Helldivers 2 Invades Steam / Xbox’s Big Non-Event / Supercell’s Annual Letter

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another novic round table I'm your host Dev Becker and with me of course three fantastic panelists we've got Aaron Sebastian and Tammy uh how you guys doing hello we are ready definitely cool well we uh actually have a a Meetup we wanted to talk about Sebastian yeah so if you are in the New York area in particular in Manhattan you should come by to the first uh beta Works Venture SL novic game meet up at the beta Works office in meat packing um I work out there I think it's a really awesome space Alex te who you may know from some of the other podcasts is organizing this Meetup for people who do gaming in the New York City area so come by I believe there's going to be Pizza there's going to be some stuff to drink there's going to be 2K codes for people who love 2K we toss the Luma link inside the show notes if you are listening to this and it's before February 29th which is next Thursday upon recording uh go sign up let us know

and hope to see you there so make sure if you're interested to uh to sign up hopefully as soon as you hear this so you don't forget over the weekend and then it bleeds into the next week and then you forget and don't end up making it so definitely do that add it to your calendar it sounds really cool if I was on the East Coast definitely would check it out unfortunately I'm on the other side so it's a little bit of a long walk but cool looking forward to that uh cracking off the me time we have a lot of great topics today actually might be a bit full in terms of uh lots of interesting stuff to talk about around uh you know games coming out and actually doing a lot more a lot better than we thought some not doing as well uh but which we also kind of expected and uh and a lot of Industry talk here um so why don't we just start off with uh the the game that did well the good news part uh so we've had a lot of unexpected hits lately you know power world was a good example we had Dave the diver kind of snuck in there lethal company so a lot of stuff actually doing quite well and this one as well somewhat I would say kind of Indie but but published by playst station which was

interesting as this was the first simultaneous PlayStation and steam pc release from PlayStation which is Hell divers 2 uh so if you're not familiar with hell divers was actually a kind of a top down uh sort of I mean they come from making Gauntlet which you can see the the uh sort of lineage there they also made a game called Magicka before that and they kind of done these top down sort of games and they decided to make this one I think a little more third person behind the scene uh and it has this kind of VI of like maybe Warhammer 40K mixed with like Starship Troopers and it very much wears the Starship Troopers stuff on its sleeve so if you're uh if you're familiar with that stuff some of those games have been trying to come out lately and uh there's definitely demand for it so it seemed to do quite well this game just stormed with the charts I saw it below uh Counter-Strike two pretty easily and I think the peak uh had beat quite a quite a few games uh in terms of peak players obviously you know this may not last indefinitely but for a game that had the pre previous one I think the concurrence

on Steam only managed to make it up to 5,000 at one point and most of the time were in the the two to 500s so just stor up with a sequel kind of out of nowhere like this I think it was a little unexpected uh especially since it just kind of released and I don't think a lot of people are anticipating it so definitely a very exciting and having played it myself I I definitely see the appeal it's a very fun game and the big complaint if you see the mix reviews is more just because the servers can't seem to handle all the excitement everyone I mean it's one of those ones where it's like good good problem bad problem so it's an interesting mixed bag in that sense but otherwise uh fantastic multiplayer game thoughts from you guys hell diver is really cool apparently as of recording there's already been a million plus units sold hell diverse 2 has been a ton of fun um I I quite enjoy it but I've always been a huge fan of Arrowhead game studios regardless I was a big fan of Maga big fan of gaunlet I think they make really good games I think the thing that like took people by surprise was that it didn't

have the typical AAA buildup that we're used to seeing like people are used to the almost moviees people going on road doing a bunch of AD sales and and and ads everywhere and compared to that it like sort of just dropped which was awesome it was a ton of fun I think it's still doing really well and it's yet another example of this style of game that we've discussed and we'll probably discuss later as well which is hey unlike some of the free-to-play games that people have gotten used to Hell divers is not a free-to-play game like you know and deep down it doesn't have that as its mechanism right it's it's a box game it's 40 bucks at least where I'm buying it from maybe it's cheaper elsewhere yeah I think it's um what you said first s about it being you know kind of the first time PlayStation is releasing a game on PC and Playstation simultaneously I think think that's a

that's a pretty big deal actually and is a sign of what else is to come and if you triangulate it with some other data points and discussions that are going on I think it paints a picture of how the future of PlayStation at least in this current ERA could be a little bit different from the past because as we've seen for the the most part PlayStation has invested a tremendous amount of money into typically it's single player more narrative based games that become the tiple franchises of PlayStation and because they are great games they're beloved and respected those are the games that really ship the PlayStation units that make people want to buy the consoles themselves and that strategy worked phenomenally well PlayStation sells about twice as many Hardware units as Xbox does um but now

now that they have successfully pulled that off they are starting to think about other ways to grow their business or improve parts that are less than great right now so Sony they released their financial statements their latest quarterly results and uh a couple things about PlayStation specifically stood out one was that they lowered their forecast for PS5 sales uh which you know it's just a sign that that market we're now midcycle it's now maturing I don't think it's necessarily as bad of a deal as you know maybe some headlines are making it out to be S is still very dominant in console here and they have a long ways to go but that's going on and then the second part of the conversation was around margins where a bunch of analysts are saying like hey your business is more digital than it's ever been you sell more of these online subscriptions than ever before why why are your

margins worse what's going on and so you know that's a fair criticism there's a lot of there's a lot of reasons at any time why margins might be what they are but the Sony president who recently Mr Toki who recently stepped in to spearhead PlayStation in the interim as Jim Ryan who was the CEO of PlayStation he stepped aside uh he made a couple Frank blunt statements recently these earning results that I think also just kind of tie some things together here and help paint where this is going and so um also thanks to Simon caros and his newsletter for pulling some of these quotes together but he essentially said that um Sony's their first-party developers they're very highly motivated they're very good people but in terms of overall growth and sustainable profitability with increasing margins I don't think people understand this that deeply and so so that was one quote he

