Benchmark’s Mitch Lasky and Blake Robbins on The Art of Business in Gaming
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I will see I want to give you guys just to A A pre recording compliment. I forget what it's called that there's a name for IT, but basically, it's where you're reading something in the newspaper about something that you are a part of, right? And you go, people don't know anything, right? This is so damn stupid and then you turn the page and there's something about foreign fairs and you're like, wow, super interesting.

Like the thing you know about, you don't apply that same logic to the second thing. And I have to see, I have so much trust in your podcast because the stuff that you do that I was a part of, and there are many things you've done that you don't know that I was a part of, that I was a part of. You guys are so good, like it's so accurate. IT is really remarkable. Somehow you are able to tell a story that is actually as close to true as as true exists.

Well, the secret is we don't have people on the show, so this is not gona be that who. Get true. get. Easy, you see you, you see me down, say, state. Welcome to this special episode of acquired .

the podcast about great technology companies and the stories and played books behind them. And then gilbert David, rainfall, and we are your hosts after our deep dives into nn tando o and sea, we wanted to do something special to cap off our gaming extra. And we wanted that something to be a special with guests who are actually in the belly of the beast of the gaming industry.

Fortunately, we knew just the people. So today our conversation is with mitch lakey and Blake robbins. Mitch is perhaps the best games investor of all time, generating literally billions of dollars of returns from early investments in riot games, discord and that game company, not to mention Snapchat. Mitch was also an executive vice president at both E A. And activision and took his own gaming company jammed at public in two thousand and four, which of course was a partner at benchmark in the fab five era that we chronic called on our benchmark.

which actually we stole that line from mitch when we were talking to him in the research. And that's how he referred to IT.

So we are joined by mitch and Blake robbins. Benchmark's current principle has also come up on previous episodes. Blake is one of the best thinkers in the world on the gaming landscape today. And mitch Blake just launched an incredible podcast called game craft that chronicles the history of the gaming industry, the business perspective.

And one of the thing, if you are listening to this on the audio feed, we did full video on this. It's up on youtube. You can find IT on our website there.

Uh, we did IT at benchMarks woodside office at IT. Turns out they have another triangle table. So we have now recorded required episodes at both of the famous benchmark dinner tables.

Well, listeners, as you know, we have an interview show called A C Q. two. We've had back to back killer discussions with the CEO of retool and Angela st. English in particular was like very mind expanding for me on how to leverage A I to get huge, huge leverage in your business, like specifically on the Operation side of the house.

And uh, I think of luck is one of the best thinkers about how to apply A I to kind of turn something that looked more like a services business historically into a true tech venture scale opportunity. You can find A C Q two in any podcasting APP. Join this lack. There's an incredible discussion of gaming history going on right there right now, including a bunch of episode follow ups where David night, or learning from you all in real time, acquire dota, flash, slack and without further a due, this show is not investigated by Steve, and I may have positions in the companies we discuss.

as may our guess, and of course, their firm benchmark .

capital today. Yes, and this show is for informational and entertainment purposes only.

Well, I think appropriate place to start might be what inspired the two of you to go talk about this and create game craft and create this test.

Well, I think after I retired from benchmark uh, couple years ago, retired from active investing, I obviously the glide path out adventure is kind of a long glide, so i'm still involved to this day.

But after I I retired from front line investing, I really started to think about ways that I could be useful in and helpful in the video game business, and whether that was, you know, doing boards without compensation, whether IT was helping Young entrepreneurs or mentioning Younger venture capitalists. And I thought, you know, maybe I should just write a book. So I was very much inspired by a book that I think you know as well, right? The genius of the system by Thomas chef.

And that book is a remarkable book, in my opinion, because IT really takes the business side of the film business back from the twenties to, say, the fifties, and really elevate the business side of the business and shows how a lot of what we understood to be the creative part of the business really was a collaboration between creative people in business people. And i've always had that same sense of the video game business. And so I thought I might be fun to do something in that vein where we we showed what was happening on the business side and how he was informing what was happening on the creative side.

And I think the common narrative is video games or something created by creative genius, a mea motor type person. And then the business models sort of rearrange around the creative vision having consumers that flock to IT and I think already are introducing this interesting wage of uh, actually there are very clear business models that guide where the water of creativity can flow. And that has been for the last fifty years. What has defined the video game industry, not the other way around.

Yes, not to take anything away from people like mr. Ma mota, who I have infinite respect for him and he is a, he's a legend, he's a god among the the video of designs. And I have had the great pleasure in my career of working with some incredible designers.

And they they are the leaders of the industry in many ways, but they are constrained quite a bit by the business models in which they Operates. So just to give you example, in the package goods era, your goal was to sell a disk and then get somebody to come back a year later and buy another disk. And that's a business model choice. And therefore, what you're going to put on that disk is going to be informed by that business models got to to have a degree of planned obsolescence to IT because if IT doesn't, if you just bought one game and played forever, that's the end of the .

video game business and that's how you get final, final 74。 Yeah, I M talking about how many .

fef s are called duties and at this point and is still firing. And also on this, despite sort of the the business models which will talk about rotating red and need them and those still thrive, I even to the day.

I think one of the super cool things for me, and the reason why game craft, I think, has been listening to by far more people than just in the games industry, is that this time namic applies to a lot of industries, like when we did A L V M H episode the whole time, I was thinking that, like, it's the same dynamic in any creative industry. Like if you want to achieve success, either as a creator and have people use and appreciate your work, or on the business side, like you have to work together, you can be at odds.

Yes, interesting. I actually I really admire that L V M H episode. And and there was a part of IT where in your nintendo episode that kindly reminded me of the L V M H episode as well. Because those of us who had worked as competitors to intendo in the console business, and I did for a part a part of my career when I was running the studios at vision, um they had this .

thing you considered yourself a competitor to intendo a well.

they come back to there's limited shelf space in best by. And so they were very much a competitor for that shelf ACE. And so on the software side in particular. And they would, for example, if they had a new metro sky or a news settle or whatever, they were very clever about only releasing a limited amount of inventory for black friday, and then the parents would go, because that was on the kids Christmas list, and they would go to buy the the disk and IT, and they would be sold out and panic. So and then two weeks before Christmas or a week before Christmas, they would suddenly flood the shelves with all of the inventory that was available. And so everybody was back to the stores, and they and I was just IT was genius s but is something that only they could do because they had that sort of luxury good kind of vibe.

You, so I bring you back.

You didn't write a book. I wrote about a two hundred page manuscript. And I the idea, those of you who haven't listening to game craft, who are listening to this pot test, it's basically eight episodes, but they are topical episodes.

And so we we basically retell the same story from one thousand and ninety, roughly, until the present. But we look at them through eight different lenses. And I thought that was kind of an interesting and unique approach, because all the other histories of the video game business are very chronological and very like, and this happened, happened.

And does he have a bit of that? And then this happened, and then this happened. Hopefully it's a little bit more interesting than that.

So I, I, I finished. I sent IT to some friends of mine. They read IT.

They said, this is a great, but like, nobody reads books and so I was like, well, that's unfortunate, but I don't really know what to do with that. And I said, I could read IT. I could do as an audio book. I could read IT as a monologue I don't know what to do with IT uh and then I had a feet ful dinner in boston with welcome, glad well and welcome. I've an investor in pushkin, which is his uh podcasting company with Michael Lewis and Michael and uh and now come or both acadian ces and mgm was like, do you really have to do this is a podcast and and .

he really to do IT .

as part of push. I did submitted to push, and they .

rejected me.

Wo but what? Why too nature and so but but he kind of got me to rewrite IT essentially in as a dialogue and at in the same time I got to meet Blake on twitter. Oddly, that's kind of where we met.

I was admiring his thinking and he he was reading about the games industry and they're so precious little good uh like public commentary on the games. I was kind of attracted to IT. And so I kind of asked them, you wanted do this with me and you, anna, be my introductory on this one and he flushed, agreed.

yeah, I IT is funny because, like mitchin, I knew each other I like briefly before I joined here. And then I I remember I was just down an office here one day and which I, I, I ask me if he was worn to me. You before you join you like, okay, is mitch actually still actively? What .

is .

IT actually is .

he actually .

retired. What is red still think that here all the time, and convincing to meet with me. And we were just chatting and throughout the course of those conversation, and we just became clear, like we were having so much fun, just refer and all and I was learning so much like I thought I knew a lot about the games industry and and mitchy advantage points so unique and rare that the moment that he shared the man to me.

Oh, my god, this is amazing. Like I was I was like, the perfect target audience of that. And I think IT became really clear over time like, oh, this be a really fun part a .

and IT was really useful as well because there is a kind of generation component to to the dialogue, right? Because we really are starting when I is started in the business in the nineties and we're ending when he's running the business basically in the in the twenty, twenty. And so I thought that there was there was some nice timely to that actually to to have to be .

multi generation so made to enter the industry right when I was born. And he's telling the stories of of the the games that worked on and those are little with the games I played and and the games that he published and all the stuff and I like, this is insane.

MIT, when you were on the business executive side, did you have a sense of league, how much you were impacting, like the work of the industry was impacting this whole generation?

You know, IT IT was a kind of a boiled frog type situation for me because when I entered the industry, uh my first game really was in the formation of disney interactive, which was in the very, very early nineties and this was right around the time Bobby was taken over, uh, activision, when he and Steve win basically finances by Steve in boby .

was buying activities. Ve.

yes, to find the famous story. I don't know you guys have done .

a activision way .

back before research because there he he basically bobbi crashed the cattle's ball uh, and without an invite and basically did IT so that he could button hole uh Steve win and get him to put the money up for the act by activision out of bankrupcy. Um wow. And IT was a genius deal because they renegotiated all the debt as interesting ity in the new entity IT was bob.

Bobbi was a brilliant, brilliant executive. We even back then. So um because when I was work at disney subsequently in my start up and at activision, this was still kind of the geeky era of you know the serious video game business. Obviously, nintendo had brought the council business back in in eighty five, but we were really only five, seven years into that, right? There was still a fairly recent .

phenomenon and toys and .

dominated by the japanese in general. There were a few, obviously, interplay existed, and there were a couple of others, but they were PC publishers, you right primarily PC publishers. So that said, um no, I had no real idea of what the impact was because I thought I was making games for myself, right, and other nerds .

like me and the notion of casual gaming hadn't really hit IT stride yet. So I mean, I think one of my big takeaway from game craft is, uh, gaming is not for teenage boys. Gaming is a innately human activity that now we see in full bore.

I mean, I flew down here this morning from seattle and like the amount of Candy crush going on around me on the plane, gaming is a human activity. And during the area you're describing, IT really hadn't fully permeated yet. Absent maybe snake on some early mobile phone.

not even I mean, you think about IT. IT was like probably ninety six, was a barby's fashion designer and uh some hasbro games like oti and the game of life and other things like that, that they basically did very lame digital versions of and that was kind of the beginning of the casual game revolution really like um and and IT happened very quickly in those titles, did incredibly well.

But the mainstream video game industry always viewed them as kind of and Frankly, to this day's views, a lot of the cat what's happening in the casual game industry is like not the real games business, right? right? And yet as we know because know what the numbers look like, it's like it's most of the video k business, right? It's probably more than fifty percent of the video k business these days would be considered casual gaming by nineteen .

ninety standards is interesting because those people who are playing any still might not even identify gamers. Actually what what I mean like when we talk about the games in the story, IT is is so like all encompassing at this point that IT doesn de the Candy crash, but also includes councils and the core PC games. And there's a little bit of like how do you even frame what is gaming? And I I think for us, a lot of the podcast was walking through how that has.

