Game Economist Cast
What does the new wave of open economies mean for monetization? Will negative externalities overcome cosmetics economies in the long run? What exactly does a game economist do?
Game Economist Cast is a roundtable discussion of the latest developments in mobile, HD, and crypto games through a bunch of people figuring it out using the economic tool kit.
Game Economist Cast
E22: Airdropping The Missing Web3 Palworld Take
No Palword take is too late; something is not lost on the Game Economist Cast crew. Eric beguiles us with Cassette Beasts' analysis, while Chris reminds us of web3's oft-forgotten but newly popular Airdrop mechanics. Bonk? Phil can't get over the post-COVID decline in weekly gaming hours, but Eric cooks on a theory that a growing leisure pie might save us all.
[1] Sub to Eric and Chris's Substack!
[2] It's a bubble, it's a market, it's an Airdop!
[3] The Tremendous Yet Troubled State of Gaming in 2024
I want to complain about Lego. So I haven't bought a Lego set in 15 years probably maybe 18 years and like finally bought another Lego set for Valentine's Day because this is the perfect combination it's flowers for my wife for Valentine's Day and it's Legos for me. Because they've got like these, like cool flower Lego sets now and bought it, started building it. We're missing like a pretty critical piece, one piece, and I was like, damn, like this doesn't happen very often. I'm sorry, Han, I swear Lego's quality is better than this. Like I didn't just buy you some shitty mega blocks. This is supposed to be high quality. And we get to the next stage of the thing, we're missing literally seven of the same piece and I'm like what the fuck is going on. And then we get to the next part and we're missing five. I'm like what happened to Lego? Lego ruined my Valentine's Day.
Speaker 3:Let's start with utility. I don't understand what it even means.
Speaker 1:Everybody has some kind of utils in their head that they're calibrated.
Speaker 3:There's hardly anything that hasn't been used for money.
Speaker 2:In fact, there may be a fundamental problem in modeling when we want to model.
Speaker 3:The problem is cast, episode 22. Here we are a little bit late this week on our semi-regular ish posting schedule. We are coming down from Power World type. Chris is on to another board game already.
Speaker 1:No, no, I'm still playing a little bit, but yeah, I swapped out my pals for monsters and monster hunter. I realized that Pale World just made me want to play Monster Hunter. Pale, no more.
Speaker 2:X Pal Still charting pretty well. It's trending down but still turning really well.
Speaker 3:I've been surprised, but if you compare, if you comp to Battlebit, it doesn't look that great anyway. But before we get into the meat and potatoes, we have topics to talk about. Today we have two wonderful topics. Chris, you've published an original piece on your sub-stack which everyone should sub to. Yeah.
Speaker 1:Yeah, I took quite the hiatus, but I've got a bunch of stuff that's drafts, and Eric and I made a pact that we're going to release an article. We're going to release content. It might just be like what we ate for breakfast, but we're going to release content every week and we have a smart contract written that is going to destroy all of our crypto If either of us fail to adhere to the pact. I'm kidding, but, yeah, excited to talk about it.
Speaker 3:Eric, you've had some legendary posts too. I really want to see you when you're desperate for content. That's when you're at your finest, when you've been starved, I think.
Speaker 2:I had two really good ones, and then I just haven't been able to come up with something good.
Speaker 1:The CSGO one borderline went viral. What's that the content, chris?
Speaker 3:What's the content in the piece?
Speaker 2:Yeah, tell us about it.
Speaker 3:A little primer, a little tweeted out.
Speaker 1:A little primer on the article. I just pushed it out last night. It's titled it's a Bubble, it's a Market, it's an airdrop, and I'm not good with art so I couldn't draw a little Superman with an A on his chest. Basically, I find airdrops extremely fascinating for a whole bunch of reasons, and this article just puts together those thoughts, tries to come up with some sort of coherent thesis. There's two main points to the article. The first thing is airdrops are a really interesting new way to distribute content to a bunch of people really quickly overnight. There's a zillion consequences of that which we'll probably talk about. And then the other thing is just the ability for an airdrop to produce negative prices, discounts, which is really interesting. And I even posited in the article that when an airdrop makes a price negative there's almost like a substitution and income effect that happens like at the same time. I can't really wrap my head around it, so I wanted to bring up the point and maybe people who are smarter than me can actually figure out what this is substitution or income effect.
Speaker 3:And I will be covering the Matthew Ball piece which came out a little while ago. It is entitled the Tremendous Yet Troubled State of Gaming in 2024. I've been covering it on that other podcast, Amon, and I wrote a little bit about it last week. It's following up on a lot of themes that we've been talking about here in terms of time played.
Speaker 3:Matthew Ball, of course, known for his very long pieces. He was the former author of the Metaverse and he did a lot of Metaverse stuff early on in terms of his writing and he's been pretty big into the games industry. He's a VC, but he worked at Amazon in their film division beforehand. He doesn't have a game industry background. There's a lot of really great research in this post. I think there's a lot of interesting takeaways you can have from this post. I think there's a lot of ways you can take the research that he cites, which is pretty fast and pretty expansive, and come up with some new theories. And maybe we'll be doing a little bit of that. But before we do, let's talk about what we've been playing.
Speaker 2:You've got to select a good things on sale. Stranger, I've been playing the hottest new Pokemon clone that everyone's talking about, that's what I've been playing.
Speaker 1:I'm fucking Pokemon. I've been playing cassette beasts.
Speaker 3:I was waiting for it, man, I knew it was coming.
Speaker 2:What I just you guys have been playing Power World. I've been playing cassette beasts, which is some Pokemon clone on Xbox Live, but no Power World. Was everyone talking about you? What's your take on Power? I downloaded it and never played it.
Speaker 1:I want to hear about cassette beasts.
Speaker 3:Yeah, this looks literally like Pokemon. This is turn based combat.
Speaker 2:Yeah, no it is actually. People call Power World a Pokemon clone because there's Pokemon in it. This one is actually a Pokemon clone. They took the Pokemon template get eight gym badges and love catch Pokemon and level them up and they streamlined it and polished it for a more modern audience. Like, you can switch your moves of your Pokemon more easily. Like your Pokemon don't level up, you level up so you don't have to worry about when you catch a low level Pokemon that like way weaker than the rest of your party, that kind of stuff.
Speaker 2:But other than that, it was a Pokemon game and then I, after playing for a couple hours, I was like, oh yeah, pokemon is kind of slow, isn't it? So I turned. But the nice thing is it was in Xbox Game Pass and the thing that we've been talking about with Xbox, with the game sub, is that I tried this game. I wouldn't have bought it ordinarily. I like played it for a couple hours, got bored, picked up another game. Played it for a couple hours, got bored, picked up another game. Yeah, I don't know. I've been enjoying the ability to quickly trial indie games that I would not have paid full price for.
Speaker 3:And why in God's name did you pick this up over Power World, which is also on Game Pass? Was this a counterculture thing? Well, I logged into Power World, counter evolution.
Speaker 2:And it was like, like make an island. And I was like I don't want to make an island solo, because I'm only going to play this for a couple hours and then you can invite people after the fact, just make it.
Speaker 1:Multiplayer is not great. On Power World, the multiplayer is not great either, especially for Xbox, which, like, is ironic because I feel like Xbox is game pass, like you get it for free, basically and then it's awkward because so, like my friends and I, we can't play on the same world unless I'm there. So we I created this world, we're all there and then all of a sudden, like I realized this sucks because I have to be on for these guys to play. And then we're playing and I want to get off, I want to go play something else or I want to just get off and I'm like I guess I have to abandon my friends and they can't play. Definitely a lot of work to be done, but Microsoft's helping them, I thought, with that.
Speaker 3:Their server stuff. Yeah, I thought so they send in some reinforcements.
Speaker 1:So hopefully that'll fix it. Are they like a partner?
Speaker 2:or something. Why is Microsoft getting involved?
Speaker 1:I don't know. It's like a huge game on their game pass. It's not Fortnite. Fortnite's not on game pass, but because it's free to play, I think that's probably why.
Speaker 3:And you said cassette, cassette pieces, slow, or is it just? But the Pokemon formula, turn based turn combat, is slow.
Speaker 2:Yeah, turn based combat is switching and the random encounters you run into something of one, then you have to wait for all the animations to play out. Yeah, I think there's something about turn based combat that's just slow Right Like I can't think of a turn based combat game where I was like, oh, that was really fast paced and I got a lot done quickly.
Speaker 1:Isn't Baldur's Gate three? Wasn't that? Isn't that turn based? How did you feel about that? Did that feel more Fucking slow, oh, super slow.
Speaker 2:I was like this is like a super basic fight. It's taking me 15 minutes where. I'm just like I just suck through my basic attacks.
Speaker 1:I played it. So I was never a Pokemon kid. I never played Pokemon. It's because it was satanic.
Speaker 1:That is actually true, as we found out, I think, in episode two. But no, what I played was a game called Adventure Quest 64, which is it's an indie game from a no name publisher. I think I don't even remember who published it. But what ended up happening with that is they actually didn't finish it. So you would hit the, you'd hit like the late game and then all of a sudden the game just goes to absolute ballistic and there's like just it's terrible, but I used to love it and play it all the time and it was just it was turn based.
