Aug. 8, 2022

Newspaper Subscriptions Versus Music Subscriptions

This week we talk about subscriptions, specifically how the subscription business model in newspapers struggles, while half a billion people are willing to pay subscription fees for music.

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This week we talk about subscriptions, specifically how the subscription business model in newspapers struggles, while half a billion people are willing to pay subscription fees for music.


Richard:Welcome to Bubble Trouble, conversations between the independent analyst Richard Kramer, that's me, and the economist and author, Will Page, where we lay out some inconvenient truths about how financial markets really work. This week and in coming weeks, the Bubble Trouble team will turn our attention to the phrase du jour, the bait of all clickbaits, the mother of all bubbles, that is the Metaverse. We're gonna keep this deep dive going with another doer, not just a thinker, a three-strike veteran of the gaming industry who's career dates back to Sega in the early 1990s. Since 2018, he's led Survios to become the fastest growing and most successful crossplay-focused gaming studio in the industry, winning numerous awards along the way. So, welcome, Seth Gerson. We'll hear lots more about Survios and Seth in a moment.

Will:Seth, it's been high on my list to get you on this podcast as we'll be discussing later a huge influence of my book way back during the heart of lockdown. But before we pass, go and collect 200 pounds, we just want you to pick up the microphone and introduce yourself, perhaps just give us a quick hop, skip, jump through your incredible career in gaming, but most importantly, tell our audience how they can follow your work, and follow your commentary.

Seth:Uh, so first of all, thanks for having me. I started off actually at the Human Modeling and Sim Lab at the University of Pennsylvania. We were making sort of the first round of VR research that was on these, uh, if you remember, silk and graphics machines that could-


Seth:... basically cover a room. From there, I went to Sega. At Sega, I was at the tail end of Genesis, but I really spent my time there on a platform called Sega Saturn. From Sega, I moved over to Activision. And at Activision, I started running teams. I was, uh, running the Asteroids team. And then from there, I went to Universal Studios. At Universal Studios, I was, uh, running production. I made a game they probably maybe have heard of called Crash Bash. It was sort of the fourth iteration of Crash Bandicoot. And then I started a company called YaYa, and we ended up selling YaYa. I, uh, started another company called Pocket Soul, and sold that tech to AOL Time Warner. Most recently, I met Survios and, uh, I just covered a lot of years in a quick span.

Will:[laughs] When we say a three-strike veteran, few people have got as many strikes as you in the metaverse. You were doing it way back then. But let's get to the definition. We're playing this wordplay, and we've had three guests present. We've had Yoshio from IDG Consulting, we've had Ernest Lee from AmazeVR, we've had Eric Cress, a well-known consultant in the business. And we're asking these two questions to get this conversation started, and it's really crucial, it is a two-folded question. If I was to give you no more than an Elon Musk tweet length statement to answer this, what is the metaverse?

Seth:Today's definition is really being used to describe the next generation browser. I would just say, thank UI for the Internet versus the older definition, which was really, an MMO game that morphed into, uh, what I would call plug interconnectivity, where you could do everything from make money to have social interactions and experience, but it was all in a particular art style that is most akin to hyperreality.

Will:Concise and precise. Now, this is a tricky bit because different side of the same coin. In a similar type expression, can you tell me what the metaverse isn't?

Seth:Everything else. I've seen more pitches come through lately that everything is a metaverse of X. I mean, I- I'm pretty sure there's a pet metaverse now that you can put your animals into.


Seth:Because pe- what people are doing is they're slapping the word on their pitch deck to get extra capital at this point. [laughs]

Richard:Didn't Philip K. Dick already cover that in Androids Dream of Electric Sheep?

Seth:[laughter] Good point.

Will:Okay. So, I'm gonna tee up, Richard, who, if the pendulum was swinging from being a cynic to an optimist, I think he's over on the cynic side given that-

Richard:No, no.

Will:[inaudible 00:03:59] today. We'll see, we'll see. But the way I wanted to frame this was just to talk about the children's bedtime story, The Boy Who Cried Wolf. Boy cries wolf, the wolf isn't there, parents get upset. Boy cries wolf, wolf isn't there, parents getting more upset. Basically, when the wolf comes, the parents don't believe him. The whole [inaudible 00:04:15] metaverse story has suffered from the [inaudible 00:04:19] I think it's fair to say. What makes you think that this time around, it's gonna be different?

Seth:Okay. I'm gonna go with, uh, Richard. It sounds like with his pessimistic comment, he's cautiously optimistic. I- I wanna throw this question back to you for a second, is Xbox as a platform, is that a business?

