Benchmark’s Mitch Lasky and Blake Robbins on The Art of Business in Gaming

0:00 I will say I wanna give you guys just a a pre recording compliment. I forget what it's called. I there's a name for it, but basically it's where you're reading something in the newspaper about something that you were a part of, right? And you go. People don't know anything, right? This is so damn stupid. And then you turn the page and there's something about foreign affairs and you're like, wow, super interesting. Like the thing you know about you don't apply that same logic to the second thing. And I have to 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 you've done that you don't know that I was a part of that I was a part of. Oh. You guys are so good. Like it's so accurate. It is really remarkable. Somehow you're able

0:41 To tell a story that is actually as Close to true is as true exists. Well the secret is we don't have people on the show, so this is not gonna be that. But who got the truth? Is it you, is it you, is it you No.

1:01 Is it you, is it you, is it you Down. Straight! Another story on the way Welcome to this special episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them.

1:17 I'm Ben Gilbert. I'm David Rosenthal. 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.

1:37 So today our conversation is with Mitch Laskey and Blake Robbins. Mitch is Perhaps the best games investor of all time. generating literally billions of dollars of returns from early investments in Riot games. Discord and that game company, not to mention Snapchat.

1:55 Mitch was also an executive vice president at both EA and Activision. and took his own gaming company Jamdat public in two thousand and four. Mitch, of course, was a partner at Benchmark in the Fab Five era that we chronicled on our benchmark episode. Which actually We stole that line. From Mitch when we were talking to him in the research, and that's how he referred to it. So we are joined by Mitch and Blake Robbins, Benchmark's current principal, who has also come up on previous episodes.

2:25 Blake is one of the best thinkers in the world on the gaming landscape today. And Mitch and Blake just launched an incredible podcast called Gamecraft that chronicles the history of the gaming industry from the business perspective. And One other thing, if you are listening to this on the audio feed, we did full video on this. It's up on YouTube. You can find it on our website or there. Uh we did it at Benchmark's Woodside office. At it turns out they have another

2:52 Triangle table. So we have now recorded acquired episodes at both Of the famous. Benchmark dinner tables. Well listeners, as you know, we have an interview show called ACQ Two. We've had back to back killer discussions with the CEOs of Retool and Angelist.

3:09 Angelist in particular was like very mind expanding for me on how to leverage AI to get Huge. Huge leverage in your business. Like specifically on the operations side of the house. And uh I think Avlock is one of the best thinkers about how to apply

3:25 AI to kinda turn something that looked more like a services business historically into a true tech venture scale opportunity. So you can find ACQ two in any podcasting app. Join the Slack. There's an incredible discussion of gaming history going on right there, right now, including a bunch of episode follow ups where David and I are learning from you all in real time. Acquire.fm slash Slack.

3:49 And without further ado, this show is not investment advice. David and I may have positions in the companies we discuss. As may our guests and of course their firm, Benchmark Capital, today. Yes. And this show is for informational and entertainment purposes only. Well, I think an appropriate place to start might be

4:09 What inspired The two of you. To go talk about this and create game craft and create this podcast. Well, I think after I retired from benchmark uh a couple of years ago, retired from active investing, obviously the glide path out of venture is a kind of a long glide path. So I'm still a involved to this day, but uh after I I retired from Frontline investing.

4:29 I really started to think about ways that I could be useful and and helpful in the video game business and whether that was, you know, doing boards without compensation or whether it was helping young entrepreneurs 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 Shaf. And that book

4:55 is a remarkable book in my opinion because it really Takes the business side of the film business back from the twenties to say the 50s, 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 and business people. And I've always had that same sense of the video game business. And so I thought it might be fun to do something in that vein where we we showed the what was happening on the business side and how it was informing what was happening on the creative side.

5:28 And I think the common narrative is Video games are something created by creative geniuses, a Miyamoto type person. And then the business models sort of rearrange around the creative vision. having consumers that flock to it. And I think already you're in introducing this interesting wedge of Uh actually there are very clear business models that guide where the water of creativity can flow, and that has been

5:51 For the last fifty years, what has defined the video game industry, not the other way around. Yes, and not to take anything away from people like Mr. Miyamoto, who I have infinite respect for. I mean he is a he's a l legend. He's a god amongst the video game designers. And I have had the great pleasure in my career of working with some incredible designers. And They they are the leaders of the industry in many ways, but

6:16 They are constrained. quite a bit by the business models in which they operate. So just to give you an example, in the package goods era, Your your goal was to sell a disc and then get somebody to come back a year later and buy another disc. And That's a business model choice and therefore what you're gonna put on that disc is going to

6:37 be informed by that business model. It's gotta have a degree of planned obsolescence to it, because if it doesn't, if you just bought one game and played it forever, that's the end of the video game business. And that's how you get Final fantasy Seven. Fourteen. Yeah, I mean think about how many FIFAs or Call of Duty's there's been at this point and and and it's still firing and all sundaes despite sort of the the business models which we'll talk about.

7:02 Rotating right underneath them and those still thrive, uh, even to this day. 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.

7:18 Is that This dynamic applies to a lot of industries. Like when we did our LVMH episode, the whole time I was thinking that like it's the same dynamic. in any creative industry, like if you want to achieve success either as a creator and have people use and appreciate your work Or on the business side, like you have to work together. You can't be at odds. Yeah, it's interesting. I actually I really admired that LVMH episode, and and there was a part of it where you where

7:43 In your Nintendo episode, that kind of reminded me of the L VMH episode as well, because those of us who had worked as competitors to Nintendo in the console business, and I did for part a part of my career when I was running the studios at Activision. It's interesting you considered yourself a competitor to Nintendo. Trevor Burrus You know there's there's limited shelf space in Best Buy, and so for they were very much a competitor for that shelf space. uh on the software side in particular. And they would, for example, if they had a new Metroid SKU or a new 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 disc and it w and they would be sold out and panic would ensue. 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 they and it was just

8:40 It was genius, but it's something that only they could do because they had that sort of luxury good. Kind of vibe. Yeah. So to bring it back, you didn't write a book. I wrote about a two hundred page manuscript. Um

8:53 And I w the idea and those of you who haven't listened to GameCraft who are who are listening to this podcast. Uh it's basically eight episodes, but they're topical episodes. And so we s we basically retell the same story from nineteen ninety roughly until the present. But we look at them through eight different lenses. And I thought that was kind of an interesting and unique approach because all the other histories of the video game business are very chronological and very like, and then this happened and then this happened. And while ours does have a bit of that, and then this happened and then this happened, hopefully it's a little bit more interesting than that.

9:25 So I I I finished it, I sent it to some friends of mine, they read it, they said this is great, but like nobody reads books. And so I was like, well, that's unfortunate, but I don't really know what to do with it. And I th I could read it, I could do it as an audiobook, I could read it as a monologue. I don't know what to do with it. Uh, and then I had a fateful dinner in Boston with Malcolm Gladwell. And Malcolm I've been an investor in Pushkin, which is his uh podcasting company with Michael Lewis, and Michael and and uh and Malcolm are are both acquaintances of mine. And Malcolm was like, dude, you really have to do this as a podcast. And I and he was like, Did he try to get you as do it as part of Pushkin? I did submit it to Pushkin. They m they rejected me. Whoa. Why? Two niche? Yeah.

10:09 And so I but but he kind of m got me to rewrite it essentially in as a dialogue. At the me in the same time I got uh to meet Blake on Twitter, oddly. That's kinda where we met. I was admiring his thinking and he's was tweeting about the games industry and there's so precious little good uh like public commentary on the games industry. I was kind of attracted to it.

10:32 And so I I kinda asked him, Do you want to do this with me? And you wanna kinda be my interlocutor on this one. And he foolishly agreed. Yeah, I it it's funny because like Mitch and I knew each other I like briefly before I joined here. And then I I remember I was just down in the office here one day.

10:52 And you know, Mitch and I I I'd I'd ask Mitch to if he was willing to meet,'cause you know, before you join, you're like, okay, is Mitch actually still active? Is he not? You know, what does it actually mean to do that? Yeah, it it's like is he actually retired? What is it? Uncles. Uncles. Yeah, you're an uncle. Yeah. Mit Mitch never retired and and so like he he still hangs out here all the time and uh I I convinced him to meet with me and we were just chatting and throughout the course of those conversations it just became clear like we were having so much fun just riffing on all this and I was learning so much. Like I thought I knew a lot about the games industry and and Mitch is you know, vantage point is so unique and rare that when the moment that he shared the manuscript with me, I was like Oh my gosh, this is amazing. Like I was like 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 90s.

11:55 And we're ending when he's running the business, basically, in the in the twenty twenties. And so I thought that there was there was some nice symmetry to that actually to have uh to have it be multi generational. So Mitch entered the industry right when I was born. And

12:11 He's telling these stories of Oh, all of the s the games that he's worked on. And those are literally the games that I played and and the games that he published and all this stuff and I'm like This is insane. Mitch, when you were

12:22 On them. 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 uh kind of a boiled frog type situation for me because when I entered the industry, uh my first gig really was in dis the formation of Disney Interactive, which was in the very, very early nineties.

12:45 And I mean this was right around the time Bobby was taking over uh Activision when he and Steve Wynn basically financed by Steve Wynn, Bobby was was was buying Activision. Thank God Steve Wynn financed it. Yeah, Steve. The famous story. I don't know if you've you guys have done Activision episode. Way back before we were researched. Bobby crashed the cattleman's ball. Uh and without an invite and basically did it so that he could buttonhole uh Steve Wynn and get him to put the money up for the act to uh buy Activision out of bankruptcy.

13:18 Um and it was a genius deal because they renegotiated all the debt uh as a into into equity in the new entity. It was uh Bobby B Bobby was a a brilliant, brilliant executive even back then. So Um So when when I when I was w work at Disney and then subsequently it in my startup and at 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? It's it was it it was still a fairly recent phenomenon in other ways. And it was a corner of the toys industry, as we've talked about. And dominated by the Japanese tr too, in general, right? I mean there were a few obviously electronic arts had gotten started and

14:00 Interplay existed and there were a couple of others, but it was primarily PC publishers. Yeah, right. Primarily PC publishers. So That said, um no, I had no real idea of what the impact was because I thought I was r making games for myself. Right. And other nerds like me. And

14:17 The notion of casual gaming hadn't really hit its stride yet. So w I mean I think one of my big takeaways from GameCraft is Uh, gaming is not for teenage boys. Gaming is a innately human activity that now we see in full bore. I mean, I flew down here this morning from Seattle and like the amount of candy crush going on around me on the plane, like gaming is a human activity. And I during the era you're describing, it really hadn't fully permeated yet. Absent maybe snake on some early mobile phones? Not even. I mean you think about it, it was like probably 96 was uh Barbie's fashion designer.

14:53 and uh some Hasbro games like Yahtzee 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 mainstream video game industry always viewed them as kind of And Franklin to this day still views a lot of the cat what's happening in the casual game industry as like not the real games business. Right. Right. Um and yet.

15:22 You know, as as we know because we now know what the numbers look like, it's like it's most of the video game business, right? It's probably more than fifty percent of the video game business these days would be considered casual gaming by 1990 standards. It's interesting because those people who are playing Candy Crush still might not even identify as gamers. I'm sure they don't. And what what it mean like when we talk about the games industry It is it's so like all encompassing at this point that it does include the Candy Crush, but it also includes the consoles and the hardcore PC games and There there's a little bit of

15:55 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 a second startup uh JamDat, which ultimately was the successful one, the one that went public. We would be on the road, me and Michael Marketti, my my chief financial officer, and Um we check into a hotel and You know, we'd he they'd ask for a business card, we'd hand him the business card and they'd go, Oh, I'm playing your bullet game and it was literally like You know, late night people on the desk at a hotel or

16:26 you know, uh train operators or people in you know, we would just meet these randos all over the place. A little girl will sat down on 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 understood kind of the ubiquity of gaming in in that human sense that you described. So we were going back and forth before recording here on sort of big takeaways from GameCraft, and this is one of them. This feels like a huge beat to me. What are some of the other big beats for those who haven't? Listened yet. So uh the me just to very quickly review what the eight episodes are, so they're free to play.

