TWIG #384: Turkey Raises Capital & the West Cuts Jobs, Xbox's Leadership Moves, and Roblox's Pivot

This one's going to be a train wreck.
[laughter]
Yes, that's the opener for this episode.
[music]
All right, everyone, welcome to Deconstructor of Fun as we can games 384. I'm Jen Donahoe. I fill the marketing publishing role on the podcast. Today we have in first chair, back from Istanbul, Eric Kress, strategy investing. I'm back. Phil Black, monetization Tsar. Misha Lyalin, friend of the founders and investors. Yes, you are. You are kissing their ass like Oh, I was kissing rings. so hardcore. I cannot Okay, we'll get there cuz the very first thing
The bigger the fun, the more kisses you get. That that is [laughter] true. That is true. All right, here's what we got going on today. Event recaps. I had games B, you guys were kissing rings in Istanbul. What's the fate of Supercell North America? Xbox leadership changes or is it spring cleaning? Which leads us into Roblox leadership and what they're doing with their love of HD gaming. The Lord of the

Rings MMO studio Amazon Games is no more. Kress is going to cry about that for just 2 seconds and we'll move on. Griffin Gaming Partners launches a $100 million project financing fund for indie games. Google DeepMind will train AI models on the MMO RPG EVE Online. And oh my god, casino wars are back. Board master is scaling and it's Ford versus Ferrari is back on against Monopoly Go. So we will check in with that with charts and graphs from Phil. So let's just jump into shilling. Misha, I know you So couple of podcasts. So one was last week with Play Venture Capital's founders Henrik and Harri. Of course it's going to be a positive take. I've known these guys, so Henrik probably 15 years and Harri like seven. Good friends. So it is an interesting podcast to hear how gaming VCs have essentially expanded from just gaming. Then we had a UA monthly drop this week,

UA monthly number four, and this is going to be the last UA monthly in this form. We are pivoting and repositioning this thing. It is not going to be about news, but it's going to be about decoding growth. And that is something I want to understand, so that is the content that they will make. And I hope others will enjoy. And then on the blog side, we have gamification breakdown of Earbuds Widget, which is an app that used a lot of gamification features to basically build a sort of a 2 million DAU social network platform. Funny thing, I posted this on LinkedIn the CEO and the founder of the company commented like, "This is the best deconstruction I've heard about our company." Like, "What the [ __ ] is this?" So, uh essentially the goal is to show, look, these [ __ ] app companies, not [ __ ] nice app companies, are looking at games and just picking apart all the elements that work, putting them into their app, and growing their business. So, why don't you do the same thing? Anyway, that's it. Phil, what did you have? Shooter monthly episode seven. Not a lot of growth. Uh degrowth in Arc

Raiders. We're trying to figure out what's going on, but those numbers have slipped. If you just followed the news, Embark announced they're moving to more distant content updates. They just haven't been able to keep up with the pace, and they want to do bigger drops. That's not a good sign. That's not a good look for the West. Tough to see, and so we talk about it. What could they do? What they should be doing. I bet the game stops when they go on their holidays. Sweden, summer, is going to be a shutdown in the entire country. It's true. Can't update the game from your lake houses.
[laughter]
No. No. If people are not playing Arc Raiders, what are they playing? I mean, first of all, Apex continues to do well. I haven't seen anything that's an obvious contender that's stabilized. Overwatch seems to do well. There doesn't seem to be anything like obviously out of place. There's not like a hot new contender really yet. Phil, we talked about We didn't get a chance to like it in in detail, but the Overwatch Fortnite collab that's happening. Did you get a chance to see if both games got a bump from that or Not sure

what happened.
it about next time. Let's check on it Yeah, let's check on it next week. I actually I was just looking at eFootball recently, which is a very interesting title. We don't get to talk about it today, but that was another title that's used a lot in crossovers, and I would say the results are skeptical. Yeah, Owen Mahoney was at the Game Speak conference and Arc Raiders obviously came up again, and he even said that they ran out of content was one of the reasons for the decline. And he also said something interesting, which was the cost of Arc Raiders is about 1/10 of Call of Duty. Basically, take a zero off whatever Call of Duty costs, and that's what Arc Raider. And I Chris, we've talked about this a hundred times, but that lens was really kind of interesting. And then obviously talked a lot about AI and how they use AI in that production process, but What about AI for [ __ ] content production then? Like how could they run out of content if they have the Well, the efficient AI tools. I mean, that's total. Yeah. No, agree. I mean, it helped them, but not enough apparently, cuz I guess people are just churning through it. Well, a little smoke and mirrors on that

data point, not
[laughter]
not complete vaporware, but I would be skeptical about those claims of AI. And I think like again, listen to the podcast, but I would say the cool key question is like not how few can people can they do this with, but like should they be spending more, right? We talked about just like a moving completely off the Finals onto Arc Raiders. Why have they not done that? The Finals are still running. Consensus has not been found in that studio yet. That is how the Swedish studios run. A good summer vacation will help, I'm sure. Yeah, they will find consensus after [laughter] that. A whole A whole month summer vaca- Okay, Phil, what do you got on corrections? Shan Lai was the author of one of the pieces we talked about, which was after World of Flying Everything, What's Next for Live Service Games. We talked about Genshin. I just want to make sure that he got credit. He's an MBA candidate. I thought that was a really sharp piece. Follow him on LinkedIn. Kick-ass live ops need kick-ass tools. That's where Heroic Labs comes in. They just released a massive update to their

