The Truth About Gaming's Crisis: 2024 Recap & 2025 Predictions

hello everyone and welcome to pixels and profits we are back with the pixel Brothers in this episode we're going to be focusing on our Outlook and predictions for 2025 ahead of that we will probably just do a really quick recap also on 2024 and so I think we could just go ahead and get started so maybe starting with 2024 Al although we will spend most of our time uh on but in terms of I don't know events lessons uh companies what do you guys what do you guys have what what are your takeaways from 24 yeah I'll start on a on a on a weird note I would just say that this year for me was just uh more facts-based about us being in a a mild gaming recession so you know if I if I squeeze back I've been covering gaming pretty intensely for a little over 10 years um and back then like gaming from an investor perspective was just in a much different

place um major US Publishers traded at drastic discounts to uh B2B and b2c software peers more in line with consumer goods like toys uh and Nvidia made gpus and had A1 billion doll market cap but fast forward to uh 21 and 22 which was a much different story right like fortnite was in full swing we had high high-profile IPOs of things like unity and Roblox Activision was acquired for 70 billion a lot of mobile Publishers were taken off the table and compounding on that we had a lot of VC Capital pouring into new game development at a record pace so this was like Peak gaming Euphoria and and in my opinion ultimately the end of a cycle um but I think folks that have been in the gaming industry for over 10 years have a different view on the last couple years of downturn because they they've seen it before largely uh this industry is cyclical there's no other way around it um so yeah I think we've been in a recession for about two and a half years and that's noted by mass industry layoffs student closures and new games

falling flat in their face but uh you know from a more positive lens I don't think the last 10 years were a waste by any stretch I mean there's a huge difference in where gaming sits from an investor perspective largely due to Gaming's overall impact on culture and valuations and fundamentals have inflected and held materially and I I do think that we're near a turning point so that'll be my my first take away for 25 24 I would just add on the topic of the recession you know economists like to talk they like to describe recessions with letters the shape of the recession is it a vshape and we bounce back quickly right we go down and we go up is it a w shape we go down we go up we go down we go up or is it a u shape and we kind of drag along the bottom and I feel like we're dragging along the bottom I feel like it's not getting worse but it's not getting better right um layoffs have mostly well I could say they slowed there's been some high-profile app Loven did a big you know round of layoffs at itjust recently but those feel more

product specific than just like we need to cut 20% across the board layoffs I think we're past that point at this point and we're you know we're at we're at the point of more you know project fails okay people lose their jobs but like that's kind of the state of where it was before 2020 right that happened and I think that you know when we look at things like that we look at you know even though I know you guys want to talk about new releases there have been successful new releases you know sporadically Brian were just saying you were playing Marvel Rivals for a little bit right there's been some successes recently um I I think there's there's positive signs as you're saying it's just when does the bottom start to inflect upwards I think that's a that's a losers betting game right and one of the things for me with respect to 24 you mentioned new releases and it's really about how do new games get attention and so you know it it's been mentioned before and one of the things when we saw

Netflix's interest in gaming it came from when they noticed that fortnite was taking time away from Netflix right and so I think we're seeing the impact of ongoing live operated games crowding out the ability for new games to gain as much attraction as we would hope for so we've seen a number of high-profile fail failures in the market in some pretty hyped up games whether it's you know Spectre super viive multiverses deadlock and other are now fighting for attention and I think uh very recently it's become popularized about Val's recent year in review for steam some of the statistics came out that only 15% of steam players spent their time on new game released new on games released in 2024 relative to for example the past one through seven years where 47% of players played games there and 37% played titles from eight or more years ago so

we're really seeing um this challenge of new games to be able to gain attention and so I think that's going to have a pretty dramatic impact on the market um and clearly what we've seen is that when it comes to skill set it's not like uh the the guys that create more premium game products or you know kind of like um uh you know uh non-live operated game products are are able to transition well into creating live operated games so we we'll see that story continue to play out I think in the future but for me that was like a big thing that that became pretty obvious in 24 yeah I've kind of gone back and forth myself on this one wondering if some of these headlines around time spent in older games is more a byproduct of us being in that bottom part of the recovery curve and just piling on but I mean those statistics are pretty pretty Stark and and shocking frankly and I think it's just a product of having so many games in the market you know from a 5 to sevene time frame that have focus on live operations have focus on player retention and content that eventually

just you kind of run out of things to play yeah I mean it's it's weird because you see some of these old games and you know my kids are going from valant back to fortnite back to you know some of it's it's it's hard to like compete against some of these games that that are um that have such a strong core Loop and when there continues to be changes and I I think live Ops has actually become more sophisticated uh for for a lot of these game development Studio and so they've been doing a better job as well I've also personally like kind of developed a mental model I like we tend to lump every live Ops game together fortnite's very different from OverWatch right the social dynamics the the demographics the time spent Etc you know um we have to start think I think we have to start thinking about these in terms of which of these are are Quasi social platforms GTA online right no one's going to usurp GTA online anytime soon because it's it's more than just a

game I watch these stupid Tik toks this guy Samurai he rides a motorcycle and kicks the NPC cars and then they chase him and then he tries to get them to crash and wreck themselves and it's just stupid but it's like hilarious but that doesn't exist in a game like OverWatch right so there's so much more to a lot of these games that if you're trying to compete with them for time you're going to fail that's not something you can compete with just by creating a better game Loop you're also competing against a demonstrative amount of spend right like how many people have spent more than $200 $300 in fortnite in any given year and if you change games you have you lose that labrary of content that you like to to flex with or whatever so it's battle for sure stop it what about uh what about China Joe oh yeah so yeah that I think the other thing that we saw in 24 rise of China from black myth Wukong to genin impact Zess Zone zero and many others we also on the mobile side we saw that when you look at the top 10 games worldwide half

were from China honor of Kings pubg mobile last war survival white out survival and dungeon fighter Origins and in addition to mobile we're starting to see a shift to HD games from China and it's not just Wukong it's games like Delta Force that re recently launched and there's more on the way like wuang Fallen feathers ananta honor Kings World Arc Knights Enfield where winds meet and there there's just a bunch more on the way as I think that China is starting to become a lot more um expert in terms of uh having the capability of of delivering very high-end experiences and ALS and creating triaa games and one can argue creating these games better than the West at this point yeah I have to agree on China being a material takeaway for for 24 um you know I think some of the success factors are what we've talked about in the past like lower costs or more intense development cycle

uh but I also think it speaks to investment duration on behalf of Chinese Publishers right it's like it's a natural reaction for us companies to pull back on investment and Staffing when times get tough like when monetization and engagement Trends rolled after the lockdown lifts and this is all F and good but you know investors have largely looked past Lo lackluster Topline growth for names like EA and take two and Activision if it were still public but the other part of this is like while us Publishers have largely done a good job at playing defense they're also not playing offense whether that be through developing those billion- dollar franchises or acquiring them so naturally it gives the opportunity to those who have the stomach to invest in downturns and we've been talking about China for a while I think I saw a lot of competition uh in my mobile experience at glue like in the 2017 2018 time frame and I think we always just kind of guessed that it would just coales there and stay there because HD was so so hard but you know we're kind of seeing the the the fruits of that labor over the past you know call it four to five years it's it takes

a while for games to be made and now we're kind of seeing those impacts a lot more in our face I would also just add that none of this is by accident um you know a lot of people who don't pay attention to China have never spent material amount of time in or around China or in Asia in general you know probably see these games coming from China and they're like where did this come from but if you go back to 2021 when they had the big gaming Crackdown domestically every major gaming company in China shifted their strategy to growth in the west uh to take you know an analogy you know alliteration from Chinese folklore it was a Journey to the West right and and that's exactly what they've done and so this was not by accident this is years in the making we're three years into a strategic initiative to grow outside of China especially in the West on on HD you know console and PC especially and we're seeing it take fruit this year you know three-year dep cycle that that checks out right so you know it's it's been a couple years in the making but it's it's by no means an AC and you know it's there's so many

