16 Minutes on the News: Fortnite, Esports, Gaming, and Entertainment

0:00:05 Hi, everyone. Welcome to the A6nZ podcast. I’m Sonal. I’m here today with the third
0:00:10 episode of our new short-form news show, “16 Minutes,” where we cover recent headlines
0:00:14 the A6nZ way, offering expert takes on the trends involved and more. You can follow the
0:00:19 show in its own feed in your favorite podcast player app. Our other episodes cover multiple
0:00:24 news items and topics, but this week we’re doing two separate, short-but-deep dives connected
0:00:32 to recent headlines. One on the opioid crisis, which you can find in this feed, or at a6nz.com/16minutes,
0:00:36 and this episode, which is on eSports, gaming, and entertainment.
0:00:40 So here’s the news. The Fortnite World Cup just happened this past weekend. It’s the
0:00:43 first time ever it was the inaugural World Cup, and it actually took place in the same
0:00:49 exact stadium in New York that the U.S. opened for tennis takes place. And the news was that,
0:00:53 besides the fact that this is a big new thing, was that a 16-year-old named Kyle Gearsdorf
0:00:59 won $3 million, and that is actually the largest prize ever for a single person in eSports history.
0:01:02 And by the way, his nickname or his player name is Booga, and that’s actually the name
0:01:05 he got from his grandfather calling him Booga Booga Booga, and he was a baby, which I think
0:01:09 is really cute. Just to put this in an even more context before I introduce our experts,
0:01:13 what’s also really interesting about this is that this prize money is not that different
0:01:17 from traditional physical sports. Everyone’s talking about how Booga earned more money than
0:01:22 Tiger Woods did for winning the Masters, and it’s not even the biggest prize pool overall.
0:01:27 Dota 2’s The International is the largest ever so far, with over $30 million. And that’s
0:01:31 what everyone’s talking about. To me, the real big news here is that 2 million people
0:01:37 concurrently live-streamed this past Sunday on Twitch and YouTube. My friend Angela Watercutter,
0:01:40 Wired, pointed out that this is not as big as Game of Thrones, but that’s a hell of
0:01:44 a lot, so it’s slowly mainstreaming. I’m going to introduce our A6NZ experts, Andrew
0:01:50 Chen, general partner, who covers our consumer vertical and Darcy Kuliken on the investing
0:01:54 team for consumer. I want to hear from you guys, what’s a broader category that this
0:01:58 fits in, what’s hype, what’s real, and how are you guys thinking about this in the context
0:02:01 of the future of entertainment and tech? That’s a big question.
0:02:05 Awesome. I think when we look at esports, the most fascinating thing about it is it
0:02:12 is the most publicly visible phenomenon of the much broader trend, which is the emergence
0:02:20 of gaming as a new form of entertainment at a peer level to TV and movies and music and
0:02:25 so on. It’s inevitable that it’ll get there. Just the hours that consumers are putting
0:02:29 in really show that. For years, people have said, “Well, gaming, it’s this hits-driven
0:02:34 business and you build a game and you release it and you get all your sales in year one
0:02:40 and then that’s it.” I think what we’re seeing is that in this new style of hyper-social gaming
0:02:45 properties that have esports leagues around them, that have multiplayer built in, that
0:02:49 these properties like League of Legends Riot Games is their flagship game has now been around
0:02:53 for 10 years. It’s still doing over a billion in revenue. There’s still a ton of people
0:02:59 playing EverQuest. There’s still a ton of people playing World of Warcraft.
0:03:04 This is a new way that consumers are coming together and interacting with each other in
0:03:08 a big way. Esports is the natural outcome of all that.
0:03:12 You’ve alluded to the fact that people have been talking about this for a while. Why now?
0:03:17 What’s different that this is finally starting to compete with TV and other forms of entertainment?
0:03:20 There’s a couple different trends that are coming together. I think the very first one
0:03:26 is that video has just become such a huge thing. Streaming has become such a huge thing.
0:03:29 That is very much to do with the fact that we have phones, we carry these supercomputers
0:03:34 in our pocket, we have the bandwidth ability to be able to do it. When you look at these
0:03:39 stats around Twitch and YouTube, there’s literally billions of monthly actives that
0:03:44 are consuming video. What that means is that creates this new medium for any product that
0:03:49 produces lots and lots of visual content to live on top of that video.
