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

Episode Date: April 26, 2023

We sit down Benchmark’s legendary gaming investors Mitch Lasky and Blake Robbins (now also of the excellent Gamecraft podcast fame) to discuss the history and future of gaming business models. This episode is the perfect bookend to our Nintendo/Sega gaming series this season on Acquired — no one is more qualified than Mitch and Blake to breakdown how the business side of the industry has evolved so radically from the Periscope quarter-drop days to the forever games and platform based publishers of today.Regardless if you’re a gamer, understanding the incredible innovation that’s taken place over the past two decades in gaming and what it portends for other industries is critical for any founder and investor to understand. Tune in!LinksThe Gamecraft PodcastMitch and Blake on TwitterThe Genius of the SystemMitch’s old “Investing in Content” blog postThat Game Company and SkyRiot and the League of Legends dota-allstars.com growth hackSponsors:ServiceNow: https://bit.ly/acqsnaiagentsHuntress: https://bit.ly/acqhuntressVanta: https://bit.ly/acquiredvantaMore Acquired!:Get email updates with hints on next episode and follow-ups from recent episodesJoin the SlackSubscribe to ACQ2Merch Store!Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.

I will say, I want to give you guys just a pre-recording compliment. I forget what it's called. 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 to tell a story that is actually as close to true as true exists.

Well, the secret is we don't have people on the show. So this is not going to be that. Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight. Another story on the way. Who got the truth? Welcome to this special episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them.

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. So today, our conversation is with Mitch Lasky and Blake Robbins. Mitch is perhaps the best games investor of all time, generating

literally billions of dollars of returns from early investments in Riot Games, Discord, and that game company, not to mention Snapchat. Mitch was also an executive vice president at both EA and Activision and took his own gaming company Jamdat public in 2004. 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. 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 a full video on this. It's up on YouTube. You can find it on our website or there. We did it at Benchmark's Woodside office. It turns out they have another 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 ACQ2. We've had back-to-back killer discussions with the CEOs of Retool and AngelList. AngelList in particular was very mind-expanding for me on how to leverage AI to get huge, huge leverage in your business, specifically on the operations side of the house. And I think Avlak is one of the best thinkers about how to apply AI to kind of turn something that looked more like a services business historically into a true tech venture

scale opportunity. So you can find ACQ2 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. 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 what inspired the two of you to go talk about this and create GameCraft and create this podcast? Well, I think after I retired from Benchmark a couple of years ago, retired from active investing, obviously the glide path out of venture is kind of a long glide path.

So I'm still involved to this day. But after I retired from frontline investing, I really started to think about ways that I could be useful 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 know as well, right? The Genius of the System by Thomas Schaaf. And that book is a remarkable book, in my opinion, because it really takes the business side of the film business back from the 20s to, say, the 50s and really elevates the business side of the business and shows how a lot of what we business back from the 20s 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 showed what was happening on the business side and how it was informing what was happening on the creative side. And I think the common narrative is video games are something created by creative 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 introducing this interesting wedge of actually there are very clear business models that guide where the water of creativity can flow.

And that has been for the last 50 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 legend. He's a god amongst video game designers. And I've had the great pleasure in my career of working with some incredible designers. And they are the leaders of the industry in many ways, but they are constrained quite a bit by the business models in which they operate. So just to give you an example, in the packaged goods era, 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 going to put on that disc is going to

be informed by that business model. It's got to 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 7. 14! 14! Yeah, I mean, think about how many FIFAs or Call of Duties

there's been at this point. And it's still firing on all cylinders despite sort of the business models, which we'll talk about, rotating right underneath them. And those still thrive 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,

is that this dynamic applies to a lot of industries. Like when we did our LVMH episode, the whole time I was thinking that 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 there was a part of it where in your Nintendo episode that kind of reminded me of the LVMH episode as And there was a part of it where in your Nintendo episode that kind of reminded me of the LVMH episode as well, because those of us who had worked as competitors to Nintendo in the console business, and I did for a part of my career when I was running the

studios at Activision, they had this... It's interesting you considered yourself a competitor to Nintendo. We'll come back to that. You know, there's limited shelf space in Best Buy. And so they were very much a competitor for that shelf space. And so 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 would go to buy the disc 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 so everybody was back to the stores and it was just – 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 200-page manuscript. And the idea, and those of you who haven't listened to GameCraft who are listening to this podcast, it's basically eight episodes, but they're topical episodes. And so we basically retell the same story from 1990 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.

So 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 said, I could read it. I could do it as an audio book. I could read it as a monologue. I don't know what to do with it. And then I had a fateful dinner in Boston with Malcolm Gladwell. And Malcolm, I'm an investor in Pushkin, which is his podcasting company with Michael Lewis. And Michael and Malcolm are both acquaintances of mine. And Malcolm was like, dude, you really have to do this as a podcast. And he was like, you can't do it. Did he try to get you to do it as part of Pushkin?

I did submit it to Pushkin. They rejected me. Whoa. Why? Two niches it to Pushkin. They rejected me. Whoa! Why? Two niches. What a miss. Yeah. And so, but he kind of got me to rewrite it, essentially, as a dialogue.

And at the same time, I got to meet Blake on Twitter, oddly. That's kind of where we met. I was admiring his thinking, and he was tweeting about the games industry and there's so precious little good like public commentary on the games industry. I was kind of attracted to it. And so I kind of asked him, do you want to do this with me? And you want to kind of be my interlocutor on this one? And he foolishly agreed. Yeah, it's funny because like Mitch and I knew each other briefly before I joined here. And then I remember I was just down in the office here one day and Mitch and I, I had asked

Mitch if he was willing to meet because before he joined, you're like, okay, is Mitch actually still active? Is he not? What does it actually mean? His LinkedIn says partner. What does that mean? Yeah. It's like, is he actually retired? What is it? The term for that. Uncles. Uncles. Yeah, you're an uncle.

Yeah, I mean, Mitch never retired. And so, like, he still hangs out here all the time. And 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 Mitch's vantage point is so unique and rare that the moment that he shared the manuscripts with me, I was like, oh, my gosh, this is amazing. Like, I was just 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 dialogue, right? Because we really are starting

when I started in the business in the 90s, and we're ending when he's running the business, basically, in the 2020s. And so I thought that there was some nice symmetry to that, actually, to have it be multi-generational. So Mitch entered the industry right when I was born. And he's telling these stories of all the games that he's worked on. And those are literally the games that I played and the games that he published and all this stuff. And I'm like, this is insane. Mitch, when you were on the business and 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 was kind of a boiled frog type situation for me because when I entered the industry, my first gig really was in the formation of Disney Interactive, which was in the very, very early 90s. And this was right around the time Bobby was taking over Activision when he and Steve Wynn basically, financed by Steve Wynn, Bobby was buying Activision. I forgot Steve Wynn financed it. Yeah, Steve Wynn financed it. The famous story, I don't know if you guys have done an Activision episode.

Way back before we went to research. Because he basically, Bobby crashed the cattleman's ball without an invite and basically did it so that he could buttonhole Steve Wynn and get him to put the money up for the act to buy Activision out of bankruptcy. Wow. And it was a genius deal because they renegotiated all the debt into equity in the new entity. Bobby was a brilliant, brilliant executive even back then. So when I worked at Disney and then subsequently in my startup and at Activision, this was still kind of the geeky era of the serious video game business. Obviously, Nintendo had brought the console business back in 85,

but we were really only five, seven years into that, right? It was still a fairly recent phenomenon. And it was a corner of the toys industry, as we've talked about. And dominated by the Japanese, too, in general, right? I mean, there were a few, obviously, electronic arts had gotten started, and Interplay existed, and there were a couple of others. But they were PC publishers. Yeah, primarily PC publishers.

So that said, no, I had no real idea of what the impact was because I thought I was making games for myself and other nerds like me. And the notion of casual gaming hadn't really hit its stride yet. I think one of my big takeaways from GameCraft is gaming is not for teenage boys. Gaming is an 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 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 Barbie's Fashion Designer and 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. And it happened very quickly, and those titles did incredibly well. But the mainstream video game industry always viewed them as kind of, and frankly, to this day, still views a lot of what's happening in the casual game industry as not the real games business, right? And yet, 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 50% of the video game business these days would be considered casual gaming by 1990s 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. I'm sure they don't. Yeah. And what it means, like when we talk about the games industry, 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's a little bit of like, how do you even frame what is gaming? And I think for us, a lot of the podcast was walking through how that has evolved. How that happened. Yeah. I mean, when I did my second startup, Jamdat, which ultimately was the successful one, the one that went public, we would be on the road, me and Michael Marchetti, my chief financial officer. And we'd check into a hotel, and they'd ask for a business card. We'd hand them the business card, and they'd go, oh, I'm playing your bowling game. And it was literally like, you know, late night people on the desk at a hotel or, you know, train operators or people in, you know, we would just meet these

randos all over the place. A little girl sat down 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 was when I really understood kind of the ubiquity of gaming 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, I mean, just to very quickly review what the eight episodes are. So they're free to play, which was one of the real revolutionary business model changes in the industry. I mean, it's the equivalent of the film business having

television introduced, right? Where you went from, you know, a very formal go buy a ticket and sit in the theater to coming into your home. Or even probably more apt, 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 to this day, the impact of free to play and how it's changed, you know, how people consume games, how they play games and how games are made, because it requires a very different kind of game in order to be susceptible to a free to play mechanic than the old school stuff everything onto a disc and hope that it's worth 60 hours for $60.