Richard:A- A succinct answer is yes, that's a business. They sell hardware, possibly at a loss so that they can sell gaming content at very high margins and get multiple people to participate in it. That may or may not be a hosting of a metaverse, depending on how broad you wanna make the definition but may not fit the criteria of today's overhyped definition that says we are all going to be living our lives in these virtual worlds.

Seth:So, I think that's a great point and I want to use that as a starting point. I was down [inaudible 00:05:13] Oceanside and I was talking to some analysts and, um, I asked them that question. I said, "Is Xbox a business?" Of course, the answer I've got from one of them was, "Duh." And I've said, "Okay. Well, what does duh mean?" And said, "Of course, it's a business." I said, "I'm just gonna assume that you're referring to it's such a business that they can do it in 80 billion, uh, $70 billion acquisition, right?" And he said, "Of course, the Activision." Wh- Which where I used to work. And so yes, it's a business, but here's what that analyst didn't realize. Did you know that there were more VR units that shipped last year than there were Xbox units?

Richard:I did.

Seth:So, that is an inflection point. And if you go back and you just kinda look at VR for a second, a lot of people are writing about VR is not, um, not a business yet or you're not the metaverse yet or, or what have you. But the thing about it is is I think a lot of people got it wrong and it went through that perfect Mary Meeker hype cycle. And people were expecting everybody to buy an HMD just like a cell phone, but it's not like that. The- The adoption was much more similar to lik, uh, a colored television [inaudible 00:06:23] one because here's the thing, your phone, what you're using this for, your daily needs, right? You- You use it to talk. You use it to text, communicate. You can't do that with a pair of goggles that cut off the rest of the world. With AR, you can, but here's what a lot of people just don't realize, to make good VR, you've gotta be able to make great flat screen content. By flat screen content, I mean Xbox, PlayStation 5, Nintendo Switch, all of the gaming systems. And the reason it has to be better in VR is because if I'm rendering something on a flat screen device at 90 frames a second, you have two eyes, most people, and so as a result, I need to render that at 180 [inaudible 00:07:12] frames a second.

Now, let's talk about that second inflection point. So, there's a first inflection point that I think most people don't realize which was hit and that was last year. The second inflection point will come with AR. And to do AR well you have to be the best in VR because it's that much harder. When you have glasses that you can wear anywhere you go and they're as thin as these and they account for optics, your phone becomes obsolete and this becomes your daily communication tool. Look, there are companies working on making those now in contact lenses and that's, you know, over a decade out [inaudible 00:07:50]. I- What I can tell you is we get hardware somewhere between 18 to 24 months, probably before rest of the world in most cases. And I've seen new devices that are down, you know, coming down and they're there. And you will start to use these and you'll ditch your phone.

Richard:So, I- just to throw a bit of devil's advocate into that because I think we're gonna touch on some of the aspects of that shift in a moment when we talk about human behavior and how long that takes to change, if I would throw it back to you and say, between the number of Xbox units shipped and the number of VR units shipped, which is consuming more time spent today? I think you would concede that Xbox is hands down orders of magnitude greater because the time spent in these new virtual worlds is very limited. I know a lot of people who would buy an Oculus device, use it a bit and leave it to the side or it's just a party trick. And the Xbox is something where you have built an immersive, collaborative world, where tons of people are constantly engaging one another in. So, when do you see that shift of time spent from these kind of 2D immersive worlds that we all participated and called Internet or the piece of glass sitting on our wall where we watch our, our Netflix or whatever other streaming content we have at the same time as our friends do and we're texting them to something that's more completely immersive and excludes the rest of the real world while we're in that environment?

Seth:Right, There's a lot to unpack on that one. Let's look at the economic side and then let's look at the behavioral side. The first part is you think that people are spending more time on an Xbox than they are in VR. I would have to go back. I don't have data in front of me on that, but what I would say there, I'm sure that's probably accurate but at the same time, for the most part, two things, VR is completely immersive, right? You're out of the real world. And as a matter of fact, the core tenent of VR is something called presence, which is effectively your mind's ability to forget that you're in the real world. And if software is doing its job, that will be 3 minutes or less. So, that's the first piece. The second piece is VR is active, so if you take our Creed game, if I play that thing for four hours, you're gonna have to defibrillate me. [inaudible 00:10:18] I- I cannot, I physically just can't do it. You burn something like 320 calories in less than 30 minutes. I- It is absolutely exhausting. You're sweating.

