TWiG #368: Ubisoft Cuts, TikTok Slips, and Gaming’s Next Distribution Crisis

I don't hate Ubisoft. I just hate like what they've done to thising beloved company, you know. So, I'm going to pull back on the hate a little bit on Ubisoft. We'll see how this like nets out, but I think we'll see more and more layoffs, particularly in Paris. So, we will see.
Phil, I think Crest is being compromised. [laughter] I think.
Welcome, welcome, welcome to This Week in Games episode 368. [clears throat] Today on the roster, we got
Phil Black Monization's our first chair. [laughter]
Welcome.
Eric's gone. I'm second chair today. Lord Toranto at Mcraft but also cover puzzle
aircraft strategy and investing. I had to take a wee. [laughter] That's very good to know for the audience.
Small bladder as you get older.
Yeah, no doubt. [laughter] Yours truly, Mishka Katcov, founder whisperer. And in this episode, I shall

be the protector of venture capitalists because I presume there will be some venture capital rants. Now in this episode we will do the P the mandatory PGC recap and rumor section. We will discuss Ubisoft going full embracer mode. We will be talking about Tik Tok's latest US deal. Crest will mount an attack on venture capitalist. This is attack number 327.
What's new? [laughter]
The walls will fall one day. And then we'll talk about GDC that is next month and will they trump last year's numbers and also on the game side new shooter high guard and New York Times's crossplay. Eric I think you met somebody last week.
I did actually. Um I met Mahir Vadia I think is how to spell his last name last week. to remind you he is the chief strategy officer at Electronic Arts and

the one that I've been talking mad [ __ ] about since his [laughter] presentation to the investors about AI and gaming. Well, I have to admit he did live up to expectations. He was very, very, very smart, thoughtful. He really was well informed. Obviously, the legion of McKenzie consultants at his disposal gave him lots of intel. And he's definitely sporting that EA BMI requirement, right? exact BMI requirement. The only issue though is I I don't know how much you can trust someone that doesn't wear socks with tennis shoes, you know, like [laughter] I'm just kidding. I'm joking. I'm joking. All right. What I didn't know and what he explained to me is that he has a very extensive tech background and he did a lot of work on AI and machine learning early. So, in essence, he is probably one of the bigger experts on AI at EA. But to be honest, that's like being the tallest [ __ ] I think at EA. but he is clearly one in the in the exec org that understands AI the most and he

actually understands how these models work. So it made sense for him to get up there and talk about AI. Having said that, that was not my real objection at all really. Whether or not he knows anything about AI, it doesn't matter. What matters was not his knowledge but his qualifications. So, I still think in this world of AI, like having some McKenzie guy up there talking about AI and game development doesn't make any sense, right? They should have had a tech guy talking about it regardless. But anyway, I it was great to meet Mahir. You know, he very very very smart guy clearly and he had some amazing kind of forwardinking ideas about the industry. That's I think why he really wanted to talk to me about some stuff. We'll see where it goes from here. I I can't really talk about anything else. Quest was glazing this person pretty hard, right, Laura? [laughter]
Quest saying how handsome he was, and I was going to chime in on that picture and be like, "Yeah, he's [laughter] the guy could be a Bollywood actor, you know, like I just to be clear, right?" Like he is that to be in his film.

That'd be great.
Yeah, [laughter] he he is way too handsome for executive at EA for sure, you know? Well, then again, they have Andrew. It's like him and him and Andrew are like a perfect pair, dude. They be like,
"Yeah,
Evan and Arbory, right?
Two black belts doing their goddamn thing." [laughter] Without any context, I just want to give a shout out to Mirror and possibly EA's PR team if they were involved because when criticized by the media, it's like very important to meet the person behind the hot takes because in room you pick up signals and looks that you can't get from onstage reveals and you kind of kill the whole cartoon villain narrative, which was successfully done in this case. And now Eric's critique is more specific, credible, definitely not dismissive. He's super smart. He's this. He's that.
Did you get honeypotted with [laughter]
To be clear, I No, no. I I also don't want to feel like I've been manipulated by his hamsomeness, you know? But like everyone had told me allegedly like how smart he was. Like everyone I talked to

said the exact same thing. like it was like many many many people I talked to at EA objected to him being up there talking about AI and game development and and the fact that he's from Mckenzie and he hires only Mckenzie people, that sort of thing. So, I'm not I'm not offen
bandwagon in terms of how they've destroyed this industry. So, just to be clear, it doesn't change any of my opinions.
Mr. Mahir, you're clearly the friend of the podcast. So, anytime you're welcome on the podcast. Yeah, he would be a great interview though. I would I do would recommend
100%. And I disagree, by the way, by having technical people talking about AI. Nobody [ __ ] cares. I want somebody who talks like a smart person, a real person to tell me about AI, not an engineer. No offense. So,
I thought you say you don't want an AI telling you about AI.
Yeah, exactly. Or a robot. Anyways, PDC recap. So, we hosted two events. We got a dinner. We got a mixer. Shout out to our partners AppCharge, Heroic, Vibe, Sensor Tower, Dualingo for for

sponsoring. The dinner was packed. We had 80 people. So, huge huge huge thanks for everybody to came. And also, apologies for everybody to came because I tried to do something new. I'm trying to make panels great again. I had an idea and it backfired. It wasn't like anything catastrophic, but it wasn't as fun as I thought. But it was actually such a bad idea that people reached out to me with much better ideas what we should do in the next one. So if you weren't on the last dinner at PGC, you should definitely come to the next one because implementing some ideas from the audience on how to make really engaging and interesting panels. Overall, the mood at PGC was, I would say, very energetic. Fun was back. Mixers were everywhere. Yeah. Yeah. I know it sounds crazy, but people were like somehow just really happy and excited. And the energy was just really really good. AI was everywhere like you can't say anything propose anything without an AI and I think they had like an AI summit as well somewhere on the side and now also apps

