TWIG #389: GTA 6 Pricing, Tencent Pulls Back from Japan, and Steam Machine Flops at Launch

I got to meet Tim and I have a picture with him, which is kind of fun. Um
Dude.
It's somewhere.
She got sucked into the Matrix, man. What the just happened?
What happened? What the happened, dude?
That's why it's all interesting. Okay, that's why.
[music]
Hello everyone and welcome to this week in games 389 Deconstructor Fun, that's us. I'm back after 2 weeks, so I'm Jen Donahoe. I head up the marketing and publishing role on the podcast. Today we have in first chair back from Canada.
Adam Telfer, product just product.
Oh my god, that was like the most excited I've ever heard you in your entire life.
[laughter]
I've had a coffee.
Canada deserves first chair, just saying.
Chris strategy and investing.
[laughter]
Mishka Gotkoff, friend of the founders and to be clear, friend of sustainability.
Oh god, all right.
More like

Okay, we'll get to that in a second. Here's what we have on the episode today, a recap of the round tables by Deconstructor Fun LA edition. Chris and I hosted that. GTA pricing is finally out, we get to stop the speculation. Tencent is exiting some studio investments, leaving us wondering who has any money anymore to do anything. Epic state of Unreal and Unreal Fest head Tim Sweeney recruiting for team open. General Intuition has a really big raise, we want to cover that. Roblox announced a brand integration fees in an unprecedented business model, CPM model, it'll be crazy. Sadly, Digital Entertainment, which was the puzzle studio that two ex-King Chiefs built to be the Candy Crush killer, looks like it's sadly not going to make it. Steam Machine pricing takes the consoles over $1,000. Holy [ __ ] the rampocalypse is real and a topic we might not get into today, but I think you a monthly

will is Google Unity meta and Maloko partner to invest a billion in AppsFlyer, one of our lovely sponsors and good friend Byron Murphy. So amazing to hear that they got just a little pocket change. So Adam, welcome back. It's been a while. How are you? How is Canada? How are things?
Well, it's the last week of school here in Canada. It's shifting into sort of the cottage season. So I'll be heading up to my cottage next week for the full week for Canada Day. It'll be good. Yeah. On the lake.
Canada Day.
Canada Day. Well, I'm sure there's a little World Cup action. So I am sporting some gear because I'm going to the World Cup game tomorrow. US versus Turkeye. It's actually not pronounced Turkey. It's pronounced Turkeye. And then to remember how to say it correctly, Adam, I invited you on the podcast because I just need to do my best Canadian and say Turkeye. And then I'll remember how to [laughter] do it, right?

[laughter]
At least in terms of World Cup, it's been really fun to watch. I was in Europe last week, so I got to watch actually the Spain game in Spain, the England game when I was in England. So that was fun and I went to the Canada Bosnia game, the first one, the
You went to what?
Yeah, cuz it's in Toronto, right? There's one in Toronto. So it's like a 20-minute train ride for me.
Oh, that's amazing. So the US and Canada are moving on and Mishka, how's Greece doing?
What I learned, I actually did not know Greece is a basketball country, which is so counterintuitive. Like honestly, it's I don't get it. But you know, not not part of this game. Neither is Finland, by the way.
I know. Sorry, guys. All right. So our next Deconstructor of Fun round table is in Seattle, August 6th. It's at Amazon AWS headquarters. Laura's coming. Chris, you in for another one? Can I talk you into that one?
I'm in. I'm unless something comes up with the schedule, but I'm in.
Awesome. Uh we had a lot of fun. You're the best. Thank you for coming.

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So, I messed up. This is now Wednesday, so I messed up on Monday. I posted about Rovio Entertainment and got myself in a really hot mess. So, the point that I was trying to get across was the companies under distress, which by all account Rovio is, need a blinding focus on fixing the core, and that means zero distraction. And my damn ass used the sustainability report that came just fresh out of oven as an example of a distraction. And, you know, I foolishly also named some of their goodwill initiatives against the backdrop of revenues halving in just 4 years after the Sega acquisition. And that was a huge mistake. So, I came off like I dismissed climate change. It came off like I dismissed role of women in gaming and I totally understand why it came off that way because I kind of wrote it in that way. But, neither is what I believe in, but

it sure reads like it. So, I apologize publicly and privately to the person that wrote this report, who is Thormir Lopalian. I think it's an A-class report and I also thank the people who pushed back because they were right and my initial replies were just stupid. I got defensive instead of listening because I was in my head making the point of non-distraction. Anyways, overall, just need to be much more careful with the platform that I have in what I post. So, sorry for the splash damage to this crew as well.
First, just it takes a lot to admit mistakes at all and to admit them publicly. So, thank you for doing this and also thank you for setting a really good example for others. I think the world we live in right now, people double down on their mistakes and you know, I I'd love to see that you have the willingness to come on a public platform and say this. So, thank you for doing that because many of us did get splash damage. I'm not your mom or your work wife and so it's not my role to like guide you. So, thank you for just

doing this on your own even without us kind of prodding you to do that. It takes a lot.
Let's be crystal clear here, Mishka. There are three rules for LinkedIn. One, no [snorts] politics. Yeah. No nasty responses in the [ __ ] responses. And for you personally, no [ __ ] economics,
[laughter]
So, let's just leave it at that. Those three rules you can live by and then you'll be fine, okay? And stop [ __ ] AI-ing everything.
I know. I know. In my mind, I didn't even understand that I was posting something that is culturally sensitive cuz I was like, "This is about focus." Anyways, let's just move on. I was an idiot, but yeah, I admit.
Well, thank you. All right. So, uh let's go on to the first topic, which is our Deconstructor Fun Roundtable event that was in LA. So, thank you for coming, Kress, all the way down from San Francisco. It was hosted at Google Play with Webtoon and Helpshift sponsoring us. So, thanks to them for doing that.