Speaker 1:But what they had was and I don't know if this Beast Quest, what's it called again, do you just Kits and beasts, puzzle beasts, whatever Eric is playing they had this escape mechanic where, once you do get higher level or you don't want to be like wasting time fighting these pigeons or whatever you can escape, which I think it's like a really strong mechanic. I'm assuming a lot of these. I don't play a lot of turn based games, but I assume a lot of turn based games have escape mechanics.
Speaker 2:Yeah, you're going to run away to dodge the fight.
Speaker 3:Why not auto play? I feel like this was the big revolution of squad RPGs on mobile is just auto play. And then in some games like mobile legends, adventure, they will actually include a button that lets you speed up animations. You can six X, all animations, which is wild to be a part of. But that kept me retained Exactly for the point you just mentioned, eric is like why do I just? It feels like I'm playing the same music every single time I go into a battle, except it's not fun. It's menu menu, select game.
Speaker 2:Yeah, one thing I was disappointing is the whole thing's music theme. Right, it's called cassette beasts. There's these little cassette tapes and you catch a monster by recording it on a cassette tape. There's a bunch of like music theme stuff, but there's only two battle themes that just play over and over.
Speaker 1:So so, instead of a ball, it's a cassette, which that's how they got around Pokemon's copyright stuff, right.
Speaker 2:That's. But the combat was made more complex. So like you can't just auto play, like you have to, there's like action points that build up and so you sometimes you save them and do a big burst attack, or sometimes your attack hits your teammate, but then if you hit your teammate grass type, with a water type move, it'll heal them, and so there's there's some like tactics going on, but once you figure out some basic strategy, like it's pretty auto play.
Speaker 1:So I'll let Phil talk about pale world, because those are basic gamer. He's like he plays mom games and like that.
Speaker 3:There's nothing wrong with it. The film plays a live variety. Does your mom play power world?
Speaker 1:Hey, I play hyper casual. No, that was probably a bad example Place hyper casual games.
Speaker 2:He plays like Vpex legends.
Speaker 1:My wife started playing and my wife started playing Candy Crush. Oh my God, she told me she's. I've almost accidentally purchased like 17 power ups because the pop up just like the natural button press. So I got to watch our credit cards. We're going to have a Candy Crush credit card, but I've been playing Cal world. Of course I think there's maybe we'll talk about that more but I've been playing chess.
Speaker 1:I do this thing where I get interested in chess, start playing and I like to watch a few YouTube videos and then I suck and then I stop playing. So this time I bought a book. I started doing an actual course, started to really try to learn how to play chess, and it's the first time that I've really felt like I'm actually growing. I do one or two long form games a day and really focus on after the game going back, looking through all the different moves that were played, studying like the game that was played, what mistakes that I make, what good moves that I make. The chess book is incredibly helpful, but now I've just been having an incredibly fun time playing chess and the thing I love about chess is it's a game that's existed for like thousands of years and hasn't changed that much. I could probably talk a long time about chess. Are you guys big?
Speaker 3:chess guys.
Speaker 2:I saw Queen's Gambit Nice so you're an expert, I know a bit about it, but I never played that much. Okay, Speaking of not changing for thousands of years fun fact chess had Power Creep. The current version of chess is like the most Power Creep version. That is true.
Speaker 1:I don't know if you're talking about the same thing, eric, but I did hear that originally the Queen could only move diagonally one space. Then she could move diagonally multiple spaces and then like, basically I think it was like after Queen Victoria or something like that, like some badass Queen came by and the I don't know, I don't know when Queen Victoria and they like just the Queen was OP, all of a sudden they're like she can move any direction, as fucking far as across the field as possible. Sorry, I don't know if that's what you were talking about.
Speaker 2:Yeah, no, it's like the Queen used to have the same movement options as the King, just one square in any direction. Bishop's used to only be able to move two scores diagonal. There's some restriction in rooks as well. The whole first pawn move go up too. They just did that to speed up the game. Originally pawns moved one piece each.
Speaker 1:Yeah, I guess what I mean is. Okay, there's definitely been Power Creep.
Speaker 2:Don't get me wrong. The core of the game has definitely held up for thousands of years and there's so much legacy built up. But just an interesting fact that clearly they were like hey, this game's too slow, let's make it faster. Let's make the pawns move up too, to speed things up.
Speaker 1:One thing I want to like, because I feel like there are people who listen to podcasts who like chess Bill Grosso we had him on. I think he's pretty into chess and he got me into playing chess puzzles every day. Like I start my day with a chess puzzle. But one of the things like this is not a chess podcast, but I'm going to give you my chess beginners advice as someone who has just basically started off as a beginner, and it's like all you really need to do to level up pretty quickly is practice like these fundamental moves and don't go away from those fundamental moves. Play good foundational moves and you will. Eventually the opportunities to take advantage of your opponent will arise.
Speaker 1:Oh, there's this awesome quote that it's in a book in a different room, but the chess book I'm reading it's basically. The quote is from, like, some dude from the 1800s and it's if you just play the moves that the instructor don't wonder move your pawns in the center, try and take control of the center, get your pieces, your knights and your bishops out in the action in the active squares. If you just play these fundamental moves like theoretically good moves, you will eventually set yourself up to be able to completely dominate your opponent, and I just love that, because that happens to me now. So I'm just playing this good fundamental chess and all of a sudden I'm like, oh shit, there's, there's a queen fork. I didn't even realize that. Now I've got a queen fork, or oh, there's checkmate just pops out of nowhere. I don't know. I've been enjoying it a lot. I guess it's not a real suggestion for you.
Speaker 3:I love for you to come back and talk to us about this game that I've been following for a little bit, called Kingdom Chess, and I actually think there's something to the format that they might be pioneering and honestly I'm surprised we haven't seen more of it.
Speaker 3:But the idea of Kingdom Chess, which is in soft launch right now I believe it's on Android is to maintain the core mechanics of chess but basically add I hate to see the word gamification but basically add elements to the meta that are not doing anything to affect the core pieces or how they move or what the power is, but it's essentially just saying okay, if you do well in a match, we're going to rate all your moves and then we'll give you soft currency. That's stuff. Currency will let you upgrade a base and then there might be some base attacking and then you might have an avatar and your avatar might change based on cosmetics. So they're basically trying to add all these meta elements to these classic games without affecting the core underlying gameplay, and I've been surprised we haven't seen more of that, particularly to appeal for an older audience, because we know all those mechanics. You can squeeze some retention points out of there. And chess has been exploding.
Speaker 3:I don't know if anyone's been keeping track of this. Chess is one of the top downloaded mobile games. There was an integration of excuse me, even chesscom has been exploding. That's become the de facto brand, and the gentleman from Norway, magnus, something or other.
Speaker 1:Magnus.
Speaker 3:Carlsen, they got their Tiger Woods to be the ambassador of the sport and honestly, I'd love to see more of these Kingdom chess type games. To me, there's just a lot of classic games. Usification of Phi, I agree.
Speaker 1:I think that's probably the biggest problem facing chess is chess it's the same game over and over again. So it's not like your. Yes, you're experiencing a different board, but it's not like a CSGO map where, like you might, or any other type of game map where you might see something you've never seen before, literally like a piece of visual art. So that makes the retention like really brutal. It also requires like I'm taking on as a hobby, but I spend probably an hour and a half or two a day right now, like not always, but like right now because I'm super into it on chess, which is more like a chore and like work than it is a hobby. So I definitely think this is interesting. The one pushback I would have is I'm assuming this is playing against bots, right?
Speaker 3:Oh no there's PVP is PvE, but there's PP in the game at the higher levels.
Speaker 1:Oh, really, that would be super interesting. I'm very curious. I would love to see like a. So I just, I just personally hate that. I'm not a fan of a Clash Royale like art style, but definitely would love to see a more kind of oh, this is made by chesscom.
Speaker 3:Thank you, just feel so obvious that you would do this.
Speaker 2:This is the right move, this is like the get kids into jet.
Speaker 3:I know it's not educational, though it's not a kitchen. This is a mobile game. This is a legit mobile game. I'm looking at this steam one. The steam one is not the run. It's not the right one. There's actually two. It looks like there's one on steam, there's one on Google Play.
Speaker 1:There's it's got like a picture of a red-headed king with a chess piece and like a black-haired queen or king or something On the other side. I'm definitely gonna take a look at it. I've actually seen a few screenshots from people who like on the just chess subreddits check beginners subreddit not super nice. I've tried posting there and they're mean. They're like fucking misters mitten 45, you idiot. It's all god. I'm sorry.
Speaker 2:I'm like my reading a beginner in the name. It should be beginner friendly.
Speaker 1:It's like such a chess and that's another reason that like retention is brutal is because the community is super. I think it's pretty toxic personally. But, I've had a who don't play bots. If you're gonna try and get into chess, bots don't play like humans at all. They are binary. They're not very good. They're either good or they're bad. They're either playing absolute garbage moves or they're playing like Magnus Carlson, leveled Grandmaster moves against you.
