On the ground with TechCrunch at GDC 2019

The Game Developers Conference was held last week in San Francisco and we wanted to get together to discuss what we saw at the show for Extra Crunch members.

VR, gaming engines, Unity, Unreal and Epic were just some of the topics we touched upon. But perhaps the biggest of all was Google’s new game-streaming service Stadia. Lucas had the opportunity to play with Stadia in a room at the Four Seasons and was a little underwhelmed at first.

I was playing it on a hotel TV hooked up to a laptop and I think I was connecting to a data center in San Jose which was about 50 miles away, which is definitely on the low end if they are rolling it out across the entire United States. But, when I started, the demo was a little like — I think they just had the system on for a couple of hours when I tried it and immediately it was awful. There were so many problems with it. And I was playing Doom 2016 and was just like clicking the trigger, and then a half second later it was firing a shot.

And I could just see over my shoulder just all of these, the Google execs and then the PR people, they were just like kind of making low chit chat like, “Oh shit.” Then one of these guys just grabs the controller from me and is like, “Yeah it kind of seems like we’re having some issues, we’re just going to restart the system.”

While Google Stadia was the big talk of the week, Eric had a chance to learn more about Unity and Unreal offerings, both of which unveiled a number of new features for developers, as well as their expansion into spaces beyond gaming.

For access to the full transcription and the call audio, and for the opportunity to participate in future conference calls, become a member of Extra Crunch. Learn more and try it for free. 

Eric Eldon: Hi, everybody my name is Eric Eldon. I am the managing editor of Extra Crunch, and with me today is are Lucas Matney and Eric Peckham — two writers who cover games quite a bit at TechCrunch. They spent a good amount of time at GDC this year in San Francisco and are able to report back on some of the biggest trends that they observed there and who they talked to and everything else.

Lucas Matney: All right everybody, so this week we got a chance to see a few pretty big updates. Eric and I were doing our things throughout a lot of the conference, but we had a couple of key areas of overlap that we definitely wanted to talk about here and kind of communicate. I think probably the biggest trend at GDC was a lot of this talk about game streaming and kind of this Netflix for games idea, and just a lot of conversations about who’s going to be the one to really tackle that space and who’s going to gain a key early advantage.

I got a chance to check out Stadia and demo it. And Google is really playing it pretty close to the vest, and it kind of feels like they are just sharing some early work they’ve been keeping under wraps up until now, but there are a lot of pretty key specifics that we still don’t know anything about. Like Eric what were your thoughts on the announcement? I don’t know if this is a space that you follow super closely, but I’m curious.

Eric Peckham: Yeah, I haven’t been following the cloud streaming debate for a long time. There have obviously been attempts at this before. Sony has, PlayStation has a version out there. I think from all my conversations at the conference, it seems like there’s a clear split between a lot of people who are quite skeptical that this is going to turn into much anytime soon. I think especially from kind of vets in the industry.

But also a lot of excitement from other folks, especially a lot of entrepreneurs looking at this from different perspectives. But I think there are a number of key technical questions, and business questions here that Google didn’t really address, I’m quite sure very cautiously so, but ultimately they’re going to be the key question in figuring out, is this going to take off. I think it’s a radical shift for the games industry and for entertainment in general if it does.

Lucas Matney: Yeah, I mean the technical issues are the part where a lot of gamers are just raising their eyebrows, because most of these systems that are out right now whether they’re by startups, or whether they’re something that Sony is looking at with PlayStation now, or I think G-Force also has something. They max out at 1080p or 720p and everyone is trying to hit 60 prints per second, but the big questions here are bandwidth and latency.

And Google didn’t really go into the how very much, but they did say that they’re going to try to aim for 4K 60 on a 30 mega bit per second connection. Which is pretty aggressive, because I think if basically … I’m trying to think, I think it’s G-Force. They tried to hit 1080p 60 at 50 megabit per second.

So I don’t know, it seems like lately, and this is just me but in the past year, it feels like Google, not in the past year, past few years, like Google makes an announcement, and then that’s not necessarily an indication that it’s even going to launch in the next few months. Like it feels like they make announcements and —

Eric Peckham: Just getting people warmed up.

Lucas Matney: Yeah. I mean, all that means is that before they have their next GDC keynote they will have told us more. So I don’t know whether this means Stadia is even … like they said it’s launching 2019, I’m curious how wide they go with that. I mean, I don’t know, if they have a lot of this stuff figured out, and they have this nice hardware and everything. But there’s just a lot of questions left, it feels like.

Eric Peckham: Yeah, yeah. Obviously latency is one of the biggest ones. Input latency obviously is huge right of … if kind of, you can’t respond fast enough to whatever’s happening in a game, then that’s detrimental to the experience. I think particularly I know this goes for hardcore gamers, I’m curious, since you go the chance to actually spend some time with them and test this out, what was your experience with it?

Lucas Matney: It was interesting. So I had a conversation with a couple of the executives at Google who were leading up Stadia, and we were meeting at The Four Seasons Hotel in San Francisco, and we were all just up in this suite. And I was really trying to get them to answer some questions about latency. And they were kind of giving me the, “Well we’d just rather have you try it and see what you think.”