It's always a whirlwind when you have to run the thing, and I was on stage the whole time and preparing the whole thing. Uh I think it went really well. Kress, I'll get your feedback in a second. The turnout was really great. The conversations, the quality of people from game companies to licensors to obviously, you know, Google folks being there as well. We captured some key takeaways, and I'm kind of synthesizing it. So, I did a little LinkedIn post, but maybe next time I'll do a little bit more on on some of the thoughts. Uh Kress, how do you think it went?
It was really a solid group of professionals from all over the place. There were a lot of people I knew, but also a lot of people from all the industry around like EA and Scopely, and it just seemed like a good group of people that actually do work, you know. The venue is [ __ ] amazing. I mean, the the Google office, you know, it's the where the Spruce Goose was made. It's this absolutely massive hangar, which they built an office within a hangar. It's so absurd. It is like the Silicon Valley throwing up in LA. I mean, it is almost grotesque, but it is

by far the best office I've ever seen. But, I think the event keeps getting better and better, and I feel it really does create like a pragmatic dialogue between actual professionals that are doing work, you know. And a lot of people were just kind of mentioning like that's kind of what they want. They want to get that stuff out of conferences, but it's really hard to achieve, you know, because all you see with the like GamesBeat and stuff are these PR-trained speakers that are just [ __ ] shoveling shite out there, you know, [laughter] or insane benders that are just [ __ ] boring you with like [ __ ] statistics trying to sell you their [ __ ] you know. And all these conferences like GamesBeat are like that. Or, you know, at GDC you're dealing with these absolutely massive audiences and you end up being stuck with some idiot that's talking about ad tech for 45 minutes and you're like,
[laughter]
"Get me the [ __ ] out of here." you know? I didn't see any of that happening here as I mean as much obviously there's a little bit of shilling and a little bit of of salesmanship on some of the things, but I do like these events. They're a very intimate setting and I think you can get some real insights, some best practices and and actually

talk to people that are actually on the ground doing [ __ ] so that you can get see what's going on.
Yeah, I I got a lot of those stories on the side which, you know, I think as being many of us are consultants, so it's nice to like be able to leverage that to learn a little bit. So, I created a fun AI image for the roundup that Chris, I think you and I both love, showing it here on the screen. I didn't know that uh Gemini still was able to use IP. I guess it is cuz you got you got Mario and Pokémon in here. But, uh the thing that I wanted to cover two of the the insights here. I had this platform that was pretty cool but I could survey the audience and so in real time you could see people's reaction to certain questions and so I asked, "What is the state of the games industry versus last year?" It was a five-point scale. On the bad end it was shite, a little worse, same, a little better, or [ __ ] yeah. And so, as you can imagine, I think it was, you know, 57% that basically were on top or bottom two

box. The sentiment of how people were feeling in the room was a little bit negative. You had same to worse and now you're not doing so great. So, that felt a little icky, but one of the things that we talked about that was positive, we asked, "By the end of 2027 GTA 6 will not have launched, underperform versus the hype, met expectations, or holy [ __ ] sales?" Holy [ __ ] sales wins with 41%. And so, I think we even said meeting expectations was like 2 billion in the first, what was it, like couple weeks? So, I think everyone thinks it's going to just absolutely crush it. That kind of leads us into the next topic, which is we didn't know this at the time that we did it, but GTA just announced their pricing. And so, I got this from Game File. Rockstar confirmed GTA 6 will cost more than the average game. So, well, same as if you look at what Mario Mario was on the Switch, too. So, it's going to launch at $80 for the

standard SKU and $100 for deluxe. It's going to be on November 19th for PS5 and Xbox Series X and S. You know, it's not on PC for a little while later. So, here's a couple things we didn't know, or at least I don't think I knew. One is it it's a single-player only experience. There's no word on the online experience, and it's obviously not PC at launch. And then, they're also launching disc-free. So, the box copies will launch with a download code. So, I guess you go to the store, you buy a box, and there's like a slip of paper with a code in it. That's funny that they're even doing that at all, but I'm sure retail is making them do that to make sure that they get the retail SKU. Titles are around 60. They've been that way since 2007 through 2020, and then it's been $70 since the start of the current console generation. GTA 5, so the last edition launched in 2013 at 60 bucks. Can you I mean, I just sometimes can't remember that it's been that long since the last GTA. GTA 5 had

230 million copies sold since its 2013 launch. So, here's what's in the deluxe SKUs. Phil's going to love this stuff. More in-game content overall, including multiple exclusive in-game stores, a set of collectible classic cars, plus exclusive vehicles, clothes, and weapons, an exclusive illegal goods store. Great, like we're teaching the next generation good stuff. Unlike Take-Two's usual deluxe edition, this $100 version does not include early access to the game. So, I thought that was really interesting. I mean, mostly these days you always get early access. So, Adam, now that we have pricing, I know you've been dying to talk about this one. What do you think?
Yeah, I like this play. I think GTA can price what they want.
[laughter]
Like this could have easily been 100 and would still sell absolutely well. Yeah. And I think as an industry, this should be celebrated as like this is giving us a little bit more breathing room, getting from that 70 to 80. And I

think any of these games that are like over 100 hours of incredibly deep in quality and engagement, like Elden Rings, Skyrums, these should be 80 bucks. And I think this gives a little bit more pricing ceiling because I believe that they're worth it. And in general, in terms of like the premium PC console industry, I think we're in a good spot in terms of like players accepting sort of a stratification of pricing between 40, 50, 70, and 80 base edition games based on the scope of the game. In terms of the deluxe edition, I I just reacted there. I I didn't actually know it didn't include early access. That just seems like a a weird thing to cut out. And you know, I can always speculate why they didn't do it, but that just feels like an odd thing not to include. But everything in the deluxe edition is just optional. Like optional, but slightly gameplay impacting. So, I think they're doing the right thing in terms of like I saw it like there's a lot of value in the $100 skew. But either way, this is GTA. There's going to be a ton of price

insensitive buyers. They're going to get a ton of attached to that ultimate edition.
Yeah, Chris, like I don't think there's any such thing as price in inelasticity with anything GTA related, right?
No, and I think a lot a lot of people are out there basically bitching because they left money on the table by not having a $100 skew. And I'm like, I kind of always felt that they were going to be more player-friendly to get them into the ecosystem and $80 even though that is a high price the Wall Street guys maybe disappointed but they shouldn't be because I I I think this is a the better price. I think it also confirms that online is not coming at launch which is what I've been saying for a long time. But I still think that's a shock to some people I suppose. I'm actually a little bit disappointed in the high-end skew. I thought they would have another high-end skew that would be more compelling and make the average selling price even higher.
They they could have easily done a 120
Yes.
160 skew right of just like with crazy

