TWIG #356 Epic vs Google, Roblox’s Rough Quarter, Supercell Pulls the Plug

Supercell's mission is to create games that will be remembered forever. I think that's huge [ __ ] that strikes at the problems that Supercell is facing as they continue to scale. Ilka, you cannot let press releases like this go out. [music] Hello everyone and welcome to This Week in Games 356. I'm Jen Dano. I fill the marketing and publishing role on the podcast and we're back to the four. So first we have
Eric Crest strategy invest
Phil Black Monizations are straight from Cyprus second chair creative director era.
Okay. Uh Khalispera straight from Greece friend of the founders Mishki Katco.
I am so glad that you guys have all landed. Now the next thing is to get you some Starlink and some microphones and we'll be back to normal. Here's what we have going on today. Absolutely breaking news. Google and Epic kiss and make up in the US court, but this actually

applies globally. We're going to spend a lot of time breaking this down. Roblox sets more records with its Q3 earnings in a paradox. Its stock gets hammered. Holy crap. When I looked last night, it was down 20%. We should check again this morning. We're absolutely not going to talk about how Squadbusters was canceled by Supercell and how we were sadly right all along. Nor will we gloat about any of that, Bill. You posted a picture of the most adorable kitties in their new location. Tell us more.
Yes. So, I'm choosing to use my once a quarter personal update, not on myself, but on the kittens who have moved because who cares about me? They did wonderful in a plane ride from Stockholm to Cypress. We are in more of an industrial loft style apartment here, so they are having an absolute blast. They're also on suicide watch. Kaya likes to look at the beams in this apartment with a glee and a sparkle that terrifies me. But they have been absolute champs and I think they might

be the first Norwegian forest cats on this island.
So I have a ball.
Oh my god, they're so adorable. A cat lover here. So I appreciate the sharing even though wants to kill himself.
How far how far have we fallen at this point? [laughter] [ __ ] cat. All right, moving on. Oh, our clown fish laid eggs in our saltwater tank, but okay. Anyway, so quick update and I guess kind of a shill is there is a a group called Wiggy, Women in Games International. We had an event in LA at the Google headquarters last week. That's Crest. This is the place that we went to that amazing the hanger that was the Spruce Goose. So, there were about 20 women who stood up and talked about how each of them had been in the game industry for 20 or 30 years. like it was really actually impressive to be around these like rockstar women who had seen it all. Some of them are from Europe, some of them from the US. So, this is just a good reminder to support and tap these kinds of groups out there for experience, for mentorship, for recruiting. And so, I I

did the football stance in the picture that we're showing because my knees, even though I've had five knee surgeries, somehow they allowed me to do that. So, thank you to the Wiggy group. Please support them. All right, Mishka. Oh, shield. Um, six podcast episodes that I need to show. Luckily, one the other seven come into one bundle. So, as we all know by now and will be hearing more, Phil has moved to Cyprus. He is officially avoiding taxes. No, I'm just kidding. [laughter]
Lifestyle reasons, Mishka.
Lifestyle reasons. Anyways, so he's now on the island. So he dropped seven episodes which are to be frank it was one long episode but they were clipped to seven pieces and they were published today. So all those on his conversations with one Greek founder and six Russian or Bellar or Bellarussian or Ukrainian founders in a wine seller in Cypus. Am I correct Phil?
That is correct. I think there was one

who there was another Greek as well of Greek origin but yeah lar largely true.
Larely [laughter] true. Anyways, talking about origins, we also had CEO of General Intuition, Pim Dewit, who was on the podcast last Friday. We released an episode. So, this is the company that raised $13.7 million. Nerds want me to say this exact number, and I've gotten a lot of messages by rounding it up to 134 cuz then you apparently missed the Easter egg. Anyways, so he was on the podcast. Please listen to it. I understood half of what he said because I'm dumb. [clears throat] But if you understand more, then that's good for you. And then final show, I will be back in Finland for Slush. That's on 18th will be Robio Con. And I just learned that I'm the opening talk at the event. I don't know what happened.
I need to call them. Like what are they doing first? I thought they took your passport away when you left.

Yeah. Well, they want some heat. Apparently, they've been they said like, "You know what? Come with some heat." We don't have Google sponsoring this [ __ ] anymore. So, let's wake people up. So, I'm like, "Fine, I'll come in and bring the spices with me." So, hope to see everybody at Roioon. That's a great event. I'm really happy that they're continuing to do it even without Google. So, there's bunch of new partners, AWS, Appcharge, etc. So, fun event. See you there. And then SAS as always 34 34.
Yeah, that leads to a slush. Then there's this event called 32F, which is the apparently the freezing point of Fahrenheit. So that's the sauna event. And Jen was also invited to slush, but she couldn't travel. She couldn't travel. So it would have been me and Jen, but now you get only me.
Yeah. Well, in in lovely good news, I can travel now. So, as of Friday, I went back to see my doctor for my posttop checkup and she like removed some gel foam thing from my inside my head and like the tweezers were like this long and I was like, "Oh my god, how what did

you just stick in my head?" And she said I could travel. It's too late for me to like make changes now. But I am back on the list to get on the flight. All right, I'm super happy. Stay ahead of the competition with Sensor Tower, the trusted source for mobile marketing intelligence. Whether you're tracking trends, benchmarking performance, or scouting the next big hit, Sensor Tower delivers the data that drives strategy. Dominate the charts with Sensor Tower.
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heroiclabs.com. All right, so let's get into the ve very very big breaking news. I wish we had some sort of like stinger that was like, "Okay, here is the breaking news." Multiple sources, but I'm going to use Verge. Epic and Google agree to settle their lawsuit and change Android's fate globally. Globally is very key in this. So, I know our audience is all over the world and this actually pertains to everybody. So, what happened? Tuesday's court filing from Google and Epic asked the judge to modify his while keeping many of the parts intact. So, if the judge agrees, and they're going in front of them, I think this week, this could end the five years of litigation that we've been in since August of 2020. This also resolves the Samsung versus Epic litigation that's going on. And if this is approved, it it will go until June of 2032, which is about 6.5 years versus