Speaker 1:Just a way that I sliding scale, like no, there is. But the problem is what's, especially if you're in the middle range, the moves that they play like they'll play a terrible opening, and then if you start to take advantage of them and they're start to lose, then they'll start to play good. So they like, if you're playing poorly though it's like the GRE like they'll play poorly. If you're playing poorly, they'll play good if you're playing good, and it's just like. That's not how a human plays. A human Just always plays good moves or always plays not great moves. So then, enjoying chess.
Speaker 3:We should talk about power world. I think we just we have a, we have an obligation, we have a duty. Power world is out. Power world, of course, is the game from a Japanese studio. Man, it's been a long time. So we've talked about a Japanese studio, small Japanese studio, blowing it up. They apparently, by the way, have around a 50 head count. They previously released a game on steam called craftopia, which looks largely abandoned. Now they did a couple updates to it. It looks like craftopia served as a technical base to get this one off the ground. What is the company called? Again, pocket pair from pocket pair.
Speaker 3:In Japan there was this great interview where the CEO, before the game was launched, published a blog post talking about all just the wild things they did that were unscalable to get a game like this at the door. They had a lot of their code on flash drives which they weren't backing up to the jagrin of what I would imagine would be millions of producers all over the world. They also hired someone to do animation who worked out of a 7-eleven, which is like really an animation. They pivoted the game from unity to unreal, which is an incredible task to undertake, and no one in the studio knew unreal and, by the way, that isn't the first time I've heard of a studio doing that. One of my clients I worked with did that. It is a monumental task to do that, especially if none of your engineers have experience with that, and they came out the other side and they have sold the Second. I think it's like almost like the second highest number of steam copies in a given period. Forget what the exact sales were there. Certainly the second there, the second highest played game, highest concurrent player count on steam ever, besides PUBG, which is incredible. And PUBG, by the way, when I looked into this record, was incredible. Pubg achieved the highest concurrent player count in steams history when it was a paid title. This was before it went free to play battle royale. Height was just that crazy and to that everyone to get at it. They're willing to play this really shitty Korean game to get it's out. It's real. This was, by the way, this is in a trailer. The hype started to build. Look like a meme game where you had these Pokemon that you were almost Slaving and they had machine guns and you're shooting them. It was crazy shit and the game actually came out. It looked like it fulfilled a lot of those promises and I would argue it even exceeded those promises and what they Appeared to have do.
Speaker 3:I don't know you guys disagree with me, but I think what they've added to the survival crafting genre is, first of all, a easy entry point, which is cute monsters. Survival crafting is an extremely hard genre to get into Because, by definition, you're starting in a server and all these servers are instance to have, let's say, 30 players in them and you're gonna go back to that server for quite a period of time before the server resets. So you're starting almost with nothing. When you go into these servers and there could be players in there that are in the middle of their lifecycle and so, without anything to really grab on to, it can be intimidating to get started and having these cute pals that you're capturing and to like really guide you along until at least know that you're gonna capture in the future to me is a wonderful entry point to a Rather brutal genre.
Speaker 3:I think the other thing they do is they just add a collection metagame that just makes a lot of sense to people, which is that I Build better buildings, I build a better base if I have more pals, because I can assign pals to do labor, and so it almost becomes an economy management game, which is where survival crafting is always teetered on to.
Speaker 3:It just seems like they embraced it and I don't think people are picking up enough about what par world means for the genre, because we're oh hey, it's a Pokemon, clotin's an IP story and I do think there's an IP story in here. But I also think it's doing something to the survival crafting genre, which no one has really triple aid and of course we know Diablo cance or, excuse me, cancel their triple a game that was in development which was supposed to be a survival crafting game. No one's really figured out how to streamline and mainstream this, but if there's anything that should tip the boat into major publishers getting involved in this genre, it absolutely should be this game, and we should make sure that we take the right lessons away from it, and I think those are the right lessons is is adding Meta collection, adding approachable meta collection, survival crafting.
Speaker 1:I've been playing it as a player. I haven't even really been thinking about the as the only the depth that I went in terms of the game economy was literally like the actual Like more so the game design and the systems design and I find it. You know, I wish, almost wish, I could transfer my character to a new account or something like that, or change the the difficulty, because it is like a little bit on the normal difficulty. I think the economy is a little too easy. Like I think within 10 hours you can get a pretty like self-sufficient. I find very little reason to Expand my base or really build up fortifications or anything like that. Like typically people are gonna set up in the first area where there's not a lot of. I had one game instance where the big mammoth Thing came and started destroying everything and I was like level five and I was like okay, but I just restarted at that stage. But that's like from more of the systems design perspective. I want it to be a little bit more like. I want it to be more pushed, feel like I need to really actually expand.
Speaker 1:I find myself now I think I probably have about 50, 60 hours in the game just chilling at base, like I've got enough of my pills I can. I'm starting to starting to venture out to some areas but at least in my experience. I'm curious what you guys are and I know I'm talking more about the systems fill, but I'm curious your guys's experience with the difficulty, like I've noticed. That is like very stark. I'll be in one area one-shotting in pales or enemies and I'll go over a river and then I'm like way out of my depth getting one-shotted by by enemies which I don't know. Maybe I'm just playing the game wrong feels. Feels a little bit like there's maybe some some balancing that needs to happen.
Speaker 3:I would say this is the problem. When you have shared shards of 30 players and you need to accommodate people all at different points in their life cycle, like a traditional MML would, and like, how do you make sure that you Segment players so that the mammoth you're talking about doesn't come into an area that's really new?
Speaker 1:you have to have Geographical when you say there's 30 people in the shard, that's just if I invite. When I was looking at.
Speaker 3:When I joined Power World servers, I was just looking at the server list, seeing the max player count and picking the one that was the highest. That's how I played. We guys spinning up your own, so there are other people in your server.
Speaker 1:In your instance, eric. Are there other people in your server?
Speaker 2:No, I don't know. I got two minutes in well what turned you?
Speaker 1:Oh, that's right, I'm like.
Speaker 2:I was just like oh, like I want to play with my friend, I quit, and then I never booted it up.
Speaker 3:Yeah, chris, this is the whole thing.
Speaker 1:This is a whole survival crafting thing, I know, but I didn't know. There was like PvP yet Like I invited my friends and they joined my clan and we were like building together. Oh no, I don't mean, I didn't know.
Speaker 3:They're just mean like you. You're sitting a shared world with 32 other people. I haven't, I haven't fought anyone, so there's like other people in there's other people if you made a public server. Yeah, other people can join your game.
Speaker 1:Yeah, no, you can join the server Impossible, but I would know if they were there. I'm not just gonna go. It would be that the magic of running into another person would have been incredible. I'm like wandering around and like after 50 hours I like see another person.
Speaker 3:Oh, fuck this to me is the promise of survival crafting. It's the moment and last of us like when you're like holy shit, they found another survivor group or walking dead. It's I've been on my own for so long and you find like another survivor town. You're like holy shit. I think that is the fantasy that these games encapsulate in a way that the way that battle royale could never because they have roguelike elements like they, recent battle royales reset very quickly and I think this is the attraction of survival crafting you can still have those moments of man. I've been starving for water. I've been out for 30 days and I found a level 60 village.
Speaker 1:That's super interesting. I don't think. Yeah, I don't think that world is set up like that yet, but I could see it very being very feasible very quickly, especially once they get some of the help from Microsoft. I don't know how I feel about that. It's funny. I'm actually the opposite. A lot of my friends are like oh, I love the shared server, I like playing with other people. I personally don't like it, but that's just because I like to have. I don't like when people are fucking with my chests, Like I've got everything in order and I like sort everything, and then people come in and they'll like put a, like a sandwich in my stone chests and I'm like that's where the stones go, that's not a sandwich chest. But yeah, that's interesting. I just play video games for different reasons, though. So you think that the collaborative multiplayer thing is that's where I don't.
Speaker 3:Well, first of all, just in terms of survival, crafting like they need to figure out all the onboarding stuff. Like the idea that I'm choosing from a server list is a non-starter for mainstream adoption. That is very much a steam PC thing. Is that immediately confronted with this choice? And the other thing is it's not really clear for end users whether or not the progress is saved at the character level or whether or not the progress is saved at the server level. Surprise is at the server level and again you have that brutal. Okay, if I'm switching servers then I'm screwed. Okay, I joined a full server when I started the game. 60 hours in my friends join, I want to play with them. Okay, I need to restart into another server.
Speaker 3:There's a lot of those shenanigans which I really expected Blizzard to solve, because you know they're solvable problems and they're just these artificial barriers that have lagged on in this genre, from rust to arc to this game.
Speaker 3:So all those things need to be solved. But I do think there is something to the cooperative element. Like that to me is the fantasy that this game promises in the same way that, like battle royale's, fulfilled like the original battle royale movie, if you remember that, the Japanese one that he did multiple versions like, I think battle royale's fulfilled that fantasy. I think this has the same potential to do it for the zombie fantasy, and I think it does it because it plays with the mechanics we've been talking about for a really long time, which is in and out of round, progression and persistence. It's starting to play with all these different things and I think this one really turns the bar on persistence quite a bit like you're persistent within the server, right, so you're going to reset if you go to another server and roguelikes are playing that within the context of a match. So this expands it just a little bit, or actually quite, quite a bit actually.
