TWiG #372: Death at an Xbox Funeral & Balling Out Ball’s State of Gaming

Well,
let's throw it out there. My prediction is that Phil Spencer gets fired this year.
Wow.
And heaven helped them cuz he's like the only gamer left. [music]
All right. Hello everyone and welcome to This Week in Games 372. I'm Jen Dano. I fill the marketing and publishing role in the podcast. Today we have in first chair our guest
Adam product just product.
Yes. Love it.
Aircraft strategy and investing.
Phil Black monetizations are.
All right. Here's what we have on our super sized episode because we have Adam back. This is a corporate moves episode where we talk all about the game industry. Game of Thrones. The people movement, the closures, the changes. What a week. Xbox made a few changes. PlayStation shuts down Bluepoint Studio. Nexon appoints Embarks Patrick Sodderland to a newly created executive chairman role. Uh, we probably won't get into this because I didn't want to trigger Crest too much, but Ubisoft also

announced new leaders of Assassin's Creed at Vantage Studio. There three folks, all of whom had previously worked on the franchise before coming back. Some mobile news. Uh, our Magic Aball was right. Scopaly buys or, you know, takes a majority stake in Turkish develop Pixel Flow. Gossip Harbor surpasses Candy Crush on a weekly revenue basis for the first time. Go Gossip Harbor. my OG merge game. Overwatch not only removes the two, but they add Rush, announcing a made for mobile Brawl Stars inspired game. Some say MOA, maybe.
It's a [ __ ] MOA, dude. It's a [ __ ] MOA.
Going to ask about that. Uh, so in Philosophy Corner, Adam wants to review Matthew Ball's annual report. Crest doesn't want to. Phil gets spicy. So we saved the best for last where we're all going to yell at each other. So So there you go. So, first Adam, it has been a long time. Where have you been? What are you up to? And what new family edition

do you have to talk about?
You know, one thing, wait, one thing that Adam hasn't been doing is winning in hockey. Go USA. USA. USA. Canadians are losing their goddamn minds about this hockey thing. But 20 years it's been, we justing destroyed you. By the way, the women also won. I just would like to also say
they always win, right?
Well, yeah.
No,
no, Canadian women are good.
Yeah. Know, like Canadian women usually win the gold. This year we didn't. It was both like two overtime losses. It was pretty heartbreaking on both sides. But to be honest, like in my household for the last like what, six months, I had the Blue Jays lose the World Series, which was incredibly heartbreaking with that ball stuck in the outfield. And then Bo Knicks goes down with the inj injury, doesn't go to the Super Bowl, and then now lost two gold medals. It's It's heartbreaking. I'm I'm losing my mind. This is me losing my mind, Eric. I'm [laughter] glad you're happy.

What about the curling cheat?
Oh, yeah. Cheating curling. You cheated. You cheated the Swedes. You cheated me.
You're cheating in the stupidest sport ever made, every ever conceived.
Have you played curling? It's actually a really fun game to play.
Curling is awesome. Yeah, curling is actually a really fun game.
If you're like 70 years old,
do not condone the behavior of the Canadian team that won. That is an embarrassment to Canada, but curling as a sport is a great sport.
Yeah. The reason why I've not been on the podcast, number one, I got a new puppy.
So, I think we got a picture.
We made him pull a picture because the little Boston Terrier is the cutest little thing ever.
My family's always been a Boston Terrier family. We actually used to dogsit one was it like 20 years ago and that was really like a turning point for us. So we've always been a Boston interior family but this is Frank and his older brother is Bean. So we've got Frank and Bean [laughter] running around the house
having a great time.
Yeah. No, it's good. And then besides that I I have to admit I am off the deep

end when it comes to AI right now.
Absolutely. So like especially with claude code, open claw, all of this agentic code building stuff like being able to I am absolutely addicted. I have killed my gaming time in favor of building weird web apps that help me in my dayto-day. It is insane,
dude. You and Joseph Kim, dude, just areing in the matrix, man.
I can't wait for
just to chat with Joe about crazy [ __ ] we've been building.
Oh my god. I I I need to do a podcast with you two and then Travis Boatman was the other guy at dinner was like telling me all of the stuff his open claw was doing. I bought a Mac Mini. I'm gonna set mine up. I just need the weekend to like get it done. Phil's on the train, too. Right, Phil?
Oh, I've been chugging for a while. I got Codeex, VS Code, and Mac Mini with a Telegram channel open at all times.
Oh, man.
Remember last time I've made a Google search? Not good for that share price.

Scoreboard, dude. Look at Google's share price. [laughter] You're killing it right now. I would I think that's a lie. Short cell.
Let's get into the shill section first. I just want to thank Ed Zubrist and his USC intro to game business class. They put up with one of my Yoda talks. Speaking of AI, I scared the living [ __ ] out of them about AI. I asked them who had even heard of OpenClaw. No one in the class raised their hand. And I'm like, if you all are not googling and getting on that right now, you will not get a job in the game industry. And I saw all of them like get on their phone like that second. They're like, "What's this open claw thing?" I like it's it's really interesting how the next generation feels about AI, which is not good. They kind of hate it. And I was I was like, "Oh gosh, you you guys got to get on this." Anyway, Phil, what's going on for you at GDC? And then I'll read off all of the events that we have.
Hype train is going. I am giving a talk Wednesday morning at a time I can't remember. I think it's 10:30 on the economics of a billion dollar cosmetic economy. I just went over it with my GDC

mentor mentor to get some some final feedback. I am very excited. I've been wanting to give this talk for a very long time. This was my first love in gaming was building cosmetic economies and this is the playbook you're going to want to hear.
Oh, congrats on getting selected.
Thank you. I will I will make sure that they regret it [laughter] soon enough.
All right, so here's some of the other key events that we have. Sorry, you got two weeks more of us listening to this is why Crest went up to pee right now because he hates the section. Subscribe to the newsletter for length. Sunday, the Beta Hat Deconstructor of Fun Kickoff Party. Monday, sensor tower 2 to9 p.m. Mishka and I are hosting panels, roundts. Phil Crest, come on. The attendee list is fantastic, like 150 people. Tuesday, brunch with AppCharge and us. Wednesday there is a live ops summit with AWS and AppSlier. I'm co-hosting that with JK. Actually JK is

going to be there. Wednesday is our supper club. So this is us with news Morgan Stanley and then new. Okay everyone, this is uh exciting. We're going to be doing a live recording of Twig Thursday at GDC from 4 to 5:30 p.m. They have a podcasting booth that they have set up. The podcast studio is in the GDC Commons in the festival hall. It's one of the first things you'll see when you go down the escalators from the south hall. So, if you're at the show, they're going to have these like little listening stations outside. If you want to come see us and heckle us inside this tiny little glass booth, do that. All right. And then, who wanted to compliment Mishka on being a marketer for his UA podcast? You put that unfortunately that was me. I did listen to UA Monthly number one and I really enjoyed it. I'm going to be tuning in every month. Remember [snorts] 50% of mobile budgets are marketing. Like you need to understand this no matter what position you're in in mobile gaming. Like this is the name of the game. And I

was surprised how good it was. Mishka Mishka plays a good dummy on the show. I don't mean that in a bad way. He's asking the questions he needs to ask. So I'd encourage people to listen.
Yeah. I guess the one good thing about what he can do is represent the audience who isn't a UA nerd like Josh Chanley who is often like nerded out to the extreme on the which is fantastic right you get the extremes of people okay corrections I can't remember if I said Nexon was down on our last podcast but in case I did Nexon released it 20 25 earnings last week they had record-breaking revenue for the third consecutive year this is from Dungeon and Fighter Maple Story and Then obviously Arc Raiders, 14 million copies sold to date on that one. Also on corrections, there is a tilting point correction. We are going to wait for Mishka to come back to do that. So tilting point, we hear you. It's coming a little bit later.
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Unless you've been living under a rock, you know this is web store rumbringer. 70% of top apps are using a web store. And the best ones, they're doing it with app charge. Do you want a $20,000 inapp purchase? Yeah, app charge does that. How about using web- based Apple Paycheckout? Yeah, Appcharge does that.

