GTA VI Online is the Next Big Metaverse Platform

[Music] so we have our usual year in review which epics game store does you know steam does this as well they don't have to do this so it is really great to see them come out and like publicly publish data on how the store is doing and so what we can do is we can go back to at least 2020 when they started doing the posts we can kind of put together a Time series of some key kpis and it gives us a lens into how epic is doing overall remember this doesn't to knowledge include uh console it's just epic game store it's not just like EGS services or anything so it is it is predominantly it's just going to tell you PC I don't know if mobile is mixed in here I think it is so maybe that's one of the things that might explain some numbers if it's 2024 when did the store launch we're got toine we're going to line that up a little bit more and that might be in the fine print but when we look at monthly active users there was relatively stable from 2023 to 2024 and the reason the reason I laugh is

only you know it's intense it's insane what they're up against trying to compete with Roblox but again like they need to grow like they need to grow like this whole strategy is predicated on them growing and not growing monthly active users or having relatively stable monthly active users is not a good sign we take a look at thirdparty Revenue share and so you can back into this number because they report the actuals it's down to its lowest on record in terms of the amount of third- party Revenue that isos the EGS total revenue that's not a good look either that's not the mark of a healthy platform when you have that I mean look this looks like Nintendo this looks like a like a Nintendo product almost you know it's it's all first party you look at the absolute number in terms of third party revenue and I don't think it's actually anything to chalk up it's around 270 million that's a lot of money I don't think that's nothing I think that's still a sizable business it just isn't a large share of the overall Revenue like of course fortnite is driving most of it and so I look at the top titles and I would say the only thing that seems

interesting here is that they've doubled down on a lot of like Eastern RPGs so gench and impact is distributed through the EGS store and it's not distributed on Steam we see the same thing with weathering waves which I thought was another interesting strategy and if you remember Infinity Nikki was on the EGS store again so I don't know maybe they're cesing some sort of strategy here but I would say overall this is not a good look I think for epic or for EGS this is not moving in the direction they needed to move right now you forgot the most important graph dude the overall Revenue oh yes oh yeah I suppose I suppose that one matters that actually completes the story right like the Epic store has done maybe not what they wanted it to achieve but it's certainly done the thing that is most important to Epic right is to generate more Revenue right for them right so it's like the fact is that even though it's primarily a fortnite launcher and you're starting to see third party revenues decline the fact is that it's generating more Revenue I think it's up to 1.1 billion right in

2024 so like I keep having these conversations with investors about epic generally speaking it's like you know what is this the like ugc and what is the store what does all this stuff mean for epic I'm like well the way they're doing it right now it's still all good for epic because it's building the ecosystem and keep people engaged within their ecosystem but they're capturing all the [ __ ] Revenue right like they're not giving it away because third part is not doing [ __ ] on this platform you know right now anyway they they care like personally right but the reality of it is from a business perspective this is all good this is all gravy for them right they can use all these third parties both the software as well as these ugc guys just to basically pump up their platform to bring people more in to play fortnite and and other games that are made by epic and that's really good for their business right I mean I think they could be doing a lot more right we've talked about this many times about the ugc stuff and allow people to actually monetize the games they make on [ __ ] ufn but for the most part I

think they're doing exactly what they want to do right they're generating more revenue and and taking money to the bank what what do you think they spend on the free games per year like I don't doubt that this is a positive p&l like there's no doubt about it right like I can't imagine they spend this much money and even just supporting fortnite the margin on fortnite over its lifetime saving whatever they would pay to steam and paying it to themselves like I can imagine like I'm sure it's extremely profitable just on that basis but like do you have any sense of what they're spending to pump up all this third party stuff like what if they just threw in the towel and said no more free games you know how much does that give them back a 100 million a year 200 million a year well I think the majority of the 40% that they're spending for content is going to themselves right because they're the ones that are generating most of the engagement you know so the payouts that they're giving to third party is nothing right relative to the the money that they're generating

for themselves right I mean that's my understanding I don't correct if I'm wrong ugc payout or the other games that you would download on no ugc payout right it's based on engagement right so yeah the majority of the engagement is from epic games so they're not Distributing any of that but when I think about something like GTA remember we were talking about Netflix games paying what was it 50 million for the old GTA for exclusivity like the thing that has generated so much value for EGS is when they gave away GTA right because they unlock something then which is that GTA online is a live service game it's mostly been paid it's almost exclusively been paid it's a live service game and so you give that away you get all this lifetime value of people coming back to the store every time they launch the game right so if you get a single player game you only get X number of EGS opens right until you complete the game but if I give you a live service game I keep you coming back to the platform remember they had to give that away for free so I imagine they wrote a check right they wrote a check for for GTA and if Netflix

