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
GEC BONUS EP: What's up at GDC 2024?
- Eric Guan on the economics of the video game job market
- Phillip Black on why big gaming co. employees are frustrated
- Dr. Julian Runge build a theory of persona and personalization in an Uber to the airport
- Christopher Kaczmarczyk-Smith solve for the missing web3 UGC game
Plus, a GEC After Hours on the state of San Francisco.
It's Phil here. I am back with a special episode of the Game Economist cast. The crew had room together at GDC and somehow, against all odds, we were not able to record together, so this is a special episode in which Eric and I did find a little bit of time. I also found some time with Julian, who was on the podcast a couple episodes ago. Ironically enough, on the way to the airport in an Uber, we were able to get together after GDC and reflect on what had happened at GDC. We have a lot of fun guests we have just locked down coming to the podcast, so keep your ears tuned Without further ado. Game Economist cast Bonus episode. What's up at GDC?
Speaker 2:Let's start with utility. I don't understand what it even means.
Speaker 3:Everybody has some kind of utils in their head that they're calibrated.
Speaker 2:There's hardly anything that hasn't been used for money. In fact, there may be a fundamental problem in modeling.
Speaker 1:when we want to model, we're recording Dude GDC day two, the boys of Game Economist cast are rooming together. Dude, it's tight quarters here. Yeah, sharing beds and shit.
Speaker 4:That's how you know. You know brotherhood.
Speaker 1:Is there like some sort of econ angle to this Fucking save?
Speaker 4:money by being cheap. I don't know the sharing the gig, econ. The interesting thing is what you said about you booked this place on Airbnb, but it's just a hotel, right. So the question is why did they list on Airbnb? Is it exposure and discovery? Is it price discrimination? Is it cheaper on Airbnb than through the hotel and this allows them to double price? Why is the hotel listing on Airbnb?
Speaker 1:I guess the equation you have to run is what is the discovery you get by being Airbnb versus what is the fees you have to pay for Airbnb because it's like a resort thing which is Airbnb takes fees. Airbnb takes fees. That's how they make money, like how much I don't know off the top of my head, but I would imagine it's gotta be profitable for them.
Speaker 4:Based on that, you probably got up to $1,000 and got upcharged from being on Airbnb.
Speaker 1:Fee. I think they absorb the cost, though Most guest services are under 14.2% fee.
Speaker 4:That's huge for like a-.
Speaker 1:I don't think it's that huge People are bitching about Apple at 30%.
Speaker 4:Yeah, there's zero marginal cost. Right Like they gotta clean the room and shit.
Speaker 1:You mean the hotel themselves.
Speaker 4:Yeah, yeah, like all physical products, the margins are way slimmer.
Speaker 1:Sure, but like digital stuff, like that margin of Apple, still looks your profit.
Speaker 4:I'm saying 14% on a physical product is a huge margin. That's fair.
Speaker 1:I don't think this counts as a physical product, though I wouldn't put it in the same category.
Speaker 4:It's not zero marginal costs.
Speaker 1:Cause you gotta remember that there are things that Airbnb provides that I don't think would be beneficial to the hotel. Like they have insurance, air cover, it's like a million dollar insurance.
Speaker 4:It's for the consumer or the host.
Speaker 1:So if someone comes over and like fucks up your place, Airbnb will pay for your shit.
Speaker 4:So if I like shit on the bed, the hotel's not paying? Yes, that is true.
Speaker 1:I think I don't know. It'd be interesting to see how the insurances work with one another. Show shit on the bed to find out.
Speaker 4:You know, let's do it Find out if the hotel finds us, or what do they call it in McGrooper?
Speaker 1:You ever see that upper decker.
Speaker 4:What is?
Speaker 1:that it's when you shit on top of the toilet.
Speaker 4:It's pure spite, no reason to do it. Yeah, that's the upper decker. Oh my.
Speaker 1:God, I love McGrooper. We shouldn't have room together, chris. Chris was in here and Chris can't join us.
Speaker 4:He's with the Wolf's Dow, he's deep in the sauce, the Win3 sauce. Is that the Wolf's Dow Cal? I don't know, it's the Wolf's sound.
Speaker 1:Do you want to do your Thailand thing? I think you have to tell it to me.
Speaker 4:Well, no, I wanna say this first. So people are like, oh, what's the theme for this year's GDC? They're like, oh, last year AI was the big thing. Two years ago, web3 was the big thing. I take the big thing this year layoffs. But, like unironically, I have a friend who's like pitching. He's like, oh yeah, there's all these distressed assets, there's all these game companies who are desperate for cash and let's get a fun together and scoop up a bunch of assets and discounts. There's definitely an angle to the industry crash, but definitely the theme of this year people unemployed and looking for jobs.
Speaker 1:I'm surprised how many people are using it to try to find jobs. I think it's a tough place to try and do that.
Speaker 4:I don't think I'm gonna get a job here. I think I'll meet people, reconnect with people who in the future will.
Speaker 1:So I had one of my friends who I'd coffee with, who's looking for a job here, and I hooked him up with my boss, who's also here. So I don't know, maybe it does work. Like you meet a lot of people very quickly. I'm surprised with all the job losses we've seen in games. You would expect there to be a short run decrease in wages, but I think this goes back to the idea that wages there's rigidity.
Speaker 4:Yeah, instead of wage decreases, it's you're hiring more qualified people at the same price.
Speaker 1:You need to be able to have. The GDP has not grown. You can't hire that many more people, right? That's the whole point of layoffs to begin with, is GDP was not sufficient to support all these salaries.
Speaker 4:So there's fewer roles, and those roles, the people getting them, are more qualified relative to two years ago.
Speaker 1:So you think like the equilibrium almost of the hire hasn't gone up as the pool has expanded.
Speaker 4:Everything I've heard is no one's taking junior people, no one's taking mid-level people, and the people are basically getting roles that are one level below their old role.
Speaker 1:That makes sense to me. That would be an adjustment right, but I feel like they'll leave, though, when the market readjusts themselves. If the companies don't adjust them, fear for opportunity cost is high, like you'll, but you know jobs are sticky right.
