National Game Engines Could Shape The World - The Metacast by Naavik

[Music] what does it mean for an authoritarian regime like a russia or maybe a china to be more realistic to build their own game engine that is sort of state controlled state sponsored and what are the implications on that [Music] hi friends welcome to the metacast roundtable by navik today i'm joined by my diane lead product manager ia and contributor at navic and we're on a roll with new guests today we have tammy lip levine gosh did i screw that up this is forever recorded um chief games officer at captain.tv welcome thank you it's a pleasure to be

here um do you have like a 30-second intro about what you have to do yeah yeah yeah so um as maria said and tammy levy uh i am the chief games officer at captain tv we're a uh smallish startup uh building what we call streamer-led games um so it's all about uh social interactions uh in really enabling streamers to connect with their community and doing that through games um so it's a it's a very interesting space that we're exploring and trying to build out um so a lot of a lot of exciting um you know design spaces to explore for us uh before being at captain tv uh i spent eight years at congregate uh that's um and i did a bunch of different things that congregate from uh user acquisition prog management uh analytics um my last role there was as

uh chief product officer um so that's that's me that sounds really exciting so streamers player someone who's watching a stream can play the game or yeah yeah yeah yeah so you have um you know if um you join a streamer-led game you usually how how it goes is um right now the kind of like the framework that we have for for our games is uh the streamer we call them captains hence captain tv um you know and they're kind of leading the charge like the one game that we have live it's called stream readers and they're like leading the charges they're like going down these dungeons and like uh you know beating clearing the dungeons um so you know they play their big union and then their audience all rallies behind them and plays all your little units then the battle plays out um that's just one example but really is about kind of those those interactions instead of kind of being broadcast

streamer to audience all the time with like very minimal interaction just through chad is creating a more meaningful connection and interaction uh between the the streamer and their community wow that could be a topic in itself i'm very curious but we have a full episode so i can't ask further questions maybe maybe on the next and next time and just get to know you a little bit better you have a dog i used to have a dog uh you'll see him in a lot of my social media and my profile pictures because he was i i came to realize that my my little senior dog was just always in my pictures so i was like sure i'll just like embrace that so uh we lost him a few months ago um but his name was jasper and i'm more than happy uh he's a joy um so i'm really happy to talk about him um he was 17 years

uh young when he when he passed a few months ago wow and we adopted him when he was 12. um so we we experienced his his retirement everyone's like oh man i want to have a retirement with you uh live my retirement with you because uh he had a wonderful retirement with us was he like a party senior or was he a chill relaxation retiree uh he was like both a little bit of both uh once he came out of his shell he um you know he he liked to chill but you know he also liked to he was an introvert for sure um so it took him like a little bit to like warm up to people but once he did he he could be a riot and like loved playing and he was a a nerdy dog we say because he loved solving puzzles um so we ended up buying like the most difficult like puzzles and like he would go all out and unsolving them wait what do you mean by puzzle so i've

never seen a dog solve a puzzle a dog puzzle we've entered the peta cast section right it's it's games games uh so the the ones that we had for him and like there's different levels of like um difficulty but uh it's like you know they have to find the traits and he was also very treat motivated um but you would have to like say like there's like three little boxes or like drawers uh but they have a lock so that you have to first like unlock it with the paw and like align it in the right place then pull the drawer and then you get the treat um that was the easy one uh and there were like two two levels of difficulty more that he eventually mastered that's so cute i think i'd find that fun i and i like to solve that puzzle right and try to find it yeah take take five five different steps to get your tree it just you know taste

way better let's let's pivot captain tv let's do the human human treat puzzles yeah and what's what's the game that you recently churned from do you remember uh that that's a great question and i am i'm going to talk about a game that i haven't turned that i turned and then i just i just reactivated um and it's pokemon go um and i've had like this rollercoaster relationship with pokemon go of like playing a lot turning something gets me back to it playing a lot churning um so i went through like that last cycle of like playing a lot and then i was like i'm done with this i'm so tired like it's it's just collections like it's i'm i'm done i was like i'm gonna move it out of my home screen just like get it out of my view and i'm done with it like turning for real

uh the problem is that i i every time i've gotten my partner into like the let's play like he's like um he gets like way more upset and like he's way more completionist than i am um so the social pressure yeah this is the pure fresher social pressure he'd be like come on we're on the same team we i need someone else to defend this uh gym with me um and he just like started slowly pulling me back into it um and then we were traveling and i was walking a lot uh and i was like well if i'm gonna be walking a lot i wanna have get get cracking those eggs from pokemon go and then once you get cracking those eggs you're like well i gotta spin those stuffs because i want like the gifts and the postcards and like and now i'm back in full swing with with pokemon go after a two-month hiatus of i'm never touching this again