17:02 Which was one of the real revolutionary business model changes in the industry. I mean it's the equivalent of the film business go uh having television introduced. Right, where you you went from you know, a a very formal go buy a ticket and sit in the theater to coming into your home. Or even Probably more apt. Um

17:20 Professional sports when television was introduced and like you know it was only the upstart NFL that embraced it instead of fighting it. So I think that it was a revolution of that import and I think we're still feeling the reverberations of it. uh to this day the the impact of free to play and how it's changed you know, how people consume games, how they play games, and how games are made, because it requires a very different kind of game in order to be susceptible to a free to play mechanic than the old school stuff everything onto a d a disc and hope that it's worth sixty hours for sixty dollars. That's 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

18:03 uh game economies and how they've evolved from their very, very earliest stages to these incredibly sophisticated and now even web three enabled economies of our era. One of my favorite episodes is is the Forever games, which is really around this idea of with the shift to free to play. Can a game actually entire? Forever and what do those play patterns look like? And Mitch has these amazing sort of guidelines or just rules of but he thinks about it. Going into listening to Gamecraft I sort of had this

18:35 High level idea that there's more durability in the video game industry now than there used to be. Like it used to be very hits driven. I think a lot of people still believe or a lot of investors look at the category as very hits driven. But there's two different and very distinct reasons why there's more durability now. One is this concept of forever games.

18:56 The other is the concept of Mitch, I think you coined this term. of uh platform based publishers. Can you talk a little bit about each of those and and how they sort of fuel each other and how they're 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 were either the franchises were durable. I mean you look at FIFA. And

19:24 I mean, I started playing FIFA on Trip Hawkins's three Dio back in nineteen ninety-three, and I've been playing every year continuously for the last thirty years. And so if you really if you think about it, that's a thirty year persistent play pattern, very much Kind of. con congruent with what we describe in the Forever Games episode with some of these long duration play patterns. It's just that they packaged it very differently. Like you were playing the same game, but you just had to go buy it again and again and again and again and again. And 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've been able to bring the same characters and the same kinds of play patterns back again and again as they shift from you know, NES to S N E S to Cube to

20:09 Dreamcast to whatever and like and all and that is a sense that is in a sense durability. Uh to my mind, one of the most genius things about Miyamoto is that He came up with like two to three. Really good stories. And they tell that story over and over and over. Every Mario game is the same story. Every Zelda game is the same story. Absolutely. And and they're fine because as the graphics get better, as their ability to tell that story improves and is richer and deeper.

20:35 then you can go back and explore that story again and it's and and it has a kind of hero's journey quality to it where you don't feel like you're seeing the same story again. It feels new and old at the same time. Yeah. I I I think Grand Death Auto is probably like one of the best examples of it. I think Grand Death Auto five was probably released eight or nine years ago. And it still i is is a top game on Steam and and on everyone still plays it, which is amazing. But when they do an update It it's it's 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 based publishing, I think that's really been more of the way that the online distributors have

21:16 created competitive advantage against the their package goods rivals and and how they built very similar businesses to a lot of the kinds of businesses that we've seen emerge and disrupt. incumbent industries across the the the internet space. So you know Uber in the taxi industry or 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 you're entering in. I think you look at Steam and Steam shares many of those attributes. And I think

21:49 that move which was essentially perfected by Ten Cent. with uh QQ and and and the things that they did sort of leveraging their messaging platform in the games business. That's been sort of the kill shot for for platform based publishing in the industry, but that is essentially it's more about how you use the internet in a jujitsu like way. to massively disrupt the packaged goods industry, which was Up until that point, up until maybe two thousand three or four.

22:19 absolutely dominant. And in fact, I think to your surprise, Blake, when we were discussing some of the uh the games in the early two thousands, you were like, oh my God, that game was actually on a disc. Like it was surprising to him to remember that some of these games that he grew up with as downloads The craziest thing is steam was on a disc. All right. Listeners.

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23:17 They embedded inside a massive law firm. For months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lagora's Bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work. and do higher value work. And this means that the pie can grow even as each individual task takes less time.

23:49 And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Lagora numbers essentially speak for themselves. When they have a head to head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from twelve hundred legal teams in fifty countries. And crazily, they went from one million to a hundred million in ARR.

24:36 Eighteen months. Mm. Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client.

24:51 If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at Lagora.com/slash acquired. And just tell'em that Ben and David sent you. Can you share how Steam got started? Sure. So um you know, the the Valve team, Gabe Newell in particular, and his his uh partner Mike Harrington, they uh envisioned that they needed a an updater, essentially, for their software because they were releasing these games like Half-Life 2 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 era was still a real thing. And anytime you're selling box software, it's gonna be a big thing. It's absolutely the case. And so they um thought, hey, we could build this thing basically that would form function as a software updater for our products. We'll put it on the disk and

25:45 Uh you'll be go up, login, and then it'll download patches and whatever rebalance uh rebalancings for your game, et cetera, et cetera. And so they went around to the rest of the industry. They went to m even their old employers at Microsoft where they they were early Microsoft employees, I think among the first twenty five or so employees at Microsoft. So uh had good connections there, and they asked if Microsoft would be willing to build this tool for them, and they said no. So they built it themselves. And then very incrementally after they released it originally with Half Life in the box, as you say, and it just auto installed when you installed the game. And then you know, very incrementally over the next decade. They just kept adding features, community.

26:25 A an app store. Mods. All of these various features and and and just eight the games industry. I mean now it's an eight billion dollar a year business, right? I mean it's just a remarkable, remarkable company. Completely privately held. Yep. And is that Steam itself is an eight billion dollar or valve all up?

26:42 I I think I think it's Valve overall. When you think about actually the strategy that happened there. Which is really the essence and we talk about this in episode two of of GameCraft, where It's actually releasing the game. Like we're talking about with half life. And it's like this sneaky route of oh wait, like I I I I don't know how intentional it actually was in in hindsight, but

27:03 they've ended up building this platform and they're like, Oh wait, now all these other developers want to use this. And now it's very clearly become Like it is the go to place. Even And and a lot of people have followed, right? You have Activision having their own launcher, you have all these uh EA or as their launchers. They all have launches and they all are still forced

27:24 Uh well I'm not forced, but really pushed by the market. to launch on stage 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 the most market power of any company, maybe a apart from Nintendo and Sony, you know, to to ro to roll their own, that he's putting games on Steam. And so you fish where the fish are. Yeah, I think it there's there's an it's a new iteration of that, or what the the latest attempt of being a platform based publisher would actually probably be Epic, which you know Epic has Fortnite. It does incredibly well. They've launched that on their own launcher.

28:00 And now they've been spending the past couple of years really trying to build up that big game store. And From My vantage point, I it hasn't made nearly enough like a dent, like relative to Steam because Steam still loses power. That's one of the things I wanted to ask you guys about, which is Where are we in the

28:19 business model journey of the platform based publisher. Like It almost feels like kinda like the rest of the internet, the platforms are starting to ossify. Uh is is that fair or are there still opportunities? You're saying gaming is not opportunities. No, no, the gaming is. Like you know, you've got Steam. You've got Obviously the consoles, you've got Microsoft.

28:39 Um And Epic is trying, but like who else could really conceivably and Tencent has done the best, but could conceivably break in. Or do we need a new paradigm? Well I I mean I think n the next one to go is gonna be Nintendo. Right. I think they're I think that's If you're looking for a reason to invest in Nintendo as a as a company, it's it's I I think they're about to crack that nut, right? And and and enter the app store business in a meaningful way. I mean, they have the lowest Uh

29:08 third party revenue per active user. By like an incredible amount, right? I mean like hundreds of dollars to like twenty-five dollars, right? Like in versus the rest of their console competitors. So They're waiting for that lid to to boil off there, I think. So that's that the on the conventional platform based publishing side. But I want to return to the question, the your original question, which I think is very interesting. I agree with you, and I think that um game pass from Microsoft.

29:37 is an interesting harbinger of maybe the end of the road for the platform based publisher, or at least the end of this road for the platform based publisher, because where they had historically aggregated users in an attempt to collapse the supply side. So aggregate demand to collapse supply. He's now filled with Game Pass aggregating supply again. I mean, you look at the Activision deal,$69 billion acquisition of Activision. It's basically a like you know, Netflix or Apple or or or one of these other companies built buying it exclusive content. And now I use the term exclusive somewhat guardedly because that's this is currently in the European Commission as a as a hot button issue. Clearly this is Microsoft strategy. So they're now back to aggregating supply in order to have enough viable IP in the plat on the platform such that you will continue to subscribe. Which is really interesting. I mean Just speaking for me personally

30:32 As a gamer, that is an incredibly compelling value prop of like I could I don't have a gaming PC. I don't really want to go make a gaming PC. I don't really wanna go go deep in the Valve ecosystem. I don't wanna go deep in the epic games ecosystem. Uh

30:48 Microsoft is offering this really easy all you can eat option to me. And streamable. In a lot of ways, right? So with the new uh X Cloud platform and and I I was a pioneering investor in this with Gai Kai back in the day. And it wasn't really economically viable, but now with scale and

31:04 Moore's Law and all these other things, we and bandwidth improvements, we can now really do it well. And so Uh you know, with a device like a Steam Deck or something like that, you know, you're you're able to n really avoid going down that path of building your own uh gaming PC. It is interesting that we're finally in the cloud gaming era. Like this has been the dream for so long. And of course there's this TikTok in computing to thin clients, thick clients, thin clients, thick clients. But like the whole thin client thing never really made its way to gaming. I remember I worked at Microsoft in 2012 and I was at our annual meeting in the old key arena and I watched a demo. of cloud gaming on a Windows phone with an Xbox controller. And I remember Steve Ballmer coming out and being like, next year is the year we're shipping this. It's finally happening. And here we are a decade later and now it's finally happening. Tesla full self-driving this year is happening.

32:02 Business models are inherently intertwined with new technology waves, and how does cloud gaming change? the business model of the games industry. I think there's one thing that's interesting about the cloud model and w one of my theses on why it didn't work back when I first tried it with with Gai Kai and with On when OnLive was out as a competitor and and some of these other things. Early twenty tens. Early twenty tens. Um

32:27 Was it was a mismatch between the user and the technological opportunity. So you could stream these games without owning a a gaming PC, but all the games that were really viable to stream were the kinds of games that gamers who already owned a damn PC were wanted to play. So you look at Stadia from you know from Google. Like what were the if you walk the floor of GDC and the launch here of Stadia, they were showing Assassin's Creed and like these other really high fidelity. Everybody already had this. And so I think with the real expansion of the audience in these those in that intervening decade. You now have actually the question that that that that David brought up, which is he he doesn't want to own one of these devices, and yet he wants to play those games. And I think that didn't really exist so much as a market back at in the early days of streaming. So you think it's demand driven. I do. I do think, however, that the the audience has expanded really in the in the last twelve to fifteen years and and that

33:32 this next generation of kids who've grown up on Fortnite, who've grown up on harder core games. Um but are still casual in their self-identification, who don't think of themselves as being core gamers. I think that's the real opportunity for the cloud gaming. Yeah, I think it it's there's also a part of Yeah, you think about all these people that are playing or used to play Fortnite on on mobile and it's like

33:54 Oh, that's just what I expect at 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 want to play Assassin's Creed on on mobile, whatever that might be. But I I I still think it's one of those things again that

34:11 n for multiplayer for those pieces, it might take a little bit more time, but surely for the single player stuff it it's Quite magic right now. I I I I I wanna bring bring it back a little bit to your question though, David and Ron like The platform based publisher stuff. And and where those might fall.'Cause

34:28 Like Mitch was involved with 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 instead they've decided to all aggregate all the demands and really keep it's it's sort of a social network and that there's friends and all of that within their own universe. And they're continue to publish their own games. incredibly well, right? You have team fight tactics. through their launcher and you have Valorant through their launcher. And those have worked

34:55 Exceptionally well. And it it really begs the question if you're a game today that is just launching on Steam and you're a venture backed company, what does that mean? You know, like i is that enough to really endure and build a real business, right? But it's really interesting because yeah, that's a that's a different approach to the platform based publisher because you're you're really aggregating that demand. for yourself. Right. It's like a Nintendo version of a platform based publisher. So you're you're you've got this audience there that's pre-qualified, where you've got their credit cards, hundreds of millions of users. And so you just use it as a way to lower your customer acquisition cost effectively to zero for the next products that you launch. in the pipeline and it just gives you tremendous competitive advantage. This is the bull case on the switch that we've been talking about, which is like

35:40 At some point Nintendo has to wake up and I assume it will be with the switch line and say, Wait a minute, we shouldn't come out with a completely new console and have to re-aggregate our whole fan base again. We should iterate the switch. and make it super backwards compatible and bring that 100 million plus person install base 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, much as you're talking about their sort of app store opportunity, but also Preserve this ridiculously durable first party revenue thing that we've had, you know, especially for the last six years with the Switch, but basically through Nintendo's whole life. once their consoles get to scale. Absolutely. I think we will learn a lot about what their strategy is gonna look like for the next decade in the next like ninety days. Yeah. Right. Because I think if they do come to market with a non-backwards compatible.