were there as well and there was like a side app summit PGC as itself if you've been to one you've been to all of them it's vendors doing panels to other vendors while the actual activity is happening around all the side events and the side events in London are phenomenal. I mean, it's a I know I give [ __ ] to London, but it is a fantastic city, especially for arranging anything interesting. I was just I'm just joking that it's that it's stabby, which it can get. Anyways, some hot rumors as well. They're
hot rumors. I'm hearing stuff coming out of PGC [laughter]
dish. I haven't heard anything.
Yeah. Yeah. There's there's all kinds of stuff like I have to say like people listen to the podcast so they would kind of open up about certain topics that we would cover and some of them I forgot like naturally Forte like anybody who's ever worked at Forte came to talk to me about Forte. [laughter] So I'm honestly not that interested. Now I suddenly know how much money they have left and interest they're getting on

that and and all the details. Really not interested. I'm not a journalist. But the worstkept secret of course is the PixelFlow creator Loom being acquired by Scopi. Everybody keeps citing this I assume with an earnout number $400 million.
Mishka, I couldn't believe it was someone $400 million.
No, no, no, no, no. It's with an earn It's It's with an earnout. It could be $15 billion with an earnout. You just say,
"How do you even have that cap, though? How do you even have a 5? This company was launched what, like a year ago? It could be like 40 m c like up. I don't know. I'm just throwing out a number. It could be $40 million cash and after that it's based on revenue targets and so forth like growth targets. It's not guaranteed that they will hit the 400. I hope they do. All the best to them, but that is an earnout number. It's not guaranteed by all and I don't know the specifics.
I think Javier gets his white whale. So, I just congratulations to Javier who has

been hunting a casual game to hang in his mantle for the better part of eight years. Laura may may be intimately familiar with this quest. [laughter] Mr. Abe, Mr. Abe Javier, congratulations. You finally got one.
Yeah. Yeah. Congratulations also to the Loom team. Congratulations to Heroic Labs who are powering PixelFlow by the way with their massive audience.
Hold on a minute. We don't make news. We cover news, right? like [laughter] this has been not been announced like no one knows that this has happened yet.
Yes, it could be an absolute rumor. I said this is the worstkept secret and the hottest rumors over there. And what I was left thinking about was of course the other part of this rumor was like well it's Arcadia partners. So Akin Babit's VC of 100 mil the one that has been absolutely creaming the Turkish market and probably deployed like 85 million in like 6 months. And to me, this just doesn't make any sense because the math doesn't work. If you are a VC of a company that gets so much heat so

early on that it's scaling, why would you sell? I'm not going to hypothesize more than this, but this makes no sense. And I have definitely question marks about why Arcadia Partners is getting rid of of an asset that is growing so fast, so early. So anyways,
I think we need a new twig segment called sipping tea where we talk about all the rumors we hear over tea.
I want to just say one thing. I was in Montreal with a client and so I'm going to put my European ignorance at full blast. I'm trying to understand probably as North Americans now what is the relationship between French Canadians and French? Because to me it feels like they're they're treated like the bastards of France. Meaning like you ask them like, "Hey, who are these French Canadian?" They're like, "Oh, we don't know. We've never met them. We have no idea. And meanwhile, like the French Canadians are feeling very Frenchy. I don't know. I don't know. Just
Well, my contractor wife is one of them. I would say they're both very prideful people. If the first time you meet a French Canadian, they'll tell you that they speak the true French, not the

bastardized version that has come out of Paris. I don't know. It's It's like the UK and the United States. One people separated by two languages. What Winston Churchill said. [clears throat]
Okay. [snorts] Interesting. [laughter] Oh, all right. Anyway,
I've been studying this for a long time.
That's actually interesting. I need to talk to your contractor wife about this. I want to find out more. Let's go to the shill section. So, on the blog and on the podcast, we had Yaron Leand, who is Zingga's executive vice president of studios. So, he leads all the mobile gaming studios. We had a deep dive into forever franchises, aka games that never die while making nine digits annually. I think this podcast offered great insights and learnings. For example, like the proven better new that still gets cited the 702010 framework. Yarn was pretty clear. He's like this is only for live ops. The market is so mature that you need to create a standout product. You can't just copy and make slightly better products.
Zinga saying that

racing three guys
that is like that is like completely
really he said that.
Yeah. Yeah. What stand out product have they made in the lasting 20 years?
What are you talking about?
Dawn of Titans. Excuse me.
Yeah. I mean, exactly. All their innovative games justing crashed and burned, dude. They just kept replicating the [ __ ] Turkish playbook, dude. Making the same game over and over again.
Okay. He's talking about this case. Anyways, I thought it was very interesting, very insightful how a person like runs essentially a global studio network. And
now you're forcing me to listen to this podcast and pick it apart. So next week,
literally the section section is called shilling. This is what I'm doing.
All right. Well, next week I'm coming I'm coming at him. I'm coming at him with my critique of his assessment of the market cuz that is complete [ __ ]
right? Watch out. Eric's coming for you.
All right. I I got a lot of personal comments based on this because I worked at Zingga as well as has Jen. went

through three CEOs, three division heads and eight direct managers in a span of two and a half years. So, a lot of people reach out like I have to say Zinga friends are real friends. So, thank you for all of that and remember to subscribe to the Deconstructor Fun newsletter which gets the spicier version of stuff, not the milky version that you get on the blog. So, into corrections.
So, this is not quite a correction and Jen sent this to us. It's like I'd say like correction hybrid update. She wanted to cite that their Simon Carlos summarizes actually quite well changes to Steam's AI disclosure policy and I feel like this has come up a lot with what Expedition 33 got there was some drama around them getting the award them not getting the award about what the use of AI but Steam now has taken has now has a position on this. So Steam just significantly rewrote wrote did not but did not remove does your game have AI in it in its dev disclosure form. So the headline is that valve's making it very clear that AI powered tools like code

