Host Aaron Bush welcomes Shahar Sorek, CMO of Overwolf, and Nick Tuosto, co-founder of Griffin Gaming Partners and GoodGame Advisors, to discuss the growing – and increasingly interconnected – impact of transmedia and modding on the gaming industry. 

As beloved entertainment IPs partner with more types of game creators, we examine how these transmedia efforts are reshaping consumer behaviors and evolving the market, especially with the younger UGC-native generation and as UGC creation gets more professionalized. Our guests share insights into how cross-platform support and new technologies, especially AI, are democratizing creation and unlocking new possibilities. They also share best practices for both publishers and brands who want to make UGC an effective strategy. Tune in to discover what lies ahead for the intersection of UGC and transmedia.

We’d also like to thank Neon – a merchant of record with customizable webshops optimized for conversion – for making this episode possible! Neon is trusted by some of the biggest names in gaming and can help you sell direct without the typical overhead. To learn more, visit https://www.neonpay.com/?utm_source=naavik 

This transcript is machine-generated, and we apologize for any errors.

Aaron: Hello everyone, and welcome to the Naavik Gaming Podcast. I'm your host Aaron Bush. Everyone listening has almost definitely been informed of or benefited from some of the emerging trends we'll talk about today.

For instance, transmedia has been discussed for years and we're living in a golden age of video game adaptations as top gaming IPs take over Hollywood and as Hollywood IPs regularly become the backbone of games. Similarly, modding has been around for decades, but as we've regularly discussed over the past couple years, modding is not just making a comeback, but it's soaring to new heights as new technologies and economic models incentivize new creator behaviors.

Much of this has been discussed in previous episodes and around the industry, but what has been less discussed is how transmedia has actually impacted the games industry. How these trends converge and impact each other. And lastly, how new technologies, like all things, AI may impact the trajectory of these trends going forward.

So joining me today to discuss all of this in detail are two amazing guests. I'm here with Shahar Sorek, the CMO of Overwolf, which has been a long time Naavik partner and also Nick Tuosto, co-founder of Griffin Gaming Partners, and more recently, Good Game. Advisors. So we have a lot to dig into here and we'll kick things off briefly with some intros and I'll start with you, Shahar.

Could you just tell us about your games industry journey, how you came to overwolf and what you're up to as CMO right now?

Shahar: Sure. Thank you. So generally speaking, I have. As a kid, I had two passions. One was martial arts, which I practiced daily and was a national five time national champion. And I was a gamer before that word even was a word. And then I had following that a career in the entertainment industry. And then I founded my own game studio. I was a founder and CEO of a game studio before I moved to Overwolf and currently serving as the chief marketing and investor relation officer at Overwolf. Which is the world's leading horizontal UGC ecosystem.

Aaron: And one follow up, Shahar, remind our audience all what Overwolf does and whether there are any big updates in the few months since we last hosted Uri. What's new at Overwolf?

Shahar: Well, there's a lot of new things happening. So like I said, Overwolf is the largest horizontal UGC ecosystem, and Overwolf stands apart by partnering with over 1500 IPs, enabling diverse content creation beyond a single IP ecosystem like a Roblox an Epic.

And within that, we serve three core Target audiences. First of all, in game creators, which range from mod authors and app developers to private servers, owners, and small game studios to game studios, which we're helping studios explore and adapt to the UGC landscape. And of course gamers, which consume the vast array of UGC content that we produce.

Aaron: Awesome. Well, I look forward to digging into more detail of all of that today, but Nick, similarly, tell us about your journey with Griffin and what all you're up to right now.

Nick: I also started life as a gamer and, I'm fortunate to be able to make a career of working in the video game space today.

I've been a career investment banker advised on some of the largest transactions in the video game space. I helped Tencent acquire Supercell. More recently I helped Take Two buy Zynga. Those are some of the marquee advisory assignments and also started Griffin Gaming Partners with two other gentlemen back in 2019.

We've now grown to one of the largest sources of capital and one of the fastest growing venture funds of all time. But our thesis is to be exclusively focused on games. It's our passion and it's what we love doing.

Aaron: Awesome. Well, super excited to have both of you here with me today. And let's go ahead and kick this off by talking about Transmedia and get your perspectives on a couple unique angles going on here.

So obviously transmedia isn't new. A lot has been said about it over the years. There's good and bad examples. But you know, in terms of gaming IP, Extending to other mediums, I'm curious what you think the actual impact has been on the games industry. Like, is there just. Changing consumer preference at play or is transmedia growing the size of the overall gaming market or just put another way like how should we even be viewing the overall impacts of transmedia on games right now.

Nick, I'll start with you on this one.

Nick: I think it's absolutely growing the size of the pie. When you look back 10 15 years ago, there were very few examples of successful media adaptations. Lara Croft Tomb Raider was one example, but very few of the IPs that were game native actually worked in other forms of media.

And if you flash forward to today, I mean, you just have to watch the last of us to see what's possible to see something that leverages the passion of a community that just deep expertise that the team that built that game had and translated to a mass market and different audience. It just works. So synergistically, you're selling more game copies in catalog, but more importantly, you're reaching audiences and you're telling a story to deepen their relationship with the intellectual property.

I think this is a trend you're gonna see a lot more of, the Five Nights at Freddy's type of examples, where an entire generation of kids now know this media as transmedia in all of its capacities. That's what we're excited about from an investment perspective and on the hunt for deals of that variety.