0:03:54 We often will talk about this in the context of gaming or the context of education or the
0:04:00 context of many other of these things. Gaming is clearly the one that has very much benefited
0:04:06 from that. That’s one really big piece. The second piece here is that there’s steam, there’s
0:04:10 all the new consoles, there’s cloud gaming that’s coming out. I think all of these new
0:04:16 trends really serve to bring gaming that maybe back in the day, you would have had to buy
0:04:20 a $3,000 PC rig in order to run the top end.
0:04:23 Fully load up all the graphic processors and all these different things to really enjoy
0:04:24 the game.
0:04:29 Exactly. Now it’s like, wow, actually, the iPad plays Fortnite pretty well. They have
0:04:34 to modify the controls a little bit and this and that. That is such an amazing experience
0:04:38 to be able to play one of these massively multiplayer games without needing to spend
0:04:43 thousands of dollars. I think those two things and we’re also just seeing that kids that
0:04:48 are growing up playing Minecraft and Roblox, they’re graduating to Fortnite and there’s
0:04:51 a very good question like, are they going to graduate from Fortnite and what else are
0:04:56 they going to do? Are these kids going to find that in a world where they’ve been immersed
0:05:01 with all of their friends in these insane 3D environments that they’re going to go to
0:05:07 a 2D feed with static images and think that that’s actually the coolest way to hang out
0:05:08 with their friends.
0:05:11 That’s new for us, but for the kids growing up like that with that native worldview, that
0:05:14 you’re right. That’s their new, that the baseline has shifted.
0:05:18 If you grew up on AOL Instant Messenger, you would not have been able to guess that a system
0:05:22 of profiles and feeds and this and that would be the dominant way to hang out with your friends,
0:05:27 not Instant Messenger. And now for many of us that are in the Facebook or Instagram kind
0:05:32 of generation, I think it’s going to be hard to extrapolate like, maybe actually the next
0:05:37 way that all the humans in the world want to get together isn’t going to be also feeds
0:05:41 and following and photos and all this other stuff. It might look more like Minecraft,
0:05:42 might look more like Fortnite.
0:05:46 Yeah, that’s so fascinating because it has interesting implications for where the future
0:05:48 social network comes from, which is from games.
0:05:52 Yeah. I mean, I think you’re already seeing this, like the product experience of a Facebook
0:05:56 or a chat group is now the product experience of a game itself and the social network layers
0:06:01 around it. Fortnite then becomes the place where people hang out. We say why now and
0:06:05 it’s this idea that games entered the cultural zeitgeist and that’s driven by a lot of technology
0:06:08 and it’s driven by video and it’s driven by bunch of other things. But then once your
0:06:12 friends are playing it, you want to play it. It’s kind of like reaches this gating point
0:06:16 and then it hits a tipping point and then everybody wants to be playing and then they
0:06:17 want to be where their friends are.
0:06:20 So just to bring it back to the news then, because that’s where the trends are going
0:06:24 and how to think about the big picture, let’s talk about eSports for a minute in particular.
0:06:27 So you guys are saying that this is part of the larger trend and what’s happening with
0:06:31 gaming, technology, social networks, the future of entertainment really. But first of all,
0:06:35 when I was at where I did an op-ed in 2013 that argued that eSports was quite a long
0:06:38 time ago is no different than other sports. It was from Kevin Morris who was at the Daily
0:06:42 Dot at the time. And it was really interesting because I had to fight the headline desk because
0:06:45 they were like, “What the hell is eSports?” They were like, “You can’t say that.” And
0:06:49 just to give people context who are not familiar with that category, eSports is big business.
0:06:52 What really struck me is that it has a lot of the same features as traditional sports.
0:06:56 You’ve got training, like Buga in particular was playing for only two years, but he played
0:07:00 six to eight hours a day. He’s been training for two years like entirely. He has a management
0:07:04 company. There are sponsors. There are fans. There’s all these things in the regular sports
0:07:08 ecosystem that play out with eSports. I’m actually curious for your thoughts in particular
0:07:11 around eSports about where does this fit and how to think about this?
0:07:14 So I actually think the eSports term is maybe a little bit tortured. Maybe not necessarily
0:07:18 the best term, but you can just think about this as like eSports is another form of entertainment.
0:07:21 Sports is one form of entertainment. You want to watch the people that are like the highest
0:07:25 skilled people at any particular sport. And it’s kind of like a performance-based form
0:07:30 of entertainment. You also have like personality-driven forms of entertainment. That’s everything
0:07:36 from like reality TV. You can call that like some sort of eSport in and of itself. I think
0:07:41 eSports sits somewhere in the middle of that kind of like performance-based entertainment,
0:07:44 personality-based entertainment. Like Fortnite is much more kind of cartoonish. It’s much
0:07:48 more driven off the personality of the streamers. Ninja is probably the most famous and the
0:07:52 most highly compensated streamer. And he’s kind of like personality-based.
