Interested in learning what's next for the gaming industry? Join gaming executives to discuss emerging parts of the industry this October at GamesBeat Summit Next. Register today.
We’re kicking off our GamesBeat Summit Next event today with a speech from yours truly. This extended version of the talk introduces the ideas we’ll discuss at the conference, as well as my own thoughts on big changes in the industry.
I hope that you are ready for some long overdue inspiration. GamesBeat is our community where passion meets business, and I’m glad we can enjoy some online togetherness for a short time.
Our mission is to bring everybody up to speed on the thought leadership on gaming’s next big opportunities in a very efficient way. The idea for this event is simple. The core of the game industry is doing just fine. By various measures, it grew users and revenues by 23% last year when the pandemic made almost everything else fall apart. The center held. But this game conference is about the edges of the industry and the opportunities to expand the game industry beyond its natural borders.
We’ll discuss everything from the metaverse to nonfungible tokens and other buzzwords of the moment. Are they overhyped and scammy waves that will get our feet wet? Or will they be tidal waves that sweep through the whole industry like free-to-play and social mobile gaming.
In the midst of the pandemic, as so many people were having a hard time, I sought peace of mind. Fortunately, I was always surrounded by family. And games like Warzone and the audio chat of Clubhouse made me feel more connected. I realized that all of you out there are my family.
We saw the pandemic’s impact on so many other people, and we’ve struggled with how things could be better and how our online lives could be so much more human and social than they were. Because the pandemic hit us so hard, the time for the metaverse has come.
I want to once again celebrate and thank game developers and publishers for providing us with entertainment that distracted us and saved us. You have done so well in creating human happiness, and we don’t recognize that enough. But we’re not done. The pandemic continues to take a toll on our mental health. It’s never been so clear that we need something like the metaverse, a universe of immersive virtual worlds like those we saw in Snow Crash and Ready Player One — just without the dystopian part because we have enough of that in real life.
Just like fighting the coronavirus is a worldwide priority for our survival, we could use a massive effort to build the metaverse to help us with our collective state of mind.
While I was back at the gym and thinking about the metaverse, I reached back decades to the days when I was my nerdiest. Back to those days when I would rather read a sci-fi novel than give a speech. I was so quiet I used to shake before giving an oral report in class. I’m happy to say I no longer have such a fear of speaking, although I’m not the best at it.
And I remembered authors like William Gibson, who wrote about cyberspace in Neuromancer, and Neal Stephenson, who described the metaverse in the craziest of adventures in Snow Crash. I thought about the book’s gang war between the hackers and the feds and how it reminded me of the battle between the cheaters and the game developers in modern games. I also loved how Ernest Cline’s Ready Player One communicated the difference between the haves and the have-nots of the online universe of the Oasis, where the rich folks had the coolest avatars and the poor people couldn’t afford to go to new planets.
My tribe, the nerds of Silicon Valley and elsewhere, remembered those sci-fi nerdy things too. And now they’re building the metaverse because they know that the Zoom calls of today just aren’t going to cut it. So many people think that the metaverse is pie in the sky stuff. Other people think that the metaverse is already here in the form of online games like Grand Theft Auto Online.
He pointed back to the disappointment that Second Life and other virtual worlds failed to reach a true mass market. My favorite line from game developer Will Wright is that a dog-eared copy of Snow Crash is the business plan for every startup in Silicon Valley. Back when he said that, there was some cynicism to it. Virtual worlds like Second Life were being born and the metaverse reference really required you to accept an experience that wasn’t quite there. That makes some people think this idea will forever be a failure.
I think they are wrong. Those people who think the metaverse of our imaginations will never come should study the last six years of AI. After decades of failure, AI started working in the form of deep learning neural networks. There are 8,500 AI startups using this transformative technology. It is an enabling technology for the metaverse, and that’s why Jensen Huang is right to say that we are living in science fiction now.
Just take a look at Nvidia’s Omniverse, a metaverse for engineers where hundreds of companies are simulating their designs now. BMW is building a factory in the Omniverse first, as a digital twin, and it will build the real factory in the physical world when they get it right. Nvidia hopes Omniverse can be used to build out a 3D map of the U.S. to test self-driving cars. But tools like this will also make it easier to build the maps for metaverse games, which will stand on breakthroughs made in other industries. Nvidia said today they are making Omniverse available to more than 40 million 3D designers and making it viewable in AR, VR, and traditional screens.
Now Strauss Zelnick, the CEO of Take-Two will speak about his view of these new technologies and throw some cold water on them. But it should be our ambition to set the quality bar so high on the metaverse that we could impress someone as skeptical as Strauss. And while I happen to know he isn’t a fan of VR or the metaverse, but he is a fan of some of the other major technologies we will discuss here.
