Where does the metaverse fit in the future of gaming? Perhaps someone who played Pong when it first came out, and coded text-based games on a PDP-1011 released by Digital Equipment Corporation in the early 1960’s has some good insight here … especially if he’s currently the CEO of one of the most important companies in gaming.
I’m talking, of course, about Unity CEO John Riccitiello.
Unity makes software that makes half the games on the planet, it’s a huge company. They’ve recently bought an ad network (ironSource), had another ad network jump up and say no, buy us instead (Applovin), and they have a lot of creator tools for 3D creation, game creation, all that stuff.
In this TechFirst podcast we’re going to chat about a recent Unity report on multiplayer games and the massive growth we’ve seen in multiplayer games. We’re also going to chat about the odd correlation between people who play multiplayer games and people who actually pay for games. And we’re going to chat about the metaverse, of course.
In between, we’ll get little bits and tidbits from John on the games he built, the games he built with his daughter, and the very first game that he played … which, of course, is Pong.
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Transcript: Unity CEO on on gaming, ironSource acquisition, metaverse
(This transcript has been lightly edited for length and clarity.)
John Koetsier: John, it’s been probably two, three months since we last chatted. You acquired a company, or at least set an agreement in place to acquire a company that is ironSource. How’s it going?
John Riccitiello: It’s going great. Obviously, a busy summer. You know, we’re running a business in a dynamic market. Obviously, the stock market’s had its roller coaster and I try not to look at that every day. And we announced a merger with ironSource and we feel great about that. All in, in the world that we live in, we’re doing great.
John Koetsier: Living in a dynamic environment. Yes, that is one way of putting it [laughing], there’s many things going on. AppLovin tried to get in on that deal. That was quite interesting, you do not see that every day.
John Riccitiello: Well, you know, it’s wonderful to be loved by everyone.
John Koetsier: [Laughing] Ah, good answer. Let’s talk about the report. You released a report on gamers and gaming. And I know we’ve seen it before, but half the world…more than half the world plays games. It’s kind of mind blowing if you think about it.
John Riccitiello: So look, I’ve been in the game industry a long time, you know, back in the nineties. The first game I ever played was Pong, so one could argue that was the very first… [laughter].
Back in school, I wrote really miserable text-based games on the PDP-1011, when I was in college at Berkeley, one computer shared by three university campuses. That computer [was] less powerful than like an iPhone 8.
So, you know, the world has moved on, but it’s an area that I’ve had passion and love for for a very long time. And I can remember, so the late nineties, when it was a miracle if a million people would play a particular game. And we used to give awards to games that achieved a million players. And I remember prognosticating about the first two-million player game, and the first five, and the first ten. We stopped doing that when it got kind of obnoxious at the first twenty. But remember, when you start to have games out there where 10 and 20, sometimes 30 million people are playing them and then you realize that there’s just on Unity alone, over a thousand games published every week, it adds up.
And, you know, the game industry used to look up to music as a bigger industry, and from music to TV to being a bigger industry, from TV to film being a bigger industry.
And we’ve been jumping over those hurdles to become the world’s most pervasive medium.
And there’s a lot of reasons, I think, for that. First, it was enabled by smartphones more than almost anything, because you’ve got a computer in the pockets of nearly 4 billion people on this planet. But the second thing, is it’s just really compelling entertainment. It’s one thing to be told a story — either in a book or a movie or a television show — it’s another to be part of a story, to be involved in it, to be engaged in it. And I think, as a species, engagement’s important. We don’t want it to wash over us. We want to be involved in figuring out how it all works. And I just think that’s more compelling and, you know, where I still think we’re in infancy relative to what’s possible and what’s going to happen, but it’s no surprise that it’s gotten to be the most pervasive medium on the planet.
John Koetsier: I want to get where it’s going as well, and we’ll get to that in just a little bit. Want to hit some of the high points of the report. One of the things that it says, that 91% of people, nine out of ten people who play multiplayer games play across platforms, like somebody’s on mobile, somebody’s on PC, somebody’s somewhere else on a console, or whatever.
Clearly, you can’t just build for one platform anymore.
John Riccitiello: So there’s, let’s tease apart two things, right? So, one of them is that 91% of players cross play. That means they play on more than one platform. And then there’s the second issue, which is over half of them play with other players.
So, you can play a game by yourself, like, figure out a Candy Crush on your PC, on a mobile device…you can play it in more than one place, Bejeweled or whatever you might be playing. Or a lot of people, you know, with what gets shipped with a new device, like we have some basic games out there, card games and such, and so they’re playing on more than one device.
