TWIG #376: Epic's Failed Bet, Roblox's Brand Fee & Google’s Level Up

Hey, would you like to have this feature? It makes your game better. They're saying, "Hey, put it in and we'll lower the amount of money we [laughter] take from your revenue." Like, what the This is not a value proposition. This is extortion. [laughter]
Okay, that's a little harsh. Little harsh.
That was well said. Well said, Mishka. Well said. [music] Hello everyone and happy Independence Day I guess if you're in Greece
or Cypress or Cypress
or Cypress. Welcome to Deconstructor of Fun. This week in games number 376. I'm Jen Dano. I play the marketing and publishing role in the podcast. Today we have in first share
Eric Chris strategy and investing.
Phil Black modizations are
Mishkatkov friend of founders and a resident Greek. God. All right, here's what we have going on on the episode. Lots to cover. Corrections and clarifications on the Google Play rate change and the Level Up

program. Epic sadly lays off a thousand people, which is about 20 or 25% of the entire company, all while announcing Star Wars coming to UFN, which if you're a Star Wars nerd, this looks amazing. Newu's 2026 PC console gaming report is out. We we're going to hit some highlights. Roblox introduces a controversial brand integration revshare or brand tax some people are saying online. So let's skip banter because we have an amazingly long episode and go to shills
super fast shills. So this week I'm in a full swing of marketing cosplay. We have UA Monthly that just dropped episode 2 with Josh Chanley as always first chair and this one had John Wright. We talk about Unity Vector's D28 campaign. We talk about Google's fee cut implication on growth. So from the UA angle and a really interesting topic, Apploven's plans to build or buy a social network.

And also I had on Monday on a podcast discussing Epic's Google aftermath, the winners, the losers, the unknowns with the CMO of Upcharge, Giltov Lee. And I wanted to give a shout out something that I forgot to do last time to play venture. So, we recorded episode twig episode 374 in a studio. We actually recorded before that with Play and they picked up the full tab for that recording. So, thank you Play Adventures for supporting the Deconstructor of Fun this week in games podcast.
Oh, that's so sweet. The other slight chill for Appcharge, I think they had a press release where they announced hitting over a billion dollars in transactions. So, looks like they're actually getting some good volume. So, congrats to them. Web stores. You've seen what good looks like, but have you seen great? App charge is the direct to consumer platform backed by the likes of Supercell and built by monetization pros from Moonactive, Platika, Huge Games, and others. People who know the

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out Hero today at heroiclabs.com. All right, let's run into corrections/clarifications. This actually came up from a couple different places that we covered this topic. So, last week, first of all, for me, I kept saying level play. So, sorry guys. I I was confusing it with Unity's uh Unity's admon tool. Uh Google's program is called Level Up. So hopefully I will get that right. And then with this whole process, let's remember that this doesn't go into effect yet in the US or anywhere. It has a roll out schedule throughout the rest of the year. It goes in front of the judge on April 9th for approval or a rework. We'll see what happens. And I also want to preempt it to say that the reason why we keep covering this is the messaging is confusing. There's a lot of open questions. And so my humble ask of comm's folks everywhere is to get some feedback before going live, especially with complicated topics. So with that,

let me do the best I can to kind of go over some of this. Again, we're clarifying things that we might have covered in the newsletter, also uh Mishka in your podcast. So for level up, let me just do a little bit of an overview. This is still work in progress. It's not final as it relates to the cut, but here's the latest that devs need to know on the three components for the three dates that if you want to participate in level up, which gets you a 5% discount. So, by July, you need to integrate Google Play Sidekick and Sidekick. And we'll talk a little bit more about what that is. It's an AI powered game overlay or it's a game overlay system, and then it gives you game tips, and we'll talk through that. Uh also by July of 26 you need to have play games service PGS and this uh is achievements and so this is that you must implement a high-quality achievement system that supports modern gamer profile to track player engagement

and then by November you have to have clouds save and so this this was kind of important I think this came up in your podcast Mishka you must implement a cloudsafe system for Cross device progress note you can use your own serverside solution. You are not forced to use PGS play game services save specifically. So I think you guys said that you have to use Google. You do not have to use Google. You just have to have a cloud save system in place so that players can sync cross device. So how of this impacts the rate? So in our newsletter we just want to add a clarification to the chart and the table that we had in the newsletter. So the level up program uh you get the 5% discount is available both for new and existing installs. So the existing installs are going back in time. In fact something interesting there was a article this morning from Scopely saying that 80% of the revenue comes from the

existing installs which is why live games are such a big deal for them. So participating in the level up discount does get you a 5% discount for new and existing. So, what that means, if it's a new install, the fee is 15% plus the 5% if you do the Google Play billing and then an existing install is a 20% with the level up program and then, you know, 25% if you use Google Play billing.
I have a question. Why are we why are we cleaning up their mess? You know, like why can't they communicate this properly so we don't have to be here doing this 20 minutes on our podcast? This dude.
I think I know why. because they used a generic big PR company who doesn't know the target audience and probably didn't even test with anybody and they did these really nice interactive web pages and launched it and there were probably 200 people looking at them and everybody said yeah kind of okay but I'm not taking responsibility and now it's live and people are confused and our podcast

is is trying to explain what a multi- what is it trillion dollar company is trying to say [laughter] it's so that's the reason Google please use niche agencies when communicating to the industry, game industry.
Yeah. Yeah. Okay. Then there's Sidekick too. Yeah. Yeah. So,
the one other thing I'll I'll just say it was Sidekick today doesn't have AI in it. The AI Google Gemini Live is is in the testing phase for for what that is. So, the way that you guys were describing, you know, how AI is scraping things isn't exactly correct with where they are today. And actually that is contradicted by again the messaging that I saw that was live. So for me what I'm trying to discern is it sounds like they have good intent. A lot of this is still in testing. The messaging was confusing and I I think Google is not intending for this to come out as the runtime fee fiasco but and it's not at that level

