Benchmark’s Mitch Lasky and Blake Robbins on The Art of Business in Gaming 02:15:08

i will say i want to give you guys just a a pre recording compliment i forget what its called i theres a name for it but basically its where youre reading something in the newspaper about something that you are a part of right and you go people dont know anything right this is so damn stupid and then you turn the page and theres something about foreign affairs and youre like wow super interesting like the thing you know about you dont deply that same logic to the second thing and i have to say 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 youve done that you dont know that i was a part of that i was a part of oh you guys are so good like its so accurate it is really remarkable somehow youre able to tell a story that is actually as close to true as as true exists well！

the secret is we dont have people on the show so what this is not going to be that but who got the truth？

welcome to this special episode of acquiredthepodcast about great technology companies and the stories and playbooks behind them im then Gilbert um David Resinthall and we are your hosts after our deep dives into Nintendo and Sega we wanted to do something special to cap off our Gaming extravaganza， 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 mitchlasky and Blake robins 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， which was also an executive vice president at both ea and activation and took his own Gaming company Jam Dat public in 2004， which of course was a partner at Benchmark in the Fab five era that we chronicalled on our Benchmark episode， which actually westallthatline from it what we were talking to him in the research and thats how he referedo it so we are joined by Mitch and Blake robins benchmarks current principle who has also come up on previous episodes Blake is one of the best thinkers in the world on the Gaming landscape today enmission Blake just launched an incredible podcast called gamecraft that chronicles the history of the Gaming industry from the business perspective and one of the thing if youre listening to this on the audio feed。

we did full video on this its up on YouTube you can find it on our website or there uh we did it at benchmarks woodside office at it turns out they have another triangle team so we have now recorded acquired episodes add both of the famous benchmark dinner tables well listeners as you know。

we have an interviewshow called acq to weve had back to back killer discussions with the ceos of retool an angelist angelist in particular was like very mindexpanding for me on how to leverage ai to get huge huge leverage in your business like specifically on the operation side of the house and uh i think of lock is one of the best thinkers about how to apply ai to kind of turn something that who looked more like a services business historically into a true tech venture scale opportunity so you can find acq to in any podcasting app join the slack theres an incredible discussion of Gaming history going on right there， right now including a bunch of episode followups were David and i a learning from you all in real time acquiredatafm slash slack i without further ado the show is not investment advice Steven and i may have positions in the companies we discuss as may Argus and of course。

there firm benchmark capital today！

yes and this show is for informational an entertainment purposes only well。

i think an appropriate place to start might be what inspired the two of you to go talk about this and create gamecraft and create this by cast well。

i think after i retired from benchmark a couple years ago retired from active investing obviously the glide path out of ventures kind of a long glide path so im still at involved to this day but uh after i， i retired from frontline 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， or whether it was helping young on trepaners or mentoring 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 you know as well right the genius of the system， by Thomas shaft and that book is a remarkable book in my opinion， because it really takes the business side of the film business back from the twinese to say the fifties and really elevates 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 Ive always had that same sense of the video game business and so i thought it might be fun to do something in that vain where we we showed that what was happening on the business side and how it was informing what was happening on the creative side and i think the common narrative is video games are something created by creative genius？

a memodo type person and then the business models sort of rearrange around the creative vision having consumers that flock to it and i think already your inner introducing this interesting way 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 define the video game industry not the other way around yes and not to take anything away from people like Mr Mia moto who i have infinite respect for i mean he is a he is a legend！

he is a guide amongst the video game designers in it ive 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 operate so just to give you an example in the package goodz era， your goal was to sell a disk and then get somebody to come back a year later and buy another disk and thats a business model choice and therefore， what youre going to put on that disk is going to be informed by that business models gotta have a degree of planned obs lessons to it because if it doesnt if you just bought one game and plaated forever thats the end of the video game business and thats how you get final fanacy seven yeah！

i mean think about how many fifas are called duties theres been at this point and and its still firing， and also， theres despite sort of the the business models， which will talk about rotating？

right underneath them and those still thrive i even to the state i think one of the super cool things for me and the reason why gamecraft i think has been listened to by far more people than just in the games industry is that this dynamic applies to a lot of industry is like when we did our lvmh episode， the whole time， i was thinking that like its the same dynamic in any creative industry like if you want to achieve success either as a creator and have people using appreciate your work or on the business side like you have to work together you can be a dods yes！

interesting i actually， i really enjoyed that lvme episode and there was a part of it where in your Nintendo episode that kind of reminded me of blvmh episode as well， because those of us who had worked as competitors to Nintendo in the console business and i did for a part of my career when i was running the studios at act vision？

um they had this interesting you consider yourself a competitor to Nintendo well？

wecomback to that uh you know theres， theres limited shellspace in best by and so for they were very much competitor for that shellspace and so uh on the software side in particular and they would for example， if they had a new metroidsku or a news Zelda， 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 would and they would be sold out and panic wouldnsu 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 and so everybody was back to the stores and Abe， and it was just it was genius but its something that only they could do because they had that sort of luxury good kind of vibe yeah so to bring it back you didnt write a book i wrote about a two hundred page manuscript um and i would the idea those of you who havent listen to game craft， or who were listening to this podcast uh its basically eight episodes， but theyre topical episodes and so we we basically retail the same story from 99 roughly until the present， but we look at them through eight different lenses and i thought that was kind of an interesting in unique approach because all the other histories of the video game business are very chronological and very like and then this happened and then this happened and wales does have a bit of that and then this happened and then this happened hopefully its a little bit more interesting than that so i i i finish it i sent it to some friends and mind they read it， they said this is a great but like nobodyreadbooks and so i was like well thats unfortunate but i dont really know what to do with it and i say i could read it i could do this an audio book i could read it as a monolog， i dont know what to do with it and then i had a featful dinner in Boston with Malcom Gladwell and Malcom Ive， mimen investor in pushgen， which is his podcast in company with Michael， Louis and Michael and and Malcom are both acquaintances of mine and Malcolm was like dude you really have to do this is a podcast and i and even did he try to get you as do it as part of push can i did submit to push can they reject me？

um wow！

but why too nicer what did miss yeah and and so i but but he kind of got me to rewrite it essentially in as a dialog and ittheme in the same time i got up to meet Blake on twitter oddly thats kind of where we met i was embiring his thinking and hes was tweeting about the games industry and theyre so precious little good uh like public commentary on the games industry i was kind of attracted to it and so i i kind asked you want to do this with me and you want to kind of be my interlocutor on this one and he foolishly agreed yeah！

i it its funny because like mitchina i knew each other i like briefly before i join here and then i i remember i was this down in the office here one day and yeah michin i i i asked mister if he was one to me because yeah before you join your like OK is match actually still active is he not you know what is it actually dences partner like it what does that mean yeah its like is he actually retired what is it the what the term for that um uncle s uncle s yeah your uncle yeah i mean mi mitch never retired and said like he he still hangs out here all the time and at that convince them to meet with me and we were just chatting and throughout the course of those conversation it just became clear like we were having so much fun just ripping on all this and i was learning so much like i thought i knew a lot about the games industry and misses your vantage point is so unique in rare that the moment that he shared the manuscript with my house oh， my gosh this is amazing like i was i was just like it the perfect target audience of that and i think it became really clear over time like oh！

this would be a really fun podcast to do and it was really useful as well， because there is a kind of generational component to the to the dialogue right because we really are starting when i started in the business in the nines and were ending when hes running， the business basically in the in the twenty 20 and so i thought that there was there was some nice symmetry to that actually to have a to have it be multigenerational so match enter the industry right when i was born and hes telling these stories of who all this？

the games is worked on and those are literally the games i played and and the games they publish and all the stuff and im like this is insane mitt when you were on the business executive side？

did you have a sense of like 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 this the formation of Disney interactive which was in there very very early 九十 and i mean this was right around the time Bobby was taking over uh activision when he and Steven win basically finance by Steven win Bobby was was was buying activision god， Steven finance did yes d we find a the famous story i dont know if you guys have done a activation episode way back before we return research because there was a cause he he basically Bobby crashed the cattlemans ball uh and without an invite and basically did it so that he could button whole uh Steve win and get him to put the money up for the act uh by active vision of a bancripsy um wow and it was a genius deal because they reenago sheedid all the debt as a into into equity in the new entity it was a Bobby Bobby was a brilliant， brilliant executive even back then so um so when when i， when i was but work it Disney and then subsequently it in my startup and it activision this was still kind of the geeky era of you know the serious video game business obviously Nintendo had brought the console business back in in eighty five but we were really only five seven years into that right its it was it it was still a fairly recent phenomenon in other way it was a corner of the toys industry as we and dominated by the Japanese true to in general right， i mean there were a few obviously electronic arts gotten started in interplay existed in there were a couple of others but there are pc publishers yeah right primarypc publisers 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 hadnt really hit it stride yet so what what i mean i think one of my big takeaways from gamecraft is uh Gaming is not for teenage boys Gaming is a unaitely human activity that now we see in full board i mean i flew down here this morning from caddle and like the amount of Candy crush going on around me on the plane like Gaming is a human activity and i during the area describing it really hadnt fully permeanated yet absent maybe snake on some earlymobile phone not even i mean you think about it it was like probably 96 was a barbie fashion designer and uh some hasbro games like yotc 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 it and it happened very quickly and those titles did incredibly well， but the main stream video game industry always viewed them as kind of and frankly to this day still views a lot of the cat whathappening in the casual game industry is like not the real games business right？

right， um and yet you know as as we know， because we now know what the numbers look like its， like its most of the video game business right？

its probably more than 50 percent of the video game business these days would be considered casual Gaming by 99 standards is interesting because those people who are playing any cross still might not even identifies in gamers im sure they dont isure they dont yeah and what what it mean like when we talk about the games industry， it is its so it like all encompassing at this point that it does include the candy crush， but also includes councils and the hardcore pc games and there theres a little bit of like how do you even frame what is gaming and i i think for us you know a lot of the the podcast was walking through how that has of how that happened yeah i mean when i did my second start up a Jam dat？

which ultimately was the successful one， the one， the one public we would be on the road me and Michael marketty my chief financial officer and um we check into a hotel and you know we did he that asked her business card we can do the business card and they go oh im playing your boiling game and it was literally like you you know late night people on the desk at a hotel or you know uh train operators or people in you know we would just meet these randos all over the place a little girl will set down a on a barge in Hawaii next to me and whipped out a phone and started playing one of my games and it was like that that was when when i really understand kind of the ubiquity of gaming in in that human sense that you described so were going back and forth before recording here on sort of big takeaways from gamecraft and this is one of em this feels like a huge beat to me what are some of the other bigbeats for those who havent listen yet so i the me just a very quickly review what the aid episodes are so theyre free to play which was one of the real revolutionary business modelchanges in the industry and its the equivalent of them film business go ug having a television introduced right where you you went from you know a a very formal goal by a ticket and sitting the theater to coming into your home or even probably more apt um professional sports when television was introduced in like it was only the upstart nfl the embraced instead of fighting it so i think that it was a revolution of that import and i think were still feeling the reverberations of it uh to this day the the impact of free to play and how its 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 suceptable to a free to play mechanic than the old school stuff everything on to a da disk and hope that its worth sixty hours for sixty dollars thats one of the episodes we do an episode on the change in publishing from a 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 evolved from theyre very earliest stages to these incredibly sophisticated and now even web three enabled economies of our era one of my favorite upsesses is the forever games？

