TWIG 120: Supercell CEO Annual Letter, Zynga To Build Ad Network, Bad Robot Getting into Games

hey everybody welcome to twig 120. we are here with myself joe kim mishka katkov and eric kresh adam is not with us this week but for today we are going to be covering four news articles first zynga is building its own ad network mulling m a by add exchanger second bad robot looking to be the rare hollywood and game success story by gi.biz third microsoft's head of cloud gaming james worksman talks past present and future of gaming tech by game rant and finally my take on supercell in 2020 as we begin our second decade from ilka ponan ceo of supercell from the supercell blog what's up guys we're we're all in weird locations we're all like eric is in his in his um i want to call it eagle's nest but don't be wrong the gamer den dude it's just it's all about video games

well it's the hq yeah it's lifting and games that's what it's all about like a bike a dumbbells and couple of uh beautiful images of games by the way the update on the 15 by 50 is i i my back got injured for the last two weeks so i've been on hiatus but that does not deter me i am going to get this done but i'm i'm basically been stable for the last couple weeks so i need to get back into it this week because i think my back's back yeah you should dick and could give you the uh the goggins book on bro was it called unbreakable or something that should motivate you a little bit i tell you i the really scary part is i bought this super fancy bike and the minute i did like a crazy like two hour ride which is a lot for me my back and my knee just got shot i'm like i spent all this money on this freaking bike and it may be the cause of all this pain and agony so i'll be very sad so but i i we'll get back into it and we'll keep going all right gaming right right all right let's just roll

into it then i guess we've got a bunch of updates starting with me first the verge is reporting that microsoft is starting its xcloud game streaming through a web browser and sources told the verge that employees are now testing this web version of xcloud ahead of a public preview so that should be coming up pretty soon and this service will allow xbox players to access not only through browser but will open up xcloud to work on devices like iphone and ipads as well but currently xcloud is available on android second update three months ago pubg corp promised to launch pubg mobile for india but according to the publication dna india pub g corp has no near-term plans to launch the game anytime soon i think this is just them with speculation but that it is true that i have not heard of any announcements in terms of pub g for india but i will say if anyone from crafton is listening i can definitely recommend a very good studio you can partner with for india called lila game so hit me up

anyway what is india's beef with pub g i i'm sorry i'm missing this there's a cup it's not just pubg there were actually i think 114 apps that were basically banned as part of the the ongoing sort of skirmishes and rivalry between india and china there have been actually some physical confrontations on their border that led to a number of bands being app and things like that oh so they're targeting chinese specific apps yeah gotcha gotcha okay sorry i didn't know that third update forbes is reporting that according to hasbro's latest earnings report magic the gathering had its best-selling year ever in the game's 27-year history so match made 581.2 million dollars in 2020 and that is actually up 27 from the year earlier in 2019. why well the card game dude the card i wish they could find some success in interactive but like i just feel like

this license is just never is destined for failure interactive but man these things just sell off the shelves but but how do that's what i mean like it's a physical game like you have to go to a tournament how how does it succeed in in cold i i assume that also includes their digital revenues for magic there there are a bunch of magic games and stuff as well and i i know a lot of people that continue to play all the time i mean you know magic's a fantastic game i i but i do agree they could be doing better fourth update ign is reporting that zynga will launch its unannounced star wars game by end of this year and as we had reported before zynga did open a brand new austin texas studio to develop the star wars game the other thing to note is that zynga in other reports has stated that it has quote a mission of bringing aaa console visuals and deep compelling gameplay to mobile platforms so you can kind of imagine that the star wars game might be

not just a mobile game but might be more cross platform might be more like engine impact dude this feel you know what this feels like this feels like raid this doesn't feel like a gentian but yeah but that would be too close to galaxy heroes i i i sorry about i mean they've got to have the game i'm just saying the game play like it's just transferred to pc you know it's not like this is not going to be a genshin type game i just don't i just can't even imagine that but we'll see yeah pc skew rather if the update appsflyer just announced a new product called predict sk basically a service that appears to try to work within the compact the confines of apple's ski ad network and predict user behavior and do some type of attribution with just the data collected using sk ad network so you know that's very limited within the first 24 hours of all the limitations imposed on by apple so i suspect a lot of devs are

not ready they're going to be caught pants down to try and optimize ski ad network and so it does sound on the face of it like a potentially good offering so folks who are interested check that out sixth update since the scc start to push back on roblox's form of revenue recognition roblox has now restated their financials and that actually boosts the revenue uh before roblox was and we kind of talked about this on previous podcasts before but they've been a little bit too conservative with how they recognize revenue and how long they defer but also in terms of the types of of um iap and how they classify what iap to defer and what not to defer also roblox is now suggesting they will go public in march and final update from me is that this friday at 12 p.m pst we are getting a murderer's row of free-to-play game designers and experts joining me and mitch zamar to talk about how to fix clash royale and