I mean, when I did my second start jammed at which ultimately was the successful one, the in public, we would be on the road. Me and Michael marketing, my two financial officer and um we checked a hotel and we ask for a business card.

We had hand him the business ard and they go, oh i'm playing your bullet game ment IT was literally like, you know late night people on the desk at a hotel or, uh, train Operators or people know we would just meet these windows all over the place. A little girl will set down on a barge in hawaii next to me and wipe out a phone and started playing one of my games. And I was like, that was when I really understood kind of the ubiquity of gaming in that human sense that you described.

So we are going back and forth before recording here on sort of big takeaway from game craft. And this is one of them. This feels like a huge beat to me. What are some the other big beats for those who haven't .

listened yet? So the mean just a very quickly review. The eight episodes are so they're free to play, which was one of the real revolutionary business model changes in the industry. And it's the equivalent of the film business having a television introduced right where you you went from you know of a very formal go buy a ticket and sit in the theater to come in into your home or you probably more apt .

um professional sports when television was introduced in like that was only the upstart nfl that embraced instead of fighting IT.

So I think that IT was a revolution of that import. And I think we're still feeling the reverberations of IT uh, to this day, the impact of free to play and how it's changed. You know how people consume games, how they play games and how games are made.

Because IT requires a very different kind of game in order to be acceptable to a free to play mechanic. Then the old school stuff everything onto A A disc and hope that it's worth sixty hours for sixty dollars. That's one of the episodes.

Do an episode on the change in publishing from uh, package goods at retail business to an online distribution business. Really the rise of steam would be kind of indicative of that particular part of IT. Uh, we do an episode on uh, game economies and how they have evolved from they're very earliest stages to these incredibly sophisticated and now even web three enabled economies of our era.

One of my favorite episode is is is to forever games, which is really run this idea with the shift to free to play can game actually in there forever? And what does those play pattern look like? Met these amazing so of guideline rules of they can about .

IT going in to listening to game craft. I sort of had this high level idea that there is more durability in the video game industry now than they are used to be. Like I used to be very hit driven.

And I think a lot of people still believe or a lot of investors look at the category is very hard driven, but there's too different and very distinct reasons why there's more durability. Now one is this concept of forever games. The other is the concept of which I think you coin this term of the platform based publishers. Can you talk a little bit about each of those and how they sort of view each other and how they're different, but how they both provide their ability in the industry?

sure. I think the forever games are part of a continuum. I mean, there was durability in the early video game business. IT was just not the games of themselves that we're there able either. The franchises were there able. I mean, you look at fea and I mean, I started playing fea on trip hawkins s three deo back in one hundred and ninety three. And i've been playing every year continuously for the last thirty years.

And so if you really if you think about IT, that's a thirty year persistent play pattern, very much kind of configure with what we have described in the forever game piso's with some of these long duration play patterns. It's just that they package IT very differently like you were playing the same game, but you just had to go buy IT again and again and again and again and again. You look at the nintendo portfolio, which you guys have done a really good job of expLoring. And um you know you look at the continuity of their brands where they they be able to bring the same characters and the same kinds of play patterns back again and again as they shift from know N S to S N S, to cube, to dream cast to whatever and like and all and that is a that is in a sensibility to my mind.

One of the most genius things about me, a motto is that he came up with like two to three really good stories, and they tell that story over and over and over. Every mario game is the same story. Every elder game is the same story.

absolutely. And they're find because as the graphics get Better, as their ability to tell that story improves and is Richard and deeper, then you can go back and explore that story again. And and IT has a kind of heroes journey quality to IT where you don't feel like you're seeing the same story again. IT feels new and old at the same time.

Ah I think grata total probably like one of the best examples of IT. I think grant total to five was probably released eight or nine years ago and IT still is is is a top game on steam and everyone still plays IT, which is amazing. But when they do and update IT, it's it's to the new generations and IT really blow your mind. But very similar play battery, very similar story overall.

And then to your point about the platform base publishing, I think that's really been more of the way that the online distributors have created competitive advantage against the their package goods rivals and and how they built very similar businesses to a lot of the kinds of businesses that we've seen emerge and disrupt in common industries across the the internet space.

So you uber and the taxi industry or airbed in the hotel industry where you aggregate demand on an online platform and then you utilize that demand to leverage the supply side of of whatever industry that you're entering. And I think you look at steam and steam shares many of those attributes. And I think that move, which was essentially perfected by.

With uh Q Q and and and the things that they did sort of leveraging their messaging platform in the games business, that's been sort of the kill shot for, for a platform based publishing in the industry. But that is essentially it's more about how you use the internet in a judicial likely to massively disrupted package goods industry, which was up until that point, up until maybe two thousand, three or four, absolutely dominant. And in fact, I think to your surprise, Blake, when we were discussing some of the uh the games in the early two thousands, you're like, oh my god, that game was actually on a disk like IT was surprising to him to remember that some of these games that he grew up with as downloads originated as package goods.

The crazy thing is steam was on a date.

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Can you share how steam got started?

sure. So um you know the the valve team gave neal in particular in his his partner, my parents they are envision that they needed a an up data essentially for their software because they were releasing these games like half life two and uh CSGO um and they wanted to be able to sort of affect the competitive baLance after they released them to fix bugs, to validate licenses because piracy this in this area was still a real thing.

And anytime you're selling box off, it's going to be a big thing.

It's absolutely the case. And so they um thought, hey, we could build this thing basically that would form function as a software updatable for our products will put IT on the desk. Uh, you'll be go up, logged in and in ita, download patches and whatever baLances rebalancing for your game and set set.

And so they went around to the rest the industry they went to even there were old employers at microsoft where they were early microsoft employees, I think, among the first twenty five or so employees at microsoft. So had good connections there. And they asked if microsoft be willing to build this tool for them, and they said no.

And they build themselves. And then very incrementally, after they released, originally with half life in the box, as you say, and they just auto installed when you installed the game. And then you know very incrementally over the next decade, they just kept adding features community, uh, an ad store mods, all of these various features and and and just eight, the games industry. I mean, now it's an eight billion dollar of your business, right? I mean, it's just a remarkable.

remarkable company, completely privately held.

And I said steam itself is an .

a billion dollar value up. I think I think it's vall when you think about actually the strategy that happened, which is really the essence. And we talk about this in episode of of game craft, where is actually releasing the game, like what time I will, tough life. And it's like the snick ky out of a weight like me.

I don't know how intentional actually was in hands, but we've ended a build in this platform and like, oh, wait, now all these other developers want to use this and now it's very clearly become like IT is the go to place even and a lot of people have followed, right? You have activation having launch. You have all these uh E A or as their launch, they all have launchers and they all are still forced and well have not forced, ed, but really pushed by the market to launch on.

We had breakfast with fill spener, the head of microsoft games yesterday and we were talking about steam and film was like I put my game steam and this is microsoft, most market power of any company, maybe apart from nintendo and sound to to roll their own that he's putting games on steam. And so you fish where the fish .

are yeah I think there there's a new iteration or what the the latest attempt of being a platform public would actually probably be epic, which have epic has fortnight IT doesn't credibly well. They would ve launched that on their own launcher. And now they've been spending the past couple of years really trying to build up that the game store and from my vantage point, hasn't made nearly enough like a like relative steam.

That's one of things I wanted to ask you guys about, which is where are we in the business model journey of the platform based publisher lake IT almost feels like kindly the rest of the internet, the platforms are starting to osf .

y uh is is that .

the opportunities you've got obviously the consoles you've got microsoft um and epic is trying. But like who else could really be done but could break in this maybe? Or do we need a new pair that well.

I mean, I think the next one to go is going to be nan tando, right? I think there I think that if you're looking for a reason to invest in intent, do as as a company. It's I I think they're about to crack that night, right and and enter the APP store in a meaningful way.

I mean, they have the lowest uh third party revenue per active user by like an incredible amount, right? I mean like hundreds of dollars to like twenty five dollars, right? Like inversus the rest of their console competitors.

So they're waiting for that lead to to boil off there. I think so that on the conventional platform based publish. But I want to return to the question, original question. So that is very interesting.

I agree with you and I think that um game pass from microsoft is an interesting harbinger of maybe the end of the road for the platform based publisher, at least the end of this road for the platform based publisher because where they had historical aggregated users in an attempt to close collapse the supply side. So aggregate demand to collapse supply. He's now filled with game pass aggregating supply. Again, you look at the activision deals, sixty nine billion dollar acquisition of activision. It's basically like you know netflix or apple or or or one of these other companies built by exclusive content to know I use the term exclusive some gardening because that this is if currently in the european commission .

is is a hot button issue. Clearly.

this is Michelle. So they're now back to aggregate supply in order to have enough viable IP in the plate on the platform such that you will continue to subscribe.

which is really interesting. I mean, just speaking for me personally as a gamer, that is an incredibly compelling value prop of like I could I don't have a gaming P. C.

I don't really want to go make a gaming P. C. I don't really want to go go deep in the valeo system. I don't want to go deep in the epic games ecosystem. Uh, microsoft is offering this really easy or you can need .

option to me and streamed in a lot of ways, right? So with the new uh x cloud platform and and I was a pioneering investor in this with guy kde back in the day and IT wasn't really economically viable. But now with scale and morals, law and all these other things we've been with improvements, we can now really do IT well. And so uh you know, with a device like a steam deck or something like that, you know you're you're able to really avoided going down that half of building your own a gaming P C.

IT is interesting that we're finally in the cloud gaming era. Like this has been the dream for so long. And of course, there's this. Tiktok in computing to thin clients thickens thin clients. The client, but like the whole thin client thing, never really made its way to gaming.

I remember I worked at microsoft in twelve, and I was at our annual meeting in the old carreno, and I watched a demo of cloud gaming on a windows phone with xbox controller. And I remember Steve balm are coming out and being like, next year, the year were ship in. This is finally happening. And here we are a decade later.

Now it's IT is finally happening. Text self driving this happening.

My question to both of you on this is business models are inherently intertwined with new technology waves. And how does cloud gaming change the business model of the games industry?

I think there's one thing that's interesting about the cloud model and one, one of my faces on why I didn't work back when I first tried IT with with guy kind with on when on life that is a competitor .

in and some of .

these that was early twenty ten early twenty ten um was IT was a mismatch between the user and the technological opportunity. So you could stream these games without owning gaming, P. C, but all the games that were really viable to stream, or the kinds of games that gamers already PC, we wanted to play. So yeah, you look at stadia from you, from google, like what were they if you walk the floor, gdc and the launcher of dia, they were showing assassins creed. And like these other really .

high fidela everybody.

Or if you were gonna play that game, you had a play station or an x box, or you had a gaming PC that was capable of playing IT. And so I think with the real expansion of the audience in these those in that intervening decade, you now have actually the question of the the David broader, which is he doesn't one one of these devices and yet he wants to play those games. And I think that didn't really exist so much as a market back at .

in the early days of streaming.

huh, seeing its demand from I do I do think, however, that the audience has expanded ed really in in the. To fifteen years and and that this next generation of kids who've grown up on fortnight, who've grown up on harder core games um but are still casual in their self identification, who don't think of themselves as being core gamers. I think that's the real opportunity for the cloud gaming.

Yeah I think is also a part of know you think about all these people that are playing are used to play four night on mobile and it's like, oh, that's just what I expected this point. And there is a natural evolution that maybe will happen, which is the number of people that have grown up playing games on mobile. E just been like, of course, I want to play assessment to whatever that might be.

But I, I, I still think it's one of those things again, that for multiplayer, for those pieces, IT might take a little bit more time, but surely for the single player stuff and it's quite magic. Now I want to bring bring a back a little bit to your question of David around like the platform based publish your stuff and and where does my folks like mitch was involved, right? And ride is another spin of what that looks like today of in theory, they could become an actual publisher of third party games at at at some point.