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Oh, Istanbul was fire, as it always is. It feels like they're living in the past where the market hasn't slowed down at all. They're just raising tons of capital. The games
[laughter]
are growing like crazy. I had Grand Games CEO on the podcast again. They five-folded their revenue and are tracking towards becoming a unicorn in about 2 and 1/2 years. So, you know, that kind of stuff. We did three events. Kress did two. I did the third one as well. So, the one that he bailed to go

to watch basketball or something like that. Our first one was with Moloco VIP event. That was fun. We took a little boat ride. It was at the Kempinski Palace and I was like, "Oh, you know, people call places palaces, but Kress, that was a real palace, right?" That was beautiful.
Absolutely amazing. Yeah, I mean, that was pretty incredible. Istanbul is former, you know, capital of an empire and it's a little bit of a, you know, it's every bit of a of pieces of empire there. So, Kempinski one. Then Latam Summit was at the place where the Deconstructor of Fun's second event was. So, that was the Divan. That's a beautiful location again. It's like overlooking the sort of Bosphorus pier and there's like yachts parked in front of it. So, that event was phenomenal. It had 300 participants. Like it was kind of like 50/50 between founders and investors. Just a fantastic crowd top to bottom of the venue, the crowd. Like it is the type of event that if I get invited next year, if we're not banned after our little performance there with Kress.

[laughter]
I'm definitely coming back. We did a banter session. They asked us to talk about market. And so, basically, I was just, you know, sitting in front of Kress and trying to trigger him say even things about participants in the crowd. But, you know, all for laughs, you know, just anything for LOLs. And then the third event that we did was at the Mandarin Oriental. So, that was the one where I invited mainly Turkish founders. We worked on this with Appcharge and Meta and Tencent. And we brought in actually pretty interesting speakers. They were all fireside chats. We had FunPlus, Kress Petrowic, of course. And then we had CTO and CMO of Century Games. Again, nothing strategic, all tactical. The questions I was asking and others is like, what is your incentive structure? Like, how much is a salary of a PM and an engineer in China? What is the size of your teams when you start? What is the size of this game right now? How many people? Like, because of that it was very interesting, I think, for many people. But Istanbul has some fantastic locations for any types of events, but it is an expensive city. So,

takeaways, Turkey is booming and definitely overheated. The sentiment is that they want to become a regional powerhouse that rather than the sort of a like a first stage of growing industry where they build and sell, they want to build and build more and actually become, you know, maybe a buyer. And these invite-only summits and gatherings is where it's at. Like,
[laughter]
I'm not going to conference anymore. These are the fun stuff. So, that's my takeaway. Chris, what what was your takeaway? A couple things I would say is Turkey was particularly beautiful this time in terms of weather. Holy crap, it was like absolutely crystal clear. Usually it's really hazy, so it's really beautiful just in general. So, great pictures and great things. And we got on the boats, that was really nice. The second thing is the yacht. Yeah, the yacht. Finally, I see some chinks in the armor where I kept hearing from people that they don't have enough people at Turkey to support all these companies, right? So, it's like they can't hire the key people and everyone's like dying to get these particular people and so they're going for the highest bidder. Grand

Games did another financing round, so Lathan is in really good shape this year from their fund perspective, which is yeah, all in all, amazing events, great turnout. Of course, as I've said million times, like doing presentations with Mr. Mishka is an exercise in frustration because he's always waiting till last [ __ ] moment. And his idea was [ __ ] great. Like, a back and forth between the two of us would have been [ __ ] amazing if we had prepared more than 30 minutes before the goddamn presentation. Yes. Yeah. Why do you sound like every [ __ ] Twig episode every week. I had to exit the venue. I had to exit the venue to do my notes before the event. And I was just people don't come talk to me. So, my fault. But Crest did phenomenally. We executed it reasonably well. One of the people that was like super critical of any type of conference gave us a B plus A minus. So, I'm going to take that. Oh, wow. Overall, it could have been so much better if we had actually prepared better. But it it was a really cool idea

for a format. Just again, not 30 minutes before the god damn presentation. Overall, great trip. God damn, I was [ __ ] a jet lagged to [ __ ]
[laughter]
It took me forever to get back. Dude, it's not 4 days just not enough. I gained 3 lb. Just just shout out to Istanbul.
[laughter]
And I was jet la- I felt jet lagged, too. Flying 45 minutes. No, it's an hour. So. All right. Well, let me do a little GamesBeat LA recap. They were actually both tours in Marina here, but I I get T6, so I didn't go on them. But GamesBeat LA, it actually felt really vibrant. It felt really busy. A lot of big name speakers. This is probably the most well-produced version of GamesBeat now that they're independent. I think they're celebrating their 1 year. I didn't even get to go to all of the speaking gigs that I wanted to. The Cybo CEO spoke. They had a lot of mobile people actually this time. I think you guys would have really loved that. I spent a lot of time with Zoe Bell, who's the EP of games at New York Times and

who's a freaking rock star. It's so interesting to talk about how a game company is existing inside of a 175-year-old like institution where they're not allowed to say [ __ ] It's really funny. The CEO of Super Evil Megacorp was there in fielding. So, he's a super fan of the of the show and talked a lot about, you know, how we talked about them back in the day. Remember they were building they did Vainglory and then they did the Rebel Moon game and so we were talking about
going to do a sequel? First one was fire. Yeah, yeah, probably not. They they do have other things in development. So, I was excited for them. I mean, they do make great games and so that was super cool to do that. The Morhaimes, so Amy and Mike Morhaime, so Mike Morhaime co-founder of Blizzard and his wife, they're super lovely. They were there for to run a charity event with the Children's Hospital of Orange County. So, it was like very cool to talk to them about like you know, old school Blizzard and Dreamhaven is kind of what they're up to

