GI Podcast | iicon, Gamescom Latam, and Roblox financials

Hello, and welcome to the gamesindustry.biz podcast, looking back at the major stories of the week. I'm John Hicks, editorial director at gamesindustry.biz, and I'm joined again by features editor Lewis Packwood. Hello. Hello. It's been an immense It's been an event-heavy week this week. So, Lewis is calling in from Gamescom Latam in Sao Paulo. I am just back from the ESA's inaugural Icon conference in Las Vegas. We will get to those in a minute. The news events I wanted to touch on before we get there were financials. It's We It's the 1st of May as we record this. It's a new financial year. So, a bunch of new financial information. The one I wanted to The two I wanted to call out. One was Roblox, which remains very significant, very fast-growing disruptor in the in the industry. So, the The headline Well, not the headline. What I noticed from their releases is that they posted a loss
they buried further down Yes, is that is

the loss of $248 million for the quarter. But the stuff that they do highlight is strong growth in user metrics. So, it's basically up across the board. Daily active users are up 35% year-on-year. Revenue is up 39% year-on-year. Unaudited free cash flow up 40% a year. I'm sure that's what they'll point to over the headline loss. The slightly interesting bit is the It's a mark They marked things down a little bit from their last quarter's report, which to what they euphemistically returned term as safety headwinds, which is basically ongoing litigation, concerns over child safety. I think last week they settled a case against the state government in Nevada. They still have over 140 other such cases going on around child safety. Um That sounds expensive. Yes, it is

expensive and interestingly they the markdown um I was just sort of having a very quick look at the at the financial uh statements which I was going to look at on the road, but the strongest markdown seems to be in net bookings. So, their projected net bookings is still projected to grow year-on-year, but they've really cut back down um by more than half. So, that's uh notable that whilst there it was there is going to be a cost implication in um settling these cases, it looks like they're they're anticipating it's going to have impact on that uh people spending money with them as well. Although people do continue to spend money with them um and that was very much a topic at uh Icon which I'll mention when I come to you uh when I when I come to that. Um And they've also announced um yesterday they've announced an AI upscaling tool which is a little bit more forward-looking, but uh broadly uh

it claims to be able to make Roblox games uh in photorealistic which will Do we need that though? I mean [laughter] aren't Roblox meant to be rough and ready? Do we need photorealistic Roblox games? I mean I think I'm really interested to see how that manifests, right? Cuz Ro- Roblox notoriously very has very sort of very simple graphics. I think the experience the most popular Roblox games are very simple mechanics. I don't know that you're going to make that any more uh sophisticated by uh making it photorealistic, um but just from a visual perspective and from a marketing reach thing, um the clips they put out look a look a lot more impressive. I think it's it's easy to sort of disregard Roblox games as kind of crude, childish, and um silly because they're sort of swings, you know, sort of stiff on block figures. Um when they look a little bit more like what people expect console games to look like, I think that's that's that's a perception

boost. As interesting as it is, kind of stepping into Fortnite creative's territory over this by doing something like that, you know, that's that's kind of Fortnite's USP. Fancy things in the Unreal Engine. Yes, definitely. And actually that was another thing that's was announced this week was they've announced very elaborate suite of Star Wars assets in Fortnite UEFN as well. So basically people can create their own Star Wars games now. Which is something I was talking to them about it's at GDC. Um so that's that's out there now. That's really um that's that's very powerful as well. The it was Star Wars
[snorts]
Um we're getting well we're we're we're coming we're coming into Star Wars day. So there's going to be some interesting chat around that. Um anyway, rambling. Uh other uh financial I wanted to touch on was Microsoft gaming revenue fell 7% and Xbox content and service services declined 5%

year-over-year. Uh that was also not something that was dwelt upon, but the the note in the in the note to shareholders um uh attributes this to a drop in first-party software, which is Call of Duty again, basically. Uh and that's just another a little a little an extra detail backdrop to the recent changes in Game Pass which we talked about last week. Uh now that's they've taken Call of Duty out. Uh so you would hope that will improve the uh revenue picture a bit next year. And a lot rides on the quality of Call of Duty this year. Um I'm seeing Black Ops 7 not well received, seemingly has not performed very well. The company of course has I'm put out uh numbers on this, but all the analyst data suggests uh it has substantially underperformed, so that's uh shows its overall impact on the Xbox bottom line. We will see how that one goes. Yeah, that's interesting, isn't it?

