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1/ One of the questions asked yesterday at the @Oppenheimer Future of Gaming event I spoke at: what is the opportunity for established game publishers in the UGC era. My answer: think of Activision like Disney and Roblox like YouTube.
2/ Publishers and UGC platforms have different core values and opportunities. Publishers are IP based businesses. They invest into franchises that can last lifetimes. They are risk adverse and move slowly because they have expectations from consumers for a level of quality.
3/ (Mismanaging expectations with their IP is what can harm a Publisher's business the most. See Disney and the Star Wars films, or CDPR and Cyberpunk.)
4/ The strength of a publisher's IP is based on the strength of their creative and development capabilities. Once a publisher has established franchises, they have myriad ways to monetize those franchises. Console games, MMOs, F2P mobile titles, films, toys.
5/ There is no clear benefit to an EA or T2 making their own Roblox relative to investing into their own IP. In other words, just because Disney owns Star Wars does not mean a Star Wars themed YouTube platform is a good idea. Indeed, Disney's entry into YT via Makers failed.
6/ The joy of Star Wars or Final Fantasy or Grand Theft Auto is being part of its world, its stories, told by their creators. UGC platforms are different experiences from game publishers. The IP and creative comes from third parties and are of varying quality.
7/ The majority of UGC platform content is garbage, and there is a lot of copyright infringement. Most of these platforms buckle under their own weight (bad discovery, lawsuits) when swimming alone, and frequently have monetization issues.
8/ The free for all nature of UGC is the reason that YouTube, Twitch are both owned by big tech companies. Indeed, of the three big UGC platforms (Roblox, Minecraft and Fortnite Creative) one is already owned by big tech.
9/ Publishers have most of their value in the IP, creative, and distribution. UGC platforms, like YT, have most of their value in network effects, creating winner-takes-all scenarios. Few meaningful alternatives to YouTube exist because of double network effects at work.
10/ You need both a large creator base and a large viewing audience to sustain that creator base. This creates strong moats for YouTube and it is the same for UGC platforms like Roblox. They resemble social media companies, the same way game publishers resemble traditional media.
11/ To conclude this portion of the thread, there are myriad opportunities for UGC platforms, and I am bullish on Roblox’s prospects. But UGC platforms are a fundamentally different business than game publishing and don't extend naturally into each other.
12/ Another topic that came up is the speed by which traditional publishers move into new areas. This was within the context of the opportunity for major publishers to engage in new Massive Interactive Live Events (MILEs) like @RivalPeak. https://www.matthewball.vc/all/cloudmiles
13/ Many publishers area already doing so: we can see MILEs in Fortnite, for example, and @GenvidTech is already enabling AAA publishers to create new MILE experiences for their upcoming games. But it will take years, and they will be slower. This is fine.
14/ As noted earlier, publishers must be adverse with their IP. Publisher ROI requirements, timelines are different than those of smaller studios. If you look at how long it took ATVI to put out Warzone, the Battle Royale genre already was established by its release.
15/ This is not surprising. ATVI has 3 studios dedicated to pumping out a CoD each year. These teams have P/L to hit with expectations of revenue in the billions of dollars, and plans that are established a half decade in advance.
16/ The opportunity cost to have a studio work on a new genre needs to be high enough, and chance of success high enough, to justify diverting resources from established paths to revenue. In failure, the cost of brand risk is also high.
17/ Furthermore, great IP comes from great creators. Star Wars in the hands of Rian Johnson resulted in a different experience than in the hands of Jon Favreau. Your best creators need to be put on experiences that will generate the highest, best guaranteed ROI.
18/ Even if you have the ability to expand your production lines to work on new experiences, that doesn’t mean it’s the best use of your management and creative resources until there’s a proven model. That is why publishers were fast followers rather than leaders in Battle Royale
19/ Content is always a combination of creative, production and timing. And hits are not guaranteed. This returns us full circle to the start of the thread: publishers have two strengths that UGC platforms lack, which is creative and IP.
20/ Great creative and great IP don’t necessarily result in success, but they increase the chances by bringing an existing understanding of the content and existing audience.
21/ Comics and films are a good example. The comic market is a small market. But great IP (Marvel) in the hands of great creative (Disney) resulted in the Avengers. Great IP in the hands of other creators resulted in the DCEU. Sony knew this when they let Disney drive Spider-Man.
22/ In the case of UGC platforms, the chance of success for any individual piece of content is small, but there are infinitely more creators available. It is a game of odds, and the creators rather than the platforms generally own their IP.
23/ MILEs are a more natural expansion for publishers than UGC platforms because they play to the strengths of a publisher. Furthermore @RivalPeak proves that a new type of experience can be delivered via MILEs, and we are finding an audience. https://twitter.com/pucknorris/status/1347769912295444482?s=20
24/ What remains to be proven is the path to monetization. It took the battle pass system to make BR work, but this has generated tens of billions. FN concerts have been free supplements. Once we figure out the business model for MILEs, a new value chain for publishers will open.