said then he went on to say in the past we wanted to popularize consoles in the first party titles main purpose was to make the console popular but if you have a strong first-party content not only on our console but also other platforms like PC Computers first party can be grown with multiplatform and that can help operating profit to improve and so now we're basically seeing the point in their cycle where they won the console battle and now they're thinking about how to improve the profit ability of their bus with the games that they're already making um and I think it's worth noting that like there are real reasons that the margins are maybe more depressed than they have been one budgets on games have have massively risen especially on these like AAA Blockbusters for example Spider-Man 2 which has been their like latest big Blockbuster release it had a budget people are saying of a little over $300 million dollar which is 3x what the that

first Spider-Man one game was um which is a massive increase and yeah it's you're gonna have a much harder time getting the same level of margins on on that if your costs go up 3x and so it's worth thinking about how to to change that up also there's there's a lot of people working on games that have not yet shipped that aren't live there's even parts of the business you know a bunch of people working in Mobile for instance where nothing has been shown yet so those are other factors to consider but all in all um I think that it's PlayStation is at a point where they can start thinking about PC more that doesn't mean that crossb for means they'll be bringing games to Xbox I don't think they need to do that but across PlayStation and PC yeah I think their publishing can become much bigger and more profitable at least in this console cycle yeah the other the other the last thing I'd say um on on this piece is like it's

interesting the strategy around marketing right like I think that that's also want to highlight in terms of just shifting strategies overall you know not having like this multi-million dollar budgets for like launching PC games or well console games in this case um it's it shifts the the the economics and the Dynamics and like proving that they can have like a big hit on their hands without having to spend like these multi-million dollar budgets ahead of time I think it'll also kind of it's a little bit of a glance like into what we can expect um around that focus on on profitability and trying to you know increase margins overall this particular game has some interesting details too and that I mean first off as you mentioned the $40 it's not a 6070 game you know you just came out and was like it's at a reasonable price to try it out similar to power world was at 30 just you know one of these prices where it's like hey you know if you're into this kind of game

like it's pretty affordable it's not A10 $20 indie game and it's not a you know $70 AAA game it's in that kind of double A maybe doublea plus with the the quality of this one sort of caliber and then also the monetization was a nice kind of balance where there's like a little bit of sort of live service mentality but never it's it doesn't come across greedy and so I think it kind of had a nice balance of like hey you pay $40 for this but also you know you could spend a little bit more but you don't have to like so you like a a soft currency sort of thing through the game that you can also buy um if you want to move in faster and uh you could spend it on the the stuff for free and like the sort of free set of stuff which includes a rotating store that you know that puts in new stuff but they also added like sort of a battle pass thing but rather than it being a battle pass it just unlocks another shop where you could spend those same things that it's an interesting sort of balance where they're not they're not forcing a grind other than like hey there's this currency you could pick up as you do it but the the part I found interesting that was a big Evolution between the first game and the second game was that

they the first game was kind of just this Co-op sort of like a single player experience whereas this one has this sort of mosque feel by trying to make it like this big Universal war that you're part of and all your battles are contributing to all the players and what you're doing and like this big war against these two different uh species essentially and everyone's participating and there's these ways they create illusions that you're seeing everyone battling from the ship and all this they create this very cool like Planet Side kind of vibe to it uh and I think that was an interesting upgrade that I I imagine contributed a lot to this sort of virality of this that sort of feel that everyone's in this sort of War together as opposed to just a single player game you play with your friends um and obviously has the matchmaking stuff like that so I found it kind of interesting that you know the timing of a game like this to come out but also like hitting the right Mark I think obviously I don't think you could just easily replicate it but it's kind of funny that this did much better than the more recent Starship Troopers attempts that that just didn't quite hit the mark even though this isn't actually an

official one just kind of the spirit of but you know we'll see how it goes I don't know how long this will last but hopefully they get the server squared away before they uh shut it down one really fun fact about uh pricing in particular and audience targeting is that we're starting to see more Market segmentation around price point as well as targeting this game hearkens to Gauntlet to Starship Troopers and those are terms that no one in gen Z knows just as an aside sorry it's like one of those things where that is the price point that people are used to that's a type of game style that they want to play and so we're seeing that type of targeting that's not to say that live Ops games are dead or that the $70 $80 $100 Prestige box sales are dead it's yet more segmentation that we expect to see as a mar as a market matures and so hell diverse to I think is a great example of that type of targeting I would imagine if I had to guess the vast majority majority of players of Hell divers 2 are male and

Millennials like I think that seems to be the Target demographic it seems to have hit that note pretty well and it seems to be the type of person who played honestly H1 Z1S back probably when they were in University a decade ago and now they're out on the workforce and they're they're playing these styles of games their friends are playing these styles of games and they're coming back to it and so it cannot be understated that it may not be unlocking a new audience in the same way that mobile games did or that perhaps VR Gam in the future but it's doing a doubling down of targeting that audience that honestly the folks at Arrowhead game studios know really well that's their demo that's the audience that they've always sold to and that's the audience they're gonna continue to sell to it also helps that they've got a good track record you know they've generally produced quality games this was like I think a big step up in terms of like what they were trying to do with it both on the the visual side and on the multiplayer side which obviously they're struggling with a bit of that frame rate problems combined with the server problems so you know a little bit of a stretch but overall it shows that you know building up quality

over time and just I guess hitting the right timing with everything on the Right audience even without the marketing really there I literally just saw like oh hey I guess this game's out like none of us that played even knew like play the original knew that it was even coming out so it's I guess just you know one of those things where again you probably couldn't easily replicate it but it shows like that sort of hard work paid off for this company but speaking in terms of targeting and and trying to uh figure out where things should go especially around exclusives there was an interesting Xbox business event uh discussing some of that well unfortunately I don't think it was very interesting but after a week or two of speculation and you know pretty poor communication strategy I would say from the Xbox team Xbox announced that four of its games are going to PlayStation they didn't name the games but the general consensus is that these games going to PlayStation as well are going to be Hi-Fi Rush pentant sea of Thieves

and grounded so that's pretty minor news for them to host an event around um and obviously there was a lot of Buzz around like are they going to take Starfield to PlayStation what about these these big games um and of course if they did that there would have been you know Xbox riots in in the street but it is they're framing this as an experiment but even so that the conversation is taking place that there is speculation it is worth sort of zooming out recognizing where we are and trying to think more about like what actually makes sense here because this does not feel like a bold move in any direction at all really and maybe they're tiptoeing their way to another Direction I also would have thought though that with Activision Blizzard being under their wing officially and

them you know taking 18 months to lock that down that they would have hit the ground running faster with a more specific laid out strategy that they had plenty of time to think through and the fact that they're allowing you know many days to go by with speculation before figuring out what to say they have an event and then it's pretty minor um it just makes me wonder what conversations are going on behind the scenes that could have a larger impact on the direction that Xbox is really willing to go um so anyways I I have a bunch more thoughts on kind of what this could mean for for Xbox and the directions that they could take but I'm curious if anyone else has immediate thoughts on on this announcement before digging into the the bigger picture stuff I really miss E3 was one of the first thoughts I had when I saw this announcement is interesting because to me at least and

