A new frontier is emerging with the advent of "web shops," also known as direct-to-consumer distribution methods. Alexandra Takei, Director at Ruckus Games, sits down with Chris Faught, the CEO and founder of Neon, a direct-to-consumer payments service currently working with Space Ape, Metacore, and Theorycraft to build customizable web shops and geography-specific payment systems, challenging the traditional distribution models of Apple and Google. 

We explore the evolving landscape of mobile regulations, contextualize the current payment stack in gaming, and break down what it means to be “the merchant of record.” The discussion highlights what major publishers and game studios have done since the iOS and Android distribution shake-up that began with Epic's lawsuit against Apple in 2021. 

Additionally, we dig into the nuances of why a direct-to-consumer webshop is about more than just increasing profitability. For any studio, investor, or revenue strategist interested in optimizing margins and considering a shift to a direct-to-consumer webshop, this episode is a must-listen.

We’d also like to thank Lightspeed Venture Partners for making this episode possible! With its dedicated gaming practice, "Lightspeed Gaming," the firm is investing from over $7B in early- and growth-stage capital — the by far largest fund focused on gaming and interactive technology. If you’re interested in learning more, go to https://gaming.lsvp.com/.

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

Alexandra: Hello everyone, and welcome to the Naavik Gaming Podcast. I'm your host, Alex Takei, and this is the Interview and Insights segment. Over the past four years the gaming industry, specifically the mobile gaming industry, has been fighting for and incurring shifts from regulators as it pertains to mobile app distribution centers, primarily the Apple iOS store and the Google Play Store.

The core premise here is that these distribution gatekeepers are extracting value from mobile games not tantamount to the value they provide, and that they have intentionally put down competition for alternate app stores and or made it a logistical circus. for a consumer to pay for their games in app purchases through another payment gateway.

At the beginning of October, the games industry made some major headway when Google's Android store was officially ruled as an illegal monopoly in the final ruling of Epic versus Google, with the primary changes being one, to let Android developers tell users about other ways to pay from the Play Store.

Two, let Android developers link to downloading their apps outside the Play Store. Three, stop requiring Google Play billings for apps distributed in the Play Store. And four, Google's no longer allowed to pay OEMs to not preinstall alternative storefronts or to preinstall Google Play. Of course, Google will appeal this ruling and so time will tell what will transpire over the coming years.

Meanwhile, there are many operators and founders building in the adjacent space of web payments to compete with the 30 percent fee on in app purchases. And this is what our episode is going to be about today. Specifically, how does payment gateway work for most games? Do web payments, quote, solve the problem of the high in app purchase fees?

Who web payments work for and what sort of differentiation is there between web payment providers? All of this, of course, is set against the backdrop of regulations meant to protect and enhance consumer choice. And so, in order to break down this topic, I am joined by my friend, Chris Faught, founder and CEO of Neon, a direct-to-consumer web payment service that allows game studios, primarily mobile but not limited to mobile, to create customizable web shops and integrated payment checkouts.

Neon is currently working with clients like MetaCore, SpaceApe, TheoryCraft, and PerBlue. Chris has a background at Apple, Booz and Company, and Affirm, and it's my pleasure to have him on air today.

Chris: Great to be here. Thanks for the intro.

Alexandra: Yeah, it's very excited to have you on. Um, we've spent a ton of time in person preparing for this episode.

Um, so I'm so excited to download all your knowledge on this brand new space, honestly, in gaming, um, and the direct to consumer and web payments world. Um, I know I gave you a little bit of a brief intro, but I would love for you to tell the audience in your own words, uh, how you came to found neon, uh, specifically why you founded it.

And what Neon is doing in your own words. So before we dive into our show today.

Chris: Yeah, of course. Thanks again, Alex. So, let's see. I have spent the majority of my career in sort of FinTech. Like you said, a firm. I spent some time at Apple Pay. After that, I was helping a FinTech VC called Ribbit Capital start what will likely become a new payment network with and alongside Walmart.

And the common thread, you know, among these experiences effectively is building payments or commerce networks and I became very, very obsessed with this problem or that business model. So, what is a payment network? What is a commerce network? Effectively, it just means any payments or FinTech tooling software or otherwise that, helps bring a buyer and a seller closer together.

 Helps shorten the distance between that relationship, facilitate better commerce, better rewards, better visibility, understanding one another, et cetera. So, you know, in our view, as has been the case with every one of these payment networks I've helped sort of build, uh, if done right, it could be a really powerful accelerator to enabling commerce in any vertical.

After my time at Apple and I was working, With Ribbit on the Walmart thing, , I was trying to figure out like, where are and what verticals outside of like general purpose retail or travel, , could benefit from having a commerce or payment network of its own, you know, maybe it hadn't existed before and for me, of course, like very importantly that I cared passionately about potentially founding something into because of how hard It is to do this.

And this was in the summer of spring, summer of 2021, I kind of went down a couple of different paths and then ultimately landed on gaming. , most notably because of the opportunity to, especially in light to your point of all the regulatory stuff, that's been changing what we believe is an opportunity to introduce a payment network or a commerce network that will fundamentally help change.

The relationship between a developer and its player in a very positive way. So it was in the summer of 21, when Apple came out with a, you know, an update, the app store policy, you know, basically said, look, we're not going to change our 30 percent fee, but we will reconfirm our commitment to every developer that you're allowed to have an off platform or out of that payments experience, commerce experience.

If you want to. And as long as the customer opts into giving you their contact information and you can find a way of sending them there outside of using the in app real estate of doing so, and again, that's been changing too. Have at it, right? Pay whatever that costs for you to build. So that's when we started to go deep.

I'm like, well, what exactly would it take to enable an out of app commerce experience for a game studio? What would it be in terms of a value prop or, you know, the, the sort of the technical complexity of bringing something like that to life, spoiler alert, a lot harder to do than I think we expected.

And then if we were able to do it, like what type of capability with that allow a studio to do, you know, thereafter, you know, including a lot of our mission is really centered around everything we do is to help a game creator, big, small or otherwise kind of build and become an enduring brand of their own and selling direct to consumer is a really big part of that.

Alexandra: Awesome. Well, that sounds like a fantastic journey. very much like the, the lean startup method, finding the problem space, tackling the problems, seeing the need, so I love hearing that thesis actually playing out in action versus it just came to me one night a dream.

Chris: And I'll say my, my wife was at PlayStation at the time, Twitch there shortly thereafter.

And it was so, Motivating, inspiring to see just how like beloved those brands of course are, but it's like just building a business where you're helping no developers or, you know, connecting streamers with, with viewers and stuff. It was really, really inspiring. Really jumpstarted our interests here too.

Alexandra: That's terrific. And so, so you set a little bit of context there about like what web payments means it's basically just bringing the buyer and bringing the seller, like you said, way, way, way closer together. But before we get started, like specifically on store policies, neon, more specifically what AAA studios are doing in the payment space, I actually just want to ground us in some general education about how payments work in games.

