“I’m pretty frightened by the DRAM crisis” – Matthew Ball Part Two

This week, more fallout from Xbox's senior management changes. The Amazon Games call [music] continues. IGN makes even more cuts to Eurogamer. Marvel's Wolverine dodges Grand Theft Auto 6. And part two of our epic interview with Matthew Ball. Hello and welcome to the Game Business Show. Before I kick off with the big stories of the week, a bit of news from us. Particularly our event, the Game Business Live. It is returning to Los Angeles in June, in particular on Monday, June 8th at the Grammy Museum. That's in downtown LA for those who don't know where that is. You'll get more big name interviews going on there. It's going to be quite a special one. I had an exciting meeting today with Geoff Keighley about it. And here's the best thing. If you are a paid subscriber to the Game Business, you can grab a ticket at no extra cost. Tickets will be available separately. You don't have to be a paid subscriber, but the cost of the ticket separately is the same price as a paid subscription to the Game Business for a year. Plus, of course, paid subscribers get our monthly market report. They get our micro newsletter and podcast on a Monday and the

occasional bonus episode, too. It's really worth it if you're thinking of going to the event. Also, if you're a paying subscriber, you know, you'll get a note from us when to to sign up for the event. So, if you're not a paying subscriber at the moment, why not become one now? You'll be first in line for tickets, plus you'll get all our bonus stuff I just mentioned there. And you of course you'll be helping to fund the entirety of the Game Business. You can find out how to become a paying subscriber by going to the gamebusiness.com. That's our news story. Now on to proper actual industry news story. And let's begin by talking about the ongoing chaos at Xbox. When I say chaos, I mean a lot of fuss over not a lot of information. So, last week, you can't have missed it. Phil Spencer, the famous head of Xbox since 2014, announced his retirement. His successor is Asha Sharma. That was a surprising bit. A relatively newbie to the Xbox business, relatively newbie to the Microsoft business. She has been running the core AI team there since 2024. Now, unlike Phil, Sharma isn't particularly a gamer, nor does she have a big history in video games. None of

that of course matters if you checked out our edition of the Game Business Micro on Monday, you all already know my thoughts on this. A CEO's job isn't to play games or sign games. Sharma's job is to make sure she has the right people in the right roles and to create an environment and culture for those people to thrive and give them the right tools, all that kind of thing. But alas, gamers are going to be gamers and have been pulling apart all her posts. Are they really AI posts? Are they really from her? Her gamer this true? What's this seven bit dodgy to us and and so on and so on and so on. It's all a lot of nonsense. She has been doing some interviews. Most of them, I'll be honest, aren't exactly worth reading. She's only just started, right? She's hinted she will review whether Xbox should continue releasing games on PS5. Which is generating lots of noise amongst gamers online, but there's no indication of a radical change of strategy here. There's been a promise to return to Xbox. Um, it's not quite clear what [clears throat] that means. I think it's the Xbox spirit. Not that I think that really went away, but it's certainly excited fans on what that might mean. You know, maybe back to the old days, that's what they all seem to be clamoring for. I don't think that's

going to happen. Sharma isn't doing this alone. They've named Matt Booty chief content officer. I'm not sure if that fundamentally actually changes his job. He's already, you know, he already runs all of Xbox, Bethesda and Activision's game studios. But certainly it provides Ash with a senior games expert to support her right next to her. I do find Matt quite interesting. I know he's a nice guy. I love talking to him. He's well liked internally. Loads of people like him. But you know, Xbox is studio output has not been in It's been inconsistent. Some of it's been good. Like it's not fair to say it's all been bad. His track record is is spotty, but he is knowledgeable and he has a strong team around him including the likes of, you know, Todd Howard and Craig Duncan and people that I admire very much. So, that's great. You know, she's got some Ash has got some great people around her. Now former Xbox president Sarah Bond who had been tipped for the role of boss of Xbox is now out. Um, and been frankly somewhat thrown under the bus by a lot of people in the media who have reported that she was responsible for a lot of the decisions that fans

didn't like at Xbox in recent years, including the "This is an Xbox" campaign, which I actually quite liked. I had heard for a while now that Sarah wasn't especially popular internally. Um, I know people [clears throat] who have left the company who cited her as a reason for leaving the company. So, there might be some truth to these stories. I'm not saying that Sarah's spotless at all, but um, we haven't heard her side of things and it and I don't know. It feels a bit unfair to me. But there's I mean god knows there's quite a lot of noise, quite a lot of um fuss. But ultimately, there's a new boss. Some of the old guard are now gone, and it will be interesting to see if we'll end up with a fundamentally different Xbox or not. We might not. We'll just wait and see. Um, certainly been a time of change in the 25th year of the Xbox business. Now, um, moving on from Xbox, move on to another business going through a big change, Amazon Games. Um, yesterday we broke the news. Game Business has broke the news. It was an exclusive that Amazon will no longer publish the open world driving game from Maverick Games. Maverick Games is a UK studio formed in 2022 by mostly sort of