But they instead they have decide all, aggregate all the demands and really keep it's it's sort of of the social network ds and all that, their own universe. And they are continue to publish their own games incredibly well. You have team fight tactics through their launcher, and you have value through their launcher, and those have worked exceptionally well. And IT IT really begs the question of you, your game today that is just launching on steam and your venture abt company, what does that mean? You know like IT is, is that enough to really enter and build a real business?

But it's really interesting because yeah, that is a different approach of the platform based publisher because you you're really aggregating that demand for yourself.

right, like an intendo vers a form based publisher.

So you've got this audience there that's prequalified, where you've got their credit cards hundreds of millions of users. And so you just use IT as a way to lower your customer acquisition cost effectively to zero for the next products that you launch in the pipeline. And IT just gives you tremendous competitive with the ange.

This is the bulcke on the switch that we've been talking about, which is like at some point, nintendo has to wake up and I assume IT will be with the switch line and say, wait a minute, we shouldn't come out with a completely new console and have to reagan gate whole fan base again. We should iterate the switch and make its super backwards compatible and bring that hundred million plus person install base with us across all the hardway we released in the future so that we can make this incredibly um compelling thing to third party developers as much as you're talking about their sort of APP store opportunity, but also preserve this ridiculously durable first party revenue thing that we've had no especially for the last six years with the switch, but basically through intendo s whole life once their councils get to scale. absolutely.

I think we will learn a lot about what their strategies is going to look like for the next decade in the next like ninety days. Yeah right. Because I think if they do come to market with the non backwards compatible uh, device, it's back to the aol era.

It's back to you know we're going to where a hardware company and we have propriety software, which helps to sell hardware, and it's back to the toys, right? If they come out with a fully backward compatible switch and an open APP store and they really try improve that position of third party revenue on A A on on an active user basis, that's the new nintendo, right? That's the nintendo that's going to play.

The money is so compelling, least for me as a consumer. If they do that, I mean, like a game, like hates an incredible game. The game, the switch is by far the best platform to play that on. And like I just i've set there for years like staring my switch being like the nintendo. Why do you not embrace this dynamically?

I think it's you can see publicly in the way that they're going with microsoft against SONY that a who knows what this actually looks like in the next ninety days, both everything we can tell of how they are citing with microsoft, the open and embracing openness gives a clue of maybe how ah .

mention that a little bit on the series on the game craft series of intended with microsoft. Let's talk a little more about that.

sure. We don't talk about IT that much on the series just because i'm avoiding to talking about the console business and whatever. But um and and let me let me just trying to explain why, right, like the council business has been essentially the same business since one thousand nine hundred eighty five, really since one thousand nine hundred and seventy five, right? I mean it's sea box and sell some physical hardware for that box.

And grudging allow IT to be played online and grudging allow communication between users, right? And I don't find that that interesting for a business model perspective. I'm interested in revolutionary business models.

And game craft is really about that, right? It's about how these revolutionary business models like up ended the industry. And Frankly, there haven't been a lot of those in the console business now. They're been a lot of interesting developments.

And you guys explore the story of intendo is a fascinating story, but it's kind of a human story and it's a you know there's a particularly your first episode where you go way back, right? And you just talk about everybody who's everybody else sun in law. I mean, it's it's an intensely human story in that regard.

Well, I feel like the intense au had the in my mind, they did have one revolutionary idea that they have just run with for the past forty years, which was make incredible games and get people who are capable making incredible games either in house or make sure they publish on the P. I don't believe that. I think that's right.

And I think they put IT really well when he was convincing me to do the said, which was he said, look, uh, the console when I entered the market was a revolutionary business model because at the time, the arcade was the dominant way and IT was a quarter drop. And so in some sense, IT was almost like the equivalent to free to play because instead of having to sort of pay every time you wanted to touch the controls, now you had the thing in your living room.

you could play whenever you want. Yes, you talk about sixty dollars for sixty hours of game play. That's little the equation you are doing. Our twenty five years .

in years, I was six dollars for six minutes. So, so I expect .

that and that's that's why and I think I think the .

we we really ends that episode to to bring this full circle around cross platform, which is sort of the latest evolution of where the council businesses been, where you had microsoft and actually intendo o embracing in in fortnight, was really the cats of this to let them be able to play across these different platforms of up until this point. Uh, up till fortunate, if you had next box, you couldn't play with your friend who had a play station or a switch. And really nintendo and and microsoft went to war against .

SONY feel said in in our conversation yesterday, uh, he said, so these perspective was, if you want to play with your friends.

get them to buy a place station, right? All these different business strategies are about figuring out in what way can you leverage an asset to get people to do something that eventually generates profit for you.

And the way SONY was looking at IT was, well, um you want to play with your friends so we're going to use that as the carrot stick with everyone to call IT to get you to buy our console, which we actually don't make money, to get you to buy our games, which we do make money on. And god, it's like hop, hop, hop, hop. Nintendo and microsoft ended up being quite odd bedfellows, having completely the opposite .

strategy you cynical about, and you say the result of the fact that SONY has dominant market chair and that if you were the dominant market chair player, you might not be so embracing of open this either, right, because you had a competitive advantage. But I think it's going to come back to buy them in the air over time.

It's interesting, right? At one point, I think on the series, you guys say that with your investor hats on, you would be really weird if an entrepreneur proved to you today. Instead, I want to build a game for a council.

But everything we're talking about, if the air of cross play really comes to bear, that might change things do like, would you agree like if IT truly is that you could build a forever game with cross play across council PC mobile? I mean, we as part of our an intended research, we talk to the C E O of very large venture back gaming company that is not on the switch right now. That is working very hard to come on the switch for this very reason.

So I will say yes, IT is now viable. I would not uh, council any of my a portfolio companies to launch on the council because the hopes that you have to jump through uh, for approvals for manufacturing is a for just in general r dire. And they're not the kind of thing that I would I would sort of put in front of, of a company that was struggling find product market fit.

That said, I have Green a switch uh skill at that game company for sky, and that is now come to market and this is really meaningful. And we have a play station fight skill as well. And so for an established product where is already found product market fit on another platform on a more open platform.

sure. Finding that adjusts its like as as fortunate disclosed in the apple lawsuit. Uh the the cross play players monetized like the new whales, I mean they were monetizing at at multiple of what the non cross play players .

were playing. And why not turns the cross play? There's there's different moments in in council where council really was the package good and then at some point, the package to good business for the games and at some points, free to play games were able to to thrive. And you have the fortnights actually do really well. And if free to play games are really driven by social or playing with your friends, which for night was it's sort of you need to have a council and think about .

IT demographically, like if you've got a game on the console, for example. We were talking about this with one of our our our co workers about. Um fea ultimate team, which you may be familiar with, which is kind of a playing card, add on to the underlying fef view.

You can buy card packs and open them and then you can play with those players that you get in the card packs in the sim. And that is a massive business. Like IT is a little greater than a billion dollar a year.

Business card pass selling like literally bits. I mean, IT is like a ninety nine percent gross margin. I mean, it's the most astonishing business ate.

And this person, who says, will look at the attach rates for fever ultimate team, right? And can't we accomplish those with a free to play game? And we we were like, wu, slow down.

You understand that you're selling a twenty dollar add on to seventy R T, paid sixty dollars for the game and five hundred dollars for the council, right? The willingness to pay of that, of that user IT cannot be compared to getting somebody from zero to one on a free to play game to put their credit card in for the first time to buy a virtual good on on on a free to play game. And I think that nuance is lost on a lot of people when they look at the industry.

That's the great part of goal with the councils, right, is you've got these highly committed user bases with all the credit information stored. You've got easy payment rails, easy distribution. It's like the dynamic of iphone versus android, but like a whole another level, it's you can look at IT in the data with for like even Better than .

iphone motivation. Yes, it's also exactly we talked about on the pelton episode where pelletan, despite all the problems, has possibly the most incredible consumer subscription business, at least from their first five years of customers because they selected in the buying a two thousand old exercise by, of course, you're not going to cancel a monthly subscription.

I think this is part of why I epic actually felt table go in the war with apple is is if you look during those filings, so much of the revenue is actually coming from playstation encounter and and that to me is just like, okay, the mobile gamers were not the same value as the council and PC players.

yes. One question before we leave platform based publishers that I i've been sort of thinking about, but I don't have a clear answer, is when does the company have the right to leverage their relationship with customers into becoming a publisher? And like QQ is very he is a ChatApp. How to have they're become successful in being, you know the tencent we know today the most powerful video game distribution on the planet. Whereas you look at like facebook has made eleven different runs at gaming and is not steam, is not tense, why does sometimes, uh, a company have the right to leverage that relationship to be a publisher?

And other time to not, I would rephrase IT, right, which is my opinion, is, is that why QQ was successful was that they didn't just decide that they're going to be a platform based publisher. They embrace to be a platform based publisher. They went out in the deals they owe forty nine percent of epic.

They owned fifty one percent of rio. Now one hundred percent of they were one of the financiers of resort in the in the games business for triple a titles, the aggregated products they did the aggregated third party products from as a pathway into china because you needed a local partner because of government regulation in order to published in china. And they just ran with that.

They just embrace that. And instead of facebook or some of these other american platforms that have treated games is kind of a bad smell over in the corner that they weren't too crazy about like you okay yeah the single thing they flooded with briefly um but ultimately that didn't go out well and they decided now we're just gonna come know A A customer acquisition vehicle for the games industry. And Frankly, it's been a look very lucrative piece of their business.

But they really embraced IT tencent and and invested deeply in IT. And I think that's the difference, right? It's like they were credible as a platform based publisher .

where facebook never was yeah in in QQ. They they had the games, they they they were committed and they were so intentional. And I when meeting i've talked about when we look at investing in the studio of, for example, it's actually how intentional are they the beginning and setting out that you are gna try and become a platform based publisher, even even to saying i'm going to launch my game on steam as a new company, maybe is is, is just showing your ambition of what you want to build. I think that when you're talking about facebook IT, should I talk about this part? A lot of and a lot of the executives in in the valley there is not gamers and they're like, oh, we can maybe launch a games thing but there are served dipping their foot and water versus .

actually like goole.

You're saying just because David and I have a bunch of the listen in the podcast, we can just decide like, alright, you guys, we're now acquired games. You all just start playing games and .

we're turning on the .

we have to be game gravity though even then it's difficult. It's like we tried this is discord, yes, right? And we tried to start a game store. This was obviously my my failure because I pushed them very hard toward becoming the platform based publisher because I thought, hey, man, this is a great way to leverage this audience and uh, a great and we've already they already self identify primarily as gamers.

This was earlier on before the disco audience brought into becoming the bloomberg of crypto o and now basically the launch area for free, much every AI checkbox. But the in those days, I was very gamer centric and IT seem very logical to me that you could try and leverage that intentionally into the games business. And IT didn't work. So IT doesn't always work. And and look, Jason.

as as deeper .

gamer as you can get, right? This is a failed game cup.

right and get me um so .

uh so IT doesn't even with the best of intentions IT can be a difficile propose.

This goes full circle to your earlier question, David. Like are the giants to just set on the platform based public side and is really to be determined because you have your discount attempt, you have epic and really trying to do IT. And there sort of I mean, everything to forcing that the possible c can make that happen, and IT doesn't seem like it's sticking at all. And so there is a little bit of question of what does that mean actually try and build one today?

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How do you um think about one of your other investments that game company is that game company a platform based publisher? Or is IT just like a really, really great modern studio? Or is that something else?