That's one of the episodes. We do an episode on the change in publishing from a packaged 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. We do an episode on game economies and how they've evolved from their very, very earliest stages to these incredibly sophisticated and now even Web3-enabled economies of our era. One of my favorite episodes is the Forever Games, which is really around this idea of, with the shift to free-to-play,

can a game actually endure forever? And what do those play patterns look like? And Mitch has these amazing sort of guidelines or just rules of how he thinks about it. Going into listening to GameCraft, I sort of had this 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. The other is the concept of, Mitch, I think you coined this term, of platform-based publishers. Can you talk a little bit about each of those 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? Either the franchises were durable. I mean, you look at FIFA. And I mean, I started playing FIFA on Trip Hawkins' 3DO back in 1993. And I've been playing every year continuously for the last 30 years. And so, if you think about it, that's a 30-year persistent play pattern, very much kind of congruent with what we've described 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, 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 NES to SNES to Cube to Dreamcast to whatever. And that is, in a sense, durability. To my mind, one of the most genius things about Miyamoto is that he came up with 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 they're fine because as the graphics get better, as their ability to tell that story improves and is richer and deeper, then you can go back and explore that story again. 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 think Grand Theft Auto is probably one of the best examples of it. I think Grand Theft Auto 5 was probably released eight or nine years ago, and it still is a top game on Steam, and everyone still plays it, which is amazing.

But when they do an update, it's to the new generations, and it really blows your mind. But very similar play pattern, very similar businesses to a lot of the kinds of businesses that we've seen emerge and disrupt incumbent industries across the Internet space. So, you know, Uber and the taxi industry or Airbnb and the hotel industry where you aggregate demand on an online platform and then you utilize that demand to leverage the supply side of whatever industry that you're entering. And I think you look at Steam and Steam shares many of those attributes. And I think that move, which was essentially perfected by Tencent with QQ 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 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 were discussing some of the games in the early 2000s, 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 originated as packaged goods. The craziest thing is Steam was on a disc. Okay, listeners, now is a great time to tell you about longtime friend of the show, ServiceNow. Yes, as you know, ServiceNow is the AI platform for business transformation. And they have some new news to share. ServiceNow is introducing AI agents. So only the ServiceNow platform puts AI agents to work across every corner of your business.

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for everyone. Yep. So learn how you can put AI agents to work for your people by clicking the link in the show notes or going to servicenow.com slash AI dash agents. Can you share how Steam got started? Sure. So, you know, the Valve team, Gabe Newell in particular,

and his partner, Mike Harrington, they envisioned that they needed an updater, essentially, for their software because they were releasing these games like Half-Life 2 and CSGO, 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 in this era was still a real thing. And anytime you're selling box software, it's going to be a big thing. It's absolutely the case.

And so they thought, hey, we could build this thing, basically, that would function as a software updater for our products. We'll put it on the disk, and you'll go up, log in, and it'll download patches and whatever, rebalancings for your game, et cetera, et cetera. And so they went around to the rest of the industry. They went to even their old employers at Microsoft, where they were early Microsoft employees, I think among the first 25 or so employees at Microsoft.

So 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, an app store, mods, all of these various features, and just ate the games industry. I mean, now it's an $8 billion a year business, right? I mean, it's just a remarkable, remarkable company. Completely privately held. Yep. And is that Steam itself is an $8 billion or Valve all up? 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 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 don't know how intentional it actually was in hindsight, but 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 a lot of people have followed, right? You have Activision having their own launcher. You have all these. EA Orange. Yeah, EA as their launchers. They all have launchers and they all are still forced. Well, not forced, but really pushed by the market to launch on Steam as well.

We had breakfast with Phil Spencer, the head of Microsoft Games yesterday. And we were talking about Steam and Phil was like, I put my games on Steam. Yeah. And this is Microsoft, which was the most market power of any company, maybe apart from Nintendo and Sony, you know, to roll their own. He's putting games on Steam. And so you fish where the fish are. Yeah, I think there's a new iteration of that, or what the latest attempt of being a platform-based publisher would actually probably be Epic, which Epic has Fortnite. It does incredibly well. They've launched that on their own launcher. And now they've been spending the past couple of years really trying to build

up the Epic Game Store. And from my vantage point, it hasn't made nearly enough like a dent like relative to Steam. That's one of the things I wanted to ask you guys about, which is where are we in the business model journey of the platform-based publisher? Like, it almost feels kind of like the rest of the internet. The platforms are starting to ossify. Is that fair, or are there still opportunities? You're saying gaming is not ossifying?

No, the gaming is. Like, you know, you've got Steam. You've got, obviously, the consoles. You've got Microsoft. And Epic is trying. But, like, who else could really conceivably, and Tencent has done the best, but who could conceivably break in? This is maybe. Or do we need a new paradigm?

Well, I mean, I think the next one to go is going to be Nintendo, right? I think that's, if you're looking for a reason to invest in Nintendo as a company, I think they're about to crack that nut, right? And enter the App Store business in a meaningful way. I mean, they have the lowest third-party revenue per active user by, like, an incredible amount, right? I mean, like, hundreds of dollars to, like, $25, right? I mean, like hundreds of dollars to like $25, right? Like versus the rest of their console competitors. So they're waiting for that lid to boil off there, I think. So that's on the conventional platform-based publishing side. But I want to return to the question, your original question, which I think is very interesting.

I agree with you. And I think that Game Pass from Microsoft 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 side. So aggregate demand to collapse supply. He's now, Phil, with Game Pass, aggregating supply again. I mean, you look at the Activision deal, $69 billion acquisition of Activision. It's basically like Netflix or Apple or one of these other companies buying exclusive content. And now I use the term exclusive somewhat guardedly because this is currently in the European Commission as a hot

button issue. Clearly, this is Microsoft's strategy. Strategy, absolutely. So they're now back to aggregating supply in order to have enough viable IP on the platform such that you will continue to subscribe. Which is really interesting. I mean, just speaking for me personally, as a gamer, that is an incredibly compelling value prop of like, I don't have a gaming PC. I don't really want to go make a gaming PC. I don't really want to go deep in the Valve ecosystem. I don't want to go deep in the Epic Games ecosystem. 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 xCloud platform, and I was a pioneering investor in this with Gaikai back in the day, and it wasn't really economically viable, but now with scale and Moore's Law and all these other things, and bandwidth improvements, we can now really do it well.

And so with a device like a Steam Deck or something like that, you're able to really avoid going down that path of building your own 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 tick tock 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 is finally happening. Tesla full self-driving. This year it's happening. Yes. My question to both of you on this is, business models are inherently intertwined with new technology waves. And how does cloud gaming change the business model of the games industry? I think there's one thing that's interesting about the cloud model, and one of my theses on why it didn't work back when I first tried it with Gaikai and when OnLive was out as a competitor and some of these others. And that was early 2010s?

Early 2010s. It was a mismatch between the user and the technological opportunity. So you could stream these games without owning 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 wanted to play. So you look at Stadia from Google. If you walk the floor at GDC and the launch year of Stadia, they were showing Assassin's Creed and these other really high-fidelity—

Everybody already had those. Or if you were going to play that game, you had a PlayStation or an Xbox, or you had a gaming PC that was capable of playing it. And so I think with the real expansion of the audience in that intervening decade, you now have actually the question that David brought up, which is 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 in the early days of streaming. Huh. So you think it's demand-driven? I do. I do think, however, that the audience has expanded really in the last 12 to 15 years,

and that this next generation of kids who've grown up on Fortnite, who've grown up on harder core games, 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 there's also a part of, you know, you think about all these people that are playing or used to play Fortnite on mobile, and it's like, 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 being like,

of course I want to play Assassin's Creed on mobile, whatever that might be. But I still think it's one of those things, again, that for multiplayer, for those pieces, it might take a little bit more time, but surely for the single-player stuff, it's quite magic right now. I want to bring it back a little bit to your question, David,

around the platform-based publisher stuff and where those might fall, because Mitch was involved with Riot, and Riot is another spin of what that looks like today. In theory, they could become an actual publisher of third party games at some point, but instead they've decided to aggregate all the demands and really keep, it's sort of a social network in that there's friends and all of that within their own universe. And they continue to publish their own games incredibly well. You have Teamfight

Tactics through their launcher and you have Valorant through their launcher, and those have worked exceptionally well. And it really begs the question, and you have Valorant through their launcher, and those have worked exceptionally well. And 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, is that enough to really endure and build a real business? But it's really interesting because, yeah, that's a different approach to the platform-based publisher because you're really aggregating that demand for yourself. Right. It's like a Nintendo version of a platform-based publisher because you're really aggregating that demand for yourself. Right. It's like a Nintendo version of a platform-based publisher. So 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, 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 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 compelling thing to third-party developers, Mitch, 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 going to look like for the next decade in the next, like, 90 days. Yeah. Right? Because I think if they do come to market with a non-backwards compatible device, it's back to the Iwata era, right? It's back to, you know, we're a hardware company and we have proprietary software which helps us sell

hardware and it's back to the toys, right? If they come out with a fully backward compatible switch and an open app store and they really try and improve that position of third-party revenue on an active user basis. That's the new Nintendo, right? That's the Nintendo that's going to play in the modern industry. That is so compelling, at least for me as a consumer, if they do that. I mean, like, a game like Hades, an incredible game, indie game. The Switch is by far the best platform to play that on.

