With the games industry in constant evolution, it’s important to occasionally pause and take stock of where things stand. Host Devin Becker is joined by Aaron Bush, Managing Partner and Co-Founder at Naavik, for a wide-ranging check-in on market trends, strategic moves from platform holders and investors, and how the current landscape might evolve from here. 

The conversation explores Epic’s latest expansion of user-generated content monetization, plus Meta’s recent AR updates and what it might mean for the future of digital interactivity. The episode rounds out with a look at current console strategies – including the success of the Switch 2, Xbox's identity crisis, and how PlayStation fits into the broader picture – and a discussion about the fragmentation of the gaming investment industry.

We’d like to thank Lightspeed Venture Partners for making this episode possible! With its dedicated gaming & interactive media practice, the firm invests from an over $6.5 billion pool of early and growth-stage capital. If you’re interested in learning more, go to https://gaming.lsvp.com/.

We’d also like to thank Overwolf for making this episode possible! Whether you're a gamer, creator, or game studio, Overwolf is the ultimate destination for integrating UGC in games! You can check out all Overwolf has to offer at https://www.overwolf.com/.

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

Devin: Hello everyone. I'm your host, Devin Becker, and today I'm delighted to be joined by a familiar face, for sure, for you, those of you here that at least watch the YouTube, Aaron Bush — the managing partner and co-founder at Naavik.

And today we're gonna do something a little bit different, something we haven't had a chance to do all that much since our previous round table series, which is just take a broader look at the overall game market, kind of check in, see what's going on, and what kind of topics might be important at the moment, especially with it being such a big year, I think, for gaming, both good and bad.

So, but we wanna start a little more, even more broadly than that, I guess, which, we don't talk about a whole lot, but we just wanna go over what's new. Aaron, what, what's going on here at the biz?

Aaron: Yeah, I mean, first of all, good to see you Devin, and it's good to be on the other side of the mic.

It's been, it's been quite a while, probably since the round tables that we've done this, but, yeah, I mean, we should talk more bigger picture about the industry and, we can dig into all sorts of interesting stuff. But yeah, I mean, starting with Naavik, it's been an entrepreneurial journey for sure, which I'm sure like a lot of the guests that we have and a lot of people listening will understand in their own way.

But, ultimately things are good. And, you know, some of this is, you know, self-serving, but I honestly do think that like a lot of people should learn and like more about what we're doing. 'cause you might find it helpful too, but I'll, I'll keep it brief. I mean, we're doing a ton of consulting work around the, around all sorts of various games and business aspects.

But, you know, maybe what's more interesting and newer is like, over the past few months we've, we've launched a couple new verticals at Naavik. The first one is our fractional talent collective, where basically companies have always come to Naavik for support on various projects and filling gaps in their team.

And Devin, you've been involved in a ton of these over the past few years. But sometimes consulting is just the wrong framing. And sometimes people just need help, right? They just need like a person to come in, for however many hours a week, for however many months and just play a role, whether it's related to the product side, game economy design, whether it's related to QA, or art or engineering, or basically like any function related to like making successful games and game companies.

What a lot of people don't realize is that at Naavik we have a really deep bench of this fractional talent, and we're looking for more work for these awesome people. And so, whether it's now or later, if your company just needs awesome people to work with, to fill gaps at various parts of your production cycle, at various parts of your, your growth stages, just reach out for a conversation. Maybe, you know, maybe we can find someone who's a good fit for you. And even if we can't, we often know of where to point you anyway. So that's one, And then, the second newer thing is what kind of got pulled out of us, out of a lot of our work with startups and investors in the past is a bunch of M&A and investment advisory type of work.

And so, we've been helping some teams with fundraising, if you're in the market too, maybe we can help you there. We're not an investment bank. We work a little bit differently, but because of all of the other work we do in the weeds with games teams and with investors, we have some unique advantages and have a helpful lens for that.

And then similarly, like on the other side of the equation, we've been working with a ton of investors, like a lot of private equity firms, for example, and due diligence in companies that they're interested in, investing in or acquiring. And so, if you're on either side of the spectrum and are interested in how we can potentially help or just need support in general, reach out to chat. We'd be happy to, to maybe support you guys.

And the last thing I would say, which is more timely, is that we have been having conversations with more Indian companies, ever since they, the Indian government banned the real money gaming market, which you know, was a pretty big pillar of how most people would define the Indian games industry.

A lot of these larger companies in the Indian market, most of their revenue was just wiped out. And so they're actively looking to backfill that lost revenue. And so they're in the market for pretty meaningful acquisitions at the moment. And there's what is likely a three or so month window in which we're just gonna see more aggressive acquisitions.

And we've been working with some of those companies and investment banks that are connected to all of those companies to just help them find good companies to buy and backfill. And so, if you are interested in all, in just having those conversations, I'm just talking to a lot of studios right now. What these Indian companies are looking for, you know, is primarily free to play mobile studios that are, you know, have 15 million or larger and revenue, ideally profitable. But like, there's a ton of flexibility at the moment just because of the, kind of the, the crisis points of what's going on right now where it doesn't really matter what genre you're in, if you're not even in mobile, that's okay if you're in more like adjacent.

Tech related to sports or casino or, or whatever it might be. Like, there could be an opportunity for you there too. And I feel like a lot of companies don't quite realize that this opportunity is going on right now to the extent that it is, and all these conversations are happening. And a lot of it is just because the, a lot of the conversations are behind the scenes, but I don't, I don't see why we can't at least say it publicly.

And so, if anything here is helpful to you, you know, we're, we're here to serve and so, and we can kind of talk into the news and the bigger picture points after this. But I thought it would be helpful to just update everyone on some of the new things that we're up to, just in the, in case it is actually genuinely helpful to you.

Devin: Yeah. I mean that's, that's one of the things I love about Naavik. I mean, not to toot our own horn too much, but the, the, the flexibility and adaptability to what the market needs at any given time. I think it's, I personally find great, like just because it keeps things interesting here at all times. But you definitely always reach out even if there's something that we don't have, say, listed on the website as a service.

We're very flexible and have a lot of people that are able to do a lot of different things and know a lot of people and things like that. So, I always recommend talking. Plus, it's just fun, you know, good chat. Anyways. Yeah. If's nothing else.

Aaron: Happy to share notes. Worst case.

Devin: Yeah, exactly. And I mean, I, you, you, you gave almost gave a little bit of review of a, of a topic we're not covering, but it is definitely timely as well, which is around the, the real money stuff in, in India is definitely an interesting one.

And I think we have a pretty recent digest piece if, for those of you who are listening who are just hearing about this for the first time, that I think is worth digging into as well. Covered some pretty good stuff on that. Which is that, but there's, there's a lot of stuff going on. I, I mean, we, we don't have really enough time to cover every possible thing going on, and we just thought we'd cover a couple interesting things from sort of a, a business level looking at some different aspects of this, this market, starting with one that I think we've, you know, touched on a lot, but not necessarily, always dug into the details of like, the financial side since the, probably the round tables too much and, and maybe some of the guests.

But, there's been some big changes to what UEFN or Fortnite Creative or whatever the, the, the best moniker is for it at the time, is doing around making money for people that are, basically creating content in there.

Aaron: Yeah, so what's interesting is if you zoom back to what we were saying in the round tables, or at least what I remember I was saying in the round tables, was that UEFN would just take time to improve both in terms of what it enables devs to do and hopefully how it enables monetization around it.

