Arbitrage Media
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Did you miss the message from Troy? He's at advanced tennis camp. Advanced. He wanted to make sure that we knew that he was not just at tennis camp, but he was at advanced tennis camp. It's his advanced-aged tennis camp. I think it's a cry for help. Anytime a middle-aged man starts to greatly improve at a sport, something's wrong.

This is a season of decline for that. Yeah, you should be slowing down. I mean, he seems to just, as he's doing that, he seems to be requesting more and more from all of us. And he's excited about the podcast and his little empire. But here we are working while he's at tennis camp. That's okay. I do this. This is a passion. ♪

I'm at a newsletter marketing conference right now in Austin, Texas. I mean, it's pretty much like tennis camp then. This is like tennis camp. It's really fascinating to me because, you know, with how the information ecosystem has changed quite a bit, that there is an entirely different world that do not actually intersect. Like the people here are...

Mostly, I don't mean this in a bad way, they're like information entrepreneurs. The information, the content is not where they start. It's like they are entrepreneurs and content just happens to be the product that they're using in their entrepreneurial activities. Right. It's just like a resource. It's a resource that they use to build a business around, basically. Yeah. You know what it reminds me of? It reminds me of DTC companies.

In that, when I started like, you know, we started covering DTC companies at my old company. We had this publication that was into fashion and beauty and then another one in retail and it focused on DTC a lot. And the more I was like getting into them, I was like, these aren't product companies.

They're marketing. And they would always come out of Harvard Business School. And all of a sudden, they were like, oh, we're solving a problem. But the core of what they did was not actually the product. Everyone got the products from the same supply chains. You can get them made pretty easily. I mean, I have a confession to make. And I think for the longest time, I really looked...

down on people like that because they do i come from the creative and production side yeah so when i see people just just like manning the ship around that stuff and not caring what cargo is being carried you know they're essentially like oh we just take this ship from here to here and we sell it off i don't care if it's like pork loins or orange juice or whatever right

And I always, I had a lot of trouble connecting with people that thought about that. Because for me, it's always been about like, what are you making? That's the thing, you know, everything else is peripheral. Well, it's the same for me on the content side, right? Because I was like, wait a second, like you're 19, you built like an AI newsletter that you flipped.

Like, I've been doing this my whole life. But it's interesting because you can do that. But a lot of, I mean, that's a lot of the economy, really. It is. And I don't think everybody, I don't know. I mean, I'm conflicted about it. I don't think everybody has to care so deeply about it that it overtakes their lives. I think people are allowed to care about whatever they want to care. But I think it, you know, we've had it, was it this week with,

Amazon acquiring the creative, you know, gaining creative control over James Bond, right? And how people are worried about that. One of the last franchises that hasn't been, you know, kind of turned into a content machine like Star Wars. And some of the stuff that's been coming out of that is how Amazon executive or some Amazon executive called like really piss the James Bond team off by calling it content. Yeah.

Yeah. That's just like, oh, it's Kata. She's like, I don't care. Yeah, that's always going to be a tension for me. And it's interesting. But when it comes back to newsletter, one thing I was curious about, are those folks over there, like, are they worried about AI? Because we're this close to having the inbox turned into something that just chomps up all your, I mean, you know, my Google, even Gemini is kind of

trans you know transcribing stuff for me and and simplifying it and pushing stuff out i like by the way i like the apple and i'll answer that but i want to get out apple intelligence a little bit like do you use like their summations of text messages are like so hilariously awful like they're yeah unusually wrong yeah yeah like take this product back like stop it dig steve jobs out of

out of the earth, he was probably cremated. He's definitely a cremation guy, right? But like, I don't know, reconstitute him somehow because like he has to put a stop to this. So I'm an early adopter. I always like I'm using beta software and stuff like that. And this time was no different. But it is the first Apple feature I turned off.

Your phone works much better. You can turn it off. You can go into Apple Intelligence and just turn all that stuff off. And it's just like, it's made so much of it worse. It's so hilariously bad that I actually enjoy it. It's like a hate listen. It's like all in for me. Like...

Yeah, and the thing is, I do a lot of driving and, you know, I have my text kind of being read out to me. Texting is actually a good way for me to go back and forth when I'm driving. And it will read the summarized one. It'll go like, you know, summarized from your wife, you know, cat threw up, TV not working. And I'm like, that makes no sense. Yeah.