And, like, I just have sat there for years, like, staring at my Switch being like, Nintendo, why do you not embrace this dynamic? I think 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 90 days. But everything we can tell of how they're siding with Microsoft and embracing openness gives a clue of maybe how this works. Yeah, you mentioned that a little bit on the series, on the GameCraft series of Nintendo siding with Microsoft.

Let's talk a little more about that. Sure, we don't talk about it that much on the series just because I'm avoidant of talking about the console business and whatever. And let me just try and explain why, right? Like, the console business has been essentially the same business since 1985, really since why, right? Like, the console business has been essentially the same business since 1985, really since 1975, right? I mean, it's sell a box and sell some physical hardware for that box and grudgingly allow it to be played 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 have been a lot of interesting developments. 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, there's a, particularly your first episode where you go way back, right, and you just talk about everybody who's everybody else's son-in-law. I mean, it's an intensely human story in that regard. Well, I feel like Nintendo had the, in my mind, they did have one revolutionary idea that they have just run with for the past 40 years, which was make incredible games and get people who are capable of making incredible games 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 do the episode, which was he said, look, 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 of free-to-play. Because instead of having to sort of pay every time you wanted to touch the controls, now you had the thing in your living room and you could play whenever you want. You talk about the $60 for 60 hours of gameplay. That's literally the equation you were doing at the arcade, right? You're like, I'm putting 25 cents in for a minute. Well, it was in the arcades. It was $6 for six minutes of gameplay.

So I accept that, and that's why we're here. And I think we really end that episode to bring this full circle around cross-platform, which is sort of the latest evolution of where the console business has been, where you had Microsoft and actually Nintendo embracing, and Fortnite was friend who had a PlayStation or a Switch. And really, Nintendo and Microsoft went to war against Sony. Yeah, I mean, as Phil said in our conversation yesterday, he said, you know, Sony's perspective was, if you want to play with your friends, get them to buy a PlayStation. Yep. Right. All these different business strategies are about figuring out, in what way can you leverage an asset to get people to do something that eventually generates profit for you.

And the way Sony was looking at it was, well, you want to play with your friends, so we're going to use that as the carrot stick, whatever you want to 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 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 I think it's going to 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 going to build a game for a console. But everything we're talking about, if the era of cross-play really comes to bear, that might change things. Would you agree? If it truly is that you could build a forever game with cross-play across console, PC, mobile... I mean, 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 that is working very hard to come on the Switch for this very reason. So I will say, yes, it is now viable. I would not counsel any of my portfolio companies to launch on the console because the hoops that you have

to jump through 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 sort of put in front of a company that was struggling to find product market fit. That said, I have greenlit a Switch SKU at that game company for Sky. And that has now come to market and it is really meaningful.

And we have a PlayStation 5 SKU as well. And so for 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 Fortnite disclosed in the Apple lawsuit,

the cross-play players monetized like the new whales. I mean, they were monetizing at multiples of what the non-cross-play players were playing. Why not take advantage of that as a startup? Yeah. It turns out that actually the cross-play, there's different moments in console where console really was the package good, and then at some point, the package good business for the games, and at some point, free-to-play games were able 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 Fortnite was, 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 co-workers about FIFA Ultimate Team, which you may be familiar with, which is kind of a playing card add-on to the underlying FIFA SKU 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 99% gross margin. I mean,

it's the most astonishing business, right? 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 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 willingness to pay 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 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 other level. I mean, literally, you can look at it in the data with Fortnite. It's like even better than iPhone monetization. It's also exactly what we talked about on the Peloton episode, where Peloton, despite all the problems,

has possibly the most incredible consumer subscription business, at least from their first five, eight years of customers, because they selected into buying a $2,000 exercise bike. Of course they're not going to cancel a monthly subscription. I think this is part of why Epic actually felt comfortable going to war with Apple, is if you look during those filings, so much of their revenue is actually coming from PlayStation and console. And that, to me, is just like, okay, the mobile gamers were not the same value as the console and PC players. Yeah.

One question before we leave platform-based publishers that I've been sort of thinking about, but I don't have a clear answer, is when does a company have the right to leverage their relationship with customers into becoming a publisher? And QQ is a chat app. How the heck did they become successful in being the Tencent we know today, the most powerful video game distribution on the planet? Whereas you look at Facebook has made 11 different runs at gaming and is not Steam, is not Tencent. Why does sometimes 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 QQ 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 49% of Epic. They owned 51% of Riot, now 100% of Riot. They were one of the financiers of resort in the games business for AAA titles. They aggregated products. They aggregated third-party product 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, you know, okay, yeah, the Zynga thing they flirted with briefly, but ultimately that didn't go that well. And they decided now we're just going to become, you know, a customer acquisition vehicle for the games industry. And frankly, it's been a very lucrative piece of their business. But they really embraced it, Tencent, 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, Tencent and QQ, they had the games. They were committed and they were so intentional. And when Mitch and I have talked about when we look at investing in a studio, for example, it's actually how intentional are they at the beginning of setting out that you are going to try and become a platform-based publisher? Because even just saying, I'm going to launch my game on Steam as a new company maybe is just showing your ambition of what you want to build. And I think that when you're talking about Facebook, Mitch and I talk about this part a lot, and a lot of the executives in the Valley, they're just not gamers.

And they're like, oh, we can maybe launch a game thing. But they're sort of dipping their foot in the water versus actually like really committed to it. Look at 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, we're now acquired games now. And you're all going to start playing games and we're turning on the network. Yeah, we'd have to be game grafted. Although, you know, even then it's difficult. It's like we tried this at Discord.

Yes. Right? And we tried to start that. Right. Although, you know, even then it's difficult. It's like we tried this at Discord. Yes. Right? And we tried to start a game store. This was obviously 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 look, 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. But 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 look, Jason is as deep a gamer as you can get, right? Discord was a failed game company, right? And I invested in that failed game company. I invested in it as a game company. I was trying to blame them, not you. No, no, it was me. So it doesn't, you know, even with the best of intentions, it can be a difficult proposition.

This goes full circle to your earlier question, though, David, of just like, are 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 they're sort of, I mean, everything brute forcing 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?

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How do you 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? It's a great question. I think that the intention is for it to be a platform-based publisher. The beginnings of thinking about not only game three, but a sort of way to stitch the games together in a more persistent and coherent way and with more continuity. So I think Jenova, he wouldn't phrase it in that way. He wouldn't 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 now Nintendo has a legit physical theme park to go along with their virtual theme park. But I do think it is in that same vein. I would call it a platform-based publisher. And similarly, I think the greatest disagreement I had with the founders at Riot was when we sat down and I was like, okay, great, we got a hit. Now we're going to leverage this audience into another hit or into a third-party game or into a licensed intellectual property. And they were like, nah, chill, man. We want to be Blizzard. We want to make a game every five years. And I'm like, I don't want to fund a studio. 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 Warbucks somewhere figuring out how to fund it. Absolutely. And I was wrong because they just took their time to become a platform-based publisher. But they waited— Took them 10 years. Took them 10 years. But they did it.

I'm not that patient. But there was an opportunity to start doing it after three years. And I think their strategy was, like like triple down on League of Legends and let's make sure that 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 esports component and the worlds and all these other things. And then we'll go and release Valorant and Tactics and some of these other things. Okay, fine. But ultimately, they got to the place I wanted them to go. It just took them seven years longer. I 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, just an amazing, amazing pitch. Because at the time, it still was like for you to invest in a studio, right? Like, that would have been a big ask or a big leap of faith. And my understanding is you just crushed it. By now, though.

This is great, too, because I bet a lot of people listening will be like, what are you guys talking about? What is that game company? Are you referring to a specific thing? No, it's a little confusing. It's not my favorite name for a game company, although it's indicative. I want to actually, though, take a pause just because I don't like funding studios, right? And I wrote about this, I think, you reminded me of this because you found it in some internet archive somewhere. Like, I blogged about this like 15 years ago. Yeah, I think it was like 2011 or something like that. And it's amazing. It's like the title, I mean, about this, like, 15 years ago. Yeah, I think it was, like, 2011 or something like that.

