PC and Console Gaming Predictions with Newzoo's Tom Wijman

[Music] 3 two 1 and we are recording very ni Tom welcome to the Trap House wow thank you thank you a you fairy safe this is being recorded right this this is being recorded this is being the as I like in the previous podcast that we recorded here we're moving up we're from Zoom to the uh the most shadiest area in London y wait to see what next year brings so it's step by step um we're here at at PGC and you had a great talk on Monday which I did not listen Okay because I get to get do this which is more than a great talk exactly you get the talk was 20 minutes you get more than that yeah so thank you thank you so much for that um today we're going to talk about Market predictions yes and you were as a lead Analyst at newu and

newu being the leading data platform I'm just going to describe it in a way that I understand uh and you correct me please for PC console a little bit of a mobile you do Consulting yes um and Consulting is for nuu it's like Ikea where you give the tools and if the customer says I also this want this to thing to be built then you come in and build them so basically it's an add-on service that you do for your customers that's correct um so I I'll just on our platform there's no mobile data uh we do cover mobile as part of our reports because it is half the industry yes um so would be wrong not to but our our data platform is purely PC and console and then we have our reports in which we also cover mobile we have customer research consumer research as well and then indeed we have Consulting business which is fairly as you describe it I think that's a it's a good analogy the Ika model uh yeah there's there's also occasions where like if there's a

questions that kind of Falls in between some of these data products we have we can also get the Consulting team to fill in the gaps a little bit but so for the customers to understand those who are using newu or thinking about new using newu is they will give you the report and if you feel pinched for time they will also do the custom analysis for you for those beautiful boardroom presentations absolutely for strategy so don't feel that there's an obstacle there's no reason exactly so the Shilling part is over let's let's jump in into the um into the most interesting part so you delivered a 10piece prediction series yes we're going to cover a lot of them now but rest is for the folks to download it's for free it's for free it's available on our website as per this morning actually um well actually when this go we go out Link in the description Link in the description no more need to be set it's free free

it's free it's good and this time around what makes it different is that you've added uh quotes from your customers which are biggest Publishers around the world um little bit what we've been doing in deconstructor fund so I hope that that we've been able to influence with that idea and inspiration great inspiration uh so it's fun to read That's why no yeah I I think and I think it it has a bit of um like there's only so much that can be said as we as relative outs like we we are dedicated two games so and we work with all of them but also to have the inside of VI part of the report I think makes it stronger but you guys would agree we agree so deep breath let's kick it off I have a lot of like I have notes on notes because I have I go through your reports I don't have a Consulting person so I need to actually analyze all the stuff uh let's start with number one the market will continue to recover and grow yes I'm going to already say

that's not going to happen but let's listen why you think it will happen let's let's go there so growth is estimated to be 1.3% for 2024 oh yeah that is until 202 kered until 2026 got it got it right got it okay so so a very very tiny growth rate not a decline not a down swing but we're almost at an even level and this is noticeably still below 2021 yes the numbers are not inflation adjusted right that is correct okay and that paints a very different picture because traditionally we accustomed to about 2% inflation yeah even more the last two years I think yeah but but during the last couple of years we've been seeing anything between 5 to 15 depending on the European country and how Reliant they are on gas let's put it that way um so why aren't we bouncing back as fast as everybody wanted us to bounce back I mean we can spend the next half hour talking about that um on macro

level like even like where do you see that the growth haven't occurred because let's put it this way last time we discussed uh it was a projected that console would grow up 7.7% or something like that yeah did that materialize no no so we revise that so let's start on Console um I think what happened on Console at least is an outside is super interesting because you would expect seeing how many big releases sold so many yes units last year that that grow Zelda you name it yeah Diablo I mean Diablo doesn't have the staying power but it sold units uh eafc still sold units Call of Duty Theif reception yeah not FIFA EC yeah exactly so Madden did crazy again like all of those games and then on top of that you get indeed Hogwart Legacy Zelda balers gate um so would expect yes but what we

saw and I think this is a a a a sign of um a couple of the other things we also talk about in the report like talking about the future of Life Services Etc premium that um selling all of those units and people playing that hurt life service revenues that went down so um what we believe happened we have the data to show for hours played on Console went down year on year um theoretically at least we think because people were playing these finite premium experiences and then going on to the next one but maybe because it was such a good um year for premium releases and also because you know there's still pressure on disposable income there's still high inflation econom is not great they bought a new game but then

did not spend on fortnite Roblox how about subscription did they continue Xbox pass and cuz we've seen the growth really stall with the subscription yes very much so so premium so if I would just crudely conclude premium cannibalized the other two business models absolutely I think that's a very conclusion and that is the the basically the big conversation that we had last time when we were talking about the challenges of console ex where there are three competing business models stalling growth and really pressure on users time because you have the social medias you got the uh video streaming you got everything else that is going on and now amazing games launch and they're like well I'm going to play Boulders gate and Tik Tok and that's about it and then in the evening a little bit of a Netflix and we're good essentially yes um and I think you know I I didn't foresee that our conversation from last time would show in the data that quickly but we are evaluating what happened in 2023 and that's what we see so um yeah you can