ex-Forza Horizon developers. Uh, Mike Brown is the one of the leaders of the studio. He's the creative He's the creative director on Forza Horizon. Alongside Mike, there was Harinder Sangha who um actually didn't have much to do with Forza at all. Uh, she ran Sumo's Leamington studio and Sega's Hardlight mobile developer back in the olden days. So, here's the thing. I'm not actually think they'll be okay. The game is still in development. In fact, I understand it's very, very, very deep into development. We may be seeing something soon, maybe, hopefully. It has a good chance of finding a home because Amazon probably paid for most of it. This, of course, is all part of Amazon's continued exit from video game publishing and development, or at least at least mostly exiting. Last year, it cut most of its MMO development staff, including those working on their game New World, which goes offline January 31st next year. That's when it will be offline. They had an unannounced Lord of the Rings MMO in development, they don't anymore. It has also ceased operations, this was only announced this week. On the newly released co-op game King of Meat, they sold the MOBA game they were working on, March of Giants, to Ubisoft.

The head of Amazon Games Studios, Christoph Hartmann, left the firm last month as well. So, it's just been a big sort of cut, a big carve out of Amazon's games. The company is continuing to publish some games, particularly Tomb Raider games. Tomb Raider: Legacy of Atlantis, that's the remake or reimagining whichever word you'd like to use of the original 1996 game, that is due this year. So, that's the anniversary of Tomb Raider this year. Tomb Raider: Catalyst is an entirely new adventure one they're doing, which is coming out in 2027. That's also Amazon. Amazon is also behind the upcoming Tomb Raider TV show, which has just entered production. And of course, Amazon has its Luna game streaming service, too. I asked Amazon, "Hey, what's going on?" This was the statement they gave me. As part of our strategic evolution to focus on projects that leverage Amazon's unique strengths and scale, including the recent relaunch of Luna and our Tomb Raider franchise partnership with Crystal Dynamics, we've decided to release Maverick Games from their publishing agreement with Amazon Games Studios. With tremendous respect for the Maverick Games team and the compelling narrative-led driving experience they're creating, this decision allows Maverick

the flexibility to find a publishing partner whose strategic priorities are better aligned with bringing their game to market. We're proud of what we accomplished together during our partnership and wish them every success in the future. As do I, the Maverick Games team are lovely. Hopefully, they'll find a home for their game, too. But, obviously, it continued scaling back of Amazon's games efforts. It you know, it's going on, it's continuing. Speaking of things that are not fun to talk about, let's talk about IGN, shall we? There've been more cuts at IGN, specifically to its prestigious Eurogamer team. Look, I have a lot of sympathy for the IGN team, the leadership team there, I like them. I like them personally. But, this has been just a disastrous acquisition of Gamer Network. So, they bought Gamer Network in 2024. If you don't know who Gamer Network is, they own Eurogamer, they own GamesIndustry.biz, VG247, Rock, Paper, Shotgun, Outside Xbox, Digital Foundry. They had a stake in Hookshot Media, which makes Nintendo Life and stuff like that. Most of those sites they do

actually fully own, so GI, Eurogamer, VG247, Rock, Paper, Shotgun. Um some of it it just partially owned. Now, since the acquisition, all sites have lost significant talent. VG247 and saw almost all of its top guys move to Eurogamer, and it was cut back to basically a guides team. It's still going just about. And GamesIndustry.biz had to lay off a bunch of folks the day IGN came in uh without much thought really into who was being cut, which led to the majority of the team, and yes, that included me, taking voluntary redundancy at the end of the year. Um very sad uh that [clears throat] was. Digital Foundry bought themselves out of IGN, uh went independent last year, and doing very well. And now Eurogamer is a much reduced team. Um there's still some top folks folks there. Um Chris Dring is a great journalist. He's he's still there at Eurogamer. But this feels like managed to client territory. Um
[sighs]
You could argue that IGN probably only bought these sites for the traffic. But it's been a uh Well, an absolute gutting there of pretty pretty famous UK game media