helpers do not trigger the need to disclose any use. So they're basically slicing finally what is okay versus not. Efficiency gains through the use of AI powered dev tools is not the focus of this section. Right? Otherwise, if you do continue to use AI, devs still have to disclose two types of AI use. One, AI to generate content for the game, whether it be for the game itself, the store page, or marketing materials. Our free form box allows devs to describe this purely in the text form of their choosing. So I imagine this is going to affect more things like are you using AI to make assets for you? Are you using it to generate text? I'm thinking more in game than I am in terms of marketing materials. And the second one is AI content generated during gameplay. This is a tick box simply on whether the game itself is generating AI created images, audio text, and other content. Valve's labeling this decision as an outlier on game platforms, but fits within their internal rules on how they would want to be informed if they were a player. So, a couple changes. We'll follow this. I think this is actually quite important

with everything coming up with AI and then how it's going to be like implemented and used by games and then how we're going to be critiqued or appraised or punished for it going forward.
Yeah. And just as we you were going through it, I received an email with with an information that Valve has received a lawsuit in Britain for about $897.7 million which alleges it charged publishers excessive commission for its Steam online store. Good luck.
I was literally reading it this morning. This just came out. This is like
Yeah, it just came out. Yeah. And another thing regarding Valve. So, I received kudos from our European listeners for bringing Yiannis Varuakis thoughts on AI, a world-renowned Greek economist and politician, also known as former Valve economist. People talked a lot about this this fell. He's he's famous here. And yes, very very much on the left, Phil. Very very much.
Yeah, look at look at the Greek economy.

Um,
all right. [laughter]
I can see it from the window.
That's great. That's a good one. Okay. [laughter]
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monetization features, seamless in-game payment integration, and a robust SDK. While 70% of top grossing games already have web stores, the ones scaling the fastest are doing it with Appcharge. Ready to transform good into great? Learn more at appcharge.com. Well, hell has frozen over. We are now finally after decades seeing layoffs in Paris at Ubisoft. It is a marquee time in the history of the planet that we are actually seeing layoffs in France for Ubisoft. So, just to put this in perspective, they have laid off over 3,000 people in the past two years. And not one job has come out of France with like 4,000 people. Now, it's only 200 people and it should likely be 2,000 people. And I don't want to make fun of people getting laid off. I know it's

horrific, but given the performance of this company where they are down like 95% on the stock, like this is long overdue in my opinion. Of course, the French unions are up in arms. They're already talking about walkouts and and they're very saying very unkind things about Eve, which I frankly don't mind, but they should get ready because this is only the beginning. You know, I think really Ubisoft, as I said many times, is trying to avoid the process of economic dismissals in France where you require all kinds of regulatory hoops. But I for I just think that it's inevitable that this is likely going to happen. But this ends my coverage at Ubis of Ubisoft because the one thing Mir did say that really bothered me honestly was like he's like look I've listened to a few of your podcasts and it's pretty clear that you [ __ ] hate Ubisoft. Now obviously need to use the word fing but you really hate Ubisoft. I'm like [laughter] I don't hate Ubisoft. I just hate like what they've done to thising beloved company you know or what the Eve has done to this beloved. So I'm going to

pull back on the hate a little bit on Ubisoft. We'll see how this like nets out but I think we'll see more and more layoffs particularly in Paris. So, we will see.
Phil, I think Crest has been compromised. I think [laughter]
I don't think you hate UB. I think you're just really really frustrated with them and you look at the economics with your hedge fund advisor hat on and you see like tremendous potential being wasted and because you voiced out many times how amazing their core franchises are and how they keep mismanaging those with the Parisian iron grip which is why you root for cuts in the HQ instead of the studios. And I was just thinking about it because they bought into mobile pretty hard and they bought actually hyper casual publisher, hybrid casual publishers, Idol like Ketchup, Fluffy Fairy, we got Green Panda, that was kind of lost despite that being kind of like the French forte of being good in hybrid casual. But yes, I hear is right. You've gone overboard when you talk about my

beloved Ano and Heroes of Might and Magic. Like you even get triggered by these these franchises, these little mice nuts.
Yeah. And and speaking of triggered, sorry, now of course I'm gonna do exactly what I just said I wasn't going to do. I keep reading Yos's coverage of this kind of thing. And he wrote this article on The Verge about, you know, them focusing and consolidating on their core franchises is riddled with risk, right? It's like a classic risk aversion strategy that he discussed on the Verge. Markets get choppy and large publics retreat to what they know works. the biggest brands, their proven mechanics, their most reliable audiences, Assassin's Creed, Far Cry, Rainbow Info 6, Repeat for Scale. He says this feels like a safe bet, but it comes with real costs, right? And what he's suggesting is that this is too risky because you won't have like long-term bets that are additional to what your core franchises are. I think what Yoast and and these people don't understand is this is exactly why they're [ __ ] up right now. You know, it's like this is the exactly the wrong assessment of the situation. They should have done this 20 years ago.

