Former VP at MGA Entertainment Inc
- Metaverse developments and initiatives across Meta Platforms (NASDAQ: FB), Activision Blizzard (NASDAQ: ATVI), Electronic Arts (NASDAQ: EA), Take-Two (NASDAQ: TTWO), Roblox (NASDAQ: RBLX), Unity Software (NYSE: U) and others
- Advertisement inventory and deal structure opportunities within metaverse platforms and applications
- Key investment and product roadmap developments across NFTs (non-fungible tokens), virtual reality, measurement and digital asset creation
- Five-year outlook – industry winners and losers, advertising revenue opportunity size and downside risks
Could you define the metaverse and the companies across the value stack investing towards it and trying to accomplish things? We seem to be slowly approaching a standard definition of what the metaverse might evolve into.
You seem to be defining the metaverse as multiple virtual platforms through which a broader virtual reality exists. Would you therefore define some existing experiences such as Roblox or Unity as metaverse in their own rights? How do you think about whether or not persistence requires the singular virtual world vs an amalgamation of many different community experiences that exist virtually?
Do you think there will be a certain degree of consolidation on that platform or ecosystem dynamic? If not, are there largely fragmented areas of developments that are occurring in the metaverse more broadly in the value sector that do need consolidation? The NFT [non-fungible token] dynamic is one where there are so many cryptocurrencies and blockchain technologies that are really pushing for this and I’m curious if that scenario, that persistence and durability, is a key requirement of this metaverse, that at least starts to consolidate towards something that’s more winner takes most. Which areas across the development sphere are more inherently prone to consolidation?
You mentioned it seems there’s a platform-agnostic perspective from the coin level where it’s a utility where you’d want whatever currency that might have been invested in by end users to be able to be used in the market. If you think of an Immutable X as a similar layer to an NFT marketplace being not the right model in the sense that they’re very skewed solely to Ethereum, is it right to think that from a coin level, things will remain point-agnostic in the long term?
Could you elaborate on the nature of the nuance you expect between what Meta builds and what Microsoft builds? There seem to still be multiple schools of thought around what on-ramp technology types will be used to drive these virtual immersive experiences, whether it already exists with gaming platforms such as GTA and Fortnite vs more AR or even VR. What’s most promising around driving the actual on-ramp? Are you negative on VR? I think many people don’t expect wearing an Oculus to be where the world heads and that it’s not necessary. How might the hardware component evolve?
What are the commercial aspects of the metaverse and how might that evolve? You highlighted a few of the early opportunities that brands are considering, including Fortnite with all these skins where you can be characters such as Thanos or The Mandalorian. You also mentioned the community aspects with Vans World or Gucci. Even more recently, Adidas or Nike are thinking about NFT initiatives to digitalise their existing assets. Do you think the biggest opportunities will come through these brands digitising their assets through NFT-based technologies?
It seems gaming platforms all have their own coins, including Roblox and even Ubisoft just announced Quartz. Is there a need for that to at least be something that transcends the platforms and carries over? Even from a conflict of interest, would many of these separate platforms want something that can actually be brought outside of their platform? What bottlenecks might have to be worked through to that goal?
How do you expect the evolution of construction of digital assets to evolve, where many companies such as Unity or Roblox are well-positioned to do a lot of it because it’s predominantly skins and consumer goods? As that becomes a bigger thing when we start including restaurants, shopping malls and even real estate, could brands be the frontrunners around digital asset construction? Do you think of a company such as Republic Realm? Who might be the main builders of the assets that get the royalties once they are acquired by the end users?
Considering this from a physical world vertical standpoint, who do you think the laggard adopters are? I mentioned a lot of it’s consumer goods right now where it’s easily transferable. What might be the latest to buy into the metaverse concept as it becomes more about restaurants, shopping malls, real estate and music? Who should we think about driving transitions over to more digital asset orientations over the next decade and beyond?
It seems gaming platforms’ approaches to live services are inherently flawed right now in that there’s a lack of persistence. Apex Legends has subsequent seasons and the games completely update in terms of annual or biannual releases, meaning a lot of the collectable values dissipate as new versions of the game come out. Is that something that might fade away – if you can buy an asset but you can’t take it out of a certain game and doesn’t transcend when a new version of the game comes out? How might publishers be thinking about making collectables and digital assets more long-lasting?
