The Bleeding Edge: Building Games on Discord, ChatGPT, and Beyond

[Music] welcome to the novic 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 pulse on current events dissect emerging Trends and games share Lessons Learned and have a great time this podcast is also part of novic growing ecosystem which ranges from free and premium research to Consulting and AD advisory services for more information visit [Music] www.nic.edu CL Creator programs driving

significant growth in conversion arpo retention and LTV Nexus has partnered with Incredible live service Publishers like Capcom grinding gear games highres ninjak kiwi and more and would love to help you our novic gaming podcast listeners do the same if interested in learning more simply head to nexus. g/ novic there you can learn more about the efficacy of support of Creator programs and discover how to easily build your own again that's nexus. g/ novic or check out the link in the show notes and with that let's jump into the episode hi everyone I'm your host Aaron Bush and my guest today is the incredible Sebastian Park you've likely heard of him on a few previous Round Table episodes and if you've been listening for a while you may have heard our pretty popular interview from exactly one year ago which covered the state of Esports ugc gaming and Capital we covered those

topics because those are areas that Sebastian knows very well for years he was a founder and executive in the land of Esports more recently has focused on all things ugc gaming and Beyond with his latest company Infinite Canvas and he remains a venture partner at bit craft so there are always many reasons to talk to Sebastian and learn from him about what's going on in the everchanging games industry but I especially wanted him back on the podcast today because at infinite canvas his team has been experimenting with building games on all sorts of new platforms and with new technologies that most people haven't even considered yet and we'll dig into more details about what that means and what all those platforms are in a moment but Sebastian welcome back to the Pod thanks for having me I should remember that if we're going to do this yearly it's right around when I filed for taxes yeah just F my taxes give you a ring there we go that's the way to do it I guess uh but

it has been a year um since our our last one-on-one interview I think it'd be cool for you to just give the audience an update on what you've been up to what's new with you what's new with Infinite Canvas yeah Infinite Canvas is doing super well I think the biggest change in 2023 to 2024 is is really just how much AI has impacted consumer tuck up and down and it's not just the fundraising environment it's not just people talking about it there there just really has been a lot of fundamental change in terms of the things like cost things like workf flow that now we even take for granted the year end but you know a year ago today it was fairly nent and so that's been a ton of fun uh the economy is Shifting which I think is crazy to think about I think one conversation we had last year was talking a lot about how the next year was going to be turbulent it's it's fun to get through

that turbulent year knock on wood hopefully we're over the cliff and and it looks like the following year is going to be far more interesting and less turbulent as a result so those are sort of the macro trends that that have informed what we've done and and and infinite canvas in particular we spent this past year building games across all sorts of different platforms doing all sorts of different tests and so it's it's a walk through the Wilderness to figure out if anything is actually fun and playable and and becoming that next big hit but certainly it's not for a lock of try yeah well I'm glad you're on the the bleeding edge trying all these crazy experiments for for the rest of us but um is there anything that you've changed your mind on on the past year because last year in our episode we talked about Esports ugc gaming um Venture Capital you just talked about how the AI landscape has shifted um how you just the economic narrative has changed over the past year have any parts of any of this surprised

you or made you fundamentally change your mind on anything big here yeah I mean so there there are a couple things that have changed uh mentally and then for the best or for the worst it's like it's hard to say the first thing is when we look at the economic landscape for a second it's so clear to me that we have these like massive delays in terms of how we as consumers or Founders or even investors feel relative to the macro EOS system and what I mean by that and Erin I think you talk about this a lot yourself which is you know two years ago we felt like we were about to enter a recession and last year it felt like we were in a relation like definitionally we were not by the way like in terms you know we have two consecutive quarters of GDP decline in a few years right and so that that's not something that we actually saw but the sentiment was pervading around the investor class and the lp class and the founder class was really started to feel it right like the

crunch in terms of fundraising really started to hit people closer to 2023 than it did in 2022 people are still raising 2022 a year out you know I think our evidence is clear that like no one really raised that much money in the last 12 months what and so it's interesting to see through experience like how this time shift is happening right and so right now I can tell you and you and I talked about this GDC I'm sensing a shift in sentiment in the lp markets right now and and for those of you don't know LPS are limited partners are the people who give money to vure capitalists again give to uh to Founders the lp Market's about fairly Frozen you know 18 months ago and we saw that in the data we see that and how much funds have raised in the Venture market and as a result you see how much was deployed against Founders now when we see a sort of a Tha of that ecosystem I'm now thinking about Okay cool so if we see

the Tha in q1 Q2 of 2024 we're going to see funds starting to announce new raises Q3 Q4 of the of this year which means that like funds Founders and game developers and whatnot and then everyone else will see more deployments in 2025 which is such a interesting thing to follow along that type of Crescendo of activity and then really that's that logical flow has uh changed my mind about the fund raising environment in terms of when things are going to hit from from games and AI it's suggested to me that everything's a lot slower than we all hoped or felt it would be and and certainly that type of incumbency that we see gives people a little bit more time to catch up than we expected yeah that that's really interesting um so uh I guess if LP interest is returning now that means we have a pretty exciting what 2025 202 six where it starts to like really show

through and you know all of the the hiring new projects that are getting talked about um and such uh and yeah I'm curious to see how this will play out too I mean the funny thing about this is you know anytime we talk we'll have a current take that will just immediately get outdated because everything is changing all of the time um and even with the like the economy ever changing and its impact on the games industry um you know we've certainly have been going through this age of efficiency I guess you could say which was triggered really more by macro stuff but is almost seeming to be continued for micro more technology driven reasons with a bunch of these new you know um AI toolings other other types of technologies that are coming out too maybe we can get to that a bit more um yeah today but but that's but that's actually really interesting because it's one thing that I've noticed and this the past year has confirmed to me is a a lot of the things that we feel are wrong

or different about the ecosystem it really requires a shock to the system to reveal those things so yeah here's a great example uh in the past year we've had some great I would say like single to double Style game releases that are box games at like 30 to $40 I mean even in the last six months we have hell divers 2 we have power world we have batro right all games are costing $30 $40 we knew as an ecosystem for a number of years that the market segmentation of free to-play versus box games versus everything else should exist but when the getting was good and people were making billions of dollars no one was focused on that type of Market segmentation information once the economy started to shift we're now very clearly seeing things that you know you and I have talked about for a couple years already but now the market has to respect which is hey if you need right away you need to get this infusion then

