This transcript was generated using transcription software.
00:00:05:00 - 00:00:09:09
Kassandra
Hey, and welcome to The Dip, the podcast that tells money stories across borders.
00:00:09:09 - 00:00:10:07
Kassandra
I'm Kassandra
00:00:10:09 - 00:00:18:01
Kai
and I'm Kai. A bit later today, we're going to talk about video games and how they make it from the really small screens to the really big ones in Hollywood.
00:00:18:03 - 00:00:29:05
Kassandra
But today, we're starting with the biggest story in this newsroom and in newsrooms around the world, which is the US and Israel's attack on Iran and the Iranian response attacks on neighboring countries.
00:00:29:07 - 00:00:52:11
Kai
A lot has been happening there. You've probably read a few headlines, but we are going to zooming in on the fact on why this small region has such a big impact on everything. So gas prices, farming products and even anything that contains plastic, basically. But first up, we're going to Dubai to turn to our latest. Joining us, Emily Gore Dean.
00:00:52:11 - 00:00:58:14
Kai
She's a correspondent that's usually hosted in Jerusalem, but now she's in Dubai.
00:00:58:15 - 00:01:04:24
Kassandra
Emily, why are you in Dubai when you're normally based in Jerusalem?
00:01:05:01 - 00:01:25:07
Emily Gordine
Well, I was actually on holiday in, americold the most London, which is an Omani peninsula, which is disconnected from actual Omani territory. And you have to go through the UAE to get there. And that's where I was on holiday. And I was on my way back to Jerusalem when, when we got stuck in divine,
00:01:25:09 - 00:01:36:16
Kai
Even on your way back. So, I mean, you see a lot of this stuff. People being stuck there, evacuations. What's the latest in the situation? Like people being stuck in Dubai?
00:01:36:18 - 00:02:05:05
Emily Gordine
Well, a lot of people have been making their way back home through Amman. So they've taken taxis to Muscat and then flying out with the through the airport, in Muscat. Some people have even taken the land route, to Saudi Arabia. And I've been flying out of via Riyadh and the Emirates and, and Etihad Airlines, which is, the Dubai based and the, Abu Dhabi based, home airline, so to speak.
00:02:05:07 - 00:02:28:21
Emily Gordine
They've also been operating some flights out of the region. They've also been expatriate and people from abroad to come back home to be with their families. And they've been operating some flights, but now they've again suspended, the majority of flights from what we understand until the weekend. So it's a bit difficult to tell when people are going to the ones that are still left here, when they're going to make it home.
00:02:28:23 - 00:02:50:08
Kassandra
Right. A difficult situation. The UAE billionaire. Halley. I'll hub tour criticized US President Trump in a social media post on Thursday, accusing him, or saying that he's put the Gulf and other Arab countries, quote, at the heart of a danger they did not choose. What's your what are you making of that, Emily?
00:02:50:10 - 00:03:08:15
Emily Gordine
Well, I think it very much reflects how people, the residents of Dubai feel. I mean, when I was talking to some people in the last few days, one thing they kept telling me was that they did expect strikes on the UAE because it is one of the many countries in the Middle East that hosts U.S. military bases.
00:03:08:15 - 00:03:31:03
Emily Gordine
But what they didn't expect is for them to become targets to. When you look at the Iranian strikes on the Gulf, but specifically the UAE, then, you see that, hotels, were hit or were badly damaged by debris from from intercepted missiles or drones. The airport was the airports have been targeted in Abu Dhabi and Dubai.
00:03:31:05 - 00:03:52:12
Emily Gordine
We're talking about, you know, business infrastructure. One of the data centers in Dubai was hit. And so people are, you know, wondering why are they getting why are they being they feel like they're being dragged into something that is not of their own making. And of course, you have to keep in mind here that these strikes on Iran were not launched by the US alone, but also by Israel.
00:03:52:14 - 00:04:23:05
Emily Gordine
And together, they are seen as, responsible for the destruction of Gaza over the last two years. Israel primarily being the main actor here, but the US certainly not standing in Israel's way here. And, and, and the people who live in the Gulf, they feel with the Palestinians very strongly and to be seen as allied with the US and and Israel specifically, that will not go down well in its population.
00:04:23:05 - 00:04:30:22
Emily Gordine
I think that is one, aspect that contributes, to a certain feeling of disgruntlement. I think.
00:04:30:23 - 00:04:55:00
Kai
So when you look at this from the outside, I guess Dubai often has this label of a safe zone. A lot is been I mean, all the influences there and like has everything is safe and these kind of things. What is the impact on daily business? In Dubai, you know, it has a lot of things changed or, just people going about their way as and as always.
00:04:55:02 - 00:05:18:11
Emily Gordine
I think largely people are trying to go about their day as normal. Shops are open, the malls are open. People are going to work. Some might be working remotely from home, but generally speaking, people are still working. And I think that very much speaks to, you know, the kind of resilience that the Gulf states have been trying to build up for many years now.
00:05:18:13 - 00:05:41:07
Emily Gordine
They might have been doing so in anticipation of a possible conflict with Iran, because it's always been somewhat depending on which Gulf country you're talking to. But, a shaky relationship. And so what we're seeing play out now is in terms of, you know, when you look at the military side of things, Gulf countries being quite well equipped at parrying these Iranian attacks.
00:05:41:07 - 00:06:06:14
Emily Gordine
I mean, if you look at the UAE alone, they've dealt with over a thousand, attacks since Saturday. So we're talking 100. I feel like about 200 missiles and and over 800 drone attacks and according to the Emirati officials, of course, that sometimes has to be taken with a grain of salt. But generally speaking, over 90% of those attacks have been intercepted.
00:06:06:14 - 00:06:29:09
Emily Gordine
And that is quite an incredible achievement. So we're seeing a level of military resilience that is quite remarkable. And then we're also seeing, an economic resilience that is quite remarkable. So we have had these attacks. But still when we look at the markets in general globally, then they have been recovering a little. They're rebounding in some cases.
00:06:29:10 - 00:06:59:02
Emily Gordine
European stocks are coming back stronger, possibly expecting a shorter conflict after all. US equities are also outperforming. The dollar is a bit stronger than what it was before. So even though you've had this shock to the system here, specifically to the energy market, of course. You are seeing a certain resilience. And I think, that also has to do with the resilience that the, the UAE that the Gulf states have been building up for many years.
00:06:59:04 - 00:07:07:20
Emily Gordine
And that that is also a reason for why things have continued. As much as it can as, as normal as possible.
00:07:07:24 - 00:07:28:00
Kassandra
Yeah. We're talking, you know, right now about a shift from maybe in-person work to online work or in-person school to online school people maybe ordering food instead of going out for groceries, for example. But I do want to acknowledge that this is a war that's been started. Lives have been lost, including in the UAE, dozens of people also injured there.
00:07:28:02 - 00:07:49:05
Kassandra
And so looking at this, this topic and just looking at the money, I don't mean to seem crass, but it does have an effect on people outside of the region. So that's why I want to ask you about the Strait of Hormuz, because Iran has claimed complete control of the Strait of Hormuz. It's a vital entry point, a very narrow entry point to the Persian Gulf.
00:07:49:05 - 00:08:00:21
Kassandra
And it's a way that a lot of oil from these exporting countries gets, out of their countries and into the other countries that are buying them. What's the latest with the Strait of Hormuz?
00:08:00:23 - 00:08:21:23
Emily Gordine
Well, the Iranian government claims that the strait is in fact not closed. But you're not seeing any ship movement so far. I think it is one Chinese vessel that braved the waters and, and and then exited the Strait of Hormuz. But other than that, ships are staying put. And I think that speaks to the general uncertainty of what's going to happen.
00:08:21:23 - 00:08:49:11
Emily Gordine
And of course, this is part of Iran's strategy here. When you're looking at how the Iranians have responded to U.S. Israeli attacks, then you're seeing a very wide range of targets. You're seeing Israel being target targeted, you're seeing U.S. military assets being targeted. But they're also going after other U.S. allies, and economic targets. And I think that's with the goal of creating a political cost to Donald Trump specifically.