 

But I don’t know, like there’s so many different classes of gamers, there are the people who are just super casual, and they are playing single player games that don’t necessarily necessitate the lowest possible latency where it’s really going to ruin someone’s experience. Because there are people who can probably tell like this 25 milliseconds, this is no good for me for input response. And on the opposite end of the spectrum, they’re people who are playing Super Smash Pro Melee competitions and they’re not using LCD screen, they’re using CRT tubes that’s like a 2 millisecond … like that takes 2 less milliseconds for the input latency.

So it’s like, there are all of these people, and Google is not going to hit that group for sure. So I basically communicated this to them and they were … I don’t know. It’s obviously very variable because this is … input latency is fundamentally … This was kind of the most interesting thing they had to say was like, “We’re all operating under the same bounds of limitations to the speed of light.” So like it just depends how far you are from the data centers and there’s going to be a decent range for what latency is.

Now, for what I was doing, I was playing it on a hotel TV hooked up to a laptop and I think I was connecting to a data center in San Jose which was about 50 miles away, which is definitely on the low end if they are rolling it out across the entire United States. But, when I started the demo was a little like … I think they just had the system on for a couple of hours when I tried it and immediately it was awful. Like there were so many problems with it. And I was playing Doom 2016 and was just like clicking the trigger, and then a half second later it was firing a shot.

And I could just see over my shoulder just all of these, the Google execs and then the PR people, they were just like kind of making low chit chat like, “Oh shit.” Then one of these guys just grabs the controller from me and is like, “Yeah it kind of seems like we’re having some issues, we’re just going to restart the system.”

So they did that and after it went through the system restart and I got to log on and dive back into this Doom title. It was pretty quality, I mean, I feel it was definitely in the arena that I could notice it, but I could also notice it because it was the one thing I really wanted to pay attention to. I was focusing more on the latency than I was actually on playing the game.

Lucas Matney: Just because that’s what I knew was the big question, but I think like from a general perspective, it was definitely good enough where it could reach a mass audience.

Eric Peckham: Yeah, I think you testing it on a hotel Wi-Fi was actually more helpful of a test than if you were doing it in Mountain View. Part of my question rather, during the presentation they talked about, this will be 1080p, 60 frames a second, and then they talked about 4K coming soon and even 8K coming soon. And part of what, and actually this popped out in my mind, was how many Americans actually have the kind of internet bandwidth to get 1080p kind of in a very strong consistent basis?

Eric Peckham: There’s one thing here in Kansas City with Google Fiber, but … And I think, there’s some fundamental infrastructure questions regardless of how well they build the core product.

Lucas Matney: Yeah, I was fairly annoyed when they were like, “Oh it’s 4K 60, now but we’re working on 8K 120.” I was like, “God that is so …” And I thought it was like, “Really.” That was just annoying that they even mentioned that, because I was like, “A, who has an 8K TV? Who has any of these like … I get that, that’s like the future, and of course you’re working on it. Because you’re working on …” I’m sure you could just as honestly say, you’re working on 16K or whatever. I don’t know but it’s … If Google can launch this, this year, that would be interesting enough.

I am curious, what do you think consistent pricing would have to be for something like this, because other companies have their solutions of like charging like $20, or 25?

Eric Peckham: Yeah, I think the business model’s one of the big questions here. And thinking about, kind of who is this actually for. I’m skeptical that, at least in the early days, hardcore gamers are going to adopt this. And then looking at casual gamers, I think it’s very exciting in the sense of like, the integration with YouTube where you’re watching kind of an eSports stream, or something else, clips from a game, and right there alongside the video it says play this game. And in one click it throws you into it.

I think that’s pretty exciting and can be powerful in bridging kind of the split between people who just watch games, and people who really get into playing them. Kind of the eSports viewer versus players. And so in that I think is exciting, to kind of expand the market. But obviously these triple A games aren’t being given away for free, right?

So there has to be a business model around this. And I think that’s the tricky part which is, if you’re watching one of these and you click through to play this game, will you get to play around in it for a little while for free? Is it like a trial before you’re prompted to subscribe to Stadia. And I think the pricing gets tricky. Because even when we talk about like mid core casual gamers, that’s such a big spectrum of people. And especially as we think globally and different markets for this, it’s tough to think about the pricing. But I wonder if, in terms of a pricing on par with like Netflix, or some of these streaming video services, if that is a fair spot for them to end up, right?

Lucas Matney: Well the whole deal with this that makes me, I don’t know, skeptical about whether game streaming platforms are going to follow the same way the video streaming platforms are, is that it just kind of seems like maybe somebody downloads HBO, or subscribes to HBO Go only because their strongly interested in watching Game of Thrones. But it just kind of feels like maybe with gaming, there are just these single titles that are just massive behemoths in way that just doesn’t have a parallel with TV. Where like, yeah sure maybe everyone’s watching Game of Thrones, and so they’re going to subscribe and that’s going to be a key reason.

But, if you do any game streaming platform and maybe you don’t have access to one of these big free to play titles like Fortnite or something, like it just now seems … and that’s where this is kind of concerning in a way, and like obviously there’s pretty high infrastructure barrier to entry here. But like EA is looking at doing a game streaming platform, and I’m just imaging if they only keep their titles in their own platform.

