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Gaming Economies Uncovered: Insights with IDC’s Lewis Ward
39 Plays5 months ago
Key Takeaways
- Evolution of In-Game Economies:
The gaming industry has shifted from paid games to free-to-play and subscription models, significantly impacting game economies.
Smartphone gaming has popularized business models that perform well on mobile platforms. - Role of Economists in Game Development:
Economists play a crucial role in balancing in-game economies to ensure fair and engaging player experiences.
Sophisticated economic systems in games like Fortnite and Roblox highlight the importance of economic expertise in game design. - Single Player vs Multiplayer Games:
Narrative-driven single-player games continue to have a strong market presence despite the rise of multiplayer and live service games.
Companies like Sony are investing in narrative games, indicating ongoing demand for story-rich gaming experiences. - Virtual Events and Cloud Gaming:
Virtual events, such as concerts in Fortnite, offer new ways to engage players and attract non-gamers.
Cloud gaming services are growing, providing more accessibility to high-quality gaming experiences across different devices. - Importance of Customer Support:
Effective customer support, especially through in-app services, is crucial for player satisfaction.
AI tools are increasingly used to manage trust and safety, ensuring a positive gaming environment.
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Transcript
Welcome & Guest Introduction
00:00:07
Speaker
Good morning, everybody. Welcome to the PlayerEngage podcast right here. Today, we're excited to welcome Lewis Ward, Research Director for Gaming and AR and VR at the IDC. With over three decades in the industry, Lewis brings in extensive insights into video game consoles, digital, PC gaming, mobile gaming, AR, VR, everything everything gaming related.
Overview of Discussion Topics
00:00:25
Speaker
We'll discuss the evolution of in-game economies, strategies for balance, aligning economies with business goals. We'll also cover kind of live virtual events things we're seeing more often, mid-generation console refreshes, cloud streaming, everything that's going on in gaming. So Lewis, thank you so much for joining us today. Is there anything you want to say about yourself? Well, thanks for having me, Greg. ah Pleasure to meet you. So yeah, I mean, I'm director of gaming eSports and AR VR at IBC. So yeah, I took over gaming in 2009. So PC console, mobile gaming, um looking at a variety of aspects of the market. And um yeah, I'm excited to be here and talk through what we're seeing these days.
00:00:59
Speaker
Yeah, I love it. You know, there's so much going on in gaming, there always is, but there's just so much great stuff on the horizon, things that were new technologies. Before we really dig deep into it, do you mind kind of giving our audience like a quick elevator pitch on what the IDC is?
IDC's Role in Technology Research
00:01:13
Speaker
ah How did you end up as the research director for gaming? Because that sounds like an awesome role to be in. It is pretty fun, especially compared to some of the drier things we cover. So IDC is is kind of one of the granddaddies of technology research. So instead of, you know, there are investor type companies that look at, you know, how companies performing and examine their stock prices, think things like that in depth. IDC was founded actually 50 years ago, believe it or not, which again, are just one of the earliest companies to specifically look at high tech. So I do market research on technology.
00:01:44
Speaker
ah So that's private and public companies, right? And how they intersect a wide variety of other sectors and things like that. But at the end of the day, in a gaming context, again, I took over in 2009. That was right after the big downturn. ah Bottom line is that one of my predecessors moved on. And I've been covering the kind of mobile gaming, which at that point was smartphones and tablets, you know, for for iPhones and and Android phones had just getting off the ground. So I've done a little bit of game specific research with my with my former colleague and then I was asked to take over gaming. So I was i was a gamer. I did a little bit of programming in the 1980s with with Apple to basic.
00:02:22
Speaker
believe it or not so i've actually done a little bit of coding but i was ages ago you know played arcade games in the nineteen eighties so i grew up ah you know with with with the tarry consoles at home and things like that in high school so yeah i've been around for a long time but i didn't start covering it until two thousand and nine formally And you know I really have enjoyed it. And I agree with you that there's always something new on the horizon.
Lewis Ward's Career Journey
00:02:45
Speaker
It always pushes the boundaries of what technology can do. And in the broader context of IDC, you know it covers all sorts of high-tech markets, from server things to pricing on high-tech products and services. So it's been around for a long time. It's a pretty big company. Yeah, it's been a pleasure to be here. I i recently celebrated 20 years at IDC, believe it or not.
00:03:06
Speaker
Congratulations. ray to like one of The white hairs I should say is to show for it. Hey, you know, he's funny in gaming, you think it's the least stressful of all the jobs, but then you realize every job is stressful. You can't escape that no matter what. I have a kind of a two part question here because you know, when I was younger, i I dreamed of what I wanted to do when it was growing up. And embarrassingly enough, it was working easy video. If you know easy video from the east coast, blockbuster. It's just basically a rental store. I was like, Hey, I want to do that because it looks so cool. I was like six years old at the time. So what, I mean, what did you want to do when you grew up because it seemed like it was seems like it probably everything aligned perfectly. And then the the latter question I'll ask her that is what is the day to day
00:03:45
Speaker
for your job as market researcher. What are you doing? how do you How do you figure out what to be reading? Well, I mean, I went to UC Berkeley in the early 1990s. And what I studied there was was English. I was an English major with some you know kind of history and some other economics thrown in, kind of a liberal arts major with an English focus. So I wanted to become a journalist. So right out of college, ah this was in the Bay Area, San Francisco ah worked for a Ziff Davis magazine for a while. At that time, late 1990s, the internet was kind of taking off. And I kind of fell backwards from a you know journalism job, which was on the periphery of technology, into full-time analysis. And I did some, I don't know what WebEx is, but they they kind of started audio video data conferencing or one of the one of the early front runners for you know digital meetings, online meetings. At that point, it was like brand new. So I worked for a boutique firm in San Francisco, which did you know business-oriented data audio video collaboration.
