Episode Transcript
[00:00:00] Speaker A: They called him the Math Pirate because he had a big black eye patch over one eye and two peg legs. Like, I'm not even joking. Like, the rumor I heard, I don't know how true this was, is that he had, like diabetes, but he, like, didn't really get it treated properly. So, like, you know, he started to lose his eyesight and had to amputate his legs. But he loved math education. He was super committed to it. So he, you know, he'd still come in and he, you know, be walking around kind of talking. He has this big eye patch on, waddling down the hall.
[00:00:26] Speaker B: He had all the charisma you would imagine somebody with an eye patch and a peg leg called the Math Pirate would have. So pretty, Pretty amazing. Let's start with utility. I don't understand what it even means.
[00:00:38] Speaker A: Everybody has some kind of utils in their head that they're calibrated.
[00:00:42] Speaker B: There's hardly anything that hasn't been used for money. In fact, there may be a fundamental problem in modeling you wouldn't want to model.
[00:00:52] Speaker C: We are hot off the heels of some incredible UEFN news. The entire model is changing. MTX is coming to the UEFN platform. Alex, I would like to introduce you as a podcaster of the fourth curtain, as a fellow podcaster. You're out there, dude, doing the work, you know, putting in the videos, interviewing the people. What's that all about?
[00:01:15] Speaker B: You know, it is interesting to me, like, I could never, ever have predicted I would be doing what my, like, what my life would be like right now. Like, even just like three years ago. Like, this was not on the radar for me. But, you know, a couple of years ago when I, you know, found myself a little bit of time on my hands. I love podcasts as a format I listen to a lot. I wanted somebody to be telling the story of, not like, not my story, but like, you know, all the game dev folks that I grew up admiring. I just wanted to hear those stories. So that's what it's about. And I love the format. It started as an audio guy. I love audio.
[00:01:51] Speaker C: I know, Alex, I've. I've listened to you way back on the DoF podcast, talking about where you guys were as a studio. You had started a new studio focusing on these type of endeavors. You did mods, which I'm curious to hear about. I don't know how that got slipped into the, the company roadmap, but I'm curious exploring that angle. You have a Gundam tie in. So I'm going to be Biased and ask about that. I also know you're Chicago math guy, which I think Eric.
[00:02:14] Speaker B: Yeah, we. We. We made that connection right there. We both have very difficult and. And not terribly useful degrees to obtain.
Yeah, Right on, Eric.
[00:02:24] Speaker A: Was Paul Sally there when you were there at the Math Pirate?
[00:02:27] Speaker B: Yes. Paul. Paul Sally, Diane Herman. They were the core of the math department.
[00:02:31] Speaker A: Wow. Yeah, they were still there when I got there.
[00:02:34] Speaker D: What's up?
[00:02:34] Speaker A: You should look up Paul Sally Jr. I think the picture says it more than anything else. They called him the Math Pirate because he had a big black eye patch over one eye and two peg legs. Like, I'm not even joking. Like, the rumor I heard. I don't know how true this was, is that he had, like, diabetes, but he didn't really get it treated properly. So, like, you know, he started to lose his eyesight and had to amputate his legs. But he loved math education. He was super committed to it. So he'd, you know, he'd still come in and he, you know, be walking around kind of talking this big eye patch on, waddling down the hall.
[00:03:03] Speaker B: Was he hardcore? Yeah.
[00:03:05] Speaker A: What do you mean by hardcore?
[00:03:07] Speaker C: Just like a strict math disciplinarian.
[00:03:11] Speaker D: Get something wrong, you lose a finger.
[00:03:12] Speaker A: That fourth picture where it says it's calculus, I took that picture.
[00:03:17] Speaker B: He had all. All the charisma you would imagine somebody with an eye patch and a peg leg would. Called the Math Pirate would have. So pretty. Pretty amazing.
[00:03:25] Speaker C: So last time we had checked in, like, I. I went back and I, like, briefed some of the. The old Deconstructor Fund podcast you had with. With Pete Holly, checking on UEFA dashed hopes. Felt like the kind of theme is like, hey, you know, we have all these things writing for UEFA. It doesn't.
[00:03:40] Speaker B: It.
[00:03:41] Speaker C: It feels like they're being communicative.
[00:03:43] Speaker B: Right.
[00:03:43] Speaker C: I think we got to give Epic, like, a huge. This is the universal feedback. I've heard from everyone. Super communicative on what the roadmap is. They publish it publicly. They responsive to feedback. You know, Tim usually goes out and very proactive. What could I add to the platform? They did deep linking. I think that was one of the big requests. They have a public API that, like, I developed a package for, for, like, retention, so you can see other islands and how they're performing, which I think is very nice. The black box still exists, but it seemed like everyone was really burnt out. The numbers weren't growing. And then they come out with this announcement that we're on the heels of that you will finally be able to add MTX to your islands. Not only that they're, they're. I won't say solving but attack and user acquisition problem with a sponsored row that there's now an auction system for which is another econ specialty. Is there's now going to be your usual sealed second price bidding for ad.
[00:04:31] Speaker A: Inventory platform ad bidding?
[00:04:35] Speaker C: Oh yes, oh yes. And not only that, the money will swish back into the system so that all the money that goes towards bidding for that advertiser space will go back to engagement based payouts or will go back to payouts in the ecosystem. So they're not even taking the ad revenue. It's, it's just an allocation mechanic. Does this change everything?
