E06: What's the deal with markets anyways?

<cite>chris:</cite> <time>0:00</time> I've realized recently that I don't have a good relationship with caffeine, or at least not as good as I thought. My wife and I recently bought a burger grinder, and it extracts the caffeine at a ridiculous rate. I I, yeah. Anyway, my normal two cups of coffee. I need to, I'm gonna do a cleanse this week. Cuz it's I'm like twitching. But anyway, <cite>phil:</cite> <time>0:21</time> Two cup of coffee. <cite>chris:</cite> <time>0:23</time> yeah I don't know what we're doing wrong. Maybe we're using too much coffee or something, but, holy crap, Berg grinders are dangerous. <cite>phil:</cite> <time>0:29</time> Wait till I introduce you to cold Brew. <cite>chris:</cite> <time>0:31</time> I've had cold brew, I've never made my own cold brew. I've heard horror stories of people just going absolutely insane and not knowing why. <cite>phil:</cite> <time>0:54</time> game Economist, cast episode six. The boys are back in town again. Belated, I don't know. We took a couple weeks off mostly. I took a couple weeks off. I've been in Hawaii surfing, hurting <cite>chris:</cite> <time>1:06</time> Phil's been on a bender. <cite>phil:</cite> <time>1:07</time> something like that. I say that the caffeine the caffeine, the sunlight is enough for me, but we are back. We have two beautiful articles to talk about today. I will be talking about limit breaks, super Bowl ad. Did it make sense? Why did they do it? What has been the fallout? There was a lot of hype going into the, and there was, I would decompression afterwards. <cite>eric:</cite> <time>1:30</time> Yeah, I was taking a look at the Csco, in-game economy for the gun skins. I think it's a great example of a market economy and a lot of Web three games are always like, we're gonna be new cause we've got a real asset. Game economy was like, actually Csco did it 10 years ago. Let's look at what happened over there. <cite>phil:</cite> <time>1:45</time> But before we begin., our next episode is the male episode. We've been hyping it up forever. I actually have in my hands gentlemen, somehow metaphorically emails from people that have sent in questions. We have 13 emails so far. They're gonna be mostly web three questions. Pleased by someone's grace, save us from only web. Three questions. please. I beg of you like, I dunno how much more web three I can take. But we'll be doing that next episode. I do have a guest in the hopper, which I'll talk to you guys about after this. Other than that, let's talk about what we've been playing. <cite>chris:</cite> <time>2:23</time> Do we have theme music for that? <cite>phil:</cite> <time>2:25</time> Yeah, we do. Have you not listened? We got <cite>chris:</cite> <time>2:29</time> Wait, what? <cite>eric:</cite> <time>2:30</time> What are you buying? <cite>phil:</cite> <time>2:31</time> you. <cite>chris:</cite> <time>2:32</time> Oh, that's right. Oh, Okay. Since I'm the loud one I've still been playing Monster Hunter Rise. I'm addicted to it. It's taking up my mor I get out of bed early to play before work. I'm not super proud of it, but yeah. Yeah, that's my problem. It's all or nothing. With video games. I either can't get into a video game and I'll put 10 hours into it, or I'll like just get addicted and put a hundred hours in, in the span of a month. So that's where I'm at. I've been playing the Hogwarts game Mostly been watching my wife play it, but I have also got an account going. I think they did a good enough job with the world and building up this really, truly unique feeling Hogwarts that, no matter what they did, it was gonna be a success. I, my, my more casual less, in, in the games industry and less in the, game culture, friends love the gameplay. They think it's fun. They think it's, there's plenty of variety. Which is funny because that's one of the biggest cri criticisms I've read of the game is oh, there's not enough enemy variety. The gameplay feels stale after a while. But I actually think it's just enough, just perfect for. The typical buyer of this product. And I'm convinced that the typical buyer is like a new somebody who hasn't owned a console in five years, or somebody who's coming back into the industry. Or sorry, I say industry coming back into video games cause Hogwarts legacy came out. It's the push they've been waiting for. I would love to see what that breakdown looks like, but you see the sales figures for this product and you know that a huge portion of that is nostalgia. So yeah, it's been very interesting to, to play. I think it's been really fun for me to watch my wife play. She, she was a big fan of the Harry Potter series when she was growing up. And we're not really big Harry Potter people anymore, but but yeah, it's like, it's brings you back, makes you feel like you're watching the movies for the first time or reading the books for the first time. <cite>phil:</cite> <time>4:17</time> You said something that was interesting and I've heard this pushback against what you said, which is that the success of the game was almost predetermined. What lead you to believe that success was almost predetermined? <cite>chris:</cite> <time>4:28</time> So we can see that a lot of people pre-ordered the game a lot or a lot of people got the early access or whatever it was. So we know that's true. I know people, and some of this is anecdotal. I know two people and I don't have a lot of friends. So that's a lot. That's a huge portion of of people for me that bought Xboxes or PlayStations to play this game. Obviously I'm curious. I suppose that's an effect you could look at, what's the, what did the purchasing of consoles look like two weeks, prior to the release of the game. But I guess most of that's just a hunch. But I know that a lot of people committed to the game before it came out. or at least I know a lot of people who committed to the game before it came out. And I'd like to, I'd love to see the data to see if that is backed up. <cite>eric:</cite> <time>5:11</time> But yeah, there's plenty of moderately successful or unsuccessful Harry Potter games in the past. So I think it's worth looking at why is this one such a hit? <cite>chris:</cite> <time>5:18</time> Yeah. <cite>phil:</cite> <time>5:19</time> this word that's come up is fantasy fulfillment. This was something that was mentioned on that other podcast that exists about games. Do you think there's fantasy fulfillment in this? Like that? That's what this is. <cite>chris:</cite> <time>5:31</time> I'm not up on the, on that other podcast you were talking about, but can you explain fantasy fulfillment? <cite>phil:</cite> <time>5:37</time> So I would say one of the things that's preoccupied my mind a little bit as I try to transform myself into an evil executive is this idea of characters and world and like how those used together to form ip. And so when you think about this game, there's no Harry Potter attachment. Harry Potter's gone. There's no Dumble door. There isn't a lot of those named characters that people are so familiar with the franchise. And so to me that's almost an experiment. That tells us that what's really compelling about this franchise is the world of Harry Potter, not necessarily Harry Potter, right? It's called Hogwarts. People have this fantasy of wow, I wish I could have been at Hogwarts when they watch these films. And again, to turn my eye into the evil executive I wanna become, that to me is far more valuable than characters because characters are attached to actors, and actors can control pricing. Theyre inelastic goods. It's hard to replace them. They also age. There's a lot of complications. I would say that it's much easier to manage a world or an ip, to own an IP than it's to manage actors who age and may not be around for the roles any longer or may demand higher salaries. So if I were an evil executive, I'd invest in world and like when I look at Avatar, I can't, no one can name a single character from Avatar. They do know that the world of Pandora is super cool and they wanna exist in that world. But if I'm an executive, I want world, I don't want characters, they don't want actors. <cite>eric:</cite> <time>7:00</time> And that's what Marvel does, right? They turn over their characters or their actors for their characters. <cite>chris:</cite> <time>7:04</time> Yeah. And that's like a lot of the feedback I've seen is it feels like I am a student at Hogwarts and I have this is like a new story. And maybe Eric, that's one of the reasons why this is sold better than previous titles. Cuz a lot of the previous titles were like walking like the Lord of the Rings games, where it was like, Lord of the Rings, the two towers already what that story's gonna look like and the different scenes you're gonna be playing out. <cite>eric:</cite> <time>7:26</time> Yeah. <cite>chris:</cite> <time>7:27</time> This is all new. <cite>eric:</cite> <time>7:28</time> Yeah. And Harry Potter's kind of a blank slate protagonist anyway, right? Just get'em outta there. Put yourself in there, but my wife really likes, really enjoyed she had mixed feelings about it because on one hand they did a beautiful realized castle with all these like little secret nooks and crannies. Like you really are exploring Hogwarts and there's like a rumor requirement that you can decorate however you want, but the characters in Harry Potter are so flat, like they don't respond to you being there. And they're very interactable. My wife's main critique of the game was like, I want this to be a full on high school simulator. I want to be able to build relationships. I want like this cute slithering boy. I want to be able to give him gifts until like we start a dating quest line and we go off to the, I don't know, Madame Palm freezer or whatever? But the castle, the world is very well realized, but the characters in the world are basically non interactable objects. That was her main beef with it. <cite>chris:</cite> <time>8:16</time> I've noticed I'll, like my wife will do one dialogue path in her play through, and I'll see how the character reacts. I'll do another dialogue path when I go to do the same exact scene and the character the, the responding character will say one thing. The first thing they say is different. That it's the same. So it's like it and the two different, dialogue paths seem very different. One is like always a little bit more s you know, snarky and mean, and one is super bubbly and happy. And they always result, it seems like they always result in the same they always have the same results. So I could definitely see that. <cite>phil:</cite> <time>8:50</time> It reminds me of what you're mentioning Eric is how there's no Harry Potter mmo. Like it seems to me like that would be one of the greatest ways to capitalize on this franchise is, choose your path. Choose your gameplay story, interact in a social world like that of life stuff seems super compelling, Why