reasons that you know China can compete much more better than Western developers can both from a internal politics and internal devel you know Studio structure but also from a cost perspective um also incentives I think they do a much better job on incentives in China I've got one more takeaway from 24 but do you guys have any others uh one um I would say that uh I think 24 was an interesting year for like to generate some excitement over potential new platforms um there's a handful of Mega cap companies that have similarly continued to invest during the gaming recession so to speak whether that be apple or meta or Nintendo on a smaller scale um so I think there's a lot to be said where we are for the consumer adoption Arc for things like uh virtual reality or mixed reality and like there's two major blockers right the first is the the Chicken and the Egg conundrum on Hardware versus software uh and the other would be the financial viability for VR and Mr Studios to to take a chance on an ecosystem with a

fraction of user base of console PC and ultimately mobile but uh I mean the fact is that Computing platforms any new Computing platform will need games to succeed and and I think that last part is the most exciting for me like when does it become financially viable for uh developers to to go outside of their comfort zone and try something new yeah I I mean one thing I think is that I'll just say here is you know name me a successful gaming platform that existed without first party content um even steam has you know valve has first-party content right um Apple doesn't have first-party content and they don't seem to want to meta doesn't have first party content doesn't seem to want to so um I don't know maybe they can be they can break the mold and they can be a platform without developing content but history shows that that doesn't work and I'm curious if that changes right um for me the my my last sort of 24 takeaway is basically that people

have rediscovered that liveops matters and I think for a time liveops was seen as a bit of kind of like a sleepy you just turn the crank uh you know and for forever franchise types of games it wasn't really thought that you could achieve too much or gain significant alpha or generate a big outcome and then enter brawl Stars right and so one of the crazy outcomes in 24 was just a ridiculous turnaround that the two Franks at supercell LED in terms of the performance of brawl Stars which dramatically increased Revenue I think by over 6X or something like that and when we look on the HD side we see some titles uh for example uh comparing pubg Battlegrounds and Apex Legends you know hat tip to Mitch zamar for pointing this out for us but um you know one is growing and the other is declining and so I think there's a little bit a of a kind of re-evaluation in terms of how important a good live Ops team is and

just what kind of impact a good live Ops Team can have on the success of a product and so I do think that more companies are going to be re-evaluating um how the the teams and not just looking at these games as okay this game is kind of declining we're just going to ship it over to to India or wherever and just operate for cost I think they there may be a greater emphasis on really trying to understand whether the right teams are Behind These games and having more uh more aggressive Targets in terms of trying to turn some of these games around yeah I think the hardest thing to do in game development is to to build an audience and you know a strong base of Da and Mau and if those aren't being monetized appropriately of course like the team behind it is of utmost concern but uh you know if you have something like that that's under leverage that's largely what the large Publishers have been doing for the past three years is figuring out ways to uh make the the audience they do have captive uh monetize or you know and also not just

like spend more money but also perform for the game so that they do have something to spend money on and enjoy spending money on right and on the mobile side there's actually App Store algorithmic benefits from having a game that's been live operated for a time and certainly I mentioned some of the steam statistics but it seems like a lot of the PC gamers are are sitting in old games as well anyway so something to think about and so maybe in terms of wrapping up 24 I had I had I'm sorry I I had one I had one more for 24 um okay just from my time in ugc land and it's it's that at least from an investment and a in a profit share perspective um you know especially venture-backed you know studios in ugc space basically no one's hit escape velocity yet and we're a couple years into the significant boom of these platforms Roblox and now ufn um some of these stud Studios you know gamef Etc are you know seeing great

vanity metrics user growth engagement but monetization is elusive for a lot of these businesses and no one's hitting escape velocity on the on the financials that matter and I'm curious if that happens when or if it even does or if we have the wrong mental model about you know you know Roblox and for and epic are going to continue to take the Lion Share of profit in the space which they have been for a long time and and I'm curious if anyone really hits Escape velocity and sees economics akin to mobile games cuz right now economics look more like you know what we're seeing you know you know they're they're they're hon not even like traditional games they're more like marketing branded you know branding economics you're kind of just getting you know either paid for work for higher or some sort of you know modest Revenue share but the you know the the spending capacity of the user base especially when you're dealing with the these Venture back Studios and what they're developing these aren't you know always going to be you know native platform games they're made by marketing execs

and so it's just it hasn't hit escape velocity yet and I don't know when that's going to happen yeah and if we were to like roll back the clock to 23 looking into 24 I do think that that was like a major thesis or potential growth story was around a lot of bigger opportunities around gugc and to your point it just hasn't panned out and so that was a little bit of a underwhelming outcome for ugc platforms and you know companies that are basically staking their you know their their business around some type of ugc business but um yeah I mean myself myself included like a lot of people thought this year was going to be like 2013 for mobile um where we'd really start to see that inflection and I just don't think it happened for a lot of reasons but you know I think part of it is just the the how the users spend time you look at the Roblox reported statistics everyone spends two and a half hours a day but look at the average session length in any individual game it's seven

minutes and that's good that's like a good session length is seven minutes so all right so just speaking about public gaming companies uh and more specifically winners and losers I can start with my take and I I think it's kind of obvious that App 11 has really just been killing it and they kind of they they kind of really just kind of broke loose in 202 for executing incredibly well and these guys really know how to win they they are known in the industry as the most ruthless and aggressive in a good way compan maybe uh maybe to inter to put into this you can have ai do take the McDonald's I'm loving it and you can have them go I'm app loving it you know after this year for them sorry that's my really bad dad joke of the day yeah you're cut off yeah um you know they're winning uh a

lot um there's probably you know I do actually want to record a podcast at some point that speaks to the market share that they're taking at least on the ad side from from Unity I think there's a lot of nuance there that I think it'd be interesting for our audience to know more about but certainly I would say from an execution and performance perspective App 11 I felt was like the big winner in 24 and for losers what I would say for me and and again I you know um Matthew a long while back I I published that post based upon you know your your recommendation about uh examining bookings to um to employees and we saw that Ubisoft was one of the most inefficient companies in in the games industry I gotta say Ubisoft is probably the big loser of 24 I feel like we are witnessing the end of an era in terms of these big slow in efficient monolithic game studios and

how they operate I think a new model must emerge and I think 2024 um was the year where it just became painfully obvious and I do think next year is a year where newer models may become more obvious in terms of a path forward uh for more viable type of model and I mean I think the big monolithic game Studio still can work but if it does it's probably going to be out of China so those are some of my thoughts I don't know what you guys think and who do you guys think who would you say are big winners and losers in 24 yeah it's insane for me to to refute app as a top pick I mean just Stellar execution and kind of reaping those rewards from their software business reading into a software multiple something that we highlighted a few times over the course of the year uh I would take roblock as a solid number two um stock is up only 30% year this year but it's a solid double from early May after they took a beating on a weak quarter but since then they've

really accelerated and outperformed for the remainder of the year um going public is is a tough tough job and I think we're now like two and a halfish years from their IPO and sometimes it takes a little bit of a resettlement but for a management team to dig down and and you know reset expectations then outperform those for the second half of the year was pretty commendable and not easy to do um yeah losers Ubisoft for sure uh I mean there's a point in time where you know we've done I think probably two or three near full shows on Ubisoft um almost never positive and it was almost to the point where we were like should we even bother talking about them anymore I think for that embracer episode um because they've just fallen so far from Grace uh it's unfortunate but I hope it does turn around um my number two would be Unity uh the stock lost almost 70% of its market cap through the first half of the year uh this obviously goes hand inand with hiring Bromberg mid year and the stock has responded well thus far that was enough for me to at least take a closer