And so when you look at the PNL of a game studio, you often see this line item PGF that stands for payment gateway fees. And these fees are usually associated with fulfilling the payment method that a consumer inputs for purchase I think of that being the annoying fee that I have to pay ticket master for my online payment.

But there's a lot more going on underneath the hood here than just like the credit card vendor. , and so I want to hear from you a breakdown on how payments have been working on PC and console and mobile in the past. How many steps are there in the chain and who are the key partners along the way that provide those services?

Chris: Totally. Yeah, that's a great question. It's, it's most helpful to start the answer to that question by introducing The very played out concept of a merchant of record, which I think has been bounced around, maybe abused to this point, especially in this world. But so let me start there and like maybe demystify what exactly that is.

, and then, and then use that as a bit of a roadmap to get into like all the other payment activities that come thereafter. So a merchant of record basically just means you're a merchant. And the concept was, I think, born. Out of certainly e commerce, but when the card networks, Visa and MasterCard in particular once platforms were enabled where you have Amazons or other marketplaces of the world selling, people are selling through them.

Well, Visa and MasterCard and the regulating entities needed to know, well, who's the consumer actually buying from, right? Is it the supplier or is it Amazon? It's Amazon. Same is true for all the gaming platforms that you mentioned. When you buy or make an in app purchase or an in game purchase console, PC, or otherwise you are purchasing from, or transacting with Apple or Google or Steam or Xbox, Microsoft, et cetera.

, because they're the merchant of record. So we'll kind of come back to, well, why do they operate as a merchant record? Like, why is that the part of the value chain that they, these platforms? And now we. Need to operate in and sort of the value prop for the, the buyer and the seller in doing so, but maybe we'll start first with like, well, what are the activities that they handle?

So, and, and, and again, you can look at any proxy in e commerce where there's a merchant and they're going to be doing all of this stuff themselves. The biggest difference though, is that because of the install base of mobile phones, consoles, PCs, et cetera, is global. And you have a consumer base that is global.

You now need to figure out how to be a merchant of record everywhere, right? Everywhere the players are that you want to sell to. And that is a very non trivial part of the complexity. So anyway, merchant of record, what do they do? They handle. Payments. What does that mean tangibly? That means they're responsible for identifying onboard and negotiating with integrating, optimizing every payment processor or payment service provider, if you've heard the term or specifically payment method.

In every market around the world that they want to sell, you know, to, it's in this case of their players. The other part of that is managing very important. Part of that is calculating, collecting, remitting, registering to do all of those things as it pertains to sales tax or value added tax in every market around the world to then you have the, the sort of the long tail of things where they're responsible for managing fraud, they're, they're, they're responsible for mitigating disputes and charge backs.

They are responsible for. Providing post purchase support, you know, to the player, if they have inquiries or there there's an issue with their purchase. , as well as things like when you kind of go a little bit up the stack in terms of what the, you know, the merchant of record needs to do for a player, they're responsible for data privacy and, and complying with data privacy laws like PCI or rather with GDPR or payments compliance law laws like PCI DSS.

So there's a whole lot of stuff that you need to do in order to sell right to an end consumer and to do so globally. The other wrinkle globally is that because you're basically having pay ins across so many different currencies. That merchant of record also needs to find a way to manage and hedge foreign exchange risk, right?

So you got a balance of a whole bunch of different currencies in addition to, you know, dispersing the, the payouts out to the, the developer at the end of the day too. So anyway, that, that stack of things effectively is what any platforms, you know, payment system is really doing under the hood. So then you kind of go back to, well, why do they need to do that?

I mean, just given the complexity itself. Every app developer, every developer of any game in particular, they're just focused on building a game, right. And they want the app store to kind of manage that distribution payments, complexity for them. Cause it's a lot of work to do. And you know, these capabilities aren't native to.

A game studio or, or any, or any app studio for that matter.

Alexandra: Totally. That's definitely sounds like all the things you said sound like things I don't want to do. That's right. Yeah. None of that seemed exciting. Yeah, it is too much, thankfully.

Chris: Yeah.

Alexandra: Okay. So that actually was one of my questions, which was, what is a merchant of record and how should I think about it?

But it basically sounds like. Payment methods on PC, console and mobile are currently working summarily as the following. On PC, if you are a platform, you are Steam. You are the merchant of record, and you are doing everything that you just said. If you are a console, and you are Sony, and you are Xbox, you are doing everything you just said.

And if you are a mobile game, Mobile game developer, you are the iOS store, you're the Google Play store, you are doing everything that I just said. And so, you just described actually a lot of work, right? And so, actually one of my questions was, Are those fees already inside the 30 percent store and the 30 percent platform fee?

Chris: And I would presume, yes.

Alexandra: So, what's the, that sounds like a lot of value.

Chris: Look, so, there's, maybe there's two sides to this. The first is where did the 30 percent number come from? And, you know, I don't know this definitively, but in, in terms of like being a complete nerd on games, market history and stuff like that, from what I've gathered, and I think some others would attest to the same, this was born out of the, you know, 1985 Nintendo coming to the U S if you want to license, if you want to produce a game for.

The NES, you got to pay two things. There's a cartridge manufacturing fee and there's a licensing fee. And that somehow ended up at 30 percent royalty, 30 percent take rate on revenue. So. Steve Jobs was a priorly, you know, before, before Apple and worked at Atari, I think it was very familiar with what was going on in that world.

And I think for, for, you know, has that number got propagated through other platforms over the years? And I think Apple and Google very much built their app stores to Emulate what was happening among game studio platforms to that 30 percent ended up being like the market standard. So it's sort of like, where did it come from?

Is it really justified? Or are we talking about something that's like very much an artifact of a different era where we're not paying manufacturing fees for cartridges, et cetera, fine. But then you say, well, to your question, what does it really represent today? And like, you know, I have gotten the question many times and I know people are, you know, come out on both sides of this question, but like, is it justified?

I'd That's a, that's a very sort of nuanced question or like line of inquiry that you can go down, but I think the better way of asking it is like, when you talk about these things that we just walked through merchant of record stuff. What's the cost basis here? So a really important thing to know about Apple and Google and their app stores is that they support with some exception, only card payments.

So credit cards and debit cards, and that's Visa, MasterCard, Amex, and then there's local card brands in different countries. And those fees, you know, especially if you have a direct deal with Visa, given the volume that Apple and Google put through, not only as an app store, but as a retailer, I'm sure that they do, you know, that fee per swipe is anywhere between, you know, one and a half percent and five cents.

To, you know, Amex is notoriously expensive given their brand. It could be upwards of three and a half to 4 percent and sometimes 30 cents. So, but then you say, okay, well, how do you get from there to 30%, right? So you start to build this up and you're like, well, how much is the cost of managing foreign exchange?