Do you want to pretend that subscriptions are still a viable monetization strategy for games? Yeah, Appch charge even lets you do that. Look, these guys are backed by Supercell, Moon Active, and Play Tikka. They get what high average revenue per paying customer means, and they're already doing over half a billion dollars in transactions a year. So, are you going to be the first to do a $20,000 AP? Don't accept microtransactions. Embrace macrotransactions. Learn more at appcharge.com. Okay, now drum roll please. Is there any other topic? We are so excited today to present the latest on the Xbox changes. Let me do a summary. I went and just tried to see what all the latest news was in addition to just letting you know what happened. So, Microsoft gaming leadership overhaul. So, Phil Spencer retires. Are we going to throw him a party or something? I do feel like 38 years at Microsoft kind of should get him some sort of podcast sendoff from

us, but we'll talk about that later. Sarah Bond resigns. AI executive Asha Chararma named CEO. So, the biggest shakeup in Xbox history. Phil Spencer is retiring after 38 years of Microsoft 12 leading gaming. Xbox President Sarah Bond resigned. That has a ton of controversy that I actually want to touch on when I give my take a little bit later. So replacing them, Asha Sharma, previously head of Microsoft's core AI division, no prior gaming experience. This may have come up a few times. Her resume includes stints at Instacart, Meta, and Microsoft AI. Who knew that the farm team for being a head of gaming is Instacart and Meta? Matt Booty has been promoted to chief content officer. Sacha Nadella framed the move as part of Microsoft's broader AI pivot, but Chararma moved quickly to reassure gaming, pledging not to flood our ecosystem with soulless AI slop and calling games artcrafted by humans. Bond in her departure statement confirmed that the development of the next Xbox is

very well underway. So just a few context numbers since we are nerds about this. Xbox hardware revenue fell 10% in Q4. hardware revenue down 32%. Microsoft also announced a unspecified impairment charge on its gaming business in January of 26. Xbox consoles have been outsold by PlayStation 5 over 43 million units.
Jesus Christ.
I guess that's losing the console war. I think I added this quote in the choice of an AI executive with zero gaming background to run $23 billion division following a $75 billion Activision acquisition is generating significant debate about Microsoft's strategic direction for gaming. So, I'm going to pass the conchk to Crest since we're all just waiting for you to rip. I just at least wanted to catch everyone up on the latest.
Well, let's throw it out there. My prediction is that Phil Spencer gets

fired this year.
Wow.
And heaven helped them cuz he's like the only gamer left.
Uh first of all, I think um the post on LinkedIn is done by be by far the best ever for me. It's like 30,000 views. [laughter] So that's I mean obviously there the thing is this thing is is so [ __ ] complicated. There's so many different strings to pull. I'm going to do my best to summarize it as I see. First thing I want to do before I throw shade, I want to begin by saying this is that these executives perform at levels that I could only dream about, right? Sarah Bond, Don Matrick, Frank Jabau, even the pretty boy Andrew Wilson, right? The type of dedication like fortitude, the sacrifice, family, friends, everything. Like they perform at a level that I could not even imagine. And Asha Sharma is like the apex predator of executives. like she is the youngest executive vice president in the history of Microsoft. Let me sink this in. She is 36 years old and the CEO

of one of the largest video game companies on the planet. How many lifetimes would it take me to achieve that same goal? So with that in mind, [laughter] she has absolutely no business running a video game business. Period. End of sentence. like she is running the largest gaming company in the world basically besides Tencent. There's no way that she should be in this role, right? And I'm not quite sure how this actually happened, right? Because clearly Sarah Bond was air parent from the very very get-go, right? The plan was there to take over for him. He was going to resign, right? And it's really kind of unclear as to how Asha was chosen. Was she chosen before and then Sarah Bond resigns or does Sarah Bond resign and then Asha is put in place? But what is really clear is that Satcha had a clear role in putting this woman in charge. Okay. And I know that Satcha could give a [ __ ] about gaming, right? Just generally

speaking, but definitely he wants someone in charge that is aligned with Microsoft, right? So the obvious reason she has no business being here is she has absolutely no gaming credibility whatsoever. She has no experience, no track record, no reputation, no relationships with anybody in the gaming space. And she has no instincts for the gaming culture itself, right? She is basically 36 years old with only like two years at Microsoft under an AI title that's not really AI at all. Like she was a product manager basically for Copilot, right? This is not like she's not like some AI like phenom like some of these other people in the AI business. And none of this experience that she's had really has anything to do with gaming at all, right? But she definitely understands what Satcha's goals are for the corporation of Microsoft. So she's an operator, right? Her experiences are building platforms at scale, Meta, Instacart, Copilot, and she blends like this operations as well

as product management, right? And so that makes does make a lot of sense on paper as to why she was put in this position, but she's going from roughly like 3,000 employees at Instacart to like 20,000 people at an industry she has no concept of whatsoever. Self-admitting, right? She's like, I'm in learning phase right now, you know, on the press. And so again, for me, this feels like when Don Matrick put Yousef Medi in charge from MSN Hotmail, right? that wasn't even a great part of Microsoft back in the day, right? So, he became chief operating officer at Microsoft when they introduced the Xbox One, right? And this again, MSN and Hotmail were not successful places within Microsoft at the time, you know? So, them together clearly had no idea what the [ __ ] they were doing. And it was literally the most disastrous reveal in gaming history with the Xbox One. So again, they built a marketing message and a platform that is built for

Microsoft's entertainment ambitions, you know, mandatory connect, use game restrictions, always online requirements, and forgot about gamers entirely, right? And they squandered a dominant position in the console market and never recovered at that stage. And so this feels like that kind of thing again, right? Putting someone in charge that clearly doesn't really understand this business at all, right? and likely will change it and continue the strategy that has them you know for the last like 5 years and Yos had a great quote on this to some degree right he he basically says under Spencer Xbox tried to win in gaming under chararma gaming may be tasked with strengthening Microsoft I think that is the insight that you need to understand but I'm going to push back on this framing because I think Spencer was the one that was already pushed to support what Microsoft wanted with subscriptions and cloud, right? Sharma signals kind of more of the same, right? They're basically doubling down likely on a strategy that doesn't make sense and it

doesn't work for this the gaming business or the console business, right? So, this will fail, right? And if she tries to infuse some kind of AI strategy to be able build more align with Microsoft, that's even more stupid, right, in my opinion. And I don't I don't think that will work either. So, again, what I would have done is gone back to basics. I don't want to just throw shade and not offer an alternative. I think Booty should keep running the studios, although he's a controversial fur figure evidently. I would have actually installed a real gaming exec that knows someone with DNA, relationships, credibility, right? Focus on the exclusives, bring back the brand the way it should have been all along to compete head-to-head with Microsoft and Sony. Now, I realize that everyone's probably saying this, that ship has sailed. That may be, and I know that Microsoft really doesn't have this ambition. It doesn't really fit with their AI narrative at all. and they want to keep these non-core divisions at a 30% profit which basically really eliminates the required spending and the required investment to go compete on market share from Nintendo

and Sony. So the question really is what do you think Asha will do right and I think the former Xbox founder at Seamus Blackley who I've never actually even heard of. He says, "I expect that the new CEO Arsha Shramama, her job is going to be palative care doctor who slides Xbox gently into the night." Right.
Wow.
First of all, this is a bit reductive.
And I think you think gently is the right word there.
Yeah. [laughter]
I actually I don't even think this is accurate. You know, I don't think she's managing this down to close the division. I think she will ultimately try to bring it into the AI narrative at Microsoft and build some ambitious strategy, but ultimately it's going to fail because this is not compatible with gaming in general, the business, right? And ultimately they're going to sell they're going to spin this thing out or sell to the Saudis, one of the two, right? I think the one point that I really wanted to make that I didn't make in the piece on LinkedIn is that you can't really uncouple Xbox fate and