Aaron I'd love your opinion on this it felt like a departure from the previous buildup announcements where you would hold everything until E3 or until one big Keystone event to announce everything there it seemed more a return to a more Microsoft style of announcing which is hey here are the updates here's what we got get used to this Cadence markets please don't OV exaggerate one way or the other we're a publicly traded company with a lot of different parts where frankly most most of our value probably comes from the fact that we own open AI right so who who the hell knows right and I think that was the initial thought beyond that I think consoles are such a inherently American Concept in a lot of ways and as an American and I think all of us on the callor live in the US or are American like it seems like a no-brainer given the world we've come from that consoles take such a large part of the Mind share it doesn't seem to be the case that it's such a large part of their business line or

their International view right mobile becomes a larger and larger part PC is becoming a larger larger part there's a lot to be said about those types of things and so I looked at this as honestly like the the the reserve nature of the of the press conference from meta perspective makes a ton of sense to me it's really trying to set that tone of hey we're gonna just keep doing this this is something we care about we really love this I think Ben Thompson said it great in um strategy or however he pronounce his newsletter where he mentions that Xbox was a point of Pride for Microsoft for such a long time in a similar way to when I talk to my Microsoft colleagues now they love talking about open Ai and it's very much one of those things where Microsoft is taking the step of being more in the Forefront of an entertainment world than you know their old school approach yeah I don't I mean your E3 point is interesting to me this felt more like they just felt like they had to say something because the the rumors were

getting out of control um but I I guess a couple things stand out to me about this to try to take this a bit bigger picture one Xbox in part is doing this taking games to PlayStation because it doesn't have the luxury of being the top dog the way that PlayStation has right since PlayStation has dominant market share it can sell on its own console and PC and create a very large dominant business but Xbox can't get the same results if it follows that same strategy and recoup cost generate meaningful Roi the same way since they have a much lower console base um and player base to spread those costs around um it's sort of like how in video Netflix would never license its content to Max because it has dominant reach but Max Fields a need to license to Netflix in order to better cover it cost and generate meaningful Returns on that content um so even

though they have similarish models in terms of you know console businesses the nature of their business models is just different depending you know on the level of market share and scale that they have so like that's one reflection it sounds like they're doing similar things but they're actually not because one is caving and putting their content on the competitors platform and the other is succeeding without doing that but the second thing is I I can't help but wonder whether this small experiment is a mistake or rather that it will it signals what could end up being a mistake just because it's so small it's so so minor it it almost like lacks courage or or something from my point of view to be able to make a larger move that actually like points them in a clear Direction um it seems like they're Towing the line between two distinct and somewhat opposing strategies right now which is one they need killer console exclusives to gain

share in hardware and then two Game Pass and Publishing success hinges on games being playable everywhere and console exclusives and being playable everywhere really are at odds especially when it comes to those major tent pole games so I I can't help but think that they eventually will have to pick a path and they're they're kind of dragging that decision out as long as they can now having these experiments and such but it doesn't like what they're doing right now doesn't make sense to me and so you know you could look at the different paths if they minimize Game Pass and double down on hardware and exclusives that's giving up on a unique business model that's more in line with how Microsoft itself used the world in which Microsoft minimized the importance of everyone and every device being on Windows and instead now wants it services available everywhere on every device on every operating system and Microsoft as a business it's hard to see them going down going back down that

path and it's hard for to see Xbox going down that path again now that the services strategy is sort of out of the bottle so to speak um but the other path is to minimize the hardware Ambitions and double down on Game Pass broader publishing um and Cloud to a lesser degree and this way you know if they make strong concessions they would absolutely unlock ways to get much more game sales because of PlayStation they may be able to even bring Game Pass to other devices they would have a much higher margin business and higher Roi business and you know if we were to speculate and if we were to be allowed by Regulators they could even combine their gaming business broadly with other types of entertainment like video to create like a new type of super bundle to differentiate that is more in line with Microsoft strategy and obviously if XBox left Hardware that would just leave place station which is a huge win for them but bad for the industry in other

ways um but either way like both sides have issues but walking this tight rope between them in my mind just solidifies further Meandering and further just not going to win big in either direction and so it's hard to get out of that but I can't shake that feeling that it's just Meandering and not bold enough in any way so I do you agree with me disagree like is there something to that or am I being too harsh I another take is from the G kind of gamer perspective uh in some historical context so first thing that I think of is Sega so when they kind of bowed out of Hardware obviously Microsoft doesn't seem like they're bowing out of Hardware like you said uh but like when Sega bowed out like it actually was kind of a win for gamers right because now suddenly Sonic could be on uh Nintendo you could have Sonic and Mario at the Olympics like it wasn't a strictly competitive thing and they're

actually doing pretty well as a company in that sense right like where they didn't they didn't continue to double down and lose money on the hardware they found okay you know we have enough Hardware I mean software and IP and other businesses we don't need to like overly focus on controlling the hardware Market even though that's kind of where they made a big push initially you know the the Master System and Genesis and all that stuff the other thing makes me think of is these are games that are not like brand new games right these are games that have been out for a while some of them much longer than others and they're deporting them over so it's not like they're losing that like initial exclusive window right where a lot of the sales happen but the other big thing is that these are uh games that are on Game Pass at least I know a couple of them are specifically I don't know if all four of them are but that that sets up a situation where it almost like if you're if you're the kind of person that has a game pass or is interested in Game Pass you you like oh I could buy these on PlayStation or I could play them sort of for free on Game Pass now like if you if you don't if you have to buy the console like that's less of a decision but for someone like me for example I

