The Future of Media: Movies, the Metaverse, and More | Matt Ball on Invest Like the Best with Patrick O’Shaughnessy

Check Out the Invest Like The Best Podcast Episode Page & Show Notes

Key Takeaways

  •  Over the past hundred years, there’s a been a major shift of attention towards massive fantasy worlds
    • The book The Witcher by Andrzej Sapkowski was written in the 1990s but didn’t become an NYT bestseller until 2015 when Witcher 3 (a video game based off the book) was released
      • The second time it hit the NYT bestseller list was in 2019 when the Witcher show was released on Netflix. The Netflix show tripled the number of players on the Witcher video game.
    • The Game of Thrones book series sold 15 million copies before the HBO series came out. It sold 65 million copies in 8 years after the show came out.
  • There are 300 million Americans that spend 5.5 hours daily watching traditionally defined long-form media  
    • Matt Ball predicts that by 2035, that number will drop to 3.5-4 hours daily and the rest of time will go towards interactive gaming
      • “I don’t think that in 2030 or 2035 that’s five and a half hours a day. I think it’s probably three and a half to four hours and most of that substitution is going to go to interactive gaming.” – Matt Ball
  • From 2007, the gaming industry, excluding China, has doubled and 80% of that growth has been in mobile
    • Being able to play video games on the go on your phone has driven enormous growth for the video game industry
  • “On an hourly basis, video games are still monetizing at fractions of what even standard television is on an hourly basis which makes very little sense when you compare the degree of immersion and focus and distractibility of the audience”Matt Ball
    • “So there’s a big argument on bullish just on monetization there”
  • In the US, there are about 2.1 billion hours of leisure time daily:
    • 75% of that is in the television format
      • 50% of television is watched by people who are 50 or older
  • Generation X plays more video games than Gen Y or Gen Z
    • “Each generation is adopting gaming more significantly and as they age up, their media appetites grow” – Matt Ball
  • The App Store is becoming saturated:
    • “There are more apps than ever before..the cost of installation or awareness that has saturated and escalated so much that you can make something superb and very few people know about it.”Matt Ball 

Intro

  •  Matthew Ball (@ballmatthew) is the former head of strategy at Amazon Studies and an investor.
  • Host: Patrick O’Shaughnessy (@patrick_oshag)

Books Mentioned

  • The book The Witcher by Andrzej Sapkowski was written in the 1990s but didn’t become an NYT bestseller until 2015 when Witcher 3 (a video game based off the book) was released
  • The Game of Thrones book series sold 15 million copies before the HBO series came out. It sold 65 million copies in 8 years after the show came out.
  • The Hero with a Thousand Faces by Joseph Campbell

The Value of Intellectual Property (IP)

  • One big trend of consumer social companies: Supremacy of intellectual property
    • Over the past hundred years, there’s a been a major shift of attention towards massive fantasy worlds
      • The book The Witcher by Andrzej Sapkowski was written in the 1990s but didn’t become an NYT bestseller until 2015 when Witcher 3 (a video game based off the book) was released
        • The second time it hit the NYT bestseller list was in 2019 when the Witcher show was released on Netflix. The Netflix show tripled the number of players on the Witcher video game.
      • The Game of Thrones book series sold 15 million copies before the HBO series came out. It sold 65 million copies in 8 years after the show came out.
        • “We’ve seen over the past century or century and a half, this ever-growing need to immerse ourselves in this franchises” – Matt Ball
    • Intellectual property (IP) is no longer in just one medium since the audience is everywhere, so should the IP (books, movies, video games, etc.)
      • “It’s clear that intellectual property has a disproportionate impact on customer attention” – Matt Ball
        • The big resource companies are competing, for now, are mindshare and attention from consumers

Thinking About Media

  • Two things to think about in the media space:
    • Consumer behavior in leisure
      • Most consumers don’t want to invest a ton of time comparing different media services, they rather spend time watching something
        • “The truth of the matter is most of us don’t want to invest the extra 20 minutes in finding the perfect thing to watch, we just want to watch what makes sense at the time, what is good.” – Matt Ball
    • Impact of creating intellectual property and hits
      • Netflix’s reach allows them to reach more people and create hits more often than other streaming services
        • “The fact that Netflix has that reach, means they can actually produce hits and franchises at a greater degree on an equivalent quality of other services. That advantage is enormous in a content business.” – Matt Ball