Chararma's ambition, right? You know, for Booty and Spencer, this was a labor of love. This was the endgame, right? For Chararma, this is a means to an end, right? She wants to be a CEO of a publicly traded company. She needs to have a perceived win here, right? And I think she will quickly discover the quagmire that she's put herself in and pivot out by either spitting this thing out or selling it and moving on because her goal was to be the youngest woman CEO of a Fortune 500 company ever and she is on that path to do so, right? Because this is what Apex predators do, right? And so that's what you have to think about from Chararma's perspective is exactly what does she want out of this particular experience. She's not the type of person that wants to stay at Microsoft and be second fiddle. She wants to run her show, right? So, this is her ambition. So, she has like a three to four year runway, right? And she will do as much as she can in order to like package this thing up and make a win here, but she's going to be a CEO, right? In three or four years. Fundamentally, I think this is really, really bad news for Microsoft

fundamentally and Xbox, right? I think we're going to have massive uncertainty short term. We're going to see studios scrambling to justify their existence. The culture is going to take another hit. And if history is any guide, we're going to see it significant layoffs and teams closures in the next 12 to 18 months while Sharma kind of tries to figure out her footing and Xbox continues to lose, right? Like so this is not a good situation at all. So there are lots of strings to be pulled from all of this stuff and I think only time will tell, but that's kind of what I'm thinking is going to happen. And it's actually very very sad in my opinion and that's why I'm wearing my Xbox sweatshirt.
Good.
Yeah. in memorial in memorial.
Sometimes I just generally wish we were wrong. Yeah.
Right. Like I love the situation that the most pessimistic version of this news story would not come true. Right. That Crest was absolutely wrong and in five years we're all thinking that it's just it's not the case, right? Like in my mind, what has just happened is Ashes

walked into the room like Donald Glover in Community in that meme. Smile on his face, pizza in his hand. with everyone running around the room on fire. [laughter]
This is mine,
right? Especially from a lot of those like public posts of like embracing it, learning. I want to learn and you're like, well, you have just walked into a room of fire cuz like what what she's walking into nearly all studios are in a pivotal moment. We talked about Call of Duty. The franchise needs its comeback moment. You think of what Battlefield 6 had to do in order to regain trust from players in order to get back to the moment that it just had. You think of its studio structure and having to completely rethink that model in order to get back to a regular cadence of quality releases, right? Like you have to make some pretty quick substantial bets on how to get Call of Duty back on track. Blizzard, Bethesda, Obsidian,

343, Halo, all of these studios are looking completely out of step with what players want and need their big comeback moments, right? When we look at this situation, in many cases, you don't necessarily have to be gaming exec CEO, right? Like gaming knowledge CEO. But in this situation for Microsoft, who they need is that person, right? On top of this, losing the console race. top of this to the point that you're going multiplatform and supporting Sony in order to make the math work on top of this whole studios are all recoiling from layoffs and just trying to stabilize their culture, stabilize their studios. So yeah, Xbox needs a back to basics focus on gamers to build confidence internally to have a chance at rehabilitating its studios. And personally, I just don't see Asha being that, even though agreed, she's an absolute monster operator because unfortunately, like just part of dealing with creatives is credibility. And I have a ton of battle scars on

this, but like walking into that room as the AI person from Instacart is such [laughter] a cultural mismatch. It's how do you gain that credibility fast enough with these teams is a huge issue. And not to mention the PR issue, but I'm not even going to talk about that. All respect her on paper. She's a monster operator as you said like porch billion dollar annual run rate manage Facebook messenger Instacart COO all the way to that IPO she did that by driving significant monetization changes like revenue per user metrics not so much costs cutting not so much sort of audience growth so that's why it comes back towards like can she win back gamers and can she ship hits and with such a stated reason that he loves that She builds and scales platforms and aligns business models to long-term value and operates global scale. She drove ads at Instacart, [laughter] right? Like that's a platform monetization AI infrastructure resume,

not a save the creative brand that's losing the console war resume. So right now, all signals say that she's been hired to make Xbox make sense for Microsoft, not to make Xbox make sense for gamers. So, I'll take a slightly different take from you, Eric, on like if I were Asha, right? Like, we're not going to change this appointment, and I totally agree with you about like what the default path will be here, but if she's listening, if I were Asha, what strategy would actually make sense. number one completely aligned, maybe not a CEO, but you need to headunt an operator with serious credibility. That will absolutely break through the doors of a number of these studios, as well as give you somebody you can trust to navigate some of these incredibly difficult conversations you've got across the studio board. Second, build a strategy around quality and gamer first, which I think will motivate the studios, which would regground everything. But the problem will be is that you need to restructure all of your different

studios and franchises in order to align them with the market. So this is going to be the most painful step, right? Like your your 12 to 18month comment around like studios like this is going to require big bets on P&L doubled downs that won't pay off in your games with major delays or studio closures and game closures. And then number three from my perspective is like finding the minimum viable synergy, let's call it. Give Satcha just enough AI and cloud synergy to keep the lights on. Maybe like smarter tools for dev AI recommendations in the storefront. I don't know. That's going to be the challenge. But like find that minimum viable strategy that is not like directly conflicting with what players want and just don't turn Xbox into a co-pilot storefront with a controller attach. Ultimately, these three things have to drive towards a strategy that reclaims revenue, not player share during Gen 10 console. Will she do any of this? Probably not. The incentives

all point to synergy, efficiency, and AI, which is exactly what got Xbox in the mess in the first place. So maybe part of our education [laughter] is listening to this podcast. We'll see. We'll see. I was kind of wrong about Spencer, right? Evidently, I still may be wrong on this is that my assumption was Spencer was always looking out for Xbox and the gamer. And I think that's his reputation, but the reality is he came up with these strategies, right? This wasn't Sarah Bond. And Sarah Bond is is becoming a scapegoat on this.
Yeah.
He's the one that was pushing subscription. He was the one that pushing Xbox Anywhere. He was the one that basically was placating corporations on this strategy and he's the one that failed Xbox in order to push Microsoft's agenda, right? And so I agree with exactly what you're saying. I just don't think that that's what her mandate is, right? I think she's Satcha's person, you know, and and this is not going to go well. But what do you think, Phil?
I think the Supreme Court's going to go 40. I think the most important thing that basically unravels this whole

situation is to ask from Satia's perspective along what lines is Asha the right person to lead Xbox right now? Why would you choose this individual? And I think there's a very simple answer to this, which is well, let's look at Microsoft share price over the last 3 months, which gets even worse on a 6 and 12 month horizon. It's getting hammered relative to Google, Nvidia. Apple's actually up over a longer time period. Amazon's still suffering. Then we can line of break down the year-over-year revenue growth for Microsoft's different subdivisions. And that's in front of us if you're watching the YouTube version right now. And you'll notice the Xbox content and services is consistently one of the worst performing. And you'll see that Azure is one of the best performing except for Q1 FY25, which is Activision Blizzard. So that's fake. Then we can kind of look at Microsoft's Q1 FY26 income statement and you'll find that enterprise so Microsoft 365 LinkedIn all of those things 33 billion cloud 30

billion then there's personal computing which includes Windows and Xbox at 13 billion and micros Xbox is about 8 billion 6 billion it hovers around there so you're looking at a part of Microsoft which is about 8% of their total revenue. Not that important relative to the other things which is the next generation of computing which is happening right before our eyes. They have burned so muching money on Xbox. They burn so much money on this Activision Blizzard acquisition that I guarantee you Satia would love right now to unlock more possibilities on the AI front and they don't have it. And I agree with everyone who's saying that they got to get rid of it. They got to get rid of core assets here. What other reason would you appoint her? What other reason could there possibly be? And to your point, Eric, you know, I don't have a lot of sympathy for Phil Spencer. Everyone seems to love this guy. He's a true gamer. He's a man of the people. Here's a picture of him and not Sarah Bond on his final day with Matt Rudy and Asha. Clearly beloved by the people. But