It's a great question. I think that the intention is for IT to be a platform based publisher. Game too was already in development as is the beginnings of thinking about not only game three, but a sort of way to stitch the games together in in a more persistent, coherent way in with more community.

So I think jan ova, he wouldn't freeze IT in that way. He wouldn't call IT a platform based publisher. He call IT a digital theme park, right? But the idea which which .

is sort of intendo.

which is sort of an intendo, like anyway, right and now in nintendo has a legit physical theme park to go along with their their virtual theme park. But, uh, I think but but I do think IT is in that same vain, A, A play. B, I would, quality platform based publisher.

And similarly, ly, I think the greatest disagreement I had with the founders at rio was when the we SAT down. I was like, okay, great. We ve got a hit now we're going to leverage this audience into into, into another hit or into a third party game or into a licensed intellectual property.

And they were like, not chill men. We went to be blizz. We want to make a game every five years.

And i'm like, I don't want, I don't want to fun a studio. I want to fun. Now.

little did I know. So blizz, as you pointed out, a game craft, all the an independent company that had to figure out its funding for three years. The rest of a history is, you know, daddy warburg somewhere figuring .

and and and I was wrong because they just took their time to become a platform based publisher. But they .

but that I but but there .

was an opportunity to start doing IT after three years. And I think the their strategy was like triple down on on league legends. And let's make sure that we can.

We can get IT to all corners of the globe and that we can really build a billion dollar plus annual revenue based in the east sports component in the worlds and all of these other things. And then we will go in release baLance tactics and some these those things. Okay, fine, but ultimately they they got to the place I wanted him to go. I just took on seven years longer.

I think you would be interesting if you're well in the share much of just like what you know that actually pitch for that game company back in the day because i've talked to Peter, i've thought other people, they still remember that pitch being just so like just an amazing, amazing pitches at the time, is still was not like for you to invest in a studio, right like that. That would have been A A big ask or A A big leap of face. And my understanding is he just crushed .

on now this is great too.

because I I bet a lot of people listening will be like, what are you guys talking about? What is that game company referring to a specific thing or a no.

it's a little confusing as and it's not my favorite name for for a game company, although it's it's indicative I want to actually do take a pause just because I don't like funding studios, right? And and I wrote about this, I think you remind of me this because you found that in some internet archives somewhere, like I blogged about this, like fifteen years ago.

yeah was like twenty eleven or something like that. It's amazing. It's like the title is probably removed. But I think I was like investing in content and it's I don't invest in I don't .

invest in content even though i've done more content deals than anyone else in the valley, right? Um and and what I meant by that is that I invest in businesses, not in studios, right? And and those businesses have to have a strategy that transcends I want to make a game and put IT on steam or I wanna make a mobile game and put IT in the APP store, right? And i'm really interested in strategy more than i'm interested necessary.

The content is a means to an end, but the end can't be oh, then we're going to go make another game and put IT on steam or put IT in the APP store. The end has to be something Better. That has to be something more durable.

IT has to be something more value aggregating. And so i've had this philosophy since the very beginning and i've tried to you to be very disciplined in about its a genova approached us as genova chin. I had met him uh, in the early two thousands when he was a graduate student at usc and he was working. He was making games there, and I was working at electronic cards and I had the license for sport, which was will rights, a kind of creature emotion after.

and I was doing .

the mobile version of that rate. And so h genoa had made this game um called flow. That was basically this game where little creatures, eight bigger creatures, and evolved based on what they ate. And IT was just this unbelievably cool thing, right? And so I wanted to kind bring him in and build sport, like this mobile version of sport, with me.

And of course, he was way too clever for that and said, no, but I kept up within then we hung g out and then he went off into the sonny ecosystem and built journey. Um journey is this amazing kind of meditation on death where you're playing a single player venture game and you're climbing a mountain and enduring all this hardship and it's got all this crazy multiplayer play where you don't know who you're playing with. You have these deep emotional relationships with the people. He's just an unbelievable .

game maker and the art for that game and is just a using a screen shot, any frame.

and you can put IT up. And so he came to me and said, here, I want believing the SONY thing I wanted start over. I wanna make a game for the masses.

Can you help me? And I was like, yeah, I can, but like, let's pitch the partnership. So he came in and he did this pitch of the partnership where he basically talked the whole time you didn't talk about the game I wanted to make at all.

He just talked about emotions and how the video game business was so stunted, because I was only serving this incredibly narrow band of the human emotional spectrum of anger, violence, of envy, of accumulation and what he would. There were all these other emotions that they were being explored in music and in art and in poetry and in the movie business. And we should do that in the video game business. And he finish this thing, and he walked out, and I literally ducked because I thought that the blast radius from my partners like seeing what you do, bringing this into the partnership. We Better .

capital firm and we're funding happy .

like Kevin harvey n to me and said, chase that guy out in the parking lot and give him a term sheet he was like he was like we are in business to fund people like that and IT was and I still get goose saying IT now because I was because as how I felt, but I was too afraid to say that in the partnership meeting because I I I I didn't have enough juice to really to do IT.

But there must been relatively early in .

york because I ve been working on that thing forever um but yeah was probably uh you know within within the first couple years that I had been that .

I was a bench work before nap, before discord.

before riot uh right around the same time as snap OK right .

after right but snap know going .

to be Peter tells .

exactly the same story, by the way. On our on our team he is like when he talks about the range of emotions that he was going to cover and how to serve that was IT was just magical like this this moment of, oh my gosh, this person to genius. And so in a lot of ways, you know, just like an exception to the rule, yes. And even still, he he is on the path to build this, know something much bigger than this.

And and very, i'm a very small contributor to the success of IT. But what I did help and understand was that he can't make journey again. Great that if he's going to, if he makes journey again, he's gonna get the same result that he got from journey, which is is going to get a console like indeed developer result.

And so I really helped to understand how to build a forever game. And he rose to the occasion and just built an amazing forever game. And that thing is now, I mean, he was in the fall the number four growing game in china by revenue.

Um what's the game called? It's called sky skin. So we're talking about hundreds of millions of dollars in revenue and he he does IT with a tiny team. So it's ludicrously profitable. Mean, I think it's got greater than thirty percent net h income margins.

And would you fund at this point the concept of sky even if there wasn't a broader platform based publisher strategy around IT? Like is that a good enough investment?

Or let me make a different game out.

Yeah let me even even sharper example. If you got the pitch for riot games and IT was literally just league of legends and IT was going to be a league of legend sized impact on the world, is that interesting? As a venture funded .

able opportunity. So I had the great benefit at the moment of not being a of venture capital but having a lot of do. So I am in a position where I can make these investments personally.

And so the answer is yes. And in fact, Blaken, I have made some of these investments, uh, in things that maybe would have shaded into the studio realm in my previous life. However, I would not have done the .

benchmark if i'm hearing you right. It's because it's it's just difficult to a crew enough power over the ecosystem to have flexibility in your business, to have pricing power to um be able to negotiate effectively with everyone else you need to to reach .

your customer. Distribution is king, right? And if you which is so funny, right.

like everybody is content is king. And like now, distribution barriers have been removed in everybody. Anybody can make a game, but like this is today in twenty twenty three.

distribution is kicking. And if you don't have distribution leverage of some sort, all invest against any credible distribution leverage. But if you don't have that distribution leverage, its very difficult it's very difficult to aggregate enough value to justify adventure investment.

Yeah, I would say the bar you should just assume every venture backed studio is an amazing game like IT just just should be one of the best games.

It's never been a Better .

time to be a gamer. yes. Yeah, that should be an amazing, amazing game. But like we know with apps and software like having a great APP, unless IT is truly like top one APP in that category, your people never noticed. And I I think that's a lot of people that are building studios today are much more in the camp of i'm going to build the best game ever. People will come and I think prevent arned that he think over the years, unless IT is truly the exception, they won't come.

I think part of the pitch that ride made that may be convinced that I had a distribution of vange that was made me willing to invest in IT was the way they understood the existing audience for defensive the ancient, which was the game that they were essentially modifying in in making into a IT was a game that was a mod of warcraft three.

And they were going to turn this into a standalone product with its relying ched IT online, with its own characters and O, I. P, and you could see that as a studio bet on a certain level, but they had identified this enormous pool of users who were playing defensive the ancient. And there was this crazy pent up demand for exactly what they were going to do because Martin, defensive the ancient and and running IT as an user, and need to find an out of print copy of warcraft three and go through all these machinations to.

like diary, did some pretty awesome growth. Acx, in the a early days.

bought the websites that we bought the defense of the instance websites, and turn the editor real too, all the .

content on the internet, right?

IT, by the way, if you like search, I just like even Better than the L. B. R. You now you can .

call IT a great tech. I all IT a customer acquisition. And IT gets you out of the kind of junk pile of throw a game up on steam and pray, right? And that was enough because I knew if I could get if I could leverage that, right, I would give me enough of a profit advantage.

That I could reinvest, maintain that customer acquisition of the energy and build a platform based publisher out of IT. And that's how I roll. Blake.

are you saying about the red thread?

I I was on the red thread. If you search IT I what the name the website is that bought, it's all of these people who are playing defence of the agents to duck what what what happened, happened, what's going and he was like time of the top of at the time. That is like, what happened? who? Who are these people? Who are they buying? What happened? They killed this like, and they all just move over.

So I still over there, but the forms are all playing to the very similar in with different something.

You to discussing this.

I say it's incredible how there was a thing with clear product market fit that was kind of unloved and unmaintained and hard to discover in our world of podcasting. That was apple podcasting and this all team at apple that was sort of looking after that. They had turned into a real business.

Uh, there wasn't like prioritization at the company. And as a pod, caster was always hard to like IT in touch with someone or be like I get editorial on the thing. I don't even know. It's a weird black box. It's basically just like a directory where like it's a key value store on the left side they have no um uh uh U R L and on the right side to just points to my r feed and then spotify comes along g and is like, oh well, we have tons of users. Where is going to expose this right on the main feed?

So much of our .

growth last year, two years has come from spot specifically because more people are listening to podcast on spotify. There's some canalized, but there's an enormous amount new market because is .

easy to fight as a total neo fight to this world, right? Like we have both been just gobs macks by how what percentage of our users are coming from spotify would never predicted that how big of an audience was on spotify because I just didn't OCR to me right that spotify had done that well in progressing until we were started releasing these episodes really like well like more than fifty percent .

of our audience in from sort if you'd raft two years ago.

it's actually really weird. Like wild yeah.

it's wild. It's like there's this really interesting like opportunity and capital m, where sometimes there's clear product market fit, there's clear heat around the use case and yet there's still massive economic opportunity for some new company to come in and say, oh, that that thing we're going to be the best.

And by the way, this happens again and again in the video and you look at so for example, the survival um genre right which started with ARM modes like uh days ed and h one n one and sort of like evolved into pub g and then into fortnight right but these were dead generate right these these were super geeky hard core like kind of weird nesses right talk off right uh which now is like a dominant play pattern in in the kind of mobile shooter insta.

It's specially the market gives market fit, then they realize a wait. If we just make this maybe more casual or we change the business model, whatever might be, they expand over our audience. And one of the the most famous examples right now is fortnight was you comes from pog so that that whole rain is actually four guys which which which for nator epic bot uh and fog guys was this amazing party game that they couldn't publish on I O S because of the apple lost uh and so they never they never built a mobbed game for IT。 And then there's these three guys in finally made a basically the same as game uh pushed on mobile called stumble guys and IT gets acquired by, I mean, it's like one of the number one apps for the entire year, number one games for the entire year uh and gets quiet by scope y and then IT mitral showing me other day the biggest game in china is is is this game called uh egg party on mobile and that is actually fog.

