TWIG #402: Xbox Bets on Kojima, Halo Gets Handed to CoD and AppLovin Hits the Road

[music] Hello everyone and welcome to Deconstructor Fun this week in games 402. I'm back. Sorry I took last week off and everything went off the rails. It's fine now. It's fine. I'm Jen Dano. I head up the marketing and publishing side of the podcast. Today we have in first chair
Adam who needs a better tagline product. Just product.
No, I love it.
When is it going to be a corp dev? Adam, I want a corp dev. I don't want a product Adam. [laughter]
What are you Why are you fooling? You're a corp dev.
Yeah, we'll do that. We'll go with that then. Eric Crest, strategy and investing.
Mitch Katkov. Um, still friend of the founders and investors and bankers. Basically, anybody who needs money and gives money.
All right, here's what we have on the episode today. Apple at prompt changes in Europe. Does this mean there are any changes for the rest of us? Kjima tells the story of ending the PlayStation deal

and why Xbox picked it up. Halo has a new home. We're going to go through all the Xbox changes. The Minds Eyee studio closes, so build a rocket boy sadly comes to an end. And then Apploven CEO Adam is on a speaker circuit. He is just going everywhere and talking after not really being very public. The one fact that I want to talk about just here in the opening is he estimates the mobile ad market is a $50 billion opportunity reaching 1 billion adult gamers. He has to say adult daily. So 1 billion adult gamers daily. So first what's going on in Dice Athens like right did they come to your did you organize this? Like what's going on? Oh, no, no. There is an event, Dice Athens, and I I've never been actually to any of the Dices, not the the OG Dice in Vegas. And apparently what they do is this is actually really cool. So, they do Dice Europe is it's plus one event. So, it's it's for Americans to go on a trip and now you

can take like like I was I was talking to a couple of executives who like you pay you'd get the two. And while they are on this hotel lobby conference thing talking about you know whatever they talk about the wives can choose or the spouses not necessarily wives but I just assume based on the activities it's like cooking it's like going to see the guided tour of the Acropolis and so forth. So it's an interesting concept and it's weird every time there's an event in your hometown. I don't know, Jen, if you get this in LA or Crest and SF and Toronto doesn't have events at even have to talk about that, but
no one comes here.
Like even Athens has more game events than Toronto. So, so it's really hard to get into it. And you get like pings from people like, "Hey, are you around?" You're like, "No, I just took my kids on, you know, to school. I'm doing this, I'm doing that, and we're doing this." And, you know, it's it's tough. It's tough when you have hometown events. But hopefully everybody is enjoying the city. I got messages that this is really nice even though we're having worse weather which is again Canadian summer.

Uh but um but um seems to be a fun event. So
you know, keep pinging me. I'll I'll come to one of the dinners.
I'm going to talk about a hometown event. The LA Games Conference returns on September 30th. It's at UCLA in the Palisades Ballroom. We have a discount code dof. So go to the website laamesconference.com. I'm actually going to moderate a panel. It's on the leadership journey in games. So, I have three leaders from Netflix, Embracer, and Blumhouse. I can't wait to ask them lots of questions. So, come to that.
Can I pause for a second? You have a leadership journey in the games business from Netflix and Embracer.
No, these are how to how to manage a train wreck. How to manage
after Crisis comments, you had a panel.
Wait, what is happening? Yeah.
How do you how do you avoid the tit, you know, the the iceberg in the Titanic?
This isn't about the business. This is about the people and their journey to

get to these roles.
Oh, I just Okay. Yes.
I see. Well, I think you need to change the uh
and I'd rather actually hear from people who have gone through some hardships in their company than from somebody who's been, you know,
like, oh, I've been at Supercell for 15 years. Like, that's not interesting. You know, I want to hear from from tough times.
No, no, no. We want to hear people that have had success, not failure.
Well, uh, the Netflix leader is doing the AI initiative, so I'm super interested to dig into that, too.
Embrace had some success.
We're going to move on because we're going to get tired from this if we keep this going on.
All right. So, the other event in Crest's hometown is the Deconstructor Fund Roundtables. This is at Zinga headquarters in Sonteo. This is October 19th. We're going to do a twig live. We're going to have Stan from Beta Hat do a little Gen Alpha presentation. Optic is going to do a little creative. We'll have some roundts. Appch charge is sponsoring. Thanks to them for that. So very excited. It's the last of our

roundt series after doing Seattle and LA. So coming to a close. All right. What else you got in Europe?
Middle East. So I consider Cypress for Middle East. So, we're heading to to Middle East of the Cypress in the end of the October. I don't know exact dates, but we're doing paddle and a dinner. And then we're continuing from Cypress to Tel Aiv. That's going to be also paddle and a dinner. So, that kind of caps off the last few events of the year. And then I think we're doing something at Slush and Helsinki. So, that will be in November. But come and join if you're in those cities. Should be fun. We can do dinners. We can do paddle. We will definitely have fun. So that's that's those. But let me show something more fun. So for the events, by the way, newsletter. Newsletter is the place where you sign up. We do have it on web page, but please sign up to deconstruct funfun newsletter. Go to deconstructorfund.com. There's going to be a pop-up. Just sign up to the newsletters. You will get those sign up links from there. These events are free. They're fun. You should come. And then