Like all over sudden this isn’t playing out like Hulu, and Netflix, and HBO. It’s like all of these game streaming companies have the benefits of watching how that’s kind of turned out and how … I just saw like Netflix has more of their own original content than they have sourced content now. So maybe people like Google like just approach it that way from the beginning and are just like using their Stadia game developers to approach new titles first.

But I just I don’t really know how that works necessarily. I mean I think across all types of media right now it’s clear that whoever controls the relationship with the end user, with the consumers is one with the power in their hands. And so it’s very risky to kind of lose that and not compete for it. And think about a game streaming platform I expect that would look more like subscription video streaming, like Netflix versus Hulu, versus HBO et cetera, as opposed to like the Spotify and Apple Music and these music streaming services where, whichever one that you subscribe to, you have access to every game that’s out there.

But I think inherently, to your point, the publishers themselves of some of the top games are looking at doing this. And then there’s, I think naturally a question for them, if they’re going to launch something, whether they should keep their games exclusive to their own platform.

Yeah and I mean like for free to play titles like if you could … I’m sure like Epic Games doesn’t even want their, like they created a game store pretty much for the reason that they just wanted people to download Fortnite from their game store. Like I feel that the amount of infrastructure people are willing to create in order to just keep what have sacred and not give any of it to … like not have any middleman taking a slice like I would not be surprised id Epic Games was just like, “All right we’re doing the game streaming thing.” It’s just for Fortnite but, you know god knows there’s a lot of-

Eric Peckham: And I think there is a question here of is a bundle as compelling with games as it is with these other formats, where to the point you were making before, there is a difference between joining a service to play one game as opposed to joining a service to watch one show like Game of Thrones, right? I mean one thing is people join these streaming video services because of a hit show, but show only lasts for a certain period of time. And then they’re there and hopefully they start watching other this on the platform, and the difference with the game is you can keep playing that for multiple hours every single day of the year, right?

In a way where, kind of, you can’t just keep watching Game of Thrones for two hours everyday of the year. So if really going for one particular franchise of experience, if you necessarily need to join a bigger bundle as a part of that, as opposed to you decide just to pay up for access to that one game.

Lucas Matney: Yeah, I mean, I guess one of the key things that a lot of the people in gaming who are interested with Stadia, is that Google just has kind of a tangential relationship to the gaming market in general it kind of feels like, or at least best top gaming specifically, because obviously android gaming, gaming on a Chrome Book like that’s … because Google doesn’t have necessarily the closest access to, outside of Chrome like the closest access to some of these high powered platforms, that’s partially the reason that this makes so much sense for them. But at the same time, I guess people would kind of expect maybe the main streaming service that takes off to be something created by Valve, or Sony, or Microsoft just because they are more [inaudible] in the market.

Eric Peckham: They did mention creating their own first priority game studio, which was really interesting.

Lucas Matney: Yeah and I guess, because you just have to think about what advantages does Google have that makes this a worthwhile huge bet for them to take. And like there are some clear ones, and I thought it was interesting how much they played on YouTube gaming in the presentation because, I guess Twitch has just becoming sort of the vernacular for talking about game streams, but like YouTube gaming is massive.

And it’s this awesome opportunity for them, where I think they just showed that one kind of blip where it was watching an influencer ran through a new game and then being able to click play now. Like that’s such a … that as an ad unit, it seems like believable, like in terms of being able to go directly from someone that an audience already has an established trust with, to being able to dive into that experience. That seems huge. So I can see why games would want to get on to Stadia, if only for that exact ad unit interaction.

And then like they have YouTube gaming, but obviously the hard part about this is latency and Google kind of talked about how, and I didn’t totally understand this, to be honest, but they talked about just because they own all these data centers that they can shave off latency because they’ll be able to kind of move through the process quickly. I don’t know if you really got what they were saying either, but they definitely brush stroked with it. The technical capabilities in the keynote.

Eric Peckham: I think they definitely have an infrastructure advantage compared to, well like a Sony, PlayStation or EA trying to build a cloud gaming platform. But if you put it next to Amazon, which is rumored to also be working on something in this space. Which make sense a massive tech company, huge infrastructure, the dominant player in cloud, and has Twitch which is a dominant force in terms of eSports. That’s a pretty strong rival in terms of the infrastructure they could bring to this.

The last point I wanted to touch on this and maybe you got more things, but I was talking to a lot of people during the conference, and Stadia was definitely kind of, yeah anyone you started chatting with, one of the first things they brought out that was on their mind during the conference. But, I think one question is, if this does happen, whether it’s through Stadia or through a competitor, but we really shift to a cloud based gaming world, what’s the bigger impact of that on the industry?

And where I’m coming down on this, is I think it’s actually a pretty big threat to indie game builds. I think what you’ll see is kind of the blockbuster effect that’s happened in other content formats, entertainments happening here, where all over sudden, every person with internet access is able to play these triple A games without having to buy specialized hardware like they have had to in the past.

I mean, it’s all over sudden where you’re on YouTube, you’re kind of watching some clips and able to in one click jump into playing some of these games. I think it’s a pretty threat to kind of the whole market of indie games for casual gamers.

