TWIG #308 Plarium Gets Raided / Take-Two Divests / EA CEO Flirts With Disney

[Music] hello everyone and welcome to this weekend games 308 where we have lots of game industry news to talk about but really we're going to talk about VCS all day actually here's what we're going to talk about in summary on our correction section if we make it out of that section today I will be surprised we got a lot of feedback on is VC talk from last week so we're going to go into that a bit more crunchy rooll is funding games in their Netflix like service MTG acquires the company behind raid Shadow Legends Royal Kingdom has a new launch date and it's the end of November I'm sure Laura is thrilled about that one and then key3 earnings have come in really positive for the game industry or many of the publicly traded companies unless you're Ubisoft or Unity I think everyone else had a great Q3 so hi I'm

Jen donaho strategic marketing consultant at Jade Inferno and beta hat and today we have yes chef Philip black game Economist Consulting this is Eric Crest principal of gossamer Consulting screaming at the clouds m katkov a blogger podcaster former game maker surprisingly busy consultant angel investor and founder of deconstructor of fun awesome so Misha do you want to kick off our banter section because I think you have a Candyman reference yeah so I just came from a run and I was listening to Twig just before we recorded this one and moris was said more than three times which is when you do that in one episode you say moris three times he will come in in The Following episode so moris has confirmed we will be filming an on-site episode uh during the slash week and we'll address some of the criticism shared by Mr Eric crest

I can guarantee you he ain't gonna say jack [ __ ] right so I mean like yeah Fair interview at slush with you know getting wasted that's not gonna do it right bring it bring it yeah well talking about getting wasted well actually the opposite of getting wasted so last week was Google's move event and this time around it was in Abu Dhabi Chris were you on the last one in Dubai oh yeah yeah I did the last one yeah it was the yeah it was apparently a really fun and cool event so now it was my turn to you know enjoy the fun so this one in Abu Dhabi uh venue was fantastic if you watch UFC as always a show in Abu Dhabi and they always at the W Hotel and I'm a huge UFC F was kind of weird to be around that hotel where I watch so many of these like YouTube shows as they're getting ready to fight now I was walking the hall so for me that was huge but uh it was this really cool hotel which the Formula One Track goes through the hotel

and people like you can rent out a formula it's not the formula that they drive but you can like normal people will renting out like you know easier version of a formula it was pretty crazy hotel anyway good people great venue the fir side chat I was now hosting a fir side chat with Petrovic he was talking about launching new games in 2025 so interesting stuff Mr Peter Levan was there he was doing firesight chat with Louis D Kamara they were discussing the importance of building IPS in gaming and you have to say one of the podcast test that I would like to do on on our show is with Tobias nooke he had a very interesting Google Presentation he's a he's from Google very interesting presentation about gen Z and a lot of Market insights into this generation he had this big counter that's like now probably 416 days until jenz becomes the number one spending audience on mobile devices so very interesting fun stuff and and of course folks from play were also there and then uh they have this Abu Dhabi creative Hub which is is essentially a complex of buildings with

entertainment and also gaming companies that they have located there so like brand new spaces right next to the edad Arena again if you watch UFC you would know what edad arena is but uh it was really cool like they had like space for gaming companies that a lot of you know gaming companies have relocated I think there was 40 gaming companies and everything was razor so it was clearly like somebody was like hey how can we make this like really cool and what says gaming more that razor everything so cool place record a three podcast from there and probably releasing sometimes this year so that was my trip being the crest of the UAE now your pictures were hilarious yeah Jesus Oh the Bro the Bromance with Lewis dude Jesus you look like you guys were like walking on the beach in Sunset dude what was happening with that he was he was taking a photo he was trying to take a selfie and I was like let me come like I actually kind of photob bombed him and made it more sexy

you guys are a gorgeous couple absolutely gorgeous couple what what happens in Abu Dhabi stays in Abu Dhabi so you know this podcast is brought to you by apps flyer in today's Digital World understanding your apps Journey from Discovery to download is more than just insightful it's essential enter apps fer the leader in Mobile attribution and marketing analytics that allows you to measure the full potential of your marketing efforts making every ad dollar look Smarter with apps flyer that's your new reality dive deep into datadriven insights that reveal exactly where your users come from and how they'll interact with your app apps sler where your app's potential reach [Music] performance all right what are you Shilling sir I think we have lots of cool newsletter stuff going on yeah so I'll make Chan posted a really interesting analysis it's called The Sweet art a feature adaptation in other words how to borrow with pride and make

it work for you so I met John has really focused on puzzle games and different liveops and so in this article he was talking a lot about different games taking different feature from each other and and how they modified to make it work and it was funny because Javier Barnes who has been on the podcast multiple times and a lot of times he like oh cool you're showing some of the features that we worked on where they live probably from dream or something cool stuff and then final one for me is like the Supper Club that's we're recording this now on Thursday it's next Monday but there was only 30 places for the Supper Club so naturally some of the people will not get their seat but if you got it please come if you can't come please let us know so we can get somebody else in so that's about it all right let's move into Corrections who wants to go first well I think we have to first talking about the riot numbers that were revealed I guess in quotes what was it two two or three episodes ago there was this idea that us Western revenue for Riot is only about 3% maybe that wasn't the exact number but it was something really really small when this was post on the slack there was a lot of