can't I relationships with other players? It seems like there's a ton more you can milk outta this f. <cite>chris:</cite> <time>9:10</time> Yeah. And that's, my main takeaway is the game is far from perfect, but I still really enjoy playing it. It's just fun to be in Hogwarts, but you can tell that it was created. I feel like you can the fact that it was a relatively I don't wanna say immature inexperience, but a studio that has never put out a product like this before you can tell the map is terrible. Some of the ui ux stuff is terrible. Some of this like kind of r p g stuff is just lackluster. So anyway I'm excited to, to keep playing and watch my wife play. Eric, other than your wife playing Hogwarts, have you been playing anything? <cite>eric:</cite> <time>9:39</time> A little bit of a inscription. It's a kind of indie game that came out last year. An interesting game. So the game has like a bunch of layers. So the core layer is like a roguelike deck builder, slay the spire, but really watered down. But wrapped around that is this escape room game where a serial killer kidnaps you and traps you in this log cabin and forces you to play this card game with him. And you try to escape by finding keys and locks that open. Other keys, that those, the those that kind of retro escape room game. And then wrapped around that is like a Blair witch style like video horror story where like you're watching these VHS tapes of this guy who's oh, I found this trading card that has these coordinates on it. And he goes there and he is oh, I dug up a box and it's got this old video game. Let me pop it into my computer and see what happens. This like old shaky cam video. I'm not all the way through it, but it's it's been pretty compelling. Like the core gameplay is fine. It's not that great, but like the layers of narrative of oh, I gotta escape this room to figure out what's going on with this guy. And this shaky cam VHS tape has been pretty compelling. <cite>phil:</cite> <time>10:38</time> This sun's nuts. <cite>eric:</cite> <time>10:39</time> Yeah, it nuts is a good way to describe it. <cite>chris:</cite> <time>10:42</time> So is it mostly once you've played through the story, you've played through it? Because you said it was slay the aspire. So is it a roguelike or is it just <cite>eric:</cite> <time>10:48</time> Yeah. You have to play The serial killer forces you to play slay the spire with him, basically. And to hit certain, I don't know, goals you have to like, beat, slay the spire playing against this guy. <cite>chris:</cite> <time>10:59</time> Sounds like me trying to convince my friends to play card games with me. Play this game. You're gonna love it. And they're like, I hate this game. Chris <cite>eric:</cite> <time>11:04</time> you can get up and walk around, but you can't leave this room like <cite>phil:</cite> <time>11:07</time> If Netflix Games is listening to this podcast, Eric just gave you an amazing pitch to turn like all of your serial killer franchises into some sort of mechanic maybe 10 who. <cite>eric:</cite> <time>11:16</time> Huh, I didn't think about that. But yeah, the multimedia angle here is pretty interesting. But yeah, inscription, check it out. <cite>chris:</cite> <time>11:22</time> Phil, what about you? <cite>phil:</cite> <time>11:24</time> I have been playing the recent release Striped Street Fighter Dual, which has come out. It is published by Crunchy Role who is famous for mainly importing anime from Japan into the United States. They were purchased, I believe, by Sony, This is one of the first games that they're publishing under their own banner. So it's appropriate that they would do Street Fighter. It's a traditional squad RPG on mobile. And so what that means is that you're gonna be collecting street fighter characters. They're going to have various stats and they're going to have gear as well. And so you're gonna be spending your journey collecting these characters, upgrading your gear, and ultimately making a compelling roster of characters. The big twist in this game, which I think is something that has been. Pushed and pulled around mobile in the last two to three years is this idea of active inputs and what role active inputs should play in gameplay. So most of the time when you play a squad rpg, there is this idea of autoplay, and so you'll just click a button and the characters will play. And this is usually when the HD gamers shrug their nose or turn their nose up at mobile games. Like, how could you just click a button and play? That doesn't seem to make sense to me. That's worthless. That defeats the whole purpose. But the whole idea here is that the gameplay is really at the meta layer, that it's really about which characters you collect, how you choose to upgrade your gear. There's Roche Bow in most of these games, so there's Earth, wind, fire, water. They all defeat one another at all. Its stats, so there's huge meta layer. And so with Street Fighter, what they. Cause they wanted to bring in some of those street mechanics. And so what you'll do is you'll create this lineup of three characters. And each of the characters has special moves and abilities like you would in a traditional squad rpg, except in this case, they can be strung together to form combos. And so a lot of what you're doing before you enter the match is deciding what string of combos you want to do. Cause the order matters here. And a lot of. Is really satisfying. This game is watching these combos appear on screen and there is an active input you need to do to be able to activate a combo, and they do not activate with autoplay on, so it requires you to press this button. Of course the meter is going fill. When you do something really great in the game, your characters do something great just naturally, and then you'll have to click this active input. There's further inputs in this game where after you click this special combo button and things are starting, you can activate these special abilities on the characters as well. The question here is do players really wanna see these active inputs? Do they wanna have more active inputs in the battle? And I would say the answer is, I don't know. After playing this game, because the UX is so awful, the problem is that they put. Special combo meters that you have to activate in the bottom right hand corner of the screen. And you're waiting to time these combos in the perfect way. And your eyes are just focused on this lower right hand part of the screen. You're missing all the beautiful animation and combos that happen in the center. And I know Eric, like you play a ton of fighter games. You need to pay attention to action. It's all about timing. And also you just wanna see cool shit, That's part of getting into a flow state, I would imagine in fighter games is just bang. And I've dropped the game, but I would say I'm still starting to question active inputs. Since the fall of Apex Mobile, that was a game that was a dualt stick shooter on, on mobile. We saw call duty like really blow this open. The mobs have struggled in the last, it's just a complicated story. What players expect when they play mobile games? How much should be an active input and how much should be outside of that? And focus on the meta. Just one more example here. Squad busters, the recent super cell game, brawl Stars, like they've been going in this active input direction. So I'm confused on this question. I'm not quite sure, but it seems like there's a lot of tug and pull right now and the winds are turning towards active inputs. <cite>chris:</cite> <time>15:01</time> Eric, have you played it <cite>eric:</cite> <time>15:03</time> No, I haven't. I was checking, looking at. Was I was like, crunchy roll games. Wait the anime platform. But yeah, it's interesting what you said about cuz street Fighter, the legacy franchise is all about action and paying attention to the characters and watching them fight. Whereas these kind of auto battlers are much more you assemble your five star team or like maximize your stats and just press play and watch'em fight. And it sounds like they tried to go somewhere in the middle which may have landed in an awkward spot. <cite>chris:</cite> <time>15:27</time> It's not a multi-player game, right? You're versing a bot or I mean you're versing it. It reminds me of like the mini games that you get in story-driven games where it's press a, like in God of war, they do this press a at the right time, press y really fast or something like that. <cite>eric:</cite> <time>15:41</time> Those QuickTime events work in God of war cuz it's, there's a cinematic spectacle happening. Like a giant <cite>chris:</cite> <time>15:46</time> the middle of the screen. <cite>eric:</cite> <time>15:47</time> Yeah. And and it gets you to pay attention to this cut scene, whereas this is, every fight I imagine is just another fight. Maybe it's the kind of thing you want to put down while you're pooping or whatever. I dunno. Where, when do you play mobile games? I dunno. <cite>chris:</cite> <time>16:01</time> is a family friendly podcast. <cite>phil:</cite> <time>16:02</time> did you do to me with super auto pets? Man, I was like looking forward to go taking a shit man. Get some super autos in. <cite>chris:</cite> <time>16:08</time> Phil is playing at the dinner table. Don't lie to yourself. Can't put it down. That's an addiction. They call that an addiction, Phil. <cite>phil:</cite> <time>16:14</time> The only theory I would throw out you guys on this one, this is, this has been my as far as I've gotten an explanation. So you see a younger generation of gamers, they're not owning consoles. Mobile is the first platform their own and potentially the only platform their own for gaming. So perhaps there's a skill increase for this new award of players that they've been raised on this. They don't know anything different. If you watch someone play like PUBG Mobile in the west, it's unbelievable. So they're not using auto fire. They're using both fingers to move the character around, and they're tapping to shoot, which is a very complicated series of actions to complete. So on one hand, you could think about, okay, we've got younger players coming into the game. The other thing I've started to think about is that you're playing these games more at home, So you're not having an experience where there's an opportunity cost at home where you might play PC or console games, right? So I'm by my pc, I wanna have a full fledged hd, unbelievable high to 4K experience on Call of Duty. Whereas if I didn't own a pc, I don't have the opportunity cost. And so I'm more likely to have long sessions, and I think long sessions might be able to include more active inputs. Maybe there's something. There's something there. That's all I got for you. <cite>eric:</cite> <time>17:27</time> what you said about younger players who are super adept and dextrous on a mobile device. It's interesting like that