Gamecraft

• The Venture Deadpool (Ep. 21)

  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.]

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• China (Ep. 20)

  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:  

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• Valve (Ep. 19)

  Mitch and Blake take an in-depth look at one of the most important companies in the global gaming business: Valve. They trace the company's origin as the developer of first-person shooter Half Life, their use of the Quake engine and the benefits Valve derived from their relationship with id, and their development and deployment of the Steam platform. They explain how Valve used content like Half Life, Counter-Strike, Team Fortress, and other games to aggregate audiences on Steam, and how they used those audiences as the bedrock of their move to platform-based publishing on Steam. They discuss the evolution of Steam and its competitive advantages as an internet business, and how Valve used those advantages to become the publisher/distributor of choice for independent PC games, and later a key distributor of games from incumbent publishers -- including the rumored launch of the PC version of the much-anticipated new Grand Theft Auto VI.  Finally, they look at the Steam's success in China, how the increasing market power of Steam could pose a problem for the PC gaming business, and how Valve is attempting to leverage Steam into a hardware platform.  Show Notes: GameCraft S1E2: The Fall and Rise of Publishing Aggregation Theory Valve 25th Anniversary Documentary Michael Abrash "The Fragile State of Steam in Mainland China" - gamesindustry.biz Steam Anti-Trust Litigation

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• The Mobile Gaming Duopoly (Ep. 18)

  Mitch and Blake discuss the mobile duopoly in which Apple and Google exert extraordinary power by tying their app stores to hardware and software platforms. They warn that the inflexible and expensive distribution systems on iOS and Android could be models for future PC and console distribution systems. They briefly review the history of mobile distribution and mobile technology innovation from the late 90's to the present, and what that development meant for content on the platforms. They discuss the similarities between the JAMDAT and Scopely content portfolio strategies as responses to their very different distribution situations.  They discuss in depth the often perverse incentives that are created by platform dynamics and distribution expenses, which lead to content and customer acquisition strategies that are designed to maximize return on invesment rather than quality entertainment. Blake explains the particularly dark advertising strategies of companies like Playrix that intentionally deceive users. They make the case for government regulation as perhaps the only solution to the current mobile distribution cost gouging problems, given the market power of the two duopolists, and explain why sideloading isn't a simple solution to the distribution problem. Finally, they discuss the increasing similarities between the iOS App Store and Steam, and why that is a frightening development. Show Notes: Macworld 2007 iPhone Announcement  Do [Steam] Wishlists Matter Any More?

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• Cycles & Survival (Ep. 17)

  Mitch and Blake kick off Season 3 of the podcast with a high-level look at the current moment in the video game business, critiquing both the idea that the business is cyclical and we are in a downward phase of the cycle (and the naïve notion of "survive 'till '25"), as well as the idea that the business has simply matured, suggesting we are in a new phase of low growth and consolidation. Instead, they propose a framework for thinking about the games business that argues for the continuous interplay of three innovation forces: content, distribution, and technology. They outline how each of the three forces have played out historically, and offer some examples of the discontinuous inflections that have occured along these three vectors of innovation. They also try to explain why innovation is currently stalled, and how that creates a downward spiral that affects valuations, risk-taking, and ultimately what kinds of games get made.  Show Notes: Matthew Ball's state-of-the-games-business deck Joost van Dreunen's newsletter  Live Service Games The Demise of Mid-Budget Cinema Sideloading apps on IOS Discord's new ad units

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