disagreement whether or not this was real including real right employees with authority who I would personally vouch for saying that this is not the right number that this is too low so I don't know what the real number is but 3% seems too low I don't know what the [ __ ] real number is right but three different people B one person came up to me specifically and said you would have no idea how low the number is in the US and then two other people basically confirmed that it is very low right so the 3 % is a number right but for the riot guys to say no it isn't you know and not really real do any real numbers dude that's not going to cut it right so my gut tells me it's probably you know in the five to 10% range in the US but is even if it's that low it is so much that doesn't change the takeway than yeah that's all that matters is the takeaway is that the [ __ ] this business is very very very small in the US right and it's like the fact that I didn't know this before now

it's just shocking after all this time so anyway I think this just confirms that the US market is much smaller because otherwise if they really had a big number they would just say it's like 20 to 25% you idiot right that's what they should be saying instead is probably like 5 to 10% depending on the month year promotion right or what's happening in [ __ ] China you know like whatever dude it's a low number so that's part of the reason that this mobile market doesn't even exist in the West in the US anyway so that means the East is supporting honor of kings and Riot simultaneously both of those products are coexisting and monetizing mobile one's PC right honor Kings is not PC is it no it's different platforms no but it's still the same players it's monetizing it's monetizing eastern players that's where all the money is coming from whether on PC or on mobile Korea and China yeah that that makes Riot's decision not to do mobile look even stupider how I mean how could you not understand the audience that you're appealing to if they were making a game

for the east of course you should have made wild riff like 10 years ago well that's why honor of Kings exists right I just think it makes that decision even more painful if they knew this if they knew who was paying the bills of course you have to understand your target market and what their interests are it was mobile I mean but you have to remember that Riot didn't know how to make mobile it didn't want to make mobile back then when they were first asked before honor of Kings was created you know mobile wasn't you know the HD product that it could be the phones weren't quite ready for that type of thing and so listen I agree they probably should have figured out how to do it sooner but but honor of Kings like came in and crushed it and literally crushed it so anyway let's talk about supercell they are not actually shutting down their North America location at all it is merely an office move they're shutting down their office it's just a work from home situation just like with

many companies is like no one can afford downtown San Francisco real estate if I said that they were shutting down North American operations that is not what I meant I meant that they were shutting down the most beautiful office people have ever seen in the world in San Francisco and fine I don't know where they're moving maybe they're moving to [ __ ] Oakland I don't know you know who knows probably not Oakland these days all right so so my big correction from last week and the only real correction that I'm really offering is that clearly there have been some great exits from gaming on the VC side like I don't want to suggest that they're having super play for instance is an amazing outcome right I was caught off guard by Mr Philip black for two reasons one I really didn't want to focus on why VC doesn't make sense in gaming all I really wanted to focus on is the perverse incentives around VC are not aligned with Founders in general right that's what I was trying to just focus on because it's a very complex topic as we all know and two and this is where Philip we mobile was out of scope to begin with because the context of the whole thing was tripa and not mobile I

have said consistently that mobile is a great VC type investment because it can scale over time right and maybe less recently because of [ __ ] idfa and the challenges of bringing games to Market but that is the type of business that BC's make sense and what I said I have said in the past is that when mobile became difficult all these VCS started turning to tripa which never made sense for venture capital investment so I want to be clear Philip kind of tripped me up but I sound like an absolute [ __ ] the podcast last week when I said that and I do want to push back on dream a little bit because actually dream is could be an example of the same type of thing that I was saying is that all these rounds of financing are not success right when you're at a 2.7 billion valuation for a private company that's actually a challenge right because there is very very few exit strategies for dream at this scale right IPOs are off the table completely at this point right particularly from Mobile gaming acquisition they've like priced themselves out of of many companies that

could might want to acquire them right so now it's like they're too big for liquidity right to some degree so if that's their goal you know they have missed kind of a window for liquidity at at this level of value right can they return cash stly to shareholders or directly to investees can they pay out dividends or something of the sort because I mean they're just generating free cash flow right yeah 100% but that's not the VC model that's the whole point totally yeah yeah the whole point but if their goal is to run a private successful private company then they're in great shape right I just want to reiterate like huge private rounds are not the endgame they do provide liquidity to Founders for sure right that's part of these deals is they get secondary shares they sell their shares on these rounds but what about the rest all the other employees you know the VCS and ultimately the LPS the Pension funds the endowments the insurance companies the family offices The Sovereign wealth funds right they're all left holding the bag there's no liquidity event for those

guys right but to be clear this is an amazing story of growth and growing scale and profitably you know with these dream guys and you know I think it's a good bet but is it a great Venture investment it's unclear right and this is clearly not a AAA console PC B make sense or am I just screaming at the clouds yeah no it makes sense you could you explain why you look at mobile differently than AAA is it really just the UA piece means velocity of scale can be so much higher with capital like it just it's slower to grow a AAA HD game which is why you look at them differently you look at mobile as more as like a traditional software as a service company and HD is is more creative driven yeah I mean like historically like these VC Investments have been trying to invest in the early and build scale right and with mobile game companies you kind of do that with user acquisition and scale it over time it's a live service game it's basically a SAS business by definition almost for a free-to-play mobile game but for cons games and PC games it's a hit driven