And what that’s suggestive of the fact is that, you know, back 20, 25, 30 years ago, people would say, “Well, wouldn’t it be amazing if most of the world had a computer of some sort?” Now, certainly in the industrialized world, people have more than one and if you start thinking about it, I’m guessing that most of your viewership might have a smartphone, might have a PC, might have a tablet, might have a second mobile device that they use one way for work and one way at home. They might have a game console or a Nintendo console. And so, what that speaks to is the world’s gotten richer, but those devices have gotten more important in our lives.
And if you really start to think about it, your dashboard on a modern car is driven by a CPU and GPU, and it’s interactive. And so, really this stuff’s surrounding us. The second thing that that speaks to is humans like playing with other humans. So, if you take most any of the big games that show up cross platform, a lot of them have a single-player campaign. So, one of the more famous games and more successful games on a global scale is Call of Duty from Activision.
John Koetsier: Yeah.
John Riccitiello: That’s a shooter game. And I think most people in your audience will know what that’s about, but it’s basically about prevailing in a war scenario. It’s obviously just a video game, so people are really having a lot of fun with it.
It doesn’t feel like life or death, it feels like Rock, Paper, Scissors, except…
John Koetsier: [Laughing] a little more intense.
John Riccitiello: And it gets massively intense. And historically, if you go back 10 years ago, the majority of people that were playing that game, and games like it, were playing a single-player campaign. What does that mean? Is they were individuals or part of a squad and they were trying to prevail over the computer software. Software itself had adversaries for you, but invariably those adversaries were either too good or not smart enough.
And I remember, certainly 15 years ago when that was the norm, you know, you’d realize there’s a pattern. They stay behind a blind, but every third shot they pop their head up. So you can sort of time against that ’cause that’s what the software was written to do. So, shoot, shoot, pop…I got ’em, right? So, they didn’t behave like humans.
Now, they got smarter and the AI definitely got smarter behind it, but that ultimately gave way to the reality that playing against another human was infinitely more unpredictable.
And you had just a little more satisfaction imagining that somewhere on the other side of the world, the other side of the university campus, or, frankly, two bedrooms over, against your sister. Didn’t really matter. It was somebody else over there that took you out, or you took out, or whatever it was, it just … it’s more human, and people really like it. And I think, you know, you can play…I don’t know, pick your game, play blackjack against the computer or chess against the computer. And while that has, I don’t know, certain advantages relative to learning the skill, it doesn’t feel live. It doesn’t feel important until like in a blackjack game there’s someone sitting next to you and that person’s a human. Now, they may be beside you just digitally, but they’re next to you.
And, or when you’re playing, frankly, anything. I mean, again, you can play a game like FIFA, one of the most important sports games in the world, or NBA 2K, you can play that. Those are great games. But you can play against the computer and that’s satisfying to a degree, but there’s something … it’s hard to explain, but there’s an essence that is fundamentally different when you’re playing with another live opponent.
John Koetsier: I remember office Quake parties [laughter]. And there is something different about that, absolutely. I had to think as you’re talking about NPCs, of course, Free Guy with Ryan Reynolds that I think it’s on Amazon Prime or something like that. He becomes self aware, obviously.
But what’s interesting about what you’re saying is what’s in the report is in the last half of 2021, there was actually negative growth in multiplayer games being made, at least on mobile. This year, there’s 40% growth in mobile and 150% on PC.
That’s a massive shift. I don’t know if that’s pandemic related. I don’t know what that’s related to, but that’s a huge change over the course of 12 months.
John Riccitiello: Yeah, but let’s say that, first off, it should be no surprise to us that the world’s first truly global pandemic in a century had an impact on us. So, obviously with deep sadness for those that have experienced loss, but it was a big deal. And, it’s affected everything. If you read the data around education, around fourth and fifth graders have gone backwards in their reading skills for the first time in decades. I mean, it’s been important in more ways than one.
And we’re still wrestling, you know, collectively as a society, in many societies across the globe, with how we’re going to manage like going back to the office and going back to school and all the shockwaves around that. And so, what I would offer is this … I’ve been doing this around gaming for coming on to three decades now. And, one of the things that’s important is just to look at the through line.
So, historically, the industry would grow four or five years, then people would get tired of their — this was before mobile gaming — they’d get tired of their consoles, it was sort of long in the tooth, and they’d play it less.
And then, you know, Sony or Sega or Nintendo or Microsoft would announce a new console, and that stopped people on their tracks and they would not buy anything ’cause they were anticipating, “I don’t wanna buy a game for the one I’m about to get rid of, I’m gonna wait until I get the next one.”
