TWIG 125: Mr. Beast Night Media VC Fund, Ironsource SPAC, NY Times Gaming, Discord for $10B?

provided to you by exola hey everybody and welcome to Twig 125 today we have a very special guest with us the famous Dean Takahashi who is the lead writer for games beat and Venture beat probably does not need an introduction but uh definitely welcome to the podcast Dean and he's also putting on the games beat sum conference which is April 28th to 29th and Dean maybe do you want to talk a little bit more about the the conference wait a minute wait a minute Dean [ __ ] Takahashi dude we have arrived dud this guy's a luminary and he's gone on our podcast dude I I remember this guy ignoring me at at conferences for years and years but now he's on our podcast welcome Mr Dean have we met exactly exactly you good answer good answer Dean yeah

uh well yeah thank you um um I've been at the Venture beat and games beat for 13 years now and uh I am U uh the curator on the the games speed Summit conference and uh that's happening in April 28th and 29th and uh uh we have some folks like Bobby codic the CEO of Activision Blizzard coming to speak and we have a pretty interesting um diverse audience this time as well well so got uh Laura melee from um the head of Studios at Electronic Arts as well and some some other folks that are still in the planning nice we gonna ask him about his $200 million bonus let see we'll see how that goes it's it's all in battl net so it's fine yeah that's right they gave they gave the $150 gift certificate all the blizzard employees they [ __ ] canned and he gets $200 million of stock right I like the roller coaster of of events

because last episode we recorded it was like the worst we've ever recorded and this one we're back on top with Dean on it I think I think he gets Call of Duty points but all right so just covering the news that we're gonna be talking about today so first Mr Beast management company night media has a new Venture fund that's backed by creators reported by Tech crunch second 2K sports acquires HB Studios signs PGA Tour 2K deal with Tiger Woods third Thomas Bravo back agrees to take iron Source public fourth facing post Trump slowdown New York Times eyes 100 billion doll games Market uh reported by Bloomberg and Dean if you want maybe we could even cover this uh Discord sale potentially withth more than 10 billion and that's the news we'll cover today any other kind of personal updates or other things going on with you guys nothing that I feel like sharing

it's all it's all bad I just this is a public service announcement to all you uh people out there that are thinking about having kids please avoid having kids in San Francisco it's a [ __ ] Cesspool of [ __ ] and nonsense that you have to deal with in order of getting your kids educated and it's it's one of the most amazing places to grow up in in the world it has been I mean I'm very biased because I grew up here but man the system these days we got placed in the worst school in the world where we have the most the best school like two blocks away from us right for high school it's just crazy it's just crazy and the private school system avoid it at all costs go live in Marin or freaking orenda or something or Finland oh yeah or go to the happiest place on [ __ ] Earth Mr Finland godamn it now now Dean isn't this kind of bad to be mixing news with like politics I didn't say anything political I don't know I mean it affects the game industry I guess um you know I hear I hear lots of similar things people who

are based in San Francisco it's it's not good for the the core of the Bay Area I think you know the core falls apart then well you know the rest of it will follow and I'm I'm in the rest of it so I'm I'm okay for now so Eric being supported by Dean I like him already all right rolling into updates Adam you wanna you want to go yeah um so One update from me uh Eric suer did an excellent summary I think this week of the latest updates of the epic ver versus Apple um Fiasco so specifically his point of view on the reasons why ATT um app track test transparency is happening number one to Take Back Control of distribution on the app store number two to use privacy as a consumer Crusade against Facebook and Google's core values and number three to benefit its own ad Network search ads um which I think is a great summary and uh secondly I think he really talks about the latest development in epic V Apple

after the red herring of um Apple actually saying if you make less than a million a year you only pay 15% uh which actually recently Google just announced um so that was their way of getting a little bit of the off their back but um specifically now epic is arguing that it has reached a scale that it doesn't need any of the benefits that Apple's app store is offering as part of the 30% cut so um typically when Apple talks about what that 30% Cuts value is they're thinking fraud prevention payment processing tax accounting Discovery Etc epic proposes that really it doesn't need that so Apple should be giving developers the options to operate on iOS without the tax right so if developers don't see any value for that 30% why do they need to pay for it and which Eric argues is actually partially the reason why ATT is happening um because uh H actually increases the importance of featuring and and abore Discovery making

that value hard to dismiss even at scale and the only way that ATT is actually governed is that app store review there actually are ways to get around all of this idfa stuff if Apple never checked um so these are very important bits that's my only update I love Eric I mean the guy is so freaking consistent on this stuff you know he he really is he's just railing Against the Machine dude these big bullies at Apple that are just doing whatever the freck they want to do and and screwing everyone over you know so I don't know it's going to be interesting in the next couple weeks to see how this is going I got all this analysis all set up so that every freaking day I'm seeing exactly what the impact is by product by genre I'm want to see that dashboard yeah and you know what it could be it could nothing could happen nothing right it could take months years who knows right no one knows right but I tell you these stocks are not trading like anything is going to happen like Snap and Facebook and Twitter and you know all the gaming stocks so we'll see what happens all right I got a couple updates nothing really that major I notic one small

thing about the you know the um internet uh uh advertising Bureau was stirring up some trouble for for Appo in um in uh France and that the French antitrust authorities were going to look at idfa changes um as a uh you know and for the anti-competitive effects that it might have yeah anything in Europe too tends to actually go a lot faster and get done a lot faster in terms of regulations so maybe that would that would be a bad thing for them to go after it's also interesting to see what happens with China because uh with the ca CIT the the way they circumvent the idfa in China the one the one they've been planning if Apple will let that one go then the whole privacy doesn't have any meaning yeah dude that would be just the biggest hypocritical move ever if they let that L go then you then everyone should know 100% that all they care about is selling devices right they don't care about their Partners they don't care about even the ad Revenue that they generate