box games are the way to go and by the way Millennial men very clearly prefer to pay 30 bucks play a game for 30 minutes and call it a day then play a game for 100 hours and feel incredibly insense to pay $2 yep funny how that happens uh let's go ahead and switch gears and talk about new platforms we have a lot of areas to to cover today but I wanted to start with like a big picture far out question um it's really more of a thought exercise because there's no way we could actually know the answer which is 10 years from now Seb what percentage of the time do you think people will be playing on platforms that have either minimal to no traction today so this would be like you know it's not playing on Steam it's not playing on Playstation maybe this is playing on Discord maybe it's playing on your messaging phone app maybe something else what do you think

yeah I it's it's an interesting question uh there there are two things to unpack with this question one you've already discussed anyone who says they can predict more than 24 months into the future is like full of it I think we can all agree on this you can feel the narrative flow of Market you really can't figure out what happens in 10 years my my go-to example for the last three years has been think back five years did you have covid in your your production sweet no one did right uh my honest answer is percentage that they're not playing on is actually a really interesting word and that I do think there are a lot of platforms that people are aware of but that the number of people who are playing on them is a different term so a good example would be Discord right Discord has hundreds of millions of users people don't consider Discord as a gaming platform my expectation is that that's going to increase in market share and so I would say 10 years from today day if you

account for things like Roblox or fortnite and those ecosystems that's not playing on PC or console but inside of those games as ecosystems none themselves that I would say over 50% I would say the majority of players are going to be finding themselves playing these different ecosystems and why is that well the reason why these ecosystems are so interesting and why I feel like there're going to be more and more players on them is because they was this assumption in Venture world that it's going to be a winner take all Market that these games and ecosystems will somehow become new technology and new platforms and they're just going to capture the entire market like the Apple App Store did and what's become incredibly clear just not only in the numbers as you can see in terms of uh the numbers between Roblox and their age versus fortnite and their age but in the game style in the game style I think is something that like it blows me away in terms of How It's playing

out you don't see Shooters on Roblox Roblox Shooters are like a sub 10% genre on fortnite Shooters are north of 80% genre right you you you be surprised and shocked when a shooter takes off and does well on Roblox and you'd be surprised and shocked when a non-shooter does well on fortnite this type of marment segmentation is happening across the board which allows us to have more and more platforms across the world and we have even talked about the international markets where it's already part of their workflow to play on platforms we in the west just haven't heard about yeah so over 50% is your guess and I that's sort of what I was thinking and my mind is sort of around there too um who do you think the contenders are in this maybe some of them we can already name obviously 10 years from now there will be platforms that probably haven't even been made yet using technology

that's not really existing yet but maybe maybe you can play this out a bit on like what do you think the contenders are like what that could look like that's a bit different from today yeah I I I I have the I have a thought and hopefully this is not too much of a spoiler but if it is and and you're watching treat body problem skip forward in next 45 seconds which is that there's a theoretical physicist who goes into future 100 years in in that book series and he's still able to teach theoretical physics and he turns the camera where with the metaphorical camera in the book and says you know if theoretical physics is still theoretical physics 100 years in the future we're really screwed and similarly if there is no new platformization or new technology in 10 years we're going have led a fairly boring decade uh in the game ecosystem I think that would be very bearish for us to have the same platforms we do today in 10 years there has to be change because that's really what propels the future and I think there's a lot of change I think the easiest answer which

is weird to say because it's like probably not the answer people are thinking of is is that like a lot of the biggest contenders are not the ones we're thinking of at all right now it's not going to be fortnite it's not going to be Roblox like my approximation is that it's going to be WhatsApp it's going to be WeChat it's going to be Tik Tok it's going to be Facebook YouTube places that have not we don't associate with games right now and and the reason for that is actually purely a number situation I don't know if you know this but there are two billion monthly active users on WhatsApp there's 1.3 billion monthly active users on WeChat there's about a little under a billion monthly active users on Facebook Messenger these people somewhat overlap but you're talking about some massive majority of the world is using these Platforms in order to talk to Grandma effectively or talk to the person who's helping book their cars or help them order food these ecosystems especially outside of the United States where a little bit more segmentation in terms of the app world

are just ubiquitous use all apps around the world the there was a a report that came out last year that basically said that something like 30% of wead users play video games and they're willing to play video games inside of their ecosystem 12% of Facebook Messenger players still play games inside of the Facebook ecosystem now now think about that for a second right 12% of a billion is still like over 100 million users right these people may not be considered Gamers right now in the traditional way that people are talking about gaming but they're definitely Gamers and as Generations go forward in 10 years it's going to be very hard for the PlayStation 7 or six to keep up with two billion monthly active users in terms of uh playform and and where they're playing through well that's exciting let's go ahead and dive in and talk about some examples and we'll see where this goes um and let's start with Roblox which is the latest example of a

breakout platform that's already at scale so I wouldn't even necessarily consider this as like one of these new platforms uh for the future but I want to talk about it because this is where your company Infinite Canvas started building if I'm not mistaken and where many large games teams today are looking to build next at GDC there was a ton of Buzz about how like existing games companies who have already been successful on mobile or console PC are looking to start building on Roblox in particular or at least try it out and you know see what it's all about which I thought was really interesting but at Infinite Canvas um you guys put a lot of effort into building on Roblox but you also started putting more effort into building Beyond Roblox 2o and so I'm curious is there anything about the platform itself that you've changed your mind on over the past year or so um that has led you to also to like not put all

of your eggs in that one basket but to look elsewhere um at these other Cutting Edge places that other teams aren't thinking about that you think would help all of these teams who are now eyeing Roblox Roblox is an awesome platform we're huge fans and we're incredibly lucky to have done a lot of our studio and Publishing work inside of Roblox we were fans a year ago we were fans years ago we're still fans today diversification outside of Roblox was always part of our game plan it one one thing that's always important to know when you're thinking about Venture scale gaming businesses and and we'll talk a bit about this later is that you need to get to a certain amount of ARR and you need to have a certain amount of hedging against the es and flows of any platform uh Rising Tides lifts off boats however you don't want to be purely uh beta against a specific platform that's not a great way to run a business it's