wow well that's the power of pokemon that's great when a game manages to associate something like a long walk to a moment to reactivate you that that's so smart yeah yeah i mean it's it's because it felt like a miss opportunity right like first two days that we were traveling i didn't have like the adventure sync because it's like what what counts your your distance um without you having to open the app it's like i had i was like and no adventure sync when i was like i'm turning so i was like i don't want you reading my data um all about the data privacy there uh and i was like so upset i was like man i missed two days of like walking i was like okay it's fine i will i will enable adventure sake again well maybe in a few months you can tell us again if you're still you're still on the go i'm i'm sure i'll be i'm sure i'll be uh churning

especially when the winter hits but um oh yeah well we'll get them on that bridge when we get there no one noticed my my pawn i'm really sad you know you're on the go because it's pokemon go that's okay too smooth too smooth you're a cheeseman sorry sorry um matt what do you think about elon musk saying that tesla is going is making progress with the steam integration are you looking forward to playing games in a tesla uh no uh i don't have a tesla um and i don't have many friends who have tesla any i guess my boss is a tesla but i don't often drive with him and so uh you know i'm comfortable with my steam at home i'm comfortable with my uh xbox i'm not particularly excited about it i think uh i think he has bigger fish to fry honestly than putting steam in tesla

spoken like a true product manager should be lower down what's the opportunity cost of this yeah yes exactly um i'm really excited about just this quick snippet of news the warframe studio digital extremes they're making a new free to play fantasy mmo i love warframe and so i'm even more pumped to play a fantasy version and they called it soul frame warframe soul frame yeah anyway it's inspired by princess mononoke which is my favorite miyazaki movie as well so hopefully i think it's i don't know when it's coming out they just announced that they're doing it so hopefully sometime next year i was gonna say probably like 2024 no okay i'll hold off being excited about this um all right well we'll just jump into the topics uh today we're going to be

talking about the highlights and pitfalls of letting players choose your content russia is preparing to fund its own national game engine and we're also going to talk about the unity and the iron source merger which should be a spicy topic who's excited for the topics today okay let's get into it all right i'm actually bringing the first topic which is the highlights in pitfalls and this is based on uh old school runescape's polling system i know it's been talked a lot when there are discussions about dows and web3 games just a quick disclaimer i used to work at jagex but everything i'm about to share is public knowledge it's all an nme article that was written by andy brown recently and as a bit of context jagex develops two runescape mmorpgs one called runescape three and one called old school runescape runescape runescape 3 continued to evolve old-school runescape was reignited with

a nostalgia from the players who used to play the 2007 version of the game it's really cool to go check it out slowpoly um yeah it's very nostalgic to be honest i used to play it when i was younger so i really like delving into it once in a while it's also available on on mobile so old school runescape decides whether the updates are going to go live based on player polls and it has to reach a 75 yes criteria for it to be released runescape 3 does not use a polling system i think it all started when old school runescape were deciding whether to bring um something i think pvp back into the game it was something about the game and they ran a poll and the poll passed and that's where it all started in terms of that community and some of the benefits of the polls that were mentioned is i adds quality to what's being released because it passed the player pull and the polls are actually quite detailed in terms of the design documentation it also makes the game unique because

there is no game out there with the scale and longevity of old school runescape that permits players that to have like such control over the game's content and it also allows players to permit the game to evolve because it was brought back with the nostalgia of a very specific year that the game that existed and the player base it shows that the player base is still committed to keeping the the game growing over over time and then just quickly some challenges of having polls is that some players like the counterpart of that benefit is that players can be very attached to the nostalgic feeling and the design at the time so they might block content that is more futuristic even in its design style so i imagine it must be really hard for the game designers to have to keep one foot in 2007 and then the other foot designing for 2022. it can also be difficult to reach 75

percent of acceptance when you're talking about something that's a bit niche what examples is the pvp content players don't like to be killed and so if there's something that will increase pvp or make it better or make it harder for players to defend themselves it can be very hard to reach just group consensus and so that niche player base could be affected and not have content they i think they experimented or are experimenting with restricting polling to players who play a certain mode to try to make that more fair but apparently that brings its own challenges and i can i can imagine so um and then it's also really difficult for developers who are super passionate about an idea um you know you see the data you see a pain point you think oh this would be a really good solution but then it's actually quite a high acceptance um criteria with the 75 percent and then just for one percentage something that you're really passionate about it just gets gets lost so i can imagine it's difficult to