now. So, a lot of folks at real jobs at real companies. Scopely sponsored it, so that was a lot of it. Your buddy Rob Rucka was there, like a lot of Scopelians. They did the Boss Mode Awards and as predicted, I certainly didn't win, but here's who won. The Rising Star went to the CEO of Loom for Pixel Flow and I cannot even say Kubra's name, but she was not there, but she was super lovely. The Lifetime Achievement went to Amy Hennig who's a co-president in new media division of Skydance Games and she's I don't know, been making games for 40 years or something amazing. And then the Woman of the Year, which was my category, it went to a very amazing Eunice Lee who is the COO of Scopely. You know, if you know what Scopely's been up to, absolutely deserved it. So, that's my recap. Thank you, GamesBeat LA come, guys. Next Chris, you should come. Okay. You should come next time. Can I What, Chris? Can I ask a question? So, you're basically suggesting that the CEO of Pixel Flow won as well as the COO of Scopely won

Yes.
And Scopely was the primary sponsor of the GamesBeat conference? All of those are facts. Is that Yeah. Is that Can I read into that a little bit or I All of those are facts. Beat, GamesBeat has kind of a history of doing this when EA was involved or Zynga was involved. I will just say that those women are very deserving women outside of the sponsor. All right. Have you seen the awards Walter has won, the CEO of Scopely? Have you seen the like the [ __ ] that Scopely PR would sign him up for? And he won like all this like businessman of the year in Los Angeles. Like how do you even apply for that? Like how would they evaluate that? And you just stop asking questions at some point. They'd always have the photo shoots going. Yeah. They work overtime at Scopely. Yeah, their PR department there.
and comms team, they are [ __ ] gangster rockstars and I do nothing but give them all the credit in the world. They're on a tear right now, so I just wanted to say one thing about Morhaime.

I'm going to do a a public thank you for him. So we were at the same event and he suggested a game that we now play through with my daughter, Us Two. Kind of asking like what type of games to play. He also suggested Helldivers. I'm like hell no, I'm not playing that with my daughter. [laughter] But Us Two was absolutely phenomenal, a bonding experience with my daughter. So Mike, thank you so much for suggesting this game. I will always take half of your suggestions of the games to play seriously and play them through with [laughter] my daughter. Not Helldivers. I want her to sleep, too. Oh, that's funny. All right, let's get into it. Mishka, what's your news on Supercell North America? I don't have much news. Here say from the conference is that the North American studio has been shut down. I don't know if this is true or not, so we're not going to cover in any depth until they verify if this is actually true or not. But um yeah, till then, stay put. Oh my god, Chris.
It was a pleasure to serve. Chris, like are we going to have jobs here on the West Coast as game makers? Like I feel

like these stories are happening all the time where there's not much left in the US West Coast for I mean, which is actually the only coast for game making. Well, not that's not exactly true. I know there's some folks in Boston and New York, but uh sigh. Yeah, sigh. Your prices are way too high. I talked to a VP of a of a pretty big multi-platform publisher yesterday. We're talking about some of the games that are currently in soft launch. I'm not going to say who and what, but this is a big publisher and big titles. And essentially he was saying that to reach ending of a prototyping phase and kind of like day one testing was about Was it $9 million? It was between six and nine. I didn't write this down, but he was saying that for the game to get to a soft launch, a mobile game from their studios was about $60 million. So, that's just to get soft launch. That's way more than European or Turkish developers or even Chinese. Chinese salaries are way smaller than Turkish, actually. 60 60?

million. So, this is top US game publisher part of a larger publisher conglomerate. So, that's that's basically the threshold, and because of that they need to choose their categories very carefully, and because of that they do coin looters and and various sort of a friendly franchise bets, slots, etc. So. Too expensive. Too expensive. I would just say that part of the reason that Turkey is so successful at what they do is because there is no other competitive draw for game developers in Turkey, right? So, they all focus on gaming because that's the only game in town. Unfortunately, in the West, particularly in California, there are a million different things to go to, particularly AI right now, but also enterprise software and every other security every other type of software. So, engineers are much
Social media.
Yeah, there's so many different things to do out here, and so if it's not as viable and the market does not grow the way it has grown in the past, it's hard to attract that type of talent, right? Because the upside's

not there.
Yeah. To build on what Chris said, actually that's what the CTO of Century Games, Shawn, was saying the same thing is that in China gaming is not perceived as like the tier one. That's not like your your normal Chinese parents wouldn't like you to be a game engineer. They want you to be something a little bit more more more you know productive. And so he was saying the same thing it's kind of difficult to make good hires in China for gaming. So you could read it that their B team is doing pretty well. So Well, I think it's going to get difficult all around. This week is like major major meta layoffs again for like the fourth or fifth time. This year, right?
Yeah, like they just keep like every month keep doing a different round of layoffs. You know, I have obviously I have friends who work there and so they just keep talking about how like it's so difficult at these companies to watch all your friends go and like thousands of them and so I mean, I know you said there's all these other places to go but I guess if you're not if you're working on it AI at

one of the three AI companies maybe but God there's not like there's nowhere to for people to go. And I heard that meta is did it in a way that today is Wednesday that essentially Wednesday is work from home and we're going to email you if you need to come in on Thursday or not. That is [ __ ] brutal. It is so [clears throat] brutal. Imagine the anxiety. Let's go to the Xbox story. So okay, first of all, we'll do a preamble. I know we talk about Xbox a lot but they did have new news and they had some really big org leadership changes and here's what happened. So Asha Sharma announced that Xbox will stop development of gaming co-pilot for consoles and begin phasing it out on mobile. Five executives brought in from Microsoft's core AI division spanning from engineering design growth transformation and subscriptions. Four existing Xbox leaders were reshuffled into new accountability areas including project Helix, platform personalization and media. Two senior executives are out.