look and turn the corner on that name but uh for sure for the first half of the year a huge loser well I'll just be different for the sake of being different and won't repeat the same answer so you know if I take away the ones that you guys called out embracer has to be on the list of winners right I mean the stock has doubled since they sold gearbox and announced the split plan like you know it obviously it's still way down from where it was you know 2021 22 but I mean give them credit for making very very difficult decisions and you know come having a come to Jesus moment um and finding a path forwards that's going to be financially viable um and I you know looking ahead I mean I don't want to preview what we're going to talk about but I don't I don't know if it's over I mean the spin-off of asod is going well they just raised the debt financing and that went I think that was I got to go back and check it was over I think it was over subscribed significantly so it's clear that that's going work out and then they're going to spin off the

coffee stain business and be left with a really nice IP business sometime next year so um you know then we go back to what we talked about that you know hey is this an is this a takeover candidate with all the IP they have once it's kind of you know cut down to the Brass tax so I think embracer is a winner for sure on the loser side you know I'll just add one more to the list Microsoft's a loser I mean you spent $69 billion on Activision to put Call of Duty in Game Pass and drive significant Game Pass growth and all the indicators point to zero growth in Call of Duty on Xbox and if Game Pass Subs were growing 50% they sure as would be telling us that but you you go through the financials there's no mention of Game Pass Subs they used to highlight it when it was growing 5 million year-over-year now it's not growing and so it's clear that that hasn't worked and you know we'll see what happens as as the business continues to go and if you're Microsoft it doesn't really move the needle for

them so they kind of probably don't care but from a gaming industry perspective it's clear that that hasn't worked yeah I think that that that deal specifically was kind of a loss for gaming uh in general and it's probably about as deep as I'll go into it for now uh and I like your call out for embracer for sure after uh the last episode we did on them things didn't look great but we did take a quick look at how those things were repackaged and I would say that'd be a good lesson learned for Ubisoft maybe pay attention to what they did and understand understand the position that they're in and really make some um decisions that might be tough but really sets them up for long-term success although if I'm correct I think JK said he wouldn't buy the stock there when they did the split so well it sounds like you're long so I only try to own like four or five stocks oh we know we know yeah all right so I think with that maybe we can roll into 2025 predictions um I've got uh let's see how many do I I think I've got five I don't

know how many of you guys have but who who wants to start thre I got five also but I think Jake why why don't you start because you kind of alluded to you kind of alluded to your first one in in kind of your there for 24 so why don't you kick off there yeah Okay cool so the the first prediction I have is something that I'm just calling the new new game development model and when you look at like um the way that Western game development at least at the you know bigger has has worked which is basically a a top down kind of Monolithic game development process it seems like this isn't working and so we've had some pretty high-profile failures whether it's like Concord or a Suicide Squad kill the Justice League um but at the same time we've seen the rise of China and Chinese gaming as we talked about beginning to dominate the market um you know in 2015 China started to increasingly develop mobile games capabilities until it became dominant

and now in the 2020s we're seeing China take over not just mobile but starting with uh also in the HD Market with games like genin impact black MC Wukong more recent titles we mentioned some of these Marvel Rivals Delta Force and so I just think that we've got to like re-evaluate how this kind of game development is operating the costs associated with it and whether it actually makes sense right so I think like if we were to think about you know mentioned Activision but uh there there was also um I remember seeing some um some posts on LinkedIn about you know trying to build a Warcraft 4 or a new Starcraft at Activision and just how expensive that would be and so I think like some of these products make sense but they just can't be developed with the current kind of model that we have and so I think with what's happening today with uh you know potentially lower cost structures

out of China and their work ethic as well as Ai and things like that um we're going to start to see what I call kind of large Vector to small Vector development and what I what I mean by Vector is just like the amount of resource Time Staffing energy effort required to make a game we're gonna have to move towards more agility and this isn't just in terms of like the development process itself but like everything associated with game development in terms of approvals pre-production you know should should NBAs you know be making decisions on what games should be made people who don't who are business savvy but really don't understand the products that they're overseeing and so whether it's the structure the de decision making the culture I just think that we're seeing as as I mentioned when we talked about Ubisoft the end of an era in terms of how things were operated how things were done from a game development pers persp perspective and I think that change um

we're going to start to see newer models start to I mean there there already are newer models emerging and but I I think it's going to become a little bit more obvious in 25 you know I once had a pretty long talk with trip Hawkins who uh talked on a number of different topics but one thing that he mentioned is that he didn't believe that developers can reliably repeat making hit games and so I do think that this is a situation in our industry where it's kind of like necessity is the mother of invention I I think that there's going to be better processes and better ways in which we approach things so that maybe you don't have you know 100% repeatability but the repe the repeatability of being able to create successful products should improve yeah I and one thing I'd call out that's like similar there you know speaking of like small Vector is look at what Path of Exile 2 has done in terms of they've released a paid Alpha effectively it's not a complete game it's buggy they admit it but it's doing

very well because you're getting the core audience in to basically help you fix the game before it's ready to go you know 0 to 60 right and so I think there's a lot of things that we need to learn from various things about what's the proper way to go to market I think the old way of just releasing this $500 million sunk cost game Into The Ether and and hoping that you make your money back is just not the path forward anymore I would I would just say like just to guard that a little bit um and I talked about this in the past with games like once human which is from China as well is that there's there's a lot of risk involved in those launches that are asking for player feedback especially since we're talking about a rather Consolidated Market that has a lot of games that are highly performant a lot of content a lot of lab Ops calendars behind them and it's like you really have to take advantage of that first 100,000 200,000 players that are in in your game because if they just leave after giving you some feedback like get

you only get one shot at launching your game and I hope to see that well depends you want to see China be successful here or not but you know I think that the more they push towards things that are polished that have a lot of content that aren't super buggy from the get-go that would be a positive step for them but I also see I can see it both ways well I don't have an NBA I have a BBA JK you can kick me out you can kick my idea out there uh yeah and one actually kind of Interest specific example that that I can mention um is essentially like so I I used to work at fun plus uh worked on a game called King of Avalon which did employ a monolithic game development model and I think that in to some degree worked because we actually were not making too many changes from existing games existing Forex games like uh Game of War for example and so we we made very specific changes in terms of trying to make the game more accessible improving UI things like that but like um when I was at fun plus we had that

model in in for a time uh fun plus became the number one publisher in forx with a lot of like um you know sort of uh reskins of of king of Avalon the game that I worked on now uh one of the guys who I worked with when I was at fun plus is a guy by the name is Shan Shen who is currently the CTO of century now he had a company that actually was working on Roblox games and so um there came a point where Shong actually joined Century games having been a Roblox developer and one of the interesting things that um that I thought of was like I I met uh sha um and talked to him about how theyve how they approach game development and it was a much more agile much more lean model and when you look at the success of the games that uh Cent has now and you know um white out survival

is a you know is one of the top five top 10 grossing games of 2024 um they have made changes to their development process and I think that I I wouldn't I wouldn't ascribe all of their success to the development process and and basically the learnings from having more of a roadblox based approach but I do think that that was a factor yeah and they're one of the most they're one of the most successful Roblox developers but you know back to my earlier Point Liftopia basically make basically makes money from marketing activations it has hundreds of thousands of CC average ccus I I can check the latest numbers it's super successful but it doesn't monetize like a game which is interesting right all right any other predictions I'll start another one um we've been tip toing around this for a while but I think that 2025 is the beginnings of uh when the Activision power vacuum intensifies I would say

