TWIG 128 | Epic Will Lose $300M on Game Store, Epic Raises $1B at $30B, Apple/Google Kill F2P?

provided to you by axola hello what's up everybody welcome to twig 128 you've got myself joe kim eric crass miska katkov and adam telfer and today we are going to be covering three articles first epic will lose over 300 million on epic game stores exclusives is fine with that by pc gamer second epic games raises 1 billion dollars for long-term metaverse plans with 200 million dollars from sony by venturebeat third could apple and google pull the plug on mobile game monetization by gameindustry.biz and finally we will end with some predictions on revenue for wild rift the mobile league of legends game how are you guys doing so i finally got a vacation it wasn't long it was like three days in napa but i tell you it does does like getting out of the house after like

being you know stuck here for that long was actually really nice california despite all its challenges and problems and terrible governor terrible city government uh california i'm with you on this man it's a beautiful place though see the thing is that no matter how shitty it gets to still like it's the best place in the world right there's just you know everyone is gonna flock here no matter what you know so no no no so what are you talking about you guys are going to be missing out on all the tech all the [ __ ] that's going on you know yeah well you're really really [Laughter] yeah number one apologize for the background noise roofers decided last minute that this was the morning that they wanted to show up even though they were supposed to show up last friday um so anyways there's going to be some background noise same crap as last week

with the neighbor that was chopping down their house but anyways um it's here right idfa it's here what we've all been talking about no it's not is it yeah it's not fully is it like the att pop-ups are rolling out developers are getting first clients right at opt-in rates so now all of your idfa methodologies have to be in place so it'll be interesting to watch download rates um for top gross and games you know watch who's able to grow who isn't and of course as financial calls start coming up really interesting to watch you know what does this do to percentage of net revenue going to marketing so that will be fun um but beyond this eric actually did a great article um calling it apps flyers so the the article from appsflyers was basically they stated the opt-in rates for uh att

to be roughly about 41 or even higher uh when most publishers assumed 20 percent which you know right right apocalypse averted we're good um but that's not really the case and i appreciate eric for for calling them out on this um the first collet here is number one it's not 41 on a per app basis that's 28 and it's actually dependent on genre um second callout this is definitely early this is the golden cohort of att so we definitely cannot assume that this is the baseline and that's it and the biggest call out is that opt-in rates have to happen by both the advertiser and the publisher so at minimum we should be multiplying these rates together but really right like asphalt research isn't really looking at it this way and we have to be looking at it more as a probabilistic given um scenario right so the overlap

in terms of the probability of opt-in on the advertiser's perspective versus opt-in on the publisher's perspective um that overlap not being calculated that way so the percentage could be very very different so don't equate idfa availability with an optimized opt-in rate for your own app that was the biggest takeaway and i would definitely say excellent article as always what are you doing eric you sound like what is going um but wait a minute so the opt-in stuff is for every app too right so the more apps that you're how does it actually work so if i have one game that i play and then i open up another game if i opt out of that first game is it gonna out of me second game was going to ask for another opt-in and opt out again i think every single game has their own att yeah yeah

okay so i could opt in one game but not opt in another game in theory yes okay yes got it and that's exactly what eric is talking about here and then if one of them is not opted in then the whole thing doesn't work so uh okay i'm sorry that is my question sorry i i clearly was not paying attention so if i opt out of one then i've opt out of them all no no it's per app that's per app yeah yeah all right can we let's get eric like the smarter eric on the podcast next time tomorrow um next article uh by ethan levy from network uh a previous monetization consultant i loved his gdc talks in in the past especially the one on the tower of want but he did a great post on gama sutra this week on the nba top shot economy and definitely recommend reading it to give context on how this works right because nba top shot nfts blockchain all this hype

it's really nice to get somebody to cut through the crap there and actually say okay this is how this economy is built um and and this is how you should be thinking about it and it's great um the title of the article is even better three ways the nba top shot economy could collapse love clip clickbait um but anyways so top shot as we've reported before 305 uh dollars or million in investment round 204 million of transactions happening on the platform and really it's an effectively built rarity focus gotcha card pack game that really ratchets up the rarity systems as much as physically possible um so what's great about this this article really kind of shows the way that they did this with things like limited windows for selling card packs like sneakers uh rarity tiers of content multiplied by issued amounts so there's rarer versions of rare cards so to speak like where in cs go and the value of these cards right has to be arguable um goes into this a little bit but of course this is just pruning

ownership on the blockchain everyone can download see view get every discernible value about that card just digitally they can copy it as many times but this is only proof that you exist on this blockchain so the value is completely tied to whether you believe in this blockchain um but anyways putting your mobile ccrpg live hops hat on the collapse scenarios that he's talking about are number one that new content is becomes not as valuable as old content core fans no longer attaching to new content no longer seeing value which could create market panic scenarios where spiraling happens new content is dropping in value over increasing in value which on top of the obvious friction of blockchain based transactions right ethan actually mentions that while you could sell your cards to make 200k right now that's the headline profit is theoretical since that actually takes 68 weeks to do with withdrawal so these are all yeah to actually do eight weeks for

withdrawal yeah they promised 30 days and the reality right now is 68 weeks given the given blockchain so this creates all the ingredients for a very precarious position and i i really like that that that wording of it but anyways great article definitely recommend reading it um i've got two callouts for recruitment number one magmatic games in berlin uh friends of the podcast flooring and florian they've actually built a very successful merge title travel town and soft launch with great kpis that are now scaling they're looking for game designers pms producers analysts ua developers all these positions are open in berlin and are definitely open to remote so preferring of course being around say european time zone uh but still very open so if you work for misca studio and you're very talented and you want to make more money you should definitely go to magmatic games i can i can assure you i can i can assure you that nobody who works at our studio in berlin

