And you know, people might not even realize or recognize themselves as gamers, but you know, the mom playing Candy Crush or the random person playing Candy Crush on the subway is a gamer. Or if they're playing Monopoly Go, they're a gamer. And obviously what we're going to talk so much about is gaming is a broad term. And it covers a wide bucket. But it is really remarkable to scale that it's reached. And obviously it's never been more exciting. And as

a player, it's definitely been like never been more exciting than right now. Well, and to your point about ubiquity, what's made the business so ubiquitous and is the accessibility of platforms, right? And again, when I was a kid growing up, in order to be a computer gamer or a console gamer, it was very expensive. It was there was gear that you had to manage. Obviously, the consoles were relatively simple, but not cheap. And there was no such thing as free to play, right? The PCs, you really kind of in many ways had to be a bit of a hobbyist in order to get them to work. Today, your mobile phone is as powerful as consoles were just a few years ago. And you know, if you could take you can now take your phone with the new iPhones come with with USB-C, you can plug them into and you can get an HDMI out of them and plug them into a big screen television and run 4K video. It's absolutely remarkable what's what's what's possible. And I think that that platform accessibility has really helped the video game business in ways that that nobody's really fully articulated yet. Yeah,

and it's obviously as mobile continues to proliferate throughout the entire world, it's continuing to just grow. Right.

And that's the other point here, right? Which is, this used to be a Japanese North American and kind of UK, maybe Germany and France kind of phenomenon. Now it's a global phenomenon. And I think we're seeing, and we'll talk about in later episodes, penetration, not just in China, but in Latin America, in Southeast Asia, in India, in Latin America, and even in Africa. And I think those are amazingly useful and important areas of growth, interestingly, not necessarily for Western companies. And I think some of the exciting things that we're seeing, and we'll talk a little bit about it when we talk about this in some later episodes, is companies that are specifically targeting play patterns that are important and unique to certain territories. And I think we saw it early in China, right, the sort of Three Kingdoms games, right, where they took the Korean MMOs and reconfigured them into the Chinese mythologies. But now we're seeing even more interesting things. I remember the peak guys in Istanbul were showing me a couple of years ago, some casual games that they had built derived from Arabian Peninsula play patterns from board games, or from, or Egyptian board games, or other things like that, that really have no relevance outside of those territories, but dominate in those territories. And I think that is so cool, and that there's an enormous amount of opportunity. We looked at a crazy, cool shooter we'll talk about in the India episode, kind of Fortnite-like battler, that again is completely based on Hindu mythology. Super cool. So as we record this episode at the end of 2023, the game's business, obviously, on the one hand, has never been bigger or more exciting. But I think at this particular moment, coming out of the pandemic, coming out of the first real sort of full post-pandemic year, the businesses hit a bit of a rocky patch. And that's caused some analysts to wonder if we kind of hit peak gaming during the pandemic. Now, I don't believe that, frankly, but I think there's some logic to it. And I think it's worth talking a little bit about that. So I want to start this new season and this first episode with kind of a high level look at where the industry is and a little bit of a hint of where we might go from here. So what's this rocky patch I'm talking about, right? It's primarily a global slowdown in revenue growth, right? That's really what these analysts mean. And I think the most sensible of these analysts who cover the industry, the non-hype, non-promoter types, are predicting kind of one to three percent top line growth for the industry annually for the next couple of years. Now, that's in stark contrast to where we've been. And I think there's a number of contributing factors to that that's really holding us below historical growth norms. And we're going to talk about some of them here. We'll talk about some of them in later episodes. Yeah.

And I think it's for just again, to reiterate, as a player, gaming has arguably never been better. And so it's this weird juxtaposition of there's amazing games. The games have never been higher quality, more accessible. But the business itself is in question. And the growth is certainly being questioned. And I think it's really, it comes back to a few different things. I think it's worth exploring why we're having this reset or this moment of re-examining

what's happening. And I think that point you make is extremely important. And I want to compare it to kind of what we saw with streaming and the golden age of television over the last few years. So obviously, once it became clear that Netflix was going to become an insanely valuable company, the Disney's, the Paramount's, the Max's, etc., etc., all jumped into the streaming business and started spending like drunken sailors in Hollywood. And as a result of these billions of dollars invested in creative in the industry, we have seen a proliferation of some of the most remarkable content on our televisions that we've ever seen in the history. These shows that would have been unthinkable in another era with adult themes, unbelievable production values, incredible locations, things that were really beyond anybody's imagination of what TV could be. And I think in a similar vein, we're kind of seeing the same proliferation of high quality gaming content as well, that's delighting us as players. But just like the streaming business, the business got kind of out of the stream, this got a little bit out over its skis over those over those years. And as we're seeing now, there's been a massive pullback, right? I mean, you saw this in the context of the strikes in Hollywood earlier this year, the stream actors guild and the writers guild, really going toe-to-toe with studios that were in the midst of a real pullback and a real kind of refocus on cost and discipline in a way that hadn't really been present, of course, during the go-go years of the streaming boom. And I think, again, not dissimilar to what we're going to talk about that's happening right now in the video game business.

