Sega Acquires Rovio for $776M / Niantic’s New Games / New AI Upgrades

foreign [Music] gaming podcast where it is our mission to explore the business and future of video games we bring together the industry's brightest Builders investors and thinkers to keep a full sun current events dissect emerging Trends and games share Lessons Learned and have a great time this podcast is also part of novik's growing ecosystem which ranges from free and premium research to Consulting and advisory services for more information visit www.navic.com now let's jump into the episode hello everyone welcome to another novik Roundtable I'm your host Devin Becker and we've got some great panelists here today we've got the always uh Lively Aaron Bush co-founder of Navigator Matt Dion a contributor at novik a frequent contributor and David Amore CEO of playment how you guys doing today sounds good yeah probably the only time

I've been called Always Lively but I'll I will take it thanks I'm just gonna say how do you always live here I'm not sure how to take that but it's also nice as four of us sometimes three sometimes four it's a good group of people it's fun definitely we actually are looking to maybe get some more uh outside stuff as well Aaron you want to explain yeah so we're excited to to kick start a mailbag we know that we have a really awesome audience we hear from many of you all the time and we know that you all have many great insights and great curiosity as well and so we want to shift the conversation to be more inviting and inclusive of all of you I know we sometimes get lots of emails or slack messages or LinkedIn messages about comments and you know questions about the things that we talk about so um going forward I think we can just kind of shift some of that even into one place so if you have any comments or questions just shoot us a note at

podcast navic dot Co and if you submit an interesting question or topic prompt um we'll we'll do our best to carve out some time on the podcast to talk about it and similarly if you have any comments or anything to add about a topic we'd we had discussed in a previous episode we'd love to hear that too and potentially riff off that and future episodes as well so we can involve of more voices around the industry more thoughts I think we'll all level up that way and it'll just be fun to have more um engagement with everyone who who listens to this podcast so um so again don't be shy if you have any questions or comments just send them to podcast navic dot Co absolutely no idea how this is gonna go but please if you're out there and interested make us happy shoot us some some interesting thoughts and questions and we'll we'll plug you into future episodes so excited to get that started yeah obviously uh Spotify doesn't really have like comments or anything like that so it's kind of hard to get sometimes a

little bit feedback from listeners who aren't on something like YouTube so be great to hear what you guys think for sure uh we've got some great topics today as usual uh we got some stuff on uh niantic's new web game or new game announcements that I think will be pretty interesting uh the state of web through gaming in general the latest in generative AI as as we like to talk about here lately and then sega's acquisition of Rovio should be pretty interesting right the shocker but we're gonna start out a little simple uh with just some stuff on Europe's uh console and PC data yeah so some high level data for the games industry to get things going so GSD recently released its q1 Data Tracking Europe and actually circana released its its March Q on Data Tracking the us as well um so can throw that in there too and they're both similar but what's notable is that video game sales are down across the board compared to last year especially on Console PC but obviously Mobile isn't showing too many signs of strength either which we've we've talked about

many times on this podcast the data did note that casual games had their strongest performance since a year ago so mobile as a whole did outperform the holiday period but that's still not exactly a sign of strength or growth they're just going to be back to where it was a year ago the what's interesting is that the only thing driving outsized growth in the market right now is the PS5 and Europe console Hardware Sales Rose 41 and q1 compared to last year and that's because the PS5 is up about 370 percent year over year well the switch is actually down 18 and Xbox is down 10 too so in the US also it's similar Hardware spending as a whole is up 21 purely driven by the PS5 and now what's also interesting is the PS5 has surpassed the PS4 in terms of unit sales on a time adjusted based so looking to be a very strong when there we talked for a long time about how supply chain restrictions

and just hold UPS across the console industry even game delays have slowed the the growth of of console sales especially the PS5 and now it's really the the only hero of of the industry as a whole when you look at these big picture numbers uh which is really interesting to see obviously growth is going to have to slow from what it is right now it can't continue at 400 percent growth forever um but it is outselling Xbox two to one in its key markets which says a lot PlayStation It also says a lot about Xbox too and how they they need to to Really level up their um you know first party pipeline to to drive sales across the board there too but anyways just thought it was interesting to just share a quick update on on q1 as as a whole can I can I ask a question so yeah as you say PlayStation 5 up a lot on last

year but also up because you couldn't buy a PlayStation 5 last last year so I mean is it selling well or is it just saying selling you know four times better than last year when you couldn't buy one it's selling really well um and so I mean as I mentioned compared to the PS4 on like the same time period since launch it's now outselling the PS4 um and the fact that it is outselling Xbox as tremendously as it is I mean it's just it's a it's a sign that PlayStation is just going to continue to to kill this generation I think and now that we have seen that um you know can I take away the supply restrictions and we see more untapped demand it still is really strong it's going to continue to be strong for for quite some time so yeah we'll continue at the same level of growth but I think it'll still be the the outsize winner and console for a long time probably

until whatever the switch to whatever that hits and then that'll that'll mix things up a bit again as as it always does with Nintendo but yeah this isn't just a fluke or just good compared to one year it's uh it's a real long-term hit for Sony because it makes you wonder then if uh if the x-cloud really does anything to push any units especially when it's like you could play it on PC you could play it on your phone stuff like that like I gotta imagine that's not really boosting unit sales like they want to it's all about the games uh where are the the big AAA games that everyone wants to play um still still waiting been waiting for a while with Xbox so once once that maybe turns around then maybe we'll see some more acceleration there but at the end of the day it's all about the games always has been speaking of games but not on Console Niantic had a couple of actually interesting announcements if you want to take that away Matt yeah yeah so I

wanted to give a kind of a quick update and Roundup on some announcements um or just a bit of bits of news from Niantic that came across my desk recently so um you know we all know them for Pokemon go and they've had a few titles that have come out and kind of not done so well and and there are now more titles that are coming out and we'll kind of see if they're able to break through so the first one is called Peridot I hope I'm pronouncing that correctly it was first announced in April of last year um and it's set to go live next month uh it's been in beta for several months now um my understanding is it's more of like a Tamagotchi style virtual pet uh type game with a focus on breeding um so that's one game um they also have a new game in soft launch um called Marvel World of Heroes so obviously the Marvel IP first announced in September of last year um I had a quick look at data AI it's it's apparently in soft launch in New