you can say that premium to a certain extent cannibalized Lifey it's not like the market is going down yeah we still for a tiny bit of growth or just for inflation but not the 7.7 where was pushing the whole Market forward this is fascinating and it's really cool that we actually discussed it so for folks I'll I'll link also the previous conversation as well as the blog post where you can really go deeper into that I want to spend again too much time on the console business model um it is fascinating this year I think and I I I I do think that we'll see there's a lot of threats coming together here because I do think that we'll also see in the coming this year 2024 um there's not that much games coming that we know yeah like the release schedule is looking light so it be very interesting to see okay does that mean that people then bounce back to games and and of course there was this idea that uh life service was the

future also for console um a lot of games were being pivoted into life service games we're seeing some of that now retract right there's games that are not being launched or games that are being turn into premium games again um because the life service model is as you mentioned like it drives off engagement and then you're not just competing with other games you're competing with uh social media apps you're competing with video streaming you're competing for attention and if you can't get those hours and your business model was built to maximize hours because that turns into spending it's uh it's not an infinite Market how about this is the console Market kind of capped in terms of like are we at like 90% of the maximum of what console Market can deliver because if we're seeing this big of a shift with premium like a lot of great premium games launch the market kind of stays

the same because just eyeballs and and money just shifts between it yeah and we're like seems pretty maximized yes but I would have also thought that maybe in 2018 and and then 2019 and then the pandemic happened and and what I think is also very fair is look I don't know if console is ever going to make the impact that it has in Western markets in Emerging Markets because um there's already such a history of mobile and then PC gaming but there are like console revenues much more so than BCM mobile revenues are concentrated in a few regions right you got North America Europe Japan oania and that's it so there is a lot of players out there that are currently not playing on mass on consoles so there's there's there's an addressable Market and then they those players would

absolutely love to play um like the big narrative titles that launch exclud console but the issue is of course you know access to Hardware access to access to Hardware access to the games um disposable income economy so and and especially because um you if you want to get their attention you're competing with very lower priced or already available devices yeah so I don't I don't really know if that market is ever going to be there MH but because that uh addess Market hasn't expanding yet I also wouldn't say that there's a cap console right now especially since every next generation is more and more expensive considerably so it doesn't make it more accessible it's not like the cheaper iPhones go to cheaper markets it's like well you do have now the the the the series s and series X and and and Playstation doesn't really do that uh and I think that was a bit of a play to

get more um address Market addressable Market in these regions I don't think that's particularly paid off how about PC like so console cap for now because of multiple macroeconomic reasons let's put it this way yeah um PC did PC stay the same actually did a little bit better than we expected damn which I'll be honest I still don't fully understand how that happened cuz I I did not see that come BC has been kind of trudging along for for many years and it's it's is a good market like there's a lot of opportunity there but in terms of the crazy growth potential it was was console where you know there was more capability to shift that business model see yeah but one thing that we were talking before I forgot sorry to cut you off before I forget is like we talked about console games like especially PlayStation games or launching on PC yeah they did actually really well they did and when we last discussed that you kind of said that you know porting to PC

console games is not that good of a business yeah and I think you were a little bit wrong with that I think I'll have to even work a little bit yes so it is like we learn we learn we learn we learn and and and I think um maybe what influenced me then is like uh the quality of the ports wasn't as good yet but son's made Acquisitions that Studios that are really I'm blanking on the name but they're the dut stud the Dutch Studio yeah NE Nexus Nexus something like that um they do a really good job and obviously it's selling so yes it does work and and and on top of that you know Ballers gate it's technically not in PC exclusive but I think uh the majority vast majority unold will be on on PC um that well there's always going to be a market for competitive multiplayer games and that market is on

PC and yeah PC kind of bucked the trend so throughout the year you know we had made our predictions for 2023 unfortunately for us and the rest of the market by the way we had to sort of revise those downwards that's good at least you go back and then say what you got right and what you got wrong yeah well I think that's that's part of the job that we do but I'm always happier to say hey we were wrong it's actually twice as much as we thought but you know it yeah that's what happened during the now now we're in a different Market but anyway PC was the one where we actually said oh actually it's grown more than we had uh originally predicted or forecast yeah that's and and mobile was pretty much the same right yeah yeah mobile is a rough one China going down some countries going up like yeah there's yeah yeah it depends a bit per region but overall if you look at the entire Market China is um uh uh indeed in a tough a tough Market um regulatory Market is horrible and

without some key franchise I'm not going to spend too much time on mobile because most of the stuff we talk mobile but without some key franchise launching like Monopoly goal or key franchise is scaling like dream games um blanking anyway that amazing game from turkey that scaled really big um yeah would would would have been a down year pretty much it it's um yeah two things that that came out in your report about the market as well so we're still in 0.1 go ahead can one more comment about the market because we're on to Market predictions there's one thing that I have to mention when it comes to macroeconomics um is foreign exchange rates because we do report in the on the market in dollar value but a lot of the um money that is being generated especially in the East like in Japan China Korea versus the dollar all those three currencies went down last year and that does have an impact on the market as well got it because that's I mean that's

yeah it's a consequence of reporting on the global market in dollar values that we have to make these adjustments based on exchange rates and yeah that played a huge part in the market value particularly in the East yes and dollar is not as stable as it used to be like it tends to go like Five Points up and down all the time yeah but it's it's it's gone up every quarter pretty much for the last six or seven versus the n and the uh one and uh so it makes an impact I feel like when we talk Global and it's important to yeah a lot of things that that in the end affect bigly when when you sum them up but correct more on the micro level yes uh development budgets are expected to go down yes and in the in the report exe so there's executive sentiments and it feels like uh profitability is really important so a lot of projects that are not profitable or not you know deemed to be profitable or you know smart are now