but I I think that yes messaging needs to be a little bit more cleaned up here. So the theory is platform free's big share of revenue. I've called it the UA multiplier. Like how much additional revenue above a dollar in UA spend you need to bring in because remember that platform tax sits on top of that. You got to clear that to even break even. The theory here has been okay this will go down but you're going to see a resulting increase in CPI is equivalent to this tax. Like essentially if you're meta you're going to eat all of this margin and CPI gains. So, why isn't Meta Stock up on this news if that's the case? And what should we look for
if your theory holds true? Like, what would validate that? Because I agree with you. That's what I think happens here. But do you think we really get 0% of the margin that we save on web stores? Like, there's nothing there.
Yeah, I I say that kind of tongue and cheek. So, for existing games, if you're not spending as much UA and you're just monetizing your existing audience, then

it's probably good for the incumbents, right? because you are probably incrementally making more profit, right? But in theory, you're probably spending that some another game, right? But any money that's freed up from the publishers would likely go to UA. I I don't think it would benefit Facebook per se. It'd probably be benefiting appetit more than Facebook.
No, Facebook is still doing really well with games UA, Instagram, Facebook.
Not not compared to AppLoving. Not what Not at scale, right? The big three are Apploving, Meta, and oh well, Tik Tok is number four, I think.
Well, and then the other is that Google's going to benefit, right? Because if you know all the savings on their platform could go right back to their UA funnel, too, right? Like their advertising funnel, right?
Yeah. We I mean, we've been talking about this and saying this forever that, hey, everybody, don't get so excited about the rate cut going to your bottom line. It just goes back into UA. So, so then why isn't App Love and share price up then? Why is AppL love and share

price sitting at like 12week lows?
Do we think investors are smart enough to understand this relationship?
Do you think this is a big enough impact on on what Apploven's what 88% profitability already
at the margin? It should be right. It should make it more profit. More revenue should be throwing through its coffers. I don't know. I'd at least throw that out there. I think this is important. Like so many budgets touch UA that this should have a material impact. Like this is 5% of all purchases this affects. That's that should be an incredible impact, right? Or at least 50% of the market being Google Play.
Well, it could be more than 5%. So there there is the the rate reduction and then there is the if you participate in level play reduction.
That's Google Play is 30% of all the global revenue. 30 not 50.
Yeah, that that that makes sense. I was just that was just a simplifying assumption. I totally concede to that. Yeah,
they would like to be 50. So, I I just wanted to like first of all, Jen, thank you for the corrections. And yes, we shouldn't be the one doing so many

corrections because I also read the page and looked at it and even used AI to scrape all the data to to make sure that I was on point with my questions. But the fact that I got it wrong is not only my mistake, but also Google's mistake of of putting something like this out. The one thing that I'm a super skeptical hippo about is the sidekick thing that they have there. It's a a helper for a free-to-play games with examples like how do I beat the boss and and that helper comes on your Android device on the right side. Like I bet my upcoming hair transplant surgery that what this is [laughter] is a glorified offer wall with search ads in just in a very short amount of time. And it won't be about, you know, helping you to pass a level in freeto play, which is, you know, come on. Like we these games are based on progression and user testing. It will be about telling you about something on web on Teeu or whatever e-commerce platform or promoting you other games or

upselling you a bigger bundle. That's
or just collecting data like they do you know on every
from what I've seen there are no ads in this yet and I think there are some examples. It's an overlay that is primarily like yet of course uh it's it's like achievements and it's a lot of the things that you actually would do normally inside your game come in in an overlay on top of the game that slides in and out.
As I've said a million times, they're up to something. They're up to something with this you know? Like,
yeah, [laughter]
doesn't sound right.
I got I got [laughter] 100%. I think that you have valid questions and I I guess I'm trying to play the fair and balance person on the podcast to say I don't think they're nefarious that are trying to get a game team's data. I think they're trying to come at this from what is beneficial to the player. Again, I would say that any of these types of features should be tested. You know, just like

with anything with AI, they should have privacy. they should explain to a game team what they are and aren't scraping or utilizing to help make this happen. So, I think that's good feedback for them to hear.
But, Jen, the fact is that they're rolling out this feature, not like, "Hey, would you like to have this feature? It makes your game better." They're saying, "Hey, put it in and we'll lower the amount of money we take from your revenue." Like, what the This is not a value proposition. This is extortion. [laughter]
Okay, that's a little harsh. Little harsh. All right, that was well said. Well said, Mishka. Well said. All right, moving on.
Moving on. Let's Let's get past this. Okay, so let's go into the big news and the sad news. Phil, do you want to take us through the Epic layoffs?
Yeah, that sounds I don't want to say good, but it is very tragic to report that Epic Games is doing layoffs. And it's interesting when you read the press release, they cite the number of employees. I actually think discussing this press release is going to be really

important. They discussed the number of employees they're laying off, which amounts to around a thousand employees, which is no small share. If you remember, they were on a hiring spree since really 2018, kind of scaling the company, although they reached an equilibrium in the last couple years. And so, based on the prior layoffs that they did in September 2023, if you go back and look at those press releases, they tell you the percent of the company that was laid off during that period. So, you can kind of infer headcount. And so, I got to this being around 20 to 25% of the company. So, like this is no small news at all. And the reason is that they apparently are running a negative P&L according to what they reported in the press release. Like they said that their costs exceeded their revenue, which is crazy to me. Like, how much is this company spending? That's insane. And if you at least look at the Fortnite player data, which gives us a hint. And right now, we're looking at Fortnite GG numbers, and we're looking at the peak number of players. It's kind of just a moving average of 14 days. You can see for each year from 2024 to 2025