And, um. You know, it's sort of a, ironically, an unpopular position because to creators in the moment, it like, the time doesn't really matter, right? They're looking to make games now to make experiences now to make money now. And so, there's always a bit more impatience from the, the creator side and not wrongfully.

So like, you know, like they're like, all these platforms should be working to serve these creators as best as they can. But what, at least I've always been trying to remind people is that like these massively complex undertakings, like what all goes into these platforms that where you can hopefully one day make almost anything and build like tons of flexibility for people to build on.

Like, it's really hard to do and it just takes a lot of time to build up all the unique feature sets to enable that. And then on top of that monetization, which there has been more of a philosophical element there where I think Tim Sweeney has been much more hesitant historically of in-game transactions and anything that looks like microtransactions and, you know, definitely not advertisements.

And so that's why Epic leaned into the engagement model. And it's not necessarily a bad model. I think that Fortnite and Epic have been generous in terms of the money that they've earned and how they're handing it over to creators to tune, turn Fortnite from a game into a real platform. But it doesn't change the reality that the, the health of that environment still just hinges so much to the health of Fortnite.

And when Fortnite struggles in any sense and just has normal seasonality and  changes depending on the time of year or year over year, depending on what other games are on the market, the creators will see reduced benefits anytime Fortnite, you know, is going through like a, a depressed time period, even if it's not the, the long term reality of, of the game. And that's just hard to operate in.

Devin: Yeah.

Aaron: And adding all of these, additional monetization changes, which really, in this case, just like it centers around, enabling users to create and sell their own items in their own experiences. And I think they get, I think it's like a 74% cut of, of revenue in doing so.

It's just, I mean, one, it's additive. It's not like replacing any of that other revenue. And two, it like puts a bit more power into the hands of creators to like control their own destiny a bit and not just live and die by the whims and engagement of Fortnite as a whole. Right. So I mean, I think it's a very positive step.

It's not the ultimate step that solves everything, but along this like, long-term journey, if you're looking out over improving this platform over a span of many years, like I still think this is a platform that is on track and improvements like this are the steps that prove that.

Devin: I mean, you keep in mind, like when it comes to the building up thing, right?

This is a company that originally started by making games, build it up into a huge engine, still makes games, and then builds those games now into a huge engine. So, it's not like it's new to, to Tim Sweeney, to build an engine from a game that then facilitates other games within it, right? That is kind of in their DNA as I remember going back to playing like the old Unreal games, like the very first Unreal, you know, like this, they've always pushed the tech and with that, you know, it takes time to do so.

But the, the thing I think of that's interesting about this. I mean, first off, they're kind of adopting Roblox as model, right? Where they were kinda like, well, we're, we're gonna do this differently than Roblox. But then it's the end of the day they see like, well, there's also benefit to that. The, the other thing that's interesting about this is one of the metrics that they had for payout stuff was like trying to associate V buck purchasing with gameplay.

Where it was like if people purchase V bucks within a certain time period of playing your island, that they would kind of associate that as a metric. But now, there's actually a way to get that direct metric, like, because people spend V bucks in the game, therefore they actually are in theory purchasing them for that purpose. Right? So they can actually directly link it now. And I think that's kind of important 'cause they just, some of the metrics were kind of loose, right? You just had to kind of like by association now, this gives it like a direct incentive where you control a, a bit more your own destiny as you were saying about the, the, the creators.

The only, the only thing I worry about though is like, every metric that they pick is going to skew what people create, right? Because they're gonna create what's good, ideally, what's gonna be successful for them. And that's going to be based around whatever metric is paying out for them, or at least at the end of the day, like survival of the fittest will drive that.

And now that, that, that means like spending V bucks in the game. I mean, it's good for Epic because it does now actually allow a game to drive V buck purchases, whereas it couldn't really be four for, right. It wouldn't necessarily like get you to do it except for possibly I think somewhere around, somewhere around the license stuff.

But in general, this is like good for them. But now I question a little bit. I mean, I, I wanna see how this plays out whether or not this is good for players because we've seen sometimes what happens in Roblox kind of games where it can be very aggressive with the monetization and sort of that pay to win element that you get in there.

Yeah. And then where Fortnite is a bit more skill driven than something like Roblox, Roblox is not exactly a game you usually associate with skill driven gameplay too much, where Fortnite tends to be. So I have some concerns there.

Aaron: Yeah. I mean, a couple thoughts. One, I, I am curious to what extent, I mean, we did say this revenue is additive to the engagement revenue, but there still is an elements of wondering to what extent this revenue will cannibalize the revenue that went into the engagement revenue in the sense that like, are players just going to spend more money to buy these items versus just instead choosing to spend this instead of what they would've spent like in the, the normal Fortnite right store. And the economics here would be better for creators if they, they do that. But, you know, I still wonder how exactly additive it is, to the whole ecosystem. I'm sure it is to some extent, but we'll have to see what that means.

Either way, moving the monetization to be more in the control of creators, I think is a good step. But, you know, there, there will continue to be changes from here as well and to how invest, or how creators monetize and how aggressively in the game. I think that's just like the benefit of being a platform.

You can criticize Roblox, for example, for having creators that do that. But at the same time, like that is a platform that has seen tremendous success because these comp creators compete for player attention on all sorts of different factors. And to the extent that they can get away with it, you know, like it's their right to do that.

And if they push too far in one direction, players will just go elsewhere to where they feel more, more value and, and, and benefit. And I think ultimately like that tension of the marketplace where creators can actually figure out the supply and demand of the economies on top of building fun gameplay is a very like natural elements of building a successful economy across an ecosystem.

And so, I'm less concerned about that. I mean, sure creators will have to be mindful and players, it might lead, create some service area for players to be dissatisfied with, with some, some economic items here or there, but I, in aggregate, I think it is a positive way more than it is a negative, but it's also up to Epic to, you know, help steer the ship and not slip into the types of engagements that a lot of players would dislike.

But I feel pretty good about that given Tim Sweeney has like very strong views on, on what, like what economics should be allowed or not.

Devin: Right? I guess the other, the other angle on this as well, that, the other announcement on monetization was around sponsored positions. Something that, you know, Roblox is big on selling advertising for, you know, the, the mods or games, whatever you wanna call them.

And now there's going to be a, I believe, just a row of sponsored content. You know, you could skip over that row, whatever, and, and when you're browsing for it. But now there is, you know, a way to actually pay your way to discovery, which pros and cons, right? Like obviously does help to be able to, to do something, to, to drive some discovery because it's, it's currently inundated quite a bit, and AI has certainly not made it any easier for people that are trying to create quality content.

It certainly made it easier for people that don't care as much about that, but that's a whole like, rabbit hole. It could go down, but it, it now this having this other sort of cross incentive where now, obviously if you're making money from the IAP, then you're gonna be even more incentivized to pay for that sponsorship.

So now some of that money drives, you know, through Epic to the creator and then right back to Epic in theory, right? Like, and, and hopefully like in a, in a, in a flywheel to sort of get that up. But we already have a problem sometimes in Fortnite with entrenched content. And in theory this can help break that, but this could also make it worse, right?

We see that in mobile, for example, where the winners keep winning most of the time and the, the top charts barely move for the most part 'cause things get pretty cemented for somewhat similar reason. I mean, it's a bit different like the economics of it stuff, and the way it works with the platform.

But do you think there's like risk of that? Do you think this is like a good thing for creators as well? Or just good thing for Epic, good thing for players? Where do you think that falls?

Aaron: Yeah, I mean, I don't think it's bad necessarily to have sponsored content as long as you don't overdo it and worsen the experience as a whole.