don't own PlayStation 5 or the current Xbox like I own the older Generations but not the current one but I have windows so I can play these games on my phone or on my computer whatever through the game pass and I don't have to buy anyone's exclusive Hardware Microsoft still wins right in that situation because they've got a a position that is as you said the services business the software side of things where they can obviously if you're on you know Mac OS then maybe it's different I'm not sure if they have any way to play that on there but I mean there would even love to be on Steam deck and everything else so they seem to be comfortable with this idea of the will be anywhere strategy with the game pass at least and obviously I'm sure they would love to campaign to be like hey can we get game pass on Playstation because PlayStation is not meaningfully competing with Game Pass they're trying to do their stuff but let's be real it's just not the same level of value and interest and there's been like a lot of debate over the value even of PlayStation Plus with the price raises and and stuff like that so it Microsoft's kind of seem seem like they're making their case for like Hey we're still in the software business

more than anything else and our Hardware is like a tool for us but not the whole business like it's it allows us to do a lot of things but at the end of the day it's still just a PC in a box like there's still a PC software company and so I don't know I mean I don't know where their strategies going forward but those are some I think interesting uh perspectives for me in terms of like how I see this as a benefit to me because I'm not on either side of the war I just get to benefit from the extra accessibility and the ability to play this stuff anywhere I don't know if this is like we're going to see a lot of this going forward this is probably like trying it out see like hey are we going to pick up some you know follow on sales for stuff that we kind of already because if it's on Game Pass and it's not new they're probably not making a lot of money from these games anymore anyways it's like well can we just make some extra dough this way because we've spent a lot of money lately buying companies and on all this stuff like we could recoup some so I don't know we'll we'll see I guess when sales of that come around if it was beneficial or not and they also do have at least in terms the Activision Blizzard thing that you mentioned uh they do at least have

Diablo coming out a Game Pass next month not sure about the other uh Activision Blizzard games but they are at least starting to move on that I mean like do incorporating it a bit more just thought i' throw that out there for those of you who didn't know here's a super fun history lesson actually and one that really informs this movement because often I feel we think about actions to eron's point is he being hyperbolic no like it's a reflection actually on how much development has changed over the last decade when I first started in gaming uh back in 2012 one of the things that was really fun and an actually incredibly difficult problem was developing a multiple platforms if you want to develop on Console you need to get like a custom console you need to get a specific type of c um 3D printing not 3D printing but like CD printing now done if you wanted to make an iOS game versus an Android game those were completely different text Stacks using completely different chipsets that responded completely differently since

then Unity unreal the market share of a lot of these platforms have grown to the point where you can really develop ones and Target different devices you still it's not like the old days where you need to have multiple different teams running at things in order to maintain multiple platforms that honestly is really cool it means that there is no longer the same barrier that we used to see where you would never see a game on Mac we're starting to see games show up on Linux I never saw that coming personally I just always assume that you would have to run a virtual machine for PC to play on Linux this is representative of the greater trend line what people are doing at whether Microsoft or Sony is in line with that because whereas before the cost structure was such that hey for me to develop on the Xbox as well as the PlayStation I need to have two separate development teams to do the exact same thing now I can develop ones and perhaps ship not only to PC but Xbox also to

PlayStation that's a no-brainer for a lot of people and I think that's probably the larger driver in terms of this change that more so than anything else the second thing that I think Aaron brought up which I really want to flag is the increasing price and cost of all this stuff as it turns out if your movies cost $100 million you have to Market to China it's just because they have more people and they have other people to play this we know that conss have a smaller Market if you're spending a lot of money on something you want to reach a larger audience and that's a no-brainer so we're seeing some of the trickle down effects here if anything I think the biggest surprise is that we haven't seen this sooner and that's almost in my opinion a certainly a function of just delays from covid you often don't see the value and the rough when everything's going super well you start to see the inefficiencies once things calm down and and that's almost certainly where we are today yeah if I were SAA and Adela and I were looking at this I I probably wouldn't be that

pleased um and again like just to like double emphasize the business model of exclusives on console and dedicating a big part of your business to console is at odds with Building Services where you bring all those games to play everywhere they're they're genuinely at odds with each other and so as long as you're Meandering in the middle you're not going to win in a big way and so you know if I were to guess what would happen and I could totally be wrong in this and crazy things could happen is you know at this point Xbox was probably already like pretty deep into planning its next console generation out and so we might not see radical changes in the near- term but what I guess would happen is Xbox is going to lean much more into the services side which means that in order for that to win in a bigger way for Game Pass to succeed in a bigger Way

for their tent pole games to get a magnitude of sales to generate Roi that they they need and want to succeed um they're going to have to be less exclusive to Xbox and so Xbox will still be there for those who want it but um basically their business strategy will shift in a way that makes owning and Xbox less important um to being able to play all of these games and put it down a path to maybe at some point winding it down so that this strategy can't be much more about the games and services and as I mentioned Microsoft does a lot of things they're a Titan of Industry with enormous amounts of cash once you have entertainment services that you can buy all aart that you can uh buy the games all aart or the service and some type of subscription they can think even bigger about how to make that part of an even

bigger entertainment strategy um which sounds farfetch from where we are today but I think once you like take that step it's the next logical step to kind of be thinking in those terms and so you know it's an experiment now they're taking it slow but I really think this is just a stepping stone to Services being the future of this business and Xbox kind of fading fading away and and PlayStation's going to dominate console for for a long time to come unless something else crazy happens that's my best guess of where this is going to go could be totally wrong but yeah I do have to agree with that it's like this feels like a stepping stone just if you if you add up all the steps that Microsoft is taking and just knowing Microsoft as a whole right like what they're best at because we often talk about these these pieces of like is it a hardware company is it a software company um you know which one leads the strategy for the particular business like Microsoft historically

like the last X decades like it's been software first right like they're okay you know having their software run on all sorts of Hardware like they've never been like Darlings about you know controlling that way like too much and on on Console like the Xbox is actually an exception of how Microsoft operates first and foremost of like we just want our software being like everywhere and being like the software of you know the the top dog basically like it's it's uh everywhere it's ubiquitous with you know whatever segment they're they're tackling so I think that what we're seeing is gaming getting moved and like slowly pushed much more towards that strategy like that Microsoft strategy of um you know software being the the