Sharma's stated diagnosis is too slow to ship too internally focused missing technical and consumer depth. Financial backdrop is ugly, 33% hardware revenue decline and 5% content services decline in Q3. Partially offset by record monthly active users and streaming hours. So, it sounds like lots going on. So, changes are needed, but Chris, why don't you take us through what's going on with the hires? Okay. First, yeah, I do want to focus on the key hires because, you know, obviously removing co-pilot was a no-fucking-brainer. That was a stupid, stupid, stupid idea from the get-go. But anyway, I want to focus on the key hires because I think that is kind of an indicator of where we're headed with the apex predator. So, Gerald Palmer is the VP of Xbox engineering, Tim Allen is the CVP of Xbox design, Jonathan McKay is Xbox head of growth, and Evan Chang is Xbox GM of transformation, and David Slosh is the head of Xbox subscription

and cloud. The only thing these idiots have in common is that they all have no gaming experience whatsoever. I mean, like so
I'm not sure they're idiots, Chris. Come on. They're just They're They're They're not gaming natives.
The fellow apex predators are all non-gaming people. It's clear basically Sharma is hiring loyal subjects, not strategic leaders in gaming. That is very, very, very clear. She's putting these people in place that she can trust, that will do as she asks, and not push back too much, right? Like, not having any dissension in the ranks basically, you know, loyal loyalty over everything. So, this is bad. I think this is very, very, very, very, very bad. And I'm really surprised it hasn't got as much coverage in the press at all, like from the enthusiasts in particular, like cuz these people just do not have the background to fix what ails Xbox, right? Xbox does not have a [ __ ] platform problem. They have a content problem,

right? They are not competing at the same level as it Sony and Nintendo. They need more content pop people to bring up more predictable releases and quality of content. You know, they don't need to build a better mouse trap per se. They don't need to build a better platform. Hell, they don't even need a better platform strategy. They just have to revert back to the old strategy frankly in my opinion. And you kind of have to compare what Sony has done versus Microsoft over the last few years. PlayStation's delivered God of War, Spider-Man, Horizon Forbidden West, Demon's Souls, Returnal, Gran Turismo 7, and Stellar Blade. Xbox first-party answer? Starfield. That's it, right? And a [ __ ] busted ass Halo, right? It's a disaster. Obviously we have Activision and Call of Duty, but all these cross-platform stuff but that's not provided any type of reason to own or be part of Xbox. It's the creative pipeline that's broken, not the engineering pipeline was what these people seem to be focused on. So Palmer is a developer tools builder.

McKay is a growth and retention optimizer. Allen is a design systems person. Chucky or whatever is internal efficiency operator. Sloss ran subscriptions. All these people are oriented towards the platform layer, right? Making it stickier, making the UI cleaner, making it onboarding easier, right? None of them have ever greenlit a game, managed a studio, evaluated creative pitch, you know, building a content slate. You know, Matt Booty is still there, but he was in charge when they broke all this [ __ ] you know? Adding like platform operators around him doesn't fix the [ __ ] problems at Xbox because it's a freaking content organization, period, end of story. And they've been investing, you know, this entire generation on Game Pass and the subscription platform is completely broken, right? This works on Netflix because the cost of development is cheap, but and you can produce it at scale and you have the broadest audience possible, but this is does not work in games, as we said a

[ __ ] million million times. They need creative executives to execute on a product strategy that makes sense to build loyalty within Xbox and bring people back, right? While Sharma is like building a faster, more efficient platform, they still don't have a content, right? And so, with a creative like organizations in shambles, this [ __ ] is not going to work, and these people can't execute against something. It's like a square pegging a round hole. Like, they these are not the right people to fix the issues. Plus, they are all tech bros with absolutely no [ __ ] experience on content and no gaming experience at all. And so, this is absolutely not going to work, in my opinion. Yeah, the thing that I've been seeing on this topic of like the people working there, right? Like, LinkedIn every other day is somebody who has been in gaming for a very long time leaving the Xbox group. And so, a friend of mine and you might remember Tami So, amazing amazing rockstar. So, she's been at Xbox

for a long time leading and set up like developer relations. And so, she just went back to EA actually in a very super cool position called VP of transformation for publishing. So, it's actually a great signal for what EA is doing on and what they're focused on, which is publishing and improving the link between communities and studios. And Godspeed, like I think that's fantastic for her and for EA. But, what does it say about what's going on with Xbox? Like, and I don't know the reason, you know, EA is obviously growing and she has roots there. But, you know, all of this impact is that you're losing you're losing the culture. And it looks like Asha is doing spring cleaning at Xbox and taking the broom and just kind of like going through and cleaning out a lot of the traditional gaming folks and bringing in folks who have a different point of view. And by the way, I've seen this in many different companies. When I was at Riot, the same thing happened when all of the Netflix people came in. We were like, wait, why are we now surrounded with like Netflix marketing

people you know, trying to tell us what to do and they weren't necessarily gamers. And so, what I will say is like I'm going to talk out of both sides of my mouth here is one is you need to rip the band-aid off when things aren't going well. And so, you need to make big swings and you need to make big changes and that absolutely makes sense. But, just be careful to not throw the baby out with the bathwater and lose a lot of the secret sauce or the magic that you have with people who know how to do things. How do they get things done? What's the understanding of the player? What does work? And she's moving fast, right? Like just make sure you do a little bit of discovery, you have the due diligence. What are the real problems that you're trying to solve? And before you just, you know, clean slate completely just do a little bit of that homework to make sure you're not like losing everybody. So, anyway, you know, when you go in with a bulldozer, sometimes the bulldozer can wreck culture and morale in addition to all of the