I also think that the power law nature is kind of a given in, in this kind of content. Like you look on any platform, there's generally power laws at play on Twich, on Roblox, et cetera. That doesn't mean that it doesn't change over time, though. Like I do think large games, being able to stay large is, is a good thing.

You know, it proves that people can build like real sustainable businesses on these platforms, which is, you know, a goal that these platforms have, but also being able to foster new, new content as well that can ultimately grow on top of all this other content as the platforms grow. Like there's gonna be more opportunity for more successful experiences as these platforms grow and just naturally as games ebb and flow over time. I, but I mean like all of that said, like there still is a lot of work to do just like in discovery in general and you know, probably like his best in the world at discovery is like a YouTube, right? That like shows you like both what it thinks you will, like what is popular out in the world and can even like throw in some like, like smaller videos from creators you've never heard of that like hit on things that you're interested in.

And I do think there is an opportunity more in these UGC gaming platforms to, to lean into that as well. Naturally it's really hard to get the algorithms to be like right and helpful to the extent that it is on, on YouTube. But I think, you know, moving more in that direction is probably inevitable.

And I do think there already have been improvements since the very beginning of these platforms getting off the ground. And we'll just continue to see that over time. So, I don't really view that like, as like a very critical thing to be negative about. As much as just recognizing along with all of these like items, they'll just steadily improve over time and these will become like pretty meaningful like consumer platforms that are like, become like the iconic platforms of, of an era, especially Roblox, UEFN, much more TBD.

But you know, Roblox specifically can be like one of the iconic, defining companies of a generation and just continue to outperform bigger and longer than most people realize by implementing a lot of these best practices and, and new ways that just serve its giant network.

Devin: I mean like with Roblox, it took them so long to build up and get that traction in the first place.

It's almost like it would take, take that long to break it down as well, just with how much like they've been able to stick around. And Fortnite, I, you know, maybe hasn't quite got there yet. But they also haven't been around as long as Roblox was before it got that traction. So it's, it's only fair to kind of compare apples to apples there and be like, well Fortnite is not even to that point yet.

What they're already doing, maybe better than, I don't know how the benchmarks look, maybe better than Roblox was doing X amount of years, you know, into their sort of push. So, it'd be interesting to compare down the road.

Aaron: Yeah. Yeah. No, I'm excited to see how it shakes out. I mean, I'm still like very bullish on this like genre as a whole.

I know like we talk about UGC to death, but like, as I just said, for like these network effects type of businesses, especially like the ones that are like proven and dominant like a Roblox, I do think that people, even though people recognize like how big they are and how successful they are, they still underestimate how much bigger they can be and how much like longer that growth can persist.

And ultimately, like just one thing I learned in investing, like a lot of people say that to be a great investor you have to be non-consensus and right. Like you have to be able to go against the herd and be right about it. But like within that, I learned that a lot of times, like what is most valuable is to not necessarily just be bullish when other people are bearish. It's to be even more bullish when people are already bullish. And I feel like, again, when it comes to these network effect businesses that are like snowballs rolling down a mountain, people are like still underestimating like what these platforms are capable of, especially Roblox, but UEFN, especially if they can just continue to hit away at these, like adding these feature sets and monetization opportunities, like they'll be in that conversation as well.

Devin: Yeah. I guess the way I think of it too is like we already have this problem with, you can't compete with free, but it's now you can't compete with free that you already have installed that continually adds new content both from the creator and from other creators that are potentially more with the, the zor zeitgeist or trends at the time.

Aaron: Totally.

Devin: So like, because Epic can't always keep up with that stuff, right? They could, they could try to hire people that are younger and stuff like that, but creators could always stay on top of trends potentially.

Aaron: Yeah. I mean, Amazon became the largest, one of the largest companies in the world because it was the everything store, and Roblox will be similar because it's the everything game like, I, I don't know. It feels pretty obvious to me. But anyways, let's, let's talk about some other things,

Devin: Right? No, but I, I mean, on a related topic, the, the, the other company that was trying to be the, the everything platform that I, I would say so far has failed, which would be Horizon and Worlds, beta's attempt to try and do the same thing despite the fact that you can play Roblox on the Quest headsets.

Not, not Fortnite though, so maybe that's, maybe that's coming eventually. I mean, I don't know how well it'll run on, on the Quest headsets, to be honest. It's not there. It is not the best platform for that level of tech, but they had a lot of stuff going on recently 'cause we had the MediConnect event.

And I think there's, you know, there's a certain amount of this that relates to games and there's a certain amount of it just as a broader platform, especially as they sort of branch a little bit away from being sort of a console. Into more of an entertainment platform. I, I mean, not that we haven't seen Xbox try and do that as well.

But overall, I mean, if you wanna, if you wanna touch on any of the specific stuff other than the huge epic fails they had during the Meta Connect event, like, you know, what do you, what do you think of the strategy where things are going with Epic? , Or I'm sorry, meta, , and what were some of the interesting things that you think that sort of lean towards different directions for them that they announced?

Aaron: Yeah, I mean, I'm pretty excited about meta in general and I have always kinda leaned that way. Even, even if there are, there are specific things that you can criticize and not, like, similar to what I was saying about Roblox and just like these killer network effect businesses, they can grow faster and longer than people expect.

And that is what happened to, to Meta and still is what is happening, like at his very foundational route with Facebook and Instagram and WhatsApp and everything that goes into that. And the success that they have in those network effect businesses. And just being able to, to, to monetize through ads.

And now with AI to be able to like way better like target ads and help people create ads. Like the foundation of this business, like, has always been strong. It's getting stronger and it's going to be like, like very, very, very strong. Like once that like AI flywheel continues to get rolling and they're gonna be generating, I mean, just like hundreds of billions in like cash flow, right?

And in, in time. And that cash flow enables them to reinvest in the types of businesses that others wouldn't do. And this is a business that is founder led, which is now like genuinely pretty rare for like these larger tech companies now. It's like Mark Zuckerberg, Jensen Wong of Nvidia. But if you look at Apple, if you look at Google, if you look at, you know, a long, a long list of these companies, they aren't founder led anymore.

And those are the companies that, you know, you see less clear efforts on like very targeted innovation like Meta is now doing with its augmented reality. And when you look at something like Horizon's World, like yeah, obviously, like that's a fail. Like this is a business that would've acquired Roblox if it were like legally allowed to, but like, it, it never was even like given the chance to, for like antitrust reasons and probably for the best.

But, so instead of, you know, buying the best of what exists in like another great network of fact and another great generation, they just kinda went at it from their own lens. And I'm sure the vision here has evolved over time. And meta is like, you know, very obsessed with like the people side of like building connections and helping people engage with each other, which maybe is the wrong lens for some aspects of VR and even AR.

But I'm not like overly critical of it because I think that a lot of the, the investment that goes into that business, even if a lot of money was burned along the way, , it sets the foundation for a lot of like the technical achievements that just go into other aspects of, of AR and VR that we'll all be able to benefit from in the future.

And Zuckerberg recently said that. You know, VR is the future of TV and AR is the, like, the future of mobile. And I think I agree with that. You know, even if it takes like quite a long time for us to get there and for prices to come down and for the tech to, to like really get to the point where it's awesome.

So yeah, I mean, I, I think they can be more efficient in what they're doing and they have been, and like cutting a lot of, like cost at reality labs. But ultimately what they're set up to achieve right now is like the byproduct of founder-led vision tremendous underlying business and like a tenacity to like, build the future in ways that like others are not doing at the same intensity.