[00:04:53] Speaker B: It definitely changes the midterm outlook short term midterm outlook on the platform for us as a developer here. Absolutely a hundred percent.
I say I characterize it like that because I have always been bullish on this platform.
Throughout all of our conversations with Epic. I firmly believe that Epic at least intends for this UEFA to be the foundation of their 10 plus year plan. So for them it, it's fairly critical for it to be successful and success means that it is a content engine for keeping players engaged. So it has to work for high quality content. This is a great, to me more than anything this is a signal that they're serious. We have been asking for commercial features on this platform since it launched. They've had many of the features that we've asked for on a theoretical roadmap. The commerce features like this, not on the roadmap and unknown. And even up until I would say four to five weeks ago, sort of the mess the message was. We're thinking, we're thinking so to see like.
And this was surprise to me that they went this far for as a developer it's a very, very, very meaningful signal. We'll see what it does to revenue. Like on any platform that has a lot of users a mechanic like this that's in the hands of the developer usually means a lot more revenue which I think will be very good for not just developers but the platform. I think the platform needs to have like really high health to, in order to be successful long term. So I mean it's a win all the way around I think except potentially you know, because I gotta, I have to give Mark and Tim, Mark Green and Tim Sweeney over at Epic a lot of credit because you know they have, they didn't have, they didn't build this from scratch. Right. This is something that like exploded for them like what a dozen years into the company and they're trying to channel it into something new. And for them I think they have a lot of credibility. History sunk cost, revenue, whatever cost, goodwill, investors cap table. All of that is at stake for them. And so they are taking some risk here I think with just at least how they're perceived philosophically in the industry. They've been very, very vocal in creating equ. Equitable ecosystems in terms of sort of like distribution, rev share and all that. So all of that is for some, for, for folks like you guys studying economies and systems their decision making process is I think kind of complex from that point pov. So I give them a lot of credit for taking this risk. It's, it's kind of a one way door. I don't think they can put the toothpaste back in the tube after this. There's my hot take dump on, on the feels of the last week of Post that news.
[00:07:37] Speaker D: Alex, I'd be curious if you could give us an idea of how this like commercial feature or revenue operations, you know feature differs from what Roblox offers and is it like, is it a competitive advantage now that UEFN has compared to Roblox from the point of view.
[00:07:55] Speaker B: Of a developer, I would say that this, this one thing, how they're doing their microtransactions, I, I would say it's getting them closer. It's table stakes. Right. I read Joe from GameFam like a few weeks ago, posted on LinkedIn like a, a long post about UEFN is not a platform and listing out sort of reasons why and I, I think that isn't exactly the right. It's, it's definitely a platform. I think really, really the question is it a good platform? And when you compare it to what we consider other, you know, distribution mechanisms that have a discovery and monetization involved with them, Roblox in particular, when you compare the two you can see the deficiencies in what UEFN has to offer. And MTX gets it closer but it's not, it's not a competitive advantage yet. I mean they're offering better rev share. That's a competitive advantage. There isn't an exchange rate to get V bucks out into dollars. So that's a competitive advantage. But that's unit economics. Like how, how far does that go? It's really about how strong of a sustainable business I could build on the platform. So there still are commercial features that we need but those I think are easy things. It's Just mechanical things for Epic to just have the bandwidth and time to produce like attribution and all that other kind of stuff which is I have very, very high confidence we'll get now. So if I'm, you know, if like my point of view is I started a company to sort of build in these spaces because I saw cost advantages to build there. I saw I could get as close to the metal as possible when as terms as like interacting with an audience. Like I actually build, I build there where everybody's playing and everybody builds there. So it's, it's way more community, all of those things super attractive. Now if we, EPIC puts an ad up about their, their microtransactions, economics and it has the word Roblox on that ad because they're comparing their rev share to Roblox's. Now we have a competitive ecosystem with more than one platform. And for a developer like me who wants to be able to create the next Star wars here, that's amazing. It's, it's like wow, we got something cooking now. And then over on the side over here you have meta going these, these platforms are eating our, our social lunch. These kids are, are playing Roblox more than they're on Insta. Mm. What are we doing? So you know they're not afraid to write a few billion dollar checks to build horizons. So like this is two years ago this was very much just a place to build and now I think meaningful part of the industry. I couldn't be more excited.
[00:10:23] Speaker C: I don't understand what the end game is. So like when you, when you've been talking about the studio and like what the opportunity in UGC is, I look at something like Adopt Me which is one of the most successful games on the Roblox platform and they might top out. You know I forget remember the last check was around 70 million that they're making. So that's not the top line in terms of total but when you go through the Dev share program, you're looking at maybe 70 million. That's the top, the top performing title, right? And then you get your normal Matt.
[00:10:48] Speaker B: Look at Grow a Garden. Grow a grow garden's on $180 million run rate. That's a billion dollar asset right now.
[00:10:54] Speaker C: Do you think that's a sustainable number?
[00:10:55] Speaker B: My answer to that is yes. Look at Steal the Brain rot. I mean it's doing some, it's going to, it's being even bigger. And now that's cross platform. Those, those are IPs now like whether the, the Owners of that asset decide to reinvest in that ip, grow that ip, port that IP to other media places. I don't know, you remember Angry Birds, you know, got pretty close to creating movie franchise out of their little 99 cent mobile game.
[00:11:18] Speaker C: Hey, the third one's coming. We're not done.
[00:11:21] Speaker B: Yeah, see, there you go, there's your.