The fact that people like Zelnick, Sarah Bond of Microsoft, and Mike Frazzini of Amazon are here is an indicator that the biggest companies in gaming and tech are seriously thinking about the issues we’re going to address here.
What’s exciting now is that some leaders are making their chess moves now. Mark Zuckerbeg made a huge bet changing the company’s name to Meta and invest $10 billion-plus a year into Facebook’s metaverse efforts.
And Brendan Greene announced his Project Artemis. He wants to build a planet-sized world and fill out the world using a combination of game design, user-generated content, and machine learning.
As Matthew Ball of Epyllion pointed out in a 30,000-word explanation of the metaverse, the real metaverse is going to be immersive. It’s going to feel like you’re inside another world. As Mark Zuckerberg said, it’s going to deliver a feeling of presence, or the sense you have been transported to someplace else. I want to feel like I’m walking into the world of Blade Runner or The Matrix. This is not the feeling that you get when you are inside an online game today.
Another important thing about the metaverse is that it needs to exist with the real-time internet. Subspace COO Ron Williams will explain how his company is building a parallel internet to optimize for latency, or delivering interactions in real time, with no delays that ruin the experience. When we are in the metaverse, we’ll want it to be snappy. There are almost no products on the market today that have such snappiness in everything from gameplay to payments. It’s all kind of clunky, especially when one company’s product has to talk to another’s.
If you are still skeptical about the metaverse, NFTs, blockchain, and other things that sound like snake oil, I would suggest that you follow the money.
We have just gone through an extraordinary period of growth, where more money went into games than ever before. Drake Star reports that $71 billion was invested in games in the first nine months of the year, through acquisitions, investments, and public offerings. That’s double the rate of investment for last year.
A lot of smart people, from big private equity firms like Blackstone to Silicon Valley VC funds like Andreessen Horowitz, are investing in games. There are many home-grown game funds, started by former operators of games, doing those investments. The money for the metaverse is coming from both outsiders and insiders.
And while we follow the money of some of the smartest investors in the world, we have to remember that games are hard. Investing in them is not a slam dunk. The public markets are shaky. And so we shouldn’t put all our eggs in the metaverse basket.
Mike Sepso of Vindex will talk to us about why the game industry needs esports to succeed. We will talk about new categories that could deliver growth, like AR/VR, NFTs, play-to-earn, emerging markets, creators, user-generated content and modding. We have 33 sessions, four roundtables, and 89 speakers. Half of them come from diverse backgrounds.
I love the ambition of our speakers to shake things up. The biggest companies in the game industry are happy to sit on the sidelines, milk their current audiences, pour huge budgets into marketing to drown out competitors, and let others take the risks. They are busy finding new ways to tax the industry of creators and the communities of gamers. They want to bundle things in a way that forecloses competition.
We should try not to laugh at the nutty ideas from people who want to change the status quo. I recall how much derision Magic Leap encountered when it raised nearly $2 billion and hired 2,000 people to build its mixed reality glasses.
With Facebook changing its name to Meta and Zuckerberg saying he’s putting $10 billion in, I think we can all see now that Magic Leap wasn’t spending enough money. For sure, Apple, Google, and Microsoft are spending a lot of money too because they all understand that the metaverse is really about the next generation of the internet.
When I look at the capital markets, and the amount of money they are putting into games and the metaverse, I see they are betting on change. You don’t orchestrate something so huge, something on the scale of the Manhattan Project and have nothing come of it. The metaverse will happen because capital is betting it will happen.
Now a lot of people made jokes about Zuckerberg’s recent metaverse speech, the same way they used to make jokes about us nerds. Gaming was in the nerd ghetto for so long. It has emerged into the mainstream. Young people today grew up in a world where games and tech are cool. When the nerdy gamers play esports at school, they’re often joined by the athletes. Gaming culture has become so pervasive that it has bridged the divide of the jocks and the nerds. Gaming’s impact on culture is finally being felt, and it is good to remember games are a great equalizer. If you’re the strongest athlete in the world, or you’re a scrawny kid, with games, you still have a chance at esports greatness. This is a reason why, as this generation and the next one comes of age, gaming is only going to become more pervasive. Now is the time for the revenge of the nerds, as there are companies building every piece of the metaverse and people who ignored this before are getting up to speed.
As Zuckerberg astutely observed, games have arrived and they will lead the way to the metaverse. They’re already engaging many people for hours a week, and it’s not hard to convince those people to spend even more time in the metaverse. And while we can expect Zuckerberg to create a walled garden full of Facebook-owned properties, it was interesting to hear him say that he believes the metaverse should be led by games, that it should be open, that it should not be built by just one company, that it should respect privacy and safety, and that it should be interoperable.