Aaron: Yeah. And I'd like to dig into a little bit more nuance here because, you know, as I've been following the industry from, from my vantage points of, you know, also working with a bunch of teams, studying a lot of businesses and just looking at the high level data, , like one thing that has been pretty clear Like even as trans media has been hitting these highs like, you know We just think about last year with the last of us tv show that you mentioned the Super Mario bros movie Which broke records for like a video game?

movie adaptation , it was a massive year for trans media, but if we look at player trends, you know since covid and I saw this data from circana recently the percentage of Of the population who plays game has actually been going down as I've been thinking about transmedia, I'm not entirely sure if it's necessarily growing the player pie and these, primary markets, but it's obviously doing something.

And it seems like at least from what I've seen, what it's doing. Is that it just puts more importance on the IPS themselves on great IPS on great storytelling and then whoever has these awesome IPS, whether they're going to video games from traditional media, whether they're going. from gaming, you know, the other way around that, you know, what, what seems to matter most is just building audience around these IPS, whether it's on games, whether it's on the big screen, whether it's somewhere else, I'm curious to heart, like, how do you think about like, where these trends are going?

And what matters most here from, from your seat?

Shahar: Yes, so I'd like to pull for, for a second to the, for the macro overview of everything, just to give a sense of how we see the world and how transmedia plays a pretty significant role. So, from our standpoint, the world of games, primarily as we see it from the UGC perspective evolved in three stages where we could say gain one is was solo gameplay, which was defined by linear closed experiences, right?

Single player driven games like Zelda, Super Mario, Final Fantasy. These games were developer driven with no mechanisms for players, influence or modification. That's game one game two was around multiplayer and initial and started to be an initial player content creation engine in game two through modding and custom content creation.

The experiences became semi participatory here. We have doom half life Warcraft three in game three, where we are right now. We have the first UGC platforms, Minecraft, Roblox, Overworld, Fortnite. In game three, games are designed as open participatory worlds. Here, players are provided with tools to create their own game worlds, asset experiences.

And this is where we're starting to see the impact of transmedia, following kind of what Nick said, to start to take effect. Currently, we see it with very particular verticals, primarily between film and TV business. So we have the Mario Brothers, The Last of Us, my personal favorite, Fallout. But We're going to move slowly into game four in game four.

So if game one was solo and game two was multiplayer and game three was UGC first platforms, game four is about transmedia ecosystems and co creative digital societies. And there are four drivers that are going to usher in game four. One of them is the player demands and behaviors, right? The, the, the gen alpha, Gen Z of today plays.

And in a malleable content environment that's one thing that's gonna drive a lot of demand for content in general there's a rise in user acquisition costs and it's very noisy to get your game or piece of content noticed there's standardization platforms. Like Roblox and Overwolf and others that are going to come out that are going to kind of tie and build the blueprint for brands, IPs in and out of games to start speaking with each other.

And naturally, of course, the fourth one is AI, which is going to put everything on hyperdrive. What's going to happen is big IPs are going to change how they behave today. One thing that is important to note is that if we look at what happened in the film industry, so the film industry had kind of a boom in the seventies and eighties where a generation of young kids grew up consuming that as their primary source of entertainment 20 years later, those consumers and viewers became movie makers also because digital cameras, editing tools, YouTube came, there was a convergence of player consuming movies. Movie goers consuming movies and having the tools to really explode content creation that kids that are consuming today.

I am primarily UGC experiences are going to be the makers of tomorrow and it's important to state that not only makers in terms of content creators but today if you look at a big. Big IP holder the people that are running the IP are of the old generation they're used to making deals. In a very particular way, the new kids that are going to come are going to be UGC experienced deal makers.

So people like Nick and myself are going to, our experiences won't be solo game experiences or multiplayer. They're going to be UGC game. And that's going to allow for the arena of transmedia to change completely.

Aaron: I mean, I love the framing of that Shahar. I think it. It makes a lot of sense, you know, both from UGC being a discovery mechanism to being like this new composability layer that, um, everyone, especially younger generation sort of takes part in, in the stories themselves in a sense.

Nick, what do you think about what Shahar just said? Is there anything that you especially agree with or anything that you disagree with or want to add any nuance to?

Nick: I think it's a really smart framework. It's part of the reason we invested in Overwolf. We see the world very similarly. As investors, we're really looking for the next leg of growth.

These step functions higher in the industry. I saw the same report in terms of player counts, and I don't actually read too much into that. I mean, if you zoom out and look on a 30 year time frame, You've got an exponential curve at play with gaming. And you see these new form factors come online. You know, obviously PC is one of the oldest, but it's actually growing record.

You know, player counts on Steam are happening. You're seeing new content explode and succeed on Steam, one of the oldest platforms. And new platforms are still emerging. You know, Roblox released its daily active user account a few days ago, 90 million people play on Roblox every day. And that number has grown between 20 and 30 percent consistently year over year.

And it's new content that's driving that, but it's also this participatory ecosystem where creators and players overlap. Many of the people who are most engaged as consumers are also creators. And there is a sense that you're part of something. And that's what we love about the Overwolf business model.

When we think about the next leg of growth as mobile has sort of hit its point of, I wouldn't say saturation, but you're not seeing that same exponential growth just by virtue of mobile platform coming online out sort of outside of developing geographies. We do think that this AI revolution is going to substantially lower the barriers to creation.