And it's amazing. Like, the title, I mean, Mitch has probably removed all of his blog posts at this point. I think it was, like, investing in content. And he's like, I don't invest in content. I don't invest in content. Even though I've done more content deals than anyone else in the Valley, right? And what I meant by that is that I invest in businesses, not in studios, right? And those businesses have to have a strategy that transcends, I want to make a game and

put it on Steam, or I want to 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 content is a means to an end, but the end can't be, oh, then we're going to go make another game and put it on Steam or put it in the App Store. The end has to be something better. It has to be something more durable. It has to be something more value aggregating. And so I've had this philosophy since the very beginning, and I've tried to be very disciplined about it. So Genova approached us, Genova Chen. I had met him in the early 2000s when he was a graduate student at USC. And he was making games there. And I was working at Electronic Arts, and I had the license for Spore, which was Will Wright's kind of creature evolution

game. After SimCity. After SimCity, yep. And I was doing the mobile version of that, right? And so, Jenova had made this game 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 Spore with me. And of course, he was way too clever for that and said no. But I kept up with him and we hung out. And then he went off into the Sony ecosystem and built Journey. 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 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 fireplace. It's extraordinary. So he came to me and said, hey, I'm leaving the Sony thing. I want to start over. I want to make a game for the masses. Can you help me? And I was like, yeah, I can, but let's pitch the partnership. So he came in and he did this pitch to the partnership where he basically talked 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. And there were all these other emotions that were being explored in music and in art and in poetry and in the movie business. And we should do that in the video game business. And he 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 in bringing this into the partnership? We're a venture capital firm and we're funding half, like, yeah. And Kevin Harvey turned to me and said, chase that guy out in the parking lot and give him a term sheet.

He was like, we are in business to fund people like that. And I still get goosebumps saying it now because that's how I felt. But I was too afraid to say it in the partnership meeting because I didn't have enough juice to really to do it. But that must have been relatively early in your career. It was, because I'd been working on that thing forever. But yeah, it was probably within the first couple of years that I was at Benchmark. Before Snap? Before Discord? Before Riot? Right around the same time as Snap.

Okay. Right after Riot. But Snap, you didn't know it was going to be Snap yet. Snap was still pretty small at that point. Peter tells exactly the same story, by the way, on our team. And he's like, when he talks about the range of emotions that he was going to cover and how underserved it was, it was just magical, like this moment of, oh my gosh, this person's a genius. And so in a lot of ways, Genova is just like an exception to the rule. And even still, he is on the path to build

this, you know, something much bigger than just a content. And look, 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 makes Journey again, he's going to get the same result that he got from Journey, which is he's going to get a console-like indie developer result. And so I really helped him 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.

What's the game called? It's called Sky. Sky. So we're talking about hundreds of millions of dollars in revenue. And he does game called? It's called Sky. Sky. And so we're talking about hundreds of millions of dollars in revenue, and he does it with a tiny team. So it's ludicrously profitable. I mean, I think it's got greater than 30% net income margins. Wow. And would you fund, at this point, the concept of Sky, even if there wasn't a broader platform-based publisher strategy around it, like, is that a good enough investment? Or let me make it an even sharper—

As a forever game without a— Yeah, let me make it an even sharper example. If you got the pitch for Riot Games, and it was literally just League of Legends, and it was going to be a League of 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 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

in things that maybe would have shaded into the studio realm in my previous life. However, I would not have done them at Benchmark. If I'm hearing you right, it's because it's just difficult to accrue enough power over the ecosystem to have flexibility in your business, to have pricing power, to be able to negotiate effectively with everyone else you need to, to reach your customers. Yeah, distribution is king, right? Yeah. And if you can't- Which is so funny, right?

Yeah. Everybody says content is king, and distribution barriers have been removed, and anybody can make a game, but today, in 2023, distribution is king. And if you don't have distribution leverage of some sort, 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. Yeah, I would say the bar, you should just assume every venture-backed studio is an amazing game. Like, 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. It should be an amazing, amazing game. But like we know with apps and software, having a great app, unless it is truly top one app in that category, people will never even know it exists. And I think that's a lot of people that are building studios today are much more in the camp of, I'm going to build the best game ever and people will come. And I think if we've learned anything over the years, 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 made me willing to invest in it was the way they understood the existing audience for Defense of the Ancients, which was the game that they were essentially modifying and making into a... It was a game that was a mod of Warcraft III, and they were going to turn it into a standalone product 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 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 Defense of the Ancients and running it as a user, I mean, you had to find an out-of-print copy of Warcraft 3 and go through

all of these machinations to, like... The Riot team did some pretty awesome growth hacks in the early days, right? We bought the websites. We bought the

Defense of the Ancients websites and just turned their editorial to League of Legends. All the fan content on the internet. It still sits on Reddit, by the way.

If you, like, search... I forget what the name of it is. I love this thing. This is even better than the Airbnb Craigslist growth hack. Yeah, yeah. If you search this company. No, you could call it a growth hack. I call it a customer acquisition advantage. And it gets you out of the kind of junk pile of throw a game up on Steam and pray, right?

And that was enough because I knew if I could 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 that's how I roll. Blake, what were you saying about the Reddit thread? I was just saying on the Reddit thread, if you search it, I forget what the name of the website is that they bought. It's all these people who are playing defense of the agents. They're like, what the hell happened? What happened to the site?

What's going on? And it was like the top post. We'll link to it in the show notes. It was the top post of the Dota subreddit at the time. And it's just like, what happened? Who are these people? What are they buying? What happened?

They killed this. And they all just move over. It's like, oh, no, Dota's still over there. But 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 incredible how there was a thing with clear product market fit that was kind of unloved and unmaintained and hard to discover. In our world of podcasting, that was Apple Podcasts. And this small team at Apple that was sort of looking after it, they didn't turn it into a real business. There wasn't like prioritization at the company. And as a podcaster, it was always hard to like get in touch with someone or be like, 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, 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 going to expose this right on the main feed. We're going to redirect. So much of our growth in the last year, two years has come from Spotify, specifically because more people are listening to podcasts on Spotify. There's some cannibalization, but there's an enormous amount of brand new market because it's easy to find. As a total neophyte to this world, right? Like we have both been just gobsmacked by how, what percentage of our users are coming from Spotify. I would never have predicted

how big of an audience was on Spotify, because it just didn't occur to me, right, that Spotify had done that well in podcasting, until we started releasing these episodes, and we were like, wow, like, more than 50% 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 there's this really interesting 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 thing,

we're going to be the best in the world at that now. And by the way, it happens again and again in the video game business. I mean, you look at, so for example, the survival genre, right, which started with Arma mods like DayZ and H1N1 and sort of like evolved into PUBG and then into Fortnite, right? But these were dead genres, right? These were super geeky, hardcore, like kind of weirdnesses, right? Tarkov, right? But these were dead genres, right? These were super geeky, hardcore, like, kind of weirdnesses, right? Tarkov, right? Which now is like a dominant play pattern in the kind of MOBA shooter industry. Yeah, it's basically these genres emerge, right? And it gives the 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 most famous examples right now is that Fortnite comes from PUBG and sort of stole that whole reign is actually Fall Guys, which Fortnite or Epic bought. And Fall Guys was this amazing party game that they couldn't publish on iOS because of the Apple lawsuits. And so they never built a mobile game for it. that they couldn't publish on iOS because of the Apple lawsuits. And so they never built a mobile game for it. And then there's these three guys in Finland made basically the same exact game, pushed it on mobile.

It's called StumbleGuys. 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, and gets acquired by Scopely. And then Mitch was showing me the other day, the biggest game in China is this game called Eggie Party on mobile. And that is actually literally just a Fall Guys 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 were, you know, you started with, you know, Ultima Online and EverQuest and these things. But they were all that we made a joke in the video. They weren't ambitious enough. Well, and they never, yeah, they weren't ambitious enough.

They weren't, they didn't reach out enough. Like, they were very content to serve that core 500,000 users. And the joke at Activision back in the late 90s, early 2000s when I was working there was there was a herd of 500,000 users who just migrated from one MMO to another, but the audience never grew. And then, boom, World of Warcraft basically does this, right? They find the product market fit and just embrace it and blow it out. And 17 years later, it's still a number one product. I want to pick up on something Mitchie said a minute ago about how you roll. I think it also might be relevant far beyond games, and some of your investing beyond games too.

You said you'd look for something that can have a distribution advantage up front, gain differential profits versus your competitors, and then reinvest. 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? Yeah. Like 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 I think once you start down the paid path for customer acquisition, it's kind of 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're so reliant on it. And you start to twist your mental model to believe that you're in this lifetime value return on investment kind of thing that is unhealthy, I think. But what I do love is doubling down on the organic stuff, right? So like in that game company case, it's like, okay, we got this thing crushing on mobile.