we'll hear a lot of different opinions on what to do for clash royale i'm sure it'll be chaotic hopefully fun and we'll see how this goes and on top of that i'm trying to convince matchnation.io to then take some of the best ideas and see if we can simulate what the impact of that would potentially be on clash royale so if you are available feel free to join us i'll leave a link in the show notes somebody from clash royale should join this this sounds like uh this sounds like uh like a job interview for the position [Laughter] um all right let me continue with with just one piece of news so this marks a record year from remedy despite the company not releasing new new games so remedy enjoyed its best year ever with full year revenues up by 30 to 41.5 million euros all this was achieved again without launching new games so remedy if you guys don't know it's a smaller aaa developer independent developer

their their latest title uh control was really well received across the world a lot of nominations a lot of a lot of categories wins previously alan wake max spain so i'm highlighting it even though i don't follow triple a but they're literally like the neighboring studio here where i live so i have to give them a shout out and a couple interesting things they're they're working on crossfire story mode so they're really good narrative designers they're also pretty good shooter designers because um their previous games are shooters and they're actually working on their first game as a software uh title called vanguard is the reason that remedy rates on this is because they're finished i mean is that is that the only reason we're talking about this control yes yeah control control game is are they friends of yours do you like hang out with the families or something yeah like these guys are tiny now control is literally on every platform known to man and it's actually a great game so more power to you but this is not

maybe maybe this is just pr for getting sold or something i mean why are they i'm i'm taking this p they're public so this is a public company actually so they're not looking to be sold yes this is a public company in the finnish stock exchange uh actually helsinki stock exchange which is a finnish stock exchange and yes this might be pr and i'm biting on it because they're good guys and shout out to remedy for making great games oh my god you're so biased okay what's next oh let's talk about 10 70 okay so i'm stealing this from adam who couldn't be here today but uh but he did the work so i'll give him credit um i guess there was announcement something around 10 cent and uh respawn uh getting apex legends out on mobile um and basically [Music] daniel i actually met daniel didn't they did we talk to daniel on the podcast anyway whatever daniel um ahmad is is kind of the pm or he's kind of in charge of this

and he's an intense dude um and he's basically kind of helping along the development uh which is basically being run by by tencent they're looking at a q3 release i think i don't even know if they're going to do beta which doesn't make a lot of sense but anyway but the rumor is that the specs are going to be pretty insane iphone 8 or above uh basically this is a real focus on tier one markets and certainly not going after something like arena which can be played in lots more devices but my my issue here though is uh i don't know how this game is really going to translate to mobile very well because it's so twitch and it's first person but i i have no doubt that the teami guys are going to know what they're doing and maybe they modify the game design to make it more compelling on mobile um but but we'll see you know we'll see if uh if if they can execute against it and see how well they can do but you know it's a good great development team uh daniel is super

intense and hardcore and i think he gets it so we'll see if they can build an economy and build a successful game and extend the success of apex outside of pc onto mobile what do you guys think about this one actually so so daniel is actually the uh the analyst from nico partners that's what that's who you were thinking about and yes you have you've been on a podcast with him talking about the china oh no okay right so i was getting confused i met the pm from ea oh giovanni ducati yes giovanni ducati the coolest name ever right giovanni ducati i mean dude oh do we i think i actually did this on the podcast before dude that guy just must get laid just because of his name anyway but he's married and he has two kids let's relax on that anyway he's a really good guy super intense and like he's on top on point on this and uh anyway got it that's that's what it was okay shout out to giovanni giovanni and this is actually interesting because ea is working on another shooter game they bought the um

industrial toys in pasadena uh the uh the the maker of halo uh european alex ropion his studio and there's different kind of rumors of what kind of game they're making but oh that's who's making battlefield that's that makes sense oh my god i totally didn't even know that i i actually just went through all of ea's acquisition i saw industrial toys and i know them from kabam because they were working on a game uh for publishing i think for a while but anyway or we were looking at them for a publishing deal anyway yeah that makes sense they're probably working on battlefield unconfirmed unconfirmed look man this is what we do this is just a rumor unconfirmed but most likely working on a shooter since industrial toys worked on morningstar or something like that something star game great studio down in pasadena and giovanni ducati is down there in beverly hills it's like saying the name right it's just it's just hello i like giovanni a lot he's great all right hopefully he doesn't listen to this podcast all right moving on

all right rolling into the news so first article zynga is building its own ad network mulling m a so according to ad exchanger zynga ceo frank chabot has stated that zynga will build out its own ad network including quote key components of technology unquote so basically are suggesting related to demand sites of supply side an exchange layer and some type of attribution further dubose stated quote we're also looking at acquisitions as a potential opportunity to accelerate in key areas and also potentially add steel to this initiative that we think will be powerful growth drivers for us in 2021 and beyond then cfo gerard griffin stated that its ambition is to have a quote a significant part unquote of its business go through its own network given zynga scale and then finally bernard kim zing as president of publishing also stated one of zynga's biggest costs is buying ads to promote its games on other networks so they want to

capture some of that margin so my take on this is that with m a drying up zynga on the studio side zinger now is looking to basically follow applovin's path and become more vertically integrated this announcement also really makes the rolex acquisition make a lot more sense now they were actually buying inventory for their upcoming ad network as well hence this must have been in the planning for a while now the problem with this model and just to be clear i i don't like it and we've stated on multiple occasions in the past is that this type of you know this type of business model is extremely fraught with conflict of interest what tim sweeney calls a customer adversarial relationship and the potential to do bad things very bad things with the data from their customers on behalf of their own interest on the game studio side is pretty high so anyway for many of you who have listened or read some of my material