[ __ ] but if they don't have online at launch there's a lot fewer bits of content they could use.
Yeah, I mean early access I know why that is a little bit controversial because they want to everyone to experience it without spoilers and so that might have been off the table. I don't know if they did that for the last GTA. But anyway, so I'm I'm a little bit surprised that there's not like a third like super skew, you know, like an insane skew that gives you a [ __ ] statue for $200 or something.
There is there is a There is a collector's edition. It's just like that is so incremental. You don't have to worry about that.
I wouldn't be surprised about having codes because I think people are doing they're doing that already with a lot of games.
Yeah.
Yeah, this game is too [ __ ] big. There's [laughter] no way it's going to fit on a disc.
We're we're now in a digital only world. Yeah. I think anyone who's honestly thinking disc whatever.
I think I'm treating this as a happy medium.
Right cuz I had assumed that it was going to be $70 and then they were going to have a $100 skew and a $120 skew but the average selling price is going to be over $90, right? And so basically it split the difference, right? Because between 80

and 100, you know, the average price is going to be in the 90s, right? Probably. So
Adam, what do you think the attach rate is going to be with GTA 6 in the consoles? Like when Chris and I we were talking about this like 40% was was like what okay, Chris is that what you said? Like do we think this is going to be like 50 or more?
During a pre-order phase, you're seeing much north of 50% 60% attached to the premium SKU and then when thing comes out the launch phase, you're still seeing this like golden cohort very high attached. If you're looking at it on a longer ultimate phase, then you're looking at
Adam Adam Adam Adam, she's talking about attach rate to the hardware.
To hardware, sorry sorry.
But like this is PS5 basically only. Like this is next
PS5 and Xbox.
And Xbox.
Dude, they said see oh that was the surprise, sorry. I thought they would get a Xbox Series S like past dude, because that's [ __ ] [ __ ] that this thing works Series S, you know.
Oh that's true.
Yeah, but that wasn't the announcement. Dude, that's going to be the shittiest

[ __ ] SKU ever. They're going to cut to that this year.
Oh what what do we think the attach rate of the SKU is going to be to hardware? So
Current install base.
Install base, yeah.
Always in like what's the percentage of people that it's going to play on PS5?
On both.
On both.
Dude, that's the most simple way of looking at this. What is the attach rate to the 150 million install base of hardware, right? Is it a 10% attach rate, 20%, 30%?
I have I have a question. So GTA 5 base game sales generated between 6 to let's say 9 billion globally. I think they sold 230 million copies and GTA online has grossed over 5 billion in lifetime revenue. What do you reckon will the the online of GTA 6 be higher than the base sales?
I don't think that no.
Well, we don't know what it is.
Base game? No.
Yeah.
I think that those numbers look low. Why do they look really low?
Yeah, like the the leak the leak had it

yeah, the leak had it that there was like the 500 million annual run rate coming from GTA online over time. Right? Like again, you're just looking at what's the different timelines. The base edition is going to clean house for the next few years, right? The live online, especially if it's delayed, will mean like, okay, year two, year three, then you're going to start to have a stronger baseline. This absolutely could be over a 500 million annual run rate online opportunity for this game, right? If they execute well, cuz GTA 5's online, if you remember, like they inflated the [ __ ] out of the economy and it was basically broken expansion over expansion. So, if they can set up a better foundation with this game and learn their lesson, yeah, definitely.
Mhm.
Yeah.
Yeah.
I My model is basically 1.5 mi- billion when they get going.
A year?
Yeah.
A year. 1.1 to 1.5.
And no egregious monetization. You think they're going to avoid any like loot boxes or gacha?
No, but they The first one already had egregious monetization. Had a casino.

Like you could buy whatever [ __ ] car you wanted.
[laughter]
I think they got one taste of that casino thing and they're like, this, dude, we're doing that because that really did monetize them. And it was a daily appointment mechanic as well. Refreshed every day, so people would come in, you know.
So, I don't think there's loot boxes, but like they don't need loot boxes to have crazy monetization either.
All right. Well, let's keep going. Uh Crash, you brought up this Tencent article. Go ahead.
Yeah, I will kind of make this quick a little bit, but there was just some rumors out there about Tencent is negotiating kind of exits from some of its Japanese investments from a few studios in Japan, Marvelous. And basically it was saying they're kind of reassessing their global company portfolio. Obviously, this is all rumors, um but they do have a lot of minority stakes in many studios, including some US and European studios. But if they were planning on really doing a divestiture out of games in general, that would be bad, right? So, you know, my take is basically, look,

it's another buyer off the table, first of all, because even though they were restricted by CFIUS in the US, they still were making moves in Europe, Japan, Southeast Asia, other places they were actually trying to build this stuff. But, if the corporate strategy is going away from games and focusing on other things like AI and like other stuff, not good for gaming, generally speaking. So, anyway, that would mean basically again, as I said yesterday, was that the Saudis are the only ones left buying assets in gaming. [laughter] It's It's not a good thing.
For the listeners, can you describe what CFIUS means?
Oh, CFIUS are these absolutely egregious like reporting requirements from the government.
US government, right?
US government, but it's like DOD [ __ ] you know? It's almost insane for a Chinese company to do any type of M&A in the US because of the restrictions and all the things the hoops they have to go through in the legal. So, it's almost impossible to acquisitions in the US.
So, from the Eastern market, you know, NetEase pulled back back already on a