[00:11:22] Speaker D: I think we need to describe what is what. Brain rot.
[00:11:25] Speaker C: Steal a brain rot.
[00:11:26] Speaker D: You're telling me this is going to be ip? How is.
[00:11:28] Speaker B: I don't even understand is ip.
[00:11:30] Speaker A: You know, you just don't understand the kids, Chris.
[00:11:32] Speaker D: I know. I, I tried to like Google it and I didn't get very far.
[00:11:36] Speaker B: The advertising people like to name all the generations and we have a, we have a, A gen Alpha and we have a Gen Z. I don't really understand what those labels really mean, but I can tell you behaviorally these kids have grown up inside of these gaming ecosystems where it's not just play, you know, it's play, it's create, it's share, discover, monetize. These are entire ecosystems that start with play and end with monetization. And whether all these kids are making or not, they're in a community where making is part of the action, you know, so they, it just experience and value content through a different lens, you know, steal the brain rods. Think of the, there's like a fantastic example of that where it's like, you know, you look at it from the outside of where your experience is growing up with trip games and you're like, you kind of do the dog head tilt at it, you know, but it's, it makes perfect sense, you know, if you look at it from the other angle.
[00:12:30] Speaker C: So, so I went into a toy store recently. So I sometimes go into toy stores and I do, I do like a stock check and I try to see the share of the shelves that we as a game industry have. Like what are the share of toys that are based on gaming IP? And to your point, you know, you've got what, 80% of kids in the United States playing Roblox and like add in Brawl Stars and all these other things. I mean we must have a hundred percent coverage. Yet I see the amount of shelf space we demand in terms of toys and we're like maybe 20%. And so like it, it feels like these IPs on Roblox or on even just the IPs we're making in general in games are ephemeral. Like when we talk about Sila Braun, Brainrot, there's, there isn't a lot of IP value in that. There isn't a lot of IP value in grow garden. Like, this is the flavor of the week. This is the dish of the week. Like, it feels like, you know, potential riff raff. It could be the criticism that's thrown at it right there.
[00:13:21] Speaker D: Like you can't.
[00:13:22] Speaker A: The merch thing is a different.
[00:13:23] Speaker B: It could be. It could be. I think it really depends on. I mean, look, you know, a lot of these games, here's another interesting thing about these platforms is that a lot of these games that are popping and getting and going, going viral are created by folks who are new to everything.
It's not always the case, but like, if you look at what happened at the beginning of the year, the game Brookhaven on, on Roblox is a game created by a father and son duo, you know, and it grew with the platform and Voldex comes in and acquires it for over a hundred million dollars. Do you think they're going to just sit on it? Do you think, you think that's just going to be a cute little social town? That investment is indicative of the value of that IP and where, where it has to go from here forward. The Ephemeral, and it's been at, on top of the charts for like five plus years. So I don't, I, I think the ephemeral nature of Flavor of the Week is just, is, is a side effect of, you know, where this platform has kind of come from and who has so far built it. But as it gets.
What are there 350 million people on here a month?
[00:14:30] Speaker C: Craziness.
[00:14:31] Speaker B: Bigger. It's a bigger channel than, than any other game channel.
[00:14:34] Speaker D: I'm kind of on Phil's side here. When I think about like ip, I think about the Halo helmet in the background of your, you know, like everybody in our demographic knows what that is, you know, instantaneously. I, you know, put a helmet like that on in Helldivers, you know, and I feel, you know, I feel something positive. How do you get that? I would say, like, for me it's a little bit more confusing when I think about Roblox, because in Roblox, like, it's a little bit more homogenous. Like the environments feel more homogenous than the Xbox game collection. How do you, how do you generate something that's both distinguished and can stand the test of time? When I think about like these titles and Roblox that like, you know, the flavor of the week or whatever.
[00:15:14] Speaker B: Yeah, part of, part, part of it is time. I Mean, how long has Minecraft been out? You know, we got our Minecraft movie this year and you watch the footage of all the kids in the theater like reacting to all the inside jokes and memes. I mean it's, in some ways it's about the demographic of the audience that's playing the particular thing. But Minecraft has been around for a long time. We'll see how long Roblox is going to stick around for. But it's been around for what, 12, 15 years.
[00:15:41] Speaker D: I think it's here to stay. But it's not Roblox that's the ip, right? It's these.
[00:15:47] Speaker C: Can you survive separately from the umbilical cord of Roblox? Can adopt me survive outside of that? I mean I wrote a piece a while back take Battle bit, think of both directions.
Battlebit is a game that kind of had these bloxy characters. Battlefield style. Four developers releases on Steam, 15 bucks. Kids make a bunch of money. PSU does what it does. Technically you couldn't put that on Roblox because of the server side restrictions. But assume, assume you could put that on. Like wouldn't you want to put something like battlebit on, on Roblox and wouldn't you want to put something like Adopt me on Steam?
[00:16:18] Speaker B: Well, I mean, I think the answer to the both of those questions is, is yes. But I look at it as a, as a, as a why not? I mean like the total addressable market. Is it the sum, you know, Steam plus Roadblocks, is it. How much Venn diagram overlap is there, there? I don't, I don't know.
[00:16:36] Speaker A: Part of the appeal of these UGC platforms is they take care of a bunch of like DevOps stuff that you don't want to deal with, like servers and you know, payment processing and stuff.
[00:16:45] Speaker B: That is definitely part of the appeal.