wants to make merge games if they do you know so uh and second recruiting notice is about wb um so i'm working in a central strategy role across the wb portfolio so that's mobile mpc console i'm looking for fully remote systems designers and pms who really want to work across mobile pc consoles so i really say if you're tired of working live ops on a single title for years and want a new challenge with the focus on high level strategy please reject definitely need help anyways it's good all right all right all right all right some news so first of all applovin's ipo now we finally see some numbers so they're raising 2 billion at a valuation of 30 billion dollars interesting points in the in the document is that 86 of all revenue is coming from the mobile games portfolio nevertheless despite being a games

company with an ad tech component they're trading at a 20 times revenue and 73 times ebitda so i mean this is a shout out just to the leadership team of of selling this company in an extremely great way and um yeah a 30 billion valuation just like we predicted actually in growth triggers this can't end well it just really can't end well like they're basically 86 percent of the revenues from mobile games they're like zynga trading it at 20 times revenue zynga doesn't have the attic component yet so maybe when zynga gets the attack component maybe they go to 20 times oh so heaven help us heaven help us dude iron source applovin this is not gonna go end well at all unity's already down fifty percent all right let's talk about crash bandicoot so we talked a little bit and it's performing as expected about 37 minutes million installs and a

bit over a million in revenue so this was i'm just raising this because there was a lot of talk on the constructor fun slack channel about this game uh so just i played the game very well made you know game it's it's a runner still they added a crafting mechanic to pace the session instead of going with something like energy and the crafting is used to challenge the mod the other bosses but i mean everybody can play and see how this works um king's strategy usually at least previously has been that they're making games that make 100 million a year i really doubt that this game makes 100 million a year the global revenue per download has declined from 9 cents which was the highest to two cents now of course this this doesn't take the uh the advertising revenue into account but i doubt that it's gonna you know make 90 cents on top of that what do you saying what do you think what's gonna happen actually someone reached out to me and confirmed exactly what i said the last time is

that this was like activision's like king you're not making any new games make a game for crash bandicoot okay king's like let's make a runner right like like that's ever going to make any money and that's what they did so joe joe replied to you like who said they're looking for 100 million that's been usually their thresholds at least according to the word on the street that's usually other greenlit games they need bigger games and 100 million kind of makes sense for a developer of that size and a publisher um and again a little bit of a word from the street and that is that they've been looked like activision has been looking to make a mobile version of bandicoot since 2014 they finally found it and this is i don't mean it in a in a condescending way or anything uh but it looks like the design is from 2014 so it looks like this design has been there and they finally found somebody to do it and they did it and it's a good execution but it's very much a puzzling element here is that like what is the product market fit and what i'm really like what i would

really want to hear is how did this game get green lit not that it's a bad game but it's just not the right game maybe for king's portfolio so it would be interesting to hear the conversation because there was a lot of thesis on why they would do this type of game that has a broad audience but doesn't really monetize uh but yeah anyway i already told you why i told you exactly why the guys activision were like dude make something king you're making the same [ __ ] game over and over again and you're losing share every year right runner like a runner like we know it's like what else can they make you know like it's just been forced out you know what else are you gonna do with the crash bandicoot license right do a platformer like a platform will be worse and much harder to develop so this is the easiest the economics of a runner are pretty well known so i i kind of suspect they they couldn't this couldn't be a shock to those guys right like it must it must be more of a reach play they must be they must have known it's not just here's how it goes

we are innovating on the runner genre by adding a battle pass to the runner category this is going to monetize and we're going to get 15 conversion and you know only like five percent a month like you know uh but the echo economic depth unless they're total idiots because economic depth of runners is also very well known so adding a battery position i know how the pitch went i i i these these [ __ ] mckenzie bane [ __ ] are out there making pitches you know with all these crazy stats i i gotta believe this was a reach play for them i by the way from the runners like i've played the uh the gameloft spider-man runner game it's really well made and has this very interesting gotcha and like an rpg mechanic and even the economics for that game weren't that hot and you can actually find the people who

made it so maybe they could have talked to them about an ip plus a progression anyways so i'm very okay i'm giving him the benefit of the doubt they had no choice they had to make this game there is no choice all right so we we all agree that it's a good game but maybe a wrong company to be to be doing it like if activision would have done a third party first of all like you shouldn't have and you shouldn't make runners full stop stop just stop okay so we'll talk about let's let's go to the next one clash quest so i've been playing it for a few days i've personally turned out uh it has a very rapid increase of difficulty pretty much like what we saw with hay day pop the game also felt extremely restrictive and what i mean by that is as you enter the level you're taking your army but in this case you're not allowed to change your army so let's say you've unlocked the archer you can't go back to the previous level now use the archers to pass the square and to get more points and to get maybe the queen stars which the game really rewards you so they it it enforces you to do mastery but it

doesn't allow you it doesn't give you the freedom to achieve that the only way to progress is really by upgrading your units and the only way you upgrade units is by getting the unit shards and coins and the only get way to get those is by replaying the levels where you have to replay it with the same same troops so this in my opinion leads quickly to a position where where the replaying is just not fun and you're doing it just to get a some amount of points and it's restricted by energy and um yeah it's i don't know i'm wishing all the best for the team that they can turn this around uh really requires quite a trick because as a reference this is uh pretty much like legend of soul guard uh which pretty much got two bucks per inch what is you guys you gotta like mute your mic don't worry kids don't meet me don't meet me don't cancel me dude