uh I want to show the uh the episode. I actually listened a podcast episode that I hosted for the first time in a really really long time because I, you know, like many of you, I hate my sound of my own voice. Uh, and this one was with Martinez cuz I had so many comments about about like how silly we were. And I was just driving a car and I was like, "This is a really fun podcast. We talk about a pretty serious topic which is going out and trying to sell your company and essentially getting no from everybody. But but is really brutal if you're a founder. Not by everybody, I mean literally the whole market and how they turned it around from like being, you know, rejected to being a company that is doing actually really well. So it's an interesting story, but it's it's a lot of banter. I've known Martinez for over 10 years. So fun fun little episode. So check that one out.
Martinez is awesome. Yeah, that was a good podcast. You can tell the camaraderie, but like Martinez is awesome. Really enjoy hanging out with him at conferences.
That was in an American way. It was a ball busting episode. So, um, so enjoy

that.
So, he's from Funcraft, right? Is that
Yeah. Yes.
Okay. Got it. Got it.
Yeah.
Awesome. Well, Chris and I have one coming soon. I'll tease it here. We We spoke with the Riot CFO, so many of the the things we want to cover are covered in that podcast. So, hopefully in the next couple weeks, we'll get that one out. Chris, to you for corrections.
Yeah, one big correction from episode 400 regarding Amir Sapat. I really didn't connect the dots on who he was when I first read the Edge article. I was just more focused on how shitty that article was and how the crash 2.0 just made noing sense whatsoever. So, to be clear, he is exceptionally exponentially qualified to speak on employment in this industry. Right. Right. He tracks this industry very very closely. And I should have totally recognized that going in, but I clearly wasn't focused on it. And I went back and reread his actual quotes. And what he says is specific and accurate, right? He scoped that North America and Europe

are ground zero for destruction. And he specifically says that AAA studios in North America and Western Europe have lost tons of people, the same amount as when the first crash happened. And but he was not speaking of the industry globally, right? So my criticism should have been more aimed at at the sensationalized piece that the magazine put out, not the accuracy of his actual quote. And so I apologize to Amir for that because he did not really do anything wrong except giving lending his credibility to an article that was really stupid, right?
I know that. How does he how is he supposed to know?
I agree with that. And also Amir is amazing. You should continue to do what he's doing. It does really help. It's good.
Yeah. 100%.
Co-sign that.
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because your data is your best co-op partner. Let's get into our our first topic. Apple rewrites its AT tracking prompt in the EU, dropping the word track and adding a reject button. This new prompt ships with iOS 27.2. Apps in Germany, France, Italy, Poland, and Romania must use it, and it's optional in the rest of Europe. Basically, there's like 8 to 12 different changes, but one of the biggest one is the buttons change from allow and ask, apps not to track to allow and reject. Everyone felt like it was a little bit too much. Like, of course, don't track me. it it felt like um so a lot of people have reject the AT prompt. Um so all of this is shown full screen. There's a bunch of other ones you can go in and look it up including some color changers. Developers can link to details on how they use the data and they can ask EU users again one year after their last choice. So when when you get to what this really means, it's

a move in the right direction. This isn't a lot. It's also for a very limited amount of countries right now. Hopefully though this can be a test bed to roll out to more regions especially like the US. This is moving in the right direction though. So I think we all know you know what the core argument is is Apple is putting up this quote you know scare screen and they have limited potential for the app levens metas you know unities of the world to not opt in and so they're trying to keep the data a little bit for themselves and this led to a lot of the challenges we had in the in the in the game industry. Apple obviously says it's for privacy maybe what you should just talk to your UA team opt-in rates will move first in these five man you know mandated countries so just kind of keep an eye on those cohorts like segment them out see if this makes any changes to the opt-in rates so that you can track what's going on there so you can give any credit to what's happening to this specific thing so just ask them to keep an eye on that in particular to see what may matter

I'm feeling uh deja vu. I thought we covered this already, but you know, this is not obviously the return of the IDFA as I talked about a while back, the rumor, but it potentially creates more people that are opting into IDFA and brings it back for more, which will help targeting and attribution. And Meta could be a beneficiary of this because they're the ones that are still struggling to figure out targeting and attribution on iOS. But the way I understand it, and this is from Josh himself, is that like look, Apploven already owns this business. They already went around IDFA and used fingerprinting and other methods and now their system is so robust that I don't know if it even matters anymore, right? It's still not going to create any type of change to the overall ecosystem at this late stage because Apple already up, you know? But yeah, the the message that they were showing was really egregious outside of Apple. So, just to understand this button, if you're watching the video version, it says ask

app not to track. This is turning into reject.
There's a number of changes, but that is one of the bigger ones to that gets highlighted.
We had screenshots of what it looked like for a third party and what it looked like for Apple, and it was night and day in terms of the scare tactics of these optins, right? And so they're just trying to make par with them and make it easier for people to opt in. Basically, that's the way that I understand it.
Got it.
Adam, you threw this one in here. Kjima, actually, Adam, you want to do the intro to this? Go for it.
Yeah. So, um, there was an interview on IGN from Kajjima since the switch from Sony to Xbox. talked a little bit about how Sony abruptly ended the fizzant funding on a June Zoom call with no detailed reason given to Kajjima and he says that the news really put their production and studio at risk because they had staffed you know from two projects if you remember OD which is

this like Jordan Peele not quite a game experimental thing and then Fizzant which is this espionage let's call it like return to Metal Gear but with a new IP So they feared layoffs and even studio collapsing. And I think Shrier previously had claimed that Sony's decision was driven by missed milestones, budget and platform concerns and Death Stranding's commercial performance. So I dug into this a little bit like Death Stranding while I think was you know a critical and indie darling I don't think was ever really a commercial success. One or two both of them you know less than 3 million in terms of year one. So, I'd bet that Sony had to keep budgets tight on this one. And if and when they looked like they were asking for too big of a budget, Sony just wasn't in the financial position to just keep going. And I think this was for Fizzant, which is supposedly like going back to Cojima's roots as like espionage with Bill Scaris