important for diversification it's also why we're seeing diversification of existing companies into Roblox because it is a platform it has a great ecosystem it has some really interesting players people make some really cool things for for those there's two things I can say about people going into Roblox and two things for people who are already in Roblox the first thing is the way that Roblox user acquires and the flow in which people discover and play games and their half lives are very different than anything we've seen in Mobile anything we've seen in casual core H hybrid casual it's just very different in the ecosystem there's a lot of Revenue and money to be made and certainly there's going to continue to be so but certainly one thing that we saw in the past year is you know the longevity and halflife of games that are not the top 10 games started getting shorter my assumption is that this is probably good for Roblox that roblox actually benefits from having a lot more chur in the top 50 top 100 you really don't

want one game to be in there constantly unless there's a lot more happening there but that turn I think is interesting and should affect how people think about building businesses on top of Roblox I think Roblox is one of the greatest platforms for Indie small developers who want to just make something really cool and reach a broad audience it's certainly an ecosystem that you need to develop differently for so an example of this from infinite canas is that development cycles for Roblox games you know were were weeks maybe days at a time in part because we had to keep it that short as a function of what people cared about and how we were monetizing that's not the case when we build for other ecosystem we still buildt fairly quickly but we're still talking order magnitude of a couple months if you're spending six months building a Roblox uh initial test that's almost certainly a mistake like it is almost certainly the case that you're not going to get enough reps in that ecosystem fast enough to justify

spending that much on One Singular deployment I have yet to see anyone do that exact one thing and do it well you just need a lot more reps and so that I think is the biggest thing I recommend people in Roblox for people leaving Roblox or people who are already developing roblo I I think it's really fun to go out and you know flect your game development muscles on different ecosystems uh we we see this in terms of poker players there are some poker players who only play no limit hold them there are people who play both cash and tournaments but there are people who play do7 triple draw Pot Limit Omaha and what we see is that when you flex your different muscles you just SC better at the entire muscle of Poker and similarly I think a lot of these guys and gals who are working on roadblocks would be well served to flex their muscles elsewhere and and see if that will give them types of cross- learning and that certainly has helped us a ton so I do think that over the next year or two we probably will see this big push from the these uh traditional gaming companies uh there's

probably better tar to use but from those those companies going into going into Roblox how do you think that's going to play out do you think that they at large this cohort will succeed and there will be like this new more professional presence in Roblox do you think most will get washed out and get disillusioned by what's by the traction they get the revenue that's possible on that platform maybe somewhere in the middle leaning in a certain direction what do you think yeah I mean I I think by definition uh I will always bet the field right so if you have five AAA Studios or 50 AAA Studios coming in it's not that they're just competing with 50 kids they're competing with like 50 million kids making games right like and so the the odds would suggest that like we should take the 50 million like they're much more likely to create something interesting and B uh one one story that

blew my mind while we were working in the ecosystem about 18 months ago now was a game called Duck game it was a Vibe game if you've never heard of vibe games they're the style of cozy's games if you haven't heard of cozy games we should have a conversation that though these are very esoteric but interesting game ecosystems the game Loop had nothing to do other than Chill on an island and watch a big duck float around and try to get on the duck it had you know I want to say 100 million like Impressions over the first two weeks it was doing a ridiculous amount in terms of mind shareing the ecosystem it was clearly built in under a week it was clearly something that would like hit the Zenith of the Zeitgeist within that month or two and then you know no one talks about it anymore but during those two months it was probably one of the biggest games on Roblox that type of zeit guys is something that we as older game developers and it's Weir say older to game developers because coming from

GDC I've spent a bunch of time with game developers who are you know were there since the first GDC in the 90s and and certainly they're my senior but we know we can't compete with that type of Psy guys we're not on the the dis like 100 discords or 100 Twitter threads talking about the latest memes and making stuff like that that's hard to compete with I do think there's G to be some really high quality games that come out of these Studios I would almost always assumed that some of them are going to be good but when one group is making a million games one group is making 50 you have to bet on the million yeah it reminds me have you seen that simulator I forget what it's called it's like epic battle simulator something that pits up like 1 million toads versus like a giant Bowser or or like Thanos or like these weird um I these weird matchups it's that's what it reminds me of and sometimes the 1 million toads from from Mario uh they end up winning um and it's it's those are so funny to see um anyways just funny analogy there uh

let's talk about ufn we're about a year end um from infinite canvasist perspective what's the viability of building on the platform right now have you changed your mind on anything here from what you initially expected it was going to be for for your business what are your current thoughts yeah I think GDC last year we people were coming out thinking that ufb was the Roblox killer we talked about this briefly uh at the top of the show but you know people think these platforms are going to be ultra competitive and that there's only going to be one UDC platform but it's very clearly not the case Roblox and fortnite's audiences don't overlap that much on a relative basis right the age ranges so far and and probably forever is is is sort of our hypothesis here right it's just that it's just a function of the the control schema and how people are used to playing the games

what they're used to Roblox doesn't have a great first person or third person shooting mechanism it probably never will it's not conducive to that as much as it's for everything else fortnite is inherently a shooter that and everyone's trying and build on top of the shooter that I think is so important to look at and I and I would go to bad to say I think the most likely outcome is that we have both fortnite and Roblox existing in tandem of other platforms and you know fortnite destroying Roblox or vice versa now to to the question of what's changed you know what's really interesting about ufn over the past year is just incentive design ufn has changed how people are paying out like probably every few months over the last year and what's been really interesting is to watch the style of games that change now the shooters that were Shooters at the beginning those continue to be very successful and popular and platform that's probably not

the intention of ufn right the ufn intention is to create really interesting new game formats and have different people come through uh I'm I'm an investor in a company called Barnyard games and I think they're doing a really cool game with they have a golf game I did not expect a golf game to do that well on on fortnite but they're absolutely crushing it and then and props to JB and the team over there for doing that we feel similarly inside of infinite canvas which is that we are interested to see how the different incentives change if it goes from incentivizing play hours versus skin spot versus some other metric I think really changes how the uh the format goes and how the platform goes I will also say that U the other the second point that that's just true for all development Cycles across all ecosystems we always assume that things are going to happen faster than they are I I I like to say that if you're