It's just IT is kind of remarkable I think you could argue world of word craft was this right that like they know you started with, uh, automobile and every quest in these things but they were all that we made a joke in the video, were ambition enough well. And they never said they weren't ambitions. They were.

They in, they didn't reach out enough like they were very content to serve that core. Five hundred thousand users, the joke activision, back in the late nineties or early two thousand, I was working there was, there was a heard of five hundred thousand users who just migrated from one m mo to another, but that the audience never grew. And then, boom, world of warcraft basically does this right? The they they find the product market fit and just like and just embrace IT and blow IT out and and it's seventeen years later, it's still a number one product.

I wanted pick up uh something minutes every minute to go about uh how you are all uh I think IT also might be um relevant far beyond games and is some of your investing beyond games too?

Um you stand, you d look for something that can have a distribution vantage of front game differential profits verses their competitors and then reinvest yeah how do once something starts take a game once the game starts to work, how do you think about the reinvesting piece? Like that's the customer acquisition piece, right? What's that calculus for you?

I resist as long as possible going paid, although sometimes you so profitable that you can with and not really mester margins up too much, right? But I think once you start down the paid path for customer acquisition, it's kind of A A slippery slope and it's a very difficult thing to come back from because you become almost like an addict to IT and you you're so reliant to IT and you start to twist your your mental model to believe that like you're in this lifetime value return on investment kind of thing that is unhealthy, I think for but what I do love is doubling down on the organic step, right? So uh like in the in the that game company case, it's like, okay, we got this thing crushing on mobile.

Um let's look at some other platforms where a similar kind of user could be aggregated, whether it's switch, whether it's like casual peak play station, etta, and let's go after those. And then you know apple wanted us in the arki. We couldn't do IT because we wanted to be cross platform, right? And they wanted to exclusives. So you know it's also what you say no to during net because IT would have been easy to say, okay. Hey, there's a couple million of .

audience.

It's it's it's making those kinds of key choices that like continue to reinforce the competitive .

advantage. I think there's another piece of this for free to play games where live Operations, keeping the events fresh, adding new cosmetics in the game like legal legends, is actually we where most of the investment probably goes IT versus any of the marketing. It's let's keep this game fresh because you know a lot of ways when you launch a game likelier al legends, that is the starting line and there there's still on you ten journey of keeping this game alive in fresh. That's where a lot of the reinvestment goes in these studios.

How does the level of and capital intensity of reinvestment in uh fresh content for forever games compare to the old world of building new package games for a studio .

or a publisher? Oh, man, IT is fast becoming like an annual amount equivalent to what an annual amount during production was. So I don't know if that makes any sense, but let's see that you were spending a hundred million dollars, got forbid. Let's say you're in fifty million dollars breaking out in that number.

But to build a to build a game.

yes, let's a tookey three years, right? So you're spending roughly fifteen million dollars a year, right? Like I think you can expect to spend as much or more. It's on an annual basis that you were spending in development in live ops.

in live ops. wow.

yeah. And that can cover anything from the support side of this of one, people report toxic users. But really, you see a lot in events of I need to make new scheme, yeah yes, or I I need a new champion. And in legal legends. And when you think about legal legends, so much of that game is actually run balancing. And so then you have you you're investing all this time in H Q A testing and balancing and making sure things don't break in, that is and and right updates legal legends every two weeks, yeah and every two because they are putting out new content, they're balancing everything. And so that's pretty much the entire peno of that game at this .

point is just keeping a fresh this story content to people have realized the IP s for this has become incredibly valuable.

absolutely. Were we in the e sports journey in terms of that being a sort of reinforcing marketing strategy? And and I ask plake you .

you the U. S. Played for good reason. You're going to get a very different answer if you ask me.

I want with your prospects. Actually, I think I think would be closer than you. And then I think you to start, yeah .

thought I was good idea at some point yeah .

I would say like the not .

to be the with no.

I think I actually think if you like four hundred years, which is the news ford organization that has three pillar of IT, which is new content in immediate side. IT has an a pair l side, which is also a drive business. Then the exports side.

And the view is always, which is probably somewhere in matches, is that e sports is marketing right? And the view was, how do you start a brand in gaming was what's try and will go and get a spot in legal origins, which was franchise at the time, that will legitimize the brand. And then we will be able to well, hopefully, that eventually figures itself out and becomes sustainable. They will be great marketing and distribution for legitimizing a new brand in the gaming space.

And I I think there is all sorts of nuances around I like around league legends, e sports and counter shock these sports and really when when you say the word exports and this is probably like the real struggle of IT is IT, it's quite little just saying like what do you think of sports and owning a sports team? And it's like every single sport actually has a zone present cost to IT and they're certain certain leagues that maybe a crew more values than not. But for the most part, they really are like a marketing engine.

And they can be a marketing engine for for your organza. If you. Have seit up that way, but in for the most part of a marketing engine for the game itself in keeping IT fresh.

That's actually what a more curious about David took IT to like enterprise value of these sports organza, which are less .

like that's less addressing because it's an obvious failure. IT is but but is good again for I think the game no, but with all, do respect. There are some yours team liquid. There's a few of them that have kind of transcended. There are now brands and up themselves of a certain certain you know can sell merch and other stuff like that and they compete in the league legends words and get a lot of exposure and cell skins and all other seven yeah but even are financially, those are not great still not great businesses, but they're kind of viable businesses right? This um but ultimately like all of this is a cruel benefit to the league of legends right to the over watches, to the to the C S. Goes of the world because that's really what is functioning is it's basically like you're getting thirty million people to league legends streams during the worlds and those people are going to go play more league of legends and buy skins and whatever. And it's like when the chinese team one worlds, the right guys were like throwing confected because like when the chinese win, it's like a hundred and fifty million dollar revenue opportunity um in terms of of of increased like new unexpected sales of of skins.

When I think about why I was excited, why I actually still am excited about these forts, is video games especially free to play game like legal legends? IT feels different than, let's say, soccer or basketball and best ball. I know at a very Young age I am not gonna go uh and and I also like I don't have any real way to even play with people with some more skill level of me like my nights hood. And I think when I play league of legends, there's clear science of progression and actually just think the average person probably feels like it's more achievable, like the it's more if I just play, if I final hours I could go through, right right? That's the average person might actually say that.

So more like golf or tennis maybe. Yeah thanks for yeah.

I would just say you think is is so much of the scale this feels more obtainable. And because you're seeing another kid in the town over who's like making money, you like that can be me if my parents just let me play.

It's even Better. It's way Better than golf and tennis because the various entry or so. So you don't need the money. You can have a lot of money .

if you're going to go. And you you are immediately chewing up against .

the best in the world. But I just think about IT in terms of like participatory with a smooth .

continuity to pro. What my favorite examples you think about that there's like a stream name t fo in in fortnight. He got famous because he ended up in the same love is niner and he just absolutely styled on .

anja on a stream and and .

he his his name was twitter. And when do that? Because he risk heard all this stuff where they just playing all day. And if you style and there's a real chance free to get famous and that part there, there is just a difference of like the dream is obtainable and ah that is so compelling to me in that way.

I think it's very similar to what we saw during the poker boom, right, where people were playing online and you could play on into the world series of poker, right, like from the from those online online games and so there was like, I think that that's kind of an interesting .

analogue yeah yeah actually uh uh violent ant, for example, just recently released this this a sort of semi pro mode where it's you you you have team and actually let you run tournaments and and eventually if you your team gets high enough up the latter, they will play in in essentially the world cup. And I think that is just so amazing of selling that dream because is not even selling is like sort of real and that there is going to someone is life has change if .

they get discovered and that is and so back to their earlier conversation about um reinvesting in the game over time, like what an incredibly leveraged way for for successful forever games to invalid the R O I on investing lots of capital in your exports ecosystem is going to .

be very high, very high. IT works yeah um yeah and there's a lot .

of different approaches for worth like you look at look at conor strate involve theyve taken a very old like they just don't really care.

Like go in the the P G A where they sanctioned to events s to basically owning the league cosine .

for turn year called the but there is no hundreds of tournament that happen outside of that. You as a team, you choose which ones you go to. And actually the real reason why know the east bods boom happened from an investment stone is you finally had the publishers like, uh, lego legends stepping in saying no to trying run this like a sports league where teams are able to buy a franchise spot.

This should be like a equivalent of a tower to s team. There's a lot of things, but really IT goes into, uh, can this a true value? And I think that's really a different dynamic. And I spent five .

years talking those owners like the existing sports owners who had terrible foo from like dumping money into these things and and some of took my advice and some of them didn't and ended up, you know what, I M really dead assets. But that's what that that was, Bobby strategy. That was the legal leg .

strategy but people so with .

up because he was basically like, look on, this is the next N, F L. Get in now where it's still where you can buy in for tens, millions of dollars opposed to tens of billions. And this is the overwatch league need.

Yes, yes. And Better way that, uh, I think even me at that time was was telling people that's probably not the wise the saying especially think about it's .

I venit forever again you working .

for you ah yeah yeah right and that that is a that that was a game that a sixty dollar lar package good that's trying to be in the sport and my brain is sort of broke at that moment. Like, okay, least let's think about the incentives here, like we're going to line. This is completely different business model and game overall, at least in legal gds incentives, still to keep us game of alive for hopefully forever. And that could be differently than something like you never.

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So we are talking a minute ago about in gaming, as in many corners of the internet investing, there are things that have lots of usage but don't have have not attracted a lot of capital or attention or care. Perhaps we could talk about the the opposite of that with web three entries to over the past few years. And specifically, web three encrypt u gaming, U N game craft. To my my kind of on a hopeful note about that what you agree how are you feeling about IT?

I do and and I have been incredibly skeptical, right? And i'm primarily skeptical because it's a character flow of mine that I am part of the original tribe, right? I'm part of that O G gaming tribe, right? Like maybe is slightly Younger than the real og s like being in in trip, but kind of still part of that generation.

And so I still am very protective of the video game business because I was this kind of nerds paradise like that in that day. And i'm always resistant to tourism, right? I'm always resistant to people kind of coming in from outside and kind of claiming IT is their own and and it's a character flaw because I should be big tent and i'm just not um .

and at the same time, right? Was that right? They never made a game before.

They never made. But man, those kids were so down. No, they were. They were super hard core.

I would have adopted them, right? They deserve to be in the tribe. They embraced the tribe. But a lot of the early web 3 gaming content came from crypto people slumming in games， right, who had no idea what they were doing, who made really crappy games that were really just an opportunity to maintain and launch N, F, T.

And participate in an N F, T marketplace that had some light way, you know, game mode that was associated with. And there is a bunch of those out there. I don't want to go room chapter inverse, but their heads this new crop that we are starting to see now. And I I just actually invested in one ugly enough um just recently uh super cell, the um finish game company and and I made a Angel a joint Angel investment in in deal. Has a component of this, uh, you saw eve online, uh, just raise forty million LED by entries and horror to make a egypt enabled diversion of eve.

Oh, I didn't realize that. And eve is like a long running. I mean, that's a twenty twenty years, eighteen years, I think iceland .

ic gaming up. Yeah, yeah. So now you're seeing game people who've had a chance to kind of digest the technology and see if they can find an organic use for IT start to bring product to market. And that gives me a bit of hope, right? Because maybe because of a lines with my narrow view of the business, but maybe also because we're going to get good games out of IT that don't seem like scams.

And so far, our audience who's not been paying attention to web 3 gaming， how is IT mechanically different than traditional game business models, or even lets to say that the current most popular free to play business model of gaming, uh, what new things do does blocks in a lock.