And so the industry would grow substantially, 20, 30, 35, 40% and then have a year to year-and-a-half where it was down or flat because people were sort of holding back on purchase to get ready for the next big gorging moment where we got a new console and we buy a whole bunch of games.
And so the industry, you know, there’s two ways you look at it. If you look at it up close and personal, you say, “Oh my god, growth, growth, growth, declines. What happened? The world’s coming to an end.”
Stand back and get a new perspective, and it kind of looks like a sine wave up into the right where it’s always really been growing, but there’s temporal impacts around when a new hardware device comes around. Now, I would argue the pandemic was a bigger deal than any new console release, and it’d be hard to argue, certainly if you watch cable news, it was the only thing that mattered for about a year and a half. And so, in that world, what happened was at the very beginning of 2020 when people were starting to work from home and stay home from school is engagement levels — ie: the number of hours people were playing and the number of players — went through the roof.
Not a surprise, because those that are first coming into their gaming experiences, you know, 8, 9, 10 year olds. But then people in the prime of their gaming experiences through their twenties and early thirties, they suddenly have more time in their hands and nowhere to go down. Now, we all talk about, like, maybe I hiked more, some people got an intense fit. A lot of other people said, “All I did was stay home and drink wine.” Whatever people did that allowed them to pass the time, but I think what a lot of them did … they gamed more.
And because they were gaming more, the industry jumped up in 2020 and 2021 in ways that were out of trend, massively out of trend. And so, that we start to see in ’22, a little bit of that sine wave up into the right where there’s some correction against that, is not a surprise.
And the other issue is it also impacted developers. And so, look, most games shipped late because people are ambitious around when they want to get a product in the market. And then, because they care about quality, most publishers hold things in order to ensure that what they deliver is of high quality. I would say there’s no question, as we look back at the second half of ’20 and pretty much the first half to three quarters of ’21, production teams, development teams that were building great product found themselves in a situation that they’d never been in before.
How do I whiteboard a solution to a problem? How do I build in fun? And maybe you don’t know this, but a development team a lot of times would literally build out a game with pieces of paper to say, “Is this loop fun? Is this interesting?” And they do it together around a table, and suddenly they’re trying to figure out how to do it around a Zoom camera.
And so, none of those things were quite as productive as they once were. And so, that we are dealing with the aftermath of a pandemic that sort of brought consumer engagement to a new high, but productivity to a temporal low, and then we’re recovering off of that … you know, I would say there’s nothing that I see today to suggest to that the near three-decade long pattern that I’ve seen of increased engagement, increasing number of people that want to work in the game industry consequently making more stuff to deal with that ever-rising tide of consumers that wanna play … my sense is we got years more of that.
And I tried to read less in the weird breaks in pattern that were introduced by, hopefully, a once-in-a-lifetime experience of a pandemic like we’ve just gone through.
John Koetsier: One of the key challenges in gaming that you’re trying to solve by acquiring ironSource is monetization. Trying to find high value players. Interesting in the report, 60% of multiplayer gamers — gamers who play with people — spend money. That’s huge. That’s way out of band from…and I’m talking about in a mobile game where you can spend extra money, get downloadable content, do other things, or a console game as well, get extra things. That’s huge compared to the average gamer where it’s pretty challenging to find monetizable players that buy extra stuff.
John Riccitiello: So, look, let me tell you first off, the dynamics of who pays or who doesn’t in the aggregate though, it’s still a minority that pay for things, and most games are monetized through advertising…predominantly monetized through advertising. The second thing is, back to just how compelling multiplayer games are and why people would rather play against another human, just lay down that fact.
Once you’re playing against another human, putting up a buck to get a little bit of an advantage…if the advantage is nothing but livery so my dance is cooler, right? My avatar is cooler. That’s worth the buck. And so, multiplayer gaming is definitely an aspect of this that’s going to, the more that increases in the percentage of total gaming, the more people are going to spend on in-app purchases, I think.
The next question is, most of mobile is single-player gaming.
And one of the things that Unity recently released is, inside of Unity Game Services, is a self-serve hosting solution for people that want to build multiplayer games but never have before. ‘Cause getting to a multiplayer game experience is hard. It requires a different kind of engineering than a single-player game does, and we enable that. And so, I fully expect more mobile games to be multiplayer games, really starting towards the end of this year, ’cause that’s been true for a while, and to accelerate into ’23 and ’24, and that will lead to more engagement in gaming.
I think multiplayer in mobile is a big story. It’s a big reality. Initiating kind of now, but accelerating over the next couple of years and what’s going on out there.
Now, you’d mentioned what we’re doing at ironSource, the merger there. And really what that’s about, relative to the creators we support, is two things.