Do you think on a franchise-by-franchise basis, that the revenue generated by live service line items will stagnate or decline in the interim 3-5-year period during which these new assets are being developed? Historically, were you always able to grow it because you had your power users coming in and buying a lot of the same skins or you’re spending the same amount of money or even more in every subsequent season, where now a lot of the growth is from getting them to buy more? Presumably, you could also price those assets up because they are carrying forward longer term. If you examine the live service aspects of those business models in the sense that the brand opportunities are in short supply now because a lot of them have to be developed, could this be troubling for live services if you think about in the short term, 3-5 years out? Is it that once those brands really start to pour in, that’s where it kicks in, so you should inherently allow your live service business to decline or maybe stagnate, knowing that a lot of the upside will come over time?
How do you expect game models to evolve? Axie Infinity has a play-to-earn model and I think it’s trying to do watch-to-earn models. What might be most successful in an increasingly virtual-first world? What’s the persistence element in mind?
Do you think it will be more difficult to develop and innovate a more immersive experience dependent upon your technology type? What’s your outlook for mobile publishers and developers vs other device types – including PC, console and even cloud streaming eventually – as Web 3.0 gets more network scale? Are they most challenged to innovate and build that immersive communal experience, given the device type that it’s putting the experience through?
What are your thoughts on the pacing of the commercialisation within these metaverses over the next five years vs over the longest term? Tim Sweeney talks about a several-trillion-dollar opportunity that a billion metaverse users can drive. Even over the next year, App Annie thinks there will be USD 3bn in consumer spend already within these metaverse apps in terms of the ones that are sandbox or avatar life simulator oriented. How are you pacing the revenue trajectory? What might drive a lot of this from becoming USD 1bn to a USD 10bn to a USD 100bn line item over the next decade?
You defined the metaverse as this place where you represent yourself world-to-world and that’s inclusive of the physical world. How might that play out? Will it be something where if you buy a Ferrari in real life, you can also have one virtually or could it purely be a pursuit of a separate and isolated, where it’s a reputational ranking in a virtual world and the goal is to equip the GDP that exists in a virtual world vs the physical one? Is this something that could happen in tandem vs competing?
Is there any cannibalisation risk for companies from consumers buying a physical vs virtual good and it ends up being duplicative and additive where they’re purchasing a second asset vs carrying things over, vs it’s cannibalising many things?
Engaging with end users in a virtual world is, to an extent, a way to target the consumers. You mentioned that this hybrid transition could play out over the next 5-10 years. Could the USD 300bn spent in advertising in the US annually grow significantly due to the opportunity to potentially double up GDP, meaning there’s enough ROI to have all these companies increase their advertising spend? A lot of those branding opportunities are also advertising in the mindset of the companies themselves.
Do you think in an increasingly internet-driven world that content companies – the studios as an example – just become a more top-of-the-funnel customer engagement acquisition mechanism vs a pure way to monetise? We could consider streaming services and the propensity to pay for the consumer. How much longevity do you think there is for products such as premium video, or how they are utilised, perhaps becoming more immersive and persistent vs being structured simply in episodic and film structures? Could this just become a way through which platforms can resonate with the end users?
Does that necessitate an eventual remarriage of content distribution? At the platform level, do you expect content-driven M&A on the horizon where Meta or Microsoft try to acquire a lot of these content companies just to have more assets to leverage, to make these digital assets? Alternatively, is this something that’s openly partnered and that it’s just structuring deals and we won’t have a lot of the studios or anyone getting acquired over the next decade or two?
To what extent could a potentially outdated regulatory structure be a bottleneck? The FTC [Federal Trade Commission] is placing the Amazon-MGM deal under regulatory scrutiny as well as WarnerMedia-Discovery. Could a lot of innovative opportunities be held back by transaction headwinds, where these M&A deals are going to be difficult to push through because there’s not a full understanding of exactly where the world might be in 10-20 years? How might the regulatory landscape evolve?
You mentioned getting the banks and the SEC on topic and in real time with the developments occurring around blockchain, crypto and NFTs, given that might be the future for payments. How much of a bottleneck is that as well? How much of a ceiling on revenue opportunities or growth could macro factors cause for the metaverse?
How long-lasting could regulatory trends be? Regulators won’t get up to speed over the next decade, because it’s generational and the people who are overseeing these things need to be savvy as to exactly where the world’s headed.
What 3-5 developments or initiatives are you monitoring that haven’t been figured out yet, but need solutions that could dictate what the world will be like the most?
Is the Apple-Epic ruling and fallout there even that important when considering the waning importance of the mobile phone in this evolving world?
Which dark horses, start-ups or disruptors are you monitoring that might play a way bigger role in this evolving metaverse than they typically get credit for?
Who do you think stands to win out the most? It seems this won’t really be a winner-takes-most market, but a lot of different areas in the value stack have a lot to benefit. Which companies do you think we might start to forget about in the next 20 years?
Is there anything else you would like to comment on?
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