00:04:43
Speaker
I worked there until 2004 and came to IDC, covered cellular services. So I got hired on covering you know AT and&T, Verizon, Nextel, if you remember them. And then again, 2009 took over gaming and I've kind of been doing that ever since. Augmented that recently with a little bit more coverage of esports and ARV, augmented virtual reality, which is business and consumer. I contributed to that with a colleague with a couple of colleagues of mine. Did I miss part of your question or did did I answer your question as to, you know, that's what I, I want to
Cultural Impact of Gaming
00:05:12
Speaker
be a journalist. I became, I, you know, kind of fell backwards almost into game research in 2009, but I was a gamer. So I think I was, you know, my my boss at the time who recommended me for it, not only had it written about it, but they knew that I'd, you know, play video games. I did a crap ton of.
00:05:26
Speaker
you know, ah PlayStation console gaming. I mean, we had them going back to PS1, you know, new Xbox. So it wasn't a hard sell for me to to start doing it. And like I said, it's it's it's always a fun industry. So I went to basically every E3 since 2009, and that's now defunct. But um you know it's been a it's been a pretty wild ride to to watch gaming uh evolve over the years and i would say impact you know cultural norms in many countries in a general sense and that's that's interesting to me when when ah when a game kind of breaks through into the general culture and you know whether it be fortnite or take your pick of uh
00:05:58
Speaker
of a game and even some transmedia properties, right? Like Nintendo's done some hit movies. ah The Fallout game show, you know, became a hit. ah The Fallout TV show became a massive hit ah earlier this year. So those sorts of things are always interesting to me. And I think more of those things will happen in the future. I mean, i mean the arc of your career, it seems like timing was fantastic for a lot of this. And that's awesome. I mean, i mean you jumped into mobile gaming around 2008-09, which is I think when kind of mobile gaming really like Zynga probably moved Farmville from Facebook onto mobile phones. Right. flash right It was flash. Right. Right. You have all that you're talking about the Nextel stuff. And I remember the Sprint Nextel merger, everyone was excited about getting pushed to talk on all these different devices. and I went to another race was with Sprint Nextel back in the day. So that's how. far Yeah, I remember I was a Sprint user.
00:06:51
Speaker
Yeah, it was, ah and then you you talked about, I want to just say I missed it, but one thing I wanted to talk about was you mentioned Ziff Davis, right? Because that was in the news recently, right? Where they're just expanding. And I don't know how much we want to talk about this, but but from a journalist's point of view, right? Like, are we worried that Ziff Davis is now controlling kind of the main media that we're consuming? And is it going to start becoming a little more bias for lack of better words. Who did they just buy? Like was it? and Was it in gaming? Or was it did they buy somebody else? Honestly, I hadn't heard the news that meet some yeah da they they acquired. I didn't realize it was if Davis for some reason I thought it was some other some other holding firm or whatever.
00:07:34
Speaker
Yeah, I mean, obviously, you know, the pandemic saw a big bump in total gaming activity, spending, gamers, you know, everything moved up. A lot of different companies in gaming and beyond gaming over invested in it, I would say. And now it's kind of come back down to the
Pandemic Effects on Gaming
00:07:50
Speaker
baseline, right? And so the expectations were, oh, it'll stay that high for some cases. We thought maybe it would come down a third to a half, something like that. But it's kind of come back down more like two thirds or three quarters back to the the pre-pandemic baseline, if you look at some of those norms. So a lot of casual gamers came on, then they got their jobs back or went back to their normal activities they were doing before the pandemic. And so it's really gone back down. I think on the downside of that has caused a lot of companies that perhaps over invested, hired too many people, whatever it may be, made risky bets.
00:08:20
Speaker
have had a a very ah tough reckoning. That's certainly happened in e-sports, for example. A lot of those companies are in trouble or merged or whatever, who got out of business. So, you know, if you're a giant company that allows you to buy up distressed smaller competition, is is my short answer of what I see in multiple industries over many years, is that if you're a large company with pretty deep pockets and financial resources, when the market turns south, even if you've made bad decisions yourself, you generally are in a better position ah to acquire other distress companies that are smaller simply because of your scale advantages so i can't speak to what you know why is if davis did it obviously they may view gaming as a growth opportunity as i still do you know there's been a reckoning but i also think compared to going to the movies or going to concerts or whatever
00:09:10
Speaker
I'd rather be in gaming than than some of these other aspects of entertainment that people do all the time around the world. ah so i can't I don't know specifically why they bought them, but I suspect at least part of it is that you know they're looking at the numbers of where gaming is going over time. They want to jump into it. i think i think was it um I saw some announcement that ah Rolling Stone is investing in in some gaming publication ah very recently and I saw that you know the the Washington Post did so and then got back out of it like a year later. you know I can't speak to the specifics of Ziff Davis, but I guess consolidation means that whoever's on top of that organization is going to be able to potentially dictate
00:09:52
Speaker
more of what is said across all those media properties. I have no particular knowledge of whether Ziff Davis is the type of company ah that would want to do that at a micro level, but there are cases where big companies buy smaller studios or whatever it may be and they're hands off and they let those people make the decisions they would have otherwise made. So I just can't speak to whether, you know, generally speaking, I'm against consolidation because I think there's a lot of markets that are overly consolidated. ah So my my, you know, out of the gate blush take is that I'm not a fan of it, but I can't speak to that specific instance. Yeah, and that's fair. My first mindset was like, oh, with all and hopefully the layoffs are kind of the tail end of it, right? It seems like things are slowing down, hopefully. But my my worry was like, oh, if they control all the media outlets, they're gonna maybe start saying, hey,
00:10:42
Speaker
Don't report on this, or let's keep it a little quieter. but But hopefully, again, they let those entities stay as they are and keep doing what they're doing and just keep writing the game. I'd be more concerned if they own gaming properties, but I'm not aware of if they're actually you know also making games. That would be the obvious conflict of interest. ah But i don't I don't run into them, so I don't don't think they're doing much directly. So let's go back to a thing part of the statement you made before. you know During the COVID years, gaming boom, that was great, right? People were stuck inside. So they picked up their phones, they picked up games and started playing. And in game economies evolved over these years. I think we look back, we have those clash of plans, games that started putting it in game microtransactions and some, so some companies went crazy with it and started charging for everything. I know I hear a lot about people complaining about things like
00:11:31
Speaker
speed store and because you can pay to win, you can pay to upgrade and they incentivize that, but a lot of them are now cosmetic as well. Yeah. And there's all different types of economies from within games. People are just thinking, Hey, I can purchase this or I can do that. But there's also, Hey, this horse armor is worth X amount, right? So, so how have you seen game economies evolve over the years? And do you think, and maybe this is too deep of a question, we got to kind of build it out a little more, but like, what are the strategies if you look from the outside in, like, what are the strategies that you see happening
Evolution of Game Economies
00:12:00
Speaker
in these companies? Yeah i mean you could take it from a technology point of view which is or the the platforms that are generally out there such as again consoles which tend to use a controller pc's which are mice and keyboard and then the rise of smartphone gaming which is touchscreen right so there's three different interfaces and i would say that the rise of smartphone gaming overall means that.