knowledge base. So, Oh my god. Oh my god, dude. Breaking news. Guess who is chief strategy officer at Xbox. Please. Who? Matthew Ball is now chief strategy officer. No. Oh my god. I cannot believe Woah. Wow. Wow. Okay, I've lost all respect for Sharma, dude. That she Oh my god, I can't believe that she got caught up in the grift of Matthew Ball. Oh my lord, it is over. It is [ __ ] over.
that just that just dropped.
That just dropped like 5 seconds ago. Oh god. Oh my lord.
we're recording Wednesday, May 20th. Okay, so so first of all, Chris, why? Just just just just explain like why? Why is this such a bad thing? He's a great talker. He doesn't know [ __ ] He doesn't know [ __ ]
What do you mean he doesn't know [ __ ] His 160-page deck is good information.

I can see how people who do not understand our industry are wowed and wooed by his strategic approach. I mean, Chris, you you have to at least concede that. For those that are not in the know and that have not worked in the industry for 30 million years like you like all of us here, well, a couple of us here.
Yeah. Right?
Yeah. Okay. I I I will concede this. I think because Sharma and the rest of her team know nothing about video gaming. Yes. I do think that Matthew Ball has a very, very extensive understanding of the history of video games.
Correct. So, that may help to give them context to the mistakes that they're ultimately going to make. Having said that, if in order to connect the dots and get them to the future, like, Matthew Ball is the last person that you want because he doesn't know anything about being in this business and managing a business called Balls and Strikes in this business. And it's clear by everything that he's ever published that he doesn't know [ __ ]

Well, I think where I do agree with you, Chris, is that Matthew Ball's predictive side of the decks that he does doesn't seem to help with where people should go. He is just fantastic at what is going on today and where have we been. So, the attention war topic, like, he's absolutely true. By the way, Yoas Friend Jurman's been talking about this as well. Like, I don't know anyone who has a kid, this is obvious that whether it's the gambling addiction, only fan like whatever any of these things are, it's taking attention, share of time, and share of voice away. Like, that's kind of a to me is a bit of a no-duh. He put data behind it, awesome. But, where has he been successful in showing where things should go? And by the way, being a crystal ball reader in strategy is not easy to do. If it was, everyone would be perfect and we would have a great strategy. So, tell me more, Chris. Yost is actually a probably a better fit, but even even he has his limitations in terms of his experience about managing teams and managing creatives, right?

Like he has no experience whatsoever at companies, either, but if you just look at the body of work that I've seen, anyway, from from Ball is like every single prediction that he's made has been wrong. He cannot understand where we're headed. He just is focused on the intellectual pursuit of where we've been, and my whole thing with Microsoft is they do need to go back to where they were, right? So, maybe he is the right person in that sense, if that's their goal, but the hiring that they've done and what I've just gotten through explaining is not going backwards. It is moving forward to some [ __ ] that makes no sense, right? Subscriptions, advertising, optimizing platforms, all this [ __ ] tech bro [ __ ] is not going to help Xbox. What they need to do is get better content, right? And Matthew Ball is not going to help them find the right content, right? He's not going to find the right teams, the right leaders, the right people to manage the content library and build a

competitive platform to Sony and and Nintendo. They're just not, right? And so, this is a disaster. Absolute [ __ ] disaster. I I push Chris a little bit, but I don't know. It's going to be interesting to see because I agree with Chris that they're hiring people who are not from gaming and they see it as a good thing because previous leadership was of gaming and it didn't work out, so they're going like 180. Is that the right call, especially with the success of Sony that is very much focused on content? Seems like not, but Matthew Ball will tell. The leadership at Xbox was pushed by the powers that be at Microsoft to pursue these strategies that didn't make sense. And Phil Spencer is to blame, don't get me wrong, but he led this [ __ ] [ __ ] subscription thing, which is clean clearly blown up in their face. Even if they did go what I think they should do from a strategy perspective, they are so [ __ ] far behind. It's going to be really, really, really, really hard to gain back share. What do you think Matthew Ball's actions are going to be? What do you think his strategy will be based on what you know about him? Like he has Minecraft. I

think they're going to start talking about streaming, right? I think they're going to start talking about that [ __ ] strategy again, right?
I don't think Matthew Ball's ever shown affinity really in a strong way towards streaming. I I don't agree with that. He liked audiences. He's going to probably acquire Discord, you know, that kind of stuff. I UGC, he talks a lot about Discord.
UGC, where the gamers are going.
Where's the mobile? So, like for the love of God, you know, half of the entire game industry revenue comes from mobile, and Xbox now has like has King. They don't have Sell King is
Sell King. I thought they They should get rid of King. It's a distraction. Yes.
It's a distraction. No, the fact is they don't have the content for mobile. They do not have the content for subscriptions. They don't have the content for advertising. They don't have the content for any of this [ __ ] right? They have the content for a traditional console model, period, end of sentence. They acquired the two most hardcore [ __ ] studios in the planet with Activision and Bethesda.
Blizzard. And now you want them to go to