from the store is I don't think is as relevant as just pushing devices in China and everywhere else in the world so yeah let's be fair like there there should be a need for better protections around data privacy so you know we can speculate on Apple's motives but like there on the on the Android side there have been a lot of lot of issues in terms of data privacy and things like privacy schy who cares who cares if they know that I wear boxers instead of briefs dude what the [ __ ] who cares anyway whatever I'm not moving on all right Jade Raymond again in the news man this woman has been everywhere for the last like 10 years right but she's still yet to make a game in 10 years or more right I can't remember exactly what the the status the last one was 2013 right Blacklist Blacklist oh the spinter cell right yeah yeah toron all right which is a bomb right disaster she she didn't spin up the uh the the the studio that made watch dogs right

yeah no no she gets credit for a lot of things she's never done but anyway you're right she did create that studio but she did not create that game okay so uh I never thought that stadia made sense for Jade right because she's basically an action adventure style person and so this she's making a move to Sony which makes total sense to me right because that's all they have in their Arsenal is basically action adventure games um so I think that she finally made a home that made sense because stadia was just never a fit for her period end of sentence all right ad Network discussion all right I listened to this podcast that you guys put together on ad networks Mr Joseph yeah and I joke but I really do want to understand ads and the this stuff I do I I honestly do but every time I listen to discussions around this I feel freaking dirty dude I need a shower because it's all about trust issues stealing ideas stealing data stealing prodct the whole whole business just seems like a cesspool of

[ __ ] and I I I I I just feel dirty I don't like it I don't like it all right all right next one some updates from me first Activision Blizzard CEO to get even bigger bonuses While others get laid off this is a article published by Kotaku and essentially they're reporting that CEO Bobby cotic will reportedly earn a total payout of nearly $200 million this is while some of its employees have been sharing personal pay information last summer protesting low wages even further the company has just recently laid off between 50 to 190 people as well as roughly 800 people in 2019 and hundreds more in the months thereafter I think what some of the employees are really complaining about is you know why are their layoffs when the company itself is doing so well and finally Kotaku noted that recently laid off employees would receive health care benefits throughout the year and to your point earlier $200 GI cards to Battle.net that's part of their Seance

package I love it I love it I I I do want to say one thing on this like Bobby is ruthless dude like he really knows how to manage his businesses and so like I I got mad respect for Bobby and how he operates but yeah this this is not a good look uh generally speaking but I bet the 200 million was related to something completely unrelated and was done years ago and so one has nothing to do with the other but I I I do appreciate the sentiment this has been discussed lot in you know private slack groups and things like that right so I think there there is definitely a lot of resentment around this but at the same time the company's doing well now whether whether you attribute that to the covid bump or whatever but it was basically the the reason why he got the payout is is essentially a clause in his uh from the board and part of this restructuring seems to be related to the investment that he did in orts right which made no sense at the time frankly U particularly for OverWatch and so a lot of those people like there's no OverWatch lead left like

for people to to work on right I mean or maybe it's there but it's not really what you was so they just had to get rid of these people right which is sad I mean I guess I would give him credit that he's got the only game company now outside of 10 cent that's more valuable than Roblox 71 billion do is is the market value so there's some wealth that gets distributed that way right um yeah I think the other the other thing interesting is that they have 2,000 openings at Activision yeah right now and you know it's it's hard to see um like I mean it's it's it is not a good look at all for sure but you know they lay off 50 people here and you know everybody hammers um you know Bobby for that but he is uh about to create 2,000 more jobs and like I I haven't seen a single story mention that and you know um and maybe they're not going to be

able to hire those people and they haven't been able to hire those people uh but uh but still like that's that's more of the context the 10,000 person company is about to become 12,000 people uh and they did layoff 50 and I think they've just notified you know people of of layoffs coming in Europe as well right dude this is like having an adult in the room I don't know if I like it all that much you know he's making too much sense you know yeah what a what a fair balanced view actually that's a great point and it it does seem like you know I don't know if Activision does but you know there there was that sort of management philosophy popularized by Jack Welch and GE where you just regularly trim off like whatever the bottom 5% so they they may have a similar kind of management approach or policy there but yeah and to your point Eric if certain if certain divisions are no longer being operated related to orts or whatever then it it does make sense in that context but you can't you can't argue that the share price has gone up

and if that's how his compensation package was structured then you know he he he obviously you know you can argue or disagree whether he deserves that but it it's it's certainly the share price has gone up and that's how his compensation package was structured next update Reuters is reporting that bite dance has acquired gaming studio moonton the makers of the popular mobile mobile Legends bang bang for $4 billion in an internal memo newon CEO Yuan Jing said the company would operate independently from bite dance so more of this decentralized model that we've been talking about quite a bit further according to Reuters tensent also made a bid for moon but the offer was matched by bite dance finally Reuters also notes that since 2017 tensent and Riot games have filed multiple lawsuits against moonton for copy right infringement next update gamesindustry.biz is reporting that the embracer group is Raising over $890

million for even more Acquisitions according to the article quote embracer group said it is looking to acquire new Publishers developers and other assets the latter potentially meaning more IP having purchased the rights to dozens of games franchises in the past the company also said it is actively reviewing and evaluating a growing number of potential near-term acquisition targets quick history lesson for our audience first uh Embraces most recent acquisitions incl included easybrain asper media and gearbox those three Deals were worth just over2 billion with gearbox as the biggest part of that at 1.3 billion although much of that may actually be an earnout and back in November it had acquired 12 development Studios and a PR and influencer relations agency and for anyone interested in embracer in their strategy I'll leave a link in the show notes to a podcast and YouTube video interview with CEO Lars vinga for and Studio CEOs kenchi arasaki from I