Zealand uh very recently so we'll see how that goes but that's sort of um create your own hero take them out on missions in your neighborhood and that's expected to launch sometime this year and then the the big news from from this week was the announcement of Monster Hunter now um and that is also starting beta testing later this month uh according to the coverage and set to launch uh globally this fall so Monster Hunter now I think is going to be much more similar to Pokemon go right you're going around you're catching the monsters um or battling the monsters so you know I had a look at the data um just kind of wondering like we we kind of all know that none of their previous titles have broken through or really been successful just some some others that they put out were Pikmin Bloom they did NBA all World um none of those have really had any sort of meaningful success but if you look at their their rev they're still pulling in like a baseline of a million dollars per day just on Pokemon go which is kind of crazy right it's like really

successful um just uh just a couple months ago February 25th they brought in eight and a half million dollars from Pokemon go alone crazy crazy success so um I guess two questions one will any of these new games be a hit and two does it matter uh when they have this like incredible Baseline of um success and popularity from Pokemon go uh of course they're going to continue to support that game um but anyways I just wanted to kind of throw that out as a discussion Point we've got three big titles uh two of them with big IPS Monster Hunter and Marvel do we see them I don't know expanding the audience of location-based games or ar games breaking out of their Pokemon bubble what do you all think I have an opinion I I think the Pokemon location based thing was like a one-time thing like I and I think it will continue to be successful I think it's amazing but I don't and I I thought that when they talked about they did talk about doing a Harry Potter version of

Pokemon go right and that they didn't win yeah oh okay and I I said oh well that's going to be massive obviously because Pokemon go is massive and uh Harry Potter IP license but just doesn't work that way I think uh I think that there's one game and it's Pokemon go and you I I don't think you can just apply another license to it and have a similar success it feels like everybody is doubling down on the games that are working for them and Jesus Christ it's working for them right so so yeah as you say that maybe they don't need to and then if it's not a Pokemon go style then they're just competing with everybody else trying to get a traction on a mobile game which is so hard at the moment so uh my guess would be node I haven't looked at any of these games but I just know how hard it is to do that yeah I'm curious about the the Monster Hunter one I mean um it's it's definitely not the same scale of Ip as Pokemon um and probably shouldn't be compared to Pokemon

um but I'm curious to see what they do with that one just out of curiosity um but yeah I probably agree with David just I have some skepticism um what is interesting though I mean it's constantly being rumored now that apple is going to unveil its mixed reality headset whatever that is sometime this summer so perhaps you know if if Apple feels good about something perhaps it actually maybe is the onset of some new movement from a hardware standpoint because I think for for these games the hardware is just as much to hold up as anything like augmented reality on a phone compared to what it would be on a headset is just gonna be night and day I doubt we're going to see mixed reality adoption you know really surge anytime soon because the rumors also say the headset's gonna be like three thousand dollars or something which is not mass Market at all um but you know perhaps we're slowly entering an era where these kinds of games can see a revitalization

um in a different in a different way but obviously that still is a long-term bet but from niantic's point of view too I mean they're not really a games company they're they're more of a of a software company in the sense of how they're building like a 3D map of the world and then being able to leverage that for all the other things you can do um uh with with ar in the future and something like Pokemon go massively profitable it just funds those those building Ambitions it's more it's more of a driver for the other side of the business and maybe they're hoping that they can unlock something else on the game side too to just further Drive their reinvestment elsewhere where the larger opportunity probably is or just continue to have their name in the game until eventually like AR gaming location based gaming whatever like it actually picks up at another time um similar to even just like Sony staying in the game with VR probably just waiting it out for it actually maybe one day to take off in a more

notable way um proceeding the ecosystem themselves yeah yeah so long-term play but yeah hard to be super optimistic and the the short term probably what do you think Matt well I think Aaron makes some interesting points um and I was sort of thinking as you all were talking like if if um if their ambition is really to be like this sort of software infrastructure company and not a game developer like why do they keep making games that when you know you talk to anyone in the games industry about like their views on whether these titles will be successful even going back to Harry Potter and NBA all world and these like I don't know that that many people were really bullish on their um prospects right like um I don't know so so the question that I have is like why do they keep doing that and maybe it's because they want to you know I'm speculating here maybe they want to sort of prove to IP holders that they can be good stewards of ips and

they have built up their business development team and their capabilities so that when they are ready to go uh bigger with their their other products that they're funding with r d the light ship SDK and things like that like they they're ready to kind of hit the ground running and say like hey you know big Brands we're ready to do this AR thing now that AR is you know mass mass Market whenever we get there but I'm just speculating I don't really know um I am not particularly optimistic about Peridot or Marvel World of Heroes or whatever so maybe uh I don't know that's that's kind of my perspective I think they're just trying to fund their r d and prove that they can be good stewards of Ip and um be ready when uh the ecosystem is ready for them I I feel like the big question is whether or not the AR even matters so like yeah I mean I'm not a I'm not a Pokemon go player at this point anymore but my understanding was most people turned off the AR over time either for better reasons or just because it didn't

matter and NBA all-world launched without even having AR features like at this point are they even an AR technology company or are they a location-based company and like that's not really new tech it's just GPS well they're totally I I what I've read is that they prompts a lot of like the Pokemon go players to scan the world around them so basically they're like Outsourcing their 3D scanning of the world Everywhere by leveraging their players um which is which is super interesting to be able to do that like as a as a byproduct of another business especially a game so yeah I mean I think the AR is super important that's definitely their long-term play we're just kind of in an awkward period with games where it's you know it's not up to its full long-term potential right yeah well it seemed like the Marvel one was trying to do the location one maybe a bit more with the move in the title and stuff like that so I guess we'll see whether or not they launching these