Let- Let's talk about it from the economic side. The software to hardware ratios are what drive gaming companies. How many units of software do you buy for every unit of hardware? And, uh, Richard, you alluded to that when you were talking about hardware shipments where companies make their money. Software is obviously a high-margin business. Um, what's interesting is on the meta quest, that ratio, and I don't have it right in front of me, but it's one of the highest I've ever seen. So then, you have to think, well, why is that happening? And I think the answer is is who's buying it and how it's being used.

Richard:And that maybe the front end of a much wider behavioral change, where you're talking about a relatively small base of early adopters today in VR relative to what has been a phenomenal success story in distributing game consoles for the last, pretty much, two decades since you've been in the gaming industry.

Seth:Yeah. And look, going back to your previous question, it's when do you have people using it ubiquitously. You can't walk down the street with an HMD that cuts you off from the world. You're gonna fall in a manhole and die.

Richard:Or someone's gonna punch you in the face just for like shits and giggles.

Will:[inaudible 00:11:47] that's where the game, Creed, comes in helpful, right?

Richard:Right, yeah. [laughs] Right, right. You're ready, you're ready.

Seth:But I mean, how many times have you read articles about someone taking a stupid selfie falling off a cliff and dying or something like that? And the- the first thing you think is that's a Darwin Award winner. [laughs] But at the end of the day, you can't do that. But with AR, you can because AR is completely passed through. My daughter is only 14 and we were listening to the radio and someone said, "Smartphone." My daughter turned to me 'cause she's only known basically iPhone and Android, you know, since she was born. She said, "What's a smartphone?" [laughs] And I had to explain to her, "Well, before there were iPhones, there were these things called smartphones and they basically really didn't work." The point there is-

Will:[inaudible 00:12:31] smartphone.

Seth:Exactly, exactly, but the whole point of that is that what makes technological leaps and these secular shifts are when you get a culmination of enabling technologies, like think of the enabling technologies that came together for an iPhone. And now, if you just look at VR in actually since probably 2014-ish, think about what's happened in just a very, very short span. Number one, you went from people who wanted to experience VR, what they would do is they would go maybe to their home or maybe to like a VR location-based, uh, entertainment facility. And why would they do that? Number one, it was really expensive, right? You had to have sort of a $3000 PC and then you had to get, you know, a 5 to $700 HMD. And also, it was really cumbersome. If you wanted White House units, you had to drill holes in your wall. I mean, I remember I was getting up to drill holes in my wall and my wife just sort of walked in and looked at me and, you know, was like, "Hey, that's gonna be about 50% assets if you proceed." And I thought the better of it.

Uh, the other thing you've had is foreign factors, and those have come way down and they're way more comfortable. The next generation of VR devices, they have a bunch of enabling technologies that are, like think of the eye tracking, foveated rendering, better haptics. And so as these things come together, they make these experiences more and more real. The flip side of it too is one of the most important things is developer tools. You have to have great developer tools. That doesn't exist. We've been working on a tool set since 2014. We probably have a 5 [inaudible 00:14:20]. At Survios, we probably have a five and a half year moat, uh, around that tool set. And if you can't build these great experiences, then you're not gonna drive hardware. Look, y- you don't buy this device because you think you know what? This got an amazing chipset and I wanna own that silicon 'cause that's gonna be awesome. You buy it 'cause you wanna play Aliens or you wanna play Call of Duty or some other experience.

So, you're buying these devices because you wanna play that software. To build that immersive software, you have to have tools. Developers need tools because that's the plumbing that everything works on. And frankly, when we started out, none of that existed. We had to build tools for locomotion. We had to build tools so that we could move bodies around on screen faster because a lot of the lighter form factor devices, they have these chipsets where they have less powerful GPU or CPU. And so, some of our tools will take along the processing load off of the GPU and it'll put it on the CPU. You need better physics. Just think about it this way, if you are making virtual reality and the game takes I don't know. Generally, games take about three years to build.

And the developer has to just put on the HMD and off. Every time they wanna test something, by the time you put it on and you sort of look at it, it's 15 to 30 seconds every time over three years and engineers are not inexpensive, that adds up. So, you have to build all these tools. By the way, you have to build tools because if I have a gun in a game and I wanna reload it, it's a button press. If I have a gun in virtual reality, I actually have to cock it like I would a real gun. And so, those assets [inaudible 00:16:12], those methodologies, there's not a one to one transfer. So if you don't have those tools, it's way more expensive, way more time-consuming to build, but the market's there, that's kind of the trade off that a lot of developers are making right now.