thinking ape Randy Pitchford from gearbox and Ken go from Deca it was actually a really well- watched uh episode so definitely check it out and final update from me the story no one here wanted to cover I'll just cover it no I don't want to editorialize too much but the Washington Post is reporting that the riot games board found no wrongdoing by Riot CEO Nicolo laurren and he has denied misconduct allegations in a new Court filing but for those who aren't aware on January 7th the former executive assistant accused Lauren of a hostile work environment and unwanted sexual advances so this type of article obviously is very difficult to comment on especially in our current times however just to be fair to Laurent a special committee was tasked with reviewing the results of a third party investigation that look for evidence of misconduct they didn't find anything and therefore declared that quote no action should be taken against Laurent so this

is a rough situation because whatever the scenario if Lauren is guilty it's a bad situation and if he's innocent it's a bad sit situation so to wrap this up we can only hope the truth comes comes out and uh actually M guy I think you've got some updates so can turn it over to you yeah and regarding the last news the court papers were actually leaked so I was I was reading some of them there were on Twitter uh that were going into details and I'm not going to go into the det if you're interested I'm sure you can find in the depths of Twitter uh you know the details of these allegations but overall just not a not a good look on either side however this ends it's not going to end well for one of the parties anyways um my updates so first of all Laura torano uh used to work at King scopely root a deconstructions of Royal match and that deconstruction can be found on deconstructor of fun so she did a previously the puzzle prediction this year and correctly actually predicted that Heyday po pop won't be

seeing Global launch with significant change without significant changes in the team size so why this deconstruction is important well Royal match comes from dream games and we covered it in the news I think a week or two ago uh it's an X it's a it's a team formed by X Peak uh they shipped their first game and they've raised 57.5 million and they just you know it wasn't a spack or anything like that they raised from Top tier investors uh index was the leading of series a and index previously invested into King supercell and roblock so they definitely know what's going on and the fact that they invested 50 million in series a into this company makes it very very interesting so check out that deconstruction uh the second update uh netic announces Pikman the an next AR game from the makers of Pokemon go so the game is set to launch this year and the Pikmin franchise is all about exploring a very earthlike planet with packs of adorable Pikmin creatures so antic made a Pikmin game about

walking and exploring the world around he makes a lot of sense so hoping the lockdowns are over so that people can actually enjoy this game when it launches and of course this is another Nintendo franchise and if we look at AR games as a whole it has had a rough Go I mean Jurassic world back when JK was at NBC holla it was a success it was let's call it a success it came out from ludia it was a success it was it was a success it was like one of the whoa whoa that was not a success that was a freaking train wreck just stop listen I know the numbers winners right history and we're gonna call it success JK was launching that game so I did it did phenomenal on the other other side Walking Dead uh that came in from next games um also also Studio I think JK you worked with I mean that game was a disaster and almost took down the whole company and then we got Harry Potter from Warner Brothers that was a massive disappointment um okay that really hurt the Warners about San Francisco I remember they were coming out saying that they're going to

make 100 million and so forth like they were really expecting and they should have been expecting a lot from this game but it was a massive disappointment okay first of all I I have two objections to this whole thing right first of all these these games are not AR games right anybody worth their salt turns off the AR functionality almost immediately when they download this game right so this is horeshit right first of all there's not an AR you can't put Pokemon go and say this is AR Revenue no stop it stop second thing is that I actually went into nanch to talk to a bunch of product managers about why Harry Potter failed right before I joined Warner and I don't think they have a clue as to how to make another game of this and their whole thing is not AR their whole thing is location based right and so like it's really that's what they should be focused on so I don't categorizing this as AR is just Folly to me um so I you know I wish them the S some success I don't really know how they're actually going to make Pikmin work um but I don't

know what I don't know what they're going to do for a second act look Pokemon go is amazing dude the thing is just a juggernaut dude and it's did really well last year too and so I'm not suggesting that that's GNA go away anytime soon but creating another success just seems very challenging and if not almost impossible um and Pikmin I don't think is the right answer so that's all I got to say yeah yeah correct uh anyway next update digital turbine announces acquisition of fiber for six 600 million in cash and stock so this comes less than a month after spending 400 million to buy at colony and just two months after acquiring mobile DSP appreciate so congrats to fiber we had their president over talking about their turnaround story just a couple of weeks ago and uh I think you need to watch out for digital turbine they're really building a an atte Fortress over there so and they're going to start acquiring Studios uh let's talk about that in a moment and the last article so do you guys do you guys think that's an

idfa play that the you know these companies are selling out because of ID Ida and that the consolidation is happening because yeah you what my opinion I think everyone's just yeah selling out before the the Ragnarok right and then and they're selling at really high valuations and I think everyone's I think personally everyone's afraid but you know they're getting cashing out right go for it I think there's two things there's that what Eric is mentioning in in terms of the risk and the second part is is just the market is is great now for selling so those two things coming together that there's uncertainty in the future and now is the best time to sell what's so and and iron source is doing its spe as well right oh my Lord oh my Lord that K that can't end well that can't end well all right we'll get to that all right let's not this story no please I can't take it I can't take it anym no not another ad for Finland yeah yes CNN travel topic was this country has

been just named the happiest P place in the world so for the fourth year running Finland has come on top of annual list powered by data from Gallup World Poll with Iceland Denmark Switzerland and Netherlands following in second third fourth and fifth position respectively researchers say it's no surprise that Finland has retained a top position once again as the Nordic country has always ranked highly when it comes to Mutual trust trust is recognized as one of the major factors that helped to protect people during the pandemic as well as confidence in government some I mean you guys are Americans so you don't know what it is to trust your your government so I'm just explaining what it what it really means uh anyway the United States moved up from 18th to 14th so happy happy happy move and UK dropped from 13 to 14 Australia at 12 so for everyone listening the podcast uh of course this doesn't come as a news we've been talking about Finland as a great place pretty much every week and um funny thing is on deconstructor fund slack Channel I've had people working in in