number of companies. I remember when they that happened.
NetEase didn't pull back. They completely eliminated all of their investments. So, it's like Yeah.
Okay.
They could have divested.
Divested all North American studios. It was a big
They fired everybody.
Fair point. Pull back is the light version of divested. Yes, you you were correct. Got it. And then, all right, so we know your thoughts on gaming VCs. So, there's only a few of them left like Griffin and Haveli are kind of left. On the public company, you got Take-Two. I don't know, Embracer, I guess, is public, but you know, in a different market. But, they don't seem to be in shopping mode, you know, for Embracer, quite the opposite. From a platform perspective, you know, Google Play, Netflix, they don't seem to be in buying mode. So, I don't know. I just started to run down everything and I'm like, I you know, maybe you're right. Like, maybe it's only the Saudis who still have money, but even then, like, they're also kind of not doing as much with, you know, geopolitics going on right now.

Basically, what this means though is that if there's less demand for these for game companies on the acquisition side and and for liquidity purposes then the value of the supply is lower right that that's the that's the main problem here. There's no exits. There's no way to exit anymore. People won't invest in things that they can't exit from.
I read the the article on Bloomberg and I think there's a little bit of a projection when I'm looking at the things that you guys are saying not that they're wrong but I again I'm not familiar with the Japanese gaming market or the valuation that that are going on there but according to this report and what we're seeing this might be very market specific decision because Tencent was super active in 2020 with the investments into the Japanese market into the gaming in the Japanese market seeking a lot of minority positions probably that were quite expensive. Those investments again during that time period they must be underwater right now and they're and they're you know divesting from those but not from gaming but they clearly stated in that article that Tencent is in gaming long-term.

This is just Japanese market. And I agree with Eric's sentiment that once the acquirer exit the scene there's kind of no point in investing because there's no exit in sight. So that is pretty brutal for the entire ecosystem because you know it just basically takes it away from any professional fund to justify their investments into content and you kind of are left with either strategics or private equity or angel investors. So that kind of is problematic but again I wrote about this extensively in the article called the math that broke gaming VC on Deconstructor Fun. You can check that one out but I really want to challenge specifically these projections that we're making here because from what I know Tencent has been very active in some of the key markets like Turkey for example. Their investment team is always present in Istanbul. They have very close relations with the local VCs so they see all the deals going through like you know the Latams the Arcadias. They were at the event Crest when when we were in Istanbul last time, Tencent. So, they are always there.

Yeah.
What have they done? Give me a transaction.
You could have your biz dev person there. Like, what's her name? She's always there. I've I've seen her for 5 [ __ ] years. Have they done one investment?
I'm not sure. I and I'm not going to go to the details because I know that they are active at least when when the bidding process has come in. And then there are other Tencent portfolio companies that are taking actions. Like, Miniclip has been active on buying fronts. That's a Tencent company. I know Supercell hasn't bought much. I mean, they did get the rest of Metacore, but, you know, their whole board has been actively visiting Istanbul. I'm not going to talk more about that, but I'm sure there's some moves coming on there. The way I see it, it's not a good look for sure, but this feels like a Japan specific here. And doesn't just feel like it Bloomberg article really states it. And on the positive side, you know, got to have a bull case here. I think we'll see more management buyouts. Those have been in the news as of late. So, that's a good thing because as a friend of the founders, I would love the founders to sell a company, get wealthy,

and then buy the same company back on pennies on the dime, and just run it again. Like, that's a perfect scenario. The management buyouts is like double thumb.
I do agree with that. That is actually interesting potential anyway. I mean, that's a silver lining. But, I would say that what it seems to me is that either Tencent is moving out of games and focusing more attention on other parts of their business or focusing on internal development the same way that NetEase did. Right? So, they'll develop in China because it's cheaper and better and yeah, and more profitable.
Right, let's go to our next topic, which is the state of Unreal, so or Unreal Fest. So, I was actually there all last week. It was in Chicago, and there was a lot going on. The actual state of Unreal presentation was really really well done, and they had a bunch of announcements. So, I wanted to cover just a couple of things here I think that are interesting for the audience. So the first thing is they announced probably more officially Unreal Engine

6. So they're targeting an early 2027 release for early access. Basically, this is going to combine UEFN, which is kind of their verse engineering system, and Unreal Engine into one consolidated platform, and so that's a pretty big deal from the engine world. They've crossed a billion dollars paid out to Fortnite creators through UEFN, which is a real milestone. I think I saw something like 75% are going to creators that are not just doing kind of shooting, but like multi-multi-genres. They moved it over to Unreal Engine 5 across PC and mobile while running the game live. And I'm like kudos to them for even doing that. The woman who runs tech has been in videos. I think it actually leaked cuz I saw it in LinkedIn before I saw it here. I was like, "Oh my god, that's well done." And I just have such a soft spot for that. So congrats to Riot for doing that. All of the LLM MCP integrations, Adam, I just thought of you. These looked amazing. I mean, I

know that a lot of this was still like stage show, and they showed videos with like accelerated timelines because you can't you know want to sit there and watch the engine think for a while. But this is like pro-level AI assistants. And so if you're in the camp of being pro-AI, and they made sure during the entire thing to always say the creator was in control of all the AI integrations. And this was allowing you to control things. It wasn't necessarily like coming up with like gen AI kind of things. But when you see this, it was just like incredibly incredibly impressive. And so I I just think if you're in that space, you should really check it out. The thing I wanted to dig into was something that Tim Sweeney said in the keynote, and I think it's worth a conversation. Besides him really having his finger on the pulse of the changes of in Alpha, he's calling out Roblox as a threat. And in his words, one view of the future is that Roblox grows and eats gaming. A centralized platform with a single keeper that takes more than 70% of revenue and has 450 million users.