How much is the cost of managing and mitigating fraud? What about the overhead associated with providing refunds and player support? Like it begins to get very ambiguous. But then of course, Apple and Google certainly argue that it's not just that stuff that the app stores are doing. There's hosting, there's SDK development.

They have a platform with a ton of consumer trusts already in preloaded payment methods, et cetera. But if you really just isolate the merchant of record stuff, I think you come out somewhere around. You know, probably six, 7%. You know, on the high end, especially given the deals, they probably have the payment networks.

Alexandra: Hmm. Okay. Well, six or 7 percent definitely sounds lower than 30%. So there we go. And you answered, I think a lot of my other questions. I was going to ask this oversimplified question, which was, let's just say that I didn't want to pass through the first parties or Apple or Google or whatever. Why can't I just like, Set up Stripe or PayPal.

Like that's a, I, what's the complication that I'm missing? Cause if it was as simple as that, everyone would be doing it. I think some of it has to do with regulation, geo and taxes and compliance, but is that the bulk of it or is there another reason?

Chris: Yeah. So, and that gets a little bit into sort of what we're doing and our approach to doing it.

But, you know, so you're a game studio and you say, okay, I saw this 2021. Press release where I'm allowed to have an out of app store or an out of app payments experience or whatever. Great. I'm going to do, I'm going to go do that. If you only had players or consumers that are like heavily concentrated in one country, then the, the, the amount of things you'd have to do to stand up that experience or less, right?

So, First thing you got to get a front end. So what's your version of an e commerce storefront on web, you know, vis a vis what you have in game already, that will take some front end development, find a way to be integrating that in your existing live ops tools, workflows, game server, backend, et cetera. So you can populate offers, et cetera, on web.

Okay, great. Let's assume that you can do that. And now you're saying, well, now you got to accept payments, yeah, if you are in just one country and you want to plug in something like a Stripe or an Adyen or PayPal, you can do it, but you still have to do the sales tax piece. So again, if you want to take the burden of doing that, the sales tax regime regime in the U S tends to be actually one of the most complex in the world because it's very state by state.

You can, but it's now something that you have to not only take on as a responsibility, like I said, calculate, collect, and remit. You know, back to the state authorities of the IRS, but also stay compliant with those things as they change, as they happen to change, you know, fairly often. So it's not just about, you know, plugging in a stripe.

I'm scared already. Even if it's in the U S you know, but once you go globally, that's when the complexity kind of really scales exponentially, I guess, as well.

Alexandra: Okay. Got it. All right. So it sounds like there's a lot of sophistication there. And that's leading to kind of my, my final question on like does grinding us and some web payments one on one, which is, you know, you told you talked a little bit about the geographical differences.

And you just explained that the US is actually one of the most complicated state tax income. Like, I guess, uh, tax scenes, regimes in the world. Right. But tell me a little bit more about how this looks across maybe some key gaming markets, the U S the EU and Korea and China. So at a high level, I know. Go.

Chris: Well, so I mean, it's, this is like the question, right? So I, I think one of the most interesting observations about all this stuff since we got started is. It is so intentionally confused and obfuscated with headlines that say, oh, they won or they lost. You can do this now, but you can't do this or they're gonna appeal.

It's gonna be another year, whatever. You can start to try to pick the questions apart platform by platform. You can pick it apart, you know, market or geo by geo, you can pick it apart. Like, is it mobile? Is it consoles, a PC, et cetera. All of that, I think actually is not like the best way to do it. How we think about this, having spent a lot of time with a bunch of lawyers, a lot of like former Apple and Google policy people, too.

It's just start with the questions that any developer or game creator is asking and then run through those questions and see, am I allowed to do it? And if so, what do I have to pay to do it? Right? So in your mind, imagine there's a table. I'm very much a two by two and tables guy says my team will tell you.

The table has five rows. These are five questions. Every app developer is asking. And then there's two columns. It's like, can I do this? Just, just take mobile. Can I do this with Apple? And can I do this with Google? And if so, what do I got to pay? Right. Is there a penalty or like a commission attached to it?

So the five questions are as follows. First is. Am I allowed to have an out of app, call it just web, uh, sales channel or payments experience at all? You know, yes or no. And the answer to both of those is yes. And the answer is what do I got to pay Apple and Google to do it is no, you don't have to pay them anything.

It's your percent as long as we'll get into the other sort of nuances there. And that is true globally at this point. Then the next question is, am I allowed to link to that out of app experience or advertise the availability of that out of app, you know, payments experience from within my game? Now that is something that has been very hotly contested this year.

And it made its way up to the Supreme court in January, who decided to not hear the argument from, from Apple. And the answer right now is in the U S for Apple. Yes, you can, you know, link to that out of app experience, but now you've got to get this sort of basically app to web entitlement from Apple. And what it comes down to is you pay 26 or 27 percent of all revenue that is generated.

Once Alex clicks the link in game, makes a purchase on a neon powered webshop or whatever, they owe it back to Apple. So, and the same is sort of true now. And this is one of the things that came up with this decision recently with Google is yes, you can, I would imagine they'll mirror the same thing here.

You can do it. You got to pay us for it. And I think that's kind of the standard internationally as well. So what does that actually mean? It renders the whole point moot. Why would I do that? Right. When you add up the fees, as we've said about, you still need a merchant of record, you're in excess of 30 percent to the point where I think it was, , one of the trial evidences recently came out that said that after that decision was Of the 65, 000 apps on the iOS app store that take in app purchases, like filed for this in app link thing.

Nobody's doing it. Right. So, so anyway, yes, you can do it. It doesn't make sense to. The third question is, am I allowed to have an alternative payment method or payment system in app, in game, right? Again, this is the same thing where in Korea, in Japan, through the EU, in the DMA, in the Netherlands, and now in the U.S., or soon to be in the U. S., the answer is yes, but if you know, incorporate a PayPal or something else in app player makes a purchase using that payment method. You owe us 27%. I think it's 27 percent for Apple, 26 percent for Google. So same thing. Why bother doing it? Right. The fourth question is, and this gets into a lot of the DMA stuff and the third party app stores is, okay, am I allowed to directly distribute my game from a website side loading sort of as it's known?

And am I allowed to do that on Apple and Google? And this is sort of still being contested. It's playing out through DMA. There's a lot of. Questions around what sort of like install fees, Apple or Google might try to levy for that as well. But like that's trending toward. Yes. And then the fifth question is our third party app stores permissible, right.

And can they distribute through the app store as well? And what are the fees associated with it? So anyway, if you kind of like step back from all of this country platform, you know, region or otherwise, those are the five questions. And for us. We view question number one as the most important question, and it's something that we just fundamentally don't think is not going to change.

And I can share a little bit more as to why we think that. And that's what we're building this whole business on and the opportunity surrounding sort of the out of app payments in the first place.