Speaker 4:Like I locked in a high salary during the boom, like I'm sure people who lock in a job now, they'll stick around for longer, even though even after the market recovers.
Speaker 1:Do you really think the salaries are that different, though you said you like locked in a big salary at the height? Would they be that different today? For Genadies? True, it's real.
Speaker 4:I think so. I think I was less qualified for my job than the job market would be today. Right, but they were looking for people and they was like super tight, they gotta be real desperate to hire you.
Speaker 1:Yeah, that's what I felt.
Speaker 4:Double my salary, but yeah layoffs is the theme.
Speaker 4:I was talking to my friends. I know, like esports people from Riot. My friend was saying like all the esports people were like super depressed, they're like, we're fucked, like we got because esports is obviously it's gaming related. But like a lot of these guys, they played one game professionally for 10 years. Those skills are not transferable. Maybe you could pick up another game, but you would be like amateur level compared to the pros. So those guys who, like, went all in on League of Legends or all in on PUBG, they're like and those esports scene dried up, they're fucked.
Speaker 1:Well, are you seeing any other trends? I've met a lot of interesting people. It's. I didn't think things were as negative here as I expected them to be. There's money still going around Like the economy hasn't hit the shitter.
Speaker 4:It was just. The COVID boom came back to baseline.
Speaker 1:I feel like Just the COVID boom. I do think people still don't believe the economy is doing as well as it is, especially in the United States.
Speaker 4:Tech in particular. Everyone in tech is like there's a tech recession. Anything that surprised you so far.
Speaker 1:Is this your first year of GDC?
Speaker 4:This is my first GDC. Hey, I'm on note too. Yeah, so I'm mostly here as a tourist. I've been up with old friends. You know, I was at Riot for a long time and when you're at a big company you don't need a network outside right. But once you leave there's all these ex-Ryder's who are all over the fucking place. So I've been meeting up with them.
Speaker 1:A lot of them are like you guys spread your seed everywhere. It's gross and like you spread your seed. You spread your seed like Riot people spread their seed in a very interesting way because they have some weird tech fetish. I feel like Riot people have.
Speaker 4:They were definitely doing the thing like oh, we're a game company, but we want to pay tech salaries.
Speaker 1:There's that and I feel like they just think of themselves, as always. It's everything Blizzard should have evolved to be in the age of live service, and I feel like Riot executed on it very well. And you guys are all cultists. You're all cultists Like. You guys hang out together, you married together there's a guilty person right in front of me of doing that and then you go off and you start like VC fund adventures. It's not like anyone's going to a publisher.
Speaker 4:Yeah, people are throwing money at. They call it pedigree. There's the Riot Blizzard Epic pedigree which, honestly, I don't think it's working out that well, like I know. A lot of these startups, like most of their games, are failing.
Speaker 1:There was the soccer one. Odyssey interactive craft who we've you know? I think we've all seen behind doors of what they're building. Yeah.
Speaker 4:Theorycraft is definitely as the most power. Like Joe, that was the League of Legends leadership team, like he just took everyone from the league leadership. So if anyone is high powered, it's those guys, like a lot of the other guys are just Riot Rando's who just used the brand.
Speaker 1:Who else is out there there's.
Speaker 4:Odyssey, there's Hidden Leaf, so they made things which flop. They got another game in the work Hidden Leaf. I forgot about them. There's Treehouse games.
Speaker 1:Forgot it. No, I know them.
Speaker 4:There's Singularity 6. It's not all Riot people, but they're doing okay.
Speaker 1:There was just an article about them in Palliah. Yeah, that they really milestone.
Speaker 4:Might have been PR, but yeah, I don't know how well they're doing, I know they had modernization issues and economy balance issues and I know a couple of people who left, but I don't know, they're still checking along. Shout out to Jeff Dennis WizardCrab. You hear me, I hear you. I think I talked to him about something. Yeah, I love Jeff, he's a great guy. There was also this guy named Riley Riley. Riley Hausden yeah.
Speaker 4:He just went to second dinner. Oh fuck, did he? Yeah, he bailed on Palliah to go to second dinner, and so so I would say, this is the experience of being at GDC.
Speaker 1:That's amazing is it feels like this high school reunion that you never know you needed, and that's why I love it so much, cause I can't tell you how many times today like I've walked down the street and then you, just you rudely interrupt someone else who's having a meeting, because it's like that guy you used to work with.
Speaker 1:Oh shit, I forgot about him. Let's shake hands and oh okay, let's grab lunch later. You send a couple text messages. It's, it's really something special. You need it. You need these shilling points. I think her shelling points, excuse me to make a healthy industry like it does. It's not as fun when it's motto, when it's it's fragmented into different places.
Speaker 4:Let's good men see an old riot people, a lot of them x riot.
Speaker 1:Dude web. The red threes has a heartbeat here, man.
Speaker 4:Yeah, I mean I don't know web threes. Web three is a marketing first industry. Obviously they're trying to show off.
Speaker 1:They could tell you, make it web three seems healthy here, man like web threes got parties, web threes got stuff going on web three people are shaking hands. No one's trying to sell me their token yet. I'm bummed about that.
Speaker 4:Go buy onion token and Solana.
Speaker 1:Is this the new hotness?
Speaker 4:in token. There's no trading activity, but I own 98% of the tokens.
Speaker 1:Oh, did you make? This is your own personal token. The following is a conversation I had with Julian, who was on the cast. Oh boy, a couple episodes ago Actually got the way to the airport, we grabbed an Uber together and what better time to turn on the mic. We had a little wide-ranging conversation. Julian, of course, is that game data pros and he now has a tenure-track position at Northwestern enjoy. What is what is game data pros doing there? You guys like trying to sign clients. Keep up. Yeah, parents's.
Speaker 2:Faggots. Yeah, it's interesting. I was just bringing the brand out there a little bit.
Speaker 1:It's interesting that you focus so much on triple a HD. Your roots are in mobile. Scientific gravity was mobile.
Speaker 2:Mine are okay, but the others know they actually love don't come from different backgrounds. They've been doing gaming for an over and also the future is cross-platform, free to play. In the end, I think triple a is gonna be no longer the key Distinguishing factor, or whatever.