you look at all the strategies that he developed and I'm sure there was pressure from Redmond. That's one of the things that's important about being executive is managing expectations both up and below you. But like they missed on Game Pass that all the evidence was front. been shouting this on this podcast that this is incompatible with the fundamental paradigm of gaming. It's been tried over and over and over again. Long live on live and no one seems to learn. They don't seem to want to take any of these lessons which is just so frustrating. And so I think the more interesting question is who's going to buy King Games [laughter] cuz that is the first thing you got to rip off. Is it going to be private equity? I mean it's got to be fire. Eric, who is knocking on the door? Why would you not be knocking,
dude? If I was if I was a PE guy, if I was savvy, if I was Dexon, I don't know. I think you should start knocking start putting offers in, right? I mean, that's got to be what's happening right now. If we are right about this, why wouldn't you be why wouldn't you be knocking at that door?
First of all, because it's the only profitable asset they have in the whole [ __ ] business, [laughter] you know? So, it's like I mean, do you really want to get rid of the golden goose? You

know, that they make like 30 40% margins every year.
Our coal for AI and plus private equity, you're going to go in, you're going to gut Stockholm. What is it? 3,000 employees, 1,000 at King. That is absolutely unnecessary to run.
Again, if they start spinning out [ __ ] like King, then it is [ __ ] over, right? Like everything is gone ultimately, right? Because they don't want to lose their most profitable asset, you know? So,
and consistent revenue, right? Like all the other gains or peaks and valleys, pops and drops because of everything else.
You can get that all in a sale price. You can get that all net present value. You need coal right now to get the AI war machine going.
Yeah. [laughter] So at at the end of the day, that's what what's going to happen is that she is going to figure out a way of packaging this up, spinning it out, getting rid of everything, and then move on to be CEO of a SAS company or social media company or [laughter] something, right? And that's it. It's already written, you know? So anyway, what do you think, Jen?
Yes, you're right, Phil. This is a 40. I think I'm going to cosign everything

that you guys said. So because I'm going last, I wanted to take a different angle. And so I wanted to focus on three areas. One is leadership. Number two is brand. And then the last one is competition. And so that's my spiciest one. So again, I want to set this up with I am an Xbox fan. And so this is like it just kind of personally hurts to see what this happen. So first is leadership. So this feels like a leadership miss on so many different levels from a number of people inside of Microsoft. And it makes me sad to see gamers and also women treated like this. So one, Satcha not even mentioning Sarah Bon and his letter is so disrespectful to her and her team and the surrounding team no matter what the reason was. You thank people for their contributions and you wish them well. You take the high road and you just do that. Bond's own statement that was actually on LinkedIn didn't even appear until hours later and

was never posted on Microsoft's official blog. Her social media team was so caught off guard that a presscheduled LinkedIn post about Xbox accessibility went live just before the departure news broke and it sat there awkwardly for hours. I've heard rumblings, I'm sure you guys have as well, that she was challenging to work with, not that impactful, you know, good at partnerships, but that doesn't change my stance that you still publicly give respect to the people in the team. So, under leadership number two, Phil and Satcha didn't pivot on the succession plan. Assuming the answer wasn't Sarah Bond, they should have done something different. A lot of my friends are talking about the succession planning that was at Disney back when Bob Chapek was selected under Bob Iger, but you know getting him ready. You know Sarah Bond was in that position when they knew it wasn't working out. They should have pivoted and Satcha should have said Phil we need somebody else and we need to like give them time. Typically you know

when you know it's not working you got to make another move. So number three is Satcha and team are not understanding the kind of leader that you need for this particular moment for this particular kind of business for this particular audience. Spoiler, it's not someone like Chararma. While I you guys are lovely in how you're saying she's an Apex brother and she's all those things are wonderful and she looks like a badass. And you know, it was the same thing when Johanna Fairies became CEO of Blizzard. You know, we we said the same thing. She doesn't have a lot of game experience, although she was on the Call of Duty franchise and Call of Duty esports. You know, they surrounded her with talent. And Blizzard, I would actually argue, isn't the [ __ ] storm that it was like it seems like that's going a little bit better. So, kudos to Adam. I wanted to give This is the line of the episode. All the signals say she's been hired to make Xbox make sense for Microsoft and not make Xbox make

sense for gamers. And I think you kind of nailed it there on the the leadership kind of thing is they picked in a sense the wrong embodiment of a leader. The leader for this business has to be an insider. It has to be a gamer. They have to have legit street cred. They need to be a beacon of hope for gamers in the game industry on a sinking Titanic ship that is Xbox written on the side of it. Peter Moore, Frank Jabau, Owen Mahoney, hell, even bring Bobby Kotek back. That would have been a glimmer of hope for those of us in the industry that would have been like, "Okay, God. Okay, at least somebody understands gamers in this industry cuz it is like an absolute, you know, weird industry that we have here." Okay, number two is brand. So, this pains me again as an Xbox fan who came back in in 2001. Did you guys play four player co like co-op Halo on a screen like it just really really you know brought me back. Xbox

was cutting edge. It was like rebellious and this is just not what the brand is today. It's has a brand identity crisis and this leadership change just actually makes it a little bit worse. when your new CEO comes in from AI, your co-founder calls it palative care, your console sales are down 32% and the brand story you're telling is one of retreat, not of renewal. So that was kind of my feeling coming out of her three pillars where she's trying to say, "Hey everybody, it's going to be great again." She described the three pillars as great games, return of Xbox, and future of play. specifically calling out returning to Xbox's founding spirit of surprise, rebellion, and fun. She's leaning hard into this, but I think all of us are like m sure I believe you on that. All right, my final point, competition. And so here's my spicy weird take for you. No one hates this announcement more than PlayStation. So, PlayStation needs Xbox thriving because

Xbox going multiplatform, Adam, to your point earlier, has turned Microsoft Studio into a premium content pipeline for PlayStation, Forza, Gears Reloaded, okay, maybe not that one as much, although I'm a huge Gears fan. Indiana Jones, Doom, Age of Empire 2. We need a competitive Microsoft gaming division. Xbox has to avoid Monopoly land out there for PlayStation, and I don't mean Monopoly Go, without meaningful competition. Sony has less incentive to innovate on pricing, services, quality. You know, if you look back to what happened with PS3 when they were super arrogant and they charged a lot of money for PS3, it really incentivized them to come out with PS4 and get back to it because Xbox 360 like kind of kicked their ass a little bit at that time. So, we need that competition going. Okay. Anything to wrap up?
In some ways, I think you're right about PlayStation. They need a competitor, but I do think they are celebrating because they know that this is probably the end,

you know, so they will win or they have won and they will win, continue to win, [laughter]
right?
Yeah. And that's why, you know, I I think there's like mixed feelings, especially with this multiplatform strategy. And I think in the news today, you know, fans were saying, "Go back to exclusives." And she said something like, "Hear you." And so now everyone was like, "Oh, are they going to pull back on multiplatform?" You know, I don't I don't think that's I think they found a new drug. Did they turn into a publisher? I guess that's my other take
is
yes, they keep saying console is going to be around, but it feels like from what they're showing us that they're more of a publisher than a console manufacturer. I think we will continue to talk about this, but I think it's more of the same on a strategy perspective. So,
all right.
All right, Chris, take this one. Now, let's pick on PlayStation. Yeah.
So, the next news is somewhat disturbing in the minds of the gamer particularly, but also just from a business perspective, is that Sony is shutting down Bluepoint Games. Like, this is a