I mean, if you think about kids playing with Legos, my son's 10, He doesn't need any sort of incentive. He wants to create. This is part of having fun. And if you make the tool simple enough where you can take text and translate that to code, I think you're going to see exponential growth on the side of the creators.

And it's a two sided network where more content drives a lot more consumption on the user part. But there'll also be another side to that coin, which is a lot more noise in the ecosystem, a lot more junk for consumers to wade through. And we saw that with mobile with tens of thousands of apps launched every year.

Bye bye. And so this is why we're particularly attracted to the role of IP plus user generated content because there's so much fandom around these marquee franchises like Star Wars. If you look at how much fan fiction has been created around the Star Wars ecosystem, or if you look at Harry Potter and you just think about how much time and energy people spend, there's an intense passion around these big intellectual properties.

So when Harry Potter Hogwarts Legacy launches, there's It's no surprise that an open world where people can wander around and sort of dive into that ecosystem has just tremendous pull from players. But they need the tools to be able to create content, gaming content around that. And Roblox is chipping away at that, but we think Overwolf has a really unique angle to attack that same phenomenon.

Shahar: I want to respond to what Nick said and say two things that one of them is more relevant than the other. I think transmedia will go both ways, right? Because right now we're seeing primarily, we're seeing big IP games. Go out into movies and we see some big movies come into games. I think we're going to see variations of content that's doing really well, but isn't necessarily a big IP from the gaming side also come out.

So it's going to be a two door, a two door way where, where, for instance, there was a mod called the Stanley parable, which is a Half Life 2 mod that became a standalone game that sold around, you know, a million copies in 2018. And that's sort of an existential philosophical mod. That can take up so many forms outside, outside the world of gaming, but currently there are no, you know, apropos standardization.

There's no ways and there's no dealmakers and there's no technology to make that work. I think I think we're going to see all that on hyper drive and a lot of that. It's going to be due to a I and Nick touched a little bit about a I wanted to say that what's going to happen with a I is a I acts both.

It's going to be due to a I is a I acts both. As a creative partner in a procedural generator. So AI is going to be a co creative partner that will put players in ongoing dialogue. It's the ultimate partner in any really gameplay companionship and also in creation. So gaming companions for playing and creation, but it's also a procedural generator transforming trend will, which will transform the game world in real time, based on players choices and fostering emergent co creative narratives.

Okay. So this will support a self sustaining loop of content emergence. So interject and, and, you know, an IP on this future tool building kind of AI incentivized infrastructure. And this will, this will just change the way entertainment is going to be done in general.

Aaron: I love it, and I, since we're talking about AI, maybe we can poke into a question or two about it right now, before we kind of get back to more of the, you know, The details around IPS and and modding specifically, but, you know, you talked a little bit about your thoughts on how AI might impact modding specifically what is Overwolf doing anything about that?

Or like, how are you setting the company up to succeed in a world where these co creator tools are just going to become so much more? Powerful. So,

Shahar: so I want to, I want to get real on this point. We are, of course, having AI run through our company in various touch points, but AI, this game for transmedia vision that I was talking about is not here yet.

There's a few things that need to be built in order to allow for these types of tools to take effect. So the key thing that will concern brands. And justifiably so is brand safety, integrity and holding up just the fidelity of their brand. So you need to be able to facilitate, facilitate an infrastructure that can uphold that before anything.

And that includes moderation, curation, how, you know, we'll talk maybe about cloud cooking and how the various platforms interact with mods today. So all that needs to be set in place. AI does take a part in that, but a very small, a very small part. Once that is set, then the kind of visionary AI companion and procedural engines are going to be able to take place when it comes to UGC and transmedia.

Aaron: Got it. And in my last episode, I was talking to Sebastian Park, who runs a company called Infinite Canvas, which, you know, is working with all sorts of new technologies and new platforms. And one point in that episode he made, essentially, it's just that like the baseline for making games, you know, kind of wherever you, you are in the industry as a maker is going to increase.

And this is just the way it's always been. Technology, right? Like as new tools progress, like what you have to incorporate into how you build your games just evolves over time. And, you know, as a whole, the industry gets, , more complex and better and it's output. Nick, I'm curious from, from your end, from the investment side to just, as you think about AI and the baseline increasing and understanding that this still is, you Very much a work in progress that takes years to to unfold, , like what is exciting to you like in this landscape in terms of You know backing and supporting teams that are helping increase that that baseline of development.

Nick: I actually disagree with that assertion.

I think that's true in certain respects Like I think if you were to ask, you know, what's the impact of ai on on rockstar as business? I think it's obviously going to be that they're going to do more They're going to use those tools to step up the bar to create, you know, the world's best content That's that's their standard and that's how they'll use the technology But when you think about just With broad brushstrokes, it's very hard to paint this industry with with one stroke.

I think there'll also be a lot of really, you know, superficial shallow experiences, which are delightful There's going to be a lot of innovation and core loops and gameplay and that's part of the magic of roblox There are some experiences that are really fun for half an hour or an hour, but don't necessarily, you know Work for hundreds of hours the way that rockstar attempts to create content that'll engage people for you know That type of amount of time and I think that ai Is creating a lot more potential to bring more creators into the ecosystem by having it be less of a burden to code and especially complex coding and building games on unreal historically has taken a lot of sophistication and today you're seeing a lot more people dive into the creation side of this two sided network.