other ones with with it that's a different one the the movement one that's a that's not Niantic that's like a fitness-based Marvel game different announcement this Marvel World of Heroes is is more like Pokemon go I think yeah well a lot of a lot of attempts coming out here but we uh we have an interesting transition for a Halo vet developer moving over to Netflix of all things yeah it should be pretty interesting so a couple days ago it was announced that Joseph Stanton is joining Netflix to create a new AAA multi-platform game I don't know much about this guy other than that he was a notable leader um and Halo he um helped lead several of the early Halo games as well as Halo Infinity more recently but you know more important than any one specific person it's really interesting to see in my opinion how Netflix continues to to quietly ramp up its Ambitions behind the scenes um in more ways so the last time

um we discussed Netflix I noted that Netflix has so far released 55 games all of which are mobile based and at that time this was like a month ago it had plans for another 126 games 40 more for this year and then 70 more via development partners for 2024 or later and then 16 more at in-house Studios for 2024 or later so obviously Netflix is building far and wide for better or worse and it went from you know just licensing on mobile to small Acquisitions to launching major new Studios to now extending Beyond mobile and looking to make big budget multi-platform games and this is the first time that the company has clearly announced its ambition for a triple A multi-platform game it'll definitely be a while before we we learn more I'm sure but I do think it's now a matter of time before we start to hear more about Netflix's plans

to bring games to TV um and how their Cloud streaming is going to work how controllers are going to work and and all of that I really just think it's a matter of time before we start hearing much more about all of this especially since their pipeline is so crazy massive at this point um that you know if once once more of those games start edging towards launch and I don't know the timeline on on those I have a feeling most of those are still um mobile but um yeah Netflix is going from being an outsider to just spending its way into being a kind of a mover and Shaker in the market so no one really knows what it's going to turn into or what it's going to look like or how it's really going to work inside the ecosystem but but man super interesting to see these these Ambitions continue to ramp up it's uh there's quite a lot hidden behind that headline isn't it because you shared that with me and I go okay Netflix hired some guy that I hadn't heard from the disrespect but

actually you're right what that suggests is there's a multi-platform strategy coming and it's about the TV and then there's something about the hardware there's quite a lot behind that interesting yeah they've definitely tried to make some attempts with the game stuff right because they had that Microsoft or the Minecraft uh Telltale style one that they did and then the Trivia Crack kind of one they've done they actually have a lot of the interactive ones kind of buried in the interface but they're not really like game games yet so I I would be interested to see if this is like pushing towards that or if like that's as far as we get is like the um you know the band or snatch kind of experiment uh and we don't get a whole lot from there but I mean so many question marks just with the model right because they're not monetizing they're not doing in-game advertisements so they're optimizing for engagement um and it's not clear to me um how that like if you're gonna spend millions and

millions of dollars making a triple A cross-platform um you know hardcore game or whatever like how does that investment pay back just via engagement um I don't know I mean we can speculate but it's it's just a very different business model right for that then we're all accustomed to when it comes to making games um so how they go about that will be very interesting yeah it's like an alternative reality of Game Pass but starting from a different foundation in a way yeah so many question marks but that's what makes it super super interesting in my opinion definitely well speaking of overly ambitious projects with lots of games announced web3 is is a bit of an interesting space recently if you want to dig into that a little bit Aaron yeah so I'll just sort of be the host of of this segment because really David is is the guy who is operating in the the middle of it all and I know you think a lot about this stuff too every week Devin and you as well Matt but but David obviously the

web 3 games industry has undergone profound Swift changed over the past year Venture funding has cooled new game releases have slowed to a crawl if you look at active wallets transaction volumes they're you know mostly stagnant and well below their Highs but there still is a tremendous amount of building being done behind the scenes and you as a founder of a web 3 games company are operating at the The Cutting Edge of everything going on here so I'd love to get your pulse on on where we are right now and maybe to to stop darts I'm curious what your Reflections are as an operator in this bear Market could you just give us a feel of what is it like to to operate right now or even just compared to to a year ago what yeah what's going on yeah I think I've never made games in all sorts of verticals before this is really odd because what we set out to do two years ago hasn't changed you know give or take and yet

the sentiment towards it is like in 2021 it was off the charts and then we haven't changed anything that we're doing right now it's down here and largely down to people's feeling toward crypto which is odd because we're not really particularly connected to to crypto in what we're doing but we sort of get caught up in it so it's strange is like things that are completely outside of our control really affect how people feel about what we're doing and I've never really experienced with that you know if I'm making mobile games then everyone has a feeling about mobile games it's fairly consistent doesn't go up and down and that's hard to know navigate what I what I have found is that you know I guess everyone's talked about this is that a lot of things were being propped up by the fact that numbers were going up in crypto so all the time there was a bull market well we'll aren't we amazing we've done all these really clever things it goes the other way oh yeah we're not amazing at all and it's quite interesting to see well who's left who's still got conviction in what they're doing who who's the things that people are doing

what still works even when things are going down and that's like a good X I mean it's tough but it's a really good exercise to to test whether what you're doing has legs or not because it neat any game needs to survive things going up or down right so so I think it's a good test but it's harsh um I think um another thing I notice is that there's really not a lot of commonality in um what people are doing in web3 you can't really usefully say web 3 games because it could mean one of ten things or more right and I know even know what's going on on you know we're doing our thing in our pocket web 3 games but the things that other people are doing like play and earn and all those those kind of ideas we're just a long way from it I'm not saying one's better and one's worse but there isn't you know there'd be times we've all done things where okay this is the playbook for making a mobile free to play game or Facebook canvas game or a PlayStation game there isn't a Playbook so

everybody's just trying things out and there isn't necessarily a lot of crossover but it all gets lumped in together uh I suppose another observation for you you mentioned sort of Market Cooling and you know when we started the company then uh the level everybody wanted to give us money we were pushing it away and then the sentiment again not because we're doing anything different but the sentiment changes and there you're thinking the market is further away than everybody hoped like there isn't millions of people playing on um web 3 games and so then you're relying on VC money that uh to relying on the sentiment of somebody a group of people you don't really control so it's sort of uh it's certainly more testing but I think it's sort of what it flushes out the things that are less credible yeah I think it's interesting the point you were making about how like what is a web through game everyone's trying all sorts of different things it's so pretty experimental but it kind of makes me reflect a bit on at least the the era of