being shut down and we see that in the layoffs but the other part is like most of the executives believe that the future and then the ongoing development budgets are going to be smaller and I feel like this is something new because it feels like every year the budgets have been bigger and bigger and there's almost like a like a moat to start making a game because it's always more expensive now executives are saying we're going to go smaller now yeah yeah yeah that's what we're hearing and and I think what what's happening is that you know the the executives are banking or hoping on on AI yeah no just put in robots and have to make a game I hope not as a fan I hope not even know it's maybe the robots know better what we like than we do uh no that that's yeah it's happening and it's also um I was reading a report uh just last week um and and uh there was a quote there saying like there's a lot of projects have got green lit during like 2020 21 yeah that should never have been

green lit metaverse nfts well not not even just that like generally in just good old regular PC and console gaming yeah like a strategy strategy Studio making a shooter game never yes well that's yeah that's I mean yeah that's that's one of those where you where in hindsight it's very easy to say like yeah that was never going to work exactly um so reality has returned back back to the market yes I think one thing that was really interesting as a comment was that the executives believe that m&a will grow in 24 yeah you know it's the executive Wishful okay that's moving on I don't I don't think actually here at PGC have been able to talk a little bit with investors and they share a sentiment but there's no signs yet to say that it's and this to me felt like somebody just wished from a Santa Claus that that the companies will be get bought again but with a higher interest rate traes with as we see pinch on on growth on on the

available resources I don't know what type of an m& they're thinking will happen yeah I I yeah no and the same Executives were here also they gave an opinion that they don't see new IPS popping up pal World say said in January hello yeah but that's exactly and congrats to them on the success but I think in general that's that's not a new sentiment I think for the past years five six seven years especially in the bigger Studios it's risk averse it's relying on non IP franchises franchising sqis sequelitis um and it's always been from the you know a bit from the outskirt from the smaller developers that are risking something that are building something new and and they can take the market with a completely new IP and and uh it's kind of the way the the development Market works right now is that something like power world nine out

of 10 times going to come from from small unknown or smaller studio and that's how it always is that the smaller companies are more risk thirsty and can do these type of things and they also have to yes right if you if you just make the same game that's already made by a triple A then you're not going to get three or four million unit sold within a couple of days that's that's one of the key takeaways actually I need to WR write this down because that is very important for smaller compan to remember is like you can't be doing what the big ones are doing not only in the terms of size but you can't even go to the same direction take a risk and go to a different direction and that's more and more true in in in in you know with these markets and with these life services that are popular because there's no there's no intermediate period there's no bridging period like before that you would have like oh there'd be a um Grand offt Auto and seven years later there' be a new grand offt auto within that in between that time people would be looking to play a experience like

that yes to fill the Gap but now they launch grand of auto eight times and you have GTA online yes and then um in no next year now because 25 yeah 2025 will get the next one and and there's been no room in that time to get in that market because it's only been them um and that is true for so many other genres where you see like the big guys being very successful so if you want to succeed you have to be doing something different Perfect all right we've covered the market let's talk talk about talk about the other trends that you've seen here so 24 will be a lean year for gaming companies you said the engagement and spending boom ended in 2022 replaced by inflation High interest rates careful investment environments layoffs and Wars now we're even multiple already yeah um so on mobile what has been very interesting is that

there was a notion that mobile is Recession Proof mhm or games are Recession Proof and definitely mobile proves not to be because we can see that the the decrease in disposable income is decrease in in up purchases we see that increase in inflation is decrease in Ina purchases how is this trend being on PC and console um yeah I mean it's I find these kind of statements hard to make even though like I don't want to go ahead and challenge you on the mobile part but even there right there's been so much happening on mobile that isn't related to income levels and yes there has been inflation and a pressure on in disposable income and yes also IP and Etc has gone down but there's also been all these privacy changes and you know I I struggle to True Rel if you're not able to acquire that many valuable users then of course the purchases going to start going down also as you pointed out

with that we could say that the rise of web shops and direct to to Consumer stores will be seen as decrease in inapp purchases made because the inapp purchas are made outside the data analytics view I I'll tell you that just yesterday coming off PGC the main topic direct stores direct of course because they're sponsoring the whole event yeah exactly exactly every every other talk like you have a talk on hey come to our web store then you have something else and you have a new talk about have you considered coming to our web store so let me remind you again in 20 minutes n it is yeah exactly they sponsor it but they set it up and it does feel like cuz CU they they sponsor so many events I do feel like the tide is shifting a little bit like now people are listening yeah um and that is part of it because you know there's more of a focus on profitability and of course you know going Direct in customer relationship that is an important part

as well exactly yeah retention profitability so that's now we're singing the song for web shops do they sponsor you guys yes yes they do shout out to exola you're welcome you're welcome so sorry can I just interrup I I have my my talk right and I'm talking about you know mobile developers you should maybe expand your addressable Market to PC and consoles well I don't say drop everything but you know there's this and um it's the end of my talk I get a question from the crowd yeah and it's like um the question is some like if you um if you would advise mobile developers to go here would you also advise them to switch payment providers and I'm seeing that there's a branded hat and it's like she's wearing a hat with the with the name on it of the payment provider yeah it's like do we do you want me to mention your company it's what like very interesting question oh my God