00:12:22
Speaker
business models that work well on a smartphone have generally outperformed, right? and And as those install bases of smartphone tablets keep growing, you would think that those business models would come with it. Having said that, there's also you know looking at the business models of specific parts of that market, which are common across them, like free to play or subscription models, you know the premium paid games, but but generally speaking, It's moved from paid games before smartphones came along. And then, you know, free to play is basically dominant on mobile. That's kind of infiltrated PC and console gaming. And then more recently, if you'd like, and you know, if you'd like Game Pass and think that subscription models are going to keep growing, I'm a little bit less sure that's going to happen. But I would say more recently, there's been the rise of subscription based business models.
00:13:12
Speaker
and then live service games, which in effect makes any kind of business model you want. But at the end of the day, the point is that new game content keeps coming. There's like monthly twists on what players can do. And so there's different tactics that studios use in different genres to monetize their user base, do something unique that you can only find there, things like that. so Those are kind of a ah very roundabout or or high-level answer to your question. But I think there's been an evolution toward free-to-play, generally speaking. you know you could We could talk about subscriptions or live service games if you want. I guess the little coda I'd add to that, which I think are really interesting and sophisticated from an an economics angle, is things like UEFN, right Unreal Editor for Fortnite, and things like Roblox, games where
00:14:03
Speaker
the revenue model is being turned around and the content creators are actually super players of the game super fans of the game that said hey i can go build this level or do something interesting there and if you marry that would like twitch and youtube facebook gaming you know live streaming platforms with someone or a small team that's competent at building content that honestly a lot of kids wanna play you can make millions of dollars now you can get paid to make those experiences and the economics associated with that to me are super interesting and i think. I may be on my topic because i think it's uf and again robots things like that are super interesting to me there are other examples but that idea that the gig economy the people at the edge of the network are gonna move from.
00:14:47
Speaker
you know, being players of the game and accepting whatever business model is thrown on them to being a revenue sharing participant with a platform provider. I think there's legs to that and I think that will keep growing. So I would say that that's a ah particularly sophisticated economy and not every company can do that by a long shot, but I suspect that things like that are going to grow. I love those platforms. I hadn't played Fortnite for a couple of years. And then when Lego Fortnite came in, I wanted to play with my wife, so we both downloaded it. And the experience is completely different than what Fortnite was. And it made me think, you know, I'm not a believer of the metaverse, but
00:15:25
Speaker
But they're building one that I can get behind and I can believe doesn't require any
Educational Potential of Games
00:15:29
Speaker
hardware. It makes sense. And same thing with Roblox. And not only that, I love them as educational tools. I would tell any child who wants to start getting into gaming, like play Roblox, play Fortnite or or play ah Minecraft. guide if i meant <unk> yeah yeah Minecraft has their marketplace, which is doing something similar on a smaller scale, but the same idea where there are some companies making millions of dollars a year from those mods and add-ons, things like that. And I agree, I love it, right? It's educational, it's helping as as long as you're safe doing it, right? Obviously, there's some it kicked back from what Roblox has been done doing over the years, but but I love it. Minecraft loves to do the educational stuff. I think they've actually leaned into the connection between Minecraft
00:16:11
Speaker
and being used in an educational context. yeah I think they're, I know they're doing things like having people model good behavior, like not being trolls, like they have an actual like ah experience for people in school to do where you're behaving nicely to fellow players and things like that. So maybe they're all, I guess they're also being used for math and and and reading or something, you know, things like that. But I know that Microsoft, you know, is a big believer that um they want to create the type of communities that are positive and contributing to society and and even coding, right? So there's some some coding up in Minecraft, things like that. And so yeah, I think that's a pretty awesome thing they're up to. A slightly different tangent. You know, if you go back to the 90s, early 2000s, right? I don't know why I think this often, but like, I used to have a game genie, I used to have a game shark, which maybe you're familiar with, they're kind of just cheating tools, right? You plug them into your game, and like, you can unlock these things.
00:17:04
Speaker
using these fun cheats, right? Those don't exist anymore. It's it's pay to play. And, you know, GTA and congratulations for being on Bloomberg, right? Lewis was just on Bloomberg where he got asked about GTA and kind of what's going on with that. But like, is a single player experience ever going to be what it was or has the dynamic completely shifted, right? GTA is going to be an outlier because GTA is its own monster, right? But like, Gone are the days where I can sit down and play Mass Effect to not have to worry about internet. And the problem is, EA, if they put out Mass Effect 4, the new one that's coming out, and there's no upgrades or DLC, right they're only going to make as much money as there are sales. and And any business person can see, why am I going to invest five years and hundreds of million dollars to build this single-player experience and not get any true return? like
00:17:53
Speaker
i don't This is such a rhetorical question, and it's stupid. I get it. But like, is single player gaming the way we've seen it dead? And yes, there will be more games coming out. There will be great games, but is it dead?
Viability of Single-Player Games
00:18:03
Speaker
No. I mean, I'm, you know, what was it? Larian's Baldur's Gate 3, right? I mean, there have been some monster hits, which I don't believe are really into multiplayer. They want to tell overarching stories. I would say that Sony's background is really with Naughty Dog and all those sorts of games that do sell really well. are not really about multiplayer. They may have that mode, they may support it. They they tried, Sony has tried to launch more live service games, but then they also canceled a bunch of them, right? It's really hard to do it. Especially if you you have a background of telling great stories, overarching narratives, and you want to keep doing that, go have at it. I think as a matter of fact, in a strange little thing, I don't know if it's going to play out.