Scarsgard as a leading face. And this was still really early, so it was pre-pro. So, I'm guessing Sony looked at the projected budget versus sales expectations and said no. And then Xbox saw the opportunity, got sold on the IP and felt it was worth it. Overall, I'm skeptical on like if you can't make it work on units, if you can't make it work as a game that a Cojima IP does not all of a sudden add a ton of aura and a ton of value. But I do applaud Kojima like as a creative leader and glad he gets to I get to keep playing his games. When I heard the story, I just, you know, think of demand planners, right? Remember the demand planners? And we either really love them if they like the name.
I I have been a demand planner in my life. That's why I sales [laughter and clears throat] all the time.
I imagine that's why you pulled the article, too, cuz you I mean, that's exactly what I thought about was, you know, we love demand planners when they love our game and we hate them if they give us a bad review. And I think finally somebody pulled a demand planner

into a meeting and said, "All right, like let's look at the size of the audience. Let's look at past sales. Let's look at the scale of the development costs and like let's do some math." And said, "Ooh, actually like we know that you are a nostalgic, amazing creative director, but we just can't like the math doesn't math on this." So why would Xbox take it? The only reason that I see, Adam, I actually agree with you that I'm not sure the IP is going to save it, but I think that's what Xbox is thinking. So, Kajjima kept ownership and sold Fizzant to Microsoft as a franchise with film and TV rights attached. So, Xbox is valuing more than just the game. Their demand planners are thinking, "Wow, we can do more as an entertainment, you know, franchise." So when I went back and looked at like Chararma's quotes, Xbox and Chararma had been talking about this strategy since June, July. And so she says, quote, "I'd love to see us be the number one gaming and entertainment company." And that was

in a Bloomberg article in June. and their her strategy memo in July says the four priorities include content, grow great games into global franchises, connection, extend the worlds that fans love. And so Chararma word that Xbox will push its biggest franchises across film, television, consumer products, sponsorship, live experiences and form new partnerships globally, including China. So this is uh from a Verge article and I know that Crest is is dying to on this. I am explaining what I think is a reason why I agree that I don't know if this is what I would have placed that bet on. But first, Mishka, what do you think?
Yeah, I mean the rational here that you guys are explaining is very solid because this is what corporations do. They rationalize, they act rationally and you know makes sense. But then I I tried to as always take the the contrarian approach here and just counter for the sake of argument and

[clears throat] I've also been on this Rick Rubin's the creative act book. So I took some of the elements of creative work and tried to be clear like is this your opinion or is this Rick Rubin's opinion? This is me using his his his book has like 74 78 tenants, but I'm taking some of these elements of like creative work and seeing if it makes case because I I read the I didn't read I was listening
in the middle to an opinion that [laughter] I was not blaming Rick but no I'm not blaming Rick. I'm I'm He has a really interesting like this book this the creative act book is very interesting on creative work. I'm not sure yet what I feel about it because I haven't listened through it thoroughly, but it is the type of book that makes you think differently about creative process. And so I'm using this thing that is influencing me this week and this weekend to analyze this. And let me just go for it. So this
sure fent is it called fent.
Fizz damn it. That's a difficult name.

Just call it like Metal Gear Solid 2. There you go.
Yeah. Like like what are the Chinese to name a game or Turks? like you know smash puzzle hit or something like that. Anyway, so fizzant it was in a very early production and then Sony ran what corporations do a demand test a P&L test and there's a risk when you're doing that because you're judging an idea too early and when you do that it can kill the idea before it becomes what it could be and that way the risk turns into reality. So that's one of the tendencies and that's true. I've seen this so many times.
Is this your opinion or this is me? This is me. [clears throat] This is me taking the thing because I've seen this so many times in studios.
I I would just say like we cover the news all the time around AAA games and costing too much.
There's a part of this which is right now in where we are in the industry. We have to do this better.
I'm getting there.
Right. Because I I've been on both sides as a creative and as a demand planner, right? And there has to be fiscal responsibility in a project because

these things go real off the rails later on.
I'm there with it.
All right. That is correct. That is very rational. So [laughter] the second part is like you've mentioned multiple times, Death Stranding was a niche game and then it kind of leads to like when you start describing this game, you'll be like this is a niche game and so you get into this conversation of projected budgets versus sales expectations which is very rational conversation as you said and that's exactly according to Rick clearly staying here. It's a process that produces forgettable work. Work made to hit a target market tends to come out diluted. And then I'm thinking about this from my perspective, seeing this multiple times, is that you can see so many head games that AIA's response to conviction instead of calculation. We see it on Steam all the time and on AAA as well. Games that are that are made by creative team that had the conviction in what they're making like Metal Gear Solid and Death Stranding is another great example. They found their durable audience through that and became, you know, hits that we

remember for decades. So there's that. But again going back to the finance part, I'm not saying that Sony or any other publisher should be just open checkbook. You're a you know generational creative you can do whatever and then miracle emerges at the end because now that's you know that's how you build the Rocket Boy or a typical type of company constraints as we know we've worked in all the studios they help they really help because they they set the creative fuel they set the boundaries of what you do. So the the question that that I was confused when I was reading this interview is instead of shutting down the project, why didn't they ask Kajjima to like a ship a smaller version? Because what was happening is as you mentioned the trans media play everything he was kind of like pumping up the game to increase the budget. That's the way I read it. And if they would have just decreased the expectations say just ship the game and don't worry about you know conquering the Chinese market. That was the one point. And then final one is like again

