Gamecraft

Explore how Hasbro and Lego navigated the gaming industry, revealing their distinct paths and strategies. Discover tales of licensing triumphs, like the iconic Lego Star Wars collaboration, and learn about Hasbro's strategic acquisitions and iconic Monopoly Go. The podcast also dives into the rise of competitive block-based games like Minecraft and Roblox, highlighting challenges that both toy giants faced in the digital realm. Tune in for insightful commentary on how these brands adapted their business models and influenced modern gaming culture.

Mitch and Blake address the unpleasant topic of how and why venture-backed games companies fail. They look first at the nature of venture financing and the inherent differences between venture and publisher money. This leads to a conversation about how developers who were used to working with publishers treated venture capital like production financing as opposed to company financing, and why that distinction matters. They then turn to the flawed strategies and tactics of gaming funds and investors, who tried to make up for their lack of judgment and taste by placing many bets on startup studios. They address several other factors that made games investing tricky for venture capitalists who often had little experience managing creative businesses and lack a basic understanding of the peculiarities of game production.   Mitch and Blake look at reasons why venture backed companies fail, and why catastrophic failure appears to be more common among venture-backed games companies than other software companies. They discuss the concept of the "naked B," why growth rounds are rare in games companies, and why games companies are uniquely difficult for conventional venture capitalists to evaluate. They conclude with a look at some examples of companies that failed to return capital to investors -- in some cases very significant amounts of capital -- and discuss a few companies that appear to be in danger of following suit. They explain why the cumulative effect of these failures is one of the factors behind the current difficulties game companies experience raising money from venture capitalists. [Ed.: since recording this episode, one of the companies in the deadpool, Elodie Games, has shut down.]

Mitch and Blake look at the current state of the vitally important Chinese gaming market, on the precipice of a bitter trade war resulting from the Trump tariffs. They review the history of the games business in China, discuss the reasons China is so competitive in the global gaming market, and look at how some of the ways the Chinese market diverged from other markets influenced the strategies of Chinese game companies. In particular, they look at how China's relatively late entry into the games business proved to be a benefit, by allowing them to skip the packaged goods era and therefore avoid all the ways that the packaged goods legacy has burdened incumbent US and European publishers. They discuss how the restrictions that the Chinese Communist Party places on the games business have influenced the development of the market, for better or worse. They analyze how this unique domestic situation pushed the top Chinese companies to look outside China to deploy capital to secure various strategic content and distribution advantages (e.g., Riot, Epic, Garena). They discuss the strategies of top Chinese publishers TenCent and Netease in this light. They talk about how US national security interests affect Chinese publishers' ability to invest in and potentially acquire US game companies. They discuss how, over time, homegrown content has come to dominate the Chinese market, and the way that pattern is similar to what happened in the film business, where China migrated from importing Western content to creating its own. Mitch and Blake marvel at how China has gone well beyond replacing Western game imports, with Chinese products such as Genshin Impact and Black Myth: Wukong emerging as viable AAA games suitable for successful export to the US and European markets. They also look at the success of Chinese mobile games such as Last War and Block Blast! and how good these companies are at distribution arbitrages.  They conclude the episode with a look ahead and discuss how the current global political situation may affect the future of both Chinese and Western game businesses. Show Notes:  

Delve into the fascinating evolution of Valve, from its groundbreaking role in shaping first-person shooters to its transformation into a digital distribution giant with Steam. Discover how the iconic launch of Half-Life 2 set the stage for the platform's dominance. Explore Valve’s strategic maneuvering within the competitive landscape, the challenges of entering the Chinese market, and the implications of its growing market power. Finally, examine the shifting dynamics between mobile and PC gaming that could reshape the future of the industry.

Mitch and Blake delve into the tight grip Apple and Google have over mobile gaming, warning how their current distribution models might bleed into PCs and consoles. They explore the historical evolution of mobile tech, highlighting how past innovations shaped today's content. The conversation reveals the troubling advertising tactics of some developers, designed to prioritize profit over player engagement. They argue for government intervention to combat cost exploitation in the app store duopoly, raising alarms about the unsettling parallels to Steam's practices.

Mitch and Blake examine the current state of the gaming industry, challenging the notion of cyclical downturns or stagnant maturity. They argue for the interplay of content, distribution, and technology as key innovation forces. The discussion highlights the decline in venture capital and its impact on both independent and major studios, while exploring the shift to free-to-play models and the revolutionary role of AI. They critique the stagnation in content innovation and the monopolistic trends in game distribution, urging for a deeper understanding of market dynamics.

Exploring the impact of AI advancements on the games business, from creative efficiencies to potential disruptions in the labor force. Delving into the dark arts of customer acquisition through behavioral analysis and ad personalization. Examining the bull and bear cases for game AI and its implications for the future of the industry.

Mitch and Blake delve into the world of intellectual property licensing in games, discussing the value of licensed IP and sharing secrets to finding gems for licensing. They dissect EA Sports' success in licensing real teams and players, and explore the recent Epic/Disney partnership for a massive re-engagement scheme. The podcast touches on celebrity endorsements vs. IP licensing and the challenges faced in the gaming industry with licensing deals.

Exploring the importance of distribution in the video game industry, discussing the evolution of distribution costs from physical to digital era, and analyzing the impact of platforms like Steam. Delving into the transformation of distribution platforms within the gaming sector, discussing profitability, curation, and innovative marketing approaches. Highlighting Netflix's strategic venture into the gaming industry with a bundled game subscription service.

Discussions on the expansion of gaming in emerging markets like Middle East, Latin America, and Southeast Asia. Insights on the challenges of introducing games in diverse regions and the importance of localization. Exploring the growth potential of Indian gaming market and the regulatory impact on China's gaming industry.