Interview Transcript

Going back to the publishers, where they invested in a developer and intellectual property, how are they looking at the changes? For example, do they want cross-play games and, going back to the console and the platform business, whether it’s Steam or the consoles, they earn a margin based on every game that goes through the platform. If we have more cross-play games, does that pressure the take rates on all the platforms?

I think there is pressure on the margins, both in PC and console. Digital marketplaces can be competitive and we’ve seen new entrants, like Epic, coming into the digital marketplace business, with both their middleware and their marketplace and being very aggressive on their margins. All that aggression and competition and the fact that you’ve got Google and Amazon coming in, creates pressure on the margin structure, certainly. To some extent, that pressure has been bubbling over for a long while, because as the publishers consolidated, over the past couple of decades, when you have consolidated suppliers into a platform, obviously, their bargaining position increases.

There’s lots of types of pressure. It will be interesting to see how that impacts the environment. In the end, what a developer and a publisher wants, is a strong active user base, because of the development economics we talked about and the need to achieve scale. That is more important, to some extent, than whether you are paying 15% or 20% or 30%. It’s painful and I think everyone would prefer to pay less. But the way in which a developer will look at the economics is around the opportunity. If you look at Apple, other than the fact that it’s getting a bit knocked around the head at the moment, by the European Commission, it maintains a reasonably level playing field of its margin, which is relatively high, at 30%. Most developers still choose to lead on an iOS platform, because of the installed base that it offers and the fact that they need that income stream.

But isn’t mobile quite different from PC and console, in that sense?

In terms of the basic economic realities of whether or not you should develop for a platform, I think it’s kind of the same. You would have a fairly brutal calculation on what your opportunity is, in terms of revenue and lifetime value. Obviously, the margin you need to pay, to get on that platform, comes into that equation. It’s a factor. But the ultimate determining factor is not just that margin; it’s the installed base that’s created. It’s kind of the same economics. If PlayStation or Xbox said, okay, we’re going to do it for free or it’s going to be 5%, but as a result, the installed base that you’re addressing and the user base is going to be half what it is now, that would probably be unattractive. It’s that balance that the industry needs to find, around this.

In mobile, you have iOS and Android; that’s defined. But the big question now, on console and PC, is where the users are really going to migrate and how the bargaining power changes for the platform owners?

Yes, and it is interesting. In terms of cross-platform play, we’re seeing a convergence of console and PC communities. Whereas, in the past, they were very different, both as people and franchises, they’re beginning to get closer. The console world was not very free-to-play friendly, five years ago. However, we’ve seen, in recent years, quite a lot of free-to-play content come onto the console and those have often been PC-origin franchises. Those worlds are beginning to get closer. I think we’ll start to see some interesting dynamics, where consumers are making choices across PC and console. But it’s worth bearing in mind, going back to our original discussion about the history of why consoles exist, the problem statements of accessibility and affordability, which consoles addressed, to some extent, is still there.

In order to have a PC that does the same job as an Xbox or a PlayStation, you need to spend a lot of money. I think there is still a role to play for the consumer base that wants that. At the same time, if you look at the competitive gaming and esports environment, where you have very, very dedicated gamers, who are not cost conscious – they want the very best and the very latest and they want to continuously upgrade their experience – they are still living in the PC world and they haven’t really shifted. You’ve got this fragmentation, to some extent, but the overlap pool is a lot bigger.

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