I think uh we've had a lot of news coming out of Microsoft this week. There's a lot of course correction going on at the moment. It'll be interesting to see what direction they take in the future. And they they've also said, you know, there was worries about the the hardware as well coming down the line. I'm sure they must be impacted by all of these uh huge right price rises in memory, so yeah, we'll see how how it goes. Yes, it's a tough business. Uh everybody who makes physical hardware is facing down some major supply chain issues at the moment. And obviously Microsoft uh with Xbox was not starting from a very strong position to begin with, so all riding on uh Asha Sharma's changes that she is rolling out over there. So, we will I I look forward to uh hearing more about it. Uh obviously it's uh we are a 1 month away from the E3 window, Summer Game Fest. So, there's there's going to be an Xbox uh showcase there, I believe. So, I expect we'll get some more consumer-facing news there. Yeah, that's it. Any other news, John?

Uh no, I think that's the main uh the main things uh that uh I noticed, although I wasn't in a position to notice too much cuz I was out at ICON um this week, so Yeah, how was that? Uh it was good. It was quite guarded, so ICON Guarded in what sense? You're not allowed to talk about what you you saw there. Is it all like ears only kind of thing? Uh there's Well, I will say the there were a bunch of very very senior people there. So, it's the new event from the ESA. Uh previously their main event was E3, which was very sort of splashy and consumer-facing. This was much smaller. Uh there was maybe 2 300 people there, and they were all very senior like industry leadership folks. So, Mhm. yes, quite a lot of um behind-the-scenes conversation and off-the-record chat, which uh which I'm not going to address cuz it was off-the-record. Uh but, the um
[snorts]
the there was some uh stage uh stuff which uh we haven't I'll summarize some

bits and pieces of it uh now that I'm back in back in the UK, but it was quite It was quite interesting topic. So, the the vision for the event is it's about uh is it's for senior people, and it's supposed to be talking about the intersection of games and sort of culture and technology. So, there were some sessions about, you know, there there were some opening keynotes with Andrew Wilson from EA and one of keynotes uh conversations with Andrew Wilson from EA, Strauss Zelnick uh from Take-Two. Um then there was um on the second day, it was You Ke Mou and um the CEO of Riot, who's called Dylan, and I've totally forgotten his surname. I [laughter] don't know. I'm sorry, Dylan. Um that That's say there was exact chat, but then there was other conversations with, you know, Sony uh Sony San Diego studio talking about how they partner with the um with um the um Major League Baseball. There was uh 2K talking about how they work with uh the um NBA. Um Tony Hawk showed up to talk about

being Tony Hawk. Uh always a treat. Um [snorts] but, the Did he pull any tricks while he was there? He did not pull any tricks.
the stage? He did neither of those things, which is very much a missed opportunity, I think. But, But, he's getting on a bit now. Uh you know, Yes. you can't really expect him to pull tricks these days. Yes. Although, I did There was a golf game There was a golf simulator in the in the in the uh meeting area, in the sort of social, you know, the place where all of the catering. Um and the It's kind of little It sort of tickles me when you can go and see the leaderboard
[laughter]
for that, which, you know, Carl was number one on the leaderboard. Number two is Tony Hawk, and there's something about games No, no, no, it's actually That's actual Tony Hawk on the leaderboard.
[laughter]
And also Tony Hawk Tony Hawk number two on the leaderboard, so he's going to he's he's going to golf as well as skate.
guess he's in his golf phase now, isn't he? We It all comes comes to us eventually. You get to a certain age and golf just has an appeal. Yes. But but that My headlines on Judgment of the of ICON was it was a really useful crowd.