Speaker 1:Do you really believe that the future is free to play? I've got a lot of.
Speaker 2:Everybody's probably cross-platform and there's gonna be some notion of free to play in it, meaning it could be that the game, the initial Free to play, is just the platform and from there it goes into cooler games. Yeah, but I think free to play will partner with. This is no way to generate scale these days.
Speaker 1:So I've gotten pushback on this position because I think free to play is the future. I think it's like the end of histories. You get Fukuyama. Yeah, I think it's like the funnel and there's been like this idea there's gonna be a research and this year in premium. But at the end of the day, I think you have to pick the right metric to measure this, because even though a lot of free to play games might have a higher failure rate, but if they end up being profitable, they're widely profitable. So it's like a more skewed distribution.
Speaker 1:But at the end of the day, like the right metric to the look at to see whether or not they're growing or fit falling is like the percent of spend. Like that to me, is the most important part. If People are spending an increasing amount of money on free to play games as a share of total spend, that to me is like the ultimate metric that this is happening on an. I'm actually not sure that's the case. It feels like the case. I'm also on team crossbar. You can amortize your costs. It's a wider player base.
Speaker 2:It's nice.
Speaker 1:I like your speakers, I like your tune. Yeah, he was good. He definitely has a focus on big picture items, but he's definitely he's definitely a macro guy. Former CEO of Superdata makes sense.
Speaker 2:Yeah, macro is really a strategy guy. He key noted at South by and we met up also there and he talked me bit through. Yeah, he goes back to what he did is be a DM. He does PGA Columbia All right and he talked to me about, like, how much we overlook and I think that's so true in like in the future In the ways that companies behave, how we overlook their contingencies. What are the specific cultures that I come out of? What are the people there? What did they come from? Yep, that is just shaping strategies so much and I think as economists we tend to rationalize those soft factors away when often they actually are maybe more important than the rest, I completely agree with you.
Speaker 1:I've actually started to form this larger thesis that there's something deeply wrong with the American corporation. I meet so many people who work for large corporations and they seem really frustrated. The incentives don't seem right. The executive class seems all over the place. It feels like there's something there and it feels like people have gotten like increasingly frustrated and a lot of the problems to me Are driven actually by RSU compensation. Once a prize from GDC. Xbox wasn't there. I didn't see Sony there. Yeah, I saw what three there.
Speaker 2:Yeah, what gaming sucks.
Speaker 1:I actually think those hilarious. It take away. Take away the ammo. Be easy against them. I've lunch. How to create campaign.
Speaker 2:Yeah, indeed, fine enough. Talk web street. You know the Roland ever guess sounds familiar he's. He wrote and directed independence day, oh yeah, and so he actually had an event Tuesday afternoon when they were announcing a crypto, a web three based game called Space Nation, which is about this like open worlds thing in the space, with trading and everything he works on. That was your own boo and it was interesting to me because I would say even the star power, somebody who pretty serious director and screenplay writer Working on it. I would have expected a bigger turnout but was a little under attended. I'd say boom, and I think that's also because of web three just being a little bit in a slump right now. I think it's on a slump.
Speaker 1:They got like Quentin air 65,000.
Speaker 2:You know I am not saying for the long term, but like the gaming community isn't super excited about it. Well, at least that's the sense I got and the web to gaming community doesn't give a shit.
Speaker 1:There you go and they shouldn't give a shit. There's nothing there right now.
Speaker 2:Yeah, there you go. There's run for the hills, for the hills.
Speaker 1:So we was a talk again. You recommend there was so much. Massimo was the SVP of monopoly go. They have a other event here on Monday was pocket gamer connect and he apparently talked about monopoly go and I'm just I'm surprised he didn't have a bigger forum for it, because that's the new hotness. You should want the creative director of monopoly go to have the biggest hall for the biggest talk.
Speaker 1:I still think GDC is way too HD centric. It's too old school. Yeah, like mobile games like that. There's like the most month. So here's the thing I can't find a single game that's made more than two billion dollars over eight or ten months or whatever it is. So you think I think monopoly goes the most successful Game on record ever. Wow, putting aside HD games like met, the thought over a little or whatever. I went back I looked at Clash of Clans wasn't anywhere close to this, at a tight same thing with Candy Crush. I think this could be the most successful and I'm surprised Hopefully hasn't come out with that title, I mean with with that talk, or the most accessible game of all time. Yeah yeah.
Speaker 1:I like that seems like a really powerful headline. Yeah, it hasn't. That hasn't stuck anywhere.
Speaker 2:Yeah, you might be sure to live than Candy Crush or a pleasure of plans, right yeah?
Speaker 1:but that's a right. That's why I'm hurting a piece on it. I think it's. I don't think there's been good. I don't think there's been good deconstructions yet. I think there's been. Like dick, instructions can be literal here's this feature, here's the button you press, here's the rewards you got. But I think the deconstruction I want to see is like why do we think this thing is successful? Like, what does it mean for like social to see now, yeah, no one talks about social diss on what the effects are of this game. Like, is this like a really elaborate zero tautumy? Let me think about that.
Speaker 2:I actually did play it for a few weeks right.
Speaker 1:Great cards, it's a pretty cute and nice, and it's definitely not an implant, so it is Still it's a good version, just the visuals.
Speaker 2:I think it's I rise pretty nice and and it has a social component. No, I actually Reconnected with because it did the same thing with Facebook login and whatnot. So I reconnected with people. Adam toff to in years oh, wow, yeah.
Speaker 1:And then you go and you trash the building or whatever, and then when you say reconnect though, you don't really chat with them though. No, no, but I act in some way.
Speaker 2:Yeah, but it even reminds you of them and then maybe you sent them a message somewhere also. I think the social component is always so important. Coming back also to the relatedness dimension oh, my god of my.
Speaker 1:Talk, oh my god, seriously.
Speaker 2:But it's just true. Okay, I don't want, I don't want to write on that general theory so much, and I can understand that it's a little far away from from some considerations in practice. But humans moved. Feelings of competence, relatedness. No, I'm not talking to me. Oh my god, it was so good.