handle that loss in a way um so the thought that i was having about this article is first to bring it back to the dao style decision making and i know about you wrote an essay about this a few months ago so i was actually thinking could we see more games for example blockchain games bring player decision based on a polling such as old school runescape rather than a dow style so the differences being polling the content is still generated by the the game dev team so you understand what you want to do with the game what problems to solve what the high level design is and then you propose it and you see if you get that acceptance or feedback contrary to a dow style where anyone in the dao that owns governance tokens they can propose something for the game and then if it passes it's just introduced to the game i i think you could still have a little

bit of both um you could it i think it comes down to how your dow and your tokens are designed right like what governance rights are you granted with your tokens it could be just as you describe maria where you know only the developers have the right to propose a topic for voting and then you as a dow member by owning that token have voting rights but you might not necessarily have proposal rights you could also do something in between where like you need a certain amount of tokens or a certain class of tokens that lets you also propose and maybe there's some gating behind that like you need to be vetted by the community or vetted by the developers or i don't know i feel like there's there's solutions to kind of bridge that gap between sort of traditional polling where it's all very centralized and completely decentralized um and you know as you pointed out like there are all sorts of challenges and problems to having something that's completely uh decentralized or even putting things up for a vote to begin with um

that's my kind of quick take i'm curious to hear what tammy has to say like working on games that are by nature very participatory like yeah and i think like it's i think it's super interesting and i was i was really like thinking about um you know this the specifics of this topic and like how the the runescape team has been able to manage it because you know there's you know a lot of teams and even you know captain tv like we talk about like community first and building with the community and building games with the community um and that can look many many different ways um and just seeing kind of like this longitudinal example right because like taos are just getting started right like they're you know they've been around here and there um but for games like we're we're we haven't hit this point where like you're live up like you're doing live ups with um you know a ton of games and a ton of examples that have dao's um as far as

i'm i'm aware so i think it's it's it was a very interesting thought exercise for me like you know how do you keep that balance between um ensuring you do right by all players and you could argue that by you as the developer proposing what changes should be made to a game which updates should come to the game you know you're thinking about like the the broader um user base how do you balance that with you know letting the the community that wants to be vocal be vocal because i think that's always been the challenge and that continues to probably be like the challenge that i've i've experienced is you know you're always going to have like a vocal percentage of your your community and it's like it's it's a vocal minority um and how do you how do you best balance that and i think like you know dows

kind of address it from one angle polling probably addresses it from another if it's like easy enough to like participate and not have to like you know think too much about it and you're just like passionate about the game and just go and you know share share your opinion about what shouldn't come into into your turf of your game um so it was you know i think that what what matt saying is like it is an interesting point of you know balancing and keeping kind of like a little bit of both intense of you know being able to opening up for the community like what do they think would be good and having like very clear avenues to do that because i think that also is where a lot of like community frustration can come up it's like you know they mentioned hey we need this this is broken we want this and developers being like yes we hear you and then nothing happens right so having like better revenues for that

um as well as like hey are you like are you on board with this this big update um and i think it just creates like much longer engagement for sure um so i think it's you know it's something that i've been just thinking a lot about in in general and i think it's like continues like it's a thing that continues to evolve i think for me um and i'm also very curious to see how like a lot of like the the games in the web3 space that are implementing like dows like how they start handling these challenges um and you know you pointed out a lot of the challenges that the runescapes uh team has has run into because it has it's it's uh it's pros and cons yeah i think the niche audience for different areas of content was really interesting

because i can see exactly that if you give full democratic decision to uh a large player base across all all of the game content then unless that population is even in terms of their interests and if the game is really complex like an mmo where something that's good for one part of the player base or content could then make lives harder for other players that would be hard to to reach that kind of consensus i think i think in the game if a game decides that this is part of their gameplay that's what makes it fun and it could be it could be well just like old school runescape it works so well for them and people are enthusiastic to play the game because they can be part of that journey as long as people are aware of the challenges that will come with it it could be part of the game design from the from the get-go i am interested you know if i put my product manager roll on i'm interested