brands just been destroyed here. Um IGN wasn't the only suitor interested in Gamer Network back in 2024, and I think, from my point of view, the wrong choice may have been made. But uh yeah, more cuts going on at Gamer Network. Shall we end by talking about a video game? That'd be fun, wouldn't it? Um Sony has announced the release date for its upcoming superhero game, Marvel's Wolverine. Uh that's the game that's being made by Insomniac. For those who don't know who Insomniac are, they made Spider-Man and Ratchet & Clank, and they are excellent and brilliant. It is one of the most anticipated game of the year. We did our most anticipated game of the year list uh a couple of weeks ago, and Wolverine was in the top five. The title is coming out on September 15th. That's a whole two months before Grand Theft Auto 6 is due to land on shelves, assuming that doesn't get delayed anymore. I'm not going to say that. I'm just going to assume it's coming out this year cuz it's definitely coming out this year, right? Wolverine looks great. It's a lot more violent than Spider-Man. It was teased nearly 5 years ago. That upsets me. Uh had the first gameplay trailer shown in September last year. We know there's a big summer reveal for the game coming

too. I have to imagine around Summer Game Fest. I don't know exactly when. I think this is going to be a strong hit for Sony. And it's quite handy for everyone to see that these dates in the calendar. You sort of know when to drop your own games. It's shaping up to be a big year for the console game. Not just GTA and Wolverine. Um those are obviously big ones, but this Tomb Raider is coming back. I mentioned that a moment ago. There's a new Fable game coming this year. That looks great. Forza, obviously, which is out in May. Uh Lego Batman, um also out in May. 007 First Light, the new James Bond game, also out in May. May is going to be a busy one. We've got Resident Evil coming out tomorrow. That's going to be a pretty big launch. I'm pretty certain of that. Possibly the biggest Resident Evil launch of all time. So, some classic video games coming up this year. I am obviously a man in my 40s, so I I'm excited to see James Bond Resident Evil and and Tomb Raider and Grand Theft Auto and all these things that appeal to my younger days. But, I'm sure they'll do well with the younger crowd as well. Certainly something I'm looking forward to. That's it for the news segment. If you enjoy that sort of wrap-up of news and a

bit of analysis, do consider becoming a paid subscriber because I do something like this every Monday morning in newsletter form and podcast form and video form for paying subscribers. And I think they're jolly good, if I do say so myself. So, gamesindustry.com, consider becoming a subscriber. Anyway, shall we move on to our big interview? Our big piece of the week is a continuation of our chat with the game analyst Matthew Ball. He released his state of the game industry report last week. It went down a storm. Everyone's been sharing it. Everyone's been giving their views on it. We did a big bumper hour-long podcast with Matthew last week. It was so long we had to stop the interview and we're going to start it back up again in just a moment. This week Ball and I will discuss layoffs. We'll discuss streaming subscriptions, PC handhelds, and a whole lot more. Here it comes. The graph I I don't even know if this actually told me anything, but the graph that really jumped out to me was you had this list of job opening in your report. You had this list of job openings by

location and then they sort of how they sort of roughly reflected where the revenues are now and I can't tell if that's a strategic thing or it's a coincidental thing, but I I just thought that was a an interesting observation that's come out of your your your search. I thought that was just Yeah, so so this really comes from Amir who's ASG C is a phenomenal resource. He's outstanding. Obviously, there's very little that I can say in from mentally that hasn't already been said, but he deserves it. He provided me with a bunch of research here and one of it is, as we know, 75% of layoffs have been in North America. About half of them have been in California. That's a tragedy. It is also tragic that rehiring, which has now come back in pretty full force, does not match those layoffs. Now, we don't see all hiring, so we don't know exactly how many jobs have been lost permanently. We don't know how many people have exited the industry and that is a tragedy. But,

what we do know is that for the first time ever hiring matches the location of revenues. That is positive. That means that the industry is now speaking to its players. It means that those who have never had the opportunity for employment, no matter their talent or training, because the jobs don't reside locally, now have that. And if you ask me, what is the most important thing for growing revenues globally, we've already discussed that they are not growing in 60% of the PC console market, 50% of the global market, and that is those major market eight. Most of the players and most of the spend in front of us is going to come in those other territories, and we know whether it is music or books or video that the best way to do that is with local content. And so that hiring I don't think is just strategic. I don't think it is coincidence. I think it is best characterized as gravity. Over time, content creation and investment matches where people are and where the