Speaker 1:Oh my god. No, they have utility their preferences. They seek to maximize those preferences from their budget constraints. Interestingly enough about this, I was talking to Joseph Kemp. He's been taking trip for fun and does game makers, and we were talking about With Brett Novak, who's up a get out of froze for talking about the fact that there hasn't really bad but good persona, serious enough, personas like this idea of creating kind of model customer and describing though, and like it's all done in that Hawk way and like an academic so taking shots at this.
Speaker 1:But I don't think there's been like a really good, falsifiable persona and certainly not a persona that you can use for Personalization, because that, to me, is the end point. Like they were talking about personal. They were talking about personas to help think about your games and what features your players would respond. Yes, that me that's just like farts in the ocean to me. I think that's just a silly waste of time to get yourself all scoffed. But if you can figure out a segment that responds to price in a different way they have different great elasticity's then personalization that's ultimately what personalization, I would argue, was supposed to do, so as to find little pockets that have really weird Elastic effects of things and then serve them. Pop that, it's a stone with that. That's how you make more money, absolutely yeah, I agree. I mean you're not sorry of the player, though. You're strong through the player and he is strong theory of like.
Speaker 2:Why this particular pocket, the way you've defined it, responds in a very particular way exactly because almost like a theory of heterogeneity, yep, like, where do you find people that actually meaningfully different on some of it?
Speaker 1:Yeah, fair point and I would love to see more thought capital put into like how we should think about that, because you could do that a million different Ways. Yeah, is it the features they play? Is that the characters they buy? Is that how much they spend? Is it the frequency? I don't know.
Speaker 2:Yeah, well being is hard to do an appeal.
Speaker 1:It's impossible to do an appeal to data their boy, I don't think there's no like natural, there's no like Eurylis way to get segments like I've seen this pedaled sometimes by non-social scientists. The natural scientists we're gonna have, we're gonna have theory pre.
Speaker 2:Yeah.
Speaker 1:I don't think so either.
Speaker 2:But one way to get there is just playing games, oneself playing games and just observing what kind of things come to make that moment create. You could play a mobile RPG, right, and then all you want to do is you want to be the best on your team and you spend money to be the best. I would love to talk more about revenue optimization. It's really gonna become more important, especially with the cross-block platform. Let's only cross-promotion as well.
Speaker 2:No but if you believe, okay, explain this to me. If you believe in cross-platform, how is cross-promotion?
Speaker 1:bull, so cross, as I define it, and I think you had a paper about this.
Speaker 1:You tell oh, maybe you know like it was better than me like the whole theory of cross-promotion is I'm gonna take one, advertise it in another game. Ultimately, the paired LTB's had to be bigger than the counterfactual. Yeah, without doing us, yeah, and ultimately you are not gonna be able to optimally Find the second game for a player because, first of all, a few people play two games simultaneously, so you have to move them to a higher LTB for this to be positive. You are fair with the case. Usually other people would bid more for that same player. She might as well just do ads in your game and take the ad revenue. No, you can't solve the discovery problem. Your platform can never solve it.
Speaker 2:No, but you need to combine all of this and optimize across every option. Right Is the best note to show an ad. If you want to show an IP offer, you want to cross works whatever Generates the biggest complementary. Okay, I'm, don't cross remote substitutes, that that makes sense to me.
Speaker 1:I want board with that. Okay, oh, board that that's nice.
Speaker 2:Oh, we're gonna approach it. Game dinner pros Whoa.
Speaker 1:Three, two, one Game economists cast bonus episode. Not in person recording because we feel that that, despite living with each other Looming for a couple days, eric and I found 10 minutes before I crashed we have the technology.
Speaker 4:We can do this on them.
Speaker 1:We have a technology and I think, like now that GDC is over and we've had 48 hours to think about it, we're gonna have much more powerful revelations, right?
Speaker 3:Maybe, or it's all diluted been poisoned by our experiences getting home.
Speaker 1:All right, let's go around, let's get some GDG DC takes in there. Chris GDC, how was it for you?
Speaker 3:I was exciting. It was good. Web 3 seems to be holding its own. If I'm being honest, I wasn't terribly impressed, but the fact that there were some big, big tents with lots of people around them was pretty impressive. I think if you'd asked me in 2022, last year, 2023, bottom of the bear, I would not have expected there to be two relatively Massive areas where you know that they were completely committed to web 3. There was the avalanche tent, there was the Gaming sucks.
Speaker 3:Yeah, arbidum tents. Yeah, really, leaning into the whole, the whole magicians meme, we were magicians and we demand to be taken seriously. I think it was pretty impressive. I went to a couple of different blockchain events. Swee sui that blockchain had a huge event. They got a whole bunch of interesting people to talk. They had Lee Take, her name is lian colter, she's colin or something like that. She's she's like a pretty serious web 3 journalist. They got her on stage with dean takahashi, who's?
Speaker 3:He's the guy who does. I think he does games beat or game no, game venture or something like games beat huge journalists, like really Legitimate guy who's been in the industry for probably like longer than I've been alive and he had a very sobering take at the Swee event. He said Look, I get a lot of crap from other journalists for covering web 3 stuff, but at the end of the day, this is an emerging technology. Would be stupid not to follow it. He's certainly not. He's no maxi. He's no, he's no bull. He's not sitting around saying that this game or that game is going to be the big thing. He's really just watching and he's taking it seriously like any good journalists should. So I was really impressed with just the reception, the vibe.
Speaker 3:A lot of people who exited I won't mention any names are now back in. Oh, we're just seeing how things are coming along. Seems to be good. Yeah, it's like now we're not at the bottom, so your shit talking is Subsided. There's been a fair amount of criticism in the last year so I'm not gonna. I'm not gonna begrudge people for their hot takes during bottom of the bear, but Overall really positive on web 3. I was obviously there meeting with mostly web 3 people. I saw some sweet projects, saw some really good games that I played. Yeah, I think I have other takes, but what games did you play that you liked?
Speaker 3:So I played cipher. I enjoyed that. I did like that. I yeah, I played a few like that. People just put in front of me that I I mean I didn't play like a million.
Speaker 3:I think I probably played three and what I noticed is most of them were Mobile. A lot of mobile games and a lot of web 2.5. Nobody's doing like the full on-chain thing that star out was doing. I don't know if I could convince any of them that that's fully on chain is the way to go, but mostly people trying to get the depth of spin, that web 3 kind of permits I heard eric and eric ress and you fell.