Will:If I could just quickly [inaudible 00:16:30] investor lens in there, I think you're echoing a remark that Yoshio told us which is, I mean, the podcast is called Bubble Trouble, where the metaverse, where VR gets some stuff into Bubble Trouble is the investors that you can turn this around a lot faster than it actually happens in reality. Someone could have bet on this gaming company and hopefully, my return comes back in two or three years. Could you just maybe quickly talk to that sort of misalignment between what Wall Street thinks can happen in the metaverse time-wise and what foot soldiers like you down on the ground are doing in, in the trench warfare of building these tools, building this apparatus?

Seth:So, one of the first things I would go to is, sort of, actually, how do VR developers start? And a lot of them would get together in a room. They would try and put sort of a, a demo together or some tools together or maybe a PowerPoint presentation, and then they go to a bunch of venture capital firms. I think a lot of capital that would chase VR, they thought of it like mobile. I think there was a lot of this, hey, if I put 3 million bucks in a company, they can make three games, and one of those is just gonna be the sort of a magical moment. And I don't... I think they've missed the boat in a couple areas. The first area where they missed the boat is that VR and mobile technology, number one, they're very different. The use cases are different. The reason that consumer is gonna buy the device is different. Bunch of people got sort of the, the hardware adoption curve wrong.

But on the flip side of that, if you're gonna build something, by the way, forget about three $1 million games because here's the thing, I think everybody right now o- or at least all three of us would sit here and say, hey, VR is really immersive. I think we would all agree with that. We would also say console is immersive, but VR is more immersive than console because you have to achieve presence. So you're telling me that you're gonna take a game that's $1,000,000 [inaudible 00:18:30] the game that's 100 times that in terms of production budget and the consumer is gonna say that, say, that's fantastic. It doesn't make any logical sense. So, what happened was is I think a lot of the capital that was chasing the category fundamentally did not understand what it took to build an experience that was not a gimmick, not something where I'm just jumping off a building and I lose my stomach. That's not a game that's a gimmick or an experience. And I think that's where a lot of Main Street and Wall Street missed.

Will:Seth, you remind of an expression in the music industry, which goes, um... How does it go? It goes, you can't produce a baby in a month by getting nine women pregnant.

Seth:[laughs] Right, right.

Richard:Before we get to the break, I wanna wrap up on one big question here, which is vexing us. So, the hype on the metaverse started from what we regard as a giant misdirection play by Facebook, now known as Meta, saying that, uh, we'd like to distract attention from a fading advertising business that we have and all the other issues that have come up with our use of data or, or how social media is promulgated. And let's change the narrative and let's talk about this far-flung future, where we'll all be communicating with avatars and spending time in other worlds. How do you regard the bazookas and other missiles and what have you brought to the knife fight by the money that has poured into this space from big tech? 'Cause you mentioned developer costs and so forth.

Facebook has roughly $50 billion of cash on its balance sheet. Google's got 120 billion. They've all staked out time and, and effort to make the metaverse something they want to participate in if not dominate. Microsoft, is spending 80 billion or 70 billion, as you mentioned, on Activision, and that came funded from its enterprise software business. So, now that if money is no object for these firms, how do you see the development of this industry when what you just told us a moment ago was we've gotta be mindful of competing with $100 million games, we've gotta be mindful of those developer's time, we need to develop tools and that's expensive but here- here along come a bunch of companies that, uh, that have, money is no object?

Seth:So, I think the first part of that is great, right? What you just described is a secular shift in gaming. The question is is why are all those almost trillion dollar companies in some cases putting so much money against us? And the answer is everyone wants to own a piece of the future.

Richard:Own a piece or own it? Because that's another question we've got.

Seth:Both. I think those companies wanna own it, right? [laughs] Everybody wants to own it if you can. But if not, and the way most industry sort of break out is you own a piece of it. And the other thing too is every time you have one of these secular points as well, that's when new billion dollar companies are formed, right? Because you have this period of sort of chaos. And out of that chaos, you get these companies that emerged. The second thing I would say is, look, there's a real business, uh, just on the VR side right now. If you look at Creed, the game that we have out that I was talking about earlier, that game did 40% of the revenue that Creed 1, the movie did in U.S. box office.


Seth:I'd say that's real. And that was [inaudible 00:21:56]. It came out when there were only four million units of installed base market.

Will:[inaudible 00:22:00] Creed wasn't a flop at the box office.