One is, there’s a technology that they have there around their Supersonic publishing platform that enables a developer or a publishing organization to get better, detailed, nuanced feedback around player engagement before they release the game, and more so than you’d get from typical A/B testing. So, a key part of the thesis is making those technologies available more broadly to Unity developers. And remember, in mobile for example, that’s 74% of them.
So, for those people out there to help them make a game that is frankly just better from the player’s perspective.
Now, that developer may be, I mean, I built games with my daughter when she was in middle school, using ActionScript and all sorts of tools that predates Unity. But, making a better game is everyone’s ambition. Even if all you’re doing, as I was doing, was helping my middle school daughter do a homework assignment and hopefully then showing off to her friends. There was no intent to monetize or do anything commercial. That was just for the love of something and for the education.
So, if people are on that end of the spectrum, we could help them make something better … if that’s what they want. Of course, if they’re up to being parts of large commercial organizations, they want a product that engages more, because more engagement means generally getting paid better, and getting paid is part of their goal set when they create a game. So that’s one part of the equation.
The other part of the equation is that a combination of analytics and advertising is one way to get paid.
And, more engagement means more hours of play, which means more revenue for a game developer. And, better targeted ads means getting paid more. And then the ability to use our network to find users that would play their game, meaning they could target their ads better. Those are all good things. And so, part of the ironSource deal is it enables us to do that bigger and better on behalf of our customers.
So, really the story of that merger is born in a long term commitment to helping game developers find the success that they’re looking for. Whether that success is only making a better product and no worries at all about monetization, or whether it’s making a better and more engaging game and helping them monetize it better. We’re here for both scenarios.
You know, we have a deep love of the indie that’s just kind of doing it for the love of it. But we also know a lot of indies and of course many commercial organizations are also looking to make a living from it.
John Koetsier: And some people who start indie just hit the big time and do amazingly well. You said off the top that we’re still just scratching the surface of what games can be, what stories they can tell, how we can insert ourselves into those stories. Let’s talk a little bit about metaverse and gaming. What does gaming tell us about the future of what the metaverse could be?
John Riccitiello: So, first off, I think there’s precious few concepts that are more hyperinflated and confused than what is the metaverse?
I saw an analyst report that said by the end of the decade it’s going to be a $13 trillion industry. I mean, wow! I mean, I hope they’re right [John laughing]. I have no idea how they got to that or even what it means. And I see quotes from so many like really important CEOs saying some things that are sort of, in my view, nonsensical.
And the problem with that is not that I care if another CEO says something nonsensical, it’s that it’s put a label on this space that I think within a year or two we’re gonna say, “Wow, the metaverse came and went, and it’s sort of gone now and it’s out of fashion.” It might be like buying a meme stock that no longer…
John Koetsier: That would really suck for Mark Zuckerberg, he just changed the whole company’s name [laughing].
John Riccitiello: Yeah. And, you know, I don’t want to comment on that, but I just think it can be just fundamentally misinterpreted. An analogy I might use is, it got caught up with the baubles. So, let’s take another sort of important…take any holiday. You know, Veterans Day we mostly remember the people that defended our nation. Christmas, for me, it’s really a time where I get to see my family and people I care deeply about. But if I use sort of any of these holidays…let’s use Christmas as an example. To me, that’s about family. It’s about time. It’s about slowing down. It’s about turning off my cell device so I can really listen to my sister or my brother. Or it’s about hugging my kids a little longer. I mean, it’s about all of those things. It’s not presents and trees, and ornaments, and ribbon. Although, all of those things are present.
And, if you try to understand Christmas through the lens of presents and trees and ornaments etc., I think you miss a lot. Because you kind of miss the motivation that got us there to begin with. And I could say the same thing about Veterans Day, or Fourth of July, or Hanukkah, or any other thing that sort of has this tradition but it draws us together as a culture.
And my biggest problem with the metaverse is it’s got nothing to do with AR, or VR, or avatars, or so many of the things that people are describing. It’s actually pretty simple. And it’s, we’ve lost the simplicity because the baubles in front of us, the ornaments in front of us have obliterated the view of what’s really happening. And so that’s troublesome to me, because I think that misunderstanding is going to wash through the media where they’re going to say, “Metaverse, metaverse, metaverse,” you know, “Long live the king,” followed by “Metaverse, metaverse, metaverse,” you know, “It’s over and gone and dead.”
John Koetsier: The emperor has no clothes.
John Riccitiello: So, what [the metaverse] is in my view, is pretty straightforward. It’s the next version of the internet.