But what I really like about, you know, Overwolf and Roblox and now UEFN is there's business model innovation as well. I mean, if you go back 15, 20 years ago, there was a lot of appetite from the most engaged players of Quake, let's say, to go create a level because they wanted to participate in this ecosystem that they were so immersed in and it was part of their lives.

But they didn't have any sort of economic incentive to do so. So what you saw were people dabbling in the creation side of the ecosystem. And today there are people making millions, tens of millions of dollars creating games on other people's platforms. And that's part of what needed to happen to see the industry evolve so that people could build real businesses, could spend two, three years potentially building a game.

That was expected to be monetized over time. Create real enterprise value that a venture capitalist like us could actually invest in. And we are starting to see that watershed moment where there are, you know, very strong incentives now economically to make big swings and big investments. And I like the fact that generative AI allows creation at every level of creation.

You know, it could be the most shallow and superficial experience, which could be very fun and the next big thing. And sometimes those core loops, by the way, they turn into franchises. It just takes that breakthrough moment of something really fun and delightful that goes viral and gets discovered for then the resources to go double down on that idea.

And so that's where being an equity investor with a very long term orientation is a lot of fun around this ecosystem, because it could be 15 years until you see the fruits really, truly start to ripen. Even Roblox today, I think is still in the early innings and it's 15 years later. But these two sided network effects, if you pull back and look at the value creation history in games, these are the most powerful business models and those that accrete value over very long times would die, right?

Aaron: Yeah, I think that's really well said and I think we actually agree with each other and what I sort of meant by increase the baseline is just no matter where you are in the ecosystem Like these tools propel you to make something Better than you could have with the resources or talent that you had before So as you said with rockstar that has you know, one of the biggest budgets around like, you know They'll be able to create things even more awesome Or if you're like an indie studio and you know, you have a set budget that can only support three to five people.

What you're going to be able to create with this new generation of tools is going to be better than what you could have made 10 years ago. And as such, the baseline increases for being competitive in the market. And similarly with the democratizing angle with individual creators, you might just be doing it for fun and all of these different.

Platforms. They're going to be able to create things that they haven't been able to do, um, in the past. And, what gets discovered and, and when's big will blow people's minds, you know, who, , think of modding or, , user generated games of, of, you know, a previous era. So, totally agree with you on that.

And Shahar, I want to get your thoughts on. The, the business model side of this too, because obviously changing technologies, they don't live in a vacuum. They have an impact on the way that. That people create on the incentives that exist in the ecosystem. So, so how do you think from the Overwolf perspective about changing business models and incentive models here?

Shahar: First of all, I want to say plus one to what Nick said in a way that. Building and facilitating a business environment for content creation is a must for various points. That's our view. That's the overwolf viewpoint. So, so first of all, we envision a world in which gamers spend most of their game time on user generated content.

That's one. And we are also, our mission is to build a world where in game creation, which is the model, the modding and the apping and, and, and the private servers and the indie studios and the studios is a profession, right? So going and creating something on the game is the equivalent of being a streamer on YouTube, for to make things simple.

And this is what drives us because we found out that when you introduce and you, you, you construct a fairly monetary ecosystem, you can enforce many rules that if you don't have a monetary system are a little harder to enforce. I want to, I want to be clear that a lot of the UGC is and will always be free, but there are professionals that are coming now and evolving their level of doing UGC and they deserve to be compensated because they're doing it all the time.

So our North star at Overwolf is how much did we pay out to creators per given year? Last year it was 201 million. This year it's going to be more, but that's what drives us because we know that First of all, brand safety that guards brand safety, especially in high level DLC level content like we're doing with arc.

So about business models. And again, the innovation comes there this year on, on June 17th, we launched on arc survival ascended, the power rangers mod, right? We teamed up with studio wildcard Hasbro and Luke North world to bring power rangers into arc, which is an example of a new business model.

Take an IP. Take a small game studio and construct a premium mod for premium into an existing game. The game becomes a content engine, which is part of how we envision the future. We envision a future in which game developers, the game is an engine of content and many small game developers or indie game developers can interact and create if they have the skill premium level.

To be sold on, on inside the game. Now, basically what that meant for the Power Rangers, the players could skin their characters, the original mighty Morphin Power Rangers and equip their weapons and zords. And first and foremost, again, goal is to create a brand safe, moderated space where players can interact with an IP.

Nick mentioned that word before, and I love that word participating. So I said, game one, game two, game three, game four, and each of them level of participation intensifies. It's Which causes Many, many, many, many different effects on the engagement and what gaming does for a person now are inside arc. We unlock this new business model by introducing premium work premium mods.

We also introduced a creator category, new creator category with Luke North World, which is a small studio now for the existing IP for Power Rangers. This was a new type of brand experience. It's, it's not building a storefront, it's a branded premium mod that enables gamers to interact with their IP through gameplay, which is a much higher valued interaction, process.

Right and and business wise it did really really well and I would expect we we we would continue to announce more deals of this fashion in the future so so again this is all kind of the game 3 building the UGC platforms that allows. The brands and the IPs and the content creators and the game studios to, to talk with each other.

I mean, going back a decade or two, who would have thought that an indie modder from England could be working with a major studio in the U S I mean, there's no, no way that would have happened. And today that becomes, becomes more and more a reality.