the three years, which was the original ruling that the judge had. So [laughter] I love I mean just follow Tim Sweeney on Twitter sort of they call it. He called Google's proposal awesome and said it's genuinely doubles down on Android's original vision as an open platform. So here are some of the major changes. Um the service fees have been capped at 9 or 20% depending on the transaction type versus the traditional 15 or 30%. We're going to break that down in a second. Let me just give you a couple of the other things. Separate 5% fee for Google Play billing or payments if the developer chooses to use it. So this is the traditional I put my game in the store and I use Google Play billing. You have to pay 5% service fee. If developers use alternative billing, they pay Google zero zero billing fees. And developers can show prices side by side for different payment methods. So, let's stop here first and just talk fees

before we get into a couple of the other areas that are important. So, Crest, let's break down that nine and that 20%.
All right. First of all, my constant, you know, expectation that they're going to reduce fees. I guess this is it sort of, right? Reduce
a little bit. A little bit
a little bit, but not quite what I had hoped I would imag. Anyway, thing that stood out to me obviously clearly is the 9% fee applies to transactions that don't affect gameplay where the advantage is negligible. So, cosmetics, skins, emotes, themes, avatars, premium UI options. The 20% fee applies to everything else. Purchases that do affect gameplay in a meaningful way. Example, powerups, gear, currency, energy, anything that ch changes progression, PVP strength, or win rates. Right? So, [laughter] in essence, this feels like a deal for Sweeney, right? This is a total deal for Fortnite because Fortnite represents like 2% of the overall

ecosystem. You know, the rest of the 98% are going to have to pay 20%. He's going to pay nine. Like, it doesn't seem quite what we were hoping for.
I tried to dig into the actual ruling paperwork. I'm not quite sure how this pans out because while it does say, you know, the 9% is a little bit more for subscriptions. And so the way that you buy cosmetics is you have to buy V-Bucks which is the currency which is under this 20%. So the 9% the way I was reading it was a bit more for the subscriptions like Spotify, Netflix, which is the old way was they would pay 30% the first year and then 15% after. And so now that's just 9%. So, let's pretend you bought a $100 of V-Bucks in the premium currency. So, Google used to take 30% Epic take 70, right? That's the old school way. The new way is if they were using Google Pay billing, which we all know that's not going to be the case, but let's just say you're like now like everybody else. So, the service fee

is 20% because it's game, you know, in a sense you're buying the game. Let's pretend it's just a currency. 5% billing fee. So, that's five bucks. So, it's 25 to Google and 75 to Epic. So, $5 savings in the new system. Let's see. If Epic uses its own payment, 20 of the $100, 20 goes to the service fee, zero billing fee, 20 to Google, Epic keeps 80. So, Epic in a sense makes 10 more bucks.
I I don't think Sweeney would have been happy with that arrangement if that's what I don't think that makes sense. Actually, I think the V-Bucks is still considered probably in the non advantage tier.
There's very important context for this. So, you have to remember Fortnite, the Unreal UGC part of Fortnite, remember they're opening up monetization in December for gameplay. And so, you can buy V-Bucks and then you'll be able to buy gameplay advantage things within particular islands. That's next month.

And so this regulation is going to be super complicated to enforce because remember that happens after you purchase V-Bucks. You're exchanging V-Bucks or essentially hard.
Okay. Okay. Sorry, forget that for a moment. I'm saying like there's no way Tim Sweeney would have been happy with this if they're still paying 25% for V-Bucks, right?
So it would be 25%. So the 20% plus the 5% if they used Google Play billing. So they're not because the Epic Games Store already has their own billing. So he just went in a sense from 30 to 20. He's getting 20%.
That doesn't seem like something he'd be happy with.
He's just going to use alternative billing. Delivers will use alternative billing. They're going to pay Google Zero. They already have all this infrastructure built. This was behind the web store. This is behind EGS. He's been building for this for years. He's been waiting for this moment. If you're in the EU, you can download the alternative Epic Store and I'm sure it's going to be even easier on Google Play. You'll be able to go through all their billing system and they won't owe anything to Google. Maybe this will help a bit more on the key difference between

the ruling and the proposed settlement. So, it's global. This goes for longer. There's no scarecras. There's the pre-negotiated terms for implementation. So, maybe this gets into it. Registered app store program. Third party stores that meet pre-agreed safety security criteria can be installed from websites with one-click neutral language screens. No catalog screens, no listing in the Play Store.
Now, go direct to consumer. Remember, you can always sideloadad under Google Play. That's always been a possibility. You can get the APK and you can install Fortnite. That's how they used to distribute. The problem is that there was a lot of fraud and Tim Sweeney was always freaking out about the scarecreens that whenever you would try to install a app that wasn't distributed through Google Play, then you would see this big, oh my god, this is an unknown developer. Oh my god, oh my god, oh my god. And of course, Apple took that to the nth degree when they had their ruling that was handed down in the United States. This removes some of that barrier and I'm sure he's going to direct distribute. Maybe they'll offer inapp purchase. But again, the key difference here is that you can do sideby-side pricing. And if you remember