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 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 wanted to be cross-platform, right? And they wanted exclusives. So, you know, it's also what you say no to during that, because it would have been easy to say, okay, hey, there's a couple million dollars of, you know, minimum guarantees. But you're not going to expand your audience, by the way. Not going to expand the audience. So it's making those kinds of key choices that continue to reinforce the competitive advantage. Yeah, I think there's another piece of this,

especially for free-to-play games, where live operations, keeping the events fresh, adding new cosmetics in a game like League of Legends is actually where most of the reinvestment probably goes versus any of the marketing. It's let's keep this game fresh because in a lot of ways, when you launch a game like League of Legends, that's just the starting line. And they're still on a 10-year journey of keeping this game alive and fresh. And that's where a lot of the reinvestment goes in these studios. How does the level of and capital intensity of reinvestment in fresh content for

forever games compare to the old world of building new package games for a studio or a publisher? Oh man, it is fast becoming like an annual amount equivalent to what an annual amount during production was. So I don't know if that makes any sense. But let's say that you were spending $100 million, God forbid, let's say you're spending $50 million. It's like I'm breaking out in hides here saying that number. To build a package game. Yeah, and let's say it took you three years, right? So you're spending roughly $15 million a year, right?

Like, I think you can expect to spend as much or more on an annual basis than you were spending in development in live ops. In live ops. Wow. Yeah. And that can cover anything from the support side of this of when people report toxic users. But really, you see it a lot in the events of, oh, I need to make new skins. Content refresh. Yeah. Or I need a new champion 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're investing all this time in QA testing and balancing and making sure things don't break. And Riot updates League of Legends every two weeks. And every two weeks, they're putting out new content. They're balancing everything. And so that's pretty much the entire P&L of that game at this point is just keeping it fresh.

Plus story content too, right? Like people have realized the IPs for this has become incredibly valuable. Absolutely. Where are we in the eSports journey in terms of that being a sort of reinforcing marketing strategy? And I asked Blake because you... No, you asked Blake for good reason because you're going to get a very different answer

if he asked me. Well, I want both your perspectives. Actually, I think we'll be closer than you think. And then I think it's... And Blake, you helped start the famous esports team. Yes, yes. So you thought it was a good idea at some point. Yeah, well, I would say like the...

Not to lead the witness, though, but... No, I actually think if you, like for 100 Thieves, which is an esports organization, that has three pillars of it, which is content and a media side. It has an apparel side, which is also a thriving business. And then the esports side. And the view was 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? Was, let's try and 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 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 think there's all sorts of nuances around League of Legends esports

and Counter-Strike esports. And really, when you say the word esports, and this is probably the real struggle of it, is it's quite literally just saying, 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 are 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 your organization if you have set it up that way. But 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

enterprise value of esports organizations, which I'm less... That's less interesting because it's an obvious failure. No, it is. But is it a good idea for the game? With all due respect, there are some. Yours, 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 and, 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. A hundred million viewers on that. Yeah, but even those are struggling financially. Those are still not great businesses, but they're kind of viable businesses, right? Yes, yes. Those are still not great businesses, but they're kind of viable businesses, right? Yes. But ultimately, like, all of this is accruing benefit to the League of Legends, to the Overwatches, to the CSGOs 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 going to go play more League of Legends and buy skins and whatever. And it's like, I mean, when the Chinese team won Worlds, the Riot guys were like throwing confetti because like when the Chinese win, it's like $150 million revenue opportunity in terms of increased like, you know, unexpected sales 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 feels different than let's say soccer or basketball where in basketball, I know at a

very young age, I'm not going to go pro. And I also like, I don't have any real way to even play with people of similar skill level as me, like, 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, 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? Yeah, yeah. Like a team sport? Yeah, I would just say like, you think it's so much of the skill just feels more obtainable. And because you're seeing another kid 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 going to play golf and tennis. And 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 there's like a streamer named Tfue in Fortnite. He got famous because he ended up in the same lobby as Ninja. And he just absolutely styled on Ninja on a stream. And his name was twitch.tv slash tfoo. Truly any given Sunday

for everybody. Yeah, it would be like, imagine just being able to go and play pickup basketball with LeBron. And LeBron wouldn't do that because he'd risk getting hurt and all this stuff. Whereas Ninja's playing all day, and if you style on them, there's a real chance for you to get famous. And that part, there is just a difference of like, the dream is obtainable. And that is just so compelling

to me. And 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? Where people were playing online and you could play on into the World Series of Poker, right? Like from those online games. And so there was like, I think that's kind of an interesting analog. Yeah, yeah. And actually, Valorant, for example, just recently released this sort of semi-pro mode where you have a team and they actually let you run tournaments.

And eventually, if your team gets high enough up the ladder, they will play in essentially the World Cup. And I think that is just so amazing of selling that dream because it's not even just selling it. 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 amazing.

And so back to the earlier conversation about reinvesting in the game over time. What an incredibly leveraged way for successful forever games to... The ROI on investing lots of capital in your esports

ecosystem is going to be very high. Very high if it works. Yeah, and there's a lot of different approaches for what it's worth. Like, you look at Counter-Strike and Valve and they've taken a very, like, they just don't really care. Yeah, it's more like golf in the sense, it's more like the PGA where they sanctioned

events, right, as opposed to basically owning the league, right? They'll co-sign, like, four tournaments a year. They'll call them majors, But there's 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 the esports boom happened from an investment standpoint is you finally had the publishers like League of Legends stepping in and saying,

no, we're going to try and run this like a sports league where teams are able to buy a franchise spot. This should be like the equivalent of a token similar to an MLS team. There's a lot of things. But really it goes into can this accrue value? And I think that's really a different dynamic. And I spent five years talking those owners, like the existing sports owners who had terrible FOMO from dumping money into these things. And some of them took my advice and some of them didn't years talking those owners, like the existing sports owners who had terrible FOMO from like

dumping money into these things. 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 that, that was Bobby's strategy. That was the League of Legends strategy. Bobby got people so whipped up. Whipped up because he was basically like, look, I'm going to, 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. Yes. And by the way, I think even me at that time was telling people that's probably not the wisest thing, especially when you think about it's not even a forever game. And you were working for a sports company. Yeah. And that was a game that's a $60 package good

that's trying to be an esport. And my brain just sort of broke at that moment. I'm like, okay, at least let's think about the incentives here of like how we're going to align this. It's a completely different business model and game overall. At least in League of Legends, the incentive is still to keep this game alive for hopefully forever.

And that could accrue differently than something like an Overwatch League. We want to thank our longtime friend of the show, Vanta, the leading trust management platform. Vanta, of course, automates your security reviews and compliance efforts. So frameworks like SOC 2, ISO 27001, GDPR, and HIPAA compliance and monitoring,

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and streamline security reviews like Vanta's 7,000 customers around the globe, and go back to making your beer taste better, head on over to vanta.com slash acquired and just tell them that Ben and David sent you. And thanks to friend of the show, Christina, Vanta's CEO, all acquired listeners get $1,000 of free credit, vanta.com slash acquired. So we were talking a minute ago about 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 attention or care. Perhaps we could talk about the opposite of that with Web3 and crypto over the past few years, and specifically Web3 and crypto gaming. you end GameCraft, to my mind, kind of on a hopeful note about that. Would you agree? How are you feeling about it?

I do. And I have been incredibly skeptical, right? And 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 slightly of that OG gaming tribe, right? Like maybe slightly younger than the real OGs like Bing 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 I'm always resistant to tourism, right? I'm always resistant to people kind of coming in from outside and kind of claiming it as their own. And it's a character flaw because I should be big tent, and I'm just not. At the same time, Riot was that, right? They'd never made a game before.

They'd never made a game before, but, man, those kids were so down. Like, they were super hardcore. I would have adopted them, right? I mean, they were, they deserve to be in the tribe. They were, they embraced the tribe. But a lot of the early Web3 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 mint and launch NFTs and participate in an NFT marketplace that had some lightweight, 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 just actually invested in one, oddly enough, just recently. Supercell, the Finnish game company, and I made a joint angel investment in a deal that has a component of this. You saw EVE Online just raise $40 million, led by Andreessen Horowitz, to make a crypto-enabled version of EVE. Oh, I didn't realize that. And EVE is like a long-running, I mean, that's a 20-year, 18 years, I think. Icelandic gaming company? Yes. So now you're

seeing game people who've had a chance to kind of digest the technology and see if they can find an organic use for it start to bring product to market. And that gives me a bit of hope, right? Because maybe because it aligns with my narrow view of the games business, but maybe also because we're going to get good games out of it that don't seem like scams. And so for our audience who's not been paying attention to Web3 gaming, how is it mechanically different than traditional game business models? Or even let's just say the current most popular free-to-play business model of gaming. What new things does blockchain unlock? The good news is not that much, right?

I honestly believe this, right? 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 improve 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 take your character and mint it as an NFT. It gives you certain benefits in the underlying game, but it kind of gives you status in the status competition

that you and the other very advanced players are engaged in. Because at some point, if you've been playing World of Warcraft for 15 years, you're not running around killing chickens for gold, right? Like, 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 Web3 technologies

that actually are additive to the gameplay. And I think that's exciting to me. What's an example? I'm not going to tell you. You can imagine Eve with this. Oh, Eve is a good, yeah. I mean, Eve's a good example. So they're going to have a token, and that token is going to be useful in the game in a way that's not pay to win, right? Which is the death of a free toplay game, right? And Blake is almost a religious

fanatic around pay-to-win. Why do people do pay-to-win then? Like, it will kill your game. Because it works. Because it works in the short term. I was talking about this with someone at Supercell recently. And I think like Clash Royale, if you play that game, has some real pay-to-win mechanics. It's like softer, where you can go from, you could probably spend 100 hours playing that game completely free to play and it's balanced and great. But once you hit a certain point, it's like, oh, you hit a wall. It's going to take a while to grind out here. And so either spend or you're going to be playing this game like eight times longer than the person 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 game from a multiplayer

standpoint, then it's way easier to do more pay-to-win stuff. Fair enough. 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... Leaderboards. Yes. I mean, in progressive status, yes. Yeah.