spend is. But make no mistake, that is awful to our that transitionary curve. We all know people who have just been frustrated out of the industry. And Whitney saw I think it's I almost want to dive even deeper into that. I could go down the rabbit hole there cuz you obviously you end your report by talking about how there's not one games industry. There's mobile games industries. We've talked about it earlier. We've talked about it I've talked about it on the show a few times, actually. And I'd be interested to know where the revenue growth is and where the hiring growth is. I could go a few other things in the report. You meant you talk about advertising. Yeah. Cuz I work in the media. Advertising is a conversation that comes up quite a lot. And I always worry when it comes to advertising and sort of traditional PC and console games. I can get it in mobile. Like you can track the ROI on that. You can track how many clicks and where it comes from and the UA. But in PC and console cuz I think it's harder to just stick a pop-up in people's faces, particularly on console. And it's a lot of the time it's like branding. It's more like product placement in a way, I guess, in video games than it is than it is that kind of thing. I I think it's difficult to track

the ROI. So I'm not I think ever since I saw a doll sticker on the Monkey Ball on GameCube, I've been talking about in-game advertising and and sponsorships and stuff. But I I I don't know. I I think that holds it back a little bit. But you seem quite like that could be an opportunity for the market. So this is where I get shot. And so I'm glad we buried it in like minute 66 of the [laughter] the podcast. It's important. There's a few different things that are truisms, right? Eventually advertising does reach all addressable surface areas. True me, right? It does. It is now more than 100% to streaming video subscription growth in the United States. We see it in an Uber app, we see it in Tinder, it's now in chat GPT, it's going to be in Gemini, we see it at gas station kiosks. Every place that can have an ad does ultimately have an ad because the user economics suggested that it should be there, which is to say yes, it's clumsy sometimes, it's cludgy. I'm not an ad supporting customer, but I happen to have the financial resources to buy that

out most of the time at least. But by and large, all of those frustrations tend to lose against the economics of the people who are frustrated. It's a frustrating truism, but it does seem to be true. When are we talk about PC console, I think the points that you're mentioning are real, but I suspect that they'll be edged away over time. When you take a look at Hulu or I think Peacock and now it's I mean it's Disney Plus and Netflix, they make pretty ample use of pause screen ads, right? There's no reason why you can't see a shampoo bottle when you pause Bridgerton. And the same thing will likely come in some way, shape, or form to PC console. When you take a look at more AAA oriented titles on mobile, we are starting to get to rewarded ads. You want an extra item, you want an extra 100 virtual coins, you want an outfit, rewarded ads, which are not forced upon you, but are saying Chris, we'll give you something if you do it, tend to be

gaining steam across the entire ecosystem. It's not impossible to imagine that that comes to PC console, but the more important thing is the economic reality. If we say that again, [snorts] audiences in those eight major markets, which I'll repeat, are 60% of all PC console sales globally, are not spending more. The costs are going up. We don't want layoffs. We don't want fewer games. We don't just want the same games. I'm not trying to do that to burn sympathies. I'm just saying like the reality is you either need to invest in And by the way, like we don't want price increases. Those have been pretty firmly rejected by the market. More and more time is going to free-to-play games. The money comes in one way or another. When you're saying they're not necessarily measured, that's true. I think broad brand advertising and impressions aren't as valuable. We know that. However, let's also keep in mind that the world's first $100 plus ad medium was TV ads with no

metric, right? Those scaled pretty effectively. I wouldn't be surprised by the idea of a load screen here and there. 2K talked earlier this year, I think in February of last year, sorry, that 2 and 1/2 billion games of 2K NBA 2K are played for year, 2 and 1/2 billion. Again, I I don't know what 2K's talk thinking. EA and Andrew Wilson have expressed that they have teams working on ad deployments, but if we think very basically, that's 2 and 1/2 billion games that were match made that have some loading screen. That is such an extraordinary amount of inventory that if you said Ford Mustang or the Avengers for Old Spice, would they pay some pretty material sum for that inventory with a targeted valuable audience, an audience that is resistant to spending more? But there's no precise measurement. Of course, you know the audience side, who is it? Yeah, that seems pretty essential. Yeah, yeah, I can see

that. We already saw, I thought it was quite funny that the Resident Evil direct Bringing up Resident Evil again. But part of it was to promote watches and a and a car. Look, Chris, I my favorite one to quit I think I'm all the time is cuz I'm a big Kojima-san fan. Just like if you remember from Death Stranding 1, like Norman Reedus would literally go to the restroom, and there would be an ad for a Norman Reedus show. Like Sam Porter, that the character played by Norman Reedus Yeah.
would show you an ad while you went on the john of Norman Reedus in a TV show on AMC. Really clumsy. There's almost no way that that made sense, but that's always the one that makes me laugh. Yeah. Like it made no narrative sense, which is funny in some ways and some ways not for Kojima-san, but Yeah. Well, and interesting that the Resident Evil watch is made by Hamilton. Uh they did a watch in Death Stranding 2 as well. Yeah.
Right. There's there's there's I don't know. I'm I'm I'm interesting well. But