Anyway, so the AI, is there concern about AI? You know, not really among this crowd anymore.

Exactly. Although it was funny, they had one like, you know, they have vendor pitches at events and the vendor, I won't name it. I mean, whatever, it doesn't really matter. But like, they're basically it's like you can get CPA under a dollar for like newsletter subscribers. They have this network of emails that they AI generate emails and then will like basically promote your product.

newsletter in there. And I think one of the interesting aspects of this newsletter world is, I say this with a lot of love and respect. You always seem to be like... Well, I don't want to go to the cocktails and, well, this won't come out until tomorrow. With total respect for the cigarette industry, I would like... It's like when someone says not to be racist.

but you know they're going to say something racist. No, with this, it's like there's a lot of multi-level marketing vibes in the newsletter world. No, you don't say. For instance, there's 3,000 AI newsletters, not AI generated, but newsletters about AI on one email platform. That's just on Bihai.

Like we don't know how many there truly are. We might need Doge to like be pointed at the email newsletter world. How many of those are written with AI, you know?

Well, that's the thing. It's like, again, with this information entrepreneur space is how I'm trying to like sort of nicely brand it, right? Like it's kind of irrelevant. You know, this is like part and parcel. You asked me of a lot of people look for it. To me, it's adjacent to fire the financially independent, retire early sort of movement, a lot of passive income world, you know, have a holding company, own a bunch of storage units or vending machines or whatever, right?

There's definitely a tinge of that there. The thing is, I wonder though, it's the same race as always, right? People...

get entrepreneurial in any space and they want to create more surface area, right? Like in New York, in this case, like, okay, let's get CPMs below a dollar and just, you know, content creation is really cheap. CPM, CPA. They're delivering you customers for under a dollar. Yeah. So, wow. Okay. And so as like the surface area becomes bigger, then what happens is that the consumer of these things like starts to require a product that

fence that off, right? Like the mess of your inbox, you know, is going to just become just noise. This is the story of media, right? Like I always compare it to like a children's soccer game, at least an American children's soccer game. I'm sure in Europe their children are way more sophisticated when it comes to football.

But, you know, a children's soccer game here, it's just like the ball goes to one part of the field or pitch. I want to be sensitive to you. You know, we're talking. Thank you. And a clump of a clump of kids just follows around the ball and all move to newsletters a few years back. And so the whole clump went following following along with them. And yeah, like I worry about that, like with kids.

You know, the fact that this happens all the time in media where everyone piles in, creates an untenable situation, and then technology companies, you know, come in. It's like daddy's home and they shut it down. Yeah. Yeah. Or they sell you a product to finally make it work. You know, I think part of it. Or they shut it down and then they sell like a version of the same product. Oh, their own version. Yeah. Yeah. Yeah.

Yeah, I mean, but it's the thing with media and what happens is you want to increase your surface area. So in newspapers, at some point you started seeing these newspapers with all these, you know, Sunday edition and sports specials and whatever added into the newspaper and the thing looked like a phone book, you know, because they wanted to sell more ads, right? But there was like a physical constraint there.

to how much you could do there. There was a physical constraint to how many ads you could fit in an hour of television. Here, everybody's seeing this as like unlimited, scalable, and the only physical constraints is how much people will tolerate, you know? And that always ends to a place where people no longer tolerate it and it breaks the medium. I think the newsletter medium is...

is ready to be broken, which is why the Substack thing of turning itself into a platform and bypassing email is probably right, even though we don't like it.

Wait, why do you think it's right? I mean, because they're pivoting hard into video and they want all kinds of... Right. It's well beyond email now. Because I think that, like, right now you're sending everything into an uncontrolled inbox, right? Which is essentially like this kind of uncontrolled assorted feed. So which means...

And more and more people are going to fight to be in someone's inbox, which means that over time you're going to have more and more newsletters and more and more kind of things being sent to you, which means you're either going to use tools to reduce them or the actual interface of the inbox is not going to work anymore. And it is a huge risk for somebody that runs a newsletter business to say, like, we're completely dependent to...

you know, what this entire industry is doing to try to, you know, load people's inboxes with more and more cheaper and cheaper newsletters. And then it opens up an avenue for a startup or somebody like Google to say, hey, we've got a new button that's called the Erase All Newsletters.