These are populist messages that we can expect to hear from a revolutionary like Epic’s Tim Sweeney. Like Roblox, Epic has been positioning itself for the metavese as well, adding features like concerts to Fortnite, which remains one of the strongest games in the world. As Sweeney’s antitrust lawsuit against Apple and Google suggests, we are seeing a time when the game companies themselves are challenging the platforms that they depend upon and have to pay a tax to. Whether it comes from Facebook or Epic, the metaverse is emerging from multiple directions.
If I see a plan in what Zuckerberg is doing by being the first to bet his company on the open metaverse, it is to get game developers on his side and drive a wedge between developers and the other platforms that aren’t so open.
I see a war coming between Facebook and Apple, which has been very quiet but is working on its own technologies for the metaverse. The business models of these companies are opposites. Apple sells devices, while Facebook sells ads. Apple charges premiums for its products. It has the highest quality, but it is often inaccessible to the masses. This is why Apple has 600 million consumers, and Facebook has nearly three billion.
Facebook, by contrast, gives away its products for free, or it sells its Oculus Quest 2 virtual reality headsets for low prices. Its advertising model generates enough revenue to subsidize the free products. In return, Facebook asks for a lot of personal data so that it can better target ads and generate more value with each ad. Pushing this business too far has gotten Facebook and Zuckerberg in trouble, and it is why Zuckerberg needs to regain some cred.
But this model is like the old razor and razor blades model of game consoles that we gamers know so well. Give away the razor, and make money on the razor blades. Lose money on the console, but make up for it with games.
When you have as much ad revenue as Facebook, you can afford to give away things for free, like your social networks. In fact, Facebook could probably afford to pay us to use its products. That could make it tough on Apple, which hasn’t made a lot of friends in gaming thanks to its focus on privacy over targeted ads. Apple doesn’t want to wield so much control over the ecosystem that it becomes friendless and repeatedly sued for anticompetitive behavior.
I think Facebook should take the long road and realize it should evolve and respect the skills of game developers in holding the attention of gamers. That is, Zuckerberg should really live up to his ambitions and knock the open metaverse out of the park. If he delivers the open metaverse and Apple doesn’t, it will be free. It will be accessible, and a lot of people around the world who don’t have access to the finest technology will be able to use it.
If he gets the users into the metaverse, the brands will come, and they will give him advertising revenues like he has never seen before. And that will enable him to subsidize his devices and bring them out at prices that everybody on the planet could afford. And I would go one step further. He talked about the creator economy, about people like streamers who are making a living by being influencers that are courted by brands. He said the goal was not only to create a good business, but to create a full economy for creators and developers, so that they get to share the benefits of the metaverse.
Zuckerberg should not only give away his products and services for free, as he has done in the past, but he might also need to pay us. He could pay us for giving his social media and his devices our attention. You can call it universal basic income, and it just might get Zuckerberg his cred back and lift a lot of people out of poverty.
Greater access and inclusion
And we definitely can’t forget that one of the byproducts of this war should be greater accessibility and inclusion.
While we’re celebrating growth, we’re not pretending that everything is OK. We can’t simply focus on growth alone. We have so many other perspectives to consider. This is not just a Squid Game. We should remember Black Lives Matter, Stop Asian Hate, and the Me Too movement. The lesson should be that no one should be left behind. Every day, I learn that I should seek out not only the views of my own tribe, but the different perspectives of many.
When we acknowledge our blind spots and embrace diversity, then we will have that true chance to bring games and the metaverse to everyone on earth. We have to remember that it takes a village to succeed with something as big as the metaverse.
And like I said, it is a complicated war. Rivals such as Google, Microsoft, Amazon, and Netflix will make their own bets. The wild card here will be gamers and game makers. The game developers may seize power. It could very well be that games, not platforms, will become the kingmakers, proving the old adage that content is king.
And the advocates of blockchain and decentralization will make their own bids to seize power from big tech by decentralizing everything that they can, escaping fees and giving people the ability to make a living through play-to-earn games. As AI proceeds to wipe out a lot of jobs, this Leisure Economy supported by games like Axie Infinity will create jobs and enable people to create careers that never existed before. I truly hope that you’ll find some answers here and lead us to the golden age of gaming and bring the non-dystopian metaverse to life.
Thank you for continuing to come to our online events and keeping your ties with our community strong. I hope we’ll see each other soon, in person or in the metaverse. And if we do, try to remember to thank the nerds.
GamesBeat's creed when covering the game industry is "where passion meets business." What does this mean? We want to tell you how the news matters to you -- not just as a decision-maker at a game studio, but also as a fan of games. Whether you read our articles, listen to our podcasts, or watch our videos, GamesBeat will help you learn about the industry and enjoy engaging with it. Learn more about membership.