And so overall, I'm, I, I think I'm optimistic, like there still are questions about AR in particular. It'll take time, I think. There are like social things that will need to be figured out. Like people just walking around with glasses, recording everything. Like what does that world like really look like?

It's kind of dystopian in some sense, but also a like awesome in other, in other ways. But I think, yeah, meta is one of the few companies that like has the chance to be one of like the largest company easily in the world one day.

Devin: Yeah. And it's funny 'cause like I am pretty skeptical and, and and, uh, and not as, as kind to them, but I also am a huge consumer of all these things, right?

So I have, you know, use all the Quest headsets. I think the money sometimes does show in what they've accomplished with the Quest headsets because it's taken for granted when you start to look at the competitors, which is like what the vibe that's kind of, yeah. Just sitting, you know, rotting to an extent.

I mean that, especially with the Steam Deck kind of taking its own, you know, place and in valves, ecosystem. Just what they've accomplished with, with the Quest three and, you know, even the push they did into mixed reality with it. I think it's kind of ignored. Like when I, when I first, you know, started using the mixed reality stuff with the Quest three, it was very impressive.

Like we take it for granted very quickly what it can do. And part of that's just because it hasn't really integrated into our life yet because it's, it's still like bleeding edge tech that doesn't have super good use cases. I've done a lot of work in VR, things like that, but the big problem of course, is that it's just not comfortable long-term for a lot of people, for a lot of reasons.

And honestly, they release them pretty uncomfortable. You have to kind of buy accessories. To make it fit a lot of different heads. And the pro was definitely like anyone who bought a pro, I'm sorry, you basically bought the thing from saw that goes on your head. Like it was not comfortable to go. And, and that was kind of, I think a rush release.

But they're definitely trying and trying and I think it's interesting to see the, the, the AR stuff kind of come out and sometimes in a way feel a little bit behind what the X reel or n reel, depending on which version you're talking about. This like the N reel now, like glasses, like you talk about people walking around with that stuff.

I was, there's a, a long period of time I was walking around with the N reels on, I'm like watching stuff into my screen. Like I was walking, walking around Japan, like in Tokyo, like getting directions with the map over in like my side of my vision. And like there's a lot you could do with that stuff. And then I walk around with Meta, the, the meta connect or the RayBan ones, constantly taking pictures of stuff. Not in a, like a weird way, but like, oh, hey, I wanna make a note of this, or I wanna buy this later. I'm gonna look this up on Amazon. Unfortunately, I can't just ask it to look me up, look it up on Amazon, which not yet. That, that drives me nuts that you can't do that yet.

I, I would love to be able to just be like, Hey, look this up. How much is this on Amazon? Or like, what is this product review? Stuff like that, that's definitely coming, I'm sure, because it's just a lack of like that sort of internet connectivity, but I just ha having experienced a lot of the stuff you're talking about, like, what's that feature like?

It's like, it's, it's technically already here. It's just as a, as a, the say goes. Like, I can't remember if it was which cyber book author it was, but it was like, it's not widely distributed. Basically. I think it was maybe Gibson, William Gibson, I can't remember. Yeah. But it's, you know, the future's here just not, not widely distributed.

And I think that's true with a lot of meta stuff where it's like cutting edge, but just it doesn't fit into a lot of people's lives yet. Because it's either not comfortable or it's not there, or like the fact that I can't ask those Amazon questions. Too expensive. Yeah, too expensive, too. Like yeah, a lot of those things.

But the fact that they brought the prices down to where they did with any of those, that is an impressive output, I think of that reality lab spend. But it is a little, it does look excessive on paper.

Aaron: Yeah. So I, yeah, I guess the latest glasses they unveiled, the Met Arabians display is 7 99, which is still a lot of money.

And, but it was actually a lot less than I was expecting it to be to the, to the extent that like, it'll drive like early adopters that are just like interested in and curious, and those early adopters will then, you know, kinda like help set the foundation to help meta understand where to better take it in the future.

Right. It'll serve as the foundation for building an app store. Right. For, for ar, which. It doesn't really exist yet. And it gives the company like a unique opportunity to just like build something from scratch and not force an old paradigm onto like, what is gonna be new in the future of ambient computing.

So, so yeah. I mean, I am like pretty optimistic about where this will go. It'll just take time. Like this isn't the iPhone moment, right? Like the, the iPhone moments in 2007 I think, or 2009, somewhere in there. You know, it came together like when all the technology just like happened to be ready at the moment.

Right. Like they could have made something like an iPhone maybe a bit earlier, just like would've been clunkier. It would've been more expensive. You already kind of saw it with like the palm pilot types of devices. Exactly. And so, yeah, I mean meta, they just like got to this technology like way too early, which is why so much of it was clunky and a lot of money has been burned and they're like brute forcing their way into something that eventually will be available to the mass market and interesting. And you just kind of have to be willing to just like, accept a lot of the things like, like it's, that aren't like quite there yet, but it's part of the, the process and yeah. I mean, for games, like, I don't know how that will fit into to any of this yet. I mean, like, as things get better, I think they will find more of a place, and if people are like wearing these devices or immersed in these things more frequently, like it'll, it'll be a bigger deal.

I don't, it's, I don't think it's investible right now and it definitely hasn't been over the past three years.

Devin: It's like, it's like the voice chat agent, things that we're just like the trying to be a platform for a while and clearly didn't have a great like, setup to really build on yet. Other than like just a few different talking kind of games, like quiz games and stuff like that. Like I'm talking like Alexa and things like that.

Aaron: Yeah. Yeah. And that's not to say there can't be exceptions, like there still are successful, right? Like VR studios for example, even if there aren't like a ton of them. But yeah, I mean I think it's really exciting. Where this is going on the hardware side.

Yeah, I mean, I think AR is gonna be a big thing. And obviously on the software side, AI is central to basically everything that is being improved around all of technology. So, so yeah, it's an exciting future we'll be operating in and it's gonna touch everything that we're, that we work on.

Devin: I think it'll be interesting from the games angle too, that like, you know, uh, you're like, I don't know what those will look like.

And that's, I think, a really important consideration is that that form factor is so different. Like we, we already see the difference between mobile and console, right? Like the types of games that, that work. The kinds you could play, in theory, you could make the two like closer together from a hardware standpoint.

That doesn't really solve the gap. They still play very differently. They still have very different audiences, very different use usage patterns, very different types of things being built for them. And it'll probably almost always be that way. You're not gonna get a lot of overlap, right? Like you will to some extent when people can successfully do that.

But I think it'll be the same way with, with the, any of these other new platforms. Like VR was already like, you couldn't just port stuff over easily. Like, you know, people try, there's some decent ones like the Resident Evil four Port and things like that. But ultimately stuff kind of had to be built native for the platform, which meant figuring out a lot of stuff.

And it has been interesting to see that. Social, I think has been one of the parts of VR as a platform that has been maybe sometimes ignore do an extent to where it's like building single player games probably isn't the way to go a lot of times with VR other than as a novelty, right? Like, you get it, you play it, you consume it, you kind of don't come back to it a lot the way you would, maybe a console game or something like that.

There's been some great ones, like the Batman 1, the Alien 1, like some great IPs. I think I heard good things about the Assassin's Creed 1 but never played it myself. But, you know, the great attempts, but ultimately, like you look at a gorilla tag, you know, VR chat, even, like if you could see a big screen, a social app, like a, a lot of these social aspects have been the more interesting one.

And I kind of wonder if maybe we'll see similar things in a weird way with AR because it's like, it's a weird kind of platform for like interacting, with like a game element. But from a social element, you have your voice, you have like what's being seen from the cameras. There could be some interesting things there.