which is really around this idea of yeah what the shift to free to play can a game actually interf forever and what does those play patterns look like in which has these amazing sort of guidelines or these rules of that he thinks about it going into listening to gamecraft i sort of had this highlevel idea that theres more durability in the video game industry now than theyre used to be like it used to be very hitstruven i think a lot of people still believe or a lot of investors look at the category is very hit striven but theres two different and very distinct reasons why theres more durability now one is this concept of forever games， the other is the concept of which i think you coin this term of a platform base publishers can you talk a little bit about each of those， and and how they sort of fuel each other？

and how theyre different but how they both provide durability 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 themselves that were durable right， the there either the franchises were durable i mean you look at fifa， and i mean i started playing fifa on tripockeses 3 do back in 993， and i been playing every year continuously for the last thirty years and so if you really if you think about it， thats a thirty year persistent play pattern very much kind of congreint with what we described in the forever games episode with some of these longduration play patterns， its just that they packaged it very differently like you were playing the same game but you just had to go by it again and again in again！

in again！

in 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 be able to bring the same characters in the same kinds of play patterns back again and again as they shift from you know， nes to sns to cube to dream， cast to whatever and like and all and that is a sense that is in a sense of durability to my mind one of the most genius things about me a moto is the 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 Zelda game is the same story absolutely and then theyre fine because as the graphics get better as their ability to tell that story improves and is richer and deeper than you can go back and explore that story again and its n and it has a kind of heroes journey quality to it where you dont feel like youseen the same story again it feels new and old that the same time yeah i i i think granttadodos probably like one of the best examples of it i think granted out of five was probably released eight or nine years ago and it still is is a top game on steam and on everyone still plays it which is amazing but when they do an update it its its to the new generations and it really blows your mind but very similar play pattern very similar story overall， and then to your point about the platform base publishing i think thats really been more of the way that the online distributers have created competitive advantage against the their package goods rivals and how they built very similar businesses to a lot of the kinds of busines that weve seen emerge and disrupt in incomment industries across the the internet space so you know， Uber in the tax the industry are Airbnb in the hotel industry where you you aggregate demand on an online platform and then you utilize that demand to leverage the supply side of the of of whatever industry that youre entringin i think you look at steam and steam shares many of those attributes and i think that move which was essentially perfected by tencent with uh q q and and the things that they did sort of leverage in their messaging platform in the games business， thats been sort of the kill shot for for platform base publishing in the industry， but that is essentially its more about how you use the internet in a jugitsoon like way to massively disrupt the package goods industry which was up until that point up until maybe two， 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 2 thousands youre like oh my god that game was actually you on a disk like it was surprising to him to remember that some of these games that he grew up with as downloads we were were originated as package good the craziest thing is steam was on a diss yes！

OK listeners now is a great time to think one of our big partners here required service now yes！

service now is the ai platform for business transformation， helping automateprocesses improve service delivery and increase efficiency 85 percent of the fortune 500 runs on them and they have quickly joined the Microsoft at the nvidias as one of the most important enterprise technology vendors in the world and just like them service now has ai baked in everywhere in their platform there also。

a major partner of both Microsoft and Nvidia i was at nvidiasgtc earlier this year and Jensen brought up service now and their partnership many times throughout the Keynote so why is service now so important to both Nvidia and Microsoft companies， weve explored deeply in the last year on the show well ai in the real world is only as good as the bedroc platform， its built into so whether youlooking for AI 的 supercharged developers in it empowerent streamlinecustomerservice or enablehr to deliver better employee experiences service now is the platform that can make it possible interestingly employees can not only get answers to their questions。

but theyre offered actions that they can take immediately for example， smarter selfservice for changing 41K contributionsdirectly through AI powered chat or developers building apps faster with ai powered code generation or service agents they can use ai to notify you of a product that needs replacement before people even chat with you with servicenals platformat your business can put ai to work today its pretty incredible that service now build ai directly into their platform。

so all the integration work to prepare for it that otherwise would have taken you years is already done， so if you want to learn more about the servicenal platform anyhow accounturbochargethetimetodeployeforyourbusinessgoovertoservicenow dot com slash acquiredand when you get untouchjust tellthembedondavid sent if thankservice now can you share how steam got started sure so um you know the the Valve team Gabe neural in particular in his his partner？

my current and they uh envisioned that they needed a an updator essentially for their software because they were releasing these games like half life to 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 at this in this error was still a real thing and any time your selling box off or its gonna be your big thing its absolutely the case and so they um thought hey， we could build this thing basically that would for function as a software updater for our products will put it on the disk in uh， yoube gouplogin and in itll download patches in whatever rebounce rebouncings for your game， etc etc and so they went around to the rest the industry they went to even their old employers at Microsoft were they？

they were early Microsoft employees i think among the first twenty five or so employees at Microsoft so i had good connections there and they asked if Microsoft be willing to build this tool for them， and they said no so they build themselves and then very incrementally after they released originally it with halflife in the box as you say and it just auto installed when you install the game and then you know very incrementally over the next decade they just kept adding features community uh an Appstore mods all of these various features and and just eight the games industry i mean now its an eight billion dollar year business right i mean its just a remarkable remarkable company completely held yeah and is that steam itself is an eight billion dollar valve all up i i think i think its valve overall when you think about actually the strategy that happened there！

which is really essence if we talk about this in episode two of of game craft where its actually releasing the game like were time out with half life and its like this Nicky route of a wait like i i i donknow how intentional it actually was an in hindsight， but theyve ended a building this platform and like oh wait now all these other developers want to use this and now its very clearly become like it is the goal to place even a lot people have followed right you have activision having their own launcher you have all these uh， ea？

origa？

yeah， ea as as her launchers they all have launters and they all are still forced that well have not force but really pushed by the market to launch on state we had we had breakfast with Phil Spencer the head of Microsoft Games yesterday and we were talking about Steam and Phil was like i put my games on Steam yeah！

right， and this is Microsoft with raise market power of any company a maybe a part from Nintendo and Sony you know to to row to roll their own that hes putting games on steam and so you fish were the fish are yeah i think it theres！

theres an the new iteration of that or what the the latest attempt of being a platform base publish would actually probably be epic， which have epic has fortnight it does incredibly well theyve launch set on their own launcher and now theyve been spending the past couple of years really trying to build up that a game store and from my vantage point i it hasnt made nearly enough like a dent like relative to steam yes！

thats one of the things power thats one of the things i wanted to ask you guys about， which is where are we in the business model journey of the platform base publisher like it almost feels like kind of like the rest of the internet the platforms are starting to ossify is is that fair or are there opportunities your saying gaming is not no the gaming is like you know， youget steam， youve got obviously the consoles yougot Microsoft， epic is trying but like who else could really conceivable？

intensign is done the best but i could conceivably break in this is maybe or do we need a new pair that well？

i mean i think the next one to go is going to be Nintendo right， i think there i think thats if youlooking for a reason to invest in Nintendo as a as a company， its its i i think there about to crack that net right and and enter the app store business 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 25 dollars right like in versus the rest of their console competitors so theyre waiting for that lead to to boy off there i think so thats that the on on the conventional platform basepubliciingsa but i wanna return to the question the the your regional question try things very interesting i agree with you， and i think that um gamepass from Microsoft is an interesting harbinjer of maybe the end of the road for the platform base publisher at least the end of this road for the platform base publisher because where they had historically aggregate 的 users in an attempt to collapse the supplyside so aggregate demand to collapse supply hes now fill with gamepass aggregating supply again you look at the activision deal sixlion dollar acquisition of activision its basically a like you know Netflix or apple or or or or one of these other companies build buying it exclusive content， and now i use the term exclusive somewhat guardidly because thats this is if currently in the European commission， as a as a hot button issue clearly this is Microsoft strategy absolutely so theyre now back to aggregating supply in order to have enough viable ip in the plan 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 incredibly compelling value prop of like i could i dont have a Gaming PC i dont really want to go make a Gaming PC i dont really want to go deepin the valbe go system i dont wanna go deep in the Epic Games you go system Microsoft is offering this really easy all you can need option to me and streamable in a lot of ways right！

so with the new uh x cloud platformen and i was a pioneering investor in this with guy guide back in the day and it wasnt really economically viable， but now with scale and more sala and all these other things we and bend with improvements we can now really do it well and so uh you know with a device like a Steam Dahk or something like that you know youre youre able to really avoid going down that path of building your own uh Gaming PC it is interesting that were finely in the cloud Gaming era like this has been the dream for so long and of course， theres this TikTok in computing to thin clientsthic clients thin clients the client but like the whole thin client thing never really made its way to Gaming i remember i work at Microsoft in 22 and i was at our annual meeting in the old Keyarina and i watched a Demo of cloud Gaming on a Windows phone with an Xbox Controller and i remember Steve Balmer coming out in being like next years the year were shipping this its finally happening and here are decade later now its it is finally happening Tesla full selfdriving this years happening is my question to both of you on this is business models are inherently intertwined with new technology waves and how does cloudgaming change the business model of the games industry i think theres one thing thats interesting about the cloud modeling one of my thesees on why it didnt work back when i first try it with with guy kind with on when on live was out as a competitor in and some of these other that was early twenty tens early twenty tens um was it was a mismatch between the user and the technological opportunity so you could stream these games without owning a uh Gaming PC but all the games that were really viable to stream were the kinds of games that gamers who are the owned dampc were wanted to play so yeah you look at Stadia from you know from Google like what were they were you walk the floor a GDC and the launch year of Stadia they were showing assassins Creed in like these other really high fidelin everybody had this git will or if you were gonna play that game you had a PlayStation or an Xbox 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 or the the the David brought up， which is he the he doesnt want to own one of these devices and yet he wants to play those games and i think that didnt really exist so much as a market back at in the early days of streaming。

ha seedingis demand driven i do！

i do think however， that the the audience has expanded really in the in the last years and that uh this next generation of kids whove grown up on fortnight who growing up on harder core games um， but are still casual in their selfidentification who dont think of themselves as being core gamers i think thats the real opportunity for the cloud gaming yeah！

i think it is also a part of you know you think but all these people that are playing are used to play fortnight on on mobile and its like oh， thats just what i expected this point and there is a natural evolution that maybe will happen with just the number of people that have grown up playing games on mobile and just be like of course， i wanna play a sastance create on on mobile whatever that might be but i i i still think its one of those things again that for multiplayer for those pieces it might take a little bit more time but travelly for the single player stuff it is quite magically now i i i i i want to bring bring it back a little bit to your question a David around like the platform base published your stuff and and where those might fall because like which was invulted riot and Riot 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 theyd decide all aggregate all the demands and really keep its its sort of a social networking that theres friends and all that within their own universe and theyre continue to published on games incredibly well， right， you have team five tactics through their launcher， and you aviolent through their launcher and those have worked exceptionally well， and it it really begs the question of your game today that is just launching out steam and your ventubat company what does that mean you know like it is is that enough to really ender and build a real business？

but its really interesting because yeah thats a its a different approach to the platform base publisher because youre， youre really aggregating that demand for yourself right like a Nintendo version of platform base publisher so your youve got this audience there thats prequalified where youve 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 as zero for the next products that you launch in the pipeline， and it just gives you tremendous competitive advantage this is the bolcase on the switch that weve been talking about。

which is like at some point Nintendo has to wake up and i assume it will be with the switchline and say wait a minute we shouldnt out with a completely new console and have to reaggregate our whole fanbase again we should iterate the switch and make it superbackwards compatible and bring that hundred million plus person installbase with us across all the hardware we release in the future so that we can make this incredibly um compelling thing to third party developers matches your talking about there sort of APP store opportunity， but also preserve this ridiculously durable first party revenue thing that weve had you know， especially for the last six years with the switch。