If your rank meant something in League of Legends, which it does, if there was a way for you to pie the highest rank, that game would break. It just simply would break. So wait, let's go back to the token notion. So what is the token in EVE Online? Okay, great. Now there's this like crypto element. What can I do with it?

So Hilmar hasn't released the design yet. And because he pitched Blake and I, I'm a little uncomfortable discussing it. Of course. But let's just say abstractly, it functions in a way like a store of value almost, like a super currency where you will have 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 are acquired through ownership. And you're incentivized to buy it because it provides you with certain benefits in the game that don't necessarily make it competitively unbalanced. But that 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, 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 has one of the best framings that I've ever heard around this, which is Yvonne Lyon, the original, he's like, this is Rome. And you know, like, you have like broken sewage and just like, no paved roads, all this stuff. And he's like, Web3 and building it with crypto rails actually makes it look closer to like New York City. And so he's like, we'll still keep Realm

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 he had this great line of, and you still have Italians that move to New York, you know, and he's like, it might take a bit, but like they still move over to New York. 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 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 80% of the gameplay is economic. Right.

Mining, trading, manufacturing, et cetera. It is the perfect- Vehicle, yeah. Like if this game doesn't work, it will be actually very telling of the current. Because if it works anywhere, it should work here. Exactly. Yeah, like it is a perfect application. There's a real question of is this game still a viable game that people want to play in 2023? That's maybe a different question.

But it is the perfect vehicle for Web3. I ask all these questions because my skepticism has sort of come from, there's all these egalitarian notions of in the Web 2 world, it's awful because you have to pay the gaming company for the items. But in Web 3, 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. 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? Because they can hopefully increase the size of the pie, incentivize you to trade at a much greater volume and harvest transaction costs, right? I mean, look at Roblox, right?

Roblox doesn't have a Web3 component, or at least not yet. But man, it's got a very viable peer-to-peer economy in it. And Roblox is the most highly taxed app store on earth, right? I mean, because you get paid as a developer in Robux, right? So when you're extracting those, they're taxed. Right. Robux isn't Web3, but it might as well be. It might be the most successful Web3, quote unquote, Web3 application out there. Absolutely. And so, I mean, I think the last time I calculated the total tax, the gross tax was somewhere close to 60%. It was like 57% of- Yeah. I was going to say, the last I heard is like 55% to 60%.

Yeah. Because it just keeps compounding. Every time that Robux moves between parties, it just keeps getting. And like Twitch and like YouTube gaming and other things where there was this incredible feedback loop. And we talk about this a bit in our user-generated content episode in GameCraft. You know, Minecraft, for example, where they just crossed the one trillion view mark on YouTube, right, of Minecraft-related videos. You know what? The company that made that, Mojang, didn't make any of those videos. They were 100% 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 Web3 space is that this can be more broad than even that. I would say even you look at a game like Counter-Strike, and a lot of people don't look at Steam and view it like an OpenSea or one of these marketplaces. But in Team Fortress 2 and in Counter-Strike, they introduce these virtual goods and they're literally just cosmetic. But you open a loot box, you get the skin, and those skins have real value because it costs $2 to open up that crate. And you might have just got something that's super rare.

And in the public market that is hosted on Steam, where they take, I think it's 10%, they are double dipping and triple dipping on the content that they primary issued. And they're getting all the secondary sale of just recycling through of, oh, you got a knife? I want a knife skin. That's like $400 is what those go for on that market. So Valvin is actually like the closest to probably like Web3 being just open where they actually let you take these things off

and you can transact for US dollars if you want to. 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 they're bots and they're sites that just literally will transact for US dollars. So I think there's a lot to study there. And one thing that Mitch and I always talk about

is there is the speculator problem in a Web3 example where if you truly were looking at Counter-Strike and you wanted to buy, in theory, you want to speculate, is Counter-Strike going to be bigger over time? I should just buy all these skins in the open market. And that just raises the price. And it's what we saw 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 problem. Yeah, I mean, Blake and I, Blake and I I talk about this. We call it the Bitcoin pizza problem, right? Which is, you have the person who spent three Bitcoin back in the early days on a pizza

and those three Bitcoins are in today's dollars worth 75 grand. And so you feel like a fool because you spent that currency. And so when we're looking at Web3-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 Hilmar's new EVE game, Awakening, because he actually had a really interesting solution to that problem. And we've seen so precious few good solutions to that problem. Right. And it's a double solve because when something goes up a lot in value, there's a problem because you don't want to spend it. And the goal of creating any economy is dynamism to create a lot of transactions 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 incentives for everyone. So if it doesn't have that problem, then you solve two issues. Yes. Yeah, it's really tricky. And I don't think anyone has solved it yet. But we're certainly finally starting to see some people have theories around how to solve that. And it will be really interesting to see it play out because if you can solve it, then there's no reason why these things shouldn't exist in games moving forward.

So when we were going back and forth on what to talk about on this episode, Mitch, I think it was you in our shared doc here, had quite a few thoughts that you wanted to add on to our Nintendo episode. Mitch, I think it was you in our shared doc here, had quite a few thoughts that you wanted to add on to our Nintendo episode. Specifically, I thought the most interesting

was around our assertion that the NES was the first consumer device with a GPU architecture. Right, your PPU discussion. Yeah, yeah, yeah. And yeah, tell us what we got wrong.

I don't think you got it wrong necessarily, but I just wanted to – I'm fascinated by the history of this company, this Utah-based company called Evans & Sutherland. And I was really just teasing you guys because this felt like such an acquired, like, mini-episode, right? Because these guys were like the Fairchild semiconductor of computer graphics. So these two professors, they were, you guys talked a little bit about this in the Atari context, right? The U of U mafia of computer graphics, Alan Kay and Ed Catmull and Nolan. But what you get wrong about that is that Nolan was like 10 years senior to the rest of those guys, right? So Nolan went through as an electrical engineering student. And then Evans and Sutherland came in and formed the computer graphics practice at the University of Utah. And so Nolan had already graduated. But they got Catmull, Alan Kay.

So Catmull, who goes to Pixar, Alan Kay, who basically goes everywhere. I mean, he's part of the Apple user interface thing. He starts the Atari research groups that basically invent virtual reality. I mean, he is pollinating flowers all over the computer business. He's credited with 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. Oh, yeah.

Jim Clark, right, was a student of Evans and Sutherland. So all of these incredible people came through that University of Utah computer graphics program. The professors then spun out with an absolute bucket of DARPA money and started this company that basically started to build in the late 1970s, early 1980s, the first commercial flight simulators. And so, you know, with very high fidelity, you know, flight simulators. And, of course, flight simulators required the kinds of advanced graphics that just weren't available on desktops, even in the workstations of those days. This is pre-Silicon graphics. This is pre-any of that stuff. So they had developed a bunch of this proprietary Silicon during those days and ultimately ended up in the supercomputer business later on in the 1980s. And then ultimately in the 1990s, were in the 1980s, and then ultimately in the 1990s were in the console business. They helped develop

Bridge Racer for Namco, the very advanced 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 I just find that whole episode incredibly fascinating. And it's so interesting to think about all of those people kind of coming through that same program and what it must have been like. And Evans & Sutherland had a big impact in the games community because former employees of theirs started up a bunch of games companies. And again, like just one of those incredibly seminal, in really the true sense of that word, 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. And 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 our research was basically like, I think it's always been true. Could be. I don't know as much about what they count when they count the Hollywood revenues or the music industry revenues, right? Whether it's sort of ticket prices or what. But I think regardless, the really interesting fact is how big the arcade business was. And if you go back and look, some people do these really clever little graphical drawings where they show sort of how we got from early games business to the $180 billion of today,

and they show sectors 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 Sega, and when we were researching for the Council Castles episode, it was so clear that these console manufacturers really were wrestling with, do we risk it? Do we risk our coin-op business? And in a lot of ways, it's probably why Sega isn't what it was, or isn't Nintendo, is they were trying to protect what they had. They're literally making billions of dollars in the 70s, like billions of dollars in revenue

in the 70s. Of course, you're not going to stop doing that. Yep. I mean, I grew up in that era. So I was one of those rugrats who was camped out with a handful of quarters in a video game arcade. And so I remember that. I mean, they were important social loci, right, for kids in those days.

Yeah, let's talk about it. I'm curious for both of you. 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. You played Space Wars? At a Woolworths in Fort Lauderdale, Florida, where I was miserably consigned to grow up. Did you have a PDP-1, or how did you get access to Space Wars?