The good news is not that much, right? No, I I honestly believe this right. I think the best of IT here very closely to the conventional models, and they use the crypto component really almost to maybe a improve or or enhancing elder game. So for example, if you've been playing for a while and you're kind of board with just grinding on the underlying free to play progression mechanic, there's another severe where you could play right where you you could take your character nino is an nf t IT gives you certain benefits in in the underlying game.

But it's kind of gives you status that in the status competition that you in the other, like very advanced players are, are engaged because at some point, if you've been playing warcraft world of aircraft for fifteen years, you're not running around killing chickens for gold, right? Like you're you're playing a very different kind of game and you're playing kind of a social game, right? right? And so I think there's aspects of that, that can be enhanced and enabled with the web 3 technologies that actually are additive to the game play。 And and I think that's exciting to me. What what's an example i'm not going to tell you.

you imagine eve with this a yeah I mean is .

a good example. So they're gonna have a token and that token is going to be useful in the game in a way that's not paid win right, which is the the death of of of free to play game right um and Blake is almost almost a religious fanatic around, please hate to win.

Why do people do Peter in then like IT will kill you again. IT works .

because it's short time. IT works in the .

short term as time, about one to recently. And I think like clash, well, if you play that uh, has some real paid to win mechanics, it's like softer uh, where you can go from, you can play, spends a hundred hours playing the game, completely free to play. It's balancing great.

But once you hate a certain point, it's like how you hate a wall, like it's gonna take a while to ground out here. And so either like spend or or you can be playing this game like eight times longer than the person you are playing against. And I think that one way that you see, you typically see that more on mobile. But if competitive integrity is in the goal of your in your game, like from a multiplayer standpoint, then it's way easier to do more.

Peter winter, so social status is a key component of the game that when paid to win, is the worst .

thing you can do. Yeah I I would say .

I an in progressive state yeah yeah.

Like if if your rank meant something in we of legends, which IT does, if if there was a way for you to pie the highest rank, that game would break. Like I would I would just simply would break.

So wait, let's go back to the token ocean. So what is the token and eve online? Okay, great. That there's this like cyp pto. And what can I do with IT?

So hilma hasn't released the design yet. And because he pitched Blake and I am a little uncomfortable discussing, but but let's to say abstractly IT um functions in a way like A A store value, almost like a super currency where you you will have uh the token as well as an in game currency. And the token isn't necessary and the token can be acquired through play.

But IT has some interesting properties that you are acquired through ownership and and your incentivize to buy IT because IT IT IT provides you with certain benefits in the game that are they don't necessarily make IT competitively unbaLanced but that um open up areas of game play that might be closed to you if you did know IT interesting. Very clever, by the way. Like, I mean, he, Blake and I I ve looked at a bunch of these things. Most of them were absolute crap. This one is really well thought out.

He is one of the best framing that i've ever heard around this, which is, even if you like this is room and and like you like broken, like no pay road, all the stuff, and like webs three and and building a with crypt al rails actually makes you look closer to like new york city. And so he, like, we still keep room and that was, the game will still be here, but now we can build IT with the right pipes and do this for the right way.

And is, here is a great line of, and he still have italians that that moved in new york now ah and it's like I might take a bit, but like they still move over to the new york. And and I just think that's the right way to think about is there very different cities and people like them for their own reasons. But in in new york example, he just think there's a lot more you can do with the game.

And eve is fundamentally and economic simulation, right? Even though with the near of being a kind of space combat, think fundamentally eighty percent of the game play is economic, right? Mining, trading.

manufacturing.

IT is the .

perfect vehicle if this game doesn't for work, uh l be actually very telling of of the current. Because if IT works anywhere.

IT should work exactly .

yeah is a perfect application there. There's a real question of, is this game stoled viable game that people want to play in twenty twenty three? That maybe a different question, but is the perfect vehicle for a web tory?

My I asked his questions because my skepticism m has sort of come from there's all these, a egalitarian notions of in the web two world is awful, because you have to pay the gaming company for the items. In web three, you can actually own your own loot, and then you can all trade that around. And you don't have to go. Not everyone has to go back to the store to buy the thing you can buy a pear appear. And in my heart is like, that sounds nice, but why would a gaming company ever enable peer to peer sales when their whole business model is having them buy the goods from you?

Because they can hopefully increase the size of the pie, incentivize you to trade at a at much greater volume and harvest transaction costs, right? I mean, look at row blocks. right? Row blocks has doesn't have a web three component or at least not yet.

But man, it's got a very viable peer to peer economy in in IT. And robo ks is the most highly tax APP store on earth, right? I mean, because you get paid as a as a as a developer in robots, right? So when you're extracting those .

their text to get the robots maybe the most successful of application out.

I think the last time I calculated the the total tax, the growth tax was somewhere close to sixty percent.

like fifty seven percent, heard is fifty five to sixty percent.

And so because that just keeps compounding every time that robots moves between parties that just keeps getting.

and like twitch, and like youtube gaming and other things, where there was this incredible feedback loop. And we talk about this a bit in our user generated to content episode in game craft, you know, minecraft, for example, where they just cross the one trillion view mark on youtube of mine rafer related video OS. You know that the company that made that more yang didn't make any of those videos.

There were a hundred percent made by the community, right? And yet that community was highly incentivize because they had an economic incentive, because they became famous. They became rich by becoming minecraft streamers, by becoming minecraft youtube ers. And the same thing is happening inside of the blocks in a certain way. And I think the dream of the web, three spaces, that this be more than even.

I would say, even you look at a and a lot of people don't look at steam and view IT like and open, see or one of these marketplaces, but in in teen, teen for ters two. And in canada, they introduce these virtual goods, and they are little just cosmetic. But you open a loop box, you get to the skin and the skin's have your value because they cost two hours open up that create and you might have just got something that super rare.

And in the public market that is hosted on steam where they take and I think is ten percent, uh, they are double dipping and triple dipping on the content that they primary issued and are getting all the secondary itself just a recycling through of, oh, you got a knife, I want a that's like four hundred dollars is what does go for on that market. So valvo is actually like the closest to probably like web being just open where they they they actually let you take these things off and you can transact for U. S.

Dollars if you want to. They eventually shut down. That's like maybe, but it's there like you can people use these accounts.

People spend up steam accounts as esco services and like their bots and you their sites that just what your transacts for U S. dollars. So I I, I think it's there's a lot to study there. And one thing the men I always talk about is there is the speculation problem, a of in in a web through example, where if you truly were looking at countercheck and you want to buy, in theory, you want to speculate, that is kind of try going to be bigger over time. I should just buy all these skins, uh, in the open market and that just for cases the Price and is what we saw in encysted a where the people who are owning these nfs were never even playing the game and you just Priced out your average user that's one sort of unsolved or to be determined .

from yeah and and I black and i've talked about this we call IT the um you know the coin pizza problem right which is. You know you have the the person who spent three bitcoin back in the early days on a pizza and that those three bitcoins are are in today's dollars worth seventy five grand. And so you feel like a fool because you spent that currency.

And so when when we're looking at web three related deals, like solving that problem, like incentivizing you so that you don't feel like an idiot for utilizing the token is a key, key factor in these games. And I think he was one of the things that got me over the hump on hilmar uh eve you know new eve game right uh awakening because he actually had a really interesting solution to that problem. And we've seen so precious fewer good solution to that problem.

And it's a double solve because when something goes up a lot in value, there is a problem because you don't want to spend IT and the goal of creating any economy m to create a lot of transactions and a and turn over. Then there's the second problem of speculation. When things go up a lot and value IT encourages a lot of people to speculate, brings in the wrong sort of people, makes the game not fun, messes up the intense for everyone. So if IT doesn't have that problem.

then you solve two issues. yes. Yeah, it's it's really tRicky. Uh, I don't think anyone is is is solved to yet, but we we're certainly finally starting to see some people have theories around how to solve that. And IT IT will be really interested to see a play up because IT if you can solve IT and there is no reason why these things should not exit in games moving forward.

yes. So uh, what we were going back for them what's talk about on this episode a mitt, I think IT was you and share duck here had quite a few thoughts that you wanted to add on to our ninth endo o episode. Um specifically, I thought the most interesting was around our assertion that the N S. Was the first consumer device with A G, P, U. architect.

Your P, P, U discussion.

yeah, yeah. Tell us what we get wrong. I don't think you got that wrong necessarily.

but I I just wanted to be fascinated by the history of this company is a utah based company called Evans and southerland. And I was really just teasing you guys because this felt like such an acquired like mini episode, right? Because these guys were, if like the fairchild semiconductor of computer graphics. So these two professors, they were you guys talk a little bit about .

um this in the atari context where you view mafia como graphics wrong .

that like ten years senior to the rest of those guides right? So no one went through as an electrical engineering student. And then Evans and southerland came in and formed the computer graphics practice at the university of utah.

And so no one was had already graduated. But but they got cat mall Allen k. So cat mall googol to picks r Allen k.

Basically goes everywhere. I mean, he's part of the apple use interface thing. He he starts the atari research groups that basically invent virtual reality. I mean, he is pollinating flowers all over the the computer the computer business .

he's credited with. Um the best way to predict future is to invent IT yes .

so incredibly important figure you have john warnock who goes on to found adobe, one of the most important companies .

in the in the computer .

graphics business. He was guy in Clark Evans on southern. So all credible people came through the that university of utah computer graphics. So the professors then spun out with a absolute bucket of darpa money and started this company that basically started to build in the late nineteen and seventies, early one thousand nine and eighties, the first commercial flight simulators.

And so, you know, with very high fidelity based of flies in the days, and of course, flights, the latter required the kinds of advances graphics that just weren't available on desktops, even on in the workstations of those days. The this is pressly icon graphics. This is you know for any of that stuff. So um they had developed a bunch of this depreciatory silicon during those days and ultimately ended up in the supercomputer business uh later on in the one thousand nine hundred eighties and then ultimately in the one thousand nine hundred nineties uh were in the console business. They helped develop rigorous or for name co um the very advanced racing sim.

You put this in the notes and I was like.

so IT comes back full circle to the video game business um I just find that whole episode incredibly fascinating ing and and I is so interesting to think about uh, all of those people kind of coming through that same programme and and and what IT must have been like an evidence in southern had a big impact in the games community because former employees of their started up a bunch of games companies um and again, like just one of those incredibly in in really the true sense of that word um technology companies. There was .

another thing we brought up on the intendo epsom. Curious for both of your fact check on which I was shocked to learn that the ging has always been larger than T V. In hollywood. If you include the total coin drop in our kids, I always just thought this was this new phenomenon. I like how video games have become so much a part of the fabric of our society, but our research was basically like, I think it's always been true.

could be I don't know much as much about what they count when they count the hollywood revenues or or the music industry revenues, right? Rather, it's sort of ticket Prices or or or what. But I think, regardless, the really interesting fact is how big the ark business was. And if you go back and look, some people do these really clever little graphical drawings where they show sort of how we got from early games business to the hundred and eighty billion of today, and they show like sectors by market chair as they have been flooded. And the thing that always stands out when you look at IT is just not only how big the archie business was but how long .

is persisted ah you think about like say and when we are researching for the council castles episode was so clear that this these council manufacturers really were wrestling with do we risk IT? Do we risk our our coin up business? And probably, I say, is what I was isn't nintendo, is they were trying to protect, literally making billions .

of dollars in the seventies likes billions of dollars in revenue in the, of course, you're dog could to stop doing that.

I am an I grew up in that year I so I was one of those regrets he was like camped out with handful quarters in a video game cade um and I remember that I mean, they were important social lokai right for kids in in those days yeah let's talk but .

i'm curious for for maybe but with me because you're talking about IT, what was your entrance into video games before .

you got into the business side of so yeah like space wars s win da, where I was miserably consigned to grow up.

Um did you have A P D P one or how did you get access to space?