Aaron: Yeah. And just so our, Our listeners know about six months ago, I hosted a conversation on the podcast with Uri of Overwolf, but also leaders from the teams of Studio Wildcard and Look North World.

So if you're interested in learning more about Like what these relationships are shaping into and how like the composability of platforms and builders are stacking on top of each other in interesting ways and how that business is, is working in the early stages and, , want more thoughts from different people, , in, in the stack of where it's going.

I definitely recommend, checking out that, that episode. It was a really good one, but Shahar, I want to follow up on this just by asking You like in a bit more detail, where do you see this going? Like three to five years from now, in terms of like the games and the IPS that are going to be built on over Wolf, like what is this ecosystem going to turn into and in the same way that.

Like with modding in the past, I know some publishers have had hesitations about like, like what are users going to build and they just have to get comfortable with a new tool set, a new way of thinking about it. I assume IPs also have similar hesitations about how their IPs are going to be used.

So what are the. Like the, I don't even necessarily want to call them challenges, but like the mindset shifts and like tool shifts that like still need to happen to, to make this become a much bigger thing than it is right now.

Shahar: Yes. So first of all, I'll share with you some numbers, which I can do now when we talked when you got together with Uri and Luke North with Alex, I guess, and we didn't have stats.

Now we have stats. Some of them I can share. So in Ark Survival Ascended in the time we've been working with him up until now, we have a little over 300 million mod downloads altogether. Around 3000 mods, 300 million downloads and a staggering in stat is that 74 percent of arc players play mods.

Yeah, let that sink in. 74 percent of arc players play mods and modded content increases on average play time by 42%. Now, that alone is kind of like an end game for any, any publisher to consider why to engage in UGC. Now, given there are valid, deep concerns and, and depending on the game and the popularity and the complexity, these, you know, game publishers will always be worried.

And of course, big IP owners, but the numbers are overwhelming and they're just growing because of the consumption habits of younger generations, right? 1 percent of these 3000 mods, a little over is premium sold at a price, 2, 5, 10. And I could, you know, happily state that with arc we sold and we paid over, we paid to creators over 500, 000, which is life changing to some of them.

So when you look at these numbers. And, and you look at what the future look like, looks like you say, well, it's going to look more like this and everything in the trends we're seeing here are going to be intensified because the consumer, the players are just going to want that. So eventually it's going to be, you know, a Kodak moment for brands, publishers, and IP owners.

You're either going to fold into what the consumer wants and are getting on all these platforms, or you're just going to not exist. And it's going to be very competitive because buying traffic in three, four, five years from now is not what it private buying traffic is today. It's still very expensive.

It's going to get more noisy. Nick talked about a lot of these, you know, experiences that are going to be a I based or what not a I based. It's gonna be a noisy heavy world. You want to make sure that your UGC ecosystem is well built to handle that noise and that you can create business relations with IPs. Mhm. It's a different story. And I'll reiterate the point because they're a bit more old school, the game publishers are a bit more on the frontline because they're seeing the numbers and they're actually, they're hurting with IPs, it's, it's a bit different, a bit old school, but I think that once they start seeing some of these deals come through and the impact it's going to have on their business and how they're, how their players and fans are going to engage and expand their IP, I think They're going to find a way.

Nick: I would just add that, like, when I take stock of where we are in the market today, there is just this tremendous opportunity in my view, looking at, you know, the big franchises getting bigger.

Obviously, you've got a football club that sort of record player numbers, record engagement. You see Call of Duty at its peak. Lots of these big franchises, they're known commodities. They can justify huge amounts of investment and the companies behind them deliver. These products are at their peak in my opinion.

So while you've got the big franchises getting biggest and the biggest publishers redoubling their efforts to focus on that sort of low risk of deployment of capital into these franchises, they already know work. On the other side, you've got a player community that's just desperate for innovation, for something new.

And you'll see, you know, an unknown brand new developer launch a game like Black Myth Wukong and you see just tremendous appetite for something that feels innovative and new. And when I look back at sort of the hit rate relative to user generated or modding content, you know, it's an ecosystem that's evolved based on lots of user generated or content creator sort of steps forward in a franchise.

You look at Counter Strike, PUBG, Dota 2, League of Legends, these all started as mods, these iconic, huge, and new franchises built on what was out there, and they were a function of that participatory instinct. And people who are deeply engaged in products who see angles for something new can do, but they lack the tools a to really dive in and sort of mass market create in those ecosystems.

And then B, they lack the economic incentive to leverage existing platforms to do so with little friction. So most of those companies either had to raise venture capital or leverage, you know, their ability to fund those projects to build something new. And there's a huge amount of effort to launch an entirely new franchise.

Versus launching on a platform like Roblox, UEFN, or Overworld. And so as I think forward, you know, the most excitement I have is around these mods that can take existing ideas and concepts forward in a way that feels really innovative to meet that player demand for something new.

Aaron: I like it. It makes a lot of sense, Especially how it almost seems like the pendulum is swinging back. Cause if you look at the, the history of the industry, maybe 20 years ago, , a bit before I was paying attention, but as I understand it, like when modding was coming into full force and people were trying to, you know, the people who are most excited about making games, many of them just wanted to build on top of.

