Factually! with Adam Conover - Is The Video Game Industry Collapsing?

Episode Date: September 2, 2026

The gaming industry's old model is falling apart. RAM costs are skyrocketing, making new consoles scarce and unaffordable. The industry is beset by layoffs and studio closures, and indie developers aren't doing much better. Will there be anything left for young gamers beyond Fortnite and Roblox? Videogame journalist and podcaster Robert Zacny joins me to discuss the predicament of modern videogames, and the future of the industry.National helpline for substance use concerns: https://www.samhsa.gov/find-help/helplines/national-helplineThe Deadliest Drug whole series is available here.SUPPORT THE SHOW ON PATREON: https://www.patreon.com/adamconoverSEE ADAM ON TOUR: https://www.adamconover.net/tourdates/SUBSCRIBE to and RATE Factually! on:» Apple Podcasts: https://podcasts.apple.com/us/podcast/factually-with-adam-conover/id1463460577» Spotify: https://open.spotify.com/show/0fK8WJw4ffMc2NWydBlDyJAbout Headgum: Headgum is an LA & NY-based podcast network creating premium podcasts with the funniest, most engaging voices in comedy to achieve one goal: Making our audience and ourselves laugh. Listen to our shows at https://www.headgum.com.» SUBSCRIBE to Headgum: https://www.youtube.com/c/HeadGum?sub_confirmation=1» FOLLOW us on Twitter: http://twitter.com/headgum» FOLLOW us on Instagram: https://instagram.com/headgum/» FOLLOW us on TikTok: https://www.tiktok.com/@headgum» Advertise on Factually! via Gumball.fmSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

This is a headgum podcast. Hey there, welcome to Factually. I'm Adam Conover. Thank you so much for joining me on the show again. I'm thrilled to have you, as I talked to an incredible expert, about all the amazing things they know that you or I probably don't know. And this week, we're talking about one of my favorite subjects, video games. You know, for most of my life, playing video games sort of followed a pattern. Every couple of years, a new console would come out.

It would be bigger and better than the previous generation. There'd be a whole bunch of new games. They'd be exciting. They'd do things you could never do before. They'd have new ways of interacting. They'd tell new stories. And then a couple years later, oh, you'd buy one that would be even better.

The industry grew and grew like that over time. Very quickly became one of the largest entertainment industries in America. And people were saying, hey, video games, they're bigger than movies now. They're the future of entertainment. But recently, that entire narrative has begun to crumble. First of all, we've been on the same console generation for about six years now. And no one knows when the next generation is going to come out. Microsoft seems to have entirely left the industry.

And a new PlayStation now costs 30% more than it did when it came out. And no one even knows when the PlayStation 6 is going to come out. Part of that is because the companies that make the games seem to have lost sight of their own business model. It no longer seems possible for them to put a certain amount of money into a game and know that they're going to make a profit on the other end. As a result, we're seeing massive layoffs. across the video game industry. Microsoft is laying off thousands of people from the most popular game studios, studios like Bethesda and Bungee that have made some of the most profitable

games ever made. So it's starting to seem like this model where you buy a console and then buy a new game for 60 bucks or 70 bucks every couple months, it might be dying out. And maybe the gamers of the future are just going to play Fortnite, Roblox, and Minecraft forever. Or at least, that's the conversation in the industry. And this is all the more striking because over the past couple years, there's been a lot of talk about the decline of music and movies and book publishing, but the sudden collapse of the video game industry has been far more rapid and far more almost instantaneous after years of hearing how this industry was going to be the future of American media overall. Well, on the show today, we have the perfect guest. His name is Rob Zackney. He's

a podcaster and one of the very best commentators on the industry. He has, been for many years. He's a co-founder of Remap Radio, one of my very favorite podcasts in any medium, and I'm thrilled to have him on the show today for what I think you'll find is an extensive and fascinating discussion of every element of not just his industry, but the entertainment industry that I work in and how capitalism is, you know, crushing both of them under its stupid heel. Before we get into that, I want to remind you if you want to support this show and all the podcasts we bring you every single week, head to patreon.com slash Adam Con, over five bucks month gets you every episode of this show ad-free.

You can also join our wonderful online community, and we do bonus podcast episodes for you regularly. Please join at patreon.com slash Adam Conover. And now let's get to this interview with my friend, the incredible Robert Zackney. Rob, thank you so much for being on the show, man. Oh, thanks for having me. I've been listening to your podcast for many years, like close to a decade now. I think I've been listening to you talk about video games. and I've been struck by the sort of slow line going downwards

in terms of your positivity about the industry. Like so often when I hear you and your colleagues talk now, you say, hey, this game is great, but this might be the last one of these we ever get. Or will there ever be another console generation? You know, this sort of thing. And I heard you say recently on a podcast with our friends at 404 Media that the,

The entire video game industry, as we know, it might be somewhat of a millennial phenomenon, something that lasted for a couple decades, but will in the future look like sort of a blip rather than the future of entertainment? What's the broad case for that possibility? Yeah, so I think there's a few things. This is me synthesizing a few points other people have made. I remember years ago, a MMO developer obviously makes sense that he would come up with this idea because he was in the MMO business. But his position back then, I think this was Raff Van Lairup, was talking,

or Raff Koster, was talking about historically games are played multiplayer. People play games together. And in a lot of ways, it's kind of a weird reality that the games industry was centered on single player games. That's kind of at odds with the history of how people play games. And the year since

he made that case, you saw a lot of live-service games, multiplayer games, take pride of place, in the industry that suggests that on some level there was there was something to that. But the other part of this that started to occur to me over a number of years is I don't have kids myself, but I had a lot of friends with kids and I had family with kids. And I noticed among my friends who had kids, there was a pattern that was consistent,

which was that being peers of being my peers and in my generation, They had grown up with NES, S-NES Genesis, and they'd continued to get new gaming PCs, new gaming consoles. But those were their devices. And they moved from the child's bedroom or the downstairs rec room to the living room and became, like, mom and primarily dad's video game device. And when they had kids, they kind of gave the kids hand-me-down phones or low-powered laptops.

And the kids played completely different games because that is what their hardware ran. And that was a completely different reality to, you know, people growing up in my generation, our generation, where if you had a new console, that was your gaming device. That wasn't primarily for your parents. That was yours. That was something that you were going to be playing games through most of the time. And now suddenly in these households, there was a split. And I remember a few years into my career as a games journalist. I remember it was, I was buying Christmas gifts for my nieces and nephew.

And I put a lot of thought into it. I was like, I'm going to buy them a lot of cool games. And this is the Christmas of being the cool uncle. And I don't remember what all I bought. For the most part, I whiffed. And I remember Christmas. day I'm watching kids like play these games. And what dawned on me was they had, they had Nintendo Wii.

They had some of the other consoles, but like a lot of families, they were, they were a Wii family. But as I'm watching them, I'm realizing that I had made a major, I had had a very faulty assumption, which was that these kids knew how to play video games. Silly me. I thought, you know, having a game console and saying they wanted games for Christmas, I was like, then, yeah, they know how to play video games. I'm sitting there watching.

And I'm realizing, I am 100% wrong. They have no idea how to play most of what I got them. I think the big loser was this game, Okami. People remember that. It's a game where you play a wolf spirit. Yeah. You are sort of a healing nature by drawing, like, beautiful symbols and pictograms. on the scene.

But the thing that came, and that was kind of an esoteric pick to begin with, it's gorgeous, but, you know, that was not a huge hit. But every game I bought them, watching the kids. And it's dawning on me that every game was assuming a great deal of video game knowledge and understanding that these kids hadn't really built up. They didn't even really understand that they were in tutorials,

that they were supposed to learn how the game worked here, and this was going to, this wouldn't teach them how to play and what they were doing for the rest of the game. And so they were interacting with a lot of these things as fairly inscrutable objects. And I thought, huh, that's interesting because I wasn't going for necessarily all deep end of the pool stuff here. But there's like a barrier to entry here that I was not expecting because there's just video game conventions that I adapt to without thinking. That kids playing other games spending their time on like Habo Hotel or like playing Wii sports, they were not. they were not picking that stuff up.

And then over a number of years, I start thinking about, you know, a few years ago, I go through this phase every few years, I want to say, where it's like, it's time to get good at Madden. And then I realize how much harder Madden is than it was the last time I played it. The controls are so much more sophisticated.

The simulation is difficult. And so I think across the board, you see this thing where a lot of what we call core games, games made for modern gaming PCs or current generation consoles, things like that. A lot of them are basically built on a series of assumptions that, you know, younger Xers, millennials grew up with and the medium evolved with them. And so to keep their interest, games evolve, their abilities and understanding as players evolve, and they sort of move in lockstep. And then the next generation didn't have quite the same access to the devices, had a different relationship to the games.