But I do think there's a huge gap in time based off of my experience using AR screens that older people will not. Get into this platform even worse than like an old person using an iPhone when they first came out. It's gonna have to be a generational thing where people are gonna have to kind of grow up using this stuff to some extent because the focus shifting you have to do between looking in real life and looking at a screen like right in front of you.

It's, it sounds weird, but if you try and do long term usage, that's gonna be wayer for younger people. The way, like using AI has been like integrated more into their life than it is for us where we have to kinda like find use cases. So I think that is going to be like a, a gap creator. I think. We'll see.

But Meta is definitely trying to get there and I, I kind of wonder like, hopefully they'll be able to continue to burn money till they get to that point and don't just run out first because you see them kind people. They're not running outta money that's not sure.

Aaron: They're just not at the gushing money. Yeah.

Devin: But, but the, like, the Meta Connect seemed to like, while they still, you know, talked about VR as a platform, it seemed like they were shifting towards this, this entertainment platform. So where they're talking about the 2D apps, right? Like the, we're getting, we're gonna continue to push the, the apps that are like, you know, Instagram or the stuff you poured over from Android.

Onto the phone, or, I mean, I mean from the phone onto the screen. And then also even bringing out, like James Cameron trying to do like stuff with movies. I mean, it's a great movie platform, but a lot of people can't wear it for two hours, let alone the three or four hours a James Cameron movie is these days.

And so I, I don't know. It'll be, it really interesting to see whether or not we shift away from even that as a games platform for now. And like we have to figure that out as like a sort of generational leap.

Aaron: Yeah, I think just give all of these things time, which you could have said like a decade ago too, right?

You know, we're still waiting now, but I think there's a lot of value in what's gonna be created here. And it's gonna be exciting and it's gonna open up new opportunities, for so many different types of right. Of businesses. And yeah, there's still a lot to, to figure out. Like we'll probably see in like the next year, as I mentioned, like an app store for AR like be a thing and, Oh yeah. That, you know, will kind of unleash like a new wave of developers being able to just like, try things. And similar to how like the Apple watch, like how it came out and, you know, the company was able to like learn what people use it for and that like directed the future of its development.

And so like the Apple Watch has become more of a, of a health device, you know? Right. 'cause of, of that, I think we will see similar things happen with AR and, and VR once, uh, you know, there's just like more data in place and much when they can see how people are using all of this. And maybe they'll even be like different devices that kind of spring up that are targeting different types of activities, based on it.

But yeah, I don't know. In general, I'm, I'm excited. Yeah. It's a little tangential to games, but all of these things are like the bigger picture contacts that are gonna like, define the next generation that we're all gonna be operating under. So I still think it's worth spending the time to at least like.

So I think it's important to just be on top of all of these things,  'cause even if you can't do anything about it right now, like you'll be ready when, when the time comes and, you know, you can ride the tsunami instead of be hit by it.

Devin: Yeah. This stuff will all absolutely be competing with games at some point, and then eventually part of the same world.

So it's like, we're kind of early for that, but I think it is, it's worth keeping your periphery, which is, I think, appropriate to AR in general.

Aaron: Yeah. And it's just fun. Like, I, I enjoy staying on top of it.

Devin: Absolutely. Yeah. I could, I could probably go on for another three hours about the AR stuff, just based off personal usage.

But, there is a lot else going on, on in the console space that I think is worth talking about too, related to some of this stuff, but a bit more games focused around, we've got stuff going on with Nintendo, with Xbox, with Sony. Just take us through, what, what do you think is the more interesting one you have that we have going on with consoles right now?

Aaron: Well, I mean, first of all, we can keep it short, but Yeah. I mean, props to Nintendo for the Switch. Two, it's been. Very successful. You know, it's outselling the switch, on, you know, like in terms of like number of days, , which I mean I think we, like in Avic Digest article, we're kind of leaning towards like, I mean obviously like it's gonna do well out of the gates and, you know, that probably like bodes well for the business and the stock and all of that, which it has.

But you know, looking longer term at the life cycle of the Switch 2, like is it gonna sell as well as the original switch. Like we had some questions about that and so far the data is, you know, maybe showing that it's a little stronger than, you know, maybe we. Expected. And I think we were just a little hesitant, you know, in the sense that like, it's not that new.

Like, it's not like a new form factor. And you know, there weren't like a ton of like new switch to specific games, like launched out of the gate to get super excited by, but despite that, you know, it's, it's had very strong reception. So, you know, maybe we have to like rethink what the magnitude in terms of like long-term unit sales of a switch two v— You're shaking your head.

Devin: I'm so bearish on it, actually. Yeah, yeah. It's counter to the trend. I'm, I'm very bearish on the Switch 2 for a variety of reasons that I think are slowly starting to be revealed.

Aaron: Yeah, well I was about to say like, I'm not quite there to like being like overly optimistic about like, you know, the next like eight years of the, the console. But I'm curious why you think that is.

Devin: I mean, there's, there's just a variety of problems with it. The biggest one being that it doesn't bring anything significantly new to the table that drives that longer term. I think the short term, it's mostly fans buying it and like it sold out like crazy, but it sold out like crazy off the success of the Switch one, not the success of itself.

Yeah, 'cause it is people buying it because the Switch one was so good and they, and you know, there was the possibility of shortages. There's a billion different reasons, but it wasn't off its own success and certainly wasn't off of Mario Kart being like the, the system seller. It was people like, oh my God, I gotta play this to do Mario Kart so bad, I'm gonna pay for this really expensive version of the switch one.

And, and to me it feels closer to Weu or closer to GameCube, where it's like an incremental thing. And they've had such a bad history with every other console. For a while, and the price stuff has been a significant issue where it's like they continue ratcheting up of prices that they're having to do with their games, including DLC added onto them for the value you're gonna get in Nintendo even talking about like, they're having to try and figure out like their production stuff.

The problem is when you make a higher def console, you know, it, it then your costs to make games go up too. But I don't think it brings that value to the Nintendo audience to justify the extra cost. It's gonna cost Nintendo to make 4K games. I don't think their art styles, uh, are needing to be in 4K.

They've clearly been able to do so much with the switch. One that, yeah, a little bit extra horsepower is not bad for, so you don't have like, you know, the, the new Zelda exploding, uh, when it gets into some really complex stuff. But I don't think it's gonna bring enough to the table long term to make sense.

It'll help a third party, for sure. But, but, but look, it's all old PC ports right now. Like cool. Yeah. I could play Cyberpunk on there, but do I want to, at this point.

Aaron: Yeah. I mean, some people might Right. Play it handheld, you know, like in, in a way they couldn't before, but I have a Steam Deck for that. But most, most people don't. But yeah. Yeah. I mean, I hear what you're saying. Yeah. I mean, like, I obviously it's, it is very successful and it's not like, it's not going to be a flop. It is not a flop. Right. Like it's still going to have like, it long tail of success and as more games come out, like people will be excited about it for the games.

Right. Not even necessarily like for the tech. And that's, that's the way Nintendo has always been. But yeah, I, yeah, but just like how strong it came out of the gate versus

Devin: Yeah.

Aaron: What I thought it just had surprising me questioning a bit of like where exactly it will end up. But I don't even know how much it, it really matters.