Alexandra: Okay. But then I think to the, to the regional point, right? Like the, Merchant of Record is responsible for handling all the complexities of the payment methods, for example, in another region.

So like if, you know, like there are different bank cards in Korea than there are in the U. S., but the Merchant of Record would handle those things. And so, a huge benefit of just making my life easy and just, you know, kind of washing my hands and stepping away and letting Apple do the work is, Basically, like not dealing with any of that complexity.

Chris: And again, that's what we have to do as well. Right. And in our world, it's so important to us, you know, back to what we were saying earlier around, you know, card usage or card penetration as it's known, how, how much does a population use credit and debit cards? It really varies by country. So for instance, in India, I think it's around like 50 percent penetration.

In the U S and the EU, it's quite high. But the reality is that the app stores, because they only support card based payments, even in places like India, you will have a very high number of downloads or daily active users in a country that isn't monetizing that, you know, payer to player conversion is low.

And it's largely due to the fact that they don't have payment methods that that consumer base wants or use is used to paying with. So in our world, we have to do the same, but also add in A lot of these other payment methods that the app stores do not support so that we can actually help you tap into, you know, a payer base that you're otherwise ever looking to.

Alexandra: I see. Yeah. All right. So you kind of laid out some of like the key questions that a studio is looking to ask, , and making a little bit of sense of the very confusing app store policies and regulations. , and you set the scene for when you first found me on, , when Epic had first filed against Apple in 2021.

And there's been a lot that has changed in the regulatory environment since then. , If you had to kind of like summarize and this now we're kind of moving into store policies and regulations. If you kind of had to summarize what the top five changes have been. Over the past, like, two years, you kind of said some of them and we talked a little bit about some of the ones that had happened just very recently this past month, what are those things?

And then also, like, what are the top five app store policies and regulations that studios usually mess up? Like what? And like, and what are the consequences for making those mistakes?

Chris: Yeah, maybe I'll start with the second one. First, obviously they're related, which is, you know, I don't think, I don't think of it as messing up, but like, what do they get tripped up on?

Or what's just confusing? Because again, these, you know, 1. 5 and 2. 5 trillion market cap businesses and their PR machine. It's very intentional about like, Oh, well, even if, you know, I lost this legislative battle, I'm going to make sure that it makes it look like nothing can change for a studio. So it's, We generally view this as like, you've just been sort of misled.

And the biggest one is back to this sort of five questions is like, am I allowed to do something out of app? Right. Am I allowed to have a web store? Am, am I allowed to, even though that, you know, Apple or Google say that I can, are they going to shadow ban me in other ways, or is this actually legit?

So this is where I kind of take the, the retail analogy, which is in the early two thousands, if you were a brick and mortar merchants or an offline merchant or something, and you wanted to sell online, you sold through Amazon and Amazon had, you know, a very expensive take rate, they had distribution, all that sort of thing.

But it wasn't until companies like Shopify and Stripe and add in all the other enabling infrastructure sort of startups came into being later in the two thousands that you could now say, I'm going to keep selling through Amazon. They charge a lot, but they provide a lot of value, but now I'm going to bolt on my own direct consumer channel as well.

Right? So the idea is that if Amazon were to try to prevent that from being possible, that's like the biggest antitrust red flag imaginable. It's not going to change. So the answer is yes, you can do it. Completely understand why it can be confusing, you know, given some of the headlines in recent memory as well, especially since we started.

So I'll go back to your first question, too, which is. What's changed. So that has become more clear, right? Whether it's the August, 2021 press release that reconfirms this as well as a lot of the, especially like AAA publishers who've leaned into and embrace this early on, it's been a social proof of saying, well, I can do it and people are doing it like studios that they admire doing it.

And it's actually working, right. It's resonating not only with their players, with their business. So that's a big shift from like, when we got started. To be like, I guess we might be able to do this. I'm not sure to now it's becoming more and more of like a strategic necessity, right. As, as just part of scaling your, your game and your business, the other things are sort of on the margin.

Right. Because I generally think they have not fallen one way or the other definitively yet. Right. So the in app payments. Is that going to open up and not have a, you know, 27 percent commission attached to it? I doubt it, but TBD, at least there's taking steps toward, you know, continuing to litigate it and all the countries that you mentioned the big one, right.

About driving awareness of your out of app channel through advertising or linking in app. That was a, you know, quote, big win earlier this year, especially with Apple in the U S. But with what they threw up in terms of the 27 percent penalty, Renders it moot. So I don't know if that's going to fall one way or the other.

And then I think, you know, the stuff around the third party app stores and direct downloading it's possible it's permissible in some of these markets. Then it's a little bit to be determined whether or not it's gonna take hold. Right. But I just go back to, we know that you can have your own direct channel.

So start there and let's build on it as these regulatory environments kind of unfold over time too.

Alexandra: Hmm. And if I mess it up, my consequence is that I'm banned, right?

Chris: Yeah. Well, it depends. It depends on what you mean by mess it up. So like if you're. Trying to, you know, play a gray area by, you know, serving an in game ad about your web store, like, can you do that?

Like, can, can that like get past app review? Maybe, right. If you not gonna give tips and tricks there, but like probably not, we certainly don't advise it like our job. Is it not only be experts in all the domains that, you know, it's sort of, we're talking about, but certainly be on the forefront of both regulatory and apps or policy so that we can be sort of a source of advice and counsel on questions like this.

So, you know, mess up. I think it's like a, you're going to get a slap on the wrist. If you try to do these things, it's caught an app review if you continue to do it, of course, as, as Fortnite had done with their in app payment method, they're going to get booted out. But you know, we'll see how it unfolds over the years to come.

Alexandra: I see. All right. And earlier you mentioned that there are, that big publishers had actually like started leaning into this as basically like a sample of approval that like, yes, indeed, you can have your own store and you can share that you have your own store. Publicly what are there? Let's talk a little bit about examples of studios and gaming companies that have done that that you find to be strategically mood meter moving.

For example, take two has built a consumer platform for mobile games that actually allows customers to purchase in game currency from web stores. And the margin expansion is obviously tremendous for someone like take two who has a lot of owned and operated properties and was honestly just paying 30 percent and now Yeah, maybe paying a lot less.

Who else is doing something like this to choose success? And is this kind of like one of those things where if you are a take two, should you just be doing it de facto?

Chris: Yeah. So there's, there's a lot there. I think just maybe on that point, it's who should be doing this and then how should you be doing it?

Right. Is this a build? Is it a buy as a partner, et cetera. And there's a lot to talk about there as well. How, you know, of course we have our own sort of like self serving bias there, but in speaking with most, if not all of the large studios in particular, publishers that have, you know, built this or flirted with building it or have since moved to partnering.

Yeah, we've got a lot of interesting feedback on that front. So who's doing it? I think the, the one that was most visible because they're, you know, they publicly traded and they had their quarterly financials that were stating. So the direct to consumer, you know, we think of it as mixed shift.