Speaker 1:I will say the. The for the FTUE is much different on Xbox than it is on. It sounds like it's much different on Xbox than it is on Steam. Like I was prompted to create my own world I don't think I even got a list of servers, but I know that the, I know that the sharding and the like, all that is handled very differently compared to Steam because, like for Steam, you can go into somebody else's world and the owner does not have to be in that world on Xbox.
Speaker 1:You still need to be like I have to be online in that world, are you fucking?
Speaker 3:serious. You're the gatekeeper, so if they join another server they have to restart their character. That's brutal.
Speaker 1:I mean, yeah, like they can't play. They can't play, they have to start their own. They have to have like a solo.
Speaker 1:They pay you and be like Chris, can you log on? What I've done, like the other day. I was on and I was like, okay, guys, I got to work out, and so I just left the console on and just downstairs and worked out, but then, like the game, the game crashes all the time. So if I crash, all my buddies get booted out. So it's a bit rough right now. What I should probably mention, since I'm at Web three, I do. I think that some Web three people have gotten shit for saying, oh, this is a big thing for Web three. I do think that's true, right, what it's shown, because there's a little bit of controversy about the AI stuff, and I think what this to me, emphasizes is that the vast majority of gamers don't give a shit about what that small fringe of super loud online gamers complain about. The super loud Reddit users are screaming about AI, but then a really good game comes along that's using AI and nobody really care.
Speaker 2:But there's no evidence this game used AI to generate anything.
Speaker 1:No, I thought the whole thing was that they used a bunch of AI.
Speaker 2:No, that's what people on social media are saying.
Speaker 3:The models were very close to Pokemon models. It could have. Maybe there was AI where they fed the Pokemon models in, or maybe they just sculpted them, but that's. I think this is false controversy.
Speaker 2:I think what's more likely is they just copied.
Speaker 1:Yeah, I think my thesis still holds that the game was surrounded by controversy only because there's this fringe psycho group of people who complain about everything. But the vast majority of gamers, the vast majority of people playing games, are not. They don't care about that stuff, and you can like. I think that there this is a story for a shrapnel coming in and watching a game that people just want to play and people start playing it and people are like, oh, this game is fun, it has Web three. We don't really care who cares, Just play the game because it's easy to use and we've got a long way to go. But I do think. I think it's a web three win and I'm willing to.
Speaker 3:I'm willing to argue with it.
Speaker 1:I think it's a. It's an argument for big concern, for web three is like gamers hate crypto. They do the ones online hate crypto and, like a web three game will never be successful because gamers hate crypto. So even if it's good, they're not going to play it because it's crypto. To me, this emphasizes the fact that the vast majority of people who are playing games don't actually care about that mainstream or like the current Twitter hotness, like what's the controversial topic on Twitter, I don't know. To me it's just, it's like a good it's. Maybe it's just a reminder, maybe I'm wrong, I don't know. Somebody fight me, like I. I want to be able to articulate the point.
Speaker 3:So what is it that you think this does? For what three? That's nice.
Speaker 1:Okay, so obviously the fact that there is no actual AI is a problem for my argument, but let's just assume that the the whiny bitches on Twitter are correct. And then they used AI. Let's just say that's true. This game got millions and millions of users. There was some resistance, like I know personally. I know some people who were like I don't know if I'm going to play that game. They used AI and they copied Pokemon and the reality is like the interest of the masses and the masses are not the loud people on the internet, they are the 75, the 90 percent who aren't loud, who just play games. We're willing to play this game and they couldn't care less about the fact that it used AI, assuming it used AI, which it didn't. But I guess my point is it's a success story for the silent majority winning over this very loud.
Speaker 3:Oh okay, on that regard I completely agree with you. If a web three game comes along, that's compelling enough. All of the arguments that web two users inflate and internet forums that prevent them or the barriers they create themselves to play these games, no one will give a shit. But this, to me, this is the fucking web three. Problem is that they actually need to deliver this, deliver something that overcomes the friction.
Speaker 3:Deliver something that's better than the friction. Deliver something like I don't expect the infrastructure to be seamless, give me something that makes the infrastructure cost worth it. And they haven't been able. Web three hasn't been able to do that yet, but I agree with you all of these things are going to evaporate. There isn't a real animosity here from Redditors that they'll be gone.
Speaker 1:I totally like, and I think that's probably the biggest. The biggest argument is, chris, like that's fine and dandy, but nobody's actually doing that, and I think that's 100% true. Even like in our game, we're like trying to make the process as seamless as possible so like you can, in one transaction you could buy a whole starter pack and start playing Star Alice, but you still need a wallet and you still need to fund that. What like it's no matter what. I don't know how we're going to get over that.
Speaker 1:I don't know any game that has a fix, because at the current juncture there's no way to have decentralization and simplicity, because that solution hasn't been made yet. If you want to be decentralized it's a clunky experience If you want to, if you want to hand over some of that authority, then you can make it an easier and easier transition. So I think if a Web three game were to come out right now and be like we have I think Honey Land is this way you pretty much just are in the game. Now a lot of that stuff is not on chain. A lot of that game is off chain, at least from my understanding of the games. How the game function works. All the tokens are on chain, but the easiest onboarding process not fully decentralized. And if it's not fully decentralized, then what's the point Like, why not just do a Web two game?
Speaker 3:Speaking of decentralization, let's talk about airdrops. It's a bubble, it's a market, it's an airdrop. What is an airdrop and how do they generate value?
Speaker 1:Yeah, I finally posted a sub-stack article and I think it's been two months and sub-stack has been telling me that I'm going to become poor and impoverished if I don't start posting again because I make exactly zero dollars off of my posts on sub-stack.
Speaker 1:My airdrops have been the hotness in Web 3 for I don't know two months. I guess Bonk wasn't technically Did Bonk get airdropped, but that was, at any rate Bonk was when all of a sudden, this idea of value, just poofing into existence came up, and that was, I think, October, November of last year, when a whole bunch of airdrops started happening. And then recently we've had the Jupe airdrop, which was probably the biggest airdrop of all time, at least in Solana ecosystem. So I wanted to talk about airdrops. Yeah, you want to explain what an airdrop is first.
Speaker 1:So an airdrop is basically where and I explained this in the article, but it's called an airdrop because it's actually not the similar from Apple's thing where you can just like anybody who's got their network open, you can just drop them content, like a cat picture or something you know. You're about people dropping pictures to people on planes. Oh, I'm just going to send this meme to everybody on the plane who's got airdrop open.
Speaker 1:So what an airdrop is. Like you as a central authority for some token on a blockchain, you might have a list of a whole bunch of wallets. Now, if you have a list of a bunch of wallets, you can send any token to a wallet and they don't really they can accept it. They can, depending on the protocol, but you can just send. I could send Sol to Eric right now if I had his wallet addressed and he would just get it. There's nothing he can do about it just shows up in his wallet. So an airdrop is when a central authority over a token distributes a ton of tokens to a ton of people. Now this could be NFTs. So I think Drip House is a good example of an airdrop where, if you interact with the Drip House interface, any artist that is on Drip House, which is a web three kind of like art dissemination platform you sign up for. I like this artist, I want to receive any airdrops that come from this person. They make a piece of art and that gets airdropped for free to everybody who's associated with that artist or associated with the Drip House platform and what it is. It's free. An airdrop is necessarily free. You typically have to meet some condition because you need to get into that list of wallets that's going to receive the token. But this could be, for example, in the Jup airdrop. If you use the Jup platform, you're going to be on that list of wallets that's going to receive a or at least the potential wallets that could receive a Jup airdrop, for example. And Jup Jupyter Exchange is a decentralized cryptocurrency exchange, so you can go, you can purchase, you can sell, you can trade cryptocurrencies on Jup. Now what happened with Jup, for example, is they grabbed a list of all the wallets and they said, okay, we're going to rank our wallets by how participatory they are in our environment and the most highly active, the people who have given us the most kind of volume, or I don't even know what the metric they use is. Eric, you might have a better idea of what metric they ended up using. But intensity essentially, you're going to get more of the drop and if you're like me and you barely interact with Jupyter, you're going to get less of the airdrop. So then they get this list of wallets and they just drop a token. In the case of Jup, they drop a token that's never been minted before or that's never that doesn't have a market. So sometimes you'll get airdropped a token that has a market, like in the case of Bonk. So Bonk airdropped a bunch of tokens to Solana phones, the saga and that Bonk token already had a market. So a bunch of different ways this can go is a bunch of different flavors of airdrops. You can drop NFTs, you can drop SFTs, you can drop cryptocurrencies.
Speaker 1:The point is out of nowhere, all of a sudden, this thing that didn't exist poofs into existence. And the key, in my opinion, is that it poofs into existence for a lot of people overnight. It creates a market. Now I say it's, I think the title it's a bubble, it's a market, it's an airdrop. I think if you were to just take the textbook definition and look at the fact that all this value is value in quotes, was generated overnight, you would say, okay, it's got to be a bubble, right, because there's no fundamentals. That explains why this thing has value. Now I take I'm in all my writing, I really talk about value a lot and I talk about extrinsic value and intrinsic value and I talk about okay, let's look at this, what kind of extrinsic value is there to an airdrop?