subsidiary that developed like the remakes of Demon Souls, Uncharted, Shadow of Colossus, which was an amazing remake by the way. They acquired them in 2021 after the release of the remakes of Demon Souls. And in 2022, it was tasked with co-developing God of War Ragnarok, which I didn't know that actually. Anyway, it was founded in 2006. So, with 20 year history on this studio, most recently, it was tasked with working on a live service God of War game that was cancelled in 2025. And this is where the trouble started, right? So, it was reported that Bluepoint like after this cancellation pitched like four different like remake projects in 2025. Two of them were like single player remakes and then PlayStation felt that they just would not be commercially successful. So, none of these proposals were really approved. So the fully arc is here is that Sony acquires one of the best remake studios in the industry, forces them to pivot to a live service that blows up and then when Bluepoint tries to get back to where they were and

actually build like world class like remakes, they shut them down, right? So this sounds eerily familiar and maybe Adam can comment or not. This is exactly what happened to Rock Steady, right? To some degree, right? Rock Steady was like Warner Brothers Bluepoint, right? the studio that built one of the best single player franchises in gaming history with the Arkham series abandoned that were chasing this live service [ __ ] right? A decade of development time making a game that completely bombed and lost $200 million for Warner Brothers and then now it's like getting dug into the dirt with like multiple rounds of layoffs. So, in my opinion, this is like basically studio mismanagement 101, right? This is like clearly bad on Sony and Sony studio management on not being able to leverage what they had and trying to force, you know, a square peg down a round hole. So anyway, what do you think, Mr.
Well, at least with WB at the end of

that, I think they're now building a single player game from that studio.
Good. [clears throat]
So, they didn't shut down the studio at the end of because that's the weird part here, right? Cuz I get Blueoint, Incredible Studio. I'm a huge fan of that Demon Souls remake. It was stellar. Almost better than some of the FromSoft games. These guys could have been making God of War original trilogy remake. They could have been doing Bloodborne remake. I hear Miyazaki probably block that, but like that's obviously like a huge one. So like the rest of the industry is turnurning out remakes after remakes as one of the most consistent releases and of profitability. Sony couldn't find a path here. That's the weird part, right? Like, how did they not find a game in their history that was worth a remake to set this team on? That is so weird to me.
Yeah.
Or even like sell the studio.
Yeah.
This is so valuable. Like, right, like you give this to EA or any other publisher where each one of them are

absolutely hungry for a team that can turn out consistent quality remakes from their library. Like all of these publishers are sitting on huge back catalogs of games that continue to see engagement. Yeah, they're absolutely hungry for these remakes. Something just doesn't add up.
Maybe personality clash, some kind of like political thing.
I would be very interested to hear because I think if they were actually pitching single player remakes, maybe they just weren't guided by the Central teams around what's the most valuable remakes to make. Like this seems like such an easy thing of partner with Central. Central gives you the list of top performing back catalog that has not been remastered yet and then work with the studio to figure out which is the right one to go and they have huge history of action RPG. That just feels odd to me.
Yeah, it's only 80 people. Like it's
exactly weird. But like in general, all of these studio closures continue to be that overextended live service strategy which really happened between sort of 2015 and 2020 of all of these types of

studio closures. It just continues to be this story of overextending these teams to go into a space that they shouldn't have been in in the first place. Speaking of which,
go [laughter] for it. Yet another one, another big company closes a studio. This time a Chinese one.
Yeah. So this one is the T-Mi Montreal was closed by Tencent. So the studio was founded by Ashraf Ismael. I think he's a former Assassin's Creed creative director behind Origins and Valhalla and they were working on a AAA open world game for console and PC. Oh okay. Basically, the studio was pitched as like the 10 cents third North American outpost under this team studio group where they did Call of Duty Mobile, Honor of Kings, Pokemonite, and their mandate was actually to to build a AAA game multiplatform. They have an LA studio team Kaju that had already shut down in 2023. So again, this seems to be

more of the same the same story about China really divesting its studios in the west. They cost too much and they don't deliver. And you know clearly Tencent and Netis are both agre you know aggressively invested in the western studios but both of them particularly net I mean NEI [laughter] has basically gotten rid of everything right so they're devesting most of these assets and the reality is there are very few games and few successful games that have actually come from these investments with the exception of Call of Duty Mobile from a speculation standpoint and actually after reading this I might be wrong on this is that one of the things I did hear was that the Assassin's Creed IP was being built for mobile or Tencent was going to build something with that and I I thought maybe they were working on this, but it says that it was AAA developer. So, I I don't know exactly what they were building is what I'm I was trying to figure out what that was.
It was like Jade something was the Assassin's Creed mobile game from
Yeah. Not a serious not a serious title. [snorts]
Not a serious
No. And and and so what I wanted to throw shade here is that I heard that

even though that this was such a tentpole
deal for Ubisoft to maintain its control and basically start an apocalypse, they're not working on the Assassin's Creed mobile game, [laughter] right? After all this, hundreds of millions of dollars were spent to license these IPs. And I don't think Tencent is making jack [ __ ] with it, you know? But instead, Ubisoft is still burning things into the ground. I will say this, and I I'll cover this next week. I can't believe I'm saying this. I have been co-opted. The move of the three executives that are now running Assassin's Creed is actually exactly against my thesis on Ubisoft. Those three appointments are actually really really positive for that game. Like the fact that this manchilding Eve son is able to get commitment from these three guys to build Assassin's Creed is exactly the opposite of what I said before and it's really really good news, right? That they're sticking around because that that's the leadership you need in order to bring

this [ __ ] back. So I'll cover it more next week, but I I I want to be clear on that because I think we mentioned it quickly before. That's actually really good news.
Well, and some good news for Patrick Soderland. Nexxon appoints him as the new executive chairman. So this was announced on February 20th. Sodtherland, if you don't know who he is, is a founder and CEO of Embark Studio. This is a Nexon subsidiary, and they did obviously Arc Raiders and finals if you remember the finals. So he takes on a newly created role with broad authority over Nexon's long-term strategy, creative direction, and global game development. He'll work alongside CEO Jung Hung Lee with Sodderland setting strategic direction and Lee handling execution. So he and Leo are going to lay out Nexon's strategic priorities at capital markets briefing on March 31st. We just talked about Tencent and NI leaning out. It looks like they're leaning into Western style development leadership to complement its Korean and Japanese studio base essentially elevating a proven creative executive to

shape the entire company's direction. Adam, is this true? I don't know. What are you seeing?
I heard it's global.
Yeah. Is Nexon actually putting subtle in charge of Korean MMOs [laughter] in mobile games? Like look, the guy absolutely deserves a huge promotion. Arc Raiders was incredible. You know, leverage him to find the next big western bets, get some of that Arc Raiders momentum behind another game. But one, I hope they are literally throwing all bodies they can at Arc Raiders right now, given it needs live content. And two, like not Korean MMOs and not mobile games, right? Like he can maybe be on the side giving some advice, but Patrick Sutherland walking into a Dungeon and Fighter meeting like what? Doesn't make sense.
He's very tall man. I'm sure he
is a very tall man.
Yeah, it's fine.
He's a very tall man.
Doesn't make sense to me that
does not know mobile from my experience back in the day.
I got three words for you. Short the

stock. [laughter] This is not financial advice on the podcast, but okay.
Yikes. Yikes.
Oh, interesting.
Moving on.
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blind. Start your free trial today at sensortowwer.com. That's sensortowwer.com. All right, let's get into games. One thing that is close and near to dear to my heart is that Gossip Harbor is overtaking Candy Crush. I used to play the [ __ ] out of Gossip Harbor. Phil, take us through this.
This happened last week. I think this is a monumental moment in Puzzle. Blake and Mitch, if you are still listening, this is where that innovation that you kept saying did not happen in match is happening. Last week, Gossip Harbor overtook Candy Crush Saga in terms of weekly revenue, bringing in $21.4 million to Candy Crush's $21 million. And of course, I think China will probably push up this number even more for Gossip Harbor. I just think you got to look at the west and we've been, you know, going back and forth on the west and the east for a couple weeks, but how did King and Metor [ __ ] this up, right? And I think even if you're Ilka, you're