like you know for again for as long as I've been covering gaming Activision's sole purpose in the industry was to develop or acquire businesses with1 billion dollars of potential and you know across the space I would say they generally had a pretty good track record of execution um so stated goals with Microsoft are much less clear but um you know certainly different Microsoft's main incentive is to induce subscriptions and that's almost exclusive so with the product of like Call of Duty effectively lowering their ASP by virtue of a Game Pass I think it's going to be harder for other Publishers to push premium products in the same space um and moreover you know Microsoft is still undergoing rapid Studio rationalization and consolidation and they're unlikely to be size acquirers if we're looking for a Resurgence of m&a uh and and well I don't think this will happen in 2025 I do think we'll soon see a first year without a Frontline Call of Duty title and that would be the first time in over 20 years so I think that would be another big change for the game industry that that title has been around for a

long time and forever but I just don't see it with the same kind of muscle involved at uh as a portfolio company yeah I'm with you if ever there was a time for EA to be cooking on Battlefield and giving Battlefield one last chance this is it right um you know or someone else to step in but honestly I don't I don't I don't think a new IP can can can fill the vacuum there for COD it has to be an established franchise yeah and it just like the uh the multiplayer component of of Duty outside of war zone is just like uh it's I don't want to say it's tired but it's really hard to imagine uh how that changes materially in the next three to five years I mean I'm looking at Call of Duty being played now on streams and I hardly recognize it it's it's still very fun but um I still think they need to figure out a way for that a Cod title to exist over a longer period of Time Versus a kind of like an EA Sports once a year event I'm going to sound like the old man yelling at Clouds but I feel like all the new physics and stuff they've done in the last two cods and now all the the new motion it feels like

they made it very like super Twitchy like for Gen Z and gen Alpha who all like are just like you know all over the place and we're just the old men who don't have the reflexes anymore to compete with them and that's just kind of so I don't even play anymore civ7 will be out soon Matt you [Laughter] can all right Matthew what do you got what do I got I mean I I can go a couple different ways here but I'll start with with this one because it kind of doves tailes in terms of you know people trying to fill that power vacuum and I I I think the VC funded AAA starters will continue to struggle and a lot of people are looking at a couple games that come out right now because they're not from Activision EA or take 2 right they're looking at Path of Exile 2 Marvel Rivals and Delta Forest that are off to very good starts in terms of their steam releases but we have to remember that those are backed respectively by 10cent nety and desney Disney and 10 cent right though it's not like it's I mean it's not like these are you know Indie

Studios that are making breakout games with VC funding these are you know Studios that are backed by some of the biggest and best in the world um although the 10cent studios do operate independently it's not this is not an unproven team and IP for either of those games as well and so I just think that you know as we as I've probably said the term come to Jesus a few times already on this podcast but I think there hasn't been a come to Jesus moment in the Venture Land that a lot of these Investments that were made in 20 122 they have to mark them down and just start start you know seeing the reality that if they want to exit these for anything and recoup any of their investment they're going to have to mark them down and seize what's there because the reality of the market is not going to live up you know we talked about this in in a slack chat right that um you know for example I I joke about Survivor game survival games right everyone thinks that oh you know tarov existed so what if we casualized survival this is just one example that a lot of people

you know went after in 21 and 22 right is let's make survival games that are more mass Market well it turns out you know Battle Royale games have some of those elements and that scratches the itch for the Casual Gamer and so I feel like you know the product Market Fit For A lot of these opportunities hasn't been vetted and a lot of these games just will never see the light of day or will not live up to expectations yeah it seems like from a VC investment perspective that sometimes a lot of the money is being driven by themes and so whether it was like crypto gaming or basically betting on X Riot blizzard you know sort of sort of folks to start new game companies and now that's like not starting to really um materialize as successfully as people thought and you know some of these newer things now now it's I'm starting to see like a mini theme around India and so a bunch of you know a bunch of money starting to jump into India but like it's like this money's looking for something but there doesn't seem to be a

theme and I think the ugc theme also kind of fizzled out so I would say like I do expect to your point I I would probably expect that VC funding to reduce um in in in the future I I don't know exactly when like a lot of these funds are locked up for a while but yeah and the problem is that they raised so much money like even recently we're still seeing nine figure funds being raised right like they have to invest this money like and and where are they going to go you can't just go buy public stocks I think for for VCS especially uh mobile was a different story and and that's uh that's now a decade long story too I keep going back to 10 years um mobile was successful for VCS much because of why mobile was successful in general right you had um hundreds of millions of users being acred over the the course of 3 to five years you had very low costs to acquire customers in the early part of that that growth curve and so there was a lot of successful exits I mean you could I mean even like

Zengo or supercell or etc etc there's a lot of um Capital that had been increased by virtue of deals being done in in Mobile and it's a space where you at one point in time could develop a game for $25 million and launch with a$3 to5 million budget and and maintain a team and actually have pretty good Roi on being able to outstrip that and return funds to your your investors but I mean for God's sake like don't get involved in the console and PC business I mean all those costs go up 5 to 6X unless we want to talk about China again but um it's just not a space for Venture investors sometimes these games like a take two like GTA costs more than these funds can raise uh so why do you want to play in play in that it's just a recipe for for disaster and I think like you said it's we're not quite there yet these these these Investments need to be written down some of these funds probably don't belong there's just too much competition there too which also has weird deal Dynamics right like

supply and demand on a few deals versus adequately funding hundreds that's not happening um so yeah it's it's a it's a weird it's a weird spot to be in cool all right so I've got my next prediction is really around Ai and what I'm just kind of calling like the first beginnings of an AI native game and so I think clearly AI is g to have Well here here's how I would characterize it so kind of like at the beginning you know post chat GPT so many people got so excited about Ai and so there was all this like people just kind of piling on about how big of an impact AI was going to have on gaming and game development and then we're kind of I would say if if we're look looking at like technology hype hype cycle probably in a trough of disillusionment where like people have kind of tried some stuff like ah this AI stuff is not that big of a deal and so now I think a lot of people are starting to check out in terms of like what they feel the impact of AI on game development is

going to be but I I think the thing that people fundamentally are missing at least those who are starting to give up on AI or discount it is just the rate of improvement and growth and Elon Musk whatever you think of him I I feel is you know generally right I mean his timing can often be too optimistic but Elon has suggested that in three years AI will be able to do almost anything human can and so if you believe that then AI certainly will have a big impact on game development and so kind of like the way that I'm thinking about this and and getting to my prediction I I kind of like categorize the use of AI in game development in kind of three levels first is just leveraging AI meaning you're you're using AI to kind of help you on some tasks or improve the efficiency of how you do some of your work so you might upload some csvs and do some data analysis um you might like have um external play tests

and take all of the the videos transcribe them throw them into like a uh like a like a you know Jupiter LM notebook and then have it like do a lot of analysis for you um there you know you can you can use generative AI to create concept art and then you can like paint over it or whatever so it's kind of like helping you that's what I call leveraging AI the second level is and I think this is something that we haven't quite seen yet but I think we'll start to see next here is integrating Ai and what that means is that having AI actually take over a pipeline so whether it's an art pipeline or let's say even like a feature like battle pass where you've rolled out so many battle passes that every single aspect of the battle pass could potentially be driven and optimized and executed through AI so having AI take over a complete pipeline art pipeline or a live Ops feature or something along those lines is what the second level that I'm calling integrating Ai and I think the third