Speaker 3:We're talking about this on the latest deconstructor fun this idea that web 3 or open markets really Allow for almost limitless spend. So you can buy everything in a mobile game store and you pretty much ran out of money or the stuff to buy. There's some games that have more deep spin that you can do, but In web 3 you can spend literally hundreds and hundreds of thousands of dollars on a single item. It's just really incredible to see those numbers start to come to live. Especially you're at star alice, I'm seeing the same thing. Just insane amount of arpu and an insane amount of spend. The ltv for web 3 players Good web 3 players the ones that we have is is I is far greater than like a mobile game.
Speaker 3:Now curious to see how those mobile games end up capitalizing on this. Cypher has a really cool Economy or cool idea behind competition. They've a token that gets distributed to the players and they're able to. That goes towards a or sorry, that it's not distributed to the players. It goes towards like a pool Phil knows all about this goes towards a pool and that pool pays out to like the winners of these different tournaments and events.
Speaker 3:I saw a lot of bad projects as well. I saw a lot of stuff that, like I didn't understand the tokenomics. A lot of stuff is still just trying to do tokens as a reward without thinking about the Use case, like why do I need this token? What am I doing with the token? It can't just be something I get, it has to be something else. A lot of projects From not a lot, like a few projects that I talked to there oh, we have a reward and it's a token, and then when you ask them about what is the token for, what does it do, they don't really have a good answer. So still a lot of growth to be done. I really think it was good, but really not out of the weeds yet. I played a lot of like early access stuff, obviously star Atlas.
Speaker 3:We were there, we had we have a demo there, a third person MMO like battle arena thing. We were there with a partner.
Speaker 2:Meta gravity.
Speaker 3:Who does super large, like concurrent users on a high fidelity game server. So got to play a few of the different games. They're all early access stuff, not like closed loops. These aren't like finished products. That's very interesting to see the different projects that are coming up and and want to use web 3. I spoke with a couple of web 2 people who were interested in web 3, especially like Classic game designer types, which I was a little worried to even talk about. Web 3 with star Atlas I'd be talking about the project and eventually, inevitably, you know, web 3 comes up and to my surprise, they were like oh, that's cool, I have another friend who's working on a project like this.
Speaker 3:or I have a project I'm working on that. I want to implement web 3 stuff who at this party?
Speaker 1:What was the real shit on the game Economist cast? Who had the best party? Who was the best?
Speaker 3:party. I did like the Solana party. There was a like a Solana games. Don't remember what the name of it was, but it was like an arcade almost. So you had this card, you could walk around and play a bunch of different games, like there was a ski ball, which guys all know, that I'm a part of ski ball league here in Champagne.
Speaker 1:So that was did we do, we know that.
Speaker 3:Do you like Jack and like I needed this.
Speaker 1:Oh are you seriously a part of a ski ball?
Speaker 4:Yes, yeah, is there like a standard ski ball layout and like regulation yeah these were pretty good ones.
Speaker 3:Usually if you go to an arcade you'll they'll be shorter or they'll have like crappy balls, but this one had good balls and nice long planes.
Speaker 4:But yeah, for some people bunch, bunch of games.
Speaker 3:No, I'm terrible. My team came second to last in the last tournament but no, like a lot of games to play open bar or derbs being passed around, so it was really sweet. What's the pocket gamer thing? That was not my scene. It was very like soup. It was like a nightclub and I just locked in and I was like I am not. I had maybe up until that point one drink and I was like I am nowhere near drop for this, Like I need to go back, take a couple shots of vodka.
Speaker 4:Why do they have these like business parties in places that are so loud you can't hear anybody? That seems like very non conducive to super inconvenient.
Speaker 1:Can you give me one hot take coming at you DC.
Speaker 3:There's a lot of platforms that I don't think have a market yet, that are being built, and I think we have the same issue last cycle, like 20, 21, 2022. There were a bunch of huge like NFT trading platforms and then they realized like, oh, there's actually not not much demand for these platforms and a lot of them went under. I think one of the companies I worked at we had three different partners for different platforms and only one of them still exists and I don't even know how they're doing. That's for Forte. I think it'll be interesting to see how that plays out over the next two years. Eric, how's your GDC?
Speaker 4:That's pretty good. Also, my first time mostly went as a tourist. I wasn't on their friend. I had a couple of meetings with Google, but mostly just meeting up with old X-Riot people seeing how they're. There's like a whole riot diaspora of like people who left to go, startups or big companies they're at like Epic or like all these random little startups. Catching up with them Didn't have too much web three stuff wander on the show floor. That was interesting, I guess. As you'd expect, it's like a bunch of people trying to sell stuff to each other. Right, it's like games trying to find publishers or infrastructure, so like cloud gaming or cloud services or low cap services trying to sell their services to game companies. Mostly just went up to SF to hang out.
Speaker 1:Do you have hot takes for us coming out of the GDC Can? You give us one hot take.
Speaker 4:Yeah, let me talk about I think I'll talk about the expo and then I want to talk about riot. So yeah, like I said, wandering the show floor, you're really impressed by the scale of the games industry and how interconnected it is. You've got all your cloud computing stuff with people selling data services or cloud services. Well, we'll handle your multiplayer online services for you. There's asset stores, people who make art assets and just sell them, which is really interesting industry I want to explore. At some point They've got this big problem where there's a bunch of free assets, like on the unreal store, where you just buy this stuff and people upload free assets of like just zombies and like environments and stuff and a lot of them are pretty good. And it's been criticism of asset flip games where people just get a bunch of free assets from the unreal store and then make a shitty shooter and then put a bunch of money into marketing. These guys make the high quality assets. I got a little coupon for $100 off their asset store.
Speaker 4:But there was talk to the good dough game engine people. They got a lot of attention during the unity the whole unity shit show Interesting. It's very clearly like an open source indie project. They want to be the Linux of game engine, so to speak, and it seems pretty good for 2D, indie stuff. And they kept claiming like, oh, it's pretty good for 3D, but didn't look so hot, looked like pretty last gen stuff.
