Kinda Funny Gamescast: Video Game Podcast - Is the Video Game Industry Doomed? w/ Mat Piscatella - Kinda Funny Gamescast

Episode Date: February 20, 2025

Go to http://joinbilt.com/kindafunny to start earning points on your rent payments today. Go to http://factormeals.com/factorpodcast and use code FACTORPODCAST to get 50% off your first box plus free shipping. Go to http://get.stash.com/KINDAFUNNY to see how you can receive $25 towards your first stock purchase and to view important disclosures. Thank you for the support! Run of Show - - Start & Mat Piscatella is Here! - Housekeeping - Is The Video Game Industry DOOMED?! - How the Pandemic Played a Part - Will the Job Cuts Slow Down Soon? - What About the Indie Space? - Sales Expectations - Are Black Hole Games Harmful? - Ads - Will GTA 6 & Switch 2 Save the Industry? - Income, Inflation, Etc. - The Switch 2 of It All - Is Game Pass Good for the Industry? - SuperChats - What Are We Usually Most Wrong About? - RAPID FIRE Learn more about your ad choices. Visit megaphone.fm/adchoices

What's up everybody? Welcome to a very special kind of funny games cast for Thursday, February 20th, 2025. I'm one of your host, Greg Miller, alongside executive director and video game industry analyst at Circana. Matt Piscuitella. Hello, Matt. Hello, Greg Miller. Hello, chat. Hello, fellow video game enthusiasts. Really great to be here. I can't believe we're finally getting you on the show, Matt. as much as we have bantered back and forth online, whether it be in the old days on Twitter and the new days on blue sky, wherever it may be, whether it be you big timing me at Lawson's Carvery. You know what I mean? It's E3.

You're right in front of me in line. You won't even stop your conversation to say hi. I forgive. I forget. Don't worry. It was, it's one of my darkest hours and something I regret all of the time. I feel terrible about it. Matt, thank you so much for taking time out of your very busy day to come talk to us today and answer the question.

the gaming industry doomed. Before we even get into that, not everyone is as dialed into social media as many of us are. Not everybody pays attention to the names we read every day on Kind of Funny Games Daily. Who are you and what do you do? Very envious of those people. You're making the right decisions. Well, my name's Matt. As Greg mentioned, I'm the executive director of video games at Circona, which is formerly the NPD

group. We had a little bit of a merger a few years ago. Before that, I spent a bunch of years at Activision and then Activision Blizzard, where I did everything from trade marketing analysis to business intelligence and greenlight forecasting. And then went over to Warner Brothers Games for a bunch of years. I was the vice president of sales planning and analysis over at WB game. So everything with a number. Basically, if you've ever said, hey, they dropped the price of a game or hey, they price that game at this or hey they're not putting enough copies in a store i was they you were the problem yeah i did all the bad things i guess so i think you know the question i have before we jump into all this stuff but talking about you now being this video game industry

analyst at circana what does that look like on a daily basis for you i know you of course from the fun social media graphs and information you put out about you know oh year over year month over month, this is what's happening. But what does that look like on a daily for you? So my job is to dig deep into the data, whether that's what people are playing, where they're playing, what they're playing, who they're playing with, why they're playing, and uncover the stories that'll help folks in the industry, whether it's publishers or retailers or developers, help them understand where the player is and what might be coming next. So my job is to find the story in the numbers and be able to tell that to folks

so they can make better planning decisions. And when you say the numbers, does that mean you're going through what, SteamDB every day? You're waiting for whatever trinkets that PlayStation Xbox will give you about monthly active users? Well, we have a number of ways. We collect all the physical sales from retailers.

We collect all the digital sales from participating publishers directly from the first party. so we have all of the actual data there. We also do extensive primary research across a number of different panels and studies and surveys. We're all over the place when it comes not just to what's selling, but also what people are playing and where and why. So the stuff we talk about publicly is a very small portion of what we're doing. It's like the tip of the iceberg in terms of what we're looking at

and what we're trying to understand and listening to the consumer. and trying to better satisfy what they want and need. Excellent. And that's why we're going to have quite the conversation about if the video game industry is doomed right after I remind everybody that this is the Kind of Funny Games cast each and every week to end a variety of platforms. We run you to the biggest topics in video games. Whether it be reviews, previews, or conversations we need to have. You can watch them live on YouTube.com slash Kind of Funny Games, Twitch.com slash Kind of Funny Games and podcast services around the globe each and every weekday. If you are watching live, why not be part of the show?

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For now, let's begin the show with Topic of the show. Tots, tuts, tuts, tuts. Matt, I, I did a great job teeing you. I showed you, you know, the numbers, you're listening to consumers, you're paying attention to the graphs and stuff. The question here is,

is the video game industry doomed? Because a lot of these numbers don't look great when I hear them. When I ask you, is the video game industry doomed? How do you come at that answer? Well, first we make sure the mic still work and I kind of crapped out there.

You sound great. You sound great. Awesome. All right, what kind of timeline we're talking about here? Are we talking short term, a couple years or like in a million, a hundred million or so. I love this podcast already. I love this podcast already.

Give me the short term and the long term. Are we doomed what's happening? All right. So no. In fact, consumer behavior is very strong. Like the demand from folks for video game content, whether to play or spend, is still as high as it's ever been. What the challenge is and where the change is happening is where they're, playing, why they're playing, and where they're spending. And we're in a period of really

big, meaningful change. But the good news is, this is pretty easily explainable about how we got to where we are. The big challenge is what's happening right now and the uncertainty it brings, and then what happens next? Sure. So no, but things are certainly changing in pretty fundamental ways. I love that response. For you, what is the biggest fundamental shift you're seeing right now in forecasting for in the next five years? Well, there's two things. The first thing is where we are in terms of the total industry. Now, for decades, right, video games have been a growth category. big growth as more players entered the space, as more ways of play developed. Organically, the industry grew.

In 20 and 21, that changed. Everyone who wanted to play as much as they wanted to play and spend as much as they wanted to, were able to. So instead of having organic player growth in a lot of markets, we hit a ceiling. Now, there are still pockets of air. There are still territories where, you know, growth is still happening in a big way, India, China, Brazil. Sure.