[00:16:47] Speaker A: And so if you're going to go Steam and iOS and Roblox doesn't, aren't you like doing a bunch of work that the platform isn't actually saving you effort?
[00:16:55] Speaker B: Well, I mean maybe that is part of the, the, you know, the wall to, to break through, to have an IP sort of crest over the chasm is like you can build. And this was part of our original thesis. We'll see how much of this actually comes through. But because these platforms are low cost to build, you can build very quickly. They come with content libraries, they do cover your old core. So you're not paying for servers, you're not running, matchmaking, et cetera. You can build a new IP in Months for tens of thousands instead of tens of millions. Right. So let's say you have an IP that pops on one of these platforms.
Could you, could you then move from take from one platform to another? Yeah, a hundred percent. In fact, that's what Steel the Brain Rod's doing right now.
Top of the charts on Roblox now top of the charts on Fortnite. Can you then go to mobile or can you then go to Steam? Yes, more cost. But I would argue if you have an Adopt me or if you have something where the IP is really working and you've proved it out on a platform that was easy to access, why not? Why leave that money on the table?
[00:17:54] Speaker C: That to me seems like a more compelling end game for UEFN shops though is to start. And I would argue like the problem in HD right now is that it's very hard to validate demand. You got, you got all these like VC alums going out and falling on their face.
[00:18:08] Speaker B: Yeah. No, the problem with AAA is that you have to spend 50/4 million dollars to make a game and you're fighting over 6% of the market on a new title. Why? That invest that ROI sucks. I mean like you can build a game on these platforms that have. And you know where the other 94% of the market is? They're on Roblox. But, but it's that simple.
[00:18:32] Speaker C: But, but isn't the idea that I can get off of this, like with Verse, I can, look, I can go from UEFA.
[00:18:37] Speaker B: That is part of why I. Yeah, that's why I'm very bullish on.
On Epic is because that's their vision, is that UEFA and UE6 does merge. The future of the tech stack is Verse and Scene Graph. Those are two parts of uefn, two parts of their tech stack that they're piloting in uefn. So they are sort of training a whole generation of game developers to use UE6 before UE6 comes out. And the fact that you can build in either ecosystem and deploy to any Epic surface. Grain of salt. When Epic says they're going to do something, you just have to look at the timeline and take the dates off and just say, maybe this is ordering Valve Time.
[00:19:17] Speaker C: Valve, what was it? Valve. I forget what they called it.
[00:19:20] Speaker B: Valve Time. Why is epic. But yeah, I think that's a really powerful part of the vision. So, yeah, I don't know. Look, I've, I've been in this industry for a long time and I've seen structural shifts in sort of Distribution and platforms and new tech every five to ten years happens. Right? This feels kind of like we've got a new toy here that we can play with and it could do some really interesting things that we haven't been able to do before. Very high value, being able to create new IP quickly and test it. The question of, does it, can it go anywhere from, from there? If you just peel it back to, hey, there's an IP here, there's a game here, there's a character, a world that millions of people like, put a period at the end of that sentence and say, hey, does that have any value? The answer to that is yes.
[00:20:05] Speaker A: Why is Epic building dev tools in so many strata? So they've got Fortnite Creative, which is in for. Then they've got UEFA, which is like a little more complex. And then they got like, you know, full on unreal. Like, are they just hedging their bets is like their tactical reason to be.
[00:20:18] Speaker B: At these different levels? Well, I mean they, they, I think they would describe it as yes. There are strategic reasons for having different entry points and it's, it's because I think they believe, maybe not too dissimilar from what I'm talking about, how games can enter at any point in that ecosystem and they can be portable and move within those ecosystems. I think the reality is that some had an idea for introducing Creative Mode to Fortnite and it was pretty successful. Like it was very engaging. And I think they saw the value in having the players creating content for Fortnite and when they, when they opened it up, they realized they had an advantage and they do have an advantage here, that they have some exceptional technology and the ability to build tools that can visualize really interesting things. And that led to the creation of uefn. So now Creative Mode and uefn, do they, do they overlap? Do we need both? That's, I think a legit question. It may be a side effect for just how they were developed, but I don't know, I'm not in their day to day.
[00:21:23] Speaker C: So there's, there's kind of this dark horse. There's this dark horse in the UGC wars, I guess we could call it like, you know, I look at Roblox as the evil empire and I think increasingly people, people start to see it as such, like they own the whole stack. Like they, they come in, they come in for all of it. And UEFA, again, I think that that's a very material point that you can offload, which is protection. It's protection, it's protection from UEFN is that you can offload, especially on EGS or Steam or something. But the, the Dark Horse is like you've got gta, right, which is increasingly investing, it looks like in their creator community in their UGC tools. But then you have like all these games that we're trying to build UGC with inside of the game, right? So we think about even like Battlefield's Portal, Halo's the Forge, Eggy Party, Fall Guys, Stumble guys. All these games were coming out with UGC platforms and it feels like the results have been mediocre. The great, the great promise of UGC as like supplementing the content Flywheel or like helping satiate players. It just feels like it didn't pan out to the degree that it was promised. Like these things feel like they really haven't been growing to the degree you would expect if they were successful. Is that a fair assessment of like this category of ugc?
[00:22:30] Speaker B: I think so. I mean I would say, you know, there are.