00:08:49:11 - 00:09:12:03
Emily Gordine
And you're absolutely right. But you were saying earlier, of course, the numbers at the moment, don't speak of an image that is too bad. But you're right. You have missiles and drones firing over your heads. And a lot of the times you are not aware, aware of when they're coming and when they're being shot down, because people, ordinary people, might not be accustomed to the sound of interceptions.
00:09:12:03 - 00:09:42:06
Emily Gordine
They might think, oh, it's from a construction site, for example. So people are also very much unaware of the risk and of the security situation. And, in most cases only informed afterwards from the authorities that, the Defense Ministry, the Defense forces have shot down, attacks. And so it's a very it's a very strange situation to be in because you are you're hearing the reports, you're not feeling it yourself.
00:09:42:08 - 00:09:48:04
Emily Gordine
And that's it. Yeah. I, I find it very strange myself.
00:09:48:06 - 00:10:11:10
Kai
And you're normally based in Jerusalem and you just touch base with that. The markets have been recovering a little bit. The mood is not a complete disaster, let's put it like that. How is the, like, business economic mood? Over in Jerusalem, is there already, like a small ripple effect going over? That area.
00:10:11:12 - 00:10:36:01
Emily Gordine
Like the Israelis, used to conflict and they have built up an economic resilience over the years as well. So the short answer to that is no. And also, you have to keep in mind the Israelis have a very good, warning system in place. That they can go back to work. And if something happens, they will get alerts on their phones.
00:10:36:01 - 00:10:56:01
Emily Gordine
There will be sirens around them in the air warning them, you have to go and get to the shelter. A lot of these shelters have internet, so some will be able to work from there. And again, the Israelis are they have a reputation for being used to this. For being able to absorb these kind of, these, these, these kind of attacks in a way.
00:10:56:01 - 00:11:14:18
Emily Gordine
I mean, we've just seen two years of war in Gaza. We've seen a war in Lebanon. We've seen conflict, in Syria. And still the Israeli economy has remained, very strong throughout. And so has the Israeli currency, the shekel.
00:11:14:20 - 00:11:25:20
Kassandra
For more, we're joined now by Janell Dumoulin. She is our US correspondent, joining us from Washington DC. And Azeem, he's the director of the Mena Futures Lab at the Atlantic Council.
00:11:26:00 - 00:11:42:17
Kai
Janelle, let's start with you. We just heard from Emily Gordon in the UAE. The situation on the ground, the Strait of Hormuz being controlled by Iran, potentially controlled by Iran, at least at the time of our recording. What has been the U.S. response to this?
00:11:42:19 - 00:12:08:13
Janelle Dumalaon
Hi, guys. So we've heard a few things from the Trump administration with regard to this. So one of the things he said was that he was going to get the U.S. Navy to escort ships out through the Strait as a form of protection to allow them to get through. At the same time, there is something called the US Development Finance Corporation that said, it was going to offer support to shippers, as well as to insurance providers to allow trade to go through unimpeded.
00:12:08:19 - 00:12:30:19
Janelle Dumalaon
But the thing that has to be said here is that the details have mostly been sparse. We don't know exactly how that's going to work, and there are a few questions as to how effective that will be. So, for example, on this question of Navy escorts, are there going to be enough warships to go around? Because we're talking about a lot of tankers down there, and also not a lot of them are U.S owned.
00:12:30:19 - 00:12:52:17
Janelle Dumalaon
How is it going to work in terms of this sort of scheme of government backed war insurance worth saying that we have seen something like this before. Now, if you recall, there was something like this set up for the shippers that were carrying Ukrainian cargo. It was set up to allow to, to give insurance to shippers carrying Ukrainian cargo in the Black Sea.
00:12:52:23 - 00:13:05:17
Janelle Dumalaon
So the thing that we're talking about here, though, is on a much different scale. So I can imagine that a lot of people will want to hear more details on those proposals, but so far we haven't heard them valid.
00:13:05:19 - 00:13:15:08
Kassandra
Have we ever seen a closure of the Strait of Hormuz? It's this very narrow opening to the Persian Gulf and historically really important, right?
00:13:15:10 - 00:13:32:21
Khalid Azim
I think we have there has been another, incidence of, of it slowing down during the Iran-Iraq War in the late 1980s, Operation Earnest will, which, you know, temporarily or curtail the outflow of, of hydrocarbon exports, of the region.
00:13:32:23 - 00:13:40:23
Kai
Janell, have we seen more strikes on neighboring countries, to Iran that, like, work together with the US?
00:13:41:00 - 00:14:09:17
Janelle Dumalaon
Yeah. So basically, this is an ongoing thing. I think I heard Emily alluding to a little bit of it early, earlier, but we've seen strikes on the UAE, on Qatar, on Kuwait, on Bahrain, Saudi Arabia, Oman, Jordan, Iraq, Cyprus. I may be off for getting a country here and there. Of course. Not to diminish, it's relevance or its importance, but there is this growing sense that the war could vary quite quickly in other countries.
00:14:09:17 - 00:14:33:06
Janelle Dumalaon
Remember that there was this news of this ballistic missile that was fired towards towards Turkish airspace, and that was then shot down by NATO, missile defenses. So it's unclear what the target actually was, but it's worth remembering here that, Turkey is a NATO country. And there is this thing called article five that declares that an attack on one is an attack on all.
00:14:33:06 - 00:14:43:13
Janelle Dumalaon
So you can quickly imagine a scenario where you have the 32 countries of NATO getting sucked into this war, which of course would mark a major, major escalation. Right. Very worrisome.
00:14:43:14 - 00:15:03:07
Kassandra
Janell, you know, something you alluded to very strongly was that there aren't a lot of details from the US side when it comes to this potential kind of war insurance, right, with ships that may go through the Strait of Hormuz. But I'm wondering, have you gotten any kind of detail or clearer motivation, economic or potentially, war victory?
00:15:03:07 - 00:15:13:07
Kassandra
I'm not even quite sure what the what the right word is here. Like the war objectives from the white House or just, I guess what do we know about why they're doing this?
00:15:13:09 - 00:15:47:06
Janelle Dumalaon
Well, the broad outlines presented by Trump when the first saw when the strikes first happened, you know, he gave this, he gave these remarks. And in these remarks, he referenced destroying, nuclear capabilities. He referenced destroying missile capabilities. And also he referenced regime change. Remember, this was the same speech where he told Iranians, to take back their country, but also confusingly, remember that we were told, in 2025 that operation Midnight Hammer, you know, those first strikes on Iran last year that that obliterated the nuclear facilities.
00:15:47:06 - 00:16:07:20
Janelle Dumalaon
So as objectives go, those weren't the clearest objectives delivered in the history of the universe. But if it if possible, since then, it's gotten even more confusing. So days later he mentioned the missiles again. But then he started to talk about getting Iran to stop its support for the proxies in the region and in so doing, protect U.S. assets and allies in the region and all.
00:16:07:20 - 00:16:42:09
Janelle Dumalaon
Trump and his surrogates have also started to argue that Iran posed an imminent threat. I don't know if you heard this now famous quote from Republican Senator Tom cotton, where he said that Iran had been an imminent threat for 47 years. So clearly there is some, differences in how people would define imminence in this case. But, we also heard from the likes of Secretary of State Marco Rubio, who said that because they knew that Israel was going to attack, they knew that Iran would respond and Iran's response would potentially put the US in danger as such, that the US had to strike first.
00:16:42:11 - 00:17:04:15
Janelle Dumalaon
And finally, we heard from press secretary of the white House, Caroline Leavitt. Yesterday, she told us reporters that, Trump had a feeling based on the fact that Israel was going to strike. So you could say those aren't again, those aren't the clearest statements, but the emerging consensus seems to be that Israel and the U.S. recognize that the Iranian regime is at a particularly weak point.
00:17:04:15 - 00:17:11:15
Janelle Dumalaon
It's a moment that they wanted to take advantage of. And that's why these strikes happened more than anything else they have said thus far.
00:17:11:17 - 00:17:31:16
Kai
For someone who doesn't deal with the Strait of Hormuz on a daily basis, why is it such a big deal? I mean, when you look at it and you imagine the Persian Gulf as balloon, it's like the Strait of Hormuz is this tiny outlet where everything needs to pass through. And what is everything in this in this case?
