Why Blizzard Didn’t Renew NetEase Partnership and What’s Next? - The Metacast by Naavik

[Music] project hug yeah they want to hug the developers and bring them closer in Google's loving arms and make sure that they don't go build their own it's just like the hug from your grandma you're almost suffocates you when you use a lot of Trauma from it [Music] hi everyone welcome to the metacast Roundtable by navic this is the one podcast to stay up to date with all the latest game business news and how they impact the future of games I really hope that your winter holiday is going to be like mine you're going to get under a very cozy blanket get a hot chocolate and listen to the metacasts I think don't forget to bring some cats or steal your neighbor's cats I'm allergic to cats

you've heard their voices uh today I'm joined by my Italian lead product manager at EA and also writer at navic David Amor CEO of playment Marie major wool game advisor Within game development and Esports where he's joining us for the first time today hey hey Marie hey welcome hello hello hopefully carrying me through this episode yeah we can be like a Call of Duty Squad I'll just be dying and you have to keep Reviving me oh that's not good for a host oh yeah I guess not yeah you're the anchor come on so I always like to ask a really random question two new guests and I've been asking about um pets that you like to pet in game but I thought today to enter the Christmas spirit because I started wrapping gifts this week and I realized how much I suck at it and so I was wondering Marie what's your favorite present wrapping technique do you use paper do you use bags or do you just like wrap it in

fabric foreign s if it's like something super exclusive and small then I'll just like put in a box and then I'll have some some of these like semi-transparent just colored paper around it that you just kind of fold it around oh wow if something bigger then I like to take some silvery wrapping paper and I like to do a lot of like diagonals and stuff and funky business and get everything all my angles perfectly online and then be very creative like the whatever sort of Tire or um whatever decoration you put on it needs to be unique they all need to be unique they all need to stand out and then I I usually do some calligraphy uh notes on it as well and maybe maybe a little poem or something can we all agree this is unusual quality of drinking right I am feeling very self-conscious isn't it to get like a really good Christmas present someone really put their time because what I feel today is

people are giving up material things but it's the thought that counts it's like the love you put in it is how much you thought about you know this thing you know really fitting you and having a thought behind it so you know I think those things are as valuable as the gift of itself I'm feeling very ashamed about my present rapping at home now Marie seems like a good person this would be two minutes in she seems like good personally yeah yeah definitely Maria you've at least started wrapping your your gifts I haven't even started shopping yet so I know well it is as we recall this 23rd of November so you're you're the weird ones Marie is the weird one to be fair I mean now so it's probably only [Music] sent straight from Amazon and those I do have the time to rap so you know there's also that I I'd be more comfortable if we move on from this conversation please yeah I'm not feeling good

so the the main topics we're going to be discussing today is Blizzard not renewing the contract with netease um for being their agent in mainland China and everything that means about it the rumors of Walt blizzard will do next with that market and also how Google struck deals to prevent big app developers from competing in the Play Store yeah really really curious to dive into that one both topics are pretty gossipy aren't they I know I don't Maria I don't think you're very comfortable in the world of gossip but I think we should lean into it that's where the fun is isn't it it's a couple I I must say there's a couple of things in today's episode where I have to kind of be careful with my words because I'm under NDA with a couple of these old companies you know let's get Marie drunk and see if you'll spill some Maybe we should have Amazon with a really nice

gift wrap um there you go some wine bribe always worked right Google but as as we've been doing nowadays we're just going to go through some some key updates before jumping into the discussions and it seems to be a pattern where I take the first update I have to change this around but anyway uh it's game loss successful expansion into PC and console so in the third quarter of 2022 game loss Revenue was up by 48 compared to the same period in 2021 and Gameloft as you know is a respectful respectable mobile game developer with hit titles such as asphalt so you may be asking how did they grow their revenue by 48 and what can I do to to match that well so they released Disney Dream like Valley which is their first major title to debut on PC an all major console platforms and they pivoted their strategy to become a cross-platform studio around January

2019 because at the time they their statements said that they saw that the high-end Market on mobile was not as Dynamic and as profitable as it had been and they were considering potentially moving into hyper casual but decided to lean into the high quality premium games that they're used to developing and honestly it's just proving as a really good bet for the studio um being able to show this trend of growth in a market that's been showing decline in earnings struggling across the board I just thought I think there's a lot of interesting takeaways if you want to dig into it further yeah well I can provide a small comment on that one like I think there's been like the big you know like free-to-play wave has is still like here right but there's enough people who are tired of it who also want a couple of these premium high quality games and I think that's where game off can come in because they have so much experience with with doing that so they can actually provide that hmm yeah honestly looking at Google bringing