the only failed state is is shipping and he has actually an experience with this. I believe the Khjima he worked with Konami in 2015 and that ended because of budgets and schedules. So I don't know what to think. I don't know too many too many details. Can you can you jump in? What
this hurts are you talking about? Like what is going on right now?
It's so easy to kill. You say this guy was late. He can't sleep into a budget. Just kill it. But then again, I've seen so many games that have been left and right and didn't hit the budget but became big hits.
This isn't 2015, dude. This is 2026. You cannot make bets on things that don't make sense. But he had two shots on goal with this And he failed, right? These games were disasters of epic proportions. Right? They didn't find an audience. They found a niche and they found the IGN love and they found like these nerdy gamers love, but they were not commercial successes, right? And so I think Sony in good faithing

went after this game because they thought it was a sequel to American Girl Solid, right? Which is smart, right? But then two years in they're in pre-pro and he's already overbudget and he's asking for more money and they're like, "Fuck this. We are out. We are out of this Let's pull the plug and move the on. Actually, out of all the moves that Chararma has made, this one makes no sense to me, right? This is a good way, a PR win, but this is not a good bet long term, right? Because the chance of it being successful areing zero to none almost at this point. And I don't understand why everyone's holding water for Kojima, dude. He's already failed, right? He's failed twice. So it's like if Microsoft is signing up thising thing for movie and TV rights, dude, they are all out of their collective minds. All right, that is stupid. That is just dumb. [laughter] Okay, that's not going to work. All right,
why do they pick?
I have no idea.
I told you because of the trans media.
Yes, they want they think that is

likeing McKenzie Matthew Ball that doesn't make any goddamn sense. Okay. Like because there's just no way a game that sells 2 million units is going to be a trans media success. Okay. 3 million units.
I actually agree with this. So I think that I'm just telling you why. And their strategy is trans media. Can we take a franchise and go and go bigger? That works if the IP has the ability to extend beyond one or two million units. I think the challenge is and the IP that he is potentially building, it doesn't have the mass appeal that you would need a trans media IP and franchise to have. I think sadly what it sounds like is, you know, we all move on in the world of what kind of IP that we are interested and what we want and what can go and have mass appeal. I just don't think that this is it. So, I'm not sure the strategy that they have is bad. I think what they picked isn't the right alignment. So he goes over budget and starts talking trans media to get picked

up by Microsoft because but ultim but ultimately I'm sure it went from like hey we think this thing can sell let's call it 2 three million units [clears throat] year one then he says hey we're over budget
demand planning says like there's no way we can believe 6 million 7 million units right and especially given what we're seeing right now on the in premium games on PC console like you stretch up to six seven 8 million units like that's not a that publishers want to make anymore. Keep in mind I am talking about year one units. I'm not talking about like lifetime cuz that's
that's different
And that's when you sell trans media play.
No,
I don't think he
Let's stop with the trans media.
But Microsoft picked him up. That's what I'm trying to understand. Like like he's a cult of personality. Kjima is an amazing designer and like I I think it'll be a fun game, but it won't like I would probably side with Sony here. They probably did their math and they looked it out and said like this thing isn't going to sell as many units as it the budget he's asking
and Xbox is trying to save money.
If they were doing another Death Stranding then you could basically

forecast 3 million units and that requires a certain budget. But when you say you're going to do the next Metal Gear Solid that could be 8 to 10 easy, you know, like that game could do that kind of numbers, right? And so I'm sure that's what Sony signed up for, right? But when they saw what they were doing, they're like, "This is not the next Metag Solid and this is not a 8 to 10. This is a two to three and we're not funding this with, you know, and so Microsoft picks it up
because they're talking about trans media or some kind of la like Cojima, right? And this is what they do, right? It doesn't make sense, right? Because this is Cojima now.
So basically what Jen was saying, I'm just trying to understand this from Microsoft position then. It's like they fired so many people and they have this bad press and they're like, you know what, let's pick up Kajjima and that that's gonna
No, that's not what I'm saying. I'm saying that is their stated strategy of where they the vision of where they want to go is to have IP that can extend because they're stating they want to be a games and entertainment brand. And somebody said that they thought this was

an IP that would allow them to achieve that goal. I don't know who evaluated that. We are saying, Adam and I are like, well, I'm not sure that we agree that this has that potential. This is their future vision of how they're going about it. I I'm not saying it's right, but this is why they picked it.
They spent the last like year cutting all the niche franchises and niche studios, and now they're doing a deal for a niche product and a niche studio, you know? Like that's what that's what doesn't make sense in terms of the strategy. like they they just dropped Arcane, right?
Yeah.
These are very similar. So, it just feels like a little bit of talking out of both sides of their mouth, right? Because as we're moving to the Microsoft restructure now, right? Like this is the tough part. They're going through major financial constraints. They have to figure out how to restructure their studios while this Khjima deal was being done, right? So, like they just announced big cuts. Uh so, this is still, keep in mind, they're further executing against the July plans that they already announced. They announced 3,200 jobs would be impacted at that

time. Half happened in July, right? So 1,600 happened in July. This is a continuation of that announced plan. So they cut 268 jobs mostly from say 343 or Halo Studios most. And this studio was the one that just released the Halo campaign remastered. Also called out things like Ninja Theory. The selloff that they were planning fell through. Arcane Leon is still uncertain. But then a number of other moves which I think we can speculate from is combining studios. So things like Forza, the Forza studios are emerging. So this is Forza and Fable. I think it's Playground in turn 10. Obsidian now is moving under Bethesda. Obsidian's working on a Fallout game. And interestingly, there's a number of moves now within the Activision publishing arm which is separate from Blizzard. So my take here is like Rare or Sea of Thieves is now within Activision. This one feels a little weird to me. Like I guess like it