Or here's our AI thing. It mashes up all your newsletter and just spits out the things you want. And, you know, it's completely unprotected for them. So having people say like, well, go to the app and we can control what's in the app. We can build an algorithm. We can surface things that you want, maintain engagement. I don't think it's going to be smooth sailing for email. Yeah.

Well, it's not smooth sailing for anything. So, like, honestly, anyone has been in... Maybe not some of these newsletter hustlers, but for those of us who have been on the seas for quite a while, we're used to swells. So it's not a problem. But this is coming to all kinds of media. I want to talk about the video game industry. Because some of our listeners, I've gotten... Like, you're an interesting, exotic character to a lot of our listeners. Because they don't quite know, like...

Can you explain to those who don't know, what do you do, Alex? You're building this video game. We've heard about this video game, right? What do you do? Well, if it was up to Troy, I'd be just managing this podcast. Outside of the podcast. Outside of the podcast, when I got some time. Yeah, I launched a video game studio where venture-backed.

There'll be some announcement around that soon. You know, we're building new intellectual property IP based around video games. My thesis is that video games is one of the better ways to launch new IP in this era. You know, it's very expensive to kind of make, to build affinity around IP and stories, you know, in movies or things like that. And then, you know, in gaming, we think that there's more opportunity to change the way things are

things are built and the budgets around them and the tooling and stuff like that. So we think there's a huge opportunity in part because the industry is actually in disarray. Like the industry is actually going through a massive correction phase where it grew for a decade. It grew, you know, 10% every year. And it grew a lot over the pandemic, of course.

But also, like, the industry's become really wide. And, like, with media, it's become very complicated. And the story is kind of... The story means that, like, right now, what we're seeing is, like, I think there's been, like, something like 34,000 layoffs across the last two years. It's not a gigantic industry, so...

hits hard. You know, in certain places like mobile, there's actually less game releases released and people are downloading less games than they were last year, which is interesting. Yeah, so I had listened to Peter Kafka had on his podcast channels and he had on Matthew Ball who had a very ill-timed book about the metaverse. But anyway, he was, he's an analyst in this space and was, I had no idea. There are fewer people, this is what he was calling, fewer people are playing

video games now than pre-pandemic. So there's actually fewer games being played, which, you know, a lot of things normalized after the pandemic, but it's not a growth industry anymore. One of the things that I found, and I'd love your like dissection of the industry, because there's kind of like the, I guess it's casual games, it's like mobile games, right? That's an entire world. And that is losing out to like TikTok. Like everything's losing out to TikTok, it seems like. Like,

Like you only have so much time. Yeah, yeah. I mean, I think if, you know, we talk about modality on this podcast a lot and it's just like, it's funny because I was talking to some mobile game people the other day and I said, you're on the toilet, you're commuting or you're waiting for someone in your family to get ready or something like that, right? There's these moments that are like, I have two minutes and I need to just distract myself because it's impossible being bored and sitting with your own thoughts. And it's that type of time that was,

it was really hard. And when you think about it, like, you know, okay, what media covers that in the past, it was really hard, right? Am I going to sit down and watch a five minute YouTube video? It's going to take me a minute to find it. I'm going to watch, you know, starting to read an article or getting back into my ebook or whatever. And, and,

the best kind of like 30 seconds to five minute way to spend time is to be something like, you know, like a Candy Crush or something like that, right? Like you could just go in and do something. But TikTok has really stepped in and taken a lot of that time. And it's incredible. Like, you know, I think adults are spending like 100 million hours, more hours on daily on short form video than they were last year. It's like that growth is incredible. Yeah. And that comes from somewhere. Like it doesn't, it affects everyone.

right it affects everyone but but this but this is why you need to really i mean and this is the kind of the challenge with with with the the thing with tiktok is that it's eaten the i have five seconds i have 30 seconds to five minutes time and it's also eaten to the i have two hours you know what i mean because because it's essentially like it's an infinite train that you can kind of keep kind of like

gobbling, right? And so it's going to hurt everyone. But it's definitely, definitely very much impacted mobile gaming. And mobile games, you know, customer acquisition was always hard. There was always a lot of competition. But it's like, it's collapsing now. And, you know, part of the challenge is that customer acquisition has become more expensive. The Apple changes have made that harder. And then on top of that, across all segments, but in mobile specifically, people spend more

a lot of time on the same five games that they've been spending a lot of times on for years, right? Candy Crush and all of these take over a huge amount of the attention space on those platforms. So there have been a ton of mobile games, right? Right, yeah. And it's fairly, I guess, low cost to develop a mobile game. And one of the things, as you know, one of my passions outside of this podcast is ad tech. Yes, I know. Yeah.