00:18:44
Speaker
But I recently did a console forecast where you know the cost of ah of a AAA game disc or card is you know it's over 50 overall, you know new and old consoles. But a lot of the new high-end AAA games are 60, 70 dollars a pop now. And I think there's a case to be made that if you want to do like and Yes the digital transition is happening and discs and cards are eventually gonna go away entirely i would agree with that but it over the next ten years we're probably gonna have consoles that play disc and certainly nintendo consoles they are gonna be playing cards so i think is the case to be made that if you you if you're good at at making triple a single player games you can play offline.
00:19:23
Speaker
ah that have strong story arcs, strong characters come to a clear conclusion that's satisfying and all those sorts of things. And that's what you wanna do when you're passionate about it. you know i think I think that's absolutely going to remain a viable business model. And interestingly, you know as a lot of companies shift online and are competing for the live service space, there may actually be a little opportunity over here in the antiquated discard area to be really good at selling 60 or $70 games and make a lot of money. So I don't know, it's something that popped out to me that I think the the digital client is happening for sure, but there's a way to manage that decline. And for certain types of companies, there may be an opportunity to kind of move into a, I wouldn't call it greenfield by any stretch of the imagination, but something that's perhaps a little bit underserved given the recent push into you know live service, multi-platform IP by you know all the big players.
00:20:17
Speaker
Yeah, it's funny. And it's not to throw shade at any company, right? But like, When I played Prey by Arcane, right it was like a game-changing game for me. like It changed how I looked at stories and games. And it was amazing. And then they got pushed to create a LiveOps game, which shut down the whole studio. And then you have Hi-Fi Rush from Tango. And and same thing happens. right Great games coming out. And then even the studio, or even Microsoft comes out and says, we need more games like this. But like I get it. I mean, I love Game Pass. I was a day one investor in Game Pass. I would be an investor until I can't afford it anymore. I think it's a fabulous system. but
00:20:51
Speaker
ah i don't know i want great single player games. and And there was a recent news that Sony is investing a lot into narrative games, which I'm very excited about because I think, you know, there's a whole section of casual game or is that like less intense games, but narrative can make a more intense game, but still kind of laid back playing wise. And I think, oh oh, you know what, this is going to be an interesting narrative shift to say, hey, games are now more cinematic experiences. We've already had those over years, like I think it was LA nor or something like that. So I'm excited to kind of see how that plays out.
00:21:22
Speaker
Well, in a way, Sony's, I wouldn't say raise the white flag on live service, but they're going back to what they are traditionally known for as a first-person studio. They really had zero live service games like five years ago. They jumped on the bandwagon, spent a lot of money, and have since, you know, had to let some people go and close some studios and things like that. And so if if a studio, I talked to Sean Layton, he used to run worldwide studios back in the PS4 days. At GDC, we usually get together and have, you know, have a drink or whatever. And he told me, you know, I brought up the the success of Fortnite many years ago. And he was like, we would probably acquire rather than take our existing studios and try to shoehorn them into doing something they're not comfortable doing, right? And I think that's kind of what Sony did. They didn't try to take Naughty Dog or someone like that and force them to make a game they're not comfortable making. And they're you know their talent is not set up to really want to excel at that. um
00:22:17
Speaker
And so I think, you know, like you said, I hadn't read across the thing you said that that's that's on maybe it was the the brand. I know there was a new filing that just came out or whatever. Yeah. Where they where they might have gone into that. But um it wouldn't surprise me. And it's in a way, it's going back to their bread and butter of, you know, what sucker punching on an Insomniac and all these companies are studios are really good at doing. Yeah.
Rapid-Fire Round: Personal Preferences
00:22:38
Speaker
So about halfway through the podcast, I like to do a fireball around where I just kind of shoot random questions at you. So good to go. All right. What'd you have for breakfast? Oh man. um Well, you usually have coffee and then like a granola bar or something like that. So I try to have small, light breakfast. Perfect. Coffee person here. I respect that. If you were going to go to a bar, what's the drink that you're ordering? It's been gin and tonic for a long time, but a nice cold beer on a hot day is is very tough to beat also. Awesome. um If you were to go on your dream vacation, where are you going?
00:23:11
Speaker
That's a great question. Very difficult to answer. We are planning to go to Northern Europe actually at the end of the summer, so I don't know if it's quite a dream vacation, but we're going to like the nor Norwegian fjords and out on a cruise. I don't really go for cruise ships, but that sounds amazing. We go to the Arctic Circle, see the and I guess the the Northern Lights firsthand. We're also going to to Iceland, which I've never been to, and maybe see that volcano that's going. And Edinburgh, Scotland, because I'm a big fan of Adam Smith, of all people, my my favorite economist. So it's kind of a ah bucket list item for me is to see ah the town where and umburg Edinburgh, which is where he kind of spent
00:23:51
Speaker
his latter of years of his life, probably worked on The Wealth of Nations and things like that there. So that's that that was partly for me as much as ah anything the family had to do with it. Awesome. What game are you playing right now? Clash of Clans is my biggie. That's the one I pretty much play every single day. My wife has kind of monopolized the Xbox Series X. But we do Minecraft. I mean, I've got an eight-year-old daughter, so we'll play Minecraft, all three of us. One of us on a console, one of us on a tablet, one of us on a smartphone, and we'll all get in and create stuff together. I play Roblox with my daughter as well. I've got i've got a few things in my queue, both from Sony and Nintendo, ah but I haven't started them yet. But I'm gonna try to do some more VR games. Like I just did a ah ah briefing with Skydance, which is letting out the behemoth, I believe, VR late this year.
00:24:40
Speaker
that looks pretty insane. um So I've got a PS VR two. And so I'm going to, um you know, later this year, that that's got to be on my list to check out. It looks like hack and slash bloody VR melee combat, I believe that's single player. So there's another single player game that will have something like 12 hours of gameplay total. Yeah, you got to invest in the VR and the guy invest in the PS five, you know, last question and you're off the hot seat is what is the last book you read? Wow. Well, I'm in the middle of a couple different books. Let's see which one have I finished. um Oh, man. There's a there's actually I've got one here.