Um it's really good to have just very, very senior people in in the room uh talking to each other. Uh and there wasn't anything in the way There weren't people trying to sell like hosting or codev or web stores or anything like that. It was It was senior games people, senior people from adjacent industries. So, that was really good. I think the notable thing for me was that Microsoft was very underrepresented. They had a meeting area, but I didn't really see anybody from Microsoft there. Like, if Asha Sharma was there, I did not see her. There was no representation from Activision or Bethesda or King that I was aware of. Um ditto um Nintendo. So, I think Devon Pritchard was there, but not in a as an attendee, not a speaker. And um again, Sony only had um the chap from San Diego talking about

MLB The Show. So, somewhat representative of the problem that E3 had towards the end, which is it represents the whole industry, but sometimes only some of the industry show up. And I think for this to really be hosting some really powerful conversations, I think you need that all of the ESA members to sort of show up and and and take part in it. Uh so, it was it was really good It was a really good start, and I think the Everybody I spoke to was very um was very enthusiastic about just having all the right people in a like in a in a small space together uh talking was really valuable, but some of the right people weren't there. Uh and the stage content was and I you know full disclosure, I I was uh some of the stage content I hosted one one session and I participated in another. Um but overall uh the stage content was a

little bit uh broad. Like nobody I didn't I don't think I learned anything spectacular that I uh that I didn't know already. So, interesting conversations at and I and it's understandable in as much as it's a new event. I don't think anybody had prepared to like drop some news bombs or um you know, uh really set up some new conversations, but it would have and to a degree it's the it's the backchannel you know, it's the off-the-record conversations that happen around the margins that that will be more valuable that we'll see the impact of where you'd hope we'd see the impact of in the in the months and years to come. But the I think the stage stuff could stand to be more to have more impact just to highlight the conversations that are happening and also just you know, partly to highlight the profile of of Icon in general. You know, if I think somebody it was sorry.
yeah. We need stuff to report on. Well, yes. I mean selfishly as me as a

as a media brand well, I want things to to report on, but also if you look somebody um it's it was described to me by a couple of people and I saw Stephen Totilo mention this in his game file uh newsletter that some that that couple of people tried to describe it as the Davos of gaming, which is a very which is a very grand uh description, but one of the things that Davos does is get reported on, right? And um Icon I we haven't really I don't think there are any like headlines that are going to come away from that event. But it's it's year one. I think it's a really sound foundation. I think the ESA are on like it's it's an event that should exist and should persist, but I think it needs a bit more I think it needs to all of the ESA membership to really get behind it and I think it needs to be prepared to have have public conversations about about things that maybe are more thought topics. Mhm. Mhm. Interesting. Yeah, we'll see how it goes. But like you say, first year be

interesting to see what changes the next year. I noticed they had a little kind of game section which no one seemed to go in icon. Did you go in that bit? The Could you actually play any video games? Not really. I mean there was not really. I mean again very very much not the vibe. So that was that was in the sort of center of the theater they called it. So that was there was a NASCAR simulator and that golf game and I think there was a Nintendo room that had a couple of pods in it. But yeah, it wasn't really about playing games. It was about it operated at a much higher level than that. Yeah. Um which
serious chats. Serious talks. Yes.
Not not something as as flippant as video games.
[laughter]
Well, yes. I don't I don't I don't I don't think we were going to start like cracking out the Mario Kart with um
[laughter]
uh with you know, representatives from NASCAR, but maybe maybe that's a maybe that's the direction they can take it next Something for next year maybe. Mario Kart Mario Kart tournament with all of the heads of Sega, Nintendo, and Xbox