That's sort of the number, the metric that we've come up with, which is you've got Apple and Google a hundred percent of your gross revenue. What percent of that revenue mix have you shifted to your direct consumer channel over what period of time? Is it durable, et cetera? So one of the most visible ones was Playtika.

And I think that I can't remember exactly when they started doing this, but I want to say they started reporting on their financials in 2020 or 2021 and has been slowly increasing that to somewhere to the tune of 23, 25 percent of their gross is coming through direct, but to your point, take two has also done it.

Supercell has done it. One of the members of our team, Laura Gilliland was there and had a, like a really interesting perspective as they were building parts of that capability stack, including identity among other things, and being at the forefront of doing direct consumer. , I think there are others in terms of like, you know, blizzard repurposing some of the battle net infrastructure that they had to figure out, well, is this something that we can now bolt on to, and you know, cause a lot of payments and tax infrastructure there to enable direct consumer, et cetera.

So there's been a lot of cases. And I think more and more are being more public and vocal about we're doing it. It's working. Our players love it. And it's, it's permissible, right? Like the social proofing is here. We're not getting no shadow ban from the app stores or anything like that. So that's sort of what we've seen so far.

Alexandra: Got it. Yeah. I also believe that like scopely is doing it. It's like, go tycoon club, et cetera. And this actually, I think is a great segue to talking a little bit about like what it means to actually do that and where neon kind of fits in because like many game companies, and you mentioned some examples, supercell, you know, You mentioned Blizzard, we talked about Take Two, Scopely, Playtika, that's mobile and PC and console, right?

And many game companies have attempted to own their distribution, that's what Battle. net is, of course, and payments stack by building their own launchers. So Battle. net, EA Origins, the Riot client, et cetera. But obviously this takes a ton of resources. And so for smaller gaming companies who want to invest in building their game versus a distribution infrastructure, You know, someone like and a partner like neon exists.

I see neon in a very similar way as you would potentially see like a back end gaming engine, right? Where you don't want to build out all the infrastructure for this thing and you want to focus kind of on your core competency. So let's take a little bit of time here to talk more in detail about Neon.

What, what is it? Who are some of your clients? I mentioned some of them at the beginning and what makes it different than maybe another web payment providers that might be out there?

Chris: Yeah, so you know that you gave analogies like a back end as a service provider. I think of what we do or are aspiring to be.

Which I think has now been, you know, repurposed by some other folks is we want to build the Shopify, you know, what Shopify is to e commerce merchants is what we're building for game studios, which is a suite of tools that allows you to sell direct to consumer on web. And the other analogy I like to give in the brick and mortar world in the U S at least is square.

Right. They provide a lot of a constellation of payments and commerce tools for, you know, coffee shops and others to again, you know, enable and empower them to sell directly to the consumer. So that is what I had worked with a lot of those companies, especially when I was at a firm drew a lot of inspiration from.

You know, how they build products, how they work with small and large businesses on sort of abstracting a lot of the complexity we've been talking about so that you can focus just on selling and building that, that relationship with the consumer. So that is very much the ethos of everything that we're doing the best way to think about what our product is today is it's sort of just direct to consumer in a box. So there's three parts of that, which are, you know, very technically complex under the hood. The first part, as we alluded to a little bit earlier, the front end, right? So the, the ability to stand up, merchandise theme, sort of offers to plug segmentations in your e commerce store, your web shop, your web store, , that is a set of front end tools that we've had to, to develop and expand over time to accommodate.

Basically every type of offer that a game wants to sell in game, they want to replicate that on web along with a number of other things that, you The second piece of it is this merchant of record platform, right? So again, the biggest complexity there is to make sure that we are doing everything as globally as we can.

We're now live in 43 countries that we have very intentionally selected and curated the right payment methods. To present to a player in a given region versus just throwing a big wall of arbitrarily sort of presented payment methods that actually ends up hurting conversion for a player and making sure that the checkout UX is as seamless as possible because at the end of the day, conversion's sort of the only thing that matters with this type of capability.

And then the third piece of all of this is basically the tooling or the API APIs that we've built to enable the approach that we're taking so that those two things can fit very seamlessly in the way that you build and operate your game today, too. So, you know, the approach that we're taking is We want to give total control to the studio, to the game team, uh, especially in an industry that is very acquisitive.

It's very hard to standardize these things internally, right. Is even as a big publisher so that everybody uses the same, you know, content management system or live ops tools. And therefore we're gonna have like one turnkey solution as a webshop that everybody can use. It just doesn't work. So we build our APIs to allow you to use your existing.

LiveOps tools to use your current player segmentation that you're using in game on web to, you know, port over your identity and login system so that that is seamless. And we've come up with some interesting ways to make it even more frictionless, as well as to plug into the game server where the game progression, you know, data lives so that you can personalize, you know, the web store to be as immersive as possible.

So that's a little bit of what we do and how we do it. I guess the last thing I'd say is we fundamentally believe That the difference between a direct channel, and this is played out in retail, the difference between a direct channel being, you know, simply a way of saving money or at worst actually jeopardizing revenue, hurting your player relationships, uh, turning away people that have otherwise purchased and where we're trying to take this is driving growth and incremental revenue.

The difference comes down to the player experience, right? And in our view, the best possible player experience for a direct consumer channel. Is one that is frictionless as possible from login to navigating the store, to making a purchase, to getting it fulfilled in game and getting supportive. You need it.

It is as valuable as possible for that player. Is there a compelling deal right on the store? Am I getting things that are exclusive on the story that I can't, you know, in app, uh, does it know me? And is it personalizing things to where I'm in the game or the purchase I've made before, et cetera? And then lastly, trust.

I tend to think this whole thing lives and dies on trust. And, you know, trust to us is a couple of things. How immersive is the experience? And is it familiar to me? Does this look and feel like the game or does it look janky or sketchy as a lot of the sort of like selling steam keys on websites in the past?

You know, would turn some folks away. So how do you make it as immersive as possible so that the game studio and their brand can really shine and, you know, very much connect with the player's experience in game. And the other side of it is when it comes to payments, are the partners that you're working with, what's their reputation, right?

You're talking about having somebody instead of, you know, there's a lot of trust with Apple and Google. Look at the scare screens that Apple puts up or Google puts up their whole thing is around privacy and trust. They've spent billions of dollars in getting there. So if you aren't able to establish and build trust with your consumer, this direct relationship, and you're introducing potential partners that could jeopardize it, we kind of tend to think you might as well not even bother.

So anyway, that's sort of our approach. Trust, frictionless and value for the player is going to be the difference between hurting the revenue and actually being a, uh, a, a growth driver for a game team over time.

Alexandra: Yeah. And that makes sense. And I guess it sounds like it's, like I said before, like the web payments, it's an, it's an over some, maybe an oversimplified part of what is mostly, like you said, a direct to consumer, like set up between a studio and, you know, the store, the payment backend, the trust and all that other kind of stuff.