0:07:57 That’s super interesting. How do you think about this along the spectrum of sports entertainment?
0:08:00 From your vantage point and tech and like the future of entertainment, like why does
0:08:01 that matter?
0:08:07 I mean, one aspect of it is that right now, when we think about sports and eSports, inevitably
0:08:11 it’s the player versus player competitive type genre. And I think what we’re going
0:08:15 to very quickly find is that, you know, if you just go to YouTube and search for Minecraft,
0:08:20 there are so many things that people want to watch that are not this PVP competitive
0:08:21 kind of format. And so I think-
0:08:22 Pillar versus player.
0:08:25 Right. And so I think what we’re going to see instead is we’re going to end up seeing
0:08:31 a, you know, vast set of, you know, new genres of very watchable, very streamable entertainment
0:08:36 experiences ultimately that have as much to do with, you know, creativity and creative
0:08:40 expression. You know, you can imagine playing rock band or, you know, dance sense revolution
0:08:41 or whatever.
0:08:42 Oh my God, I love-
0:08:43 Imagine that as a-
0:08:44 I’ve always loved dance sense revolution.
0:08:47 Or like, you know, even if you take the metaphor as game shows, right? Game shows are some
0:08:52 of the most widely watched forms of entertainment. We don’t call them sports, right? But people
0:08:55 love watching them. And there’s going to be competitive versions that aren’t going to
0:09:00 be about shooting somebody. It’s going to be like, who can, you know, make the best
0:09:04 virtual garden, you know, who can cook the best virtual recipes. That’s going to be
0:09:05 a thing.
0:09:07 You’re right. What I love about that is things that are very native to what people already
0:09:11 do and love, since like there’s a whole cult around the great British baking bake off.
0:09:12 Yeah, totally.
0:09:16 Imagine that and like to your point, and you’re like in sports form, that’s super interesting.
0:09:18 Yeah. Well, it’s funny because people are like, oh my gosh, I can’t believe people watch
0:09:22 other people play video games. But we watch like other people answer trivia questions.
0:09:27 We watch other people play real physical sports. We watch other people like fix homes on reality
0:09:33 TV in like quasi competitive situations. That entire world exists. And it’s just bringing
0:09:35 that world into a place where people can do that more digitally. And then you’re just
0:09:38 creating the entertainment layer that sits on top of that interaction.
0:09:43 So this is good to talk about Fortnite specifically. It’s made by Epic Games. It allows up to
0:09:47 100 players to play at a time. And some people argue that’s a thing that sort of made it
0:09:51 really work. And a lot of games are now adding, you know, a battle royale mode where people
0:09:56 can fight and compete in like a confined space, et cetera. Fortnite was a top rank free game
0:10:01 last year. It made $2.4 billion in revenue according to Nielsen owned super data research.
0:10:04 And I think people only focus on the fact that it’s been around for two years, but it
0:10:09 wasn’t really a sudden overnight success because it has a longer history. And I’m just curious
0:10:12 for your guys’s view on sort of this trend of a lot of these games starting to add a
0:10:14 battle royale mode in particular.
0:10:19 Yeah. One of the really fascinating patterns that’s been happening in the games world has
0:10:23 been that, you know, oftentimes there’s, there’s a whole ecosystem of modders. These are people
0:10:24 that, you know,
0:10:25 Oh yeah. Like I love the modding community.
0:10:26 Right. Yeah. Exactly.
0:10:27 Modify games.
0:10:30 Exactly. That’s right. They’re modifying games or adding new assets, adding new rules,
0:10:35 you know, et cetera, et cetera. And, you know, League of Legends was originally derived from
0:10:41 Dota, which was a mod of Warcraft three. And similarly, Fortnite had had a bunch of predecessors,
0:10:44 I mean, there was Part PUBG, there was, you know, a mod that was built on, you know, Arma,
0:10:45 you know, et cetera, et cetera. And so,
0:10:48 And modding goes all the way back to Doom and even before that.
0:10:49 Well, yeah, exactly.
0:10:54 And so I think what we see is that, you know, many of these genres are taking time to kind
0:10:59 of incubate and kind of evolve in the indie gaming community and in the moderate community.