to 2026 when you do year-to- date or excuse me year-over-year year-to date analysis like they're dropping every single year. Like this is this is not good news. And if we look at like the UGC maps and how players are engaging with those, which is the huge play that UFN is trying to get done, it's in a really bad state, too. Like it's not increasing its share on the platform either. And so this is a company that's just kind of in crisis trying to figure out what to do next while Roblox is still exploding. I wouldn't say exploding in terms of growth. I think that's the other thing you see here is that Roblox has actually hit a snag as well coming off of like those summer highs that we saw. Eric was right about that. I don't know what to say. You know, this really sucks. I think it also resettles things like why they settled the Google Apple case. I think that becomes more apparent if they were really suffering. They need to be on mobile. I think this explains why Tim Sweeney conceded on MTX inside of Fortnite Islands. He needs money. And I think this explains why they've been raising V-Bucks prices. Like they're bleeding on the back end. And I don't

understand where you go from here. Like isn't this an IPO company? Like is this really dead? You know, like Supercell, this is gone. Like this to me was like the next hope is that this thing would scale.
Wait, wait a minute. How why do you throw Supercell under the bus? Supercell is highly profitable.
Yeah, but they're not growing. They're not growing enough
there. There's a difference between firing 25% of your workforce and generating [clears throat] billions in they got open head.
I just got to defend here. Like come [clears throat] on.
Fair enough. Fair enough.
Well, the other thing that was really challenging for them too is they got hit a little bit with that Google open world like AI tool that hit Unity. Unity was a public hit on their stock price. Epic is hidden. Like we didn't see that. But but they don't make money from their engine.
It's still part of the company that is super challenged. And you know, for me, yesterday, the last couple days, LinkedIn has been a war zone of sadness with all of the I guess I know a lot of

Epic people with all of the layoff news. You know, I I did have friends that were sadly impacted and this is awful to see, especially because we thought they were actually doing really well, right? like we thought Fortnite was this, you know, the engine that would never die and like you said is is experiencing some some challenge. And I do want to point out one nice thing that they are doing as part of the layoff. And we covered this. I don't know if you remember when Riot a couple years ago had a really great severance package when they did layoffs. Although I didn't see Riot doing this really well when they did 2X KO the other day. So, the severage package includes four months of base pay, more if you've been there like a longer time. They're extending health care for six months, and they've accelerated, this is probably the biggest deal for people, they accelerated their stock option investing through January of 27 and extended equity exercise options for up to two years. So, at the very least, not many companies are kind of going out and doing this kind of things for their

employees. So, I thought that was nice. But Chris, what are your thoughts?
Look, in December, I wrote to a major shareholder of Epic this simple simple message, right? Basically, I said the primary focus is to build the platform. Everything else is noise. Accelerate Fortnite UFN as a platform. Make it more like Roblox, right? Improve monetization capabilities beyond cosmetics. Allows developers to introduce loot boxes, energy mechanics, power building, pay to progress, pay to win. Improve discovery on platform. build customer analytics accelerate U86 U and UFN to allow developers to experiment in more genres. Right? So this is the message that Epic is getting and now they're jettisoning all this othering noise and that was taking them off their eyes off the prize of actually creating a more robust Roblox right with a HD engine and you know hopefully more double AAA type development on it right on the platform.

So, this is all kind of the result of what I've been saying for like the last year or so about Epic is that like they were focused on way too much and they need to like buck up and start focusing on the on the on the platform. And so that seems to be what they're doing, right? And and again, as I've said a gajillion times, this is all about shareholder pressure on Tim to get the stuff in order, right? So yeah, they just can't I mean they can live with Fortnite, but they can't live and die by Fortnite. You know, they need to build up this platform. So that's been my take for years on this.
Yeah. Mishka, how are you thinking about it?
Yeah, I mean I I posted on LinkedIn about this and actually Lloyd Melnik, who commented on my LinkedIn post, said it better than what I could have said. So I'm just going to read what he said. He said lawsuits are often an indicator of a company that is having fundamental issues. Usually, if the core business is going well, they won't pursue lawsuits.

The other argument being the lawsuits are distraction that hurt the core business. Exactly what Chris was saying. Either way, a focus on legal is a leading indicator that a company will have problems in the future. So, I kind of agree with Lloyd here is that though this was a noble cause, the settlement will have already is having an effect and will have a long-term effect on on improving the industry, it's still going to hurt Epic the most. Like, I think they come out as the biggest loser out of all of this. And the win wasn't as monumental as they probably thought it would be.
You mean the Apple and Google like App Store lawsuits, right? Like that's what
Yes. Yeah. Yeah. And I mean that those ended up hurting Epic like because they focused too much on the lawsuits. They lost focus on what's really important and also part of that lawsuit was that the Fortnite was pulled from mobile and that's billions in revenue. So that hurts their revenue what Phil was showing.

Chris, do you have a face? I think Chris has [laughter] a face on this. I think I agree with the face.
I don't agree with that take really. I think you have to think about the history of this thing. Like Tim Sweeney basically was managing this company into the ground, right? Like they were about ready to go out of business. Like Tenset was going to divest them. They had two big releases that were just absolute failures, you know, the and the MOA and then the the the first version of Fortnite, right?
And the engine business was right? All of a sudden, they came under this like absolute masterful stroke of Fortnite. And he has this newfound wealth and newfound capability of doing what he wants to do. I really do believe Tim Sweeney was being a benevolent person trying to negotiate these deals at a time in which the company had oodles of cash and they were going after all these different strategies across the board, the store and blah blah blah blah blah. I think this is a little bit more revisionist history. Like, yeah, now that things are not going well in the business, they should jettison the