Because the second, second thing I was gonna say is that like, I think it's easy, especially like from an investment lens, it's easier to make like a more optimistic case around a company like Nintendo, right? Like when it's down a lot, just because it's a pretty cyclical business in terms of like its console releases and like just being able to understand like what will resonate or not in terms of the, the consoles themselves, but longer term like this still very much is a business that like the industry has grown around it and it hasn't really outside of like the form factor of the switch, like wasn't innovation and is awesome, but. In terms of like other platforms and other technologies and things like all of these other companies have kind of grown the industry around Nintendo.

Right. And Nintendo has, you know, lost share in the, the, the process. And there are new things they're doing. Like the theme parks are cool, like there's another Mario moving movie coming out, and that'll, I'm sure do pretty well. But yeah, longer term, I still wonder if it, apart from just being able to time console release as well, like, does it really have like outperformance, DNA over a very long period of time?

And I, I question that. So, so yeah, I mean there's that, I mean, it still is like very well positioned. It'll be in our lives for an extremely long time. But, but yeah, there's that, I mean, I, but I mean, just like beyond Nintendo, even in console, like PlayStation's doing its thing, like it's, you know, like you can criticize things here and there, but you know, it's become dominant and is set up to continue succeeding and they're gonna make more money from bringing more games to pc. For example, Xbox. I mean, we were talking about how they were like on the path. They were already kind of floundering when we were talking about it on the round tables a couple years ago.

And nothing materially has changed in the strategy. It's just like dealing with the after effects of it through layoffs and restructurings and right. The type of news that like no one wants to hear and at its core, which we had talked about many, many times, is that there is a strategic disconnect between what it takes to succeed in hardware, which is a lot of awesome exclusive games that drive people to your ecosystem versus what it takes to succeed in subscriptions, which is being able to have a lot of games, be able to be played anywhere and everywhere.

And by trying to be good at both, they're not great at either. And as a result, like their hardware future very much is in question, right? Which you don't want to see because you don't want to end up in a world where just PlayStation is like the monopoly more or less. And in that type of console, but also like, I wouldn't make the bet on subscription.

Like there's more than enough evidence at this point that it's just not going to hit the scale that is required for an awesome outcome. And so what do you do? Like, and like I do think there are answers to this question, but none of them are easy. And so, you know, the things that you start to wrestle with are things like, should Xbox even be in Microsoft anymore?

I don't think so. Microsoft is like, is like lapping, you know, Xbox is growth. Should the same leadership be in charge? That has led to all of these decisions that have caused. The platform to, to flounder? Maybe not, at least not to the same extent. And so what do you do from there? I just think they need like very large changes in direction to simplify the strategy and kind of most likely either get back onto like a PlayStation like track where they can have awesome exclusives.

And to the extent that there is subscription services, it's not all day one centric. , Or if they do happen to drop hardware in the future, that they just become more of like, you know, just like one of the world's biggest publishers. And they could have a very successful business in doing so, in selling across all platforms and things, but they would lose their identity.

In the process. And so, I think there are some answers that are easier than others, but the Xbox, I suspect is just going to be like one of the massive stories of the next, I don't know how many years, I don't know how long this can drag out. Yeah. But at some point, maybe in the next few months, maybe in the next few years, we're gonna be talking about, there's gonna be massive case studies on Xbox.

Right. And how it either failed, how it turned around, and how it changed the console landscape and the process.

Devin: I mean, it's definitely looking more like a Sega kinda case. I, you obviously see like Sega's still around, still doing well. I mean, they have a variety of stuff going on. They do a lot in arcades as well.

Irrelevant. So there's some hardware there. Yeah. But, but I mean like the, the cross stuff too, you already see the hint of that, right. Where it was like, oh, hey, Mario and Sonic at the Olympics. Like, wow, they're together finally. Yeah. But now we're already seeing like Xbox games going over to PlayStation now.

PlayStation games finally coming over to Xbox. Like it's. That that barrier's already been broken, where they're already turning at least partially into a seig at that point. And I mean, whether they drop the hardware or not, we'll have to see. Right. But clearly they're in a position right now where they have a lot of conflicts at the company with Microsoft's, you know, a software company, not a hardware company.

And when, if they've gotten to hardware, like, I don't know, the Windows phone, it's not always turned out great for them long term because it's still kind of not their core business. Yeah. So, I mean, we'll see. Right.

Aaron: And even with the, like handhelds, they partnered with the, the raw ally, right? To build like an Xbox version of that device, but they didn't make it themselves. They completely outsourced that capability, which—

Devin: That's, that's what they normally do.

Aaron: Well, not with Xbox, right? No, not with Xbox.

Devin: I mean with, with Windows and stuff like that, right? Partings like that.

Aaron: Yeah. But like, this is, it's like a pretty, in my mind, like, you know, it's, it's a lot smaller. The handheld market is a lot smaller than the console market, but the fact that they would outsource it kind of signals maybe like a change in internal direction or capability.

And I, I, I just don't know if that bodes well, maybe it's not the worst thing in the world if they can reorient the business more around being a publisher. But, anyways, it's good for Rogue Ally. I have one and it's great, but I love Game Pass on it too. Like, it, it, it works really well, but, yeah, tough spot.

So I think this is like a massive question just for like gaming ecosystem, right? In the future.

Devin: Yeah. Like you said, hopefully it doesn't end up just being pretty much Sony, but it, it's clear that Xbox is not going to be. Nearly what it was either way. And they did, they just raised the prices of the consoles as well, which is like, these are older consoles now and they're still kind of glorified PCs in a way.

Aaron: It’s yeah. I dunno if that was the best time.

Devin: Well that's driven, right? Right. But it's, it's still not gonna help things. And that's my point is that like it's, whether or not it's something they have to do, it's still going to hurt this position that's already hurting, I think.

Aaron: Yeah. And so what does, what does the next generation look like really is the big question, right?

Like are you like, and like how are they building up to that right now? Just in terms of like their overall strategy because like the overall strategy determines how hardware it sits within that and yeah, I don't know. Is the next generation of hardware the last like it's possible. I hope not, but we still see.

Devin: Yeah, I don't know. I think, I think we still see a PlayStation 6 at least.

Aaron: Oh yeah, totally. If that's right.

Devin: So yeah, no, I agree. You'll see the,

Aaron: The seven to eight of PlayStation for sure.

Devin: Which, yeah, it's just, it's funny to be, to come down to Nintendo and, and Sony again potentially when Sony kind of spun off from Nintendo, kind of, you know, with that whole dispute around the N 64 and everything.

So it is kind of funny that we end up here potentially again, but that's kinda it. We don't really have any new competitors. It's obviously bow out a long time ago. So it's kind of interesting that it seems like people are kind of almost steering towards PC as a potential platform or even the steam deck as something that's interesting.

Or the steam deck kind of competitors that you mentioned. The, the Rug Ally thing as well, like just handhelds as a, like, potential market of interest, but not, like you said, a huge one yet. And then the, then that's more directly competing with the, the Switch too. So it's kind of a kind of, we're kind of in a weird place, this sort of transitional place with console platforms right now, you spend a lot of time with investors though, like, and you're talking about investing in Nintendo and things like that. What investment related trends are you seeing, whether it be related to these companies and their, their shifts and stuff like that, or just broader gaming in general?

Aaron: Yeah, well, I think a lot of people talk about, for example, the changes in VC money flows and how you can look at the charts from like Convoy or Invest Game and see that, like obviously over the past few years, the money that's gone into gaming venture has decreased even recently, like quarter over quarter.

It's been sort of depressing looking at the trends and it's not all that that shocking. But what I think people don't talk about too much, at least from like a big picture context is like the, what we're really seeing here is a fragmentation and the type of investing, right? And so, a lot of money went into venture capital specifically.