00:17:31:18 - 00:18:02:15
Khalid Azim
So everything obviously is are oil and gas. And I think roughly about 20% of, of, of the world's oil and gas, transits through that space. Now, the, you know, the oil and gas markets are global commodities, and they're priced globally. So, you know, if there is a, a constraint, a supply shock, on, on the, you know, global supply and demand curve, then, then it's problematic and has a direct impact on price.
00:18:02:17 - 00:18:28:17
Khalid Azim
We have been in an environment where we've been a little lucky in that, the demand side of the equation, has, has benefited from being well stocked, well supplied, from, you know, from users, you know, most of the oil, as you, as you know, goes to Asia, and there's been a lot of capacity, and supply built up in, in, in the Asian economies.
00:18:28:19 - 00:19:00:12
Khalid Azim
So, it could have been much, much worse. That said, you know, oil prices, you know, over, last I checked, you know, $82 a barrel, certainly elevated, you know, to, to go about $100 per barrel, you know, it might, you know, depending on how long, this situation lasts. And, and, you know, if there's some type of, the asymmetric response, from the part of the Iranian regime which makes, the situation in the strait even worse than it is now.
00:19:00:17 - 00:19:18:22
Kassandra
Yeah. I don't want to ask you to look into a crystal ball, necessarily, but I'm wondering what are the factors you're keeping an eye on to tell us how expensive oil could get? $100 a barrel is always kind of this this line that we hear in headlines. Is that a risk right now?
00:19:18:24 - 00:19:49:03
Khalid Azim
It's certainly a risk. The question is, you know, what, what probability, you know, do you want to place, you know, that we we get there. I think the market's overall, are pretty sanguine on that risk. So if you look across the board, you know, from equity markets to rate markets to credit markets, to even currency markets, right now the markets are not, discounting, you know, extreme an extreme situation.
00:19:49:05 - 00:20:12:18
Khalid Azim
In the beginning, the first couple of days of the crisis, there were some sharp sell offs. And, obviously volatility has gone up, you know, materially, and as you know, volatility is, you know, a measure of risk, but that none of that has percolated, substantially to the point where, you know, it's heightened by, by by any means.
00:20:12:20 - 00:20:22:02
Khalid Azim
So I listen recently, to, to an interview with the Anthony Blinken, who, I think on Bloomberg News who said.
00:20:22:04 - 00:20:27:21
Kassandra
The former the former, secretary of state under the Biden administration.
00:20:27:23 - 00:20:46:06
Khalid Azim
Absolutely. Who said that the constraint, the limiting constraint, for the campaign and engagement in Iran or our munitions and markets, I can't speak to the munitions part, but for the markets part, right now the markets are digesting, this elevated risk pretty well.
00:20:46:08 - 00:20:58:24
Kai
So obviously oil is a big part of the economies in that region. What's the response from the other oil producers in that region? So, so far to this new situation?
00:20:59:01 - 00:21:25:11
Khalid Azim
Well, one thing I would tell you that we should distinguish between the, you know, oil and gas, oil, gas has been more, directly impacted, and and, and the supply shocks and constraints of production, on gas are going to have a more prolonged effect for a longer period of time. Europe already had shifted away a lot of their, demand away from Russia more to the Middle East.
00:21:25:13 - 00:21:43:12
Khalid Azim
You know, you've had damage done, you know, to some major, facilities, in, in, in the region. It's going to take a, some, you know, even if the war were to stop today, it's going to take some time for us to filter through that to to manage and understand the implications on gas and, you know, sorry.
00:21:43:12 - 00:21:59:00
Kassandra
Go ahead, go ahead. But I want to bring you into this part of this. Right. Because the US has a strategic petroleum reserve. Is there any conversation? On your side of the Atlantic about tapping into that yet?
00:21:59:02 - 00:22:25:18
Janelle Dumalaon
The answer appears to be not yet. So there appears to be little to indicate that the US is thinking about, tapping into the SPR. It's, the moment not really expected, but traditionally there are a few triggers for that to happen, right? So a physical supply disruption or a price spike that severe enough to threaten the economy or, as part of a coordinated release, one that's caught with allies, coordinated with the International Energy Agency.
00:22:25:18 - 00:22:45:17
Janelle Dumalaon
So that's in a situation where, you know, there's a global supply disruption and you want to head off a bidding war between allies. And that's why you tap into your reserves along with other allies. So President Biden, for example, did that in 2022 as a result of the global energy crisis that was sparked by Russia's invasion of Ukraine.
00:22:45:19 - 00:23:09:16
Janelle Dumalaon
But as you guys have been saying, you know, this time around, this could be triggered by a discussion on price. You mentioned kind of the psychological threshold of $100 per barrel. And, again, I would like to underscore what has been said here that, an extreme situation, while maybe not imminent, is also not impossible.
00:23:09:21 - 00:23:37:09
Kai
You also mentioned it's not just oil that is affected by this. Yeah, disaster closing of the Strait of Hormuz, but also LNG. As I said, Europe has shifted away from it a little bit, but I mean, still still dependent on it. The US is also a major exporter. And so far it seems that like American traders of LNG have like shrugged off this major problem a little bit in the Middle East.
00:23:37:09 - 00:23:44:14
Kai
Is that also your your assessment of the situation is the US profiting from this in that way?
00:23:44:16 - 00:24:03:23
Khalid Azim
Yeah. I mean, so the US was, smart or fortunate, depending on how you want to, categorize it in the build out of LNG production, and its ability to export. So they're picking up, you know, had the capacity to pick up some of the supply constraints. And so that's, that's to their benefit.
00:24:04:00 - 00:24:23:01
Kassandra
Janelle, I want to briefly look at markets because I know we have to let you go in a few minutes. International markets tumbled on the news of the war at the beginning of the week. The US markets really seem to shrug it off. Why this divide? Did the US markets anticipate conflict, or is it kind of baked into how companies are assessing the Trump administration?
00:24:23:01 - 00:24:26:08
Kassandra
2.0.
00:24:26:10 - 00:24:49:08
Janelle Dumalaon
I mean, you know, that's, quite a long series of questions. And, you know, I hate to just be like, yes, but yes, you know, so it was, you know, it was widely anticipated that this strike on Iran was going to happen at some point. You know, the Venezuela example taught us that you just don't move that amount of military muscle into one place to then not use it.
00:24:49:08 - 00:25:07:04
Janelle Dumalaon
So in that regard, there was a certain level of pricing in that was going on. And I believe, you know, we have, touched on it a little here in our discussion, you know, the degree to which the US is much less exposed than, say, Europe is or Asia is. And I think that played a role as well.
00:25:07:06 - 00:25:21:05
Janelle Dumalaon
And yeah, I think there is this part of it where markets, US markets simply are getting used to Trump, where volatility has become part of the norm. And there is a certain way they are rolling with the punches because there are a lot of punches.
00:25:21:07 - 00:25:41:12
Kassandra
And last question for you. I really thought Americans were worried about affordability and not necessarily international conflict. So I'm wondering, you know, is there a fear from people you're speaking to in the US about a return to inflation? If we see something as destabilizing as a war in the Middle East?
00:25:41:14 - 00:26:00:09
Janelle Dumalaon
Yeah. I mean, as we're seeing, you know, one could beget the other international conflict and high prices. And we have been talking about how this could raise the costs across the board, from airfares to shipping to grocery prices. And, you know, there was actually this poll that morning, consult, I believe it was did when the strikes happened on February 28th.
00:26:00:11 - 00:26:23:08
Janelle Dumalaon
And they found that 63% of Americans surveyed said that they were worried about what the war on Iran could do to gas prices. But we've been saying all along, right. Like so this depends on how long this goes for, how severe the conflict ends up getting. And of course, on the business side, there is this worry that the longer it goes on, the more this could undermine business confidence and that sort of uncertainty.
00:26:23:08 - 00:26:52:11
Janelle Dumalaon
That could be the sort of thing that weighs on job gains. This is something that, for example, we saw in 25 with the uncertainty delivered by Trump's tariff policies, at least in part. So what I would like to highlight here is that we are in a midterm year and, in the United States and Trump standing among voters has suffered, somewhat significantly because especially of his inability to deliver on the economic promises like lower prices.