in the opportunity cost that matt was saying about the tesla's yeah there's an opportunity cost if you invest all of this time and how i want to design this feature and this is what it's going to look like and then i'm going to pull it if then that doesn't pass the pull someone on the team has just spent i don't know maybe two weeks working on something that then doesn't go through so there's that added cost as well to the game development that could potentially get easily lost as something that's not tracked um you you mentioned earlier that some of the proposals get really detailed i was curious if you could elaborate on that a little bit like i i've not really spent much time playing runescape i don't know what level of detail they go into um would you mind talking about that a little bit i can only say i guess really details like with images and explaining all the contexts around uh is it's almost a complete game design dock that gets shared with players and yeah like i wonder you know are

are the players equipped to um understand like the full ramifications of proposing a new system i know that probably sounds like very condescending like some players are really invested in the game and they know exactly how all the systems work and some players may be more casual um you also pointed out like people have different um agendas or points of view like you know an elder player may have different interests than someone who plays once a week but is really deep into i don't know pvp combat or something like that like they're only going into specific directions there's different factions of players and their ability to like synthesize the information and then finally like um are they going to even vote are they going to participate uh or are they going to take the time to read the documentation um so there's like all these different kind of ways that this could go in unintended directions not necessarily

good or bad just like not knowing i think the same same problems manifest themselves with dows do you think that something like this would um work best with like elder games like basically um because you know as we're as we're talking about it right like players having an impact on their game and like having like this very like long-term investment in the game like you really get that understanding of the game and kind of like that ability to you know actually know the game better than sometimes like the game developers um probably once the game's out for like you know over three years for sure right like we're talking like yeah longevity here and it feels like it's it's a system that best serves kind of games in that stage and not and maybe like as you're like exploring new concepts so maybe i'm like on a prototyping typeface but it's just like there's like this this time period where

um you know it it might not be as beneficial at least to that rigor of polling not not building with like building the community yes but like that rigor of pulling it just feels like it's much more suited for like this kind of elder type very loyal user bases yeah i think that makes absolute sense actually i haven't thought about that because runescape already existed they took a game that already existed and then took an older version and then started branching it off into his own game so it was a game that already had an audience it had a history and then shaping the future and not starting from a new game hmm that's a very interesting perspective and in terms of uh matt you asked do players fully understand the the design document and i i don't remember the exact criteria but not everyone can vote i think you have to be at a certain stage of the game to be able to vote

and yeah it was honestly amazing how these players they've been playing for so long they know the game in and out every mini game every section um every strategy and sometimes because you have someone who's played the game i don't know 12 years or something they have 12 years of knowledge of the design and the balance and then you have someone on the team i don't know maybe they joined a year ago that's still not enough to gain those 12 years of knowledge of the game and so i imagine that potentially yeah some players could understand the design and the implications better than the game devs i i completely agree with this notion that it's uh better suited for elder games where this gets interesting with the dow's conversation is that the voting is often conferred through tokens right and i can sell those tokens to someone else even if i put in 100 hours i can just say i'm tired of this game i'm going to sell these voting rights to someone else and then it kind

of it changes the way that that works also um kind of counter to the idea of elder game applications is that you know just by nature of the sort of cycle of crypto that we're in all of these games are new they're all brand new and so like they're doing these uh the ones that are doing it like dao enforced voting they're doing it at the very earliest stages of development where i could still see it working it just depends how you apply it like you know maybe it's more about the aesthetic the world building the lore um and it's less about the mechanics of the game and how our tokenomics are going to work or something like that but it will be interesting to see how it all plays out with this sort of web 3 application yeah especially with like the the token granted uh voting rights right like you you can end up with like a very powerful majority dictating like the direction of your product right like

it's it is distributed but like it it doesn't it's not distributed evenly in any other form so that's gonna shape your product very much towards like you know whichever portion of your game you're enabling like that voting for that is going to be very much shaped by that powerful majority um which might or might not be an even distribution of your broader user base i'm really curious for someone to do it in the industry and see what happens would i do it especially if i'm bootstrapping or starting a company would i have the courage to do it probably no but i hope someone out there has the courage so that we can we can see what happens and before we move on to matt's topic um i know that some of my digex friends listen to this and i just want to say i miss you all right matt all right so i'm going to take things in