Seth:Nope. By the way, [laughs] I think they've announced the third one. So-


Seth:... so, i- it obviously works.

Will:It definitely wasn't a flop.

Richard:Bottom line, we've had some of our guests have argued that you can't have one company dominate the metaverse. You have to have an interoperable metaverse that has multiple companies involved. You have all these Tech Titans who are pouring money into it. Your view is that we'll have an, a large, interoperable metaverse, and they'll each set up a stall to try to colonize a portion of it, much like they do with the Internet.

Seth:Yeah. And look, think about the companies that are pouring money into it, Meta, to Qualcomm, to Apple, to Sony. There are so many new devices and there are so many new enabling technologies. There's new hardware. There's new software. There's new developer tools coming online. And then, you take a step further and you open up that field once you add AR, I don't think anybody knows exactly how the exact path that this is gonna take from when you go from where you are now to where you have complete ubiquity with, you know, AR glasses that are actually at some point, just contacts or maybe you have a chip, um, that you can walk around with. But that's evolving quickly and [inaudible 00:23:15] by the way, that's exact reason why everyone is investing, like it's like you go back to the original, put a PC on every desk in, in the world, and you're- you're doing the same thing, but now, you're doing it with every human.

Richard:Well, with that, I think we need to wrap up the first part of this because we need to go either quit our Neuralink chips in our brains or our contact lenses in or something, and we'll step in to alternate reality, uh, back in the second-half of Bubble Trouble talking about the metaverse with Seth Gerson from Survios. Thanks very much. We're back with Seth Gerson talking about the metaverse of with myself and Will page. And Seth is [inaudible 00:24:00] optimist, and I wanna lay out for him the question about all of these big tech companies participating in the metaverse. Now, from my view, these companies regard open as a four letter word. They don't like cooperating with one another. And all of our guests in the past have suggested that this metaverse can't be dominated or ruled by one company. We certainly would be very, uh, bored if we really only had one version of all these, uh, uh, experiences to look to. So, I'm gonna throw it over to Will and figure out a good analogy for trying to get Seth to unpack how, how collaboration might happen in this industry and how we might see 1000, not just one or two flowers bloom.

Will:Yeah, for sure. Yeah, I always look at collaborations like I think of, I think of the beach, where you look at, let's say, these two ice cream stalls, Haagen-Daaz and Ben and Jerry's. Typically, they compete like crazy, flavors, prices, branding, all that stuff, but they still work [inaudible 00:24:54] distribution. Why have two [inaudible 00:24:57] going to beach? Let's just have one. Once those boxes [inaudible 00:25:00] but this collaboration and this competition. My favorite tech example is Google Chromecast, which are [inaudible 00:25:09] how we watch TV here [inaudible 00:25:12] we, we, we don't press remote controls, we speak to a device. But Apple TV is inside Google Chromecast. They're sharing [inaudible 00:25:18] distribution. So, [inaudible 00:25:20] and you have these huge companies believing they can, you know, own the metaverse, hands off my metaverse T-shirts or it coming down the pipe next month, where do you see the collaboration happening in the value chain?

Seth:Look, at the end of the day, companies are trying to generate revenue and EBITDA, right? I- It's business. And you're selling software. And so, my first question would be, uh, because I hear, I hear this a lot, right? Everybody talks about how is there just one metaverse. So, I'm gonna ask you a question, is there just one cell phone, right? There are two dominant platforms, so do you have to have just one metaverse? Because I think we would all argue that both iOS and Android are successful. So, why do you have to have one metaverse? That's my first question.

Richard:What I'd throw back to you is okay, we got to a Coke Pepsi point in mobile operating systems. We got to a Coke-Pepsi point with Sony PlayStation and Microsoft Xbox. And then, there's Nintendo off to the side, which kinda plays a different game, a- a different set of games, if you will. But what we have here is all of these large gaming companies and all of these large tech companies and many small companies like your own wanting to participate in this metaverse and all with the idea that we shouldn't share it with anyone. How does that get resolved?

Seth:Yeah. So here's the thing, there are a lot of humans on the planet. And so, you have cell phones and you have computers. And what, what happened, right? Cell phones gave you sort of ubiquitous online connectivity. So in a lot of countries where they didn't have computers for a whole host of reasons, a lot of it was capital, they just skipped computers and went directly to phones, and that's how people connected. I understand that everybody wants to own everything. Of course, right? That's the nature of business. But at the end of the day, you can be successful with a small piece of that pie. You can also... You're gonna be more successful with a big piece of that pie. But realistically speaking, I would, this is the one area of VR and the only area VR, AR metaverse that I would actually look at a PC or a cell phone example because at the end state, there are a lot of people on the planet. What you're trying to do is connect people for social reasons, for commercial reasons, and all you need is the device and the software, which, uh, enables them to have that connection in that conquest.