business the product life is very very very short right you know like 80% of your revenue is driven in the first like two months of its launch right they have huge long Dev Cycles you know three to five years costing hundreds of millions of dollars right and then like when the can comes out then you have another three to five years this is just not a VC business right like fundamentally you know it's hard to scale like one game success doesn't mean the next game is going to be successful right and obviously there's shifting Landscapes you know you know consumer preferences changed Hardware like it's a [ __ ] creative industry right like it's really hard to underwrite a creative industry with vet Capital money that's kind of fundamentally why triaa gaming doesn't make any sense yeah I have a couple of things I mean I just listened to it I think it was a great round I I especially like the uh Bugattis and French Riviera and hookers that was uh that was hookers blow dude I'm telling you all these guys all these big DCS hookers and blow dude that's it that's what their goal is plenty I don't know

who you're talking about but no no no like allegedly look at the end of the day they're doing it they they are totally doing it dude it's hookers and blows for the rest of their lives you know like they're making it right again have not seen it have been out with VCS for quite a while but anyway so the one thing that you kind of missed there in my opinion is you talked about that the funds are not aligned with the founders because they're not looking for an exit that there might be a a truth to that to some extent depending on the investment but the element where the founders and the VCS are aligned is the markups and especially so by markups I mean that when you invest let's say I invest in Chris's game company I invest 1 million at 10 million valuation and when he goes to 20 million valuations I have a markup or 30 or 40 so the growth of my investment increases as the value of his company increases when he gets more Investments and I do a follow-up investment anyways when the value of the company increases there are options for

secondaries for the founders so what I'm trying to say is there's a reason for a Founder to push for a higher valuation as there is for a VC because in those instances if it's a competitive round the founder is able to sell part of their shares to the new investors that are coming along and that allows them to do a partial exit and then more markups the more rounds you do we've seen some of the founders even get family offices but by the the situation of like round D so that's a perverse way where VCS and Founders are aligned but they're not aligned LPS they're not aligned with LPS well they're pushing the founders to align with the VCS by giving them secondaries I mean I was going to say why not just give them a share of the fund right so now they care about the fund the fund performance of your individual founder like you want the other Founders never heard of this this is part of that you never heard of secondaries no no so actually secondaries make a lot of sense let me

explain to you where secondaries make a lot of sense so previously let's say let's talk about like the startup land of Israel where they had a lot of issues where Founders were selling too quickly their startups rather than you know riding them and iping them and so the secondaries were really powerful in that market because they were able to you know like Jen you're running this business and you have a atte company it's Jaden Inferno attech and it's like valued at 100 million and you're like why am I driving a Hyundai I need a Corvette like and I also need an apartment and so forth and as you raise the next round and now you're valued your 1 billion you're able to sell part of your shares as your company value increases and that allows you to exit to some extent now when that happens you're not itching to sell your company to get your first apartment your nice car your Riviera home and blow as as Eric says but but but you're like more focused on building your company and because you're basic B needs and everything that you

wanted has been satisfied with whatever let's say 5 million you're like okay I'm good now I can focus on building my company and iping and getting it to like 10 20 30 billion valuation that's where the the secondaries come in and they're actually very powerful way of ensuring that the founders stay and Le the company stop stop stop this is part of the sick this is part of the sickness this is not part of the Cure right yes Founders get liquidity but that's not Venture Capital right like venture capital is exit events IPO sale so that everyone benefits right those are not mutually aligned incentives right that does not help LPS to give money to yeah to these shares of the fund then give them shares of the fund performance then the founders themselves stop this with the fund performance they can like give them money and then they don't need to be invested into like 200 other gaming companies when are we're talking about secondaries like companies like supercell had secondaries that allowed them to do multiple like two exits even after that so it's not just out of ging company as an example that has done

secondaries before they got acquired I mean in some ways these are just total bribes to keep Founders happy right to get some liquidity and I already actually said this like five seconds ago so I don't know why you're not you're repeating it but like you know it is good for the founders but is it good for the LPS right this thing is a private company forever I can say multiple companies that have exited at at several billions that they received few rounds of secondaries before which tripa companies have laun tripa I don't know triaa I'm talking about and mobile mobile historically yes there were some great exits historically but these rounds have gone too long and these valuations are too [ __ ] high and the market has spoken and we're going to talk about these Acquisitions at two times Revenue at 4.5 times ebit like you can't get a good exit with those kind of multiples there I agree there I agree the market has Chang so this is again you're talking about a symptom of the problem not a solution right give liquidity to Founders right I want to wrap it with one thing because I think you know Jeff Cohen made a good

point right so the big risk to these bigger funds that you they need to see massive outcomes to get returns for their funds right so this will push Founders to do things that are not necessarily beneficial for their company right because they need a 10x return versus a 3X return which be fine for the founders right so putting it in context for instance like a company could grow to like a $150 million valuation as a developer right and then sell to scopely and get a good exit and you know get some liquidity Etc but the VCS are like no no no that's not good enough three extra turn is not sufficient we need a 10 extra turn invest in a publishing arm invest in multiple teams acquire teams grow right and by that time they become such a big Beth that's been funded by these guys like at insane levels that there is no liquidity event for anybody at that stage because they're too big basically too big to liquidate as I would say so all this is a problem like for the ecosystem I think ultimately but only time will tell right interest rates are going to come come down in theory