a different direction here um i saw this article sometime last week it's from pc gamer and they're talking about how the russian state is advocating for the creation of a national game engine to rival unity or unreal specifically we're talking about a few russian tech companies and politicians you know vcontact is one that's kind of like the russian facebook they also have a games presence uh ross telcom which is their state telecom provider uh these were some of the bigger names that were mentioned um and this was kind of in response to a lot of the western tech companies pulling out of russia um post invasion of ukraine so that's kind of the the summary of the story is that they're looking to set up a national game manager at least advocating for it my first reaction and i suspect the reaction of many others who read this was to kind of shrug it off and say like this will never happen um

you know unity unreal um epic games these these companies are so far ahead of someone that would be starting from scratch uh to make a new engine like this is not an easy thing to do um there's a lot of r d that goes into it a lot of investment and so this was my first reaction was like oh that's kind of like a hair brand idea but you know i thought about it a little bit more and especially in the context of all these i'm going to use the word metaverse conversations uh recently and the importance of the game engine in that tech stack for creating digital experiences um i was sort of thinking about like the long-term application long-term implications of a totalitarian state actor controlling this key piece of the tech stack as the world is increasingly spending more and more time in digital spaces

online and what what does that mean for sort of um control for privacy uh things like that um and uh in in doing the research uh digging a little bit deeper into the sources that these articles referenced um there was a german report that talked about um it's a quote here russia's quest for digital sovereignty um which at a high level has two goals one is technological independence which i mentioned earlier as the sort of decoupling from eu and american tech companies and the second goal is information control um which if you follow uh international politics about russia or you know other similarly minded nations um the control of information or propaganda uh depending on your point of view is really an important part of how they kind of maintain their power and so you know what does this mean like russia are they going to be able to pull this off in the next few years i don't know

i'm skeptical but um it's not really about competing in business terms it's more about like if they continue at this if they continue to develop something like this and they're sort of forcing adoption and by the way it's not just games like game engines are being increasingly used in other applications film and television architecture you know engineering automotive applications there's all sorts of ways that game engines are being used more and more so what does it mean for an authoritarian regime like a russia or maybe a china to be more realistic to build their own game engine that is sort of state controlled state sponsored and what are the implications on that so i wanted to kind of propose this topic and and see what you all think am i being um you know am i catastrophizing here is this like am i projecting too far out into the 1984 you know vision of things or

am i right to be concerned a little bit i it's it's very interesting side as you were talking about it um the first thing that came to mind and i don't know if you guys watched it was uh extra credits on youtube did an episode um a few years back on propaganda games uh and how the like the dangers i think was like the true dangers of gamification and they talked about um you know a lot about the social networks uh in china specifically like you know the gamification of like all your activities and you know really influencing your behavior as we live more and more in this connected uh world in like social networks and social media right and like gamifying there from like gaining points if you like the right things within you know the feed uh losing points if you're associated to the wrong people and that having impact on on your life right like

maybe you don't get access to you know the best jobs if um you don't have a good enough score and if if we go into like a black mirror territory right like uh we're we're getting turrets towards that but it really it really reminded me of that and i think that's i don't necessarily think that you're catastrophic catastrophizing i'm sorry um but i just feel it's it's an interesting move because the talent is there to build the technology like it's not like they don't have the talent to build it now is the talent uh and you know is there the motivation there however that motivation comes from or wherever it comes from to you know build the technology and then use it right um you know having games built in that technology or or a metaverse or whatnot uh but i think like the the implications of

something like this working out i don't think are like far-fetched um the question for me is more like you know the the the building it itself and then you know is is um you know some team from there going to build like this this metaverse type or you know they're gonna assemble a team to build this metaverse type space um so it does feel like more complex than social networks uh right because you know both brush and china have their own social networks and i think like that's a i would say like a prototype of this um but a social network i would argue is much easier to build um than like a game engine and then you know build games in a metaverse on top of that game engine um so all that is to say is like my my reaction was like man there's there's like a very like black mirror future that you can like

start going into if you talk think about like the implications of of something like this working out um the question for me is like would you know would they get there in terms of like building all of those building blocks i i think so um and we're not that far off from the black mirror future i believe china's a b testing um already a social credit score in that regard i believe that the presence of humanity in the digital world is just an accepted fact that that's what we're going towards and i also believe that the way that we manage the world outside of the digital so i don't know the physical world probably is a good description i believe governments will want to try to mirror that within the digital world and if we look at other countries i