the industry dming me and asking for like cost of livings and which neighborhoods should they move in as well as location to where to set up their Studio like where is our studio located oh my God make it okay okay make it stop dude this is do they ask for the average temperature as well yeah average daily sunlight yeah yeah how much does a beer cost in Finland yeah how much does that cost yeah they always do the survey during the summer at Finland right and uh I swear this podcast is becoming like a PR machine for [ __ ] Finland dude enough remember JK was in Finland in the summer like you were loving it like even your wife was like damn like this is not a bad place all right moving on on Jesus Christ I can't take it can't take it oh by the way the US uh ranked higher than Canada [ __ ] [ __ ] great white North my ass all right moving on all right starting with the news first news article we're going to cover is that Tech crunch is

reporting that Mr Beast management company has started a venture capital fund the fund is called night media based in Dallas and they have closed a debut $20 million fund from a bunch of powerful and Famous online influencers and other social media Stars so night media CEO Reed duer mentioned they will write initial checks of up to $300,000 and will invest in three categories consumer startups gaming startups and three the Creator economy and a bit more on CEO Reed duure he started off by basically stumbling upon this comedy group called Dude Perfect who we I'm sure we're all now pretty familiar with and started working with them and although he no longer works with Duke perfect he now manages 16 other top influencer groups including zhc Preston Matt Stony unspeakable ay land typical gamer and Carter sharer but the biggest star of his portfolio however is Mr Beast who as many of you already know

has over 55 million subscribers on YouTube Mr Beast posts about two to three videos each month and they generally get at least 30 million views night media last year created a joint venture with virtual dining Concepts to sell Beast Burgers through a dedicated app and as some of you already know Mr Beast also just recently launched a game called finger on the app which charted and to date night media has invested in roughly a dozen startups a 10 notes that all of the companies have agreed to work with night media in exchange for access to its creators and their knowhow what do you guys think I was like I was like what is this like usually we cover gaming news but now it was like cryptocurrency and then and then it's like it feels like it should be like this week in Tik Tock this is show M have you heard of some games like Among Us Fall Guys valim escape from tarov What's the commonality I get it and and I I mean I

I think 90% of the of audience listening to this I would argue that it's higher than 90% haven't even heard about these influencers that you're recalling also the Mr Beast character you know it's kind of like sad for Humanity I actually had to go and I thought this was like a gaming influencer like ninja so I went in and I looked at it and this guy's like top videos is like going through the same drive-thru thousand times or I ate a thou $100,000 Golden ice cream or I put 100 million Orbeez in my friend's backyard like these are watched by millions yeah but listen in all fairness all power to Mr Beast and all power to night media as you said influencers are a great source for growth not only for games but also for other other um other forms of services and products so you know we also have have some sponsors so you know we're influencers in in some capacity not necessarily positive but might be like negative influencers

listening to this podcast is a far cry from what listening to Mr Beast you know uh I'm appalled by this whole thing frankly and every time I start watching this crap I feel like such a boomer because I don't get it dude my daughter sits in her bed and watches Tik Tock for hours right I I I I don't get it now I spend a lot of time watching videos on video games and cars and things like that but that's different that's real this is just stuff is just fantasy and and just so strange that it's so entertaining to people to me you should check out the the vtuber code Mo she's got this very interesting uh take on on being an influencer with an artificial character right oh really yeah I I I do I feel I feel old every time I start looking at this stuff I just can't I can't take it anymore but anyway like but I don't think anybody can argue that this is not important right like this is obviously very important to future of the gaming yeah I think it makes sense that they're investing in in game startups I don't know about the Creator

economy like um it sort of maybe might be like League of Legends where everybody invested in mobas and only League of Legends was left standing right um and uh Roblox is is you know the company you want to uh invest in for the Creator economy and I don't know how much more there's going to be um so um you know I think if they invest in in influencers themselves the the problem with those businesses I think is that they they're not going to scale really well right so so the game startup Investments is is probably a good thing but but the influencer Investments and Creator economy Investments I don't know about that which you what what are the companies that they're investing from a Creator economy perspective I don't know I mean there was a list of some of the companies but I don't remember the specific ones like is it software to help creators do their jobs yeah I don't know all right we'll have to look into that makes more sense to me

but I don't know if how Mr Beast is a big is a good judge of of creative what I'm moving on you're such a boomer such a boomer I'm such a boomer he's the smartest and the coolest guy on Earth godd damn it I what do I know um all right 2K sports acquires HB Studios and size PGA Tour 2K deal with Tiger Woods okay so basically the publishing label of take two announced that they're acquiring this developer that actually I think they their game La last year uh their golf game and then they signed a multier deal with Tiger Woods obviously one of the greatest golfers ever in in in in in the world um and so the game I think this game is coming out it's probably it's his license will probably be used in the next next version of the game because I think they have another one coming out this year so look I'm gonna upset some fans of Tiger Woods I think and probably golf fans in general U but I love this story because there's so many ISS issues with it and and so many questions that need to be asked

right first of all why the [ __ ] is Take 2 making a golf game okay you barely get two million units out of these this golf game it is a waste of their time and it's a waste of development effort now I personally love golf games because I'm a boomer right and I will buy these games or get them for free from my friends at 2K because I do that right but no one else car is about golf okay golf second thing golf is not a big sport right the only only thing that made it big was Tiger Woods back in his Heyday but I'm sorry guys Tiger Woods is done right like he was done before this last carreck right because he his his body is like a 60y old in a 45 year old body right because his back is jacked his legs are jacked like he's over he has only won like two or three tournaments in the last three years right um and and and my last question and the biggest question is why in the hell would they release this press release like a week or two after he gets in a huge major accident in which he breaks his legs in