36:33 uh device It's back to the AWADA era, right? It's back to You know, we're gonna we're a hardware company and we have proprietary software which helps us sell hardware and it's a t it's back to the toys, right? If they come out with a fully backward compatible switch. and an open app store, and they really try and improve that position of third party revenue on a uh on a on an active user basis. That's the new Nintendo, right? That's the Nintendo that's gonna place a modern industry. That is so compelling, at least for me as a consumer, if they do that. I mean like uh

37:04 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 I've sat there for years, like staring at my switch being like Nintendo, why do you not embrace this dynamic? Like I I I think it's You can see publicly in the way that they're going with Microsoft against Sony. That Who knows what this actually looks like in the next ninety days.

37:27 both everything we can tell of how they're siding with Microsoft and open embracing openness. Yeah. Let's talk a little more about that. Sure. We don't talk about it that much on the series just because I'm avoidant of talking about the console business and whatever. But um and and let me let me just Try and explain why, right? Like the console business has been Essentially the same business since nineteen eighty five, really since nineteen seventy five, right? I mean it's Sella box.

38:01 and sell some physical hardware for that box and grudgingly allow it to be play online and grudgingly allow communication between users, right? And I don't find that that interesting from a business model perspective. I'm interested in revolutionary business models and gamecraft is really about that, right? It's about How these revolutionary business models like upended the industry. And frankly, there haven't been a lot of those in the console business. Now, there've been a lot of interesting developments, and and you guys explore the story of Nintendo, it's a fascinating story, but it's kind of a human story and it's a You know, it it it there's a y is uh particularly your first episode where you go way back. Right, and you just talk about everybody who's everybody else's son in law. Um I mean it's it's an intensely human story in that regard. Well, I feel like Nintendo had the In my mind.

38:48 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 of making incredible games.

39:02 either in-house or make sure they publish on the platform. I don't think anybody else realized that. No, I think that's right. And I think Blake put it really well when he was convincing me 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 a quarter drop. And so in some sense it was almost like the equivalent 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 and you could play whenever you want. Yeah. You talk about the sixty dollars for sixty hours of gameplay. That's r literally the equation you were doing at at the arcade, right? You're like I'm putting twenty five cents in for a minute. Well it was it was uh in the arcades it was six dollars for six minutes of gameplay. Exactly. So I accept that and that's that's why we're gonna. around cross platform, which is sort of the latest evolution of where the console business has been where you had Microsoft and and actually Nintendo embracing and and Fortnite was really the catalyst of this.

40:05 to let them be able to play across these different platforms of Up until this point, uh up until Fortnite If you had an Xbox you couldn't play with your friend who had a PlayStation or a Switch and And really Nintendo and and Microsoft went to war against Sony too. You know, Sony's perspective was if you want to play with your friends, get'em to buy a PlayStation. Yep. Right.

40:31 All these different business strategies are about figuring out In what way can you leverage an asset to get people to do something that eventually generates profit for you? And the way Sony was looking at it was Well, uh, you wanna play with your friends, so we're gonna use that as the carrot stick, whatever you wanna call it, to get you to buy our console, which we actually don't make money on, to get you to buy our games, which we do make money on, and God, it's like hop, hop, hop, hop. And

40:56 Nintendo and Microsoft ended up being quite odd bedfellows 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 openness either, right? Because you had a competitive advantage. But uh I think it's gonna come back to bite him in the ass over time. It's interesting, right? At one point I think on the series You guys say that with your investor hats on. it would be really weird if an entrepreneur approached you today and said, I'm gonna build a game for a console.

41:32 But everything we're talking about, if the era of cross play really comes to bear That might change things. Do like would you agree? Like if it truly is that you could build a forever game. With cross play, across console, PC, mobile. I mean, we uh as part of our Nintendo research. We talked to the CEO of a very large venture backed gaming company. That is not on the switch right now.

41:54 That is working very hard to come on the switch for this very reason. So I will say yes. Іва. А вот на c uh counsel any of my uh portfolio companies to launch on the console. Because the hoops that you have to jump through

42:11 uh for approvals for manufacturing, et cetera, et cetera, for just in general are dire and they're 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 green lit a switch uh SKU at that game company for Sky. And that has now come to market and it is really meaningful. And we have a PlayStation Five SKU as well. And so

42:37 For a a an established product where it's already found product market fit on another platform, on a more open platform. Sure, finding that adjunct it's like as as Fortnite disclosed in the Apple lawsuit. Uh the the crossplayers Monetized

42:53 Like the new Wales. I mean they were monetizing it at multiples of what the non cross play players were playing, and why not take advantage of that as a startup? Yeah, turn it turns out that actually like The cross play There there's there's different moments in in council where console really was the package good. And then at some point like the package good business for the games. And at some point free to play games were able to to thrive. And you have the Fortnites actually do really well. And if free to play games are really driven by social or playing with your friends, which

43:22 Fortnite was. It's it's sort of you need to have it on console. Yeah, and think about it demographically. Like if you've got a game on the console, for example, we were talking about this with one of our our our uh co-workers about um FIFA Ultimate Team, which you may be familiar with, which is kind of a playing card add-on to the underlying 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 a year business selling the card packs. Selling like literally bits. I mean, it is like a ninety-nine percent gross margin. I mean, it's the most astonishing business, right?

44:00 And this person was saying, well, look at the attach rates for FIFA Ultimate Team, right? And can't we accomplish those with a free-to-play game? And we we were like, whoa, slow down. You understand that you're selling a$20 add-on to somebody who's already paid$60 for the game and$500 for the console, right? The the willingness to pay. of that of that user, it cannot be compared to getting somebody from zero to one on a free to play game to put their credit card in for the first time to buy a virtual good on a on a on a free to play game. And I think that nuance is lost on a lot of people when they look at the industry. Well that's the great pot of gold with the consoles, right? It's like you've got these highly committed user bases with all their credit card information stored. You've got easy payment rails, easy distribution. It's like the dynamic of iPhone versus Android, but like a whole nother level. It's I mean literally you can look at it in the data with four. It's like even better than iPhone monetization. It's also exactly what we talked about on the Peloton uh episode, where Peloton, despite uh all the problems. has possibly the most incredible consumer subscription business, at least from their first

45:06 five, eight years of customers. because they selected into buying a two thousand dollar exercise bike, of course they're not gonna cancel a monthly s d subscription. I think this is part of why I like Epic actually felt comfortable going to war with Apple is is if you look during those filings, so much of their revenue is actually coming from the PlayStation and Console. And that To me is just like okay, the the mobile gamers were not the same value as the console and P C players. Yeah.

45:34 One question before we leave. platform based publishers that I I've been sort of thinking about but I don't have a clear answer is When does a company

45:44 Have the right to leverage their relationship with customers. into becoming a publisher. And like Q Q

45:53 It was very I mean it's a chat app. How the heck did they become successful in being you know, the ten cent 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 Ten cent. W why does sometimes

46:12 a company have the right to leverage that relationship to be a publisher and other times not. I would rephrase it, right? Which is My opinion is is that why Q Q was successful was that they didn't just decide that they're going to be a platform based publisher. They embraced being a platform based publisher. They went out and did deals. They owned

46:32 Forty nine percent of Epic. They owned fifty one percent of Riot, now 100% of Riot. They were one of the financiers of resort in the vi in the games business for Triple A titles. They aggregated products, they did they uh aggregated third party product from as a pathway into China because you needed a local partner because of government regulation in order to 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't too crazy about. Like

47:06 You know, okay, yeah, the Zinga thing they flirted with briefly, um, but ultimately that didn't go that well. And they decided now we're just gonna become you know a c a customer acquisition vehicle for the games industry. And frankly, it's been a luke very lucrative piece of their business. But They really embraced it Tencent and and invested deeply in it. And I think that's the difference, right? It's like they were credible as a platform based publisher where Facebook never was. Yeah, i i Tencent in in QQ is they they had the games. They wouldn't they they were committed and they were so intentional. And I when Mitch and I've talked about when when we look at uh uh investing in a studio, for example, it's actually how intentional are they at the beginning and of setting out that you are going to try and become a platform based publisher. Because

47:50 Even even just saying I'm gonna launch my game on Steam as a new company. maybe is is is is just showing your ambition of what you want to build and and I think that When you're talking about Facebook. It it should not talk about this part a lot of and a lot of the the executives in in

48:06 the valley, they're just not gamers and they're like, Oh, we can maybe launch a game thing, but they're they're sort of dipping their foot in the water versus actually like really committing to it. Google and Stadia. You're saying just because David and I have a bunch of people that listen to the podcast, we can't just decide like all right, you guys uh we're now acquired games now. And uh you're all gonna start playing games and we're turning on the Yeah, we'd have to be gave graft to do it. Although it t it you know, even then it's difficult. It's like we tried this at Discord. Yes. Right. And uh we tried to start a game store. This was obviously my my failure because I pushed them very hard toward becoming a platform based publisher because I thought, hey man, this is a great way to leverage this audience. And uh a great and look, we've already they we are they already self-identified primarily as gamers. This was earlier on before the Discord audience broadened to becoming the Bloomberg of crypto and now basically the launch area for pretty much every AI chatbot.

49:01 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 didn't work. So it doesn't always work. And and look, Jason is as deep a gamer as you can get, right? Discord was a failed game company. And I invested in that failed game company. I invested in it as a game company. No, no, it was me. So uh so it does you know, even with the best of intentions, it's it's it can be a difficult proposition. This goes full circle to your earlier question though, David, of just like Or the Giants already just set on the platform based publisher side and It's really to be determined because you have your Discord attempt at it, you have Epic really trying to do it, and and and they're sort of

49:42 I mean everything brute force him that they possibly can to make it happen. And it doesn't seem like it's 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? All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done.

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51:42 How do you um Think about One of your other investments, that game company. Is that game company A platform based publisher, or is it just like a really, really great modern studio, or is it something else?

51:58 It's a great question. I think that the intention is for it to be a platform based publisher. Game two is 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 and coherent way and with more continuity. So I think Genova he wouldn't phrase it in that way. He wouldn't s call it a platform based publisher. He'd call it a digital theme park. Right. But the idea would be Which is sort of Nintendo like Which is sort of Nintendo like in a way, right? And and now Nintendo has a legit physed park to go along with their virtual theme park.

52:32 But uh I I think he he uh but but I do think it is vein a a plat I would call it a platform based publisher. And similarly, I think the greatest disagreement I had with the founders at Riot was

52:45 When the We sat down and I was like, okay, great, we got a hit. Now we're gonna leverage this audience into the into into another hit or into a third party game or into a licensed intellectual property. And they were like, nah, chill, man. We wanna be Blizzard. We wanna make a game every five years. And I'm like I don't wanna I don't wanna uh fund a studio. I wanna fund now little did I know. Also Blizzard, as you pointed out on GameCraft, only an independent company that had to figure out its funding for three years. The rest of its history, it's had you know Daddy Warbuck somewhere figuring out how to fund it. And and I was wrong because they just took their time to become a platform based publisher. But uh they waited. I'm not that patient. But uh but there was an opportunity to start doing it after three years, and I think they their strategy was like triple down on on League of Legends and let's make sure that we can we can get it to all corners of the globe and that we can really build a billion dollar plus annual revenue base and the e sports component and the worlds and all these other things, and then we'll go and release Valorant and

53:46 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 it'd be interesting, if you're willing to share, Mitch, of just like what Genova actually pitched for that game company back in the day. Because You know, I've talked to Peter, I've talked to other people and they still remember that pitch being just so like J just an amazing, amazing pitch because At the time it it it's

54:09 still was like a a for you to invest in a studio, right? Like that would have been a a big ask or a a big leap of faith and My understanding is he just crushed it on the this is great too because I I bet a lot of people listening We'll be like, what are you guys talking about? What is that game company? No, it's a little confusing as a name it's not my favorite name for uh for a game company, although it's it's indicative. I I want to actually though take a a a pause just because I don't like funding studios, right? And and I wrote about this, I think uh you you reminded me of this because you found it in some internet archive somewhere. Like I blogged about this, like.