privacy changes in the in the midterm future I think in a couple of years there's still a continuation of iOS posts idfa challenges mobile phones technically are becoming powerful and could even be compared to switch so there's a gap that's bridging between the talent that develops mobile games with the talent that develops console games and also seeing that accessing cross-platform Game Dev Tech is just becoming more accessible I honestly believe that we'll see more Studios we'll see more mobile first Studios going into a cross-platform portfolio to mitigate these risks just real quick has anyone actually played um the the game here the Disney Dreamlight Valley I thought it looked really really clever I didn't play it but I watched a lot of videos I went into a rabbit hole of YouTube what do you think it looks amazing yeah do you it's somebody that makes driving games did you have driving game Envy uh it's not this is a life Sim game

where you're living amongst the Disney and Pixar friends I was still picturing Asphalt 9 for some reason but they are they are doing a console Disney racing game that looks pretty cool yeah I'm always I always really look up to what what Gameloft does in terms of racing they have their own engine as well that gives them a competitive advantage and I'm really curious to see it in practice on console and PC I think we'll see more of it you know I know that PlayStation also is starting to invest in Mobile Studio mobile first Studios so I think we'll see a little bit more a little bit of Renaissance coming on in the next couple of years or premium games mobile yeah and actually that ties really nicely into Mass update about genitive Ai and how that could potentially lead more of the studios to be able to pursue the high quality of these I don't know double A games is that how you describe them sure yeah um I uh yeah I think the the takeaway here that will come to you which you're

sort of alluding to is sort of an upcoming democratization of game development which I think is really interesting but anyways the the update here is that Andreessen Horowitz um games fund put out a piece uh called generative I think this is the title generative AI is the biggest thing to happen to the game industry since 3D sorry that's a quote from the piece not the actual title uh this was written by James wertzman who's a general partner at the games fund and Jack soslow who also does investing at the games fund um and they are reviewing a lot of the recent developments in generative AI um and making some predictions about where this is going to go so they walk through a few key assumptions that sort of underlie their thinking here um they're saying the amount of research being done in AI is continuing to grow of all entertainment games are going to be most impacted by generative AI they're predicting the the price of

content will continue to drop dramatically and basically going effectively to zero in some cases um and um you know it's it's still early and a lot of this is still being worked out but one of their key takeaways is that the the developers that are jumping into this space early and learning how to work with these tools are going to be the ones that are successful moving forward because this is sort of going to change the entire development pipeline um so they make a number of predictions I'm not going to go into all of them in depth here I would definitely encourage everyone to read the piece I thought it was really good and I personally find this topic to be fascinating um but a couple of predictions just off the top that I thought were interesting and uh connect to the first uh Point here is that they predict we're going to see an increase in the number of games released each year uh and the emergence of AI assisted micro Studios uh maybe some new game types that were not previously possible without generative

AI uh and of course some forthcoming legal challenges as to use of Ip and whatnot among others but the the sort of tldr is like if you're a game developer you should be looking into generative AI now as it's still quite early and this is going to be a marketable skill and a real differentiator for Studios I think like if you're a hyper casual Studio you need to be looking into this like yesterday this is so um potentially transformative I think to game development it's just massive so have you all been following any of the developments in generative Ai and what's going on there sure oh yeah I see these things every day you know some people post amazing things shout out to Eric buffoy uh um UI presentation veteran and games industry always says cool stuff but then you have all the ones making what looks like someone posted a bell Delphine you know like a lot a lot a lot of big boobs a lot of girls and some of them are actually some of some serious stuff you

know and my take on it also watching after watching deviantART and other different art arts arts Pages trying to implement this that the legal herders are so big you know at the end of it this is an algorithm it's going to take the stuff that's being fed the art is being fed into it is going to try to make something generous something new with and you will always have these legal issues so at the end of it for any game Studio to be to be safe I don't see them using these as their final asset I see them using maybe as placeholders maybe it will help during the process when you're trying to find a reference image you know maybe for example designers like myself could actually use this to try to express what I'm looking for to an artist so it could it can alleviate some of the stuff but I think for for for for the foreseeable future this this will only lead to placeholders I'm going to disagree um I I was I was a slash last week and that was AI was a Hot Topic and uh I I saw some demos of it being used in games

already and they were using a sample set that the artists had created in in-house artists so it's creating more art in the same style and they weren't copyright uh it's sort of an interesting pushback on uh from the people building the games because of course the idea that of uh Nai being able to create a lot of content for the game is not particularly comfortable one to consider and there's a bit of sort of getting around there conversely you know I think the people that are building businesses are saying whoa this is great this is and the investors is saying this is awesome so there's so like depending on who you are and some people are sort of caught up in the ethics but they understand as well but uh agree with you Matt I think it's uh it's going to be enormous we haven't seen this we haven't seen a tiny part of it yet it's got loads loads more to go yeah yeah I think reading through I think this article is excellent also a shout out man like you did if you haven't read it really recommend it and I'll put it in the show notes and just reading through it I got all of the all of these ideas just going through the pipeline of the game that I work on just thinking oh