Well, that was a different to the console. successful. They took that idea and made a box out of the only a few of them. But somehow one of them mounded up in uh, in IT was not the P D P version that you guys talk about in your episode, but IT was a like cabinet, yeah like a cabinet version of the that that that was propagated.

And somehow this whole worths in a while Greens, I can't remember what in four lauter day in a mall had one of them outside of bit. And that was literally the first video game I ever played. And then IT was Robert on.

And those kinds of games were sort of my G. M. Growing up.

Would you Better have been in the factory? Twenty six hundred?

Yeah, except that we were apple two family, and my dad was one of these love technology, but couldn't understand how any of IT worked. So he would buy this stuff, and then we would in my brother, and I would inherit. My brother ends up at the M.

I. T. media. Aben goes to hollywood, invents video assist, essentially in hollywood. So both of us ended up Carry out of techno geek s so, uh, in the old days with film cameras, the only person who could see what was being shot was the cinema together, her who literally looked through the ipds. And now if you go on a film set, there is a video village where all where the producers got forbid can come and watched what's being shot in real time, right? And that technology transition basically involved this intermediate step called video assist, which was my brothers theses at the, at the M I T.

Video in the s. You see those know George lucas in tunisia shooting in the desert, and seventy was at seventy six when they were shooting A A new hope. Like they've got that ten the'd got video monitors, everyone's pointing. They are watching daily. I mean, it's a, it's a.

it's a camp out. yes. So that was a again, we here we would inherit these technologies, whether they were like, you know, early video cameras or whether they were computers, in the case of the apple tools. And then we would screw around with them and try and figure out how to make a work. Of course, because we were children most of the time, we turned them into games.

What was your first dedicated gaming machine? Uh.

the first dedicated gaming machine that I owned because I I wasn't a nearly console adopter. So the first dedicated to giving machine I owned wasn't until I was in law school in the in one thousand nine hundred eighty seven. My wife, who is a game designer and worked at activision for fifteen years but was a lawyer also.

And we were in lost all together, but we just basically like, you know play video against all the time. So we bought in a mega a comedy omega, which was a very famous device inside the video game business, but very largely unknown by most people. But IT was an incredible device. And um this is after the counter or sixty four yeah and so that was my first I would call that my first dedicated uh, daming device.

Black was your first game experience and .

my brother is three years mean, so he was always in the games. And he've loved nintendo more than anyone and I was always the mean of just being played too and like IT was so bad growing up of like we would play and sixty four, we and then yes, and I think that's really the first council that we had. And uh, I remember just being stuck playing like the crappy other character.

IT was bad. Like, we play sonic. Can I be like tails? No, I just remember hating that experience. And I IT became really clear that my brother just love single player narrative, creative games and.

When the box came out, I was like, like, I can finally get something that my brothers not going to take all, like all of the time with. I got next box. And really, halo is the thing they like to change.

My wife like, what is this? This is amazing. Uh and then really the three sixty, when expect three sixty came out and aspect life just really took off life was .

that you talked about A A little bit the council castles apple sit at only just .

because of what an incredible little business proposition IT was because you had a captive body who really wanted a community who really wanted multiple are play and basically they said, yes, there's one way to do IT you can pay .

us five thousand one yeah talk about like the a number of people that actually upgrade IT was the number of people that wanted to get online services for their game that that had to pay x box in addition to the councillor buying. Just insane like the numbers. I forget what that actually ends up being, but it's certainly .

billions of dollars in revenue of ever. And it's not like they weren't your I S P.

They were in get net IT was the right to get online with I remember called duty online for the first time and being like, oh my gosh, my life is like changed and my parents wouldn't buy me a game PC because I just knew i'd be a total to generate probably right. And I like like now of gaming, P, C. And a total degenerate. But I i've loved uh, just like call today and all of the competitive games really. But we missed .

my wife and I the console, or are really in a lot of ways because we went from sort of, you know PC like you during that entire era, basically mean the first consoles really that would have been viable. The twenty six hundred and stuff we kind of missed because they came out right as we were graduating from high school, and we were more in the arcades, and then we went straight to the computer.

I remember we were playing some the early E A games like starfleet on a compact portable that had an R, C, A. Out that we can plug into a television. And so we were logged, we were playing that that was our monitor to play.

But I remember those old boxes for the mouse they have, like attract ball mouse.

Oh.

so and then we bought her first console, actually, when he was interviewing for the job at activision, I was a disney, and he went.

he needed to play, got into the gams .

business first. Oh yeah, yeah. He needed to play MC warrior in twenty, twenty forty seven.

And I play that on the mac. Yeah, yeah, yeah. So, but I was on so we had to buy S N E S. So he could study the, the, the activation games before he went in for her interview. And then he got hired and worked there for fifteen years.

Wow, how did he decide the transition or career from layer to game developer SHE?

When we were in lossow together, we wrote a game together. Uh, I programmed and SHE designed. No way. Yeah it's was but but still we we just certain knew that was our calling and like we practice for a couple years but neither but were totally into A G actually was a district attorney in the hard work gains unit in L A. And so he had a much sex for your job at me who was just doing representing, you know, a tari games against intendo wow.

So this is wild like both of you that IT was economically Better, if I don't want to say, decided you went to the school rather than go into making games, is because you thought there was no money in making games. There was no.

you know, it's just one of these things where you don't know that it's possible. I mean, I I I I I think that it's true and you find this to be the case in hollywood quite a bit right where kids you've grown up in in kansas or whatever。

Um i'll say when their interviews like you, why didn't you choose this profession? Why did you go do something else first? And they were like, I didn't know you could do this for a living, and I kind of didn't know you could do this for a living, right? IT just seemed so out of touch, but slowly.

But I like know partly IT was through the atari games and intendance lawsuit where I had to go around and take depositions of all of these early box console guides who made cabinets um the uh the electrical um instruments uh scientific instruments department at U C sana. Barbra was like where uh knowen tiring all of his top engineers, right? Because those guys knew how to make multiplexers. And you these, let us remember, these box counts. They were making what we would now think of a software in heart.

software.

So I went around in interview these guys, and I was like, these people are so cool. Like, what am I doing? Like, there's there's another world out there and so I laugh and went to disney.

Yeah, I think it's funny. You mention like the kid and kis has no idea this is even possible. I was just like, I had a double life, right?

I I play video games and I still play video games, probably wait too much. And I wasn't even until I enter a venture capital, you could like investing games. Like that's a thing. And I learned about match and being and all these people. Well, that's like I think that's possible and that's even after I ended .

up in venture that I was like that .

I like that you said I play games way too much. There's this stigma around this industry still. Why is there this stigma?

I mean, I I mean, I I definitely just objectively .

play but um the statement too much requires .

it's a moral .

judge playing me.

A lot of think of the we know video game industry is like a whatever that's like for kids or that's like a not a business. Well.

you I think address this quite well in the in the the first in in handle episode when you talk about sort of the the roots of of this business in the toy business, right, even intendo making the glove for the maxx oy. If I remember that yeah yeah the light i'm sorry, the light on yes indeed um and that like that was real right I mean when I I mean and IT persisted long into the nineties mean that I was still considered kind of part of the toy business, right?

Um hasbro made a run at activision, little known in fact right in the late nineties when I was running the studios s there and I remember going to toy fair in uh new york, which I which is a trip man in those days and went we went actually to the hasbro pre toy fair uh thing in in boker ron floride, of all places where they were. They taken over a hotel and in every ballroom in the hotel, one of the brains were showing their steps that like super soccer was in one room in media uh the uh whatever like nerve was in another room or whatever and you just went from room to room to see all the toys. And the deal never ended up getting done.

But but really in those days, IT wasn't that much of a stretch to think of the video game businesses basically being really apartment to the toy business. And now we don't think of IT that we think of IT more as a permanent to hollywood. I mean, look at the last of us or you know things like that where you know we're supplying the IP to like serious drama, whatever. But like that would know is the case.

Think there's also the subbed shift of games becoming really social, like there was maybe having our new friends that would come over. You take a little land party, you'd play mario party, whatever IT was. But obviously games today. Now like I play legal legends with my friends online that I actually probably even seem to one those people in person in years, but I still play with them all the time and I know what they're up to and covalent golf level like i'm catching up. And i'm sure if the games itself.

I D also say that the content itself and our choices early on in the business was somewhat self limiting, right, in the sense that um I mean, we made a lot of really violent stuff, right? We made a lot of um you know games that to genova point perhaps didn't didn't explore all of the spectrum of human emotion and as a result I think that was easy for moralists to look at this and say, oh, this is A D V and activity much the same way that comic books reviewed maybe in the one thousand nine and ties right like or um you know is certain kinds of independent film or sexually uh explicit content or whatever has been viewed historically, right? Where is maybe those things change over time as they get more mainstream, whatever. But like I think that had something to do with that as well.

IT is interesting that you say this is how I hang out my friends plague because you wouldn't say I hang out with my friends way too much, but you say I play video games too much and it's like there's nothing wrong with being social and there's nothing wrong with having fun and enjoying your life. So why is that that there's something on with playing video games with your friends.

Maybe maybe it's just the games I play that they are really competitive and so make me very upset and very tilted after I play this game. So more that .

and is the case in my family. I mean, my wife just played elden ring through finished IT, right? No, those of you who do not know what i'm talking about, elden ring to finish elden ring is not only you have to be hard core, but you have to expand hundred hours or more, right?

I finished in doing with a one year old. I'm so married. So SHE .

finish was like, okay, now I got to play as a different character. Played again. Okay, finished IT. We started watching cognitions, the last of us on H. B.

O and he was like, I, having played these games, set down and played one and two back, back all the way through, right? So this is, this is the family I live IT. Wow, where i'm like the non game.

So what? What's your drug choice here, fava? Currently.

well that has historically ally been fea um in which at which then my I had a son who griped to be a very very accomplish soccer player before becoming a musician and so he and I play a lot of feet with together which was kind of our dad son bonding stuff then he became too good and then making .

your career it's the backyard basketball .

too where you're son turns out to be lebron. And then uh but i've always, always been a real time strategy enthusiasts and uh grew up in the era of command and conquer and starcraft and warcraft and currently and playing age of empties for pretty .

obsessively well, a way that we wanted to kind of bring this epo de home is you guys recorded game craft in full before getting any input from the outside world acquired. Basically only ever has one episode in the can. And so when we released that, we get feedback we incorporate in the next episode. I'm sure you've gotten a flood of feedback, a center releasing the whole series. Is there any sort of mal bag or things people have have brought up where you might want to address things from the series?

yeah. I mean, I think you broadly IT was a bit scary, right? Because we did release eight episodes tty much just sort of back to back to back as you said, they were all in the can when we recorded basically the first episode and when we released the first episode.

And um i've just been incredibly uh surprised by how univerSally positive the feedback has been. I think there really wasn't much like IT on the market in terms. And I uh like deeply researched very much.

I think inspired by what you guys have demonstrated that you know there is an audience for this kind of well prepared um intellectual rigorous kind of exploration of of a niche industry that most people wouldn't consider interesting, but you can make interesting. And I think that was partly our goal when we started. And so we did gain have some inspired from I think if you guys hadn't existed, we probably won't do IT like but yeah.

we glad a little he .

he just told me not to write a book, which I think, uh, you know, he's been on that that for a while like the podcast for the future. I think you he's on a couple Simons who you know calls himselve the pod father and he is it's true like we've .

thought we've been asked many times. We ve thought about writing a book many times undid never pencils like it's never a decision which is kind of sad but is just the .

reality today yeah it's I I just echo what matter said, which is the feedback has been amazing. It's the most common feedback, the mail back stuff, you lead us right to the current time. And they .

like.

what about iron game?