ultra hype from a couple years ago where it felt like the the masses were mostly moving in similar directions you know chasing play to earn chasing play to own chasing whatever acronym of the day really was at the time and now it is different from that where it doesn't feel like there's as much chasing or maybe that's just because there's less fomo uh you know today than there was at the time just creating some narrative that everyone is chasing after but I'm curious also um from you both Devin and Matt um David mentioned that you know there's a lot of experimentation lots of people are trying new things are you seeing any patterns in the direction that these types of games are are going like whether it's an acronym or not um like do you agree with David that it really is kind of all across the board or do you see um you know smarter companies starting

to find some patterns start moving and in similar directions of best practices or whatever it might be yeah I mean there's a lot of people trying to like fix or move on from the play and earn right like play an own or free to own or like whatever whatever version you want I like do but it's also like kind of a space where we haven't had a big release like axi to kind of prove out a model yes or no so everyone's kind of in this weird space where they're like I hope what I'm building is gonna work because I don't I can't look at anything and know other than like I'm not building axi now and that's that's all they can go off of but but then there's like the Asian market who are happy to release like these fairly high quality games like out of South Korea that are like MMO style games arpg style games where they're building it like around like still a normal game that they would build and then adding the web 3 stuff and being like this is fine we don't really care what the market is doing we're building games that we think are good and we have crypto elements and we

think that makes them extra exciting but this isn't make or break for us we're just gonna make great games and I think that's a big difference versus Western markets I would agree with that that take from Devin like there are a lot of companies that are still kind of building and they they may not be like out there making these big announcements but it's happening and it's sort of going to Bubble Up over time you know the the sort of um argument that you always hear is that there's so much money and so much talent being put into the space and game development takes so long anyways under the best of circumstances that it's it's uh it's going to take some time and it's like almost inevitable that we'll start to see some really quality products but you know from a skeptic's point of view or maybe an outsider's point of view these these big companies that raise a lot of money they've been pretty quiet for the most part um you know we're and again it comes down to how long it takes to make a game but a lot of these companies also they didn't necessarily come from gaming they came from crypto they came from Finance

they came from you know wherever uh and were able to raise a bunch of money on the strength of a crypto plus gaming pitch uh and we're still waiting for that to materialize um so you know I think it's a mixed bag I think we're gonna start to see more and more um games get canceled or or just um under deliver let's say um but the teams that uh are you know truly bought in and truly have expertise and know what they're doing people who come from the industry like David um you know they're gonna be the ones who are more likely to deliver and sort of push the space forward now granted I'm biased I happen to be a believer in this space as I think most of us on the call are but um that's that's kind of my observation thus far so let's talk about the the timeline a little bit so we saw a fire hose of games where you could say games and air quotes um that that flew on through the market 2021-ish

um that you know most of them were very played earned they were more financialized products with some type of game rapping to now um you know Devin he writes our monthly Market updates and and novik pro and in February there was not a single notable new game release and in web3 and I think in March there might have been one um and so we've we've swung the pendulum has swung from a fire hose of of games or so-called games to nothing to we know ever there are lots of teams building but what you know what is the realistic timeline for when these we start to see like the uptick again and and releases I know all of you watch the space you track different companies and teams are we going to see another uptick again later this year or are we going to have to wait longer than that you think depends on the quality we're looking for there's tons of alphas and betas right now and that's the thing is it's like everyone's in in this like semi-public mostly like

for holders and stuff like that kind of testing phase and I feel like half of these are going to run out of Runway funding and just crumble or they're just ideas when they actually put it out you know people are gonna be like this is kind of bad and it's just not going to make it anywhere and it's like a lot of those disappear I think by the end of the year and it's like then big ones like Star Atlas shrapnel all these other like ones we're really excited about I feel like we're just gonna be waiting like Christmas is going to come Santa where was those games whereas like like I said if you look at the Asian markets like these AAA double a quality games are coming out on mobile on desktop from especially South Korea and they're just largely ignored and I think that's kind of a an interesting Dynamic where it's like the quality is actually really high and we go where's the quality web 3 games and it's like well they're just not over here they're not on the they're not in the typical space where we're usually talking about web3 games because

we're talking about the ones like you guys said that got all this funding and did all this it's actually the guys who got mid-level funding but are really solid game developers that are putting out the quality games but I'm really interested in the space like where David's at that's like super dependent on the blockchain technology side of it because a lot of these are like adding blockchain technology to a game game whereas like what David's building is like it's it's all or nothing and I'm really curious about that space where that comes out because Dave is kind of betting everything for example on the blockchain yeah I I'm interested in teams that are doing things that you couldn't do making games that you couldn't make without a blockchain or at least it'd be hard or ill-advised and I don't think those come from AAA let's call them Studios I think because then you're less likely to take risks if you're spending 50 million dollars making a game then you're not gonna try World ideas you're going to probably play it safe so I see more interesting projects coming from yeah

okay so let's call them double A and and now you have people that aren't doing it because they can make a quick Buck it's because they're doing it in a bear market and they're not trying to get rich they're just uh I hate I think we can do something cool that people haven't seen before using this technology to what I hope is that that category is successful that's the more interesting stuff rather than just taking web 2 games so to say and add a token to them less interesting I think but you know not say they won't be successful but like maybe yeah we're sort of blindsided by a new type of game where we're busy looking for the star atlases of the world are you seeing anything cool or interesting out there in the space of like the more truly on-chained games that are doing something new you can talk a bit about what what you're doing with Playmate that's new and interesting I think the audience is find that cool but other other examples would be nice too so I suppose what I see is a bit of a polarization so I think that some teams have had success burying the uh

nft in the crypto part in the game and just you know a bit like Reddit that has huge success as they understand with a bunch of avatars that people have and they don't even know that they're holding their nft I think it'd be second if they found out they had an nft because it's really nice elegantly put in but and the blockchain part is buried conversely down the other end which is as you say where we are which is fully on chain games where really you could that sort of integral to what the game is in a way that it can't be in the background I mean I'd love to get rid of all the ux issues of wallets and crypto that I don't think people necessarily care about but but nonetheless that's in order to play these kind of games because it runs on a blockchain and I think you know be a long podcast if I started chilling what we're doing but the short version I suppose is that I think you can create a genuinely new kind of video game by putting all of it rather than running everything on a game server instead