[ __ ] Trump is you know off to the Moon right maybe the you know like they're going to get rid of Le con who's been a real hindrance to m&a in the market maybe the I Market opens up and all these things are conservatives conservatives love her but anyway we shall see I look forward to your milk toast interview with Mr uh milk toast what's a milk toast that's a new term van generic I got it I got it nothing's going to be said he's pretty PR trained you know he is yeah no I think we should schedule a a Crest Moritz cage match podcast I think that that would be a lot of fun but Mish you take the first shot and then we'll set that up I'll do something that they can actually publish because light speed has to approve these podcast of course they do there we gok a financial insti they can't just like let people on on a r without procurement like it's a you know multi-billion dollar asset management company so let's

be clear so a few things going on overall Crunchyroll has surpassed 15 million subscribers this year they have kind of like a Netflix you know subscription service for mobile so they are looking for a diverse range of games for what they call the Crunchyroll gamall it's a library of Premium mobile titles for their Mega and Ultimate Fan subscribers if you think your game could resonate with an anime loving audience they offer funding and support for mobile porting so another kind of service out there that is helping to support developers and funding so they have a website crunchyroll.com and go to the games and look for Game Vault and you can apply to get onto their service next topic I thought this was really funny so speaking of irony meta launches the irony of all ad products ads that are optimized for games with ads so they now have basically what we're calling the ad

row as model and so this is similar to how you optimize for certain inapp events now you can do this for ad Impressions assuming you have everything kind of set up behind the scene so the inup ad impression conversion event is currently only available for Android you know hearkening back to crest's idfa yelling and screaming and campaigns have to be created using the app promotion objective so check that out dropping next week oh all right well there you I mean this is huge right I mean doesn't this hybrid and hybrid casual I mean should we be rushing to get voodo shares right now is voodoo up on this I'm 100% serious how do you get shares they're all private they're all private Goldman is going to sell you a piece of their business like should they be doing uh selling their shares on a secondary Market Mishka I don't know Goldman Zachs is their biggest investor so I don't think they will allow that to Shenanigans I think they got their secondaries I think their last round from Goldman the loan was 200 million so

they're good honestly it is a huge new ad unit for folks and especially if you are have any of your business that is AD optimized it is something to look into you know right away let's track hyper casual downloads let's see if they change after this starts to get scale oh yeah it might not actually be the downloads again because it's optimized for the revenue you might not necessarily see the impact in downloads and More in their I mean you can't we actually I don't think we'll be able to see it through sensor Tower yeah such a win for the game industry for hyper casual to get a second wind I I mean if roas goes up they'll have more downloads though it'll get reinvested in the business like we should see more downloads Heaven Help Us I mean Eric you call them cockroaches that like just don't die I mean they really don't die yeah they really don't die I mean they die they're back to life they just want to be resurrected like the ad people just can't stop [ __ ] yeah so I wanted to talk about a fun rumor EA's

Andrew Wilson is on the list of potentials to be the next Disney CEO to succeed Iger so I'm not sure that bringing in another industry CEO ever goes well it didn't even go well at EA during the Mobile versus PC days so thinking back to my past you know there was an EA CEO Bake Off back in the day and Cris I was wondering what would have happened to Mitch lasy the very awesome podcast game gamecraft if you haven't listened to gamecraft I make no money by saying this but it was like season one was awesome so what would have happened if Mitch lasi got the seat instead of Jr so Mitch ly was jammed at EA bought jammed at which was basically the birth of mobile Ed EA and you know he's all about distribution and disruption in platforms would EA have cared about mobile if Mitch had kind of kept it because both Jr and and Andrew Wilson don't give two sh about mobile you know their strategy is

like let's triple down on our big franchises especially if it's called FIFA slfc that's basically been the strategy so I don't know if I cosign the idea of a video game guy taking over actually having worked at Disney and seeing how many different divisions I don't know if that's a fit was playfish acquired during Jr Jr's time I'll ask the rap people and come back with a theory I do want to say something about Andrew Wilson I'm actually torn on this one because I think Andrew Wilson leaving EA would be really really really really really good for EA it's like sound like aor right so maybe he can go [ __ ] up Disney I don't know right like the thing is that the Vesta Community really doesn't like Andrew Wilson they don't find him very genuine or honest about how he positions things he's just like one of those really well button down Executives so I don't think he'd be really well received on Wall Street for Disney but I could be wrong on that front but I do think it's time of change in management for EA I think it's been time for a long time so I just

don't think and's done a great job of consolidating into like six franchises every year and building the business and allowing the CFO to control costs but there's been really no Strategic investment with the exception of um glue sorry I'm blanking out respawn but um no respawn was great right yeah this is an interesting thing that you said like Wall Street doesn't like Wilson what is a CEO That Wall Street likes ohob Bobby everyone loved that guy you know like the industry might have hated him but dude the guy did what he said and when things were working he basically just shut the [ __ ] [ __ ] down right like he was not messing around right and he made great Investments you know with King acquisition dude I mean the guy really almost Flawless victory for Mr Bobby go someone like that even Strauss like I think Strauss is far more straightforward about thing I think he he manages the street really well what other the CEOs Frank Jabo I think that