So let's talk about that, right? Because we have gotten that is a question. So this is a brave new world, right? And I think one of the things is kind of think about A I in games is that we've had A I in games.

right? I started in games.

Um I remember daily barry um when he was uh making a mule back in the e in the old E A days SHE was basically like, you know, like I would make the characters behave Randy because they seemed more intelligent, right and so everyone in a while I would I would get my NPC to make mistakes and then people were like, oh my god, they are alive because that just seem so human compared to the computer like behavior. IT started there. I mean, and it's it's kind of involved all the way to the very sophisticated kind of computer.

I meat is a five year period, I think, where microsoft S A I was called cortona, yes, after a corta from hello.

So now we obviously, you know you can every rock you turn over in silicon valley these days is an A I pitch rates. So yeah, we're a venture.

mark. I can see like fifty founders like IT.

literally the parking lot was both. We had to drive around the leak.

the town hollow park, the eight faces. But and we get asked a lot about know where we see the technology being applied. And I think there is a kind of uh, there's A A train of thought that that has been advanced that oh well, this is really onna democratize the game industry and in a way where now kind of like you're seeing with mid journey, for example, where you can just describe a piece of art and IT and IT magically appears that people will be able to describe the game unit all magically appear.

I don't subscribe that I think um and again, maybe it's just my my new narrow minded ness, but I do believe that making games is really hard right and and I think making a coherent, narratively uh satisfying you know journey in the game context and interactive context is not necessarily going to fall to A I early right. That may be one of the later things that happens, but in the inter man there is going to be some really cool stuff to happen so I would I think, were talked about this with some senior executives in the video game industry recently. And I think we kind of agreed on that there were going to be four really interesting areas of investment early on.

Um I think one is art pipeline clearly, right? Because just the amount of money that spent on our in video games is mind boggling. It's just staging because you think about IT, it's like you're making a name.

Mo, you got a town, one many. There are buildings in the town. Every building has a table in. Every building has a chair. Every building has a piece of art on the wall.

Every there is, every character has clothing.

has clothing. Every rug has a different pattern or whatever. Or IT gets monotonous .

like you have to event seems these things for halloween and Christmas and new year.

Hopefully you guys played breath of the wild. Absolutely, maya and IT is a magnificent achievement.

But men, you, when you're playing IT, think about what I took to make IT, right? Every one of those characters, the dialogue, all of that stuff, right? And so I think, you know it's not going to replace the bit that need to design those things, but IT may replace the need to have higher and artists to go and bang out thirty different variations of a chair, right, for example. So I think that's a the art pipeline. Fields like a new .

brain is like the west in food. I think right now, where in the two face that will we have a three face?

Absolutely sure. Number two I think is quality assurance and um baLances, right? Because we can now train an ai to play these things. And we were talking to a senior executive who has done so, and IT reported back that that the A I can now describe an activity as fun, wow.

which that has been a hot topic of debate in the video games industry forever to define fun. So even A I, who can tell us if something is fun or not win like I don't think there is a consensus view on what .

fun means true I mean I know I have my own theory of fun right and um which I talk about quite a bit. But um we yet to have an A I that they could describe their experience of playing the game in those terms is extraordinary. So I think that's going to be really cool.

Um balancing is really hard because balancing is essentially an arbitrary tivy, right? It's like you're trying to find little advantages that the game engine, the spread sheet, if you will, of the game allows. So for example, on playing age of empire, right um the chinese calvery under certain circumstances hasan advantage that I can exploit in an in an arbitrary like way right. And so finding encounters to those or whatever is a really interesting potential use of of artificial intelligence that we haven't explored really very much. I think that's going to be really cool.

It's like to bring in the thing with all I think at least three of us have mentioned as a as a pillar of our life to bring in halo, mean when dual building first came out, and halo to so overpowered this. And IT was one of these things that like took a whole new disk shipping to fix the fact that oil you should ever do is run around dual wielding, fully charged and then running your enemy.

And like, if we can do that, of course, three, play testing and IT gets fixed quickly. Now that's one thing. But A I can catch .

that way earlier, absolutely, and find new ones that we hadn't even thought of. And and as we move into this era of more and more open isolated game economies, being able to sort of play out those game game theory kind of scenario, right? We're uh about where we're you know hoarding of various resources and that is to the economy .

is a funny line yesterday. Like just write the problem, like get rich, right? And you like what does about do and you're like that was not at all, but we are thinking of how they're going to like right economy.

So I think those things are going to be really, really exciting. And then I the one i'm particularly excited about is, is live ops. Because we're spending boatloads of money on live ops, it's really hard and and it's a very delicate thing because you've got a game that's already working right. And so you don't want to make those kinds of nerves and buffs that that, that rip out the the competitive baLance on the one hand, but you want to continue to introduce a new content into the game. And so I think that's really interesting and also just adding a sense of dynamism to that where let's see if we were all playing together. IT understands kind of what our uh, capabilities are, what our characters are like and IT designs quests that are kind of chAllenging to us but accomplished or whatever like that you can have a real time uh, quest system or narrative system that you could build into a live game that would be really exciting. And then the last one um which is particularly interesting also is an adjunct of that is serving now is to that which is live a daming for like a dance and dragon's like experience .

where if you've ever been A A A A A different of but .

know the during master is a role if you've ever play dungy dragons with your friends, right it's like somebody who's got to play that role and it's a very difficult role to play. You are a story teller. You have to some one of your players and tres, a tab born, you've got to figure out an a non player character to interact with the tavern venture, whatever, to interact with that with that that character.

And you know that requires like storytelling in there. And if you could have an AI assistant that could help, that could supply you with narrative in the background, right, and sort of help you tell that story. I think that's super exciting. And I think that there's going to be a lot of a lot of interesting things that are gona happen in that place, particularly now where we're in the middle of a massive dungeons and dragons renaissance.

Yeah think there there is there is also this inherent tension within the games industry of. If you are maybe in common studio, are you comfortable using A I arts in doing that a generation? And what does that mean? Maybe as an innovation lima a scenario. But then there is also uh maybe like a working here that I have is the ugc platforms like the fortnight creatives or the core or the rob lox es of the world might actually be the ones that create the most value in this A I S A generation time where no, if you can spend up these three assets and you're letting the the users go and do that, that should be really more obvious way that this evolves than having your artist push back and be use my art style and can be a whole other.

But only seems from the you mostly outside, that a problem in the gaming industries right now is the amount of resources and capital required to make a great game. Would you agree with that? That is time for s innovation. I mean.

a again, as a former studio boss, I would say yes and no right. In one sense, yes, because IT doesn't fully democratize the ability to make games right and we're getting there. It's Better than I used to be used to be used to write your own engine in order to make a game work, right? And so you had so you couldn't make games unless you're john car maker and lets you are tim sweet.

That's no longer the case right now. You can go in license tim sweeneys engine, the unreal engine, and you can build the game on top of that. That's already somewhat democratized IT, right?

It's like we didn't in the old days. We used to create bitmaps by and to like you know train rap around three. Like now you got you know incredible technical tools and technology, my an advanced photoshop tools and all of these other things that are just capable of sort accelerating that process there.

A little bit expensive, but the accessible to individuals in a way that that you used to. When I started in the business, you needed literally a silicon graphics works ation. In fact, when I started, companies were being valued on the bus, on the number of silicon on gram for stations that they had available to them.

Think about crazy .

razor science games up. It's like they were literally valued in their series a on the basis of the number of contraption s works.

They that is like an artist.

So I think that that democratization, on the one hand, is fantastic, right? And we've seen with things where that has happened like youtube. Let's take that as an example.

We are all kinds of interesting new content that we never expected performing. If I had told you fifteen years ago that on boxing videos, we're going to be like a billion dollar business. On youtube you be like, get out of here, right? That's not the unboxed videos come on in, but like they are right.

And all of these are new kinds of narrative, uh, experiences that we that we would never have really found valuable. So I think there's great value and that and I am a big proponent. On the other hand, you know not everybody is good at this.

And as you and that's also something you see on youtube, right, which is thousands and thousands of videos you don't get set to you in. The algorithms suck, right? And that's going to be the same in the video game business.

Yeah, I think I think that's right. I think there is we we still haven't fully reached maybe the iphone moment for your camera, but we're getting there. And in there is this parallel track games that we know moving is such a key part of innovation and how these games evolved and new journals are created that were we're getting so close to those moments of with ugc getting Better. And you can have the random kid maybe come up with a new genre or new game and IT looks like a mod, whatever IT is. But I might just be in fortunate.

creative, a robo ks, the the old, the hero image maxim that you. There are a handful of cig mia motors in the world that can make games like that. And we want them all. We making games for intendo .

is probably still true or absolutely, absolutely not get .

worse. But the window for that like say, if I don't know one in a million, the dome intor of the number of millions is artificially limited right now. yes.

And and you think about you know how carmack and romero got into the position. They got into an all the luck and sort of serendipity that was involved. Same with me, a motor already. It's like, what has he been? He's been there and seventy seven years.

and he was hired to design .

the r exactly. So they plugged about even his, the guy who trained him that you talk about in that first episode, who himself was kind of .

you and and so I think .

that the part where hopefully we can be a little more efficient about how we find those memotas.

Well, on that note, I want to close with the pitch to you get is okay, which I have texted about, but I want to now make IT alive in public, which is I really think you should continue the game craft podcast. Not that you need to, but I do think like hopefully you've seen this in the reaction to IT, like I think this can be a really good devanic zing force for people to take this industry more seriously, invest in this industry, most importantly, enter IT like make games, become entrepreneurs.

I agree. I think, uh, i'm feeling a bit of that pressure. I mean, people when I started this, I think the other thing that I learned from now comment from Michael Lewis was I said should I do IT as a weekly and they said no that's a job right um but they said you should do IT as as a special project and so I think what we're trying to figure out right now is how we keep IT a special project and not turn IT into a job, but still make IT meaningful to the audience.

And so I think we have some ideas and I think will be back later this year with some fresh content. Um great. And look, we one of the benefits of being old is I ve met everyone in the video game business over the last thirty years, right? And some of them even like me. And so hopefully I can we can bring start bring some guests on uh who can help us tell some of these stories because um I I certainly know my pass through the video game business and black nose his pass through the video game business, but there are many pass through the video game business and I think that through the part that excites me.

well, everyone should definitely check out the game craft podcast, uh, wheels, can people find you on the internet?

I met a mitch asi on twitter.

I am Blake I R on twitter and .

you don't tweet that much, but Blake.

you an excEllent follow.

But you turn on the notification for match because once, like a week, you'll get, you'll get notification and you just know its space. So I recommend them so .

much guys. Thank you. Hi David.

That was awesome. Really pump to get to do that .

with mission Blake. So great. Love this guys.

listeners, we appreciate you joining us for those on video fun to feel like you are actually in the room, especially the White angle camera, this time capturing what the table actually looked like back on the first entry mark episode that we talked about, this cool shape and you can actually see IT. So make sure you that also huge.

Thank you to mitch, to Blake and to benchmark for hosting us and doing this together.

If you want to hang out with us more, come check out A Q 2。 It's where all of our interviews are happening with founders investors, basically all of our interviews going forward, we're going to be putting over on A C Q two, which is really becoming known as the acquired interview show. Lastly, if you want to become an L P, you should help us pick future episodes will be doing the next one in a month, two, uh, as we kick off the next season so, uh, be sure to go to acquire dota F M slash L P, if you want to, to come deeper in to the acquired kitchen alright, until we ve got talk about the episode slack. If you want acquire D, F, M, slash, slack and without listeners.

i'll see next time, next time. Who got the truth? Got the.