That's a real challenge to game developers. That was his quote. So his answer to this is something called Team Open. Studios link up their content, their communities, and their economies across games. Items you buy in one game work in another. Your friend groups travel with you, but I mean this has been his vision. I think he knows metaverse is a bad word. I don't think he's changed at all from the vision. He's running the campaign of make metaverse cool again without saying it. He's always believed in this. You know, unfortunately, I think meta [ __ ] him when they took the name and they, you know, they they kind of took that out of the, you know, out of out of out of the running of something that anyone thought was cool, especially with Horizon Worlds and the no feet world. I think his idea of interoperability is interesting and aspirational, probably difficult, but uh that's his idea. I think that this cross-game identity portable economy is a social layer that live above a single title is is super interesting. And, you know, if aspirational, probably really hard to do. I think there's a little bit of

difficulty in like, do you trust him to be the benevolent toy guy, you know, toy guy, sorry. Thinking about toy industry. The the benevolent video game guy who's going to come in since, you know, Fortnite is a closed ecosystem today. And we can maybe look at what he's done with the good intentions of, you know, the battles against what he calls the overlords, you know, meaning the platforms that take 30% of Google and Apple. Can we, in a sense, trust that he has everyone's good interests at heart? So he took those guys on and now he's taken on Roblox and I think I'd be scared to be Roblox with Tim Sweeney coming after me. But I think this is exciting for all of us to think about. And Adam, I particularly wanted to get your thoughts because we talked about this a lot. Interoperability is hard. All of these things are hard. What do you take from his pitch?
I think it's more
[laughter]
I just noticed a lot of the acrobatics you were doing as you were talking through your opinion there.
Yeah. [laughter]
It's interesting. Real interesting. It's difficult, but it's interesting.

I I I like the idea. I mean, like wouldn't it be cool?
like like Can we show your photo, Jen, of the of the event? Can we show the event photo?
I guess you could. I, you know, I I got to meet Tim and I have a picture with him, which is kind of fun.
Dude.
It's somewhere.
She got She got sucked into the Matrix, man. What the just happened? What happened? What the happened, dude?
That's why it's all interesting. Okay, that's why. Okay, cool.
But okay, as a player, from a player perspective and from a future of the industry, why is that not like a vision that is interesting and could be like a saving system rather than having a bunch of closed systems? Is that
I really want to avoid this becoming a gigantic rant about the metaverse. Look, I think Tim Sweeney's incredibly smart. I think he identifies the crises around AAA publishing really really well. But interoperability does not solve the problem. I'm very against interoperability being

the panacea of this industry because I really believe this would just make things worse. The one issue that I have is that he buckets single player and multiplayer into the same thing and even called it out, right? Which is just really stupid, right? Like playing Resident Evil, how would I ever connect that economy, that game to any interoperable economy? Like it doesn't It wouldn't make sense. I wouldn't want to do it. It's a completely different thing. So single player games on one side never should be interoperable. Those should continue in the direction that they're going in right now. And so at least in like the multiplayer space in the live service space, I don't think interoperability solves the black hole problem that we're seeing right now in the industry. I don't think all of a sudden, if games are on UEFN or in some interoperable space, that all of a sudden players are going to be able to say like, "Oh, now I want to try this one and I'm willing to retain in this live service more than before." In general, I just don't believe interoperability actually solves the

problem that players have in a way that results in stronger retention or stronger performance of these titles. What I actually believe in is the real scourge of the AAA industry is scope, costs getting out of control, and teams not being aware of when their execution is going not going to match player expectations, and they need that signal earlier in development. And that's where I'm seeing a lot of AAA devs getting way too late in development and then realizing they're not going to hit their benchmarks. They're not going to hit their targets. And I think the actual true solution that Tim can bring is Unreal Engine. A really strong game engine that makes baseline development significantly easier, reducing overall development costs, and speeding up iteration. I'd focus on that. That's the piece that actually solves AAA.
I like that, and I from what I saw from a tech perspective, it looked super cool. Like where they're going with UE.
I think I have to fly down to LA again

and pull her out of fantasy land, dude. What the [ __ ] is happening right now? Like, dude, we've been through this already, and I'm not even going to make the arguments. Like, there's no [ __ ] way we have an interoperable [ __ ] metaverse ever. Ever. That is not the way people consume content. It's not the way they play games. Like, that is just not gaming. Period. End of sentence. None of this makes any sense. They This is Snow Crash. This is Ready Player One. This is [ __ ] okay?
out Rocket League. So, they they're doing some a test with Rocket
Rocket League is within the Epic Games and makes money for Epic.
Guys, I know you're thinking today. Let's have a philosophy corner one day where we think about the future.
Let's live in the pragmatic real world, okay? Because people are dying out here and you're talking about fantasy land. Like you're talking about rainbows and unicorns and [ __ ] and people like visionary people. And I actually I'll be honest, like I love Epic.

I love what they've done and but I don't think they're a threat to Roblox really, right? They're like on their ass right now. Like they Fortnite's going down the cliff. They're laying off all these people. I don't even know if they have the capability of executing what they're promising to be honest, right? And so and Unreal is an unprobable venture, right? So, it's like I Yeah. No.
Jen, in terms of interoperability, you can agree single player it makes no sense.
For sure, I don't think every single experience needs that kind of treatment.
Single player games can't make sense, right? So, then multiplayer games and saying, "Hey, the scourge of live service games can't reach scale, would interoperability actually help them?" The issue that I have with interoperability is that inevitably it takes away the economy and takes away the cosmetics, which is one of the most important ways that those games have to be able to monetize and retain. It takes those tools away from those games in order to retain players. And then all of a sudden you're saying like now those games have like that