But Roblox was able to hurt like, you know, they had the intention to build a platform and an ecosystem and they were able to hurdle the critical mass to make it self sustaining. And that, that what is epic has the same intention and they started with some critical mass and we'll, we'll see how self sustaining it, it, it becomes if we, you know, I think, I think they need to have another growth phase in order for, for them to be a, you know, okay, this is going to be forever. All the other ones that you're talking about and maybe gti GTA is different because they have such an outsized audience and a different customer base. You know, it's older. But all the other ones you're talking about where it's like, okay, we ugc, yeah, let's have, let's let users be able to create. Platform users be able to create content are really just tool sets. You know, it's not Build, Discover, monetize, it's Build. So we have more content in the system and it's fun and it's a feature of the game and that's great. I don't know. The other, the other platform I might sort of put in the mix of the conversation is Overwolf. I don't know if you're familiar with Overwolf, but basically overall fills that. The other two parts of the circle, you know, there's the tool that lets you create, but then without a way to generate discovery and monetization, you don't complete a loop of a platform. And Overwolf basically completes that loop for, say, Ark. You mentioned. Oh, you guys have done some mods. Yeah, we've worked with Overwolf on Ark and those have been super successful for us just from a business, you know, like money in, money out.
And it's because Overwolf provides the last two legs of the loop for, to help make sort of platformatize a UGC feature. But a UGC feature on its own, a creation, a tool on its own, is, does not a platform make.
[00:24:19] Speaker C: So why don't we see more of like the Steam marketplace then or like, you know, some of Orville Wolf's features being in front of like these main distribution channels, like, it feels like free labor. Right? Like, I, I played the Witcher after I saw the Netflix TV show. I, I, you know, I. First time I ever played the Witcher was after the Netflix TV show. And I wanted, I wanted Henry Cavill's face as the Witcher.
[00:24:39] Speaker B: Right.
[00:24:39] Speaker C: And I knew there were mods and they were strong supporters of the community over at CD Projekt Red. And I was surprised about how much of a pain in the ass it was to get any of this done. And I, I was ready to hand over 10 bucks to get Henry Cavill's face on there. I'm just. The mods feel like they haven't taken off. It feels like growth has been stunted even for Orville Wolf or Mod IO. Like I'm just, I would expect better results by now. Right. And it still feels so cumbersome.
[00:25:02] Speaker B: Look, you know, game development is complicated. It's hard and it's expensive. And, you know, the Witcher has, you know, CD Projekt Red has a very fantastic business and the Witcher is an incredible property that they've built, you know, from a Polish language novel into a global phenomena. The fact that they haven't built an entire UGC platform is just not there. It's not their end game. Right. So it's fine, Phil. That's fine. You know, just use your imagination to get Henry Cavill on. Yeah.
[00:25:33] Speaker D: What's your, what's your issue, Phil?
[00:25:35] Speaker C: Well, maybe these meta, these meta glasses will do it for me.
[00:25:38] Speaker D: Project Red hasn't made a UGC platform. Is that. Or are you saying they should switch over to uefn?
[00:25:44] Speaker C: I just smell money.
[00:25:45] Speaker B: Phil wants, Phil wants to do all the things all the time. Yeah, I mean, sure, maybe there's definitely opportunity left on the table there. Sounds like at least 10 bucks. Your 10 bucks.
[00:25:54] Speaker A: Yeah, I was going to say Like Phil, you do cosmetics monetization stuff. You know, nobody wants to buy cosmetics for a single player game.
[00:26:01] Speaker C: No, not at all. Not at all. Although for this one there might be an exception. Like if they wrapped in like a Netflix Edition, I would be, I would be. That actually was a missed opportunity. I would have paid 70 bucks for.
[00:26:10] Speaker A: That remastered Netflix edition.
[00:26:12] Speaker C: All right, so let me, let me, let me ask you this, this is, this is a really good observation, I would say, by Matthew Paul. And this is one thing he put in his like original, original state of the gaming decks. Or he might have put in a separate essay where he talks about the evolution of songs with vinyl, the introduction of vinyl, and how there were limitations on how long a song could be based on the size of vinyl disc. And he was demonstrating how important the medium is to shaping the content and how that's a conversation, especially in something like gaming. So now you've got this monetization which is coming into UEFA. How do you expect it to change the type of games that are being made? Do you expect there to be a meta shift now that monetization is a part of the ecosystem?
[00:26:51] Speaker B: I, I do think it will have an impact, absolutely. 100%. I mean it's like people are, well, you know, not everybody is building to make money on this platform. You know, there's, there's a lot of just pure creativity and fun and sharing, et cetera. So I think we will always see things that look experimental, things that look just like interesting, fun pieces of content. But for, for those that are looking at this feature as an opportunity to, you know, make money. Yeah, it's going to change the kinds of games that are on there because we're going from a model that rewards minutes played to a model that rewards transaction. So it's, you know, there are different systems and designs and genres and game types that work better in a transactional model than an engagement based model. So.
[00:27:43] Speaker D: Yeah, how have your.
Because I mean you're kind of an OG developer, probably the most famous, at least as far as I'm concerned. Video game IP of all time. What was it like developing a product like Halo compared to a product, you know, in UEFN with look north like the types of products you're building and obviously the monetization is completely different. But how's that shaped your, like, what's your joy level with gaming and like being a game developer?