level that I'm hoping to see is where you're actually AI native where and here it's it's more about the product where but what I mean is that where AI is actually core to a new kind of game that will be developed and I think we'll start to see some indications of what that could potentially be next year or maybe even the year after and one of the examples that that I like to give is just Dungeons and Dragons right so what if they AI could be the dungeon master and you you like have a you know a complete kind of setup so that you can you can play Dungeons and Dragons with the AI as a dungeon master maybe even the other people that you're playing with could be AI as well but then that would be an example of an AI native game but the prediction is um that there will be a greater impact of AI starting next year I think we're going to see um a complete pipeline takeover integrating AI next year and then we're going to start to see some notion of an AI game I think next year but potentially in 2026

as well yeah I would say I I wholeheartly agree with the first two3 of that um and it's like for people that don't know game developers or designers they're they're very inquisitive and creative and they love to leverage new tech and I I can't say that I know a single one um that isn't using AI almost constantly in their workflow to speed things up or test theories or develop concept art or whatever else so that's absolutely going to happen um number two thinking about the the game development Loop and live operations absolutely going to happen I guess the the third part is like for me it it requires discounting the the creative quotient of developers that has made this industry really really strong for the past 40 or 50 years um and integrating AI into a game that's like at its core would still require a lot of human companionship so to speak um and I guess I just don't want to agree fully because I don't want to see it happen necessarily uh but what

I can say is that AI will develop a game um at its core I think before any other industry finds a rock solid proof point for for AI outside of Chad because that historically um this this business this industry excels on leveraging new tech to U take it to higher highs and so I I do think that's going to happen I'm not sure if I disagree with you at all I just like part of it is just kind of hard to to to speak of because I I kind of don't want to see some of those things replaced right you know one one thing I can mention I recently recorded a podcast with the CEO of an AI games company and one of the things that we talked about was the other thing that could happen that would be a crazy scenario would be if if we actually do achieve AI super intelligence because then what does that mean it means that not only can AI make the game but the AI can actually potentially be the audience the players and give you feedback on whether the game will actually be

successful or not and imagine if you're able to spin up you know billions of game development teams that make games and also billions of uh players that can tell you whether the game is going to be successful or not then there is absolutely no way that humans can compete against a super super intelligence game developer so I guess I guess the the other question there is we're still discounting the player side too right we already know it's a very competitive space so how many games that are operating at a Cadence like that on that kind of cost basis can the market sustain right because I don't think spend going to go up demonstrably over the next three or five years yeah it's like a it's it's an odd odd problem to think about I I would I would just say and those of you who know me know that I I rarely agree with President musk but um you know just in terms of like the path of AI there's also kind of a social psychological element to it Brian I

think that's kind of what you were alluding to with the number three that JK was describing like will as a society as an industry will we allow AI to fully Take the Wheel that's honestly more of a question I have than will the technology eventually get to the point where it could um and I and I don't know the answer to that but you know what there also that go ahead sorry no I was going to say but uh you know one thing you just what you guys were talking about reminded me of in 2021 on into the metaverse we we I had an interview with rev liberan from Nvidia who was at the time the head of the Omniverse and this is before the AI bubble this is still during the metaverse bubble um but he talked exactly about what you're describing in the sense of you know AI in a few years potentially will be able to you know for example you're in GTA Online you're doing missions and running your businesses and whatever you're doing there well AI can take the wheel and do it for you when you're not actively playing the game and that's just one use case so being able to

rethink what game economies can look like when AI can like manage games and economies for you um is just really interesting to me and I I don't really know where to go with that but I think that AI is going to make us rethink how we design games and how we you know excite users to want to actually come in as humans when AI can do so much for them I would think to the the other point worth mentioning is the vision that Joe is is talking about uh we have no idea how much that costs either right because I mean part of the the thesis behind AI driven development Cycles is are you gonna tell me how much it costs the one is that it should be cheaper right but I mean if you're talking about billions of curve it's wow it's going down so fast yeah well so so the one thing after an initial period of investment right yeah right well on on the cost curve and on the investment right most of the AI profit boom is being to you know Hardware companies Nvidia and server makers right now right

and maybe networking um so my mental model for gaming kind of works like this you know opportunity one JK is right and it's basically erased to zero on cost because AI can make every game for us option two well I hope I'm wrong I I hope no no no but like play for us too why we even bothering let's just stop no I I have I have three scenarios and I I think that's the least likely option two two is AI doesn't reach super intelligence but makes us extremely more efficient and brings down the game development cost significantly option three AI doesn't do much for us it actually ends up failing and we've invested hundreds of billions potentially trillions of dollars in mostly GPU infrastructure that cloud you know hyperscalers need to rent out on the cheap just to fill the capacity either way costs are going to go down for the industry yeah that's a good point yep all right next prediction who's got it well I kind of already talked about this one when I talked about the uh recession

in terms of layoffs so I think I'll actually just skip that one I will go to something more optimistic and not be just the bear of the room the whole time I think the IPO Market's going to make it comeback for gaming in 2025 I think that the market is setting up we're kind of in the late stage of a multi-year bull market at this point right basically since late 2022 early 23 the start of the AI cycle the market has been in a massive uh bull cycle S&P is up what 25% or so in 2024 so um you know although a lot of that has been driven by large cap teac and AI you know the end of the bull market is is when you tend to see kind of catch up trade and laggards before you get to um you know kind of the top of the market and I think we're 2025 we're getting close to something like that I'm not saying the Market's going to sell off 50% but I think there's going to be some sort of Correction in 2025 I think the law of averages just kind of dictate that but before we get there I think the IPO Market's going to open up and I do think you know we talked about supercell High

hiring G as a CFO a while back I don't think that's by accident he's not going there just to manage payroll for a private company right he's there to be more strategic whether that's m&a or an IPO and take them public and so I'm curious what happens there epic is kind of always a question mark of what will they do riot as well um but I I think that the IPO Market's going to open up for some of these you know Marquee names and I'm curious you know who kind of tests the waters yeah I would tend to agree with that but I think I was probably of the same mindset in 2023 heading in um and this kind of goes with one of my predictions too so I'll just ship right into that that and it's about a narrative shift for gaming um you know I'm seeing almost daily like Doomsday opinions along the lines of the death of multiplayer gaming um which is you know trickled into a much lower Quantum of funding for non-published sources and even like Publishers themselves right bigger and better and most of these opinions are derve from folks that are tangential the industry and not in it and I think they

kind of lack the scars of Prior Cycles um so narrative changes typically develop uh for momentum behind large catalysts and I think that starts next year with the unveiling of the switch successor before March and then the launch hopefully of GTA 6 in the fall and you know by and large Publishers have been quieter over the past two years for good reason but I think that changes in 2025 with new releases and an uptick in Deal making so so that's the kind of ECM late stage cycle I think you're talking about when the moment momentum has switched gaming is in the the spotlight again maybe AI starts to take shape like Joe was talking about and then you have a really good opportunity for those companies like you just mentioned uh epic I mean holy crap I mean it's certainly time right and I think that some folks are the opinion they were waiting to kind of anniversary these changes with apple and I think you know they've been anniversary six times like let's go well now they had the ufn which really hit them right that really hit their economics last year so I think they've you know entering the middle of

next year they're lapping that like I think that's a story to tell um well in your public you're also always lapping stuff too so it's it's just you know and we saw with Roblox we just talked about earlier too it's like yeah you're going to have some you're going to price at a great price you're going to get shellacked with the market roles like Matt called and then you kind of build a base up from there but you know it's just there's a lot of advantages to being a public company uh and they certainly have the scale to do it and frankly I think gaming public gaming is getting a little boring and and I'm just looking forward to that one quite a bit and then maybe if I can just add another prediction because it Dov tales with IPOs as m&a environment and you know this isn't necessarily specific to gaming this is just what I'm seeing from living in m&a now is I think the m&a environment is going to improve significantly in 25 um you know I I JK maybe you can layer in these charts that I threw in the in the document in in the video for people to see but you know we've been down for m&a 3 years in a row but private Equity has record dry powder basically and you know I I think we're