interoperability has to give up all of that space, all of that benefit that all that economy and cosmetics would have been able to give those live services in order to be a more successful game because of that.
I'm I'm just going to go get see if we can get Tim to do a podcast with us and cuz like yeah, I'm not trying to defend like Tim Sweeney's vision. I don't know enough about everything how he's thinking about this to totally defend it, but
It would take the soul away from all these different games if you're trying to make an interoperable universe the way he's suggesting.
But so some of it is just like that the ability of to run in different places in an open way. I think his point is he's always trying to get away from the platform and the and the closed I know I and I get it, right? Fortnite is closed, but he that's why he's trying to open it and I think that's their vision is to try to open things up. So maybe we're focusing too much on the interoperability piece and and I think a lot of his vision is more of the open piece.
It feels like Tim is a real crusader. He really likes, you know, going against

the other powers like Apple and Google on mobile. He got Steam on PC. Now Roblox is is the one he's going for for the player base. And with all due respect, and I truly mean it because Epic is an amazing company, I feel like they need to focus on the initiatives and the past they've started rather than, you know, talking about something else because as Chris said, Fortnite is not peaking. On the graph you can see it. This is from Areem's report. So Fortnite is quite down and low. UAFM is far off from being even a consideration for creators. When it launched, a lot of different people and companies rallied around it, tried to do something, but it wasn't there and still isn't. And that's years past. Epic Store really couldn't find a market space and during this time, as you can see from the graph, Steam has only been compounding growth. So it's not about PC sales not being there. And then Epic Store on mobile, I don't know how to categorize that other than a failure. Like they ended up just launching Fortnite mobile on the normal

App Store because they couldn't drive traffic no matter how hard they tried to their own store inside the store. So, yeah, really like focusing on these super initiatives feels like much more important rather than starting another crusade.
And to be fair, I didn't cover anything about what the store is doing and how they're evolving what that is and and doing player features. And what you have is great, and you're right, cuz you're looking backwards. And so, what I saw was them looking forwards, and I think they are doing what you're saying. They're focusing on the store. Fortnite doesn't necessarily on mobile doesn't necessarily need a store as much anymore, because they're in a sense winning some of the open battles. So, Fortnite is live on in the US on iOS and Android now. So, the So, the mobile store isn't that that big of a deal for them anymore, but the the PC store is. Okay.
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Adam, let's get your story in around Valve.
Okay, so big news from Valve. We've been

talking about the Steam Machine prior and they finally announced pricing. Unfortunately, it's the worst scenario. It's over a thousand dollars. So,
[laughter]
I've been reading a lot of reviews and the titles are all pretty funny to me, actually. Where Tom's Guide even has things like even Valve is disappointed by this.
[laughter]
Yeah. Cuz I think like when we go back to when we first discussed the Steam Machine when it was first announced, it was kind of between a rock and a hard place. Where OG Steam Machines, like way back in the day, they were DOA because of pricing and because Steam OS meant that they couldn't play the big games. This, unfortunately, is repeating a lot of that same problem, right? Like the pricing is still over a thousand bucks is does not compete with PS5 and Xbox. Steam OS now significantly better coverage of games, but still is blocked from major titles. Anything off Steam, things like Roblox, Valorant, Fortnite,

GTA 6 will not play on this machine at launch.
I thought they had a Windows license on this so that they would be able to play it.
It's technically possible to install Windows manually and get it dual booted over to that system. You can make that work.
Right? But Steam OS doesn't work for anti-cheat games. It doesn't work for off-Steam games like like Fortnite. And Digital Foundry actually has a very solid video going into the specifics. The TLDR here is like this is basically a mid-range PC equivalent. Like you can build a PC for roughly the same price about a thousand bucks. This is equal-ish to the PS5, maybe a little bit lower in terms of the base edition. Because you're ending up at about 1440p on a lot of these titles, not 4K on optimized settings. And the biggest issue for the future remains VRAM. And I think the bigger issue for me is number one, this will not play GTA 6 at launch. And then you're looking at like next gen is getting announced next year, 2027,

PS6, next Xbox. Like what's the actual window that people want to buy this thing? Because by next year you're already going to be looking at maybe the PS6 and the next Xbox are going to be over a thousand bucks because of RAM prices, but still now you're set up for the future with their offering versus this is already back to 2025's PS5 base. So unfortunately this will be one for just incremental sales for the Steam dedicated hardcore audiences and likely not one to get much Steam players to buy over a new PC. And I think really the real plan here is that Steam is starting to offer now Steam OS on AMD and they're trying to open up Nvidia so they're just allowing people to choose between Windows and Steam OS on their normal gaming PCs.
I think actually the good news here is that like this device will be more compatible, right? Cuz you know the Steam Deck is compatible with like 20% of the revenue generating games on PC. It's like it's

crazy like how limited that device is. At least this has the capability of running more games. And the actual reviews are all relatively positive. I think I think everyone wants this to be successful cuz Steam is such a a beloved company. And so, the device itself seems capable. Although, I it basically said that the setup process was a [ __ ] horrendous like launch, but they should fix a lot of that stuff. But, the bad news here is that like we were talking about this ages ago. Like, I think we were 800 to 1,000, right? And this is now 1,000 to 1250, right? It's like So, it's like incrementally a lot more, right? But, this is a nonstarter for 99.9% of the overall gaming audience. I mean, this is an absurd price on its surface, right? And it makes much more sense just to buy a PC, you know, like a a a Best Buy, right? And again, I said it it was a pain in the ass to set up, too, and and PC would probably be easier
in this case. Keep in mind, the price, too, doesn't include a controller. So, you still have to buy a controller.