00:26:52:17 - 00:27:09:22
Janelle Dumalaon
And Americans have been struggling with the cost of living. So it's very interesting to see how this will end up becoming politically relevant. Also on the ballot box, not just, you know, not just for security reasons. You have Americans being put in harm's way, but also for these economic reasons that you mentioned.
00:27:09:24 - 00:27:16:14
Kassandra
And now we're going to dig in a bit deeper with Halid Azeem again, joining us from the Atlantic Council in the Mena futures lab.
00:27:16:16 - 00:27:27:23
Kai
Khalid, other OPEC member, said that they will boost production, oil production. Will this stabilize things or not have so much effect on the situation?
00:27:28:00 - 00:27:44:17
Khalid Azim
Well, it will help. But you know, as you know, the the commodity markets, are, you know, globally set. So you look at aggregate supply and aggregate demand. But the question really is can they get the product to market? So if, they can increase the supply is one thing. But they have to also store that supply.
00:27:44:19 - 00:28:00:19
Khalid Azim
They have to load ships with the supply, and they have to get those ships out to market to end customers. So so the question is of itself, you know, has to look sort of in the broader context as to actually getting into the marketplace, really.
00:28:00:21 - 00:28:10:18
Kassandra
We've talked a lot about fossil fuels, oil and gas. But I'm wondering, wondering what industries are also exposed, in your view, to this conflict in the region?
00:28:10:20 - 00:28:32:18
Khalid Azim
Well, the, you know, tourism industry is taking a huge blow, in places like the UAE in particular, where it's a massive amount of their, of their GDP, and it's virtually shut down. You know, travel is completely at a standstill. Actually, I have a colleague of mine who's, stuck in the UAE or and we're trying to get her out.
00:28:32:20 - 00:28:42:11
Khalid Azim
So, you know, there are, you know, that is the most, you know, prominent industry that comes to mind that, is being impacted.
00:28:42:13 - 00:29:01:10
Kai
Obviously, another effect is that a lot of ships that are passing through, there are also container ships. So also transporting goods in and out of the region. How long on can that go on like this dried up, stream off container ships until it becomes a problem for for the countries there?
00:29:01:12 - 00:29:26:08
Khalid Azim
I don't know. But I think at some point it's going to certainly, bite, and it's, and it's not just the outflow. It's important to look at the inflow. So there's, there's incoming traffic that has a big, knock on effect to, the, you know, local economies. And, and it's the inability of bringing product into that marketplace, is going to, you know, boomerang into other sectors of the economy is.
00:29:26:10 - 00:29:53:18
Kassandra
Something that surprised me when I started to to dig into this week's story a little bit, was how services is such a growing sector in the region. And, regional Amazon data centers have been struck and have been collateral or possibly targets, in this war so far as the time of according to Amazon Web Web Service, data centers in the UAE were directly struck by drones and one of Bahrain's Amazon facilities was damaged and taken offline.
00:29:53:18 - 00:29:59:24
Kassandra
How important or how vulnerable are these kinds of service centers to these attacks?
00:30:00:01 - 00:30:40:09
Khalid Azim
They're extremely important, you know, how vulnerable is and more of a national security question than I can probably answer. But it's not just, it's not just power stations and data centers. It's even things like, you know, water purification plants, there's basic, you know, just living, you know, necessities that, are critical to the daily life of, the populations in this region and, you know, impacting the ability of, of the population to lead a normal, productive life, will have a huge impact on GDP if people don't have access to power or water.
00:30:40:11 - 00:30:48:22
Khalid Azim
And, are constrained, in other ways from, you know, living their lives. And, and then obviously the economy is going to, you know, be detrimental the impact.
00:30:48:24 - 00:31:08:13
Kassandra
We've talked a little bit about tourism, but zooming in a bit on the airlines themselves, you know, we've touched on you have a colleague stuck in Dubai. We have a colleague stuck in Dubai. I've transited in Dubai in the past. It's one of the busiest airports in the world. What does this mean for airlines? Are we already seeing, flights rerouted to other hubs, for example?
00:31:08:15 - 00:31:33:22
Khalid Azim
Well, I know people are. Are we routing through different ways? You know, I have some friends and colleagues, in South Asia who are now, you know, rerouting their flights, you know, across the Pacific instead of going into the Gulf. So, it I think the key question, though, is, you know, for a short duration, these things and this disruption can be, digested.
00:31:33:24 - 00:31:56:02
Khalid Azim
And the question is, when do you get to a tipping point where there is something more systemic which triggers, its impact on the region, on the economy? And I think, you know, as you may have read Malcolm Gladwell's book Tipping Point, you know, that one of the insights of that book is that, you know, you don't always know that tipping point until after the fact.
00:31:56:04 - 00:32:19:11
Khalid Azim
So it really is a function of when do we get to that point? You know, you know, three days, six days, one week, two weeks. You know, it's hard to know, but, it's not infinite. You know, there is there's going to be a point where there is going to be a systemic impact, which is going to have a longer, more durable, consequence to the economies of the region.
00:32:19:13 - 00:32:44:02
Kai
We also see that, like many cruise lines, are stuck in the Gulf at the moment. So again, hitting this, you know, tourist tourist area, it seems to be like the industry which is the worst hit overall, like in this, in this whole thing apart from oil and LNG, of course. But how bad is the effect for the country like UAE overall with, you know, tourism crippling?
00:32:44:02 - 00:32:46:06
Kai
Basically.
00:32:46:08 - 00:33:31:15
Khalid Azim
Well, it's it's usually bad because you have to look not just at the industries, but the industries and, and products and services which support those industries. So, you know, the cruise lines themselves, the hotels themselves, you know, the, the logistics for the husbanding services, you know, food and other production, you know, capacities, other things that tourists, you know, would spend money on and, and engage on, you know, all that revenue is, is gone, you know, restaurants and, you know, you know, nightclubs and bars and, you know, all those things are, are being impacted because, they're not people coming out of those areas.
00:33:31:17 - 00:33:32:05
Khalid Azim
00:33:32:07 - 00:33:58:01
Kassandra
I'm wondering what plans we're seeing to mitigate economic shocks, either from the Trump administration, from businesses themselves, or from these countries in the Gulf. I'm thinking, unfortunately, this hasn't been the first war in the region. And potentially there were also lessons learned during Covid. So what what's being applied here to help make this not such a big business problem, so to speak?
00:33:58:03 - 00:34:25:18
Khalid Azim
Well, I think, I think the people in the region are credibly resilient. They are, very entrepreneurial. And, you know, our, our and the leadership has been very sending the right signals as well, you know, whether whether it's leaders in the region, you know, being visible and public. The other thing to keep in mind as, as you may know, that this is a holy month of Ramadan for the Islamic faith.
00:34:25:20 - 00:34:50:07
Khalid Azim
And it's a big part of, of this month is, spending time with family and friends and, you know, getting together for evening, if the hours which are the breaking of the fast. And so you're seeing leadership, I think act very thoughtfully in the region and trying to demonstrate some sense of normalcy, in, in daily life.
00:34:50:09 - 00:35:08:14
Khalid Azim
So from what I gather, you know, in places, the people I've talked to in the Gulf, you know, they're being encouraged, you know, to to live life as normally as possible to go to work. To go to, you know, instar events, to go to the mall and, and by and large, you see people doing that.
00:35:08:15 - 00:35:43:02
Khalid Azim
So I think it's a real, testament to the leadership of the region that they are. They're they're they're they're they're they're walking the walk and they're talking the talk that said, you know, there are consequences. You know, there are implications. You know, when you're when you're when you're curtailing the, movement of people and, and people in particular, in and out of a country that is highly reliant on, you know, human beings to come in and facilitate commerce and ideas and, engagement.
00:35:43:04 - 00:35:55:19
Khalid Azim
There's going to be knock on effects of the economy and, you know, hopefully it will be hopefully will last for long. I think these economies are very resilient and they'll do quite well. But, but there will definitely be an impact.
00:35:55:21 - 00:36:10:17
Kai
As you mentioned, the financial markets like bounce back quite quickly. So other financial markets by now like used to this war happening here and there. And it's just the new the new normal.