was well respected for what he did and well perceived by Wall Street once he took over at at Singa so to summarize Wall Street likes a person that comes in with a strategy and then executes against that strategy right and is honest about when things are working and not working right and got it so no word Sal like yeah okay got it again like when people are up there for 45 minutes during a strategy conference investor conference and say nothing right in 45 minutes like being don't like that if they have a Mackenzie background and they're you know working on strategy like do you mean that yeah I one guy was saying like there should be an index of McKenzie clients like we get a McKenzie Client List and you want to short all the McKenzie clients that are gaming and go long the ones that are not doing McKenzie counter McKenzie ETF okay got it McKenzie the destroyer of interactive well we learned a lot about the big markets here so about that [Music]

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Payment Solutions worldwide unlock new markets and maximize profitability through their customize secure payment architecture and dedicated support team exola powering game developers to achieve Global [Music] success let's talk a little bit about Investments and divestments if you hate BC talk I think we're going to quickly Venture into that but basically there are a couple of big news that came out so MTG modern time groups out of the Fantastic beautiful city of Stockholm located in the northern Europe with kings and queens so they have acqu fil this was for you so they had acquired clarium a developer of global number one mobile RPG raid Shadow Legends and through that strengthen their mobile gaming position now the purchase price consideration there was 620 million USD there were $200 million earnout through 2028 let's get to the beef of it plarium

generated 613 million for the 12month period so meaning that they acquired this company The Upfront cost of the company was pretty much 1X gross revenue it's a not a big multiple no multiple it's literally no multiple exactly it's like 1. like that's that's that's scary and then you're like well they're probably unprofitable they've been investing so much in their growth so hence that's the the situation no sir The company generated $137 million in adjusted EBAs so earning before interest taxes deductibles and yada yada y with an operating margin of 22% which is pretty good I I just have questions Eric can you help us like sort through why this was such a low price I mean so so I mean we covered raid raid has been doing really well it's one of the few RPGs that has survived over time you look at the Western Market it's outdone Strike Force it's outdone Galaxy of Heroes it's on its own war path it hasn't had that

slump that you see in a lot of squad RPGs so they've asserted the dominance and kept a long running live service merge Gardens does okay macarina is kind of interesting it's scaling a little bit Vikings is too minor but they said those four games including raid was 90% of their revenue so it doesn't look like they have a ton of crazy growth factors but even just for a cash cow I don't get this Eric like is there some skeleton in their closet we don't know about I I I there are just so many things to talk well first of all yes this does feel like a very very low offer and a good deal for the MTG right to some degree right they're getting at least a reasonably profit you know really solid game and two two or three others that are decent but small but the 22% margins are relatively low given the scale and mature game they must be spending a [ __ ] fortune on marketing still for this game and this is partly you know the whole Web Store thing this is exactly what I've been talking about the web store it's like dude yes like I

think probably 50% of their business on web stores but this ain't helping them you know like it's not helping them scale to be put into perspective plarium was bought by Aristocrat for 500 million in 2017 they before this game even came out I think right God yes yeah before came out so it's like the valuations have clearly come down dramatically and I will say let's put these multiples on all the Venture Capital investments from Griffin as6 Z light speed and others and we'll see what your valuation of your [ __ ] portfolio is you know like let's do that and see what the LPS think they'll throw up all over that right so if these are the exits that you can hope for like put this in your model right this is a bit scary you know I know the earnout is like another 200 million yeah but fe's have nothing to do with the investors have nothing to do with an earnout that's for the staff in almost every deal the investors get paid out first because like why would the investors be car for an earnout when they have nothing to do with it right we

don't know for sure why they provide so much information on this deal by the way I don't understand why that was probably Swedish law of being fair transparent and beautiful kings and queens kings and queens that's the reason but isn't Aristocrat like trying to do a fire sale like this the mystery right Eric is like why this this doesn't make sense on paper let me try to like think about this a little bit so why is Aristocrat selling it there there's one reason I again I haven't looked at Aristocrats number that's a casino like real money gaming company real money Casino they could be that the multiples as you said the the profit is only 22% for Plum it could be that the multiples are dragging down the rest of the portfolio and they're exiting Mobile gaming all together so this would mean that bigfish is on The Chopping table I I forgot what other they have it's like pixel United bigfish is probably part of that like I forgot how they we already know kind of what's happening there they're trying to invest outside of anything that has nothing to do with Social Casino it

seems right so they're getting rid of their casual group they get rid of this Core Group part of their strategy was to build a big mobile organization because the multiples were better but the multiples are not better now and so now they're trying toest out of it right so this is again my point about valuations are out of control these VCS are just investing in things that don't have that value and can never get exits think about plarium as well raid is made largely out of Ukraine I remember they had over a thousand people working on that game or something in that rage like a lot of people of course plarium headquartered in Israel so you got developers in two conflict zones at the same time merge Gardens is here in Finland you know safely in in the armpit of Russia so it's all good but um that's definitely has an effect on your evaluation has to and then what was interesting is that the price was so low because usually in this case like you're when you're selling such a good asset like there should be