set for you know a very strong m&a year where would hit the highs of 2021 that always depends on like large deals and I don't think we're going to get both on the video game industry and just a macro as a whole like I don't think we're going to get those massive Mega deals or maybe we will under Trump who knows with deregulation but um you know I think overall there's just with lower rates deregulation from the Trump Administration Clarity on taxes right there was a risk that cap gains would go up and that would that would kill m&a for business owners right and so I think overall there's going to be an uptick in m&a so while we're talking about more companies potentially coming to Market there could be some you know public companies that come out of the market because of that I know Crest was talking about uh people can fly you know poent you know potentially be kind of cleaning up their books to get ready to sell um you know the Polish developer what do they they made a forget the name project Witcher c pro no well uh no people can fly as another Pol developer but yeah oh sorry I thought you were trying to name

no but I am excited for what you're for in 2077 or whenever they release it Matthew I think you're right just when I was at Gamescom earlier this year one of the things that became clear is that there was a shift previously over the last couple of years from new game development to live operated games and and one of the recurring themes was that some of the bigger Studios were lacking a new game Pipeline and as as we know m&a is always you know you you need growth these game companies need growth and especially if we're seeing a lack of new game pipeline that uh I would I would agree that there there's if if you're making a game and it's it's in if it's decent at all I I think you're gonna um have a number of offers there and so I I I fully expect m&a to pick up as as well just just to help um bridge bridge that Gap in their in their uh new game Pipeline and it also DS with the first thing sorry I was say it also dubils with the first thing said about VC funding right if if the VCS on some of these you know Studios start to kind

of you know have their come to Jesus moment on valuations like that will also spur you know exits to strategics to the large Publishers as well to fill the pipeline I can I can see a shift certainly happening in Mobile already and and I think that's fine I just you know I think I I spent a lot of time in Mobile m&a and I don't care to spend more time there most of the stuff is just fairly small and I don't really want to talk about that but if I'm thinking about large scale m&a from a US publisher perspective so again I don't think this changes much from Activision stated strategy you know five six years ago it's like you need to add a billion of Topline uh for these to be interesting and um that probably meshes now with how much EA and T2 make right it's like six seven eight n billion is um I don't know what the targets are there right and maybe it is startup environment maybe some of these games do get exit velocity and make 300 to 400 million in Top Line they become interesting um and I would love to see

that happen absolutely um I just I just think I I I don't really I don't really want to go back to the days of 2021 when the trades are mostly Financial engineering and the mobile side because you know I think we all saw how that ended up but I would love to see some big deals making like the US Publishers much bigger yeah um my next prediction is really around data and I believe that in 2025 there's going to be an increasing focus on data being viewed as the new source of Alpha and for any game Studio you're you're Dage with tons of data but it's really about how do we use and leverage that data that would lead some companies to key insights that could potentially mean success or failure and as as a specific anecdote this is word on the street but I believe this to be true is that you know we mentioned layoffs before app L did shut down a lot of their game studios including um machine Zone the makers of

game of war and kind of like the word on the street was that there there was a there was interest in taking that game externally or to like spin it out or something but um what app L doesn't have is Hardcore game data and they wanted to keep that data and they didn't want other people to have it and so when we look at for for example just even like like just look at web stores over the last year which has just been taking off and and many people don't know but there are some games now that are generating over 50% of their revenue off App Store and from the web store and so what does it mean to increase Revenue by 30 or 40% overall and again this can be the difference between being profitable or not and so when it comes to that when it comes to making decisions like you know there's a number of uh students that have scaled up their creative UA teams over 200 people how do you know when and and what to do with those people I I

think it's going to become increasingly obvious whether it's from a UA perspective or uh or changes that you make to to to your games or I would say certain decisions that were made on how you actually Implement specific features in live Ops to actually make the difference between growing a game or having it decline this is all going to come from Data Insights and we are starting to see at least in the Chinese companies that I speak with a large number of you know data analytics teams that are that are being developed that I mean part of it is looking at AI but a lot of it is also looking at how do you optimize um you know your organization and your game products yeah I think uh the DTC business you're talking about was one of the most bullish developments for mobile Publishers we've had in the last three to five years and it's just a huge opportunity um and I think any any company that has a game with call it 50,000 Dow that isn't doing this is

doing themselves a disservice it's it's uh it's not easy um but it's the first time in the mobile gaming industry you're able to develop a relationship with your customers directly and that speaks to yeah the value of data knowing who you're servicing the only caveat is so far it doesn't actually grow the Top Line it just it's a margin boost right huge margin boost yeah will will will it generate incremental top line growth well I mean so and that's where the data question comes in will having more informed you know first party data leads you to design games that monetize better and create more structural growth in the industry or is this just taking the money away from Apple and Google and putting it in your pocket the latter yeah I mean from a from an accounting perspective from now from now it is I'm saying in the future we'll having all of this data actually generate significant you know above expectation growth of the industry or is it just hey we're all more profitable now I don't know yeah I actually think

it will um and for example there have been times where uh you know working on certain games like a really small stupid feature can actually do things like double your D7 retention and so it's like you know it's just you've got all this data but then you know how do you how do you leverage it do you have a team that can actually get these insights from the data that you're collecting what data should you be collecting all that kind of stuff and so I I think there's going to be an increasing focus on that in 25 and and the guys that get it right are going to make a material a significant impact on their business in my opinion I would say like a highly performant mobile publisher in like the let's call it 2015 to 2018 era had like 15% Eaton margins this could raise that bar to 30 right if you just if you can get a hold of your whales and keep them engaged in your ecosystem show them the right deals and offers know who they are it's a big deal I think one

thing that dovetails with that and I was listening to Phil Black's podcast with the head of Timmy when he talking about Delta Force and how they're thinking about crossplatform and you know I'm a I'm a FIFA Player and I see it there with the companion app you know they're like yes you can play Delta for will be able to play Delta Force on mobile but they don't see like just playing the game as the primary use case of the mob mobile app they want you to be doing things like you know setting your all your kits and all your loadouts and everything and customizing stuff while you're on the go so that way when you get back home you can just jump in and play on your PC or console in FIFA with Ultimate Team you can do sbcs you can create your squads you know open packs and stuff and then you go play on on Console right and I think there's just an interesting Dynamic there as well that kind of dovetails with with that as well do you guys have any other predictions a small one um I would say uh subscription impacts uh I'm not a big

fan of subscription impacts on gaming kind of like the Game Pass model but I do believe it's increasingly becoming hard to fight given the companies involved um the amount of capital they have and then stating the stated goals of their gaming businesses and this would be you know Netflix Apple Microsoft um say startups are struggling for Capital and may find developing for subscription services to be the easiest path and I do think this have a modest impact on game development with developer solving for engagement first over unit sales or monetization um and I do think this is a potential successful Vector for AI to work given its way into development more in into live operations Loops this is another one of those kind of slow bleed catalysts that um is continuing to take shape Brian wouldn't this actually be a huge prediction if Subs subscription takes off like wouldn't this have a pretty Major Impact on the games industry I'm not saying that uh like the success of subscription impact businesses is going to inflect but I think that increasingly uh game developers will need to utilize this as