newsletters i've been warning about this for a while and i've been foreshadowing these kinds of activities in what i call the data wars of 2021. this is the start guys there's going to be other things that big companies and small companies are working on right now to basically steal your data and it's not good any any initiative in this area is generally not good but you should be aware of what's happening some of the bad things you can do one you could use competitor data to form ad creatives and figure out good games to compete against and secondly and probably more disturbingly in a clubhouse talk last week a zing exec talked about a term i had until now not heard of called high frequency ua now on the face of it this term doesn't actually make any sense unless maybe the only thing that i can think of is if you own your ad network so there is a a concept that was became popularized

when robin hood and the whole gme debacle kind of came to public light around various kinds of customer adversarial relationships around high frequency trading around what's called uh payment for order flow and essentially just to just to summarize this really quickly like there's potential for for zynga similar to how it happens in finance to front run their customers to take the customer data and use it for their own purposes and so i would just say this just generally is a bad idea i'm not saying that zynga is planning on doing bad things but you can we've seen time and time again when big companies are put into positions with access to data that they could use to gain unfair advantage it happens robin hood was fined 65 million dollars for this they've been fined for other things as well and i think that even great companies

like amazon use their customer data to compete against their customers overall i think this is good news for zynga and if you're a zynga shareholder probably good news but for other people in the industry for the ecosystem overall kind of probably bad news right but all right before wait before we move on from that like robin hood their whole business model was doing what you're describing right their whole idea was no commissions for the easy trader and then they sell their they said why did they get fined because they were claiming that they weren't right i see i see uh it's a sketchy business model i agree i i feel like won't apple just shut this down though like not allow this to happen on their on their phones doing this right now i mean we we just talked about their acquisition of just last week and that's the other thing i would say like if you're zynga you know their next move my guess for their next move is probably

in mmp so i would say you know look at apps supplier look at engine look at you know some of these i mean it's they're probably going to make it well i don't know i would say it's probably better for them to kind of wait for our evaluations to kind of come down after post identity yeah right at a fire sale but we'll see all right let's let's take a step back so zynga exec that you're quoting is not actually an executive and um i i i without without talking so let's not but they're not gonna we're not gonna identify but but i but i i have a hint even though i'm not spending as much time on clubhouse that is not an executive but anyways and yeah but that's the thing is executives are the ones that are all buttoned down right so these other guys are the ones that loose lip sync ships type thing right by the way zynga it's like it's like code red no no talk no talk so applovin is building a self-sufficient advertising ecosystem to connect first-party properties

that we know and zynga and its q4 earning calls last week said that they have an attempt to build an autonomous ecosystem across platform play and building an advertising network for that cross platform play so the goal is to connect their first party titles with proprietary ad network and then project some of its content interaction onto platforms that aren't governed by apple and google in a way circumvent the att so in all simplicity we've seen this happening already and i'm not talking about apple i'm not talking about the acquisition we've seen we've seen certain game types game genres that rely on low dau high monetization games so whale games moving not moving off of mobile but opening up skus on pc so we've seen clarium with raid that's a good example that russian game that is doing spec uh hero hero wars hero wars is doing that one as well uh scopely they release some something around star trek that is also web based most likely

they will take their 4x games as well as their rpg games uh to pc just makes sense to open up that web sku so what that essentially i'm not going to you know talk about what it could mean how shady it is bringing robin hood to this what i'm saying is that it's going to be change of the strategy of the company because they won't be buying companies for premium to make more ebitda like they used before they will most likely invest more into their central organization because running all this cross promotion building a central infrastructure to operate an internal ad network and the bi around it that's going to be a pretty heavy lifting that's going to be most likely down out of san francisco and then in addition to that the studios will have to create and actually operate web skus which will increase their overhead so think about like um puzzles puzzles and empires now they have a web skew that they have to update the same time so there's probably a web team doing that it's a smaller team but still that grows grows the overhead and um i

think overall this is all part of of eric sufford's um thesis of establishing content for trista's i have a lot of questions around this i can't answer them but luckily eric is jumping on a podcast tomorrow so we're going to dive deeper into this and what this means yeah i'd actually be really interested to to see what eric suffered says about all this stuff come on on dude yeah you you know mike your conspiracy theories here's my latest conspiracy theory is that eric seifried is out there talking about the epic you know apocalypse of idfa right and how it's going to just destroy everybody right he's been saying this for months and months and months i don't know if he actually believes it i think what he's doing is trading the opposite right he's buying all the companies in his personal account because when idfa happens it's not going to be that big of a deal right and then he's going to make gazillions right so he's he's he's it's brilliant right it's like the y2k thing right all the consultants