Well, no, it was the console successor to it, right? It was like they took that idea and they made a box out of it, basically. Only a few of them, but somehow one of them ended up in – it was not the PDP version that you guys talk about in your episode, but it was a cabinet. Yeah, like a cabinet version of it that was propagated. And somehow this Woolworths or Walgreens, I can't remember what, in Fort Lauderdale in a mall had one of them outside of it. And that was literally the first video game I ever played. And then it was, you know, Robotron and those kinds of games were sort of my jam growing up. Would you have been in the Atari 2600 era? Yeah, except that we were Apple II family. And my dad was one of these guys who

loved technology but couldn't understand how any of it worked. So he would buy this stuff and then 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 kind of techno geeks. What is Video Assist? So in the old days with film cameras, 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 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 MIT Media Lab in the late 80s. Hey, you always see those, you know, George Lucas in Tunisia shooting in the desert in 70,

what was it, 76 when they were shooting A New Hope. Like, they've got the tent, they've got video monitors, everyone's pointing, they're watching dailies. I mean, it's a camp out. Yeah. So that was, again, we would inherit these technologies, whether they were, like, early video cameras or whether they were computers in the case of the Apple IIs. 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'd turn them into games. What was your first dedicated gaming machine? The first dedicated gaming machine that I owned, because I wasn't an early console adopter. So the first dedicated gaming machine I owned wasn't until I was in law school in 1987. 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 played video games all the time. So we bought an Amiga, a Commodore Amiga, which was a very famous device inside the video game business, but largely unknown by most people. But it was an incredible device. This is after the Commodore 64.

Yeah. And so that was my first, I would call that my first dedicated gaming device. Blake, what was your first gaming experience? My brother's three years older than me, and so he was always in the games, and he loved Nintendo more than anyone. And I was always the meme of just being player two. And so it was so bad growing up. We would play N64.

We had an NES, and I think that's really the first console that we had. And I remember just being stuck playing the crappy other character. It was bad. We would play Sonic, and I'd be like Tails. I just remember hating that experience. And it became really clear that my brother just loved single-player narrative type creative games.

And when Xbox came out, I was like, oh, I can finally get something that my brother's not going to take all the time with. And I got an Xbox, and really, Halo was the thing that, like, changed my life. I was like, what is this? This is amazing. And then really, the 360, when Xbox 360 came out, and Xbox Live just really took off. Xbox Live was such a, you talked about it a little bit in the console castle as Apple

said. Yeah, only just because of what an incredible business 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 $5 a month. Yeah, talk about the number of people that actually upgrade. 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. It's just insane.

Like the numbers, I forget what it actually ends up being, but it's certainly billions of dollars in revenue even today. 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 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 because they just knew I'd be a total degenerate. And they were probably right.

And I like to like, I now have a gaming PC and I'm a total degenerate. So I get it. But I loved just like Call of Duty and all of the competitive games really. But we missed, my wife and I, the console era really in a lot of ways because we went from sort of, you know, PC, like, you know, during that entire era basically. I mean, the first consoles really that would have been viable, the 2600 and stuff, we kind of missed because they came out right as we were graduating from high school and we were more in the arcades. And then we went straight to the computer. I remember we were playing some of the early EA games like

Starflight on a compact portable that had an RCA out that we could plug into a television. And so we were watching, you know, we were playing it. That was our monitor to play, but the compact portable was that 30 was that 30-pound sewing machine. I remember those old boxes for the mouse. They had like a trackball mouse. Oh, wow. And then we bought our first console, actually, when she was interviewing for the job at Activision. I was at Disney, and she needed to play.

So she got into the games business first. Oh, yeah, yeah, yeah. She needed to play MechWarrior on a great game, 2047. I forgot what it was. I played that on the Mac. Yeah, yeah, yeah. So we had to buy an SNES so she could study the Activision games before she went in for her interview. Wow.

And then she got hired and worked there for 15 years. Wow. How did she decide to transition her career from lawyer to game developer? She, when we were in law school together, we wrote a game together. I programmed and she designed. No way. Yeah, it sucked, but it was like, but still, we were, we just sort of knew that was our calling. And like, we practiced law for a couple of years, but neither of us were totally into it.

She actually was a district attorney in the hardcore gangs unit in LA. And so she had a much sexier job than me who was just doing, representing, you know, Atari games against Nintendo. Wow. 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? It was no... You know, it's just one of those things where you don't know that it's possible, right? I mean, I think that it's true. And you find this to be the case in Hollywood quite a bit, right? Where kids who've grown up in Kansas or whatever, you know, 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 kind of didn't know you could do this for a living, right? It just seemed so out of touch. But slowly but surely, like, 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. The electrical instruments, scientific instruments

department at UC Santa Barbara was like where 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 consoles, I mean, they were making what we would now think of as software and 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, there's another world out there. And so I left and went to Disney. Yeah, I think it's funny. 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 played video games and I still play video games probably way too much. And it wasn't even until I entered venture capital that 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 didn't even think that's possible. And that's, even after I ended up in venture capital, I was like, I didn't even realize that was a thing. And that's today. Imagine from like the, you know, the games business in the late 80s. Yes. This is another great thread. You said, even you said, I play games way too much. There's this stigma around this industry still. Why is there this stigma? Oh, I mean, I definitely just objectively play too many games.

But the statement too much requires... It's a moral judgment. Yes. Requires, yes, some standard by which someone has to hold themselves. Let's remove it from playing games. I think a lot of people in the business world think of the video game industry as like, whatever, that's for kids, or that's not real. That's not real business. Well, and you, I think, address this quite well in the first Nintendo episode when you talk about sort of the roots of this business in the toy business, right? Even Nintendo making the glove for the Magnavox Odyssey, if I'm remembering that correctly. The light gun. Yeah. I'm sorry, the light gun. Yes, indeed. And that was real,

right? I mean, it persisted long into the 90s. I mean, that it was still kind of considered kind of part of the toy business, right? Hasbro made a run at Activision, little known fact, right, in the late 90s when I was running the studios there. And I remember going to Toy Fair in New York, which is a trip, man. Back in those days, like, and we went actually to the Hasbro pre-Toy Fair thing in Boca Raton, Florida, of all places where they were, they'd 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, 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 really in those days, it wasn't that much of a stretch to think of the video game business as basically being really a pertinent to the toy business. And now we don't toy business. And now we think of it more as appurtenant to Hollywood. I mean, you look at The Last of Us or things like that where now we're supplying IP to serious drama and whatever, but that wasn't always the case. Yeah. I think there's also the subtle shift of games becoming really social. There was maybe hanging out with your friends, they would come over and you'd have a little LAN 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, 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, I don't know, the equivalent of playing golf on some level of like, oh, I'm catching up and I'm sure the games itself are a way to facilitate. I'd also say that the content itself and our choices early on in the business was somewhat self-limiting, right? In the sense that, I mean, we made a lot of really violent stuff, right? We made a lot of, you know, games that, to Jenova's point, perhaps didn't explore

all of the spectrum of human emotion. And as a result, I think 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, you know, certain kinds of independent film or sexually 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 with my friends way too much, but you say, I play video games too much. And it's like, there's nothing wrong with being social, and there's nothing wrong with

having fun and enjoying your life. So why is it that there's something wrong with playing video games with your friends? Maybe it's just the games I play, that they're really competitive. And so they make me very upset and feeling very tilted after I play those games. So it's more that feeling. And it isn't the case in my family. I mean, my wife just played Elden Ring through, finished it. So good.

Now, 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 100 hours or more, right? I finished Elden Ring with a one-year-old, but I'm still married. Then she finished. She was like, okay, now I got to 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 the family I live in. Wow. Where I'm like the non-gamer. So what's your drug of choice here? FIFA? Currently, well, it has historically been FIFA, which then 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 our dad-son bonding stuff. But then he became too good and ended up making a career out of it. It's like the backyard basketball trope. Exactly.

Where your son turns out to be LeBron. And then, but I've always also been a real-time strategy enthusiast and grew up in the era of Command & Conquer and StarCraft and WarCraft and currently am playing Age of Empires IV pretty obsessively. 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 when we release it, we get feedback, we incorporate into the next episode. 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

brought up where you might want to address things from the series? 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, they were all in the can when we recorded basically the first episode, or when we released the first episode. And I've just been incredibly surprised by how universally positive the feedback has been. I think there really wasn't much like it on the market in terms of deeply researched, very much, I think, inspired by what you guys have demonstrated is that there is an audience for this kind of well-prepared, intellectually rigorous kind of exploration of a niche-y 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 have some inspiration from, I mean, I think if you guys hadn't existed, we probably wouldn't have done it. Thank you.

But yeah, we've gotten- It sounds like Malcolm Gladwell helped a little bit too. He just told me not to write a book, which I think, you know, he's been on that for a while, that like that podcasts are the future. I think he's done, he's been on that for a while, that podcast for the future. I think he's done a couple episodes with Bill Simmons, who, you know, calls himself the podfather. He is. It's true, though.