if we had this we could do that and if we have that we could do this and not just Time Savings but also being able to level up the holistic quality with a smaller team when we're trying to compete with um teams that have hundreds of people in it yep yeah I think you all make some good points and um you know my takeaway after reading some of the the predictions is like you know at least one one major outcome of this is is that it's going to increase the speed at which um especially small developers are able to put out uh new games put out new content um and as they say it will increase the number of games released each year so what does that mean what are the implications of that I think that puts the emphasis on discoverability and marketing which by the way could also be impacted by ai ai in different ways um and I think uh you know to Marie's Point there's also going to be an emphasis on the inputs the training data uh so what is feeding into these models

that leads to these new outputs um so rather than just scraping the entire internet we're using a more specialized set of training data to lead to whatever it is that we're trying to do whether it's concept art or it's 3D models or textures or what have you yeah definitely I used to work in machine learning and I I think the next step to remove the ethical and potential legal issues will be to use internal data sets like I think you all mentioned just one I can work I can definitely see that working just one comment I I thought maybe I wanted to bring it up so I believe one part of the article says that if you're a game Studio not utilizing them or exploring them today that you're already behind I believe there is pretty big statement in this article and I was wondering Matt what's your take is that realistic do you think game studios if they want to become relevant they have to start exploring this yesterday um I think there's probably a little bit of nuance there like there are many game studios that are already relevant that

are not using it um but I think you know from their perspective a16z's perspective right they're backing you know new studio startups that need to get to scale quickly it makes a lot of sense um but um you know to that point it would be foolish to ignore it if you're a mega publisher or a successful Studio already like these changes are coming whether you want to accept them or not so I think it makes sense to at least explore it and see what the possibilities are for your own studio and then decide for yourself if it's not for you if you want to be you know take a more bespoke approach and do everything in-house like that's totally acceptable it's worked for many years um but uh I think it would be foolish to dismiss it outright without at least investigating it and also if you've already built an art department and that's the way your studio is geared but but you're looking to take a different approach then you can't just flick a switch and start creating content for your game in a different way and so maybe it's more relevant for startups

than it is for existing Studios I think it's a new set of tools in the tool belt right I I actually don't think that that many people are going to be replaced by these tools I think it's just going to be uh you know a new set of techniques for creating art or creating content whatever it may be right it's not only art um yeah I completely agree yeah the industry is growing you know where I think we add another billion people in only like 11 years or something like super crazy like that it's always entertainment and so is games so you know we'll still need all the artists for creation and you know polishing if nothing else so I don't I I agree I don't think a lot of people are going to lose their jobs over this and then going into the next update if we're talking about companies with large data sets to take advantage of being able to create these models I just want to very quickly run through embrace your group's earnings so this was an analysis in navic digest which is navx free newsletter it was in collaboration with invest game so there are Q2 analysis main takeaway

is that Revenue grew 190 year over year however Embrace are generated only 35 percent of organic growth meaning that the remaining growth mostly comes from revenue that's connected to M A so nothing surprising based on previous analysis that we've done of embracer and this is why we're not going to cast judgment yet on their strategy and they have an exciting pipeline in terms of transmedia opportunities with their Acquisitions of asthma day and Dark Horse IPS they also recently well recently acquired um extremely important IPS such as a lot of the Rings Tomb Raider dear sex although Unfortunately they are going to Sunset the games that um was it Square Enix yes they shut that as great as Montreal the mobile Studio they still have the sister Studio I know that's where I've worked actually it's still intact and I got I got a couple of stories from there if we we get time at the end of the show we'll see and so yeah the transformation from a pure PC and console gaming

company to multi-pronged entertainment business where now the tabletop segment is actually 34 of sales that could help mitigate and have new strategies of growth over the years through their acquisition strategy yeah so we'll keep an eye on it all right and then we'll have the last update with you Matt yeah so this one is Sony uh files a patent for tracking in-game digital assets with nfts so back in July of this year Sony had revealed a new loyalty program they were calling PlayStation stars and it allows players to earn points and digital Collectibles by completing quote-unquote campaigns uh now these were referred to as digital rewards and they were explicitly stated as definitely not nfts this is what they said at the time they could not be resold which was this is why they're saying they're not nfts um however these seem like very similar topics so you know putting on my tinflo

hat here like perhaps these are related uh initiatives um I think my general take here is let's just wait and see I think um you know as I said it's not new news it's just newly revealed to the public I think every major game developer game publisher is looking at web3 and perhaps making some moves perhaps just exploring so you know I want to wait and see the patent hasn't been approved yet to be clear and it may not be approved it does seem very broad if you read through it a little bit um and even if it is approved you know how decentralized would it really be um I would assume it'd be somewhat similar to what uh Ubisoft did with their quartz uh initiative it's going to be still within Sony's ecosystem if they do it they're not gonna I'm assuming they're not going to open their digital Collectibles up to Xbox or Nintendo or what have you so

uh maybe I'm being overly skeptical but my take is wait and see what's Matt what's the difference between what you just described there and trophies are they is it more than sort of collectible sides or I don't know that there's a huge difference they mentioned um uh where was it it was uh gameplay Clips characters or in-game items so it's not just like a little trophy you put on your shelf but it could be uh you know a clip that you took while you were playing God of War or you know you're collecting some in-game items I don't know it's you know it's obviously light on details but this is yeah okay I'm not a huge fan of people um being we're trademarking things that are sort of already going on already we've seen that in the games industry a few times where something that's already basically in the public domain somebody then somehow managed to get a trademark on it and everybody has to react to it it feels a bit like that as you say I guess it's happened a while ago but uh stinks a bit I think I think you were