what kicked off this entire lawsuit, it was when they did sidebyside pricing inside of iOS. Do you remember that they had the crossed out price? That's the vision he's been charging towards because he already implemented it. That's what kicked out this whole thing. And so now they can go back to when what was it Project Liberty started and they can already deliver what I'm sure is sitting around the codebase and say here's the price for this and here's the price if you pay on the web or use this alternative billing system. It's the biggest part of this ruling. Like I was playing Clash Royale last week and the new season pass came out and almost by instinct I wanted to make an IEP and totally forgot about the Supercell store. And the fact that they aren't able to do any messaging is to me the biggest detriment to a lot of these web-based shops is getting people into the funnel to begin with because remember you could collect email addresses and send via email the idea that the store exists but you want to be at the point of sale and I think that's one of the big changes here as well.
Yeah, for sure. And this does not do anything for Apple just to be clear which is kind of operating in its own separate bucket where Epic you know has

some progress but not that much. Well, I I think we're also underelling this 9 and 20% difference between cosmetics and gameplay. So, again, there's the hard currency and what hard currency ultimately gets spent on is a really big point. So, again, if I buy V-Bucks and I spend on a gameplay affecting island content versus I buy a cosmetic inside of Fortnite, I mean, first of all, who's going to be able to decide that? Not only that, they say the 20% fee applies for purchases that do affect gameplay. And here's the key quote in a meaningful way. Who the [ __ ] is going to determine that? who is going to determine that? And you got to remember this nine and 20% difference. People respond to incentives. And so it just became radically better to build a cosmetic based business because you pay less of a tax. So that's a huge change to the type of games we could be seeing on the app store or excuse me.
Oh [ __ ] Oh [ __ ] Don't go down that route, right? Like don't go down that route, dude. If people start doing that [ __ ] like you the 10% you save is not going to justify
again, Eric LTVs.

It's at the It's at the margin. And you got to be thinking
it's at the margin. See, but people are going to [ __ ] blow this thing up as like, "Oh my god, cosmetics are back. Let's build cosmetics and fail miserably, dude. Cuz that is not the business that we are in." God, I didn't think about that angle. [ __ ] hell, dude. I don't know if I can deal with that again.
Mobas are back right now that the 10% [laughter] discount. Let's all [ __ ] make moas that are [ __ ] have cosmetic economies, dude. The other problem with Battle Pass, too, you know, does the battle pass have a gameplay advantage? Does it not?
What about Call of Duty Blueprints, right? What about things that are going on in Delta Force? I mean, all of these things become very complicated and someone's going to have to sit there and decide. And you can only imagine the appeals, the messages to your Google Play manager that are going to occur. There's one final thing that I think is really important to point out. And when the ruling came down, we celebrated Tim Sweeney as a hero of the industry. And I still stand by the fact that he took a big personal cost by starting this whole lawsuit because as we'll see later on in Fortnite numbers, not having mobile has

been a huge detriment to their battle with Roblox. But Tim Sweeney is a shrewd businessman. And if you go back to the Epic vap transcripts, there was a question that he was asked on crossexam by the lawyer Apple. And the lawyer said, "If Apple told you that a deal would only be for you and no other developers, some sort of special deal." Because if you remember that case exposed that Apple was doing all these backroom dealings with let's say Netflix with Amazon to get special deals. The lawyer asks, "Would you have accepted a deal like that?" Tim Sweeney replies, "Yes, I would have." So Tim Sweeney, I love him, but he's still a shrewd businessman. He's still fighting for Epic more than he is fighting for anyone else. And I think that's important to keep in mind as he goes on to Twitter and claims otherwise.
All right, biggest fan. Tim better watch out. He has a stalker in Phil Plaque. All right, so let's just to wrap this one up. Um, we've come a long way from the awful mobile carrier revshares that were 6040. I don't know if you guys remember this, 60% went to the carrier back in the day. You know, our era has been the 7030. We're in a new era. So,

this is going to separate distribution from payments and billing. So, entering the new era of payments on mobile, it's a big day. So, also in the news for what feels like DTOC week is Unity and Epic are in uh DTOC bromance on Twitter. So, from games beat on Halloween, Tim Sweeney tweeted that Unity should bring its payment software kit to Unreal Engine and GDAU open-source game engine as well. So, Matthew Bramberg, who's the CEO of Unity, replied, "We'd love to bring payments to the Unreal Engine. Let's do So, this is if you're watching on Spotify video or YouTube, you can see, you know, the tweet or go to X or Twitter and see it yourself. So, uh, Phil, I'm sure you're excited about what is the freedom of web shop speech topic. Like, what do you think about this one?
0% time zero is still zero. So, no one's going to be using EGS. The next big

thing thing to tackle after this, the thing that I think is is very interesting and gets very little conversation is what's going to happen to Steam and whether or not you'll be able to use the web browser to make purchases on Steam and whether or not Steam and consoles start to take the hit. Now, consoles are very locked down and Sony in particular has a stringent set of rules for what they call cross commerce. So, being able to buy something on one platform and accessing it on the PlayStation platform, there's a specific approval process that you have to go through. And Sony requires, I would argue, a lot of very douchy stuff that if it came out, I think would reflect poorly on Sony in terms of the reporting they ask about things that are happening in your game on other platforms. But I do think Steam is going to start to take more and more heat. And if you remember, there was a survey that came out this week on developers asked whether or not they considered Steam a monopoly. And I think around 60 to 70% of developers said yes. So I think Steam is potentially the next thing that will be in Epic's legal crosshairs or at least other developers. All right, there you go. Let's talk about a completely different console. Switch 2 has some amazing numbers. Crest.