yeah well anyway it's a very sponsored event but great um back to the topic uh PC and console uh Recession Proof I think what we were speaking about earlier right that that premium premium has cannibalized life services and it has canni cannibalized subscription it kind of points to the fact that it is in totally recession or people just spent so much time that they felt they was not or that you know it is it is yeah so there's always like a Nuance we can say like oh because there has been so many good games and and they are generally playing Less hours and you know playing Less hours doesn't necessarily have anything to do with the recession or not um in fact people might have more hours during a recession because they don't have jobs it can happen true true uh so I mean I I don't know I also don't could be could be it's like it's a

true broad of generalization because we honestly don't see all the data and whenever we see it shout out to data AI but data AI doesn't see inap ad Revenue nor does it report web shop Revenue so in that sense it might be challenging so we'll probably go through some of the views of maybe some of the genres where that are less webshop and Ina ad related and if we see the decline there then then we can have more that's actually a good graph to make so I'll talk to good old Randy and Lexi about that so so um you mentioned layoffs yes what do you think happens in 24 less more oh God that was one of the questions that you had in the report it was yeah um you have it in front of you the executiv said less right is what they said they were like yeah a little bit mixed um I think this morning we already saw sorry I'm referring to this morning which one Riot Riot was Riot was work was Unity also this

morning no a couple days they have another round yeah another round of course me okay they're in spiral yeah oh dear uh yeah I mean right now it's looking like it's just going to be the same and like it's part of what we say when we say it's going to be a lean year for gaming uh lower development budgets than the consquence less starts and yeah yeah uh if you ask me I'm I'm more on the pessimistic side here you don't you don't ask me but I can say my opinion and I would say that we are going to see at least same amount of layoffs or more because the layoffs that we have like the layoffs started not in the beginning of year so we have now a full year that could be potentially of layoffs and the ones that we haven't seen much is startups and if you're at these events and you ask people what's your Runway which of course not everybody will tell you but if you're at the investor events people will tell you that they have between 3 to 4 months left which is not enough even to get around

and so we're going to see a lot of startups yeah n and then yeah layoffs closures yeah closures and those are not reported people just say our company is done and then um the the the issue that already was last year but on top of again this year is like at least in the past when there was a studio closure there'd be uh investment money and these developers could start some from s something new but in this climate that's extremely hard yes yeah uh at the moment what's happening on the other that's very correct point so as companies fail and as people get laid off they are not as likely to start something new because venture capital is doesn't really know what the next thing is and actually I was talking to a to a Founder today I've talked to so many people anyway they what he said is like one of the investors told him this

I'm looking for something different wow great and I know what the investor meant but something different meant is like they don't know what is going to grow they don't know what can be successful they feel like nothing almost like nothing is successful at the moment and so their feedback is just like surprise me and there are some of the things that I've seen through throughout the conference with Founders showing me very interesting things that I don't want to talk about that are very unique and I'm like wow that's different yeah uh it could be not in terms of gameplay it's even in business models different okay but most of the stuff is the same and when you come with the same saying hey we can do a puzzle game it's like who are you again like what what's the team and so that is the very challenging so the getting the uh the the preed seed money to kick something off is difficult and through that we're going to see a lot of startups fail and people looking for jobs and unfortunately the big companies are laying off so they're not hiring anybody

yeah I think yeah so I on the other side there's app economy that is doing extremely well so yeah there are other sources but in terms of gaming there's probably just going to be less jobs at the moment I believe the yeah I think so too okay so on to the more happier things good which is uh why are multi-game subscription game what M multi-game subscription growth is slowing down so multi-game Subscription Service meaning Xbox game Game Pass yeah that's pretty much it like in terms of like the biggest ones that is the one that is has been really the most invested yeah absolutely and the challenge with that I'm just going to lay it off in is like when you have an economy of scale uh meaning that for each like when they get more audience in a subscription service each game you make is technically cheaper because you have a bigger AUD audience that you're catering with that new game if the growth of the audience stops then when

you start you know just going to the final number then the games are getting more expensive or not getting cheaper and through that that's why they rely on subscription growth that's why it's so important for Netflix always to report the growth of Subs subscribers because if it goes down the stock goes down yeah and with in case of Microsoft the growth rate is going down and they stop reporting user numbers that's the worst thing that's like let's not talk about that yeah that's a selling uh telling sign yes so talk to me talk to me about that um well you you summed it up pretty well no what we're seeing is um yeah so Xbox game pass is a large part of that market we do also include uh for example PlayStation Plus even though I also we also realize that a lot of people subscribe to PlayStation Plus for the online services yeah and the games that you get are just uh you know an extra um and then there's there's a ton of smaller uh

Services there that um reach an audience but it's not it's not like Game Pass yeah um and yeah I mean the the the user growth tampering off we don't have insight into the actual numbers anymore although we do have some in our platform we get some receipt data that allows us to track it a little bit it's an incomplete view but at least it's a it's a view uh um and and with that the revenue like there was some um I think because there was price increases throughout last year it's managed to still stabilize grow a little bit yeah um but I generally think that's because the price increase is not so much of the user growth and um that's that's problematic for multi-game subscriptions because this business is not in a place yet where um growth tapering off is is a sustainable thing

like this should very much be in a phe where is the fastest growing monetization model on console and it is not yeah so the outlook for multi-game subscriptions at the moment is pretty Grim wow um you some okay we can move on we've been saying this for a long time so we can move on and Cris is happy cuz he was very against the uh the subscription model it devalues the games it does devalue the game I also think the and do want to point that out as well is like the notion of having a monthly subscription to your games Library I don't I don't I struggle with the use case because how many games do you play per month I've like I have so like this is crazy where we're actually talking about this cuz Phil Spencer posted he's it's SP 800 hours playing Xbox which is impressive