got tons of money because they're saying this is gonna be the worst thing in the world for the world you know everything's gonna crash right so they got paid all this money to like consult on y2k and then nothing happened i think that's my latest conspiracy theory with seaford but let's let's talk about that in the next growth triggers maybe this isn't that big of a deal and tell me what stocks are you owning right now do you own zynga anyway he most likely does i'm just kidding eric yeah just relax okay ah the next one uh microsoft's head of cloud gaming james grizzman talks present future of gaming tech and i actually met james when he was at play fab before he got acquired by by microsoft uh at e3 or something or gdc or something but anyway nice guy really smart um really small industry obviously so basically he describes how like

analytic how games have become like a service right which is obvious right with analytics content data on servers etc and you could use you know a service like playfab to do leaderboards matchmaking analytics content updates and this is basically what playfab was building before they were acquired and now they continue to do that and the whole point of playfab's existence is to do the back end stuff so that the game makers can do the fun bits or the good bits as people have said so you know example he was giving was the flight simulator using real-time weather and satellite data to manufacture the worlds which could not be possible without using the cloud and i think this is kind of where it got he got interesting was that he's like why not create a world like the gta or red dead and then license out or use that world in different game executions right it's kind of a he felt like it's kind of a waste of time and effort and money to build an entire world for just one game right so like kind of like a back lot of

a studio or something so yeah rather than wasting all this massive development why not leverage it outside of um or build worlds that can be leveraged outside of the existing game that you're building which i thought was quite cool and then he starts talking about like how cloud enables things like among us like back in the day if among us was built on their own servers they would have two or three servers and it would just crash and it wouldn't have been able to scale but with cloud it's almost automatic in terms of scaling so um and that's how these type of games can thrive in in the day um so again the the last thing he kind of talks about is that like you know games the cloud offers the ability to uh have the hardware in the cloud which can can enable you know cloud streaming anywhere in the planet and it also could enable lots of players to get involved in with it within a game it's kind of like the the potential of what the cloud is right

so anyway i thought this is a really interesting article because it kind of lays it out in a very very relatively boring fashion it's not so hyperbolic as a lot of the other stuff when we're related to the cloud because i do think the cloud has enabled amazing things and games uh player generated content unlimited scalability you know social features leaderboards all that stuff that makes games super compelling right i totally agree with that um but the thing is that like i the distinction i want to make is the cloud distribution versus cloud technologies right so all these features are enabled for playing on your pc and console right it's just the cloud has not been a real great means of actually distributing content in a new way that's why you know like stadia and amazon's nonsense whatever it doesn't make that doesn't make any sense right gaming hardware in the cloud doesn't create that much of advantage because all the technology in the back end is being able to be accessed through pcs and consoles in a much more efficient and effective

way right and so i just want this is this is the distinction i always want to make when i read these articles it's like until you actually build an experience that can only be delivered in the cloud will cloud streaming technologies make sense for the the audience right because i think the console and the pc is always going to be a preferable device for that unless there's an experience that can't be done and i just don't know if that experience exists at this stage and certainly now that stevie has done and those guys aren't developing anything they shut that down who is actually making games that leverage this cloud distribution right maybe microsoft you know i don't know but anyway i just want to basically make that distinction cloud technologies enable the coolest stuff in video games like world of warcraft of course [Laughter] all the social features and everything but that those technologies exist to serve both pc and console that doesn't mean that they have to be distributed from the cloud using something like stadia or amazon's

thing so anyway that is the uh i just want to make that article and and i'm really happy for his success i mean i think the company was pretty well positioned at the time and he could have held out a little bit longer made some more money right given where we're at right now but um anyway that's all i got nothing stadia i mean they just announced a hundred more games so i i think you know what i mean i'm not saying i'm a fan of stadium but i i think that they're not done yet right this is no no my no my point has always been my point for the last two years is that if they don't build their own content that is unique to stadia game over right there's no reason to go to stadia like console microsoft and sony will be always be a preferable console a platform to play so um and without that this thing is going to become yeah they're just going to white label it again i'm not i'm not debating i'm just saying that you know

let's let's not say they're done just yet but you know i mean the no i will say it we see the trends they're done they're done all right let's talk about something uh even more aspirational so this was an article in games industry biz and the article titled this bad robot is looking to be the rare hollywood and games success story so when hollywood tries to get into the games it often doesn't end well and jk is living a walking proof of that i'm just kidding um so we this is an interesting article it was a it had a veteran developer and a turtle lock studio turtle rock studios founder mike booth uh about him taking a lead of bad robot game studios and according to mike the fundamental problem is that making movies and making games is similar now this he might be referring to aaa games when and that's that might be true so he says filmmakers filmmakers are folks who are very good about structuring and

pacing the of the story how things flow the character reveals and that sort of things and you just don't have that level of control in a video game generally the thing that attracts people to game is the feeling of agency and that it and that it's them making decisions and moving things forward so currently booth and his team are working on original intellectual property for bad robot a full triple a title on a pc and consoles with a possible move into mobile as well anyway so my take on this is this so bad robot is jj abrams production company they have franchises like mission impossible star wars star trek and the first game that this that their internal studio will be building as a aaa game with an original ip that is then turned into an entertainment franchise that possibly will have movies and and tv shows now of course extremely aspirational and that it that it should be from uh from you know such a fantastic production company as bad robot at the same time i don't know anything that that could be more difficult