a potential Vector to make their Studios work financially um I see so I'm not sure yeah I'm not saying these things are going to rip up the charts or anything like that no one is developing games that can be consumed in 20 hours anymore like those used to be kind of like the single a games you'd buy on Steam for $10 right or you know console games that maybe were only 30 bucks right um those are perfect for sub subscriptions and to your point if the economics can work if you can get the right cost structure and the right deal we should be making those games for Game Pass and you for everything needs to be not everything needs to be a live service like give me a really good content that I can consume in a couple weeks awesome right and and not every not every IP needs to get jammed into a match three game to uh you know just it just doesn't make any sense but they have a lot of Ip that's story based already um I could see that working and I could see it as a good Vector for for game studios like they want to work on a simple game like not simple but

like a um less menus driven game let's say yep well I have one that Dove tailes there and it's it's gaming adjacent but I think it has second order impacts on gaming Netflix making a much larger pression to live sports in 2025 so we're recording on Christmas Eve so Merry Christmas and happy iconica to everyone that's kicking off the next couple days but you know we saw this with the Paul Tyson m and as much as everyone ridiculed a YouTuber fighting a geriatric the end of the day it had over 100 million people watching it right like that speaks to just the sheer power of Netflix that's like super bowl levels of viewership for a stupid boxing fight that's a joke um they have two football games tomorrow NFL games tomorrow and then Monday Night Raw is moving permanently to Netflix to WWE I'm I'm a WWE Fan you know tell me it's fake I don't care it's fun to watch it's great t TV that I watch right and uh it's coming to Netflix starting on January 6th and they're treating the the the

Netflix kickoff like a PL you know the the old pay-per-views are now called ples because they don't charge for them anymore they're treating the Netflix first episode like a PL they're having the first in season inseason transfer window to let all the stars move to raw from Smackdown to be on Netflix like Netflix is is starting to stake its claim on live sports and I think that's not going away I think they're going to be very in bidding for sports rights they just bid for the Women's World Cup rights I think I saw that so I guess my question that are related to gaming is number one do they deprioritize gaming Investments to focus capital on securing Sports rights I mean these Sports deals can be multiple billions of dollars over many years or second do they actually you know become more active in looking at ways to tie their gaming portfolio to the sports rights they're acquiring do they get more you know active in building WWE games that tie into what they're doing with bringing raw and do they you know get more active in

building football games and stuff like that um I don't really have an answer but I think it's very interesting what they're doing with live sports and we know that Sports is a genre that works in games and they'd be stupid not to tie those together that that that's really interesting I think um I wonder if those those two units even talk to each other my inclination is is to always assume not but um who knows uh the stuff they're doing in sports is amazing I thought like I'm a huge Tyson fan I certainly watch the fight I also like you thought it was a joke um similar characteristics around size of investment but you know the team sizes that you have to keep on are much different I I don't like the way that gaming is taking shape at Netflix currently I think I've been behind that for quite a while but I do think that um leveraging Sports and moving in that direction would be would be uh smart um who knows I really I keep seeing this uh Netflix GM of games i' pop up on my LinkedIn are they

trying to switch strategies there or I just give me a dirty Dom game I feel like the sports is going so well for them uh that it could spur some thought around whether or not they want to continue the current path of games or or completely change it up and I still think that if they wanted to change it up in a valid gaming strategy would be a large acquisition and I mean large acquisition like EA or t 2 size that I would get behind as long as they're operating in the model of churn reduction and just giving people more stuff to do inside of the Netflix Universe like making um you know kind of these lifestyle games or stuff like that built around the sports they're bringing in whether it be NFL right you did a Travis Kelsey and Taylor Swift game my God how many people would play that just because it's Taylor Swift and Travis Kelsey r or you did something with the WWE stars you do it with you know Mike Tyson you do something with I don't know but like you you could you know even just building

very simple mobile like games around them that are just purely for engagement and churn reduction like there is some value in that but I'm with you Brian like they're not treating games like a revenue generator they're treating it as this is a way to give more value to the bundle uh and you know if they if they do shift their stance and and and start to say hey we want to monetize games directly and scale this then yeah I think an acquisition makes a lot of sense I just yeah it seems like it's the early beginnings of the Amazon Prime strategy but I I just don't um I play a ton of games I would never think about canceling Netflix either way right but uh again you can't really draw conclusions from your own experience that's a really bad way to do things I also and I said this when embracer broke up but I think the the leftover piece of embracer that's going to have like Middle Earth and and all the IP someone's going to gobble that up there's too much value too ERS in there and few like there's too much value valuable IP there someone's going to buy

that yeah maybe I can then end if you guys don't have any of the predictions with just uh I would say one layoff will continue and then New Game Dev picks back up so on the layoff side I think there was a pretty popular recent Wired Magazine article that was shared pretty widly that suggested that 10,000 video game industry layoffs happened in 2023 and in 24 there were 14,600 layoffs so a 40% increase and so I do think and you kind of talked about this a little bit um Matthew but uh we will I think Trend lower in terms of layoffs in 25 but I think we're not quite at bottom yet so um there was like a a popular Mantra this past year about just survive to 25 I think it's going to be survive to 26 really before we start training back upwards I I believe in in 26 and um so I

I do think like with a lot of these bigger layoffs generally speaking word does leak I I think I've I you know posted a bunch of times in our private slack Channel about some of the the rumors um I'm not hearing too many big rumors but certainly I think there's going to be a number of you know some some studio closures that continue throughout 25 and um I don't think I I'm not aware of any major things coming up but I do think that continues through 25 and and hopefully we do pick back up in 26 we mentioned lack of new game pipeline for some of the bigger Studios I think new game development does pick back up starting next year and then that will kind of then help offset some of the the the layoffs that are happening so you know I guess I I would just say on layoffs there's there's always a healthy amount of attrition in every industry like there's never going to be a world again where we're scrambling for for talent like we were in 2020 21 22 right early 22 um you know

I used to cover networking and Cisco literally every August because their fiscal year ends in July they they have a GE model they cut 10% and I know that that's not like common in gaming because it's more like you know I think as I said it goes back to more kind of when projects hit a point where we have to end them because they're no longer viable those teams either have to find new roles or they get cut and that sucks for those people but that's the nature of the Beast right you're operating an industry where you're taking risks and Success is Not Guaranteed and we shouldn't reward people for being unsuccessful um we can give them opportunities to be successful and support them but when the reality has to hit we have to make those tough tough decisions um and so I don't think we'll ever go to zero but you know I think yes I think layoffs will Trend down as you said I think the big cuts are done but it is the end of the year you know a lot of companies who end their fiscal year in the calendar year usually announce big layoffs after the end of the calendar year after the fiscal year and then a lot of the large Publishers EA

take two and the Europeans have March fiscal years so remember last year we had big cuts in January February right before earnings and then we had big cuts in April and May right before fiso year earnings if we're going to have more big cuts it's probably going to be around that you know one thing I think about is like there is a scenario in which it doesn't actually fully come back right so and what I mean by that is I think that one of the other kind of uh key takeaways from 24 was and not So Much from the gaming industry but more here in Silicon Valley was this notion of efficiency and the age of efficiency versus The Age of Excess and I think the the company that most that best characterized this I mean obviously you've got like you know Elon that's been pushing efficiency very strongly we we saw the first indication of what's possible with his turnaround of of Twitter uh X and then I would say Facebook like Zuck has

like like I I I know I know people at Facebook who are pretty senior where it used to be they had so much free time like it was literally like very very um not not difficult to work at Facebook and now these same people are working weekends they're working past 10 p.m. so if so a couple of things that could happen to the games industry I'm not saying it will or will not but there's a potential is if this notion of culturally this notion of efficiency gets into the games industry we may continue to see um additional attrition as people figure out new efficiencies and as I mentioned in terms of the new new game development model what if that means you you have to have a fundamentally more efficient operations then you're not going to need as much people and in terms of the prediction we talked about with respect to AI there was a pretty famous company called uh Clara is is that the the customer