Lucas Matney: Yeah, I mean, I guess I’m curious whether like because, it seems like they would want you to actually purchase the titles that you’re running over Stadia, but I guess I’m curious whether some of these entities are going to try to bundle the idea of a gaming subscription with a game streaming service and just have single price, like this what you pay and you’re going to get access to a lot of games that are just going to free all over sudden.

Because that’s kind of the big question, because, I don’t know, on one hand I totally get that and obviously the plight of the indie game developer is one of the most interesting because it is the nearest and dearest labor of love creatively like they’re creating this … a lot of this content is amongst people’s favorite games and it’s just stuff that the big tripe A game developers wouldn’t necessarily produce.

So I feel like a lot of these platform owners still have indie gamers in mind when they’re creating these services because it’s kind of indispensable. But I am curious whether having a big library of indie games as part of a subscription service ends up being a pretty clear point of differentiation especially if it ends up being the case where these giant game publishers don’t want to just have Assassins Creed or they don’t want to just have like some of these top titles on one service.

And they kind of want to have it across platform, like … I guess it all depends on if the price is right for them, because I would assume that they kind of want a certain level of ubiquity, bd the network effects in gaming are like by definition amongst the strongest, so-

Lucas Matney: Yeah absolutely-

Eric Eldon: Well let me, guys, let me interrupt there. First of all star six, folks if you want to ask any questions, or chime in on the conversation. But I’m also curious about how you see this working out versus the existing game engines? By the way, Eric is working on a deep profile of unity and how have been working given all the new competition these days.

So yeah, my question is, what were you hearing about the game engines? I know we chatted a little bit about that before, but they’re all looking at this and they’re trying to serve in the gamers, but they are also facing these big competitors.

Eric Peckham: Yeah I mean part of Google Stadia announcements was talking about with both Unreal and Unity on this project, both have been involved, and that their logo is right up there in the presentation. So on one hand they’re part of this, they’re building for it. Obviously if this platform takes off they want any developers using their engine to be able to kind of port their game over to be on Stadia, and not just on console or PC or mobile.

We’re seeing this kind of cross platform as a standard. It happened very quickly now anyway. From my conversations with execs at both those companies, Unity and Epic, the response I got was still a bit of kind of, we’re excited about this, but let’s wait and see. There’s, like we been about on this call, there’s still some big questions about both, how well the business model is going to work here, some of the technical specifics, and yeah where that’s going to roll out the door, and kind of storm through industry, or whether it will be much slower build.

Lucas Matney: Yeah Like Eric said it’s all pretty standard and they did make the announcements of the partnerships with Unity and Unreal. And basically that’s kind of amongst the first things on someone’s checklist when they’re introducing a new platform, so that definitely make sense. I guess one of the things that was kind of fascinating Google was very upfront with saying that Stadia was cross-platform, but I guess it doesn’t really … It’s not super clear what that actually means at this point I time. Because like it’s only partially up to them, and I guess it makes sense if Stadia entering a currently mature market of mostly not game streaming networks, but as soon as other companies get on board like it’s only cross-platform if everyone decides for that to be the case.

And we’re far from existing in a cross-platform utopia in gaming, because there’s that whole situation with people who have Fortnite accounts, and were playing on their PS4 and then they downloaded the switch version and all over sudden they had to like go through all these hoops, because Sony was making it so difficult for them.

And eventually they rectified that but, I think it’s … I don’t know. Just the fact that with Unity and Unreal you’re able build in this one place and then ship out to all these different units, like all these different platforms, it’s unclear whether Google is going to be approaching this from the standpoint where they’re just going to have it on Stadia, and they don’t really want it anywhere else. In terms of they want platform exclusives. And what does that mean for cross-platform? So I don’t know.

There are just some questions. Like on the engine stuff it’s a little early to tell and like honestly this is just a move that they had to do, like you have to have support for those in order to get any developer excitement for a new platform. Just because there’s so much buy-in otherwise. I mean in terms of kind of cross-platform or even across devices, from what I’ve seen no one at Google has given a real response to questions about whether this will work on IOS, but they kind of featured a lot of android devices in their presentation, but they’ve kind of sidestepped any follow up questions about that.

Eric Peckham: Yeah so I have … I think I’m blinking on his last name, but he was the VP of Stadia at Google. I asked him pointblank about IOS support earlier on. And it sounds like it’s coming, but sounds like much in the way that Google has introduced a lot of products like they’re going Pixel first, to Pixel Lite is going to get the update first, and then they’ll kind of move to IOS stuff in the future, but I mean, I don’t know this just seems like something where you really just have to that ASAP. Because if it’s something where a lot of people probably have Chromecast, but they have iPhones, and unless you’re really tackling all the devices a person has there’s not as clear a reason to have this platform. So you’ve kind of got to hit it all right at the beginning.

Eric Eldon: Yeah, yeah. I guess we should stop and just see if anyone wants to call in with questions here. We’ve been talking a lot about Stadia. I know we’ve jotted down our notes to chat a little bit more about the game engines, about VR and the new Oculus Rift S, and little on kind of voice gaming. For those who have been tuning in, any questions on Stadia and cloud gaming?

Eric Peckham: All right. Well I guess we’ll jump into the next thing then. We were just touching on the gaming engine’s … You know both in terms of kind of Unity and Unreal, I wouldn’t say this GDC was kind of major announcements from them, on par with the Google’s announcement that was obviously the talk of the town, but they each were rolling out a number of new feature of sets for developers, and emphasizing their expansion into new verticals beyond gaming as well.