three spots and breaks his ankle I mean it's so weird that the pr team would not just hold this back until he gets back on off on the men right or now of course my cynicism coming out again is maybe they did it on purpose because he was all in the Press about this accident so it's going to get more attention by by releasing it I don't know but you know with tiger in the news like he was maybe that was a better way a better PR hit for them um but more of a broad about take two and I probably have said this on the podcast before but their Strate take two strategy around Sports makes absolutely no sense right casual sports for basketball the NFL deal for non-simulation games Golf and you know someone seems to be out of their minds creating a strategy on tier three and tier four Sports I mean what's next are we going to see a NASCAR game a cricket game rugby game you know like this has all been done before and that's what that's what Bo bothers me so much about this is we've been here before EA Sports did all of this and it was a disaster for obvious reasons there's not enough

big enough audience for these Sports and and and and and Eng golf's case there's nothing that changes year on year to make it to justify the the buying of the game because it's the same freaking golfers and the same [ __ ] courses right and so anyway this has all been done before and this is when you need CI right this is when you actually do consumer insights test these things and then you will realize pretty quickly that none of these ideas make sense and this is just a waste of resource and a waste of time from take 2K and it's going to be a disaster so anyway anybody have any thoughts on golf or tigerwoods they like to share what who should they use for SE danan Quan from beta hat yeah stanwan from beta hat yes he will set them straight watch our CI podcast I mean I suppose if if you've got two million units a year maybe you you get 100 million bucks a year then right and so if you just if you just put your your business below that I mean your costs below that then

you're making money no okay well I I can't agree I can't argue with the math um well no I can't argue with the math the thing is that they don't sell two million units at $60 they tell two million units at 15 20 $30 I mean the ASP must be really low because it just doesn't move right um but it's all it's also the opportunity cost right of things that they could be doing right with these development teams and yeah that's but then then you should have three or four football games right right right right right anyway none of it makes sense a lot of sense to me um they're just like filling up the skew plan and again I'll play it right I think there are people that out there like it it just doesn't seem to make a lot of sense in terms of scale all right next article thas Bravo Spa agrees to take iron Source public so three things it's definitely an amazing valuation 23 times 2021 revenue and 79 times of their 2021 EB the mere fact that all revenue and no breakdown whatsoever is mentioned in the um in the

slides is pretty remarkable and um and just as a reference because iron source does have hyper casual business usually a hyper casual business may be worth 10 to 15 times eBid though and if you don't have any any Revenue breakdown and if somebody thinks that well all they have is hyper casual Revenue then in this case it would be 23% of the revenue in the midst of Ida deprecation but let's get deeper so analyzing the revenue a little bit uh in 2020 they did 3332 million so almost all revenue coming in from plus 100K Revenue customers 59% came in from user growth mization solution 29% came in from device PL device placement and Telco solution meaning that 12% of total revenue remaining from other streams and that would be mainly supersonic their hyper casual business which according to this generates pretty much between 30 to 35 million roughly and did a little bit of a sanity check on sensor Tower makes all the sense

so things to to talk about there's not much to chew on this Spa document without breaking down revenue or abto clearly it is intentional and they are positioning as this as top tier software Equity story with high margins and high retention indeed iron source is a platform play and Publishers will keep spending on the platform as it's one of the biggest ad networks mediation and monetization companies in the world these are facts the only concern from that these the underlying spend is on user acquisition which by all means is not as sticky and Powerful end product as other volume based software enabler for core business functions like for example Unity which offers um a tool for game developers and then is something that that won't be affected as much as as user acquisition and what I wanted to do is I wanted to compare this to appen because last time I was trying to talk talk about appen you guys totally shed on me so let's go get back to it uh there was a fantastic newsletter

from invest game and this was done by Sergey he dug app Loven S1 in his latest newsletter it was really buried fairly long in a fair long analysis so it may have been unnoticed so he took a closer look at Apple oven's Revenue breakdown in the S1 and looks like this in the report 71% is AD revenue generated by app and games this is lion Studios and others so basically in 2020 app did 740 million in inapp purchases which is 51% of their total revenue they did 55 million in ad Revenue which is 35% of their revenue and they did only 200 million which is 14% of their revenue through at Tech which is actually less than iron source so really Apple Aven is much closer to a gaming company with an ad tead Network on the side and a 5050 5050 um sorry and then the game platform kind of making the most so if your

business is doing 50% from inapp purchases 35% from ads and rest from the adte in my honest opinion this is much closer to plka and Zinga at 15 times iida than to the unities the trade decks the Robles at 20 to 30% 30 times Revenue so I know App 11 people are listening to this and in case I got the numbers wrong in case Sergey got the numbers wrong let us know and we will iFile you can come in and talk about this which I'm sure you won't but uh but but this is this puts things into perspective and that is why the platform play is so important that is why the multiples are just absolutely insane because you're not playing against game companies even though you are a game company but you're presenting yourself as the growth Loop um whatever hyper wheel whatever you you may call it through through that at Tech component and this also speaks of zinga's strategy of adding attech to them maybe they will be soon seen as well well as this sort of a uh service provider platform company dude Heaven

Help Us all dude Heaven Help Us all um so I I'll just say this quickly is that going through a spack uh it could really end badly just generally speaking um with without the type of scrutiny that that is required to go public we've talked about this before um their their IPO value puts them at 22.7 times revenue is that is that right um and they and the irony here is that one of the guys on on the slack Channel pointed out that the in a press release like two years ago they said that 2019 Revenue was 900 million and yet in their spack document it's 181 million so I mean it seems like a red flag that they their revenue changed so dramatically I mean I'm I'm sure it's partly because of different types of accounting that they're they're employing now but uh anyway is it accounting or is it gross net probably it's something along those lines I'm sure but like anyway so but these are the things that like are uncovered by going through a full vetted