but basically through intendos whole life once their consoles get to scale absolutely i think we will learn a lot about what their strategies gonna look like for the next decade， in the next like 九十 days yeah right， because i think if they do come to market with a nonbackwards， compatible uh device its back to the awada era right， its back to you know were gonna wear a hardware company and we have proprietary software， which helps us sell hardware and its a to its back to the toys right， if they come out with a fully backward， compatible switch and an open app store and they really try and improve that position of third party revenue on a uh on a on a active user basis thats the new Nintendo right！

thats the Nintendo thats Gonna place a modern industry that is so compelling please for me as a consumer if they do that i mean like uh a game like hades an incredible game indie game the switch is by far the best platform to play that on and like i just have sat there for years like staring at my switch being like Nintendo why do you not embrace this dynamic like i i i think its you can see publicly in the way that theyre going with Microsoft against Sony that a who knows what this actually looks like in the next 九十 days both everything we can tell of how theyre siding with Microsoft and open embracing openness gives a clue of maybe how this yeah you you mention that a little bit on the series on the game craft series of Nintendo sided with Microsoft what lets talk a little more about that sure we dont talk about it that much on the series just because im avoidinto of talking about the consult business and whatever but um and let me let me just trying explide y right？

like the console business has been essentially the same business since 1985 really since 1975 right， i mean its cella box and sell some physical hardware for that box and grudgingly allow it to be played online and gregingly allow communication between users right， and i dont find that that interesting from a business model perspective im interested in revolutionary business models and gamecraft is really about that right its about how these revolutionary business models like upended the industry and frankly there havenbeen been a lot of those in the console business now theyve been a lot of interesting developments and you guys explore the story of Nintendo its a fascinating story but its kind of a human story and its a you know it it theres a as a particularly your first episode where you go way back right and you just talk about everybody whos everybody else is son in law um i mean its its an intensely human story in that regard well！

i feel like Nintendo had the in 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 platform right， and i dont think anybody else realize that no i think thats right。

and i think Blake put it really well， when he was convincing me uh to to do the episode， which was he said， look uh， the console when it entered the market was a revolutionary business model because at the time， the arcade was the dominant way， and it was its quarterdrop and so in its some sense， it was almost like the equivalent of 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 yeah。

there was a you talk about the sixty dollars for sixty hours of gameplay thats literally the equation you were doing it at the arcade right youre like iput in 25 since in for a minute well？

it was there it was a in the arcades it was six dollars for six minutes of games right？

exactly so so i accept that and thats thats why what and i think the good 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 Nintendo embracing in in fortnight was really the catalogue of this to let them be able to play across these different platforms of up until this point uh up the fortnight if you had an Xbox you couldnt play with your friend who had a PlayStation out or switch and really Nintendo and and Microsoft went to war against Sony yeah minutes as Phil said uh in our in our conversation yesterday uh he said you know sones perspective was if you wanna play with your friends get em to buy a PlayStation yeah right all this 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 uh you want to play with your friends so were going to use that as the carrot stick whatever you want to call it to get you to buy our console。

which we actually dont make money on to get you to buy our games， which we do make money on and god its like hop hop hop hop and Nintendo and Microsoft ended up being quite odd！

bedfellows and having completely the opposite strategy now you could be cynical about it and you could say that that is the result of the fact that Sony has dominant market share and that if you were the dominant market share player， you might not be so embracing of open the seether right because you had a competitive advantage yeah！

but uh i think its gonna come back to bite him in the ass over time its interesting right at one point i think on the series you guys say that with your investor hats on it would be really weired if a noutrnerapproach to you， today instead im gonna build a game for a console， but everything were talking about if the air of crossplay 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 Crossplay across console PC Mobile i mean we uh as part of our Nintendo research， we talk to the ceo of a very large ventureback 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 ca uh council any of my uh portfolio companies to launch on the console because the hoops that you have to jump through uh for approvals for manufacturing， etc etc for just in general are dire and theyre not the kind of thing that i would i would sort of put in front of a of a company that was struggling to find product market fit that said i have a greenlit a switch uh sku at that game company for sky and that is now come to market in it is a really meaningful and we have a PlayStation fiveskill as well and so for a unestablished product where its already found product market fit on another platform on a more open platform sure finding that adjunct its like a as as fortnight disclosed in the apple lawsuit uh the the cross play players monetised like the new whale so mean they were monetizing at multiples of what the noncrossplay players were playing and why not take advantage of that is a startup yeah turn it turns out that actually like the crossplay there theres theres different moments in in council where council really was the package good and then at some point uh the package good business for the games and at some points free to play games were able to describe and you have the fortnight actually do really well and if free to play games are really driven by social or playing with your friends？

which fortnight was its sort of you need to have it on an uncouncil on yeah think about a demographically like if youve got a game on the console for example。

we were talking about this with one of our uh coworkers about um FIFA ultimate team， which you may be familiar with， which is kind of a plane card add on to the underline FIFA ski where you can buy card packs and open them and then you can play with those players that you get in the card pack in the sim and that is a massive business like it is a you know greater than a billion dollar year business selling the card pass selling like literally bits i mean it is like A99 percent growth March i mean its the most astonishing business right and this person was saying well， we look at the attachrates for fifo ultimate team right and cant we accomplished those with a free to play game and we we were like whos slowed down you understand that youre selling a twenty dollars rd paid sixty dollars for the game and five hundred dollars for the console right that the willingness to pay for 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 a on a on a free deploy game and i think that nuance is lost on a lot of people when they look at the industry well？

thats the great pot of gold with the consoles right is like youve got these highlycommitted uservases with all the credit card information store youve got easy payment rails easy distribution its like the dynamic of iPhone versus Android but like unwholes other level its i mean literally you can look at it in the data with forces like even better than iPhone Monetization yes！

yeah， its also exactly what we talked about on the peloton episode where peloton despite all the problems has possibly the most incredible consumer subscription business at least from their first five eight years of customers because they selected into buying a two thousand dollar exercise by of course。

theyre not gonna cancel a monthly s day subscription i think this is part of why i like epic actually felt comfortable going the war with apple is is if you look during those filings so much of the revenue is actually coming from PlayStation in council and that to me is just like OK， the the mobile gamers were not the same value as the council in pc players yeah！

one question before we leave platform base publisher is that i i think sort of thinking about， but i dont have a clear answer is when does a company have the right to leverage their relationship with customers into becoming a publisher and like qq is very it is a chat app how the heck did they 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 tencent what why does sometimes uh company have the right to leverage that relationship to be a publish another time to not i would rephrase it right？

which is my opinion is is that why qq was successful was that they didnt just decide that theyre going to be a platform base publisher they embraced being a platform base publisher they went out and did deals they own 49 percent of Epic they own fifty one percent of Riot now hundrepercent of Riot they were one of the financiers of resort in the in the games business for triple， a titles they aggregated products they did they aggregated third party product from as a pathway into China because you needed a local partner， because of government regulation in order a publish in China and they just ran with that right they just embraced that and instead of Facebook or some of these other American platforms that have treated games as kind of a bad smell over in the corner that they weren too crazy about like you know okay， yeah， the Zinga thing they flirted with briefly um， but ultimately that didngo that well， and they decided now wejust Gonna become you know， a Cu， a customer acquisition vehicle for the games industry and frankly its been a lookvery lookative piece of their business but they really embraced it tencent and an invested deeply in it and i think thats the difference right its like they were credible as a platform base publisher where Facebook never was yeah tend ten in in qq is they they had the games they would they they were committed and they were so intentional and i when mission ive talked about when we look at a a investing in a studio for example。

its actually how intention are they at the beginning and if setting out that you are going to try and become a platform base publisher because even even， even the saying im gonna launch my game on steam as a new company maybe is is is just showing your ambition of what you want to build and i think that when youtalking about Facebook it if mentioned i talk about this part a lot of and a lot of these executives in in the value there is not gamers and theyre like oh！

we can maybe watch a games thing but theyre theyd serve dipping their foot in the water versus actually like really look at Google and Stadia yousaying just because David and i have a bunch really listen the podcast we cant just decide like alright you guys uh there were now acquire games now and youre all gonna start playing games and were turning on the yeah！

we have to be gamegraphtoday right although it you know even then its difficult its like we try this at discord yes， right and we try to start a game store this was obviously my my failure because i pushed them very hard toward becoming a platform base publisher because i thought hey man this is a great way to leverage this audience and uh a great and look weve already they we are they already selfidentify primarily as gamers this was earlier on before the discord audience broadinto becoming the Bloomberg of Crypto and now basically the launch area for pretty much every ai check but but uh in those days it was very gamer centric and it seemed very logical to me that you could try and leverage that intentionally into the games business and it didnwork so it doesnt always work and and look！

Jason is as deep a gamer as you can get right discord was a failed gamecompany i mean right。

so and i invested in that failed gamecompany i invested in it as a game company trying to blame them i no no it was me um so uh so it does you know it even with the best of intentions its its its it can be a difficult proposition this goes full circle to your earlier question of David of just like are the giants already just set on the platform base published your side and is is really to be determined because you have you discord attempt at it you have epic really trying to do it yeah and and there sort of i mean everything bleu forcing that the possibit cans make it happen and it doesnt seem like its sticking at all and so there is a little bit of a question of what does it mean to actually try and build one today and is it even possible our right listeners our sponsor is one of our favorite companies vanta and we have something very new from them to share of course。

you know vanta enables companies to generate more revenue by getting their compliance certifications thats sock to ISO 2701 but the thing that we want to share now is Vanta has grown to become the best security compliance platform as you hit hypergrowth and scale into a larger enterprise its kind of well when we first started working with vanta and Macrstina。

my Gosh of they had like a couple hundred customersmavy now theyve got five thousand some of the largest companies out there。

its awesome yeah and they offer a tremendous amount of customization now for more complex security needs so if youre， a larger company and in the past， you showed Vanta to your compliance department you might have heard something like oh， well， we already got a compliance process in place and we cant integrate this new thing but now even if you already have a sock to vanta mix maintaining your compliance。

even more efficient and robust theylaunched vendor risk management this allows your company to quickly understand the security posture of the vendors that youve inginastandardizeway the cutstone on security reviewtimes this is great and then on the customizationfront， they now also enablecustom frameworksbuilt around your controlls and policies of course， thats in addition of the fact that with Vanta， you dont just become compliant once you stay compliant with realtime data poldfrom all of your systems now， all of your partnersystems and you get a trust report page to prove it to your customers if you click the link in the shownote here or go to vanta dot com slash required you can get a free trial and if you decide you love it， you will also get a thousand dollars off when you become a paying customer make sure you go to veta .com flash required you um think about one of your other investments that game company is that game company a platform base publisher？

or is it just like a really really great modern studio or is it something else its a great question？

i think that the intention is for it to be a platform base publisher game two 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 a in a more persistent coherent way in with more continuity， so i think genova he wouldnt phrase it in that way he wouldnt call it a platform base publisher he call it a digital theme park right， but the idea would which is sort in Nintendo like， which is sort of Nintendo like anyway right and now Nintendo has a legit physical theme park to go along with their the virtual theme part but uh i i think you he a but but i do think it is in that same vain a a platp i would call it a platform base publisher and similarly i think the greatest disagreement i had with the founders at riot was when they uh we sat down and i was like OK great we got a hit now were gonna leverage this audience into the into into another hit or into a third party game or into a license intellectual property and they were like not chill man we want to be blizzard we want to make a game every five years and im like i dont i dont want to fund a studio i want a fund now little did i also blizzard as you pointed out and gamecraft only an independent company that had to figure out its funding for three years the rest of it history its had you know daddy。