Now, most of the things today on the internet are, you know, we went from text to 2D and photography. Now we’re in a place that bridges really where most websites have photography and film on them but, you know, less film and more photography. Just go with the great websites you visit, they’re sort of just you interacting with a purchasing website — maybe you’re buying a t-shirt or a pair of shoes, or you’re browsing for something, or you’re going to Wikipedia to read about something — whatever it is, think of today’s internet.
Now, tomorrow’s internet is going to be real-time. What does that mean? It means the next frame isn’t something that’s already on the site. It’s created like a video game in response to your input. So, it’s an image or an animation that you were in part instigating and it’s rendered for you based on your input, just like a game. It’s likely to be 3D … it won’t always be 3D, but it’s likely to be 3D. So it’s real-time, it’s 3D.
It’s likely to be persistent, meaning, I mean, there’s nothing that’s persistent about most websites. You go to Wikipedia, unless you’re an editor inside of Wikipedia, you look something up, the world didn’t change because of you, but in these worlds they will change.
Because it’s likely to be interactive, meaning there’s somebody on the other side. It’s multiplayer, if you will. It’s likely to be social, likely to be persistent. It’s all those things taken together. And, where I think people sort of get lost is it’s about avatars.
So, one experience that I would say is probably very true is most of the world can’t afford to travel. Most people in the world can’t afford to really travel to some amazing places. You know, I’ve never seen the apes in Uganda. I’d love to see the apes in Uganda. I’ve not been. Maybe I’ll get there someday, but it’s expensive, it’s a lot of time away from work. It may not be something that ends up in my life. And, I have seen something maybe you haven’t seen yet that’s coming in the way of hardware that if you take that hardware in the right software, I can literally feel like I’m there. I can consume that experience … not for $20,000, but for $2. And it enables us to consume that experience.
Another thing, there’s real issues out there like … this one may not seem like the most pressing, but in the world of luxury goods, you know, most of the top-end luxury brands have their specialty boutiques in the top 20 cities, but they’re only really getting to maybe 10 or 15% of the population who would otherwise want to buy their products.
And what a lot of them are doing right now is working with Unity where we can create virtual try-ons in their own living room and that whole boutique comes with them. I mean, look, the great brands of high-end luxury that you see on Rodeo Drive or all the fancy streets of Paris … they don’t want to sell through a mass retailer. They want that connected … I mean, first off, you can debate whether or not the world needs $5,000 purses or $2,000 dresses, but the world does have $5,000 purses and $2,000 dresses and $2,000 suits … God knows I might look pretty nice in one if I had one. So, in that world, they want to connect with you in a deeply personal way.
Now, the first one, going to Uganda, you don’t need an avatar.
Do you really want your avatar walking up and collisioning with an ape? I wouldn’t want mine. But if I’m trying on a suit, or my wife’s trying on a dress, or my daughter’s shopping for a purse, we’re … imagine, we can be collectively in the same space, dressed collectively in the ways we might want to compose for the wedding we’re going to, or whatever happens to be.
And there we’re interactive, we’re social, we’re 3D. Very different from looking at a dress on a rack or a little video of a model that doesn’t look like me, trying it on. So, I can give you hundreds and hundreds of examples.
Some people today are working on some really complex problems.
Like one of the problems that, you know, I can’t give you all of this because I don’t have permission to talk about it in depth, but people are using it in the world of biology and chemistry where they’re literally using 3D models to, around the proteins that end up being cancerous and take our lives. They’re literally doing trillions of frames of modeling per day to train AI algorithms to solve cancer, at least partly solve cancer. And that’s the next version of the digital revolution that is real-time 3D, or in the parlance of some, the metaverse. It wouldn’t be possible without those technologies. And I want those things to happen and it will make our lives better.
And then, we have a glimpse of that already in gaming, you know, products like Roblox and Fortnite. They’re live worlds to people. They’re 3D, they’re real-time, they’re persistent, and they’re massively enjoyed by audiences around the world. Now, they’re not the metaverse. They are a destination within a metaverse, a ride in the theme park.
Server infrastructure supports lots of storage a lot cheaper. Databases are smarter. All of that underpinning technology is coming together to create the foundation that makes it possible for us to go from, you know, fairly pedestrian websites to what science fiction was talking about not that long ago, and people like Neal Stephenson was talking about when he wrote that amazing book Snow Crash, and Hiro Protagonist was brought onto the scene with two lives, one fully invested in the digital world and one a little less glorious in the world of pizza delivery.
John Koetsier: Absolutely. Well, this has been a pleasure. Thank you so much, John, for your time. Do appreciate it.
John Riccitiello: John, thank you very much.
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