leading strategy and not as much on the hardware side um and it it it just feels like you know the the console piece it's like it's hard to pull the plog on it right having had such like long history with it um you know I'd say there's pros and cons on this strategy where you'd be like hey let's not even do the next generation of console like that would be pretty shocking um but I think that we are going to see it Whittle down and and probably like this feels almost like they're they're trying to like slowly like let Xbox wind down on its own as as as a console and like it's a pretty B statement saying like hey they're just like letting it die on its own so that we don't have to pull the plug um but it almost feels like that from from just kind of like adding all these like strategy steps that they've been taking in the last last two three years I think that's worth at this point

just thinking of Xbox as a platform and not necessarily just a hardware thing I think the amount they've integrated just even the term xBox into Windows apps and kind of shorning it into more and more parts of Windows and making it kind of the game service platform on Windows like obviously doesn't compete with steam the same way but it's you know clearly they're moving that direction I mean look at how much they've invested in Cloud stuff and obviously that's not a uh consumer level Hardware platform form right that's that's Enterprise level Hardware best and you know it's something they've they've also shown that they're willing to sometimes back away from Hardware when they're just like H We're not gonna be the leader in this anymore um the the clear example being Windows phone right where they were just like okay we're we're not going to win this like it we'll just at this point and and and now you have them you know trying to be like can we just like do our own app store on something or trying to figure out some way to still kind of have their platform service but not necessarily control the hardware and you think back even in consoles like like uh a lot of people don't know this but Dreamcast was actually running on Windows CE modified

so it's like they've actually had the service of the software level like in consoles that they weren't even controlling before and they're willing to do that kind of stuff like they they even compromised on W Microsoft Edge and brought that over to chromium because they clearly weren't working or winning with their own engine so they're willing to make those shifts and I think if they if they just lost at this point to Sony but at this point like you know when it comes to to platforms and and all that like we've got epic with some interesting updates because I we've talked about that a lot and it's it keeps going yeah I think like speaking speaking of uh app stores and and whatnot I think that uh it's very interesting to you know see even you know Microsoft they're with what you were saying Devon like they're trying to almost like have Xbox become synonymous in some way with you know a gaming platform gaming ecosystem uh and another company that's that's going after that as well is is epic of course they have um the epic

game store uh they you know they had this push and pull battle with app uh Apple and Google and last week they released their uh year in review blog post for 2023 um and there's two main call outs uh in that blog post that are worth just briefly touching on uh one is they're coll outed around their year-over-year growth uh just in their overall epic game store uh both from the consumer spending side as well as a user base one thing I'd say is like if you look at the numbers uh they're almost kind of like similar percentages growth um so you could largely say that you know the the revenue growth uh could be driven mostly by new users um so not nothing like crazy here just like more users more Revenue um epic games is not you know huge or in a place where it can you know Dethrone

steam at this point uh they do release their da and Mau numbers which um on the da side it's about 30 million or so if you try to like estimate where steam is like this pales in comparison to steam it's at least half of it if not smaller than that um and really like the epic game store is still very much driven by their own games so the top ones being fortnite rocket league so nothing really surprising there the second call out is the one that was a little bit more um surprising and it's that epic is going to be back on iOS uh but only in Europe so right now it's it's kind of like caveated a lot they have their apple developer account uh back up and running they confirm that they'll be launching an IOS app store in Europe this year and

they explicitly said like 20124 we're going to launch our own app store and they're really writing the digital markets act from the European Regulators where Apple explicitly has to open iOS to third party stores which includes epic games store and back to Xbox like that also opens the door for Xbox right so it's I think that epic is in a very interesting place where they're pushing the market a lot and like they're pushing like the limits of like what Apple's comfortable with and like they're writing the regulators and just like it's a lot more political than like tangible uh progress but I think like it it it might or might not change the the overall ecosystem Dynamics in general and um Sweeney the the very vocal CEO he posted right away on on

Twitter uh that um I'll quote I'll be the first to acknowledge a good faith move from uh Apple in granting epic games Sweden a developer account for operating game epic games store and fortnite in Europe under the digital marks act so that's kind of like the latest news there I think that by next year we could be looking at having to two to three mobile app stores on running on iOS is that actually going to change the Dynamics or not I'm going to be make a book clim I'm skeptical it will because it just comes with also like a whole set of like issues first of all we're talking about Europe so none of this translates to the rest of world right so it's it's a portion of the market second from like the player side it's fragmented offerings to the

player and players will continue to fe uh favor ease of you know user experience so where can I more easily get my game Library where can I more easily download and opdate my games then from the uh developer side uh to seb's point of like it's easier than ever to build games that can be you know pretty much published everywhere that's definitely true on the other side it's a huge burden as a developer to manage publishing and updating your app on you know two app stores three stores five stores like you know something's going to give for developers and developers are going to go where players are so it's a little bit of a chicken and egg problem here that is going to be kind of interesting and see how it all shakes out in the next um two to three years as epic takes the swing at their App Store

Microsoft takes the swing at their App Store and Apple and Google need to kind of ease control a little bit but um you know I'm wondering what what your guys's take is so I mean in terms of the like epics year in review I mean I think the story like really has boiled down into two data points which is um you know on the whole platform players spent 950 million in 2023 which was up 6 15% um which is good but if you just look at third party applications players spent 310 million which is about a third of the total which was down 133% and so that's not new that's kind of been the story of the past you know two three years but it's continuing um and so you know I love epic I love the Crusade that Tim Sweeney is on to you know bust monopolies be more developer friendly and epic certainly like epic game store has its place with its own advantages like in web 3 and such um but yeah it

makes you wonder uh how much longer they'll go down this path and and this way in terms of the mobile app store I think the big unlock there is just fortnite like fortnite getting back on mobile in more ways and that in of itself will make it worthwhile um also in terms of like how it was structured I think apple is still finding ways to take like a crazy cut even though it's in in alternative app store and so we'll see where regulations fall on that and continue to change over time but really this just enables fortnite to come back but also maybe ufn coming to Mobile in its own way which is also a big deal kind of brings it more head-to-head with Roblox on on mobile too which is cool I'm not that bullish on these alternative app stores really at all but I think what I would be more bullish on is more like what you see with Roblox these platforms with mini games within them in a single app not really a its