other buyers know play and like what happened like is this like think about it this was the best deal on the table this is it like where was Savvy where was scopely I know well Savvy probably wouldn't acquire an isra company let's be honest and scopely is part of savvy so let's take that off the table just you know throwing out a whim here but nevertheless like there are other acquires there the Chinese acquires there's everybody who would gladly taken such an Eid dep positive company I think they doubled the eida or the Run rate of MTG alog together so it's good for them like like MTG is largely owned by private equity and I think this is a win for that company because yes they doubled the iida they increased the cash flow there's Tech and deep expertise in liveops and marketing am monation you all go into MTG that previously had Hutch forgot what other companies there snow print is part of their portfolio and a couple other ones like good Studios but this is definitely the Crown

Jewel and I think the biggest loss here like Phil you were showing some of the graphs here but the biggest loss is for VCS because plarium being such a good company in terms of Revenue in terms of what what they've done in terms of the IP based build when you get a multiple such low like Evena multiple was below 4.5x and then when you start looking at the tech multiples in 2024 the larger your EB the range is the bigger the multiple and so in this case like if we're talking about attech like it would be well over 10x multiple if it would be you know fintech it's over 12 semiconductors 13 software development 12 so multiples in other businesses are magnitude larger than in Mobile gaming at the moment and this is quite scary for our industry as a whole okay all right moving on oh last one so actually there's two take two news so what is take two is divesting from chart boost so chart boost is being up to grabs now

if you remember Zinga bought chart boost back in the time where idfa was being rolled in it was like 2020 2021 and it was the play together with that chart boost and roll it they will have all the beta so idfa won't be a problem and then they got a card by take two so good on them now take two overall reported over 600 million in ad revenues BEC and and chart boost and AD Revenue the connection there is that it allows company chart boost allows company to control ad placements directly as a mediation platform so this type of a sale would likely lead to a significant Payday for take two I assume and it's likely to be sold to one of the incumbents it could be abser it could be Unity could be even Apple I mean they for sure have a lot of cash at at play uh and then the chosen platform would gain increased ad Revenue user acquisition capabilities potentially improving their competitive position in Mobile advertising and then the potential sale could reshape mobile at mediation if you want to read more about

it check out Felix robber's post he had a blog post that that covered this and the effect of this potential sale to the mediation landscape I don't even understand where their position is at this point it was considered a strategic acquisition back in the days but probably did not resonate sorry just not to be negative Nelly and screaming at the clouds again but like yeah when the acquisition happened it didn't [ __ ] make sense given Zinga doesn't even know anything about us it was part of the data like they were thinking that they get roic and that will give them a lot of data and then they get mediation platform and they create a world Garden they were reading mobile Dev memo they were listening to sufur they were like we were GNA build a Content Fortress and that was contract foras [ __ ] that [ __ ] like that never happened because they didn't have the tech or the the will to invest in what was required not to mention like every other developer in zingo were publishing their own games and doing UA on different accounts like they couldn't even consolid their own [ __ ] like anyway all right zel looked at it and sold it

yeah yeah it was a dumb experiment that never made sense for Zinga it could have made sense for other companies but not zinga in particular but uh it was a good story it was a good story it was a great story to tell but it was [ __ ] and I said that back then and I'm saying that now and it's clear right you stay corrected I bet they will sell store Maven as well they acquired that one you remember that one oh that's true I they were building a Content Fortress Brick by brick that's what they were doing trying to have first party data I you know I think Apple 11 is also on fire I didn't pull their Q3 earnings but oh my God yeah hockey stick every time I think we talk about them I say they're crushing it I don't know how you can continue to crush it and unity is just you know can't stay afloat there's no end in sight although one thing I did hear recently and I need to get some understanding on this is that the one thing that could have threatened them and I've said this a million times is any type of change to fingerprinting and what I heard from some investment gu is

that there are two contingents within apple right one is that we are going after privacy at all costs and fingerprinting is on the table right and the other conent is like look we can't do [ __ ] right now because we're getting sued by every single [ __ ] country in the Free World right so it's like we have to lay low and not [ __ ] with this industry anymore until we can right you know and the complexities around implementing any type of IP stopping given like there's lots of other things that are required for IP tracking that are actually important for the function of the phone so anyway I really want to get understand if this is inevitable or not yeah I know the guy from uptick basically suggested that is inevitable that is actually consistent what I heard but the question is when the whole point is is that's the only thing that could really impact Apple at this point otherwise they're just running away with it you know so here we go App 11 on the podcast in a week or two probably two weeks Co we recorded it's been approved by the corporation so we'll get to

go yeah another news from zelik so he also sold private division take two's interactive confirmed the sale of private division for an undisclosed sum as it drops the Indie Focus publishing label to focus on larger projects the company confirmed another party has already acquired not only private division label but also its live and unreleased titles I'm going to quote Mr zelck Who said We Are really bed at these big AAA experiences we have the biggest intellectual properties in the interactive entertainment business some of the biggest intellectual properties in the overall entertainment business and to make sequels to existing beloved franchises as well as to create new head intellectual properties is our mission he could have just summarized it we're selling private division because it's mice knuts and that's that would be there you go goddamn right godamn right look I I think this is a great example of zelic doing the hard thing right and