Speaker 4:But you know a couple of indie devs. There were like, yeah, I use good dough because I could modify the game engine a lot more and they wanted to do something really wacky. One game it was. Everything was on your desktop and the windows would be like resized, like it was a shooter and you would shoot the side of the window and it would make the window grow bigger. It's hard to describe, but yeah, like basically a bunch of super custom engine code that guy used. Someone else was like I did it because they were the best at 2D and at the time Unity's version of 2D was 3D with a fixed camera angle, so they want a native 2D. There was a whole section of weird indie games. There's some like student projects of like alternative control schemes. So there was one game at Christmas like this where you play as an old man sitting on a lawn, you have to rock your chair back and forth to charge up your hose and you use your hose to spray the kids.
Speaker 1:That was hilarious, because it's an actual chair you sit in.
Speaker 4:Yeah, you saw that yeah.
Speaker 1:And there was the toilet, one next to the toilet, dashers, where you'd sit on the toilet and you race through. It's a real toilet you sit on.
Speaker 4:That was pretty goofy Overall just lots of games, industry stuff and very interconnected. How do you like your new identity as the old grandpa on the porch? Are we pushing it too much?
Speaker 3:Uh, I'm okay with that. I thought it was a wheelchair game. There also was a wheelchair game like a racing game, because that's the one I saw and I was like this is like a whole new level of like steering. You think you're steering wheel is cool for fourths, yeah.
Speaker 1:The indie section was a reminder to me of what would happen if you took hypercasual games and you made them in real life, like they all had one mechanic sit on the toilet and race, or one of them was like chopping things.
Speaker 3:Yeah, I went to the indie section as well, and definitely the thing that the cool thing about it is, like for the indie section that's that's where like experimentation happens and you really just need one, like one or two good looking games to come out of that to be a huge, I think, for that whole thing to be a huge success.
Speaker 4:The neat thing about that wheelchair game was bring your own. It was a wheelchair racing game and they said bring your own wheelchair. I just thought it was an interesting take on like the default accessibility. Where most games default to this is the physical abilities you have, and if you want to do something different, you're like the exception. They made a game where it was like no, if you have a wheelchair, this is for you, and if you're not, you don't. You don't just normalizing being in a wheelchair on my side.
Speaker 1:It's interesting. I think we all ran in different circles, which is why we didn't hang out as much as we should have. You guys were on the web three side and they know, eric, give a bunch of riot people you meet up with so they get you connecting those worlds. I was. I ended up spending more time with VCs than any person should.
Speaker 4:But you're not. You're not pitching games to them.
Speaker 1:No, it just happens man.
Speaker 1:Somehow it happens, Both of us sniff money like mosquitoes to a light. I would say this there is a lot of focus on the AI. I keep hearing this word come over, come up over and over again. There was one talk there that was focused on AI and they had lines wrapped around the building. I still would go back to that teenage sex joke about machine learning that Dana Arielle made. Everyone thinks they know what it is, everyone thinks they're doing it, but no one actually is, and that seems to be the case with AI. I just think it's going to take a lot longer than people expect to integrate AI into all these data stacks. It's moving slower than you might expect. I'm surprised there's less of a focus on distribution.
Speaker 1:Post-idfa and I think that's what we saw at Web 3 is they're starting to get to a point where product is real. I was impressed with the product. I played Trapknoll. That seems to be the one in Great Hope. I did a play on it there on Friday, Chris. I was not impressed with where that game is headed. I think there's a lot of time to fix those issues. Crypto Unicorns, which actually has product, just had a unicorn as their booth. I don't even think I saw anyone there. I've never even played Crypto Unicorns. What is it?
Speaker 1:They're building on different parts of their loop. But you collect unicorns. There's a farming loop. You can raise them. They're trying to add more to it right now, but that's kind of there's breeding.
Speaker 3:Is this like the first?
Speaker 1:crypto game? No, that's Crypto Kitties.
Speaker 4:But they've been around for a couple of years. Yeah, I expected them to move much faster.
Speaker 3:As I say, it's not like some sort of high fidelity, like beautiful, huge, open world.
Speaker 1:No, it has a colorful IP and it actually has some pretty experienced Web 2 people on it. I'm surprised the execution hasn't really been there. People always keep moving chains. This is another problem for these projects which has had Lifespan is that they keep moving chains and have to export all my assets. Pay me ass. But even Web 3 is like starting to think about distribution. So there is a lot of platform plays. I thought Parallel demoed well, I thought the booth was good and the CCG is not worth a billion dollars. So whatever market cap that things is full of shit.
Speaker 1:I've been a big fan of this platform called Hype Hype. I keep talking about it everywhere I can go because I think the team is brilliant and I met the team there. They're making a I guess you call it a TikTok for games. You can find footage of it online. It's a UGC platform on mobile where you can create on mobile and you're very easy in and out to different games and after talking with the team I was seriously impressed on how they're thinking about that product and how they're thinking about UGC. But for a lot of these games they're also betting on UEFN. That was another recurring theme is hey, look at, we can go into UEFN, we can prove that there's product market fit. That'll get us our next round of funding and we can scale this game. And because it's built in verse, which I'm sure will be coming to Unreal Engine as a coding language, this is what you code in Unreal or, excuse me, in UEFN. I'm sure you're going to be able to offload that and then you can get the deals that EGS offers. They'll probably have a one year exclusivity. This is also how the Epic Games Store wins, is that they get a lot of the things coming off UEFN onto the on ramp or, excuse me, the off ramp. There's a lot of hope that UEFN was going to be able to provide this product market fit.
Speaker 1:I just I looked at the numbers today and still the vast majority of people playing Fortnite are playing Epic Made Maps. There's just a long way to go on this platform. It took Roblox 10 years. There was no Roblox conversation at GDC. Roblox is supposed to have these crazy numbers. I think 350, 250 million Dow. I forget it's feather size the United States. There's a sudden interest in it. It felt like it was being ignored, but now people are purposely ignoring it and the reason to me is very clear there's no off ramp. Roblox owns all of that tech. It's a closed stack, it's a closed engine. There is no off ramp. Off that 70%, the ceiling is low. Roblox studios are not a venture capital opportunity unless you can figure out how to get your game off Roblox.