to wrap up, I'm going to talk about some things you didn't talk about in your report this time. Let's do it. PC handhelds, didn't didn't get a focus in the 2026 report. Are you calling on that opportunity? Some calling's appropriate, but really what I was trying to say in the report is I talk about these multiple areas where growth is not. I've mentioned them a few times during the air poll. The major market eight, there's not revenue there. Console, there is not revenue there. PC, there is revenue there, but it's largely offset by console. China, there's lots of revenue there, but it's not probably accessible. Then I spend a lot of time about talking about the areas in which we see large revenues that are growing. Advertising's one of them, if you can believe it. Total gross advertising spend on mobile games last year nearly matched consumer spending on PC console combined. I've kind of sworn, Chris, that I'm never again going to do a deck that just summarizes the industry on consumer spend because next year ads will probably exceed the amount that consumers spend on PC console. And so we just have to exclude that. I talk about ROW or rest of the

world. It's an unfair characterization, but people know what I mean. It's just that's where there is revenue growth. Rog Ally there's revenue growth there. Handheld is clearly significant. It's significant because the most valuable gamers are there. They're spending a lot of time there. They're spending money there. But when we're talking about where is large amounts of addressable new revenue, it just doesn't hold sufficient water to do so. I also think that in general when we take a look at the totality of it, IDC and Ampere by mid 2025 were estimating that about 7 to 8 million handhelds had been shipped. Fewer shipped in '24 than 2023. So we saw that some of the early momentum from the Steam Deck was just for early adopters. It cooled in 2024. 2025 looks like it had a good year. We know that the Rog Ally and the Xbox edition sold better than people expected. But if you're still talking about a total market of 10 to 11 million units, again maybe growing

three, four, five per year, some of which are replacing broken and older units. That's meaningful because they're hyper valuable customers. But in the grand scheme of things, I mean we're still talking that a third of Switch sales in a quarter. Mhm. And a lot of them are playtime extenders of existing library games. You and I are on an airplane. Not really growing beyond that. Yeah. And it's also clear that DRAM is just going to wreak utter havoc in 2026.
Yeah. It's clear that Valve de-listed their 256 gigabyte entry model of the Steam Deck because it was no longer economical. It's clear that they're no longer stocking the higher value tiers because they don't work at the price points. I think people aren't actually recognizing that the Switch has done a pretty big price hike. Nintendo has just been able to hide it, but they might not be for much longer. And Nintendo has more leverage from its supply orders than any of the handheld manufacturers.

And so I think to the extent in which that is a pretty meaningful category thus far, we're going to hit a pretty firm break. Not total, but firm. I did think that with more developers trying to get their games on mobile, getting their games working on Switch, getting their games on things like Steam Deck, I did wonder, going back to what we were saying earlier around the impact that's going to have on the high-end technical level of video games. But ultimately, that isn't That isn't what you're saying. It's It's It's It's It's hitting a wall. You were pretty cool on game streaming last year when we spoke. Now Microsoft is talking quite positively around it lately. I think they released a a funny stat, which is Xbox Game Pass cloud hours are up 45% year-on-year. Have you sort of changed your tune on it at all? Are you still doubtful? I think that when we're talking with the volume of alternatives that are available at all times at your fingertips, the number of things that are pawling on your attention, which again I would say, controversially but non-controversially, video gaming is losing to. Any sort of access modality that is

reducing friction is positive. And, right? Anything that just says I get into a game faster, like pause and resume faster, I can switch titles faster, is positive. But most of what I would say that the opportunity you and I just discussed around on, which cloud is primarily oriented around, non-gamers, foreign gamers, non-console gaming rig, is more in my view about cost, game design, and regional tailoring than it is about access provision. I suspect that cloud game streaming has some increased weight with what people call tier two markets traditionally. I suspect that I mean PlayStation certainly talks about the PlayStation Portal being a good engagement driver, but it seems like that's probably better suited, at least thus far, by handhelds and improvements in smartphones. Now, one of the questions that everyone's asking me is what do I think the DRAM impact is going to be on game streaming, especially when we start to look at what happens when hardware breaks, which is