so so as a reference this game is very much like legend of zolguard and ledger of soulguard passed recently two dollars per install but the fact is the game was launched in 2017. it made about a little over 10 million with 4 million installs and uh it pretty much hasn't had any installs since uh since june of 2020. so yeah it's um the numbers are not too high feels very yeah feels feels challenging so let's let's talk about the next next clash game so of course autochess very much interested in the autochess version of clash that is coming in soon um given the lack of monetization of this genre it's going to be very interesting to see what what supercell has done especially given that the the art style of the uh the the clash auto chess is quite kiddish uh but maybe maybe they're connect with the uh with the brawl stars audience and maybe it will be a much broader game than the tfts and and dota

battles and so forth so um very much looking forward to playing that and of course you know hoping that that the guys can turn dog and his team can turn this around um and then finally shout out to level up blog eric i'm not going to listen to your clash hate on this no no no just just just just one thing haven't helped supercell at this point no it's it's all good uh so anyway shout out to level up blog so they have this good post i missed it when it originally came but it was it's called what i wish i knew when building a new game studio this is by sophie voe she's a studio and game lead at wudu and she shares her key lessons from building up wudu's new studio in berlin very interesting read she contextualizes everything and and creates concepts like it's a it's a good read for anybody um anybody in um yeah in in studio leadership as well as working in smaller studios on how to how to yeah how to how a good studio looks like for internal anyway let's talk about epic

all right so rolling into the news and the first article is epic will lose over 300 million on epic game store exclusive is fine with that so as reported by pc gamer in its battle to take on steam as a pc game store epic has spent the last two years on essentially over a hundred exclusivity deals and obviously giving away free games every week and due to epic's big legal fight with apple we learned from some of the legal disclosure that epic did commit around 444 million to epic game store exclusivity deals just in 2020 alone and more specifically you know that 444 million on minimum guarantees uh and and what that means is that they will be exclusive to the epic game store for one year and then they can uh basically go to steam or other platforms and as one example they note that epic paid 10 10.45 million dollars for control

so sounds like a pretty good deal to me uh in epic's end-of-year report it stated that players spent 700 million on the epic game store in 2020 but third-party game sales only accounted for 265 million of that spent so obviously the remainder of that would be on fortnight according to apple epic is going to lose quote at least 330 million in unrecouped costs for minimum guarantees alone end quote if you also consider 2019 steals epics game store is projected to lose less than 600 million by end of 2021 and this is based on some of the legal depositions from epic game store vp and gm steve allison and their vp of business development and the way that it breaks down is epic lost 181 million in 2019 they projected a loss of 273 million last year and projects another loss of 139 million this year hence apple points out epic needs to riku another 600 million to break even and it doesn't

expect that to happen until 2027 epic on the other hand expects to earn profits in 2023. and uh in response tim sweeney the ceo of epic stated quote egs is not yet profitable at its current scale and stages of development because it has front loaded its marketing user acquisition costs to gain market share so my take on this is that you know you essentially have you got to bet big to win big i think that going after this market is in my opinion a really smart move this is something epic should be doing the moat to entry is huge so there's only a handful of companies that can do it epic also has massive synergies based on its engine business and fortnite also drives a lot of traffic to the store and so from my perspective the only real weakness here has been the product management of egs the epic game store itself so while you know valve's basically been asleep at the wheel for years with steam epic hasn't really

capitalized on its opportunity to create a unique and compelling customer experience so the the only complaint i would have is just the lack of innovation or creativity on the eds side so for example there's no notion of enabling game studios to for example include influencer video endorsements associated with games no referral program like like amazon has for influencers to potentially help drive sales very poor surfacing of like social features letting me know what my friends like to play what influencers buy and play and you know as far as i know i haven't received any sort of like amazon like personalized recommendations no humble bundle how about like porting publishing pc only games to mac and trying to capture the mac audience so so again just to keep it real for a second i'm a huge fan of epic just to be clear but i don't see enough experimentation innovation on the epic game store i'd love to see more of that and open offer to epic if you guys want some ideas if you want free consulting

if you promote my game when it launches i'd be happy to do free consulting same offer to apple because you got to think that those guys are cooking up a store once especially like a single deploy solution once they once they have like the m1 chips and that they'll probably do something similar anyway what do you guys think i'm not go you're not getting away with the apple m1 [ __ ] they're never going to be a gaming company they don't give a [ __ ] about gaming at all they never have um they optimize around their own os and their own apps right they don't ever ever have anything to do with gaming um let's see well we we talked about this years i mean when we first started the podcast we were talking about how epic was just basically burning burning money on these on these uh exclusives and spending insane amounts of money i mean if you do the math on just that one deal that you talked about like the 10 and a half million control i mean that implies that they have to do

like 7 million units on pc for control that's insane right that's never going to happen so well but eric do you think strategically it's a good move i'm going to make the same argument i made a year and a half ago it's like i i think it is a good move if you actually have a platform right but they don't have a platform they don't have a social platform that's embedded within this epic launcher right this is not like discord or [ __ ] even slack or something like that like there's so many they can get the players but they need to retain them and keep them engaged with the with the with the with with social features which they just don't have so it okay but but you're you're you're agreeing with me right it's like good strategy needs better execution well or or they should have like built out the platform before they started to drive all the traffic right because at the end of the day this is a launcher right this is nothing more than a launcher right i'm launching fortnite i actually i bought games on it because it's it's a better