Unity is definitely trying to make it’s case that it can be a platform for triple A games and offer the highest tier of graphics. One of their big announcements was that they’re being used for Call of Duty mobile. So the biggest game franchise working with them for mobile. They featured a number of new games coming out, whether it’s System Shock 3, or some cool demos of their technology like this clip called the Heretic, with a very life-like looking guy walking through this cave that transforms in different ways.

They’re really trying to shed this image that they’re kind of like the lower graphics quality alternative to Epic’s Unreal. And I think that was clear in their presentation one of their big announcements was that they’ll be rolling out real time ray tracing support in upcoming releases. Ray tracing has been something hoped for a while that’s now coming into reality for these engines enabling people to create really photo-realistic graphics.

One of the things they demoed was what they’re doing with BMW. Where you really can’t tell which car is photos of the BMW, and which one is the Unity version. What’s interesting to me is actually Unreal announced last year that they’ll be supporting, like us now in just the next few months, real time ray tracing. So we’ve both been working on this.

Lucas Matney: But last year when they talked about that, Unreal also showed a kind of almost identical looking demo with BMW as well. So at least BMW is winning here in press I guess.

Yeah, I’m curious what actually strikes me in stream first because both of these, it’s only natural that at GDC people are going to be talking about something that fairly future facing, but what these share in common are our general skepticism that game streaming as platform, or ray tracing as a development technique like either one of them are going to like … are really feasible within the next few years.

Ray tracing, for those of you listening who don’t really get it, it’s so much of the advances in graphics quality in all of these games are just really related to how lighting is rendered. And if you’re playing on some low powered potato, they bake lighting in so basically nothing is dynamic. They’ll decide what the lighting perspective is.

They’ll pick a point in the 3D space where the light source is, and then they’ll just kind of bake that color of the lighting on to all of the objects. And if you walk in front of it, the light isn’t changing you, nothing is really moving. So, that’s just for the most low power things. And then there’s dynamic lighting on pretty much everything that you’re playing on a console, or anything a little bit more high power.

The difference with ray tracing is that it’s not only kind of changing where the light actually falls, it’s understanding what the surface it’s hitting and how that reacts, and so all over sudden you’re getting this environment that’s really handling light in a much more complex life-like way. And that’s why these companies are so psyched about it, because I actually, I did this demo with this pretty [inaudible 00:48:48] VR headset like a month ago called the Varjo VR-1, I thinks it’s like a $6,000 enterprise focused thing and it this weird lens layout where you’re looking at, there are two displays inside the headset where there’s one that’s pretty reasonable. And then there’s a two inch micro OLED that’s just like 2,000 pixels per inch or something like that.

I don’t even remember exactly but it’s ridiculous, but I looked at a demo of some car company and it’s just mind blowing how once you integrate this like I was moving around the car and looking at it and just like, you’re seeing the reflections of like the Shanghai city skyline in it. And it’s just … it was mind blowing.

So I can see why everyone is racing to do this. And it’s not like ray tracing is a terribly new concept, the concept is that they’re doing it real time, so it’s they’ve been using ray tracing for Hollywood for a long time, but the difference is that you had like an army of PC’s rendering all of this content for six hours, and then they’d cook, then they’d send to the game.

So doing it in real time is just like very, I don’t know, it seems far-fetched for a lot of people, but they have all these demos. So it’s clearly the future it’s just a question of who’s got the power for this, and how efficient are they going to be able to get. That’s a long way to say that ray tracing is awesome and I hope that they have success, but the fact that Unreal entry was due a year ago, and Unity is just talking about it now, to me it just says that maybe Unity has a little bit of … They’re going to wait a year in order to type it. Because it still seems like a little far from mainstream.

Eric Peckham: Yeah for sure. And it’s still about companies that have the big budgets to be able to try and incorporate this as opposed to how indie game does. One of the, in terms of game engines, I said it on this Q&A session with the execs from Epic’s new Epic Game Store, so this is kind of what they’ve expanded on from building around store, that was essentially just for getting people to buy Fortnite through that as opposed to going through … They kind of notably sidestepped like the Google Play Store, and they’ve now rolled it out to be a store that’s featuring other games.

Both those built in Unreal and even those built in Unity and other gaming engines. And what was interesting to see from kind of this packed room of folks in the industry were how many questions they were getting around the fact that A, they’re very focused right now on exclusives. So a lot of these games are only available through the Epic Games Store, and second of all that they’ve focused on human curation. So everything, the games in the store, and where they’re placed and how they’re promoted, is all decided by team members at Epic, as opposed to for on YouTube or whatever else, kind of an algorithmic recommendation model.

And they felt very strongly that they plan to keep their store human curated. And that people trust the recommendations of other humans, more so than algorithms. And even mentioned kind of the challenges Facebook is having right now with that whole broader push back against social media companies recommending sensational content as a reason not to take a technology based approach here. And very interesting to see.

They also reaffirmed that they don’t envision ever having advertising, and here there’s no paid promotion of games on the front page or otherwise. What they did talk about was in the future, and they didn’t really give a sense, if this is jut months in the future, or years in the future. But easing the focus on having exclusive titles on the store.