And then they're coming in, having skipped all those steps where it's like, here's Super Mario Brothers, here's the most basic platformer in the world, learn what a platformer is from that. Having skipped all that, they arrive at a version of games that is much more inscrutable, I think. And so that creates some hurdles between what the industry, is good at making and the consumers that's traditionally good at talking to

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It's really fascinating. Like, I have friends who have young kids and my very close friend to mine whose kid is, I think he's probably now six or seven when I started talking to me. He was like four. He did become obsessed with Mario. Like, Mario was one of his first. In the same way that's Spider-Man, for some reason,

is the first character all kids love. It was Spider-Man and Mario. And my friend, she would literally say, hey, can you go on a FaceTime? with him because he just needs to talk to somebody about Mario. And the kid would come on the, come on and just go like, Brata plant! Just like yell Mario words at me. And I went and visited them and, you know, they had the little NES, you know,

replica that you plug into the TV. And we played some Mario 3. And he had all that cultural awareness. I got him on Mario book. He's played Breath of the Wild now. You know, he's done Mario and Zelda. But then the rest of his gaming is entirely Minecraft Roblocks. I presume Fortnite eventually. He's not there yet.

And he's playing those things on iPads. And I've also seen, you know, younger folks get the sort of cultural literacy with video games from, say, YouTube, you know, just like getting the history, understanding a lot of the context. But the fundamental, like, physical objects that are presented to them are so different than what we grew up with. I mean, we grew up with, like, what, maybe a 30-year span where if you're a constant, old gamer. Hey, every three to five years, there's a new piece of hardware for you to buy. There's new versions of all the games. There's this, like, rhythm of life, like, to the industry that these folks, you know, younger kids are not growing up with. It's just, hey, here's an iPad in your hands, and you might play a Roblox for the rest of your life. But then, so there's that

issue of it being, like, kids getting off the bandwagon. But the rhythm also seems to be breaking down for those of us who are adults. I mean, I'm just, you know, I'm 43 years old. I'm not that old yet. And it seems that, you know, in some ways, the entire industry is fading or at least changing in some fundamental way. And it's surprising to me because, I mean, you know, I work in the entertainment industry. The entertainment industry has massively changed.

But we still don't even talk about, like, movies going away to the same degree. that it seems like the ground is shaking underneath the video game industry. People are talking about the entire business model of AAA games being unsustainable. So let's move away from generations. What is happening in the industry at large? There's a couple major factors there. I think driving the crisis there, and this is where you start getting some of the more doomer takes about who knows if this is going to even exist in a recognizable form in,

you know, 10, 15 years time. one of them is that entire process that we grew up with and the hardware cycle that has driven the games industry. That's been important in large part because historically, I don't know if this ever changed. The last time I looked seriously at this, I was a few years ago, but historically, the video games industry grows when there's new hardware.

And the longer you go without new hardware, the more things kind of tail off people lose interest in buying new video games, because even though the hardware is, accessible and plentiful. The event that is associated with releasing new hardware,

new generation of consoles drives a lot of interest, and there's things you can point to look at this new thing that's coming out, old hardware couldn't do this, and that gets people to come back and sort of reinvest in the games industry. Right.

And two things have really worked against that. One is that you just hit a point of marginal returns, right? There is, we're two or three generations. of graphics cards deep now into an era where the differences in quality

get harder and harder to parse. Like if you watch Digital Foundry are generally pretty good at these videos on YouTube, really getting into how do modern machines, who's doing the best rendering, what version of a game looks the best, and they're looking at from the standpoint, not aesthetically

but technically. What is happening with how this scene is lit? How is it rendering this scene? How is it handling this texture? And you have to have, like, engineer's eyes to perceive a lot of these differences, because for a lot of people, you look at something running on a video card two generations ago versus now, and the differences are super hard to perceive, right? You can say, well, the water reflections look a lot better.

Yeah. That's not going to move the needle for a ton of people. Like, water does look cool, but this hardware is how much? And that's the other part of the problem. Yeah. is that the hardware cycle got completely broken down. It's been breaking down for years. Graphics cards were put under pressure by crypto money.

And so for years, graphics cards specifically were already in shorter supply and running for running higher prices in part because basically we are now over a decade into a process of people trying to figure out how can you ring more money out of the fact that there's a lot of unused. computer computation cycles floating around. And so crypto put graphics cards under pressure. And as soon as that began to die off a little bit, you had the AI boom, which put everything under pressure. The story of this year has been, you know, oh, yet another component now is its availability and prices are being impacted by AI, by data centers.

And so first it was graphics cards. then we're about over a year into the RAM crisis. And now this year it's been a tripling of prices for solid state hard drives. And now you're seeing the motherboard industry starting to crack because you can't sell a motherboard and there's nothing to plug into it. And so they are starting to run into problems. And that means that in the past, you would make cool new hardware. The differences between what you could do on that,

versus what you've been doing, you know, four years ago on your four-year-old machine, that stuff is night and day. That's no longer the case. And then as that hardware cycle went along, you would get the PS2 slim version of this, right? Oh, it's cheaper and it's smaller. Great. Now you get a whole wave of new sales and new people like buying these games that they might have missed in the early part of the hardware cycle. That is completely broken.

And so all the things that were sort of structurally supporting how the games industry traditionally worked, who it sold to, how it sold them, all of that stuff has broken down in ways that it's hard to see how it's going to get fixed. And really driving some of the doom loop this year is the big bets that the major players have made to try and address the work. conditioning conditions largely failed. So this year is really defined by the fact that Xbox, the long time Xbox had Phil Spencer departed Microsoft and basically people appointed by Microsoft C-suite took over. Asha Sharma comes from Microsoft's AI side of things, worked in various Silicon Valley startup operations for years before that. But her first order of business was to do major layoffs at Xbox.

And part of that was an acknowledgement of failure that Microsoft's big idea to meet the challenges of this industry was, well, we can sell it as a subscription service. We can basically become the Netflix of games through GamePass. And I'm not entirely sure that was the worst idea in the world. It seemed like a good idea at the time. And you can make good ideas, bad ideas, by overinvesting. And this is, you can't separate what's happening right now from the general decline of decision-making in C-sweets across, like, all industries. Right.

It's everywhere. Does boss dumb? Yeah, boss dumb and boss have too much money. It is, like, these are resource allocation problems. and GamePass was not necessarily a bad idea. GamePass starts out. It's a subscription model where you're going to, you'll pay Microsoft 20 bucks a month,

25 if you want the really premium version or whatever, and you get access to all the Microsoft games and then a bunch of stuff that shows up randomly in Back Catalog. And there's always a problem with this idea, which is that you can watch tons of TV shows and movies on Netflix or Hulu or whatever. and even then we're sort of, the attention economy is saturated, but video games suffer from this way worse,

where you can't play that many games a month and really get into them. So did that model really work? But the parts that did make sense, I think, were they had created sort of a video store vibe with GamePass that you could sort of log on and, you know, play. See what's on the shelf? Yeah, it's not new games. You're sort of giving games a second bite at the apple

to find new audiences. And that might not have been the worst idea in the world, except then Microsoft goes on an acquisition spree over a number of years to get enough developers to make it so that GamePass becomes a bargain that is too good to refuse. And that is, that acquisition spree starts before the pandemic in 2020, but it accelerates.

And the other part of this, and this is part of like why executive level decision making is, I think, generally misguided is the kind of herd animals. Post-2020, games have a boom year because people are housebound. They're looking to keep themselves occupied. Why not get a PS5, you know, if you're stuck? But you have this spree to acquire development talent in game studios. And so now you have major publishers, you have platform holders, all running around acquiring studios. So it's a seller's market. And so the price of each new acquisition goes up and they begin getting ridiculous.

Microsoft's big idea, and this is the thing that seems to have kind of sunk them with Xbox is that they paid just a preposterous amount of money. I think it's something like six, God, the numbers are, I might be off, but I've, Factor of 10, I want to say it was like $6 billion. Might have been 60. But it's an absurd amount of money for Activision. Yeah. It's a merger so huge that like Joe Biden's FTC takes them to court to stop it. It's like the biggest story in video games that year.

Yeah. And the thing there, yep, I was off by Factor of 10. It was $68 billion. Jesus Christ. Was the initial price. It closes at 75. So that's the kind of money. That is an inflated price to get the acquisition done.