I love it. You've got a tattoo. I love it. But like the ad tech world, there was always a separate ad tech world. There was like, to me, like the New York ad tech world. And then there was a West Coast ad tech world that was all about mobile app downloads. And like, they're basically using a lot of similar, but they're totally different worlds. They're different companies. And, you know, app loving...

has become this really fascinating company because hilariously named, so it belongs in ad tech. Its stock got, you know, amazing run-up in it. And it operated in the app download for, it was both in casual games and it was basically, you know, it was...

Again, we talk about newsletters. This is why I'm trying to connect them, because like I think they there might be some similarities to both in that, you know, Apple of them was was both monetizing casual games. And then it was also it was monetizing them with downloads for other games, which is interesting. Yes. And I don't know if you saw they had they had a short a short report came out.

on targeting Applovin, which, you know, look, its stock is unbelievably expensive right now. Their shares are down 12% because they found out, not that anything sketchy would ever happen in AdTech, and I have no idea if this is true, but that perhaps Applovin was doing some stuff that wasn't totally above board.

The side of video games I'm in does not look at advertising-supported video games kindly because I think, you know, video games specifically are all about setting up systems of incentives for a player to do something which hopefully is fun. But when you're incentivized to work around advertising or microtransaction, it means that the games you create, like, are just meant to psychologically, you know,

you know, get you to engage with that part of the business more, right? Well, it's like arbitrage publishers, right? Like I always felt like in publishing, the arb people were kind of looked at like, oh, come on, like you're not starting from, I want to create, you know, I'm creating content and I'm going to monetize it.

You're starting from just trying to hack your way and you're doing like ARB, whether you're doing SEO ARB or you're doing social ARB. It's ARB and a lot of newsletter is ARB. A lot of the people acquire customers very cheaply through the vendor who's giving the pre-lunch presentation. Thank you for the lunch to the vendor. I had a turkey and provolone. It was fine. It's a good sandwich. Yeah, it's a good sandwich. Top 10 sandwich.

But they're doing basic arbitrage. They're buying low and then they're selling for a little higher and then rents and repeat. It seems like this end of gaming is a little bit like that. Yeah, it is. I mean, I think a lot of revenue comes from

microtransactions right so that's something it does have it it has cracked a code around like around getting people to transact with with the games right i think media the rest of media wishes it had cracked that code the challenges are okay so you have advertising and kind of

know pre upsells that are happening within the game all the games are free the challenge is like discovery is really really hard right because the app store is not a great discovery system so they end up paying like 10 to 15 times the amount on on customer acquisition and marketing that they do on the game so these games you know they kind of build really cheap but they actually spend a lot of money to generate that and then

You know, games like Monopoly Go and stuff like that are generating billions of dollars a year. But there's maybe a handful, there's maybe 10 that kind of swamp the play field. And the rest is a lot of like smaller player to get a little bit of attention and that are getting more and more swamped with ads because they're trying to reach some sort of CPM. So I'm sure that that's having an impact on like just the audience's perception.

I mean, audiences at some point get tired of it. Like, you know, you talk to a lot of people say, I'm sick and tired of trying to play a game. Like when I turn, when you open TikTok, you're in the content, you're enjoying yourself right away. Right. A lot of these games, you turn it on, it loads, it's

You see an ad, you try to play, you see another ad, and there you are. You have to get off the toilet. It's just, I think, become a bad product where the zone's been flooded, the economics made very little sense, it became really expensive to make these games. The way the algorithms worked meant that even if you were trying to sell your game for two bucks,

it was probably going to lose out to a game that's free but packed with ads, right? It's just, I think, some of that is that the marketplaces have been mismanaged, which you don't see. Alternatively, like, the PC gaming is actually a bright spot that's happening. It's still growing. It's growing in China. You think that PC game is a kind of a niche thing that there's, you know, 300 million PCs sold every year or something like that. And that...

The marketplace, which is also supported by, you know, like buy it once as well as microtransaction is pretty much entirely owned by something called Steam, which is run by a company called Valve, right? And in that case, what they've managed to do is like create this incredible ecosystem where they take 20 to 30% of every transaction fee, but they actually are growing. They actually have more, there's more games going to be released on PCs, right?