But for those territories that have had a video game market for a long time, we've hit ceilings. And so we've gone from a growth industry to a mature industry. And what that means is it kind of changes how people look at investing. The other thing that's happened, of course, is the live service game revolution. I have some stats for you. We could get into in a bit. But the amount of players and the amount of time that are going to the biggest live service games, in an era where we have more games being made than ever before.

And when we have a ceiling on player count is making a really big, tight bunch of competition there that's been absolutely brutal. And we can get into that. But those two things are what are really combining to kind of put us where we are in terms of the market. I love all that. So the one I want to double back to you, you talk about in 20 and 21, that change, that we went from a growth market to a mature market.

When you say that, is that just, was that COVID related? Because that was our big thing. It felt like in 2020, right? Everybody's at home and suddenly people are like, well, I'm just going to buy a PlayStation. I'm going to buy an Xbox. I'm going to do whatever. Is that what that really was? Absolutely.

The stay-at-home activities, people change their entire social lives to revolve around gaming. And we saw significant growth in. both player count and hours across all demographic groups, across every psychographic profile. And hopefully, honestly, we never have to see that again because you don't want a society that's forced to stay home and play video games, right? We want to do that. We're not going to work one day or playing hooky from school. Playing hooky, wow. But yeah, so that's what that was all about. And, you know, when you have that happen, And all of a sudden, you go, okay, well, this is the player base.

This is as big as it's going to get. How do we grow? And the only way you can really do that is to have each player that's still playing pay a little bit more, which is another reason why we're seeing some of the things we're seeing from publishers and developers. So then fascinating. My question really then becomes, is we're talking about the future. We're talking about this. You have this mature market.

Everybody in 2021 who would get it. is, are we, you listen to the show. You hear me talk all the time. And I'm like, I don't know what I'm talking about, but I think I got a okay grasp on this. Am I right when I'm saying the layoffs and closures and all of this happening is because we're still seeing publishers, venture capitalists, investors who bet on the growth they saw in 2021,

in 20 and 2021, not stopping. Did they do this thinking, they do this not knowing we're at the ceiling? Some absolutely thought that that growth was going to continue. Others were a lot smarter about it. But yeah, some of what we're seeing now is from overinvestment driven by this idea that, you know, the line was going to keep going up when it came to players in hours and it just didn't. All kinds of reasons for that. People had to go back to work, had to go back to school, really had to go back to work

because the prices of things around everyday spending categories from housing to grocery have continued to accelerate. And, you know, people are really getting squeezed. So they're making decisions about what to do with their time and their money. That's having an impact in what we're seeing in the video game space, surely. So that's a big part of it. You know, when you're a growth category forever and you change to a mature category, all of a sudden the economics around investment decisions change.

significantly. You're playing a share game rather than a growth game, meaning that for a long time, the market would grow organically so you could grow as well. All, you know, the tide lifts all boats. But in this kind of market, if you're going to get an hour of playtime, you have to take it from some other game or some other platform, right? And so the entire dynamic of the strategic decisions and tactical decisions change based on what happened there. So then my question now becomes, are we to a point when we look at developers, when we look at people making games, where the bloodletting will stop soon? Like, are we to a point where people who want to publish games understand now that there

isn't this infinite growth, they understand they could hopefully make this much profit and that they're investing in things that are going on? I'm drawn to the one, the only Jason Schreier, of course. I subscribe to his Bloomberg newsletter called Game On, coming out of Dice last week where I hosted a award show. I crushed it. Everybody loved my performance. He has a whole thing in here talking about how, well, you know,

it used to be this, it used to be that, and now there's not a great vibe, right? But despite the packed bars and coffee shops, the vibes were not fantastic at Dice. Last year, the most common phrase in town was, quote, survive until 25, end quote. This year, those who have made, are looking at a new pithy mantra,

perhaps persist until 26. It talks about, of course, tens of thousands of people have been laid off. Venture capitalists who were once offering huge seed rounds at hefty valuations as they look for the next roblox have scaled back in a big way. Global turmoil and softened appetites have scared off investors from Chinese companies.

Few believe that this wave of layoffs is over. Taking that context and that color and applying it to the numbers, are you seeing publishers, venture capitalists wake up to the fact of where we are now? Oh yeah, the risk calculation is happening maybe to an extreme on the, you know, on the downside, meaning that, you know, as as overenthusiastic as some folks may have been in like 20 and 21, we're now seeing the opposite where we have maybe a little bit more pessimism than is really

warranted. Oh, okay. But, you know, that's kind of natural. it's never as good as you think it is when it's good and it's never as bad as you think it is when it's bad. And I think that's kind of where we are. The survived the 25 thing. Yeah, I use that phrase too.

You know, I think I might have used it here at the beginning of it. But that idea was all around switch to Grand Theft Auto 6, reinvigorating folks to come back into gaming that may have stepped back from it over the last few years and getting investors excited again about the category. So maybe we should have said survive to the middle of 25 or whenever they delay GTA 6-2, whenever that actually pops out. I can't even think of that. I would get another ulcer and I've got too many. Okay. So then I like to hear it's not as bad. When it's bad, it's not even as bad as you think it is.

That's helpful. In the short term, what are we looking at? Again, I kind of asked it, but then I monologue for a while there. Like, is the bloodletting going to let up soon? Are we going to get out of this? How many more cuts can there be? Oh, I hope so. The challenge we have, right?

So let's talk about service games for a second. Please. If you take the top 10 service games every month, you're talking Grand Theft Auto Online, Roblox, GTA, or Call of Duty, Marvel rivals right now. Sure. You take the 10 biggest live service. games on PlayStation and Xbox.

Seven out of every 10 people that turn on their console will play at least one of those games every month. And in terms of total time they're taking, those 10 games alone every month take up 40% of total playtime on the consoles. So, you know, you look back 10 years before the big revolution of live service games, you know, people would get the big game. They move to the next big game, move to the next big game. You have that full pool of players and hours to pull from.

Now, because of these life service behemoths, half of the gaming time on consoles is just gone. It's going to be eaten by those games, right? So you're fighting more and more for those hours and players that are remaining. You know, the other part of that is the audience is really changing their purchasing behavior than they had even 10 years ago. Now, your audience, right, the people here in the chat, you're on the very extreme enthusiast side, right?

Let me tell you. If you're watching a live video game talk show, yeah, you're not the majority. Just real quick on purchase frequency, like how many, like how many games someone buys in a period, right? Yeah. 30% of people that play video games will not buy a video game this year. Wow. that's a third of the audience that just won't buy.