don't know like western countries we're more comfortable with um companies corporations having quite a lot of control over our society whether that's by having so-called monopolization of services limiting our choice to consumer choice lobbying governments and i'm not saying that's a bad thing that's just how it is and then we have other countries where they don't want to depend on third party international even national companies to have that kind of control and so they want to privatize and have governmental offer governmental authority over other aspects of life and i think that's just that will be the same case with the with the metaverse and to do that you need a game engine and so better start now you know china has a i believe it's by 2030 they want to be the leading ai innovators globally

and i think the last article i read they're only about a year behind the united states in that regard so it's very likely that they will achieve their goal and if we look at past achievements of just the world both russia and china have been able to achieve like marvelous innovations in the digital and in engineering like the space race and all these things it seems like no matter what kind of um i don't know politics the country follows you have bright engineers you have motivated people and put those two together with a a common goal they will achieve it and we've seen that being achieved i think this game engine will follow the same path if it remains because it's going to take quite a lot of investment and cost so as long as the countries remain focused that this is an outcome that they want i believe that they have all of the skill to achieve it

the the metaverse race so to speak well yeah and i think i was at develop brighton and brenda romero did a talk about the better verse and it was all about how we need to be cautious is not bringing the physical world bias into digital worlds and the outcome of the talk was a bit cynical and i agree with it is is it possible probably not and seeing how all these different companies and countries are trying to build their their own metaverses i think that's an example um that we will see the physical world reflected in the digital yeah and i think that there's a strong case for for um governments to really like fund this right from from that um point of view in terms of you know kind of explain like western countries that really are more like private companies um you know they're struggling with regulation and

you know making sure that they have like the right privacy gates protecting the users you know kind of have have all of this uh protection for users as this expands more and more so i mean that that's like the perfect you know hypothesis and starting point for someone like russia to be like well clearly that's not working we need to do it differently um and that starts creating like a very focused and like like clear mission and like a motivated mission for building something like like this yeah it's not necessa excuse me not necessarily this dichotomy between like free markets and companies are building it and this monolithic state entity is building it like if you look at a country like china like tencent netize these are massive companies with impressive technical capabilities but they're not like distinct entities from

the state either like you know if you want to play in china you have to play by the rules and you could apply the same notion to russia or any other um you know nation with a similar mindset which is like you know if you want to access the metaverse from russia you have to do it through the russian game engine or it's and also by the way like it doesn't have to be this um you know full ready player one type metaverse um like the final you know whatever vision it's like there are many steps along the way and many sort of different digital experiences and it could just come down to from a russian or chinese state perspective like you just need to access it through our you know rules or our portal that we've built in our game engine um and by the way i should say uh like western companies aren't necessarily great at like protecting users or you know being um privacy-centric necessarily so i don't mean to make this a one-sided

argument um there are there are problems all around um but i guess the point i wanted to make with this story is that it's less about the business impact to like epic or unity and more about like what does this mean for societies as we move to like a more digital um way of living in the future and what does it mean for governmental control of these digital spaces um [Music] should we move on to the the last topic um or else we might get too bogged down in politics in in speak speaking of game engines we can you can jump into talking about the uh unity and iron source uh merger um and i can give a give a little intro here i'm sure that folks have read plenty of news about this and about the deal but just to summarize it a little bit um

i i will say that from from when i saw the news coming out um the first thing that came to mind i was like man are we like reaching like peak consolidation here and was uh iron swords the last and i'm gonna use air quotes pure ad network because they were not pure anymore like they had like a gaming artifact but i was like man is this are we reaching like peak consolidation so um it's it's an interesting you know consolidation place where we're at right now but some some details on the deal um the deal was for um unity and iron source to merge where uh it's worth 4.4 billion dollars for iron source uh that's a 74 premium uh on what was evaluated um at the time and basically our source will become a wholly owned subsidiary of unity uh some quick and interesting points uh

unity has never really been profitable um i think that they operate a loss of negative seven percent uh so on the flip side what's interesting is iron source has historically run a profitable business uh i believe with uh above a thirty percent ebitda margin um so that's a very interesting marriage that we're um talking about even if if unity is bigger than iron source um and this uh ebitda margin for iron source has they've been able to maintain it even as they've been hit with you know all the idfa headwinds um another interesting fact is that uh unity has had trouble competing in the administration space um they have the the inventory and the ad network um and they've acquired ad networks in the past but you know they've really have struggled to find their footing with the um ad mediation platform so