The big franchises, the games that they love, but there wasn't really a way to To do that, um, you know, at the time economically where it could sustain their living. And so, you know, many of those developers turned into the indie developers of the past many years, but now with some larger franchises, the ones that everyone loves today, , kind of going in the direction of enabling people to build on top of them and not just, , individual.

You know, casual creators, but increasingly the professionals as Shahar, as you were saying before, it almost seems like a full circle moment in a sense where, , yeah, we really could see some of like these biggest platforms support, like an ecosystem of creators in a way that people may be dreamed of 20, 30 years ago, but is finally going to be happening now.

And I think that's really exciting. I'm curious to hear your guys thoughts on like any best. practices that are starting to form both kind of from the publisher side and the brand side. Maybe you can give a little bit of advice here to, to anyone who's listening. So, um, on the publisher side, maybe Nick, you can speak to this, like what should Like more publishers be thinking about in terms of, of leveraging this trend.

You mentioned that with companies like EA or an Activision, they increasingly have refocused around their biggest IPs and, , the, the growth engine of their businesses in part has been making these IPs, the FIFAs or the FCs now, and the, the call of duties. Bigger as an ecosystem, but not all big IPs have like been able to make that step.

How should they be thinking about like this wave and this technology as a means to do that and for them to do it successfully?

Nick: I think there's really two schools of thought here. One is to deeply invest in your own systems of technology and tools the way that Epic has obviously started with the Unreal Engine and then leveraging that.

Um, It requires huge amounts of investment, hundreds of millions of dollars spent on engineering over time to build those sort of internal capabilities, which then they, leverage to create a fortnight and sustain fortnight, which is just a incredible leap forward in the industry in terms of what it can deliver with an always on live service.

That's one way. The other way would be to leverage third party tools, allow the technology companies to really focus deeply on building those capabilities. And then the big publishers partner the way that E. A. Did with Overwolf on the sentence. I think this concept of U. G. C. As a service is really intriguing because the core expertise of some of these publishers isn't going to be to deeply invest in technology tools, and they won't be able to leverage those in such a way to rationalize the investment.

For Roblox, it worked after 15 years of very deep investment in building their platform. But I think a lot of the biggest publishers They really need the path of least resistance to unlock that fan engagement. There are so many people who are willing to dive into franchises like the biggest franchises, you know, in the world.

And those people, they need tools to be able to do that. And they need the safety on the publisher side to understand that their brands will be respected. There'll be restrictions, kill switches to prevent things that, border on cheating or anything objectionable to the player community. And that's what Overwolf is built is to take that burden off of the shoulder of the publisher to create those tools and ensure the outcome that the publisher is looking for, which is a trusted place, a sandbox, if you will, for the community to participate in these big intellectual properties.

And on the other side of that, to see the sparks that come from that creation, the next big franchise shipped from a user generated contribution, the publishers own those intellectual properties. So to the extent the player community expands and you've got. Incredible leaps forward and engagement. And the publisher didn't have to take that creative burden on itself.

That's a huge leap forward in the business as a whole. So we think this is just the very early innings of the publisher buy in, which we're seeing with examples like the Sims, but Shahar can talk obviously in a lot more detail on that.

Shahar: Great answer, Nick. loved it. I think, I think that what, um, publishers need to be extremely aware of is that if you're not a UGC first based company, I would advise for you not to touch UGC because games specialize in, in, in, in creating a core experience.

And that's what they should spend their efforts on. And there are a few things that come with UGC that aren't evident at first until you have a successful game. And, and I would say, you know, the technology to create UGC is, is complex, but. There will be others doing that and offering that as a, as a service.

But what's tricky about UGC specifically, as you move into big titles and IPs, is that moderation, curation and safety become the main show. And nobody wants to take responsibility on an IP that's worth billions, if, if you are, I'll take a, a fictional example. If you're running a GTA six and it's open for UGC and suddenly somebody puts a Marvel character in it, that's just unacceptable.

And if you're a big publisher and you wanna run your own UGC department, the UGC department is on nail. Because it doesn't have any experience in moderation and curation and hasn't built the safeguards and the rails and it doesn't have the teams if I would say what is our main differentiator as a service provider and that's where I think the big brands and IPS need to think about is first of all brand safety as a first.

Second, you know, an economic marketplace that makes sense for IPs that they can actually also benefit from this and in various forms, not only premium mods and a moderation team that has been doing 10 years of day in day out moderation across 1500 titles with a staggering success just the results and the way we work here.

So that's, that's, that's a more complex layer. It's not as. Sexy is saying an AI or whatnot, but this is what it takes to build the kind of the base ground for transmedia to really happen for a massive IP now to come in and say, we want to engage in games and open it up to the to the community.

I would say that given the safeguards and moderation curation, safety go to market activities. We also have. A massive team of creators. We have close to 200, 000 creators on our platform on many games. We can cross reference cross collaborate with these creators. All this creates an ecosystem that that you can grow.

So it's everything Nick said, plus moderation, curation, safety. And monetization, really.

Aaron: Yeah, the nuance is definitely appreciated on that. And I mean, I guess it goes even, even deeper. And maybe one other layer of nuance to this is just that, you know, historically, best practices for different platforms have required different skill sets, different capabilities, uh, users look for, for different things.

And, one thing you didn't mention before too, just about like what the, the arc example unlocked is, is, and what much of what you do with mods in general is the cross platform nature of them, which, which I think is. Is really interesting and very powerful for enabling creators to be seen and accessed in more places, but beyond even PC and console, mobile still remains like one of the largest.