The fact that people are still getting this wrong. When you see what's happened with Activision and EA and Take Two and their focus on big franchises has been clear winner like they're like all all of them got acquired for alltime highs. Take two is at alltime high. It's only Ubisoft that [ __ ] this up. Didn't do it. Capton done it. Whatever. This is the wrong take. It just doesn't make sense. And and I I really respect Yos, but I don't think he really knows what he's talking about when it comes to stuff. All right. Anyway, moving on. A16Z.
Oh no, another another one. God damn it. Here we go.
You know, maybe I'm getting too old for this because all I want to do is rant about [ __ ] I guess. So So they they published this report about performance of their funds. And the only reason I'm doing this is basically to show how right I've been all these years. [laughter] So anyway, this is basically the performance of all their funds, not just their gaming funds. Let's be clear. And so what they basically showed is committed capital, net TVPI which is

basically the current value divided by the total capital deployed and the net DPI which is distributed capital. Like these are like metrics for VCs. What they really don't have here is a calculation of return over time which would be nice. And I actually ran this through all threeing major like [laughter] chat GPTs, right? Claude, chat GPT and and Gemini. I wasn't so biased in my assessment of these numbers, but and this is what it came out. Basically, don't invest after 2017, right? Like if you were an LP in the original funds before 2017, you got absolutely exceptional returns. But if you committed money after that, particularly in 20 2020 and 2024 based upon that track record, you're basically more better off like investing in the S&P, you know, rather than paying two and 20 fees and dealing with these 10-year lockups. That's basically the conclusion of looking at this particular data at this particular time. Now they will counter that the J curve or the return on these investments go down in

the first kind of four years potentially and then spike up in the last five years to exit later in a 10-year cycle. So basically the value will increase over time which is basically what you have to say when you have this kind of performance on your current funds right but we don't have the historical data on time series for the the returns on these early funds so we don't really know exactly when these things paid out but I would say that those things paid out far faster than these current investments after 2017 and then for the gaming funds themselves we really don't have enough data for the gaming two funds but they've deployed 1.1 billion ion dollar since 2022 and games is basically sitting at 0.9x after 3 years which is basically underwater with absolutely zero exits and again games.2 two is too new to assess any meaningful. But given the fact that we were in a super high bubble during 20 and 21, the M&A market is basically almost frozen and we are like peak bubble deployment of all this money. It is very very unlikely that

these funds are going to return or even get close to matching S&P returns and certainly not justifying the venture level risk. So, and then the last conclusion, which is what I've been saying, I don't know, forever, is that the multi-billion dollar strategy for venture capital just doesn't [ __ ] make sense. And in this data, you can see the returns compressed dramatically when they get above the billion dollar threshold, right? It doesn't make sense to have a VC firm that is that big. It's not venture capital at that point. It's basically an RAIA as I've said a million times and it's just a math problem like to return that kind of money you need like $25 billion exits in order to like justify the risk profile. Well, from A16Z perspective, it makes sense, right? You're getting, you know, 2% on, you know,5 billion dollar deployments and you can divvy that up amongst all the partners and make a [ __ ] ton of money. But at the end of the day, this feebased

architecture is just not working because performance is irrelevant, right? And that's the big challenge I think with these big VCs. And again, I would basically say that the the game funds are basically hosed at this point. And obviously, they're no longer gaming funds anyway, right? So, it doesn't matter, but they will invest in AI [ __ ] and hopefully make returns in 10 years, but we'll see.
Can you tell me why in God's name you would release this report? Cuz this is from a 16Z. Why would you release a report showing how poor your performance has been, especially when you compare it to the S&P 500, basically suggesting that you should have put your money in the S&P 500 if you're investor in a 16Z, and also showing a declining time series. Why would you do that? This validates literally everything this podcast has said for the last 10 years that all the VCs and DMs have put given us [ __ ] for. Like is there no self-humility from these people? Is there no response? I just I don't understand the context. There has to be a strategy behind this, right?
I don't know. And I I I don't know how LP can look at this and say, "Oh, I'm

definitely investing in your next fund." You know, like this is where my money should be. It's just a grift, you know, and so like at the end of the day, like we will see how this manifests itself. We are already seeing some evidence that like things are breaking at some of these endowments in terms of how they've allocated so much money to private equity and how VCs and their returns are are getting squashed, you know, we'll see what ends up happening. And I think people will start allocating more money towards the public markets, but you know, obviously maybe too late for that too, right? So it's like I don't know. That's above my pay grade to some degree. Let me try to mount the defense for the VCs. And you know, in this case, A16Z, they have raised about, you know, after those first frothy years, they've raised about 15 billion. You put in a 2% fee on that, that's about $300 million in fees alone every year. So, it's a good amount to run an interesting business. I agree with Eric's core point. Once a venture platform goes multi-billion, the math becomes sort of a destiny because you got the ownership,

the enterprise and the exit availability all working against DPI which is the distribution of capital and the incentive drift towards assets under management because the more assets you have under management the more you unlock those fees. So there is still in my opinion a legitimate big fund counter case because for an LP you're minimizing a career risk. So let's say you sit at Ohio State which is you know an example of endowment or name any US university with $20 billion in in assets for them VC is a tiny investment and also these investors don't want to do a mistake. So if I have to put in, you know, a couple of hundred million dollars to some kind of a high risk, high reward investment, which would be probably 5% of my total commit commitments, I would put it on A16Z or Lightseed or Sequoia or or any other big name cases so that I just

don't blow it up and I'm also not missing the winners because these big funds tend to have access to the best companies even at later stages or even when the funds are overs subscribed and so the latest stage investments with these big billion dollar funds is kind of like this sort of a near IPO or near liquidity event type of an investing where you have less dispersion because you're buying into companies with very known revenue and distribution. These are already proven companies. They are probably on their serious E at that point when these big funds come in and there's a very much shorter duration to DPI. So the point where the liquidation event happens and capital is being redistributed because these companies are heading towards an IPO or an acquisition by even bigger company and through that you have a lower binary risk than in a seed investment where you're just trying to throw money like like a keen in every every single company that has a Turkish flag and then you're getting that you know dispersion but early on and grabbing that growth.