the legal battles. But I think the legal battles were actually very great of Tim Sweeney to participate in to fight the good fight. He just lost. I mean, he just lost ultimately the coffers of Apple and Google are far bigger than the coffers of of Epic, right? Like
I mean, but he fought the good fight for five years or more than that, right? Like it's crazy.
Is it a loss? But it but it is a well superiric victory. What I mean is like it's a it's a distraction. Like imagine being in these lawsuits against Apple and Google for five, six years.
Nah, dude. Nah, dude. This is a war cause. I think you fight for this. I don't know. I think this rally is the troops. I don't think this is I think this is a unifying element, but now they don't have it anymore.
Speaking of Supercell, if we saw Supercell, EA, Scopely start giving money to Epic in order to fight this fight. Yeah, that would have been amazing, right? That didn't happen.
Why didn't that happen? Why didn't he call Daniel on Spotify and say like, "Look, we're already part of this like app coalition for fairness. Throw me

some cash." Like Peter Teal and like what was it? The Hulk Hogan case.
No, I'm going to be talking I am talking out of my ass like
Peter Teal and Hulk Hogan case.
I I think every legal person in this industry said there's no way you can win like like you couldn't win meaningfully. like open up the platform with zero fees or like a small fee is probably what you know really Tim wanted like they didn't think the fight was worth fighting not to mention the fact that getting pulled off the app stores just would kill their business right like their whole business would go away right I don't know I don't really agree with Lloyd's take on this I mean I I agree in principle but I think there's a lot more circumstances around this particular issue
well especially because when they started the lawsuit I mean I remember being at Riot I was still in the office. So I think that was early 2020 or late 2019 when they started all of this. This was the heyday of Fortnite. I mean I don't think back then they had fundamental issues because they had just launched a juggernaut. And so I think at the fact

that it dragged on for now we're at six years and has I think reportedly when we've covered this before they must be at like $200 million in just lawyer fees or legal fees like you said the distractions and then the loss of revenue by not being on the app stores as the app stores have really taken off I think. Well, okay. Yeah, the big distraction was the fact that they were not on the biggest platform in the world to distribute their platform
during COVID, right?
So, I guess in AdSense, like that actually contradicts Lloyd's point though, really. [laughter] It's like he lost, right? And now he's got to move on because his business is not doing as well and he has to cut tons of people and it's it's really sad. It was a big big cut. This is a huge cut. like you know like the majority of the employees are all in Virginia, right? Or wherever the hell they are in New North Carolina.
Uh Kerry, North Carolina. Thank you very much.
Yeah, sorry.
We actually posted a a Google sheet in our jobs channel on the Deconstructor of Fund Slack of folks that are were

impacted and if you take a look like a lot of them are remote. They do operate very remotely now. They do have the office just like most people, but like most people it's hybrid or if at all.
All right. very sad.
So, the kind of the the other side of the coin on this one, which is, you know, hopefully they can have some force healing news after the announcement that the the new Star Wars UFN feature for Fortnite is coming out. So, here's a little bit of what's going on with that. Epic open Star Wars toolkit for Fortnite creators. It's a licensed development tool for Star Wars experiences. It's going to launch on May the 1st in UFN and Fortnite Creative. Uh you may you may ask yourself why not May the 4th be with you which is the new kind of Star Wars holiday. The answer is I'm going to answer my own question that is May the 1st is a Friday so they want to get out before the weekend. So this includes characters, vehicles, locations, music for obviously one of the biggest IP

toolkits. Creators share 20%. There's a dedicated Star Wars section in the discovery tab launching on the May the 1st. templates include Tatooine, Hoth and Navaro, lightsabers, force powers, battle systems. Basically, this is now like Fortnite is a branded entertainment platform strategy. Like, this is accelerating, you know, crescent field to what you said earlier. As a Star Wars nerd, all of the marketing materials are stunning. It's on brand. It's everything that a nerd could hope for. And I say that with all nerdism for me. One small note also from a brand perspective is that they're allowing all the different Star Wars eras to kind of happen in the same universe. So you've got original trilogy, sequel trilogy, Mandalorian, all of these things are showing up together, which is the right thing to do. In fact, I'm actually going to Disneyland in a couple weeks. They are doing the same thing at Disneyland because at Disneyland and Disney World, you were only having the like Kylo Ren like the sequel trilogy which everyone well not a lot of people are really

interested in. people love like the original trilogy. So now they're allowing the world to mix the trilogies together, which is fantastic. This couldn't come at a better time to potentially help with revenue. I I I think this will actually drive a little bit of win back. I'm not sure it'll be the numbers to make up for a thousand people getting cut, but do you guys think this will have a positive impact on the numbers? Phil,
what what is with you guys? is you Disney folk in like Disney Infinity like what is that the toy game you guys are obsessed with
every product you people work on you try to recreate this like Javier from Scopely I think worked on this at some point you people have this fetish and the dream is gone it's not happening
and I don't think it'll be successful here either like if it didn't work there why is it why is it going to work here
what was the Activision version with the toys Skylanders or what was it
no so that was toys to life so that was a physical product yeah
that you scan And there's a rep representation inside the game, but it did have a toy box oriented feature

where you it allowed for a mixing of brands, which by the way is what Fortnite is.
Fortnite is a complete mixing of all of the IP. And so what I'm just saying is that Disney and their IPs back when I did Disney Princess, my toy team actually created the world of Disney Princess because the brand people said, "Well, you can't have Snow White and Cinderella in the same world. you have to have like rings around them because oh, they can't be in the same world. And so it took years and years and years to break down the walls to let the different aspects of the IP come together. So what is bad about that? That's like amazing. That's how kids play. That's how people play. It's what consumers expect from an IP. GI Joe and Barbie playing together. Yes, those are two different companies. I don't want to re relitigate toys to life because I do think that was an amazing category for its time. But [laughter] here's the problem. Here's the problem with this whole thing that I'm reading right now for the first time honestly is that there's not one business model

in here. Right? There's no monetization mechanics at all. Right? Where's the gotcha? Where's the pay to- win? Where's the like actual, you know, pay all cart for right? Like where are they going to generate revenue on this besides and I saw this in gate 20% engagement shared to Disney. that. that. That is not going to work right. That's not going to help help their cause.
But there's monetization in UFN now. Yes. I don't understand.
To buy cosmetics.
No, no, no, no, no, no, no. What are you talking about? You can sell gameplay. Eric, what are you talking about? This was explicitly allowed. We went over this multiple times.
Not in this No, I understand that. But not in this Star Wars integration.
Do we know that? Do we know that a lightsaber? You're The whole point is that you can use the template of the assets. The whole point is that they're opening up this license for you to be able to do something with. I don't know what the guardrails are.
I am telling you,
you're speaking very confidently. Do we know? Do we know this for
I know. I know Disney and I know what they will allow, what they won't allow, and they certainly won't allow Star Wars Galaxy heroes.