A lot of acquisitions you're paying over and above what the share price would nominally suggest. And then now you've taken on all this financing. You've spent all this, you've depleted so much cash reserves, you finance the deal. And now you have this thing. And you need to turn around and needs to start making money, except now the thing is attached to enormous amount of debt. Yeah. And so what would have been a

possibly, what might have been a perfectly sustainable, quite successful company now exists in the context of an enormous transaction cost that has to be earned back. And I think the wheels come off

at Microsoft because they go on the spree. It doesn't make GamePass a household name in the way they were hoping. The growth levels off, no matter how many things they acquire to load GamePass up with. And so then they start

massively cutting jobs across Microsoft, which they've acquired so many studios. That means massive layoffs across the industry. Sony does something similar. They push in on the live service model. Basically, we're going to... We live in an era of Fortnite. And so we are going to make a lot of Fortnites.

We're going to make a lot of things, people's Forever games, that people are going to play tons of. And then they're going to invest money in it regularly to get new seasons of content releases, new things like that. This strategy completely fails. But in the process of carrying it out, you bend all your internal pitch process toward, and I'm sure you've seen this in the industry, right?

Any time there's a mandate from on high that, like, this is where the industry is going. These are the types of, these are the types of products we want to see. These are the type of pitches we want to see. People want to keep their jobs. people want to get their pitches through. So you're going to adapt whatever you have to whatever is the paradigm that you're telling them that they have to support.

And so now you have products that maybe have no real buy-in from the vision holders. They are just trying to get a pitch through. And maybe not even in their wheelhouse, but you told them these are the only things we're going to green light. So sorry, if your expertise lies elsewhere, you're going to have to learn how to make these sorts of games.

And so you distort all the internal decision-making to push these kinds of games. And by the time, all video game development happens on a lag, especially at the AAA level, it takes four or five, sometimes significantly more years to get when he's out the door. By the time the fruits of a decision are ripe, the moment has passed 10 times over. And that's kind of what happens to Sony, is most of these bets they make are catastrophic failures. culminating in arguably, you know, what's happening right now with Bungy and Marathon, which is they paid billions for Bungy to acquire a modestly successful live service shooter in Destiny.

And then Bungy was also making a live service extraction shooter with Marathon. And in the wake of all this, as Sony's trying to, again, control the costs of, bungee and try to recoup some of the cost they incurred acquiring it, they shut down Destiny and were then surprised when users of Destiny fled. You sort of said the game was over

and there'd be no further development. And the audience collapsed, the revenue from Destiny collapsed. And then Marathon is struggling badly to find its audience. I like it quite a bit. I think there's a lot of special stuff there. It's a great game. But it is, but it's a great game being played by

a few thousand people a day. And for context, the bar of success here is like several tens of thousands of people a day to make these sort of live service games go. And there's not enough hours in the day. There's not enough customers wandering around waiting to find these. They already have their forever games. And Bungie is a great example simply because this is the company that made, you know, Halo, one of the biggest selling game series of all time. and over the course of the last 20 years, they go from doing that to making Destiny

a live service game that sort of hits the trend, but never quite gets over the top in terms of being like a mass adopted by people. Then they're purchased in the merger spree. They make another one of these games that... I think the folks who love it, love it, but, you know, it's very clearly not meeting the moment in terms of where the public's at.

And then folks get laid off. And, you know, striking to me, I was very vocal in my opposition to the Microsoft Activision merger, and that's largely because of my experience in entertainment industry mergers, that mergers are never good. But it sort of went badly for a different reason than I thought it would, because I thought it would be the, you know, the Game Pass argument, okay, they're going to try to monopolize the space and there's just going to be like one big player game pass for games. And they're going to lay people off. It turns out that, like, it was even more disastrous than that in that they just laid off, huge numbers of people who make some of the most popular,

you know, people, folks at Bethesda, right, who make the Elder Scrolls games, et cetera, et cetera. And a lot of the video game, like gamers, for lack of a better word, who follow the industry, who had been rooting for that merger were, like, shocked and dismayed at what happened. Well, so there's the interesting thing. This is just from an almost like media criticism standpoint and somebody who's consume games media for a long time

and been in that space. I remember when I was coming up, one of the things that sort of marked the transition, like the fact the games media coverage was growing up was that suddenly it was like an evolution of console war mentality of is Xbox better than PlayStation, is Nintendo better than either of them or both. And that sort of evolves into discussions about

commercial success of these companies. And people start talking about them in adopting terms of art that come from management conversations. So you start hearing on popular gaming podcast, people talking about skews, for instance, SKUs, right? The retail product lines that exist. Things you never would have heard about.

But games started, the triple a games. That is a term that comes to us from financial analysis, Right. That AAA is a bond rating. That is a rating for like the health and viability of a security. And suddenly what we're talking about with AAA games is an adaptation of that term to these are kind of too big to fail mass market games for core gamers, sort of people that I described up top, right? People playing the major consoles.

So there's a C-suite eye view that is adopted by tons of the game's audience across a lot of this. And there's a degree of corporate cheerleading that becomes part of video games fandom. And there's always a little bit of that. I think all of us have certain brands that we have a soft spot for and cars have this. And any sort of like luxury goods have this. Like people like certain publishers, manufacturers, etc. So that's nothing new. But with video games, you definitely have for this.

I am cheering. It's the Rob Lowe with the NFL hat, right? It's the, you know, I am cheering. I am cheering for the quarterly results of Sony here. Yeah. And you get, you see some indication of like the unhealthyness of that that crops up a little bit. That is an undercurrent to some of what happened with Gamergate,

where it was, you know, there are people asking us to care about things other than games as products. And we despise that. There are people asking us to think about how these exist as social spaces. And they're getting in the way of us having a good time with our Nintendo and Sony and Xbox products. But it's also part of this sort of sunsetting of techno-optimism that for games have sort of moved in lockstep and as tech got better, games got better to some extent. People in the games industry saw the problems early

that came with the budgets required to make use of all those graphics resources. But in general, the consumer experience is always like, I still have plenty of great games to play. I don't necessarily know how. sustainable or unsustainable or how much pain and suffering is involved in that production process. But the last

drags of that sort of corporate techno-optimistic view of the industry, I think, are kind of used up around the time of the Microsoft Activision merger. And it helps that Activision was such a

repellent brand in so many ways and headed by sort of a cartoon villain for a number of years in Bobby Kodick, just sort of one of the most relentlessly cynical executives in the industry, that it seemed like anything could anything be better than Activision, remaining Activision, under the head of an executive like that. But now, having seen how all this plays out and seeing the degree to which Microsoft is yet another bog standard tech company willing to sell its sole to the highest bidder. That optimism and that sort of expectation that this merger will be good,

I think that's used up now. People have now seen, they touch the stove and they've been burned by it. They now understand when people in two nice suits, or I guess these days too nice streetwear or half, leisure are telling you how good things are going to be, you should be braced for them to try and rip you off or destroy something you care about. Yeah. I mean, how much is this just the disease of American capitalism right now? Like this pattern we're talking about where one of these companies buys one of their competitors, takes on massive debt to do so, then has to cut the people

and the infrastructure that make the product. And then the consumers are like, what the fuck, where'd the product, we liked the thing you made, where to go. And, you know, the CEOs in question, they've either already exited or they're sort of standing around going, well, my plan was question mark. Like, I, I, there was something. This seems to be, this is obviously happening in the entertainment industry as well with Paramount and Warner Brothers. And that's round 11 of merger madness in this industry.

So like, how much is this? how much is the ills of the video game industry specific to video games versus, you know, this bizarre pattern we're seeing at the highest end of American capitalism overall? It's funny because I think the AI component of it means they're inextricable. Because the AI boom is in large measure

just the most built-out version of what we saw with NFTs a little bit, which is, and crypto, which is a desperate search for yield. by people who have tons of capital and they're looking for what can we use to create new asset classes to generate more capital and generate high returns. And so you're starting to just generate

basically an economy of speculative scams. You know what you really underline for me is that what underlies both of those industries, crypto and AI is, what if computer just become money? What if I don't need to sell it to anybody? There's no product. I just turn CPU cycles

and memory into cash for me. So this is, use the word product there. And this is, this is the idea I'm thinking about a lot lately. I might be working on a piece that gets at this. But almost nobody in decision making role now across most industries is someone with a background in product or product development. And that's kind of a weird thing, right? Historically, when we think about what companies are up to,

they make stuff and they try to bring it to market and figure out if people will like it, and then they make more of that stuff. Now, what you're pointing to is that what a computer could just become an infinite money printer. There's got to be something to that. And so you see a search for what is the thing we can use? It's an asset class, but it doesn't require a selling anything to people.