from in that regard you know iron source has a very solid mediation platform uh unity doesn't so in that regard um then the merger makes sense uh and it's also been a very interesting i would say roller coaster year for unity with you know they had a very strong q1 um i believe was like record revenue 30 percent uh up year over year but uh even as they you know were recording record revenue they've been lowering their guidance um you know almost with every board uh board meeting and um you know with every do announcement they've they've been lowering their guidance for the year um and they even hit a lay of round of about four percent of their workforce in in june um and their ceo and this just like kind of like it was it was interesting that this

happened like right after they announced a deal like their ceo got into some bad pr with very harsh uh comments about developers not prioritizing like station um which was just like interesting you're seeing like a ceo that supposedly has a lot of experience uh and is very seasoned um make comments like that um so you know it's all in it's it's an interesting deal you know the the mergers and acquisitions kind of slowed down during q4 as the markets were kind of cooling um and then you know we see a pretty pretty hefty deal here um i think you know as i was reading several takes uh you know people have have analyzed this um you know why i think it makes sense it's uh you know unity's mediation tools i was saying that you just like really behind um while

i resources mediation i think it's called level play has been around for three years it's solid it works you know it has a good customer base that likes it um their biggest competitor app11 acquired mopob and uh you know they've abeloven has been very aggressive with their acquisition strategy and have really like really eaten into the market so you know kind of it almost feels like apple open like push them into a corner to like you're like you're the two left uh big players here other than you know our google and facebook networks um so it's either do this or or can't compete um and you know in a hypothetical world where it all works well if the tools are well integrated into unity like it it can work like it can be a good uh kind of play all in for for both teams

although i'm skeptical um you know and and that's what overall the market and the industry have been very mixed in their reactions um so i'm curious to hear uh you know kind of just we can dive into like more specifics and about the deal or like kind of take a little bit more of like generally speaking about like where the the industry trains are going but um i'm curious to hear you know from what you guys have read and heard from the dla what is your your point of view in terms of this pretty big big merger hmm i think i think it makes sense i think it was a um a key strategic move from unity and iron sorts something that bothers me about what happened is how

unity laid off part of their workforce and and so unity went through some struggles because they ingested bad data and then i think it's called the audience pinpointer their product it was essentially destroyed and they were going to have to rebuild it and so that already hurt unity's share um and then they announced that they weren't going to lay off anyone i think the ceo announced that in all hands and then about two weeks later they did and when people were looking at who they had laid off it was the machine learning as a machine learning and i believe data science team and so everyone was just like thinking oh wait they were the people that you needed the most to go and resolve the ingestion of bad data that that happened and rebuild your product essentially and then they acquired you know they had a merger with iron source and that explained well why people were laid off i think what doesn't say right with me is how

they weren't very clear about why they were laying off and i think other companies were laying off and from what i heard a lot of people were blaming it on the recession because of the bad data they hadn't performed as well but then yeah they have the 4.4 billion um merger i'm not blaming anyone there's just something about it that doesn't fully sit right with how i feel about this and then on the other hand i think it's an excellent strategy for unity because maybe actually the cost of rebuilding that product which is critical for their revenue i believe their services revenue is higher than the engine engine revenue is probably more cheap to merge with iron source and you already have their ad mediation platform that is successful get their knowledge um from my understood unity is going to continue to build their own ad mediation platform

i can only assume that maybe iron sources platform the administration could be better and so that's why now they've joined forces like unity the expertise of unity with the expertise of iron source and building it together to make something better and new to compete in this market that um like you said applovin is very competitive right now matt any thoughts uh i don't know if either of you have used iron source as as product people um i can i can only speak as like a former user um i found their product to be very good and like the dashboarding and reporting tools they had were really good from my perspective as a pm who was working on an ad monetized game um that said you raised a really interesting point maria which i i also picked up on um shout out to the uh invest game breakdown in novik digest on this topic where they pointed out that that the ad monetization revenue stream

or the segment that includes that was a much larger proportion of unit uh unity's revenue than their engine services which is crazy when you talk about like one of you mentioned earlier how it was like their ad service was like not great um and so i don't know if they kind of stumbled into that or or what uh i'd like to give them more credit than that but um it makes sense uh from that perspective they're trying to shore up their uh capabilities in that area obviously it's important to their business um both companies were getting hammered on the you know stock markets they weren't doing particularly well um and the comments from the ceo about developers was like i get what he was trying to say but if you think about unity like probably most of their developers are on the indie side they're not doing a ton of in-game monetization they're certainly