warbox， somewhere。

and and i was wrong because they just took their time to become a platform base publisher but they would come ten years but they did it im not that patien but but there was an opportunity to start doing it after three years and i think they there strategy was like triple down on on legal legends and lets make sure that we can we can get it to all corners of the globin that we can really build a billion dollar plus annual revenue basin the esports component in the worlds and all these other things and then well go in release， ballerant and tactics and some of these other things okay， fine， but ultimately they got to the place i wanted them to go it just took them seven years longer i i i think itd be interesting if youre willing to share much of just like what genova actually！

pitch for that game company back in the day because you know， Ive talked to Peter italk to other people they still remember that pitch being just so like just an amazing amazing pitch because at the time it it still was not like a a for you did 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 but now this is great to because i i bet a lot of people listening will be like what are you guys talking about what is that game company sure referring to a specific thing or no its a little confusing as in its not my favorite name for a for a game company although its indicative i i wanted actually！

though take it a paas just because i dont like funding studios right and and i wrote about this i think i you you remind me this cause you found it in some internet archive， somewhere like i blog about this like 15 years ago yeah， it was like 20 eleven or something like that and its amazing its is it like the title it i mean it is probably removed all this blog post this plan i think it was like investing in content right and is like i dont investing content i dont investing content e i it even though ive done more content deals than anyone else in the valley right um and the and what i meant by that is that i invest in businesses not in studios right and the and those businesses have to have a strategy that transcends i wanna make a game input it on steam or i wanna make a mobile game and put it in the APP store right and im really interested in that strategy more than im interested in necessary the content is a meanest to an end but the end cant be oh then were gonna go make another game and put it on steam or put it in the app store the the end has to be something better it has to be something more durable it has to be something more value aggregating and so ive had this philosophy since the very beginning and ive died to you to be very disappointed about it so genova approach us genova Chen i had met him uh in the early two thousands when he was a graduate student at usc and he was working in he was making games there and i was working at electronic cards and i had the license for spor which was will writes uh kind of creature evolution after sim city after sims yup and e they we i was doing the mobile version of that right and so uh genova had made this game um called flow that was basically this gate were little creatures ate， bigger creatures and evolved based on what they ate and it was just this unbelievably cool thing right and so i wanted to kind of 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 with him and we hung out and then he went off into the Sony ecosystem and build journey um journey is this amazing kind of meditation on death where youre playing a single player adventure game and youre climbing a mountain and enduring all this hardship and itgot all this crazy multiplayer play where you dont know who youplaingwith but you have these deep emotional relationships with the people hes just an unbelievable gademaker and a art for that game is just a beautiful i mean a screenshot！

any frame and you can put it up above your so he came to me and said hey！

i wanna uh like im im im leaving the Sony thing i wanna start over i wanna make a game for the masses canyou help me and i was like yeah i can but like lets pitch the partnership so he came in and he did this pitch to the partnership where he basically talked the whole time you didntalk about the game he wanted to make at all he just talked about emotions and how the video game business was so stunted because it was only serving this incredibly narrow band of the human emotional spectram of anger of violence of envy of accumulation and what he would end there were all these other emotions that the that were being explored in music in in art and in in poetry in in the movie business and we should do that in the video game business and he finished this thing and he walked out and i literally ducked because i thought that the blast radius for my partners like saying what could you do and bringing this into the partnership was like were a mental capital firm and were funding half like what yeah， Kevin Harvey turned to me and said chase that guy out in the parking lot and given a term sheet he was like we he was like we are in business to fund people like that and it was an i still get goosebumps saying it now cause it was cause thats how i felt， but i was too afraid to say it in the partnership meeting because i would i would it would i i i didnt enough juice to really to to do it but that still must there must been relatively early in your career it was career been because i been working on that thing forever um but yeah was probably uh you know within the with within the first couple years that i had been that i was adventure before snap before discord before Riot uh right around the same time as snap OK right after right。

but snap you know it you dont know is gonna be snap Yapp was still pretty small that yeah Peter tells exactly the same story by the way on on our on our team and hes like when he talks about the range of emotions that he was going to cover and how underserved it was it was this magical like this， this moment of oh my gosh this this person is genius and so in a lot of ways genova is just like an exception to the rule yeah and even still he he is on the path to build this you know something much bigger than this account and look im very im a very small contributor to the success of it but what i did help him understand was that he cant make journey again right that if hes gonna make if he makes journey again！

hes gonna get the same result that he got from journey， which is hes gonna get a console like in the developer result and so i really help 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 it was you know in the fall the number four grossing game in China by revenue um whatthegame called its called sky sky and were so wetalking about hundreds of millions of dollars in revenue and he he does it with a tiny team so its ludicrouslyprofitable mean i think its got greater than thirty percent net uh income margins well and would you fund at this point the concept of sky even if there wasnt a broader platform base publisher strategy around it like is that a good enough investment or let me make it even a sharper game without a yeah let me make it an even sharp or example if you got the pitch for Riot games？

and it was literally just leagof legends and it was going to be a legal legend sized impact on the world is that interesting as a venture fundable opportunity。

so i have the great benefit at the moment of not being a of a venture capital firm but having a lot of del so i am in a position where i can make these investments personally and so the answer is yes and in fact， Blake and 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 midbenchmark if ihearing you right its because its its just difficult to acre 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 yeah distribution is king right yeah and you if you can which is so funny right like yeah！

everybody is content is king and like now distribution barriers have been removed and everybody anybody can make a game but like distribute today in 2023！

distribution is king and if you dont have distribution the leverage of some sort ilov ill invest against any credible distribution leverage but if you dont have that distribution leverage its very difficult， its very difficult to aggregate enough value to justify a venture investment hmm yeah！

i would say the bar you you should just assume every venture backs studio is an amazing game like it just should be it just should be one of the best games ever as never been a better time to be a gamer yeah， yeah， like it， it 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 and not category no people will never even notice and i i think thats a lot of people that are building studios today are much more in the camp of im Gonna build the best game ever people will come and i think frequent that he think over the years its unless it is truly the exception it they wont come i think part of the pitch that riot made to me that made me convince that it had a distribution advantage that was made me willing to investin it was the way they understood the existing audience for defensive the ancients。

which was the game that they were essentially modifying in in in in making into a it was a game that was a mod of warcraft three and they were going to turn it into a standalone product with it and relaunch it online with its own characters in onip and you could see that is a studio bit on a certain level but they had identified this enormous pool of users who were playing defense of the ancients and there was this crazy pent up demand for exactly what they were gonna do because model defi uh defense of the ancients and running it as an user you to find an out of print， copy of workwrap three and go through all these massinations to like the riot team did some pretty awesome growth hacks in the early days right we bought the websites yeah that were we bought the defense of the engines， websites and just turned their editorial to all the all the leaders content on the internet it is still sit on on right it by the way if you like search， i forgot the name i want it yeah this is like even better than the Airbnb crux list growth hack yeah it once company now you can call it a growth ac i call it a a customer acquisition of it and the can it gets you out of the the the the kind of you know 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， it would give me enough of a profit advantage that i could reinvest maintain that customer， acquisition advantage and build a platform base publisher out of it and thats how i roll Blake what were you saying about the Reddit thread i was i was just saying in on the Reddit read if you search it。

i forget what the name of the the website is that they bought its its all these people who are playing defense of the agenda study what what the hell happened what what happened and it was like the top of link to do the shit it was a top post of the the Dota subreddit at the time and it is like what happened who？

who are these people what are they buying what happened they kill this like and they all just move over like oh no do still over there but yeah that the the forms are all pointed the very similar game with different IP if you want to discuss something you want to discuss this 对 its incredible how there was a thing with clear product market fit that was kind of unloved and unmaintained and hearted discover in our world of podcasting that was apple podcast and yeah， this podify small team at apple that was sort of looking after it they didnturn it into a a real business uh there wasnt like priorization at the company and as a podcast was always hard to like get in touch with someone or be like can i can i get editorial on this thing？

i dont even know its as weird black box its basically just like a directory where like its a key value store and the left side they have you know um a a a url on on the right side it just points to my rss feed and then Spotify comes long and is like oh well， we have tons of users Wes gonna expose this right on the main feed almost gonna redirect， so much of our growth in all last year， two years has come from Spotify specifically， because more people are listening to pod cast on Spotify theres some canibization。

but theres an enormous amount all the group brand new market because its easy to find as a total nio fight to this world right like we have both been just gobsmacked by how what percentage of our users are coming from Spotify would never predicted the how big of an audience was on Spotify because it just didnoccurred me right that Spotify had done that well in podgoustic until we were started releasing these episodes and real like wow like more than fifty percent of our audience is coming from Spotify if youd make graph two years ago not that would not be the case yeah！

哼！

its actually really weired like it wild yeah！

its wild its like the theres this really interesting like opportunity in capitalism were sometimes， theres clear product marketfit fit， theres clear heat around a use case and yet， theres still massive economic opportunity for some new company to comment and say oh！

that that thing weve gonna be the best and by the way it happens again and again in the video game business you look at uh so for example， the survival um genre right， which started with armamods like uh days， ed and h one end one and sort of like evolved into pubg and then into fortnight right but these were dead genrets right， these were these were super geeky hard core like kind of weird nesses right off no right uh which now is like a dominant play pattern in the in the kind of mobile shooter industry yeah！

its basically these generic merge right and it it gives product market fit and then they realize oh， wait if we just make this maybe more casual， or we change to business model whatever might be they expand over all audience and one of the the most famous examples right now is that fortnight was you comes from pubg and serve stole that that whole rain is actually， four guys， which， which uh， which fortnoitor epic bot uh and four guys was this amazing party game that they couldnt publish on iOS because of the apple lawsuits uh and so they never they never built the mobile game for it and then theres this these three guys in in Finland made a a basically the same as x game i pushed on mobile its called stumble guys and then it gets required by a i mean its like one of the number one apps for the entire year， number one games for the entire year and get required by scopely and then you know Mitch mitchy showing me the other days the biggest game in China is is is this game called a Egi party on on Mobile and that is actually literally just a fog as clone it really is its just it is kind of remarkable i mean look is you could argue world of warcraft was this right that like there there were you know you started with uh you know ultimate online and everquestion these things but they were all that we made a joke in the video they werenbishes enough well。

and then they never yeah they wereambitisang they werenkey they wert they they didnt reach out enough， like they were very content to serve that core five hundred thousand users in the joket activision back in the late 九十 early 2 thousands when i was working， there was？

there was a herd of five hundred thousand users who just migrated from one MMO to another but did never the audience never grew and then boom world of warcraft basically does this right they they find the product market fit in just like right and just embraced and blow it out and and its 17 years later its still a number one product i wanna pick up on uh something michiset a minute to go about uh how you roll uh the i think it also might be umm relevant far beyond games and some of your investing beyond games to um you said you look for something that can have a distribution advantage of front game differential prophets versus your competitors and then reinvest yeah， how do it once something starts let lets take a game once a game starts to work how do you think about the reinvesting piece like thats the customer acquisition piece right like what whats that calculus for you i resist as long as possible going paid although sometimes youre so profitable that you can with and not really mess your margins up too much right？