It doesn't matter if people want it. It will just generate wealth, just sort of passively. And so you have this sort of desperate search for Gield in that way. And I will say this, it's not entirely... I think there are a lot of decision makers. I think probably Phil Spencer, Xbox is one of them, who is not a fool. It probably sees the downsides with a lot of this,

but you are surrounded by a C-suite, that is answerable to investors who want easy returns and reliable returns. And the nature of like the global financialized economy is that it is so easy to park money anywhere and get pretty decent rates of return. And it becomes such a hard pitch to tell people, well, you should invest in a product-driven business or hits-driven business like media. when that comes with risk that, like, sometimes you'll just lose the money you put into something.

It won't do anything. And you were always up against a reality that I think, in general, you get 8% returns on just a standard stock, like a standard market index fund. And you have for 20 years. Right. And so already your headwind is, you know, you can think, well, hang on,

If a game more than doubles my money, that's a pretty decent return. If the game takes you five years to make and it costs a fortune to make, in those five years, if you've just been earning the steady rate of return, you probably are doing better than doubling your money. Or at least you're coming close to it and you're not running the risk of losing your shirt. So they're up against this reality of the capital will just flow anywhere to go seek yield. and right now, the scam economy is exerting this huge pressure to just pull funding toward it and away from other industries. And so if you're going to keep people investing in your work, you have to kind of compete with frauds and liars.

So, like, from that standpoint, it's inextricable from a broader crisis of capitalism, which is that fundamentally the market is not driven people who make things. They don't know how things are made. They have no interest in making things. They also have no idea what sells. They've never had to sell anything. Right. They think they might be good salespeople internally, right?

They know how to do an internal sales pitch to the previous generation of Silicon Valley tech leaders, right? But they've never actually brought many products to market and then said, this needs to be a hit with ordinary average people. That's not the business they are in. And I don't think they really know how. They don't know how to develop a product. And so when you look at stuff that's specific to the games industry,

I think part of the crisis comes from the leadership in general don't really approach it from the standpoint of we are making, we are in a hits-driven content industry. They don't see things that way. And partly is, from their standpoint, an industry like that is dead. Like, that's not where the investment money is going. That's not where it should be going. So you have to tell me you're going to transform the market if I'm going to invest in it.

But also, they are more likely to, let's be frank, completely suck at making products to sell people because they don't really understand the market they're in or how it works. And I think that a hit-driven industry in particular gets broken because... there's an inherent, like, scatterplot of how things are going to turn out when you make media, right? You distribute risk. You have some things that you're pretty sure are short like sequels, right, or a popular franchise. Yeah. That's going to generate some steady return with some investment. You know what you're going to get out of that. But to find the next hit, you're going to have to have a lot of dots.

And you're going to have a lot of things that are modest successes and modest failures. They're not going to sink you. They're not going to make you rich. they're just going to exist. And they might have a cult following. Maybe they'll become a hit in time. But in general, the approach that is made at the decision-maker level, the C-suite level, is really not just risk-averse, but outcome averse.

That if something didn't sell, then the lesson there is we do not do more of that. We touch the stove, we got burned, we're not trying that again. Games are iterative. And sometimes the thing you made that only became a cult hit the first time around becomes a much bigger success later. The Eldon Ring, you know, coming after like, that's like Dark Souls game number six, right? And that's the one that becomes the mass hit after cult hit after cult hit growing year over year. It's a Japanese developer is slightly different, you know, it's a different economy over there. But that's a great example.

But even there, we don't have to go that far. Like, okay, so the entire industry is waiting for GTA 6 to come out, right? Yeah, I was going to bring that up. The modern GTA game was invented with GTA 3, arguably. Four is really a lot more where the model takes shape. But GTA 1 and 2 are different games. Yeah. And they're smaller games.

They are not what that turns into. But again, it's iterative. It's trying new things. GTA 3 is the one that changes the perspective and adopts a little bit of the cinematic story. telling. Mostly it's an open world action game. And then GTA4 is where you start getting into the, you know, very cinematic. We're telling a crime epic. Similar things happen. It happens with Red Dead. Nobody even remembers Red Dead

Revolver. It's a very different sort of game from what that series turns into. But none of those early games that are sort of foundational to starting what becomes rock stars juggernaut of properties their ability to completely dictate the games calendar for like years on end. None of that happens without the ability to experiment and refine in games that are a much smaller scale and that maybe there's no real audience for it.

Nobody's clamoring for a new bully. They're sort of boarding school action game that they made years and years ago. But this is part of how you find what is the next big hit. But that is the nature of that business model where you are, distributing risk, you're accepting a certain amount of failure to uncover hits and potential hits that if you iterate out of them a bit more, maybe you find an audience. All of that is at odds with the way decisions are made at these tech companies where they and their investors are addicted to incredible profit margins and very high rate of return. And for them, it is,

It is savvy business management to say, well, that thing you made that didn't sell, I wouldn't do that. I would, we should only make the products that are hits. And then we get rid of everything else. And then you're sort of looking at, well, now you can't distribute risk. Because you're winnowing down, what are the things you're even going to fund and release? And so now every one of these things has to hit and it has to hit huge. So now you're after a point, you're loading the dice against yourself. because this is it.

Like if the new Spider-Man game doesn't sell a ton, that's the end of that franchise. Yeah. Because now it has billions invested in it. And there's nothing else happening outside the calendar. We don't make other games outside of this at the studio. And so that is some of the stuff that's causing all of this to break down is the hits-driven model is, we kind of know how a big media publishing or conglomerate is supposed to operate.

is supposed to operate and what you can expect from a creative field. And a lot of the games industry is run by people who fundamentally reject that logic. Yeah, I think a lot of that is because of how large all of these companies have gotten and how the logic the tech industry has taken them over. I mean, I'll keep making comparisons to the entertainment industry. You know, we used to, I think both in video games and in movies and TV, have a much more decentralized market where you have a lot of small players who are, You know, Hollywood used to be a town where, hey, all I got to do is raise a million dollars and I can make a movie and, you know, I'll sell that into the theater system. And if I make a profit, I'll get to make more. And so you can go raise some, you know, there's a lot of small operators raising a lot of small amounts of money. Or I make a TV show and I'll sell it to NBC, right? NBC is a big business, but fundamentally what are they doing? Well, we're one of many channels and we sell ads, right? And this is, this is like a good business. But it's not.

a world-altering, you know, like infinite growth machine, which is what Netflix presents itself as, right? Netflix has a tech company valuation, or they're going to disrupt everything. They're going to make a massive amount of money. In so doing, they decouple the product from the profit, because now there's no ads. People are paying $15 a month.

And so how much does each show? How do you decide whether a Netflix show turns a profit or not? who knows, therefore the people at Netflix lose their feel for what makes a good show, the sort of hit maker, you know, the Hollywood mogul used to be like, I know what'll sell, like, get a pretty girl and a big explosion and blah, blah, blah.

Like those guys are all dead, and now it's all Ted Sarandos types who are like, you don't know how to talk to Wall Street about infinite growth. And you end up in this situation where, like, you do that enough? The companies almost crumble under their own wait. I mean, I'm starting to read stuff about Netflix where the entertainment press is like,

huh, looks like maybe everyone who's ever going to sign up for Netflix already has, but their valuation still assumes a lot more growth. Where is that growth going to come from? After you get, there's only so many people on earth who can pay $15 a month, and eventually you're going to run out of those people. And when you're that large, that kind of company can't go, hey, let's spend a million dollars here and see. if we can make $1.5 million. Like, the economy is built on people trying to make a 50% return

on, you know, a small-scale investment, a car dealer who likes movies a lot or likes video games, right? And that's what both of these economies used to be. And video games are not that anymore. And once you remove that open market as well, like, okay, you want to be a hits-driven business. That presumes a whole market full.

of customers who are used to paying $20 to $60 for a new video game, or in the case of movies, you know, $20 to go see a movie. And like, hey, I need something new to play. Let me take a risk on this, right? And they just plunk some money down. They like it. They tell their friends. If you stop making, like, a lot of things for them to try, and now there's only

three games a year that must be a hit, after they've played two of them that sucked, why are they going to keep participating in this market? And so it starts to feel like, you know, you talk about like Marathon not doing well. I'm like, yeah, who's still buying first person shooter live service game? Who's doing this? Like, what are people still in this market at all? Like, yeah.

Well, there's, so one, the live service thing I think does have resemblance to some of the relationships people had to Netflix shows, not the streamer shows, but like people invest their time in getting good at a game. And now that it's so clear that support will just disappear for these games, they'll release, they'll die, they'll be gone within a month or a year. It makes it actually harder to sell them now because you kind of know the equivalent is Netflix paid for two seasons, they left it at a cliffhanger, and then you're never going to see it again.