That's exactly right. And I think it's as it all ties back to excitement. But there's also a bit of a lag from COVID in that a lot of, especially games, they were un-holed or the production was put on hold, which resulted in them not launching until this year. And I think this year, by actual reviews, is one of the golden years of games in the past decade or two. And it's really just amazing to see the quality of games, but it all comes back to you're seeing more layoffs and more businesses hit and impacted in games. And maybe we've seen in several decades as well. And I

think that the pandemic was obviously a double-edged sword. On the one hand yet, it created a bit of a log jam around production that's resulted in this kind of oversupply in the short term, because a lot of stuff that got delayed or worse is now kind of getting cobbled together and coming to market. The flip side of that was that when we were in the midst of lockdowns and school closures and work from home, those things were insanely helpful to the games businesses that did exist at the time, right? Because what the hell else was there to do other than play a lot of games. And certainly, that's what people did. And we talked about the Among Us phenomenon in our last season. That thing went from basically a kind of stalled out, not particularly successful game, to hundreds of millions of monthly active users over a very short period of time, basically driven by a lot of people with a lot of time on their hands who are watching Twitch streamers and joining the party. And that was an opportunity, I think, that spiked a lot of growth in the short term in the industry, right? A lot of companies reaped tremendous benefits from the stay at home era of COVID. And I think it's created bad comps in the sense that now, you're looking at growth rates, settling back to kind of pre-pandemic norms. But by comparison with the growth rates during those couple of years of lockdowns, they pale by comparison. And so I think that it's caused Wall Street to have to do a little bit of a, let's smooth these curves out over five or six years to see if we can't find where the actual growth rates of the industry may actually come out. Yeah, I mean, we're obviously investors. And so we see this across the board, not just in gaming. We see it across all tech and software. And it's sort of, we're

normalized. And we're all trying to figure out what is this pre-pandemic level growth. And look, if you just slice off the growth graph for a lot of these gaming companies of the past three years, it's like, okay, wait, are they even back? Are they above where they were in 2019 or 2018? And I think that's the reality of what we have to reexamine and look at as to industry. But there's certainly a short term massive bump. And now it's we're trying to figure out where does this stuff

normalize? Yeah. So the pandemic was kind of elephant in the room, you know, for a number of these macro factors. But I want to get beyond that, because I think that's too facile, because I do think that other things have been going on. And I think those are kind of worth talking about. So let's talk about three of them, right? I think there's three big headwinds that the industry is currently facing that we've kind of historically never had happened simultaneously before, right? Maybe the late 80s, you know, console over supply and explosion was maybe the closest thing that that we've that we've come to, something like this. But really, this is unique. And again, if you're out there running a gaming business, contemplating running a gaming business, an executive in a larger gaming business, etc, I think this is going to be very interesting, because again, it's useful to think about these cluster of attributes kind of together and the effect that they're currently having on the industry. So what are the three of them? Let's just lay them out there, right? Let's get them on the table. There one consolidation, we've witnessed a period of substantial consolidation in the game's business amongst the major publishers and even among some of the indies. And as we'll discuss, this consolidation has a myriad of implications for the industry, some negative, some positive, maybe a little bit more negative than positive in my opinion. And and it's something absolutely worth discussing. Second, I think we've seen the true end of the zero interest rate phenomenon, right? And for those of you who are unaware, because you're, you know, you're pushing pixels or whatever, and you don't spend much time reading the financial section, a lot of the boom during the last, I would say five years before 2022, not just in the game's business, but in the business, but in the larger financial community, was driven by a period of historically low interest rates. And what when interest rates are historically low, money is cheap. And when money is cheap, people get it and they deploy it. And so we saw massive deployment of dollars into the industry. I think just to put a pin in it, I think in the couple of years around the pandemic, 2020, 2021, maybe 2022, something like 30 billion dollars was invested into the game's business, you know, more than 10 billion a year from private financing sources during that period. And this year, I think we're going to struggle to get to a billion.