54:46 Fifteen years ago. Yeah, I think it was like twenty eleven or something like that. And it's amazing. It's it's like the title, it i I mean, Mitch has probably removed all of his blog posts at this point. I think it was like Investing in Content. Right. And it'd be like I don't invest in content. I don't invest in content. And the and w 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 and put it on Steam or I wanna make a mobile game and put it in the app store, right? And I'm really interested in that strategy more than I'm interested necessarily the the content is a means to an end, but the end can't be, oh, then we're 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.

55:39 And so I've had this philosophy since the very beginning, and I've tried to you to be very disciplined about it. So Genova approached 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 Arts and I had the license for SPO, which was Will Wright's uh kind of creature evolution. After Sim City, yep. And

56:09 Ye they w I was doing the mobile version of that, right? And so Uh, Genova had made this game. Um called flow. That was basically this game where 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 spore like this mobile version of Spor with me. And of course he was way too clever for that and said no.

56:33 But I kept up with him and we hung out and then he went off into the Sony ecosystem and built journey. Um journey is this amazing kind of meditation on death where you're playing a single player adventure game and you're climbing a mountain and enduring all this hardship and it's got all this crazy m multiplayer play where you don't know who you're playing with, but you have these deep emotional relationships with the people he's just an unbelievable game maker. And the art for that game it's just beautiful. I mean you screenshot any frame and you can put it up above your extraordinary So he came to me and said, Hey, I wanna uh like I'm I'm I'm leaving the Sony thing. I want to start over. I wanna make a game for the masses. Can you help me? And I was like, yeah. I can, but like let's pitch the partnership. So he came in and he did this pitch to the partnership where he basically talked

57:19 the whole time. He didn't talk 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 spectrum of anger, of violence, of envy of accumulation.

57:37 And what he what and there were all these other emotions that the that were being explored in music and in art and in in poetry and in the movie business. And We should do that in the video game business. And he finished his thing and he walked out and I literally ducked because I thought that the blast radius from my partners like saying what could you do with bringing this into the partnership was a capital firm and we're funding happy like Kevin Harvey turned to me and said Chase that guy out in the parking lot and give him a term sheet. It was like we he was like we are in business to fund people like that.

58:10 And it was and I still get goosebumps saying it now'cause it was'cause that's how I felt, but I was too afraid to say it in the partnership meeting because I was it w it was it I I I didn't have enough juice to really to to do it. But that must have been relatively early in your career, but I've been working on that thing forever. Um but yeah, it was probably uh you know within the with within the first couple of years that I had been that I was at benchmark. Before Snap, before Discord, before Riot? Uh right around the same time as Snap. Okay. Right after Riot. But Snap, you know, it it w you didn't know it was gonna be Snap. Snap was still small at that point. Yeah.

58:45 Peter tells exactly the same story, by the way, on on our on our team and He's like when he talks about the range of emotions that he was gonna cover and how underserved it was it it was just magical, like this m this moment of Oh my gosh, th this person's a genius. And so in a lot of ways, Genova is just like An exception to the rule.

59:05 Even still He he is on the path to build this, you know, something much bigger than just a contact. And look, I'm very I'm a very small contributor to the success of it, but what I did help him understand was that he can't make journey again. Right, that if he's gonna make if he makes Journey again, he's gonna get the same result that he got from Journey, which is he's gonna get a console like indie developer result.

59:28 And so I really helped them 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 what's the game called? It's called Sky. Sky. And we're so we're talking about hundreds of millions of dollars in revenue and he he does it with a tiny team. So it's ludicrously profitable.

59:56 Yeah. greater than thirty percent net uh income margins. Wow. And would you fund At this point. The concept of sky

1:00:06 even if there wasn't a broader platform based publisher strategy around it. Like, is that a good enough investment? Or let me make it an even sharp. Yeah, let me make it an even sharper example. If you got the pitch. for Riames and it was literally just League of Legends and it was going to be a League of Legends 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 a a venture capitalist in a firm, but having a lot of dough. 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.

1:00:44 Uh in things that maybe would have m shaded into the studio realm in my previous life. However, I would not have done the mid-benchmark. If I'm right, it's because it's it's just difficult to accrue enough power over the ecosystem. Two 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 customers. Yeah distribution is King.

1:01:10 Right. Which is so funny, right? Everybody says content is king and like now and distribution barriers have been removed and everybody anybody can make a game. But like Distribution. In twenty twenty three, distribution is king.

1:01:24 And if you don't have distribution leverage of some sort, I'll I'll I'll invest against any credible distribution leverage. But if you don't have that distribution leverage. It's very difficult. It's very difficult to aggregate enough value to justify a venture investment.

1:01:41 Yeah, I would say the bar you should just assume every venture backed studio Is an amazing game. Like it it just should be. It just should be one of the best games ever. It's 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

1:01:59 Like having a great app unless it is truly like Top one app in that category. You'll people will never even know it exists. And I I think that's A lot of

1:02:09 people that are building studios today. are much more in the camp of I'm gonna build the best game ever and people will come. And I think if we've learned anything over the years, it's unless it is truly the exception. They won't come. I think part of the pitch that Riot made to me that made me convinced that it had a distribution advantage, that was made me willing to invest in it. Was

1:02:29 the way they understood the existing audience for Defense of 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 and own IP. And you could see that as a studio bet on a certain level. But

1:02:51 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 going to do because. modding defen defense of the ancients and and running it as a new user. I mean you had to find an out of print copy of Warcraft three and go through all of these machinations to like a team. Did some pretty awesome growth hacks in the uh early days, right? We bought the websites that were we bought the defense of the ancients websites and just Turned their editorial to all the League of Legends.

1:03:24 Uh content on the internet. It it still sits on on Reddit, by the way, if you like search. I forget what the name of it is. This is like even better than the Airbnb Craigslist growth hack. Yeah, it's company. No, you could call it a growth hack. I call it a uh a customer acquisition advantage. And the and it gets you out of 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 based publisher out of it. And

1:04:02 That's how I roll. Blake, w were you saying about the Reddit thread? I I forget what the name of the the the website is that they bought. It's it's all these people who are playing defense of the agents that are like What what the hell happened? What happened? What's going on? And it was like the top post linked one of the shows. It was it was the top post of the the Dota subreddit at the time. And it's just like what happened? And they all just move over. It's like Oh no, do Dota's still over there, but you know The forums are all pointing to this very similar game with different IP. If you want to discuss something, you've got to discuss this. I will say it's it's incredible how there was a thing with clear product market fit.

1:04:45 that was kind of unloved and unmaintained. and hard to discover. In our world of podcasting, that was Apple Podcasts. And this Spotify. They didn't turn it into a a real business. Uh there wasn't like prioritization at the company. And

1:05:03 as a podcaster it was always hard to like get in touch with someone or be like can I can I Get editorial on this thing. I don't even know. It's this weird black box. It's basically just like a directory where like it's a key value store on the left side, they have you know, um a a a URL and on the right side it just points to my RSS feed. And then Spotify comes along and is like, oh well, we have tons of users. We're just gonna expose this right on the main feed.

1:05:27 Almost redirect. So much of our growth in the last year, two years has come from Spotify. Специфіклібка more people are listening. Two podcasts on Spotify. There's some cannibalization, but there's an enormous amount of brand new market. Because it's easy to find it. As a total neophyte to this world, right? Like we have both been just gobsmacked by how m what percentage of our users are coming from Spotify. I would never have predicted the how big of an audience was on Spotify.

1:05:56 'Cause I it just didn't occur to me, right, that Spotify had done that well in podcasting until we were started releasing these episodes and we were like, Wow, like more than fifty percent of our audience is coming from Spotify. If you had made Gamecraft two years ago, that would not be the case. It's actually really weird. It's wild. Yeah. It's wild. It's like the there's this really interesting f like opportunity in capitalism where sometimes there's clear product market fit, there's clear heat around a use case, and yet there's still massive economic opportunity for some new company to come in and say, oh that that thing, we're gonna be the best thing. And by the way, it happens again and again in the video game business. I mean you look at uh so for example, the survival um genre, right, which started with Arma mods like uh Day Z and H one N1 and sort of m like evolved into PUBG and then into Fortnite, right? But these were dead genres, right? These were these were super geeky hardcore. Like

1:06:50 kind of weirdnesses, right? Tarkov. Right. Uh which now is like a dominant play pattern in the in the kind of moba shooter industry. Yeah, it's it's basically these genres emerge, right? And and it it Gives product market fit and Then they realize, oh wait, if we just make this maybe more casual or we change the business model, whatever it might be, they expand the overall audience and One of the the most famous examples right now is uh Fortnite was you know, comes from PUG and and sort of stole that that whole rain is actually Fall Guys, which which uh Which Fortnite or Epic bought. Uh

1:07:21 And Fall Guys was this amazing party game that they couldn't publish on iOS because of the Apple lawsuits. Uh and so they never they never built a mobile game for it. And then there's a this these three guys in in Finland made a a of basically the same exact game. Uh push it on mobile. It's called Stumble Guys. And then it gets acquired by I mean it's like one of the number one apps for the entire year, number one games for the entire year. Uh and gets acquired by Scopely. And then you know Mitch Mitch was showing me the other day the biggest game in China is is is this game called uh Egggy Party on on mobile. Uh and that is actually literally just fallgas clone. It really is. It's just it is kind of remarkable. I mean look, you could argue World of Warcraft was this, right? That like there there were, you know, you started with uh you know Ultima Online and Everquest and these things, but they were all

1:08:10 We made a joke in the video. They weren't ambitious enough. Well, and and they never Yeah, they weren't ambitious enough. They weren't they weren't they they didn't reach out enough. Like they were very content to serve that core five hundred thousand users. And the joke at Activision back in the late 90s, early 2000s, when I was working there was there was a herd of five hundred thousand users who just migrated from one MMO to another, but didn't ne the audience grew. And then boom, World of Warcraft basically does this, right? They they they find the product market fit and just like and just embrace it and blow it out. And and it's seventeen years later it's still a number one product. I wanna pick up on uh something Mitchie said a minute ago about uh how you roll. And uh I think it also might be um

1:08:51 Relevant. far beyond games and some of your investing beyond games too. Um You said you'd look for something that can have a distribution advantage up front. gain differential profits versus to your competitors. And then reinvest.

1:09:04 Yeah. How do you once something starts let's take a game. Once a game starts to work. How do you Think about the reinvesting piece. Like that's the customer acquisition piece, right? Like W what's that calculus for you? I resist as long as possible going paid, although sometimes you're so profitable that you can with and not really mess your margins up too much, right? But

1:09:27 I think once you start down the paid path for customer acquisition, it's kind of a a slippery slope and it's a very difficult thing to come back from because you become almost like an addict to it and you you're so reliant on it and you start to twist your your mental model to believe that like you're in this. lifetime value, return on investment kind of thing. But

1:09:48 is unhealthy, I think, for but what but what I do love is doubling down on the organic stuff, right? So Uh like in the in the that game company case, it's like okay, we got we got this thing crushing on mobile. Um, let's look at some other platforms where a similar kind of user could be aggregated, whether it's switch, whether it's like casual P PlayStation, et cetera. And let's go after those. And then, you know, Apple wanted us in the arcade. We couldn't do it because we want it to be cross-platform, right? And they they wanted exclusives.