Yeah. I mean, just quickly, Switch, they Nintendo announces the earning seasons as other people know, but the Switch 2 is off to a really strong start, like 10 million units, which is almost double what Switch One was at this point. So, of course, Switch One had huge like supply chain issues and stock issues. But, nonetheless, we haven't even hit the holiday season yet. And usually they double the sales over the holiday. So we could see them exiting the year with 20 million units sold. Um they raised their guidance 219 million I think and a lot of people think that they're just going to blow by that as well. Software sales were reasonably strong. Nintendo's looking good. Consoles are not dead. [laughter] Many people want that to believe. So yeah, it should have a great holiday.
Yeah, I saw the raising the forecast number. super impressive. A lot of the sales have been more to the cord gamer and I don't know, actually my friend just bought it for her kids. So, I guess it is starting to trickle down to that

next family unit versus the Nintendo fanboy and girl.
Again, I what I've been telling my clients over the last year is that there's nothing else to buy this holiday, right? Like when you think about it, like
there's no big toy, there's no new console. Like if GTA were here and people were buying consoles to upgrade to GTA, like that would be a little bit more of a headwind for them. But I think Nintendo has its own window here to sell a [ __ ] ton of units and upgrade everybody and for something to put under the tree. And what maybe people don't know is that even though retail is dead from the eyes of gamers in a lot of ways because everyone's buying digital, but for holiday time, retail is still king. And when you go to Walmart, Target, Best Buy, all they're going to be doing is promoting Switch because that's the only thing that's going to get people into the door, right, from a gaming perspective. So, they'll push it pretty hard.
Yeah. My toy friends who I still have all my friends in the toy industry are just they've said the last year has been miserable because of the tariff talk and

it's just like really decimated the toy industry. to your point about from a toy perspective, it's very difficult to have like that killer toy on shelf this year with the, you know, the tariff situation for them. I feel bad, which is why I do software and not physical goods anymore. All right. Well, speaking of another, you know, basically a digital toy that's going to most of the kids in the world. And funny, I was at Target and I saw a big giant displays stand for Roblox gift cards. So, here's what's going on with the I'll call it the paradox of Roblox there. In their Q3 earnings from October 30th, so kind of like last week, the numbers were really astonishing. It was their best ever numbers on a lot of metrics and still shockingly bad on others like losses of 257 million. The stock is down 20% as of, you know, yesterday closed of business. I don't I didn't look it up this morning. So, I'm going to do my best cross impression. I think you're going to say the reason for

all of this that the investors are sick of, you know, those margins not being where they need to be and let's make some [ __ ] money, guys. Right. Is that what you're going to say?
Basically.
Mhm.
So, they are making progress on market share. They now capture 3.2% of the global gaming bookings, up from 2.3 from the previous year. They stated their goal being 10% of the global gaming market. So, three games are driving most of it. Grow a garden, steal a brain rot, and 99 Nights in the forest. But seven of the top experiences, reached more than 10 million DAUs during Q3. And so, it was those plus, you know, a bunch of other ones. They've paid out a billion to creators year-to- date, so in 9 months, which is pretty impressive. APAC drove most of the growth, but crush, you're going to love this. The US and Canada had an increase in 47% in hours played. So, we are seeing some western market growth and I don't know what number to be the most impressed with.

Maybe it's DAU, but Phil, you put in all the charts, so can you walk us through those?
Yes. So, 103% year-over-year growth and free cash flow to $443 million, $46 million adjusted EBA.
But here is the chart that blew me away. Right now, we're looking at DAU. So, in Q3 2025, they hit 151 million DAU. That is up 70% year-over-year and is a 40 million DAU increase over Q2 2025. Oh my god. I I just like where do they keep finding these users? And we'll see in a moment where they keep finding them because they provide regional breakdowns. And despite some of air crest's previous warnings, they are also up 32% year-over-year in US and Canada. So it's not just tier three regions, although that is where they are experiencing the strongest growth. So Europe is up 56% in terms of BAU

year-over-year. APAC is 108%. So it is true that they are growing more in other regions, but they still continue to grow in tier one regions. The age group, we've talked a lot about this over 13, under 13. A lot of people can lie. They can report different things, but they are still showing growth in a 13 plus age group. And it grew at a faster rate than the under 13.
Up 89% year-over-year. Let it go. Let it go. I'm just reporting. I'm just reporting what they report. Eric,
yeah, [snorts] we'll do that. We'll do a second.
Your asterisk, your asterisk is well well hurt. Wellard. And here is the other thing that we've been keeping track of. It is stockbased compensation. It is flat. And I think this is a key part of the roadblock story is would they be able to get their costs under control and when it comes to stockbased compensation of something that was growing and quarter over quarter it is largely flat. Now that being said they have other costs which have been growing as of course we'll see I think some of the downturn in the stock price was due to a lot of their capex investments and

not only that you got to remember that their marginal cost curve will always be tied to revenue because they had developerbased payouts which is something that Spotify deals with quite a bit. The last thing I want to throw at you is this free cash flow number because it is just it is out of this world. $44 million in free cash flow in Q3 2025. That is more than double what they had in Q225. So congrats to them. I am curious why the share price is down. I couldn't believe that Wall Street would expect something more. I think the things that we didn't see a lot of conversation about was the ads platform which has been in the background. The things that they ended up talking about was the viral experiences have driven a lot of this growth. And remember those DIU numbers have been pretty steady when we talk about grow a garden or steal a brain route. Doesn't look like flashes in the pan. The other thing they talked about was AI discovery in the platform driving a lot of this. So solving a lot of the search costs that users finding great games on the platform and dynamic price floors got a shout out on the Roblox marketplace. Congrats to the econ

team. Absolutely slang every single quarter. It seems like they're doing something that drives bottom line results. One last thing I'll throw in there was the web robu. Remember, you can still buy Roblox on the web now. They're taking advantage of direct to consumer, too.
Yeah, it just impressive stuff. They've actually had a lot of employee shakeups at the higher levels. I think Chris, you've talked about the changes with product. Their head of partnerships left not too long ago. And I get asked by my non-gaming friends and my gaming friends like, "What is going on with Roblox? How do I use it?" And I just want to make sure that we say this out loud. My key piece of advice with Roblox is that this is a marketing platform for you and your game and your product or your brand. Likely not a revenue driving platform. Remember this is driven by you really have to have like a gamer experience that completely understands the play pattern and the use case of this. So for all that is holy, please do not make a gamer experience. Explore integrations. look at brand opportunities first.