00:25:24
Speaker
ah This is it. This is the one i I haven't finished for a long time. Oh no, I did finish this one. This is Capital of the 21st Century by Thomas Piketty, he's an economist. He does a lot of looking at... um you know, where where where international markets are going, where capitalism is going. So, you know, as a personal interest of mine, I'm very interested in in income inequality and and issues related to that as a armchair economist, if you will. And so books like that that are addressing how is our economy going to evolve US and worldwide economy evolving? and how to mitigate inequality because I think that's a real ah a major contributor to some of the problems we have in America today. That's my conclusion. Those sorts of books interest me. I'm actually going to an event later today about a woman from Ex-New York's Time Reporter who did something on income inequality related to race. So I'm actually going to go down south ah here in Boston and and see her give a talk about her new book. And so that's that's sort of the thing that i'm that I'm really into.
Favorite Game Adaptations
00:26:20
Speaker
Cool. I actually do have one more question that you were talking about, that is, what
00:26:24
Speaker
TV or movie adaptation of a game is your favorite. That's really hard. Okay, I'm a sucker for The Last of Us. You know, Sony, I've been very tight with those guys for years. So The Last of Us TV show, I thought was very amazing. We did watch um ah Fallout, we did watch that whole thing. I would say that was very well done. I know they they've already ordered season two. Yeah, I guess I think there's more games of throne stuff coming, but I'm not I think there was was it there was a there was at least one game that was based on Game of Thrones, I think. But anyway, that's going the other way. So I'd have to put Fallout and The Last of Us right up there. Although Halo actually, I thought Halo got a bad reputation, but I was completely wrong on that. I think they've done two seasons now. yeah
Role of Economists in Gaming
00:27:05
Speaker
We've watched that. I think that was pretty damn well done. I was very happy with the, you know,
00:27:11
Speaker
creating kind of a different narrative in the same world and and helping me understand the characters and stuff. So again, my wife, you know, pretty much monopolized the Xbox Series X and plays a lot of Halo multiplayer on there. But I thought that series was very cool too. All right, too much helmet off, but to each his own. um I want to go back to the economies you were mentioning and the economists because something you talked about on our pre call, which kind of boggled my mind was that companies have been hiring economists to help kind of build out there their studio and their structures or their economies in game. And do you mind kind of touching on that and just giving us a high level of kind of what that means and and how that happens?
00:27:50
Speaker
Right. So yes, there have been studios like Eve Online and many others that have hired formally trained economists to try to understand what's going in in their in-game markets. And to me, it's kind of a comparative economics thing where you know you've got a digital economy. At the end of the day, almost every game, you could strip away all the beautiful things to look at and the special effects and everything else. And at the end of it all, what you have is a game company that can be put in the position of a supplier. They're supplying goods and services in their game to their player base. Now, that player base in a single player game may just be receiving what that game is giving them. And if you don't give them enough,
00:28:27
Speaker
They're going to quit the game and be unhappy. You know, if you've gone, if it isn't balanced, if there's something going wrong in that process, you have a failed game no matter how beautiful it looks. And then there's another layer where you add in multiplayer. So the um the game publisher, the development team studio is in the position of creating a market where they write the rules of the market. And then the players may actually buy and sell from each other. So you've got supply coming in from one side, demand coming in from the other, and then a pricing system in there. I know Valve and some other companies you know have built some pretty sophisticated economies and they need to hire economists to optimize how they markets their digital versions of markets are working. And so there's many studios who have hired
00:29:15
Speaker
formerly trained economists or informal economists, and they give a lot of thought to something that most players don't really give a lot of thought to, which is if you strip all away the beautiful things and the sound effects and everything else, who's
Virtual Events in Games
00:29:27
Speaker
buying and who's selling what and at what price and do those things reach parity or not? And how, you know, when you think of a web three game, a blockchain game, and I know a lot of them have not succeeded, but there's another little angle of where real world economic issues contracts the price of bitcoin or whatever it is are going to affect what your player community decides to do and not to do and there's a herd mentality like investing you mentioned the gta five i haven't done it i haven't done this one but there's
Gaming for Younger Audiences
00:29:57
Speaker
a stock market i guess at least one of the things you can do in gta five is getting the stock market.
00:30:03
Speaker
and make some money, you know, virtual money in the game, the single player, by whacking somebody so their company's price stocks and then you short sell them and then you make make a lot of money. So they, you know, there's these representations of, you know, stock markets or markets in general inside of video games. And I'm personally fascinated by, you know, how how that plays out and ah interested in understanding, you know, Whether a company, whether a game studio is better off, if it's a sophisticated game, right with the player community, ideally with players interacting with each other through these economies, you know how critical is the role of an economist in making sure that supply means demand, where pricing you know comes into that mix and things like that? and so
00:30:46
Speaker
I don't know, for me, again, kind of a little bit of a a gamer plus an economics geek match mix into one, ah that sort of thing to me. And again, in the context of UEFN or UEFN or or or my ah Minecraft and Roblox, those sorts of issues get really important. And so I think that will keep coming as things like the metaverse take off. where gamification goes into lots of other aspects of what people do online. There will be gamified aspects of going to a website or going to a concert, whatever it may be. And economists are going to play you know some role in that in terms of making sure that customers are happy, right?
Future of Cloud Gaming
00:31:24
Speaker
At the end of the day, you need a balanced experience to make customers happy. And part of that is about making them feel that they're getting good value for their investment.
00:31:33
Speaker
It's a, you know, i'm I'm sitting here thinking like, this is a fascinating subject to me, and I want to keep asking questions, but I'm not even sure how to ask questions to dig more into this. So my first question I think would be is, you know, if I'm an indie studio, right, small few, obviously, I'm not gonna go out and hire an economist yet, right? But like, at what level do you start thinking, you know what, this might be something I want to consider? Is it obvious? Is it not obvious? ah And I know I'm like, I don't know anything about this, right? So I don't know. Yeah. Well, and I'm not an expert on either, right? So I know you know USC and ISAR Digital and some of these places that are prominent universities that have degrees in you know video game creation. Part of what they're gonna teach there is basic economics. i mean I mean, I think they do couch in the terms of economics, but they're going to talk about the structure of designing video games, right? There's a lot of books about how you design a video game.