and also raises question marks both uh but um I try to limit my gaming to be honest like I get hooked just like anybody else in gaming and then I'm just chasing on work afterwards yeah so less I I would say how how about this my hourly play fluctuates significantly where there are weeks where I play too much and then I don't play at all I'm like like I'm kind of pulling my myself out yeah yeah I I get that I I get into games and then I put in 30 hours in 3 days and I don't go there are the last things that when I go to bed I'm like maybe I should have it's like what am I thinking no but what I'm like what I'm trying to say is even if you play a lot of games oh typical game now takes what 50 hours to finish that's a lot if you play 15 hours in a month you know you that's good yeah and in my case like I I play a couple of games per year yeah um so why would I

pay for a subscription yes yeah it's not the same you cannot devour um like you do a show or um no and it's active right you can't just put it on the background because I know a lot of people just go through Netflix shows as they're working or as and the accessibility is another one because if you have net when as you have Netflix it's almost compulsory these days when you're in your bed that's the last thing you can watch yeah or wi him on the on the way here to London exactly you watch it but you're not going to play Boulders gate and then I get well actually have a steam neck so you can do that I could yeah I could I could um but most of the time I I do sometimes but it's still I think the second part of is that is a ve very active thing and and I I you can't just play a little bit at least I I know there are people that can but I can't play bized whereas you know you can watch a few minutes of Netflix show and

turn it on later immersive I don't think the medium's particularly well has a good fit with subscriptions interesting uh I like the idea but it seems like it's challenged and may not work in the end uh one thing that he mentioned in the in the prediction was gaming platforms so meaning like fortnite is a gaming platform uh robblox is a gaming platform they seem to be doing really well Roblox doing really well is that disrupt also these other services that's it it's hard to prove because we we you contract users across that but I I I absolutely think so yes because essentially the promise is very similar like you get on our platform and then there's all these different kind of games and experiences that you can play that are easy to play because you know this platform and there it's the same control system but it's a different gamepl yeah uh plus you get to carry around you know the Avatar that you build pression stays throughout yeah and

and the diversity of experiences on and now fortnite as well you know and social graph stays as well and that too and that too well technically there are you know there's community on Xbox as well but no I think that's those are all very fa points so again we don't have the data to track users around that so I can't necessarily prove that is happening but I think it did it very clearly offers the same thing the same idea of being able to jump around games and try new things but in a premium model yeah so so that's away again time away from others yeah it's like the Multiverse that they were selling and now it's working people don't call it Multiverse now it's called the gaming platform yeah well we switch names every year I feel like true two years ago these are metaverses metaverse Multiverse yes correct this was the metaverse and we don't talk about metaverse but the kind of like the the core idea is actually working so

but this this is working for these two platforms it's working yeah yeah okay um prediction number four was that the companies will return to develop premium games yeah is this heavily based on the success of the premium games in 23 or like what is this based on um uh yes that's part of it but I think what it is more based on is um the the business model for a life service become becomes harder and harder to succeed in as other life services are successful um because you have to compete with all of them and you compete for time like you if you make a premium game I'm oversimplifying this but you need a very good marketing campaign a good strategy you know to get your game into the market and then you see the unit sales running in and you either recoup your development cost or you haven't then you

put it on sale and then you put it on sale and then you you know you do the long subscription and then you put it on a subscription service and then you sell it to [Laughter] Netflix yeah true that's the strategy um and uh but with the life service it doesn't work like that right you have you still have to do Mar have to get your users in um and and to be fair there's there's there's like the premium franchises that can do both right they can sell and then they do a life service or microtransactions yeah microtransaction exactly but if you're trying to go free to play and then you know do it that way you have to get your users in you have to do that but also you have to keep them in for a long time continuously feed them content that they will purch gantic teams gigantic teams gigantic amount of resources in order to to make you know to recoup that development cost which is constantly

Rising because you're going to have to keep a team on that yes and you know in a market where the Market's growing 20% every year that's that's a good that's a good model but in a market where that's not and you're competing with all of these others then um that becomes very more and more challenging to succeed in um and I think it's more that realization plus the fact that there is you know premium games can sell very well so many records broken last year yeah um is what why we predict this sort of pivot to happen again it's not we're not trying to imply that there's not going to be any more new Services no it's but it's it's a shift in we're predicting a shift in mindset we we're coming from basically 2020 2021 everything is life service and now to like you you know maybe maybe not so

in other word in other words what is happening is like also on Console the market is saturating in terms of life service because we've seen this on PC where each of the categories let's say moas you got valve and you got Riot League of Legends and Dota 2 yeah anything else does not exist like like pretty much um no in terms of mobas and then you got the shooters you got the The Counter Strike and you got the valerant and yeah I mean there's that's not to say that there's no no way to be successful in any there's plenty of examples where they are but it's just getting harder and harder yeah and that same thing is indeed on on Console but it's the same games well not not mobile you can't play a mobile on Console but but it's the same Shooters uh or or fortnite it's it's robox now it's um uh your sports games and there's not that much more room yeah that yeah maybe it is getting

saturated and the the challenge is also that the uh the leaders in those in that market are really good like they are not stopping like what fortnite is doing what Roblox is doing it's not like they're parked themselves on the top and being like we are going to defend this position no they're just moving forward with Lego fortn nights with all the games that that Roblox has been putting out all the uh user generated contact economy that been putting out in both of the platforms ufn and so forth so it's like the distance between you just starting to where things are you will not catch up doesn't matter who you are no so I think yeah it's uh yeah practically impossible yes um what about the subscription services like the way I understood first is Subscription Service almost tries to kill premium games yeah what's what's like how is that so we like you're predicting the rise of Premium games yeah are you at the same time predicting demise of subscription