launcher in a way than steam is you know but steem is more of a platform of of social engagement and in recommendations and all that other stuff so i they just need to build it out right and and so i don't really disagree with the strategy per se i'm just saying like i think it was a little early i think they should have just waited until they actually built something that was a little bit more sticky you know i don't know that's kind of my thinking generally um but you know and but on the on the flip side the fact is that they likely are on a ton of desktops now or just in general because of the popularity of fortnite and so it maybe gives them the trojan horse to to build new stuff and and you know we'll get to it in the next story but like you know what their metaverse is going to be they build more and more content and more of interesting things and that that'll be a place for that consumer to go in theory but uh i personally think that joe has a crush on tim swinney after his interview

he wants them back on the podcast exactly that's what this is all about um but yeah again we're going to get this into the like into this a little bit in the next article but i think like if you count up all of the battles that epic is in right like each of them on their own could be won by epic but i just believe that even though they have so much cash from fortnite they're still stretching their resources too thin right like in terms of counting up the the uh fronts that they have to win in this war right fighting against valve with the epic game store obviously hundreds of millions have lost a year for the next years in order to gain just enough market share that they can actually compete against valve and don't forget about microsoft game pass on pc which obviously is going to be growing in share over time um when obviously from joe's feedback i agree they need to operate that game that that launcher better right and they obviously need more resources in order to operate a better user experience which is more unique which leverages all the tech that they have right

nothing about that nothing about the epic game store currently is unique at all and obviously the resource constraint in order to create that feature um second fight they're going up against apple right in order to allow them to operate on mobile without the 30 cut that is obviously taking a lot of revenue off of their their plate in order to fight that battle and then lastly metaverse ambitions which we'll get into in the next article but from my perspective like they should be building a roblox competitor right uh i would be focusing on that right creative mode and fortnite is a major gap that could drive fortnite to a whole nother level and actually create a whole unique moat of their own right which would actually drive the epic game store which would drive apple even further right and actually you know help them win those other fights so from my perspective i think obviously even with the amount of cash that they have they can fight a lot of these battles but i would be focusing much more on the metaverse ambition than i would be um against the epic game store against apple yeah

one thing that is not often raised up is like epic has grown quite significantly since the release of fortnight uh not only has it opened up these new battles and new fronts without with steam with apple but the organization has grown a lot and i think the top management has also evolved through this time so when when we think more objectively about this not being like the fanboys of epic or fanboys of tim sweeney it's um it's sometimes a questionable like who's challenging these decisions to to start these multiple wars and these investments because as adam you said like if they would have only one front they could probably win it but now where they're opening up multiple fronts and it's really hard to focus and and manage your resources between them so i don't know usually when companies grow and when companies become super successful and grow very rapidly and the leadership changes uh the leadership changes towards the way that they're supporting the ceo in everything that the ceo does and becomes sort of a yes man so i'm i don't know uh i'm just

hypothesizing i i don't know anything about epic so this this kind of from the side looking seems that that um nobody's really challenging these uh pretty big decisions all right moving on to the next article well i mean we're burying a lead here so i guess a lot of this information was was disclosed oh no this this information was disclosed from the lawsuit is that where you got yeah okay all right but they also at the same time are raising an insane amount of money a billion dollars um at like a 30 billion valuation and that was just announced recently which is is is pretty impressive in general uh 200 million is coming from sony and then like basically the who's who of investors including fidelity and t row and blackrock et cetera even i think one of my clients actually participated in this round um at this at this level um and

and my view anyway at least this company's worth may be worth that much money compared to some of the other companies we're talking about this valuation range so anyway the the the news really though is that tim c sweeney still has control of the company because he is the only or in the common stock which actually gives gives control he's still uh the majority owner um they basically said in this that this investment will accelerate our work around connected social experiences between their games um and also work on the other things that they're talking about unreal and online services etc um and then it goes on to say i i couldn't tell if this was actually old quotes from sweeney or not but they were talking i think it is actually but they said that you know sweeney was quoted as saying like the technology is here to build out the metaverse right and that you know everything is available right now the fact is that we just need to pull people together get the development developers together and get all the

elements together and the online experiences together to make it happen instead of being science fiction so um but but again i'm still a little bit concerned not concerned i'm a little bit not understanding exactly what their strategy is for the metaverse you know the the i the clickbait of this title was basically that you know they're raising one billion dollars for long-term metaverse plans but i really don't understand exactly what their plans were my understanding was that they were basically going to build a competitor to roblox right um and and that may be but uh but my people that i've talked to say that that's not what they're doing at all so i really don't understand exactly um what what what they're building so i'd love to get your guys's feedback on that and just as another as a side too is that these type of rounds that are so big um generally speaking i doubt epic needs

the working capital like needs the cash to to continue doing what they're doing a lot of this is probably allocated to early investors or employees that are cashing out right that that want to get their money out of the company and it doesn't disclose how much of this billion dollars was that but i bet a big portion of it was that um and and not necessarily you know working capital so um anybody so anyway i adam i don't know and joseph what do you guys think they're actually trying to do in terms of the metaverse if it's not roblox it's by the way it's it's not the metaverse anymore it's an omniverse you know no i actually think that uh so based upon the interview i had with tim sweeney a while back i i actually felt that he had a more grounded and practical approach to metaverse which is that because to your point about science fiction too many people talk about the metaverse in such a conceptual and like non-practical way but