A further 18% purchase a new game every six months or less frequently. So these are your folks that are buying Madden or EAFC or they're picking up Call of Duty, right? You're your big mass market only kind of buyer. The kind of purchaser that's watching this show, you're probably buying at least one game a month, maybe more. only 12% of video game players buy a game once a month, only 4% buy games more often than once per month.

So when we're talking about the developers and the publishers that are really being hurt the most that we're talking the most about, are the games that are really targeting this like 16% of total players that are purchasing very frequently while the mass majority of players are buying a game or two or year, and they're playing Fortnite Minecraft and Roblox. And I think that's like the biggest challenge. The biggest competitor to any new video game is Fortnite.

I will die on that hill no matter what it is because you have to fight Fortnite before you fight anything else to get your game seen and purchase. And that's like the biggest challenge I think happening right now. The question I always have when we talk about this and we're talking about the numbers and blah blah. And obviously when we jump to people trying to compete with Fortnite, trying to put out the next great live service, right,

rest and peace, Concord, move on all these different games. And I know Concord was live service, but stick with me. It's the conversation I have in the question that raises here is, is everything you just said good news for Indies? We talk about indie development, right? You talk about 18% that are the hardcore buying multiple games in a month. I always talk about on these shows, right,

that the level of success kind of funny needs is so much smaller than the level of success IGN needs on their videos, right? And so I look at game development that same way when you see inevitably Square Analytics publish a game and they'd be like, it didn't meet expectations versus some indie mouthwashing

sold half a million copies and they're over the moon and they're coming to console now. It's going to be great. Like when we talk about this and how hard it is to make that big game and get that share of time, is that good news for indies because they're making something smaller with a

a level of success a level of getting into the black that's better so there's opportunities and there's risks right the ability to be flexible the ability to have a smaller budget the ability to like do whatever you can do in a much faster fashion than a big publisher can is absolute advantage the challenge is discoverability is getting more difficult rather than less difficult. The democratization of publishing means that we're seeing just this rapid increase, the number of games available, whether they're actual good, well-developed games or games that are just churned out.

You know what I mean? Yeah, of course. The shovelware out there. Of course. The competition for discoverability is really difficult. So there's pluses and minuses there. But personally, you know, when a, when a game does hit from the indie space, it hits in a pretty big way now that it might not have before. But boy, is it really hard to get seen, right?

Sure. That's the challenge. In this conversation of talking about bringing up Scoranics talking about indies, I liked this blue sky post from you February 9th. Look, sometimes sales expectations for a game are based on reasonable benchmarks and forecasting. But often, they are the result of a formula that includes things. like costs and profit expectations. Folks at pubs know when a target is aggressive, but you don't plan a sales target that loses money.

It's reasonable to make an argument pointing out where breakdowns happen that caused a game to disappoint. But it isn't because folks at pubs aren't hyper aware of what reasonable sales expectations are. Can we go into depth on this? Because this is one of those forecasting things that obviously we don't know ahead of time, and then it is, guess what?

Dragon Age Leveilgard came out after going, from being a multiplayer thing to being a single player thing to getting all this different hate and then it did and then they're like yes what it didn't it didn't move nearly enough copies for us to think it's a success

and we're all like well that's a good number of copies but you only gave it two months but but but but but like can you drill into this a bit with me and talk about what sales expectations really mean in this industry sure like this is this is what I did for a decade at both Activision

and Warner and everything from Mortal Kombat to Arkham to Lego to Call of Duty and Guitar Hero. Sure. The process works. So there's a process called Greenlight. And it's basically a gate where a game is either greenlit for further development or red lit, meaning development, is canceled.

There are numerous gates that go all the way from concept phase all the way to launch. You know, there could be six, seven, eight gates depending on the length of development. At each of those points, a forecast is created, a P&L is created a profit and law statement, which takes into account both potential revenues and potential costs and ultimately to a profit estimation. In order for a game to get through those green lights, everyone involved in the planning from the most senior leadership all the way down has to agree that we believe there is a chance that this P&L is possible, that this profit is possible, right?

And so as inputs change, whether, hey, we need another year of development, that's going to cost X million dollars. Can we absorb that? Do we think we can achieve a higher metacredit? Can we get to a bigger audience? Is this going to be likely able to allow us to increase our revenue expectations? If so, then those levers all change. It's all part of a big equation. And at the beginning, you may have a, hey, here's the game, here's our expectations,

when it'll launch, what platforms it'll launch on, the genre, everything that could make up a game's basically quantifiable components. And you come to a sales target. Say, we think this game can sell 3.2 million units, right? But over time, as all of those inputs change, as all of the intricacies happen over the course of development, that number can change. quite a bit so long as everyone holds hands and says, okay, we're going to believe that we can do this. We're going to believe we can hit this target.

Even when everyone knows that, hey, you know, this is a pretty stretch case. Like this is a very optimistic scenario, but we think it's possible. The fact, let me turn it around, right, like Vailgaard in particular. Vailgard had a very troubled development. It took a long time, a lot of years, courses changed. The fact the game continued to get greenlit was a show of confidence that they believed that this game was going to be able to overcome the challenges it had in development, right? The fact the game made it out is actually a very positive thing because I've been a part of a lot of games where we just said, you know what, this isn't going to work, cut it. And that decision is extremely difficult.

If a game is canceled in development, it is for darn good reasons because there is no belief that the expectations would be able to get met. It's a very drawn out. It's a long. It's a process that involves so many people, so many inputs, so many opinions. And at the end of the day, you know, you come up with a number. That number might not be exactly what you think that game is likely to sell. But you think there's enough likelihood that it could. that you believe that it's still worth putting the game out.

And whenever that happens, it's a great thing because it shows that people are believing in each other that this thing could actually work. And sometimes it does and sometimes it doesn't, but it's not because everyone didn't understand, you know, what was happening along the way. That's fascinating.

And one of the questions I want to present and then give a hypothetical one is, right, when we see games get canceled, especially when they're further on. I always talk about the point of no return. And again, this is just me talking, not knowing anything. But, all right, the game's been in development so long, I always think of the idea of, well, some money from the project is better than no money from the project.