a lot of more legacy players like us, probably oh, I don't want to get good at mobile input controls. It feels clunky and awkward, and I know there's a superior experience in air quotes. But the younger players are like, yeah, no, this is a skill and I wanna get super good at this skill. Reminds me a lot about Fortnite when people were, at first when I started getting competitive, a lot of older gamers were like, what? Why is speed building a thing I care about? This seems so stupid. It's like net menu navigation. But a lot of the younger generation who was raised on Minecraft is no. Speed building is absolutely a skill. I can build a house way faster than my friend, and that is a skill I care about, and Fortnite lets me express that. So yeah, it might just be a generational shift as we see going forward that people will care about high dexterity. Shot accuracy on like mobile shooters. <cite>phil:</cite> <time>18:16</time> And to your point, that describes a lot of Roblox experiences. It's a lot of duals stick inputs on a touchscreen, A lot of dex. <cite>chris:</cite> <time>18:23</time> You guys think we're gonna see a movement from console based games to mobile games? The way we saw, and this was pretty quick but, movement from arcade, big giant physical games to like personal console games. Cuz I'm terrified of that. I don't want my console game to be archaic in 20 years. I wanna be able to always have my controller, <cite>eric:</cite> <time>18:44</time> Nothing lasts forever. Chris. <cite>chris:</cite> <time>18:47</time> mouse and keyboard's been around for a while. <cite>phil:</cite> <time>18:51</time> So I have some screwed up views on this. So I go back to Fukiyama and Samuel Huntington, if you remember those two leading political theorists. So Fukiyama wrote the end of history and a Last Man, which basically argued that liberal democracy was the stop of political development. Like we figured it out, like this is the paradigm, this is the meta that we're gonna have forever. And you have Samuel Huntington on the other side predicting that there's gonna be a battle between the east and the west. And really what we're heading towards is further and further divergence along that East West split. And so what do you do with mobile and hd? Is this the end of history? Or, is there gonna be a singularity where they combined or is there gonna be this clash of civilizations where they keep going in separate paradigms? Everything I I've been seeing and reading suggests singularity that we're heading towards a unified future. And the reason I would suggest that is, first of all, you have gen. Which is a dual SKU game. Like this to me, is the ultimate representation of singularity. Like this would be a validation of the prediction is that if you got more dual SKU games, so games that you can pick up and play on mobile and then you can come back to your computer and you can pick up perfectly describes GenOn Impact perfectly describes Fortnite for the time that was available. We haven't seen a lot else a lot more in this category, but, other than that, like I, I know I, I see Singularity, man, I don't think they're dive. <cite>chris:</cite> <time>20:10</time> It's a very specific game though that works across multiple devices. So that's where I would push back. I agree. There are certainly amazing. The mo lip, literally two of the most successful video games of all time have figured this out. And that's not that's not, that's. That's a selection bias, right? Like these things are ridiculously successful because they are cross-platform, because they were the types of games that could be played on multiple devices or, two different, completely different devices. Now does that mean the only way I see this, the only way I see this kind of singularity happening is if in the long run for firms, it becomes profitable to do to focus on, this they're gonna start focusing design such that it satisfies this qualification that it must be, esque or, both mobile and console. because Ultimately the customer leads the firm. So if that is what the customer wants, as unfortunate as it would be, I could see this happening, but I, deep down hope and don't want it to be the case. <cite>phil:</cite> <time>21:06</time> Would you ever consider playing Hogwarts on mobile streaming via game pass? Cuz that's another piece of evidence here, is that you can stream to your phone hd. <cite>chris:</cite> <time>21:14</time> Yeah. I hate playing on my phone, but I think that's because I'm like a millennial who's oh, I don't need my phone. I can live without it. Like when my iPhone tells me that my usage was up 15% this week, I feel really guilty. I feel bad inside. So I purposefully don't take meetings on my phone or do like business stuff on my phone because then my, I'll run my hours up and then I, I'm not a good example. I think I was listening to a podcast fill, you recommended sharp Tech, and they're on this touch grass movement thing where they're it's important to go outside. It's important to to be with people physically. I'm in that curmudgeony, phase of my life and maybe that's where I'll be for the rest of my life. But no, I would never play I do not like playing games on my phone unless I'm stuck on a plane, and then usually it's a puzzle game. <cite>eric:</cite> <time>22:02</time> I think of the, this from like an accessibility standpoint where if you ever talk to someone who's like disabled, they have one arm or they're like partially blind or have others, they'll figure out an input scheme that works for them. There's famously a Cs Go streamer named Handsy who has no hands. And so he plays with his feet and he is good. He's like pretty solid at it. But the point being that like, I think input interfaces are a thing that people will figure out what works for them. And if it's a game where it's not as sensitive to it, like GenOn impact, it works totally fine. I think the only place it really starts to fall apart is if either the input is just really bad, which I think most devices can be made to work decently. Or if it's a competitive game and there's a distinct advantage, If you're, PC versus console shooters. If the console has Amos, it might be better if the console has no Ammos, Madison keyboard is way better. That sort of thing. But by and large, I think interfaces can adapt and frankly, people are there for the game experience. And if I have to use a touchscreen to make Harry Potter run around and cast magic spells, that's what I'll do. <cite>phil:</cite> <time>22:59</time> The, to your point, do you remember when cross play was coming out between consoles and pc? It felt like we'd never hear the end of traditional gamers. When I say traditional gamers, I mean us going back and arguing the mouse keyboard as console. It'll never work, and yet here we are. Cross play is an expected feature, not one that has any sort of resistance. Everyone just got used to the new paradigm very quickly. All those concerns just washed away. There was so much hypey hype behind them, and now they're just, <cite>eric:</cite> <time>23:28</time> and at the top level of competitive play, people pick one or the other, like all the top Fortnite players play in pc. But you can have a great experience on mobile and it's fine. Yeah. <cite>chris:</cite> <time>23:37</time> I was gonna say the average player is not a professional. It's and with matchmaking the way it is, you're probably not I don't know this for a fact, but I would assume with matchmaking you're not in a perfectly 50 50 distributed, like mouse and keyboard versus controllers. I'd assume you're typically with your your input group. Just because, if there is some sort of natural disadvantage for playing on controller. There's always gonna be those guys who love the old school arcade games and they're just gonna, they're gonna keep playing those, they're gonna be old and people are gonna stop supporting them. Whatever the new paradigm is we'll move that direction. I just hope it involves a controller <cite>eric:</cite> <time>24:10</time> I just wanna point out, nobody mentioned motion controls this whole discussion. <cite>phil:</cite> <time>24:15</time> Rest in peace man. Rest in peace. Vr it's not a, it's not a good time for them. <cite>chris:</cite> <time>24:19</time> I am convinced that if I wanna move around I've said this to my friends before, if I wanna move around, I'll go outside or I'll do something else. I'm not interested in looking at this flat 2D space and also moving around like it's combining 2, 2, 2 things that are in opposition with one another. That's why I don't think I don't think Motion ever really caught on, it's because people wanna play video games from the comfort of a seat. Typically I try to stand when I'm playing video games because I know it's like better for me, but I always end up sitting down cuz that's the best way to play, on this two dimensional space. I just think it was like trying to combine, it was like watching TV while on a bike, driving down the street. Like it just doesn't really the two activities don't mix very well. Video games are a substitute for leisure, like a sitting leisure activity, like watching tv. I think we've talked about that on this cast. That's why I don't think it ever really took off. <cite>phil:</cite> <time>25:12</time> I would go back to our conversation about like mobile and HD and this whole singularity thing. It, to me, it really comes down to like how you experience a session and where you can experience a session and just the opportunity costs that come with all of that. So emotion control. We had this on phones for a while, If you remember, super Monkey Ball was like one of the launch titles, I think for the app store, the iPhone. Remember you used your phone in the gyroscope feature and you could use your phone to rotate, and the monkey would also rotate. And we saw some recent games experiment with this where you would use the phone to rotate it and the car would turn left and right. And those are all evaporated? They're all gone. And I would go back to how you experienced mobile games. Is usually I've, one of the great explanations I've heard is it fills voids in your life. the moments of like nothingness, when you think about being on a subway, you have very low opportunity costs. Why not log in and play a mobile game or you're waiting in the doctor's offices. A lot of these voids where you have low opportunity costs and mobile has figured out how to design themselves into that institution. So there's a lot of very quick sessions that you can have at mobile. So gonna clash clans, collect your resources. It's a very quick session and again, there's no PVP pressure. Going back to that thing we were talking about earlier. When you're having a long session, you can sit down and commit three minutes to PVP match ppv. You can also choose your session time, There's no downside to just clicking the home button