But I also understand the criticism of A16Z that is coming because the importance is in nuance because the big funds they can't work and behave like early stage fund. So to summarize small funds they maximize the TVPI which is the realized and unrealized gain through ownership and very early entry and then big funds they maximize the dollars returned via access diversification and later stage de-risking. And the problem is when a firm tries to claim the narrative of one while also running the economics of the other. But you know this is your criticism not mine because I love A16Z. I want to give shout out to Andrew, John, Jordan, Josh, everybody in the team. They do fantastic events. And that is actually one of the big elements of a big billion dollar fund is they not only give you access to the top companies, but they give you access to top people, the top events. And it's almost like joining a big tech country

club.
Ooh, this sounds great. I can't wait for the one at GDC. Please invite me. A6Z. That sounds fantastic. [laughter]
Of course, they didn't run one last year at GDC, which they probably won't run this one GC cuz
they ran last last year. They had run it.
No, they they
was the one where there were robotics. I was I was talking about it in the podcast.
Two years ago, they had that huge event in the in the hanger on the waterfront. It was absolutely massive. And that was the end of the gaming investment vehicles there. And so now now they've just relegated to a small
It was really nice. I remember there were at least one Turkish casual gaming company just for the spice.
All right, moving on.
All right,
Tik Tok.
Now we've talked about some of your favorite things. Eric was talking about Ubisoft and Mishka talking about A6Z. I'm talking about one of my favorite things, Tik Tok. Yay. So last Thursday, Tik Tok announced a deal to create a new American entity intended to loosen its ties with ch Chinese parent company Bike

Dance. Think we've all known this was this was happening for a while. And but before everyone starts waving their arms saying that Tik Tok isn't a gaming platform, why are you talking about this? And while that's mostly true, there are some interesting games on Tik Tok, but they're not kind of games in the way we think about games. It is a great discovery and streaming platform for games. So don't think this doesn't affect you. Over the last 12 months, Tik Tok posts roughly 1 billion DAO. I mean, if I we had puzzle games with 1 billion DA, I'd be [ __ ] my pants. I'd be so excited. But to benchmark that, just to manage excitement, YouTube is about double that. And this is courtesy of Sensor Tower. So just this chart that we're showing here just is the distribution of Q1 viewership for streaming games. So YouTube's still number one, I believe. Yep. And then we have Tik Tok and then Twitch. So now, who's doing the shopping? So, a group of non-Chinese investors now owns more than 80% of this new US Tik Tok venture. It's

a combination of Oracle, MGX, which I had to look up, and Silverlake. So MGX is an Emirati AI and technology investment firm founded [clears throat] in 2024 by I think it's pronounced Mubaala and G42 focusing on data centers, semiconductors and AI and they also invest in open AI. So I was like oo this could mean interesting things in the future.
Mubat just just for the sake.
Muba okay thank you. [laughter] So bite dance is still part of the equation. Their stake is just under 20%. The new CEO is Adam Presser and as I mentioned this has been ongoing. This was proposed in 2020 and the initial people involved in that 2020 deal were Oracle and Walmart. It was never finalized. Then we had found project Texas where Tik Tok proposed an initiative where Oracle would oversee US user data on domestic servers while biteance remained maintained control of the app's code. Then there was the 2024

federal law. This was the basic this basically drove what happened today that was upheld by the Supreme Court that mandated a total separation from bite dance by early 2025 to avoid a ban. And this was I don't know if anyone was paying attention to the ban saga. Creators were saying their goodbyes. It was a whole thing. So was interesting as they did some valuations. The US version of Tik Tok is evaluated at 14 billion as of the end of last year 2025. By comparison, this pair company was valued at 480 billion in private markets at the same time. Anyway, so I was thinking a lot about this. Almost every news channel, whether it's CNN, whether it's TechCrunch, they basically have a social team taking whatever they're talking about, whether it's in their blogs or in their actual web fronts, they have versions that they show on Tik Tok. So, it is it is a platform in which people get news like myself. And my biggest concern and wonder is what will happen with content moderation, discovery, and

the future of the algorithm because that algorithm in addition to the tools in my opinion is it's the heart of the product. And what might be a little bit of a shining silver lining is that currently bite tans will keep the Tik Tok algorithm and license it to the US company. But the question is for how long. So anyone else have as much love for Tik Tok as I do. [laughter] So to me, the only thing that's relevant about Tik Tok is that it's been this constant threat for games as an opportunity cost of when you're watching Netflix, you're on TikTok. It's a passive form of consumption. And we've constantly identified it as a threat. But the thing that hasn't gotten as much attention is that their DAU has basically stalled since 2023. And right now, we're looking at sensor tower. And don't me wrong, it is a mighty mighty mighty about 120 million MAU or excuse me, DAU, which is I I mean, wow. But that is a chart that's not grown over time. And so that's why I don't think you hear a lot about it in terms of a alternative source for games. And of

course, like we have this very strange relationship with Tik Tok, which is that it's also a source of advertising for us in that we can acquire users from it. But when you look at the new Sensor Tower report going over the state of mobile, and you look at the share of ad impressions from 2024 to 2025, Sensor Tower is reporting that Tik Tok went from 21% of ad impressions all the way down to 12. So, it seems like it's becoming less important as a source of UA. And don't me wrong, I'm sure there's a bunch of disambiguations with a chart like this, like do impressions are down, are we [snorts] getting higher quality traffic, tier one, yada yada yada, but I feel like now that Tik Tok, I don't want to say it's been defeated, but it's been thorted. The thing I keep trying to get people on board with is this idea that these AI video apps are becoming a real threat to us, or at least there's something we need to keep in mind. So, Sora by OpenAI and then Meta has their own where you have generative AI videos very similar to a Tik Tok feed and I'm sure they'll be coming to Tik Tok soon enough as an alternative form of entertainment. And we've kind of like hinted at short form dramas long live was it Quibby [laughter]