100 right damn it this is this is something that really big companies do um because they have the resources to file patents and you know go through all the legal proceedings and and defend those patents if they're granted right so this is not something that's on web3 Startup can just you know spin up and file a patent for anything you know I remember I was making games for Sony at one point and I was encouraged to to make trademarks I think we even got a studio bonus for if we're doing something cool and new then let's wrap this up in a trademark and then protect it didn't like that I worked for IBM for a while and they their whole business was basically patterned you know I was in this Almaden research lab with you know people who had 30 patents to their name each or worked there for you know like 35 plus years or something like that so some do that but uh the the crutch here like like someone you mentioned is like once you have them you have to defend them and that's going to cost you a lot of money as well that's something you need to keep keep doing because as soon as you stop and then everyone can say well

you didn't you let these guys do it so why can't we do it you know interesting and the question is if it will actually be approved or not because this is an area that's moving very quickly yeah I I don't think it'll be approved for all of the mentioned reasons yeah it's quite a slow process it takes multiple years to get these things approved and they only filed it last year um I actually don't know how it could be enforced if the blockchain is decentralized big nothing Burger okay well this is great this is honest feedback um okay uh then we'll go into the first discussion topic which is was it not renewing netease um yeah I'm not one for gossip so I will stay away from gossip but if you want to

go into gossip David you're you know you're the guests I don't have a lot but I can speculate uh but when you why don't we start with the facts and then we'll speculate and dig into gossip okay I I did notice yesterday when I was doing the prep I have three bullet points of facts and then all the rest has gossip so yeah something going on I think just starting from the conclusion blizzard games will return to China it will be with a new partner it could be with the former partner we'll see so we're going to digging into with whom and when so setting the scene of what happened um the publishing license in mainland China will not be renewed in the agreement between blizzard and netease in January next year this means that in Games like World of Warcraft OverWatch Hearthstone Diablo 3 Warcraft 3 and others will no longer be accessible they're essentially shutting down in the country I believe because

you associate your blizzard accounts to um account systems in China such as WeChat I believe you will have your progress saved so hopefully if they do bring it back you're not going to lose your progress and before going into the rumors so Blizzard's public statements was that the contract was not consistent with Blizzard's operating principles and commitments to players and employees doesn't say much and then netease publicly stated that I was because there were material differences on key terms and we could not reach an agreement there was a mysterious tweet though to kick off all of these rumors where naisa's head of Partnerships appeared to call Blizzard CEO Bobby kotik a jerk although you know all stories have two sides who doesn't they're not going to pass judgment because I know who doesn't like this so let's start let's start with the rumors um not well not really rumors yet so yeah what are the consequences for

blizzard and nays because both companies really play down the impact that this was going to have onto their performance Activision Blizzard's stock value May remain stable whilst net eases took a bit of a dive what do you think so I think that like blizzard is fine you know they'll find someone else to release this with and they still have so strong IPS and so semi-unique games and you know and some of some regarded I think that they'll be fine and Netties are they have so much other stuff going on so many other games that I think in the long term they will be fine as well but you know looking at the kind of Share value uh moving it does seem they took a little bit of a bigger hit and that does make sense can I point a Clarity Maria what's hap what's happened there that they had an agreement and then it needed to be renewed because from the language you use there it says uh yeah they're not happy with the contract but presumably there was a contract before that and so what you know even though that the the

arrangement was commercially okay the the new agreement didn't work for both sides is that what you read into that yes the Contra had an expiry date and then they had to negotiate the renewal and my understanding is that the terms that were trying to be negotiated for the renewal there was no agreement and so they decided to not renew it which means that when the expiration date hits the games you're no longer you would think the blizzard had the leverage there because as Marie says right they'll find someone else so it was interesting that they were being pushed against I found some rumors that's what happened they probably were trying to use that right to get a better deal for the extension I found some rumors yeah I found a rumor of what they were trying to negotiate against rumors but we'll we'll get into it I can see why netease did not accept it we'll see any any other thoughts on the consequences before we even won I just want to gossip I want the rumors yeah