you got to be sitting in Finland being like, why wasn't this supercell, right? He did the same thing with Gardcapes. He's famously rumored to say like, man, it should have been us. It should have been us. And again, you got to also point to all the match three players. Dream plays. This is the Innovator's Dilemma I was talking about. And so King's [ __ ] around with Rebel Riders, a failed Call of Duty game, misadventures and adventures in Singapore that never materialized into anything. They decide to go into solitire for reasons that are beyond me. Way too late with 3D match and blast. They have no one to blame but themselves. And this is very sad to see the West slipping away from this. And I think Turkeykey's got to pay attention. The Chinese are coming. They're knock [laughter] they're knocking on the casual door. And this is a huge win for them. And they're coming with money. The one thing I just wanted to throw out there was a little love for Love and Pies from Trail Mix that came out nine months before Gossip Harbor. That was back in 2021. The other kudos I wanted to give was to Moon Active. So, the Israelis who bought Travel Town in 2022. They added social casino Meta, Game Systems, pricing, UA Magic. And so, not

only was it now China, but it's like everyone outside of the US. So my disappointment in this is what is happening to to US mobile success. But maybe I don't know maybe we'll see something come out of that. So let's get into the next one which is Overwatch dropping the two adding a rush. Phil rush us through it.
So Blizzard has announced Overwatch rush. This is I don't know a brawler. Some some people may call it a moa
and it's [laughter] a [ __ ] moa. It's a [ __ ] moa. Come on. So, I I think there's an interesting question about whether it is a MOA. And the thing I would benchmark it close to is Pokemonite. Remember that? That's also from Timmy. That's actually still running. And the other one I would benchmark it is Marvel Super War, which was a Marvel themed mobile that never really made it out the door. I think it was by NIS. The reason I would choose these two titles is there's not the traditional creeps in either of these games that you have in MOBAs. those waves of enemies that you're defeating.

It is more of a pure brawler subgenre of MOA. And when you look at both of these, you don't get good results. [laughter] It's not It's not looking good. Like Pokemon Unite. So, Pokemon most valuable IP in gaming and can only muster $82 million worth of revenue. Marvel Super War of course did not make it out of soft launch. I will say this though, you look at Pokemonite, Japan, United States, they're the people that are crazy for Pokemon and I don't know, maybe [laughter]
I don't know. I Eric, I'm trying my best here, but it is just I don't understand this. This is absolutely baffling. I don't understand why you wouldn't give this. Why would you not give this to someone in China like you did Diablo Immortal? Why would you try to in-house this? I just don't understand, Blizzard. Why? Why? Why? [laughter] Valerant's killing it. Valerant's killing it. Valerant mobile just just go pure a port. Okay, there's two things that bother me the most about this. Well, the three things. One, it's aing moa, right? Don'ting make moas on mobile. Two, dude,

the amount of money, the hundreds and hundreds of millions of dollars of VC investment and other investments in these games over the years is so [ __ ] insane and so top of mind. Like, how could you possibly think this was a good idea, right? I mean, who in their right mind would greenlight something like this? It is crazy. It's very, very frustrating, right, that this is actually what they're coming up with. And so, like, okay, and then if I pull back a bit, if they can figure out a better monetization model for this that's not cosmetic, there might be a way in here. I think they'll get the downloads. I think people are going to play this game. It looks amazing.
Gorgeous.
Gorgeous. Right. But we've been here before. Like, we've been here before. And I'm not even going to name all the G games that have come before this that have failed. I it's just this is not the right way to go, right? Squad-based RPG. Let's like innovate on that stuff. Like

we need a new one that actually plus one something that's really really cool, you know? Like there's so many there other avenues. Hell, even a 4X game that with the IP that that is leveraging what some of these Chinese guys are doing. Like there's other ways.
4X game. Let's get it done.
[laughter]
It's just it's just this is so dumb. It's just so dumb. I I
What do you think is the odds? Like what's the odds here
that the monetization is cosmetic only?
I mean 100%.
You think it's cosmetic only?
No, you're wrong. You're wrong. They're going to at least I'm wrong. There's no way. There's I I just I think this is a new wave of Blizzard. I don't think this is I think this Blizzard actually has some balls.
Okay. So, you think it's Do you think it's characters? Do you think it's Brawl Stars characters with like progression on top or do you think it's just characters?
If it's not pay to win, then [ __ ] it. Right. It's
Yeah, that's that's like all all I'm doing is moving up the gradient and being like, what do we think is the overunder on like them going beyond just selling characters direct and cosmetics

direct?
Yeah. If it's not pay for power, pay for progression, and pay to win, then it's over, right, from the get-go. Like, and I'm looking at the game and there's no [ __ ] way this is pay to win, right? Because this is a competitive PvP type scenario, right?
Why are we not comparing this to Brawl Stars? This is Brawl Stars skinned with Overwatch. Brawl Stars makes money. Brawl Stars has pay to win components, character components, battle pass component, cosmetic components.
Why are you guys not comparing it to Brawl Stars? Please, someone tell me.
I think that's fair, Jen. But I think the problem is it's a different age demo. That's one thing for Brawl Star. Brawl Star is corner.
Yeah, Brawl Star goes much younger.
Jen, I would agree with you. I would agree with you. I I think if this can unlock something Brawl Stars like, including the economy and progression piece, there's something here.
That is the X, the thesis, whatever, you know, thing we want to say. This is Overwatch meets Brawl Stars. And if you go to a player and you tell most players that, I think they'd be like, "Okay, all

right. I'm interested in that." Like you said, the visuals looking amazing. It looks I mean that I pulled up that video. It looks like Overwatch in a completely, you know, different way. The thing that I wanted to ask you guys is you're so focused on I get it's in an arena, but basically Brawl Stars is really the only one in this category of brawler. I think there's like a One Piece Bounty Rush game according to Sensor Tower that's like a distant second place. So, I get that there's no one else really in this subgenre, but I don't know. I look at that and having worked on a MOA, the MOA, like what I am seeing on the screen is not what I would call a MOA with creeps, Phil, like you said, with like, okay, we have the team and we're going to slowly this looks like Brawl Stars, which I think is the it at least if you're going to take a swing, I think that this is a swing that is worthy. So, here's what they announced. They announced that they're going into testing. So, they're doing this in a really smart way. They had to

come out and say, "Hey everybody, we have a mobile team working on a mobile game. You're going to start seeing us testing this. If it doesn't work, they're not going to launch it." I I think that's smart. I think this is
Are they going to test it properly? Cuz they said that before. Like, are they going to do soft launches or are they going to do time limited betas?
I think it says timelmited betas. I'm not exactly sure. I think we are looking at to Phil's earlier point, Blizzard 2.0 that hired a mobile team. I think they're the team's in Barcelona. The guy running it I think is XA mobile. I think they're going to do it the right way. I would like to at least give them a little bit of rope on this one to see what they're doing. I do however think that I probably would have shipped this to like Netis or 10centent just anything mobile on Blizzard titles. I probably would have done that. But I think this is the first in a swing of doing something internally. I'm excited to see what they're going to do.
But this is why I was pushing on the economy piece because I think the You're right.
Looks interesting. But can they do the

economy piece?
I think time limited betas also is a flag for me.
They got to do a proper soft launch.
I don't know. I don't think we know.
It's hard. It's hard, Adam. There's so much pent-up demand, especially when you have brands like this. [laughter]
I mean, hold up. Whoa. Okay. Okay. Mr. Slate Strategy, lay it out. Lay it out for Blizzard. What is the right way to do it when you have a brand like this?
Soft launch. The point is that you have so many people that are banging down the gate because they know this. They're going to VPN in. They're excited about this. It's going to skew all the metrics.
Well, you can do betas, but like before you do the final check, you should do a proper soft launch.
Agreed.
Well, that's what I'm watching for is like do a proper soft launch with longer cohorts with enough players
that you can actually confirm retention looks good because betas are misleading.
Okay. All right. I'm going to throw them a bone and say that they have the right people down, some of the right people down there to actually make this happen, make this work and key learnings and do