selling off these divisions that don't make sense for their Core Business this is another blow to the small and double A and single a type games where there's no opportunities to publish these games because people are are just not interested it's not a good business right and you read articles about this all the time where you know the a single a doublea business is survival at best right and the Market's just moved on to these big AAA releases so this is the example of zelnick doing his job right and making a tough calls something that Mr Andrew has been to struggled with and certainly Mr Ubisoft we're not going there again we're not going there always we can't go like yeah so single a and IND is a handt mouth business the right that's pretty much how it functions yeah basically all right moving on Phil uh Roblox Roblox Q3 absolutely crushed it Eric I don't I you've talked trash about this company but it is just up across the board in

terms of daily active users they added another 10 million quarter over quarter so they went from 79 million daily active users to about 89 million active users and that is 27% year-over-year up they also are up across all regions this is one of the things Eric you had pointed out last time we had talked was that they had been slowing growth in a lot of the high tier one regions but when I looked at at least US and Canada it looked like they were up in that region as well so it's not just tier three growth it looks like it's happening in tier one too and the other thing we really needed to keep a look at with this company which has been one of the story lines is what's happening at costs because their costs have been really high for a long period of time stock based comp is really high and so when you look at the cost of Revenue it is up but the growth in revenue and the Dau is exceeding the growth in the cost of Revenue or it's exceeding the growth rate in the cost of Revenue so they are getting that under control although I still still looks pretty high to me I seriously just don't know where you end up with in terms of growth for a product like this because they must be reaching

the ceiling like if you look at how many under 13 kids there are in the United States and Canada it's 40 to 50 million and they're reporting that they have 22 million Dau in those regions so like they have literally half the population of kids that are under 13 like I just where does it stop they like keep seeming to pull like these rabbits out of their out of a hat yeah I think there was some onetime thing that happened this quarter as well which kind of Juiced their numbers I would just say buy or beware on this stock just in general like if you think it's going up and to the right I think you know next quarter we could be talking about it and it's going to be like you know back to $30 the fundamental problem is they are really not growing profitably if you take out stock-based comp yes but if you add stock stock based comp they're just not a very profitable company and stock based comp is a huge part of the compensation for their employees without that they couldn't maintain or control the poys there have been some positive things I think I've heard good things about the PlayStation five launch surprisingly but because it didn't

really do well at all on Xbox again this and App 11 are hedge fun hotels right and so people come in and come out of these names like really really aggressively and so they're GNA be very volatile stocks and someone asked me so should I go out and buy app loving and I'm like no you should [ __ ] not okay don't do that right go buy the bti as an individual investor you don't buy this [ __ ] you just don't you sell if you have it right this shit's crazy Nvidia sell if you're an employee sell your goddamn shares like it doesn't make sense to hold on this stuff anyway all right Chris you said multiple times in the last podcast that I was listening to like you said it's a trump effect or something like Trump how is the election of trump affecting positively stock markets oh because less regulation corporate tax rate cuts are what's expected and so industry is just you know the stock market's like yeah it's

you know oh fing at the mouth work but the now the challenge is though is is if you look longterm people are expecting inflation to go up because if some of the policies come to fruition they could be inflation driving but for right now the Market's on a sugar high thinking that tax cuts regulation's going to go down as Crest is saying so so that's what's going on in the short term in fact roadblock stock from their earnings has been up 25% and has kind of been maintaining that which is which is pretty pretty interesting despite the Hindenberg article from a few weeks ago where they you know they called it the quote pedophile hellscape and you know things like that they just didn't take that hit wait we have a macroeconomic expert on the podcast I mean oh Mish M no no Phil I mean you've been like pontificating this [ __ ] for like years now so what's going to happen now with the background I'm off that Trend I'm off that Trend I I detoxed from The

Economist from Wall Street I'm good to go that's what I know I'm asking you so I'm I'm all good but but hey to step back I want to reiterate this point like Nina KH specifically has been very very detrimental to the exit strategies of a lot of tech companies because big companies can't do Acquisitions under her Rule and her Reign right it is very clear that NE Khan is Persona n with the Trump Administration and so she's going to be [ __ ] canned as soon as possible and replaced and if that happens like a lot of these issues with liquidity on VCS may actually be alleviated particularly on the tech side this does not really impact the gaming side per se but on the tech side so that could be good for all venture capitalists and all LPS you know like in that business if you can start actually selling companies because Microsoft Google Facebook Apple they can't acquire [ __ ] right now right because Nina comes after them sorry I don't want to get political but like and I I think she has good cause to do so