1:10:17 So You know, it's also what you say no to. During that'cause it would have been easy to say, okay, hey, there's a couple million dollars of of of you know minimum gear. Not gonna expand the audience. So it's like it's all it's it's making those kinds of key choices that like continue to reinforce the competitive advantage. Yeah, I think there's there's another piece of this, especially for free to play games where live operations, keeping the events fresh, adding new cosmetics, you know, in a game like League of Legends is Actually where most of the reinvestment probably goes in versus any of the marketing. It's

1:10:51 Let's keep this game fresh because in a lot of ways, when you launch a game like League of Legends, that's just a starting line. And like There's they're still on, you know, a ten year journey of keeping this game alive and fresh and That's where a lot of the reinvestment goes in these in these studios. How does the level of and capital intensity of reinvestment in uh fresh content for forever games compared to

1:11:13 the old world of building new package games for a studio or a publisher. Oh man, it is fast becoming like An annual amount equivalent to what an annual amount during production was. So I don't know if that makes any sense, but let's say that you were spending$100 million, God forbid, let's say you're spending$50 million like I'm breaking out in high tier that that number but to build a game. Yeah. And let's say it took you three years, right? So you're spending roughly$15 million a year, right? I I think you can expect to spend as much or more. On an annual basis than you were spending in development in LiveOps.

1:11:50 And live ops. Wow. Yeah, and and and and that can cover anything from you know the support side of this of you know when people report toxic users, but really you see it a lot in the events of oh I need to make new skins. Yeah, yeah, it's like or I I need a new champion in in uh in League of Legends. And when you think about League of Legends So much of that game is actually around balancing. And so then you have all you're you're investing all this time in uh QA testing and balancing and making sure things don't break and that it's It and and Riot updates League of Legends every two weeks. Yeah. And Every two weeks they're putting out new content. They're balancing everything.

1:12:27 And So that's pretty much the entire P L of that game at this point is just Keeping it fresh. Plus uh story content too, right? Like People have realized the IPs for this has become incredibly valuable. Absolutely. Where where are we in the esports journey in terms of that being a sort of reinforcing marketing strategy? And and I asked Blake because I mean y you you uh No, you ask Blake for good reason. Well I want both your perspectives. Actually I think we'll I think we'll be f closer than you think. Uh and then I think it's

1:12:59 I I believe you helped start horts team. Yes, yes. So you thought it was a good idea at some point. Yeah, well I would say like the Not to be the witness though, but uh No, I think I actually think if you like for Hunter Thieves, which is an eSports organization. That it it has three pillars of it, which is you know content and a media side, it has an apparel side, which is also a a thriving business, and then the esports side. And the view is always which is probably similar to Mitch's, is that Esports is marketing, right? And the view was how do you start a brand in gaming. With

1:13:34 Let's try and uh we'll we'll go and get a spot in League of Legends, which was franchising at the time, that will legitimize the brand. And then we will be able to while hopefully that s eventually figures itself out and becomes sustainable. It will be great marketing and distribution. for legitimizing a new brand in the gaming space. And I i it I think there's all sorts of nuances around League uh like around League of Legends esports and Counter Strike esports and really When when you say the word esports and this is probably like the real struggle of it, is

1:14:05 It it's quite literally just saying like what do you think of sports and owning a sports team? And it's like Every single sport actually has its own pros and cons to it. And there's certain certain leagues that maybe accrue more value than 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 it for the most part, it's a marketing engine for the game itself and keeping it fresh. That's actually what I'm more curious about. David took it to like enterprise value of esports organizations, which i I'm less

1:14:36 Like less interesting because it's ob an obvious failure. No, it is. But is it a good idea for the game. There are some Team Liquid, there's 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 of Legends worlds and get a lot of exposure and sell skins and all that other stuff. Yeah, and but even those are struggling financially. There those are not gr still not great businesses, but they're kind of viable businesses, right? Yes. Um but Uh ultimately like All of this is accruing benefit to the League of Legends. To the Overwatches, to the to the CS goes of the world, because that's really what it's functioning as. It's basically like you're getting 30 million people to watch League of Legends, you know, streams during the worlds, and those people are gonna go play more League of Legends and buy skins and whatever. And it's like I mean when the Chinese

1:15:32 Team one worlds. The riot guys were like throwing confetti because like when the Chinese win, it's like a hundred and fifty million dollar revenue opportunity um in terms of of of increased, like, 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 a free to play game like League of Legends. it it feels different than let's say soccer or or basketball where

1:16:01 In basketball I know at a very young age I I I'm not gonna go pro. Uh and and and I also like I don't have any real way to even play with people of similar skill level of me, like in my in my neighborhood. And I think when I play League of Legends There's clear signs of progression. And I actually just think the average person probably feels like it's more achievable. Like the it's more if I just play if I had infinite hours, I could go pro in League of Legends, right? That's the average person might actually say that. So more like golf or tennis, maybe a team sport. Yeah, I would just say like you you think It it's so much of the skill just feels more obtainable. And because you're seeing another kid

1:16:37 In a town over who's like making money, you're like That could be me if my parents just let me play. You know, like it's even better. It's way better than golf and tennis because The barriers to entry are so much lower. You don't need the money. You can have a lot of money if you're gonna play bell for ten. And and you're you're immediately queuing up against the best in the world. But I'm just thinking about it in terms of like participatory with a smooth continuity to pro. One of my favorite examples is you think about th there's like a streamer named Tifu in in in Fortnite. He got famous.

1:17:06 Because he ended up in the same lobby as Ninja. And He just absolutely styled on Ninja and on a stream. And his and he uh his his name was twitch.tv slash T Fu. Truly any given Sunday for everybody. Yeah, it would be like imagine just being able to go and play pick up basketball with LeBron and you know LeBron wouldn't do that because he'd be risk it hurt and all this stuff. Whereas Ninjas playing all day and if you style on'em, there's a real chance for you to get famous and

1:17:34 That part there's there is just a difference of like the dream is obtainable. And uh that is just so compelling to me from in in that way I think it's very similar to what we saw during the poker boom. Right. Where people were playing online. And you could play on into the world series of poker, right? Like from the from those online online games. And so there was a like I think that's m the that's kind of an interesting analog. Yeah, yeah. And and and actually uh Uh Valorant, for example, just recently released this this uh

1:18:03 sort of semi pro mode where it's you put you've have a team and they actually let you run tournaments and and eventually if your your team gets high enough up the ladder, they will play in in essentially the world cup. And I think that is Just so amazing of selling that dream'cause it it's It's not even just selling, it's like sort of real, and that there is going to be someone's life who's changed if they get discovered. And that's just so back to the

1:18:28 Uh earlier conversation about um Reinvesting in the game over time, like what an incredibly leveraged way for for successful forever games. To in like The ROI on investing.

1:18:42 Lots of capital in your eSports Ecosystem is going to be very high. Very high if it works. Yeah. Um Yeah, and there's a lot of different approaches for what it's worth. Like you look at look at Counter Strike and and Valve, and they've taken a very all like They just

1:18:56 don't really care. It's more like golf in the sense. It's more like the PGA where they sanctioned tr events, right? As opposed to basically owning the league, right? And um They'll co sign like four four uh tournaments a year, they'll call them majors, but there's you know, hundreds of tournaments that happen outside of that and you as a team you choose which ones you go to. And actually the real reason why you know, the e sports boom happened from an investment standpoint is you finally had the publishers like um League of Legends stepping in and saying, No, we're gonna try and run this like a sports league where teams are able to buy a franchise spot.

1:19:30 This should be like a the s the equivalent of a token similar to an MLS team. There's a lot of things, but really it i it goes into uh can can this can this accrue value and I I think that's really a different dynamic. And I spent five years talking those owners like the existing sports owners who had f terrible FOMO from like dumping money into these things. And and some of them took my advice and some of them didn't and ended up in You know, with some really dead assets. But that's what the that was Bobby's strategy. That was the League of Legends strategy. Bobby got people so whipped up. Whipped up'cause he was basically like, look, I'm gonna I'm this is the next NFL get in now where it's still where you can buy in for tens of millions of dollars as opposed to tens of billions. And this is the Overwatch League. Indeed. Yeah. Uh

1:20:16 I think even me at that time was was telling people that's probably not the wisest thing, especially when you think about it's not even a forever game. You were working for a sport. Okay, at least let's think about the incentives here of like how we're gonna line this completely different business model and and game overall. At least in in League of Legends, the incentive is still to keep this game of alive for hopefully forever. And That could occur differently then. Something like an overwatch thing.

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1:22:38 So we were 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 don't have have not attracted a lot of capital or

1:22:51 Attention or care. Perhaps we could talk about uh the opposite of that with web three and crypto over the past few years. And specifically web three and crypto Gaming. You end gamecraft.

1:23:06 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 I'm primarily skeptical because It's a character flaw of mine that I am part of the original tribe, right? I'm part of that OG gaming tribe, right? Like maybe a slightly younger than the real OGs like Bing and and Trip. but kind of still part of that generation. And so I still am very protective of the video game business because it was this kind of nerd's paradise like back in that day. And and and I'm

1:23:40 I'm always resistant to tourism, right? I'm always resistant to people kind of coming in from outside and kinda claiming it as their own. And and it's of character flaw because it sh I should be big tent and I'm just not. Um And

1:23:54 At the same time, riot was that, right? The they've never made a game before. Man, those kids were so down. Like they they no, they were they were super hardcore. I would have adopted them, right? I mean they they they they were they they deserve to be in the tribe. They were they embraced the tribe. But a lot of the early web three

1:24:17 Gaming content. came from crypto people slumming in games. Right, who had no idea what they were doing, who made really crappy games that were really just an opportunity to to mint and and launch NFTs and participate in an NFT. marketplace that had some lightweight

1:24:36 you know, game mode that was associated with it. And there's a bunch of those out there and I don't want to go through them chapter and verse, but They're hideous. This new crop that we're starting to see now, and I I just actually invested in one. Oddly enough, um, just recently uh Supercell the um Fin Finish Game Company and and I made a angel a joint angel investment in it in in a deal that

1:25:00 has a component of this. Uh you saw Eve Online. Uh just raise forty million led by Andreessen Horowitz to make a a crypto enabled version of Eve. Oh, I didn't realize that. And Eve is like a long running I mean that's a twenty fifteen, twenty year eighteen years, I think. Icelandic gaming company. Yeah. So now you're seeing game people who've had a chance to kind of digest the technology.

1:25:24 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 aligns with my narrow view of the games business, but maybe also because we're gonna get good games out of it that don't seem like scams. And so for our audience who's not been paying attention to web three gaming.

1:25:45 How is it mechanically different? Then traditional game business models or even let's just say that the current most popular free to play business model of gaming. Uh what new things do does blockchain unlock?

1:25:58 The good news is not that much, right? No, and I think this is no 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've been playing for a while and you're kind of bored with just grinding on the underlying free to play progression mechanic. There's another sphere where you could play, right? Where you could you could take your character and mint it as an NFT.

1:26:28 It gives you certain benefits in the in in the underlying game, but it's kind of gives you status that you in in the status competition that you and the other like very advanced players are are are engaged in because at some point, you know, if if you've been playing Warcraft for World of Warcraft for fifteen years, you you're not running around killing chickens for gold, right? Like you're you're playing a very different kind of game and you're playing kind of a social game. Right. Right. And so I think there's aspects of that that can be enhanced and enabled with the web three technologies. that actually are additive to the gameplay. And I think that's exciting to me.

1:27:02 What what's an example? I'm not gonna tell you. You could imagine um uh Eve with this uh Eve is a good yeah I mean Eve's a good example. So they're they're gonna have a token, and that token is going to be useful in the game. in a way that's not pay to win. Yep. Right, which is the the death of a of a free to play game. Um and Blake Blake is almost almost a religious fanatic around play pay to win.

1:27:29 Why do people do Pay to win. Then like it will kill your game. Because it's it's short term it works in the short term. I I was talking about this with someone at SuperSo recently. And I think like

1:27:40 Clash Royale if you play that game. Uh has some real pay to win mechanics. It's like softer. Uh where You can go from You could probably spend a hundred hours playing that game completely free to play and it's balanced and great. But once you hit a certain point, it's like

1:27:56 Oh, you hit a wall. Like it it it it's gonna take a while to grind out here. And so either like spend or or you're gonna be playing this game like eight times longer than the person who you're playing against. And I think that's one way that you see it. You typically see that more on mobile but If competitive integrity isn't the goal of your your game, like from a multiplayer standpoint, Then it's way easier to to do more pay to win stuff. Fair enough.

