Above: Streamlabs enables streamers to make money from tips.
GamesBeat: The money in sports related to media is very interesting. What’s the money in games related to media right now? All the money is going to game companies. Until you had YouTube and Twitch coming along, there was no value that anybody else was getting from games. But now you have those, and people are making money independent of the game companies. That’s an interesting sea change.
It makes me feel good that a lot of people are going to create their own work for jobs that didn’t exist a generation ago, because they’re somehow fans of games. They’re getting paid to play games in some way. YouTubers, Twitch live streamers, cosplayers, esports athletes, attorneys and videographers for esports teams, all these people are in jobs that didn’t exist a generation ago. That’s fun.
Audience: Could you comment on the effect of GDPR on the industry, if it will have any?
Pachter: I guess they’re required to comply. [laughter] So they’ll comply. I don’t know that there’s much private data—the publishers probably have none. Maybe Activision has some through battle.net. But publishers honestly I don’t even think know the device. It really comes down to the console manufacturers. They know who downloads stuff, who logs on, who’s playing what game. It’s easy to protect that. I don’t think they do anything with that data anyway. I imagine they would if they were smart enough to figure out what to do.
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Amazon is at bigger risk, because Amazon will advertise to you while you’re playing a game. They’ll say, “Hey, here’s a new pot or pan. Are you out of trash bags? Do you need some more?” That’s kind of scary. But I don’t think compliance, for the guys who aren’t using data now, is going to be very hard. They’ll comply, and they’ll develop their use of data in compliance.
I think GDPR ends up becoming de facto the rule around the world, because if you’re going to comply there you might as well comply here. I don’t know how onerous it is on U.S. use of data, but it doesn’t seem like it’s greatly troubling. Facebook is going to do the same thing everywhere, and if Facebook can do it, Microsoft and Sony can figure out how to do it. Data breach is a bigger issue. Sony’s had hacks before. I’m surprised Microsoft hasn’t had a hack yet, but you know there are guys trying it.
Above: Watch Dogs 2 blends cyber crime and the hacktivist community.
GamesBeat: I did a story this week about how DDoS attacks are still happening, because attackers are commandeering IoT devices. There’s 20 to 100 times more devices that you can marshal for $10 or something like that to attack somebody now.
Audience: I work at a mobile game company, and we have a lot of advertising-based games. GDPR is going to have a big effect on that whole system.
Pachter: I guess you do, because you know who the person is through the device.
Audience: Right. A lot of the industry is based on behavioral advertising and using personal data, and now there’s additional consents and additional barriers.
Pachter: I have to say, I’m blown away. I literally, today, activated Facebook and Twitter on my laptop. I did it yesterday too. Today I had to sign in to each. Blew me away. On the same laptop. I didn’t cut off the connection. They must have updated something, and they’re making me do this every time. I had to check a couple of boxes. I’m not sure what I checked, but I’m sure I gave permission for something. [laughs] I’ve been noticing that a lot, though, on Facebook and on tons of apps on my phone.
We were joking when Klout shut down this past week. When Klout announced it was shutting down, something like 10 million people went to check their Klout score before it disappeared. Immediately, when I went to Klout, it asked me for all these permissions to use my data. I’m like, “Fuck you, no,” and I just deleted it. I haven’t been on it in two years. It reminded me that even they’re doing it. I think that’s the way out. Just getting people to opt in. If they want to play your game, they’ll opt in, if it’s free.
Audience: I don’t know if you saw the Supreme Court striking down PASPA this morning. What do you think as far as the impact it might have on games?
Pachter: Skillz is doing skill-based gaming, which is obviously different. Betting on the chance outcome—ultimately I think that esports gets much more interesting if you can bet. I’ll defer to you guys’ judgment, but I assume each state has to legalize it, and states can still make it illegal. I don’t know what our state is going to do. I can guess what the great state of Texas will do. You can’t carry a beer out of a restaurant, but you can carry a gun in and out. I would think you won’t get very many states legalizing sports betting, but you’ll probably get the tax-hungry ones. If you get sports betting, esports betting will be a lot of fun. That’ll bring a lot of interest.
Above: Rahul Sood’s Unikrn is backed by celebrity investor Mark Cuban.
GamesBeat: I’ve heard the statistic that illegal sports betting is $150 billion a year in the U.S. alone. The whole game industry worldwide is $138 billion. Rahul Sood is pretty happy today. He’s the founder of Unikrn. It’s a company that combined esports betting and cryptocurrency. He’s got all his buzzwords covered. But it’s all legal for him now.
Audience: What’s your thought on Robot Cache and this distribution model of allowing resales?
Pachter: I think that they came up with an elegant and ridiculously simple solution to a problem that was insurmountable by cutting the publishers in on a resale of a digital copy. I think the publishers are interested. I don’t think that the seller is going to be pissed if he only gets 50 percent of the value and the publisher gets a chunk and Robot Cache gets five percent.
Publishers are going to put limitations on it. You might not be able to sell a digital copy in some launch window for a game. But they’ll probably let you do it a year later. I think it’s super smart.
GamesBeat: It was smart of them to give the publishers a say as well. Steam really pisses some game companies off, just by setting any price it wants for a sale.
Audience: The idea of reselling a game without any degradation in quality is an interesting model. How does a resold game fare against a new game in the same market when there’s absolutely no difference?