Eric Peckham: Yeah, but the interesting thing about the Epic Game Store is the Epic Games like … if I heard anybody else say that they were creating a store and they didn’t have any plans on advertising in the near future, I wouldn’t believe them, but the Epic Games CEO, Tim Sweeney is such a god damn idealist that I actually believe him on that note.

Because he’s just, he’s always amongst those people who’s just like talking about kind of lines in the sand and where not fall. I mean obviously, on the benefit of hundreds of millions of revenue on Fortnite so they probably have a cash reserve that makes them not altogether concerned with new revenue sources right now, although maybe they should be.

One note I also chatted with some of the Unreal engine people, and one kind of data point that really stuck out to me, because I was asking about how do you tackle a giant like this Stream store and how do you do it in any sort of way? And I guess there’s this maybe, this false David and Goliath idea about Steam in terms of just every single PC gamer has it, because they actually said that Fortnite just has such a diverse audience because it’s kind of something … it’s cultural touch stone but a lot of people that it’s not necessarily like they’re downloading like they have fifty games on their computer. They might have just gotten something to play Fortnite.

But they said, I think it was the CEO of Epic told me that 50% of people who download Fortnite don’t have Steam installed on their computer. So that’s huge, for like if they can, not necessarily like, probably the ones who have Steam are the ones that you want, because they’re buying multiple games a month versus people who are just getting Fortnite. Like maybe that’s just their one thing.

But, there’s I don’t think that anyone doubting that the hardcore games market is going to explode a little, or expand in some ways. So they might be in a pretty posh position to capture some of that.

Eric Eldon: Yeah. One thing I want to make sure we take some time to talk about, because you spent a lot of time at the conference, digging into it more, is what’s happening on a VR side here, in particular Facebook’s Oculus Rift S.

Lucas Matney: Yeah this is super fascinating, I mean there are few companies I cover other than Oculus that I geek out like nobody’s business. Just because I’m super intrigued by the VR market and I’m more intrigued by how they develop over time, because it kind of seems like everybody has this idea where VR makes sense. VR it’s maybe the form factor isn’t right. Maybe all of these [inaudible 00:55:47] and blocks aren’t right, but eventually like yeah of course that makes sense, in the terms of capturing total immersion.

So the new product they unveiled is called the Rift S. We, Tech Crunch had actually reported on it months ago and I had heard from a source it was coming. And that more importantly I had heard from a source that the co founder of Oculus, who was their former CEO, Brendan Iribe had left the company partially as a result of this new direction change. He was the former CEO and then after, I don’t know, some internal executive switch around he became the head of PC VR.

So he left Facebook in October I believe, and I was told that part of the reasons that he had left was because he just didn’t really agree with a lot of the direction they were going in, around kind of minimizing this kind of high end feel. And that’s kind of what I thought that this headset it kind of signals that their first generation product they released it, the headset and controllers together cost nearly $800. And in the course of two years, that price got halved because they just going to … But I think they realized the only way to ship the headset was to just have it be cheaper.

There was nothing else to do, they can have a marketing budget. They can like bring in these triple A games, but no one was going to spend that much. So I think they probably got their hardware margins to an area that was just completely, ridiculously unsustainable. And obviously Facebook has ton of money, but I think that they’re like, I don’t know. They’re probably like, “All right Oculus, you can’t keep losing a huge amount of money on every single headset.”

So this new device they partnered with Lenovo and there’s some improvements in that it has an inside out tracking system that basically involves not having to set up any external sensors, and they kind of changed the display, it’s a little bit more resolution but they moved from an OLED to LCD screen, which was somewhat controversial in the nerdy circles I run in.

But, like overall the Lenovo partnership, that just doesn’t really feel as high quality anymore. And I think that the important question it raises, is whether they’re … like Facebook really believes that the PC market is going to be key area for VR to grow, or if it’s really going to develop in more a standalone. Like this is the device you buy, you set up some stuff on your phone, but like this is where it lives.

And ultimately that’s better for them because, I don’t know, like you just want to own the platform, you don’t want to have … You don’t want be beholden to all of these windows driver updates and like all of this just shit, like having to get people to buy these pretty expensive computers. So it makes sense, I guess it’s just kind of like, I don’t know, everyone else is betting pretty heavily on PC VR. Yeah so it’s-

Eric Peckham: In your article earlier this week, you said it feels like a lateral move rather than a leap forward for them. I’m curious, your conversations with folks during GDC, did it seem like most people were responding in the same way?

Lucas Matney: I mean it’s just, I think that a lot of people in the VR industry, they’ve seen so many companies be like express interest, and then kind of back off. So like Google, Google launched Day Dream and then they launched this headset that you could put your Pixel phone in and like all of these different mobile partnerships they did so that you could do mobile VR. And then they kind of, once Apple introduced AR kit, it seemed like everyone who was working on AR, VR stuff moved over to the AR team. And they really like Day Dream is a high quality platform but it’s generally not supported well. Like Google hasn’t really followed up.

And that kind of seems like a case across a lot companies, where they made this initial VR announcement in 2016 or 2017 when stuff was hot and they kind of have backed off. Meanwhile, all these people I talked to who are in the VR industry, they kind of saw Oculus as this daddy war bucks that was just like they’d gone in so deep initially like there was no way they were going to back off, they were just going to keep throwing money at it.