Pillars of the industry. And there have been some interesting UGC oriented projects out there that have, you know, found interesting niches and created some best practices, but Shahar, I'm curious to get your sense of like kind of the continued cross platform trend here, how has Overwolf thinking about.

Mobile and kind of like what we've talked about so far. Like, is there any other nuance you want to share about, how to think about this across platforms?

Shahar: So first of all, first of all, double down on crass cross platform because that's a new thing that happened. Mods on Xbox and PS5 is a new thing.

And it's, it's not trivial because there's still more knowledge for the platforms to gain. And for us. To work with, to, to enhance the experience and to better the experience for both the game studio, the modder, and the platform. Saying that, on ARK, as an example, 69 percent of mods are on consoles. So it's, it's huge and we have cross platform cross play so I can download a mod on PC, make a download it on Xbox, you on PS5 and we'll play the same instance to play the same mod.

We also have things like, dynamic blueprints where I can try a mod that's going to come out soon and try a mod before I buy it and all sorts of things. So there's so much innovation that has, that's going to happen there. Her mobile that i don't have anything in particular or interesting to say about mobile because the type of engagement currently that exists on mobile doesn't isn't conducive to the type of UGC we're working on that doesn't mean that we won't and we had dabbled with mobile from time to time but we felt it hadn't ripened to a place where we're like let's go all in on mobile because.

The players are different and the core audience is very, very different than, you know, the world of Warcraft, Minecraft, League of Legends and the Sims players, right? It's, it's, it's, it's casual, hyper casual, which constitutes the majority of the audience. And I do think that when you talk about cross platform modding, there will be a time where that's going to be available on mobile.

I do. And that time might not be so far, but we're still not there yet. And because we're doing so many things, we have to be extremely focused. And and as Overwolf, we're trying to be as disciplined and focused as we can, so mobile is still not in the stars for us just yet.

Aaron: Yeah, well, let me flip this over to you, Nick, because I know even at Griffin, the team has been, you know, still like pretty bullish and interested in all things mobile and UGC at large still is a trend that touches on that platform in bigger and bigger ways.

How do you think about kind of the role of, of mobile and cross platform, with UGC transmedia and everything we've discussed so far.

Nick: Mobile's a bit tricky to find investment opportunities around this theme of the creator economy. The closed ecosystem on iOS just makes it very difficult technologically to see robust creator ecosystems be able to contribute and iterate on existing franchises.

So what we've seen is much more of a tendency to take really talented teams that have done it before or are inspired by an existing product. The way that the team that built StumbleGuys was inspired by FallGuys, right? These fast follow examples are really all over the place in mobile. Many of the biggest franchises were inspired by another franchise.

And then a team that was highly capable on a defined budget was able to ship a product that was a big step forward. But it doesn't leverage the tools and technologies the way that PC modding has for decades, actually, there are exceptions to that. Roblox has really run away with the creator economy driven business model in mobile.

That's because of that cross platform fusion. They've got creators on PC building games that then work inside of the Roblox master app on mobile. And they've been able to do that in a way that very few have. Facebook's attempts to launch an app store within the app store on iOS were refused and Roblox has experiences and it's quite different than what Facebook attempted to do, but it does create this white space for Roblox to leverage that community participation in mobile, the platform where most of their, their audience spends most of its time. So they've got a unique competitive position there that is great for them, but it's awfully hard to find new upstarts that have a chance of competing in that.

Now, three to five years from now, as there's regulatory relief starting in Europe and other places, we'll see how the mobile ecosystem evolves and has investors in this category. We just try to study the data to see what trends are happening in real time. And this is a space we're super curious about, continue to interview companies that are building creatively around this and looking for investments actively.

Aaron: Got it. Well, we shall see. We need to start wrapping up soon, but one more question about this for you, Shahar. , we, we talked about best practices for publishers and how publishers should think about this growing space. But, I think we should also talk a little bit about, Uh, like brands themselves and how they should be thinking about thinking about and approaching this industry.

 Clearly there has been a lot of interest from brands and UGC in general. You see a lot of buzz in roadblocks. You see, IP branded worlds which makes sense to some degree. Maybe it doesn't make perfect sense. And other, and other places you increasingly see. more IP embedded in, Roblox worlds, or, you know, potentially in the future UEFN to greater extents as well with skins and such.

 But when it comes to modding and building a presence on other people's games, how should brands be thinking about Getting involved in this, like what would the steps be to take, , both in terms of like knowing where to begin, but also in thinking about like how to approach it well.

Shahar: Okay. A few, a few, a few thoughts on it. One, there is a huge shift in budgets and media budgets altogether going from traditional media into games because the brands understand that people are where the games are. Not only playing, but also socializing. And they really want to get into the game, which is a huge conundrum because especially as you move on the high fidelity games, not only the games, but the gamers do not want any ads interfering in their games at overall, we are kind of a Trojan horse in that sense that actually knows how to settle this per per perplexion because. Our, our, our creators are gamers and they're making creations that are played with the biggest games in the world. And those creations, the way we help creators make money is that we run ad units within those creations.

So what you have is gamers playing the world's biggest games as they're coming, you, as they're consuming companions. That they love and help them to game and in those companions, they see ads, but they know also these ads are going to their fellow gamers that created this content and everything is free for them.