Advertising is picking up. Rewarded video is picking up. So, all of those are ways for you to use the platform without making a game. The eyeballs on this are huge. As you can see, Gen Alpha is the best possible place for you to get in front of them. Like, this is Roblox. The other thing I wanted to point out with Matthew Ball, we haven't talked about him in a while. He is the latest to post about this. though. His tweet says, "Roblox's quarterly engagement hours are now about 82.5% as much as Netflix's. In Q325, Roblox was used more than it was the entire first year of the pandemic combined. Q2 2020 through Q1 2021." And so from the chart, you can also see that I think it's still 80% of the hours and the use case is on mobile a touch on console and I I think it's growing a little bit as it's gotten to more console partners and obviously a little bit on on PC desktop, but this is a mobile platform that is absolutely reaching kids. So uh Mishka, I think you

saw this tweet. What did you think? What's going on? So, there's the notion of this that I'm just going to quote the post said, "Roblox has a problem. Robux is becoming or always has been a non-monetizing, unprofitable platform. Roblox has never made a profit in any quarter of its existence in 21 years. Roblox has been solely investor supported and funded from 2004 to 2025. So just a you know take on this uneducated take which basically shares that they had a revenue of you know 1.4 billion and up by 50% bookings were 2 billion they were up by 70% and yet the net losses were over 250 million. So, I think the problem here is that people who post this, they don't understand, as Eric said correctly, the difference between bookings and revenue and profit because bookings show the total value of Roblox purchases and them

growing 70% is absolutely enormous because it means the players are spending and engaging and that is just growing. And the bookings mean that somebody buys Robu boxes, but they're just not spending them right away. Nevertheless, that purchase has been made and so it shows it as a booking versus direct revenue. And in my opinion, this is one of the best signals of the platform health and the monetization power because players are putting down the cash to the platform faster than they were ever before. However, Roblox defers most of this into future revenue and and that is why the growth of these purchase not immediately seen as a hit in the income statement. And so revenue is what actually is recognized from the players consuming these Robuxes. And even there we can see 50% increase year-over-year. It's very stellar. And although the bookings are trailing, it means that there's a deferred revenue that is ballooning. So

players will be spending more and those revenue will be growing. So the engine of spending of Roblox is very strong, but the delivery meaning the conversion into recognized revenue has a time lag. And that's more of an accounting problem. than the actual platform problem. And if this way if the bookings are growing as sustained as they have till date and the costs are normalized as Phil was showing the gap between those bookings and the actual revenue will become a tailwind for the future quarters and I don't understand how this is not recognized by Wall Street. So Chris can you enlighten us?
Okay so behind the numbers of an absolutely breathtaking quarter is a few things. One is they are not monetizing the audience better, right? They are monetizing it very consistently. Okay. And part of that growth that you so eloquently described of a DO AU by region was 80% growth on DAUs is rest of world, right? 32% is US. The difference

between the monetization of the rest of world and US is [ __ ] dramatic, right? It's like $50 per user versus like 10 or something insanely low, right? So if you're growing at the rest of the world, it's far greater than you are at the US and Canada. You're basically losing money in a lot of ways because you're basically paying for the same amount of DAU, right? Incorrect. Because what you see when you look at their numbers, when you look at the average amount they make per payer per month, it's been steady at $20 basically their entire history. So when they should be adding more and more unprofitable cohorts from those tier 2 and tier three regions due to those compositional effects that you just described which are true the differences in monetization between region are dramatic but when you aggregate it all they've been steady at that $20 per payer per month but you're still the cost side of it I'm not the cost side of it is dramatic right because distributing games the way they do and how expensive it is to deliver

this type of content on mobile is probably less expensive but still very expensive in rest of world as it is in the US right so
I agree I
the cost side of it is so dramatic that like growing in rest of world is not good really for the P&L right so having said that they have become profitable but Wall Street all they give a [ __ ] about what's going to happen going forward not nearly what's happened in the past like you have to always keep that in mind so in the report they basically suggested that they would have margin pressure going forward because they have to reinvest more into the infrastructure to support all these users, right? So, I will say this until the cows come home, right? Like, DAU, MAU, that is a [ __ ] vanity metric just in general, [laughter] right? It's just not what is generating revenue. Again, the reason I got bullish is on the stock is because advertising could unlock some revenue potential from that DAU, MAU, but from Roblox perspective, it is very expensive. So

when they say that they are have to reinvest even more money going forward that means their margins are going to come down and that's reflected in some analysts and that's why the stock got just destroyed right overnight and plus it's been up so much recently.
I was actually wondering since they invest so much in infrastructure and that's so important here and to your point like their cost per user is flat no matter where they come from. If you're from India from the United States if you're from Europe we're all paying the same marginal cost profile despite the revenue being different. Of course, that results in wildly different margins, but do you think because there's all this competition in terms of AI for data centers that they're going to pay higher costs for their infrastructure going forward
probably and that could be part of it too, right? They're getting squeezed out by all this money that's chasing AI. That's possible. I can look into that actually in ter getting rid of all these deferrals and all this stuff and talking about gap revenue like fiscal 25 EBITDA is going to be about 1.6 6 billion and that's like a 24% margin and next year Jeff has estimated that their their