So that's a pretty good sell, I guess, for the studio side, but I actually want to talk a little bit about the business of Neon. So tell me how big is your team? And how do you guys work with studios, cause it sounds like you're providing a lot. So how are you doing all of this?

Chris: So, uh, as I think early on, as soon as we realized.

You know, you can call it the barrier to entry or the, the, what would have to be included in a minimal viable product, which is, you know, I don't think that really holds in payments. There's not really a lot of corner cutting when it comes to like managing money. As soon as we realized that the requirements are going to be quite complex and extensive.

One of the first things that we sort of realized was Well, we need to be building our team with expertise from three domains that, you know, the Venn diagrams before now have never overlapped, right? We need people that know games and particularly mobile games. We need people that understand e commerce because that is ultimately what the product is for games.

And we need people that have a good handle for payments, fraud, sales tax, the regulatory environment surrounding all those things. If we're going to be able to pull something like this off. So our team right now, we're around 10 going to be doubling actually over the next three months we have continued to build at those intersections in our team.

Like I mentioned, supercell, we have some folks from Disney, from cash app, from Palantir, from a firm, from Apple pay, et cetera, advisors from places like Stripe and Shopify, and you know, the, the plan is how do we make sure that we can achieve the level of global scale that we need and also make sure.

That we're helping drive as much value for the studio and as much value for the players. You know, once this becomes a little bit more habituated as well.

Alexandra: Okay. So you have this team of 10 and you're currently working with some specific clients. That's right. Tell me about what that relationship looked like.

What are you, what have you stood up for them so far? And how, what does it look like? And had that come to fruition?

Chris: Yeah. So, Awesome partners. We're, we're, we're deeply grateful to all of them. We've learned so much from them and continue to learn so much from them. And, and it's probably the, certainly the most fun part of any of our jobs is just getting really close to and collaborating with like how to bring this to life in a way that makes the most sense for their game and their players.

So, you know, you mentioned MediCorps, you mentioned PerBlue, TheoryCraft, SpaceApe. It's a mixed bag. Some of them, you know, we got in touch with them directly. Others. You know, Alex, we've done zero marketing. Like we don't talk about ourselves, focus on like building a product and making sure, you know, our customers are getting what they need.

So interestingly enough, some have found us through other means back channel or otherwise, and whether they were working with sort of a legacy provider or, you know, debating whether or not to build some of this stuff in house. When they reach out to us, they ask like if they can just migrate things over to us and what that process would be like, you know, these teams also have a very clear vision for what they want to build and what they want this to represent, you know, to their game, to their studio, their brand, their players, and that's awesome, right?

So if they have a goal in mind and a vision in place, great, and we're very willing and able to meet them where they are. A lot of studios, just given the education sort of curve on this, they may not be there, right? And that's where we kind of try to work with them. To figure out, well, let's try to come up with the, you know, the web strategy, or as we think of it a little bit more as like an omni channel strategy, where you're going to be cross platform or some of your games might already be.

What does this look like now with your own direct channel and providing a seamless, uh, and consistent a player experience across all those channels as possible. So we tend to work with, you know, both and just meeting them where they are, and what does it look like day to day? You know, so we've set up the web shops with them.

We continue to iterate on. You know, whether it's the technical integration or, you know, coming up with better playbooks on how to drive traffic or conversion or what the players actually want to be buying on web, engaging more and more with the players directly to get that feedback as well. It's because it's so invaluable.

Um, and then when it comes down to, you know, geo expansion or new game expansion or payment methods, like the beauty of being a small team is we dedicate every part of our focus and our roadmap to our partners, right? That's why we've been so intentional about. Keeping that as limited as possible so that we can be as, as collaborative and go as deep on, on roadmap things with them as we can.

But going into next year, we're sort of going to be going on offense a little bit more and, you know, seeking to play with or work with a bunch more, you know, in the months to come.

Alexandra: Got it. So like something, if I'm playing beat star or something like that, and I go to like the web payment section for beat star, I'm basically working with neon and set to some extent.

Chris: Yeah. It depends on the game at the time. I can't get too into the specifics on like, you know, you could have a publisher with multiple games and we're going to do one, then the other and tested, et cetera, but, you know, transformers or earth wars is one right now. And yeah, you'll, you'll see the whole experience, the payment checkout experience, all of that sort of thing.

That's, that's what we're powering.

Alexandra: Got it. Got it. All right. So we also walked through earlier about whether or not this 30 percent fee makes sense. And you told me that it all stacks up to six to 7%. So what's your cut? How do you make money?

Chris: Yeah, good question. So maybe I'll answer it in two ways.

It's like, what's the business model and how we approach making money versus others. And then what do we actually charge? So there's kind of two models in this world that we've seen. There's the What we do is we just charge a blended rate and I'll get into what does blended mean, but we end up coming somewhere around, you know, eight to 10 percent is our take rate.

So, you know, you're, you're, you're saving or you're netting 20 percent on the app store fees. I say blended because what, what it means to us is we support, like I said, 43 countries, countless number of payment methods and wallets right now. Each of those have different costs associated with them that we just say based on the payment mix, based on the payment methods that the players in that region want or are going to be supporting, we're going to handle all of that stuff.

We don't want to burden A game studio with, Hey, now you need to go and figure out what payment method to offer players in Japan based on playing this sort of like fee arbitraging game and what the conversion rate. No, that's what we do. That's, that's why we've been, you know, building with the, with the team that comes from that world.

That's our job to handle for you. So that's what I said around 8 to 10 percent blended the other business model, I guess the more common one is they're going to ask you basically to pay the payment fees on top of their take rate. So whether it's 5 percent or 10%, then you pay the cost of PayPal in Germany or PayPay in Japan, or whatever the case may be, or PICS in Brazil, in addition to things like foreign exchange fees or cross border acquiring fees, which is just a very confusing term in itself.

So what people have found is that especially their FP and a teams and working with these, these companies, it's not very transparent. What the actual cost is going to be. Now, there was an example, I'll give you, you know, one example is a, like I said, PICS in Brazil. It's a pay by bank payment method.

It's very popular, very ubiquitous in the country. I think it comes out to costing around 30 cents per transaction to accept as a merchant, a large publisher found that, uh, in addition to all these other fees, they were paying somewhere around 38%. For picks purchases, which is like astronomically high.

It doesn't make sense. So our whole thing is a, we have to be extremely transparent and that's how we built our product. We don't want to burden you with the complexity of figuring out how to optimize a set of payment methods and, you know, conversion rates and authorization rates, that's our job to do.

So we're going to simplify that, give a blended rate, and, you know, optimize it for you over time.

Alexandra: All right. Okay. So then basically that rate is variable.

Chris: That's right. Yeah, we say it's 8 to 10 because, you know, some country, or some studios say we don't actually want or need that country. And if that country has higher costs of payment methods, we say, okay, we can actually lower it for you.