And also those two seasons took like five years to come out. And that's kind of it. So you're kind of chilling consumer expectations while you're doing this. But the other part of it, we probably shouldn't undersell this, which is the notion that they are reacting to the existence of what I want to say, Matt Piscuitella, who's a analyst for Circana Group, used to be the NPD group, I think, did a lot of retail analysis. But Matt Piscuitel is a very, a very,

smart guy on Blue Sky who covers the games industry. I think it's his term where he talked about black hole games. Fortnite being the big one, which is people start playing those and never come out. That is where their gaming time goes, is they go into Fortnite. They go into, in sports, it goes into

EA sports games, Mad and Ultimate Team, EASC, Ultimate Team, things like that. And so you have you have what feels like a very healthy audience in games, the numbers are still big. There's a lot of people playing games on consoles and PCs daily. But the availability potential customers is not what it used to be. Because now so many of them, two-thirds of their gaming time, is consumed by Forever Games. And now you're competing for a banishing slice of

available free time. Low-key, GTA is one of these. One of the reasons that GTA-5 remained to hit three years and years was GTA online. Right. GTA is kind of deceptive. And that the review hype cycle and then the release hype cycle, all that's driven around. It's another cinematic story from rock star.

It's another story about America and Americana. But long after everyone has gotten, you know, it's such the marrow out of those narratives. You've got people basically running around these huge, lavish open worlds playing cops and robbers for years on end. And so it,

sort of follows this almost like fortnightish trajectory of people start playing it and they never stop and so everyone else and I think that is in the defense of some of these awful like executives who've driven the industry into the ditch where some of the comparison to the TV and film industry breaks down is that eventually people look and they see what's in the movie theater and they go they want to go see a movie and they just see they they picked from what's there. There's a little barrier to entry. Yeah. Yeah. Video games, it's not like that. It is at times

kind of like, well, okay, anyone who watches Marvel movies, they just won't watch anything else. So just forget that. Like anyone paid for a Marvel ticket, they're gone now. They're not a potential I went on a first date with a guy who watches Marvel movies. I don't want to talk to him again. Like it becomes a type of person that most people classify themselves as not that type of person. Yeah. And so you're, it's a funny thing

because now you just don't have the ability to reach a lot of these potential buyers. Right. There's, there's, the low barrier-entry thing is huge because, and I suffer from this too. I play games a ton, but if you notice how like sometimes you can be hours into a game

and you're like, am I still basically in the tutorial? Or sometimes we get hours into a game and then the opening title screen comes up. And you're like, what? What? What do you mean this is opening credits? What is happening here? And that's in part driven by the fact that these games require a ton of investment of time

to show you everything that's happening in them. And it can feel a little bit like homework. And so if people are already spending all their time, like keeping their skills sharp in Fortnite or EA sports, now you've got much narrower window to kind of snag and hold their interests. I think that's in part why a lot of the breakthrough games in the last several years have been what's kind of being termed friend's law, which is you know you hop on a very simple, straightforward game that you play with people on your Discord server

and you shoot the shit because they are easy to figure out, they're social and they're not before you can really start figuring out what the game is doing getting good at it here's a six-hour interactive tutorial right uh yeah let's talk about some of you know i think would feel like bright spots but you know how sustainable are they uh like a lot of what people are calling friend slop games just like fun light multiplayer games that you're not really going to put that much time into but it's sort of you almost play them like you buy a board game to play with your friends. Hey, it's a couple bucks

and we'll get together. We'll play it five times and then that's plenty. A lot of those are coming out of the indie space. There's still plenty of indie hits. There's games like Balatro, for example, which is like a huge mainstream hit. There's smaller games that,

you know, like Mina the Hollowers size games that feel like they are still, you know, working on that old video game habit and ritual, you know? okay, yeah, I'll pay $25, $30, $20 for like a really fun creative game that'll be a nice experience. It'll be, you know, 15 hours for me. But, you know, Steam is, you know, still a huge marketplace that's full of these types of games. The Steam deck almost seems to cater to them specifically.

How much, you know, when AAA games are breaking down, how much is that part of the industry a lot? live and well or a potential future? I hate when the success of indie games is held up as like a Panglossian, you know, really this is just, it's a warmer, fuzzier, more twee way to phrase like the creative destruction of the, of capitalism or the, or the free market. This is the best answer I could have voted for. Please go on. It's like when people are like, I'm not worried about it.

I'm sure you hear this too. I'm not worried about like TV and films. There's always going to be making movies. There's always going to be good movies. It's always going to be good TV shows. Okay, great. Thank you. That's helpful.

Yes, I also agree this entire medium is not going to be dead in 10 years. And like there'll be you turn on TV and there's going to be nothing to watch on it. Yeah, no, that's not what we're talking about. We're talking about an entire infrastructure pipeline, collective, like knowledge, knowledge base across the industry, how to do these things and how to do them well. All of that is supported by operating a certain scale that can't be replicated on an indie scale. That is a different thing. Yeah. The indie game comparison is the equivalent to people making movies with a couple digital cameras doing guerrilla shoots, right?

Where there can be a lot of craft and some of these are going to break through, but there's tons of people making content like that that you never hear from and they're never going to be able to build a, career off this. It's never going to be a thing you can really like plan your life around. And so when I look at that, I do not really see, I see cause for optimism in that, yeah, like there will continue to be cool games to play. There'll be people making them and there will be audiences showing up for them. But that doesn't cure what ails, the stuff happening across a lot of other games and genres. And the other part of this that's always rub me wrong

is that there's always been like a... Again, like, he kind of this notion of like, twee... There's a twee sense of virtue around indie media that, one, frequently not justifiable, right? that, like, it turns out, you know where a lot of abuse can happen or, you know, abuse or toxicity can happen? Like, small teams of people collaborating on a thing. You're not good because you're small.

Yeah. Yeah. But the other part of it is, I guess, related to this meme that you probably see a lot, I want shorter games with worse graphics. And I'm not kidding, right? Yeah. The cost more of worst graphics. I'm not kidding. The Sonic meme.

The thing that bugs me about it is that it devalues a lot of other experiences that I think people like that, oh, it's actually good if big, silly blockbuster, first-person shooters, I'll die because I'll still have big walk. I'll still have, I'll still have my indie game. Yeah. Oh, it's, oh, I'm sorry, you like high fidelity sports. or racing games or, you know, you like big open world action games. Oh, well, I guess, you know, you like the awful destructive corporate media. And I don't care if that dies because my good, wholesome indie games are going to survive. And so if you're worried about the future of the industry,

that's just because you're worried that your little boring corporate media treats are going to go away. whereas I am always going to be able to patronize the arts. And there's a few things there. One, if you care at all about mass employment, you kind of need big, expensive products to be made and find their audiences so that people have jobs. Also, a lot of people pick up their craft and tools of the trade working in these environments from other people who have years and years of expertise, making games. And so if they do strike out and become indie developers,

they're doing it with a ton of knowledge they picked up that was buttressed by decades of institutional knowledge that they were exposed to during their time in the industry. And then finally, it's like survivor bias to the nth degree where I can point to these indie games that become huge breakout hits, therefore everything is fine and healthy. look at how many games come out on Steam every day that you never hear, hear about. They sink like stones.

Great games. You look at how many Steam reviews did they get? How many, nothing, dozens of people have maybe played these. These represent years of people's lives. And so if your response to this is like, well, you know, there's always going to be good indie games to play, and indie games are sort of the future, then I think what you're telling a lot of people who look at this as a source of employment

is that your future in the industry is you get to hit the corner store and buy scratch-offs for the rest of your life. Yep. Not even scratch-offs. You get to buy a mega-millions ticket. Yeah. Powerball is your future. That's not an answer to the crisis. And to me, it's actually the height of the consumerist mindset, right?

Yeah. That, well, as long as I have stuff to play, this isn't really my concern. not really affecting me. And it should be your concern, right? The health of the industry is to make the things we like is something that whether or not you were personally still amused by what's coming out, the overall health of that ecosystem is still something that should be of interest and concern. Yeah.

I'm addicted to the entertainment industry comparison. I think you make a great point that, like, you know, in Blockbuster Video Games, as in blockbuster films, there is like an infrastructure and an expertise that can go away, right? And when people say, oh, indie games are alive and well, it's a little bit like saying, well, I don't need to watch a blockbuster. I can always go watch YouTube. Well, you're not, YouTube cannot make Terminator 2 or whatever. And also, most people who are uploading to YouTube are not being paid to do so. And it is an entire. new economic model where 99.9% of the stuff on the marketplace is made by someone for free,

either as an amateur hobby project, which those are great, but that's, you know, only going to produce a certain type of output, and someone is not paid for doing that. Or B, is like literally a lottery ticket. Someone's saying, I'm going to put in hundreds of thousands of dollars of money or labor, like free labor for years, in order to get this product. out. And every time we talk about a success story like that, like Stardue Valley or Bellatro, which I mentioned strategically, because these are people who, these are massive hits that someone put years of their lives into. Well, what about all the years of people's lives that were put

into games that nobody ever played? Like, that's a bad outcome for humanity. It's also a bad outcome for the art form. And like, it could end up with us going like, and I rewatch Terminator 2 a couple weeks ago. And I was like, wow, I don't think the expertise exists in America to make this film anymore. Like, they're fucking flipping over real-ass trucks and blowing things. I just, I just don't think it could be done. I think like a movie that opens as wide, it probably is not as well made as that film today. And I think, I think a lot of people have had that experience watching movies from the 80s and 90s. Wow, why can't we make these anymore?