but i think once you start down the paid path for customer acquisition its kind of a slippery slope and its a very difficult thing to come back from because you become almost like an addict to it and you youso reliant on it and you start to twist your your mental model to believe that like youre in this lifetime value return on investment kind of thing that is unhealthy i think for but what but what i do love is doubling down on the organic stuff right， so uh uh like in the in the that game company case its like OK， we got we got this thing crushing on mobile um lets look at some other platforms where a similar kind of user could be aggregated whether its switch， whether its like casual Pete， PlayStation etc and lets go after those and then you know apple wanted us in the arcade we couldn do it， because we wanted to be cross platform right and they they wanted exclusives so you know its also what you say no to during that because it would have been easy to say okay you hey， theres a couple million dollars of of you know minimum youre not gonna expand your audience by you not can expand the audience so its， like its， all its its making those kinds of key choices that like continue to reinforce the competitive bit manage yeah！

i think theres theres another piece of this especially for free to play games where live operations keeping the events fresh， adding new cosmetics you know in the game like legal legends is actually， where most of the reinvestment probably goes it versus any of the marketing its lets keep this game fresh because in a lot of ways when you want to game like legal legends， thats just the starting line and like there still on you know！

a tenyear journey of keeping this game alive in fresh and thats where a lot of the very investment goes in these these studios how does the level of an capital intensity of reinvestment in a 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 dont know if that makes any sense but lets say that you were spending a hundred million dollar got forbit lets say yous getting fifty million dollars is like im breaking out in hot here staying that that number but to build a to build a game yeah！

lets say it took you three years right so yous spending roughly fifteen million dollars a year right like i i think you can expect to spend as much or more on an annual basis than you were spending in development in live ops in live ops wow！

yeah！

and and that can cover anything from you know the support side of this of you know one people report toxic users but really you see a lot in the events of or i need to make new schemes yeah， yeah or i i need a new champion in and i in legal legends and when you think by legal legends so much of that game is actually run balancing and so then you have all your your investing all this time in qa， testing and balancing and making sure things dont break in that its its its an right updates legal legends every two weeks yeah and every two weeks they are putting out new content theyre balancing everything and so thats pretty much the entire pin all of that game at this point is this keeping a fresh plus uh story content to really people realize the ips for this is become incredibly valuable？

absolutely were where are we in the esports journey in terms of that being a sort of reenforcing marketing strategy and i ask yeah you you uh no you ask for good reason yeah youre gonna get a very different answer if you ask me well， i want both your perspecial but i actually！

i think will i think will be closer the new thing i and then i think its i i i believe you have to start yes！

i am is eastort team yes， yes， so you thought it was a good idea at some point yeah， why would say like the name not to be the witness but no？

i think it i actually think if you it like for hundreds yeah， which is needs for organization that it has three pillars of it， which is you know content and immediate side has an apparel side， which is also a a driving business， and then the esportside and the view is always， which is probably simple to matches is that esports is marketing right and the view was how do you start a brand in gaming was whats trying we will go and get a spot in legal legends， which was franchising at the time that will agitimize the brand and then we will be able to while hopefully thats eventually figures itself out and becomes sustainable they will be great marketing and distribution for legitimizing new brand in the gaming space and i i i think there is all sorts of nuances around leg uh like around legal legends esports and kind of strict esports and really when when you say the word esports and this is probably like the real struggle of it is it it is quite literally just saying like what do you think of sports and owning a sport steam and its like every single sport actually has a zone you know present const to it and there certain certain leads that may be a creator more values not but for the most part， they really are like a marketing engine and they can be a marketing engine for for your organization if you have set it up that way， but for the most part， its a marketing engine for the game itself and keeping it fresh that that thats actually！

what a market about David took it to like enterprise value of esports organizations。

which it unless like thats less interesting because its ub an obvious failure right， but no， no it is but but， but is it a good idea for that i think the game you know i but with all do respect there are some you know yours team liquid theres a few of them that have kind of transcended and that are now brands in and of themselves of a certain sort you know can sell merch and other stuff like that and they compete in the league legends worlds and get a lot of exposure and sell skins and all that other million viewers on that yeah and but even those are struggling financially there those are not great still， not great businesses but theyre kind of viable businesses right this um but all ultimately like all of this is your cruing benefit to the legal legends by to the overwatches to the to the cs goals of the world because thats really what its functioning as its basically like youre getting thirty million people to watch legal legends you know， streams during the worlds and those people are going to go play more legal legends in by skins and whatever in its like when the Chinese team one worlds the right guys would like throwin 勤 Fetti because like when the Chinese win， its like a hundred and fifty million dollar revenue opportunity yeah！

um in terms of of increased like you know unexpected sales of of skins when i think about why i was excited or why i actually still am excited about esports is video games especially free to play game likely it feels different than lets say stocker or or baskeball where in baskeball i know at a very young age i i im not gonna go pro uh and and i also like i dont have any real way to even play with people of some more skill level of me like in my in my neighborhood and i think when i play legal legends theres clear signs of progression and actually just think the average person probably feels like its more achievable like the its more if i just play if i didnt hours， i could go pro in legal legends right thats the average person might actually say that so more like goal for tennis may be yeah yeah like it teams for yeah i would just say like you you think it is so much of the skill this feels more obtainable and because youre seeing another kid in a town over whos like making money youre like that can be me if my parents is let me play it you know like it its even better its way better than golfed tennis because the barriest entry is so much slower you dont need the money you can have a lot of money if you get yeah and and you are immediately queuing up against the best in the world but i just think it about it in terms of like participatory with a smooth continuity to pro one of my favorexamples is you think about that theres like a streamer name t Foo in in in fortnite he got famous because he ended up in the same lobby is Ninja and he just absolutely styled on Ninja and on a stream and his end he his name was twitsed at tv slashlyfood truly any given Sunday for everybody yeah would be like imagine just being able to go and play pick up with LeBron and yeah， LeBron when do that because he be risky and all the stuff wheres ninjis playing all day and if you style Adam theres a real chance free to get famous and that part theres there is just a difference of like the dream is obtainable and that is so compelling to me yeah in that way i think its very similar to what we saw during the poker boom hmm right？

where people were playing online and you could play on into the world series a poker right like from the from those online online games and so there was like i think thats there thats kind of an interesting analog yeah！

yeah and an actually， uh uh valerient for example， just recently released this this uh sort of semipro mode where its you you pet you have a team and actually let you run tournaments and in eventually， if you your team gets high enough up to ladder。

they will play in in essentially the world cup and i think that is just so amazing of selling that dream cuz it is not even just selling it is like sort of real and that there is gonna be someoneslifewhos changed if they get discovered and thats is what this so back to there 呃 earlier conversation about um reinvesting in the game over time like what an incredibly leveraged way for for successful forever games to envelop the roi on investing lot of capital in your esports ecosystem is going to be very high very high if it works yeah！

um yeah and theres a lot of different approaches for its worth like you look at look at counter strike in involve theyve taken a very all like they just dont really care yes or like often this were like the pga where they sanctioned to events right as opposed to basically owning the lead right and um they 扣 signed like for for the tournaments year the call the majors but theres no hundreds of tournaments that happened outside of that and you as a team you choose which ones you go to and actually， the real reason why you know the esports boom happens from an investment standpoint is you finally had the publishers like a legal legend stepping in and saying no were gonna try and run this like a sports league where teams are able to buy a franchise but they should be like a the si the equivalent of a token somewhere to a nonos team theres a lot of things it but really it goes into uh can can this can this free value and i think thats really a different dynamic and i spent five years talking those owners like the existing sports owners who had terrible FOMO yes from like dumping money into these things and some of them took my advice and some of them didnt ended up in you know with some really dead assets but thats what that that was Bobby strategy that was the legal legend strategy bodyguts people so wipped up wipped up cuz he was basically like look im gonna this is the next nfl get in now where its still where you can buy in for tens of dollars as opposed to tends of billions and this is the overwatch league inneed yes， yes， yeah and and by the way that thats uh i think even me at that time was was telling people thats probably not the wisesing especially game you were working first！

yeah yeah yeah yeah right！

and then and thats a yeah that is a that that was a game thats sixty dollar package good thats trying to be any sport and my brands is sort of broke at that moment OK least， lets think about the incentives here of like how are we gonna line this as completely different business model and game overall at least in in legal legends incentive is still to keep this game of alive for hopefully forever and that could accruit differently than something like you know what so our sponsorfor this episode is a brand new one for us stat seg so many of you reached out to them after hearing their ceo vj on ack two that we are partnering with them as a sponsor of acquired yeah for those of you who havent listened bjstory is amazing beforefoundingstatic vj spent ten years of Facebook where he led the development of their mobile app ad product？

which as you all know went on to become a huge part of their business he also had a front row seat to all of the incredible product engineering tools that let Facebook continuously experiment and roll out product features to billions of users around the world yep so now static is the modern version of that promise and available to all companies building great products static is a feature management。

an experimentation platform that helps product teamsship， faster， automatabtesting and see the impact every feature is having on the core business metrics the tool gives visualizations backed by a powerful stats engine unlocking realtime product observability so what does that actually mean it lets you tie a new feature that you just shift to a core metric in your business？

and then instantly know if it made a difference or not in how your customers use your product its super cool stat sigletyou make actual data driven decisions about product changes tested them with different user groups around the world and gets statistically accurate reporting on the impact customers include notion。

brax， open AI， flipcart， Figma， Microsoft and cruise Automation there are like so many more that we could name i mean im looking at the list。

plex and versell friends of the show at recroom Vanta who they like literally of hundreds of customers now also static is a great platform for rolling out and testing AI product features so for anyone whos used notions awesome generative AI features and watched how fast that product has evolved all of that was managed with stat seg yep if your experimenting with new AI features for your product and you want to know if its really making a difference for your KPI。

stat sigis awesome for that they can now injust data from data warehouses so it works with your companies data wherever its stored so you can quickly get started no betterhow your feature flagging is set up today you dont even have to migrate from any current solution you might have were pumped to be working with them you can click the link in the shownotes or go on over to statom to get started and when you do just tell them that you heard about them from bedding David here on acquire。

so we are talking a minute ago about um in gaming as in many corners of the internet and investing there are things that have lots of usage， but dont have have not attracted a lot of capital or attention or care perhaps we could talk about the opposite of that with web three encrypdo over the past few years and specifically web three encrypdo gaming you and gamecraft to my mind kind of on a hopeful note about that would you agree how are you feeling about it？

i do and and i have been incredibly skeptical right um and im primarily skeptical because its a characterflowof mind that i am part of the original tribe right im part of that OG gaming tribe right like maybe as slightly younger than the real ogs like being in trip but kind of still parted at generation and so i still very protective of the video game business because it was this kind of nerds paradise like back in that day and and im i im always resistant to tourism right im always resistant to people kind of coming in from outside and kind of cleaning it is there own an init of character flow because it i should be big tent and im just not um and this at the same time right was that right that theynever made a game before they never made a game before but man those kids were so down like they they no they were they were super hard core i would have adopted them right i mean they they they were they they deserve to be in the tribe they were they embraced the tribe but a lot of the earlyweb three Gaming content came from Crypto people slamming in games right？

who had no idea what they were doing who made really crappy Games that were really just an opportunity to to mint and launch nfts in participated in an nft market place that had some lightweight you know game mode that was associated with it and theres a bunch of those out there and i dont wanna go through chapter inverse， but theyirhidius this new crop that we are starting to see now and i i just actually invested in one oddly enough um just recently uh supercell the um fin fin finish game company and and i a bit a angel a joint angel investmen in an in a deal that has a component of this uh you saw even online uh just raised forty million lead by andreson horoits to make a crypto enable diversion of Eve how i didnrealize that and Eve is like a long running i mean thats A2019 twenty year eighteen years i think yeah！