[00:28:14] Speaker B: That is, Chris, that, that is. I love that question because I have been through like every shade of, let's say the opposite of joy dread? No, I don't know. But whatever, I've been through all the cycles, you know, and, and I like color. I will say, yeah, I will say the development of a game like Halo and the development of a game on UEFN are on pretty different ends of the, of, of the spectrum. Not necessarily the joy hate spectrum.
[00:28:41] Speaker D: Misery, Misery.
[00:28:42] Speaker B: Not the, not necessarily. I mean actually I think for me they're on similar ends of the joy spectrum. But I'll tell you a couple of things that are very different and some of them are obvious, right? Like a game like Halo takes three plus year today, it probably takes five plus years to make and it's a huge investment. So there's high expectations. Both of processes are very, very iterative.
So you, you make, you try, you play, you remake, try, play, remake, try and play.
You go through way more one way doors on a, on a, AAA game development. So you have to weigh decisions a lot more carefully as you go through your gates and various steps. Once you get into production, it's really hard nigh impossible to go back to pre production and redo a fundamental system so that you can then go forward in production. That's called Duke Nukem forever.
On, on the other side, you know, the whole game cycle's only three months so you just ship it and try again, you know. So that's very different. I'll tell you personally though, my level of engage daily engagement in terms of sort of being in the mix, thinking intellectually about what we're doing, being excited about it, has never been higher today, ever. And it's very reminiscent of what it was like back in, you know, the early Xbox days of experimenting, inventing, pushing a piece of tech we never used before. All of that feels very much the same. The midpoints of my career where it's been about, you know, sort of trying to optimize for a platform that has some maturity to it, to me personally, that has just felt less interesting, less personally motivating. It's kind of like, you know, an optimization problem is set instead of a discovery problem. I'll tell you like right now I like to think we're kind of leading the charge. I feel like we are, maybe we're not, but like I feel like it and that's a great feeling, you know, on a brand new platform.
[00:30:32] Speaker D: So statistically speaking you probably are.
[00:30:34] Speaker B: Yeah. So I mean like process wise there's a lot of differences, some similarities, but on the personal enjoyment side it's like, like yeah, this is freaking awesome. It's like, I shipped 30 games in the last couple of years. You know how many games I shipped in the three years before that? Zero. You know, God.
[00:30:51] Speaker C: Hey, rest, Rest in peace. Battlefield Mobile, that's a separate.
But I saw someone told me Soderland. Soderland would clear his calendar for you. By the way, that's a. That's a very high class.
[00:31:00] Speaker B: Wow. Wow.
[00:31:01] Speaker C: Only person sort of got a calendar for.
[00:31:03] Speaker B: I got a. I got a pink. You know, I really like Patrick. We didn't get to spend a ton of time together, but he's very tall.
[00:31:09] Speaker C: He is very tall. Very intimidating in meetings.
[00:31:13] Speaker B: He was, it was. He was very kind to me.
[00:31:21] Speaker A: Can I go on a rant about the Fortnite economy, please?
[00:31:24] Speaker B: Eric, I please have the floor.
[00:31:26] Speaker A: Because I think part of this is framing why the monetization announcement's such a big deal. And part of this because I really want to ask Alex about this because I've watched this stuff from afar. But like, you know, I've never actually developed a UEFN or anything, so, you know, context for listeners. So obviously you all know Fortnite has their UGC platform and is this kind of part of Tim's like anti platform crusade where he's trying to fight against Apple and fight against Steam? Right. And so it seems to me that Fortnite Creative was somewhat heavily subsidized and they tried to like do things the right way.
And part of this might be tech limitations, but originally they monetized games mostly based on engagement. They're like developers, don't worry about monetizing your game. We will pay you based on the amount of engagement it drives to the system almost in like a YouTube like way where don't worry about the business, just worry about the creative creation. And they use a basically a dollar per hour heuristic in order to distribute those funds and said, okay, if you drive this many engagement hours, you get this amount of payout.
And the dollars per hour for Fortnite Creative was about half of that of Fortnite Battle Royale. But this creates this weird thing where like if everyone's getting paid at the same rate, the content that kind of draws hours more cheaply than the like the super high quality but low time content wins out. Right. I don't want to call it arbitrage, but it's something like that. And so you saw a lot of these games that like basically had all these like login and retentive awards. Oh, if you play for 30 minutes, you get this extra bonus and there's all These incentives laid out in the game to extend your time so that they could, you know, optimize the algorithm. And a lot of this, I think initially it was a belief that if you focus purely on engagement, you know, you'll get better games. And part of the reason the free to play app store on mobile is so crowded with garbage is because you know, they're like, oh, monetize your own and you know, they just stuff you with, you know, arguably predatory microtransactions and advertising and stuff. But they're pivoting and they're pivoting hard. This, I think this MTX will grow to become the primary method. I'm curious, curious what you think Alex. Like do you think they're gonna, the engagement based system will still be, you know, 20 to 50% or do you think like it's just gonna be mostly MTX and you know, basically the games, it's on the games to monetize themselves?