And we may end up feeling the same way about video games. Before we wrap up, I want to ask about one other, you know, how do you fit Nintendo into your analysis, right? Because this is a company that has sort of stuck to its guns remarkably in a lot of ways. You know, plenty of times people said, oh, you know, they should just sell to Disney and start making phone games or whatever. And they basically said, no, we're going to be. keep the same button layout. We're going to keep making Mario Kart and has kept playing into

that same rhythm that people are used to. Like the American public is still like, when there's a new Mario Card out, people are like, oh, there's a new Mario Kart. Can I play it? Can I go over to your house and play it? And, you know, yeah, how does that factor in? Is that sustainable? Yeah, so that is a, I want to be wary of overly romanticizing Japanese corporate culture. because it also has its own issues. Like, in general, people tend to be paid. Jobs are more stable. Conditions are frequently worse.

Pay is frequently worse, but there is more stability. And Japanese companies can be deeply cynical as well. Like, you know, look at a lot of directions that Sony is moving right now. But I do think, to a degree, Nintendo represents a little bit of what happens when product people remain in charge of the ship because what you were describing, like, that sort of bottom line market efficiency mindset where it's like you should just sell out and be a mobile developer.

That is stupid advice. That was advice that people were sincerely saying, that's what Nintendo should be looking at doing. That's the, you can't compete on hardware with the, with the tech giants like, the hardware giants like Sony or a tech giant like Microsoft. And you have this

valuable, this valuable silo of IPs that you could, you could exploit as, you know, from a licensing standpoint or just be putting out shovelware on mobile platforms. And what that analysis, like, fundamentally misunderstood is, again, like, how a product-centric business tends to operate, because that is not how, you know, if we're talking about what, like, the core crises of American capitalism at this moment, it is that it is incredible. poorly allocating resources, right?

Like taking all of the, like, morality out of how you structure an economy, right? If you're just looking at, this is a resource allocation game that we're playing. We structure things to operate a certain way with the idea that it creates the most social good and happiness to let things operate this current way. The way a lot of people with money operate right now

indicate they don't know what's good. They can't perceive what's good. they are more prone actually than average people to buy into scams. Like this is your example earlier of Netflix, right? Share price doesn't change despite the fact that there's clear cracks in that business model. Yeah. The same with Tesla, right? This is not, the fundamentals of that as an auto manufacturer are not good.

It doesn't matter. Like for a number of years there was like the most valuable company in the world. because the investor class can't smell out, it can't smell bullshit anymore. It can't recognize sound fundamentals versus hype. And it buys into hype in part because, again, we live in a scam economy where it's like, well, as long as I bail out before the hype train runs out of steam,

all be fine, shame about the people caught in the wreckage. Nintendo recognized they were not going to be able to compete with Sony and Microsoft on the hardware front and they didn't want to compete that Sony and hardware move Sony and Microsoft moved hard toward like luxury high-end hardware and Nintendo was always very content going back to the Wii to have second-rate technology

in the box and then what becomes interesting for each Nintendo system is like well what's the physical experience, what's the toy that you are interacting with here? And they seem to have come to a durable answer, at least the most durable answer we found Nintendo history, which is they make the switch now, which is a, compared to a phone, a decently powerful handheld, but it is still like physically and financially, like fairly lightweight compared to a lot of its competitors. And it does things that, you know, they don't.

Like, Steam Deck is not a Nintendo Switch competitor. Hold one. You can tell the difference in the products. It's trying to be a PC in your hand. The Switch isn't quite doing that. Yeah. And so Nintendo kind of created a hardware platform that was all its own and then had a slate of developers they work with

and a slate of IPs. They haven't diluted past the point of no return that they can then dust off and sell to sell the customers. And get people excited. about. How is Zelda going to be reinterpreted on this hardware? How is Mario Kart going to be reinterpreted here? Oh, we're doing stuff with Donkey Kong again. And so Nintendo kind of retained a distinctive brand identity. It became more distinctive as they kind of bowed out of that market I was talking about where high-end PCs, PlayStation, Xboxes, all become like, device.

for the head of the household, millennial or Xer type consumer, the switch lands in this middle ground somewhere between like the 3DS and the core game or video game console. That's the thing that like mom and dad might have. The double-income no kids family might have, but also the kids might have. It's functionally like just like

the netbooks or the hand-me-down touch devices that they were already using, except it's better and it plays different games. And so I think Nintendo, I'm not sure they read the writing on the wall, but they also didn't get caught up chasing trends. They didn't buy it on the mobile trend. And they didn't follow Microsoft and Sony

into like a hardware death spiral. Yeah. So I think Nintendo positioned itself pretty well in a way that probably does bear some. It's hard to imitate. Like, you can't, they have so many household names that you can't. For years, my mom still call all video games Nintendo's.

Yeah. Like, you can't recapture that. You can't replicate it. But there probably are lessons that can be drawn from that that other publishers just don't want to draw from in part because it involves accepting that like not everything needs to be a mega hit. Sometimes you just keep brands around to experiment with stuff. or to remind people that they exist

so that eventually we can bring one out and maybe that'll be the breakthrough. Yeah, they do make a lot of those smaller games like the sort of Nintendo B games, the Kirby game, the Princess Peach game, the game where like, you could tell they didn't even put that much money into it, but they're just hoping to hit a single here, right?

They're just like, yeah, we just want to make up a little bit of a profit. And then the mainline stuff, I mean, to circle back at the beginning of our conversation, I mean, look, Pokemon and Mario are like two of the biggest IPs like on planet Earth. Pokemon literally is the most profitable IP or maybe the largest by revenue on planet Earth,

bigger than Marvel, bigger than Disney. But also the games themselves are like genuinely good experiences. Like my friend who has kids, she's horrified by Roblox. Like she doesn't know much about video games, but she's like, I can tell this is bad. But, you know, I helped them buy a switch and get a copy of Mario Maker.

and in comparison to Roblox, Mario Maker is like they're watching a PBS show. It's like a, it's like playing with Legos. Oh my God, they're building levels for each other and they're exploring and they're, and by the way, they're also increasing their video game literacy and, you know, their capability with this entire medium. And, you know, it's like,

it's like weird to romanticize, but I'm like, oh, they tried to be. make a good thing and they did it and then people buy it and they're like, oh, I like it. I'll buy another one later. It's a very basic experience. I mean, I think the lesson that it goes back to is just what you said, the product experience, thinking about so much of our overall capitalist system has forgotten that at the end of the day, the entire economy is just individual humans, buying.

things and using them. Like, that's all that exists. There's not much else going on. And, like, you need to think about that experience. Getting at the darkest view of this moment capitalism is that, like, some of the people, like, steering the ship badly want to change that reality. Yeah. Right? They don't want to, they don't want middle class that buy stuff. They don't want to depend on the middle class. The middle class might demand things. What they kind of want is, yes, like infinite wealth generation. Yeah. That sort of locks in the status quo forever.

And you don't have to sell things to people because they have no choice but to buy products from you regardless. They want surfdom, right? They want surf them. Yeah. Yeah, like the rent-seeking market model of capitalism. Right. And so, yeah, that is the other related to that is, I think the Nintendo model is one that doesn't overly concern self-scale.