And part of that, I think, is just generally, I think the quality of the product for consumers has been better. So I think the iPhone, the mobile video games, I just think have been mismanaged to the point of becoming not compelling and just giving all the space away

to like four or five players who dominate the field. Meanwhile, you know, you look at PC, it's a much healthier ecosystem, which is why we're focusing on PC. But like- Okay, so you're focused on PC. So let me ask you this, because I see there's a genre, since you're not on X, I'll tell you what's going on there too. Oh boy. It's just like you're not at the newsletter marketing conferences either. But on X, there's like, there's a genre of X posts, tweets, whatever we're calling them these days, of-

it's like so-and-so is over, you know, and AI is going to kill whatever. AI is going to kill game developers. That's like a mini-mean. And, you know, people refer to, I guess Google had demoed, I guess last August, Google Research had demoed being able to, I guess they created Doom gameplay without a game engine. And there's a genre of...

I guess it's like kind of the equivalent of, maybe I'm forcing this. It's kind of the equivalent of a lot of the newsletter hustlers where there's like hustlers, there's like developer hustlers on X. Yeah, for sure. They're trying to build like, you know, there were like one person living in Portugal who like has like a holding company with seven different like apps and things that they've built. And they're like ginning up, you know,

I guess, like video games. And if you just like search on it and you'll find these people out there that are, you could literally develop a whole game from scratch within a few months using AI at this point. AI can write the story of your game. AI can generate all the code and features you need. AI can generate UI assets and characters, which you can then turn into 3D muscles. I don't even know what muscles, I guess that's models with basically no effort.

Nobody's copywriting these tweets. On and on and on. It's the new iteration of the crypto scene. Is it? Yeah, yeah. It's a no effort, no effort, lots of results. Look, the industry is... I mean, the thing AI is really good at is coding. So great, right? It means that smart people are going to have more time to do other things than troubleshoot their code or things like that. But

What I find always funny is that a lot of these human replationists or whatever you want to call them, who are like, fuck you, everyone that's creative. We figured it out. We don't need you anymore. And they still buy the latest Kendrick album. You could generate something with Suno AI that is

perfectly terrible and just listen to that. But it's a mentality. It's funny, actually, speaking of student AI, I have this quote from the CEO. He said something that is telling, and I think that there's a lot of folks that are trying to use AI to replace the human creativity, not just labor, but the actual creativity of it, or downplaying the importance of creativity and taste in everything that we make.

and why you need that to stand out. And you'll need it more to stand out as more content gets created. But he said it's the Suno AI music tech that just generates songs, right?

probably built on copyrighted music data, but let's not get into that. If you mince the meat small enough, you can't tell what animal it's from. He says, it's not really enjoyable to make music now. It takes a lot of time. It takes a lot of practice. You need to get really good at an instrument or really good at a piece of production software. I think the majority of the people don't enjoy the majority of time they spend making music.

Too much friction. Too much friction in that process. Yeah, too much friction. Learning how to play guitar. Right, right. And then you find out that Radiohead's creep, that iconic sound was a mistake that somebody did and somebody heard it. And that's how you create fucking art, man. And so...

And so I don't mind the idea of saying like, hey, these things are going to save us time. We're looking at ways things can save us time. If an animator can animate three frames instead of 12 and we can get support from technology, that's what we do. We work with computers. But there's this glee of like...

This glee, like, okay, well then, you know, you can marry your robot wife and listen to AI-generated music and drink your, you know, whatever protein powder and just leave us the fuck alone. But, you know, I think what it is is like there's always this Venn diagram of like the sort of

quote-unquote art and then the hustlers you know like and the hustlers tend to tend to be out of the gates like earliest and they're always you know wanting to to yeah basically to replace or to get a do away with the part that they're not necessarily that's not where their specialty lies you know we all we all rate very highly what what what we are good at right like and if we come

I meet a lot of people here who are way better at understanding, infinitely better than understanding growth dynamics and how to buy ads on Facebook and then convert them at a low enough CAC to make it worthwhile and get the payback periods down and all this stuff. I'm like, wow, I would not have time to write the newsletter.