remodeling a house and you think it's going to take six months you should multiply that by 1.5 and it'll take closer to nine months and the same thing for making a game same thing for expecting things from a platform uh via Roblox via fortnite all the things that they want to implement are going to take longer than we anticipated and it's just a question of how much longer and we'll see what happens there yeah do you think the incentive design of the platform will continue to change I think so although there is a hilarious lag on the incentive relative to outcome uh for those of you who don't know uh if you run in a company that does work with Roblox or fortnite your accounting is a pain in the butt like a huge pain in the butt we get our data from Roblox and fortnite how much we've made in January sometime around March like sometime early March and so my co-founder t shaar has the both the pleasure and the headache of trying to account do our

accounting and send our investor memos to let people know where we are financially and it's always there's always a lag because it takes a little bit of time to figure for the payout to come through all reasonable but that also means our incentives and building towards the incentives are on an even larger DeLay So if you combine the Insight that you really shouldn't be spending that much time building games uh for for some of these platforms you want to get those you want to have fast iteration in speed combined with the fact that our feedback is not only delayed on the changing Financial incentives but also like 60 to 90day delayed on payment to see how well we did it makes for a very hard ecosystem and one where we just spend a lot of time thinking about taste and like do we have it do we have taste and are we able to implement it properly cool well let's go ahead and talk about Discord um and we can break this into a couple parts I think the the first thing we need to discuss is really just the state of

Discord so Sebastian maybe you could give us an update on where you see Discord going as a platform and what its trajectory is looking to be from a games company point of view here that's a great way to frame the question Aaron Discord as far as I can tell is not only a chat app it's it but also it's a social network it's a games publishing uh platform it's a game Studio platform and it's almost certainly a ugc platform and I think that is something that is hard to wrap your head around unless you spent a lot of time in Discord and you've spent a lot of time thinking about what the future of Social and consumer can be as you got as some of you may know but and certainly eron does I spend a lot of my time as investor at the intersection consumer and gaming and it's just very clear that gaming is eating consumer gaming is eating consumer whole and any

app that is trying to monetize better retain better and has already done the user acquisition bit benefits massively for being a games company in some version of this we see this on Netflix they have the users games company you see this with YouTube they have the users games company you're seeing this with Discord they have the users games company uh it's been a lot of fun to watch we saw iterations of this prior you have like top.gg if you ever go out there you see a lot of the chatbot bot interactions to create like text based games that's stuff that Infinite Canvas has played around with a ton you're seeing a launch of effectively their experiences platform so not only do you have that you also have an SDK such that you can now make actual in-game bits for Discord as an ecosystem they're really pushing people to download their entire app and not just function as a web app there's a reason for that it is such a powerful platform because the users are already used to using it for their game playing ecosystem and so I like at the

top of the show we talked a bit about what platforms I'm very bullish on WhatsApp WeChat messenger those are the platforms you haven't heard about but if you haven't heard about Discord and how Discord has the potential to being an amazing game platform uh Discord has to be the top of the list yeah well tell us a bit about what you've built on Discord so far and what you've learned from actually you know giving it a shot and being on the front lines of experimenting there oh man oh man uh I I I poize to all our colleagues at Discord and the people who run on the open source if you're getting a bunch of pull requests from people at Infinite Canvas like uh know that they're great engineers and they just want to help but you know it it's it's developing in the wild west again I think that's something that we really enjoy doing as a company uh you know Infinite Canvas is a fairly Senior Team uh we you know we most of our team I think we have like one person

in their 20s on our team now like the majority of the team is fairly senior and so we enjoy the the exercise of building on new platforms uh you know last year around Q4 we built and launched a game called creature craft which was a completely AI powered game using off-the-shelf llm technology and generative AI technology to create effectively a card game and card RPG game in in the ecosystem uh we got to about 1.9 Mill user reach which was pretty awesome we saw a lot of interesting play and we learned a ton about not only developing games on the platform but also like play styles on the platform so couple fun takes for those of you are interested one on the AI side you really can't do scarcity as it turns out in in the way we used to for gachas it is hard to push a gacha like system when people inherently know that you can make an infinite number of things yeah you know uh um one of our uh one of our our data science leades and

PMs van uh was joking that our company should be called limited paper if we were going to do more gotcha style games as opposed to Infinite Canvas I thought that was a pretty good line and I think that's certainly true in the ecosystem two the play behavior is so different and we knew this going in but we didn't realize how different it would be what I mean by that is that this chord if you think about how people use this chord is it's in the background the check it once in a while they're not open on it as much as unless they're watching something with friends or actively having it as like a secondary app to playing TFT or other games that means that games inside of the ecosystem have to look different like games often to right now are a little bit more anime gacha style games games where you can you play for a few minutes and put it down for days at a time that seems to be a pretty good indication the types of games that you're seeing on the platform but in terms of ease of reach in terms of being being able to acquire users you know

this is some like roadblox like numbers in terms of how how quickly we were able to reach an audience like I think we got to like 1.9 million in like 10 weeks it was pretty crazy that is pretty crazy um how do you see this playing out over the next few years um I know a lot of it is still pretty nent and their tool laying Discord itself is figuring out their own business models here uh and so obviously like their support um and what they choose to enable as a platform is massively important for enabling everyone else uh but you know based on these early successes are you seeing a direction here now where you're starting to feel more confident that two years from now three years from now we'll see this level of gaming activity and these types of games existing and being successful on Discord or do you are you not sure yet no we're there's a there's a great uh