running it on a blockchain I think it opens the door to a new kind of game and which also is just intellectually a good way to spend my working day so I'm not complaining yeah Matt knows all about it right look I'm I'm fascinated by fully on-chain games David knows this we've talked about it quite a bit um I think um it's yeah it like the the design space is relatively unexplored um these games could not exist without a blockchain uh it's not just about hey you know I own these digital assets that I can trade or I can sell or I've got these tokens it like every bit of logic is on the Chain um and we could we could spend this whole podcast talking about the various parts of that that are interesting I think you know to the broader question of like you know adoption uh from a larger audience there are um a lot of technological things that are being improved uh in sort of on the sidelines

in the background that will go a long way towards improving not only fully on chain games but uh blockchain games generally so things like zero knowledge proofs um things like account abstraction these are really important to making blockchain games more accessible uh to an audience that is accustomed to traditional games and as these Technologies start to improve and become adopted by more and more teams and improved upon that's where things will start to compound and we'll get more people coming into the space in my opinion my last question for you David is more on the the tech side of things and and more recent episodes we've talked about a bunch of the the L2 announcements of late such as immutable and polygon uh joining forces and what does that mean for for where teams of the future are going to build their their blockchain based games um and if I'm not mistaken you were at least at one point building maybe you still are building on um starkware so I'm just kind of curious

to get your your updated view on this L2 landscape whether you've rethought anything internally or thinking about changing anything up or just just generally what your your views on where to build these things uh how that's cool should we clear half an hour for me to talk about l2's then that'd be great I'll just do it I say a couple of things so I think the probably l2s are Layer Two Solutions are a good way of a better place to run games on seems like a really interesting uh uh development uh but also it's moving all the time right so uh it removes at such a pace that trying to plan a strategy around what a blockchain can do today when you're going to release a game in a year's time is a bad idea so in a way from my point of view I said look I'm just going to let the dust settle and we can we can make a choice a little bit further down the line and uh but I you know to as Matt says like there's so many people with a lot of money that are invested in

trying to improve things and uh to in terms of blockchain infrastructure so I think uh you know becomes easier and easier to build games for blockchain over time well good luck with that uh gonna be really interesting I think to watch uh what David's got going on uh just out of curiosity at the very least but in terms of moving on and in Tech and not uh being as bullish on a particular segment where we're now moving pretty heavily into the AI territory these days and I know Matt you've been writing a lot about AI stuff and there's been some really interesting stuff going on in the space yeah so I I'll be the first to acknowledge that I'm following very closely the web3 guy to AI guy pipeline uh so you know you can give me your thoughts on that in the round table inbox uh if you have some some criticisms there but um you know those of you who subscribe to the newsletter will have seen last Sunday we published a piece um titled gaming Gaming's generative AI boom is just getting started

um and so this this was a good opportunity I thought to sort of survey the landscape uh it's been about four months since chat GPT was launched and about six months since I first wrote about this topic in novik digest and so you know a lot has changed if you've been following AI at all I mean just new developments every day new tools new possibilities and personally I find this stuff really interesting and so it's been a lot of fun to write about uh and it was a good opportunity to see where kind of where we come down as an industry on this stuff so far um you know as with most things these days the response has been polarized we've got a lot of people um typically on the early stage startup Venture Capital early adopters who are really bullish um as you can probably guess I tend to fall on that side of the spectrum and then they're a a meaningful um group of people who are are against this for a variety of reasons related to

you know protection of illegal protections stolen work um a lot of people think generative AI is maybe um you know it's interesting but it's not useful or practical in a sort of real life game development scenario there's been a lot of commentary to that effect from you know real AAA Studios um and so you know this writing this piece was a good opportunity to kind of like uh take the Pulse on where we come down on some of these things and see who has made some announcements who is meaningfully building in the space or adopting these tools in their pipelines so as I said mostly the people who are are all in on generative AI tools thus far are the smaller Studios let's say small to mid-sized Studios um and they're looking for efficiency these tools allow them to eliminate a lot of really tedious work from their workflows whether it's concepting uh doing concept art writing

these like really short bits of dialogue um there was a news story from Ubisoft uh the other day which was about them using a tool called um Ghostwriter I think which allows them to create these barks for NPCs which are just like throw away lines of dialogue that would take a narrative designer hours to write all these different variations of like you know whatever an NPC might say in the town square and a generative AI tool can come up with that in seconds so when you think about these types of use cases you're eliminating a bunch of really tedious work for people who can then free up their time and their creativity and their bandwidth to work on stuff that would in theory benefit their game in other ways um so you know that's where you see a lot of these early use cases I I think there are a lot of other use cases that are being pitched that are kind of way out there that may materialize in the future and may not you know things like

entirely AI generated games or entirely AI generated 3D worlds that you know maybe we're on our way there but it hasn't materialized just yet um uh you know and into that effect we've seen some announcements from big companies as well so Roblox made a splash talking about their generative AI tools Unity has talked about some of the things that they're going to be doing with uh gen AI but um these big companies um they've made mention of it but they've not really gotten into the specifics of how exactly they're going to do it when these tools are going to roll out when we can use it um so you know it's more to come right um I I saw an interesting quote from Tim Sweeney of epic games on this topic where he was asked about these tools and he was he was saying essentially that like most of these these big companies uh with lawyers are essentially not going to do this stuff or at least not going to be early adopters because

there's so much ambiguity over authorship and ownership and stolen work that it's like it's just too much of a liability for them to really dive in head first they're going to let some of these smaller companies figure it out first so before I go on to like sort of the the new craze which is like the autonomous agents the baby AGI the auto GPT things like that we'll talk about that in a little bit I want to just ask the group like what do you think where do you come down on the usefulness of these tools for game development today um do you use them in game development uh do you use them for your job I mean I know I certainly use chat GPT and other tools uh frequently but where do you all come down on like the usefulness as it stands today with these tools if David could you find any use for them and your current game development you're on The Cutting Edge right there right so like really that's got to be a tricky one for you yeah we do um not uh I would I'd be lying if I said