00:36:10:19 - 00:36:36:17
Khalid Azim
You know I think there's some truth to that. But I think there's some unique circumstances about the environment that we're in right now. You know, like I said, on the, on the, on the oil side, you had suppliers that were well supplied, that gave a little bit of a buffer. You know, I think on, on, you know, the, you know, the credit markets have been really, you know, priced in, you know, a major, you know, major sell off any.
00:36:36:17 - 00:37:04:09
Khalid Azim
Anyway, the underlying quantum fundamentals of the credit markets, and of the equity markets is, is relatively strong. So, you know, there's confidence in these markets because the fundamentals are, you know, relatively strong. And up until now, there's nothing pointing to, you know, some major, major event or disruption or event risk which triggers, you know, a recalibration of those fundamentals.
00:37:04:11 - 00:37:21:13
Khalid Azim
So you had, you know, you had, you had you had the wind in your back a little bit. I think in terms of the timing of this event, you know, across these markets. And the other thing to keep in mind is that, I think you alluded in your question, these markets are very sophisticated.
00:37:21:15 - 00:37:44:21
Khalid Azim
They are, adept at pricing in risk. They understand how to hedge. And, and they've done a pretty effective job, at doing so. I think the other thing, you know, the, the broker dealers have have, you know, done done a pretty good job as well in helping to maintain a very orderly market.
00:37:44:23 - 00:37:49:19
Khalid Azim
So I think all in all, the situation, is being managed effectively.
00:37:49:21 - 00:38:10:11
Kassandra
Okay. We're nearly a week on since the U.S. and Israel launched these attacks against Iran, and this doesn't seem to be a Venezuela type attack from the US this time, it kind of in and out. It seems like the president, from his statements is in it for at least, the near future, from what we can gather as of Thursday.
00:38:10:16 - 00:38:25:09
Kassandra
So I'm wondering from a business perspective, how long until this becomes a problem that really rocks economies, that overtakes this resilience that we're talking about here. What kind of timeline, is in mind that you're worried about?
00:38:25:11 - 00:38:40:18
Khalid Azim
So I wrote a I wrote a research piece, quoting, Donald Rumsfeld's, you know, former secretary of Treasury, a defense, in the Bush administration and in the Ford administration. And he talked about, you know, no knowns, an unknown unknowns.
00:38:40:22 - 00:38:41:07
Emily Gordine
00:38:41:08 - 00:38:42:07
Kassandra
A classic. Yeah.
00:38:42:09 - 00:39:06:20
Khalid Azim
Right. So my my argument is that the markets are pretty, effective and efficient, measuring and managing unknown unknowns. And I think that's part of the reason why you've seen the markets, behave the way they have this past week is, they have, you know, calibrated that risk. They have discounted the probable of something, major happening.
00:39:06:20 - 00:39:35:04
Khalid Azim
And, and, you know, the markets have been, you know, relatively orderly. The unknown unknowns is, I think, the question you're asking. And that's a much harder question, to answer, you know, when you get to kind of real, you know, fat tail risk and, when and how that risk can trigger, something which can cascade, you know, across the marketplace is, is, is much, much harder to, predict.
00:39:35:06 - 00:40:04:00
Khalid Azim
And so I think from a standpoint of the financial markets, you know, markets want, clarity. They want, you know, transparency, they want, you know, to be able to calibrate, you know, having, having something that goes for a long period of time or something that goes without clear strategic, endgame for, the parties involved in this conflict.
00:40:04:02 - 00:40:29:01
Khalid Azim
You know, leads to potential, law of unintended consequences where you get more into the realm of unknown unknowns. And when you get there, then you start to really, look to really, you know, recalibrating your kind of efficient frontier and go back and repricing risk in a more material way, which then translates into, the financial marketplace.
00:40:29:03 - 00:40:49:12
Kai
Let's go back to Iran for a second. So the economy has been under a lot of stress, a lot of sanctions over the past couple of years. Last year, there was a 12 day war, with Israel. What would you say from your your perspective, like how fragile, is the economy in Iran right now?
00:40:49:14 - 00:41:18:02
Khalid Azim
So I think before the, launch of this campaign, the economy was very fragile. I think the, you know, one metric, one variable to look at closely is, the bump up in inflation. I think some of the data in the data is not always very clean and easy to see. But the last time, you know, inflation has bumped up to these kind of levels is, you know, right around the time of the, of the late 1970s, right before the revolution.
00:41:18:04 - 00:41:41:04
Khalid Azim
So, you know, periods of heightened inflation are very, very problematic because it doesn't doesn't just impact, the, you know, the protesters on the street, it impacts the regime. Everyone's pocketbook is impacted. You know, the $100 you thought you had in your pocket all of a sudden becomes, you know, a fraction of what it was before.
00:41:41:06 - 00:41:59:24
Khalid Azim
And, and then that creates kind of this, this, cycle of, you know, a of concern and an impact, and, and potential, you know, systemic changes within government itself.
00:42:00:01 - 00:42:05:13
Kassandra
If you like what we do. But you want the view not from the US, but from Germany. Have we got the podcast for you?
00:42:05:19 - 00:42:16:00
Kai
Our sister show, Berlin Briefing, where they explore German politics and the German perspective on events that are shaping the world. Take a listen.
00:42:16:02 - 00:42:50:02
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When headlines get louder, we go deeper. Say hello to Berlin Briefing, your guide to Germany's impacts on the world between East and West autocrats and democrats. Germany's whole system is under stress. Politics power takes pressure from all sides, and the world around Germany is getting more dangerous. Is democracy glitching? Too much noise, too little clarity? We decode what it means for you from Berlin to right where you are.
00:42:50:04 - 00:42:56:20
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00:42:56:22 - 00:43:13:21
Kai
Today, we're talking about something that would have sounded somewhat unlikely not too long ago. And that's games and movies together, because for a long time that combination didn't turn out too well. Like if you remember the 90s, the 2000s, the movies, they were no bueno.
00:43:13:23 - 00:43:31:00
Kassandra
No. So, for example, you had mortal Kombat, right? A very popular game, which I was not allowed to play because my mom said it was too violent. So I definitely did not go to Josh's house and play it. Mom, that never happened. But I didn't see the movie either. But you just really couldn't get past bad animation and character design.
00:43:31:00 - 00:43:50:13
Kassandra
But suddenly you fast forward to now and you've got hit series and billion dollar box offices like the Super Mario Brothers movie, which also had some really big names in it. You, of course, had the series The Last of Us, which many of us saw and did big numbers for, for, HBO. And there's a long list of adaptations in the pipeline as well.
00:43:50:13 - 00:44:02:22
Kassandra
So the question is no longer whether games can work on screen anymore or it's more, why is the film and TV industry so in love with games all of a sudden? And what are they hoping to get out of it?
00:44:02:24 - 00:44:19:24
Kai
And to unpack this, joining us now is Houston Troy, and he's a leading games industry analyst and lecturer at NYU Stern School of Business and the NYU Game Center. And there he focuses on the business side of things and economics of games.
00:44:20:01 - 00:44:25:20
Kassandra
Yo is to start us off, tell us, what's your favorite video game movie, and what do you think is the worst adaptation?
00:44:25:22 - 00:44:32:24
Joost van Dreunen
Okay, that's that's that's an easy answer. So the the best and the worst are both Mario ones.
00:44:33:01 - 00:44:34:20
Kai
That's still on.
00:44:34:22 - 00:44:48:21
Joost van Dreunen
Yeah. The best I'll start with that was when I took my oldest son to Amsterdam. And so, you know, for jet lag, they were taking the last viewing of the Super Mario movie that came out a few years ago. And we're sitting there just the two of us and maybe four other people, and he had the best time.
00:44:48:21 - 00:45:03:00
Joost van Dreunen
He's got this giant soda pop. And, you know, we have chips and popcorn or whatever. I'm drinking a beer and we just had such a nice bonding experience because I could connect with my own kids are this franchise that he and I was discovering. The worst one was the 1983 version.
00:45:03:00 - 00:45:04:00
Kai
At the.
00:45:04:02 - 00:45:19:13
Joost van Dreunen
Movies, which was this, like, ridiculous. Look at that. Dennis Hopper, a super famous actor at the time. But they poured so little effort into it that it was just trash. And so, you know, there's a weird extreme. Yeah. But I think it describes that, that this sort of trajectory that we've seen over the years.