As gotcha as you get, dude.
They were signed for the chat GTP like IP deal for Sora, the video thing. They are loosening up. They'll they'll experiment with We'll see. We'll see. But that's that's [clears throat] my only push back to this. Like I think Epic is now in a really really really good spot to potentially build the right type of platform to compete against Roblox and actually to be better than Roblox, right?
Whoa. So you're bullish on them?
No. I'm bullish on the concept of them actually being able to do something in the position that they are now. If they're both on luck on Google and then hopefully on Apple later, they can, you know, build out their platform. They can build the monetization mechanics that actually make sense for this type of platform. They can build their steel a brain right god all these different games that actually monetize and make money rather than this cosmetic nonsense with engagement as their metric. Right? So I think they have the position to do so. Do they have the will to actually make it happen and the people to actually execute against it? That's my question. And so that's what

they need to start to think about is who they need to get in positions of authority to actually execute against strategies that actually make sense to build a platform in this day and age and not do this cosmetic engagement Right.
I think that's a fair point. I think if what you're saying is the platform can compete. They just need to have the right monetization hooks in there. And now they have one of the world's biggest IPs. I think that that's a recipe for at least some of the win back of bringing players back to the platform.
So I I think we're all saying this is a good thing.
Yeah, I feel that's what it is. It's just promoting brands, getting a little bit more traffic, getting more engaging of the season that yada yada ya. But I agree with Crest. There's the business impact of this is likely very minuscular. Did you see in the press release where they said they identified $500 million in savings and I think that was before the layoffs and the only thing I could think of is like how can you just find 500 million underneath the rug and I was like must be brand

marketing must be a brand
or maybe maybe you know [laughter] doge project
must be must be like 150 for like some Dutch artist to like make a portrait of an
they said they said they cut marketing open headcount and something else. Like listen, we all know like this is the pain of my life.
My budget as a marketer is always the first thing that gets cut when somebody's in trouble. And so I don't it wasn't all marketing, but yes, they they likely cut a lot. All right, let's get to the next story, which is New Zoo released a 2026 PC console report. Mishka, why don't you hit a few headlines? So in short, this is a big report and there were five trends that I identified. Again, we're having Nuzu back on the podcast. Ben is coming in their their head of consulting. So these are I think the five trends that I want to discuss with him deeper. So number

one was on the report is that Roblox is now the number one most played game on PC console and it's eating shooter hours. So, Roblox jumped 52% in playtime and dethroned Fortnite and Call of Duty. The audience that looks to be replacing shooter players is now younger and less likely to touch AAA and actually doesn't spend the same way. So, naturally, the question is, Phil, when is shooter monthly covering Roblox like Rivals or something like that?
Oh, oh, oh, we have it on tap for sure. Oh, yeah. Yeah, we've talked a little bit on the podcast, but yeah, we're going to talk about that.
Excellent.
No discrimination. No platform discrimination.
Perfect. Uh the second trend, so Roblox trend number one, eating away shooters. Trend number two was that Call of Duty, Battlefield 6, and Arc Raiders combined could not match COD's 2024 playtime alone. So that kind of speaks that the shooter genre is contracting even with a franchise revival and two major new

releases. Uh the third trend was the PC's longtail grew 44% while the top 20 shrank. So over half of the PC revenue now goes to games that are ranked
October 30th. Just a heads up.
Yeah, exactly. So So anyways, PC revenue goes to games ranked 21 and and lower in the rankings. So games like Repo, Peak, all of these sub$30 viral indies are eating spending share that used to belong to AAA or quadruple AAA as Ubisoft would put it. Trend number four is that back in 2021, 2022, games as a service or gas was the name of the game. Microsoft, Sony really fought for assets like Bungie, paying whatever to get them because they would create this revolution of games as service inside their portfolios. Today, freeto play or games as a service, either way you want to put it, it's dying on consoles and holding actually pretty steady on PC.

So, console freeto play revenue fell faster than the play time. This could mean that the audience is disengaging and converting worse or that the latest free-to-play games missed their mark. At the same time, we see that on PC, free-to-play revenue per hour is growing 10% yearover-year.
Sorry, Kitty, what did you say?
Excuse me.
What was that? Freetoplay revenue is growing again on Steam
on PC.
No. Oh, yeah. PC.
Interesting. Okay, continue. revenue per hour is the metric that they used and that is growing 10% year.
That's interesting. I'm sure hours are I would be I don't know are hours going up.
Yeah. Or hours going down. These are my questions. These are not statements. These are my questions that please continue
and I find them interesting as well because there's many ways to interpret them. And then final one, the interesting trend was that the 30 to 50 price band is the new sweet spot and there's not many studios built around that because the fastest growing premium

tier across all platforms isn't the 70 plus blockbusters or the uh the sort of under $15 impulse buys. the midm market that publishers largely abandoned in like 2010s is really coming back and these indie and double A single AA whatever you want to call it studios are now the ones capturing it so that seems to be the trend or maybe there are just a lot of games on on discount so I don't know sounds worth discussion Phil what do you guys think
I was a little bit disappointed by this whole report to be honest like they have really good data. I mean I think like the overview for me was that the industry is back to moderate growth which we've talked about like the two to 3% type growth. PC is growing faster and should overtake console which I thought was interesting except the fact that they should not really include China at all in this analysis. I'll get to that in a minute. Conso's recovering but dominated by new releases like revenue