the western attempt at this but there's also yeah the short form dramas are kind of hanging around as well but I think Reed Hastings remember go back to his famous quote you know we want you know we compete with Fortnite and don't me wrong I think that was a lot of sometimes hidy CEOs wanting to be you know edgy but there is only a limited amount of time in the day and we're always going to be competing against these other forms of entertainment and we've been managed to hold our own, but I think we need to keep an eye on them. So, one down and a couple more coming.
Netflix is adjusting their content about how when you approach making a new series, you have to be able to speak certain things very clearly, describe what's happening, kind of like what we do in the podcast. This chart looks like this because we expect either people are not looking at the visuals or not fully, they're not doing it as their main activity. And Netflix almost has adjusted to recognize that we have these other forms of entertainment that are taking at least I would say 60% of our attention while they use the whatever television show or movie you're listening to as background noise.
It does bother me a little bit that the

majority of both Democrats and Republicans voted to baning Tik Tok were divested, right? And they they just completely backpedal on this over the last three or four years. It just seems odd the whole thing. They must have seen something, right? To get them all behind board. I mean, they never agree on anything, right? So, I don't know. The fact that we're kind of at this stage, it gets really political. It's just not that interesting, honestly. But I'm not a big fan of Tik Tok as a platform. But I would say though, though, there's a lot of AI slop going on on Tik Tok nowadays, too.
Oh, totally.
They're moving a lot of the source [ __ ] right over. So, I don't know if that's going to be a real competitor to Tik Tok. It's just going to be additive to the slop that's already on Tik Tok. Wait, there is some AI content that is really good. So, I love Dungeons and Dragons. I play monthly and they have this new series called Households and Humans and it is so good and it is a purely Sora generated show like mini show about dragons sitting around playing as humans and that stuff I think I actually quite like. Not all slop. Not

all slop.
Yeah, you're a nerd. Okay. Yeah, that's that's above and beyond nerdom.
Yeah. [laughter] Yeah. I don't know. I don't know. You're getting a cat soon, but I don't know what's She has a cat, didn't she? [laughter]
No.
No, no, no, no. We have couple more years.
We have because [laughter] Chris has a cat and Phil has two cats and Jen has a cat, right?
Oh, [ __ ] it. I'm going to get a cat.
Yes. [laughter]
Yeah. Anyways, let's talk about GDC. So Neil Long from Mobile Gamer BZ reported on the sentiment that many international visitors are planning to skip GDC due to political reasons and safety fears. Phil, you had a post about this and generated some heat. This is addressed to the people and here's the analogy I would give the people who want to experience for instance all that travel has to offer but are afraid of flying and they know that fear of flying is irrational but

the media blasts all these plane crashes and it gives them anxiety which can be very understandable and I think when it comes to GDC there's a very similar situation where I think a lot of people really want to come and experience an incredible event. Like I I can tell you personally, it is the highlight of my year professionally to go to GDC. It feels like a high school reunion. It is still the biggest game developer conference in the [ __ ] world. And should it be somewhere else like all these other questions? Yeah, I think those are total total reasonable conversations to have. But if you are someone who has this sense of anxiety but really does want to come and is trying to convince the emotional part of your brain to accept the logical part of your brain, what I would offer to you is that the United States accepts 70 million international visitors a year. And what fraction of those do you think have issues? The Customs and Border Control releases data on this. It is a very very very very small fraction. And so if you are someone who wants to come, I would say first of all, don't come if you're not comfortable. But I would say

if you're trying to convince yourself there's a lot of information out there that I would encourage people to review, San Francisco has always been a wild place, but its safety record is also improving. And so if you want to come be a part of, I would argue, an incredibly international community of developers that give us all a chance to connect and put aside a lot of the [ __ ] that's happening in the world and talk about the thing that we love, which is games. I think people should come and I would encourage them. I would encourage them to to look at the information that they need to feel comfortable and come on down because I would love to hang out and I think it would be really sad if people didn't come because of a lot of political protests or or other nonsense. I put that aside.
I read the whole article and they were saying like, "Let's do it in Europe and Gamescom is better than G." It's not. It is not. I go to both every year. Let's be honest. Like GDC is the best gaming conference in the world. Full stop. as aircraft would say, it's so amazing because the organizers do a phenomenal job with the content, not the side

events, not the panels, not the sponsors, the content. They really go through every each detail. And so, you're enjoying the best possible, the most insightful talks at GDC. And yes, without a doubt, they will probably move somewhere in maybe next 5 years. They likely have just a long deal with Mosone. That's why it's happening. And I wish that hope and root for Vegas. And I'm also scared when that change happens [laughter] because it's going to get super wild. And then we will talk about the safety issues. [laughter] No, I'm just kidding. But definitely, as Phil said, this is a high school reunion. If you're in this industry and if you feel comfortable coming, as you should, go. It is a fantastic event. I see it as the chance for like American gaming companies and European gaming companies to be in one place at the same time to catch up and connect. And the talks are great. Actually, some of the biggest talks have come out of GDC. Like

the ones that are circulated multiple times like the Frank and Frank talk,
second dinner talk was was amazing. That was
10 years 10 lessons Magic the Gathering is like one I always go back.
There's a good one that just got recommended to me. I changed the range of a sniper rifle from 5 m to like 3.5 m. That's the entire title of the talk. It's an incredible talk. We should we should post some of these in uh
Meanwhile, like no offense to Gamescom, but people were just comparing it there. Gamescom h celebrated the release of Netflix Rebel Moon game as an upcoming thing. It's [laughter] just like come on, let'sing let's
It's the highest bidder.
It's [laughter] all the highest bidder at Gamescom, right? And speaking from San Francisco's perspective, Mayor Luri, now you know I'm a fourth generation San Franciscan, so I'm very [laughter] biased clearly, right? But Mayor Larry is definitely working overtime to get that part of the city back on track. And so I bet it'll actually be much cleaner this year than it was last year if I were to guess. It seems to be
so nice. That's actually that pulls at my heartstrings a little bit. That's [laughter] really nice.