Speaker 1:There's speculative nature of the token, there's hype, there's excitement, there's like outside forces that are behaving or that are, that are that are messing with the token's price.
Speaker 1:Okay, so that's why it might have a market, that's why it might have demand and not just sell pressure. And then the intrinsic value is the fact that the Jupiter token is actually a utility token for the Jupiter exchange, which is one of the most heavily used platforms in Web 3 for Solana. It's one of the most popular places for people to go in Solana to exchange currency. Okay, so that's useful. Maybe it's got some intrinsic value. So that's my first point is just because this value poofs into existence all of a sudden and to get some numbers, like for the Jupiter drop, for example, 700, 570,000 wallets overnight, all of a sudden we're able to claim jupe into their wallet and that was 731 million tokens. At today's prices of 50 cents per token, that's $345 million. So just out of nowhere, a market of, or I guess a market cap of, 345 million worth of a token was just dropped into people's wallets Does it seem like a really inefficient way to get a market started?
Speaker 2:That's a lot of value you're throwing out there. You could just pay a market maker or put stuff in liquidity pool why?
Speaker 3:not just auction it? Why not just auction it? Make some cash on the side too, Go down to zero.
Speaker 1:So here's the so here. That's like the classic tokenomics model, though Phil right, that's hey who wants to buy my token? Otc like white label token sale. I think this was a resistance to that scammy get rich quick scheme that happened a lot in the early days of crypto, where you sell your token to some investors and then the investors sell their. Dog is very excited, maluch, go away go away.
Speaker 3:He likes airdrops. He wants some treats. Airdrops into his mouth.
Speaker 2:He wants some doge.
Speaker 3:He probably does want some doge.
Speaker 1:I have bonk. I don't have doge. God, it's not usually like that. Okay, I completely forgot where I was going. Oh, okay.
Speaker 1:So I think the idea is like if nobody bought in, it can't be considered a Ponzi scheme, it can't be considered like a scam because nobody spent money, right, I gave you it right. What are you going to do? Well, you can't lose money on this. Nobody told you you're going to make money on this. You didn't buy anything, you didn't. So I think that's the idea. I also think it was. I could be.
Speaker 1:This is pure speculation, but I think it could be a response to the regulatory or the regulation from last year about the XRP token, where all of a sudden it was like if you sell it, it's a security. If you don't sell it, if it's just given away, it's not a security. That's a really convenient way to do that. Now, as the issuer of the token, I still could retain 50% of the supply. I'm still able to sell that in the market. So it's not like me as the distributor. I'm not making money, but I avoid a whole bunch of regulatory issues and I poof this market into existence. I actually think this is for me. This is preferred over a direct sale on auction sale, so finding a liquidity pool. But then the people still, eric, to your point. They still need to interact, they still need to go and seek out the token. This way, we're literally just saying here you go, that's yours, you've got it, you don't have to do any work to get it the best way.
Speaker 3:I've had airdrops pitched to me and I'm just still perplexed at how little I see of this going on is. All activity on the blockchain is public. It's written to the chain and so you know which wallets are which ones. We can right now we could look up the wallet that received people's. Was it $50 million piece of crypto, nft or if you remember that way back at the hype, crypto artists sold a piece for 50 million creditables. This is what really blew the doors off of this in early COVID. We could look up which wallet actually got that. We can look up a lot of wallets just by how much money they've had moved through their wallets. We can look up like highest account balances for whatever tokens. Why are airdrops not more targeted to groups of users based on this public criteria? I look at it as look at, everyone has the safe and you have an opportunity to put whatever you want into people's safes and I can put, I can put shit into the richest people in the world safe, and what would I want to put in?
Speaker 3:there how could that help? I mean I think that's.
Speaker 1:I think that's where we're going right. I think that's what this gives us is the ability to say hey, post Malone, here's my thing. I know you've got like this crypto wallet. Here you go Now. Obviously, like most of the super rich users, tried to keep their wallets hidden, so you don't know who's exact wallet is who, but you know their behavior there's reveal preference there. I don't know who they are, but I think because they're buying this $50 million NFT, they're probably pretty fucking rich. So to me, that's that's the really interesting. That's more of for me, that's more of the marketing side of things, and my article doesn't really focus too much on the marketing side. It focuses more on why does this happen? Why can a market for $500 million worth of a token just all of a sudden go into existence? Why would there not be sell pressure?
Speaker 3:to zero? Do we see price to stabilize after massive airdrops?
Speaker 1:So for the token in my opinion, juke was a pretty stable. It's been floating around 50 cents for two weeks. I think that's pretty impressive for a token that right now doesn't have that much utility. We have seen airdrop. I don't know what Bonk looks like right now, but I'm sure it's gone down a zillion percent since it's since it's high.
Speaker 3:When did they do?
Speaker 1:that for juke January 30th or January 34th?
Speaker 3:You're right, and there's been very little movement in market prices. Certainly not anything. If you were just looking at a price graph that you'd be like, wow, let's see. It's saying market cap is also flat too, though. That doesn't seem right.
Speaker 1:What website?
Speaker 3:are you CoinMarketCap Share, like it's on the?
Speaker 1:else CoinMarketCap, if you look at CoinGecko.
Speaker 3:Because we should see market cap explode right when the airdrop hits.
Speaker 1:It depends on how they calculate market cap. So market cap is based on the circulating supply and you'll notice that the circulating supply is exactly 1.35 million, which is a very specific number for circulating supply. So it's uncertain how circulating supplies come.
Speaker 2:It looks like when they launched all that was just claimed as circulating supply, because the price graph and the market cap graph You're right, though.
Speaker 3:I would have expected larger drops with this massive supply chain.
Speaker 2:So here's the thing right Is, when they launched, they put a liquidity pool up with a hard sell wall at a certain price or a hard buy wall. So they essentially created a market maker who said that if, as the price drops, we're going to keep buying it up and support the price.
Speaker 1:Okay, so that's a really good piece of information. I don't know if there's.
Speaker 2:Oh, it says there's yeah, like several million. Usd in here.
Speaker 1:So that's the liquidity pool has 7 million to just eat up. That not burned through immediately, though, like just the 24 hour trade volume right now is 100 million, I guess enough people held. So that's the thing. One of the one of the metrics I point out is 60% of wallets transferred all of their jupyirdrop since they they got it. So from the time they got it to today, 60% of wallets are transferred. That now you might say, oh, 60% of wallets dump this. So, first of all, that's actually pretty like 40% of wallets held. That's pretty impressive. And then up that 60%.
Speaker 1:Most people don't interact with blockchain programs with their main wallet. Right, I'm not going to go interact with Jupiter with my wallet that has all of my crypto holdings in it. I'm going to transfer that to a hot wallet or some sort of like Spurner wallet. I'm going to interact with that program. I'm going to transfer all that value out. I'm going to forget about that wallet. So that's one thing that could be up to 30% of that. 60% could be just like people transferring funds around, especially these types of users who are extremely savvy crypto users. Right, this is like a selected group of people.
Speaker 3:So let me ask you, let me ask you this though then, chris, if you were designing an airdrop and you have the ability to target and I guess that there is a marketing function here, but there's also like a very economic function of what group of people are going to target Well, and that's the that's the beautiful part, right Because of on chain analytics this person's purchasing and selling behavior, what kinds of programs they interact with, what kind of person they are.
Speaker 1:So it's like whenever we're trying to do a promo, we're basically giving away value. We are targeting the customers that are least likely to sell, which is a really cool feature Because it's based on activity level. You're giving it to the people who are least likely to like soft hand it. They're going to be diamond handers and they're going to hold on to it. So that's another great point the ability to just study research that users that you want to drop and then say here you go. So who would?
Speaker 3:you target? What characteristics would we look at if we were going to do an airdrop to target? To drive what behavior?
Speaker 1:It depends on the yeah, it depends. If you're a game, obviously you want to measure. So you want wallets that interact with a lot of games and preferably wallets that don't transfer value outside of the ecosystem. So they're. One of the main metrics that people keep track of for crypto games is like how much of the value that the player extracts in quotes is sold into a market. So if I get, for example, in Steralis, if I get rewarded with a million Atlas tokens, do I go and I sell 75% of that or do I sell 20% of that? That percentage, that proportion, is like a really valuable method. So you target the people who have low propensity to sell and high interaction with different programs.
Speaker 2:If I just had to like, off the top of my head, choose a couple of criteria Ideally, you also target like influencers somehow, and maybe you don't know based on their wallets, but activity wallets are more likely to talk to other crypto people and I won't talk about crypto influencers, but it's like too high risk.
Speaker 1:But I don't know like the crypto influencers, like they, they get free stuff all the time. I don't actually in my personal experience I don't know how effective that would. But that's pure, that's not based off data, that's purely based off of that.
Speaker 2:So there's one component about this I think Philly referenced, like the incentives here, right? So this average of the jupy drop was very much like a surprise. It was like oh, you use this thing in the past. Here's some tokens. There's been other air drops, like the blur one, which were very much an incentive scheme, where it was like here's a list of actions on our platform. If you do these actions, you'll get more points, and the more points you have, the bigger the air drop will be.