Again, that sort of product mindset is hits are awesome. It's great when everyone who owns a switch goes and buys Breath of the Wild. Cool. But the tech perspective on that is you look at that and you can't, you can never say, like, yeah, we sold every last possible copy of Breath of the Wild. That's a good job done. That's a hit. the tech conversation

looks at that and it's like well how do we scale that success out to billions of users and the answer is basically you can't yeah you can't

like that's just there's no there's no viable path to that like what are you going to start like parachuting switches into people's hands around the world to sort of expose them like missionaries but for but for your

your game right where it's like there's an uncontact actor here who doesn't have a switch and they need to hear the good news about Breath of the Wild and Tears of the Kingdom. You're not going to do that, but the framing of the discussions in the C-suite tier, the executive tier is you can't just say, yep, did a pretty good job on that. That's as good as that's going to get. Like we made a fortune off it. Now when you think about like what additional products we're going to develop, instead it becomes, well, how do we use

this is a point of departure to create a global breath of the wild experience and scale that will pull in billions of daily users and have them paying into this. And it's preposterous to that you would think that that is, that is an argument for how you should evolve a success like that. But that is what's been carrying the day now for years in, in the game space. Yeah. You asked me where I would... I don't know if this is a source of optimism,

but I take a little bit of hope from looking at the quality of decision-making or the non-existent quality of decision-making, the conservativeness of the decision-making, the frankly stupid, greedy, like castles-in-the-air approach to managing video game companies. And to me, I look at this, moment, this crisis, and it is horrible for everyone who's caught up in it, but I also look at it,

and I'm like, well, we've tried nothing, or we've tried nothing but dog shit ideas, and we're acting like we're all out of ideas. That was Microsoft's position, right? Well, we tried Game Pass. Game Pass didn't work. Time for everyone to lose their jobs. There are so many different ways of approaching the games industry. There's so many different ways of thinking about, like, how you can release market price,

again, so many ways of conceptualizing and packaging the product that is video games. And they've basically tried none of them. Yeah. Like they've tried the infinite revenue generator. How can we turn all these into infinite low effort revenue generators? And all of that has failed. And beyond that, there's been like no real creative experimentation or appetite for that.

And so I look at this a little bit. if I had seen more good, bold ideas that I liked that I thought represented a positive direction for the games industry and those were still failing, I would be a lot more pessimistic. But in general, what I see when I survey the games industry is like years and years of complacency and then increasingly magical thinking from like the leadership class. all hitting the icebergs all at once. And the thing they haven't tried is sort of the entrepreneurialism or the creativity that sort of built the games industry. Like, again, finding what are stuff people want to play? What are products people want to buy?

Part one of that might be sell them products. and not here's your license, you piece of garbage. We'll revoke it whenever we want. Like, let people feel like they're collecting something and buying something. When you look at the early days of the games industry, it's all entrepreneurialism, right? I think about, you know, the story of like the people who made Sierra, you know, Ken and Roberta Williams, for instance. They're like, oh, what if we make like weird, horny fairy tales for adults? And, you know, they're so successful that they, I don't know, the tales of what they did with that.

money are like entertaining enough and themselves. Those people, they live on a boat full time now because, you know, they just like they had that 80s, early 90s mindset of, hey, let's make some shit and see if it works. Oh, wow, we're millionaires. What fun. And

that's sort of that's capitalism's best version of itself. And it's funny to see not just the industry, but assuming our entire economy like drift away from that. But you're right in that it's also an opportunity because, you know, I think about it in my industry as well that the public is not being served and the public is still sitting there going, I would like a good video game to play. You know, like there, even if video games are a millennial phenomenon.

And that's still a good, you know, 30 years worth of people who are like, I remember when I used to pay like $40 and like have a fun time? I would like to do that again and if you can just like hearken back in the same way that if you make a good movie people will go to the movie theater and they still want to have that experience regardless of the fact that the people of the top seem to be declaring that they don't

yes they do I do like actually going to the movies fuck you if you can serve those people you can actually make a business out of it and maybe there's a silver lining that that can be people can, that there's a new generation of business leaders can fucking figure that out and make some money doing it. Well, that's the, again, like, I think the people coming over from finance really had a contempt for people who were industry loyalists in any sense of the word. And it's, like, you look at my IMAX theater just extended the Odyssey for like the third or fourth time. Right.

They're not booking out. Like, this is the longest I've ever seen on IMAX, something playing at that I was. They're literally having conversations in the industry right now. How do we build more IMAX projectors? Like, that's the main constraint. Also, it turns out they can't. Or maybe they'll figure that out. But yes, I saw the stories where it's like some of the documentation

about building and maintaining IMAX projectors has been sort of lost by the IMAX company. Which, again, these are sort of the hidden costs of streamlined capitalism, seeking efficiency and destruction of institutional knowledge. But the degree to which, like, what's happening, with The Odyssey would feel like complete vindication for someone like Jack Warner or Louis B. Mayor, right, or Samuel Goldwyn, where it's like, yeah, of course is what people want to see. Why are you surprised The Odyssey is doing well?

You put stars, big pictures. It's like a movie from the 50s. It's like, yeah, it's the story of Anthony and Cleopatra. Look at the grandeur of the, like, that's regular old movie magic stuff. Yeah, and so the people you brought up Ken and Roberto Williams, a writer we work with a ton over at remap, Duncan Fy, wrote a really good piece for us back when we were advice about the Sierra acquisition when they were bought by, I think, CUC Capital.

And that is one of the first really big acquisitions in the 90s industry. It's like real money is showing up and buying out the publishers. And that's kind of a sad story in large part because Ken Roberta Williams, particularly Ken, were still very bottom line oriented people. They liked making money. Ken Williams really liked making money. Also liked making games. Like that his wife liked making games and made good games.

And the second the money people showed up following his acquisition, the vibe completely. changes and they start coming in chasing you know you like games too much right they start chasing people off their off their patch and they start marginalizing the people who understand the craft and understand the audiences they're they're marketing towards and eventually like sierra kind of falls apart and is sold off uh to i think vending eventually but in that process you know it's the the money people showed up they talked a good game about we just want to, you know, take this to the next level and we think this is a growing concern, but they don't want to grow it with you. They want to take it over and they want to turn it

into a cash cow. And every time you are there saying, well, what built this is experimentation, dedication to craft, excellence, they look at you like you've grown a third head. Also not a coincidence. It turns out the company that bought Sierra were basically scam artists. The money, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, a lot of the financials for that company were fraudulent. It became a huge pre-Enron accounting scandal of the time. And that is often who shows up with, you know, we're talking with the Odyssey. Like, this is kind of the beware Greeks bearing gifts.

This is the beware investment groups showing up with piles of cash and guaranteed that they are heavily capitalized and consistent in your operations. Frequently, it turns out that they don't operate that way. And they're not actually the savvy business people that they present themselves at. But what they're looking at is we really need to buy some more real estate we can charge rent on. Well, let's wrap it up here. You know, we were striking a note of optimism a second ago. You have made your business for many years, you know, talking about this art form.

I imagine it many times that was an exciting thing to do. I know the game, you know, games media has crumbled just as much as a lot of the the rest of the games industry, but that's still what you do, and you do it very well. Do you like, yeah, do you have any optimism for, you know, that you'll continue to have interesting things to talk about for the next couple decades, you know? Absolutely. I think I, so having said, I dislike it when people say, well, I'll have interesting things to play, so I'll be fine.

That is kind of the boat that media is in a lot of times that games media will all. always have interesting things to engage with and talk about. The issue there is games journalism is hard to do at scale. You know, again, investigative reporting is massively resource intensive, things like that. So there's types of games journalism that I think are hard to replicate or hard to do on an independent basis. And then it's unknowable. People don't like hearing bummer news all the time.

and that is what a lot of games coverage is right now. Like, hey, great example, like Star Wars Zero Company, which is like basically, it's a little reductive, but it's Star Wars X-Com. A story broke from Steven Titoo last night that that whole studio was furloughed weeks ago before the release. The game appears to be a hit, but everyone who worked on it is furloughed.

I literally was just listening to you guys on your show talk about that yesterday. I was like, oh, this game's really fun, and I was thinking about checking it out. And that has become a pattern. now that as soon as a game comes out and it's a hit, oh, well, the people who made it don't exist anymore. They've all been assassinated. Yeah, and some of it is probably also the fact that, I mean, the Hollywood trade system is probably a better model for how employment in the industry should work than full-time employment at a company, right? Like, AAA game development requires

huge numbers of people for a fraction of the overall like time spent developing a game. And then you kind of don't need all those people. And so you can't escape this layoff cycle because nobody needs these huge teams of artists and crafts people at all times. For a lot of the games' life cycle, you have smaller teams iterating and developing ideas.

But the industry is a long way away from converting to that sort of employment model in how it's that model is under siege in Hollywood. Yeah. So it's not like, oh, we'll just pour it over that massively successful model to this. There's a lot of structural factors that are going to make that hard. But it's a good example of we're having a good time talking about like zero company. Loving and we're having a great time.

Can't wait to see what that studio does next. And the story comes out and it's like, well, that studio may be in deep, deep trouble now. You know, they've put everyone on furlough who knows who's going to be hired back. does the game's success or failure even move the needle for whether BitReactor is going to make another one of these or continue to do cool stuff in the tactic space? We don't know. And audiences get tired of hearing that.

They get tired of hearing about people losing their jobs to AI or a developer being caught using AI. That's probably the big concern that you run into from the content-making perspective is maybe you run into it here as well. So many of the interesting but also bad things in the world right now trace back to a handful of common factors. And at a certain point, you can look at them different angles and perspectives.