I want to just give one advice to people who are coming to San Francisco and that is try to get out from the city center for a moment. Go to pack Heights. Go to Marina. I don't know like go anywhere.
Not just the tenderloin people. Like San Francisco is a beautiful [laughter] city. You're depriving yourself by not experiencing this.
If you want to blow your mind, go to Marin, go to Saucelito, go to Napa Valley, South Bay, like go to go to Burlington, anywhere. Go to Stanford. Like this is a fantastic area and you happen to be in the toilet of the whole region. That is the San Francisco city center. So venture out few miles any direction and I bet you'll fall in love with the city.
Why can't we do our podcast recording in like at Napa Valley this year? Nobody said we can't. All right, so let's talk about New York City. A New York Times.
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New York Times. So, woohoo. Okay. covered New York Times games a little bit. I've also covered the LinkedIn games. New York Times has launched

Crossplay, its first mobile exclusive two-player competitive word game that features real-time chat and Scrabble style mechanics. I opened it. It's like Words with Friends except it has a massive brand New York Times behind it. My one of my takes, which I'm putting in a little bit early, is that I think there is a hope that the brand will be enough to take share from the current multiplayer PVP word game market that exists today. Thank you, [clears throat] Sensor Tower. I did pulled some data because I kind of went into a rabbit hole of like, oh, what's going on with word games? Word has always been competitive to other puzzle subg genres from a download standpoint, but stumbles when it hits revenue territory, especially from APS making these games mostly rely on inapp ads for revenue. And I was looking at growth over time. Word saw growth in 2024. Maybe I was going to joke here. That growth in 2024 maybe was that cannibalization effect that Tik Tok saw. It wasn't. It definitely wasn't. But going through all of this, I was having a little laugh over here. And then shrunk in 2025. So in 2024, we saw

downloads increase by 0.3%. Revenue increased by 5%, almost 6%. What was interesting about this was the New York Times app grew 104%. Scrabble go relatively 7% in 2024. And then I looked at, well, what were people buying? It was actually the monthly subscription to New York Times games. So I thought that was very interesting showing New York Times is working with a lot of growth here. 2025 we see a little bit of a different story. Downloads shrunk about 6% revenue 5%. But but despite this shrinkage New York Times games in revenue grew by 43% and is the highest earning word game. So this is their New York Times base app, right? So they are actually in what I would in the word genre. They're kind of killing it a bit now with crossplay jumping back there. It is early days as you can see with these graphs and brand only goes so far. So if you play it I'm going to do my best to describe it. It wants to keep a very clean look. So there is no

buttonladen HUD. There's not many ads. I believe it was hard for me to trigger cuz I pay but there are banner ads that sometimes appear if you don't pay. But it's nothing like the games you know that you would come to expect when you open a new board game. you're like literally you're expecting to see you know add add interstitial all these buttons live ops live ops live ops will that work that they chose that not to kind of take this known path I think they will have to make some concessions and take a page out of kind of Scopy's book building out the meta building out their live operations and building out differentiation to scale this kind of shows what I was describing you can see here it's two very very different looking HUDs despite having a similar game so it's definitely a different approach there are a couple changes that crossplay made. If you play Scrabble, like your one of your objectives is do not finish the game with tiles in your hand because those score points can count against you. They've kind of gotten rid of that which was interesting. And the bonus squares, as you can see in these layouts, they did put the multiplier tiles in different places. Where are their edges? This was

a little bit more difficult to find this early. I was so excited. They have Wordlebot. I play Wordle every day. They added Crossbot, which basically criticizes I mean analyzes my moves. Could this be a skill building tool? got excited. Yes, it could. However, this is not unique. Words with friends has this and so does Scrabble. They're in booster format in those two games. There's room to grow here. Again, I'm excited. I'm going to keep an eye on this and see what happens cuz I actually started playing it and then we'll see what they do if they're going to build out their live event system, their live operation system that they're going to build out their meta to see if they really want to capture share from Words with Friends and Scrabble Go. Here's where I have a challenge with these business models because you you can download this game for free and then you can upgrade to a paid tier if I understand correctly like a paid subscription get hooked into kind of New York Times games.
But the problem is is because that monetization is capped by the subscription that means that their LTV is effectively multiplied by how many times you resubscribe. So your LTV is always going to be bent downwards. And to me, the ruling quote in mobile that I

keep going back to is that those who win the auction win the market because it's all about user acquisition. And at the end of the day, if you can't bid a higher amount because your LTV is not high enough, you will not be able to attract sufficient traffic. And if you can't attract sufficient traffic, all the things you're talking about reinvesting into the app in terms of live ops, all these things are irrelevant because at the end of the day, they're not going to drive revenue. They're going to drive this really small incremental increase in churn mitigation. And that's just a really low costbenefit analysis. So they just need to check a very small box just like Netflix, which is I just need to make sure you don't cancel your subscription. I don't need to emphasize or capture all this high LTV value that like Scrabble and all these other games do.
It's entirely true. They can't increase our poo poo, right? That's that's what's going to be their challenge, right? They're going to be capped, as you say. Well, the only thing they can do is increase their volume. And kind of like that Netflix model, what they're doing is this has been one release of many. They just keep throwing new games at this. I don't know what their model's going to be in the future or if they're going to change it. I was surprised this

was a standalone app. I thought, okay, it's probably easy. Am I like if I actually sit down and think about it, yeah, it makes sense. But I don't know if they're going to be taking a page now and they're going to be releasing multiple standalone apps that are then you can only get the full benefit, no ads by actually having that membership. It's a very good point.
Is the New York Times strategy kind of based on free traffic, if you will? They're part of the New York Times. They get promoted on the magazine. They have a lot of readers star.
That's their death star, right? Well, I'll just point I'll point NY Times at people.
Yes, that and then they use NY Times to point people at games.
So, it's less about CPI LTV game for them.
That would be my estimation. The problem is that their Death Star is really tiny. It's mice nuts, right? Because it's limited by their subscriber base, which it's a different audience you're trying to serve and that's always going to handicap them. They've been enormously successful at that what they've done.
Mhm.
But that it has a ceiling and it's why I don't take this as a serious threat to us.
Yeah. It's not like the next Words with Friends.
Wait, are you making word games? What do you mean threat to us? There's a ton of