own store and so um you know seeing what fortnite with ufn can become on mobile like that will be really interesting um and maybe there'll be a couple other examples like that I mean Game Pass you know if it kind of comes up with its own app you know you know maybe it'll be in its own store but really like whatever that app is will be where where a lot of the action can be um in terms of like streaming games it's more like that area that I'm more curious about how it will unfold but definitely more more bearish on alternative app stores right now also wonder if Roblox would ever consider going on an alternative app store if um the the terms were more favorable and and Regulators kept Apple from taking still it's like 27% cut on it all yeah I mean most of the financialization off of uh the Roo being bought right now I imagine people buying Roo on you know the iOS platform like

apple gets their cut of that whereas on PC they're like payment processor gets their cut probably and that's it like two three% whatever it is so that's a pretty significant difference just expand the platform you got to imagine they're like hey can you please buy those Roo when you're on PC bring them over like like I mean you don't have to steer as much right because people probably are are playing we playing on on PC first because it took a while to get over to mobile took a while to get over to VR and things like that so it was still like a PC was kind of the home for it same with fortnite so maybe you know that's not as big a deal but yeah it's it's the same situation fortnite was in and you gota wonder too like what's the business model long-term going to be for ufn in terms of how you know they're going to make money that if that takes over from fortnite and people aren't spending on fortnite stuff and it's ufn instead it's like well is is there going to be business small around that then uh either that favors like developers where it's like developers getting paid out out of it or it's like

the developer still on the current model but then you know epic getting money out of purchases in the games and stuff like that you look at something like core that tried to do what roox is doing Roblox was doing too with like that but just like a more favorable cut doesn't necessarily work uh and so that's that's the difficulty there is it's uh it's gonna be hard for to find the right place for these that isn't just wherever it's easiest for people because unfortunately at the end of the day as CEST said that tends to win uh and you know I think it the the the probably the best opportunity for this kind of for the alternative app store is like an alliance of companies all jumping over to it like otherwise I don't think it works like you can't just be like well fortnite's over here it's like No One's Gonna download a whole other App Store just for fortnite unfortunately I mean I guess they kind of did it on PC right I mean they they'll they'll they'll do it right they they'll do it just for fortnite but they probably already have fortnite installed right so it's like they're not going to have to unless they're new players unless yeah unless they're new players and they're coming on on mobile and they you know really really want to play

fortnite I think to Tammy's Point that's to take a step back games are great for user acquisition in terms of platformization of products end users just do not give a crap excuse my French of whether or not the developer gets 100% of their money or 7% of their money they care a lot more about parody in terms of how much value they get for their money there are mechanisms to onboard people onto new platforms I cannot stress enough that's a really big deal that there is the ability for other app stores or other ecosystems to effectively use a require and then set their own terms I think net net this is great for people who are operators and developers and folks who are doing some interesting things I agree with Deon in that the cut alone won't move developers over to the new ecosystem the only that's going to move them are users and

if we'll see some really cool users they'll come over the way you can then incentivize people to bring users over is if you're a fortnite is if you have this like large audience already one perhaps dark pattern but one that we saw historically inside of the Android ecosystem is that if you think about who generates or creates the majority of Android phones in the world it's Samsung it's um Huawei it's are these companies that have the ability to like preload quote unquote blo Weare but their own appsource in there there is distribution that way the two things that I'm keeping an eye on for the next six to 12 months are one people making inroads on distribution into these new app stores and two whether we see a response in terms of the ability to test or whatnot apple as far as I can tell and please correct me if I'm wrong if anyone knows still doesn't have a really robust way to AB test apps in their App Store like 10 years 12 years after the

App Store launched Google does let's see if there's more competition and the ability for people to acquire better users has an effect on it it'll be nice right if they're charging people that 27% that they start providing more value for that they just F that's that's the other thing too is like you do have to keep in mind like I agree with a lot of what you're saying seester but you also have to keep in mind Apple's a pretty hostile environment to launch an app store in even if you can manage to pull people over you've got to deal with like a lot of like barb wire they're throwing in your way to try and drag people through that and we have had you know on Android to your point yeah on Android people can pre-load stuff we had there was a period of time where the Amazon app store was actually pre-loaded on a lot of devices and that was not enough to get traction and get that's on Android but it's situation where like No One controls iPhone but apple and so it's like I I I feel like yeah maybe Android's more valuable environment but but iOS is just super super hostile for that stuff and and I hope I'm wrong I really really do because I would love to see that take it down to at least a

reasonably even playing field but uh I guess we'll have to wait and see right like this is definitely going to be a year or two of of shakeups around that and I hope EA keeps fighting a good fight and I hope find some good allies besides just fortnite hey imagine if Roblox did it too just to like uh you know pull that like make sure they don't lose their 30% that would be uh pretty interesting but uh speaking of developers trying to make pivots and hopefully getting some things going supercell with their annual letter of fun I always love hearing their thoughts they shared their most recent one uh yeah as you said it's the uh now the super sale tradition I think uh Ila the CEO started publishing these uh now famous long text letters or blog post back in 2018 uh where he shares kind of like a deep look into his latest thinking around whether it's strategy process culture product whatever else um at supercell and uh he started doing this

because um Finnish law requires them to release their um revenue eida and tax numbers so even though they're not a public company they actually have to release their annual figures every every year so you can tell like it's a little bit of also um storytelling a narrative around the numbers um just so that it's you know it has more context at least on where what he's thinking um and I think it's it's just fascinating that it's become kind of like this highly anticipated post across the the industry as soon as it goes out you see folks repost dissect analyze and uh many many people taking it as the gospel and was the key to making great games uh which you know a huge nod to supercell unlike many studios they're not a one hit wonder they've been able to do this you know

multiple times several games have been uh huge hits uh but on the other side they've also struggled you know to do it since you know allw Stars launch which was six years ago now so you can see a lot of like kind of like that same narrative um from the letter you know last year talking about this and really you know acknowledging it um and this year acknowledging again you know that they you know they have huge Revenue but even then like their revenue is down year over-year um 4% their eida is down 8% you know you can see that they're investing a little bit more their EBAs down um I do appreciate that there was a nod at other companies and teams that are doing you know much better or that they're you know super sell is is acknowledging that other companies you know are tackling the the the mobile