it was part of the workflow yet I know a lot of other game developers have and and in a sense maybe we're not creating a kind of game that is uh where AI is obviously useful like if I had to create a lot of assets a lot of artwork then that feels like it would be useful I think there's no doubt that it's going to end up in it's already somewhat in people's workflow and I've noticed even in the last six months it's it started off being like Oh yeah it's a good way of getting some concept done to oh actually now we're building assets and you know in time to come those will be 3D assets and those 3D assets will be animated it's all coming you can draw a line right so I think uh I I so I think that's all coming and that'll be interesting the other part that maybe you're going to touch on in a second maybe I'm not even thinking about the right way it's like what does a player get to see of this does it create a different kind of game is it just a productivity enhancer or do does the player go I love this game it's got AI in now I can think of examples like uh I

think you were talking about a NPC with uh you know with dialogue and if that NPC can watch what you're doing and remember what you said to it before and have contextually correct dialogue that's like an NPC dialogue that's more interesting than one that's been scripted trying to capture a few events that the player might do so that's like an enhancement I wouldn't say that's a new kind of game but I'm sort of more interested not just on the productivity bit but but like what does a player experience that they haven't experienced before because the AI now exists in the world so there's a an interesting point there where there are some of these early games like AI dungeon where you can just kind of the possibility space is wide open right you can just kind of take it wherever you want with your own imagination but in many ways um it's like it's almost too much choice for a player to be like meaningfully

like um different from some of these others like in many ways as a player you want a tailored curated experience because you want to experience that world or that narrative you don't want to just like make it up yourself like um that's that's the game developer's job that's not my job as a player like you make me a good game not the other way around so so like to your point like I think I think that um that's still being figured out right will AI tools enable brand new types of gameplay I think yes but I think we're not really there yet um and there need to be some constraints some bounds around um what the AI is generating otherwise the possibility it's just analysis paralysis like there's too many choices um that's kind of my take on it and it doesn't seem like the ability to dynamically respond to stuff is like the big strength right where it's like whether it be through dialogue or through fiction like that's where it can actually make it up as it goes kind of

thing where a game system just can't do that right like other than like procedurally generated stuff like that seems to be maybe the the big unlock here for actual game experiences yeah we talked last week about um like emergent behaviors that exist in Ai and you know discussing like where do you draw the line on what behaviors are allowed to exist or can you even draw the line to some to some extent like can you think up all the possibilities that need to be you know like drawn boundaries around um and I think you know that'll be interesting both in terms of like emergent behavior of course with like NPCs or you know what's going on in the world but even behind the scenes too like adjusting difficulty settings like personalizing what people can do in the games just based on you know what it picks up about how you answer things or how you act I think um I think it's going to be pretty profound but as always the hype cycle um is real and you know you sort even though it's moving really fast and it's

kind of absurd you know you're still gonna have to take a step back and not get too ahead of yourself but at the same time and maybe this will like segue kind of into like where you want to take this next mat is like what I think really levels things up is kind of the Step Beyond just forever buttons poking around the chat GPT it's when a platform when it when a tool like that becomes a platform and it starts becoming embedded with all sorts of apis and and increasingly when various AI tools and apis can start connecting with each other we're in a simple prompt they're allowed to be more powerful and what and more complex and what they can do and what outcomes they can create and to me like it's hard for me to like really wrap my head around where exactly we are right now because I feel like a week ago I didn't know half of this stuff was even a thing um but but anyways yeah becoming more of a platform where all these tools can intersect with simple prompts that's

that's where my head is just trying to grasp what that even means right now yeah I mean you you raise um two good points one is a great segue to um the sort of the latest hotness and and generative AI but I mean your point about things changing so rapidly I sort of feel like we're we're in the middle of this exponential curve that's just going up and um it's you know even for me as someone who follows the space pretty quickly it's impossible to keep track of all the developments that are happening so frequently it's um it's really incredible but um anyways sort of setting that aside for a moment like the big thing and something I referenced in um in the piece that's sort of been taking over AI Twitter lately is this idea of autonomous agents so the first one I think was called Baby AGI and that was put forth by uh an emerging uh VC manager named Yohe Nakajima and um

there's there's others out there there's Auto gbt there are there's one called hugging GPT which is also called Microsoft's Jarvis there's god mode agent GPT AI Legion camel there's a whole bunch of these and I'm sure tomorrow there will be twice as many um but essentially what these things do in a nutshell I'm oversimplifying here these are language models that interact with a task list and they automatically generate prioritize and execute tasks based on a predefined goal that you feed it and these um these models can hook up as you were alluding to Aaron to different tools or processes they can do things outside of the kind of natural language shell that chat gbt has so they can search the web they can do web scraping they can interact with apps and files and this is where if you sort of project out ahead a little bit like this is where things get really kind of interesting and also scary where um

they're they're not just you know responding with text and telling you like hey you should do this or change your code in this way but they'll actually go and do these things um and you can um with some of these new autonomous agents you can set them up to run continuously assuming you have like the credit limit on your um API bill but you could just let them run continuously and execute these tasks that they are setting for themselves um so it's I don't know it's fascinating but um one of the ones one of the um instances of this that really uh caught the eye uh caught the eyes of a lot of folks in the games industry was this study that was done out of Stanford where they put together I don't know how many like five or ten or 15 of these autonomous agents in a kind of rpg-like setting it's kind of a top-down imagine like stardew Valley or Pokemon style graphics and there was uh however many of these autonomous agents um in this same setting and they fed them you know predefined goals and I