because you have to first build a good a really good studio to make a triple a game a big studio then you have to actually make a great game then turn that game into a fantastic movie or a show and and at the same time you're targeting probably smaller audience and a more critical audience because you're going after aaa players you're also facing long development times very very long development times especially because this is your first aaa title for from that studio so you'll probably have to build all the tools and all the engines for making actually the type of games you'll be making and the development costs are incredibly high for a triple a game i'm not saying they can't do it of course not mike both seems to be the man for the job personally i'm a risk-averse person so i would have probably taken a little bit more incremental approach maybe co-develop a game or two definitely use an existing ip to to drive uh your work it helps with the setting help sort of theme helps with with marketing that would allow them to get them reps

in and kind of ship together and then go after this big kahuna that that massive game that you develop it turns into an entertainment ip but again i don't know what i'm talking about because i haven't worked in hollywood unlike my man jk here previously a senior vice president at the nbc universal so what's your take on this like you've been on on the on the other side of the table and you guys were actually doing that you were publishing you were working with you were doing co-development so what's your take am i totally wrong is this the uh the sort of approach you need to take so my own personal opinion is that i think that what makes a lot of hollywood studios or studio executives successful i don't think doesn't work in game studios i but i will say this the the model in terms of licensing ip and that sort of thing like we've seen that time and again that applying the right ip to the right game play actually makes a lot of sense and i i

think that that model will continue to be successful but like this approach like having a studio in la and then having them create a great game i mean then that's just a function of who the creators are right do they have uh do they have a world-class team that can do that at the significantly higher cost structure in la and with all that like the people in silicon valley you're surrounded by a lot of silicon valley people and then you're also surrounded by the silicon valley kind of approach and way of doing things and in la you're also surrounded by the only way of doing things which is generally like super high costs a lot of storytelling a lot of bs blah blah blah blah a lot of nonsense which is generally not good for a game studio so i i think that you're already starting with a couple of you know anchors on your legs trying to build a great studio in la and in my opinion just because of some of those issues so i would i kind of agree with you kind of more incremental approach

taking going from licensing to game rather than trying to build a great game because then what does a hollywood studio add to that right no i was i was mainly saying code development like i understand they want to do more than maybe co-development where they where they have a partnered partner studio and uh but by the way la has better game studios than san francisco hands down respawn look at the global stage right yeah i i i've been against development in san francisco for 10 years like you're not i mean so but look what's happening in in china right the content cadence the quality the the cost structure so when when you're talking about trying to be globally competitive you're not it's not so then it depends on and why is la successful because you've got great brands and ip you know like league of legends and and so you're able to leverage the ip and you also have great creators right so a lot of the

ex blizzard guys and guys with incredible talent but then you have to aggregate those those people and you have to make a team and you have to also fund them with a ton of money because those guys are not cheap yeah that was exactly my point in the sense that this this will eat a lot like this will have a lot of cost before it sees daylight because the production is so long and because the need for people is so long and that's why i consider it as a risky approach for the first title uh yeah and when you're building a new game that's to your point it takes a long time like look look at the the typical development cycle at blizzard right six years is bad robot gonna invest for six years and here's the thing if you you know like how do you how will they know that they're investing in the right people for six years like it's one thing if you're a blizzard and you've got all these rock star you know amazing talent and you know these guys are the right people and they'll eventually get it right versus you're a hollywood exec you've hired some people with some titles with some high titles are they actually the right team that you could

be investing in six years for nothing right so yeah it's just it's just being on the red no matter what you're doing being on the red for a year and years years on end and if the entertainment business is tanking like because of the covet they can't get into production they can actually you know create more movies then what do you caught you could you cut something that is most uncertain that will have more and more costs now sorry you're that is it right there you just nailed it in the head is that right now they're chasing the rainbows right they're chasing the dragon you know video games are hot hot hot and and traditional movies and television are getting a little bit hurt right now but when the tides turn and people are back going movie theaters maybe if they ever do um and the amount of money that you spend to build a triple a game you know is like 20 or 30 million dollars a year right are they gonna use that keep do putting money into that or are they gonna actually divert it to making the next you know alias or lost or fringe or whatever else they do

i mean these bad robot guys are prolific man like i was looking at the things that they do like alias lost fringe person of interest castle rock westworld love craft country which i really did enjoy that was pretty disturbing and then super 8 star wars i mean these guys are crazy good at what they do and so i think it's going to be a bit of a challenge for them to transition to building game development and we've talked about this before in the podcast is that there's just this huge disconnect between and what was mistaken in this article is that making games is different from making movies and television the skill sets are completely the opposite right in terms of two hour experience that you can craft and build a great story and whatever versus a 30 or 40 hour experience right where that is not possible right to build that kind of story arc et cetera or much more challenging and much more costly so anyway so i think you know this is riddled with that those kind of issues that have been plaguing this industry forever and that's why most media companies have