Is that a foolish, or am I summing it up? Am I being too simplistic with that answer? Because obviously, there's plenty of games that don't make it out through the gate. And I think, you know, yesterday, two days ago, when we talked about fair games and the rumor that it's been delayed further out or whatever. Me and I've been saying for a while on Blessings now on my team of like, fair games I don't think it's ever going to come out.

So I do expect one day to get the announcement that they've canceled fair games. But then the conversation yesterday, two days ago, when Blessing brought up my thing and tried to take it as his own opinion, which I see Blessing, don't try to take my opinions. But the conversation was, well, then why would you cancel it here, right? If you think you're going to, if we think it's going to be canceled later on, why would you delay it here? I guess, you know, still green gate it, have the game go forward, but not kill it here.

And I know I'm asking you to talk about a hypothetical that's a pull from the real news, but you can take Haven Studios out of it and fair games out of it and compare another game that made it, got delayed, but still got canceled. Like, why not kill it in the crib right now? Right. So it's, you're doing that at every point along the way, whether it's concept, alpha, beta, you know, all the way down to, to gold. You're doing a probability calculation.

And what I mean by that is you have certain levels of return you expect. So you're bringing out a new game and you say, you know what? This game could make a billion dollars, but we're only probably 5% likely to get a billion dollars. This game could lose $100 million, but we're only 10% likely to do that. You have a number of scenarios, you have a number of probabilities. you do that math. If it's negative, you cancel the game, right?

It's a very simplistic way of putting it. But you're always doing that evaluation. And no, there's not like a spreadsheet without actually happening. I'm speaking figuratively. Of course, of course. That's the idea around scenario planning. And you go, okay, we feel good,

we don't feel good, red light, green light. And so if you think there's still a chance that you can make it work, you continue to green light it because you have so many jobs on the line. Of course. you have total physical plans on the line, your annual operating plans on the line.

Killing a game is exceptionally painful for all kinds of reasons, including not just the game itself, but the jobs that are tied to it, the people, that you want to be exceptionally clear that what you're doing is being done from, you know,

a point of really detailed analysis. So long-witted answer, yeah. You're killing it. You're killing it. Matt. And thank you for bringing stats and figures. Everybody's having a great time in chat. But I want to pull one from chat. Francisco in the YouTube chat says, people are being cruel to fair games. We haven't even seen gameplay of the game yet. Yes, I know it's a live service, but to judge before seeing it, WTF. I want to answer but kick it to you of

you of like, I want to be very clear that I'm not saying fair games is a bad game. I'm saying fair games is entering an incredibly crowded market. And you're talking about these juggernauts of live service that I just don't see. Not even Haven. Jay. PlayStation. I just don't, like, what I'm thinking of the probabilities. How many games have we seen try to scale this mountain

and then be littered with the corpses of other games that didn't make it? Am I being cruel? No, that's the exact calculation you have to make. But the people that know best about the game or the people making the game and hopefully secondarily the publisher. Yeah.

And you're making those evaluations with that framework, but you're doing. doing it with, okay, how likely are we to succeed? How likely are we to not succeed? And, you know, if they still have enough confidence to keep going, it's like, okay, we're going to give it another year, whatever game it is. Yeah.

You know, let's keep going. Let's see what happens by the next gate. And then that's great. That means that people believe in it. And that's what you want to see. But if they don't and they kill it, you know, that's not done lightly. and when you hear about that and people go, well, how could they kill that game?

That game would be such a great seller. And it's like, well, you know, they killed it because it wasn't going to be or wasn't likely to be. And that's like, that's the conversations that are happening. CJ splits on super chats just like you can to be part of the show over on YouTube.com slash kind of funny games and says, are Fortnite and similar black hole games actually harmful?

Okay. The pause, the thought, and the okay. Okay, two ways of looking at it. One way of looking at it are games like Fortnite or Minecraft or Roblox games that last forever allow people of all kinds of people to play them. You don't need to have a lot of money. You can play with your friends. You can build a community.

From that perspective, the games are great. They allow people to have a great time and, not ask a lot of them if they don't want to. But for everyone making new games, they're a huge challenge to overcome now because they have such gravity. People have invested so much time, so many dollars,

their friends are there. All of the hooks in those games are exceptionally difficult to overcome. You have to have a very special game to break out, right? And people aren't jumping from new game to new game to new game like they were in the past. It really takes a special new game to get people to jump in, like the mass market. Not everyone in the chat here, you guys are generally playing a lot of stuff. But for the mass market consumer, you know, am I going to go spend 70 bucks, 60 bucks on this new game?

Or am I just going to hang out with my buddies in Fortnite? A lot of the times they're picking Fortnite. Of course. Yeah, this is, you know, it's a classic story for us. the success of Hell Divers too. You know, I had been such a fan of the original, did not see this coming, did not expect this, we're here, we're playing it every day.

And of course, you know, my 10-year-old nephew, Jack, Poe's son, came and visited, and we finally got him to play with us after him wanting to stream Fortnite with us for so long. He started playing Hell Divers, played multiple days with it. And then on that last day, he was like,

this game's so cool. And we're like, yeah, are you going to get your friends to play it? And he's like, oh, no, they'll never play this. We're like, what do you mean? And he's like, no, they're never going to play Hell Divers. that's what you're talking about, right? It's the investment is getting all of your friends on board.

It's the reason we see things like split fiction, what every, Hayes Light, right, where you, one person can buy it and at least share it so you can play it that way. Like, there's so many moving parts to this to get someone anywhere else. Like, I was joke about, like, how hard it is to get anyone in the world to click a link. You know, I put out the blue sky. I put out the post and I'm like, Matt's on the show. And everybody's like, oh, that's really cool. But such a small percentage of them are going to click the free link to watch the free

show versus talking about how you're going to get something to go buy these games to go play with you. Yeah, it's, I mean, you can, I think everyone's got stories like that personal stories and can relate to this kind of idea. But that's like that's what folks, that's what folks making games are up against now. And that's not the case or where it was 10 years ago. On the plus side, these life service games are keeping people in gaming and engaged on, on the negative side. it's really making it difficult to break through with something new. Is it fair?

Because when I talk about these and I think about this and I'm thinking about Jack and all his friends at school playing Fortnite and that's just where they go and they hang out after school and blah blah. Is it fair that like a lot of, if not the majority of Fortnite live, the big live service game players wouldn't play anything else?