market today in a much you know from a stronger position or from a different position that is working out uh as opposed to what they've you know what they've been trying um there's two you know two big themes in in this year's uh letter one is you know the the side of the live games and the other one's side of of new game teams uh and that's kind of how they split they're talking about splitting focus and the company and their strategy and you know their operations in general so Li Bobs games uh you know even since last year they acknowledged that they've been under staffed under operated underleveraged I think there was a quote uh in there that said U we got too too in love with our small teams to the D detriment of the games um so they started making changes last year leaning into a more traditional you know game Studio model where you know we have bigger teams you have uh managers you GMS you have uh

they're they're calling it their sales but it's like you know a lot of teams run on like these pods where it's like a inter like multi-disciplinary pod with your producer your PM your designer your engineers that are focused on like a set of features like it's nothing you know groundbreaking or or crazy like none of is new uh and it you know if you've been in one of those companies it sounds like fairly obviously like well that's a good way to like run a liveops um studio so it's it's good to see supercell like embracing that and they are seeing uh results already from at least how the braw braw Star team has been operating so you know they've been making some pretty big changes uh releasing uh you know changes to their battle pass um their content Cadence uh and the revenue is showing it it's

coming uh it's been growing very impressively and moving in the right direction um so that's on the on the live op side I think it's uh you know pretty straightforward um on the new game side they've also talk about not having been very rigorous with the new uh game teams you know letting them just kind of Mander for bunch of time not having you know they they're a little bit allergic to uh any kind of process or green light process which you know it works for supercell at the same time it hasn't worked because they haven't really been able to you know be a little bit more rigorous and have kind of this sense of you know narrowing down into a game that is working well and resonating with um Their audience so you know they fleshed out kind of like this new way that they're going to be operating much more around like a startup model uh and really like letting new game teams like opt out from

like even like company uh you know slacks and best practices and they're using their engine like they can prototype however they want um they can like opt out of being in the office like they can move they still have to work in like same location as a team but they move to like a different office that is not like the main super sale office so it's it's pretty interesting kind of like this big shift of like trying to preserve their like uh startup energy in a bigger company um what I've seen is you know folks some being very skeptical about this move um some people you know celebrating that uh kind of pivot and that shift what I'll say is that uh um it really comes down to how each company operates what I found very interesting

is that as I was saying it's like people take a lot of what uh super cell does as a gospel and like how you should be operating and it's not it's not a formula right it's not like oh this is guaranteed to uh you know be the right approach you have to have like the right team and the right management management around te the team and the right right Dynamic and like know all of that coming together to get a great game um so it's not it's not like a a formula and they're like what I'd s respect a lot is like the constant like pivot and trying to change their uh how they operate to figure out how they can scale their you know success and find their next big success um but I would say just like I would I'm I'm interested to see if this actually you know produces better you know you know faster successes for for super so not

better but like faster successes and they can find like the next the next big game um I don't know if you guys got got any other takeaways from that uh this year's letter um not really I think you summarized it pretty well to me just like as a broader observation it seems like every year I read these the tone becomes more humble and more flexible and how they're being open to work which I think is good I mean this is a business that definitely had really strong views on like what it stood for and how it were to operate and it worked for a while um but yeah I mean the letters are interesting I maybe don't like take them with the same weight as some other people that dissect you know every word um of them I'm you know more Curious to dissect their actions in this case and like the the new games and stuff than than a letter but um obviously wish them all the best and can't wait to play whatever games they

they spin up we see this in poker a lot where and this is saying I say all the time which is people who are really bad and really good both can't escape the fact that there's a lot of luck involved there is there's a great even better quote from Maria konova and the biggest Bluff but there it's like one of those funny memed bell curves where here you're like oh everything is luck and there's like the Middle where everyone's upset know everything is skill and at the end it's like everyone's well everything is a luck making a super hit game uh new IP out of nowhere it is a is an exercise and hard work a lot of really cool structuring and then a lot of luck and I think that's something that uh when I read these letters uh you see a healthy respect for over and over again there are different mechanisms to try to generate that luck there's different mechanisms try to stay alive along enough to generate that luck it's the various bands are so large

it makes sense that people don't want him to change right makes sense that supercell could continue to operate in the same way and attribute this to variance they they clearly aren't doing that they're clearly looking at updates to the model and and differences in in what happens you have to adapt in order to get better and succeed in in new worlds and that I think is really awesome to see super excited to see the games he put out from a beian perspective the likelihood of supercell having a bigger hit than Clash Royale or Clash of Clans is zero however at the same time if you told me that they were going to have a clash Royale hit after Clash of Clans that probability was incredibly low too and and that's really the industry we're in right one of the downsides that we don't talk enough about in games is that like we are in a hist ofen industry and hist ofen Industries inherently mean that there's going to be a lot of failures and I think that term and model is something that we often mistake because as humans we have a really hard time understanding

probabilities and the structure as long as you have a structured approached and you're tackling it in a reasonable way you'll see a lot of different outcomes I'd imagine so best of luck to the supercell super excited to see what they do huge Val of their games let's see what happens next yeah I mean the the problem I have with with all of these letters is they don't talk about the one issue really supercell has they're fantastic at making games they make great games polish them really well they do a great job they're Innovative they're really great at simplifying genres doing cool things with it what they're not great at very clearly is monetization like from a like having good principles and ideas around how you do it because they seem to kind of like if they can't figure it out they just kind of fumble I think the the prime example that is Clash mini that's been in soft launch for almost three years at this point and it's all because they can't figure out how to monetize properly partially because they picked a genre that's extremely difficult to monetize well and it's generally across most of the markets as a genre just kind of died because it's very difficult to

monetize without like breaking other rules like and I think just not having Good Foundations across the company and how monetization should work before you're even starting to make a game leads them down this path and they they don't seem to just have like good you know they're letting people run rampant and then they're changing that up and they're changing this up and they seem to be changing stuff around structure and process without really like having the fundamentals laid across the company of like hey here's why we've been successful across these games here's how we start to think about from like these principles of how we design whatever we're doing so that everyone in the company understands if you're doing a new game keep this stuff in mind so you don't go into soft launch for three years off what a great game because you did a great job developing it but you just could never figure out how to make good money from it and I mean you even think about it like they're not even always good about knowing what's their own good games because brawl star just barely made it because it was going to get killed pretty early on it had to do huge pivot in the early days literally pivot from from uh portrait to landscape