The Fate of Movies, Music, & Video Games

  • People still love the 2 hour narrative of a feature film, the format isn’t going away anytime soon
    • In the 1930s and ‘40s, the average American went to the movie theater 40-70 times per year and about 20% of the population went 100+ times a year
  • Media consumption has changed over the generations. Today we have TikTok, Fortnite, etc.
  • There are 300 million Americans that spend 5.5 hours daily watching traditionally defined long-form media  
    • Matt predicts that by 2035, that number will drop to 3.5-4 hours daily and the rest of time will go towards interactive gaming
      • “I don’t think that in 2030 or 2035 that’s five and a half hours a day. I think it’s probably three and a half to four hours and most of that substitution is going to go to interactive gaming.” – Matt Ball
  • It’s estimated that 285 million Americans listened to music for an average of 2.5 hours daily last year
    • The average Spotify user listens for 130 minutes daily
      • Matt admires Spotify and is deeply bullish on them
  • From 2007, the gaming industry, excluding China, has doubled and 80% of that growth has been in mobile
    • Being able to play video games on the go on your phone has driven enormous growth for the video game industry
    • New gaming features now let users listen to their friends play a game without playing it themselves
      • “There’s a huge investment right now of the major developers on the mobile and console side to say, let’s build more features like chat where we can reach mobile players on the go out of context and perhaps beyond connecting their audio, let’s immerse them in the experience” – Matt Ball
  • “On an hourly basis, video games are still monetizing at fractions of what even standard television is on an hourly basis which makes very little sense when you compare the degree of immersion and focus and distractibility of the audience”Matt Ball
    • “So there’s a big argument on bullish just on monetization there”
  • In the US, theree are about 2.1 billion hours of leisure time per day:
    • 75% of that is in television
      • 50% of television is watched by people who are 50 or older
  • Generation X plays more video games than Gen Y or Gen Z
    • “Each generation is adopting gaming more significantly and as they age up, their media appetites grow” – Matt Ball

The Power of Marvel Universe

  • The success of the Marvel Cinematic Universe is unprecedented and no one has come close to it
    • The power law applies to media: hit shows will only get bigger and more successful
      • “That big lesson basically means that these positive feedback loops are getting stronger” – Matt Ball
  • Because the Marvel Universe has been 15 years in the making, it’s hard to compete with something that has captured people’s attention and emotion for almost two decades
  • The best chance of competing with the Marvel Universe is through video games. Video games provide an immersive and interactive experience while having the ability to scale to a massive audience.

The Metaverse

  • Video games are an internet mall, it’s where people can hang out, meet new people, and shop
  • There are 3 core elements in a metaverse:
    • Mass concurrency: Having a large number of people all participate in a shared experience
      • The Fortnite and Travis Scott concert has 12 million people participating in it
    • Standards and protocols: You need a common language and set of standards
    • Forward compatible code: The metaverse has to be continuous while also being able to evolve
      • You need to be able to update code, fix bugs, change the game physics if needed
  • Tim Sweeney is the creator of Unreal Engine, the world’s most powerful real-time 3D creation platform
    • Matt believes the company is purposely keeping their royalty margins low to accelerate the growth of metaverses and in a sense become like the Apple app store where they take a cut from each application on their platform

The Business of Gaming

  • Gaming companies are starting to be seen as platforms and tech companies which have increased their value
  • The new media business cycle: Technology comes first, it creates the business model, and that drives content
    • Broadcast television gave anyone the ability to watch TV. Since anyone could watch, the business model became advertising. With advertising, you want to maximize the number of eyeballs you can get which lead to lowest common denominator content or broadcast TV
      • “Gaming relies on technology to change content and business model more than any other media category” – Matt Ball
  • “The venture capital community remains bullish on gaming as the biggest players get bigger but still believe that pre-seed checks in $20 million in pre-money valuation companies can be valuable” – Matt Ball
    • There’s an incredible appetite to overpay at the Series A stage and as a result, investing in a Series A round has become phenomenally expensive
      • “Gaming is becoming a very hot sector at the startup level”
      • “If you want to create your own studio, there’s never been a better time to do so” 
  • The latest Grand Theft Auto game is brought in $7 billion:
    • “The most recent Grand Theft Auto is believed to be the most successful, single, media property ever with $7 billion in top-line revenue since 2013. And I’m not talking about the franchise, I’m talking about that game.”Matt Ball
  • Cloud gaming is likely years away: The servers are expensive and the delivery costs of cloud gaming are high

Additional Notes

  • The two most popular games in the world are Fortnite and Minecraft and can be played on almost any device in the world
  • HQ Trivia proved 3 things about game shows:
    • It can be live, not prerecorded
    • It can be interactive, not passive
    • It can focus on the audience, not the contestant
  • The App Store is becoming saturated:
    • “There are more apps than ever before..the cost of installation or awareness that has saturated and escalated so much that you can make something superb and very few people know about it.”Matt Ball
  • We’re starting to see video games move into other mediums such as TV and movies
    • Pokemon created Pokemon Go which is an AR game
Invest Like the Best : , , , ,
Notes By Alex Wiec

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