Will:You point on more than one. It does remind me of a question I keep on getting asked about my book, Tarzan Economics, which is what do we do about all these tech monopolies? It's like, how can you use the plural in describing a monopoly?

Seth:Right, right. Exactly. [laughs]

Will:How many monopolies do we need to worry about before we know we got a problem to competition? It's interesting how this vision of, you know, the Highlander effect, there can only be one actually unbundles itself when you take a look around and count how many ones there are.

Richard:If you want to spin that forward and use the Internet broadly as an example where all of these companies have built their business models, how do you get to the point where there are standards and common protocols like we have since DARPA invented them in the 60s for the Internet? How do we get those common protocols and standards, which allow everyone from a small developer team in some far-flung country to these giant colossus organizations with billions of dollars of resources to plug into the same metaverse since all of our previous guests have agreed we can't just have one?

Seth:Well, you're not going like my answer on this one, Richard, but historically, [laughs] the way that works is you have a couple of dominant players. And as a result, then you have those standards. I mean, when you go back and you look at any industry that is pretty much how that, those standards get quantified, look, here [inaudible 00:29:22], there's some interesting things, right? The... I- If you look at Qualcomm, they're powering a lot of the- the chipsets of a lot of the head-mounted displays. So, you have that there, but each company has its own, uh, SDK or software de- development kit that you're gonna build on top of. And then, when you're building a game, you're gonna build off of some engine, like let's say, we build on unreal. And then, we have a tool set that sits on top of unreal, and that, that tech stack that we've been building since about 2014, that's what it [inaudible 00:29:54] enables us to do all the special things that garner the user retention, and the physics, and the interactivity, and the locomotion, and the whole experience, and the actual world [inaudible 00:30:07].

But you know, going back, and I think what's important is also how do you make content? So right now, we're on a podcast and the technology for that podcast, we've got a camera on us, and we've got a microphone and, you know, there's some software, and we're able to do a podcast. And then, you had YouTube and you have this whole generation of influencers. And basically, anybody with a cell phone, you can go out and make a movie and put it up on YouTube and you start to generate views and try and make a business out of it. Same thing with Instagram. Guess what? It doesn't really exist in games, right? You can say Roblox or, you know, something like that but honestly, it really doesn't exist in games. And the reason why is games are incredibly complex to make. Uh, you- you need a whole lot of different types of human capital. You need animators, and traditional artists, and conceptual artists, and you need modelers. And then, you need, you need artificial intelligence programmers, and gameplay programmers, and tools programmers and, um, and I could go on and on.

There is a tremendous amount that goes in the games, but the bottom line is when people make games, they're at a computer like this. And in the future, you'll use your fingers and your voice and you'll be able to get five people in a room and there will be a creator economy for games. And to me, that's really how you start to get to the metaverse. You need that underlying tool set, and you need it simplified, and you need it codified, and you need it so people can lay out a level very, very simply, and then that level can go into any engine that they wanted to go into. And so, when you start to do that, then you can really have what I think you're trying to get to, which is how do you build a meritocracy, right? So that the best software bubbles up, that's what you have to have to get there. And we might be building that.

Will:Seth, I just want our audience to know that [inaudible 00:32:06] for the first time, somebody's come on this podcast and give me light at the end of the tunnel of seeing where this goes. That's a very, very powerful answer.

Seth:Here's the other interesting thing, and this is where when things become a platform, they start to just become part of your consciousness. I- I was at a conference and I met this person. He was sort of head of entertainment for, you know, one of these countries. She said to me, "What do you do?" And I said, "I make games." She said, "I don't play games." And I said, "Okay." You know. And, but her 16-year-old son was there. And he said, "Well, can you name a game you made?" And I'm just gonna use Creed [inaudible 00:32:41]. I said, "Yeah, we, we make Creed." And her face lit up. Before her son could say anything, she said, "You make Creed?" She said, "We play that as a family three times a week? Three generations of us." Her father, herself, and her 16-year-old son. [laughs] And I said, "But you told me you weren't a gamer." She said, "I didn't realize that was a game." Uh, Richard, you mentioned Nintendo was a little different. And it, um, i- it is, but i- it's, it's a different sector. But the thing that I think people don't always recognize about games is games is a massive business. Games is a $200 billion business. Movies are $46 billion business, so it's bigger. And people consume that content on different platforms and they don't always know that they're playing games.