you know i mean one of the things that tim mentioned was like hey you know may what if the metaverse were 2d you know like and so i i feel that their at at least like in fortnight you've got real practical things happening whether it's concerts or whatever that are more tangible than a lot of the pie in the sky conceptual things that people are talking about um you know and not not to not to point anybody out but i think when other people talk about metaverse it's just not practical enough but um you know i but one thing i want to say adam to your point are about are they fighting too many battles on too many fronts i i think that the other thing you have to think about is that sometimes you know it's it's a timing issue right like is it a great time to raise money yes is it a great you know is fortnite at a high so you want to launch epic game store to take advantage of some of the things that are happening yes and so i think there's there's kind of the balance between um

timing against some of the organizational issues and scaling issues that you're going to have to deal with so for me i i think epic is doing all the right things strategically but yeah it will have to get its execution underneath it and its organizational issues underneath it but um strategically i can't fault epic for for anything that it's doing right now how about this between all of you guys would you guys be an investor right now at a 30 billion dollar evaluation i'd be really good about this because the thing thing is we were talking a lot about you know how how all the companies are getting like i see jk trolling everybody on linkedin with the uh the growth loop hyperloop uh nft metaverse but but think about it like in a company like epic could you get project started could you get things forward by just saying the word metaverse like is that the magic word that opens up gates i don't think so no i don't think i think they're smarter than that i don't think i would i would invest in epic now because i just feel like they

are steps away from building a proper metaverse they've already got that scale and their engineering capabilities are like there's no one else in the west that can match them so i would definitely bet on epic even at this evaluation how about you uh mr skeptic mr metaverse skeptic joseph uh i mean of any gaming company i i probably more most optimistic about epic but you know i go online yes okay yeah so epic versus app loving like would you if you had to invest into one of those two oh my god please give me a break i wouldn't invest in anything dude epic but i i will say people people underestimate applovin though because if if they're if they're able to continue to execute their strategy i

mean you know and people just keep feeding them data they can take over all of casual you know just casual they bought you know machine zones so they can move to i i'm more doubtful in terms of their ability to execute against midcore hardcore titles but in anything that's closer to top of funnel anything that's closer to the front end where they're able to leverage a lot of the advantage of their ad network i would say yes and then on the midcore hardcore side i okay i'm skeptical i i know they may be able to add that capability over time especially with that much money but i don't think they got it now okay yeah all right go ahead mishka all right um so there was an article on game industry biz called could apple and google pull the plug on the mobile game monetization so very clickbaity uh this was an opinion piece written by rob fahey i'm if i'm mispronouncing apologies so the thesis is as a consumer and

governmental pressure mounts over loot boxes services like apple arcade indicate a desire by platform holders to move away from the monetization free for all the article talks about various national and supernational bodies taking an interest in how loot box types monetization works predicts that legislation in these fields is almost inevitably going to drag in the platform operators mainly apple and google overseeing whatever mishmash of laws and regulations end up being in place so the author justifies apple arcade in the following way the apple weighed up the popularity and reputation of existing app store games against the revenues it realizes from their in in-app purchase and found the results of that calculation troubling enough that it invested a pretty significant amount of time and money in creating an alternative in other words author sees it as a service designed to appeal to users who are put off by predatory monetization strategies um he's seeing apple arcade as the plan

b and even though he realizes that the other sort of a plan b and apple arcade is is not working as it should and in in according to to rob he mentions that it's because of lack of discovery that according to him would or could be fixed if app if apple arcade would live outside the app store and he also mentions that it's because of lack of those premiere titles which he actually says he doesn't say it's fixed but he talks about the new premiere titles coming in by people who i already whose name i forgot i'm sure as an indie developer everybody is very excited i think it's a square enix developer somebody else anyways so many developers with jrpgs are doing some games that should be the ones that draw the big traffic to to apple arcade and finally he he talks about apple arcade and kind of makes this notion that it functions much like the netflix model and in the way he sees it is that once you have a net

netflix subscription you're likely to balk at paying to rent a movie or going to a cinema so uh you know there's of course no data to prove this and i actually took some numbers okay all right stop stop stop stop this guy i mean look i think i've read fakie stuff before i don't think he's in [ __ ] i'm not and i'm not saying he is a [ __ ] but that is a [ __ ] moronic statement right there that is like he doesn't even understand free to play at all he doesn't understand the game business at all anyway go ahead so let's talk about some facts so you know and that netflix thing was was basically saying but i looked at the stats of box office and the box office have been rising since 2007 and of course last year was horrific but it just kind of shows that even though you have a netflix subscription you can still go to cinema and you probably will rent a movie because netflix doesn't have it all anyways so let's talk about some of the facts with apple arcade they had a very large batch of games and there was a massive promotion in app store like even eric accidentally i think you got apple arcade for a month because it was free for everybody it was

impossible to open up the app store without it and even now it's impossible to open up the app store without seeing massive promotion for really cool looking games after this big batch the first batch they slashed a lot of games and a lot of games in development were killed by apple so they just stopped funding them and we know this because there's a ton of developers who are suddenly open for work and they were unable to talk about it but you know word on the street was that they were working for a certain premier mobile subscription and i doubt it was google anyway why this happened well the quality of a single player game like a quality single player game it takes about a year to build and ship and that's if you have a gel team that has done it before but in order to play that quality single player game like how much time does it take you to play one of those 10 hours maybe 30 hours at max i doubt you're playing much longer than that and of course you increase the lifetime of these games by having social gameplay that's always great and