At a time when gaming was blowing up, there were, you know, all the talks about the Metaverse Web3, all these big trends and that led to these large funds investing in games. But I think there's been more realization that games companies and games themselves often are not the perfect fit for venture capital specifically.

Like that specific model. There are plenty of instances where it does, and like I think there'll be very successful venture capital funds and future fundraising and such, and venture, right? But that realization has led to a fragmentation beyond venture that I think is interesting. And so, we're seeing, you know, more revival and project financing where a lot of traditional venture minded people are realizing there's a difference between investing in a game and investing in a business.

And it's not necessarily wrong to invest in either one. You just have to know what exactly you're investing in so that you can set that investment structurally. For success. And if you're investing in a game, project financing versus backing the business as a whole from an equity lens is often the better way to go.

And so, you know, we're seeing more of that get carved out and that's always existed through publishing. There's just more players doing that type of financing or slate financing now too. Similarly, it's just like the new big thing everyone is talking about these days is UA financing, which is, you know, more on the mobile side where it's like, yeah, not all of this money has to go into games, right?

You can just raise money specifically around structurally what it should be used for, which is user acquisitions, scaling for scaling, right. And there still is a place for venture in that people still need to build products and grow teams and, expand the business, not just like any one game, but if you are focused on expanding one game, equity is often not the way to do that.

And all these unique models around UI financing, they have a place. And Alex and our team recently had a conversation with the Tilting Point Chief Business Officer about what they're doing here too, which is interesting. And they're just like one of many players. And you know, you know, I've seen just through conversations and looking around, like a lot of investors are figuring out where, where to place their bets here.

And even if you look at a tilting point, for example, like they have to get their money from somewhere, and there's other investors behind the scenes that are providing the, like the, the financing, the debt financing to serve these kinds of funds and businesses that are deploying at larger and larger scales.

And so, I mean, I think it's really interesting, and that's just two examples, but even beyond venture, like as the market slows down. And there's just kind of like a reset in various parts of the industry. Private equity very much has a place, and I've seen more private equity interest, literally, like in all corners of the market, from mobile to VR to Roblox, to, to UA financing, to all sorts of things like literally every platform and every like lens of investing. You can think about there's like more types of money coming in, which I don't know, I find fascinating and all of this goes to show that like, and I think any given snapshot moment of the investing world around gaming.

Probably is the wrong view of where things are ultimately going. And in the same way that we've seen a lot of innovation recently and how people are at least realizing innovation might be the wrong term, this is just financial engineering. But we're seeing more financial engineering around like how to back teams in ways that create real win-win scenarios.

I think that we're gonna see more innovation in financial engineering in the space, especially just like with this AI wave in particular coming where smaller teams are going to be able to create larger outcomes for themselves than we've seen smaller teams be able to do in the past. And as a result, do those teams really need to raise venture money the exact same way?

In some cases, yes. Maybe in some cases the model is a bit different. Should it be project financing? Maybe something like that, but maybe not quite that or publishing, like, I think there's gonna be room to innovate and how people back the next generation of game makers and I think that's really interesting.

So even though a lot of the headlines, I guess there's a bottom line to this like look kind of negative and to some extent they are, that really signals like a reset going on and a fragmentation that will just lead to being able to support games teams in the ways that they specifically need the support and structured in a way that generates win-wins and sidesteps a lot of the issues that led to kind of the up and down swing that we've seen in this last generation.

So, yeah, I've really enjoyed having a lot of these conversations with investors. And if you're an investor and you wanna talk about this stuff too, it'd be, be happy to to help out where, where we can, we do a lot of this kind of work at Naavik, but it's been super interesting to. To watch and figure out what's going on.

Devin: Yeah, I mean, it just makes me think too, like even the movie businesses, like one of the other newer ones in relation to, you know, games and, and just businesses in general and like, that's had to go through all kinds of stuff and it's in its own question mark period to some extent as well, especially when you throw the streaming in the mix and what we've had to deal with movie theaters and everything else.

So everyone's kind of trying to figure out these new models. As for, for media in general, like, and, and in creating like creative content as a business Yeah. Is such a, the value chain model.

Aaron: The value chain has changed even too, like with like K-pop demon hunters, right? Which is like taken over the world.

Like it's a, it's the first Disney like success that Netflix has had and you know, like one of like a small handful of moments that they've like really tapped into the zeitgeist. Maybe like the last big one was Stranger Things, but this one, you know, it was like a more like a Disney like movie. But they didn't make it themselves? No. It was Sony animation. Yeah, right.

Devin: Sony's just hitting man.

Aaron: Yeah. And so they're, Sony is like playing into the, the streaming gold rush of like, you know, they're just like selling their services and you know, they'll make decent money, but they give up a lot of upside when it hits.

They don't feel the downside maybe as much when it doesn't. And yeah, the value chain and that type of content has restructured. And I don't know to what extent that's like parallel to what we'll see in games, but yeah, just as people engage content differently, engage with content differently. It's gonna have like some impact apart from some of the changes that I talked about.

If things move to other platforms or console changes or what, whatever, like all of these, like trends stack on top of each other, that ultimately leads to like how money flows differently and where value is captured. So, yeah, it'll be a very fun industry, I think, to, to be a part of with, you know, future ups and downs. A lot, layers this stuff out the layers to get to.

Devin: Yeah. Like I, I don't think any one person will have any of like significant chunk sorted out. It'll all be, people have little, little pieces here or there that hopefully you could throw some bets down on now and then. But, uh, we're, we're just gonna, we're gonna finish off with the, with the old rapid fire finish.

Just a couple of hot takes from you possibly here on a few different questions. Yeah. Yeah. To wrap things up, 'cause I, we had a million more topics we could have covered, but I think we, we had some good depth in there rather than breadth. So hopefully that was a, was a good set of topics. But just, just the first, we're just any game or company you're excited about, especially if it's one you didn't mention during any of the talk so far?

Aaron: Yeah. I'll, I'll give a couple answers just for like different lenses. I, I mean, I guess first I would just reinforce some of what I said. Like I'm most bullish on the companies with the killer network effects today. So, this is like the Roblox and Discord maybe as like the prime two, where they already have been successful, people have already been bullish on them, but I still suspect people underestimate what ultimately they can become.

And so again, like, being non-consensus and I feel like the non-consensus is just, you should be even more bullish on these kinds of companies. And even when you see like negative headlines like Discord is having to like testify in front of Congress for negative, for very negative reasons, or Roblox gets criticized for safety related things.

Like, these are all very good reasons for criticism, but they all point to how important they are as platforms.

Devin: Right. Victims of success almost.

Aaron: Yeah. But I don't even necessarily think they're victims. They're just, they are that successful and operating at a level of scale where society is having to just grapple with what it means for these companies to be as large as they are now.

And that's, we're seeing some of this criticism for the first time at scale, but it's probably not gonna be the last time. So I, so that's kinda like my longer term answer, I guess, more. This year I think the game release that's going to matter most is Battlefield from EA and I, I think it's gonna do really well.

And we'll see exactly what it means. But I think it could mean a lot for EA in the sense that EA really needs like another killer IP to like push the growth of its business. EA as a company is kind of stagnated in its growth in a lot of ways as it's, um, become more reliance on fewer of its biggest games like sports, EAFC.

Yeah. Sports. And so, you know, Battlefield has had like a long history and has been successful at very much at times in EA’s history. And if they can make it bigger and more successful than ever and kind of use that success to turn it more into the Call of Duty model, for better or worse, like just from like a business standpoint, like that is going to make like a very real difference for EA and I feel pretty optimistic about the new entry being a catalyst for, for more to come there.