Creator and colleague of mine named Avi gandia Trader logic he's he's brilliant you know was a first digital agent at WME IMG and then uh did a bunch of stuff for patreon and a bunch of other companies just a really brilliant guy and and he always talks about Creator incentives and how money is what drives true creativity in a lot of ways and that and that and sort of a weird combination because obviously people are creative inherently and the money comes later but but that like if you have one platform that gives you money one platform doesn't give you money people block a platform that gives you money it's like the the best reductionist version of what he says we don't know deep down we have no idea even as people who spend a lot of time on these ecosystems I spent a lot of time talking to my fiance about how most of the stuff we worked on will fail because that is the base rate things we work on we enjoy making games we enjoy

the challenge and as a business we're confident that we can see hits as we Deploy on these ecosystems and that having a lot of users enjoying your games in retained fashion is a noou way to make money at some scale and we're confident in our ability to do so we saw this in orts we saw this with YouTube we saw this with creators we believe this should be the case for games that's fundamentally true will it be Discord inherently it's unclear you know we spent the a bunch of time messing around with exola inside of Discord you saw a ton of drop off between people trying to like work inside Discord and getting the paid for things if you have three clicks are off platform you're seeing like 80% 80% loss in terms of click to payment right that's not sustainable from a you know 100 million AR type business we do think that Discord has signal to the market that they're moving in that direction it's clear that they want to IPO at some

point soon this is more the investor had on it's clear that showing revenue and showing throughput is important and I think they're going to do well there the thing that Discord has a chance of doing which I'm super bullish on is if anyone looks at roblox's uh like quarterly reports which I know Aaron does but I'm not sure if anyone listening to this does but one of the things that they do is there's this like Nuance language where they announce and report gross bookings as opposed to profits and revenues in a lot of their reports the reason for that is there's a lot of money floating inside the Roblox ecosystem I buy a Roblox gift card for my nephew he then deposits it I've already given Roblox $100 however or or let's be honest $20 he's not getting $100 of Roblox credit but but Roblox doesn't see that converted into profits until he then spends it and it's burned into the ecosystem Discord has has a chance to do that I think that's going to be really interesting to see how they

set up monetization certainly not their concern this moment uh but like Discord monetization has always been a huge headache I going take a second to describe what Discord monetization looks like right now it's mostly Nitro it's mostly some amount of money that's around $4.99 and definitionally from an economic perspective Nitro is either massively overpriced or massively underpriced there is no version of the world where discord's Nitro is properly priced because the type of power user who wants to spend a bunch of money on Discord almost certainly is reaping a lot more than 60 bucks a year worth of value from Discord someone argued everyone is reaping much more than that and the type of person who's spending um spending $1 could really get them a much higher through put that that's the mechanism they're trying to hit and so pricing on Discord has been hard because the community is used to not spending any money on the platform

they're used to receiving this massively expensive service that does Real Time Voiceover IP which was a technological Wonder a decade ago or two decades ago for free and at scale and at cost and able to stream 1080p video to all their friends instantly that's the expectation and so yeah when you have that as the offering monetization looks a little bit strange yeah let's let's go ahead and and talk about AI there's still so so much more to to dig into um I guess the best place to start here is just for you to tell us about your work building games so far with GPT components what have you done so far what have you learned so far and specifically um like what have you already seen about AI being able to unlock new creative surface area uh honestly on my end I find it absolutely ridiculous that people assume that AI gaming somehow is

fake or somehow not real because they think it's all hype the honest answer is that AI is completely changing a large SWA of the gameing ecosystem in ways that are perhaps less visible to those of us who aren't working in the day-to-day for one using gen tools to get 80% away there is honestly a great way to deploy and think about the ecosystem here's a good example uh you don't expect a 22- year old college grad to be correct 100% of the time if you expect them to be correct 80% of the time like mazov you have a much more bullish view of the world than I do but 80% is pretty good and that's really what gen allows a lot of our designers to do which is quickly scope together the conversation between producer and product lead and designer to align on Vision that speed has gone really far the second thing that's happening in Ai and that we spent a lot of time on is that when new technology comes out it

takes some time to create new formats the best analogy I've heard is the radio right when radios were first invented they just put Broadway plays inside of the radio right like it made no sense it didn't capture everything but that's how we first started and then we had radio plays and then we had a lot more of radio as an ecosystem when mobile first started the first games that I had a chance to play and work on were these like 45 minute RPGs that clearly is not conducive for actual mobile engagement and play we now know that it takes time to develop new formats there's a lot of focus on what the future's going to be there are companies like latent that are doing really cool generative uh work around physics engines that's the future what Infinite Canvas focus on is that we're effectively a middleware company we take these new tools and we figure out new game types that weren't possible before and then we try to find the fun and

finding the fun is a is a hell of a journey but that's what really what we're focused on awesome and um maybe you could even just take a moment talk about like what what have you built so far uh with it like what have your handson like exact learnings have been from like the specific things you've built I think that would just be fascinating to ground that in the the details a little bit Yeah there there are three categories of game development I will say one is just general level development it is pretty good at putting together levels and content for existing games and so like this is sort of the secret sauce a lot of the games that we have already use Ai and they already use a lot of the generative AI Tech as well as just simply like scaffolding Tech in order to build out levels and design way ahead of time and so vast majority of our games that you see probably use Ai and you just won't know and we're gonna probably keep it that way so like it's like it shouldn't affect your experience if you don't know

this we've done our job so that's that's one category of game the second category of game um like obviously we've talked about creature craft inside Discord we've also launched a game that we built in a hackathon called prompto you can go to prompto p r o m ptle e. G uh you know that's a game that uses effectively image recognition as longside gener the technology in order to determine like how close you are to getting to an answer we never seen that game style before and and I think it's really cool and it uses technology in a really fun novel way we've been spending a lot of our time on mobile puzzles like we're we're doing a lot of puzzle design puzzle creation and level enforcement and so one thing that is uh the holy grail and and I'll take us uh take a step back and say calling somebody Holy Grail is never a great idea typically because you know just spoiler alert they never find the Holy Grail one one Holy Grail in Mobile gaming puzzles is that you really want to ensure that the puzzles are fit to

the user you want them to be fun you want them to be hard but not too hard and that type of difficulty modulation super hard typically because it's hard to figure out someone's ELO it's something that some people worked on but there's very like lowlevel implementations we've been doing a ton of that in our games and so a puzzle game a word puzzle game for example that we're working on uh modulates after a certain point relative to how good or bad you are at the game hopefully in a seamless way that doesn't engender the type of uh hatred towards that but rather it's it's fun it's found it's there's a lot of fun stuff there oh that's cool um and one big question for you here in in a previous episode I asked you something along the lines of like with AI which is going to be more disruptive to gaming it's potential to help create games or its potential to distribute games in new ways and you said distribute which at the time thought was really interesting especially from someone who is you know