the weird thing. Like people are talking about I can't upgrade. People are talking about I might not be able to afford GPU. We're talking about the RTX series in 2017 being canceled. But we haven't really gotten to the people who are like my GPU broke or over whatever. And I can replace it. That's going to be streaming. Like Like what does happen there? Something that used to be 200 bucks is now 700. And again, like not to move back, but I talked about the Switch having increased prices. Like one of the reasons why the Switch is relatively inexpensive, I mean it's not inexpensive, but I mean relatively, is that Nintendo basically does BYOS, right? Bring your own storage or bring your own memory. But SD cards are expensive now. A Nintendo Switch that is 449, but you need to spend what used to be 49 bucks and now is like 129 bucks on an SD card for your son, and you have three kids

and you want them to all have their own memory card, is not a $449 device. And so there's definitely an argument to be made that the historical cost trade-off of cloud game stream subscriptions versus hardware didn't make sense. We might end end up with a weird period where it kind of does at least some of the time. I'm still skeptical because devices are now outstanding. Like a low-end Android is still pretty remarkable. But we'll see. Well, you uh you answered my own that follow-up question, but
[laughter]
What was the follow-up question? It was the impact of the DRAM situation on the Yes. on the streaming thing, but yeah.
What's the What's What's up with the Switch though? The Switch one's funny because and I don't find that people are talking about it enough. Obviously, Nintendo was working very hard to keep the price on Switch down. Mhm. But like I think Wii Sports has what, like 70 or 80 million units shipped, right?
Yeah. The Wii Sports Wii Sports shipped so many units because Wii Sports was free with the Wii forever basically. Not literally, but basically.

Nintendo terminated the Switch 2 bundle with Mario Kart after like 3 to 4 months. And that's really early, and I suspect that it is primarily a DRAM and memory replacement thing, which is they're just recognizing we currently have it's $449 for the Switch, it's 80 bucks for Mario Kart, so it's 530 all in. We sell them for 500 as a combined unit. But if we deprecate that unit, so then it's 450, and if you want Mario Kart, you now have to spend 80 bucks. They've done a price increase. For the 85% of customers that buy Mario Kart, you now have to spend 30 bucks more. It's a $449 device. We're getting close to, you know, a 10% price increase. Nintendo has probably come to the conclusion anyone who is able to afford a Nintendo Switch 2 and wants Mario Kart will spend an extra 30 bucks to do that. We probably need to do that because the cost of materials for the newly manufactured devices that are therefore shipping right now have

gone up. And then again, we're talking about the memory card costs has gone up. And even still, they're talking about trying to avoid another price hike. And then we'll see if Nintendo Switch Online has a price hike. I would suspect so. And that's by the way one of the reasons why PlayStation has been able to keep their price flat and even dropped it in the holidays is, make no mistake, the reason that I just mentioned. They're now making 5. 1 billion a year on PlayStation Network. 3 years ago, they were making 3.4 billion. They if they are able to say, Chris, we now get 60 bucks a year from you, and we used to get 30 bucks a year from you and more. Right? We know that about a quarter or 4/10 of all s- PlayStation Network users are on the higher tier plans. that allows them to offset the console price increase. And so, we may see Nintendo do the same thing. My point here is By the way, I'm not holidays. I think I'm getting darker. There's a storm coming. And so, anyone who's watching will be like, "What's going on?" I'm standing in

the kitchen of an Airbnb. Yes, I would make the argument that the impact we see a lot about the headlines on DRAM. We see a lot of you know, deserve scrutiny among the gamers as to why they're being so negatively impacted by trillion-dollar companies pursuing AI and a lot about the headlines. I actually think that the impacts have been a lot more severe already. And therefore, if you think that things are bad now and we're just seeing the quasi responses, if this continues, it could get much worse. And again, we always talk about the install base for console. You talk about PlayStation doing 140 million units or the Switch doing 150 million units. A lot of those units are replacement units, especially for the Switch, right? And so, there are going to be some families in particular that buy a $440 Switch and then like their kid accidentally breaks it. And 2 years in, 3 years in, where you were used to the price coming down, it sucks, it's expensive, it hurts a family, but they can afford it because the price has