a mass market model like advertising with all these ad tech executives and and [ __ ] you know, [ __ ] tech bros. It's It's nonsensical, absolutely nonsensical, right? And the amount of investment required to do what Matthew Ball will likely suggest is like some kind of UGC platform. They're not going to be willing [clears throat] to do that. They're not going to hit the profitability targets required. God, they need to spin this thing out. All right. Well, thanks for bringing up breaking news and ruining our script, but that was fun. It was actually really interesting. So, we'll probably go a little bit deeper on that next week when we get more information that comes out. Stay ahead of the competition with Sensor Tower, the trusted source for mobile marketing intelligence. Whether you're tracking trends, benchmarking performance, or scouting the next big hit, Sensor Tower delivers the data that drives strategy. Dominate the charts with Sensor Tower. Let's be honest, you're tired of chasing installs across the same crowded

networks. We all are. That's why Vibes built a new playbook. They're the fastest growing gamified rewards platform and they are helping studios scale smarter, not just bigger. Their AI-powered targeting means you will finally hit the audience you want and with their new ROAS optimization engine, performance doesn't just grow, it actually levels up. So, if you're looking for a growth with a fresh angle, check out Vibes. It's built different. It's designed for growth and it's powered by good vibes. So, head over to v y b s dot c o and get yourself some good vibes. Unless you've been living under a rock, you know this is web store rumspringa. 70% of top apps are using a web store and the best ones, they're doing it with Appcharge. Do you want a $20,000 in-app purchase? Yeah, Appcharge does that. How about using web-based Apple Pay checkout? Yeah, Appcharge does that. Do you want to pretend that subscriptions

are still a viable monetization strategy for games? Yeah, Appcharge even lets you do that. Look, these guys are backed by Supercell, Moon Active, and Playtika. 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 IAP? Don't accept microtransactions, embrace macrotransactions. Learn more in appcharge.com. So let's go to actually another leadership [laughter] discussion on Roblox. Chris, I know that you wanted to get into some detail here. I think it's really interesting what's happening right now and I think I can shed a little bit more color as to why it's happening. Okay, so they have a new strategy. Clearly like they are aggressively pursuing a new strategy and primarily like driving more HD games is what the strategy is in order to age up and and change kind of the platform in in a way in terms of what they provide. And personally, I think this is a super

risky proposition given the nature of the platform and frankly the Wall Street expectations in a on a publicly traded company, which is obviously a huge risk, right? So here's what I think. I think David has been looking at this platform that he built and I think it's he thinks it sucks, frankly. He's all there's a bunch of money-grabbing chotsky titles, child torture video creators, and a bunch of other licensed IP garbage, right? And this is not his vision, right? His vision was to create a platform like Snow Crash or Ready Player One. So David basically is looking at a hard pivot to like HD content and you know, removal of a lot of the pedo [ __ ] and the connections to pedo stuff and get rid of all that like mess that's on his platform. And frankly, I think going for a more player-friendly, less predatory monetization platform is a good thing in a way if he wasn't a publicly traded company, right? That's the hard part, right? But that's why this is going to be a huge challenge for Roblox generally speaking moving forward. So the story I heard was that

the former CPO, Manuel Bronstein, was really pushing Roblox towards a more like traditional platform monetization playbook. Similar to these tech bros that we were just talking about at Microsoft. These are the same type of suggestions that these guys would say, right? Prioritizing revenue per user with advertising as the key driver, right? Alongside like investments in the the social platform that they were talking about. Like all kinds of things. For a publicly traded company, this makes a lot of sense, right? Particularly for the broad audience that is on Roblox, this strategy actually makes sense because it's just defensible and it's more predictable, and that's what the Wall Street absolutely [ __ ] loves, right? So, but ironically, during this shift of strategy, grow of garden and steal brain rot took the [ __ ] off, right? Like they set the stock to levels that were almost unimaginable, frankly absurd, and had nothing to do with the ad strategy at all or any of the strategies that Manuel was trying to go after. And it it was like the absolute like viral nature of the Roblox

platform, the content discovery engine that would surface these type of organic hits, which is huge, right? And it's messy, it's unpredictable, and the whole point of this ad strategy and this better monetization strategy is to eliminate a lot of this like, you know, dependence on this virality and this this hit-driven type business. But what happened was there was a clearly a falling out between David and Manuel, right? And the story I heard is that once Manuel got fully vested, he started mouthing off and was like speaking his truth about what he really thought and pushed back against David, and along with the CFO really at the same time, roughly, but for different reasons, uh they both left. So now we have David in charge with a new CFO. And this is a recipe for [ __ ] disaster, right? So like this super creative founder is now with a new CFO, and he's in charge, and no one no one has a say as to what's going on on that platform. Now, what I will acknowledge is that this new strategy for HD content may

actually be a good thing for the long-term health of the company. But as a publicly traded company, this could be a [ __ ] disaster, right? Particularly in the medium term for the next two or three years. Because I think this strategy is an illusion of an opportunity, right? It sounds good to people like Chris Heatherly, right? Who talks about this stuff all the time, like Roblox is the second coming, but it doesn't really fit this platform for three fundamental reasons. One, they don't have the developers to build this HD content they're suggesting, right? It's much more complicated. It takes a lot bigger teams and a lot more resources, and they're trying to attract these new developers with a 40/60 split? They're out of their goddamn minds. They got to go to 70/30, minimum, right? And I will have to say that I have heard that they have signed up a developer, which will actually make my thesis sound really stupid, but but the failure of these games will be proof of my overall point. Second, they don't have the