Will:[inaudible 00:33:27] i- it's a really interesting sample of different vertical seam problem of perception just real quick, but I- I- it's always stunned me that if you ask the podcast ministry, is YouTube a podcasting platform, they all say no, no, no, no, no, no. Is Spotify, is Apple, is [inaudible 00:33:43]. Yeah, when you're serving the customer, and remember, the customer is always right, what's your favorite podcasting platform, they always say YouTube. And I- I get worried in media when I see that disconnect.

Richard:Now, one of the things, Seth, we asked our guests to do is, uh, lay out some smoke signals since we've already talked about some ways in which metaverse has become a synonym for the bubbles that, that, that froth up in this market. And what we're asking you for is a couple of those either phrases or, or stock answers you hear, uh, those uh-oh moments when you realize, well, you know, that is just veering into hysteria or an executive comes in with a pitch for you and you just say, oh my God, here we go again. So, could you give us a couple things associated with the metaverse that just absolutely make you cringe when you hear them?

Seth:Anything that says the metaverse of, and you can fill in the blank, that's the first one-


Seth:... 'cause the minute you see that, you know you just gotta turn and run. [inaudible 00:34:43] that is the very first place I would start because when, when, when I'm looking for when, when I'm looking at, at, at different concepts is I'm looking at just what's the core concept and why do I want to engage. And so, if it's gotta be a metaverse or something, then to me, that means two things. That means A, there's absolutely no business there. Uh, and it also, [inaudible 00:35:07] they're- they're, you know, they're just, they're seeking financing to tinker. So, I think that's the first piece. And then, the second thing when I see that is there's no thought to what is the core experience, what's the core loop, and why do I, why do I wanna engage? 'Cause If you think about it, spatial computing, all the tools that we make, everything that we make, i- it's not just, it's not just VR, it's flat screen, it's AR, it's holographic displays. Our tools work across anything. It's spatial computing, but at the end of the day, it's the concept that, that makes it fun. And look, we're all trying to get to sort of that Turing test, right? That moment when you truly just don't know where you are. And I've had some similar moments, where developers built this, um, walkthrough of this world [inaudible 00:35:55] it was huge.

And there were two things that happened in this world, it was like one of them is you're in a spacecraft and the spacecraft catches on fire, so you have to run around, and you have to pick up these fire extinguishers, and you're putting these things to put it all out. And the person with me [laughs], the person with me, as we're leaving that room and going in the next said, "[inaudible 00:36:16] hey, where, where do I put the fire extinguisher?" I said, "Just put it down. The janitorial staff will get it." And he did. [laughs] It really... He forgot. And I was thinking, man, I can't believe he completely forgot. And about three minutes later, there was sort of this ledge. And I was waiting for him and I put my hand like this and I put my elbow, the next thing I know, I fell down, right? An- And then I was like, oh, man, I forgot myself, so I can't really make fun [inaudible 00:36:41]. So tho- but those Turing test moments will get better and better as all of these new tools come in, and new rendering capacity comes in, and new artificial intelligence comes in, and that's what makes something just seem real.

Richard:And what's something else that if it's not the metaverse of something because it's like saying it's the reality of something, uh, what else, what's something else that you hear all the time and you just go, oh man, that's just not gonna work?

Seth:NFTs with no utility.

Will:[laughs] NFTs are Not For Me is currently our number one podcast. Your- Your podcast is in the 54, but we went to work on NFT since, uh, this sounds interesting.

Richard:Sorry, but wha- what is the utility of NFTs in, a- anyway?

Seth:Well, that's the thing, right? If they have no utility, to me it's a for- it's, what- what is that called? The, the forward fool theory or something, where you just gotta get someone else to buy this thing and it's, it's effectively a Ponzi scheme.

Richard:Yes. So, the greater fool theory.

Seth:The greater fool theory, greater fool theory. Yeah, NFTs with no utility are greater fool theory to me. Look, here's where NFTs make sense to me over- o- overtime, if I buy an asset in the game and you pick what- whatever that that asset is, by the way, here's the deal, gaming has been doing this for o- over 20 years. I think the first game that did it was KartRider by Nexon, and it's a microtransaction. I can buy some digital good. Now, here's where an NFT makes sense, one of the things we always wanna be able to do is reward the creators of content. And so with an NFT in a blockchain, I can put in instructions that enable me to have that creator continually make money. So right now, if I sell a microtransaction, I sell it on one marketplace. And what you'll find is that there are a lot of illegal marketplaces out there.