00:32:29
Speaker
Well, yes, there's there's knowing the tools. There's knowing the processes and becoming great at ah Gen AI, or whatever else it may be that's coming in over the transom new to it. But there's also something that you can abstract away. And it's existing in the real world, right? that That at the end of the day, if you're trying to replicate, again, anything with a bunch of multiplayer gamers involved in it, you're going to probably have forces of supply and demand. And if you get out of whack on having you know one tranche of multiplayer gamers playing downhill, right beating up on noobs, the noobs are going to quit and the successful players are also not going to be happy. So it gets into matchmaking because you need if you want parody, like in esports or whatever it is, everybody's kind of got to be banded within a certain narrow level to make sure that the skill of that individual player is the difference in a competitive match rather than simply you know what level they are or 20 other things that
00:33:23
Speaker
you be be able to grind for advantage or pay for advantage as the case may be. you know the The game companies need to be cognizant of you know how they're structuring the interaction between their player bases in a way that makes it fulfilling for as many people as possible. If you get that mix wrong, which again, touches on economics in my view, you're probably gonna have a failed game no matter how to number matter how how great it looks or how great your social media campaign may be. If the experience itself is unsatisfying, you're in big trouble as a studio.
00:33:57
Speaker
It's gonna be a, you know, the last part you brought up was about skills matchmaking, right? And it's gonna be interesting because, you know, X Defiant, don't know if you've played it. It's the latest Ubisoft game that came out, free to play. First person shooter, it's their Call of Duty killer. It got rid of the gold space match matchmaking ah and You know, it's funny, a lot of people are saying, well, they're trying to to reverse a problem that's been solved already, right? And the finals came out and had similar skills based matchmaking and quickly kind of started to drop off. So they're going against this grain. And it's gonna be curious to see if it pays off or not. Because some people have been loving it. Some people have been hating it. I as a player, sometimes I do all right. Sometimes I get
00:34:36
Speaker
crushed but I keep coming back but it's gonna be interesting to see how the player base reacts to that because it is in my mind a step backwards but maybe it's a step forward in another way yeah I can't speak to that one I haven't played that one but um so so are you saying they they are allowing noobs to play very advanced players and they're just throwing everybody into the same mix and and seeing what happens is that what you said there's not really that's what's happening like like they do in League of Legends or whatever it is where you're just paired with people very close to you nope they got rid of that Wow. Yeah. And you know, see yeah you know, I think the problem they realize is that when you're playing people the same level, sometimes that's good. Sometimes that's bad. It might get boring. I don't know. Forget it. I'm trying to solve a problem that I have no idea why they did that. But but there they are. We will know in short order, we will know if if the you know, if it's super easy for advanced players to crush noobs, I guess that's fun for a while. But after after a while it gets boring, I would I would think
00:35:27
Speaker
and the same is true for the other way around. If you're a noob who's experiencing the multiplayer for the first time and you're just getting crushed, that happened to me in Uncharted 3 multiplayer where I went crazy for that in like 2013, played that endlessly. When I was a noob, I didn't know what the hell was going on. I would die so much. I got super frustrated and it did motivate me to get good at it. But I don't know how many people are going to get over that hump. I eventually learned that the shotgun you could just get up near and shotgun people and I beat my kill to death ratio one eventually wind up like being three to one after being the other way 10 to one at the start. And so that feels good. But I'm not sure how many people are going to grind for hundreds of hours or whatever it may be to to figure out the nuances of that system and want to master it.
00:36:09
Speaker
Yeah, let's kind of move to this next part of the conversation because I love it and it kind of does still play with the economies in game. We're seeing a rise of virtual events. Again, we already talked about kind of my my reintroduction to Fortnite and you know, they have the whole kind of Fortnite concert. i yeah what a festival, right? And you've had Billie Eilish in there now, you had I think Dua Lipa at some point in their providing providing these concerts. I haven't done any of them. I don't know what your PSVR if you've messed around with them. But you know, this is going to introduce, you know, almost goes back to what we talked about earlier, too. Like, Sony kind of I said, they're going to narrative games, right? This is more of a casual experience.
00:36:46
Speaker
on a major platform that's going to start attracting people. And or have you done any of these live events of things like that or those concerts? ah And what was the experience like? Yeah, I did. um I think GamesBeat had something called MetaBeat like two years ago. I think it was Somnium Space. There were a few different ah metaverse instances I went to. I guess it was on PC rather than PSVR. but i want But I attended a few concerts, a few live events, a few, watched a few canned ones too. So, you know, Travis Scott back in the day, just look at on the grande, looking at what those experiences were like simply by watching YouTube video, whatever it is. So I want to familiarize myself with how music and the metaverse were kind of coming together. Those, those the more recent, ah the Fortnite festival, music festival, I didn't attend, so I can't speak to that one. I think Epic Games obviously bought
00:37:40
Speaker
ah was a rockstar right who does a lot of the music games and so I think there's an incentive there to want to bring back the music genre in some way and so you could think about ah just like UEFN for example allowing in Legos or or you know a bunch of other Star Wars and all those sorts of things in a way I think that that ah what they're doing around the music festival is kind of bringing music into that same concept where you you don't have to be a fan of Fortnite to do this, right? it can It can bring in casual fans who ne who might never have played Fortnite or might even not know what it is, but one of their friends said, you gotta check out this thing. There's gonna be this free concert or whatever it may be.
00:38:22
Speaker
And you know go go check it out um on ah any device you own, or I guess not on smartphones yet for Fortnite. But um I think that it isn't an on-ramp into gaming for people that aren't serious about gamers, but maybe huge music fans. And in that sense, you know What UEFN is, to a large extent, is trying to go a little bit younger. I would say they're trying to compete with Roblox and things like that. They want to attract those people and their tweens and teens. And therefore, bringing in big acts that appeal to those folks is going to grow their platform. right I think that that's part of the vision of what they want to do here.