would be something we could report on maybe. [clears throat] That would I mean yes, that would be that's that's the mainstream country right there. Smash Brothers tournament. So but yes, yes. Yes, what's the view what's the view from there?
on video, you get to see my gloriously gray hotel room. Um and also my slightly smeary camera cuz I I didn't bring my my webcam with me. So, this is the the laptop cam. But, uh but yes, I'm in Brazil. It's lovely. I love I love being in Brazil. Uh Gamescom Latam was it's been going for about This is a it's third year now, I think. But, before that, it was the Big Festival, which was run by the local uh games trade association, Abragames. Um and yeah, it's kind of going through sort of the same It seems bigger this year. I I've heard I know the show itself was really busy towards the end, and I've heard that the Saturday and Sunday are projected to be even busier. So, it's going to be It's clearly kind of a popular thing. Um obviously, it's mostly

consumer-focused, but then there's a quite a large B2B area as well. And in the consumer area, there's quite a wide range of stands. Nintendo's got a big stand, Nvidia, AMD. There's a huge stall for Phantom Blade Zero. The new Lego Batman game has got a big stand. Um so, yeah. Well, noticeable by their absence are Sony and Xbox. They didn't have any stands here. Although, I did see a few people from Sony and Xbox in the B2B area, and I know a couple of them were giving some talks. So, so there is a limited presence, but um definitely Nintendo uh leading the way on that out of the big three. Um but yeah, it's been interesting, really interesting to kind of check the vibe. It's like obviously, Brazil is a a huge market, uh the biggest in South America, one of the biggest in the world in terms of number of gamers. But, the development scene historically has more been focused on external development. Although, we're now seeing kind of really some really interesting kind of indie

games coming through. I I've been shown a few of them. There was one called Black Sails, which I really liked the look of, which is uh kind of a cross between Arko and Sid Meier's Pirates, which is a great combination. If you've ever played [snorts] Arko, you know it's a fantastic game. Um so, yeah, I've mostly been kind of chatting with people, meet getting the vibe. I spoke with Tim Endres as well and Steven House from the Steven's from Stefan, sorry, not Steven, Stefan. He's from Game, the German Game Trade Federation and uh uh Tim Endres is the director of Gamescom. So, I was chatting with them about their plans for the event. You know, they they want they're keen to kind of grow Gamescom Latam over the next few years and but they said they've not got any plans to do any more. They already do Gamescom in Cologne and then Gamescom Latam and then uh Gamescom Asia in Thailand uh towards the end of the year. And they said they don't plan to do any more after that. Um at the moment anyway.
they've got no current plans. Yes, yes, [laughter] yes. Well, I think that's that's that's very much in line with uh I mean, it's events are hard.

I've worked in events. Um but they're like that that that's covering a lot of ground uh I I would say that. And as you say, like Latin America, huge growth area, um Asia and um uh kind of uh yeah, like obviously Asia, a huge market. I think the the interesting one would be Mina and maybe Turkey. There was an interesting uh presentation at Icon from IDG sort of talking up there what they see as the kind of the potential of uh of emerging markets and Turkey, obviously huge mobile space in Turkey. But uh that's that was definitely the kind of standout in terms of the amount of uh the potential growth. But but yeah, Latam Sorry, I'm I'm I'm getting I'm getting off I'm getting off topic here. That's basically I was talking about Turkey with with some people as well, you know, we're talking about you know, how how huge the game market in Turkey has grown or the number of developers in Turkey has grown. It's kind of the linchpin of these a couple of really

big companies. Ruby Games is is really big, which is owned by Rovio and um What's the other one? Dream Games, I think it's Is it Dream Games? Maybe I've got the name wrong. Correct me later if I'm wrong. But they uh but the Turkish government is providing enormous amounts of help for these developers. Just throwing money at them, even paying for things like user acquisition for mobile game or not entirely paying, but giving money towards user acquisition. Um and I guess that's the thing that's really lacking at the moment in in Brazil and more generally in Latin America uh is government help. Um and that's the thing that I kept hearing from developers and and trade industry people that I spoke to uh since I've been here that that's the thing they need. They need the government to kind of say, "Right, here's a tax rebate. Here's some generous funding." Uh or something along those lines because uh and and that is I think the key thing. And I I think nowadays it's that kind of level of commitment is uh from the government is necessary really, rather than a nice-to-have. Particularly when you're