[00:33:31] Speaker B: Yeah, that's a very good question. Good observation. I think that some, some bit of your sort of narrative there around why engagement was the model and how it's worked is, is correct. Some, some has some nuance to it. You know, they did defend a FTC lawsuit about basically like their COPPA compliance. So they're very sensitivity to how they're monetizing on the platform because of their settlement with the ftc. And in addition, yeah, Tim philosophically does not want the platform to go the same route as other free to play platforms like mobile and Roblox, in their opinion promoting sort of predatory microtransaction mechanics. So I would add those two bits of nuance and like I was saying before, they do have a lot to lose. So. So it is a bit risky for them to sort of introduce a fair amount of unknown that may not align with their philosophical approach to the game industry. So we'll see if they, if they do change a little bit of the weighting between engagement and microtransaction. My hope, think about like how they set up their engagement payout. Basically they're taking the revenue pool for all transaction on their battle pass. That's their sort of primary, primary driver of revenue in Fortnite and they're sharing that with everybody. So in order for the platform to grow, that top line has to grow and the majority of the burden there is on EPIC to provide that growth. I mean the theory is, well, we'll have a lot of content, so we'll get a lot of players in, but ultimately they have to go through some storefront that Epic controls in order to grow the platform. What microtransactions are going to do for the platform regardless of like how I design my game and I make money etc. And the quality of my business is it's going to spread that burden of growing the top line revenue, the platform across the entire ecosystem. To me that's a huge growth driver that me that gives me hope that genius developers like my peers will come up with some new stuff that will start generating more revenue and will be incremental to the revenue that the Epic storefront is generating.
[00:35:34] Speaker A: Wait, so when you say it's redistributed, does that mean let's say your creative game has some mtx, does that some of that get redistributed among the whole developer pool or is it mostly just go to you?
[00:35:45] Speaker B: Yeah, no, Epic is going to take, you know, they're going to give me 70% of it and 30% of it's going to go to Epic.
[00:35:51] Speaker A: But does that 30% get redistributed in the pool or is that just going straight to Epic?
[00:35:55] Speaker C: No, it doesn't go back to the pool. I think Epic takes us as revenue.
[00:35:59] Speaker B: The sponsor ad revenue goes into the pool but the MTX revenue goes to the, to the platform I. E. Epic.
[00:36:05] Speaker D: I know the, the Roblox Rev shares is like famously 30, 70, 30 to the developers. 70 to Roblox. What is it on UEFN on average?
[00:36:13] Speaker B: I mean they just, I don't have the numbers in front of me. They just announced it and it's got like it's 100% of developers from December 1st through the end of the year.
And then I think it's like, I think it's the other way around. 70, 30 for everything else.
[00:36:27] Speaker D: Okay, so it's, it's kind of comparable.
[00:36:29] Speaker B: No, it's, it's, they've, they've, they, they are very public about their rep. Their Rev share is better because is is marketing a more advent developer advantageous revenue share.
[00:36:38] Speaker A: There's this notion, how do I call it, like incentive determinism where like the way the YouTube algorithm is set up will incentivize certain content. So when they incentivize views you got a lot of meme videos. When they incentivize watch length you got a lot of long form let's plays and this kind of to Phil's point about like why not multiplatform? How much do you believe in this kind of incentive determinism where like whatever system Fortnite ends up Stabilizing on is going to determine the type of content that gets surfaced.
[00:37:02] Speaker B: Well, we'll, we'll see. I would argue that creating a pizza like a game is a little bit longer form more complex than creating videos. It's a little harder to, I mean you can, yeah, but it's just a little, it's like one step harder to go back and re remix your game content to take advantage of. Hey, we're changing the algorithm to, to you know, quadruple incentivize new players to the platform. They do that, right?
I think. Yeah, it will, it will, I think it will. Yeah, I think it will shape but I think it will be less moment to moment than say like YouTube just because of the, you know, the production timelines are just a little bit more complicated. But yeah, definitely. Edmaid already has, they already do that. And I get Epic is, you know, it is black box but they are sort of transparent about the components that go into it. It's not just engagement. I mean it's not just playtime. It's. There is an incentive for bringing new players to the platform. There is an incentive for re engaging lapsed players. How much control do we really have around that? I mean some of that is designed to get us to market our games off platform to get somebody to play our game that wouldn't necessarily play Fortnite. It's you know, on UEFA I think that's a little bit harder than say on a Roblox because Fortnite, it's Fortnite. So it's like how effective is a Tycoon game at getting somebody to come and download 5 gigabytes of battle royale to play the Tycoon game.
[00:38:27] Speaker C: You'd be surprised on what's going on in mobile like the fake ad revolution.
[00:38:30] Speaker B: And you know, it's funny, there aren't a lot of those fake ads actually getting turned into real games.
[00:38:34] Speaker C: Absolutely.
[00:38:36] Speaker B: Because the click through rate on the fake ads is so good.
But anyways it is, you know, arrogant. It's all fascinating just like how those little decisions on things like an engagement payout or the design of the monetization system from the platform side incentivizes the developers to make the games. And, and I think you're right. In a platform like Roblox or Fortnite where it is a lot faster to make a game than aaa, developers do have the opportunity to really consider the knobs and dials and rules to maximize their revenue. I don't think any developer should be shy about that being a Goal. If you're running a business, yes, we are artists and we're making new incredible games. Whether it's also a business, I think it will have an impact for sure.
That's just Machiavelli, right?
No, Adam Smith, one of those books we read in Hyde.
[00:39:26] Speaker A: Some old guy said this before.
[00:39:27] Speaker C: There's a Milton Friedman statue now out here, like a little shrine. You have something kind of out of left field. Where is China in all of this? Where is China in this UGC race? They, you know, we talk about the influence of the east and how they're growing in terms of AAA development. They're completely absent from this conversation. What's going on? Where's the imperialism? Why are they not in the arena? I'm confused.
[00:39:47] Speaker B: Well, I. I think the game industry in China is doing fine.