Like you know what I mean? The people who are addicted to war zone and play war zone every night, like I remember when Call of Duty was a box game and it was cool. There are gamers who are only buying their Xbox to play Call of Duty multiplayer. They weren't the ones who were like, I'm also going to try this JRPJ.

I'm also going to try this. I would hope the benefit and you can tell me if you're seeing any results to this are you bring in a generation like Jack, you bring in older gamers who play the game for free and maybe they do like that so much that then they are encouraged to look at the store. Is that just wishful thinking?

No, and I think it's one of the things why, like when I look at Grand Tft Auto 6, it's not just a benefit for Rockstar and Take 2. Sure. Because that's the kind of game that gets people into consoles, right? That's the kind of game that makes people buy a new box. And hopefully then you get them buying accessories or they're subscribing to something or they're picking up some other new games.

That's like that's how that works, that blockbuster bringing in audience. And hopefully they do try some other things. And I think that's that's perfectly reasonable and why so many people are looking at grant theft auto 6, not just for what it can do for Rockstar and Take 2, but what it can do for the entire industry. Whether it will or not, I mean, who can say at this point?

You say that. I have that question. I want to ask that question, but first I want to remind people about the kind of funny membership. Of course, you can pick up the kind of funny membership if you love what we do here, an 11 person small business making live talk shows about video games all day long. Pick up a membership over on patreon.com slash kind of funny YouTube.

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And we're back with the one, the only executive director in video game industry analyst at Circana, Matt Piscuitella. Again, thank you so much for this, Matt. This is such an honor to have you here and you're such a good guest. I want you to know. Oh, that's very kind. Right on. It is time to talk about the elephant in the room for 2025, maybe 2026. Grand Theft Auto, six. talk to me about, I mean, people understand the game's going to be big, but why is this such a big deal for your job? So Grand Theft AutoSix should be the biggest entertainment launch in U.S. history across anything. That's where the expectations set.

It's one of the things that really breaks through, not just into the video game audience, but across, you know, all media. Sure. You know, when we talk to consumer, we talk to them all the time, we had a recent study we did in the fourth quarter asking people what are your expectations for how much you're going to spend next year what you're looking to buy

nearly a third of the people we talk to side of that there's a new game this year I want to get and you know grant theft auto 6 is the one that's doing that a little bit higher percentage about 45% so that there was new hardware this year they wanted to buy so you know switch to you. It's switched to in GTA6. And, you know, these are going to be the two things that really move the market this year. But Grant Debt Auto 6 is the one that everyone's looking at as being

like, okay, this is this is the real deal. This is the game that could, you know, kind of change the momentum we've had over the last couple of years. So are you hopeful? We just talked a little bit about it with the Fortnite analogy. Do you think that we'll see that boom, that it's going to be GTA 6 drops and people are like, oh, well, I'd never bought the PIA. During COVID, I bought a PlayStation 4. I bought an Xbox Series S.

Now I'm going to buy an X. I'm going to buy a PlayStation 5. Is that the kind of hope we're talking about here? I think it's an expectation. Okay. We saw similar behavior with EA Sports College Football 25. Hell yeah, you did. the best-selling sports video game of all time in dollar sales at this point.

It tripled the launch or the triple the lifetime sales of NCAA Football 07 in its launch month. You know, so this was a massive hit and actually sold boxes. This is expected to do the same, if not a lot more. Now, you know, this market's different than it's been in past years. I don't think you could take a GTA-5 impact on. sales of last gen consoles in 2013 and apply it to what's going to happen in 2025. I'm not going to say 26 because I refuse to believe it. But you could take some references there and that's that's the belief.

And when you look at the purchase intent, you look at the just how many people are watching trailers and how many people are talking about this game all the time, then it's one of the games that makes you believe. I want to know how much you believe. We have a question here that is something gets kicked around a lot. Gary the third super chat and says, how much does price point have to do with where we're at? Is $100 GTA6 even an option?

That quote. Look, you don't need to price a game at $100 as a base price. What's happened over the last few years are gold editions, silver editions, deluxe editions, the bloodline edition. Let's go, WWE. Yeah. All of those are driving the launch sales price well,

above $60 or $70 already. And you're not forcing consumers into doing that. And they've received absolutely no pushback on it. So I don't know. Could they do it? It could. Sure. They could do anything they wanted.

Do they need to? I don't think so. But here's, all right, being a little technical, I hope you don't mind. Please. What we have in this market now is we have a market where,

especially on the console side, it's becoming a little bit older and a little bit more affluent than it had been even at the beginning of the pandemic. What we're seeing is that, you know, people who are a little less affluent, a little younger, they're choosing things like PC and mobile more than they had in the past. These are easy access devices and they're playing games on them that are a little bit more accessible from a cost standpoint.

It's the older, more affluent folks that still have the funds and money available to really invest in these, especially in the big console games, especially at launch. So what we're seeing is a very strong day one performance for big games at super premium price points, including things like collectors and deluxe and silver editions and all that. And then we're seeing extended strength at lower price points. But, you know, in the time we're going from the very high. price point to the lower price point is compressing versus what it had been in the past. Like we're seeing deals more quickly. We're seeing price drops more quickly for a lot of titles, but that's not really hurting the overall spend.

So long-witted way of saying that people who are day one buyers are more willing to spend a higher price, people who are not day-one buyers just have to wait a little while. And I think that's kind of what we're going to see. But there's going to be more options for pricing, more ways to enter. and I think, you know, we're seeing that already, whether that's, you know, a game starting premium and going to subscription service or, you know, discounting or price drops.

Like you're seeing more flexibility in the pricing approach. And that's really, I think, what we're going to continue to see going forward, except for Nintendo because they kind of do their own thing. Of course. I want to venture in a little deeper on what you're talking about here with household incomes in video game consoles. You had a thread that I really appreciate it on Valentine's Day.

It wasn't romantic. I went this way. High income households are becoming a bigger part of the U.S. console hardware market. 49% of U.S. video game console buyers during Q4, 2024, had a household income at at least $100,000 a year. This is a record high, being the 48% seen in Q4, 2021. This group accounted for only 29% of video game hardware purchases in Q1, 2020. You go on.