at the the bleeding edge and like using AI tools to create new types of games do you still think that and and if you do uh like maybe you could just unpack that a bit more for us because I think that's a fascinating Insight yeah yeah to to reframe the question one of the coolest things about technology in general is it lets you make new things things of course but the most important thing that any platform that we work on period And this is not only true for for AI but also for mobile and the internet is distribution if you can't get like the the adage goes if a tree falls in the wood and no one's around to hear it did the tree fell obviously the tree fell but like no one's around to hear us no one cares is really the takeaway there that's almost certainly true for every new technology we've seen it's going to be true for every new technology in the future which is the biggest impact is getting users into it what we're seeing

with AI as as opposed to user acquisition is we're already seeing it generate new ad formats and new ad content at a much faster scale that allows us to use the existing AB testing tools or just the meta platform to figure out golden cohorts at much cheaper and faster scale than ever before you don't need to have new technology of 3D animation 3D generation to know that an ad format that can acquire more users quickly is going to be incredibly valuable and Incredibly cheap the thing that when I talk to um experienced game producers the thing that keeps everyone up at night well there are two things one is the fact that their game may may never be fun and they'll never know if it's fun until it's fun that's obviously existential and and we talked less about that but then there's also the bit around golden cohorts and how much user acquisition costs and can your game survive if the C LTB curve is different if you can really reduce cost if you can really reduce

cost of acquisition and do hyper targeting at scale that makes a lot of game formats possible in ways that we previously weren't able to let me unpack that further and and I know Erin loves when I do the the the unpack further thing which is no idea please there there's the there are two ways you can unlock further game development section one is stuff that was really hard to code or really hard to create edge cases against there are a lot of styles of games be it your um your Rog likes your procedurally generated games your like asset based games that benefit from having more compute effectively because they will make better fun more fun games and having a fitness function that allows you to like really churn out the unfun parts of the game that's going to make more fun games period that's awesome we can ignore that for the time being it's a huge category it's where we spend a lot of our time Infinite Canvas but that's one part the other side is a math

equation if your LTV is higher than your CAC you have a game if you game makes more money than it costs to acquire users for your game or it cost to make the game you have a game if it doesn't you have a project and your project is not profitable and you're going to have to go back to work and do something else at some point a lot of games die on the gra bind in part because they're fun games but they can't compete with the user acquisition cost that Monopoly go is able to pay because they monetize at a much higher rate than yours if we can instead create a lot of hyper targeting using specific AI tooling or we can figure out a way to reduce the cost of acquiring users or we can distribute it better on Tik Tok or we can distribute it better on these like ugc social agic platforms suddenly games that historically would have just lost to Monopoly go or lost to a AAA title now can exist and now they can find a non and they can make money and they can like sustain a

career for people that's huge that's just as big but almost certainly much bigger than creating new formats it's the ability for existing formats that historically would find a niche audience and then they'd have to move on now can sustain people's careers and lives we see this in Roblox we're seeing this in fortnite and I I think we're gonna see this everywhere yeah I think that's massive and it'll be fascinating to see how exactly that plays out um and you know what the good and bad actors are um and you know like pushing this technology forward um in the face of consumers it could get a bit wacky I I expect um another side of this that I've been thinking about too is just whenever you see these new technology waves um sometimes and often these new technologies are embedded into existing platforms so in this case like better AI functionality improving the algorithms of Facebook or Tik Tok that make them

you know better tools better platforms to Target Gamers to have games on whatever but at the same time new technologies also enable entirely new consumer apps that just do new stuff that and we've already seen with chat GPT it was I think the fastest app ever to reach 100 million users and so I suspect that as this whole AI wave comes to fruition and Finds Its footing um for consumers is also going to unlock like these entirely new platforms that some of which maybe we've already seen like chat GPT that will be much more than just a chat interface in the future but probably also other apps and services that we haven't seen yet that maybe will have an impact here Seb have you thought about that side of the equation at all or are you excited about that how disruptive you think that could be yeah it's it's going to be super

disruptive we're already seeing roblocks for example I love robloxs because they always are trying to push The Cutting Edge you may not agree with how they deploy their Capital but they're deploying their Capital into headcount that helps them achieve their goals right Roblox is doing a lot on AI in part to try to make their platform more no code in order to allow more creators to make things in the ecosystem that's awesome I think the flip side and the reason why AI is disruptive though especially in gaming and consumer is in part because uh games are squalled machines you know I've been spending a lot of time with my uh friend and colleague Brian XI Brian used to be the VP of product at pocket gems and we've been talking a lot about how as you become a mature games company or mature company in general you just don't have the opportunity to use new technology that quickly like there is so much more risk in integrating AI into your AAA game that's 80e time span to ship when it's not proven out versus just working

on the stuff you know will work and making money that way that's an awesome opportunity for startups because it allows you to take on that risk it's existential risk of course like things cannot work but that allows us to effectively disrupt existing game markets and existing consumer Brands because we're allowed to work with this knowing that all these machines are squalled that they aren't built to work with anything else they're built to work with technology from a decade ago and so I think that land shift is going to be really cool to watch it's something that we're already seeing and we're seeing it even the GPT store is a great example people are thinking about so much quicker if you guys don't know chat GPT has a store where you can launch game apps in there we've launched a couple things in there versions of prompto versions of other things gp4 uh gp4 turbo coming out and that's been a ton of fun as well all these things are to say for people who are looking the ecosystem that is where these new platforms look like it's where where this new tech allowed people to come check it out now there's a ton of users

who for whom chat gbt is integrates their world when you have that people going to make cool consumer products on top of them and in ways that existing players like let's say for example Activision Blizzard cannot move quickly in that direction because they're acquired by Microsoft and they have other logistical and Regulatory risk and there's a law stuff pushing them away from it there there's so many other ways we could take this conversation and there are platforms emerging plat forms existing platforms that we haven't really talked about yet there's obviously AR with which with the Apple Vision Pro having come out seems to be you know like hasn't quite found its footing as a as a device yet because of maybe decisions Apple has made and not supporting like new content well enough and seing that developer ecosystem but there's also other places too there's like um like even in the realm of PC distribution there's all sorts of activity um with web 3 companies epic gam store is out there you know pushing