Speaker 2:And it's interesting the difference in approach right. The blur one was very clearly we're paying you in blur to do specific tasks, right. Whereas the Jupiter one because it came as a surprise. There was no prior knowledge of the incentive, so none of the actors specifically tried to optimize them.
Speaker 1:That's where I like. So this new term came up played to air drop and I'm like how the fuck is that different than play to earn? In play to earn, you do actions and you get air dropped an item in response for that action. How is this different?
Speaker 2:Like it pisses me off, so yeah every variant on that is still play to earn. They're just using a different word. Play to own is play to own a thing that you can later. So play to own money, play to claim a mission comes a token.
Speaker 1:I have. It's funny, I've only been in Web 3 for three years and I've experienced every single fucking iteration of that.
Speaker 3:Oh, Web 3 makes you an OG at this point.
Speaker 1:Play and earn. Play four earn, plays five earn just earn and play. I don't see that as a new, unique thing. Right To me, AirDrop's only work if they're a surprise. Like AirDrop, boom, it's there, Like where did it come from? To me, that's where it's really fascinating.
Speaker 3:But why is it useful? I don't understand why this like exogenous about. I can understand there might be some marketing noise that could be interesting, but I feel like I'd always want a segment, like there's always a behavior I'm trying to drive that could be further enhanced by a segment.
Speaker 1:That's true. I think that's like can you do this in Web 2? Can a studio just go and drop a button? No, they can, I think this is again.
Speaker 3:I think this is like Web 3's underexplored like. Point is, if it takes shrapnel, that the extraction shooter that's coming out looks legit. I'm building, let's say, an opposing Web 3 game. I want to look at all the wallets that have shrapnel NFTs and I can also say here's how much you've spent in shrapnel. I'm going to give you that equivalent amount of credit in my game If you come play this game, or I'm going to give you similar NFTs. That, to me, is it's super interesting because you have public, verifiable information about how this player performed economic activity in another game, like that shit is now. There's a lot of dark things that you can do. You can keep a lot of these transactions off chain. There's a lot of counteraction that you can do if this thing really takes off. But I still feel like this is an underexplored Web 3 advantage.
Speaker 1:I think that's probably one of the things I didn't explore enough in this article. But I wanted it to be a relatively short and sweet article because, especially with Eric and I's plan like these are going to.
Speaker 3:This is the worst thing about writing. Man is like trying to do like proof shit, especially if you were in academia. You're to do both proofs, you and you just get worn down. You're like, fuck, I just need to publish something this week. Fuck, just let it rip yeah.
Speaker 1:And so like the data transparent. This is to me like really emphasizes the power of blockchain data transparency thing. But in the interest of time.
Speaker 1:I wanted to move to one final thing with respect to airdrops. This is maybe less to. This is maybe not definitionally by my definition, and airdrop although I think bonk just air drops the shit out of their token, so I'm pretty sure it is an airdrop. I don't know what their original distribution look like. Maybe it was OTC, but the bonk price action Anybody who's in Web 3 is seen like the bonk thing. It did a hundred X over there. It's done a hundred X. Between October and December of last year it did a hundred X. So it went from zero, zero, zero, zero, zero, zero, two to zero, zero, zero, zero, zero, two or five or whatever it is, but basically a hundred X.
Speaker 1:Now what's really interesting about this airdrop is not necessarily bonk itself going ballistic. That is a case of extrinsic value. A bunch of people get in and get excited and the things becomes super valuable because there's a huge influx of irrational demands. I don't want to talk about that. I want to talk about the saga phone that received each phone received an airdrop of about 30 million. Now the phone itself is a crypto phone. The whole thing is that it has this hot, this. It's a hard wallet and it's really cool you can. It's really all the crypto features that you would want in a phone or committed into it. So 30 million bonk and a bunch of other different stuff can't came with the phone as little features and it's a classic bundling thing. Hey, get a free subscription to this. Okay, 30 million bonk.
Speaker 1:At the time that the phone was selling its initial sale, that was worth $6. The phone is was $5.99 retail. Now this hundred X happens all of a sudden. The tokens on the phone are worth like $600, $700. And the phone is worth less than the tokens on the phone that are stored on it. So you have this and right now I'm just reiterating but you have this huge sell, all the saga, phones sell out. But what I wanted to do is explore what happened. Like what was this? All of a sudden, the price of the phone goes negative and, essentially to demand, skyrockets, basically to infinity right. There's like nobody, assuming you're able to liquidate and sell the tokens, there's nobody who wouldn't take that deal. No rational agent wouldn't buy the phone and get money back. So this is a negative price. I actually study negative prices.
Speaker 1:In my undergrad I did a replication of an Aurelia experiment and so I talked too, much about that, but anyway, it's really interesting because so I the big question I was asking myself is this income effect or is it substitution effect? Now, when we're talking about the elasticity of demand, we break it into two different parts. We break it into the substitution effect and we break it into the income effect. So if a price goes down, that's substitution effect. If the user gets more money, that's income effect. So if I all of a sudden have more money to spend, I might buy more of an item because I'm richer. Or if the price goes down, relatively speaking, I can afford more of it at my current wealth. So substitution income effect. What's really interesting, in my opinion? I think that this is like a I don't know what it is. I don't know if it's substitution effect.
Speaker 1:Why did the price, why did the demand go up? Why did the quantity demand go up once the price went negative? Did it go up because the price was so low? Or did it go up because the players got richer? It's this interesting thing where, all of a sudden, the net wealth transfer is not negative, the net wealth transfer is positive. So they get the phone and they get the money. Did they buy the phone because they have more money? Or did they buy the phone because the price went down? And I just love this. To me it's like a mind fuck. I would love to put this into an econ 400 level core, like a micro econ in an undergraduate course, and be like what is it? I think it's income effects.
Speaker 2:I'd love to I don't know if there's, if that's kind of this is demand, for the phone went up and you're at. You're asking is that the income or substance?
Speaker 1:Yeah, so is the change in the quantity demand for the item due to the change in the price or is it due to the change in income of the users? So did they demand more of it because they became richer? Because it's negative price?
Speaker 2:They weren't more of it until they had the phone, so does that make it a substitution effect? Okay, maybe their budget constraint isn't higher, there's just the price got negative.
Speaker 3:But because they still don't have the capital. Yeah, to Eric's point, they only get the capital to get the phone. Yeah, oh, bummer, that was a terrible for a while too. It's more interesting than that.
Speaker 1:I was excited. I like we could be wrong. I think that's a perfect rebuttal to the argument. Right, they didn't get more income, I guess, until after they made the purchase. So it has to be substitution effect.
Speaker 2:Unless they're holding up like a bunch of money.
Speaker 3:Let's talk about the tremendously at trouble state of gaming in 2024. This was a great piece by Matthew Ball. We were talking about him beforehand. He was the author of the metaverse. He has worked at Amazon Studios not the game studios, the film studios beforehand. He's a VC right now.
Speaker 3:I think he did a lot of great research on this piece. He is attempting to solve a paradox, which is that gaming has seemed so successful from the outside. It looks like all the revenue numbers are pointing up. All of these things are growing. Everything looks fine and dandy.
Speaker 3:We're going through some of the what appeared to be the most tumultuous layoffs of gaming's history in the last at least 10 to 20 years. I actually don't know if that's the case. I think there's been a lot of reports about that. When the gaming industry has grown so dramatically over the last 30 years, that just means there are more people working here. If there are layoffs even if it's the same let's say, 3% of the industry gets laid off in a given year that's just going to mean more absolute number of people. I would love better data on how employment in the game industry has actually grown over these last years. We could have a better idea of what these layoffs actually are comparably, but nonetheless it still looks like gaming is doing well on the outside, but seems to have some trouble on the inside. What's actually going on? I think Bal does a really great job here of pointing out the very simple observation that things are down from COVID.
Speaker 3:There's this argument during COVID that COVID accelerated a lot of trends that were happening anyways. If you looked at pre and post COVID trend lines, it almost looks like a completely linear trend for a number of technologies or a number of things that were happening. Work from home is a great example. We just remove out the COVID sample size and it looks like we've been on a linear trend. Covid was just this exception. Gaming, on the other hand, has actually taken a rather big dump. We're basically back to where we were pre COVID. There's been very little change.
Speaker 3:The most compelling point, I think, at the top is that spend is down. When you adjust for inflation, which is what many people are not doing when you adjust for inflation, spend is down. When you look a lot of industry forecasts and he actually goes back into prior forecasts because, remember, they're projecting multi-year forecasts you can go back and you can look at a 2020 forecast and see what they're going to do in 2024. But anyways, he goes back to some of the industry forecasts for service providers like Nuzu. He finds out that they were way too optimistic, that those forecasts have been going down. The great thing about Matthew Ball is he goes even one layer deeper.
Speaker 3:It's not just that that spend is down, but what is the causal reason that spend is down? People are just spending less time on games. That is a huge problem for us. That is something that obviously is correlated with spend the weekly average gaming hours among US gamers. In 2019, it was 12.7 hours per week with spend gaming among US gamers. When we start to get into COVID land in 2020, we get 14.8. When we hit the height of COVID in 2021, we get 16.5. In 2022, we're down to 13. That's one hour more than 2018. It is about on par with 2019. It's a little bit up over 2019. That's a problem, I think.