most importantly having new content and the new content is only justified to be created by the studio that made the game if that brings them additional revenue and if it keeps growing or it keeps the existing player base at the same time at the same size so in the apple arcade business model this additional content is really discouraged because it re it only brings additional cost to the developer now of course i don't know if there is some kind of a revenue share based on time spent playing these games or how it functions i don't think many people are talking about that openly i'm sure apple is not talking about openly so i'm just making a hypothesis here and what this scenario creates it's it's leads to a pressure to create more games because the existing games are not holding players and they're not releasing more content and when you're making more and more games that increases the cost of that content and also bloats your organization because suddenly you're becoming this big publishing organization choosing what type of games should be

coming in and following those and kind of acting almost like like a third-party developer for them and in the end the content chosen to apple arcade is chosen by people uh who are clearly not maybe the fans of free to play and want to bring a new kind of experience so it is driven by the taste of certain critics instead of the taste of the market and that's actually you know being a capitalist that that is a there's a weird way to to operate an economy so the kind of like the big question without talking too much about on on rob's thesis or an apple arcade it's it's really a question like how can apple turn this around so now they have a new batch of games they've clearly change their strategy to a little bit different but i believe that the games have to be inherently social because that increases their play time and it's fun to play any kind of games together i think they have to ramp up their revenue model to incentivize the content creation so if you made a great game for apple

arcade and people are p playing it i don't know if they have this if they do that's great but the model has to be in a way that the people who made that game are incentivized to create more content so that game continues to be the one that is played by the players in apple arcade and through that they're they're continuing to subscribe to it and finally i think micro transactions make sense whether it's dlc or you know some certain kind of content packs like in fifa ultimate team but the inherent problem always is that if the business is driven by ideology versus a market need or or market demand it's it's very hard to to adapt to the market so that's my uh that's my analysis uh look uh dude i'm not i'm not gonna go on the [ __ ] apple arcade rant again but like apple arcade is the stupidest idea ever brought to video games and it made it continues to be so and it's never going to be successful except as part of the overall

subscription package for apple which in that case people are going to do it they're just going to opt into it and but they're never going to get the engagement on anyway so there's no way you can fix apple arcade it was a dumb idea to begin with the guys at apple that are running it are not not thinking clearly about what the consumer how the consumer actually consumes content on mobile right and so but this article is a little bit more disturbing in the sense that it's it's not about apple arcade per se the notion that google and apple are going to go after and shut down monetization of the of the apps on the store is is outrageous i mean it's out [ __ ] rages you know like they are not doing that right it's up to the publisher to determine whether or not they're in compliance with the local laws of every country so i've read this guy before i don't think he is i think he's good but this article is really bad right because it is clear that he doesn't have an understanding of monetization on on games he doesn't have an understanding of what the app store's policies are he doesn't understand the

pay-to-win mechanics that are involved in gaming just in mobile free-to-play gaming loot boxes he doesn't really understand that he doesn't understand the legislation bodies that he's talking about right in in the uk i i it seems like he did no research on this piece whatsoever he basically is reacting to this study that was done basically condemning loot boxes because it's targeting children right like that is a [ __ ] legitimate story right because the the results of this particular study were actually relatively interesting is that like 23 of kids ages 11 to 16 were involved in loot boxes that's not good right they shouldn't be doing that and it says that loot boxes the behavior mechanic of loot boxes is similar to gambling i [ __ ] agree i totally agree i think that that's what makes loot boxes sketchy as [ __ ] right and they should not be targeted at kids 100 agree with that right but what he fails to mention is the part of the article that basically says just that it says that the uk ie responded to this

article saying look we've already identified this as an issue we have made age ratings and age gating part of these type of programs using the peggy system in the uk and it allows managers to players and and even um publishers to manage or limit or turn off spend completely right so they've already acknowledged this before this research even came out right and so anyway i i think far-reaching like platform changes in which they're going to basically outlaw like loot boxes is ludicrous right and then on top of it it doesn't really go into the clear thing is like what percentage of this 20 billion dollar market that's estimated is kids it's probably very very small so even if it were a problem and it wasn't being dealt with with the ukie and other bodies that are trying to manage this stuff it's still likely mice

nuts relative to the overall industry and so so that that that there's no reason for google and apple to go after loot boxes in in this scenario right so that's kind of my whole take so the whole article was ludicrous from the get-go and so i wish frankie would uh yeah would actually do a little work rather than throwing these like loop you know clickbait articles out there i think mishka the point that you raise is to me the more interesting point which is if not apple arcade in its current manifestation what could actually make it work how do they turn it around and i think that the fundamental problem is just that the the basic operating model is not the right one they shouldn't be thinking of it as netflix for gaming they should be thinking about about it more like in terms of an operating model more like what is the amazon prime of gaming you know what i'm saying more of a club membership humble bundle something that's a little bit more not oriented around like

how they have it but that would actually achieve their objective of how do you protect artistic and high quality experiences on for mobile games and so how how would you continue to support games like fantasian and other interesting unique compelling indie experiences and so again i think that they do have to go back to the drawing board they have to throw out this [ __ ] ridiculous netflix idea and adopt amazon prime as their operating model and then they would have a thousand times a success yeah absolutely if you have any questions let me know feature my game in the future i'll help you guys out what's been twice shy anybody that actually tries to develop and is is taking money from apple to to build on this [ __ ] is it's just like they're basically signing their death warrant right i mean they're both ultimately as we said before you know the the music is going to stop right and it did stop for like multiple developers right and so i