Services um or is it like are these two contradicting or [Music] um I think that not necessarily it depends on on how you go about it um right I think uh Microsoft putting games Day One on Game Pass MH obviously means they are cannibalizing premium revenues of course that that I don't think that we have to question that but that's that's the strategy yeah [Music] um other most there's no other Studio that does that basically I yeah no does EA do it with EA play I think they do it but then EA is that a thing yeah it still is okay haven't heard about that in a while no me neither um I believe it still is but anyway I think with that it is um like like especially on the life service part people don't buy EA games they want FIFA

EC or mad or M Mo to show whatever the Americans play no uh so I think that's a different conversation entirely but for the most part all other Subscription Service aren't about putting Day One games on a subscription service in that case yeah I do think both can coexist um because particularly on Console Triple A you know you're going to get a lot of your unit sales in your right after launch and then in your first sale yeah yeah so and and then if you you know foro maybe some of the longtail sales that you could get in favor of putting it on a subscription service yeah it's not going to make a massive impa yeah and the steam is another place where it's very interesting where you can have the um

the Early Access sales going on for quite a while yeah the Early B like essentially just running it for years and then launching it big so it's like a uh it's like we're not even talking about long tail we're talking about early tail yeah yeah it's kind of head on exactly so you get like the drip from the beginning and then the big push and then yeah I I don't see that working anywhere else than PC though I think the PC audience is is is so much more experimental in the sense that they're and and um I feel like Hypes like P worlds which the example now that happens on PC there was Pixel boom or something like that there the the battlefield looking game by four devs and yeah valheim like there's constantly these type of small con yeah yeah it happens and everyone latches on and it it it get and then they never have enough staying power because four people cannot bu it if there would be a company here's an idea for all you know people that have been

laid off maybe in publishing function if you can set up a company that essentially acquires these that these small games that are going to blow up just get the asset from them and get the live UPS from them run it properly give give give it sustainability then that's a good business because currently they just pop the guys make several millions of dollars they're all burned out they're like we're gone yeah but get give them those millions of dollars say well done we're going to handle the uh the growth from here just like scopy did with the uh with the stumble guys do that with PC yeah so just food for thought sell that to VCS maybe or actually private Equity that's that's a private Equity model there there's there's there's inherently though I think a need for experimentation new experiences with the PC audience that is unique to that platform and that means that no matter how good your life service for your small teams going to be essentially something new is going to pop up it's going to get hype it's going to get um and it's going to attract

millions of players out of practically nothing couple of mors to go yes mobile developers will turn to PC gaming yes that was your prediction and I'm going to say that that is not going to be true already on the face because here's my here's my point okay um the reasoning for this that mobile developers will turn to PC in the prediction was said that because adver in is so hard on mobile we're going to go PC cool cool beans guys but PC is still harder even with all the Privacy changes to Market than mobile yeah which where that falls it on its face and then the second part is like we've like now we've talked about console developers trying to do live Op games and like we're talking about like one type of a team with one type of a competence doing another type of a game here we're talking about the same thing but somehow we're thinking that people who did mobile are going to be successful on a different platform if even though people from different platform come to mobile and they're unsuccessful and I think the

same is going to happen mobile developers are used to different type of session length different type of Engagement different type of HX different type of monetization mechanics uh that will not work with PC actually counter them where they hate it we've seen like Plum release their raid Shadow Legends on Steam they're just getting bombed I don't know if they're at least on the common side people are not liking it and so I find this pred hard to believe that it's it's going to come true but what I do believe about this is like these PC skes like scopely has been doing PC SKS you know polarium is another one where you can play it on your client while you're on those beautiful Zoom calls from your busy work from home days and when your boss is telling you about something and you're doing a raid at the same time I believe that that works really well yeah and I actually um had you seen my talk yesterday that's one of the too early it was too early 9:00 a.m. exactly 11 but

consider 9 uh no I I but I I think that's look that that is part of it right it is in some cases um simply and even with the raid example right I I I I see the same thing like and they would always have a hard time going to PC just because of the anti mobile game uh almost identity that some people have uh made that to themselves genuinely I think like even with all those negative comments I don't even know if that was ever a play to get like new players yeah that was hey indeed you on your Zoom call you can't just open your mobile phone but you can certainly grind horrible for productivity yeah exactly but you know it is reality and I think part of it is and we would phrase that a little bit differently than grinding away on a zoom call but it is it is you know your audience um is not always on their phone

and sometimes they're on a PC and sometimes they have to pretend that they're working exactly um and uh and again here's where we where we look into more our consumer research and this is not exactly mind-blowing information but the people that play on multiple platforms tend to play more hours and they tend to be spending more of course they thinking about game all the time yeah exactly so um and doesn't even mean for one game right but if people play multip you know that's not mind-blowing but I think it is you know if you have a game you're in a position that user growth is very tough your very first thing that you want to do is to get your game to your players whenever they are at the time and that can be important to PC and that doesn't have to be a play to expend a dressable market massively or to attract all these this entire new pc audience it is just incremental yeah incremental