0:11:04 And then you have a new entrepreneur that then comes out with a fully integrated AAA type
0:11:08 level kind of thing. And that kind of, you know, brings it forward. And I think what
0:11:12 they end up tapping into, especially this kind of new generation of games is bringing
0:11:13 network effects into the games industry.
0:11:15 What do you mean by that?
0:11:19 What I mean is that it used to be that game was just a piece of content and you’d play
0:11:20 it and then you were done.
0:11:23 Right. A lot of the times these games are great, the tradition you’re describing a modding,
0:11:25 it actually leads to quick games being built and then dying.
0:11:29 Right. Right. Exactly. And so what ends up happening is in a world where you can mod
0:11:34 and then also ultimately create these full games that are multiplayer intrinsically and
0:11:38 have competition, have these different elements, what these are tapping into is they’re able
0:11:42 to create video and streaming communities around the game that kind of keep it going.
0:11:43 Hence the network.
0:11:47 That’s one form of a network. Another form of a network has been the e-sports leagues
0:11:51 and the teams and this whole ecosystem of folks that that are…
0:11:52 Management, sponsors, everything.
0:11:56 Right. Right. Who all have this very strong incentive to like keep the game going and
0:12:00 continue marketing it, et cetera, et cetera. And then, you know, third one, which we haven’t
0:12:04 talked about is, you know, user-generated content in the context of games.
0:12:06 I’m actually very interested in that because that’s actually been a trend in every media
0:12:10 wave where there’s always like a central established player that makes the content and then there’s
0:12:13 a user-generated phase that kind of comes right after that.
0:12:16 That’s right. Yeah. And I think, you know, as much as we’re talking about Fortnite’s
0:12:21 Battle Royale, you know, a lot of what the company Epic has been, you know, emphasizing
0:12:26 is their creative mode, which is just being able to like make cool structures and new
0:12:31 types of gameplay, et cetera. And that’s another form of how you can build a network
0:12:35 effect, the same one that’s propelling Minecraft and Roblox as well as, you know, kind of this
0:12:40 entire modding community. That’s obviously been one of the most powerful forces in the
0:12:44 internet consumer product sphere. And I think it’s inevitable that that all makes its way
0:12:49 into the game’s world. That’s absolutely right. And I think the focus you’re seeing on games
0:12:53 companies trying to build, whether it’s eSports, whether it’s kind of Battle Royale or multiplayer
0:12:58 modes, whether it’s UGC, like user-generated content, user-generated content, you know,
0:13:03 like Epic didn’t get Fortnite, like the eSports of Fortnite right on the first try, right?
0:13:06 It took iterations. That’s to me the interesting story here. It’s not an overnight success.
0:13:10 It’s not an overnight success. And like the game itself is not an overnight success. Like
0:13:14 the eSports, it is not an overnight success. But the idea of building towards network effects,
0:13:18 I think you’re seeing more and more games companies focused on that as the kind of ultimate
0:13:20 end goal. So how does this play out with the real
0:13:23 world? Because another really interesting article that actually the Wall Street Journal
0:13:27 did this past week, and we’ve seen this as well, which is that real estate developers
0:13:31 all over the country are trying to convert malls, convention centers, et cetera, into
0:13:36 destinations for eSports. They’re doing stuff like adding locker rooms, like broadcast studios,
0:13:41 higher speed connectivity, massive LED video walls, like in Times Square. And some of the
0:13:45 cities involved here like Baltimore, Philadelphia, Arlington, Texas, Los Angeles, New York and
0:13:49 Las Vegas, of course. So how do you guys think about this in this context?
0:13:53 So I think that’s a really interesting trend, which is around this idea of like what’s happening
0:13:57 in real life versus what’s happening in the digital world. This division between like
0:14:03 atoms and bytes and gaming and this kind of genre is like this really fascinating transition
0:14:07 point. You literally have people sitting in New York in a stadium watching something happen
0:14:12 online. You also have people within the game watching the event happen within the game itself.
0:14:16 And then you have like these characters and it’s got this like Disney World feel to it.
0:14:18 But then you also have this stuff where they announced Marshmallow was going to do a concert
0:14:22 at the World Cup. And there’s this moment where you’re like, is that happening in the
0:14:26 game? Is that happening online only? Because like Marshmallow had that concert, you know,
0:14:30 a couple of months ago that had millions of people, the cell membrane between like what’s
0:14:34 happening in real life and what’s happening in the digital world in this game’s context
0:14:37 is getting super, super thin. People are now building stadiums for people to have eSports
0:14:42 competitions and it’s just this blending of the physical world and the digital world.