45 plus-year-old buyers are, accounted for 45% of the U.S. console purchasers during Q4, 2024, also a record high. Under 44-year-old buyers made up 55% of the console purchasers in the quarter, a record low. During Q1 2020, under 44s made up 69% of purchasers, with 31% being 45 plus. Console buyers, y'all are getting old, but at least you seem to be making more. So you have that going for you, which is nice. And then I like this end point. If any enthusiast board reads

If any enthusiast board reads this And gets mad for some reason Please know that you are You are indeed going to live forever And nothing in gaming is ever going to change From what you want it to be Parentheses Which is whatever gaming was when you were 12

You're welcome Well said Sorry about that No no no that's great That's what I'm talking about This is why I love following you on Blue Sky You have so many great stats And so many little jokes like that about that

I This is great people are making more money And they're choosing the right thing console I love that I'm old I of course choose console. I just want it to work. I love it. I love that for that reason. And I love my Steam deck and that's a conversation for a different time.

My question, when you look at the stats and you're seeing, you know, 49% of U.S. video game console buyers during Q424, at least $100,000 or more, when you're talking about GTA and you're talking about Switch 2 and you're talking about the year in general, how are you also accounting

for what I would call hard times? Eggs cost a lot. Gas is still really expensive. we're about to tariff the shit out of everything. Like, we're not in a great place with the U.S. economy, and it seems like it's going to get remarkably worse. How do you then bring that into forecasting video games?

Uh, it's, it's become much more difficult to say the least. The, um, the known unknowns are, are piling up. And, you know, whether you're a fan of this, of the administration or not, you have to admit that they love chaos. Sure. And from day to day, you never quite know what you're going to get. So, you know, that's part of the baked in uncertainty that we're seeing. Now, you're absolutely right.

Things are not great all over. We have basically a split happening where, you know, the more affluent, the more wealthy you are, you know, we're seeing no slowdown on all on their spending. They're buying everything and they're buying a lot. People on the, you know, who are not quite as affluent, they're being forced to make extremely difficult choices. And those choices are getting more difficult all the time.

What we've seen in the U.S. over the last two years is a distinct shift in terms of the number or the percentage of a wallet, meaning, you know, what portion of a person's income is going to different spending areas? We're seeing a distinct shift towards food and everyday spending essentials like housing and away from what we call general merchandise categories, which are those areas of discretionary spending, things like clothing, video games, you know, all of those beauty products, all of those things where, you know, you have to make a decision. It's not something you have to buy. You can kind of choose or not to.

And people are putting off purchases of things like apparel because they're being forced to spend more on things like food. You know, depending on what happens here, we could see that really kick in even more, which would apply a significant amount of pressure on our categories and could, you know, really push a lot more people to those free to play easy entry options because it just couldn't afford to do anything else. And I don't know what we're, I really don't know what's going to happen next. If anyone does, good for you. But, you know, it's a little, you know, it's a little scary is probably a fair way to put

it. Especially when you look at things like food prices and just the, just, you know, where the dollars are going. Because people are, you know, just need to spend there. They need to eat. Of course. Yeah, I think, you know, discretionary spending has always been a concern. I remember when COVID did pop off and I remember, you know, running a business that is so crowdfunded.

You know what I mean? Obviously, we do ads, we do sponsorships, we do a million appearances and blah, blah, blah, but it's like Patreon, getting the membership now on YouTube and Apple and Spotify is such a core pillar of us that for me, I was like, oh man, like people are going to lose their jobs. This is what's going to happen. I thought discretionary spending on video games. I thought people would tighten the purse strings, right? When it was actually the opposite.

People were at home, video games boomed, our audience boomed as well, because suddenly you didn't have that free time. And then we've seen it since then. We've already talked about it on the video game front. You know, okay, then it comes down. We've hit the ceiling. Same thing with us. And so you get into this thing now of like not knowing what the next day is going to bring

and what, you know, six months from now everybody's bank account looks like is egg still cost a gazillion dollars. Like you wonder what is going to get cut? And there was a question that went through the chat from Terrence and said, Matt, do you think video games are recession proof? Because this is something people boasted a lot, right? When it was all going south a couple years ago. Yeah, I mean, Bobby Kodig said that back in 2008 and Guitar Hero was flying high.

And he said it in a Forbes article. And it was wrong then and it's wrong now. Absolutely not. Absolutely not. And it turned out that Guitar Hero wasn't either. Yeah. Just happened to hit at the very right time. Now, is the category as susceptible to changes driven by this type of thing as other categories?

You could argue not certain areas of spending are certainly going to be hit worse than something like video games, especially for that 16% of the audience that really loves video games. Like people are going to choose video games when they want to escape, when they want to feel something other than what they're feeling. And so that's always going to be there. But no, not recession proof. We are as a category or as susceptible to changes in the macro environment as any, especially when we're in a market like we are now where prices are going to start shifting around dramatically, perhaps even significantly.

And that's going to add shocks to the market and people are going to have to react in the ways they're going to react. We're in, I think, uncharted territory in a lot of ways. And, you know, we're going to have to see. what happens because I don't even know if anyone really fully knows what is going to come down the pipe. So, you know, we just have to wait and see. And this is what makes this next question impossible to answer. So I'm just looking for your prognostication on this one, right? But like, with the constant threat of tariffs and this and the other and da-da-da-da-da, do you think

Nintendo is sweating that with Switch 2? Is that something they eat the, would they be willing to eat the cost on and not raise from what the price point they want to? Are they just going to do it? Like, what do you think about all that? It's tough to say, I don't have any inside knowledge of that. Obviously, they're doing a lot of work around it, as is everyone. I talk to publishers and retailers all the time. This has come up. The price point questions come up a lot.

Where do we price games? How do we react? My advice that I've been giving to publishers is, you know, if you're selling a physical good, maybe how? have a little bit more on hand in your warehouse right now than you would normally otherwise have. Be sure that you're communicating to folks that you're doing everything you can to maintain availability and to maintain a good price point. But it's one of those things where everyone's kind of waiting to see what happens. You have your scenario plans and you have to react

because you just never quite know what's going to happen. So I have no idea what they're going to price at. I don't know, you know, if they even know at this point, because, you know, a lot of these things are still happening. So it's extremely difficult to say, I mean, hopefully it's nothing. Yeah. You know, if it is something and, you know, everyone's going to have to react. I mean, Acer has already announced that they're lifting the prices of their PCs, driven by the tariffs on the China market. And, you know, that's just one of those things we're going to have to ride the wave on a little bit. I feel like we. with this looming threat that no one can really nail down yet,

this question becomes like two timelines. But we're talking about the youth with their tablets, their PCs, the olds like me with our consoles and blah, blah, blah. A conversation that is continually happening is how much longer will consoles be around? When I was at IGN, you know, I mean, literally 18 years ago, we were like, oh, well, you probably got a PS4 generation, and then it's over.