failed miserably including disney mgm i don't know even warner originally but i think they're doing quite well now as i've said before and lucas obviously as i said many times in the podcast is probably the worst example of that so anyway i'm always worried about these hardcore game guy game developers starting talking about cross media whenever that word comes out in any type of press release i i get worried right because i know he doesn't believe that right this guy from what i'm reading between the lines i don't know this guy i know he built left 4 dead which is an absolutely amazing game he spent some time on counter strike he worked at blizzard and the last four years i think he's been at facebook doing vr which i'm sure was a disaster and and nightmarish in in in in that capacity what i think is that this guy wants to make freaking games like that's what he wants he wants to make games and so he he's taking this opportunity jumping in and and hoping for the best to build a great team to build a great aaa product and i think he seems to be potentially capable i don't know if he's

gonna be able to navigate you know the the cost and and the and the politics of doing this within a very very successful media company so that's on it so i don't know him actually i've never even heard about him like even indirectly so i don't know how good he is or whatever so but just yeah if he really wants to make a game he used to go to asia he should you know look forward to this [Laughter] come on i can't go anywhere right firecracker i can't just jump up and go to asia and create a team out there it's not that easy it's not that easy you make you make china sound like it's not that easy anyway let's talk about let's talk about the last article of the day so my take and this is not my take but the article is my take on supercell in 2010 2020 as we begin our second decade so this is the yearly post from supercell ceo il cabanan and it's generally very well received because it's very down to earth and has straightforward messaging

so there are a few highlights that he raises up in his post he talks about their monthly player active players increase year in a year and being highest ever uh total installs across all five games crossing five billion brawl stalls brolst brawl stars is the fifth game that hit one billion in total grass sales and investi companies are putting out better and better games this is from the article uh he talks about the work from from home being a big change for teams that used to work in cells and praises the the lack of of the and and are praising lack of processes so supercell notoriously doesn't like any kind of middle management and that kind of stuff people work together they're really fast almost like a startup you like atmosphere and now you're working from home that's a big change from for for that type of organization he talks about updates specifically game updates so this is very interesting like okay is raising game updates in his post talks about the brawl stars updates he talks about the clash of clans

updates uh hey day pop uh sorry he talks about heyday and even boom beach uh doing some kind of earth day stuff and then he calls out clash royale quite specifically that they did a big update that kind of landed flat that was the clan war stuff didn't really work out didn't move the needle so they're really looking hard at that game that was just you know a clear collab he talks about heyday pop uh saying that unfortunately it didn't find large enough audience interesting uh reason for uh for termination of the game because it was a very good game and as we analyzed before heyday has tremendous amount of downloads but it's just an old game and they never really invested into the brand so it's clear that the brand didn't resonate but also kind of confusing but because i would assume that it wouldn't be that difficult to get players for this type of game considering what kind of other puzzle games there are in the market so i don't know if you know

maybe could have searched vader what sir come on dude anyway no no hold on hold on hold on you can't just say that i look like the game wasn't monetizing well enough to spend against and they they likely were not getting the organics they're used to with their games right so yeah when plarium and and ricks and and peek and all these guys even freaking zynga come out with a mobile game for puzzle game they're crushing it right because in theory they're actually earning their money back as they spend and they just didn't see that with this heyday pop so it wasn't that great of a game right it wasn't competitive in terms of monetization with with with the rest of the ecosystem otherwise they would have kept the game it's difficult to say it's difficult because supercell hasn't used to compete in this type of ua um right but the ua the competitive ua sorry puzzle games that become super competitive way right like in terms of scaling there's so many competitors coming out with games and if you're not competitive on the product you're not gonna be competitive in ua

right well sometimes you can be less competitive on the product but really competitive in the ua and you actually win in the market uh or or okay so in that way maybe they just didn't feel comfortable with the profitability of the game on ongoing basis compared to someone like play fine right but it didn't monetize as well as the other games yeah yeah yeah revenue per download wasn't wasn't in that and that's in that sense the at the same level but here's here's my thing this is why i want to this is why i'm pointing this out making a puzzle game for for for supercell never made sense to begin with right we called out why didn't monetize it those type of games even though they're you know somewhat easy to make as a vertical slice they're extremely difficult to run they require insane cadence right and that's not their wheelhouse either right and so i i actually i mean i don't know i'm you know as a consultant for the day for

supercell i think they should try to reinvent heyday or do something like you know on the simulation side that's like kind of what they're doing or keep building you know cool course stuff that they do you know yeah i don't know why they're messing with puzzles next are they going to do casino like you know try to build a casino game and try to scale that with like a gajillion other people that are building casino games i mean they can't be competitive in that make sure well well anyway they don't they don't operate like that it's a team that wants to build it and if the team felt that they could build a really cool puzzle game i q i question why they green like this this is what i'm saying i'm i'm because there's no green light process and i like we'll make one supercell has been talking about building a heyday puzzle game since heyday launched that's how long it's been sorry i'm interrupting anyway let me go through everyone says i'm a jerk because i talk smack about supercell right well i mean come on like that's what that's what my job is is to like pick them apart you know so let me let me pick this apart and you can do it so uh ilka talks about that they have more betas launched and potent