It's doing very well.
Yeah. I think, I think they're leaning into what's working. Don't forget that Tencent owns 40% of Epic.
[00:40:02] Speaker C: Yep, that's a good point.
[00:40:03] Speaker B: I wouldn't be surprised if there are quite, quite a few Chinese companies on Roblox's cap table somewhere. I wouldn't be surprised. I don't know though. I think TikTok is. And honestly, I don't know what the fate of TikTok in the US is really. Who knows what this month, what's happening. But They've been with ByteDance in and around games as well. I know a lot of companies in the east are very interested in ugc. Some of them have spun up some UGC platforms as well. Haven't really stuck as much. I know Genshin is, I think, probably thinking about. I think they announced a thing they're doing.
So it's not, it's not easy turning. Like we talked about earlier, UGC is a feature, but creator platform is more than just the UGC platform feature. So it's hard to just. It's kind of like, you know, I think one of you is a. Is an East. It has an esports background. Yes. No.
[00:40:54] Speaker A: Oh yeah. Or I worked at Riot and I just play a lot of esports games.
[00:40:57] Speaker B: Yeah. So like you remember, you remember the day when that was the feature flavor of the week and every developer had burning money Sport. Yeah. It's like it's kind of hard to put esport as a feature on a title. I mean, you could make a competitive title that maybe could graduate to become an esport if you have the critical mass and you have the competitive, like the actual design works for it. Can you put creator? Well, I Guess if you're Manticore, you can put creator platform on your business plan, but as evidenced by them, it's hard to do.
Same with.
Oh shoot, what was that? The other guys that just pivoted out of being a creator platform. Whatever. It's hard. I guess that's my point. It's hard. So where's China? China's doing just fine.
[00:41:42] Speaker C: Rec room. Rec room.
[00:41:44] Speaker B: Rec room.
[00:41:44] Speaker C: That's who rec roomed us. Yes. Yeah, trying to.
[00:41:46] Speaker D: Alex, I have a question about like being a developer on these platforms. When I'm looking at the production cycle of these products, a lot of times like what I'm imagining is going on in these developers brains is like they put something out there and if it's consumed then they just put it out there again and they try and they're almost like emulating the things that are successful. Whereas if I think about this from like a data scientist point of view, you know, working in an individual company, I am optimizing with only data that I have available within my own business. So okay, this type of creative is more popular than this type of creative. Okay, this type of outfit, this type of gameplay is more attractive, I guess. What does the feedback look like? What does the feedback loop look like on these platforms? Especially from your point of view, do you have highly sophisticated data analytics and tools that you're able to optimize? I know they have some of that in Roblox. Or is it just like, oh, that was successful. Let's do a little bit more of that. Let's move closer to that direction. Concurrent users and revenue, like that's, that's all that matters.
[00:42:50] Speaker B: These, these platforms do have a lot of data. I mean there's a lot of players on here, there's an end, there's a lot of content. Way more players, way more content than any. Well, I don't know, not more players than mobile obviously, but, but as far as like one repository of data, you know, that's native, it's, it's very, very data rich. Hats off to epic. This is one place where they are ahead of Roblox for publishing their data API a couple months ago. We drink from all the fire hoses. So we have, we have a cross platform data set that scrapes every game, every platform as much as we can.
And we have a natural language front end to it. So we absolutely use these data sets to inform what kinds of games we should be making. We have an acquisition business. What kind of games we should be investing in.
I think has never been more useful or important on a platform that moves so quickly and has so many players. That said, look at what is successful on these, on these platforms. The ground up success comes from creators that have grown up here. You speak the language, who are native and have, and have been part of the community for years. You know, you kind of got to put a grain of salt on like how far data is going to get you. I think anything in our industry that's built on comps, you're half, you're looking in a rear view mirror, decide to go where next, where to go to next. And that is absolutely useful and informative. It doesn't necessarily give you any, any answers. You know, it gives you information which makes you hopefully smarter.
[00:44:22] Speaker C: Our guest today has been Alex Ropian. You are the CEO of Look Northworld and more importantly, the host at the Fourth Curtain. You've done a lot of collabs, you've experimented and dabbled in a lot of UC platforms. I'm sure this, this news is going to bolster your outlook.
[00:44:37] Speaker B: It seems like we're very excited about what's happening on his platforms. The news out of Epic last week was met with cheers and a lot of optimism about the future for the game industry in general.
That's another thing that I love about what we're doing. There's just a lot of excitement and heat and growth happening in this part of the industry which is, I think it's a little bit of a contrast to other parts of the industry which as maybe struggled. So that's just another great thing about what's going on on these platforms. Well, gee, you know, if you want to listen to the Fourth Curtain, you can find that wherever you get your podcasts. I'll preview that. We will have an episode with the founder of Electronic Arts, Trip Hawkins, coming out in a couple of weeks. That's a fascinating conversation.
We have games at Look North World coming out every month. We'll have a couple coming out in October for Halloween. So you can find us on Fortnite and now on Roblox. Super excited. Thank you for having me.
[00:45:34] Speaker C: Thank you so much for taking the time. We appreciate it.
[00:45:37] Speaker B: Thank you. Thank you guys so much. Pleasure.
[00:45:39] Speaker D: It was a pleasure to meet you, Alex. Thank you so much.
[00:45:42] Speaker B: We should teach this to our children. Economics is major.
Everyone has to major in economics. Number one for personal survival. Economics is major.