IPO process is like these these accounting issues which I think is going to hurt skills and and and and maybe even um Unity uh when when the time comes but we'll see but Unity seems to be really pretty yeah I don't understand why why you can't get the full like S1 like financials at a at a time when the spack is actually announced um and you have to wait for it to get filed uh it's not Reed sometimes months right yeah they're raising you know they're they're getting investors interested in the stock during that time and yet you know uh from what I saw on the slides of the risk factors like they didn't they didn't mention idfa at all as as a risk factor right I yeah no and this is like all part of like the land grab just to get it you know to cash out as much as possible it's really quite frightening to me anyway so here's where these things kind of start to fall apart and this is already happened with skills a little bit and certainly Unity is that

and unity I know was not a spack but anyway their implied growth rates were kind of given during during their presentations but and the expectations were set during the IPO process but with the spa they can actually go and give you long-term projections right you can't do that when you file a general IPO and so what what what these guys are doing at iron source is they're putting together a forecast where they're going to grow 37% in the next two years right and so at $1 billion evaluation right they better do that right because if they don't then the stock is going to get annihilated right and and so that's what's happening with unity they brought down their kind of implied guidance they brought down their implied guidance for long-term growth skills kind of did the same thing you know even though they had a good quarter and so this is where all these companies are are going to start to fall I think right and and to Dean's Point um what the [ __ ] you know where's idfa issues that how is that going to impact all these businesses including app loving and and it doesn't seem like there's a mention of it right like this is happening in a week right they don't they don't even discuss it right this is

it just is very very very concerning for me as someone that's been covering video games Investments for so long uh to see these kind of valuations on companies with a lot of potential threats and I don't know um Iron source is a really good friend of the podcast right and I I love I really like those guys like I've talked to them a lot I just think and I'm not saying that they shouldn't go public what I'm saying is the valuations are applying things that may or may not actually happen right and that have not been really fully vetted right and and so that always makes me a little bit concerned but we'll see how it all F you know how it all works out yeah I mean it seems like what people are assuming is that iron Source will eventually adopt more of an app Loven or Zinga type of model right is is what what it seems like people are assuming if Micha what you're saying is right where the major if people are expecting based upon the advantage they have from a you know ad Network adtech perspective that you can get content

advantages and that eventually the majority of your your revenue is going to be coming from the content side then you know that that could be part of the the valuation justification yeah it's also just a different different model like if you go with a SAS model and you list yourself with that the multiples are 20 to 30% and then if you're a game company it's 10 to 15 so I think that's the play with App 11 that's seems to be the player with iron Source just showing that we are a platform and naturally iron source is an attech company they do have gaming business but it's it's you know what 15% of all the revenue but App 11 was interesting that SRA breakdown that they actually make vast majority of their money through just normal gaming business and when they present themselves they there's like this flywheels it's this and that and this and like it's a full on they they talk about apps they don't even say games and it's a gaming company yeah I I wouldn't be surprised to see app App 11 actually expand into

Apps as well though I mean that would they will they will expand to anything they I think like like fun plus like fun plus does you know whatever makes sense we'll do it so so I think they they they see it the same way they're very opportunistic but today it is a gaming business when they're iping it is straight up gaming business with an attech component all right let's move on um so so facing post Trump slowdown the New York Times is eyeing the1 billion games Market um so the New York Times is currently Under Pressure to diversify their brand away from news um for obvious reasons um the times is actually investing more in its cooking app selling subscriptions to wire cutter its product recommendation site um and even experiment with Autumn I don't know how to to say it properly but a read allowed audio subscription so obviously they're trying to diverse away from news they're

trying a bunch of different things and games is one of them right um the goal is you know trying to drive as much new types of Engagement from within the New York Times app and I think that's kind of a critical component here um so you know let's enter gaming obviously right obviously the easiest way easiest industry to enter Drive reach and margin right um let's see so the interesting thing here which actually kind of changed my opinion about this of just the immediate Assumption of reading the headline and reading the article of you know who's joining games who's completely naive about the costs and of entering this industry um like they already actually have a pretty decent slice of this they have 840,000 game subscribers um year-over year so they have a $40 a year subscription um and it's growing about 40% year-over-year from 2019 to 2020 so they have goals like apple to actually even bundle some of these subscriptions together with the cooking thing and the

wire cutter thing and the gaming thing okay this makes sense so now they've added Jonathan knight uh to join the New York Times after leaving WB and previously from Zinga where he was the SVP of the Vil games and the With Friends games U to help build out this word game portfolio within the company so I think like really the question to kind of chum the waters here and get some debate going is what would you do if you were the New York Times right like and you had you were sitting on this gaming asset would you create U would you create this app within the New York Times app or would you create solely separate games try to drive as much reach with them and then and then pull them towards that Central app as a secondary thing yeah and actually maybe we should hear from Dean Dean as someone who's part of uh you know kind of uh new you know news source it'd be great to hear what you think in terms of what you know would you guys have Venture beat G gaming division or games beat gaming division as well what do you think um no