Like, we've been asked many times, we've thought about writing a book many times. It never pencils. Like, it's never a good decision. No. Which is kind of sad, but is just the reality to me. Yeah. I just echo what Mitch has said, which is the feedback has just been amazing. The most common feedback or the mailbag stuff is just, you lead us right to the current time and they're like,

we want you to talk about AI and games. So let's talk about that, right? Because we have gotten that as a question. So this is a brave new world, right? 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? AI started in games. Exactly. I remember Danny Barry, when she was making Mule back in the old EA days, she was basically like, 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 get my NPCs 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 kind of evolved all the way to the very sophisticated kind of computer opponent AI. I mean, there was at least, what, a five-year period, I think, where Microsoft's AI was called Cortana. Yeah. After Cortana from Halo. Exactly. So now we obviously, you know, you can't, every rock you turn over in Silicon Valley these days is an AI pitch, right? Yeah, we're at Benchmark, and I can see, like, 15 founders lying outside with decks.

Literally, the parking lot was full. We had to drive around to, like, the town hall to park. There's only eight spaces, so it's not that big. But, and we get asked a lot about, you know, where we see the technology being applied. And I think there is a kind of, there's a train of thought that has been advanced that, oh, wow, this is really going to democratize the game industry 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 magically appears, that people will be able to describe a game and it'll magically appear.

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

I think one is art pipeline, clearly, right? Because 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, every building has a chair, every building has a piece of art on the wall. There is a... Every character has clothing. Has clothing. Every rug has a different pattern or whatever, or it gets monotonous.

Like you have to change it. 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 a magnificent achievement. But, man, 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 I think, you know, it's not going to replace the need to design those things,

but it may replace the need to hire an artist to go and bang out 30 different variations of a chair, right, for example. So I think that's a, like, art pipeline feels like a no-brainer. Yeah, that's like the lowest- fruit, I think. And right now, we're in the 2D phase of that. Will we have a 3D phase? Absolutely. Yes. For sure you will. Number two, I think, is quality assurance and 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 it reported back 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 have my own theory of fun, right? Which I talk about quite a bit. But yeah, to have an AI that could describe their experience of playing the game in those terms is extraordinary. So I think that's going to be really cool. Balancing is really hard because balancing is essentially an arbitrage 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? The Chinese cavalry, under certain circumstances, has an advantage that I can exploit in an arbitrage-like way, right? And so finding counters to those or whatever

is a really interesting potential use of artificial intelligence that we haven't explored really very much. And I think that's going to be really cool. It's like to bring in the thing we've all, I think at least three of us have mentioned as a pillar of our life to bring in Halo. I mean, when dual wielding first came out

and Halo 2, so overpowered. Yes. And it was one of these things that took a whole new disc shipping to fix the fact that all you should ever do is run around dual wielding fully charged and then running your enemy. And if we can do that, of course, through play testing and 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 as we move into

this era of more and more sophisticated game economies, being able to sort of play out those game theory kind of scenarios, right, where about where, you know, hoarding of various resources and what that does to the economy, etc. Yeah, you had a funny line yesterday of like

you just write the prompt of like, get rich, like to someone, like to this bot, right? 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 going to break the economy. So I think those things are going to be really, really exciting. And then the one I'm particularly excited about is LiveOps because we're spending boatloads of money on LiveOps.

It's really hard. 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 rip out 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 capabilities are, what our characters are like, and it designs quests that are kind of challenging to us, but accomplishable or whatever, like that you can have a real-time quest system or narrative system

that you could build into a live game, that would be really exciting. And then the last one, which is particularly interesting also, is an adjunct of that. It's sort of analogous to that, which is live DMing for Dungeons & Dragons-like experience, where if you've ever been a DM... Live Dungeon Master. Dungeon Master, yeah, I'm sorry. Not live direct messaging. Not direct messaging. I was like, well, I'm pretty sure OpenAI does that. You're among geeks here, so we have a different kind of acronym.

But, you know, the Dungeon Master is a role in a... If you've ever played Dungeon Dragons with your friends, right, it's like somebody's got to play that role, and it's a very difficult role to play. I mean, you are a storyteller. You have to some... You know, one of your players enters a tavern. You've got to figure out a non-player character to interact, like the tavern wench or whatever, to interact with that character. And, you know, that requires, like, storytelling and narrative. And if you could have an AI assistant that could help, that could supply you with narrative in the background, right, and sort of help you tell that story, I think that's super

exciting. And I think there's going to be a lot of interesting things that are going to happen in that space, particularly now where we're in the middle of a massive Dungeons & Dragons renaissance. Yeah, I think there's also this inherent tension within the games industry of if you are maybe an incumbent studio, are you comfortable using AI arts and doing asset generation? And what does that mean maybe as an innovator's dilemma type scenario? But then there's also maybe like a working theory that I have is 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 this AI asset generation time, where if you

can spin up these 3D assets and you're letting the users go and do that, that should be just a really more obvious way that this evolves than having your artist push back and be like, hey, don't use my art style. And that's going to be a whole other sort of work. It certainly seems 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? That it stifles innovation? I mean, 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 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. That's already somewhat democratized it, right? In the old days, we used to create bitmaps by hand to try and wrap around 3D characters. It's like now you've got incredible tools and technology, Maya and advanced Photoshop tools and all of these other things that are just capable of sort of accelerating that process. They're a little bit expensive, but they're accessible to individuals in a way 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 number of Silicon Graphics workstations that they had available to them.

You talked about this in the series. It was crazy. It was true. Rocket science games. Go look them up. It's like they were literally valued in their Series A on the basis of the number of Silicon Graphics workstations they had. 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. 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 going to be like a billion dollar business 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 these, you know, these are new kinds of narrative experiences that we would never have really found valuable.

So I think there's great value in that, and I'm a big proponent of that. On the other hand, you know, not everybody is good at this. And that's also something you see on YouTube, right? Which is, you know, there's thousands and thousands of videos you don't get fed to you in the algorithm, which suck, right? And that's going to be the same in the video game business. Yeah, I think that's right. I think there is, we still haven't fully reached maybe the iPhone moment to, you know, for your camera, but we're getting there. And 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 we're getting so close to those moments of with UGC getting better and you can have the random kid maybe come up with a new genre or a new game. And it looks like a mod or whatever it is, but it might just be in Fortnite Creative or Roblox.

Right. The old Hiroshi Yamauchi maxim that, you know, there are a handful of Shigeru Miyamoto's in the world that can make games like that and we want them all, you know, making games for Nintendo is probably still true. It's true. Absolutely true. Spielberg is still amazing, right?

Spielberg didn't get any worse 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 you think about, you know, how Carmack and Romero got into the position they got into and all the luck and sort of serendipity that was involved. Same with Miyamoto, right? It's like, what is he? He's been

there since 77? Yeah. And he was hired to design the arcade cabinets. Yeah, exactly. And they plucked him out. Even the guy who trained him that you talk about in that first episode who himself was kind of plucked off the assembly line. And so I think

that's the part where hopefully we can be a little more efficient about how we find those Miyamotos. Well, on that note, I want to close with a pitch to you guys. Okay. Which I've texted you about, but I want to now make it live in public, which is I really think you should continue the GameCraft podcast. Not that you need to, but I do think, like, hopefully you've seen this in the reaction to it. Like, I think this can be a really good galvanizing force for people to take this industry more seriously, invest in this industry, and most importantly, enter it. Like, make games, become entrepreneurs.

I agree. I think I'm feeling a bit of that pressure. I mean, people, when I started this, I think the other thing that I learned from Malcolm and from Michael Lewis was, I said, well, should I do it as a weekly? And they said, no, that's a job. Right? But they said you should do it 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.

Great. And look, one of the benefits of being old is I've met everyone in the video game business over the last 30 years, right? And some of them even like me. And so hopefully we can start bringing some guests on who can help us tell some of these stories because I certainly know my path through the video game business and Blake knows his path through the video game business, but there are many paths through the video game business. I think that's the part that excites me. Well, everyone should definitely check out the GameCraft podcast.

Where else can people find you on the internet? I met Mitch Lasky on Twitter. Yeah, I'm BlakeIR on Twitter. And Mitch, you don't tweet that much, but Blake, you're an excellent follow. When Mitch does tweet, though, it's great. You turn on the notifications for Mitch because it's just once like a week, you'll just get a notification

and you just know it's spicy. So I recommend it. Awesome. Thanks so much, guys. Thank you. This was a pleasure. All right, David. 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. For those on video, I'm sure it was kind of 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 to get that.

Also, huge thank you to Mitch, to Blake, and to Benchmark for hosting us and doing this together. If you want to hang out with us more, come check out ACQ2. It's where all of our interviews are happening with founders, investors, and basically all of our interviews going forward, we're going to be putting over on ACQ2, which is really becoming known as the Acquired Interview Show. 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 as we kick off the next season. So be sure to go to acquired.fm slash LP if you want to come deeper into the acquired kitchen. All right, that's all we got. Talk about the episode in Slack if you want,

acquired.fm slash Slack. And with that, listeners, we'll see you next time. We'll see you next time. to you who got the truth now.