Speaker 1:So to me, just again, again, whether it be through UGC or through platforms, or through the, the application of IDFA, every game needs to have a better answer for getting distribution. I'm like starting to, I'm starting to write on a piece. I just think it's so important to get distribution and get marketing right these days. For the last 50 years, I think games have been defined by monetization and how technology and monetization have intertwined. When you think about putting a quarter into time crisis to at your local arcade, to playing, playing the N64, nes, to having online play, to having IP, to having multiplayer, monetization and technology have been intertwined and defining games and I really think the next 50 years is actually going to be defined by marketing and distribution. That, to me, is the most important point over the next 50 years. So I think it's going to be a big take away from the distribution channel to find the type of games that are being made.
Speaker 3:That was my big takeaway from GDC it's distribution baby. This was my impression. A lot of companies are trying to build the game and the distribution channel at the same time, which just seems like a recipe for disaster.
Speaker 1:Like way too expensive you need to do one first.
Speaker 4:You need to want to get one first. The theme I've heard is venture VC backed games. They're like oh, Riot Games did it, you guys should do it too.
Speaker 1:That was the venture scale opportunity. Right, that was what Riot Games was pitched on. Is that we're going to own our own distribution?
Speaker 4:But it's so hard and you have to get a huge marketing and publishing or just to do that, and then, once your game launches, you have to throw all those people away. It just doesn't really make sense and the trend I'm hearing is a lot more games looking at hey, maybe we go back to the tradition or traditional publisher model. Let them handle all that.
Speaker 3:And then distribution and UAF and Roblox, like. Another takeaway that I forgot to mention was UGC. I felt every single company I talked to especially in Web 3, was talking about UGC, and obviously that's natural. When you're talking about NFTs, oh, they're unique, totally unique features and characteristics. But that's another one that I'm a little bit cold on because in my opinion, the Fortnite example is great. Sorry, the Epic example is a great example.
Speaker 2:Not a lot of the stuff that people are playing is actually built by players.
Speaker 3:A lot of it's just built by Epic. I'm of the belief I don't know if this is true, but I'm of the belief that people need a reason and a desire to build, to produce something that's UGC. And if you're a brand new game, if you're a brand new Web 3 game with weak IP and maybe you do need weak IP for UGC to take over but how do you get people to come into your game and really want to spend time and energy creating these unique assets? That's always a conflict.
Speaker 1:So here's what I've been confused by is where Web 3 is with UGC. This is one of the things Web 3 was sold on was interoperability. I think Shrapnel lets you import other NFT JPEGs and makes them into gun charms or something. Is that it? Where is Web 3?
Speaker 4:Web 3 should be at the forefront of this. I think they have map creation too, but again, that's just standard shooter stuff. You can make your own maps and counter strike.
Speaker 1:Where is the? Web 3 UGC company is what I want to see. Where is the company that's pulling in all these different assets that sit on chain? This, to me, was the promise, and I'm just surprised there isn't a de facto company that's emerged and saying hey, we're actually building an experience that integrates all these different things that exist on chain and we're going to make an experience around it.
Speaker 3:The reality is, even if you build a program that can generate those assets, you still need agreement within the projects to make those usable in the game. So I think that's probably why you would need a company that has a relationship with every one of the big games, and they would have to build it into their actual blockchain architecture. Now, that said, most games are Web 2.5, so they don't even have there's no permissions needed to edit the.
Speaker 1:Do you mind telling us what is Web 2.5?
Speaker 3:So Web 2.5 is, I think, the reason it's so. First of all, the reason it's so popular is because it allows, it gives the studio access to probably the most attractive part of Web 3 right now, which we talked about earlier, and that's basically like deft of spend, Like you can virtually spend an unlimited amount of money. It's like gambling, Like you could go and you could blow 100 bucks or you could go blow a million dollars. I'm not saying that Web 3 is gambling, but you get the point. There's no cap because the prices are floating and if you're creating something that has some sort of yield or promise of yield or something that can be resold, there's a lot more incentives there to spend more money. So there's just this. There's the step thing, and that's why people are interested in Web 3. And the only thing you need for that is the open marketplace.
Speaker 3:Now, Web 3, blackchains, cryptocurrencies those all make, like real money markets much simpler. You don't have to be like. You don't have to be a clearinghouse. You don't have to have any of the kind of you don't have to be a bank. You don't have to manage people's accounts and their money. All that's done by third parties blockchains, wallets, etc. You don't even have to. You can have a decentralized exchange. That's really simple. That's just an agreement between two parties to exchange something. So there are advantages to doing that type of open money open market money, real money trade on a blockchain over doing it in a Web 2 environment.
Speaker 3:There's a lot more that you have to build and do regulatory, because you're managing all that stuff in-house as opposed to letting basically the players do it all with external parties. So there are liquidity pools for Star, atlas and Sol or Atlas and USDC. That's done like completely outside of our ecosystem. We don't have to deal with that at all. So there's like advantages to doing that.
Speaker 3:And if you implement that like real money market so you have assets that could be traded between players on a blockchain, that to me is Web 2.5. That means like all the items that are registered to an account are registered to that account and that account is on the blockchain. Now let's say you're in an RTS or you're in some sort of like MMO and you're wandering around and you're like doing actions. If those actions are registered on chain, if everything that happens in the economy is registered on chain, that's Web 3. Now the way I, the mental model that I keep, is if you could go onto the blockchain and get all the money on the blockchain and get all of the data you ever need for your game your.
Speaker 3:Web 3. If you need to supplement that with different RPCs or different data providers like you need to go and get data from Amplitude or you're getting data from Game Analytics one of these like third parties that are able to collect this data and store it for you, that's Web 2.5. Now that's a really strict definition Strateless. We satisfy that definition for Sage. We don't satisfy that definition for our UEFI product or like our website. If you're going on to our website, we absolutely need to collect that data.