if doctor calls your name, God forbid, after 15 minutes rather than three hours, you control. There's so much institutional set. It's not. It's not a medium that builds around how you're already experiencing your life. It demands something out of you. And not only that, your physical setup in your house has to be different. To accommodate this, you have to have room in your living room to pull this off, and that to me is then the barrier. So I have this Oculus that's just, I friend alone. It to me just sitting there and part of the reason is that it has to be plugged in. So that advancement where you could have it wireless seemed huge to me. But again, it comes down to how does this device fit into my life and how do I have a session with it that isn't a pain in the ass. <cite>chris:</cite> <time>27:14</time> Yeah, if you think about like mobile, 6 billion people on earth have access to a mobile maybe lower than that less than that. How many people have access to a computer? Half that, probably less than half that. How many people have access to a space big enough to accom, like you're keep you keep trimming down the population to this small group. And then you're, you add onto that, the fact that this is one of the most expensive technologies to develop compared to like a mobile game or something like that. I just, th I think that the business model doesn't make sense. The if it were as if it were as ubiquitous as something like a mobile app, then maybe it would be a worthwhile venture. But I think because it's so expensive to develop and because the clientele is is such a small group of people, I just don't think it makes sense. Not right now. <cite>phil:</cite> <time>27:55</time> Do you have a motion control? Eric, do you have something of that? <cite>eric:</cite> <time>27:56</time> I have an Oculus. Don't really use it much. I know we've basically been talking about VR this whole time, but one thing I want to throw out there where motion controls actually have sneakily become very successful is gyro aiming. On switch games. So the gyroscopic gaming actually is a lot easier than twin stick gaming. For, especially for precision and as evidence, the top platoon players all use gyro, aim and breath of the wild speed runners all use gyro, aim to shoot their arrows. And this totally went under the radar cuz you know who follows the platoon competitive scene. But yeah, no, the nobody uses twin stick there. They're like, no Jiro aim is superior. Just learn how to use it. It's way faster, you get way more access to more buttons. and you can use it while sitting on your couch and you don't need a whole room to use it, to both of your points. <cite>phil:</cite> <time>28:35</time> No one else is gonna tell you about this platoon competitive scene. No other podcast does. <cite>eric:</cite> <time>28:40</time> Yeah, I know all the super niche underground competitive games. <cite>chris:</cite> <time>28:43</time> I know if Phil once said that I play indie games, I think Eric gets that gets that accolade <cite>eric:</cite> <time>28:51</time> I like the weird stuff. What can I say? <cite>phil:</cite> <time>28:52</time> Eric's on the weird stuff. Chris, you're into like the New York Times play stuff. I could just see a page about like the indie games you're playing and I like mainstream shit. Like I wanna eat what the troops are eating, don't avert your eyes. This is what they're consuming is my motto. Speaking of mainstream, Eric, I think you wanted to talk about Csco today and a great article that you published on Medium <cite>eric:</cite> <time>29:12</time> Cool. Yeah. Glad you liked it. so yeah. Way back in 2015, I was, taking a look at cs, go. I was playing a little bit and paying attention to the markets and I was like, oh, hey, these prices basically move. as we would predict based on economic phenomena. That's the gist of the article, but I guess for the listeners, just a real quick rundown on the csco economy. So Csco competitive shooter all the stuff you buy in game is cosmetics. They're gun skins. Like your AK 47 now is like this graffiti paint job on it. And this is valuable because the gun is super in your face when you're playing. And also when you die, someone else can pick up your gun and they say, oh, Johnny had this super expensive skin, I want it now too. Yeah. The way the skins are unlocked is through cases which are basically loot boxes, or you can think of'em as t c g card packs, whether each case there's a distribution of its contents of common, uncommon, rare mythic, and there's like essentially holographic versions of each. And yeah, when you open one up, you don't know what's in it. It costs a flat$2 and 50 cents to. To buy a key to open the case. But the cases themselves also can cost between 2 cents and$2. But yeah, because it's a competitive shooter, different guns of different skins, we naturally see that as guns become more or less popular, their corresponding skins become more or less popular. And, the most dramatic effects is when, they make a game balance change. So there's two different counterterrorist rifles, the M four A one s and the M four A four. I'm just gonna call'em the M four and the silenced M four. And yeah, back in 2015 they made a severe Nerf to the silenced gun and, buff to the uns silenced one. And you almost immediately, you saw like a step function increase in the desirability for the B recently buffed gun. it makes perfect sense. You nerf a gun, you buff another, their prices move accordingly. One interesting thing to note there was that the price jump for the buffed gun was like, like a step function, just like immediately went up, whereas the price declined for the Nerf gun was much slower. And I think this speaks to these inventory inertia effects where the people who owned the old gun, you know the Nerf. they're like, oh maybe they're not immediate to react on selling it. They're like, they don't realize after a couple weeks they're like, oh, actually the price went down. I should probably sell now. Whereas on the buff gun the available supply to buy is whatever's just on the market and it just jumps up immediately. But yeah, interesting to see like asymmetric effects there. But yeah, similarly when a new case comes out and there's more guns that come out, let's say a new AK 47 gun just came out all the other AK 47 guns get a little bit devalued cuz of substitution effects, right? Some people want the new gun and to get the new gun, there's less demand for the old guns. People might sell the old guns to get the new guns. Especially in this more liquid marketplace. And the, I'm sure anyone who's run a storefront ever has seen these kinds of substitution effects. it's really fascinating to see what it's like when there's a live marketplace with floating prices. Cuz most of the time you just see it in quantity. Sold. With fixed prices, if you're a McDonald's or League of Legends or whatever. Yeah. And then I think one particularly interesting thing, and I wanna delve a bit more into this cuz play to earn is that when I mentioned these cases get released a new set of skins comes out and the way they get distributed is players will earn cases as they play. And somebody can buy a case and buy a key for$2 and 50 cents and combine them to unlock the chess. And initially, like normally these cases are worthless cuz like you, you get them for free while playing, but when they're new they can sell for a dollar or two. And one interesting thing is that this essentially is this, almost like a universal basic income where like everyone playing the game all of a sudden starts earning, a couple dollars when they play. And this creates this, this stimulus Where. All the gun skins that are under$2 suddenly see a surge of demand because a bunch of players who previously had$0 balances now have$2 with which they can buy a skin. So yeah, it speaks to the closed nature of the economy where a lot of players will play and not refuse to deposit or withdraw any money. Like they refuse to put$2 into the game, but once they have$2 into the game, they're not withdrawing the$2 to say I don't want any money in this game. They're just like, no, let me keep it in the system. And there's some friction there and whenever you have these income effects it most, there's a gigantic swath of players with zero balances that are affected the most. <cite>chris:</cite> <time>33:12</time> much fee does c does valve extract from the Csco skins marketplace? <cite>eric:</cite> <time>33:17</time> There's a flat and a percentage fee, I wanna say 2 cents plus 5%, but I could be wrong about those specific <cite>chris:</cite> <time>33:24</time> Interesting. I know that there's every single one of these that is or has to be purchased originally for$2 and 50 cents, right? Like from the store. And then you open it up just like a card pack. Do you think if they were to have those drop. And then increase the fee or something like that. They could make up for that lost revenue if they eradicate the original purchase. Basically do more of the web three thing where or, and actually Phil's gonna talk about limit break later, but do this thing where, these things are essentially given away for free. Maybe it's because somebody put in some effort and they earned it through a quest or something. And then all of the profit is extract, or the revenue is extracted at the point of sale as or the, depending on the volume the trade volume in the marketplace. Or do you think that their monetization strategy relies on this initial sale of the loot box for$2 and 50 cents? <cite>eric:</cite> <time>34:17</time> My guess is the majority of the revenue comes read that initial open. Because I know that for big ticket purchases like these thousand dollars knives people usually actually go through secondary markets because you can if I trade for a thousand dollars in-game cash valve takes a percentage cut, but if I trade for a thousand dollars worth of in-game assets, like people usually use keys as their sort of their unit of account then there's no fee if it's just trading assets. And yeah, the people dodge the store tax that way, the same way we see people dodging a royalty tax fees on, N F T marketplaces. <cite>chris:</cite> <time>34:48</time> I really like that you pointed out that a lot of this money stays inside the market. Like people aren't taking that$2, windfall and leaving the market. They're taking in, they're reinvesting it in the digital assets in that marketplace. Do you think that's I almost imagine, Keeping the player base constant. I always like to picture like this bundle of cash that's just used in the economy, whether it's a web three game or like a game like Cs. Cs go, where you've got all this cash that's just bundled up and it's, trading around, it's transacting around. And if you're relying on these transactional this revenue that, that comes from transactions your goal is to maximize the