Yeah, I think that that's exactly right, which is we were in a pure, let's fund games mode. And now we're in the complete opposite of weight, where the returns. And I think everyone's slightly scared of the current phenomenon. That's what happens when zero interest rate phenomenon ends is everyone's like, wait, I, one, I need the returns, but also two, is this the best place to be investing? And we'll talk about

it in a little bit more detail, because the, because the end of zero interest rate phenomenon is really a double edged sword, because when interest rates are extremely low, and we'll talk about this, it vastly inflates the value of public equities, because people can't get a safe return from just keeping their money in the bank, they're subject to inflationary pressure. And so they're much more inclined to seek, seek alpha by putting that, that to work in the stock market. And when we're now in a situation with 5% interest rates, where you can really have sizable amounts of money in the bank and generate income on that money, like you couldn't do a couple of years ago, that changes the equation for a lot of private investors who are thinking, okay, where do I want to deploy my dollars? Do I really want to put those into a venture capital fund that, you know, maybe has a 10 year return trajectory? Or do I want to put it into a money market fund, right, or into treasuries or whatever? And so I think that the fact that those are now alternatives, where they really weren't for previous years, has affected the stock prices of the larger companies, which trickles down to the developer side of the market in very, very meaningful ways. So the last of the three is something that I think is going to be a bit controversial. And this is a real sort of article of faith for me in the game's business. And that is, I believe that this overfunding of the game's industry over the last few years primarily chased content and did not, to a large degree, chase innovations in business model or distribution, and particularly distribution. And the result of that is that we have an oversupply of content, which delights you as a player, but perhaps is not as healthy for the businesses it potentially could be. In the meantime, the combined factors of the consolidation in the industry and the lack of distribution innovation coming bottoms up is creating an extraordinary amount of power in the incumbent distribution show points, the valves, the apples, the Googles, even Microsoft. And I think those factors are not good for the health of the industry long term. So let's unpack all of these in turn.

I think another way of framing these three headwinds is also that we might just be in a later stage or a more mature state of the current market and that we don't have new platforms really emerging. Maybe Apple's Vision Pro will open this back up again, who knows. But in the current state, it's pretty mature. We know the platform's mobile is certainly in a later stage right now. And now we're trying to figure out, okay, does that lead to consolidation? What happens when we're no longer in zero interest rates? And then what happens when you're overinvest? And so that's where we end up today. All of these things are continuing to play out live. And so I'm really excited for us to just examine what that means for the industry. Yeah, I think I would

hesitate to describe the game's market currently as mature, for many reasons. But

most stable maybe in the current in some period of time, we're entering some flat line or a stable. I

think we've reached a kind of local plateau, right? And I think that I think there's, again, opportunities to inflect out of that plateau with the right kinds of businesses. So I am very hopeful in that regard. But I do think that, and we're going to talk about it in future episodes and maybe a little bit later today, when we look at ways that the business models of the industry could be transformed by new technologies. And if and when that happens, I think we could see some really profound changes in the way that the video game business is viewed as a business. And until then, though, I'm with you. We may have reached a bit of a local maximum.

Yeah. And we'll touch on this even more. But I think it's a lot of this maybe is just from bad behavior. And when you're in a zero interest rate and when you are over investing in the content innovation, you're getting funded to simply just make a better game. And so you're not actually thinking about how do I win? And maybe the more capitalistic

things that you and I spend a lot of time thinking about it. Yeah, to this end, I was talking to a very well-known and very experienced developer running his own independent game studio. And we were talking about his go to market. And this is a game that he's in that he's sought outside investment for and has raised tens of millions of dollars to deploy. And he looked at me quizzically. And he was like, what do you mean? I was like, well, how are you going to say, what is your distribution innovation here? What is your unfair advantage in taking this game to market other than it's a cool game? And he was like, I don't know what you mean. I'm just going to put it up on steam early access. And I didn't want to, I just winced inside. My heart sank because I think there's a lot of companies out there for whom that really is their strategy. They're like, we're going to make a cool game and put it up on steam early access. And you know what, fine. But that's a lifestyle business. That's not a business business. And when you go out and we'll talk about more and in greater depth in the venture capital episode, when you go out and raise tens of millions of dollars for venture capitalists, their expectations are very different than you launching on steam early access and creating a lifestyle business for yourself. And so I think that there's a real disconnect out there in the industry.