Like, will it actually be able to? And we've seen such crazy success throughout one of your blue sky posts. PlayStation 5 has been the bright spot for the console business in recent quarters. Interesting tidbit from today's results, and these were from February 13th. The U.S. accounted for approximately 30% of the PS4 unit sales through December 2017 and 33% of the PS5 unit sales through December 2024. PS5 is currently 7% ahead of PS4's U.S. unit sales price. what is your take look prediction on the future of video game consoles?

And then, of course, I'd love to hear the alternate take of tariffs do roll in and things get crazy. Is this the kick in the ass to everybody going digital, going every screen is in Xbox in the same way it was in 2020 of COVID? You just play games on, you know, buy a system, you're at home, blah, blah. walk. So if the console market itself has been relatively stable for many years, so it goes up and down, it's cyclical, new consoles come in, it goes up, consoles get old, it goes down, it peaked in 2008. 2008 was the year that console hardware sales peaked. And ever since then, it's been a mature market. So, you know, what I think is going to happen, pending any significant shocks to the system.

I think we continue to get new boxes that let people play their shiny new games on their shiny displays. I don't think that changes. But I do think changes over time is the flexibility of those devices. We are seeing diminishing returns on graphical fidelity. You know, going from PS1 to PS2, you could sure see it. Oh, yeah. From PS4 to PS5, a little bit more difficult, except for, you know, the sickos and the chat.

Pixel count digital foundry videos. I need the reflections in my puddles. I need to see the puddles. Yeah. You know, but generally we're seeing diminishing returns there. So what I think happens is I think, you know, the Steam deck and the switch have provided a, you know, path towards, you know, more hybrid devices, devices that can display excellent quality on a screen, but also be able to take in remote,

all kinds of different ways of adding flexibility to those devices. But I still think people are going to want to hook up a new box to play new games on their new displays. Now, in the shorter term, if we get 50% tariffs, I don't see how that doesn't have an impact in where people decide to play. at least in the short term. But that's an extreme case.

And you know what? We've never seen it before and we don't know what will happen. But you have to imagine that people are going to adjust their spending behaviors and their patterns given significant changes in price. Like that's just kind of human nature. I hope we don't see it. I really do for all kinds of reasons. Oh, yeah. But it would just be it would be unfortunate.

I feel like this is in this vein of questioning, but we can take away the negative, negative part of like what could happen tomorrow. Instead, we'll talk about, give me your February 20th, 2025 read on Xbox Game Pass and Xbox's strategy. Like, what are we seeing there in terms of growth in terms of success? I have a question about how Game Pass goes into your whole algorithm, but we'll get to that in a second. Right now, February 2025, where are we at with Xbox Game Pass from your vantage point? All right. Let me put this in a way that does it get me a phone call. All right. So the Xbox strategy, right, has been evolving, clearly. They've been talking about the change in strategy. You know, we went from a game pass first initiative to now a, you know, we want to provide content to everyone everywhere. That's a pretty significant shift.

I don't think those changes are anywhere near done. I think what happened, so, all right, so Call of Duty Blackop Six going to GamePass was the big, that was pushing in all the chips, right? That was making the big bet. I think the results from that are mixed. We did see an increase in folks subscribing. We saw really healthy, like fantastic sales on,

across platforms, Xbox sales for Call of Duty Black. Rockop 6, you could tell a difference because it was available on GamePass. Of course, you could. It didn't hurt sales on PlayStation at all. Sure. And it didn't really help sell Xbox series consoles. So a bit of a mixed bag there. Now, their overall results that they report on the gaming division have been consistently

strong despite hardware declining. And, you know, they're the ones that are most on the bleeding edge of new technologies, new ways to play, expanding. I'm trying to find new avenues. So in that respect, I have a lot of confidence in what they're doing. They're doing things that aren't the traditional model. And you know what? Sony's not doing the traditional model either anymore with their expansion into PC and other categories.

But Xbox is really kind of leading the way on doing things differently, partially because they have to, but partially because there's opportunity there. But one of the things that they have to keep doing is adjusting on the fly because not every idea is going to work and trying to find the best way forward through those bumps in the road is kind of how that works. So I'm cautiously optimistic, but yeah, you know, they might come out with an Xbox OS Steam Deck like device. They might come out with some other crazy things. Who the hell knows, right? And that could change the dynamic as well. So ultimately, though, I'm glad that games are getting in front of more people and more places because the consumer of

the game player of today demands playing what they want, where they want with who they want, with whom they want. And, you know, forcing people to just go down one road may not be the optimal case for everyone. I like that. The question came from BJ Bernardo as a YouTube super chat. BJ says, great interview, guys. Thank you, BJ. How does game pass and subscription services affect the internal equation you were talking about earlier in the show?

Did they make gaming a little more accessible? It does. So subscription services have been weird. They had a pretty nice growth period there in 2021. Of course, GamePass Ultimate came around. Nice little boost there. For several years, spending on subscription services was flat. There's a percentage of the audience,

probably a good chunk of the folks in the chat who subscribe because they are super interested in playing a lot. lot of games, a lot of variety. But what we found is that that audience is not mass market. The mass market audience, they'll buy their two games or one or two games a year and play Fortnite and be just fine with it. We're not interested in a service like, you know, PS Plus Extra or Game Pass Ultimate. Now, Call of Duty helped boost it a little bit, but, you know, it's like a 12% growth rate

and total subscription spending because of it. wasn't this massive jump. You know, so it is a, what we're seeing as subscription services now is a nice supplement to the main offering, which is the premium content sold at a, you know, sold the premium price or, you know, or free to play driven by add-on content spend.

Subscriptions are nice to have. It's a little bit of an extra rather than a core selling and a component of a platform at this point. Excellent. Matt, you know I love you and you're a great guest I could talk to you all day long but I know you have to do real work at some point

so I got two questions and then a rapid fire segment and then I'll get you on your way I swear Motor World Hype Super Chats for question number one and says what would Matt say is the number one contributing factor to the inflating cost of making AAA games?