come down. You know, what happens when your PlayStation 5 that you bought in 2020 goes down and you can't afford the replacement? Like there's going to be a lot of and maybe it's more expensive. That's going to be weird. It's probably a bull signal for PC, but we'll we'll see. Mhm. Yeah. I'm pretty pretty done on that front. The streaming thing I was going to go back to. I was going to talk about I thought it was interesting what Amazon tried to do around the Fallout season 2 series and Xbox as well to try and convert Fallout players. I don't I have no idea if that worked. But to convert Fallout players from the TV show to the games. Um They're not the easiest games to get into. So, the idea of sort of a a non-gaming crowd that discovers this big at IP through TV and here's here's Fallout 76. I'm not sure how effective that is, but um we talked about that before. I'm sorry. I'm [laughter] a bit The last line of everything is sort of taking me a bit. Um I'll end because I'm conscious of the time. Um one on subscription cuz

actually we've never spoken about subscription. We saw some subscription growth last year and it appears on a few of your slides. Um my view is there's revenue growth to be had there. We talked about that just a second ago. But I don't believe there's significant user growth. So, what's your take? On which side of subscriptions? The Game Passes and the NSOs of the world. I think there's more money to be made out of those. I mean, my view is there's more money to be made out of them. You can you can add value to them. You can increase the prices of them. There's people that engage in them. But I I'm not convinced there's a huge cohort of particularly sort of broader gamers that see value in subscribing to a subscription service. I've had that view for years and years and years, but we've never spoken about it. So, I was interested in in your take. Yeah, for the most part it it seems like it has been a artful increase or or implied customer value for the platforms. We don't see much growth or I haven't uh non-console subscriptions, certainly. GeForce Now has some, but no, it doesn't seem like a massive driver off console.

On console, we know it's a large driver, but we don't know how much of that is separate from the network services, which are primarily pay gates to multiplayer services. Look, at the end of the day, PlayStation has been very, very successful increasing penetration of PlayStation Network and massively increasing price. And that is partly through tearing customers up to the tiers that give you free games, early games, discount games. And so, I actually think that there is there's clearly value there. I think as much attention as Game Pass makes, and I'm not trying to say it's not succeeding, I just mean PlayStation didn't magically add 1.7 billion or 50% growth in 4 years because they raised the floor price price. They raised the ceiling price, too, when they put free games in it. So, clearly, that's some evidence of success. But as an overall driver, doesn't seem to be so. What I will say is And again, cuz part of that is you're going to be eating out of the console

TAM, but if the overall console TAM isn't going up, then some form of non-growth is occurring. What I will say is I talked about this a little bit in the presentation. Roblox has been extraordinarily successful in growing their D2C non-platform commerce business. That is to say, in cutting out app stores, excuse me, and platform fees. And that seems to be in large part because how many of their customers they've been able to shift to Roblox subscriptions. The Roblox Premium membership is pretty lucrative. They have a massive benefit, which is many parents have realized that Roblox is essentially where all of the allowance goes. So, why not just convert the allowance into a monthly Roblox subscription? But that subscription, which is not a content subscription, it's not a multiplayer services subscription, but is basically saying, let's turn incidental Roblox purchases into recurring membership dues. Yeah. Has been really successful. Different really

successful. And I wonder as the games industry struggles with some of its revenue growth potential, isolates a little bit more on different customer cohorts, and potentially brings in advertising, we may see renewed focus on membership models like that. It's interesting. I think Sakana revealed that it was an increase in people subscribing to one of the Star Wars MMOs. Um, Matt, I've taken up way too much of your time, but I do want to wrap it up this this really broad um conversation. I'm a bit worried based on the last few questions, really. But, how are you feeling about the video game market at the moment? How we Where do you think we are as a Where do you think the industry is, rather? Are you positive, dare I ask? I mean, look, I'm I'm pausing and hemming and hawing and then I've changed it. But, look, I I would say the following. There have been better times for the industry, no question about it. There have been more plentiful years of revenue growth and user growth. It's hard right now. I hear that from everyone. It is hard. And I don't think

that's going to remedy any point soon. It's not going to be easy. I finished the report by talking about there's no single game industry. We've talked about that a few times. But, you can break the games industry into different perspectives, by device, by class, by region, by business model. You can go further into sub genres. And all of these mash up. And the whole premise is that it's not just that console is different than mobile. It's that if we think of illustrative companies, and I visualize this in the report, a company that is North American and Western focused, that is PC console focused, that is AAA focused, and package game sale focused. And then you could put another layer on, shooter focused. They live in an entirely different universe than someone who is mobile with ads exposure into emerging markets in the hyper casual segment with live service. Totally different. Every single aspect of their existence is different. Not just in the sense that they build and design and tailor differently. But, want to see