looking at, you know, how global development has become and it's not you're not competing with people in your country or even in your region. It's across the entire world. So, uh if you know, it's 25% cheaper to make a game in Brazil than you know, that's that's that's a huge factor. Yeah, that that definitely. And that's, you know, that's something that every government like every local trade body has been saying about local government or their, you know, their national government for forever, right? And I'm sure it is the same it's the same in every industry. But there was always the example of Canada which built built such a huge business off the back off the back of tax funding. I think all the, you know, tax tax rebates, tax efficiency. Um UK leaning a bit more into it, which is great. Germany really leaning into it. Yes.
uh Yes, yes. That was Steph Stefan about that, you know, there And it was interesting they were talking about how games come as a

uh an event was really helped in terms of making the uh the government aware of the enormity and importance of the games industry just cuz you can sit you can point down the road and say well there's 600,000 people here or however many people come to Gamescom, you know, this is a big thing. Take it seriously. So so and I I hopefully Gamescom Latam will do the same kind of thing for for Brazil. Yeah. Interesting. And I don't know what's what about what did you see on on stage? Have there been any any announcements or any good conversations?
I think this in terms of what the stage presentations, the most interesting one was a presentation about external development and it was let me get this right. Stephanie Arnett from Epic Games who who does in charge of is in charge of the Xdev over there and there was Julian Castagne who's the partner sourcing manager for Sony and David Lamb from Blizzard. And they were talking kind of similar things, you know, how they have really have an eye on the region in terms of external development but then I think the phrase Julian used was that

it's bubbling, you know, not quite there yet but it's bubbling. So we kind of but they've got an eye on it for the for the future and they're kind of certainly making some investments and and looking to kind of you know, engage more with the teams over here. I think mostly it's less AAA development here and more kind of smaller games or smaller studios but it's starting to kind of move more into to AAA development. Interestingly, they did towards the end they they were asked about AI and how they use AI. And Stephanie from Epic Games said that that Epic Games has has been exploring AI tooling which really isn't a surprise given Tim Sweeney's enthusiasm for AI particularly with the AI Darth Vader in Fortnite. Um Julian though from Sony he was quite interesting cuz he said Sony's open to AI for back end tooling but not for content generation. Which kind of echoes the points we were making last week I think talking about how AI is being used in particularly in AAA development. I I last week I said oh you

know, AI is being used in the back end. I think it's mostly for AAA. Indies, obviously, yeah, I think it's almost a badge of honor not to have AI in your game. Yes. [laughter] Yeah. But I do think we are seeing this growth for for kind of the use of AI back end stuff, and that feature I did last week, you know, tools to tell if your game is broken was all exploring about tools that uh use generative AI to do things like check frame rates and and uh and performance levels you know uh on games. And I I I think we'll probably see growth of of that kind of stuff, but less so in terms of actually making art, for example. But who knows. Yeah. And then uh David Lam at Blizzard said they're they're still kind of in the exploratory phase. Oh, I'm going down. Oh, no.
[laughter]
If you're watching our video, I'm here in this hotel room, and I've got this chair that every now and then just decides to just lower me in a kind of comedy fashion. So, if I
[laughter]
If I sit If I sink down again, that's why. Oh, that's what it Blame the hotel furniture.