Speaker 3:Unlike Matthew Ball, I ended up very negative after reading this post and actually quite troubled about the future state of gaming. The thing that it reminded me of is that gaming is an entertainment product We've always been. Silicon Valley has loved to smooth us and make us feel important and has given us venture capital because we have a lot of software dynamics Instead of gaming. We have zero marginal cost distribution. It's very easy for me to give a copy of the game to someone else. When you make a purchase in a game, you have zero marginal cost. It doesn't cost me anything else to give you a fortnight nap. You can imagine. There are these crazy EBITAs and crazy evaluations and a lot of venture scale opportunities.
Speaker 3:I think what we start to get reminded of when we go through Matthew Ball's data is that ultimately, we're an entertainment category and we're fighting for time. We've talked about this a lot on this podcast. This is what Reed Hastings said a while ago we're competing with fortnight. We're competing with fortnight because we are. Netflix is competing with fortnight because we're competing for time share. This was a big reminder to me that we are an entertainment product, that ultimately, our revenue is derived from people spending time on the product. If they're spending less time because they're not inside, that means we're going to have a problem. Spend is ultimately going to be go down.
Speaker 3:I start to ask whether or not gaming even has a future beyond the growth we've experienced right now. Just to be clear. I'm not saying that gaming is dead. Not at all. It's far from it. But I'm just seeing. I'm arguing whether or not we've reached the growth potential, the growth ceiling, of gaming. I find this troubling because I haven't seen a lot of strategies that are going to get us back to at least where we were during COVID, which is 16.5 hours per week per gamer. What is going to drive us three and a half additional hours per week? What is the technology? What is the thing that's going to get us there? I end up short trying to answer that question. I don't think Matthew Ball has answers either here. A lot of his answers are times where I think he really exposes the fact that he hasn't spent a lot of time in gaming. He argues for Transmedia. That's a joke. That's not going to happen.
Speaker 3:All of us all three class members here live through UiBull. We live through Far Cry, the movie UiBull actually made that movie. We live through. Most of us live through the original Super Mario movie. We've gone down this route. We've also seen the Witcher come out on Netflix. That did very little to change the KPIs of the Witcher video game franchise Maybe 10 million. It added on marginal revenue. Transmedia is just not doing that much for us. All these different strategies don't? Gen AI might increase the supply side Again. What is going to get us three and a half additional hours back? That gets us back to COVID. That doesn't get us beyond COVID. How are we going to get three and a half hours back over the next couple of years? I have not seen an answer yet. That's what I find most troubling about our future.
Speaker 1:There's so much to unpack, oh my God. Real quick. A couple of comments for me. The first thing my gut reaction is if movies, film and TV are still growing which I believe they are, then gaming should still be able to grow. It's all entertainment. We've had the discussion on whether it's complements or substitutes or whatever. I'm starting to lean more into the substitutes category. I know I used to be complements, but I do think it's substitutes now. I think it's impossible. It definitely would not say that we've hit our growth potential. That just is not possible. I agree with your statement here that what is that thing that's going to get us? I just want to go back to COVID levels.
Speaker 2:I don't think COVID is a fair target. That was a.
Speaker 3:But we want to grow though. But this is my point. I'm saying, though, if we can get back to COVID numbers, then the industry size is always going to be below where we were in COVID. That, to me, is a problem. I don't like that.
Speaker 1:Yeah, but that's on the intensive margin. We can go on the extensive margin. There's certainly users that we're not getting to. Maybe we need a new revolution that's going to get people into gaming that would not have ordinarily played games. Maybe our headsets are going to make gaming easier, or something like that.
Speaker 2:To jump on that. I think one huge demographic that jumps out is PCN console for women. It's very male dominated. There's a huge population there we haven't been able to reach, but women like to play games too. Eric, I think you're completely right about this.
Speaker 3:I didn't have enough chance to explore this, but when I think about Hogwarts Legacy, which was the best motherfucking selling game last year, I think it had a very strong female demo. I think we know so little about that audience. I also have seen things like the Sims when I was at EA. No one talks about the Sims. The Sims does a lot of business. Sims does a fuck ton of money. It's made by this studio called Maxis under EA. It's almost like in this weird annex in San Francisco. No one talks about the fucking Sims.
Speaker 3:Marsable online is a horse game made here in Sweden for young teenage girls. There is just this market for console gamers, especially for the female console gamers. That has been untapped. I think it's very tough to get them to buy $400 boxes, though I think they're mostly playing on their male counterparts Gaming system. I just don't understand how we could get a new female member who doesn't have a male member of the house to buy a PlayStation when they have free to play in their pocket in a mobile phone. That's what I've struggled with, Eric. I don't know. Am I right in this assessment? Is that the right way to think it? Is that the right setup? Why is the male?
Speaker 2:member buying the console game. Is it because there's more male games on the console, so it's a better deal?
Speaker 3:I think the consoles have always been male driven right. It's Call of Duty, it's Madden, it's FIFA, it's all the traditional male franchises. I think there's a lot of content for males.
Speaker 1:Yeah, I would say like average male it's probably I don't know. 50% of males own a console and then 5% to 10% of females own a console, Isn't that overcomable with just better content, more targeted content.
Speaker 2:For example, I know a lot of women who own switches. They don't want to play like Animal Crossing or whatever. You just need the content. You need the software to drive the hardware.
Speaker 1:Or.
Speaker 2:PCs, I think like ordinary PCs, are becoming gaming capable, especially with these low spec indie games. That's a growth area.
Speaker 3:I think now we're cooking because I think it's hard to say, okay, there isn't enough content. But then it becomes a circular reasoning problem of who's going to be the one to sell to such a slow, a low base. And then the console manufacturers are going to get all the upside because they're going to help move more units.
Speaker 1:That feels tough, but I think, oh, I was just going to say, look at the games that are being copied over and over again. Those aren't necessarily the favorite games by the female audience, right? You don't see, the only game genre that I can think of that is hypercasual or casual. Where they're like, they're iterating on a genre that female demographic. We're not seeing that type of like. My wife loves Ori in the Blind Forest, but there's not a lot of games out there that are like that. Nobody's really made a game that is comparable. Even the other 2D platformers are not her style. They're just, they're targeted towards the male audience. Right, it's dark, shovel night or just these kind of grim types of games. Maybe it's a lack of exploration, a lack of experimentation, and we're, instead of experimenting, we're generating or but why?
Speaker 3:I agree with you, eric, that's a potential area of growth, but we still have free to play, which I think has been more diverse in the genders that play mobile free to play than console generally, we can, I guess, another way to put it. Isn't this demo served by free to play?
Speaker 2:Yeah, I think free to play has done a great job reaching them. I guess my belief is that, both mobile and I don't want to call it like hardcore, but like the sit down gaming I think there's a niche for women in both of those. But I guess, to back up to your point right, Is there growth in the gaming industry? So one thing I look at is underserved demographics, in this case female AAA. Another is like device expansion, although I don't know if I really he covers that Even sales.
Speaker 3:It's been bad. It's hard to hold out as that being a new platform.
Speaker 2:And then I guess I don't know what else is beyond there, new categories of games that satisfy entertainment needs that are not being met elsewhere. But that seems. I think that's unlikely, just given how high gaming.
Speaker 3:It looks like a lot of the growth opportunities in gaming that come to people's head are things that we're already pursuing, like education. We've talked about DuLingo on the program. There's a bunch of other startups that are always interested in gaming, like experiences, but the education market's not exploding. I thought about fitness. Peloton had games on it. That's a potential new platform. Peloton not moving that many units these days. Not as interested in gaming. What?
Speaker 1:about literature. Books are far more female dominated than I feel like books are to women as games are to men. Got more like Visual novel.
Speaker 3:We've had that for a long time. Episodes on mobile tried to have original story based content. Netflix games is actually doing a fuck ton of this right now. With too hot to handle, they actually launched a whole standalone app that's just based on choice based, almost like point-and-click adventure games.
Speaker 1:I wonder how much of Netflix is just, I don't even. My wife doesn't even know that Netflix games exists, and she probably is the target demo for that. I think they just suck at advertising or something I agree, like how the fuck do we log into every single day and watch? We literally watch Netflix probably Four or five times a week, and we don't know that Netflix games exist. To me, that's completely fucked up, but that's a completely different story.
Speaker 2:We've had them start showing up as the top banner, but yeah, until really okay.
Speaker 1:Yeah, never saw it in Netflix. Good, I did.
Speaker 2:Dave. But then we browse through the games and they all sucked.
Speaker 1:Yeah. So one thing I was wondering, phil, you might have a better insight on this but what about just box price? I know we're talking about how to grow, I get that. But in terms of the margins, in terms of, like Stagnant revenue, box price, like, why are we the only industry? Think about fucking groceries, think about cars, think about every other industry. Why are they able to price with inflation? Why is gaining I?
Speaker 3:also think this is the case on mobile free to play. I don't even think this is just a box price problem. We saw fortnight update prices for their virtual hard currency. We actually think there's a lot of games that have been an app store for a long time that have maintained stable prices. I'd love to like, for instance, take a look at Supercell.