um well one thing that I I would say though is like if blizzard would partner with someone else then what would that be because nutty's has a big presence in an elevation especially in China and the question is like they have the marketing potential that not everyone else does they're able to really like blizzard has the IP you know and their famous and they're good games but you still need to reach in terms of you know reaching reaching the clients and that's that's what I think that Netties could bring so who else could bring enough of that for blizzard so to say for for it to be worthy for them to make the move yeah I think the obvious choice would be tencent because Microsoft um and Activision already have relationships with previous projects and existing projects however there are other um contenders in play uh what's the name for example the company that used to be the partner in mainland China before netany is I have to go and look at what what the name is I'll look it up while you keep going

and then they have their own games too you know you know to you know are they gonna thanks so definitely because it's part of tencents it's just part of tencent's business they do that for many many games and with these Partnerships in the past yeah right and they also have oh sorry no no you're okay I was gonna say like you know they have a relationship with Activision to do Call of Duty but tencent also does pubg mobile uh and several other Shooters like they I don't think they're worried about cannibalizing their own revenues too much no and they also have code Dev opportunities and third-party Dev opportunities with um I believe they have five uh Studios for development but one of them is Timmy that did honor of Kings they also did Call of Duty mobile so some potential consequences that were discussed was whether this would limit opportunities of code Dev for um blizzard because they did code f with netease for Diablo Immortal oh yeah I didn't mention Diablo mortal is safe because it has its own contract so it's

not going to shut down in mainland China so there's also that potential relationship and the other player that they could sign an agreement with is could be numerous from bite dance okay at least when we get into what they're asking for I think you have to find a partner that has the pockets and wants to take the the name I get get the marketing get the reputation of having such agreements um yeah we'll get into it but by dance doesn't have any publishing capability does it in China with new with new births yeah oh I see okay they did um Marvel snap they publish Marvel snap oh really okay I didn't know there okay yeah so they're trying to get that reputation and Market standing so having an agreement with with blizzard could take them that way but yes they don't have the the history or the operational capacity um when comparing to netease and tencent at least nowadays yep yep

what what were the terms what were the terms okay um [Music] let me find them so again these are rumors the terms where that blizzard was trying to um have the share race ratio increased compared with more than 50 percent of Revenue and net profit during the contract period from 2019 to 2022. they're also um they want to netease to develop other IP mobile games for Blizzard's global distribution but only have the revenue share for the Chinese market and netease would have to pay a deposit additionally um because there's a game approval problem in China I think blizzard was trying to put forward some causes that just could not be guaranteed based on the regulatory environment in China and I would put netease in quite a disadvantaged position and additionally netease would

have to pay two years of Corporation money in advance which would be Millions wow and considering considering that there was a huge slowdown in terms of licenses being granted by the regulatory bodies in China for the distribution of games there that's a that's a huge gamble because you might pay those two years up front without really Knowing When your license will be will be granted yeah so you'll just be out of pocket without you having control over it yeah yeah but on the positive side we have seen quite recently tencent finally had their first game license approved I believe was um a week or so ago called Metal Slug Awakening and we've also seen that is also get a couple game licenses approved so at least that risk it's not fully mitigated at least there's some signs that the environment is improving what do you think of those conditions it's hard to know I mean you have when I

agree that that sounds like puts a lot of risk on that easy side if they're paying for things up front but not sure whether they can start seeing revenue streams from it so it's hard to it sort of depends what the Rev share is right so um as to whether or not some of those other things are fair it's hard to work out without knowing the numbers I think I think blizzard certainly has the leverage this negotiation you know they have the IPS here and I think you know if they were dissatisfied with the agreement to begin with perhaps obviously there's rumors but perhaps they put forth terms that they knew would be rejected uh so that they could go out and you know Court other professors yeah well it sounds like something they wouldn't have done unless they had a good alternative in place right right so otherwise they're gambling as well because every month that their games are not live in this region they're losing a lot of money there are two rumors about that I really went into the rabbit hole of rumors on this one so one of the

rumors is that actually tencent has been in conversations with blizzard for a year so they could have been preparing for this the second rumor is that um blizzard could do an agreement with netease again because it seems like Bobby Kosik maybe was an instigator here that was potentially not all of Blizzard being aligned on what was being pursued and so there's there's a rumor that if the the acquisition with Microsoft goes through and they assign a new CEO that then we could actually see blizzard go back and do an agreement with Netties again because that will really mitigate the risk in terms of the approval because the approval is with the agent company and not with blizzard so if they go with any company that's not netease they'll be at risk of the regulatory environment of getting that license approved but if there was netease they could just turn it back on if they wanted to it might be the bad cop good

cop you know that's sending Bobby see how good how far you can get and then they come like okay we'll meet you halfway and then that's still more than what they would have gotten otherwise hadn't done that that maneuver so to say when do you when was the last netty's mobile game is that Diablo 3 was that the last one they did oh no cool Call of Duty they did a Diablo mortal game but that's what I meant sorry when was that that wasn't that long ago was it no I don't think it was that long that I was granted to to be just wondering whether or not they waited for everything to be wrapped up on some big games like that before going to a negotiation Diablo motor is protected in a different contract so it wouldn't have been affected right yeah it would be the future games uh it's just some of the things I I thought would be interesting to dig into just before moving on is whether it'll actually become easier to publish a game in the People's Republic of China I know that it's it's an attractive Market um there's a lot of potential especially