Eric Peckham: And I think this was like, maybe people’s first reality check like that hey, they are concerned about maybe the overall build of the system and they want to create products that might actually make off of in hardware. And it was clear from some of the other stuff they released that they just were undercutting the prices of competition so much. Like I don’t know, like the Oculus Quest which is coming in spring at some point and Oculus Go, which released last year. Like those are both, like Oculus go is $199 and it seems like builder materials and everything together, it seems like they’re not making money on it. It seems like they’re not making on the Quest. It seems like they probably making money on this new headset because it just feels like a bit cheaper.

Lucas Matney: Yeah. Well yeah I mean I think, as someone who bought the Oculus Go, I think it served as a way to get a broader consumer base excited about VR. And then I think to an extent it did. Yeah, but my experience and the experience of most people I know who got one, is that after initial use of it for a few weeks it mainly just sits on a shelf. Because it’s so … the actual experience still has a long way to go in terms of creating a really high quality VR experience that only requires a headset. So that’s light weight and low cost.

Eric Peckham: Yeah you talk to a lot of the people at Oculus and they have interesting take aways from what the Go, so the the Go is the $199 dollar headset that’s it’s limited in what it can do technically it’s a cool experience and it’s pretty comfortable, but I think initially got it and it was designed to be something that like if they tried out VR for the first time or did all these demos, but I think Oculus eventually found out that like 70% of the usage was just people watching media content in the Oculus Go’s and it wasn’t necessarily 360 stuff.

So like all over sudden, Facebook is doing these commercials to get people to watch the Hand Maiden’s Tale, or some of the stuff that’s just like, they’re sitting in virtual room and they have like what equivalent of like 100′ movie theater screen and that’s like, that’s interesting, I don’t know if it’s like, it’s not game changing by any means. And it’s kind of funny because they invested so much in all this 360 content for such a long time. That it’s funny to see them advertise something that’s clearly so approachable and normal like watching HBO, or watching Netflix with this headset on your face. It’s just, it’s funny.

Eric Peckham: And I wonder whether they’re pleased with that, and they think it’s sustainable, or whether they’re kind of like ugh, who knows.

Eric Eldon: Yeah, let’s stop here and see if anyone has questions or wants to chime in or VR other things you’ve been talking about?

Caller question: How about you guys tell us what you’re working on next related to the gaming space and all the topics you just discussed?

Eric Peckham: For sure, we are, like you mentioned, I’m working on this a really big report on Unity it’s an EC one which is this new format we’re testing out called Extra Crunch one that tries to create the kind of definitive analysis of each of the unicorn, or almost unicorn startups kind of looking at them both. It’s kind of a business case study of the founding and the growth, but then also really getting into the details of how the product is evolving, how they’re evolving as a business. Whether the Excel com can be, you know in this case, Unity is rumored to be planning for an IPO within the next year.

And so I’ve been spending a lot of time diving into that. Talking to tons of people in the gaming industry, and in other verticals where the game engines have standing to, I have also gotten pretty deep access to John Riccitiello, the CEO and the exec team there. We’ll be spending time with the founders of Unity in Copenhagen where they’re based.

And I’m also talking to execs at Unreal and elsewhere, to really sink my teeth into this space. And so I think it will be an exciting report for people to read coming out in a few weeks. That will kind of look at this space which is rapidly growing, and kind of relevant to companies beyond just gaming. So definitely keep an eye out for that.

Lucas Matney: Eric I’m curious, one of the things I always wonder about Unity versus the Unreal engine, it seems like … well they’re just, I’m actually not entire sure if this is still the case, but at least it seemed for a while like Unreal was actually taking, for certain developers was taking a slice of the revenues that they were making out of their titles as well. While Unity was just charging per seat for the developers, is that still the case, and how they price stuff?

Eric Peckham: Yeah. Yeah so that’s still a fundamental difference between them as engines. Unity is a based on a … it’s a proceeds subscription. And then there are add-ons on top of that depending on some of the tools you might want to use, but Epic with it’s Unreal engine, has taken a very different approach, which is it’s completely free to use and then they take 5% of all the money you make through your game once you pass, I believe it’s $3,000.

With the idea that it’s kind of, you’re more aligned when they only make money when you make money. And I think in a way I’ve been surprised talking to a lot of different developers and kind of entrepreneurs creating their own game studios that, that business model difference hasn’t been as big a factor for them in deciding which one to use as opposed to some of the technical differences and preferences they have.

But obviously giving away 5% of your revenue, everyone hopes that their game is going to be a massive hit, in which case it’s a very large amount of money. If that’s like the case I guess switch your game over to a different engine, but for a lot people, that makes sense and that way they can be building in it without having to pay any upfront money.

Lucas Matney: Yeah I guess just to kind of on your note where Unity seems … has kind of had this rep of like, I don’t know not to be hard on them, but like it’s where half of games are made, and more than half of games are pretty shitty. So it’s kind of like a lot of people’s first efforts are made on Unity, while, that is not necessarily the case, but a lot of very early developers are doing their work on Unity.