num, maximize the the volume, the number of transactions that are happening in this marketplace. Even if there's only, a thousand dollars in your marketplace. If you've got a million transactions a day and you're extracting 1% every single time, you're making quite a bit of money. You don't necessarily need a big ball bundle. You just need people to trade it back and forth. Do you think that. is more, this is much more just a finger in the air, but do you think that's a valid monetization strategy? And it goes back to my point earlier can you just eliminate the initial fee and just have this marketplace that charges a 5% fee and nobody ever really needs to earn? If you think about pay to earn, like nobody needs to like, extract any money and get like a$10 weekly wage or whatever it might be. But the company still makes money because there's an active marketplace. <cite>eric:</cite> <time>36:07</time> My general take on secondary markets is that I think that secondary trading revenue is a lot smaller than people realize. If you look at Dota especially, has gone very heavily back towards primary sales. They the same kind of model as CS go, but they started doing, new Dota skins with three month lockups, where for three months you cannot sell this on the secondary market, very long blocks like that. And it's clear most of their money is going through their battle pass like com, formally called Compendium system which is basically an ahart purchase for an individual user, not something on the marketplace. So you can see they've pivoted very heavily back towards primary sales. And my guess is it's similar for Csco. I've thought a little bit about like when is it viable to have a secondary market supported economy? And where does it align the incentives of the game developer and the business? The problem with primary revenue focused sales is you want constant capital depreciation. You constantly want to take the old skins and devalue them so that you can sell new skins that are better, hotter, sexier, more colorful whatever, more power creep or scope group. And if your business model is entirely focused on secondary scales sales, and you can handcuff your health self some way maybe you make a, for example, a card game where rather than power creeping the cards, you're focused on rebalancing the meta and shuffling things around to stimulate trading activity, Your goal is not necessarily to make new stuff that's stronger, it's to change the value of the things people hold so that they want to trade. And that might be a card game where they're constantly doing balance changes and constantly shuffling assets around and taking secondary market fees on the side. So I, I think that's one angle I can see a secondary market focused. Economy working. But ultimately I think it really, when games focused on the secondary market, it's just a game mechanic for players. It's like something that adds to the game experience, like trading in an M M O and it's not really meant to be a revenue center. It's an engagement center. Yeah. <cite>phil:</cite> <time>37:59</time> I think the other thing here is that even just the expectation of a secondary marketplace means that the primary sales will increase up until that secondary marketplace price equals the initial price, So if I know an item's gonna sell for a hundred dollars on the secondary marketplace and it's$10 from the direct store, I'm gonna keep buying that until the supply increases hit a hundred dollars. And so I think there's also initial forward pressure. So even with that three month lockup, there's still an expectation that after three months you're going to be able to sell that. Good. So I would imagine that valve sells more initial goods as a function of this. Like even if you don't. Even if you have zero marketplace fee, adding in a secondary marketplace should increase your secondary scales as long as a secondary marketplace values the goods higher than you're charging them initially. <cite>chris:</cite> <time>38:50</time> That was one of my favorite things about Eric's article. He mentions this like explosive nature. Whenever there's a change, there's this. In increase in volume, everything starts to move around. But it's short-lived and I think that's the key. That's, to me, that's the key to all of this. And it, it gets at what Eric was talking about with respect to you can only with a secondary market unless you want to dig yourself into a corner by if you don't, if you don't have this, this power creep or this scope creep, you defeat the purpose of the secondary market. So you either have these primary sales that are really strong and then there's this secondary market that echoes those, but you still have this market that's just getting, or this economy that's just keeps getting more and more ridiculous. Or you just have this sh reshuffle because people are substitute because the meta changes and all of a sudden one gun is better than the other because maybe it's because of meta or maybe it's because of a rebalance. <cite>phil:</cite> <time>39:42</time> I'd like to poke a little bit more at these price increases that you've been talking about in your article, Eric, so it makes sense to me. Completely aligned with what I've seen that players wanna equip skins to the things that have the highest win probability. And so if we change what has the highest win probability, they'll buy new skins and they'll wanna deck out or reach like we could imagine the max cosmetic level for whatever that they're utilizing. What I struggle to understand, and this will be a function of our conversation on limit break. Is players understanding what isn't balanced and having an idea of how balancers are going to fix that or how game designers are gonna balance that. Isn't there like an efficient market hypothesis here where players would expect the balance change and they could work backwards to understand which cosmetic will have more demand and buy those up for price as well? Shouldn't the future expectation of a balance change affect price now rather than when the balance change? <cite>eric:</cite> <time>40:37</time> There's probably some of that. Or if a gun is ludicrously overpowered, people are gonna expect a Nerf. But it's also, probabilistic, So again, in the M four S case people probably were like, Hey the sounds gun. 99% of pro players are using it. They're probably gonna Nerf it, it's, but some people might say No, nobody ever nerfs Cs. This was back in the early days where they made very few changes. Nobody nerves see us go. So you might, you might have 40% of people who believe no change is coming, 60% of people who do. And so the expected value is baked in. And then when the change actually hits, it's the subsequent the a X anti state is realized and the price will move. So yeah, even if the market is efficient, you'll still see price shocks. Also, like the person making those decisions is some game designer at Val, It's a lot less predictable than like the Federal Reserve Bank, where there's a much stronger track record of and consistency of behavior. <cite>phil:</cite> <time>41:23</time> Would you say though, that there would, there could be a role for someone to try to understand how design changes are made? Isn't that the fundamental model here that would allow you to make money? And we mean that in web three too, right? If Axi gets rebalanced, I could work backwards and try to figure out how are they thinking about balance? What is their goal? Because you would imagine that even if they don't intend, we could create a model for game designers and what they're balancing towards, even if they don't explicitly have that model in their. <cite>eric:</cite> <time>41:51</time> I actually, I think it's fascinating that you mentioned that and Axi, there were people doing this where certain axi groups were very popular and people were predicting certain things would get nerfed and trading on it. It's like a futures market, of predicting what the new policy change will be right before the announcement happens. I think if the economy gets rich enough and sophisticated enough and there's enough profit in it, then people will start. <cite>chris:</cite> <time>42:11</time> Control for I guess scarcity or power level of the card. And then you can, or whatever the asset is, and then you can basically like you can infer what the power level of the, or how good something is in a meta con basically buy its price. So you condition on how good it is in technical terms or I guess like in absolute value. And you can figure out the meta value by looking at the price after you've controlled for that. <cite>phil:</cite> <time>42:33</time> So this is where I wanted to challenge you, Eric, and not even challenge the article or anything, but how do I as a designer with the. Of Web three in the Steam marketplace, how do I use prices as information and make better decisions as a designer around that? So to give you a small example and going back to Csco and to what you just mentioned, Chris, they used to have this model where the in-game guns that you buy during Csco, so if you're unfamiliar going to Csco it's two teams versus one another. When you do really well in the game, you earn in-game cash and for the next round you'll be able to buy more and more powerful equipment. But that equipment, of course, only lasts within the context of the round. And so what they did at Valve far long ago was change the prices of those guns based on a dynamic system. So if everyone was choosing like a Desert Eagle, it might suggest that the Desert Eagle is overpowered. We're gonna increase the price of the desert equal using that in-game cash, and we'll have this equi. That never really took off and has never existed in any other game, but even at a broader level how do I think about prices? How do I think about price as a designer? How do I get, how do I use this information to better games? <cite>eric:</cite> <time>43:41</time> I think in general, dynamic pricing in the game elements like you were describing, like the prices of guns. So would, so the prices of guns are priced in game like in round currency where you earn dollars by killing people and you lose dollars if you get killed. So that stuff, isn't really hard currency. But that stuff changing is really jarring and disruptive to the players cuz they're like, oh, they're planning around it. They're like, I'm gonna earn,$5,000 next round and that's enough to buy an AK and armor and a couple grenades. And oh wait, the AK price is$50 more than I thought and I don't have enough for my loadout. So price predictability is really important for that forward planning strategic element of the game. And I think that's part of why it's so disruptive. But if you're gonna introduce dynamic prices into your game like that, you want it in an area where that volatility is expected or where like unit discrete effects are less important, right? I don't