beta games coming out this year and potentially more than they had in a very long time and he talks also a lot about their different programs the supercell creators supercell make basically what they're doing is they're connecting with their audience and having take part in the content creation i think it's a powerful way to own sort of the most devoted players um but according to a ceo so this let me take a step back like this blog post wasn't probably it my personal favorite it was um it was it kind of lacked the punch but elka did actually a few interviews with the local newspaper here and he was answering these questions in totally different way and actually answering some of the difficult questions of the like how you compete against the chinese companies that are just killing you with the content what are you going to do what is happening with the culture that is that is so small team driven whereas in the live games you have to operate totally differently he had very straightforward answers like hey we are not keeping anything sacred we're looking at

things different ways uh we are discussing about maybe live games should be run differently as new games we don't want to lose what we're good at versus you know but we understand where we need to develop and those discussions are ongoing in the company so that his interviews were were really good and it's kind of sad that they didn't come in the blog post but anyways even these programs the supercell created supercell make they're all ways to kind of get user-generated content into their game and he was raising a lot of things like how many maps they've created and so forth and so forth because they are battling the one key thing and that is as we've mentioned multiple times it's how can they stay competitive when the game launches how they can produce enough good updates to sustain and grow their games and not being trampled as they've been in in certain markets that are really content heavy so also what's happening in finland is you have to release your official numbers every company has to do that whether you're public or not so supercell released numbers and

they're actually quite close to sensor tower numbers that we were reporting previously so for 2020 they made uh 1.3 billion euros i don't have dollars here anyway 1.3 and um that was down for nearly 1.5 in 2019 their ebitda went down as well but they kept the profitability margin of 31 and the interesting part was ebitda going down like that was a little bit um surprising because they didn't launch any new games uh heyday pop didn't launch globally and ilka was saying in his interviews that they had a lot the the decrees of ebitdas because of uh accounting principles or some kind of accounting element as well as their increased marketing investments as they're building player communities uh and investing into esports and stuff like that the psg tournaments and so forth but it's still kind of worrying that the ebitda went down

when they didn't launch new games they didn't scale and then in a market that was growing anyways um uh what else uh so he talks about um he you know he talks about the uh he naturally turns it around in a very positive way that they have only 340 people and that 340 people are responsible for over a billion in revenues um you know and let me let me go through all my notes i don't want to take them too much stuff so overall like i wanna i wanna just summarize it that i'm personally bullish about supercell and i know jk is as well because they're good at something they're really good and probably best in the world that's something that nobody else is great at and that is making new games they also have really really good people so when you consider the talent they have in the company and the retention rate of that talent is probably the best in the industry as well there's also no significant hit coming in from idfa deprecation because their ua hasn't been the same

type of a programmatic sniper shooting as it has with with other companies it's more like carpet bombing taking all the channels and and using a lot of top of the funnel they've invested into that and that's actually going to be very helpful for them going forward they're also invested into not only these uh platforms for content creation but they've been invested things like supercell id which is great tool for cross promotion and launching their their um whatever they want to do with user id going forward um and then the fact that as we discussed before the fact that they're getting a new lead for for clash royale and talking talking very openly about live ops the need of live ops the size of chinese teams and who knows better the size of chinese teams in supercell that not only operates in china but it's owned by tencent and gets all the information needed to do whatever they need to do in order to to modify their organization to succeed and the word on the street is finally the jk's favorite thing word on the street is that the new games and the pipeline are absolute fire like something really cool is

coming out this year so that's that's that's what i'm hearing in the street in the cold streets of helsinki so that makes me feel really bullish about this and and my take on on all of this is the same you know i i think live teams should be should be different than the new game teams i think it should be a totally different organization because it's a 100 percent different job that's what it is i think they need that live team owners need to have a clear p l focus i think they need to explore more external development that would allow their their internal teams to stay relatively small and leverage external development studios to create more content so they hold the creative vision they hold everything but they have a content treadmill somewhere else uh i think the teams for the live teams could grow a little bit i think brawl stars being run by 30 people is kind of ludicrous to be honest and and they could do probably so much more with a little bit more people and i also think that that as you're thinking about this you know on-site marketing naturally should be should be in my

opinion in the teams and i think they should align like i don't know their incentive systems i know that they're great but whatever they have it should be more likely aligned towards rewarding in different ways you know maybe maybe the game growth should be rewarded in a in a different way than than launching new games uh and operating on prototypes so that they get probably the best talent to work on the live games but if everything is equal then i always want to be making a newest coolest prototype for the company i don't want to be a running a live game and have all that pressure on me i want to be just doodling around and creating a new new fun core games and and having fun if i'm getting paid equally then i would be running you know a 24 7 game of course so i don't know what their incentive system is but i would skew it towards towards live live games and um an investment strategy is the last piece they they kind of raise couple of games that are done great or have launched new games um it was kind of confusing because because they're talking about space ape