not doing ad monetization like that's a huge part of their customer base that's using unity so i don't know it seems like not an ill-advised comment i'll say yeah i i totally agree and i um i also have used iron source a lot as a tool um unity for admon not as much um although i've you know a few years back i i did a little bit um from that experience like ironsource's product is just superior um so be interesting to see if they actually leverage that um you know in in that regard just looking at it as like very purely like and i this is a pet peeve of mine but um when all these deals get announced everything's talked about like synergies to be realized uh and i was like man where are those synergies because very rarely do you see those those synergies

get realized um so it's gonna be you know that's where i'm the the most skeptical like similar to maria like how it's all kind of gone it's you know kind of doesn't doesn't sit well um especially like with unity being so you know such a tool for you know trying to reach a any type of developer right like you're not talking about like an unreal engine where you're like hitting like these very like experienced uh you know bigger teams that can afford a tool like that right like unity's like vision and mission starting point is like enable any type of team to to build games um but that that aside uh i am very skeptical of seeing the uh the sewn so-called synergies

uh really get realized especially ironsource they acquired tap joy at the end of last year in october and they still haven't fully integrated tap joy right so now you have iron source integrating tap joy unity integrating iron source it it just feels like a little bit of a mess that uh my my skeptic side skeptical side um it's like you know the the biggest impact of this deal is that unity bought some profit and uh ironsource was able to give back a little bit of value to their shareholders you make a good point like um mma is is complex and there's some stat up there it's like eight out of ten nine out of 10 acquisitions ultimately fail um and so it's you know it's a big

challenge as you point out tammy considering how much of a portion adds the ad services are to unity i'm a bit less skeptical because i'll have to get it done they'll be motivated so yeah they'll be motivated to at least i don't know capitalize on some of that synergy one way or the other well what i'm more curious about is what is that going to look like for the developers for their um products yeah we'll we'll have to wait and see and the whole situation that happened with the ceo it's just a good reminder of how difficult the role of a ceo is because the moment you're in that role you're so public and you're essentially representing everyone who's in the company when you're communicating and i'm sure the grand majority of everyone who works at unity is lovely and doesn't agree with what was being said but yes i can imagine

it's quite hard everything you say is it's not his first go-round yeah exactly he's the ceo of va for a long time oh right um the other they're like an interesting thing that jumped out of me as i was reading about the deal is that um it was really i found it like funny that uh one of the things that was highlighted is like um that unity now has a has a game studio capability like these two capabilities uh and that is because iron source has this like little uh supersonic studio that does like hyper casual games um and for me it was like it was like such a such an interesting thing that i was like highlighted it felt like much bigger than that it was going to play a role in anywhere from so it's always like interesting to see how how the deals get uh kind of shared and communicated in the pr that goes behind them that was

that's an interesting tidbit that i was like just made me like turn my head and be like huh it's interesting that you're putting so much emphasis on this well it could be a positioning against affluent who who owns game studios for example lion lion studios and unity and iris and iron source like oh hey we have being like hey we're now we're more than ab-loving because we're like an engine and a studio and a network boom yeah because when you do these kinds of announcements it's also to create confidence with the shareholders and affect the market hopefully in a positive way uh from the last i saw that hasn't happened with the unity share price yeah it actually actually passed yeah i believe it went down a little bit but uh yeah do you guys think that we've reached uh peak consolidation at this point no more more to come right no more and i think especially with the market

and where it's going we'll see more happening yeah i think especially if we enter more like more of a deep recession um we've already seen there's an appetite among like tech giants to step into gaming and acquire gaming companies there have been plenty of rumors about ea in the past for example uh ubisoft was another one we just had playtika um get acquired by it was like a private equity firm or something so uh i don't think it's going to stop i think it might slow down and it might be like bigger companies at lower frequency um but i think i don't remember if there's aero normal on you but they said that they played tica majority share acquisition might actually be fake news so that yeah okay i don't know if that's been fully confirmed but i agree with everything that that you said and that takes us to the end of today's episode awesome a mix of interesting topics

um thanks matt you've been bringing some thought opening topics in the past couple of roundtables you've been attending sure happy to help i'm tammy thanks for joining for your first episode yeah thank you thank you for uh inviting me is this is this is fun i changed your surname pronunciation in my document with portuguese letters so that i pronounce it correctly next time i'm to be put to the test and if you want to join the conversation you know where to find us we're in the navic discord also sign up to the free newsletter navic digest where you can for example read invest games report on the unity iron source merge and thanks for joining us we'll see you again next week bye everyone [Music]

you