00:45:19:15 - 00:45:28:22
Kai
So especially in the recent years, why is Hollywood now, like so obsessed with adapting games into movies?
00:45:28:24 - 00:45:48:21
Joost van Dreunen
That's a really good question. The so the the nice way to answer it is to say, well, gaming has matured and franchises that we see now and that we've grown up with and sort of the pokemons and the Minecraft nerds, the Super Mario world, they now are relevant cultural icons, and that they have a narrative economy that we can explore to tell really great stories on the silver screen.
00:45:48:23 - 00:46:10:05
Joost van Dreunen
And that's true, of course, it's occupies a different cultural space. A more cynical perspective is to say that, you know, we've just been beaten to death with all these superhero movies. You know, we're tired, you know, grown men with capes in their underwear on the outside and they're just ready for something else. And gaming or gaming culture allows a broad variety of like, storylines that we haven't seen before.
00:46:10:05 - 00:46:18:23
Joost van Dreunen
And so Hollywood is discovering this trove of IP, this intellectual property that they haven't been able to leverage in the past. And that now becomes incredibly valuable.
00:46:19:04 - 00:46:40:21
Kassandra
Right. So the previous understanding or my understanding was that you had a movie that kind of became the center of an IP universe, right? You would have, the clueless movie come out, for example, and then you had games, that came out around it, whether they were computer games or, you know, card games or something like that or merch that went around it, now it seems like anything's fair game.
00:46:40:21 - 00:46:58:14
Kassandra
If there's a fan base around it that could become the center of the IP universe, and then you could make a movie out of it. So is this a trend that we're seeing and where did it start? Because I'm also thinking of like Pirates of the Caribbean. That's a ride in, in Disney World in the US. And then it became a whole movie franchise.
00:46:58:14 - 00:47:00:07
Kassandra
For example.
00:47:00:09 - 00:47:21:00
Joost van Dreunen
That's a yeah, I like that question. So yes, it used to be sort of in an additional form of revenue where I was like, oh, we have this thing, let's just sell off the rights and somebody's going to make a crappy movie and maybe make a couple of bucks. And that was for if you look at the economics up until like 2010, that was a great way to end your career as a film director, because there was just a strange that's like non-profitable movies.
00:47:21:00 - 00:47:40:06
Joost van Dreunen
I mean, it's terrible. It's like you would even like franchises that worked well. They end up underwater. By 2010, the franchises become more valuable and the audience drives more. You know, it comes out in droves and they start spending more. All of a sudden it starts to turn around and then it becomes a viable form of entertainment. The only exception here is the Pokemon movies.
00:47:40:06 - 00:48:04:17
Joost van Dreunen
They now have, I think, 23 full feature films, each 90 minutes long, that always break even and make a profit. But that's sort of uniquely Japanese. That's sort of that's their thing on a global scale. You know, it's turned around. And so in many ways, the film industry and the game industry have found each other. But rather than having a creative revenue or additional money coming into these franchises and merch events, now it's part of this flywheel, right?
00:48:04:17 - 00:48:21:15
Joost van Dreunen
The games industry has grown. It's become incredibly large and also cluttered. So it's a great way to stand out. If I'm not playing the game, then maybe I can go watch the game, or I can go online and discuss the game with other people. But so there's all these other activities surrounding it, and film is taking a very, notable piece of that.
00:48:21:15 - 00:48:37:15
Joost van Dreunen
So you mentioned HBO, you know, you see a revitalization of game sales because the TV series just reminds people of their favorite franchise, whether that's The Last of Us, whether that's fallout. So it becomes part of a flywheel rather than sort of a little bit of extra money on the tail end.
00:48:37:17 - 00:48:52:12
Kai
As the film industry had like kind of had such a bad run that they now need to turn to these ideas and games, you know, to get some, to get some creativity from them or, why? Why the sudden spark of interest? I say.
00:48:52:14 - 00:49:16:22
Joost van Dreunen
Are the interest of Hollywood in the film industry more broadly in the games business or the stories that the games you see has been telling everybody? Is that the audience is disproportionately interested in this. Lots of people grow up with the games that they play and they identify through them. So whether that's Zelda, whether that's super Mario, whether it's Minecraft, World of Warcraft, any of these games, you know, this is what people do for fun.
00:49:16:23 - 00:49:36:08
Joost van Dreunen
This is where they meet their friends. And so in the same way that we have sports instance, you know, it's much easier to understand that it's not just about the actual seeing where the activity takes place. It's also everything around it. So Hollywood is just tapping into that, you know, for the same reason that we see lots of films being made around sports events and sports categories and all this kind of heroic stuff that happens.
00:49:36:08 - 00:49:55:18
Joost van Dreunen
So the games industry has its own stories and its own narrative economies, and because an entire generation, has grown up with this now, there's just demand for it. And Hollywood is very cleverly plugging into that. So they they're just growing with the culture and they're growing with the generations as they, they change interests and preferences.
00:49:55:20 - 00:50:07:11
Kassandra
Casting your mind back to the past. Yost. Why did games movies historically fail compared to how successful they are today?
00:50:07:13 - 00:50:26:04
Joost van Dreunen
Yeah. So the the history of the games industry at the box office is terrible. You know, you end up with a lot of people losing money. And so it just has always been this venture where people go like, okay, don't do this. You're gonna you're going to lose all your cash. The the reason was because they didn't know very well.
00:50:26:04 - 00:50:55:09
Joost van Dreunen
So famously I mentioned, the, 1983, adaptation of Super Mario Brothers with Dennis Hopper. You know, allegedly Dennis Hopper, as famous as he was, never even looked at the scripts or the IP or really bothered to get to know who Bowser to watch. Like the bad guy. They're the arch nemesis of Super Mario. And so you get a, you know, a creative industry that is totally disconnected from the actual text, from the actual, you know, cultural of the games industry.
00:50:55:09 - 00:51:12:06
Joost van Dreunen
And so as a result, they just make movies that are, sorry. And so and so they did it to themselves. It's really what it's like. You see this disconnect for them. It was much more opportunistic. I think over time they've learned to be a little bit more aware and you start to see people that come from the games industry now get jobs at Hollywood and Hollywood.
00:51:12:06 - 00:51:26:15
Joost van Dreunen
People get jobs at game companies or publishers. And so there's much more of a connective tissue between the two worlds, whereas previously that didn't exist. And so you get all these sort of weird interpretations of what is otherwise deep lore, for instance.
00:51:26:17 - 00:51:37:24
Kai
So Hollywood kind of learned a bit that they, you know, need to consider the fans actually, or, you know, look at the stories that this game's told before, right?
00:51:38:01 - 00:51:40:02
Joost van Dreunen
Absolutely.
00:51:40:04 - 00:52:01:20
Kassandra
You know, I'm wondering I'm of two minds of this, right? One part of me is like, Hollywood's just milking this nostalgia machine. They're doing the same thing that, like, these reboots, are doing right now, like the reboot of Harry Potter, for example, or the Barbie movie. Right? Like just milking this, idea. That people grew up with and trying to turn it into profit now.
00:52:01:20 - 00:52:21:08
Kassandra
But then the other part of me is looking at, for example, The Last of Us. Maybe that was a story that a few years ago, the gaming industry was just willing to tell, and Hollywood wasn't willing to tell it. And now that Hollywood can see, okay, actually, people do like this game. And like the queer characters, for example, that are centered there.
00:52:21:10 - 00:52:28:16
Kassandra
They're like, oh, okay. Now somebody else has taken the risk. We're ready to take the risk. Less of a risk now. So how do you see it?
00:52:28:18 - 00:52:50:24
Joost van Dreunen
That's a good, good point. Right. So the I think in general terms, I've always looked at it as to say that the games industry is into stories that it tells, is able to go beyond sort of like the classic Disney narratives. Yeah. You know, like every movie, like it's only recently that we stopped rescuing princesses. I have a four year old daughter, and so I'm, I am all the way up on all of the frozen lore.