1:28:19 So when social status is a key component of the game, that's when pay to win is the worst thing you can do. Yeah, I would say well I would say Uh Leaderboards. Yes. Yeah. I mean in in the in progressive Uh status. Yes. Yeah.

1:28:35 It like w if if your rank meant something in League of Legends, which it does. If you if there was a way for you to buy the highest rank, that game would break. Like it would it would just simply would break. So wait, let's go back to the token notion. So what is the token An Eve Online, okay, great. Now there's this like crypto element, what can I do with it? So Hillmar hasn't released the design yet, and because he pitched Blake and I, I'm a little uncomfortable discussing it. But but let's just say abstractly.

1:29:02 Yeah. Um functions in a way like a s a store of value almost like a supercurrency where you you will have uh it the token as well as an in game currency. And the token isn't necessary and the token can be acquired through play. But it has some interesting properties that you are acquired through ownership.

1:29:24 Mm-hmm. And and you're incentivized to buy it. Because it it it provides you with certain benefits in the game that are that don't necessarily make it Competitively Unbalanced. But that

1:29:35 Um open up areas of gameplay that might be closed to you if you didn't own it. Interesting. Very clever, by the way. Like I mean, of w we he Blake and I have looked at a bunch of these things. Most of them are absolute crap. This one is really well thought out. He he has he has one of the best framings that I've ever heard around this, which is

1:29:54 Evan Line, the original, and he's like, This is Rome. Uh and and you know, like You have n like broken sewage and just like it's it no paved roads, all this stuff. And he's like uh web three and and building it with crypto rails.

1:30:09 actually makes it look closer to like New York City. And so he's like We'll still keep Rome and and that version of 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 you still have Italians that that move to New York, you know? And and uh and he's like it might take a bit, but like they still move over to New York and and I just think that's The right way to think about it is there's very different cities and people like them for their own reasons, but

1:30:39 In a New York example, he just thinks there's a lot more you can do with the game. And Eve is fundamentally an economic simulation, right? Even though it has a veneer of being a kind of space combat kind of thing. Fundamentally eighty percent of the gameplay is economic. Right. Mining, trading, manufacturing, et cetera. It is the perfect vehicle. Yeah. If this game doesn't work, uh, it will be actually very telling

1:31:04 Of of the current Because if it works anywhere, it should work here. Exactly. Yeah, like it is a perfect application. There's a there's a real question of is this game still a a a viable game that people want to play in twenty twenty three? That's maybe a different question, but it is the perfect vehicle for web three. My I ask all these questions'cause my skepticism has sort of come from there's all these uh egalitarian notions of In the web two world, it's 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 don't have to go, not everyone has to go back to the store to buy the thing, you can buy it peer to peer.

1:31:42 And in my head I'm always like Well that sounds nice, but why would a gaming company ever enable Peer to peer sales. when their whole business model is having them buy the goods from you. Increase the size of the pie.

1:31:57 Incentivise you to trade at a much at much greater volume and harvest transaction costs. Right. I mean, look at Roblox. Right? Roblox has doesn't have a web three component, or at least not yet. But man, it's got a very viable peer-to-peer economy in in it, and Roblox is the most highly taxed app store on earth, right? I mean, because you get paid as a as a as a developer in Robux. Right? So when you're extracting those, they're taxed when you're going to be able to do it's not robots isn't web three, but it might as well be maybe the most successful web three. quote unquote web three application out there. Trevor Burrus Absolutely. And so I mean I think the last time I calculated the ta the total tax, the gross tax was somewhere close to sixty percent. It was like fifty seven percent of like the last time I heard is like fifty five to sixty percent. Yeah. Because it just keeps compounding every time that robux moves between parties, it just keeps it.

1:32:50 getting and like Twitch. And like YouTube gaming and other things where there was this incredible feedback loop. And we talk about this a bit in our user generated content episode in GameCraft, you know, Minecraft, for example, where they're they're they just crossed the one trillion view mark on YouTube. Right? Of Minecraft related videos. You know what? Uh the company that made that, Moyon.

1:33:13 didn't make any of those videos. They were a hundred percent made by the community, right? And yet that community was highly incentivized 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 space is that this can be more broad than even that. I I would say even You look at a game like Counter Strike and and a lot of people don't look at Steam and view it like an open sea or one of these marketplaces. But In in

1:33:47 Team f uh Team Fortress Two and in Counter Strike. They introduce these virtual goods and they're literally just cosmetic, but you open a loot box, you get the s the skin and Those skins have real value because it cost two dollars to open up that crate. And you might have just got something that's super rare.

1:34:05 And in the public market that is hosted on Steam, where they take I it's I think it's ten percent, uh They are double dipping and triple dipping on the content that they primarily issued and they're getting all the secondary sales just at recycling through of, oh, you got a knife, I want a knife scan, that's like four hundred dollars is what does go for on on that market. So Valvin 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 they'll eventually shut down that site, maybe, but it's there. Like you can people use these accounts, people spin up Steam accounts as escrow services and like their bots and you know, there's sites that just literally will transact for US dollars. So I I I think it's There's a lot to study there. And you know, one thing that Mitch and I always talk about is there is the speculator problem, uh of in this in in a web three example where

1:34:57 If you truly were looking at Counter Strike and you wanted to buy In theory, you want to speculate is contract going to be bigger over time. I should just buy all these skins uh in the open market and That just raises the price. And and it's 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. That's one sort of Unsolved or to be determined probably. Yeah, I mean Blake and I uh Blake and I talk about this. We call it the um

1:35:25 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 75 grand. And so you feel like a fool because you spent that currency. And so When you're when we're looking at web three related deals. Like solving that problem, like incentivizing you so that you don't feel like an idiot. for utilizing the token is a key, key factor in these games. And I think it was one of the things that got me over the hump on Hillmar's uh Eve, you know, new Eve game, right? Uh Awakening, because he actually had a really interesting solution to that problem. And we've seen so precious few good solutions to that problem. And it's a it's a double solve because

1:36:12 When something goes up a lot in value There's a problem'cause you don't want to spend it. And uh the goal of creating any economy is dynamism to create a lot of transactions and and uh and turnover. Then there's the second problem of speculation. When things go up a lot in value, it encourages a lot of people to speculate, brings in the wrong sort of people, makes the game not fun, messes up the antennas for everyone. So if it doesn't have that problem, then you solve two issues. Yes. Yeah, it it's it's really tricky and

1:36:39 I I don't think anyone has has has solved it yet, but we we're certainly finally starting to see some people have theories around how to solve that. And it'll it will be really interesting to see it play out because it it if you can solve it then There's no reason why these things shouldn't exist in in games moving forward. Yeah. So uh Well we were

1:36:58 Going back and forth on what's talk about on this episode. Uh Mitch, I think it was you and our Shared doc here. Had Quite a few thoughts that you wanted to add on to our

1:37:08 Nintendo episode. Um Specifically, I thought the most interesting was around our assertion that The NES was the first Consumer

1:37:17 device with a GPU architecture. Yeah. Tell us what w what we got wrong. I don't think you got it wrong necessarily, but I I just wanted to I'm fascinated by the history of this company, this Utah-based company called Evans in Sutherland. 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.

1:37:46 So These two professors, they were you guys talk a little bit about um this in the Atari context, right? Where you of you mafia of computer graphics, H and um Ed catmole and Nolan but what you get wrong about that is that Nolan was like ten years senior to the rest of those guys, right? So Nolan went through as an electrical engineering student. And then Evanson Sutherland came in and formed the computer graphics practice at the University of Utah. And so Nolan was had already graduated.

1:38:13 But Allen the but they got catmole. Alan K So Catmole, who goes to Pixar, Alan Kay, who basically goes everywhere. I mean he's part of the Apple user interface thing. He he starts the Atari research groups that basically invent virtual reality. I mean he's pollinating flowers all over the the computer the computer business. He's credited with um the best way to predict the future is to invent it. Yes. So incredibly important figure. You have John Warnock, who goes on to found Adobe, one of the most important companies in the computer graphics business. He was the other guy on the Nintendo episode that we were trying to think of. Jim Clark, right? Was a student of the of of Evans and Sutherland. So all of these incredible people.

1:38:56 came through the U that University of Utah computer graphics program and so the professors then spun out with The absolute bucket of DARPA money. and started this company that basically started to build in the late nineteen seventies, early nineteen eighties. the first commercial flight simulators.

1:39:14 And so uh you know, w with very high fidelity uh f basic you know, flight simulators and of course flight simulators required the kinds of advanced graphics that just weren't available on desktops, even on in the workstations of those days. The You know, this is pre-Silicon graphics. This is, you know, pre any of that stuff. So Um, they had developed a bunch of this d proprietary silicon during those days and ultimately ended up in the supercomputer business.

1:39:39 uh later on in the nineteen eighties, and then ultimately in the nineteen nineties. Uh we're in the console business, they helped develop the bridge racer for Namco. um the s the the the very advanced uh racing sim. You put this in the notes and I was like what so it comes back full circle to the video game business. But um I just find that whole episode incredibly fascinating and and and I and it's so interesting to think about. uh all of those people kind of coming through that same program and and and and what it must have been like and and Evans and Sutherland had a big impact in the games community because former employees of theirs started up a bunch of games companies. Um and again like just

1:40:18 One of those incredibly seminal in in really the true sense of that word. Um C technology companies. There was another thing we brought up on the Nintendo episode where I'm curious 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.

1:40:40 And I I always Just thought this was this new phenomenon 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 it's always been true. Could be I don't know much as much about what they count when they count the Hollywood revenues or the or the music industry revenues, right? Whether it's sort of ticket prices or or h or what.

1:41:01 I think regardless, the really interesting fact is how big the arcade business was. Yeah. And if you go back and look, some people do these really clever little graphical drawings where they show sort of how we got from early games business to the hundred and eighty billion of today and they show Like centers by market share as they ebbed and flowed. 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 and when we were researching for the Council Castles episode It was so clear that these These castle manufacturers really were f wrestling with

1:41:37 Do we risk it? Do we risk you know our our coin op business and I in in a lot of ways is probably why Sega you know w isn't what it was or isn't Nintendo is they were trying to protect uh what they have. They're literally making billions of dollars in the seventies. Like billions of dollars in revenue in the seventies. Of course you're not gonna stop doing that. Yep. I mean I grew up in that era, so I was one of those, you know Rugrats who was like, you know, camped out with quar a handful of quarters in in a video game arcade.

1:42:06 Um and so I remember that. I mean, they were important social lochi, right, for kids in in those days. Yeah, let's talk about I'm curious for for both of you. Maybe maybe let's start with Mitch because you're talking about it. What was your entrance into video games before you got into the business side of things. So yeah, like space wars at w at a Woolworths. You played Space Wars? At a Woolworths 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 one? It 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.

1:42:44 Th 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 Woolworths in Or Walgreens, I can't remember what, in in Fort Lauderdale in a mall.

1:43:04 had one of them outside of it. And that was literally the first video game I ever played. And then it was you know, Robotron and those kinds of games were sort of my jam growing up. Would you but been in the Yeah, except that we were Apple Two family. And my dad was one of these uh guys who loved technology but couldn't understand how any of it worked. 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 and invents video assist, essentially in Hollywood. So both of us ended up kinda kinda techno geeks. What is video assistant so uh in the old days with film cameras

1:43:38 The only person who could see what was being shot was the cinematographer who literally looked through the eyepiece. And now if you go on a film set, there's a video village where All where the producers, God forbid, can come and watch what's being shot in real time, right? And that technology transition basically involved this. intermediate step called video assist, which was my brother's thesis at the meet at the MIT media lab in the late eighties. You always see those, you know, uh George Lucas in Tunisia shooting in the desert in seventy what was it, seventy six when they were shooting. Uh a new hope. Like

1:44:11 Th they've got the tent, they've got video monitors, everyone's pointing, they're watching dailies. I mean it's a it's a It's a camp out. Yeah. So that was uh again. We would inherit we would inherit these technologies, whether they were like Or you know, early video cameras or whether they were computers in the case of the Apple IIs.