margins will go down to like 20%. Right? So from 22% from 24%.
So that's why the stock got hurt was because [clears throat] their profitability is actually going down on a non-GAAP basis. That's why whoever made did that report that you were talking about Mishka is just completely causing all kinds of mess in terms of understanding the story really. The other part is that the big expenses that changed this year were the dev exchange expenses. So the dev exchange fees went up dramatically like I think from 900 million to 1.5 billion how much money they're giving to their developers. Infrastructure and R&D ratio continued at the same kind of ratio but again they're not showing as much leverage on these investments as they could right because the revenue is not growing as much as the expenses. Revenue is growing faster than the expenses but not enough to really improve marginal profit. So anyway, but they are profitable. That is pretty clear. And again, margins are expected to decline next year. So again, what they need to

do is see profitable growth, right? That's critical in the stock market, right? And that's what they need to see. And they're not seeing that if they're saying that they're going to increase spend next year, right? And so what I'm hoping is that advertising will start to kick in, although it's going to take time and to scale it in a way. and they have an audience issue, but that's kind of like the hope in terms of scaling and like leveraging all this DAU MAU.
I've talked to some of the Roblox developers and the advertising revenue that they are seeing from this advertising program is extremely low. It's like onetenth of what mobile
isn't rewarded video. Didn't it just kind of kick in and a lot of people are in beta and
Yeah, it's going to take a while.
Yeah.
I mean, it could be years.
Exactly. And the developers, you know, they're 12, you know, for them a year is a long time. It's like, [laughter] no, but but I just mean like it's it's uh the the in on paper it makes all the sense because everything is an ad

network as we know, but currently it's just not as interesting for the developers. But again, we have actually chief business officer of Roblox coming in on the podcast and that's one of my questions to him. So,
I'm going to reiterate, I know I'm a broken record on this. The age [ __ ] metrics on this platform are total [ __ ] [ __ ] Absolute 100% [ __ ] right? There is no incentive for them to age verify properly on their platform. Everyone knows this internally, externally. Like, I hate people who use that narrative that they're growing up the age demo. They're just not, right? They're really not, you know? So I mean maybe in third world countries you know the then that makes sense right because there's no alternative so they can play these amazing experiences on mobile right but then that doesn't matter it really all that matters is the US is like what is the age demographic in the US and I'm telling you it ain't even near what this they're reporting on this this this is total [ __ ] okay
ready to move on to Arcadia

so Arcadia Gaming Partners invests 4 million in Iron Game Studio And Arcadia Gaming Partners is of course the uh famous new fund $100 million fund set up by exod president Akin Babaigit and it has been interesting to follow this fund because I think he's deployed like 80% of the fund already and it seems like if you're not a Turk do not call Aken cuz [laughter] like he has he only funds Turks which I love. This is how it should be. I saw this article here on the feed and I was just I was thinking about it because like they're quite similar to Laton because Laton by Girkam is set up almost at the same time. Laton is you know half of the size and you can see kind of the different approach of investing like Girkham is coming from Google. He's very measured very sort of analytical approach and and I wouldn't say careful but you know measured and analytical would be right. And then Aken is like a former founder and doing what

founders do just handing out checks and taking risks. So, I'm curious to see like which of these Turkish funds will boast better returns in the end because essentially the portfolios are quite similar, but the approaches are are very different. So, Chris, you're a friend of Latan. What do you think? [laughter]
Oh, by the way, this article is from pocket gamer.biz.
There's a certain level of overinvestment in Turkey at this point, right? where the valuations are getting a little bit frothy and like not everyone
is open for business.
Not everyone can possibly succeed. The uh early investments are hopefully going to cash out quicker than the older investors, but who knows, right? But yeah, I mean more money, right?
Yeah. Yeah. So, so they are definitely keeping the the Turkish ecosystem alive and new founders. So, the exitors are coming back and setting up new companies. So shout out to Aken and shout out to Gerkam for funding the third wave of Turkish puzzle developers.

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are a key partner in their success. Appslier, where your app's potential meets performance. All right. From something that is alive to something that is sadly very dead. Mishka, walk us through.
Yeah. So, last week, Supercell CEO announced that SquadBusters has been cancelled and will be shutting down, I believe, with December being the last the last update. And the brief story is this. SquadBusters launched after one month soft launch. Their decision to make launch globally was done before the soft launch based on internal tests and the feedback from Apple and Google. To my knowledge, there was a massive launch campaign with A-listers, Thor and Friend was featured. They launched in June. There was a holiday break as you do in Finland. The game slid after that. The next big update came in as late as in December. And then in the May they had

this heroes update. So that was the second big update, second big overhaul. And at that point, I believe the game lead was already in London and the team has been shaken after that. Neither of these updates had big impact. And as you look at the graph, you can see that there's just that big bump and then slide down to a bottom. And over its time, it generated, I believe, $100 million according to Sensor Tower in gross revenue and had about $80 million installs. Mr. Black,
first of all, condolences to the team. Like, this isn't easy [ __ ] It isn't easy to ship games, and it is personal. It's really [ __ ] personal. And they put an interesting thesis out in the field. And the thesis didn't work. It's a thesis I believed in. I thought there was still a lot going on here. And to Supercell's credit, when things do not go well, they do not do these incremental updates where they're changing, you know, the color of UI buttons. They do big overhauls because they know that's what you do when you have a game that's not working out. You need to do big overhauls if you want to