0:14:45 Yeah. Nathan Juergensen used to talk about this concept of digital dualism that it’s
0:14:50 kind of a false dichotomy to separate in real life, IRL and the online world in many ways.
0:14:54 You’re saying that games is the bridge between them, which I think is super fascinating.
0:14:58 The other thing that is happening if you look at it from the real estate end of things is
0:15:02 that, you know, what are we going to do with all of this mall space, right? And what are
0:15:05 we going to do with all these, you know, restaurants that are, you know, kind of the
0:15:08 three star Yelp restaurant is just there, you know, but like really you could order
0:15:13 from your favorite place on, you know, Uber Eats or DoorDash or whatever. And like, you
0:15:17 know, that’s even better, right? So it’s, you know, cities are changing a lot and there’s
0:15:20 a lot of space that’s opening up that we’re going to have to figure out what to do with
0:15:24 it. You know, that very naturally leads to all these new forms of entertainment, especially
0:15:29 when they’re things that can drive foot traffic. Consumers are going to go to these locations
0:15:34 when they’re deeply experiential, when they’re very Instagrammable, when it’s something that’s
0:15:35 fun to do together.
0:15:38 What’s going to drive people to go to the mall and these spaces versus doing it in their
0:15:39 home?
0:15:43 Yeah, I think there’s a bunch of different reasons why people will ultimately want to
0:15:47 go to these experiential places. The very first thing is, you know, if you’ve ever been
0:15:52 to Oracle Arena while they’re playing League of Legends in a group of like, you know, tens
0:15:56 of thousands of people, it is a very different experience than doing it at home. Or you’re
0:16:01 going with your family to a, you know, a sandbox VR, you’re putting on all the latest gear
0:16:03 and you have, you know, haptic feedback, you have like…
0:16:06 You can actually feel the moves, not just play it in VR visually.
0:16:09 And you have fans, you have this and that, you know, and you’re in a thousand square
0:16:13 foot space, like how many folks in San Francisco have a thousand square feet of playing space
0:16:19 and, you know, five VR headsets, you know, and all the gear and custom software and content.
0:16:22 When you’re talking about the highest end cutting edge experience, you know, that is
0:16:26 going to be something that, you know, you’re going to have to do outside in a system that
0:16:30 costs hundreds of thousands of dollars. We also are very excited about the in-home experience
0:16:35 as well, but that will always be a more casual type of, you know, experience than what you
0:16:36 can get out in the field.
0:16:38 Ultimately, I think it’s going to be both.
0:16:41 This is a very hopeful future. Sounds like we’re going to have a lot of fun and interesting
0:16:45 entertainment and it’s going to creep into other areas of our lives, education, et cetera.
0:16:50 So we’ve covered everything in this episode from, you know, the recent milestone, Fortnite,
0:16:55 gaming, eSports, the future of entertainment, real estate, bottom line it for me. Like,
0:17:00 how should we think about the recent news of Booga, Booga, Booga, Booga, making, you
0:17:04 know, $3 million and in this context of these larger trends.
0:17:08 So I think there’s three things I can bottom line. One piece of it is, you know, it just
0:17:12 reflects Fortnite’s kind of status within the current zeitgeist at the top of the stack
0:17:15 right now. I mean, obviously these things shift around, but for right now it’s at the
0:17:19 top. The second thing is it’s the importance of eSports competitive play to gaming more
0:17:24 broadly. You know, publishers are going to continue to push this, Fortnite push this,
0:17:30 you know, the importance of events like this, the publicity they get, live events, the retention
0:17:35 it drives, the kind of engagement it drives from players is just going to kind of continue
0:17:38 to grow and it’s going to be more and more important to publishers as they develop these
0:17:39 games.
0:17:43 The third thing is just it shows the size and scale of what happens when games meets
0:17:48 network effects, right? Which I don’t think is a surprise, but I think what these events
0:17:52 do is they crystallize it for the outside world. It gives you that point where you can
0:17:57 now compare it to, you know, how big is Booga relative to Tiger Woods or Roger Federer or
0:17:58 anything like that.
0:17:59 Exactly.
0:18:00 Exactly.
0:18:03 Yeah, you literally put it in the Earth or Ash stadium and now you have this nice contrast
0:18:07 point which for people outside of the gaming industry gives them something tangible about
0:18:10 how big this is as a force in the world right now.
0:18:12 Fantastic. Thank you guys for joining this segment.
0:18:13 Awesome. Thank you.