Lucas Matney: So it’s interesting that in their presentation they were kind of trying to highlight some of these big triple A brands, they have … Meanwhile, they talked about like how Pokemon Go was built on unity, or they talk about how these big title, but it actually they seemed to have minimal payoff from actually having these pretty big games on. From these out sized works from small studios be built on them, because their just getting the same … like they are not getting that much more money, it feels like.

Like if they’re getting this giant hit that was made by like a shop with 20 people in it who are all on Unity licenses, they’re not getting that 5%. So I’m just curious as the IPO … I don’t know how much that affects the idea that there are games that are just blockbusters that are just going to print money and Unity is not going to really benefit from them in that way.

Eric Peckham: Yeah. I think part of what they’re doing is, I mean they’re rapidly expanding. Both kind of up and down the stack within gaming. With different tools and services. They’re doing hosting now, a whole number of things, but also expanding into new verticals, right? Where they’re working with enterprise customers and architecture construction, automotive. Their big push into Hollywood in terms of cinematic experiences.

And those, given this kind of very different dynamics, have different pricing models around them. They’re also doing a lot of services, kind of working with some of the game makers other big customers that are kind of additional consulting services essentially. But for sure, I mean, the way to think about this two engines is really, we’re talking about a game engine, people are pretty much choosing either to build on Unity, build on Unreal, or build they’re own proprietary engine.

And the way to think of it is kind of, Unity is going from the bottom up, it’s focused on being the easiest to use, quickest to learn, it’s what people are learning in school and what is by far the most popular in terms of building casual games, mobile games. It completely dominates market share in AR and VR. And kind of it’s a little bit more about packaged product, so it’s going to make it easier for you to throw together a prototype, or build something out of someone who maybe isn’t highly technical.

But on the other end of that, it’s a much more constrained engine relative to someone who’s kind of working on Unreal, which is based on C++ as opposed to C#. Unreal has been kind of the engine of choice a the high end of the market in terms of triple A games and kind of the highest quality graphic experiences, but requires more technical savvy. And just it’s kind of a different way to work which is why you see this split where it tends to be the preferred game engine for PC an console games.

And they’re each expanding to each other spaces, or each going … obviously Fortnite is on mobile and so they’re kind of expanding into each other spaces, but from different directions. And you see then both expanding to new verticals like automotive and architecture et cetera, where they see the opportunities for the game engines to be used.

Lucas Matney: Yeah, I mean on my end, I guess one of things that I’m interested in kind of working on going forward, I enjoy writing breathlessly about VR, so I’m tempted to kind of get some sort of more forward-thinking look at what Oculus perhaps moving in a direction that’s a little bit more focused on standalone versus PC powered stuff. Like I think that there is this general assumption that PC powered VR was kind of going to be the way that stuff moved forward for quite a while.

Just because it’s just so power dependent in terms of running on these high end GPUs. I’m curious whether if the market kind of softens on this idea, like how that really affects some of these companies that had clear things to gain from that, and I’m especially curious about what it means for a company like Nvidia, or something where like maybe in 2016 or 2017 Nvidia was just this huge rocket ship. Where it was like, everyone like, the GPUs were flying off the shelf, because there was this situation where people were thinking Nvidia is going to be at the forefront of more powerful and powerful PCs, because people are going to be enjoying these VR systems.

And at the same time also crypto currency stuff. So there was this kind of twin idea that they were going to just be this rocket ship. And then all over sudden, you look at their stock price now compared to two years ago like stuff is really shit the bed over there. So I’m curious what other powers in this space would be hit pretty hard by stuff moving to stand alone? But that’s just something I’m think about.

Eric Peckham: Yeah. Yeah, no I think that is an exciting story to be digging into. I mean it’s interesting to see kind of the cycle we’ve gone through bot in terms of VR and AR, and in kind of how they have diverged where a lot of the resources and kind of focus seems to be on the AR side, and in terms of VR kind of everyone is trying to figure out the right steps for them and where the market is really going. What they should be building for.

Lucas Matney: I bet it switches back. I bet it ping-pongs a little bit. But I bet in the next year. So I think overall excitement it’s going to decrease in general, but I think people are going to realize that some of these AR systems are just require just such different thinking on such fundamental levels about interface and how people interact with content, and how difficult it is to tell a story or create a game that dynamically adjusts to your environment.

I think that all of these things have been kind of slow learnings for developers but I think that people are just going to determine that, on the developers side especially, and creators and tool makers, are just going to see that if you have this situation that’s just literally perfect where you get to control end to end the environment and how, what a person’s tools, and what their interactions are, that just makes a lot more sense.

And I think that it’s easier to build to build the hardware too. It’s not quite as ubiquitous as what’s available on phone, but who the heck has used anything involving AR on their phone other than maybe like measuring tape. And meanwhile, this is pitched by Apple as like the forefront phone. That’s just an interesting situation, but yeah we’ll see how it goes.

Eric Peckham: Yeah, yeah that’s right.

Lucas Matney: I think, looks like we’re pretty much out of time. Well thank you so much to those who joined us. We’ve had a great time chatting with Eric and yeah, if any of you have any questions about stuff we talked about that you think of next, you can hit it up on Twitter or shoot me an email. My email is lucas@techcrunch.com. But yeah I would love to hear from you guys and thanks for joining us.