i sladec gaming up yes， yeah！

so now youre seeing game people who 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 it alignes with my narrow view of the gamesbusiness， but maybe also because were going to get good games out of it that dont seem like scams and so far are audience whois not been paying attention to web three gaming？

how is it mechanically different than traditional game business models？

or even lets just say the the current most popular free to play business modelof gaming？

uh what new things do does block chain a lock？

the good news is not that much right no， i think this new i i honestly believe this right i think the best of them adhere very closely to the conventional models and they use the crypto component really almost to maybe uh improve or or enhance an elder game so for example， if you been playing for a while youkind aboard with just grinding on the underlying free to play progression mechanic theres another sphere where you could play right where you can you can take your character nentidisan nft it gives you certain benefits in the in in the underline game， but its kind of gives you status that you in in the status competition that you in the other like very advanced players are are are engaged in because at some point， you know if youbeen playing warcraft for world of warcraft for fifteen years， you youre not running around killing chickons for gold right， like your youre playing a very different kind of game and youre playing kind of a social game right， right， and so i think theres aspects of that that can be enhanced in enabled with the web three technologies that actually are adative to the gameplay and and i think thats exciting to me what whats an example？

im not gonna tell you that that or you could imagine um Eve with this oh！

if is a good yeah yeah i mean it is a good example， so theyre theyre gonna have a token and that token is going to be useful in the game in a way thats not paid a win yeah， right？

which is the the death of of free to play game right？

um and Blake Blake is all my almost a religious fanatic around play a win why do people do paidolwin then like it will kill your gift it works cause its its short terit it works in the short term i as talking about this with someone is super so recently and i think like crash right out of you play that game uh has some real paid a win mechanics its like softer uh where you can go from you can probably spend a hundred hours play that game completely free to play and its balanced and great but once you hit a certain point its like oh you hit a wall like yeah it is its gonna take a while to grind out here and so i there like spend or or youcan be playing this game like eight times longer than the person who playing against and i think thats one way the you see you typically see that more unmobile but if competitive integrity is in the goal of your your game like from a multiplayer standpoint， then its way easier to to do more paydepend stuff fair enough so when social status is a key component of the game thats when paid a win is the worst thing you can do yeah i would say i why would say uh leaderboards yes lately good more yeah i mean in in the in in progressive。

uh status yeah yes！

yeah itlike if if your rank meant something in we give legends which it does if you if there were the way for you to pi the highest rank that game would break like it would it just simply would break so wait lets go back to the token notion so what is the token anyonline OK great theothers this like crypto element what can i do with it？

so hill marr hasnt released the design yet and because he pitch the Blake i am a little uncomfortable discussing it but lets just say abstractly it um functions in a way like a su， a store value almost like a supercurrency where you you will have a it the token as well as an in game currency and the token isnt necessary and the token can be acquiredthrough play but it has some interesting properties that you are required through ownership， hmm and and youre incentivized to buy it because it， it provides you with certain benefits in the game that art that dont necessarily make it competitively unbalanced but that um open up areas of gameplay that might be closed to you if you didnown， it interesting very clever by the way like i mean of what we he Blake and i have looked at a bunch these things most of them were absolute crap this one is really well thought out he he is he is one of the best frameings that Ive ever heard around this！

which is even line there originally， hes like this is Rome and you know like yeah like broconsuage and just like its it no paveed roads all the stuff and hes like it webs three and and building a with crypto rails actually makes it work closer to like New York city and so hes like westokeep Rome and and that version the game will still be here but now we can build it with the right pipes and do this sort of the right way and is he he he had this great line of and he still have a tallions that that moved to New York you know and and hes like it might take a bit but like the theystill move over to New York and i distinct thats the right way to think about is theres very different cities and people like them for their own reasons but in a New York example。

he just thinks theres a lot more you can do with the game and even is fundamentally an economic simulation right， even though it has a venearer being a kind of space combat kind of thing fundamentally eighty percent of the Gameplay is economic right mining trading manufacturing its it is the perfect vehicle yeah like it if if this game doesnt work。

uh itll be actually very telling of of the current because if it works anywhere， it should work exactly yeah like it is a perfect application theres a theres a real question of is this game still a viable game the people want to play in twenty twenty three thats maybe a different question but is the perfect vehicle for a web three my i ask this questions。

because my skeptisystem has sort of come from there is all these uh egalitarian notions of in the web two world it awful because you have to pay the gaming company for the items but in web three you can actually own your own loot and then you can all trade that around and you dont have to go not everyone has to go back to the store to buy the thing you can buy a peer to peer and my headcount always like that sounds nice but why would a gaming company ever enable peer to peer sales when their whole business models having them by the goodsfrom you because they can hopefully increase the size of the pi incentivize you to trade at a much greater volume and harvest transaction costs right？

i mean look at roblox right， roblox has doesnt a web three component or at least not yet but man its got a very viable peer to peer economy in init and roblox is the most highly text app store on earth right， i mean because you get paid as a as a as a developer in robox right， so when youve extracting those their tasks when its not the robot as is web three， but it might as well it may be the most successful web three quota quote web three application out there absolutely and so i mean i think the last time i calculated the ta the total tax the growth tax was somewhere close to sixty percent like fifty 7 percent i want to say i but the less i Ive heard is like fifty five to sixty percent yeah and so cause it just keep compounding every time that rowbox moves between parties it just keeps getting and like Twitch and like YouTube， Gaming and other things where there was this incredible feedback loop in we talk about this about in our user generated content episode in gamecraft you know Minecraft for example， where there had they just crossed the one trillion view mark on YouTube right of Minecraft related videos you know what uh the company that made that Mojang didnt make any of those videos they were a hundred percent made by the community right and yet that community was highly incentifized because they had an economic incentive， because they became famous， they became rich， by becoming Minecraft streamers， by becoming Minecraft Youtubers， and the same thing is happening inside of Roblox in a certain way and i think the dream of the web three spaces that this can be more broad than even matt i i would say even you look at a game account。

strike and a lot of people dont look at steam and view it like an openc or one of these market places but in in team， uh team fortres to and in kind of right， they introduce these virtual goods and theyre literally just cosmetic but you open a loop box， you get this the skin and those keins have real value because it cost two dollars open up that create and you might just got something thats super rare and in the public market that is hosted on steam where they take ide that think is ten percent theyare double dipping and triple dipping on the content that they primary issued and are getting all the secondary sale just it recycling through of oh， you got a knife i want a knife scheme thats like 4 hundred dollars is what does go for on on that market so vallevin is actually like the closest to probably like web three being just open where they they they actually let you take these things off and you can transact for us dollars if you want to they， you know theyeventally shut down thats like maybe but its there like you can people use these accounts people spin up steam accounts as scroll services and like their bots and you there sites it just little will transact for us dollar so i i i think its theres a lot to study there and you know one thing the mission i always talk about is there is the speculator problem uh of in this in in a web three example where if you truly were looking account trade and you want to buy in theory once speculate is kind of try going to be bigger over time i should just buy all these skins in the open market and that just for his is the price in and its what we saw in in in Crypto where the people who are owning these nfts were never even playing the game and you just priced out your average user thats one sort of unsolved or to be determined from yeah mean Blake and i o i Blake and i talk about this we call it the um you know the bitcoin 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 right and so you feel like a fool because you spent that currency in so when you when were looking at web。

three related deals like solving that problem like incentivizing you so that you dont feel like an idiot for utilizing the token is a key key factor in these games and i think it was one of the things that got me over the Hump on hill Mars even you know new Eve game right awakening because he actually had a really interesting solution to that problem hmm and weve seen so precious few good solutions to that problem right and its a its a double solve because when something goes up a lot in value。

theres a problem because you dont want to spend it and the goal of creating any economy is dynamism to create a lot of transactions and turn over then theres the second problem of speculation when things go up a lot in value， it encourages a lot of people speculate brings in the wrong， sort of people makes the game not fun message up the intent for everyone so if it doesnt have that problem， then you solve two issues yes！

yeah， its its really tricky and i dont think anyone as as as solder yet， but we were certainly finally sorting to see some people have theories around how to solve that will be really interesting to see a playout because it if you can solve it？

then theres no reason why these things should exist in in games moving forward yeah so uh what we were going back in for them whats talk about on this episode uh mitch i think it was you in our shared doc here had quite a few thoughts that you wanted to add on to our Nintendo episode um specifically， i thought the most interesting was around our assertion that the nes was the first consumer device with a gpu architecture right your ppu discuss yeah yeah and uh yeah tell us what were what we get wrong i dont think you got it wrong necessarily！

but i i just wanted to im fascinated by the history of this company this utabase company called Evensens 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 right where you view moffia of computer graphic zone k and um and capmalan but what you get wrong about that is that Nolang was like tenyears senior to the rest of those guys right so nolanthroughis an electrical engineering student and then evenson southern land keymen and form the computer graphics practice at the university of Utah and so no one was had already graduated but Allen the but they got catmall Allan k so catmall who goes to pixr Alan k who basically goes everywhere i mean hes part of the apple it you user interface thing he he starts the Atari research groups that basically invent virtual reality i mean heis polinating flowers all over the the computer the computer business hes credit with them the best way to predict the future is to inventit yes， hmm so incredibly important figure you have John warknock who goes on to found Adobe one of the most important companies in the in the computer graphic business he was the other guy on the Nintendo episode that we were trying to think oh！

yeah， yeah！

Jim Clark right was a state of the of of evens and southern， so all of these gave credible people came through the you that university of you talk computer graphics for women， 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 197 early nineteen eighties， the first commercial flight simulators and so， uh you know we with very high fidelity， uh base you know flight simulators and of course， flight simulators required the kinds of advanced graphics that just werent available on desktops even know in the workstations of those days the you with this is presilicon graphics this is you know pre any of that stuff so um they had developed a bunch of this the proprietary silk on during those days and ultimately ended up in the supercomputer business leader on in the nineteen eighties and then ultimately in the nines， uh were in the console business they help develop the regiracer for nameco um this the the the very advanced uh racing sim you put this in the notes now is like what so it comes back full circle to the video game business but um i just find that whole episode incredibly fascinating and i and its so interesting to think about uh all of those people kind of coming through that same program and and what it must been like in an evenset southern land had a big impact in the games community because former employees of there started up a bunch a games companies um and again like just one of those incredibly seminal in in really the true sense of that word um comptechnology companies there was another thing we brought up on the Nintendo episode were image for both of your fact check on which i was shocked to learn that the Gaming industry has always been larger than tv and Hollywood if you include the total Coin drop in Arcades。

and i i always just thought this was this new photomini of like wow video games have become so much a part of the fabric of our society but i our research was basically like i think its always been true could be i dont know much as much about what they count when they count？

the Hollywood revenues or the or the music industry revenues right whether its sort of ticket， prices or or what but i think regardless the really interesting fact is how big the arcade business was yeah and if you go back and look some people know people do these really clever little graphical joins 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 share as they abdonflowed and the thing that always stands out when you look at it is just not only how big the arcade business was but how long it persisted yeah！

you think about like Sega and and when we were researching for the council， castle said we it was so clear that these these castle manufacturers really were wrestling with do we risk it？

do we risk you？

our our coin out business and in and a lot of ways is probably why say it what is in what it was our isnt Nintendo is they were trying to protect what they had theyre literally making billions of dollars in the seventies like billions of dollars in revenue in the seventies of course。