see the KPIs you need to see. So, I still continue to give them credit for when they're faced with adversity. They do do the right thing. I hope they're not popping champagne. I didn't hear any champagne in the press release. And God knows you shouldn't be popping champagne when a game fails. You should be taking the time to mourn. You should be taking some time off. And my hope for this team is that they come back and they have more energy than they ever have and they go after something just as ambitious as they did with this game. We'd love to see it from them. Now, the thing that I'm going to continue to give Supercell Comm's [ __ ] for, and I don't think this was a small thing. This was in the press release that Supercell itself released. If you're looking at the Spotify or YouTube version right now, I've highlighted a line. And this is a line again in the press release that Supercell has released saying, "While this is not the outcome we had hoped for, we believe it is the right decision to stay true to Supercell's goal of creating games that players can love for years." Does anyone know what the problem with that line is? That is that is not Supercell's mission. Supercell's

mission is to create games that will be remembered forever. And I don't think that's a small [ __ ] I think that's huge [ __ ] up that strikes at the problems that Supercell is facing as they continue to scale. Ilka, you cannot let press releases like this go out. This is core to the company's mission. The Supercell is dead. This was the second plank of the Supercell platform. First plank was the whole idea of a Supercell. And the second plank is that you create games that will be remembered forever. And now later in the press release, they allude to this, but this is the first time they mention something like this in the press release. can be loved for years. Just colossal [ __ ] in my opinion to have this in a press release and this needs to be fixed immediately because it goes internally. This is what a lot of people are looking at these press release internally and thinking is this the company culture now? This cannot be the company culture. You still need to be the company that creates games that will be remembered forever. So very disappointing to see this comms. Get your [ __ ] together and update what is the company mission and

do it in this press release.
Oh Jesus. We're just giving Supercell comm [ __ ] We are like like liking the games but giving their coms a lot of feedback. Anyways, I wanted to talk about the cost of the game because I think that's an interesting thing to discuss. So overall, the game had 60 million downloads and $80 million in net revenue according to Sensor Tower, which I believe is quite accurate of a number. They spent about 3 years of building squadbusters and two years in live ops. That would put it at 5 years. Notori skipped the soft launch, went big, alias Hollywood, massive influencer activation, global PR. So what does going big cost? Now Jen, I need your feedback on this.
So according to Sensor Tower, 25 million of all downloads were paid and 40% of those were on iOS. So in postAat iOS CPI for a premium title in western markets would give between $4 to $6 of a CPI and Android blended CPIs would be between$1

to $2 on a global tier 2 and tier three markets. You add an A-list campaign with Thor and Friends that puts you at about $15 million probably to the celebrities. Another $5 million to a two-day film production. And I think we discussed too detail. You gave a lot of details on how these shoots go and if there's multilocation like this was so there was multilocation etc. Then you got the flights, you got the edits, you got the agents. So that will put you probably back by $20 million. And then comes something that you know is seen as organic traffic which is the influencers and creators and supercell has an army of those. So I would probably put it on another $20 million to those and would follow it roughly with a $5 million budget on global PR because they did things like the summer gamefest clip that was few millions I think of a cost. And so the overall math Jen is would be this. I would put in $65 million on user acquisition, $50 million on brand,

celebrity campaigns, influencers, and PR. And development costs would be between 30 to $45 million over 5 years. And this is assuming you got a about 60 person team, full-time employees, contractors based out of Helsinki and London plus the outsourcing to that. How does that sound to you? So marketing you have at 115. Is that
Yeah, about that. Yeah. Yeah. 115.
I kind of thought 125 to 150. I like your breakdown. I think those numbers were higher.
So I don't know. I don't know as much on the development side. So for my world, I would have said like 125 to 150. A little higher than what where you're pegging it.
Okay. I was I was conservative. But overall, I think the total investment if we let's say put it at 150 overall for this project, Supercell boasted an EBIDA of almost eight billion dollars in 2024. So they could launch five squadbusters a

year and they would still do [laughter] a half a billion of EB that year. So this is not any kind of a financial hit on them. But on on perception wise, I think there is a little bit of a hit because, you know, this is the first time a game essentially fails for them that they've pushed live and it showed that they shipped a product that didn't scale, but they also failed with the live ops that they've been really good at to kind of fix it mid-flight. And these type of things put Supercell further away from the coveted IPO because I think if this game would have hit, if it would have been as big as they thought and we thought in the beginning, they for sure would have IPOed by now. And now now they're kind of unfortunately showing a little bit of a recklessness in the launch strategy. And I think the post that Phil criticized, I found it to be really

good. It was extremely positive as it should from a CEO and it gave a sense the cultural sense that they celebrate a a failure. In this case, it was a verbal celebration. And what else could CEO say in these type of situations? Like if he wouldn't said anything then that's kind of a cold thing and pundits like ourselves would have created a narrative for him and now he did the right thing and I think the employees you know really love him for that. But reality of course is probably quite different than the message would entail because during this time there have been quite big changes in the leadership. You have COO changed, you have CMO changed or both are actually out. You have chief game lead who is not chief anymore and you have new game development changes where new game development is now done by AI labs and spark labs essentially other than internal people who are somewhere outside Supercell or in the proximity of Supercell making new games. So those are

massive changes both in terms of leadership and in terms of the way they make games post the launch of Squadbusters as well as Moco. I don't know. I think it's overall a bummer that the game failed and I feel for the team. I hope as you guys said they are able to kind of work on something new, something exciting and and hopefully Supercell will find that success and finally ship a game because they haven't been able to ship a game that succeed in 7 years and it is interesting to see how the company's strategy and approach to new game launches and new game development is I don't know affecting the leadership and the changes in the process like these are not small things. changing CMO, changing COO, launching AI labs, launching the Spark Labs, like these are all intended to bring new games to a market. And as you can see right now, next year or this year will look pretty good because Clash Royale is absolutely crushing it, going higher than Brawl Stars before that. So they are living off the live games and in that sense

just like any successful publisher they have mastered their existing portfolio and having extreme challenges in shipping anything new and kind of causing that organic growth as Eric Crest puts it. So that's my take. Not a great story for Wall Street, right? This is not a story that people want to invest insane amounts of and invest you know at a high valuation. So um
all eyes on Moco. They need to scale it ain't looking good.
They need to scale new games profitably and they are not doing that. This is like still front's problem. This is obviously um
I heard from a very credible sources, multiple sources before Squadbusters launched, before Squadbusters was even in soft launch that they are coming with a new game and they're going to launch it bigger than they have ever launched before. And that was the request from the leadership, not not a request or a a mandate like let's go out big with the next game. So the decision to launch