per title versus meaningful player growth which is that's a trend that makes sense that we've been seeing. Sandbox is gaining share from shooter and battle royale. Really? Like do we know that for sure? Like Call of Duty had a year, right? Like wait, Call of Duty is coming back this year with a better game. So, we'll see. We'll see, right? And the premium midpric titles 30 to50 are emerging as the fastest growing revenue segment. So, so basically they're suggesting that if you're a publisher, you should make a $30 to $50 premium title on Steam. I'm not sure. I'm not sure that's a good strategy. No, I don't [laughter] I I think Nuzu forgot to connect the dots a little bit on this one. Nuzu had a slide a few years ago which basically showed revenue share by games that are new. Yeah, except for the See, this is what the title This is actually the slide that actually threw me over the edge a little bit. Right. So, this could give you a good indicator of what this is. Playtime, right? I don't playtime is

relevant to me. Honestly, I want to see revenue, right? But they said non- annual franchises are Monster Hunter Wilds, Battlefield 6, Elden Ring and and Hell Divers and Borderlands, right? Like those are like huge IPs. It doesn't matter if they're not annual, right? These are like massive titles, right? So I want the analysis which shows how many actual new games it came out and drove revenue, right? And it's like it's like 5% of the market if you take out China and if you take out if you if you look at the US, North America, and Europe, it's got to be less than 5%. Like like mobile is mobile's around 6%. Right? And so like that's the TAM and this is the problem. So you're making a $30 to $50 game in a TAM of 6% of the market of a really small market like 50 million, right? If it's mobile, if it's console. So it's like if you actually do that that's the that's the analysis I want news to do. What is the total adjustable

market on a yearly basis for PC in the west console in the west right that would be interesting and it's tiny right and this is the fundamental problem in this whole business right now and and I I know why they're not doing it. I I have a feeling they're not doing it because they do not want to articulate it that way. Otherwise they would have had revshare on here. Right. we're really not getting to the crux of the issues of where we are in the market and we're not really articulating well what the right options are and the real right options are is for people to create new right that attract new audiences I keep saying over and over again like if you're trying to compete head-to-head against hell divers and borderlands and battlefield like you're going to lose you know over and over and over again and so what I would suggest for them to do is get rid of China altogether. Like China is actually irrelevant. We don't we do not compete in China. We we have no market share in China. Take that out of all the analysis completely and just put PC in the west

and console in the west. Right? And then the second thing is I would separate PC and console completely because I think they are fundamentally different markets and then see what the TAM is for each of those for new games on a yearly basis. How that's changed over time for playtime and for revenue. That would be interesting. But right now, I don't know how useful this is. And I certainly do not agree with the strategy of creating $30 to $50 PC games. Oh, and the final point is that ARC Oh, god damn. That was the main point. I don't I don't want to go third rail here, but Arc Raiders is the biggest thing that's driving a lot of this analysis for $30 to $50. And I I will say this as eloquently and as succinctly as possible. Arc Raiders, they say it was 75 million to make that game. Yes, 100% true. It was 75 million to make that game. Having said that, they had 300 people in Sweden building tools and technologies on Unreal for the finals and other things that helped make that game capable of being made for $75

million, right?
An independent studio making a $40 game would not have those resources. Okay? So, it's like
is a false positive in the market that that that game has done as well as it has with such a low development cost. And it's dangerous, really dangerous to think that you can replicate that success. So, and that's driving a lot of this analysis because one of the only games that keeps coming up is a new game.
No, Hell Divers 2, same story. I would argue
Marathon is in the same category. There's a certain audience I agree that this premium category speaks to. And you have to remember for those studios, like I'm sure the counterfactual, in fact, I think we know this for Arc Raiders, Marathon, and Hell Divers was free to play. If I'm sitting in that studio booth, I'm like, do I go free to play or do I go premium? And I do think the evidence has shifted since the release of these games to right pursue premium. Get the money now. You can't bet on your live service. Frontload it. Don't bet on the Arput Tail.
I agree with that.

Premium Plus though, right? Like of course, of course, of course. I I I 100% agree with what you just said, right? Premium makes sense. Having said that, Hell Divers 2, Arc Raiders and B was the what was the third one?
Marathon.
Oh, Marathon. Really?
They were all built by the absolutely massively funded studios. These are not like startups. These are not this is not double A.
Yes. Yes. I think you know we we are talking about like I think 30 to 50 was identified but there's still kind of like this indie price range for like schedule one and repo here which I think kind of bolsters the story maybe expands the range but I think you have to grapple with that too which is an interesting story like that's grown on Steam that's been a consistent category for them
it's the friend slop games those games are like $5
right that's why we need revenue share because
that is peanuts mice nuts like revenue that's generated from those games is so tiny that it's not even a lifestyle business at that at that stage, you

know. So,
what kind of lifestyle you have? Well, but so Chris, I think I hear you saying that the challenge especially even though there's modest and Phil would, you know, throw in the inflation term here that there's the modest 3% growth, especially on PC and console, I think, is about the same that it's still just a fight over share because nobody's growing the overall TAM or the overall audience big enough and there's no new titles that are expanding the pie. Is that what I'm hearing you say? I think we talk about this all the time. Again, if you take out China, the PC situation doesn't look nearly as good either. Frankly,
much of the report does control for China and India is mostly the West, but the global numbers do not. That is true.
Mishka, you have a podcast coming up that's going to go a little bit deeper deeper on this. So, it'll be good. You can take a bunch of these questions and you can all the content for it. So, and more if you join Deconstructor Fun Slack and in the in the podcast channel. Just [snorts] shoot whatever you want to ask about this report and I'll ask for you.

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So, while the exact Yeah, this is like this is like really really a
big I love it.
Okay. Well, hold on, let me explain it.