And those marketplaces people are buying and selling digital goods, the- the differences is is they're effectively steeling, right? They're not paying the creator of the content. But with an NFT and with blockchain, what you can do is you can ensure every secondary transaction that the creator and the owner of that intellectual property always gets paid. And by the way, that's utility and that makes it better game, and that also would mean that if that was enabled, that every cell side analyst effectively right now has the numbers of the growth of gaming wrong because it would be much bigger. Imagine if you could get an extra 20% on every secondary transaction you did, it would open up an unbelievable TAM [inaudible 00:39:26] market.

Richard:But one of them, we've also done many podcasts about the misuse of the TAM, and that money has to come from somewhere. So, there's not an unlimited budget to stand on these things. And one of the things also we pointed out about NFTs is their propensity to be involved in wash trays, which is what ladders up the value before you find the last grid or [inaudible 00:39:49] buy it from you.

Seth:Look, right now, if I play all these games, and, and I think that's why a lot of the first parties have basically [inaudible 00:39:56] the other day, right? They're- They're not-

Richard:We're not gonna do NFTs.

Seth:Yeah. And I think a big piece of that is exactly what you were describing, but if you look at the flip side of that, overtime, if I create, uh, an avatar skin, I can create that skin and I can sell that skin to you, Richard. And then, you can sell that skin to [inaudible 00:40:20]. And every time that skin is sold, the creator of that skin should get a piece of that. He created that intellectual property. And the first party can get a piece in the publisher, but the other thing too is is if I buy an NFT right now and I can make that my avatar in Twitter, what exactly does that do for me? And why do I care? Okay. But if that avatar skin has certain attributes that are helpful in the game, but they don't, they don't effectively cut out the loop and pay to win, then that has utility to me and I want to use it.

And by the way, that NFT is now, it- it actually has a- a- a worth, there's value to it versus it just being sort of a digital thing that I can flip through. And so to me, it's adding utility to those objects, especially in games that are not pay to win because no one, no one wants pay to win. And by the way, no one wants pay to earn. So, it's gotta be something and it's- it's gotta be objects that you can use, those objects are helpful in games, and creators get paid. To me, that is utility for an NFT and that's actually a use case for NFT. And everything else gets what you were talking about, and when I listen to it, I just, just a face palm.

Will:So Seth, this is literally the all killer, no filler. And my personal pendulum in terms of cynic versus optimist, [inaudible 00:41:48] optimist, it's gonna take a lot of time, it is gonna take an awful lot of collaboration, which I don't think is being factored into the equation. You've talked a lot about that necessity. But yeah, you definitely put me in the optimistic camp. I mean, two things to just, to bring it to a close here on the [inaudible 00:42:05] of the Bubble Trouble, one, I remember five years ago, [inaudible 00:42:09], who went into the gaming [inaudible 00:42:10] around the same time as yourself, there with the Sony PlayStation just standing up on stage saying that all these young gaming developers [inaudible 00:42:18] like pretty soon, we'll gonna have to think of games which don't involve our hands. That remark you made about, you know, when game developing changes from the way we've done it in the past,[inaudible 00:42:29] it makes me think of that quote like, gaming goes hand in hand, pun intended, with hands. That might not be the case in 18 months, two years, three years time. And the second one is, is Richard talks very eloquently in this topic of perception and reality and your Creed example catch us at. The perception is, no Seth, I don't play games ever. The reality is three generations of that family were engaging in a quasi metaverse game.

Seth:Three times a week.

Will:[laughs] Yeah. [inaudible 00:43:04] on something that they perceived they weren't part of and I, that really is gonna stick. What am I seeing when I look at a survey? Ooh, 60% of people would say they don't participate in me- metaverse and what could be happening down in the drain could be wildly different from what they're saying. So [inaudible 00:43:20] this podcast has done what Bubble Trouble is trying to do, inform our audience about how to avoid the bubbles and troubles ahead. And this has been fantastic, so huge thanks to my coach, Richard Kramer. And Seth, thanks for making time [inaudible 00:43:34] join us in this one. This has been an absolute joy.

Seth:Thank you so much for having me.

Richard:If you're new to Bubble Trouble, we hope you'll follow the show wherever you listen to podcasts. Bubble Trouble is produced by Eric Nuzum, Jesse Baker Julian at Magnificent Noise. You can learn more at Will page and I will see you next time.