think um they asked them to like plan a Valentine's Day party or something and one agent was able to convince the other agents to attend this party and I think some of them like flaked out and some of them brought gifts and like I don't know you know it's it's worth investigating but if you think about this for game applications you know what does this mean not just for NPCs but for things like um you know personalized onboarding or um maybe like a co-op play with an AI um you know I'm just riffing here but like we could all kind of speculate about some of the crazy use cases that this um this kind of implementation of generative AI could enable in gaming so that was the that was one of the things that really kind of blew my mind I'm curious to hear your all's thoughts on on this autonomous agent thing Devin what do you think I know you're playing with this yeah so like the the thing that this brings up to me the autonomous agents part especially so like something

like Auto GPT right like every step it's gonna do it stops and like asks if that's okay other than if you give it permission to just like keep going right and so while I'm not a big fan of like worrying too much about the ethics or like safety guard rails and stuff like that especially for games and stuff like that it does seem like maybe we need to consider like how do we have like another AI babysitting it or a set of like uh stop buttons and circuit breakers that stop things when it's doing something that is like out side of the parameters because like when you're saying like hey I give you a high level goal and you just execute until you've establish that that's where we start to get into Skynet level problems where we go oh well it turns out that goal is gonna like it has to involve eliminating Humanity as part of its goal to just scrape the internet or something right like and that's that's where we start to run into problems like even in games right where like you've seen Microsoft constantly get into this problem where you know they have their their Twitter one a while back you know that turned into Hitler pretty fast then they had

the one that was on Bing that got pretty crazy pretty fast and it's like people are going to troll those people are going to act all kinds of weird ways to it so what I wonder is like if we start putting this into NPCs or the things where there's a certain level of behavior That's Just Happening un unmodified like on uh babysat by the game developer or by whoever like how do we even like start to look at how do we like put in whether it be guard rails or stops or something like imagine a game just crashing because the AI does something the game developer didn't want it to like how do we stop it do we just make the AI just like the character the LBC just shut up if it's about to say something really offensive like it seems like a problem that's not like a let's pause it for six months but uh maybe we should think about you know that sort of thing yeah I think the next three years or however many years it's gonna be pretty wild in terms of what we see and again don't want to get too far ahead of ourselves but you know if you connect the dots back to like the autonomous agents point where you start giving AI more access and control and you know you

Empower it to do things around the internet across different apps and things like that it really is operating with a mind of its own in some ways of course it's prompted but um but yeah I'm sure we'll hear some wild stories about things that AIS are doing that you know as a result of some emergent behavior that wasn't exactly planned or prompted or fully thought through other repercussions that have to be dealt with I think it's just going to be one of those interesting like sign of the times kinds of narrative that that emerges but but yeah I mean I think the the reward uh probably I don't want to say it outweighs the risk but there's there is tremendous like upside potential in terms of like how like these these AI agents act as helpers and turbocharged all the work that we're doing like in our jobs or personal life or or wherever and yeah I'm excited to see where where all that goes I'm also curious I've just been trying to process like what does this mean for

companies like if um it's it's so obvious to me that this this wave is going to lead to an efficiency boost and we're already starting to hear kind of the the cries out there of like oh is it going to replace jobs and of course most of it is from journalists who you know kind of whine about everything but um but like even so like I do think like we're gonna start to see more pressures we're going to see small companies like you leverage these tools probably really effectively first but then large companies would be crazy not to so then it's just a question of like are we going to see downsizing are we gonna see uh you know just if theoretically like if it takes half as many people to build a triple A game as it did before because of these tools I don't know but just you know hypothetically are we going to see them not have as many people are they going to make twice as many games like are they going to double down into creating more stuff I think the next few years is also going to be really interesting just to see how companies

grapple with this because I feel like it's the first time it's a bit different from web3 in the sense that this is like a tool that kind of permeates all parts of like the the value chain and the creation chain um that I don't know if the games industry has seen something like this before it's not really a platform shift it's more of like uh a value chain shift um and I'm very curious to see how the industry will respond and react um really really not sure I I'm a simple man I want to play Matt's birthday party game you know weird okay I was talking like 10 minutes ago ago I wonder if we'll be able to buy build a new kind of game because we've got Ai and then I'm just thinking about the birthday I mean I know it's not a birthday party game but like oh that's like a better version of The Sims you just described that sounds great so I welcome it at any cost sure we're bringing ourselves rapidly closer to the singularity but in the meantime we get to play birthday party games so that's all good with me you know

I'm looking forward to when this podcast is hosted by the Max Headroom version of me exactly in the near future at the Deep fake Devon but uh on a much more grounded level uh an older older companies here we have a pretty interesting acquisition of Sega being the surprise uh buyer of Rovio yeah yeah that's I mean I'm sure that anybody listened to this podcast has heard that news already so it won't be news but but equally somehow it caught me by surprise maybe everyone's reaction that I spoke to is like what say your point I didn't see that coming I think oh yeah well that does make sense and I suppose yeah Rovio were sort of in play if you you know I think they sort of uh flirted with play Tico a while so oh yeah well all right so they're sort of in play and uh actually it does sort of make sense for my Sega point of view and the price seems right so it's one of those ones that's both surprising and unsurprising when you sort of look back in the rear view mirror from my point of view uh what what was you well first of

all what is before we get into the meat of it what was your reaction to the to the news I was also surprised to see Sega was the one who was the buyer it wasn't if I had the gas five companies it probably wouldn't have been the one but as you mentioned you know now that it's sad you can sort of kind of see what they're they're thinking so interesting outcome that was the response I've heard from a lot of people myself included was like oh Sega like they're still doing stuff like um I you know I didn't even know that they were looking to acquire um Mobile gaming companies or companies generally so yeah I mean hey as a as a child of the 90s I'm happy to see this news I think I I should have dug around a little bit and my initial reaction and this just shows that I don't have a good word for you is like oh yeah we'll say you could use some help in Mobile and then you yeah I said had a look on the sense of talent and saying oh okay so say uh West doesn't do particularly well in in terms

of mobile but in the East they're killing it I mean they're what does it say are probably combined it looks like about 25 million dollars a month so you know they're doing better than Rovio well and so I think the Sega have a lot of mobile expertise but they just haven't been able to translate that to the west and so maybe this gives them a bigger footprint or more expertise at making Western games or something but you know I was misunderstood the situation when I thought the Sega needed a leg up in Mobile I think is they need a leg up in Mobile in the west I suppose and I suppose the other thing that people are talking about is that uh you know 775 million dollars is a huge number nonetheless if you think of other mobile companies that had early success so supercell King uh Zynga I guess then they haven't played their card as well and famously they went for the sort of proudly said we're going to be Disney