00:38:59
Speaker
and they can you know they're testing out the boundaries of what their platform can handle in terms of concurrent users. In the past, I don't know if this has changed, but before, like back in the Travis Scott days, you couldn't interact with other people. there were You would pass through them. like If you go to that event, there's no there's no physics collision. There's way too many people. You can't do it. It'll be interesting to me. like Again, I mentioned that MediBeat stuff. There was an example of, I think it was Somnium Space. I could have had it wrong. I attended an event where there were physics, much smaller event, live event, but they could have turned in the option of hearing what people around you are saying. So if you're standing next to a complete stranger, like you could at a real concert, ah you know, their their mic might be open, they may be standing with a friend of theirs, they could be talking about something completely different, you can hear what they're saying and potentially start interacting with them.
00:39:50
Speaker
you know in a way that's that you that's much more like what the real world interactions are like. And so, excuse me, I think over time, ah you know there's a potential for those sorts of things to take off and attract a wide base of users that they don't think of themselves as gamers, but they will go in and see their favorite act for at little or no cost within Fortnite and just experience you know that that crazy extravaganza that that it turned out to be. Yeah, I don't know if it's just becoming more visible to me now that I have my own kids, but you can see a lot of these companies are putting money into
00:40:25
Speaker
building games that will attract kids, right? Because they know if you can get on the and the positive side sentiment wise for kids, as kids grow up, they're gonna know that brand, they're gonna play that brand. like There's even games like Tokaboka out there, right? Like, my kids know Tokaboka now, right? I wasn't familiar with them until kids. And now it's like, all right, well, that's really smart of them. You did one with ah outright games, right? They make all the kids games. I'm just like, they're doing such cool things. Like, and I don't know, it's just an ass thing to be able to watch this because they're investing in their future. And it's a long play and it makes so much sense. Yeah, my daughter plays um Hello Kitty inside of Fortnite. Sorry, inside of ah Roblox. So there's a few different, you know, branded experiences that she'll go to. And, you know,
00:41:09
Speaker
fall in love with the brand there. And yeah, we wind up going to, you know, last time we were in San Francisco, my wife went over to Japan down to their Hello Kitty store and bought like a hundred dollars worth of things. So there is a tangential benefit to keeping that relationship going. you know And with that, you know with travel and all that stuff, we have a lot of tools that allow us to bring games with us places now, right? Whether it be Game Pass, right whether it be GeForce, whether it be, I don't know what place, I guess, if you have the portal as long as there's Wi-Fi, you can play. like It's an interesting time because you know console sales have been tough. I'm an Xbox fan and I know Xbox consoles aren't living up to the hype.
00:41:47
Speaker
but or the sales forecast, right? But you have these streaming platforms coming up that allow you to stream games close to the same resolution as your Series X would play, right? ah What are your feelings on these services? Do you use them? ah You kind of mentioned that you have, and and do you see that being the future? Obviously, you're a believer, I believe, in the console still, but what are these next 10 years going to look like? Yeah, I mean that's a great question and 10 years is a long time horizon window and I tend to do five year forecast max. It is growing. I know that that Microsoft said that they had grown, that that their cloud stream service use had grown by double digit rate. I think it was back in
00:42:25
Speaker
March or February um from, was it Sarah Bond who said that? So I think they're seeing growth on their Game Pass Ultimate uptake. Obviously, they're trying to push into mobile gaming as an option. And they're looking at, I think even GeForce Now is doing this, they're adding ads to their Cloudstream gaming service to try to better monetize it, especially if you're on the free tier. And I think that Microsoft intends to eventually offer, you know especially in developing countries where they're never they might not have a credit card to begin with, ah but they're never going to spend, what is it, $17 a month now on on Game Pass Ultimate, but they may spend $5 a month for a
00:43:08
Speaker
a restricted tier of games that may be localized that may not have quite the resolution, but they can play them on a mobile device, and they're going to show you some ads before you can do it. So there's a way to make make ends meet, as it were, for those services. There's one there a company called NowGG, which is doing some really interesting stuff, from my perspective, on Cloud Stream Gaming. there They're mobile centric. They're heavily into ads. ah It's done via links over the internet. you There's no downstall at all no local install at all. So you can friend a link and you can just start playing it immediately without even signing up for a ah signing up for an account. So there's a very different vision I think emerging from some economies like India and elsewhere where
00:43:57
Speaker
this isn't gonna be a subscription model. It's going to be, yes, instant on access. i think I think one of the, I sat down with the CEO at GDC and he said that you know he's not trying to replicate what Game Pass Ultimate is doing. he And he quite honestly doesn't think that's got very much legs outside of developed economies. He wants to lean into this ah very, bringing games to where gamers are, very casual leaning, mobile focused games. A lot of them aim to kids, quite frankly. Where you know, LinkedIn now has games. I believe I just saw what don't I just see some other some other YouTube discord. Yeah, I mean so there's he's seeing growth and cloud stream gaming among websites where
00:44:41
Speaker
gaming is extremely tangential to what they do. And they're simply presenting a simple way to start playing a game, you're going to see an ad, and they're seeing significant growth numbers. Obviously can't verify you know their number of users, but they seem to be doing well. right And so I would argue that It's not going to replace consoles anytime soon and develop economies where these things are entrenched. And there is an advantage, let's be clear, about a local game, and as long as you have a good internet connection, you know you're going to have a better experience than you can get on 99% of Cloud Stream gaming services. I think that's that's clear. And for competitive games especially,
00:45:17
Speaker
you know there is an advantage to having the best hardware and ah the best internet connection and things like that. You get a competitive edge by having it local and having sophisticated hardware. And so the hardware companies are loath to give up you know that advantage. I think it's a real advantage. But that doesn't mean that, again, for those more casual fans that we were talking about earlier, maybe the ones that left via COVID, they might start playing you know very casual word games or you know simple match three games, things like that. through Cloud Stream Gaming services, they may not even know it. I think Facebook Gaming has a download option, but they also are also Cloud Stream Gaming over the same service without making a distinction between the locally downloaded one, or HTML5 type game, and something that's being Cloud Streamed. The more sophisticated games are being Cloud Streamed. If they're simple HTML5 games, you can just do it in a browser. And they're not making a distinction between which delivery channels actually being used to deliver it, which I think is you know indicative of
00:46:13
Speaker
where the casual fans are going to wind up going over time. Yeah, I love the fact that tools like Unreal and Unity are also putting in processes that allow you to stream games easier. It makes it less intensive on hardware. Obviously, I see that as being the future. And it's exciting to me because it's enabling more choices for gamers, right? And I don't know, it's going to just expand the number of people that play games. And to me, that's always a good thing. Yeah, I think you're right. It's going to take time to get there and be as solid because of where the internet infrastructure is in certain countries and whatnot and 4G, 5G cellular, all those sorts of dynamics. But over time, um I think it is going to grow. But right now, it's only a you know a percent or something of total industry revenue. Cloudstream gaming is not is growing and it's outpacing the average growth of gaming in general, but it's not some like high share of of of total industry revenue.
