How to build the metaverse
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How to build the metaverse

Protocol Entertainment

Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Thursday, industry insiders share their insights on how to build the metaverse, and we take a closer look at the reasons behind Netflix’s stock rollercoaster. Also: push polling!

We all live in a baby metaverse, baby metaverse

What does it take to build the metaverse? What building blocks do we need, how can companies ensure that the metaverse is going to be inclusive, and how do we know that we have arrived in the 'verse?

To answer some of these questions, we convened a panel of experts this week for Protocol Entertainment’s first virtual live event, including Epic Games Unreal Engine VP and GM Marc Petit, Oasis Consortium co-founder and President Tiffany Xingyu Wang and Emerge co-founder and CEO Sly Lee.

Getting content moderation right will be key — and challenging. Forty percent of U.S. internet users have experienced hate speech or harassment online, according to Wang. Doing better than existing social media platforms will be key to creating an inclusive metaverse.

  • This will require tackling content moderation issues from the get-go. “When we built the last iteration of the web, we didn’t think about safety by design,” Wang said.
  • The metaverse may provide a chance for a reset, with Petit arguing that people won’t troll as much if they interface with each other in person. “Voice … reduces the problem,” he said.
  • However, real-time voice is also harder to moderate than written text, Wang said. “Voice moderation tools are pretty new,” he said. “We are at the very beginning of this battle.”
  • Whatever the solution ends up being, the panelists all agreed that tackling problems like these can’t wait until the metaverse exists. “I’m grateful that we are having these conversations now,” Lee said.

Interoperability isn’t just a technical problem. When people talk about an open, interoperable metaverse, they often bring up the idea of driving a car from Fortnite to Roblox, and all the technical challenges that may entail.

  • Taking assets from one game or virtual world to another may sound daunting to developers, but it can be done, Petit said. “I’m a tech guy, and I’m optimistic; we’ll figure out interoperability.” he said.
  • The business side may prove to be more challenging. If Epic builds an asset to make Fortnite better, how does it get compensated if people take that asset to a competitor’s game?
  • Allowing people to keep those assets also isn’t just about interoperability between competing titles. Letting players grow up with their Fortnite skins, and keep virtual items around for years or even decades, is just as important.
  • “We need to build content that can withstand the test of time,” Petit said. “That is going to be a very complex problem.”

The metaverse needs a new type of hardware. The public’s expectations of the metaverse have been shaped by sci-fi movies like “Ready Player One,” in which the characters don VR goggles and haptic suits, much to the chagrin of our panelists.

  • “‘Ready Player One’ is really hurting us,” Petit said. Instead of an out-of-body future, he hopes more for experiences that bring interactivity to our everyday lives.
  • Lee shared Petit’s dislike for “Ready Player One.” “I particularly don’t like the vision of touch in that movie, with haptic suits and gloves,” he said. “Those are silly. Those won’t happen.”
  • Lee’s company has been working on an alternative approach: A device that uses ultrasound to bring touch to the metaverse without the need for gloves.
  • The most important lesson from this work? The metaverse doesn’t need to copy the real world, and attempts to bring old metaphors like keyboards into this new world will hold the industry back. “It’s time to end that UI and establish a new UI in the virtual space,” Lee said.

Spoiler alert: We’re already in the beta-metaverse. A lot of us are using platforms that can be considered metaverse prototypes. In fact, these early versions are already as popular as the internet was two decades ago.

  • If we combine the numbers from Fortnite, Roblox and Minecraft, we have 300 million people using metaverse-like platforms every month — which equals the total use base of the internet in 1999, according to Petit.
  • “We are in the baby version of the metaverse, and it will evolve,” he said.
  • In the end, it may even be hard to tell where and when the real metaverse starts. “When did the Big Bang stop?” Lee asked. “I don’t think we are a result of the Big Bang, I think we are a continuation of the process.”
  • “We are in the mini version, or the very beginning of the metaverse,” Wang said. To drive it forward, the industry now needs to get everyone else on board. “It ultimately is a question of adoption,” she said.

You can watch a recording of the entire event here.

— Janko Roettgers

Netflix’s stock rollercoaster, explained

It’s been quite a week for Netflix: Last week’s earnings report thoroughly spooked investors, sending the company’s share price down 22% Friday. Netflix shares haven’t really recovered since, and the company’s market cap is now nearly half of what it was last November.

The stock plunge has predictably led to all kinds of speculation, much of which is completely baseless (no, Netflix won’t launch an ad-supported business, or sell to Disney, no matter how many times pundits bring it up).