makes sense in terms of like keeping these assets clean, but like sure live ops experience, but I actually said like why not rare going into Blizzard given sort of the DNA overlap.
Yeah.
Seems like a better fit to move towards say like Starcraft 2 expansion or World Warcraft 3 expansion like Blizzard just announced. Like again RTS Studio, why not put them next to a bunch of RTS IPs? And then the big one is that Halo will now be built by Activision and 343 or Halo will now become a support studio. In general, I'm think this is smart, right? Like keep shooter expertise and shooter IPs alto together, but it's just unclear at this point around like who will actually build it, who will actually run it because of obviously all of the Call of Duty studios all leaprog each other and support the games that they're building. And right now I'm seeing sort of weaker pre-launch Modern Warfare 4 signals. Seems like it's going to come in low. Again, keep in mind, I'm not saying it's going to be as low as Black Ops 7, but it doesn't look like

it's going to, you know, exceed out what we saw with Modern Warfare 3, which was still an issue. And the real tough part is that this is Infinity Ward this year,
right? This is supposed to be the big one, but obviously timing wise, they kind of got screwed because of GTA 6. So, I'm just not sure how stable the Activision Call of Duty Studio Group will be by the end of this year. So, I suspect that they're going to have to re reconfigure the studio leaprog model to get caught back to quality annual releases and then maybe this Halo piece in 343 is just a piece that they're using to figure that out. That's all obviously big huge speculation, but all of this is just looking like they're starting to make nice clean vertical assets that they can shop. Blizzard,
Activision or the shooter, Bethesda, RPG, Forza, Post Fable, and sort of King now has casual and moan. These are all nice, clean businesses they can show up
done by consultants.

Yeah. No, I mean clearly I mean this is just really giving them the insane flexibility to basically sell all of it or none of it or some of it, right? And I'm going to steal from our friend Matthew Cananterman who did a really succinct LinkedIn post which I think you should all read and give him kudos is basically they're restructuring spin and then harvest right all these plans are kind of coming into place by the end of their fiscal year which is June 2027 to get all this stuff done and so they have like really clean lines to report and so the structure is just getting cleaner and cleaner right you have Activision which basically becomes the shooter studio with Halo Sea of Thieves, Age of Empires doesn't make a lot of sense, [laughter] but yeah, I'm surprised that actually made the cut, frankly, in terms of studios, but that's just me. Bethesda's getting Obsidian. They have Fallout, Elder Scrolls, Starfield, and Doom. King becomes a natural home for mobile and casual. Blizzard already kind of looks like a standalone, right, down in Irvine with Warcraft, Diablo,

Overwatch, and Mojang is basically a separate entity altogether that's doing uh Minecraft. So, why does this matter? Well, because at the end of the day, Xbox is just too big, right, for to optimize all these different pieces, right? And so, if they put them into different vertical categories, it makes it much easier for them to not only manage, but potentially spin off and sell, right? And what people keep saying is, oh, why don't they just sell King? Why don't they just sell this? Why don't they just sell that asset? Well, it's really hard to uncouple these assets when they're all kind of embedded within different organizations within the company. But if you split them evenly and succinctly, it m makes it much m much much easier, right? So now like the assets within Xbox could be ultimately sold, right? So King could be a valuable mobile consolidator, right? Blizzard could command a huge strategic premium out there from places like, you know, the Saudis, etc. Activision, Bethesda could be their own publishing platform, right? They could actually spin that out

by itself, right? And then you have things like Minecraft which actually could be a standalone entity within in Microsoft itself etc. So I think that's what he was basically saying is that that's why this restructuring is really interested. He's like Microsoft is not necessarily interested in breaking Xbox apart. It's like trying to put things pieces together in much cleaner boxes so that if Xbox becomes independent those boxes could actually be easier to value and much easier to sell, spin out or combine into one entity. and and created Uber Activision 2.0. Again, this is giving them far more flexibility, right? When you think about how clean this this is, what in the are they doing with Cojima, right? Why in the are they signing Yeah. Where does that go and spending all this money on? That's why like this that doesn't make sense. It just doesn't make sense to me. Um but anyway, I think Chararma is doing an excellent job in terms of putting these pieces together. I still have serious

concerns on their ability to actually manage things going forward. Right? Again, I want to be clear. This is the easy part, right? When you have absolute tabularasa and you could do whatever the you want. This is the type of you do and you cut tons of people and you cut tons of studios, consolidate verticals, etc. What's hard is managing these assets going forward. It's executing against the skew plan at Blizzard. It's making what you were talking about Call of Duty. It's like make bringing Call of Duty back to its roots, actually monetizing Minecraft, right? Like I mean, these are all huge issues that have to be done going forward. And and the last thing I'll say is that like the PR spin on this stuff is that Chararma is saving Xbox. She is not. She is actually cleaning up Xbox, but she's hasn't saved it yet. They are getting their ass handed to them. They are in death in terms of market share across platforms. And so this is not saving Xbox. It's just packaging it.