So there's sort of a palatable excuse and reasoning for everybody. It's a win, win, win for everybody, for the brands, for the game studios, for the gamers and for the creators. And that's kind of our secret sauce when it comes to how do we infuse this marketplace? I would say that any brand needs to get into the world of gaming.

Now it's too late. Now you need to get into it and you need to get to it by doing small bites. Work with overwolf work with whomever you want the issue with the roblox is or the challenge more more to say with the roblox is in the big IPS. It's a one off thing. It's a very big. What you're seeing are is very big from a media buying budget.

 It's a huge initiative that costs sometimes millions of dollars. It comes and goes, and there's no consistency. So you need to come to platforms like ours that allow you to engage. You don't need to spend big budgets. You can, if you want, but you can consistently engage with the audience.

Learn how can you track? How can you reach what, what, what works for you here? The gaming world is complex. There are many genres. There are many devices. The audience is fragmented. You need to map, make it. So you need to team up with a team that can map, map, make it, know how to spend your budgets. And, and show you like return on your, and show return on your investment when it comes to, to media.

So, move into games, find platforms like us to work with, and, and figure out a strategy here.

Nick: And I, I just think these brands are fighting for survival. You look at these iconic intellectual properties like Monopoly. It's not clear my son would know what Monopoly even is today if it weren't for Scopely's game.

You know, a game like that reaches tens of millions of players. It builds a. A massive economic franchise, like 3 billion of aggregate revenue in a new game. I mean, it's not like proof that new games can still break through, but the power of that intellectual property to reduce the cost to acquire consumers, to create a gameplay that follows on for people who do know what monopoly is just naturally with what people know of as monopoly and allows that intellectual property to evolve and thrive.

And for the biggest companies in the world, like Hasbro, they've got very active licensing teams. They can go find partners like Scopely. I would say the same is true with Epic. They've got just this robust ecosystem of intellectual properties feeding into Fortnite. And that's, you know, again, how my son knows who Snoop Dogg is as an artist.

It's because of the live event activation. It's how he knows who Jason Voorhees is. These characters that many of us from an older generation knew because of film and because we used to talk about it or from comic books, etc. But the new generation, the younger kids are all interacting digitally with IPs.

And if these IPs aren't naturally finding their footing on TikTok, they've got to find deliberate strategies to get in front of the consumers where they are. And so working with a platform like Overwolf is our bet as to how these big IPs in mass can find their way to consumers who are spending their time playing games.

And the results on the other side can be electric when you marry an intellectual property like we saw with Pokémon and Pokémon Go, the right game mechanic with the right intellectual property can just be explosive and you end up with a piece of software with your IP and a direct-to-consumer relationship with a billion users, right?

And that's something Pokémon would have struggled to do without that type of game on the other side. So Overwolf seeding that ecosystem with the community creations and being able to forge those relationships with the intellectual property owners for us is the next leg of growth for Overwolf and one of the reasons we're long term very excited investors behind the company.

Aaron: Well said, I have one to two quick questions for both of you as we wrap up. Um, first of all, Shahar, what else? Is exciting at Overwolf right now or what else should people be looking forward to in your ecosystem as this year wraps up and 2025 hits off soon.

Shahar: You know, look later in the month or later in the quarter, we're announcing a very big partnership, that's going to be quite impactful.

That's one thing we're very excited about that. We're kind of all around the clock around that. , and second, we have more IP deals coming. , next year, , into arc, , and that's very exciting, to see that take shape and form and also scale. So these are kind of the things that are on our radar right now.

There's a bunch of other things, but these are the most exciting and context to this, to this type of conversation.

Aaron: Awesome. And where should listeners go to, to learn more or stay tuned or get involved with over wealth?

Shahar: Stay tuned. Basically LinkedIn is a good place. We push a lot of stuff on LinkedIn.

Also the, the senior leadership of Overwolf is present there. And in general blogs, social accounts, if you're a modder or if you're a gamer that consumes mod , the quitter that, that CurseForge Twitter X is a wonderful place to hang out. Also TikToK and Instagram. Just look out for us.

Aaron: Awesome. And similarly, Nick, back to you. We talked a lot about modding, UGC, transmedia today, but , what's another area of the gaming landscape that's exciting you right now from an investment perspective that you would like to highlight, or if you don't want to dig into that, is there anything else you want to share about what your teams are building at Griffin or Good Game right now?

Nick: We're really passionate actually about the indie ecosystem The hit risk is very high and it's very hard to predict success, but we're intrigued by the breakthrough evidences of Hits like Manor Lords, for example Which was largely driven by one person's contributions to the game and obviously it's grown a bit since then But to see the power of individual creators in this world where AI can really amplify those creative capacities That's extremely exciting for us.

Takes a lot of work. There aren't VC sort of formulas to look at someone's LinkedIn and predict whether or not they'll be able to come up with a new sort of creative endeavor that is unpredictable, innovative and exciting to consumers. And that for us is thrilling. I mean, to be on the hunt and talking to people of all varieties.

We're also active on, on LinkedIn and social channels. So if you've got an interesting idea, feel free to reach out pitch at griffingp.com. We'll respond to everybody who sends us, what they're working on.

Aaron: Awesome. Well, let's go ahead and wrap up here, guys. It was a real pleasure to chat with you both today.

I learned a lot and to all of our listeners, thank you as always for tuning in. We'll catch you in the next one.

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