Cause we're not going to incur that cost. Yeah.

Alexandra: Okay. Makes sense. All right. And so basically your business model is basically this almost very similar to the ones that have the current way that web payments and distribution stories have done. Okay.

Chris: There's a world where, you know, and in fact, we've had a lot of interesting conversations recently.

Okay. Where this could be more of a SAS business model where, you know, maybe you're handling to your point earlier, you've got battle light or something. You're already handling payments on your own, you know, whether you should or want to over time, maybe you already have it. So what would it look like to, you know, just purchase the software tooling from, from neon and we'll get to that.

But for now. You know, for the, for the first three years of this, we're just so focused on making sure that it works. It works well for the studios that need it and that we can scale globally and then we'll figure out some of those like nuanced business model questions over time.

Alexandra: Yeah. Makes sense. And that brings me to, the who of all of this, which is, you know, who should use a web payments provider?

Because all the things that you've said, sound. You know, pretty obvious, and I probably want to conclude this with a bit of a nuanced discussion on who and why should use web payments, because I suspect that it's maybe the answer is not just yet. The Nexus CEO, Justin Sachs actually spoke with pocket gamer about the benefits of making a DTC strategy work.

And he made a comment that converting that 25 percent of mobile revenue to DTC could actually lead to as much as 8 percent an increase of profitability. And this highlights the operational reality that as much as something like Neon or Nexus were to exist as a consumer, I still have the choice just, you know, scan my face on using Apple or Google Pay because I trust that service already.

, and, and do it the regular way, right? Because again, we're pivoting DAU from the original way that they used to pay to a place that they don't know which may be foreign or uncomfortable for them. Yeah, what is the way that people are thinking about this? Should every game studio just automatically be having a direct to consumer web payment portal? Is that the right way to think about it? Or is this, is web payment not right for some studios?

Chris: Yeah, and in fact, it can in many cases with our partners is much more than 8 percent increase in profitability because it depends on how you do the math and all the sort of things. So it goes back to our mission, or at least my answer.

This question goes back to our mission, which is we live to help game creators build and become an enduring brand of their own. Stepping out from behind the platform to whom they were a supplier and building a direct relationship with their player, their end consumer. So the answer to the question for us is any game studio, publisher, developer, otherwise, that has aspirations of becoming a brand.

And owning a player relationship, we think they fundamentally should be standing up a direct consumer, a direct consumer channel as a part of that. I understand that can sound like a self serving claim, but it's just fundamentally true when you look again at proxies and retail app stores, aren't going anywhere.

Amazon's not going anywhere. They will always play and serve a very valuable part of this value chain and distribution. But it's just bad business to completely rely on them. If you have ambitions. Of building a brand and building sort of that, that relationship with your end consumer. So the way we think of it is if you have aspirations, whether you're a new game or an old game, a small studio, a big publisher, otherwise, then you should do this and you should do it.

Now there's a really fun conversation I had with the CEO, one of our partners, a couple of months ago. We're sort of like waxing philosophical and this stuff. And, you know, his take was like, you know, Chris, this is, it's not about web payments or, or like direct consumer. This is a movement. It is a fundamental restructuring of how this industry has been operating for 40 plus years.

Right. And the only way it's going to take hold and take hold in, you know, a matter of time that hopefully sort of aligns with the regulatory environment unfolding too, is if we all band together, you know, game creators and studios and push at the same time, there's a crack in the dam. We all have to use our inertia and push through it together because that's how you change consumer behavior.

That's how you set new standards. And if we were only to say, no, it's only for the AAA publishers or, you know, games that fall into this category of genre or something, then the inertia is just not going to build up as it needs to over time. So we think of it as like, it is a movement we all need to push together.

There's more competitors come into the space for us. Like we view that not only as validating, but like a rising tide, right? We're, we're hopefully all in it, you know, for the same thing, the studios are the games that for which this doesn't make sense. And I think that this is a, there's a fair number of them is if it's just like a lifestyle business and you don't necessarily want to, you know, build, build a brand or build a household familiarity or really own your player relationship.

That may just not be important to you. You've got a cash flowing business, right? Or you're okay with, you know, the 30 percent take rate is fine because you're doing something else, I think at that point it ends up coming down to. Are you motivated to, you know, market this sort of thing to your players?

Are you motivated to do something with the player relationship now that you've been able to build it and enrich that? , and if not, I don't think you should bother, but I also think that those that like should probably either wait or hold off are those that are overly short term focus on, I just want to save money because what we've seen there is if they rush to market.

A like a clue G web shop or something that could like we're talking about earlier actually hurt road trust or jeopardize revenue. Now you're actually jeopardizing your in game purchases as well. So it's like, I think you either need to take a longer term view and do this very intentionally with that sort of brand building consumer ownership mentality in mind.

Or I would just wait, right? It may not be worth the trouble.

Alexandra: Yeah. And that's some good nuance there is if you are to do it, how do you do it and when, right? So it sounds like, you know, for anybody that wants to build something long and sustaining, this is like, like you said, it's a, this is a movement.

This is a fundamental restructuring of the way that, Things have been for the past 40 years, but that was another question, which was, you know, when do you set up all this web payment infrastructure? If your game is already live, how do you convert it? If your game is not live yet, how do you best prepare to do it? Any advice for how, any folks should be thinking about that?

Chris: Yeah, you're right. There's a few different of those archetypes, right? Like you're, you're either an existing game and you're asking, how do I retrofit this sort of thing into not just my game or my infrastructure, but like my consumer behavior and sort of what they've been conditioned to do in terms of how they interact with us.

Then there's net new games, thinking about this sort of thing pre launch, there's a, there's a couple of different sort of like archetypes and considerations. So our view is, and by the way, to the point around a new game, what we've seen recently is because so many games, increasingly more games are being built to be cross platform, then the idea is let's, let's build the web channel, whether it's just your website where you have forums or a place to enroll people or sign them up for accounts and bolt on sort of a web store.

Let's build that first as our hub, and maybe we need to do direct marketing to acquire that user to our website versus, you know, downloading the game initially, initially, so that then we can send them to the different platforms or channels through which the game is played, right? So that's like an interesting evolution that we're seeing, especially among, you know, web and PC games, over the last couple of years, at least.

But then for those that have an existing game, whether they are still sort of like in the first couple of years of their life and trying to figure out how to optimize. , you know, their monetization or the live ops in general, or they've been live for many years and they might be on maintenance mode, both are valid, right?

Like I think the, maybe the misnomer here is too, it's not about necessarily taking someone who's buying in app and now moving them permanently to web. Right. I still buy on Amazon or I buy on that, that brands, you know, direct channel, depending on what I want to get, depending on if there's an offer or a deal there.