More than just being a successful game. Being a catalyst to like reinvigorate a franchise that grows the company in ways that maybe you wouldn't have seen a couple years ago. And then just personally, I'm excited for Ghost of vte. Nice. Coming out this year on PlayStation, Ghost of Tima was one of my favorite games when, when it came out and still to this day. So very excited for the sequel.

Devin: Nice. Well hopefully it hits well. Same with Battlefield Six, which I would actually love to see that somehow then combine with that resurgence of Battle Front too, to, to become some something as well. You know, like capitalize off both those like. Sort of things to that Battlefront three, it not have all the issues that Battlefront two had on launch.

Aaron: Yep. Totally understand. Would love to see that too. You, but I think I'll, I'll take a successful Battlefield. Yeah.

Devin: And step one step at a time. For sure. Well, what else are you watching the industry right now? And it doesn't necessarily have to be like Gabe specifically, but something, you know, related to just the broader industry.

Aaron: Yeah, I mean, again, some people will say that, you know, we're getting too ahead of ourselves if we talk about things like this, but I think that the intersection of world models and vibe coding is going to have a very profound impact in defining the next generation of entertainment and, and gaming specifically.

And Devin, you, you know, helped write like an article, one of the deep dives that we wrote about this. And so, if you're listening and you're, you're curious to just learn more about like, the history and kinda like the present state of world models, like we have a deep dive on it that digs into all of the different players and it's super interesting.

But I really can't help but think that creating immersive digital worlds in an entirely new way that just sidesteps what game engines have been. It opens up like new creative surface areas for people to just rethink almost what like games can be which is sort of like, almost like a too big thing to say.

But I do think we're gonna just see more types of like digital 3D immersion. Some of it's gonna be fun, some of it's gonna be maybe more like interactive experiences. But in the same way that like LLMs with text have taken over the world, and then you start to see great success with images and then videos coming next, and that's gonna transform much of how like content creation on YouTube and TikTok and all those places work.

I think we're gonna see something similar after that with these like 3D immersive worlds with world models and connecting that to more like the, just like the vibe coding aspect, just lowering barriers to creation in general and enabling people to create those worlds and to kind of create the rules of what you can do and what happens in those worlds is just gonna be something entirely new and very different that I think like the next generation, especially like, that'll be more what they are native to, like, similar to like, like how Roblox took over the world.

Like I think there is an aspect here that I would just predict. I don't know exactly what the platform is or what exactly is going to look like, but. , When once world models become more of a thing and there's a younger generation that is native to it, it's going to redefine a lot of how we think about what games can be and how they work and where people experience 'em in the same way that every generation kind of has that, that moment.

And again, similarly, it's what I said before, like even if it doesn't really matter right now, I think we should all pay attention to it. So you can ride the tsunami instead of be hit by it. And that's very important.

Devin: Well, here's where the intersection to, to our earlier conversation at the very beginning ties in, right?

This is where you get better. Verse 2.0 with AR is suddenly now you couldn't just hard code AR that responds to the real world and becomes a layer world over top of it. But suddenly you throw a world model in there with the ability to generate some of this stuff and react to your voice with that sort of vibe coding stuff.

It, you know, maybe that's where the intersection finally hits with that. What are games in AR you start looking at that, that Metaverse 2.0 with that word model stuff. I don't know, just food for thought.

Aaron: Maybe I, I feel like that'll fit more in the, like, the VR side of things, but like generally like, could be a catalyst for like AI world models will be a catalyst for, um, like a new generation of VR where people can just like experience entirely new things or create like their own worlds to experience whatever that looks like. Yeah, I do think that's gonna be a big deal for, for VR. Maybe not as much AR but you know, it's all, the tech is all like, pretty interconnected in terms of just like the next generation of, of hardware.

Devin: Absolutely. Well, a lot of, a lot of good stuff. Hopefully they can keep spending money to keep making our dreams come true, 'cause I, I am not going to be personally funding that development, so.

Aaron: Yeah. Because that can keep it up, you know, neither will we, yeah, need very deep pockets to, to do that. But I mean, it's been really exciting to see what companies like Google have, um, been able to, to achieve and yeah, a ton of startups in this space.

So anyway, some of this is very much like. In the sky kind of abstract. Right? Unclear. And you know, like even like in our business, like of course like our day-to-day of working with clients, like it's less with world models and it's more, you know, like, like how are you thinking about your economy design and your mobile game?

Yeah. And, and you know, just kind of more like the present state of things, but you know, like as a, as a founder, as an investor, as like really any of us who like want to like build something long term in the industry, I just think all of these things like, like we should just try to stay on top of it.

Like make it fun, make it interesting and, well take a long time deal. Well see.

Devin: And to, to just looking at layoff headlines all day long and, and shaking your head. You know, I think we've had enough of the, the doom and gloom over the last couple years. It's starting to start thinking a little optimistic, even if we have to still sit through some of that doom and gloom for the moment.

Aaron: Things will, things will change. Like there's always, like, anytime new technology rolls around, like you're gonna see some structural changes and there's gonna be more unemployment and, you know, shutdowns and things whenever all of this starts taking over. But, you know, it'll be replaced by like, awesome new businesses, new platforms, and sort of just a redefining of what the industry can include.

The same way that it, it has changed many, many times. And so I think it's important to, you know, even if you've been in the industry a while, and many people listening have been in the industry much longer than I have been, you, you know, don't be the, the old man yelling at clouds or yelling to like, get off your lawn.

Like yeah, recognize like what has happened historically. Like at some point, like you might have been the upstart that was doing something new, right? On a new platform that didn't exist 10 years before. And to be kinda welcoming to the, to the change that we will see in the future and be excited by it.

Devin: Absolutely. Well, game's gotta be the, the, the driver man. We gotta keep using games to push tech forward. So always a good idea to keep an eye on that ball. Even if it's ahead far ahead of where you can actually do something at the moment.

Aaron: For sure.

Devin: Cool. Well thanks for joining, Aaron. It's always great.

Like you said, we had had a good conversation since going back to the round tables and, and it was good to just kind of talk about the market general gives a broader perspective. I know we do, you know, there's a lot of just talking to individual companies and developers and things like that, so hopefully, you listeners enjoyed just a good broad look at what's going on.

A lot of, a lot of interesting things happening. And, of course make sure you're checking out the digest as well, because we're still, you know, firing on all cylinders with that, putting out lots of great content, lots of deep dives into things, games, companies as, as Aaron mentioned, a couple of those things earlier.

So definitely make sure you're subscribed to that and, and keep up to date on everything. And in the meantime, you know, appreciate everyone tuning in regularly to the podcast. Also, I wanted to mention, just since this is probably my last chance to plug it before happens, next month for anyone who is in San Francisco, I will be speaking at Games Forum SF on the 22^nd, so, the first day of the event, around I think three and the afternoon. So, it'll be on if you, if you're into game economies at all. It'll be on game economy balancing. If you're not into game economies, you probably will be by, by the end of the talk. So make sure to stop by and check that out if you're gonna be there right in the heart of San Francisco.

So, hope to see you guys there. If you're looking to reach out to someone at Naavik in person, you know, it could be good, good opportunity to do so. And I could always also put you in touch with, with others like Aaron as well, If you wanted to speak to him through me, that's fine as well. But, thanks everyone for, for tuning in. Hope to see some of you in person next month, but you know, in the meantime, make sure to check out the podcast, and I'll see you here.

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