But I mean, I think in the end, it's unique to have the blend, a little bit of the blend of both. But everyone comes from somewhere. And so you've got to come from one end. I mean, I think the conversation is interesting right now. It's like specifically going back to the AI thing, part of an issue that I see on the other side is that a lot of people that work in games and in creative fields are completely shutting themselves out

from AI saying like, nope, we're not using it, blah, blah, blah. You're putting fingers in the areas. It's not happening. You know, that's also wrong. But yeah, it's just either way. I think the gaming industry is in for like an incredible like next five years that are going to see it fundamentally change. There's lots of consolidation. But if the audience is interested, do you think you want to hear some interesting data? Do you mind if I rattle out some like interesting numbers? Yeah. Rattle? Okay. Yeah.

So here's the interesting thing. The industry is huge, right? So if you look at Call of Duty, which, full disclosure, I worked on, its lifetime revenue is estimated at $45 billion. 45. That exceeds Marvel and all of these things. That's Call of Duty. And every year, Call of Duty is the number one game released, except on years when Grand Theft Auto comes out, which is this year. This year, we expect Grand Theft Auto 6 to come out. They...

You know, sources are saying they spend anything from one to three billion dollars on the game and they'll make it back in a weekend. So these media, you know, if you want to consider those media companies, they are insanely huge. And a lot of the activity happens on a platform called Steam, which I talked about. Steam is one of the few kind of American-owned platforms that's growing in China. 70 million Chinese users, 200 million monthly active users.

22 million commercial activity happening on the platform. Do you know how big Valve is?

No. 300 people. I just learned it existed. Right. Okay. 300 people work at Valve. All right? 300 people work at Valve. And you would say, wow, that's crazy. No, 350 people work at Valve and they generate $22 billion in their ecosystem. But that's not all. Out of those 350 people, actually 250 people work on hardware that has nothing to do with the marketplace. So 100 people work...

on that. And so, so like the amount of revenue per employee is crazy. It's, it's privately owned and it is probably the biggest like media platform in the world. Like, you know, it's insane. And so, and so it's, it's crazy. And on this platform, you have a space called the independent or indie space. And,

And we've seen, you know, games by teams of five to 20 people that cost less than $5 million generate over $100 million in revenue. Okay, so that's kind of similar. I mean, the numbers are just like bigger, it seems like in this period. Yeah, I mean, look, the numbers are bigger. The moat is actually much higher. Video games, no matter what anybody says that you can prompt it and it can...

poop something out. Video games are incredibly difficult to make and take anything from like 18 months to 10 years to complete, right? They're very difficult. A lot of time you're releasing a cultural product, you know, that's five years away and you don't know where the audience is going to be there or not by the time you're out with it. So it is a high risk, you know,

So when is this game? Can we say what it's about? No, I mean, we're not announcing it yet. We're going to announce some stuff about our venture backing and plans for the studio later this year. And the reason I'm not announcing it is because it is really important to keep some sort of exclusivity potential in case one of the big... Video games actually has a pretty active events platform.

kind of business going around it. There's the Game Awards and some Game Fest. I thought you were going to say espionage. I was like, let the screen get excited. Yeah, no, it's less about that, actually. You'd be surprised. People are incredibly open talking about things. I think the currency is being able to announce a premiere. So unlike movies, people get excited for trailers and new games coming out. So the Game Awards, for example, which is the video game Oscars, is 60% game announcements. Wow.

And it actually makes the show way better. Imagine if you were watching the Oscars and they interrupted it for like a world premiere of like Top Gun Maverick 2 coming this summer. You know, like it would be amazing. Wait, are those paid? Do they monetize that? Oh, they are sometimes. If the game is a hot enough property, they will give the, you know, they will kind of

you know, work around those things. But I think the Game Awards, it was going, a spot was going for $100,000. So it's not Super Bowl, but it's, you know, it's not bad. It's kind of a big deal. But so like... Oh my God, it's started and owned by a journalist. Good for him.

See? Kids, go into journalism. Jeff Keighley. He's kind of an incredible success story. He's done a lot for the industry. And the Game Award is like a big deal now. So lots of things are changing. Industry is definitely not dying. I mean, Call of Duty is still making billions of dollars. This year's Call of Duty made billions of dollars. Still.

Steam, Valve Steam is profitable. I think they're like, what is it, like 60 to 70 million dollars per employee they're making. But we're fighting in the attention economy. And so, you know, distribution is still hard as with every product. Marketing is hard, you know, and it's all up to the algorithm. I mean, less like culturally, I don't want to say relevant, but like that it's not losing steam.