customers. You bring HD content and to this platform, every single person I've talked to at Roblox has said building HD content is an exercise in losing money, right? And anybody that wants HD content is going to go to [ __ ] consoles or PC. If you want to play GTA, you're not going to boot up Roblox and search for GTA game. You're going to go to play GTA on a console. So, I think there's a huge mismatch in terms of the customers that they actually have. But the biggest and the most important thing to think about is that 80% of their audience on mobile, right? They They have a huge problem from a platform perspective, right? HD content does not work on mobile. Full stop, right? There are two exceptions, Call of Duty and Genshin, but like 3% of the revenue on mobile is driven by that HD content from my last analysis of this particular thing. Not the fact the fact that to mention the fact that like most these people are on mobile devices that couldn't run this HD content to begin with, right? Because

that's the whole point of Roblox. It fits on almost any type of spec for device. So, and the fundamental problem is that this the company They're basically pivoting in a way that they have been pitching since the IPO about user growth, low fidelity, higher audience participation, higher audience reach. Like that's been their mantra from the get-go. And aging up to some degree, but ultimately their core strategy has been trying to attract more users. That's really the core premise of their whole platform. And to pivot from now is going to be really, really challenging, right? From a growth perspective. But the other fundamental problem is that having this much power at the top with Pincus and Zynga, you know, these visionary founders, we've seen this happen before, right? And with Zynga, like Pincus almost managed that thing into the ground because he stayed true to his vision of what he wanted, right? Which was which a failed vision in a changing market between Facebook and mobile.

So, I think the the danger here is that this pivot is going to take them back significantly and cause real serious problems in the medium term. And this is my my big issue with what they're doing right now. You know, Chris, as usual, I agree with so much of what you're saying around HD, particularly because I come at things from a player and a consumer lens. And the reason why Roblox has been so successful is it has made a gaming platform that fits the needs of Gen Alpha and the next generation of gamers. It built a low-spec, you know, operating platform that works on Somebody told me it works on like a like a second or third generation Kindle. It's so pervasive in what it can do. And you're right about the mobile ecosystem and what it's able to hit with 80% being on mobile. And captures the social playground, which is what kids are looking to do. Now they want to go into the red ocean that every other platform lives in today, and they want to do that

in a way that is super challenged because they have this safety and security issue with this whole other set. So, you're trying to actually make new products and services that your existing audience doesn't necessarily want. We've talked about how kids, when they see HD content, high fidelity, deep content, they're like, I don't want to try that hard. I really enjoy the social jump in. I can do all of these experiences. So, you're trying to create something that your customers and your players haven't necessarily signed up for. It feels like Roblox is doing a look over here. We're going to do things for that older consumer and that older player because we're getting our asses kicked with all of the lawsuits and all of the different things going on. It's like, oh, wait, we're going to be different. We're segmenting this into different age groups. We're We're having new content so that we can appeal to advertisers who, by the way, are not really allowed or can't easily market to those younger kids. So, Mishko, what I know I know you work a lot with developers and and Roblox themselves in

many cases. What are you seeing? Uh I mean, seeing and talking. I actually Roblox safety, chief safety officer and head of policy was on the podcast last week. So, that one is dropping. I have I have pretty hard questions. People think I'm shilling. Like, the my questions were so tough that the uh the comms team had to have a call before that. Two comms managers are like, what are you trying to get out of this? So, anyways, that's coming in. But, I read the news. This was a little bit of an older one, like a couple of months old, regarding this where Roblox announced the incubator as well as the jumpstart program. So, the incubator is like this six-month milestone driven program designed to help experienced team refine experienced team, by the way, to refine promising concept of novel game into polished, scalable, commercially successful games. And then, Roblox jumpstart is basically this sort of a continuous program after incubator designed to help creators who are new to Roblox learn the platform and help experienced creators explore novel game. So, both these programs are focusing on

experienced developers. and that kind of is what has been happening and what I've been hearing from the market that they have approached quite a few of very known developers to create content on the platform to essentially bring a more older audience, and that is also how they're skewing in in different payout methods like they announced that older audience, you basically and the US-based audience, you get a bigger payout as well as the other new programs. But overall, just talking about the incubator, I was able to talk to a few people who actually went through original incubators at Roblox. I think they closed it down 5 years ago. And these incubator programs had a lot of success, and a lot of these companies that are currently doing very well were spawned out of these incubator platforms. And the difference between then and now is before, when kids joined these incubators, they were kids, they used to pay them to build games. But now it's sort of like this free labor on side in one of the most expensive

locations in the world known as the Bay Area. And I know that I'm you know, I'm accused by some of being a Roblox shill, always seeing the positive in whatever news we're covering, especially against Press's quite negative takes. I mean, the camp of Heatherly. But I do have to agree with Press on this one because again, talking to some of the people who have gone through and have been working with the advisors of Roblox, the advice given is not that great. And according to my sources, you know, the reason be why the previous incubators worked so well was because everybody was young, everybody was poor, and their backs were against the wall. Yes, they had shipped some games before, but this was kind of like the last thing before they need to go back to school. And today, these studios that are participating, and I talked to some of the studios who were asking me actually whether they should participate or not, and I actually said yes to them because they're mobile studios. So, these studios that are participating, they're not broke. They still have some funding. So, it's kind of like their backs are not really against the wall and it's not

really successful. They're kind of dipping their toes. This is their first foray into Roblox for these teams. I have this analogy basically. So the analogy is is like if Meta or Apple or Google would be running an accelerated program and you join that. Do you think that the teams that joined that accelerator program would be shipping some blockbuster titles? Like seriously, the problem is is that Roblox is a fantastic platform, but they know very little why the certain games are successful and why others are not on their own platform. And so it's kind of weird that that they're providing this accelerator with help to succeed on their platform even though they're not even game developers. So I think the direction is correct. I would disagree on that with Chris that they should be going towards the older audience and the audience that is maturing on Roblox so that they can keep them rather than losing them to other platforms, but I think the methods that they're getting there, not all of them are great. Like the compensation methods and in terms of giving a bigger percentage of the income for older