is paying 50 million for first of all you can understand I think a little bit more about where Netflix was coming from if this was so successful for EGS but if they paid 50 million for those old games how much does Epic pay for GTA online to give away GTA 4 we have no idea 100 million no so far so good I think this is actually kind of achieving what they wanted to achieve from the business perspective from the company but maybe not what they stated to achieve from the perspective of of having successful third part they how about this let me just say it this way they are not competing with steam at all they are not competing with steam at all period end of sentence right they are getting [ __ ] killed by steam they have like less than 10% share of the PC market right but they're killing it on the sense of Engagement and fortnite's doing well and they're bringing people into the ecosystem and and so I think that is what will add shareholder value over time right all right so speaking of ugc and GT PA Rockstar Games is gearing up

to make Grand Theft Auto 6 the next big metaverse platform question mark this is like a little bit you know rumor but they have been in discussions with top Roblox and fortnite creators as well as dedicated GTA content creators about the potential to create custom experiences inside the upcoming game according to three industry insiders with knowledge of these meetings requested anonimity in order to protect their business relationships these experiences would allow creators to modify the game's environment and assets to bring their own IP and potentially their brand sponsors into GTA's virtual sandbox so I when I saw this I was like well this is probably a big deal you know just in general that you can do more ugc I mean there's already a lot of modders in this community but on the brand integration side it's still a little bit of a challenge to bring in Brands to GTA Universe given you know the M rating which I you know brand safety as a lot

of Brands like to say you're not going to see like a kids brand in here and then also the game does all these parody brands that are already inside of the game and so from that brand standpoint I I didn't think this was as big of a deal as it is just the idea of like a a ugc platform that's going to be out there competing with all the other ugc platforms I don't understand like on these calls investors will ask about GTA and ugc and it's like always been the dark course in like the ugc race like there's kind of been fortnite which is the teenagers you got Roblox getting the Young Young Bucks and it's like okay where do you place GTA you know is this the ugc platform for adults if you remember there's this platform called core which I think Manore I I don't I wonder if they're still be there's a heartbeat over there no I think they're gone gone okay rest in peace they tried hard but like how do you capture kind of this elder ugc element and GTA always felt like the leading candidate I don't understand why they keep retreating from the suggestion it's seems awesome I'd

lean into this hire Tam all right wow wow you guys are just just pushing buttons right now right okay first of all first of all first of all his job is to manage expectations on Wall Street right and Strauss zelick if anything he's not a gamer he doesn't give a [ __ ] about games he is a business person and what he's trying to do is manage expectations right on what can be accomplished with this ugc's I'm getting questions from clients this morning about this bu [ __ ] right so the fundamental problem with having a ugc systems is it is so [ __ ] expensive and challenging to build ugc systems right it's not like it just you unlock it immediately right and Rockstar as much as they are a creative Powerhouse they have no [ __ ] idea on how to build a system like this they don't have the people like the backend Engineers they don't have the ux UI they don't have [ __ ] [ __ ] anything and if you

talk to anybody at Epic or Roblox it took them years and years to figure this [ __ ] out hell epic's been working on it for five years their system still sucks right it [ __ ] sucks like if you ask anybody it sucks okay the notion that [ __ ] Rockstar is going to create something like this to build a competitive system is laughable right now having said that right having said that I can understand why people are dreaming the dream you know one of my favorite investors that I'm not going to name but like this guy's been following this stff for a long time he's bulled up he's thinking like they could do like six billion dollars in revenue on their online thing like compared to like a billion or so that they've done before right he is a very very smart guy like one of the smartest investors I've had he's dreaming the dream drinking the Kool-Aid right but the reality of it is that ain't [ __ ] gonna happen dude because I don't think they have the expertise can they build the expertise can they build it up sure if they're successful maybe right that happens over time it evolves that way but I think

what zelnick is trying to do is say hey guys [ __ ] chill the [ __ ] out right you're we're not doing like $30 a share next year because we're gonna have this insane ugc platform that's [ __ ] beating up Roblox and ufn it's just not real realistic in my opinion anyway but it is a great platform to do it I would say and if they can pull it off it's going to be amazing and that might be something that happens five years from now or something but Jesus give them a break you know they got to get this game out first when do we think the game's coming out any any it's coming out October November right yeah like okay they they announced Borderlands 4 is in September that gives them a window of opportunity to sell as many shitty units as that shitty game is g to sell and then the real deal comes out right you know it's like throw out the bastard child right get that thing out and then we'll have the real star come out the year month later two months later I'm kind of surprised that they would do them so close together cuz Borderlands 4

is I mean as much as you're calling it a bastard stepchild like a lot of people love that franchise but it's going to do 80 to 90% of its units within the first month right they know that and then on top of it based upon the last Borderlands which was an absolute disaster right because they basically didn't do anything to innovate I don't think this game's going to be any different right but we'll see maybe I'm wrong okay so you think it's going to make the year even though I think I heard he said probably it'll probably come in Q4 I mean I guess he always has to hedge his bets right with that game I it could come in Q4 like it would be March quarter potentially but I I'm I'm I think it'll come out in November okay okay [Music]