youre not gonna stop doing that yeah！

i mean i grew up in that era so i was one of those you know regrets who was like you know camped out with core a handful of quarters in in a video game arcade， um and so i remember that i mean they were important social lokai right for kids in in those days yeah lets talk but im curious for for both view maybe maybe lets start with mid because youtalking about it what was your entrants into video games before you got into the business side of that so yeah like spaceswars at a world you play space at a wolf worths in fort lauderdale Florida um， where i was miserably consigned to grow up？

um did you have a pdp one or how did you get access to space？

well， there was a different was the it was the the console successor to it right it was like they made they made they took that idea and they made a box out of it basically the only a few of them but somehow one of them ended up in uh in it it was not the pdp version that you guys talk about in your episode but it was a a like cabinet yeah， like a cabinet version of it that that that they that was propagated in somehow this Wollworths in a walle greens i cant remember what in in fort lauderdeal in a mall had one of them outside of it and that was literally the first video game i ever played and then it was you know robatron and those kinds of games were sort of my GM growing up would you better have been in the atory twenty six hundred years yeah， except that we were apple to family and my dad was one of these uh guys who love technology but couldnt understand how any of it work so he would buy this stuff and then we would my brother and i would inherit it my brother ends up at the MIT media lab and then goes to Hollywood in events video assist essentially in Hollywood so both of us ended up kind of Techno geeks what what are video assist so uh in the old days with film cameras， the only person who could see what was being shot was the cinematocker for who literally look through the IP and now if you go on a film set theres a video village where all were the producersgod forbid can come and watch whats being shot in real time right and that technology transition basically involved this intermediate step called video assist， which was my brothers thesis at the me at the MIT video lab in the way status they always see those you know！

uh？

George Lucas in Tunitia shooting in the desert in seventy was it seventy six when they were shooting， uh a New Hope like that theyve got that ten theyve got video moderance point in there watching daily so i mean its a， its a， its a camp out yeah？

so that was a again we we would hear we would inherit these technologies， whether they were like er you know early video cameras or whether they were computers in the case of the apple toes and then we would screw around with them and try and figure out how to make a working of course。

because we were children most of the time we turn them into games what was your first dedicated gaming machine？

uh the first dedicated gaming machine that i owned because i wasnt nearly console adopter， so the first dedicated gaming machine i owned wasnuntil i was in law school in the in nineteen eighty seven um my wife who is a game designer and worked at activision for fifteen years but was a lawyer also and we were in law school together but we just basically like you know play video games all the time so we bounding them mega meego， 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 comdoor sixty four yeah and so that was my first i would call that my first dedicated con uh Gaming device Blake what was your first Gaming experience？

i my brothers three years old means of he was always in the games and he loved Nintendo like more than anyone and i was always the meme of just being player two and so like like like it was it was so bad growing up of like we would play in sixty four in any s and i think thiss really the first council that we had and i remember just being stuck playing like the crappy other character you plan it it was bad like we play sonic and id be like tails you know it is like it i just remember hating that experience and i it was it became really clear that my brother just love single player narrative type creative games and when the Xbox came out i was like ah like i can finally get something that my brothers not gonna take all like all of the time with and i got next box and and really Halo was this thing they like to change my life i was like what is this this is amazing and then really this three sixty when expect three sixty came out and Xbox live just really took off i spent live with such a you talk about it a little bit the console castles apple set yeah！

only just because of what an incredible like business the proposition it was because you had a capative audience who really wanted a community who really wanted multiplayer play and basically they said yeah， theres one way to do it you can pay us five dollars a month yeah！

talk talk about like the you number of people that actually upgrade it was in the number of people that wanted to get online services for their game that had to pay Xbox in addition to the council of their buying just insane like the numbers i forget what it actually ends up being， but its certainly billion of dollars in revenue even and its not like they werent your isp they werengiving you the internet it was just the right to get online with the Xbox yeah yeah was just they controlled that hardware and i i just remember playing call of duty online for the first time and being like oh my Gosh my life is like changed and good my parents would buy me a Gaming pc because i just knew id be a total degenerate and theyre theyre probably right and i like Tis it like i now have a Gaming pc and im a total degenerate so i get it but i i i loved uh just like call of duty and all of the competitive games really but we missed my wife and i the the consul are really in a lot of ways because we went from sort of you know！

PC like you know during that entire era basically means 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 e early ea games like star flight on a compact portable that had an rca out that we could plug into a television and so we were watching it we were playing it that was our monitor to play but the back competence have a theres a thirty pound port you know sewing machine i remember those old um！

those old boxes for the mouse they had like a trackball mouse oh！

wow， so and then we had we yet we bought our first console actually， when she was interviewing for the job at activision um， i was a Disney and she what she needed to play so she got into the games business first oh， yeah yeah she needed to play macwarrior uh on great game twenty twenty 47 i forget what it was i played that on the Mac yeah yeah so but it was on so we had to buy a sns so she could study uh the the activision games before she went in for her interview well， um and then she got hired and work there for fifteen years wow， how did she decide the transitional career from lawyer to game developer she when we were in law school together we wrote a game together uh i programmed and she designed no way yeah its hard but it was like but but still we we we were we just sort knew that was our calling and like we practice law for a couple years but neither of us were totally into achieve actually was a district attorney in the Hardcore games unit in la and so she had a much sexuer job that me who was just doing representing you know Atari games against intending um wow was so this is wild like both of you decided that it was economically better for i dont say decided you went to lost we were now then going to making games it is because you thought there was no money in making games it was no you know its just one of these things where you dont know that its possible right i mean i i i uh i i i think thats its true you find this to be the case in hollywould quite a bit right where kids have grown up in in Kansas or whatever um you know theyll theyll say when theyre interviewed like you know what， what， why didnyou choose this profession， why did you go do something else first and they were like i didnt know you could do this for a living and i kind didnt know you could do this for a living right， it just seemed so out of touch but slowly but literally like i you know partly it was through the Atari games Nintendo lawsuit where i had to go around and take depositions of all of these earlybox console guys who made cabinets um the uh the electrical um instruments uh scientific instruments department at uc， Santa Barbara was like where uh Nolan was hiring all of his top engineers right because those guys knew how to make multiplexers and you know these like is remember these box console they they were making what we would now think of as software in hard yeah， there was no software there was no software what so i went around in interview these guys and i was like these people are so cool like what am i doing like like there is there is another world out there and so i left and went to Disney yeah！

i think its funny you you mention like the kids and cans this has no ideas this is even possible i always joke like i had a double life right i i play video games and i still play video games probably way too much and i really it wasnt even until i enter venture capital that i realize oh， you could like investing games like thats a thing and i learned about match and Bang and all these people im like wow， thats like i i didneven think thats possible and thats even after i ended up adventure capital i i was like that i didnt realize i was and thats today imagine from like the you know the games business in the late eighties yes！

this is not a great threat you said， even you said i play games way too much theres this stigva around this industry still why is there this stigva？

oh， i mean i i i mean i i i definitely just objectively play too much， too many games！

but to to uh， the statement too much requires its a moral judgement yes， yes required yes！

some standard by which someone he has a lets remove it from playing games uh i think a lot of people in the business world， think of the you know video game industry is like whatever， thats like for kids， or thats like not real， thats not real business well？

and and you i think address this quite well in the in the the first Nintendo episode when you talk about sort of the the roots of of this business in the toy business right， even Nintendo making the glove for the the the magnibox odousy if i remembering that current the lake on yeah yeah the light is sorry the like done yeah indeed um and that like that was real right？

i mean when i would i mean it it persisted long into the nines i mean that it that it was still kind of part of the toy business right？

um hasbro made a run it activision the little known fact right？

in the late 九十 when i was a running the studios there， and i remember going to toy fair in a New York， which i would， which is a trip man there is going back in those days like and we went we went actually to the hasbro pre toy fair uh thing in in boker return flored of all places where they were theyd taken over a hotel in in every ballroom in the hotel one of the brands was showing their stuff so like super soaker was in one room and you know uh the uh whatever like nerf was in another room or whatever and you just went from room to room to see all the toys in the deal never ended up getting done but it but really in those days it wasnt that much of a stretch to think of the video game business is basically being really a partner to the toy business and now we dont think of it that we think of it more is a partner to Hollywood i mean you look at the last of us or us you know things like that where where you know that were supplying ip to like serious drama and whatever but like that what knows the case yeah！

i think there is also the subtle shift of games becoming really social like there was maybe hang out with your friends who would come over and you have a little land party or you 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 seems done those people in person in years but i still play with them all the time and i know what theyre up to and it sort of the error the equivalent of playing golf and on some level of like im catching up and im sure if the games itself are a way to the sales id also see that the content itself and our choices early on in the business was somewhat selflimiting right in the sense that um i mean the the we made a lot of really violent stuff right we made a lot of um you know games that to genobus point perhaps did do didnt explore all of the spectrum of human emotion and as a result， i think it it was easy for moralists to look at it and say oh this is a deviant activity much the same way that comic books were viewed maybe in the nineteen forties， right， like or um you know v is certain kinds of independent film or sexally uh explicit contentor whatever has been viewed historically writewhereas maybe those things change over time as they get more mainstreamed or whatever but like i think that had something to do with it as well。

it is interesting that you say this is how i hang out with my friends play because you wouldnt say i hang out with my friends way too much but you say i play video games too much and its its like theres nothing wrong with being social and theres nothing wrong with having fun and enjoying your life so why is it that theres something wrong with playing video games with your friends？

uh maybe maybe is just the games i play that theyre really competitive and so they they make me very upset and feeling feeling very tilted after i play those games so its more that and it is the case in my family i mean my wife just played eldenring through finished it right now i those of you who do not know what italking about eldenring to finish eldenring is not only do you have to be hard core but you have to expend hundres or more right i finish stelden ring with a one year old but im so married so um explains she finish she was like OK now i gotta play it is a different character played it again OK？

what finished it？

we started watching do that the creek masones the last bus on hbo and she was like oh i havent played these games sat down and played one and two back to back all the way through right so this is this is the family i live it wow where im like the nongamer so what？

whats your drug of choice here？

fifa currently will it？

his historically been fifa um and which i which then my i had a son who group to be a very very accomplished socker player before becoming a musication and so he and i played a lot of fifa together which was kind of a our dad sunbonding stuff would he then he became too good um and then did i make your career its like the backyard basketball true that whered your sunturns said to be LeBron， and then uh but ive always also been a real time strategy， enthusiast and uh group in the year of commanded conquer and starcrafted warcraft and currently and playing age event parse for pretty obsessively well！

a way that we wanted to kind of bring this episode home is you guys recorded game craft info before getting any input from the outside world， acquiredbasically only ever has one episode in the can and so when we release it， we get feedback we incorporate in the next episode e im sure youve gotten a flood of feedback a sense releasing the whole series is there any sort of mailbag or things people have a have brought up where you might want to address things from the series yeah！

i mean i think you know it broadly it was a bit scary right because we did release a episodes pretty much just sort of back to back to back and we as he said we theyre all in the can when we recorded basically the first episode and error when we release the first episode and um ive just been incredibly uh surprised by how universely um positive the feedback has been i think there really wasnmuch like it on the market in terms and not all uh like deeply researched get very much i think inspired by what you guys have have demonstrated this is that you know there is an audience for this kind of well prepared um intellectually rigorous kind of exploration of of a nichi industry that most people wouldnconsider interesting but you can make interesting and i think that was partly our goal when we started and so we did gain tab some inspiration from i think you if you guys had existed， we probably would have done it thank you but yeah， we something malcom glad well help the little he just he he just told me not to write a book which i think uh you know hes been on that that for a while that like that that podcast with the future i think you hes done a couple episodes with bill symons who you know calls himself the pod father and he is he is true there like we weve thought weve been asked many times wethought about writing about many times on did never pencils like its never a good decision no！