Squadbuster big was done before the game even entered test marketing. That's an interesting thing. So
yeah. No, there's always desire and then there's reality and the two shall not be did not meet on that project and they
you know they need to try again. They have project rise in alpha. They have the boat game that's in alpha. Moco sadly is not doing it. You know, Phil, I think we both agree that, you know, a cosmetics-based a ARPG. Is it kind of like an ARPG? I don't know. It's like
very apt description.
Let me take a step back here. Well, look, if their goal is to be a independent developer, then I don't know if this strategy doesn't make it makes sense to me. But if their goal is to go public, this strategy is dumb. Like they're not listening to the right people, right? They're not listening to people that understand Wall Street and what Wall Street's looking for. And releasing Squadbuster made no sense in that time frame at all.
Isn't it hard to be a game company in

the public space anymore? I mean, I think we've talked about this is like when I lived at Zingo or at EA when it was a public company, they would make us do things that were not right for the player or for the game because we had to hit quarterly earnings. As someone who worked at these companies, that's in the best interest of games and players. But Chris, I don't know. Like, am I weird to think that? Like, I won.
By the way, have you seen Roblox's stockbased compensation anytime recently? [laughter]
They're like over a billion dollars a year of stock that they're giving to employees, right? Like there are some benefits [laughter] to being a publicly traded company, you know? you know, cash, you can't give that kind of cash out, you know, like clearly, right? A billion dollars a year in money to employees. That is one huge benefit.
Okay, fair enough. I But I meant more for doing what's right for the game. And so when I was on Farmville, God, light years ago, like 10 years ago, they would

come to us and say, "Hey, we need you to run a sale this quarter cuz we need to hit our number." or when the Sims needed to slip, but they didn't let it slip because it had to hit, you know, revenue in a quarter. So, things were done at the detriment of games for players for long-term revenue for those games because those companies were public. So, let me take me personally as Jen getting paid out of it and just say that was the challenge that I felt of doing what was right for the game and for the players.
Jen,
yes.
Let me just let you in on a little secret.
Yes, please. Not being so [laughter] a billion dollars. A billion dollars to people. Like, do you think they're going to like give a [ __ ] about your little pod dunk game? No.
Podunk game back in the day.
Money, money, money, money, money. You know,
was the number one game for Zingga back in the day. I'll just
Roblox pays better than Meta. At least Meta and Google. No, better than Meta

and Google to PMs. I know that
like Roblox is one of the
Yeah. one of the best payers in [ __ ] Silicon Valley. So yeah, Chris is absolutely,
you know, the story goes like this is more anecdotal than anything, but just bear with me right here. Is that part of the reason that could Oh, the CEO, what's his name?
No, Tazinski at Roblox. Sorry, back to Roblox. Part of the reason that he decided to allow advertising and to expand the revenue potential of the platform is because the stock was doing so poorly, right, that he couldn't pay his people and people started to [ __ ] leave that he didn't want to, right? There's a lot of like pressure to make [ __ ] happen and to keep employees. And so like that was actually part of like my understanding of why he kind of unlocked things that he didn't want to unlock historically for the company. And to keep these people engaged and motivated, you need money, money, money, money, money. You know, unfortunately,
take take me through EA then, Eric,

who's going through the opposite.
Yeah, this was something I wanted to cover is how do you keep those folks now you got to pay them more because they don't get stock RSUs?
No. And that was in my piece on LinkedIn. That was one of the biggest issues that they may have going forward is how are you going to keep people motivated when there's no stockbased comp anymore for particularly for the highle senior people, right? And so giving cash dividends is a straight cash payment that's out of profitability. Like that's an expense versus stock. I maybe this is the part that people don't understand. Stock is not an expense. When they spend this billion dollars that I'm talking about, that does not come out of the P&L, right? that is just stockbased comp that is below the line to some degree and again is extracted when you look at it on a non-GAAP basis the way Wall Street looks at it. So it's an expense that's not really realized or looked at from the Wall Street perspective. So anyway, when when EA goes private, yeah, they're going to have to give cash, right? Which is great, but yeah, again, it makes their profitability a lot less. So they may

have to spend most of their like 30% margins on non-stopbased comp, right? There is a notion, and this is part of the reason that they would go back public, is that they get shares in the new entity as part of their compensation for the hope that they go public later and they can make a huge windfall there on equity that will be realized later. That's also possible, but it's really unclear until we actually see the S4 and see what the, you know, the deal is to understand what the dynamics there. So, yeah, that's a tough one.
Oh my god, we didn't get the half of what we wanted to talk about. Lots to cover and
operators Shooter monthly. It's coming. Big box. Big box. YouTube commenter. We're here for you.
Cozy games, Simpsons, Fortnite. We will hit you up next week with much, much more and likely a ton more on the Google uh the Google Epic deal. We are still confused and we're going to try to clean that up for you next time. Bye
bye.
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