Oh, [ __ ] I didn't know.
And this is like the base unit, too. Like, base unit, no controllers.
Yeah, so like base unit, which is comparable to PS5 Pro without a controller. Like, PS5 base is just still way better option.
This could be great news for Microsoft and Sony, really, because people have to understand, they benefit from a huge manufacturing process, right? So, they make 20 million PS5s. Like, the Steam is This machine, they're making maybe 200k, if that, right? I mean, it's like a really low number. And that's why it sells out and it seems like there's demand, but there is no [ __ ] demand for this thing. So, these volume discounts are real, and they actually negotiate pricing on RAM and any everything other component that they make. So, in essence, that's why Microsoft and Sony will be more competitive on the hardware pricing, always, because Steam, first of all, is not going to make enough, and they're also not going to subsidize. So, I think, you know, until the VRAM [ __ ] is solved, right? I don't think we'll see another Xbox or PlayStation, right? Honestly. But, keep in mind that even with all the VRAM pricing issues, they

only raised the price for Sony by 50 bucks, right? Not 300. What the Steam Machine did, right? And so Anyway, so the best deal in town is buying a console, right? So that's what you should be doing. Like GTA around the corner, you're not buying a $1,200 [ __ ] piece of Steam Machine piece of [ __ ] Steam Machine that's not even going to run GTA. You're going to buy a [ __ ] PlayStation, you know? You're certainly not buying an Xbox. So you're buying a PlayStation. So the customer's choice is really obvious, right? And so I think that's actually good for the business.
Fundamentally.
I like that silver lining that the deposit fears all Sony.
[laughter]
Yeah, buy buy buy PlayStation.
Great thinking.
Dude, that's the best deal in the world right now.
I'm going to put my product marketing hat on. I don't know who this is for. I don't I mean I know, you know, maybe they didn't do any kind of market fit analysis or, you know, understanding of customer wants and needs and where does this fit? And especially at this price point, which I mean, let's be honest, none of us They didn't plan to have the RAM apocalypse

happen and they I'm sure they were like, well, it you know, 7-800 bucks maybe we're okay. I just don't know what the need state it is. I don't know who this is for because if you're a Steam player, you already got a really nice rig at home. You've already got your Steam like so I want to sit on my couch and do this versus at my really cool gaming setup. Um all right, so
Yeah.
I do have my rig connected to my TV and it's awesome to be able to play 4K 120 hertz high end games all that kind of stuff. But it's on my own gaming rig that I bought and one thing that will get me eventually is that maybe I'll convert to Steam OS given Steam OS is just a lot more efficient of an operating system compared to Windows.
Okay. So so
who this is for. This is for Ethan.
Ethan's going to get this. Ethan and Adam. So Yeah, all right. So there's like 2,000 of you. I don't know.
So even the enthusiast, they will buy a rig, like I did. They'll buy a proper big-ass PC.

Well, that is something for us to keep an eye on. So, let's go back to General Intuition, Mishka.
All right, General Intuition, really quickly. So, their founder, Pim de Wit, he was actually on the podcast just 7 months ago talking about turning down $500 million per software from OpenAI, and instead raising 133.7 million that point. 7 was really important for them. Um anyways, well, they apparently raised again and will be raising even more. So, they raised $320 million Series A funding round at a 2.4 billion valuation. And this deal was interestingly finalized already in January of this year. So, that's 3 months after raising that 133.7. And their investors are like pretty much the who's who. We got the Coz Law, the General Catalyst, Jeff Bezos, Eric Schmidt, co-founders of Remond and Cradle, and researchers of at Google

DeepMind and MIT. So, currently they are in conversation for raising Series B. So, this is, you know, that 320 is just a a continuous warm-up. And General Intuition, if you don't know or forgotten, it focuses on building new class of frontier models that can perceive, predict, and act in any environment. World models are just one part of the journey towards the ultimate goal of building agents that can solve any problem in simulation or real world. So, of course, this is gaming news in the sense that General Intuition is kind of spawned out of or spawned into or spawned together with Metal. So, they are in the same building. Seems like they're working together. Pim's company was was Metal. I don't know if he's how active he is. Maybe he's just on the board and now runs General Intuition. But, they definitely use metals, the 17 million monthly active video game players for their models. And overall, my take, I think this is a great PR strategy in the

sense that you don't use your announcement that you've got new funding just for the sake of to announce that you got new funding. They sat on it and are using it now to, you know, to hire more talented people and to give boost to their ongoing round. So, well sat on the news and um yeah, smart.
Cool. All right. Uh let's do a little Roblox.
Yeah, I I I just wanted to quickly cover this because I think it's a kind of good indication of where Roblox is headed, I guess. But so they're trying to move into the in brand integration fees. Basically, these are runtime fees, more or less. So, they're basically doing a fee to a CPM model. And this is effective January 1st, 2027. Oh, I didn't see that actually before. So, anyway, Roblox counts all visits that that include an advertising impression towards creators' revenue share obligations. With rates varying from $1.50 for the US, 75 for UK, Canada, Australia, New

Zealand, and Nordic countries, 20 cents for Western Europe, Japan and Korea, and 5 cents for the rest of the world. That's actually really ironic. They actually implicitly put a value on all these places. [laughter]
Yeah.
You know, Western Europe is worth 20 cents versus US is worth a buck 50. I like that. After the campaign has been live for 28 days, all global impressions move to a flat CPM of 10 cents regardless of location. So, this is basically a runtime fee. Like this is what that is, right? It is a tax based on the traffic, not based on the what the brand actually paid. And this is the biggest danger of it, right? Because it basically decouples cost of goods sold from revenue, right? Which could make revenue unprofitable, if that makes sense. So, Roblox's cost could outpace the amount of money that they're actually generating from the product, which is very, very, very, very bad. And so, in generally, this should hurt small and mid-size creators the most because they have the less negotiating leverage,

generally speaking, but it hurts everybody, right? In general. But, I guess they did decrease the number significantly from where they were before after after talking to publishers. Okay. I guess The way I view this is that they could not come up with a creative and good product from a advertising perspective. So, they couldn't build a successful ad product, so they're just basically finding alternative ways of monetizing this traffic, basically, right? Because they're basically taxing developers on deals that the developers put together. And it's kind of gross, you know? I guess it's good news that the tax is lower, but should there really be a tax at all for this type of revenue because this is actually all being managed and built by the developers, right? And so, this is like unprecedented to some degree. YouTube, for instance, would never do this because they have their whole ad stack that's actually generating them revenue from the MAU DAU

and the CPMs, right? And the content creators are actually generating their own revenue, not only from the ads, are they getting a piece of that, but they're also getting the sponsorships, and they're taking all the money from that. So, anyway, this is an alternative way of monetizing traffic, and it's a little bit gross.
Roblox has made the portal called Roblox for brands. Yeah, brands.roblox.com. So, they actually do have that portal where developers can connect to brands, vetted brands, and I know I believe companies like Mattel use it, if I'm I'm correct. So, no, Jen, no, am I wrong?
The brand portal is where a brand can put their license in there for developers to sign up to make games with that brand. So, that's like different than what this is, which is an integration. And these are integrations that go into existing games. So, this is like I'm going to make this up. Like if you're dressed to impress and you want to put I don't know, I'm making it up.