growth all over the place. And so, the most important thing is, yes, it's hard right now, but a lot of that is not going to go away unless you realize that the industry has restructured. That what we thought as survive to '25, stick it out to '26, this is not a temporal problem. It's not a longitudinal problem. It's a restructuring problem. Where I am optimistic is when people look at that and they say we have to think differently about what we're going to do and why. Patrick has done that expertly. Even still going through the harder markets, right? Western PC console shooter customers, but they figured that out. Others are saying, "We have to look to different customers and figure that out." When that happens, I think that's a reason for positivity. And again, without making light of the real tragedy, I know someone who I think is uh has said they're exiting the games industry. They were affected by a layoff 2 weeks ago, and that sucks. It's just bad for the industry. They exit, they've been in it for a quarter century. Hundreds of or tens of millions of copies have been

sold. That's all terrible, but the fact that while these don't substitute for one another by any means, there's now hiring in the markets that have never had a domestic development capability. That's a real reason for positivity, but that's different from saying that growth is available to all of today's players. Yeah. Since I started One of the positives of doing this is I started doing this 10 months ago now. I've spoken to over 100 different people about the state of the market. So many companies are thinking differently and trying new things and trying to innovate within their focus, within their specialty, not just randomly going off to something new because chasing a trend. There's a few doing that, but the lot of the companies I've spoken to are not. And that gives me optimism. This industry is full of really, really smart people and passionate people. And they are putting their minds to the problem at their companies. And I don't know. That's what gives me hope, I think. Yeah, and that's that's the most important thing is as much as I'm not very interested in n

plus oneing all long running trends, that story changes a little bit in the most important change is the lack thereof, which is to say that what we saw in '23 and '24, '25, and now '26, most of those underlying challenges have gotten worse or not changed. And so the real difficult thing and the real tragedy or the companies that weren't able to change path and I don't mean that to say it's a mental cognitive thing that the founder or CEO or management team refused to do so. It's that if you started making a game in 2020, you went forward with a certain budget, you can't necessarily pivot. Often you can't. Yeah. But I do think that enough have said, we now understand what is and isn't going to change. And therefore we can move towards it. I mentioned earlier, if you're now 5 years into saying that our background eight markets have shrunk over a 5-year period, we can now have a different frame of reference. How different are they likely to look 5 years from If the first part was digesting,

recognizing, accepting, now it's planning and responding. And if you say it's going to be like it is right now, that doesn't mean you can't participate in that market, but it should change what do you build, why do you build it, at what cost structure, on what time. If you say 2025 was the video game industry's best ever year, but venture funding in deals and dollar fell 55%. There's a lot of narrative right now, Chris, that you and I have seen saying all of the innovations at Indie, single A, sometimes double A, that you should not try to make a game for more than 10 to 15 million dollars. I'm going to tell you like there's like almost no startups that are going to be able to do more than that. Yeah. And there just is not the money available right now. And if 2026 falls by another half like 25 did or even if it falls by 10%, that's going to be ever fewer. And so that just fundamentally has to shift what are you going to do and why are you going to do it? And when that happens, that's a

reason for optimism. The biggest thing that sucked about the last few years in my view and has become the biggest bottleneck to growth is all of these talented teams that budgeted time and money beyond what the market would support and therefore their games got two-thirds cooked and couldn't finish. And therefore all of that talent and all of that investment went nowhere. If the perspective is we can't make the game we want to, but we can make the game that we can make, that's a better outcome and then grow from there, right?
Yeah. Sandfall's going to be a great example of that though. Keep the budget low. But my guess is even when they have the resources available to them to make it five x the budget, they won't and that's going to be positive. Yeah. I do think there's a bit of clarity. That's that I think gives people a little bit more confidence. Well, Matthew, I've taken up way too much of your time. I've gone over. Thank you so much for joining. I you everyone should definitely be reading your reports every year and that's true of this latest one as well. Yeah, thank you

for joining us and I appreciate you taking so much time. Well, thank you. I'm skeptical anyone has endured this much of me this long and if they have, they probably won't read the report, but thank you for having me. It's a pleasure. So, that's it for today's episode of the Game Business Show. Thank you to Matthew for an excellent interview. I really enjoyed talking to Matthew. I always enjoy talking to him. Hopefully we'll have him back on before the end of the year. It's not just an annual thing. That would be nice. Now, we will be back of course with more news, analysis, interviews and insight in the days and weeks ahead. So, make sure to head to the gamebusiness.com, put in your email address and that way you're not going to miss a thing. You're not going to miss a single episode. Until next time though, thank you for tuning in.