Pachter: If the publisher gets a big cut, I think they’ll be less concerned. I think they get it. Microsoft’s Game Pass came up before. Game Pass isn’t Microsoft trying to make money from 10 bucks a month. Game Pass is Microsoft trying to get publishers to rotate games through, so there’s a value proposition for the consumer, and the idea is—I don’t know if they have this game. But if you can get Red Dead Redemption from 2010 in Game Pass for the three months before Red Dead 2 comes out, is that consumer more likely to buy Red Dead 2? The answer is yes. Microsoft knows that and Take-Two knows that, so they need to agree on some kind of revenue split to get the old game in there. But it really works.
I have to say, I play a ton of games, but I don’t play every game. I’ve never played an Elder Scrolls game. If there was an Elder Scrolls game in a subscription I was paying for, I’d try it. That’s the whole beauty of these plans. They’re trying to get gamers more engaged. I think the same is true of used games. If you get someone to try two versions ago and they like it, they’re more likely to buy the current version at full price.
Above: You will never find a more wretched hive of fun and lootboxes.
Audience: What’s your sense, collectively, on whether the pressure to regulate loot boxes is here to stay? Some people will put forward the theory that what we’re seeing now is momentum that was generated by a few very controversial implementations that have since been changed, and what you’re seeing come out of Belgium and the Netherlands is just a natural conclusion of an investigation that started back in the wake of that controversy. Will we continue to see movement, either abroad or here in the U.S., or will it just peter out?
Pachter: There are three alternative outcomes for what’s going on with proposed regulation and legislation. Either the publishers comply and get rid of loot boxes, which I think is a low-probability outcome, or they fight, which I think is a high-probability outcome, or they withdraw from those countries and let the consumer bitch and moan, which I think is the most likely outcome.
If you withdraw from Belgium and tell your Belgian fans, “Sorry, your idiot elected officials have bounced us out of here and we’ll go to jail if we market our game, but here’s a link to a French website and you can play the game in Flemish there,” I think that consumer backlash will just defeat this. My bias—this stuff isn’t gambling. It’s just the wrong outcome. I get how, if you pay for something and you have a chance of winning something of value, that’s gambling. The thing you win, by the terms of service, has no value.
I was talking to Joseph Olin outside about how I wish I’d kept my 1978 Porsche 911S, because I sold it for $12,000 in 1990 and it’s worth $60,000 now. But it’s not worth $60,000 now. It’s worth $8,000 now. There’s just some idiot who might be willing to pay $60,000. Who cares if a skin is hard to get and a collector wants it? It has no intrinsic value. They’re going to win. They’ll absolutely win these things if they litigate. But again, do you want to go through the pain, or do you just want to modify the model?
Why are there loot boxes? Because consumers are stupid and they’ll spend thousands of dollars trying to get that hard-to-get thing. If you put it up for sale for $500 they won’t buy it. I mean, I actually think the Chinese solution – posting the odds of getting each item – is the right way to do it. This thing has a 1-in-250 chance in the loot box, or you can buy it for $250. Then people realize, I have to buy 250 loot boxes for $600 to get it? Then they’ll just buy it.
GamesBeat: It’s like putting the calorie counts on the menu at McDonald’s. I still buy it, though.
Pachter: In the U.S., there’s very low probability anybody passes legislation to regulate loot boxes. The guys in Hawaii are just fucking morons. They’re morons. They should not only resign, but they should kill themselves. They’re so idiotic. Seriously. They’re such morons. One of the two idiot legislators said—I forget the studio. But they said something like, “EA shut down my favorite studio in 2005 and I’ve hated them ever since.” He said that on the record. We’re going to legislate against loot boxes? What an asshole.
By the way, their solution was, loot boxes are gambling. Gambling is illegal under Hawaii law. Therefore you can’t buy a loot box until you’re 21. Does that mean you can gamble when you’re 21 in Hawaii as well? There’s no chance that law is upheld. They’re not going to get it passed, because somebody in that legislature actually went to law school. Somebody in their staff is going to look at that Hawaii law. They’re idiots. I don’t think any of that stuff happens.
GamesBeat: An interesting thing that’s going to happen, though, is that blockchain comes in and it gives you uniquely identifiable loot. One of a kind loot. Now that value is going to go skyrocketing, right?
Pachter: But why is it valuable? Because somebody wants it.
Audience: The difference there, though, is that if you tie in virtual currency or cryptocurrency to these loot boxes, it does have value now. You have the ability to take it out of the system.
Above: I’d bet my mortgage that the Shanghai Dragons are going to win Overwatch League this year. Unikrn may enable me to make that responsible decision.
GamesBeat: With Unikrn they have their Unikoin Gold, which is available in countries where it’s legal. And then they have the Unikoin Silver, which is just a virtual currency that can’t be cashed out. They just change that for each country.
Pachter: I don’t know what’s going to happen. I just know that the publishers are pretty resourceful. They’re going to come up with a way to make more money. The consumer is really stupid and they’re going to keep paying for this stuff.
I still think the most brilliant pricing mechanism I’ve ever seen is Fortnite. They create skins that have a limited life. If you don’t buy a skin by the end of the week, it’s gone forever. They charge 20 bucks. Brilliant. People are like, “Oh my God, I didn’t buy that last week and it’s gone! I’d better get the next one.” 20 bucks for a skin. Everybody emulates that, I think. If the publishers can find a way to make more money and eliminate chance, sure. They’d all rather make more money, is the certainty.