00:52:51:05 - 00:53:26:11
Joost van Dreunen
And, but that's a very relatively new development in sort of traditional Hollywood cinema, whether that's animation for children or otherwise, the game industry offers a much wider range of narratives and storylines, and it's because it borrows on animation, it borrows from comic book industry, and so it's just a different set of storylines that now suddenly become relevant. In the case of The Last of Us, for instance, or, you know, having a different set of values and, and, and, and representations in gaming, I think that that is precisely why Hollywood has embraced it, because it allows them to tell the stories which still sort of borrow the fact that was gaming.
00:53:26:11 - 00:53:42:07
Joost van Dreunen
So it's sort of like this other space that we can borrow stories from that we can have different, you know, heroes that lead to narrative. As opposed to that, we must stay true to somebody wearing a dress in a ball gown to save the day. Right? It can be something more gritty. It can be something that tells a story that we haven't heard before.
00:53:42:09 - 00:53:58:02
Joost van Dreunen
And I would add to that, that for the games industry, unlike, say, the storytelling that you see in Hollywood tends to be much more global because to cater to a global audience. And so there is much more influence from, say, Japan, right. And Japan. If you've ever watched any anime, that is an experience. All of its own, right?
00:53:58:02 - 00:54:19:09
Joost van Dreunen
I mean, it's just esthetically different. It is, storytelling wise is very different, but you see the narratives kind of progress. And so the way to button this, for instance, is to say, a phenomenon like The Hunger Games fight, which is a series of books, it's been made into movies that is also been popularized by, you know, games like Fortnite, where you sort of have last person standing wins.
00:54:19:11 - 00:54:36:16
Joost van Dreunen
But that's something that comes from the manga culture, from Japan. And so you can draw this red line from, you know, all the way to Japan, every Western audience saying like, this is an idea. It's a concept. It's a way of story. To that would have never emerged from the West, but it comes from the east. And now through gaming, it travels much further.
00:54:36:16 - 00:54:54:19
Joost van Dreunen
And it becomes all of its own and narrative economy. And so whether it's, game mechanical, whether it's like, you know, a world building conversation, whether it's certain queer characters think all of that borrows from the games industry. And I think that it has given Hollywood a bit of a pass on taking itself too serious and try out something different.
00:54:54:21 - 00:54:57:22
Joost van Dreunen
As audiences change their habits.
00:54:57:24 - 00:55:16:11
Kai
As a professor who is dealing with this on a professional level, researching games and also as a fan and maybe a gamer too, what do you think is the tricky part about, you know, getting a game adapted into a movie the right way?
00:55:16:13 - 00:55:43:04
Joost van Dreunen
That's that's a good question. So here's a recent example. One famous YouTuber, Markiplier, recently self-funded and released across 4000 screens in the US a movie called Iron Lung, which is an adaptation of a game by the same name. So Markiplier is one of these people that plays video games on the internet. And, you know, he had this epiphany as he played the game three years ago and then started slowly moving towards his self-produced things.
00:55:43:06 - 00:56:02:03
Joost van Dreunen
It's it indicates to me sort of the lack of innovation in the Hollywood side. It's like Hollywood is a great place and everybody does a good job. And also it's incredibly slow moving. Right? So so it's been historically very difficult to to synchronize down release of a title, a video game title with the release of a box office film.
00:56:02:05 - 00:56:29:07
Joost van Dreunen
And so because of it, it's basically just two giant tankers, sort of somewhere in the ocean, as opposed to like a speedboat. And so I think the production comes from the fact that we now have the ability to have, say, influence large or smaller scale projects, seeing the light of day, but because there's already a baked in audience, which is sort of the I think the takeaway from all this is like, you know, instead of making games and making movies, what we're really doing is making audiences.
00:56:29:13 - 00:56:49:06
Joost van Dreunen
Is there a baked in crowd of people that's going to care, that's going to want to spend five bucks, ten bucks at the box office or download it on some streaming service or, or do we have to upsell and sort of make people aware? And I think there's a lot of de-risking that investors, would benefit from by just looking at like, where are the people already interested?
00:56:49:08 - 00:57:01:13
Joost van Dreunen
Can we do more of that rather than try to surprise them with some secret project? It takes years to develop it. So I think more agile is Will, so that smaller scale efforts will be much more powerful in the years to come because they have an audience already.
00:57:01:14 - 00:57:25:11
Kassandra
Yeah, that makes sense. Yes. After this interview, I'm going to have to find out where you're paying $5 to see a movie, because that's information I need to know in this economy. But I'm wondering about it's classified. So I'm wondering about the balancing act between serving hardcore fans versus making something accessible, especially people who've never played the game.
00:57:25:13 - 00:57:36:06
Joost van Dreunen
That's excellent question. It's, so the challenge always is to how do I not alienate by existing fan base, while innovating and changing things and catering to a more mainstream audience?
00:57:36:06 - 00:57:50:02
Kassandra
Yeah, especially because I would imagine that those hardcore fans are going to be like the first ones who wanted to see the stills, want to know who's being cast, and if they don't like it. That could create negative buzz around a movie. And then, you know, maybe you're sunk before you can even try swimming.
00:57:50:04 - 00:58:15:23
Joost van Dreunen
Yes, that is always a risk. But in entertainment we see his repeatedly the success of that model. Right. So, Lady Gaga, but Lady Gaga has super famous. But she came up really by making her name in the gay club scene here in New York. You know, what's your name? Taylor Swift, you know, just another white girl with a guitar in Nashville, Tennessee, but somehow was able to distinguish herself from just a country singer and to, like this international pop star.
00:58:15:23 - 00:58:35:12
Joost van Dreunen
And so just because you starred in that way, it's like you need a fan base to elevate and build you up from there. And so, again, it comes back to like making an audience rather than anything else. If you can build a rapport with people and then from there launch yourself or propel yourself. I think that that's the same for games and film as it is for musicians.
00:58:35:14 - 00:58:56:24
Joost van Dreunen
And, you know, I don't expect those dynamics to be any different. Yeah, even Minecraft, a movie, you could argue. I mean, this is my students talking. They did not think that that was a great movie. And yet every single one of them went and paid money to see it. So it's a bit like, you know, there's just I'm sure there's going to be a second once, but it's, it's sort of a baked in thing that people do.
00:58:56:24 - 00:59:10:19
Joost van Dreunen
I think that there's trying to give people a little bit of autonomy and experiencing is, is, is the way to do it. And yeah, there's a risk involved. But historically it was based on the data is like that seems to be the way to really get it to a mainstream, massive blockbuster hit.
00:59:10:21 - 00:59:40:11
Kai
Yeah, I have to be honest. So when I saw Jason Momoa on those like, Minecraft movie sets, I was like, yeah, no, I'm not gonna watch that. That's gonna that's gonna be like a bit of a stretch. So but you're saying that's all fair game, basically. So you can turn any movie into a game? Because you're just, you're really trying to utilize this build in audience that you already have, and it doesn't need to be, you know, the loss of us who already have, like a story that they are telling.
00:59:40:13 - 00:59:56:21
Joost van Dreunen
Yeah. Well, so the thing to remember about the games industry is that, you know, it's it's one thing to, you know, think of it as like sort of a two dimensional flat world where you kind of just like jump on turtles and you kind of run around or and which is actually the work is like game designers, they're world builders.
00:59:56:21 - 01:00:15:01
Joost van Dreunen
They create a universe that has cohesive rules like, these are the bad guys. There's sort of mechanics that it's like it's a universe that has to make sense. And so once you've thought through the lore, you thought about the backstory of all the different characters, whatever you encounter in this experience, all of a sudden you have very rich material from which you can then do a spin off.
01:00:15:01 - 01:00:36:01
Joost van Dreunen
You can, you know, in the same way that Game of Thrones has this sort of, you know, all this political science stuff going on, opportunities to like, see the different kingdoms in a game telling. That's the same thing, right? If you look at World of Warcraft, they had factions a long time ago. They they build out all the narratives, like why what motivates this character to do this thing and what are they trying to prevent or provoke.
01:00:36:03 - 01:00:54:24
Joost van Dreunen
Like all of that has to go into the experience before the users even touch it. And so for filmmakers, there is this endless amounts of narratives that you could borrow from to make all kinds of visualized or sort of Hollywood based experiences. So it's the world building that distinguishes it. It's not just a flat, you know, sort of visualization of some idea.