don't know why you even get involved and something that cannot be commercially successful it's like seems like it seems like just suicide well i well i mean i i guess that would depend on your definition of commercially successful right because you gotta imagine that even like not a great model at all even a bad model with all that promotion i wouldn't do it though i i i wouldn't i wouldn't put my studio or my company at the behest of someone like apple who clearly does not care about their partners or their their developers well i mean i don't know about that like i i actually applaud the objective which is to pro to you know protect artistic experiences for gaming i i i mean the fact that i changed course mid flight is smart i mean they they had to course correct uh they they slash certain games and development and move towards other type of games as we're seeing with a new batch so i don't i can't fault them for that that's making decisions

and also like okay as a smaller developer as an indie right i could take money from apple build a strict strong contained experience right clean up my studio but meanwhile you're making a game that is not fit for the market right no one wants to play these games and so like therefore you're making you're building expertise around something that's not markedly viable right as opposed to actually going after games that are that are marketly viable right anyway i i i i think apple has no idea what they're doing and then their idea is to sell phones right let them cell phones they do a good job of selling phones they make an amazing operating system i love my iphone i will never get rid of it you know but that's all they do right

what you'll never get rid of it again oh yeah throwing every journalist under the bus okay so wild rift is league of legends for everyone okay we wanted to do this last week but let's do this wild riff predictions um so as contacts here wildlife obviously very well crafted moba simplifies league of legends focuses on improving the onboarding as much as possible they're selling both heroes and cosmetics but at this time characters are pretty much being given out like candy especially if you have a riot account so it's it's a little bit awkward to take a look at some of those numbers um and also when we start taking a look at those the the numbers from open beta they've been open in a lot of these countries

since what was it like december last year or even earlier earlier earlier earlier right so there's all of these installs and all this revenue already coming from the roughly 14 million downloads that they had up to this point that they just kind of opened up through these closed and private betas um so when we just look at starting from march 28th which is when the open beta effectively start and we only look at western countries so i'm not including specifically china korea japan or taiwan um we're looking at roughly 50 cents of worldwide rpi already and again lots of awkwardness here since there's still players from previous betas continuing to spend so likely the rpi is actually lower but there's no clean way to look at this but let's do this prediction how much revenue net revenue will league of legends make in its first year post-open beta in the west so that's march 28 2021 to march 27 2022

i thought we were doing it for you i gave you the instructions so quickly come on man and pasted this text without slacking i forgot we were just a week ago the definition of west is no china no korea no japan no taiwan there is no excuse joe no excuses just throw it out there yeah you'll uh my prediction so i'm going to take a look at the downloads chart um put together this quick comp cheat around mobas um and also compared it to call of duty mobile and pubg mobile so when we look at the download spike that happened uh as soon as it went to open beta roughly about three million downloads when we compare that to something like call of duty mobile it spiked at about 16 million right went on to make 240 million in that first year incredible obviously league of legends is not going to be at that level so my initial

impression of amazing ip coming to mobile could replicate what cod did very unlikely uh pubg mobile spiked at 4 million in that first thing went on to make 230 downloads i don't think it's on that path i think looking at the rate of downloads that it's currently at we're looking roughly between 30 and 40 million in installs in that first year even though roughly right now they're at about 10 million in downloads that's just the rate of that download decay the question for me is what riot does through this year for things like esports tournaments uh spiking viewership trying to incentivize people from legal legends over to their mobile app um so i'm going to give them a little bit of the benefit of the doubt here that i'm assuming it's going to be between 40 and 50. and on the other side it's on the rpi so typically mobas do not make much more than a dollar in rpi over that first year the best game in this space would be call of duty mobile with a dollar twelve after one year but then you're looking at mobile legends vainglory

arena valerie that's between 50 cents and a dollar rpi in that first year right that's just that's the cosmetic model that's what they're on here so if you give them a little bit of benefit on heroes i'm going to say they're going to hit right it's going to be 20 right so this basically hits 50 million for the net revenue okay my turn so played over the weekend a little bit of qualitative research both played on iphone really small played on ipad looked much better honestly i mean we talked about this with jk before and starting to to record this ask him like is there anything new about this game like would where when you started playing and was like wow this is truly new joe was like no this is the same game as i played this is a reno valor in that sense it's a very well made 5v5 moba on mobile there are some improvements that i saw clearly you know compared to vainglory for example you don't have to go to the store and that adds the accessibility

but that already exists another 5v5 other than that same jargon lots of heroes lots of spells lots of artifacts insane amount of depth the gameplay depth from the get-go so i doubt that it's going to be that much you know accepted by new audiences to mobas so let's go to my predictions runeterra 13 million installs team fight tactics 15 million installs till date on mobile wild rift has 23 till dates their first launch that first batch which they didn't talk about was eight million that was the peak they did a second push when they announced that beta is here that was six million so already smaller than the soft launch peak the installs are going down significantly so it seems like they stopped spending and they're kind of trying to figure out how to move forward so it'll take probably a quarter uh to to mull it over and then come back with another strategy but i predict that the install will drop now lower than one million a month and will continue there until probably a

third wave that they will try and that will be probably smaller than the 6 million that was the second wave so based on that total download slightly hitting max of 40 million by the end of the year and this is me giving them extra 10 for perhaps they pull a rabbit out of out of their hat and uh and are able to to find some additional growth on the revenue side they made 17 million thus far they're currently trailing behind roon terrace revenue per download which was 0.7 at this moment and but nevertheless with the influx of tier 1 traffic it should be doable to get them higher and i think it's gonna go there to about buck buck 50 cent with with that tier one traffic uh but overall they yeah but overall the uh the revenue for download will be on average about a dollar for the first year and that would be same as with mobile legends bang bang during the first 12 months so in short