1:44:28 And then we would screw around with them and try and figure out how to make them work. And of course, because we were children, most of the time we turned them into games. What was your first dedicated gaming machine? Uh the first dedicated gaming machine that I owned'cause I wasn't an early console adopter, so the first dedicated gaming machine I owned wasn't until I was in law school in the in nineteen eighty seven. Uh, my wife, who is a game designer and worked at Activision for 15 years, but was a lawyer also and we were in law school together, but we just basically like you know, played video games all the time. So we bought an Amiga.

1:45:01 A Commodore Mega, which was a very famous device inside the video game business, but ver largely unknown by most people. But it was An incredible device. And um This is after the Commodore sixty four or And so that was my first I would call that my first dedicated comp uh gaming device. Blake, what was your first uh gaming experience? Uh my brother's three years older than me and so 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 it w it was so bad growing up of like we would play N sixty four and we had an N E S and I think that's the really the first console that we had and

1:45:43 I I remember just being stuck playing like the crappy other character and you know, uh it was bad. Like we would play Sonic and I'd be like Tails, you know, and it it like it. I just remember hating that experience and I it was it became really clear that my brother just loves single player narrative type creative games and When the Xbox came out, I was like, Oh like I can finally get something that my brother's not gonna take all like all of the time with. And uh I got an Xbox and and really Halo is the thing that like changed my life. I was like, What is this? This is amazing. Uh and then really the three sixty, when Xbox three sixty came out And Xbox Live just really took off. Xbox Live was such a

1:46:21 You talked about it a little bit in the console castles that will sit. Yeah, only just because of what an incredible like business uh proposition it was, because you had a captive audience who really wanted a community, who really wanted multiplayer play. And basically they said, Yeah, there's one way to do it. You can pay us five dollars a month. Yeah, talk talk about like the you know number of people that actually upgrade. It was in the number of people that wanted to get online services for their game then that had to pay Xbox in addition to their console that they're buying. Just insane. Like the numbers, I forget what it actually ends up being, but it's certainly billions of dollars in revenue even to And it's not like they weren't your ISP. They weren't giving you the internet. It was just the right to get online with the Xbox. Yeah, yeah. It was just they controlled that hardware and and I I just remember playing Call of Duty online for the first time and being like Oh my gosh, my life has like changed and my parents wouldn't buy me a gaming PC'cause they just knew I'd be a total degenerate and they're they were probably right. And I like to like I now have a uh gaming P C and I'm 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.

1:47:26 But we missed my wife and I, the the console era really in a lot of ways because we went from sort of, you know, PC w like, you know, w during that entire era, basically, I mean the first consoles really that would have been viable, the twenty six hundred and stuff, we kinda missed'cause 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 of the early EA games like Starflight on a compact portable.

1:47:54 That had an RCA out that we could plug into a television. And so we were watching it and we were playing it. That was our monitor to play with the back competition. Thirty pound port you know, sewing machine type of thing. Those old boxes For the mouse, they had like a trackball mouse. Oh wow. So and then we ha we had we bought our first console actually when she was interviewing for the job at Activision. Um I was at Disney and she what she needed to play So she got into the games business first. Oh yeah, yeah, yeah. She needed to play Mech Warrior

1:48:25 Uh twenty twenty forty seven, I forget what the what it was. I played that on the Mac. Yeah, yeah, yeah. So but it was on so we had to buy a S N E S so she could study uh the the Activision games before she went in for her interview. Wow. Um and then she got hired and worked there for fifteen years. Oh. How did she Decide to

1:48:45 Transition her 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, it sucked, but it was like but but still we w we we were we just sort of knew that was our calling and like we practiced law for a couple years, but neither of us were totally into it. She actually was a a district attorney in the hardcore gangs unit in LA. And so she had a much sexier job than me, who was just doing

1:49:12 Representing you know Atari games against Nintendo. Wow. But so this is wild. Like both of you decided that it was economically better for I don't want to say decided, you Went to law school rather than go into making games. Is it because you thought there was no money in making games? There was no You know, it's just one of those things where you don't know that it's possible, right? I mean I I I uh So I I I think that's it's true. You find this to be the case in Hollywood quite a bit, right? Where kids who've grown up in in Kansas or whatever

1:49:42 Um, you know, they'll they'll say when they're interviewed, like, you know, well, why didn't you choose this profession? Why did you go do something else first? And they were like, I didn't know you could do this for a living. And I kinda didn't know you could do this for a living, right? It just seemed so out of touch. But slowly but surely, 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 early box console guys who made cabinets. Um the uh the electrical Um instruments. Uh scientific instruments

1:50:15 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 because remember these box console they were making what we would now think of as software in hardware. Yeah, there was no software. There was no software. Wow and so I went around and interviewed these guys and I was like, These people are so cool. Like What am I doing? Like like there's there's another world out there.

1:50:41 And so I left and and went to Disney. Yeah, I think it's funny y you you mentioned like the kid in Kansas has no idea this is even possible. I always joke like I had a double life, right? I I played video games and I still play video games probably way too much. And I really and it wasn't even until I entered venture capital I realized, oh, you could like invest in games, like that's a thing. And I learned about Mitch and Bing and all these people. I'm like Whoa, that's like I I didn't even think that's possible. And that's even after I ended up in Venture Capital, I I was like that I didn't even realize that was And that's today. Imagine from like the you know the games business in the late eighties. Yes. This is another great thread. You said even you said I play games way too much. There's this stigma.

1:51:21 around this industry still. Why is there this stigma? Oh I mean I I I mean I I I definitely just objectively play too man too many games. But to to m uh the statement too much. requires It's a moral judgment. I think a lot of people in the business world Think of the

1:51:45 You know, video game industry is like huh, whatever, that's like for kids or that's like not real. That's not real business. Well and and and and you I think addressed 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 Magna Box Odyssey, if I'm remembering that correctly. The light gun. Yeah. Yeah, the light I'm sorry, the light gun, yes, indeed. Um and that Like

1:52:11 That was real, right? I mean, when I was I mean, it it and it persisted long into the nineties. I mean that it that it was still kinda considered kind of part of the toy business, right? Um Hasbro made a run at Activision, little known fact, right, in the late nineties. When I was uh running the studios there and I remember going to Toy Fair in uh New York, which I d w which is a trip, man. Like back in those days, like and we went we went actually to the Hasbro pre-toy fair. uh thing in in Boca Raton, Florida, of all places where they were they had taken over a hotel and 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 and The deal never ended up getting done. But it but really in those days

1:53:00 It wasn't that much of a stretch to think of the video game business as basically being really pertinent to the toy business. And now we don't think of it now, we think of it more as a pertinent to Hollywood. I mean, you look at The Last of Us or uh you know, things like that where where you know now we're supplying IP to like serious drama and whatever, but like that wasn't always the case. Yeah, I think there there's also the subtle shift of games becoming really social. Like there was Maybe hang out with your friends, they would come over and you'd have a little lamb party or you'd play Mario Party, whatever it was. But obviously games today now, like I play League of Legends with my friends online.

1:53:33 That I actually probably haven't seen some of those people in person in years. But I still play with them all the time and I know what they're up to and it's sort of uh I don't know, the equivalent of playing golf and on on some level of like oh I'm catching up and I'm sure the games itself are a way way to facilitate. I'd also see that the content itself Um and our choices early on in the business w was somewhat self limiting, right? In the sense that um I mean the w I mean, we made a lot of really violent stuff, right? We made a lot of um You know, games that

1:54:04 To Genova's point, perhaps didn't didn't explore all of the spectrum of human emotion. And as a result, I think it 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 1940s, right? Like or um you know v s certain kinds of independent film or sexually uh explicit content or whatever has been viewed historically, right? Whereas 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, Blake, because

1:54:39 You wouldn't say I hang out with my friends way too much. But you say I play video games too much. And it it's it's it's like there's nothing wrong with being social and there's nothing wrong with having fun and enjoying your life. So why is it that there's something wrong with playing video games with your friends? Uh may maybe maybe it's just the games I play that they're really competitive and so they they they make me very upset and feeling feel feel feel feeling very tilted after I play those games. So it's more that feeling. It isn't the case in my family. I mean my wife just played

1:55:09 Elden Ring through Finished it. Right. U those of you who do not know what I'm talking about, Elden Ring to finish Elden Ring is not only do you have to be hardcore, but you have to expend a hundred hours or more, right? I finished Elden Ring with a one year old. But I'm still married. She finished, she was like, Okay, now I gotta play it as a different character. Played it again. Okay, finished it. We started watching Craig Mason's The Last of Us on HBO and she was like, Oh, I haven't 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 in.

1:55:45 Wow. Where I'm like the non gamer. So what what's your drug of choice here, FIFA? Currently well, it has historically been FIFA, um and which I which then my s I had a son who grew up to be a very, very accomplished soccer player before becoming a musician. And so he and I played a lot of FIFA together, which was kind of a our dad-son bonding stuff, but he then he became too good Um and then that maybe your career editing. It's like the backyard basketball trip. Where your son turns out to be LeBron. And then uh but I've always also been a real time strategy enthusiast and uh grew up in the era of Command and Conquer and StarCraft and Warcraft and currently and playing Age of Empires four pretty obsessively.

1:56:29 Well, a way that we wanted to kind of bring this episode home is You guys recorded GameCraft. In full. before getting any input from the outside world. Acquired basically only ever has one episode in the can and so

1:56:44 when we release it, we get feedback, we incorporate it into the next episode. I I'm sure you've gotten a flood of feedback. Since releasing the whole series. Is there any sort of mailbag or things people have uh have brought up where you might want to address Things from the series.

1:56:59 Yeah, I mean I think you know broadly It was a bit scary, right? Because we did release eight episodes pretty much just sort of back to back to back. And we as you said, we they were all in the cann when we f recorded basically the first episode. And or when we released the first episode. And um I've just been incredibly Surprised by how universally

1:57:19 Um positive the feedback has been. I think there really wasn't much like it. On the market in terms of not at all. Uh like deeply researched, very much, I think, inspired by what you guys have have demonstrated, is that you know, there is an audience for this kind of well prepared, um intellectually rigorous

1:57:38 kind of exploration of of a niche industry that most people wouldn't consider interesting, but you can make interesting. And I think that was partly our goal when we started. And so we did gain have some inspiration from I mean, I think you y if you guys hadn't existed, we probably wouldn't have done it. Thank you. But uh yeah we've got to be. He he just told me not to write a book, which I think uh you know he's been on that that for a while, that like the that podcasts are the future. I think he uh he's done a couple episodes with Bill Simmons, who you know, calls himself the Pod father.