01:00:55:01 - 01:00:58:18
Joost van Dreunen
And I think that that's it that makes it a rich trove.
01:00:58:20 - 01:01:18:19
Kassandra
So we've mentioned already that there's there's been some success recently. That might be an understatement, but there's been successes recently. There's a pipeline of, movies and shows coming that are being adapted from, video games. What are you looking for when you hear about a game movie deal? Is it how much money that is being thrown behind it?
01:01:18:19 - 01:01:37:13
Kassandra
Because I would imagine that a lot of these games are going to, games turned movies are going to be, requiring some, support, let's say, from, CGI and so on. Is it who's behind it, the kind of studio that's behind it or what are kind of the green flags you look for when we're talking about these adaptations?
01:01:37:15 - 01:01:50:09
Joost van Dreunen
That's actually the question. The the green flags are usually like, who's involved and to what degree to have exposure to the games industry. You know, it's I guess I was scarred, but as far as Mario movie back in the day. But it's it's so many ways the.
01:01:50:09 - 01:01:50:22
Berlin Briefing Ad
Movie in the.
01:01:50:22 - 01:01:52:24
Kassandra
Room with us. Right. This.
01:01:53:01 - 01:02:29:10
Joost van Dreunen
Yeah it's it's it's staring from Vegas cuz it's the. Yeah. But you, you want people to kind of have like an understanding of the cultural text to put it in academic terms and any kind of delineation, any kind of deviation from that. It's like, you know, you are risking the whole property. And so I think that that's an immediate understanding, like the reason you see things like Star Wars, you know, I don't think that every have to every single one of the recent releases of this from the Star Wars franchise have been super successful, because it's getting diluted a little too much to one to many things.
01:02:29:10 - 01:02:58:05
Joost van Dreunen
And at some point it just gets a little too far away from the original thing. And so in any kind of adaptation, like look for people that know that the, just to understand what drives fans excitement and they're familiar with the actual text of that scene so that they're not, you know, trying to sell you on this idea that there's sort of like a weird sort of fantasy dream, but it's sort of like it look like a cheap knockoff, like a devalue the experience, because people will go like, yeah, that's not exactly what I remember from Zelda.
01:02:58:05 - 01:02:59:14
Joost van Dreunen
That's not what I remember from.
01:02:59:16 - 01:03:00:10
Kassandra
Yeah, bandwagon.
01:03:00:10 - 01:03:20:10
Joost van Dreunen
So it has to be true. Exactly. And it has to you have to have someone to sort of do quality control. But rather than having some bottleneck in the in the, in the pipeline, you need to have people that are just part of the organization that understand it well. And I think that that's often the case where like the fallout adaptation, it was done really, really well.
01:03:20:10 - 01:03:36:18
Joost van Dreunen
You could see that they really took a hard, deep look at the entire universe and understood the exercise. Then it's successful. Then it becomes something that is bigger than itself. But until then it just becomes like a money grab, and people will immediately pick up on that and see that that backfires. Incident.
01:03:36:20 - 01:03:51:05
Kai
Yes. You just mentioned the fallout. Last of Us is also an example, and we've said, okay, you know, Hollywood is getting movies out of this or TV series out of this, but what is the gaming industry getting out of this?
01:03:51:07 - 01:04:14:02
Joost van Dreunen
That's a good one. So the the games industry benefits from this in many ways. One of them is, of course just visibility that it makes. Whatever the IP more grand and everybody gets it and it's all fake. Famous. If I'm I mean, just because I mean, that doesn't mean I'm not cynical of it's the, the thing that the games usually tends to do is borrow their funding film business for it's self esteem.
01:04:14:07 - 01:04:33:22
Joost van Dreunen
You know, it's like as if they don't matter as a $250 billion industry, unless somebody makes a movie out of it. It's like, you know, the games industry doesn't really have red carpet events. We don't have Oscars or Emmys, we have some BAFTA awards. So that's kind of cool. But it's not, you know, it's not recognized by the same self-congratulatory ceremonies that you see everywhere else.
01:04:33:22 - 01:04:57:14
Joost van Dreunen
And that's probably fine. It's sort of the nature of the business. And so for the longest time, they would hang their own self-esteem up on the recognition and adaptations from other businesses, other creative industries. But it really comes down to, you know, of course, it's a money plate. But it's a yeah, when you look at a fallout, for instance, like this series comes out and immediately people are reminded how much they love the game, so they start playing it again.
01:04:57:16 - 01:05:13:20
Joost van Dreunen
New fans come into it. And so did you see the revenue spike for Microsoft in the weeks that followed? The first four weeks after the series first season came out, they made like an extra $150 million. Just found money, picture sales coming through all the different.
01:05:13:22 - 01:05:15:03
Kai
Just like if you're.
01:05:15:03 - 01:05:36:21
Joost van Dreunen
2030, if you're making $25 million a year, it's fun. It's nice, but that's money they didn't have. And so then they get smart and say, we should do more of this, right? And the same applies to smaller titles. So like a CD project did, had a miserable release with the cyberpunk 2077, the pandemic, a very famous case of like, you know, it was like this big, high, mighty thing.
01:05:36:23 - 01:05:56:07
Joost van Dreunen
Anyway, the terrible launch usually means the end of a studio. The way that they recover it, among other things, is by having a Netflix adaptation. And what it allows people to do is like, familiarize themselves with the story, with the characters, with the IP, whatever, without knowing that the game initially was terrible and so by the time they then become aware of it, they could start playing it.
01:05:56:07 - 01:06:09:24
Joost van Dreunen
The game has been fixed and patched up, and so it gives them another chance at success. In other words. So it's visibility, it's sort of the self-esteem sort of recognition. It's of course the finances. And then there is sort of a, you know, a second life if you are.
01:06:10:05 - 01:06:24:00
Kassandra
We've spoken a lot about the US, and you also alluded to this pipeline of manga, to games, to US movies. Are we seeing any games turned into movies in other countries outside of the US as well?
01:06:24:02 - 01:06:44:22
Joost van Dreunen
Yes. So Japan is huge on this, obviously. And if you look particularly at Sony, which owns like 70, 80% of like, the, the anime business there and relies a large part on overseas sales, you start to see them make adaptations. So, Ghost of Tsushima is one of those like it was a new IP for the PlayStation ecosystem.
01:06:44:24 - 01:07:03:19
Joost van Dreunen
You know, you're this, 13th century samurai that goes rogue and tries to save the world or whatever, but it's this beautiful, epic story, and they've made that into an animation. Right. And so that's going to be, I think, coming out next year or whatever. But the idea is that they now start to see it more broadly as like part of the flywheel.
01:07:03:21 - 01:07:26:16
Joost van Dreunen
Yeah. And so Japan is big on this I suspect is going to be more coming. So Korea China has had a lot of success with like black mist Wukong for instance. So, you know, you can sort of set the clock to the fact that they're going to make a bunch of movies around that kind of mythology as well, because, you know, they I mean, it's basically culture telling the same story that they've always said, but in new ways, and they want to distribute them as widely as possible.
01:07:26:18 - 01:07:46:12
Joost van Dreunen
Europe is the same in that sense, is where you have a large part of, say, France, you know, rallying behind some of the stories, the tropes that they come from, from there. Okay. How do you expand it? Right. And so did everything work out? Well? No, of course not. The Assassin's Creed adaptation was not well received, to put it nicely.
01:07:46:12 - 01:08:04:03
Joost van Dreunen
And, you know, so there is the ambition doesn't always work out, but you start to see, countries that are very proud about their own storytelling, leveraging games as sort of this global platform and then manifesting also in film and TV adaptations to to kind of get the story to a broader audience.
01:08:04:05 - 01:08:12:01
Kassandra
That's it for us this week on the Dip. If you like what we do, give us a like, give us a follow, give us a subscribe and be the first to get notified about our new episodes.
01:08:12:03 - 01:08:21:15
Kai
And if you want to leave a comment to it, wherever you're listening to our podcast, or if you're a bit old school, send us an email at the tip@w.com.
01:08:21:15 - 01:08:25:17
Kassandra
But until next time you've been listening to that bit.