Because it was on a tremendous steam, so to speak. It was on a tremendous run. And we discussed it on the podcast. There's a lot of people in the overall media world who have long been like, yeah, I know video games are massive and stuff like this. But at the same time, like...

You know, most of the people aren't gamers themselves. They don't know adults who play games all the time or talk about it. It's a correction, right? I mean, like I said, it's such a big umbrella. So what's happening is a correction and a maturation and like post-COVID adjustment, right? So, you know, some more interesting data, like what's happening right now is that the top five franchises...

on console capture like 40% to 45% of all play time, right?

Right? And, you know, so if you take that and TikTok and all of these things, like, actually only 6.5% of people's attention is left to go to genuinely new games today. Right? So a lot of it is, like, it's being very successful, but there's not a lot of turnover. You know? Games like, you have World of Warcraft, Fortnite, these are games that are 10, 15, 25 years old. Right? Minecraft. Right? What was the last, like, massive, like...

like console game like hit like or PC game like not like a franchise not like it's hard to tell right like the latest massive hit

It's actually a great question. I mean, Nintendo is very successful, right? So if you want to go into that thing, Nintendo has sold like more copies of Super Mario Kart than anything else. It's doing really well. On the PC, there have been hits that are like, you know, a few years old, like Valorant from the guys who did the League of Legends. These types of games are big, big hits or Apex Legends or the finals. But the majority of the time is still taken up by games that are that are

pretty old at this stage because they've just been optimized to hack like Fortnite and Roblox and Minecraft. It's kind of intense. Yeah, I mean, it's going to be interesting, right? Like what I want to do is like, you know, we're going to do games under $10 million in budget, hopefully. Our first game is like under $1 million probably and try to make things that, you know, sell. Like, you know, the problem is the industry spends money. Players feel, you know, like they've got a lot of games and

They spend 90% plus of their time on existing franchises. So we're trying to kind of break out of that a little bit. Well, is that the risk averse?

Because I mean, like Hollywood went there because it's just, it's, it's when you spend a lot of money to make a movie, you don't want Waterworld. They're like, why not just do another Indiana Jones? I mean, how old is Harrison Ford now? 90? It's fine. He can still run. I mean, it's different to movies, right? Because these things are turning into platforms. So, so like Call of Duty came out with this mode called Warzone, which is where a lot of people spend time. And it's not a,

version that you need to buy every year. It's just ongoing. Grand Theft Auto has made most of its money from Grand Theft Auto Online, where you... Now, I don't know, like, eight, nine-year-old game is still generating billions of dollars. So, imagine if you made a movie, and if the movie's successful, you could turn it into a platform, right? That's what video game allows you to do, which is pretty unique, right? And so...

It's kind of become that. And this is why actually a lot of studios were chasing those big hits, like what they call live service games, which is games that are constantly running where people go in and spend money. And they spend billions and billions of dollars, and few of them manage to break through. So there's a lot of pullback in those investments now because people are basically seeing that they're kings of the hill right now. They're very hard to dislodge. We're going to focus on other things.

Okay, so final thing, because I know you have a hard stop, which is our spinoff podcast that we're going to eventually make. We have some fan mail I wanted to run by you for commentary because you're involved in it. Oh, boy. It says, the rebooting show on People vs. Algorithms is the only podcast I'm currently listening to. PVA is like the Duke, the Priest, and the Jester.

Brian, Troy, Alex, respect. That means I'm the jester. In a room together trying to make sense of this moment in history. The three of you reached a kind of peak moment, I think. And you are really putting out amazing stuff. In the last few months, there has been more letting each other finish their thoughts.

All of you are essential voices in the podcast at this point, and it goes on with some very nice things. But let's go back to the Duke, the priest, and the jester, because I read that, you know, and then I'm mentally skipping forward. And I was ready to be tagged as the jester. Like, you know, you have roles. Yeah. I mean, I wasn't ready to do it. You and Triller are very impressive, so I'm like, look, I just want to fit in. I mean, I kind of get it. But then you were the jester. Who was I, the Duke? Yeah.

I mean, the Duke, what does that mean? I don't know. I'll take it. I mean, it puts like, you know, nobility. The priest. Yeah. I mean, Troy being the priest makes sense. You know, he's just constantly pontificating. Yeah.