the right monetization model. I have my doubts about [laughter] what I'm
I think it's fair that you have your doubts based off of the last time they ripped off
based ON THE LAST THOUSAND GAMES THAT HAVE COME OUT IN THIS GENRE, RIGHT? Like I mean it's just it's so
Why can't they hand it to to China to do a Chinese specific skew? Don't you think there's money there?
Someone actually said that on the boards was like, "Oh yeah, maybe this game is for China, right?" Like this is going to be just sold in Southeast Asia and China. And I'm like, you know, that makes sense.
No, that's not that's not their goal. Like their goal is to make something in the US. Like the Overwatch IP, you know, it's like anyway,
okay, moving on.
Oh, my [ __ ] favorite.
My favorite munchkin.
Mr. Adam would love to talk about Mr. ball and the rest of us are going to sit here and wait for Crest to explode. So, go for it, Adam.
Sure. Straight from the Toronto ivory Tower. Right. [laughter] Matthew Ball.
Philosophy Corner.
Oh, he's a fellow Canadian. Is that

That's why that's why this mad.
Uh Matthew Ball has dropped early access for State of Gaming for 2026. I think the entirety of LinkedIn has already chimed in with their hot takes. I actually went on LinkedIn and went down that rabbit hole. not getting that time back.
But anyways, Ball actually didn't get a memo from us. Like he called this early access.
Sorry, man. Early access is your launch. This is it. But I will say like it was great analysis like last year. He only did 164 slides this year versus the 230 last year. So getting much more concise like last year. I would say Matt ball of 2.0 is better than the metaverse ball. far more grounded even on things like AI he's calling out and I don't see him extrapolating to the moon as he did in the metaverse time in line with the market and he's kind of shifting from this doom and gloom stance to well let's figure this [ __ ] out attitude which is good like trying to find growth in

pockets so congratulations Chris I think our pessimism has rubbed off on you so it's good the summary that I'll give is revenue hitting all-time high profits continue to decline since 2019. The winners in this stagnating market is Chinese publishers, non-core markets, platform holders, Steam, and Roblox. The losers are the rest of us. Everyone building for the mature market 8 or the West fighting over a market that's barely moved, 1.4%. VC being down about 85% from peak and only about three gaming stocks beating the S&P. That's I think the picture that he paints and I would say after this deck I don't think that VC is going up anytime soon.
Nope.
Yeah. Certainly this this deck was not meant for the VCs. That's for sure.
Drum up interest from the VCs. Yeah.
The big trends gaming down but gaming adjacent up which I think was an

interesting area. So that's things like gambling, AI only fans, crypto
always sort of major growth stories postcoid versus gaming. And the story there is that gaming hasn't got worse. It's that other categories figured out how to be just as rewarding and interactive. Genai, get on board or be left behind. And I would say I prefer this around like ball being surprisingly sober on AI. It's not like a replace every artist tomorrow. It's not like new genres are going to happen next week. It's maybe stop doubling down on spend every sequel, right? And maybe try to use AI to invent some kinds of genres and new games, but that's still farther out. So personally all for new genres. Everything still feels like a tech demo in this space though and definitely better for tooling to actually drop costs. But I would say that in general every experience I've had with it, especially a AAA team. You give them better tools, you give them better content generation, they won't ship cheaper or faster. They'll just ship with more polished content. The growth

levers is kind of what I want to focus on. Uh so last year he had 11 I would call speculative growth areas and I think we we went line by line on those and really kind of tore some of those apart. We're down to really like five grounded ones now. The two obvious ones that I think everyone would agree with DTOC and external development. I'm not going to call on those. Third one is non-core markets. So that would be everything outside of those major eights. Those were up 11% versus the 1% for the West. So, this is pointing to games like Garina Freefire is proof that you can really take advantage. My issue with this one is that for 99% of teams, they don't have the scale of a game to make this meaningful, right? Like IDG has been showcasing I think the rest of world growth for a long long time, but the incremental gains and the fragmentation always made this really incremental for teams. So it becomes really hard for a

team to act on this as a growth lever unless you have a game already at scale. Advertising continued growth 67 billion in gross revenue from 2025. So including ads the non-China market grew 35 billion. That's a much more positive story. If you exclude ads it grew 6.8 billion. That gives you a sense of like advertising actually is a hidden lever that continues to be a blind spot for us especially on mobile. And what's interesting is that this market is becoming durable and getting growing outcomes. The fifth lever is Roblox. Roblox now is the single dominant force in Western gaming. Quote from Matt. 67% of non-China growth goes to Roblox. Interesting graph there as well. Roblox engagement being greater than Steam, PlayStation, Fortnite all combined. Just note that that's at 5 cents in revenue per hour versus I think 44 cents for PlayStation. And still you only get 25% of that. So Roblox growth continues to

be impressive but as we've talked about many times platform still remains very immature and you did call these things out. The revenue outcomes still at the top of the pile are low but these revenue outcomes are growing every single year and the issue for me still remains finding these durable businesses within it. It's likely not long until the re revenue outcomes become favorable, but that durability is the piece that I think comes back to that immature business. So, I think it just continues to be watch Roblox. It'll continue to grow and hopefully they can start to build out a much more mature market there where where real business can be run.
I hope he makes this point is that this is actually detrimental to the business, right? Like Roblox taking all the growth. Yeah, it's absolute cannibalization of the market and so like this is not good growth, right? So the fact that it's 67% of the growth or whatever he estimates is a bad thing. The reason I don't like it is because it's not saying anything. It's meaningful of what's happening, but it's not really meaningful analysis of what

what's to come. And again, my whole problem with him is he's never capit. He's not being intellectually honest. He has not capitulated on the fact that his whole metverse thesis was complete [ __ ] And Roblox's success is actually the antithesis of his metaverse thesis. And so until he actually comes
here until he miaakas that like I I don't know want to listen to this guy like I I think this guy is is just full of [ __ ] right? And he has great people that make great charts and has really great access to data.
Yeah. Holy [ __ ]
I'm not I'm not suggesting anything he's saying is incorrect at this point, right? But
I would agree there around like as a western studio, what do you do with these levers? How do you take advantage of these things? Like DTOC, external development, and advertising I think is relatively obvious. Like take advantage if you can. Non-core market I mentioned like you kind of need a game that's scaled to really take advantage of that. Roblox not sure for most developers. Like hire a bunch of high school kids and

no
make some meme games until one pops. Like like what like what is a a normal publisher going to do? That's why like Roblox continues to be this innovator's dilemma of like it continues to grow, continues to be interesting, but like how as a publisher do you take advantage of it and I think that's why actually he could be missing levers and he had one in the previous 2025 that I think is still missing which is new genres especially looking at mobile new leaders are still being formed that are remixing genres in ways that we've never seen before. I think that was the one lever that I think he missed and actually continues to be grow because in general my take is that the industry is stagnating and revenue is changing hands. So growth is coming from that changing of hands. It's coming from teams that are better aligned with what players want. And on PC console the teams that are able to maintain that focused creative vision, right? Are not distracted by going after things like live services that they have no right or no ability to go after. and they can maintain that focus and that translates to production and cost rigor. And I

generally believe the sort of Ubisoft way of building games and scaling teams is just not going to be successful. On mobile, it's really a lot more around finding that sort of resonant gameplay, resonant creative and driving that strategy and scaling.
I'm sorry, Adam, but this is like all mice stuff like DTOC expanding markets. Like the thing he doesn't do in this analysis is basically track the growth of expanding markets to income which is exactly what we'd expect as a normal good as incomes rise people are going to spend more on all goods and services. The question is whether or not we're capturing a growth rate above what the growth rate is in terms of income. This goes back to all of our conversations about India. You need to be able to grow at a faster rate than income is growing for this to be material for us. And I just don't see that being the case or at least I would love to see that analysis explored. DDC already has a ceiling. it already has a ceiling. Like it's just going to be the difference between what you can get through a DTOC and what you get from Apple and Google's 30%. So maybe you're looking at 12%, maybe you're looking at 10% DTOC depending on