with certain game genres although the environment of actually getting published uh you know you need a local partner or you need a um sorry you need a local partner and then you need a license and this is just a lot of difficulties that has an overhead especially if you're a smaller Studio but it seems I think the the state media did a recent acknowledgment of the value of the opportunity of games and that they want to really help push forward realizing that opportunity and also we've seen countries of all countries that we've seen the European Union pass um it's not it's not a law it's a resolution so it's not binding where they're calling on the member states to try to support the growth of the game industry and as soon as our resolution passed a few days later we saw that Germany is increasing their National budget for games funding we saw that

Ireland is implementing a tax credit of 32 percent where you can claim back 32 percent of development costs and so we know that China is also has Ambitions to lead the global development of Technology they want to be the leaders of AI by 2030 and so I think seeing how other countries are really investing into the industry that might soften their position because there was a bit of Crackdown uh I think I believe a few years ago there was a Crackdown before and then it got better and then there was a Crackdown again due to the addiction but they also recently made an announcement that they've managed to resolve young people's addiction to games through their regulations so overall it could yeah just keep it could be important for companies to keep an eye on on what's happening in the market because maybe that softening could mean the opportunity is there to to try to enter it it's very hard for Western companies to really understand

what goes on in Eastern countries I I found that in the past working at EA trying to make Headway into Japan and it's just very very hard to do without pairing with a company partnering with the company that really understands the domestic market and like I I can't culturally and commercially and the way the government works I haven't wouldn't have no idea how to navigate that so and it's not just in games that's right so my experience working for both Square Enix when I worked at idos and later Capcom Vancouver is that it's just different cultures going on you know and understanding each other takes quite a while takes a couple of years and the best thing you can do is probably just to purchase or partner with someone who seems obviously successful in their market and just let them be and that's kind of what the only thing I've seen working long term really and even that doesn't work forever so I think that there'll always be those cultural differences to try to try to understand and for Western companies will always there'll be some suspicion Japan I feel

like it's it's a little bit of a better story like is there's a tradition within games especially you know coin by square and Nintendo to have these partnership with with China it's still up there and with having the state being such a liability not knowing what they're going to go next you know when they crack down you know it's hard to talk about this without getting political you know with the Hong Kong it was coveted it was you know like limiting how much uh you can play like I think this is a pattern and that is reoccurring and I think it will continue to happen I think that will continue being a risk yeah it's about measuring the risk versus the opportunity of of entering a completely new market and when I used to work in Fisheries doing export import globally we always needed to have local partners for sales in different countries because we don't understand we don't understand how sales happen we don't understand interpersonal relationships or how do you position how do you position a product in Iceland or the United States is different how you're going to position your product in China in South

Korea and Japan um and yeah I think we see that in games as well you need someone who understands the market to guide how to position your product there all right we'll move into um the next discussion topic which is about Google's deals yeah so the headline here is that Google struck a number of deals to prevent competition with their Play Store um and the thing I'd like you all to keep in mind as I'm sort of going through this just think about like do you think that this is anti-competitive or do you think that it's just good strategy on Google's part so um the the headline here Google has struck at least 24 deals with various big app developers to stop them from competing with the Play Store uh so this came out from uh again lawsuit that epic games filed against Google 2020 uh alleging anti-competitive

practices related to Android and the Play Store um and Google had entered into agreements with companies like Activision Blizzard uh 360 million over three years Riot games in 2020 30 million for one year uh to basically not go develop their own app stores uh Google was worried this apparently came from an internal I don't know if it's a presentation or Memo from their Finance team stating the potential downside if this sort of movement uh break away from the App Stores caught momentum and they were seeing you know potential massive financial implications on Google and so they started cutting these deals so Activision has denied the claims right said they're still reviewing the filing other companies that were supposedly caught into this web were Nintendo Ubisoft calm which is a meditation app and age of learning which I think is

educational games uh so some interesting names there um the remuneration included payments uh I don't know if this was for all of them but certainly for Activision uh specifically they talked about payments for posting to YouTube credits towards Google ads and cloud services um they were sort of cutting different deals to make it more appealing for these Publishers to not go do their own thing this was all a part of what was called project hug and uh yeah I thought it was a fun name uh project hug yeah they want to hug the developers and bring them closer in Google's loving arms and make sure that they don't go build their own this is like the hug from your grandma who almost suffocates you when you were here yeah yeah um I guess the question is is I'm trying to try to keep the analogy going here is your grandmother's hug anti-competitive to other grandmothers