Anyway, but yes, so that's That was like the most interesting thing I talked about. But there's a there's more talks today. Uh there's um Is it Now I'm going to get his name wrong. I've got to say it correctly. Mikael Kasurinen, I think, who's the creative director for Control Resident is giving a talk, so I'm interested in that. Mostly cuz I just like Control, and I'm interested [laughter] in hearing what he has to say about it. Um and I think David Wise is knocking around here as well. The the old used to work He obviously is famous for being the composer at Rare for millions of years. I I That's probably I do David Wise He's not that old.
[laughter]
By by by games industry standards. Veteran Veteran is the polite term. I think he was at Rare for something like 20 20 years, nearly 20 years or something. So, he was He had a long innings there. But he he's a he's around. He might even do some music. [clears throat] So, that would be be exciting. Yeah. No, I I should say actually the the AI chat, obviously that was that was one of the recurring topics at ICON, as well. There's

a Yeah, I mean everybody is it's it's very much a game of everybody's doing things with it. Certainly Well, certainly the crowd at ICON, which was very much, you know, tended towards senior senior roles, senior companies, AAA. Everyone's doing things with it. Everybody's talks still quite cautious about how they frame it. But, there is that you know, there there is that emphasis towards like nobody's claiming it's going to replace productivity productivity or the or No, no one's claiming it's going to replace human ingenuity. Well, certainly not like nobody's saying that out loud. Um and there was there was an interesting stat from the IGG presentation, actually, um about AI impressions. And it's really noticeable the negative um perception among users that AI will have a negative impact is way higher in North America than it is in in other Well, the the territories they listed were North

America, China, uh Brazil, and Germany. And AI um like a a belief that AI will negatively impact the industry is uh like twice as high in America than it was in any of those any of those other territories. Um so, I think that's an interesting thing as well, particularly as Yeah, as the as the industry looks globally for growth. Um there's going to be uh the that that tension between um it's AI's use in the production process and its perception uh in the uh in the end by the end users is going to doesn't look like that's going away. Well, certainly not going to go away in America. Maybe maybe it will never exist in a in a in a meaningful percentage in other territories. Yeah, yeah, it'd be interesting. I guess it's no surprise that there's a A of negativity towards AI in the US where the majority of the job cuts or the kind of layoffs have happened over the past few years. Um I think we can probably draw a line

between those two. Well, yes. And um yeah, it's it's it's interesting. It's a it's a challenging needle to thread. I um I don't envy people, you know, like the the people who have to try and uh land that
[clears throat]
kind of land land land those conversations and try and work out ways in which they can uh make thing, you know, make make uh make make use of this of this stuff with it. Um I do always enjoy asking people about AI in interviews cuz there's almost a a kind of audible sharp intake of breath as they [laughter] kind of quickly formulate what they're going to say. Uh Yes. Yeah. No, I I think everybody, certainly everybody I called had like knew that question was coming and had a had a careful answer about it. Um the I think Strauss Zelnick um was he's very like he's he's the you know, he's and he's he's a very um sharp conversationist sharp uh Strauss Zelnick, but I think he's very much framing it. He his preferred lens is to sort of referring to it as technology

rather than rather than as a standalone thing. Um and obviously that's, you know, by calling it technology means it could be thought of it could be thought of in the same um Yeah. frame as, you know, increased graphical fidelity or or or that kind of thing. So, well, be interesting to see if that one sticks. Yeah, we'll see. I I feel the general consensus though I think is that AI is not the panacea that the game industry wants or needs. No, I I think there's very everybody wants it. Well, I I would say like the investors want it to uh be the thing that made the kind of increases margins across the board. And most experience uh in AI uh or in any gaming as as in a number of other industries, I think the people actually using it are are discovering that it's not a magic it's not the magic solution that makes everything more efficient but there is there is useful we will we will see the journey continues we will see what see how the industry responds.

Okay, well that's about everything I wanted to talk about. Are you done you got any more insights? I I have no further insights at this time I need to return return to my
[laughter]
So yes we will we will end the podcast here we as as as ever we invite feedback you can contact me at john.hicks at gamesindustry.biz and Louis is of course [email protected]. We are striving to keep this podcast short and to the point and summarize the interesting things that we've seen and heard in the industry. If you think we've missed anything you should please let us know. Otherwise you can see find the breaking news of the main stories of the day on gamesindustry.biz everyday. We will return next week when we're both in the same time zone. Until then goodbye. Bye.