I think you said it well and Cantraman said it well like no notes. But I think this continues to be the strategy that we've been discussing and laying out that eventually the sweep up to then you know would you please would anyone like one of these verticals after I don't think Xbox is going to be around in a couple of years. I think this is to your point like we're you know she's cleaning it up and organizing it and what do you do after you do that? You start donating. You start going through your old closet and and donating stuff and getting rid of it and and selling it. Although Cresp who who who are the buyers?
That's the one thing I'm worried about.
I know. But the Saudis kind of
they bought all their stuff.
You know the chi the Chinese can't buy it, right? Because crests are American Studios.
Again, it's not going to be a buyout. They're not going to buy it for cash, right? It's going to be a spin out of some sort. Uh consortium of the willing,

right? To like spin this thing out. Microsoft
Triple Dot is going to be my get it for 1.2 billion.
One other question. And Adam, maybe this is a bit more for you. When you think about shooter franchises and moving Halo to Activision, the first thing I was like, well, that makes sense. You have the shooter people, but isn't that distracting given that Call of Duty is struggling? Isn't that now a distraction of like, oh god, now I got to like think about the storyried Halo franchise alongside of Call of Duty. Do we have a cannibalization kind of issue going on?
I think it's just more of like giving them some pieces as they figure out what to do next. So having 343 as an additional support studio I think makes sense. However, the Halo IP, like if I was internal, I would be saying it's Call of Duty, Call of Duty, Call of Duty, Call of Duty, and maybe we'll think about Halo, right? Like you're not going to mandate this team like they're going to pull Call of Duty resources to

make a new Halo. You're going to say, "Let's figure out how to get Call of Duty on track and then we can talk about what that major Halo moment is." So, this is what's really funny though is that like people are lauding this as such a great idea and stuff like that, but what they don't know is that Halo is likely dead, right? To your point, like there's no reason for Call of Duty Studio to make a Halo.
Again, I want to be clear, this is the hard part, right? The moving forward after July 2027.
That's the hard part of like, oh my god, now what the do we do? Now, all these studios of Call of Duty own Halo. Are they going to build a Halo game? that I mean from my perspective that makes no sense whatsoever. I mean Adam said much more nicely. It's like but yeah so like yeah it's not good news for Halo in my opinion right moving forward right but that's not the way it's being reported clearly.
It's also performance-based right like Halo Infinite didn't do great Halo campaign didn't sell like gang busters the IP just isn't there. I'm sorry I I

loved I loved it I loved it in 2001.
Let's let's use Call of Duty tech. Let's do Call of Duty tech and build a Halo that dude. People are horrible.
Do you remember way back in the day Activision made a Golden Eye game for Switch? Remember that?
They have done these things where like they take these like Golden Eye or now Halo IPs and they build the game, but they got to focus on Call of Duty first.
These like tech bros, Chararma, Matthew Ball, they're not thinking about that dude. They're
Matthew Ball a tech bro. How is he a tech bro?
I said Matthew and a tech bro. I got it. Pay attention.
Wait, wait. They're not thinking about this part. This part's the hard part. This is the messy part, right? The easy part is to sit there and like just cut people shooter.
Let's just put this together and that together. Let's just like And everyone's like, "Oh my god, you're saving Xbox." No, they're not saving Xbox at all.
Activision is going to publish the new Age of Empires. It's going to go gang busters. [laughter] We win. We win. Oh, let's do

trans mediaing Yeah, we win.
Adam, um, didn't they move Halo to Unreal 5 engine as well, which is now a completely different engine than what Call of Duty is on? So now you, you know, like now you got different, right? So you can't even
I don't think engine I mean, but like listen,
it's not it's never just engines when you're
No, I'm just kidding.
An engine is a whole is just a different language, right? like all of a sudden engineers take a long time to to on board. So you're going with
multiple tracks. It's you can't just move
you can't just move engineer to engineer. Like you think of the Call of Duty Leaprog model and the way that it works and why it works is because they know that engine so well that when they surge people on it, they know the engineers can immediately jump onto it. If you're now switching from a proprietary engine to Unreal 5,
that's more difficult. That's definitely more difficult.
Yeah. All right, Mishka, did you have thoughts?

Yes. Yes, cuz I I'm I'm just taking contrarian again. I just have to. So, caner man's restructure spin harvest thesis to me like I read it elegant rational. The rational me was accepting it and I was like, okay, let's get irrational. So, there's three points and the status strategy from Sharma and Xbox is pointing the other way. So, she was talking about bringing back exclusivity with at least one Xbox and one PCon release every year. She prioritized the 2027 launch of Project Helix, a new Xbox hardware. And I think the company launching a new hardware on the back of exclusive doesn't sell the studios that supply those exclusives. I mean, that's what what Cres has been speaking on this podcast forever. And so in order for this thesis of Canerman's restructured spin and harvest to be right, in my opinion have to assume that the publicly stated strategy is a smoke screen. Xbox needs the their studios. And if your strategy is restructured spin and then

harvest that then you can't really push forward with your the strategy that you've set if you don't have the exclusivity. If you start selling off your studios like how are you going to execute against the strategy that you've stated? And the second part is the harvest part. So this is we've been tracking these sales prices for a long time. And then the multiples today essentially cutting production capacity and cost by spinning off studios. You're not really making money. You're not really harvesting. Xbox for example, Compulsion, Double Fine, Undead Labs, all left with their IP and back cataloges and essentially runway funding. In other words, what I'm seeing is Microsoft is paying to get rid of these studios that they acquired and it couldn't even sell Ninja Theory. So what they could sell off is the blizzard, the king to the Chinese, to the Saudis, but then they're killing the golden goose, and that's that's the end of it. Like those are the uh profit drivers. And then the third part is, you know, we're joking about consultants making reorgs. I think that's that's what it is. That's what exacts do. They do budgets and

reorgs every year in every corporation. And Booty said that their Booty is their COO or sort of Chararma's right-hand person, right? Head of studios. I think he said that the aim is fewer business units built around teams that already work closely together. And Sharma wants management capped at five layers. They were talking about like 10 or 12 layers before that. And I think what we're reading is just execution against that very clear goal. And that goal is shipping new games cheaper, faster, and better with a more leaner organization. So I didn't per say maybe buy this restructure spin and harvest. And I would buy if they end up hiring him from Goldman Sachs and Samuel from Morgan Stanley, then that those would for me would be the clear sign that they're about to, you know, spin stuff off. I actually don't think you were paying attention. [laughter]
I'll be honest. Like I don't I mean I could I could talk I could read to say exactly what I said last, but

