a game as well uh they don't have to maintain a game but they also aren't making the kind of money that fortnite has been able to do so so I imagine they've got like the team to be able to keep keep that up but this is interesting too because it's part of like Tim's big metaverse play right like this isn't just a game and a platform this is meant to be like entryway into quote unquote metaverse stuff uh where they believe you know that metaverse isn't one

product but that this could be a very good candidate for being in a sort of Entry product for people to get into that space especially if they're continuing to do these IP collaborations and maybe they start doing deeper um sort of Partnerships where it's like oh we've created this custom experience just for Marvel just for you know Gucci or whoever they're working with like they can't go too far in One Direction unless they sort of um push aside some of the existing business Partnerships that they need to prioritize um so maybe those get prioritized in Creator mode discoverability or maybe that goes back into the main experience where they have to set aside creator for a little bit I don't know you know we'll see how it plays out but they have a number of competing priorities let's say well speaking of which I believe they also have some rules against IP usage and the Creator mode so that could be an interesting point of contention is like will epic be the only one then really kind of allowed or able to make the deals to sort of be able to do anything

IP wise in the space because you know other people are going to want to do stuff like that where they're going to want to like bring in IP but that's like like strictly prohibited like you have to have you know permission to do so but it's like well how do you prove that to Epic that you've uh you know made that deal and that you have that permission so it gives a huge advantage to utilizing IP and Partnerships in the space as well and so that might be a big thing because you know if they're pushing for like a metaverse idea going forward if you've seen Ready Player one most of that metaverse is IP usage right that's that's the idea is that it's that's what makes it so interesting is all that that IP cross-pollination stuff that fortnite already has but then it's like if the games can't do that in the Creator mode then does that kind of stunt some of the growth of this um do we almost need one that's a little more pirate friendly and underground and stuff like that for people to be able to do okay so we've definitely seen a lot of IP for example come into uh to Roblox but that was voluntarily right like these IPS were like putting stuff in there but it'll be I think an

interesting space to look at going forward whether or not that matters because we know uh epic has definitely been like you said a big push all that in fortnite but I I don't know it's going to be a a tricky space I think in general from a legal standpoint how they deal with that outside of just straight takedowns anyways I wanted to thank everyone for joining today a lot of a lot of great topics a lot of cool stuff happening uh a lot of stuff I imagine came out of GDC that will slowly roll forward as well that will end up talking about likely down the road well thanks everyone for joining today for this round table and we look forward to seeing you all next week if you enjoyed today's episode whether on YouTube or your favorite podcast app make sure to like subscribe comment or give a five star review and if you want to reach out or provide feedback shoot us a note at podcast navic dot Co or find us on Twitter and Linkedin plus if you want to learn more about what novik has to offer make sure to check out our website www.navik.com there you can sign up for

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