Jester, sure. I mean, honestly, like what the audience should know is that I know very little about what's being talked about sometimes, you know? And if you see a lot of conversation on our little WhatsApp group where Troy and Brian are talking, they'll mention names and they're like, who the hell is that? And I go, well, that's the owner of like the largest media group in Germany. And I'm like, I

I don't know. So I do come across like a clown, I think, much of the time because this is not my environment. Well, that's why I wanted to talk about video games today. I wanted to prove this gesture, slur. I have a very quick, good product. Okay.

I'm in an area of Austin I've never been before. I think it's pronounced Mueller, like Mueller Park. It was where the old airport was out here. The airport, it was the Robert Mueller Municipal Airport. And they redeveloped this thing. It's a 700-acre community. And it's like a planned community. It's like that sunshine, whatever, sunshine, celebration Florida. And it's

I think we need to build more of these things. It's not necessarily to my taste. They're very, it's very clean. It's very nice. There's like mixed use. There's enough restaurants. You have like semi high density, like condos, but then you can like graduate into like single family homes. There's like, there's a school and it's all like brand new and spotless. And I think we, I think we probably need to build many more of these, these,

Mueller redevelopment. Oh man, I'm so conflicted about that. I think they built, they did something like that in San Francisco on something called China Basin and it was built on a landfill. And for the longest time, I kind of started seeing all these modern buildings going up and that's where they have the basketball stadium and stuff like that. And it was all planned. It all felt like it was coming up at the same time. And San Francisco is kind of this

you know, city with a lot of vibe and character and it felt out of place. But over time, you know, I've seen families move there and it's nice and there's a park and people seem happy. There's a lot of parks. It's very dog friendly and it has, it's all very planned. I think the part that sort of having lived in New York City for a long time, I sort of, I'm used to how like crazy and chaotic and just like slapped together because New York is the most analog city I can think of. Yeah.

But it's the best city for that. Like, I think it's the best city in the world. Right. So that's why coming here, I'm like, this is very Truman Show and it's a little antiseptic. But at the same time, you know, we need housing and I think we need more of these. I mean, that's the thing. We need housing. I mean, it's easy to just like, you know, but yeah. All right. Well, thanks. I hope this was useful. I have, I can talk about video games for a long time. If people are interested. You have to go make one. So much work, man. It's so much work. What are they going to do?

Well, just so folks know, I think if you're interested in getting into video games or buying video games for your kids, I think there's two things that you can buy right now. The one is called the Steam Deck. It's a little portable device. You can plug it into your TV and it connects to Steam, that platform we've talked about. So this means I have games that I downloaded 20 years ago, that I paid for 20 years ago on my Steam Deck.

because it maintains... There's no other subscription or no other service that I've maintained that has been able to provide that for me. That's one thing. It's essentially a little PC that you can carry around. The second one is, of course, the Nintendo Switch. It's the one thing that we've been recommending anybody buy if you're interested in video games. Nintendo makes great video games. Everybody can enjoy them. They just announced the Switch 2, so I would hold off on that. The Switch 2 is going to be...

This year is going to be big because it's likely that the Nintendo Switch 2 as well as Grand Theft Auto are both landing. And it's essentially like a thermonuclear bomb in a farmer's market. But Nintendo Switch 2, they're like cheaper than like Xbox and like PlayStation, right? Yeah, they're cheap. I mean, I think that's the thing. They basically reused old Android devices.

Android hardware that they just shoved into a thing and they got it to do a lot. So it's a very good value. I mean, they were trying to, like the Xbox could do everything. They were like, you can like, you know, reheat your pizza in it. Yeah, that was a big mistake that they lost focus. And I think that was like

A few generations ago, they tried to turn it into a set-top box and completely lost the gaming market to PlayStation at the time. And Xbox is actually in trouble. It's one of the platforms that's doing the least well right now. I feel bad for Microsoft.

That's it for this episode of People vs. Algorithms, where each week we uncover patterns shaping media, culture and technology. Big thanks, as always, to our producer Vanya Arsinov. She always makes us a little clearer and more understandable, and we appreciate her very, very much.

If you're enjoying these conversations, we'd love for you to leave us a review. It helps us get the word out and keeps our community growing. Remember, you can find People vs. Algorithms on Apple Podcasts, on Spotify, and now on YouTube. Thanks for listening, and we'll see you again next week. All right. Thank you, Alex. All right. Thank you. Bye. Daddy will be back next week, and we'll get back to it. Yeah, the priest. The grand priest. Okay.