Speaker 4:You can use a third party for that SignalFox Amplitude, these different parties that collect your website traffic and give it to you in a nice format it's being that I think improoperability was a really compelling idea. We were talking to MatSorg over at Solana about this. I think the only place interoperability has really succeeded in crypto is DeFi. You think about this. You make a token, you can put it on a deck so people can trade it. You can set it up with a lending protocol, you can do all sorts. You can wormhole it between chains. Defi is basically succeeded in this interoperable dream where anybody can make a token and it can work in all these other systems. We're not really seeing it anywhere else.
Speaker 4:I think there's some seeds of it with Star Atlas, chris, that game that's entirely on chain. All the game state and game operations are interoperable on chain. Conceivably, somebody else could do anything they want with that system and it's all within the game universe. But in a lot of these web 2.5 games, a lot of the game mechanics, if I run to the store and I kill a monster and sell some gold, that's in a game data server somewhere that's not on chain. So no one else is allowed to interact with that except for the game company. And I think we're seeing Farkaster trying to be interoperable social media. I think behind the scenes there's a lot of smoke and mirrors. It's not really fully on chain, but I think that idea has not succeeded yet outside of DeFi, of interoperability.
Speaker 1:What the fuck is Farkaster. What the fuck is this?
Speaker 4:Oh man dude, this looks like.
Speaker 1:Instagram. Instagram meets Twitter.
Speaker 4:Yeah, it's a Twitter clone. The pitch is that all the data for all the posts you make and the content is on chain, so anybody can build a front end to Farkaster I thought there's another crypto attempt at this.
Speaker 1:I forget where you can claim your address. That was really early, do?
Speaker 4:you remember? Yeah, wasn't it you guys that did that? No, taki was the most web 2.1 of these, but all of them are like fuzzing things in the back, because storing a bunch of image and text content on the chain is usually pretty inefficient. There is some promise to the idea of a social media site where the content and the way you access the content are not one monolith.
Speaker 3:Interesting. So you're saying one thing could be. I mean it's kind of like. It's almost like the Reddit APIs before they did their new thing, where you just have this giant store of data and you can access it and display it in any way you want.
Speaker 4:Remember back then there were third party Reddit apps like Alien Blue and stuff, where you could access Reddit. Any third party could create their own portal to access it and they could show the content in any way, discover it in any way, add their own meta layers on top.
Speaker 4:I think that's the dream, and Reddit and Twitter were open initially and then they closed the doors because they're like wait, we need to make money off this, and the hope is that by one of these web 3 social networks will commit to being fully on chain and transparent, but I don't think they've gotten off the ground yet.
Speaker 3:Yeah, to go back to this idea of interoperability, right, I don't think it's any mystery to us why interoperability has not happened in gaming In DeFi. It's like a name on your website, like maybe it's like a symbol or something like that. It's like a bunch of like site data that's way easier to transfer from one medium to another or one page to another. If you want to like register, actually talk to a web 2 guy about this who has worked on interoperability before, just in the context of regular games. The big issue and this has been talked about at length, but the big issue is you can't change those to art style, even if you're built to the same engine. You could have two games built in UE5 or Unity but they have completely different art styles. Like, imagine you're trying to move from Call of Duty to what's that game with that super distinct art style that's animated. They like all their characters are outlined, they look like they're drawn, but they move around Dragon Ball Z.
Speaker 3:No sure, but they're both first-person shooters just like totally different art styles, Fuck, Anyway, my brain is completely scattered today. But even if you had the same engine, same style of game you're both using guns you still need to transfer the art style and that is just an insane amount of work. Nobody's going to do that and the payoff is like very low. The other thing is there's a conflict there where it's as a platform or as a game. If that other game is not in my ecosystem, like I'm just basically allowing them to bring value outside.
Speaker 4:I know a bunch of these ex-rioters who went and got VC-backed startups off that riot pedigree and the recurring theme is nobody knows how to burn money like riot people do. Like all these people. They scale up to 20, 50, 100 people teams. They burn through all their cash, make up, game, that kind of flops and they're like, oh shit, where'd all the money go? And you're seeing a lot of them scale back from this, like one guy hit and leave. They made fangs which flopped and they scaled back from 60 people back to six and the guy was like, yeah, I don't know what the fuck I was doing, I should have just kept it small.
Speaker 4:I kept hiring people and they wanted to hire more people and I just said yes, because I liked the content they were making. But yeah, so there's definitely a lot of them got a ton of funding during the last VC cycle and the ones who have managed to hold on to their cash are like still probably got another shot on goal. There was one startup I heard of. They raised in the tens of millions but the guy was like I don't know what I'm doing right now. So he took all his money and put it in T-bills into treasury bonds. So he's got like tens of millions in treasury bonds, collecting 6% a year or whatever, because I'm super early, I like have a team of three people. We don't even know what we're making yet, so might as well stash the money somewhere.
Speaker 1:That's smart. I don't know this guy. That's the extremely safe. It's not super liquid, but pretty safe asset.
Speaker 4:We're not going to scale up the team for another year or two, so throw it somewhere.
Speaker 3:That's way smart. Have you told about crypto? You probably get some serious yields there.
Speaker 1:I don't think that's a safe asset. I don't think that's like gold no, not quite like gold. We need to stop recording. I need to go my next meeting.
Speaker 3:I'll see you guys soon. See you guys, bye.
Speaker 1:We should teach this to our children. Economics is major.
Speaker 3:Everyone has to major in economics, number one for personal survival. Economics is major. We didn't even get to talk about the feces on the street?
Speaker 1:Would you like to talk about the? Feces on the street oh no, it's probably for the best we think. Game of Thrones cast after hours.
Speaker 4:Oh, that would be fun, you guys think it was human feces and not dog feces. I think most of it.
Speaker 3:Phil and I walked back from a sandwich shop to the hotel. We could see all the way up and I was like it was a $24 sandwich. It was better than fucking it. Who was?
Speaker 1:fucking insane that we purchased that. I keep thinking about that.
Speaker 3:I know it's fine. Yeah, definitely human feces, the places where it is. It's probably not a dog. Phil was more pissed about seeing a guy let his dog poop on the sidewalk without picking it up than he was about the human feces, though.
Speaker 1:Yep, no more comments on that, he just pooped in front of you.
Speaker 3:The dog did.
Speaker 4:Yeah, he literally like you watched it? It was fun.