we just kind of sad but is just the reality to this yeah yeah its i would i just like what meta said， which is the feedback has this been amazing its the most common feedback or you know the mailback stuff is this you you lead us right to the current time and theyre like we want to yeah！

yeah what what say i in gain so lets talk about that right because we have gotten that is a question yeah， so this is a brave new world right and and i think one of the things its kind of fun about ai in games is that weve had aingames right like this is started in games exactly um i remember danie Berry um when she was making uh mule back in the e in the old ea days um she was basically like you know the like oh i would make the characters behave randomly because they seemed more intelligent， right， and so everyone said a while i would i would get my n NPCs to make mistakes and then people were like oh my god theyre alive because that just seems so human compared to the computer like behavior it started there！

i mean and its its kind of evolved all the way to the very sophisticated kind of computer i mean there was at least what a five year period i think where Microsoft ai was called Cortana yeah after Cortana from hello！

so now we obviously you know you cant every rock you turn over in silicon value these days is an ai pitch right so um yeah！

were a benchmarket i can see like fifteen founders why about side literally the part literally the parking lot was full we had to drive around a link the town hall of parking ate spaces so。

but uh i， i， and i， and i， and we get asked a lot about you know where we， where we see the technology being applied and i think there is a kind of uh theres a train of thought that that has been advance that oh， wow， this is really going to democratize the game industry in in a way where now kind of like your scene with midjourney for example， where you can just describe a piece of art and id， and it magically appears that people will be able to describe the game minital magically appear i dont subscribe to that i think um and again maybe its just my my narrow narrow minded miss， but i i do believe that making games is really hard right and and i think making a coherent narratively uh satisfying you know journey on in a in in the car， in a in a game context in interactive context is not necessarily going to fall to ai early right that may be one of the later things that happens， but in the interim man， there is going to be some really cool stuff to happen so i would i think we we we were talking about this is with some senior executives in the video game industry recently， and i think we kind of agreed on that there were going to be for really interesting areas of investmen early on um i think one is art pipeline clearly right because just the amount of money that spent on art in video games is mindboggling its just staggering， because you think about it， its like youmaking an mmo you got a town one of many there 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 bend there is a every character has clothing has clothing every rug has a different pattern or whatever or it gets monotonous like you have to every event themes these things for Halloween and Christmas and new years i mean hopefully you guys played breath of the wild absolutely magnificent i mean it is it is a an a magnificent achievement but man you when you when youre playing， it thinkabout what it took to make it right everyone of those characters the dialogue all of that stuff right and so i think you know its not gonna replace the ability， the the need to design those things but it may replace the need to have higher an artist to go and bang out 30 different variations of a chair right for example， so i think thats a the like art pipeline， feels like a no brainer yeah！

thats like the lowest hang fruit i think that that and yeah！

right now were in the two d phase of that will we have a threat phase absolutely yes for sure you will get right number two i think is quality assurance and um bouncing right because we can now train in ai to play these things and we were talking to a senior executive who has done so and it reported back that that the ai can now describe an activity as fun wow！

oh， which that has been a hot topic of debate in the video games industry forever to define fun， so we even ai who can tell us if something is fun or not when like i dont think there is a consensus view on what fun means true i mean i if i you know。

i have my own theory of fun right and um which i talk about quite a bit but um yeah to have an ai that that could describe the experience of playing the game in those terms is extraordinary， so i think thats gonna be really cool um balancing is really hard because balancing is essentially an arbitrush activity right， its like youre trying to find little advantages that the game engine the spreadsheet if you will of the game allow so for example on playing age of empires， right， uh the Chinese cavalry under certain circumstances has an advantage that i can exploit in an o in an arbitrage like way！

right and so finding counters to those or whatever is a really interesting potential use of of artificial intelligence that we have an explored really very much i think thats gonna be really cool its like to bring in the thing weve all i think at least three of us have mentioned as a as a pillar of our life to bring in Halo mean when duolwielding first came out and Halo two soverpowered this and it was one of these things that like took a whole you know new diskshipping to fix the fact that all although 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 through playtesting and it it gets fixed quickly now thats one thing but ai can catch that way earlier absolutely and find potentially new ones that we hadneven thought of and as we move into this year of more and more suffistighted game economies being able to sort of play out those game game theory kind of scenarios right where about where were you know hording of various resources and what that does to the economy etc yeah！

you heard you had a funny line yesterday like you just write the problem to like get rich like to someone？

like to like this to spot right you like what does the bot do and youre like that was not at all what we were thinking about right to economy so i think those things are gonna be really really exciting and then i the one im particularly excited about is is live ops because Wes spending boat loads of money on live ops its really hard and its a very delicate thing because youve got a game thats already working right and so you dont wanna make those kinds of nerfs in 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 thats really interesting and also just adding a sense of dynamism to that where lets say if we were all planning together， it understands kind of what are uh capabilities are， what are characters are like edit 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 adjunctive that is serving a a a analogues to that， which is live a dmin for like a you know dungeted dragons like experience where you know if you if youve ever been at my dungedmaster dungeon master not direct as like well， i pretty sure opening i does your mongeks here today we we have a different kind of a acrname but the uh in the you know the Dungeon master is a role in in a in a if you ever play deep Dungeon dragons with your friends right its like somebodys gotta play that role in its a very difficult role to play you you are a storyteller you have to some you know you you the your one of your players centers a tavern youve got a figure out but an a nonplayer character to interact like the tavern wencher whatever to interact with that with that that character and you know that requires blakestorytelling in narrative and if you could have an ai assistant that could help that could supply you with narrative in the background right and and sort of help you tell that story i think thats super exciting， and i think thats theres going to be a lot of a lot of interesting things that are going to happen in that space particularly now where were in the middle of a massive dungeons and dragons renaiense yeah！

i think there is theres also this inherent tension within the games industry of if you are maybe an uncomment studio are you comfortable you know using ai arts and doing that generation and what does that mean maybe is an innovators the lemon types uh scenario， but then theres also uh maybe like a working theory that i have is the UGC platforms like the fortnight creatives or the core or the robloxes of the world might actually be the ones that accrued the most value in this ai as a generation time hmm where no if you can spend up these three dassets and youletting that the users go and do that that should be just really more obviously with that this evolves than having you know your artist push back and be like a dont dont use my art style and thats gonna be a whole other it certainly seems from the you know mostly outside that a problem in the games industry right now is the amount of resources in capital required to make a great game would you agree with that uh that its difals innovation？

i mean it a again as a former studio boss， i would say yes and no right in one sense yes， because it doesnt fully democratize the ability to make games right and were getting there its better than it used to be used to be you had to write your own engine in order to make a game work right and so you had so you couldnt make games unless your job carmacker， unless your team swenny thats no longer the case right now you can go in license Tim sweenese engine， the unreal engine and you can build a game on top of that thats already someone to market right its like we didnt in the old days we used to create bitmaps by hand to like you know try and wrap around 3D characters its like now you got all you know incredible technoqtools in technology， Maya and advanced Photoshop tools and all these other things that are just capable of sort of accelerating that process there are a little bit expensive， but theyre but theyre accessible to individuals in a way that that you used to when i started in the business， you needed literally a silicon graphics worksation in fact， when i started， companies were being valued on the base on the number of silicongraphics workstations that they had available to them so you talk about this of the series crazy looks crazy Rocket science games you go go！

you go go lookem up its like they were literally valued in their series a on the base of the numbers worksations they have so i think that that democratization on the one hand is fantastic right and weve seen with things where that has happened like YouTube lets take that is an example where all kinds of interesting new content that we never expected before i mean if i had told you fifteen years ago， that unboxing videos were gonna be like a billion dollar business on on on YouTube yoube like get out of here right theres not the unboxing videos come on man but like they are right and all of the you know there the the these are new kinds of narrative uh experiences that we that we would never have really found valuable so i think theres great value in that and im im a big proponent of that on the other hand you know not everybody is good at this and as you and thats also something you see on YouTube right， which is you know theres， theres， theres， thousands and thousands of videos you dont get fed to you in the algorithm， which suck right and thats gonna be the same in the video game business yeah！

i think i， i think thats right， i think there is we we still havenfully reached maybe the iPhone moment to you for your camera but were getting there and its there is this parallel trackwithin games that we know modding is such a key part of Innovation and how these games evolve and new genres are created that were were getting so close those moments of with UGC getting better and you can have the random kid maybe come up with a new gender or new game and it looks like a mod or whatever it is but it might just be infornet creative a Roblox right uh the the old Heroji yamaji Maxim that you know there are a handful of sugaromier motos in the world that can make games like that and we want them all be done making games for Nintendo is probably still true！

true absolutely true save they absolutely right like stelar didnget any worse in in you this current time right？

right？

but the window for that like say its i dont know one in a million the denominator of the number of millions is artificially limited right now， yes， yes and and you think about you know how car Mac and Ramero got into the position they got into an all the luck and and sort of serendipity that was involved same with me a moto right its like what is he been hebeen there since seventy seven yeah and he was hired to design the archive archives yeah exactly so and and they plucked about even the his pre the guy who trained him that you talk about in that first episode who himself was kind of plot that the assembly one yeah good day and uh and so i think the thats the part where hopefully we can be a little more efficient about how we find those memotos well on that note i want to close with a pitch to you guys OK which itexted you about but i want to now make it you know live 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 youve seen this in the reaction to it like i think this can be a really good galvanizing force for people to take this industry more seriously invest in this industry most important enter it like make games become entberners i agree i think uh im feeling a bit of that pressure i mean that people when i started this。

i think the other thing that i learned from malcolmen from michaelluis was they were like i， i said you will should i do it as a weekly and they said no thats a job right um but they said you should do it as a as a special project and so i think what were 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 i one of the benefits of being old is i have 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 star bringsome guests on uh who can help us tell some of these stories because um， i i certainly know my path through the video game business and Blake knows his path through the video game business but there are many paths through the video game business and i think thats the part that excites me well！

everyone should definitely check out the game craft podcast uh where else can people find you on the internet？

i met uh mitchlasky on twitter yeah！

im Blake i are on twitter and mitch you dont that much but Blake youre an excellent to follow when Michael does tweet though its good its great but i you turn on the notifications for Michael is this what its once like a week youll get it！

youll just get a notification and you just know its spicy sorry that i recommend it awesome thanks so much guys thank you thank you pleasure that was awesome really pump we get to do that with michin Blake so great love those guys listeners we appreciate you joining us for those on video sure was kind of fun to feel like you were actually in the room especially the wide angle camera this time capturing what the table actually looked like we got a lot of feedback on the first benchmark episode that we talked about this cool shape then you can actually see it so major that also huge thank you to mitch to Blake and to benchmark for hosting us and doing this together if you wanna hang out with us more come check out ack two itwhere all of our interviews are happening with founders investors and basically all of our interviews going forward were going to be putting over on ack to， which is really becoming known as the acquire interviewshow yup lastly if you want to become a lp， you should help us pick feature episodes webe doing the next one in a month or two as we kick off the next season so uh be sure to go to acquire data fm slash lp if you want to come deeper into the acquiredkitchen alright thats all we got talkby the episode slack if you want acquiredatafm slash slack and with that listeners wesee in next time well？

see next time。