yeah and Google plays is bringing up tools and think Clash of Clans is coming to pcell sign up for their beta Google but it's not going to be like mindblowing no no it's going to be probably like slowing down the decline um yeah stabilizing yeah yeah the uh the other part that that I was kind of like when I was thinking when I was reading I was getting a perception especially reading the comments that of of on the reports that a little bit of a like a I don't know if this is me I interpret it as arrogance cuz I always felt that there was an arrogance to coming in from AAA side yeah towards mobile where they thought that mobile is like a cheap version It's almost like a like a a James Cameron looking at YouTube videos and be like yeah what is like I like I can do this in my sleep like do you know how good but it's not that it's just a different form of of entertainment it is and the requirements are different and

The Taste is different even though the people could be the same and so I felt in this one looking now the other way around where mobile is arrogant towards the PC and console we like do you know what we've done on mobile how good we are at monetization and at this and like we're going to come in you guys don't even know how well we understand user behavior and data and marketing we're going to just dominate this and it's kind of the same as triaa saying we're going to bring real games mobile and and and and you know both sides it's not going to be that easy but that there's some validity I think to the argument and as we talk about like console developers do struggle with life service and that's bread and butter right you're a successful mobile developer you know how to do that plus um the quality of mobile games not all mobile games but certainly some mobile games has have gone up to the point where they're not necessarily lower quality knockoff product from P absolutely not so yeah which why we put it in like I don't I

think that we're going to see a massive shift in the market and and all of a sudden all those mobile devs are going to go to PC and console Mobile's going to go down definitely but we predicted shift there and and and and and an incremental shift and part of that is indeed incremental getting the games that you're making for Mobile on PC so your players can play them but there's also sort of argument to be made to develop not exclusively PC and console but crossplatform yeah and if you have a good game that's crossplatform there's some very good success cases out there yes 100% I think it's just like in the end like for all the developers doing that I think those who succeed whether they're coming from console they're coming from PC or mobile those who really respect the area where they go in and and coming in from the perspective like we actually don't know how to do this yeah we want to learn we want to succeed are the ones that do and then the sort of arrogance that I've Co I've conquered my own platform and I'm not

now going like a way close up and just going to take this one as well that leads to a knockout no and there's one more point I want to make on this mobile developers bring to PC and console I think um particularly on on Console development and and fair right the results are there so I can't exactly fault them but development still SKS toward a certain audience like there's an overabundance of action oriented Shooters shooter games whereas we know from doing this consumer research over the years but many other people have said the same thing the audience on PC and console is not just that mobile developers are very used to developing for diverse audiances yes and there there's opportunity there like there is room to succeed in these markets if you're willing to develop against the norm yeah good point very good point uh moving on to we got two more right and then the rest of them Xbox store launch

and mobile well Xbox will launch a Mobile store on Android I think this is given I think this is been confirmed they've confirmed but I have the question is why because like why would anybody use the Microsoft store okay I I get it if you put in all the Microsoft Office PL software you're going to put in uh all the key games the candy crushes the Call of Duties into this Xbox store and the blizzards games there's a lot of you know content that is must have almost I get it but at the same time what benefit of this is because we know with the legal with the latest documentation in this epic Apple drama not drama court case is that they will charge you 27% fee if you use uh if you pay in the apps that are downloaded through a different store so normally now it's 2 so it's going expensive for the uh for the store because you have

because they because they also have their own cost or or their own payment service providers what's what's why um like you can do this but why the hell would you do this yeah um well that's part of the reason why why we did put it like not not on app store yet uh Android first App Store ones you know if they are able to find a business model that works um I think it's a game p pass play as well like um yeah there's a lot of strong franchises that Microsoft now owns especially now with Activision blizzards King acquisition that should help get initial users in although Candon crush is not going to be removed from the app store or Google play or anything that' be crazy

um but then I think the extension of it is you use that to get game pass on mobile you power that with cloud gaming there we go um and then you know hopefully you get that mobile engagement because you again we can tie back to what we were talking about earlier one of the reasons why I think subscriptions now work is because or have struggled to work um is because it's still really only convenient to play those when you're at home on your PC or your console um because uh The Experience on mobile isn't is um restricted by access to the ecosystem I think that's the play I'm not sure if it will succeed yeah but I I because like you I I don't see the benefit of just being an alternative app

store and having games on there as well yeah it doesn't this that's like what what is this solving yeah and how is this benefit it's it's confusing and and Microsoft you know we talked to lengths about Xbox game pass how that is not looking like a service that is going to carry on well or successful I mean it can carry Microsoft car Microsoft is the biggest company in the world at the moment I think in terms of valuation yeah so they they can keep going this is a chunk of change for them yeah uh but they are definitely making interesting moves like the one that I've been um predicting is that they acquire Unity oh yeah and then through that they just wave the um the fee Unity pass fee and then you get Unity developers on the exact if you publish on their store yeah yeah yeah yeah yeah then you don't have to pay the fee and now the store is is becoming even more robust with so many games yeah and where it can actually

challenge app store and the App Store becomes like for apps just like they want it and then the games will be in the Xbox store everybody wins and yes yeah it's like you hate games Apple cool story here's Xbox store we'll take your your games yeah and we'll put it over here and you can have your apps and you can promote them all day and then Apple arcade as well and we'll have all the other games if that's fine for you who knows it' be interesting Microsoft do it yeah make it happen Apple doesn't want to games into the App Store no theyve they've shown for the last decade that that they they will do anything in their power yeah to not have this keep it down all right the most interesting part generative AI oh yeah Will accelerate game production yes in few ways so um we have cost pressures as we talked about uh the budgets are going down um so AI is a Forefront of all the conversations all the big tchs from Microsoft to