I think it's a very interesting move I mean the you know I I I think that um the business models have to change in the media industry you know especially anything that's built um so heavily around advertising right it's like a always a um a race to the bottom uh when you're trying to extract good ad rates out and uh I think that um I don't know if you guys heard of this company Arcadium before in New York but um you know they they Supply simple web games uh to uh like newspapers and you know other media companies and and these uh generate you know Revenue um for for the um uh just traffic that they get and so uh I think if if they've tried that at the New York Times and I think that's probably you know just the sort of unclaimed re Revenue that you know they could otherwise get for the traffic that they have which is you know considerable

um and uh and then it becomes like okay if if you're going to you know invest in the game business like how serious are you about that because as we just saw with Google right I mean you know when a when a non-games company does dives into games Google even hired 150 people um uh you know it it doesn't often end well um and so if if there's a a reason to do New York Times branded games then I think that's what they have to to search for and focus on here uh whereas you know if if they are just trying to do the next match three game or something like that then that's uh that's pretty dangerous yeah uh my off the cut analysis was pretty much the same as as Adam Adam pointed out like when I read this and actually knew this before I I I know Jonathan Knight and I saw his Facebook update months months months ago

that he joined New York Times so I at that point I thought the same thing I'm like this makes no sense like why would a liberal newspaper that writes these super in-depth long form articles be making games so but further thought I mean Adam you pointed it already they have a games business and I think a lot of their readers this is just to totally hypothetical and not even the type of readers that would download apps uh and this be something inside that that reading experience where where they would play crosswords and normal stuff that you do have in newspapers like back in the days when we didn't have smartphones and also you know they they could leverage their cross promotion and their ad monetization skills and maybe the ad monetization from the games could actually help them to monetize uh the newspaper better I've always for example wondered why can't I just watch some news articles so I can read a little bit of a newspaper maybe watch some more so I can continue reading it rather than them asking me to subscribe for like 25 years to this newspaper anyway uh when

we think about their competences they do have they have made games and they have been fairly successful that's why they're investing into this um they haven't really run a games business business before but now they have JK oh so sorry Joseph before I knew you as a JK I knew JK as a JK and that's Jonathan Knight so so JK is there running you know he used to be running friends he used to run Vil he actually run both at the same time then he was running War Brothers San Francisco so I've worked under j under JK and he runs his [ __ ] like a train so he has his own Playbook and he executes that Playbook to a so I reckon like what's going to happen next is um they will have a more professional approach to making games they will bring bunch of Zinga PMS to to the foil and um there will be some turnover because that will shift a certain type of culture inside the company same thing happen happened at Warner Brothers San Francisco uh you know a lot of Zinga people came in they were a little bit of a shift and then they moved along with a

new type of organization and I think you know they'll be chugging along and making several games in the in the coming quarters I don't know how successful this this would be um I have I have actually no clue I hope it's going to be successful I hope New York Times can diversify and and and keep their Their audience entertained u in other forms than being outraged at every thing uh and U and all the other form like I hope they will just be you know playing crosswords rather than than um reading the new let's not make this political yeah yeah I like the New York Times let's just let's just say I hope they enjoy crosswords I I think one thing that would be interesting is like I don't know if you guys ever saw the the sort of Syria sort of like a trip through Syria virtual reality experience but you know seeing like a like a place that you could could never otherwise see uh through something like VR is uh is kind

of incredible and it's like an incredible Mo move forward for journalism I think uh and so if somehow they could they could you know WRA content like that into uh into games then you know that is something that nobody else does yeah maybe or then the other hand when we look at the article that JK presented where all the the people want to to want to you know watch is how you can drive through drive-thru 1,000 times and Order hamburgers and that is the best content you can have in America so I don't know I don't like the the audience preferences like or should I watch Like Despair and and and just horrible things happening in Syria or drive-thru 100,000 times so it seems like uh seems like people have voted towards the uh the other direction just numbing themselves with with pointless uh entertainment so I don't know my only comment this

seems to make sense you know you make smart apps for smart people and you help with retention and engagement advertising whatever maybe even keep the subscriptions live you know um I don't know seems worth it I always like Jonathan I I knew him at EA briefly and I met him again at Warner I think he seems to be the right guy for this kind of thing and I think he can kill it so we'll see what happens I mean I do think New York Times needs needs a little of assistance now that Trump's out of office so this might this might help yeah I think the thing to to Dean's point right it's like media companies need other sources of sources of revenue I I'm a little bit less optimistic than you guys because when you think about newspapers and the kind of games that make sense associated with like the New York Times it's basically crossword Sudoku and cooking right maybe maybe Comics but it's it's not it's not a lot and so I mean don't know Jonathan's background but like you know you've got potentially limited scope and then you

really like I mean didn't didn't he work on midcore games I mean again I don't know him at all but he worked on he worked on V and he worked on War With Friends okay maybe it's a good fit but West game right yeah yeah based games so Jonathan is just he's like a he's an executioner like he just executes games like they they come out under him like that's what he's known as uh he gets the organization and just ships games so that's why I said like they will be shipping games and there will be reorgs like in my opinion like not not crazy reorgs but he will change the organization to the form where he can perform at its best right I mean I think to the extent that there is an existing model that's the right kind of person to scale an existing proven model but to the extent that you need to finesse this a little bit and figure out you know how do we do cooking or a cooking game or whatever in a new or Innovative way I would be a little bit concerned but but

I would raise this like what is the type of management that New York Times has like how much are they they're you know how much they're in tune how much they understand of this how much they are going to invest into this how much are they going to be you know putting their fingers and like let's not do this let's do that how much creative input they will be giving or is Jonathan able to run this organization the best you know the way he feels it should be run and the second point that I wanted to point out is is Jonathan has been shipping games like he's been working on big games and trying to ship really really big games like the Harry Potters the westw worlds uh Farmville um you know Words With Friends these type of games and now is he gonna go down like not down is he gonna go and and ship like no name crossword games I don't think so I think his aspiration level is much higher so that's uh that's also a big question there yeah obviously the detractor here is the innovator's Dilemma working within a massive company that doesn't really understand this business right I think that's that was obvious right from the headline um but

if if you limit the scope to just word games right word games dominantly have pretty good reach and have actually pretty good retention they just don't monetize all that well so now they have the leverage of being able to monetize through their existing advertising networks obviously not going to be super optimized still still going to make money there and also drive towards subscriptions of their gaming subscription or the the subscription sub like the the grouping subscription so overall I think if their Ambitions as a New York Times if their Ambitions match their cap here um then it could be fine if their Ambitions are to win yeah these guys aren't going to beat the hyper casual developers in the space right but I think if their Ambitions actually match their cap then this this will be fine they should make casino games no absolutely all right I think that's well actually did we want to talk about Discord yeah de you got you got an