at the end of the day, they are making this as clean as possible for a management. True. They can make this easier to manage by having clear organization, right? And less hierarchy. Like it doesn't make sense for Halo to be part of Xbox, right? It makes more sense for Halo to be part of Call of Duty, the shooter group, right? But
that looks good on paper, but the reality of it is that we were just discussing is that that's not the case. But when you bring in compulsion, devil, fine, undead, all these, they got rid of all these for the very reason that we're talking about, none of them are valuable in and of themselves. And they need to cut all that stuff out and only focus on the things that are value, have value.
Yes, I was talking about Canerman's restructure, spin, and harvest, not per se what we discussed like referencing to
misunderstand what harvest means. Harvest means in this context either selling parts of it King selling Call of Duty, selling Activision, selling Blizzard or selling the wholeing thing because it's a much cleaner organization

that doesn't have a lot of dead weight, right?
So selling the whole
that's what Harvest means.
And you know what's so funny about none of this mentions the hardware division at all, right? You know how big the hardware division is, how much money they spend on building hardware,
right? And so like that's why I'm continually leading to the idea that they're just going to spin this thing off and create another public entity. You know, again, Activision 2.0, right?
The one funny part about this is in terms of the messaging. Back in July, they were basically advocating the message was flatter Xbox,
right? Like we're going to have all these studios across. This is great.
Now in September, it's verticals.
Verticals.
Yeah. Yeah. Yeah. Yeah. articles with flatter with well that was the flatter was an excuse to lay people off. remember it was, you know, we only want
That's the really sad part. All the messaging is just a tool for them to to rationalize how how they're restructuring each time
in sickness and in health, in soft

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unlock for performance marketers who don't want to stop at the usual gardens. It's all powered by KA Loco's compound AI system. Continuously learning from billions of events and [music] getting smarter with every campaign. Hop over the world garden. Check out malokco.com. That's m o lco.com. All right. Well, let's talk about a CEO that looks like is driving the business. So Apploven CEO Adam Farugi sizes the mobile game and market at a 50 billion a year industry and 1 billion daily players. This was mainly from the All-In Summit. They he's on a speaking tour and so this is the one I'm I'm pulling from most recently and there were two interesting tracks that this took. One was like the history of the company and how they managed the business and the stock story and the other was a little

bit of the history of the adtech. So, first on the stock story, I found this interesting and crest. I can't wait to hear, you know. So, Apploven went public in April of 21 at 22 28 billion valuation and then fell 92% to 3.8 billion in 2022. Froggy stopped pitching investors and bought back 6 billion in stock while the business kept generating cash. So, then he told the ad tech story. So, Adam estimates that this market represents 50 billion. Switching it. ad model from a regression to a deep learning model is what they attribute it to. So they went to machine learning one to two and that drove the stock from $9 to $750 in 2.5 years. Apploven bought game studios to get training data for its models and then sold them once the models matured. Like this pretty much confirms what we've been talking about the whole time that those studios were a data play. apploven posted 84% adjusted even a margin in Q2 of 26 which frugally

credits to the model complexity and proprietary data. So my take on this when you start thinking about you know how this influence is our industry that the margin and moat are impressive and I wonder though with AI advancing and the way it's advancing is a deep learning model and the differentiate data going to be enough to survive with meta Google unity vector they're all going to start storming the castle soon I actually we need Josh for this conversation but I I just wonder about that point how much longer can they fend people off. I think I continue to cheer for anyone else who isn't apploving to add competition. CPIs are I think they're up 20%. It was some of the latest data that I'm seeing as I talk to games that I work with. CPIs are continuing on the rise almost on a daily basis. So, Chris, I want to get your thoughts on this. I'm sure you follow and I think you did absolutely follow this all along the way. I didn't realize what a ballsy decision it was to do that

stock buyback. So talk to me about this from your nerdy perspective.
Well, first like stock buy box do help and this particular one was really large at a very low price. So but it basically gives investors a sense that that management is confident enough because they're basically betting their balance sheet on their stock, right? And so that does help support the stock in a lot of ways and support the existing shareholder. So the part that of the narrative that he alluded to but basically rejected out of hand was the notion that he cheated, right? like and and by by all measures he did cheat, right? Well, with IDFA and Apple's complete destruction of the entire UA market overnight, right, for iOS, they said specifically that fingerprinting was not allowed on their platform, pure and simple [laughter] at a conference, right? But he built his entire system, Axon 1.0, on fingerprinting and Axon 2.0. So even though it was totally against the terms of service, which is

actually I think why he was quote unquote cheating, right? And so he did build an absolutely amazing product during a time that Apple completely torpedoed the whole industry. He zigged while others zagged because ultimately Unity, Facebook, and others did not use fingerprinting initially, right? They're all using it now by the way, but they did not use it initially. And so he created an amazing position and huge market share gains. Like you have to understand that at the time Facebook was like 80% of the UA market, right? They went down to like 15, you know, or lower now. I don't even know. And all of that was picked up by AppLin. And you have to give him credit foring executing against the opportunity that was in the marketplace. But it was cheating by many people's measures. And I wish Josh were here to say that. He probably couldn't say that, but he I think he would if he could.
He wants to get invited to Apploving events. Those are
the one in Croatia just now.
Yeah, exactly. Look, Adam's an amazing

operator. He really really did execute flawlessly, you know, when all things looked horrible. Dude, his stock was at nothing. Like $38.8 billion and he just bet the farm on this you know? like if you're interested in that story, I was like, "Oh my god, the way that they packaged it in this in this, you know, interview was like, holy shit."
And I think that's why they, you know, at the all-in summit is like all these different investor and VCs across all these different usually it's tech and AI and I was like, why is that [laughter] why is an ad tech guy sitting here? And I think it's the business story that was really resonating. But Mishko, what do you think's going on? Uh I was just pulling some data by the way because he gives the real data on the size of the ad market. I was looking at Red Sear Research. This was presented at AR's abandoned and Red Sea Research in 2025 was posting that the size of the ad market according to them would be almost