support company where they're literally just like nuking jobs left and right and they're finding better efficiency better output but here here's the other thing too is that it's not all negative right because one of the things that the CEO of Cl mentioned is that they're actually paying their existing people so while they cut people they're paying their existing people a lot more because those people are now becoming more efficient in terms of their activity there's there's a there's a higher margin to spread the the additional margin that they get amongst their employees so we'll see how this all plays out but I would say the one I I think efficiency has been you know the VC's Worm tongue whispering in the ears of Executives across technology including gaming and I think that has been a factor in the large scale layoffs at least I mean number one your stock price got rewarded when you when you announced layoffs number two um you know it it you if you're if you're going to want to do that you basically have a

free pass to do it in this environment right because everyone's doing it you can just be like oh well everyone's doing it right and so um you know but but I do think I do think the worst has passed even even with everything you're saying because I think the large Cuts have you know you can only cut out so much before you know you you take out a vital organ there was there was a lot behind the cuts that weren't just cut cut and dry right like we also had this hyper casual boom that has since subsided we had a lot of companies that got acquired that needed to be uh right sized by the new uh acquirer those are two very large factors already and I guess like just the final thought is um like gaming is a really tough place to spend a full career uh that for every person that you meet that has had 20 25 years of gaming experience uh I can find you 10 more that spent 3 to 5 years or whatever else and it's not like they can't do gaming anymore but they also have a lot of things that you learn in

gaming that you can't learn anywhere else and they take those to other successful businesses that might be messaging apps or consumer software or B2B software dating app sure anything like and and I think that's also a natural progression of um people that really know customer engagement and UI and monetization and moving that that that stuff around to other Industries um lot of history behind that so I don't think it's always like this Doom Gloom story like we have you know 50,000 unemployed game developers or something like that but uh regardless of that I do want to see this turn around this year because you know we all have friends in the industry and we would like to see us at full employment so to speak um but we've just had a lot of catalyst falling the other way for for a few years now yeah I think that's an interesting point you make Brian about the ability to leverage some of the lessons from learning uh from gaming into other Industries uh you know there uh recently somebody had posted on LinkedIn um about like finance and there's a there's an

app in India called cred they have done such an incredible job in terms of like integrating like gamification into a finance app there's obviously Duolingo Con Academy um yeah Robin Hood I mean how we gamified options trading like we turned we turned we turned like literally derivatives trading into like meme yellow games with Robin Hood yeah um I won't mention the companies but in India there were a couple of companies that were not from gaming that reached out to me to ask specifically about how do they integrate gamification into their products and I'm talking about completely uh like different industries that are very far a field and so because it's really effective at creating creating retention I mean it's proven to work in anything yeah yeah all right maybe to like wrap things up should we talk about potential winners losers from a public company's perspective for 2025 do you guys have any thoughts on that I

kind of already gave mine away but I'm I'm I'm just gonna keep riding the embracer train um you know winner it's I think it's a winner and and and I think the reason that I'm picking it is because I think the reasons I think they're going to be successful in 25 are idiosyncratic with whatever the market does I think that their continued restructuring the spin-off of asid looks like it's going to happen relatively soon soon they got the debt financing done um you know they're going to spin off the coffee stain business is kind of like the the single a and some of the other mobile games and they're going to be left with a business that I think is potentially an acquisition Target so I think there's a lot of you know idiosyncratic reasons that you can look at it and say you know profitability is improving there's a lot of good stuff left um and they're coming off of like one of the worst you know they're lapping one of their worst comps they could ever be lapping which is sorry easiest comps that they could ever be lapping as well in terms of like game releases and so I think there's just like a lot of reasons that they can continue to execute obviously the stock doubling prices some of that in but I do

think that you know just kind of sentiment Vibes if you will are strong there uh well I have uh I'm going to stick to my guns on my thesis over the past three or four months um number one would be Nintendo uh new platform and software accompanying that uh take two GTA 6 uh further uh I would say uh continue success of Zinga right like not not outwardly successful but solid grower in a good part of the portfolio and the third I would St say Unity just because self-help story not demanding on valuation um a lot of ways to win I I might disagree with you on fig you would on un un uh now now just to be clear like at our game Studio we use Unity I would love to see nothing more than for Unity be as successful as possible but I think from my perspective just like I I have

been speaking to some Engineers within unity and it just seems like the cultural change that I was hoping that bronberg would bring does not seem to be there so I mean I hope I'm wrong only a few data points that that I've um checked in on um so yeah so while I'm rooting for the best I'm not so sure they're going to be a big win next year and then clearly on on the ad side of the business I mean app L is just uh they're just destroying them so I'll I'll give I'll throw one more name in it's I don't think it's a full 2025 story no I think I think in the second half of 2025 The Witcher 4 hype for CD project is going to start that hype cycle is going to start potentially for looking at a potential late 26 early 27 release for that game now that it's in full production for the last few weeks so that's kind of two to three years so that kind of checks out um anything with any volume or market cap behind it

sorry then just go buy Nvidia then just go just go buy more invid find no no no but like okay I had another dad joke that I wanted to throw in to wrap up the Stock's been in a cyber Funk since cyber Punk flopped yeah that was bad but but no I I I think that uh you know everyone's excited for what you're for and so now that it's kind of in full production they're going to to start telling that story and whether or not you believe it like I think the stock similar like take to with GTA goes through the cycles where you kind of just buy it on the hype regardless and every time it sells off you kind of just close your eyes and buy more until it the game releases and feel like kind of be one of those scenarios the one thing about CD project that I like relative to take two is that they've actually moved their IP out of just the games world and they've done it in a really good way Fallout did the same thing really good show behind it and then take two had that absolute stinkfest with Borderlands I was on a u 18h hour flight basically over the past couple weeks and Borderlands was on the list of things to

watch in the plane and I just didn't even bothered because I heard how bad it was like just what a what what are you doing right yeah I think for me for winners you know kind of the boring answer I think is just 10cent I think they just have so much scale information Advantage all that kind of stuff so I think they just continue to roll I just I just don't know if it moves the stock like quite frankly like I think the stock not yeah I I think from like a fundamentals like gaming perspective yes but I think from like a stock price perspective like you know I think it's it's flows before hose to quote Tracy allay with 10 cent uh the one winner I'm hoping to see is just some new AI game Studio that like comes up with something brilliant so uh that that's like unnamed undiscovered winner as of yet but I hope somebody does that and um yeah I don't know losers I I think I don't want to comment too much on that but uh hopefully it's not Unity that's what I'll say it's very binary right

like I think as as someone that has to pick stocks uh professionally from time to time it's you have to take those risk rewards into play and some of the stuff you're saying is rather obvious some of it isn't uh but you know the thing trades pretty much like Zoom or you know another call bottom of the barrel OCTA kind of software name so I think it's it's it's a little better than that but M well let's put it way culture no if if if they can get something going right and get a sentiment shift there's a lot of escape velocity that can occur with that right yeah that's a pretty quick move from 14 to 27 and that can happen again and force yeah yeah all right well I think with that that's uh we pretty much have wrapped it up our 2024 recap 2025 predictions and so with that maybe the one thing I would hope for in 2025 as well is like we do have a number of uh kind of Hardcore fans that that uh

really like hearing from you guys so maybe we can make this a little bit more regular in 25 but with that I think that's it and for our audience we will catch you next time thanks guys [Music] [Music]