So, while the exact percentage is still being finalized with top creators, this marks the end of the current fee free era for external brand deals. So effective May the 4th be with you on May the 4th. All creators must register brand integrations through a new self-service ads manager. This allows Roblox to moderate content, ensure safety compliance and provide standardized advertising labels. So also happening in this is to meet global compliance with COPA which is the child online privacy and protection act. Roblox is banning rewarded ads, items given for viewing or playing ads for users under 13. They're banning this for high-risisk categories for food, cosmetics, and finance, which by the way tend to be a lot of the brand partnerships I see inside of Roblox. So, these are restricted for that younger demographic. I want to give you like the two sides of the coin. Uh, win-win. Roblox claims that this professionalizes the platform. They argue the standard

pricing and measurement will stop creators from underelling themselves and attract a larger corporate marketing budget that requires scaled media metrics. Creators on the other hand are saying this is a platform tax or double dipping. They're comparing it to YouTube taking a cut of creators independent sponsor read. There's significant concern that smaller studios are going to be squeezed out. So let me give you just some of my thoughts. So as someone who has been very involved with platforms with brands on all sides of this, I I see their logic in trying to set up a platform and an execution arm to make the brand integrations happen number one in a safe way and number two in a way that has better metrics. So brands are always like what's my CPM? What are my impressions? They always want you know standardized metrics and so that's fair and I get and understand that. However, I do not see any precedent for this on any other platform and the percentage taken by the platform in this case is already much higher than the combined fees at Apple, Google

console platforms plus the Roblox fee. So typically, you know, basically today on like AP, you only pocket between like 21 25% of like gross revenue that comes in from AP because you have to share with the platform fee and the Roblox fee. So many of the developers and agencies counted on brand deals as a main source of income because it was kind of outside all of those systems and it is just something that allowed games that were not in the top 10 or top 20 who are generating the grow a garden kind of revenues. They could get you know 20 30 $50,000 brand deals and use that to stay alive. So, just imagine the uproar if YouTube, Tik Tok or Twitch was to start taking a percentage of every sponsorship a creator receives. Like, this would be a revolt. You know, kind of like the Unity runtime fee fiasco. So, I I I'm worried that this is not

going to go well for them in terms of the creator backlash. I even think brands are going to be like, really, all of this I have to go through some dashboard even if it gets me some better metrics. So that seems like this is going to be a big deal. Cres, uh what are you seeing?
This is like the sign of a kind of mature platform where they're starting to go after these type of things, right? To consolidate collecting data and understanding, you know, where the revenue is going, etc., right? I suppose I was hoping that Joe at GameFam, so GameFam evidently the majority of their revenue is coming from these type of deals, right? Exactly. Exactly.
This keeps their business alive and profitable. Like to be honest, like as far as I understand it, I I'm not as tight and close with his deal, but like Joe is out there on LinkedIn writing an article about this. And again, the guy is a evangelist for this platform, right? He is positive no matter what. And you would think if anything would get him in the negative cat column, it would be something like this, going after his core business. But

yet he wrote kind of a fluff piece on the title was Roblox betrayed its developers or did it just grow the pie. So he kind of implied that things are not so good, right? But anyway, it's worth reading because I think Joe definitely has instincts on this stuff. But this doesn't seem like a good thing for anybody except for Roblox in the sense that like you're just creating more like capture for the big in the sense that you're dealing with all this licensing and you're putting in systems to track the stuff and it's like it just creates a lot more bureaucracy. I mean the hope is that it makes it more efficient and and and can grow you know the category of integration by controlling it but I don't know control generally has the opposite effect. So, it just all seems like a big you, you know, to publishers that have been, they're the ones that have been working really hard to get these licenses and get these things in Roblox's ecosystem and now Roblox wants to take control

after like all the work that they put in to do it. And that's why I thought Joe would being pissed off because they've been working their ass off like getting all these integrations and now they want to come in and with them, you know, and take money from them. I mean, it's like
I would be like you if I was Joe, right? especially under the opice of like oh it's safety and compliance and and me and like what has been wrong about it today and what is wrong about every other platform that allows for direct deals that this is why I was just saying like there's no precedent for this
I know and all these developers have actually built the platform and gamefam Joe and these type of guys have actually built their platforms with these partially because of these you know these these licensing things and now they're coming after them with like this you know? It's like off, right? But anyway, I want to caveat this with I haven't really talked to anybody specifically about this yet because it kind of just hit. But if I do hear anything specific, I will I will come

back and talk about it. I'm sure Joe is going to have something to say, but his piece on his LinkedIn piece, you should just read that
because I think it's a little balanced. Bill,
do you remember how the Clone Wars started? That it was the taxation by the Republic of the major trade routes that the Federation rebelled against the Confederacy. Like, man, this is crazy. This is crazy. They would do that. I would say the thing I've never heard is developers on Roblox Like, people on Apple's platform always It's interesting. I don't hear hear a lot of Roblox bitching. This is the first time I've heard it. And I just also will point out this is completely antithesis to an open platform. And I would just say that was another metaverse argument was these open platforms being a necessary requirement. And this is moving farther away from that. Right now we're looking at their daily peak players. This is also reported on Fortnite. GG. They're actually down yearto date. Like they had an incredible growth period when we had that summer of steal a brain rot and grow a garden, but

that's really leveled off and they are down. And don't me wrong, there's a lot of cyclical trends because it's kids, but man, they might actually report some down numbers next quarter. So like this to me looks like economic rent and extraction by monopolist. And I will tell you, we've been we've been raising the flag. They are not kind, benevolent overseers. They are here to extract margin. They are not friendly to games people. But I but I would say that I can't imagine that this is very material for them regardless of the percentage, right?
I mean, how what do you think GDP is for brand endorsements? They're about to get a percentage of that. What do you think? I mean, this is the ads revenue for for Roblox, the freebie
Yeah.
What I mean, what do you think it is? A billion a year, 500 million?
No. No. No.
I don't know.
No.
Really? You don't think on a platform as big as Roblox, how much money do you think swishing around in these brand deals? Oh, in terms of total brand deals,
two millions.
Well, they're again the share of them.