Hmm. So to be honest that side of the equation isn't really my wheelhouse anymore since I left publishing. Really tough for me to say, I think, you know, the general assumption that the games have become bigger

and more complicated, required more people is probably the right direction. But honestly, I don't know. Fair. I lied. There was one other super chat I wanted to get to. It came from Dakota. Dakota superchatted and said,

any advice for an inspiring entertainment media analysts. I have a master's of business analytics and an MBA, but I'm struggling to get a response. Thanks. I got very lucky. I was pulled in in 2005. I was working at Master Foods USA in Verdon, California, analyzing dog food sales. And if you don't know Vernon,

it's a very industrial part of Los Angeles. It was next door to the Farmer John Hot Dog Factory. Okay. So it did not smell good. Anyways, that's kind of a side track. But I was pulled in a point in the industry's time when I got very lucky. Today, there are more opportunities to get data and get involved in it. There are a couple people that built careers out of that very approach.

Daniel Ahmad. Yeah. He was huge on the social media. He was just someone on forums that would collect data and analyze. earnings reports, and he's turned that into an incredible career. He's a fantastic analyst. There are some folks on places like the install base forum who do absolute wonders with very limited data inputs. So, you know, when you're talking about this stuff, just look at the earnings reports, dig into the data that's available, and just keep applying and keep in mind that

you know, any analytics role that gets you some experience and dig it into the numbers, you know, at some point can be applied to those areas that you're passionate about. And I wish you all of the best. I don't know if that's good advice. That's great advice, I think personally. Great job on that. And then my final question before the rapid fire section is this. You listen to podcasts.

You see everybody on social media. What would you say, both for pundits like me, but also just the audience of, you know, the people in the chat who are talking to you about games, what's the biggest thing we don't get that you look at like oh my god i can't believe that people don't understand this aspect or this idea you know for the most part the people i chat with or or you know when i listen to um you or bosman or some of the other folks that are talking about this stuff a lot like you guys get it okay and a lot of the people i talk to on social media they get it i think the um what trips people up is and this trips people up across the board

in life, is they think that their own sample size of one or their sample size of close friends are representative of the overall market. And then they make assumptions based on what they like as though the entire industry works that way. I think that's the one thing that trips people up. You know, have empathy. Put yourself in other people's shoes. Think about the things that they might want and the pressures that they might be under. and try to help, you know,

try to understand where someone else might be coming from. That's not just, you know, talking about video games, but kind of talking about life. But it's the same kind of thing, I think, which really kind of trips people up when they talk about gaming. Excellent.

Okay, I have five rapid fire. Clear your mind. I say it, you tell me what's going on, okay? Yes. AI and gaming. Look, AI is being gaming, for a very long time. Incredible tool to be used for development.

Gen AI, completely different thing. I believe people want to play and experience stories created by people. I don't think that having Gen. AI create a game. Well, the technology is going to develop. Ultimately, I think people want to experience stories told by storytellers.

I guess I'll leave it at that. Great answer. The future of physical versus digital? You have another 10 years. Okay. Nintendo will be the last company really supporting it. Right now, physical has been in steep decline over the past year. Physical software sales in January hit an all-time January low.

So, you know, if you want to have physical games available, buy physical games, because fewer people are doing it. PlayStation 5 Pro. So you know what we're talking about the older, more affluent console consumer? Yeah. Perfect fit for that. In fact, you know, in the fourth quarter last year, we saw a pretty big spike in that 100K plus audience. So in the third quarter of last year, July through September, about 35% of console buyers were 100K plus. In the fourth quarter of the holiday quarter, it jumped to 49%.

So, you know, I think that aligns with the PS5 Pro launch. It's a premium device targeted an affluent consumer. It did its job. And that's what it's for. It's not meant to replace the base queue, but it's meant to, increase the price paid if someone's willing to pay it. Fantastic. Your fourth prompt here, Switch 2 predictions.

I'm hoping it's first half. I think it will do well. I think the Switch outselling the PlayStation 2 in the United States so far sets an incredibly high bar. I don't know that Switch 2 will be able to achieve in the current market, although it could get close. I'm cautiously optimistic. The uncertainty around price points makes me extremely nervous.

especially with, you know, Harris potentially hitting in and around launch. A lot of uncertainty in that respect, but is Nintendo going to deliver a great product? I mean, of course, I would bet on that every single day. So I think it's going to be a great product, and hopefully it finds a great response. And your final rapid fire prompt.

Self care. Self care is great. So look, these are interesting times. and you have to control what you can control. And, you know, if entities are mucked around with your personal data, you should take steps to protect it. If you're feeling stressed out, step back, manage what you can manage, control, you control. Be good to people around you, no matter where you are on the political spectrum. And hopefully, you know, everything will be okay.

But, you know, if you get overwhelmed, ask for help. It's, you know, it's an overwhelming time. Matt, you are such a ray of sunshine. I bring up the self-care topic because, of course, you are awesome on blue sky at giving all the video game stuff. And then also just dropping in, hey, it's Saturday. And everything is still off the rails. So do some self-care. Wash your sheets.

They're gross. And replace that sad excuse for what used to be a toothbrush. You've been using way too long. You're like such a friendly dad dropping advice in the gun. I'm like, oh, man, that's what I need right now on social media. I'm feeling I don't have kids because I just wanted to, you know, get a, job and buy all the games I wanted but never had kids. So I'm going to be like your pretend old old video game dad. I'm totally okay with that. Fantastic. Matt, I love you. Thank you so much

for spending so much time with us. Where can people keep up with you? I love you too, Greg. And I love your community and all the everything you do and the team does. Really all the respect in the world for what everyone there has been able to accomplish. Thank you. I'm over on on blue sky. I'm not anywhere else because, you know, one social media sites enough. But find me there. All the latest results are there. Always happy to chat and answer questions. So give me a shout.

You're the best, Matt. Don't be such a stranger. Let's not wait too long. Let's get you back here whenever you want. Whenever you got big news, whenever you got big numbers. Come on through. How about that?

I will switch to launch in hopefully soon. So maybe we'll chat then. Sounds great. For now, I'll remind everybody that this has been the kind of funny games cast. Each and every weekday, we get together to talk about the biggest topics in gamings, whether they be reviews, previews or things we need to talk about.

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