But you're playing the hits. You're coming back to like some underlying realities that don't change on the scale. They don't change on the time scale of a weekly show. Yeah. It's like, yeah, this thing was bad last week. and we are continuing to see that ripple out this week and it's going to be rippling out in two months, six months time.

And yet, you know, we kind of have to talk about it. That just is the story of what's happening in the space. Maybe the blip in games media was that for a long time as a young and growth industry, you had a lot more positive, exciting stuff to talk about that kind of overshadowed the precarity and mistreatment that was sort of part and parcel of the industry. And now you don't.

Yeah, I mean, I do run into that exact problem. I was talking to somebody about, like, how to grow what I do here and, you know, whether subscription or views or whatever, and they said to me, well, yeah, your show is pretty depressing, you know, as a, and it's true. And it's often coming back to the exact same issue. You know, we had Tim Wu on a couple months ago, and his basic entire argument, about, you know, platform economics is, is what, you know, what underlies

this entire conversation that we're having. But at some point, you have to advocate for it because, like, what produced in Hollywood, the creative flourishing of the 70s, 80s and 90s, what was the regulation that happened in, like, the 50s and 60s of, like, FinCin rules and, you know, separating out production and distribution. Actually, sorry, not to make this podcast longer, but... Please.

I've always heard the story of the new wave in the 70s. The 70s really is what we're talking about, right? Broadly, the story I've heard is largely an aesthetic one, right? That you have fatigue with the model of the big studio model. And an appetite for different kind of movies than a new generation of filmmakers. And bada bing, bada boom, you have Scorsese, Coppola, et cetera, French connection, those sorts of movies coming out. And suddenly there's a sea change in the industry,

and the time is up for the big bloated MGM studio model. I haven't heard the, oh, that was a lagging indicator for structural changes, argument that preceded this. Yeah, absolutely. I mean, you know, exactly when the structural changes went in and like which ones you're talking about and which led to which aesthetic revolution. You could debate. Right? But yeah, I mean, beyond that, beyond like the sort of Robert Altman era, there's also the argument that, you know, movies like Back to the Future existed only because they were sold into an open market, right? It was someone taking a risk on something and selling it into an open market of theaters. You just contract with a lot of individual theater operators and, you know, you made a movie for this amount of money, you're getting people to pay $10 for a ticket and you make a profit.

And you can surprise the rest of the world that way because you are, you know, you made your product. You're bringing it to the big city. And guess what? Sold like hotcakes. So now you're a millionaire. You can make a lot more. And that only existed because there was like a effort over decades in Hollywood of decoupling the studios from the distributors. So that and, you know, also the general antitrust sentiment that we had in America during that period.

So, you know, you didn't have two giant movie theater chains and three giant movie studios. Now, you know, one is buying another one, et cetera. There were individual operators, and that was the kind of town that Hollywood was for a long time. As I said earlier, a town of small operators, everybody's trying to make a buck. video games were that too but a lot of the story of Hollywood is there were like specific antitrust enforcement measures that were exercised

on Hollywood specifically the Paramount Consent Decrees, the FinCin rules these are relatively famous in the industry to the extent that people just mention them without knowing exactly what they did. We just know that it was some sort of competition measure that prevented somebody from owning somebody else and those were all removed in the, you know, 90s, and now we live in the world we live in today.

And so, yeah, the aesthetic revolution was, there's many steps of the aesthetic revolution that were created by structural reforms. And that's part of the reason I talk about this shit is because, like, a lot of the Hollywood trade press doesn't. If you go read, you know, deadline or whatever, they're like, oh, this, you know, well, this movie made money. Who knows why?

Right. Who knows, you know, there's no structural critique. And as exhausting as the structural critique gets, it's important to make just to remind people that if we want things to be better, we need to change the structure. Yeah, I think that is, that does tell us a lot with how I tend to look at things too. Like, it is, I think especially, when you're speaking like in leftist spaces to like left-leaning audiences, I think it can be tricky to decouple. like what ideally we would like to see exist versus just looking at like the structural incentives that exist. They're related conversations,

but something we return to a lot is there's tons of different structures that you can have that would generate different outcomes. They don't necessarily have to be like the full luxury communism model. It's worth considering what they would look like, right? If you're looking at like a moment like this across a lot of industries, what you're seeing

is something that doesn't look a lot like the way we're all propagandized for like free markets. And the answer is, well, we're really, really far from any sort of definition of free and open markets that is the whole argument for why this model of capitalism works. And the reason that doesn't work over time

is because capitalism generally doesn't want a free and open market. Like as soon as people have an advantage, they will continue trying to fold that advantage in the greater ones. But there are so many different ways to skin the cat, as it were. But it's worth looking at how any problem or any moment you exist in, it's rational actors responding to incentives and like facts on the ground. And you can change those.

Like there are, it can be like a jenga tower, right? where it's, this thing is probably more fragile than you think, right? These factors that seem like they're steamrolling creativity and possibility, it might be as simple as just a few regulatory changes over time, completely rewriting the incentive structure enforcing a better, healthier, fairer allocation of resources and opportunity. And you can get caught in a doom loop of this can't be fixed until, everything is fixed.

But sometimes it's like, no, literally, if you changed a few line items in, like, the laws governing these industries or governing how, like, finance works. Yeah. You could create a sea change. Yeah. And this is why I was, you know, trying to shake people awake when, you know, the Microsoft was purchasing Activision. Because this is sort of what Lena Kahn was trying to do with the FTC, was trying to say,

hey, an intervention structurally in this market could make better stuff for everybody. And, you know, the public didn't understand that. And, you know, they weren't able to make the cases as well as maybe they could have. But they were just getting started, right? And at some point, like, we need the public that likes the media's consciousness to be raised as to what the structural problems are for us to be able to make a fix to the, them, as happened in, you know, the entertainment industry and the, in the middle part of the last century, it needs to happen again in both the industries that we've been discussing today.

Look, well, you and I could talk to each other for a thousand years. Yeah. So I think we'll leave it here. People, if they want to hear more of your analysis, which I'm sure they do after this conversation, that should check you out at Remap Radio. Just tell them where to find it. Yeah. So we have podcasts that go out, just look up Remap Radio on any, on any, on any, you know.

podcatcher of your choice. And then our website is remapradiot dot com and that is member supported. So if you like what we do there, just go over to the sign up page and check us out. We do lots of stuff that is sometimes as substantive as this and sometimes

is me talking about how I accidentally completely maybe demolish the paint on one of my cars trying out a power washer. You know what's really funny is and I'll just leave it here. The success that you guys have had at Remap Radio is I think a bright spot for me, especially because I just remembered that when, you know,

I was a big fan of your previous podcast, Waypoint Advice. And I remember learning about that you guys had all been laid off and the vertical was shut down as I was sitting in the negotiating room at the AMPTP headquarters during the strike in 2023. And those, that's just a little bit of a rhyme that I hadn't thought about until now. and the fact that you guys are working successfully as small operators, right, is maybe the beginning of a little bit of rebirth. I'm trying to do the same thing here on this channel with, you know,

the entertainment industry and with comedy. And, you know, God willing, 10 years from now, we'll be able to say this is the beginning of a rebirth of the industries that we love. Fingers crossed. Thanks so much for being here, Rob. Thanks for having me. Well, thank you once again to, Rob for coming on the show. Again, Remap

Radio is where you can find him and all of his work every single week. I hope you'll go support him and I hope you'll support this show at patreon.com slash ad and conover. Once again, five bucks a month gets you every episode of this show and all my monologues ad-free. For 15 bucks a month, I will say your name in the credits. This week we got some new

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Tony Wilson, Maddie Schmidt, my engineer Sam Rogic, everybody here at HeadGun for making the show possible. Thank you so much for listening, and we'll see you next time on Factually. That was a HeadGum podcast. That was a hate gum podcast. Hi, I'm Nicole Byer.

Hi, I'm Sashir Zameda. And this is the podcast, Best Friends. Headgum. So this is just a podcast where we just talk. Yeah. We're best friends. Yeah. We talk.

And then we have a segment where we answer questions and queries. So audience members can ask questions about friendships and we can answer them to the best of our abilities. Yes. We are professional friends. Subscribe to Best Friends on Spotify, Apple Podcast, PocketCast, or wherever you get your podcast. And watch videos on YouTube. New episodes drop every Wednesday. That's the middle of a work week.

I was deeply unhelpful to you during that whole thing. You are. I'm really sorry. I felt the support. I was so, okay. I was trying to be supportive. Yeah. But I was like, I don't know, reading seems pretty hard right now.

It's a lot. I think you did good. Thank you so much. You're welcome.