even Beyond um ufn um are there other areas that you are thinking about with that Infinite Canvas that you're you're eyeing or like planning on attacking you want to experiment with we just like to hear about what else we haven't discussed yet that you're excited about yeah I mean obviously let's talk a little bit about the Apple Vision Pro the Apple Vision Pro is super cool I had chance to try it out I think anyone who tries it out thinks it's super cool it's super nent the fun fact when the iPhone came out the absord didn't exist like the App Store was a was I believe a 3Gs invention not the iPhone one invention so it takes a couple years it does take people time to get there I I think AR games in particular you know we haven't experimented with them as much because our view of AR games is much more to do with IP than anything else when you have a visual medium the thing that matters is the IP that gets people to come join one of the

coolest Parts about Pokemon go was that it's basically pound-for-pound Ingress which was the previous Niantic title but it has Pokemon which is awesome and very cool I mean I'm I'm literally drinking out of a Snorlax cup myself and so like you it is almost always the case that in these worlds in these new platforms and products IP is going matter a ton I think that is a theme that we haven't touched upon a ton which is infinite canvas do a lot of work with pre-ip we've done a lot of self IP generation if you have like the trans media thesis which I don't have but some other people do you want to have a new IP that transcends everything one thing that's hasn't been as explored inside of web 3 and epic games or everywhere else is that there's a lot of really cool I P that just hasn't been unlocked if you assume what I assume that everything that Gaming's eating consumer gaming should at the end of the day eat all IP

as well and so one thing that we're spending a lot of time on right now is new IP across the world across regions and we're looking for IP that you know may not have been considered gaming in the past but may now be games as well uh here's sort of a really really esoteric example There is almost certainly a batro version that incorporates card IP be it bicycle or copad or some of these like highend card distributor ecosystems there's a version of um uh there's a version of wingspan called worms span that's coming out almost certainly they could do IP integration with things that have dragons in general I think there's a I mean wingspan and worm span Lessa because they already have an audience but if you're a new company or new games company you should be thinking about platformization and distribution Beyond just your web through your epic game stores your AR in terms of VIs Pros you should think of it also in terms of hey what IP can really push the needle

because that's what helps often new technology yeah makes sense um so obviously there's no shortage of emerging platforms technology shaking things up but a big question for you here Sebastian um is any of this actually a new blue ocean or is it going to just change up existing market share how do you see that playing out how much does all of this really matter in terms of growing the pie for our industry you know this will certainly grow the pie for gaming period the the biggest thing that hurts gaming from a growing the pie perspective is people not assuming everything is gaming there're just too many Millennials now and and this is where I feel older uh which is that you know when were're the people shaking our fists at the sky there's too many of our colleagues a in who are analysts who are observing the ecosystem and who are

basically saying that shouldn't count as a game that shouldn't count as a game that shouldn't count as a game I think they're all full of BS anything that's a game or seems like a game is a freaking game I think that's true anyone who plays game is a gamer it's in my definition of gamer something like 90% of all kids right now are Gamers because it's actually true that they're Gamers if they're playing a game of some sort they're Gamers we've had the negative association within in the past obviously is associated with a subculture I think that's going to leave us and really all this platformization the use of AI gaming in particular allowing us to create more interesting experiences are tailored to people is going to further the idea that everything is a game and thus grow the pie substantially I cannot emphasize enough that if you are in YouTube and it makes you play an interesting version of let's say Cookie Clicker based on one of the videos you're watching that is a game

that is a version that can be better suited by Ai and three it is something that will make more and more people Gamers and that's almost certainly growing the pie overall cool and maybe to ground some of this again uh more in reality tactics for for companies how do you think games companies will look or operate differently as a byproduct of building on all these different platforms to come that just have their own unique quirks ways of working the games themselves will be a bit different um maybe you can answer that big picture but even if there's something more specific about Infinite Canvas like how you're thinking about what this company is going to look like because you're building it today versus if you were building it five years ago 10 years ago that would be fascinating to know too if you're a games company you can basically approach the world in two main ways in my opinion and I will also say that if you don't approach in one of these two ways you're

just wrong and they you're failing at some way we're at the end of the day you can approach it like an oil company in the 1900s or you can approach it like an oil company in the 2200s in the 1900s it always made sense for you to be an oil prospector once you hit it big Drilling and getting a nice oil well to take that money and look for more oil wells oil is going up in price there's a lot of oil on the ground this is a resource everyone freaking needs let's go drill drill drill in 2200 almost certainly if you're an oil company you should only if you find an oil well you should distribute the cash to everyone and you should call it a day oil one would hope is on its massive decline by 2200 there it's a it's an ecosystem that we have a lot more alternatives for and it's certainly going print money but it's not going to get there how does this affect games companies well either you're an oil company in the 19 unds and therefore you are now looking for new ways to build games and this is where Infinite Canvas

is right now we're a pure R&D Team all major game studios and Publishers should have massive R&D teams or massive m&a teams in order to find those new oil wells as people take shots and find those things and and build out their ecosystem complete flip side if you're not doing that you really should stop trying to develop anything and I think we started to see this in the last 10 years a lot of game development was about extraction it's about making more money from existing users it's about making more money from the existing IP you have I think that's a fine way to run a business it's not the most fun way to run a business by from my parls but it is one way to run a business but certainly you should either have a massive R&D or m&a team in order to like build out that ability to find more oil or you should basically be Distributing your cash back to your investors and I think that's that's going to be the big change and piece of advice I i' give to people moving forward Infinite Canvas right now we're very much in the pure