launching some kind of music game i haven't played it might be great but it's it's kind of weird they talk about frog mind which they acquired before and they made badlanders and all kind of cool like it's an indie game studio and now they're doing some kind of a you know coding platform a no-coding game and stuff like that so it wasn't that they you know i think the metacore is the only one that is really launching a game that is scaling everything else is kind of a weird weird thing to raise but overall i criticized their investment strategy before saying that they should have invested into companies like small giant for sure just acquiring that and they would have getting scaled but taking a step back and really thinking about what the core competence of supercell is it's not liveops it's not ua i think they wouldn't have done nearly as well as zynga with small giant it would have been a wrong acquisition so they should invest these small studios and be like hey guys you like to make games guess what we're the best at making new games let us help you out to make new games because that's what we do so yes go ahead invest into these small companies with talented people

and do what you do best that horse that horse has left the barn dude there's no one else to acquire you know they should have done that like 10 years ago or five days ago they could have they could have acquired anybody they could have acquired peak you know peak has a similar type of model of small teams yeah grinding this could have should have right i mean but their culture like it's not their core competence we can see it they don't they don't they're not the best at ua they're not best at live ops let me summarize this in three points one the revenue was flat and the profit was down worse than revenue in 2020. arguably the big one of the biggest years in mobile and arguably one of the best years for established players to grow right except for king right so anyway so they they fail right growing in a huge market right two they still are absolutely massive profit powerhouse 31 margins on revenue is amazing right that's industry crushing right they still are making amazing games right and so that's what their core competency is making amazing games like

growth go through acquisition managing multiple teams liveops not so much right and that's it that that that is what they are right and so what i would continue to say is that i feel that it's very risky using their operating strategy across the industry right i think using other companies trying to emulate that could be a huge mistake right because only they can do that because they have that talent they have that capability and they have the ip and so the other thing that you missed i think you missed on in terms of their potential strengths going forward is that idfa doesn't really impact these guys they're not they're not like ua arbitrage guys they just leverage their brands and they leverage cross-promotion they leverage you know their ips and and and that could actually be a huge boon for them in terms of their next releases because they will get a audience you know almost immediately and that yeah maybe that that will help them but i think they should continue to do what they're going to do but you know

growing is going to be challenged in with their current strategy that is what it is so there yeah grow by launching new games that's their strategy and that should be it if that's your core concept but don't make puzzle games it's just stone it was weird i mean i guess if you want to leverage that ip but puzzle me no it's a great audience fit like puzzle installation no like no it is not no this is come on dude it is no that is not true dude every brawl stars clash royale clash of clans all make sense right the same audience right but puzzle is a different thing it's a totally different audience it's like 55 year old ladies dude for hate but hay day is played by 55 year old yay days yeah but hay day is not a big game that's not their that's that that game has been around forever dude they have like how many people actually play that game on a regular basis nowadays you know like no i would have yeah there was no 5 million dau there was no there was no 5 million it's nothing so

they had no audience to leverage in puzzle i'd be happy with with 1 million yeah but we're talking about a different scale we're talking about a different scale i know anyway i mean i i look i i'm looking forward to seeing what they do like i i every time they come out with games it's mind-blowing right yeah i just have to say that the interview of elka was was good it was good i think yeah i don't know i mean maybe the you guys read the uh the blog post what was your take on it i skimmed it i as a supercell fan i felt it was kind of flat not not a whole lot of insights or anything but but i i think everything that we talked about is roughly right they are who they are eventually they'll they'll launch other hit games and that'll be great they're not really a growth story they're you know they've got a certain size based upon their operating model which makes sense for them that's great yeah you know by the way the fact that

they don't have any games in beta right now and they usually take like years in beta i mean doesn't that kind of indicate that they don't have any games coming out the show they're their games are pretty fast through beta like brawl stars was the longest one normally normally they kind of slam oh wait a minute nah i'm gonna i'm gonna call on that dude like i i remember um oh my god ever forgetting the name clash royale was a few months brawl stars was yeah but clash royale came out blown up right and then they struggled then they had to redo kind of the whole monetization design mid-stream right which so it's kind of like an extended maintenance what was the other like class clash of clan style game which boom beach boom beach was in beta forever right brawlstar was in beta forever no bro i remember that i was looking at it when i was at kabam anyway the point is is that like any game that has not been announced or in beta yet like even in this early it seems

impossible to cut out by the end of the year but you're right eric they redid the art on boom beach while it was in the uh in beta that was you know that was a live ops that was a that was a marketing thing to redo the art while in beta everything pretty much like all the character art and everything yeah anyway i look forward to seeing what they do yeah i wouldn't even really play it not much back to renovations dude are you you're you're not in a you're not in a cabin you're in in like some kind of like uh that's the attic of your new house or something right this is my daughter's uh top floor uh like she has a two floor room so this is i'm in a kid's room i i really like the thing where jk just wants to start a youtube show at the moment when i'm moving to a new house and i really like i don't have my study done anything like we have one floor fully in renovation i barely have a spot to to take a calls on he's like dude let's do youtube so i'll try to be at the office next time i just came in for my girls gymnastics

practice so and by the way you know finland has absolutely amazing game developers but what is wrong with the internet dude you always have problems with the internet like how is it that it's not in a country as small as finland doesn't have better internet i don't know i it's it's mine or are you just cheap and you and you buy like starling's isdns all right guys i mean you got it all right have a good week guys have a good week stay out of trouble later bye [Music] [Music] me [Music]