my prediction for the end of 2021 they will make 40 million in that revenue globally excluding china because they're not in china so people in china are playing through vpn through hong kong accounts if that's allowed and um keep in mind the rules here so i said my prediction was 50 million you said 40 million to the end of 2021 you have to do the prediction all the way to march 27th 2022 not to the end of the year so basically we had additional four months right yeah so i'll i'll give them um so mine's 50 and you just called me very very bullish all right i'll go 45 i'll go 45 just okay and um i don't see anything new like i

understand that like it's not like this is league of legends on mobile and i'm like i've played this game years ago like arena valor launched what 2018 or something like that like 2018 probably in the west and when i play this game i'm like this is the same except i don't have superman and batman and joker that i started that game with now i have some heroes that i know from tft because i love that game uh i actually don't know league of legends so so but it just feels confusing um yeah but i mean good luck all right i guess i'm going to be at the high end of this mother trucker right at this point because well i'll go over all of you guys actually my my prediction was actually more in line with atoms but i i got to be the fan boy what's remarkable not only does it not monetize at all and does not justify a nickel of freaking spend right it doesn't even download all that much and i

that's what i i actually didn't even really know like you know vainglory only did like five million downloads and arena valor only did 40. you know like i mean that sounds like a lot but really for a game that big and how much they pushed it you know like so really it's a question of keep in mind we're we're not including china japan korea right so so the 50 uh sorry the 39 million for the one year arena valerie is everyone outside of those countries right no no i know i know that's what i'm saying like that's small and so i think building a moba in the west is really stupid and i've said that a gazillion time on the podcast so i continue thinking stupid um i think while rift has a bit of a shot because i think you're right i think they will cross promote and they will do things to make it more compelling to that to that audience in theory like if they do some kind of like giveaway for game for play the game and so you get something in in league of legends or something but all that stuff is just like lipstick on a pig right this thing is not going to

make any money right you know and it's going to i think it's a really not smart to cannibalize their existing business but anyway having said all that i mean i think they get on the high end of the of the downloads and probably do like 35 to 40 million and they do about 25 buck 50 you know ultimately in a year and that and that seemed that the rpi is the one that's the real stretch right to me just generally speaking uh so i'm saying 60 million in the west by the end of the first year oh wow i'm becoming the hater oh wow we always were there you always holy [ __ ] yeah you guys just bracketed okay so like from my perspective you know the the thing about league of legends and just mobas in general is that like you know crack

is crack guys i mean if you have crack why try to create croc you know what i'm saying like it's it's it's still it's still a great game so yeah i don't think i don't think you need to like add that much innovation i i actually think that arena valor actually has some things that are better about it than uh wild rift but at the same time i'm not playing arena though i'm playing wild rift i think there's um you know uh i i do think that there are some network effects around wild rift in the sense that you know people who were fans of league of legends are now kind of coming back you're reactivating a lot of um older players who are slower and you know mobile for old slow guys is better than trying to compete and trying to learn like 3 000 champions on on the pc version uh having said that i you know it to the point that we've been making i mean the monetization is just way too friendly you know like day two i had 30 champs

and then you know i spent 20 bucks and i had nothing to spend it on i was like okay well i have nothing to buy i already have more free champ things these items and so i was like well okay well i'm glad i gave riot money because i'm a fan but you know it's nothing to buy so i mean like it's hard to imagine the rp getting to the higher end right i mean uh competitively it's probably gonna be at the lower end now having said that i can't be lower than you guys i think my original estimate uh back in the back when eric and i were talking about this was 20 20 million for us only i'll just say 80 million for the world i want to be clear on my last point and i know we have to go is that the fact that these numbers are so low and if they do 100 million it'll be absolute shocker does not in any way justify anybody out there making a freaking moba on mobile right this is freaking riot okay and they can't make it this is like mice nuts to them

right this is but but i still think they'll have the they'll have the horizon view here right again it depends on your definition we're only talking about the first year of a live service i know but they're also launching it on console right there's they will have the long point of view here they'll keep it running and even if mobile isn't that great in revenue i still think they're gonna invest no but i'm saying i'm saying i know and this is right right they have all this freaking league legends money that they can throw at this but this would not be a profitable venture for anybody else besides riot and even for riot i'd question whether it's profitable i mean so i think southeast asia dude but i think if you look at something if you look at this list of comps right like mobile legends bang bang arena valor cod mobile pubg mobile in order to get to the rpis that we're talking about that are profitable right it takes a lot of people these pvp surfaces are run by a ton of cosmetics and events not a lot of developers can do that

obviously right so don't yeah so but i i have talked to some folks about mobile legends bang bang in the west and actually even some of the estimates i had in terms of their operating costs were off they were too high so i i think they are pretty profitable in the west again again you know i know eric is always made up of a massive scale but i mean he's made of l.a free cash flows free cash flow so i yeah and some people in china as well i i forgot who told me that am i not supposed to say that i i forgot if that was like your sources maybe maybe we cut that part maybe not public word on the street right on the street all right that's it we're done with the official

hater now i feel bad about it but i keep playing tft so guys let give put something i can buy [Music] all right 45 50 60 80. basically basically yeah adam loses no matter what no no no no but keep in mind the rule is whoever is the farthest away uh has to buy the dinner which is which is impossible for the people in the yeah it's probably gonna be meeting myself so it's like all right okay maybe you are smarter than me yeah i mean i should have said 61. alright guys all right bye [Music] [Music]