Google are pushing AI Apple hasn't pushed it yet but for sure they have something Facebook as well or meta um but till this point you know having you know organizing the istanb gaming Summit in March 7th uh we got a big AI talk from Google Deep Mind nice when I was getting other speakers for that panel it was very hard to find people from Studios who want to talk about how they have used AI in successful way like tangibly successful not like I did chat GPT from my report to investors but really successful usage of AI in software at this point is in my experience non-existent and when I was asking investors to join this panel who have done investments into AI they also were very hesitant to come because at this point what I understood AI is a story okay if you're a hardware company it is

business yes if you're an Nvidia everybody's buying or AMD or whoever they're buying your Hardware to do the AI but if you're a software development company at this point I'm not saying it's it's uh you're getting Bamboozled with AI but at this point the business is not there the story is strong but it's not correlating with the money okay I mean we we anecdotally have heard some other stories um positive ones positive ones that's good um I think the finals is one where I would refer to the finals uh spoke about using AI in development um and maybe part of why studios are hesitant to appear although your theol is more for like it's for professional so it didn't necessarily reach the public but I think people are a bit afraid to talk about it because they're worried about backlash from the from Ai No from uh players play

backlash from players for using AI yes really that's it happens but I think the point what we want to talk about AI is like I don't expect and we don't expect that there will be an an AI Revolution or something like that right it's not that we flip a switch and next year all games are going to be developed by AI half the crew yeah um I there's there's going to be slowly and surely more use of AI in they have to as well like with lower budgets less staff and ever increasing scope of games particularly you know PC console but but mobile as well actually you know it it it makes it it kind of has to rely on AI to be able to deliver the same kind of experience and there's some success stories there like I said the finals uses Ai and a AI voice lines I think and there's been some

criticism there like AI voice yeah voice got it yeah like not all players like it um I don't want to dismiss player sentiment but you know there's there's always a lot lot of voices and in the end uh there's voices against po world as well like pal world supposedly used Ai and copyright infringement Stills it still sold more than 3 million is it up to 4 million units already yeah it's uh so I'm I'm going to I get it but I'll ignore the the naysayers I I think for the finals how well it's been performing it's been a success finals has been success Yeah final so finals being the uh this shooter game shooter game out of Stockholm by former dice president or CEO or yeah Patrick right I don't I don't remember I'm B with that for some some reason I'm thinking about that game

the finals is doing well owned by um Korean company Nexon yeah did it's doing well it's doing well somehow I got the feeling in the podcast from Phil and Crest that it's not doing well well our our engagement data shows it's doing well it's doing well I'm I'm glad of it like I'm I'm out of that so when they I hear their perspective and okay got it so that's doing well and they've used AI invoice yeah among other things like they wouldn't fully disclose what they're doing Square Enix was in their latest investor presentation talking about the use of AI in game projects and they had been using it for one of their games I'm terrible with names to D but the game the smaller game that launched recently by Square Enix had used AI in development last year there was high on life that used AI successfully I think at least it was uh well received so it's bits and pieces like it's not like this is a revolution that all successful games now use AI but we see some of these more and more examples trickling

in and and that's where we kind of predict that to go as well like throughout the year but also throughout the coming years it's a slow burn of more and more AI being use in game development and like hopefully at least for me as a fan it's not going to replace creativity creativity stifle creativity but more create the space for cre the big the big thing that I'm hearing from from investors is um smaller teams doing premium games oh yeah with the help of AI so basically you could do a good double a game yeah premium doublea game with a team of 20 to 25 like an old school AAA team is like you know Medal of Honor was like 30 people yeah like that type of a team would do what a current team is 100 but they would do it with 30 people yeah and so there's a clear speed Advantage there's a cost advantage and they're able to through

that come up with and I hope that's not seen as a bad thing right it unlocks a lot of potential and possibility for for smaller teams to be successful and to to try things at a larger scale than you would be do without I it's capitalism you cannot stop something that is more efficient yeah ex and so they're there probably people had feelings about horses and versus cars and I get it but in the end we have what 2% of the horses that we used to have a one cars have more horsepower yeah and um yeah and I think in this case as well it is a tool that is allowing a lot of things and it's not overnight but when it happens gradually I think we'll just see more efficient teams and through that more compact hopefully doing the same thing as they're doing currently well Tom we've covered a lot of things we've covered the market we talked about lean year for gaming companies multi-game subscription growth will slow down companies will return to developing premium games mobile developers will return to PC gaming Xbox will launch

Mobile store and Android generative AI will accelerate game production in a few ways there are other predictions that we did not cover and for that ladies and gentlemen there's a link in description that's how we drive traffic to New zooo to check it out good comments on from Executives from people who you work with about these Trends so it's not only the cool graphs but it's also some texts some context and and as always connect with Tom connect with new get the report if you don't want to do anything with a report get them to consult you on the the custom report we can do that and they they will do that but uh always a pleasure and thank you so much for this thank you for the invitation on that note we're out of the trap house