need one AK 42nd, I can buy 0.93 AK 47 s and that would've been fine. yeah, in general. So back to the question of like how do you design better games this way? Honestly I'm still noodling on it. I think like where is this kind of supply constrained market economy? Where does it actually make games better? I'm still, I don't have super strong examples outside of MMOs. Cuz you could replace CS Go's whole gun system with just an Eckhart storefront and it probably would work fine, That's what Valorian did. But I think it is interesting to think of dynamic supply as a tool and dynamic prices. So a lot of, for example, N F T collections try to launch and they wanna price at a level where they'll sell out quickly but not priced so low that they're not capturing enough profit. And that's a very tricky pricing decision cuz you don't know ex a priori the demand curves of people. But if you have essentially a dynamic pricing function, which is. what these cases function like, If the expected value of the skins in the case is above two 50, it keeps getting opened until the expected value drops to two 50. And so if the skins in that case happen to be very desirable, Like people just keep opening cases until the price drops I guess that functions just like a fixed price now that I say it out loud. Yeah. Okay. I take it back But I think there's interest more interesting things than just I'm gonna guess at what the price is and if I sell out, I'm screwed. If I put it too low, I lose, leave money on the table. If I put it too high, I sell out I, I don't sell out and everyone makes fun of me. Like they made fun of those like luxury consumer brands that failed to sell out. I think there's more pricing tools. <cite>chris:</cite> <time>45:56</time> What's the advantage of having this dynamic pricing for a gameplay mechanism that confuses me. why shouldn't I just get access to the gun that I want to use in the game that I want to play? unless I'm misinterpreting your question, Phil, are you saying how does a game designer use prices, which are just like a refl, a reflection of the equilibrium, or the equilibrium for players' preferences. Price go up, people want the item more. I can adjust the game design to, to account for that. It. Doesn't make sense to me. I think we were talking about this a couple of episodes ago, maybe last episode. Just change the gun. Don't change the price. I, I never really understood why you would want to try to use prices as a game designer to influence the equilibria. why not just change the gun? You have the power to change the gun. Oh, it was the land value tax conversation that we were having. Like that's really cool. It's a cool mechanism that you've come up with to, to price these assets properly, but you have the ability to multiply them, divide them change the quality characteristics of the item. Why do we need these fancy dynamic price models, for gameplay purposes as a gameplay mechanic itself. Playing the market in Wow. Or roone scape that I get that's fun. People like to, play that economic game. But to me it makes less sense as like a gameplay mechanic. This is going off, this doesn't really have to do with the csco skins market because to me that's more on the wow side, where it's like this non pecuniary like cool asset that I can trade back and forth and speculate on a price. <cite>phil:</cite> <time>47:26</time> I think they're, I can think of three reasons for marketplaces and why we find them valuable, and I think we've been mentioning them on this past. So to me, number one is monetization. And I think that's the reality that most web three companies, Are struggl, I wouldn't say struggling to get comfortable with. There's this whole PR front you have to put on if you're web three company about power to the people. But ultimately this is to me is about making that making price increase. And we have an auction, you can make price increase higher than you might otherwise do. And as we've been mentioning, even if you're selling directly, you're still gonna get those tailwinds in that initial purchase price. Cause there's a future expectation. I can put this on the marketplace. So I think monetization to me is very interesting when we come to marketplace use cases. Eric has been very big on this engagement factor and how it's really compelling. And we can look at sore, which is a fantasy sport. We can look at FIFA Ultimate team, which I've written about. You have 60% of players who play fifa Ultimate team. Even higher than that, using the mobile app, despite the fact that it's a PC game, what can you do on the mobile app? The only thing you can do is buy and sell players. That seems to be really compelling. Football manager, which is the whole game. So your point, Chris, you've got mms. I think there's this third thing I've been trying to figure out, which is I'm a designer on Magic, the Gathering. I'm a designer on God's Unchained, another card game. I'm getting price information on my dashboards for each of these cards. And there's so many things that get wrapped into that price signal. So for instance, supply, right? It's not just demand, it's, okay, what did I set the card drop rate in the pack ad? Ok, how many of these was I giving away in a tournament? And so if I'm gonna get this report of these prices, how could I use this information to make better games? Under what situations would I see a price movements and try to make a decision? And what would that decision be? Could I not make any decision? So I wouldn't even go to the dynamic stuff. That's one step. One step. That's a radical step. But, even just like I'm a game economist, what do I do with marketplace prices? They're interesting. It's interesting that they move, but I also don't think, we're not on a safari we aren't looking oh, look at the lion. How beautiful is that? Let's examine how the lion eats the gazelle. I want to know how I use that information to make a better jungle or, planes. And I, that's <cite>chris:</cite> <time>49:35</time> it's like I had mentioned earlier, the metagame it's one of these, there, there is certainly a model you can write that is basically, prices a proxy for a lot of different things as long as you have the right controls, on the right hand side if you're running, a regression or something like that. I, I, I could definitely see, I could definitely see that I could get on board with your your, <cite>phil:</cite> <time>49:55</time> It's the Norma a Pos, it's the norma. A positive distinction, We can observe what is, and I think we're really good at that. Like we've been doing a lot of that on this cast. We're in designer shoes, This is our long running series. We're economists, we're also game economists. We are expected to act. We have to build these institutions, we have to make changes. We can't just sit there with binoculars. So I've been struggling with, okay, I see these price movements, is there enough for me to really do anything with this inform. <cite>eric:</cite> <time>50:19</time> I think that's a great distinction. That's the difference between the designer versus the researcher. And yeah, honestly, my main takeaway is like these price effects do exist. So when Youner or Buff, anticipate this price effect will happen. And if it's a big enough effect where your players might be financially ruined cause they put a thousand dollars into AK 47 skins maybe there's ways to soften the information. But honestly that's not super impactful from a game design perspective. <cite>phil:</cite> <time>50:43</time> I think perhaps like another area of research is correlating these prices with other notions of good and bad. What happens when a particular price of a product increases? Could we correlate that with a lot of red complaints? Okay. Maybe there's something about this good that we need to be careful of. Maybe it's a staple. Good. And when staple goods rise in price, people get really pissed off. Like they notice inflation. So if we were to bring in kinda more macro concepts, you have this basket of goods, we have this idea of inflation expectations. Can we think about what's a staple good? What's a luxury good? And then how we think about prices, each of those, and tracking price movements and what makes the community react. <cite>chris:</cite> <time>51:21</time> And you don't even need to go to the macro. You can stay within you can look at real estate economics, literature, hedonic price literature where you're basically looking at a huge list of characteristics and you're trying to study how those characteristics, impact the price. And I've actually seen hedonic pricing referenced a few times in the last six months in the Web three community, which I'm actually really excited about because it means, means their head is in the right place. But this is something that, a research question I've been interested in for the last year and a half or two. Is like these things have distinct characteristics and distinct price movement now. Going back to this idea of price as a proxy, if you need to make sure that you have the right model. So I'm not sure, and this is maybe more on the technical side of the discussion, but I'm not sure you can just take a real estate economic hedonic price regression and slap it in onto a video game in, into the video game context. Because if you're controlling for the wrong things, you actually might be not measuring price, but you might be measuring utility price or utility value in a game or meta price or something like that. So it's a really interesting question. Sup obviously completely under understudied. But yeah, I think it'd be really interesting to run, some models using blockchain game data and using like a more traditional game like Csco and studying how those prices are impacted by their, how the characteristics change price or how change price changes depending on the characteristics. <cite>phil:</cite> <time>52:42</time> Speaking of changing price Limit break has released a new ad. This was an ad that ran during the Super Bowl. It was a much hyped ad, a very small run length. I think it was around 15 seconds. And to give you a little bit more context, limit Break is a company from Gabe who formally is of machine Zone fame. If you remember back, they launched a game called Game of War, which was a four x game on mobile. This had Kate Upton in those famous ads, they also launched another reskin of this that had Arnold Schwarzenegger as their main character called Mobile Strike. And then they. A last rah, which was launching a Final fantasy game, which was also a reskin. So they just took those core four x mechanics and re-skin them into a new platform. Eventually the company sold, to app Levin. At a down round, almost, I believe it was 500 million, Gabe had been mired in a little bit of controversy during his running of the company. He was going in more of a tech direction. One of the key innovations coming outta machine