  • It also showed how much the pandemic distorted the market’s expectations. It’s true, we all binged a whole lot more during lockdown — but increased demand alone doesn’t change the fundamentals of streaming as a business.
  • It probably also didn’t help that the entire market has been wary of the omicron wave, supply chain disruptions, inflation and interest rates. Sure, Netflix’s share price has been hit especially hard, but the Nasdaq itself is down 15% since the beginning of the year.

So what is really going on here? One reason investors are spooked is that Netflix’s growth in North America has effectively plateaued.

  • The company added just 1.3 million members in the U.S. and Canada in all of 2021, compared to 6.3 million in 2020.
  • When Netflix first started treating streaming as a real business, executives forecast that the company’s market opportunity in the U.S. was anywhere from 60 million to 90 million subscribers. It ended 2021 with 75 million North American subscribers. Maybe that’s as good as it gets for Netflix domestically, at least when it comes to streaming.
  • This wouldn’t be too much of an issue if Netflix still grew gangbusters abroad, but some markets, including India, have proven a lot more challenging.

With that in mind, Netflix appears to have decided to expand the market opportunity everywhere by doubling down on gaming. That’s not going to be cheap, which is one reason the company recently raised its prices. It’s also not going to happen overnight, all but assuring that this rollercoaster ride isn’t quite over for Netflix.

— Janko Roettgers

On the calendar

How tech is making sure shopping will never be the same

The future of shopping isn’t happening on, and it isn’t just happening in a Walmart or mom-and-pop shop near you. Join us at 9 a.m. PT on Feb. 1 as we explore how shopping works now, how the customer and seller experiences are changing and where there’s still room to innovate. RSVP here.


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In other news

TikTok creators aren’t happy about TikTok’s creator fund. Some make as little as $.025 per 1,000 views.

YouTube is doing … something? … with NFTs. CEO Susan Wojcicki revealed this week that the video site is looking to support NFTs, but she didn’t share a whole lot of details.

Substack is testing a video player with select creators, including Patti Smith. If that doesn’t work, it’ll probably pivot to newsletters. Oh wait …

Raven Software is reorganizing its staff amid unionization efforts. The Activision-owned studio says it’s business as usual, but union organizers believe it’s meant to undermine their efforts. Now, studio management says it wants all employees to vote on unionization, not just QA workers.

Neil Young is leaving Spotify over Joe Rogan. The rock legend doesn’t want to be on the same service as Rogan’s podcast with its frequent vaccine disinformation.

Google Drive’s copyright enforcement is a bit too binary. The service has been flagging documents with ones and zeroes for copyright infringement, including some that include only one single digit.

Microsoft’s Call of Duty plans are up in the air. Despite reassurance from Xbox chief Phil Spencer last week, Bloomberg reported that the fate of Activision-owned Call of Duty on PlayStation platforms remains unclear after contracts are honored through 2023.

Valve sets a new date for the Steam Deck. The new handheld console will start shipping Feb. 25 to the first round of reservation holders, after Valve delayed the product’s launch from late last year.

Panic in the metaverse

Polls can be a funny thing. For example, did you know that 72% of Americans are afraid of gangs of armed and dangerous clowns roaming the streets after midnight? And that 87% of Americans are concerned about the metaverse, with 47% saying they’re afraid that their identity won’t be legally protected in those new digital worlds?

OK, I’ll admit it: Only the metaverse numbers actually come from a real poll, even though we all know how dangerous armed clowns roaming the streets after midnight can be. The point is: If you ask your poll questions just right, you can always get a majority of people to agree with you. That’s apparently what a VPN company did with its latest metaverse survey, out this week.

Case in point: 55% of respondents to that poll said they didn’t even know what the metaverse was. Granted, people are afraid of things they don’t know all the time (even though they should really worry about suspicious characters with red noses, giant shoes and knives, if you ask me). To drive home the absurdity of the entire poll, 74% still said they would join the metaverse, despite many of them not knowing what it is, while simultaneously being afraid of it.

I guess we may need better polls to truly understand what people think about the future of their digital lives. Now, will someone please do something about those clowns?

— Janko Roettgers


Make 2022 the year you speak a new language. The #1 language learning app, Babbel, gives you bite-sized lessons in a variety of languages. It'll have you speaking the basics in just 3 weeks. Plus, it has podcasts, games, videos and more to switch things up! Get 60% off today.

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