1:58:10 And uh he is. It's true though. Like we we've thought we've been asked many times, we've thought about writing a book many times. On it never pencils. Like it's never a good decision. No. Which is kinda sad, but Is just the reality to the Yeah. Yeah, it it's I w I just echo what Mitch has said, which is the feedback has just been amazing. It's the most common feedback or you know, the mailbag stuff is just You you lead us right to the current time. Uh and they're like

1:58:37 We want you to have AI and game. So let's talk about that, right? Because we have gotten that as a question. This is a brave new world, right? And and I think one of the things that's kind of fun about AI in games is that we've had AI in games, right? Like this isn't started in games. Exactly. Um I remember Danny Barry um when she was uh making uh mule back in the e in the old EA days. Um, she was basically like

1:59:03 you know, like, oh, I would make the characters behave randomly because they seemed more intelligent. Right. And so every once in a while I would I would get my N N PCs to make mistakes and then people were like, oh my God, they're alive. Because that just seemed so human compared to the computer like behavior. It started there, I mean, and it's it's kind of evolved all the way to the very sophisticated kind of computer immediately. There was at least what a five year period, I think, where Microsoft's AI was called Cortana. Yeah. After Cortana from Halo. So Now we obviously, you know, you can't every rock you turn over in Silicon Valley these days is an AI pitch, right? So um Yeah, we're at benchmark and I can see like 15 founders lying up outside of uh Dexter. Literally the parking lot was full. We had to drive around to like the town hall to park. There's only eight spaces. 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

2:00:00 uh there's a a train of thought that s that has been advanced that Oh wow, this is really gonna democratize the game industry in in a way where now, kind of like you're seeing with Midjourney, for example, where you can just describe a piece of art and it and it magically appears. That people will be able to describe a game and it'll magically appear. I don't subscribe to that. I think Um and again, maybe it's just my my narrow narrow mindedness, but I I do believe that making games is really hard, right? And and I think making a coherent narratively uh satisfying

2:00:32 you know, journey on in a in in the in a in a game context, in an interactive context is not necessarily gonna fall to AI early, right? That may be one of the later things that happens, but in the interim Man, there is gonna be some really cool stuff to happen. So I would I think we we we we're talking about this with some senior executives in the video game industry recently, and I think we kind of agreed on that there were gonna be four really interesting areas of investment early on. Um I think one is art pipeline. Clearly, right? Because

2:01:02 Just the amount of money that's spent on art in video games is mind boggling. It's just staggering because you think about it, it's like you're making an MMO, you got a town, one of many. There are buildings in the town. Every building has a table. In every building has a chair. Every building has a piece of art on the wall. Every b and there is a Every character has clothing. Or whatever, or it gets monotonous. Like you have to cheat on the U.S. Every event themes these things for Halloween and Christmas and New Year's. I mean hopefully you guys played Breath of the Wild. Absolutely magnificent. I mean it is it is a a magnificent achievement. But man, you when you when you're playing it, think about what it took to make it. Right. Every one of those characters, the dialogue, all of that stuff, right? And so

2:01:46 I think you know it's not gonna replace the abil the the the need to design those things, but it may replace the need to have hire an artist to go and bang out. thirty different variations of a chair. Right, for example. So I think that's a like our pipeline feels like a no brainer. Yeah, that's like the lowest hanging fruit, I think that that and Yeah, right now we're in the two D phase of that

2:02:08 Will we have a three D phase? Absolutely. Yes. For sure you will. Right. Number two, I think, is quality assurance and um balancing, right? Because we can now train an AI. to play these things. And we were talking to a senior executive who has done so and

2:02:25 It reported back that that the AI can now describe an activity as fun. Wow. Which that has been a hot topic of debate in the video games industry forever to define fun. So we have an AI who can tell us if something is fun or not when like I don't think there is a consensus view on what fun means. True. I mean I've uh 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

2:02:51 that could describe their experience of playing the game. in those terms is extraordinary. So I think that's gonna be really cool. Um Balancing is really hard because balancing is essentially an arbitrage.

2:03:04 activity, right? It's like you're trying to find little advantages that the game engine, the spreadsheet, if you will, of the game allows. So for example, I'm playing Age of Empires, right? uh the Chinese cavalry under certain circumstances has an advantage that I can exploit in an 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 haven't explored really

2:03:31 Very much. And I think that's gonna be f really cool. It's like to bring in the thing we've all I think f at least three of us have mentioned as a That's a pillar of our life to bring in Halo. I mean when dual wielding first came out and Halo Two, so overpowered. Yes. And it was one of these things that like took a whole, you know, new disc shipping to fix the fact that all you should ever do is run around dual wielding, fully charged, and then run at your enemy. And like If we can do that, of course, through play testing and it it gets fixed quickly now, that's one thing, but AI can catch that way earlier. Absolutely. And find potentially new ones that we hadn't even thought of. And and and as we move into this era of more and more sophisticated game economies. being able to g sort of play out those game game theory kind of scenarios, right, where

2:04:16 Uh uh about where where you know hoarding of various resources and what that does to the economy, et cetera. You had a you had a funny line yesterday of like you just write the prompt of like get rich. Like to someone like that. And you're like what does the bot do? And you're like That was not at all what we were thinking of how they're gonna like break the economy. So I think those things are gonna be really, really exciting. And then I uh The one I'm particularly excited about is l is live ops. Because we're spending

2:04:43 boatloads of money on live ops. It's really hard and And it's a very delicate thing because you've got a game that's already working, right? And so you don't want to make those kinds of nerfs and buffs that that that rip out the the competitive balance on the one hand, but you want to continue to introduce new content into the game. And so I think that's really interesting. And also just adding a sense of dynamism to that, where let's say if we were all playing together, it understands kind of what our uh capabilities are, what our characters are like, and it designs quests. That are

2:05:15 Kind of Challenging to us, but accomplishable or whatever, like that you can have a real time. uh quest system or narrative system that you could build into a live game that would be really exciting. And then the last one Um, which is particularly interesting also is an adjunct of that. It's sort of an a a analogous to that, which is live uh DMing for like uh you know Dungeons and Dragons like experience where you know if you if you've ever been a DM dungeon not live direct message. Well I'm pretty sure OpenAI does you're among geeks here so we we have a different kind of uh acronym but d uh in the you know the Dungeon Master

2:05:55 is a role in in a in a if you've ever played De Dungeons and Dragons with your friends, right? It's like somebody's gotta play that role and it's a very difficult role to play. I mean you you are a storyteller, you have to some you know you y the your one of your players enters a tavern You've got to figure out an a non player character to interact like the tavern wench or whatever to interact with that with that that character. And You know, that requires like storytelling and narrative and if you could have an AI assistant.

2:06:22 that could s help that could supply you with narrative in the background, right? And and and sort of help you tell that story. I think that's super exciting. And I think that's there's gonna be a lot of a a lot of interesting things that are gonna happen in that space, particularly now where we're in the middle of a massive Dungeons and Dragons renaissance. Yeah, I think there there's there's also this inherent tension within the games industry. Of If you are maybe an incumbent studio

2:06:47 Are you comfortable? Yeah. using AI arts and and doing the asset generation and what does that mean? Maybe as an innovator's dilemma type s uh scenario. But then there's also uh maybe a like a working theory that I have is

2:06:59 the UGC platforms like the Fortnite creatives or the core or the Robloxes of the world might actually be the ones that accrue the most value in in this AI asset generation time. Where You know, if you can spin up these three D assets and you're letting the the users go and do that. That should be just a really m more obvious way that this evolves than having, you know, your artist push back and be like, Hey, don't don't use my art style and that's gonna be a whole other It certainly seems to be a

2:07:26 From the you know, mostly outside. That A problem in the games industry right now is the amount of resources and capital required to make a great game. Would you agree with that?

2:07:40 Uh that it stifles innovation. I mean it uh again. As a former studio boss, I would say Yes and no, right? In one sense, yes, because it doesn't fully democratize the ability to make games, right? And we're getting there. It's better than it used to be. It used to be you had to write your own engine in order to make a game work, right? And so you had so you couldn't make games unless you were John Carmack or unless you were Tim Sweeney. That's no longer the case, right? Now you can go and license Tim Sweeney's engine, the Unreal Engine, and you can build a game on top of that.

2:08:11 That's already somewhat democratized it, right? It's like we didn't in the old days we used to create bitmaps by hand to like you know, try and wrap around three D characters. It's like now you've got all you know, uh incredible technol tools and technology, Maya and advanced Photoshop tools and all these other things that are just capable of sort of accelerating that process. They're a little bit expensive, but they're but they're accessible to individuals in a way that that you used to when I started in the business, you needed literally a silicon graphics workstation. In fact When I started companies were being valued on the basis on the number of silicon graphics workstations that they had available to them. So you talked about this in the in the series. It was crazy. It was crazy. Rocket science games. Go go go go look'em up. It's like they were literally valued in their series A on the basis of the number of uh Silicon Graphics workstations they have. That feels like an arbitrage. So I think that that democratization on the one hand is fantastic, right? And we've seen with things where that has happened, like YouTube, let's take that as an example.

2:09:07 where all kinds of interesting new content that we never expected before. I mean, if I had told you 15 years ago that unboxing videos were gonna be like a billion dollar business on on on YouTube, you'd be like, get out of here, right? It's like there's not the unboxing videos? Come on, man. But like they are. Right. And all of the you know, there the the the these are new kinds of narrative uh experiences that we that we would never have really found valuable. So I think there's great value in that, and I'm I'm a big proponent of that. On the other hand, You know. Not everybody is good at this. And as you and that's also something you see on YouTube, right? Which is, you know, there's there's there's thousands and thousands of videos you don't get fed to you in the algorithm, which suck.

2:09:47 Right, and that's gonna be the same in the video game business. Yeah, I think I I think that's right. I think there is We we still haven't fully reached maybe the iPhone moment to for your camera. But We're getting there. And and and it's There is this parallel track within games that we know modding is such a key part of innovation and how these games evolve and new genres are created. That

2:10:09 we're we're getting so close to those moments of With the U G C getting better and you can have the random kid maybe come up with a new genre or a new game and it looks like a mod or whatever it is, but it might just be in Fortnite Creative or Roblox. Right. Uh the the old uh Hiroshi Yamuji maxim that you know, there are a handful of Shigeru Miyamoto's in the world.

2:10:31 that can make games like that and we want them all making games for Nintendo is probably still true. Absolutely true. Same thing is absolutely right. Like Spielberg didn't get any worse in in this current time. Right, right, right. But the window for that like say it's I don't 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

2:10:56 Carmack and Romero got into the position they got into and all the luck and and sort of serendipity that was involved. Same with Miyamoto, right? It's like what is he's been he's been there since 77. Yeah. And he was hired to design the arcade capture. Yeah, exactly. So and and they plucked him out, even his pr the guy who trained him that you talk about in that first episode. who himself was kind of plucked off the assembly line. Assembly. Yeah. Good. And uh and so I think that's the part where hopefully we can be a little more efficient about how we find those Miyamoto's. Well On that note. I wanna close with a pitch to you guys. Okay.

2:11:31 Which I've texted 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

2:11:43 hopefully you've 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 importantly, enter it. Like make games, become entrepreneurs. I agree. I think uh I'm feeling a bit of that pressure. I mean people when I started this, I think the other thing that I l learned from Malcolm and from Michael Lewis was

2:12:06 They were li I s I said, would you well should I do it as a weekly? And they said, No, that's a job. Right. Um, but they said you should do it as a as a special project. And so I think what we're trying to figure out right now is how we keep it a special project and not turn it into a job, but still make it meaningful to the audience. And so I think we have some ideas and I think we'll be back later this year with some fresh content. Um And look, we I one of the benefits of being old is I've met everyone in the video game business over the last thirty years, right? And some of them even like me. And so hopefully I can we can bring start bringing some guests on.

2:12:40 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 path through the video game business. And I think that's the part that excites me. Well, everyone should definitely check out the GameCraft podcast. Uh where else can people find you on the internet? I met Um Mitch Lasky

2:13:01 On Twitter. Yeah, I'm Blake IR on Twitter. And Mitch, you don't tweet that much, but Blake, you're an excellent follow. When Mitch does tweet though. It's good. It's great. But it's you you turn on the notifications for Mitch'cause it's just w it's once like a week you'll get it you'll just get a notification and you just know it's spicy. So I I recommend it. Awesome. Thanks so much, guys. Thank you. This was a pleasure.

2:13:26 All right listeners. Now is a great time to talk about one of our favorite companies, StatSig. Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI powered experiences at scale. Yeah. In the crazy speed of today's AI world. Shipping fast is just table stakes now.

2:13:49 It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers, and how fast you can use that signal to guide what you ship next. This is where StatSIG comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed. to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. All right, David.

2:14:27 That was awesome. Really pumped we got to do that with Mitch and Blake. So great. Love those guys. Listeners, we appreciate you joining us. Uh, for those on video, I'm sure it was kinda fun to feel like you were actually in the room, especially with 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 and you couldn't actually see it, so made sure that you get that.

2:14:49 Also, huge thank you to Mitch, to Blake, and to Benchmark for hosting us and doing this together. If you want to hang out with us more, come uh check out ACQ two. It's where all of our interviews are happening with founders, investors, and basically all of our interviews going forward, we're gonna be putting over on ACQ2, which is really becoming known as the acquired interview show. Yep. Lastly, if you want to become an LP, you should help us pick future episodes. We'll be doing the next one in a month or two. uh as we kick off the next season, so uh be sure to go to acquire.fm slash LP if you wanna come deeper into the acquired.

2:15:27 Kitchen. Alright, that's all we got. Talk about the episode in Slack if you want. Acquire dot fm slash Slack. And with that, listeners, we'll see you next time. See you next time. Who got the truth? Is it you, is it you, is it you Who got the truth now

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