The tax revenue is proportional to how big that is, right? That's that's what I'm curious about.
Can I can I just go cuz you guys are just about let it rip. Let it rip. First of all, I'm sorry. We have no idea. No, no. Just you're just taking this from like philosophical perspective and it's correct from philosophical perspective, but in real life it's incorrect. So, I think all of your analysis makes total sense, but I think it's also way off. My take is this. I think this is a fantastic move from Roblox. I know, and I don't know if they intended it. So, let me explain my reasoning. A typical successful Roblox game today has lots of low value, short sessions, low spend audience. These games tend to make money by selling the impressions from their lowquality audience to brands who have no idea what to look for when analyzing games. They're sold with visits, not per se DAU or MAU or any deeper engagement metrics. And because of that, the brand integrations

tend to not work out. The audience is just not worth to be advertised for. So in other words, in the current setup, brands make games with poor engagement metrics bigger by giving them money. In practice, what this means is you can build a game, inflate the audience with very cheap UA that you can buy on Roblox and get the brand on it to turn profit or several brands back to back. Or you can just build a poor quality branded game and inflate it with again cheap UA and take the portion of the player base on the platform. So, I believe that the new brand fee will kill this. And the way the brand fee actually works is this is based on some of my conversations with people in Roblox Studios is that games that integrate brands have to pay Roblox a fee based on visits and geography. Now, we don't know what the fee is, but from what I heard, they could be between

This tends to put a significant dent on your brand revenue that these often poor quality games rely on as a as a main source of income. So, why I think it's good? Uh, I think that this is a [clears throat] pretty drastic measure, but nevertheless, it's a massive blow to large audience, lowquality games that are inflated on this platform. And I think they're in real trouble when this comes to an effect. And I think what's good about this is that it boosts the games that actually retain and monetize. It gives them not only more visibility because the branded games will to some extent go away, but also gives them more brand dollars because now the brands will be looking for other developers. And these other developers that have more engaged audience tend to have less visits, less number of visits, but

longer visits, more engaged visit. And through that higher quality of player base that actually also pays and that means that these games will get additional revenue source from brands and through that can be build bigger and better experiences. So overall I think this is purely in line what Roblox founder CEO Dave has been talking about and that is bringing AAA games to the platform. I think again this is a very harsh and drastic move, but I believe that this will make the platform better by taking away away revenue from games that the platform doesn't want to be known for. And finally, I don't know if this is Roblox's master plan. They might have gone for this just for the bag, but actually improved the platform while being greedy. Um, with all due respect to great and powerful Roblox, sometimes it feels like they succeed despite themselves. But I most likely this was

uh this was premeditated plan. So, what do you guys think?
I don't know. I'm super offended you told me I didn't know what I was talking about and said everything that I just said.
I was just being hyperbolic. Of course you do. I know you guys are. But you I mean I don't know what you said differently except for oh USC is a precedent and not YouTube or Tik Tok or something else.
Like like in short this I think this punishes the bad games that have a tremendous large audiences that is of poor quality and I think that's a good thing.
Well, which part is good? A revshare deal or that they're putting in better performance metrics? Like I I would say
that to me that is the cost of the platform tax that you get charged by being on the platform. But by the way that has probably the most difficult revshare of any of the platforms out there. It is too far to then take an additional uh undisclosed revshare likely 20 or 30% from what is not done

on other platforms and is not there's no benefit to to that happening. I I I I don't know. I I think this is detrimental to game devs that are going to look to make money off of this cuz there's no other way to make money. If you're outside of the top 20,
if you're outside of the top 20, you basically don't make any money on this platform. And the way that those have been surviving have been these brand deals.
I I don't disagree with you. I would reframe it in a way that I don't think that this sort of a brand tax is a good thing per se, but I think the effect of it will be good for the platform because it will punish the type of a developers that are braining the platform.
Okay, but okay, but the problem with that idea is that they've been valued based upon users, right? Every time their users goes up, the stock goes up. Like people love the fact that they have all these users. Every headline is user, user, user. You know, it's not revenue,

right? Like revenue is not going up as much as users are going up.
This reminds me of like honestly the runtime fee where they're like, "We are struggling to make revenue. We're getting pressure on child safety. Rewarded video obviously isn't working that great." And now they have to limit it because you're not allowed to advertise to kids under 13. So now they're going to sadly lose more revenue that way from people that want to reach that audience. and they're like, "Oh how else can we possibly make revenue?" They know that there's this secret cash of revenue being done on the side, you know, these brand deals. And so they're like, "hm, how can we effectively message that we're going to take a cut? We're going to do that by saying things that we should already be doing for the platform." I don't think they have ill intent. I think just like Unity didn't have ill intent to want to like make revenue, you know, for the engine business that is a difficult business. I think what we're seeing continually is that the Roblox business is still a difficult long-term business

that even though it has all the users, it has the kids, it has the all these huge benefits, they're just not able to make the revenue that they need to make. I don't know, Chris, am I
I I I just don't think it's a big revenue driver for them. I think it's more of a control thing, like they want to know what's going on and and be able to communicate that. I mean, I think there's some truth into what they're saying, but it just I think Phil said it right. It's just the idea of a closed platform. They can do whatever the they want, right? Like they can choose whatever works best for them and they can try to sell it any way they want, you know? But I don't know. We'll we'll see. We'll see. I mean,
okay.
Yeah. I I think if I talk to Matt Canerman quickly and then maybe Joe, I think I'll probably get a better feel for it soon.
Okay. All right. Well, this is going to wrap up this week. Sorry we didn't get to a bunch of topics. We'll have a lot of that for you next week. See you next week.
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