Speaker 3:Over time has one unit of hard currency If I were to give them a dollar, can I buy the same amount of hard currency as I always have been able to, or is that? Has that actually my purchasing power actually increased with inflation? I completely believe we need to like relook at inflation, especially with live service right, this hasn't been a problem because you could refresh prices when you're launching a new product. But when you have live service things, these prices tend to drag on. But here's the thing, guys like, what is the big thing? What is the big thing that's going to drive it?
Speaker 3:There's actually one that I've been thinking of that I don't think Matthew Ball drove home enough which to me, is actually where the revolution has been, which is dual skew, having one skew of a game playable on both mobile and pc. I think that does something interesting on the, and I'm thinking of games like genshin, impact, but pretty much every game these days has a pc skew, like even squad or peaches these days are distributing Direct versions through the browser. Google play put out a App on pc hunkai, star rail, like these type of games. I really think there's an opportunity. First of all, you amortize more of your costs over a wider base because you get your pc In your console. You can get rid of the app store fees if they're making a purchase on pc. Usually you can open a boy browser if you're doing direct distribution or use axola third party provider. And I think there's just something to the game design piece we haven't really unlocked in these dual skews which is really compelling, which is I want to have one experience. I want to have it on a mobile, I want to have it on on on pc. Like I can invest more time in this experience. I can almost have more progression.
Speaker 3:I think there might be something to the dual skew. I I still think 2020, 2023, was a big year for dual skews. I think we'll see more of them, but I still don't understand, like what's going to get us three and a half. Three and a half hours Is a fuck ton of time to make up. We're down 20 percent and again that gets us back to covid numbers. So it doesn't get us beyond covid numbers. But I want to see industry gdp as high as possible. I want gaming to continue to grow. I want my wage to continue to go up. I think all of us do. We all want more employment options, like we want the industry to grow.
Speaker 2:It's good for everyone one big trend that's going to bring up hours but bring down your wage.
Speaker 2:Fill is ugc, right, like you said, the supply side. It's so much in between ugc like these engines, like for night for unreal and generative ai. It's so much easier to mimic games than it ever has been before. My wife's been messing around with unreal engine. She'd never programmed or anything in her life but she made like a level. It's like, yeah, this is pretty fun. So I do think we're that is a big potential. You think about the music industry where in the last you know 30 years, in the internet era, music creation is exploded. It's so much easier to make and distribute music than it ever was before and that has massively increased music Consumption, but not necessarily the industry's revenue, right.
Speaker 1:I was gonna say that industry has shrunk since that revolution. Now it's there's no, there's no money in it.
Speaker 3:In music I look at that because subscription is price capped and ugc doesn't need to be spot-ified 15 bucks, 20 or 10, 15 bucks a month and ugc can still be empty x'd.
Speaker 2:Yeah, yeah, I will say the trend. I imagine it going the way of youtube, where there's all these Enthusiast creators making content very cheaply and getting paid very cheaply per engagement unit.
Speaker 3:So that's why I see it as like an increase in consumption there is another strategy here that I would really love to see explode in 2024, or at least get closer, which is that you can develop a product on unreal fortnight and you can try to find an audience. You can try to figure out your game design, you can actually build out some cost and then you can off-ramp that To epic game store, steam, or you can just convert it to a full unreal product. I find that path really inspiring and I think it's a path that triple-a developers have needed as a long, for a long time, and I think it actually lowers the barrier beyond where early access was, because you can still get income stream From fortnight, although it's still pretty bizarre like it's based on time shares as black box formula. But I think triple-a developers have needed a way to build an audience and to get out there and Steam early access was a huge boon to them. If you look at the number of games pre and post Early access, it's incredible and, of course, like we've covered so many success stories in early access battle bit, crazy, valheim, vampire, survivors all these games were early access games. I think putting a game on unreal for fortnight also lowers those expectations quite a bit and lets you keep your code base. It lets you build that audience and you can take it wherever you want. You can take it to steam, you can take it to unreal engine, the unreal's, the epic storefront. That to me seems really interesting.
Speaker 3:But again, like that's, 50% of the industry is pc, the a pc console. The other 50% is on mobile and mobile looks like an absolute piece of shit, like if a fuck to everyone there's still. There's nothing I look at in mobile and I'm like this is a healthy market. Like I'm getting an ad for match three game. Oh wait, no, it's a four, it's a fucking 4x game, it's a chinese 4x game. Like how can anyone look at mobile right now and be like this is a healthy, this is a healthy, well functioning market when incentives are aligned? It looks like mobile is going to continue to become just a chitchat.
Speaker 1:That's an argument for web 3, right, we're talking about air drops, we're talking about data transparency, we're talking about everybody having a universal profile.
Speaker 3:that that, I think, is is chris, I fucking agree with you, because web 3 also brings in new audiences. Web 3, to me, is a new audience. It's an audience that hasn't done gaming in this way before.
Speaker 1:Yeah, I totally agree, financial types sports better Like, brings them into video games is a fundamentally new experience.
Speaker 3:That, to me, is an amazing entry point in the games. That is web 3 stuff like that. That I think might be able to get you back a couple minutes per week.
Speaker 1:Yeah, my here right before we go. My here's my bull case. The world is is going to shit. The climate is collapsing. More and more of the earth is Unlivable and people are spending more time inside because they can't go outside, people will start playing more video games. That's where you get to three hours to escape the baron hell.
Speaker 2:That is the real world. People Naval gaze into the metaverse.
Speaker 3:Player, player, let me, let me actually form like a better retort to what eric had said earlier about like consoles and women. And it's really do what you said, chris. I think it's not about bringing the person to the games. I think it's really about bringing the games to the people. That is what mobile free to play was. It was about. People are on their phones. We need to put on, we need to put games on their phone. People on the peloton bikes need to be playing games. I'm just trying to think about what surface area have we not invaded yet, like where we? We're in motherfucking airplane tv's. You're gonna, you're gonna sit there on a 10 hour flight. You can play bejeweled if you want. You can play like a stupid quiz game. What? Where are we missing? Where's the surface area we haven't gone after yet?
Speaker 2:I know a guy who went to a company making games for smart speakers. I don't think I went anywhere.
Speaker 3:I just feel like we're running out of space. We're running out of space. I just don't know what where else we can bring games to be like. We're basically just betting on tier 3 growth right now. We're betting on india and china continuing to get rich, their disposable income going up and them spending more money. That seems to be the bet right now. I don't know where the west. What else does the west have right now?
Speaker 2:Maybe we're capping out. I think every new media music had a tate and capped out video had a tate a Starting to cap out and maybe it's a pressing conclusion returns. Maybe if we reduce how much people have to work, they'll have more time to spend on Leisure.
Speaker 3:Now we're cooking. So you think like one of the things that we could see is like automating a way more of our tasks. We potentially are spending less time at work, so our time for leisure could go up and we could capture an increasing share of that.
Speaker 1:How many people work and play games at the same time? There's. That's actually that I guarantee that number is going up.
Speaker 2:Oh, yeah, definitely.
Speaker 1:I see people like all the time on discord. It's the middle of the work day. Oh, they're playing arc. They're playing.
Speaker 2:Yeah, get your phone out in the bath. You take a little bathroom breaks, play some clash royale.
Speaker 3:I think you're on to something, eric. I actually think that is a great hope is that like time for leisure continues to increase, and I wonder what we were pretty aggressive in capturing.
Speaker 1:That that deserves more reason. I don't know that's like. To me that's the same as the as the developing country argument. Right, india richer. It relies on this, this fundamental, like structural to an economy agreed.
Speaker 3:But I think the way you could measure Gaming's improvement is whether or not we're able to capture a large outsized share of that marginal time or that marginal income, certainly more than we have been previous. If you got an additional free hour, let's say in 1990, what percent would gaming capture that on average? Like maybe we would capture five minutes of that additional hour. But I think gaming as a technology. If we think about gaming as a technology and I know I'm betraying things I said earlier but if you think about something that approved, like it's improved as a medium, like we are capturing more time than we've ever captured beforehand, like game design has advanced, it's become a technology, like the processes and design has improved. So I think, if you think about as a technology, we're out, we're outpacing other forms of entertainment because we're improving at a rapid rate and that is evidenced. That would be evidenced by us capturing an increased marginal share of time or income in these countries.
Speaker 2:I don't know how much more leisure time do people have, right, if they go from four hours a day to five hours a day, this is pretty big. I mean, that's what like five years of industry growth.
Speaker 3:Yeah that could be a fuck ton I. I definitely want to spend more time with it, with the time stuff, the time survey stuff, like the other thing is like when he showed this time survey, it was weekly average gaming hours among us gamers. Okay, did people who call themselves us gamers change? Because it's the denominator is not necessarily stable, okay.
Speaker 1:Yeah, yeah, you just have a bunch of more casual people come in lower the mean.
Speaker 3:I want medium baby. I want distributions. I'm hungry. Talk soon, See you guys. We should teach this to our children.
Speaker 2:Economics is major, major major.
Speaker 1:Everyone has to major in economics, number one for personal survival. Economics is major.