50% of 141 billion mobile market. This is excluding China. So this is
bigger. But what we can see here I think the most important is just the trend line of how ad revenues have been growing. So compound annual growth rate according to them 16 let's say it will be even half of that would be looking at 8% growth between 2020 20 and 2025. So just just trying to to find you know different data points but $50 billion market is is massive and then his company being able to take it like they are biggest on mobile Google is the second and if you listen to the last episode with Martinez on Funcraft he Meta is not even in the race they really tried to push maybe it's him maybe it's not them but apparently Meta is not doing that well they are trying to get back on the horse but but they've let it go. There's a podcast called The Founders. So the guy basically David Cindra I think his name he just reads

different memoirs of Founders. They were fantastic. There's like Rockefellers and like really like old school like Dyson and so forth. He's like really into it and then he has a spin-off that is like very high quality interviews with different founders and Ivanka Trump was in one episode like what the is this? But anyway, everybody else is is just like Dazuki is there and so forth. He has like these generational founders. Adam was on that one as well. He was like one in the first 10 episodes. I think he was one of them. And I was just trying to understand like why is he doing suddenly so many podcast and public speaking engagement in the sense because usually you do this type of a PR when you want to raise capital or you want to hire people or you want to sell your company. So, don't get me wrong, exceptional leader, exceptional founder, exceptional speaker on the podcast. Like, very clear, very good delivery, very honest, and very, you know, blunt, straightforward, however you want to put it. But Chris, like why why is he speaking? That's my main question, dude.

Because his stock is down 50% this year. [laughter] The market's up like 15. His stock is down 50 50, dude. I [clears throat] mean, I think it's like 56 from its all-time high. So, I mean, this is likely part of an investor road show to convince the investors that he's on the right track here. And so, at the end of the day, their next big thing of growth, and the reason the stock was at $700 is because they said they can compete in the e-commerce space against Google and Meta, right? Right. Which they are. I mean, they're starting to bear fruit, but it's not bearing it the way they wanted, and they justing torpedoed the last quarter. The stock was down 20% on on EBIT DA issues last quarter, right? And so they need to prove to people that this strategy is going to bear fruit. And so he's out there trying to pitch the idea. These are IR PR moves in order to like support the stock, right? That's what he's trying to do. Now, I could be cynical like I I've done, sorry, I'm not covering these names anymore because I I'm glad I'm retired from that stuff. But it it could be that he's that Q3 is

not going to be as good as he's hoping, right? and he's trying to like get in front of that because if they miss another quarter like they did in Q2, like dude, the stock is going to get annihilated, right? I'm actually more thinking that they just want he wants to get the story out so that people get more engaged similar to what he had to do with the shop stock buyback and the communication when the stock was ating $15 or whatever.
I think it's brands. I think it's marketing. They're trying to get brands into the platform and saying, "Hey, there's a billion people today that play games.
BMW, American Express, like, oh, hey brands, come put your stuff here." And then they have a lot of data that says, as much as I know you hate ads, this generation of people, especially with rewarded video, are okay with ads in their games. I know that you hate IAA and those things, but those are viable models in many cases. They're not the biggest ones, but if brands come to the platform, I think he might feel that things are saturated in our industry

with CPIs rising and all of the different companies not being able to afford it. So, I think he's mining for new clients.
No, that's smart. That's smart. So, he's just basically pitching the inventory to brands basically. Yeah, that makes sense, too.
Yeah,
that makes Yeah. I don't listen to all. How big is that podcast? Like, that's probably huge. It's huge.
Doesn't Isn't like Trump calling in on that podcast?
He did. He he so Jensen Jensen
a big
podcast is one of the guest
so they have a summit so they do a summit every year it's actually was in LA and it's right by USC and they have all of the big leaders in tech show up so during Jensen Wong's talk and they were talking actually about like the AI slowdown discussion that's going on right now Trump calls Jensen while he's on stage and then they put him [clears throat] on speaker phone and it was pretty funny Trump made fun of Jensen because he was like Jensen you make the most powerful chips in the world and you can't figure out how to put me on speaker phone on on on stage. [laughter] So, so that was really listen I listen to all of these things because they get like the biggest leaders in the

world and then next they had Elon and Glenn Shatwell from SpaceX talking about SpaceX and all these leaders.
I always say to people it's like regardless of whether or not you agree with anything they say or whether the politics or or the tech or whatever, you still got to know what these guys are doing, right? These guys are really engaged with the people that actually are doing on the ground, right? You know, like all the AI companies, all the tech companies, you know, the president of the United States, you know.
Yeah. But but it's like watching a news. I'm not like watching a news and there's like a Kim Jong-un is speaking. I'm like, "Yep, I'm watching because I'm like I'm just interested." So, u No, of course with from the horse's mouth. This this makes sense.
Yeah. I think that all of us should be listening to different points of view, especially when it's like people that are running. These people are running the world. All right, that wraps it up, Adam. Lovely to have you. I'll see you in a few weeks hopefully. And that wraps it up. We will see you next week.
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Are you getting paid? Like what the are you doing
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