00:47:04
Speaker
So this question I just kind of randomly thought of, but, uh, you know, at help shift,
Advanced Customer Support with AI
00:47:10
Speaker
right? We do provide in-app support to start with mobile and we're pushing to console, right? And it's interesting to me because as a console gamer back in the day, whenever I wanted help. as an Xbox player, we were to launch Edge, and it was a ah terrible experience, right? you No one wants to support Edge on on the Xbox. It's tough. So we did a QR code. But, you know, I'm always curious, like, from customer experience, do you see that as being, A, a difference for these companies? We we obviously sell it, and we say it is, right? And I will stand by that, but but what are you hearing from the outside? I don't know if you do any your research on that, and kind of where customer service is it important, and what ah would you wrap rank it on the top few things of things to pay attention to?
00:47:49
Speaker
Yeah, I mean, it's it's somewhat difficult to rank, I suppose. I would say, one, the profile of companies that are involved in customer support at GDC has risen from my perspective quite a bit over the past five years. So I think that there that the companies that offer those services, even if they're not directly in gaming or didn't grow up in gaming, they're pivoting to gaming because they recognize that gamers need customer support and sometimes they need quite sophisticated customer support and the game development studios themselves often don't want to deal with it right they want to make their game they don't necessarily want to hire call center people and dealing with with all those things themselves so a lot of outsourcing going on of the high touch interpersonal stuff at the same time there is
00:48:35
Speaker
but you know Gen AI being applied to those processes where it makes sense. So you've seen ToxMod and several other tools ah you know being introduced into the market and succeeding. Microsoft has kind of leaned into this with their trust and safety reports where they're showing how many ah actions they've taken against their own player base to make sure that the toxic trolls and the you know horrible people doing horrible things are identified and pulled out. But doing it manually with the rise of multiplayer gaming that we've been talking about, doing it manually simply becomes unwieldy very, very quickly. So there's a very good application for Gen AI to identify the snippets of text or voice chat or whatever it may be. I know Discord's doing some stuff along these same lines where you want to identify who your toxic trolls are through an automated system.
00:49:25
Speaker
Elevate that to your support staff for the appropriate level of, you know, dealing with them, whether whether it's getting rid of them or whatever it may be. But having said that, you know, there are a lot of the vast majority of players aren't trolls. They're just playing the game and they run into real issues, whether it's fraud or a million other things. that unfortunately happens inside of games, you know they want to get resolution to their issues quickly and it can cost studios a lot of money if they don't do it well. So there again, you've seen bots and you've seen you know various escalation trees emerge that are intended to resolve the customer's issues quickly, but do it in a way that doesn't break the bank for game studios. And so again, as multiplayer keeps rising and as the metaverse emerges,
00:50:10
Speaker
I think those sorts of things are going to become yeah a really important piece of it. But I can't i can't quantify you know where it is on some sort of ranking in terms of um things to do. But I will say that getting it wrong can be really costly. So if you want to look at it through the negative lens, there are a couple of violations. There's GDPR. There's a million issues where trust and safety can wind up costing a company a lot of money. And it gets wrapped into larger security issues or or DevOps, things like that, where you know you've got to have security and trust and safety and the game itself, you know kind of all working in a coherent whole in a cost affordable manner. And so I think a lot of companies are working through, a lot of studios are working through how they can do that the best way.
00:50:52
Speaker
Yeah, I like that you brought that up because we we are partners with ToxMod and we are partners with Community Sif, which is Microsoft and it's really cool to see some of the AI that they're building in because you know, if someone's playing Call of Duty, which is ToxMod, right? And someone says yeah racial slur, right? that user can be banned automatically right and what happens is if that user were to reach out to support and i could just talked from the help shift perspective right we can see hey this user did this don't even send them to an agent they can't play anymore right like don't expose your own trust and safety agents to the terrible things out there let let the computer like.
00:51:28
Speaker
understand, hey, this person said something terrible, they're done, right? Like, it's easier for a computer to say no, sorry, goodbye, than it is for a human that might have some sort of empathy for that user. um We've also seen a lot of people investing a lot recently into kind of understanding who their segmentation is, who their VIPs are. and focusing on it, right? Because using AI, you can start to understand, hey, we need to provide better support for this user. They're in a tough spot versus maybe this freemium user has been playing this game for 10 years and not spent a dollar in the app. like like Let's make them check the FAQs before reaching out to support. So it's interesting were using all these latest technologies to see how you can make a better experience, not just in the game, but in the customer service side as the world as well.
00:52:07
Speaker
Absolutely. ah Lewis, I think that's all I had for you today. I think what you do is an awesome, awesome job, market research, of gaming for IDC. I think you do some cool stuff. I really appreciate just having this conversation, things like learning about economies and games ah and really how deep it gets. ah And I think it's just as we could probably talk for hours on more of this stuff, but I realize it's noon. um So before you go today, is there anything you'd like to just share with our audience? No, thanks, Greg, for having me. i Very cool to be on your podcast. And yeah, like maybe we can do one of these in the future at some point. Yeah, I appreciate it. And another thanks to Lewis, because he was also at our community clubhouse at GDC. I don't know what's going on for Gamescom, but we'll figure that out. But again, Lewis, thank you so much for coming out today. We'll have all this information, all of IDC's information on our Player Engaged website. Thanks for coming out. I hope you have a great day. Thanks again, Greg. See ya.