and that was a huge change and they had to go through all these things they nearly killed it like I think multiple times and so they wouldn't had a hit game since 201 16 had they not like just barely squeaked that out and so they just all these G they've killed way more games than they've released and I think that's continuing and they they try these weird different release strategies but what I don't see them really doing honestly and having played like all of the games they could to try and push out except for maybe Squad Busters I didn't get a chance to but other than that like I never see them really thinking about the structure of monetization first and I I know it hates it sucks to think like business first as a game developer you don't really want to you want to think creative first but it's clearly showing years and years on that that's the biggest problem supercell has and I only bring this up because I never see this really talked about in these letters they just talk about structure and process but they're never like just UPF front like hey we just need to figure out how to make money better from our games because that's honestly the metric we're using that's just the honest upfront truth as a company that's why

these are killed like oh retention yeah know retention because you need to keep making money off of it so anyways I really hope they figure that out because I think as a game developer they've got mad skills as a monetizer they seem to be struggling and you could see that very clearly with brawl Stars not that they haven't been successful but they've had to try very extreme changes even after launch to keep going uh and I hope they're learning a ton that's that's really the thing it's like I hope they're learning a ton and the new games teams whether they do them as these weird uh startup Founders or whatever they're going to do whatever is in the letter next year uh that they just figure out how to make money and like I I love to see Clash mini actually make it work because it's a great game but anyways that's that's a that's a very fair point uh den and and uh I think it's spot on I think what's interesting is that um you know bringing a lot of people with liveops experience and you know that comes with like much more

better understanding around like monation and like kind of like these long-term um you know sustain like looking for a sustainable business long term from a monetization point of view I think the challenge that we're going to see is that um they are taking like this very desperate approach to like okay let's get good at making money with the games that are live and the games that are not live we're just like they can even like not talk to anyone else at the company so I I do think that there's going to be like a lot of learnings in one side the other side it's going to be you know a lot more challenging to see them like even integrate those learnings into what they're doing so we'll see uh what I what I do think is that supercell has you know a a really good business um in terms of just being profitable having enough uh

money to like experiment and and you know keep running and you know keep iterating and try to find the next uh big hit but the market has also changed so they haven't launched a hit game since 2018 and the market has changed a hell lot since 2018 so that's that's another uh curveball there that they're going to have to um figure out for sure yeah just to be clear by the way supercell did make like $1.9 billion last year right in terms of revenues they did make $600 million in terms of profit I think it's unfair to say they're bad at monetization they are one of the most profitable game companies of all time definitely not saying that just be clear I just mean about it transferring that to new games the the the thing that I will say specifically about supercell which I think is not an indictment on supercell but a question we have to ask ourselves is there are multiple phases of a startup and this is something that the games industry especially the one that's evolved in the last 10 years has

never dealt with before which is there is the growth phase where you invest heavily into R&D where you're putting like 50% if not 100% of all revenues into development of new games then there is the liveops model that came around the idea they can make work on the same game over and over and over again and that shifted the model to allow for more Ventures to come in because people are like oh these are like sustainable ecosystems One open question that we don't know the answer to is one is it repeatable like can you make more or more games and it's success two if it is repeatable are the revenues repeatable and three if those three things are true how much R&D should you be doing in there is a strong argument from the oil sector which is oil as you guys know is incredibly profitable but we're going to run out of it there's a lot of both societal and real reasons to use less of it every year and so in a lot of ways if you're an oil company like you should probably either dividend out your money

because any investment to oil you do is going to be have um upward pressure downward pressure rather in terms of price or you invest into Renewables but that might not be your expertise this is fundamental to where companies find themselves often and I actually don't know of a company that's able to succeed in this regard right it takes something very special to to get beyond that and so the the Helsinki guys I I have a lot of respect for them I think they're really cool but remember there there's there is no exit anymore right like if you're an employee they they already sold to 10 cent right there is no none of that upside anymore if you love working on mobile games the mobile game industry to your point Devon has changed a ton right hyper casual is King in a lot of ways hyper casual and turning into more the midcore casual or what's the what's the word people are using now H casual hybrid casual yeah that's that's super hard and super different and that I think is why that

ecosystem is so weird because in some ways there's a strong argument that they should lay off 80% of the people and print revenues because there is no guarantee that there's gonna be a new game that comes out right and and that's often what's other companies are doing right they're like hey we're not sure there's going to be a new hit let's make some sequels let's like actually increase profitability by an extra $500 million and let it you know longtail out I have a lot of respect for what they're trying to do here I don't know if they're going to be successful the guts the BET should be that they're not because that's just base rates but it it does tail into why making live up games is so weird and so different than everything else but I thought the strategy was not even sequels now it's remasters right you don't you don't have to make a new game you just remake the same game literally hopefully that uh that Clash of Clans remastered HD or whatever yeah it's 4K game yeah it's I mean I hope that doesn't end up the case with mobile like that would be pretty sad but you saw

like even the struggle they had with uh trying to get people from Angry Birds one to Angry Birds 2 at roio like the difficulty there is like would they have been better off making Angry Birds remastered I don't know that's an open question I guess but anyways like a lot of uh a lot of interesting stuff going on obviously this is a big year for all of gaming whether that be console or mobile or PC uh we're seeing shifts everywhere so I think a lot of cool stuff to talk about continued and definitely a an interesting start of the year not always good but definitely interesting so hopefully you look forward to many more interesting things with at least a fair bit of them being good news like you know we started out with at the beginning with a a doublea developer just managing to knock it out of the park and we've actually seen a lot of that already this year so hopefully at least that continues into the new year but anyways thanks everyone for tuning in of course and contining to do so and hopefully been longtime listeners but if not you know continue to do so and make sure to check out our other podcasts and of course our digest and make sure to go to nov. And subscribe to all that and if you're not already so again lots of cool stuff

coming out there and I want of course thank the panelists for awesome conversation as usual and we'll see you guys 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 nvic.org plus if you want to learn more about what navic has to offer make sure to check out our website www.nic.edu and advisory Services again that is www.nic.edu [Music]