Zone was this live language translation, which was big for four X games. So you're put into a Chardon, a four x game with. 10,000 generally other players, there's a lot of communication. There's a lot of C U problems. When you have 10,000 players, you need to make sure that all of them can work together and what's one of the most important things in working together, it's communication. So they made this live language translation tool in chat, which was incredible. So you're typing in Spanish player who's in the United States, who speaks English, would get bad message in English and vice versa. Though they had all these really key technical innovations, they ended up expanding this and almost spinning out part of this. They worked with an New Zealand bus company to do realtime tracking, but ultimately all these distractions didn't really get end up going anywhere. They didn't generate a lot of revenue. They were burnings VC cash at once. At one time, they were valued at over a billion. So this was quite the fall from Grace exiting at 500 million. So this is Gabe's second attempt at doing something I think very interesting. He's very been, he's been very outspoken about marketing. If you remember back to those early free to play days, machine zone was paying, 30,$50 in install, which was unheard of at the time. They were dominating all app install ads. They had a huge marketing machine. Gabe was giving interviews about user acquisition. They had built this huge infrastructure. And so when you place in context, I think it makes sense that he's been doing a lot of marketing. And of course was as he's announced this company, he's been getting a lot of press you know from it as well. He's been doing a press tour, about the Super Bowl ad, and he has a large number of Twitter followers. He's almost become a meme. The question is, did this make sense to run the Super Bowl ad? So it's about 6.5, I think, million dollars to run the ad limit break has raised 200 million, which is breathtaking to have a Series A or union. There's almost a seeded round of. 200 million. We still don't know about the game they're making. All they've released so far is these NFTs called Digital dku, if I'm pronouncing that correctly. Dia, one of them. <cite>chris:</cite> <time>55:48</time> did you die? Gk? <cite>phil:</cite> <time>55:50</time> Digi dku. That is it. Thank you so much, Chris. So they've released these NFTs, they're just pictures right now. We don't really know anything about the game. And so they just had this ad. It was 15 seconds. It was a small animation of the characters and then a QR code that you would be able to follow with your phone. And if you went to this link, you might be able to mint an nft, a digital Dia and add it to your collection. But unfortunately, there's only 10,000 of these NFTs. So most times when you are, and they were sold out within a nanosecond of people minting these and seeing the Super Bowl ads. So if you were to follow the link, it would end up at Gabe's. That is how, that was the end of their user acquisition funnel. So again, the question here is, did it make sense to run the Super Bowl ad for 6.5 million? Did they generate more than 6.5 million in lifetime revenue, net present lifetime revenue? <cite>chris:</cite> <time>56:39</time> It was a super interesting divergence from the style of ad in their previous their previous ads were like very, live action kind of getting the most famous person they could possibly find. And noticed he cites those ads for a long, he's oh, they, these have been remembered forever. It's because you had Arnold Schweitzer and Kate Upton no offense, but the ad that they ran at the last Super Bowl. I had to look it up cuz I was like, I don't remember that. So I think in terms of the stickiness, it's very interesting. I feel like it will be remembered as that thing that, that one crazy dude did at a party that you weren't really sure why. Who is this guy who did, who invited him, but you remember it. You don't remember his name or his face. You just remember that it was crazy. As opposed to oh, I remember that cool, like mobile company. Mobile, game company getting Kate Upton on a on, on the big screen. <cite>eric:</cite> <time>57:31</time> It was very similar to the Coinbase ad last year where Coinbase threw up a QR code and then the site it links to, I don't remember something went wrong. I don't know exactly when it went wrong, but it basically just ultimately they paid for a Super Bowl ad to send a whole bunch of people to the Coinbase website. <cite>chris:</cite> <time>57:47</time> Yeah. And I, he's got, what, 10 million followers now, or some, or 1.25 million followers or something like, <cite>phil:</cite> <time>57:54</time> so let's talk about that, So if we were to examine whether or not this Super Bowl ad generated at least 6.5 million in net present revenue or more, what would be the first ways we'd look at this? And I think one of them would be looking at the market floating prices for digital diets. Chris, I think you took a quick look at this. Did we see any changes in. <cite>chris:</cite> <time>58:14</time> I did a very brief glance. I saw a, and I don't know how old the data was, I was looking on flip side to try and find history of transactions of these things. Cuz my understanding is they should be on the Ethereum blockchain. But thus far haven't found anything. I've only been looking for a couple of minutes don't take my word on that, but I saw a floor price of 3 77 and a high of 700 and something. I have no idea how old those numbers are though at this point. Yeah, price sword is high as$700, but this article is from <cite>eric:</cite> <time>58:44</time> Where do you go for your NFT analytics? <cite>phil:</cite> <time>58:47</time> So Dune. Dune is usually what pops up in Google, but I don't trust the numbers. I've seen a lot of, on a lot of. <cite>eric:</cite> <time>58:54</time> I'm looking at open sea, and it looks like the press went down after the Super Bowl. <cite>phil:</cite> <time>59:00</time> That, that makes sense to me. I think this goes, tying all the things we've been talking about today together, I think part of it comes down to like rational expectations. So I would wonder if when they initially announced the, I would imagine it's an exogenous shock, you couldn't really predict this. And when that exogenous shock happened, that price increased. And after there was a realization of what it was and the lack of hype it drove, or the lack of activity it drove. Expectations were adjusted downward. Kinda like Aian model, they had new information, they just updated their priors. Okay, this is gonna take off. So price it adjust downward. But still you had that elevated price from when they would announce it until when they actually happened. I think the other angle here is that they have royalties. This is something that limit break has been really big on his royalties. Gabe was very frustrated when a lot of these marketplaces were figuring out ways to avoid royalties. It's very hard to enforce in web three. You can trade with another person at a very low price and then use another transaction to actually trade the bulk of the revenue you want to exchange. So there's a lot of ways to get around this, which are rather challenging. And so they've been very frustrated with the inability to enforce royalties and they've been coming up with solutions to this. But again, like one way we can think about a model is, if the royalty is 5%, and I dunno what the actual number is off the top of my head, how much market activity would you need to generate to break even? <cite>chris:</cite> <time>1:00:19</time> So I read 65 million, 65 million because it's a 10% fee. They spent six and a half million on it. <cite>eric:</cite> <time>1:00:25</time> The royalty is set at 10%. That's <cite>chris:</cite> <time>1:00:28</time> and from what I can see on open sea, they've got 23,400 eth have been transac total volume. So about 33 million from what I can see on opens sea. But I also noticed that opens sea only. Counts 2021 of these things, and we know there are about 10,000 of them floating out there, so who knows what the real numbers look like. <cite>phil:</cite> <time>1:00:47</time> So they definitely didn't do 65 million in marketplace activity over this period. They definitely haven't recapture that. I would say, let's say we award them even. 1 million in royalty fees. So let's say they generated around 10 million in activity at a 10% royalty rate. So that's a million they've already paid back. So one divided by six, what is that? 12%? They 12%, 12 and percent recoup during the period. I think the other thing that you need to do to evaluate this is see how many people have subscribed to Gabe's Twitter page, So he's grown quite a bit in Twitter followers. Let's say that he's generated an additional 500,000 Twitter followers, which would be an incredibly large number. The other thing you need to do is you need to put a price on what is the lifetime value of having a Twitter follower, which is something I've seen no one try to take a stab at But that to me is adding those two things together. 500,000 Twitter followers, what LTV do you need to give them to cover their remaining amount? Yeah that, that doesn't work out. That math doesn't work out <cite>eric:</cite> <time>1:01:48</time> Yeah. <cite>phil:</cite> <time>1:01:49</time> So you would need these really high bars to make this make sense. <cite>eric:</cite> <time>1:01:52</time> Yeah. We're talking about it, right? Like how much is this worth, you <cite>phil:</cite> <time>1:01:55</time> yeah. So you add all these LTVs together and it still feels like it's hard to figure out what the value of this is. It's interesting cuz Gabe has gone on and talked about how TV is a bad deal, right? TV advertising is a bad deal. And so when you've gone to digital advertising, you can directly observe LTV and you can directly observe the cost that you paid to generate that ltv. And when you're in a world of brand marketing, those two things become disambiguated. And so even if we try to do this hokey paper brand marketing math, There are very few conditions in which I think you win on this, and so I just what is the model that got them to six and a half million dollars? And the other thing here is they don't even need publicity for raising capital. Like they have all the capital they need. <cite>chris:</cite> <time>1:02:39</time> What's really interesting is that they did this in so far in advance of the release of the game. If the game was releasing within a week or it had already come out, I could see this really paying off. I saw he made comments about, oh, a lot of these companies they issue the NFTs, they make you buy the NF t and then they do the rug pole and they don't deliver a game. Yeah, no, he didn't charge people, but he also is still, it's still this I don't think the typical gamer is used