Barbie, like a Barbie 1-month campaign for the next Barbie TV show in there.
That is what this is talking about. It's a It's an integration into an existing game that somebody has. And so, the challenge is that you know, we And we talked about this before when it was announced and leaked. And And to Roblox's credit, they did talk to a bunch of the different publishers, understood some of the concerns, decided to still move forward with an unprecedented tax on the developer audience. So, Twitch tried this a long time ago and in 24 hours took it down because all of the creators got really mad.
Imagine if you've got a [ __ ] ton of traffic. And And Chris, I think you're right about the lower, you know, mid mid and small. But imagine if you're a big you're you're big game with with a [ __ ] ton of traffic and now you you know, what's So, what's going to happen is the brands are going to have to the you know, it's a tax. So, everyone keeps or tariff, people keep passing that on eventually to the brand.

So, now the brand [clears throat] is going to have a higher CPM than they've ever had before and they're going to maybe consider not running those things or So, it might even sour a little bit of the brand integrations into Roblox
Yeah.
that's had before.
It It definitely comes off as a CPM instead of any kind of a revenue share because they don't look at the other values of deals. And um like as you said, it It really is probably not the best thing for giant games that don't monetize well. I was just thinking about like one of the biggest games, if not the biggest game, it's Brookhaven. And they have all kinds of integration. Like I think Wicked was was a couple of months ago and so forth. They have what, 60 billion cumulative visits and about 120 million MAU and only about 10th the owner charts. So, that would put them at roughly, I don't know, 50 to 100k a day with an ARPDAU of like well less than a cent. And for them, if this is uncapped like it is in CPM, it's a you know, perfect loss profile per visit because

they have maximum reach and kind of a like a minimum amount monetization per head. So, kind of the way I took it, the bottom line is if you work with a brand, if you do a brand integration, make sure that your game is monetizing already. And if your branded experience goes viral and your contract doesn't account for it, you could be in trouble. Uh so, that kind of leads to branded experiences moving more to games that have higher retention and higher monetization than a typical Roblox game that can get boost from that integration, can use that uh revenue that they get from that integration without losing their ass on on the uh on the essentially
to be so hard to for developers to do these deals now with the brands because how do you plan like is there a cap? I mean, I know they capped it at 28 days, but you bring up a point is like everyone wants something to go viral, but then it does and now you're paying out the ass. Like, oh my god, imagine.
it's about the reach. Like if Lego does with Brookhaven or with Voldex when they

work, they can easily say what's the reach of those games and they make a deal of that. But now there's essentially tax on that reach. So, it is difficult.
Yeah, and all of a sudden you could be on the hook for insane levels of incremental spend that you did not anticipate and you didn't get paid for by
Yeah.
by the partners. So, you could be like negative margin for like your entire product.
I reached out to Roblox about this. I actually asked them to come in together with a developer who does integrations in their game to talk about it. So, let's see if we can get a podcast going. I'd be interested in hearing.
Yeah, cuz the other thing, too, is a lot of these developers have a section of their game where they do integrations. So, it's not the entire game experience, but it sounds like you're also charged on your traffic for the entire game. So, there's so many kind of nuances that happen here that I think are going to be challenging.
The last point I want to make is that I just want to re-emphasize this is like another regulatory type capture moment. Like so, the big developers are going to

be able to negotiate terms, right? So, I don't think this is going to impact, you know, Brookhaven and those guys as much because they'll probably negotiate it, right? But for the medium to small developers which have no, you know, leverage at all, like that they're the ones that are going to suffer from these type of of things. So, I don't think this is necessarily there's anything really good about it at all, right? For anybody, frankly.
Yeah.
Except for the big, I guess.
Yeah, I think this is challenging.
Let's end up on a happy note. No, this is actually a sad note. So, Queen [laughter] Digital
It's not happy. Yeah.
Yeah, it's it's not happy. We tried to end up on a happy. We have so many news, but Queen Digital Entertainment, the puzzle studio that two ex-King Chiefs, so co-founders built as a Candy Crush sequel, great name, is unfortunately dead just 3 years in. So, they raised overall about 50 million. I believe they have a couple of studios and tens of people employed. They released four different titles in testing about 21 months. None of them actually graduated. Two different games. Like actually, I

can show a little bit of a gameplay here so you can see the quality of of gameplay here. Pet Panic, they got about 830,000 installs since September 2024, and then they had a tail team at 60,000. So, kind of like the other last last last spin off a tail, if you will. Both games used same assets, so they were really into these pets. Very well-made game. Like it looks pretty, it looks fun. I can't say it looks anything truly unique. But, anyways, the bull case is they tested fast, they they read the data and killed three years in and 50 million spent instead of kind of zombieing it out for a decade like most overfunded studios do. And the bear take would be that the founder pedigree thesis that most VCs kept underwriting is really not the edge. Play Ventures founders, when they were on the podcast, they said that this was one of the biggest learnings that they got is investing into sort of a unexpecting founders tended to yield better results

than investing into sort of a sure shot cases. Again, nothing against these wonderful people that built this game and and built this company. And sadly, they could not compete against the Turks on this one.
Got it. All right, everyone. Thank you for listening, and we will see you next week.
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Thanks for listening.