So again, app stores aren't going away. It's more about how do you appeal to your existing player base? Both those who are paying in app to give them something of value on web. And certainly in one of the things that we've seen, which is really encouraging for people who've actually never made a purchase in game.

Are you now able to give them something compelling so that they're converting as a payer for the first time on web as well? Right. So. It's just a different channel based on the consumer's desire for a deal or an offer that doesn't exist in game two. Got it. Yeah, makes sense.

Alexandra: Okay, there was one thing that you said there that I wanted to double click on before we go to our concluding questions.

And that is, you said something about, you know, a lot of PC, you know, if your game is PC and you're, and you, you're using a web payment method, does this still work with, like, How does it work if you distribute your game on steam as a launcher? Can you, and it's a premium title. So like, how does that function?

Chris: It's, it's mostly relevant today or at least where we are focused and where the, the, you know, app store policy regulatory position stand is mostly for sort of free to play games where you're doing in app purchases, premium games, you're buying it, you know, keys or otherwise. I think that has been.

Litigated and I know seam is, is currently under trial with, a lot of the same antitrust stuff that Apple and Google are, but I think that's been litigated over the years. If people like humble bundle and others are selling steam keys, that's not really what we're doing. I think that's an easy thing to add on later if, and as sort of the PC app store platforms open up as well, but you are allowed still to have web payments.

Right. And, and the challenge with steam, there's a couple of great studios from. We were in Andreessen Horowitz's speed run program, which is shout out awesome program with a lot of great learnings for us early on. There's a guy who's building a game for steam and he's like, well, look, steam still has, you know, app store or I'm sorry, their game rankings based on gross sales.

So like every dollar I'm moving outside of steam would hurt my discoverability ranking. Right. So those sorts of things are sort of built in disincentives, even though you can do it. But our general take is As goes the app store regulation. And because, by the way, when, you know, Microsoft was trying to get the Activision Blizzard deal through, , a couple of years ago, they preemptively came out and said, we, here's our open app store principles.

They're going to apply to all of our app stores, including basically doing everything that Apple and Google have been sued for. So, like, use whatever payment method you want. If you want to have a direct download, go for it. Right. So I think as goes the app stores, as goes the regular story environment on mobile, we tend to think it's going to apply to all of the other gaming platforms as well.

And it's just a bet that, you know, cross platform will continue. Web payments will continue. Direct consumer will be a big core part of both.

Alexandra: I see. Yeah. All right. Well, that was one of my questions about the future that I wanted to conclude with, which was, do you see something like this? Basically, the idea that we skirt Google and Apple store fees happening to someone like steam and obviously steam is currently being litigated.

But one of the things that I would say is that the monopoly, the monopolistic or the duopoly behavior between Google and Apple is not as present on steam as there is a really vast market. Theoretically, a very vast network of distribution launchers, Riot, Battlenet, Steam, etc. But now, Battlenet's just been bought up, right?

And so then, that kind of gets like, hogged in again, and that also might be going towards the Xbox PC launcher, etc. Like that. So, do you have any perspectives on like, how you see the future going for the PC landscape?

Chris: I think the optimists in me, you know, if we get into sort of like our vision for, I guess like we view the apple epic trial and all of the, the trials since, by the way, there've been so many lawsuits over the course of this industry that effectively around the same thing against Sega, Nintendo and others, but like the apple epic trial in particular we view as.

An inflection point where the future of the games industry can finally shift and I don't, mobile PC console, et cetera, can finally shift from this oligopoly effectively that is owned and operated by platforms or platform based publishers, however you want to call them. To something that is more open and fair and fun for all participants involved, right?

So our mission is to help, you know, game studios become and build their brand, but our vision is to help accelerate that change. So like I said about the, the, the regulatory landscape, as those dominoes continue to fall, I tend to think it is a question of when, not if, , of course people appeal and it takes more time, but like the, the crack in the dam is there so that in the future, I believe most games will be cross platform to start.

All right, doesn't matter what screen you play on, you want to play a game on one thing, you want to pick it up and progress it on the other. Of course, things like game streaming, as that continues to evolve, that makes that reality very true, as well as erodes sort of the graphics or hardware advantages that some of the consoles have themselves today, too.

And they know that, right? About sort of like where consoles are going. So we kind of think that that's the inevitable future where every game is cross platform. You have your own web channel, you can play it no matter what screen you're playing on, and it's just going to be a matter of time.

Alexandra: All right.

So that's my first, my first future question. And then my second future question is more related to neon. You know, what is something that absolutely must go right? In the currently frothy regulatory environment for your business to work.

Chris: Yeah. I mean, now, now you're asking like the investor, I think it's already happened.

Alex, like again, you go back to my five questions, if you remember them right, like question number one, am I allowed to do this on web? I just, there's probably no world. Because of it being an antitrust, you know, red flag, number one. And again, liken this to Amazon saying, Hey supplier, you can't sell anywhere other than Amazon.

It's not going to happen. Right. So question number one, can I sell on web? I think that is at this point etched in stone, right? That's the, the, the business that we're building. I think all the other questions, they're upside cases. I think that, you know, if there's a doomsday scenario and again, sort of like an investor questions, okay, well, what happens if Apple and Google drop their commissions right to 15%, 10 percent or, or, or 0%, right, maybe, but I, maybe I'd say that's a good one, right?

First is they would never though. That's the thing, right? Like they have the most recent, um, some analysts like expert testimony in the, in the trials. Most recently. I've come out and you'll see this on, I think it's in the information in Bloomberg and Forbes or something, but estimates say that app store revenue, which by the way, 70 percent of which is derived from games.

Right. Mm-Hmm. App store revenue accounts for upwards of, for both Alphabet and Apple, 20% of their annual operating income.

Alexandra: One trillion. Yeah. So like why drop at like an 85% profit margin? Exactly. That's right. Like literally taking down 50 bips is like Yeah. Billions of dollars . That's right.

Chris: So like, my view is, you know, our whole, our whole plan, our whole strategy is it's, it doesn't need to be zero sum.

People will continue to buy and make purchases in an app. Some will buy from both. Some will only buy on web. And if we can drive incremental revenue and we actually help grow the pie as a, you know, as a service provider and a partner to our studios, that's the best outcome, right? So anyway, I don't think that doomsday scenario is likely to happen, even if it did.

You know, I think just given the cross platform nature of games and how that's been evolving, we still think it makes sense to have a direct channel to support more pressure on our margins. Sure. Right. That's why we're startup. We got to figure that part out. That's awesome.

Alexandra: Chris, really, really, really good stuff.

Enjoyed the whole conversation. There's clearly so much to learn here. I feel like I'm so much more educated now on the direct to consumer space for games. This was so awesome to have you on, so thanks for coming. Thanks for having me. Yeah, as always, friends, if you have feedback or ideas, hit me up at [email protected]. I'm always open. And with that, that's our episode. See you all next time. Thanks, Chris. Thanks everybody.

Chris: Thank you.

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