word games out there. This is an interesting genre.
By us, he [laughter] means the the portfolio companies that we have invested into. Right.
Okay.
But less on that and more about shooters. So, I saw this come out with a very interesting fanfare. So, we're talking about Wildlife Entertainment launching HighG Guard, and I've never seen quite this type of a launch. So, High Guard was out now on PlayStation 5 P and Steam and Xbox, and it is a 3v3 PvP raid shooter. So, the creators behind Highguard have helped to shape some of the gaming's most influential franchises. I believe this team is from Respawn. So, they have Apex Legends, Call of Duty, and Titanfall. I hate the word veterans, but I don't know what else to use. The game blends objective-based combat with base raiding. The teams clash over the shield breaker, which is a sword, and whoever

controls this sword, can then crack open the enemy's walls and raid their base. So, when I was looking at this game, watching the streams, it has clearly elements from Rainbow 6 because there's this all base reinforcing, choosing the base and kind of building it up for defenses. It has the battle royale elements because there's the looting part and then there's also the elements happening on the map where you need to go to. It has the hero shooter hero brawler elements through all these different kinds of magic abilities that each hero has. It has the tactical shooter elements by pushing really players to play together, stick together in order to fight. And then I think it has a little bit of like a MOA elements through this sort of a powering up that happens over time. And I believe that this game matters, Phil. That's why I brought us in to the esteemed monthly shooter expert is that it's a take on shooter from a different take on shooter from a great team that has built amazing genre defining shooters before. And most

importantly, I was looking, they had like over 300,000 streams watched on the launch day. Despite all of this, like despite the team, despite the background, despite, you know, all these elements, they had such a negative feedback and it started off with their uh reveal at the game awards initially and then I was looking through comments. It says mostly negative on Steam. I looked at some of the stream comments like people are saying like, "Yeah, it looks kind of generic. They say that the map is massive for a 3v3. It says that the basic features are still missing. Like there's no text chat, there's no spectating of a friend's match, there's no match history, there's no profile, and people are kind of saying that it's a boring game. Phil, what do you think?
We'll be covering in shooter monthly, so that's what basically what I have to say. But right now, we're looking at the Steam DB chart. And despite that 100,000 CCU start you talked about, Mishka, it is down to 10K right now. And that is not a good slope. [laughter] Wow.
That basically means this thing is toast. I think ultimately what this game

will serve as a case study in is launching games particularly on a short time span. If you remember Apex Legends, you remember how that launched? Remember uh Mr. Bruo, our favorite Starbucks executive at EA? Boy, he wrote he wrote this one to the grave. He launched Apex Legends with basically no marketing. It dropped overnight and then remember it exploded in terms of popularity. And you have to wonder if the Hard Guard team was taking notes from that. I remember they had the trailer at the Video Game Awards that from what I heard, from what's been reported, they actually didn't pay for it. Jeff Kingsley actually decided to include it just out of pure love. And so for him, this is becoming an incredible platform to launch games cuz he got 100,000 people down this funnel. So if you're thinking about buying a trailer at the Video Game Awards, I mean, I think this is actually a boost for that vote. But at the end of the day, this looks like it's not going very far. The genre is super interesting. I think we'll talk a lot more about it on Twitter Monthly. I have to touch touch on the the marketing strategy because they said this like we wanted to do it like back at Respawn and EA we didn't want to have marketing.

They just wanted to announce the game and then go dark and release. Unfortunately, the announcement got bad response and now I I just open up there's the game business newsletter. Yes, on that one they're in a full damage control mode. It's basically they're asking is like, hey, like, you know, how are you handling this for somewhat hate from the players for releasing a new kind of free-to-play game? Like, what the [ __ ] is going on? You give a game for free and people are like, "Fuck you. [ __ ] you for making this game and for giving me a free game to play. What [laughter] the [ __ ] is going on?" So, I hope they can weather the storm, but given the free-to-play model, it's unlikely that the game breaks even after this. And given the market today, I don't know how much they raised, but I know that they have operations in good old LA and Seattle, two super lowcost cities to have devs in. So, yeah, it's um
jokes on them.
No, no, no. It's it's it's really sad. I'm actually kind of pissed at players. They gave a free game and people are like, "Fuck you. You for this game."

I'm very excited for Jen. I hope Jen comes back next week and has some opinions about this because I think gamers gamers took this game and they use it as fashion. Like everyone need to have an opinion about whether or not this is fashionable. Like it was on some sort of red carpet like oh do I like that dress on her? That became Highguard
for some reason. I think how it became that I think is a very interesting marketing case study.
Yeah.
This one will not be forgotten. Well, it will be forgotten, but the marketing case study won't.
I'm upset. I'm honestly upset. These guys like worked for three years on this. Four years.
Okay. Ne next next week we will do Ark Knight's Enfield which you know is the crazy huge wonderful launch from the Chinese company that brought you Ark Knight. Surprise surprise. There's a whole lot going on there that we need to talk about a whole whole lot. I've wasted four hours in tutorials. So I really want to talk about today but [laughter] we'll talk about it next week.
That will be in the next episode. Chris is already clicking. His raid is starting in World of Warcraft. We [laughter] shall conclude this episode.

Shout out to Shout out to EA's head of strategy, Mr. Mi. Lovely man. Beautiful man. Such a handsome man. And on that note, goodbye everybody.
Bye.
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