exclusive inside info for us is is Microsoft buying them well we did uh do that exclusive report that they were uh uh in talks with one company uh for an acquisition that could be worth more than10 billion um and uh unfortunately Bloomberg didn't contradict me but uh but they did also additional reporting and they they also conf confirmed what um uh what I was hinting at in my story and that was the the company that's in the talks with Discord is Microsoft and I believe that they're in an exclusive um uh talks uh period which uh typically I think lasts about 30 days um so uh that means that uh you know it's a lot more serious I think than just kicking the tires um and seeing if they can they can do this or maybe they're doing IPO or something like but you know if if you go into exclusive talks with anyone then you're pretty serious about making

something happen and I think Microsoft's um you know probably has a pretty good pitch for Discord that uh you know we can help you accomplish your mission uh easier and faster and more effectively than if you were on your own and tried to go through an IPO and stay on your mission yeah they know like didn't they acquire Yammer back in the day and like kind of they acquired Skype they they acquired mixer right yeah yeah their track record is a little bit suspect but part of part of the strategy here probably is the bankers are probably throwing these press releases out there to Garner more interest than Microsoft I mean that's a general Ploy of m&a Bankers right I mean dean are you asking me who my source is sorry no no no I didn't sorry didn't mean to do didn't mean to go there anyway so I let me just make it a stas

of fact yeah Bankers have strategies in which they throw it out there so that they get more interest from other potential buyers this happens all the time and it's happened many times and we've talked about the podcast before um the second thing is like we were talking about this in the slack channel it's like there are very few companies that actually can afford Discord because they lose so much freaking money so it's like when you buy 10 billion and you're losing hundreds of millions of dollars I don't know how much are losing but they're losing a lot so there are very few people that can actually acquire this company and and and and and and they're big enough to absorb these type of losses it's like similar to um uh twitch right I mean Amazon twitch loses hundreds of millions of dollars a year I keep saying that and they still lose hundreds of millions of dollars a year and so only company like Amazon could actually acquire that kind of asset so but it's their revenues last year were $140 million and um Everybody kind of like Compares Discord to like oh this could be the next Roblox right um but

Roblox had what uh almost two billion in bookings and you know $923 million in Revenue um and Discord is like a tenth of that right so right right um trying to go public on a tenth of what Roblox has that's not going to be that easy I think no and and the problem is they don't have a business model right dis Discord really doesn't have a a solution for a business model and um but they been interesting thing is that they they've sort of turned down the business opportunity of advertising right and they are strictly a subscription business and uh and they believe that that is essential to the user experience uh of Discord right and and twitch Founders had the same type of vision that they were made for the creators not made to make money from the creators something along those Lin lines like the philosophy was not a revenue generating philosophy so anyway I I I you know

Microsoft can make as many plays as they want right they got all this money they can try it again right I I would be if I were Discord I don't know if I would go to Microsoft to be honest but just just do spack oh no please no they have a they do have a a more focused and serious uh game division than uh than I've ever seen at Microsoft right now you know like acquiring a dozen companies in the last couple of years including Bethesda right I mean that's that's showing their intention that they they are really serious about games yeah you know I I was not gonna mention this I had a talk with Mike Verdo do you know Mike Dean yeah yeah and uh and he gave me some insights about you know why you know these companies these big companies fail on on gaming is and we've said it in the podcast before but having him say it makes me feel smarter right is that like

you have to create a separate entity that does games because any big tech company that says oh yeah we're going to do games and we're going to do it the Facebook way or we're going to do it the Google way they're going to fail right because that's not the way you make games right and so I agree now that you actually mentioned it you know Microsoft did one of the big companies that did a good job of separating Xbox into to a different campus a different operating entity you know they they basically were beholden upon themselves and and and that turned out to be successful and then every other thing like Amazon and Google have failed so miserably because they try to do it their way and that way doesn't work so uh anyway it's a good point about Microsoft and Discord because they would probably make it work better although what what former Sony executive who went to Amazon and asked them that like are you going to let us operate on our own the way we think is right um and they said well you're going to be part of

Amazon and uh and so that wasn't the right answer and so the guy didn't take the job yeah I'm very negative on Microsoft yeah and like look at look at Minecraft the quite possibly the most underleveraged game product in the world you know what I'm saying like where Roblox has taken off I don't know well I don't know why you Minecraft is doing great Minecraft but what could it what could it do like you know what I'm saying like it could have been Roblox I think it is Roblox it's just as big as Roblox yeah I mean they're big in a different way it's it's not Roblox but it's but super popular and actually I think they've done better with the demographic I think they've actually been able to expand the demographic for Minecraft compared to Roblox and what they got it for like what is it a billion billion right I mean that price compared people are paying today for things could you imagine could you

imagine incredible buy I just think they they need to leverage it better that that that that that founder the founder of Minecraft could have bought a, 70 million houses in in LA right you know if he had waited like a few years I wonder what he's doing now is he just out deed you know by the last I heard he was throwing big parties yeah Hey Dean Dean thanks a lot for coming I I honestly it's it's it's almost an honor to have someone like you on the podcast who actually knows what they're talking about um thank you thank you just just kind of in conclusion Dean do you have any final message for our audience or how could people reach out to you uh Well's see well thank you for having me on the podcast it's fun and I think there should be more fun in the world so that's great uh I'm Dean Tac on Twitter and uh yeah I run a conference

that's going to have a next installment on April 20th and 29th nice all right guys well there you have it that's it see y'all later [Music] bye [Music] [Music]