where and again I just had a look at their company report and said okay they they smashed it with the movies right two great movies half a billion dollars each but if you look at where their revenue from licensing it's 300 million dollars coming from in-app purchase in the games and 10 million from licensing so you know they haven't had a movie out this year but I mean that strategy of uh creating a ton of revenue from licensing just isn't working for them and when you compare with you know zingas selling for 13 billion and supercell valued at north of 10 then you would say maybe they would have been being better off doubling down on a mobile strategy where they keep 70 of the revenue maybe I I mean the way I see it is like I mean I think you're right Sega has room to improve mobile and the west and um this is one way to just kind of immediately inject a boost on the other side of the equation Rovio has sort of

been running in place for a long time um they've been trying to Branch out Beyond The Angry Birds IP for years hasn't really worked um and then if you just even look at like the business as a whole um their revenue has been roughly flat ish over the past five years and so is their stock price over the past five years and so both companies are looking for like an injection of some type and um interestingly both these companies might be able to to give each other what the other wants where you know Rovio plugs a hole and and sega's portfolio and um with Rovio coming into Sega it probably will unlock access to other notable IPS namely like Sonic right um to to be able to to build around um elsewhere and kind of make an extension Beyond just Angry Birds and I think that's interesting when I when I look at this deal

um it is a 63 premium to what Rovio was trading at before platika um announced its its first bid to kind of Kick the whole bidding war into motion and so um it actually has become more expensive um and if you look at the multiple that um it's being purchased at which is you could say it's like about 16 times last year's um ebitda which of course is you know excluding certain certain factors like like taxes and isn't a perfect representation of like the actual profits in cash flow which should be lower 16 times ebitda does price in some growth and for a company that hasn't been growing to then be bought priced in growth um it means that Sega like has to unlock something new with Rovio for this deal to even just like break even in terms of

its justification and you know I think there are things that they can do we talked about you know extending like the Sonic IP kind of handed over its Rovio to do some stuff um maybe Sega can help Angry Birds expand even Beyond Mobile in some ways I don't know and of course course like yeah their licensing revenue is it rounds to zero right now and and um Sega has had more success lately on the licensing front than than Rovio has so maybe there's more that they can work together to unlock that upside but I think that upside generally across the board has to be unlocked for this deal to make sense and I think a lot of it will I think there are other areas that it is more uncertain and therefore uncertain of whether True Value True outsized Value will be created from this deal but I think it's a great outcome for Rovio and now it's really up to the combined team to prove that they can create create you know pretty tremendous new upside that didn't exist before from being together yeah I'm really curious

which way the IP ends up going because uh you know is it going to be Sega using Angry Birds IP or Rovio using Sonic IP and I think another interesting like angle on that is Sig is a a pretty prolific arcade developer and there has been occasionally some Angry Birds say related games on Arcade and stuff like that does this open up a more of an opportunity for Rovio stuff to say make it into the arcade space um especially if we're talking about like you know they do Sega does well in the East and maybe Rovio doesn't do great in the East maybe there's an opportunity for Rovio to move into the arcade space for example in Japan and things like that like do you think there's some good cross-pollination from like their different expertise that they have individually combined with that IP or even we see some Angry Birds in the insock the Hedgehog 3 or if there's a second Angry Birds movie you see a guest appearance by Sonic you know that kind of cross-pollination stuff you can see there's a lot of room for upside there so you write this the arcade there's

Pachinko I don't know how much money to enter but there's like Sega has his tendrils everywhere and you can imagine a Sonic Angry Birds game so that seems obvious you they talked in their press release about they're going to help Rovio get to other platforms that would suggest I suppose console I I suppose so and then conceivably just helping Rovio get more of a foothold in the East generally so it feels like there's a lot of potential room for that upside often execution is a lot harder than uh than things written down in an email but um but nonetheless you could see like four or five places where that upside could come from um so yeah that sort of works for me hopefully they can make it work for them as well I would I would hate to see this be the end of Rovio if they can't find a way to be a value to Sega of course here's a I'm pulling out a second do these mostly work like uh well so I try to think of like big mobile Acquisitions

Ian EA and glue didn't work quite as best I know or so far uh take two Zynga Aaron will notice did I think take two share price tanked a little bit on that news but are they making good on that I mean I think they've pretty heavily overpaid for that deal given what we know now about the state of mobile right right and then Zynga Peak I think worked and Activision King certainly worked so I think that maybe the mobile acquisition seemed to work better than maybe in console so I guess the prognose my guess is this will work out but uh it's nothing more than the hunch well best of luck to them we all hope that it works well because you know the Angry Birds is uh is a bit of a classic in the in Mobile space especially from the early days so it'd be good to see them uh continue to survive maybe somehow make it past Angry Birds into some other new IP but uh by the way I want to thank everyone for coming today great conversation I also want to remind

everyone about the the mailbag that Aaron talked about at the beginning podcast navic dot Co so make sure to send in your emails your comments let us know what you think ideas other things you want to just share with us tell us where we're wrong which I'm sure there's a lot of things especially when we're talking about stuff like Ai and you know all the craziness going on there okay absolutely maybe it'll spark some some new uh topics of conversation in future episodes so definitely uh open it up obviously Kickstart that get it rolling we're just kind of now spreading that out so take advantage but either way we'll see you guys next week if you enjoyed today's episode whether on YouTube or your favorite podcast app make sure to like subscribe comment or give a five star review and if you want to reach out or provide feedback shoot us a note at podcast navic dot Co or find us on Twitter and Linkedin plus if you want to learn more about what novik has to offer make sure to check out our website www.navic.com there you can sign up for

the number one games industry newsletter navic digest level up your insights with our premium research platform novik Pro or contact us to learn about our wide-ranging Consulting and advisory Services again that is www.navic.com thanks for listening and we'll catch you in the next episode