or is it just out of love and concern um so Grandma just right you know so they're competing so you know they gotta make sure you remember them I'm just kidding um I have I have a take on this I think this is a bribe like straight up bribe obviously and I think it is Andy competitive in on the one hand but on the other hand the op I mean this this is a deal there's two sides of the deal they could also just say no and move ahead and make their own store if they wanted to if they want to take the risk but obviously all these companies are just taking the money and they're like well it's not worth the risk going off making my own store you know and trying to fight this this Dragon so I'll just take the money and be happy with it I think it's a really interesting take um because you know Google has the perspective you know 30 000 feet they can see all the companies that could potentially take this path or join forces and team up against the App Store

but if you're just um you know calm or you're just Nintendo you're not necessarily having these conversations with other companies that might not be like directly competitive doing the these app stores so it's like much riskier for the people that they're it's easier as you say Marie to cut deal and take the money than it is to you know go out and take a risk to build your own app store and compete against Google this Behemoth now you can't I'm just trying to think how this would work so you can't you're not allowed to build a store that you can download from now to go never store within the store um so is this obviously uh fortnite was side loaded so that's I think what they were reacting to First is there also an issue that uh Samsung and Huawei at least used to have um their own stores and they've got some sort of you know what is that sort of baked into their phone when you buy it it has that's right so what do you think is it um to prevent both of those and

maybe if you're saying hey don't don't build a store for three years if legislation went against Google and it was decided that actually people can have a store on on the phone then it sort of prevents them from doing it even though it become easy and wouldn't uh or much easier so you know do you think they're trying to protect against all three of those or is there one in particular uh well certainly Samsung was mentioned um in the research that I was doing I think fortnite had cut a deal with Samsung uh at the time to have fortnite on the Samsung's store or something like that right and so they were concerned Google was concerned that other developers might follow suit um I don't know if they were concerned about Samsung specifically uh or you know some of these some of these companies that cut deals could feasibly compete I think Nintendo Activision Blizzard like these companies have major IP they have a lot of games they could potentially compete but if you talk about some of these smaller players you

know then maybe working Google is concerned about Samsung they're concerned about Huawei or what it is and I worked a little bit on stores at one point and uh there's a critical mass Point as well because if the top 20 grossing or most downloaded games all of a sudden site were available in another app store I think you know go go to another app store just for one game but if all of the major ones are there and they give you some sort of incentive as a player where they say do you know what starting will give you a three dollar pack for free or 30 off or whatever they can afford through not giving that to Google then it might be enough of a critical mess to have players start to get in the habit of opening a different store rather than Google Play Store well well if we're talking about Activision Blizzard with Candy Crush that that's a massive Market to to move into the App Store and with Android it is a little bit different from Apple where you can download apks and install them you can I think even on Apple you can

almost side load apps and it creates a web app so it kind of looks like an app but you download it in a different way so these I thought it's interesting that fortnite ultimately ended up back on the Google Play store so that that side loading experiment I remember trying that to see what that was like and it was a lot of friction as you imagine I tried it all at the time yeah and um and ultimately they epic decided they weren't forced to they just decided we're losing too many installs by not being on the Google Play store so that side loading just isn't just too much friction there so I think they needed a little bit more right I think what Google needs to do is not to bribe every single one just bribe enough for them so that there's not enough critical mass for them to kind of go together and do something alone and one thing that might have spurred Google on is like looking at what happened to Netflix and what's happening with the TV streaming right now whereas first everyone was on Netflix and then everyone decided Netflix making so much money off of rips and now you have Disney plus yeah Hulu you have all everyone is you know HBO everyone's doing their own network so I'm probably

Google's looking at what's happening over there and decided we just need to put enough branches into the market to make sure that that doesn't happen yeah right I agree it does feel anti-competitive you know what makes me wince a bit there is that there's the big players get what 360 million is that what you said and that's a nice you know that's Google ads spend budget and you're up against as a small independent developer or frankly not one of the 24 that that was listed right you um you're now trying to compete with somebody that's got 360 million dollars of ads spent that doesn't have to worry quite so much about the cpis anymore it's tough enough as it is without that sort of Advantage going to the to the major uh game makers I I will mention one thing out of this you know about the under competitiveness I haven't thought about you know it is and competitive in the terms that you're giving out the free money to to a couple of developers probably not every you know game developer out there so those people have the the big advantage of course to their

games but I think in the end to the actual Gamers I'm not sure this has a big impact because I'm guessing if they're even worse a competitive apps are being opened up on Android those probably they would probably take like they wouldn't make a lower price for the consumers you know they wouldn't make different or better games they would just take a bigger chair to themselves into their pockets I think at the end of the day for the gamers this is not you know really anti-competitive maybe we don't know that um I think you know one of the things that epic was doing at least with their epic game store is taking a lower um share of revenues right so it's certainly theoretically possible that Nintendo or Activision Blizzard or whoever could set up their own store and take a smaller cut in an effort to attract more developers to their platform we don't know um I do agree with the take that it's like the rich get richer you know they get these sort of um they cut these deals with Google they get the credits towards ad spend and like I don't know the Activision Blizzard really needs