if you're using a third party or doing it inhouse, but there's still costs associated with that. So that's a fixed margin. That's a runway that's I think already been extinguished. Remember, it's only for midcore games. Candy Crush is not bringing in huge amounts of DCC's money. Remember, it's when there's competitive aspect to spend. That's when DTC is the highest. It's highest in social casino and it's the highest in forex because again you can win by being more efficient with spend. So all those things you're already looking at only 50% of the market and then you know it's a share of a share. Like should we take it? Absolutely we should take it. But I'm actually kind of crestlike on this one. The thing that I think is most important is actually a Matthew Ball piece that he published before all the metaverse intellectual slop which by the way he was asked on the Ben Thompson Tetery podcast about the metaverse. Ben asks him, "Is the metaverse dead?" And of course, Ben, I'm sorry, but that presupposes the metaverse was alive. And then he just rambles about Roblox. Not consistent with his definition at all. I'm completely with you, Eric. He hasn't been honest about that at all. He knows about it. He's being an intellectual coward, quite frankly, by not talking about the metaverse again. But this

graph from his seven reasons gaming will take over, I think, is very important. And right now, we're looking at the growth in video game revenue between arcades, console, PC, and mobile. And what you'll notice is that these things stack on top of one another. They grew the market. They didn't just take relative shares. The console market grew on top of arcades. PC grew on top of console. And mobile is really where generally all of our growth has come from. Stacking, stacking, stacking, stacking. So what is the thing that's going to stack revenue? And it goes back to the central theme of this podcast that Eric has been trouting for maybe three years now. New platforms are new opportunities for growth. What is the new platform? What is the new platform? It ain't going to be the metaverse. And it it has to it has to be AI. In my opinion, it has to be AI. But I would say the other piece that is important is it's not just about us growing. And I think this is the one thing, Eric, that that you should take away from Matthew Ball's piece that I think was really important is that we actually have to play some defense when it comes to time

share. Like we were growing because we were incredibly compelling and immersive form of interactive entertainment, right? there is no other form of interactive tamement besides us except now it looks like dating short form video gambling is what he mentioned like these are things that we now got to play defense on and I don't know may maybe we can reverse osmosis like I one of the things I said at the beginning of the year is I'm spending a lot more time gambling because I got a lot more gambling clients but a lot of that is gamification of gambling as it is rare we've talked about is a fantasy NFT platform
so no I think there's some reverse osmosis here about whether or not we can actually invade these forms of entertainment like you can play games on Tik Tok. In some ways, I would go back to things that move our GDP number and it ain't going to be any of the things he's talking about. New platforms, it's got to be AI or it's got to be some breakthrough in advertising. That's the only thing I can I can see going on here.
Last thing that I talk about a lot is like unlocking new monetization models, right? Like getting that 3% to like 5% 8% 10%, right? Like that would move move mountains, right? if you come up with

games and mechanics and monetization methods that monetize a broader slate of the audience that's playing your games and you know revenue per user as well but mostly like the conversion I think that
what do you think that is though Eric like could you [ __ ] if I do that you know like I mean I don't know I don't have no idea
throughout everything that he said and I listened to all of his podcasts that he was on I think his big point right now is that we are in an attention competition and we talked about this last week and multiple weeks which is we are all fighting over share of time and share of wallet and share of time is the most competitive thing right now because typically male gamers are 18 to 35 and what are they doing these days they're doing gambling apps they're on only fans they are doing things that are taking away that you know someone's attention when you play a game especially a more of a core game you need two hands on a controller a hand on a keyboard and a mouse and you can't dual screen watching Netflix and gambling on, you know,

whatever your poly market thing is going on. And so the the challenge for gaming is it's a singularity of attention that you need to truly engage in that. And so I actually buy into this argument that we're in a war over attention. So that I was like, "Okay, dude. I get you, but that I think we already knew that." And I listened to him also on that strategy. How do you even say that podcast name?
Stratey.
Stratey.
Subscribe now. Ben Thompson's a god.
Yeah. No, I Yeah. Yeah. And I I actually love love love that that podcast. So the thing that I took away at the very end when he kind of challenged Matthew Ball on like is the metaverse dead? The thing that Matthew Ball said which I actually kind of agree with is that the metaverse turned into in the media's mind VR and it turned into I'm going to put a headset on and walk around with no legs and talk to my co-workers. And that actually and isn't what I think it is. I think Roblox is a metaverse. If you watch and talk to kids these days, they go into Roblox. It is their mall. It is

their life. They make dates with their friends to go in and hang out in a world and jump from game to game, you know, whether it be a branded experience with Sonic or Barbie Dreamhouse or like the next Grow a Garden. That is actually what a Roblox is.
No, no, no. [laughter] I can't I cannot take this anymore. He defines after an exhausting exhausting series of chapters. He says a massively scaled and interoperable network of real time rendered 3D virtual worlds that can be experienced simultaneously and synchronously and persistently by an effectively unlimited number of users each with an individual sense of presence and continuity of data such as identity, history, entitlements, objects, communications, and payments. That is not Roblox. That is not Roblox. And he's been running away from it. He's been running away from it because he actually had to put the stakes down.
Yes. Okay. Fine. Fine. All right. Don't call me a flop.

What Roblox is is what Facebook gaming was when it first launched now on steroids.
No, no, no, no. You have to go back to Second Life. You cannot make this new and sexy, right? You have to go back to Second Life. I mean, [ __ ] You can Yes. Yes.
Why? Why Second Life? because it it has all those components you just mentioned and it failed.
Is Roblox failing? I mean, Roblox is crushing it. Go talk to any kid. It's like crack. The only thing they want to do is go into Roblox cuz they can play with their friends. Now, the problem is that it is sucking again share of time and share of wallet from the rest of the game industry that actually delivers higher margin and higher value. The thing we don't realize as dinosaurs is kids look at a Roblox game and they see shitty graphics and they're like, "Yes, I want to play that because I don't want friction in my life. I don't want something that's really hard. I want to jump in with my friends and have 10 minutes and jump out." They look at what we think are great games and they're like, "I don't want to do that cuz I

don't want to invest my time and my energy and have to learn a game that I may or may not want." like we are losing out to what Gen A is now considering a game and a social experience. I think if we aren't paying attention to this, it's one of the things that like I was chatting about at USC with some of these younger folks that are like studying this and looking into this is I really think we are underestimating how the game industry is changing. And if you aren't putting these social mechanics in and thinking about this type of experience, I think we're going to get our ass kicked. But fine, if you want to say it's not a metaverse from that definition, I I don't I'm not trying to defend the word metaverse. I don't give a [ __ ] I'm just saying that Roblox is and the is likely part of the future. And Chris, I know you say this all the time as well. It's just right now it's not monetizing.
I just would never never give Matthew Ball credit for that. Right. He's the one that defined it in a way that was completely ridiculous. Right. We were back then defining it as you're defining it now, which I said World of Warcraft

is a metaverse. I think Call of Duty is a metaverse. I think all these are like communities of people playing interactive entertainment, right? And and communicating and socializing like that is
what the metaverse was. His definition was completely off. Yeah. In the podcast that was his work back. skip to the end where he he gets asked this question and he dodges it by saying well we overindexed on VR and actually if you look at Roblox that's kind of and so that was his a summary of his anyway anyone else want to wrap up on Mr. ball. Adam, you want to close us out on your philosophy corner?
No, I don't want [laughter] to deal with the numbers ever again.
All right, everyone. Thanks and thanks for the super size episode and see you again next week.
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