audience makes a lot of sense and other things that they've done, but these sort of accelerators, I don't think they will work. I think we just need to take a moment and something Mishka you've talked about previously is Frontlines. Do you remember this? This was the AAA shooter that they attempted to make. And when I say they, it wasn't Roblox. It was a developer. We're playing video that right now. It looks almost exactly like Call of Duty. You don't need the blocky Roblox characters. That's a mis- misconception. You can do whatever you want in the Roblox engine. This game failed. This game does not sustain. The shooter that's succeeding is Rivals which we've talked about previously. It's a great shooter, has strong mechanics, but it's still clearly in Roblox's art style. And so I think the question for Dave that he really needs to answer is like why did Frontlines fail on the Roblox platform? And then why isn't the platform naturally creating this content that he wants. Like why are the incentives messed up that this is what succeeds and the stuff I want doesn't succeed? I mean, here's the thing. Roblox only spends 200 and 300 million

on marketing per year on about 5 billion in bookings when you remove the DevEx payouts. And so they need to grow. Why not you just use this as a marketing stunt? I mean, that's your that's your kind of like lower bound is like you go out, you make a triple-A game. Maybe you spend 100 250 million on the triple-A game and you show whether or not the platform can win on distribution. Like this is supposed to be the Death Star. They've never showed that because they've never done first-party games. They've never really pointed the audience at anything. And I think the question is like can they make hits? Can Roblox be a hit maker? This was always the question for Netflix, right? Can Netflix like revive series' corpses? And they've been able to do that. And I think the question is like can Roblox make a hit and can they make a triple-A hit? So 250 million maybe in production, don't spend anything on marketing, you just distribute it on the platform like Netflix. That basically doubles your marketing cost for a year and still gets you like under 15%. Like why wouldn't you take a bet at that size? [ __ ] it, why not? Even if it's not working right now. The strategy seems

seems apropos, Eric, which is like hire another developer, don't try to do this in house. They don't know how to make games. They're not game makers. Hire someone, they have to learn the engine. That's the only downside. Right? You got to learn the Roblox engine, so that's going to be a barrier for like a, you know, a Timmy or another studio, but yeah. I I I think take take your shot and go. What do you have? Just imagine you're going to run into some serious issues from production perspective using their platform. All right, it's not Unreal, you know? It's built to make the type of chachki [ __ ] that's on the platform now, not to build HD content like a $250 million joint, you know? That's fair and I would say it's very interesting to see Epic grapple with this with Unreal for Fortnite. But again, you're going to have Roblox's support in ear if you you this deal, right? They want us to succeed, so they have a vested interest in getting your feedback about like what does this tool not do? Well, ironically, the rumor I heard was something that like the type of AAA developer that they're getting on board could lead you down this road. So, oh,

to your point, actually no, the one thing I did think about was that doing a deal with a AAA publisher to do bigger products will actually help inform on how to build the development tools better to build this type of content going forward. So, I think that that's smart and they as far as I understand it, they are doing that. There's still a huge problem with the disconnect between the type of software and the platform that they're on and the customer that they have, right? And so like this is the problem, right? You're not playing Call of Duty on Roblox, you're playing Call of Duty on a console.
Sure. What's your growth strategy, right? Cuz you can't say double down on the core audience. I don't think that's the answer anymore. You have to monetize the audiences better and that's with advertising, social media, better monetization mechanics. Yes. Yes, advertising, but of course you're going to have a problem with this audience, which is always going to hamper you in terms of age verification, the ECP Ms. I agree it's a revenue stream, but you know their income capped this audience. Like I work a lot with education clients and we go through this all the time, right? Like, oh my god, this thing

spreads like wildfire, but I can't monetize. Really low conversion rates.
Yeah. And it's because this is an income capped audience. That's just the reality. You're fighting against that. Like you always complain about the fact that conversion in the West has never moved. I mean, Jesus, man, this is far worse. And they don't want this. They don't want to come to this platform to play this kind of content and people might say, well, Jen, there's nothing really there for them to play and then you just show this front line art style. Like they they want HD content, they go on their PC Steam and they play their front slot games or they go to console and play the next amazing looking thing. I would love to have seen the consumer insights that says that this audience is craving this kind of content. Like they're trying to say that the content is going to be the bait to capture the older audience, and I I just don't think that's I think that's really difficult to do because they already can do that better other places. I think we're going to have to end it and boot a lot of the other topics. The

one thing, let me just say if if you were interested in safety and compliance and all of those things, Kid I D just launched a a new kind of like a a program that can help you do this a lot better if you're a small developer and you really want to be mindful of the stuff, go check out what Kid I D just announced, which is an integration into AI platforms. So, that way I cover that topic, and I do not get paid from them. I just think it's super super difficult and impactful to know how to make sure you're navigating this space correctly. And they've been on the podcast. I think what they're doing is a service to the industry and like super helpful. I have so many parent friends that just talk about how many of them won't let their kids play Roblox or other kinds of of games because they're just worried about this type of stuff and this type of compliance. And so, I think the more that we can educate people on platforms that allow us to be better at it, I think it's great. All right. So, that that'll wrap up. We will see you all next week and get more

into it. Nice to have the four crew back. It's been a while. Missed you guys. You did it. You made it to the end of [music] the episode. As a fan of the show, it would help us out if you subscribe and leave us a review on the podcast service of your choice. Those stars and likes, while a small action on your part, mean a lot to us and help to grow [music] the show. More importantly, are you a member of the Deconstructor of Fun Slack group?
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