that help um but they're in such a powerful position to where they get that deal offered to them in the first place I know I'd say for I mean when it comes to Epic one needs to remember that yes they are you know taking a lower cost in their store but they're also making money off of unreal off of the platform itself and if it was true that you know Publishers wouldn't you know up the price when they could then all the digital copies of games would cost just as much as will cost less than the physical ones because the distribution costs went down but that never happened right or not really yeah and we look out I believe as Empires and puzzles they release the webshop recently where they're selling the hard currency at a lower price than compared to buying on the platform because a 30 chunk you still have space to give your player base a discount and take a lot home from giving that discount so personally I think we're going to see more and more of it unless

we see some changes in terms of the regulations in the in the stores and I I was looking at the data of Activision Blizzard how much they took away in the past year in terms of their um Android and it was about 830 million so if we look at 360 million across across three years probably worth it not have to overhead the technical overhead of developing the store the marketing overhead of trying to get players to know it exists and going into it and in all of those cases it probably wasn't I doubt they were actually building a store so it's just free money right it's not like oh we're going to make a load of money from building a store and circumventing a 30 fee Hardware fee uh but oh well we'll take this one which is no they weren't doing it anyway they were just carrying on trucking probably right and then and then Google said how about some free money for not for not doing anything just continuing to do what you would do that's a nice email to get it can be used to build a war chest till later go

ahead and do it once you don't want to sign a paper anymore so it's just business I I look in terms of whether it's anti-competitive or not I think if it's called project hug and no one is willing to admit that they took the money I'm not saying it's illegal or anti-competitive but definitely feels suspicious if you're not comfortable to public state that you did take this deal additionally I looked into the anti-competitive rules in terms of the UK and it says that you cannot agree with other businesses to share markets or customers you'll be breaking competition law if you agree with another business to not compete with them for customers but this is to start something that you don't have yet you know which I feel like is a different case because you could also say we're just not doing it because we don't want to take the risk you know legally I think it's just a deal it's just business ethically it stinks a bit and Rich get richer so and Google I don't know

like to have a reputation used to be don't be evil right and uh it I'm sure they wouldn't be happy about this policy being known to all those independent developers that they try and you know they do their events don't they where everyone gets together and let's help the little guy out that's certainly flies in the face of that doesn't it do you have any other takes Matt for for this time well I mean similar to to what David just said um it's interesting that this happened to Google on the Android platform which is kind of more open than app like I don't think Apple would ever do this they would just be like you know good luck you know making your own app store you're not going to be allowed on our our store and we have all the Apple devices so I just kind of think it's an interesting outcome or I don't know just like fact of life uh that because Google is taking this open strategy with the Android platform um this could be a result um whereas I don't think it would ever

happen to Apple yeah but well unless legislation Falls against them and Google right and that's that's really not impossible I mean that's exactly what the Epic one one of the things the Epic lawsuit is testing right it's uh how come we don't get to sell things directly if we you know why can't we build our own store so that's not that's not going Google it sorry that's not going epic's way right now basically but uh it's not over yet yeah and I think whether it's Apple or Google I think the sort of General uh let's say legislative momentum is towards um pushing back on these policies pushing back on the 30 cut and I think they know that but they are willing to spend all sorts of money to delay it as much as possible whether it's project hug or or other things because they make far more money from their current situation that it's like you know this is a drop in the bucket for Google uh so

they'd be happy to sort of uh delay any sort of opening up of the ecosystem as long as possible so yeah the takeaway of this episode is lots of rumors and hopefully we'll we'll see them confirmed [Laughter] a year from now we realized we were all wrong wait a second Matt's story about Google and the handouts is that rumors that fact that's fact yeah project hug is a real thing this was previously revealed and it was I think only recently came out uh more details about who was involved and the numbers and whatnot but I think even even back to last year we knew about project hug I was like Oh I thought no company that was part of the deal had acknowledged that they did take this deal I don't know that anyone has acknowledged it any of the recipients have acknowledged it but it's I think it's generally public knowledge that project hug is a real thing it was

revealed in these court filings um it's just that no one has sort of acknowledged taking the handout right it seems there's a lot of secrecy around both these trials some stuff we learn and then but all the companies involved because everyone has ties with both Google map right everyone wants wants it to be kind of secret they don't want any more of their com of their deals or anything to be out in the Limelight but on the second hand it's hard to deny this publicly if if someone catches the rumor of it all because then maybe eventually the court will ask them for the actual details and you know are they going to lie publicly like that might might come back to bite them later on I don't know you get to do that you can't well I see yeah I see what you mean to the public you mean yeah yeah okay well if you have an angle on this let us know in the comments of the episode you can find us on YouTube uh also if you want to help us reach a broader audience if you could give us a like and also subscribe and yeah we appreciate you joining us

and we hope to see you next week [Music]