R&D Prospect space yeah so if you had 10 chips uh Seb and um each chip represented building a a project um and you're looking at all of these different platforms and you have to put all 10 chips down as your your bets uh maybe you could put four chips on ufn two on Discord and the rest elsewhere how would you be placing your chips today you know as like a new company that could only build on these emerging platforms yeah I mean so so amusingly if you were to apply Kelly criteria maybe we should only apply one ship and then and stay alive for 10 years but no uh this is a really interesting take and I think it differs company to company and differs on your incentives here's something I will say as a Founder in at my intersection if you're doing a free-to-play game because your investors are telling you that's

the only way to show ARR you should find new investors you should find people who are actually in your corner I think it's ridiculous that people are placing bets based on what their in investors want I will say if you're a venture back company we'll talk a little bit about this later but like you want to get to certain amount of risk because if you don't take enough risk you're not going to get to enough scale to justify being a B company and so like I think that is something that I think about a lot for infinite canas and for ourselves you know we've raised a little under $10 million we've been around for a little over three years now we are a company that we're a venture back company and so the decisions we make are purely based on trying to find the type of massive oil well the type of really fun compelling Superstar home run game that would get us to to where we want to get to from that definition we have done nothing but

fail in the last three plus years right I think that's something that's always fun to say because you don't hear enough people saying this we have a lot of singles and doubles we have games have made a million AR right but from this perspective of being a venture back company from the perspective of being a successful AI powered games company we still haven't found the home run that we really will feel proud about and in that sense we're spreading our bets wide we're this is not good economics if you're trying to stay alive for 20 years this is great economics if you're trying to be a venture back company this is great economics you are incentivized like we are to be a game Studio publisher in this new cool na ecosystem we're placing our bets on Discord if you had to place them in anything you can say that it's really we're placing all our bets on black and if black is AI and red is not AI we're all on all in on black and as Wy Snipes used to say always always SP on black right we're certainly all in on AI however if you were to go more platform by platform

we're so agnostic to where that's going to look and what that's going to look like 12 months ago I would have told you perhaps that was on Roblox maybe on fortnite six months ago I would have said Discord for sure Tik Tok perhaps today I would say almost certainly we have no idea uh perhaps it's mobile perhaps it's PC but it's really where we can find that intersection of users as well as reality in combination with a new game format is where we're going to be placing our bets but it's all in on AI until then awesome um a couple final questions for you Sebastian I'll get you out of here um last time around we talked a lot about Esports too because you spent a lot of time in that field um any quick updated thoughts one year later on the state of that industry or what you're excited about yeah I mean they are the audience is getting older right is by definition true and because we we're year in the future I think

that's awesome I I've been looking a lot at Esports and I've been thinking a lot about the non-venture scale of Esports and how that's okay right I think that is something that uh is almost certainly the case that in the traditional investing model you don't have to be Venture backal right one concern I've always had with venture capital is that the way you succeed in Venture Capital as a traditional VC uh is and and David horn go at Lobby says this all the time which is you have to hit a 100 million AR that's that's recurring Revenue right like annual recovering Revenue 100 million and then really if you want to be a successfully publicly traded ipoed company you have to grow 50% between year one and two right you have to go from 100 to 150 million ARR are there Esports teams that are getting there probably not are there Esports businesses does that mean that they're bad businesses no like if you have that many eyeballs they're a good business and I think a lot of what's happening right now is that shifting of

focus one of the coolest things I've seen in orts and I've talked to a lot of my colleagues and I still help out on is how do you then build incentives for your employees to stay now I think it's going to be really interesting seeing that space if you are if you've sold people on the idea that they're going work for you for four years and you're going to have a billion dollar exit that's almost certainly not true how are you going to retain your customers that how are you going to retain your employees it's going to require a different ecosystem and I've been very fortunate to be privy to a lot of those conversations on how that's going on people are thinking about it but certainly it's going to look a lot more like traditional sports teams it's going to look a lot more like people doing passionate things probably making less money than they would on General markets but doing something they're passionate about and that's an interesting trade-off for them so Esports super healthy in terms of the actual EOS your ship is fine across the board however it is going to look more cost controlled than it did in the past years past final question I've learned you have good

taste in books you're widely read um and so any book wrecks that you would uh recommend to games industry leaders out there um or just that you've enjoyed recently yeah yeah so I am a huge believer in not reading anything about gaming when if you're trying to think about gaming and then the reason for this is pretty straightforward if you s believe that your friends and colleagues are reading the same books as you are that means there's no way unless you're a freaking genius to have interesting novel thoughts the only way to get interesting novel thoughts is either to be so far ahead of the curve that you can consume the same amount of content and come to those insights earlier or to consume a different set of content and so I've spent a lot of time actually reading a lot of stuff that's like completely unrelated to gaming and I think that's really helpful for anyone thinking about games or ecosystems I highly recommend Chip War I think Chip War is an amazing book um by Chris

Miller it talks about the um it talks about how the microprocessor ship ecosystems come together it's just a really cool historical book I I always recommend books like power broker um by Robert Caro the Robert Moses book it's 1300 pages so apologies but I think it gives you a good sense of why people are incentivized to do what they do I think I learned more about negotiating with Publishers from the power brok than I have from any other thing I've read because it's just like they have the power they're building the land what do I have to offer like this I think that interaction is pretty interesting pretty cool you know I I would not recommend you read tomorrow and tomorrow and tomorrow uh it is a really good work of fiction but it is very depressing as a game developer to read because it's a little it's a little bit too close to home and then if I can recommend one last thing as like a as a final followup to everyone is I would highly recommend reading a bunch of newsletters outside of your industry and so I think Derek Thompson's work is really awesome

I think naic's work is awesome you probably are already reading the knic work and then I think there's a lot of stuff honestly in sports that are so applicable to business and so I highly recommend looking at Walt hickey's new website uh let me just make sure I have the URL correctly he just laed it yesterday at time of recording um but like there is such really cool insights from sherwood. newws s h wo o d. newws really cool Data Insights there um they had a piece yesterday about naming of uh of like effectively different Arenas in sports and how that shows you the economic trend lines that's so applicable to the stuff we do highly recommend reading that stuff cool yeah I've definitely learned that both business is a liberal art and that you know everything involved in making in building games is also a liberal art too and so being well well studied in a

variety of areas you know whether it's you know psychology economics you know literature whatever it is it surprisingly you know comes into play here and there so yeah if if it's if it's actually the case that AI is uh making easier for everyone to make things almost certainly that means taste is going matter more and so developing your sense of taste like Ira Glass all the time where you get into the industry because you have taste developing your sense of taste is going to matter more and more the easier it is to use AI tools to make content awesome well let's go ahead and wrap up here Sebastian as always it's a pleasure to chat with you thanks as always for joining me thanks for having me and if you guys are around you can follow me on Twitter you can find me on LinkedIn and we'll go from there 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.co or find us on Twitter and Linkedin plus if you want to learn more about what navic has to offer make sure to check out our website www.nic.edu and advisory Services again that is www .n. thanks for listening and we'll catch you in the next episode