I'm not really suggesting otherwise but but the reality of it is without her it could be better for Tech in general over the next four years so all right hey Nina time to go we need to make some money like it's worth clarifying Jance is a known fan of hers I think we should point that out before before state with certainty so let's see how that goes down the administration so and I bet musk isn't a fan either anyways she had a good run but let's get juicy now like enough enough about one Royal Kingdom how about the other oh there we go uh so Royal Kingdom is launching uh the end of November and so let's see if they're ready or if they're going to pull a squad Busters they've been in soft lunch for quite a long time they just announced a trailer it's a very supercell inspired trailer that's kind of Cheo and adorable I enjoyed it so if you at just kind of currently what is the state of what's called it the you

know the big four franchises in Match 3 you've got Candy Crush let's call it the Scapes franchise with Garden Scapes and homecapes you've got the king franchise with Candy Crush Soda Saga and the original Candy Crush Saga and you got Royal match and so what you'll notice is that all of these major franchises have their accessory game they have their side game that they launched later on usually as I would probably like a CPI marketing play a lot of the core mechanics are the same and the only one that doesn't have that yet has been Royal match which has been interesting to see and again we should point out that Royal match has been on an absolute tear when it comes to like dominating this market and it didn't come at the expense of these other games I think that's something that's really important to point out is that like Candy Crush Saga has had some of its best quarters over the last two years and that game has been around since literally you know the birth of freeo play January 2013 so it hasn't come with the expense of all these other games but it's been on a rocket ship like no other in terms of cumulative Revenue after 51 months months Royal match has done $2.7 billion

which is well far and above all these other franchises on a month sense release basis and it's still cranking out just around 350 million per quarter which is just absolutely mind-boggling and if you remember correctly like this game is sperring to incorporate more of the PVP elements they've done some experimentation with translating some of that into PVE they have a lot of the mechanics that we saw in The Clash quest game where you have a series of enemies that you need to defeat they have health they almost function like blockers and you've got to make matches to take them down I will go back to the piece that Laura and Amed John had published beforehand which is that they said that this game the Royal Kingdom game marks a step in the right direction for dreams second game but is unlikely to pop investing in one's strengths is the right approach but dream is the king of Match 3 but they still need to find a solid point of differentiation or unique selling point to have positive Network effect and grow Their audience through this other type so they were a little bit on the possibility I think it's just

it's hard to see this do anything less than a crazy number I I just a question of like what is your expectation of how additive this is going to be to the portfolio would be my argument yeah because it looks very puzzle RPG when you see like the screenshot that you're showing on the screen by the way if you don't watch us on YouTube or Spotify video you we often share screenshots and charts if you want to kind of follow along in sometimes in what we're looking at and so when I think when you think about the puzzle RPG Market it is not nearly what you see in the puzzle market so I think you're right Phil and I think what they said back then this was a while ago that they wrote this is probably still you know somewhat applicable but the good news is they you know they're pulling it out of soft launch for a reason so it must be hitting some of the kpis that we're looking for and they seem to be like putting it in a very good timeout because like if they're launching now they probably would be scaling aggressive ly in what I learned today is Q5 so Q5 is apparently this term that

attech uses it's the holiday season it's between what was it like 22nd of December to end of the first week of January where people are off work and is spending more time on devices and that is kind of like anomaly weeks during which you can really grow your game and a lot of people are getting new devices so they're installing a lot of apps and the spending is much higher and it's seems like this game is coming out right between that so they are gearing up for pretty massive scaling during the holiday season that's what I feel like yeah so a little bit of a challenge is there's something called if you want to get into terming the heart a so the Hard Eight are the eight weeks before the Christmas time zone which is the most expensive time to Market anything in the world and so it always my advice to people to not unless you are a AAA major game or or you have a [ __ ] ton of marketing dollars do not launch in the

end of Q4 because you have to compete with share of time share of wallet and add uh budget with Call of Duty with all of the other AAA games that are out there trying to get your attention and every other product and service has trying to get you to buy them for the holiday season however what you just said is very true and something that we would do at scop play and other companies is you want to launch your mobile game at the end of the year because you can capitalize on marketing that when everyone gets their new devices for the holiday season they get their gift cards they can start to make purchases and so yes there is that time of the year once you get past Christmas or the other holiday you know that you can purchase stuff and when you get in the January January is like now this wonderful time to launch your games and so here what they're doing you know in this in this time zone I think they're going to try to like ramp up and hit that moment when they're really looking to scale if I were to guess is is how they're thinking about it so this is their side piece game it has to be it

it's going to be complimentary I mean puzzle RPG as we've talked about many many times is very crowded Market it doesn't do nearly as well it plays more midcore than it does casual the audience tends to be very I I haven't seen anything be casual in puzzle RPG that's actually worked so maybe this is the first one that's going to try to do that playrix had one game in this exact segment kind of looked similar and it failed as well in soft lunch they had it for probably like two years in soft lunch we have a deconstruction I even forgot the name of the game but they did a go s but it was more like super sell and like there were Orcs And you were killing them with puzzles you stuff like that so yeah it's a it's a tough one it's a tough one yeah nobody works harder at dream like the stories I've heard you know they work super super hard super long hours it's like a it's like a hedge fund you know it's tough place but they sure find success with all that hard work all right everyone

that wraps it up for this week next week we'll do a little earnings talk and follow up on everything else see you next week more games next week money talk you did it you made it to the end of the episode as a fan of the show it would help us out if you subscribe and leave us a review on the podcast service of your choice more importantly are you a member of the deconstructor fund slack group if you have 5 years or more of games industry experience go to deconstructor of fund.com slack and apply to join join the games industry's best professional Community filled with peers always willing to lend a hand or subscribe to our newsletter to get all the latest insights from the deconstructor of fund content creators thanks for listening [Music]