to waiting as long as Web three gamers are wa are used to waiting for product know, he delivered this ad. And probably I would assume maybe within a year the game will be available to play. H how does that pay off for the person who he was reaching through the Super Bowl? I just, I don't know. <cite>phil:</cite> <time>1:03:21</time> So I think you mentioned an interesting question, Chris, which is time and place of the spend, is this. More time to spend six and a half million dollars when you're gonna have the maximum return. And generally with marketing campaigns, you wanna put the marketing campaign close to the launch. That's usually when your effective spend is. <cite>chris:</cite> <time>1:03:39</time> Yeah. <cite>phil:</cite> <time>1:03:40</time> The only explanation I can come up with here is that I think limb break is experimenting. And then going back to our idea of being able to cover revenue with marketplace fees alone. When you look at the math of a lot of these marketplaces and the fees that you can generally charge, it's really hard for the math to work out. You have to do an incredible amount of trading volume for this to make sense for you to be able to live on royalties or marketplace fees alone. And so I think maybe the theory here is what are the things that change marketplace activity? So one of the things we've talked about is balance. People wanna use the things that are valuable to them, or what are external factors that can get the speculators going. So maybe this was just an idea of, Hey, we've got 200 million in the bank, we're into marketing. How can marketing affect open prices? How can marketing affect what the price of these digital are? <cite>chris:</cite> <time>1:04:32</time> I think I dis on our first episode, maybe our second episode, I talked about one of the papers in my dissertation and in the theoretical model there for these like Plato earn firms that are using the play to earn monetization strategy. They issue a number of NFTs. They keep some of those NFTs for themselves so they can sell those on the secondary marketplace at market prices. As long as there's sufficient, volume and support for those prices on the secondary market. What's really interesting about Gabe's po, from what I can tell in terms of their monetization strategy, that is their monetization strategy. We're going to withhold some of these NFTs that we've issued in order to sell them ourselves to make money back. I find that really interesting because while it's theoretically it makes the model really easy, that's why we chose that model because we were like, oh, this makes sense. And it's a lot easier. And it can expand to cryptocurrencies very easily. I wonder though, this is gonna be incredible to watch because this is their main monetization strategy. So right now, while it's just gonna be, a little nod in the paper, maybe five, 10 years from now, that's another paper. Hey, look, somebody actually tried this. See how it turned out. I'm really curious because we were talking about in the last, with with Csco article by Eric, like what does that secondary market volume look like? Is it enough to support a company and their entire operation, a 200 a company that's valued at over a billion dollars because they just got 20$200 million worth of funding? I don't know. <cite>phil:</cite> <time>1:06:00</time> and to your point, the amount of dece, so I mean the pro case I give for this is that doing balance changes are very little marginal costs, right? There's generally numbers on a spreadsheet, so I can and see us go. I can say the bullet of an AK 47 does one damage and I'm gonna change that to 0.5 damage. That costs almost nothing to make happen, and yet you can generate all of this activity. out of that outcome. So it seems like on a very small piecemeal, marginal cost, marginal benefit analysis, oh shit, this is a great way for to make money, but to really drive the absolute values you need, the amount of disequilibrium you need to cause is enormous. And I wonder if you are causing that much dis equilibrium. People are gonna retract from the market. So if there's a lot of instability, people don't wanna participate, they don't want$1 to go into a machine and they dunno if it's gonna be$2 or 50 cents afterwards, it just becomes an R money wheel. <cite>chris:</cite> <time>1:06:56</time> Now, I wonder though if their monetization strategy, or sorry, if their strategy with respect to these these prices is really focused on. Marginal changes to the gameplay system or the game system and the impact on prices. I'm not sure they're relying too much on that dynamic. You look at the N F T, and it's like this really cool piece of artwork that ha it's very unique. It has a very specific style. I think they're leaning more into the, this is a really unique, cool piece of, I think they're, I don't wanna, I don't wanna say like the pfp, it feels more like that where it's here's this unique thing that's valuable because it's the only one. Maybe not nec, who, if this game takes off, who knows how much these 10,000 original NFTs are gonna go for? And it looks like only 2000 of them are actually circulating and 8,000 of them are like stuck in some teenager's wallet that they forgot the, the key to I think that's probably more their strategy as opposed to this csco strategy. Let's shift the meta up a little bit and so we can see some, some some guns exchange hands. So more non pcu or more aesthetic than it is like actual functional prices that reflect the utility of the asset. I could be wrong. <cite>eric:</cite> <time>1:08:09</time> Here's a question. It's a little less on the economic side of things, but they did this QR code based advertise. Coinbase did one last year and I don't follow TV advertising, but is this a thing or are are they specifically trying to be edgy? Because I can see the crypto appeal of oh, what is this? It's curious. And if you really wanna get into web three, you gotta go down the rabbit hole, scan day, QR code, make a wallet, blah, blah, blah, blah, blah. But is this actually an effective advertising message? Should they just tell people what the game is and get them excited? <cite>phil:</cite> <time>1:08:38</time> QR advertising is interesting cuz going back to our brand marketing ltv, performance marketing distinction is that you want a direct response. So when I view an ad, I have no direct response for the advertiser. There's a Nielsen box, which is sketchy, which sometimes tracks what people are watching, what they're not watching. But I can't drill that down to an individual user. But if I'm Gabe, we were talking about, one of the things is, okay, I caused this equilibrium. I wanna see if I can make money on generate enough activity and appears that the answer is no. Appears like you can't do this. And the other thing I wanna just mention here is that there is few people who own these NFTs. I was looking at some of the wall holders, we're talking about perhaps less than a thousand people. I dunno that for sure I haven't looked at, but it's, it's under 10,000 people own one of these NFTs. So it's very few number of people that you're trying to target these things. Again, I just go back to number one, use of marketplace is really about appealing to these whales. Very few people are driving a lot of these volumes and I think that's really important to keep in mind. But the other thing that I think you get outta QR based advertising is that you get direct response. So Gabe is gonna know how many people followed that link and to this particular website. And not only that, but you can have more direct response on the website. Bring them through a funnel. So go mint this thing after you click this QR code, it's a lot of active inputs that are tracked and give you more performance metrics. <cite>eric:</cite> <time>1:09:54</time> Yeah, it's interesting that they opted the once they ran outta the mint to send it to his Twitter profile rather than to like a splash page that explains the project. Cuz I guess presumably the better marketing channel is they follow him on Twitter and so the next time he posts update, they see it as opposed to a website they're gonna forget. <cite>chris:</cite> <time>1:10:10</time> Who was he trying to reach? I'm curious who were they trying to reach through this? Because like like a millennial crypto person. he did a really good job at getting their attention. They followed him on Twitter. We're all on Twitter. Some of us have PFPs. I don't, some people do. And are, they're into that. So like I think he did a good job at getting to that person. But I totally agree. I, did he get to the younger audience who are, heavily into mobile games? Certainly didn't get to the older generation I don't think. <cite>phil:</cite> <time>1:10:38</time> And to your point though, they didn't have a game, so what are they gonna get to them with? This, to your point, like who is the target audience? It had to be the crypto people. <cite>chris:</cite> <time>1:10:46</time> Yeah, cuz PR crypto people are the only people who are gonna buy a$10,000 pfp. <cite>eric:</cite> <time>1:10:51</time> I spent a lot more time reading tweets in the lead up to the Super Bowl about the ad than the ad itself. But I dunno, is there a general takeaway that this seems like a big gaff, like I don't know. <cite>phil:</cite> <time>1:11:04</time> I, I would agree. I think this was an experiment. It felt like a very expensive experiment at six and a half million. That's a pretty big chunk of change. Out of your 200 million, it seems like there are better ways to spend six and a half million dollars. And even like at least time this closer to the launch of the product, like that CME seems where you need to maximize the. <cite>chris:</cite> <time>1:11:21</time> I'm curious about the entire capital raise more generally, was it just this all-Star team that has two to three smash hits, with, a lot of the team is from is from what's his old company called. He came. Yeah. From what I can tell, a lot of this team is from machine zone. Was this just the crypto invest crypto VC firms going, oh, thank God, like a traditional game studio that wants to do web three stuff. Let's give them a whole bunch of money because they know what they're doing. I'm curious how much of that was because the whole monetization strategy is pretty, from what I've read I can't really get a lot of detail on it. It seems pretty. He even said at one point in an interview I don't want to give this out yet. I don't wanna, I don't wanna have copycats on my tail. So I'm really curious, I'm really curious to see how this pans out. If there is something really unique here in terms of the monetization strategy. <cite>phil:</cite> <time>1:12:14</time> All right, game economist episode six in the can. Talk to you <cite>chris:</cite> <time>1:12:16</time> All right. See you guys. See ya.

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